Thank you for standing by. This is the conference operator. Welcome to the CES Energy Solutions third quarter 2023 results conference call and webcast. As a reminder, all participants are in listen-only mode and the conference is being recorded. After the presentation, there will be an opportunity to ask questions. To join the question queue, you may press Star, then one on your telephone keypad. Should you need assistance during the conference call, you may signal an operator by pressing Star, then zero. I would now like to turn the conference over to Tony Aulicino, Chief Financial Officer. Please go ahead. Thank you, operator. Good morning, everyone, and thank you for attending today's call. I'd like to note that in our commentary today, there will be forward-looking financial information and that our actual results may differ materially from the expected results due to various Risk Factors and assumptions. These Risk Factors and assumptions are summarized in our third quarter MD&A and press release dated November 9th, 2023, and in our Annual Information Form dated March 9th, 2023. In addition, certain financial measures that we will refer to today are not recognized under current generally accepted accounting principles, and for a description and definition of these, please see our third quarter MD&A. At this time, I'd like to turn the call over to Ken Zinger, our President and CEO. Thank you, Tony. Welcome, everyone, and thank you for joining us for our third quarter 2023 earnings call. On today's call, I will provide a brief summary of our strong financial results released yesterday, followed by an update on the capital allocation plan and then our divisional updates for Canada and the U.S., as well as our outlook for 2024. I will then pass the call over to Tony to provide a detailed financial update. We will take questions and then we'll wrap up the call. I'll start my comments today by highlighting some of the major financial accomplishments we were able to achieve through Q3 2023. These include record Q3 revenue of CAD 536.5 million, versus our prior record level set in Q3 of last year of CAD 524.7 million, and this was our third highest revenue quarter ever. Record Q3 EBITDA of CAD 80.2 million, versus our prior record level set in Q3 last year of CAD 73.3 million, and effectively tying our all-time EBITDA record set in Q4 of 2022. EBITDA margin of 15% versus 14% in Q3 of 2022 and 14.3% in the prior quarter. This result was the highest EBITDA margin achieved by CES in over eight years. We once again reduced total debt to TTM ratio, this time to 1.46 from 2.52 one year ago and from 2.17 at year-end. We realized free cash flow in the quarter of CAD 75.6 million. This was our strongest free cash flow quarter ever, other than when we harvested significant working capital during the crises of 2015 and 2020. As promised on the Q2 earnings call, we have made significant progress on maximizing our NCIB purchases, having already bought almost 64% of the 18.7 million shares allowed under our current NCIB in just 4 months. Our capital allocation strategy for the upcoming year remains consistent with what we announced last quarter. We will continue to support the business with the necessary investments required to provide acceptable growth and returns. We intend to fully utilize our current NCIB, expiring in July 2024, to repurchase the full 10% or 18.7 million shares allowable under the program. We will continue to pay our dividend. I'm sorry, CAD 0.10 per share per year, or approximately CAD 24 million per year. We may choose to adjust this level from time to time as cash flows and forecasts allow. We will use the balance of the remaining free cash flow to continue paying down debt towards a target of 1x debt to TTM. I will now move on to summarize the Q3 performance by division. Currently, our rig count in North America stands at 199 rigs out of the 821 running, or 24.2% of the market. The Canadian Drilling Fluids division continues to lead the WCSB in market share. Today, we are providing service to 67 of the 196 jobs listed as underway in Canada, or a 34.2% market share. Drilling activity in Canada throughout 2023 has been slightly lower year-over-year. However, we are excited about the prospects for 2024 and anticipate it will be a stronger year due to the expected completion and start-up of infrastructure projects and their associated takeaway capacity in Canada. PureChem, our Canadian Production Chemical business, set new records for quarterly revenue and EBITDA in Q3. We have continued to see growing contributions from our frac chemical stimulation and H2S scavenger groups as we further penetrate each of these end markets and gain market share, while utilizing only our current infrastructure and supply chain to support them. Our primary business, production treating, also continues to take market share and grow. We are very optimistic about the coming year and the current growth trends we are experiencing in this division. In the United States, our U.S. Drilling Fluids group, AES, is providing chemistries and service to 132 of the 625 rigs active in the U.S.A., for a 21.1% market share. The number of rigs is down from 147 rigs at this time last year, but ahead of, on market share from the 19.1% reported at that time. This includes a basin-leading 98 rigs out of the 318 listed working in the Permian, equating to a 31.1% market share versus the 29.8% market share we had at this time last year....Our second barite grinding facility, located in the Permian Basin, will allow us to self-supply 100% of our barite needs going forward, supporting increased market penetration and further margin improvement. As well, we have made a soft entry into the Haynesville market and are looking at picking up a couple more rigs there. We believe our Pecos grinding facility capabilities will provide us with a niche to allow us to gain market share in the United States by participating in this market, which we previously were not focusing on. Finally, Jacam Catalyst had its highest revenue quarter ever and second highest EBITDA quarter ever in Q3. Our manufacturing facility in Kansas continues to operate at a very comfortable output level of approximately 65%-70% of what we believe to be the current maximum capacity. We have continued the recent trend of winning more business in this region, and internal analysis has allowed us to conclude that we have comfortably achieved the largest market share in the basin, even as we continue to grow. Since this is the last earnings call for us in 2023, I will now provide a view into our outlook for the future. Our short-term outlook for the industry activity in North American land market remains largely the same as discussed on the last couple of calls. We continue to experience a more stable environment and activity levels. At AES, our U.S. Drilling Fluids group, we have initiated operations and plans to grow AES within the Haynesville play in Texas, where we think we can add rigs into an area that we have not really participated in during the past handful of years. Once we achieve a meaningful run rate, we will fine-tune supply chain to optimize earnings and efficiencies. Obviously, this will lead to further improved market share overall when combined with the steady progress we are making throughout the U.S. This, combined with ever-increasing service intensity due to longer and more complicated horizontal sections and wellbore geometries that many operators have been speaking to, has AES looking forward to 2024 being another very profitable growth year. For our Canadian Drilling Fluids group, CES, we view the impending infrastructure completions in Canada as highly positive for the Canadian market and investments by E&Ps. As both TMX and LNG Canada get closer to operation, we see activity in Canada continuing to accelerate. Due to our position as a leader in the Canadian energy services market, we stand to directly benefit from this inevitable uptick in activity. Service intensity is also a phenomenon being experienced in the Canadian market, which will lead to more meters being drilled by the same number of rigs. With the increase in meters comes an increase in chemical spend due to more complex issues. We see revenue growth in 2024 within Canada, and what we view as likely to be a flat to slightly higher activity level. As evidenced by our Q3 numbers, Jacam Catalyst and PureChem are both growing at a rate that has almost fully offset the revenue reduction from the North American rig count, dropping by 17% year-over-year. The annual third-party Kimberlite Production Chemical Supplier Performance Report highlighted and supported our view on how Production Chemicals divisions on both sides of the border have captured market share and outperformed our competitors. We believe the growth in these two divisions will continue to accelerate and that we have lots of room to take market share and increase revenue and earnings. We have also continued to make progress in the long road to gaining traction in the lucrative Gulf of Mexico offshore market after our acquisition of ProFlow last year, as we fine-tune our support facilities and team locally. All these positive developments taken together have us very optimistic about the Production Chemical groups and their short and long-term organic growth opportunities. As a reference point for the growth prospects in front of us in Production Chemicals, we have consistently publicly noted that our total corporate revenue consists of about 50/50 split between Production Chemical business and Drilling Fluids business. Spears Research publishes reports on market size by geography and market space. Their most recent report estimates that the North American Production Chemical spend stands at approximately CAD 6.75 billion in 2023. Since 50% of our revenue in 2023 equals about CAD 1 billion, this math shows that as a percentage of addressable market in North America, we have achieved only around 15% of the total spend. We believe we see a path to doubling this penetration by methodically continuing to execute our business plan in Production Chemicals in North America. To summarize this outlook, I want to emphasize the growth prospects directly in front of us in the markets that we are already participating and established in. As a secondary focus, we continue to look for opportunities to potentially enter strategic international markets in order to establish a foothold in these regions, which we currently have no exposure to. As always, I want to extend my appreciation to each and every one of our employees for their commitment to the business, culture, and success of CES. It is rewarding to note that due to the growth that we are experiencing, we have increased our total number of employees at CES from 2,122 on January first of this year to 2,235 to date. This is an increase of 113 employees so far this year, or approximately 5%. Unlike last year, where we increased headcount in the company by 17% over the course of the year, we expect headcount growth to be relatively muted going forward. In conclusion, I would like to note that the results in Q3 were once again not due to any one division or area excelling. This was a balanced effort across the company in which every business unit contributed, and it speaks once again to the quality of people employed everywhere in every division here at CES. As always, I want to sincerely thank all of our customers for their trust and commitment to CES in good times and in bad. With that, I will turn the call over to Tony for the financial update. Thank you, Ken. CES's financial results represented a good quarter record and demonstrated a continuation of strong revenue, adjusted EBITDAC and free cash flow levels. CES continued its trend of strong cash flow generation amid a constructive supply-demand environment, increasing levels of service intensity and leading market share positions throughout its business. In Q3, CES generated revenue of $537 million and adjusted EBITDAC of $80.2 million, representing a 15% margin. Q3 revenue of $537 million, compared to $516 million in Q2, and represented an increase of 2% from $525 million in Q3 2022. Revenue generated in the U.S. was $361 million, or 67% of total revenue for the company. This revenue number compared to $375 million in Q2 and $350 million a year ago. Although US revenues for the quarter were impacted by decreased industry drilling activity, this was more than offset by higher production levels, increased product intensity levels and market share gains year-over-year. Revenue generated in Canada was $175 million in the quarter, up from $140 million in Q2, as expected, off of seasonally lower activity levels and compared to $175 million in Q3 2022. Sequentially, Canadian revenues benefited from an increase in rig counts and higher production volumes. When compared to the previous year, increases in production volumes offset declines to industry rig counts. Adjusted EBITDAC of $80.2 million in Q3 represented a 9% increase from $73.3 million generated in Q3 2022, and a sequential increase of $6.3 million, or 9% from $73.9 million generated in Q2. Adjusted EBITDAC margin in the quarter increased to 15%, compared to 14.3% recorded in Q2 and 14.0% in Q3 2022, and is reflective of favorable product mix, effective pricing and procurement practices, and maintaining prudent SG&A levels. I am proud to report that during Q3, our net cash provided by operating activities totaled $99.9 million, representing an increase of $10.6 million over Q2 and $116.2 million over Q3 2022. The improvement came from strong revenue levels, attractive margins, and continued improvements in working capital management. During the quarter, CES achieved strong free cash flow of CAD 75.6 million, compared to CAD 66.7 million in Q2. This measure demonstrates the cash conversion quality of our earnings, as measured by some of our peers and respective research analysts, by calculating CFO less net CapEx and lease repayments divided by adjusted EBITDAC, resulting in an industry-leading 94% ratio for the quarter. CES continued to maintain a prudent approach to capital spending through the quarter, with CapEx spend net of disposal proceeds of CAD 16.1 million, representing 3% of revenue. We will continue to adjust plans as required to support existing business and growth through our divisions. For 2023, we expect cash CapEx to be approximately CAD 65 million, weighted towards expansion capital to support higher levels of activity and business development opportunity, particularly in the Production Chemicals division, as Ken mentioned. During Q3, we were very active in our NCIB, purchasing 12 million common shares at an average price of CAD 3.34 per share, for a total of CAD 40 million. Following Q3, we continued our aggressive buyback activity with an additional 2.9 million common shares at an average price of CAD 3.66 per share, for a total of CAD 10.4 million. We exited the quarter with a net draw on our senior facility of CAD 92.2 million, compared to CAD 120.2 million at June 30 and CAD 208.5 million at December 31st, 2022. The decreases realized during the quarter were driven by strong cash flow generation, enhanced by a reduction in required working capital investments, partly offset by $40 million in share repurchases and $6.3 million in dividend payments. We ended Q3 with 454 million in total debt, net of cash, comprised primarily of 288 million in senior notes and a net draw on the senior facility of 92.2 million. Our total debt to adjusted EBITDAC declined to a prudent 1.46x at the end of Q3, down steadily from 1.57x at Q2 and 2.52x a year ago, demonstrating our continued deleveraging trend. I would also note that a working capital surplus of CAD 650 million exceeded total debt of CAD 454 million by CAD 161 million, and demonstrated continued improvement in respective year-over-year metrics, with cash conversion cycle improving and working capital as a percentage of annualized quarterly revenue achieving 29% versus historical norms of 30%-35%. Where each 1% improvement at these revenue levels represents approximately CAD 21 million on our balance sheet. From December 31st, 2022, to September 30th, 2023, our draw declined by CAD 117 million, from CAD 209 million to CAD 92 million, driven by prioritization of surplus cash flow generation. When you account for the $51.8 million spent on share repurchases and the $16.5 million on dividends, the surplus cash flow was actually $185 million through the first three quarters of 2023. This very strong surplus free cash flow performance is indicative of the strong cash flow generating capability of CES in this environment. At this point, I believe it's important to step back and highlight the relative positioning of the company over the past five quarters, as we have now achieved a consistent and still increasing altitude of financial performance that we've been talking about for the last year and a half. Annualized revenue levels have remained in $2-$2.2 billion run rate range, EBITDA in the $75 million-$80 million range, and FFO in the general $60 million-$70 million range, which collectively underpins our thesis of strong cash flow generation. These consistent near record levels have allowed CES to deliver on our commitment to returning capital to shareholders. During the quarter, we returned $46.3 million, through $40 million in share buybacks and $6.3 million in dividends, representing 46% of cash flow from operations and 61% of free cash flow. At current levels of activity, market share and service intensity, CES remains in a position of strength and flexibility, supporting our capital allocation priorities as outlined by Ken. Number one, we continue to prioritize capital allocation towards supporting existing and new business through investments in working capital as required and CapEx projects that deliver IRRs above our internal hurdle rates. Next, we intend to repurchase up to the maximum common shares under the renewed NCIB over the coming year. Year- to- date, we have repurchased 19.3 million shares, or just under 8% of outstanding shares, at an average price of CAD 3.22 per share, and have exhausted 11.9 million of our 18.7 million NCIB program, which expires in July of 2024. We remain very comfortable with our dividend, which represents a yield of approximately 2.8% at our current share price and is supported by a prudent 13% payout ratio within our target range of 10%-20%. We will continue to use remaining surplus free cash flow to reduce leverage toward the one-time level to further strengthen our balance sheet over time. At this time, I'd like to turn the call back to Ken for comments on our outlook. Thank you, Tony. As you and I both noted, the near all-time record Q3 results, combined with a 15% EBITDA margin, allowed us to return significant capital to shareholders. We are confident in our ability to grow the company within a stable industry environment while continuing to provide growing returns. I'll now pass the call back to the operator for questions. Thank you. We'll now begin the question- and- answer session. To join the question queue, you may press Star, then one on your telephone keypad. You'll hear a tone acknowledging your request. If you're using a speakerphone, please pick up your handset before pressing any keys. To withdraw your question, please press Star, then two. Our first question is from Aaron MacNeil with TD Cowen. Please go ahead. Hey, morning, and thanks for taking my questions. Ken, I know you referenced this in your prepared remarks, but as it relates to the soft tech entry into the Haynesville and the Pecos facility, you know, I'm wondering if we can all just take a bit of a step back and compare your Haynesville footprint to, say, your Permian footprint, and recognizing that the Permian is much more established, how that might impact your cost competitiveness and your ability to deliver a high-quality service to your customers? And then, as a follow-on, if you're ultimately successful in the Haynesville, will it require a bigger slug of capital in the future to build out that infrastructure? Sure, yeah. I mean, I pointed out because we've been thinking a lot about where we can grow within the markets we're already in, as well as where we can grow outside of the markets we're currently in. And one of the things that we did back in 2015 as energy and commodities kind of collapsed was minimize our infrastructure across North America. And the Haynesville warehouse was one of the ones that we shut down, mothballed, and actually sold. So we don't actually have any infrastructure there right now. So with everything backing off a little bit over the last year here, we view this as a good time to come into that space as rigs start to pick back up, hopefully. I mean, currently there's about 45 working there, which is, you know, 7% or 8% of the total number of rigs in the U.S., so it's a decent size. But the reason it's attractive to us is because it's primarily because of the Pecos facility and the fact that that facility is gonna allow us—you know, right now we have the Corpus Christi barite grinding facility. That gives us a big advantage in the Permian, but all that barite is going to the Permian, so we didn't really have any extra to spare, and we're actually buying in the open market right now. We're so busy in the Permian as well, to a small degree, hence the Pecos facility. So once we get Pecos online, we can, we can supply from there. Sorry, Pecos. We can supply from there into the Permian, and that'll give us some extra capacity in Houston or Corpus Christi to supply the Haynesville market. And the Haynesville market, barite market, is supplied primarily by the grinders on the Gulf Coast. So we will be online with what they have, Halliburton being the only one that we directly compete with that has full grinding capability. Cimbar is the barite wholesaler in the United States. They supply most of our competitors and the independents. They're the ones supplying into that Haynesville play as well. So that'll be the advantage we get. And Haynesville is traditionally weighted, it's gas, it's pressured, and so you have to have a lot of barite, and that becomes a big part of what you're selling there and the advantage you can bring. So that, combined with the fact that it's a little more technical, allows for some better margins, and now that we have the infrastructure in place, we can actually support it reliably. But we won't just run in there and buy land. And even when we get going with a market that size, you know, we're looking at leasing and renting. We're not looking at buying and building. That's very helpful. Thank you. And then similar question on the Production Chemical side. I know it's not disclosed per se, but since you've sort of laid out the growth potential of the U.S. Production Chemicals business, I'm wondering if you can give us a sense of how total volumes in the U.S. Production Chemicals business has been trending. I know you get treatment points, but it's not a great measure. Like an annual CAGR, if you have that handy. And then how would you characterize the potential future growth trajectory over the next few years if you're ultimately successful in achieving that market share capture strategy? Yeah, I'm trying not to get—I mean, we're trying to be—I'm trying to be promotional about where we're going and talk about the growth that we see. But I don't want to give hard numbers on where we think we can go or where we believe we're going to. I don't have the number right now for the volumes per se, as an overall push into the field, just the treatment points. But suffice it to say, we are picking up customers, and we are picking up market share with customers. That we know. And then when you look at the Kimberlite report, it gets a little more detailed on who's working where and what they estimate and what customers are telling them they're doing. And we fared very well in that report. We've always fared very well, but on this most recent one, it was pretty obvious that we were well ahead of everybody else. And then we did some internal study as well on customers in the region, and what we believe the people beside us are doing for volumes and treatments compared to what we're doing. And it established us having a pretty significant lead in market share in the Permian Basin in Production Chemicals. Yeah, we, we talked about it internally a lot, Aaron, and you guys have covered it a bit in your research, and we don't know if it's exactly the same trajectory, but we talk a lot about how AES doubled market share over the last 5-6 years, from the low double digits to 21, touching 22%. Don't know exactly where Jacam Catalyst and PureChem are respectively in that growth trajectory, but suffice it to say that they are starting to get recognized by the bigs even more. Not that they weren't, but all of the infrastructure that the teams have built, the exposure that they're getting at the conferences, the technical pieces that they've been putting out, in some cases, working with producers on that, is being recognized. You can see the results in our revenue and EBITDA levels, where they are on that growth trajectory. The real question is: how long does that continue, and how steep is that curve? But right now, we're right in the middle of it, with market awareness and growth. Okay, makes sense. Appreciate the answers. I'll turn it back. The next question is from Keith Mackey with RBC Capital Markets. Please go ahead. Hi, good morning. I'm just curious, there's been a fair bit of M&A announced amongst the customers or E&P base, rather, in Canada and the U.S. over the last several months. Can you just maybe speak to how you see that activity playing out for CEU and, you know, ultimately, what your strategy is to make the best of it, you know, either way, as customers tend to consolidate? Yeah, I think it's a tough one to protect against, Keith. There's going to be times when you don't come out on the right end of those things, but, you know, we just try and do that by being as broad-based as we possibly can, and we try and work for everybody. We've made a real effort over the last 10 years to get more integrated with the bigger, larger, more likely to acquire companies or to be the acquirer companies. And, you know, year- to- date, we haven't had an acquisition that's hurt us, and we've probably had a couple... Well, we've definitely had a couple that have helped us. So far, we're winning in that battle, but there is an opportunity. I mean, there's a couple of the big guys that we don't work for. So if one of them bought one of our good customers, it could be, it could be, it could cost us a little bit of business. But, you know, we, we are doing everything we can to be in almost every door and at least have a third or a piece of the work in all the, all the majors, as well as even the private companies trying to get, you know, in those doors. So like always, it's a blanket approach, but like always, there's no real way to defend against that. But as an industry and people, other teams have talked about this trend, we sort of like it, like it a lot because you have these bigger, stronger, higher creditworthiness, access to capital, results-oriented companies that are probably developing resources that would not have been developed, A, at that pace and that extent, and B, these bigger guys that are results-oriented are deploying their technology to get more out of what they got. Like, let's not forget that a lot of this has been prompted by a deterioration in the inventory quality. So we like it when these bigger, more complicated, results-oriented guys are buying these other assets, because what we're seeing, and frankly, we're in Houston right now, we had our board meetings here this week, listening to the AES guys, and they're working with these bigger customers to employ more technically leading-edge solutions, which falls right down the middle of the fairway for us. Got it. Just one more question from me. So appreciate the growth potential numbers on both the chems and the drilling fluid side. Can you just talk generally and directionally about how you would think about margins under the potential growth trajectories that you can see? Like, should margins materially improve from that 13.5%-14.5% range if one business line grows faster than the other? Or if you could just help us think through that a little bit, would be helpful. Sure. Well, I can start on it just from a financial perspective. If you look at how we've been trending, and we've been pretty candid about it, we made a step change going from a billion-dollar run rate to $2-$2.2 billion. And if you look at the last few quarters, that SG&A has sort of flattened. And we are gonna be spending a little bit in CapEx, and that helps explain that $5 million increase that we showed. But make no mistake about it, we think that we can, at least on the SG&A line, continue to keep that flat or growing at a lesser rate than that revenue growth, which would mathematically lead to a bit of a margin expansion. Then it's a question of the type of work Ken has talked to, and we'll elaborate probably on some of the other stuff that we look at in the Gulf and some of these other really attractive opportunities. Yeah, I think, I think it's hard to predict how high we could go with margin, but as Tony talked about, there is some efficiency gain. We're not entering any of these markets to get less margin. So first and foremost, you know, the 13.5%-14.5% stands, and we've spent a lot of time in the last year really focusing on cash conversion cycle, really focusing on inventory levels. This will help with that, and it will keep us focused on that, but our intent would be to let margins keep growing higher. 15%, which took a lot of things to come together to hit that this month. I don't think necessarily that that's the new minimum. We're gonna continue to talk about the 13.5%-14.5% range. However, we'll see what the future quarters hold, because everybody is working at a high level right now on conversion cycle, and that's having a big impact on overall. All right, appreciate it. I'll leave it there. Thanks. The next question is from Tim Monachello with ATB Capital Markets. Please go ahead. Thanks for taking the question. I'm just wondering if you can outline broadly what you think capital spending might look like in 2024. You've outlined a number of, you know, promising growth trajectories, and based on that spending outlook, what you think you can yield for EBITDA growth in a moderate industry growth environment, moderate to flat? Sure. Yeah, I mean, I would describe 2024 as being sort of the catch-up year. There's no major project that we're doing, but we've grown a lot over the last year and a half, and we've been, you know, we've been running on some tight supply restrictions due to the storage volumes that we have in some of the facilities, and we've put some pressure on the reactors and the blenders, so it's just updating equipment. Not even updating, it's adding equipment that we probably should be adding. It just takes time to get the equipment. But things like our scavenger plant in Nisku, you know, we've doubled the volume of scavenger in the last two years, and we haven't really done a lot with storage capacity there, so we've been using rail cars to store product because that's all we can get our hands on. We're gonna update that a little bit and add some more storage there so we can stop paying for the rail cars to sit still, and because the rail companies are telling us we can't have them anymore. So just some things like that, you know, reactors in Kansas, blending facilities all over and more delivery trucks at Jacam. So no one big item like in prior years. There's no barite plant going in, no big warehouse going in. It's just all the other stuff that we're catching up on. So, do we expect CapEx to be lower year-over-year? I think 2025 potentially has some of the chance to do that, yeah. If things stay relatively flat, just, it'll just come down to growth again. I mean, if what we're doing in 2024 will get us caught up, and then I could see it dropping back down to that $50 million range, if we stay completely flat, 2024- 2025. However, that is not our intention, so hopefully, we're spending more in 2025. Gotcha. Okay. And then, I guess you're pulling on a lot of levers around margins, and it's kind of a follow-up from the last one. But when you think about the margin expansion that you've seen over the last two quarters, how much of that do you think is, you know, structural in nature in terms of like sustainable cost reductions on a product level? And how much is kind of just like operating efficiency and I guess operating leverage? I'd say it's about 50/50. Like, that's a high-level answer, but if you look at that steady progression, Q1 through Q3, 13.85, 14.3%, 15% was a bit of an anomaly. We had one month of the three months where the stars aligned for a few of our big areas of business. But it's been a combination of those two. We've been really smart, or the divisions have been really smart about having fair pricing with the customers and doing a bunch of work internally to bring those costs down, either by leveraging procurement opportunities, or using our technical capabilities to reformulate and change sources. So that's where you saw the COGS contribution. Then on the other, it's like, make no mistake about it, everybody knows their sort of guideposts in terms of margin expectations. They're going after new business. Not just for new business, they're looking for juicier margin business, and that's what they're doing. It's been a combination of product mix and being smart about balancing the COGS level with the pricing. Okay, and then I guess a similar question, just on working capital. It was a pretty staggering draw in the quarter. Yeah, like staggering is a great way to describe it, and we were sort of scratching our heads. We knew that the divisions were doing a great job of moving that working capital optimization down or working capital management, improving every single quarter. We were looking at it like these numbers are phenomenal. 110 days of cash conversion cycle and 28.7% working capital as a percentage of annualized revenue. We did a lot of work, and there's one very large division that month after month, quarter after quarter, has shaved probably about 15% of their historical cash conversion cycle number. So there's a structural improvement there, and we look forward to that continuing. In two of the other divisions, sort of in line or slightly better than historical levels. And then we have another division that is a bit higher than where they've been historically, and we're seeing a significant improvement in those numbers. So, I'd like to say, don't expect 110 next quarter. Don't expect 28.7%. Our normal level of cash conversion cycle in a flat market is typically in the mid-teens. So if you're looking to model, I would model that, and we all hope to beat that estimate. But it's a little bit early on at this new, very efficient level of working capital management. Can you give us some tangible examples of the initiatives that you're implementing that are driving that type of efficiency that might be structural in nature? Yeah, it's a really good question, and just like we run a decentralized model from an operations, HR perspective, and where we allow the divisional presidents to run their businesses. Every division is a little bit different. So, for example, in one division, had a massive customer that they worked very closely with to plug our ERP system directly into their payable system, to shave a few days off of what is otherwise a very boring, mundane process from the customer's side. But that allows us, in that case, with a very big customer, to shave a few days off of DSO. Another example is where the division decided, okay, well, we need more manpower, and we need people in the very specific area, geography, that our customers are in, and have them as collection folks, so they can develop relationships with the customers and in a very constructive way beyond them, develop the relationships. Make sure that we're tracking that so that they're being measured appropriately, and that division decided to hire a few extra people to do that. In another division that historically has been very efficient at working capital optimization, just like the entire company, there have been cases where we had to buy a whole bunch of inventory that was not readily available at a time where the price was high, and you had to step up and pay up and take down a big volume. Where we probably bought a little bit more than we needed to, and there's a division that is watching working capital like a hawk, saw a little bit of a spike and then just whittled that down. So, Like, those are the individual things. This isn't like a corporate edict where we're incorporating some technology or software to do it. It's, it's cultural. It's, it's people at the divisions talking about working capital and making presentations, in some cases, about working capital to everybody, from the sales guys down to the warehouse people, and getting them to understand, look, if you make this little tweak in the amount of product that you're sending to the rig, this is the amount that it saves. And actually showing them how the rubber hits the road, where every day of cash conversion cycle that they're saving is $6 million-$8 million on the balance sheet, and that resonates. And it doesn't have to come from Ken or, or Tony, or the divisional presidents. What we're finding is people in those influential operational positions are understanding it because they're really smart, and they're getting people to realize the implications of what they're doing on a day-to-day. So I would say, like, that's a long-winded answer, but it's our D&A. Like, these are results-oriented people that get it and want to continue to help drive the ship in the same direction, and this quarter was an example of that from a working capital perspective. That's fantastic color. I appreciate it. Yeah. Thanks, gents. My questions. The next question is from Jonathan Goldman with Scotiabank. Please go ahead. Hi, good morning, guys. A lot of my questions have already been asked, but I was wondering if you could provide some high-level color on the relationship between rig counts and fluid intensity. Obviously, you don't break out Drilling Fluids versus Production Chemicals, but revenues were up 2% year-on-year, in a lower rig count environment. You know, obviously, production's up and rig counts are down. Are we at a point where fluid intensity has fully offset declining rig counts, 1-to-1, or maybe even more than 1-to-1? We've been doing a bunch of math on that ourselves, Jonathan, trying to understand exactly the impact of intensity. There's definitely an impact, and we see it in our magic number that we use, which is, you know, cash flow per day per rig. It's been steadily increasing over the last six years at a pretty good rate. So we have a ballpark idea, but to give you an exact, I think, you know, part of the offset we've seen in revenue year-over-year was due to that, and part of it was due to Production Chemical performance. We don't break the two out, so the ratio has changed a little bit on the percentage of work that we're doing on the Production Chemical side. But hopefully, we can get more clarity and color for you guys going forward on what we see as intensity, because it's a phenomenon that's happening, and we're noticing it on both sides of the border. Perfect. That makes sense. And then maybe just another one on the margins. You guys did a great job talking about the structural improvements in the business, but, Ken, you mentioned these are the highest margins. I think you said 8 years, maybe it's back 2017. You know, you're doing 14+ in the LTM. You were 13 in 2018, 2019. Is there anything structurally different in the operating environment that's causing the higher margins, or is it mostly internal initiatives on your part? There's a lot of internal initiatives. There's a lot of things like Tony's talking about. Everyone you know, is very focused on conversion cycle. Like, practically a year ago, everybody was talking about where are we gonna get product and how much should I order? Because we should get what we can get because it's so short everywhere. And nowadays, when you walk around, everywhere you talk within the company, everyone's talking about how to, how to be more efficient and what is the right level to be at, and how, how thin can we run things. And that makes a difference overall to, to cost of goods as well as our capital structure. And then, as far as why the margins expanded on a, on a practical level, you know, I think efficiencies come with everything when you get volume. We've been pretty good at focusing on reservoirs and areas throughout the business, and I think that has a part in it. As we continue to be really busy in those areas, we get really good at fine-tuning costs in order to lower the cost side, not the sell side. But the need it remains the same with all the managers. Like, with the 13.5%-14.5% target I talk about, we have everybody has specific margin targets to aim for that generally arrive in there, and this quarter it actually arrived a little higher than there, which just means everybody's getting more efficient, and maybe that will equate to a little better margins than at the bottom end of our range, but we'll see. Like, we just don't want to make too big of promises yet. It's one quarter, but it's a positive. It was a positive result, and we look forward to continue to try and achieve it. Well, it seems to be working. Thanks. Take my questions, guys. Once again, if you have a question, please press Star, then one. The next question is from Michael Bunyan with TMS Capital. Please go ahead. Good morning, Michael. Yes. Yes, good morning. Can you hear me okay? We can, yeah. Terrific. First of all, congratulations. Truly remarkable performance. There were a lot of questions on margins. I just want to point out that the math on incremental margins is showing that for the 9 months, your incremental margins are 23%, and for the quarter, they were 57%, which is outstanding. It would tell a businessman that you're entering an incredibly profitable period, which will also translate into significant free cash flow. So the question I have is that as you think about this, next 4 quarters, 6 quarters, 8 quarters, you are in a cyclical business. You’ve touched on the priorities in terms of offshore. Can you share philosophically, how much do you think you will be able to spend on growth, and how much do you think may be left over? If you're thinking of the offshore, how significant could that business become over the next three years? Yeah, look, it's very difficult to predict. Suffice to say, we're doing a whole bunch of work that is assessing the market size of chemicals and markets in North America, land, Gulf, offshore, and in Middle East, North Africa. And if somebody is expecting a swing for the fences and an A&D deal to get us there, that's not the direction we're going. What we're doing is supporting each other, supporting the business units. You mentioned the Gulf of Mexico, so let's talk about that one, where, under the leadership of Jacam Catalyst, found an opportunity with ProFlow. Small, low risk, $10 million-ish. It's in our financials from earlier this or last year, in terms of what we paid for it. We're taking a year, we took a year to learn a lot and gaining a footing there with our understanding of the technical requirements, with our understanding of the capital requirements, and they're not massive, Michael. We're looking at 1s and 2s and 3s to bring in that specialized quality control equipment to bolster the potential lab capabilities. And what we're finding is it's allowing us to be the next guy being called for potential work after Baker and Champion for offshore. Vern Disney and his group is seeing that right now in Jacam Catalyst. And we're gonna continue to grow that reputation and bring them more in the fold. And just like we did with AES over the last 5, 6 years, and Jacam Catalyst is in the middle, really grow with that trajectory. So we still, and we typically provide it during Q4 MD&A publication. But as Ken mentioned, cat's out of the bag, we're probably looking at about 65 again next year. And if we saw another 10-ish opportunity to further grow into a very large, very, very large market like that, offshore market in Gulf of Mexico, you could see us spending it, but only if it was a competitive use of capital, i.e., it would have to exceed our internal hurdle rate of 15% for production related CapEx, big CapEx projects, and 20% for more cyclical drilling fluid. Ken, can you share your philosophy? Because any way you look at the performance of the company, it's outstanding, and it's just started. Because you have executed a cultural change, the way people perform at the operating level is clearly resulting in significant cash flow generation. And this conversion cycle is a fly on the wheel, which only will mean that you will generate more cash. And again, I mentioned last night, I spoke your EVA spread, which is the difference between the return on invested capital and weighted average cost of capital, continues to be positive and increasing, versus, by the way, in 2015, 2016, when it was negative 12%-19%, and your return on equity is now over 20%. My point is that you're gonna have a lot of cash to reinvest, and the market is missing it. Share your philosophy and the way you believe you will prioritize this cash spending. And obviously, first on operations, but you're not gonna be able to spend it all. What is your philosophy or thinking? What is the board's philosophy and thinking on this? Sure, Mike. You know, I'd like to take a bunch of credit for how things have gone the last couple of years, but really, the market has cooperated with us a lot. What's happened in the company is it's been a cultural change in the last couple of years, where everybody's pretty focused on details. As leaders and managers of divisions and VPs and divisions, everybody's looking at the details, and everyone's trying to optimize, and we give clear instruction on the points we're looking at, specifically cash conversion cycle, inventory levels, margin targets, those types of things. And it's just, it's well received, and we have a great culture at CES, and everybody's focused on it. So the results show for themselves due to everybody's input. As far as where we're gonna go and what we're gonna do with the capital we create, the group, I would say my philosophy is that for this year and for next year, we're gonna just continue to see what it gives us. We've been through a lot of cycles in this over the last 25 years... don't want to get ahead of yourself, but where there's opportunity and where there's confidence, we'll enter. And we understand we need to continue to grow, hence the small step we're taking in the Haynesville, hence the sort of little bit of footing that we're starting to get in the Gulf Coast. I'd say the Haynesville has the potential to come on in more immediately or in a quicker way. Like, inside of a year, potentially, we could have some sort of a footprint. Gulf Coast, it might happen, but that's a longer term, more difficult place to enter. Same with the Middle East, and as Tony keeps pointing out, you know, we're not looking for a swing for the fences kind of transaction to just suddenly enter one of those markets. If one fell in our lap, and the price was right, and the culture of the business that we were looking at fit our culture, we may look at it, but we're not looking for that. We're going to try and figure out how to strategically enter, and then we'll do what we did with the primary business. We'll look at vertically integrating to ensure our supply chain. We'll get into the market. We'll get to know the customers. We'll get to know the competitors. We'll get to understand how the business is done in a small way, and then we'll look for opportunities to grow, and we'll do that through infrastructure inputs, kind of like we did in North America. The Pecos barite grinding facility, the Kermit invert plant, the, you know, Kansas, when we got into Production Chemicals, didn't take us long to realize we needed to be basic in the chemistry, so we went and found Jacam. Steps like that. So I won't say we have a five-year plan on how we're going to spend the capital, but assuming the capital keeps coming, we'll find a way to reinvest it to make money with it. Thank you so much, and congratulations on excellent results and paying down debt. Thank you. Thank you, Michael. This concludes the question and answer session. I'd like to turn the conference back over to Ken Zinger for any closing remarks. Well, with that, I'm going to wrap up the call by saying thank you to everyone who took the time to join us today. We continue to be very optimistic about the future, as discussed here at CES Energy Solutions, and we look forward to speaking with you all again during our Q4 update in February of next year. Thank you. This concludes today's conference call. You may disconnect.