RE:Patience isn't being rewardedFrom a recent Canaccord midstream report:
Tidewater (TWM-TSX | BUY, $2.00 PT) Expecting a stable Q4 as LCFS continues to develop HDRD. Tidewater will report its Q4/21 results on March 10 before market open. We are looking for a relatively steady Q4/21 operating performance on a sequential basis. Tidewater Renewables (LCFS-T | SPEC BUY | $21PT) will also report its fourth-quarter results concurrently given Tidewater’s ~69% ownership position (recall Tidewater must fully consolidate LCFS in its financial statements due to the edicts of IFRS).
Operationally we believe PGR enjoyed strong utilization and robust crack spreads (in the low $60/bbl range) in the fourth quarter. We also believe Pipestone operated at above 100 mcf/d in Q4/21, with the company’s Brazeau facility benefitting from strong frac spreads in the quarter.
On a fully consolidated basis we are estimating Q4/21 EBITDA of $54 million, FCFPS of $0.05 and (pre IFRS 16) net debt of ~$675 million (4.0x 2022E EBITDA). We are making minor adjustments to our estimates and reiterating our BUY recommendation and $2.00 price target based on a DCF valuation that equates to a 6.0x EV/EBITDA multiple applied to our stand-alone Tidewater 2023 expectations plus ~$0.92/sh for the company’s equity interest in LCFS.
[They estimate EBITDA for 22/23 at $219/$299]
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TWM hasn't been the place to park money if you step back over the 2020 chasm. KEY/PPL/ALA are all trading below their 2017 levels [though do have higher yields]. As this cycle matures though I think the upside potential migrates from the producers to the services sector to the midstreams, if the usual pattern of increasing prices leads to increasing activity leads to increased volumes. If the renewable diesel facility begins operating close to on time and on budget their debt/EBITDA metrics will improve dramatically and they could reasonably double the TWM dividend. Right now their debt is still high in relation to their ability to pay it down with retained cashflow. They've been a growth story that has shifted business lines a few times but at these prices ($3-4 AECO on the strip, US$80 WTI) their 'legacy' assets have significantly more value than they receive credit for in the TWM share price [which is mostly LCFS equity, and LCFS is essentially the promise of a renewable diesel facility]. Either the market gives them credit as the project de-risks or TWM gets taken private. As a long time, frustrated shareholder I don't have high confidence in either but it's not long to wait now. Maybe in a year we're at 1.25 and a $0.04/yr dividend...but at $300M in forward EBITDA that'd be hard to justify.
[That said: while cracks at PGR remain healthy and I'm sure EBITDA is healthy I think Q4 could be another disappointing quarter of DCF due to the dropdowns to LCFS and any accounting noise over inventory at PGR]