CALGARY, AB, March 11, 2021 /CNW/ - CES Energy Solutions
Corp. ("CES" or the "Company") (TSX: CEU) (OTC -
Nasdaq Intl: CESDF) announced today the Company's results for the
three and twelve months ended December 31,
2020.
CES is pleased to announce Q4 2020 financial results
demonstrating the resiliency of our business model, commitment to
our customers, realization of benefits related to initiatives
undertaken in response to the impact of the coronavirus
("COVID-19") pandemic, and our strong position amid improving
industry conditions.
While overall oil and gas industry conditions continued to be
significantly impacted by a reduction in global oil demand, the
fourth quarter of 2020 saw some of these headwinds subside
following news of successful COVID-19 vaccines nearing final
regulatory approval and initial rollouts. As a result, throughout
the fourth quarter and to date, CES has benefited from the reversal
of temporary production shut-ins across major basins and an
improvement in drilling and completion activity. Our established
infrastructure, cost rationalization initiatives, and committed
employee presence in key basins allowed CES to realize market share
gains and sequential improvements in revenue and Adjusted EBITDAC.
CES' overall liquidity position and balance sheet strength
continued to improve in the fourth quarter, as the Company once
again displayed its defensible business model and counter cyclical
balance sheet at low points of the cycle while preserving financial
strength as we enter improving industry conditions.
CES' Q4 2020 financial results included herein demonstrate our
continued emphasis on established financial goals comprised of
balance sheet strength, ample liquidity, working capital
optimization and cost structure rationalization. During Q4 2020,
CES generated revenue of $212.8
million and Adjusted EBITDAC of $24.7
million, and revenue of $888.0
million and Adjusted EBITDAC of $102.2 million for the twelve months ended
December 31, 2020. CES exited the
year with a net cash position of $18.3
million and a fully accessible Senior Facility, driven by
strong cash flow generation achieved through a combination of
increased activity levels, greater market share, effective
inventory management and cost containment measures. Demonstrating
the Company's disciplined approach to protecting its balance sheet
through the downturn, CES has been able to reduce Total Debt, net
of cash, by $107.9 million from
$407.6 million at December 31, 2019, and by $126.9 million from $426.6
million at March 31, 2020 to
$299.7 million at December 31, 2020, of which $289.0 million relates to the Company's Senior
Notes which do not mature until October 21,
2024. Subsequent to December 31,
2020, industry activity continued to improve from trough
levels seen in 2020 in both production chemicals and drilling
fluids end markets requiring the Company to make modest investments
in working capital. Currently, the Company has a net cash balance
of approximately $8.0 million.
CES believes that continued focus on ensuring employee safety,
preserving quality of operations, working capital management,
balance sheet strength, and liquidity will allow the Company to
best serve high quality customers during this challenging
environment and continue to successfully gain attractive market
share. While some of our peers have taken steps to reduce exposure
to or withdraw from key market segments, CES remained focused on
maintaining and growing market share as demonstrated by our record
US Drilling Fluids Market Share in the quarter of 20%. We
believe that our solid financial position will continue to enable
CES to maintain and strengthen our talent base and strategic
infrastructure which will further improve our competitive position
in a recovery.
Revenue for both the three and twelve month periods ended
December 31, 2020 was significantly
affected by the global economic impacts of COVID-19 and lower
commodity price environment, which resulted in temporary production
shut-ins, deferred completions and drastic declines in drilling
activity in North America
throughout most of the year. The financial results reported for
2020 also reflect the importance of CES' geographic positioning and
strategic commitment to the US market which generated 64% of the
Company's overall revenue in Q4 2020. These results
demonstrate the significance of CES' diversification through
operating efficiencies and capitalizing on the completed
infrastructure buildout in both the US and Canada. As activity levels declined
significantly in Q4 2020 as compared to Q4 2019, CES has been able
to maintain and grow its commitment to a strong and high quality
customer base in both operating regions.
Revenue generated in the US for the three and twelve months
ended December 31, 2020 decreased 37%
and 34% to $137.3 million and
$600.9 million, respectively, over
the 2019 comparative periods. US revenues in both periods were
negatively impacted by lower activity levels across all operating
divisions. US land drilling activity fell by 63% from Q4 2019 to Q4
2020 as operators curtailed 2020 capex spending in order to
preserve capital and avoid uneconomic completions. Despite this
challenging environment, CES was able to increase its US Drilling
Fluids Market Share to 20%, a record for the Company and up from
13% in Q4 2019 and the previous record of 17% in Q3 2020. Year over
year, production related volumes were also down significantly,
however, sequentially, the Company benefited from the reversal of
certain production shut-ins.
Revenue generated in Canada for
the three and twelve months ended December
31, 2020 decreased 23% to $75.6
million and $287.1 million,
respectively, over the 2019 comparative periods. Both the
production chemicals and drilling fluids businesses in Canada saw significant declines in industry
activity levels and experienced intense pricing pressure from
customers over the comparable periods. Sequentially, the Company
benefited from increased industry activity levels and increased
production volumes, however peak drilling activity levels were
considerably lower than previous year highs as customers curtailed
spending, shut in some existing production, and scaled back
drilling in order to preserve capital.
In light of the increasingly challenging global oilfield market
and the cost containment initiatives executed by the Company to
right-size the business for reduced industry activity levels, CES
recorded the following items during the three and twelve months
ended December 31, 2020 which
negatively impacted net income and EBITDAC and are considered to be
non-recurring:
- Within cost of sales, the Company recorded $nil and
$12.3 million, respectively, of
inventory write-downs as certain commodity based products were
revalued to net realizable value to reflect the commodity price
environment at the time of the revaluation;
- Within general and administrative expenses, the Company
recorded $0.7 million and
$3.8 million, respectively, in
additional bad debt allowances; and
- Within cost of sales and general and administrative expenses,
the Company recorded $0.4 million and
$2.8 million, respectively, in
restructuring costs.
Excluding the items noted above, CES achieved Adjusted EBITDAC
of $24.7 million in Q4 2020, compared
to $39.7 million in Q4 2019. For the
twelve months ended December 31,
2020, CES achieved Adjusted EBITDAC of $102.2 million compared to $167.1 million for the respective 2019 period.
CES' Adjusted EBITDAC of $24.7
million and margin of 11.6% in Q4 2020 represent significant
improvements from the $8.2 million
and 5.1% recorded in Q2 2020 and the $18.2
million and 11.0% recorded in Q3 2020 as the Company
benefitted from improved competitive positioning and the reversal
of certain production shut-ins in both the US and Canada. CES responded to falling activity
levels by significantly rationalizing costs and headcount in
Canada and the US early in the
second quarter, along with the implementation of a number of cost
cutting measures with respect to compensation and discretionary
expenses. In light of the uncertainty surrounding current market
conditions, as activity levels fluctuate, CES will continue to
diligently manage its cost base, gradually assessing personnel and
overhead costs, compensation levels, discretionary spending, and
the reversal of cost structure reductions to support growth in the
divisions, as required.
During the three and twelve months ended December 31, 2020, the Company recognized the
Federal Government's Canada Emergency Wage Subsidy ("CEWS")
program benefits in the amount of $2.9
million and $14.7 million,
respectively, as a reduction to wage expense of which $1.5 million and $7.7
million allocated to cost of sales, for the respective
periods, and $1.4 million and
$7.0 million allocated to general and
administrative expenses, for the respective periods. The CEWS
program has been instrumental in allowing CES to mitigate further
Canadian personnel reductions while navigating uncertainty
surrounding the severity and duration of current market conditions,
and CES is encouraged by the Federal Government's planned extension
of the program until June of 2021.
Net income for Q4 2020 was $40.5
million compared to $11.9
million in Q4 2019. Net income increased from Q4 2019 to Q4
2020 primarily due to an increased deferred income tax recovery
attributable to the significant tax benefit recognized on the
unused tax losses in Canada and in
the US, lower interest expense due to lower debt levels,
recognition of $2.9 million benefit
from the CEWS program, and a reduction in stock based compensation
expense, offset by the factors outlined above. For the twelve
months ended December 31, 2020, net
loss was $222.9 million compared to
net income of $30.1 million for the
twelve months ended December 31, 2019. For the twelve month
comparative period, net loss was impacted by a $248.9 million goodwill impairment recorded by
the Company in Q1 2020 and the associated deferred income tax
recovery.
As at December 31, 2020, CES had a Working Capital Surplus
of $273.3 million, which represents a
$96.3 million reduction from
$369.6 million at December 31, 2019, and a $144.0 million reduction from $417.3 million at March
31, 2020. This reduction in working capital was primarily
driven by the reduction in activity levels experienced across the
Company's operating divisions and was further amplified by the
Company's focus on working capital optimization over the last two
years. Through the pandemic, CES has benefited greatly from the
high quality of its customers and diligent internal credit
monitoring processes. As a result, CES managed to maintain a strong
collection record and minimized accounts receivable losses,
recording only $3.8 million in credit
loss provisions to date in 2020 (2019 - $0.5
million), representing less than 0.5% of revenue during the
year ended December 31, 2020. In the
fourth quarter, CES generated $17.2
million in Funds Flow From Operations and exited 2020 with
net cash of $18.3 million and a fully
accessible Senior Facility while making modest investments in
working capital attributable to higher drilling related activity,.
While CES' counter-cyclical leverage model provides the Company
with significant balance sheet protection through a downtown, the
Company continued to generate positive Funds Flow From Operations
in each quarter of 2020 in this low commodity price environment,
which excludes the impact of working capital release and is
reflective of the Company's cost rationalization efforts and
improved market conditions in the quarter.
CES exited the year with a net cash balance of $18.3 million, a fully accessible Senior
Facility, and Total Debt, net of cash, of $299.7 million, of which $289.0 million relates to the Company's Senior
Notes which don't mature until October 21,
2024 (December 31, 2019 - net
draw of $76.7 million and Total Debt,
net of cash of $407.6 million). CES'
Senior Facility was fully accessible at December 31, 2020 with
a maximum available draw of $170.0
million on the Canadian facility and US$50.0 million on the US facility
(December 31, 2019 - $170.0
million and US$50.0 million,
respectively), and the facility does not mature until September 28, 2022.
Starting in mid-March of this year, the Company acted quickly on
a number of proactive measures to preserve balance sheet strength
through the downturn. Among these actions were initiatives relating
to personnel related cost reductions, capex reductions, dividend
suspension, and NCIB activity:
- The Company took proactive measures to right-size the business,
including reductions to Executive, Board of Directors' and employee
compensation levels coupled with reductions in personnel and
overhead costs.
- In light of challenging market conditions, the Company
suspended all non-essential capital expenditures. Capital
expenditures incurred in 2020, excluding amounts financed through
leasing arrangements, were $7.1
million below the expected 2020 expenditures of up to
$30.0 million, compared to
$45.2 million in 2019, and
representing a $27.1 million or 54%
reduction from the original 2020 capex plan of $50.0 million. In Q4 2020, CES incurred
$2.4 million in capital expenditures,
representing an 84% decrease from Q4 2019. In 2020, CES incurred
$22.9 million in capital
expenditures, representing a decrease of 49% year over year. Q4
2020 capital expenditures are primarily comprised of field
equipment, processing equipment, and tank expenditures to support
increased activity levels in Q4 2020, specifically in the
production chemical business.
- The Company reduced its monthly dividend on March 12, 2020 from $0.06 per share to $0.015 per share on an annualized basis. As
industry conditions continued to deteriorate, CES suspended its
monthly dividend on April 16, 2020.
This decision conserved approximately $16.0
million on an annualized basis.
- CES temporarily suspended activity under the NCIB program in
the second quarter of 2020 after using $4.8
million to repurchase for cancellation 2,325,277 common
shares in Q1 2020. On July 16, 2020
the Company announced the renewal of its previous NCIB, which
allows for the repurchase and cancellation of up to 19,025,236
common shares, being 7.5% of the public float at the time of
renewal before expiry on July 20,
2021. During Q4 2020, the Company opportunistically
repurchased 4,481,900 common shares at an average price of
$0.91 per share for a total amount of
$4.1 million. During the year ended
December 31, 2020, the company
repurchased 9,440,577 common shares at an average price of
$1.19 for a total amount of
$11.3 million. Subsequent to
December 31, 2020, the Company
repurchased 5,356,700 additional shares at a weighted average price
of $1.46 for a total amount of
$7.8 million.
Outlook
In 2020, global demand for fossil fuels was severely impacted by
COVID-19 and the associated public health restriction measures
implemented worldwide. Estimated energy demand and oil prices
were severely affected in the second quarter of 2020, leading to
significant reductions to drilling activity and production
levels. As the year progressed, production shut-ins began to
reverse mid-year and drilling activity began to improve towards the
latter half of the year, albeit well below pre-COVID levels.
There is increased economic optimism going into 2021 as
governments worldwide distribute the COVID-19 vaccines which could
lead to lifting restrictions and spurring demand for fossil fuels
above 2020 levels. This increased activity and demand may
lead to improving commodity prices, production levels and drilling
activity. CES remains cautious with its 2021
outlook and expects upstream activity across North America to continue below pre-COVID
levels. The uncertainty surrounding the magnitude and duration of
this downturn has prompted customers to reduce their capital
spending programs compared to pre-COVID levels thereby resulting in
a corresponding reduction in demand for the Company's products and
services. During 2020, CES undertook significant steps to
rationalize its cost structure and will take additional appropriate
actions as necessary, including gradually assessing cost structure
reductions to support growth throughout the divisions. During the
second and third quarters of 2020, CES applied for and received
funding from the Canadian Federal Government's CEWS program,
recognizing an aggregate benefit of $14.7
million, thereby mitigating further personnel reductions
while we navigate through this downturn. Further, in the
September 23, 2020 Throne Speech from
the Government of Canada, it was
announced that the CEWS program would be extended until
June 2021. While details regarding
the program require further clarification, CES expects to continue
to participate in the program through the duration of its extension
as applicable.
CES believes it will continue to benefit from its asset light,
consumable chemical business model and its ability to maintain a
prudent cost structure in this industry activity level environment.
CES' counter cyclical leverage model was tested during the pandemic
and demonstrated its ability to remain resilient despite expected
declines in industry activity. During the 2015-2016 downturn, CES
experienced a reduction in Working Capital Surplus of $152.7 million from December 31, 2014 to June
30, 2016, and was able to reduce Total Debt outstanding,
fully pay down the Senior Facility, and grow cash balances through
the end of Q2 2016 to $111.1 million.
From Q1 2020 to Q4 2020, CES has again demonstrated its financial
resiliency with consistent positive Funds Flow from Operations, a
$116.5 million working capital
harvest resulting in a fully accessible Senior Facility and a
positive net cash balance of $18.3
million as at December 31,
2020. Currently, the Company has a net cash balance of
approximately $8.0 million.
CES has proactively managed both the duration and the
flexibility of its debt. In August
2019, CES successfully amended and extended its Senior
Facility to September 2022. In
October 2017, CES successfully
re-financed and reduced its coupon on its previously outstanding
$300.0 million Senior Notes by
issuing new 6.375% Senior Notes which mature in October 2024. This provides the Company with an
additional level of financial stability during the ongoing COVID-19
crisis and the related deterioration of the global crude oil
market.
In light of challenging market conditions, the Company suspended
all non-essential capital expenditures in 2020. CES expects 2021
capital expenditures to be at or slightly above 2020 levels and
will continue its disciplined and prudent approach to capital
expenditures. CES is currently reviewing 2021 planned expenditures
which will be adjusted as required as conditions continue to
unfold.
CES continues to believe that coming out of this downturn it can
continue to grow its share of the oilfield consumable chemical
markets in which it competes. CES' underlying business model is
capex light and asset light, enabling generation of significant
surplus free cash flow. As our customers increasingly regulate
their business models to maintain spending within cash flows, we
believe that CES will be able to leverage its established
infrastructure, business model, and nimble customer-oriented
culture to deliver superior products and services to the industry.
CES demonstrated this ability during the depths of the downturn and
expects to continue doing so as industry conditions improve. CES
also believes that competitor consolidations and business failures
will provide further opportunities for CES in a recovery scenario.
CES sees the consumable chemical market increasing its share of the
oilfield spend as operators continue to: drill longer reach
laterals and drill them faster; expand and optimize the utilization
of pad drilling; increase the intensity and size of their fracs;
and require increasingly technical and specialized chemical
treatments to effectively maintain existing cash flow generating
wells and treat growing production volumes and water cuts from new
wells.
CES' strategy is to continue to use its decentralized management
model; its vertically integrated manufacturing model; its problem
solving through science approach; its patented and proprietary
technologies; and its superior people and execution to increase
market share. By being basic in the manufacture of the consumable
chemicals it sells, CES' vertically integrated business model
enables it to be price competitive and a technology leader.
Operators require increasingly technical solutions and deeper
customer-centric coverage models to meet their needs. CES believes
that its unique value proposition makes it the premier independent
provider of technically advanced consumable chemical solutions to
the North American oilfield.
In its core businesses, CES will focus on profitably growing
market share, controlling costs and managing working capital,
developing or acquiring new technologies and making strategic
investments as required to position the business to capitalize on
current and future opportunities.
Conference Call Details
With respect to the fourth quarter results, CES will host a
conference call / webcast at 9:00 am
MT (11:00 am ET) on
Friday, March 12, 2021.
North American toll-free:
1-(800)-319-4610
International / Toronto callers: (416)-915-3239
Link
to Webcast: http://www.cesenergysolutions.com/
Financial Highlights
|
Three Months Ended
December 31,
|
Year Ended December
31,
|
($000s, except per
share amounts)
|
2020
|
2019
|
%Change
|
2020
|
2019
|
%Change
|
Revenue
|
|
|
|
|
|
|
United
States
|
137,262
|
217,427
|
(37)%
|
600,898
|
906,377
|
(34)%
|
Canada
|
75,552
|
98,134
|
(23)%
|
287,149
|
370,880
|
(23)%
|
Total
Revenue
|
212,814
|
315,561
|
(33)%
|
888,047
|
1,277,257
|
(30.5)%
|
Net income
(loss)
|
40,453
|
11,910
|
240 %
|
(222,903)
|
30,106
|
nmf
|
per share –
basic
|
0.15
|
0.04
|
245
%
|
(0.85)
|
0.11
|
nmf
|
per share -
diluted
|
0.15
|
0.04
|
254%
|
(0.85)
|
0.11
|
nmf
|
Adjusted
EBITDAC(2)
|
24,651
|
39,653
|
(38)%
|
102,168
|
167,127
|
(39)%
|
Adjusted
EBITDAC(2) % of Revenue
|
11.6
%
|
12.6
%
|
(1.0)%
|
11.5
%
|
13.1
%
|
(1.6)%
|
Cash provided by
operating activities
|
14
|
41,455
|
(100)%
|
156,679
|
187,304
|
(16)%
|
Funds Flow From
Operations(2)
|
17,194
|
31,553
|
(46)%
|
72,353
|
132,328
|
(45)%
|
Capital
expenditures
|
|
|
|
|
|
|
Expansion
Capital(2)
|
1,559
|
9,098
|
(83)%
|
14,885
|
32,504
|
(54)%
|
Maintenance
Capital(2)
|
832
|
5,718
|
(85)%
|
8,063
|
12,745
|
(37)%
|
Total capital
expenditures
|
2,391
|
14,816
|
(84)%
|
22,948
|
45,249
|
(49)%
|
Dividends
declared
|
—
|
3,970
|
(100)%
|
2,948
|
15,942
|
(82)%
|
per
share
|
—
|
0.0150
|
(100)%
|
0.0113
|
0.0600
|
(81)%
|
Common Shares
Outstanding
|
|
|
|
|
|
|
End of
period
|
258,264,857
|
263,956,291
|
|
258,264,857
|
263,956,291
|
|
Weighted average -
basic
|
260,997,098
|
265,214,700
|
|
263,065,652
|
265,956,626
|
|
Weighted average -
diluted
|
260,997,098
|
271,779,891
|
|
263,065,652
|
272,604,972
|
|
|
As at
|
Financial
Position ($000s)
|
December 31,
2020
|
September 30,
2020
|
%Change
|
December 31,
2019
|
%Change
|
Total
assets
|
857,888
|
838,270
|
(5)%
|
1,219,772
|
(35)%
|
Long-term financial
liabilities(1)
|
298,776
|
300,370
|
(1)%
|
385,865
|
(23)%
|
Total Debt, net of
cash(2)
|
299,677
|
292,397
|
4 %
|
407,631
|
(26)%
|
Working Capital
Surplus(2)
|
273,313
|
266,897
|
2 %
|
369,628
|
(26)%
|
Net
Debt(2)
|
26,364
|
25,500
|
4 %
|
38,003
|
(30)%
|
Shareholders'
equity
|
455,663
|
443,054
|
(5)%
|
679,310
|
(38)%
|
Notes:
|
1Includes the long-term portion
of the Senior Facility, the Senior Notes, lease obligations and
cash settled incentive obligations.
|
2CES uses certain performance
measures or operational definitions that are not recognizable under
International Financial Reporting Standards ("IFRS"). These
performance measures include net income (loss) before interest,
taxes, depreciation and amortization, finance costs, other gains
and losses, and stock-based compensation ("EBITDAC"), Adjusted
EBITDAC, Gross Margin (excluding depreciation), Funds Flow From
Operations, Total Debt, Working Capital Surplus, Net Debt,
Expansion Capital and Maintenance Capital. Management believes that
these measures provide supplemental financial information that is
useful in the evaluation of CES' operations. Readers should
be cautioned, however, that these measures should not be construed
as alternatives to measures determined in accordance with IFRS as
an indicator of CES' performance. CES' method of calculating
these measures may differ from that of other organizations and,
accordingly, these may not be comparable. Please refer to the
Non-GAAP Measures section and Operational Definitions Section of
CES' MD&A for the three and twelve months ended December 31,
2020 for additional details regarding the calculation of these
measures.
|
Business of CES
CES is a leading provider of technically advanced consumable
chemical solutions throughout the life-cycle of the oilfield. This
includes total solutions at the drill-bit, at the point of
completion and stimulation, at the wellhead and pump-jack, and
finally through to the pipeline and midstream market. At the
drill-bit, CES' designed drilling fluids encompass the functions of
cleaning the hole, stabilizing the rock drilled, controlling
subsurface pressures, enhancing drilling rates, and protecting
potential production zones while conserving the environment in the
surrounding surface and subsurface area. At the point of completion
and stimulation, CES' designed chemicals form a critical component
of fracturing solutions or other forms of remedial well stimulation
techniques. The shift to horizontal drilling and multi-stage
fracturing with long horizontal well completions has been
responsible for significant growth in the drilling fluids and
completion and stimulation chemicals markets. At the wellhead and
pump-jack, CES' designed production and specialty chemicals provide
down-hole solutions for production and gathering infrastructure to
maximize production and reduce costs of equipment maintenance. Key
solutions include corrosion inhibitors, demulsifiers,
H2S scavengers, paraffin control products, surfactants,
scale inhibitors, biocides and other specialty products. Further,
specialty chemicals are used throughout the pipeline and midstream
industry to aid in hydrocarbon movement and manage transportation
and processing challenges including corrosion, wax build-up and
H2S.
CES operates in all major basins throughout the United States ("US"), including Permian,
Eagleford, Bakken, Marcellus and Scoop/Stack, as well as in the
Western Canadian Sedimentary Basin ("WCSB") with an emphasis on
servicing the ongoing major resource plays: Montney, Duvernay, Deep Basin and SAGD. In the US, CES
operates under the trade names AES Drilling Fluids ("AES"), Jacam
Catalyst LLC ("Jacam Catalyst") and Superior Weighting Products
("Superior Weighting"). In Canada,
CES operates under the trade names Canadian Energy Services,
PureChem Services ("PureChem"), StimWrx Energy Services Ltd.
("StimWrx"), Sialco Materials Ltd. ("Sialco"), and Clear
Environmental Solutions ("Clear").
Following a series of transformative acquisitions, including the
purchase of Jacam Chemicals ("Jacam") in 2013 and Catalyst Oilfield
Services ("Catalyst") in 2016, the Company has been focused on
integrating these businesses into its existing operations and
driving efficiencies and organic growth. On December 31, 2020, the Company completed an
internal organization which combined the retail businesses of Jacam
and Catalyst to form Jacam Catalyst, LLC.
The Jacam Catalyst, PureChem, and Sialco brands are vertically
integrated manufacturers of advanced specialty chemicals. In
addition to being basic in the manufacture of oilfield chemicals,
Jacam Catalyst, and PureChem have expanding distribution channels
into the oilfield. The StimWrx brand provides near matrix
stimulation and remediation of oil, gas, and injection wells
in Western Canada and the US. The
Canadian Energy Services and AES brands are focused on the design
and implementation of drilling fluids systems and completion
solutions sold directly to oil and gas producers. The Superior
Weighting brand custom grinds minerals including barite, which is
the weighting agent utilized in most drilling fluid systems.
Clear is a complimentary business division that supports the
operations and augments the product offerings in the WCSB. Clear is
CES' environmental division, providing environmental consulting,
water management and water transfer services, and drilling fluids
waste disposal services primarily to oil and gas producers active
in the WCSB.
CES continues to invest in research and development of new
technologies and in the top-end scientific talent that can develop
and refine these technologies. CES operates nine separate lab
facilities across North America:
two in Houston, Texas; two in
Midland, Texas; one in
Sterling, Kansas; and one in each
of Calgary, Alberta; Grand Prairie, Alberta; Carlyle,
Saskatchewan; and Delta, British
Columbia. In the US, CES' main chemical manufacturing and
reacting facility is located in Sterling,
Kansas with additional low-temperature reacting and chemical
blending capabilities just outside of Midland, Texas and chemical blending
capabilities in Sonora, Texas. In
Canada, CES has a chemical
manufacturing and reacting facility located in Delta, British Columbia with additional
chemical blending capabilities located in Carlyle, Saskatchewan, Nisku, Alberta, and Grand Prairie, Alberta. CES also leverages third party
partner relationships to drive innovation in the consumable fluids
and chemicals business.
Cautionary Statement
Except for the historical and present factual information
contained herein, the matters set forth in this press release, may
constitute forward-looking information or forward-looking
statements (collectively referred to as "forward-looking
information") which involves known and unknown risks, uncertainties
and other factors which may cause the actual results, performance
or achievements of CES, or industry results, to be materially
different from any future results, performance or achievements
expressed or implied by such forward-looking information.
When used in this press release, such information uses such words
as "may", "would", "could", "will", "intend", "expect", "believe",
"plan", "anticipate", "estimate", and other similar
terminology. This information reflects CES' current
expectations regarding future events and operating performance and
speaks only as of the date of the press release.
Forward-looking information involves significant risks and
uncertainties, should not be read as a guarantee of future
performance or results, and will not necessarily be an accurate
indication of whether or not such results will be achieved. A
number of factors could cause actual results to differ materially
from the results discussed in the forward-looking information,
including, but not limited to, the factors discussed below.
The management of CES believes the material factors, expectations
and assumptions reflected in the forward-looking information are
reasonable but no assurance can be given that these factors,
expectations and assumptions will prove to be correct. The
forward-looking information contained in this document speaks only
as of the date of the document, and CES assumes no obligation to
publicly update or revise such information to reflect new events or
circumstances, except as may be required pursuant to applicable
securities laws or regulations. The material assumptions in making
forward-looking statements include, but are not limited to,
assumptions relating to demand levels and pricing for the oilfield
consumable chemical offerings of the Company; fluctuations in the
price and demand for oil and natural gas; anticipated activity
levels of the Company's significant customers; commodity pricing;
general economic and financial market conditions; the successful
integration of recent acquisitions; the Company's ability to
finance its operations; levels of drilling and other activity in
the WCSB, the Permian and other US basins, the effects of seasonal
and weather conditions on operations and facilities; changes in
laws or regulations; currency exchange fluctuations; the ability of
the Company to attract and retain skilled labour and qualified
management; and other unforeseen conditions which could impact the
Company's business of supplying oilfield consumable chemistry to
the Canadian and US markets and the Company's ability to respond to
such conditions.
In particular, this press release contains forward-looking
information pertaining to the following: the certainty and
predictability of future cash flows and earnings; expectations that
EBITDAC will exceed the sum of expenditures on interest, taxes and
capital expenditures; expectations of capital expenditures in 2020;
expectations regarding CES' ability to harvest working capital as
activity levels decline based on historical performance and current
circumstances; expectations that EBITDAC will provide sufficient
free cash flow to pay down the Company's Senior Facility and add
cash to the balance sheet; expectations regarding the impact of the
COVID-19 pandemic on CES' operations and the oil and natural gas
industry generally; CES' ability to execute on
financial goals relating to its balance sheet, liquidity, working
capital and cost structure; expectations regarding the
performance of CES' business model and counter cyclical balance
sheet during downturns; expectations regarding CES' ability to
qualify and participate in the Canadian Government's CEWS
program; expectations regarding the impact of the
COVID-19 pandemic on industry activity levels; expectations that
CES will continue to remain open and fully operating during the
COVID-19 pandemic; expectations regarding the availability and
distribution of COVID-19 vaccines and the corresponding impact on
government mandated travel and gathering restrictions, increased
demand for fossil-fuels, improving commodity prices, increased
production levels and drilling activity; expectations regarding
reduced capital expenditures by CES' customers and the quantum of
shut-in production by CES' customers; expectations that CES'
financial position will provide a competitive advantage in a
recovery; the sufficiency of liquidity and capital resources to
meet long-term payment obligations; CES' ability to increase or
maintain its market share, including expectations that PureChem and
JACAM will increase market share in the oilfield consumable
chemical market, that Catalyst will increase market-share of
production and specialty chemicals in the Permian Basin, and that
AES will increase drilling fluids market share in the Permian
Basin; optimism with respect to future prospects for CES; impact of
CES' vertically integrated business model on future financial
performance; CES' ability to leverage third party partner
relationships to drive innovation in the consumable fluids and
chemicals business; supply and demand for CES' products and
services, including expectations for growth in CES' production and
specialty chemical sales, expected growth in the consumable
chemicals market; industry activity levels; commodity prices;
uncertainty surrounding the duration and severity of a low oil and
natural gas price environment; development of new technologies;
expectations regarding CES' growth opportunities in Canada and the US; expectations regarding the
performance or expansion of CES' operations and working capital
optimization; expectations regarding end markets for
production chemicals and drilling fluids in Canada and the US; expectations regarding the
impact of production curtailment policies; expectations regarding
demand for CES' services and technology; investments in research
and development and technology advancements; access to debt and
capital markets and cost of capital; expectations
regarding capital allocation including the use of surplus free cash
flow, the purchase of CES' common shares by CES pursuant to the
NCIB, debt reduction through the repayment of the Company's Senior
Facility or repurchases of the Company's Senior Notes, investments
in current operations, issuing dividends, or market acquisitions;
CES' ability to continue to comply with covenants in debt
facilities; and competitive conditions.
CES' actual results could differ materially from those
anticipated in the forward-looking information as a result of the
following factors: general economic conditions in the US,
Canada, and internationally;
geopolitical risk; fluctuations in demand for consumable fluids and
chemical oilfield services, the severity of the downturn in
oilfield activity; the severity of the decline in activity in the
Permian, the WCSB, and other basins in which the Company
operates; a decline in frac related chemical sales; a decline in
operator usage of chemicals on wells; an increase in the number of
customer well shut-ins; a shift in types of wells drilled;
volatility in market prices for oil, natural gas, and natural gas
liquids and the effect of this volatility on the demand for
oilfield services generally; the declines in prices for natural
gas, natural gas liquids, oil, and pricing differentials between
world pricing; pricing in North
America and pricing in Canada; impacts of production level decisions
among OPEC+ members and the potential demand impacts of COVID-19;
competition, and pricing pressures from customers in the current
commodity environment; the degree and severity of the COVID-19
pandemic, including government laws and regulations implemented in
response to the pandemic and the resulting impact on the demand for
oil and natural gas; government support programs implemented in
response to the COVID-19 pandemic and potential changes to the
qualification criteria and amount of available support; political
and societal unrest that may impact CES' operations as well as
impact the market for oil and natural gas generally; currency risk
as a result of fluctuations in value of the US dollar; liabilities
and risks, including environmental liabilities and risks inherent
in oil and natural gas operations; sourcing, pricing and
availability of raw materials, consumables, component parts,
equipment, suppliers, facilities, and skilled management, technical
and field personnel; the collectability of accounts receivable,
particularly in the current low oil and natural gas price
environment; ability to integrate technological advances and match
advances of competitors; ability to protect the Company's
proprietary technologies; availability of capital; uncertainties in
weather and temperature affecting the duration of the oilfield
service periods and the activities that can be completed; the
ability to successfully integrate and achieve synergies from the
Company's acquisitions; changes in legislation and the regulatory
environment, including uncertainties with respect to oil and gas
royalty regimes, programs to reduce greenhouse gas and other
emissions, carbon pricing schemes, and regulations restricting the
use of hydraulic fracturing; pipeline capacity and other
transportation infrastructure constraints; government mandated
production curtailments; reassessment and audit risk and other tax
filing matters; changes and proposed changes to US policies
including tax policies or policies relating to the oil and
gas industry; international and domestic trade disputes,
including restrictions on the transportation of oil and natural gas
and regulations governing the sale and export of oil, natural gas
and refined petroleum products; the impact of climate change
policies in regions which CES operates; the impact and speed of
adoption of low carbon technologies; potential changes to the crude
by rail industry; changes to the fiscal regimes applicable to
entities operating in the US and the WCSB; supply chain disruptions
including those caused by global pandemics or disease or from
political unrest and blockades; access to capital and the liquidity
of debt markets; fluctuations in foreign exchange and interest
rates; CES' ability to maintain adequate insurance at rates it
considers reasonable and commercially justifiable; and the other
factors considered under "Risk Factors" in CES' Annual
Information Form for the year ended December
31, 2020 dated March 11, 2021,
and "Risks and Uncertainties" in CES' MD&A for the three and
twelve months ended December 31,
2020, dated March 11,
2021.
THE TORONTO STOCK EXCHANGE HAS NOT REVIEWED AND DOES NOT
ACCEPT RESPONSIBILITY FOR THE ADEQUACY OR ACCURACY OF THIS
RELEASE.
SOURCE CES Energy Solutions Corp.