Secure Energy Services: Strong Start Amid Challenges

Secure Energy Services ((TSE:SES)) has held its Q1 earnings call. Read on for the main highlights of the call.

The recent earnings call of Secure Energy Services painted a picture of a company starting 2025 on a strong note, with strategic initiatives and robust financial performance. Despite these positives, the call also highlighted macroeconomic uncertainties, including extreme weather conditions and declining commodity prices, which have somewhat dampened the overall optimistic outlook.

Strong Start to 2025

Secure Energy Services reported a solid beginning to 2025, characterized by high-quality earnings and stable cash flow. The company achieved an adjusted EBITDA of $121 million, which translates to a 33% EBITDA margin. This performance was primarily driven by recurring waste volumes, underscoring the company’s strong operational foundation.

Share Buyback and Capital Return Strategy

In a bid to return value to shareholders, Secure Energy Services repurchased 5.3 million common shares for $79 million and initiated a $200 million Substantial Issuer Bid in April. The company is on track to return nearly $400 million to shareholders in 2025, reflecting a robust capital return strategy.

Increased Organic Growth Capital Program

The company has increased its 2025 organic growth capital program to $125 million. This expansion is supported by a 10-year commercial agreement with a senior Montney producer. Key projects under this program include the development of two new greenfield water disposal facilities in Alberta, which are expected to bolster the company’s growth trajectory.

Phase 3 Expansion of Clearwater Terminal

Secure Energy Services completed the Phase 3 expansion of its Clearwater terminal, enhancing its capacity to 75,000 barrels per day and adding new treating capabilities for truck and emulsion volumes. This expansion is a significant step in increasing the company’s operational efficiency and capacity.

Acquisition of Edmonton-based Metal Recycling Business

The company closed the acquisition of an Edmonton-based Metal Recycling business for $162 million. This acquisition is expected to strengthen Secure Energy’s processing capabilities and improve logistics through investment in railcars, marking a strategic move to enhance its market position.

Impact of Extreme Cold Weather

Extreme cold weather in February temporarily softened activity levels, impacting processing volumes. This unforeseen weather condition posed challenges to the company’s operational activities during the period.

Cautious Stance Due to Macroeconomic Volatility

The earnings call highlighted ongoing macroeconomic volatility, including uncertainties surrounding tariffs and recessionary concerns. These factors have contributed to a weaker economic outlook, prompting a cautious stance from the company.

Decline in Commodity Prices

Recent declines in commodity prices have added to the uncertainty for Secure Energy’s customers, impacting their business outlooks. This decline is a significant concern as it affects the overall market dynamics and customer confidence.

Decision Not to Proceed with Metal Recycling Acquisition

Secure Energy Services decided not to proceed with an $18 million acquisition in the Metal Recycling business due to due diligence outcomes. This decision reflects the company’s prudent approach to acquisitions, ensuring that any strategic move aligns with its long-term goals.

Forward-Looking Guidance

Despite the macroeconomic uncertainties and recent declines in commodity prices, Secure Energy Services maintained its full-year adjusted EBITDA guidance range of $510 million to $540 million. The company continues to execute its share buyback strategy and has increased its organic growth capital program. With a leverage ratio below its target range, Secure Energy demonstrates financial strength and a focus on strategic growth.

In summary, Secure Energy Services’ earnings call showcased a company with a strong start to 2025, driven by strategic initiatives and solid financial performance. While macroeconomic challenges and commodity price declines present hurdles, the company remains committed to its growth strategies and shareholder value return. The forward-looking guidance reflects confidence in navigating these uncertainties while maintaining financial stability.