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Investors - MAY 15, 2019

SemCAMS Midstream and Keyera to build Canadian liquids pipeline system

by Released

SemCAMS Midstream has entered into an asset joint venture with Keyera Corp. to construct a natural gas liquids and condensate pipeline system to connect the liquids-rich Montney and Duvernay production areas of northwestern Alberta to the fractionation and condensate hubs in Fort Saskatchewan, Alberta. This pipeline system provides producers additional and alternative transportation solutions to meet growing production and is supported by long-term contracts with significant take-or-pay commitments.

This joint venture brings together two producer-focused midstream companies to develop a world-class pipeline and replaces SemCAMS Midstream’s previously announced Montney to Market (M2M) pipeline. SemCAMS Midstream and Keyera will be equal partners on the project, with Keyera acting as operator. Both partners will form a commercial committee to ensure collaboration as they pursue additional volume commitments.

SemCAMS Midstream will now have liquids take-away capabilities, introducing another component to the midstream value chain. This project strengthens SemCAMS Midstream's role as a leading Canadian integrated midstream company, providing an improved ability to offer comprehensive infrastructure solutions for producers across a broader capture area.

The current scope of the project includes a 16-inch condensate pipeline and a 12-inch NGL pipeline. These pipelines are designed to be connected to third-party facilities as well as Keyera and SemCAMS Midstream-owned facilities. Keyera and SemCAMS Midstream expect to have nine gas plants operating in the area by 2022, with access to approximately 2.25 bcf/d of gas processing and 130,000 bbl/d of condensate handling capability in Canada's premier liquids-rich fairway stretching from Pipestone to Kaybob. The project is targeted to become operational in the first half of 2022, with the majority of the capital spending expected to occur during the second half of 2020 and into 2021.

Total cost for the project is estimated at C$1.3 billion ($970 million). SemCAMS Midstream's 50 percent portion of the construction cost will be financed with a combination of funds from SemGroup, KKR Global Infrastructure Investors III and affiliated investment vehicles, internally generated cash flow from SemCAMS Midstream, and fully-underwritten financing at SemCAMS Midstream, consisting of a C$300 million ($223million) KAPS construction facility which is being provided by a syndicate of banks led by TD Securities and BMO Capital Markets. This facility will be drawn as construction begins in mid-2020, subject to regulatory approvals. SemCAMS Midstream intends to continue maintaining a prudent capital structure before, during and after construction and expects the project to materially improve SemCAMS Midstream's overall credit profile.

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