CORPORATE PRESENTATION OCTOBER 2017 IT'S ABOUT PERFORMANCE 1

Transcription

1 CORPORATE PRESENTATION OCTOBER 2017 IT'S ABOUT PERFORMANCE 1

2 Forward Looking Information Certain information in this document is forward-looking and is subject to important risks and uncertainties. The results or events predicted in this information may differ from actual results or events. Factors which could cause actual results or events to differ materially from current expectations include, among other things, the ability of Trinidad Drilling Ltd. to improve margins and returns, maintain or grow market share, expand international operations, add new revenue lines, use technology to improve performance and increase EBITDA, to re-crew rigs, to achieve capital payback expectations, to fund capital program as expected, the availability and price of energy commodities, regulatory environment, growing customer demand, competitive factors in the natural gas and oil extraction industries and the prevailing economic conditions in North America. While the company is exploring a number of options with respect to its operations and growth strategies, there can be no assurance or certainty that any particular action will be undertaken, that the options currently identified by the company will be available on terms acceptable to the company at all or that the taking of any particular action will have the impact on the company s operational and financial position currently anticipated by management For additional information on these and other factors, see the reports filed by Trinidad Drilling Ltd. with Canadian securities regulators. Trinidad Drilling Ltd. disclaims any intention or obligation to update or revise any forward-looking statements, whether as a result of new information, future events or otherwise. IT'S ABOUT PERFORMANCE 2

3 Non-GAAP Measures Definitions This document contains references to certain financial measures and associated per share data that do not have any standardized meaning prescribed by IFRS and may not be comparable to similar measures presented by other companies. These financial measures are computed on a consistent basis for each reporting period and include Adjusted EBITDA, Total Debt to EBITDA, Drilling days, Operating days, Utilization rate - drilling day, Utilization rate - operating day, and Rate per operating day. These non-gaap measures are identified and defined as follows: Adjusted EBITDA is used by management and investors to analyze the Company's profitability based on the Company's principal business activities prior to how these activities are financed, how assets are depreciated and amortized and how the results are taxed in various jurisdictions. Additionally, in order to focus on the core business alone, amounts are removed related to foreign exchange, share-based payment expense, impairment expenses, the sale of assets, and fair value adjustments on financial assets and liabilities, as the Company does not deem these to relate to the core drilling business. Adjusted EBITDA also takes into account the Company s portion of the principal activities of the joint venture arrangements by removing the (gain) loss from investment in joint ventures and including adjusted EBITDA from investment in joint ventures. Adjusted EBITDA is not intended to represent net (loss) income as calculated in accordance with IFRS. Adjusted EBITDA is calculated using 100% of the related amounts from all entities controlled by Trinidad where Trinidad may not hold 100% of the outstanding shares. Adjusted EBITDA from investment in joint ventures is used by management and investors to analyze the results generated by the Company's joint venture operations prior to how these activities are financed, how assets are depreciated and amortized and how the results are taxed in various jurisdictions. Additionally, in order to focus on the core drilling business, amounts related to foreign exchange, share-based payment expense, impairment adjustments to property and equipment as well as preferred shares and the sale of assets are removed. Lastly, amounts recorded for the revaluation on the investment of the TDI joint venture are removed as these are non-cash entries and unrelated to the operations of the business. Adjusted EBITDA from investment in joint ventures is not intended to represent net (loss) income as calculated in accordance with IFRS. Net Debt to EBITDA - is defined as net debt (long-term debt plus short term portion of long-term debt less cash-on-hand) divided by adjusted EBITDA. Utilization rate - drilling day is defined as drilling days divided by total available rig days. Rate per operating day or Dayrate is defined as operating revenue (net of third party costs) divided by operating days (drilling days plus moving days). IT'S ABOUT PERFORMANCE 3

4 Why Invest in Trinidad? The right assets to meet customer demand Well located in key resource plays International diversification Strong financial position IT'S ABOUT PERFORMANCE 4

5 Trinidad is Active in the Key Plays Montney Deep Basin Cardium Duvernay Main areas of activity Permian Montney Deep Basin Active Fleet 1 Bakken / Torquay Frobisher Permian Eagle Ford Haynesville Permian Montney Deep Basin Eagle Ford (1) At Aug 1, 2017 Frobisher Cardium Other IT'S ABOUT PERFORMANCE 5

6 Update from the Field Canada Improving activity into the fall, with visibility of activity into winter drilling program Activity focused mostly in Duvernay, Montney and Deep Basin Trinidad regaining market share as dayrates rise United States Permian is the key driver of US industry activity Trinidad s Permian market share grown from 3% - 8% in past three years Customers requesting 1,500 HP, AC walking rigs with 7,500 PSI; additional mud pumps and generators also in demand IT'S ABOUT PERFORMANCE 6

7 Diversified Operations REVENUE (TTM) 1 OPERATING DAYS (TTM) 1 RIG COUNT (TTM) 1 32% 44% 48% 43% 25% 49% 7% 45% 7% US Canada JV US Canada JV US Canada JV Geographic diversification provides stability, optionality and growth opportunities 1 At June 30, 2017 IT'S ABOUT PERFORMANCE 7

8 Canadian Fleet 70 Rigs in Canadian Fleet RIG TYPE HORIZONTAL DEPTH (METRES) HOOKLOAD* (LBS) 9% 16% Singles 13% 0-4,000 20% > 350,001 Triples 4,001-6,999 < 350,000 76% Doubles / HD 79% 7, % 9% Trinidad s Canadian fleet is well suited to Canadian drilling requirements * Pro forma for 2017 upgrade program IT'S ABOUT PERFORMANCE 8

9 US and International Fleet 69 Rigs in US and International Fleet SPEC* RIG TYPE* HORSEPOWER 28% 29% 43% Mech High Spec 28% 16% Ultra-high Spec 57% AC SCR Mech 20% 9% 71% > = 1,500 1,000-1,499 < 1,000 The US and international fleet will be 43% ultra-high spec by year-end 2017 * Pro forma for 2017 upgrade program; two rigs removed from the program with the RigMinder acquisition IT'S ABOUT PERFORMANCE 9

10 Consistent Industry Outperformance Trinidad s rigs are more active 60% 50% 40% 30% 20% 10% CANADIAN UTILIZATION 1 RATES Trinidad s Canadian Utilization Industry Average TDG US US AVERAGE ACTIVE RIG COUNT Industry Average Active Rig Count Trinidad s US Average Active Rig Count US 2,800 2,400 2,000 1,600 1, % 0 0 Source Canadian Association of Oil Well Drilling Contractors 1: Utilization rate drilling days Source US Baker Hughes Rig Counts, Company Reports excludes rigs on Standby IT'S ABOUT PERFORMANCE 10

11 International Joint Venture Fleet 10 Rigs in Joint Venture Fleet HORSEPOWER RIG TYPE COUNTRIES 20% Other 2,000 + HP 20% Mech AC 40% Saudi Arabia 40% 3,600 HP Mexico 80% 60% 40% The joint venture fleet has some of the world s largest, most advanced rigs IT'S ABOUT PERFORMANCE 11

12 Trinidad s International Operations HAL JV contributing Adjusted EBITDA YTD 2017 $25.4 m 1 Saudi: three rigs working, one on standby revenue Mexico: one rig working, one on standby revenue Two rigs early terminated, US$10.9m in early term revenue One TDG-owned rig in UAE 1: Trinidad s 60% interest IT'S ABOUT PERFORMANCE 12

13 International Strategy Extended Saudi rigs on a well-to-well basis Relocate/re-contract available Mexico rigs Pursuing opportunities through JV and independently Saudi Arabia, Kuwait and Argentina most likely Possibility to relocate existing equipment IT'S ABOUT PERFORMANCE 13

14 Changing Industry Conditions Changes in the industry Drilling deeper, longer wells Customers demanding better efficiency Trinidad sharing the benefits of improved performance Innovative contracts to reward performance Using technology to improve performance and add EBITDA Integrating services to generate additional revenue IT'S ABOUT PERFORMANCE 14

15 RigMinder Adds Functionality and Revenue Fully integrated rig performance solution Provides improved, repeatable performance and better efficiency Integrates drilling data, equipment data and existing rig control system to optimize directional drilling Ability to expand revenue generation platform Ongoing advancement of rig automation technology IT'S ABOUT PERFORMANCE 15

16 RigMinder Acquisition Metrics At Close US$30 million US$10 million Potential Earnout US$25 million in cash US$5 million in Trinidad shares (3.9 million shares) Payable on the anniversary of the acquisition close Dependent on achieving equipment deployment targets Dependent on 2019 profitability of RigMinder products IT'S ABOUT PERFORMANCE 16

17 RigMinder Technology Improves Performance Full Rig Integration Package RigMinder EDR 1 PLC 2 Integration Criterion Bit Guidance Ongoing Advancement Monitors drilling and equipment performance Integrates with Trinidad s control system Improved directional drilling efficiency and accuracy Continued technology and automation advancement 1 EDR Electronic Data Recorder 2 PLC Programmable Logic Controllers IT'S ABOUT PERFORMANCE 17

18 RigMinder Electronic Data Recorder (EDR) Equipment monitoring drives improved performance RigMinder EDR monitors functionality of rig and directional equipment to provide near real-time data on drilling process Ongoing PLC monitoring optimizes maintenance of physical assets to reduce downtime Integrates with Trinidad s control system for increased monitoring and data analysis Brings EDR rental and services within Trinidad product offering IT'S ABOUT PERFORMANCE 18

19 Criterion Bit Guidance Provides improved, repeatable directional drilling accuracy Continually monitors downhole tool face placement Provides corrective directions to smooth well bore and stay within well plan Integrates with EDR, rig control system and all downhole tools Ability to monitor remotely Brings directional drilling skill set and technology within Trinidad service offering Additional revenue generation ability with drilling tool rental IT'S ABOUT PERFORMANCE 19

20 Benefits of RigMinder Customer benefits Reduction in well bore costs and increased production by optimizing well path Improved drilling performance with smoother wells and better accuracy to well plan Better data management and security Trinidad benefits Expanded product offering and revenue generation Reduced downtime through predictive maintenance Improved safety and less risk of human error Intuitive analytics and customized reports IT'S ABOUT PERFORMANCE 20

21 Increased Revenue Generation New Revenue Platforms EDR Rental Monitoring equipment Communication rentals Data and satellite services Add on monitoring equipment Criterion Bit Guidance Optimizes directional performance Third-Party Tool Rentals Negotiating bulk deals with third parties Add-on revenue items IT'S ABOUT PERFORMANCE 21

22 Contracts Provide Stability with Upside Current contract status 22% or 33 rigs under long-term contract 1 with more rigs on variety of shorter contract terms Contracts with upside Commodity-price linked contracts provide ability to step up dayrate at pre-determined WTI levels Performance contracts hare the benefits of improved efficiency and provide an incentive to outperform 1 At Aug 1, 2017 IT'S ABOUT PERFORMANCE 22

23 Pro Actively Maintain Market Share 2017 Capital Budget $175 million Upgrades on 30+ rigs to increase dayrates and marketability Largely backed by customer commitments Capex expected to be funded by cash flow, equity proceeds, JV distribution, cash on hand and credit facility Includes RigMinder acquisition (US$25 million) 2017 Capital by Type Growth RigMinder Maintenance 2017 Capital by Country US Canada IT'S ABOUT PERFORMANCE 23

24 Solid Balance Sheet and Financial Flexibility Senior note US$350m, 6.625% matures 2025 Credit facility undrawn at Q (~$230 million available) Joint venture distribution of ~$40 million paid in Q NET DEBT TO ADJUSTED EBITDA Peer average (5.0) TDG 1 At June 30, 2017 Trinidad s peer group includes H&P, Ensign, Nabors, Patterson, Pioneer, Precision, Total, Western, and Xtreme IT'S ABOUT PERFORMANCE 24

25 Trinidad s Strengths Strong operational performance Well-trained people and strong safety performance In-demand, high-spec equipment Strategic geographic footprint and optionality Solid balance sheet and strong liquidity IT'S ABOUT PERFORMANCE 25

26 Ph: IT'S ABOUT PERFORMANCE 26