TWM Tidewater Midstream and Infrastructure Ltd

Tidewater Midstream and Infrastructure Ltd. ("Tidewater" or the "Corporation") (TSX:TWM) is pleased to announce that it: has entered into an agreement to acquire from Pipestone Energy Corp. ("Pipestone Energy"), a 100% working interest in a strategic 30 MMcf/d raw gas compression, 5,400 bbls/d condensate handling and associated water disposal battery (“Pipestone East Battery”) for total consideration of up to $30 million in cash (the "Acquisition"); plans to invest $25 million in additional liquids handling infrastructure at its Pipestone Gas Plant ("Pipestone Plant 1") and extended a take or pay agreement with Pipestone Energy.  Tidewater is also pleased to announce that it has entered into a $75 million bought deal offering of convertible debentures with a syndicate of underwriters.

Pipestone East Battery Acquisition

Tidewater is pleased to announce that it has entered into an agreement with Pipestone Energy to acquire a 100% working interest in the Pipestone East Battery (the “Acquisition Agreement”) which will be located approximately 24km directly east of Pipestone Plant 1 and will be a physical extension of existing Tidewater infrastructure that services Pipestone Energy.  The total cash consideration payable under the Acquisition Agreement is up to $30 million consisting of an initial cash payment by Tidewater of approximately $14 million to purchase existing compression, power generation, water handling infrastructure and facility equipment, with a commitment to fund up to $16 million to finalize the design, construction and commissioning of the Pipestone East Battery, which is expected to be completed over the next 12 to 18 months.  

Concurrently upon signing the Acquisition Agreement, Pipestone Energy has elected to not exercise its option to acquire a 20% working interest in the Pipestone Plant 1 and has entered into certain other commitment agreements with Tidewater for Tidewater’s current and future projects in the Pipestone area, including:

• a 10-year take-or-pay agreement for compression, separation and liquids handling at the Pipestone East Battery;
• an extension of Pipestone Energy’s current 30 MMcf/day take-or-pay commitment at the Pipestone Plant 1 from a 5-year term to a 10-year term;
• a 10-year, 20 MMcf/d take-or-pay commitment for Tidewater’s proposed Pipestone Plant 2 project (defined below), subject to the project receiving final investment decision by Tidewater on or before year-end 2019 and the proposed Pipestone Plant 2 being commissioned by Tidewater on or before the end of the second quarter of 2022; and
• a 10-year dedication of an existing Pipestone Energy facility to Tidewater’s liquids handling expansion project.  

Once the Pipestone East Battery is complete, it is expected to improve the strategic position that Tidewater has in the Pipestone area, provide additional EBITDA to Tidewater of approximately $4 million per year and further increase the average contract life of Tidewater’s infrastructure assets in the greater Pipestone area.

Pipestone Plant Update

At Pipestone Plant 1, Tidewater has received all the required regulatory approvals, including with respect to the acid gas injection well, and has commenced commissioning operations. The project remains on budget with an expected in-service date in the third quarter of 2019.

Tidewater plans to invest an incremental $25 million in liquids handling equipment (“Pipestone Liquids Handling”) in order to increase truck-in, stabilization, treating and storage capacity at the Pipestone Plant 1 due to increased demand in the area. The investment in additional liquids handling equipment is expected to generate an EBITDA multiple of approximately 6.0x once complete.

Tidewater continues to obtain significant commercial support for its proposed Pipestone Plant 1 expansion (“Pipestone Plant 2”) where the economics of this second plant are expected to be equivalent to Pipestone Plant 1.  The Corporation has received significant interest from multiple parties to finance the project on an attractive basis to Tidewater.  Tidewater expects to reach a final investment decision on Pipestone Plant 2 in the next 90 days.

Convertible Debenture Financing

In connection with the Acquisition and liquids handling expansion, Tidewater is pleased to announce that it has entered into a $75 million bought-deal financing (the "Convertible Debenture Financing") of five-year convertible unsecured subordinated debentures (the "Debentures") with a syndicate of underwriters (the "Underwriters") co-led by CIBC Capital Markets and National Bank Financial Inc. The Debentures will have a coupon of 5.5 percent per annum, and a conversion price of $1.86 per Tidewater common share ("Common Share").  The Corporation has granted the Underwriters an over-allotment option to purchase up to an additional $11.25 million aggregate principal amount of the Debentures, on the same terms, exercisable in whole or in part at any time up to the 30th day following initial closing of the Convertible Debenture Financing.

Net proceeds from the Offering will initially be used to complete the Acquisition and repay Tidewater’s credit facility, which is then expected to be utilized to expand Pipestone Liquids Handling, and for general corporate purposes.  

The Debentures will be offered in all provinces of Canada, by way of short form prospectus and in certain other jurisdictions as may be agreed by the Underwriters and Tidewater.

The Debentures offered, and the Common Shares issuable on conversion or redemption thereof, have not and will not be registered under the U.S. Securities Act of 1933, as amended (the “Act”), and may not be offered or sold in the United States absent registration or an applicable exemption from the registration requirements under the Act.  This press release does not constitute an offer to sell or a solicitation of any offer to buy the common shares in the United States.

Closing of the Offering is expected to occur on or about, August 8, 2019 and is subject to customary conditions and regulatory approvals, including the approval of the Toronto Stock Exchange.

Chief Executive Officer’s Intent to Acquire Additional Tidewater Shares

Mr. MacLeod has entered into a term sheet with an arm’s length loan provider to facilitate, inter alia, the acquisition of additional Tidewater Common Shares.  Mr. MacLeod feels that Tidewater Common Shares continue to be undervalued.  The term sheet includes a pledge of approximately 5.5 million shares of Tidewater (the “Collateral”) as security in connection with a loan.  The loan has a term of three years and upon repayment Mr. MacLeod is entitled to 100% of the appreciation or increase in the value of the Collateral. 

Second Quarter, 2019 Earnings Call

In conjunction with Tidewater’s second quarter 2019 earnings release, investors will have the opportunity to listen to Tidewater senior management review its second quarter results of fiscal 2019 via conference call on Tuesday, August 13th at 11:00 am MDT.

To access the conference call by telephone, dial 647-427-7450 (local / international participant dial in) or 1-888-231-8191 (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 by following this link: https://event.on24.com/wcc/r/2054100/9C564F679042E1460EE659317D970AC1 and will also be archived there for 90 days.

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

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: gas plants, pipelines, railcars, trucks, export terminals and storage facilities.

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 news release contains forward-looking statements relating to but not limited to: the Offering and its use of Proceeds; an acquisition by Tidewater of a 100% working interest in the Pipestone East Battery, projected completion of the Pipestone East Battery and timing thereof and projections of anticipated EBITDA to Tidewater resulting from this project; plans to invest capital in liquids handling at the Pipestone Plant 1; anticipated in-service date of the Pipestone Phase 1 plant; plans with respect to a proposed Pipestone Phase 2 plant, the anticipated economics of such plant and expectations to reach final investment decision.

Such forward-looking statements of information are based on a number of assumptions which may prove to be incorrect.  Tidewater has made assumptions regarding, among other things: the timing of closing and regulatory and third party approvals for the Offering and the satisfaction of the conditions to closing the Offering, including, if required, the consent of the Toronto Stock Exchange and, if required, the consent of Tidewater’s lenders under its credit facility; general economic and industry trends; the Corporation’s ability to secure natural gas supplies; anticipated timelines and budgets being met in respect of the Corporation’s projects and operations, including specifically with respect to the Pipestone Gas Plant and any expansions thereof; receipt of regulatory approvals for the Corporation’s capital projects; that counterparties will comply with contracts in a timely manner; that there are no unforeseen material costs relating to the facilities which are not recoverable from customers; customer demand for processing at the Pipestone Gas Plant and expansions thereof; future capital expenditures to be made by the Corporation; the ability to obtain additional financing on satisfactory terms; the ability of Tidewater to successfully market its products; the Corporation's future debt levels and the ability of the Corporation to repay its debt when due; that any third-party projects relating to the Corporation’s growth projects will be sanctioned and completed as expected; that transactions will close as expected; and, the Corporation's ability to obtain and retain qualified staff and equipment in a timely and cost-effective manner.

Actual results achieved will vary from the information provided herein as a result of numerous known and unknown risks and uncertainties and other factors including but not limited to: general economic, political, market and business conditions, including fluctuations in interest rates, foreign exchange rates and stock market volatility; regulatory approvals of the Corporation’s capital projects; activities of producers and customers, procurement of natural gas supplies; the regulatory environment and decisions and First Nations and landowner consultation requirements; operational matters, including potential hazards inherent in the Corporation's operations and the effectiveness of health, safety, environmental and integrity programs; transportation of hazardous materials; fluctuations in commodity prices, inventory levels and supply/demand trends; actions by governmental authorities, including changes in government regulation including environmental, tariffs and taxation; changes in operating and capital costs, including fluctuations in input costs; competition for, among other things, business, capital, acquisition opportunities, requests for proposals, materials, equipment, labour and skilled personnel; environmental risks and hazards, including risks inherent in the transportation of NGLs which may create liabilities to the Corporation in excess of the Corporation's insurance coverage, if any; non-performance or default by counterparties to agreements which the Corporation has entered into in respect of its business; construction and engineering variables associated with capital projects, including the availability of contractors, engineering and construction services, accuracy of estimates and schedules, and the performance of contractors; the availability of capital on acceptable terms; changes in the credit-worthiness of counterparties; effects of weather conditions; reliance on key personnel; technology and security risks; technical and processing problems; changes in gas composition; and failure to realize the anticipated benefits of recently completed acquisitions.

The foregoing lists are not exhaustive.  Additional information on these and other factors which could affect the Corporation’s operations or financial results are included in the Corporation’s most recent Annual Information Form and in other documents on file with the Canadian Securities regulatory authorities.

The above summary of assumptions and risks related to forward-looking statements in this news release is intended 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.

Non-GAAP Measures

This news release refers to “EBITDA” which does not have any standardized meaning prescribed by generally accepted accounting principles in Canada (“GAAP”).  EBITDA is calculated as income or loss before interest, taxes, depreciation and amortization.

Tidewater Management believes that EBITDA provides useful information to investors as it provides an indication of results generated from the Corporation’s operating activities prior to financing, taxation and depreciation and amortization expenses.  Management utilizes EBITDA to set objectives and as a key performance indicator of the Corporation’s success.  In addition to its use by Management, Tidewater also believes EBITDA is a measure widely used by security analysts, investors and others to evaluate the financial performance of the Corporation and other companies in the midstream industry.  Investors should be cautioned that EBITDA should not be construed as alternatives to earnings, cash flow from operating activities or other measures of financial results determined in accordance with GAAP as an indicator of the Corporation’s performance and may not be comparable to companies with similar calculations.

For more information with respect to financial measures which have not been defined by GAAP, including reconciliations to the closest comparable GAAP measure, see the “Non-GAAP Measures” section of Tidewater’s most recent MD&A which is available on SEDAR.

Neither the Toronto Stock Exchange nor its Regulation Services Provider (as that term is defined in the policies of the Toronto Stock Exchange) accepts responsibility for the adequacy or accuracy of this release. 

Contact Information

Tidewater Midstream & Infrastructure Ltd. Joel MacLeod, Chairman, President and CEO 587.475.0210 jmacleod@tidewatermidstream.com