Tidewater Midstream and Infrastructure Ltd. Announces Year End 2017 Results and Operational Update

CALGARY, March 29, 2018 /CNW/ – Tidewater Midstream and Infrastructure Ltd. (“Tidewater” or the “Corporation“) (TSX: TWM) is pleased to announce that it has filed its audited consolidated financial statements, Management’s Discussion and Analysis (“MD&A”) and Annual Information Form for the year ended December 31, 2017.

RECENT HIGHLIGHTS

Financial Earnings Highlights

• Tidewater delivered its tenth consecutive quarter of growth reporting Adjusted EBITDA of $17.0 million or $0.05 per share for the fourth quarter of 2017 compared to $11.8 million or $0.04 per share for the same period in 2016.
• The Corporation maintained a conservative payout ratio of approximately 29% with distributable cash flow of $11.5 million in the fourth quarter of 2017.
• The Corporation’s previously guided 2017 exit run-rate Adjusted EBITDA of $80 million was achieved with exit net debt of approximately $150 million.
• Tidewater remains focused on delivering approximately 20% annualized EBITDA per share growth over the next 24 months.

Increased Financial Flexibility Highlights

• Tidewater completed its first debt placement of $125 million of 6.75% senior unsecured term notes due December 2022, creating long term balance sheet stability, better matching the Corporation’s long-term asset base.
• The Corporation increased total availability under its credit facility from $180 million to $250 million.
• Tidewater received approval from the TSX to graduate from the TSX Venture Exchange and list its common shares on the TSX. Tidewater’s shares began trading on the TSX on November 20, 2017.

Continued Long Term Contract Growth Highlights

• Announced the first definitive agreement with TransAlta Corporation (“TransAlta”) to procure long lead items in order to construct a 120 km natural gas pipeline from Tidewater’s Brazeau River Complex (“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. Construction of the pipeline remains subject to certain customary conditions and regulatory approval
• Entered into a six-year firm storage service commitment with an investment grade counterparty at its Pipestone Gas Storage Facility for approximately 5 Bcf of storage capacity.
• Entered into a five-year, 17.2 net Bcf volume commitment with an investment grade counterparty to process incremental net raw gas volumes of approximately 15 MMcf/d which will decline over a five-year timeframe at the Ram River facility.
• Continued to move forward on major construction, regulatory and contracting milestones on the 100 MMcf/d sour, deep cut Montney gas plant with acid gas injection and 20,000 bbls/d of NGL processing capability, as well as an extensive gathering pipeline network in the Pipestone area near Grande Prairie, Alberta, which, subject to regulatory approval, is expected to be commissioned in the second quarter of 2019. The project is initially anchored by two, five-year take-or-pay agreements totalling approximately 55 MMcf/d. Additionally, the Corporation recently signed a third customer to a reserve dedication agreement. The project remains subject to regulatory approval.

Continued Opportunistic Acquisition Highlights

• Tidewater announced a $35 million acquisition of assets with a replacement value in excess of $900 millionand generating EBITDA of approximately $10 million in 2018. The acquisition creates a backbone for the Tidewater network between the Montney and Deep Basin and includes a ten-year reserve dedication agreement.

Financial Overview

OUTLOOK AND CORPORATE UPDATE

Tidewater continues to position itself to offer producers additional egress solutions and better pricing for its products in a difficult commodity price environment through development and connectivity of its infrastructure and access to end markets.

Ram River Gas Plant

During the first quarter of 2018, Tidewater announced that it has entered into a five-year, 17.2 net Bcf volume commitment with an investment grade counterparty to process incremental raw gas volumes of approximately 15 MMcf/d which will decline over a five-year timeframe at the Ram River gas plant.

BRC Expansion

Tidewater completed the 50 MMcf/d expansion at the BRC on-time and on-budget in late December 2017. Tidewater also completed construction of the previously disclosed key strategic pipelines from the BRC both on-time and on-budget. The pipelines provide access to a new core area for the BRC which is supported by a 55,000 acre reserve dedication and a three to four horizontal well drilling commitment. The Corporation continues to move forward on several egress solutions around the BRC including the Brazeau Gas Storage Facility and the Intra-Alberta Pipeline to TransAlta’s power generating units at Sundance and Keephills.

The Corporation extended the term of a take-or-pay processing agreement at the BRC by an additional two years to December 2020 and increased the volume commitment by approximately 10 MMcf/d to 30 MMcf/d with a provision to deliver volumes up to 45 MMcf/d throughout the term. The agreement is with a well-capitalized, intermediate-sized producer which will underpin the recently announced expansion of the BRC.

Tidewater expects to commence its planned maintenance and turnaround operations in April 2018 at the BRC which is scheduled to occur every four years. As a result, throughput at the BRC will be reduced in the second quarter of 2018. Planned activities continue to remain on-schedule and on-budget.

Natural Gas Storage

Tidewater has entered into a six-year firm storage service agreement with an investment grade customer at its Pipestone infrastructure/egress hub (“Pipestone Gas Storage Facility”) for approximately 5 Bcf of storage capacity. Tidewater can currently inject approximately 40 MMcf/d at the Pipestone Storage Facility and is working on additional injection capacity up to 55 MMcf/d by the end of the second quarter in 2018.

Tidewater has also been injecting 25 – 30 MMcf/d of producer gas at the Brazeau Gas Storage Facility which has helped increase egress capacity at the BRC. Total combined injection capability at the Brazeau and Pipestone Gas Storage Facilities is approximately 70 MMcf/d with potential to increase to 85 MMcf/d by the summer of 2018. Tidewater’s storage facilities are 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

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 successfully reactivated the recently acquired deep cut extraction plant in late July 2017, ahead of schedule and under budget and is currently operating at 50% of expected capacity. Overall throughput on Tidewater’s extraction facilities is approximately 95 MMcf/d.

Tidewater’s 10,000 bbl/d C2+ fractionation facility and 40 MMcf/d of additional deep cut processing capacity at the BRC continue to outperform and throughput levels have exceeded expectations with no material downtime since commissioning.

Power Supply and Generation

Tidewater has seen significant demand for low cost power and is responding by contracting tolls for small scale industrial power supply related to computer processing, which will generate approximately $1 million of annualized EBITDA in the next 30 days for zero capital investment by Tidewater.  Tidewater may, subject to significant future contingencies, grow this opportunity to $5–$10 million of annualized EBITDA over the next 12 to 18 months without investing capital, but will evaluate future equity ownership for non-cash consideration given upside potential.

CAPITAL PROGRAM

Tidewater completed its 2017 capital program on-time and on-budget with the commissioning of 50 MMcf/d of additional processing capacity at the BRC and completion of the strategic gathering lines into the BRC late in December 2017.

Pipestone Montney Sour Gas Plant

Tidewater continues to move forward on major regulatory and construction milestones as well as contracting at the Pipestone Plant with an increased commitment from Kelt Exploration Ltd. (“Kelt”) to 25 MMcf/d of firm raw gas processing under a five-year take-or-pay agreement. The Pipestone facility is also anchored by Blackbird Energy Inc. (“Blackbird”) with a 30 MMcf/d five-year take-or-pay agreement for total contracted volumes at Pipestone of 55 MMcf/d. Blackbird and Kelt have options to exercise ownership in the facility for 20% and 15% respectively.

Capital costs for Tidewater’s Pipestone Montney Sour Gas Plant remain on-budget with expected in service date of mid-2019 where Tidewater’s two anchor tenants have the option to purchase a combined working interest of approximately 35% prior to commissioning the plant. The project is being funded through a combination of internally generated cash flow and undrawn capacity under the Corporation’s Credit Facility. Tidewater continues to work with multiple producers to contract the remaining capacity at the facility.  The project remains subject to 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 items such as the 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 describes the key terms that will be contained in subsequent definitive agreements to see the project to completion, including provision for a 15 year take-or-pay commitment by TransAlta and an option for TransAlta to invest up to 50% in the pipeline.  The parties agreed in the Development Agreement to negotiate in good faith and execute the remaining definitive agreements over the summer 2018 timeframe. The TransAlta Pipeline is a significant step toward Tidewater providing producers with increased optionality, improved pricing, and direct access to an end market.  Construction of the project remains subject to certain customary conditions and regulatory approvals.  The project remains on-schedule and on-budget.

Stock Options and RSUs

The Corporation has approved a grant of 2,350,000 restricted share units and 2,250,000 stock options to directors, officers, employees and consultants of the Corporation. The options will have an exercise price equal to the price per common share on the date of grant, will vest over a period of three years, and will expire five years from the date of grant. The Corporation has determined that exemptions from the various requirements of TSX Policies are available for the granting of the options and RSUs.

Fourth Quarter, 2017 Earnings Call

In conjunction with this earnings release, investors will have the opportunity to listen to Tidewater senior management review its fourth quarter and full year results of fiscal 2017 via conference call on Thursday, March 29^th at 11:00 am MDT.

To access the conference call by telephone, dial 647-427-7450 (local / international participant dial in) or 1-888-231-8191 (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: http://event.on24.com/wcc/r/1624042-1/F8D075910E8A202D9870DFA3C5810BBD 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.

A digital rebroadcast will be available approximately two hours after the conclusion of the live event on March 29^th until April 5, 2018. To access the rebroadcast, please dial 416-849-0833 or 1-855-859-2056 and enter pass code 1689684 #.

The Corporation’s Business

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.