CALGARY,
AB, Aug. 11, 2022 /CNW/ - CES Energy
Solutions Corp. ("CES" or the "Company") (TSX: CEU)
(OTC: CESDF) announced today the Company's results for the three
and six months ended June 30,
2022.
Second Quarter
Highlights
- Record quarterly revenue of $433.7
million
- Record Adjusted EBITDAC of $61.0
million, representing a 14.1% margin
- Funds Flow from Operations of $46.1
million
- Paid quarterly dividend of $0.06
per share on an annualized basis, representing a 12% payout
ratio
- Working Capital Surplus exceeded Total Debt at June 30, 2022 by $53.3
million
CES is pleased to announce strong Q2 2022 financial results,
demonstrating record quarterly revenue and Adjusted EBITDAC, margin
expansion and strong Funds Flow from Operations.
Revenue for the quarter was $433.7
million, representing a sequential increase of $32.4 million or 8% relative to CES' previous
record of $401.3 million in Q1 2022.
Adjusted EBITDAC for the quarter was a record $61.0 million, compared to the Company's previous
record of $51.1 million in Q1 2020
and $42.5 million in Q1 2022.
Adjusted EBITDAC margin expanded to 14.1% versus 10.6% in Q1 2022,
as CES continued to realize the benefits of updated pricing
adoption and increased scale.
Backed by continued strong energy market fundamentals, CES
realized significant revenue growth throughout its business lines
during the second quarter as it was able to leverage its
established infrastructure, strong industry positioning, committed
employees, and strategic investments in key raw materials.
Increased revenue levels at strong margins were supported by
strategic investment in working capital as CES was able to use its
balance sheet and liquidity to support this profitable growth. The
sustained positive momentum demonstrated in the quarter has been
bolstered by improvements in rig activity, higher production
volumes, the realization of pricing increases, and strategic
procurement initiatives that are expected to continue throughout
2022.
CES exited the quarter with a net draw on its Senior Facility of
$182.3 million (December 31, 2021 - $110.1
million) and Total Debt of $521.2
million (December 31, 2021 -
$439.4 million), of which
$288.0 million relates to Senior
Notes which mature on October 21,
2024. At June 30, 2022, CES'
Senior Facility had a maximum available draw of approximately C$
equivalent $262.5 million, which was
increased to approximately C$ equivalent $315.0 million subsequent to quarter end. The
increased draws realized during the quarter were primarily driven
by strategic investments in working capital to support strong
sequential revenue growth and dividends paid out during the quarter
totaling $4.1 million. Working
Capital Surplus of $574.6 million
exceeded Total Debt of $521.2 million
at June 30, 2022 by $53.3 million (December
31, 2021 - $20.4 million). As
at this date, the Company had a net draw on its Senior Facility of
approximately $195.0 million of the
upsized Senior Facility of approximately C$ equivalent $315.0 million.
CES is also pleased to announce that it has entered into support
agreements with the majority of holders of its 6.375% Senior Notes
due October 21, 2024 to amend the
Company's trust indenture dated October 20,
2017 (the "Indenture") to better align with the increased
financial scale of the Company and the strength of its balance
sheet, thereby providing flexibility to support the current and
future requirements of the Company's growing business. The existing
Indenture was created in 2017, when CES generated $1.0 billion in revenue versus the
$1.7 billion in revenue implied
by annualizing our Q2 2022 results. These increased revenue levels
necessitated an update to the Indenture to support the
potential future needs of our much larger Company. The amendment
(the "Amendment"), when implemented, will permit the Company and
any of its restricted subsidiaries to incur indebtedness under any
credit facilities in an aggregate amount at any time outstanding,
not to exceed the greater of (a) $400 million or (b) 30% of
consolidated tangible assets (as defined in the Indenture).
Additional details are provided in a separate press release issued
concurrently with this release.
Second Quarter Results
In the second quarter CES generated revenue of $433.7 million, representing a sequential
increase of $32.4 million or 8%
compared to Q1 2022 despite the expected seasonal slowdown as a
result of spring breakup in Canada, and an increase of 71% compared to Q2
2021. For the six months ended June 30,
2022, CES generated revenue of $834.9
million, an increase of $320.7
million or 62% relative to the six months ended June 30, 2021. As producers' capital spending
increased and production levels have improved year over year,
activity and industry rig counts have seen a significant uptick
since the comparative periods, which were still highly impacted by
the COVID-19 pandemic.
Revenue generated in the US during Q2 2022 was $300.2 million, representing a sequential
increase of 21% compared to Q1 2022 and an increase of 71% compared
to Q2 2021. For the six months ended June
30, 2022, revenue generated in the US was up 60% to
$549.0 million relative to the six
months ended June 30, 2021. US
revenues for both the three and six month periods were positively
impacted by increased industry activity and production levels year
over year, while also benefiting from a favorable product mix. US
land drilling activity in Q2 2022 improved by 14% on a sequential
quarterly basis and by 60% from Q2 2021. CES maintained its strong
industry positioning, with a US Drilling Fluids Market Share of 17%
for Q2 2022.
Revenue generated in Canada
during Q2 2022 was $133.5 million,
representing a sequential decline of 12% compared to Q1 2022, as is
expected on a seasonal basis, and an increase of 70% from Q2 2021.
Canadian revenues were impacted by a 37% decline in rig counts on a
sequential quarterly basis as a result of spring break up, and
benefited from a 50% increase relative to Q2 2021, as well as
strong production levels. Canadian Drilling Fluids Market Share for
Q2 2022 was 33%. For the six months ended June 30, 2022, revenue generated in Canada was up 67% to $286.0 million relative to the six months ended
June 30, 2021.
CES achieved a record Adjusted EBITDAC of $61.0 million in Q2 2022, representing a
sequential increase of 44% compared to Q1 2022 and an increase of
91% compared to Q2 2021. Adjusted EBITDAC as a percentage of
revenue of 14.1% achieved in Q2 2022 was up significantly from the
10.6% recorded in Q1 2022 and the 12.6% recorded in Q2 2021.
Throughout the quarter the Company worked to implement pricing
increases aimed at offsetting the rapid inflation of product and
labour costs seen in late 2021 and early 2022, and in the second
quarter margins have largely rebounded from the temporary
compression experienced in Q1 2022 as a result of these efforts,
combined with the impact of increased scale from higher activity
levels in the US. For the six months ended June 30, 2022, Adjusted EBITDAC was up 56% to
$103.5 million. For both the three
and six month periods, Adjusted EBITDAC improved on significantly
higher industry activity levels year over year.
Net income for the three months ended June 30, 2022 was $20.1
million compared to $6.7
million in Q2 2021. Net income for the six months ended
June 30, 2022 was $30.4 million compared to $11.8 million for the six months ended
June 30, 2021. Higher net income for
both periods was driven primarily by increased industry activity
levels and associated revenues. CES no longer recognized a benefit
from the Canada Emergency Wage
Subsidy ("CEWS") program in 2022, compared to $3.1 million and $4.8
million for the three and six months ended June 30, 2021.
CES generated $46.1 million in
Funds flow from Operations in Q2 2022, up from the $33.1 million generated in Q1 2022 and nearly
double the $23.1 million generated in
Q2 2021. For the six months ended June 30,
2022 CES generated Funds flow from Operations of
$79.3 million compared to
$48.8 million in the six months ended
June 30, 2021. Funds flow from
Operations excludes the impact of working capital investment, and
is reflective of strong surplus free cash flow generation amid
significant improvements in market conditions in the quarter and
year to date relative to the comparative periods.
As at June 30, 2022, CES had a Working Capital Surplus of
$574.6 million, which has increased
from $506.2 million at March 31, 2022 and from $459.8 million at December
31, 2021 as CES has strategically used its balance sheet to
further finance investments in inventory beyond normal carrying
volumes, in order to meet the increasing needs of existing and new
customers, manage cost inflation, and mitigate the effects of
global supply chain constraints. In addition, accounts receivable
increased by 8% from March 31, 2022,
to support significant increases in revenue and corresponding
collection cycles. The Company continues to focus on working
capital optimization and to benefit from the high quality of its
customers and diligent internal credit monitoring processes.
CES exited the quarter with a net draw on its Senior Facility of
$182.3 million (December 31,
2021 - $110.1 million), and Total
Debt of $521.2 million
(December 31, 2021 - $439.4
million), of which $288.0
million relates to Senior Notes which don't mature until
October 21, 2024. The increases
realized during the period were primarily driven by required
working capital build as described above, combined with dividends
paid out during the first half of 2022 totaling $8.1 million. At June 30,
2022, CES' Senior Facility had a maximum available draw of
approximately C$ equivalent $262.5
million. Subsequent to June 30,
2022 the Company exercised an additional $50.0 million of available capacity, increasing
the maximum amount available on the Canadian Facility from
$175.0 million to $225.0 million, for a total facility size of
approximately C$ equivalent $315.0
million. All other terms and conditions remain unchanged.
Working Capital Surplus exceeded Total Debt at June 30, 2022 by $53.3
million (December 31, 2021 - $20.4 million). As at the date of this MD&A,
the Company had a net draw on its Senior Facility of approximately
$195.0 million in support of working
capital levels associated with strong revenue growth and continued
strategic investment in surplus inventory levels.
Outlook
The global supply-demand balance for energy continues to be very
constructive with demand surpassing pre-COVID levels and tempered
supply increases governed by healthy returns, particularly in CES'
North American target markets. As the global economic recovery has
gained momentum, increased activity and demand have led to
improving commodity prices, production levels and drilling
activity. The ongoing military conflict in Ukraine has further exacerbated persistent
global supply and demand imbalances, and is likely to create
continued strength and volatility in global oil prices in the near
term. We expect the strong activity levels to continue through the
balance of 2022, moderated by ongoing challenges with availability
of labour and supply chain constraints. CES is optimistic in its
outlook for 2022 as it expects to benefit from elevated upstream
activity and improved pricing across North America by capitalizing on its
established infrastructure, industry leading positioning,
vertically integrated business model, and strategic procurement
practices. While the challenges surrounding the global supply chain
market are expected to persist throughout 2022, CES remains
confident that a combination of proactive inventory procurement
practices, targeted pricing increases and working capital focus
will help to mitigate the impact of the elevated cost environment.
As industry activity has continued to improve, the Company has made
strategic investments in working capital to manage global supply
chain challenges, and will continue to focus on working capital
optimization and balance sheet strength and liquidity as the year
progresses.
Commensurate with current record revenue levels, CES expects
2022 capital expenditures to be approximately $50.0 million, of which $25.0 million is maintenance and $25.0 million is earmarked for expansion,
excluding amounts related to business acquisitions. CES plans to
continue its disciplined and prudent approach to capital
expenditures in 2022 and will adjust its plans as required to
support growth throughout divisions.
CES has proactively managed both the duration and the
flexibility of its debt. In September
2021, CES successfully amended and extended its Senior
Facility to September 2024. In light
of the growth in activity and revenue levels seen in the first half
of the year, in 2022 year to date the Company has proactively added
$80.0 million of incremental capacity
to the Senior Facility. In October
2017, CES successfully re-financed and reduced its coupon on
its previously outstanding $300.0
million Senior Notes by issuing new 6.375% Senior Notes,
which mature in October 2024. To
support growth in the business and related working capital needs
CES routinely considers its capital structure, including further
increasing the capacity of its Senior Facility, refinancing of the
Company's Senior Notes, updating existing indenture terms, and
other potential financing options.
CES' underlying business model is capex light and asset light,
enabling generation of significant surplus free cash flow. As our
customers endeavor to maintain or grow production in the current
environment, CES will leverage its established infrastructure,
business model, and nimble customer-oriented culture to deliver
superior products and services to the industry. CES sees the
consumable chemical market increasing its share of the oilfield
spend as operators continue to: drill longer reach laterals and
drill them faster; expand and optimize the utilization of pad
drilling; increase the intensity and size of their fracs; and
require increasingly technical and specialized chemical treatments
to effectively maintain existing cash flow generating wells and
treat growing production volumes and water cuts from new wells.
Conference Call Details
With respect to the second quarter results, CES will host a
conference call / webcast at 9:00 am
MT (11:00 am ET) on
Friday, August 12, 2022. A recording
of the live audio webcast of the conference call will also be
available on our website at www.cesenergysolutions.com. The webcast
will be archived for approximately 90 days.
North American toll-free:
1-(800)-319-4610
International / Toronto callers:
(416)-915-3239
Link to Webcast:
http://www.cesenergysolutions.com/
Financial Highlights
|
Three Months Ended June
30,
|
Six Months Ended June
30,
|
($000s, except per
share amounts)
|
2022
|
2021
|
%Change
|
2022
|
2021
|
%Change
|
Revenue
|
|
|
|
|
|
|
United
States(1)
|
300,167
|
175,257
|
71 %
|
548,963
|
343,304
|
60 %
|
Canada(1)
|
133,483
|
78,348
|
70 %
|
285,968
|
170,927
|
67 %
|
Total
Revenue
|
433,650
|
253,605
|
71 %
|
834,931
|
514,231
|
62 %
|
Net income
|
20,105
|
6,667
|
202 %
|
30,355
|
11,789
|
157 %
|
per share –
basic
|
0.08
|
0.03
|
201 %
|
0.12
|
0.05
|
158 %
|
per share -
diluted
|
0.08
|
0.03
|
203 %
|
0.12
|
0.04
|
160 %
|
Adjusted
EBITDAC(2)
|
61,027
|
32,005
|
91 %
|
103,484
|
66,363
|
56 %
|
Adjusted
EBITDAC(2) % of Revenue
|
14.1 %
|
12.6 %
|
1.5 %
|
12.4 %
|
12.9 %
|
(0.5) %
|
Cash provided by (used
in) operating activities
|
(12,829)
|
16,766
|
nmf
|
(25,264)
|
10,984
|
(330) %
|
Funds Flow From
Operations(3)
|
46,141
|
23,091
|
100 %
|
79,260
|
48,833
|
62 %
|
Capital
expenditures
|
|
|
|
|
|
|
Expansion
Capital(1)
|
5,537
|
2,152
|
157 %
|
10,777
|
4,188
|
157 %
|
Maintenance
Capital(1)
|
5,778
|
2,317
|
149 %
|
9,053
|
3,260
|
178 %
|
Total capital
expenditures
|
11,315
|
4,469
|
153 %
|
19,830
|
7,448
|
166 %
|
Dividends
declared
|
4,099
|
—
|
— %
|
8,177
|
—
|
nmf
|
per
share
|
0.016
|
—
|
— %
|
0.032
|
—
|
nmf
|
Common Shares
Outstanding
|
|
|
|
|
|
|
End of
period
|
256,159,018
|
255,525,375
|
|
256,159,018
|
255,525,375
|
|
Weighted average -
basic
|
255,568,154
|
254,890,507
|
|
254,800,628
|
255,066,702
|
|
Weighted average -
diluted
|
262,206,332
|
263,803,688
|
|
261,466,404
|
263,773,795
|
|
|
As at
|
Financial
Position ($000s)
|
June 30,
2022
|
March 31,
2022
|
%Change
|
December 31,
2021
|
%Change
|
Total assets
|
1,265,455
|
1,162,218
|
9 %
|
1,087,598
|
16 %
|
Long-term financial
liabilities(4)
|
500,828
|
467,641
|
7 %
|
423,077
|
18 %
|
Total
Debt(5)
|
521,246
|
487,207
|
7 %
|
439,392
|
19 %
|
Working Capital
Surplus(5)
|
574,585
|
506,227
|
14 %
|
459,754
|
25 %
|
Net
Debt(5)
|
(53,339)
|
(19,020)
|
180 %
|
(20,362)
|
162 %
|
Shareholders'
equity
|
521,204
|
484,517
|
8 %
|
486,675
|
7 %
|
Notes:
|
1Supplementary financial measure.
Supplementary Financial Measures are provided herein because
Management believes they assist the reader in understanding CES'
results. Refer to "Non-GAAP Measures and Other Financial Measures"
for further detail.
|
2Non-GAAP
measure that does not have any standardized meaning under IFRS and
therefore may not be comparable to similar measures presented by
other entities. The most directly comparable GAAP measure for
Adjusted EBITDAC is Net income. Refer to the section entitled
"Non-GAAP Measures and Other Financial Measures"
herein.
|
3Non-GAAP
measure that does not have any standardized meaning under IFRS and
therefore may not be comparable to similar measures presented by
other entities. The most directly comparable GAAP measure for Funds
flow from operations is Cash provided by (used in) operating
activities. Refer to the section entitled "Non-GAAP Measures and
Other Financial Measures" herein.
|
4Includes
the long-term portion of the Senior Facility, the Senior Notes,
lease obligations, deferred acquisition consideration and cash
settled incentive obligations.
|
5Non-GAAP
measures that do not have any standardized meaning under IFRS and
therefore may not be comparable to similar measures presented by
other entities. The most directly comparable GAAP measure for Total
Debt, Net Debt and Working Capital Surplus is Long-term financial
liabilities. Refer to the section entitled "Non-GAAP Measures and
Other Financial Measures" herein.
|
Business of CES
CES is a leading provider of technically advanced consumable
chemical solutions throughout the life-cycle of the oilfield. This
includes total solutions at the drill-bit, at the point of
completion and stimulation, at the wellhead and pump-jack, and
finally through to the pipeline and midstream market. Key solutions
include corrosion inhibitors, demulsifiers, H2S scavengers,
paraffin control products, surfactants, scale inhibitors, biocides
and other specialty products. Further, specialty chemicals are used
throughout the pipeline and midstream industry to aid in
hydrocarbon movement and manage transportation and processing
challenges including corrosion, wax build-up and H2S.
CES operates in all major basins throughout the United States ("US"), including the
Permian, Eagleford, Bakken, Marcellus and Scoop/Stack, as well as
in the Western Canadian Sedimentary Basin ("WCSB") with an emphasis
on servicing the ongoing major resource plays: Montney, Duvernay, Deep Basin and SAGD. In the US, CES
operates under the trade names AES Drilling Fluids ("AES"), Jacam
Catalyst LLC ("Jacam Catalyst"), Proflow Solutions ("Proflow"), and
Superior Weighting Products ("Superior Weighting"). In Canada, CES operates under the trade names
Canadian Energy Services, PureChem Services ("PureChem"), StimWrx
Energy Services Ltd. ("StimWrx"), Sialco Materials Ltd. ("Sialco"),
and Clear Environmental Solutions ("Clear").
Non-GAAP Measures and Other
Financial Measures
CES uses certain supplementary information and measures not
recognized under IFRS where management believes they assist the
reader in understanding CES' results. These measures are calculated
by CES on a consistent basis unless otherwise specifically
explained. These measures do not have a standardized meaning under
IFRS and may therefore not be comparable to similar measures used
by other issuers.
Non-GAAP financial measures and non-GAAP ratios have the
definition set out in National Instrument 52-112 "Non-GAAP and
Other Financial Measures Disclosure". The non-GAAP measures,
non-GAAP ratios and supplementary financial measures used in this
news release, with IFRS measures, are the most appropriate measures
for reviewing and understanding the Company's financial results.
The non-GAAP measures and non-GAAP ratios are further defined as
follows:
EBITDAC - is a non-GAAP measure that has been
reconciled to net income (loss) for the financial periods, being
the most directly comparable measure calculated in accordance with
IFRS. EBITDAC is defined as net income before interest, taxes,
depreciation and amortization, finance costs, other income (loss),
stock-based compensation and impairment of goodwill, which are not
reflective of underlying operations. EBITDAC includes government
relief subsidies received to help mitigate the impact of the
COVID-19 pandemic. EBITDAC is a metric used to assess the financial
performance of an entity's operations. Management believes that
this metric provides an indication of the results generated by the
Company's business activities prior to how these activities are
financed, how the Company is taxed in various jurisdictions, and
how the results are impacted by foreign exchange and non-cash
charges. This non-GAAP financial measure is also used by management
as a key performance metric supporting decision making and
assessing divisional results.
Adjusted EBITDAC - is a non-GAAP measure that is
defined as EBITDAC noted above, adjusted for specific items that
are considered to be non-recurring in nature. Management believes
that this metric is relevant when assessing normalized operating
performance.
Adjusted EBITDAC % of Revenue - is a non-GAAP ratio
calculated as Adjusted EBITDAC divided by revenue. Management
believes that this metric is a useful measure of the Company's
normalized operating performance relative to its top line revenue
generation and a key industry performance measure.
Readers are cautioned that EBITDAC and Adjusted EBITDAC should
not be considered to be more meaningful than net income (loss)
determined in accordance with IFRS.
EBITDAC, Adjusted EBITDAC, and Adjusted EBITDAC % of Revenue are
calculated as follows:
|
Three Months Ended June
30,
|
Six Months Ended June
30,
|
$000s
|
2022
|
2021
|
2022
|
2021
|
Net income
|
20,105
|
6,667
|
30,355
|
11,789
|
Add back
(deduct):
|
|
|
|
|
Depreciation on
property and equipment in cost of sales
|
12,273
|
11,303
|
24,325
|
23,150
|
Depreciation on
property and equipment in G&A
|
1,869
|
1,784
|
3,541
|
3,583
|
Amortization on
intangible assets in G&A
|
3,832
|
3,655
|
7,985
|
7,567
|
Current income tax
expense
|
1,641
|
853
|
2,900
|
1,753
|
Deferred income tax
expense
|
6,334
|
2,335
|
10,842
|
4,036
|
Stock-based
compensation
|
3,261
|
3,868
|
7,904
|
7,265
|
Finance
costs
|
11,232
|
6,012
|
15,227
|
11,755
|
Other expense
(income)
|
480
|
(28)
|
405
|
(91)
|
EBITDAC
|
61,027
|
36,449
|
103,484
|
70,807
|
Add back
(deduct):
|
|
|
|
|
Gain on sale of
building
|
-
|
(4,444)
|
-
|
(4,444)
|
Adjusted
EBITDAC
|
61,027
|
32,005
|
103,484
|
66,363
|
|
|
|
|
|
Adjusted EBITDAC % of
Revenue
|
14.1 %
|
12.6 %
|
12.4 %
|
12.9 %
|
Adjusted EBITDAC per
share - basic
|
0.24
|
0.13
|
0.41
|
0.26
|
Adjusted EBITDAC per
share - diluted
|
0.23
|
0.12
|
0.40
|
0.25
|
Funds Flow From Operations - is a non-GAAP measure
that has been reconciled to Cash provided by (used in) operating
activities for the financial periods, being the most directly
comparable measure calculated in accordance with IFRS. Funds flow
from operations is defined as cash flow from operations before
changes in non-cash operating working capital and represents the
Company's after tax operating cash flows. This measure is not
intended to be considered more meaningful than cash provided by
operating activities, comprehensive income (loss), or other
measures of financial performance calculated in accordance with
IFRS. Funds Flow From Operations is used by management to assess
operating performance and leverage, and is calculated as
follows:
|
Three Months Ended June
30,
|
Six Months Ended June
30,
|
$000's
|
2022
|
2021
|
2022
|
2021
|
Cash used in operating
activities
|
(12,829)
|
16,766
|
(25,264)
|
10,984
|
Adjust for:
|
|
|
|
|
Change in non-cash
operating working capital
|
58,970
|
6,325
|
104,524
|
37,849
|
Funds Flow From
Operations
|
46,141
|
23,091
|
79,260
|
48,833
|
Working Capital Surplus - Working Capital
Surplus is a non-GAAP measure that is calculated as current assets
less current liabilities, excluding the current portion of finance
lease obligations. Management believes that this metric is a key
measure to assess operating performance and leverage of the Company
and uses it to monitor its capital structure.
Net Debt and Total Debt - Net Debt and
Total Debt are non-GAAP measures that Management believes are key
metrics to assess liquidity of the Company and uses them to monitor
its capital structure. Net debt represents Total Debt, which
includes the Senior Facility, the Senior Notes, both current and
non-current portions of lease obligations, non-current portion of
cash settled incentive obligations, offset by the Company's cash
position, less Working Capital Surplus.
Readers are cautioned that Total Debt, Working Capital Surplus,
and Net Debt should not be construed as alternative measures to
Long-term financial liabilities determined in accordance with IFRS.
Total Debt, Working Capital Surplus, and Net Debt are calculated as
follows:
|
As at
|
$000's
|
June 30,
2022
|
December 31,
2021
|
Long-term financial
liabilities(1)
|
500,828
|
423,077
|
Current portion of
finance lease obligations
|
18,964
|
16,315
|
Current portion of
deferred acquisition consideration
|
1,454
|
-
|
Total Debt
|
521,246
|
439,392
|
Deduct Working Capital
Surplus:
|
|
|
Current
assets
|
789,773
|
619,201
|
Current
liabilities(2)
|
(215,188)
|
(159,447)
|
Working Capital
Surplus
|
574,585
|
459,754
|
Net Debt
|
(53,339)
|
(20,362)
|
1Includes
long-term portion of the Senior Facility, the Senior Notes, lease
obligations, deferred acquisition consideration and cash settled
incentive obligations.
|
2Excludes
current portion of lease liabilities and deferred acquisition
consideration.
|
Supplementary Financial
Measures
A supplementary financial measure: (a) is, or is intended to be,
disclosed on a periodic basis to depict the historical or expected
future financial performance, financial position or cash flow of
the Company; (b) is not presented in the financial statements of
the Company; (c) is not a non-GAAP financial measure; and (d) is
not a non-GAAP ratio. Supplementary financial measures found within
this news release are as follows:
Revenue - United
States - comprises a component of total revenue, as
determined in accordance with IFRS, and is calculated as revenue
recorded from the Company's US divisions.
Revenue - Canada -
comprises a component of total revenue, as determined in accordance
with IFRS, and is calculated as revenue recorded from the Company's
Canadian divisions.
Expansion Capital - comprises a component of total
investment in property and equipment as determined in accordance
with IFRS, and represents the amount of capital expenditure that
has been or will be incurred to grow or expand the business or
would otherwise improve the productive capacity of the operations
of the business.
Maintenance Capital - comprises a component of total
investment in property and equipment as determined in accordance
with IFRS, and represents the amount of capital expenditure that
has been or will be incurred to sustain the current level of
operations.
Cautionary Statement
Except for the historical and present factual information
contained herein, the matters set forth in this press release, may
constitute forward-looking information or forward-looking
statements (collectively referred to as "forward-looking
information") which involves known and unknown risks, uncertainties
and other factors which may cause the actual results, performance
or achievements of CES, or industry results, to be materially
different from any future results, performance or achievements
expressed or implied by such forward-looking information.
When used in this press release, such information uses such words
as "may", "would", "could", "will", "intend", "expect", "believe",
"plan", "anticipate", "estimate", and other similar
terminology. This information reflects CES' current
expectations regarding future events and operating performance and
speaks only as of the date of the press release.
Forward-looking information involves significant risks and
uncertainties, should not be read as a guarantee of future
performance or results, and will not necessarily be an accurate
indication of whether or not such results will be achieved. A
number of factors could cause actual results to differ materially
from the results discussed in the forward-looking information,
including, but not limited to, the factors discussed below.
The management of CES believes the material factors, expectations
and assumptions reflected in the forward-looking information are
reasonable but no assurance can be given that these factors,
expectations and assumptions will prove to be correct. The
forward-looking information contained in this document speaks only
as of the date of the document, and CES assumes no obligation to
publicly update or revise such information to reflect new events or
circumstances, except as may be required pursuant to applicable
securities laws or regulations. The material assumptions in making
forward-looking statements include, but are not limited to,
assumptions relating to demand levels and pricing for the oilfield
consumable chemical offerings of the Company; fluctuations in the
price and demand for oil and natural gas; anticipated activity
levels of the Company's significant customers; commodity pricing;
general economic and financial market conditions; the successful
integration of recent acquisitions; the Company's ability to
finance its operations; levels of drilling and other activity in
the WCSB, the Permian and other US basins, the effects of seasonal
and weather conditions on operations and facilities; changes in
laws or regulations; currency exchange fluctuations; the ability of
the Company to attract and retain skilled labour and qualified
management; and other unforeseen conditions which could impact the
Company's business of supplying oilfield consumable chemistry to
the Canadian and US markets and the Company's ability to respond to
such conditions.
In particular, this press release contains forward-looking
information pertaining to the following: the certainty and
predictability of future cash flows and earnings; expectations that
EBITDAC will exceed the sum of expenditures on interest, taxes and
capital expenditures; expectations of capital expenditures in 2022;
expectations that EBITDAC will provide sufficient free cash flow to
pay down the Company's Senior Facility and add cash to the balance
sheet; expectations regarding the adoption of the Amendment, the
strength of the Company's balance sheet, the achievement of the
Company's strategic objectives, expectations regarding revenue for
2022, and the generation of shareholder value; expectations
regarding improving industry conditions and the Company's ability
to generate free cash flow to sustain the quarterly dividend;
expectations regarding the impact of the COVID-19 pandemic on CES'
operations and the oil and natural gas industry
generally; CES' ability to execute on financial goals
relating to its balance sheet, liquidity, working capital and cost
structure; expectations regarding the performance of
CES' business model and counter cyclical balance sheet during
downturns; expectations regarding CES' ability to qualify and
participate in various government support programs; expectations
that CES' financial position will provide a competitive advantage
in a recovery; the sufficiency of liquidity and capital resources
to meet long-term payment obligations; CES' ability to increase or
maintain its market share, including expectations that PureChem and
JACAM will increase market share in the oilfield consumable
chemical market, that Catalyst will increase market-share of
production and specialty chemicals in the Permian Basin, and that
AES will increase drilling fluids market share in the Permian
Basin; optimism with respect to future prospects for CES; impact of
CES' vertically integrated business model on future financial
performance; CES' ability to leverage third party partner
relationships to drive innovation in the consumable fluids and
chemicals business; supply and demand for CES' products and
services, including expectations for growth in CES' production and
specialty chemical sales, expected growth in the consumable
chemicals market; industry activity levels; commodity prices;
uncertainty surrounding the duration and severity of a low oil and
natural gas price environment; development of new technologies;
expectations regarding CES' growth opportunities in Canada the US and overseas; expectations
regarding the performance or expansion of CES' operations and
working capital optimization; expectations regarding the
impact of conflict (including the conflict in Ukraine) and global unrest on commodity prices
as well as CES' business and operations; expectations regarding end
markets for production chemicals and drilling fluids in
Canada and the US; expectations
regarding the impact of production curtailment policies;
expectations regarding demand for CES' services and technology;
investments in research and development and technology
advancements; access to debt and capital markets and
cost of capital; expectations regarding capital allocation
including the use of surplus free cash flow, the purchase of CES'
common shares by CES pursuant to the NCIB, debt reduction through
the repayment of the Company's Senior Facility or repurchases of
the Company's Senior Notes, investments in current operations,
issuing dividends, or market acquisitions; CES' ability to continue
to comply with covenants in debt facilities; and competitive
conditions.
CES' actual results could differ materially from those
anticipated in the forward-looking information as a result of the
following factors: general economic conditions in the US,
Canada, and internationally;
geopolitical risk; fluctuations in demand for consumable fluids and
chemical oilfield services, oilfield activity in the Permian, the
WCSB, and other basins in which the Company operates; a
decline in frac related chemical sales; a decline in operator usage
of chemicals on wells; an increase in the number of customer well
shut-ins; a shift in types of wells drilled; volatility in market
prices for oil, natural gas, and natural gas liquids and the effect
of this volatility on the demand for oilfield services generally;
declines in prices for natural gas, natural gas liquids, oil, and
pricing differentials between world pricing; pricing in
North America and pricing in
Canada; impacts of production
level decisions among OPEC+ members and the potential demand
impacts of COVID-19; competition, and pricing pressures from
customers in the current commodity environment; the degree and
severity of the COVID-19 pandemic, including government laws and
regulations implemented in response to the pandemic and the
resulting impact on the demand for oil and natural gas; government
support programs implemented in response to the COVID-19 pandemic
and potential changes to the qualification criteria and amount of
available support; political and societal unrest that may impact
CES' operations as well as impact the market for oil and natural
gas generally; currency risk as a result of fluctuations in value
of the US dollar; liabilities and risks, including environmental
liabilities and risks inherent in oil and natural gas operations;
sourcing, pricing and availability of raw materials, consumables,
component parts, equipment, suppliers, facilities, shipping
containers and skilled management, technical and field personnel;
the collectability of accounts receivable, ability to integrate
technological advances and match advances of competitors; ability
to protect the Company's proprietary technologies; availability of
capital; uncertainties in weather and temperature affecting the
duration of the oilfield service periods and the activities that
can be completed; the ability to successfully integrate and achieve
synergies from the Company's acquisitions; changes in legislation
and the regulatory environment, including uncertainties with
respect to oil and gas royalty regimes, programs to reduce
greenhouse gas and other emissions, carbon pricing schemes, and
regulations restricting the use of hydraulic fracturing; pipeline
capacity and other transportation infrastructure constraints;
government mandated production curtailments; reassessment and audit
risk and other tax filing matters; changes and proposed changes to
US policies including tax policies or policies relating to
the oil and gas industry; international and domestic trade
disputes, including restrictions on the transportation of oil and
natural gas and regulations governing the sale and export of oil,
natural gas and refined petroleum products; the impact of climate
change policies in regions which CES operates; the impact and speed
of adoption of low carbon technologies; potential changes to the
crude by rail industry; changes to the fiscal regimes applicable to
entities operating in the US and the WCSB; supply chain disruptions
including those caused by global pandemics or disease or from
geopolitical unrest, conflict and blockades; the impact of the
conflict in Ukraine on supply
chains, commodity prices, and the global economy; access to capital
and the liquidity of debt markets; fluctuations in foreign exchange
and interest rates; CES' ability to maintain adequate insurance at
rates it considers reasonable and commercially justifiable; and the
other factors considered under "Risk Factors" in CES' Annual
Information Form for the year ended December
31, 2021 dated March 10, 2022,
and "Risks and Uncertainties" in CES' MD&A for the three and
six months ended June 30, 2022, dated
August 11, 2022.
THE TORONTO
STOCK EXCHANGE HAS NOT REVIEWED
AND DOES NOT ACCEPT RESPONSIBILITY FOR THE ADEQUACY OR ACCURACY OF
THIS RELEASE.
SOURCE CES Energy Solutions Corp.