Analyst Note| Stephen Ellis |
After taking a fresh look at Keyera, we reaffirm our no-moat rating and update our fair value estimate to CAD 27. In the near term, we are optimistic that Keyera will benefit from a healthy commodity price outlook and are supportive of the firm’s KAPS (Key Access Pipeline System) project, which is part of a larger pivot toward more stable long-term cash flows. The pipeline will stretch from northwest of Grand Prairie to Keyera’s Fort Saskatchewan liquids hubs and will consist of pipelines for condensate and NGL mix. It will be connected to the firm’s Northern plants (Pipestone, Wapiti, and Simonette) concomitantly with several third-party plants. The system is set to come online in early 2023 and is already 70% contracted with long-term agreements averaging 14 years. More broadly, we expect strong fundamentals and steady output from upstream producers in the region to bolster Canadian midstream, and Keyera is in an opportune position to benefit given the geographical positioning of its assets.