- Record quarterly revenue of
$524.7 million , increased 21% sequentially and 67% year over year - Record Adjusted EBITDAC of
$73.3 million , increased 20% sequentially and 74% year over year, representing a 14.0% margin - Record Funds Flow from Operations of
$48.9 million - Leverage reduced to 2.5x Total Debt/Adjusted EBITDAC from 2.7x at
June 30, 2022 and 3.0x atMarch 31, 2022 - Working Capital Surplus exceeded Total Debt at
September 30, 2022 by$100.2 million - Paid quarterly dividend of
$0.06 per share on an annualized basis, representing a 10% payout ratio
CES is pleased to announce strong Q3 2022 financial results, demonstrating record quarterly revenue and Adjusted EBITDAC, strong margins and Funds Flow from Operations as the Company continues to demonstrate increased activity and pricing levels across its business lines.
Revenue for the quarter achieved another consecutive record high at
These solid financial results reflect CES' ability to leverage its established infrastructure, strong industry positioning and dedicated people to capitalize on the constructive environment in the broader industry. CES remains confident in its ability to continue generating strong surplus free cash flow and on
CES exited the quarter with a net draw on its Senior Facility of
In the third quarter CES generated revenue of
Revenue generated in the US during Q3 2022 was
Revenue generated in
CES achieved a record Adjusted EBITDAC of
Net income for the three months ended
CES generated a record
As at
CES exited the quarter with a net draw on its Senior Facility of
During Q3 2022, under its NCIB program the Company purchased 550,000 common shares at an average price of
The recovery in global energy demand combined with several years of lower investment in the upstream oil and gas sector have resulted in reduced inventories of oil and natural gas and higher commodity prices, providing a supportive outlook for the sector in CES' North American target market. Increased activity and demand have led to improved production levels, drilling activity and commodity prices. We expect current strong activity levels to continue through the balance of 2022 and into 2023, moderated by challenges with availability of labour and supply chain constraints. Further, broad economic concerns exist with respect to recession risk, rising interest rates and geopolitical instability, which may impact customer spending plans. CES is optimistic in its outlook for the remainder of the year and into next year as it expects to benefit from elevated upstream activity and continued strength in commodity pricing across
Commensurate with current record revenue levels, CES expects 2022 capital expenditures to be approximately
CES has proactively managed both the duration and the flexibility of its debt. In
CES' underlying business model is capex light and asset light, enabling generation of significant surplus free cash flow. As our customers endeavor to maintain or grow production in the current environment, CES will leverage its established infrastructure, business model, and nimble customer-oriented culture to deliver superior products and services to the industry. 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.
With respect to the third quarter results, CES will host a conference call / webcast at
North American toll-free: 1-(800)-319-4610
International /
Link to Webcast: http://www.cesenergysolutions.com/
Three Months Ended | Nine Months Ended | |||||
($000s, except per share amounts) | 2022 | 2021 | %Change | 2022 | 2021 | %Change |
Revenue | ||||||
349,503 | 196,966 | 77 % | 898,466 | 540,270 | 66 % | |
175,214 | 117,429 | 49 % | 461,182 | 288,356 | 60 % | |
Total Revenue | 524,717 | 314,395 | 67 % | 1,359,648 | 828,626 | 64 % |
Net income | 24,455 | 13,372 | 83 % | 54,810 | 25,161 | 118 % |
per share – basic | 0.10 | 0.05 | 82 % | 0.21 | 0.10 | 118 % |
per share - diluted | 0.09 | 0.05 | 84 % | 0.21 | 0.10 | 119 % |
Adjusted EBITDAC(2) | 73,289 | 42,035 | 74 % | 176,773 | 108,398 | 63 % |
Adjusted EBITDAC(2) % of Revenue | 14.0 % | 13.4 % | 0.6 % | 13.0 % | 13.1 % | (0.1) % |
Cash provided by (used in) operating activities | (16,258) | (45,883) | (65) % | (41,522) | (34,899) | 19 % |
Funds Flow From Operations(3) | 48,868 | 34,887 | 40 % | 128,128 | 83,720 | 53 % |
Capital expenditures | ||||||
10,489 | 5,064 | 107 % | 21,266 | 9,252 | 130 % | |
4,491 | 4,735 | (5) % | 13,544 | 7,996 | 69 % | |
Total capital expenditures | 14,980 | 9,799 | 53 % | 34,810 | 17,248 | 102 % |
Dividends declared | 4,092 | 4,078 | 0 % | 12,269 | 4,078 | 201 % |
per share | 0.016 | 0.016 | — % | 0.048 | 0.016 | 200 % |
Common Shares Outstanding | ||||||
End of period | 255,728,104 | 254,871,878 | 255,728,104 | 254,871,878 | ||
Weighted average - basic | 256,246,967 | 255,194,323 | 255,288,039 | 255,109,710 | ||
Weighted average - diluted | 262,332,402 | 263,284,730 | 261,758,242 | 263,608,982 | ||
As at | |||||
Financial Position ($000s) | %Change | %Change | |||
Total assets | 1,392,967 | 1,265,455 | 10 % | 1,087,598 | 28 % |
Long-term financial liabilities(4) | 543,787 | 500,828 | 9 % | 423,077 | 29 % |
Total Debt(5) | 565,918 | 521,246 | 9 % | 439,392 | 29 % |
Working Capital Surplus(5) | 666,109 | 574,585 | 16 % | 459,754 | 45 % |
Net Debt(5) | (100,191) | (53,339) | 88 % | (20,362) | 392 % |
Shareholders' equity | 584,205 | 521,204 | 12 % | 486,675 | 20 % |
Notes: |
1Supplementary Financial Measure. Supplementary Financial Measures are provided herein because Management believes they assist the reader in understanding CES' results. Refer to "Non-GAAP Measures and Other Financial Measures" for further detail. |
2Non-GAAP measure that does not have any standardized meaning under IFRS and therefore may not be comparable to similar measures presented by other entities. The most directly comparable GAAP measure for Adjusted EBITDAC is Net income. Refer to the section entitled "Non-GAAP Measures and Other Financial Measures" herein. |
3Non-GAAP measure that does not have any standardized meaning under IFRS and therefore may not be comparable to similar measures presented by other entities. The most directly comparable GAAP measure for Funds flow from operations is Cash provided by (used in) operating activities. Refer to the section entitled "Non-GAAP Measures and Other Financial Measures" herein. |
4Includes the long-term portion of the Senior Facility, the Senior Notes, lease obligations, deferred acquisition consideration and cash settled incentive obligations. |
5Non-GAAP measures that do not have any standardized meaning under IFRS and therefore may not be comparable to similar measures presented by other entities. The most directly comparable GAAP measure for Total Debt, Net Debt and Working Capital Surplus is Long-term financial liabilities. Refer to the section entitled "Non-GAAP Measures and Other Financial Measures" herein. |
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. 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
CES uses certain supplementary information and measures not recognized under IFRS where management believes they assist the reader in understanding CES' results. These measures are calculated by CES on a consistent basis unless otherwise specifically explained. These measures do not have a standardized meaning under IFRS and may therefore not be comparable to similar measures used by other issuers.
Non-GAAP financial measures and non-GAAP ratios have the definition set out in National Instrument 52-112 "Non-GAAP and Other Financial Measures Disclosure". The non-GAAP measures, non-GAAP ratios and supplementary financial measures used in this news release, with IFRS measures, are the most appropriate measures for reviewing and understanding the Company's financial results. The non-GAAP measures and non-GAAP ratios are further defined as follows:
EBITDAC - is a non-GAAP measure that has been reconciled to net income (loss) for the financial periods, being the most directly comparable measure calculated in accordance with IFRS. EBITDAC is defined as net income before interest, taxes, depreciation and amortization, finance costs, other income (loss), stock-based compensation and impairment of goodwill, which are not reflective of underlying operations. EBITDAC includes government relief subsidies received to help mitigate the impact of the COVID-19 pandemic. EBITDAC is a metric used to assess the financial performance of an entity's operations. Management believes that this metric provides an indication of the results generated by the Company's business activities prior to how these activities are financed, how the Company is taxed in various jurisdictions, and how the results are impacted by foreign exchange and non-cash charges. This non-GAAP financial measure is also used by management as a key performance metric supporting decision making and assessing divisional results.
Adjusted EBITDAC - is a non-GAAP measure that is defined as EBITDAC noted above, adjusted for specific items that are considered to be non-recurring in nature. Management believes that this metric is relevant when assessing normalized operating performance.
Adjusted EBITDAC % of Revenue - is a non-GAAP ratio calculated as Adjusted EBITDAC divided by revenue. Management believes that this metric is a useful measure of the Company's normalized operating performance relative to its top line revenue generation and a key industry performance measure.
Readers are cautioned that EBITDAC and Adjusted EBITDAC should not be considered to be more meaningful than net income (loss) determined in accordance with IFRS.
EBITDAC, Adjusted EBITDAC, and Adjusted EBITDAC % of Revenue are calculated as follows:
Three Months Ended | Nine Months Ended | |||
$000s | 2022 | 2021 | 2022 | 2021 |
Net income | 24,455 | 13,372 | 54,810 | 25,161 |
Add back (deduct): | ||||
Depreciation on property and equipment in cost of sales | 12,950 | 11,275 | 37,275 | 34,425 |
Depreciation on property and equipment in G&A | 1,881 | 1,735 | 5,422 | 5,318 |
Amortization on intangible assets in G&A | 4,132 | 3,797 | 12,117 | 11,364 |
Current income tax expense | 2,113 | 824 | 5,013 | 2,577 |
Deferred income tax expense | 5,982 | 3,339 | 16,824 | 7,375 |
2,961 | 2,505 | 10,865 | 9,770 | |
Finance costs | 18,680 | 5,334 | 33,907 | 17,089 |
Other expense (income) | 135 | (146) | 540 | (237) |
EBITDAC | 73,289 | 42,035 | 176,773 | 112,842 |
Add back (deduct): | ||||
Gain on sale of building | - | - | - | (4,444) |
Adjusted EBITDAC | 73,289 | 42,035 | 176,773 | 108,398 |
Distributable Earnings - is a non-GAAP measure that is defined as cash provided by operating activities, adjusted for change in non-cash operating working capital less
Dividend Payout Ratio - is a non-GAAP ratio that is defined as dividends declared as a percentage of Distributable Earnings. Management believes it is a useful measure of the proportion of available funds committed to being returned to shareholders in the form of a dividend relative to the Company's total Distributable Earnings.
Readers are cautioned that Distributable Earnings should not be considered to be more meaningful than cash provided by operating activities determined in accordance with IFRS. Distributable Earnings and Dividend Payout Ratio are calculated as follows:
Three Months Ended | Nine Months Ended | |||
2022 | 2021 | 2022 | 2021 | |
Cash provided by (used in) operating activities | (16,258) | (45,883) | (41,522) | (34,899) |
Adjust for: | ||||
Change in non-cash operating working capital | 65,126 | 80,770 | 169,650 | 118,619 |
Less: | (4,491) | (4,735) | (13,544) | (7,996) |
Less: Repayment of lease obligations | (5,178) | (4,353) | (15,466) | (14,395) |
Distributable Earnings | 39,199 | 25,799 | 99,118 | 61,329 |
Dividends declared | 4,092 | 4,078 | 12,269 | 4,078 |
Dividend Payout Ratio | 10 % | 16 % | 12 % | 7 % |
1Supplementary Financial Measure. Supplementary Financial Measures are provided herein because Management believes they assist the reader in understanding CES' results. |
Funds Flow From Operations - is a non-GAAP measure that has been reconciled to Cash provided by (used in) operating activities for the financial periods, being the most directly comparable measure calculated in accordance with IFRS. Funds flow from operations is defined as cash flow from operations before changes in non-cash operating working capital and represents the Company's after tax operating cash flows. This measure is not intended to be considered more meaningful than cash provided by operating activities, comprehensive income (loss), or other measures of financial performance calculated in accordance with IFRS. Funds Flow From Operations is used by management to assess operating performance and leverage, and is calculated as follows:
Three Months Ended | Nine Months Ended | |||
2022 | 2021 | 2022 | 2021 | |
Cash provided by (used in) operating activities | (16,258) | (45,883) | (41,522) | (34,899) |
Adjust for: | ||||
Change in non-cash operating working capital | 65,126 | 80,770 | 169,650 | 118,619 |
Funds Flow From Operations | 48,868 | 34,887 | 128,128 | 83,720 |
Working Capital Surplus - Working Capital Surplus is a non-GAAP measure that is calculated as current assets less current liabilities, excluding the current portion of finance lease obligations. Management believes that this metric is a key measure to assess operating performance and leverage of the Company and uses it to monitor its capital structure.
Net Debt and Total Debt - Net Debt and Total Debt are non-GAAP measures that Management believes are key metrics to assess liquidity of the Company and uses them to monitor its capital structure. Net debt represents Total Debt, which includes the Senior Facility, the Senior Notes, both current and non-current portions of lease obligations, non-current portion of cash settled incentive obligations, offset by the Company's cash position, less Working Capital Surplus.
Readers are cautioned that Total Debt, Working Capital Surplus, and Net Debt should not be construed as alternative measures to Long-term financial liabilities determined in accordance with IFRS. Total Debt, Working Capital Surplus, and Net Debt are calculated as follows:
As at | ||
Long-term financial liabilities(1) | 543,787 | 423,077 |
Current portion of finance lease obligations | 20,584 | 16,315 |
Current portion of deferred acquisition consideration | 1,547 | - |
Total Debt | 565,918 | 439,392 |
Deduct Working Capital Surplus: | ||
Current assets | 907,051 | 619,201 |
Current liabilities(2) | (240,942) | (159,447) |
Working Capital Surplus | 666,109 | 459,754 |
Net Debt | (100,191) | (20,362) |
1Includes long-term portion of the Senior Facility, the Senior Notes, lease obligations, deferred acquisition consideration and cash settled incentive obligations. |
2Excludes current portion of lease liabilities and deferred acquisition consideration. |
Total Debt/Adjusted EBITDAC – is a non-GAAP ratio that Management believes to be a useful measure of the Company's liquidity and leverage levels, and is calculated as Total Debt divided by Adjusted EBITDAC for the most recently ended four quarters. Total Debt and Adjusted EBITDAC are non-GAAP measures that do not have any standardized meaning under IFRS and therefore may not be comparable to similar measures presented by other entities. Total Debt and Adjusted EBITDAC are calculated as outlined above.
A supplementary financial measure: (a) is, or is intended to be, disclosed on a periodic basis to depict the historical or expected future financial performance, financial position or cash flow of the
Revenue -
Revenue -
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 2022; expectations that Adjusted 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 adoption of the Amendment, the strength of the Company's balance sheet, the achievement of the Company's strategic objectives, and the generation of shareholder value; expectations regarding improving industry conditions and the Company's ability to generate free cash flow to sustain and increase the quarterly dividend; 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 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; 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; development of new technologies; expectations regarding CES' growth opportunities in
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,
THE
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