CES ENERGY SOLUTIONS CORP. ANNOUNCES STRONG Q1 2025 RESULTS WITH RECORD REVENUE AND DECLARES CASH DIVIDEND

Canada NewsWire

CALGARY, AB, May 8, 2025

CALGARY, AB, May 8, 2025 /CNW/ - CES Energy Solutions Corp. ("CES" or the "Company") (TSX: CEU) (OTC: CESDF) is pleased to announce strong financial results for the three months ended March 31, 2025. The Company's Board of Directors also approved a quarterly dividend of $0.0425 per share, which will be paid on July 15, 2025, to the shareholders of record at the close of business on June 30, 2025.

   -- Record quarterly revenue of $632.4 million, increased 7% year over year 
 
   -- Quarterly Adjusted EBITDAC of $99.9 million at a 15.8% margin 
 
   -- Conservative leverage of 1.17x Total Debt/Adjusted EBITDAC, a reduction 
      from 1.28x year over year 
 
   -- Returned $28.1 million to shareholders through $6.8 million in dividends 
      and $21.3 million for the repurchase of 2.7 million shares, representing 
      approximately 1.2% of common shares outstanding at January 1, 2025 

CES' first quarter results continue to demonstrate the significant merits of its unique business model. CES has continued to provide mission critical chemical solutions enabling our customers to succeed in an era of high service intensity levels, and increasingly complex drilling fluids and production chemical technology requirements.

CES' performance is characterized by strong levels of financial resilience, cash flow generation, and profitability inherent in its capex light, asset light, vertically integrated consumable chemicals business model supported by industry leading people, infrastructure, and technology. CES continues to provide valuable solutions to increasingly complicated drilling programs which require higher levels of service intensity, effectively overcoming a lower US industry rig count. Attractive revenue growth was also achieved by delivering superior production chemical services and technology to active, results oriented, high quality customers as they continue to maximize returns on their producing wells through effective chemical treatments.

CES remains confident in its ability to continue generating strong surplus free cash flow, supported by its financial performance, outlook, and capital structure, and furthermore, on May 8, 2025, the Company's Board of Directors approved a quarterly dividend of $0.0425 per share, which will be paid on July 15, 2025, to the shareholders of record at the close of business on June 30, 2025.

First Quarter Results

In the first quarter, CES generated record revenue of $632.4 million, representing a sequential increase of $27.0 million or 4% compared to $605.4 million in Q4 2024, and an increase of $43.9 million or 7% compared to $588.6 million in Q1 2024. Increasing service intensity levels, higher industry rig counts in Canada, and strong market share positions resulted in an overall uptick in revenue compared to both prior quarter and prior year, despite continued softness in US industry rig counts.

Revenue generated in the US during Q1 2025 was $402.5 million, representing a sequential increase of $12.3 million or 3% compared to Q4 2024, and an increase of $14.8 million or 4% compared to Q1 2024. US revenues for the three month period benefited from higher production levels, increased service intensity, and an increase in USDCAD foreign exchange rates, collectively. CES furthered its strong industry positioning, achieving US Drilling Fluids Market Share of 23% for the three months ended March 31, 2025, compared to 23% and 21% for the three months ended March 31, 2024, and December 31, 2024, respectively.

Revenue generated in Canada during Q1 2025 set a new quarterly record at $230.0 million, representing a sequential increase of $14.8 million or 7% compared to Q4 2024, and $29.1 million or 14% compared to Q1 2024. Canadian revenues for the period benefited from higher industry activity and production chemical volumes year over year. Canadian Drilling Fluids Market Share of 42% compared to 34% and 36% for the three months ended March 31, 2024, and December 31, 2024, respectively.

CES achieved Adjusted EBITDAC of $99.9 million, representing a decrease of 3% compared to the record set in Q4 2024, and 2% compared to Q1 2024. Adjusted EBITDAC as a percentage of revenue of 15.8% in Q1 2025 was within the targeted range of 15.5% to 16.5%, and below the 17.0% and 17.3% recorded in Q4 2024 and Q1 2024, respectively, resulting from a less favorable product mix, and input cost fluctuations realized during the quarter when compared to both the prior period and prior year.

Net income for the three months ended March 31, 2025, was $44.1 million and compared to $54.5 million for the three months ended March 31, 2024. The decrease to Net Income of 19% year over year was driven by an increase to finance costs and current taxes to $17.5 million and $12.1 million, respectively, (Q1 2024 - $6.9 million and $7.7 million, respectively) partially offset by record revenue levels.

During the quarter, CES returned $28.1 million to shareholders (Q1 2024 - $23.7 million), through $21.3 million in shares repurchased under its NCIB and its quarterly dividend of $6.8 million (Q1 2024 - $17.8 million and $5.9 million, respectively).

CES generated $77.8 million in Funds Flow from Operations in Q1 2025, compared to $68.8 million generated in Q4 2024 and $74.2 million generated in Q1 2024. Funds Flow from Operations excludes the impact of working capital, and is reflective of the continued strong surplus free cash flow generated in Q1 2025.

For Q1 2025, net cash provided by operating activities totaled $60.1 million compared to $86.3 million during the three months ended March 31, 2024. The decrease in net cash provided by operating activities for the three month period was driven by an increase to working capital requirements to support record revenue levels when compared to the prior year.

CES generated $25.6 million in Free Cash Flow in Q1 2025, compared to $34.6 million generated in Q4 2024, and $57.4 million generated in Q1 2024. The decrease in Q1 2025 was driven by elevated working capital requirements to support record revenue levels and increases in investments in capital expenditures to sustain elevated revenue levels. Free Cash Flow includes the impact of quarterly working capital variations, net of capital expenditures, and lease repayments.

As at March 31, 2025, CES had a Working Capital Surplus of $686.8 million, which increased from $681.1 million at December 31, 2024. The movement during the quarter was driven by increased Accounts Receivable and Accounts Payable and Accrued Liabilities as a result of record activity levels in the period. The Company continues to focus on working capital optimization benefiting from the high quality of its customers and diligent internal credit monitoring processes.

As at March 31, 2025, CES had Total Debt of $469.2 million compared to $452.6 million at December 31, 2024. Included in Total Debt at March 31, 2025, is the Senior Facility of $157.7 million (December 31, 2024 - $148.8 million), $200.0 million of Senior Notes (December 31, 2024 - $200.0 million), and lease obligations of $102.4 million (December 31, 2024 - $91.9 million). The increase in Total Debt during the period was driven by an increase to lease obligations and working capital requirements to support record revenue levels combined with elevated shareholder returns, partially offset by continued strong financial performance and ongoing efforts to optimize working capital cycles.

Working Capital Surplus exceeded Total Debt at March 31, 2025, by $217.5 million (December 31, 2024 - $228.5 million). As of the date of this press release, the Company had total long-term debt of approximately $373.0 million, comprised of a net draw on its Senior Facility of approximately $173.0 million and its outstanding $200.0 million Senior Notes due May 24, 2029.

Outlook

The demand trends of developing countries and global demand requirements to support eventual energy transition initiatives, combined with depletion of existing resources, reduced investment in the upstream oil and gas sector over recent years, and diminished available inventory quality has necessitated increased service intensity for available resources thereby resulting in continued constructive end markets for CES services which enhance drilling and production performance.

Economic uncertainty, OPEC+ easing of production cuts, and ongoing global conflicts have tempered near-term energy supply-demand dynamics. Despite this, energy industry fundamentals continue to support critical drilling and production activity for oil and natural gas as current depressed global inventories and fewer high-quality drilling locations provide cautious optimism for suitable pricing over the mid to longer term. In the shorter term the situation is more fluid as customers are closely monitoring fluctuating oil and gas pricing in the context of their inherent production economics which may impact activity levels, spending plans, and, by extension, product pricing. While the current political landscape and impact of recently imposed tariffs in both the US and Canada continues to generate uncertainty, including within the energy sector, CES' business model provides relative protection due to its significant proportion of revenue derived in the US versus Canada, its vertically integrated business models in both countries, and flexible supply chain capabilities.

CES expects to benefit from secular trends in upstream activity, increased service intensity levels, and adoption of advanced critical chemical solutions by capitalizing on its established infrastructure, industry leading positioning, vertically integrated business model, and strategic procurement practices.

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