CALGARY, March 12, 2020 /CNW/ - Tidewater Midstream and
Infrastructure Ltd. ("Tidewater" or the
"Corporation") (TSX: TWM) is pleased to announce that, with
its partner TransAlta Corporation ("TransAlta"), has entered into a
Letter of Intent to sell the Pioneer Pipeline to NOVA Gas
Transmission Ltd. ("NGTL"), a wholly-owned subsidiary of TC Energy,
for total cash consideration of $255.0
million (the "Pioneer Transaction"). Proceeds of the
transaction will be split equally between Tidewater and TransAlta
pursuant to their existing Pioneer Pipeline partnership.
![Tidewater Midstream and Infrastructure Ltd. (CNW Group/Tidewater Midstream and Infrastructure Ltd.) Tidewater Midstream and Infrastructure Ltd. (CNW Group/Tidewater Midstream and Infrastructure Ltd.)](https://mma.prnewswire.com/media/1123206/Tidewater_Midstream_and_Infrastructure_Ltd__Tidewater_Midstream.jpg)
In addition, Tidewater and TransAlta have entered into a
separate Letter of Intent whereby TransAlta will pay Tidewater an
additional $10.5 million for certain
ancillary assets not included in the Pioneer Transaction, and
for completion of some budgeted restoration work along the Pioneer
Pipeline route that was delayed until 2020 due to weather (together
with the Pioneer Transaction, collectively known as the "Proposed
Transactions").
Independently, NGTL and Tidewater have also agreed to terms and
conditions to qualify Tidewater for NGTL services that would result
in Tidewater's proforma Adjusted EBITDA remaining unchanged
following the close of the Proposed Transactions.
The Proposed Transactions result in net proceeds to Tidewater of
$138.0 million. As such, the
Proposed Transactions and NGTL services are expected to be 15%
accretive to year-end 2020 Net Debt to Adjusted EBITDA and 30%
accretive to Net Income per share on a proforma basis to
Tidewater's 2020 guidance.
Pioneer Pipeline Disposition Details
Tidewater and TransAlta have entered a Letter of Intent with
NGTL (collectively known as the "Parties") to sell the Pioneer
Pipeline for total cash consideration of $255.0 million to be split equally between
Tidewater and TransAlta. The Pioneer Transaction is subject to
standard closing conditions, including the Parties entering into a
purchase and sale agreement, and receipt of approval of the
necessary regulatory applications.
Tidewater and TransAlta have also entered a Letter of Intent
whereby TransAlta will pay to Tidewater $10.5 million to purchase certain assets that are
not part of the Pioneer Transaction, and for completion of some
budgeted restoration work along the Pioneer Pipeline route that was
delayed until 2020 due to weather.
Tidewater's aggregate net proceeds to be received from the
Proposed Transactions is $138
million.
New Commercial Arrangements
Independent of the Proposed Transactions, Tidewater and NGTL
have agreed to terms and conditions to qualify Tidewater to receive
interruptible storage services ("IT-S Service") at Tidewater's
Brazeau River Complex storage facilities ("BRC Storage
Facilities"). With the IT-S Service, Tidewater will be able to
attract new, creditworthy storage customers at the BRC Storage
Facilities, creating new future expansion opportunities to increase
storage capacities at the BRC Storage Facilities.
Subject to regulatory approvals, Tidewater and NGTL have also
agreed to terms and conditions to qualify Tidewater for NGTL
services with respect to the natural gas currently transported on
the Pioneer Pipeline and incremental natural gas from increased
access to the NGTL system, which will lead to higher fractionation
and processing utilization levels at the Brazeau River Complex
("BRC"). The terms and conditions of this arrangement would be for
a similar term as TransAlta's current 15-year take-or-pay agreement
on the Pioneer Pipeline, resulting in Tidewater's proforma Adjusted
EBITDA remaining largely unchanged following the close of the
Proposed Transactions.
Financial Highlights
The divestiture of the Pioneer Pipeline significantly
accelerates Tidewater's commitment to achieve approximately 3.0x
Net Debt to Adjusted EBITDA by the end of 2020. Tidewater's
proforma EBITDA will remain unchanged through off-setting,
increased capacity utilization at the BRC and future growth and
expansion opportunities at the BRC as throughput on the Pioneer
Pipeline increases to 400 MMcf/d to meet TransAlta's future natural
gas demands. The Proposed Transactions and NGTL services are
expected to be 15% accretive to year-end 2020 Net Debt to Adjusted
EBITDA and 30% accretive to Net Income per share to Tidewater's
2020 guidance. While Tidewater continues to evaluate future growth
opportunities, the Corporation intends to use the proceeds from the
Proposed Transactions to reduce debt.
Toby McKenna, President,
Midstream commented, "The proposed transaction will provide oil and
gas producers throughout Western
Canada with access to the Pioneer Pipeline through the NGTL
system on a much larger scale, benefiting our industry as whole. We
would also like to take this opportunity to thank TransAlta for
being an exceptional partner in developing the Pioneer Pipeline
which provided oil and gas producers in the greater Brazeau area
with direct connectivity to a new, large demand source."
The Parties are expected to enter the purchase and sale
agreement prior to the end of the May of 2020, and the Proposed
Transactions are expected to close as soon as regulatory approvals
are received.
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,
natural gas liquids ("NGL") and crude oil 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: refineries, gas plants, pipelines,
railcars, trucks, export terminals and storage facilities.
Cautionary Notes
Non-GAAP Measures
This press release refers to Adjusted EBITDA and net debt which
are supplemental financial measures ("Non-GAAP Measures") that do
not have standardized meanings under International Financial
Reporting Standards ("IFRS") representing GAAP. Since
Non-GAAP Measures do not have a standardized meaning prescribed by
GAAP and are therefore unlikely to be comparable to similar
measures presented by other companies, securities regulators
require that Non-GAAP Measures are clearly defined, qualified and
reconciled to their nearest GAAP measure. These Non-GAAP
Measures are calculated and disclosed on a consistent basis from
period to period. Specific adjusting items may only be
relevant in certain periods. The intent of Non-GAAP Measures
is to provide additional useful information respecting Tidewater's
financial and operations performance to investors though the
measures do not have any standardized meaning under IFRS. The
measures should not therefore be considered in isolation or used in
substitute for measures of performance prepared in accordance with
IFRS. Other issuers may calculate these Non-GAAP Measures
differently.
Investors should be cautioned that these measures should not be
construed as alternatives to revenue, earnings, cash flow from
operating activities, gross profit or other measures of financial
results determined in accordance with GAAP as an indicator of
Tidewater's performance. For additional information regarding
Non-GAAP Measures, please refer to Tidewater's most recent MD&A
which is available on SEDAR at www.sedar.com.
Adjusted EBITDA
2020E Adjusted EBITDA for Tidewater standalone is further
described in the Corporation's corporate presentation, which can be
found on the Corporation's website.
Net Debt
Net debt is defined as bank debt, notes payable and convertible
debentures, less cash.
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 information" within the meaning of applicable
Canadian securities legislation ("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: the sale of the Pioneer
Pipeline to NGTL and the sale of certain ancillary assets to
TransAlta Corporation (the "Proposed Transactions") and the
proceeds to be received by Tidewater from the Proposed
Transactions; projections of proforma EBITDA to Tidewater resulting
from the Proposed Transactions and new NGTL service; estimated
impact of the Proposed Transactions to Net Debt to Adjusted EBITDA
and Net Income per share; the anticipated receipt of all regulatory
approvals for the Proposed Transactions; Tidewater's ability to
attract new, creditworthy storage customers at the BRC Storage
Facilities; anticipated higher fractionation and processing
utilization levels at the BRC; and, Tidewater's projected use of
proceeds from the Proposed Transactions. These forward-looking
statements are based on certain key assumptions regarding, among
other things: our ability to execute on our business plan; the
timely receipt of all governmental and regulatory approvals; that
third parties will provide any necessary support; that any third
party projects relating to the Corporation's divestitures will be
sanctioned and completed as expected; that there are no unforeseen
events preventing the performance of contracts; that there are no
unforeseen material changes related to the divestitures, that
counterparties will comply with contracts in a timely manner; new
commercial arrangements or current operations; our operating
activities; the availability and cost of labour and other industry
services; and current industry conditions, 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. These known and
unknown risks and uncertainties, include, but are not limited
to: the regulatory environment and decisions; the
possibility that governmental policies or laws may change or
governmental approvals may be delayed or withheld; the ability of
Tidewater or its joint venture partners or customers to raise
sufficient capital (or to raise sufficient capital on favourable
terms) to fund future expansions and growth projects and satisfy
future commitments; failure to negotiate and conclude any required
commercial agreements or failure to obtain project sanctioning;
increased construction costs, or construction delays, on
Tidewater's expansion and growth projects; labour and material
shortages; non-performance of agreements in accordance with
their terms; the impact of competitive entities and pricing;
reliance on key industry partners, alliances and agreements; the
continuation or completion of third-party projects; actions by
governmental or regulatory authorities including changes in tax
laws and treatment, construction delays; labour and material
shortages; and certain other risks detailed from time to time in
Tidewater's public disclosure documents including, among other
things, those detailed under the heading "Risk Factors" in
Tidewater's management's discussion and analysis and annual
information form for the year ended December 31, 2019.
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.
Additional information relating to Tidewater is available on
SEDAR at www.sedar.com and at www.tidewatermidstream.com.
SOURCE Tidewater Midstream and Infrastructure Ltd.