Tidewater Midstream and Infrastructure (TWM) Q2 2024 earnings summary

Executive summary

• HDRD complex operated at 98% utilization in Q2 2024, averaging 2,925 barrels per day, exceeding expectations and on track to surpass the 85% full-year utilization target.

• Depressed US low carbon fuel credit prices impacted Canadian BC LCFS credit prices, reducing demand and revenue for credits, which are a significant part of overall revenue and cash flow.

• To address liquidity challenges, a related party transaction was approved: Tidewater Midstream will acquire assets from Tidewater Renewables for $129.7 million upfront and commit to purchase 80.7 million BC LCFS credits over nine months.

• The transaction simplifies the corporate structure, returns deconsolidated EBITDA to Midstream, and provides Renewables with liquidity and debt relief.

• Net loss attributable to shareholders improved to $4.7 million in Q2 2024 from $6.4 million in Q2 2023, driven by higher operating income but offset by unfavorable derivative contract changes and no deferred tax recovery.

Financial highlights

• Q2 2024 consolidated adjusted EBITDA was $45.3 million, up from $44 million in Q2 2023, with Renewables contributing $29.6 million (vs. $8.1 million last year).

• Year-to-date consolidated EBITDA reached $85.1 million, with $55 million from Renewables.

• Q2 2024 distributable cash flow attributable to shareholders was $4.0 million, up from negative $31.8 million in Q2 2023.

• Net debt at June 30, 2024 was $505.9 million consolidated and $189.4 million deconsolidated.

• Total capital expenditures in Q2 2024 were $21.7 million, down from $96.0 million in Q2 2023.

Outlook and guidance

• 2024 consolidated adjusted EBITDA guidance lowered to $130–$150 million due to BC LCFS market uncertainty.

• Guidance assumes PG crack spreads average $80–$90 per barrel and transaction completion in Q3.

• Full-year 2024 maintenance capital expected at $35–$40 million, unchanged from prior guidance.

• Compliance for 2024 and 2025 is covered by the credit purchase agreement, with ongoing market monitoring.

• Proposed asset transaction expected to close in Q3 2024, subject to regulatory and financing approvals.