CIBCEQUITY RESEARCH
March 10, 2022 Earnings Update
TIDEWATER MIDSTREAM &
INFRASTRUCTURE LTD.
Q4/21 Results: Slight Miss, But Optimistic For The Future
Our Conclusion
Despite the slight EBITDA miss, operations are strong with volumes ahead of our expectations. Tailwinds also exist from refinery crack spreads widening due to the recent volatility in commodity markets. Tidewater Renewables also remains on track with the renewable diesel project, keeping us positive on TWM shares. We reiterate our Outperformer rating and $2.00 EV/EBITDA- based price target.
Key Points
Results: Adjusted EBITDA of $53.9MM slightly missed our estimate of
$54.4MM and consensus of $51.7MM. We characterize these results as solid in light of the challenging weather in the quarter. Reported distributable cash was $14MM or $0.04/share fully diluted.
Operating Performance: The Prince George Refinery (PGR) throughput
was 12,200 Bbl/d during the quarter, and crack spreads were over $60/Bbl, despite higher feedstock costs. Producer activity is improving and the Pipestone Gas Plant had record throughput of 99 MMcf/d. Overall processing volumes were also up at 430 MMcf/d, in line with our 429 MMcf/d estimate and up 5% Y/Y.
Capex And Funding Outlook: So far, growth capital for 2022 is targeted at
$30MM-$35MM and aimed at smaller projects with shorter payback periods of about three years, including the gathering system for the Brazeau River Complex. Net debt at the end of the third quarter was $678MM ($619MM on a deconsolidated basis) and was 3% higher than our estimate of $657MM due to working capital. Leverage at 3.2x is in the target range of 3.0x to 3.5x net debt to annualized adjusted EBITDA. The company is evaluating several options to refinance its second lien term loan and notes payable and expects to make a decision in the near term. If the notes are not refinanced or extended prior to the end of June, the senior credit facility maturity accelerates from August 18, 2024 to August 23, 2022. We expect to see this refinanced, and a refinancing may contemplate funding for expanding the Pipestone facility, subject to securing customer commitments following confirming capital costs.
Company Developments: The company announced that Brian Newmarch
will be appointed Chief Financial Officer (CFO) of the company. Most
recently, Mr. Newmarch was the Vice-President, Capital Markets and
Stakeholder Engagement at Seven Generations Energy. Joel Vorra, the
current CFO, will support Mr. Newmarch in his transition into the CFO
position, while Mr. Vorra continues in his role as President and CFO of
Tidewater Renewables Ltd. We believe that adding to the management
capacity is prudent in light of the significant business development activity