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Western Canadian natural gas/oil processor presents profit potential

Ron Walter looks at Tidewater Midstream, a refinery near Prince George, B.C.
Bizworld by Ron Walter

Tidewater Midstream and Infrastructure is an oil and natural gas processor that bears inspection by investors.

The company owns one of the few Canadian oil refineries not under the thumb of a major processor. The refinery near Prince George, B.C. can produce 12,000 barrels of light oil per day.

Ironically, production is shipped to the Vancouver Lower Mainland while northern B.C. receives oil from Edmonton operators who control the distribution network.

Midstream operations involve a natural gas processor and oil battery in the prolific B.C./Alberta Montney play, natural gas processor and sour gas plant near Rocky Mountain House, central Alberta rail terminal and processor as well as associated storage and pipelines.

The acquisition and building of 12 operations since 2015 increased earnings per share to 60 cents from 20 cents. Some operations were sold to reduce debt.

Tidewater shares, trading at $1.05, sell at 9.4 times earnings. The sector average is 12.3 times. Shares were $1.72 just before last year’s market crash.

The dividend yields 3.88 per cent with less than one-third of earnings paid out.

The crown jewel in Tidewater’s asset stable is a 69 per cent interest in Tidewater Renewables, which is opening a new renewable fuels facility near Prince George before spring. The plant will initially produce 13.4 million gallons of renewable diesel, 100 million tonnes of hydrogen and 6.3 billion cubic feet of natural gas annually.

Eventual plans are to double production.

The $150 million renewables plant required more debt from the parent but Tidewater Midstream’s debt is a reasonable one-third of assets. The renewables company debt is small.

Tidewater Renewables is also building a natural gas manufacturing plant at High River, Alberta using feedlot manure as feedstock.

Aside from being undervalued, Tidewater Midstream offers a lower risk while investing in the renewables sector.  

The renewables company is a one-trick pony. If the new process creating renewable fuel sustains hiccups for a year or two, investors risk losses. Investors in Tidewater Midstream are getting the shares at a good value with the renewables plant for free.

The company estimates the renewables plant will increase annual cash flow by 30 per cent.

Tidewater does have a lot of shares outstanding, having opted to sell shares rather than increase debt load. The company has 423 million shares out.

CAUTION: Remember when investing, consult your adviser and do your homework before buying any security. Bizworld does not recommend investments.

Ron Walter can be reached at    

The views and opinions expressed in this article are those of the author, and do not necessarily reflect the position of this publication.  

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