CALGARY, AB, April 27, 2021 /CNW/ - SECURE ENERGY Services
Inc. ("SECURE") (TSX: SES) reported today its operational and
financial results for the three months ended
March 31, 2021, highlighted by Adjusted
EBITDAi of $39.2 million.
The following press release should be read in conjunction with
the Corporation's management's discussion and analysis ("MD&A")
for the three months ended March 31, 2021, and the condensed
consolidated financial statements and notes thereto for the three
months ended March 31, 2021, which
are available on SEDAR at www.sedar.com.
FIRST QUARTER HIGHLIGHTS
- Achieved Adjusted EBITDA of $39.2
million for the three months ended March 31, 2021. This reflects the level of
SECURE's production and contracted volumes and the significant
measures taken following the first quarter of 2020 to reduce
operating and general and administrative ("G&A") expenses to
adjust the Corporation's cost structure to levels consistent with
activity levels.
- Recorded a net loss of $1.1
million, compared to a net loss of $22.4 million for the three months ended
March 31, 2020. The net loss in the
current year period includes transaction costs of $3.1 million associated with legal and advisory
fees related to the Tervita Merger (refer to "Tervita
Merger" section below).
- Reduced G&A expenses (excluding depreciation, depletion and
amortization and share-based compensation) by 30% from the prior
year comparative period. As a percentage of revenue (excluding oil
purchase and resale), G&A expenses were 10% for the three
months ended March 31, 2021.
- Generated discretionary free cash flowi of
$27.5 million, which was used
primarily to repay debt, as well as fund the Corporation's
quarterly dividend, maintenance and capital program. Net cash flows
from operating activities were $24.6
million in the quarter.
- Reduced the amount drawn on the Corporation's credit
facilities, net of cash held, by $17.0
million. As a result, SECURE reported Total Debt to trailing
twelve-month EBITDAii of 3.1x, well within the
Corporation's 5.0x covenant restriction.
- Declared dividends of $1.2
million, representing $0.0075
(0.75 cents) per common share for the
quarter.
- Continued to prioritize the advancement of SECURE's
Environmental, Social and Governance ("ESG") practices. During the
three months ended March 31, 2021, in
addition to publishing our 2020 Sustainability Report, initiatives
taken by SECURE included:
-
- Establishing a framework for an ESG education and awareness
program for employees;
- Progressing development of a framework of short and mid-term
energy usage and emissions targets as we map out milestones towards
achieving our long-term objectives of reducing carbon intensity in
half by 2030 and achieving net zero emissions by 2050;
- Expanding vendor involvement and compliance with SECURE's ESG
practices; and
- Establishing ESG targets for short and long-term executive
compensation.
TERVITA MERGER
On March 8,
2021, SECURE entered into an arrangement agreement (the
"Arrangement Agreement") with Tervita Corporation ("Tervita") to
combine in an all-share transaction pursuant to which SECURE will
acquire all of the issued and outstanding common shares of Tervita
on the basis of 1.2757 common shares of SECURE for each outstanding
common share of Tervita (the "Tervita Merger"). The combined
company will operate as SECURE and remain listed on the TSX as TSX:
SES.
The Tervita Merger combines highly complementary midstream
infrastructure asset bases and environmental service lines, which
are expected to materially enhance scale and utilization and
provide operating efficiencies for the combined company's
customers. Significant estimated annual integration cost savings of
approximately $75 million are expected to be realizable within
12 to 18 months after closing, contributing to a strong pro forma
discretionary free cash flow profile.
In connection with entering into the Arrangement Agreement,
SECURE entered into a binding agreement with a syndicate of banks
to provide the combined company with committed financing by way of
a $725 million three-year credit facility available upon
closing of the Tervita Merger (the "new SECURE Credit
Facility"), subject to the satisfaction of certain conditions
precedent. The new SECURE Credit Facility will be utilized to
replace and repay SECURE's existing first and second lien credit
facilities and Tervita's first lien credit facilities.
On April 12, 2021, SECURE received
an initial issuer credit rating of 'B' from S&P Global
Ratings with a positive outlook following the announcement of the
Tervita Merger. This represents the Corporation's first public
credit rating and the rating is expected to increase transparency
and comparability for debt investors and other capital market
participants.
On April 16, 2021, Tervita obtained the requisite consents
from the holders of Tervita's outstanding US$500 million aggregate principal amount of 11%
senior second lien secured notes due 2025 to facilitate completion
of the Tervita Merger (the "Tervita Noteholder Consent"). Obtaining
the Tervita Noteholder Consent was a condition to the effectiveness
of the new SECURE Credit Facility.
Completion of the Tervita Merger is subject to, among other
things: (i) obtaining the requisite approvals of securityholders of
Tervita and shareholders of SECURE; (ii) the approval by the Court
of Queen's Bench of Alberta; (iii)
the new SECURE Credit Facility becoming effective on the completion
of the Tervita Merger; (iv) receipt of requisite approvals under
the Competition Act (Canada); (v) conditional approval by the
Toronto Stock Exchange of the listing of the SECURE common shares
issuable to Tervita shareholders pursuant to the Tervita Merger;
and (viii) other customary closing conditions.
OPERATING AND FINANCIAL SUMMARY
The Corporation's operating and financial highlights for the three-month periods ended March
31, 2021 and 2020 can be summarized
as follows:
|
Three months ended
March 31,
|
($000's except
share and per share data)
|
2021
|
2020
|
%
change
|
Revenue (excludes oil
purchase and resale)
|
132,135
|
172,022
|
(23)
|
Oil purchase and
resale
|
529,077
|
433,555
|
22
|
Total
revenue
|
661,212
|
605,577
|
9
|
Adjusted EBITDA
(1)
|
39,153
|
42,094
|
(7)
|
|
Per share ($),
basic
|
0.25
|
0.27
|
(7)
|
Net loss attributable
to shareholders of SECURE
|
(630)
|
(21,952)
|
(97)
|
|
Per share ($), basic
and diluted
|
-
|
(0.14)
|
(100)
|
Cash flows from
operating activities
|
24,585
|
45,850
|
(46)
|
|
Per share ($),
basic
|
0.15
|
0.29
|
(48)
|
Discretionary free
cash flow(1)
|
27,509
|
30,854
|
(11)
|
|
Per share ($),
basic
|
0.17
|
0.19
|
(11)
|
Capital expenditures
(1)
|
6,427
|
41,360
|
(84)
|
Dividends per common
share
|
0.0075
|
0.0675
|
(89)
|
Total
assets
|
1,415,717
|
1,574,420
|
(10)
|
Long-term
liabilities
|
538,354
|
609,122
|
(12)
|
Common shares - end
of period
|
160,137,641
|
158,444,194
|
1
|
Weighted average
common shares - basic and diluted
|
159,540,722
|
158,513,800
|
1
|
(1)Refer
to "Non-GAAP measures" for further information.
|
- REVENUE OF $661.2 MILLION FOR
THE THREE MONTHS ENDED MARCH 31,
2021
-
- Midstream Infrastructure segment revenue (excluding oil
purchase and resale) decreased 31% to $51.3 million during the three months ended
March 31, 2021, from the 2020
comparative period. Despite higher crude oil and liquids pricing
and an uptick in field activity levels over recent quarters,
producers remained cautious deploying their 2021 capital programs.
The active rig count remained approximately 25% below the prior
year comparative period in the Western Canadian Sedimentary Basin
("WCSB") as producers navigated increasing COVID-19 restrictions
and a period of significantly cold weather in February. Reduced
drilling, completion and production volumes at the Corporation's
facilities negatively impacted treating and disposal
revenues.
- Oil purchase and resale revenue for the
three months ended March 31,
2021, increased 22% from the 2020 comparative
period to $529.1 million. The
increase in revenue is a result of a 32% increase in Canadian light
oil benchmark pricing during the three-month period ended
March 31, 2021, over the 2020
comparative period, partially offset by reduced marketing activity
as a result of lower production volumes and less volatile
differentials.
- Environmental and Fluid Management segment revenue decreased
17% during the three months ended March 31,
2021, from the 2020 comparative to $80.9 million. Environmental management
project work was negatively impacted by job shut-downs or deferrals
resulting from public health measures taken to limit the spread of
COVID-19 and the 25% reduction in drilling and completion activity
in the WCSB from the prior comparative quarter. The extent of the
revenue decrease in the segment was partially mitigated by stable
revenue from production chemicals as the Corporation continues to
win new bids and gain market share, and increased revenue generated
as a result of government abandonment and reclamation stimulus
programs.
- ADJUSTED EBITDA OF $39.2
MILLION FOR THE THREE MONTHS ENDED MARCH 31, 2021
-
- Adjusted EBITDA decreased 7% to $39.2
million during the three months ended
March 31, 2021, from the 2020 comparative period. The
impact of a 23% reduction to revenue (excluding oil purchase and
resale) as described above was partially offset by cost reductions
taken since the first quarter of 2020 to reduce operating and
G&A expenses to adjust the Corporation's cost structure to
levels consistent with activity levels.
- NET LOSS ATTRIBUTABLE TO SHAREHOLDERS OF SECURE OF
$0.6 MILLION FOR THE THREE MONTHS
ENDED MARCH 31, 2021
-
- Net loss attributable to shareholders of SECURE was
$0.6 million during the three
months ended March 31, 2021, compared to a net loss of
$22.0 million for the 2020
comparative period. The variance is primarily a result of expenses
recorded by the Corporation in the prior year comparative period
associated with the sudden onset of the economic downturn in
March 2020. These expenses included a
$15.7 million non-cash
impairment charge on intangible assets and $9.4 million of one-time costs related to
restructuring initiatives to align the Corporation's fixed cost
structure with anticipated activity levels.
- CASH FLOWS FROM OPERATING ACTIVITIES OF $24.6 MILLION FOR THE THREE MONTHS ENDED
MARCH 31, 2021
-
- The Corporation generated cash flows from operating activities
of $24.6 million during the
three months ended March 31, 2021, a decrease of 46% from the
prior year comparative period. The variance was primarily a result
of a $21.3 million change in
non-cash working capital. In the prior year comparative period, the
Corporation had a large working capital recovery as a result of
reduced accounts receivable and accrued receivables at
March 31, 2020 compared to December 31, 2019, following the decline in crude
oil prices in March 2020. At
March 31, 2021, SECURE carried total net working capital,
excluding cash, of $58.1 million, relatively consistent with
the balance at December 31, 2020.
- CAPITAL EXPENDITURES OF $6.4
MILLION FOR THE THREE MONTHS ENDED MARCH 31, 2021
-
- Total capital expenditures for the three months ended
March 31, 2021, included $4.5 million of expansion capital related
primarily to connecting an additional segment of the East
Kaybob oil pipeline.
- Sustaining capital incurred in the three months ended
March 31, 2021, of $1.9 million relates primarily to well
maintenance, and asset integrity and inspection programs.
- FINANCIAL FLEXIBILITY
-
- During the three months ended March 31, 2021, the
Corporation paid down its credit facilities, net of cash held, by
$17.0 million. The reduction is
primarily a result of SECURE's efforts to direct discretionary free
cash flow, net of the first quarter 2021 capital program, against
outstanding debt. As at March 31,
2021, the Corporation had drawn $393.1 million on its credit facilities,
resulting in availability of $336.9 million, subject to covenant
restrictions.
- The following table outlines SECURE's Senior and Total Debt to
trailing twelve-month EBITDA ratio at March 31, 2021, and
December 31, 2020. SECURE remains well within compliance
of all covenants related to its credit facilities.
|
|
|
|
|
Mar 31,
2021
|
Dec 31,
2020
|
Covenant
|
|
|
|
|
Senior Debt to
EBITDA
|
2.1
|
2.2
|
3.5
|
|
|
|
|
Total Debt to
EBITDA
|
3.1
|
3.2
|
5.0
|
- DIVIDENDS OF $1.2 MILLION FOR
THE THREE MONTHS ENDED MARCH 31,
2021
-
- During the three months ended March 31, 2021, the
Corporation declared dividends of $1.2 million to holders of common shares,
representing a quarterly dividend of $0.0075 (0.75 cents) per share.
- SECURE believes sharing excess cash flows with shareholders is
a core business principle; as a result,
management and the Board of Directors of the Corporation will continue
to
monitor the Corporation's dividend policy with respect to
forecasted Adjusted EBITDA, debt, capital expenditures and other
investment opportunities, as well as expected interest, lease,
tax and transaction costs, and will look for opportunities to
increase the dividend after the successful integration with Tervita
and as business conditions warrant.
MIDSTREAM INFRASTRUCTURE SEGMENT HIGHLIGHTS
|
Three months ended
March 31,
|
($000's)
|
2021
|
2020
|
%
Change
|
|
|
|
|
Midstream
Infrastructure services revenue (a)
|
51,264
|
74,627
|
(31)
|
Oil purchase and
resale
|
529,077
|
433,555
|
22
|
Midstream
Infrastructure Revenue
|
580,341
|
508,182
|
14
|
|
|
|
|
Cost of sales
excluding items noted below
|
21,163
|
30,865
|
(31)
|
Depreciation and
amortization
|
19,034
|
23,502
|
(19)
|
Oil purchase and
resale
|
529,077
|
433,555
|
22
|
Midstream
Infrastructure Cost of Sales
|
569,274
|
487,922
|
17
|
|
|
|
|
Segment Profit
Margin (1)
|
30,101
|
43,762
|
(31)
|
|
|
|
|
Segment Profit
Margin (1) as a % of revenue (a)
|
59%
|
59%
|
|
(1)Calculated as revenue less cost of
sales excluding depreciation and amortization. Refer to
"Non-GAAP Measures" for further information.
|
- Revenue generated from Midstream Infrastructure services of
$51.3 million decreased 31% for the
three months ended March 31, 2021,
from the 2020 comparative period. The decrease was due to lower
processing and disposal volumes tied to drilling and completion
activity compared to the first two months of 2020, prior to the
large decrease in oil prices and corresponding activity levels.
Produced water, emulsion treating and terminalling volumes at the
Corporation's midstream processing facilities also decreased
primarily as a result of natural production declines in the WCSB,
continued production shut-ins in North
Dakota, and limited overflow volumes from producers with
capacity to handle their own product. Recovered oil revenue was
relatively flat in the three months ended March 31, 2021, compared to the 2020 comparative
period as higher average crude oil prices were offset by reduced
volumes. Less volatile differentials limited the upside for price
optimization at the Corporation's pipeline connected FSTs compared
to the three months ended March 31,
2020, resulting in reduced crude oil marketing revenue.
- Disposal volumes decreased 39% during the three months ended
March 31, 2021, from the 2020
comparative period as a result of lower waste water volumes
corresponding to reduced producer completion activity, limited
overflow volumes from producers with capacity to handle their own
product, and customer storage of production water for anticipated
completions.
- Processing volumes decreased 22% during the three months ended
March 31, 2021, from the 2020
comparative period due primarily to lower waste processing volumes
corresponding to the decrease in drilling and completion activity
compared to the first two months of 2020. Emulsion treating volumes
were also down due to lower overall production levels, particularly
in North Dakota where activity
levels have been slow to recover.
- Oil volumes recovered through our processing operations
decreased 33% during the three months ended March 31, 2021, from the 2020 comparative period,
consistent with lower overall volumes received at the Corporation's
midstream processing facilities as described above. The impact of
lower volumes on recovered oil revenue was largely offset by a 32%
improvement in benchmark oil pricing in the current year
period.
- Crude oil terminalling and pipeline volumes decreased 14%
during the three months ended March 31,
2021, from the 2020 comparative period. The decrease was a
result of reduced terminalling at certain facilities due to lower
production, partially offset by the addition of the East Kaybob oil
pipeline in June 2020, and stability
of volumes associated with the contracted Kerrobert crude oil pipeline.
- Oil purchase and resale revenue in the Midstream Infrastructure
segment increased 22% to $529.1
million for the three months ended March 31, 2021, from the 2020 comparative period.
The increase corresponds to the increase in benchmark oil prices,
partially offset by reduced marketing activities compared to the
prior year comparative period.
- The Midstream Infrastructure segment's profit margin decreased
31% to $30.1 million for the three
months ended March 31, 2021, from the
2020 comparative period due to the factors described above. As a
percentage of Midstream Infrastructure services revenue, segment
profit margin was 59% for both the three months ended March 31, 2021 and 2020. Lower revenue in the
current year period was offset by fixed cost structure
reductions.
- G&A expense decreased by 31% to $4.6
million for the three months ended March 31, 2021, from the 2020 comparative period.
The decrease is mainly due to lower personnel costs resulting from
the restructuring initiatives taken to right-size the Corporation's
workforce to anticipated activity levels beginning at the end of
March 2020, and strict cost control
measures restricting discretionary spending. Excluding depreciation
and amortization, G&A expense as a percentage of the segment's
services revenue was 8% for the three months ended March 31, 2021, compared to 6% for the three
months ended March 31, 2020, as a
result of lower revenue.
- Income before tax of $6.3 million
for the three months ended March 31,
2021, decreased $3.6 million
compared to the income before tax of $9.9
million in the prior year comparative period. The decrease
is a result of lower segment profit margin, partially offset by
lower depreciation and amortization expense and G&A expense in
the 2021 period, as well as a $3.4
million restructuring charge incurred in the prior year
period related to right sizing the Corporation's workforce to
anticipated activity levels and streamlining business processes
resulting in termination of certain functions.
ENVIRONMENTAL AND FLUID MANAGEMENT SEGMENT
|
Three months ended
March 31,
|
($000's)
|
2021
|
2020
|
%
Change
|
|
|
|
|
Environmental and
Fluid Management Revenue
|
80,871
|
97,395
|
(17)
|
|
|
|
|
Cost of sales
excluding items noted below
|
59,345
|
74,408
|
(20)
|
Depreciation,
depletion and amortization
|
8,361
|
12,089
|
(31)
|
Impairment
|
-
|
15,723
|
(100)
|
Environmental and
Fluid Management Cost of Sales
|
67,706
|
102,220
|
(34)
|
|
|
|
|
Segment Profit
Margin (1)
|
21,526
|
22,987
|
(6)
|
|
|
|
|
Segment Profit
Margin (1) as a % of revenue
|
27%
|
24%
|
|
(1)Calculated as revenue less cost of
sales excluding depreciation, depletion, amortization, and
impairment. Refer to "Non-GAAP Measures" for further
information.
|
- The Environmental and Fluid Management segment revenue
decreased 17% to $80.9 million for
the three months ended March 31,
2021, from the 2020 comparative period. Reduced producer
spending in the first quarter of 2021 decreased drilling and
completion activity, lowering drilling waste volumes at the
Corporation's landfills and demand for fluid management associated
with drilling and completions. Additionally, project work was
negatively impacted by job shut-downs or deferrals resulting from
public health measures taken to limit the spread of COVID-19. New
revenue generated from the government stimulus programs partially
offset the impact of reduced project job volumes on the
Corporation's Environmental business units.
- The extent of the revenue decrease in the Environmental and
Fluid Management segment was also partially mitigated by relatively
stable revenue from production chemicals as the Corporation
continues to win new bids and gain market share. SECURE has
experience and expertise in key production fields where producers
have been the most active in WCSB. As a result, the Corporation can
provide tailored solutions and improved product formulations that
optimize production, provide flow assurance and maintain the
integrity of production assets.
- Segment profit margin decreased 6% to $21.5 million for the three months ended
March 31, 2021, from the 2020
comparative period. For the three months ended March 31, 2021, segment profit margin as a
percentage of revenue of 27% increased from 24% in the prior year
comparative period. The profit margin increase was primarily a
result of service mix, including higher production enhancement
stimulation work, as well as fixed cost reductions following the
first quarter of 2020 which also contributed to improvements in
segment profit margin.
- G&A expenses decreased 36% to $5.2
million for the three months ended March 31, 2021, from the 2020 comparative period.
The decrease is primarily due to lower personnel related costs and
reduced discretionary spending as the Corporation manages costs to
correspond to current industry activity levels. Excluding
depreciation and amortization, G&A expenses as a percentage of
the segment's revenue was 6% for the three months ended
March 31, 2021, compared to 8% in the
prior comparative period.
- The Environmental and Fluid Management segment recorded income
before tax of $8.0 million for the
three months ended March 31, 2021,
compared to a loss before tax of $17.8
million for the three months ended March 31, 2020. For the three months ended
March 31, 2020, the segment's loss
before tax included a non-cash impairment charge of $15.7 million, as well as restructuring costs of
$4.8 million incurred related to
organizational restructuring.
OUTLOOK
Over the next few months, the Corporation will work with Tervita
to achieve the remaining major milestones required for the closing
of the Tervita Merger. Completion of the Tervita Merger is subject
to, among other things: (i) obtaining the requisite approvals of
securityholders of Tervita and shareholders of SECURE; (ii) the
approval by the Court of Queen's Bench of Alberta; (iii) the new SECURE Credit Facility
becoming effective on the completion of the Tervita Merger; (iv)
receipt of requisite approvals under the Competition Act
(Canada); (v) conditional approval
by the Toronto Stock Exchange of the listing of the SECURE common
shares issuable to Tervita shareholders pursuant to the Tervita
Merger; and (viii) other customary closing conditions.
A joint information circular regarding the Tervita Merger and
the meetings of SECURE and Tervita's securityholders, which are
each scheduled for June 15, 2021, is
expected to be mailed in mid-May
2021. Closing of the Tervita Merger is expected to occur
during the third quarter of 2021. The key benefits of the
arrangement include:
- Highly complementary midstream infrastructure asset bases and
environmental service lines provide for enhanced scale,
utilization, efficiencies, and expanded services for the combined
company's customers.
- Significant estimated annual integration cost savings of
approximately $75 million are
expected to be realizable within 12 to 18 months after
closing.
- Expected to be immediately accretive to cash flow from
operations and discretionary free cash flow per share for all
shareholders of the combined company.
- Significantly improved cost structure to serve a growing and
consolidating customer base through the full business cycle.
- Strong pro forma financial position with attractive
discretionary free cash flow generation expected to reduce debt and
help achieve the combined company's target debt to EBITDA ratio of
less than 2.5x, which is expected to be achieved within two years
of closing.
- Enhanced scale anticipated to provide greater access to capital
markets and the ability to partner with our customers to execute on
a strong pipeline of organic growth projects.
- Combines two strong corporate cultures driven by highly
talented teams with shared commitments to environmental, social and
governance principles, safety, performance, customer service and
profitability.
- Elevates position to advance and deliver on environmental,
social and governance initiatives for the combined company and its
customers.
Both the Corporation and Tervita are committed to a successful
integration of the two companies and their facility and operating
networks. Post-closing, the combined entity will be focused on
achieving the estimated annual integration cost savings of
approximately $75 million, of which approximately 40% relates
to Corporate costs and 60% relates to operational cost
savings.
Until closing of the Tervita Merger, SECURE will continue to
operate our business independently and competitively. As always, we
remain dedicated to working with our customers to deliver
innovative midstream and environmental solutions that reduce their
costs, lower emissions, and improve safety.
While near-term COVID-19 lockdowns and COVID-19 variants create
considerable uncertainty with regards to the outlook on short-term
oil demand, successful vaccine deployment, the introduction of
rapid COVID-19 testing, and higher crude oil and liquids prices
provide optimism for overall industry improvements in the second
half of 2021. Based on current macroeconomic conditions and
commodity prices, SECURE anticipates higher year over year
discretionary free cash flow for the remainder of 2021 based on the
following expectations:
- Continued stability from our core Midstream Infrastructure
business, of which approximately 35% is underpinned by contracted
volumes associated with the Corporation's oil and water pipelines,
which provides a base level of cash flows. Additionally, SECURE's
business remains highly concentrated on production volumes and
related services that historically represent approximately 75% of
the Corporation's Adjusted EBITDA.
- Higher producer cash flows resulting from improved commodity
prices. As a result, the Corporation expects an increase in
drilling and completion activity from 2020 levels for the remainder
of the year as producers seek to add production to offset natural
declines that occurred in 2020 in order to maintain flat production
levels. SECURE anticipates that producers will remain focused on
controlling costs and improving balance sheet strength in favor of
production growth in the short-term.
- Increased utilization at our midstream processing facilities
and landfills as higher drilling, completion and production volumes
from increased activity levels require treating, processing and
disposal. The Corporation has significant capacity to increase
facility throughput and disposal with minimal fixed costs or
additional capital.
- Increased abandonment, remediation and reclamation activity in
the second half of 2021 as a result of the Canadian Federal
Government's $1.7 billion stimulus
package to help fund the closure and reclamation of orphan and
inactive wells in the WCSB. SECURE expects increased abandonment,
remediation and reclamation activity to positively impact all
Canadian operations over the term of the program, particularly
within our Environmental Management group as a result of higher
demand for environmental site assessments, onsite abandonment,
remediation and reclamation management and decommissioning
work.
Waste volumes resulting from these activities will also require
disposal; SECURE owns and operates six industrial landfills in
Alberta capable of handling this
waste.
- Continued prudent approach to capital spending. The Corporation
expects to spend less than $20 million in 2021, which includes
approximately $12 million of
sustaining capital. The capital budget will be reviewed quarterly
in 2021 and may be revised in accordance with opportunities to
connect producers to existing midstream infrastructure to further
increase volumes and utilization on a long-term basis. A full
evaluation of SECURE and Tervita's combined capital project
opportunities will be conducted immediately following close of the
Tervita Merger.
Throughout 2021, the Corporation will continue to focus on
maintaining financial resiliency and prioritize the repayment of
debt, which we expect will also contribute to a strong pro forma
financial position upon closing of the Tervita Merger.
Our business is uniquely positioned to deliver economic and
environmental benefits that make the oil and gas industry more
efficient and sustainable. We are committed to working with our
customers to challenge what's possible and develop innovative
solutions that are both cost effective and minimize the
environmental impacts associated with the development of our shared
resources. The Tervita Merger provides the increased size and
scale, utilization, and efficiencies to enhance the services and
capabilities we can provide to our customers to help achieve their
objectives of responsible development, while reducing costs.
Additionally, SECURE will continue to take proactive measures to
reduce the environmental impact of our own operations, and
positively contribute to the health, safety, and economic wellbeing
of our employees and communities where we live and work. The
Tervita Merger elevates our position to accelerate the
Corporation's environmental and social sustainability initiatives
for the benefit of all stakeholders.
FINANCIAL STATEMENTS AND MD&A
The Corporation's condensed consolidated financial statements and
notes thereto for the three months ended March 31, 2021
and 2020 and MD&A for the three months ended March 31, 2021 and 2020 are available immediately
on SECURE's website at www.secure-energy.com. The condensed
consolidated financial statements and MD&A will be available
tomorrow on SEDAR at www.sedar.com.
FORWARD-LOOKING STATEMENTS
Certain statements contained in this document 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
document, the words "achieve", "advance", "anticipate", "believe",
"commit", "could", "deliver", "drive", "enhance", "estimate",
"execute", "expect", "focus", "integrate", "intend", "may",
"opportunity", "plan", "position", "prioritize", "realize",
"result", "strategy", "target" "will", and similar expressions, as
they relate to SECURE, its management, or the combined company, are
intended to identify forward-looking statements. Such statements
reflect the current views of SECURE and speak only as of the date
of this document.
In particular, this document contains or implies forward-looking
statements pertaining but not limited to: expectations with respect
to the strength of the combined company; the combined company's
access to capital markets and the resulting effect on its future
growth and acquisition plans; the relevance of SECURE's credit
rating to debt investors and capital market participants; the
complementary nature of the combined company's asset base and
environmental service lines, and the ability to enhance
scale and increase utilization as a result thereof; the
combined company's expected discretionary free cash flow profile;
expected annual integration cost savings of the combined company
and the timing thereof; debt repayment plans; the ability to
achieve the combined company's target debt to EBITDA ratio of less
than 2.5x and the timing thereof; anticipated closing
conditions and regulatory approvals required pursuant to the
Tervita Merger; future ESG goals and the ability of the Tervita
Merger to accelerate Tervita's environmental and social
sustainability initiatives; the meetings of each of SECURE's and
Tervita's shareholders; the joint information circular
prepared in connection therewith and the expected publication date
thereof; the timing and completion of the Tervita Merger, including
the expected closing date of the Tervita Merger; management's
expectations with respect to the duration of the COVID-19 pandemic
and related restrictions and the related effect on demand for oil,
supply and demand balance, and our operations generally; the
outlook for oil and liquids prices;
the oil and natural gas industry in Canada
and the U.S., including drilling, completion and production
activity levels for 2021 and beyond in the Corporation's operating
areas, and the related impact on SECURE's business, operations and
financial results; increased year over year discretionary free cash
flow; the effect of the current economic conditions on the future
demand for SECURE's services and the impact on SECURE's cash flows
and impairment charges on long-term assets; SECURE's financial
resiliency and corporate priorities, including debt repayment , and
strategies to achieve such priorities; the benefits of contracted
and/or fee-for-service contracts on SECURE's cash flow and the
expected stability of such sources; capacity at the Corporation's
existing facilities; increases to the Corporation's throughput at
existing facilities and costs thereof; the impact the Canadian
Federal Government's orphan and inactive well fund may have to the
business, operations and results of the Corporation; increased
abandonment and reclamation activity in the oil and gas industry
and the related effect on SECURE's results of operations and the
timing thereof; the Corporation's 2021 capital budget and the
future evaluation of SECURE's and Tervita's combined capital
project opportunities following close of the Tervita
Merger; future dividend plans and opportunities to increase
dividend payments after the successful integration with Tervita;
debt service and the Corporation's ability to meet obligations and
commitments and operate within any credit facility restrictions,
including the financial covenants related to our debt facilities;
the sufficiency of the Corporation's liquidity and expectations
that our capital investment, working capital, debt repayment, share
repurchases and cash dividends will be funded from internally
generated cash flows; the Corporation's credit risk levels;
expected benefits customers will receive from our midstream and
environmental solutions; key factors driving the Corporation's
success; demand for the Corporation's services and products;
industry fundamentals driving the success of SECURE's core
operations; future capital needs; and access to capital.
Forward-looking statements are based on certain assumptions that
SECURE has made in respect thereof as at the date of this document
regarding, among other things: the satisfaction of the conditions
to closing of the Tervita Merger in a timely manner, including the
entering into of the new credit facility and the receipt of all
necessary approvals under the Competition Act (Canada) on terms acceptable to SECURE and
Tervita; the satisfaction of the conditions to entering into the
new credit facility; the combined company's ability to successfully
integrate the businesses of SECURE and Tervita; sources of funding
that each of SECURE and Tervita have relied upon in the past
continue to be available to the combined company on terms favorable
to the combined company; the impact of COVID-19, including related
government responses related thereto and lower global energy
pricing on oil and gas industry exploration and development
activity levels and production volumes (including as a result of
demand and supply shifts caused by COVID-19 and the actions of OPEC
and non-OPEC countries); the success of SECURE's operations and
growth projects; the Corporation's competitive position remaining
substantially unchanged; future acquisition and sustaining costs
will not significantly increase from past acquisition and
sustaining costs; 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; increases to the combined company's share price and market
capitalization over the long term; the ability of the combined
company to repay debt and return capital to shareholders; the
combined company's ability to obtain and retain qualified staff and
equipment in a timely and cost-efficient manner; and other risks
and uncertainties described 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: the ability of SECURE and Tervita to
receive, in a timely manner, the necessary regulatory, court,
shareholder, lender, stock exchange and other third-party consents
and approvals and to satisfy the other conditions to the closing of
the Tervita Merger; the ability to satisfy the conditions to the
new credit facility becoming effective; interloper risk; the
ability to complete the Tervita Merger on the terms contemplated by
SECURE and Tervita or at all; the ability of the combined company
to realize the anticipated benefits of, and synergies and savings
from, the Tervita Merger and the timing thereof; consequences of
not completing the Tervita Merger, including the volatility of the
share prices of SECURE, negative reactions from the investment
community and the required payment of certain costs related to the
Tervita Merger; actions taken by government entities or others
seeking to prevent or alter the terms of the Tervita Merger; the
potential that a significant number of Tervita shareholders
exercise dissent or appraisal rights; the ongoing evaluation of the
credit rating of the combined company; legal claims resulting from
the announcement or completion of the Tervita Merger; negative
reactions to the Tervita Merger, including from customers,
suppliers or employees; potential undisclosed liabilities
unidentified during the due diligence process; the accuracy of the
pro forma financial information of the combined company; the
interpretation of the Tervita Merger by tax authorities; the
success of business integration; the entry into new business
activities and the resulting business mix of the combined company;
the focus of management's time and attention on the Tervita Merger
and other disruptions arising from the Tervita Merger; and those
factors referred to under the heading "Risk Factors" in the Annual
Information Form for the year ended December
31, 2020. In addition, the effects and impacts of the
COVID–19 outbreak, the rapid decline in global energy prices and
the length of time to significantly reduce the global threat of
COVID-19 on SECURE's business, the global economy and markets are
unknown at this time and could cause SECURE's or the combined
company's actual results to differ materially from the
forward-looking statements contained in this document.
Although forward-looking statements contained in this document
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 document 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.
NON-GAAP 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
measures, such as Adjusted EBITDA, discretionary free cash flow,
and segment profit margin, 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, they should not be used as an alternative to
IFRS measures because they do not have a standardized meaning under
IFRS and therefore may not be comparable to similar measures
presented by other companies. See the MD&A available at
www.sedar.com for further details, including reconciliations
of the Non-GAAP measures and additional GAAP measures to the most
directly comparable measures calculated in accordance with
IFRS.
ABOUT SECURE
SECURE is a publicly traded energy business listed on the Toronto
Stock Exchange ("TSX") providing industry leading customer
solutions to upstream oil and natural gas companies operating in
western Canada and certain regions
in the United States ("U.S.")
through its network of midstream processing and
storage facilities, crude oil and water pipelines, and crude by
rail terminals
located throughout key resource plays in western
Canada, North Dakota and Oklahoma. SECURE's core midstream
infrastructure operations generate cash flows from oil production
processing and disposal, produced water disposal, and crude oil
storage, logistics, and marketing. SECURE also provides
comprehensive environmental and fluid management for landfill
disposal, onsite abandonment, remediation and reclamation,
drilling, completion and production operations for oil and gas
producers in western Canada.
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i Refer to
the "Non-GAAP Measures" section herein.
|
ii Refer
to the "Liquidity and Capital Resources" section herein for
details on the Corporation's covenant calculations.
|
SOURCE SECURE Energy Services Inc.