Secure Energy Services Inc T.SES

Alternate Symbol(s): SECYF

SECURE Energy Services Inc. is a Canada-based company that operates waste management and energy infrastructure business. Its Waste Management segment includes a network of waste processing facilities, produced water pipelines, industrial landfills, waste transfer stations, metal recycling facilities, and specialty chemicals. Through the infrastructure network, it carries out business operations, including the processing, recovery, recycling and disposal of waste streams generated by its energy and industrial customers. Its services include produced and wastewater disposal, hazardous and non-hazardous waste processing and transfer, treatment of crude oil emulsions, metal recycling, drilling waste management and specialty chemicals. Its Energy Infrastructure segment includes a network of crude oil gathering pipelines, terminals and storage facilities. Through this infrastructure network, the Corporation engages in the transportation, optimization, terminalling, and storage of crude oil.

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Secure Energy Services Inc > Double From Here?

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Post by retiredcfon Jul 28, 2021 2:04pm

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Post# 33617448

Double From Here?

Yes according to RBC whose current and upside scenario targets are $8.50 and $10.00. GLTA

July 27, 2021

Secure Energy Services Inc. 2Q21 – Solid showing

Our view: Secure's 2Q21 EBITDA came in ahead of the street as stronger industry activity boosted revenue across all business lines. We believe Secure remains poised to unlock value through enhanced operating scale and FCF generation capability with its expanded infrastructure footprint. Our EBITDA estimates remain largely unchanged, and we maintain our Outperform rating and $8.50 price target.

Key points:

Solid showing. Secure’s adj. EBITDA of $30MM compared to RBC/Street Consensus of $27MM/$26MM. Key variances to our estimate included 5% higher revenue and stronger Midstream Infrastructure gross margins (60% vs RBC 55%). Secure did not receive material CEWS proceeds in the quarter. Reported discretionary FCF generation was $19.5MM and Secure reduced its net debt balances by $10.1MM after total capex spending of $6.8MM.

Midstream Infrastructure revenue of $48.4MM increased 41% y/y while segment EBITDA margins of 60% improved on higher facility throughput, increased drilling & completion demand, and cost reduction initiatives. Environmental & Fluid Management revenue of $68.3MM increased 118% y/y while segment EBITDA margins of 20% improved from 1% on higher product demand across the board.

Starting the synergy clock. Secure expects to capture $75MM of operating and G&A synergies within 18 months of closing the Tervita merger, including $10-15MM in 2021. On the ESG front, Secure appointed Rhonda Rudnitski as VP, ESG. Ms. Rudnitski will be tasked with combining both companies' ESG programs and driving toward Secure's emissions reductions targets.

Debt reduction remains first priority; Evaluating opportunity portfolio. Secure remains committed to reducing its net debt/EBITDA leverage to sub-2.5x within 2 years of transaction close. We see this number as achievable based on our FCF estimate of $212MM over the next 18 months. Secure plans to spend $20MM in capex in 2H21 across its total asset base (inc. $15MM mtce) as it reviews its expanded portfolio of capital opportunities within the context of debt reduction goals. Asset sales remain a potential wildcard to accelerating leverage reduction, in our minds.

Minimal estimate revisions. Our 2021/22 EBITDA estimates change to $273/$451MM from $270/$450MM versus street consensus of $256/ $438MM.

Maintaining Outperform rating and $8.50 price target. Our price target is based on an 8.0x multiple of our 2022 EBITDA estimate. We believe Secure is well positioned given its exposure to recurring revenue and increasing mix of longer-term revenue contracts, and strong corporate EBITDA and FCF margins. Our price target supports an Outperform rating