Good morning, ladies and gentlemen, and welcome to the SECURE Q3 2024 Results Conference Call. At this time, all lines are in listen-only mode. Following the presentation, we'll conduct a question-and-answer session. If at any time during this call you require immediate assistance, please press star zero for the operator. This call is being recorded on Wednesday, October 30th, 2024. I would now like to turn the conference over to Alison Prokop. Please go ahead.
Thank you, and good morning to everyone who is listening to the call. Welcome to SECURE's conference call for the third quarter of 2024. Joining me on the call today is Allen Gransch, our President and Chief Executive Officer, 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 may 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 statement, and identify and define our non-GAAP measures. Today, we will review our financial and operational results for the third quarter of 2024. I will now turn the call over to Allen.
Thank you, Alison, and good morning, everyone. Yesterday, our shareholders voted in favor of our name change to SECURE Waste Infrastructure Corp, a name that better aligns with our core business activities, which are centered on processing, recovery, recycle, and disposal of diverse waste streams, and the efficient operation of our critical infrastructure network. The new name reflects our strategic transformation over the last five years from a full-service energy service company to a specialized waste management and energy infrastructure provider. We are pleased to retain the trade name SECURE, a brand synonymous with safety, reliability, and entrepreneurship. The formal adoption of the new name is expected on January 1st, 2025, coinciding with certain year-end activities planned by the corporation. Our shares will continue to trade on the Toronto Stock Exchange under the ticker symbol SES.
This morning, we reported another strong quarter, achieving Adjusted EBITDA of CAD 127 million, or CAD 0.53 per basic share, on the high end of our expected range for the third quarter as robust industry fundamentals drove strong customer demand. Sequentially, from the second quarter, net revenue and Adjusted EBITDA increased 11%, maintaining our strong 34% EBITDA margin. As we head into the final quarter of the year, we are reaffirming our guidance at the top end of this range, providing for full-year Adjusted EBITDA of CAD 470-CAD 490 million. This quarter, we generated CAD 106 million in Funds from Operations, enabling us to fully self-fund share repurchases, dividend payouts, and growth initiatives. In total, we returned CAD 77 million to shareholders through repurchases under Normal Course Issuer Bid and our quarterly dividend of CAD 0.10 per share.
We also advanced our organic growth capital program, spending CAD 19 million primarily to add two water pipelines to an existing facility to integrate incremental volumes from existing customers. We also continue to enhance our capacity at the Clearwater Heavy Oil Terminal to meet growing demand in the region and pursue various optimization projects to reduce costs across our waste network. At September 30th, 2024, our total debt-to-Adjusted EBITDA ratio was 1.1 times, a full turn below our target leverage ratio of 2-2.5 times, providing us with significant financial flexibility. Along with strong discretionary free cash flow, we're well-positioned to continue to grow the business while delivering enhanced shareholder returns. Looking ahead, we have a robust pipeline of organic growth opportunities, and we will also consider strategic acquisitions that align with our disciplined approach to enhancing efficiencies, expanding network density, and diversifying the waste streams we manage.
While we've seen positive momentum in our stock recently, we still trade at a substantial discount to our waste and energy infrastructure peers. Consequently, share buybacks remain a key priority of our near-term capital allocation. We have 2.1 million shares remaining under our current Normal Course Issuer Bid, and we intend to renew this program in mid-December, allowing us to repurchase up to 10% of the public float over the subsequent 12-month period. I'll now pass it over to Chad to provide some further financial highlights for the quarter.
Thanks, Allen, and good morning, everyone. The divestiture of 29 facilities to Waste Connections in February of this year, along with the sale of a non-core oil field service business unit in late 2023, naturally impacted our financial metrics on an absolute basis compared to the third quarter of 2023. This impact was partially mitigated by strong customer demand, increased pricing, and contributions from capital investments made since the third quarter of 2023. Additionally, as a result of strategic share buybacks over the past year, our weighted average shares outstanding in the third quarter decreased by 18% over the same period last year. This reduction enhanced many of our financial metrics on a per-share basis, reflecting the benefits of our capital return strategy. Net revenue for the quarter was CAD 374 million, a 12% decrease year-over-year, primarily due to the divestitures.
However, this was largely offset by several positive factors: higher volumes at our remaining facilities, pricing increases on volume-based processing and disposal, growing demand for specialty chemicals, and contributions from the Clearwater Heavy Oil Terminal, which began operations in late 2023 and has continued to increase throughout 2024. We reported net income of CAD 94 million, or CAD 0.39 per basic share, an increase of CAD 47 million, or 100%, compared to Q3 2023. While the sale of the facilities impacted operating profit, income before tax was CAD 2 million higher, driven by significant reductions in interest accretion and financing costs, as proceeds from divestitures were used to repay CAD 543 million of higher-interest debt, replacing it with a new CAD 300 million issuance of 6.75% senior unsecured notes in the first quarter of 2024.
We recorded a one-time CAD 30 million tax recovery this quarter, driven by revisions in the underlying assumptions with respect to the tax treatment of the divestitures. As a result, we now anticipate approximately CAD 30 million of current taxes in 2024, increasing to approximately CAD 60 million to CAD 70 million in 2025. Our adjusted EBITDA for the quarter was CAD 127 million, a 20% decrease from Q3 2023, due to the same factors impacting revenue. However, on a per-share basis, adjusted EBITDA was only down CAD 0.01, demonstrating the positive effect of our share buybacks. The adjusted EBITDA margin for the quarter was 34%, down from 37% in the same period last year due to the divested facilities. 34% remains a strong industry-leading margin, reflecting our disciplined focus on efficiency and profitability as consistent with our most recent second quarter margin.
We generated CAD 106 million in funds from operations, a decline of 18% year-over-year, influenced by the same factors previously noted, along with the timing of fixed debt payments. We recorded Discretionary Free Cash Flow of CAD 90 million, a 13% decrease from the third quarter of 2023 as a result of factors above, partially offset by reduced spending on sustaining capital due to fewer facilities following the divestitures. However, the share buybacks drove an increase of 6% on a per-share basis. We directed Discretionary Free Cash Flow in the quarter to shareholder returns and business growth as we continue to allocate capital where we can generate the highest return for our shareholders. We incurred CAD 53 million to repurchase another 2% of our shares in the quarter at a weighted average price of CAD 11.83 per share, a level we believe remains significantly below the intrinsic value of the corporation.
At September 30th, 2024, in addition to the CAD 300 million of fixed debt held, we had drawn CAD 93 million on our CAD 800 million revolving credit facility, leaving us with significant capacity and ample liquidity. This positions us well to fund future growth initiatives, continue returning value to shareholders, and maintain maximum financial flexibility for capital allocation over the coming years. I'll now turn it over to Corey to provide some operational highlights from the third quarter.
Thanks, Chad. During the quarter, our facilities handled, on average, 93,000 barrels of produced water per day and 43,000 barrels of slurry waste and emulsion. Through our processes, we were able to recover over 296,000 barrels of oil from waste. Across our landfill network, we safely disposed of a record 1.2 million tons of contaminated solid waste in the quarter as higher volumes were driven by increased remediation and reclamation project work. Ferrous metal volumes recycled increased 15% over the third quarter of 2023 due to the acquisition made in the second quarter, expanding our operations into Saskatchewan, along with the continued strong demand for recycled metal driving higher throughput at our remaining facilities.
In our energy infrastructure segment, crude oil and condensate terminaling and pipeline volumes averaged 130,000 barrels per day in the third quarter, a 24% increase from the same period in 2023, driven by the addition of the Clearwater Heavy Oil Terminal, which commenced operations in the fourth quarter of 2023 and approximately doubled capacity in the second quarter of 2024. In the year to date, we have spent CAD 41 million of our CAD 75 million growth capital planned for 2024, which primarily related to the expansion of our Clearwater Heavy Oil Terminal to increase capacity and two water pipelines to safely transport and facilitate the disposal of 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.
We also purchased 50 rail cars, increasing the efficiency of our metals recycling, logistics, and distribution operations, and completed several optimization projects across our waste network. The remaining CAD 34 million of growth capital expected for 2024 will be primarily spent on further expanding our phase 3 of the Clearwater Heavy Oil Terminal and gathering infrastructure for incremental clean heavy oil delivery and adding treated capabilities for trucked and emulsion volumes, reopening a suspended industrial waste processing facility located north of Edmonton to support demand in the area. Capital expenditures required include replacing and upgrading critical infrastructure and restarting the facility operations, and pre-spending on various long-lead equipment and critical equipment associated with 2025 capital plans. We continue to expect to spend approximately CAD 60 million on sustaining capital in 2024, which includes expansions of landfills that are nearing capacity.
We are currently working through our capital plans for 2025 and expect to provide preliminary guidance for 2025 in December of this year. SECURE's strategic purpose is transforming waste into value. We are committed to being a trusted partner for our customers and other stakeholders, providing solutions that safely manage environmental liabilities, minimize costs and environmental impacts, and create new opportunities for resource development, recovery, and reuse. These commitments around safety and environmental stewardship extend to our own operations as well. We have made good progress this year across the ESG objectives established in our 2023 sustainability report published in May of this year. Notably, we are advancing many safety initiatives that are improving an already strong safety culture across our business units.
Our operations personnel continue to implement the grassroots ideas for the reduction of freshwater consumption in our day-to-day operations, and as a result, our 2024 first-half freshwater consumption is down 6% from the same period in 2023. We are also pleased to complete the Partnership Accreditation in Indigenous Relations Certification, receiving bronze by the Canadian Council for Indigenous Business. Finally, we are on track to spend approximately CAD 15 million on settling SECURE's Asset Retirement Obligations this year, exceeding minimum spend targets. Included in this figure are two-stage landfill caps and investment to reduce leachate generation and proactively respond to climate change modeling. I'll now turn it over to Allen for some concluding remarks before we open it up to questions.
Thanks, Corey. Our strong results year to date, along with positive market dynamics expected for the remainder of the year and beyond, reinforce the strength of our business. Our critical infrastructure network continues to generate stable and recurring cash flows and is well-positioned to benefit from multiple growth drivers. Increasing industrial and production activity is leading to higher volumes that require processing, recycling, and disposal across our facility network. Our waste processing facilities are operating at 60%-65% utilization, providing us with ample capacity to accommodate growing customer demand with minimal additional costs. We also have a robust pipeline of opportunities to deploy growth capital, including both brownfield expansion and greenfield projects, to support our customers in regions where production growth is outpacing the available processing and disposal capacity.
We plan to secure these investments with commercial agreements that offer contracted volumes and recurring cash flows, ensuring a minimum rate of return on our investments. We will also continue to look at smaller-scale acquisitions, such as the metal business acquired in the second quarter of this year, that align with our core business segments and competencies, further enhancing our ability to grow our network and cash flows. With a strong balance sheet, ample capacity on our revolving credit facility, and significant financial flexibility with our September 30th total debt to trailing 12-month pro forma EBITDA at 1.1 times, we are well-positioned to capitalize on these growth opportunities, solidifying our leadership in waste management and energy infrastructure while continuing to deliver enhanced shareholder returns.
Since initiating our share buyback program in late 2022, we have reduced our outstanding shares by 24%, underscoring our commitment to creating value for shareholders and our belief in the significant undervaluation of the business. We continue to see a large gap between our market valuation and the value of our underlying business, driven by our critical infrastructure network providing stable recurring cash flows, strong growth opportunities across both our waste management and energy infrastructure segments, a robust balance sheet and flexible capital allocation strategy, and a large valuation gap between SECURE and our waste and energy infrastructure peers, despite the strong parallels between our businesses. We are actively working to address this valuation disparity, and we are starting to see positive momentum.
In addition to share buybacks, our upcoming name change to SECURE Waste Infrastructure Corp, management presentations at key waste and industrial conferences, new research coverage, and changes to industry classifications are all contributing positively to our share price. However, SECURE continues to trade at a significant discount to our peers, and as a result, share repurchases will remain a key component of our capital allocation strategy moving forward. With that in mind, the board of directors has decided to maintain our dividend at CAD 0.40 per share on an annualized basis, which represents an aggregate payout of CAD 95 million based on our current shares outstanding. In closing, I'd like to thank you for your continued support. We are excited about the road ahead as we continue to remain focused on executing our strategy and driving long-term success. That concludes our prepared remarks. We are now happy to take your questions.
Thank you. Ladies and gentlemen, we will now begin the question and answer session. Should you have a question, please press the star followed by the number one on your touch-tone phone. You'll hear a prompt that your hand has been raised. Should you wish to decline from the polling process, please press the star followed by the number two. If you are using a speakerphone, please lift a handset before pressing any keys. One moment, please, for your first question. Your first question is from Konark Gupta from Scotiabank. Please go ahead.
Thanks. Good morning and congrats on a good quarter. Just wanted to ask you on the volume side first, maybe. It's difficult to kind of see the underlying volume trends given the transactions you have had in the last two years or so. So if you can help us understand how these underlying volumes trended in the waste management segment, especially for wastewater and oil recovery?
Thanks, Konark, and good morning. Yeah, I think when we look at our produced water volumes, our emulsion volumes within our waste processing facilities, I would say it correlated very closely to production growth, call it in that 2%-3% on a pro forma basis. We saw a significant increase in our volumes from our landfills. I think Corey had mentioned 1.2 million tons were put into our landfills in the quarter, and I think part of that volume increase was driven by the fact that there was a lot of wildfires in 2023. So a lot of that cleanup work that is now mandated both in Alberta and in Saskatchewan to force a lot of our customers to clean up some of their asset retirement obligations. I think that's starting to take fruition.
We saw significant volumes in our landfills, and you can see that even with the divestment of five landfills, we were still up on a quarter-by-quarter basis, which really speaks to the strength in tons on the waste processing assets and that critical infrastructure. I think moving into the terminalling side, you saw a significant increase. That would have been primarily as a result of the Clearwater terminal up in Nipisi. We're upwards of 60,000 barrels a day on that pipeline, and as we complete our phase three here at the end of, call it, end of Q4, early Q1, we'll move up into that 70,000 barrels per day just for that Clearwater system alone. I think on a pro forma basis, it'll become a lot clearer as we get post Q1 next year.
But yeah, I would say very strong performance on our volumes, which is reflective of the strength in the EBITDA in Q3 and why the performance was so strong.
That's helpful. Thanks. And then on the pricing side, I think there was a note in the MD&A about 5% pricing growth you implemented in Q4 of last year. Any indications on where pricing is trending in the current context? What do you expect for the upcoming cycle?
Yeah, on pricing, I mean, we're all cognizant of cost structures increasing across the network. I think we've seen inflationary charges on electricity, chemicals, salary, and wages. And so last Q4 of 2023, we raised prices by 5%. We have done that again here in Q4 starting. It will be fully implemented by the end of the year. We started having discussions with our customers in Q3, and obviously, they're cognizant of their own cost structure going up, very similar to ours. And so we have raised prices. I think as we think about 2025 and just the overall environment, we're still seeing a lot of pressure on inflationary costs. So I would expect we'll continue to take a look at pricing and make sure that our services and our infrastructure and what we do is priced accordingly.
If you look at our margins, part of our ability to manage price and cost is indicative in our margins. And on a pro forma basis, if you look at Q3 last year, they were 34% once adjusted for the sale of those assets, and we're now 34% again here in the third quarter. So I think we're doing a good job on managing prices, and I think our customers are understanding of where cost structure is going and what needs to occur within Western Canada.
That's great, and last one from me before I turn over. On the capital allocation side, maybe it's more of a strategic question. If I look at your balance sheet, and let's say you want to go to like 2.5 times EBITDA, that gives you about CAD 700 million of excess capital that you can deploy today without increasing your EBITDA, obviously. That's a lot for buybacks clearly, and I know you're doing buybacks in the short term, but what's the best sort of plan for allocating that CAD 700 million of cash available for M&A, for buybacks, or something else?
So yeah, I mean, we talked about capital allocation every quarter with the board. I think we did that substantial buyback in the second quarter, and I think year to date, we bought back 18%. So a significant amount of share buybacks. We think that is the best return to our shareholders from a capital return standpoint, which is why we've been so aggressive this year. I mean, when we think about our growth capital, we're at about CAD 75 million. A lot of these projects on these brownfield opportunities are helping our customers more efficiently get their water and waste into our facilities. We will come out in December and announce our 2025 guidance along with our capital spend, and that will be part of our capital allocation program as we think about it. We came out and said we're going to maintain the dividend.
I think at our current yield, we're all quite comfortable where the dividend's at, but I think, and then on the M&A side, I think we've had the strategy of tucking in our core competencies and our core business segments, and you saw us do that with the B&N acquisition there in the second quarter, so I think every quarter we're going to continue to look. I mean, we're going to reinstate our NCIB here in December, which will allow us another 10% of buybacks through 2025. We've continually stated we're undervalued, and that is a good return of capital to our shareholders, so I think it's a quarter-by-quarter discussion on whether or not, as we get into 2025, do we want to do another meaningful NCIB? I think you're pointing out something that's quite obvious. Our balance sheet is very clean.
It gives us a lot of flexibility to pull these levers when we believe it's the right time to do so. So I think that flexibility gives us that optionality on buying back our stock, our organic opportunities, and then M&A as well. So yeah, I would say that NCIB would be the area we're probably going to focus on first, but it is an ongoing discussion as we think about the undervaluation of the business currently.
Okay. That's great. I appreciate the time.
The next question is from Keith Mackey. Please go ahead.
Hi, good morning. So heard the increase in volumes loud and clear. Certainly, Western Canada has been seeing more oil, water, waste volumes, all of the above the last little while. Just curious if you can talk a little bit more about the customer trends, whether they're more willing now to outsource volumes for things versus insource volumes for things as the overall waste and water volumes grow. Just what trends are you seeing on that front?
Morning, Keith. Thanks for the question. Yeah, I think our customers look at capital allocation the way we do. What's the best return to their shareholders? I think you've seen a lot of our customers buying back their stock and special dividends, etc. I think when they think about waste and managing water, I think they look at our footprint and how close we are to their existing production. And I stated that we're 60%-65% utilization. That infrastructure should be utilized first. That obviously gives that producer that ability to send that volume to us. But I would say the overall trend here, and specifically on water and water management, I think we're getting less access to freshwater. A lot of our customers are using produced water to complete their wells as they bring them on production.
As they're doing that, the produced water is just, it has a lot more chemistry involved with it as they complete the wells and open up some of the reservoirs. As the water complexity gets harder to deal with, that's our expertise. They look at us and say, "You understand how to filter, how to process mechanically, put it in a position where you're filtering it to get it into that disposal aspect of it." So I think the trend we'll see is they'll use more produced water in some of their operations, but we're going to see a lot more of it come into our facilities as we think about how hard it is to manage and process it. I don't know, Corey, is there any points I've missed on that?
No, it's really status quo from how they look at it. I think the other piece to add, because of the complexity in this water, it's a tailwind for our specialty chemicals business because we utilize a lot of the chemicals that we produce in our own business as well to help our customers to streamline their production and the waste that they manage on a day-to-day basis.
Got it. No, that's helpful. And I know you're planning on giving the 2025 guidance in December, but certainly try to at least help frame it up as best as we can now while we're here. But essentially, the way we've thought about 2025 from a growth perspective is roughly similar to maybe how this year is between that CAD 50 million-CAD 100 million growth CapEx number within your large opportunity set. Can you maybe just talk a little bit more about the opportunity set and what you're thinking as far as growth, whether things might differ from how they were this year?
I think when I think about activity levels and the activity specific to 2024, I do see a very similar 2025. I think a lot of our customers are going through their own budgeting processes right now. I would say I would agree with you that I think activity levels will be similar. I do think we benefit from our same store sales growth. I think we've seen volume growth just because that's production water. As wells continue to produce, our production water continues to rise in that, call it, 4%-5% on water specifically. I do see our volumes continuing to grow into 2025. In terms of a capital spend, we're not going to announce capital projects until we do have signed contracts.
A lot of the pipeline of opportunities, I would characterize it as brownfield expansion where we're adding pipeline volume to some of our existing network. We do have some greenfield opportunities on the waste processing side. Speaking to your point about outsourcing, I think customers recognize that's our expertise. They want to outsource. We will put in greenfield infrastructure. So we do have some of those opportunities as well. But we will announce those as we get those contracts completed. And so that will happen throughout the year. We'll provide initial capital spend guidance in December to allow you to kind of put that into your numbers. A lot of the times, as we start developing the infrastructure and get it put online, it'll be more of a back half of 2025 EBITDA contribution, if not 2026 EBITDA contribution as we think about it.
But the pipeline of opportunities is definitely quite robust right now when we think about the infrastructure and our infrastructure network.
Okay. That's helpful. Thanks very much.
The next question is from Jamie Somerville. Please go ahead.
Good morning. Thanks. Growth CapEx, I think it was always going to be heavily weighted to the end of the year, but you've still got 45% of your full-year guidance for CAD 75 million to complete in the fourth quarter to match that guidance. Is there a risk of some of that being carried over into Q1? And have there been any delays to these projects? Was Phase 3 on the Clearwater terminal always planned to go into 2025? Yeah, maybe we can start with that.
Morning, Jamie. Yeah, I think we've always talked about our Nipisi project and Phase 3 coming online late Q4 to early Q1. There really hasn't been any delay on spending or timing. Similar to our spend on our connecting of our two water pipelines within our waste processing infrastructure, that will come online as well. We do typically spend a lot of our capital, call it, in the fall. And as we hit to the end of the year, our projections are and still remain that we will actually spend the 75 as we get to the end of the year. But I would say all our projects are on time, on budget. There might be some even advanced spending as we think about 2025 on some long-lead opportunities and some greenfield opportunities if we get them signed.
I could provide more color around that in December because I'll have more clarity. But yeah, no, it's just really a function of timing. It's just happening in the fall here as we approach the end of the year.
Yeah. Thank you. Makes sense. Related, so yeah, the throughput volumes for the energy infrastructure side look good. But in terms of quarter-over-quarter revenue and gross operating profit for the energy infrastructure business, it's up from the prior quarter, down from Q1. I can't remember if there's anything you divested or reclassified. But despite the crude volumes transported showing a very positive trend, the vast majority of the EBITDA and cash flow growth this quarter seems to have come from the waste side. So I guess my question is, was there something holding back revenue or margins for the infrastructure business in the quarter?
Yeah. Hi, Jamie. Good morning. It's Chad here. Just thinking back, there was a portion of energy infrastructure that was divested. So those numbers did go down as we sold the 29 facilities. However, we had a really strong Q2, Q3 as we had some storage profits there. We held some inventory at Hardisty and I'd say had irregular profits there that didn't continue into Q3. And that would probably be the main reason for the delta.
Okay. Perfect. Thank you.
The next question comes from John Gibson. Please go ahead.
Thanks, and congrats on the great quarter here. I just had one more on the landfill volumes uplift. Obviously, it was higher in Q3. It appears to be both drilling and cleanup related. Wondering what the margins look like on your landfill volumes versus those that are more production-oriented, and if any of this growth in landfill volumes continues. Could we see your margin shift higher into 2025?
Yeah. The margins are the same regardless of the waste type, whether it be drilling-related or remediation-volume-related. I think what we're seeing from a volume growth perspective in Q3, and I think Allen mentioned it, is really around the tailwinds around the liability management programs. So typically, Q3 and Q4 are the stronger months for the remediation project work just because the weather is a little easier and more amenable to some of these excavation projects that they work on. So no difference in margin between those types of waste.
I guess I should add this as well on here. You obviously maintain the dividend, and you're happy to do that, and I agree with it with the valuation. But I guess pending your stock continues to perform as it has over the past little while, when could you start to think about potentially increasing that dividend a little bit?
Yeah. I think, hey, John, it's Chad here. Just going back to what Al said, we do look at all of our capital allocation items quarter by quarter. So we haven't really. I can't tell you a price at which that changes other than we've given the guidance for now of how we felt, just given where our valuation's been. And we'll continue to update, hopefully, as our valuation changes.
Fair enough. I had to ask, but really appreciate the responses. I'll turn it back.
Thanks, John.
Your next question comes from Jamie Somerville. Please go ahead.
Yeah. Thanks. Just a follow-up here. You've given high-level guidance that 20% of EBITDA or cash flow is coming from cyclical drilling and completions CapEx. But kind of listening to some of the comments, I'm suspicious that you might be trending below that. Can you provide any color or thoughts as to how that number might change on a quarter-by-quarter basis?
Yeah. I'm trying to understand your question. I mean, I think we've broken down our volumes, and we have this in our investor presentation. Effectively, when we think about drilling and completion volumes and volumes that I would, even on the industrial side that are somewhat cyclical, it represents about 20%. So if we do, if you do see a decline in any sort of drilling or completion activity, there would be some minimal impact to it. But I'm not quite sure of your question. Maybe if you could provide a bit more color on it.
Yeah. I guess I'm asking, you're saying that your business is at around that 20% level. And I'm just wondering whether you're seeing that decline quarter over quarter. Is there a chance that a year from now you're actually at 15%?
Oh, yeah. I mean, yeah. I mean, we're constantly monitoring the volumes and where the volumes are coming from. I mean, I don't see a decline in it. I mean, I think it's been pretty consistent if we think about 2023 and 2024. And as I mentioned, 2025, we think is going to be very similar. But I think as production gets brought on, our production volumes continue to grow. Our utilization will grow. We could get into a scenario where that does get reduced. I mean, even by adding some of the metal recycling businesses that we did buy there in Q2, you're getting more industrial residential markets as well that provide more stability and kind of that recurring nature. So over time, as we grow, I believe that percentage will come down.
But I'm not saying that's going to be significant enough to mention kind of year over year.
Okay. Thank you.
Thank you.
Ladies and gentlemen, as a reminder, should you have any questions, please press the star key followed by the number one. Our next question is from Willem Vorster. Please go ahead.
Thank you, guys. Just a quick one from me. I'm just thinking post-U.S. election, are there any headwinds that are expected for the waste industry? And I know it's outside of your core operating area, but just thinking M&A, whether it be Republicans or Democrats getting in.
Yeah. I mean, I think when you look at the majority of our operations were in Western Canada, we do have some operations in North Dakota and the Bakken. I think a lot of the things we've talked about in the last year when I think about M&A opportunities, I've talked about in our core business segment and geographically remaining in Canada. I'm not sure that will have any impact on what we see here in Western Canada. But I think whether it's positive or negative for the overall sector in North America, I think that's yet to be determined. But I think for ourselves, I think we're primarily focused in Western Canada.
Okay. Perfect. Thanks, guys.
Ladies and gentlemen, as a reminder, should you have any questions, please press the star key followed by the number one. There are no further questions at this time. Please proceed with closing remarks.
Thanks, everyone, for being on the conference call today. A tape 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 October. End of February. At the end of February. Sorry. Thanks, everyone.
Thank you. Thank you for participating. This concludes today's conference. You may now disconnect.