CALGARY, Alberta, May 03, 2018 (GLOBE NEWSWIRE) -- Enerflex Ltd. (TSX:EFX) (“Enerflex” or “the Company” or “we” or “our”), a leading supplier of products and services to the global energy industry, today reported its financial and operating results for the three months ended March 31, 2018.

Summary Table of First Quarter 2018 Financial and Operating Results

1. Earnings before Interest (Finance Costs), Taxes, Depreciation and Amortization (“EBITDA”) and Earnings before Interest (Finance Costs) and Taxes (“EBIT”) are considered non-GAAP and additional GAAP measures, which may not be comparable with similar non-GAAP or additional GAAP measures used by other entities.
2. Adjusted EBITDA is a non-GAAP measure. Please refer to the full reconciliation of these items in the Adjusted EBITDA section.
3. Determined by taking the trailing 12-month period.
4. Bookings and backlog are considered non-GAAP measures that do not have standardized meanings as prescribed by GAAP, and are therefore unlikely to be comparable to similar measures used by other entities.

“Enerflex saw growth in revenues on the basis of strong backlog coming into the quarter.  However, the margins and earnings decreased with a significant impact from increased costs on an international project without corresponding increases in revenue,” said J. Blair Goertzen, Enerflex’s President and Chief Executive Officer. “Enerflex had another strong bookings quarter in the USA and Rest of World segments, which more than offset continued weakness in Canada.  Going forward, Canadian market conditions are expected to remain soft but the Company expects strong activity in the USA and Rest of World segments across all product lines.  The Company’s strategic diversification across geographies and product lines provides protection against downturns in any one region and focuses on locations where opportunities arise.”

Quarterly Overview

• USA and Rest of World (“ROW”) segment bookings are $76 million and $43 million higher than the first quarter of 2017, respectively.  The USA segment’s bookings were boosted by the sale of a cryogenic gas plant, with Rest of World bookings related to an integrated turnkey project in Latin America that continues to expand our presence in the Colombian market. 
• Canadian bookings continued to weaken due to challenging market conditions and have declined $136 million over the first quarter of 2017, which included some large projects. 
• Backlog of $654 million decreased slightly from $671 million at December 31, 2017 due to the weakness in the Canadian backlog offset by growth in the USA and ROW segments.
• EBIT for the quarter is $19 million, which is down from $33 million in the comparative period.  This $14 million decline is driven by a $9 million decrease in gross margin and a $2 million increase in SG&A expenses.  The prior year results also include a $3 million gain on sale of fixed assets.    
• The Company invested $19 million in rental assets during the quarter, continuing the organic expansion of the USA rental fleet, which has grown 26% since the acquisition of the contract compression business from Mesa Compression, LLC (“Mesa”).
• Subsequent to the quarter, as part of ongoing efforts to reduce capital employed associated with idle facilities, the Company entered into an agreement to sell an idle facility in Wyoming for USD$3.5 million. A letter of intent was also received on a second idle facility in Wyoming with expected proceeds of USD$6.4 million.
• Subsequent to March 31, 2018, the Company declared a quarterly dividend of $0.095 per share, payable on July 5, 2018, to shareholders of record on May 17, 2018.

First Quarter Results Summary
Revenue increased across all product lines during the first quarter.  Engineered Systems revenue was higher, driven primarily by increases in the Canada segment based on the strength of backlog entering 2018.  Service revenues were higher due to increased activity levels in the Middle East and Australia. Rental revenues increased due to the contributions by the assets acquired from Mesa and the new build-own-operate-maintain (“BOOM”) revenues in Colombia.

Gross margins have decreased even as revenues have increased due to the completion of higher margin projects in the prior year, margin erosion on certain projects in Canada, and margin erosion and project delays on a project in the Middle East.   

SG&A costs were higher compared to the same period of 2017 due to higher compensation costs and foreign exchange expense, offset by lower share-based compensation and lower third party service costs. As a result, net earnings of $11 million was lower than $25 million from the first quarter of 2017. 

First Quarter Segmented Results
USA
Revenue in the USA segment was $192 million, a decrease of $2 million from the same period in 2017.  Engineered Systems revenue declined, driven largely by the inclusion of some large projects in the prior quarter and the impact of the weaker U.S. dollar, offset by higher revenue in the Service and Rental product lines.   EBIT declined by $8 million due to lower margins in Engineered Systems driven by a greater proportion of revenue coming from lower margin compression sales, the inclusion of some high margin projects in the prior year results, and an increase in SG&A costs. 

Rest of World
Revenue in the Rest of World segment increased by $10 million due to higher Engineered Services revenue on the progression of some large projects in the Middle East and Latin America.  Service revenue was also higher due to increased activity levels in both Australia and the Middle East.  The decline in rental revenue was the result of lower utilization rates in Mexico, partially offset by the new BOOM project revenues in Colombia.   Operating income was lower than the prior year due to margin erosion in the Middle East and the comparative period included some high margin projects that were completed in 2017.  SG&A costs decreased as there were no third-party costs associated with the Oman Oil Exploration and Production LLC (“OOCEP”) arbitration, partially offset by some negative foreign exchange impacts. 

Canada
Canadian revenue increased by $23 million over the comparative period due to higher Engineered Systems revenue driven by strong bookings in the last half of 2017.  Service revenues and rental revenues are both down year-over-year, both being negatively impacted by lower parts and equipment sales.  Operating income improved by $4 million due to the higher Engineered Systems revenues, partially offset by margin erosion on certain projects and higher SG&A costs. 

Outlook
While the first quarter was challenging from an earnings perspective, bookings remain healthy in the USA and Rest of World segments, and while customers in Canada remain cautious about committing to new projects, enquiry levels remain strong.  Continued strength in the backlog provides solid visibility over revenues for the balance of 2018 with Canada expected to face ongoing pressure until the back half of 2018.  Enerflex expects these underlying market conditions to continue and is well positioned to focus on areas where activity will remain strong due to the Company’s strategy of regional and product diversification. 

Adjusted EBITDA
The Company’s results include items that are unique and items that management and users of the financial statements add back when evaluating the Company’s results. The presentation of adjusted EBITDA should not be considered in isolation from EBIT or EBITDA as determined under IFRS.  Adjusted EBITDA may not be comparable to similar measures presented by other companies and should not be considered in isolation or as a replacement for measures prepared as determined under IFRS.

The items that have been adjusted for presentation purposes relate generally to four categories: 1) impairment or gains on assets; 2) restructuring activities; 3) acquisition costs; and, 4) share-based compensation.  Identification of these items allows for an understanding of the underlying operations of the Company based on the current assets and structure. Enerflex has presented the impact of share-based compensation as it is an item that can fluctuate significantly with share price changes during a period based on factors that are not specific to the long-term performance of the Company.

There were no costs related to the ongoing arbitration proceedings with OOCEP during the first quarter of 2018.  The first quarter of 2017 included approximately $2.0 million of arbitration related costs.   These amounts are not adjusted for in the calculation of Adjusted EBITDA.

Dividend
Subsequent to the end of the first quarter 2018, Enerflex declared a quarterly dividend of $0.095 per share, payable on July 5, 2018, to shareholders of record on May 17, 2018. 

Quarterly Results Material
This press release should be read in conjunction with Enerflex’s interim condensed financial statements as at and for the three months ended March 31, 2018, and the accompanying Management’s Discussion and Analysis, both of which will be available on the Enerflex website at www.enerflex.com under the Investors section and on SEDAR at www.sedar.com.

Conference Call and Webcast Details
Enerflex will host a conference call for analysts, investors, members of the media, and other interested parties on Friday, May 4, 2018 at 8:00 a.m. MDT (10:00 a.m. EDT) to discuss the first quarter 2018 financial results and operating highlights. The call will be hosted by Mr. J. Blair Goertzen, President and Chief Executive Officer and Mr. D. James Harbilas, Executive Vice President and Chief Financial Officer of Enerflex.

If you wish to participate in this conference call, please call 1.844.231.9067 or 1.703.639.1277.  Please dial in 10 minutes prior to the start of the call. No passcode is required. The live audio webcast of the conference call will be available on the Enerflex website at www.enerflex.com under the Investors section on May 4, 2018 at 8:00 a.m. MDT (10:00 a.m. EDT). A replay of the teleconference will be available on May 4, 2018 at 11:00 a.m. MDT until May 11, 2018 at 11:00 a.m. MDT.  Please call 1.855.859.2056 or 1.404.537.3406 and enter conference ID 6075915.

About Enerflex
Enerflex Ltd. is a single source supplier of natural gas compression, oil and gas processing, refrigeration systems, and electric power generation equipment – plus related engineering and mechanical service expertise. The Company’s broad in-house resources provide the capability to engineer, design, manufacture, construct, commission, and service hydrocarbon handling systems.  Enerflex’s expertise encompasses field production facilities, compression and natural gas processing plants, gas lift compression, refrigeration systems, and electric power equipment servicing the natural gas production industry.

Headquartered in Calgary, Canada, Enerflex has approximately 2,100 employees worldwide. Enerflex, its subsidiaries, interests in associates and joint-ventures operate in Canada, the United States, Argentina, Bolivia, Brazil, Colombia, Mexico, Australia, the United Kingdom, the United Arab Emirates, Oman, Bahrain, Kuwait, Indonesia, Malaysia, and Thailand. Enerflex’s shares trade on the Toronto Stock Exchange under the symbol “EFX”.  For more information about Enerflex, go to www.enerflex.com.

Advisory Regarding Forward-Looking Information
This press release contains forward-looking information within the meaning of applicable Canadian securities laws. These statements relate to management’s expectations about future events, results of operations and the Company’s future performance (both operational and financial) and business prospects. All statements other than statements of historical fact are forward-looking statements. The use of any of the words “anticipate”, “plan”, “contemplate”, “continue”, “estimate”, “expect”, “intend”, “propose”, “might”, “may”, “will”, “shall”, “project”, “should”, “could”, “would”, “believe”, “predict”, “forecast”, “pursue”, “potential”, “objective” and “capable” and similar expressions are intended to identify forward-looking information. In particular, this press release includes (without limitation) forward-looking information pertaining to: the anticipated duration of weak natural gas prices and the effect thereof in Canada and USA markets; expected bookings; and the nature and scope of challenges and opportunities in the Rest of World segment. In developing the forward-looking information in this news release, the Company has made certain assumptions with respect to general economic and industry growth rates, commodity prices, currency exchange and interest rates, competitive intensity and regulatory approvals. Forward-looking information involves known and unknown risks and uncertainties and other factors, which are difficult to predict and may affect the Company’s operations, including, among other things: the impact of general economic conditions; industry conditions, including the adoption of new environmental, taxation and other laws and regulations and changes in how they are interpreted and enforced; volatility of oil and gas prices; oil and gas product supply and demand; risks inherent in the ability to generate sufficient cash flow from operations to meet current and future obligations, including future dividends to shareholders of the Company; increased competition; the lack of availability of qualified personnel or management; labour unrest; political unrest; fluctuations in foreign exchange or interest rates; stock market volatility; opportunities available to, or pursued by, the Company; obtaining financing;  and other factors, many of which are beyond its control. The foregoing list of factors and risks is not exhaustive. For an augmented discussion of the risk factors and uncertainties that affect or may affect Enerflex, the reader is directed to the section entitled “Risk Factors” in Enerflex’s most recently filed Annual Information Form, as well as Enerflex’s other publicly filed disclosure documents, available on www.sedar.com. While the Company believes that there is a reasonable basis for the forward-looking information and statements included in this press release, as a result of such known and unknown risks, uncertainties and other factors, actual results, performance, or achievements could differ materially from those expressed in, or implied by, these statements. The forward-looking information included in this press release should not be unduly relied upon. The forward-looking information contained herein is expressly qualified in its entirety by the above cautionary statement. The forward-looking information included in this press release is made as of the date hereof and, other than as required by law, the Company disclaims any intention or obligation to update or revise any forward-looking information, whether as a result of new information, future events or otherwise.

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