powerpoint presentation€¦ · · 2017-03-31readers are cautioned not to place undue reliance on...
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Forward Looking Information
Advisory
In the interests of providing Tidewater Midstream and Infrastructure Ltd. (“Tidewater” or the “Corporation”) shareholders andpotential investors with information regarding Tidewater, including management’s assessment of future plans and operations relating to the Corporation, this document contains certain statements and information that are forward-looking statements or information within the meaning of applicable securities legislation, and which are collectively referred to herein as “forward-looking statements”. Forward-looking statements in this document include, but are not limited to statements and tables (collectively “statements”) with respect to: the strategic acquisition and concurrent equity financing; subsequent acquisitions and strategies for acquisitions, capital projects and expenditures; strategic initiatives; anticipated producer activity and industry trends; and anticipated performance. Readers are cautioned not to place undue reliance on forward-looking statements, as there can be no assurance that the plans, intentions or expectations upon which they are based will occur. By their nature, forward-looking statements involve numerous assumptions, as well as known and unknown risks and uncertainties, both general and specific, that contribute to the possibility that the predictions, forecasts, projections and other forward-looking statements will not occur and which may cause Tidewater’s actual performance and financial results in future periods to differ materially from any estimates or projections of future performance or results expressed or implied by the forward-looking statements. These assumptions, risks and uncertainties include, among other things: receipt of third party, regulatory and governmental approvals and consents in respect of the strategic acquisition and concurrent equity financing; completion of the strategic acquisition and concurrent equity financing; Tidewater’s ability to successfully implement strategic initiatives and whether such initiatives yield the expected benefits; future operating results; fluctuations in the supply and demand for natural gas, NGLs, and iso-octane; assumptions regarding commodity prices; activities of producers, competitors and others; the weather; assumptions around construction schedules and costs, including the availability and cost of materials and service providers; fluctuations in currency and interest rates; credit risks; marketing margins; potential disruption or unexpected technical difficulties in developing new facilities or projects; unexpected cost increases or technical difficulties in constructing or modifying processing facilities; Tidewater’s ability to generate sufficient cash flow from operations to meet its current and future obligations; its ability to access external sources of debt and equity capital; changes in laws or regulations or the interpretations of such laws or regulations; political and economic conditions; and other risks and uncertainties described from time to time in the reports and filings made with securities regulatory authorities by Tidewater.
Readers are cautioned that the foregoing list of important factors is not exhaustive. The forward-looking statements contained in this document are made as of the date of this document or the dates specifically referenced herein. For additional information please refer to Tidewater’s public filings available on SEDAR at www.sedar.com. All forward-looking statements contained in thisdocument are expressly qualified by this cautionary statement.
Any financial outlook or future-oriented financial information, as defined by applicable securities legislation, has been approved by management of Tidewater as of March 29, 2017. Such 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. Readersare cautioned that reliance on such information may not be appropriate for other purposes.
Non-GAAP Financial Measures: This presentation refers to “EBITDA” and “cash available for distribution” (CAFD), which do not have any standardized meaning prescribed by generally accepted accounting principles in Canada (“GAAP”). We define EBITDA as meansearnings before interest, taxes, depreciation and amortization. We define “cash available for distribution” (CAFD) as the amount of cash generated from operations, before changes in working capital and after deducting sustaining capital expenditures, scheduledprincipal repayments of debt and distributions to non-controlling interests.
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Track Record of Success
➢ Previous two companies generated 20x returns for shareholders (Predator Midstream Ltd. and Predator Oil Ltd.)
High Growth, Pure Play NGL Infrastructure Business
➢ Pursuing Canadian natural gas liquids (“NGLs”) and natural gas market opportunities through the acquisition and optimization of strategic midstream, pipeline, storage, rail, downstream, and export assets
➢ Capitalizing on Management’s strong producer and downstream market access relationships, Tidewater can guarantee producers improved pricing for their NGLs
➢ > 10 acquisitions announced/completed since IPO and continue to see opportunity to purchase key midstream assets in strategic locations at deeply discounted valuations
➢ Q3 to Q4 2016 EBITDA/share growth of ~25% with continued EBITDA/share growth through 2018
➢ EBITDA increased from zero at IPO to current run rate of ~$56 million with visibility to over $80 million in the next 18-24 months while maintaining a strong balance sheet with Debt to EBITDA of 1-2x
➢ Current net debt of ~$25 MM with recently increased $180 MM credit facility
Established three core areas in strategic locations (Deep Basin, Montney and Edmonton)
➢ Deep Basin currently Tidewater’s largest core area where activity is at all time highs with 370 wells being licensed within 60 mile radius of Tidewater’s largest deep cut gas plant (BRC) in past 6 months. Tidewater scoping an expansion of the gas processing facility due to demand
➢ Edmonton assets continue to increase cashflow with the successful reactivation of the Fort Saskatchewan Ethane Extraction Plant and the build out of Tidewater’s first rail facility
➢ Tidewater continues to expand its Montney core area with a recent BC acquisition and its Pipestone Montney infrastructure/egress hub and is currently scoping its Pipestone Sour Gas Plant
Proven Capital Project Execution
➢ 10,000 bbl/day fractionation facility and relocation of turbo expander to BRC remain on-time and on-budget on industry leading timeline of 8 months and capital cost of $25MM for 10,000 bbl/day fractionation facility
➢ Phase I of Pipestone Montney infrastructure/egress hub on-time and on-budget with execution of initial injections. Tidewater continues to advance toward a final investment decision on Phase II of the project and has received significant interest from several investment grade counterparties to contract available capacity on a five-year basis, further diversifying Tidewater’s customer base
➢ Scoping Montney Pipestone sour gas plant with significant producer support
Continue to See Significant Acquisition, Organic Growth Opportunities and Synergies with Acquired Assets
Tidewater Summary
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Tidewater is a High Growth Midstream Company
NGL Connectivity Strategy
Acquire Strategic
Contracted
Infrastructure
Own key NGL/gas infrastructure and
gas plants with proximity to multiple
transportation options, coupled with
take-or-pay and/or reserve dedication
agreements
Opportunities to acquire top-tier
midstream assets in strategic locations at
discounted valuations. Ongoing review of
new opportunities to further enhance the
NGL Connectivity Strategy
Optimize Through
Organic
Investments
Enable Tidewater to own a strategic
integrated value chain from well head
to end market and/or tidewater
Opportunities to invest organically to fill
gaps in existing network
Significant opportunities within acquired
assets to continue to generate incremental
EBITDA at > 20% IRR
Increase
Capabilities of
Infrastructure
Increase third party throughput and/or
improve liquids capture/pricing of
NGLs for all related parties
Nearing completion of construction of
10,000 bbl/d fractionation facility for $25-
$27MM, generating $6-$7MM of annualized
EBITDA in Q2 2017
Relocation of existing acquired and idled
turbo expander and now scoping expansion
at BRC
Commence construction of first NGL rail
loading facility
Focused on building out large scale
Montney infrastructure and related egress
Enhance Logistics
Network & Market
Access
Infrastructure
Various logistics infrastructure
including rail, pipelines and trucking
Various port and pipeline
infrastructure to get us to export
markets
Improve cost structure and realized pricing
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Maintaining a low-risk and highly flexible
capital structure
Current net debt ~$25 million on $180
million dollar credit facility
Minimal debt vs. comparable average of
4.5x, payout ratio of ~25% vs. average of
~70%
m
Protection obtained from vendors,
contracts, competitive positioning to
ensure go forward cash flow
> 60% of EBITDA backed by take-or-pay
contracts, long term agreements and/or
reserve dedications
Continue to increase long term contracts
and diversify to customers with strong
balance sheets
Taking advantage of ongoing pipeline of
acquisition and organic growth
opportunities to increase per share value
via creativity of management team
Since the April 2015 IPO, EBITDA increased
from zero to current proforma EBITDA of
~$56 million
Visibility to over $80 million in the next 18-
24 months while maintaining a strong
balance sheet with Debt to EBITDA of 1-2x
through the execution and commissioning
of capital program
Currently trading at an overly large
discount to the comparables given more
conservative capital structure and more
easily achieved relative growth rates
EV/EBITDA multiple of 6.5x vs. peer
average of 12.0x
... That Currently Provides a Low-Risk Attractive Investment
Opportunity
Very Conservative
Capital Structure
Underlying Stable
Cash Flow
Producing
Infrastructure
Assets
Growing EBITDA,
CFPS and Share
Value
Relatively
Undervalued versus
Comparable
Companies
Attractive Investment Opportunity
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Overview of Deep Basin Assets
Deep Basin Processing Facilities & Pipelines
Brazeau River Complex continues to be Tidewater’s core asset where activity is at all-time highs with 370 wells being licensed in last 6 months
Tidewater recently completed the acquisition of the remaining 37% working interest in the Brazeau River Complex (“BRC”) gas plant, the remaining 60% working interest in 105 km of gas gathering pipelines connected to the BRC and the remaining working interest in three proven natural gas storage reservoirs for $30 million
Tidewater also recently acquired a ~50% working interest in 150 km of gas gathering pipelines connected to the BRC
Tidewater has entered into a second processing agreement inprinciple with a customer who is a well capitalized, medium sized producer on a 10 year basis for the majority of the remaining capacity of the BRC
➢ Tidewater is also marketing all related NGLs for the producer, consistent with Tidewater’s goal of working with producers to achieve improved NGL netback pricing, while also diversifying its customer base and strengthening its related contracts
➢ Includes a 3-4 well commitment and reserve dedication on 55,000 acres of highly prospective lands
Tidewater near completion on 10,000 bbl/day fractionation facility at the BRC immediately at a significantly lower cost than it’s peers and on a industry leading timeline and is on-time and on-budget
➢ Fractionation facility is expected to cost $25-$27 million and generate $6-$7 million of annualized EBITDA once commissioned in Q2 2017
Tidewater is working on multiple egress/takeaway options on both natural gas and NGLs in and around the BRC to tie producers into Tidewater’s own network at Edmonton
Tidewater now scoping an expansion at BRC due to demand
Tidewater recently expanded Alder Flats by 10 MMcf/day and Alder Flats is currently processing all-time high amounts of natural gas and NGLs
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Overview of Edmonton Assets
Edmonton Processing Facilities & Pipelines
Tidewater has over 500 km of key pipelines and valuable rights of ways at Edmonton, 600 acres of heavy industrial land at Edmonton/Fort Saskatchewan, and 3 key extraction plant licenses
Edmonton assets provide egress/takeaway options for natural gas and NGL production throughout the Deep Basin and Tidewater is now tied into some of the largest industrial consumers of natural gas in Western Canada
Over the next 2 to 3 years, Tidewater plans to build out its Edmonton Energy Hub on its 600 acres of heavy industrial land and improve connectivity to major hubs at Edmonton
➢ Includes the potential for propylene and polypropylene production and/or iso-octane production as Tidewater has received several expressions of interest from various off-take and joint venture parties who Tidewater management has worked with in the past for these products
Tidewater is currently railing in NGLs from refiners through a third party rail facility and trucking the NGLs to the BRC. Tidewater anticipates a significant improvement in margins by eliminating third party rail transloading fees, eliminating trucking costs and reduced pipeline tariffs at the Acheson facility
Fort Saskatchewan Ethane Extraction plant successfully reactivated and online and on-time and on-budget at > 100% IRR
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Overview of Montney Assets
Montney Processing Facilities & Pipelines
Tidewater continues to receive interest to expand it’s natural gas processing, NGL Marketing and various egress options at its core Montney area
Tidewater finished construction of phase one of its TransCanada and Alliance connected infrastructure and related natural gas liquids hub and natural gas storage project on-time and on-budget and has commenced injections
Tidewater has received significant support from multiple producers in the Pipestone area to license and construct a 50-100 MMcf/d sour gas plant which would be backed by take-or-pay contracts and/or reserve dedications
Tidewater has received multiple term sheets from investment grade counterparties and potential financial partners to develop a large scale Montney infrastructure/egress hub near Grande Prairie
Tidewater closed NEBC Montney acquisition where it acquired 40% in an operating 30 MMcf/day sour plant in the heart of the Montney at Parkland as well as ~1,000 acres of surface land
➢ Tidewater has received significant producer support of other organic capital projects including material egress options for producers in the Deep Basin and Montney and expansion into the Montney in British Columbia. Over the next 2 to 3 years, Tidewater will attempt to tie in new British Columbia Montney NGL and station 2 natural gas infrastructure into its existing Pipestone Alliance and TransCanada connected Montney infrastructure
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5
5
6
6
6
6
9
11
18
18
20
25
65
90
Producer #13
Producer #12
Producer #11
Producer #10
Producer #9
Producer #8
Producer #7
Producer #6
Producer #5
Producer #4
Producer #3
Producer #2
TCPL Extraction
Producer #1
Tidewater has a Solid Infrastructure Business With a Strengthening
Customer Base
> 60% of EBITDA backed by take-or-pay contracts, long term agreements and/or reserve dedications with > 50 customers
Interest from several new investment grade counter parties to backstop Tidewater infrastructure
Tidewater continues to work hard to strengthen customer base and contracts
Top Producers Utilizing the Core Facilities
Take-or-pay Reserve DedicationTake or Pay:
Years Remaining
Yes Yes 2
Yes No 10+
Yes Yes n.a.
Yes No 1
Yes Yes 5
Yes No 1
No Yes n.a.
No Yes n.a.
Yes Yes 4
Yes No 2
Yes No 5
Yes No 10
Yes Yes 7
Yes No 5-10
Core Facility Throughput (MMcf/d)
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EBITDA Growth Since Inception
Focused on per share EBITDA growth with 25% per share EBITDA growth from Q3 2016 to Q4 2016
Research analysts forecasting further EBITDA growth through 2017
EBITDA Growth1
($0.2)
$5.0
$7.1 $7.3
$9.3 $9.5
$11.8
$13.9 $14.7
$16.2
$17.4
($0.02)
–
$0.02
$0.04
$0.06
$0.08
($5.0)
–
$5.0
$10.0
$15.0
$20.0
2015-Q2 2015-Q3 2015-Q4 2016-Q1 2016-Q2 2016-Q3 2016-Q4 2017-Q1 2017-Q2 2017-Q3 2017-Q4
EBIT
DA
per S
hare
($/sh.)
EBIT
DA($MM)
EBITDA EBITDA per Share
1 Forward looking EBITDA estimates as per FactSet street consensus as at Mar. 29, 2017.
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$54
-
$24 $24 $26
$28 $28
$42 $42
$46 $49
$54 $54 $56
$61
$69 $71 $71
$87
($5)
($25)
($17)
($12)
$20
$25
$55
($23)($21)
$20
$50
($15)
($2) ($2)
$38
$44
$44
$98
($30)
($20)
($10)
$0
$10
$20
$30
$40
$50
$60
$70
$80
$90
$100
IPO BRCAcquisition &
Financing
PipelineAcquisition
Peace RiverArch Gas
PlantAcquisition
Gas Plant &Propane
Acquisitions
EdmontonArea
InfrastrucutreAcquisition
AltaGasAcquisition
$80.5 MMFinancing
AchesonPlant, Landand PipelineAcquisition
and RailFacility
BRC Infra.Acquisition
RemainingBRC Interest,
GatheringPipelines, NatGas Storage
$69 MMFinancing
NEBCProcessing
Plant / NGLTrucking
Q4 ProcessingAgreement /
PembinaRestrictionsLifted / Fort
SaskatchewanReactivation
FractionationFacility &
Relocation ofTurbo
Expander
TransCanadaand AllianceConnected
Infrastructure
Total RemainingCapital OverNext 12-24
Months
C$ M
illions
Positioned for Organic Growth Outperformance
Balance sheet is well positioned to execute on un-risked organic growth opportunities
Potential to add significant shareholder value over the next 2 years
… While maintaining a low risk capital structure with minimal debt
EBITDA Growth
EBITDA from previously announced acquisitions
Total EBITDA
Net Debt
Pro Forma EBITDA
Capital Spent/
Required Capital$180 $8 $12 $22 $10 $87 n.a. $17 n.a. $2 $40 $6 $442
Current TWM Status
$80-$150
1 Cash flow for forward looking net debt calculated as EBITDA less growth capex, maintenance capex and dividends.
1
$15 $30 $13
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Tidewater Q4 2016-2017 Capital Budget Review
Up to an additional $80-$150 MM to be spent over the next 18-24 months generating similar returns
Tidewater Capital Projects
Project Capital EBITDA Description
Acheson Facility and
Rail Terminal$17 MM $4 MM
Acquisition of sour gas processing plant ($11 MM) and construction of operated rail facility ($6 MM)
BRC Infrastructure
Acquisition$15 MM $3 MM
Acquisition of network of gathering lines connected to the BRC and Windfall processing facilities, related E&P assets and working interest in three EOR/storage pools
Remaining BRC Interest,
Gathering Pipelines,
Natural Gas Storage
$30 MM $4 MM Acquisition of remaining working interest in
BRC facility and related upstream assets
Fractionation Facility $25-$27 MM $6-7 MM
10,000 bbl/d fractionation facility at the BRC backed by existing throughput commitments and take-or-pay contracts. Capable of producing premium HD2 and HD5 propane. On-time and o- budget on industry leading timeline of 8 months
Relocation of Deep-cut
Turbo Expander$12-$15 MM $3 MM
Relocate the currently idled 40 MMcf/d deep-cut turbo expander from the Edmonton area assets acquired in January 2016. On-time and on-budget.
TransCanada and Alliance
Connected Infrastructure$6 MM $2 MM
Completed construction of Phase 1 of TransCanada and Alliance connected infrastructure and related NGL hub and natural gas storage project on-time and on-budget
Total $105-$110 MM $22-$23 MM
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Stock Symbol TSXV: TWM
Common Shares Outstanding ~328 million
Insider Ownership (Fully Diluted) ~5.0%
Market Capitalization1 $450 million
Net Debt $25 million
Enterprise Value $475 million
Total Midstream Processing
Capacity (gross/net) and Length of
Pipelines (gross/net)
~1 Bcf/day / ~650 MMcf/day
~3,500 km / ~2,500 km
Replacement Value of Midstream
Assets> $1.5 billion
Annual Dividend $0.04/sh.
Current Yield1 ~2.9%
Tidewater Corporate Profile
1 As at Mar. 29, 2017.
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Tidewater Midstream Trading Comparables
Source: Company reports and Bloomberg. Estimates based on consensus equity research; management estimate for 2017E EBITDA.1 As at Mar. 29, 2017.2 Includes options and warrants using the Treasury Method.3 EV includes non-recourse debt and preferred shares. TWM net debt includes produces from assumed exercise of over-allotment option.4 Based on consensus equity research estimates. TWM 2017E EBITDA based on management estimates.5 Cash available for distribution (“CAFD”) defined as cash from operations less maintenance capex, preferred dividend, non-controlling interest
and amortization of debt payments.6 Total capitalization value based on book value of equity plus net debt.
Tidewater is trading at a large discount to comparables despite a more conservative capital structure
Tidewater’s EV/EBITDA multiple of 6.5x trades at a large discount to its peer mean of 12.0x EV/EBITDA
Tidewater Midstream Trading Comparables
18E / 17E Payout Net Debt /
Share Market Enterprise EBITDA EV / EBITDA Ratio Dividend CAFD Yield EBITDA Debt/ Credit
Company Price1
Cap.2
Value2,3
Growth4
2018E4
2018E4 Yield 2018E
4,52018E
4Total Cap.
6 Rating
($/Sh.) ($MM) ($MM) (%) (x) (%) (%) (%) (x) (%)
Enbridge Income Fund Holdings Inc. $33.20 $25,223 $39,690 10% 13.3x 74% 6.2% 8.4% 5.4x 51% Baa2
Pembina Pipeline Corp. $42.46 $17,180 $22,698 20% 12.4x 56% 4.5% 8.1% 2.6x 36% BBB
Inter Pipeline Ltd. $28.37 $10,463 $16,248 3% 13.6x 65% 5.7% 8.8% 5.1x 65% BBB+
AltaGas Ltd. $31.04 $5,229 $10,117 40% 9.5x 95% 6.8% 7.1% 7.1x 44% BBB
Keyera Corp. $39.15 $7,285 $9,001 17% 10.9x 47% 4.1% 8.7% 2.6x 48% n.a.
Veresen Inc. $14.64 $4,592 $7,972 14% 12.3x 82% 6.8% 8.4% 4.3x 57% BBB
Mean 18% 12.0x 70% 5.7% 8.2% 4.5x 50%
Median 16% 12.4x 70% 5.9% 8.4% 4.7x 50%
Tidewater Midstream $1.37 $450 $475 14% 6.5x 23% 2.9% 12.5% 0.3x 6% n.a.