Aug 11, 2022
CALGARY, AB, Aug. 11, 2022 /CNW/ - Tidewater Midstream and Infrastructure Ltd. ("Tidewater Midstream" or the "Corporation") (TSX: TWM) has filed its condensed interim consolidated financial statements and Management's Discussion and Analysis ("MD&A") for the three and six month periods ended June 30, 2022.
(1) Adjusted EBITDA, distributable cash flow, payout ratio and consolidated net debt used throughout this press release are non-GAAP financial measures or ratios. The most directly comparable GAAP measure for Adjusted EBITDA is net income (loss) and for distributable cash flow is net cash from operating activities. See the "Non-GAAP and Other Financial Measures" in the Corporation's press release and MD&A for information on each non-GAAP financial measure or ratio. |
(in thousands of Canadian dollars except per share | Three months ended | Six months ended | |||||||||
2022 | 2021 | 2022 | 2021 | ||||||||
Revenue | $ | 793,565 | $ | 369,781 | $ | 1,451,989 | $ | 729,820 | |||
Net income and comprehensive net income | $ | 18,751 | $ | 63,857 | $ | 65,775 | $ | 72,468 | |||
Net income attributable to shareholders | $ | 16,067 | $ | 64,280 | $ | 57,287 | $ | 72,676 | |||
Basic net income attributable to | $ | 0.05 | $ | 0.19 | $ | 0.17 | $ | 0.21 | |||
Diluted net income attributable to | $ | 0.04 | $ | 0.16 | $ | 0.14 | $ | 0.18 | |||
Consolidated Adjusted EBITDA (1) | $ | 69,922 | $ | 52,294 | $ | 127,328 | $ | 103,407 | |||
Net cash provided by operating activities | $ | 57,037 | $ | 42,325 | $ | 109,227 | $ | 97,857 | |||
Distributable cash flow attributable to | $ | 30,992 | $ | 17,272 | $ | 53,279 | $ | 34,189 | |||
Distributable cash flow per common share | $ | 0.09 | $ | 0.05 | $ | 0.16 | $ | 0.10 | |||
Distributable cash flow per common share | $ | 0.07 | $ | 0.04 | $ | 0.13 | $ | 0.08 | |||
Dividends declared | $ | 3,419 | $ | 3,393 | $ | 6,837 | $ | 6,785 | |||
Dividends declared per common share | $ | 0.01 | $ | 0.01 | $ | 0.02 | $ | 0.02 | |||
Total common shares outstanding (000s) | 341,830 | 339,299 | 341,830 | 339,299 | |||||||
Payout ratio (1) | 11 % | 20 % | 13 % | 20 % | |||||||
Total assets | $ | 2,256,683 | $ | 1,948,381 | $ | 2,256,683 | $ | 1,948,381 | |||
Net debt (1) | $ | 714,078 | $ | 742,969 | $ | 714,078 | $ | 742,969 | |||
Notes: |
(1) See "Non-GAAP and Other Financial Measures" in the Corporation's press release and MD&A. |
This MD&A 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 and Other Financial Measures" section of this MD&A for further details.
(in thousands of Canadian dollars) | Three months ended | Six months ended | ||||||||
2022 | 2021 | 2022 | 2021 | |||||||
Deconsolidated Adjusted EBITDA | $ | 53,020 | $ | 52,294 | $ | 97,689 | $ | 103,407 | ||
Deconsolidated net debt | $ | 606,249 | $ | 742,969 | $ | 606,249 | $ | 742,969 | ||
Ownership in Tidewater Renewables | 69 % | 100 % | 69 % | 100 % | ||||||
During the second quarter of 2022, total throughput at the Corporation's Prince George refinery was approximately 11,810 bbl/day, consistent with the first quarter of 2022.
PGR Historical Performance: | ||||||||
Q2 2022 | Q1 2022 | Q4 2021 | Q3 2021 | Q2 2021 | Q1 2021 | Q4 2020 | Q3 2020 | |
Daily throughput (bbl) | 11,810 | 11,745 | 12,245 | 12,209 | 11,459 | 12,095 | 12,187 | 12,180 |
Refinery Yield (1) | ||||||||
Diesel | 44 % | 48 % | 47 % | 45 % | 45 % | 49 % | 49 % | 43 % |
Gasoline | 42 % | 40 % | 40 % | 42 % | 43 % | 39 % | 39 % | 44 % |
Other (2) | 14 % | 12 % | 13 % | 13 % | 12 % | 12 % | 12 % | 13 % |
(1) Refinery yield includes crude, canola and intermediates. |
(2) Other refers to heavy fuel oil (HFO), LPG and feedstock consumed to fuel the refinery. |
Prince George refining margins increased significantly during the second quarter of 2022, averaging over $100/bbl, a 37% increase from the 2021 average of $60/bbl and a 37% increase from the first quarter of 2022 average of $73/bbl. The increase in Prince George refining margins is partially offset by increased regulatory compliance costs related to British Columbia's Low Carbon Fuel Standard program.
Strategically located within the Alberta Montney fairway, the Pipestone Natural Gas Plant processed its highest average volume of 101 MMcf/day in the second quarter of 2022, a 10% increase from the second quarter of 2021 and a 4% increase from the first quarter of 2022. Facility availability for the second quarter of 2022 averaged 96%, an increase of 2% from the first quarter of 2021, and a 4% increase from the first quarter of 2022. The Pipestone Natural Gas Plant's next scheduled turnaround is in the third quarter of 2022, which is expected to decrease third quarter throughput by approximately 20%. The local Montney formation continues to remain very active and the Pipestone Natural Gas plant remains fully contracted with over 85% of capacity committed on take-or-pay arrangements.
The Brazeau River fractionation facility was able to maintain steady operations during the second quarter of 2022 by maintaining stable plant production and truck in volumes. The fractionation facility utilization averaged 67%, a 10% increase from the second quarter of 2021 and a 20% decrease from the first quarter of 2022. The transitory decrease was due to the scheduled facility turnaround that was completed during the second quarter of 2022. The fractionation facility continues to serve as a key asset for Tidewater Midstream's NGL marketing business.
The BRC gas processing facility averaged throughput of 123 MMcf/day for the second quarter of 2022 an increase of 24% relative to the second quarter of 2021. The raw gas processing rates at the BRC increased by 18% compared to the first quarter of 2022. Tidewater Midstream continues to look for opportunities to increase third-party throughput by working with producers to improve netbacks by increasing the utilization of the BRC's facilities.
Tidewater Midstream's 2022 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 second quarter of 2022, the Corporation safely and successfully completed two large planned turnarounds at its Ram River Gas Plant and at the BRC. The Corporation has upcoming turnarounds occurring in the third quarter of 2022 for the Pipestone Gas Plant and the second quarter of 2023 for PGR. Tidewater Midstream expects full year 2022 maintenance capital expenditures to be approximately $35 – $40 million.
Subsequent to the second quarter Tidewater Midstream announced its Financing Plan to fully fund the repayment of $125 million of its Senior Unsecured Notes and its $20 Second Lien Term Loan. The Senior Unsecured Notes payable and Second Lien Term Loan repayments will be funded through, the previously announced unit financing and draws on the Corporation's credit facility. Under the unit financing the company expects to raise gross proceeds of $58.1 million through a public offering and an additional $34.5 million through a private placement of units. Each unit will be issued at a price of $1.20 per unit and will consist of one common share and one-half of one common share purchase warrant. One full common share purchase warrant will entitle the holder to acquire one common share of the Corporation at a price of $1.44 for a period of up to 24 months from the expected closing date, currently expected to be on or about August 16, 2022. Full details and regulatory disclosures are available on SEDAR.
Additionally, and concurrent with the above transactions close, Tidewater expects to increase its senior credit facility from $420 million to $550 million through an expanded syndicate of lenders including two of Canada's largest financial institutions. The amended facility will mature on August 18, 2024.
Tidewater Midstream's outlook for full year 2022 remains unchanged, with the Corporation expecting 2022 consolidated Adjusted EBITDA to range from $230 – 245 million with deconsolidated Adjusted EBITDA expected to range between $180-190 million.
Due to the announced unit offering associated with the short form prospectus filed on August 9, 2022, the Corporation will not be hosting an earnings conference call. For further detail and discussion of Tidewater Midstream's financial performance please refer to our condensed interim consolidated financial statements and MD&A for the period ended June 30, 2022. Tidewater management expects to resume its quarterly earnings calls following its third quarter 2022 results release.
Tidewater Midstream is traded on the TSX under the symbol "TWM". Tidewater Midstream's business objective is to build a diversified midstream and infrastructure company in the North American natural gas, natural gas liquids, crude oil, refined product and renewable energy value chain. Its strategy is to profitably grow and create shareholder value through the acquisition and development of conventional and renewable energy infrastructure. To achieve its business objective, Tidewater Midstream is focused on providing customers with a full service, vertically integrated value chain through the acquisition and development of energy infrastructure, including downstream facilities, natural gas processing facilities, natural gas liquids infrastructure, pipelines, railcars, export terminals, storage, and various renewable initiatives. To complement its infrastructure asset base, the Corporation also markets crude, refined product, natural gas, NGLs and renewable products and services to customers across North America.
Tidewater Midstream is a majority shareholder in Tidewater Renewables Ltd. ("Tidewater Renewables"), a multi-faceted, energy transition company focusing on the production of low-carbon fuels. Tidewater Renewables' common shares are publicly traded on the TSX under the symbol "LCFS".
Throughout this press release and in other materials disclosed by the Corporation, Tidewater Midstream uses a number of financial measures when assessing its results and measuring overall performance. The intent of non-GAAP measures and ratios is to provide additional useful information to investors and analysts. Certain of these financial measures do not have a standardized meaning prescribed by GAAP and are therefore unlikely to be comparable to similar measures presented by other entities. As such, these measures should not be considered in isolation or used as a substitute for measures of performance prepared in accordance with GAAP. 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 Other Financial Measures" section of Tidewater Midstream's most recent MD&A which is available on SEDAR.
The non-GAAP financial measures used by the Corporation are Adjusted EBITDA and distributable cash flow.
Consolidated and Deconsolidated Adjusted EBITDA
Consolidated Adjusted EBITDA is calculated as income (or loss) before finance costs, taxes, depreciation, share-based compensation, unrealized gains/losses on derivative contracts, non-cash items, transaction costs, lease payments under IFRS 16 Leases and other items considered non-recurring in nature plus the Corporation's proportionate share of EBITDA in their equity investments. Deconsolidated Adjusted EBITDA is calculated as consolidated Adjusted EBITDA less the portion of consolidated Adjusted EBITDA attributable to Tidewater Renewables.
In accordance with IFRS, Tidewater Midstream's jointly controlled investments are accounted for using equity accounting. Under equity accounting, net earnings from investments in equity accounted investees are recognized in a single line item in the consolidated statement of net income (loss) and comprehensive income (loss). The adjustments made to net income (loss), as described above, are also made to share of profit from investments in equity accounted investees.
The following table reconciles net income (loss), the nearest GAAP measure, to consolidated Adjusted EBITDA and deconsolidated Adjusted EBITDA:
Three months ended | Six months ended | ||||||||
(in thousands of Canadian dollars) | 2022 | 2021 | 2022 | 2021 | |||||
Net income | $ | 18,751 | $ | 63,867 | $ | 65,775 | $ | 72,468 | |
Deferred income tax expense | 7,804 | 15,303 | 23,513 | 19,077 | |||||
Depreciation | 20,146 | 20,068 | 40,016 | 41,238 | |||||
Finance costs | 17,853 | 20,715 | 33,976 | 40,354 | |||||
Share-based compensation | 3,819 | 1,205 | 7,299 | 3,056 | |||||
Loss (gain) on sale of assets | 3,409 | (24,597) | 2,250 | (24,710) | |||||
Unrealized gain on derivative contracts | (3,356) | (48,427) | (48,883) | (53,799) | |||||
Transaction costs | 566 | 1,451 | 809 | 1,620 | |||||
Non-recurring transactions | 203 | 1,276 | 485 | 1,329 | |||||
Adjustment to share of profit from equity | 727 | 1,433 | 2,088 | 2,774 | |||||
Consolidated Adjusted EBITDA | $ | 69,922 | $ | 52,294 | $ | 127,328 | $ | 103,407 | |
Less: Consolidated Adjusted EBITDA | (16,902) | - | (29,639) | - | |||||
Deconsolidated Adjusted EBITDA | $ | 53,020 | $ | 52,294 | $ | 97,689 | $ | 103,407 |
Distributable cash flow attributable to shareholders (excluding distributable cash flow to non-controlling interest shareholders associated with Tidewater Renewables)
Distributable cash flow is calculated as net cash provided by operating activities before changes in non-cash working capital plus cash distributions from investments, transaction costs, non-recurring expenses, and after any expenditures that use cash from operations. Changes in non-cash working capital are excluded from the determination of distributable cash flow because they are primarily the result of seasonal fluctuations or other temporary changes and are generally funded with short term debt or cash flows from operating activities. Deducted from distributable cash flow are maintenance capital expenditures, including turnarounds, as they are ongoing recurring expenditures which are funded from operating cash flows. Transaction costs are added back as they vary significantly quarter to quarter based on the Corporation's acquisition and disposition activity. It also excludes non-recurring transactions that do not reflect Tidewater Midstream's ongoing operations. Distributable cash flow attributable to shareholders also deducts distributable cash flow to non-controlling interest shareholders associated with Tidewater Renewables.
The following table reconciles net cash provided by operating activities, the nearest GAAP measure, to distributable cash flow attributable to shareholders:
Three months ended | Six months ended | |||||||||
(in thousands of Canadian dollars) | 2022 | 2021 | 2022 | 2021 | ||||||
Net cash provided by operating activities | $ | 57,037 | $ | 42,325 | $ | 109,227 | $ | 97,857 | ||
Add (deduct): | ||||||||||
Changes in non-cash working capital | 11,396 | 4,294 | 13,262 | (2,537) | ||||||
Transaction costs | 566 | 1,451 | 809 | 1,620 | ||||||
Non-recurring transactions | 203 | 1,276 | 485 | 1,329 | ||||||
Interest and financing charges | (10,946) | (14,920) | (20,758) | (29,983) | ||||||
Payment of lease liabilities, net of sublease payments | (12,088) | (13,121) | (24,393) | (26,476) | ||||||
Maintenance capital | (11,666) | (4,033) | (19,376) | (7,621) | ||||||
Tidewater Renewables' distributable cash flow to | (3,511) | - | (5,977) | - | ||||||
Distributable cash flow attributable to | $ | 30,992 | $ | 17,272 | $ | 53,279 | $ | 34,189 | ||
Three months ended | Six months ended | ||||||||||
(in thousands of Canadian dollars except percentage | 2022 | 2021 | 2022 | 2021 | |||||||
Dividends declared | $ | 3,419 | $ | 3,393 | $ | 6,837 | $ | 6,785 | |||
Distributable cash flow attributable to | $ | 30,992 | $ | 17,272 | $ | 53,279 | $ | 34,189 | |||
Payout ratio | 11 % | 20 % | 13 % | 20 % | |||||||
Distributable cash flow per common share
Three months ended | Six months ended | ||||||||||
(in thousands of Canadian dollars except per share | 2022 | 2021 | 2022 | 2021 | |||||||
Distributable cash flow attributable to shareholders | $ | 30,992 | $ | 17,272 | $ | 53,279 | $ | 34,189 | |||
Distributable cash flow per common share – basic | $ | 0.09 | $ | 0.05 | $ | 0.16 | $ | 0.10 | |||
Distributable cash flow per common share – diluted | $ | 0.07 | $ | 0.04 | $ | 0.13 | $ | 0.08 | |||
Consolidated and Deconsolidated Net Debt
Consolidated net debt is defined as bank debt, notes payable and convertible debentures, less cash. In addition to reviewing consolidated net debt, management reviews deconsolidated net debt to highlight the Corporation's financial flexibility, balance sheet strength and leverage. Deconsolidated net debt is calculated as consolidated net debt less the portion attributable to Tidewater Renewables.
The following table reconciles consolidated and deconsolidated net debt:
(in thousands of Canadian dollars) | June 30, 2022 | June 30, 2021 | ||
Tidewater Midstream Senior Credit Facility | $ | 396,064 | $ | 472,000 |
Tidewater Renewables Senior Credit Facility | 110,000 | - | ||
RNG Credit Facility | 7,900 | - | ||
Second Lien Term Loan - principal | 20,000 | 100,000 | ||
Notes payable | 124,639 | 123,890 | ||
Convertible debentures - principal | 75,000 | 75,000 | ||
Cash | (19,525) | (27,921) | ||
Consolidated net debt | $ | 714,078 | $ | 742,969 |
Less: Senior Credit Facility – Tidewater Renewables | (110,000) | - | ||
Less: RNG Credit Facility – Tidewater Renewables | (7,900) | - | ||
Add: Cash – Tidewater Renewables | 10,071 | - | ||
Deconsolidated net debt | $ | 606,249 | $ | 742,969 |
Advisory Regarding Forward-Looking Statements
Certain statements contained in this press release constitute forward-looking statements and forward-looking information (collectively referred to herein as, "forward-looking statements") within the meaning of applicable Canadian securities laws. Such forward-looking statements relate to future events, conditions or future financial performance of Tidewater Midstream and Infrastructure Ltd. (the "Corporation" or "Tidewater Midstream") based on future economic conditions and courses of action. All statements other than statements of historical fact may be forward-looking statements. Such forward-looking statements are often, but not always, identified by the use of any words such as "seek", "anticipate", "budget", "plan", "continue", "forecast", "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. 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 the expectations reflected in those forward-looking statements are reasonable, but no assurance can be given that these expectations will prove to be correct and such forward-looking statements included in this press release should not be unduly relied upon.
In particular, this press release contains forward-looking statements pertaining to but not limited to the following:
Although the forward-looking statements contained in this press release are based upon assumptions which management of the Corporation believes to be reasonable, the Corporation cannot assure investors that actual results will be consistent with these forward-looking statements. With respect to forward-looking statements contained in this press release, the Corporation has assumptions regarding, but not limited to:
The Corporation's actual results could differ materially from those anticipated in the forward-looking statements, as a result of numerous known and unknown risks and uncertainties and other factors including but not limited to:
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 AIF and in other documents on file with the Canadian Securities regulatory authorities.
Management of the Corporation has included the above summary of assumptions and risks related to forward-looking statements provided in this press release in order to provide holders of common shares in the capital of the Corporation with a more complete perspective on the Corporation's current and future operations and such information may not be appropriate for other purposes.The Corporation's actual results' performance or achievement could differ materially from those expressed in, or implied by, these forward-looking statements and, accordingly, no assurance can be given that any of the events anticipated by the forward-looking statements will transpire or occur, or if any off them do so, what benefits the Corporation will derive therefrom. Readers are therefore cautioned that the foregoing list of important factors is not exhaustive, and they should not unduly rely on the forward-looking statements included in this press release. Tidewater Midstream 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, other than as required by applicable securities law. All forward-looking statements contained in this press release are expressly qualified by this cautionary statement. Further information about factors affecting forward-looking statements and management's assumptions and analysis thereof is available in filings made by the Corporation with Canadian provincial securities commissions available on the System for Electronic Document Analysis and Retrieval ("SEDAR") at www.sedar.com.
SOURCE Tidewater Midstream and Infrastructure Ltd.