RBC Global Energy Best Ideas ListJust saw their latest report this morning and pleased to say that SES is one of 8 Canadian companies on the list. For those who are curious, the others are CNQ,TOU, CVE, TVE, ALA, ARX and AQN. GLTA
Secure Energy Services (SES)
Keith Mackey, Analyst (403) 299-6958 keith.mackey@rbccm.com
from its expanded waste processing network through enhanced operating scale, FCF generation capability, and ultimately investor attention, while the larger footprint also expands Secure’s level of tuck-in and tie-in opportunities.
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Targeting debt reduction in the near term, but strong FCF provides optionality. Secure is targeting leverage of sub-2.5x within the next 1.5-2 years of closing. We see this as achievable based on our FCF estimate of $291 million over the next 15 months. FCF generation should be buoyed by increasing activity levels in the WCSB, cost efficiencies, and a largely maintenance capital spending profile as the company re-assesses its expanded opportunity set. We believe the company also has FCF optionality to implement share repurchases or issuer bids, but debt reduction is the top priority.
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Merger cost-reduction initiatives on track. Secure has achieved approximately 40% of its targeted $75 million annual cost savings. The company remains on track to hit its overall target by YE22. Focus areas to date have included operational optimizations, reduced public company costs, and headcount. Total reductions are split 60%/40% operational optimizations/corporate initiatives.