Mr. Tom Simons reports

CES ENERGY SOLUTIONS CORP. ANNOUNCES RESULTS FOR THE FIRST QUARTER ENDED MARCH 31, 2019 AND DECLARES CASH DIVIDEND

CES Energy Solutions Corp. has released its financial and operating results for the three months ended March 31, 2019. Further, CES will pay a cash dividend of 0.5 cent per common share on June 14, 2019, to the shareholders of record at the close of business on May 31, 2019.

Commenting on the quarter, Tom Simons, CES's president and chief executive officer, said: "First quarter 2019 results represent improvements in key focus areas for the company and a good start to 2019. Revenue and adjusted EBITDAC [earnings from continuing operations before interest, taxes, depreciation and amortization] increased year over year as the company's significant U.S. operations and associated infrastructure have expanded. In Canada, we continue to be the market leader in a challenging environment and remain disciplined on cost structure while ensuring the business maintains the scalability to grow into its infrastructure. In the quarter, we reduced the draw on our senior facility and remained active in our NCIB [normal course issuer bid] share repurchase program. With margins improving from prior quarter, significant capex largely completed and reduced levels of working capital, CES continues to increase free cash flow generation from all business lines and is well positioned to capitalize on existing and improving industry trends in key markets."

CES generated $333-million in revenue in Q1 2019, representing a record first quarter result for the company and achieved adjusted EBITDAC of $43.7-million in Q1 2019, both of which represent increases over Q1 2018.

Revenue generated in the United States was $224.9-million in Q1 2019, or 68 per cent of the company's total revenue in the quarter, and represented an increase of 25 per cent over the 2018 comparative period. The year-over-year increase in U.S. revenues was driven by CES's improving market share, completed investments in U.S. infrastructure and operations, improvement in the drilling fluids business, and increased production chemical related activity, particularly in the Permian basin.

Revenue generated in Canada was $108.1-million in Q1 2019, or 32 per cent of the company's total revenue in the quarter, and represented a decrease of 11 per cent versus the 2018 comparative period. The Canadian oil and gas industry continued to face headwinds in Q1 2019 with government-mandated production curtailments and winter drilling activity that was significantly lower than Q1 2018, negatively impacting both production chemical and drilling fluids revenues in the current quarter.

On Jan. 1, 2019, the company adopted IFRS 16, Leases using the modified retrospective approach, therefore comparative information has not been restated. The adoption of IFRS 16 resulted in the addition of $19.9-million in right-of-use assets and corresponding lease obligations on Jan. 1, 2019. For the three months ended March 31, 2019, the impact of IFRS 16 on adjusted EBITDAC was an increase of $1.4-million, whereas the impact on net income was a decrease of $200,000 as the reduction in cost of sales and general and administrative expenses was offset by higher depreciation expense and finance costs. Further details are included in the "significant accounting policies" section in the company's management discussion and analysis for the three months ended March 31, 2019.

In Q1 2019, CES recorded gross margin of $69.2-million, or 20.8 per cent of revenue, compared with gross margin of $70.6-million, or 23.5 per cent of revenue generated in Q1 2018. In Q1 2019, CES recorded gross margin (excluding depreciation) of $81.8-million, or 24.6 per cent of revenue, compared with gross margin (excluding depreciation) of $80.2-million, or 26.7 per cent of revenue generated in Q1 2018. Throughout 2018 and into Q1 2019, cost inflation on significant inputs has outpaced the combination of CES's operating leverage gains and CES's current ability to pass cost increases through to customers. As was evidenced from Q4 2018 to Q1 2019, CES believes that as it increases sales in areas such as the Permian basin and the Deep basin, CES will realize improved operating leverage from its expanded infrastructure, and its innovative technologies and superior service culture should improve margins going forward. Net income for Q1 2019 was $2.2-million, compared with $13.3-million in Q1 2018.

Q1 2019 adjusted EBITDAC was $43.7-million, representing 13.1 per cent of revenue, versus $42.5-million in Q1 2018, or 14.1 per cent of revenue. Excluding the $1.4-million increase resulting from the adoption of IFRS 16, adjusted EBITDAC in Q1 2019 would have been $42.3-million, representing 12.7 per cent of revenue. In Q4 2018, CES achieved adjusted EBITDAC of $42.1-million, which represented 12.1 per cent of quarterly revenue. When compared with the prior quarter, Q1 2019 adjusted EBITDAC as a percentage of revenue benefited from revenue mix, internal cost improvement initiatives and isolated price increases.

In Q1 2019, CES incurred $9.4-million in capital expenditures, compared with $15.8-million for the three months ended March 31, 2018, excluding amounts reimbursed through insurance proceeds. Current quarter capital expenditures were primarily comprised of fleet additions, lab equipment and field equipment to support higher U.S. activity levels and associated head count. The company has completed its significant infrastructure buildout in the United States and Canada to optimize existing operations and support growth in key markets.

CES continues to maintain a prudent balance sheet and is well positioned to capitalize from existing operations and potential growth opportunities in key markets. At March 31, 2019, CES had a net draw of $132.1-million on its senior facility (Dec. 31, 2018: $161.5-million). The decrease was primarily driven by working capital returning to the balance sheet and free cash flow generation, offset by opportunistic share repurchases through CES's normal course issuer bid program. The maximum available draw on the senior facility at March 31, 2019, was $180-million on the Canadian facility and $40-million (U.S.) on the U.S. facility (Dec. 31, 2018: $180-million and $40-million (U.S.), respectively). At March 31, 2019, CES was in compliance with the terms and covenants of its senior facility. As at the date hereof, the company had a net draw of approximately $130-million on its senior facility. In October, 2017, CES successfully refinanced and reduced its coupon on its $200-million senior notes by issuing new 6.375 per cent senior notes which have an extended maturity into October, 2024, providing a stable long-term tranche of debt to withstand potential industry volatility.

CES continues to see improvement in its financial performance and the company's board of directors and management believe that the market price of CES's common shares do not reflect their underlying value. On July 17, 2018, the company began a normal course issuer bid (NCIB) to repurchase for cancellation up to 24,587,978 common shares. The NCIB will terminate on July 16, 2019, or such earlier date as the maximum number of common shares are purchased pursuant to the NCIB or the NCIB is completed or is terminated at the company's election. Since inception of the NCIB and up to March 31, 2019, the company has repurchased 5,160,500 common shares at an average price of $3.99 per share for a total amount $20.6-million, representing 21 per cent of total shares available to repurchase. Subsequent to March 31, 2019, the company has repurchased 822,400 additional common shares at a weighted average price per share of $2.78 per share for a total amount of $2.3-million.

CES has also made changes to the executive management team of its Canadian production chemicals division, PureChem. Effective May 9, 2019, Ken Zinger, currently president of Canadian drilling fluids and chief operating officer, will also assume leadership of Canadian production chemicals in his new role as president of Canadian operations. Mr. Zinger will assume the PureChem leadership position formerly held by Jason Waugh, who is leaving the company. Senior management and operations of Canadian production chemicals remain otherwise unchanged.

"On behalf of the company, we would like to thank Jason Waugh for his hard work and contributions over the last several years, particularly in growing CES's PureChem division in Canada and assembling a high-quality team to carry the division forward. Employees, customers and shareholders have benefited from his service to the company and we wish Jason all the best in his future endeavours," said Mr. Simons. "Ken Zinger has been an integral part of the company's growth since 2006, and we are confident in Ken's leadership in this expanded role as PureChem continues to grow into its infrastructure and gain market share in Canada."

Outlook

CES continues to be optimistic about its prospects for 2019 and beyond. CES's infrastructure buildout in both the United States and Canada was largely completed in 2018, and this strategy has positioned the company to take advantage of the opportunities ahead. CES believes that, over time, it can continue to grow its share of the oil field consumable chemical markets in which it competes. CES also sees the consumable chemical market increasing its share of the oil field spend as operators continue to: drill longer-reach laterals and drill them faster; expand and optimize the utilization of pad drilling and cube development techniques; 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 from new wells.

In the United States, CES's infrastructure is largely built out to meet anticipated growing production chemical and drilling fluid needs in the key basins. In the Permian basin, the Kermit, Tex., mud plant expansion has been designed to double capacity over 2017 levels, and has enabled the company to take on new work and continue to grow market share. In addition, Catalyst's current platform is set up to capitalize on growing production and higher levels of activity in the Permian basin, which CES believes will be even more pronounced in 2019 as several pipeline projects are on track to add significant offtake capacity. Further, CES continues to recruit top talent in this highly competitive region. CES plans to expand its barite grinding capabilities in the United States, further adding to the company's competitive positioning and operating leverage.

In Canada, market conditions continue to face headwinds due to current take-away capacity constraints and lack of consistent market access, which caused wide price differentials, relatively low natural gas prices as well as government-mandated production curtailments. As a result, Canadian oil and gas operators pared back capital programs for 2019 and winter drilling activity was muted. Price differentials were positively impacted in late 2018 by the mandatory crude oil production curtailments established by the Alberta government; however, customers remain cautious on capital programs in the second half of 2019. CES believes that its current Canadian business is well positioned to weather these persistent market challenges through its scalable Canadian drilling fluids business model and through improved financial contribution from its PureChem production chemical division as it realizes continuing structural efficiency gains and grows into its infrastructure.

CES's strategy is to utilize 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. The downturn made many middlemen, or competitors that are simply resellers of other company's products, redundant. By being basic in the manufacture of the consumable chemicals it sells, CES continues to be price competitive and a technology leader. Recent competitor consolidations and business failures will provide further opportunities for CES as 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 oil field.

CES's balance sheet is well positioned to capitalize on robust oil field activity levels in the United States and weather the current decline in industry activity in Canada. In October, 2017, CES successfully refinanced and reduced its coupon on its $300-million senior notes by issuing new 6.375 per cent senior notes which have an extended maturity into October, 2024. In 2019, it is expected that EBITDAC will materially exceed the sum of cash expenditures on interest, taxes and capital expenditures, allowing for free cash flow to be returned to shareholders through CES's monthly dividend and recently implemented NCIB.

As CES's infrastructure buildout in both the United States and Canada was largely completed in 2018, absent acceptable return expansionary capital projects, such as the buildout of the northeast U.S. barite facility, CES expects capital expenditures in 2019 to return to levels below 2017/2018 levels. CES's business model, capital structure and free cash flow generation attributes continue to permit prudent capital allocation to one or a combination of: investment in current operations, debt reduction, opportunistic share repurchases, dividends and acquisitions.

CES will continue to assess organic and M&A (merger and acquisition) opportunities that will improve CES's competitive position and enhance profitability. Any acquisitions must meet CES's stringent financial and operational metrics. In its core businesses, CES will focus on profitably growing market share, controlling costs, developing or acquiring new technologies, and making strategic investments as required to position the business to capitalize on growing activity levels and increasing intensity.

Conference call details

With respect to the fourth quarter and annual results, CES will host a conference call/webcast at 9 a.m. MT (11 a.m. ET) on Friday, May 10, 2019.

North American toll-free number:  1-855-327-6838

International/Toronto number:  416-915-3239

Webcast:  on the CES Energy Solutions website

                             FINANCIAL HIGHLIGHTS
                      ($000s, except per-share amounts) 

                                                Three months ended March 31,           
                                                        2019           2018
Revenue
United States                                       $224,892       $179,462
Canada                                               108,096        120,856
Total revenue                                        332,988        300,318
Gross margin                                          69,155         70,605
as a percentage of revenue                             20.8%          23.5%
Gross margin (excluding depreciation)                 81,841         80,166
as a percentage of revenue                             24.6%          26.7%
Net income                                             2,198         13,250
Per share -- basic                                      0.01           0.05
Per share -- diluted                                    0.01           0.05
Adjusted EBITDAC                                      43,713         42,489
Adjusted EBITDAC % of revenue                          13.1%          14.1%
Cash provided by operating activities                 51,835         23,575
Funds flow from operations                            36,294         34,084
Capital expenditures
Expansion capital                                      7,865         12,461
Maintenance capital                                    1,537          3,382
Total capital expenditures                             9,402         15,843
Dividends declared                                     3,995          2,010
per share                                             0.0150         0.0075

About CES Energy Solutions Corp.

CES is a leading provider of technically advanced consumable chemical solutions throughout the life cycle of the oil field. This includes total solutions at the drill bit, at the point of completion and stimulation, at the wellhead and pumpjack, and finally through to the pipeline and mid-stream market.

We seek Safe Harbor.