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Thank you for standing by. This is the conference operator. Welcome to the CES Energy Solutions Corp. Third Quarter 2020 Earnings Conference Call. [Operator Instructions] The conference is being recorded. [Operator Instructions]I would now like to turn the conference over to Tony Aulicino, the CFO. 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 12, 2020, and in our annual information form dated March 12, 2020. In addition, certain financial measures that we will refer to today are not recognized under current general accepted accounting policies, 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 Tom Simons, our President and CEO.
Good morning, and thank you, Tony. On today's call, we'll provide an operations and financial review of Q3. We'll also provide an update to listeners on our current activity levels, our cash position and our share buyback process. While we celebrated the news of a possible COVID vaccine on Monday, like all listeners, we will remain cautious and vigilant running the business. Until planes and office buildings are full again, we believe energy demand will be muted. This cautious and prudent approach allowed us to achieve what we think are extraordinary results in horrible end market conditions for energy services companies. In Q3, we achieved adjusted EBITDAC of $18 million. We built a cash position of almost $30 million and purchased and canceled 2.6 million shares, which is about 1% of our outstanding share count. We did that while upstream activity plunged more than 70% from Q1 and pricing was discounted. Production treating volumes remain partially shut in, and pricing was also discounted. I want to acknowledge that it's been hard on our employees, it's been hard on our shareholders and hard on our suppliers. We do remain confident that doing the right things at the right times will benefit all stakeholders over the fullness of time. At this point of the call, traditionally, long-term followers of the company would expect a very granular operations and technical update from me. I want to explain why I'm choosing to deviate from sharing exciting problem-solving breakthroughs with customers across North America. I won't share what we've done with supply chain to remain profitable when industry volumes and pricing have collapsed, and here's the reason. We have some terrible competitors. I can't or won't explain their business practices. I can only explain our own. So part of our very deliberate strategy is to let competitors self-destruct. And for that reason, we will not be segmenting production versus upstream results nor will we segment the contributions our niche businesses make to headline EBITDAC margins, so StimWrx, HDD trenchless, Sialco and Clear Environmental. We're not helping our competitors figure out what makes our results better than theirs. We do realize that analysts are very concerned that customer consolidation implies lower oilfield service margins across North America. We like our chances to remain a cash flow-generating company because of our unique business model and company attrition. With that unique caveat, I'll get to the meat of the quarter and current activity. I'm going to begin with Canada. In Q3, Canadian drilling fluids averaged 18 jobs through the quarter. We had 12 running in July, 18 in August and 24 in September, and I'm really proud to say that today, we've got 38. PureChem is our Canadian production treating business, also led by Ken, the same gentleman that I started the company with, who runs Canadian drilling fluids. We saw steady improvement through Q3. As Alberta government ended curtailment, I think, subsequent to the quarter, we're seeing our volumes continue to go up, and we've also seen a result of certain customers expanding their winter upstream programs. So that's a positive for the business across the board in Canada. I'll move on to the U.S. AES, our U.S. drilling fluid business, averaged 41.6 jobs in the U.S. through Q3, 3/4 of those were in the Permian. And today, about 3/4 of our drilling fluid activity remains in the Permian. In July, we had 38 jobs running in the U.S., in August 42, in September 45, and today, I'm proud to say we have 54. I'll note that our throughput capacity for the Permian is over 140 jobs. That's because of CapEx we spent 1 or 2 years ago. We've got 2 monster mud plants with rail siding there. So as operators see better oil pricing in the future because of declines, natural gas has become valuable again, as drilling goes up in the Permian in the future post COVID, we've become the #1 drilling fluid provider in that market, and we will have the ability to do more work. Jacam Catalyst, our production treating business in the U.S., we've seen about 90% of production in the Permian restored. We've seen less restored in the Rockies and a little better than the Rockies in Oklahoma but not fully restored. We'll note that pricing across the spectrum for the company remains discounted. We've had some come back that's been pegged to WTI, but certainly nothing like what it was pre COVID. I'll note that as the Permian consolidates over time, we are now the #1 drilling fluid provider in that market. I had a chance to be there just a couple of weeks ago myself. Vern and his team have now opened the world-class lab that the Disney brothers built on budget, on time. We bought that business 4 years ago. It was 7 acres in size. Today, it's over 30 acres. As that basin rebuilds production, we're poised to grow with it. With that, I'm going to turn the call over to Tony for a financial update.
Thank you, Tom. Our third quarter results continued to demonstrate the company's financial resiliency and balance sheet strength during challenging industry conditions, as Tom alluded to. Despite generally depressed industry activity levels, we were able to continue to strengthen our balance sheet through working capital harvest and generate positive funds from operations driven by improving EBITDAC levels. We entered the downturn from a position of financial strength and proactively implemented measures during Q2 to provide additional protection and ultimately support growth as industry conditions stabilize and gradually improve. Our third quarter benefited fully from those cash preservation and cost-reduction measures, and as a result, our overall liquidity position and balance sheet strength continued to improve as we once again displayed our defensible business model and our countercyclical balance sheet at low points of the cycle. CES exited the quarter with a net cash balance of $29 million compared to a $93 million draw at the end of Q1 as the downturn began. Our strong cash position was driven by free cash flow generation through working capital harvest, continued inventory management and cost containment measures. We ended Q3 with $292 million in total debt, net of cash, comprised primarily of $289 million of the company's senior notes, which don't mature until October 21, 2024. This represents $135 million reduction from the $427 million at March 31, 2020. Our focus on company-wide working capital optimization in 2019 and into 2020 position the company extremely well to maximize working capital cash inflows through the second and third quarters as activity levels declined. During the quarter, CES realized a further reduction in working capital, which fell from $417 million at the end of Q1 to $301 million at the end of Q2 and then down to $267 million to close the third quarter, representing a total reduction or cash harvest of $150 million. We would also like to note that we experienced a similar working capital harvest during the 2015, '16 downturn when we harvested $153 million and came out of the downturn with an undrawn facility, net cash position and ample liquidity to support improving activity levels and market share growth. We expect to be in a similar position coming out of this downturn and believe that our Q3 balance sheet demonstrates that capability. Through the pandemic, we have benefited greatly from the high-quality of our customers and diligent internal credit monitoring processes. As a result, we have managed to maintain a strong collection record and minimized accounts receivable losses, recording $3.1 million in credit loss provisions to date in 2020, representing less than 0.5% of revenue during the 9 months ended September 30, 2020. We continue to remain very diligent and focused on strong AR collections, minimal bad debt expense and inventory management. Subsequent to September 30, industry activity continued to improve marginally from trough levels seen earlier in the year in both production chemical and drilling fluids end markets, requiring the company to make modest investments in working capital while still retaining a net cash balance of approximately $23 million at this time and an undrawn fully accessible senior credit facility. During the quarter, CES generated revenue of $166 million compared to $159 million in Q2 and down from 315 -- sorry, $315 million in the third quarter of 2019. Revenue generated in the U.S. was $114 million, representing 68% of total revenue for the company, while Canadian revenue was $52 million in the quarter. Both of these revenue results represent a decrease over prior year comparative periods, which was driven by reduced activity levels across all business lines as the low commodity price environment resulted in temporary production shut-ins, deferred completions and significant declines in drilling activity throughout North America on a year-over-year basis. As Tom mentioned, notably, the U.S. drilling fluids market share increased to 17%, a record for the company and up from 13% in Q3 2019 and the previous record of 15% in Q1 2020. CES achieved adjusted EBITDAC of $18.2 million in Q3 compared to $8.2 million in Q2 and $42.2 million in Q3 2019. Included in these results for the quarter is a $5.6 million benefit recognized by CES from the federal government's Canada Emergency Wage Subsidy program, which has been instrumental in allowing CES to mitigate further Canadian personnel reductions during the downturn. Adjusted EBITDAC as a percentage of revenue in the quarter was 11% and represents a significant improvement over 5.1% recorded in Q2 2020 as the company recognized a full quarter of cost rationalization efforts and benefited from the reversal of certain production shut-ins in both the U.S. and Canada. In May, we announced that in light of deteriorating industry conditions, we are eliminating all nonessential CapEx spend and reduced projected 2020 spend by 40% from $50 million to $30 million. In the third quarter, CapEx spend was $3.1 million, bringing the year-to-date total to $20.6 million, and we are well on track to end the year significantly below the $30 million estimate. Our balance sheet continues to benefit from prudent structuring and maturity schedules of our credit facility and senior notes. As mentioned, total debt at the end of Q3 2020 was primarily comprised of $280 million of outstanding principal on our 6 3/8% coupon senior notes which do not mature until October 2024. At September 30, we had a net cash balance of $29.4 million and an undrawn fully accessible senior facility which notably has a maximum draw of approximately CAD 237 million equivalent, providing us with significant ample availability. In summary, we feel very comfortable with our strong financial position, liquidity and conservative maturity schedule. We continue to monitor our capital allocation options in the context of market conditions, outlook and the levels of our surplus free cash flow generation. In Q2 2020, we made a difficult yet calculated decision to suspend our dividend. This decision will conserve approximately $16 million in cash on an annualized basis. Given the heightened uncertainty at the time, we also temporarily suspended activity under the NCIB program in the second quarter of 2020 after using $4.8 million to repurchase 2.3 million shares in Q1. During Q3, the company opportunistically repurchased 2.6 million shares at an average price of $0.90 per share for a total amount of $2.4 million and repurchased $1.0 million of our senior notes at 93.75. Subsequent to Q3, we also repurchased 2.1 million shares at an average price of $0.73 per share. We continue to pursue share buybacks and bond repurchases in the context of our assessment of market conditions, market prices and certainty around our surplus free cash flow levels. We remain responsibly cautious on our outlook for 2020 and beyond in this oil price environment. However, we came into this downturn from a position of strength with an excellent first quarter and strong balance sheet and with a proven countercyclical leverage model in the second and third quarters. Our goal through this COVID-19-driven downturn continues to be the safety of our employees, the preservation of our strong balance sheet and optimization of our industry-leading operations and critical employee base to weather the downturn and maximize our potential for when conditions improve. At this time, operator, I'd like to open up the call to potential questions from the audience.
[Operator Instructions] The first question comes from Keith MacKey with RBC.
First one, just on CapEx. What do you kind of project your maintenance capital to be currently? And how should we be thinking about CapEx for 2021 in general?
So generally, we've had the position that maintenance CapEx tended to be $20 million of the $30 million that we were estimating for spend in the year. Given that activity levels and head count have both come down, some of that CapEx is commensurate with head count and includes vehicles. And as a result, that $20 million of maintenance CapEx that we're expecting to spend in the year will likely be a bit lower, in the mid- to high teens. And so on a 2020 basis, we'll -- you'll see where we'll end up. As I mentioned, we'll be below the $30 million, likely below $25 million, and maintenance CapEx could be in the mid- to high teens as a portion of that. To be honest, Keith, it's really difficult for us to project at this time an estimated CapEx for next year. But we would have started with the same estimate that we gave this year. And given that we're at current activity levels and current head count, we'd expect that maintenance CapEx in 2021 to be $20 million or below.
Got it. Okay. Last question, when the shutdown sort of started up, one of the thoughts was that the vertical wells that required the expensive treater trucks would be the ones to shut in and not come back and therefore, lower your overall capital intensity. Has that played out? Or have you sort of changed your view based on what you've seen in the market as things have come back a little bit?
Some of that's still in progress, Keith. The Permian is a big treater truck market. That market has mostly come back on. The Rockies and Oklahoma are the markets where there's still stuff shut in. Some of the old vertical stuff has stayed shut in. And so there's a little less treater truck intensity.
The next question comes from Aaron MacNeil with TD Securities.
Margins were obviously quite strong this quarter. I expect we're starting to see the impact of some of the cost-saving measures you implemented earlier. I know you don't want to get into so much detail, but -- so your input costs are variable, including oil price-linked input costs. So I guess I'm wondering if you could give us a sense of what kind of operating leverage you think you have at higher drilling activity, production and revenues. And what might have helped you this quarter that you may have to give back in a recovery?
Aaron, we've got a glitchy connection there. We understood it, and that's a great question. So you'll probably hear this from big chemical companies, maybe other companies that move things on the water, some of the shipping companies are sort of turning the screw on probably more than just North America. They're actually tightening supply of ships so they can get freight rates up, which is interrupting supply chain a little bit. So we've had to go into North America and buy some of our feedstock or ordinarily, it would come from the water. So we warn customers that there may be some real-time price adjustments required. We'll see how it goes, getting that as kind of a pass-through while you have to use more expensive feedstock. But you nailed it that a lot of our cost of goods is tied to the value of oil. And as it moves up and down, our stuff is either cheaper to make or more expensive to make. My dad always used to bug me that I drove gas-guzzling vehicles, and I told him I could afford it. If oil was $100, I could drive a Suburban or an Escalade and not worry about what it costs to drive. So it's a little bit like that in our business. But there'll be a little bit of variability in some of our gross margin because of some of the shipping stuff. Other than that, vertical integration for us and some very clever and, we think, sustainable work by our supply chain people have helped our margins. But as I said on the call before, we're not lifting the kimono and helping people copy us.
Okay. Understood. That's helpful. You guys have been fairly active on the NCIB in Q3, I guess in Q4 as well. I guess given the pretty strong performance in the quarter, line of sight and positive cash flows going forward and assuming the stock stays at the current level, do you think it would be reasonable to expect for the company to purchase the entire 19 million shares that you're allowed to purchase over the NCIB? And maybe as an additional question, would you consider something more material, like a substantial issuer bid?
Tom, you want to take that or you want me to start?
I think we're just going to reserve comment, Aaron. It's in everyone's interest that we just decide this stuff in real time and announce it as it happens. We're going to not run out of money. We're going to make sure we can pay for the bond and fill the shelves with product when we need to. And if we're going to buy a lot of stock, the last thing we should do is tell everyone before we do it. So I think we just kind of want to keep our head down and run the business.
Fair enough. Last question for me on working capital. Obviously, it has been a big part of the capital structure, which has been a positive for you in the last couple of quarters. But are you working on, when it comes to that, a potential increase in working capital? And do you think we can see a smaller balance on longer-term recovery scenario?
Yes. That was before COVID. It's -- and you people can fact check this. We've shaved probably $0.05 against $1 of working capital off. That's a combination of people and field offices getting invoices out faster using AI to be able to carry less inventory on drilling locations by proving to company men that they were overstocking the drilling rigs with contingent products. And the production part of the business, which you don't have to be a genius to figure out, is becoming a bigger part of the company when upstream collapses the way it has. It uses less working capital than the drilling part. So we're always going to need working capital. We wish we didn't. But as long as people pay their bills, when it slows down, we get all the money back. It will be a little less working capital-intensive than it was historically, but that's not because of COVID. It's because of a lot of deliberate activities that started to show up, say, a year ago. And that's from Tony and his team, Gary and his people in Midland and Vern and Baxter and Ken and their people running operations.
The next question comes from Cole Pereira with Stifel.
So the U.S. drilling fluid market share was quite strong in the quarter, and it sounds like you guys are confident you can keep that up. Can you maybe talk about your strategy for that and whether it's adding additional rigs with existing customers, adding new customers, et cetera?
Sure, Cole. So it's not using our balance sheet, unlike some of our competition. It's trying to help our customers get pipe in the ground faster than they can using another mud company without losing money doing it. And part of the trick is the infrastructure we have in the right places. We think we've got better people, better products. And when you kind of mix that all together into a mud system, the proof's in the pudding. We've got high 20s for market share in the Permian. We're mid-30s in Canada. The deeper the well is; the longer the horizontal leg is; in the oil sands, the tar sticks to the pipe; the trickier the well is to drill, the better our chances are to distinguish ourselves from somebody that just sells on a relationship or on price. And so as you evaluate is gas going to be economic for the customer, again, because associated gas has declined in the Permian because money hasn't gone back in the ground and people are going to drill some gas wells again and you have to drill deeper generally to get that, those kinds of wells are better for us. We're more in play. So like our work mix in Canada today has way less work in Southeast Saskatchewan than historically. And the daily revenue is higher on a Montney well than a Bakken well. So our strategy is to pursue the technically difficult work, have better products, better people and not use our balance sheet.
Got it. That's helpful. Maybe going back to Canada. For Canadian production chemicals, are you able to indicate which parts of the market you're seeing some strength in? Would it be Montney or different areas?
Montney and oil sands.
Got you. For U.S. production chemicals, have you seen much of an impact from completions-related work so far? Or is it really more a lot of the stimulation type jobs?
The -- that's a great question. Not very much contribution in Q3 at all, but we've seen some in October thankfully.
The next question comes from Tim Monachello with ATB Capital Markets.
Obviously, the U.S. drilling fluids market is fairly transparent. You can draw fairly quantifiable conclusions on market share there. Not the same sort of clarity production chemical side. So I'm wondering if you can just talk a little bit about how your market share has progressed with the downturn in production chemicals and if you've seen some upside like you have in the drilling fluids business and really what the strategy is sort of over the medium term to gain more penetration into those larger customers on the production side as well.
Well, we went ahead and built that lab in the Permian, Tim, and have expanded that facility where we blend, fill the trucks, stage the product, train the people, do sales calls, analytical work in Gardendale or Midland because we are expanding our share in the market. We're a clear #3 in the lower 48. We actually think we're #2 in the Permian. And there is some third-party data out there that in fact, we bought, it's not inexpensive, you guys are a bank, you can buy it, that corroborates that stuff. I don't know if it counts wellbores, but it's customer-based intelligence about the market. It's not service companies telling you what they think of theirselves or management representations. It's surveys of customers on value creation, on technology delivery and things like that, but we're very confident to say that we're a solid #3 and pretty confident we could be 2 in the Permian. And we remain convinced that, that's the upside of the U.S., is the Permian.
Okay. Great. Have you seen increased penetration in the horizontal production market?
Well, it was there all along. I mean everything that's been brought online in the last 5 years in the Permian is horizontal unless it's a saltwater disposal well.
Yes. No, I understand that part. But my understanding was that most of production treating was sort of vintage vertical wells and the horizontal wells were sort of higher-value stuff that was tougher to convert on a customer basis. I'm just curious if that conversion rate has increased.
You do both. We would have the vertical wells that you almost would prefer not to treat because they're not that economic and they require a treater truck often. But then you're continuously injecting chemical into the big horizontal that could be right beside it, taking 10 or 20x the volume of product continuously instead of this $0.25 million milk truck that scored some chemical in it once a week. You don't need an MBA to figure out which one's a better piece of business. We do both. And obviously, all the shale production comes from the horizontal wells. And for us -- and we think the magic or trick to our business is we don't touch that horizontal well just treating it. We have a legitimate shot to run the drilling fluids, maybe run the chemicals to drill the frac plugs out with and then treat the well forever and not very often, but sometimes even provide the frac chemicals and treat the pipeline or tank that stores the oil or moves it. So for sure, you've nailed that the importance of the horizontals for our business can't be overstated, but we do a ton of CO2 floods, polymer floods, waterfloods, that stuff, old vertical wells. And it's good business for us, and you have to do all of it for your customer.
The next question comes from John Gibson with BMO Capital Markets.
Just first, looking at the U.S. Can you maybe talk about market share outside of the Permian? And more specific -- I'm just trying to get a sense of where you stand in the gassier regions. It looks like you've had a pretty good uptick in job count over the past weeks. I'm just wondering if it's correlated to that sort of gas-focused drilling increase.
Sure, John. We ran 6, 7, maybe 8 jobs in the Northeast through the quarter. Same job count today. I'm disappointed to say that pricing there continues to slide down. We've seen competitors come into that market late, and so they lead with their chin and work cheap. That Dorado play that people are talking about, so the extension of the Eagle Ford, we have been doing that work. We know about that play. And we're excited about the idea that natural gas could be feedstock to be converted to hydrogen and then sequester the carbon. That might be a 5- or 10- or 15-year process before fuel cells can be -- that are perfected to power trucks and buses and stuff. But there could be a way for fossil fuels to continue to create energy and not put carbon in the atmosphere, and that will drive drilling. And we supply products to drill. So we're watching natural gas too. And the Marcellus used to be our biggest drilling fluid market before all the money went down to the Eagle Ford and then went to the Permian. So we know how to work there. We have people in Pittsburgh. We have 2 mud plants there. One is basically mothballed, and the other one supports, say, the half dozen or 8 jobs we run every day. And we know how to do both the Utica and the Marcellus.
Okay. So I guess it's fair to say that the market share gains in the U.S. are driven more in the sort of shale regions that you're more prevalent in?
Yes. The gains are in the Permian. So it would be the Midland basin, the Delaware. And I should add we've done a bit of research on how much of the tax base for New Mexico comes from oil and gas. And the estimates are anywhere from 40% to 60%, depending kind of what part of the tax base you're talking about. But I saw a note yesterday that as much as 60% of the tax base that pay for schools in New Mexico comes from oil and gas and that our customers have got 2 years worth of drilling permits on federal and state lands in place in New Mexico. So we think there's probably runway still in that market for quite a bit of activity there.
Okay. Great. Do you mind if I ask the same question in Canada just in terms of your gas-focused jobs and potential market share increases there?
For sure. That's been the backbone of our Canadian drilling fluid business. It's why we built our big facility in Grand Prairie, why we put rail there that drove our cost of goods down for drilling fluids, for production chemicals. We've got a little team together for frac now in the Montney and the Duvernay and then all the other plays that people are -- or formations that people are poking at between those zones. Those are the places that we want to play for both of our businesses. The wells are hard to drill. If they don't go well, it's a disaster economically for the oil company. And our market share is astounding. We have ways that we can run the drilling fluids that's unique to us, so we've kind of run the table there. That's why we've got almost 40% of the market in Canada, and it's been how we've been able to get PureChem profitable. There's paraffin in the condensate that comes out of the Montney. It's a little bit sour, so it's highly corrosive. The paraffin breaks out and plugs up the well, and so it's complex stuff to treat. It has to be treated properly. And so it's good business for the production chemical company. And we've been able to sort of sell to the same customer in 2 different ways then, so great operating leverage.
The next one for me, obviously, large capital -- or working capital draw during the downturn. At what point -- or what type of retail environment would we need to see in order to it -- for it to move sort of the other way toward a build?
You want to take that, Tony?
Yes. I -- so we're obviously naturally going to see a bit of working capital draw over the next couple of quarters. And that's really related to the seasonality that we see in Canada with increased rig activity in Q4 and Q1 versus Q3; and in the U.S., which is less seasonal and has gradually increased from the low 40s that Tom mentioned to the 54 today. They've been able to do that quite effectively with -- and still focusing on good working capital metrics. So given what we see in the foreseeable future for the industry rig count and watching what Richard Baxter in the U.S. has been able to do with the team in the current environment, getting up to that 54 rigs, we expect to be at that 54 rigs and hopefully a little bit higher. But it's not going to be a massive additional working capital draw based on our current market share and our anticipated rig levels for 2021.
The next question comes from Matthew Weekes with Industrial Alliance Securities.
I was just wondering if -- going forward, if you'd be able to provide any granularity on how much more of the Canada wage benefit you expect to get going forward as it is extended out to June 2021.
Yesterday, Matthew, I saw on the elevator riding up to our Board meeting that our glorious leader cautioned everyone that COVID benefits may not last forever. With that, I'll maybe turn it over to Tony to say what we've penciled in for expectations. I heard on the radio this morning that there may be some rent relief for businesses beyond small business. We're certainly enjoying the benefit of it. It's allowing us to keep people that today, we have a lot of work for them to do. But over the spring and summer, there wasn't as much for them to do, and we may not have been able to keep them. But Tony, do you want to run through some of the calculations we've done? But I do want to make light of the fact that we don't believe in socialism, and we want our business to pay its own way in society.
Thanks, Tom. Yes, good question. And I probably should have provided that information earlier. We did provide an estimate for Q3 that was in that lower $5 million range, and it ended up being a little bit higher based on calculations during the quarter. Just to help you guys out for Q4, based on our head count and our current calculations, we anticipate the CEWS contribution in Q4 to be approximately $3 million. And for next year, for that first half, we're expecting to get some CEWS, we're expecting a little bit. But given that we're going to be down to $3 million in Q4, it's going to be a pretty small number. And as Tom mentioned, we -- when we talk about our business and our strategy, it's based on the amount of EBITDA that we generate and free cash flow that we generate, excluding CEWS. So $3 million for Q4, and we're not expecting too much in the first half of next year.
Okay. That's helpful. Folks, still focusing on the cost. It looks like cost reduction efforts started to really take shape, were pretty successful in the quarter. As you look forward to 2021, on a normalized kind of non-CEWS basis, do you expect that you'll be able to keep those gross margins kind of close to where they were prior to the downturn sort of in 2019?
From a -- sorry, go ahead, Tom.
Honestly, no. I think that things have changed. As I said, there's going to be some issues with freight. And unless we see more attrition of competitors that are using their balance sheet to subsidize huge oil companies, companies stealing intellectual property and then working on the cheap to get the work, things like that, I think there could be margin pressure for the whole OFS space. Once the customer gets you to blink on price, it's tough to get it back. We've got agreements with customers that it's pegged to oil price. You tell us where oil price will be and we'll tell you what our margins will be. That's why I've said when planes and office towers are full, we'll be more bullish. We'll put the cash to work. It's hard to predict when that's going to happen. I hope I'm inoculated in 6 months and everyone takes a vacation and goes back to work and oil is $60 and gas stays at $3. I -- we want to get this business to 15% EBITDA. We want to keep working capital in the low or no higher than mid-30s on the dollar and not get into equipment. And we don't want to put more debt on the balance sheet. We're proud of where the bonds hung in there. But if it dips down, we're going to buy some, and we're going to keep trying to shrink the share count without getting too cute with how much cash we have in the bank. But it's -- there's going to be pressure on margin. That's why I'm choosing not to get too granular about all the different ways that we can prop up margins as we built out this business. We spent 20 years getting this business vertically integrated. We're not going to show our competitors where the juice is in the business so they can go try and knock it off because they will.
Yes, absolutely. It's understandable. I do appreciate the commentary, and it's certainly a nice picture you paint of $60 oil and everyone getting a vaccine and a nice vacation. So I'll leave it there and turn the call back.
I'll add that our job from now to then is to not go out of business so that we can all benefit from this on the other side. And we don't wish anyone ill will, but for people that are running their businesses into the ground and eroding the overall end market for our business lines, we're going to let them run off a cliff.
[Operator Instructions] Our next question comes from Andrew Bradford with Raymond James.
Happily, most of the questions I had were already pretty taken up by others in the call, except for one. So the thing I'm kind of curious about is how -- as we're starting to ramp back up again, I want to be careful how we describe that for sure, and I'm sure you do, too. But as things start to get busier and you get a call on working capital, I can understand how you might want to -- might view this as kind of justified review of how you finance that working capital. You could easily finance it through your credit facilities without really adding any -- as you've shown, without really adding any risk to the business because it's -- you've demonstrated through the $150 million drawdown that it's completely reversible. So how are you viewing that? Is this -- are you going to view this as an opportunity to use your cash flow to fund that working capital? Or are you going to use this to -- or you think you might be -- allow debt to ramp back upwards again as things start to get busier? More of a philosophical question than anything. And again, that would be notwithstanding whatever your plans might be with respect to the NCIB.
So I'll handle this one, Tony. We're going to make everyone tune in to the Q4 call and find out what we did. I'm going to steal the words of the CEO of one of our top customers. I think we have a generational opportunity, Andrew. It's horrible what's happened in the world obviously with the pandemic, but I agree with you, we've got access to liquidity. And as long as we work for people that pay us, all that working capital comes back the next time there's an energy bust, which, of course, will happen. So we're going to try and be savvy with how we spend this money. And I'm happy that the bond is hanging around 90, but there are days where I wish it was 70. So we're going to act like businesspeople, and we're going to try and deploy that money to maximize what everyone on this call gets for it.
This concludes the question-and-answer session. I would like to turn the conference back over to Tom Simons for any closing remarks.
Well, I'll thank everyone for the great questions. Tony, great job on the call. And I'll summarize it by saying that people should expect us to continue what we think is prudent operational and financial management of the company. We believe that we can continue to generate free cash flow running the business this way. As I said, we're going to retain flexibility to maximize value for all stakeholders. And I do want to truly thank our employees and our customers and assure our equity and bondholders that we have our eye on the ball. And with that, I'm going to conclude today's call.
This concludes today's conference call. You may disconnect your lines. Thank you for participating, and have a pleasant day.