Enerflex Ltd. Announces Partial Redemption of Senior Secured Notes, Further Debt Reduction and Timing of Third Quarter Results

Rhea-AI Summary

Enerflex (TSX: EFX) (NYSE: EFXT) has announced a partial redemption of its 9.00% Senior Secured Notes due 2027. The company will redeem $62.5 million (10% of the original principal) on October 11, 2024, at 103% of the principal amount plus accrued interest. This redemption will be funded through available liquidity, including $100 million in cash and the undrawn portion of its $800 million revolving credit facility.

As of September 30, 2024, Enerflex's net debt balance was approximately $700 million, reflecting a gross debt repayment of about $100 million during Q3. The company expects net working capital movements to be a modest source of cash for the second half of 2024 and fiscal 2024. Enerflex aims to reach a target leverage bank-adjusted net debt-to-EBITDA ratio of 1.5x to 2.0x.

Enerflex will release its Q3 2024 financial results on November 14, 2024, before market open, followed by a conference call and audio webcast at 8:00 a.m. (MST).

Positive

• Partial redemption of $62.5 million of high-interest (9.00%) Senior Secured Notes
• Gross debt repayment of approximately $100 million during Q3 2024
• Net debt balance reduced to approximately $700 million as of September 30, 2024
• Expectation of positive cash flow from net working capital movements in H2 2024
• Progress towards target leverage ratio of 1.5x to 2.0x bank-adjusted net debt-to-EBITDA

Negative

• Redemption price of 103% of principal amount, resulting in additional costs

Insights

Financial Analyst

Enerflex's announcement of a $62.5 million partial redemption of its 9.00% Senior Secured Notes is a positive step towards debt reduction and financial optimization. The company's net debt of approximately $700 million as of September 30, 2024, reflects a significant $100 million gross debt repayment in Q3. This demonstrates strong cash flow generation and effective working capital management. The redemption at 103% of principal value will result in interest savings, offsetting the premium paid. The company's leverage target of 1.5x to 2.0x bank-adjusted net debt-to-EBITDA indicates a commitment to a stronger balance sheet. With $100 million in cash and an $800 million revolving credit facility, Enerflex maintains ample liquidity for operations and further debt reduction. This financial strategy should enhance shareholder value and improve the company's financial flexibility in the long term.

Market Research Analyst

Enerflex's debt reduction strategy signals confidence in its cash flow generation and operational performance post-Exterran acquisition. The 10% redemption of high-interest notes, coupled with $100 million debt repayment in Q3, suggests the integration is yielding financial benefits. This move may positively impact investor sentiment, potentially leading to improved stock performance. The company's proactive approach to optimizing its capital structure, including the recent credit facility expansion, positions it well in the energy services sector. Management's hint at increasing shareholder returns in coming months could catalyze investor interest. However, the energy market's volatility remains a factor to watch. Overall, Enerflex's financial maneuvers and positive cash flow trajectory present an improving outlook for the company.

ISSUES NOTICE TO REDEEM $62.5 MILLION OF ITS 9.00% SENIOR SECURED NOTES DUE 2027

NET DEBT BALANCE OF APPROXIMATELY $700 MILLION AT THE END OF Q3/24, REFLECTING GROSS DEBT REPAYMENT OF APPROXIMATELY $100 MILLION DURING THE THIRD QUARTER

CALGARY, Alberta, Oct. 01, 2024 (GLOBE NEWSWIRE) -- Enerflex Ltd. (TSX: EFX) (NYSE: EFXT) (“Enerflex” or the “Company”) announced that it has delivered a notice of partial redemption of its 9.00% Senior Secured Notes due 2027 (the “Notes”).

All amounts presented are in U.S. Dollar (“USD”) unless otherwise stated.

Partial Redemption of Senior Secured Notes

Enerflex has issued a notice of partial redemption for $62.5 million (or 10% of the aggregate principal amount originally issued) of its Notes. The redemption will be completed on October 11, 2024 (the “Redemption Date”) at a redemption price of 103% of the principal amount of the notes being redeemed, plus accrued and unpaid interest up to, but excluding, the Redemption Date. The redemption of the Notes will be funded with available liquidity, which includes approximately $100 million of cash and cash equivalents as at September 30, 2024 and the undrawn portion of Enerflex’s lower cost $800 million revolving credit facility (the “RCF”).

As at September 30, 2024, Enerflex’s net debt¹ balance was approximately $700 million, which reflects gross debt repayment of approximately $100 million during the third quarter. Debt repayment during the third quarter was funded through cash provided by operating activities, including a reduction in net working capital, and cash balances. Enerflex continues to expect net working capital movements will be a modest source of cash during the second half of 2024 and for fiscal 2024.

Management Commentary

“The partial redemption of our Notes reflects on-going focused efforts to reduce debt, lower net finance costs, and optimize Enerflex’s debt stack,” said Preet Dhindsa, Enerflex’s Senior Vice President and Chief Financial Officer. “We are pleased with the results of these efforts to date and expect to make further progress in coming quarters. The recent extension and expansion of the RCF provides ample liquidity to support our global business and we remain on track to reach our target leverage bank-adjusted net debt-to-EBITDA ratio of 1.5x to 2.0x.”

Marc Rossiter, President and Chief Executive Officer of Enerflex commented, “Since completing the acquisition of Exterran approximately two years ago, we have effectively integrated the two companies and are generating solid free cash flow. We see a visible path for Enerflex to increase shareholder returns and look forward to providing further updates to stakeholders in coming months.”

Third Quarter Results

Enerflex plans to release its financial results and operating highlights for the three and nine months ended September 30, 2024, prior to market open on Thursday, November 14, 2024. Results will be communicated by news release and will be available on the Company's website at www.enerflex.com and under the electronic profile of the Company on SEDAR+ and EDGAR at www.sedarplus.ca and www.sec.gov/edgar, respectively.

Investors, analysts, members of the media, and other interested parties, are invited to participate in a conference call and audio webcast on Thursday, November 14, 2024 at 8:00 a.m. (MST), where members of senior management will discuss the Company's results. A question-and-answer period will follow.

To participate, register at https://register.vevent.com/register/BI8422c47e8fb8449fb752892d24f2c1e6. Once registered, participants will receive the dial-in numbers and a unique PIN to enter the call. The audio webcast of the conference call will be available on the Enerflex website at www.enerflex.com under the Investors section or can be accessed directly at https://edge.media-server.com/mmc/p/y2vuep4e/.

_______________
¹ The Company defines net debt as short- and long-term debt less cash and cash equivalents at period end.

Advisory Regarding Forward-looking Information

This news release contains “forward-looking information” within the meaning of applicable Canadian securities laws and “forward-looking statements” (and together with “forward-looking information”, “forward-looking information and statements”) within the meaning of the safe harbor provisions of the US Private Securities Litigation Reform Act of 1995. All statements other than statements of historical fact are forward-looking information and statements. The use of any of the words "future", "continue", "estimate", "expect", "may", "will", "could", "believe", "predict", "potential", "objective", and similar expressions, are intended to identify forward-looking information and statements. In particular, this news release includes (without limitation) forward-looking information and statements pertaining to: the Redemption Date and expectations that the redemption of the Notes will be completed on the Redemption Date funded with available liquidity; expectations that net working capital movements will be a modest source of cash during the second half of 2024 and for fiscal 2024; the on-going efforts by the Company to increase shareholder returns and the timing associated therewith, if at all; continued efforts by the Company to reduce debt, lower net finance costs, and optimize its debt stack, will continue to progress in the coming quarters; and the expectations that the Company will release its financial results and operating highlights for the three and nine months ended September 30, 2024, prior to market open on November 14, 2024.

All forward-looking information and statements in this news release are subject to important risks, uncertainties, and assumptions, which may affect Enerflex's operations, including, without limitation: the impact of economic conditions; the markets in which Enerflex's products and services are used; general industry conditions; changes to, and introduction of new, governmental regulations, laws, and income taxes; increased competition; insufficient funds to support capital investments; availability of qualified personnel or management; political unrest and geopolitical conditions; and other factors, many of which are beyond the control of Enerflex. As a result of the foregoing, actual results, performance, or achievements of Enerflex could differ and such differences could be material from those expressed in, or implied by, these statements, including but not limited to: the ability of Enerflex to realize the anticipated benefits of, and synergies from, the acquisition of Exterran Corporation and the timing and quantum thereof; the interpretation and treatment of the transaction to acquire Exterran Corporation by applicable tax authorities; the ability to maintain desirable financial ratios; the ability to access various sources of debt and equity capital, generally, and on acceptable terms, if at all; the ability to utilize tax losses in the future; the ability to maintain relationships with partners; risks associated with technology and equipment, including potential cyberattacks; the occurrence and continuation of unexpected events such as pandemics, severe weather events, war, terrorist threats, and the instability resulting therefrom; risks associated with existing and potential future lawsuits, shareholder proposals, and regulatory actions; and those factors referred to under the heading "Risk Factors" in: (i) Enerflex's Annual Information Form for the year ended December 31, 2023, (ii) Enerflex's management’s discussion and analysis for the year ended December 31, 2023, and (iii) Enerflex's Management Information Circular dated March 15, 2024, each of the foregoing documents being accessible under the electronic profile of the Company on SEDAR+ and EDGAR at www.sedarplus.ca and www.sec.gov/edgar, respectively.

Readers are cautioned that the foregoing list of assumptions and risk factors should not be construed as exhaustive. The forward-looking information and statements included in this news release are made as of the date of this news release and are based on the information available to the Company at such time and, other than as required by law, Enerflex disclaims any intention or obligation to update or revise any forward-looking information and statements, whether as a result of new information, future events, or otherwise. This news release and its contents should not be construed, under any circumstances, as investment, tax, or legal advice.

ABOUT ENERFLEX
Enerflex is a premier integrated global provider of energy infrastructure and energy transition solutions, deploying natural gas, low-carbon, and treated water solutions – from individual, modularized products and services to integrated custom solutions. With over 4,500 engineers, manufacturers, technicians, and innovators, Enerflex is bound together by a shared vision: Transforming Energy for a Sustainable Future. The Company remains committed to the future of natural gas and the critical role it plays, while focused on sustainability offerings to support the energy transition and growing decarbonization efforts.

Enerflex's common shares trade on the Toronto Stock Exchange under the symbol "EFX" and on the New York Stock Exchange under the symbol "EFXT". For more information about Enerflex, visit www.enerflex.com.

For investor and media enquiries, contact:

Marc Rossiter
President and Chief Executive Officer
E-mail: MRossiter@enerflex.com

Preet S. Dhindsa
Senior Vice President and Chief Financial Officer
E-mail: PDhindsa@enerflex.com

Jeff Fetterly
Vice President, Corporate Development and Investor Relations
E-mail: JFetterly@enerflex.com

FAQ

How much of its Senior Secured Notes is Enerflex (EFXT) redeeming?

Enerflex is redeeming $62.5 million, which represents 10% of the aggregate principal amount originally issued of its 9.00% Senior Secured Notes due 2027.

What is Enerflex's (EFXT) net debt balance as of September 30, 2024?

Enerflex's net debt balance was approximately $700 million as of September 30, 2024.

When will Enerflex (EFXT) release its Q3 2024 financial results?

Enerflex plans to release its Q3 2024 financial results on Thursday, November 14, 2024, before market open.

What is Enerflex's (EFXT) target leverage ratio?

Enerflex aims to reach a target leverage bank-adjusted net debt-to-EBITDA ratio of 1.5x to 2.0x.