Secure Energy Services Inc T.SES

RBC

[retiredcf]

April 25, 2024

Secure Energy
1Q24 - EBITDA 8% ahead of Street; SIB slated for next week

TSX: SES | CAD 11.07 | Sector Perform | Price Target CAD 13.00

Sentiment: Positive

Our view: We expect Secure's 1Q24 results to have positive implications for the stock in today's trading. Adj. EBITDA of $132MM was ahead of the Street at $122MM, Secure raised the low end of its 2024 EBITDA guidance, and plans to launch a Substantial Issuer Bid next week.

• Key financial metrics ahead of Street/RBC estimates. Revenue was 6%/9% ahead of Street/RBC estimates, while adj. EBITDA of $132MM was 8%/7% ahead of both Street and RBC estimates. Reported EPS of $1.47 was $1.32/$1.44 Street/RBC's  due mostly to a $520MM gain on the asset divestiture. FCF (CFO-capex) was -$11MM vs our -$37MM estimate. SES repurchased $126MM shares during the quarter, and repurchased 2.8MM shares subsequent to quarter-end. 

  • Revised 2024 guidance; $75MM growth capex targeted for 2024. SES increased its expectation for FY24 Adj. EBITDA to be $450-465MM (prior $440-465MM), maintained FY24 capital program guidance of sustaining capex/ARO of $60MM/$15MM, and increased its targeted growth capital plan from $50MM to $75MM for the third phase of its Clearwater terminal and facility connections.

  • Substantial Issuer Bid intended for next week. SES announced its intention to initiate an SIB next week as part of the company's capital allocation strategy. This will be a key focus for the 3PM conference call.

Liquidity and cash position following the WCN asset divesture. By the end of 1Q24, SES had $i264MM of cash and $751MM in available borrowing capacity following the closing of the $1.15Bn asset divestiture to WCN, and the issuance of the 6.75% $300MM notes due 2029 to refinance the $340MM 7.25% 2026 senior notes.