Earnings call transcript: Tidewater Midstream reports Q4 2025 loss amid turnaround impacts

Tidewater Midstream reported a Q4 2025 consolidated net loss of CAD 30 million versus CAD 3.3 million a year ago, while adjusted EBITDA fell to CAD 3 million from CAD 20 million, hurt by extended turnaround disruptions at Tidewater Renewables’ HDRD Complex. Offsetting the weak quarter, management guided to CAD 150 million-CAD 170 million of consolidated adjusted EBITDA for 2026, supported by improved crack spreads, BC LCFS / federal biofuels incentives, asset sales, and hedging on roughly 50% of exposure. The company also said the HDRD Complex is back near full capacity and the Prince George Refinery throughput rose 5% sequentially to 10,809 bpd.

Analysis

The market is finally discounting a clean inflection, but the setup is more nuanced than a simple “turnaround” trade. The leverage to 2026 is operational, not just financial: once utilization normalizes, small moves in crack spreads and renewable credit pricing should disproportionately expand cash flow because fixed-cost absorption is the dominant swing factor. That makes the equity highly convex to margin normalization, but also means the stock can re-rate quickly on any evidence that hedges, throughput, and incentive monetization are tracking the guide.

The real second-order winner is the capital structure. Management is explicitly steering most incremental cash toward debt paydown, while the covenant reset buys time for the earnings step-up to show through; that combination lowers near-term solvency risk and can force a multiple expansion before absolute earnings are fully visible. The flip side is that the current share price already embeds some success, so the next leg likely requires proof points: sustained refinery utilization, stable renewable production, and at least one non-core divestiture converting into debt reduction.

For competitors, the government incentive regime effectively subsidizes domestic renewable diesel capacity and could compress economics for smaller or import-exposed players that lack integrated feedstock/logistics. The most important missing piece in the consensus is that the largest upside may come from policy durability rather than commodity strength: if domestic-content rules or credit multipliers are implemented, Tidewater’s relative economics improve even if crack spreads normalize. Tail risk is execution slippage or a reversal in regulatory support; both would hit because the 2026 plan is still highly dependent on a favorable policy backdrop and uninterrupted plant uptime.

Key Decisions for Investors

• Long TWM.TO on a 3-6 month horizon as a high-beta turnaround: buy on pullbacks rather than strength, targeting a move toward covenant/FCF de-risking as the market prices 2026 guidance credibility; risk is any evidence of another utilization miss or delayed asset sales.
• Add LCFS.TO only as a relative-value beneficiary if you want policy exposure, but prefer TWM.TO where the catalyst stack is broader; pair long TWM.TO / short a weaker small-cap refining or renewables peer to isolate domestic incentive and uptime execution.
• Use a call spread in TWM.TO for the next 6-9 months if options are liquid enough: the asymmetry is favorable because a single asset sale or strong monthly operations update could trigger a sharp rerating, while downside is partly cushioned by the improved covenant runway.
• If TWM.TO rallies hard on headline guidance alone, fade part of the move and wait for confirmation from Q1/Q2 operating data; this is a proof-trade, not a full de-risking event until the cash conversion cycle and debt paydown are visible.
• Watch for a follow-on catalyst in the next 30-90 days from non-core asset monetization; if announced at a meaningful valuation, it is likely the cleanest signal to add, since it simultaneously reduces leverage and validates management’s execution narrative.