CES Energy Solutions Corp T.CEU

Alternate Symbol(s): CESDF

Energy Oil & Gas Equipment & Services

CES Energy Solutions Corp. is a Canada-based provider of consumable chemical solutions throughout the lifecycle of the oilfield. This includes 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. Its core businesses include drilling fluids and production and specialty chemicals. Its drilling fluids business operates throughout North America. Its production specialty chemicals business operates in the United States and in the Western Canadian Sedimentary Basin (WCSB), with an emphasis on servicing the oil and natural gas liquids resource plays. The Company provides environmental and drilling fluids waste disposal services to operators active in the WCSB through its Clear Environmental Solutions (Clear) division. It provides trucks and trailers specifically designed to transport drilling fluids to operators active in the WCSB through its Equal Transport (Equal) division.

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CES Energy Solutions Corp

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Post by retiredcfon May 13, 2022 9:16am

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Post# 34680935

RBC

There's potential here for them to raise their target. GLTA

May 12, 2022

CES Energy Solutions Corp. 1Q22 - Better than feared

Sentiment: positive

Outperform

TSX: CEU; CAD 2.33

Price Target CAD 2.75

All values in CAD unless otherwise noted.
Priced as of prior trading day's market close, EST (unless otherwise noted).

Our view: CEU's stronger 1Q22 results relative to both Street/RBC estimates were driven by a softer landing on pricing versus inflationary factors, primarily later in the quarter. Revenue grew 9% sequentially, which contributed to further working capital build of approximately $46MM.

Financial results:

• Revenue: $401MM, Street/RBC $388/$389MM • Adj. EBITDAC: $42MM, Street/RBC $39/$39MM • EPS: $0.04, Street/RBC $0.04/$0.05

Key Points:

• Adj. EBITDAC was above Street/RBC estimates. Adj. EBITDAC of $42MM was 8% above our estimate of $39MM and company guidance of $38MM, driven by a softer than expected landing on pricing versus inflationary factors, primarily in March. EBITDAC margin of 10.6% was ahead of our 10.0% expectation, though decreased 195bps y/y (exc. CEWS) on input cost inflation. Working capital build of approximately $46MM was above our expectation of $28MM, primarily on higher revenue, which led to -$23MM of FCF generation. The company ended the quarter with $148.7MM drawn on its $262.5MM bank line.

Guidance & future outlook. CEU expects improved rig activity, production and price increases to continue through the balance of 2022. The company maintained its $40MM capex budget for 2022, split $20MM maintenance, $20MM expansion.
Conference call May 13, 2022 @ 11:00 AM ET; webcast. Key questions include: 1) After dropping sequentially, can you walk through the trajectory of margin recovery through 2022? 2) Has there been an increase in customer receptivity toward price increases over recent months? 3) US drilling fluid market share dipped slightly in the quarter, are current levels (18%) approximately where you expect market share to settle out? 4) When do you expect to turn FCF positive?