Tidewater Renewables Ltd. (LCFS) Earnings Call Transcript & Summary

Good afternoon, everyone, and thank you for joining us for Tidewater's fourth quarter 2025 earnings call. Right now, all phone lines are muted so that you can only listen. After the presentation, there will be a question-and-answer session. Should you need immediate help at any point during this call, just press star zero to reach the operator. Today's call is being recorded on March 26, 2026. I'll now hand the conference over to Ian Quartly. Please go ahead.

Thanks, Vincent, and welcome everyone to the joint conference call covering the fourth quarter 2025 results for both Tidewater Midstream and Infrastructure Limited and Tidewater Renewables Limited. With me today is our CEO, Jeremy Baines, who will give an update on operations during the quarter. I'll then cover the financial results and 2026 guidance, and after that we'll open the line for questions. This morning, both Tidewater Midstream and Tidewater Renewables reported results for the fourth quarter ended December 31st, 2025. Copies of the news releases, financial statements, MD&As, and annual information forms can be accessed on SEDAR+ or on the respective companies' websites. Before we get started, I'd like to note that today's call is being recorded for the benefit of individual shareholders, the media, and other interested parties who may want to review the call at a later time. A recorded call will be available through Cision. Some of the comments made today may be forward-looking in nature and are based on Tidewater's current expectations, judgments, and projections. Forward-looking statements we express today are subject to risk and uncertainties, which can cause actual results to differ from expectations. Further, some of the information provided refers to non-GAAP measures.

For additional detail regarding those forward-looking statements, GAAP measures, and risk factors, please refer to the various companies' financial reports, which can be found on the companies' websites and on SEDAR+. At this point, I'll hand the call over to Jeremy.

Thanks, Ian, and I appreciate all of you being with us today. I'll start with Tidewater Renewables, then move on to Tidewater Midstream, and I'll cover regulatory and strategic developments, operational performance, and commercial updates. Beginning with regulatory developments: on September 5th, 2025, the Government of Canada announced a $370 million Biofuels Production Incentive Program aimed at addressing the economic challenges created by US subsidies and policies. The specifics of this incentive program were communicated to eligible recipients, including Tidewater Renewables, in December of 2025. Under the program, non-repayable cash support will be provided from January 2026 to December 2027 at an incentive rate of 16 cents per liter for the first 170 million liters produced annually. Since the HDRD complex is expected to produce between 150 million and 170 million liters annually over this period, Tidewater Renewables is ideally positioned to receive between $24 million and $27 million in both 2026 and 2027. Additionally, the Government of Canada announced its intention to make targeted amendments to the Clean Fuel Regulations to further support Canada's biofuel sector. Two amendments are currently being evaluated. The first is a minimum renewable domestic content approach, similar to the policy implemented by the Government of British Columbia in early 2025.

The next one involves a credit multiplier mechanism, in which fuels made domestically with low carbon content would get a larger share of CFR emission credits compared with fuels brought in from abroad. Tidewater backs both of the amendments on the table and stands in a strong position to gain from either one, or from the two combined, should they be put into effect. Turning to operations at the HDRD complex, throughput fell to 48% of design capacity in the fourth quarter of 2025 because of the scheduled turnaround and an equipment failure that followed. As we said before, the repair work on that equipment wrapped up successfully on December 12th, 2025, and utilization has been running close to nameplate capacity through the opening months of 2026. Let's now shift to Tidewater Midstream, beginning with regulatory and strategic matters. In the fourth quarter, Tidewater Midstream carried out two initiative agreements with the Government of British Columbia aimed at supplying BCLCFS credits to back the output of low-carbon renewable diesel and renewable gasoline from the hydrotreater and FCC co-processing units located at the Prince George Refinery. The BCLCFS credits granted through those initiative agreements should cover a substantial share of what it costs to secure the renewable feedstocks needed to run the co-processing units over the coming two years, at rates reaching as much as 300 barrels per day for each unit.

Beyond that, selling co-processed low-carbon transportation fuels in the British Columbia market is going to create CFR emission credits along with extra BCLCFS credits for Tidewater Midstream. Turning to strategy, Tidewater assumed complete operational control of the Western Pipeline system it acquired in the fourth quarter of 2025. Integrating that pipeline into the operational systems and processes we already have has been handled very well by our team, and we anticipate achieving in full the operational synergies plus the $10 million to $15 million in yearly cost savings that we previously announced. In January of 2026, Tidewater announced it had signed long-term agreements covering gas handling and NGL supply at the Brazeau River Complex. Through these agreements, Tidewater will process as much as 75 million cubic feet per day of natural gas at the BRC from dedicated producer facilities, and it will obtain the marketing rights to ethane, propane, and butane for initial terms of roughly five years. For Tidewater, these agreements matter because they supply substantial gas volume to the BRC facility from dedicated producer facilities over the long term. We are also continuing to move forward with our program of selling non-core assets. On October 21st, the Sylvan Lake gas processing facility was sold for cash proceeds of $5.5 million.

Back in December 2025, the last $1.5 million in cash proceeds from the BRC roads sale came in, and then in February 2026, Tidewater Renewables got $2.1 million as the final proceeds from selling the renewable natural gas partnership. We're still pursuing additional divestiture opportunities, and one of them is the growing market interest we're seeing in repurposing energy sites for data center developments. As those discussions move forward, we look forward to keeping the market updated. Now let's move on to operations at the Prince George Refinery. At the PGR, throughput came in at an average of 10,809 barrels per day in the fourth quarter of 2025, which is up 5% from the third quarter of 2025. The semiannual heat exchanger cleaning wrapped up in October, and during November and December 2025, throughput levels came in at roughly 11,900 barrels per day on average. Refined product margins got better in the fourth quarter, with the Prince George crack spread averaging $94 per barrel, versus $90 per barrel in the third quarter of 2025. As we moved into the start of 2026, market conditions for refined products have improved considerably. The Prince George crack spread averaged $94 per barrel in January and $98 per barrel in February. In March, the crack spread widened even more because of the ongoing conflict in Iran, and month-to-date in March it has averaged $113 per barrel.

As Ian will detail afterward, during March we added 2-1-1 crack spread hedges covering roughly 50% of forecasted output between April and December 2026, so as to lock in the present strength we're seeing in crack spreads. Now let's turn to our wider midstream business. Throughput at the BRC gas processing facility came in at an average of 102 million cubic feet per day during the fourth quarter, versus 124 million cubic feet per day in the third quarter of 2025. That decline stemmed mainly from reduced straddle volumes. The Ram River gas plant is still temporarily curtailed, though sulfur handling operations keep running. Prices in today's market for natural gas and for sulfur sit at levels we see as highly economic for sour gas producers, and we intend to bring the gas plant back online once production in the area returns. Going forward, our focus stays on operational excellence, margin enhancement, and carrying out strategic initiatives — among them maximizing efficiency at the PGR and HDRD complex, reinforcing commercial platforms and offtakes, moving our SAF project ahead while managing capital prudently, and advancing non-core asset sales to unlock liquidity — and we will keep advocating for a fair regulatory environment.

Our view is that these foundational pieces set us up to achieve growth in revenue as well as margin improvement in 2026. So with that said, I will hand things back over to Ian now for the financial review.

Thanks, Jeremy. For the fourth quarter of 2025, Tidewater Renewables posted a net loss of $13.8 million, versus a net loss of $3.4 million in the fourth quarter of 2024. Adjusted EBITDA came in at negative $3.8 million for Q4 2025, compared with $6.1 million for Q4 2024. The extended turnaround and the equipment repair that followed both weighed on net income and adjusted EBITDA, leading to reduced sales volumes in the fourth quarter. On top of that, contributions from the equity investee were lower. Moving to Tidewater Midstream, the consolidated net loss attributable to shareholders for the fourth quarter was $30 million, versus a consolidated net loss attributable to shareholders of $3.3 million for the fourth quarter of 2024. The bigger net loss in Q4 2025 stemmed mainly from the Tidewater Renewables extended turnaround I mentioned earlier, along with the absence of an impairment reversal this quarter. Partly offsetting that were favorable movements in the fair value of derivative contracts and lower interest rates. Consolidated adjusted EBITDA for the fourth quarter of 2025 was $3 million, compared with $20 million in the same period of 2024. That decline was driven primarily by lower gross margins this period and smaller contributions from the equity investee, partly offset by reduced losses on realized derivative contracts.

Alongside the year-end release, we've put out our 2026 financial guidance. For Tidewater on a consolidated basis, 2026 adjusted EBITDA is projected in the $150 million to $170 million range. Consolidated capex — covering both growth and maintenance capital, net of capitalized BCLCFS credits obtained through the SAF initiative agreement — is forecast at $20 million to $25 million. At Tidewater Renewables, annual adjusted EBITDA is anticipated between $80 and $90 million, with capital expenditures of $2 to $3 million. The HDRD complex should gain from robust utilization and market pricing, and remains on course to generate 150 to 170 million liters of renewable diesel during 2026, volumes that are anticipated to qualify for the 16 cent per liter Canadian Biofuels Production Incentive. Strong utilization is likewise expected to favor the Prince George Refinery, together with operational efficiencies and cost reductions stemming from the acquired Western Pipeline. Restarting the co-processing units should further deliver a positive benefit through lower compliance costs, and the initiative agreements announced earlier will help Tidewater Midstream finance feedstock procurement. At the BRC, benefits are anticipated from the start-up of recently signed agreements covering gas handling as well as NGL supply and fractionation.

Our 2026 financial guidance excludes any EBITDA from Ram’s gas processing coming back online. The improved North American crack spreads, refined product prices, and emission credit prices we’ve seen at the start of 2026 should deliver an extra windfall to results at Prince George Refinery and the HDRD complex. To safeguard cash flow and manage commodity price risk, Tidewater began hedging in early March and kept adding positions through the month. As it stands, Tidewater Midstream has hedges covering roughly 50% of its crack spread exposure for the rest of 2026, while Tidewater Renewables has hedges covering roughly 50% of the HDRD complex’s revenue and feedstock purchases for the rest of 2026. Our consolidated adjusted EBITDA guidance range of $150 to $170 million represents an increase of approximately 400% over 2025’s actual consolidated adjusted EBITDA. With a disciplined capital program of between $20 and $25 million for 2026, the cash flow that results is expected to go mainly toward debt reduction. Lastly, on March 23rd, 2026, we took another important step in strengthening Tidewater Midstream’s financial position by amending the senior credit facility. Both the $50 million operating facility and the $125 million syndicated facility had their maturity dates extended from September 2026 to August 2027.

For the first quarter of 2026, we amended the financial covenant ratios to give an additional turn on the senior debt to adjusted EBITDA ratio, plus an extra half turn on the debt to adjusted EBITDA ratio and on the adjusted EBITDA to interest coverage ratio. When we calculate the financial covenants for Q1, Q2, and Q3 of 2026, we'll do so on an annualized basis rather than a trailing 12-month basis, which reflects the significant step change in Tidewater Midstream's financial results in 2026. That wraps up our prepared remarks. Vincent, please open the line for questions.

Thanks. So, everyone, we're going to start the Q&A portion now. If you've got a question, hit star and then 1 on your touch-tone phone. A prompt will come up telling you your hand's been raised. If you'd rather drop out of the polling, just hit star and then 2. Our first question is from Robert Hope at Scotiabank. Go ahead, please.

Hi, everybody, and thanks for taking my question. Perhaps I'll start with the non-core sales. Could you update us on roughly what stage those discussions have reached, and on whether you have a longer-term target for how much in additional asset sales you'd like to complete?

Thanks, Rob, for that question. In the prior year, we provided guidance regarding what we were aiming for with respect to sales of non-core assets. We remain on course to achieve that figure. The timing is stretching out a bit more than we'd prefer, though these asset sale conversations are complex and bespoke in nature. We're in advanced talks concerning a very substantial asset, and we have three non-binding LOIs, with efforts underway to convert that into a single binding LOI. We anticipate being able to make an announcement at some point this year, ideally during the first half of the year, on that front. There's a second asset where we're at a comparable stage of negotiations with a third party, and we're working to bring it to binding, and we hope to be able to put something out early in the second quarter on that one as well. We remain on course. The timing, purely because of the complexity of certain of these assets, is taking us somewhat longer, but we expect to be able to deliver on the figure we published last year.