Tidewater Midstream and Infrastructure Ltd. (TWM) Earnings Call Transcript

All those in favor of the motion, please signify in the usual manner by raising your right hand. [Voting]

Any opposed? [Voting]

I declare the motion carried. The next item of business is to approve the amended and restated stock option plan of the corporation and the unallocated options thereunder. May I please have a motion in this regard.

I move that the resolution as set forth in the management information circular to approve the amended and restated stock option plan for the corporation and the unallocated stock options thereunder be approved.

I second the motion.

In order to accurately record the voting results of this resolution, it is necessary to conduct a vote on this resolution by ballot. If you have not received a ballot, please identify yourself to the scrutineers. Okay. I have received the report on the ballot from the scrutineer and declare the motion carried. The final item of business is to approve an advisory nonbinding basis are on an advisory nonbinding basis, the corporation's approach to executive compensation. May I please have a motion in that regard.

I move that the motion -- I move that the resolution as set forth in the Management Information Circular to accept on an advisory nonbinding basis the corporation's approach to executive compensation be approved.

I second the motion.

All those in favor of the motion, please signify in the usual manner by raising your right hand. [Voting]

Any opposed? [Voting]

I declare the motion carried. That now concludes the formal business of the meeting. I declare the meeting terminated. Now that the formal business of the meeting has concluded, I will ask Rob Colcleugh to provide a corporate update on Tidewater. The question period will occur after the presentation.

Good afternoon. This will just be a brief update, and then we can take some questions at the end. As most of you I think know, our business is generally divided into 3 general areas: Midstream and Downstream and then our Renewables business. We'll speak about that at the end a little bit, but the renewables business is a separate publicly traded company. We actually had our AGM yesterday, it's Tidewater Renewables. We, as Tidewater Midstream owns 69% of that company. And that's why you see a lot of our consolidated versus deconsolidated terminology in our financial statements. This is where we stand right now. As you can see, the EBITDA has been growing fairly materially for a number of years, pretty much since the company IPO-ed. Debt has also been increasing as we've been going. And what we're really very focused on right now is I've made a few public comments about us being very focused on our cash flow. So EBITDA as a measure of cash flow is great, but actually having that cash flow is what we're going to be focusing on, and that's had us really looking at how we spend our maintenance and growth capital. Yes. I don't think that there's anything else from a '22 perspective, $250 million, a significant amount of EBITDA. We did achieve that last year. We had very good results, especially in the downstream group, crack spreads were very much in our favor. But all areas of the business have performed decently in '22. These are a few of the things that we're focusing on. I know it says '22 highlights. There are really some of the things we're focusing on in '23. Deleveraging, made several comments talking about a process that is currently underway to potentially monetize one or more assets. And as I say, we will make those results public once they are in hand or close to being in hand, that will drive some of that delevering. Our renewables business has a pretty exciting project in the mix right now. It's our HDRD, which is a renewable diesel plant. That's going to be the very first renewable diesel facility in Canada. And so we're quite excited about that. It was a source of a little bit of consternation earlier just as a result of some cost overruns that we experienced, again, inflationary environment that we're in. We have solved that fortunately with the help of our capital providers, both debt and we've got very good support from the government, and got that gap quickly closed. And we are looking at an end of June construction period. So we're very closely coming up on what will be a very big driver for both companies in the near future. On the growth side, again, that is the largest growth project is our HDRD, I mean both companies because we own 69% of it, it does drive a significant amount of our results in midstream as well. And again, the capital discipline, we are going to be extremely focused on what dollars go out. And really, I think you'll see generally a reduction in our growth capital going forward. Just to touch on a couple of the -- our 3 silos, if you will. Our midstream assets are the largest number of our facilities are clearly in the midstream side. We've got a variety of assets from some smaller ones, in fact, a number of ones that are even not even on the map, to larger growthy assets. In particular, I guess I'd point to -- I think I used to know there's a pointer on this. But anyway, the Pipestone gas plant, which is one where we're considering a doubling of our processing capacity from $100 million to $200 million, and that's something that we're working on right now. And again, we'll be making those kinds of announcements whether we're proceeding and at what pace in the very near future. On the downstream side, it's principally the Prince George Refinery. I think this is our third year running that, [ Joe ], third? Yes. And as I say, it's been performing very well from a volume perspective, especially considering this is potentially -- not a potentially, it's a 55-year-old asset. It's been performing at or above capacity shortly after we took it over. We are shortly going to be announcing the results of our turnaround. And I can say that things are generally on budget and on time. And the team did an exceptional job to get this, which is our first major turnaround done complete on time with a tremendous number of people on staff. Remember, we're also building the renewable diesel plant at the same facility at the same time. So -- we got that done with no lost time incidences, which is a phenomenal result, very safe build, and I think we can all be very proud of that fact. And proud of the fact that we're on time and on budget on our first turnaround. So that is a big relief on the Prince George side. And in a month's time, we expect to be announcing that we're finished construction on the HDRD., So lots going on at Prince George. We are looking at a number of -- I wouldn't call them growth as much as ways to save costs, one of which, as you can see -- most of our crude comes from Taylor into Prince George. We're investigating some alternatives to some pipelining that we've been sending most of our product down which has tended to be quite expensive. We're looking at some rail and truck opportunities to feed our Prince George Refinery. So anyway, those are some of the -- I guess you call them growth initiatives that we're looking at, which I more consider optimization. This is our current -- we'll talk about it in a second, but this is a few of the shots of the construction project that's going on up at Prince George, most of which is the renewable diesel. I don't know if we've got any of these or turnaround, but these are all, I think, renewable diesel ones. They will be driving our cash flow growth coming forward. Well, in the second half of this year. So again, we are expecting -- move right to it. We're expecting run rate coming out of the HDRD, of around a $100 million of EBITDA, and that's really cash flow -- that's a significant amount for renewables. Obviously, renewables currently has about $50 million of EBITDA. And these results, again, are consolidated into the Tidewater Midstream results. And again, that's why you'll see both debt, obviously, as well as our cash flow once it gets consolidated. But if you look at renewables as a stand-alone business and again, it trades on the TSX as well, it's a -- these renewables companies have tend to trade in the 10x multiple range. Again, this is not guidance or anything. This is just where things are tending to trade in the renewable space. We're going to have about $150 million of EBITDA there. That should be a considerable bump over the -- what, $650 million EV enterprise value that it currently trades at. So we're looking for to demonstrate that the facility works to demonstrate that the economics are as we model them, and we are hoping to see that, that gets revalued. And again, owning 69% of it should have a dramatic impact on Tidewater Midstream stock price. So that is the big project that is now underway, and we will have results, as I say, in the month, on the construction and commercial operations will be shortly after that. And ESG is a big part of what we do, and there aren't a lot of companies that have their own specific renewables company. So that's the way we've done, TransAlta did the same thing, but companies our size, it sort of gives you an idea of where we -- how we value our ESG commitments and not just in our ownership of our -- sorry, of our renewables company, but also in the way we conduct our own business. And that goes from safety right through to our environmental initiatives and the way we're trying to reduce CO2 emissions coming out of all of our facilities. So that's largely all I wanted to get through today. I'm happy to take some questions, and Thomas as well. Is there any -- are there any questions either in the room or on the line?

[Operator Instructions] There are no questions over the phone at this time.

Okay. Any questions in the room? Excellent. Well, we can wrap it up. Mr. Chairman.

Okay. Well, thank you everyone for attending, and I will now terminate the meeting. Thank you very much.

Ladies and gentlemen, this concludes your conference call for today. We thank you for joining and ask that you may disconnect your lines. Thank you.