CALGARY, Nov. 13, 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
September 30, 2018.
Recent Highlights
- Tidewater delivered another quarter of Adjusted EBITDA growth
of $17.3 million or $0.05 per share for the third quarter of 2018
compared to $15.3 million or
$0.05 per share for the same period
in 2017.
- Cash flow from operating activities totalled $7.3 million, an increase of $5.6 million over the third quarter of 2017.
- Distributable cash flow increased by approximately 23% to
$12.9 million for the third quarter
of 2018 compared to $10.5 million for
the same period in 2017 yielding a conservative payout ratio of 26%
for the quarter (25% year to date).
- On October 18, 2018 Tidewater
received approval from the Alberta Energy Regulator to construct
and operate the Pipestone Montney, Sour Deep-Cut Gas Processing
Complex.
- On October 30, 2018 Tidewater
also received approval from the Alberta Energy Regulator to
construct and operate a 120 km natural gas pipeline connecting
Tidewater's Brazeau River Complex ("BRC") to TransAlta
Corporation's generating units at Sundance and Keephills.
- Tidewater has executed approximately ten crude oil
infrastructure agreements to date to deliver crude oil to end
markets including direct to three refiners.
- During the third quarter of 2018, the Corporation amended its
existing Credit Facility with its banking syndicate which increased
the total availability from $250
million to $325 million and
contains adjustments to the Corporation's previous pricing grid,
which is expected to reduce overall borrowing costs. The amendments
provide additional liquidity to the Corporation's financial
position.
- Tidewater remains confident in its ability to execute its
operational direction as previously disclosed.
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 September 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
September
30,
|
|
Nine
months
ended
September
30,
|
|
|
2018
|
|
2017
|
|
2018
|
|
2017
|
Revenue
|
$
|
80,102
|
$
|
52,003
|
$
|
233,550
|
$
|
157,682
|
Net income
(loss)
|
$
|
(1,453)
|
$
|
(38)
|
$
|
6,176
|
$
|
12,351
|
Basic and diluted
income (loss) attributable
to shareholders per
share
|
$
|
(0.00)
|
$
|
(0.00)
|
$
|
0.02
|
$
|
0.04
|
Adjusted
EBITDA1
|
$
|
17,283
|
$
|
15,346
|
$
|
56,499
|
$
|
44,586
|
Adjusted EBITDA per
common share -
basic1
|
$
|
0.05
|
$
|
0.05
|
$
|
0.17
|
$
|
0.14
|
Cash flow from (used
in) operating
activities
|
$
|
7,251
|
$
|
1,649
|
$
|
(1,017)
|
$
|
31,351
|
Distributable cash
flow2
|
$
|
12,911
|
$
|
10,509
|
$
|
39,965
|
$
|
32,622
|
Distributable cash
flow per common share
–
basic2
|
$
|
0.04
|
$
|
0.03
|
$
|
0.12
|
$
|
0.10
|
Dividends
declared
|
$
|
3,293
|
$
|
3,290
|
$
|
9,876
|
$
|
9,866
|
Dividends declared
per common share
|
$
|
0.01
|
$
|
0.01
|
$
|
0.03
|
$
|
0.03
|
Total common shares
outstanding (000s)
|
|
329,313
|
|
328,973
|
|
329,313
|
|
328,973
|
Payout
ratio3
|
|
26%
|
|
31%
|
|
25%
|
|
30%
|
Total
assets
|
$
|
1,093,936
|
$
|
692,073
|
$
|
1,093,936
|
$
|
692,073
|
Net
debt4
|
$
|
317,162
|
$
|
73,094
|
$
|
317,162
|
$
|
73,094
|
Notes:
|
|
1
|
Adjusted EBITDA is
calculated as net income (loss) before interest, taxes,
depreciation, share-based 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 September 30, 2018. Adjusted EBITDA and Adjusted EBITDA per
common share are not standard measures under GAAP. See "Non-GAAP
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.
|
2
|
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 September 30, 2018. Distributable cash flow and distributable
cash flow per common share are not standard measures under GAAP.
See "Non-GAAP Measures" in the Corporation's MD&A for a
reconciliation of distributable cash flow and distributable cash
flow per common share to their most closely related GAAP
measures.
|
3
|
Payout Ratio is
calculated by expressing dividends declared to shareholders for the
period as a percentage of distributable cash flow attributable to
shareholders. This measure, in combination with other measures, is
used by the investment community to assess the sustainability of
the current dividends. Payout Ratio is not a standard measure under
GAAP. See "Non-GAAP Financial Measures" in the Corporation's
MD&A for a reconciliation of Payout Ratio to its most closely
related GAAP measure.
|
4
|
Net debt is defined
as current liabilities, plus bank debt and notes payable, less
current assets. Net Debt is not a standard measure under GAAP. See
"Non-GAAP Measures" in the Corporation's MD&A for a
reconciliation of Net Debt to its most closely related GAAP
measure.
|
OUTLOOK AND CORPORATE UPDATE
Tidewater continues to position itself to provide producers
additional egress solutions and improved pricing for their products
in a challenging commodity price environment by developing and
connecting its infrastructure in order to access additional end
markets.
Overall, while gas processing volumes remained under pressure
compared to the first quarter of 2018, Tidewater moved significant
NGL volumes and generated incremental fee for service revenue from
its gas storage assets during the third quarter. The Corporation
also began entering into new crude oil infrastructure contracts
where the benefits to Tidewater's earnings will be visible in 2019.
Tidewater is pleased with the progress on its two largest projects,
including regulatory approval for both the Pipestone Plant and
Intra-Alberta Pipeline to TransAlta, in which both projects will
provide producers with much needed egress solutions for natural
gas, NGLs and condensate.
Crude Oil Infrastructure
Tidewater is aggressively growing its crude oil infrastructure
business and has received significant support from producers and
refiners. Tidewater expects it will deliver Canadian crude to
approximately ten end markets by the end of Q1 2019 and continues
to explore various market access opportunities including storage,
terminals and pipelines. The majority of the agreements are for
terms of less than 12-months, however, Tidewater intends to grow
this business and negotiate longer term agreements with existing
and new customers. Contribution to net income for crude oil
infrastructure contracts in 2019 is expected to be approximately
$7 million - $8 million based on an average contracted volume
of 200,000 – 400,000 bbls per month at market rate loading and
transportation fees to locations throughout North America. Contribution to Adjusted EBITDA
is expected to be approximately $10
million after adjusting for capitalized lease and finance
costs over an average of 2-5 years.
Ram River Gas Plant
During the third quarter, Tidewater completed new tie-ins and
subsequent to September 30, 2018
began accepting incremental volumes at the Ram River Plant under
the previously announced five-year take-or-pay for gas processing
and sulphur handling with a mid-size oil and gas producer. The
agreement is for an incremental 18 MMcf/d in the first contract
year with the take-or-pay volume declining by approximately 30%
year-over-year during the five-year period. Throughput at the Ram
River Plant remains strong with new customers Tidewater has tied-in
since the acquisition.
Brazeau River Complex
Throughput at the BRC was below its historical average for the
quarter due to continued pressure on gas prices and downtime
related to the turnaround and tie-in projects at the BRC. Tidewater
is working diligently with producers to improve netbacks by fully
utilizing BRC's facilities including its three NGL pipeline
connections, truck loading and offloading, fractionation and
natural gas storage facilities. During the third quarter, Tidewater
installed the BRC tie-in riser for the Intra-Alberta Pipeline to
TransAlta during the final turnaround operations at the BRC. The
Intra-Alberta Pipeline to TransAlta will offer producers a third
natural gas takeaway option directly to an end market in the second
half of 2019.
Natural Gas Storage
Tidewater continued to inject customer gas under long-term
contracts at the Pipestone gas
storage facility through the quarter, growing the cushion gas at
the facility and increasing the injection and withdrawal capability
of the storage reservoir.
Tidewater also completed its previously announced $2.5 million project at the Brazeau gas storage
facility for an increased injection capability of approximately 10
MMcf/d. The Brazeau gas storage facility now has injection
capability of approximately 40 – 45 MMcf/d.
Tidewater's gas storage projects 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 improved pricing to
producers.
NGL Extraction and Fractionation Facilities
During the third quarter of 2018, one of the pipelines on the
Trans Canada Pipeline system that supplies natural gas to
Tidewater's extraction plants experienced an approximate one-month,
unplanned maintenance outage which impacted NGL sales volumes from
the Corporation's Villeneuve and Fort
Saskatchewan extraction plants by approximately 450 bbls/d.
Despite the unplanned maintenance, Tidewater'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 prices.
Tidewater currently has approximately 100 MMcf/d of natural gas
straddle volumes flowing through its extraction facilities and has
been notified by Trans Canada Pipeline of the potential for
curtailment or shut-in of two of the pipelines on their system due
to potential pipeline integrity concerns. As a result, Tidewater
may experience curtailment or shut-in natural gas volumes to the
Corporation's Paddle River and Fort
Saskatchewan extraction plants that could impact NGL sales
during the fourth quarter of 2018.
CAPITAL PROGRAM
Pipestone Montney Sour Gas Plant
On October 18, 2018 Tidewater
received approval from the Alberta Energy Regulator to construct
and operate the Pipestone Plant. The Pipestone Plant is designed to
process approximately 100 MMcf/d of natural gas. During the
quarter, as previously announced, Tidewater executed a definitive
agreement with a large oil and gas producer for firm volumes of 25
MMcf/d over a five-year term. With this additional arrangement,
Tidewater is fully contracted at the Pipestone Plant.
As a result of significant producer support, Tidewater is
currently evaluating a condensate liquids hub at Pipestone.
Tidewater began construction on the Pipestone Plant in late
October and expects approximately $120 - $125 million
of capital remaining to be spent between the fourth quarter of 2018
and the plants commissioning early in the third quarter of 2019.
Remaining capital excludes the 32MW cogeneration units which
Tidewater is considering monetizing all or a portion of. Two of the
Pipestone Plant's anchor tenants, Blackbird Exploration Ltd. and
Kelt Exploration Ltd., have options to exercise ownership in the
facility for 20% and 15% respectively.
Contribution to net income for the Pipestone plant is expected to be
approximately $25 million -
$30 million based on plant throughput
of approximately 100MMcf/d of contracted volume at market rates
over a 5 – 10 year period. Estimated annual operating costs are
based on plants of similar size with sour gas processing capability
and similar NGL handling capability. Adjusted EBITDA
contribution is expected to be approximately $30 - $35 million
after adding back depreciation and finance costs based on a 60-year
useful life.
Intra-Alberta Pipeline to TransAlta
On October 30, 2018 Tidewater
received approval from the Alberta Energy Regulator to construct
and operate the previously announced 120 km natural gas pipeline
connecting Tidewater's BRC to TransAlta's generating units at
Sundance and Keephills (the "Pipeline"). The Pipeline will
have initial capacity of 130 MMcf/d which may be expanded to
approximately 440 MMcf/d and is supported by a 15 year take or pay
commitment from TransAlta. TransAlta has an option to acquire a 50%
ownership in the project and it is likely that TransAlta will
exercise its option. Tidewater expects to commence construction of
the Pipeline in mid-November 2018
with total cost of the project expected to be approximately
$180 million ($90 million net) assuming the option is exercised
by TransAlta. Remaining capital costs of approximately $140 million ($50
million net) are expected to be incurred during the fourth
quarter of 2018 through to the commissioning of the Pipeline in the
third or fourth quarter of 2019.
Since executing binding construction contracts and purchase
orders, following regulatory approval of the TransAlta Pipeline,
and due to increasing pipeline construction activity in
Alberta, Tidewater has seen an
increase to base construction costs of approximately 10% bringing
baseline capital costs related to the project to $180 million.
Assuming TransAlta exercises its 50% option, contribution to net
income for the TransAlta Pipeline is expected to be approximately
$8 - $9
million based on throughput of approximately 130MMcf/d of
contracted volume at market rate tolls over a 15-year period.
Estimated annual operating costs for the pipeline are based on
other pipelines within Tidewater's currently owned infrastructure
of similar size and flows rate capability. Adjusted EBITDA
contribution is expected to be approximately $10 million after adding back depreciation and
finance costs based on a 60 year useful life.
Tidewater remains fully funded with its existing credit facility
and cash flow from operations to fund its capital program through
the end of 2019.
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: planned commissioning in
Q2 of 2019 of Tidewater's planned Pipestone area plant and projections with
respect to contracting capacity at this proposed plant and net
income to be derived therefrom; expectations regarding
funding of capital projects; planned commissioning in mid
2019 of Tidewater's planned Pipestone area 100 MMcf/d sour, deep-cut
Montney plant, estimated
commissioning date and net income to be derived therefrom;
projections regarding future delivery of crude oil to end markets
and impact to earnings and adjusted EBITDA in 2019; potential
curtailment or shut-in of natural gas volumes to the Corporation's
straddle plants and the predicted impact to NGL sales; expectations
regarding the Intra-Alberta Pipeline to TransAlta including
projected capital costs, specifications, planned in-service date
and estimates of net income and Adjusted EBITDA; Tidewater's
expectations that TransAlta will exercise its option to acquire an
ownership interest in the Intra-Alberta Pipeline to TransAlta;
expectations regarding performance of NGL extraction and natural
gas storage operations; and, expectations regarding funding of
capital projects;
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; the success of the Corporation's
operations; 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; the impact of
increasing competition; receipt of regulatory approvals; 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; anticipated timelines and budgets being met in
respect of the Corporation's projects and operations; the ability
of the Corporation to obtain equipment, services, supplies and
personnel in a timely manner and at an acceptable cost to carry out
its evaluations and activities.
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; 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, tariffs and taxation;
changes in operating and capital costs, including fluctuations in
input costs; changes in environmental and other regulations;
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; changes in the political environment and public
opinion; risks and liabilities associated with the transportation
of dangerous goods; risks and liabilities resulting from
derailments; effects of weather conditions; reputational risks;
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, or
disruptions in the transportation network on which the Corporation
is reliant; technical and processing problems, including the
availability of equipment and access to properties; 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.
Future Oriented Financial Information
Any financial outlook or future-oriented financial information,
as defined by applicable securities legislation, has been approved
by management of Tidewater as of November
12, 2018. Financial outlook or future-oriented financial
information is provided for the purpose of providing information
about management's current expectations and goals relating to the
future of Tidewater. Readers are cautioned that reliance on such
information may not be appropriate for other purposes. The purpose
of the future oriented financial information contained herein
including but not limited to future periods, of net income and
Adjusted EBITDA is to assist investors, shareholders, and others in
understanding certain financial metrics relating to expected future
financial results for the purpose of evaluating the performance of
Tidewater's business for future periods. This information may not
be appropriate for other purposes. The results and conclusions of
these assessments, along with the known and unknown risks,
uncertainties and other factors referred to above, could impact
Tidewater's estimates and the information related to such future
periods contained herein and any such impact could be material.
Non-GAAP Measures
This news release refers to "Adjusted EBITDA" which do not have
any standardized meaning prescribed by generally accepted
accounting principles in Canada
("GAAP"). Adjusted EBITDA is calculated as income or loss before
interest, taxes, depreciation, share-based compensation, unrealized
gains/losses, non-cash items, transaction costs and items that are
considered non-recurring in nature.
Tidewater Management believes that Adjusted EBITDA 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 security analysts, investors and others to
evaluate the financial performance of the Corporation and other
companies in the midstream industry. Investors should be
cautioned that 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 Measures"
section of Tidewater's most recent MD&A which is available on
SEDAR.
SOURCE Tidewater Midstream and Infrastructure Ltd.