CES Energy Solutions Corp.

Good morning, everyone, and welcome to the CES Energy Solutions' fourth 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 and 0. 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 annual information form, fourth quarter MD&A, and press release dated February 29, 2024. 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 fourth quarter MD&A. At this time, I'd like to turn the call over to Ken Zinger, our president and CEO.

Thank you, Tony. Welcome, everyone, and thank you for joining us for our fourth quarter and year-end 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 capital allocation, and then our divisional updates for Canada and the U.S., followed by an announcement regarding Richard Baxter, president of AES. I will then pass the call over to Tony to provide a detailed financial update. We'll take questions and then we'll wrap up the call. I will start my comments today by highlighting some of the major financial accomplishments we were able to achieve in Q4 2023, as well as for full year 2023. The Q4 highlights include Q4 revenue of $553.5 million, our second highest quarter Q4 ever, just 2% shy of last year's Q4. and our third highest revenue quarter ever. Our all-time highest quarterly EBITDA of $84.6 million, beating our previous record level of $80.2 million set in Q4 of last year by 5.5%. Our highest quarterly EBITDA margin in over eight years of 15.3%. This compares to 15% in the prior quarter and 14.3% in the same quarter last year. Annual highlights for 2023 include All-time record revenue of $2.16 billion versus our prior record from 2022 of $1.92 billion, or an increase of 13% year over year. All-time record EBITDA of $315.8 million versus our prior record from 2022 of $257 million, or an increase of 23%. Our highest annualized EBITDA margin since 2017 of 14.6%, which came in just above our stated target range of 13.5% to 14.5%. Significantly reduced cash conversion cycle from 120 days in 2022 to 112 days in 2023. 2023 full year free cash flow of $211.6 million, representing a 20% cash on cash yield at our current market capitalization. Annual return of $93.5 million to shareholders through $22.5 million in dividends and $70.9 million in share repurchases, which represented 8.6% of common shares outstanding at January 1, 2023. And finally, the announced 20% increase to the quarterly dividend to $0.03 per share, which represents a 12% payout ratio. Our capital allocation plans for 2024 remain the same as stated in Q3 2023. We will continue to support the business with the necessary investments required to enable acceptable growth and returns. An increased dividend to $0.12 per year We intend to fully utilize our NCIB expiring in July of 2024 to repurchase the full 18.7 million shares allowable under the program. Then we will renew the NCIB immediately thereafter. We will use the balance of remaining free cash flow to continue paying down debt towards the lower end of our one to one and a half times debt to EBITDA target range. I'll now move on to summarize Q4 performance by division. Currently, our rig count in North America stands at 220 rigs out of the 860 running, representing our highest ever North American land market share at 25.6%. The Canadian Drilling Fluids Division continues to lead the WCSB in market share. Today, we are providing service to 83 of the 234 jobs listed as underway in Canada, or a 35.5% market share. Drilling activity in Canada so far in Q1 2024 has been slightly lower year over year. However, we remain excited about the prospects for 2024 and anticipate it will be a little stronger year overall. We also expect that 2025 will follow with another increase in activity in Canada. This is due to the expected completion and startup of infrastructure projects and their associated takeaway capacity, which should tighten differentials and improve operator economics for this market. Purechem, our Canadian production chemical business, set new records again for quarterly revenue and EBITDA in Q4. We have continued to see growing contributions from our 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. The main gains in our outperformance are from the primary business, production treating, which continues to take market share and grow meaningfully. We believe that we are now firmly the number one provider of production chemistry and service to the conventional land market in Canada. AES, our U.S. drilling fluids group, is providing chemistries and service to 137 of the 626 rigs active in the U.S. land market for our highest quarterly market share of U.S. land at 21.9%. This is in a market where the number of rigs working in the quarter was roughly flat from the previous quarter but down significantly year over year. We currently enjoy a basin leading 104 out of the 314 rigs working in the Permian Basin, equating to our highest ever market share in this basin of 33.1%. Our second barite grinding facility located in the Permian Basin now enables us to supply 100% of our barite needs going forward, supporting increased market penetration and further margin improvement. Our soft entry into the Haynesville market is on track and we are slowly establishing customers and working through fine-tuning our supply chain to the area. Obviously, with the lower natural gas prices currently, activity is muted in the area at 43 rigs currently versus 68 a year ago. Our strategy is to establish success with an operator or two so that whenever operators start picking up rigs again, we can position ourselves to be on them. We see our new Permian-based grinding facility providing us with the edge to allow us to gain market share here. Finally, JCAM Catalyst continues to observe outsized growth in revenue and EBITDA as compared to the competitive landscape. We continue to see growth in all aspects of this business unit. Service intensity combined with consistent market share gains are driving the growth. We have continued the recent trend of winning more business in this division, and based on internal analysis combined with available third-party data research, we believe that we have comfortably achieved the number one market share in the Permian Basin, and we also believe, based on the same intelligence, that we are the clear number two production chemistry and services provider in the North American land market. At this time, I would like to publicly announce that Richard Baxter, the president of our U.S. drilling fluids group, AES, is retiring from his current position as planned in April of this year. This date, which aligns with the solar eclipse, was chosen by Richard over a year ago, and we have been planning towards it since then. At the time of planning the retirement date, we also named his successor internally. Richard has spent the past couple of years grooming him to take over this role. Richard joined FMI, the private drilling fluids company that we bought 14 years ago, back in October of 1997. This makes him one of our longest-serving employees with 27 years at the companies, 18 of those with CES. He was promoted the president of AES 10 years ago in January of 2014 after the prior owner of FMI retired. Richard has worked tirelessly in building AES from a smaller market participant at that time with a 7% market share in 2014 into the owner of the clear number one U.S. land market share that AES enjoys today with 21.9%. Richard is responsible for the unique culture and success that AES enjoys today and will be truly missed in his current role by the employees throughout the company, the executive team at CES, as well as the board. Richard is planning to take about a month off to enjoy retirement and then get right back to it. The plan is for him to remain at AES in a strategic executive advisor role and a title of President Emeritus. He will remain on staff and will spend his time working on projects to improve technologies, develop new products and systems, and generally optimize our product offerings and systems while supporting his groomed successor as need be. For those of you who don't know, Richard has a Master's of Science in Petroleum Engineering by education, but he is a scientist at heart. He is responsible for many of the proprietary systems and technologies the company currently utilizes, I want to thank Richard for sharing his life with us all here at CES. He has truly been a committed, honorable, and trustworthy business partner, and most importantly, a friend for the past 14 years. I look forward to spending a few more years with him in his new role, and I will appreciate all further years he chooses to share with us. Going forward, the new president at AES will be Mr. James Strickland. James joined AES 13 years ago back in 2011. He was hired as an account manager in the Northeast USA. He joined us from MI SWACO Schlumberger, where he had spent the prior eight years as a drilling fluids engineer offshore. James has spent these past 13 years working his way up through a variety of positions and locations at AES to his current role as senior vice president, which he has held for the past eight years. Myself, the board, and the executive management have complete confidence in James' ability to fulfill his new role as we have watched him evolve into it over the past few years and look forward to walking him officially into it in about six weeks. 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 at CES. I'm proud to say that we employed 2,236 people at CES at the end of 2023 versus 2,122 at the beginning of 2023, representing an increase of 5.4% year over year. Obviously, this number of employees represents a massive accomplishment from what started back in 2001 as a company with three guys and three pickup trucks. In conclusion, I would like to note that the results in Q4 and throughout 2023 were once again not due to any one division or area excelling. This was a balanced effort across the entire company in which every business group contributed. It speaks once again to the quality of people employed everywhere in every division here at CES Energy Solutions. With that, I'll turn the call over to Tony for the financial update. Thank you, Ken.