CALGARY, AB, Nov. 4, 2021 /CNW/ - Tidewater Midstream and Infrastructure Ltd. ("Tidewater Midstream" 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 and nine month periods ended September 30, 2021.
THIRD-QUARTER 2021 FINANCIAL PERFORMANCE
Highlights
- Tidewater Midstream delivered its tenth consecutive quarter of consolidated Adjusted EBITDA growth. This performance continues to highlight the resiliency and stability of the Corporation's integrated business model as the Corporation continues to grow in the renewable energy sector with the creation of Tidewater Renewables Ltd. ("Tidewater Renewables").
- Consolidated Adjusted EBITDA increased to $53.1 million in the third quarter of 2021 as compared to $47.6 million in the third quarter of 2020, resulting in 11% consolidated Adjusted EBITDA growth year over year. Net income attributable to shareholders was $1.8 million for the third quarter of 2021 as compared to a net loss of $3.8 million in the third quarter of 2020. This increase includes the impact of both realized and unrealized gains on derivative contracts related to the Corporation's feedstock for its downstream operations, secured at a lower cost.
- Net cash used in operating activities totaled $3.8 million for the third quarter of 2021, with distributable cash flow attributable to shareholders of $15.8 million and a payout ratio of 21%.
- On August 18, 2021, Tidewater Renewables closed its initial public offering (the "Offering") of an aggregate of 10,000,000 common shares (the "TWR Common Shares") at a price of $15.00 per Common Share, for gross proceeds of $150 million, with an additional 735,000 TWR Common Shares issued on September 15, 2021 pursuant to the partial exercise of over-allotment option, for additional gross proceeds of approximately $11 million , with total gross proceeds of approximately $161 million raised by the Offering. In total, Tidewater Renewables received approximately $150 million in cash consideration net of underwriter commissions and legal expenses. The TWR Common Shares held by Tidewater Midstream represents approximately 69% of the outstanding common shares, with Tidewater Midstream retaining a majority equity stake in Tidewater Renewables. After the closing of the Offering, and as a result of certain transactions completed in connection with the Offering, the Corporation achieved its leverage target of 3.0x to 3.5x consolidated net debt to annualized consolidated Adjusted EBITDA.
- Tidewater Midstream remains focused on pursuing and developing high rate of return capital projects to support continued growth. The Corporation is currently evaluating multiple projects in the $5 million to $25 million capital cost range with payouts of under 3 years and remains committed to its leverage target of 3.0x to 3.5x consolidated net debt to annualized consolidated Adjusted EBITDA.
- Tidewater Midstream remains optimistic in its outlook for global energy demand. Within Western Canada, Tidewater Midstream continues to see strong demand at PGR as a result of large infrastructure projects in central and northern British Columbia. Throughput at PGR remains strong, at over 12,000 bbl/day. The PGR crack spread, a measure of refining margins, remains strong going into the fourth quarter averaging over $60/bbl. The Pipestone Gas Plant had its strongest quarterly run times and cash flow generation to date during the third quarter of 2021.
- The Corporation is committed to its Environmental, Social and Governance ("ESG") performance. The Corporation continues to advance its inaugural sustainability report, which is scheduled to be published in the first quarter of 2022. Furthermore, Tidewater is proud to have recently provided another significant update to its ESG website disclosures which now include 2020 metrics here: https://www.tidewatermidstream.com/esg/esg-metrics/
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 and nine month periods ended September 30, 2021 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
September 30, | Nine months ended
September 30, |
| | 2021 | | 2020 | | 2021 | | 2020 |
| Revenue | $ | 433,961 | $ | 273,461 | $ | 1,163,781 | $ | 704,493 |
| Net income (loss) attributable to
shareholders (1) | $ | 1,797 | $ | (3,820) | $ | 74,473 | $ | (40,846) |
| Basic net income (loss) attributable to
shareholders per share (1) | $ | 0.01 | $ | (0.01) | $ | 0.22 | $ | (0.12) |
| Diluted net income (loss) attributable to
shareholders per share (1) | $ | 0.01 | $ | (0.01) | | 0.19 | $ | (0.12) |
| Consolidated Adjusted EBITDA (2) | $ | 53,076 | $ | 47,602 | $ | 156,483 | $ | 130,981 |
| Net cash provided by operating activities | $ | (3,827) | $ | 63,990 | $ | 94,030 | $ | 150,965 |
| Distributable cash flow attributable to
shareholders (3) | $ | 15,834 | $ | 10,578 | $ | 50,023 | $ | 33,626 |
| Distributable cash flow per common share
– basic (3) | $ | 0.05 | $ | 0.03 | $ | 0.15 | $ | 0.10 |
| Distributable cash flow per common share
– diluted (3) | $ | 0.04 | $ | 0.03 | $ | 0.12 | $ | 0.10 |
| Dividends declared | $ | 3,403 | $ | 3,386 | $ | 10,188 | $ | 10,147 |
| Dividends declared per common share | $ | 0.01 | $ | 0.01 | $ | 0.03 | $ | 0.03 |
| Total common shares outstanding (000s) | | 340,314 | | 338,609 | | 340,314 | | 338,609 |
| Payout ratio (4) | | 21% | | 32% | | 20% | | 30% |
| Total consolidated assets (1) | $ | 1,925,201 | $ | 1,865,715 | $ | 1,925,201 | $ | 1,865,715 |
| Consolidated net debt (5) | $ | 643,363 | $ | 854,870 | $ | 643,363 | $ | 854,870 |
| | | | | | | | | | | |
| Notes: | |
| | |
| 1 | Amounts for the three and nine months ended September 30, 2020 have been restated. Refer to the "Voluntary Change in Accounting Policy"
in Tidewater Midstream's MD&A and Note 2(b) to the condensed interim consolidated financial statements for the three and nine months
ended September 30, 2021. |
| 2 | Adjusted EBITDA is calculated as net income before interest, taxes, depreciation, share-based compensation, unrealized gains/losses, non-cash
items, transaction costs, items that are considered non-recurring in nature and the Corporation's proportionate share of EBITDA in their equity
investments. Adjusted EBITDA is not a standard measure under GAAP. See "Non-GAAP Measures" in the Corporation's MD&A for a
reconciliation of Adjusted EBITDA to its most closely related GAAP measure. |
| 3 | Distributable cash flow attributable to shareholders 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. Tidewater Midstream's distributable cash flow excludes Tidewater
Renewables' distributable cash flow to non-controlling interest shareholders. Distributable cash flow per common share is calculated as
distributable cash flow over the weighted average number of common shares outstanding for the three and nine month periods ended September
30, 2021. Distributable cash flow and distributable cash flow per common share are not standard measures under GAAP. See "Non-GAAP
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. |
| 4 | Payout Ratio is calculated by expressing dividends declared to shareholders for the period as a percentage of distributable cash flow attributable
to shareholders. This measure, in combination with other measures, is used by the investment community to assess the sustainability of the
current dividends. Payout Ratio is not a standard measure under GAAP. See "Non-GAAP Financial Measures" in the Corporation's MD&A
for a reconciliation of Payout Ratio to its most closely related GAAP measure. |
| 5 | Consolidated net debt is defined as bank debt, convertible debentures and notes payable, less cash. Consolidated net debt is not a standard
measure under GAAP. See "Non-GAAP Measures" in the Corporation's MD&A for a reconciliation of Consolidated net debt to its most closely
related GAAP measure. |
DECONSOLIDATED FINANCIAL HIGHLIGHTS
This press release presents the financial information of Tidewater Midstream on a consolidated basis, unless otherwise noted. In addition to reviewing fully consolidated results, management reviews Adjusted EBITDA and net debt on a deconsolidated basis to highlight Tidewater Midstream's financial results, financial position, leverage and debt covenants, excluding the impact of the Corporation's ownership in Tidewater Renewables. Tidewater Midstream's distributable cash flow excludes Tidewater Renewables' distributable cash flow to non-controlling interest shareholders. These metrics are not defined under IFRS and may not be comparable to those used by other entities. See the "Non-GAAP" Measures section of this press release for further details.
| (in thousands of Canadian dollars
except per share information) | | Three months ended
September 30, | Nine months ended
September 30, |
| | 2021 | | 2020 | | 2021 | | 2020 |
| Deconsolidated Adjusted EBITDA | $ | 47,746 | $ | 47,602 | $ | 151,153 | $ | 130,981 |
| Deconsolidated net debt | $ | 609,436 | $ | 854,870 | $ | 609,436 | $ | 854,870 |
| Distributable cash flow attributable to
shareholders (excluding Tidewater
Renewables' distributable cash flow to
non-controlling interest shareholders) | $ | 15,834 | $ | 10,578 | $ | 50,023 | $ | 33,626 |
| Ownership in Tidewater Renewables | | 69% | | N/A | | 69% | | N/A |
OUTLOOK AND CORPORATE UPDATE
Tidewater Midstream is pleased to deliver a record quarter of consolidated Adjusted EBITDA generation in the third quarter of 2021 as the PGR and Pipestone Gas Plant continue to run at high utilization rates. Continued consolidation and new investment in the energy sector, as well as a material recovery in commodity prices, have had an overall positive impact on producer balance sheets and Tidewater Midstream continues to work with its customers on ways to improve margins and related service offerings. Tidewater Midstream remains positive about the outlook for commodity prices, energy transition and renewable sectors, where Tidewater Midstream is uniquely positioned to play a key role in the continued development of renewable fuels, carbon capture, renewable natural gas, and renewable hydrogen through its subsidiary Tidewater Renewables.
Prince George Refinery
PGR is a 12,000 bbl/day light oil refinery that predominantly produces low sulphur diesel and gasoline to supply the greater Prince George region. PGR has significant onsite storage capacity of greater than 1.0 MMbbl and flexible logistics, with pipeline, rail and truck connectivity in place. The Prince George region is generally in short supply of refined products, and the refinery's location within the region makes it a critical piece of infrastructure with a significant logistical advantage to address demand in northern British Columbia.
PGR has significant advantages given its location as the Prince George market faces logistical and economic challenges given transport costs and the lack of offloading facilities in the area. Additionally, the refinery supplies the majority of the regional demand, which is comprised of major local industries such as forestry, mining and oil and gas.
During the third quarter of 2021, total throughput was approximately 12,200 bbl/day, an increase of 7% from the previous quarter and consistent with the third quarter of 2020. In August 2021, Tidewater Renewables commissioned it's canola co-processing project and began processing canola feedstock which yields both renewable gasoline and renewable diesel.
Tidewater Midstream's daily throughput and refined product yields at PGR were as follows:
| | Q3 2021 | Q2 2021 | Q1 2021 | Q4 2020 | Q3 2020 | Q2 2020 | Q1 2020 |
| Daily throughput (bbl) | 12,209 | 11,459 | 12,095 | 12,187 | 12,180 | 10,569 | 11,576 |
| Refinery Yield (1) | | | | | | | |
| Gasoline yield | 45% | 45% | 39% | 39% | 44% | 42% | 42% |
| Diesel yield | 42% | 43% | 49% | 49% | 43% | 43% | 46% |
| Other (2) | 13% | 12% | 12% | 12% | 13% | 15% | 12% |
| | | | | |
| (1) Refinery yield includes crude, canola and intermediates. |
| (2) Other refers to heavy fuel oil (HFO), LPG and feedstock consumed to fuel the refinery. |
Tidewater Midstream's refining margins are largely driven by commodity prices, particularly the cost of crude feedstock and other raw materials, along with market prices for refined products. Prince George crack spreads remained strong averaging just over $60/bbl during the quarter, consistent with the first and second quarter of 2021. The Corporation realized increased diesel demand during the third quarter, as compared to the second quarter of 2021, due to the end of spring breakup and continuation of the local industrial activity. Gasoline demand remained consistent quarter over quarter. The strong Prince George crack spread continues to demonstrate the strength of the regional refining market.
Tidewater Midstream continues to pursue numerous low capital and high rate of return debottleneck and optimization opportunities within its downstream business unit.
Pipestone Gas Plant
The Pipestone Gas Plant has a designed capacity of approximately 100 MMcf/day of sour natural gas. This asset includes two acid gas injection wells, a saltwater disposal well, and sales gas pipelines directly connected to the Pipestone Gas Storage Facility, as well as the Alliance and NGTL pipeline systems. The facility is also pipeline connected to Pembina's liquid gathering systems for the C2+ and C5+ liquid streams. In 2021 the Corporation applied for and received an increase to the plant's licensed capacity to 110 MMcf/day.
The Pipestone Gas Plant processed its highest average volume of 97 MMcf/day in the third quarter of 2021, a 35% increase from the third quarter of 2020 and an increase of 5% from the second quarter of 2021. Facility availability for the third quarter of 2021 averaged 93%, an increase of 19% from the third quarter of 2020. During the month of September 2021, there was a six-day planned maintenance outage which resulted in a small decrease in facility availability as compared to the second quarter of 2021. Overall, the Pipestone Gas Plant continued to perform well during the quarter, with August averaging a record daily throughput of approximately 102 MMcf/d combined with 97% facility availability. The Montney area continues to remain very active, and the plant remains fully contracted with over 85% committed capacity on take-or-pay arrangements.
Brazeau River Complex and Fractionation Facility
The BRC is a core asset for Tidewater Midstream, offering a full suite of services to producers, including C2, C3, C4 and C5 pipeline connections, NGL fractionation capacity, sweet and sour deep-cut gas processing capability, truck loading and offloading facilities, natural gas storage facilities and two natural gas egress solutions including the NGTL system and gas storage.
The Brazeau River fractionation facility performed well during the third quarter of 2021, despite third-party turnarounds, maintenance activities and significant disruptions in third-party distribution infrastructure. Through multiple egress options, Tidewater Midstream maintained throughput levels at the facilities and provided optionality for producers who were constrained by third-party force majeures.
Throughput at the BRC gas processing facility for the third quarter of 2021 increased by 8% compared to the second quarter of 2021. Strong AECO gas prices in the past six months have increased producer activity near the BRC. Tidewater Midstream continues to look for opportunities to increase third-party plant throughput by working diligently with producers to improve netbacks by utilizing the BRC's facilities.
Natural Gas Storage
Tidewater Midstream operates three natural gas storage reservoirs: Dimsdale Paddy A (Pipestone Gas Storage Facility), Brazeau Nisku F, and Brazeau Nisku A. The Pipestone Gas Storage Facility and Brazeau Nisku A are owned through joint ventures with a private Canadian entity and are accounted for as equity investments.
The third quarter was notable in terms of natural gas price volatility at AECO, with cash prices ranging from $1.18 CAD/GJ to $4.80 CAD/GJ largely due to maintenance on the NGTL system. Operationally, all storage facilities performed well through the quarter and successfully met all delivery obligations. The Pipestone Gas Storage Facilities deliverability rates increased over the quarter as the facility was optimized for current reservoir pressures. Similarly, the deliverability at the Brazeau Nisku A and Brazeau Nisku F storage pools matched expectations throughout the quarter, helping meet Pioneer Pipeline's demand and realizing both storage and liquids extraction value.
The Pipestone Gas Storage Facility is largely contracted with take-or-pay contracts spanning through 2029 with multiple investment grade counterparties. The facility represents a significant contribution to Tidewater Midstream's fee-for-service gas storage business and offers producers at the Pipestone Gas Plant significant optionality via three egress solutions including connections to the TC Energy and Alliance systems and gas storage.
CAPITAL PROGRAM
Tidewater Midstream's 2021 capital program focuses on small-scale optimization projects along with its renewable initiatives. Tidewater Midstream continues to evaluate and execute smaller capital projects in the $5 million to $25 million capital cost range with strong short-term returns on investment.
During the third quarter of 2021, Tidewater Renewables announced its final investment decision on the 3,000 bbl/day renewable diesel and renewable hydrogen complex, which is expected to be in service the first quarter of 2023. The canola co-processing project achieved successful commissioning and start-up, slightly ahead of its planned schedule and first production of renewable diesel has commenced.