Enerflex Ltd. Provides Full-Year 2023 Update and Preliminary Outlook for 2024
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Insights
Enerflex's proactive approach to debt management, as indicated by the repayment of approximately US$120 million during Q4 2023, suggests a strategic focus on balance sheet strength. This action is likely to be received positively by investors and credit rating agencies, as it implies a lower risk profile and potential interest cost savings. The company's preliminary outlook for 2024, highlighting strong demand and a disciplined capital program, reflects a robust business model. The emphasis on generating free cash flow and improving financial flexibility is a prudent strategy in the current economic climate, where many sectors are facing liquidity constraints.
The forecasted capital expenditures of US$90 million to US$110 million for 2024, with a significant portion earmarked for maintenance and property, plant and equipment, indicates a commitment to asset integrity and operational efficiency. This conservative capital allocation aligns with the company's goal of debt reduction and is likely to support sustainable growth. The targeted approach to discretionary investments in the Energy Infrastructure business suggests that Enerflex is positioning itself to capitalize on high-return opportunities without overextending its financial resources.
The energy sector, particularly natural gas, is poised for growth, supported by global decarbonization efforts and economic expansion. Enerflex's strategic focus on its highly contracted Energy Infrastructure product line and the recurring nature of After-market Services, expected to account for a majority of its gross margin, underscores the company's resilience through predictable revenue streams. The Engineered Systems product line backlog of approximately CAD$1.5 billion (US$1.1 billion) as of year-end 2023, which is expected to convert to revenue over the next 12 months, provides visibility into the company's future earnings and operational momentum.
Enerflex's emphasis on low-carbon solutions and its vertically integrated offerings in natural gas, produced water and energy transition is aligned with industry trends. The company's strategic positioning in this area could provide a competitive advantage as the global energy mix evolves. The robust long-term fundamentals for natural gas, highlighted by Enerflex, align with broader market expectations for increased demand and support the company's growth prospects in this sector.
The commitment to maintaining a sustainable dividend, despite near-term impacts from increased leverage and interest expense, indicates Enerflex's focus on shareholder value. The company's ongoing efforts to improve its capital structure and clarify its capital allocation strategy will be critical for investor confidence. The clarity around these parameters will be key for investors assessing the company's long-term value proposition.
Furthermore, Enerflex's robust backlog and its potential to generate revenue in the near term may provide a cushion against market volatility. The company's focus on debt reduction and lowering net finance costs is a strategic move that could enhance its ability to provide shareholder returns over the medium to long term. Investors will likely monitor the company's ability to execute on its disciplined capital program and its impact on the overall financial health and stock performance.
REPAID APPROXIMATELY US
PRELIMINARY OUTLOOK FOR 2024 REFLECTS STRONG DEMAND ACROSS BUSINESS UNITS AND GEOGRAPHIC REGIONS
DISCIPLINED CAPITAL PROGRAM IN 2024, PRIORITIZING DEBT REDUCTION AND LOWERING NET FINANCE COSTS
CALGARY, Alberta, Jan. 16, 2024 (GLOBE NEWSWIRE) -- Enerflex Ltd. (TSX: EFX) (NYSE: EFXT) (“Enerflex” or the “Company”) today is providing a full-year 2023 update and its preliminary financial and operational outlook for 2024.
FULL-YEAR 2023 UPDATE
Based on our preliminary review of unaudited results, Enerflex estimates 2023 capital expenditures of approximately US
OUTLOOK
Enerflex’s preliminary outlook for 2024 reflects strong demand across our business units and geographic regions. The company is focused on generating free cash flow and further improving our financial flexibility.
Operating results in 2024 will be underpinned by the highly contracted Energy Infrastructure product line and the recurring nature of After-market Services, which together are expected to account for
Enerflex is targeting a disciplined capital program in 2024, with total capital expenditures of US
Providing meaningful shareholder returns, including a sustainable dividend, continues to be a priority for Enerflex. We recognize this has been impacted in the near-term by increased leverage and interest expense. Enerflex will continue to focus on debt reduction and lowering net finance costs in 2024, which will improve our ability to provide shareholder returns over the medium and long-term. We continue to evaluate our target long-term capital structure and capital allocation parameters and expect to provide more clarity in the coming months.
Long-term fundamentals for natural gas are robust, given its critical role in supporting global decarbonization efforts and future economic growth. Enerflex is poised for long-term growth as it continues to capitalize on the growing demand for low-carbon solutions through its vertically integrated natural gas, produced water and energy transition offerings.
FOURTH QUARTER AND YEAR-END 2023 RESULTS
Enerflex plans to release its financial results and operating highlights for the three months and year ended December 31, 2023 after markets close on Wednesday, February 28, 2024. Results will be communicated by news release and will be available on the Company's website at www.enerflex.com and under the Company's SEDAR+ and EDGAR profiles 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, February 29, 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/BI222e9b07c1cd49bf83196efe5ae1976c. 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/c68of9ho.
NON-IFRS MEASURES
Throughout this news release and other materials disclosed by the Company, Enerflex employs certain measures to analyze its financial performance, financial position, and cash flows, including net debt to EBITDA ratio and bank-adjusted net debt to EBITDA ratio. These non-IFRS measures are not standardized financial measures under IFRS and may not be comparable to similar financial measures disclosed by other issuers. Accordingly, non-IFRS measures should not be considered more meaningful than generally accepted accounting principles measures as indicators of Enerflex's performance. Refer to "Non-IFRS Measures" of Enerflex's MD&A for the three and nine months ended September 30, 2023, information from which is incorporated by reference into this news release and can be accessed on Enerflex's website at www.enerflex.com and under Enerflex's SEDAR+ and EDGAR profiles at www.sedarplus.ca and www.sec.gov/edgar, respectively.
GROSS MARGIN BEFORE DEPRECIATION AND AMORTIZATION
Gross margin before depreciation and amortization is a non-IFRS measure defined as gross margin excluding the impact of depreciation and amortization. The historical costs of assets may differ if they were acquired through acquisition or constructed, resulting in differing depreciation. Gross margin before depreciation and amortization is useful to present operating performance of the business before the impact of depreciation and amortization that may not be comparable across assets.
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: expectations as to continued robust demand for natural gas; the priorities of debt reduction and lowering net finance costs in 2024 which will improve the ability to deliver shareholder returns and the timing associated therewith; the Company’s expectations that 2023 capital expenditures will be below the previously issued guidance range; all disclosures provided under the heading “Outlook” including: (i) the expectation that
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; the ability to successfully continue to integrate Exterran and the timing and costs associated therewith; 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 and the timing and quantum thereof; potential undisclosed liabilities associated with Exterran which were not identified during the due diligence process; the interpretation and treatment of the transaction to acquire Exterran 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 and to successfully manage and operate the integrated business; risks associated with technology and equipment, including potential cyberattacks; the occurrence of unexpected events such as pandemics, 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 Enerflex's Annual Information Form for the year ended December 31, 2022 accessible on SEDAR+; in Enerflex's management’s discussion and analysis for the year ended December 31, 2022 accessible on SEDAR+; and in Enerflex's Management Information Circular dated September 8, 2022, and in the Proxy Statement of Exterran and Prospectus of Enerflex dated September 12, 2022, accessible on SEDAR+ and 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.
The outlook provided in this news release is based on assumptions about future events, including economic conditions and proposed courses of action, based on Management's assessment of the relevant information currently available. The outlook is based on the same assumptions and risk factors set forth above and is based on the Company's historical results of operations. The outlook set forth in this news release was approved by Management and the Board of Directors. Management believes that the prospective financial information set forth in this news release has been prepared on a reasonable basis, reflecting Management's best estimates and judgments, and represents the Company's expected course of action in developing and executing its business strategy relating to its business operations. The prospective financial information set forth in this news release should not be relied on as necessarily indicative of future results. Actual results may vary, and such variance may be material.
ABOUT ENERFLEX
Transforming Energy for a Sustainable Future. Enerflex is a premier integrated global provider of energy infrastructure and energy transition solutions, delivering natural gas processing, compression, power generation, refrigeration, cryogenic, and produced water solutions.
Headquartered in Calgary, Alberta, Canada, Enerflex, its subsidiaries, and interests in associates and joint ventures, operate in over 85 locations in: Canada, the United States, Argentina, Bolivia, Brazil, Colombia, Mexico, Peru, the United Kingdom, the Netherlands, the United Arab Emirates, Bahrain, Oman, Egypt, Kuwait, India, Iraq, Nigeria, Pakistan, Saudi Arabia, Australia, Indonesia, and Thailand.
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
Jeff Fetterly
Vice President, Corporate Development and Investor Relations
E-mail: JFetterly@enerflex.com
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1 The Company defines net debt as short- and long-term debt less cash and cash equivalents at period end.
2 Non-IFRS measure that is not a standardized measure under International Financial Reporting Standards ("IFRS") and may not be comparable to similar non-IFRS measures disclosed by other issuers. Refer to "Non-IFRS Measures" of this news release for the most directly comparable financial measure disclosed in Enerflex's current financial statements to which such non-IFRS measure relates.
FAQ
How much debt did Enerflex repay during Q4 2023?
What is Enerflex's preliminary outlook for 2024?
What is the total capital expenditures targeted by Enerflex for 2024?