Tidewater Renewables (LCFS) Q2 2024 earnings summary

Executive summary

• Announced a related party asset and forward credit sales agreement between Tidewater Renewables and Tidewater Midstream, including asset divestitures and credit sales to address liquidity challenges amid weak BC LCFS credit markets.

• The agreement involves selling assets for $130 million and BC LCFS credits for a minimum of $81 million over nine months, improving liquidity and de-risking near-term cash flows.

• Net income attributable to shareholders rose to $4.9 million in Q2 2024 from $2.7 million in Q2 2023, with record Adjusted EBITDA of $29.6 million, up 17% sequentially.

• Operating cash flow reached $32.5 million and distributable cash flow was $20.3 million, both record highs.

• Additional sale of the used cooking oil business for $10.5 million to a third party, with proceeds used to reduce debt.

Financial highlights

• Q2 2024 revenue was $147.2 million, up from $13.2 million in Q2 2023; six-month revenue was $258.5 million, up from $33.1 million year-over-year.

• Achieved record adjusted EBITDA of $29.6 million in Q2 2024, up from $8.1 million in Q2 2023 and $25.3 million in Q1 2024, driven by strong HDRD complex performance.

• HDRD complex contributed $27 million to adjusted EBITDA, with 98% utilization and 2,925 barrels/day throughput.

• Distributable cash flow per share (basic) was $0.58 in Q2 2024, compared to $(0.23) in Q2 2023.

• Net debt reduced to $316 million at Q2 end, down from $346.6 million at year-end 2023, aided by strong cash flow, lower capex, and credit sales.

Outlook and guidance

• Expect to exceed 85% utilization for 2024, with projected average throughput of 2,550 barrels/day.

• Q3 initial results show utilization above 95%.

• Anticipate market conditions for BC LCFS credits to improve as compliance obligations tighten and winter diesel requirements limit imports.

• SAF project remains on track, with final investment decision expected in 2025.

• 2024 maintenance capital expenditures are projected at $4.4 million, with the capital program significantly offset by government funding.