Keyera Corp. (OTCPK:KEYUF) Q2 2023 Earnings Convention Name August 10, 2023 10:00 AM ET
Firm Members
Calvin Locke – Supervisor-Investor Relations
Dean Setoguchi – President and CEO
Eileen Marikar – Senior Vice President and CFO
Jarrod Beztilny – Senior Vice President, Operations and Engineering
James Urquhart – Senior Vice President and Chief Business Officer
Convention Name Members
Robert Hope – Scotiabank
Robert Kwan – RBC Capital Markets
Robert Catellier – CIBC Capital Markets
Linda Ezergailis – TD Securities
Patrick Kenny – Nationwide Financial institution Monetary
Feng Huang – BMO Capital Markets
Operator
Good morning. My identify is Lyra, and I can be your convention operator at present. At the moment, I want to welcome everybody to Keyera Corp.’s second quarter convention name. [Operator Instructions]. Thanks. I’d now like to show the decision over to Calvin Locke, Supervisor of Investor Relations. It’s possible you’ll go forward, sir.
Calvin Locke
Thanks, and good morning. Becoming a member of me at present can be Dean Setoguchi, President and CEO; Eileen Marikar, Senior Vice President and CFO; Jamie Urquhart, Senior Vice President and Chief Business Officer; and Jarrod Beztilny, Senior Vice President, Operations and Engineering.
We’ll start with some ready remarks from Dean and Eileen, after which we are going to open the decision to questions. I want to remind listeners that among the feedback and solutions that we provides you with at present relate to future occasions. These forward-looking statements are given as of at present’s date, and replicate occasions or outcomes that administration at the moment expects.
As well as, we are going to check with some non-GAAP monetary measures. For extra data on non-GAAP measures and forward-looking statements, please check with Keyera’s public filings obtainable on SEDAR and on our web site.
With that, I am going to flip the decision over to Dean.
Dean Setoguchi
Thanks Calvin. Good morning, everybody. I am happy to announce that our Board of Administrators have permitted a 4.2% dividend improve, returning Keyera to its lengthy historical past of sustainable dividend development. The rise is supported by the expansion of Keyera’s fee-for-service enterprise segments.
Within the final 5 years, we have been investing considerably to create a completely built-in service providing from the Montney and Duvernay place via to our core Liquid Infrastructure in Edmonton and Fort Saskatchewan. These strategic investments proceed to ship quantity and money circulate development. We stay on observe to succeed in a focused annual 6% to 7% fee-for-service EBITDA development out to 2025.
Our Liquid infrastructure section delivered 21% year-over-year development reaching a brand new quarterly document of $119 million. KAPS is now totally in service with the second of two pipelines delivery its first volumes in June. KAPS integrates our price chain, making us extra aggressive and enhances our capacity to trace new volumes.
Our platform presents clients a a lot wanted aggressive various from wellhead to finish market.
In our G&P section, we delivered $84 million in realized margin. This consequence was achieved regardless of the affect of Alberta’s wildfires.
Once more, we would wish to thank all emergency responders and care personnel who ensured that everybody stays secure and that our belongings had been largely unimpacted.
[Diluent] liquid stays sturdy for G&P enterprise. We foresee continued filling of accessible capability, significantly at Wapiti and Simonette, as producer exercise ramps up. Enlargement of the Pipestone Fuel Plant is on observe for completion within the first quarter of 2024.
Our G&P clients are in a robust monetary place and have multi-year development plans. That is driving continued development of the section, whereas on the similar time growing the size of contracts and enhancing money circulate stability.
Our advertising and marketing section had one other sturdy quarter supported by the energy of our iso-octane and condensate companies. This section delivered
$134 million of realized margin within the quarter and $251 million year-to-date. We’re growing the 2023 steering for this section to vary between $380 million to $410 million have realized margin.
With the most important investments of the final 5 years behind us, we count on development spending to be decrease going ahead. This implies we’ll have extra free money circulate to allocate.
Our capital allocation priorities are unchanged. The primary, to make sure monetary energy, after which a steadiness between growing returns to shareholders and disciplined capital investments.
Our debt leverage metrics are nicely inside our focused vary, and now we elevated our dividend.
When it comes to future development investments, they will be primarily targeted on initiatives that leverage and improve our present core asset place in Western Canada. This might embrace a debottleneck of present frack, a brand new frack growth and a possible KAPS zone for extension.
Any incremental investments must generate a robust return underpinned by long run contracts. I am going to now flip it over to Eileen to offer an replace on Keyera’s monetary efficiency for the quarter.
Eileen Marikar
Thanks, Dean. Adjusted EBITDA for the quarter was $293 million, in comparison with $316 million for a similar interval final 12 months. Distributable money circulate was $207 million or $0.90 cents per share, in comparison with $209 million or $0.94 cents per share for a similar interval in 2022.
Web earnings had been $159 million in comparison with $173 million for a similar interval final 12 months. These outcomes had been pushed by document efficiency from our Liquid Infrastructure section, and the third greatest ever quarterly advertising and marketing section margin.
We’re persevering with to take care of a robust monetary place, ending the quarter with web debt-to-adjusted EBITDA at 2.6x, on the decrease finish of our focused vary of two.5 to 3x.
Shifting to our steering for 2023. As Dean talked about, we now count on our advertising and marketing section to contribute between $380 million and $410 million of realized margin in 2023. That is up from our earlier steering of $330 million to $370 million.
The revised steering takes under consideration monetary hedges at the moment in place and assumed AEF runs at capability. There aren’t any important logistics or transportation curtailment and present ahead commodity pricing for any unhedged volumes for the rest of the 12 months.
Development capital steering stays unchanged at between $200 million to $240 million. Upkeep capital steering is now anticipated to be between $95 million and $105 million, up from the earlier vary of $75 million to $85 million. About half the rise is as a result of completion of labor that was already pay as you go. The steadiness of the rise consists of extra upkeep price of Pipestone Fuel Plant which is predicted to be recovered to elevated future income.
Money tax expense is predicted to be nil. I am going to flip it again to Dean.
Dean Setoguchi
Thanks, Eileen. Macro outlook for our enterprise atmosphere stay very optimistic. Canada’s vitality sources can be important in assembly the world’s rising vitality demand. Our basin continues to develop and units new information for each pure gasoline and crude oil manufacturing.
LNG Canada and the Trans Mountain pipeline growth will unlock future development. We’re excited to contribute to this development by being a necessary infrastructure service supplier.
On behalf of Keyera’s Board of Administrators and administration crew, I need to thank our workers, contractors, indigenous rights holders and different stakeholders for the continued help.
With that, I am going to flip it again to the operator for Q&A.
Query-and-Reply Session
Operator
[Operator Instructions]. Your first query comes from the road of Rob hope from Scotiabank.
Robert Hope
First off, need to perhaps get a bit of little bit of an replace on KAPS. How have volumes ramped relative to your form of base expectations, simply given — I suppose it is early days, however simply given some dynamics out within the basin? In addition to now that the pipeline is in service, have discussions with clients accelerated? Have any extra contracts been signed?
Dean Setoguchi
Pay attention, it is an important query that you’ve got on KAPS, and I’d have anticipated that. Initially, we’re very happy that the pipeline is totally in service, with the second pipeline once more delivering volumes in June. So, once more, it is like every asset, whenever you carry it up, all the things does not simply activate abruptly. However I’d say that, that course of works very, very easily and we work very carefully with our clients, and now that it is in service, and definitely there’s much more visibility to development within the basin, now we have plenty of nice discussions with our producers.
And once more, I need to emphasize that, to start with, now we have a completely built-in system now, so we will provide that bundled service. Once more, I at all times like to make use of analogy of your web cable, and mobile phone, and residential safety supplier. I might say nearly all people makes use of a bundled service as a result of it is extra environment friendly, and clearly our bundle package deal is identical manner. So I believe that is an important benefit.
What we’re seeing is that our volumes are a bit of bit forward of the place we might have anticipated to begin up. However once more, it is nonetheless early days but. We have at all times gotten to the market that this may be a gradual ramp up and we nonetheless count on that, however as of the place we’re at present, we’re a bit forward of schedule.
However I’d reiterate that — the ultimate notice that we did information 6% to 7% fee-for-service EBITDA development out to 2025. A variety of that’s coming from our G&P enterprise and filling our white area there, however a part of it in addition to KAPS and the KAPS ramp as much as 2025.
The beauty of KAPS is that, particularly with the basin development that we’re seeing, we count on it to proceed to develop by way of volumes and money circulate proper via the tip of the last decade.
Robert Hope
After which as a comply with up, simply take — I need to dive a bit of bit deeper into the feedback you made on capital allocation, particularly with how you may check out outperformance in advertising and marketing. So, good to see one other sustainable dividend improve. However whenever you check out transferring ahead, how do you steadiness dividend will increase versus development capital? And in an atmosphere the place you possibly can see exterior advertising and marketing margins like 2023, might you look to return these to shareholders through buybacks?
Dean Setoguchi
Sure. That is an important query. And earlier than I flip that over to Eileen, I’d simply say that we’re very happy with the place that we’re in at present. We have undergone quite a lot of years of very important capital for the final 5, 6 years, and we have constructed a really sturdy Montney place — totally built-in Montney place over that time period, and now we have these expenditures behind us. We now have a really sturdy steadiness sheet and now we have rising money circulate. In order that places us in an important spot the place now now we have choices as to the place we allocate capital so as to add essentially the most worth for our buyers. However with that, I am going to flip it over to Eileen.
Eileen Marikar
Sure, that may be a nice query. I believe it is very important take it again to our total priorities. Our first precedence will at all times be to take care of our steadiness sheet energy, and we’re actually there at present.
For this 12 months, we’re prioritizing paying down short-term debt from the upper advertising and marketing contribution. However past the steadiness sheet, our goal actually is to develop distributable money circulate on a per share foundation in order that we will proceed to develop the dividend.
And this could actually be achieved in two methods: one, shopping for again shares; or reinvesting within the enterprise. As we glance out to subsequent 12 months it will likely be a contest for capital between these 2 choices.
Our desire can be to do smaller dimension, however impactful development initiatives that meet our funding standards. And actually, by small, I imply smaller relative to the large-scale initiatives that we have undertaken over the previous few years.
Operator
Your subsequent query comes from the road of Robert Kwan from RBC Capital Markets.
Robert Kwan
If I can perhaps simply proceed on the capital allocation subject. Eileen, clearly you are prioritizing the steadiness sheet. I am simply form of questioning the low debt EBITDA is partly a operate right here of sturdy advertising and marketing. So do you introduce a 3rd precedence? And even simply the fiscal dividend of lowering leverage, like — or how are you taking a look at that leverage vary? Is that on the long-term advertising and marketing quantity? Are you — though you have got the long-term quantity, you are form of simply planning for one thing that is nearer to what you are doing, as a result of the opposite manner you possibly can develop DCF for shares is to simply proceed to repay debt and save the curiosity as nicely?
Eileen Marikar
Sure, that is an important query. And after we plan leverage, I imply that 2.5 and 3x could be very conservative. And positively via varied cycles, it has protected us from taking any drastic measures, like for instance, chopping the dividend throughout COVID. We by no means had to try this. So we’re very, very a lot — we need to persist with these ideas.
And relating to these advertising and marketing money flows, you are completely proper. We do not take into consideration nor plan for outdoor advertising and marketing as we take into consideration leverage going ahead. We’re actually extra to that face, the advertising and marketing steering.
Robert Kwan
So is the bias then whether or not — if you may get the expansion CapEx, that is nice, however is the bias into 2024 to perhaps proceed to repay debt versus direct to share buybacks?
Eileen Marikar
I believe this 12 months, like I stated, that it truly is to repay, use these sturdy advertising and marketing money flows to cut back our short-term debt. When it comes to the remainder of our debt profile, we do not have something materials that is coming due for the subsequent — till 2025. And in order we have a look at subsequent 12 months, it’s — if now we have some nice initiatives or if it is returning money to buybacks, we are going to have a look at each choices going into subsequent 12 months.
Robert Kwan
If I can simply end with a few questions right here on KAPS. The primary is, can you disclose what the precise contribution was within the quarter, and in addition affirm that what was booked is a Liquids Infrastructure was all third-party margin?
The second is simply — along with your new accomplice right here, has there been something simply stumpy, having a recent set of eyes on KAPS, whether or not it is the contracting or growth potential that you’ve got been capable of get out of the partnership thus far?
Dean Setoguchi
Possibly only a final query with a brand new accomplice. They have been actually nice to work with. They’re very engaged. And our crew has labored — Jamie’s crew has labored very carefully with them. So sure, we predict that they have been very optimistic by way of attracting new enterprise. So we will proceed to construct that relationship. And we’re very aligned by way of what we need to accomplish with this pipeline. In order that’s all been nice.
Your first query with disclosing quantity. Sure, we’re not going to reveal the quantity of how a lot KAPS contributed within the within the second quarter. I’d say it was fairly modest, simply because, once more, it got here on center of the — kind of mid-quarter, but additionally, there is a wrap up profile like every buyer kind of come on sequentially. So it wasn’t like all the things got here on directly, the volumes that we do have. So I’d say it was modest within the second quarter.
Robert Kwan
However — and was all of it third-party income or are you reserving into company as nicely?
Dean Setoguchi
Sure, third-party. And as you already know, now we have a notice. I can not bear in mind off prime my head of any kind of intercompany allocations, however I can affirm it with third-party income within the second quarter.
Operator
Your subsequent query comes from the road of Robert Catellier from CIBC Capital Markets.
Robert Catellier
I am involved in understanding what the contribution is and in addition the schedule, the ramp up over the subsequent couple of years? However seems to be like that may not be forthcoming at present. So perhaps, Dean, you possibly can discuss concerning the precise bodily working efficiency of the asset since it has been positioned into service?
And second, they’re simply the Zone 4. The place you stand with that at present and what’s your imaginative and prescient for an affordable time line for making your choice there?
Dean Setoguchi
Sure. Initially, simply perhaps I am going to add extra shade to the wrap of KAPS, is that, clearly plenty of the discussions now we have with clients could be very commercially delicate. So now we have to be aware of that. There are confidentiality provisions put in place and, we are going to replace on the proper time when it is good for our shareholders, but additionally respecting the confidentiality and sensitivity of these discussions.
With respect to Zone 4, we stay optimistic on Zone 4. And particularly as we see Canada LNG, it isn’t that far-off now. And as soon as that will get put into service, that is going to be one other couple of DCF of demand. And we actually see our basin rising to fulfil that demand. So I believe that is going to be nice for our complete NGL worth chain.
So with that, a few of that is going to be in BC. We have clearly seen plenty of progress with the very first nations group and in addition the Treaty. So with that, there’s extra total optimism in DC. And — so we proceed to have plenty of partaking discussions with clients in that Zone 4 in Alberta and in addition within the BC to trace their volumes, so, proper via the KAPS, and into Fort Saskatchewan.
So, timing on that. I believe that we would in all probability count on extra within the first half of subsequent 12 months. However we do have actually nice conversations on that perspective.
And once more, the entire rationale for why producers are actually is that they need to have a comparable various. They’re investing billions of {dollars} alongside that Montney fairway. And from a reliability perspective, it is good to have two methods to get your volumes into Fort Saskatchewan, the place the market hub is.
And second of all, commercially, it is at all times good to have two events which you can negotiate with, in your service. So, we’re pleased to be that comparable various.
And I might additionally perhaps say the third level is that now we have a brand-new pipe. So from a reliability perspective, we predict we’ll have a extremely, actually stellar run efficiency over the subsequent a number of years.
Possibly simply on the working efficiency on KAPS. I am going to flip that over to Jarrod right here. However I do commend the group for the good job they did in commissioning and citing that challenge up. It went too seamless as one might hope for.
Jarrod Beztilny
Sure, we’re actually happy with how that challenge got here on line and ramped up. And, as Dean described, it was actually a staged strategy with varied clients and actually on each traces, somewhat than form of one shot at a time, and actually happy with how our ops and enterprise groups work with the shoppers and work with one another to essentially carry all these up easily. And we have been very happy with the operational efficiency of that line thus far.
So it is allowed us to be a bit forward of volumes as you heard, but it surely’s early days in that ramp up. And — However operational efficiency is actually key for us in giving our present clients confidence and — or capacity to draw new clients. And once more, actually, actually happy out of the gate.
Robert Catellier
I’ve an analogous query on frack capability. It seems to be such as you’re fairly excessive by way of your utilization. And that is not unusual within the business proper now. So leads me to consider that perhaps the debottlenecking, though it is fairly environment friendly, I am simply curious if it is actually sufficient capability? And associated to that, I am interested in your urge for food for being out there for a brand new frack, extra important growth on the similar time that [ammonizing] out there with theirs?
Dean Setoguchi
That is an important query. I imply, clearly, frack capacities is tight, and we have a look at the forecast for [nat] gasoline blowing drill from the basin over the subsequent 3 or 4 years. It’s extremely important. And with that, we will see much more liquids that get stripped out of the gasoline stream as nicely. So we predict that is an important alternative for our frack complicated at KFS.
Once more, I — we’re very happy that we’re ready so as to add capability in a really tight market with their acquisition — the 21% acquisition of curiosity at KFS earlier this 12 months. In order that helps us out. You are proper. I imply, we have been telling everybody that we have actually been doing engineering on a debottleneck, which is, I believe, seemingly going to be an important alternative for us.
However we actually have our eyes set on a possible frac growth sooner or later as nicely as a result of extra capability can be required. And you already know what, we offer an important service out of our KFS website. It’s extremely, very nicely related from a pipe perspective and for all commodities, but additionally for rail and truck egress as nicely. Jamie, is there any else you needed so as to add on that?
James Urquhart
Sure, Dean. I believe you hit the excessive factors. I believe the one factor I might add as nicely is that the chance exists and that we’re making actually good progress on truly recontracting our present frac as nicely. So chances are you’ll notice that we have stepped into the opposite 21% at KFS, however the alternative is now to have the ability to recontract and lengthen present agreements out into the longer term. And that is been our first focus. We have been very proud of the success on that entrance. After which as Dean alluded to, we’re taking a look at alternatives to both debottleneck or broaden on our website.
Dean Setoguchi
I believe — I imply, clearly, with the totally built-in system out of the Montney with KAPS in place, we’re on the lookout for these previous bundled package deal offers the place we will provide G&P providers, NGL transportation, fractionation, and advertising and marketing providers. So making an attempt to offer that full service, and clearly, that helps increase our company income total.
Robert Catellier
Final query for me is said — I am pleased to see the 2023 advertising and marketing steering improve. However as you’ve got heard me say earlier than, I have been anticipating directionally a long-term improve sooner or later. Is frac capability the bottleneck for having the ability to try this? Or is there one thing else you want to see to take a second have a look at the long-term advertising and marketing steering?
Dean Setoguchi
Sure. I imply, that is an important query concerning our advertising and marketing steering. Clearly, now we have an excellent observe document with our advertising and marketing enterprise. And I do need to emphasize that our advertising and marketing enterprise is actually leveraging off of the bodily belongings that we personal and the volumes that now we have in our system. So it is a method to actually maximize profitability throughout our total worth chain. However perhaps with respect to the steering and the potential improve, I am going to flip that over to Eileen.
Eileen Marikar
Positive. Sure, I do know it is a nice query as a result of now we have persistently outperformed that steering. Possibly just a bit context on the bottom steering. It is meant to signify a stage of contribution that now we have a excessive diploma of reaching inside, like sure regular or typical assumptions. So — and people are specified by the MD&A. However the document margins that we noticed final 12 months and the rise in steering this 12 months is essentially pushed by exceptionally sturdy iso-octane premium that can’t be hedged in addition to our [BOB] pricing that is nicely above the 5-year common.
However that stated, we do plan to revisit our base steering later this 12 months in mild of getting access to extra volumes now that KAPS is on-line and with the extra frac capability that we simply acquired. So extra to come back on it.
Operator
Your subsequent query comes from the road of Linda Ezergailis from TD Securities.
Linda Ezergailis
Recognizing that it is a board choice on a dividend improve, past your 50% to 70% payout ratio guardrails, how may you consider the frequency and development price of future dividend will increase would form of the default be usually every year? Or perhaps prospectively, we’d see as new accretive belongings, whether or not they’re constructed or acquired coming — and contribute perhaps a bit extra of a bump then?
Dean Setoguchi
Nice query on the dividend. Initially, I need to reiterate that we’re very happy to return to dividend development once more. And you’d know in addition to anyone that, that is actually the legacy of our firm. We began out as a belief 20 years in the past. That is our twentieth 12 months as a public firm. And we have distributed and dividend out some huge cash over that time period. We took a little bit of a hiatus after 2019 and a part of that was we hit the COVID interval, however we even have — had a heavy capital spend with KAPS.
And so — however I do need to reiterate, although, throughout that point, we shut off our DRIP. So we truly self-funded KAPS throughout that time period. We did improve our dividend. However now that KAPS is behind us, we’re ready to try this now. And we have by no means had a — we have by no means decreased our dividend. So any time we improve our dividend, it is bought to be sustainable. However let me simply flip it over to Eileen and she will be able to perhaps talk about our philosophy on dividends going ahead?
Eileen Marikar
Sure, Linda, it is actually tied to rising that distributable money circulate on a per share foundation. So EBITDA, however after taking into consideration curiosity taxes and upkeep bills, and it must be supported by development in our fee-for-service enterprise. So we’re on observe to realize that 6% to 7% EBITDA development out to 2025 that comes from our fee-for-service enterprise. And that does help then development in a DCF per share. However finally, the timing and the quantity of future will increase can be a board choice. However that is the framework that we use.
Linda Ezergailis
And simply as a follow-up, the 6% to 7% development, what’s — I imply, I am assuming it is a excessive confidence which you can obtain that. However what aspect of that, if any, is perhaps coming from future capital investments, even when they’re small bolt-on initiatives versus the white area that you have already got or the initiatives which can be beneath development?
Dean Setoguchi
Sure, that is an important query. The nice factor is that almost all of that 6% to 7% improve is capital that has already been invested already, and we have spent the cash. So it is actually our G&P enterprise and filling up white area there. There may be some capital related to the Pipestone growth. In order that’s within the $50 million to $60 million vary, however we have disclosed that. A few of that’s tied to our acquisition, the 21% acquisition of KFS.
After which clearly, we see contribution from our KAPS pipeline that is going to ramp up over time. And as I stated, that is going to contribute to our EBITDA development nicely into the tip of the last decade. So that can proceed to develop. So we’ll improve that. I imply, clearly, new initiatives can have a lead time by way of construct and having the ability to generate a return off of that. However we do see some good initiatives to construct, so as to add future development for the longer term as nicely.
Linda Ezergailis
And simply one other fast follow-up, because it pertains to money flows, recognizing that there’s some below-the-line transferring elements under EBITDA. Are you able to discuss concerning the present medium and longer-term outlook in your money taxes as your capital expenditures form of loosen up by way of your tax swimming pools, and the way they’re depleting, and the way we’d consider the money taxes ramping up over the subsequent 5 years?
Eileen Marikar
Sure, money taxes, I imply, actually, we do not present particular steering on that. We’ll within the third quarter for subsequent 12 months. However as you concentrate on our swimming pools, actually, the KFS acquisition gave us important swimming pools in addition to the massive capital initiatives that we have undertaken, that can assist for actually a time period. However you are completely proper that there comes a degree the place tax is one thing that’s particular and can are available in. In order that’s simply one thing that we are going to proceed to handle.
Operator
Your subsequent query comes from the road of Patrick Kenny from Nationwide Financial institution Monetary.
Patrick Kenny
Only a follow-up on the Liquid Infrastructure section. Simply needed to substantiate that you just see this larger demand in your storage and fractionation providers as being repeatable, I suppose, beneath present commodity costs. And if that’s the case, what alternatives there is perhaps to exceed that 6% to 7% adjusted EBITDA development outlook, merely from sweating the belongings, both via optimizing your business framework at KFS or maybe taking a look at new methods to maximise throughput and NGL dealing with capability at Rimbey.
Dean Setoguchi
Effectively, hear, I imply, we nonetheless have white area in our methods. So we’re not forecasting 100% utilization of all of our belongings. So, there’s potentialities to exceed our 6% to 7% development. I’d say that the most effective alternatives are nonetheless the G&P enterprise, and in addition in our KAPS pipeline, the place we would have essentially the most capability to try this. However we’ll should see in timing of when these volumes present up. However we do consider that we will assist allow the basin to develop, and we’ll see extra volumes to their system over time.
When it comes to larger demand for Liquids Infrastructure belongings, perhaps I can flip that over to Jamie, and he can present a bit extra shade on that.
James Urquhart
Sure. Like I imply, I believe what your query factors to is one thing that we have at all times achieved in our group, is making an attempt to both optimize our present belongings bodily, and we have been ready to try this over time and proceed to look to try this round our KFS asset, but additionally with [AEF] as nicely. We have gotten a number of additional p.c of capability approaching over turnaround final fall, and we have got different concepts to increment up the capability at AEF, not in tens of percents, however in single-digit p.c, so over the subsequent few years.
After which as you are alluding to at KFS, so bodily, we will do it. After which as you alluded to, my group’s mandate is to clearly optimize commercially how we will sweat the belongings, as you stated. So I believe there’s alternatives. However as Dean says, I believe the extra impactful alternatives will lie within the Wapiti, Pipestones, the KAPS capability that now we have. That is what’s driving our goal round EBITDA development.
Dean Setoguchi
Possibly simply so as to add to what Jamie stated, Pat, is that we at all times discuss concerning the 21% curiosity that we acquired at KFS and we talked concerning the frac. However with it additionally got here storage capability, and in addition the pipeline capability [under] FSPL system between Edmonton and Fort Saskatchewan. In order volumes develop. We expect that there is going to be actually extra demand for that storage, our pipeline capability, and in addition extra volumes additionally interprets to seemingly extra enterprise via our terminals as nicely. So I believe it is a fairly optimistic outlook.
Patrick Kenny
After which I suppose with respect to throughput within the South area, you talked about within the MD&A that you just count on Deep Basin volumes to stay comparatively sturdy, simply given the monetary energy of producers. However simply curious if there’s every other optimization or consolidation alternatives throughout the asset base within the south as you look into, say, 2024?
Dean Setoguchi
Sure. You understand what, we at all times discuss our Montney enterprise, which — that is the place nearly all of our G&P margins are generated. However we should not overlook concerning the Deep Basin as a result of the Deep Basin remains to be a sexy place. The geology remains to be very sturdy, not simply with among the standard performs which have been developed over time and making use of higher applied sciences to drilling and finishing them.
However we’re seeing extra emergence of the Duvernay that is beginning to turn into an rising play down there, which I believe could possibly be thrilling for us. So we see alternatives, however we nonetheless have plenty of — we nonetheless have white area down in our South portfolio. So our main focus goes to be to fill that and make it as worthwhile as potential. However on the similar time, perhaps Jamie can remark too. I imply — I believe we’re beginning to see alternatives to recontract among the volumes that now we have going via our services there, however — and that is been wanting good as nicely.
James Urquhart
Sure. Simply to offer a bit of bit extra taste, and I alluded to this. So I can not bear in mind it was final quarter or the quarter earlier than, is that we’re seeing comparatively excessive utilization in our Strachan, Nordegg, Brazeau complicated that is related with pipe. And as Dean alluded to, is that we have been within the final 6 months within the strategy of recontracting with clients round these belongings, and based mostly on the truth that there’s restricted capability obtainable, we’re happy to — with the outcomes of that recontracting.
The white area that Dean alludes to might be extra within the Rimbey space. However as Dean alluded to, is that, that’s the place we’re beginning to see some fairly encouraging outcomes from the Duvernay. And now we have — we’re optimistic with respect to having the ability to help these producers’ development on the Rimbey gasoline plant. And that gasoline plant is totally built-in into our price chain, pipeline related all the way in which into Fort Saskatchewan. In order that’s a key asset for us within the South G&P asset base.
Operator
Your subsequent query comes from the road of Feng Huang from BMO.
Feng Huang
A few questions on Keyera new ventures. I am questioning — maybe perhaps a business replace in your key initiatives in new ventures, and I believe extra about try on sanctioning? I am additionally curious round any ideas across the draft laws and the tax credit final week, and perhaps feedback on the way you assume you assume your steadiness sheet places into these potential alternatives?
Dean Setoguchi
Sure. We’re enthusiastic about our new ventures alternatives. Actually, they’re — I’d say they’re extra long term wanting on the again half of the last decade. However once more, we predict that we’re very nicely positioned to seize extra alternative there. As I stated earlier than, I imply, as an infrastructure firm, we offer important providers to standard hydrocarbon enterprise, primarily on the gases and NGL aspect.
However for the enablement of low-carbon merchandise, you want the identical form of providers, you want pipelines, you want storage — above floor, under floor storage. You want truck and rail logistics, and also you additionally must have processing capabilities as nicely. All issues that now we have plenty of energy in. So we see an important alternative there to perhaps repurpose among the belongings that now we have within the larger Edmonton-Fort Saskatchewan space. And particularly, now we have a extremely nice undeveloped land block there that we need to develop a low-carbon industrial park. However with that — I imply, that is all beneath Jamie’s group and perhaps I am going to flip it over to him to offer extra shade on that.
James Urquhart
Sure. So I believe I can present a bit of bit extra taste round among the issues that we have introduced beforehand with respect to relationships that now we have with CN round rail. I can share with you that we have gotten plenty of curiosity and uptake with respect to clients, with respect to the unit prepare alternative that we see with CN on our becoming a member of winds up within the Fort Saskatchewan space. So we’re progressing with understanding these alternatives a bit of bit extra. We’re spending some cash on engineering to ahead that chance.
Equally, we’re in conversations with different entities round carbon seize, sequestration to essentially make our lands the popular location for among the alternatives that others are taking a look at. Particular with respect to tax credit, not precisely positive what — the place you are leaning with respect to that query, and maybe you possibly can simply attain out to our Investor Relations group to — perhaps pose that query and get the solutions you are on the lookout for.
Feng Huang
And I used to be extra curious if the laws is something totally different than you are anticipating and doubtless — extra examine on that. And might you additionally discuss — are you — is there something with these — are these initiatives associated all to the ammonia worth chain? And will you remark additionally, are these extra within the context of multibillion {dollars} of capital alternative?
Dean Setoguchi
No, perhaps simply from a normal macro perspective, we’re seeing a normal curiosity in ammonia. And I believe Japan, they’re expressing an curiosity for ammonia and so they have incentives in place. How actual that’s, I suppose, we’ll — solely time will inform, however there is definitely plenty of curiosity. You’ve got heard totally different initiatives which have been on the market. We have been approached for citing some alternatives on our lands. However once more, it is nonetheless very early days.
The nice factor is that if it is a actual alternative, now we have, I might say, top-of-the-line areas — if not the most effective location to develop ammonia challenge. And once more, it is simply due to our connectivity within the space the place now we have industrials owned land. We now have cavern — underground cavern capability. We now have the potential for our rail terminal with CN to egress ammonia to the West Coast.
However once more, it is nonetheless early days. And I believe there’s bought to be plenty of work even from a transportation perspective and the protection of transporting ammonia via communities all the way in which to the West Coast.
So perhaps the final benefit now we have is we’re very near the place you’d hook up with a carbon seize line. So once more, all issues that you’d want for ammonia challenge, however — early days, however we’re seeing — we’re actually seeing curiosity there.
Feng Huang
After which perhaps lastly, something on WildHorse? adjustments on the outlook there?
Dean Setoguchi
Sure. Nice query. I have never talked about WildHorse shortly. That asset’s simply based mostly on the place crude was buying and selling, given the truth that the [backwardization] that we have seen during the last couple of years — when it began up, we had an present buyer base, contracted the ability. We have not seen a ton of volumes transferring via the terminal, however that has truly began to alter within the final quarter. And we’re actually optimistic now based mostly on the distinctive traits of that terminal, and the capabilities of that terminal and getting conversant in the entities that do commerce in [indiscernible]. That asset is beginning to carry out the way in which we envision after we initially sanctioned that asset. So a well timed query. I’d have in all probability had a much less rosy outlook to share, however you’d posed that query 1 12 months in the past and even 6 months in the past.
Operator
There aren’t any additional questions right now. I might now like to show the decision again over to Mr. Calvin Locke, for any closing remarks.
Calvin Locke
Thanks all as soon as once more for becoming a member of us at present. And please be at liberty to succeed in out to Keyera’s Investor Relations crew with any extra questions you could have. Thanks.
Operator
Thanks, presenters. And girls and gents, this concludes your convention name for at present. We thanks for collaborating and ask that you just please disconnect your traces.