Sign Up for FREE Daily Energy News
 
BREAKING NEWS:
Copper Tip Energy Services
Hazloc Heaters
Precision Well Servicing
Hazloc Heaters
Precision Well Servicing
Copper Tip Energy

Tidewater Midstream and Infrastructure Ltd. announces fourth quarter 2018 results and operational update and earnings call


CALGARYMarch 14, 2019 /CNW/ – Tidewater Midstream and Infrastructure Ltd. (“Tidewater” or the “Corporation“) (TSX: TWM) is pleased to announce that it has filed its annual consolidated financial statements and Management’s Discussion and Analysis (MD&Afor the year ended December 31, 2018.

FOURTH-QUARTER AND FULL-YEAR 2018 FINANCIAL PERFORMANCE

Despite a challenging industry environment, 2018 was a record year for Tidewater both operationally and financially as volumes and earnings increased as compared to 2017. During the year, the Corporation commenced construction of approximately $400 million (gross) of new capital growth projects, experienced NGL and natural gas volume growth across its operations and executed crude oil infrastructure agreements to deliver crude oil to end markets. Tidewater delivered another record year of net income attributable to shareholders and Adjusted EBITDA growth.

Highlights

  • Net income attributable to shareholders was $13.3 million or $0.04 per share for the fourth quarter of 2018 compared to $0.5 million or $0.00 per share for the fourth quarter of 2017.
  • Tidewater delivered a record quarter of Adjusted EBITDA growth to $20.9 million or $0.06 per share compared to $17.0 million or $0.05 per share for the same period in 2017.
  • Net cash provided by operating activities totalled $26.7 million for the fourth quarter of 2018 with distributable cash flow of $17.3 million, yielding a conservative payout ratio of 19% for the quarter (23% year-to-date).
  • Tidewater’s 100 MMcf/day sour deep-cut gas processing complex (“Pipestone Gas Plant”) is now fully contracted and Tidewater has executed a gas processing contract with a second investment grade counterparty at Pipestone, reflecting the strategic value of the Pipestone Gas Plant. Tidewater has significant support for future gas processing and liquids handling expansions at Pipestone. The Pipestoneproject remains on time and on budget.
  • Tidewater continues to progress construction of the Pipestone Gas Plant. In December 2018, Tidewater successfully drilled an acid gas injection well, with a salt water disposal well completed in January 2019. The wells provide the capacity necessary to accommodate higher volumes of sour gas production received at the plant.
  • On October 30, 2018 Tidewater received approval from the Alberta Energy Regulator (“AER”) 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.
  • On December 17, 2018, TransAlta Corporation, through its subsidiary TransAlta Generation Partnership (“TransAlta”) exercised its option to acquire a 50% ownership interest in the gas pipeline (“Pioneer Pipeline”). The project is supported by a 15 year take or pay commitment from TransAlta. Construction of the 120km pipeline commenced in November 2018 and is expected to be fully operational in the second half of 2019. Construction of the Pioneer Pipeline remains on schedule and on budget as previously disclosed.
  • The Brazeau River Fractionation facility, part of the BRC, is fully contracted for the first time in Tidewater’s history and Tidewater signed agreements with two new investment-grade customers at the BRC to provide fractionation services. When Tidewater first acquired the BRC in 2014 Tidewater had one customer that accounted for the majority of Adjusted EBITDA at the BRC. Tidewater transformed the BRC into a fractionation facility, with two new investment-grade counterparties in 2019, a gas storage facility with multiple investment-grade counterparties with long term contracts, and a new egress option with a 15 year take or pay contract with TransAlta.
  • Tidewater continues to grow its crude oil and refined products infrastructure business and is focused on strengthening customers and contracts. Tidewater will have delivered crude oil to approximately 10 markets by the end of the first quarter of 2019.
  • Tidewater remains confident in its ability to execute its previously disclosed strategic plan where net income and Adjusted EBITDA is expected to increase by greater than 50%, compared to current levels, into the fourth quarter of 2019 and 2020 once the Pipestone Gas Plant and Pioneer Pipeline are operational. Tidewater continues to evaluate additional strategic projects that address customer needs and the increasing demand for natural gas, NGLs and crude oil in North America. 2018 was a year of growth and new project construction and 2019 will be a year where Tidewater will rely on its ability to execute and position its business for continued earnings growth into 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 year ended December 31, 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
December 31,

Year
ended
December 31,

2018

2017

2018

2017

Revenue

$

90,740

$

63,707

$

324,290

$

221,389

Net income attributable to shareholders

$

13,285

$

504

$

20,318

$

12,855

Basic and diluted net income attributable to shareholders per share

$

0.04

$

0.00

$

0.06

$

0.04

Adjusted EBITDA (1)

$

20,924

$

16,974

$

77,423

$

61,560

Adjusted EBITDA per common share –
basic (1)

$

0.06

$

0.05

$

0.24

$

0.19

Net cash flow provided by operating activities

$

26,672

$

51,051

$

25,655

$

82,402

Distributable cash flow (2)

$

17,347

$

12,372

$

57,312

$

44,994

Distributable cash flow per common share – basic (1)

$

0.05

$

0.04

$

0.17

$

0.14

Dividends declared

$

3,308

$

3,290

$

13,184

$

13,157

Dividends declared per common share

$

0.01

$

0.01

$

0.04

$

0.04

Total common shares outstanding (000s)

330,797

328,973

330,797

328,973

Payout ratio (3)

19%

27%

23%

29%

Total assets

$

1,233,543

$

934,624

$

1,233,543

$

934,624

Net debt (4)

$

392,660

$

151,906

$

392,660

$

151,906

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 and year ended December 31, 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 and year ended December 31, 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 with 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.

During 2018, Tidewater achieved a number of operational milestones with strong demand for its services; including blending, crude oil infrastructure, and storage. In addition, the Corporation is carrying out the largest capital program in its history. Tidewater continues to execute successfully on its strategy, expanding its integrated network of assets with disciplined capital allocation.

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 fourth 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 Gas Plant and Pioneer Pipeline.  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 is well positioned in the crude oil space with three pipe connected oil batteries at Valhalla, Brazeau and Acheson, including a large rail facility at Acheson. Tidewater expects it will deliver Canadian crude to approximately ten end markets by the end of the first quarter of 2019 while it 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 – $8 million based on an average contracted volumes 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 approximately 3 years.

Brazeau River Complex

Throughput at the BRC was in-line with the prior quarter where Tidewater is working diligently with producers to improve netbacks by fully utilizing the BRC’s facilities including its three NGL pipeline connections, truck loading and offloading facilities, fractionation and natural gas storage facilities.

The Brazeau River Fractionation facility is fully contracted for the first time in Tidewater’s history, including two new investment-grade customers signed during the first quarter of 2019. When Tidewater first acquired the BRC in 2014, the Corporation had one customer that accounted for the majority of Adjusted EBITDA at the facility. Tidewater transformed the BRC into a fractionation facility with the addition of two new investment-grade counterparties in 2019, a gas storage facility with multiple investment-grade counterparties with long term contracts and a new egress option with a 15 year take or pay contract with TransAlta, another investment grade counterparty. Tidewater has added contracts with greater than five investment-grade counterparties at the BRC which services include gas processing, gas storage, fractionation and natural gas transportation.

Natural Gas Storage

Tidewater continued to inject customer gas under long-term fee-for-service 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’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.

CAPITAL PROGRAM

The Corporation’s two large capital projects currently underway mainly focus on establishing a strong position in the Montney and Deep Basin development areas. It is expected the two capital programs will begin delivering incremental cash flow during the third and fourth quarters of 2019, launching the next phase in Tidewater’s growth.

Pipestone Gas Plant

On October 18, 2018 Tidewater received approval from the Alberta Energy Regulator to construct and operate the Pipestone Gas Plant. The Pipestone Gas Plant is designed to process approximately 100 MMcf/day of natural gas. The total infrastructure project includes an acid gas injection well, salt water disposal well and pipelines directly connected to the Pipestone storage facility as well as connections to both Alliance and TCPL. A second investment-grade customer has executed an additional take or pay contract at the Pipestone Gas Plant in the fourth quarter of 2018. The Pipestone Gas Plant is currently fully contracted, and Tidewater has significant support for future gas processing and liquids handling expansions at the facility. The Pipestoneproject remains on time and on budget.

As a result of significant producer support, Tidewater is currently evaluating a condensate liquids hub at the Pipestone Gas Plant.

Tidewater began construction on the Pipestone Gas Plant in late October 2018 and expects approximately $50 – $55 million of capital remaining to be spent in 2019 with commissioning expected to occur in the third quarter of 2019. Remaining capital excludes the 32 MW cogeneration units which Tidewater expects to monetize in the first quarter of 2019.

Contribution to net income for the Pipestone Gas Plant is expected to be approximately $25 – $30 millionbased on plant throughput of approximately 100 MMcf/day 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.

Pioneer Pipeline

On October 30, 2018, Tidewater received approval from the Alberta Energy Regulator to construct and operate the 120 km natural gas pipeline connecting Tidewater’s BRC to TransAlta’s generating units at Keephills, and subsequent approval for an 11km lateral connecting to Sundance. The Pioneer Pipeline will have initial capacity of 130 MMcf/day supported by a 15 year take-or-pay commitment from TransAlta, which may be expanded to approximately 440 MMcf/day. The Pipeline will allow TransAlta to increase the amount of natural gas it co-fires at its Sundance and Keephills coal-fired units, resulting in lower carbon emissions and costs.

A reconciliation of capital costs and contributions at December 31, 2018 is summarized below:

(In thousands of Canadian dollars)

Tidewater

TransAlta

Total

Partner share of capital

$

90,000

$

90,000

$

180,000

Contributions

(65,000)

(15,000)

(80,000)

Remaining

$

25,000

$

75,000

$

100,000

The Pioneer Pipeline is currently ahead of the original schedule contemplated at final investment decision. As a result, capital expenditures for the project were accelerated in Q4 of 2018.

TransAlta exercised its 50% working interest option in the Pioneer Pipeline in the fourth quarter of 2018 and is expected to fund up to its 50% of incurred capital costs on the project in the first quarter of 2019. During the year ended December 31, 2018, TransAlta made advanced refundable payments of $15 million, and $25 million in the first quarter of 2019.

Contribution to Tidewater’s net income for the Pioneer Pipeline is expected to be approximately $8 – $9 million based on throughput of approximately 130 MMcf/day 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 flow 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 net cash provided by operations to fund its capital program through the end of 2019.

Fourth Quarter, 2018 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 2018 via conference call on Thursday, March 14th 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:

https://event.on24.com/wcc/r/1945582/5D492C382E85A9F163B08521CED36678 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 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.



Share This:



More News Articles


New SHOWCASE Directory Companies

 

CFR Chemicals
Osprey Informatics
Stream-Flo
Vision Integrity Engineering Ltd.
Ironhub
Scovan Engineering
Silverstream Energy Solutions
Nationwide Boiler Inc