Secure Energy Services Inc. (SES) has unveiled a robust financial and operational performance for the first quarter of 2024, despite a net revenue decrease attributed to a recent asset sale. The company's strategic transactions, including the sale to Waste Connections (NYSE:WCN) for $1.15 billion, have strengthened its capital structure and provided flexibility for further investments and shareholder returns.
While net income rose due to gains from this sale, both adjusted EBITDA and funds flow from operations saw a decrease. Operational improvements were noted in water handling, landfill disposal, metal recycling, and oil terminalling, positioning the company for future growth.
Key Takeaways
- Secure Energy Services completed a significant asset sale to Waste Connections, totaling $1.15 billion.
- The company repaid debt, repurchased 12.1 million shares, and paid dividends, demonstrating a focus on enhancing shareholder value.
- Capital expenditure for the year is set to increase to $75 million, with a strong emphasis on organic growth and possible acquisitions.
- The CEO will retire on May 1, 2024, with the President set to assume the role.
- Despite a 13% decrease in net revenue due to the asset sale, net income increased, although adjusted EBITDA and discretionary free cash flow saw declines.
Company Outlook
- Secure Energy Services is optimistic about future growth, with plans to invest in $75 million worth of projects in 2024, focusing on brownfield expansion.
- The company aims to add $75 million in EBITDA to its 2025 guidance and has tightened its 2024 EBITDA guidance range to $450 million to $465 million.
- With the TMX expansion pipeline commissioning on the horizon, Secure Energy Services anticipates enhanced revenue opportunities and a favorable business climate.
Bearish Highlights
- Net revenue saw a 13% decrease due to the asset sale to Waste Connections.
- Adjusted EBITDA and funds flow from operations decreased compared to previous periods.
Bullish Highlights
- The strategic sale of assets has provided significant capital for potential acquisitions and organic growth.
- Operational highlights include increased volumes in water handling, landfill disposal, metal recycling, and oil terminalling.
- The company is well-positioned to benefit from the Trans Mountain pipeline expansion and expects increased volume and demand for its services.
Misses
- Discretionary free cash flow decreased due to a lower operating profit.
Q&A Highlights
- The company is progressing toward net-zero emissions by 2050 and is developing a carbon credit protocol.
- Secure Energy Services has refinanced long-term debt and is focused on delivering returns through dividends and share repurchases.
- The company believes its market valuation does not fully reflect its position compared to peers in the waste management and energy infrastructure sector.
- Details on the percentage of business mix from the metals recycling business were not provided, though there is confidence in the long-term demand for recycled materials.
Secure Energy Services is committed to sustainability, reducing emissions, and supporting communities. In 2023, they made significant strides in environmental impact by recovering oil from waste, processing scrap metal, and reducing truckloads through their pipeline infrastructure. The company is set to continue its focus on safety and sustainability, with an eye on growth opportunities and financial capacity to enhance shareholder returns.
Full transcript - Secure Energy Services (SECYF) Q1 2024:
Operator: Good afternoon, ladies and gentlemen and welcome to the Secure Energy's First Quarter 2024 Results Conference Call. [Operator Instructions] This call is being recorded on Thursday, April 25, 2024. I would like to turn the call over to Alison Prokop. Please go ahead.
Alison Prokop: Thank you. Welcome to Secure's conference call for the first quarter of 2024. Joining me on the call today is Rene Amirault, our Chief Executive Officer; Allen Gransch, our President; Chad Magus, our Chief Financial Officer; and Corey Higham, our Chief Operating Officer. During the call today, we will make forward-looking statements related to future performance and we will refer to certain financial measures and ratios that do not have any standardized meaning prescribed by GAAP and may not be comparable to similar financial measures or ratios disclosed by other companies. The forward-looking statements reflect the current views of Secure with respect to future events and are based on certain key expectations and assumptions considered reasonable by Secure. Since forward-looking information addresses future events and conditions, by their very nature, they involve inherent assumptions, risks and uncertainties and actual results could differ materially from those anticipated due to numerous factors and risks. Please refer to our continuous disclosure documents available on SEDAR+ as they identify risk factors applicable to Secure, factors which may cause actual results to differ materially from any forward-looking statements and identify and define our non-GAAP measures. Today, we will review our financial and operational results for the first quarter of 2024 and our outlook for the remainder of the year. I will now turn the call over to Rene for his opening remarks.
Rene Amirault: Thank you and good morning, everyone. We are pleased to report a fantastic start to 2024 with first quarter results meeting our expectations, allowing us to narrow our adjusted EBITDA guidance to $450 million to $465 million for the year. Our strong financial performance continues to underscore the stability and growth potential of our waste management and energy infrastructure business. During the quarter, we are extremely pleased to close the $1.15 billion asset sale to an affiliate of Waste Connections. Proceeds from the sale transaction as well as continued strong free cash flow generation provides the corporation with significant capital allocation optionality for 2024 and beyond, facilitating our ability to execute on all Secure's strategic priorities. With a solid foundation and clear direction, we're confident in our ability to protect the base business and seize new opportunities to create value for our shareholders. We also remain committed to enhance shareholder returns through our $0.40 per share annualized dividend and share repurchases, all while maintaining low leverage. Over the past few months, we have materially strengthened our capital structure with debt repayment and financing. In February, we have repaid the entire amount drawn on the $800 million revolving credit facility and redeemed a senior second lien secured notes due 2025. In March, we closed the offering of the 6.75% five year senior unsecured notes with an aggregate principal balance of $300 million. Net proceeds from the offering along with cash on hand were used to redeem the outstanding principal amount of the 7.25% senior unsecured notes due 2026. At March 31, '24, the corporation had $264 million of cash and unused debt capacity of approximately $750 million, subject to covenant restrictions, providing ample liquidity for shareholder returns and funding of growth initiatives. During the quarter, we have repurchased and canceled approximately 12.1 million shares under the normal course issuer bid at a weighted average price per share of $10.47 for a total of $126 million reducing our shares outstanding by 4%. The corporation repurchased an additional 2.8 million shares subsequent to the quarter end. We also paid our quarterly dividend of $0.10 per common share, which is currently represents an attractive yield of 3.5% on our common shares compared to peers. And finally, today we announced an increase to our unexpected capital spend in '24 to $75 million up from the $50 million previously announced. The increase relates to customer agreements for a produced water pipeline to a waste processing facility, as well as processing equipment for Phase 3 at the Clearwater heavy oil terminal. We continue to have a solid pipeline of organic growth opportunities and will consider acquisitions that meet its investment criteria and enhance its core operations in waste management and energy infrastructure. I believe this is only the beginning for Secure. We are well-positioned with the right people, the asset network and financial flexibility to take us on our next phase of growth. As previously announced, I will retire as CEO on May 1, 2024. The leadership transition with Allen Gransch, assuming the role of President and CEO marks the beginning of an exciting new chapter for the corporation. I'm proud of what we have accomplished together and even more excited about our future. Allan's proven leadership capabilities, extensive experience and diverse skill set will allow for a seamless succession and guide Secure, as it moves forward. I look forward to continue to support Secure strategy as Vice Chair of the Board. I'll now pass it over to Chad to provide some additional first quarter highlights.
Chad Magus: Thanks, Rene and good afternoon everyone. Strong execution across all business units continues to underscore the stability of our cash flow generation capabilities. As a sale transaction with Waste Connections, decreased number of our overall facilities, this reduced most of our financial metrics on an absolute basis, when comparing the first quarter of 2024 to a year earlier. However, thanks to our opportunistic share buybacks over the past year, we have decreased our weighted average outstanding shares in the first quarter of 2024 compared to the first quarter of 2023 by 8%, partially offsetting the impact of the reduced number of facilities to our results, on a per share basis. To be clear, we have not prepared any financial highlights on a pro-forma basis. Corey, however will provide some volume information on a pro-forma basis. Net revenue of $360 million decreased 13% from the first quarter of 2023, primarily related to the impact of the sale transaction and the divestiture of two non-core oilfield service business units in 2023, partially offset by higher volumes and improved margins across corporations remaining infrastructure network. Net income of $422 million or $1.50 per basic share increased $367 million or $1.32 per basic share, compared to the first quarter of 2023. The increase was primarily driven by the $520 million gain recognized on the sales transaction, net of the current and deferred tax expenses resulting from the gain. Adjusted EBITDA of $132 million or $0.47 per basic share, decreased 13% from the first quarter of 2023 or 4% on a per basic share basis, as a result of the sale transaction. Funds flow from operations of $108 million or $0.38 per basic share, decreased 21% from the first quarter of 2023 or 14% on a per basic share basis, as a result lower operating profit resulting from the sale transaction. Discretionary free cash flow of $93 million or $0.33 per basic share, decreased 24% from the first quarter of 2023 or 18% on a per basic share basis. The lower adjusted EBITDA was partially offset by reduced spending on sustaining capital due to the reduced facility count following the sales transaction. As the sale transaction utilizes significant amount of Secure's tax pools, the corporation is reporting current tax expense in 2024, the majority of which is expected to be actually paid in the first half of 2025. I'll now turn it over to Corey to provide some operational highlights from the first quarter.
Corey Higham: Thanks, Chad. In the quarter, our facilities handled on average 114,000 barrels of produced water per day and 51,000 barrels of slurry waste and emulsion. Through our processes, we were able to recover over 315,000 barrels of oil from customer waste. On a pro-forma basis, produced water volumes were up 11% from the first quarter of 2023. The increase was a result of higher same-store volumes due to industry trends, resulting in increased water volumes. On a pro-forma basis, waste processing volumes were up 3% from the first quarter of 2023, due to production growth as well as increased drilling and completion activity driving incremental volumes in certain regions. Across our landfill network, we safely disposed 940,000 tons of contaminated solid waste in the quarter. On a pro-forma basis, landfill volumes were relatively flat quarter-over-quarter, supported by disciplined drilling and completion activity and mandatory abandonment remediation and reclamation spending. Overall, ferrous metal recycling volumes increased 48% due in part to incremental scrap volumes associated with project work driving higher volumes to Secure facilities as well as strategic investments made in 2023 and process improvements, which resulted in improved operating capabilities and efficiencies. In our Energy Infrastructure segment, crude oil and condensate terminalling and pipeline volumes were up to 115,000 barrels per day in the first quarter, a 23% increase from the same period in 2023, driven by the Clearwater heavy oil terminal which commenced operations in the fourth quarter of 2023. Turning now to our capital program. Our $75 million growth capital plan for 2024 relates primarily to brownfield infrastructure expansion projects to manage incremental production volumes for our customers. Major growth projects are backstopped by new commercial agreements providing reliable volumes and recurring cash flows over the life of the contract. In the first quarter, we incurred $11 million, as we progressed our investment in the second phase of the Clearwater terminal and spent some additional capital at our metal recycling locations. The Clearwater terminal expansion is backstopped by both existing and new customers and will approximately double the terminal capacity to over 60,000 barrels per day. Construction activities are expected to be completed and the expanded capacity operational in the second quarter of 2024. We also closed a small acquisition in our Specialty Chemicals business during the quarter, expanding our product offerings for fluid optimization within the water treatment, production, remediation and drilling fluid chemical segments. Sustaining capital of $8 million for the quarter related to landfill cell expansions, well maintenance and asset integrity programs for processing facilities and asset replacements for our waste management operations. We continue to expect to spend approximately $60 million on sustaining capital in 2024 and approximately $15 million on settling Secure's abandonment and retirement obligations. I will now turn it over to Allen.
Allen Gransch: Thanks, Corey. Secure is looking forward to releasing our fifth annual comprehensive sustainability report and our second task force on climate related financial disclosures report in May, demonstrating our ongoing commitment to transparent reporting. These reports showcase the advancement we made in our ESG priorities in 2023. We are especially proud of substantial progress Secure made in reducing our emission intensity, as we've experienced a decrease of nearly 13% on our overall emissions intensity from 2021 to 2023. We are on track to reach our short-term goal of 15% reduction over three years in our greenhouse gas emission intensity by the end of 2024. We introduced new in technologies to ensure compliance and standardization of waste and recyclable documentation. We also continue to deliver on our commitments to supporting the communities, where we live and work through more than 1.3 million in contributions. The solution Secure provides are designed not only to help reduce costs, but also lower emissions, increase safety, manage water, recycle five products and protect the environment. In 2023, we avoided 28,000 tons of CO2 by recovering crude oil from waste, when compared to producing the same barrel from extraction of virgin resource. And similarly, by processing scrap metal for recycling, we avoided 94,000 tons of CO2, when compared to creating the same ton of metal from resource extraction. Combined, this is enough to offset all our Scope 1 emissions in 2023. Additionally, we displaced 140,000 truckloads because of our pipeline infrastructure network, resulting in 13,000 tons of CO2 reduction of our customer Scope 3 emissions. The company's success is a testament to the hard work and dedication of everyone on the Secure team. As we look at 2024, some of our key objectives include; progressing on our journey to net zero with ambitious safety targets, fostering our indigenous partnerships with the completion of our progressive Aboriginal Relations Program certification and working to develop a protocol for carbon credits generated from recovery of products from waste, which will be a critical milestone in achieving our net zero by 2050. Turning now to the outlook for the remainder of the year. Secure is extremely well-positioned for success with a strong industry backdrop, growth opportunities and a financial capacity to execute on our strategic initiatives and deliver enhanced shareholder returns. With the Trans Mountain pipeline expansion scheduled to begin operations in the second quarter, our customers can gain takeaway capacity and stronger pricing with access to global markets paving the way for sustained and expanded activity levels in years ahead. We expect industry fundamentals will drive increased volume and overall demand for Secure's infrastructure. With our waste processing facilities currently operating at 60% utilization, we have ample capacity to accommodate growing customer needs for processing, disposal, recycling, recovery and terminalling all with minimal incremental fixed costs or additional capital investment. Over the last quarter, the corporation successfully refinanced its long-term debt and continue to deliver shareholder returns through dividends and share buybacks, while maintaining significant financial flexibility. Given our positive operational results in the first quarter, the Board of Directors and management continue to believe that significant gap exists between Secure's current market valuation and that of the peers in the waste management and energy infrastructure sector. In light of these factors alongside ongoing initiatives, we intend to initiate a substantial issuer bid next week as a key element of Secure's capital allocation strategy. I also invite you all to attend tomorrow's Annual General Meeting of shareholders. At this meeting, among other things, shareholders will be voting on Secure's Board of Directors. I am pleased to be on the ballot for the first time with seven other highly-qualified and experienced Directors. Brad Munro, long-time Director of Secure will not be seeking reelection at the meeting and we offer him a sincere thank you for his 15 years of valuable service. Lastly, I want to wish Rene congratulation on his well-deserved retirement from management. Thanks to Rene's visionary leadership, Secure has established itself as a trusted industry partner, showcasing remarkable accomplishments in growth and operational excellence. The corporation is extremely well positioned to advance our strategy as a leader in waste management and energy infrastructure, prioritizing value creation for our customers through reliable, safe and environmentally responsible infrastructure. I am very privileged to be taking over as CEO at this time, and I'm excited for this opportunity for continued growth and innovation. I look forward to Rene's continued support as Vice Chair of the Board of Directors and working with him and the entire Board to help guide Secure into the future. That concludes our prepared remarks. We would now be happy to take your questions.
Operator: [Operator Instructions] Your first question comes from Cole Pereira at Stifel.
Cole Pereira: I just wanted to start on the SIB. Obviously, there's some questions around what the size and price may be. Can you just talk about how you're thinking about what the right level might be for most of these factors, whether it's a certain valuation multiple or certain leverage that you want to be at after? How you guys are thinking about that?
Rene Amirault: It's Rene here. I'm sure that's going to be the number one theme until we press release our intentions and those are great questions around the SIB. All we can tell you is that next week, we'll get that all figured out and take a look at a bunch of different factors that go into the various criteria and ultimately get signed off by our Board of Directors. But, stay tuned. We'll press release it, as once we get it all together and it should happen next week. That's our intent.
Cole Pereira: And then, obviously, you're effectively debt free now. The business is generating a lot of free cash. How do you guys think about, what the right level of growth spending is for this business going forward?
Allen Gransch: It's Alan here. Yes, no, great question. If you look at 2023, we spent over a $100 million in growth projects primarily in the Montney for water disposal infrastructure and then our Nipisi terminal, which is great economics and great growth projects. A lot of our projects are result of our customers wanting to work with us to partner up, to get there whether or not it's waste products into our waste processing facilities or whether they want clean oil onto a mainline system. We're there to help them. And I think, as we think about growth here for 2024, we just announced another $25 million. A part of that is we're going to complete phase two for Nipisi, and we're going to add Phase 3, which will add some processing capacity, some treating capacity to get a total terminal output of around 70,000 barrels a day. That'll be complete by the end of this year. So great growth project. We also announced that we're doing another, Montney water disposal pipeline that's backed by an anchor tenant. And these are all very similar sort of take or pay and area dedication arrangements that we have with our customers. As I said in the past, we'll come to, announcing these projects when we've got signed agreements. When we do that, we'll roll out the project and what it relates to. We've been focusing a lot on brownfield growth expansion. Those are great return projects because you have your base infrastructure and the more infrastructure you add, the higher rate of return. So my expectation here, I think we spent $100 million last year. I could see that number, the $75 million that we've announced so far trending upwards to a $100 million. But again, that'll be predicated on when we get agreement signed, some of it might roll into 2025. But ultimately, I'd say, our hopper of opportunity is pretty robust. When you have a strong backdrop in the sector like we're seeing, more opportunities start to present themselves. As those opportunities are vetted and you see where that infrastructure is added again, we'll come to market.
Cole Pereira: And then just one more quick one. Chad, you mentioned, you'll be cash taxable in 2025. Any bookends you want to put around this in terms of a dollar amount, percentage rate, something like that?
Chad Magus: I think the best thing to do is our year end note, we'll have a taxable income and then I would knock that down for the divestiture and a rough percentage of what the cash flow we lost for the divestiture and then just apply that 25% rate. But given you ballpark dollar numbers that's on a go forward basis, it's probably in the $60 million to $75 million range.
Cole Pereira: That's all for me. Thanks. I'll turn it back and congrats again, Rene on your retirement.
Operator: Next question comes from John Gibson of BMO Capital Markets.
John Gibson: Congrats Rene on stronger at Secure and best wishes in your retirement. Just one thing that's gone under the radar is your dividend. I guess when the dust settles on the SIB, could we expect a similar payout level for the dividend? Just obviously this would imply an increase, just given where your share count falls to?
Allen Gransch: It's Alan here. I think obviously in our capital allocation decision making share buybacks are really paramount. I mean, if you look at what we've done in the first quarter, we bought back over 12 million shares. We've used about 70% of that NCIB, because we continue to believe the stock is undervalued. And it’s a real value when you see what we transacted and saw in a distressed situation to waste connection. That's a real discount. We've been taking advantage of it and that's why next week when we come out and put out terms on the SIB, you'll get an understanding of what that looks like. But as I go through the other elements of capital allocation in terms of growth, which we've now announced and there's a little bit of parameters around it. Our balance sheet is in fantastic shape. The deal that Chad restructured in March, I think sets us up well for the future here. I do believe as the dust settles here and we get through Q2, we will take another look at the dividend and our current yield, because you're right as we buy back stock. There will be contemplation. Are we getting the value for the dividend and what do we want to do? Do we want to increase it? But that will be our optionality and I think we will take a look at, as we progress through the year.
John Gibson: And then last one for me. Thanks for providing the pro-forma metrics or volume metrics on the call and obviously impressive to see the year-over-year increases. Could you maybe speak to what the drivers were more specifically? Was it more production volume related or more due to the infrastructure you've built over the past few years?
Corey Higham: It's Corey here. I think it's a combination of both. We saw a steady activity through the quarter on drilling completions and production. When you combine all those three together, you get those results of produced water being up 11% quarter-over-quarter, our waste processing volumes up 3% quarter-over-quarter. We've been very successful on metal recycling project work which has increased 40% quarter-over-quarter. I think it's just a little bit of everything and great execution by our team.
John Gibson: What type of organic growth is your guidance this year incorporate?
Allen Gransch: It’s Allen here. We've announced that the $75 million most of that capital will likely be spent throughout call it Q3 and Q4 a little bit here in Q2. The expectation is the contribution of EBITDA from that $75 million will be added on to what would be our 2025 guidance. As you know, because of our $10 million above the numbers here in Q1, we've tightened our guidance range to $450 million to $465 million of EBITDA, for 2024. Any of the organic spend and then contribution will be 2025.
Operator: The next question comes from Keith MacKey at RBC.
Keith MacKey: Just wanted to start out on the TMX expansion pipeline is hopefully becoming towards commissioning very shortly here. Can you just talk about your exposure to whether it's direct exposure or not to the improved operating environment with this pipeline in effect. You certainly got some ability to store crude and looks like did some in Q1. Can you just talk about your revenue opportunity and the overall business environment pre and post the TMX expansion commissioning?
Rene Amirault: Sure. You are absolutely right. We've always said that we'll optimize differentials and obviously help our customers to get the best net price and obviously having the ability to store some crude in select months enhances both the customer's net price in our bottom line. Think of TMX as coming on. You have got a lot of our customers who have indicated to us and shared some of those long-term forecasts. Obviously, when it comes to making sure they have the right infrastructure is that, I think, you'll be a little bit more aggressive in terms of bringing on new production because, let's face it, since 2008, we've been pipeline constrained. And so kind opens the door for a lot of the volumes that maybe -- wouldn't have been as aggressively drilled to obviously be drilled and new production come on. So what we're seeing in that in Western Canadian basin is, there's a lot of new start-ups. There's a lot of smaller companies that go under the radar. They're private a lot of the times, who have a lot of land holdings and are starting to drill up with some of the new drilling techniques. Traditionally, some of these areas, just weren't economical at that $70 to $75. Now with the new drilling techniques, you're seeing them getting a six month payback, three month payback. That just opens up a whole new door in terms of bringing new production and new waste and new water into our facilities. The great thing about our network is that, we've got pretty well most of Western Canada covered, where this new drilling is happening in the new incremental production is coming on. I think what you'll see Keith over the next three years is, I think you're not going to see a whole bunch of apportionment, and maybe there's a little less of the volatility and differentials, but you also have a customer base that wants to take advantage of that higher netback and actually bring on new production. All-in-all, we just think, it's really positive for not only Secure, but for our customers.
Keith MacKey: Just secondly on acquisitions. You have talked about potentially doing acquisitions, but sticking with your core competencies and things like that and strict return targets. But can you talk a little bit about your readiness to be able to execute on anything you need? Is there any particular new capabilities you'd have to stand up to be able to evaluate potential deals and things like that? Or is that pretty much all ready to go and now it's just a matter of finding the right deals that meet your criteria?
Chad Magus: Yes, Keith. I think we spent so much time in 2022 realizing the synergies. They were such low-hanging fruit. I would call it in 2023, we played defense because we were not only going to battle against the competition barrel but we were also all hands on deck to try to get as much value as we can for these infrastructure assets, which ultimately very successful considering the distressed situation. So I now have a team in my business development and M&A group that are really ready to go on to the next chapter, which is, you got a great balance sheet and there's lots of good acquisitions. I just don't think we've had enough time considering we just closed Feb 1 and there was lots of things that needed to happen to make sure that was successful. We're just now starting to get into what type of opportunities within our own core competencies make a lot of sense for us to transact on. I would think we have the current bench strength to go ahead and start betting through acquisitions. A lot of them are early days, call it tuck-in acquisitions that fit where the business is growing in terms of that waste management space. But I think as we get through 2024, we'll provide more clarity about what that looks like. But right now it's really early days and we're obviously focused on the capital allocation priorities here of just buying back our stock, because that's the best return for our shareholders right now.
Keith MacKey: Of course, Rene, I'd echo all the sentiments on your career and congrats on your ''retirement''. Thanks very much. Have a good day, guys.
Rene Amirault: I'm trying to go from 8,000 to 7000 RPMs.
Operator: [Operator Instructions] Next question comes from Patrick Kenny at National Bank.
Patrick Kenny: Just on the EBITDA margins, 37% realized in the quarter. Can you remind us within your financial guidance for the year, if you're expecting any material change in margins going forward? I mean, it sounds like higher customer activity with TMX coming on offsetting any headwinds potentially related to total differentials. But I'm just curious with your new high-quality take-or-pay assets coming on this year as well, how we should be thinking about your consolidated EBITDA margins trending over the next year or two?
Chad Magus: It's Chad. We're very happy with our EBITDA margins obviously at 37%. We do think as we go forward, the trend will be more in that mid 30% range, so around 35%. Obviously, we'll do what we can to obviously increase that. But I think that, over the longer-term, that's what we're modeling today and that's what we're seeing and that's what we're managing to.
Patrick Kenny: Maybe just a higher level curious if you could provide a bit of an update on your overall strategy with respect to the metals recycling business. It looked to be a nice tailwind during the quarter. But just perhaps your outlook for ferrous pricing and overall demand for recycling services and perhaps a bit of a look into what regions across North America that you might be interested in extending your metals franchise?
Allen Gransch: I think we've done a very, very successful job at getting the operational aspect of that business turning inventory on a monthly basis. We've upgraded some of the equipment purchases within our facility network. We purchased 40 railcars last year. We've got another 40 here on the table here for 2024, because a lot of the, let's call it, CP and CN aren't leasing cars anymore, actually to have the railcars and these railcars can hold 30% more. They're deeper and they're a little bit wider that allows you to actually ship more efficiently. So there's some operational efficiencies that we're going to get from these new cars. We have that as an advantage. I know there's a bit of a trend from a decarbonization in, how metal is actually creating on the fair spaces. A lot of the refiners are moving from these blast furnaces to arc furnaces. Arc furnaces just require recycled material. We believe the long-term outlook for metals is very strong. I think the demand for recycled material, when refiners are only able to use that recycled material, I think will help to create demand for that market in the long-term. I think what we've done to set up the business is fantastic. We had some of the benefits of TMX and volume throughput through the facilities. We also work up in Fort Mac and help some of our customers up there manage some of the tailings pipe. We've got a steady state of volume that we see and given the demand and the backdrop, I think that, you can envision a scenario where metal pricing remains relatively robust here. I think that business is set up for success, in the long term.
Patrick Kenny: And too early to say what, I guess percentage of your overall business mix might come from the metals recycling business over time?
Allen Gransch: I think it's too early. I mean, we've got pro-formas all over the place, Pat. We just divested some facilities. Chad is running models all over the place. I think give us a little bit of time for that one and we'll we can provide as much clarity as we can on what that looks like in an overall waste management segment of the business.
Patrick Kenny: Thanks to both of you again on your retirement, Rene and on your appointment, Alan.
Operator: We have no further questions. I will turn the call back over to Allen Gransch for closing comments.
Allen Gransch: Thank you for being on the conference call today. A taped broadcast of the call will be available on Secure's website. We look forward to providing you with updates on Secure's performance at the end of July after the completion of our second quarter.
Operator: Ladies and gentlemen, this concludes your conference call for today. We thank you for your participating. We ask that you please disconnect lines.
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