Tidewater Midstream and Infrastructure Ltd.

Good morning, ladies and gentlemen, and welcome to the Tidewater Midstream and Infrastructure Limited and Tidewater Renewables Limited Second Quarter 2025 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 4-0 for the operator. This call is being recorded on Thursday, August 14th of 2025. I would now like to turn the conference over to Michael Gracher, Manager of Investor Relations. Please go ahead, sir.

Thank you, Chloe, and welcome everyone to the joint conference call for the second quarter 2025 results for both Tidewater Midstream and Infrastructure and Tidewater Renewables. I'm Michael Gracher, Manager of Investor Relations. Joining me today are our CEO, Jeremy Baines, who will provide an update on operations during the quarter, and our CFO, Ian Portley, who will provide an update on our financial results. We will then open the line for Jeremy and Ian and other members of the Tidewater management team to take your questions. Before I get started, I would like to note that today's call is being recorded for the benefit of individual shareholders, the media, and other interested parties who may want to review the call at a later time. The recorded call will be available through CEDAW. This morning, both Tidewater Midstream and Tidewater Renewables reported results for the second quarter ended June 30th, 2025. A copy of the news release, financial statements and MD&As will be available on CEDAW Plus or the respective company websites. Before passing the call over to Jeremy, I'll remind you that some of the comments made today may be forward looking in nature and are based on Tidewater's current expectations judgments, and projections. Forward-looking statements we may express 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-GAAP measures. To know more about these forward-looking statements, non-GAAP measures, and risk factors, please see the company's various financial reports, which are available on the respective company websites and on CR+. I will now turn the call over to Jeremy.

Thanks, Michael, and thanks to everyone for joining us today. I will divide my remarks into two sections. First, I'll provide an update on Tidewater Renewables' commercial strategy, and then I will walk through the operational performance and project progress for both Tidewater Midstream and Tidewater Renewables. Tidewater Renewables continues to see strong momentum following the government of British Columbia's amendments to the Low Carbon Fuels Act. which doubled the renewable fuel requirement for diesel to 8% for the 2025 compliance period. The amendments also mandated that the renewable fuel content be produced within Canada from April 1st, 2025. These policy changes have been a catalyst for increased market activity, reinforcing our view that the demand for low carbon Canadian produced fuels is not only sustainable, but accelerating. As a result of this more favorable environment, I'm pleased to report that during the second quarter, Tidewater Renewables successfully contracted offtakes for over 70% of forecasted production from the HDRD facility for the second half of 2025. Most of these contracts are for the sale of R100, which is renewable diesel with the environmental attributes included. These contracts are priced based on U.S. import parity benchmarks, which aligns the contract pricing with prevailing U.S. market values. positioning us competitively in the North American renewable fuel market. This commercial success is a direct outcome of our strategic focus and supports our belief that Tidewater Renewables is becoming a critical and reliable supplier within the Canadian clean fuels value chain. I will now provide an update of our operational performance for the quarter. At Tidewater Renewables HDRD complex, average throughput for the quarter was 2,164 barrels per day, were approximately 72% of design capacity. Utilization was relatively stable quarter over quarter as we continued to ramp up following the minor fire incident that temporarily suspended operations in early April. As we shared last quarter, that event was managed safely and repairs were completed using on-hand spare parts. After restarting on April 14th, the utilization rates steadily improved up to 2,850 barrels per day, which is 95% of design capacity by the end of June. With continued strong performance, we remain on track to achieve our full year throughput guidance of 2,200 to 2,400 barrels per day, which is inclusive of our scheduled Q3 turnaround. Turning to Tidewater Midstream's Prince George Refinery throughput averaged 9942 barrels per day in Q2 2025, which was consistent with 9936 barrels per day during the first quarter of 2025, but 17% lower than the second quarter of 2024. The second quarter of 2025 had lower throughput compared to the second quarter of 2024, largely due to operational and feedstock composition adjustments that were required to process higher density feedstock entering the refinery. Over the last few months, we've been able to source lower density feedstocks and expect that throughput at the refinery will return to normal levels following the semiannual heat exchanger cleaning and crude heater decoking that is scheduled for October this year. PGR continues to be impacted by lower refined product margins driven by wider commercial wholesale discounts, which stems from an oversupplied diesel in Western Canada, largely due to U.S. renewable diesel imports at five-year-high Western Canadian refinery utilizations. As we have previously disclosed, our offtake agreement with Synovus expired in November 2024, and we have successfully transitioned to marketing our refined products in-house. Our team has been actively expanding our customer base and we are pleased to report steady quarter over quarter growth in sales volumes. As discussed on our first quarter conference call on May 6, 2025, we announced the planned acquisition of the north segment of Pembina's Western Pipeline. Integration planning It's well underway and we remain on track to close the transaction in the third quarter. Once complete, this acquisition is expected to generate meaningful cost reductions and operational synergies by enhancing our ability to optimize VSOC procurement and integrating pipeline operations and maintenance within our downstream platform. At our midstream assets, Tidewater Midstream's Brazil River Complex had throughput of 95 million cubic feet per day in the second quarter of 2025, relatively consistent with 94 million cubic feet per day during the first quarter of 2025, and 5 million cubic feet per day higher than the second quarter of 2024. As previously disclosed, Plant 3 of the BRC facility was temporarily shut down for maintenance and repairs, resulting in lower straddle volumes coming through the facility during the second quarter. The repair work was completed and Plant 3 was restarted as expected in late June. With Plant 3 restarted, we expect the facility to be stronger in the second half of the year. At Tidewater Midstream's Round River gas plant, gas processing remains curtailed while sulfur handling operations continue. We are focused on cost control of the facility and remain prepared to restart operations as acre prices improve and upstream producer activity resumes. Moving to project progress, the front-end engineering design at Tidewater Renewables' 6,500 barrel per day SAF project in British Columbia is now complete and we continue to progress further optimization, commercial and regulatory work. As part of this ongoing development, I am pleased to report that Tidewater Renewables recently received approval to amend its initiative agreement with the government of British Columbia. The amendment will provide further support in the form of additional BCLCFS credits which will partially fund the advancement of the optimization and development efforts as we advance toward a final investment decision, which is now targeted for 2026. Continue to focus on increasing liquidity at Tidewater Midstream and Tidewater Renewables and are making good progress on non-for-asset sales. Following the end of the second quarter, Tidewater Midstream announced that it had successfully entered into an agreement to sell the Sylvan Lake gas plant and associated gas gathering infrastructure for total proceeds of approximately $5.5 million. We expect the sale to close during the third quarter of 2025, subject to customary closing conditions and regulatory approvals. Inclusive of this transaction, we have successfully closed or executed agreements for the sale of approximately $38 million of non-core assets sales during 2025. We will continue to update the market as we progress with additional asset sales. Looking ahead, we remain focused on maximizing operational efficiency at the PGR and HDR&E complex, enhancing netbacks on conventional and renewable refined products, strengthening our commercial platforms, increasing throughput at our tidewater midstream facilities and controlling costs, increasing our liquidity and focusing the business by progressing our non-core asset sales program, advancing our SAP initiative while prudently managing capital costs, and continuing to advocate for a fair regulatory environment that supports energy security, supports existing domestic energy industry and operations, and attracts investment across Canada's low-carbon and conventional energy sectors. We believe the building blocks are in place for revenue growth and margin expansion in the second half of 2025 and beyond. With that, I'll now turn it to Ian for the financial review.

Thanks, Jeremy. I'll begin with Tidewater Renewable's financial results, and then we'll discuss Tidewater Midstream's consolidated financial results. Tidewater Renewables delivered strong financial results for the second quarter of 2025. The corporation reported net income of $13 million and adjusted EBITDA of $10.7 million, which represents an $8 million improvement in both metrics compared to the first quarter of 2025. This quarter-over-quarter growth was primarily driven by the new R100 sales contracts Jeremy mentioned previously, which allowed Tidewater Renewables to sell the majority of its second quarter renewable diesel and the associated emissions credits at U.S. import parity benchmark prices. From a liquidity standpoint, we also took important steps to further strengthen our financial position during the quarter. We increased the available capacity under the Tidewater Renewable Senior Credit Facility by $7 million, driven primarily by the improved cash flows from the newly contracted off-takes and more favorable Canadian federal emission credit economics. As previously disclosed, Tidewater Renewables also extended the maturity of its senior credit facility to February 28, 2027. This extension pushes Tidewater Renewables' earliest debt maturity out by another year, enhancing our financial stability and providing us with greater flexibility as we execute on our strategic priorities. Turning to Tidewater Midstream, The company reported a consolidated net loss attributable to shareholders of $16.3 million during the second quarter of 2025 compared to a net loss attributable to shareholders of $4.7 million during the second quarter of 2024. Consolidated adjusted EBITDA was $16 million during the second quarter of 2025 compared to $45.3 million during the second quarter of 2024. The change in both net loss and adjusted EBITDA was largely due to lower refined product margins, the corporation's downstream assets, offset in part by favorable changes in the fair value of derivative contracts and lower general and administrative costs. During the second quarter of 2025, Tidewater repaid approximately $20 million of consolidated debt on its senior credit facilities. resulting in $55 million of combined available capacity on these facilities at June 30th, 2025. I'll now ask the operator to open up the call for questions.

Thank you. Ladies and gentlemen, we will now begin the question and answer session. To ask a question, you may press star then one on your touch-tone phone. If you are using a speakerphone, please pick up your handset before pressing the keys. To withdraw your question, please press Start in the number two. At this time, we will pause momentarily to assemble our roster. Our first question comes from the line of Maurice Choi from RBC Capital Markets. And it's open.

Thank you, and good morning, everyone. I just want to start with the renewable side. You noted that there has been a significant increase in commercial activity reflecting the rising demand and improved emissions credit economics. Looking at the LCFS prices, we are still at about $200 or so. Given the encouraging commercial and demand activity that you highlighted, how do you see the credit prices over the remainder of this year and into next year?

Thanks for the question, Maurice.

When we look through the rest of the year, we've seen a number of positive developments in the U.S. market around their RBO obligations and as well with some of the changes in 45Z. We have seen some supply come out of the market and obviously with the changes the B.C. are looking to meet their LCFS and CFR obligations with Canadian produced renewable diesel, which has really been supportive in the quarter. Right now, we're seeing that forward combined stack of LCFS and CFR credits better than what I got into last quarter when I think I said 450 to 500. We're actually seeing it right now in that 500 to 550 range based on some strength with the CFR credit in particular.

I was going to follow up to that, is whether or not you see the credit prices staying at those high levels into next year, or do you feel like it might wane a little bit from here?

We feel actually like LCFS credits that you're seeing the reported prices in BC are a little bit soft right now, and we actually expect the LCFS side to probably improve. As we look forward into future years, with the increasing CI standards, we actually see that market tightening up. So we think the markets are pretty supportive. Another kind of interesting outcome of our strategy where we're basically backing out US imports, the pricing mechanism gives us an ability to price all of the pieces of those transactions which is a nice feature. So we might look at doing a little bit of revenue stabilization on some margins on that front as well as we go forward.

Understood. And if I could just finish up on a question on the midstream side, specifically on PGR. You mentioned that you've expanded your customer base now that you've transitioned to marketing refined products in-house. Can you unpack that comment a little bit on the customer base side? and whether or not you feel like you are now a better place to have your products in Western Canada versus elsewhere.

Yeah, thanks for the question, Maurice. So as you will recall, and I think everyone will recall, we had basically one customer last year that was taking 90 plus percent of our product, being the Synovus offtake that came with the original purchase of the refinery. Over the first half of this year, I mean, we started preparing for this last year as well. We started going out to the market because we knew we were going to be selling direct and marketing all that product. We took the customer list from basically one to a significant number of diversified customers. And we're getting better and better at adding customers and finding the various customers. It's a mix. We sell into... We try to focus and get as much product in Prince George as we can. We sell into downstream retail networks. As larger industrial customers, we've had some success, particularly on the mining side. As their supply management programs come up and their fuel contracts come up, we're having some success bidding into those and getting successful there. You know, we continue to look at various independent distributors. We also, at times, have found opportunities to do some product swaps in markets outside of Prince George that are, you know, attractive to us. And so we continue to build and add more and more customers and optimize price that we're able to sell at. So we're feeling, you know, like we said last quarter, we're getting better every quarter. And you can see that in this quarter. So it's been... A process, obviously, as we went through the first quarter, you're all aware, you know, we built a bunch of inventory. We've been able to clear all of that out in this quarter and generate liquidity, reduce our working capital we're carrying. And I think that's a testament to the team. And now with our inventory levels, you know, sort of operationally optimized, we're looking, you know, we're continuing to optimize that sales book to the customers and try to pull margins up as we move forward with it.

And when you look at the contract terms or length of the contracts, are they somewhat short-term for now and kind of test out the relationship, or do you envision that this is going to get longer in term over time? Sorry, Maurice, we couldn't hear you there. The question was whether or not when you look at the contract terms of some of these potential customers, Do they tend to be on a shorter end for now as you test out the relationships, or is it more ones that will slowly get longer over time?

Yeah, we've talked about this before. in the conventional refined products market the contracts typically roll between you know one to two years out and so we continue to roll those obviously certain people have entered into various contracts particularly the industrials like the mines where maybe they'll do a couple years or more and so you know as those come up we we bid into them and uh and we continue to work um we are having some very interesting discussions on the renewables front on some longer-term RD off-takes. We'll make an announcement as we progress there, assuming we get something across the line there. But typically, conventional, I would call it one to two. I think there's maybe some potential to do a little longer RD.

Understood. Thank you very much. Thanks, Maurice.

Our next question comes from the line of Rob Hope from Scotiabank. Your line is open.

Thanks, everyone. In the prepared remarks, you mentioned that the commercial supply discount is still relatively wide. But can you maybe speak to how that changed through Q2 as well as Q3 as well? You know, it does look like a number of the factors that were really weighing on Q1 are starting to abate and kind of, you know, move in the right direction.

Yeah, I mean obviously we don't give, it's commercially sensitive, but what we're seeing as we go through, we moved a lot of inventory. That puts a bit of pressure on the discount in Q2, but we're starting to optimize the sales. We're working to find those fuel buyers closer to Prince George as their contracts and supply management pieces come up. You know, looking for the market to balance, backing out imports with our RD sales, I think is helpful on the amount of fuel in the market, looking for a home. And so all of those things combined, like this is always going to be an ongoing, you know, we're looking for the best netbacks. We've obviously seen some pretty high fuel runs in Western Canada. Obviously, we're hoping for some economic growth and some demand to come with some of the big projects. um, the country's talking about and some development of new mines, uh, in British Columbia. So it's an ongoing battle and we continue to optimize it. We're obviously getting better. We went from basically, you know, one off taker to we've got to be selling to many customers and finding the best customers that have the best, um, logistical, um, cost from our refinery, and we have to fight for those customers a bit too.

So, you know, it's an ongoing battle, but quarter over quarter, I think we've done better. I appreciate that.

And then, you know, the MD&A also continued to reference an oversupplied diesel market. Can you speak to how that's improving as well? You know, we're seeing less U.S. imports, maintenance on some of the other facilities out there as well.

uh and some lower runs so you know how close are we to a a more normalized environment well i mean we're hopeful um we've turned the quarter from the corner from the worst of the um supply overspline the market but um you know there's still you know we need some economic activity to take up that diesel but you're right all of those things you referenced There has been a reduced supply of RD in the US. Our ability to back them out with the changes made by the BC government, all of these things are making small impacts and progress.

Alright, thank you.

Again, if you would like to ask a question, simply press start and the number one on your telephone keypad. Our next question is from Patrick Kenney from National Bank Financial. Your line is open.

Thank you. Good morning, guys. Just maybe on the asset sale program, sounds like there's some interest in the Atchison site. Can you just remind us if this site is being sought after by potential data center customers or other energy infrastructure or producer customers, perhaps all of the above? Just curious the dynamics around the site at this point.

Yeah, thanks for the question, Patrick. It's an interesting site. We are in discussions with multiple parties, I would say. Most of those parties are interested in it from a data center site. As you know, everybody knows Alberta's Bring Your Own Power. There's the potential for us to... We've got gas at the site right now. We've got water at the site. It's got very dense and overlapping fiber networks at the site. It's industrial zoned and people can move quickly to put data centers in there. We have also done some expressions of interest on ways to bring a significantly increased amount of gas to the site with some of the things that are happening, Yellowhead mainline in particular around there and we could see us reposition some idled extraction equipment to the site and do additional extraction there. That's one stream and we've got multiple parties that were in advanced commercial discussions around that use of the site. There's also been some reach out of some other industrial potential buyers, but I would say the lead horse we're focusing on is on block sale of the land data center with us having a gas supply agreement and expanded extraction straddling at the site.

Okay, got it.

And I guess now that we're more than halfway through the year, You've executed on a few transactions, but maybe you can just update us on what your target level of asset sale proceeds might be for the remainder of the year just to ensure a healthy liquidity position exiting the year.

Yeah, there's a couple of big ones obviously that we're focusing on. You've mentioned one of them. There's a couple other pieces of equipment that are fairly large that we're working on and then a bunch of smaller ones. We're still trying to get to our target of 100. We're almost 40% done on that. It's a bit of a stretch, but I think we've got the team and the assets that can get that done.

So we hope to be able to announce some stuff fairly soon in the back half of the year here.

Okay.

And I guess last one for me, just on the back of, I guess, combining the conference calls today. might be a good time to, for an update on potentially looking at, I know you looked at it in the past, collapsing the structures and maybe to help simplify the story and then improve the cost of capital for both entities going forward.

I'm not sure we mentioned that in the past. Um, it's really something we can't comment on.

And, uh, uh, you know, we, you know, we are focused on two business lines, uh, fuels transitioning to renewable, clean fuels and midstream.

And, you know, we're always looking to optimize and we'll continue to do that. Okay, great. That's it for me. Thanks, guys. Thanks, Patrick.

There are no further questions at this time. I would now like to turn the conference back to Mr. Grasher. Please go ahead.

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

This concludes today's conference call. Thank you for participating. You may now