Tidewater Midstream and Infrastructure Ltd.

afternoon ladies and gentlemen and welcome to the tidewater midstream and infrastructure ltd q4 2024 financial results conference call at this time all lines are in listen only mode following the presentation we will conduct a question and answer session if at any time during this call you require immediate assistance please press star 0 for the operator this call is being recorded on thursday march 27th 2025. i would not like to turn the conference over to michael gracher Please go ahead.

Thank you, Joelle. I welcome everyone to Tidewater Midstream's fourth quarter 2024 results conference call. I'm Michael Grasher, Manager of Investor Relations, and joining me today are Jeremy Baines, CEO, and Aaron Ames, Tidewater Midstream's Interim CFO. Also with us and available during the question and answer session is Sean Heaney, EVP, Planning and Strategy. Before we begin, please note that matters discussed on this call include forward-looking statements under applicable securities laws with respect to Tidewater Midstream and infrastructure LTD, including, but not limited to, statements regarding investments and acquisitions by the company, commercial arrangements of the company, the business strategies and operational activities of the company, the markets and industries in which the company operates, cost and expense management, the company's leverage and plans for debt and leverage reduction, refinancing of the company's indebtedness, the value of the company's assets, and the future growth objectives, targets, and financial and operating performance of the company and its businesses. Such statements are based on factors and assumptions that management believes are reasonable at the time that they were made and information currently available. Forward-looking statements we may express or imply today are subject to risk and uncertainties which can cause actual results to differ from expectations. Further, some of the information provided refers to non-gap metrics. To learn more about these forward-looking statements and non-gap measures, please see Tidewater Midstream's financial reports, which are available at www.tidewatermidstream.com and on CDAR. And with that, I will now pass the call over to Jeremy to go over some highlights of the quarter and the full year 2024.

Thanks, Michael. Thanks to everyone for joining us today. Operationally, Tidewater had another safe and successful quarter. Our downstream and midstream facilities continue to operate reliably and consistently throughout the fourth quarter. At PGR, throughput averaged 10,963 barrels per day, which was 6% lower than Q3 2024. The lower throughput was largely attributed to scheduled maintenance and third-party pipeline maintenance, which temporarily decreased the feedstock volume coming into the facility. HDRD had an average throughput of approximately 2,677 barrels per day, slightly lower than Q3 2024, which averaged 2,849 barrels per day. Keep in mind, during winter operations, the HDRD facility requires a minor reduction in throughput rate in order to optimize hydrogen production and produce high quality, low cloud point diesel that meets cold temperature specifications. During the fourth quarter, Prince George crack spreads spreads averaged approximately $75 per barrel, which was lower than in the fourth quarter of 2023, which averaged $87 per barrel. So far, during the start of Q1 2025, crack spreads have averaged in the low $80 per barrel range and are approximately $86 today. During the fourth quarter, the five-year offtake agreement with Synovus, which provided the sale of the majority of refined product volumes for PGR, expired. and the company has now successfully transitioned to marketing all refined products produced at both HDRD and PGR facilities in-house. Tidewater has made significant progress in marketing its diesel and gasoline volumes for 2025. As we have previously disclosed, current market discounts are wider than those at the time the Synovus offtake agreement was entered into, largely stemming from the oversupply of imported renewable diesel from Western Canada. On December 30th, 2024, Tidewater Renewables filed a trade complaint with the Canada Border Services Agency with the aim of combating the adverse effects caused by the unfair imports of subsidized renewable diesel from the US. In early March 2025, the CBSA formally initiated a countervailing anti-subsidy and anti-dumping duty investigation into imports of renewable diesel from the United States. In initiating the investigation, the CBSA confirms that Tidewater Renewables provided satisfactory evidence to support its allegations that U.S. renewable diesel imports were subsidized and dumped, causing harm to Tidewater Renewables. A decision by the CBSA regarding whether provisional duties will be imposed at the Canada-U.S. border is anticipated by June 2025. Final duties, which would be in place for five years and can be renewed every five years thereafter, could be imposed by September 2025 following a ruling by the Canadian International Trade Tribunal. If final duties are imposed at the anticipated levels valued between 50 and 80 cents per liter of renewable diesel imported from the United States, these duties would support long-term market stability for tidewater renewables, renewable diesel production, BCLCFS credit prices, and work to help restore balance within the BC market. In addition to the trade complaint, on February 27, 2025, the government of British Columbia announced changes to the Low Carbon Fuels Act, specifically to increase the renewable fuel requirement for diesel from 4% to 8% for the 2025 compliance period, together with effective April 1, 2025, requiring such renewable fuel content to be produced in Canada. The amendments represent a good first step in leveling the entire trade environment supporting tidewater renewables and the broader Canadian biofuels industry. On the midstream side of the business, the Brazzo River Complex operated well. The facility averaged 132 million cubic feet per day compared to 134 million cubic feet per day in the same period last year. Gas processing activities at the Rand River Gas Plant have been temporarily curtailed due to producers shutting in their volumes as a result of depressed natural gas prices. Natural gas prices are expected to recover during 2025, and gas processing operations are expected to resume as producer activity restarts. Sulphur handling activities continue to be operational. We also continue to remain very focused on our liquidity, and we have made great progress on non-poor asset sales and deleveraging. On March 25, 2025, we announced that the company completed the previously announced sale of the BRC Roadway Network for total proceeds of $24 million. of which 22.5 million was received and used to repay amounts outstanding on the three-year delayed draw term loan. The balance is expected to be received on or before December 31st, 2025. The disposition of the BRC roadway network is expected to have an immaterial impact to Tidewater's 2025 operating results. In addition to the sale of the previously announced used cooking oil business at Tidewater Renewables for 10.6 million on January 10th, 2025, Tidewater Renewables also completed the sale of its interest in the Rimrock Renewables Partnership for total proceeds of $7.8 million, of which $4.7 million was received on close, and a further $3.1 million is expected to be received upon the satisfaction of certain post-closing conditions on or before December 30, 2025. The net proceeds of this transaction were used to repay outstanding debt Overall, we remain laser focused on safe, efficient and reliable operations while maintaining liquidity and protecting the balance sheet by reducing costs and capital spending, which doesn't mean our return hurdles. In summary, I want to take a step back to when I joined in January 2024. At that time, the company had just completed a strategic review, which culminated in the sale of Pipestone and Dimmesdale assets in December 2023. It is worth pointing out that there have been significant changes throughout the company from the board of directors to senior management, both Tidewater Midstream and Tidewater Renewables. Since that time, we have continued making progress towards improving our operations and optimizing our asset portfolio across the consolidated entity. During this time, we sold three non-core assets for total combined proceeds of over $40 million, which was used to deliver. We have completed four financings totaling $290 million, including the convertible debentures, the revolving credit facilities, and the intercompany transaction. We completed a major turnaround at BRC Complex safely and below initial cost expectations, initiated cost and capital savings totaling over $15 million, and run rate savings expected to be on the cost side between $7 and $10 million go forward. We commissioned the HDRD facility and got it running reliably in that capacity. We weathered unfair trade practices in the renewable diesel and emission credit market stemming from a policy breakdown and worked with the government to implement necessary changes to the BCLCFS program. We still have more work to get done. Our strategy is underpinned by three key initiatives, maintaining safe and reliable operations, driving ongoing operational efficiencies, and optimizing our asset portfolio to ensure we have the right mix of assets that are generating appropriate returns. I'm proud of our Tidewater team, and I am confident in our ability to continue to progress on our plan and achieve our goal of delivering sustainable free cash flow and growth. I will now turn the call over to Aaron to go through our financial results.

Thank you, Jeremy. Facility net loss attributable to shareholders was $3.3 billion during the fourth quarter of 2024, compared to a net loss attributable to shareholders of $331.8 billion during the fourth quarter of 2023. The decrease in net loss attributable to shareholders is largely due to the reversal of certain non-cash impairment charges previously taken in 2023 as a result of the transaction with Tidewater Renewables, offset in part by the gain on the sale of Pipestone and Dimsdale in the fourth quarter of 2023. Consolidated adjusted EBITDA was $20 million during the fourth quarter of 2024 compared to $21.4 million during the fourth quarter of 2023. The change was primarily due to higher EBITDA of equity investments in the comparative period, offset in part by lower general administrative costs in the current period. For 2025, we expect our consolidated capital maintenance program to range between $15 to $20 million. Finally, we amended our senior debt covenants to increase deconsolidated debt to EBITDA to 4.5 to 1 and lower interest coverage to 1.5 to 1. Also, following the road sale and debt repayment, we defer the first mandatory quarterly repayment of 5 million on the term facility until April 30th, 2026. These amendments provide additional flexibility to navigate current market conditions. I'll now ask the operator to open the call up for questions.

Thank you. Ladies and gentlemen, we will now begin the question and answer session. Should you have a question, please press star, followed by the one on your touchtone phone. You will hear a prompt that your hand has been raised. Should you wish to decline from the polling process, please press star, followed by the two. If you are using a speakerphone, please lift the handset before pressing any keys. One moment, please, for your first question. Your first question comes from Rob Hope with Scotiabank. Your line is now open.

Hello, everyone. Questions on the LCFS market. Can you update us on kind of how participants have changed their behavior following the rule changes from the BC government as well as kind of what you think kind of the clearing price could be for April?

Thanks, Rob.

Appreciate the question. So how have they changed their behavior? So if you go back to the 2024 year, about a billion liters of diesel was imported into the British Columbia from the U.S. With the latest announcements as well as improvements or increases in the California LCFS price and E4 RIN prices in the U.S. and the pending tariffs that we expect to be in place, this has put a significant disincentive for conventional players to import U.S. subsidized renewable diesel into the BC market to generate LCFS and CFR credits. So we have seen with the new Canadian renewable content requirements reach out and have significant discussions with customers that is supporting demand for Canadian made renewable diesel as well as We have changed the way we are marketing that diesel to a fully loaded barrel that includes the emission offsets in a lot of cases. And we've also expanded our customer base. Last year was the first year we had one significant key customer. We are now going to multiple customers. So all of that has been a big change. Obviously, the import season for BC is typically the summer because a lot of the Gulf Coast and US producers are not set up to produce winter spec, low cloud point renewable diesel. So anybody who's thinking about doing that should be very aware of the potential outcomes of the trade case and the significant tariffs that they would face in importing it. So it has been a real important leveling of the playing field for the renewable diesel. Ultimately, with all of these things coming together, the tightening CI, market that will continue to tighten to 2030 under the LCFS rules in British Columbia. Tariffs and the buy Canadian mandate for renewable diesel in British Columbia. We expect to see credit prices normalized throughout the year closer to where they were in the first half of 2020. Obviously the buy Canadian mandate kicks in in April. the trade complaint interim tariffs would likely kick in early June. So we're watching that market. We have seen it improve significantly from where it was last year.

All right. That is very good and helpful.

So thank you for that. Maybe tying that into the commentary from the LCFS call, just regarding kind of LCFS EBITDA getting back to H1 levels with the changes you're seeing in the credit market plus the resolution of the duties. I guess if we're going to potentially put those into two buckets, if... Credit pricing improves, but the duties or the trade complaint is not successful. You know, where do you think, you know, improvement could get to all else being equal?

You know, we haven't, you know, our view, so let's talk long term, because like one, we're highly confident that we will be successful um the subsidy is is crystal clear and i think the trade case will will acknowledge that and that we've been harmed so we do expect to be successful and those duties are material in the long term the british columbia market needs to see significant portion be supplied the diesel market by renewable diesel and we expect that with the tightening ci we're going to have a very In fact, we start to see deficits and are going to see a tightening market as we go forward in the long term. So ultimately, between the actions the BC government has made, they've also publicly pledged that they're going to watch the Canadian content number to make sure that the market stays balanced and will look to increase it as warranted. We expect that we will get to a level that provides for economic and profitable, long-term profitability at the RD facility. I can't speculate what, you know, it's a moving target, and we are pretty confident the tariffs are going to take place, and that's our expectation, and we'll see that we'll move closer to first half numbers as we move through the year into 2026.

All right. Thank you.

Your next question comes from Maurice Chow with RBC Capital Markets.

Your line is now open.

Thanks, Anne. Good morning, everyone. I just wanted to turn to the downstream business. I know that you mentioned that in one of your disclosures that if the downstream products, if not all of it can be placed in Western Canada, the balance may be exported to potentially lower margin markets. Now, I know this is something that you've obviously said in the past, so it's not new. But could you give us an update on how these alternative markets kind of look like, or given how crack spreads currently are at the low to mid-80s, that urgency is a lot less?

Yeah, I mean, look, we look every day to optimize the netbacks of our sales out of the out of the refineries and place our product. Historically, our best markets have been British Columbia and inside what we call the Prince George orbit. We're logistically advantaged there and there is significant economic activity in that area from mining, forestry, oil and gas, and all of those things that are sort of base industry. So we try to place as much of our product there, but we do look every day to make sure that we are optimizing volume and price. And we've actually been doing some creative things where we're moving product in different spots when it makes sense. Obviously, we're subject to the macro environment and the crack spreads, and they have been soft over the Q4 and early Q1. But we continue to do that. Our desire is to place as much of a product as we can in close proximity to the Prince George refinery, just on the logistic savings that we get by doing that.

Maybe on that note, switching over to tariffs, threat of tariffs at least, any thoughts on what that could do to produce activity, which obviously is already impacted by low-eco as well as the supply and demand for your products?

Yeah, like we have various, you know, different analyses. We do think when you look at the feedstock we use in our refineries, it might actually be an advantage for us in that our feedstock will become more advantaged versus where the people that are buying the heavy from and so forth that would uh, be supportive. Um, obviously a Western Canada is long refined products with the refining complex we have. And so, you know, how will markets balance will more go offshore, um, or more go to East coast and keep the market in balance versus, uh, what typically will go into the U S today. So it's, we're watching it. Um, we feel like we're relatively isolated from that. And, uh, You know, obviously, our case would put tariffs on. There could be a case where there's outside of our trade case, the government decided to put tariffs on a product that's imported in that would be supportive of us as well.

Just a quick cleanup question on the capex that you shared today.

So last year, for example, the maintenance capex was just below your $25 to $30 million guidance. The guidance itself having previously been downgraded from 35 to 40. So for 2025, when you've announced $15 to $20 million, can I confirm if this is only maintenance? And separately, if you could just help us walk through the year-over-year differences between 2014.

We don't have any. We had a turnaround last year. So that's where you had a bigger bump. And it is mostly maintenance capex, very small amount of growth capex.

So that's where it's coming from. Got it. Thank you.

Ladies and gentlemen, as a reminder, should you have a question, please press star one. Your next question comes from Robert Cattelier with CIBC Capital Markets. Your line is now open.

Good afternoon. Just to follow up on the capital spending question. I'm curious if that $15 to $20 million includes the annual turnaround at

at PGR? This is Sean Robert.

Are you talking just annual maintenance at PGR or turnaround at PGR?

Well, the maintenance. It usually takes the facility offline, I think, in the second quarter for a brief period.

It'll factor in annual maintenance, but there's no turnaround schedule for PGR this year. We obviously got through our last one in 2023, so the next major turnaround is not scheduled until 2027. What we disclosed today will include, call it, you know, our normal course non-turnaround of your annual maintenance spend.

Yeah, got it. And then I'm just curious on the progress you've made since you started marketing the PGR volumes and what trends you're seeing in the wholesale discounts. Obviously, you indicated that they're wider discounts to lower margins, but can you give us a sense of degree in how the markets evolved since you started marketing your own product?

Yeah, sure. I mean, obviously when we had the offtake with Synovus, they were taking like 90% plus of the product. And so we didn't have to really worry too much about it. We knew that contract was coming up and we started discussions last year and we've just been getting better and better. We've been expanding our customer base, finding the optimal spots where we have logistic advantages to market to. We've recently won some mining RFPs that are supportive, and we'll continue to optimize that. Ultimately, there are some very big buyers with downstream retail networks that we are working on, and we're seeing some success there. So it's a work in progress, but we are moving the product and now trying to optimize our netbacks and where we can sell the product advantage versus what else is in the market.

Okay, and then what do you expect it's going to take to, in terms of producer, to get producer activity to a level that justifies bringing the Ram River plant back fully online?

Yeah, I think if they can see sustained prices, you know, call it above $250, a forward curve is still pretty soft in the summer of $25. But I think with LNG Canada coming on, it sounds like they were – energizing and starting to cool things that by the back half of the year we should see a much better and more supportive gas environment out there.

Okay, thank you.

Your next question comes from Patrick Kenney with National Bank Financial.

Your line is now open.

Thank you. Good morning, guys. Just on the production levels at PGR, I know there was some normal optimization going on in Q4 there with winter operations, but if you could comment on how utilization rates have been trending year to date, especially following the expiry of your committed tolling agreement there. And then also, if you can comment on any mitigation plan you might have in place if you do lose access to the pipeline.

So the first one, Yeah, we did see a little bit lower utilization in Q4. There were some, a little bit of, you know, just normal maintenance that we did as well that was coincided with an outage by upstream infrastructure that supplies us oil there. So that was the real reason why we saw it trend down. We expect to, you know, run those uh that refinery it's sort of in that 90 low to mid 90s kind of uh utilization on a long term go forward but that was the reason in q4 for um a little bit of the trend downwards um in relation to the pipeline i got to be careful what i say obviously we're in the middle of a regulatory hearing um that is a common carrier pipeline it is um regulated by the BCUC. Our view is, you know, the application by Pembina around the abandonment is really just negotiating and positioning. They tried this. They've tried this before in the past and made that same application. And obviously, as a common carrier, typically one of the key things required to actually get an order or allowed to abandon is consent of shippers and obviously we wouldn't provide that so you know we think they're just blowing a bit of smoke there and we're working through the regulatory process and other commercial arrangements and we view that as a good long-term transportation alternative to provide crude at the PGR refinery.

Okay thanks for that and then Just on the sale of the roadway at BRC, can you maybe just provide a bit of an update on where you're at with your broader non-core asset sale program, what might be remaining or available throughout the course of 2025?

Yeah, so thanks for the question, Pat. So as we stated, obviously in 2023 they went through a large strategic review of assets. We've continued to execute on that optimization through a number of non-sport asset sales. There are still probably about $100 million worth of assets that generate no to negative to low return in the portfolio that we were in various stages of discussions on. Obviously, we need to get the right value for these, but we will continue to optimize the portfolio and There is significant value in some of these non-core assets, and we've got various discussions ongoing. Obviously, we can't comment more than that, but if everything went right, you could see $100 million of divestitures over the next 12 months. That would not impact cash flow and EBITDA at all or materially.

Okay. Got it. I appreciate that. And then would that, I guess, allow you to, um, return to the normal covenant levels or perhaps would you have other, you know, credit ratio targets, uh, that you're hoping to hit by year end?

Yeah, it would, uh, it would, uh, you know, obviously generate a significant amount of liquidity, put the business into a much better, um, spot. Um, and yeah, I think we would be comfortable with that level of deleveraging, um, Obviously, subject to all of the normal risk factors that we face around crack spreads and gas prices and those things, but in the current environment, it would be a very stable situation.

Okay, that's great. Appreciate the comments.

There are no further questions at this time.

I will now turn the call over to Michael for closing remarks.

Thanks, everyone, for joining the call. The team is available to address any outstanding items with the contact information at the bottom of today's press release.

Thank you.

Ladies and gentlemen, this concludes your conference call for today. We thank you for participating and ask that you please disconnect your lines.