Tidewater Renewables Ltd. (LCFS) Earnings Call Transcript
August 13, 2026
Earnings Call Speaker Segments
Thursday, August 13, 2026 — this call is being recorded. At this point I'd like to hand the conference over to our CFO, Mr. Ian Quartly. Please proceed.
Thanks, Ina, and hello everyone — glad to have you on this combined call covering the second quarter 2026 results for both Tidewater Midstream and Infrastructure Limited and Tidewater Renewables Limited. With me this morning is Jeremy Baines, our CEO, and he'll walk you through how operations have performed, the regulatory tailwinds, and the favourable market conditions we've encountered as the year got underway. After that, I'll take you through the financial results and the details behind our increased 2026 guidance, and following that we'll open up the line for your questions. Earlier today, Tidewater Midstream and Tidewater Renewables both released results for the second quarter ended June 30th, 2026. You can find copies of the news releases, financial statements, and MD&As on SEDAR+ or on each company's website. Before we begin, I want to mention that this call is being recorded for the benefit of individual shareholders, the media, and other interested parties who might want to review it at a later time. The recorded call will be available for decision. Certain comments made today may be forward-looking in nature and are based on Tidewater's current expectations, judgments, and projections. The forward-looking statements we express today are subject to risks and uncertainties, which can cause actual results to differ from expectations.
In addition, a portion of what we're sharing relates to non-GAAP measures. For additional detail on these forward-looking statements, the non-GAAP measures, and risk factors, please refer to the companies' various financial reports, which can be found on the companies' websites as well as on SEDAR+. I'll now hand the call over to Jeremy.
Thanks, Ian, and good morning, everyone — appreciate you being with us today. I'll begin my comments by focusing on Tidewater Renewables. In the second quarter, the HDRD complex hit record average daily throughput of 3,315 barrels per day, which works out to a 111% utilization rate. Our team has done a tremendous job finishing several debottlenecking initiatives at very low cost, and those efforts — combined with outstanding facility reliability — allowed the HDRD complex to run consistently above nameplate capacity. That mattered a great deal for producing beyond nameplate capacity in a quarter when we achieved record margins on renewable diesel sales made at U.S. import parity pricing from the facility. We also picked up an extra 16 cents per liter of margin through the biofuels production incentive, and that drove the record financial results Ian will walk through later in the call. Turning to regulation: in the first quarter of 2026, Tidewater Renewables obtained conditional approval from Natural Resources Canada under the biofuel production incentive program. The contribution agreement was executed on July 7th, locking in total funding consistent with the HDRD complex's full annual production capacity. We anticipate receiving the first and second quarter cash contributions, totaling $13.8 million, in the third quarter of 2026, with later contributions arriving quarterly in arrears — a steady boost to our cash flow and liquidity.
Turning now to the sustainable aviation fuel project, which keeps advancing toward a final investment decision in this year's fourth quarter. Tidewater Renewables signed a new initiative agreement with the Government of British Columbia on June 19th, 2026, and that agreement will supply extra BC LCFS credits to help fund critical pre-FID activities. Those pre-FID activities should let Tidewater Renewables keep the project on schedule, hold vendor and fabrication capacity availability, bring engineering deliverables to maturity, assist regulatory advancement, and set the project up for efficient execution after FID. As certain project milestones are reached, Tidewater Renewables anticipates BC LCFS credits in the third and fourth quarter of 2026. Shifting now to Tidewater Midstream. At the Prince George Refinery, throughput came in at an average of 10,032 barrels per day during the second quarter, reflecting a planned 17-day partial facility outage in April for scheduled equipment cleaning and other maintenance work. Outside the effect of that scheduled outage, PGR throughput averaged 12,060 barrels per day, or 101% of design capacity. Refined product market conditions sat at historically high levels in the second quarter, driven by global energy supply disruptions and shrinking worldwide refining capacity, especially in the Middle East and Russia.
So because of that, the Prince George crack spread came in at an average of $118 per barrel during the second quarter of 2026, which is a 16% rise over the first quarter of 2026. When we look toward the back half of the year and further out, the refining macro backdrop continues to be quite favorable. Around the world, roughly 10% of refining capacity is currently offline, and the bulk of that reflects damaged equipment that will need a lengthy period to fix or rebuild. Meanwhile, refined product inventories sit at historically low levels. As we disclosed before, Tidewater Midstream hedged about 50% of its crack spread exposure from April through December 2026. After the second quarter ended, in the latter part of July, Tidewater Midstream put on further hedges covering approximately 40% of its crack spread exposure for 2027, at fixed prices well above both mid-cycle pricing and the hedge pricing realized in 2026. Tidewater's hedging program is built to manage commodity price volatility and to establish a baseline for the corporation's free cash flow. At the BRC gas processing facility, throughput came in at an average of 105 million cubic feet per day in the second quarter of 2026, an 8% decline versus the prior quarter. That weaker throughput stemmed mainly from NGTL curtailments, which constrained producer volumes entering the facility and also pulled fractionation facility utilization down to 76% in the second quarter, compared with 90% in the first quarter of 2026.
Talks are still ongoing with both prospective and current customers as our focus stays on lifting utilization at the BRC. The Ram River gas plant is still temporarily curtailed, and sulfur handling operations keep running. Market prices right now, particularly for sulfur, sit at levels that are highly economic for sour gas producers, and we intend to restart the gas plant once production in the area comes back. Going forward, our focus remains on driving operational excellence, enhancing margins, and executing strategic initiatives, including: maximizing utilization at the PGR and HDRD complex, strengthening commercial platforms and offtakes, advancing our SAF project while managing capital prudently, increasing utilization of our midstream facilities at BRC and Ram River, progressing non-core asset sales to unlock liquidity, and we keep advocating for a fair regulatory and trade environment. These building blocks, we believe, position us for revenue growth as well as margin expansion during the second half of 2026. With that, I'll now hand it over to Ian for the financial review.
Thanks, Jeremy. Tidewater Renewables turned in record adjusted EBITDA of $56 million for the second quarter. Driving this result was the HDRD complex operating above nameplate capacity, which let us take advantage of better market pricing by drawing on our offtake contracts indexed to U.S. import pricing benchmarks. Within that $56 million of adjusted EBITDA is $7.7 million in expected proceeds booked in the second quarter from the biofuels production incentive, along with $7.7 million of adjusted EBITDA from our equity investment in the cattle company, mostly on the back of higher cattle prices. Tidewater Midstream posted deconsolidated adjusted EBITDA of $32.9 million in the second quarter of 2026, up $7.3 million versus the first quarter of '26. The main driver here was stronger crack spreads at the Prince George Refinery, partly offset by realized losses on the crack spread hedges. At the Tidewater consolidated group level, adjusted EBITDA for the second quarter came in at $88.9 million, a quarterly record and a $39.2 million increase over the first quarter of 2026. Turning now to the credit facilities and leverage, both Tidewater Renewables and Tidewater Midstream made significant progress toward our debt reduction and deleveraging targets in the second quarter.
During the second quarter, consolidated net debt went down by $44.4 million. That reflects a $30.9 million cut in debt at Tidewater Midstream, plus a $13.5 million reduction at Tidewater Renewables. Combined with the stronger adjusted EBITDA we reported in the second quarter, this has driven meaningful drops in leverage at both companies. At June 30th, Tidewater Renewables posted a debt-to-adjusted EBITDA ratio of 1.47 times, while Tidewater Midstream came in at 2.3 times. Looking at the consolidated picture, the debt-to-adjusted EBITDA ratio stands at 1.7 times, which puts us back inside the target range of 1.2 to 2.5 times. Alongside this morning's release of the second quarter financial results, we also announced raises to our full-year 2026 adjusted EBITDA guidance. Consolidated adjusted EBITDA is now expected to land between $230 million and $250 million, which is a 20% increase over the midpoint of the prior guidance. At Tidewater Renewables, adjusted EBITDA guidance moved up to a range of $130 million to $140 million, and Tidewater Midstream's deconsolidated adjusted EBITDA guidance moved up to a range of $100 million to $110 million. What's mainly driving the higher adjusted EBITDA guidance is greater facility utilization, continued strength in forward market crack spreads, and better pricing for renewable diesel and emission credits.
Our outlook for 2026 capital spending is still the same: $2 to $3 million at Tidewater Renewables, and $20 to $25 million on a consolidated Tidewater basis. That capital guidance covers growth capital as well as maintenance capital, and it's net of the BC LCFS credits we expect to receive under the executed initiative agreements for capital projects. Keeping a disciplined capital program means the free cash flow that results will go mainly toward paying down debt. That wraps up our prepared remarks. Ina, please open the line for questions.
Thank you. Ladies and gentlemen, we will now start the question-and-answer portion. If you have a question, please press star and then 1 on your telephone keypad. A prompt will tell you that your hand has been raised, and if you want to cancel your request, please press star and then 2. If you are on a speakerphone, please pick up the handset before pressing any keys. Please hold for a moment for your first question. Thank you. Your first question comes from Rob Hope of Scotiabank. Please go ahead.
Good morning, everyone. Our first question concerns the SAF project. With a potential sanctioning of that project in Q4, could you bring us up to date on any important milestones we ought to watch for, along with the sizing and the costs, and when the asset might potentially enter service?
Thanks for that question, Rob. On milestones, our position has stayed very consistent. The project needs a supportive regulatory framework. That really breaks down into two parts. First, we're awaiting the targeted amendments ECCC is examining regarding the CFR and the way SAF is handled under it. Our expectation is those will appear at some point here, my guess being in Q3. Second, there are additional regulatory programs focused on backing a SAF industry in Canada that we're monitoring. Once those are in place, we'd move forward and take FID on the project later this year. On capital cost, we're looking at roughly a $1.2 billion build-out. We have a very detailed, solid Class 3 FEED behind that.
Thanks for that. So turning to the hedging program, perhaps you could bring us up to date on how you view the right amount of hedging for Tidewater? It certainly looks like 50% is roughly the figure for 2026, and you already have 40% in place for 2027. Might we potentially see you adding layers beyond that, depending on how the forward market shapes up, or is something around 50% open essentially the sweet spot for the company?
That's a great question. We've been keeping an eye on how things are developing, and clearly, the crack spread environment is fairly attractive right now. We aimed to establish a baseline of cash flow beneath the business for the year so we could be sure we'd hit some of our debt reduction targets, and that's what brought us to the 50% hedge program in '26. We've begun layering in for '27. We're pleased with where the forward cracks sit in '27. Adding some certainty underneath those strikes us as prudent. I don't see us going above 50 — perhaps opportunistically at certain moments if we could — but 50 appears to be the right spot for us, simply to make sure we remove some of the volatility from revenues.
I appreciate that.
Thanks. As a reminder, if you’d like to ask something, press star and then 1 on your phone keypad. We now have Maurice Choy of RBC Capital Markets on the line. Please go ahead.
Thank you, and good morning, everyone. I’d like to spend a moment on funding. Net debt to EBITDA has clearly fallen very nicely into the target ranges. In the past, I suppose you focused a great deal on raising fresh capital through things like sales of non-core assets, for example. When you consider your funding plan and the amount of cash you’re generating, is there still a need to pursue some of those efforts, or should we view this balance sheet as meant to support initiatives such as the SAF, for example, or other growth projects?
No, that's a fair question. Thank you, Maurice. There are two things there: we'll keep pursuing those non-core asset sales we've discussed previously, and we remain on track with the guidance we provided to the market on that. Over the past couple of years, we've conducted a deep review of all our assets, and for any asset that isn't delivering an appropriate return and doesn't align with our strategy, we're actively working to core up and sell it. We'll keep going on that front. Really, it comes down more to whether these assets fit our strategy, but most importantly, whether they generate an appropriate return. Some of the assets we're selling are negative period and produce no return at all, yet they do hold some value for others, so we're continuing down that path and are on track. When it comes to funding going forward, yes, obviously we've managed our capital programs very carefully over the past couple of years. I think the team has done a very good job implementing a new risk-based framework, making sure that every dollar we spend delivers an appropriate return or an appropriate reduction in risk. We'll keep doing that. The big item I think you're probably thinking about is our SAF project, and assuming the regulatory environment reaches the point we need for us to go ahead and FID that project, we expect to receive the same level of support for that project as we did on the RD plant on a relative basis.
We certainly see the capability, across a build period of three years for that project, to put in funds from operations cash flow to finance that construction. As this project moves forward, we're fairly comfortable in our capacity to do so. We also have other options available. There's a First Nations partner examining a modest equity position in the project, and they're highly supportive of it. Other parties have shown interest in partnering with us too, so that alternative exists for us as well. We believe we're well positioned to satisfy our key funding programs. Naturally, we'll keep managing our capital and spending in that area to make sure we're achieving a suitable risk-adjusted return on it.
Thanks. Perhaps a brief clarification on that point. You brought up a build lasting 3 years, and you can likely cover it from your own operating cash flows. It sounds as though other funding partners aren't strictly necessary for you, though the collaboration and reconciliation aspect is probably something you welcome. Is that accurate?
At the moment, as you'd expect, we're in discussions with a possible First Nations partner. If they decide to put money in, we'd welcome them onto the project. If not, we think the Part 3 agreements plus cash flow from operations give us what we need to complete the entire SAF project independently. The build-out takes three years, with operations starting in 2030, and at that point it will meaningfully affect our cash flows. That's the base case, though as we proceed on that project we do have plenty of other alternatives we can consider.
Got it. Perhaps taking a broader view of the whole Tidewater complex. Clearly, at the time Tidewater Renewables first came into being, conditions were quite different, market expectations were different, and the outlook was different. We find ourselves where we are now, and I'm simply curious whether you could reset how we should think about why you still believe this remains the right structure today, and maybe which factors might shift such that you would revisit the structure itself?
From our perspective on the business—and I believe I've said this since the very beginning—we view it as two parts: a fuels business and a midstream business. Across both of those lines of business, we have an excellent team with substantial experience in building, owning, and operating. Around both of those business streams, we keep seeing constructive environments. For renewable fuels, we see a regulatory environment that is very supportive. For our conventional fuels refining business, we've seen global events that are very supportive. In Western Canada, we continue to see the build-out and development of a great resource, which supports demand for our midstream services. With our businesses, we're very comfortable. We have two companies. Operating them has generated significant efficiencies, and we keep working to generate cash flow for all our shareholders and to optimize the businesses.
Got it, and thanks.
Thank you. As a reminder, if you'd like to ask something, just hit star and then 1 on your phone's keypad. We have no more questions right now. I'll turn things back over to Mr. Ian Quartly for closing remarks, if he has any.
Thanks, everybody, for being on the call. Our team is ready to handle any items you still have open — you can find our contact details at the bottom of each company's press release. Thank you.
That brings us to the end of today's call. We appreciate everyone for joining. You're all free to disconnect now.
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