Mr. Pat Powell reports

CALFRAC REPORTS RECORD SECOND-QUARTER ADJUSTED EBITDA OF $87.8 MILLION

Calfrac Well Services Ltd. has released its financial and operating results for the three and six months ended June 30, 2023. The following press release should be read in conjunction with the management's discussion and analysis and interim consolidated financial statements and notes thereto as at June 30, 2023. All financial amounts and measures are expressed in Canadian dollars unless otherwise indicated. Additional information about Calfrac is available on the SEDAR website, including the company's annual information form for the year ended Dec. 31, 2022.

Chief executive officer's message

Calfrac's sound execution on its strategy enabled the company to generate record second quarter adjusted EBITDA (earnings before interest, taxes, depreciation and amortization) of $87.8-million and one of the best second quarter adjusted EBITDA margins in its history at 18.8 per cent. Calfrac demonstrated its ability to prudently manage debt as it continued to drive down its net leverage to 1.04 times, which is the lowest level in recent history, and expects to reduce borrowings by approximately $80-million by the end of 2023. Even as the company navigated Canadian forest fires, weather delays and customer scheduling gaps in its North America operations, Calfrac more than doubled adjusted EBITDA and grew net income from continuing operations by $57.3-million year-over-year. In addition to strong financial results generated during the quarter, the company balanced near-term profitability with its long-term vision as it deployed seven upgraded and two new Tier IV dynamic gas blending (DGB) fracturing pumps into its operations in North America. An additional 50 upgraded Tier IV DGB units remain on schedule and are expected to be deployed by the end of the first quarter in 2024. Calfrac expects that steady utilization combined with rigorous cost management across its operations in North America and Argentina will produce improved free cash flow in 2023 and the company believes that using any excess free cash flow to repay debt will provide the highest return for its shareholders.

Calfrac's chief executive officer, Pat Powell, commented: "I am proud of the Calfrac team as it executed on its brand promise and maintained its strong safety record while generating record second quarter adjusted EBITDA and one of the highest second quarter profit margins in its history. We are looking forward to deploying additional upgraded Tier IV DGB pumps through next year as we continue to make progress on our strategic priorities."

During the quarter, Calfrac:

• Generated revenue of $466.5-million, an increase of 46 per cent from the second quarter in 2022 resulting primarily from improved activity in North America and better pricing in Argentina;
• Reported adjusted EBITDA of $87.8-million versus $40.7-million in the second quarter of 2022;
• Reported net income from continuing operations of $50.5-million or 58 cents per share diluted compared with a net loss of $6.8-million or 18 cents per share diluted during the second quarter in 2022;
• Reported period-end working capital of $282.9-million versus $183.6-million at Dec. 31, 2022;
• Reduced its net debt to EBITDA to 1.04:1:00;
• Received net proceeds of $21.5-million related to the sale of idle, redundant and non-core equipment in North America;
• Incurred capital expenditures of $30.7-million, which included approximately $12.8-million related to the company's fracturing fleet modernization program.

Outlook

Calfrac leveraged its diverse geographical footprint to overcome a significant amount of lost operating days by redeploying a fracturing fleet to an area of increased activity as well as adjusting to uncontrollable events during the second quarter to generate the highest second quarter adjusted EBITDA in its history. Additionally, the company was able to successfully utilize its supply chain network and operational expertise to set new performance records for proppant pumped in a month. This high level of execution gives Calfrac the confidence that it will remain a sought-after service provider with sustained activity through the second half of the year.

The pressure pumping market in North America has transitioned from undersupplied to relatively balanced as exploration and production companies have taken a cautious approach toward their capital deployment in response to commodity price uncertainty. Despite the recent slowdown, the company maintains that the oil field services industry remains in a long-duration upcycle to assist producers in meeting the growing demand for oil and gas and believes that it is well positioned through its geographic diversification and strong customer relationships to capitalize on the anticipated increase in activity over the medium to long term.

Calfrac is excited about its transition into a next-generation pressure pumping company as it deploys additional Tier IV DGB fracturing pumps and to realize their full operational benefits and generate increased returns for its shareholders.

Three months ended June 30, 2023, compared with three months ended June 30, 2022

Revenue

Revenue from Calfrac's North American operations increased significantly to $376.3-million during the second quarter of 2023 from $264.9-million in the comparable quarter of 2022. The 42-per-cent increase in revenue can be attributed to a 34-per-cent increase in the number of fracturing jobs completed combined with a 7-per-cent period-over-period increase in revenue per job. The increase in job count was mainly due to the company operating 15 fleets during the quarter with more consistent utilization compared with an average of 13 operating fleets in the respective quarter of 2022. The higher revenue per job was mainly the result of job mix as most pricing increases were implemented during the second quarter in 2022. Despite the improved utilization relative to the comparable quarter, the second quarter was impacted by wild fires in northeastern British Columbia and Alberta during April and May resulting in lost operating days, but the majority of this delayed work was completed in June. Coiled tubing revenue also increased by 35 per cent as compared with the second quarter in 2022 due to increased utilization for its six crewed fleets.

Adjusted EBITDA

The company's operations in North America generated adjusted EBITDA of $75.3-million during the second quarter of 2023 compared with $42.7-million in the same period in 2022. This increase in adjusted EBITDA was primarily driven by utilization as pricing remained stable and consistent with the comparable period in 2022. The company was able to achieve an adjusted EBITDA margin of 20 per cent compared with 16 per cent in the comparable quarter in 2022 through much higher utilization in Canada combined with slightly better margin performance in the United States on a higher revenue base.

Six months ended June 30, 2023, compared with six months ended June 30, 2022

Revenue

Revenue from Calfrac's North American operations increased significantly to $789.4-million during the first six months of 2023 from $504.9-million in the comparable period of 2022. The 56-per-cent increase in revenue can be attributed to a 26-per-cent increase in the number of fracturing jobs completed combined with a 25-per-cent increase in revenue per job period-over-period. The increase in job count was mainly due to the company operating 15 fleets during the period with more consistent utilization compared with an average of 11.5 operating fleets in the comparable period in 2022. The higher revenue per job was mainly the result of job mix and improved pricing. Coiled tubing revenue also increased by 21 per cent as compared with the first six months in 2022 due to increased utilization for its six crewed fleets.

Adjusted EBITDA

The company's operations in North America generated adjusted EBITDA of $151.8-million during the first six months of 2023 compared with $64.1-million in the same period in 2022. This increase in adjusted EBITDA was largely driven by utilization. The company was able to achieve an adjusted EBITDA margin of 19 per cent versus 13 per cent in the comparable period in 2022 through much higher utilization combined with better realized pricing.

Outlook

The strong profitability generated from Calfrac's Argentina division is expected to continue through the end of the year as the company anticipates solid utilization across all service lines in the Vaca Muerta shale play and the conventional basins of southern Argentina. Calfrac believes that the robust demand for its services will remain and enable it to achieve improved year-over-year financial performance.

Three months ended June 30, 2023, compared with three months ended June 30, 2022

Revenue

Calfrac's Argentinean operations generated revenue of $90.1-million during the second quarter of 2023 versus $53.6-million in the comparable quarter in 2022 primarily due to higher revenue across all service lines. Fracturing revenue increased due to a combination of client mix, larger job sizes and higher pricing, as the company entered into a new contract at the beginning of the third quarter of 2022 at pricing levels that covered higher costs caused by inflationary pressures. The company also completed 57 per cent more jobs than the comparable period in 2022 with the majority of the increase attributed to its operations in southern Argentina. Activity in the company's cementing operations increased by 4 per cent combined with a 19-per-cent increase in revenue per job due to job mix. The number of coiled tubing jobs increased by 11 per cent while revenue per job decreased by 10 per cent primarily due to job mix.

Adjusted EBITDA

The company's operations in Argentina generated adjusted EBITDA of $17.8-million during the second quarter of 2023 compared with $1.9-million in the comparable quarter of 2022, while the company's adjusted EBITDA margins as a percentage of revenue also improved to 20 per cent from 3 per cent. The company entered into a new contract for its large fracturing fleet servicing the Vaca Muerta play at the beginning of the third quarter of 2022 with higher utilization and improved pricing which resulted in higher adjusted EBITDA margins relative to the comparable period in 2022.

Six months ended June 30, 2023, compared with six months ended June 30, 2022

Revenue

Calfrac's Argentinean operations generated revenue of $170.4-million during the first six months of 2023 compared with $108.2-million in the comparable period in 2022. Activity in the Vaca Muerta shale play continued to increase while activity in southern Argentina also achieved significant growth compared with the first half of 2022. Overall fracturing activity increased by 27 per cent compared with the first six months in 2022 while revenue per job was 36 per cent higher primarily due to overall inflation in operating costs and better pricing commencing in the second half of 2022 combined with a stronger U.S. dollar. Revenue from the company's coiled tubing and cementing service lines also continued to improve relative to the previous year. The number of coiled tubing jobs increased by 10 per cent as activity increased in Neuquen and southern Argentina while revenue per job was 16 per cent higher primarily due to job mix and inflation. Activity in the company's cementing operations increased by 12 per cent and revenue per job increased by 4 per cent due to changes in job mix as a greater number of prefracturing projects, which are typically larger job sizes, were completed in the first six months in 2023.

Adjusted EBITDA

The company's operations in Argentina generated adjusted EBITDA of $29.3-million during the first six months in 2023 versus $7.7-million in the first six months in 2022 as utilization of the company's equipment improved across all service lines. The company's operating margins as a percentage of revenue increased significantly from 7 per cent to 17 per cent primarily due to improved utilization and better pricing in all operating areas and service lines.

Capital expenditures

Capital expenditures were $30.7-million for the quarter ended June 30, 2023. Calfrac's board of directors has approved a 2023 capital budget of approximately $160-million, which excludes expenditures related to fluid end components as these have been recorded as maintenance expenses beginning in January, 2023, for all continuing reporting segments. This change in accounting estimate was based on new information surrounding the useful life of these components.

Second quarter conference call

Calfrac will be conducting a conference call for interested analysts, brokers, investors and news media representatives to review its 2023 second quarter results at 10 a.m. (Mountain Time) on Thursday, Aug. 10, 2023. To participate in the conference call please register on-line. Once registered, you will receive a dial-in number and a unique PIN, which will allow you to ask questions.

The call will also be webcast on-line. A replay of the webcast call will also be available on Calfrac's website for at least 90 days.

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