Canada's Keyera to Invest $65 Million and Enhance Ownership Interest in Alberta's Gas-Processing Sector

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Researched by Industrial Info Resources (Sugar Land, Texas)--Keyera Facilities Income Fund (TSX:KEY.UN) (Keyera) (Calgary, Alberta), an open-ended trust that operates one of the largest midstream businesses in Canada's natural-gas industry, has announced plans to invest $65 million to increase its share in gas-processing plants operating in the province of Alberta and to ramp up its system-wide processing capacity by 9%. Keyera intends to increase its share in four of its existing gas plants and to acquire shares in two more, effectively bringing its portfolio holdings to 17 and increasing processing capacity by 151 million cubic feet per day. All the acquisitions are in west-central Alberta, the heart of Keyera's operations.

Keyera's gas plants gather and process raw gas before injecting the gas into long-distance pipeline networks that transports it to end markets. The new capacity acquired by the company is capable of extracting natural-gas liquids (NGL) and processing sour gas. Subject to normal closing conditions, all of the new acquisitions are expected to close by July 15, 2010. Some parts of the acquisitions are subject to rights of first refusal.

Keyera will acquire an ownership share of 57% in the Minnehik Buck Lake Gas Plant and an ownership share of 20% in the Edson Gas Plant owned by Talisman Energy. It will acquire additional shares in its Brazeau River (1%, bringing Keyera's ownership to 92%), Gilby (1.7%), Nordegg River (7%), and West Pembina (7%) gas plants.

With the new acquisition, Keyera will own the largest share in the Minnehik Buck Lake Gas Plant, which is between the company's existing Bigoray and Rimbey gas plants. The area has significant geological potential, and the plant has widespread gathering infrastructure. Its ability to extract NGL and process sour gas increases the processing options for producers. Keyera soon will be submitting a proposal to the operating committee of the plant, whereby it will seek to become the operator of the facility. The current throughput of the plant is about 50 million cubic feet per day, while it has a license capacity to process 100 million cubic feet per day.

The Edson Gas Plant is in the foothills of the northwest regions of the province and will extend Keyera's reach in an area with relatively under-developed land, but with attractive geological characteristics. Operated by oil and gas producer Talisman Energy Incorporated (NYSE:TLM) (Calgary), the Edison plant is able to process both sweet and sour gas besides extracting NGL. With a license capacity to process 375 million cubic feet per day, the plant has an output of 215 million cubic feet per day.

The transactions also will include an interest of about 60% in approximately 260 kilometers of sweet and sour gathering pipelines, an inlet compressor and nine compressor stations at the Minnehik Buck Lake Gas Plant. Other acquisitions include about 12 billion cubic feet of probable and proved natural-gas reserves, and about 711,000 barrels of NGL reserves. The current production rate of natural gas is about 4 million cubic feet per day, and that of NGL is about 350 barrels per day.

Keyera's ownership interest will increase to 76% in the West Pembina plant. The income fund will acquire a 20% share in a field compressor and an additional 8% in the plant's sulfur-blocking facility. It will acquire 100% interest in the plant's 125,000 tons of sulfur inventory, and a 29% and 11% ownership interest respectively, in the Nisku S Pool and the Nisku W Pool, both of which supply raw gas to the West Pembina Gas Plant for processing.

The company's ownership interest in the Nordegg River Gas Plant will increase to 89% after the acquisition. With an additional 11% ownership interest in the plant's inlet compression, Keyera's ownership interest will increase to 83%.

With Keyera's additional ownership interest in the Gilby and Brazeu River gas plants, its ownership interests in the two plants will increase to 79% and 92%, respectively.

"These transactions are a continuation of our growth strategy in the Gathering and Processing segment of our business," said President and Chief Executive Officer Jim Bertram of Keyera. "The new plants meet all of our evaluation criteria. They are in areas where the geology is prospective and have the potential to continue to benefit from horizontal drilling and multi-stage fractionation techniques. As well, because these plants are connected to significant gathering pipeline infrastructure and are capable of extracting NGLs, they are a good fit with our Liquids Business Unit operations and overall integrated business strategy. We are also pleased to acquire additional interests in four of our existing plants, as this simplifies administration and gives us better opportunities to maximize the benefits of our business development initiatives."

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