Tidewater Midstream: Opportunistic Company Run by Incentivized CEO

Curtis Jensen of Robotti & Company Advisors presented his in-depth investment thesis on Tidewater Midstream & Infrastructure (Canada: TWM) at Best Ideas 2019.

Thesis summary:

Tidewater Midstream & Infrastructure, headquartered in Calgary, Alberta, provides oil and gas midstream services, including gathering, processing, and transportation and NGL marketing and extraction as well as storage services. The company receives fees under long-term contracts for its services.

Management started the company by opportunistically buying up distressed assets during the energy downturn of 2015-16.

Commodity prices in Canada remain depressed, owing to a lack of takeaway and egress options such as those provided by the company. The shares trade at a meaningful discount to any reasonable assessment of economic value, likely owing to poor sector sentiment and the company’s small size and perceived quality. Two large projects slated for completion in 2019 should improve the company’s scale, cash flows, counterparty risk, and asset quality.

Birch Hill Equity, a Toronto-based private equity firm, recently acquired 22% of the shares. Tidewater’s CEO is paid C$1 per year and has committed to purchasing stock in the open market every year (he owns more than five million shares).

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About the instructor:

Curtis Jensen is the portfolio manager of the Ossia Partners Fund. Ossia Partners employs a fundamentals-based strategy, grounded in primary research, to identify securities whose public market prices diverge significantly from a conservative estimate of intrinsic or economic value. Prior to joining Robotti & Company Advisors in 2016, Curtis was employed by Third Avenue Management in various roles from 1995 to 2014. Curtis oversaw that firm’s Small-Cap strategy and, from 2003 until 2009, he also served as Co-Chief Investment Officer, along with the firm’s founder, Martin Whitman, until being named sole CIO in January of 2010. Curtis was a member of the firm’s management and risk committees and oversaw the recruiting and mentoring of the firm’s research team. During his tenure at Third Avenue Curtis was a member of the nominating committee of the Board of Directors at Investor AB, Sweden’s leading industrial holding company. Curtis holds a BA in Economics from Williams College and an MBA from Yale University School of Management.