Good afternoon, ladies and gentlemen, and welcome to the Tidewater Year-end 2021 Financial Results Conference Call. At this time, all lines are in a listen-only mode. Following the presentation, we will conduct a question-and-answer session. If at any time during this call you require assistance, please press star zero for the operator. This call is being recorded on March 10, 2022. I would now like to turn the conference call over to Mr. Doug Beamer. Please go ahead.
Thank you. Welcome, everyone, to Tidewater Midstream's year-end results conference call. My name is Doug Beamer. I'm the Vice President of Corporate Finance. On the call with me today is Joel MacLeod, Tidewater's Chairman and CEO. Before passing the call over to Joel for a review of the operating highlights, I'd like to remind everyone that some of the comments made today may be forward-looking in nature and are based on Tidewater's current expectations, estimates, judgments, and projections. Forward-looking statements we may express or imply today are subject to risk and uncertainties, which can cause actual results to differ from expectations. Further, some of the information provided refers to non-GAAP measures. To know more about these forward-looking statements and non-GAAP measures, please see the company's various financial reports, which are available at tidewatermidstream.com, our website, or on SEDAR.
With that, I'll pass it off to Joel MacLeod to discuss highlights from our year-end results.
Thank you, Doug. Good morning, and thank you for joining our Q4 2021 conference call. We are proud to have now delivered 11 consecutive quarters of record per share adjusted EBITDA growth and delivered CAD 54 million of adjusted EBITDA in Q4 2021. This represents a 10% increase in per share adjusted EBITDA growth year over year. More importantly, the total adjusted EBITDA for 2021 of CAD 210 million was a 17% increase from 2020 at CAD 180 million, with net debt being reduced by 21% to CAD 678 million. EBITDA increasing 17%, net debt decreasing by 21%, and continuing to deliver record quarters. Net income was also a record at CAD 71.5 million in 2021, and distributable cash flow per share also grew by approximately 40% versus 2020.
Overall, we had a record year on all fronts, including debt reduction, and want to thank our staff, our board, shareholders for all their support. We look forward into 2022, where we're off to one heck of a start and expect to deliver a 12th consecutive record quarter in Q1 of 2022. Further, with our 70% owned subsidiary, Tidewater Renewables, on track to bring online the renewable diesel project in approximately 12 months, we do anticipate being able to deliver over CAD 300 million of annualized adjusted EBITDA on a consolidated basis in approximately 14 months, which translate into an increase of approximately 35% of consolidated adjusted EBITDA in approximately 14 months, while we're maintaining our leverage target of 3-3.5 times debt to adjusted EBITDA.
We definitely did not expect to see CAD 150 per barrel WTI prices again, and this has been a huge tailwind for Tidewater and our customers. We are seeing material increases in activity, volumes, and margins at both our midstream and downstream facilities, including our refinery, and expect this to result in another consecutive record year for Tidewater. It was also great to see transactions by our peers over the past 30 days validating what we are building for our shareholders, to see Pembina and KKR announce their partnership, which values their Montney gas processing assets at around a 12x EBITDA multiple.
As most of you are aware, our Pipestone gas plant would be right in the heart or the sweet spot of this JV, and as a deep cut plant, has acid gas injection and carbon capture and is one of the only gas processing facilities connected to gas storage. Further, we also saw Chevron acquire Renewable Energy Group for approximately $3 billion in the past 30 days, where Renewable Energy Group is a producer of biodiesel and renewable diesel, and the transaction was at around a 6-8x multiple, depending on what year of EBITDA you evaluated. Again, further validation of what we are building with large, well-capitalized entities deploying large amounts of capital into our backyard and/or into common assets. Back to our assets.
Just to summarize the performance of some of our assets in the quarter, we'll start with Prince George. During the fourth quarter of 2021, total throughput was approximately 12,200 barrels a day, consistent with previous quarter and fourth quarter of 2020. In August 2021, Tidewater Renewables commissioned the Canola Co-Processing Project at Prince George and began processing canola feedstock, which yields both renewable gasoline and renewable diesel. Prince George crack spreads remained very strong in Q4, averaging just over $60 a barrel during the quarter, consistent with the previous three quarters of 2021. During the fourth quarter, the corporation realized decreased diesel and gasoline demand as compared to the previous quarter due to the normal seasonal demand fluctuation with the end of driving season and reduced industrial activity at the end of December due to the holiday slowdown.
Additionally, the flooding in B.C. created some temporary logistical constraints for the refined product customers' demand due to rail and highway washouts. That said, we were very helpful in the floods, and we're more than happy to have to help the province. Demand for both gasoline and diesel has picked up and increased to Q1 2022, and the crack spread or margin has also increased. Great to see Prince George continuing to outperform. We continue to pursue numerous low capital, high rate of return, debottleneck, and optimization opportunities within our refinery and downstream business unit. Again, in Q1, record crack spreads and Prince George continues to heavily outperform expectations since acquiring the asset in late 2019. We'll jump over to Pipestone. Pipestone Montney sour deep cut plant on the Alberta side of the border.
The Pipestone gas plant processed our highest average volume of 99 million cubic feet a day in the fourth quarter of 2021, a 38% increase from the fourth quarter of 2020, and an increase of 3% from the third quarter of 2021. Facility availability for the fourth quarter of 2021 averaged 96%, an increase of 25% from the fourth quarter of 2020. The Montney area continues to remain extremely active, including the Charlie Lake as well, and the plant remains fully contracted with over 85% committed capacity on take-or-pay arrangements. Big thank you to our team, as I would never dream we'd see an asset run at 99 million cubic feet a day with 100-110 million in capacity.
We continue to see strong customer support, supported by long-term take-or-pay agreements for a potential Pipestone expansion and continue to evaluate. Over to Brazeau River. The Brazeau River facility will start with the frac. Our Brazeau River fractionation facility performed well during the fourth quarter of 2021. We were able to maintain stable operations while providing egress optionality to our producers who were constrained by third-party force majeure at the beginning of the quarter. The frac at Brazeau utilization averaged 92%, an increase of 850 barrels per day relative to the third quarter. The frac continues to serve as a key asset for Tidewater Midstream's NGL marketing business.
Throughput at the BRC gas processing facility for the fourth quarter of 2021 did decrease by 5% compared to the third quarter of 2021 due to producer equipment maintenance and outages during the quarter. Fairly minor. Tidewater Midstream continues to look for opportunities to increase third-party plant throughput by working diligently with producers to improve netbacks by increasing the utilization of Brazeau facilities. We have completed a new gathering line at Brazeau, which has recently come online and again, bringing in more volumes to the facility and excited to get those volumes online and ramped up. A quick update on our 70% owned subsidiary, Tidewater Renewables, just briefly, given we own 70%.
Tidewater Renewables did deliver a strong quarter with CAD 10.6 million of EBITDA and the majority of their cash flow are backstopped by 10- to 15-year agreements. Tidewater Renewables made on time and on budget to bring online their renewable diesel plant in approximately 12 months and remains confident adjusted EBITDA will grow 300% within the next 14- to 18 months with the renewable diesel project coming online. Tidewater Renewables base business is performing well, and they expect to see 20% growth over the next 8- to 9 months, where Tidewater Renewables continues to make material progress on the long-term feedstock strategy. It's great to see our subsidiary performing well. Also wanna announce that Mr. Brian Newmarch has been appointed our new CFO. We're real excited to have Brian on board.
He brings over 20 years of experience, most recently with Seven Gen, strategic planning, financial management, corporate development, sustainability and capital markets. Again, we're all excited to have Brian on board. Again, we'd like to reiterate a record quarter for shareholders where we saw 17% adjusted EBITDA growth while delivering a 21% reduction in net debt. Further, we delivered 11 consecutive quarters and expect a twelfth in Q1 2022. With the renewable diesel project coming online in approx 1 year, we expect to see further growth of an incremental 35% in our consolidated adjusted EBITDA while maintaining debt in the 3-3.5 times range. Just wanna thank our staff again, our board, shareholders, credit syndicate partners, and all stakeholders for all your support. We look forward to delivering strong results for our shareholders in 2022.
I'll pass it over to Mr. Beamer, and he'll walk you through the financial highlights of our Q4.
Thank you, Joel. As Joel mentioned, 2021 was a year of solid execution for Tidewater Midstream. The corporation delivered annual consolidated adjusted EBITDA of CAD 210 million, a 17% increase from 2020 of approximately CAD 180 million. We also had another successful fourth quarter, reporting approximately CAD 54 million of consolidated EBITDA, up slightly from the previous quarter. The consolidated EBITDA, being just purely Tidewater Midstream, was approximately CAD 43 million for the quarter, slightly down from the previous quarter, which is just reflecting the full three months of the spin-out of Tidewater Renewables. Distributable cash flow for the quarter, which excludes the non-controlling interest portion of Tidewater Renewables, was CAD 14 million for the quarter, compared to approximately CAD 16 million from the previous quarter. Again, the decrease is a reflection of the full three months of the spin-out of Tidewater Renewables.
Our consolidated revenue for the quarter was CAD 535 million, representing a 23% increase from the prior quarter, in large part strengthening of commodity prices and continued strong demand at PGR and throughput at Pipestone. Consolidated gross operating margin, which includes realized gains on hedges, was approximately CAD 61 million in the fourth quarter, representing a 10% increase from the prior quarter and a 15% increase from the same period in 2020.
During the quarter, Tidewater Midstream extended its pipeline lease with Pembina being the Western Pipeline, which supplies feedstock to the Prince George Refinery. There was no impact to adjusted EBITDA or distributable cash flow, but one will see an increase in the lease liabilities on our balance sheet as a result of IFRS 16 measurements. Consolidated net debt was CAD 678 million versus CAD 643 million in the previous quarter. Overall, the consolidated increase in net debt is due to the HDRD construction costs on a consolidated basis. Deconsolidated net debt was CAD 619 million versus CAD 609 million from the previous prior quarter, Q3.
Tidewater Midstream has been able to successfully deleverage within 3-3.5 times debt-to-EBITDA range, and we will continue to monitor that range as well on a go-forward basis. The corporation remains focused on improving its financial position, including refinancing its second lien term loan and notes payable and enhancing go-forward liquidity. As part of this process, the corporation is currently evaluating several refinancing options and expects to make a decision in the near term. With that, I'll pass it back to the operator and open it up to questions.
Thank you. Ladies and gentlemen, we will now begin the question-and-answer session. Should you have a question, please press star followed by one on your touchtone phone. You will hear a three-tone prompt acknowledging your request, and your questions will be pulled in the order they are received. Should you wish to decline from the polling process, please press star followed by two. If you're using a speakerphone, please lift your handset before pressing any keys. Your first question comes from Robert Hope with Scotiabank. Please go ahead.
Afternoon, everyone. Maybe the first question is just, Joel, on your prepared remarks. If I understood correctly, you're looking for EBITDA growth once again to, or EBITDA to grow once again in 2022 versus 2021. You know, as you take a look at the business, where are the largest sources of growth there? Then how are you thinking about kind of refinery margins 2022 versus 2021, you know, given that, you know, it's off to a relatively good start?
Hi, Rob. Good question. I would say continuing to debottleneck the refinery. Obviously margins have improved. I would say we're trying to not get ahead of ourselves, but where margins are today versus where our budget definitely ahead. Where's the growth coming from? I'd say it's increased throughput at Prince George, slightly higher margins, and then in general, just more volume at our facilities. Even the Pipestone asset, as we mentioned in the opening remarks, the exact percentage was kinda 30% increase Q4 versus Q4. As we started off early 2021, we're gonna start off at 99, 100-ish million cubic feet a day. We're just gonna start off the year better, which is gonna result in even from Pipestone for the full year, more reliable cash flow as well.
Then we are seeing more volumes at our other facilities. Then we are planning to deploy today roughly CAD 30 million of capital at, I'd say 3-ish year payouts or less. All those pieces, I would say our goal would be to have 10%-ish growth in the year on adjusted EBITDA. Then the big project that I'm sure we'll get a question we do have daily is on the Pipestone expansion. More work to do, but that would be the one bogey over the next couple weeks to couple months as to determining capital costs, confirming customer support, and potentially moving forward with a full financing plan.
Mr. Hope, do you have any other questions?
Oh, sorry. Yeah, just to follow up on Pipestone, you know, it does look like volumes are moving up nicely in the area. How have conversations with customers gone there? Is the gating factor there just kind of the structure of financing there and whether or not you bring a partner in?
Yeah, I'd say, Rob, you're well aware, 6 or 8 months ago, I think our message was around 50% probability. That's definitely moved up. Today with the active commodity prices, I'd say we're fairly confident we have customer support. Now to your point, it's capital costs. What gathering lines do we need to build to connect our customers? We are seeing, like everyone, inflationary pressures, so we need to nail the capital cost. Then to your point, determine the optimal way to finance. The good news is there's lots of capital flowing into the Montney with the recent transaction and other private equity groups.
Step one is nailing our capital and step two will be nailing a financing plan, but trying to move through that process here over the next few weeks into a few months.
All right. Thank you.
Your next question comes from Robert Catellier with CIBC. Please go ahead.
Yes, thank you. Just to follow up on that comment you made about Pipestone and the timing, what has to be done to make that a success. Is that in any way tied to your refinancing of the second lien and the notes payable tied to that at all? In other words, are you trying to do a comprehensive financing package that addresses both the Pipestone need as well as the refinancing of those two items?
Potentially, Rob, yes, absolutely. The refinancing of our notes are important. The Pipestone expansion is equally important. Absolutely working through both those pieces concurrently. It's great to have a pile of options. I think we just need to determine and can we commit to them both happening at the same time in the market we live in? I would hate to over-commit, but know that those are both a real focus for us to get wrapped up here. In the coming months.
Okay. When you look at what's happening in the commodity price markets and the impact it could have on refining margins, what are you doing to protect yourself from that volatility and the possibility of acquiring expensive feedstock only to see the, you know, the refined product prices drop in a short period of time?
Yep. We've been actively and continue. As you know, Rob, there's no way to perfectly hedge a Prince George crack, light sweet crude for the most part through to a Prince George rack diesel and gasoline price. Even the ULSD crack has been around $30 and north of $30, which is the first time since we've acquired the refinery. We are definitely looking at ways and have been selling our diesel position and our gasoline and also securing our feedstock or in Edmonton Light. We don't hedge more than 50% as there can be dislocations with COVID, but are definitely working to even secure the inventory values as we did not anticipate to see CAD 150 diesel prices.
I would say various ways to lock in related gains and manage our risk, but at the same time need to be careful, as there's no perfect way to hedge a Prince George rack price.
You touched on my next question, which was, you know, how much do you think you'll have to invest in working capital given the run-up in commodity prices? Even if throughput and volumes didn't change, they're more expensive, so that requires a working capital investment. Assuming prices stay close to where we are right now, what's the additional working capital requirement?
Yeah, Rob. We're very fortunate with our Cenovus Energy offtake, where weekly we are paid for our sales. We're essentially provided the refined product cash before we have to pay for the crude on the 25th of the following day. The impact is not as material as you would anticipate, and I would say there's an impact, but it to me it's nominal. Doug, you can jump in. I think there could be a minor impact, but we also have had our credit syndicate and others offering ways to manage. It hasn't been an issue with the big run-up, would wanna be clear. Doug, feel free to jump in if you think I missed anything.
Yeah.
The offtake agreement is extremely helpful to manage our working capital.
No, that's a fair statement, Joel, that it's definitely top of mind looking at working capital. Because of that weekly Cenovus offtake payment, it does mitigate that risk of a run-up.
Thanks, Doug.
Okay, last question from me. I wondered if you could comment on G&A trends, you know, given the bump up in the quarter and whether that's, you know, inflationary or just, you know, how would you look at that? You know, part of it could be from Tidewater Renewables, but just in terms of the Tidewater deconsolidated G&A, what trends are you seeing there?
Yep. I would say it's growth, definitely renewables and midstream. In general, with oil at CAD 140, we're gonna need to compensate our staff, Rob. Individuals like myself, there'll be no salary increase, but I think everyone else, you'll definitely see a bump. We wanna retain. We have incredible people, but Doug can speak to the numbers, better than I can. I would say expect a move up, inflation, retaining people, and then the growth of renewables on a consolidated basis. Absolutely, you're gonna see G&A move up, but Doug can probably quantify it a little better than I can, Rob.
Yeah, it's a good question, Rob. I think Joel summed it up quite well. There is the growth aspect of it. And then on a deconsolidated basis, we do have shared services between Tidewater Midstream and Tidewater Renewables on that, but there is definitely on the just general labor and inflation, et cetera. It's something that we do monitor, but we do expect a slight increase probably in G&A in 2022.
Yeah, obviously considered in your, the guidance you gave about, EBITDA growth for the year.
Correct. Yep.
Yep. Okay. Thanks, guys.
Thank you, Rob.
Your next question comes from Andrew Kuske with Credit Suisse. Please go ahead.
Thanks. Good morning. Joel, you talked a little bit about this in your opening comments, and this is the private equity influence in the basin. I mean, maybe if you just give a bit more color and context on, you know, do you see private equity or alternative capital as being more of a friend in the future or a bit more of a foe?
Oh, that's a good question, Andrew. I would say today, as a small player, we have strong relationships with a lot of the major players, and we need to. As I think everyone knows, even with KKR being involved in the Peace system and Pembina, we're excited to also support KAPS and Keyera with their system. Obviously, they'll be looking for a new partner to step into that ownership position. Our goal is to help industry as a whole work with Pembina, work with Keyera, and work with private equity groups. As I think most would understand, the financial capital, the private equity also needs management teams. I think it's an opportunity. To your point, Andrew, there is a negative there where competition increases, and it gets tougher to compete.
We're very fortunate to have one of the first Montney sour deep cut plants connected to gas storage and definitely in the heart of the action. That's helpful to have an initial footprint. For me to say it's all positive, I think the negative side is if we do see more private equity capital flow in, competition will go up. Getting our hands on volumes or say, even a Pipestone Phase III or a Phase IV, it's gonna get more and more competitive. I think there's gives and takes, and we're real excited about the next 6, 12 months.
It also, for our shareholders, I think results in true value examples in the market that our shareholders can say, "Okay, now I can look at that Pipestone asset and it's worth 10x-12x." That's been validated in the market, which I think really helps some of our shareholders that have been with us for 5+ years.
That, that's helpful. If you think about the validation of the mark, with the transaction in the market, and then maybe looking at it through a friendly lens-
Yeah.
Do you see an opportunity to really accelerate the growth in a more capital efficient fashion for yourselves? Then what could that look like?
Yep. Definitely open to those discussions, and I've had them in the past and expect to continue to have them. I think too it's interest rates, global macro pieces, Andrew, that you know way better than I, when is the right time and when is the cost of capital ideal. We won't be picky or trying to pick the perfect time. It's more when do those private equity groups wanna deploy capital. I do think the Pembina KKR merger has been helpful for the area and the activity and oil prices, definitely higher than I thought we'd ever see them. We're definitely open to those discussions. We're having a few of those, and the timing feels pretty darn good to be having those conversations when oil commodities are where they are and there's a transaction in the market with a merger.
Great. If I could sneak in one more, and it really is looking back on PGR and then maybe looking ahead. If you were to think about anything in the refinery space, in the future from an opportunity set, what were the lessons learned from PGR and how could something in the future maybe look?
Lesson learned with PGR. That's a good question. Obviously the assets outperformed, which is great, but if there was some lessons learned, I would say we always value our people, and I think even in meetings, I say our greatest asset is our field team, and what they do, and I would just emphasize that as well. To see the refinery run as well as it has, the value our team brings and even the relationship with the BC government to provide CAD 100 million of grant support is critical. But I would say as far as learnings, just maybe to the number of low capital, high rate of return opportunities and even the future within BC of potentially working to continue to expand that footprint with the BC Montney.
I think the market reaction was one we weren't ready for as we took a lot of negative feedback when we announced the deal, and definitely the most negative feedback I've received in my life. If we did look at something similar, I think we'll be a little more hesitant. At the same time, the asset has outperformed and we hope at one point the market will recognize how well the assets perform for us. There's a lot of rambling there, Andrew. I just wanted to try and give you an honest answer.
Yeah, that answer could be a separate call by itself, but I do appreciate the candor.
Thank you.
Your next question comes from Robert Kwan with RBC. Please go ahead.
Great. Good morning. If I can kind of carry on a little bit with that discussion, Joel, and if you just think about your share price, you're talking about hoping the market will realize, you know, the value and what you've done. How much do you see it or how important is it for you to take move or make moves to try to improve the share price, just given where the low multiple is? And if you can maybe tie it together with your statements on Pipestone and the value you see there, would you look at selling an interest not to finance an expansion, but really for the purposes of getting that leverage into that, say, 2.5-3 times range sooner than later and possibly buying back stock?
Yeah, Rob, I'd say all of those discussions are. It's a great time to have them. Definitely at the board level, as you know, our cost of capital is probably our biggest struggle as well. A lot of discussions at the board level, what can we do to improve that cost of capital? I think all who know us, including yourself, we're open to ideas, partnerships. At the same time, selling down a portion of an asset does make it potentially reduce value longer term to monetize. I think we're open to discussions, but we're not gonna just enter into a JV or sell down an interest. I think it's gotta be the right option, and today it's nice to have multiple options.
Leverage is definitely a piece that you know well, everyone knows well from 2020 to 2021, our leverage bringing our leverage down was such a focus. Now we've accomplished it, are we willing to take our leverage somewhere between 3.5-4 times if we had 10-year take-or-pays? Lots of discussions. The good news is we're gonna have lots of options in front of us. It's just, I think getting feedback from the market yourself, Robert, is all helpful.
Because look, these are discussions that have happened over the course of the past year, and obviously you've had different things unfold, including with renewables. Is there a bit of a thought, of course you'd like to have a higher share price and a lower cost of capital, but if you're not issuing equity, that it's really just not a priority to take, you know, steps that maybe you feel are outside of your strategy, at least operationally?
Today it would be unlikely we'd issue equity depending on the opportunity. To your point, we need to be careful. I think, as you know, our biggest fault or criticism is we chase too many squirrels. I think the largest squirrel we chased in the Prince George Refinery has turned out to be the best acquisition I've ever done in my career. I don't think we're ready to, or want to, step out again. We need to focus on our assets, focus on Pipestone, that opportunity, focus on debottlenecking Prince George.
Yeah, we'll be a little more hesitant to step outside the box and try and focus in on those core assets, especially if we can build a Pipestone at a 5-6x multiple, and the market's gonna value that asset at 10-12x. I think our shareholders would say, "Focus on that core area. You guys are known today as a lead operator in the area and focus." I think the question, to your point, is how are we gonna finance that opportunity. The good news is we're gonna have lots of options. I think the question will be, well, what is the best option.
Maybe it is just around the focus, but the 2022 capital program, I think you mentioned CAD 30 million of CapEx at one point. Can you just break down, though, the 2022 capital program between how much is growth, how much is maintenance? Then if you can just be clear, the figures you're giving, whether it's consolidated or deconsolidated.
Let's start with deconsolidate. Deconsolidated Tidewater Midstream today, we will plan to deploy CAD 30 million of growth capital and deliver roughly a 3-year payout or sub 3-year payout. Examples are our 1 tie-in at Brazeau. Some of it that was deployed in Q4 but rolls into Q1. Our propylene splitter project, which does have a 5-year investment grade offtake, taking our existing LPG mix, which has propylene, and being able to split off to a propylene product that we can increase value on. Those would be kind of the biggest chunks. That's close to 20 million of the 30, and then we'd have some other debottlenecking projects through our assets. Our maintenance CapEx, I'll probably pass over to Doug. We do have turnarounds at Brazeau, Ram River, and Pipestone.
Our deconsolidated number on that is in the CAD 30 million-CAD 35 million range. Doug will jump in the event I'm out by CAD 5 million or so there.
No, that's a good summary, Joel. This 2022 and obviously in 2023 are our turnaround years. 2023 is the PGR turnaround, but given supply chain issues, inflation, we will lock in some of those costs earlier that will be incurred in 2022. Roughly in that CAD 30 million-CAD 35 million turnarounds for 2022.
Perfect. Just on the consolidated side, I think on the prior call it was, what? CAD 90 million-CAD 95 million on the growth and 5-10 of maintenance?
Great. Maybe, yeah, I think we're CAD 12 million of maintenance in renewables. That versus CAD 5 million-CAD 10 million. Within the CapEx, Robert, you have it CAD 90 million-CAD 95 million. Just realize the timing of those credits and when they're received and monetized, you may end up with a timing difference of, I don't know, CAD 10 million-CAD 15 million on either end of that. Just the timing of when those credits are received. We have been monetizing them, as you know, at a much higher price, but you know that there's probably a wider range on that growth CapEx number in renewables, just mainly due to timing of when the credits are received and monetized.
That's great. Thank you.
Ladies and gentlemen, as a reminder, if you do have any questions, please press star one. Your next question comes from Patrick Kenny with National Bank Financial. Please go ahead.
Hey, guys. Just on your sustainability report, I guess, related to comments around stepping outside the box. You highlighted the potential integrated project at BRC that might include blue hydrogen, CCS, cogen and whatnot. Can you just remind us where this project would sit within the corporate structure? The timing of any regulatory milestones or a potential FID? Where this project might rank relative to, say, a Pipestone expansion or other competing decarbonization opportunities?
Good question, Pat. You went digging for that question. Good job. I would say definitely lower on the priority scale. The Alberta government has awarded Tidewater Midstream a grant related to that project, but the economics of the project, we're still working through it. It would be at Brazeau. It would sit within Tidewater Midstream. Depending on how large that project got, I think Tidewater Renewables could potentially participate, but for now, it's a Tidewater Midstream project that Midstream is evaluating. To your point, it potentially includes carbon capture, hydrogen, and even potential involvement with some end users and some larger midstreamers. Definitely more work to do. We don't have the economics, so I would just notch that one down into the low priority and even sub 50% probability for now.
Okay, perfect. Maybe just a cleanup question on PGR. Just, I know there were some headwinds late in the year, but you did mention the facility outperformed. I assume that the base CAD 75 million adjusted EBITDA guidance, so maybe you can just quantify the outperformance there. Also looking forward, based on your current hedge book, I'm just trying to get a sense as to how much of your spreads are locked in going forward, relative to, say, the $75+ crack spreads that we're seeing today.
Yeah. Yeah, Pat, I'd say high level. I'm gonna give you ranges or high level. If you said in 2021, how did Prince George perform? The start of the year was COVID, so our margins weren't into the $60 range. Definitely we delivered in that CAD 100 million EBITDA range, even if we set up CAD 90 million-CAD 105 million. I know that's a wide range, but was great to see the asset outperforming. Q4 was definitely helpful. Your next part of your question was how much are we hedged on our crack? We definitely have. I would say we would be 20%-30% hedged on our cracks. But just know, again, there's no way to perfectly hedge a Prince George rack price.
The majority of our related margin does ride with the market. Definitely on light sweet dips, when those are wide, we do step in and lock that in. Then when we do see opportunities on the diesel market, we will also sell the diesel side or the above gasoline. There's essentially no way to perfectly lock in a Prince George rack price on diesel or gasoline. The majority of our margin at Prince George will continue to run with the market. I think the message is, and I think most of our shareholders, and you definitely know if you look at a chart on the margin at Prince George, it's way more solid than anyone I think would anticipate. In a COVID year, we maintained our $40-$50 crack.
Now with wars breaking out and just global macro uncertainty on refined product, we're definitely seeing material that moves up. We're not planning for those, but we are doing our best to try and lock in portions of that value.
Got it. Okay. I appreciate the color. Thanks, Joel.
Thank you, Pat.
There are no further questions at this time. Please proceed.
Thank you. Well, thank you everyone. Thanks for your time. Thanks, Doug, and appreciate everyone's time and look forward to a strong 2022.
Thank you, everyone.
Ladies and gentlemen, this concludes your conference call for today. We thank you for participating and ask that you please disconnect your lines.