Why is this sentence grammatical?

[It being low water], he went out with the tide.

The bracketed element is a supplementary non-finite clause.

Since it contains a subject, "it", it belongs to what is known as the absolute construction, one that is subordinate in form but with no syntactic link to the main clause "he went out with the tide".

Supplements are not modifiers; rather, they have a semantic 'anchor' that they refer to, in this case the main clause. But there is no explicit indication here of the semantic relation between the supplement and the anchor. This has to be inferred from the content of the clauses and the context.

The natural interpretation here is causal, more specifically 'reason': "He went out with the tide because it was low water".