SES Secure Energy Services Inc

• Achieved Q3 Adjusted EBITDA¹ of $158 million ($0.54/basic share¹)
• Repurchased 7% of outstanding shares in 2023 and reached the maximum allowable repurchases under the NCIB that commenced in December 2022
• Executed key environmental and energy infrastructure growth projects backstopped by long-term commercial agreements

CALGARY, AB, Nov. 1, 2023 /CNW/ - SECURE ENERGY Services Inc. ("SECURE" or the "Corporation") (TSX: SES) released its 2023 third quarter results today.

Rene Amirault, Chief Executive Officer of SECURE, remarked, "Third quarter results highlighted SECURE's ability to generate significant free cash flow across our critical infrastructure network, enabling us to execute on our capital allocation priorities. Year to date, SECURE has delivered an annualized 12% return to shareholders, achieved through our $0.40 per share annualized dividend payment and the repurchase of 7% of our outstanding shares under SECURE's NCIB. These actions underscore our commitment to enhance returns to our shareholders, complemented by our growth capital program this year.

"We were pleased to bring into service our Clearwater oil terminal and gathering infrastructure, and our Montney water disposal infrastructure expansion at the end of the third quarter, both of which are backstopped by commercial agreements. These additions provide critical infrastructure for the safe and reliable handling of production volumes for our customers. We continue to see a strong opportunity set to work with customers seeking further brownfield expansions based on reducing their costs and environmental footprint."

THIRD QUARTER HIGHLIGHTS

• Continued demand for our critical services and strong utilization across our infrastructure network resulted in revenue (excluding oil purchase and resale) of $427 million, up 2% from the third quarter of 2022.
• Recorded net income of $47 million or $0.16 per basic share, down $13 million from the third quarter of 2022 primarily due to a gain on an asset sale recorded in the prior year period.
• Achieved Adjusted EBITDA¹ of $158 million or $0.54 per basic share, up 8% from Adjusted EBITDA of $0.50 per basic share in the third quarter of 2022.
• Maintained an industry leading Adjusted EBITDA margin¹ of 37%.
• Generated funds flow from operations of $130 million, or $0.45 per basic share, up 5% per basic share from the third quarter of 2022.
• Generated $104 million of discretionary free cash flow¹, or $0.36 per basic share, up 3% per basic share from the third quarter of 2022.
• Completed and commissioned the expansion of our Montney water disposal infrastructure and Clearwater oil terminalling and gathering infrastructure projects safely, on time and on budget. These assets will begin contributing to the Corporation's results in the fourth quarter.
• Paid a quarterly dividend of $0.10 per common share, representing an attractive yield of 5.2% on our common shares.
• Repurchased and cancelled 4.6 million common shares under the Corporation's normal course issuer bid ("NCIB") at a weighted average price per share of $7.32 for a total of $33 million. The purchases in the third quarter resulted in SECURE reaching the maximum allowable repurchases under the NCIB, which included repurchases of 7% of outstanding common shares this year. SECURE's Board of Directors has approved the renewal of the NCIB which is expected to occur in December 2023.
• Maintained a Total Debt to EBITDA covenant ratio of 1.9x².

The Corporation's operating and financial highlights for the three and nine months ended September 30, 2023 and 2022 can be summarized as follows:

OUTLOOK

March 3, 2023, Competition Tribunal Order

On March 3, 2023, the Competition Tribunal of Canada (the "Tribunal") issued an order requiring SECURE to divest 29 facilities all formerly owned by Tervita Corporation ("Tervita"). On August 1, 2023, the Federal Court of Appeal dismissed SECURE's appeal of the Tribunal's order. "The combination of SECURE and Tervita better positioned us to serve our customers and we have proven the significant cost efficiencies through our financial results over the past two years," said Rene Amirault. "We are disappointed that the Federal Court of Appeal dismissed our appeal and sought leave to appeal to the Supreme Court of Canada. We are pleased that the Federal Court of Appeal stayed the Tribunal's order while the Supreme Court determines whether to hear our appeal. As a prudent course of action, SECURE has engaged an advisor and is evaluating the potential sale of the 29 facilities. Due to the uncertainty with respect to the timing of a hearing being granted or a resolution of the matter, our Board of Directors and management continue to consider all options with respect to the Tribunal's order to best serve our customers and other stakeholders."  

Q4 2023 and 2024 Expectations

For the remainder of 2023, SECURE expects activity levels to remain strong in the energy and industrial sectors despite ongoing macroeconomic factors, shifting supply and demand dynamics driving commodity price volatility, and elevated interest rates. Our customers continue to showcase balance sheet strength, modest growth, cost optimization efforts and operational efficiency strategies for disciplined production growth. The industrial sector is also expected to remain stable, marked by sustained volumes, demand for our infrastructure services and activity linked to long-term and recurring projects. SECURE also continues to diligently manage inflationary costs through price increases and operational efficiencies.

Our infrastructure network maintains significant capacity to support customers, accommodating increased volumes for processing, disposal, recycling, recovery, and terminalling, driving higher same store sales with minimal incremental fixed costs or additional capital. We also continue to realize a sizable organic opportunity set to partner with our customers in areas where infrastructure and additional capacity are required to match production growth. In 2023, the planned $100 million in growth capital has been committed, with significant growth projects now operational. In 2024, we expect to spend approximately $50 million on opportunities that continue to leverage our existing infrastructure through long-term contracts, as well as approximately $85 million on sustaining capital including landfill expansions, and approximately $20 million on settling SECURE's abandonment retirement obligations.

Overall, SECURE maintains a constructive outlook for volumes, activity levels, and infrastructure demand throughout the remainder of 2023 and 2024. Looking ahead, we expect to continue to direct our significant discretionary free cash flow to our four capital allocation priorities. For 2024, this includes capital structure improvements through the repayment of high interest debt, paying our $0.40 annualized dividend which currently yields an attractive 5.2%, growing our base infrastructure with customer-backed contracts, and opportunistically repurchasing shares.

Long-Term Outlook

The continued need for energy security has placed renewed focus on the long-term role we believe Canadian oil and gas will play in responsibly meeting the growing demand for energy. While energy diversification is crucial to address future global demand and achieve emission reduction objectives, the significance of oil and natural gas as fundamental energy resources will persist for decades to come. Canada stands out with our world-class safety, environmental and social practices making it a reliable source of sustainably produced energy.

The significant expansion of access from the Trans Mountain Expansion Project, LNG Canada, and new natural gas liquids marine export terminals is expected to lead to increased domestic production across commodities. The Corporation is encouraged by the long-term investments undertaken by energy producers, from exploration and appraisal to production development and capacity expansions, highlighting the extensive and robust nature of the energy industry in Canada. We anticipate that these market dynamics will persist, driving sustained and growing activity levels in the years to come.

SECURE is well positioned to benefit from this activity for the long-term due to the critical services provided energy and industrial customers through our infrastructure network located in key areas across western Canada and North Dakota. Furthermore, SECURE's industrial landfills will benefit from recurring volumes resulting from government regulations mandating abandonment, remediation and reclamation activities. Diverse waste streams and ongoing demand from our industrial customer base further enhance the stability and resilience of our operations.

We remain committed to our vision of being the leader in environmental and energy infrastructure, prioritizing value creation for our customers through reliable, safe, and environmentally responsible infrastructure. This approach allows our customers to allocate their capital where it can yield the highest return while emphasizing operational excellence and leading ESG standards.

NON-GAAP AND OTHER SPECIFIED FINANCIAL MEASURES

The Corporation uses accounting principles that are generally accepted in Canada (the issuer's "GAAP"), which includes International Financial Reporting Standards ("IFRS"). This news release contains certain supplementary non-GAAP financial measures, such as Adjusted EBITDA and discretionary free cash flow and certain non-GAAP financial ratios, such as Adjusted EBITDA Margin, Adjusted EBITDA per share, and discretionary free cash flow per share which do not have any standardized meaning as prescribed by IFRS. These measures are intended as a complement to results provided in accordance with IFRS. The Corporation believes these measures provide additional useful information to analysts, shareholders and other users to understand the Corporation's financial results, profitability, cost management, liquidity and ability to generate funds to finance its operations.

However, these measures should not be used as an alternative to IFRS measures because they are not standardized financial measures under IFRS and therefore might not be comparable to similar financial measures disclosed by other companies. See the "Non-GAAP and other specified financial measures" section of the Corporation's MD&A for the three and nine months ended September 30, 2023 and 2022 for further details, which is incorporated by reference herein and available on SECURE's profile at www.sedarplus.ca and on our website at www.SECURE-energy.com.

Adjusted EBITDA, Adjusted EBITDA Margin and Adjusted EBITDA per share

Adjusted EBITDA is calculated as noted in the table below and reflects items that the Corporation considers appropriate to adjust given the irregular nature and relevance to comparable operations. Adjusted EBITDA margin is defined as Adjusted EBITDA divided by revenue (excluding oil purchase and resale). Adjusted EBITDA per basic and diluted share is defined as Adjusted EBITDA divided by basic and diluted weighted average common shares.

The following table reconciles the Corporation's net income, being the most directly comparable financial measure disclosed in the Corporation's financial statements, to Adjusted EBITDA for the three and nine months ended September 30, 2023 and 2022.

Discretionary Free Cash Flow and Discretionary Free Cash Flow per share

Discretionary free cash flow is defined as funds flow from operations adjusted for sustaining capital expenditures, and lease payments. The Corporation may deduct or include additional items in its calculation of discretionary free cash flow that are unusual, non-recurring, or non-operating in nature. Discretionary free cash flow per basic and diluted share is defined as discretionary free cash flow divided by basic and diluted weighted average common shares. For the three and nine months ended September 30, 2023 and 2022, transaction and related costs have been adjusted as they are costs outside the normal course of business. 

The following table reconciles the Corporation's funds flow from operations, being the most directly comparable financial measure disclosed in the Corporation's financial statements, to discretionary free cash flow.

FINANCIAL STATEMENTS AND MD&A

The Corporation's consolidated financial statements and notes thereto and MD&A for the three and nine months ended September 30, 2023 and 2022 are available on SECURE's website at www.SECURE-energy.com and on SEDAR+ at www.sedarplus.ca.

THIRD QUARTER 2023 CONFERENCE CALL

SECURE will host a conference call Wednesday, November 1, 2023, at 9:00 a.m. MST to discuss the third quarter results. To participate in the conference call, dial 416-764-8650 or toll free 1-888-664-6383. To access the simultaneous webcast, please visit www.SECURE-energy.com. For those unable to listen to the live call, a taped broadcast will be available at www.SECURE-energy.com and, until midnight MST on Wednesday, November 8, 2023, by dialing 1-888-390-0541 and using the pass code 527696.

FORWARD-LOOKING STATEMENTS

Certain statements contained or incorporated by reference in this press release constitute "forward-looking statements and/or "forward-looking information" within the meaning of applicable securities laws (collectively referred to as "forward-looking statements"). When used in this press release, the words "achieve", "advance", "anticipate", "believe", "can be", "capacity", "commit", "continue", "could", "deliver", "drive", "enhance", "ensure", "estimate", "execute", "expect", "focus", "forecast", "forward", "future", "goal", "grow", "integrate", "intend", "may", "maintain", "objective", "ongoing", "opportunity", "outlook", "plan", "position", "potential", "prioritize", "realize", "remain", "result", "seek", "should", "strategy", "target" "will", "would" and similar expressions, as they relate to SECURE, its management are intended to identify forward-looking statements. Such statements reflect the current views of SECURE and speak only as of the date of this press release.

In particular, this press release contains or implies forward-looking statements pertaining but not limited to: SECURE's expectations and priorities for 2023 and beyond and its ability and position to achieve such priorities; higher volumes and activity levels; shifting supply and demand dynamics driving commodity price volatility; stability in the industrial sector; SECURE's business and demand for SECURE's products and services for the remainder of 2023 and into 2024; opportunities as a result of production growth; SECURE's infrastructure network capacity and costs to meet growing demand; SECURE's long-term take or pay contracts; the amounts and purposes of capital expenditures in 2024; capital allocation priorities, including capital structure improvements, repayment of high interest debt, payment of dividends and the amounts thereof, growing our base infrastructure with customer-backed contracts and opportunistic share repurchases; directing significant discretionary free cash toward capital allocation priorities; Canada's role in responsibly meeting growing demand for energy; the significance of oil and natural gas; the effect of expanded access from the Trans Mountain Expansion Project, LNG Canada, and new natural gas liquids marine export terminals on domestic production; long-term investment by energy producers, resulting in sustained and growing activity levels; SECURE's position to benefit from increased activity for the long-term; the benefit of recurring volumes on SECURE's industrial landfills as a result of government regulations; the stability and resilience of SECURE's operations and the drivers thereof; SECURE's vision of being a leader in environmental and energy infrastructure; value creation for SECURE's customers through reliable, safe, and environmentally responsible infrastructure; SECURE's ability to help their customers achieve operational excellence and leading ESG standards; the renewal of SECURE's NCIB; the contribution of completed projects to SECURE's results and the timing thereof; and the continued consideration of all options with respect to the Tribunal's order to best serve our customers and other stakeholders.

Forward-looking statements are based on certain assumptions that SECURE has made in respect thereof as at the date of this press release regarding, among other things: economic and operating conditions, including commodity prices, crude oil and natural gas storage levels, interest rates, exchange rates, and inflation; the changes in market activity and growth will be consistent with industry activity in Canada and the U.S. and growth levels in similar phases of previous economic cycles; the impact of the COVID-19 pandemic (including its variants) and other international or geopolitical events, including government responses related thereto and their impact on global energy pricing, oil and gas industry exploration and development activity levels and production volumes; the ability of the Corporation to realize the anticipated benefits of acquisitions or dispositions; the resolution of SECURE's appeal of the Tribunal's decision on terms acceptable to the Corporation and the impacts of the divestiture of facilities, if any, as a result thereof; anticipated sources of funding being available to SECURE on terms favourable to SECURE; the success of the Corporation's operations and growth projects; the Corporation's competitive position, operating, acquisition and sustaining costs remaining substantially unchanged; the Corporation's ability to attract and retain customers (including Tervita's historic customers); that counterparties comply with contracts in a timely manner; that there are no unforeseen events preventing the performance of contracts or the completion and operation of the relevant facilities; that there are no unforeseen material costs in relation to the Corporation's facilities and operations; that prevailing regulatory, tax and environmental laws and regulations apply or are introduced as expected, and the timing of such introduction; increases to the Corporation's share price and market capitalization over the long term; the Corporation's ability to repay debt and return capital to shareholders; the Corporation's ability to obtain and retain qualified personnel (including those with specialized skills and knowledge), technology and equipment in a timely and cost-efficient manner; the Corporation's ability to access capital and insurance; operating and borrowing costs, including costs associated with the acquisition and maintenance of equipment and property; the ability of the Corporation and our subsidiaries to successfully market our services in western Canada and the U.S.; an increased focus on ESG, sustainability and environmental considerations in the oil and gas industry; the impacts of climate-change on the Corporation's business; the current business environment remaining substantially unchanged; present and anticipated programs and expansion plans of other organizations operating in the energy service industry resulting in an increased demand for the Corporation's and our subsidiaries' services; future acquisition and maintenance costs; the Corporation's ability to achieve its ESG and sustainability targets and goals and the costs associated therewith; and other risks and uncertainties described in SECURE's current annual information form and from time to time in filings made by SECURE with securities regulatory authorities.

Forward-looking statements involve significant known and unknown risks and uncertainties, should not be read as guarantees of future performance or results, and will not necessarily be accurate indications of whether such results will be achieved. Readers are cautioned not to place undue reliance on these statements as a number of factors could cause actual results to differ materially from the results discussed in these forward-looking statements, including but not limited to: general global financial conditions, including general economic conditions in Canada and the U.S.; the effect of the COVID-19 pandemic (including its variants), inflation and international and geopolitical events and governmental responses thereto on economic conditions, commodity prices and the Corporation's business and operations; changes in the level of capital expenditures made by oil and natural gas producers and the resultant effect on demand for oilfield services during drilling and completion of oil and natural gas wells; volatility in market prices for oil and natural gas and the effect of this volatility on the demand for oilfield services generally; a transition to alternative energy sources; the Corporation's inability to retain customers; risks inherent in the energy industry, including physical climate-related impacts; the Corporation's ability to generate sufficient cash flow from operations to meet our current and future obligations; the seasonal nature of the oil and gas industry; increases in debt service charges including changes in the interest rates charged under the Corporation's current and future debt agreements; inflation and supply chain disruptions; the Corporation's ability to access external sources of debt and equity capital and insurance; disruptions to our operations resulting from events out of our control; the timing and amount of stimulus packages and government grants relating to site rehabilitation programs; the cost of compliance with and changes in legislation and the regulatory and taxation environment, including uncertainties with respect to implementing binding targets for reductions of emissions and the regulation of hydraulic fracturing services and services relating to the transportation of dangerous goods; uncertainties in weather and temperature affecting the duration of the oilfield service periods and the activities that can be completed; competition; impairment losses on physical assets; sourcing, pricing and availability of raw materials, consumables, component parts, equipment, suppliers, facilities, and skilled management, technical and field personnel; supply chain disruption; the Corporation's ability to effectively complete acquisition and divestiture transactions on acceptable terms or at all; a failure to realize the benefits of acquisitions, and risks related to the associated business integration; the inaccuracy of pro forma information prepared in connection with acquisitions; risks related to a new business mix and significant shareholder; liabilities and risks, including environmental liabilities and risks, inherent in SECURE's operations; the resolution of SECURE's appeal of the Tribunal's decision on terms acceptable to the Corporation and the impacts of the divestiture of facilities, if any, as a result thereof; the Corporation's ability to invest in and integrate technological advances and match advances of our competition; the viability, economic or otherwise, of such technology; credit, commodity price and foreign currency risk to which the Corporation is exposed in the conduct of our business; compliance with the restrictive covenants in the Corporation's current and future debt agreements; the Corporation's or our customers' ability to perform their obligations under long-term contracts; misalignment with our partners and the operation of jointly owned assets; the Corporation's ability to source products and services on acceptable terms or at all; the Corporation's ability to retain key or qualified personnel, including those with specialized skills or knowledge; uncertainty relating to trade relations and associated supply disruptions; the effect of changes in government and actions taken by governments in jurisdictions in which the Corporation operates, including in the U.S.; the effect of climate change and related activism on our operations and ability to access capital and insurance; cyber security and other related risks; the Corporation's ability to bid on new contracts and renew existing contracts; potential closure and post-closure costs associated with landfills operated by the Corporation; the Corporation's ability to protect our proprietary technology and our intellectual property rights; legal proceedings and regulatory actions to which the Corporation may become subject, including in connection with SECURE's appeal of the Tribunal's decision and any claims for infringement of a third parties' intellectual property rights; the Corporation's ability to meet its ESG targets or goals and the costs associated therewith; claims by, and consultation with, Indigenous Peoples in connection with project approval; disclosure controls and internal controls over financial reporting; and other risk factors identified in SECURE's current annual information form and from time to time in filings made by the Corporation with securities regulatory authorities.

Although forward-looking statements contained in this press release are based upon what the Corporation believes are reasonable assumptions, the Corporation cannot assure investors that actual results will be consistent with these forward-looking statements. The forward-looking statements in this press release are made as of the date hereof and are expressly qualified by this cautionary statement. Unless otherwise required by applicable securities laws, SECURE does not intend, or assume any obligation, to update these forward-looking statements.

ABOUT SECURE

SECURE is a leading waste management and energy infrastructure business headquartered in Calgary, Alberta. The Corporation's extensive infrastructure network located throughout western Canada and North Dakota includes waste processing and transfer facilities, industrial landfills, metal recycling facilities, crude oil and water gathering pipelines, crude oil terminals and storage facilities. Through this infrastructure network, the Corporation carries out its principal business operations, including the processing, recovery, recycling and disposal of waste streams generated by our energy and industrial customers and gathering, optimization, terminalling and storage of crude oil and natural gas liquids. The solutions the Corporation provides are designed not only to help reduce costs, but also lower emissions, increase safety, manage water, recycle by-products and protect the environment.

SECURE's shares trade under the symbol SES and are listed on the Toronto Stock Exchange. For more information, visit www.SECURE-energy.com.

SOURCE SECURE Energy Services Inc.