TIDEWATER RENEWABLES LTD. ANNOUNCES SECOND QUARTER 2024 RESULTS
SECOND QUARTER HIGHLIGHTS
- Net income attributable to shareholders was
$4.9 million during the second quarter of 2024, compared to net income of$2.7 million in Q2 2023. - During the second quarter of 2024,
Tidewater Renewables generated record Adjusted EBITDA(1) of$29.6 million , an increase of 17% from the previous quarter. - Net cash provided by operating activities totaled
$32.5 million and the Corporation generated record distributable cash flow(1) of$20.3 million in the second quarter of 2024. - Tidewater Renewables' second quarter 2024 results were driven by the improvements in throughput and reliability at the
Renewable Diesel & Renewable Hydrogen Complex ("HDRD"). During the second quarter of 2024, theHDRD Complex averaged daily throughput of 2,925 bbl/d, representing a 98% utilization rate. - During the second quarter of 2024, Tidewater Renewables continued to make meaningful progress on the front-end engineering design ("FEED") of its proposed 6,500 bbl/d sustainable aviation fuel ("SAF") project. The SAF project remains subject to a final investment decision which is expected in 2025.
____________________________________ |
|
(1) |
Non-GAAP financial measure. See the "Non-GAAP and Other Financial Measures" in this press release and the Corporation's MD&A for information on each non-GAAP financial measure or ratio. |
SUBSEQUENT EVENTS
- The Special Committees and Board of Directors of both Tidewater Renewables and Tidewater Midstream ("the Parties") have approved entering into a related party purchase and sale agreement, whereby Tidewater Midstream will acquire from
Tidewater Renewables its canola co-processing infrastructure, the fluid catalytic cracking co-processing infrastructure, working interests in various otherPrince George refinery units, and a natural gas storage facility co-located at TidewaterMidstream's Brazeau River Complex . Consideration for this related party transaction will consist of a cash payment by Tidewater Midstream of$129.7 million , and a commitment to purchase a minimum of$80.7 million for BC LCFS credits, as they are produced byTidewater Renewables , over the next nine months, if theHDRD Complex continues to operate at over 90% utilization (the "Proposed Transaction"). The Proposed Transaction is expected to close during the third quarter of 2024, pending regulatory and lender approvals. The Corporation will use the net proceeds from the Proposed Transaction to repay amounts on its Senior Credit Facility, which will provide an immediate improvement toTidewater Renewables' liquidity issues and leverage profile and a reduction to cash interest costs going forward. - On
August 14, 2024 , the Corporation entered into a definitive purchase and sale agreement for the sale its used cooking oil feedstock assets for$10.5 million , subject to certain adjustments prior to and following the closing of the transaction. The sale is expected to close in September, 2024. Net proceeds of this transaction will be used to repay outstanding debt balances.
Selected financial and operating information are outlined below and should be read with the Corporation's condensed interim consolidated financial statements and related MD&A for the three and six months ended
Financial Highlights
|
Three months ended |
Six months ended |
||||||
(in thousands of Canadian dollars except |
2024 |
2023 |
2024 |
2023 |
||||
Revenue |
$ |
147,238 |
$ |
13,163 |
$ |
258,477 |
$ |
33,059 |
Net income (loss) attributable to |
$ |
4,935 |
$ |
2,654 |
$ |
12,655 |
$ |
(18,823) |
Net income (loss) attributable to per share – basic |
$ |
0.14 |
$ |
0.08 |
$ |
0.36 |
$ |
(0.54) |
Net income (loss) attributable to per share –diluted |
$ |
0.14 |
$ |
0.07 |
$ |
0.35 |
$ |
(0.54) |
Adjusted EBITDA (1) |
$ |
29,570 |
$ |
8,067 |
$ |
54,840 |
$ |
20,702 |
Net cash provided by (used in) operating activities |
$ |
32,494 |
$ |
(7,348) |
$ |
72,952 |
$ |
4,101 |
Distributable cash flow (1) |
$ |
20,326 |
$ |
(7,877) |
$ |
33,107 |
$ |
(2,604) |
Distributable cash flow per share – basic (1) |
$ |
0.58 |
$ |
(0.23) |
$ |
0.95 |
$ |
(0.07) |
Distributable cash flow per share – diluted |
$ |
0.56 |
$ |
(0.22) |
$ |
0.91 |
$ |
(0.07) |
Total common shares outstanding (000s) |
|
38,868 |
|
34,724 |
|
38,868 |
|
34,724 |
Total assets |
$ |
1,073,881 |
$ |
1,032,896 |
$ |
1,073,881 |
$ |
1,032,896 |
Net debt (1) |
$ |
316,387 |
$ |
293,088 |
$ |
316,387 |
$ |
293,088 |
(1) Refer to "Non-GAAP and Other Financial Measures". |
OUTLOOK AND CORPORATE UPDATE
In line with its objectives,
RELATED PARTY ASSET SALES AND FORWARD CREDIT SALES
During the first and second quarters of 2024,
In the long-term, the Corporation believes that the combination of supply demand fundamentals forcing the shut-in of high-cost US renewable fuel production, tightening California LCFS compliance obligations, and tightening BC LCFS compliance obligations is expected to ease the pressure on BC LCFS credit prices. In addition, cold weather diesel specifications are expected to limit physical imports of renewable diesel in the fourth quarter of 2024 and first quarter of 2025.
However, the current market situation has created a liquidity issue for the Corporation.
As the Corporation had no forward sales contracted for BC LCFS credits expected to be generated from renewable diesel sales during the third quarter of 2024, management has been evaluating alternative liquidity sources for the Corporation, including the Proposed Transaction, while the sector awaits a longer-term solution. In connection with the Proposed Transaction, the Corporation's Board of Directors established an independent special committee (the "Renewables Special Committee") to evaluate the Proposed Transaction and negotiate the terms thereof with the independent special committee established by the Board of Directors of Tidewater Midstream (the "Midstream Special Committee") and to assess alternative liquidity sources. The Renewables Special Committee has retained a financial advisor and legal counsel in connection with the Proposed Transaction.
The Special Committees and Board of Directors of both
The assets to be divested include
The Divestiture Assets generated annual Adjusted EBITDA(1) of
The completion of the Proposed Transaction is contingent upon
_____________________________ |
(1) Non-GAAP financial measure. See the "Non-GAAP Measures" section of this MD&A |
CONFERENCE CALL
In conjunction with the earnings release, investors will have the opportunity to listen to
To join the conference call without operator assistance, please register here approximately 5 minutes in advance to receive an automated call-back when the session begins.
Alternatively, you can dial 800-836-8184 (toll-free in
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
A live audio webcast of the conference call will be available here, and archived for 90 days.
ABOUT
NON-GAAP AND OTHER FINANCIAL MEASURES
Throughout this press release and in other materials disclosed by the Corporation,
Non-GAAP Financial Measures
The non-GAAP financial measures used by the Corporation are Adjusted EBITDA and distributable cash flow.
Adjusted EBITDA
Adjusted EBITDA is calculated as income (or loss) before finance costs, taxes, depreciation, share-based compensation, unrealized gains and losses on derivative contracts, transaction costs, and other items considered non-recurring in nature, plus the Corporation's proportionate share of Adjusted EBITDA in its equity investment.
Adjusted EBITDA is used by management to set objectives, make operating and capital investment decisions, monitor debt covenants and assess performance. The Corporation issues guidance on Adjusted EBITDA and believes that it is useful for analysts and investors to assess the performance of the Corporation as seen from management's perspective. Investors should be cautioned that Adjusted EBITDA should not be construed as an alternative to net income, net cash provided by operating activities or other measures of financial results determined in accordance with GAAP. Investors should also be cautioned that Adjusted EBITDA as used by the Corporation may not be comparable to financial measures used by other companies with similar calculations.
The following table reconciles net income (loss), the nearest GAAP measure, to Adjusted EBITDA:
|
Three months ended |
Six months ended |
|||||||
(in thousands of Canadian dollars) |
2024 |
2023 |
2024 |
2023 |
|||||
Net income (loss) |
$ |
4,935 |
$ |
2,654 |
$ |
12,655 |
$ |
(18,823) |
|
Deferred income tax expense (recovery) |
|
1,557 |
|
1,105 |
|
3,841 |
|
(6,557) |
|
Depreciation |
|
9,334 |
|
5,264 |
|
18,898 |
|
10,188 |
|
Finance costs and other |
|
10,304 |
|
4,542 |
|
19,655 |
|
9,949 |
|
Share-based compensation |
|
(1,241) |
|
1,635 |
|
(113) |
|
3,355 |
|
Unrealized loss (gain) on derivative |
|
5,234 |
|
(9,195) |
|
(317) |
|
27,840 |
|
Gain on warrant liability revaluation |
|
(460) |
|
(720) |
|
(945) |
|
(7,970) |
|
Transaction costs |
|
- |
|
21 |
|
5 |
|
101 |
|
Non-recurring transactions |
|
1,152 |
|
3,927 |
|
2,667 |
|
4,264 |
|
Adjustment to share of profit from equity accounted investments |
|
(1,245) |
|
(1,166) |
|
(1,506) |
|
(1,645) |
|
Adjusted EBITDA |
$ |
29,570 |
$ |
8,067 |
$ |
54,840 |
$ |
20,702 |
|
Distributable Cash Flow
Distributable cash flow is calculated as net cash provided by (used in) operating activities before changes in non-cash working capital plus cash distributions from investments, 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. Maintenance capital expenditures, including turnarounds, are deducted from distributable cash flow as they are ongoing recurring expenditures which are funded from operating cash flows. Transaction costs are added back as they vary significantly quarter to quarter based on the Corporation's acquisition and disposition activity. Distributable cash flow also excludes non-recurring transactions that do not reflect
Management believes distributable cash flow is a useful metric for investors when assessing the amount of cash flow generated from the Corporation's normal operations. These cash flows are relevant to the Corporation's ability to internally fund growth projects, alter its capital structure, or distribute returns to shareholders.
The following table reconciles net cash provided by operating activities, the nearest GAAP measure, to distributable cash flow:
|
Three months ended |
Six months ended |
||||||
(in thousands of Canadian dollars) |
2024 |
2023 |
2024 |
2023 |
||||
Net cash provided by (used in) operating |
$ |
32,494 |
$ |
(7,348) |
$ |
72,952 |
$ |
4,101 |
Add (deduct): |
|
|
|
|
|
|
|
|
Changes in non-cash working capital |
|
(2,930) |
|
11,037 |
|
(21,253) |
|
10,749 |
Transaction costs |
|
- |
|
21 |
|
5 |
|
101 |
Non-recurring transactions |
|
1,152 |
|
3,927 |
|
2,667 |
|
4,264 |
Interest and financing charges |
|
(7,842) |
|
(3,564) |
|
(16,645) |
|
(6,568) |
Payment of lease liabilities |
|
(1,763) |
|
(1,603) |
|
(3,502) |
|
(3,216) |
Maintenance capital |
|
(785) |
|
(10,347) |
|
(1,117) |
|
(12,035) |
Distributable cash flow |
$ |
20,326 |
$ |
(7,877) |
$ |
33,107 |
$ |
(2,604) |
Non-GAAP Financial Ratios
Distributable cash flow per common share (basic and diluted)
Distributable cash flow per common share is calculated as distributable cash flow over the weighted average number of common shares outstanding for the period.
Distributable cash flow is a non-GAAP financial measure. Management believes that distributable cash flow per common share provides investors an indicator of funds generated from the business that could be allocated to each shareholder's equity position.
|
Three months ended |
Six months ended |
||||||
(in thousands of Canadian dollars except per |
2024 |
2023 |
2024 |
2023 |
||||
Distributable cash flow |
$ |
20,326 |
$ |
(7,877) |
$ |
33,107 |
$ |
(2,604) |
Weighted average shares outstanding – basic |
|
34,847 |
|
34,722 |
|
34,812 |
|
34,721 |
Weighted average shares outstanding - diluted |
|
36,028 |
|
35,613 |
|
36,194 |
|
34,721 |
Distributable cash flow per share – basic |
$ |
0.58 |
$ |
(0.23) |
$ |
0.95 |
$ |
(0.07) |
Distributable cash flow per share – diluted |
$ |
0.56 |
$ |
(0.22) |
$ |
0.91 |
$ |
(0.07) |
Capital Management Measures
Net Debt
Net debt is defined as bank debt, less cash. Net debt is used by the Corporation to monitor its capital structure and financing requirements. It is also used as a measure of the Corporation's overall financial strength.
The following table reconciles net debt:
(in thousands of Canadian dollars) |
|
|
|
|
Senior Credit Facility |
$ |
143,358 |
$ |
171,749 |
Term Debt |
|
175,000 |
|
175,000 |
Cash |
|
(1,971) |
|
(105) |
Net debt |
$ |
316,387 |
$ |
346,644 |
Supplementary Financial Measures
Growth Capital
Growth capital expenditures are defined as expenditures which are recoverable, incrementally increase cash flow or the earning potential of assets, expand the capacity of current operations, or significantly extend the life of existing assets. This measure can be used by investors to assess the Corporation's discretionary capital spending.
Maintenance capital expenditures are generally defined as expenditures that support and/or maintain the current capacity, cash flow or earning potential of existing assets without the characteristic benefits associated with growth capital expenditures. These expenditures include major inspections and overhaul costs that are required on a periodic basis. This measure can be used by investors to assess the Corporation's non-discretionary capital spending.
Forward-Looking Information
Certain statements contained in this press release constitute forward-looking statements and forward-looking information (collectively referred to herein as, "forward-looking statements") within the meaning of applicable Canadian securities laws. Such forward-looking statements relate to future events, conditions or future financial performance of
In particular, this press release contains forward-looking statements pertaining to, but not limited to, the following: the expected financial performance of the Corporation's capital projects and assets, including the
Although the forward-looking statements contained in this press release are based upon assumptions which management of the Corporation believes to be reasonable, the Corporation cannot assure investors that actual results will be consistent with these forward-looking statements. With respect to forward-looking statements contained in this press release, the Corporation has made assumptions regarding, but not limited to:
The Corporation's actual results could differ materially from those anticipated in the forward-looking statements, as a result of numerous known and unknown risks and uncertainties and other factors including, but not limited to: changes in supply and demand for low carbon products; general economic, political, market and business conditions, including fluctuations in interest rates, foreign exchange rates, supply chain pressures, inflation, stock market volatility and supply/demand trends; risks of health epidemics, pandemics and similar outbreaks, including COVID-19, which may have sustained material adverse effects on the Corporation's business, financial position, results of operations and/or cash flows; risks and liabilities inherent in the operations related to renewable energy production and storage infrastructure assets, including the lack of operating history and risks associated with forecasting future performance; competition for, among other things, third-party capital, acquisition opportunities, requests for proposals, materials, equipment, labour and skilled personnel; risks related to the ability to complete the Proposed Transaction on the terms (including proceeds) and timing expected or at all and the financial and operational, liquidity and leverage risks if the Proposed Transaction is not completed on such terms and timing or at all; risks related to the Corporation's ability to refinance its Senior Credit Facility and Term Debt Facility on acceptable terms; the risk that the Corporation's Senior Credit Facility and the applicable portions of the Term Debt Facility may not be renewed or extended beyond the
The foregoing lists are not exhaustive. Additional information on these and other factors which could affect the Corporation's operations or financial results are set forth in the Corporation's most recent annual information form, its MD&A and in other documents on file with the
Management of the Corporation has included the above summary of assumptions and risks related to forward-looking statements provided in this press release in order to provide holders of common shares in the capital of the Corporation with a more complete perspective on the Corporation's current and future operations and such information may not be appropriate for other purposes. The Corporation's actual results, performance or achievement could differ materially from those expressed in, or implied by, these forward-looking statements and, accordingly, no assurance can be given that any of the events anticipated by the forward-looking statements will transpire or occur, or if any of them do occur, what benefits the Corporation will derive from them. Readers are therefore cautioned that the foregoing list of important factors is not exhaustive, and they should not unduly rely on the forward-looking statements included in this press release.
Financial Outlook
This press release contains future-oriented financial information and financial outlook information (collectively, "FOFI") about expectations regarding financial results for 2024 which are subject to the same assumptions, risk factors, limitations and qualifications as set out under the heading "Forward-Looking Information". The actual financial results of the Corporation may vary from the amounts set out herein and such variation may be material. The Corporation and its management believe that the financial outlook has been prepared on a reasonable basis, reflecting management's best estimates and judgments and the FOFI contained in this press release was approved by management as of the date hereof. However, because this information is subjective and subject to numerous risks, it should not be relied on as necessarily indicative of future results. Except as required by applicable securities laws, the Corporation undertakes no obligation to update such FOFI. FOFI contained in this press release was made as of the date hereof and was provided for the purpose of providing further information about the Corporation's anticipated future business operations on an annual basis. Readers are cautioned that the FOFI contained in this press release should not be used for purposes other than for which it is disclosed herein.
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