CES Energy Solutions Corp.

Hello and welcome to the CES Energy Solutions fourth 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. And if you would like to ask a question during this time, please press star one on your telephone keypad. I would now like to turn the conference over to Tony Alicino, Executive Vice President and CFO. You may begin.

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 March 10th, 2026. 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 full year 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 outlook for 2026, and finally, our divisional updates for Canada and the US. 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 achieved in Q4 of 2025. These highlights include our highest ever quarterly revenue of $664.5 million, beating our prior record from Q1 of 2025 by almost 5%. Our highest ever quarterly EBITDA of $113.2 million, beating our prior record from last quarter by 9%. Fourth quarter EBITDA margin of 17%. Total debt to trailing 12 months EBITDA was at 1.23 times. at the end of Q4 2025, which was almost dead center with our targeted range of 1 to 1.5 times. Cash conversion cycle days in Q4 was 98 days, well below our targeted range of 110 to 115 days, and our lowest quarterly level ever. The 2025 full-year annual financial highlights include all-time record revenue of $2.5 billion, which was up 6% over the prior record from 2024, all-time record EBITDA of $404.6 million, and 7.5% of our outstanding shares were repurchased during the year at an average price of $8.20. 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. So on that note, we are happy to report that we are increasing our quarterly dividend by 29%, to 5.5 cents per share beginning for shareholders of record on March 31st, 2026. We will continue to support the business with the necessary investments required to provide acceptable growth and returns. This includes the previously announced CapEx in 2026 of 85 to 90 million. We will continue to research and execute on strategic tuck-in acquisition opportunities which support vertical integration or interrelated business lines or geographies. where we believe we can add value and grow returns. We will continue repurchasing shares while staying within our current debt to trailing 12 months EBITDA range of one to one and a half times as previously communicated. Although there has been negativity surrounding oil prices since April of 2025, due to the forecasted oversupply expected to appear in the market in late 2025 and early 2026, this oversupply still has not materialized. The fear of it appearing has served to keep oil prices lower during the past nine months, but not down to the feared level of $50 or less. This has led to only slightly reduced exploration and production in 2025. As a result of the Middle East situation and spiking oil prices, there is fresh optimism that severely constrained production out of the Middle East may actually serve to offset the impending oversupply concerns, or if it drags on for a few weeks, even outpace the supply. and instead create a shortage. Although this is not currently represented in our outlook, it is possible. Needless to say, prolonged inventory deficits that could result in oil prices at anything north of $65 to $70 could materially affect the industry outlook in both the short and medium terms, leading to increased activity levels and resulting in further upside in our operation and financial performance. Obviously, we have tremendous torque stored in the company performance. I would predict that any activity moved to the upside would translate to outsized participation in activity, revenues and earnings by CES. We'll have to wait and see what the next few weeks brings us in the way of short and medium term supply, demand and dynamics and pricing. Now for a summary of our Q4 performance overall and by division. Today our rig count on North American land stands at 221 rigs out of the 745 listed as currently operating on land in North America representing an industry-leading and an all-time record North American land market share of 29.7%. This market share surpasses our prior record from last quarter of 29.5%. In Q4, 65% of CES revenue was generated in the United States and 35% in Canada. As previously noted, quarterly revenues by countries and by divisions were at all-time highs in Q4. That speaks to the strength of the entire business currently. These results were driven by outperformance across the board, not just by one division or national jurisdiction. As noted during the Q3 call and message throughout the first half of the year, we expected margins to be under pressure during the first half of 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 in our Q3 performance of 16.6% margins, and then emphasized in our Q4 results with the 17% margins, the business has been dialed back in and is now operating at an extremely high efficiency level. We have staffed up even further throughout the second half of 2025 as we continue to gradually take on the full workload from the RFP wins. We expect the full realization of the awarded revenues to show up completely in the financials by the end of Q2. In Canada, the Canadian Drilling Fluids Division continues to lead the WCSB in market share. Today, we are providing service to 81 of the 213 jobs listed as underway in Canada, or a 38% market share. The overall active drilling rig count in Canada throughout Q4 and so far in Q1 has been trending consistently lower than 2024 by approximately 10% year over year. In contrast to that, as previously noted by our record revenues, the service intensity phenomenon continues to more than offset the reduction in the number of rigs. We remain very optimistic about the prospects for 2026 due to the completion and full startup 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 if and when those pressures subside. Purechem, our Canadian production chemical business, continued its run of record results in Q4. Purechem continued its impressive growth trajectory as all of the business lines continued to perform at record levels. We experienced further revenue and earnings from our continued market penetration and market share growth in Q4. Additionally, we have recently begun achieving access to larger opportunities in the attractive heavy oil thermal market. This is a market we've 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 thermal production for a couple of the smaller operators and plants in the regions. This has now given us the data to demonstrate to the larger operators that not only do we have capability to service the production reliably, but we can also provide superior results in the status quo. This is high-volume, high-revenue, and very sticky business due to its complexity and due to the cost of change. We liken this business to the offshore business in the United States, different chemistry and problems with large rewards if you can penetrate and execute on them. Now for the United States. AES, our U.S. drilling fluids group, is providing chemistry and service to 140 of the 532 rigs listed as active in the U.S. land market today, for a continually widening and AES record-tying number one market share of U.S. land rigs at 26.3%. The number of rigs drilling in the USA is slightly up since we last reported in November, but down by just over 10% year over year. In spite of this, AES is actually up by two rigs year over year, and currently we enjoy a basin leading 87 rigs out of the 241 listed as working in the Permian Basin, or a number one market share of 36%. very close to our highest market share ever in the Permian. I would also like to note that AES Completion Services, formerly Hydrolyte, 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 the pre-acquisition levels. As well, fossil fluids group that we acquired in Oklahoma during Q2 of 2025 is also running at a much higher revenue and profitability level than prior to our purchase. Their specialization in the increasingly attractive Cherokee shale hybrid oil and gas plate provides us with more exposure to another growing basin with alignment to the strong trends currently being experienced in the North American natural gas market. Our market shares throughout the USA land market continue to grow as natural gas production continues to garner attention. A little over two years ago during our November 2023 earnings call, I noted that we intended to begin putting an emphasis on getting back into the Haynesville play as gas was starting to become relevant again. At that time, we had zero rigs in the Haynesville. Today, I'm very proud to report that we are on 15 of the 53 working in the Haynesville. This represents a market share of over 28%, which is up from 21% when we reported three and a half months ago. Over the past year, we have constructed a blending plant and distribution facility, including a rail siding strategically located within the basin. We've also developed some highly technical products and systems specifically for the high temperature, high pressure challenges within the Haynesville play. We anticipate further growth in this area as activity continues to ramp up in the coming months and years. At the beginning of 2024, there were 33 rigs working in the Haynesville. Today, there are 53, which represents year over year activity growth of close to 30% per year as LNG exports and AI continue to drive demand and growth in both the Hainesville as well as the Northeast USA. Finally, our U.S. production chemical division, JTAM 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 prior quarterly earnings calls in 2025, JCAM Catalyst invested in CapEx and personnel during the first half of 2025 in order to support not only its growing activity levels, but also to support several potential meaningful business opportunities. It is important to note that JCAM's business, like Purechem's, is almost entirely leveraged to production-related spending by the E&Ps, and therefore the revenue and earnings are extremely durable through any cycle. As noted earlier in my comments, J-CAM Catalyst has now been awarded some of the major RFP business and have been actively onboarding this business since late November. In the coming few months, we will complete the transition to servicing this new opportunity. This will be evidenced by the increased revenue EBITDA and CapEx that we have previously discussed and forecasted for 2026. Also, as noted on the Q2 earnings call, J-CAM 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 to be followed by the six ultra deepwater platforms in the Gulf. These types of platforms experience extreme technical conditions and require high volume treatment and superior technical support. These conditions allow for specialized chemical solutions which, although 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 begun treating our fourth platform with all of the chemistries required and have now been awarded a trial on a fifth platform to start testing chemical applications. As with prior platforms, it will take several months to a few quarters before all testing is complete and we are fully treating the platform with the full suite of chemicals. As always, I would like to reiterate the confidence I have in the resilience of our business model in the face of any market conditions possible. Our business is counter-cyclical, requires minimal capex, and demonstrates high free cash flow throughout the cycles. Noteworthy as well is that in spite of the pullback and upstream activity, we have consistently experienced revenue and opportunity growth throughout 2025 and into 2026. 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 differentiating us from our competitors. We believe our Q4 results are an early indicator of the tremendous work we have building in our business right now. We also believe that US upstream activity will inevitably accelerate at some point in 2026 or 2027. In the meantime, we continue to expect 2026 to be a year of growth and positioning, with 2027 potentially looking even stronger in North America as the oil market seems headed towards a more positive structure and natural gas demand accelerates due to LNG and AI development. With regard to USA tariffs and the suggested Canadian counter tariffs, these continue to have little to no direct effect on our business in our current state. However, we have taken significant steps to restructure our manufacturing and supply chain in order to minimize future exposures as much as possible. I will state again for clarity that as noted quickly on our Q1 2025 earnings call, the impact from tariffs to date continues to be immaterial to our overall business. Finally, 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 anticipating experiencing, we have increased the total number of employees at CES by 7% from 2,530 on January 1st of 2025 to 2,707 at the end of 2025. I will now pass the call over to Tony for the financial update.