CALGARY, AB–(Marketwired – February 02, 2016) –
Tidewater Midstream and Infrastructure Ltd. (“Tidewater” or the “Corporation”) (TSX VENTURE: TWM) is pleased to announce that it has entered into an agreement with AltaGas Ltd. (“AltaGas” or the “Vendor”) (TSX: ALA) to acquire 100% of AltaGas’ working interest in select Deep Basin and central Alberta gas processing facilities and related infrastructure (the “Assets”), the majority of which are located in Tidewater’s core West Pembina region (the “Acquisition”). Under the terms of the Acquisition, Tidewater will issue to AltaGas approximately 43.7 million Tidewater common shares and pay AltaGas $30 million in cash, funded through cash on hand and availability under Tidewater’s existing corporate credit facility.
“The Acquisition is consistent with Tidewater’s strategy to capitalize on Canadian natural gas liquids (“NGLs”) market opportunities within the Deep Basin. The acquisition of strategic midstream infrastructure allows Tidewater to capture the value of infrastructure connectivity and offer additional options to producers,” commented Joel MacLeod, Chairman, President and CEO of Tidewater. “The majority of the earnings from the acquired assets are derived from our strategic Deep Basin core area and will be highly synergistic with our existing Brazeau River Complex assets, allowing Tidewater the opportunity to optimize the currently underutilized plants being acquired and further build out our natural gas and NGL network”.
“Moving forward, AltaGas and Tidewater have agreed to work together to identify additional opportunities that could enhance value for each company’s respective producer customers and shareholders,” commented David Cornhill, Chairman and CEO of AltaGas. Tidewater and AltaGas are currently discussing other strategic opportunities involving NGLs and natural gas.
The Assets include working interests in select Deep Basin and central Alberta gas processing facilities and related infrastructure. The facilities have a combined gross licensed natural gas processing capacity of approximately 490 MMcf/d and current throughput of approximately 102 MMcf/d. The Acquisition includes eight core facilities that are focused in the Deep Basin, located in proximity to Tidewater’s Brazeau River Complex (“BRC”), which generated approximately 77% of the acquired Assets’ 2015 EBITDA. These core facilities are located at Windfall/Kaybob, Marlboro/Edson, Alder Flats, Gilby, Manola, Bonnie Glenn, Malmo and Sylvan Lake. In addition, the Acquisition also includes over 2,000 km of gathering pipelines and other associated infrastructure.
Key transaction highlights include:
Attractive Acquisition Metrics: Pursuant to the Acquisition, Tidewater will acquire the Assets, which are forecasted to produce 2016E EBITDA of approximately $14.4 million, for $30 million in cash and approximately 43.7 million Tidewater common shares. The Acquisition is being completed in line with metrics that are consistent with Tidewater’s previous acquisitions and are attractive relative to market precedent transactions. Further, the Assets are contiguous with Tidewater’s existing network, providing several attractive optimization opportunities.
Accretive to Tidewater Shareholders: The Acquisition is expected to be immediately accretive to cash available for distribution in 2016E by approximately 11%. With the low capital intensity growth initiatives that Tidewater expects to undertake (similar to those being undertaken at the BRC), there is the potential for meaningful accretion in 2017E and beyond with relatively small capital additions, in addition to NGL marketing opportunities related to the acquired Assets.
Core Facilities Situated in Growing Multi-Zone Production Region: The eight core facilities are located throughout the Deep Basin, a production area that continues to experience growth, even in the current lower commodity price environment. Continued drilling activity in the Deep Basin is expected to allow Tidewater to increase throughput and utilization rates at the core facilities as the utilization rate from the acquired Deep Basin/core area plants average approximately 35%.
Significant Committed Volumes: Approximately 50% of the 2016E volumes from the Assets are underpinned by either take-or-pay contracts with remaining terms ranging from 5 to 9 years or area/reserve life dedication contracts backed by credible counterparties/producers.
Significant Growth Opportunities: Increasing volumes through the facilities, NGL marketing and near-term small-scale optimization investment opportunities are available to increase EBITDA with modest capital expenditures. Additional larger scale investment opportunities are also available to provide greater facility optimization, further build out Tidewater’s network and provide producers with egress and takeaway options for their natural gas and NGLs.
Another Link in Tidewater’s Infrastructure Network: The acquired Assets are contiguous with Tidewater’s existing core assets and customer base, increasing the opportunity to better utilize Tidewater’s entire network and drive higher gross volumes for its customers. The extensive pipeline gathering systems and proximity to major egress pipelines of the expanded network continue to position Tidewater to obtain better market pricing for its customers’ production.
Relationship with AltaGas
Upon closing of the Acquisition, AltaGas will own approximately 19.9% of the total issued and outstanding common shares of Tidewater. AltaGas will have the right to nominate one member to Tidewater’s board of directors and the right to increase their related board nominees commensurate with ownership. AltaGas has agreed to a standstill agreement to not acquire additional Tidewater common shares that would increase its ownership interest above 19.9% without the consent of Tidewater.
All of the common shares issued pursuant to the Acquisition will be subject to a statutory hold period of four months from the closing date.
The Acquisition is expected to close in the first quarter of 2016 and is subject to standard closing conditions customary for a transaction of this nature, including the approval of the TSX Venture Exchange (“TSX-V”).