Mr. Pat Powell reports

CALFRAC REPORTS THIRD-QUARTER ADJUSTED EBITDA OF $91.3 MILLION AND FREE CASH FLOW OF $48.1 MILLION

Calfrac Well Services Ltd. has released its financial and operating results for the three and nine months ended Sept. 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 Sept. 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 overcame lower-than-expected utilization in North America to make significant progress on its key strategic objectives during the third quarter. The company leveraged its diverse geographic footprint in North America and Argentina to generate adjusted EBITDA (earnings before interest, taxes, depreciation and amortization) from continuing operations of $91.3-million. Calfrac's strong execution in the field combined with its disciplined approach to capital allocation resulted in the generation of $48.1-million of free cash flow during the quarter, which was used to strengthen its balance sheet through a $43.7-million reduction in net debt and the deployment of an additional nine Tier IV dynamic gas blend (DGB) fracturing pumps. Consequently, Calfrac exited the third quarter of 2023 with a net debt to EBITDA ratio of 0.92:1,00, the lowest in recent history. This strong execution leaves the company well positioned to capitalize on the current oil field services market upcycle. Calfrac is currently collaborating with its customers to optimize completions schedules and anticipates that steady utilization throughout next year will drive further improvements in financial performance.

Calfrac's chief executive officer, Pat Powell, commented, "The Calfrac team took additional steps towards accomplishing our long-term goals this quarter and I am excited about our future as we continue to execute on our brand promise to generate strong returns for our shareholders, reduce debt and improve our asset quality in the field."

During the quarter, Calfrac:

• Generated revenue of $483.1-million, an increase of 10 per cent from the third quarter in 2022 resulting primarily from higher activity in all operating divisions;
• Reported third quarter adjusted EBITDA of $91.3-million, which included $11.9-million of maintenance expense related to fluid end components, versus $94.3-million in the third quarter of 2022 ($8-million of fluid end components capitalized);
• Reported net income from continuing operations of $97.5-million or $1.09 per share diluted, which included a reversal of impairment of property, plant and equipment of $41.6-million and a deferred tax recovery of $9-million related to the improved business outlook in Canada, compared with net income of $45.4-million or $1.10 per share diluted during the third quarter in 2022;
• Amended and restated its $250-million credit facilities, which included an extension of the maturity date to the earlier of July 1, 2026, or six months prior to the maturity of the company's second-lien notes on March 15, 2026;
• Reduced its net debt by $43.7-million, further reducing its net debt to EBITDA to 0.92:1:00;
• Increased period-end working capital to $283.7-million from $183.6-million at Dec. 31, 2022, due to a combination of higher revenue and geographical mix;
• Incurred capital expenditures from continuing operations of $50.8-million, which included approximately $33.2-million related to the company's fracturing fleet modernization program.

Outlook

Calfrac benefited from the superior execution enabled by its centralized organizational structure in North America as it successfully navigated schedule gaps to generate one of its highest third quarter adjusted EBITDA margins since 2012. The company increased the number of active Tier IV DGB units which are achieving significant diesel replacement rates. For the fourth quarter, the company anticipates a decrease in activity across its operations in Canada driven by typical seasonality and customer budget exhaustion. However, Calfrac expects an increase in utilization across its United States operations due to the reallocation of customer capital programs from the third quarter to the fourth quarter stemming from recent strength in crude oil prices. Calfrac believes that its capital discipline and solid activity for its 15 fracturing fleets next year will support further fleet modernization investments and a continued reduction in long-term debt.

The industry-wide discipline demonstrated thus far in 2023 has been a welcome change compared with previous oil field services cycles as companies idled underutilized equipment rather than sacrificing margins to gain market share. Calfrac expects similar fracturing activity across North America next year as operators maintain production. The company believes that its strong customer relationships across all of its operating areas and growing fleet of next-generation fracturing equipment will drive improved shareholder returns over the long term.

Three months ended Sept. 30, 2023, compared with three months ended Sept. 30, 2022

Revenue

Revenue from Calfrac's North American operations increased to $401.3-million during the third quarter of 2023 from $374.2-million in the comparable quarter of 2022. The 7-per-cent increase in revenue was due to a 10-per-cent increase in the number of completed fracturing jobs, offset partially by a 3-per-cent period-over-period decrease in average job revenue. The increase in job count was mainly due to the company operating 15 fracturing fleets during the quarter with more consistent utilization compared with an average of 13 operating fleets in the respective quarter of 2022. The slightly lower revenue per job was mainly a result of job mix as pricing remained relatively consistent with the same period in 2022. Coiled tubing revenue increased by 25 per cent as compared with the third quarter in 2022 mainly due to higher utilization of Calfrac's six deep coiled tubing units. The 3-per-cent appreciation in the U.S. dollar also contributed to the higher reported revenue.

Adjusted EBITDA

The company's operations in North America generated adjusted EBITDA of $83-million or 21 percent of revenue during the third quarter of 2023 compared with $91.5-million or 24 per cent of revenue in the same period in 2022. This decrease was primarily due to the change in accounting estimate that was adopted for fluid ends at the beginning of 2023. In the third quarter of 2023, Calfrac incurred $10.5-million of maintenance expense related to fluid end components versus $7.7-million of capital expenditures in the same quarter of 2022. However, utilization during the third quarter of 2023 was impacted by a reduction in activity, mainly in the United States, as a result of lower natural gas prices and lower crude oil prices during the second quarter of 2023, which resulted in the deferral of planned capital programs by some of the company's clients.

Nine months ended Sept. 30, 2023, compared with nine months ended Sept. 30, 2022

Revenue

Revenue from Calfrac's North American operations increased significantly to $1.2-billion during the first nine months of 2023 from $879-million in the comparable period of 2022. The 35-per-cent increase in revenue can be attributed to a 20-per-cent increase in the number of fracturing jobs completed combined with a 13-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 13.5 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 nine months in 2022 due to increased utilization for its six crewed units.

Adjusted EBITDA

The company's operations in North America generated adjusted EBITDA of $234.8-million during the first nine months of 2023 compared with $155.6-million in the same period in 2022. This increase in adjusted EBITDA was largely driven by higher utilization of its fracturing and coiled tubing crews. The company generated an adjusted EBITDA margin of 20 per cent versus 18 per cent in the comparable period in 2022 through higher utilization combined with better realized pricing. In 2023, Calfrac's adjusted EBITDA included $26.3-million of maintenance expense related to fluid ends versus $18.1-million of capital expenditures that were recorded in the comparable period in 2022.

Argentina

Outlook

Calfrac's Argentina division continues to leverage its strong market position to produce significant year-over-year adjusted EBITDA growth. The company expects its recently demonstrated profitability to continue into the fourth quarter and throughout 2024 driven by robust utilization across all service lines in the Vaca Muerta shale play and the conventional basins of southern Argentina.

Three months ended Sept. 30, 2023, compared with three months ended Sept. 30, 2022

Revenue

Calfrac's Argentinean operations generated revenue of $81.8-million during the third quarter of 2023 versus $64.2-million in the comparable quarter in 2022 primarily due to higher activity across all service lines. The significant increase in revenue was due to the strategic repositioning of certain fracturing and cementing equipment from southern Argentina into the Vaca Muerta shale play during the first half of 2023. Coiled tubing revenue also increased due to an increase in overall activity with both existing and new customers.

Adjusted EBITDA

The company's operations in Argentina generated adjusted EBITDA of $14.3-million during the third quarter of 2023 compared with $8.7-million in the comparable quarter of 2022, while the company's adjusted EBITDA margins also improved to 18 per cent from 14 per cent. This improvement in adjusted EBITDA was primarily due to the higher revenue base and changes in the company's customer and geographic mix which resulted in higher profitability relative to the comparable period in 2022.

Nine months ended Sept. 30, 2023, compared with nine months ended Sept. 30, 2022

Revenue

Calfrac's Argentinean operations generated revenue of $252.2-million during the first nine months of 2023 compared with $172.4-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 nine months of 2022. Overall fracturing activity increased by 26 per cent compared with the first nine months in 2022 while revenue per job was 19 per cent higher primarily due to overall inflation in operating costs and better pricing that commenced during the second half of 2022 combined with a stronger U.S. dollar. Higher coiled tubing and cementing revenue also contributed to the overall increase in revenue. The number of coiled tubing jobs increased by 32 per cent as activity increased in Neuquen and southern Argentina while revenue per job was 6 per cent higher primarily due to job mix and inflation. Cementing activity increased by 5 per cent and revenue per job increased by 12 per cent due to changes in job mix as a greater number of prefracturing projects, which are typically larger job sizes, were completed during the first nine months of 2023.

Adjusted EBITDA

The company's operations in Argentina generated adjusted EBITDA of $43.6-million or 17 per cent of revenue during the first nine months in 2023 versus $16.4-million or 9 per cent of revenue in the comparable period in 2022 primarily due to higher utilization and pricing across all service lines. Adjusted EBITDA in 2023 included $4.7-million of maintenance expense related to fluid end components that would have been recorded as capital expenditures in 2022.

Capital expenditures

Capital expenditures were $50.8-million for the three months ended Sept. 30, 2023, versus $24.7-million in the comparable period in 2022. 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.

Further information regarding Calfrac, including the most recently filed annual information form, can be accessed on the company's website or under the company's public filings found on SEDAR+.

Third quarter conference call

Calfrac will be conducting a conference call for interested analysts, brokers, investors and news media representatives to review its 2023 third quarter results at 10 a.m. (Mountain Time) on Wednesday, Nov. 8, 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 and can be accessed 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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