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.