CES Energy Solutions Corp.

Good morning, everyone, and welcome to the CES Energy Solutions First Quarter 2024 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 first quarter MD&A and press release dated May 8, 2024, and in our annual information form 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 first 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 first quarter 2024 earnings call. On today's call, I will provide a brief summary of our incredible financial results released yesterday, followed by an update on capital allocation, and then our divisional updates for Canada and the U.S. I will then pass the call over to Tony to provide a detailed financial update We will take questions and then we will wrap up the call. I'll start my comments today by highlighting some of the major financial accomplishments we were able to achieve in Q1 of 2024. They include all-time record Q4 revenue of $588.6 million, our highest quarterly revenue ever, beating the prior record set in Q4 of 2022 by almost 5%. Our all-time highest quarterly EBITDA of $102 million, beating our prior all-time record level set last quarter of $84.6 million by over 20%. EBITDA margin of 17.3% versus 13.8% in Q1 of last year and 15.3% in the prior quarter. This result was the highest quarterly EBITDA margin achieved by CES in nine years as we continue to focus on returns. As predicted on the Q4 2023 earnings call, we have now exhausted purchasing all of the 18.7 million shares allowed under our prior NCIB plan from July of 2023. Free cash flow of $57.4 million during the quarter and the total debt to trailing 12 months EBITDA ratio dropped to a new low of 1.28 times from 1.49 times at December 31st of 2023. I now want to confirm that our capital allocation plans for 2024 remain the same as stated on the last call. We will continue to support the business with the necessary investments required to provide acceptable growth and returns. We will continue to look for tuck-in acquisition opportunities into related business lines or geographies where we believe we can add value and grow returns. We will continue to pay our quarterly dividend of $0.03 per share or approximately $28 million per year. We intend to renew our NCIB plan once we are able in July of 2024. We will once again maximize the number of shares available for repurchase under the NCIB at 10% of our float. We will continue to exercise the NCIB to its maximum until we see a share valuation more aligned to our financial performance. We will use the balance of our remaining free cash flow to continue reducing leverage to approximately one times total debt to trailing 12 months EBITDAG. I'll now provide a brief summary of Q4 performance by division. Today our rig count in the North American land market stands at 171 rigs out of the 723 listed as running, representing a market share of 23.6%. The Canadian Drilling Fluids Division continues to lead the WCSB in market share. Today we are providing service to 39 of the 118 jobs listed as underway in Canada. Drilling in activity in Canada so far in Q2 2024 is tracking a little higher year over year. However, rig counts at this time of year can be a little lumpy as rigs are shutting down daily due to spring breakup. The space remains highly competitive. However, our offering of competitive pricing along with high levels of service, employee expertise, and thousands of historical offsets almost everywhere in the WCSB provide us with a value proposition that is second to none. We remain excited about the prospects for 2024 and anticipate it will be a little stronger year overall due to the completion and impending startup of infrastructure projects and their associated takeaway capacity for our market. Purechem, our Canadian production chemical business, grew again in Q1. The vast majority of the lines within Purechem continue to grow as we have continued to take market share, win bids, optimize formulations, and fine-tune our supply chain. The revenue and earnings from our primary business, production treating, continues to accelerate in Canada as we continue to deliver superior products and service combined with competitive market pricing. Now for the U.S. AES, our U.S. drilling fluids group, is providing chemistries and service to 132 of the 605 active rigs listed as working in the USA land market today, representing a continued number one market share of U.S. land rigs at 21.8%. The number of rigs drilling in the USA was slightly down again quarter over quarter, but we do see this level as being at or near the bottom of the trough. We continue to enjoy a basin leading 104 rigs out of the 316 listed as working in the Permian Basin. Again, equating to our highest ever market share in this basin of 33.1%. I will note that although the USA land rig count is down since our last call, the rig count in the Permian is roughly flat. That said, service intensity continues to demonstrate its presence in our numbers for AES as our revenue per rig per day continues to rise with more footage being drilled each day along with more complicated chemical solutions and service being provided due to the complexity and length of the horizontal sections. This was evidenced in the continued strong financial performance by AES in spite of a rig count that was almost 20% lower than its peak last year at this time. We see this trend continuing for the foreseeable future on both sides of the border. Finally, JCAM Catalyst had its strongest financial performance ever in Q1. We continue the recent trend of winning more business in this division, and internal analysis has us concluding that we are comfortably the number one provider of production chemicals and the related service in the Permian Basin, even as we continue to grow. As with PureChem, JChem Catalyst continues to take market share and grow revenue, all while providing competitive market pricing. They are doing this through best-in-class service and responsiveness, diligent problem solving, and constantly optimized formulations and manufacturing. To summarize these operations reports, I want to emphasize that we continue to observe growth prospects directly in front of us, in the markets we already are participating and established in. We continue to anticipate growth in revenues and free cash flow during the upcoming year as we earn new business and grow our market share in each of our business segments. As well, I want to emphasize that we are a technology company with scientists and manufacturing infrastructure, as well as a strong connection to our customers and their challenges. This combination of strengths allows us to continue to fine tune our product offerings in order to find unique solutions to complicated problems. As was made obvious during this past quarter, when we find solutions that meet this criteria, we are able to provide it to our customers at outsized margins that can be extremely attractive to CES, but still in line with the value proposition required by our customers. Then we have been able to use these technologies to gain more market share by helping other customers achieve the results they strive for as well. 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 have no exposure to currently. We are also spending significant time evaluating North American tuck-in acquisitions of similar businesses to ours, as well as potential opportunities to further improve our vertical integration. Finally, I would like to highlight that the recent consolidation in the space by SLB clearly demonstrated the value of capital-light, asset-light, high free cash flow businesses like ours. We believe that valuation markers such as this support our aggressive buyback philosophy at current and even higher share price levels. 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. Once again, this quarter, we have increased our total number of employees at CES from 2,236 on January 1st of 2024 to 2,304 at the end of Q1. This is an increase of 68 employees so far this year, or approximately 3%. In conclusion, I would like to note that the results in Q1 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. It speaks once again to the quality of the 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.