- Keyera (TSX:KEY) has announced that it will cut its capital growth budget to between C$475 million and $525 million
- The company and its partner, SemCAMS Midstream ULC, will also defer the construction of the KAPS pipeline system until mid-2021
- Salary and payment reductions have been implemented across the company’s executive team, as well as the Board of Directors
- The revised capital budget will be used to fund the completion of the Wapiti gas plant, as well as other projects across the US and Canada
- Keyera (KEY) is currently up 3.51 per cent to $17.26 per share, with a market cap of $3.78 billion
As challenging industry conditions continue, Keyera (TSX:KEY) is making moves to preserve its liquidity and increase its financial flexibility.
In an announcement dated February 26 this year, the company revealed a 2020 capital growth program of between C$700 million and $800 million.
However, due to the ongoing disruptions caused by COVID-19, Keyera has cut this projection to between $475 million and $525 million.
The funds will be used to complete the second phase of its Wapiti gas plant in Montney, Canada. The Wildhorse crude oil storage and blending terminal in Cushing, Oklahoma, will also go ahead, as will the Pipestone gas plant in Montney.
In addition, Keyera, along with its partner SemCAMS Midstream ULC, has made the decision to defer construction of the KAPS pipeline system for approximately one year. Regulatory approval processes are expected to continue through the rest of this year, with construction now due to begin in the second half of 2021.
Keyera stressed that the project remains “highly desired” for its ability to offer alternative and additional transportation solutions for condensate and natural gas liquids from developments in northwestern Alberta.
The company also noted that, with the cooperation of the project’s customers, all transportation agreements have been amended to support the deferral. As such, there have been no changes to long-term volume commitments.
Current expectations are that the economic returns of the project will be in line with previous forecasts.
In support of cost-cutting initiatives, Keyera has implemented salary and pay reductions for senior employees.
Effective from April 16, the company’s CEO, President and Chief Commercial Officer have taken a 20 per cent pay cut, while other executives have taken a 10 per cent cut. Keyera’s Board of Directors have also taken a 20 per cent reduction to their fees.
David Smith, CEO of Keyera, said that the decisions represent short-term pain for long-term gain.
“While this is a difficult and uncertain time in our industry, Keyera is committed to taking prudent steps to address the short-term challenges and enhance the long-term success of the company and our customers.
“With a dedicated team, disciplined strategy and a strong financial position, I am confident that Keyera will successfully navigate the current challenges and strengthen our foundation for future growth,” he added.
Keyera (KEY) is currently up 3.51 per cent to $17.26 per share at 2:47pm EST.