CES Energy Solutions Corp.

Hello and thank you for standing by. My name is Regina and I will be your conference operator today. At this time, I would like to welcome everyone to the CES Energy Solutions Corp third quarter 2025 results conference call. All lines have been placed on mute to prevent any background noise. After the speaker's remarks, there will be a question and answer session. If you would like to ask a question during this time, simply press star then the number one on your telephone keypad. To withdraw your question, press star one again. I'd now like to turn the conference over to Tony Alicino, Chief Financial Officer. Please go ahead.

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 13, 2025, and in our annual information form dated March 6, 2025. 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 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 third quarter 2025 earnings call. On today's call, I will provide a brief summary of our financial results released yesterday, followed by an update on capital allocation, and then our divisional updates for Canada and the U.S., as well as our outlook for the remainder of 2025. 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. As always, I will start my comments today by highlighting some of the major financial accomplishments we achieved in Q3 of 2025. These highlights include our highest ever third quarter revenue and second highest quarterly revenue ever of $623 million. Our highest ever quarterly EBITDA of $103.3 million, which represented a 16.6% margin. Total debt to trailing 12 months EBITDA was at 1.29 times at the end of Q3 2025, which was well within our targeted range of one to one and a half times. Cash conversion cycle days in Q3 of 110 days, right at the low end of our targeted range of 110 to 115 days. US revenue of $409.4 million, which was our second straight all-time quarterly record. Canadian revenue of $213.8 million, which was our third highest quarterly revenue ever. With regard to our capital allocation plans, I am pleased to report the following. Consistent with our prior messaging, we intend to address the dividend once per year while reporting Q4 or Q1 of each year. We will continue to support the business with the necessary investments required to provide acceptable growth and returns. This includes anticipated capex in 2026 of $85 to $90 million. We will continue to research and execute on strategic tuck-in acquisition opportunities into related business lines or geographies where we believe we can add value and grow returns. We intend to fully execute on our current NCID allotment of 18.9 million shares prior to its expiry in July of 2026. We will continue to target a debt level in the one to one and a half times debt controlling 12 months EBITDA range. I'll now move on to summarize Q3 performance overall and by division. Today, our rig count on North American land stands at 211 rigs out of the 716 listed as currently operating, representing an industry-leading and all-time record North American land market share of 29.5%. This market share surpasses our prior record from last quarter of 28.4%. In Q2, 66% of TES revenue was generated in the United States, and 34% in Canada. As previously noted, this U.S. revenue result for Q3 2025 set a new all-time record as our highest U.S. revenue quarter ever. In conjunction with this, our Canadian divisions had their best ever revenue for a third quarter, as well as their third best quarterly revenue ever. As noted during the Q2 call and message throughout the first half of the year, we expected margins to be under pressure in H1 2025 as tariff concerns The negative macro outlook and our overstaffing in preparation for some large RFPs all took a toll on margins in Q1 and Q2. As shown with our Q3 performance and with the results of these new RFPs now known, we have been able to optimize metrics in order to begin to recover margins. There will also be a requirement for additional CapEx to support these business wins as indicated by our increased CapEx estimate for 2026 of 85 to $90 million. Although we will not be identifying exactly who the recent RFP wins were rewarded by, nor the exact amount of each of them, I will note the following. The new revenue will begin filtering into our Q4 2025 results with the majority showing up in Q1 and Q2 of 2026. We previously indicated that we expected these awards to help enable EBITDA growth in the low single digits up to 10% in 2026 over 2025. We now estimate more confidently that in the flat activity environment, the upper end of this range is the most likely outcome. In Canada, the Canadian Drilling Clues Division continues to lead the WCSB in market share. Today, we are providing service to 73 of the 191 jobs listed as underway in Canada, or a 38.2% market share. The overall active drilling rate count in Canada throughout Q3 and so far in Q4 has been trending consistently lower than 2024 by a little more than 10% year-over-year. In contrast to that, our current rig count is only down about 5% from 2024. Additionally, due to service intensity and the mix of well types being drilled, our overall revenue in Canada hit an all-time record for a Q3. We remain very optimistic about the prospects for 2025 due to the completion and full start-up of infrastructure projects and their associated takeaway capacity. We continue to view the WCSB as a basin which is in a great position to not only weather the macro pressure, but also to benefit significantly when those pressures subside. Curechem, our Canadian production chemical business, continued its run of very strong results in Q3. Curechem continued its impressive growth trajectory, as well as all of the business lines continued to perform at extremely high levels. The revenue and earnings from our continued market penetration and market share growth continued to accelerate in Q3. Additionally, we have begun achieving access to the larger opportunities in the attractive heavy oil SAGD market. This is a market we have been focused on penetrating for the past 10 years. Although it is a long and complicated process to break into this market, we have persistently worked to find effective solutions. Over the past year or two, we have finally been able to achieve some wins in treating SAGD production for a couple of the smaller operators and plants in the region. This has now given us the data to demonstrate for the larger operators that not only do we have the capability to service the production reliably, but we can also provide superior results than the status quo. This is high volume, high revenue, and very sticky business due to its complexity and cost of change. We liken this business to the offshore business in the USA. Different chemistry and problems, but with large rewards, if you can penetrate and execute on them. In the United States, AES, our U.S. drilling fluids group, is providing chemistries in service to 138 of the 525 rigs listed as active in the USA land market today for continually widening number one market share of U.S. land rigs at 26.3%. At AES, we truly believe we have unique structure within the drilling fluid space in North America. We believe we have superior technical capabilities, procurement teams, as well as manufacturing and logistics people and facilities. all of which are focused on bringing value to our customers. The number of rigs drilling in the USA is flat since we last reported in August, but down by about 7.5% year-over-year. However, AES is actually up by 18 rigs year-over-year, or 15%. Currently, we enjoy a basin leading 93 rigs out of the 251 listed as working in the Permian Basin, or 37.1% of the market, very close to our highest market share ever in the Permian. I would also like to note that AES Completion Services, formerly Hydralite, continues to make significant penetration into the clean-out, drill-out market in the Permian and South Texas regions. In partnership with AES, this business unit is delivering material revenue and EBITDA contributions significantly above pre-acquisition levels. As well, the fossil fluids group that we acquired in Oklahoma during Q2 of 2025 is already running at much higher levels than prior to our purchase. Fossil is an impressive niche drilling fluids company that we knew very well. Their specialization in the increasingly attractive Cherokee shale hybrid oil and gas play provides us with exposure to another growing basin and with alignment to the strong trends currently being experienced in the North American land gas market. Finally, I will note that our market shares throughout the USA land market continue to grow as natural gas production continues to garner attention. Two years ago, during our November 2023 earnings call, I noted that we intended to begin putting an emphasis on getting back into the Hainesville play as gas was starting to become relevant again. Currently, we are up to seven of the 40 rigs working in the Hainesville, with two more moving in the next three weeks. This represents a market share of over 21%, Over the past year, we have constructed a blending plant and distribution facility strategically located within the basin while also developing some niche products and systems specifically for the high-temperature, high-pressure challenges which Hainesville wells are notorious for. We anticipate further growth in this area as activity continues to ramp up in the coming months and years. One year ago, there were 33 rigs working in the Hainesville. Today, there are 40, which represents year-over-year activity growth of almost 20%. As well, today we are currently servicing 14 of the 37 rigs in the Northeastern USA, and we have recently been awarded two more, which will be moving in the next couple of weeks. This gives us close to a 40% market share in this gas-rich region, which includes the Marcellus and Utica shale plays. All of these results speak to the quality of the business we are operating throughout North America. Our focus on executions of strategy, service to customers, along with unmatched technical and logistical capabilities all explain while we now service almost 30% of all the rigs in North America. We have meaningful market shares in every basin which we are targeting. Finally, our U.S. production chemical division, JCAM Catalyst, continues its steady trend of growing market share and profitability. The division remains focused on further market penetration in all the areas in which they operate. As noted on the quarterly earnings call in August, JCAM Catalyst continued to invest in CapEx, and personnel during the first half of 2025 in order to support not only its high activity levels, but also to support several potential upcoming business opportunities. It is important to note that JCAM's business, like PureCAM's, is almost entirely leveraged to production-related spending by EMPs, and therefore the revenue and earnings are extremely durable through any cycle. As noted earlier in my comments, JCAM Catalyst has now been awarded some of the major RFP wins we were preparing for during the first half. In the coming months, we will transition into this new business as it is possible. This will be evidenced by the increased revenue, EBITDA, and CAPEX that we previously discussed and forecasted for 2026. Also, as noted on the Q2 earnings call, JCAM Catalyst has been optimizing manufacturing, developing products, and hiring some technical specialists in order to become a relevant supplier in the Gulf of America. Our initial targets in this region are the 54 deepwater platforms in the Gulf. meaning those that are in over 1,000 feet of water. These types of platforms experience technically challenging conditions and require high-volume treatment. These conditions allow for specialized chemical solutions which, although very different from land-based chemistries, present opportunities for product development and solution differentiation. Although a long and steep learning curve, we are making progress as evidenced by the fact that we have recently been awarded a fourth platform And in the coming months, we will be taking over providing the full suite of treatments for it. This now puts us on four of the 54 targeted deepwater platforms for a market share of approximately 7.5%. I want to reiterate the confidence I have in the resilience of our business model in the face of the current market uncertainty. Our business is countercyclical and requires minimal capex, especially during times of disruption in our industry. Noteworthy as well is that in spite of the pullback in upstream activity, we have consistently experienced revenue and opportunity growth throughout 2025. Therefore, our strategy remains the same, anchored by a cautious focus on maintaining relationships with existing clients while continuing to develop products and solutions which benefit them as well as opening doors with new clients and markets for us. We believe our Q3 results are an early indicator of the tremendous torque we have building in the business right now. We also believe that U.S. upstream activity will inevitably accelerate, more than likely during the second half of 2026. In the meantime, we continue to expect 2025 to be a year of growth and positioning, with 2026 looking even stronger in North America as the oil market seems headed towards a more positive structure and natural gas demand continues to grow. With regard to U.S. tariffs and the suggested Canadian counter tariffs. These continue to have little to no direct effect on our business in the current state. However, we have made significant progress in restructuring our manufacturing and supply chains in order to minimize future exposures as much as possible. Where possible, we will manufacture products within the same country in which they are being sold. We will continue with this strategy until we have insulated the business as much as possible from future tariff risks. I will state again for clarity that as noted clearly on our first Q1 call, The impact from tariffs announced to date continues to be immaterial to our overall business. 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. Due to the growth we are still experiencing, as well as anticipate experiencing, we have increased our total number of employees from 2,530 on January 1, 2025, to 2,675 at the end of Q3. With that, I will pass the call to Tony for the financial update.