S&P Global Ratings on Thursday revised its outlook for CES Energy Solutions Corp. to positive from stable, while maintaining the company's issuer credit rating and its issue-level rating on unsecured debt at 'B+'. The ratings firm left the company's recovery rating at '4'.
The Toronto-based oilfield services provider produced record revenue of C$2.5 billion in 2025 and achieved S&P-adjusted EBITDA margins of 15.1% for that year, despite falling rig counts in both the United States and Canada. S&P highlighted CES' market-leading positions in drilling fluids, noting roughly 40% shares in both the Western Canada Sedimentary Basin and the Permian basin.
Looking ahead, S&P expects CES to generate adjusted free operating cash flow in the range of C$200 million to C$220 million in each of 2026 and 2027. That cash generation is forecast to be supported by capital expenditures of C$100 million to C$120 million per year, equivalent to about 3% to 5% of revenue on an annual basis.
On leverage and coverage, S&P projects adjusted funds from operations to debt will average roughly 65% for 2026-2027, while debt to EBITDA is forecast at about 1.3x. In explaining its positive outlook, the ratings firm indicated it expects CES to expand its North American operations, sustain stable-to-improving margins and produce robust cash flow under an asset-light business model. S&P further noted it anticipates funds from operations to debt staying near 60% and debt to EBITDA remaining below 1.5x.
The ratings agency forecasts gradual revenue growth through 2027, supported by recent market share gains, and expects adjusted EBITDA margins in a 14% to 16% range. S&P also reported that Canada accounts for approximately 34% of CES' revenue, with activity there expected to stay strong due to increased oil sands production and heightened drilling in the Montney region.
Context and implications
The outlook revision reflects S&P's view that CES' combination of market share, margin performance and projected free cash flow will strengthen its credit metrics over the medium term. The agency's guidance on capital spending and leverage provides the framework underpinning the upgraded outlook, tying expected cash generation to disciplined capex of 3% to 5% of revenue.
What remains unchanged
- The issuer credit rating and the issue-level rating on unsecured debt remain at 'B+'.
- The recovery rating remains '4'.
The information above summarizes S&P Global Ratings' published view on CES Energy Solutions and its expectations for the company's financial performance and credit metrics through 2027.