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Tidewater Midstream and Infrastructure Ltd. Announces Year End 2017 Results and Operational Update

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Tidewater Midstream and Infrastructure Ltd. Announces Year End 2017 Results and Operational Update

Canada NewsWire

/THIS RELEASE IS INTENDED FOR DISTRIBUTION OUTSIDE THE UNITED STATES ONLY AND IS NOT AUTHORIZED FOR DISTRIBUTION WITHIN THE UNITED STATES/

CALGARY, March 29, 2018 /CNW/ - Tidewater Midstream and Infrastructure Ltd. ("Tidewater" or the "Corporation") (TSX:TWM) is pleased to announce that it has filed its audited consolidated financial statements, Management's Discussion and Analysis ("MD&A") and Annual Information Form for the year ended December 31, 2017.  

RECENT HIGHLIGHTS

Financial Earnings Highlights

  • Tidewater delivered its tenth consecutive quarter of growth reporting Adjusted EBITDA of $17.0 million or $0.05 per share for the fourth quarter of 2017 compared to $11.8 million or $0.04 per share for the same period in 2016.
  • The Corporation maintained a conservative payout ratio of approximately 29% with distributable cash flow of $11.5 million in the fourth quarter of 2017.
  • The Corporation's previously guided 2017 exit run-rate Adjusted EBITDA of $80 million was achieved with exit net debt of approximately $150 million.
  • Tidewater remains focused on delivering approximately 20% annualized EBITDA per share growth over the next 24 months.

Increased Financial Flexibility Highlights

  • Tidewater completed its first debt placement of $125 million of 6.75% senior unsecured term notes due December 2022, creating long term balance sheet stability, better matching the Corporation's long-term asset base.
  • The Corporation increased total availability under its credit facility from $180 million to $250 million.
  • Tidewater received approval from the TSX to graduate from the TSX Venture Exchange and list its common shares on the TSX. Tidewater's shares began trading on the TSX on November 20, 2017.

Continued Long Term Contract Growth Highlights

  • Announced the first definitive agreement with TransAlta Corporation ("TransAlta") to procure long lead items in order to construct a 120 km natural gas pipeline from Tidewater's Brazeau River Complex ("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. Construction of the pipeline remains subject to certain customary conditions and regulatory approval
  • Entered into a six-year firm storage service commitment with an investment grade counterparty at its Pipestone Gas Storage Facility for approximately 5 Bcf of storage capacity.
  • Entered into a five-year, 17.2 net Bcf volume commitment with an investment grade counterparty to process incremental net raw gas volumes of approximately 15 MMcf/d which will decline over a five-year timeframe at the Ram River facility.
  • Continued to move forward on major construction, regulatory and contracting milestones on the 100 MMcf/d sour, deep cut Montney gas plant with acid gas injection and 20,000 bbls/d of NGL processing capability, as well as an extensive gathering pipeline network in the Pipestone area near Grande Prairie, Alberta, which, subject to regulatory approval, is expected to be commissioned in the second quarter of 2019. The project is initially anchored by two, five-year take-or-pay agreements totalling approximately 55 MMcf/d. Additionally, the Corporation recently signed a third customer to a reserve dedication agreement. The project remains subject to regulatory approval.

Continued Opportunistic Acquisition Highlights

  • Tidewater announced a $35 million acquisition of assets with a replacement value in excess of $900 million and generating EBITDA of approximately $10 million in 2018. The acquisition creates a backbone for the Tidewater network between the Montney and Deep Basin and includes a ten-year reserve dedication agreement.

Financial Overview

(In thousands of Canadian dollars, except per share data)



Three-months
ended
December 31,

Year ended
December 31,



2017


2016


2017


2016

EBITDA1

$

12,331

$

9,719

$

51,701

$

34,084

Adjusted EBITDA2

$

16,974

$

11,768

$

61,560

$

37,871

Adjusted EBITDA per common share - basic2

$

0.05

$

0.04

$

0.19

$

0.15

Total cash and cash equivalents

$

52,494

$

8,010

$

52,494

$

8,010

Total assets

$

934,624

$

580,430

$

934,624

$

580,430

Bank debt

$

60,000

$

50,000

$

60,000

$

50,000

Notes payable

$

121,708

$

-

$

121,708

$

-

Cash flow from operating activities3

$

14,076

$

11,654

$

51,725

$

36,851

Cash flow from operating activities per common share – basic3

$

0.04

$

0.04

$

0.16

$

0.14

Distributable cash flow4

$

11,506

$

10,113

$

43,160

$

34,717

Distributable cash flow per common share – basic4

$

0.03

$

0.04

$

0.13

$

0.13

Dividends declared

$

3,290

$

2,846

$

13,157

$

11,309

Dividends declared per common share

$

0.01

$

0.01

$

0.04

$

0.04

Total common shares outstanding (000s)


328,973


284,158


328,973


284,158

 

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 year ended December 31, 2017. Adjusted EBITDA and Adjusted EBITDA per common share are not standard measures under GAAP. See "Non-GAAP Financial Measures" in Corporation's the 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 year ended December 31, 2017. 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 year ended December 31, 2017. 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 its products in a difficult commodity price environment through development and connectivity of its infrastructure and access to end markets.

Ram River Gas Plant

During the first quarter of 2018, Tidewater announced that it has entered into a five-year, 17.2 net Bcf volume commitment with an investment grade counterparty to process incremental raw gas volumes of approximately 15 MMcf/d which will decline over a five-year timeframe at the Ram River gas plant.

BRC Expansion

Tidewater completed the 50 MMcf/d expansion at the BRC on-time and on-budget in late December 2017. Tidewater also completed construction of the previously disclosed key strategic pipelines from the BRC both on-time and on-budget. The pipelines provide access to a new core area for the BRC which is supported by a 55,000 acre reserve dedication and a three to four horizontal well drilling commitment. The Corporation continues to move forward on several egress solutions around the BRC including the Brazeau Gas Storage Facility and the Intra-Alberta Pipeline to TransAlta's power generating units at Sundance and Keephills. 

The Corporation extended the term of a take-or-pay processing agreement at the BRC by an additional two years to December 2020 and increased the volume commitment by approximately 10 MMcf/d to 30 MMcf/d with a provision to deliver volumes up to 45 MMcf/d throughout the term. The agreement is with a well-capitalized, intermediate-sized producer which will underpin the recently announced expansion of the BRC.

Tidewater expects to commence its planned maintenance and turnaround operations in April 2018 at the BRC which is scheduled to occur every four years. As a result, throughput at the BRC will be reduced in the second quarter of 2018. Planned activities continue to remain on-schedule and on-budget.

Natural Gas Storage

Tidewater has entered into a six-year firm storage service agreement with an investment grade customer at its Pipestone infrastructure/egress hub ("Pipestone Gas Storage Facility") for approximately 5 Bcf of storage capacity. Tidewater can currently inject approximately 40 MMcf/d at the Pipestone Storage Facility and is working on additional injection capacity up to 55 MMcf/d by the end of the second quarter in 2018.

Tidewater has also been injecting 25 – 30 MMcf/d of producer gas at the Brazeau Gas Storage Facility which has helped increase egress capacity at the BRC. Total combined injection capability at the Brazeau and Pipestone Gas Storage Facilities is approximately 70 MMcf/d with potential to increase to 85 MMcf/d by the summer of 2018. Tidewater's storage facilities are 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

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 successfully reactivated the recently acquired deep cut extraction plant in late July 2017, ahead of schedule and under budget and is currently operating at 50% of expected capacity. Overall throughput on Tidewater's extraction facilities is approximately 95 MMcf/d.

Tidewater's 10,000 bbl/d C2+ fractionation facility and 40 MMcf/d of additional deep cut processing capacity at the BRC continue to outperform and throughput levels have exceeded expectations with no material downtime since commissioning.

Power Supply and Generation

Tidewater has seen significant demand for low cost power and is responding by contracting tolls for small scale industrial power supply related to computer processing, which will generate approximately $1 million of annualized EBITDA in the next 30 days for zero capital investment by Tidewater.  Tidewater may, subject to significant future contingencies, grow this opportunity to $5-$10 million of annualized EBITDA over the next 12 to 18 months without investing capital, but will evaluate future equity ownership for non-cash consideration given upside potential.

CAPITAL PROGRAM

Tidewater completed its 2017 capital program on-time and on-budget with the commissioning of 50 MMcf/d of additional processing capacity at the BRC and completion of the strategic gathering lines into the BRC late in December 2017.

Pipestone Montney Sour Gas Plant

Tidewater continues to move forward on major regulatory and construction milestones as well as contracting at the Pipestone Plant with an increased commitment from Kelt Exploration Ltd. ("Kelt") to 25 MMcf/d of firm raw gas processing under a five-year take-or-pay agreement. The Pipestone facility is also anchored by Blackbird Energy Inc. ("Blackbird") with a 30 MMcf/d five-year take-or-pay agreement for total contracted volumes at Pipestone of 55 MMcf/d. Blackbird and Kelt have options to exercise ownership in the facility for 20% and 15% respectively.

Capital costs for Tidewater's Pipestone Montney Sour Gas Plant remain on-budget with expected in service date of mid-2019 where Tidewater's two anchor tenants have the option to purchase a combined working interest of approximately 35% prior to commissioning the plant. The project is being funded through a combination of internally generated cash flow and undrawn capacity under the Corporation's Credit Facility. Tidewater continues to work with multiple producers to contract the remaining capacity at the facility.  The project remains subject to 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 items such as the 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 describes the key terms that will be contained in subsequent definitive agreements to see the project to completion, including provision for a 15 year take-or-pay commitment by TransAlta and an option for TransAlta to invest up to 50% in the pipeline.  The parties agreed in the Development Agreement to negotiate in good faith and execute the remaining definitive agreements over the summer 2018 timeframe. The TransAlta Pipeline is a significant step toward Tidewater providing producers with increased optionality, improved pricing, and direct access to an end market.  Construction of the project remains subject to certain customary conditions and regulatory approvals.  The project remains on-schedule and on-budget.

Stock Options and RSUs

The Corporation has approved a grant of 2,350,000 restricted share units and 2,250,000 stock options to directors, officers, employees and consultants of the Corporation. The options will have an exercise price equal to the price per common share on the date of grant, will vest over a period of three years, and will expire five years from the date of grant. The Corporation has determined that exemptions from the various requirements of TSX Policies are available for the granting of the options and RSUs.

Fourth Quarter, 2017 Earnings Call

In conjunction with this earnings release, investors will have the opportunity to listen to Tidewater senior management review its fourth quarter and full year results of fiscal 2017 via conference call on Thursday, March 29th at 11:00 am MDT.

To access the conference call by telephone, dial 647-427-7450 (local / international participant dial in) or 1-888-231-8191 (North American toll free participant dial in). A question and answer session for analysts will follow management's presentation.

A live audio webcast of the conference call will be available by following this link: http://event.on24.com/wcc/r/1624042-1/F8D075910E8A202D9870DFA3C5810BBD and will also be archived there for 90 days.

For those accessing the call via Cision's investor website, we suggest logging in at least 15 minutes prior to the start of the live event.  For those dialing in, participants should ask to be joined into the Tidewater Midstream and Infrastructure Ltd. earnings call.

A digital rebroadcast will be available approximately two hours after the conclusion of the live event on March 29th until April 5, 2018. To access the rebroadcast, please dial 416-849-0833 or 1-855-859-2056 and enter pass code 1689684 #.

The Corporation's Business

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.

Cautionary Notes

Advisory Regarding Forward-Looking Statements

In the interest of providing Tidewater's shareholders and potential investors with information regarding Tidewater, including management's assessment of Tidewater's future plans and operations, certain statements in this press release are "forward-looking statements" within the meaning of the United States Private Securities Litigation Reform Act of 1995 and "forward-looking information" within the meaning of applicable Canadian securities legislation (collectively, "forward-looking statements"). In some cases, forward-looking statements can be identified by terminology such as "anticipate", "believe", "continue", "could", "estimate", "expect", "forecast", "intend", "may", "objective", "ongoing", "outlook", "potential", "project", "plan", "should", "target", "would", "will" or similar words suggesting future outcomes, events or performance. The forward-looking statements contained in this press release speak only as of the date thereof and are expressly qualified by this cautionary statement.

Specifically, this press release contains forward-looking statements relating to but not limited to: plans to construct a 120 km natural gas pipeline from Tidewater's BRC to TransAlta's Sundance and Keephills facility and associated take or pay agreement; potential future investment in the pipeline project; negotiation and execution of definitive agreements related to the pipeline project; capital costs with respect to the pipeline project; future regulatory approval of Tidewater projects; future development plans of the Pipestone Plant; a future option for an anchor tenant in the Pipestone Plant to convert a part of its take-or-pay arrangement into an ownership interest in the Pipestone Plant; Tidewater's efforts to work with multiple producers to fully contract the Pipestone Plant; expectations regarding gas storage customers; projections with respect to guidance and run rate EBITDA; anticipated reduction in throughput at the BRC; and, anticipated EBITDA growth and in particular related to small scale industrial power supply; and, potential for ownership in a computer processing entity.

These forward-looking statements are based on certain key assumptions regarding our ability to execute on our business plan including with respect to construction of the BRC to Sundance and Keephills and construction of the Pipestone Plant; our operating activities and current industry conditions; the timely receipt of required regulatory approvals; general business, economic and market conditions; the ability of Tidewater to obtain the required capital to finance its operations; anticipated timelines and budgets being met with respect to Tidewater's operations; future natural gas liquids prices and laws and regulations continuing in effect (or, where changes are proposed, such changes being adopted as anticipated). Readers are cautioned that such assumptions, although considered reasonable by Tidewater at the time of preparation, may prove to be incorrect.

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: risks related to regulatory approval; the ability of management to execute its business plan; risks inherent in the Corporation's marketing operations, including credit risk; fluctuations in crude oil, natural gas liquids and natural gas prices; health, safety and environmental risks; uncertainties as to the availability and cost of financing; the possibility that governmental policies or laws may change or governmental approvals may be delayed or withheld; the sufficiency of budgeted capital expenditures in carrying out planned activities; uncertainties regarding aboriginal claims and in maintaining relationships with local populations and other stakeholders; processing, pipeline, de-ethanization and fractionation infrastructure outages, disruptions and constraints; rail transportation curtailments, disruptions and constraints; the availability and cost of labour and services; cryptocurrency price volatility and uncertainty regarding world financial markets; risk of cyber security threats; risk of cryptocurrency loss, theft or restriction on access; uncertainty regarding regulations regarding cryptocurrency; and other risks and uncertainties described elsewhere in this document or in the Corporation's other filings with Canadian securities regulatory authorities.

The above summary of assumptions and risks related to forward-looking statements in this press release has been provided in order 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.

Non-GAAP Financial Measures

This press release refers to "EBITDA", "Adjusted EBITDA" and "Adjusted EBITDA per common share" which do not have any standardized meaning prescribed by generally accepted accounting principles in Canada ("GAAP").  EBITDA is calculated as income or loss before interest, taxes, depreciation and amortization.  Adjusted EBITDA is calculated as EBITDA adjusted for incentive compensation, unrealized gains/losses, non-cash items, transaction costs and other items 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 year ended December 31, 2017.

Tidewater Management believes that EBITDA, Adjusted EBITDA and Adjusted EBITDA per common share provide useful information to investors as they provide an indication of results generated from the Corporation's operating activities prior to financing, taxation and non-recurring/non-cash impairment charges occurring outside the normal course of business. Management utilizes Adjusted EBITDA to set objectives and as a key performance indicator of the Corporation's success. In addition to its use by Management, Tidewater also believes Adjusted EBITDA is a measure widely used by securities analysts, investors and others to evaluate the financial performance of the Corporation and other companies in the midstream industry. Investors should be cautioned that EBITDA and Adjusted EBITDA should not be construed as alternatives to earnings, cash flow from operating activities or other measures of financial results determined in accordance with GAAP as an indicator of the Corporation's performance and may not be comparable to companies with similar calculations.

For more information with respect to financial measures which have not been defined by GAAP, including reconciliations to the closest comparable GAAP measure, see the "Non-GAAP and Additional Measures" section of Tidewater's most recent MD&A which is available on SEDAR.

U.S. Securities Laws

This press release does not constitute an offer to sell or the solicitation of an offer to buy, nor shall there be any sale of these securities, in any jurisdiction in which such offer, solicitation or sale would be unlawful prior to registration or qualification under the securities laws of such jurisdiction. The securities have not been and will not be registered under the United States Securities Act of 1933, as amended, or any state securities laws and may not be offered or sold within the United States unless an exemption from such registration is available.

Not for distribution to U.S. Newswire Services or for dissemination in the United States. Any failure to comply with this restriction may constitute a violation of U.S. securities laws.

SOURCE Tidewater Midstream and Infrastructure Ltd.

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