CALGARY, AB, July 27, 2021 /CNW/ - SECURE ENERGY Services Inc. ("SECURE" or the "Corporation") (TSX: SES) provided today an update on the Tervita Corporation merger and reported the Corporation's operational and financial results for the three and six months ended June 30, 2021.
TERVITA MERGER UPDATE
On March 8, 2021, SECURE entered into an arrangement agreement with Tervita Corporation ("Tervita") to combine in an all-share transaction pursuant to which SECURE agreed to acquire all of the issued and outstanding common shares of Tervita on the basis of 1.2757 common shares of SECURE for each outstanding common share of Tervita (the "Transaction"). On July 2, 2021, the Transaction closed, resulting in the issuance of approximately 147.6 million common shares of SECURE and following which Tervita amalgamated with SECURE. The common shares of Tervita were delisted by the TSX at the close of market on July 6, 2021.
The key benefits of the Transaction include:
- Highly complementary midstream infrastructure asset bases and environmental service lines provide for enhanced scale, utilization, efficiencies, and expanded services for the combined company's customers.
- Significant estimated annual integration cost savings of at least $75 million expected to be realizable within 12 to 18 months from closing.
- Immediately accretive to cash flow from operations and discretionary free cash flow per share for all shareholders of the combined company.
- Significantly improved cost structure to serve a growing and consolidating customer base through the full business cycle.
- Stronger financial position with attractive discretionary free cash flow generation expected to reduce debt and help achieve the combined company's target total debt to EBITDA ratio of less than 2.5x, which is expected to be achieved by mid-2023.
- Enhanced scale anticipated to provide greater access to capital markets and the ability to partner with our customers to execute on a strong pipeline of organic growth projects.
- Combines two strong corporate cultures driven by highly talented teams with shared commitments to environmental, social and governance principles, safety, performance, customer service and profitability.
- Elevates position to advance and deliver on environmental, social and governance initiatives for the combined company and our customers.
With the closing of the Transaction, all litigation between SECURE and Tervita has been discontinued.
In connection with the closing of the Transaction, SECURE entered into an $800 million three-year senior secured revolving credit facility (the "new SECURE Credit Facility") with nine financial institutions and Chartered Banks. The new SECURE Credit Facility has been used to replace and repay SECURE's existing first and second lien credit facilities, Tervita's first lien credit facility, and SECURE's two bilateral letter of credit facilities totaling $75 million. SECURE also entered into a $30 million unsecured letter of credit facility guaranteed by Export Development Canada (the "new SECURE LC Facility"), providing additional stability and capacity to the Corporation's capital structure.
The statutory waiting period for the completion of the Transaction under the Competition Act expired on June 30, 2021. SECURE continues to work cooperatively with the Competition Bureau and the Competition Tribunal to resolve any concerns relating to the Transaction, which it understands relate to certain waste disposal assets. SECURE believes the resolution of such proceedings will not be material to the combined company's asset base or Adjusted EBITDA.
SECURE also confirmed today the appointments of Grant Billing, Susan Riddell Rose, Jay Thornton, and Michael Colodner to the Corporation's Board of Directors ("the Board") following the closing of the Transaction. All incoming directors previously served on the Tervita Board of Directors. Grant Billing, former Chairman of Tervita, will act as Chairman of the Corporation.
With these additions to the Board, Marion Burnyeat, Shaun Paterson, Dan Steinke, and Rick Wise have formally retired.
"We are happy to welcome our new Board members, all of whom are experts in their chosen fields and bring with them years of industry experience," said Rene Amirault, President and CEO. "I would also like to thank the retiring Board members for their service and contributions to SECURE's ongoing success."
"On behalf of the incoming directors, we are excited to be joining SECURE's Board and look forward to working with existing Board members and management of the Corporation," said Grant Billing, Chairman of the Board.
The Corporation would also like to thank former SECURE and Tervita employees that have moved on for their hard work and contributions driving each company's success. We continue to expect change as we work towards achieving target integration cost savings to transform SECURE into a stronger and more efficient company. Our purpose remains to deliver energy to the world so people and communities thrive. By partnering with our customers to challenge what's possible and develop innovative solutions that lower their cost structure, improve capital efficiency, and deliver energy with the highest ESG standards in the world, we all win.
OPERATIONAL AND FINANCIAL RESULTS
The following should be read in conjunction with the Corporation's management's discussion and analysis ("MD&A") for the three and six months ended June 30, 2021, and the condensed consolidated financial statements and notes thereto for the three and six months ended June 30, 2021, which are available on SEDAR at www.sedar.com.
Unless otherwise indicated, the financial information and references to SECURE Energy Services Inc. and its subsidiaries and partnership interests contained herein, exclude Tervita and its subsidiaries and is presented on a non-consolidated basis. SECURE will report its initial post-Transaction consolidated results as at and for the three and nine month period ended September 30, 2021.
SECOND QUARTER HIGHLIGHTS
- Achieved Adjusted EBITDAi of $30.0 million, an increase of 47% from the three months ended June 30, 2020, primarily due to higher oil prices driving increased activity levels in the Corporation's operating areas, which led to higher processing and disposal volumes at the Corporation's midstream infrastructure facilities and landfills and increased demand for drilling and completion services within the Environmental and Fluid Management segment.
- Generated revenue (excluding oil purchase and resale) of $116.7 million, an increase of 78% from the three months ended June 30, 2020. Both the Midstream Infrastructure segment and Environmental and Fluid Management segment benefited from improved industry activity levels, driving incremental volumes and demand for drilling and completion related services, resulting in a 41% and 118% increase in revenue from the prior year comparative period for the respective segments.
- Continued focus on managing costs. As a result, the Corporation maintained strong segment profit margins as a percentage of revenue (excluding oil purchase and resale)i in both segments, including 60% for Midstream Infrastructure, and 22% for Environmental and Fluid Management. G&A expense before depreciation, depletion, amortization and share-based compensation expense as a percentage of revenue (excluding oil purchase and resale) was 12% for the three months ended June 30, 2021.
- Generated discretionary free cash flowi of $19.5 million, which was used primarily to repay debt, as well as fund the Corporation's quarterly dividend, capital program and costs associated with the Transaction. Net cash flows from operating activities were $20.8 million in the quarter.
- Reduced the amount drawn on the Corporation's credit facilities by $10.1 million from March 31, 2021. At June 30, 2021, SECURE had drawn $383.0 million on the Corporation's senior secured credit facilities and reported Total Debt to EBITDAii of 2.9x.
- Closed the private offering of $200 million aggregate principal amount of 7.25% unsecured notes due December 30, 2026 ("2026 unsecured notes"). The net proceeds of the offering were deposited into an escrow account pending the satisfaction of certain conditions, including the completion of the Transaction. The escrow release conditions were satisfied on July 2, 2021.
On July 16, 2021, SECURE used a portion of these proceeds to fund the redemption of US$100 million of the US$500 million aggregate principal amount of 11.00% senior second lien secured notes of Tervita due December 1, 2025 (the "Tervita Notes"), at a redemption price of 105.50%, plus accrued and unpaid interest. The remaining proceeds have been used to repay indebtedness, pay fees and expenses incurred in connection with the note issuance and for general corporate purposes.
- Declared dividends of $1.2 million, representing $0.0075 (0.75 cents) per common share for the quarter.
- Continued to prioritize the advancement of SECURE's Environmental, Social and Governance ("ESG") practices:
- As described above, established the new Board of Directors upon closing of the Transaction, consisting of four members from each of the previous SECURE and Tervita Boards, representing the strengths and capabilities of each organization. The new Board will continue to follow SECURE's existing best in class governance practices. In addition, the Board now has an independent Chairman, and seven of the eight (87.5%) directors are independent.
- On July 2, 2021, SECURE appointed Rhonda Rudnitski as VP, ESG. This newly established senior leadership position affirms SECURE's commitment to sustainability. In her position, Ms. Rudnitski will provide strategic and functional direction for ESG initiatives and monitor SECURE's performance on key sustainability indicators. She previously held the role of VP, Health, Safety, Environment, Regulatory and Engineering with Tervita.
- Advanced the development of short and mid-term energy usage and emissions targets as we map out milestones towards achieving our long-term objectives of reducing carbon intensity in half by 2030 and achieving net zero emissions by 2050.
- Received the following credit ratings from S&P Global Ratings ("S&P") and Fitch Ratings ("Fitch"), providing increased transparency and comparability for debt investors and other capital market participants:
2026 unsecured notes
Prior to completion of the Transaction, the Tervita Notes were rated CCC+ by S&P.
OPERATING AND FINANCIAL SUMMARY
The Corporation's operating and financial highlights for the three and six month periods ended June 30, 2021 and 2020 can be summarized as follows:
Three months ended June 30,
Six months ended June 30,
($000's except share and per share data)
Revenue (excludes oil purchase and resale)
Oil purchase and resale
Adjusted EBITDA (1)
Per share ($), basic
Net loss attributable to shareholders of SECURE
Per share ($), basic and diluted
Cash flows from operating activities
Per share ($), basic
Discretionary free cash flow (1)
Per share ($), basic
Capital expenditures (1)
Dividends per common share
Common shares - end of period
Weighted average common shares - basic and diluted
(1)Refer to "Non-GAAP Measures" for further information.
- REVENUE OF $511.9 MILLION AND $1,173.1 MILLION FOR THE THREE AND SIX MONTHS ENDED JUNE 30, 2021
- Midstream Infrastructure segment revenue (excluding oil purchase and resale) increased 41% to $48.4 million during the three months ended June 30, 2021, from the 2020 comparative period. The increase was driven by higher producer activity levels resulting in increased drilling, completion and production volumes at the Corporation's midstream processing facilities, which positively impacted revenue from treating and disposal. Higher crude oil pricing in the current year period also positively impacted recovered oil revenue and resulted in improved marketing opportunities.
- For the six months ended June 30, 2021, Midstream Infrastructure segment revenue (excluding oil purchase and resale) decreased 8% to $99.6 million from the six months ended June 30, 2020. Activity levels in January and February of 2021 were lower than the prior year comparative period as producers remained cautious deploying their 2021 capital programs, navigated increasing COVID-19 restrictions and managed a period of significantly cold weather in February.
- Oil purchase and resale revenue for the three and six months ended June 30, 2021, increased 75% and 40% from the 2020 comparative periods to $395.2 million and $924.3 million, respectively. The increase in revenues is a result of a 137% and 67% increase in Canadian light oil benchmark pricing during the three and six month periods ended June 30, 2021, over the comparative periods of 2020, combined with increased marketing activity as a result of higher production volumes and expanded opportunities to work with our customers to optimize pricing by utilizing multiple crude oil and condensate streams at SECURE's midstream facilities.
- Environmental and Fluid Management segment revenue for the three months ended June 30, 2021, increased 118% from the 2020 comparative periods to $68.3 million. Higher and more stable crude pricing drove a rebound in activity levels in the Western Canadian Sedimentary Basin ("WCSB"), evidenced by an increase in the active rig count of over 250% from the prior year comparative period. This positively impacted service lines supporting drilling and completion activities, including drilling and completion fluid services, solids control equipment rentals, drilling waste management, water management, and industrial landfill disposal. Production chemicals revenue also increased compared to the second quarter of 2020 which was negatively impacted by production shut-ins. Environmental management project and consulting work continued to benefit from the government abandonment and reclamation stimulus programs in the current year quarter, as well as higher revenue generated in the Fort McMurray region from scrap metal recovery operations due to improved metals pricing.
- For the six months ended June 30, 2021, Environmental and Fluid Management segment revenue increased 16% from the 2020 comparative period to $149.2 million. Higher second quarter revenue in the current year as described above was partially offset by lower period over period revenue in the first quarter of 2021 due to job shut-downs or deferrals resulting from public health measures taken to limit the spread of COVID-19 and reduced drilling and completion activities as producers were cautious to ramp up spending.
- ADJUSTED EBITDA OF $30.0 MILLION AND $69.2 MILLION FOR THE THREE AND SIX MONTHS ENDED JUNE 30, 2021
- Adjusted EBITDA of $30.0 million and $69.2 million increased 47% and 11% from the three and six months ended June 30, 2020, primarily as a result of higher period over period revenue as described above. Additionally, Adjusted EBITDA for the three and six months ended June 30, 2021, had the full benefit of cost reduction measures which began to take effect in April 2020 to align the Corporation's fixed cost structure to levels consistent with industry activity levels, which included organizational restructuring and associated personnel reductions. The Corporation continues to maintain strict cost control measures despite increasing activity levels. These positive factors were partially offset by a $9.7 million recovery recorded in cost of sales and G&A expenses for the three and six months ended June 30, 2020, related to the Canada Emergency Wage Subsidy, a program provided by the Canadian Federal Government for qualifying entities impacted by the consequences of the COVID-19 pandemic.
- NET LOSS ATTRIBUTABLE TO SHAREHOLDERS OF $14.9 MILLION AND $15.5 MILLION FOR THE THREE AND SIX MONTHS ENDED JUNE 30, 2021
- Net loss attributable to shareholders of SECURE was $14.9 million for the three months ended June 30, 2021, compared to a net loss of $20.9 million for the corresponding 2020 comparative period. The variance is primarily a result of higher period over period Adjusted EBITDA as described above, partially offset by $7.2 million of costs related to the Transaction recorded for the three months ended June 30, 2021.
- For the six months ended June 30, 2021, net loss attributable to shareholders was $15.5 million compared to a net loss of $42.8 million for the prior year comparative period. The decrease is primarily a result of higher period over period Adjusted EBITDA, along with expenses recorded by the Corporation in the prior year comparative period associated with the sudden onset of the economic downturn in March 2020. These expenses included a $15.7 million non-cash impairment charge on intangible assets, and $10.4 million of costs related to restructuring initiatives to align the Corporation's fixed cost structure with anticipated activity levels.
- CASH FLOWS FROM OPERATING ACTIVITIES OF $20.8 MILLION AND $45.4 MILLION FOR THE THREE AND SIX MONTHS ENDED JUNE 30, 2021
- The Corporation generated cash flows from operating activities of $20.8 million for the three months ended June 30, 2021, a decrease of 6% from the prior year comparative period. Higher Adjusted EBITDA in the current year period was more than offset by $7.2 million of transaction costs incurred and a smaller change in non-cash working capital recovered compared to the second quarter of 2020.
- For the six months ended June 30, 2021, the Corporation generated cash flows from operating activities of $45.4 million, a decrease of 33% from the 2020 comparative period. The decrease was primarily a result of a $25.8 million change in non-cash working capital. In the prior year comparative period, the Corporation had a large working capital recovery as a result of reduced accounts receivable and accrued receivables at June 30, 2020, compared to December 31, 2019, following the decline in crude oil prices in March 2020. At June 30, 2021, SECURE carried total net working capital, excluding cash, of $58.4 million, relatively consistent with the balance at December 31, 2020.
- CAPITAL EXPENDITURES OF $6.8 MILLION AND $13.2 MILLION FOR THE THREE AND SIX MONTHS ENDED JUNE 30, 2021
- Total growth and expansion capital expenditures for the three and six months ended June 30, 2021, of $2.7 million and $7.2 million, respectively, related primarily to connecting an additional segment of the East Kaybob oil pipeline in the first quarter of 2021, and the construction of a new landfill cell at Saddle Hills.
- Sustaining capital incurred in the three and six months ended June 30, 2021, of $4.1 million and $6.0 million, respectively, relates primarily to spare parts, well maintenance, and asset integrity and inspection programs.
- FINANCIAL FLEXIBILITY
- During the six months ended June 30, 2021, the Corporation paid down its credit facilities by $16.4 million. The reduction is primarily a result of SECURE's efforts to direct discretionary free cash flow, net of capital expenditures, dividend payments, and costs associated with the Transaction, against outstanding debt. As at June 30, 2021, the Corporation had drawn $383.0 million on its senior secured credit facilities.
- On June 30, 2021, the Corporation closed the private placement of the 2026 unsecured notes. The net proceeds of the offering, along with $6.4 million of interest accrued up to the latest possible mandatory redemption date in accordance with the offering, were deposited into an escrow account pending the satisfaction of certain conditions, including the completion of the Transaction. The escrow release conditions were satisfied on July 2, 2021. The proceeds of the 2026 unsecured notes have subsequently been used to (i) fund the redemption of US$100 million of the Tervita Notes at a redemption price of 105.50%, plus accrued and unpaid interest to the redemption date of July 16, 2021; (ii) repay outstanding indebtedness; and (iii) pay fees and expenses incurred in connection with the note issuance and for general corporate purposes.
- The following table outlines SECURE's Senior and Total Debt to trailing twelve-month EBITDA ratioii, calculated in accordance with the Corporation's first and second lien credit facilities, at June 30, 2021, and December 31, 2020.
June 30, 2021
Dec 31, 2020
Senior Debt to EBITDA
Total Debt to EBITDA
- DIVIDENDS OF $1.2 MILLION AND $2.4 MILLION FOR THE THREE AND SIX MONTHS ENDED JUNE 30, 2021
- During the three and six months ended June 30, 2021, the Corporation declared dividends of $1.2 million and $2.4 million, respectively, to holders of common shares, representing a quarterly dividend of $0.0075 (0.75 cents) per share.
- SECURE believes sharing excess cash flows with shareholders is a core business principle; as a result, management and the Board of Directors of the Corporation will continue to monitor the Corporation's dividend policy with respect to forecasted Adjusted EBITDA, debt, capital expenditures and other investment opportunities, as well as expected interest, lease, tax and transaction costs, and will look for opportunities to increase the dividend after the successful integration with Tervita and as business conditions warrant.
Cost Savings and Synergies
SECURE's priority for the next 18 months is to successfully integrate the Tervita facility and operating networks and deliver on expected integration cost savings to become a more resilient, profitable, and efficient business. Annual integration cost savings of at least $75 million are expected to be achieved by the end of 2022. The Corporation expects the integration cost savings will be attained through operational optimizations (approximately 60%), including increased facility utilization, reduced field overhead, field office closures, transportation savings and operating cost efficiencies, as well as corporate overhead reductions (approximately 40%).
The Corporation's business is uniquely positioned to deliver economic and environmental benefits that make the oil and gas industry more efficient and sustainable. We are committed to continuing to work with our customers to challenge what's possible and develop innovative solutions that lower their cost structure, improve capital efficiency, and minimize the environmental impacts associated with the development of our shared resources. The Transaction provides the increased size and scale, utilization, and efficiencies to enhance the services and capabilities the Corporation can provide to our customers to help achieve their objectives of responsible development, while reducing costs.
Improvement and Progression of the Capital Structure
The Corporation's revised capital structure following the close of the Transaction provides increased stability with no near–term maturities, as well as enhanced flexibility with early redemption options available on the 2026 unsecured notes and the Tervita Notes, and capacity on the new SECURE Credit Facility, subject to covenant restrictions. The Corporation's current capital structure includes:
- $800 million new SECURE Credit Facility (matures July 2024). Total amount drawn on the new SECURE Credit Facility as at the date hereof was approximately $476 million. Letters of credit issued against the new SECURE Credit Facility in the amount of approximately $78 million reduce the amount available to be drawn under the facility. As a result, at July 27, 2021, the Corporation had availability of approximately $246 million on the new SECURE Credit Facility, subject to covenant restrictions. The Corporation expects to incur an average interest rate of less than 4.5% for funds drawn on the facility for the remainder of 2021.
- US$400 million principal amount of Tervita Notes.
- $200 million principal amount of 2026 unsecured notes.
- $30 million new SECURE LC Facility. SECURE has currently issued letters of credit in the amount of approximately $22 million against this new SECURE LC Facility.
Throughout the remainder of this year, the Corporation will continue to focus on maintaining financial resiliency and prioritize the repayment of debt to best position the Corporation for long-term success. The Corporation has established a target to achieve a total debt to EBITDA ratio of less than 2.5x by mid-2023.
The Corporation will continue to take a prudent approach to capital spending for the remainder of the year. The capital expenditure budget for the second half of 2021 is expected to be approximately $20 million, which includes approximately $15 million of sustaining capital, including that associated with the acquired Tervita facilities. A full evaluation of SECURE and Tervita's combined capital project opportunities is ongoing, and the capital budget may be revised in accordance with opportunities to connect producers to existing midstream infrastructure to further increase volumes and utilization on a long-term basis.
Enhanced ESG platform
SECURE will continue to take proactive measures to reduce the environmental impact of our own operations, and positively contribute to the health, safety, and economic wellbeing of our employees and communities where we live and work. The Transaction elevates our position to accelerate the Corporation's environmental and social sustainability initiatives for the benefit of all stakeholders. During the remainder of 2021, SECURE expects to continue to explore opportunities to further reduce our carbon footprint so that we can continue to positively contribute to the efforts to mitigate climate change and integrate two strong ESG frameworks into a single one that will provide the roadmap to establish SECURE as an ESG leader. We will continue to help our customers find innovative ways to support their ESG goals. We believe that, by working collaboratively, Canada's energy industry can win the race to lowest emissions by 2050 and operate with the highest ESG standards in the world.
The second quarter of 2021 results exceeded the Corporation's expectations as rising crude oil and liquids prices and producer cash flows drove industry activity, including increased demand for drilling and completion services, incremental facility volumes, increased recovered oil pricing and crude oil marketing opportunities. Higher crude oil and natural gas prices are expected to continue to provide significant improvement in overall industry activity in the second half of 2021. Producers are ramping up spending in response to higher prices and increased discretionary cash flow growth. Based on current macroeconomic conditions and commodity prices, SECURE also anticipates higher year over year discretionary free cash flow for the remainder of 2021 based on the following expectations:
- Increased drilling and completion activity for the remainder of the year. Since April, the monthly active rig counts in the WCSB have been trending relatively in line with 2019 levels, a substantial increase compared to 2020. SECURE anticipates producers will continue to seek to add production to offset natural declines that occurred in 2020 in order to maintain flat production levels.
- Increased contribution to Adjusted EBITDA from the realization of synergies of approximately $10–$15 million for the remainder of year, comprised primarily of corporate headcount reductions and public company cost savings.
- Increased utilization at our midstream processing facilities and landfills as higher drilling, completion and production volumes from increased activity levels require treating, processing and disposal. The Corporation has significant capacity to increase facility throughput and disposal with minimal incremental fixed costs or additional capital.
- Increased abandonment, remediation and reclamation activity for the balance of the year as a result of the Canadian Federal Government's $1.7 billion stimulus package to help fund the closure and reclamation of orphan and inactive wells in the WCSB. SECURE expects increased abandonment, remediation and reclamation activity to positively impact all Canadian operations over the term of the program, particularly within the Environmental Management group as a result of higher demand for environmental site assessments, onsite abandonment, remediation and reclamation management and decommissioning work. Waste volumes resulting from these activities will also require disposal; with the addition of the Tervita network, SECURE has broad geographic coverage of facilities across western Canada capable of handling this waste.
FINANCIAL STATEMENTS AND MD&A
The Corporation's condensed consolidated financial statements and notes thereto for the three and six months ended June 30, 2021, and MD&A are available on SECURE's website at www.secure-energy.com and on SEDAR at www.sedar.com.
Certain statements contained in this press release constitute "forward-looking statements and/or "forward-looking information" within the meaning of applicable securities laws (collectively referred to as "forward-looking statements"). When used in this press release, the words "achieve", "advance", "anticipate", "believe", "commit", "continue", "could", "deliver", "drive", "enhance", "estimate", "execute", "expect", "focus", "grow", "integrate", "intend", "may", "maintain", "ongoing", "opportunity", "plan", "position", "prioritize", "realize", "result", "strategy", "target" "will", and similar expressions, as they relate to SECURE, its management, or the combined company, are intended to identify forward-looking statements. Such statements reflect the current views of SECURE and speak only as of the date of this press release.
In particular, this press release contains or implies forward-looking statements pertaining but not limited to: the expected benefits of the Transaction and the combined company following close of the Transaction, including expectations with respect to the strength the combined company; the combined company's access to capital markets and the resulting effect on its future growth and acquisition plans; the relevance of SECURE's credit rating to debt investors and capital market participants; the complementary nature of the combined company's asset base and environmental service lines, and the ability to enhance scale and increase utilization as a result thereof; SECURE's ability to partner with its customers to execute on growth projects; the combined company's expected discretionary free cash flow profile; expected annual integration cost savings of the combined company and the methods and timing thereof; improvements to SECURE's cost structure to serve a growing customer base; debt repayment plans; the ability to achieve the combined company's target debt to EBITDA ratio of less than 2.5x and the timing thereof; ongoing cooperation with the Competition Bureau and Competition Tribunal; the resolution of any proceedings under the Competition Act and the materiality thereof, including the impact on the combined company's asset base and Adjusted EBITDA; prioritizing the advancement of SECURE's ESG goals; governance practices and priorities of SECURE's new board of directors; plans to reduce carbon intensity in half by 2030 and achieving net zero emissions by 2050; SECURE's ability to deliver economic and environmental benefits; future ESG goals and the ability of the Transaction to accelerate SECURE's environmental and social sustainability initiatives; Canada's energy industry's ability to win the race to lowest emissions by 2050 and operate with the highest ESG standards in the world; maintaining strict cost control measures and a prudent approach to capital spending; SECURE's capital structure and benefits thereof; the outlook for oil and liquids prices; the oil and natural gas industry in Canada and the U.S., including drilling, completion and production activity levels for the remainder of 2021 and beyond in the Corporation's operating areas, and the related impact on SECURE's business, operations and financial results; increased year over year discretionary free cash flow; the effect of the current economic conditions on the future demand for SECURE's services and the impact on SECURE's cash flows and impairment charges on long-term assets; SECURE's financial resiliency and corporate priorities, including the integration of Tervita's business, debt repayment, and strategies to achieve such priorities; increased contribution to Adjusted EBITDA from the realization of synergies and the timing thereof; the benefits of contracted and/or fee-for-service contracts on SECURE's cash flow and the expected stability of such sources; capacity at the Corporation's existing facilities; the impact the Canadian Federal Government's orphan and inactive well fund may have to the business, operations and results of the Corporation; increased abandonment and reclamation activity in the oil and gas industry and the related effect on SECURE's results of operations and the timing thereof; the Corporation's 2021 capital budget and the future evaluation of SECURE's and Tervita's combined capital project opportunities; future dividend plans and opportunities to increase dividend payments after the successful integration with Tervita; debt service and the Corporation's ability to meet obligations and commitments and operate within any credit facility restrictions, including the financial covenants related to our debt facilities; the sufficiency of the Corporation's liquidity and expectations that our capital investment, working capital, debt repayment, share repurchases and cash dividends will be funded from internally generated cash flows; the Corporation's credit risk levels; expected benefits customers will receive from our midstream and environmental solutions; key factors driving the Corporation's success; demand for the Corporation's services and products; industry fundamentals driving the success of SECURE's core operations; future capital needs; and access to capital.
Forward-looking statements are based on certain assumptions that SECURE has made in respect thereof as at the date of this press release regarding, among other things: the resolution of applications made under the Competition Act (Canada) on terms acceptable to SECURE; SECURE's ability to successfully integrate the previous standalone businesses of SECURE and Tervita; sources of funding that each of SECURE and Tervita have relied upon in the past continue to be available to SECURE on terms favorable to SECURE; the impact of COVID-19, including related government responses related thereto and lower global energy pricing on oil and gas industry exploration and development activity levels and production volumes (including as a result of demand and supply shifts caused by COVID-19 and the actions of OPEC and non-OPEC countries); the success of SECURE's operations and growth projects; the Corporation's competitive position remaining substantially unchanged; future acquisition and sustaining costs will not significantly increase from past acquisition and sustaining costs; SECURE's ability to retain Tervita's previous customers; that counterparties comply with contracts in a timely manner; that there are no unforeseen events preventing the performance of contracts or the completion and operation of the relevant facilities; that there are no unforeseen material costs in relation to the Corporation's facilities and operations; that prevailing regulatory, tax and environmental laws and regulations apply; increases SECURE's share price and market capitalization over the long term; SECURE's ability to repay debt and return capital to shareholders; SECURE's ability to obtain and retain qualified staff and equipment in a timely and cost-efficient manner; and other risks and uncertainties described from time to time in filings made by SECURE with securities regulatory authorities.
Forward-looking statements involve significant known and unknown risks and uncertainties, should not be read as guarantees of future performance or results, and will not necessarily be accurate indications of whether such results will be achieved. Readers are cautioned not to place undue reliance on these statements as a number of factors could cause actual results to differ materially from the results discussed in these forward-looking statements, including but not limited to: SECURE's ability to realize the anticipated benefits of, and synergies and savings from, the Transaction and the timing thereof; actions taken by government entities or others seeking to prevent or alter the terms of the Transaction; the ongoing evaluation of SECURE's credit ratings; legal claims resulting from the announcement or completion of the Transaction; negative reactions to the Transaction, including from customers, suppliers or employees; potential undisclosed liabilities unidentified during the due diligence process; the accuracy of the pro forma financial information of the combined company; the interpretation of the Transaction by tax authorities; the success of business integration; the entry into new business activities and the resulting business mix of the combined company; the focus of management's time and attention on the Transaction and other disruptions arising from the Transaction; and those factors referred to under the heading "Risk Factors" in the AIF and the Joint Information Circular. In addition, the effects and impacts of the COVID–19 outbreak, the rapid decline in global energy prices and the length of time to significantly reduce the global threat of COVID-19 on SECURE's business, the global economy and markets are unknown at this time and could cause SECURE's or the combined company's actual results to differ materially from the forward-looking statements contained in this press release.
Although forward-looking statements contained in this press release are based upon what the Corporation believes are reasonable assumptions, the Corporation cannot assure investors that actual results will be consistent with these forward- looking statements. The forward-looking statements in this press release are expressly qualified by this cautionary statement. Unless otherwise required by applicable securities laws, SECURE does not intend, or assume any obligation, to update these forward-looking statements.
The Corporation uses accounting principles that are generally accepted in Canada (the issuer's "GAAP"), which includes International Financial Reporting Standards ("IFRS"). This news release contains certain supplementary measures, such as Adjusted EBITDA, discretionary free cash flow, and segment profit margin, which do not have any standardized meaning as prescribed by IFRS. These measures are intended as a complement to results provided in accordance with IFRS. The Corporation believes these measures provide additional useful information to analysts, shareholders and other users to understand the Corporation's financial results, profitability, cost management, liquidity and ability to generate funds to finance its operations. However, they should not be used as an alternative to IFRS measures because they do not have a standardized meaning under IFRS and therefore may not be comparable to similar measures presented by other companies. See the MD&A available at www.sedar.com for further details, including reconciliations of the Non-GAAP measures and additional GAAP measures to the most directly comparable measures calculated in accordance with IFRS.
SECURE is a publicly traded energy business listed on the Toronto Stock Exchange ("TSX") providing industry leading customer solutions to upstream oil and natural gas companies operating in western Canada and certain regions in the United States ("U.S.") through its network of midstream processing and storage facilities, crude oil and water pipelines, and crude by rail terminals located throughout key resource plays in western Canada, North Dakota and Oklahoma. SECURE's core midstream infrastructure operations generate cash flows from oil production processing and disposal, produced water disposal, and crude oil storage, logistics, and marketing. SECURE also provides comprehensive environmental and fluid management for landfill disposal, onsite abandonment, remediation and reclamation, drilling, completion and production operations for oil and gas producers in western Canada.
i Refer to the "Non-GAAP Measures" section herein.
ii Refer to the "Liquidity and Capital Resources" section of the MD&A for details on the Corporation's covenant calculations.
SOURCE SECURE Energy Services Inc.