CALGARY — A deal to sell its Pioneer Pipeline will help insulate Calgary-based Tidewater Midstream and Infrastructure Ltd. from a “severe downturn” that’s afflicted the energy industry for the past three years, the company’s CEO said Thursday.
The proposed $255-million sale by operator Tidewater and 50 per cent partner TransAlta Corp. of the 131-kilometre natural gas pipeline system to a subsidiary of TC Energy Corp. was announced Thursday.
“We are taking the severe downturn in the energy industry very seriously,” said Joel MacLeod, chairman and chief executive officer, on a conference call to discuss Tidewater’s fourth-quarter results.
“We have been focused on growing and acquiring defensive assets that do well in a low commodity environment.”
He said the company will use the funds, if the Pioneer deal closes as expected, to pay down debt.
Pioneer, which runs from west of Drayton Valley to west of Edmonton, transported its first gas in May 2019. It is backed by 15-year take-or-pay agreements with TransAlta, which uses it to supply its gas power generation facilities.
Tidewater reported a loss of $13.8 million for the three months ended 2019, reversing a net profit of $13.2 million in the year-earlier period.
Revenue jumped to $266 million, compared with $90.7 million, thanks to the construction and completion of its Pipestone gas plant and storage facility and Pioneer, along with the closing in November of its acquisition of the Prince George light oil refinery from Husky Energy Inc.
Tidewater stock rose by as much as 31.7 per cent on Thursday, to 54 cents from 41 cents, despite another losing day for the S&P/TSX Capped Energy Index amid falling oil prices.
On the call, MacLeod said the 12,000-barrel-per-day refinery is insulated from possible declines in fuel demand due to the COVID-19 pandemic because it is a relatively small plant supplying a small local market.
The planned construction of three major infrastructure projects — the Coastal GasLink and Trans Mountain pipelines, and the Site C hydroelectric project — offer potential market growth, he added.
He said the company has a strategy to move fuel by rail to other markets if necessary.
This report by The Canadian Press was first published March 12, 2020.
Companies in this story: (TSX:TA, TSX:TRP, TSX:TWM, TSX:HSE)
Dan Healing, The Canadian Press