Release Date: March 27, 2025
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
Positive Points
- Tidewater Midstream and Infrastructure Ltd (TWMIF, Financial) successfully transitioned to marketing all refined products in-house after the expiration of the offtake agreement with Cenovus.
- The company completed the sale of several noncore assets, generating over $40 million in proceeds used for debt repayment.
- Tidewater Midstream and Infrastructure Ltd (TWMIF) made significant progress in marketing its diesel and gasoline volumes for 2025, despite wider market discounts.
- The company initiated a trade complaint against subsidized renewable diesel imports from the US, which could lead to tariffs supporting market stability.
- Operational efficiency improvements and cost savings initiatives are expected to result in run rate savings between $7 million and $10 million going forward.
Negative Points
- Throughput at the Prince George Refinery (PGR) and HDRD facilities was lower in Q4 2024 compared to Q3 2024, due to scheduled maintenance and winter operations.
- Prince George crack spreads averaged $75 per barrel in Q4 2024, lower than the $87 per barrel in Q4 2023.
- The company reported a net loss attributable to shareholders of $3.3 million in Q4 2024.
- Gas processing activities at the Ram River Gas Plant were temporarily curtailed due to depressed natural gas prices.
- The company faces challenges from an oversupply of imported renewable diesel in Western Canada, impacting market discounts.
Q & A Highlights
Q: Can you update us on how participants have changed their behavior following the rule changes from the BC government regarding the LCFS market, and what do you think the clearing price could be for April?
A: Jeremy Baines, CEO: The rule changes have led to a significant disincentive for conventional players to import US subsidized renewable diesel into the BC market. We've seen increased demand for Canadian-made renewable diesel and have expanded our customer base. The import season for BC is typically the summer, and with the new Canadian renewable content requirements, we expect credit prices to normalize closer to where they were in the first half of 2020.
Q: Regarding LCFS EBITDA, with changes in the credit market and the resolution of duties, where do you think improvement could get to if the trade complaint is not successful?
A: Jeremy Baines, CEO: We are confident that we will be successful in the trade case, which will impose significant duties. In the long term, the BC market will need a significant portion of diesel supplied by renewable diesel, and we expect a tightening market. We anticipate credit prices will move closer to first-half numbers as we progress through the year.
Q: Could you provide an update on how alternative markets for downstream products look, given current crack spreads?
A: Jeremy Baines, CEO: We optimize netbacks daily, with our best markets being British Columbia and the Prince George orbit. We are logistically advantaged there due to significant economic activity. We continue to explore creative ways to place our products optimally, despite softer crack spreads in Q4 and early Q1.
Q: What progress have you made since you started marketing the PGR volumes, and what trends are you seeing in wholesale discounts?
A: Jeremy Baines, CEO: Since the expiration of the Cenovus offtake agreement, we've expanded our customer base and optimized our netbacks. We've won some mining RFPs and are working with large buyers with downstream retail networks. It's a work in progress, but we're moving the product and optimizing sales.
Q: What will it take to justify bringing the Ram River plant back fully online?
A: Jeremy Baines, CEO: Sustained natural gas prices above $2.50 are needed. We expect a more supportive gas environment in the latter half of the year with LNG Canada coming online.
Q: Can you provide an update on your noncore asset sale program and what might be available throughout 2025?
A: Jeremy Baines, CEO: We have about $100 million worth of noncore assets that generate low returns. We are in various stages of discussions and could see $100 million in divestitures over the next 12 months without impacting cash flow and EBITDA materially.
Q: Will the sale of noncore assets allow you to return to normal covenant levels or achieve other credit ratio targets by year-end?
A: Jeremy Baines, CEO: The asset sales would generate significant liquidity, putting the business in a better spot. We would be comfortable with the level of deleveraging achieved, subject to normal risk factors like crack spreads and gas prices.
Q: Does the $15 million to $20 million capital spending include the annual turnaround at PGR?
A: Shawn Heaney, EVP, Planning and Strategy: The disclosed capital spending includes normal annual maintenance but not a major turnaround, as the next major turnaround for PGR is scheduled for 2027.
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
