SECOND QUARTER 2023 HIGHLIGHTS & OPERATIONAL UPDATE
The HDRD Complex is quickly approaching commercial operations with a recent commissioning highlight being the pretreatment unit activation. The first production of renewable hydrogen is expected within days and the start-up of the renewable diesel unit is anticipated in late August, with commercial operations beginning shortly thereafter. The Renewable Diesel & Renewable Hydrogen ("HDRD") Complex is expected to be one of the first sizable producers of BC LCFS and federal CFR credits.
The HDRD Complex is mechanically complete and most of the commissioning milestones have been achieved. Commercial operations are now expected to commence in lateAugust 2023 (previouslyJune 2023 ) due to resource challenges and minor commissioning issues. This delay is expected to raise gross project costs by approximately$8 million ; however, this is anticipated to be entirely offset by the higher realized value of capital emissions credits. Net project costs and run rate EBITDA(1) expectations are in line with previous guidance and the project's economics remain attractive with payback expected within two to three years.- In the second quarter of 2023, during the scheduled turnaround at the
Prince George Refinery ("PGR"),Tidewater Renewables earned net income attributable to shareholders of$2.7 million , compared to$4.4 million in the second quarter of 2022. Adjusted EBITDA(1) was$8.1 million , which was impacted by scheduled downtime at PGR and realized losses on feedstock hedges, compared to$16.9 million in the second quarter of 2022. - On
June 6, 2023 , the Corporation executed a Credit Offtake Agreement with a Canadian investment-grade counterparty to sell all the operating emissions credits once generated by theHDRD Complex throughNovember 2023 . This Credit Offtake Agreement is expected to work in conjunction with the Corporation's previously announcedU.S. Renewable Diesel Offtake Agreement. - During the second quarter of 2023, the Corporation successfully completed a turnaround maintenance program at the
Prince George Refinery . The program was focused on the operating assets, including the Fluid Catalytic Cracking ("FCC") and canola co-processing projects. The turnaround was executed safely, on budget and within the expected timelines. - The Corporation is pleased to welcome Ms.
Andrea Decore as Executive Vice President, Strategy & Corporate Development.Tidewater Renewables stands to benefit fromMs. Decore's significant commercial and leadership experience within the renewable energy industry. Before joiningTidewater Renewables ,Ms. Decore spent over 19 years at Suncor Energy, most recently as Vice President,Low Carbon Fuels & GHG Offsets . Additionally, she has served as a board member for several low carbon fuel technology development companies acrossNorth America .Ms. Decore holds a Bachelor of Laws degree from theUniversity of Calgary . - The Corporation is pleased to welcome Mr.
Simon Bregazzi to its Board of Directors. Simon brings 30 years of finance and industry experience toTidewater Renewables . Simon spent the first half of his career in finance, ultimately establishing and leading Goldman Sachs'Calgary investment banking office. He spent the second half of his career in energy and energy transition, as a co-founder and CEO of Jupiter Resources, which grew to becomeCanada's ninth largest natural gas producer, and more recently as co-founder and CEO of Carbon Alpha, a leading provider of carbon capture and storage solutions.Mr. Bregazzi holds a Bachelor of Science in Actuarial Science fromWestern University and began his career as a Chartered Accountant.
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(1) Adjusted EBITDA, distributable cash flow, net debt and run rate EBITDA used throughout this press release are non-GAAP financial measures or ratios. 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. |
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 period ended
Financial Highlights
Three months ended | Six months ended | ||||||||
(in thousands of Canadian dollars except per share information) | 2023 | 2022 | 2023 | 2022 | |||||
Revenue | $ | 13,163 | $ | 19,730 | $ | 33,059 | $ | 36,980 | |
Net income (loss) attributable to shareholders | $ | 2,654 | $ | 4,363 | $ | (18,823) | $ | 21,877 | |
Net income (loss) attributable to shareholders | $ | 0.08 | $ | 0.13 | $ | (0.54) | $ | 0.63 | |
Net income (loss) attributable to shareholders | $ | 0.07 | $ | 0.13 | $ | (0.54) | $ | 0.63 | |
Adjusted EBITDA (1,2) | $ | 8,067 | $ | 16,902 | $ | 20,702 | $ | 29,639 | |
Net cash provided by (used in) operating | $ | (7,348) | $ | 13,903 | $ | 4,101 | $ | 33,188 | |
Distributable cash flow(1) | $ | (7,877) | $ | 11,274 | $ | (2,604) | $ | 19,190 | |
Distributable cash flow per share – basic (1) | $ | (0.23) | $ | 0.32 | $ | (0.07) | $ | 0.55 | |
Distributable cash flow per share –diluted (1) | $ | (0.22) | $ | 0.32 | $ | (0.07) | $ | 0.55 | |
Total common shares outstanding (000s) | 34,724 | 34,712 | 34,724 | 34,712 | |||||
Total assets | $ | 1,032,896 | $ | 876,497 | $ | 1,032,896 | $ | 876,497 | |
Net debt(1) | $ | 293,088 | $ | 107,829 | $ | 293,088 | $ | 107,829 |
(1) Refer to "Non-GAAP and Other Financial Measures" in this press release and the Corporation's MD&A. (2) For the three and six months ended |
OUTLOOK AND CORPORATE UPDATE
The Corporation's immediate focus remains on the safe and successful commissioning of
After the
CONFERENCE CALL
In conjunction with the earnings release, investors will have the opportunity to listen to
To access the conference call by telephone, dial 416-764-8659 (local / international participant dial in) or 1-888-664-6392 (North American toll free participant dial in). A question and answer session for analysts will follow management's presentation. A live audio webcast of the conference call will be available by following this link: https://app.webinar.net/KQyDE20VP7m will also be archived there for 90 days.
For those accessing the call via Cision's investor website, we suggest logging in at least 15 minutes prior to the start of the live event. For those dialing in, participants should ask to be joined into the
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, distributable cash flow and run rate EBITDA.
Adjusted EBITDA
Adjusted EBITDA is a non-GAAP measure. Adjusted EBITDA is calculated as income (or loss) before finance costs, taxes, depreciation, share-based compensation, unrealized gains/losses on derivative contracts, non-cash items, transaction costs, lease payments under IFRS 16 Leases and other items considered non-recurring in nature plus the Corporation's proportionate share of EBITDA in its equity investment.
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) | 2023 | 2022 | 2023 | 2022 | |||||
Net income (loss) | $ | 2,654 | $ | 4,363 | $ | (18,823) | $ | 21,877 | |
Deferred income tax expense (recovery) | 1,105 | 1,919 | (6,557) | 8,362 | |||||
Depreciation | 5,264 | 4,815 | 10,188 | 9,503 | |||||
Finance costs | 4,542 | 1,410 | 9,949 | 2,184 | |||||
Share-based compensation | 1,635 | 904 | 3,355 | 1,354 | |||||
Unrealized loss (gain) on derivative contracts | (9,195) | 2,876 | 27,840 | (14,309) | |||||
Gain on warrant liability revaluation | (720) | - | (7,970) | - | |||||
Transaction costs | 21 | 347 | 101 | 400 | |||||
Non-recurring transactions (1) | 3,927 | - | 4,264 | - | |||||
Adjustment to share of profit from equity | (1,166) | 268 | (1,645) | 268 | |||||
Adjusted EBITDA | $ | 8,067 | $ | 16,902 | $ | 20,702 | $ | 29,639 |
(1) | Non-recurring transactions for the three and six months ended |
(2) | For the three and six months ended |
Distributable Cash Flow
Distributable cash flow is a non-GAAP measure. Management believes distributable cash flow is a useful metric for investors when assessing the amount of cash flow generated from 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. Distributable cash flow is calculated as net cash provided by 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. Deducted from distributable cash flow are maintenance capital expenditures, including turnarounds, 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. It also excludes non-recurring transactions that do not reflect
The following table reconciles net cash provided by (used in) operating activities, the nearest GAAP measure, to distributable cash flow:
Three months ended | Six months ended | |||||||||||
(in thousands of Canadian dollars) | 2023 | 2022 | 2023 | 2022 | ||||||||
Net cash provided by (used in) operating activities | $ | (7,348) | $ | 13,903 | $ | 4,101 | $ | 33,188 | ||||
Add (deduct): | ||||||||||||
Changes in non-cash working capital | 11,037 | 1,896 | 10,749 | (4,764) | ||||||||
Transaction costs | 21 | 347 | 101 | 400 | ||||||||
Non-recurring transactions (1) | 3,927 | - | 4,264 | - | ||||||||
Interest and financing charges | (3,564) | (446) | (6,568) | (1,002) | ||||||||
Payment of lease liabilities | (1,603) | (1,434) | (3,216) | (2,905) | ||||||||
Maintenance capital (2) | (10,347) | (2,992) | (12,035) | (5,727) | ||||||||
Distributable cash flow | $ | (7,877) | $ | 11,274 | $ | (2,604) | $ | 19,190 |
(1) | Non-recurring transactions for the three and six months ended |
(2) | Maintenance capital includes expenditures incurred on the scheduled Q2 2023 turnaround at PGR. |
Run Rate EBITDA
Run rate EBITDA is defined as the expected Adjusted EBITDA to be generated by
Run rate EBITDA guidance related to the
Non-GAAP Financial Ratios
Distributable Cash Flow Per Common Share
Three months ended | Six months ended | |||||||
(in thousands of Canadian dollars except per share information) | 2023 | 2022 | 2023 | 2022 | ||||
Distributable cash flow | $ | (7,877) | $ | 11,274 | $ | (2,604) | $ | 19,910 |
Weighted average shares outstanding - basic | 34,722 | 34,712 | 34,721 | 34,712 | ||||
Weighted average shares outstanding - diluted | 35,613 | 34,712 | 34,721 | 34,712 | ||||
Distributable cash flow per share– basic | $ | (0.23) | $ | 0.32 | $ | (0.07) | $ | 0.55 |
Distributable cash flow per share– diluted | $ | (0.22) | $ | 0.32 | $ | (0.07) | $ | 0.55 |
Capital Management Measures
Net Debt
Net debt is defined as bank debt and term debt, less cash and cash equivalents. 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 | $ | 140,000 | |
Term debt | 175,000 | ||
Cash and cash equivalents | (21,912) | ||
Net debt | $ | 293,088 |
FORWARD-LOOKING INFORMATION
Certain statements contained in the 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, the Press Release contains forward-looking statements pertaining to, but not limited to, the following: the expected operational and financial performance of the Corporation's Renewable Assets, including the
Although the forward-looking statements contained in the 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 the 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; risks relating to the BC LCFS credit or CFR credit systems; general economic, political, market and business conditions, including fluctuations in interest rates, foreign exchange rates, commodity prices, Consumer Price Index, supply chain pressures and restrictions, inflation, stock market volatility and supply/demand trends; risks related to changes in feedstock prices and revenues from offtakes; economic uncertainties, further cost increases, or unexpected delays with the Corporation's projects; 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 environment and changing environmental laws in relation to the operations conducted with the Renewable Assets and the Corporation's other capital projects; and the other risks set forth in the Corporation's most recent AIF available under the Corporation's profile on SEDAR+ at www.sedarplus.com.
The foregoing lists are not exhaustive. Additional information on these and other factors which could affect the Corporation's operations or financial results are included in the Corporation's most recent AIF and in other documents on file with the
Management of the Corporation has included the above summary of assumptions and risks related to forward-looking statements provided in the 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 the Press Release.
Financial Outlook
This press release contains future-oriented financial information and financial outlook information (collectively, "FOFI") about expectations regarding financial results for 2023 and 2024, including Adjusted EBITDA and annual run rate EBITDA, 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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