Tidewater Midstream and Infrastructure Ltd T.TWM

Could TWM be a takeover target?

[Wordless1]

Would a bigger guy like ALA or PPL with a better cost of cpaital be interesting in TWM?  If someone could recaptialize the company with a lower cost of debt, there would be some nice FCF that a bigger guy could add onto its bottom line. I'd take $2 right about now lol.

[Maxmoe]

It surely could happen. Biggest hurdle is twm is just so small. Ppl could lose twm in the couch cushions. Ala is finally out of the dogshit house over the last time they bought something. Something smaller, like topaz size maybe? 

[fauxtomato]

The PPL/IPL merger today I think says a lot about what TWM isn't: integrated, at scale and unique. Every piece of the current patchwork that is TWM could have been bought by someone else: PGR, BRC, Ram were all purchased individually and competitively. I think with PGR a private equity take over could make sense, or a partnership with an infrastructure fund. TPZ taking an interest in the

[AntoninScalia]

A more optimistic view: A bidding war for midstream assets is good for TWM.

[fauxtomato]

It's certainly been good for KEY the last 2 days, up from $30 to $32. [In the back of my mind I'd like to see them take on TWM's assets: the uplift simply from the logistics ['marketing'] of the additional NGL volumes would make Pipestone and Brazeau alone worth a majority of current EV, but that's a day dream] ...and you're right, the optimism that's implied by

[Maxmoe]

Yup, I thought May was going to be the month. I'm patient. I have a little club of stocks I'll just put away for the summer. This is one of them. 

[Wordless1]

TWM has an EV of ~C$1.275B right now so it's not cheap. Pioneer closing will go a long way towards re-rating TWM. Hoping June is the month, looking forwart to having this behind us. ====== So post pioneer sale, the EV would be around ~$1.1B or so? On a EV/EBITDA basis (Assuming $200M EBITDA) we're at ~5.5x EV/EBITDA  -- That doens't sound too expensive? On an EV to FCF basis

[fauxtomato]

Yeah, on first glance I'd agree with your numbers: the adjusted EBITDA numbers are essentially worthless and DCF isn't representative due to the inflated debt. The true value is something in between: the entire EV of the company could be tucked into Keyera's credit line at a marginal interest rate and the dividend to shareholders would double.  As a long hauler, I'm thinking

[Maxmoe]

The key point missing in your analysis surrounds EV. We don't own debt. We own only the equity component. Cheap debt provides awesome leverage to changes in the value of the business. Let me illustrate. Let's say EV is 1 billion to build assets worth $1 billion, and debt is 600 MM and equity is400 MM for rounding. If, a year later the EV grows to 1.4B because of retained profits and

[fauxtomato]

In terms of being a takeover target though, the entire price tag needs to be considered. I think in the energy industry in western Canada and the refinery business in general it's a buyer's market still, and at the full EV no one is going to come out and pay a premium.  There are specific assets in the TWM portfolio that I think are incredibly attractive to outside money (Pipestone

[AntoninScalia]

In terms of valuation the most important development is the life extension of PGR. By producing renewable diesel and hydrogen at some point you're taking an asset valued at From Elias Foscolos at Industrial Alliance Securities at the time of the PGR acquisition: “The purchase of the PGR includes a five-year offtake agreement with Husky for 90 per cent of the plant’s nameplate capacity,” he

[fauxtomato]

That's an interesting statement from Elias. Rack prices in Prince George have more to do with transportation costs into the market than they do with the efficiency of the refinery, prices are typically $0.10/l above Edmonton. It's the remoteness that makes this refinery...different. Without the offtake agreement with CVE he has the value of PGR at $0 in 3 years? Guess they really need to

[AntoninScalia]

Yes I very much doubt PGR's earnings will go to $0 after 2025 (even if you exclude the renewable initiatives) In terms of efficiency I think because of the low volumes relative to other refineries the margins aren't as good (this is rectified with the highest crack spreads in NA). If PGR doubled their production I'm guessing expenses wouldn't double resulting in some operating

[fauxtomato]

The ownership of such a small refinery by a small company makes sense: improving throughput 5% and fully utilizing the secondary units has material benefits to the company so warrants more attention from management. I think you're right that the economies of scale, especially for heavy industrial applications like this, work against PGR, but that's offset by the location, simultaneously

[AntoninScalia]

Stock is up 23% in the past month. Maybe getting some ESG flows?

[Maxmoe]

Love the price action. There's a few happy news stories that may bless us. ESG, pipeline resolution,earnings surprise, buybacks/divy, buyout. It is getting a bit stretched if it's "none of the above" but I'm expecting at least two of the above at or before next earnings release.