Keyera Corp.

Lavonne Zdunich – Director of Investor Relations David Smith – President and CEO Steve Kroeker – Senior Vice President and Chief Financial Officer Brad Lock – Senior Vice President, Gathering and Processing Business Unit Dean Setoguchi – Senior Vice President, Liquids Business Unit

David Noseworthy – CIBC Rob Hope – Macquarie Securities Robert Catellier – GMP Securities Matthew Akman – Scotia Bank Andrew Kuske – Credit Suisse Robert Kwan – RBC Capital Markets

Thank you, and good morning. It’s my pleasure to welcome you to Keyera's 2015 first quarter conference call.

With me are David Smith, President and Chief Executive Officer; Steven Kroeker, Senior Vice President and Chief Financial Officer, Brad Lock, Senior Vice President, Gathering and Processing Business Unit; and Dean Setoguchi, Senior Vice President, Liquids Business Unit. In a moment, David will provide an overview of the quarter, Brad and Dean will discuss the business and Steven will provide additional information about our financial results.

After that, we'll open the call for questions. Before we begin, however, I would like to remind listeners that some of the comments and answers that we will be providing today speak to future events.

These forward-looking statements are given as of today's date and reflect events and outcomes that management currently expects to occur based on their belief about the relevant material factors, as well as our understanding of the business and the environment in which we operate. Because forward-looking statements address future events and outcomes, they necessarily involve risks and uncertainties that could cause actual results to differ materially.

Some of these risks and uncertainties include fluctuations in supply, demand, inventory levels, and pricing of natural gas, NGLs, isooctane and crude oil, the activities of producers and other industry players, our operating and other costs, the availability and cost of materials, equipment, labor and other services essential for our capital projects, contractor performance, governmental and regulatory actions or delays, general economic conditions, and other risks as are more fully set out in our publicly filed disclosure documents available on SEDAR and on our website. We encourage you to review our MD&A, which can be found in our 2015 report published yesterday and it is available on our website and on SEDAR.

With that, I'll turn it over to David Smith, our President and CEO.

Thank you Lavonne, and good morning everyone. Thanks for joining us today.

I’m pleased to report that Keyera had a great start to the year. Adjusted EBITDA for the first quarter was $185 million, 71% higher than the first quarter of 2014.

All three business segments performed well and contributed to our strong financial performance. Our Gathering and Processing Business Unit reported a 25% increase in operating margin compared to the same period last year.

Our NGL Infrastructure segment increased its operating margin by 37%. And Marketing’s results were strong again this quarter and similar to the same period last year.

Distributable cash flow was $140 million, 79% higher than the first quarter of 2014. This resulted in a payout ratio of 40% in the quarter and about 50% for the last 12 months.

In February, we announced a 7% increase in our dividend beginning with our March dividend, which was paid in April. In April, we completed a two-for-one share split and paid our first dividend at the new rate of $0.115 per share on a post split basis.

Steven will speak more about our financial results later in the call. Over the last two months, we've completed three strategic growth initiatives; the gas plant expansion and condensate stabilizer at Simonette, the de-ethanizer project at our Fort Saskatchewan facility; and the Twin Rivers pipeline system.

All of these projects are now operating and generating incremental cash flow. In addition, we continue to make good progress on a number of projects including the turbo expander at Rimbey, the Josephburg rail terminal and the Alder Flats and Zeta Creek gas plants.

All of which we expect will be completed over the next several months. Keyera is very well positioned for continued growth with our network of interconnected gas plants, pipelines and facilities, as well as our diverse service offering within this Western Canada Sedimentary Basin, our gathering and processing facilities are located to serve some of the most economically attractive liquids rich gas developments in North America.

Including such zones is the Mannville, Glauconite and Montney. Our condensate network is industry-leading with demand growth – as oilsands production continues to increase.

We continue to pursue new investment opportunities such as the recently announced baseline terminal crude oil storage project, which is underpinned by tenure fee-for-service contracts. As we continue to expand our asset base, service offering has become more.

With that I’ll pass it over to Brad Lock to discuss our Gathering and Processing Business Unit.

Thanks David. As David mentioned, the Gathering and Processing business had a strong quarter.

Overall, net processing throughput was 1.23 billion cubic per day, up 10% from the first quarter of 2014, as several of our facilities including Rimbey, Nordegg River, Minnehik Buck Lake and Pembina North were operating at or close to their effective capacities. In the first quarter, volumes at our Strachan and Brazeau River gas were affected by TransCanada pipeline curtailments.

As TransCanada continues maintenance and integrity work on their systems. As a result, first quarter net throughput volumes were down slightly, about 5% from the fourth quarter of 2014.

While TransCanada has recently advised that the curtailment at our Strachan plant has been lifted, curtailments continue to affect other parts of the TransCanada system, which will affect Keyera’s volumes in the second and possibly the third quarters of this year. In addition, Keyera will be undertaking maintenance turnarounds in the second quarter at the Rimbey, Brazeau River and Bigger A gas plants, while the Minnehik Buck Lake gas plant has a turnaround plan for the third quarter of this year.

Partially offsetting the effect of these activities our incremental volumes that we are beginning to see in the second quarter associated with two projects that were recently completed. At our Simonette gas plant, the plant expansion and condensate stabilizer were completed during the quarter.

This has enabled us to activate the 6-inch condensate pipeline and additional Montney volumes from the Wapiti region. We also completed the Twin Rivers pipeline system, which is now delivering incremental gas volumes to our Brazeau River and West Pembina gas plants.

Looking forward, we are expecting [indiscernible] half of the year, from the start of the Alder Flats gas plant being constructed by Bellatrix Energy and the Zeta Creek gas plant being constructed by Velvet Energy. Demand for infrastructure continues despite the challenge that low-commodity prices present for producers.

During the quarter, we reached agreement with the customer to construct a 17 kilometer extension of our Wilson Creek pipeline, which delivers raw gas to our Rimbey gas plant. The project is underpinned by take-or-pay contract.

Based on the proposed schedule, we are targeting to have the extension operational in early 2016. I will now turn it over to Dean to discuss the Liquids business unit.

Thanks Brad. The Liquids business unit also had a strong quarter with both our NGL Infrastructure and Marketing segment is performing well.

We can continue to see a high level of activity at our facilities driven by increasing liquids rich gas and oilsands growth. To culminate this increased demand for services, we have a number of projects underway that will add incremental cash flow in the near future.

During the quarter, we completed a 30,000 barrel a day de-ethanizer at our Keyera Fort Saskatchewan complex. We will continue to ramp up volumes over the remainder of the year 2016, as producers increase their production.

The majority of our share of the facilities capacity is contracted under a long-term take-or-pay agreement. We expect to be generating a incremental cash flow from our Josephburg rail terminal and our 13 storage cavern, as we complete these projects and bring them both into service in the third quarter.

In the first half of 2016, we expect to have the fractionation expansion completed at our Fort Saskatchewan complex, which will more than double our C3 plus fractionation capacity at that site. Looking forward, we have a number of other projects that will add to our revenue stream, most notable is our baseline terminal, which addresses demand for merchant crude storage, oil storage in the Edmonton area.

This project is a 50/50 joint venture with Kinder Morgan, initially providing 12 tanks or 4.8 million barrels of above ground crude oil storage. This project is fully underpinned by several take-or-pay agreements providing Keyera with a stable and predictable cash flow stream for a number of years.

We expect the first set of tanks to be in service in the second half of 2017. Our iso-octane business continued to perform well with Alberta Envirofuels facility operating near capacity in the quarter.

With reliable access to butane, which is the primary feedstock for AEF and Keyera’s development of new markets for iso-octane this business continues to generate very attractive returns. The Marketing business once again performed very well during the quarter.

Our risk management program was effective in protecting our NGL inventory from the effect of fall in commodity prices in 2014 and contributed a realized cash gain of $40 million to our Q1 results, offsetting a significant portion of the inventory write-down we reported at year end. Our risk management program continues to deliver the results we expect and is meeting our ultimate goal of reducing variability and our marketing cash flow.

With that, I’ll turn it over to Stephen to discuss the financial results in more detail.

Thanks Dean. As David mentioned earlier, we were pleased with how all segments of our business performed during the first quarter.

Net income was $57 million comparable to the same period last year, even though it includes a non-cash impairment charge approximately $20 million pretax relating to the write-down of our 50% ownership interest in the Bonnie Glen Pipeline. The pipeline is currently underutilized and as a result will be shut down by its operator later this year.

Our adjusted EBITDA was a record $185 million in the first quarter of 2015, $77 million more than the first quarter of 2014. On a trailing 12 months basis, our adjusted EBITDA continues to grow, reaching over $600 million by the end of the first quarter 2015.

This performance reflects the strength of each of our business segments including the effectiveness of our ongoing risk management program, which can be seen in the marketing results over the last two quarters. In the first quarter of 2015, we had $39 million in realized gains related to risk management contracts that were put in place to protect the value of our inventory and to protect margins.

As can be seen in the notes to our first quarter financial statements, we continue to employ risk management contracts to prudently protect the value of our inventory and to help protect margins. We have refined our cash tax estimate for this year and now expect 2015 cash taxes to be between $75 million and $85 million, $10 million less than previously indicated.

At March 31, we estimate our tax pools at $1.4 billion consisting primarily of high claim rate pools. We anticipate cash taxes for 2016 will be reduced as a result of increased capital cost allowance deductions related to several major capital projects that became available for use in 2015.

Our capital liquidity continues to be strong with the net debt to EBITDA ratio of 2.3 times at March 31 compared to our strictest covenant of four times. As well, as of March 31, the asset value of our foreign-exchange hedges relating to the principal portion of our outstanding debt was approximately $90 million.

Given our continued strong capital program, Keyera is reactivating an amended premium dividend reinvestment plan, effective with the May dividend payable in June. The premium dividend reinvestment plan will have shares issued from treasury at a cost effective 3% discount and participating investors will receive cash equal to 101% of the regular dividend.

Our regular dividend reinvestment program raised $18.3 million this quarter and we expect this to increase going forward with reactivation of the premium component of the dividend reinvestment plan. Keyera is well-positioned to execute 2015 capital plan of $700 million to $800 million and to selectively pursue acquisition opportunities.

More information on our financial results and our dividend reinvestment programs, please visit our website. That concludes my remarks, David?

Thanks Stephen. The lower commodity price environment has created a challenging time for our industry, most oil and gas producers have curtailed their 2015 capital budgets, which has slowed the pace of drilling and development activities across Western Canada.

To date there has not been a material effect on our operations and we believe that our business model provides insulation from short-term changes and activity levels. Our assets are strategically located in the Western Canada Sedimentary Basin, where prospective geology and proximity to infrastructure allows liquids-rich gas wells to remain economic in the current environment.

As Brad and Dean highlighted, both of our business units are expected to continue to generate additional cash flow as we bring new projects on line. We take a long-term view of our business and we’ll continue to focus on the next phase of infrastructure investment that the industry will need.

With a strong balance sheet, low payout ratio and access to capital we are well positioned to prudently fund these expenditures and pursue selective acquisitions. On behalf of Keyera’s Directors and management team, I would like to thank our shareholders for their continued support and our employees for their hard work and dedication.

I look forward to continued success in 2015. Finally, you may have noticed the absence of a familiar voice this morning.

I would like to take this opportunity to recognize and express our appreciation to John Cobb, our Vice President of Investor Relations, who has decided to retire this summer. John has been with Keyera since we started in 1998 and he has worked with many of you over the years, patiently explaining our business.

Unfortunately, John could not be with us today, but I would like to take this opportunity to say thank you and wish him all the best in the future. John will still be around for the next few months, so please feel free to give him a call to wish him well.

With that I’ll turn it back over to the operator, please go ahead with any questions.

Thank you and good morning. Congratulations on a good quarter and many congratulations John on his retirement.

I guess I’ll have to give him a call. Just in terms of the impact of curtailments on the [indiscernible] can you give us an idea of what that was and what you're expecting for Q2?

David, this is Brad. We had some curtailments at a couple of our facilities, namely the Strachan and the Brazeau River plants, and those are scenarios where our customers did not have sufficient firm service to move their volumes on to sales.

Throughout the second and third quarter we are expecting those curtailments to continue at some of the more northern facilities, Brazeau River, Buck Lake areas, while we have been advised the curtailments of Strachan have been relieved and we are now flowing full nominations of that facility.

So might the impact should be similar to what we saw in Q1, so hopefully kind of just adjusted from there going forward that would get us in the ballpark?

There is a lot of noise that enters into that. The TransCanada curtailments have – are fairly dynamic in nature, so they tend to vary and particularly in Q2 when you see their maintenance program in addition to that, as we mentioned we’ve got our turnarounds in Rimbey, Brazeau and Bigger A that will also affect our volume for that quarter.

Offsetting that you have Twin Rivers bringing volumes in for Q2 as well, positively.

Maybe just moving to your diluent-handling, I was wondering if you could give us some idea of what sort of incremental offering margin we should expect between say Q1 and the end of the year related to your diluent-handling services contracts, as they – your producers that – your contractor would ramp up production?

David, I’m not sure exactly what you’re asking, we’re not in a habit of providing guidance in terms of the actual contribution for any of the pieces of our business.

I guess what I was thinking is that, you signed a number of contracts with each subcontractor, kind of the materiality is either become less because you're a bigger company, but it's been kind of floored, but I was wondering if you might be able to give us an idea collectively because then that doesn't get you into kind of confidentiality agreement issues as opposed to guidance on what to expect it’s more what is a real impact of those contracts?

I'm not sure we give you any quantitative answer to that. I mean, we certainly can talk about the parties involved and sort of the general direction, we certainly continue to see growth in condensate volumes on our system, growth and demand for the transportation and the storage capacity, but it would be difficult and something we’re not prepared to do to give specific guidance on any of those elements.

I think it is safe to say though David over the next three years, the projects that are under development that we expect to come on stream, there is a number of those customers or producers that we will be providing the services that David described going forward, so we will see some growth, it’s just something that we don’t publicly disclose what that magnitude is going to be.

Fair enough, so perhaps if we look at their growth, we can get an idea of what you guys might be expecting?

David, offline we can certainly give you an idea of what our expectations are in terms of the timing of some of these projects coming on, where we have services that we’re providing.

Much appreciated. Okay, and then just one last question, just with regards to Josephburg you mentioned you bought some new land near that terminal, I was just wondering what sort of opportunities you’re planning to explore of that new land, is it just for the propane by rail expansion or is there something else you have in mind?

We want to have extra land in the area and we always want to have the capacity expand should the demand for services be there, so our lands, you know we typically have in mind additional rail capacity, the possibility of storage or those sorts of assets of those lands, so I guess they would have potential for both rail and storage.

Okay. Thank you very much.

Good morning everyone. Over the last few quarters, you continue to reference that some of your gas plants are operating at capacity, I’m just wondering where you are in your thinking on some potential expansions and what plans do you think could be expanded, we could see sanctioned in 2015?

I think certainly some of the acquisitions and plant expansions or new plant constructions that we announced late in 2014, we think are going to continue to support the growth in our area. Ricinus Zeta Creek, Alder Flats are all interconnected with our network of infrastructure and designed to supplement that existing gas processing capacity that we have out there.

We continue to look at that and look at our capacity constraints and figure out when new capacity can come online and are certainly prepared to continue to invest in those opportunities when they are available.

I would add that the network that we have a real advantage in terms of being able to move gas to plants that have capacity from areas where the capacity might be tight. The Twin Rivers pipeline that we just completed is a perfect example of where we’ve taken – we are now able to move gas from an area where capacity is tied to the Brazeau River and West Pembina plants, where we do have available capacity.

So that's always the first priority of where we can do it. Then I think at plants like Rimbey and Simonette for instance where we may have a little bit less flexibility in that way.

We will look to the future and figure out what the lowest cost way to expand the capacity as when it’s needed.

One quick follow-up. With the new NGL here, can you comment how you are adjusting your fees?

Our fees – our contractual structure is relatively somewhere where really we are trying to manage the variability in our marketing group and we’re basically trying to buy essentially and sell on the same index and hedge our inventory. So generally, I guess it’s relatively same as last year, same with our propane, which is the question we get after a lot.

The small portion of our overall book and again, we’ve been switching to more of a convey hedge, so working off for the same index that we sell on, and we also use a market price, look back price in terms of the price that we pay to our customers, so we’ve mitigated a lot of a risk in our book. I guess with respect to frac and storage fees, which is the other kind of product, the recontracting, we’ve seen some modest increase in the fees, but keep in mind that a lot more of our capacity is under a longer term contracts fees days.

So it’s unlikely that you’re going to see a material effect from that this year.

Alright. Thank you.

Good morning. I just have one question, I wonder how the uncertainty associated with royalty rates and taxes under the new NDP government will impact your capital deployment strategy?

Well, for those of you who are not in Calgary, I want to reassure you that the sun did rise this morning, the world seems to be operating normally so far. Seriously, I don’t think it’s I’ve heard some a lot of commentary this morning.

I don’t think it’s any sort of time for panic. I think certainly Albertans have given a very clear message, a message for change and I think that’s something that we need to embrace and work with the new government on.

I would say the leader of the NDP is a smart sincere capable leader and she cares a great deal about the future of this province and the future of this country. I think she is – she knows that she can’t make the improvements that the NDP want to make in areas like healthcare and education with already healthy economy in Alberta, a healthy economy depends on a healthy oil and gas sector.

So I think that they will be very cautious and very intelligent about how they approach that, particularly in the current commodity price environment with the tremendous reduction that we’ve seen in investment year-over-year. The industry has a lot going forward.

We have a stable and predictable fiscal regime, we have a regulatory framework and enforcement program that’s the envy of the world, and we have education – educational institutions and technology and research that is world leading as well. I think as an industry, and as a province and as a country we need to remember that we compete on the world stage, so we need to make sure we build on our strengths and provide access to markets and keep our cost competitive and encourage new investment, which means encouraging investment capital from outside of Alberta as well.

So I’m sure those are all of the things that our new leader is reflecting on this morning and I’m very optimistic.

Okay. I agree with how you’re sort of messaging your macro view there, you know, sort of hard to panic, but at the same time, specifically with how you’re operating.

You know, I guess the specific question is what level of risk are you willing to take on the new compliant for taxes if you wanted to do that, but royalty rates are trickier thing, and if you really want to have plans and franchise area that will be large plant standing that may – the royalties changing may have some impact on that. So are you willing to take that risk or do you just pull back on capital and wait for the result?

Rob, we’ve never made a habit of making speculative investments, we’re always working with the government, with the regulator and with our customers to make the investments that we think are prudent. We’re looking to make sure that we have appropriate commitments from our customers to help to reduce the risk of those investments and we’re not going to change that.

I don’t think that it’s appropriate for us to – as I said before, I don’t think we need to panic or start to change our strategy or our investment philosophy on the basis of guesses that we might make about the direction of the new government in Alberta. I think we’ll wait and see and in the mean time I think it’s appropriate for us to work with and to make sure that they understand the economic realities of our industry.

Okay. Thank you.

Good morning. My question is on the marketing business and I guess transparency on it.

I mean, given that it’s become quite a large part at least for now the EBITDA, almost half in the quarter and from what I understand is that you guys hedge a lot of that at least 12 months forward and the vast majority of it is coming from butane. Will you provide some range at least of marketing profit over the next reasonable period of time, so that everyone can have a reasonable level of consistent expectations of financial performance?

I’ll let Dean comment on our hedging strategy Matthew. But the first thing I wanted to say is that the numbers that you’re looking at are based on EBITDA and the marketing results – the marketing EBITDA for the first quarter included roughly $40 million worth of realized gains that related to hedges that were put in place in the fourth quarter to protect the inventory write down that we had a result of the dramatic drop in prices.

If you look at it on an operating margin basis, which more appropriately matches the hedges with the actual physical results our marketing contribution, our marketing operating margin was about 24% of total in Q1, and that range of 25% to 30% has not changed very much over the years. So it’s been a stable contributor.

There is certainly there has been quarters where it’s been a little stronger as a result of the opportunities that we take advantage of, but I certainly wouldn’t want to leave the impression that it was half of our financial results in the quarter. Dean you might want to comment on our – the way we manage the business in our hedging program.

I would say that we don't provide guidance to Marketing business, but I would say that our iso-octane value chain has been a large contributor both last year and we expect it to be a strong contributor this year as well. Iso-octane, RBOB prices have been lower, gasoline prices have been lower with the fall of WTI, but on a relative basis the feedstock for our iso-octane business, which is butane has even fallen more dramatically, so again, that helps our overall margin for our iso-octane business.

Outside of that, I would say for condensate and for propane generally in a high price environment or a low price environments, our contracts are structured in a way where we’re just trying to preserve a small margin between the buy and a sell, so we’re buying product and we’re selling a product usually within the same month and the amount that we put in the inventory we hedge though we've mitigated a lot of our risk, by both our contractual nature of how we've contracted our product, but also how we hedge our inventory. We always do have some volume risk, so volumes did fall off, obviously that would affect the amount of margin we generate in our marketing book, but as of right now those ones are very fairly stable.

Maybe just one quick follow-up Dean if I could ask you this way. Is there any reason why you won’t provide it to us – why you wouldn’t know, or be able to predict how much marketing margin you can make over the next year?

Is there an operational concern that could play into it for example or certain hedges which aren’t perfect?

We won’t comment on that, I would say though on the operational front, our facility runs very well and very reliably, and we had our fourth longest run time in its history last year and we expect to have long run times this year as well.

Matthew, it’s Steve Kroeker here as well. I would just point out as well that in the interest of writing more clarity on the marketing, but we did continue to look at our disclosure in the notes to our financial statements.

And you'll see in there that we have taken an attempted, trying to provide more clarity on our inventory hedging, so people can look at how we’re looking at WTI and have a reference point in the marketplace and as well our RBOB, iso-octane is also distinctly identified now on the notes as well. So to that point, we are trying to provide clarity and as well in the MD&A as well at year-end you’ll see a lot of clarity on the status of gains and write downs and so forth.

So I think we have been trying to do a continuous improvement in that area.

Okay. Thanks guys, those were my question.

Thank you, good morning. I guess the first question is for Dean, just carries on the Marketing side of things.

Just want to try to understand how we should think about the operating margin in the quarter the $36 million and obviously there's a impact on sequential quarters, if we look at this more holistically, but if we just focus on Q1, $36 millionish of operating margin, but within that number there's the 40 of just the realized cash gains from what you locked in at the end of last year. So should we look at the quarter if we excess that 40, I’m not saying we should adjust for it, you were effectively down on operating margin by $4 million this quarter if we took out that 40?

Steven here, maybe I’ll take a crack at that question. First of all, we’re very comfortable with how the hedging program came into place as we try to described in Q4, the inventory write-down was largely dealt with is what in terms of realized gains in Q4, as well as expected realized gains in Q1, and from what we can see internally those basically substantially offset and we’re very happy with our operating margin in Q1 from a marketing pint of view.

That’s helpful, and then bigger broader question. As your business mix changes, and I guess the question is really for David, as the business mix changes and we face, we see things like Norlite in the future, then the Kinder JV that you’ve just signed.

How do you think about just this more stable asset streams, does that give you a little bit more opportunity to maybe take on a bit more risk in the GMP side of the business? Especially if the basin transforms and starts to be a bit more along the US lines of the GMP industry?

I guess I'll treat those as two separate concepts maybe the easiest way to respond. We certainly like the idea that we've been able to add more long-term take or pay fee-for-service contracts with projects like the baseline terminal and Norlite pipeline and the condensate – the long-term condensate services agreements that we have around our Fort Saskatchewan system for storage and transportation.

It gives a more solid base to the business and tends to make the lenders a little happier as well. We haven't changed our strategy overall though with respect to the business you know, we put in place facilities on primarily initially on a fee-for-service basis and then we’ll look for opportunities to add cash flow around that whether that's from more NGL marketing or additional services that we can provide.

Your question about the Gathering and Processing direction is an interesting one because as the – as the industry requires more investment in Gathering and Processing Infrastructure, particularly in the deep basin area, in northwest Alberta and northeast BC, there have been a number of different commercial models that have been utilized for the purposes of trying to meet the return expectations of facilities providers, as well as the risk and fee expectations of the producers, and I think that's an evolving topic. It’s certainly in the conversation that we’ve had with producers, those are recognition that that risk reward trade-off is there.

And I think it's an interesting time because there is a lot of creative discussion going on and we will continue to put our best put forward, but it's a little difficult to predict how that landscape may evolve.

Okay. That’s extremely helpful, thank you.

Good morning. If I can just come back to marketing, some of the, kind of questions and answers that you had.

In turn the realized cash gain of $39 millionish this quarter, how much of that related to product though that actually moved in the quarter. It almost sounds like some of it was maybe overhedged and related to Q4?

Steven here again. There's another reference in the Q1 report where we try to take a little bit of a look down and see if you were specifically trying to identify what portion of the realized gains and margin came from the inventory issue at the end of last year because of the write-down because of commodity prices, we calculate about $40 million and that would be realized portion of financial gains, as well as margin coming in on the physical side, again inventories written down or not, but I mean there were physical hedges in place as well.

But when they get settled or crystallized they show up in our physical margin book, and so we had taken a crack at looking at how much of that EBITDA was related to the inventory issue and we figured out about $40 million that was related to that. So one way to look at it might be, you know if you're sort of EBITDA of $90 million on marketing and take off $40 million, then you’re at $50 million, sort of a normalized marketing for the quarter, which is a very strong quarter for us.

Right, so essentially this quarter benefited, it really wasn't the realized cash gain on the contract so that's the normal hedge, the physical sell through was low because you wrote the inventory down?

Yeah, I would say it’s coincidental that the $40 millionish number we quoted is so similar to the $39 million. The $39 million is the realized gain on all financial contracts in that quarter including those that were related to inventory hedging, as well as those related to protecting margin for example on iso-octane.

And so I think that you're really trying to get at is if you trying to address the inventory issue from last year, we calculate about $40 million of margin came in on that side, but if you sort of assume an $89 million, $90 million EBITDA like number for marketing in Q1 and took off $40 million, you’d be at $50 million and that's a strong quarter.

Right. I guess where I'm just going is, the quarter does look strong from an EBITDA perspective, but it feels to me it has very little to do with the realized cash gain and has everything to do with the fact that you wrote it down so your COGS sell through is kind of super low, you took the charge in Q4 and you’d benefit in Q1?

Both those elements occur, but there was a significant piece of realized financial gains that came in there.

It’s hard to measure apple-to-apples because you basically value your inventory at year-end and you have a write-down, but not all that inventory necessarily goes to the system and the fill during the first quarter, so and during that time the commodity price have changed, so then your realized gains will be based on when they're actually unwound during the quarter, so it's not a complete apples to apples comparison, the comparison of the write-down and the gains on the financial contracts in the first quarter.

Fair enough, but maybe on that last point, if it wasn't all related to Q1 given you didn’t take a further inventory write-down you must be above water on inventory, so that will make Q2 to be a little bit better?

It will be on something like a propane product to the extent that we’re selling propane, regularly throughout the year, low cost inventory will flow through, but butane and condensate are, and iso-octane are generally sold on a shorter cycle basis, one month, two month. It was benefited beyond the propane side.

Okay, I’ll leave marketing there. Just last kind of question, you had this leased own pipe up before, can you talk a little bit more about your vision for what you’re going to do with that, is kind of very small, and like a small pipe, that is there or some much bigger implications to get you a connection that’s going to be really helpful going forward?

Generally, we have to be careful what we say based on the arrangement that we signed with the other counterparties, so can’t disclose all detail, but generally it helps us move products from Edmonton to Fort Saskatchewan which we handle propane, butane, condensate and mix and it will help us enhance our abilities to do that.

Okay, so does it alleviate the need because I think there was some potential bottlenecking issues with all the different types you have in the ground and we were talking about expansion yet, that's really expensive stuff as you come out of pipeline, does this buy you some good running room there?

Robert, I’ll maybe comment on that, I think that’s true, we’ve certainly identified the Edmonton/Fort Saskatchewan corridor as an area where eventually we will have to be looking at bottlenecking options. So we’ve been spending a fair bit of time studying those options over the last two or three years.

And I would say that’s likely going to be the case in the future for both butane and condensate. So this arrangement gives us a little bit of an insurance policy if you like for and provides a way to have a lower cost way of bottlenecking the system compared – certainly compared to a new build pipeline in that very congested area.

So it's a little difficult to be specific today, but I think what it does is it sets us up very well for the future.

That’s great. Thank you very much.

Thank you and good morning. I would like to talk about Josephburg, which looks so necessary for the Alberta NGL market right now.

How much of the terminal will be contracted and which party is going to be responsible for providing the railcars, to shift those contracted volumes?

What happens is that the – that facility will be used mainly for as you mentioned railing out propane to market and again, last year we lost the pipeline connection with – the ability to flow spec propane by pipe with the reversal of Cochin and which is bringing in condensate. So again, the need for more rail capacity to get propane to market and what we do is the services that we provide to our customers is basically we will buy their mix and we will – for a price that would reflect a fee for travelling at that and other sites, and margin to basically sell it into the US.

So indirectly we are charging a fee to rail out that product through that terminal.

Okay. Thank you Dean.

I know there has been some discussion about over production on going through some of the facilities and into the NGTL system, and it seems to me like Keyera might be getting caught in the – caught in the middle on this, is there anything that you might be doing to realize or square up the difference between TransCanada and the producers when you’re running the facilities?

I think the way we try to run our business is the producers for the most part are responsible for arranging their own transportation into their facilities and at the same point they are responsible for delivering gas and satisfying their contract with us. So we as the common stream operator of the station that delivers in TransCanada has an obligation to work both with the producer and with TransCanada to ensure that volumes that flow into those – into TransCanada’s systems are appropriate for the producers to hold service on that.

And that is a complicated thing to do because we don’t always have really good visibility back to whose individual molecule is coming out of the ground on any given day or hour, which is how TransCanada wants us to manage it. So it’s a bit of iterative process that we worked actively with the producers in TransCanada to ensure that we bring the producers in line with their production obligations [indiscernible] as well as through TransCanada.

Thank you Brad for that answer, those are my two questions.

Thank you everyone for joining us today for our first quarter conference call. If you have any other questions, please feel free to call us.

Our contact information is in yesterday's release. Thank you for listening and have a great day.