Tidewater Midstream and Infrastructure Ltd. Announces First Quarter 2018 Results and Operational Update

Posted by on May 14, 2018

CALGARY, May 14, 2018 /CNW/ – Tidewater Midstream and Infrastructure Ltd. (“Tidewater” or the “Corporation“) (TSX: TWM) is pleased to announce that it has filed its condensed interim consolidated financial statements and Management’s Discussion and Analysis (“MD&A”) for the three-month period ended March 31, 2018.   

Highlights

Financial Earnings Highlights

  • Tidewater delivered another strong quarter of growth reporting Adjusted EBITDA of $20.0 million or $0.06 per share for the first quarter of 2018 compared to $14.4 million or $0.04 per share for the same period in 2017.
  • The Corporation maintained a conservative payout ratio of approximately 23% with distributable cash flow of $14.5 million in the first quarter of 2018.
  • The Corporation achieved its first quarter annualized Adjusted EBITDA target of $80 million with net debt at the end of Q1 of approximately $177 million.
  • Tidewater remains focused on delivering approximately 20% annualized Adjusted EBITDA growth over the next 24 months.

Continued Long Term Contract Growth Highlights

  • Entered into its first definitive agreement with TransAlta Corporation (“TransAlta”) to construct a 120 km natural gas pipeline from Tidewater’s Brazeau River Complex (“BRC”) to TransAlta’s power generating units at Sundance and Keephills. The pipeline is supported by a 15 year take-or-pay agreement with TransAlta.
  • Entered into a six-year firm storage service commitment with an investment grade counterparty at its Pipestone Gas Storage Facility for approximately 5 Bcf of storage capacity.
  • Entered into a five-year, 17.2 net Bcf volume commitment with an investment grade counterparty to process incremental net raw gas volumes of approximately 15 MMcf/d which declines over a five-year timeframe at the Ram River facility.
  • Continued to move forward on major construction, regulatory and contracting milestones on the 100 MMcf/d sour, deep cut Montney gas plant with acid gas injection and 20,000 bbls/d of NGL processing capability, as well as an extensive gathering pipeline network in the Pipestone area near Grande Prairie, Alberta, which, subject to regulatory approval, is expected to be commissioned in the second quarter of 2019. The project is initially anchored by two, five-year take-or-pay agreements totalling approximately 55 MMcf/d. The Corporation recently signed a third customer to a reserve dedication agreement and expects to have the facility fully contracted by the end of 2018.
  • Acquired an additional three proven natural gas storage reservoirs at the BRC through a jointly owned subsidiary with existing investment grade storage customers.

Selected financial and operating information is outlined below and should be read with Tidewater’s condensed interim consolidated financial statements and related MD&A as at and for the three-month period ended March 31, 2018 which are available at www.sedar.com

and on our website at www.tidewatermidstream.com.

Financial Overview

Consolidated Financial Highlights

(in thousands of Canadian dollars, except per share information)

Three months
ended
March 31,

2018

2017

EBITDA1

$

18,215

$

12,889

Adjusted EBITDA2

$

20,001

$

14,382

Adjusted EBITDA per common share – basic2

$

0.06

$

0.04

Total cash

$

10,965

$

7,555

Total assets

$

960,058

$

629,810

Bank debt

$

76,500

$

25,100

Notes payable

$

121,890

$

Cash flow from operating activities3

$

16,209

$

13,133

Cash flow from operating activities per common share – basic3

$

0.05

$

0.04

Distributable cash flow4

$

14,487

$

12,150

Distributable cash flow per common share – basic4

$

0.04

$

0.04

Dividends declared

$

3,291

$

3,288

Dividends declared per common share

$

0.01

$

0.01

Total common shares outstanding (000s)

329,091

328,389

Notes:

1

EBITDA is calculated as income or loss before finance costs, taxes, depreciation and amortization. EBITDA is not a standard measure under GAAP. See “Non-GAAP Financial Measures” in the Corporation’s MD&A for a reconciliation of EBITDA to its most closely related GAAP measure.

2

Adjusted EBITDA is calculated as EBITDA adjusted for incentive compensation, unrealized gains/losses, non-cash items, transaction costs and items that are considered non-recurring in nature. Adjusted EBITDA per common share is calculated as Adjusted EBITDA divided by the weighted average number of common shares outstanding for the three-month period ended March 31, 2018. Adjusted EBITDA and Adjusted EBITDA per common share are not standard measures under GAAP. See “Non-GAAP Financial Measures” in the Corporation’s MD&A for a reconciliation of Adjusted EBITDA and Adjusted EBITDA per common share to their most closely related GAAP measures.

3

Cash flow from operating activities is calculated as net cash used in operating activities before changes in non-cash working capital less any long term incentive plan expenses. Cash flow from operating activities per common share is calculated as cash flow from operating activities divided by the weighted average number of common shares outstanding for the three-month period ended March 31, 2018. Cash flow from operating activities and cash flow from operating activities per common share are not standard measures under GAAP. See “Non-GAAP Financial Measures” in the Corporation’s MD&A for a reconciliation of cash flow from operating activities and cash flow from operating activities per common share to their most closely related GAAP measures.

4

Distributable cash flow is calculated as net cash used in operating activities before changes in non-cash working capital and after any expenditures that use cash from operations. Distributable cash flow per common share is calculated as distributable cash flow over the weighted average number of common shares outstanding for the three-month period ended March 31, 2018. Distributable cash flow and distributable cash flow per common share are not standard measures under GAAP. See “Non-GAAP Financial Measures” in the Corporation’s MD&A for a reconciliation of distributable cash flow and distributable cash flow per common share to their most closely related GAAP measures.

 

Outlook and Corporate Update

Tidewater continues to position itself to offer producers additional egress solutions and better pricing for its products in a challenging commodity price environment through development and connectivity of its infrastructure and access to end markets.

Through the first ten days of May 2018, AECO 5A gas prices averaged less than $0.50/GJ forcing some gas producers to curtail volumes through Tidewater infrastructure. AECO gas prices are not expected to materially recover through the summer months with balance of summer forward prices trading below $1.00/GJ. While Tidewater’s NGL extraction and natural gas storage operations are expected to perform well, acting as a natural hedge to low prices through the summer months, processing and transportation volumes are expected to decrease through the second and third quarter of 2018 before returning to historical levels in the fourth quarter of 2018.

Ram River Gas Plant

During the first quarter of 2018, Tidewater announced that it had entered into a five-year, 17.2 net Bcf volume commitment with an investment grade counterparty to process incremental raw gas volumes of approximately 15 MMcf/d which will decline over a five-year timeframe at the Ram River gas plant.

Brazeau River Complex

Tidewater commenced its planned maintenance and turnaround operations in April and May 2018 at the BRC which is scheduled to occur every four years. As a result, throughput at the BRC will be reduced in the second quarter of 2018. Planned activities continue to remain on-schedule and on-budget.

Natural Gas Storage

Tidewater has entered into a six-year firm storage service agreement with an investment grade customer at its Pipestone infrastructure/egress hub (“Pipestone Gas Storage Facility”) for approximately 5 Bcf of storage capacity. Tidewater was successful in the first quarter at increasing injection capability at the Pipestone Gas Storage Facility from 40 MMcf/d to 55 MMcf/d with minimal capital and ahead of schedule.

Tidewater has also been injecting approximately 25 MMcf/d of producer gas at the Brazeau Gas Storage Facility which has helped alleviate constraints on the TransCanada Pipeline system. Total combined injection capability at the Brazeau and Pipestone Gas Storage Facilities is approximately 90 MMcf/d. Tidewater also acquired, through a jointly owned subsidiary, an additional three proven natural gas storage reservoirs at Brazeau with existing investment grade storage customers. The Corporation continues to inject cushion gas and develop its storage assets at Brazeau. Tidewater’s storage facilities are well positioned to benefit from the low commodity price environment while acting as a natural hedge to Tidewater’s core business thereby achieving its goal of offering additional egress options and better pricing to producers.  

NGL Extraction and Fractionation Facilities

The Corporation’s extraction plants in the Edmonton area performed well in the quarter and together with natural gas storage continue to act as a natural hedge to low AECO gas prices.

Tidewater currently has approximately 100 MMcf/d of natural gas straddle volumes flowing through its extraction facilities generating significant liquids while NGL prices remain near three-year highs.

Tidewater’s 10,000 bbl/d C2+ fractionation facility and 40 MMcf/d of additional deep cut processing capacity at the BRC also continued to perform well through the quarter.

CAPITAL PROGRAM

Pipestone Montney Sour Gas Plant

Tidewater continues to move forward on major regulatory and construction milestones as well as contracting at the proposed Pipestone plant with an increased commitment from Kelt Exploration Ltd. to 25 MMcf/d of firm raw gas processing under a five-year take-or-pay agreement. The Pipestone facility is also anchored by a 30 MMcf/d five-year take-or-pay agreement with Blackbird Energy Inc. for total contracted volumes at Pipestone of 55 MMcf/d. Blackbird and Kelt have options to exercise ownership in the facility for 20% and 15% respectively.

Capital costs for Tidewater’s Pipestone Montney Sour Gas Plant remain on-budget with expected in service date of mid-2019. The project is being funded through a combination of internally generated cash flow and undrawn capacity under the Corporation’s Credit Facility. In addition, Tidewater’s two anchor tenants have the option to purchase a combined working interest of approximately 35% prior to commissioning the plant. Tidewater continues to work with multiple producers to contract the remaining capacity at the facility and expects the facility will be fully contracted by year-end. The project remains subject to customary conditions and regulatory approval.

Intra-Alberta Pipeline to TransAlta

In the fourth quarter of 2017, Tidewater entered into a Letter of Intent with TransAlta to construct a 120 km natural gas pipeline from the BRC to TransAlta’s power generating units at Sundance and Keephills. The pipeline will be supported by a 15 year take-or-pay agreement with TransAlta. Subsequently, Tidewater entered into a definitive agreement with TransAlta for the procurement of long lead items including steel and associated valves to construct the 120 km natural gas pipeline (the “Development Agreement”). The Development Agreement pertains primarily to the early work and procurement necessary to construct the pipeline and contains the key terms for subsequent definitive agreements through to completion, including a provision for a 15 year take-or-pay commitment by TransAlta and an option for TransAlta to invest up to 50% in the pipeline. The parties have agreed in the Development Agreement to negotiate in good faith and execute the remaining definitive agreements over the summer 2018 timeframe. The project remains subject to customary conditions and regulatory approval. The TransAlta Pipeline is a significant step toward Tidewater providing producers with increased optionality, improved pricing, and direct access to an end market. The project remains on-schedule and on-budget.

About Tidewater

Tidewater is traded on the TSX under the symbol “TWM”. Tidewater’s business objective is to build a diversified midstream and infrastructure company in the North American natural gas and natural gas liquids (“NGL”) space. Its strategy is to profitably grow and create shareholder value through the acquisition and development of oil and gas infrastructure. Tidewater plans to achieve its business objective by providing customers with a full service, vertically integrated value chain through the acquisition and development of oil and gas infrastructure including: gas plants, pipelines, railcars, trucks, export terminals and storage facilities.

Additional information relating to Tidewater is available on SEDAR at www.sedar.com and at www.tidewatermidstream.com

Advisory Regarding Forward-Looking Statements

Certain statements contained in this news release constitute forward-looking statements and forward-looking information (collectively, “forward-looking statements”). Such forward-looking statements relate to possible events, conditions or financial performance of the Corporation based on future economic conditions and courses of action. All statements other than statements of historical fact are forward-looking statements. The use of any words or phrases such as “seek”, “anticipate”, “plan”, “continue”, “estimate”, “expect”, “may”, “will”, “project”, “predict”, “potential”, “targeting”, “intend”, “could”, “might”, “should”, “believe”, “will likely result”, “are expected to”, “will continue”, “is anticipated”, “believes”, “estimated”, “intends”, “plans”, “projection”, “outlook” and similar expressions are intended to identify forward-looking statements. These statements involve known and unknown risks, assumptions, uncertainties and other factors that may cause actual results or events to differ materially from those anticipated in such forward-looking statements. The Corporation believes there is a reasonable basis for the expectations reflected in the forward-looking statements, however no assurance can be given that these expectations will prove to be correct and the forward-looking statements included in this news release should not be unduly relied upon by investors.

Specifically, this news release contains forward-looking statements relating to but not limited to: expectations regarding regulatory approval of Tidewater’s planned projects; planned commissioning in Q2 of 2019 of Tidewater’s planned Pipestone area plant and projections with respect to contracting capacity at this proposed plant; expectations to execute definitive agreements related to Tidewater’s planned pipeline from the BRC to power generating units at Sundance and Keephills; projections with respect to commodity prices; projected reduction in throughput at the BRC in Q2, 2018; expectations regarding performance of NGL extraction and natural gas storage operations; expectations regarding funding of capital projects; projections regarding cash flow from operating activities.

Such forward-looking statements of information are based on a number of assumptions which may prove to be incorrect.  In addition to other assumptions identified in this document, assumptions have been made regarding, among other things: general economic and industry trends; oil and gas industry expectation and development activity levels; the success of the Corporation’s operations; future natural gas, crude oil and NGL prices; the Corporation’s ability to obtain and retain qualified staff and equipment in a timely and cost-effective manner; the impact of increasing competition; receipt of regulatory approvals; that counterparties will comply with contracts in a timely manner; that there are no unforeseen material costs relating to the facilities which are not recoverable from customers; funds flow from operations and cash flow consistent with expectations; future capital expenditures to be made by the Corporation; the ability to obtain additional financing on satisfactory terms; the ability of Tidewater to successfully market its products; the Corporation’s future debt levels and the ability of the Corporation to repay its debt when due; foreign currency, exchange and interest rates; that any third-party projects relating to the Corporation’s growth projects will be sanctioned and completed as expected; the amount of future liabilities relating to lawsuits and environmental incidents and the availability of coverage under the Corporation’s insurance policies; anticipated timelines and budgets being met in respect of the Corporation’s projects and operations; the ability of the Corporation to obtain equipment, services, supplies and personnel in a timely manner and at an acceptable cost to carry out its evaluations and activities.

Actual results achieved will vary from the information provided herein as a result of numerous known and unknown risks and uncertainties and other factors including but not limited to: general economic, political, market and business conditions, including fluctuations in interest rates, foreign exchange rates and stock market volatility; activities of producers and customers, the regulatory environment and decisions and First Nations and landowner consultation requirements; operational matters, including potential hazards inherent in the Corporation’s operations and the effectiveness of health, safety, environmental and integrity programs; fluctuations in commodity prices, inventory levels and supply/demand trends; actions by governmental authorities, including changes in government regulation, tariffs and taxation; changes in operating and capital costs, including fluctuations in input costs; changes in environmental and other regulations; competition for, among other things, business, capital, acquisition opportunities, requests for proposals, materials, equipment, labour and skilled personnel; environmental risks and hazards, including risks inherent in the transportation of NGLs which may create liabilities to the Corporation in excess of the Corporation’s insurance coverage, if any; non-performance or default by counterparties to agreements which the Corporation or one or more of its subsidiaries has entered into in respect of its business; construction and engineering variables associated with capital projects, including the availability of contractors, engineering and construction services, accuracy of estimates and schedules, and the performance of contractors; the availability of capital on acceptable terms; changes in the credit-worthiness of counterparties; changes in the political environment and public opinion; risks and liabilities associated with the transportation of dangerous goods; effects of weather conditions; reputational risks; reliance on key personnel; technology and security risks; potential losses which would stem from any disruptions in production, including work stoppages or other labour difficulties, or disruptions in the transportation network on which the Corporation is reliant; technical and processing problems, including the availability of equipment and access to properties; changes in gas composition; and failure to realize the anticipated benefits of recently completed acquisitions.

The foregoing lists are not exhaustive.  Additional information on these and other factors which could affect the Corporation’s operations or financial results are included in the Corporation’s most recent Annual Information Form and in other documents on file with the Canadian Securities regulatory authorities.

The above summary of assumptions and risks related to forward-looking statements in this news release is intended to provide shareholders and potential investors with a more complete perspective on Tidewater’s current and future operations and such information may not be appropriate for other purposes. There is no representation by Tidewater that actual results achieved will be the same in whole or in part as those referenced in the forward-looking statements and Tidewater does not undertake any obligation to update publicly or to revise any of the included forward-looking statements, whether as a result of new information, future events or otherwise, except as may be required by applicable securities law.

Non-GAAP Financial Measures

This news release refers to “EBITDA” and “Adjusted EBITDA” which do not have any standardized meaning prescribed by generally accepted accounting principles in Canada (“GAAP”).  EBITDA is calculated as income or loss before interest, taxes, depreciation and amortization. Adjusted EBITDA is calculated as EBITDA adjusted for incentive compensation, unrealized gains/losses, non-cash items, transaction costs and items that are considered non-recurring in nature.

Tidewater Management believes that EBITDA and Adjusted EBITDA provide useful information to investors as they provide an indication of results generated from the Corporation’s operating activities prior to financing, taxation and non-recurring/non-cash impairment charges occurring outside the normal course of business. Management utilizes Adjusted EBITDA to set objectives and as a key performance indicator of the Corporation’s success. In addition to its use by Management, Tidewater also believes Adjusted EBITDA is a measure widely used by security analysts, investors and others to evaluate the financial performance of the Corporation and other companies in the midstream industry. Investors should be cautioned that EBITDA and Adjusted EBITDA should not be construed as alternatives to earnings, cash flow from operating activities or other measures of financial results determined in accordance with GAAP as an indicator of the Corporation’s performance and may not be comparable to companies with similar calculations.

For more information with respect to financial measures which have not been defined by GAAP, including reconciliations to the closest comparable GAAP measure, see the “Non-GAAP and Additional Measures” section of Tidewater’s most recent MD&A which is available on SEDAR.

SOURCE Tidewater Midstream and Infrastructure Ltd.

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