Release Date: November 14, 2024
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 its refined products in-house after the end of its offtake agreement with Cenovus.
- The Prince George refinery and HDRD facilities continue to operate well, maintaining consistent throughput levels.
- Tidewater Midstream has entered into agreements for the sale of the majority of its diesel and gasoline volumes for the remainder of 2024.
- The company is actively engaging with government bodies to address trade issues impacting the competitiveness of its operations.
- Tidewater Midstream's Brazeau River Complex operated efficiently following a Q2 turnaround, despite lower producer volumes.
Negative Points
- The Prince George refinery experienced a 9% decrease in throughput compared to the previous year due to a third-party outage.
- Crack spreads have decreased from $87 per barrel in Q3 2023 to approximately $84 per barrel in Q3 2024, with further declines expected.
- The oversupply of imported diesel in Western Canada is leading to wider market discounts and lower margins.
- Gas processing activities at the Ram River facility have been curtailed due to low natural gas prices, impacting throughput.
- Consolidated adjusted EBITDA decreased year-over-year, primarily due to lower diesel and gasoline pricing and reduced throughput volumes.
Q & A Highlights
Q: How does the LCFS credit market issue affect Tidewater Midstream's capital allocation and relationship with Tidewater Renewables?
A: Jeremy Baines, CEO, stated that the strategy at Tidewater Midstream remains unchanged. They will continue to operate their refineries and manage midstream assets efficiently. They expect government policy changes to support renewables and are optimistic about market conditions improving in 2025.
Q: Are there any plans for further asset sales or monetizations, particularly focusing on the refinery side?
A: Jeremy Baines, CEO, mentioned that they do not publicly comment on potential asset sales or monetizations.
Q: Has there been any indication from the new BC government regarding regulatory or subsidy changes for imported diesel or renewable diesel imports?
A: Jeremy Baines, CEO, noted that discussions with the BC government have been supportive. The government is interested in solutions that protect jobs and support the renewable fuels industry in British Columbia.
Q: What is the plan if regulatory changes or subsidies from the government do not materialize?
A: Jeremy Baines, CEO, expressed optimism that the market will correct itself, and they are working towards a solution. They are monitoring the US market and expect a fix to the current unlevel playing field.
Q: Can you provide an update on the maintenance CapEx position and whether it reflects a new norm for the business?
A: Aaron Ames, Interim CFO, explained that each year is different due to factors like turnarounds. The current guidance reflects optimization of work activities, and future guidance will be provided in subsequent calls.
Q: How much of the combined production at PGR and HDRD is absorbed by the local Northern BC market, and how much competes with US volumes?
A: Jeremy Baines, CEO, stated that the vast majority of their product is sold in British Columbia. They evaluate netbacks and have historically sold into Alberta, the Lower Mainland, and the US based on market conditions.
Q: Has the hedging policy changed, and what is the current approach?
A: Aaron Ames, Interim CFO, mentioned that due to the lack of a perfect hedge in BC, they engage in minimal hedging. They consider both input and output costs, but do not hedge extensively.
Q: With Ram River shut in, how long can it remain offline without incurring asset retirement obligation expenditures?
A: Jeremy Baines, CEO, indicated that the site remains active with sulfur operations, and they do not anticipate triggering ARO accelerations. They expect gas prices to improve, allowing operations to resume.
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
