Good morning. My name is Lyra, and I will be your conference operator today. At this time, I would like to welcome everyone to Keyera Corp's Second Quarter Conference Call. All lines have been placed on mute to prevent any background noise. After the speaker's remarks, there will be a question- and- answer session. If you would like to ask a question during this time, simply press star, then the number one on your telephone keypad. If you would like to withdraw your question, please press star followed by the number two. Thank you. I would now like to turn the call over to Calvin Locke, Manager of Investor Relations. You may go ahead, sir.
Thank you. Good morning. Joining me today will be Dean Setoguchi, President and CEO, Eileen Marikar, Senior Vice President and CFO, Jamie Urquhart, Senior Vice President and Chief Commercial Officer, and Jarrod Beztilny, Senior Vice President, Operations and Engineering. We will begin with some prepared remarks from Dean and Eileen, after which we will open the call to questions. I would like to remind listeners that some of the comments and answers that we will give you today relate to future events. These forward-looking statements are given as of today's date and reflect events or outcomes that management currently expects. In addition, we will refer to some non-GAAP financial measures. For additional information on non-GAAP measures and forward-looking statements, please refer to Keyera's public filings available on SEDAR and on our website. With that, I'll turn the call over to Dean.
Thanks, Calvin. Good morning, everyone. I'm pleased to announce that our board of directors have approved a 4.2% dividend increase, returning Keyera to its long history of sustainable dividend growth. The increase is supported by the growth of Keyera's fee-for-service business segments. Over the last five years, we've been investing significantly to create a fully integrated service offering from the Montney and Duvernay plays through to our core liquids infrastructure in Edmonton and Fort Saskatchewan. These strategic investments continue to deliver volume and cash flow growth. We remain on track to reach our targeted annual 6%-7% fee-for-service EBITDA growth out to 2025. Our liquids infrastructure segment delivered 21% year-over-year growth, reaching a new quarterly record of CAD 119 million. KAPS is now fully in service, with the second of two pipelines shipping its first volumes in June.
KAPS integrates our value chain, making us more competitive and enhances our ability to attract new volumes. Our platform offers customers a much-needed competitive alternative from wellhead to end market. In our G&P segment, we delivered CAD 84 million in realized margin. This result was achieved despite the impact of Alberta's wildfires. Again, we'd like to thank all emergency responders and Keyera personnel who ensured that everyone remained safe and that our assets were largely unimpacted. That liquid remains strong for our G&P business. We foresee continued filling of available capacity, particularly at Wapiti and Simonette, as producer activity ramps up. The expansion of the Pipestone gas plant is on track for completion in the first quarter of 2024. Our G&P customers are in a strong financial position and have multi-year growth plans.
This is driving continued growth of the segment, while at the same time increasing the length of contracts and improving cash flow stability. Our marketing segment had another strong quarter, supported by the strength of our iso-octane and condensate businesses. This segment delivered CAD 134 million of realized margin in the quarter and CAD 251 million year to date. We're increasing our 2023 guidance for this segment to range between CAD 380 million-CAD 410 million of realized margin. With the major investments of the last five years behind us, we expect growth spending to be lower going forward. This means we'll have more free cash flow to allocate. Our capital allocation priorities are unchanged. They're first to ensure financial strength and then a balance between increasing returns to shareholders and disciplined capital investments.
Our debt leverage metrics are well within our targeted range. Now we increased our dividend. In terms of future growth investments, they will be primarily focused on projects that leverage and enhance our existing core asset position in Western Canada. This could include a debottleneck of existing frac, a new frac expansion, and a potential KAPS Zone 4 extension. Any incremental investments need to generate a strong return underpinned by long-term contracts. I'll now turn it over to Eileen to provide an update on Keyera's financial performance for the quarter.
Thanks, Dean. Adjusted EBITDA for the quarter was CAD 293 million, compared to CAD 316 million for the same period last year. Distributable cash flow was CAD 207 million, or CAD 0.90 per share, compared to CAD 209 million or CAD 0.94 per share for the same period in 2022. Net earnings were CAD 159 million, compared to CAD 173 million for the same period last year. These results were driven by record performance from our liquids infrastructure segment and the third-best-ever quarterly marketing segment margins. Keyera continues to maintain a strong financial position, ending the quarter with net debt to Adjusted EBITDA at 2.6x, at the lower end of our targeted range of 2.5x-3x. Our guidance for 2023.
As Dean mentioned, we now expect our marketing segment to contribute between CAD 380 million and CAD 410 million of realized margin in 2023. This is up from our previous guidance of CAD 330 million-CAD 370 million. The revised guidance takes into account financial hedges currently in place and assumes AEF runs at capacity. There are no significant logistics or transportation curtailments and current forward commodity pricing for any unhedged volumes for the remainder of the year. Growth capital guidance remains unchanged at CAD 200 million-CAD 240 million. Maintenance capital guidance is now expected to be between CAD 95 million and CAD 105 million, up from the previous range of CAD 75 million-CAD 85 million. About half the increase is due to the completion of work that was already prepaid.
The balance of the increase includes additional maintenance costs, the Pipestone Gas Plant, which is expected to be recovered through increased future revenue. Cash tax expense is expected to be nil. I'll turn it back to Dean.
Thanks, Eileen. Macro outlook for our business environment remains very positive. Canada's energy resources will be essential in meeting the world's growing energy demand. Our basin continues to grow and set new records for both natural gas and crude oil production. LNG Canada and the Trans Mountain pipeline expansion will unlock future growth. We're excited to contribute to this growth by being an essential infrastructure service provider. On behalf of Keyera's Board of Directors and management team, I want to thank our employees, contractors, indigenous rights holders, and other stakeholders for their continued support. That, I'll turn it back to the operator for Q&A.
Thank you, sir. Ladies and gentlemen, we will now begin the question and answer session. Should you have a question, please press star followed by one on your touchtone phone. Again, that's star followed by one. If you would like to withdraw your request, please press star followed by two. Your first question comes from the line of Rob Hope from Scotiabank. Please go ahead.
Good morning, everyone. Thanks for taking my questions. First off, want to maybe get a little bit of an update on KAPS. How have volumes ramped relative to your kind of base expectations, just given, I guess it's early days, but just given some dynamics out in the basin, as well as now that the pipeline is in service, have discussions with customers accelerated? Have any additional contracts been signed?
Good morning, Rob. It's Dean Setoguchi, and glad you're participating here in our call in the middle of August. Hopefully I didn't defer your vacation. Listen, it's a great question that you have on, on KAPS, and I, I would have expected that. You know, first of all, we're very pleased that the pipeline is fully in service with, with the second pipeline again, delivering volumes in June. Again, it's, it's like any asset when you bring it up, you know, everything doesn't just turn on all at once. I would say that that process works very, very smoothly.
We work very closely with our customers, now that it's in service, and certainly there's a lot more visibility to growth in the basin, we have a lot of great discussions with our, with our producers. Again, you know, I wanna emphasize that, you know, first of all, we have a fully integrated system now, so we can offer that bundled service. Again, I always like to use analogy of, of your, your, internet, cable and cellphone and, and, security, home security provider. I'd say almost everybody uses a bundled service, because it's more efficient and, and, obviously, you know, our bundle package is the same way. I think that's a great advantage.
You know, what we're seeing is that our volumes are a little bit ahead of where we would have expected to start up. Again, it's still early days yet. We've always guided to the market that this would be a slow ramp-up, and we still expect that, but as of where we are today, you know, we're a bit ahead of schedule. I would reiterate that, as a final note, that we did guide 6%-7% deeper service, EBITDA growth out to 2025. A lot of that is coming from our G&P business and filling our white space there, but part of it as well is KAPS and the KAPS ramp up to 2025.
The great thing about KAPS is that, especially with the basin growth that we're seeing, we, we expect it to continue to grow in terms of volumes and cash flow right through the end of the decade.
All right, appreciate that. Then as a follow-up, just take. I wanna dive a little bit deeper into the comments you made on capital allocation, specifically with how you'll take a look at outperformance in marketing. You know, good to see another sustainable or a sustainable dividend increase. When you take a look at moving forward, how do you balance dividend increases versus growth capital? In an environment where you could see outsized marketing margins like 2023, you know, could you look to return those to shareholders via buybacks?
Yeah, listen, that's a great question, and, and before I turn that over to Eileen, I'd just say that we're very pleased with the position that we're in today. You know, we have-- we've, we've undergone a number of years of very significant capital for the last, you know, five, six years, and we've built a very strong Montney position, fully integrated Montney position over that period of time. We have those expenditures behind us. We have a very strong balance sheet, and we have growing cash flows. That puts us in a great spot where now we have options as to where we allocate capital to add the most value for our investors. With that, I'll, I'll turn it over to Eileen.
Thanks, Dean. Hi, Rob. Yeah, that is a great question. I, I think it is important to, to take it back to our, our overall priorities. You know, our first priority will always be to maintain our balance sheet strength, and we're, we're certainly there today. For this year, we are prioritizing paying down short-term debt from the higher marketing contribution. Beyond the balance sheet, our objective really is to grow distributable cash flow on a per share basis so that we can continue to grow the dividend. This can really be achieved in two ways: one, buying back shares or reinvesting in the business. As we look out to next year, it will be a competition for capital between these two options. Our preference would be to do smaller size, but impactful growth projects that, that meet our investment criteria.
Really by small, I mean smaller relative to the large-scale projects that we've undertaken over the past few years.
Thank you.
Thank you. Your next question comes from the line of Robert Kwan from RBC Capital Markets. Please go ahead.
Great. Thank you. If I can maybe just continue on the capital allocation topic. And Eileen, clearly, you're prioritizing the balance sheet. I'm just kind of wondering, you know, the, the low debt EBITDA is partly a function here of strong marketing. So do you introduce a third priority, and even just the fiscal dividend of reducing leverage? Like, how are you looking at that leverage range? Is it on the long-term marketing number? Are you, you know, even though you have the long-term number, are you kinda just planning for something that's closer to, to what you're doing? Because the other way you can grow DCF for shares is to just continue to repay debt and save the interest as well.
Thanks, Robert. Yeah, that's a great question. When we planned leverage, I mean, that 2.5x-3x times is, is very conservative, and, and certainly through various cycles, it has protected us from, from taking any drastic measures, like, for example, cutting the dividend during COVID. We never had to do that, so we're very, very much, you know, we wanna stick to those principles. When it comes to those marketing cash flows, you're absolutely right. We don't take into account nor plan for outsized marketing as we think about leverage going forward. We're really more to that base marketing guidance.
Is the bias then, whether if you can get the growth CapEx, that's great, but is the bias into 2024 to maybe continue to repay debt versus direct to share buybacks?
I think this year, like I said, you know, that it really is to repay, use those strong marketing cash flows to reduce our short-term debt. In terms of, you know, the rest of our debt profile, we don't have anything material that's coming due for the next, you know, until 2025. As we look at next year, it is if we have some great projects or if it's returning cash through buybacks, we will, we will look at both options going into next year.
Okay, that's great. If I can just finish with a couple of questions here on KAPS. The first is, are you able to disclose what the actual contribution was in the quarter and also confirm that what was booked in the liquids infrastructure was all third-party margin? The second is just, you know, with your new partner here, has there been anything, just Stonepeak, you know, having a fresh set of eyes on KAPS, whether it's the contracting or, or expansion potential, that you've been able to get out of the partnership so far?
Yeah, maybe, thanks for the questions, Rob, Robert. You know, maybe just the last question with our new partner, they've been really great to work with. They're very engaged, and Jamie's teams work very closely with them. Yes, we think that they've been very positive in terms of attracting new business. You know, we're gonna continue to build that relationship, and we're very aligned in terms of what we want to accomplish with this, this pipeline. That's all been great. You know, your, your first question, so disclosing amount. Yeah, we're not gonna disclose the amount of how much KAPS contributed in the second quarter.
I would say it was, it was pretty modest just because, again, you know, it came on, middle of the sort of mid, mid-quarter, but also, you know, there's a wrap-up profile, like each customer sort of come on sequentially. It wasn't like everything came on at once, the, the volumes that we do have. I would say it was modest in the second quarter.
Okay. Was it all third-party revenue, or are you booking intercorporate as well?
Yes. Yeah, third party. Third party.
Okay, that's great.
As you know, we, we have a note, I can't remember off the top of my head of any, any sort of intercompany, allocations, but, but, I can confirm it was third-party, revenue in, the second quarter.
That's great. Thank you.
Thank you. Your next question comes from the line of Robert Catellier from CIBC Capital Markets. Please go ahead.
Hey, I, I'd have some interest in knowing what the contribution is and also the schedule of the ramp-up over the next couple of years, looks like that might not be forthcoming today. Maybe Dean, you can talk about the actual physical operating performance of the asset since it's been placed into service. Second, you know, just the Zone 4, where do you stand with that today? What's your vision for a reasonable timeline for making a decision there?
Yeah, thanks for the question, Rob. It's, it's, it's great to get the three Rob questions right off the bat in sequence. You know what? You know, first of all, just maybe add more color to the ramp of KAPS, is that obviously a lot of the, the, the discussions we have with customers is very commercially sensitive, so we have to be mindful of that. There are confidentiality provisions put in place, and, you know, we'll update at the right time when it's, when it's good for our, our shareholders, but also respecting the confidentiality and sensitivity of those, those discussions. With respect to Zone 4, you know what?
We, we remain optimistic on, on Zone 4, you know, and especially as, you know, we see LNG Canada, it's not that far away now, and once that gets put into service, that's gonna be another couple of BCF of demand. We certainly see our, our basin growing to fulfill that demand. I think that's gonna be great for our whole NGL value chain. With that, some of that's gonna be in BC. We've obviously seen a lot of progress with, with the, the Blueberry River First Nations and also the Treaty 8. With that, there's more overall optimistic optimism in, in BC.
So we continue to have a lot of engaging discussions with customers in the, in that Zone 4 in Alberta and also into BC to track their volumes right through the KAPS and into Fort Saskatchewan. Timing on that, you know, I think that we'd probably expect more in the first half of next year. We do, you know, we do have really great conversations on that perspective. Again, you know, the whole, the whole rationale for, you know, why producers are really interested is, A, they wanna have a competitive alternative. They're investing billions of dollars along that Montney Fairway.
You know, from a reliability perspective, it's nice to have two systems to get your, your, your volumes into Fort Saskatchewan, where the market hub is. Second of all, commercially, it's always nice to have, you know, two parties that you can negotiate with to for your, for your service. You know, we're happy to be that competitive alternative. I'd also maybe say the third point is that we have a brand-new pipe. From a reliability perspective, you know, we think we, we'll have really, really stellar run, run performance over the next several years. Maybe just on the operating performance on KAPS, I'll, I'll turn that over to, you know, to Jarrod here.
I, I do commend the group for the great job they did in, in commissioning and, and, bringing that, that project up. It went as seamless as one could hope for.
Yeah. Good morning, Robert. It's Jarrod here. We're really pleased with how that project came online and ramped up. You know, as Dean, Dean described, it was really a staged approach with the various customers and really on both lines, rather than kind of one shot at a time. And really pleased with how our, our ops and business teams worked with the customers and worked with each other to, to really bring all those up smoothly. We've been very pleased with the operational performance of that, of that line so far. You know, it's allowed us to be a bit ahead of volumes, as you heard, but it's, it's early days in that ramp-up, and that operational performance is, is really key for us in giving our existing customers confidence and/or ability to attract new customers.
Again, really, really pleased out of the gate.
Okay. Thanks for that answer. I have a similar question on frack capacity. It looks like, you know, you're, you're pretty high in terms of your utilization, and that's not uncommon in the industry right now. It leads me to believe that maybe the debottlenecking, although it's capital efficient, I'm just curious if it's really enough capacity. Related to that, I'm, I'm curious about your appetite for being in the market for a new frack, more significant expansion at the same time that Pembina is in the market with theirs.
Yeah, that's a great question. I mean, obviously, frack capacity is tight, tight, and when you look at the forecast for not gas volume growth in the basin over the next three or four years, it's very significant. With that, we're gonna see a lot more liquids that get stripped out of the gas stream as well. We think that's a great opportunity for our frack complex at KFS. You know, again, we're very pleased that we're able to add capacity in a very tight market with our acquisition, 21% acquisition of interest in, at KFS earlier this year. That helps us out. You're right.
I mean, we've been telling everyone that we've certainly been doing the engineering on, on a debottleneck, which is, you know, I think likely gonna be a great opportunity for us. We certainly have our, our eyes set on a potential frack expansion in the, in the future as well, because more capacity will be required. You know what? We provide a great service out of our, out of, out of our KFS site. It's very, very well connected from a pipe perspective and for all commodities, but also for, for rail and truck egress as well. Jamie, is there anything else you wanted to add on that? Yeah.
Yeah, Dean, no, I think you, you hit the high points. I think the only thing I'd add as well is that, you know, the opportunity exists, and that we're making really good progress on actually recontracting our existing frack as well. You made note that we've stepped into the other 21% at KFS, but, y ou know, the opportunity is now to be able to recontract and extend existing agreements out, into the future, and that's been our first focus. We've been very happy with the success on that front. Then, as Dean alluded to, we're looking at opportunities to either debottleneck or expand on our site.
I think, I mean, obviously, with the fully integrated system out of the Montney, with KAPS in place, we're looking for those full bundled package deals where, you know, we can offer, you know, G&P services, you know, NGL transportation, fractionation, and marketing services. Trying to provide that full service and, obviously, that helps boost our corporate profits overall.
Okay, last question from me, you know, I'm happy to see the 2023 marketing guidance increase, but as you've heard me say before, I've been expecting, directionally, a long-term increase at some point. Is frac capacity the bottleneck for, for being able to do that, or is there something else, you need to see, to take a second look at the long-term marketing guidance? Thank you.
Yeah, I mean, that's a great question regarding our marketing guidance. Obviously, we have a very good track record, with our, with our marketing business. You know, I, I do want to emphasize that our marketing business is really leveraging off of the physical assets that we own and the, and the volumes that we have in our system. It's, it's a way to really maximize profitability across our entire, value chain. Maybe with respect to the, the, guidance and, a potential increase, I'll turn that over to Eileen.
Sure. Thanks, Robert. Yes, I know this is a great question because we have consistently outperformed that guidance. You know, maybe just a little context on the base guidance. It's meant to represent a level of contribution that we have a high degree of achieving within, like, certain normal or typical assumptions. Those are laid out in the MD&A. The record margins that we saw last year and the increase in guidance this year is largely driven by exceptionally strong iso-octane premiums that cannot be hedged, as well as RBOB pricing that's, you know, well above the five-year average. That said, we do plan to revisit our base guidance later this year in light of having access to more volumes now that KAPS is online and with the additional frac capacity that we just acquired. More to come on this.
Okay, thanks, everyone.
Thank you.
Thank you. Your next question comes from the line of Linda Ezergailis from TD Securities. Please go ahead.
Thank you. Recognizing that it's a board decision on a dividend increase, beyond your 50%-70% payout ratio guardrails, how might we think of the frequency and growth rate of future dividend increases? Would kind of the default be typically once a year, or maybe prospectively, we might see as new accretive assets, whether they're built or acquired, come in and contribute, maybe a bit more of a bump then?
Hey, good morning, Linda, and great question on the dividend. You know what? First of all, I, I want to reiterate that we're very pleased to return to dividend growth again. You would know as well as anybody that that's really the, the, the legacy of our company. We started out as a trust 20 years ago. This is our 20th year as a public company, and we've, we've distributed and, and divvied out a lot of money over that period of time. We took a bit of a hiatus after 2019, and part of that was we hit, we hit the COVID period, but we also had a heavy capital spend with KAPS.
But I do want to reiterate, though, during that time, we shut off our DRIP, so we actually self-funded KAPS during that period of time. We, we didn't increase our dividend, but, you know, now that KAPS is behind us, we're able to do that now. We've never had a, we've never reduced our dividend, so anytime we increase our dividend, it's, it's got to be sustainable. Let me just turn it over to Eileen, and she can maybe speak about our philosophy on dividends going forward.
Thanks, Dean. Yeah, Linda, it's really tied to growing that distributable cash flow on a per-share basis. you know, EBITDA, but after taking into account interest, taxes, and maintenance expenses. It has to be supported by growth in our fee-for-service business. We're on track to achieve that 6%-7% EBITDA growth out to 2025. That comes from our fee-for-service business. That does support then growth in a DCF per share. you know, ultimately, the timing and the amounts of future increases will be a board decision, that's the framework that we use.
Okay. Thank you. Just as a follow-up, the 6%-7% growth, I mean, I'm, I'm assuming it's a high confidence that you can achieve that, but what element of that, if any, might be coming from future capital investments, even if they're small bolt-on projects, versus the white space that you already have or the projects that are under construction?
Yeah, that's a great question. You know, the great thing is, is that most of that 6%-7% increase is, is capital that has already been invested already, and we've, we've, we've spent the money. It's really our, our G&P business and filling up white space there. There is some capital associated with the Pipestone expansion, so that's in the $50 million-$60 million range, but we've, we've disclosed that. You know, some of that is tied to our, our acquisition, the 21% acquisition of KFS. And obviously, we see contribution from our KAPS pipeline that's gonna wrap up over time. As I said, you know, that's gonna contribute to our, our EBITDA growth well, well into the end of the decade, that'll continue to grow.
You know, we'll enhance that. I mean, obviously, new projects will have a lead time in terms of build and being able to generate a return off of that, we do see some good projects to to build, to add future growth for the future as well.
Thank you. Just as another quick follow-up, as it relates to cash flows, recognizing that, you know, there is some below the line moving parts below EBITDA, can you talk about the current medium and longer term outlook for your cash taxes as your capital expenditures kind of lighten up in terms of your, your tax pools and how they're depleting, and how we might think of the cash taxes ramping up over the next five years?
Thanks, Linda. Yeah, cash taxes, I mean, really, we, we don't provide specific guidance on that. We will in the third quarter for next year. As you think about our pools, certainly the KFS acquisition gave us significant pools, as well as the large capital projects that we've undertaken, that will help for certainly a period of time. You're absolutely right, that there comes a point where taxes is something that is definite and will come. That's just something that we will continue to manage.
Thank you.
Thank you. Your next question comes from the line of Patrick Kenny from National Bank Financial. Please go ahead.
Thank you. Good morning. Just to follow up on the liquids infrastructure segment, just wanted to confirm that you see this higher demand for your storage and fractionation services as being repeatable, I guess, under current commodity prices. If so, what opportunities there might be to exceed that 6%-7% Adjusted EBITDA growth outlook simply from, you know, sweating the assets, either through optimizing your commercial framework at KFS or perhaps looking at new ways to maximize throughput and NGL handling capacity at Rimbey?
Right. Well, listen, I mean, we, we still have white space in our system, we're not forecasting, 100% utilization of all of our, our assets. You know, is there possibilities to exceed our 6%-7% growth? I would say that the best opportunities are still their G&P business and also in our KAPS pipeline, where we'd have the most, most, capacity to do that. You know, we'll have to see in timing of, of when, when those volumes show up, but we, we do believe that we're gonna help enable the basin to grow, and, we'll see more volumes through our system over time. In terms of higher demand for our liquids infrastructure, assets, you know, maybe I can turn that over to Jamie, and he can provide a bit more color on that.
Yeah. Thank- thanks for the question, Pat. You know, like, I mean, I, I think what, what your, you know, your question points to is something that we've always done in our organization, is trying to either optimize our existing assets physically, and we've been able to do that over the years and continue to look to do that around our KFS asset, but also with AEF as well. You know, we've, we've gotten, you know, a few extra percent of capacity coming out of our turnaround last fall, and we've got other ideas to, to, you know, increment up the capacity at AEF, not in a, in a, you know, 10s of percents , but, you know, in, in single digit percent , so over the next few years.
You know, as you were alluding to at KFS. Physically, we can do it, and then, as you alluded to, you know, my group's mandate is to obviously optimize commercially, you know, how we can sweat the assets, as you said. You know, I think there's, there's opportunities, but as Dean says, you know, I think the more impactful opportunities will lie in the Wapiti Pipestone, the KAPS capacity that we have, that, that's what's driving, you know, our target around EBITDA growth.
Maybe just add to what Jamie said, Pat, is that, you know, we always talk about the 21% interest that we acquired at KFS, and, you know, we always talk about the frack, but with it also came storage, storage capacity and also the pipeline capacity on our FSPL system between Edmonton and Fort Saskatchewan. You know what? As, as volumes grow, we think that there's gonna be certainly more demand for that, that storage, our pipeline capacity, and also more volumes also translates to likely more business through our terminals as well. I, I think it's, it's a pretty positive outlook.
Then, I guess, with respect to, to throughput in the South Region, you mentioned in the MD&A that, you know, you expect Deep Basin volumes to remain relatively strong, just given the financial strength of producers. Just curious if there's any other optimization or consolidation opportunities across the asset base in the south as you look into, say, 2024?
Yeah, you know what? We're we always talk about our Montney business, which, you know, that's where the majority of our of our G&P margins are generated. You know, we shouldn't forget about the Deep Basin, because the Deep Basin is still an attractive place. The geology is still very strong, not just with some of the conventional plays that have been developed over time and applying, you know, better technologies to drilling and completing them. You know, we're seeing more emergence of the Duvernay that's, you know, that's starting to become a emerging play down there, which I think could be exciting for us. We see opportunities, but we still have a lot of we still have white space down in, in our south portfolio.
Our primary focus is gonna be to fill that, fill that and, and make it as profitable as possible. But at the same time, you know, maybe, maybe Jamie can comment too. I mean, you know, I think we're starting to see opportunities to recontract, some of the, some of the volumes that we have going through our facilities there, but, and, and, and that's been looking good as well.
Yeah, just to give a little bit more flavor, and I alluded to this, I can't remember if it was last, last quarter or the quarter before, is that, you know, we, we, we are seeing, relatively high utilization in our Strachan North Brazeau, complex that's connected, with, with pipe. As Dean alluded to, is that we, you know, we've been, in the last six months, in the process of recontracting, with customers around those assets and based on the fact that there is limited, capacity available, you know, we're, we're, we're pleased to, with the results of that recontracting.
You know, the, that white space that Dean alludes to is probably more in the Rimbey area, but as Dean alluded to, is that, that's, that is where we're starting to see some pretty encouraging results from, from the Duvernay. You know, we, we have, you know, we're, we're, we're, we're optimistic with respect to, you know, being able to support those producers' growth, you know, at, at the Rimbey gas plant. That, that gas plant is fully integrated into our value chain, pipeline connected all the way into Fort Saskatchewan. You know, that's a key, key asset for us in the, in the south G&P asset base.
All right. That's great, guys. I'll, I'll leave it there. Thanks.
Thanks, Pat.
Thank you. Your next question comes from the line of Fong Huang from BMO. Please go ahead.
Hi, thanks. Good morning. A couple of questions on key new ventures. I'm wondering, perhaps maybe a commercial update on your key projects in new ventures, and I'm thinking more about potential sanctioning. I'm also curious around any thoughts around the draft legislation on tax credits last week, and maybe comment on how you think about your balance sheet into these potential opportunities.
Yeah, good morning, Fong, and, really great questions. We're excited about our new ventures, opportunities. You know, certainly I would say they're more longer term, looking at the back half of the decade. Again, we think that we're very, well-positioned to capture, more opportunity there. As I said before, I mean, as an infrastructure company, we provide essential services to, conventional hydrocarbon business, mainly on the gases and NGL side. For the, you know, enablement of low carbon products, you need the same kind of services. You need pipelines, you need storage, above ground, below ground storage, you need, truck and rail logistics, and, you also need to have, processing, capabilities as well.
All things that we have a lot of strengths in. We see a great opportunity there to maybe repurpose some of the assets that we have in the greater Edmonton, Fort Saskatchewan area. Specifically, we have a really great undeveloped land block there that we wanna develop a low carbon industrial park. With that, I mean, this is all under Jamie's group, and, and maybe I'll turn it over to him to provide more color on that.
Yeah. You know, I, I think I can provide a little bit more flavor around, you know, some of the things that we've announced previously with respect to, you know, relationships that we have with CN around rail. I can share with you that, you know, we've gotten a lot of interest and uptake with respect to customers, with respect to the unit train opportunity that we see with CN on our co- conjoining lands up, up, up in the Fort Saskatchewan area. You know, we, we are progressing with understanding those opportunities a little bit more. We're spending some money on engineering to, to, to forward that opportunity.
Similarly, we're, we're in conversations with other entities around carbon capture sequestration, to really make our lands the, you know, the, the preferred location for some of the opportunities that, that, that others are looking at. Specific with respect to tax credits, not exactly sure, you know, what, what, what-- where you're leaning with respect to that question. Perhaps you can, you know, just reach out to our, our investor relations group to maybe pose that question and get, get the answers you're looking for.
Okay, thanks for that. Yeah, I was more curious if the legislation is anything different than you were expecting, and probably not, but more checking on that. Can you also talk about, are you-- is anything with these parties projects related at all to the ammonia value chain? Could you comment also, are these more in the context of multi-billion dollars of capital opportunity?
You know, maybe just from a general macro perspective, we are seeing general interest in ammonia. I think, I think Japan, you know, they're expressing an interest for ammonia, and they have incentives in place.
How real that is?
You know, I guess only time will tell, but there's certainly a lot of interest. You've heard different projects that have been out there. We've been approached for siting some opportunities on our lands. Again, it's still very early days. The great thing is, is that if this is a real opportunity, we have, you know, I'd say, one of the best locations, if not the best locations, to develop an ammonia project.
Again, it's just because of our connectivity in the area, where we have industrial zone land, we have cavern, underground cavern capacity. You know, we have the potential for our, our, rail terminal with CN to egress, you know, ammonia to the West Coast. Again, it's still early days and, and, you know, I think there's got to be a lot of work, even from a transportation perspective and, and, the safety of transporting ammonia through communities all the way to the West Coast. Maybe the last advantage we have is we're very close to, you know, where you would connect to a carbon capture line. Again, all things that you would need for a, for ammonia project. You know, early days, but we're seeing. We're certainly seeing interest there.
Okay. Then maybe lastly, anything on Wildhorse, changes on outlook there?
Yeah, great question. We haven't talked about Wildhorse in a while. That, that asset, you know, just based on where crude was, was trading, given the fact that, you know, backwardization that we've seen over the last couple of years. You know, when it, when it started up, it. You know, we had an existing customer base contracted the facility. We haven't seen a ton of, of volumes moving through the terminal, but that, that has actually started to change in the last quarter. We're, we're really optimistic now based on the unique characteristics of that, that terminal, and the capabilities of that terminal, and getting familiar with the entities that, that, that do do commerce in Cushing.
That, that asset is starting to perform the way we envisioned when we originally sanctioned, yeah, that, that asset. A timely question. I would have probably had a less rosy outlook to share if you'd posed that question a year ago or even six months ago.
Okay, great. Thanks for the update.
Thank you.
Thank you. There are no further questions at this time. I'd now like to turn the call back over to Mr. Calvin Locke for any closing remarks.
Thank you all once again for joining us today. Please feel free to reach out to Keyera's Investor Relations team with any additional questions you may have. Thank you.
Thank you, presenters. Ladies and gentlemen, this concludes your conference call for today. We thank you for participating and ask that you please disconnect your lines.