fauxtomato wrote: AntoninScalia wrote: “We believe Tidewater trades at a discounted valuation – which is partly a function of its unique asset base (midstream and refinery exposure) and market cap (i.e., small-cap status). Given its unique niche regional exposure along with the structure of the renewable fuels business, we believe the stock offers a compelling risk-reward, combined with additional growth potential in light of basin dynamics,” he said.
This was the sales pitch that made TWM grow into an outsized position for me over the last 3 years ago. Having survived 2020 with their balance sheet stretched to the limits and now repaired through Renewables Magic, it's probably more true. But I've mostly bailed on the stock in the last couple of months, it's down to a third of its original size. My average cost was exactly $1.006 so I escaped without losing my shirt which didn't always appear to be possible. Most of the proceeds went to gas levered producers (in order of size: SDE, TOU, PIPE), and I may reverse that trade once we get some clarity on TWM, as those producers have taken off while TWM hasn't moved as dramatically. Especially if it starts to move towards $2/sh where it'd be marginable. [I went big on SDE after it fell to ~$4 after the Velvet acquisition and become marginable by moving to the TSX, now up to about $6]
Their results should be great for the next couple of quarters as volumes remain strong and crack spreads at PGR are wide. Legacy deep basin and extraction plants will be doing well with high NG prices and even higher NGL prices. But their assets remain too much of a patchwork to capture the marketing upside that KEY and PPL can. TWM's growth will have to come from building out additonal contracted assets. A Pipestone expansion seems inevitable at current pricing, and hopefully they provide some clarity on the smaller scale, high return opportunities that they've hinted at for years but never had the capital for. Should be lots of room for that now with good volumes and benevolent pricing.
Earlier this year when everything was stupidly cheap, it seemed smarter to take a gamble on producers that offered more upside to increasing pricing. As that thesis matures I may revisit TWM. My goal is to build a portfolio of safe passive income. The producers are not a place I'd want to live long term, but for now they're increasing the amount of capital I can rotate back to midstreams if the situation calls for it. They could self fund a lot of growth [including selling part of their LCFS shares] and increase the dividend. I also reduced my PPL at around $40 but have held onto my KEY. I'm convinced that NG could move higher still this winter and may then cash out of some of the producers and look for safe haven in the midstreams again.