Keyera moving propane hedges to Conway index

OREANDA-NEWS. Canadian midstream operator Keyera is switching more of its propane hedges to Conway propane indices.

Propane markets expose the company to the most commodity price risk, Keyera said today in its first quarter earnings call. But the company also emphasized that propane is a small portion of its overall book and that much of its revenue is generated by fee-for-service contracts.

Keyera's marketing revenue fell 38.5pc year-on-year in the first quarter as lower NGL prices offset higher sales volumes.

Marketing revenue for the quarter was C\$517mn, down from C\$841mn a year earlier, despite averaging roughly 20,000 b/d more sold compared to the prior year.

Keyera plans to bring its Josephburg, Fort Saskatchewan, Alberta, rail terminal online in July to help alleviate some of the propane market's oversupply caused by Kinder Morgan's reversal of the Cochin pipeline last year. The terminal will charge a fee that reflects the terminalling cost at that site and comparable sites plus a built in margin. Indirectly, Keyera will be charging a fee to ship propane to the US.

Keyera was able to capitalize on cheaper butane feedstock prices by running its iso-octane producing Alberta Environmental Fuels facility at nearly full capacity.

The lower marketing figures were offset by stronger operating income from the company's natural gas, liquids and NGL business units.

The company benefited from higher NGL fractionantion and storage fees, which Keyera raised on 1 April in response to greater demand for services at its Fort Saskatchewan facilities in Alberta.

Keyera completed a gas plant expansion and a 10,000 b/d condensate stabilizer at the Simonette gas plant, a 30,000 b/d de-ethanizer unit at the Fort Saskatchewan facility, and the Twin Rivers natural gas pipeline system during the quarter.