Tervita Corporation Announces Strong First Quarter 2020 Results and Company Update on Current Economic Environment
May 6, 2020
- Q1 2020 Adjusted EBITDA of $53 million was moderately down 5% compared to the prior year as increased volumes into our waste facilities from newly commissioned facilities, stable production-based volumes and increased drilling activity, were more than offset by a decline in event-based project activity within Industrial Services' and lower commodity prices
- Q1 2020 revenue excluding energy marketing of $174 million decreased by 5% from prior year for similar reasons to Adjusted EBITDA
- Adjusted EBITDA Margin remained strong and stable to prior year at 30%
- General and administrative expense ("G&A") of $12 million in Q1 2020 decreased by 14% compared to prior year due to ongoing focus on cost management
- Successfully commissioned and are fully operational at our Montney water disposal facility, which is backed by a senior producer with a minimum five-year commitment
- Generated $25 million of Discretionary Free Cash Flow in Q1 2020
- At March 31, 2020 we retain $234 million of available liquidity from cash on hand and available credit facility capacity
- Late in the first quarter, in response to the COVID-19 pandemic, steep decline in global oil prices and the resulting decrease in drilling and production activity, Management took immediate action to ensure safe operations, drive continued financial discipline, and protect liquidity and balance sheet strength in these unprecedented times:
- Actioned our business continuity plan in response to the COVID-19 pandemic to keep our employees safe, assist our customers and ensure safe operations. Our operations have not been materially affected by the virus at this time;
- Proactively reduced fixed costs for expected annualized savings of $30 to $34 million through a reduction to the Board of Directors' cash retainer, salary reductions for the executive leadership team, employee headcount reduction, location optimization throughout our network and an organizational restructuring of the Industrial Services segment and Tervita's business services resulting in a 20% reduction to the size of the executive leadership team;
- Quickly and actively engaged customers to provide safe and efficient waste and environmental solutions in a time of tight capital and cost pressure;
- Reduced our 2020 capital budget to $60 million, a 56% reduction from 2019 capital expenditures; and
- Suspended our normal course issuer bid ("NCIB") program.
CALGARY, May 6, 2020 /CNW/ - Tervita Corporation ("Tervita" or the "Company") (TSX: TEV) announced today the results for the three months ended March 31, 2020. All financial figures are in millions of Canadian dollars unless otherwise noted.
"We started 2020 with solid performance reflecting the resiliency in our production-based business and focus on cost control," said John Cooper, President and CEO. "The quarter closed with the COVID-19 global pandemic and unprecedented declines in commodity prices and demand, resulting in significantly reduced energy activity levels and producer capital programs. We quickly responded to the health crisis and downturn through implementation of our business continuity plan to keep our people safe, and strategic actions to preserve liquidity and reduce fixed costs. As a result of acting quickly, Tervita has not suffered any interruptions to services or our capacity to handle our customer requirements due to the pandemic outbreak.
"Over the last three years Tervita has focused on continuous improvement to streamline and right-size the business. These actions have materially enhanced our resiliency and positioned us well to navigate this environment. In response to the current economic conditions we have promptly taken further steps to continue to enhance sustainability.
"In the face of these challenging times, we see a unique opportunity to leverage our infrastructure and create efficiencies for customers in a time of uncertainty and tight capital discipline. Through the resilience in our business, the hard work of our people, and the financial strength of the company, we believe we are well positioned to succeed when the economy recovers. In the meantime, the Company is well positioned to manage through this downturn."
Q1 2020 Financial Highlights(1)
Three Months Ended March 31
Energy Services revenue
Energy marketing revenue
Industrial Services revenue
Revenue excluding energy marketing
Energy Services Divisional EBITDA(1)
Industrial Services Divisional EBITDA(1)
G&A as a % of revenue (excl. energy marketing)
Net profit (loss)
- per share ($), basic
- per share ($), diluted
- per share ($), basic and diluted
Adjusted EBITDA margin(1)
Maintenance capital additions
Growth and Expansion capital additions
Discretionary Free Cash Flow(1)
- per share ($), basic and diluted
Net Debt to Adjusted EBITDA(1)(2)
Shares as at March 31 (000's of shares) (3)
Weighted average shares - basic
Weighted average shares - diluted
Refer to Tervita's Q1 2020 Management's Discussion and Analysis ("MD&A") and Interim Financial Statements ("Financial Statements") for further information. These financial measures are Non-GAAP measures and are, therefore, unlikely to be comparable to similar measures presented by other issuers. These Non-GAAP financial measures are defined and reconciled in Tervita's Q1 2020 MD&A
Net Debt to Adjusted EBITDA in Q1 2020 is Last Twelve Months. See Tervita's Q1 2020 MD&A and Q1 2019 MD&A for further definition and reconciliation
As at May 6, 2020, the Company had 113,107,140 common shares, 2,702,649 common share purchase warrants, and 2,304,034 stock options outstanding. Each common share purchase warrant and option outstanding is exercisable for one common share
Recent developments in the energy markets and the impact of COVID-19 on the economy has caused a steep decline in commodity prices. As a result, customer spending and drilling is expected to decline significantly in Q2 and the second half of 2020. Further, production levels are being challenged by the decline in oil prices due to reduced customer demand and the resulting shortage of storage capacity, which has resulted in some producers shutting in or reducing their production. In this unprecedented environment we have proactively taken steps to keep our people safe, reduce costs, and protect liquidity. Due to the uncertain and rapidly changing nature of the current environment, we cannot provide any meaningful guidance at this time. Our business remains strongly underpinned by ongoing production in the Western Canadian Sedimentary Basin ("WCSB"), which has been more resilient than drilling activity and which we anticipate will recover more quickly. Our Industrial Services business, while impacted by the COVID-19 downturn, is less exposed to the upstream oil and gas industry and is also anticipated to recover more quickly.
The health and safety of our people, our customers and the communities we operate in remains our top priority. We have implemented our business continuity plan in response to the COVID-19 pandemic to keep employees safe and healthy, assist our customers and ensure safe operations. We also have a dedicated COVID-19 team that has been formed to manage the continuity plan, implement proactive measures and keep our people and customers updated on this ever-changing situation.
We took immediate action following the decline of commodity prices to reduce our fixed costs by an estimated $30 to $34 million on an annualized basis ($22 to $26 million before restructuring costs in 2020). These actions include a reduction to the Board of Directors' cash retainer, salary reductions for the executive leadership team, employee headcount reduction, and location optimization throughout our network. We have also completed an organizational restructuring of the Industrial Services segment and Tervita's business services resulting in a 20% reduction to the size of the executive leadership team. Further, we reduced our 2020 capital plan to $60 million, a 56% reduction from 2019 expenditures, with the ability to adjust the capital plan up or down in response to commodity prices and the economic environment. We continue to look for and execute opportunities to reduce costs, improve efficiencies and ensure all open and operating facilities are generating positive cash flows.
In recent weeks the Federal Government of Canada has announced programs to assist companies through the current economic environment. We are actively monitoring the programs including the Canada Emergency Wage Subsidy, which we have applied for, and the $1.7 billion fund to accelerate orphan and inactive well abandonment, which will provide thousands of jobs throughout Western Canada. We believe the orphan well program provides many opportunities for Tervita, including work through the Orphan Well Association ("OWA") in which Tervita is a prime contractor. Tervita has the largest portfolio of landfills in Western Canada and, in connection with our environmental services' business, we are well positioned to work closely with customers across British Columbia, Alberta and Saskatchewan to access and remediate their oilfield liabilities.
We remain focused on financial discipline and protecting liquidity and have positioned the company with ample liquidity of $234 million of cash and unutilized capacity on our credit facility. Tervita's US$590 million senior notes are not due until the fourth quarter 2021.
Through this challenging environment our priorities remain the health and safety of our people as well as providing a valuable service to our customers. We continue to monitor our external environment and are well prepared to take any further action required throughout the year.
MD&A and Financial Statements
The Q1 2020 MD&A, Financial Statements, and Annual Information Form, which contain additional notes and disclosures, are available on SEDAR under Tervita Corporation at www.SEDAR.com or on our website at www.tervita.com on the Investor Relations page.
First Quarter 2020 Conference Call
Tervita will host a conference call on Thursday May 7, 2020 at 7:00 a.m. MST to discuss the first quarter results. To participate in the conference call, dial 647-427-7450 or toll free: 1-888-231-8191. To access the simultaneous webcast, please visit www.tervita.com. For those unable to listen to the live call, a taped broadcast will be available at www.tervita.com and, until midnight MST on Thursday, May 14, 2020 by dialing 855-859-2056 and using the pass code 4587968.
Annual General Meeting
This year, in light of the rapidly evolving global COVID-19 public health emergency and to protect our employees, shareholders and other stakeholders, Tervita will hold its Annual General Meeting (the "Meeting") in a virtual only format, which will be conducted via live audio webcast. Shareholders will have an equal opportunity to participate in the Meeting online regardless of their geographic location.
Meeting Date: May 11, 2020, 2:00pm MST
Meeting Location: Virtual only meeting. Please refer to the Notice of Meeting in the Company's recently released Management Information Circular for details on how to attend the meeting. Tervita's Management Information Circular is available at www.tervita.com or www.sedar.com.
Record Date for Notice of Meeting: March 23, 2020
Tervita is one of the largest waste and environmentally focused energy service providers in Canada. We primarily serve companies in the oil and gas industry, as well as the Industrial and natural resource sectors, predominantly in Western Canada.
For over 40 years, Tervita has been focused on delivering safe and efficient solutions through all phases of a project while minimizing impact, maximizing returns™. Our dedicated and experienced employees are trusted sustainability partners to our clients. Safety is our top priority: it influences our actions and shapes our culture. Tervita trades on the TSX as TEV. For more information, visit www.tervita.com.
This news release contains forward-looking statements and forward-looking information (collectively referred to herein as "forward-looking statements") within the meaning of securities legislation. Such forward-looking statements include, without limitation, forecasts, estimates, expectations and objectives for future operations that are subject to assumptions, risks and uncertainties, many of which are beyond the control of Tervita. Forward-looking statements are statements that are not historical facts and are generally, but not always, identified by the words "expects", "plans", "anticipates", "believes", "intends", "estimates", "projects", "potential" and similar expressions, or are events or conditions that "will", "would", "may", "could" or "should" occur or be achieved. These statements are not guarantees of future performance and are subject to risks, uncertainties and other key factors that could cause actual results or events to be materially different from those anticipated in such forward-looking statements.
Specific forward-looking statements contained in this news release includes, amongst others, statements and management's beliefs, expectations or intentions regarding the following: all statements regarding Tervita's 2020 capital plan; Tervita's expectations regarding the decline in drilling activity and customer activity in Q2 and the second half of 2020, recovery and production activity in the WCSB, Tervita's expectations and beliefs regarding its ability to recover from the current economic conditions, in particular its Industrial Services' segment, , Tervita's expectations regarding its access government assistance programs and the fund to accelerate orphan well abandonment, Tervita's expectations regarding its ability to achieve its expected cost reductions, Tervita's expectations regarding its ability to continue to exercise capital discipline; and Tervita's business strategies and objectives.
Forward-looking statements relating to our business contain uncertainties and assumptions, including the following: current economic and operating conditions, including commodity prices, interest rates, and environmental and regulatory matters; the ability of its customers to recover from the current economic and operating conditions, the ability of Tervita to access government assistance programs and the fund to accelerate orphan well abandonment, the ability of Tervita to execute on cost-savings measures, the ability of Tervita to execute on its business continuity plan in connection with the COVID-19 pandemic, Tervita's ability to maintaining sufficient liquidity in the current economic and operating conditions, the ability of Tervita to obtain equipment, services, supplies and personnel to carry out its business activities; the ability of Tervita to successfully market its business in the areas in which it operates; that Tervita's current business environment will remain substantially unchanged; Tervita's ability to secure financing on acceptable terms, if needed; demand for services in Tervita's businesses can be adversely impacted by general economic conditions and Tervita is dependent on exploration, drilling and production activity levels in the markets where Tervita offers its services; risks related to limited pipeline capacity; the ability of management to execute its business plan; the risks of the environmental solutions industry, such as operational risks and market demand; risks inherent in Tervita's marketing operations, including credit risk; the uncertainty of estimates and projections relating to revenues, costs, expenses and capital expenditures; fluctuations in fuel, raw material costs, oil and natural gas prices, foreign currency exchange rates and interest rates; health, safety and environmental risks; uncertainties as to the availability and cost of financing; general economic conditions in Canada, the United States, and globally; industry conditions; the possibility that government policies or laws may change or governmental approvals may be delayed or withheld; governmental regulation of the environmental solutions industry, including environmental regulation; unanticipated operating events; failure to obtain third-party consents and approvals, when required; risks associated with existing and potential future lawsuits and regulatory actions against Tervita; the highly competitive nature of Tervita's markets, and competition that could adversely impact Tervita's financial position, results of operations, cash flows or its ability to make required payments on debt outstanding; global financial conditions are subject to increased volatility; legislative and regulatory initiatives related to hydraulic fracturing that could result in increased costs and additional operating restrictions or delays as well as adversely affect Tervita's support services. For a more detailed discussion of risks relating to Tervita, see our most recent Annual Information Form ("AIF") dated March 8, 2020. These factors should not be construed as exhaustive. The forward-looking statements included in this news release are made only as of the date hereof and Tervita does not undertake to publicly update these forward-looking statements for new information, future events, or otherwise, except as required by applicable laws. Any forward-looking statements contained herein are expressly qualified by this cautionary statement.
For additional information relating to Tervita, including our AIF, please see our profile on SEDAR, available at www.sedar.com.
Non-GAAP Financial Measures
Certain financial measures identified in this news release are not prescribed by Internal Financial Reporting Standards ("IFRS") and therefore are considered non-GAAP measures. All non-GAAP measures presented herein do not have any standardized meaning and therefore are unlikely to be comparable to similar measures presented by other companies. Therefore, these non-GAAP measures should not be considered in isolation or as a substitute for measures of performance prepared in accordance with IFRS. All non-GAAP measures are included because management uses the information to analyze operating performance and results, and therefore may be considered useful information by investors. Any non-GAAP measure presented herein has been identified and the applicable definition and reconciliation of such non-GAAP measure can be found in MD&A for Q1 2020 available at www.tervita.com or www.sedar.com.
All non-GAAP measures presented herein do not have any standardized meaning and therefore are unlikely to be comparable to similar measures presented by other companies. Therefore, these non-GAAP measures should not be considered in isolation or as a substitute for measures of performance prepared in accordance with IFRS.
Readers should refer to Tervita's most recently filed Financial Statements and accompanying MD&A filed on www.sedar.com for the definition and reconciliation of these non-GAAP measures to the most directly comparable GAAP measure in Tervita's financial statements for prior completed periods.
SOURCE Tervita Corporation