Mr. Ken Zinger reports

CES ENERGY SOLUTIONS CORP. ANNOUNCES STRONG FOURTH QUARTER AND FULL YEAR 2023 RESULTS WITH RECORD REVENUE AND ADJUSTED EBITDAC AND A 20% INCREASE TO ITS QUARTERLY DIVIDEND

CES Energy Solutions Corp. has released strong financial results for the three and 12 months ended Dec. 31, 2023, along with a 20-per-cent increase to its quarterly dividend from 2.5 cents per share to three cents per share, which will be paid on the company's next scheduled dividend payment of April 15, 2024, to the shareholders of record at the close of business on March 29, 2024.

• Fourth quarter revenue of $553.5 million increased 3% sequentially and decreased 2% year over year
• Record quarterly Adjusted EBITDAC of $84.6 million at a 15.3% margin, increased 5% sequentially and year over year
• Record annual revenue of $2.16 billion representing an increase of 13% over $1.92 billion in 2022
• Record annual Adjusted EBITDAC of $315.8 million at a 14.6% margin representing a 23% increase over $257.0 million at 13.4% in 2022
• Annual Cash Flow from Operations of $301.8 million and Free Cash Flow of $211.6 million
• Total long-term debt reduced by $100.9 million to $390.6 million and Total Debt/Adjusted EBITDAC reduced to 1.49x from 2.17x year over year
• Annual return of $93.5 million to shareholders through $22.5 million in dividends and $70.9 million in share repurchases, representing 8.6% of common shares outstanding at January 1, 2023
• Announced a 20% increase to the quarterly dividend to $0.030 per share representing a 12% Payout Ratio

The record results achieved in 2023 demonstrate the unique resilience, cash flow generation, and profitability characteristics inherent in CES' capex light, asset light, consumable chemicals business model supported by industry leading people, infrastructure, and technology. These record results were achieved through strong contributions across all parts of the business. CES countered a declining industry rig count by providing valuable solutions to increasingly complicated drilling programs which required higher levels of service intensity. Attractive growth was also achieved by delivering superior production chemical services and technology to active, high quality customers as they continued to maximize returns on their producing wells through effective chemical treatments.

With strong free cash flow generation and prudent leverage, CES continued to aggressively return capital to its shareholders. During the quarter, CES returned $25.1 million to shareholders, through $19.1 million or 5,301,700 common shares repurchased under its NCIB and its quarterly dividend of $6.0 million. For the full year 2023, CES returned $93.5 million to shareholders, through $70.9 million or 21,794,900 common shares repurchased under its NCIB and its quarterly dividend of $22.5 million, collectively representing 31% of Cash Flow from Operations and 44% of Free Cash Flow for the year ended December 31, 2023.

CES remains confident in its ability to continue generating strong surplus free cash flow, supported by its financial performance, outlook, and capital structure. Furthermore, on February 29, 2024, the Company's Board of Directors approved a 20% increase to the quarterly dividend from $0.025 per share to $0.030 per share, resulting in an annualized dividend of $0.12 per share representing an implied yield of 3% and Payout Ratio of 12%. The increased dividend returns additional value to shareholders while preserving the strength of the Company's balance sheet and maintaining ample liquidity to fund capital allocation alternatives. The new dividend payment amount will be paid on the Company's next scheduled dividend payment of April 15, 2024 to the shareholders of record at the close of business on March 29, 2024.

Fourth Quarter and Annual Results

In the fourth quarter, CES generated revenue of $553.5 million, representing a sequential increase of $17.0 million or 3% compared to Q3 2023, and 2% behind the record revenue set in Q4 2022 as industry rig counts experienced decreases year over year in both the US and Canada. For the twelve months ended December 31, 2023, CES generated record revenue of $2.16 billion, an increase of $241.2 million or 13% relative to the twelve months ended December 31, 2022. Higher production chemical volumes, strong market share, and increasing service intensity resulted in an overall uptick in revenue compared to prior year, despite a decline in the US and Canadian industry rig counts.

Revenue generated in the US during Q4 2023 was $361.1 million, in line with Q3 2023 and represented a decrease of $17.4 million or 5% compared to Q4 2022. For the twelve months ended December 31, 2023, revenue generated in the US of $1.5 billion was up 15% from the twelve months ended December 31, 2022. US revenues for the three and twelve months ended December 31, 2023 benefited from higher production levels with increased service intensity, and market share gains which partly offset the impact of decreased industry drilling activity. CES maintained its strong industry positioning, with US Drilling Fluids Market Share of 22% and 21% for three and twelve months ended December 31, 2023, respectively, and a year over year improvement from 19% and 18% for the three and twelve months ended December 31, 2022, respectively.

Revenue generated in Canada during Q4 2023 set a new record at $192.4 million, representing a sequential increase of $17.4 million or 10% compared to Q3 2023, and an increase of $8.2 million or 4% compared to Q4 2022. Canadian revenues were positively impacted by higher production chemical volumes and increased service intensity, outpacing the 7% decrease in industry rig counts relative to Q4 2022. For the twelve months ended December 31, 2023, revenue generated in Canada of $696.5 million was up 8% from $645.4 million for the twelve months ended December 31, 2022, driven by higher production volumes year over year. Canadian Drilling Fluids Market Share of 33% and 34% for the three and twelve months ended December 31, 2023, respectively, compared to 38% and 36% for the three and twelve months ended December 31, 2022, respectively.

CES achieved record Adjusted EBITDAC of $84.6 million in Q4 2023, representing a sequential increase of 5% compared to Q3 2023, and an increase of 5% compared to Q4 2022. Adjusted EBITDAC as a percentage of revenue of 15.3% achieved in Q4 2023 compared to 15.0% recorded in Q3 2023 and 14.3% recorded in Q4 2022. For the twelve months ended December 31, 2023, Adjusted EBITDAC was up 23% to a record $315.8 million from $257.0 million in 2022 and Adjusted EBITDAC as a percentage of revenue of 14.6% compared to 13.4% a year ago. For both the three and twelve month periods, Adjusted EBITDAC improved on strong activity levels combined with improved margins as a result of increased service intensity, attractive product mix, strategic procurement initiatives, and a prudent cost structure.

Net income for the three months ended December 31, 2023 was $49.2 million compared to $40.4 million in Q4 2022. Net income for the twelve months ended December 31, 2023 was $154.6 million compared to $95.2 million for the twelve months ended December 31, 2022. Net Income for both the three and twelve months ended December 31, 2023 benefited from strong activity levels combined with improved margins and prudent management of expenses.

During the quarter, CES returned $25.1 million to shareholders (Q4 2022 - $7.8 million), through $19.1 million in shares repurchased under its NCIB and $6.0 million in dividends paid. For the twelve months ended December 31, 2023, CES returned $93.5 million (2022 - $21.6 million) to shareholders, through $70.9 million in shares repurchased and $22.5 million in dividends paid.

For Q4 2023, net cash provided by operating activities totaled $39.3 million, compared to $38.8 million during the three months ended December 31, 2022. For the twelve months ended December 31, 2023, net cash provided by operating activities of $301.8 million compared to net cash used by operating activities of $2.7 million for the twelve months ended December 31, 2022. This year over year improvement was driven by strong financial performance with higher contribution margins on associated activity levels relative to the comparative periods, combined with a lower required investment in working capital through stabilizing revenue growth rates and working capital optimization efforts.

CES generated $68.2 million in Funds Flow from Operations in Q4 2023, compared to $57.9 million generated in Q3 2023 and up 2% from $66.9 million generated in Q4 2022. For the twelve months ended December 31, 2023, CES generated $251.7 million of Funds Flow from Operations compared to $195.0 million in 2022. Funds Flow from Operations excludes the impact of working capital, and is reflective of the continued strong surplus free cash flow generated in 2023.

CES generated $15.2 million in Free Cash Flow in Q4 2023, compared to $75.6 million generated in Q3 2023, and $20.8 million generated in Q4 2022. The sequential decrease in Free Cash Flow was primarily driven by a $28.9 million investment in working capital as Canadian divisions ramped up inventory and accounts receivable balances commensurate with the winter drilling season. For the twelve months ended December 31, 2023, CES generated $211.6 million of Free Cash Flow compared to a use of $64.4 million in 2022. Free Cash Flow includes the impact of quarterly working capital variations, net capital expenditures, and lease repayments.

As at December 31, 2023, CES had a Working Capital Surplus of $632.8 million, which increased from $614.6 million at September 30, 2023 (December 31, 2022 - $691.1 million) as revenue levels increased compared to prior quarter. The increase during the quarter was driven by higher investments in working capital in support of elevated revenue levels quarter over quarter and in preparation for seasonally higher activity levels in Canada. The decrease year over year was driven by improving cash conversion cycle metrics on stable revenue and activity levels as compared to the year ended December 31, 2022. The Company continues to focus on working capital optimization benefiting from the high quality of its customers and diligent internal credit monitoring processes.

On November 30, 2023, CES redeemed all of the Company's outstanding 6.375% Senior Notes due October 21, 2024, which had an aggregate principal amount of $288.0 million. CES redeemed the Notes by utilizing its available $250.0 million Canadian Term Loan Facility, with the balance of approximately $38.0 million drawn from its $450.0 million syndicated senior facility (the "Senior Facility"). These facilities mature on April 25, 2026, and provide CES with ample liquidity to support its current business requirements and potential future needs.

CES exited the quarter with total long-term debt of $390.6 million (December 31, 2022 - $491.5 million) comprised of a net draw on its Senior Facility of $140.6 million (December 31, 2022 - $208.5 million) and its Canadian Term Loan Facility of $250.0 million which replaced the previously outstanding Senior Notes. Total Debt, inclusive of lease obligations, was $469.6 million at December 31, 2023 compared to $454.0 million at September 30, 2023 and $557.5 million at December 31, 2022. During the quarter, CES settled the Company's outstanding Senior Notes net of the Canadian Term Loan Facility, increased working capital investments in support of the upcoming winter drilling season, and returned $25.1 million to shareholders. The decrease in total long-term debt and Total Debt year over year was driven by strong financial performance combined with lower working capital requirements as revenue growth levels stabilized. Working Capital Surplus exceeded Total Debt at December 31, 2023 by $163.1 million (December 31, 2022 - $133.6 million). As of the date of this press release, the Company had total long-term debt of approximately $370.0 million, comprised of a net draw on its Senior Facility of approximately $120.0 million and a draw of $250.0 million on its Canadian Term Loan Facility, representing a reduction of approximately $121.5 million since December 31, 2022.

During the quarter, CES repurchased 5,301,700 common shares at an average price of $3.61 per share for a total of $19.1 million. During 2023, CES repurchased 21,794,900 shares at an average price of $3.25 per share for a total of $70.9 million. Subsequent to December 31, 2023, the Company repurchased 3,482,600 additional common shares at an average price of $3.61 per share for a total of $12.6 million. Since the July 21, 2023 commencement of the Company's current NCIB program, the Company repurchased 17,625,900 common shares of the allowed 18,719,430 at an average price of $3.59 per share for a total of $63.3 million. Since inception of the Company's NCIB programs on July 17, 2018, and up to the date of this press release, the Company has repurchased 57,535,857 common shares at an average price of $2.59 per share for a total of $148.9 million, representing approximately 21% of common shares outstanding on July 17, 2018.

Outlook

The strong demand trends of developing countries and global demand requirements to support eventual energy transition initiatives, combined with depletion of existing resources, and reduced investment in the upstream oil and gas sector over recent years, has necessitated increased service intensity for available resources thereby resulting in continued constructive end markets for CES. This has led to stable commodity prices and a favorable outlook for CES' primary North American target market. Despite economic uncertainty and ongoing global conflicts, energy industry fundamentals continue to support critical drilling and production activity for oil and natural gas. Moreover, current depressed global inventories and fewer high-quality drilling locations provide cautious optimism for price improvements, despite potential economic headwinds such as recession risks and geopolitical instability impacting customer spending plans. Currently, oil prices are sustained by increasing global demand and limited supply growth, with OPEC adhering to lower production quotas, and while natural gas has demonstrated price weakness since early 2023, we anticipate a sustained period of elevated gas drilling activity in the US and Canada as projects under construction come online.

CES is optimistic in its outlook for the next year as it expects to benefit from stable upstream activity, increased service intensity levels, and continued strength in commodity pricing across North America by capitalizing on its established infrastructure, industry leading positioning, vertically integrated business model, and strategic procurement practices.

Commensurate with current record revenue levels, CES expects 2024 capital expenditures, net of proceeds on disposals of assets, to be approximately $70.0 million, split evenly between maintenance and expansion capital to support sustained revenue levels and business development opportunities. CES plans to continue its disciplined and prudent approach to capital expenditures and will adjust its plans as required to support prudent growth initiatives throughout divisions.

CES has proactively managed both the duration and the flexibility of its debt. In April 2023, CES successfully amended and extended its Senior Facility to April 2026. The Senior Facility effectively addresses CES' near-term and foreseeable longer-term requirements. The Canadian Term Loan Facility provides CES with the opportunity to refinance and right-size the term portion of its capital structure on suitable terms at any time up until April of 2026. CES routinely considers its capital structure, including increasing or decreasing the capacity of its Senior Facility, refinancing of the Canadian Term Loan Facility, issuance of Senior Notes, and other potential financing options.

CES' underlying business model is capex light and asset light, enabling the 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.

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 1, 2024. A recording of the live audio webcast of the conference call will also be available on our website. The webcast will be archived for approximately 90 days.

• North American toll-free: 1-(800)-319-4610
• International / Toronto callers: (416)-915-3239

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. 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 the 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"), Proflow Solutions ("Proflow"), 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").

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