TSE:TWM Tidewater Midstream and Infrastructure Q2 2023 Earnings Report C$0.30 +0.03 (+10.91%) As of 05/2/2025 04:00 PM Eastern Earnings HistoryForecast Tidewater Midstream and Infrastructure EPS ResultsActual EPS-C$0.02Consensus EPS -C$0.02Beat/MissMet ExpectationsOne Year Ago EPSN/ATidewater Midstream and Infrastructure Revenue ResultsActual Revenue$508.70 millionExpected Revenue$575.00 millionBeat/MissMissed by -$66.30 millionYoY Revenue GrowthN/ATidewater Midstream and Infrastructure Announcement DetailsQuarterQ2 2023Date8/10/2023TimeN/AConference Call DateThursday, August 10, 2023Conference Call Time1:00PM ETConference Call ResourcesConference Call AudioConference Call TranscriptPress ReleaseEarnings HistoryCompany ProfilePowered by Tidewater Midstream and Infrastructure Q2 2023 Earnings Call TranscriptProvided by QuartrAugust 10, 2023 ShareLink copied to clipboard.There are 10 speakers on the call. Operator00:00:00Afternoon, ladies and gentlemen, and welcome to the Tidewater Midstream and Infrastructure Limited Quarter 2 Financial Results Conference Call. At this time, all lines are in a listen only mode. Following the presentation, we will conduct a question and answer session. Please press star 0 for the operator. This call is being recorded on Thursday, August 10, 2023. Operator00:00:25Would now like to turn the conference over to Scott Baumann. Please go ahead. Speaker 100:00:31Thank you, operator. Welcome everyone to Tidewater Midstream's 2nd quarter 2023 results conference call. I'm Scott Bowman, Tidewater's Director of Capital Markets. And joining me today are Rob Koklow, Tidewater's Interim CEO Brian Newmarsh, Tidewater's Chief Financial Officer and other members of Tidewater's management team. Before passing off the call to Rob to review some highlights, I want to remind everyone that Some of the comments made today may be forward looking in nature and are based on Tidewater's current expectations, estimates, judgments and projections. Speaker 100:01:08Forward looking statements we may express or imply today are subject to risks and uncertainties, which can cause actual results to differ from expectations. Further, some of the information provided refers to non GAAP measures. To know more about these forward looking statements and non GAAP measures, Please see the Tidewater Midstream Financial Reports, which are available at tidewatermidstream.com and on SEDAR Plus. Speaker 200:01:33And with that, I'll pass Speaker 100:01:35it off to Rob to discuss some highlights from the quarter. Speaker 300:01:38Thanks, Scott. Good morning, and thank you for joining our Tidewater's quarter was very eventful. We conducted our 1st major turnaround of the Prince George Refinery, which while on time and on budget took the facility offline for about 6 weeks. We also overcame the challenges presented by wildfires near the Brazeau River Complex, which resulted in that facility being down for over 3 weeks. Finally, Tidewater Renewables has completed the construction of the HDRD facility and began actively commissioning units to prepare for commercial operations. Speaker 300:02:16Fortunately, our Midstream business continued to deliver consistent results during the quarter. So starting with our Midstream business, Our Pipestone Natural Gas Plant maintained consistent run times and strong throughput throughout the quarter, which helped to offset the downtime at the BRC. We have previous as we've previously discussed, the facility was safely evacuated during May and remained offline until Utility companies were able to safely restore power to the facility. Operations resumed when the power was restored in June and we Our natural gas Storage asset at Dimmesdale achieved record results in the quarter. And given the term structure of the futures market, it's expected to continue to drive strong results Moving to the Downstream business, I'd like to thank our operations team at the Prince George Finally, for safely and successfully keeping the turnaround on time and on budget. Speaker 300:03:23The diligence of our operations team allowed us to maintain our Excellent safety record on major maintenance projects as no lost time man hours were reported in the project. Operations at PGR resumed in June, which was timed to capture the increase in demand for gasoline as a result of the onset of summer driving season. Within the Tidewater Renewables business, Several process units of the HGRD facility have been successfully commissioned with the final two to take place over the next 2 weeks. 1st diesel is expected before the end of the month. The HDRD economics continue to remain attractive and the facility will be Canada's 1st, Renewable Diesel Plant. Speaker 300:04:03Although we have experienced minor delays while commissioning during the quarter, the project remains on track with the previously communicated net forecast Capital cost of $174,000,000 Ramping up HDRD production volumes through the second half of the year, we should see 35 to $45,000,000 of adjusted EBITDA in the second half of twenty twenty three and we anticipate run rate annualized corporate EBITDA to range from $130,000,000 to $155,000,000 once the HCRD facility is fully operational. I'll now turn the call over to Tidewater Midstream's Chief Financial Officer, Brian Newmarsh, to walk through some of our financial results. Speaker 200:04:45Thanks, Rob. During the Q2 of 2023, our midstream business drove consolidated adjusted EBITDA of $44,000,000 which includes about $8,000,000 of contribution from the renewables business that we report on a consolidated basis given our 69% ownership stake. On a deconsolidated Tidewater Midstream basis, 2nd quarter adjusted EBITDA was approximately $36,000,000 As Rob mentioned, we undertook our once every 4 year 6 week turnaround at our Prince George refinery during the Q2. This project equates to an approximate $45,000,000 investment that will help enhance run time and throughput at the facility and is the primary contributing factor to this quarter's distributable cash flow number. With the scheduled turnaround at our refinery, our midstream business delivered strong results during the quarter with RAM, Pipestone and our natural gas storage business offsetting We saw a pickup in volatility in natural gas pricing during the quarter as these wildfires led to a loss of field receipts in the AECO market during the quarter that drove volatile cash prices. Speaker 200:05:47These price dynamics led to a very profitable quarter for natural gas storage assets due to the additional extrinsic value capture and the wide storage spreads realized. Within our Downstream business, we saw the seasonal bump to gasoline demand to finish the quarter with stronger gasoline prices helping offset the lower diesel cracks. Despite softening diesel prices, PGR 2 11 crack spreads averaged about CAD85 per barrel for the quarter. Our first half twenty twenty three capital investments were driven primarily by the turnaround and are weighted to the first half of the year. 2nd quarter maintenance capital included unbudgeted costs at the BRC incurred due to the wildfire impacts. Speaker 200:06:25Despite the additional maintenance costs during the quarter, We still see our deconsolidated maintenance capital budget remaining within our previously guided range of $55,000,000 to $65,000,000 although we now expect to be at the higher end of this range. With PGR resuming operations, summer driving Season in full swing and the imminent completion of the HDRD facility, we expect Tidewater's annual consolidated adjusted EBITDA to be within the range of $190,000,000 to $210,000,000 for 2023. We will refine this range once commercial production of renewable diesel commences At the Renewables HGRD facility, I will now pass things back to Rob for some closing remarks. Speaker 300:07:10Thanks, Brian. The second half of twenty twenty three will be transformative for Tidewater. HDRD will be generating Canada's 1st renewable diesel sales. Our PGR Refinery is at full production and capturing strong crack spreads, and our core midstream assets are expected to continue to deliver strong results. Finally, we are nearing the completion of our structured asset review and will be speaking to the results at that time. Speaker 300:07:37I'll now ask the operator to open the call up for questions. Operator00:07:42Thank You will hear a 3 tone prompt acknowledging your request. Questions will be taken in the order received. And our first question comes from Rob Hope from Scotiabank. Please go ahead. Speaker 400:08:12Good morning, everyone. Good to see some strong results for the natural gas storage assets. When you take a look at these assets moving forward, how long do you think the strength could persist? Secondly, do you view them as kind of core and integrated to your base business, just given we have seen a number of Storage assets been transacted in the last couple of months. Speaker 300:08:42Sorry, I apologize. We had a little technical difficulty. Could you repeat the question? Speaker 400:08:46Yes, of course. Just On the natural gas storage assets, 1, are they do you view these as a core asset or could these be for sale just given the fact that we have seen a number of them transact? And 2, The strong margins that we saw in Q2, how much of that was just kind of the puts and takes during the quarter with the fires? And How much of that will you think will persist into the back half for the year and into 2024? Speaker 300:09:13Yes. So let me take the last half of that question first. Yes, we do like storage. And we think that the quarter was sort of just the Q1 of A number of strong ones. And that's just set up less by the extrinsic value, more the intrinsic value of spreads Going forward, so we're quite confident that we're going to see similar numbers on our In particular on Dimmesdale, it's more of a clean gas storage asset going forward. Speaker 300:09:52And not only that, but it does Look like the North American market is short on gas storage in general, just given the volume of production that's up there. It's doubled Doubled over the last 7 years in North America gas production and we've actually seen a decrease in the amount of gas storage. So I think this is a structural situation. In fact, we haven't even seen the very low gas prices this summer that we And others had anticipated from the NGTL maintenance cycles. So and that's Partly because they happened during the fires. Speaker 300:10:31The fires took things offline. So anyway, so yes, we like it. Could it be for sale? As we've said before, all of our assets, we want to understand where the market values our assets and Compare that relative to where we value them. And so the decisions we made on the asset Review as we when we announce them, but everything is in the process to be investigated. Speaker 400:11:04All right. Appreciate that. And then maybe diving into the 2023 guidance a little bit more, easy for us to sort of build CFS. But when you take a look at the remaining variables, is the key driver here just crack spreads at the refinery? Or are there any other issues we should be looking at? Speaker 400:11:24And I guess, is Q4 going to be more indicative of kind of the run rate for 2024? Speaker 200:11:32Yes. So obviously, cracks and the margins in the refining business are kind of the biggest factor here on how we look at the second half of the year here. Do I think there's any big changes coming? No, we're really happy with the way that our midstream, our GMP assets are performing. As we've mentioned before, if we take a look at kind of what gas storage did during the quarter, there was a chunk of extra value capture that I spoke about before, but plus We've locked in a decent chunk of storage spreads here into Q3. Speaker 200:12:02Those do moderate slightly into Q4, but I think kind of the run rate seems In line with how we should how we think about things? Speaker 400:12:12And then, sorry, will Q4 be a good run rate into 2024? Speaker 200:12:16So, yes, that's a fair assumption. Speaker 500:12:20Okay. Thank you. Operator00:12:23And our next question comes from Andrew Kuske from Credit Suisse. Please go ahead. Speaker 600:12:29Thanks. Good morning. Maybe just on the PGR turnaround. When you got under the hood of everything, were there any major surprises in the turnaround? And Do you expect to see any benefits from any kind of incremental capacity creep or just minor debottlenecking that You've benefited from that you're going to see in quarters ahead? Speaker 300:12:53Yes, I think it's pretty minor. We wouldn't anticipate seeing much of increase in capacity. There are a couple of debottlenecking items that were planned. They didn't come out as a result of the turnaround, but they're planned to with the turnaround, but they're quite small. There really wasn't any surprises, which frankly was a surprise. Speaker 300:13:19It was our 1st turnaround in 4 years since we've owned the refinery, and we were kind of anticipating to find Some issues and we really didn't. So we're very happy with the result. But yes, it went quite smoothly. It's a nice change for us. Speaker 600:13:41Well, that's always good news. Maybe just shifting gears a little bit and part of this Ties into Pipestone. And typically like the bookends of producers, those that really want to own processing on Speaker 300:13:54their own and those that only want to use processing, whether they're contracted Speaker 600:13:55or they're more open. Whether they're contracted or they're more open. Could you give us just some color on your conversations you're having around expansion and just In general, producer health and how that changes the conversations themselves? Speaker 300:14:13Yes. You're talking with regard to Phase 2 of Pipestone? Speaker 400:14:16Yes. Speaker 500:14:19Yes. Speaker 300:14:19I'm happy to get into that, but we're going to save those discussions For when we have discussions around our review process. So it all ties together in terms of Assets that we're looking at as well as where we're going to be spending our capital. So and To be clear, I expect to be able to do that sooner rather than later. Speaker 600:14:47Okay. I appreciate that. I respect that. If I could sneak in maybe one more just on Natural gas price volatility, what we're seeing in the power market in Alberta is obviously the renewable influence causing a lot more intradayvol In power markets and part of that would cascade into the gas price volatility. Are you seeing something similar and is that really affecting the value of storage Speaker 300:15:14Not really, to be honest. We are seeing and we experienced this Pretty much anybody who uses power in this province has been seeing that volatility is pretty crazy on the power side. We don't see it reflected as much on the natural gas side. It's fairly normal, Vol, there. We were anticipating to see some real volatility just as a result of Maintenance on the system maintenance in Alberta and we didn't we haven't really seen that, Which is good for producers, but and that was a result primarily the forest of the fires and a lot of the maintenance took place at the same time when That production was taken offline. Speaker 300:15:57So it smooths itself out. We see the value of storage Being structural, less of a the volatility helps. If you own storage, you love to see that volatility, obviously. But there's a structural shortage of storage out in the market and especially given the growth that we've seen in natural gas over the last 7 plus years. And that's what we where we see the real value because that's enduring value that you can capture over time and it's more predictable. Speaker 300:16:33And then you can trade around that to capture some of the What we'd consider extrinsic value from the volatility, any volatility that does show up, whether that's weather related or maintenance or anything else. Speaker 600:16:46Okay. That's very helpful. I appreciate the color. Operator00:16:51Our next question comes from Robert Kwan from RBC Capital Markets, please go ahead. Speaker 500:16:57Hey, good morning. I know you don't want to get into the asset review, which Makes sense. I'm just wondering when you do make the announcement, do you intend that it's going to be here's the path that we're going to move forward or will it be something more definitive To the extent that you're going to divest, would there be an agreement with the counterparty? Speaker 300:17:22Yes, I'm not exactly sure what you're going to get, but I am pretty sure that I don't want to go down that road At all right now, Robert. We will have some answers to you. And we know that They are owed and I don't anticipate it being very long. So you won't have to wait long. Speaker 500:17:42Okay. That's fine. If I can just ask about the guidance on the $190,000,000 to $210,000,000 There is a statement That you're going to update based on the RD commissioning. Just to be clear though, does The $190,000,000 to $210,000,000 include the $15,000,000 to $25,000,000 that was in the renewables release? Or is it just a standalone? Speaker 500:18:10No. Okay. And then the last question just on the quarter and you talked about Expecting to get insurance proceeds for the BRC, did you book any provision To receive that in Q2? Or is this a completely impacted quarter and any proceeds will be booked when received? Speaker 200:18:32Yes. There was a minimal, accrual for insurance proceeds. We think there's more to come. Obviously, that's still A live discussion with the adjuster, but we took a conservative approach in my opinion as to what was recognized during the Q2. Speaker 500:18:48Okay. And so that was in accrued amount, that wasn't anything that was paid out early? Speaker 100:18:53Correct. Speaker 500:18:54Okay. That's great. Thank Operator00:19:03Our next question comes from Robert Catellier from CIBC. Please go ahead. Speaker 700:19:08Yes. I'd like to go back to storage for a minute, please. I just wonder in light of your Volition is on that. Are you doing anything to position the company for more natural gas storage Exposure, in other words, are you investing more in your storage position in anticipation of good spreads? Speaker 300:19:34We don't have anything planned right now. As you I think know that Dimsdale is our biggest And to really make that effective, that asset needs to be needs to see some capital. It is it's a little bit it's scaled to be well, it's scaled to be closer to 100 Bcf And that's going to take some capital to get there. So we don't have any plans outside of that asset or Our other storage assets that we've got at the BRC. Speaker 700:20:12Okay. And then Just with respect to the wildfires, do those change how you view risk And manage risk either operationally or financially through leverage? Speaker 300:20:29That doesn't change that alone doesn't change anything with regard to the way we view it. We have been pretty clear, I think, that we would like to see our leverage lower than it is. And that's Frankly, it's more a function of having crack spread exposure at the refinery, which is has some volatility Associated with it probably more so than certainly than the processing side or some of our other midstream assets. So The fire was it was certainly important for us to go through that kind of an With regard to our emergency response plans and making sure we evacuated well and we could track all of our workers and all of their families as Staten Valley was also evacuated, was informative to see how close that fire could get to that facility. It was Quite remarkable, the wall of flames that was surrounding the facility as Our workers were evacuating and to see the absolutely limited amount of physical damage that happened Even though the fire was that close. Speaker 300:21:46So these are well engineered and well thought out Plants, not just us, but I've had this discussion with a number of other operators of gas plants in our province and in BC. And It is remarkable how well some of these assets can survive those types of events. Speaker 700:22:12Okay. Thanks, Rob. Operator00:22:16And our next question comes from Curtis Jensen from Robotti and Please go ahead. Speaker 800:22:21Hey, good afternoon. Can you hear me okay? Speaker 300:22:24You bet. Speaker 800:22:26Anyway, good work getting through the GGR turnaround and managing through the fires. I just kind of a question about Pipestone. It seems to me there's probably definitely customer demand for an expansion, but I'm not Howard, still talking about it because it occurs to me that Tidewater really is I mean, you're in a capital Intensive business, that'd be obviously very capital intensive project and yet you have a massive cost of capital Disadvantaged. So I guess I'm missing something about how we're still talking about expanding it Without a much larger partner who's got a lower cost of capital or something. But I guess one of my questions would be, one of your customers Pipestone announced it's going to be acquired by Strathcona. Speaker 800:23:29And I'm wondering what implications does that have for your relationship. I mean, in the Context of an expansion there is, Dracona is somebody that might bring capital to a Phase 2? Speaker 300:23:46Yes. No, I understand where you're coming from and I certainly understand We are in a Well, a little bit, but it's a fair question. But my answer might not be totally satisfactory, but a lot of this will come to light through our asset Strategic Asset Review, which is will be announced shortly. But yes, Obviously, cost of capital is a very important thing when you're involved in large especially large capital projects. So It doesn't it isn't missed by us, your comments. Speaker 300:24:34And we think that The asset review will help to clear things up. Speaker 200:24:41All right. Thanks a lot. Speaker 300:24:43You got Operator00:24:44it. There are no further questions at this time. I would like to hand it over to Scott Baumann. Speaker 200:24:51Actually, we just had one more question back into the queue here. So if you don't mind doing one last circle out for questions, that'd be great. Thank you. Operator00:25:00We have Patrick Kenny with National Bank Financial. Please go ahead. Speaker 900:25:06Thank you. Yes, hey, guys. So it sounds like the asset review process is nearing completion here. And Of course, the HDRD will be fully up and running soon as well. So not to get into any details, but can you just remind us where you ultimately want to land, Both from a capital structure standpoint and as well from a corporate structure perspective. Speaker 900:25:30Just wondering what the bull's eye looks like, Say 6 to 12 months out with respect to the consolidated balance sheet and structure. Speaker 100:25:40Yes. Maybe I'll start off with kind Speaker 200:25:41of targets on capital structure levels of leverage. I think we're the view that less debt is better. That's obviously become more obvious as we've seen floating rates increase and our cost of capital increase right alongside with it. And I think just having lower debt levels, increase your degrees of freedom on strategy and how we kind of focus the business. I think as we spent kind of the last, call it, 6 months with Robin and his seat here, there's been an enhanced focus on Cash flow generation, thinking through our cost structure, thinking how we can generate cash from each of these assets. Speaker 200:26:19And I think as we've spoken to throughout this call here, As we work through our portfolio review, which assets make the most sense to me in this business and which have value, Higher value potentially in other hands here. And I think that's all kind of part and parcel of the strategy. But I think there's a core Possible business here that we're very focused on maximizing. And then as I said, we've got some work to do on the balance sheet That is a priority for us. Speaker 300:26:48And I think it ties into the asset review as you mentioned Patrick. We've got When we come out of this, if we've got a different mix of assets, we got to look at what type of cash flow comes out of those assets and The volatility around it, are they going to be are you left with mostly take or pay type of contracts, in which case your appetite for some leverage is Probably a little higher if you're more commodity exposed, then our appetite will certainly be lower for leverage. Speaker 900:27:19And I guess, the second part, would you guys be leaning towards simplifying The corporate structure, just given some investor feedback, market appetite Or would you be averse to, I guess, adding complexity to the structure? Speaker 300:27:38Well, in my mind, A lot of the complexity comes from consolidating our results with LCFS with the renewables business. We've always said that it is not our end goal to own 70% of the Renewables business Sort of as an ongoing in an ongoing way. And we also look at that asset as probably most investors look at it. We think we're at the finish line. We think it's tremendously undervalued certainly relative to anything else in that space. Speaker 300:28:13But until we get the thing up and running and cash flowing on a steady basis, we're probably going to see a discount. So I think that's probably the easiest way to reduce some of the complexity in Tidewater Midstream is Get to a more normal holding position and to sort of stop eventually stop consolidating those results. But I think that would go a long way to simplifying things. I'm not sure how long it takes. Speaker 900:28:49Yes. Got it. We'll let it run its course. Appreciate it. Thank you. Speaker 900:28:53Thanks. Operator00:28:57There are no further questions at this time. I would like to hand it over to Scott Baumann. Please go ahead. Speaker 100:29:05Thank you everyone for joining the call today. The team is available to address any outstanding items with our contact information at the bottom of this morning's press release. Thank you. Operator00:29:16Thank you, ladies and gentlemen. This concludesRead morePowered by Conference Call Audio Live Call not available Earnings Conference CallTidewater Midstream and Infrastructure Q2 202300:00 / 00:00Speed:1x1.25x1.5x2x Earnings DocumentsPress Release Tidewater Midstream and Infrastructure Earnings HeadlinesAnalysts Set Tidewater Midstream and Infrastructure Ltd. (TSE:TWM) Target Price at C$0.53April 29, 2025 | americanbankingnews.comCIBC Keeps Their Hold Rating on Tidewater Midstream and Infrastructure (TWM)March 30, 2025 | markets.businessinsider.comTrump wipes out trillions overnight…Is there anybody more powerful than Donald Trump right now? In a single tariff announcement, he wiped out nearly $5 trillion in wealth from the S&P 500 and $6.4 trillion from the Dow Jones… Not to mention the countless trillions of dollars lost in every market around the world… leaving the major political powers scrambling in fear of Trump’s next move.May 5, 2025 | Porter & Company (Ad)Tidewater Midstream and Infrastructure Full Year 2024 Earnings: EPS Beats Expectations, Revenues LagMarch 28, 2025 | finance.yahoo.comTIDEWATER MIDSTREAM AND INFRASTRUCTURE LTD. ANNOUNCES THE CLOSING OF ITS SALE OF THE BRAZEAU RIVER ROADWAY NETWORK TO CRRMarch 25, 2025 | finance.yahoo.comTidewater Midstream to Sell Roadway Network in Alberta for C$24MMarch 6, 2025 | marketwatch.comSee More Tidewater Midstream and Infrastructure Headlines Get Earnings Announcements in your inboxWant to stay updated on the latest earnings announcements and upcoming reports for companies like Tidewater Midstream and Infrastructure? Sign up for Earnings360's daily newsletter to receive timely earnings updates on Tidewater Midstream and Infrastructure and other key companies, straight to your email. Email Address About Tidewater Midstream and InfrastructureTidewater Midstream and Infrastructure (TSE:TWM) Ltd is a Canadian company that is engaged in providing midstream infrastructure and a natural gas storage facility. It mainly focuses on the purchase, sale, and transportation of Natural Gas Liquids (NGLs) such as propane and natural gasoline throughout North America and export to premium markets. The business activities of the company include gathering, processing, and transportation relates to raw gas gathering systems, processing plants and pipelines, NGL marketing and Extraction, refined products, and other activities. Its business segments consist of Midstream; Downstream; Marketing and extraction and others. 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There are 10 speakers on the call. Operator00:00:00Afternoon, ladies and gentlemen, and welcome to the Tidewater Midstream and Infrastructure Limited Quarter 2 Financial Results Conference Call. At this time, all lines are in a listen only mode. Following the presentation, we will conduct a question and answer session. Please press star 0 for the operator. This call is being recorded on Thursday, August 10, 2023. Operator00:00:25Would now like to turn the conference over to Scott Baumann. Please go ahead. Speaker 100:00:31Thank you, operator. Welcome everyone to Tidewater Midstream's 2nd quarter 2023 results conference call. I'm Scott Bowman, Tidewater's Director of Capital Markets. And joining me today are Rob Koklow, Tidewater's Interim CEO Brian Newmarsh, Tidewater's Chief Financial Officer and other members of Tidewater's management team. Before passing off the call to Rob to review some highlights, I want to remind everyone that Some of the comments made today may be forward looking in nature and are based on Tidewater's current expectations, estimates, judgments and projections. Speaker 100:01:08Forward looking statements we may express or imply today are subject to risks and uncertainties, which can cause actual results to differ from expectations. Further, some of the information provided refers to non GAAP measures. To know more about these forward looking statements and non GAAP measures, Please see the Tidewater Midstream Financial Reports, which are available at tidewatermidstream.com and on SEDAR Plus. Speaker 200:01:33And with that, I'll pass Speaker 100:01:35it off to Rob to discuss some highlights from the quarter. Speaker 300:01:38Thanks, Scott. Good morning, and thank you for joining our Tidewater's quarter was very eventful. We conducted our 1st major turnaround of the Prince George Refinery, which while on time and on budget took the facility offline for about 6 weeks. We also overcame the challenges presented by wildfires near the Brazeau River Complex, which resulted in that facility being down for over 3 weeks. Finally, Tidewater Renewables has completed the construction of the HDRD facility and began actively commissioning units to prepare for commercial operations. Speaker 300:02:16Fortunately, our Midstream business continued to deliver consistent results during the quarter. So starting with our Midstream business, Our Pipestone Natural Gas Plant maintained consistent run times and strong throughput throughout the quarter, which helped to offset the downtime at the BRC. We have previous as we've previously discussed, the facility was safely evacuated during May and remained offline until Utility companies were able to safely restore power to the facility. Operations resumed when the power was restored in June and we Our natural gas Storage asset at Dimmesdale achieved record results in the quarter. And given the term structure of the futures market, it's expected to continue to drive strong results Moving to the Downstream business, I'd like to thank our operations team at the Prince George Finally, for safely and successfully keeping the turnaround on time and on budget. Speaker 300:03:23The diligence of our operations team allowed us to maintain our Excellent safety record on major maintenance projects as no lost time man hours were reported in the project. Operations at PGR resumed in June, which was timed to capture the increase in demand for gasoline as a result of the onset of summer driving season. Within the Tidewater Renewables business, Several process units of the HGRD facility have been successfully commissioned with the final two to take place over the next 2 weeks. 1st diesel is expected before the end of the month. The HDRD economics continue to remain attractive and the facility will be Canada's 1st, Renewable Diesel Plant. Speaker 300:04:03Although we have experienced minor delays while commissioning during the quarter, the project remains on track with the previously communicated net forecast Capital cost of $174,000,000 Ramping up HDRD production volumes through the second half of the year, we should see 35 to $45,000,000 of adjusted EBITDA in the second half of twenty twenty three and we anticipate run rate annualized corporate EBITDA to range from $130,000,000 to $155,000,000 once the HCRD facility is fully operational. I'll now turn the call over to Tidewater Midstream's Chief Financial Officer, Brian Newmarsh, to walk through some of our financial results. Speaker 200:04:45Thanks, Rob. During the Q2 of 2023, our midstream business drove consolidated adjusted EBITDA of $44,000,000 which includes about $8,000,000 of contribution from the renewables business that we report on a consolidated basis given our 69% ownership stake. On a deconsolidated Tidewater Midstream basis, 2nd quarter adjusted EBITDA was approximately $36,000,000 As Rob mentioned, we undertook our once every 4 year 6 week turnaround at our Prince George refinery during the Q2. This project equates to an approximate $45,000,000 investment that will help enhance run time and throughput at the facility and is the primary contributing factor to this quarter's distributable cash flow number. With the scheduled turnaround at our refinery, our midstream business delivered strong results during the quarter with RAM, Pipestone and our natural gas storage business offsetting We saw a pickup in volatility in natural gas pricing during the quarter as these wildfires led to a loss of field receipts in the AECO market during the quarter that drove volatile cash prices. Speaker 200:05:47These price dynamics led to a very profitable quarter for natural gas storage assets due to the additional extrinsic value capture and the wide storage spreads realized. Within our Downstream business, we saw the seasonal bump to gasoline demand to finish the quarter with stronger gasoline prices helping offset the lower diesel cracks. Despite softening diesel prices, PGR 2 11 crack spreads averaged about CAD85 per barrel for the quarter. Our first half twenty twenty three capital investments were driven primarily by the turnaround and are weighted to the first half of the year. 2nd quarter maintenance capital included unbudgeted costs at the BRC incurred due to the wildfire impacts. Speaker 200:06:25Despite the additional maintenance costs during the quarter, We still see our deconsolidated maintenance capital budget remaining within our previously guided range of $55,000,000 to $65,000,000 although we now expect to be at the higher end of this range. With PGR resuming operations, summer driving Season in full swing and the imminent completion of the HDRD facility, we expect Tidewater's annual consolidated adjusted EBITDA to be within the range of $190,000,000 to $210,000,000 for 2023. We will refine this range once commercial production of renewable diesel commences At the Renewables HGRD facility, I will now pass things back to Rob for some closing remarks. Speaker 300:07:10Thanks, Brian. The second half of twenty twenty three will be transformative for Tidewater. HDRD will be generating Canada's 1st renewable diesel sales. Our PGR Refinery is at full production and capturing strong crack spreads, and our core midstream assets are expected to continue to deliver strong results. Finally, we are nearing the completion of our structured asset review and will be speaking to the results at that time. Speaker 300:07:37I'll now ask the operator to open the call up for questions. Operator00:07:42Thank You will hear a 3 tone prompt acknowledging your request. Questions will be taken in the order received. And our first question comes from Rob Hope from Scotiabank. Please go ahead. Speaker 400:08:12Good morning, everyone. Good to see some strong results for the natural gas storage assets. When you take a look at these assets moving forward, how long do you think the strength could persist? Secondly, do you view them as kind of core and integrated to your base business, just given we have seen a number of Storage assets been transacted in the last couple of months. Speaker 300:08:42Sorry, I apologize. We had a little technical difficulty. Could you repeat the question? Speaker 400:08:46Yes, of course. Just On the natural gas storage assets, 1, are they do you view these as a core asset or could these be for sale just given the fact that we have seen a number of them transact? And 2, The strong margins that we saw in Q2, how much of that was just kind of the puts and takes during the quarter with the fires? And How much of that will you think will persist into the back half for the year and into 2024? Speaker 300:09:13Yes. So let me take the last half of that question first. Yes, we do like storage. And we think that the quarter was sort of just the Q1 of A number of strong ones. And that's just set up less by the extrinsic value, more the intrinsic value of spreads Going forward, so we're quite confident that we're going to see similar numbers on our In particular on Dimmesdale, it's more of a clean gas storage asset going forward. Speaker 300:09:52And not only that, but it does Look like the North American market is short on gas storage in general, just given the volume of production that's up there. It's doubled Doubled over the last 7 years in North America gas production and we've actually seen a decrease in the amount of gas storage. So I think this is a structural situation. In fact, we haven't even seen the very low gas prices this summer that we And others had anticipated from the NGTL maintenance cycles. So and that's Partly because they happened during the fires. Speaker 300:10:31The fires took things offline. So anyway, so yes, we like it. Could it be for sale? As we've said before, all of our assets, we want to understand where the market values our assets and Compare that relative to where we value them. And so the decisions we made on the asset Review as we when we announce them, but everything is in the process to be investigated. Speaker 400:11:04All right. Appreciate that. And then maybe diving into the 2023 guidance a little bit more, easy for us to sort of build CFS. But when you take a look at the remaining variables, is the key driver here just crack spreads at the refinery? Or are there any other issues we should be looking at? Speaker 400:11:24And I guess, is Q4 going to be more indicative of kind of the run rate for 2024? Speaker 200:11:32Yes. So obviously, cracks and the margins in the refining business are kind of the biggest factor here on how we look at the second half of the year here. Do I think there's any big changes coming? No, we're really happy with the way that our midstream, our GMP assets are performing. As we've mentioned before, if we take a look at kind of what gas storage did during the quarter, there was a chunk of extra value capture that I spoke about before, but plus We've locked in a decent chunk of storage spreads here into Q3. Speaker 200:12:02Those do moderate slightly into Q4, but I think kind of the run rate seems In line with how we should how we think about things? Speaker 400:12:12And then, sorry, will Q4 be a good run rate into 2024? Speaker 200:12:16So, yes, that's a fair assumption. Speaker 500:12:20Okay. Thank you. Operator00:12:23And our next question comes from Andrew Kuske from Credit Suisse. Please go ahead. Speaker 600:12:29Thanks. Good morning. Maybe just on the PGR turnaround. When you got under the hood of everything, were there any major surprises in the turnaround? And Do you expect to see any benefits from any kind of incremental capacity creep or just minor debottlenecking that You've benefited from that you're going to see in quarters ahead? Speaker 300:12:53Yes, I think it's pretty minor. We wouldn't anticipate seeing much of increase in capacity. There are a couple of debottlenecking items that were planned. They didn't come out as a result of the turnaround, but they're planned to with the turnaround, but they're quite small. There really wasn't any surprises, which frankly was a surprise. Speaker 300:13:19It was our 1st turnaround in 4 years since we've owned the refinery, and we were kind of anticipating to find Some issues and we really didn't. So we're very happy with the result. But yes, it went quite smoothly. It's a nice change for us. Speaker 600:13:41Well, that's always good news. Maybe just shifting gears a little bit and part of this Ties into Pipestone. And typically like the bookends of producers, those that really want to own processing on Speaker 300:13:54their own and those that only want to use processing, whether they're contracted Speaker 600:13:55or they're more open. Whether they're contracted or they're more open. Could you give us just some color on your conversations you're having around expansion and just In general, producer health and how that changes the conversations themselves? Speaker 300:14:13Yes. You're talking with regard to Phase 2 of Pipestone? Speaker 400:14:16Yes. Speaker 500:14:19Yes. Speaker 300:14:19I'm happy to get into that, but we're going to save those discussions For when we have discussions around our review process. So it all ties together in terms of Assets that we're looking at as well as where we're going to be spending our capital. So and To be clear, I expect to be able to do that sooner rather than later. Speaker 600:14:47Okay. I appreciate that. I respect that. If I could sneak in maybe one more just on Natural gas price volatility, what we're seeing in the power market in Alberta is obviously the renewable influence causing a lot more intradayvol In power markets and part of that would cascade into the gas price volatility. Are you seeing something similar and is that really affecting the value of storage Speaker 300:15:14Not really, to be honest. We are seeing and we experienced this Pretty much anybody who uses power in this province has been seeing that volatility is pretty crazy on the power side. We don't see it reflected as much on the natural gas side. It's fairly normal, Vol, there. We were anticipating to see some real volatility just as a result of Maintenance on the system maintenance in Alberta and we didn't we haven't really seen that, Which is good for producers, but and that was a result primarily the forest of the fires and a lot of the maintenance took place at the same time when That production was taken offline. Speaker 300:15:57So it smooths itself out. We see the value of storage Being structural, less of a the volatility helps. If you own storage, you love to see that volatility, obviously. But there's a structural shortage of storage out in the market and especially given the growth that we've seen in natural gas over the last 7 plus years. And that's what we where we see the real value because that's enduring value that you can capture over time and it's more predictable. Speaker 300:16:33And then you can trade around that to capture some of the What we'd consider extrinsic value from the volatility, any volatility that does show up, whether that's weather related or maintenance or anything else. Speaker 600:16:46Okay. That's very helpful. I appreciate the color. Operator00:16:51Our next question comes from Robert Kwan from RBC Capital Markets, please go ahead. Speaker 500:16:57Hey, good morning. I know you don't want to get into the asset review, which Makes sense. I'm just wondering when you do make the announcement, do you intend that it's going to be here's the path that we're going to move forward or will it be something more definitive To the extent that you're going to divest, would there be an agreement with the counterparty? Speaker 300:17:22Yes, I'm not exactly sure what you're going to get, but I am pretty sure that I don't want to go down that road At all right now, Robert. We will have some answers to you. And we know that They are owed and I don't anticipate it being very long. So you won't have to wait long. Speaker 500:17:42Okay. That's fine. If I can just ask about the guidance on the $190,000,000 to $210,000,000 There is a statement That you're going to update based on the RD commissioning. Just to be clear though, does The $190,000,000 to $210,000,000 include the $15,000,000 to $25,000,000 that was in the renewables release? Or is it just a standalone? Speaker 500:18:10No. Okay. And then the last question just on the quarter and you talked about Expecting to get insurance proceeds for the BRC, did you book any provision To receive that in Q2? Or is this a completely impacted quarter and any proceeds will be booked when received? Speaker 200:18:32Yes. There was a minimal, accrual for insurance proceeds. We think there's more to come. Obviously, that's still A live discussion with the adjuster, but we took a conservative approach in my opinion as to what was recognized during the Q2. Speaker 500:18:48Okay. And so that was in accrued amount, that wasn't anything that was paid out early? Speaker 100:18:53Correct. Speaker 500:18:54Okay. That's great. Thank Operator00:19:03Our next question comes from Robert Catellier from CIBC. Please go ahead. Speaker 700:19:08Yes. I'd like to go back to storage for a minute, please. I just wonder in light of your Volition is on that. Are you doing anything to position the company for more natural gas storage Exposure, in other words, are you investing more in your storage position in anticipation of good spreads? Speaker 300:19:34We don't have anything planned right now. As you I think know that Dimsdale is our biggest And to really make that effective, that asset needs to be needs to see some capital. It is it's a little bit it's scaled to be well, it's scaled to be closer to 100 Bcf And that's going to take some capital to get there. So we don't have any plans outside of that asset or Our other storage assets that we've got at the BRC. Speaker 700:20:12Okay. And then Just with respect to the wildfires, do those change how you view risk And manage risk either operationally or financially through leverage? Speaker 300:20:29That doesn't change that alone doesn't change anything with regard to the way we view it. We have been pretty clear, I think, that we would like to see our leverage lower than it is. And that's Frankly, it's more a function of having crack spread exposure at the refinery, which is has some volatility Associated with it probably more so than certainly than the processing side or some of our other midstream assets. So The fire was it was certainly important for us to go through that kind of an With regard to our emergency response plans and making sure we evacuated well and we could track all of our workers and all of their families as Staten Valley was also evacuated, was informative to see how close that fire could get to that facility. It was Quite remarkable, the wall of flames that was surrounding the facility as Our workers were evacuating and to see the absolutely limited amount of physical damage that happened Even though the fire was that close. Speaker 300:21:46So these are well engineered and well thought out Plants, not just us, but I've had this discussion with a number of other operators of gas plants in our province and in BC. And It is remarkable how well some of these assets can survive those types of events. Speaker 700:22:12Okay. Thanks, Rob. Operator00:22:16And our next question comes from Curtis Jensen from Robotti and Please go ahead. Speaker 800:22:21Hey, good afternoon. Can you hear me okay? Speaker 300:22:24You bet. Speaker 800:22:26Anyway, good work getting through the GGR turnaround and managing through the fires. I just kind of a question about Pipestone. It seems to me there's probably definitely customer demand for an expansion, but I'm not Howard, still talking about it because it occurs to me that Tidewater really is I mean, you're in a capital Intensive business, that'd be obviously very capital intensive project and yet you have a massive cost of capital Disadvantaged. So I guess I'm missing something about how we're still talking about expanding it Without a much larger partner who's got a lower cost of capital or something. But I guess one of my questions would be, one of your customers Pipestone announced it's going to be acquired by Strathcona. Speaker 800:23:29And I'm wondering what implications does that have for your relationship. I mean, in the Context of an expansion there is, Dracona is somebody that might bring capital to a Phase 2? Speaker 300:23:46Yes. No, I understand where you're coming from and I certainly understand We are in a Well, a little bit, but it's a fair question. But my answer might not be totally satisfactory, but a lot of this will come to light through our asset Strategic Asset Review, which is will be announced shortly. But yes, Obviously, cost of capital is a very important thing when you're involved in large especially large capital projects. So It doesn't it isn't missed by us, your comments. Speaker 300:24:34And we think that The asset review will help to clear things up. Speaker 200:24:41All right. Thanks a lot. Speaker 300:24:43You got Operator00:24:44it. There are no further questions at this time. I would like to hand it over to Scott Baumann. Speaker 200:24:51Actually, we just had one more question back into the queue here. So if you don't mind doing one last circle out for questions, that'd be great. Thank you. Operator00:25:00We have Patrick Kenny with National Bank Financial. Please go ahead. Speaker 900:25:06Thank you. Yes, hey, guys. So it sounds like the asset review process is nearing completion here. And Of course, the HDRD will be fully up and running soon as well. So not to get into any details, but can you just remind us where you ultimately want to land, Both from a capital structure standpoint and as well from a corporate structure perspective. Speaker 900:25:30Just wondering what the bull's eye looks like, Say 6 to 12 months out with respect to the consolidated balance sheet and structure. Speaker 100:25:40Yes. Maybe I'll start off with kind Speaker 200:25:41of targets on capital structure levels of leverage. I think we're the view that less debt is better. That's obviously become more obvious as we've seen floating rates increase and our cost of capital increase right alongside with it. And I think just having lower debt levels, increase your degrees of freedom on strategy and how we kind of focus the business. I think as we spent kind of the last, call it, 6 months with Robin and his seat here, there's been an enhanced focus on Cash flow generation, thinking through our cost structure, thinking how we can generate cash from each of these assets. Speaker 200:26:19And I think as we've spoken to throughout this call here, As we work through our portfolio review, which assets make the most sense to me in this business and which have value, Higher value potentially in other hands here. And I think that's all kind of part and parcel of the strategy. But I think there's a core Possible business here that we're very focused on maximizing. And then as I said, we've got some work to do on the balance sheet That is a priority for us. Speaker 300:26:48And I think it ties into the asset review as you mentioned Patrick. We've got When we come out of this, if we've got a different mix of assets, we got to look at what type of cash flow comes out of those assets and The volatility around it, are they going to be are you left with mostly take or pay type of contracts, in which case your appetite for some leverage is Probably a little higher if you're more commodity exposed, then our appetite will certainly be lower for leverage. Speaker 900:27:19And I guess, the second part, would you guys be leaning towards simplifying The corporate structure, just given some investor feedback, market appetite Or would you be averse to, I guess, adding complexity to the structure? Speaker 300:27:38Well, in my mind, A lot of the complexity comes from consolidating our results with LCFS with the renewables business. We've always said that it is not our end goal to own 70% of the Renewables business Sort of as an ongoing in an ongoing way. And we also look at that asset as probably most investors look at it. We think we're at the finish line. We think it's tremendously undervalued certainly relative to anything else in that space. Speaker 300:28:13But until we get the thing up and running and cash flowing on a steady basis, we're probably going to see a discount. So I think that's probably the easiest way to reduce some of the complexity in Tidewater Midstream is Get to a more normal holding position and to sort of stop eventually stop consolidating those results. But I think that would go a long way to simplifying things. I'm not sure how long it takes. Speaker 900:28:49Yes. Got it. We'll let it run its course. Appreciate it. Thank you. Speaker 900:28:53Thanks. Operator00:28:57There are no further questions at this time. I would like to hand it over to Scott Baumann. Please go ahead. Speaker 100:29:05Thank you everyone for joining the call today. The team is available to address any outstanding items with our contact information at the bottom of this morning's press release. Thank you. Operator00:29:16Thank you, ladies and gentlemen. This concludesRead morePowered by