Ensign Energy Services Q1 2025 Update - $ESI.to

Not bad. Focusing on paying down debt.

*Disclosure: I own shares in ESI. I am not a professional. Please do your own due diligence.

Price: $2.11 CAD

MC: 390 million CAD

EV: 1.4 billion CAD

1 year performance: -8%

ESI reported this morning and held a call. Results were roughly in line with of my expectations and the stock was up 11% today.

*all numbers in CAD unless stated otherwise

Quarter Recap

• 436.5 million revenue vs 431.3 million last year

  • Up 1%

• 102.4 million adjusted EBITDA vs 117.5 million last year

  • Down 13%

• Geographical Mix

  • Canada - $152.0 million, 35% of total

  • United States - $205.8 million, 47% of total

  • International - $78.7 million, 18% of total

• Capex at 37 million

  • down 30% yoy

  • down 49% if you include asset sales

  • about 3 million in growth and 35.7 million in maintenance capex

  • 2025 capex budget at 164 million

Call Notes

• Had some frictional costs in the US for deactivation and reactivation of rigs

• Despite the headlines, they didn’t seem overly concerned about the business

• More rigs needed to hold production in US here

• Started beta testing of AutoDrillingMax

• 100-110 drilling rigs and 50-60 well servicing rigs operating daily both sides of the border

• US near term headwinds, expect to get better in 2026

  • Expecting a couple of rigs to come off in Q3

• I got the impression that International will net out to being about flat this year

• 750 million in booked revenue

• 1/3 of rigs under contract

• 25% of contracts on a performance basis

• Expect real estate disposal in 2025

• Still expect around 200 million in total debt repayment in 2025 and 600 million from 2023-2025

  • Given where they are at after Q1, I have them attempting to pay another 140 million (minimum) for the remaining 3 quarters this year

Valuation

I have them at 3.3x EV/ttm EBITDA. Not sure what the rest of 2025 holds for OFS cos, so I’m hesitant to make too many estimates.

Closing Thoughts

I thought the quarter was as good as can be expected. As we get used to whatever activity levels look like, I think capital slowly returns to the industry and the valuations creep higher.

ESI has a large debt repayment story. They have been making strong progress at deleveraging the balance sheet and I expect this to continue.

ESI has more of a direct exposure to activity levels than some of my other OFS cos. I think this point in the cycle is not a bad place to build a position. I own ESI in a basket of OFS cos. I added a bit to the name under $2.

Thanks for reading my work.

Dean

* long ESI.to