CES Energy Solutions Corp.

Thank you for standing by. This is the conference operator. Welcome to the CES Energy Solutions third quarter 2023 results conference call and webcast. As a reminder, all participants are in listen-only mode and the conference is being recorded. After the presentation, there will be an opportunity to ask questions. To join the question queue, you may press star then 1 on your telephone keypad. Should you need assistance during the conference call, you may signal an operator by pressing star, then zero. I would now like to turn the conference over to Tony Alucino, Chief Financial Officer. Please go ahead.

Thank you, operator. Good morning, everyone, and thank you for attending today's call. I'd like to note that in our commentary today, there will be forward-looking financial information and that our actual results may differ materially from the expected results due to various risk factors and assumptions. These risk factors and assumptions are summarized in our third quarter MD&A and press release dated November 9th, 2023, and in our annual information form dated March 9th, 2023. In addition, certain financial measures that we will refer to today are not recognized under current general accepted accounting policies, and for a description and definition of these, please see our third quarter NVNA. At this time, I'd like to turn the call over to Ken Zieger, our president and CEO.

Thank you, Tony. Welcome, everyone, and thank you for joining us for our third quarter 2023 earnings call. On today's call, I will provide a brief summary of our strong financial results released yesterday, followed by an update on the capital allocation plan, and then our divisional updates for Canada and the U.S., as well as our outlook for 2024. I will then pass the call over to Tony to provide a detailed financial update. We will take questions, and then we'll wrap up the call. I'll start my comments today by highlighting some of the major financial accomplishments we were able to achieve through Q3 2023. These include record Q3 revenue of $536.5 million versus our prior record level set in Q3 of last year of $524.7 million. And this was our third highest revenue quarter ever. Record Q3 EBITDA of $80.2 million versus our prior record level set in Q3 last year of $73.3 million and effectively tying our all-time EBITDA record set in Q4 of 2022. EBITDA margin of 15% versus 14% in Q3 of 2022 and 14.3% in the prior quarter. This result was the highest EBITDA margin achieved by CES in over eight years. We once again reduced total debt to PPM ratio this time to 1.46 from 2.5 to one year ago and from 2.17 at year end. We realized free cash flow in the quarter of $75.6 million. This was our strongest free cash flow quarter ever other than when we harvested significant working capital during the crises of 2015 and 2020. As promised on the Q2 earnings call, we have made significant progress on maximizing our NCID purchases, having already bought almost 64% of the 18.7 million shares allowed under our current NCID in just four months. Our capital allocation strategy for the upcoming year remains consistent with what we announced last quarter. We will continue to support the business with the necessary investments required to provide acceptable growth and returns. We intend to fully utilize our current NCIB expiring in July of 2024 to repurchase the full 10% or 18.7 million shares allowable under the program. We will continue to pay our dividend of 10 cents per share per year or approximately $24 million per year. We may choose to adjust this level from time to time as cash flows and forecasts allow. We will use the balance of the remaining free cash flow to continue paying down debt towards a target of one times debt to TTM. I will now move on to summarize the Q3 performance by division. Currently, our rig count in North America stands at 199 rigs out of the 821 running, or 24.2% of the market. The Canadian Drilling Fluids Division continues to lead the WCSB in market share. Today, we are providing service to 67 of the 196 jobs listed as underway in Canada, or a 34.2% market share. Drilling activity in Canada throughout 2023 has been slightly lower year over year. However, we are excited about the prospects for 2024 and anticipate it will be a stronger year due to the expected completion and startup of infrastructure projects and their associated takeaway capacity in Canada. Curechem, our Canadian production chemical business, set new records for quarterly revenue and EBITDA in Q3. We have continued to see growing contributions from our crack chemical stimulation and H2S scavenger groups as we further penetrate each of these end markets and gain market share, while utilizing only our current infrastructure and supply chain to support them. Our primary business, production treating, also continues to take market share and grow. We are very optimistic about the coming year and the current growth trends we are experiencing in this division. In the United States, our U.S. Drilling Fluids Group, AES, is providing chemistry and service to 132 of the 625 rigs active in the USA for a 21.1% market share. The number of rigs is down from 147 rigs at this time last year, but ahead on market share from the 19.1% reported at that time. This includes the basin-leading 98 rigs out of the 318 listed working in the Permian, equating to a 31.1% market share versus the 29.8% market share we had at this time last year. Our second bare-eye grinding facility, located in the Permian Basin, will allow us to self-supply 100% of our bare-eye needs going forward, supporting increased market penetration and further margin improvement. As well, we have made a soft entry into the Hainesville market and are looking at picking up a couple more rigs there. We believe our PECOS grinding facility capabilities will provide us with a niche to allow us to gain market share in the United States by participating in this market, which we previously were not focusing on. Finally, JCAM Catalyst had its highest revenue quarter ever and second highest EBITDA quarter ever in Q3. Our manufacturing facility in Kansas continues to operate at a very comfortable output level of approximately 65% to 70% of what we believe to be the current maximum capacity. We have continued the recent trend of winning more business in this region, and internal analysis has allowed us to conclude that we have comfortably achieved the largest market share in the basin, even as we continue to grow. Since this is the last earning call for us in 2023, I will now provide a view into our outlook for the future. Our short-term outlook for the industry activity in North American land market remains largely the same as discussed on the last couple of calls. We continue to experience a more stable environment and activity levels. At AES, our U.S. Drilling Fluids Group, we have initiated operations and plans to grow AES within the Hainesville Play in Texas, where we think we can add rigs into an area that we have not really participated in during the past handful of years. Once we achieve a meaningful run rate, we will fine-tune supply chain to optimize earnings and efficiencies. Obviously, this will lead to further improved market share overall when combined with the steady progress we are making throughout the U.S. This combined with ever-increasing service intensity due to longer and more complicated horizontal sections and wellboard geometries that many operators have been speaking to has AES looking forward to 2024 being another very profitable growth year. For our Canadian Drilling Fluence Group, CES, we view the impending infrastructure completions in Canada as highly positive for the Canadian market and investments by EMPs. As both PMX and LNG Canada get closer to operation, we see activity in Canada continuing to accelerate. Due to our position as a leader in the Canadian energy services market, we stand to directly benefit from this inevitable uptick in activity. Service intensity is also a phenomenon being experienced in the Canadian market. which will lead to more meters being drilled by the same number of rigs. And with the increase in meters comes an increase in chemical spend due to more complex issues. We see revenue growth in 2024 within Canada in what we view as likely to be a flat to slightly higher activity level. As evidenced by our Q3 numbers, JCAM Catalyst and PureCam are both growing at a rate that has almost fully offset the revenue reduction from the North American rig count, dropping by 17% year over year. The annual third-party KinderLite production chemicals supplier performance report highlighted and supported our view on how production chemicals divisions on both sides of the border have captured market share and outperformed our competitors. We believe the growth in these two divisions will continue to accelerate and that we have lots of room to take market share and increase revenue and earnings. We have also continued to make progress in the long road to gaining traction in the lucrative Gulf of Mexico offshore market, after our acquisition of ProFlow last year, as we fine-tuned our support facilities and team locally. All these positive developments taken together have us very optimistic about the production chemical groups and their short- and long-term organic growth opportunities. As a reference point for the growth prospects in front of us in production chemicals, we have consistently publicly noted that our total corporate revenue consists of about 50-50 split between production chemical business and drilling fluids business. Spears Research publishes reports on market size by geography and market space. Their most recent report estimates that the North American production chemical spend stands at approximately 6.75 billion Canadian in 2023. Since 50% of our revenue in 2023 equals about a billion, this math shows that as a percentage of addressable market in North America, we have achieved only around 15% of the total spend. We believe we see a path to doubling the penetration by methodically continuing to execute our business plan and production chemicals in North America. To summarize this outlook, I want to emphasize the gross prospects directly in front of us in the markets that we are already participating and established in. As a secondary focus, we continue to look for opportunities to potentially enter strategic international markets in order to establish a foothold in these regions, which we currently have no exposure to. As always, I want to extend my appreciation to each and every one of our employees for their commitment to the business culture and success of CES. It is rewarding to note that due to the growth that we are experiencing, we have increased our total number of employees at CES from 2,122 on January 1st of this year to 2,235 today. This is an increase of 113 employees so far this year, or approximately 5%. Unlike last year, we increased headcount in the company by 17% over the course of the year. we expect headcount growth to be relatively muted going forward. In conclusion, I would like to note that the results in Q3 were once again not due to any one division or area excelling. This was a balanced effort across the company in which every business unit contributed, and it speaks once again to the quality of people employed everywhere in every division here at CES. As always, I want to sincerely thank all of our customers for their trust and commitment to CES in good times and in bad, and with that, I will turn the call over to Tony for the financial update. Thank you, Ken.