Secure Energy Services Q4 Earnings Call Highlights

Core Insights - SECURE Energy Services plans to increase its dividend by 5% to CAD 0.42 per share starting in Q2 2026 and will continue share buybacks [1] - The company ended 2025 with a total debt to adjusted EBITDA ratio of 2.1x, or 1.8x excluding leases, and refinanced part of its debt with CAD 300 million of senior unsecured notes due in 2032 [2] - SECURE returned CAD 373 million to shareholders in 2025 through dividends and share buybacks, repurchasing nearly 19 million shares at an average price below CAD 15, representing about 8% of shares outstanding [3] Financial Performance - For 2025, SECURE reported funds flow from operations of CAD 378 million and discretionary free cash flow of CAD 273 million, with a year-over-year decline in discretionary free cash flow primarily due to higher interest expenses and cash taxes [4] - Full-year adjusted EBITDA rose 5% year-over-year to CAD 501 million, supported by infrastructure-backed earnings and pricing discipline [5] - The company achieved higher fourth-quarter profitability and modest full-year growth in 2025 despite weaker commodity prices [6] Growth and Capital Plans - SECURE invested CAD 138 million in organic growth capital in 2025, exceeding its original plan of CAD 75 million, focusing on produced water infrastructure, industrial waste processing, and metal recycling optimization [7] - The company commissioned its first two fully contracted produced water disposal facilities in the Montney, with one facility operational in Q4 2025 and the second expected to be online in March 2026 [8] - For 2026, SECURE plans to allocate CAD 75 million for organic growth projects, with potential increases as projects are sanctioned [9] Operational Metrics - In 2025, SECURE processed approximately 95,000 barrels per day of produced water, 38,000 barrels per day of liquid waste, and disposed of about 3.2 million tons of solid waste [10] - The energy infrastructure segment handled over 133,000 barrels per day of crude oil across 13 terminals and three gathering pipelines, with modest increases in pipeline and terminal volumes [11][12] - Weaker oil prices impacted exploration-linked service lines, leading to a decline in waste processing and oil recovery volumes [13] Metal Recycling and Pricing - The metal recycling segment faced challenges in 2025 due to a 50% U.S. tariff on finished steel, which reduced Canadian domestic demand [14] - SECURE repositioned over 90% of scrap volumes into U.S. markets, with an estimated EBITDA impact of 10% to 15% in 2025 [14] - The company was selective in pricing discussions, with no immediate plans for additional pricing actions [15] Accounting and Future Outlook - A voluntary accounting policy change was made regarding the presentation of oil purchase and resale activities, with no impact on net income or adjusted EBITDA [16] - For 2026, SECURE provided adjusted EBITDA guidance of CAD 520 million to CAD 550 million, with expectations for improvement later in the year [17] - The specialty chemicals business performed well in production chemistry related to paraffins and wax removal, and a potential CAD 100 million claim related to a lawsuit was disclosed [18]