CALGARY, May 14, 2020 /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
March 31, 2020.
FIRST-QUARTER 2020 FINANCIAL PERFORMANCE
Highlights
- Adjusted EBITDA increased by $19.1
million to $41.5 million in
the first quarter of 2020 as compared to $22.4 million in the first quarter of 2019,
resulting in over 85% growth as a result of the acquisition of the
Prince George Refinery ("PGR") and the commissioning of the
Pipestone Gas Plant. Net loss attributable to shareholders was
$39.6 million for the first quarter
of 2020 as compared to $7.1 million
in the first quarter of 2019, predominantly related to unrealized
losses on derivative contracts of $46.3
million due to volatility in commodity prices, foreign
exchange and interest rates in 2020.
- Net cash provided by operating activities totaled $28.0 million for the first quarter of 2020, with
distributable cash flow of $12.5
million and a payout ratio of 27%.
- On March 12, 2020, Tidewater and
TransAlta Corporation ("TransAlta") entered into a Letter of Intent
to sell the majority of the assets of Pioneer Pipeline LP
("Pioneer") to NOVA Gas Transmission Ltd. ("NGTL") for gross
proceeds of $255 million. Tidewater
and TransAlta have also entered into a separate Letter of Intent
whereby TransAlta will pay Tidewater $10.5
million for certain assets that are not part of the NGTL
transaction, resulting in approximately $138
million in total cash consideration net to Tidewater.
Proceeds from the transaction will be used to accelerate
Tidewater's commitment to reduce debt in 2020. Tidewater expects a
purchase and sale agreement to be executed on or about May 31, 2020 with closing to occur during the
fourth quarter of 2020 after regulatory approval from the Canada
Energy Regulator ("CER").
- At the Pipestone Gas Plant, all third-party infrastructure is
now in place with throughput averaging approximately 80 MMcf/day
and over 95% run-time through the months of April and May.
- The Corporation continues to be committed to its Environmental,
Social and Governance ("ESG") performance by investing in
infrastructure to increase energy and natural resource efficiency,
reduce emissions, and enhance environmental
performance. Tidewater's employees and contractors have
embraced this commitment. Tidewater's ESG Committee continues to
meet weekly and is in the process of developing a website interface
for the investment community to view as part of its transparency to
communicate key environmental performance metrics.
- On May 4, 2020 Birch Hill Equity
Partners Management Inc. ("Birch Hill"), announced it had acquired
6,977,500 additional common shares of Tidewater. Following the
completion of the acquisition, Birch Hill beneficially owns
and controls an aggregate of 80,509,771 common shares, representing
approximately 24% of the issued and outstanding common shares of
Tidewater.
COVID-19 UPDATE
- Tidewater has been closely monitoring developments related to
the novel coronavirus ("COVID-19"). Safeguarding the well-being of
Tidewater's personnel is its principal concern and it remains
focused on operating safely and responsibly and providing the
essential services that its communities and customers rely on
during the COVID-19 pandemic. The board of directors, executive
team and division leaders continue to meet regularly to align
response strategies and efforts within all areas of the Corporation
and remain focused on continuity plans at each of its facilities.
The Corporation has encouraged all employees to work from home, to
the extent possible, and has increased safety protocols for those
critical employees continuing to work at facility sites. The
Corporation's facilities have not seen any downtime as a result of
workforce disruptions.
- The COVID-19 pandemic has led to an unprecedented global energy
supply and demand imbalance. However, despite the challenging
environment, Tidewater's defensive assets perform well in low
commodity price environments. These defensive assets include its
gas storage assets, which are contracted to six investment grade
counterparties; the Brazeau River Complex ("BRC") which allows
producers access to three natural gas egress solutions; the
Pipestone Gas Plant with over 80% of the volume under take or pay
contracts; and PGR which has a five-year offtake agreement with an
investment grade counterparty. Approximately 50% of the
Corporation's cashflow is now derived from investment grade
counterparties which is critical in an extremely challenging energy
environment.
- The full extent of the COVID-19 pandemic to the global economy
remains unknown at this time and to date has resulted in extreme
volatility in global financial markets and a slowdown in economic
activity. The recent commodity price collapse and resulting
pullback in crude oil production is greatly impacting the
industry.
- Specific to Tidewater, COVID-19 has resulted in a decrease in
demand for refined products. With a network of integrated assets,
as described above, the Corporation has the ability to take
advantage of current market conditions. PGR is in a unique position
to benefit from low crude oil prices with significant crude oil
storage and its feedstock costs significantly reduced with the
decline in WTI prices. Crack spreads remain over $50/bbl at PGR. The Corporation also uses
its pipeline connections, railcars, trucks and storage to access
the best market possible. While the current impact to Tidewater's
gas processing facilities has been minimal, the Corporation
continues to monitor oil and gas production around its facilities
and related shut-in activity. Tidewater's gas processing and
fractionation facilities could see a decline in revenue as a result
of shut-in production and reduced drilling activity, however the
Corporation's two largest facilities, Pipestone Gas Plant and BRC,
are supported by take-or-pay arrangements which reduce this
risk.
- Acknowledging the uncertain market conditions and gradual
economic recovery, the Corporation updated its forecasted Adjusted
EBITDA to range from $175 million -
$185 million for the full year 2020.
This guidance highlights the benefits of the Corporation's
integrated business model as it can generate strong Adjusted EBITDA
in volatile markets. Year-end net debt to Adjusted EBITDA, assuming
closing of the Pioneer Pipeline sale, is expected to be
approximately 3.0x to 3.5x. The timing and extent of the
economic recovery could impact these forecasts. Tidewater remains
committed to deleveraging throughout 2020.
Selected financial and operating information is outlined below
and should be read with Tidewater's consolidated financial
statements and related MD&A as at and for the three-month
period ended March 31, 2020 which are
available at www.sedar.com and on our website at
www.tidewatermidstream.com.
Financial Overview
Consolidated Financial Highlights
|
Three months
ended
March 31,
|
(in thousands of
Canadian dollars except per share information)
|
|
2020
|
|
2019
|
Revenue
|
$
|
252,464
|
$
|
123,665
|
Net income (loss)
attributable to shareholders
|
$
|
(39,631)
|
$
|
(7,135)
|
Basic and diluted net
income (loss) attributable to shareholders per
share
|
$
|
(0.12)
|
$
|
(0.02)
|
Adjusted EBITDA
(1)
|
$
|
41,506
|
$
|
22,404
|
Adjusted EBITDA per
common share -
basic (1)
|
$
|
0.12
|
$
|
0.07
|
Net cash provided by
(used in) operating activities
|
$
|
27,990
|
$
|
(3,310)
|
Distributable cash
flow (2)
|
$
|
12,489
|
$
|
16,310
|
Distributable cash
flow per common share – basic (2)
|
$
|
0.04
|
$
|
0.05
|
Dividends
declared
|
$
|
3,377
|
$
|
3,309
|
Dividends declared
per common share
|
$
|
0.01
|
$
|
0.01
|
Total common shares
outstanding (000s)
|
|
337,679
|
|
330,930
|
Payout
ratio (3)
|
|
27%
|
|
20%
|
Total
assets
|
$
|
2,043,258
|
$
|
1,518,769
|
Net
debt (4)
|
$
|
871,321
|
$
|
353,363
|
|
Notes:
|
1
|
Adjusted EBITDA is
calculated as net income 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 March 31, 2020. 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 March 31, 2020. 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 bank debt, convertible debentures and notes payable, less cash.
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 is well positioned to weather the current economic
environment and remains focused on cash flow generation, increasing
liquidity and reducing leverage. The Corporation does not plan to
spend significant capital in 2020 with its large 2019 capital
program now complete. Tidewater's payout ratio is expected to
remain under 30% with the remainder of Distributable Cash Flow used
to reduce leverage. The sale of the Pioneer Pipeline continues to
progress on schedule with a definitive agreement expected to be
signed on or about May 31, 2020. The
Pioneer Pipeline sale will significantly reduce leverage with net
proceeds of approximately $138
million. Tidewater has a large portion of its cashflow
generated from take-or-pay contracts and long-term agreements with
over 50% generated from investment grade counterparties. Tidewater
expects net debt to adjusted EBITDA of approximately 3.0x – 3.5x by
year end with the sale of the Pioneer Pipeline.
Prince George Refinery
On November 1, 2019, Tidewater
closed its acquisition of the Prince George Refinery. PGR is a
12,000 bbl/day light oil refinery that predominantly produces low
sulphur diesel and gasoline, in addition to other products, to
supply the greater Prince George
region. The Prince George Refinery has significant onsite storage
capacity of greater than 1.0 MMbbl and flexible logistics, with
pipeline, rail and truck connectivity in place. The Prince George region is generally in short
supply of refined products and the refinery's location within the
region makes it a critical piece of infrastructure with a
significant logistical advantage to address the domestic demand in
northern British Columbia.
During the first quarter of 2020, throughput and production at
the Price George Refinery were in line with the Corporation's
expectations, achieving over 90% utilization. Tidewater's refined
product yields at PGR for the first quarter of 2020 were as
follows:
Throughput
|
11,124
bbl/day
|
Gasoline
yield
|
42%
|
Diesel
yield
|
46%
|
Other
(1)
|
12%
|
(1) Other
refers to heavy fuel oil (HFO), LPG and feedstock consumed to fuel
the refinery.
|
The refinery achieved consistent operational run time during the
first quarter of 2020 and did not experience any unplanned
maintenance or downtime. Tidewater's refining margins are largely
driven by commodity prices, particularly the cost of crude
feedstock and other raw materials, along with market prices for
refined products. Refined product sales were in line with
expectations for the majority of the first quarter, however during
the last two weeks of March, refined product demand and related
sales, decreased by approximately 20% compared to the first half of
the month. PGR's reduced margins in March
2020 resulted from a higher carrying cost of crude oil
feedstock purchased prior to the price decline combined with a
significant decline in refined product pricing. As a result of the
decreased demand in the last two weeks of the quarter, while
maintaining consistent throughput, excess refined products produced
were held in storage. As a result, PGR's operating income was
approximately 25% below the Corporation's expectations.
With refined product pricing forecasted to increase over the
medium term, and the current price at which Tidewater is acquiring
crude oil feedstock for PGR, Tidewater expects a positive impact to
margins in the second and third quarters which will partially
offset the expected decline in demand. It is anticipated that
these factors resulting from the effects of the COVID-19 pandemic
will impact Tidewater's second quarter earnings by approximately
20%.
At the end of April, Tidewater completed its previously
disclosed two-week maintenance program at the refinery, which
resulted in reduced throughput of approximately 35% during that
time.
Husky Energy Inc. ("Husky") has issued a force majeure
notice under the offtake agreement at PGR citing decreased refined
product demand related to COVID-19. Husky has indicated it remains
committed to work with Tidewater on the impact to refined product
volume forecasts. Tidewater and Husky are actively exploring
opportunities for incremental demand and volumes through the second
quarter, including increased product shipments by rail which began
in the second quarter. Husky has committed to providing regular
updated demand forecasts as the COVID-19 situation evolves.
While Tidewater is pleased to be working with Husky to manage this
situation, Tidewater has advised Husky of its position that the
force majeure notice is invalid.
Tidewater is encouraged by the resilience of the PGR asset in an
unprecedented time and has not seen the drastic narrowing of crack
spreads observed in other locations across North America. This further reinforces the
refinery's long-term value in servicing the markets where it
operates.
The Corporation also continues to evaluate opportunities to
participate in future low-carbon fuel standard ("LCFS") agreements
and continues to execute on the LCFS projects initiated by Husky
prior to the acquisition.
Pipestone Gas Plant
The Pipestone Gas Plant is designed to process approximately 100
MMcf/day of natural gas. This asset includes acid gas injection
wells, a saltwater disposal well, and pipelines directly connected
to the Pipestone Gas Storage Facility, as well as connections to
both Alliance and TC Energy pipelines. The facility is also
pipeline connected for C2+ and C5+ streams.
Tidewater processed an average volume of approximately 65
MMcf/day in the first quarter on 2020. Throughput was impacted by
third party pipeline infrastructure delays and operational issues
resulting in Pipestone operating
income for the first quarter of 2020 being approximately 30% below
expectations. Throughput continues to increase with average
throughput in April and May of approximately 80 MMcf/day and over
95% run-time. In addition to throughput increasing, Tidewater
has completed various performance tests that demonstrate the
facility is capable of design flows of 100 MMcf/day. The
Pipestone facility is now fully
connected to all third-party egress pipelines allowing for
optimized operations and reduced trucking activities. The Pipestone
Gas Plant is fully contracted with over 80% committed on take or
pay.
Pioneer Pipeline
On March 12, 2020, Tidewater and
TransAlta entered a Letter of Intent to sell the majority of the
assets of Pioneer Pipeline LP to NGTL for gross proceeds of
$255 million. Tidewater and
TransAlta have also entered into a separate Letter of Intent
whereby TransAlta will pay Tidewater $10.5
million for certain assets that are not part of the NGTL
transaction, resulting in approximately $138
million in total cash consideration net to Tidewater.
Proceeds from the transaction will be used to accelerate
Tidewater's commitment to achieve approximately 3.0x – 3.5x net
debt to Adjusted EBITDA by year-end 2020.
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 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, and it is expected that the EBITDA generated from the new
service will partially offset the reduction in EBITDA from the
Pioneer Pipeline sale.
The parties are expected to enter into a purchase and sale
agreement on or about May 31, 2020
and the proposed transactions are expected to close concurrent with
regulatory approval.
Brazeau River Complex and Fractionation Facility
Throughput at the BRC for the first quarter of 2020 was in-line
with the previous quarter. Tidewater is working diligently with
producers to improve netbacks by fully utilizing the BRC's
facilities, including its two NGL pipeline connections, condensate
pipeline connection, truck loading and offloading facilities,
fractionation, natural gas storage facilities and two natural gas
sales pipeline connections.
The Brazeau River Fractionation facility continued to
perform well through the first quarter of 2020 and has maintained a
near capacity throughput since the start of the NGL contract
year. The NGL Marketing business has grown the supply base
with two investment-grade customers and has developed strategic
relationships with several other producers in central and northern
Alberta. Despite a number of
headwinds that impacted the Western Canadian NGL market over the
past 6-12 months, including the Alberta EnviroFuels facility
outage, the CN Rail strike, rail blockades, and fractionation
constraints, Tidewater has successfully maintained flexibility and
mitigated the majority of the burden for its customers through its
network.
The Brazeau River Complex remains a flagship asset for
Tidewater, offering a full suite of services to producers,
including C2, C3, C4 and C5 pipeline connections, NGL fractionation
capacity, sweet and sour deep-cut gas processing capability, and
two natural gas egress solutions given the BRC's connection to the
NGTL system, and the Pioneer Pipeline.
Natural Gas Storage
Tidewater operates three natural gas storage reservoirs at two
different facilities: Dimsdale Paddy A (Pipestone Gas Storage
Facility), Brazeau Nisku F, and Brazeau Nisku A (Brazeau River Gas
Storage Facility). The Pipestone Gas Storage Facility and the
Brazeau River Gas Storage Facility are owned through joint ventures
with a private Canadian entity and accounted for as equity
investments.
The first quarter of 2020 saw AECO natural gas price volatility
continue to experience normal levels, compared to the previous
summer, with prices generally following a downtrend after peaking
in early January.
The Pipestone Gas Storage Facility performed well in the first
quarter of 2020 as it maintained steady withdrawals to successfully
meet customer park-and-loan obligations. The Pipestone Gas Storage
Facility continued to demonstrate its inherent optionality by
consistently delivering gas to both Alliance Pipeline at the
Saskatoon Mountain meter station and to TC Energy's NGTL at
Pipestone Creek.
The Pipestone Gas Storage Facility is fully contracted with
take-or-pay contracts spanning as long as eight-years with multiple
investment-grade counterparties. April
2020 marks the beginning of the first summer injection
season where the Pipestone Gas Storage facility will have full
injection capability after completion of the storage expansion in
2019. The facility represents a significant step forward in
Tidewater's fee-for-service gas storage business and offers
producers at the Pipestone Gas Plant significant optionality where
the plant has three egress solutions including connections to the
TC Energy and Alliance systems, and gas storage.
Similarly, both Nisku A and Brazeau Nisku F storage pools
successfully met their withdrawal targets to help meet Pioneer
Pipeline supply commitments through the quarter. The Nisku
Pools were able to capitalize on spot price weakness on some days
in February and March and concurrently inject and withdraw gas to
realize increased cycling benefits.
CAPITAL PROGRAM
During 2019, Tidewater commissioned three of the largest capital
projects in the Corporation's history related to the Pioneer
Pipeline, Pipestone Gas Plant and Pipestone Gas Storage Facility.
The Corporation's focus in 2020 is on small-scale optimization and
commissioning projects.
Tidewater's focus over the next 12 months is to employ the
related cashflow from its 2019 large completed capital projects and
the Prince George Refinery, as well as proceeds from the Pioneer
Pipeline sale, towards deleveraging with a target net debt to
Adjusted EBITDA ratio of approximately 3.0x – 3.5x by the end of
2020. To date, Tidewater has not committed to a significant capital
program in 2020, however continues to evaluate smaller capital
projects with the potential to generate returns in excess of
50%.
MANAGEMENT INFORMATION CIRCULAR
The Corporation intends to rely on the temporary blanket relief
provided by the Canadian Securities Administrators (including the
exemptive relief contained in Alberta Securities Commission Blanket
Order 51-518 – Temporary Exemptions from Certain Requirements to
File or Send Securityholder Materials) to postpone the filing of
its executive compensation disclosure required under applicable
securities laws until such time as it is filed and delivered to
shareholders as part of the Corporation's information circular
relating to its 2020 annual general and special meeting of
shareholders, currently scheduled for June
29, 2020.
FIRST QUARTER 2020 EARNINGS CALL
In conjunction with the earnings release, investors will have
the opportunity to listen to Tidewater senior management review its
first quarter 2020 results via conference call on Thursday, May 14, 2020 at 11:00 am MDT (1:00 pm
EDT).
To access the conference call by telephone, dial 647-427-7451
(local / international participant dial in) or 1-888-231-8192
(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:
https://produceredition.webcasts.com/starthere.jsp?ei=1307036&tp_key=ad57628744 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.
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, crude oil and refined product 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 storage facilities and downstream facilities.
Additional information relating to Tidewater is available on
SEDAR at www.sedar.com and at www.tidewatermidstream.com.
Advisory Regarding Forward-Looking Statements
FORWARD-LOOKING INFORMATION
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 press release contains forward-looking
statements relating to but not limited to:
- anticipated increase to cash flows in a variety of commodity
price environments and projected use of such cash flow to reduce
the Corporation's leverage ratios;
- anticipated execution of a purchase and sale agreement and
resulting closing of a transaction to sell the majority of the
assets of Pioneer Pipeline LP to NGTL, the sale of certain
ancillary assets to TransAlta Corporation, and Tidewater's
expectations to replace EBITDA generated by the Pioneer Pipeline
with no additional capital;
- projected use of proceeds from the sale of the majority of
the assets of Pioneer Pipeline LP;
- the Corporation's focus on generating cash flow, increasing
liquidity and reducing leverage;
- the Corporation's intention to not spend significant capital
in 2020;
- anticipated focus on environmental, social and governance
initiatives in 2020 and expectations to improve ESG disclosure with
the introduction of ESG metrics on the Tidewater website;
- expectations for a positive impact to margins in the second
quarter which will partially offset the expected decline in
demand;
- continued construction of butane and natural gasoline
blending infrastructure at the PGR and forecasted timing for payout
of this project;
- anticipated impact of the COVID-19 pandemic on Tidewater's
second quarter earnings;
- expectations regarding utilization at the PGR;
- projections regarding the impact of Husky's force majeure
notice at the PGR and the Corporation's plans with respect to this
notice;
- throughput expectations at the Pipestone Plant through the
second quarter and through the balance of 2020;
- Tidewater's anticipated receipt of interruptible storage
series at Tidewater's BRC resulting in expectations to attract new,
creditworthy storage customers at the BRC;
- expectations for higher fractionation and processing
utilization levels at the BRC; and
- expectations that net cash provided by operating activities,
cash flow generated from growth projects and cash available from
Tidewater's Senior Credit Facility and other sources of financing
will be sufficient to meet its obligations and financial
commitments and will provide sufficient funding for anticipated
capital expenditures.
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:
- Tidewater's ability to execute on its business
plan;
- the timely receipt of all governmental and regulatory
approvals sought by the Corporation including with respect to the
anticipated sale of the Pioneer Pipeline;
- 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
Corporation's planned divestitures and that counterparties will
comply with contracts in a timely manner;
- Husky volume demands from the PGR are consistent with
forecasts;
- that formal agreements with counterparties will be executed
in circumstances where letters of intent or similar agreements have
been executed and announced by Tidewater and that such transactions
will close as expected;
- oil and gas industry expectation and development activity
levels and the geographic region of such activity;
- the Corporation's ability to obtain and retain qualified
staff and equipment in a timely and cost-effective manner;
- assumptions regarding amount of operating costs to be
incurred;
- that there are no unforeseen material costs relating to the
facilities which are not recoverable from customers;
- distributable cash flow and net cash provided by operating
activities are consistent with expectations;
- the ability to obtain additional financing on satisfactory
terms;
- the availability of capital to fund future capital
requirements relating to existing assets and projects;
- 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; and
- the amount of future liabilities relating to lawsuits and
environmental incidents and the availability of coverage under the
Corporation's insurance policies.
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 and impacts related to widespread epidemic or pandemic
outbreaks, including COVID-19;
- changes in demand for refined products;
- general economic, political, market and business conditions,
including fluctuations in interest rates, foreign exchange rates
stock market volatility and supply/demand trends;
- activities of producers and customers and overall industry
activity levels;
- failure to negotiate and conclude any required commercial
agreements;
- non-performance of agreements in accordance with their
terms;
- failure to execute formal agreements with counterparties in
circumstances where letters of intent or similar agreements have
been executed and announced by Tidewater;
- failure to close transactions as contemplated and in
accordance with negotiated terms;
- the regulatory environment and decisions and First Nations
and landowner consultation requirements;
- that receipt of third party, regulatory, environmental and
governmental approvals and consents relating to Tidewater's capital
projects can be obtained on the necessary terms and in a timely
manner;
- the ability to secure land and water, including obtaining
and maintaining land access rights;
- operational matters, including potential hazards inherent in
the Corporation's operations and the effectiveness of health,
safety, environmental and integrity programs;
- actions by governmental authorities, including changes in
government regulation, tariffs and taxation;
- changes in operating and capital costs, including
fluctuations in input costs;
- 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;
- actions by joint venture partners or other partners which
hold interests in certain of the Corporation's assets;
- 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;
- adverse claims made in respect of the Corporation's
properties or assets;
- risks and liabilities associated with the transportation of
dangerous goods;
- risks and liabilities resulting from derailments;
- effects of weather conditions;
- technology and security risks, including
cybersecurity;
- 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 AIF 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 press 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.
Actual results achieved will vary from the information
provided herein as a result of numerous known and unknown risks and
uncertainties and other factors related to COVID-19. These
known and unknown risks and uncertainties include, but are not
limited to: risks and impacts related to widespread epidemic
or pandemic outbreaks, including COVID-19; demand for refined
products related thereto; the possibility that governmental
policies or laws may change or governmental approvals may be
delayed or withheld; failure to negotiate and conclude any required
commercial agreements; non-performance of agreements in accordance
with their terms; failure to execute formal agreements with
counterparties in circumstances where letter of intent or similar
agreements have been executed and announced by Tidewater; failure
to close transactions as contemplated and in accordance with
negotiated terms; non-performance or default by counterparties to
agreements which Tidewater has entered in respect of its business;
construction delays, labour and material shortages; technology and
cyber security risks; 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 for the
three-months ended March 31, 2020 and
annual information form for the year ended December 31, 2019.
Any financial outlook or future-oriented financial
information, as defined by applicable securities legislation, has
been approved by management of Tidewater as of May 13, 2020. A 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.
"Distributable cash flow" is a non-GAAP financial measure and
is calculated as net cash used in operating activities before
changes in non-cash working capital plus 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. 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's
ongoing operations. Distributable cash flow also excludes
cash outflows related to the purchase of linefill on pipelines and
tank bottoms for storage tanks, whereby Tidewater transports oil on
third-party pipelines for which it is required to supply linefill
or tank bottoms for storage. As these pipelines/storage tanks are
owned by third parties, the linefill is not considered to be a
component of the Corporation's property and equipment. The linefill
is classified as a non-current inventory asset and an operating
cash outflow, however linefill is not a principal revenue-producing
activity and therefore is considered an investment to gain access
as a shipper on the pipeline.
Management of the Corporation believes distributable cash
flow is a useful metric for investors when assessing the amount of
cash flow generated from normal operations and to evaluate the
adequacy of internally generated cash flow to fund
dividends.
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.