December Corporate Presentation

Transcription

1 December 207 Corporate Presentation

2 Disclaimer The information contained in this presentation does not purport to be all inclusive or to contain all information that prospective investors may require. Prospective investors are encouraged to conduct their own analysis and review of STEP Energy Services Ltd. ( STEP or the Company ) and of the information contained in this presentation. Without limitation, prospective investors should read the entire final prospectus, and any amendments thereto, consider the advice of their financial, legal, accounting, tax and other professional advisors and such other factors they consider appropriate in investigating and analyzing the Company. In this presentation, unless otherwise indicated, all dollar amounts are expressed in Canadian dollars. Certain capitalized terms and abbreviations not otherwise defined herein have the meaning assigned to them in the prospectus. Certain statements contained in this presentation constitute forward-looking statements or forward-looking information within the meaning of applicable securities legislation (collectively, forward-looking statements ). These statements relate to management s expectations about future events, results of operations and the Company s future performance (both operational and financial) and business prospects. All statements other than statements of historical fact are forward-looking statements. The use of any of the words anticipate, plan, contemplate, continue, estimate, expect, intend, propose, might, may, will, shall, project, should, could, would, believe, predict, forecast, pursue, potential, objective and capable and similar expressions are intended to identify forward-looking statements. These statements involve known and unknown risks, uncertainties and other factors that may cause actual results or events to differ materially from those anticipated in such forward-looking statements. No assurance can be given that these expectations will prove to be correct and such forward-looking statements included in this presentation should not be unduly relied upon. These statements speak only as of the date of this presentation. In addition, this presentation may contain forward-looking statements and forwardlooking information attributed to third-party industry sources. In particular, this presentation contains forward-looking statements pertaining to the following: future commodity prices; anticipated market recovery; projections of market prices and costs; supply and demand for oilfield services and industry activity levels, including the Company s integrated services offerings; benefits to the Company of increased fracturing intensity; estimates of industry experts of the daily active drilling rig count and the number of horizontal wells drilled in Canada and the U.S. in 207 and 208 and the effects of such trends on the Company; the Company s objectives, strategies and competitive strengths; future development activities; the Company s ability to refurbish and deploy its idle capacity; the Company s ability to increase Canadian and U.S. coiled tubing units by 208; the Company s ability to retain existing clients and attract new business; the Company s growth strategy; expectations with respect to future opportunities; the Company s capital expenditure programs and future capital requirements; the Company s current 207/208 capital plan; and debt and industry conditions pertaining to the oilfield services industry. With respect to forward-looking statements contained in this presentation, assumptions have been made regarding, among other things: future oil, natural gas and natural gas liquids prices; the Company s ability to market successfully to current and new clients; the Company s ability to utilize its equipment; the Company s ability to obtain qualified staff and equipment in a timely and costefficient manner; the regulatory framework governing royalties, taxes and environmental matters in the jurisdictions in which the Company conducts its business and any other jurisdictions in which the Company may conduct its business in the future; levels of deployable equipment; future capital expenditures to be made by the Company; future sources of funding for the Company s capital program; the Company s future debt levels; the impact of competition on the Company; and the Company s ability to obtain financing on acceptable terms. Actual results could differ materially from those anticipated in these forward-looking statements as a result of the risk factors set forth in the prospectus. The forward looking statements included in this presentation are expressly qualified by the foregoing cautionary statements and are made as of the date of this presentation. The Company does not undertake any obligation to publicly update or revise any forward looking statements except as required by applicable securities laws. For additional information, including with respect to the assumptions, expectations and risks applicable to such forward looking information, see Forward Looking Statements in the prospectus. Non-IFRS Measures In addition to using financial measures prescribed by IFRS, references are made in this presentation to Adjusted EBITDA which is a measure that does not have any standardized meaning as prescribed by IFRS. Accordingly, the Company s use of such term may not be comparable to similarly defined measures presented by other entities. For further details on this non IFRS financial measure, see IFRS and Non IFRS Measures and Three Year History Recent Developments in the prospectus. Additionally, this presentation makes use of the following abbreviations: MM millions HP horsepower

3 Experienced and Proven Leadership Regan Davis, President & CEO, Director Co-founder of STEP; CEO since start up in March 20 P. Eng. with over 25 years of industry experience ICD.D, Member of the Institute of Corporate Directors Prior to STEP, held senior positions at Renaissance Energy Ltd. and Enerline Restorations Ltd. Former President and CEO of Flexpipe Systems Ltd. and most recently was the President and CEO at Severo Energy Ltd. Rob Sprinkhuysen, CFO Chartered Accountant with over 20 years of oilfield and related industry experience Prior to STEP, was CFO at Technicoil Corp. from 2008 to 20, and previously held senior positions in various financial capacities at Enerflex Ltd. Other Key Management Rory Thompson VP, Coiled Tubing Services Canada Brock Duhon VP, Coiled Tubing Services U.S. Mike Burvill VP, Fracturing Services Bailey Epp Co-founder of STEP VP, Engineering and Technology Todd Rainville VP, Sales and Marketing David Johnson VP, Human Resources Lori McLeod-Hill VP, Finance Experience 20+ Years 6+ Years 20+ Years 20+ Years 20+ Years 20+ Years 25+ Years Steve Glanville, VP Operations & COO Co-founder of STEP Certified engineering technologist with over 20 years of oilfield experience Prior to STEP, held senior positions in various operational capacities at Schlumberger, Sanjel and Calfrac Former President of ICoTA Canada Board of Directors Douglas Freel Chairman Jeremy Gackle Director Jason Skehar Director Michael Kelly Director James Harbilas Director Donna Garbutt Director Leadership team in-place to grow the Company 2

4 Leading Specialized Coiled Tubing and Fracturing Service Provider Company Overview Headquartered in Calgary, STEP is a recognized, award-winning oilfield service company providing specialized and fully integrated coiled tubing and fracturing solutions Canadian Coiled Tubing and Fracturing Markets Fit-For-Purpose Equipment One of Canada s largest and newest fleets of deep-capacity coil spreads Established and expanding fleet of deepcapacity coil spreads in the US Canada s third-largest fracturing company 2 High Performance Culture High-performance, engaged culture with experienced professionals U.S. Coiled Tubing Markets Comprehensive Business Model STEP s comprehensive business model encompasses all required field support elements inside the Company - STEP Head Office STEP is the 204 and 205 recipient of the Top Safety Culture Award, Large Enterprises Category, in addition to most recently being named the safety record winner by The OGM Safety Awards. 2 As measured by fracturing horsepower of publicly traded Canadian peers. - STEP Service Centre 3

5 STEP Has Built and Grown the Business Through the Downturn Company Milestones Start-Up Founded in 20 First coiled tubing operation in 202 Asset Acquisitions coil, 5 N 2 from Kamber 205 5,000 HP from Gasfrac ,000 HP from Sanjel 206 7,500 HP from other parties ARC Energy Fund Equity Contributions Committed capital in 20, 205 and 206,00 Professionals 3 Coil Spreads 297,500 HP 6 Coil Spreads 3 Professionals Coil Spread 5,000 HP Coil Spread

6 Integrated Services Provider 9 Total Canadian & U.S. Coiled Tubing Spreads Coiled tubing has a reason to be involved with all completion methods, and has a reason to be on every well site NCS Plug and perf Sliding sleeve 3 Fit-for-purpose deep-capacity 2 coil spreads in the WCSB STEP depth record of 7,200 metres Six fit-for-purpose deepcapacity coil spreads in Texas and Louisiana STEP has complete services with leading electronics and technology equipped coiled tubing equipment, that provides integrated, real-time info Coiled Tubing Solutions (33% of last 9 mos. Revenue) Fracturing Solutions (67% of last 9 mos. Revenue) 297,500 Fracturing HP 209,000 HP currently deployed (seven spreads) 3 Newly developed sand handling and blender technology and equipment Large bi-fuel (natural gas) fracturing fleet of 97,500 HP Expert engineering and lab teams design and provide customized refracturing solutions and STEP- PLEX diverting agents High-quality equipment with the latest electronics and technology so that all the equipment is fully integrated and talks together Upgrading existing equipment as required and complementing with new-builds Multiple service lines - one team As of September 30, Wells >5,500 metres in length. 3 As at December 7,

7 Expanding Client Base and Service Offering STEP s Blue-Chip Clients and Offered Services Have Grown With the Company Building on Existing Relationships While Attracting New Clients...And Offering New Services Client Revenue Retention Revenue Growth of Retained Clients Client Base Canadian Revenue Composition 94% 6% Revenue ($MM) $00 $80 $60 $40 $ Number of Clients (#) U.S. Canada % 00% Single Service Multi-Service 2% Clients representing 94% of STEP s revenue in 203 remain clients of STEP in 206 Revenue generated by retained clients has increased ~30% since 203 STEP grew its client base by ~45% since % of STEP s 206 Canadian revenue is generated by clients utilizing its multi-service offering Representative Canadian and U.S. Client Base 6

8 Proven Ability to Grow Successfully Grew the Company and Gained Market Share Canadian Coiled Tubing one coil spread in 202 to 3 coil spreads today; 6 coil spreads by year end 208 U.S. Coiled Tubing zero coil spreads in 204 to six coil spreads today; coil spreads by year end 208 Canadian Fracturing total of 297,500 HP today (209,000 HP currently operating); 305,000 active HP in spreads by year end 208 STEP s Coiled Tubing Fleet STEP & Publicly Traded Canadian Peers Fracturing Capacity U.S. Canada STEP Active STEP Available Capacity 680 Total Coiled Tubing Fleet (#) Total Canadian Fracturing Capacity (000s HP) Current 208YE Current 208YE Calfrac Trican Based on the most recent public disclosure. All information regarding STEP s publicly traded Canadian peers was obtained from the most recently released management s discussion and analysis, presentation or Annual Information Form. 2 As of June 30, As at December 7, Forecast 207 and 208 based on the current capital program. 7

9 Investment Highlights High-Quality Asset Base Providing Combined Coiled Tubing and Fracturing Solutions Third-largest fracturing company in Canada Significant market share in the deep capacity coiled tubing market in Canada with a growing presence in the U.S. Integrated service offering leading to expansion of existing client relationships and the acquisition of new clients Technology Focused Solutions and Equipment Largest bi-fuel fracturing fleet in Canada, 3,000 HP Thunderpumps, integrated electronic platforms, proprietary STEP-PLEX diverter solutions Fibre optics, e-coil, engineered high grade string designs, IHX 30 injector prototypes, IDEX coil data acquisition Established Operations with Blue-Chip Client Base in Canadian and U.S. Basins Established presence in some of the highest-growth resource basins in Canada and the U.S. (Montney, Duvernay, Permian and Eagle Ford) Commitment to core values has earned STEP a client base of well-capitalized, blue-chip E&P companies Client base has grown with STEP due to its track record of safety and execution Experienced Management Team and Supportive Private Equity Investor Senior management team in place with average experience of over 20 years Proven ability to grow both organically and through multiple acquisitions through the downturn Did so in a financially prudent manner with support from ARC Financial Strong Financial Position Debt-free balance sheet Positions the Company to grow through new-build opportunities while capitalizing on opportunistic acquisitions $22. MM of working capital (incl. cash of $60.2 MM) and an undrawn $00 MM credit facility as of Sept 30, 207 Well Positioned to Capitalize on Industry Recovery Rigorous preventative maintenance program and growing headcount of experienced professionals have positioned the Company to take advantage of the oil and gas industry recovery STEP offers exposure to recovery in completions activity in both Canada and the U.S. As measured by fracturing horsepower of publicly traded Canadian peers. 8

10 Market Outlook Industry Undersupplied for Active Completions Equipment Active fracturing equipment booked through 207, clients currently booking into Q and Q Experiencing high demand of coiled tubing fleet. Pricing for Fracturing Services Continues to Gain Traction, Though Partially Offset by Supply Chain Inflation Prevalent supply and demand dynamic has resulted in pricing gains through 207, though partially offset by cost inflation. Since Q 207, fracturing pricing up ~5-20%; cost inflation, particularly last-mile sand hauling and proppant costs, partially offsetting pricing gains. Pricing has plateaued in response to uncertainty around capital plans and volatility of commodities supporting cash flow. Pace of Industry Equipment Reactivations Restricted Due to Labour Constraints Across the Industry Attracting and retaining qualified field professionals becoming increasingly difficult. Vendors are also experiencing the same limitation, with labour being a primary bottleneck for servicing equipment. Increasing Fracturing Intensity Thesis Continues To Be Relevant Across Deeper Basins Continue to see the completions intensity thematic play out in the Montney, Duvernay, Cardium and Deep Basin. Continued Demand for Sand Resulting in Supply Tightening Select sand sizes are becoming more difficult to procure. 9

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12 Appendix

13 Recent Developments Q3 207 Results Actual Company Results for Q3 207 ($000's except per day, units, days and HP) Three Months Ended Sept 30, 207 Nine Months Ended Sept 30, 207 Revenue $75,537 $398,967 Net Income $28,575 $40,67 Adjusted EBITDA $50,043 $87,62 Adjusted EBITDA % 29% 22% Total fracturing operating days 2 472,05 Fracturing revenue per operating day $252,92 $24,964 Fracturing capacity (HP): Average active HP 76,750 5,750 Exit active HP 76,750 76,750 Total HP 3 297, ,500 Total coiled tubing operating days 2,250 3,022 Coiled tubing revenue per operating day $44,930 $43,546 Coiled tubing capacity: Average active coiled tubing units 7 5 Exit active coiled tubing units 8 8 Total coiled tubing units 8 8 Quarterly Highlights Working capital of $22. million (incl. cash of $60.2 million) Fracturing Services: Six active fracturing spreads throughout the quarter, resulting in average active HP of 76,750 HP vs. 00,000 HP in Q3/6. Canadian Coil: 2 coiled tubing spreads active throughout the quarter. U.S. Coil: Six coiled tubing spreads active in the Permian, Eagle Ford and Haynesville throughout the quarter. Capital Program: $5 million approved for 207 and $09 million approved for 208. Upon completion of the 208 capital program, STEP expects to have an operating fleet of fracturing spreads, representing approximately 305,000 HP and 6 coiled tubing spreads in Canada, and coiled tubing spreads in the U.S. High utilization, fracturing intensity growth and improved pricing have had a positive impact on Q3 207 See "Non-IFRS Measures". 2 An operating day is defined as any coiled tubing and fracturing work that is performed in a 24 hour period, exclusive of support equipment. 3 Represents total owned HP, of which 76,750 HP is currently operating and the remainder of which requires certain maintenance, rebranding and refurbishment. 2

14 Coiled Tubing At A Glance STEP s Coiled Tubing Units Are Capable of Servicing Deeper, Complex Formations What is coiled tubing? A coiled tube is a long steel pipe that is transported on a reel and straightened when utilized. Coiled tubing services are primarily used in the completion of new wells or enhancement of existing wells Evolution of coiled tubing. The first coiled tubing unit was developed in 962 for well cleanouts. In 206, an estimated,95 coiled tubing units exist worldwide, with the majority developed before 200. The recent advancement of deep resource plays (Montney, Duvernay, Deep Basin, Permian, Eagle Ford) and horizontal pad drilling has increased the demand for deeper, dynamic coiled tubing units What is coiled tubing used for today? Over the last five years, coiled tubing has advanced from traditional well servicing (cleanouts, interventions) to being an integral part of the initial completions process. It is now commonly utilized for milling plugs, annular fracturing, and recompletions Conventional Coiled Tubing Unit (<,500m of <2 CT) STEP s Ultra-Capacity Coiled Tubing Spread (<6,800m 2-7/8 CT) A conventional coiled tubing unit would be limited in servicing deeper formations. Advancement of industry plays and increased requirements result in these conventional units to be largely obsolete in the completions process ICoTA, Worldwide CT Unit Count for 206 (March 206). STEP s ultra-capacity spread is designed to handle up to 7,900m of 2-5/8 coil or 6,800m of 2-7/8 coil. Deeper, high pressure, complex formations require dynamic coiled tubing units capable of servicing extended reach depths STEP s coiled tubing units are designed to service the deepest wells in North America 3

15 STEP at a Glance Services Integrated provider of coiled tubing and fracturing solutions with a technical focus on deeper, more challenging plays Basin Exposure Montney Duvernay Deep Basin Cardium Permian Viking Eagle Ford Shaunavon Haynesville Supply Chain Diversified supply chain and established infrastructure with access to Northern White and domestic sand via multiple transload sites Logistics Ensure people, equipment, chemicals and proppant are in the right place at the right time Equipment 297,500 HP (209,000 HP deployed) 9 coil spreads (3 in Canada, six in the U.S.) Technology Interconnected equipment Proprietary products such as STEP-PLEX Global IP suite Facilities Nine in-basin field service centres Two lab facilities Clients Blue-chip client base of well-capitalized E&Ps with positions in prolific resource basins Safety Two-time recipient of the Top Safety Culture Award Professionals Motivated management team with extensive industry experience Over,00 professionals and growing 4