CES Energy Solutions Corp.

Good morning, everyone, and welcome to the CES Energy Solutions second quarter of 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. To do need assistance during the conference call, you may signal an operator by pressing star then 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 second quarter MD&A and press release dated August 8th, 2024, and in our AIF dated February 29th, 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 second 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 second quarter 2024 earnings call. On today's call, I will provide a brief summary of our impressive financial results released yesterday, followed by an update on capital allocation, and then our divisional updates for Canada and the US, followed by a summary of our recent tuck-in acquisition in Texas. 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 Q2 2024. These highlights include all-time record revenue for a Q2 of $553.2 million, beating the prior Q2 record set in Q2 of last year by 7%. Our second highest quarterly EBITDA ever of $95.4 million. Our highest Q2 EBITDA ever, beating our prior Q2 record level set last year of $73.9 million by 29%. EBITDA margin of 17.3% versus 14.3% in Q2 of 2023 and 17.3% in the prior quarter. This result tied last quarter for the highest quarterly EBITDA margin achieved by CES in nine years, as we continue to focus on returns. We renewed the NCID plan, effective July 22, 2024, and this allows us to repurchase up to 19.2 million shares during the next 12 months, of which we have already purchased 1.5 million shares at an average of $7.90 per share. Free cash flow of $54.8 million during the quarter driven by the strong financial metrics noted prior. Total debt to trailing 12 months EBITDA dropped to a new low of 1.12 times from 1.49 times at the beginning of 2024 and 1.28 times at the end of Q1. 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 pay our quarterly dividend of $0.03 per share or approximately $28 million per year. We will continue to support the business with the necessary investments required to provide acceptable growth and returns. We will continue to look for strategic tuck-in acquisitions opportunities into related business lines or geographies where we believe we can add value and grow returns. We have renewed our NCIB as of July 22nd. And based on our current outlook, we intend to once again purchase the maximum number of shares possible under the NCIV. We will continue to exercise the NCIV to its maximum threshold 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 paying down debt to maintain leverage towards the lower end of the one to one and a half times debt trailing 12 months EBITDA range. I will now move on to summarize Q4 performance by division. Today our rig count in North America stands at 203 rigs out of the 786 listed as running on land in North America, representing a market share of 27%, up from 23.6% at the time of the last call. In Canada, the Canadian Drilling Fluids Division continues to lead the WCSB in market share. Today, we are providing service to 76 of the 220 jobs listed as underway in Canada, over a 34.5% market share. The active drilling rate count in Canada so far in Q3 2024 is higher by approximately 15% year-over-year. We remain excited about the prospects for 2024 and 2025 and continue to anticipate that activity will be a little stronger during these years than was experienced in 2023 due to the completion and startup of infrastructure projects and their associated takeaway capacity. Purechem, our Canadian production chemical business, had very strong results once again in Q2. After a slow start to the quarter on the frack chemical space within Purechem, June came in stronger. All of the business 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, continue to accelerate in Canada as we consistently strive to deliver superior products and service combined with competitive market pricing. In the United States, AES, our U.S. drilling fluids group, is providing chemistry and service to 127 of the 566 rigs listed as active in the USA land market today for a continued number one market share of US land rigs at 22.4%. The number of rigs drilling in the USA was slightly down again quarter over quarter by about 3%, but we continue to view this level as being at or near the bottom of the trough. We continue to enjoy a basin leading 98 rigs out of the 303 listed as working in the Permian Basin. equating to our market share in this basin of 32.3%. The Permian industry rig count is down 4% from the time of our last call. That said, service intensity continues to demonstrate its presence in our numbers for AES as our revenue per day per rig 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. We see this trend continuing for the foreseeable future on both sides of the border. Finally, J-CAM Catalyst continued its revenue growth in Q2. We have continued to win more business throughout this division and we remain confident that we have comfortably achieved the largest market share in the Permian Basin. As with Purechem, J-CAM Catalyst continues to take market share and grow revenue throughout the areas in which they operate, all while providing competitive market-based pricing. We also are achieving this through a focus on service and problem-solving, while providing streamlined processes designed to minimize response times for solutions to our customers' needs. Now for our quick summary of our announced tuck-in acquisition of Hydrolyte LLC in Midland, Texas. I would like to publicly welcome the founders of the business to the CES team. President Blake Linrood and his partners Kyle Duncan and Mike Robinette were majority owners of Hydrolyte and were the backbone of both the management as well as the day-to-day operations of the business. All three will continue to run this business on behalf of CES Energy Solutions. HydroLite has been renamed as AES Completion Services and will now operate as a division within the AES Drilling Fluids Group. We are proud to have these three ambitious, hardworking men on our team, and we believe their DNA fits like a glove within our culture. The service line in which HydroLite LLC operates resides in the space between drilling fluids and production chemicals. The companies in this unconsolidated space are all independents, providing specialized service and chemistry to operators, primarily when they drill out frack plugs after fracking and when they do wellbore cleanouts to optimize and maintain existing wells. We estimate that there are approximately 20 to 25 companies in Texas that participate in this market. Most are smaller, owner-operated companies with one or two customers. We estimate that Hydrolite currently has a sub-10% market share in this space in Texas. AES Completion Services will continue to offer this specialized chemistry equipment and service to the market. In addition to more basic systems, some operations require a specialized high-reology, low-density system to clean these wall boards or frac plugs due to under-pressured reservoirs. This chemistry is specialized and requires knowledge and expertise to make work effectively, and AES Completion Services now welcomes this proprietary chemistry to its portfolio. When applied correctly, this chemistry can significantly reduce costs and improve performance as compared to the historical solution of utilizing M2 to lighten the fluid. We believe that AES completion services will benefit from CES's infrastructure, manufacturing, and supply chain advantages. As well, the chemistry being used in most circumstances is the same or similar to what we commonly utilize in drilling fluids applications. Our field personnel will be able to cross over between the groups with some minor training, and our facilities are perfectly located with the capacity to provide the necessary support to this business. As well, we will now have the ability to share our relationships and MSAs with the vast majority of USA operators. Finally, I will note that there is an opportunity to grow this division outside its current footprint, which exists almost entirely in Texas today. 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 2,236 on January 1st of 24 to 2,369 at the end of Q2. This represents an increase of 133 employees so far this year, or approximately 6%. In conclusion, I would like to thank all of our employees in every division for their commitment to the success of the company. It speaks once again to the quality of the people employed everywhere in every division here at CES Energy Solutions. With that, I'll pass the call over to Tony for the financial update.