Mr. Marc Rossiter reports

ENERFLEX LTD. REPORTS STRONG FIRST-QUARTER 2023 FINANCIAL AND OPERATIONAL RESULTS, INCLUDING ENGINEERED SYSTEMS BOOKINGS OF $517 MILLION

Enerflex Ltd. has released its financial and operational results for the three months ended March 31, 2023.

"Enerflex's first quarter results demonstrate the successful execution of our long-term strategy to grow our base of stable energy infrastructure assets and our ability to build upon the momentum we generated in our manufacturing business in 2022. We expanded margins, reduced costs, lowered our leverage ratio and successfully completed two large infrastructure projects in the quarter," explained Marc Rossiter, Enerflex's president and chief executive officer. "Our priorities for 2023 are unchanged: We continue to focus on postacquisition deleveraging and synergies, delivering sustainable returns to shareholders, and safely delivering critical natural gas and energy transition solutions to our customers around the globe."

Overview:

• Enerflex reported first quarter 2023 financial results that included record quarterly revenue of $825-million. Revenue increased across all regions and product lines, and reflects continued operational momentum within the business.
• The company is focused on continuing to expand its gross margin and reduce its overall cost structure. Relative to the fourth quarter of 2022, Enerflex expanded its gross margin by 27 per cent to $161-million and significantly reduced core selling and administrative expenses.
• Enerflex recognized net earnings of $14-million and adjusted earnings before finance costs, income taxes, depreciation and amortization of $123-million in the first quarter of 2023.
• The company generated $55-million of distributable cash flow, composed of $73-million generated from normal course operations and $18-million of restructuring, transaction and integration costs. Distributable cash flow was used to finance the completion of two large infrastructure projects and will now prioritize deleveraging for the balance of the year. As at March 31, 2023, Enerflex's bank-adjusted net debt to EBITDA (earnings before interest, taxes, depreciation and amortization) ratio was 2.9 times.
• Enerflex safely brought the following two infrastructure projects in the Middle East to commercial operation in the first quarter of 2023, the cash flows from which are expected to significantly contribute to the company's deleveraging strategy:
  • The second phase of a natural gas infrastructure asset, underpinned by a 10-year take-or-pay contract with a national oil company: The project's first phase commenced operations in the fourth quarter of 2022.
  • A build-own-operate-maintain (BOOM) produced water facility, underpinned by a 10-year take-or-pay contract with a joint venture between a national oil company and an international super-major oil and gas company: The project will commence generating contracted revenue in the second quarter of 2023.
• Work continues on the modularized cryogenic natural gas processing facility in the Middle East. The project is being accounted for as a product sale and is expected to be completed in 2024.
• Enerflex delivered excellent results within its manufacturing business during the first quarter of 2023. The engineered systems product line generated $481-million of revenue with a realized gross margin of 15.5 per cent. Total new engineered systems bookings of $517-million replenished the company's backlog to maintain a balance of $1.5 billion. This was Enerflex's highest quarter of bookings since 2018:
  • Building on the successes achieved in its energy transition business in 2022, approximately $85-million of the quarter's engineered systems bookings were for electric compression units, which will aid significantly in reducing the environmental impact of customer operations. Enerflex secured an additional $10-million of energy transition-related bookings in the period and continues to collaborate with customers to advance various other energy transition projects.
• Enerflex has now captured approximately $50-million (U.S.) of the expected $60-million (U.S.) of annual run-rate synergies associated with the acquisition of Exterran Corp. that closed on Oct. 13, 2022), attained primarily through reductions in overhead. In addition, to optimize its global manufacturing footprint and increase operational efficiencies within the business, Enerflex plans to close its manufacturing facilities in the United Arab Emirates and Singapore in 2023. The company is currently assessing the costs and synergies associated with the closures. Any such synergies will be incremental to the $50-million (U.S.) already captured.

Enerflex's unaudited interim condensed consolidated financial statements, notes, and management's discussion and analysis as at and for the three months ended March 31, 2023, can be viewed on the company's website and under the company's SEDAR and EDGAR profiles.

Outlook

Strategic priorities:

• Enerflex's strategic focus for 2023 is to maximize cash flow generation to strengthen the company's financial position, including executing its $1.5-billion engineered systems backlog and realizing the benefits and synergies from the transaction. The company also plans to safely advance the cryogenic facility in the Middle East.
• Enerflex continues to expect that it will reduce its bank-adjusted net debt to EBITDA ratio to below 2.5 times by the end of the year due to strong cash flow generation anticipated across all product lines. As at March 31, 2023, the company's bank-adjusted net debt to EBITDA ratio was 2.9 times.
• Once the company's debt reduction target has been met, Enerflex anticipates it will have the optionality to deliver increased capital returns to shareholders and invest profitably in strategic growth projects.

2023 guidance:

• Enerflex reaffirms its previously disclosed financial guidance for 2023, including its expectations that it will meet its debt reduction target by the end of the year, reflecting the company's commitment to deleveraging and delivering on its near-term strategic objectives.
• During the first quarter of 2023, Enerflex invested $51-million in growth capital expenditures, primarily to complete the two BOOM produced water projects that were being advanced in 2022. The total investments associated with the two projects were initially budgeted for 2022; however, the final expenditures were accounted for in the first quarter of 2023.

Market outlook:

• Enerflex's opportunity set remains constructive across all regions. The company's large base of international energy infrastructure assets throughout Latin America and the eastern hemisphere is expected to continue serving the growing need for reliable power and energy independence and deliver stable, predictable performance for the company.
• In North America, new engineered systems bookings continue to be weighted toward crude oil and liquids-rich natural gas resource plays, with near-term weakness in natural gas prices not materially impacting the company's manufacturing business. Enerflex is securing a growing number of energy transition-related projects, and the company's contract compression fleet utilization remains at record highs, which has enabled Enerflex to increase its pricing through recontracting efforts.
• The long-term fundamentals for natural gas remain robust given the critical role the commodity is expected to play as a key transition fuel in global decarbonization efforts. Enerflex is poised to continue capitalizing on the growing demand for low-carbon solutions through its vertically integrated natural gas and energy transition solutions by collaborating with customers and securing new projects.

Conference call and webcast details

Enerflex's senior leadership team will be hosting a conference call and webcast to discuss the company's first quarter 2023 results on Thursday, May 4, 2023, at 8 a.m. MDT.

To participate, please register. Once registered, participants will receive the dial-in numbers and a unique PIN to enter the call. The live audio webcast of the conference call will be available on the Enerflex website under the investors section.

About Enerflex Ltd.

Transforming energy for a sustainable future: Enerflex is a premier integrated global provider of energy infrastructure and energy transition solutions, delivering natural gas processing, compression, power generation, refrigeration, cryogenic and produced water solutions.

Headquartered in Calgary, Alta., Canada, Enerflex, its subsidiaries, interests in associates and joint ventures operate in over 90 locations in: Canada, the United States, Argentina, Bolivia, Brazil, Colombia, Ecuador, Mexico, Peru, the United Kingdom, the Netherlands, the United Arab Emirates, Bahrain, Oman, Egypt, Kuwait, India, Iraq, Nigeria, Pakistan, Saudi Arabia, Australia, China, Indonesia, Malaysia, Singapore and Thailand.

Enerflex's common shares trade on the Toronto Stock Exchange under the symbol EFX and on the New York Stock Exchange under the symbol EFXT.

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