Image source: CES Energy Solutions

CES Energy Solutions (Toronto: CEU) reported record revenues for the fourth quarter ended Dec. 31, 2021, of C$367.8 million (US$288.1 million), an increase of 73% over the same period a year ago.

The Calgary-based provider of consumable chemical solutions for the oilfield posted adjusted EBITDAC of C$47.8 million (US$37.5 million), up 94% over the same period from last year.

For the full year 2021, CES reported revenue of C$1,196.4 million (US$937.4 million), up 34.7% from 2020, and adjusted EBITDAC of C$156.2 million (US$122.4 million), up 53% from 2020.

(Note that EBITDAC is defined as net income before interest, taxes, depreciation and amortization, finance costs, other income, stock-based compensation and impairment of goodwill.)

"Backed by strong energy market fundamentals, CES realized revenue growth throughout its business lines during the fourth

"The continued positive momentum demonstrated in the quarter has been bolstered by improvements in rig activity, higher production volumes, pricing increases, and strategic procurement initiatives that are expected to continue into 2022."

Investment thesis

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CES stock has performed well over the past year and has particularly outperformed the market since the broad swoon at the end of 2021.

Despite the strong run, the stock is still under the radar of most investors, with a market cap of just C$691 million (US$542 million).

We think this provider of technically advanced consumable chemical solutions for the oilfield is a solid small cap value play in an environment of increasing global energy demand.

• Low capital intensity.
• Strong free cash flow generation, with Funds Flow from Operations of C$33.5 million for Q4, and C$117.3 million for the full year 2021.
• Growth across all five business lines - drilling fluids, completion chemicals, production chemicals, pipelines and midstream, and industrial
• The company reinstituted its dividend in 2021, which it had suspended at the onset of the COVID-19 pandemic in 2020.

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Source: Equities News

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