Canadian Energy Services & Technology Corp. Announces Results for the Fourth Quarter and the Year Ended December 31, 2015 and Declares Cash Dividend

CALGARY, ALBERTA--(Marketwired - March 10, 2016) - Canadian Energy Services & Technology Corp. ("CES" or the "Company") (TSX:CEU)(OTCQX:CESDF) is pleased to report on its financial and operating results for the three and twelve months ended December 31, 2015. Further, CES announced today that it will pay a cash dividend of $0.0025 per common share on April 15, 2016 to the shareholders of record at the close of business on March 31, 2016.

CES generated revenue of $165.0 million during the three months ended December 31, 2015, compared to $278.7 million for the three months ended December 31, 2014, a decrease of $113.7 million or 41%. Year-to-date, revenue totaled $749.6 million, compared to $972.7 million for the year ended December 31, 2014, representing a decrease of $223.1 million or 23% on a year-over-year basis. Adjusted EBITDAC for the three months ended December 31, 2015 was $16.4 million as compared to EBITDAC of $47.6 million for the three months ended December 31, 2014, representing a decrease of $31.2 million or 66%. For the year ended December 31, 2015, Adjusted EBITDAC was $101.6 million as compared to EBITDAC of $177.2 million in 2014. For both comparative periods, the Company's operating results were negatively affected by the current low commodity price environment and by the additional factors outlined below.

Revenue generated in the US for the three months ended December 31, 2015 was $109.9 million compared to $178.5 million for the three months ended December 31, 2014, a decrease of $68.6 million or 38%. Although the number of wells or oilfield sites serviced in Q4 with production and specialty chemicals ("Treatment Points") by JACAM rose in Q4 2015 in comparison to Q4 2014, this growth was offset by a decline in frac related chemical sales, and continued price discounting on all products as customers are increasingly focused on managing near-term cash lifting costs. US revenues in the quarter were also negatively impacted by lower activity levels and an increasingly difficult pricing environment for the drilling fluids business. For the year ended December 31, 2015, US revenues were $514.9 million compared to $599.7 million for the same period in 2014, representing a decrease of $84.8 million, or 14%. The year-to-date revenue numbers were down primarily as a result of the increasingly unfavourable pricing environment and the rapid decline in drilling fluids activity, which offset the growth experienced at JACAM. For both the three and twelve months ended December 31, 2015, the Company's US revenues were also positively impacted on translation by weakness in CAD versus USD over the comparable periods in 2014.

Revenue generated in Canada for the three months ended December 31, 2015 was $55.0 million compared to $100.2 million for the three months ended December 31, 2014, a decrease of $45.2 million or 45%. PureChem continued to gain market share in Canada and increased Treatment Points during the quarter, however these gains were offset by price discounting and weaker frac related chemical sales. CES' drilling fluids business experienced a weak recovery out of spring break-up in 2015 as activity levels never recovered to prior year levels and was capped off by a very weak Q4. The drilling fluids business experienced intensifying pricing pressure as the year unfolded and this pressure has continued into 2016. For the year ended December 31, 2015, revenue in Canada was $234.7 million compared to $373.0 million in the same period in 2014, representing a decline of $138.3 million or 37%. Year-to-date, revenue was negatively affected by the steep drop-off in drilling activity and continued pricing pressure. Offsetting this was year-over-year growth in production and specialty chemical sales as PureChem continued to grow and take market share in Canada.

During the three months ended December 31, 2015, the Company recorded a goodwill impairment of $154.8 million with respect to the Company's two cash generating units ("CGU") as determined under IFRS (2014 - $nil). The Company's impairment analysis indicated that the recoverable amount of the net assets for each CGU did not exceed its respective carrying value and, therefore, goodwill allocated to the Canadian Operations CGU was impaired by $39.1 million and goodwill allocated to the US Operations CGU was impaired by $115.7 million. The impairment charges were internally allocated for accounting purposes to the CES and AES drilling fluids divisions respectively.

Despite the current operating challenges, CES' balance sheet is well positioned to weather the current downturn in oilfield activity. We have a net nil draw on our Amended Senior Facility and our $300 million of Senior Notes are not due until April 2020. However, due to weaker upstream activity expected in 2016, CES is proactively in discussions with its banking syndicate seeking relief of certain covenants in the Amended Senior Facility. Interest costs, maintenance capital and dividends in 2016 will be fully funded from EBITDAC, leaving excess cash generation and available sources of capital to fund our growth capital and to fund M&A activity.

CES also announced today that it will pay a cash dividend of $0.0025 per common share on April 15, 2016 to the shareholders of record at the close of business on March 31, 2016.

CES Q4 Results Conference Call

With respect to the fourth quarter results, CES will host a conference call / webcast at 9:00 am MST (11:00 am EST) on Friday, March 11, 2016.

North American toll-free: 1-(877) 291-4570

International / Toronto callers: 647-788-4922

Link to Webcast: http://www.canadianenergyservices.com/

Outlook

CES' 2015 results are reflective of the difficult industry conditions with reduced activity levels lowering revenue and price discounting resulting in margin compression. CES remains cautious with its outlook as 2016 looks even more challenging with no visibility to a turnaround in the current low oil price and weak natural gas price environment. The end result is that until commodity prices improve, CES sees weak upstream activity across North America and very thin margins to be realized on that work. To address this CES has undertaken significant steps in Q1 2016 to further rationalize its drilling fluids cost structure and will take additional appropriate actions as necessary. CES does see significant opportunities in its production and specialty chemical business. However, our customers are under extreme pressure to lower lifting costs. CES believes it has the technologies to help them achieve this, but to maintain and win work we are required to also lower prices, provide even more service and in certain cases apply reduced treatment regimes, which temporarily reduce chemical usage. The current pricing environment is also making middlemen or competitors who are resellers of other company's products redundant. By being basic in the manufacture of the consumable chemicals it sells, CES continues to be price competitive. CES also believes that competitor consolidations and business failures will provide further opportunities for CES in a recovery scenario. In addition, CES sees that water usage including the problems of getting access to water for fracturing, and the costs of handling water will become an increasingly more important issue for the oil and gas industry as activity levels recover. CES is focused on using its knowledge and leading technologies to create opportunities and solutions to address these problems.

CES believes over time it can continue to grow its share of the oilfield consumable chemical market. CES' strategy is to utilize its vertically integrated business model; its problem solving through science approach; its patented and proprietary technologies; and its superior execution to increase market share. CES believes that its unique value proposition in this increasingly complex operating environment makes it the premier independent provider of technically advanced consumable chemical solutions throughout the life-cycle of the oilfield in North America.

CES will continue to assess M&A opportunities that will improve CES' competitive position and enhance profitability. Any acquisitions must meet CES' stringent financial and operational metrics. In its core businesses, CES will focus on retaining accounts, rationalizing costs, monitoring and capturing opportunities and making strategic investments as required to position the business to capitalize on the next positive cycle.

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 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 the Western Canadian Sedimentary Basin ("WCSB") and in several basins throughout the United States ("US"), with an emphasis on servicing the ongoing major resource plays. In Canada, CES operates under the trade names Canadian Energy Services, PureChem Services ("PureChem"), Sialco Materials Ltd. ("Sialco"), Clear Environmental Solutions ("Clear"), and EQUAL Transport ("EQUAL"). In the US, CES operates under the trade names AES Drilling Fluids ("AES"), AES Frac Fluids ("AES Frac"), Superior Weighting Products ("Superior Weighting") and JACAM Chemicals ("JACAM").

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. The JACAM, PureChem and Sialco brands are vertically integrated manufacturers of advanced specialty chemicals. In addition to being basic manufacturers of chemicals, JACAM and PureChem also have distribution channels into the oilfield.

Two complementary business divisions support the operations and augment the product offerings in the WCSB. Clear is CES' environmental division, providing environmental consulting, water management services, and drilling fluids waste disposal services primarily to oil and gas producers active in the WCSB. EQUAL is CES' transport division, providing its customers with trucks and trailers specifically designed to meet the demanding requirements of off-highway oilfield work in the WCSB. EQUAL transports and handles oilfield produced fluids and supports the oilfield chemical business by hauling, handling, managing and warehousing products. EQUAL operates from two terminals and yards located in Edson, Alberta and Carlyle, Saskatchewan.

Led by JACAM's state of the art laboratory in Sterling, Kansas, CES operates seven separate lab facilities across North America: two in Houston, Texas; and one in each of Midland, Texas; Carlyle, Saskatchewan; Delta, British Columbia; and Calgary, Alberta. In 2015 CES significantly expanded its laboratory capabilities in Calgary with the opening of its new laboratory. In the US, CES' main chemical manufacturing and reacting facility is located in Sterling, Kansas with additional chemical blending capabilities in Sonora, Texas. In Canada, CES also has an additional chemical manufacturing and reacting facility located in Delta, British Columbia with additional chemical blending capabilities located in Carlyle, Saskatchewan and Nisku, 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 forward-looking 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 this 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 and statements are reasonable but no assurance can be given that these factors, expectations and assumptions will prove to be correct. The forward-looking information and statements contained in this document speak only as of the date of the document, and CES assumes no obligation to publicly update or revise them 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: future estimates as to dividend levels, including the payment of a dividend to shareholders of record on March 31, 2016; the potential means of funding dividends; the intention to make future dividend payments; the certainty and predictability of future cash flows and earnings; the expectation that interest costs, maintenance capital and dividends will be fully funded from EBITDAC, with excess cash generated and available sources of capital to fund growth capital and M&A activity; the sufficiency of liquidity and capital resources to meet long-term payment obligations; potential M&A opportunities the long-term capital investments required for CES to execute on its business plan; management's opinion of the impact of any potential litigation or disputes; the application of critical accounting judgments and estimates; the collectability of accounts receivable; CES' ability to increase its market share, including expectations that PureChem and JACAM will increase market-share in the oilfield consumable chemical market; supply and demand for CES' products and services, including expectations for growth in CES' production and speciality chemical sales; expectations that CES will rationalize its drilling fluids cost structure; industry activity levels; commodity prices; treatment under governmental regulatory and taxation regimes; expectations regarding expansion of services in Canada and the United States; development of new technologies; expectations regarding CES' growth opportunities in Canada and the United States; the effect of acquisitions on the Company; expectations regarding the performance or expansion of CES' operations; expectations that competitor consolidation and business failures will provide future opportunities to CES; expectations regarding demand for CES' services and technology; the potential for CES to expand its business as it relates to water handling; investments in research and development and technology advancements; the Company's ability to negotiate relaxed financial covenants with its banking syndicate; access to debt and capital markets; 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 Canada, the United States, and internationally; fluctuations in demand for consumable fluids and chemical oilfield services, and the recent downturn in oilfield activity; a decline in activity in the WCSB, the Permian and other basins in which the Company operates; 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 oil, and pricing differentials between world pricing and pricing in North America; competition, and pricing pressures from customers in the current commodity environment; currency risk as a result of recent fluctuations in value of the U.S. 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 and natural gas price environment; ability to integrate technological advances and match advances of competitors; 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 programs to reduce greenhouse gas and other emissions and regulations restricting the use of hydraulic fracturing; reassessment and audit risk associated with the Conversion and other tax filing matters; changes to the fiscal regimes applicable to entities operating in the WCSB and the US; access to capital and the liquidity of debt markets; fluctuations in foreign exchange and interest rates, and the other factors considered under "Risk Factors" in CES' Annual Information Form for the year ended December 31, 2015 and "Risks and Uncertainties" in CES' MD&A. dated March 10, 2016.

CES has filed its 2015 annual audited consolidated financial statements and notes thereto as at and for the year ended December 31, 2015, and accompanying management discussion and analysis in accordance with National Instrument 51-102 - Continuous Disclosure Obligations adopted by the Canadian securities regulatory authorities. Additional information about CES will be available on CES' SEDAR profile at www.sedar.comand CES' website at www.CanadianEnergyServices.com.

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