CES Energy Solutions Corp. Announces Strong 2019 Results, Provides Update on Capital Allocation and Declares Reduced Cash Dividend

CALGARY, March 12, 2020 /CNW/ - CES Energy Solutions Corp. ("CES" or the "Company") (TSX: CEU) (OTC - Nasdaq Intl: CESDF) announced today the Company's results for the three and twelve months ended December 31, 2019 and provided an update on capital allocation and the Company's dividend.

Commenting on the quarter and year, Tom Simons, CES' President and Chief Executive Officer said, "We are pleased to report on strong 2019 financial and operational results, where we successfully executed on our strategic focus areas including cash flow generation, stable EBITDAC margins, disciplined capital spending, and prudent capital allocation, while continuing to grow market share in key areas."

CES generated record annual revenues in 2019 of $1.28 billion, of which 71% was realized in the US. Adjusted EBITDAC for 2019 was $167.1 million representing a 13.1% margin. CES' US drilling fluids division successfully grew market share, maintained significant cash flow generation, and has continued these trends into Q1 2020 to date, significantly offsetting the year-over-year decline in US industry rig count. Production chemical end markets in both Canada and the US remained strong while Canadian operations continued to benefit from improvements in operating efficiencies and rationalization efforts.  CES reduced the net draw on its Senior Facility to $76.7 million at December 31, 2019 from $161.5 million at December 31, 2018, while completing $13.1 million in share buybacks and $8.5 million in Senior Note repurchases during the year. CES remained disciplined on capital spending, with capital expenditures of $45.2 million in 2019 versus $87.0 million in 2018.

"We are confident in our ability to capitalize on stable production chemical end markets and believe that our prudent cost structure, growing market share, working capital optimization, and completed infrastructure buildout enables us to continue generating strong free cash flow despite potential uncertainty surrounding the level of upstream activity across North America in 2020", said Tom Simons.

"We are closely monitoring current developments in global oil and gas markets, specifically as it relates to production level decisions amongst OPEC+ members and the potential impact to demand resulting from COVID-19, which have collectively resulted in a sharp decline in commodity prices. This decline in commodity prices and associated uncertainty surrounding the duration and severity of this low oil price environment could have a significant impact on our customers' activity levels and planned expenditures in 2020 and beyond. Accordingly, we are altering our capital allocation strategy by reducing our dividend to maintain our strong balance sheet while enhancing our ability to opportunistically further reduce debt and repurchase shares.  CES will pay a cash dividend of $0.00125 per common share on April 15, 2020 to the shareholders of record at the close of business on March 31, 2020. On an annualized basis, the new dividend would be $0.015 per common share representing a 75% decrease from the previous annualized level of $0.06 per common share. This new dividend level will allow CES to prudently redeploy approximately $12.0 million on an annualized basis.  Surplus free cash flow after the dividend will be guided by using 70% to reduce debt levels and 30% to repurchase shares, with the flexibility to alter allocation based on share price and debt levels. We believe our counter cyclical leverage model and capital light business will demonstrate our resiliency in this challenging market. We remain committed to our customer centric service model while we maintain our focus on significant free cash flow generation and returning cash flow to shareholders as business conditions permit."  

Results Overview

CES generated $315.6 million in revenue and achieved Adjusted EBITDAC of $39.7 million for the three months ended December 31, 2019 ("Q4 2019") and record annual revenue of $1.28 billion and Adjusted EBITDAC of $167.1 million for the year ended December 31, 2019. CES' 2019 results are reflective of continued improvements in CES' geographic positioning and strategic commitment to the US market which generated 71% of the Company's overall revenue in 2019, rationalization efforts to reflect a softened Canadian market, significant exposure to recurring production chemical end markets, realization of operating efficiencies, and capitalizing on the infrastructure buildout in both the US and Canada which was largely completed in 2018.

CES' 2019 results demonstrate significant exposure to steady production chemical end markets, particularly in the US, allowing the Company to sell higher volumes of its products across a prudent cost structure and generate significant free cash flow through this recurring revenue stream. Concurrently, the drilling fluids business in the US was able to continue to generate significant free cash flow and grow market share in spite of a falling industry rig count in H2 2019. The Canadian oil and gas industry continued to face headwinds throughout 2019 with government mandated production curtailments and drilling activity that was significantly lower than comparable periods in 2018. Softer Canadian end markets were mitigated by improvements in operating efficiencies and rationalization through effectively combining leadership and management of Canadian production chemicals and drilling fluids operations.

Revenue generated in the US for the year ended December 31, 2019 was $906.4 million, representing 71% of the Company's overall revenue, and a 7% increase from 2018. The year-over-year increase in US revenues was underpinned by CES' completed investments in key US infrastructure and capabilities, significant drilling related activity improvement in H1 2019, an increase in US drilling fluids market share, and increased production chemical related US Treatment Points, particularly in the attractive Permian Basin and Rocky Mountain regions.  During Q4 2019, industry rig counts fell sharply as operators reached their budget limits and remained highly disciplined on capital spending. Although the Company was able to grow drilling fluids market share in this difficult environment, revenue generated in the US for Q4 2019 decreased by 9% compared to Q4 2018, primarily driven by reduced drilling related activity levels.

Revenue generated in Canada decreased 9% and 12% to $98.1 million and $370.9 million for the three and twelve months ended December 31, 2019, respectively, over the 2018 comparative periods, primarily due to a decline in drilling activity and continued production curtailments throughout 2019 which was driven by market uncertainty around lack of current oil and gas takeaway capacity. As a result, Canadian oil and gas operators pared back capital spending and 2019 drilling activity declined, negatively impacting revenues in CES' Canadian drilling fluids business in Canada for 2019 compared to the same period in 2018. Despite these market conditions, Canadian drilling fluids was able to maintain market share in 2019 when compared to 2018.

Net income for the three and twelve months ended December 31, 2019 was $11.9 million and $30.1 million, respectively, compared to $15.5 million and $47.7 million for the comparative 2018 periods. In 2019, CES demonstrated increased stability in free cash flow generation and Adjusted EBITDAC margins. Adjusted EBITDAC margin improved from 12.1% in Q4 2018 to 12.6% in Q4 2019. Despite some weakened industry conditions, stable Adjusted EBITDAC margin was realized at 13.1% for 2019 versus 13.2% in 2018. CES saw areas of margin improvement in the year as a result of continuation of improvements resulting from restructuring efforts within PureChem, rationalization of the Canadian drilling fluids business aligned with declines in industry activity and lower rent expense with IFRS 16 adoption on January 1, 2019. Partially offsetting these improvements, as US industry rig counts fell in H2 2019, CES preserved its US drilling fluids service and cost structure in anticipation of a potential pick-up in activity levels in 2020 and further market share growth which was realized in the first two months of 2020. The impact of recent developments in the global oil and gas industry remains to be seen, however, CES believes that its financial performance may continue to benefit from increased sales in areas such as the Permian and Deep Basin, realization of benefits from restructuring efforts, increased operating leverage from its expanded infrastructure, and from our innovative technologies and superior service culture.

For the three and twelve months ended December 31, 2019, CES incurred $14.8 million and $45.2 million in capital expenditures, representing respective 26% and 48% reductions from $19.9 million and $87.0 million for the three and twelve months ended December 31, 2018, respectively. Q4 2019 capital expenditures were primarily comprised of fleet additions and processing equipment to support the higher US production chemical activity levels, and associated headcount in the US. The Company has invested significantly in building out infrastructure in the US and Canada, and large expansionary projects such as PureChem's Grande Prairie facility for blending and storage of production chemicals and the Kermit mud plant expansion in the Permian Basin were largely completed in 2018.

CES continues to maintain a prudent balance sheet and is well positioned to capitalize on robust production chemical end markets while its counter cyclical leverage model allows the Company to remain resilient in the face of potential uncertainty over drilling related industry activity levels in Canada and the US. In October 2017, CES successfully re-financed and reduced its coupon on its $300.0 million Senior Notes by issuing new 6.375% Senior Notes which have an extended maturity into October 2024, providing a stable long-term tranche of debt to withstand potential industry volatility. On November 28, 2019, the Company repurchased and canceled $9.0 million of its Senior Notes for an aggregate purchase price of $8.5 million resulting in a gain of $0.5 million and an annualized reduction of associated interest expense of $0.3 million. As at December 31, 2019, the Company had $291.0 million of outstanding principal on senior unsecured notes due October 21, 2024.

At December 31, 2019, CES had a net draw of $76.7 million on its Senior Facility, a significant reduction from a net draw of $161.5 million at December 31, 2018.  The decrease in the net draw from December 31, 2018 was primarily driven by strong operational free cash flow generation in 2019 used to pay down the Senior Facility, offset by opportunistic repurchases of the Company's common shares under the NCIB in the amount of $13.1 million in the year and repurchases of Senior Notes. In August 2019, CES completed an amendment and two year extension of its Senior Facility, and the maximum available draw on the Senior Facility at December 31, 2019 was $170.0 million on the Canadian facility and US$50.0 million on the US facility (December 31, 2018 - $180.0 million and US$40.0 million, respectively). At December 31, 2019, CES was in compliance with the terms and covenants of its Senior Facility. As at the date hereof, the Company had a net draw of approximately $95.0 million on its Senior Facility, compared to $76.7 million at December 31, 2019 which is primarily driven by increased levels of drilling activity and associated working capital required to service market share growth, particularly in CES' US drilling fluids business, in 2020 to date.  

CES considers capital to include shareholders' equity and long-term debt.  The Company's objectives when managing capital are to permit prudent capital allocation to one or a combination of: investment in current operations, debt reduction, opportunistic share repurchases, dividends and acquisitions; while maintaining creditor and shareholder confidence.

Regarding shareholders' equity, CES continues to see improvement in its financial position and the Company's Board of Directors and management believe that the market price of CES' common shares does not reflect adequate underlying value. Under the NCIB, effective July 17, 2019, the Company may repurchase for cancellation up to 18,649,192 common shares, being 7.5% of the public float of common shares on the effective date. Since inception of the Company's NCIB programs on July 17, 2018 and up to December 31, 2019, the Company has repurchased 10,601,603 common shares at an average price of $3.08 per share for a total amount $32.7 million, representing approximately 3.9% of outstanding common shares, as at the July 17, 2018 inception date. During Q4 2019, CES repurchased 1,964,600 shares at an average price of $2.01 per share for a total amount of $3.9 million. For the year ended December 31, 2019, CES repurchased 5,801,703 shares at an average price of $2.27 per share for a total amount of $13.1 million. Subsequent to December 31, 2019, the Company repurchased 2,325,277 additional shares at a weighted average price per share of $2.07 for a total of $4.8 million.

With respect to long-term debt, CES exited 2019 with Total Debt of $407.6 million, which represents a 17% reduction from Total Debt of $488.8 million, as at December 31, 2018. Excluding the impact of incremental lease obligations of $18.1 million, as at December 31, 2019 as a result of IFRS 16 adoption, Total Debt at December 31, 2019 would have decreased by $99.3 million or 20% to $389.5 million when compared to December 31, 2018.

Outlook

With recent developments in the global oil and gas industry, CES remains cautious with its 2020 outlook. Given the sharp decline in commodity prices, CES expects weakened upstream activity across North America and downward pressure on margins. CES believes it will benefit from its counter cyclical leverage model and its ability to maintain a prudent cost structure in this low oil price environment. With infrastructure buildout largely complete, the business is well positioned to weather further declines in drilling and production related activity.  

CES continues to believe that over time it can further grow its share of the oilfield consumable chemical markets in which it competes. CES also 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.

In the US, CES' infrastructure is largely built out to meet anticipated growing production chemical and drilling fluid needs in the key basins. In the Permian Basin, the Kermit, Texas mud plant expansion has been designed to double capacity over 2017 levels, and has enabled the Company to take on new work and continue to grow market share, as was evidenced by market share growth experienced in Q4 2019 despite falling US rig counts. In addition, Catalyst's current platform, which has more than tripled in size since 2016, is setup to capitalize on growing production and higher levels of activity in the Permian Basin, which despite recent developments in commodity prices, could be even more pronounced in 2020 as several pipeline projects are on track to add significant offtake capacity. Further, CES continues to recruit top talent in this highly competitive region.

In Canada, market conditions continue to face headwinds due to current takeaway capacity constraints and lack of consistent market access, which caused wide price differentials and relatively low natural gas prices, and government mandated production curtailments. As a result and further emphasized by the recent sharp decline in commodity prices, Canadian oil and gas operators remain cautious on their capital programs in 2020. We continue to assess related changes to operator's activity levels and potential impacts on our business. CES believes its Canadian business is well positioned to weather the current market challenges through its scalable Canadian drilling fluids business model and through improved financial contribution from its PureChem production chemical division as it realizes ongoing structural efficiency gains and grows into its infrastructure.

CES' strategy is to utilize its decentralized management model; its vertically integrated manufacturing model; its problem solving through science approach; its patented and proprietary technologies; and its superior people and execution to increase market share. The downturn made many middlemen, or competitors who are simply resellers of other companies' products, redundant. By being basic in the manufacture of the consumable chemicals it sells, CES continues to be price competitive and a technology leader. Operators require increasingly technical solutions and deeper customer-centric coverage models to meet their needs. CES believes that its unique value proposition makes it the premier independent provider of technically advanced consumable chemical solutions to the North American oilfield.

Despite the current industry challenges, CES' balance sheet is well positioned to capitalize on stable production chemical end markets, while its counter cyclical leverage model allows the Company to remain resilient in the face of potential uncertainty over drilling related industry activity levels in Canada and the US. In August 2019, CES successfully amended and extended its Senior Facility, which has an extended maturity into September 2022. In October 2017, CES successfully re-financed and reduced its coupon on its previously outstanding $300.0 million Senior Notes by issuing new 6.375% Senior Notes which have an extended maturity into October 2024. In 2020, it is expected that EBITDAC will materially exceed the sum of cash expenditures on interest, taxes, and capital expenditures, allowing for free cash flow to be used to pay down draws on the Company's Senior Facility, and be returned to shareholders through CES' monthly dividend and NCIB.

Although CES previously expected 2020 capital expenditures to be at or below 2019 levels, in light of recent developments in the global oil and gas markets, the Company is reviewing planned expenditures and will adjust as required as conditions continue to unfold. CES' business model, capital structure and free cash flow generation attributes continue to permit prudent capital allocation to one or a combination of: investment in current operations, debt reduction, opportunistic share repurchases, dividends and acquisitions.

In its core businesses, CES will focus on profitably growing market share, controlling costs and managing working capital, developing or acquiring new technologies and making strategic investments as required to position the business to capitalize on current and future opportunities. CES will continue to assess organic and M&A opportunities that will improve CES' competitive position and enhance profitability. Any acquisitions must meet CES' stringent financial and operational metrics in the context of CES' cost of capital.

Conference Call Details

With respect to the fourth quarter and annual results, CES will host a conference call / webcast at 9:00 am MT (11:00 am ET) on Friday, March 13, 2020.

North American toll-free: 1-(800)-319-4610
International / Toronto callers: (416)-915-3239
Link to Webcast: http://www.cesenergysolutions.com/

Financial Highlights

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. At the drill-bit, CES' designed drilling fluids encompass the functions of cleaning the hole, stabilizing the rock drilled, controlling subsurface pressures, enhancing drilling rates, and protecting potential production zones while conserving the environment in the surrounding surface and subsurface area. At the point of completion and stimulation, CES' designed chemicals form a critical component of fracturing solutions or other forms of remedial well stimulation techniques. The shift to horizontal drilling and multi-stage fracturing with long horizontal well completions has been responsible for significant growth in the drilling fluids and completion and stimulation chemicals markets. At the wellhead and pump-jack, CES' designed production and specialty chemicals provide down-hole solutions for production and gathering infrastructure to maximize production and reduce costs of equipment maintenance. 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 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 Chemicals ("JACAM"), Catalyst Oilfield Services ("Catalyst") 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").

The JACAM, Catalyst, PureChem, and Sialco brands are vertically integrated manufacturers of advanced specialty chemicals. In addition to being basic in the manufacture of oilfield chemicals, JACAM, Catalyst, and PureChem have expanding distribution channels into the oilfield. The StimWrx brand provides near matrix stimulation and remediation of oil, gas, and injection wells in Western Canada and the US. The Canadian Energy Services and AES brands are focused on the design and implementation of drilling fluids systems and completion solutions sold directly to oil and gas producers. The Superior Weighting brand custom grinds minerals including barite, which is the weighting agent utilized in most drilling fluid systems.

Clear is a complimentary business division that supports the operations and augments the product offerings in the WCSB. Clear is CES' environmental division, providing environmental consulting, water management and water transfer services, and drilling fluids waste disposal services primarily to oil and gas producers active in the WCSB.

CES continues to invest in research and development of new technologies and in the top-end scientific talent that can develop and refine these technologies. CES operates nine separate lab facilities across North America: two in Houston, Texas; two in Midland, Texas; one in Sterling, Kansas; and one in each of Calgary, Alberta; Grand Prairie, Alberta; Carlyle, Saskatchewan; and Delta, British Columbia. In the US, CES' main chemical manufacturing and reacting facility is located in Sterling, Kansas with additional low-temperature reacting and chemical blending capabilities just outside of Midland, Texas and chemical blending capabilities in Sonora, Texas. In Canada, CES has a chemical manufacturing and reacting facility located in Delta, British Columbia with additional chemical blending capabilities located in Carlyle, Saskatchewan, Nisku, Alberta, and Grand Prairie, Alberta. CES also leverages third party partner relationships to drive innovation in the consumable fluids and chemicals business.

Cautionary Statement

Except for the historical and present factual information contained herein, the matters set forth in this press release, may constitute forward-looking information or forward-looking statements (collectively referred to as "forward-looking information") which involves known and unknown risks, uncertainties and other factors which may cause the actual results, performance or achievements of CES, or industry results, to be materially different from any future results, performance or achievements expressed or implied by such forward-looking information.  When used in this press release, such information uses such words as "may", "would", "could", "will", "intend", "expect", "believe", "plan", "anticipate", "estimate", and other similar terminology.  This information reflects CES' current expectations regarding future events and operating performance and speaks only as of the date of the press release.  Forward-looking information involves significant risks and uncertainties, should not be read as a guarantee of future performance or results, and will not necessarily be an accurate indication of whether or not such results will be achieved.  A number of factors could cause actual results to differ materially from the results discussed in the forward-looking information, including, but not limited to, the factors discussed below.  The management of CES believes the material factors, expectations and assumptions reflected in the forward-looking information are reasonable but no assurance can be given that these factors, expectations and assumptions will prove to be correct.  The forward-looking information contained in this document speaks only as of the date of the document, and CES assumes no obligation to publicly update or revise such information to reflect new events or circumstances, except as may be required pursuant to applicable securities laws or regulations. The material assumptions in making forward-looking statements include, but are not limited to, assumptions relating to demand levels and pricing for the oilfield consumable chemical offerings of the Company; fluctuations in the price and demand for oil and natural gas; anticipated activity levels of the Company's significant customers; commodity pricing; general economic and financial market conditions; the successful integration of recent acquisitions; the Company's ability to finance its operations; levels of drilling and other activity in the WCSB, the Permian and other US basins, the effects of seasonal and weather conditions on operations and facilities; changes in laws or regulations; currency exchange fluctuations; the ability of the Company to attract and retain skilled labour and qualified management; and other unforeseen conditions which could impact the Company's business of supplying oilfield consumable chemistry to the Canadian and US markets and the Company's ability to respond to such conditions.

In particular, this press release contains forward-looking information pertaining to the following: the certainty and predictability of future cash flows and earnings; expectations that EBITDAC will exceed the sum of expenditures on interest, taxes and capital expenditures; expectations of  capital expenditures in 2020; expectations regarding the impact of increased operating leverage on margins going forward; the sufficiency of liquidity and capital resources to meet long-term payment obligations; potential M&A opportunities; CES' ability to increase or maintain its market share, including expectations that PureChem and JACAM will increase market share in the oilfield consumable chemical market, that Catalyst will increase market-share of production and specialty chemicals in the Permian Basin, and that AES will increase drilling fluids market share in the Permian Basin; optimism with respect to future prospects for CES; expectations regarding the timing of completion of pipeline projects in the basins which the Company operates; impact of CES' vertically integrated business model on future financial performance; expectations regarding challenges in the Canadian market and near term opportunities in the US market; CES' ability to leverage third party partner relationships to drive innovation in the consumable fluids and chemicals business; supply and demand for CES' products and services, including expectations for growth in CES' production and specialty chemical sales, expected growth in the consumable chemicals market and the impact of such increased sales on operating leverage and cost structure; industry activity levels; commodity prices; uncertainty surrounding the duration and severity of a low oil and natural gas price environment; development of new technologies; expectations regarding CES' growth opportunities in Canada and the US; expectations regarding the performance or expansion of CES' operations and working capital optimization; expectations relating to operating efficiencies and rationalization as a result of management changes; expectations regarding end markets for production chemicals and drilling fluids in Canada and the US; expectations regarding the impact of production curtailment policies in Alberta; expectations regarding demand for CES' services and technology; impacts of pricing differentials for oil between Canada and the United States; investments in research and development and technology advancements; access to debt and capital marketsand cost of capital; expectations regarding capital allocation including the use of surplus free cash flow, the purchase of CES' common shares by CES pursuant to the NCIB, debt reduction through the repayment of the Company's Senior Facility or repurchases of the Company's Senior Notes, investments in current operations, issuing dividends, or market acquisitions; the potential means of funding dividends and the NCIB; CES' ability to continue to comply with covenants in debt facilities; and competitive conditions.

CES' actual results could differ materially from those anticipated in the forward-looking information as a result of the following factors: general economic conditions in the US, Canada, and internationally; geopolitical risk; fluctuations in demand for consumable fluids and chemical oilfield services, and any downturn in oilfield activity; a decline in activity in the Permian, the WCSB,  and other basins in which the Company operates; a decline in frac related chemical sales; a decline in operator usage of chemicals on wells; an increase in the number of customer well shut-ins; a shift in types of wells drilled; volatility in market prices for oil, natural gas, and natural gas liquids and the effect of this volatility on the demand for oilfield services generally; the declines in prices for natural gas, natural gas liquids, oil, and pricing differentials between world pricing; pricing in North America and pricing in Canada; impacts of production level decisions among OPEC+ members and the potential demand impacts of COVID-19; competition, and pricing pressures from customers in the current commodity environment; currency risk as a result of fluctuations in value of the US dollar; liabilities and risks, including environmental liabilities and risks inherent in oil and natural gas operations; sourcing, pricing and availability of raw materials, consumables, component parts, equipment, suppliers, facilities, and skilled management, technical and field personnel; the collectability of accounts receivable, particularly in the current low oil and natural gas price environment; ability to integrate technological advances and match advances of competitors; ability to protect the Company's proprietary technologies; availability of capital; uncertainties in weather and temperature affecting the duration of the oilfield service periods and the activities that can be completed; the ability to successfully integrate and achieve synergies from the Company's acquisitions; changes in legislation and the regulatory environment, including uncertainties with respect to oil and gas royalty regimes, programs to reduce greenhouse gas and other emissions, carbon pricing schemes, and regulations restricting the use of hydraulic fracturing; pipeline capacity and other transportation infrastructure constraints; government mandated production curtailments; reassessment and audit risk and other tax filing matters; changes and proposed changes to US policies including the potential for tax reform, and possible renegotiation of international trade agreements and the implementation of the Canada-United States-Mexico Agreement; international and domestic trade disputes, including restrictions on the transportation of oil and natural gas and regulations governing the sale and export of oil, natural gas and refined petroleum products; divergence in climate change policies between the US and Canada; potential changes to the crude by rail industry; changes to the fiscal regimes applicable to entities operating in the US and the WCSB; supply chain disruptions including those caused by global pandemics or disease or from political unrest and blockades; access to capital and the liquidity of debt markets; fluctuations in foreign exchange and interest rates; CES' ability to maintain adequate insurance at rates it considers reasonable and commercially justifiable; and the other factors considered under "Risk Factors" in CES'  Annual Information Form for the year ended December 31, 2019 and "Risks and Uncertainties" in CES' MD&A dated March 12, 2020.

THE TORONTOSTOCK EXCHANGE HAS NOT REVIEWED AND DOES NOT ACCEPT RESPONSIBILITY FOR THE ADEQUACY OR ACCURACY OF THIS RELEASE.

SOURCE CES Energy Solutions Corp.