Secure Energy Services Signals Steady Growth in 2026

Secure Energy Services ((TSE:SES)) has held its Q4 earnings call. Read on for the main highlights of the call.

Secure Energy Services’ latest earnings call struck a cautiously upbeat note as management highlighted resilient, infrastructure-backed cash flows and solid year-over-year growth in adjusted EBITDA despite visible macro and sector headwinds. Executives balanced confidence in recurring revenue and capital discipline with frank discussion of metal recycling disruptions, softer volumes in some service lines and unresolved legal risks.

Full-Year EBITDA Growth and Quarterly Outperformance

Secure reported full-year adjusted EBITDA of $501 million, up about 5% year over year on a pro forma basis, underscoring durable performance amid volatile energy markets. Fourth-quarter adjusted EBITDA reached $135 million, a robust 15% increase year over year and up 24% on a per-share basis, reflecting operating leverage and the impact of buybacks.

Revenue Expansion and Strong Cash Generation

Fourth-quarter revenue climbed 10% year over year to $372 million, demonstrating steady top-line momentum across the platform. Funds flow from operations in Q4 was $118 million, with discretionary free cash flow of $84 million, helping drive full-year funds flow of $378 million and $273 million of discretionary free cash flow, converting over half of adjusted EBITDA into cash.

Shareholder Returns and Capital Allocation Discipline

Management leaned heavily into capital returns, sending $373 million back to shareholders in 2025 through a mix of dividends and buybacks. The company repurchased nearly 19 million shares at an average price below $15, roughly 8% of the float, and has since retired another 1.1 million shares at $17.10 under its renewed buyback program.

Growth Investments and Project Execution

Secure deployed $138 million of organic growth capital in 2025, well ahead of the original $75 million plan, directing funds to produced water infrastructure in the Montney, industrial waste processing and metal recycling optimization. The company commissioned its first Montney produced water disposal facility in the fourth quarter, with a second asset expected online in March 2026 to further bolster recurring infrastructure cash flows.

2026 Guidance and Dividend Uplift

For 2026, management guided to adjusted EBITDA of $520 million to $550 million, with a midpoint around $535 million implying continued growth from 2025 levels. The company also announced a 5% increase in its dividend to $0.42 per share on an annualized basis starting in the second quarter of 2026, signaling confidence in the outlook and cash flow durability.

Balance Sheet Strength and Enhanced Liquidity

Secure emphasized its balance sheet as a core advantage, ending the year with total debt to adjusted EBITDA at 2.1 times, or 1.8 times excluding leases, leaving room for both growth and capital returns. The company further de-risked its profile by issuing $300 million of senior unsecured notes due 2032, extending its maturity ladder and reinforcing financial flexibility.

Platform Scale and Operating Metrics

Management underscored the size and diversification of Secure’s infrastructure footprint, highlighting average fourth-quarter disposal of about 95,000 barrels per day of produced water and 38,000 barrels per day of liquid waste. The network also recovered roughly 1 million barrels of oil from waste streams, safely disposed of around 3.2 million tons of solid waste and handled more than 133,000 barrels per day of crude across 13 terminals and three gathering pipelines.

Accounting Change to Sharpen Transparency

The company voluntarily changed its accounting presentation to report realized and unrealized gains and losses on physically settled commodity contracts and related derivatives on a net basis within revenue. While this has no impact on net income, adjusted EBITDA, cash flow or the balance sheet, prior periods have been restated, and management expects the move to support a reclassification into a waste infrastructure industry code that better reflects the business.

Metal Recycling Pressured by U.S. Tariffs

A new U.S. 50% tariff on finished steel sharply reduced demand from Canadian mills, forcing Secure to quickly redirect metal recycling volumes into U.S. markets. The shift required building new customer relationships, expanding rail capacity and working through inventory and transport bottlenecks, and management estimated metals segment EBITDA will face a roughly 10% to 15% drag in 2025.

Volume Softness in Activity-Sensitive Service Lines

Secure reported year-over-year declines in waste processing, oil recovery and landfill volumes as lower exploration activity and tighter customer budgets weighed on demand. Management reminded investors that about 20% of adjusted EBITDA remains tied to drilling and completion activity, leaving that slice of the portfolio more exposed to commodity-driven slowdowns.

Free Cash Flow Impact from Higher Interest and Taxes

Despite strong cash conversion, full-year discretionary free cash flow of $273 million dipped modestly versus the prior year, largely due to increased interest expense and higher cash taxes. Even so, the company maintained an industry-leading profile with discretionary free cash flow still exceeding 50% of adjusted EBITDA, giving it ample room to fund both growth and capital returns.

Inventory and Logistics Challenges in Metals Recovery

Inventory built up in the metals business during the back half of 2025, and logistical constraints forced Secure to bring on more rail capacity, including 50 new railcars in the fourth quarter. Management expects inventories to normalize by mid-2026 as flows to U.S. outlets ramp, but cautioned that the timing and strength of any rebound in Canadian mill demand remain unclear.

Macro and Commodity Volatility Weigh on Activity

Average WTI prices were down about 14% in 2025 compared with the prior year, pushing customers to scale back discretionary spending and exploration programs. Management said it has seen only limited activity improvement so far in early 2026 and anticipates any recovery will likely be gradual and skewed to the back half of the year, keeping some cyclical pressure on activity-linked volumes.

Legal and Policy Uncertainties

Secure flagged ongoing patent litigation that carries a potential claim in the nine-figure range, noting that the outcome, timing and ultimate exposure remain uncertain and could affect future results. The company also pointed to unpredictable policy and market shifts around tariffs and Canadian steel mill restarts, which could eventually aid metals profitability but are impossible to reliably forecast.

Forward-Looking Guidance and Capital Plans

Looking ahead, Secure expects 2026 adjusted EBITDA between $520 million and $550 million and sees first-quarter performance broadly in line with fourth-quarter 2025 levels. The company plans to deploy at least $75 million of organic growth capital plus about $10 million in metals-recycling investments, continue selective tuck-in acquisitions and opportunistic buybacks, target discretionary free cash flow conversion above 50% with cash taxes not exceeding roughly $60 million and maintain leverage around current levels.

Secure Energy Services delivered a call that balanced solid current performance, tangible growth projects and generous shareholder returns with candid acknowledgment of metals, macro and legal risks. For investors, the story is one of steady, infrastructure-driven cash flows and disciplined capital allocation, tempered by cyclical and policy uncertainties that will need to be monitored through 2026.