Forward Looking Information

Transcription

1 April 2017

2 Forward Looking Information Advisory In the interests of providing Tidewater Midstream and Infrastructure Ltd. ( Tidewater or the Corporation ) shareholders and potential 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 forwardlooking 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 All forward-looking statements contained in this document 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, 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. Readers are 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 means earnings 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, scheduled principal repayments of debt and distributions to non-controlling interests. 2

3 Tidewater Summary 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 Q 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 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 onbudget 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 3

4 Tidewater is a High Growth Midstream Company NGL Connectivity Strategy 1 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 2 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 3 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 Q Relocation of existing acquired and idled turbo expander and now scoping expansion at BRC Commence construction of first NGL rail loading facility 4 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 Focused on building out large scale Montney infrastructure and related egress Improve cost structure and realized pricing 4

5 ... That Currently Provides a Low-Risk Attractive Investment Opportunity Attractive Investment Opportunity 1 Very Conservative Capital Structure 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% 2 Underlying Stable Cash Flow mproducing Infrastructure Assets 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 3 Growing EBITDA, CFPS and Share Value 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 months while maintaining a strong balance sheet with Debt to EBITDA of 1-2x through the execution and commissioning of capital program 4 Relatively Undervalued versus Comparable Companies 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 5

6 Tidewater Facilities and Connectivity 6

7 Overview of Deep Basin Assets 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 in principle 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 ontime and on-budget Fractionation facility is expected to cost $25-$27 million and generate $6-$7 million of annualized EBITDA once commissioned in Q 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 Deep Basin Processing Facilities & Pipelines 7

8 Overview of Edmonton Assets 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 Edmonton Processing Facilities & Pipelines 8

9 Overview of Montney Assets 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 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 Montney Processing Facilities & Pipelines 9

10 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 Core Facility Throughput (MMcf/d) Take-or-pay Reserve Dedication Take or Pay: Years Remaining Producer #1 90 Yes Yes 2 TCPL Extraction 65 Yes No 10+ Producer #2 Producer #3 Producer #4 Producer #5 Producer #6 Producer #7 Producer #8 Producer #9 Producer #10 Producer #11 Producer #12 Producer # 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

11 EBITDA ($MM) EBITDA Growth Since Inception Focused on per share EBITDA growth with 25% per share EBITDA growth from Q to Q Research analysts forecasting further EBITDA growth through 2017 EBITDA Growth 1 $20.0 $0.08 $16.2 $17.4 $15.0 $13.9 $14.7 $0.06 $11.8 $10.0 $5.0 $5.0 $7.1 $7.3 $9.3 $9.5 $0.04 $0.02 EBITDA per Share ($/sh.) ($0.2) 2015-Q Q Q Q Q Q Q Q Q Q Q4 ($5.0) ($0.02) EBITDA EBITDA per Share 1 Forward looking EBITDA estimates as per FactSet street consensus as at Mar. 29,

12 C$ Millions 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 $100 $90 $80 $70 $60 $50 $40 EBITDA from previously announced acquisitions Pro Forma EBITDA Current TWM Status Total EBITDA Net Debt 1 $55 $42 $42 $46 $49 $54 $54 $50 $56 $61 $69 $71 $71 $44 $44 $87 $98 $30 $20 $24 $24 $26 $28 $28 $20 $25 $20 $54 $38 $10 $0 - ($5) ($2) ($2) ($10) ($20) ($25) ($17) ($12) ($23) ($21) ($15) ($30) IPO BRC Acquisition & Financing Pipeline Acquisition Peace River Arch Gas Plant Acquisition Gas Plant & Propane Acquisitions Edmonton Area Infrastrucutre Acquisition AltaGas Acquisition $80.5 MM Financing Acheson Plant, Land and Pipeline Acquisition and Rail Facility BRC Infra. Acquisition Remaining BRC Interest, Gathering Pipelines, Nat Gas Storage $69 MM Financing NEBC Processing Plant / NGL Trucking Q4 Processing Agreement / Pembina Restrictions Lifted / Fort Saskatchewan Reactivation Fractionation Facility & Relocation of Turbo Expander TransCanada and Alliance Connected Infrastructure Total Remaining Capital Over Next Months Capital Spent/ Required Capital $180 $8 $12 $22 $10 $87 n.a. $17 $15 $30 n.a. $13 $2 $40 $6 $442 $80-$150 1 Cash flow for forward looking net debt calculated as EBITDA less growth capex, maintenance capex and dividends. 12

13 Tidewater Q Capital Budget Review Up to an additional $80-$150 MM to be spent over the next months generating similar returns Tidewater Capital Projects Project Capital EBITDA Description Acheson Facility and Rail Terminal BRC Infrastructure Acquisition Remaining BRC Interest, Gathering Pipelines, Natural Gas Storage $17 MM $4 MM $15 MM $3 MM $30 MM $4 MM Fractionation Facility $25-$27 MM $6-7 MM Relocation of Deep-cut Turbo Expander TransCanada and Alliance Connected Infrastructure $12-$15 MM $3 MM $6 MM $2 MM Total $105-$110 MM $22-$23 MM Acquisition of sour gas processing plant ($11 MM) and construction of operated rail facility ($6 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 Acquisition of remaining working interest in BRC facility and related upstream assets 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. Ontime and o- budget on industry leading timeline of 8 months Relocate the currently idled 40 MMcf/d deepcut turbo expander from the Edmonton area assets acquired in January On-time and on-budget. Completed construction of Phase 1 of TransCanada and Alliance connected infrastructure and related NGL hub and natural gas storage project on-time and onbudget 13

14 Tidewater Corporate Profile Stock Symbol Common Shares Outstanding TSXV: TWM ~328 million Insider Ownership (Fully Diluted) ~5.0% Market Capitalization 1 Net Debt Enterprise Value Total Midstream Processing Capacity (gross/net) and Length of Pipelines (gross/net) Replacement Value of Midstream Assets Annual Dividend $450 million $25 million $475 million ~1 Bcf/day / ~650 MMcf/day ~3,500 km / ~2,500 km > $1.5 billion $0.04/sh. Current Yield 1 ~2.9% 1 As at Mar. 29,

15 Tidewater Midstream Trading Comparables 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 Price 1 Cap. 2 Value 2,3 Growth E E 4 Yield 2018E 4,5 2018E 4 Total 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. Tidewater is trading at a large discount to comparables despite a more conservative capital structure Source: Company reports and Bloomberg. Estimates based on consensus equity research; management estimate for 2017E EBITDA. 1 As at Mar. 29, 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. 15