Mr. Jeremy Baines reports

TIDEWATER MIDSTREAM AND INFRASTRUCTURE LTD. ANNOUNCES FOURTH QUARTER 2023 RESULTS, OPERATIONAL UPDATE AND JOINT DEVELOPMENT AGREEMENT FOR SUSTAINABLE AVIATION FUEL

Tidewater Midstream and Infrastructure Ltd. has filed its consolidated financial statements and management's discussion and analysis (MD&A) for the period ended Dec. 31, 2023.

Fourth quarter and year-end 2023 highlights:

• On Dec. 22, 2023, Tidewater closed the sale of its Pipestone natural gas plant (Pipestone phase I), Pipestone expansion project (Pipestone phase II, collectively Pipestone), Dimsdale natural gas storage facility, and associated gathering and other infrastructure, to AltaGas Ltd. for $665-million before closing adjustments. As consideration for the transaction, Tidewater received $328.3-million in cash and 12,466,437 AltaGas common shares. Cash proceeds from the transaction were used to settle credit facility debt of approximately $275-million and working capital of approximately $53.3-million.
• On Jan. 9, 2024, Tidewater monetized its AltaGas shares for net proceeds of $341.6-million. The share proceeds were used to further reduce credit facility debt by $293-million and working capital of $48.6-million.
• In 2023, Tidewater Renewables Ltd. completed a feasibility assessment for an expansion of its renewable fuel facilities. In the first quarter of 2024 Tidewater Renewables and Tidewater entered into a joint development agreement related to a new 6,500-barrel-per-day renewable diesel and sustainable aviation fuel (SAF) project in British Columbia, whereby both parties have the right to participate in up to 50 per cent of the project upon a final investment decision. Front-end engineering design work on the SAF facility has begun, with the cost to be covered through government support in the form of capital emissions credits.
• In the fourth quarter of 2023, Tidewater Renewables achieved a transformational milestone with the renewable diesel and renewable hydrogen (HDRD complex) commencing commercial operations in November, 2023. Commercial operations progressed during the first quarter of 2024 and the facility has been operating at its design capacity since late February, 2024. Tidewater expects the HDRD complex to achieve a utilization rate of approximately 65 per cent in the first quarter of 2024 and to continue to operate reliably at design capacity going forward.
• Tidewater Renewables has secured purchasers for the HDRD complex's operating emission credit production through the second quarter of 2024.
• Consolidated net loss attributable to shareholders was $331.8-million during the fourth quarter of 2023, compared with a net loss attributable to shareholders of $30-million during the 2022 comparative period. Full-year consolidated net loss attributable to shareholders was $385.9-million compared with net income attributable to shareholders of $8.5-million during the full year in 2022. The higher losses reported in 2023 are primarily a result of higher unrealized losses on derivative contracts, non-cash impairment charges taken during the fourth quarter of 2023 and the second quarter 2023 turnaround at the Prince George refinery (PGR) impacting full-year results.
• Fourth quarter 2023 consolidated adjusted EBITDA (earnings before interest, taxes, depreciation and amortization) was $21.4-million for the quarter, compared with $60.4-million during the fourth quarter of 2022. Full-year 2023 consolidated adjusted EBITDA was $162.9-million, compared with $249.8-million during 2022. The quarter-over-quarter decrease was primarily due to lower refining margins and reduced diesel demand related to warmer weather in the fourth quarter of 2023, realized losses on derivative contracts, as well as a maintenance outage at Pipestone during the quarter, with full-year 2023 results also impacted by the PGR turnaround during the second quarter of 2023.
• Subsequent to the transaction close, the corporation took a non-cash impairment charge of approximately $418-million on its mid-stream assets.

"I've joined Tidewater at a very exciting time and I am pleased to be a part of the team. I've had the chance to get to know our people, visit a number of key facilities and I am very encouraged by the opportunities in Tidewater's future," stated chief executive officer Jeremy Baines. "As we move forward from a challenging 2023, the Pipestone transaction has transformed Tidewater's balance sheet and will provide us with the financial flexibility to optimize our existing asset base in 2024. The HDRD complex has reached new production milestones in 2024 and we are seeing strong demand for R30 diesel. Our team is focused on controlling costs and optimizing returns within our asset base and we will continue to delever to position for the long-term growth of our business. The planning stages of our SAF project have begun, which is a project that closely aligns with our conventional and renewable fuel businesses at PGR and will allow us to further expand our existing infrastructure."

Strategic update

Tidewater's strategy is fundamentally supported by three key operational initiatives: maintaining safe and reliable operations, generating return on assets through maximizing facility throughputs and optimizing its existing asset base, and achieving synergies through integration. The following progress was made on these initiatives in 2023 and 2024 year to date:

• Maintain safe and reliable operations:
  • No lost time incidents at the PGR in 2023 during the planned turnaround or through regular operations;
  • Construction of the HDRD complex and related commissioning were completed with no lost time incidents.
• Return on assets and optimizing existing asset base:
  • Record second-half 2023 throughput at the PGR;
  • The HDRD complex reached commercial operations in 2023 and increased reliability toward design capacity in the first quarter of 2024;
  • New downstream customer serviced using the infrastructure of the HDRD complex and PGR;
  • The SAF project in British Columbia can utilize infrastructure at PGR and the HDRD complex;
  • Operating and maintenance optimization initiatives identified approximately $5-million of potential maintenance capital savings and $6-million of run rate potential operating cost savings.
• Corporate integration and synergies:
  • Cost reduction measures to reduce up to $5-million of general and administrative expenditures identified for 2024.

Pipestone and Dimsdale transaction

On Dec. 22, 2023, Tidewater closed the sale of its Pipestone and Dimsdale assets to AltaGas. Transaction proceeds comprised $328.3-million in cash and 12,466,437 AltaGas common shares, representing total proceeds of approximately $665-million. On Jan. 9, 2024, Tidewater monetized its shareholdings in AltaGas for total proceeds of approximately $341.6-million, with the proceeds primarily being allocated to debt repayment.

The use of proceeds from the transaction results in an immediate reduction in Tidewater's interest expense and simplifies the corporation's operating and capital structure. With reduced leverage, Tidewater is well positioned to finance its base operations and pursue its strategy of providing mission-critical products and services that support the growing demand for cleaner energy products.

Downstream

Tidewater achieved record throughput at the PGR during the second half of 2023, operating above its nameplate capacity in both the third and fourth quarter. The increased throughput in the second half of 2023 is driven by catalyst and unifiner upgrades that were completed during the second quarter planned turnaround.

Fourth quarter refinery margins were impacted by unseasonably warm weather, which drove weaker diesel demand and impacted the downstream financial results. In December of 2023, Tidewater began selling R30 diesel and expects to significantly increase sales in the first quarter of 2024. Existing infrastructure at the PGR provides Tidewater with the flexibility to sell renewable diesel direct to customers or blend renewable and conventional diesel, based on customer specifications.

Mid-stream

Brazeau River complex and fractionation facility

During the fourth quarter, the Brazeau River complex (BRC) facility throughput decreased to 134 million cubic feet/day, a 14-per-cent decrease from the previous quarter. The BRC's fractionation facility benefited from approximately 87-per-cent availability during the quarter.

The BRC remains one of Tidewater's core assets and is well positioned in the Deep basin, by offering producers multiple natural gas liquids egress options through its fractionation facility, truck loading and offloading facilities, natural gas liquids pipeline connections, along with two natural gas transportation connections. The BRC's fractionation facility serves as a key asset for Tidewater's natural gas liquids marketing business.

Ram River gas plant

The Ram River natural gas processing facility average throughput increased to 96 MMcf/day during the fourth quarter of 2023, an 8-per-cent increase over the previous quarter. Tidewater is actively working with local third parties to increase throughput volumes, enhance overall regional processing efficiencies, and maximize contracted revenues with the plant's natural gas and sulphur handling infrastructure.

Pipestone natural gas plant

Tidewater closed the sale of its Pipestone assets on Dec. 22, 2023. Facility throughput during the fourth quarter of 2023 was reduced due to maintenance activities in November.

Capital program

Tidewater's 2023 growth initiatives were primarily focused on the completion of Tidewater Renewables' HDRD complex located at Prince George. Investments during the second quarter scheduled turnaround at PGR led to increased unifiner capacity and upgraded catalyst that contributed to record throughput volumes during the second half of 2023.

Outlook

For 2024, Tidewater expects the operating guidance noted herein at its core facilities.

In 2024, management's top priorities are focused on generating positive operating cash flow and deleveraging. Management is currently reviewing its operating structure for cost synergies within its existing asset base. In addition, management is reviewing the scale and scope of planned maintenance spending in 2024, to ensure that maintenance projects appropriately prioritize safety and asset integrity, while maximizing its return on assets.

To date, the company has identified opportunities to reduce $5-million of general and administrative expenses on a run-rate basis. In addition, at BRC the company has optimized the scope of the 2024 turnaround and identified potential cost savings of approximately $5-million and an additional $6-million of potential operating cost savings on a run-rate basis. Through the remainder of 2024, Tidewater will continue to review and optimize its capital and operating expenditures, while ensuring safe and reliable operations.

Tidewater's 2024 maintenance capital program is weighted to the first half of 2024, with an expected turnaround at the BRC in the second quarter of 2024. Full-year expected deconsolidated maintenance capital is expected to be in the range of $25-million to $30-million.

Fourth quarter 2023 earnings call

In conjunction with the earnings release, Tidewater's executive will hold a call to review its fourth quarter 2023 results via conference call on Thursday, March 14, 2024, at 11 a.m. MDT (1 p.m. EDT).

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 and will also be archived for 90 days.

For those accessing the call via Cision's investor website, Tidewater suggests logging in at least 15 minutes prior to the start of the live event. For those dialling in, participants should ask to be joined into the Tidewater Midstream and Infrastructure earnings call.

About Tidewater Midstream and Infrastructure Ltd.

Tidewater is traded on the Toronto Stock Exchange under the symbol TWM. Tidewater's business objective is to build a diversified mid-stream and infrastructure company in the North American natural gas, natural gas liquids, crude oil, refined product and renewable energy value chain. Its strategy is to profitably grow and create shareholder value through the acquisition and development of conventional and renewable energy infrastructure.

To achieve its business objective, Tidewater is focused on providing customers with a full-service, vertically integrated value chain through the acquisition and development of energy infrastructure, including downstream facilities, natural gas processing facilities, natural gas liquids infrastructure, pipelines, railcars, export terminals, storage and various renewable initiatives. To complement its infrastructure asset base, the corporation also markets crude, refined product, natural gas, natural gas liquids, and renewable products and services to customers across North America.

Tidewater is a majority shareholder in Tidewater Renewables, a multifaceted, energy transition company focusing on the production of low-carbon fuels. Tidewater Renewables' common shares are publicly traded on the TSX under the symbol LCFS.

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