Tidewater Midstream and Infrastructure Ltd. announces an accelerated deleveraging plan through the accretive disposition of the Pioneer Pipeline as well as additional commercial arrangements at the Brazeau River Complex

CALGARY, March 12, 2020 /CNW/ - Tidewater Midstream and Infrastructure Ltd. ("Tidewater" or the "Corporation") (TSX: TWM) is pleased to announce that, with its partner TransAlta Corporation ("TransAlta"), has entered into a Letter of Intent to sell the Pioneer Pipeline to NOVA Gas Transmission Ltd. ("NGTL"), a wholly-owned subsidiary of TC Energy, for total cash consideration of $255.0 million (the "Pioneer Transaction"). Proceeds of the transaction will be split equally between Tidewater and TransAlta pursuant to their existing Pioneer Pipeline partnership.

In addition, Tidewater and TransAlta have entered into a separate Letter of Intent whereby TransAlta will pay Tidewater an additional $10.5 million for certain ancillary assets  not included in the Pioneer Transaction, and for completion of some budgeted restoration work along the Pioneer Pipeline route that was delayed until 2020 due to weather (together with the Pioneer Transaction, collectively known as the "Proposed Transactions").

Independently, NGTL and Tidewater have also agreed to terms and conditions to qualify Tidewater for NGTL services that would result in Tidewater's proforma Adjusted EBITDA remaining unchanged following the close of the Proposed Transactions.

The Proposed Transactions result in net proceeds to Tidewater of $138.0 million.  As such, the Proposed Transactions and NGTL services are expected to be 15% accretive to year-end 2020 Net Debt to Adjusted EBITDA and 30% accretive to Net Income per share on a proforma basis to Tidewater's 2020 guidance.

Pioneer Pipeline Disposition Details

Tidewater and TransAlta have entered a Letter of Intent with NGTL (collectively known as the "Parties") to sell the Pioneer Pipeline for total cash consideration of $255.0 million to be split equally between Tidewater and TransAlta. The Pioneer Transaction is subject to standard closing conditions, including the Parties entering into a purchase and sale agreement, and receipt of approval of the necessary regulatory applications.

Tidewater and TransAlta have also entered a Letter of Intent whereby TransAlta will pay to Tidewater $10.5 million to purchase certain assets that are not part of the Pioneer Transaction, and for completion of some budgeted restoration work along the Pioneer Pipeline route that was delayed until 2020 due to weather.

Tidewater's aggregate net proceeds to be received from the Proposed Transactions is $138 million.

New Commercial Arrangements

Independent of the Proposed Transactions, Tidewater and NGTL have agreed to terms and conditions to qualify Tidewater to receive interruptible storage services ("IT-S Service") at Tidewater's Brazeau River Complex storage facilities ("BRC Storage Facilities"). With the IT-S Service, Tidewater will be able to attract new, creditworthy storage customers at the BRC Storage Facilities, creating new future expansion opportunities to increase storage capacities at the BRC Storage Facilities.

Subject to regulatory approvals, Tidewater and NGTL have also agreed to terms and conditions to qualify Tidewater for NGTL services with respect to the natural gas currently transported on the Pioneer Pipeline and incremental natural gas from increased access to the NGTL system, which will lead to higher fractionation and processing utilization levels at the Brazeau River Complex ("BRC"). The terms and conditions of this arrangement would be for a similar term as TransAlta's current 15-year take-or-pay agreement on the Pioneer Pipeline, resulting in Tidewater's proforma Adjusted EBITDA remaining largely unchanged following the close of the Proposed Transactions.

Financial Highlights

The divestiture of the Pioneer Pipeline significantly accelerates Tidewater's commitment to achieve approximately 3.0x Net Debt to Adjusted EBITDA by the end of 2020. Tidewater's proforma EBITDA will remain unchanged through off-setting, increased capacity utilization at the BRC and future growth and expansion opportunities at the BRC as throughput on the Pioneer Pipeline increases to 400 MMcf/d to meet TransAlta's future natural gas demands. The Proposed Transactions and NGTL services are expected to be 15% accretive to year-end 2020 Net Debt to Adjusted EBITDA and 30% accretive to Net Income per share to Tidewater's 2020 guidance. While Tidewater continues to evaluate future growth opportunities, the Corporation intends to use the proceeds from the Proposed Transactions to reduce debt.

Toby McKenna, President, Midstream commented, "The proposed transaction will provide oil and gas producers throughout Western Canada with access to the Pioneer Pipeline through the NGTL system on a much larger scale, benefiting our industry as whole. We would also like to take this opportunity to thank TransAlta for being an exceptional partner in developing the Pioneer Pipeline which provided oil and gas producers in the greater Brazeau area with direct connectivity to a new, large demand source."

The Parties are expected to enter the purchase and sale agreement prior to the end of the May of 2020, and the Proposed Transactions are expected to close as soon as regulatory approvals are received.   

About Tidewater

Tidewater is traded on the TSX under the symbol "TWM". Tidewater's business objective is to build a diversified midstream and infrastructure company in the North American natural gas, natural gas liquids ("NGL") and crude oil space. Its strategy is to profitably grow and create shareholder value through the acquisition and development of oil and gas infrastructure. Tidewater plans to achieve its business objective by providing customers with a full service, vertically integrated value chain through the acquisition and development of oil and gas infrastructure including: refineries, gas plants, pipelines, railcars, trucks, export terminals and storage facilities.

Cautionary Notes

Non-GAAP Measures

This press release refers to Adjusted EBITDA and net debt which are supplemental financial measures ("Non-GAAP Measures") that do not have standardized meanings under International Financial Reporting Standards ("IFRS") representing GAAP.  Since Non-GAAP Measures do not have a standardized meaning prescribed by GAAP and are therefore unlikely to be comparable to similar measures presented by other companies, securities regulators require that Non-GAAP Measures are clearly defined, qualified and reconciled to their nearest GAAP measure.  These Non-GAAP Measures are calculated and disclosed on a consistent basis from period to period.  Specific adjusting items may only be relevant in certain periods.  The intent of Non-GAAP Measures is to provide additional useful information respecting Tidewater's financial and operations performance to investors though the measures do not have any standardized meaning under IFRS.  The measures should not therefore be considered in isolation or used in substitute for measures of performance prepared in accordance with IFRS.  Other issuers may calculate these Non-GAAP Measures differently.

Investors should be cautioned that these measures should not be construed as alternatives to revenue, earnings, cash flow from operating activities, gross profit or other measures of financial results determined in accordance with GAAP as an indicator of Tidewater's performance.  For additional information regarding Non-GAAP Measures, please refer to Tidewater's most recent MD&A which is available on SEDAR at www.sedar.com.

Adjusted EBITDA

2020E Adjusted EBITDA for Tidewater standalone is further described in the Corporation's corporate presentation, which can be found on the Corporation's website.

Net Debt

Net debt is defined as bank debt, notes payable and convertible debentures, less cash.

Advisory Regarding Forward-Looking Statements

In the interest of providing Tidewater's shareholders and potential investors with information ‎regarding Tidewater, including management's assessment of Tidewater's future plans and ‎operations, certain statements in this press release are "forward-looking information" within the ‎meaning of applicable Canadian securities legislation ("forward-looking statements"). In some ‎cases, forward-looking statements can be identified by terminology such as "anticipate", ‎‎"believe", "continue", "could", "estimate", "expect", "forecast", "intend", "may", "objective", ‎‎"ongoing", "outlook", "potential", "project", "plan", "should", "target", "would", "will" or similar ‎words suggesting future outcomes, events or performance. The forward-looking statements ‎contained in this press release speak only as of the date thereof and are expressly qualified by this ‎cautionary statement. ‎

Specifically, this press release contains forward-looking statements relating to but not limited to: the sale of the Pioneer Pipeline to NGTL and the sale of certain ancillary assets to TransAlta Corporation (the "Proposed Transactions") and the proceeds to be received by Tidewater from the Proposed Transactions; projections of proforma EBITDA to Tidewater resulting from the Proposed Transactions and new NGTL service; estimated impact of the Proposed Transactions to Net Debt to Adjusted EBITDA and Net Income per share; the anticipated receipt of all regulatory approvals for the Proposed Transactions; Tidewater's ability to attract new, creditworthy storage customers at the BRC Storage Facilities; anticipated higher fractionation and processing utilization levels at the BRC; and, Tidewater's projected use of proceeds from the Proposed Transactions. These forward-looking statements are based on certain key assumptions regarding, among other things: our ability to execute on our business plan; the timely receipt of all governmental and regulatory approvals; that third parties will provide any necessary support; that any third party projects relating to the Corporation's divestitures will be sanctioned and completed as expected; that there are no unforeseen events preventing the performance of contracts; that there are no unforeseen material changes related to the divestitures, that counterparties will comply with contracts in a timely manner; new commercial arrangements or current operations; our operating activities; the availability and cost of labour and other industry services; and current industry conditions, laws and regulations continuing in effect (or, where changes are proposed, such changes being adopted as anticipated). Readers are cautioned that such assumptions, although considered reasonable by Tidewater at the time of preparation, may prove to be incorrect.

Actual results achieved will vary from the information provided herein as a result of numerous known and unknown risks and uncertainties and other factors. These known and unknown risks and uncertainties, include, but are not limited to: the regulatory environment and decisions; the possibility that governmental policies or laws may change or governmental approvals may be delayed or withheld; the ability of Tidewater or its joint venture partners or customers to raise sufficient capital (or to raise sufficient capital on favourable terms) to fund future expansions and growth projects and satisfy future commitments; failure to negotiate and conclude any required commercial agreements or failure to obtain project sanctioning; increased construction costs, or construction delays, on Tidewater's expansion and growth projects; labour and material shortages; non-performance of agreements in accordance with their terms; the impact of competitive entities and pricing; reliance on key industry partners, alliances and agreements; the continuation or completion of third-party projects; actions by governmental or regulatory authorities including changes in tax laws and treatment, construction delays; labour and material shortages; and certain other risks detailed from time to time in Tidewater's public disclosure documents including, among other things, those detailed under the heading "Risk Factors" in Tidewater's management's discussion and analysis and annual information form for the year ended December 31, 2019.

The above summary of assumptions and risks related to forward-looking statements in this press release has been provided in order to provide shareholders and potential investors with a more complete perspective on Tidewater's current and future operations and such information may not be appropriate for other purposes. There is no representation by Tidewater that actual results achieved will be the same in whole or in part as those referenced in the forward-looking statements and Tidewater does not undertake any obligation to update publicly or to revise any of the included forward-looking statements, whether as a result of new information, future events or otherwise, except as may be required by applicable securities law.

Additional information relating to Tidewater is available on SEDAR at www.sedar.com and at www.tidewatermidstream.com.

SOURCE Tidewater Midstream and Infrastructure Ltd.

Tidewater Midstream & Infrastructure Ltd., Joel MacLeod, Chairman, President and CEO, 587.475.0210, [email protected]