Mr. Pat Powell reports

CALFRAC REPORTS BEST EVER ANNUAL NET INCOME AND FULL-YEAR ADJUSTED EBITDA OF $325 MILLION

Calfrac Well Services Ltd. has released its financial and operating results for the three months and year ended Dec. 31, 2023. The following press release should be read in conjunction with the management's discussion and analysis (MD&A), and audited consolidated financial statements and notes thereto, as at Dec. 31, 2023. Additional information about Calfrac is available on the SEDAR+ website, including the company's annual information form for the year ended Dec. 31, 2023.

Chief executive officer's message

Calfrac's operations during 2023 generated a new company record for net income from continuing operations of $197.6-million. The company converted these strong results into significant free cash flow, which it deployed toward reducing long-term debt to its lowest level since 2009, as well as improving the quality of its assets through the deployment of two new Tier 4 dynamic gas blending (DGB) fracturing fleets into North America. This operating performance, combined with substantial debt repayment, resulted in a trailing 12-month net debt to adjusted EBITDA (earnings before interest, taxes, depreciation and amortization) from continuing operations ratio of 0.74 times, the lowest in recent years. In addition, Calfrac's commitment to safe and efficient operations decreased the total recordable injury frequency (TRIF) rate for continuing operations from 1.19 in 2022 to 1.05 in 2023. This excellent result was accomplished despite adding two fracturing fleets to its operations in North America during the year. The company expects to continue delivering on its brand promise of "Do it safely, do it right, do it profitably" in the year ahead and generate strong, sustainable long-term returns for its shareholders.

Pat Powell, Calfrac's chief executive officer, 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 $421.4-million, a decrease of 6 per cent from the comparative quarter in 2022, primarily due to a larger proportion of jobs completed in North America where sand was supplied by the customer, which resulted in a 29-per-cent reduction in revenue per job compared with the same period in 2022;
• Reported adjusted EBITDA of $62.6-million versus $76-million in the fourth quarter of 2022, primarily due to the change in accounting estimate that was adopted for fluid ends at the beginning of 2023. In the fourth quarter of 2023, Calfrac incurred $12.6-million of maintenance expense related to fluid-end components during the quarter;
• Deployed the equivalent of two Tier 4 dynamic gas blending fracturing fleets in North America;
• Received cash proceeds of $11.4-million during the quarter from the exercise of warrants;
• Reduced its outstanding credit facility borrowings by $55-million, that resulted in a total draw amount of $95-million at the end of the year;
• Reduced its net debt to adjusted EBITDA ratio to 0.74:1;
• Reported net income of $13.2-million, or 15 cents per share diluted, compared with a net income of $14.8-million, or 17 cents per share diluted, in 2022;
• Reported period-end working capital of $236.4-million versus $183.6-million at Dec. 31, 2022;
• Incurred capital expenditures of $49.4-million, which included $33.7-million related to the Tier 4 fleet modernization program.

Outlook

Calfrac's North America division generated revenue of $1.5-billion and adjusted EBITDA of $282.9-million in 2023, both of which were some of the best full-year financial results in its history. However, the company is anticipating a significant year-over-year reduction in first-quarter activity and financial performance due to the impact of lower natural gas prices, combined with a slower-than-expected start to the year as completion programs were deferred until later in the year. As a result, Calfrac idled two fracturing fleets in February and expects to operate an average of five crews in the United States for the first quarter. The company expects customer demand for its services will improve from the first quarter and support its revised operating footprint for the remainder of the year. Calfrac's operations in Canada expects to continue deploying five large fracturing fleets and six coiled tubing units throughout 2024, and deliver consistent financial results with the prior year.

Calfrac believes that it will generate lower profitability in North America in 2024 due to the anticipated shortfall from the first quarter and its reduced operating scale. In order to maintain its long-term debt reduction targets, the board of directors approved a deferral of up to $50-million of capital expenditures related to the company's fleet modernization program.

Three months ended Dec. 31, 2023, compared with three months ended Dec. 31, 2022

Revenue

Revenue from Calfrac's North American operations decreased to $331.7-million during the fourth quarter of 2023 from $369.1-million in the comparable quarter of 2022. The lower revenue was primarily due to a larger proportion of jobs completed where sand was supplied by the customer, which resulted in a 29-per-cent reduction in revenue per job compared with the same period in 2022. The impact on revenue was partially offset by a 28-per-cent increase in the number of completed fracturing jobs. The increase in job count was mainly due to the company operating 15 fracturing fleets during the quarter, including deploying the equivalent of two new Tier 4 DGB fleets, compared with an average of 13.5 operating fleets in the respective quarter of 2022. Coiled tubing revenue decreased by 32 per cent as compared with the fourth quarter in 2022, mainly due to lower utilization of Calfrac's six deep coiled tubing units.

Adjusted EBITDA

The company's operations in North America generated adjusted EBITDA of $48.1-million, or 14 per cent of revenue, during the fourth quarter of 2023 compared with $68.8-million, or 19 per cent of revenue, in the same period in 2022. This decrease was partially due to the change in accounting estimate that was adopted for fluid ends at the beginning of 2023. In the fourth quarter of 2023, Calfrac incurred $11.4-million of maintenance expense related to fluid-end components versus $8.8-million of capital expenditures in the same quarter of 2022. Additionally, utilization during the fourth quarter of 2023 was impacted by a reduction in activity, mainly in Canada, as a result of customer budget exhaustion.

Year ended Dec. 31, 2023, compared with year ended Dec. 31, 2022

Revenue

Revenue from Calfrac's North American operations increased significantly to $1.5-billion during 2023 from $1.2-billion in 2022. The 22-per-cent increase in revenue was primarily due to higher customer activity and a larger operating scale, as the company operated 15 fracturing fleets during the year with more consistent utilization compared with 13 fleets in 2022. Pricing during 2023 was relatively consistent with the second half of 2022, but was partially offset by job mix, as a greater amount of customer-supplied product resulted in a similar year-over-year fracturing revenue per job. Coiled tubing revenue increased by 7 per cent as compared with 2022, mainly due to higher utilization for its six crewed units.

Adjusted EBITDA

The company's operations in North America generated adjusted EBITDA of $282.9-million during 2023 compared with $224.4-million in 2022. This increase in adjusted EBITDA was largely driven by higher fracturing and coiled tubing utilization. In 2023, Calfrac's adjusted EBITDA included $37.7-million of maintenance expense related to fluid ends versus $27.7-million of capital expenditures that were recorded in the comparable period in 2022. The company's North American operations generated an adjusted EBITDA percentage of 19 per cent compared with 16 per cent in 2022, after adjusting for the change in fluid-end accounting treatment.

Outlook

Calfrac's Argentinean operations leveraged higher efficiencies across all three service lines to generate divisional records for revenue and adjusted EBITDA of $341.9-million and $63.6-million, respectively, in 2023. The company's position as a leader in this pressure pumping market was enhanced through the start-up of simul-frac operations in the fourth quarter, as well as setting internal records for coiled tubing maximum depth achieved and highest cementing customer satisfaction. Calfrac anticipates that, absent any impacts from the devaluation in the Argentinean peso, the momentum from this year will be carried into 2024, driven by expected strong utilization across all service lines in the Vaca Muerta shale play and the conventional basins of southern Argentina.

Three months ended Dec. 31, 2023, compared with three months ended Dec. 31, 2022

Revenue

Calfrac's Argentinean operations generated revenue of $89.7-million during the fourth quarter of 2023 versus $78.7-million in the comparable quarter in 2022, primarily due to higher activity across all service lines. This 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 $19.9-million during the fourth quarter of 2023 compared with $14.6-million in the comparable quarter of 2022, while the company's adjusted EBITDA margins also improved to 22 per cent from 19 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. The significant devaluation of the peso in December also contributed to the margin improvement during the quarter.

Year ended Dec. 31, 2023, compared with year ended Dec. 31, 2022

Revenue

Calfrac's Argentinean operations generated revenue of $341.9-million during 2023 compared with $251.1-million in 2022. Activity in the Vaca Muerta shale play continued to increase while activity in southern Argentina also achieved significant growth compared with 2022. Overall fracturing activity increased by 26 per cent compared with 2022, while revenue per job was 9 per cent higher, primarily due to overall inflation in operating costs and better pricing that was realized during the second half of 2022, combined with a stronger United States 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 consistent with the prior year. Cementing activity increased by 7 per cent and revenue per job increased by 9 per cent due to changes in job mix as a greater number of prefracturing projects, which are typically larger job sizes, were completed during 2023.

Adjusted EBITDA

The company's operations in Argentina generated adjusted EBITDA of $63.6-million, or 19 per cent of revenue, in 2023 versus $31-million, or 12 per cent of revenue, in 2022, primarily due to higher utilization and pricing across all service lines and, to a lesser extent, the impact of the peso devaluation that occurred in the fourth quarter of 2023. Adjusted EBITDA in 2023 included $5.8-million of maintenance expense related to fluid-end components that would have been recorded as capital expenditures in 2022.

Capital expenditures

Capital expenditures were $49.4-million for the three months ended Dec. 31, 2023, versus $35.8-million in the comparable period in 2022. Calfrac's board of directors approved a 2024 total capital budget of approximately $210-million in December, 2023, which was an increase of $45-million from the previous year, primarily to continue its fracturing fleet modernization program in North America and dedicate $40-million to support its Argentinean operations, while implementing new company-wide field-based technologies. On March 13, 2024, the board of directors approved a deferral of up to $50-million of capital allocated to its North American fleet modernization program to align with current market conditions.

About Calfrac Well Services Ltd.

Calfrac provides specialized oil-field services to exploration and production companies designed to increase the production of hydrocarbons from wells, with continuing operations focused throughout Western Canada, the United States and Argentina. During the first quarter of 2022, management committed to a plan to sell the company's Russian division, resulting in the associated assets and liabilities being classified as held for sale and presented in the company's financial statements as discontinued operations. The results of the company's discontinued operations are excluded from the discussion and tables presented herein, unless otherwise noted. See Note 4 to the company's audited consolidated financial statements for the year ended Dec. 31, 2023, for additional information on the company's discontinued operations.

Fourth quarter conference call

Calfrac will be conducting a conference call for interested analysts, brokers, investors and news media representatives to review its 2023 fourth-quarter results at 10 a.m. (Mountain Time) on Thursday, March 14, 2024. To participate in the conference call, please register on-line. Once registered, you will receive a dial-in number and a unique PIN (person identification number), 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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