CES Energy Steers Through the Iran Conflict to a Record Quarter — and the Production-Chemicals Engine Keeps Compounding
Third straight record quarter and an above-guidance 16.7% EBITDA margin, delivered despite Iran-driven supply-chain chaos — while U.S. production chemicals, the 'magic number,' and a C$300M refinancing keep the growth math intact.
CEU.TO · Earnings Call · 2026-08-07
Record revenue under a supply-chain storm
CES Energy Solutions posted its third consecutive all-time record quarter in Q2 2026: revenue of $714.1 million, up 24.4% year over year, and adjusted EBITDA of $119.2 million, up roughly 35%, lifting the annualized revenue run rate past $2.9 billion for the first time. The headline was the EBITDA margin of 16.7% — above the top of management's own 15.5%–16.5% guidance — delivered even as the Iran conflict roiled supply chains across the business.
“Cost pressures and supply chain challenges due to the fallout from the Iran conflict were felt across the business throughout Q2.” — Kenneth Zinger, Chief Executive Officer · 2026-08-07
The margin itself deserves parsing. CFO Tony Aulicino walked through three one-timers that flattered the quarter: a single short-term project in a Canadian division, a weaker Canadian dollar, and an inventory credit that flows through standard cost accounting when product values rise. Strip those out and the quarter sat "squarely between the 16% to 16.5% range" — still inside guidance, still in the upper half.
those were the sort of one-timers that would have otherwise had that margin be lower than the 16.7%, probably somewhere squarely between the 16% to 16.5% range.
The real story is resilience. Analysts pressed management on why the guidance band wasn't being raised — the company has now topped the range in roughly seven of the last ten quarters. Ken Zinger pointed straight at the macro:
the latest conflict has us right back into the midst of shortages, shipping problems, prices fluctuating all over the place based on tweets, like it's a very difficult environment to not only cost products, but to get some products.
So the band holds — but the same conflict is also a tailwind. Higher oil prices and the "vastly improved futures pricing" have pushed the WCSB rig count in August to its highest seasonal level since 2014, and management now sees 2027 "looking stronger than previously anticipated" on LNG and AI-driven gas demand.
The production-chemicals compounding engine
The strategic narrative this quarter is a deepening tilt toward production chemicals. Revenue is now split 53% production chemicals / 47% drilling fluids, and every long-horizon growth initiative — U.S. land, offshore Gulf of America, and Canadian heavy oil SAGD — lives on the chemical side. Production Chemical is the company's #1 keyword of the quarter, and management was explicit about priorities. “These results underpin the resilience of CES' consumable chemicals business model and sustained profitable growth as our customers continue to adopt chemical-related improved efficiencies and require higher treatment levels for increasingly prolific wells.” — Anthony Aulicino, Chief Financial Officer · 2026-08-07
U.S. land is the clear immediate winner — "hitting on all cylinders," with daily market-share gains and the big RFP business now "seamlessly operating at this much higher revenue run rate level." Offshore Gulf of America remains "very early innings," with more trials running than three months ago but margins not yet accretive as the company absorbs the cost of a new Houston lab and hires. Heavy oil follows the same playbook: two more trial facilities added, timelines "measured in months and years." It's a continuation of a long arc management has been honest about:
“It's been a much longer, harder path than we thought it would be... we are actually starting to make some progress there.” — Kenneth Zinger, Chief Executive Officer · 2025-11-14
The through-line is drilling-fluids intensity — what the company calls the "magic number," revenue per rig per day, which is up 40% over three years as wells get longer and chemistry gets more specialized. “that number over the last 3 years is up 40%, revenue per rig per day.” — Anthony Aulicino, Chief Financial Officer · 2026-08-07 The surfactant use theme reinforces this — treating the after-effects of more targeted surfactant programs is higher-margin work, pushing the specialty chemical mix further up. Aulicino ties it together: new wells are "way more prolific," and their first, highest-rate production phase "requires the biggest concentration of chemistry," meaning higher revenue and higher margins. That is why record revenue keeps converting into record EBITDA.
Capital allocation: buybacks, refinancing, and the Iran question
The capital story is disciplined. CES completed a $300 million placement of 5.625% senior notes due 2033, retiring $275 million of 6.875% notes due 2029 — roughly $2 million a year in interest savings — and ended Q2 at 1.15x total debt/EBITDA, inside the 1.0–1.5x target. Buybacks accelerated: 780k shares in Q2 at ~$17, and a further 735k shares after quarter-end at a lower average. The renewed NCIB covers 18.1 million shares, about 10% of the float, and CapEx guidance rose to $100 million, split 50/50 between maintenance and growth, centered on the expanded Pecos barite facility. It all tracks the template set in prior calls:
“We're running pretty loose right now with a lot more staff than we would normally be carrying because we believe we are in a really good spot to win some of these bids.” — Kenneth E. Zinger, Chief Executive Officer · 2025-08-08
That deliberate over-hiring for the RFP pipeline is now paying off — the revenue per rig base is compounding as the awards come onstream.
Context and confluence
The Iran conflict keyword is not CES-specific: the global Q2 2026 keyword set ranks "Middle East impacting" near the top, and several energy reporters this week — including TDW, Talam, and OXY — echo the same conflict-driven disruption language. What sets CES apart is the execution: a record quarter with an above-guidance margin, crediting procurement and supply-chain teams for navigating the storm, and a balanced message that keeps guidance conservative while the opportunity set — production chemicals in the U.S., offshore, and heavy oil — keeps compounding. For a roughly $4 billion-market-cap oilfield services name with a 22% return on average capital employed, the math is the story: consumables, market share, and chemicals.