CALGARY, Aug. 9, 2018 /CNW/ - Tidewater Midstream and
Infrastructure Ltd. ("Tidewater" 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-month period ended June 30, 2018.
Highlights
Financial Earnings Highlights
- Tidewater delivered another strong quarter reporting Adjusted EBITDA attributable to its shareholders of $19.0 million or $0.06 per share for the second quarter of 2018 compared to
$14.9 million or $0.05 per share for the same period in 2017.
- The Corporation maintained a conservative payout ratio of approximately 28% with distributable cash flow of $11.6 million in the second quarter of 2018.
- Tidewater remains focused on delivering approximately 20% annualized Adjusted EBITDA per share growth over the next 24
months.
- Tidewater reiterates its annualized Adjusted EBITDA target of $80 million for 2018.
Continued Long Term Contract Growth Highlights
- At the Pipestone Montney Sour Gas Plant, Tidewater increased and extended the take-or-pay commitment with Kelt Exploration
Ltd. by 5 MMcf/d for a total commitment of 30 MMcf/d with a five-year extension and total term of ten years.
- Along with the take-or-pay commitment described above, the Corporation has also executed a non-binding letter of intent
with a natural gas producer for a volume commitment of approximately 12.3 Bcf over a seven-and-a-half-year period, which
includes a minimum take-or-pay provision. With these additional commitments, Tidewater is approximately 70% contracted at the
Pipestone Montney Sour Gas Plant. Tidewater continues to see significant interest from Montney
producers for processing capacity and is confident the facility will be fully contracted by the end of 2018.
- Entered into a fifteen-year liquids sale commitment with an investment grade counterparty, in exchange for an agreed upon
liquids pricing premium, adding price certainty of cash flows generated from Tidewater's marketing business.
- Signed a term sheet for gas processing and sulphur handling at the Ram River Gas Plant under a five year take-or-pay with
an intermediate oil and gas producer. The term sheet provides for an incremental 18 MMcf/d in the first contract year with the
take-or-pay volume declining by approximately 30% each year over the five-year period. It is expected that definitive
agreements, incorporating the terms and conditions set out in the term sheet, will be finalized before the end of the third
quarter or early in the fourth quarter of 2018.
- Tidewater continues to progress construction plans, regulatory and contracting milestones on the 100 MMcf/d sour, deep cut
natural gas processing facility located along the Montney trend at Pipestone near Grande Prairie, Alberta (the "Pipestone Montney Sour Gas
Plant"). The Pipestone Montney Sour Gas Plant will also provide for acid gas injection, 20,000 bbls/d of NGL processing
capability and will include an extensive gathering pipeline network for regional producers. The Pipestone Montney Sour Gas
Plant is expected to be commissioned in mid 2019.
- In the first quarter of 2018, Tidewater entered into a definitive agreement with TransAlta Corporation ("TransAlta") to
construct a 120 km natural gas pipeline from the Brazeau River Complex ("BRC") to TransAlta's power generating units at
Sundance and Keephills. Tidewater believes that TransAlta
will likely exercise its option to acquire an ownership interest in the pipeline. The project remains on-schedule and
on-budget.
- Tidewater continues to evaluate numerous optimization opportunities aimed at increasing the profitability of its business
through discretionary projects that expand capacity, increase throughput, extend pipelines or reduce costs. Management expects
these optimization projects will increase Tidewater's Adjusted EBITDA and Distributable Cash Flow per share.
Operational Highlights
- Tidewater places a high priority on the maintenance and upgrading of its gathering and processing assets, to provide safe,
reliable midstream services to its customers. During the second quarter of 2018, Tidewater successfully completed its planned
maintenance and turnaround operations at the BRC, without a lost time safety incident. This maintenance and turnaround occurred
over a 16-day period and is scheduled to occur every four years.
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-month period ended June 30,
2018 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
June 30,
|
Six-months
ended
June 30,
|
|
|
2018
|
|
2017
|
|
2018
|
|
2017
|
|
EBITDA1
|
$
|
16,482
|
$
|
14,143
|
$
|
37,996
|
$
|
30,012
|
|
Adjusted EBITDA attributable to shareholders2
|
$
|
18,981
|
$
|
14,858
|
$
|
38,982
|
$
|
29,240
|
|
Adjusted EBITDA attributable to shareholders per common share - basic2
|
$
|
0.06
|
$
|
0.05
|
$
|
0.12
|
$
|
0.09
|
|
Total assets
|
$
|
1,041,777
|
$
|
686,728
|
$
|
1,041,777
|
$
|
686,728
|
|
Bank debt
|
$
|
130,000
|
$
|
65,000
|
$
|
130,000
|
$
|
65,000
|
|
Notes payable
|
$
|
122,225
|
$
|
-
|
$
|
122,225
|
$
|
-
|
|
Cash flow from operating activities attributable to shareholders3
|
$
|
17,421
|
$
|
12,027
|
$
|
33,630
|
$
|
25,159
|
|
Cash flow from operating activities attributable to shareholders per common share –
basic3
|
$
|
0.05
|
$
|
0.04
|
$
|
0.10
|
$
|
0.08
|
|
Distributable cash flow4
|
$
|
11,568
|
$
|
9,721
|
$
|
26,055
|
$
|
21,870
|
|
Distributable cash flow attributable to shareholders per common share – basic4
|
$
|
0.04
|
$
|
0.03
|
$
|
0.08
|
$
|
0.07
|
|
Dividends declared
|
$
|
3,292
|
$
|
3,289
|
$
|
6,583
|
$
|
6,577
|
|
Dividends declared per common share
|
$
|
0.01
|
$
|
0.01
|
$
|
0.02
|
$
|
0.02
|
|
Total common shares outstanding (000s)
|
$
|
329,224
|
$
|
328,908
|
$
|
329,224
|
$
|
328,908
|
|
Notes:
|
|
|
|
1
|
EBITDA is calculated as income or loss before finance costs, taxes,
depreciation and amortization. EBITDA is not a standard measure under GAAP. See "Non-GAAP Financial Measures" in the
Corporation's MD&A for a reconciliation of EBITDA to its most closely related GAAP measure.
|
|
|
|
2
|
Adjusted EBITDA is calculated as EBITDA adjusted for incentive
compensation, unrealized gains/losses, non-cash items, transaction costs and items that are considered non-recurring in
nature. Adjusted EBITDA per common share is calculated as Adjusted EBITDA divided by the weighted average number of
common shares outstanding for the three-month period ended June 30, 2018. Adjusted EBITDA and Adjusted EBITDA per common
share are not standard measures under GAAP. See "Non-GAAP Financial Measures" in the Corporation's MD&A for a
reconciliation of Adjusted EBITDA and Adjusted EBITDA per common share to their most closely related GAAP
measures.
|
|
|
|
3
|
Cash flow from operating activities is calculated as net cash used in
operating activities before changes in non-cash working capital less any long term incentive plan expenses. Cash flow
from operating activities per common share is calculated as cash flow from operating activities divided by the weighted
average number of common shares outstanding for the three-month period ended June 30, 2018. Cash flow from operating
activities and cash flow from operating activities per common share are not standard measures under GAAP. See "Non-GAAP
Financial Measures" in the Corporation's MD&A for a reconciliation of cash flow from operating activities and cash
flow from operating activities per common share to their most closely related GAAP measures.
|
|
|
|
4
|
Distributable cash flow 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.
Distributable cash flow per common share is calculated as distributable cash flow over the weighted average number of
common shares outstanding for the three-month period ended June 30, 2018. Distributable cash flow and distributable cash
flow per common share are not standard measures under GAAP. See "Non-GAAP Financial 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.
|
|
|
OUTLOOK AND CORPORATE UPDATE
Tidewater continues to position itself to offer producers additional egress solutions and better pricing for their products in
a challenging commodity price environment by developing and connecting its infrastructure to access end markets.
Through the second quarter of 2018, AECO 5A natural gas prices averaged approximately $1.12/GJ,
which forced some gas producers to curtail volumes through Tidewater infrastructure. Overall, Tidewater's processing volumes
were down approximately 18% due to the combination of producer shut-ins and the BRC turnaround which had an impact of
approximately 5% on Tidewater's Adjusted EBITDA net of the positive impact from Tidewater's NGL extraction and natural gas
storage facilities. Tidewater's NGL extraction and natural gas storage operations performed well, acting as a natural hedge to
low prices through the second quarter.
Ram River Gas Plant
Tidewater continues to explore options with producers to bring incremental volumes to its Ram River Gas Plant. In the second
quarter of 2018, Tidewater signed a term sheet for a new five-year take-or-pay for gas processing and sulphur handling at the Ram
River Gas Plant with an intermediate oil and gas producer for an incremental 18 MMcf/d in the first contract year with the
take-or-pay volume declining by approximately 30% each year over the five-year period. The producer has commenced capital outlays
related to the tie-in to one of the Ram River Gas Plant's gathering systems and is expected to start flowing to the facility
before the end of the third quarter or early in the fourth quarter of 2018. The new tie-in will also allow for incremental
volumes above the 18 MMcf/d to flow to the Ram River Gas Plant from an existing customer at the facility. It is expected that
definitive agreements, incorporating the terms and conditions set out in the term sheet, will be finalized and executed prior to
the new tie-in. Since acquiring the Ram River Gas Plant, Tidewater has secured an additional 17.2 Bcf (net) volume commitment
over a five-year period with an investment grade counterparty and an incremental 18 MMcf/d take-or-pay on a declining basis over
a five-year term as noted above.
Brazeau River Complex
Tidewater completed its planned maintenance and turnaround operations over a 16-day period at the BRC in the second quarter of
2018, without a lost-time safety incident. The turnaround was completed on-time and on-budget and is scheduled to occur every
four years. As a result, throughput at the BRC was reduced in the second quarter of 2018 compared to the first quarter.
Natural Gas Storage
Tidewater has entered into two new natural gas storage service agreements with an investment grade customer beginning in
April 2019. The agreements are for approximately 5 MMcf/d for each of two and three-years,
respectively, at its Pipestone infrastructure/egress hub ("Pipestone Gas Storage Facility").
Tidewater currently has injection capability at the Pipestone Gas Storage Facility of approximately 55 MMcf/d. The agreements
give additional assurance over 2019 cash flow at the Pipestone Gas Storage Facility.
Tidewater continues to inject approximately 30-35 MMcf/d of natural gas at the Brazeau Gas Storage Facility which has assisted
in alleviating constraints on the TransCanada Pipeline system and resulted in higher netbacks for producer gas during the second
quarter.
Tidewater has commenced a capital project to increase injection capacity at the Brazeau Gas Storage Facility by approximately
10-12 MMcf/d for approximately $2.5 million in capital.
Total combined injection capability at the Brazeau and Pipestone Gas Storage Facilities, after completion of the project, will
be approximately 100 MMcf/d. Tidewater's storage facilities remain well positioned to benefit from the low commodity price
environment while acting as a natural hedge to Tidewater's core business thereby achieving its goal of offering additional egress
options and better pricing to producers.
NGL Extraction and Fractionation Facilities
During the second quarter of 2018, one of Tidewater's liquids customers experienced an approximate two-week outage, which
impacted NGL sales volumes out of Tidewater's Fort Saskatchewan Extraction Plant by approximately 400 bbls/d. Despite the
shut-down, the Corporation's extraction plants in the Edmonton area performed well in the
quarter and together with natural gas storage continue to act as a natural hedge to low AECO gas prices.
Tidewater currently has approximately 100 MMcf/d of natural gas straddle volumes flowing through its extraction facilities
while NGL prices remain near three-year highs. Tidewater hedges commodity price exposure where possible to protect its NGL
margins and cashflow from volatility.
CAPITAL PROGRAM
Pipestone Montney Sour Gas Plant
Tidewater continues to move forward on major regulatory and construction milestones as well as contracting initiatives at the
Pipestone Montney Sour Gas Plant with an increased and extended commitment from Kelt Exploration Ltd. to 30 MMcf/d of firm raw
gas processing under a ten-year take-or-pay agreement. The Pipestone Montney Sour Gas Plant is also anchored by a 30 MMcf/d
five-year take-or-pay agreement with Blackbird Energy Inc. for total contracted volumes of 60 MMcf/d.
Tidewater has also executed a non-binding letter of intent, the terms of which will form the basis of a definitive agreement,
with a natural gas producer for a volume commitment at its Pipestone Montney Sour Gas Plant of approximately 12.3 Bcf over a
seven-and-a-half-year time period, which includes a minimum take-or-pay provision. With the additional commitments, Tidewater is
approximately 70% contracted at the facility. Tidewater continues to see significant interest from Montney producers for processing capacity and expects the Pipestone Montney Sour Gas Plant to be fully
contracted by the end of 2018.
Capital costs for Tidewater's Pipestone Montney Sour Gas Plant remain on-budget with an expected in-service date of
mid-2019. The project is being funded through a combination of internally generated cash flow and undrawn capacity under the
Corporation's Credit Facility. In addition, Tidewater's two anchor tenants have the option to purchase a combined working
interest of approximately 35% prior to commissioning the plant. The project remains subject to customary conditions and
regulatory approval.
Intra-Alberta Pipeline to TransAlta
In the fourth quarter of 2017, Tidewater entered into a Letter of Intent with TransAlta to construct a 120 km natural gas
pipeline from the BRC to TransAlta's power generating units at Sundance and Keephills. The pipeline will be supported by a 15 year take-or-pay agreement with TransAlta. Subsequently,
Tidewater entered into a definitive agreement with TransAlta for the procurement of long lead time items including steel and
associated valves to construct the 120 km natural gas pipeline (the "Development Agreement"). The Development Agreement pertains
primarily to the early work and procurement necessary to construct the pipeline and contains the key terms for subsequent
definitive agreements through to completion, including a provision for a 15 year take-or-pay commitment by TransAlta and an
option for TransAlta to invest up to 50% in the pipeline. Tidewater believes that TransAlta will likely exercise its option
to acquire an ownership interest in the pipeline. The parties have agreed in the Development Agreement to negotiate in good faith
and execute the remaining definitive agreements over the summer 2018 timeframe. The project remains on-schedule and on-budget and
is subject to customary conditions and regulatory approval. The TransAlta pipeline is a significant step toward Tidewater
providing Western Canadian producers with increased optionality, improved pricing, and direct access to an end market.
About Tidewater
Tidewater is traded on the TSX under the symbol "TWM". Tidewater's business objective is to build a diversified midstream and
infrastructure company in the North American natural gas and natural gas liquids ("NGL") space. Its strategy is to profitably
grow and create shareholder value through the acquisition and development of oil and gas infrastructure. Tidewater plans to
achieve its business objective by providing customers with a full service, vertically integrated value chain through the
acquisition and development of oil and gas infrastructure including: gas plants, pipelines, railcars, trucks, export terminals
and storage facilities.
Additional information relating to Tidewater is available on SEDAR at www.sedar.com and at www.tidewatermidstream.com.
Advisory Regarding Forward-Looking Statements
Certain statements contained in this news release constitute forward-looking statements and forward-looking information
(collectively, "forward-looking statements"). Such forward-looking statements relate to possible events, conditions or financial
performance of the Corporation based on future economic conditions and courses of action. All statements other than statements of
historical fact are forward-looking statements. The use of any words or phrases such as "seek", "anticipate", "plan", "continue",
"estimate", "expect", "may", "will", "project", "predict", "potential", "targeting", "intend", "could", "might", "should",
"believe", "will likely result", "are expected to", "will continue", "is anticipated", "believes", "estimated", "intends",
"plans", "projection", "outlook" and similar expressions are intended to identify forward-looking statements. These statements
involve known and unknown risks, assumptions, uncertainties and other factors that may cause actual results or events to differ
materially from those anticipated in such forward-looking statements. The Corporation believes there is a reasonable basis for
the expectations reflected in the forward-looking statements, however no assurance can be given that these expectations will
prove to be correct and the forward-looking statements included in this news release should not be unduly relied upon by
investors.
Specifically, this news release contains forward-looking statements relating to but not limited to: expectations regarding
regulatory approval of Tidewater's planned projects; planned commissioning in mid 2019 of Tidewater's planned Pipestone area 100 MMcf/d sour, deep-cut Montney plant and related
infrastructure and projections with respect to contracting capacity at this plant; expectations to execute definitive agreements
related to letters of intent and term sheets that Tidewater has executed with counterparties with respect to current or
anticipated capital projects; Tidewater's forecast of annualized Adjusted EBITDA and Distributable Cash Flow per share;
Tidewater's belief that TransAlta will likely exercise its option to acquire an ownership interest in the pipeline; projections
with respect to commodity prices; expectations regarding performance of NGL extraction and natural gas storage operations
including injection capability; expectations regarding funding of capital projects and projected in service dates; Tidewater's
expectation that the Pipestone Plant will be fully contracted by the end of 2018; projections
that cash flow from operating activities and organic growth projects will be sufficient to meet obligations and financial
commitments and will provide sufficient funding for anticipated capital expenditures; and projections that Tidewater will bring
incremental volumes to its Ram River Gas Plant.
Such forward-looking statements of information are based on a number of assumptions which may prove to be incorrect. In
addition to other assumptions identified in this document, assumptions have been made regarding, among other things: general
economic and industry trends; oil and gas industry expectation and development activity levels; future natural gas, crude oil and
NGL prices; the Corporation's ability to obtain and retain qualified staff and equipment in a timely and cost-effective manner;
receipt of regulatory approvals; that definitive agreements will be executed with counterparties that contain terms and
conditions consistent with executed letters of intent and term sheets; that counterparties will comply with contracts in a timely
manner; that there are no unforeseen material costs relating to the facilities which are not recoverable from customers; funds
flow from operations and cash flow consistent with expectations; future capital expenditures to be made by the Corporation; the
ability to obtain additional financing on satisfactory terms; the ability of Tidewater to successfully market its products; the
Corporation's future debt levels and the ability of the Corporation to repay its debt when due; foreign currency, exchange and
interest rates; that any third-party projects relating to the Corporation's growth projects will be sanctioned and completed as
expected; the amount of future liabilities relating to lawsuits and environmental incidents and the availability of coverage
under the Corporation's insurance policies; and anticipated timelines and budgets being met in respect of the Corporation's
projects and operations.
Actual results achieved will vary from the information provided herein as a result of numerous known and unknown risks and
uncertainties and other factors including but not limited to: general economic, political, market and business conditions,
including fluctuations in interest rates, foreign exchange rates and stock market volatility; a failure to conclude definitive
agreements with counterparties that contain terms and conditions consistent with executed letters of intent and term sheets;
activities of producers and customers, the regulatory environment and decisions and First Nations and landowner consultation
requirements; operational matters, including potential hazards inherent in the Corporation's operations and the effectiveness of
health, safety, environmental and integrity programs; fluctuations in commodity prices, inventory levels and supply/demand
trends; actions by governmental authorities, including changes in government regulation including environmental, tariffs and
taxation; changes in operating and capital costs, including fluctuations in input costs; competition for, among other things,
business, capital, acquisition opportunities, requests for proposals, materials, equipment, labour and skilled personnel;
environmental risks and hazards, including risks inherent in the transportation of NGLs which may create liabilities to the
Corporation in excess of the Corporation's insurance coverage, if any; non-performance or default by counterparties to agreements
which the Corporation or one or more of its subsidiaries has entered into in respect of its business; construction and
engineering variables associated with capital projects, including the availability of contractors, engineering and construction
services, accuracy of estimates and schedules, and the performance of contractors; the availability of capital on acceptable
terms; changes in the credit-worthiness of counterparties; effects of weather conditions; reliance on key personnel; technology
and security risks; potential losses which would stem from any disruptions in production, including work stoppages or other
labour difficulties; technical and processing problems; changes in gas composition; and failure to realize the anticipated
benefits of recently completed acquisitions.
The foregoing lists are not exhaustive. Additional information on these and other factors which could affect the
Corporation's operations or financial results are included in the Corporation's most recent Annual Information Form and in other
documents on file with the Canadian Securities regulatory authorities.
The above summary of assumptions and risks related to forward-looking statements in this news release is intended to provide
shareholders and potential investors with a more complete perspective on Tidewater's current and future operations and such
information may not be appropriate for other purposes. There is no representation by Tidewater that actual results achieved will
be the same in whole or in part as those referenced in the forward-looking statements and Tidewater does not undertake any
obligation to update publicly or to revise any of the included forward-looking statements, whether as a result of new
information, future events or otherwise, except as may be required by applicable securities law.
SOURCE Tidewater Midstream and Infrastructure Ltd.
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