INVESTOR PRESENTATION. April 2019

Transcription

1 INVESTOR PRESENTATION April 2019

2 FORWARD LOOKING STATEMENTS This document contains statements that constitute forward-looking statements within the meaning of applicable securities legislation. These forward-looking statements include, among others, the Company s prospects, expected revenues, expenses, profits, expected developments and strategies for its operations, and other expectations, beliefs, plans, goals, objectives, assumptions, information and statements about possible future events, conditions, results of operations or performance. These forward-looking statements are identified by their use of terms and phrases such as anticipate, achieve, achievable, believe, estimate, expect, intend, plan, planned, and other similar terms and phrases. Forward-looking statements are based on current expectations, estimates, projections and assumptions that involve a number of risks and uncertainties, which could cause actual results to differ materially from those anticipated. These risks and uncertainties include: fluctuating prices for crude oil and natural gas; changes in drilling activity; general global economic, political and business conditions; weather conditions; regulatory changes; and availability of products, qualified personnel, manufacturing capacity and raw materials. If any of these uncertainties materialize, or if assumptions are incorrect, actual results may vary materially from those expected. 2

3 TRICAN & INDUSTRY OVERVIEW

4 INVESTMENT SUMMARY Largest Canadian pressure pumping company Industry-leading fracturing and cementing service lines Focused on top quartile return on invested capital Capital disciplined investments Investments must exceed ROIC hurdle rate Cash flow in 2018 used to repay debt and re-purchase shares Shareholder returns through NCIB Repurchased approximately 16% of the Company s shares from October 2017 to present Continue to invest into repurchasing shares into Q Very strong balance sheet Net debt of approximately 38 million at year end. (debt less cash) Non cash working capital balance of 108 million Focused on lowering costs in competitive environment Approximately $55 million of annualized cost savings since Canyon acquisition in June,

5 INVESTMENT SUMMARY Existing idle equipment provides opportunity for incremental returns upon a market recovery (minimal investment required for reactivations just staffing) Substantial leverage on existing infrastructure and fixed cost structure Monetized $17.6 million of idle non-core assets in 2018 Strong loyal customer base that supports the company through the downturn Experienced and motivated work force supported by an executive leadership team with extensive experience managing oilfield services cycles Trading substantially below tangible book value and replacement cost Opportune time to invest in cyclical business 5

6 INVESTMENT SUMMARY 1.20 Price to Tangible Book Value vs. Leverage Profile 2.0x Debt / Tangible Equity x 1.6x 1.4x 1.2x 1.0x 0.8x 0.6x 0.4x 0.2x Price to Tangible Book Value - Q1/15 Q2/15 Q3/15 Q4/15 Q1/16 Q2/16 Q3/16 Q4/16 Q1/17 Q2/17 Q3/17 Q4/17 Q1/18 Q2/18 Q3/18 Q4/18 0.0x Debt to Tangible Equity (LHS) Price to Tangible Book (RHS) Company valuation approaching cyclical low valuation opportune time to invest in a cyclical business Company has significantly improved asset coverage relative to 2015 cyclical low exit 2018 debt lower than 15% of tangible equity value 6

7 WHAT WE DO Trican is a Canadianfocused, energy services company, which provides an array of specialized products, equipment and services for the drilling and completions cycle of oil and gas exploration and development. Full Cycle Technical Expertise Engineering Support Reservoir Expertise Laboratory Services Drilling Cycle Cementing Services Customer Completion Cycle Fracturing Coil Tubing Nitrogen Fluid Management Acidizing Production Cycle Coil Tubing Acidizing Pipeline Services Industrial Services Chemical Services Remedial Cementing 7

8 OUR CANADIAN MARKET AND FINANCIAL POSITION Market Leading Positions Canadian market leader in fracturing services (based on adjusted EBITDA margin and market share) Canadian market leader in cementing services (based on market share no competitor margin data available) Supporting service lines: coil tubing, nitrogen, acid, water management services, pipeline and industrial services Trailing 12 Month Revenues: Service Line Breakdown Fluid Management, 4% Coil, Nitrogen, Acid, 9% Cementing, 16% Industrial, 2% Strong Financial Position 2018 revenue of $900 million Market capitalization $431 million (April 5, 2019) Total debt of $46 million (net debt of 38 million) at year ended 2018 Hydraulic Fracturing, 69% 8

9 OUR FOCUS Strengthen Existing Business - Maintain market leading position in Fracturing and Cementing service lines - Strengthen auxiliary service lines (Coiled Tubing, Nitrogen, Water Management) To achieve top quartile ROIC in our sector Growth Shareholder Return - Growth in existing or complimentary, less capital intensive, less cyclical services lines (i.e. Production & Pipeline Services) - Leverage strong technical expertise into additional markets or services - Disciplined investment into future growth ensure ROIC hurdle rates are met - Return value to shareholders through Normal Course Issuer Bid (share buyback program) Cost Control & Efficiency Gains - Reduce costs for ourselves and our clients through efficiency improvements and scale 9

10 FOCUSED GEOGRAPHIC COVERAGE Horn River Shale British Columbia Alberta Saskatchewan Manitoba Montney Shale FORT ST. JOHN Deep Basin GRANDE PRAIRIE WHITECOURT HINTON NISKU LLOYDMINSTER DRAYTON VALLEY RED DEER CALGARY BROOKS ESTEVAN MEDICINE HAT Duvernay Shale Viking Tight Oil Cardium Tight Oil Lower Shaunavon Tight Oil Bakken Shale Spearfish 10

11 CANADIAN INDUSTRY DYNAMICS INCREASING WELL INTENSITY WCSB - Tonnes / Well WCSB - Wells Drilled 3,000 2,851 12,000 10,924 2,500 10,000 2,000 1,855 8,000 6,959 6,940 1,500 1,329 1,384 6,000 5,376 5,600 1, ,000 2,000 3, E 2019E Source: Canadian Discovery Source: GMP First Energy 2018 well count 37% below 2014 levels 7,000 8,000 wells today equates to 2014 well count levels in terms of fracturing equipment demand We expect well service intensity to remain flat in 2019 to 2018 levels; Tonnes of proppant placed per / meter grew by approximately 25% in 2018 relative to 2017; tonnes/metre in 2018 vs. 1.2 tonnes/metre in data weighted to higher well service intensity wells 11

12 CANADIAN INDUSTRY DYNAMICS FRACTURING COMPETITIVE LANDSCAPE Hydraulic Horsepower (HHP) Capacity Idled Available Active Crewed Trican 671,850 90, , ,000 Competitor A 355,000 28, , ,000 Competitor B 297,500 72, , ,000 Competitor C 270, , ,000 Competitor D 250, , ,000 Competitor E 240, , ,000 Competitor F 80,000-80,000 50,000 Competitor G 50,000-50,000 50,000 2,214, ,600 2,023,850 1,732,000 Source: Competitor company reports, internal company data, and internal estimates Estimated industry demand of ~ 1,400,000 HHP in Q Internal estimate of 20% - 25% of equipment in Canada is not suited for higher well service intensity plays (Montney and Duvernay) 12

13 CANADIAN INDUSTRY DYNAMICS TRICAN S COMPETITIVE POSITIONING More than 50% of Trican s fleet is continuous duty pumps, most efficient style of fracturing pump, designed for higher well service intensity plays: Approximately 122,000 HHP dual fuel capability Positions Trican to service growing, higher well service intensity plays Supports Trican s continued leading Canadian fracturing market position as measured by both market share and margin Allows Trican to continue to efficiently operate in the highest well service intensity resource plays: Montney, Duvernay and Deep Basin (estimated to account for ~ 80% of the required HHP demand in Canada) 13

14 OPERATING ENVIRONMENT PRICING, LABOUR & REPAIRS EXPENSE Pricing: Q pricing dropped slightly sequentially as activity decreased in the quarter Experienced further pricing concessions in the first quarter of 2019 relative to Q Demand improvements, or supply contraction, will be required for pricing to improve: Increased customer budgets Improvement in commodity prices and / or Canadian commodity price differentials Pricing Index West Coast LNG Indexed to 2014 pricing levels. Based on equipment revenue per tonne of proppant pumped. 14

15 OPERATING ENVIRONMENT PRICING, LABOUR & REPAIRS EXPENSE Labour Index Labour Wage Rates for Field Staff: Labour wage rates in-line with industry We have and will further adjust field labour levels going forward to match our utilization Variable pay for field staff in 2019 Well size and operating efficiencies allow more efficient labour rates Indexed to Based on personnel expenses per tonne of proppant pumped (component of cost of sales other within the statement of income). 15

16 OPERATING ENVIRONMENT PRICING, LABOUR & REPAIRS EXPENSE Repairs and Maintenance Expense: Increased intensity equals increased expense, built into our pricing models Stainless steel fluid ends are expensed, not depreciated Reduced 2018 annual capital expenditures by $22 million Decreases fracturing gross margins by 4% Only Canadian company expensing fluid ends (estimate that > 80% of US listed public pressure pumping companies expense fluid ends) R&M Index Changed to cash expense of fluid ends, previously depreciation Indexed to Based on repairs and maintenance expense per tonne of proppant pumped, a component of cost of sales other within the statement of income. 16

17 PERFORMANCE ROIC and ADJUSTED EBITDA % Corporate Adjusted EBITDA margin of 18% or greater supports corporate level ROIC hurdles To improve adjusted EBITDA margins: Continue to optimize costs Recovery in utilization of existing fracturing fleet: adjusted EBITDA margin improvement when utilization at >80% Generate revenue from idled equipment Leverage existing IP and technology into new opportunities: sell chemicals and technology in US and internationally Modest pricing improvements 17

18 OUTLOOK & TRICAN ADVANTAGE

19 Q Slower start to 2019 Rig count approximately 35% below Q Uncertainty surrounding commodity prices, especially differentials, and the impact of production cuts in late 2018 slowed customer plans at start of the year Ran 10 fracturing crews in the quarter vs. 11 crews in crews fully booked from mid January to mid March Crews smaller this year: running 340,000 HHP in Q vs. 455,000 HHP in Q Utilization on active equipment this year approximately 75% per as compared to 90% last year; more move and rig-up days Cementing activity is down approximately 30% from Q levels correlating to the decrease in rig count Coil services is operating at comparable levels to 2018 with 2 additional units active Pricing has stabilized 19

20 Q Approximately 30% of fracturing fleets booked in April and May (weather permitting) Approximately 70% of fracturing fleets booked in June (weather permitting) Cementing will follow rig count 30% below last year Coiled tubing has stronger activity than last year Still have tenders outstanding for May and June to increase work scope Focus on lowering costs in Q2 Labour costs reduced 20

21 OUTLOOK SECOND HALF OF 2019 Visibility past the second quarter is still limited as customers have not confirmed second half budgets Approximately 70% of crewed fracturing equipment committed to clients in the second half of Additional bids are currently being tendered that could fill second half commitments Potential for increased spending by our clients if current commodity prices hold Approximately 340,000 HHP active but not staffed (6 large fleets) We ll adjust active staffed equipment to meet customer demand as second half programs are finalized 21

22 CAPITALIZATION POSITIONED FOR OPPORTUNITIES Strong balance sheet allows for opportunistic investment: Keane Monetization: December 2018 monetization of Keane for approximately $72 million further strengthens our financial position Continued return to shareholders, active NCIB: repurchased 50.4 million (approximately 15%) of the outstanding Trican shares from October 2017 through February 20, 2019 Fleet upgrades: can further strengthen our market leading fracturing fleet through selective upgrades Debt / Tangible Capital Invest in supporting service lines: target increased market share in coil and other supporting service lines - Q1/15 Q2/15 Q3/15 Q4/15 Q1/16 Q2/16 Q3/16 Q4/16 Q1/17 Q2/17 Q3/17 Q4/17 Q1/18 Q2/18 Q3/18 Q4/18 M&A Opportunities: low leverage levels allow cost effective funding options for acquisition opportunities 22

23 COMPETITIVE ADVANTAGE PERSONNEL DEVELOPMENT Over one third of employees with more than 5 years of experience Career progression is an attraction to entry level employees Employee experience key to training and customer service Employee Headcounts by Years of Service Manager Level Position 5+ Years 39% 0 to 1 Years 15% Technical, Support or Administrative Position Field Supervisor 1 to 3 Years 36% Field Technical 3 to 5 Years 9% Field Entry Level 23

24 COMPETITIVE ADVANTAGE - PEOPLE AND CUSTOMER SERVICE Leveraging more than 20 years of Canadian expertise: Safety: LTI rate of 0.14 Efficiency: Working to increase fracturing pumping hours per day to from hours per day Development: Industry-leading training programs Total Training Hours; 2017: 75, : 101,656 Canadian geographic focus: Canadian focus allows potential for expansion of existing service lines or adding services lines within our current infrastructure Improving our operating leverage: Building on our existing infrastructure and adding operationally focused personnel while maintaining G&A support levels Dec Field and Shared Service / SG&A Employee Dec Dec-15 Mar-16 Jun-16 Sep-16 Dec-16 Mar-17 Jun-17 Sep-17 Dec-17 Mar-18 Jun-18 Sep-18 Dec-18 Field & Shared Service / G&A Yearly Avg Field & Shared Service / G&A Expon. (Field & Shared Service / G&A) Dec Dec

25 COMPETITIVE ADVANTAGE INNOVATION Leveraging innovation for new opportunities: Scale allows targeted investment into internally developed IP and new technologies Patented MVP TM fracturing fluids; case studies indicate: 30% increased production in the Montney 20% increased production in the Cardium Global technology reputation allows new markets for IP and technology Initial licensing agreement signed in the US for MVP Frac TM CleanTRACK TM patented dust control product field tested and will be commercial in rd party interest in customer facing applications platform International technical service agreement opportunities 25

26 SUMMARY Capital disciplined company focusing on ROIC Strong financial position to: Withstand near-term cyclical weakness Evaluate opportunistic growth Return capital to shareholders Continued focus on reducing costs to gain a competitive advantage Largest Canadian pressure pumping company with broad range of services Existing equipment complement provides opportunity for substantial incremental returns upon a market recovery 26

27 APPENDIX

28 APPENDIX 1: EQUIPMENT AS OF DECEMBER 2018 Service Line Total Equipment Active, Manned Active, Maintenance, Unmanned Idled ~ Market Share Fracturing (HHP) 672, , ,000 90,000 30% Cementing (trucks) % Coil Tubing (units) n/a Nitrogen (units) n/a Given the industry slow down, increased amount of fracturing hydraulic horse power is expected to be parked We will explore opportunities to monetize equipment that is no longer anticipated to be competitive in the WCSB 28

29 INVESTOR PRESENTATION April 2019