Fitch upgrades Enerflex to ’BB’ on deleveraging and stable revenue

Investing.com -- Fitch Ratings has upgraded Enerflex Ltd.’s Long-Term Issuer Default Rating to ’BB’ from ’BB-’ and raised its senior secured notes to ’BB+’ with a Recovery Rating of ’RR2’ from ’BB’/’RR3’. The rating outlook remains stable.

The upgrade reflects Enerflex’s successful deleveraging efforts, improved liquidity profile, and sustained utilization rates and backlog. The company’s ratings are supported by stable recurring revenue from its energy infrastructure and aftermarket services segments, conservative financial approach, strong engineered systems backlog, and diverse customer and geographic footprint.

Approximately 65% of Enerflex’s gross margin comes from stable, recurring revenue streams that reduce exposure to commodity price fluctuations. The company’s contracted asset cash flows are secured by take-or-pay contracts ranging from one to three years in North America and between three and over 10 years in Latin America and the Eastern Hemisphere.

Fitch views Enerflex’s financial policy as conservative, with a leverage target between 1.5x and 2.0x. The company has been proactive in repaying debt since 2023 and maintains modest shareholder returns through annual dividends and a normal course issuer bid.

The rating agency expects capital expenditures to increase in 2026 as Enerflex expands its U.S. compression fleet and pursues projects in Gulf Cooperation Council member countries. These growth investments are supported by current market dynamics and customer commitments.

Enerflex’s engineered systems segment maintains a strong backlog of $1.1 billion as of the third quarter of 2025, providing visibility into future revenue generation. The company operates in 17 countries across North America, the Eastern Hemisphere, and Latin America, though it remains exposed to countries with significant transfer and convertibility risks such as Argentina.

Fitch forecasts Enerflex’s 2025 leverage at 1.4x, which compares favorably to compression peers USA Compression Partners (4.2x), Archrock (3.4x), and Kodiak Gas Services (4.0x). It is comparable to oilfield services peers Precision Drilling (1.4x), Weatherford International (1.4x), and Helix Energy Solutions (1.3x).

The stable outlook assumes Enerflex will maintain its conservative financial policy, with free cash flow allocated to modest shareholder returns and growth capital expenditures. It also reflects expectations for continued strong utilization across the U.S. compression fleet and stable backlog in the energy infrastructure and engineered systems segments.

This article was generated with the support of AI and reviewed by an editor. For more information see our T&C.