Tidewater Midstream and Infrastructure Ltd. Announces Third Quarter 2019 Results and Operational Update
Tidewater Midstream and Infrastructure Ltd. ("Tidewater" or the "Corporation") (TSX:TWM.TO) is pleased to announce that it has filed its condensed interim consolidated financial statements and Management's Discussion and Analysis ("MD&A") for the three and nine-month period ended September 30, 2019.
THIRD-QUARTER 2019 FINANCIAL PERFORMANCE
-- Tidewater generated strong Adjusted EBITDA in the third quarter of 2019 of $25.5 million or $0.08 per share, compared to $17.3 million or $0.05 per share in the third quarter of 2018. -- Net income attributable to shareholders increased to $11.0 million or $0.03 per share for the third quarter of 2019, compared to a net loss attributable to shareholders of $1.0 million or $0.00 per share for the third quarter of 2018. -- Net cash used in operating activities totaled $2.4 million for the third quarter of 2019, with distributable cash flow of $12.1 million and a payout ratio of 28% for the quarter and 25% for the nine months ended September 30, 2019. -- Tidewater successfully commissioned the 100 MMcf/day sour deep-cut gas processing complex (the "Pipestone Gas Plant") on time and on budget, and began processing customer gas in September 2019. The Pipestone Gas Plant is currently processing over 60 MMcf/day of natural gas and throughput continues to increase. Full capacity has been impacted due to construction delays on downstream third-party infrastructure. -- Throughput on the Pioneer Pipeline continued to increase through the third quarter of 2019, with volumes reaching approximately 130 MMcf/day in the first week of November 2019 under the 15-year take-or-pay commitment with TransAlta. Tidewater and TransAlta continue to work together on additional volume commitments on the pipeline. -- With the commissioning of the Pipestone Gas Plant, the Pipestone Gas Storage Facility saw its first injections from the gas plant in the quarter, as well as its first flows to Chicago through the recently commissioned Saskatoon Mountain meter station via Alliance Pipeline. The Pipestone Gas Storage Facility continues to exceed expectations and is poised for an active withdrawal season into a recently strengthened winter AECO market. -- On August 8, 2019, Tidewater closed the previously announced $75 million bought-deal financing (the "Convertible Debenture Financing") of five-year convertible unsecured subordinated debentures (the "Debentures") with a syndicate of underwriters. The Debentures have a coupon of 5.5 percent per annum. -- On November 1, 2019, Tidewater closed the previously announced acquisition of the Prince George Refinery for cash consideration of $215 million and approximately $53 million related to the acquisition of crude inventory at the Prince George Refinery and approximately $9 million in taxes and closing costs. The Prince George Refinery continues to demonstrate attractive operating economics. -- In conjunction with the closing of the Prince George Refinery acquisition, Tidewater closed an increase to its existing Credit Facility from $350 million to $600 million as well as a $100 million second lien term loan maturing October 31, 2022. -- With the commissioning of the Pioneer Pipeline and Pipestone Gas Plant, expansion of the Pipestone Gas Storage facility, and the acquisition of the Prince George Refinery, Tidewater has transformed its customer and contract base through the addition of over ten new take-or-pay contracts ranging in term from five to fifteen years and including over five new investment-grade counterparties. -- With the substantial completion of the Corporation's 2019 capital program and forecasted increase in cash flows, Tidewater is committed to reducing overall leverage through 2020 back to its historical levels with a target of 3.0x to 3.5x Net Debt to Adjusted EBITDA by the end of 2020.
Selected financial and operating information is outlined below and should be read with Tidewater's consolidated financial statements and related MD&A as at and for the three and nine-month period ended September 30, 2019 which are available at www.sedar.com and on our website at www.tidewatermidstream.com.
Consolidated Financial Highlights
Three months ended Nine months ended September 30, September 30, (in thousands of Canadian dollars except per share 2019 2018 2019 2018 information) --- Revenue $ 147,045 $ 80,102 $ 426,021 $ 233,550 Net income (loss) attributable to $ 11,045 $ (988) $ (176) $ 7,033 shareholders Basic and diluted net income (loss) $ 0.03 $ (0.00) $ (0.00) $ 0.02 attributable to shareholders per share Adjusted EBITDA (1) $ 25,496 $ 17,283 $ 69,686 $ 56,499 Adjusted EBITDA per common share - $ 0.08 $ 0.05 $ 0.21 $ 0.17 basic (1) Net cash provided by (used in) operating $ (2,404) $ 7,251 $ 23,301 $ (1,017) activities Distributable cash flow (2) $ 12,141 $ 12,715 $ 39,329 $ 39,887 Distributable cash flow per common share $ 0.04 $ 0.04 $ 0.12 $ 0.12 - basic (2) Dividends declared $ 3,349 $ 3,293 $ 9,969 $ 9,876 Dividends declared per common share $ 0.01 $ 0.01 $ 0.03 $ 0.03 Total common shares outstanding (000s) 334,866 329,313 334,866 329,313 Payout ratio (3) 28% 26% 25% 25% Total assets $ 1,585,551 $ 1,093,936 $ 1,585,551 $ 1,093,936 Net debt (4) $ 526,174 $ 288,464 $ 526,174 $ 288,464 ---
Notes: 1 Adjusted EBITDA is calculated as net income before interest, taxes, depreciation, share-based compensation, unrealized gains/losses, non-cash items, transaction costs and items that are considered non-recurring in nature. Adjusted EBITDA per common share is calculated as Adjusted EBITDA divided by the weighted average number of common shares outstanding for the three and nine-month period ended September 30, 2019. Adjusted EBITDA and Adjusted EBITDA per common share are not standard measures under GAAP. See "Non-GAAP Measures" in the Corporation's MD&A for a reconciliation of Adjusted EBITDA and Adjusted EBITDA per common share to their most closely related GAAP measures. 2 Distributable cash flow is calculated as net cash used in operating activities before changes in non-cash working capital and after any expenditures that use cash from operations. Distributable cash flow per common share is calculated as distributable cash flow over the weighted average number of common shares outstanding for the three and nine-month period ended September 30, 2019. Distributable cash flow and distributable cash flow per common share are not standard measures under GAAP. See "Non-GAAP Measures" in the Corporation's MD&A for a reconciliation of distributable cash flow and distributable cash flow per common share to their most closely related GAAP measures. 3 Payout Ratio is calculated by expressing dividends declared to shareholders for the period as a percentage of distributable cash flow attributable to shareholders. This measure, in combination with other measures, is used by the investment community to assess the sustainability of the current dividends. Payout Ratio is not a standard measure under GAAP. See "Non-GAAP Financial Measures" in the Corporation's MD&A for a reconciliation of Payout Ratio to its most closely related GAAP measure. 4 Net debt is defined as bank debt, convertible debentures and notes payable, less cash. Net Debt is not a standard measure under GAAP. See "Non-GAAP Measures" in the Corporation's MD&A for a reconciliation of Net Debt to its most closely related GAAP measure.
OUTLOOK AND CORPORATE UPDATE
Tidewater has significantly transformed its business over the past 24 months with the successful sanctioning, completion and commissioning of the Pipestone Gas Plant, Pipestone Gas Storage Facility and Pioneer Pipeline, and the acquisition of the Prince George Refinery. Tidewater continues to build an integrated and connected midstream infrastructure network from the well head to the end consumer in order to increase value for its customers and itself. Over the past two years, Tidewater has added over ten new take-or-pay contracts ranging in term from five to fifteen years and including over five new investment-grade counterparties which now account for a significant portion of the Corporation's cash flows. Tidewater continues to work to offer premium service to its customers through multiple egress options at its facilities (including its Alliance, TC Energy and Storage connections at Pipestone, and its Pioneer, TC Energy and Storage connections at Brazeau) and exposure to premium markets through access to its rail infrastructure and refined product markets.
The completion of the Pipestone Gas Plant, Pipestone Gas Storage Facility, Pioneer Pipeline and the acquisition of the Prince George Refinery have further strengthened Tidewater's asset mix. With its diverse asset mix, Tidewater is able to generate cash flow in varying commodity price environments and provide its customers opportunities to capitalize on high and low commodity prices.
Over the next 12 to 24 months, Tidewater will be focused on deleveraging and utilizing its anticipated significant increase in cash flows to reduce the Corporation's leverage ratios back to historic levels with a target of 3.0x to 3.5x Net Debt to Adjusted EBITDA by the end of 2020.
Natural Gas Storage
Tidewater operates three natural gas storage reservoirs at two different facilities; Dimsdale Paddy A (Pipestone Gas Storage Facility), Brazeau Nisku F, and Brazeau Nisku A (Brazeau River Gas Storage Facility).
The third quarter of 2019 saw heightened AECO natural gas price volatility which incented high injection volumes, coupled with withdrawal opportunities, to yield strong quarterly performance.
During the third quarter of 2019, Tidewater completed the facility expansion at the Pipestone Gas Storage Facility, which included the addition of compression and one new well. The Pipestone Gas Storage Facility saw its first injections from the Pipestone Gas Plant in the quarter, as well as its first flows to Chicago through the recently commissioned Saskatoon Mountain meter station via Alliance Pipeline.
The Pipestone Gas Storage Facility is fully contracted with take-or-pay contracts spanning as long as eight-years with multiple investment-grade counterparties. The facility is a significant step forward in Tidewater's fee-for-service gas storage business and offers producers at the Pipestone Gas Plant significant optionality where the plant has three egress solutions including connections to the TC Energy and Alliance systems, and gas storage.
At Brazeau, both Nisku A and Nisku F facilities have enjoyed connectivity to the newly in-service Pioneer Pipeline, allowing TransAlta to withdraw gas from storage during higher priced periods in October, and are scheduled to continue throughout the upcoming winter.
The Pipestone Gas Storage Facility continues to exceed expectations with all three storage facilities benefiting from volatility in AECO prices. Tidewater gas storage facilities are poised for an active withdrawal season into a recently strengthened winter AECO market.
Pipestone Gas Plant
The Pipestone Gas Plant is designed to process approximately 100 MMcf/day of natural gas. The project includes an acid gas injection well, saltwater disposal well, and pipelines directly connected to the Pipestone Gas Storage Facility, as well as connections to both Alliance and TC Energy pipelines.
Tidewater began processing raw natural gas and natural gas liquids in mid-September 2019. All process units are online and continue to be optimized with reliability and uptime being the key deliverables through the fourth quarter of 2019. The Pipestone Gas Plant is currently processing over 60 MMcf/day of natural gas and throughput continues to increase. Full capacity has been impacted due to construction delays on downstream third-party infrastructure. In addition to the gas plant and gas gathering systems, both TC Energy and Alliance connections are commissioned and are accepting gas flows from both the Pipestone Gas Plant and the Pipestone Gas Storage Facility. Hydrocarbon liquid handling is currently being managed through trucking operations. Egress pipelines for both condensate and NGLs are expected to come online in January 2020, allowing the facility to increase raw volumes and optimize liquid recoveries.
The Pioneer Pipeline is a 120km natural gas pipeline connecting Tidewater's BRC to TransAlta's generating units at Keephills, and an 11km lateral connecting to Sundance. The Pioneer Pipeline has an initial capacity of 130 MMcf/day supported by a 15 year take-or-pay commitment from TransAlta, which may be expanded to approximately 440 MMcf/day. The pipeline has allowed TransAlta to increase the amount of natural gas it co-fires at its Sundance and Keephills coal-fired units, resulting in lower carbon emissions and costs. TransAlta is a 50% working interest owner in the pipeline.
The Pioneer Pipeline was fully commissioned in the second quarter of 2019 and had average throughput of approximately 40 MMcf/day of natural gas through the start-up phase in the third quarter of 2019. Throughput of approximately 130 MMcf/day of natural gas commenced flowing through the Pioneer Pipeline in the first week of November in conjunction with the 15 year take-or-pay agreement with TransAlta.
Brazeau River Complex and Fractionation Facility
Throughput at the BRC was in-line with the second quarter of 2019 where Tidewater is working diligently with producers to improve netbacks by fully utilizing the BRC's facilities, including its two NGL pipeline connections, condensate pipeline connection, truck loading and offloading facilities, fractionation, natural gas storage facilities and two natural gas sales pipeline connections.
The Brazeau River Fractionation facility is fully contracted until March 2020, with two investment-grade customers and remained at maximum capacity through the third quarter of 2019.
The Brazeau River Complex remains a flagship asset for Tidewater, offering a full suite of services to producers, including C2, C3, C4 and C5 pipeline connections, NGL fractionation capacity, sweet and sour deep-cut gas processing capability, and two natural gas egress solutions given the BRC's connection to the NGTL system, and the Pioneer Pipeline.
Prince George Refinery
On November 1, 2019, Tidewater closed the previously announced acquisition of the Prince George Refinery from Husky Energy Inc. ("Husky"), approximately one month ahead of schedule. The Prince George Refinery is a 12.0 Mbbl/day light oil refinery that predominantly produces low sulfur diesel and gasoline, in addition to other products, to supply the greater Prince George region. The Prince George Refinery has significant onsite storage capacity of greater than 1.0 MMbbl and flexible logistics, with pipeline, rail and truck connectivity in place. The Prince George region is generally in short supply of refined products and the Prince George Refinery's location within the Prince George region makes it a critical piece of infrastructure with a significant logistical advantage to address the demand for these products.
Tidewater also entered into a 5-year offtake agreement with Husky for 90% of the nameplate capacity on diesel and gasoline volumes produced at the Prince George Refinery. The offtake agreement reflects committed volumes that Husky has agreed to purchase, and contains pricing review mechanisms.
Tidewater has substantially completed its 2019 capital program with the commissioning of three of the largest capital projects in the Corporation's history related to the Pioneer Pipeline, Pipestone Gas Plant and Pipestone Gas Storage Facility. The Pioneer Pipeline construction is complete and it is fully commissioned and delivering gas to TransAlta's generating units at Sundance and Keephills at contracted capacity rates. Tidewater's expansion of its Pipestone Gas Storage Facility is also operational with its 30-inch sales pipeline fully commissioned and sending gas to both Alliance and TC Energy. These three projects are a milestone in Tidewater's history and will contribute significantly to Tidewater's cash flow profile, as well as its customer and contract base.
Tidewater's focus over the next 6 to 12 months is to employ the related cashflow from our large capital projects and the Prince George Refinery acquisition towards deleveraging. Tidewater has decided to delay the expansion at Pipestone (Pipestone Plant 2) until further notice and plans to deploy limited growth capital in 2020 and focus on optimization and small capital projects with 2 to 3 year payouts. Tidewater is committed to reducing overall leverage through 2020 back to its historical levels with a target of 3.0x to 3.5x Net Debt to Adjusted EBITDA by the end of 2020.
Pipestone East Battery Acquisition and Construction
During the quarter, Tidewater announced it had entered into an agreement with Pipestone Energy to acquire a 100% working interest in the Pipestone East Battery which will be located approximately 24 km east of the Pipestone Gas Plant. The total cash consideration payable under the agreement is up to $30 million, which consisted of an initial cash payment of approximately $14 million to purchase existing infrastructure and facility equipment, with a commitment to fund up to $16 million to finalize the design, construction and commissioning of the Pipestone East Battery, which is expected to be completed over the next 12 to 18 months.
Concurrently with the Pipestone East Battery acquisition, Pipestone Energy entered into a 10-year take-or-pay agreement for compression, separation and liquids handling at the Pipestone East Battery and extended its existing 30 MMcf/day take-or-pay commitment at the Pipestone Gas Plant from a 5-year term to a 10-year term.
THIRD QUARTER 2019 EARNINGS CALL
In conjunction with Tidewater's third quarter 2019 earnings release, investors will have the opportunity to listen to Tidewater senior management review its third quarter results of fiscal 2019 via conference call on Wednesday November 13, 2019 at 11:00 am MDT.
To access the conference call by telephone, dial 647-427-7450 (local / international participant dial in) or 1-888-231-8191 (North American toll free participant dial in). A question and answer session for analysts will follow management's presentation.
A live audio webcast of the conference call will be available by following this link: https://event.on24.com/wcc/r/2129551/E76DFDC5C3C8C478FDCA5BE939FA6442 and will also be archived there for 90 days.
For those accessing the call via Cision's investor website, we suggest logging in at least 15 minutes prior to the start of the live event. For those dialing in, participants should ask to be joined into the Tidewater Midstream and Infrastructure Ltd. earnings call.
Tidewater is traded on the TSX under the symbol "TWM". Tidewater's business objective is to build a diversified midstream and infrastructure company in the North American natural gas and natural gas liquids ("NGL") and crude oil space. Its strategy is to profitably grow and create shareholder value through the acquisition and development of oil and gas infrastructure. Tidewater plans to achieve its business objective by providing customers with a full service, vertically integrated value chain through the acquisition and development of oil and gas infrastructure including: gas plants, pipelines, railcars, trucks, export terminals storage facilities and downstream facilities.
Additional information relating to Tidewater is available on SEDAR at www.sedar.com and at www.tidewatermidstream.com.
Advisory Regarding Forward-Looking Statements
Certain statements contained in this press release constitute forward-looking statements and forward-looking information (collectively, "forward-looking statements"). Such forward-looking statements relate to possible events, conditions or financial performance of the Corporation based on future economic conditions and courses of action. All statements other than statements of historical fact are forward-looking statements. The use of any words or phrases such as "seek", "anticipate", "plan", "continue", "estimate", "expect", "may", "will", "project", "predict", "potential", "targeting", "intend", "could", "might", "should", "believe", "will likely result", "are expected to", "will continue", "is anticipated", "believes", "estimated", "intends", "plans", "projection", "outlook" and similar expressions are intended to identify forward-looking statements. These statements involve known and unknown risks, assumptions, uncertainties and other factors that may cause actual results or events to differ materially from those anticipated in such forward-looking statements. The Corporation believes there is a reasonable basis for the expectations reflected in the forward-looking statements, however no assurance can be given that these expectations will prove to be correct and the forward-looking statements included in this press release should not be unduly relied upon by investors.
Specifically, this press release contains forward-looking statements relating to but not limited to:
-- projections regarding attainment of full capacity at Tidewater's Pipestone Gas Plant; -- anticipated increase to cash flows in a variety of commodity price environments and projected use of such cash flow to reduce the Corporation's leverage ratios; -- anticipated continued withdrawals from the Nisku A and Nisku F storage facilities throughout the upcoming winter; -- reliability and uptime deliverables from the Pipestone Gas Plant; -- projections regarding growth capital to be deployed by the Corporation in 2020; -- estimated timeline to finalize the design, construction and commissioning of the Pipestone East Battery; -- the Corporation's plans to satisfy debt obligations through net cash provided by operating activities and its credit facility; and -- future optionality, egress and contracting capacity at the Pipestone Gas Storage Facility and projected capital costs of such project.
Such forward-looking statements of information are based on a number of assumptions which may prove to be incorrect. In addition to other assumptions identified in this document, assumptions have been made regarding, among other things:
-- general economic and industry trends; -- oil and gas industry expectation and development activity levels and the geographic region of such activity; -- the success of the Corporation's operations; -- anticipated timelines and budgets being met in respect of the Corporation's projects and operations; -- future natural gas, crude oil and NGL prices; -- the Corporation's ability to obtain and retain qualified staff and equipment in a timely and cost-effective manner; -- assumptions regarding amount of operating costs to be incurred; -- that proposed transactions will close as expected; -- that counterparties will comply with contracts in a timely manner; -- that there are no unforeseen material costs relating to the facilities which are not recoverable from customers; -- distributable cash flow and net cash provided by operating activities consistent with expectations; -- the ability to obtain additional financing on satisfactory terms; -- the availability of capital to fund future capital requirements relating to existing assets and projects; -- the ability of Tidewater to successfully market its products; -- the Corporation's future debt levels and the ability of the Corporation to repay its debt when due; -- foreign currency, exchange and interest rates; -- that any third-party projects relating to the Corporation's growth projects will be sanctioned and completed as expected; -- the amount of future liabilities relating to lawsuits and environmental incidents and the availability of coverage under the Corporation's insurance policies; -- the ability of the Corporation to obtain equipment, services, supplies and personnel in a timely manner and at an acceptable cost to carry out its evaluations and activities; and -- that all required regulatory and environmental approvals for capital projects can be obtained on the necessary terms and in a timely manner.
Actual results achieved will vary from the information provided herein as a result of numerous known and unknown risks and uncertainties and other factors including but not limited to:
-- general economic, political, market and business conditions, including fluctuations in interest rates, foreign exchange rates and stock market volatility; -- activities of producers and customers and overall industry activity levels; -- the regulatory environment and decisions and First Nations and landowner consultation requirements; -- that receipt of third party, regulatory, environmental and governmental approvals and consents relating to the Prince George Refinery acquisition and Tidewater's other capital projects can be obtained on the necessary terms and in a timely manner; -- the ability to secure land and water, including obtaining and maintaining land access rights; -- operational matters, including potential hazards inherent in the Corporation's operations and the effectiveness of health, safety, environmental and integrity programs; -- fluctuations in commodity prices, inventory levels and supply/demand trends; -- actions by governmental authorities, including changes in government regulation, tariffs and taxation; -- changes in operating and capital costs, including fluctuations in input costs; -- changes in environmental and other regulations; -- activities of other facility owners, including access to third-party facilities; -- competition for, among other things, business, capital, acquisition opportunities, requests for proposals, materials, equipment, labour and skilled personnel; -- environmental risks and hazards, including risks inherent in the transportation of NGLs which may create liabilities to the Corporation in excess of the Corporation's insurance coverage, if any; -- failure of third parties' reviews, reports and projections to be accurate; -- the possibility that the Corporation fails to formalize agreements with counterparties; -- non-performance or default by counterparties to agreements which the Corporation or one or more of its subsidiaries has entered into in respect of its business; -- actions by joint venture partners or other partners which hold interests in certain of the Corporation's assets; -- construction and engineering variables associated with capital projects, including the availability of contractors, engineering and construction services, accuracy of estimates and schedules, and the performance of contractors; -- the availability of capital on acceptable terms; -- changes in the credit-worthiness of counterparties; -- adverse claims made in respect of the Corporation's properties or assets; -- changes in the political environment and public opinion; -- risks and liabilities associated with the transportation of dangerous goods; -- risks and liabilities resulting from derailments; -- competitive action by other companies; -- effects of weather conditions; -- reputational risks; -- reliance on key personnel; -- technology and security risks, including cybersecurity; -- potential losses which would stem from any disruptions in production, including work stoppages or other labour difficulties, or disruptions in the transportation network on which the Corporation is reliant; -- technical and processing problems, including the availability of equipment and access to properties; -- changes in gas composition; and -- failure to realize the anticipated benefits of recently completed acquisitions.
The foregoing lists are not exhaustive. Additional information on these and other factors which could affect the Corporation's operations or financial results are included in the Corporation's most recent AIF and in other documents on file with the Canadian Securities regulatory authorities.
The above summary of assumptions and risks related to forward-looking statements in this press release is intended to provide shareholders and potential investors with a more complete perspective on Tidewater's current and future operations and such information may not be appropriate for other purposes. There is no representation by Tidewater that actual results achieved will be the same in whole or in part as those referenced in the forward-looking statements and Tidewater does not undertake any obligation to update publicly or to revise any of the included forward-looking statements, whether as a result of new information, future events or otherwise, except as may be required by applicable securities law.
Any financial outlook or future-oriented financial information, as defined by applicable securities legislation, has been approved by management of Tidewater as of May 13, 2019. A financial outlook or future-oriented financial information is provided for the purpose of providing information about management's current expectations and goals relating to the future of Tidewater. Readers are cautioned that reliance on such information may not be appropriate for other purposes. The purpose of the future-oriented financial information contained herein including but not limited to future periods of net income and Adjusted EBITDA is to assist investors, shareholders, and others in understanding certain financial metrics relating to expected future financial results for the purpose of evaluating the performance of Tidewater's business for future periods. This information may not be appropriate for other purposes. The results and conclusions of these assessments, along with the known and unknown risks, uncertainties and other factors referred to above, could impact Tidewater's estimates and the information related to such future periods contained herein and any such impact could be material.
This news release refers to "Adjusted EBITDA" which do not have any standardized meaning prescribed by generally accepted accounting principles in Canada ("GAAP"). Adjusted EBITDA is calculated as income or loss before interest, taxes, depreciation, share-based compensation, unrealized gains/losses, non-cash items, transaction costs and items that are considered non-recurring in nature.
Tidewater Management believes that Adjusted EBITDA provide useful information to investors as they provide an indication of results generated from the Corporation's operating activities prior to financing, taxation and non-recurring/non-cash impairment charges occurring outside the normal course of business. Management utilizes Adjusted EBITDA to set objectives and as a key performance indicator of the Corporation's success. In addition to its use by Management, Tidewater also believes Adjusted EBITDA is a measure widely used by security analysts, investors and others to evaluate the financial performance of the Corporation and other companies in the midstream industry. Investors should be cautioned that Adjusted EBITDA should not be construed as alternatives to earnings, cash flow from operating activities or other measures of financial results determined in accordance with GAAP as an indicator of the Corporation's performance and may not be comparable to companies with similar calculations.
"Distributable cash flow" is a non-GAAP financial measure and is calculated as net cash used in operating activities before changes in non-cash working capital plus transaction costs, non-recurring expenses and after any expenditures that use cash from operations. Changes in non-cash working capital are excluded from the determination of distributable cash flow because they are primarily the result of seasonal fluctuations or other temporary changes and are generally funded with short term debt or cash flows from operating activities. Deducted from distributable cash flow are maintenance capital expenditures, including turnarounds as they are ongoing recurring expenditures. Transaction costs are added back as they vary significantly quarter to quarter based on the Corporation's acquisition and disposition activity. It also excludes non-recurring transactions that do not reflect Tidewater's ongoing operations. Distributable cash flow also excludes cash outflows related to the purchase of linefill on pipelines and tank bottoms for storage tanks, whereby Tidewater transports oil on third-party pipelines for which it is required to supply linefill or tank bottoms for storage. As these pipelines/storage tanks are owned by third parties, the linefill is not considered to be a component of the Corporation's property and equipment. The linefill is classified as a non-current inventory asset and an operating cash outflow, however linefill is not a principal revenue-producing activity and therefore is considered an investment to gain access as a shipper on the pipeline.
Management of the Corporation believes distributable cash flow is a useful metric for investors when assessing the amount of cash flow generated from normal operations and to evaluate the adequacy of internally generated cash flow to fund dividends.
For more information with respect to financial measures which have not been defined by GAAP, including reconciliations to the closest comparable GAAP measure, see the "Non-GAAP Measures" section of Tidewater's most recent MD&A which is available on SEDAR.
SOURCE Tidewater Midstream and Infrastructure Ltd.
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SOURCE: Tidewater Midstream and Infrastructure Ltd.
Joel MacLeod, Chairman, President and CEO, Tidewater Midstream & Infrastructure Ltd., Phone: 587.475.0210, Email: firstname.lastname@example.org