Investor Presentation. Peters & Co. Investor Conference September 2017

Transcription

1 Investor Presentation Peters & Co. Investor Conference September 2017

2 Forward Looking Statements Certain statements in this presentation including (i) statements that contain words such as anticipate, could, expect, seek, may, intend, will, believe, should, project, forecast, plan and similar expressions suggesting future outcomes, including the negatives thereof, (ii) statements that are based on current expectations and estimates about the markets in which the Cathedral operates and (iii) statements of belief, intentions and expectations about developments, results and events that will or may occur in the future, constitute forward-looking statements and are based on certain assumptions and analysis made by Cathedral. Forward-looking statements in this presentation include, but are not limited to, statements with respect to positioning to favorably capitalize on the industry turn around, upside leverage to improving industry fundamentals, continued focus on improving and growing the business, strong balance sheet facilitates future growth opportunities, favorable valuation and financial metrics relative to industry peers, future capital expenditures, including the amount, nature and timing thereof, oil and natural gas prices and demand; other development trends within the oil and natural gas industry; business strategy; expansion and growth of Cathedral s business and operations including Cathedral s market share and position in the oilfield service market; and other such matters. Such forward-looking statements are subject to important risks and uncertainties, which are difficult to predict and that may affect Cathedral s operations, including, but not limited to: the impact of general economic conditions in Canada and the United States; industry conditions, including the adoption of new environmental, safety and other laws and regulations and changes in how they are interpreted and enforced; volatility of oil and natural gas prices; oil and natural gas product supply and demand; risks inherent in Cathedral s ability to generate sufficient cash flow from operations to meet its current and future obligations; increased competition; the lack of availability of qualified personnel or labor unrest; fluctuation in foreign exchange or interest rates; stock market volatility; opportunities available to or pursued by Cathedral and other factors, many of which are beyond the control of Cathedral. Cathedral s actual results, performance or achievements could differ materially from those expressed in, or implied by, these forward-looking statements and, accordingly, no assurance can be given that any of the events anticipated by the forward-looking statements will transpire or occur, or if any of them do transpire or occur, what benefits Cathedral will derive from there. Subject to applicable law, Cathedral disclaims any intention or obligation to update or revise any forward-looking statements, whether as a result of new information, future events or otherwise. All forward-looking statements contained in this document are expressly qualified by this cautionary statement. Further information about the factors affecting forward-looking statements is available in Cathedral s current Annual Information Form and Annual Report which have been filed with Canadian provincial securities commissions and are available on September 2017 Investor Presentation / Cathedral Energy Services 2 C O M P A N Y O V E R V I E W

3 Presentation Overview Brief introduction to Cathedral Review of financial performance Why we believe Cathedral is a compelling investment opportunity How to contact us for more information September 2017 Investor Presentation / Cathedral Energy Services 3 A G E N D A

4 Cathedral Overview Established 1998 High performance directional drilling services that deliver Better Performance Every Day North American footprint Proprietary technology and services Partnership approach with our customers to help them achieve higher drilling performance and lower project costs September 2017 Investor Presentation / Cathedral Energy Services 4 C O M P A N Y O V E R V I E W

5 What we do Cathedral provides the services and equipment to get the wellbore from surface to the formation of interest: Accurately Efficiently Cost effectively TVD > 10,000 ( > 3,000m) TD > 20,000 ( > 6,000m) This is accomplished using a bottom hole assembly (BHA): Drilling Motor Measurement-while-drilling (MWD) equipment Other down-hole equipment Facilitated with specialized knowledge and experience Continuous increases in total depths achieved September 2017 Investor Presentation / Cathedral Energy Services 5 D I R E C T I O N A L D R I L L I N G O V E R V I E W

6 Cathedral Snapshot TSX: CET (as of June 30, 2017) TTM Financial Performance 1 $ 120 Million Revenue $ 15.2Million EBITDAS Market Statistics Recent share price $ week high / low $1.44 / $0.34 Shares outstanding (basic) Valuation Metrics Current market value Enterprise value million $49 million $45 million Tangible book value per share $2.11 TTM EV/EBITDA multiple 3.0x Ownership Insiders 5.7% Institutions ~40% Notes: 1. Revenue and EBITDA are from Continuing Operations for the 12 months ended June 30, No Bank Debt $4.1 million cash as at June 30, 2017 September 2017 Investor Presentation / Cathedral Energy Services 6 C O M P A N Y O V E R V I E W

7 Our Strategy Our business strategy is to build our business around delivering: Better Performance Every Day This applies to: Our Customers How we deliver our services Our Employees How we work together to achieve our goals Our Suppliers What we expect from them Our Shareholders How we will provide returns to attract capital to grow our business September 2017 Investor Presentation / Cathedral Energy Services 7 C O M P A N Y S T R A T E G Y

8 How We Deliver Better Performance Every Day to our Customers Proprietary MWD and Motor Platforms FUSION MWD ndurance Motors Catalyst Engineering Services Collaborate with our customers to facilitate improved drilling performance Experience Culture Training programs Health and Safety Program Financial strength, equipment fleet, geographical footprint September 2017 Investor Presentation / Cathedral Energy Services 8 C O M P A N Y S T R A T E G Y

9 Revenue Sources Canada % 2017 H1 21% U.S % 2017 H1 79% Notes: 1. Revenue in CAD September 2017 Investor Presentation / Cathedral Energy Services R E V I E W

10 Recent Accomplishments Significant cost reductions and efficiencies achieved in our business during downturn - that we are continuing forward No net Debt down from $56 million in 2014 Sale of our Flowback and Production Testing assets (finalized Jan 2017) $14.1 million equity financing completed in February 2017 Focus on strategic initiatives in all areas of our business which has positioned us favorably to capitalize on the industry turnaround Strong market share growth in US our primary focus market September 2017 Investor Presentation / Cathedral Energy Services R E V I E W

11 Past 3 Years Financial Performance 1 Revenues and profitability were significantly affected by reduced industry activity and pricing pressures 2014 Financial Performance $ 209 Million Revenue $ 25.8 Million EBITDAS $ 56 Million BANK DEBT Financial Performance $ 106 Million Revenue $ 5.3 Million EBITDAS $ 32 Million BANK DEBT 2016 Financial Performance $ 81 Million Revenue $ 7.5 Million EBITDAS $ 0 Million BANK DEBT Year End pro forma F&PT sale and Financing 3 Notes: 1. Revenue and EBITDAS are from Continuing Operations 2. Bank Debt excludes LCs 3. $3.8 million of cash at March 31, 2017 September 2017 Investor Presentation / Cathedral Energy Services R E V I E W

12 2017 Second Quarter YTD Results $ 73 Million 2017 Q2 YTD Financial Performance 1 $ 0 Million $ 9.2 Million $ 4.1 Million Revenue EBITDAS BANK DEBT CASH Notes: 1. Revenue and EBITDAS are from Continuing Operations Activity levels up sharply Continued pricing pressure DD Activity Days DD Revenue Day Rates 3,000 14,000 2,500 12,000 2,000 10,000 1,500 8,000 6,000 1,000 4, , Q Q Q Q Q Q Q Q Q Q Q Q Q Q Q Q Q Q Q Q Q Q2 Canada US Cdn drill (CND) US drill (USD) Targeted 2017 CapEx Program of $10 Million plus Replacement of Lost in Hole Equipment September 2017 Investor Presentation / Cathedral Energy Services 12 Q U A R T E R L Y R E V I E W

13 Peer Comparison TTM EV/EBITDA 25.0x 2Q17 EV to TTM EBITDAS 20.0x 2Q17 EV/EBITDAS (x) 15.0x 10.0x 5.0x 0.0x CET TDG BDI CWC HNL ESI STEP PD MTL SES WRG CFW CEU PSI PHX TOT TCW Source: GMP FirstEnergy, Bloomberg, Peters &Co. September 2017 Investor Presentation / Cathedral Energy Services 13 PEER GROUP REVIEW

14 Peer Comparison Price/Book 4.5x 2Q17 TTM Price to Book 4.0x 3.5x 2Q17 TTM Price to Book (x) 3.0x 2.5x 2.0x 1.5x 1.0x 0.5x 0.0x WRG BDI TDG CET CWC PD ESI HNL PHX TOT CFW TCW SES STEP MTL CEU PSI Source: GMP FirstEnergy, Company Reports, Cathedral Energy Services September 2017 Investor Presentation / Cathedral Energy Services 14 PEER GROUP REVIEW

15 Peer Comparison Net Debt / TTM EBITDA 10.0x 2Q17 Net Debt to 2Q17 TTM EBITDAS 9.0x 8.0x 7.0x 2Q17 Net Debt to 2Q17 TTM EBITDAS (x) 6.0x 5.0x 4.0x 3.0x 2.0x 1.0x 0.0x PSI* STEP* CET* PHX* CFW SES CWC HNL MTL CEU TDG ESI BDI TCW PD WRG TOT Source: GMP FirstEnergy, Bloomberg, Peters & Co. *company has negative 2Q 17Net Debt September 2017 Investor Presentation / Cathedral Energy Services 15 PEER GROUP REVIEW

16 Peer Comparison Return on Assets 5.0% 2Q17 TTM Return on Assets 2.5% 0.0% -2.5% 2Q17 TTM Return on Assets (%) -5.0% -7.5% -10.0% -12.5% -15.0% -17.5% -20.0% STEP MTL CEU PSI CET SES HNL TCW TOT PD CWC TDG ESI WRG CFW BDI PHX Source: GMP FirstEnergy, Company Reports September 2017 Investor Presentation / Cathedral Energy Services 16 PEER GROUP REVIEW

17 Peer Comparison US Market Exposure 80% Segmented U.S. Revenue as % of Total Revenue Q TTM 70% 60% 50% 40% Average = 27.85% 30% 20% 10% 0% CET CEU PSI PHX PD ESI CFW TDG BDI TOT WRG STEP SES HNL TCW MTL CWC Source: GMP FirstEnergy, Company Reports September 2017 Investor Presentation / Cathedral Energy Services 17 PEER GROUP REVIEW

18 Summary Cathedral has demonstrated good YTD financial performance and the ability to capitalize on improving industry fundamentals Technological leader with distinctive competitive advantages Continued focus on improving and growing the business Strong balance sheet facilitates future growth opportunities Favorable valuation and financial metrics relative to industry peers September 2017 Investor Presentation / Cathedral Energy Services 18 I N V E S T M E N T H I G H L I G H T S

19 Contact Information Scott MacFarlane, President and CEO Direct: /or/ Michael Hill, CFO Direct: /or/ September 2017 Investor Presentation / Cathedral Energy Services 19

20 September 2017 Investor Presentation / Cathedral Energy Services 20 Thank you

21 Investor Presentation Supplemental Information September 2017

22 Strategic Positioning TIER 1 Integrated Service Companies Technologically advanced Focus on large international projects Packaged offering doesn t align with North American a la carte service preference TIER 3 Regional Companies Me-to equipment Little technology development to drive continuous improvements No drilling optimization/analytics to assist customers improving performance Low inventory of equipment and personnel Tier 1 NARROW THE GAP WIDEN THE GAP Tier 3 CATHEDRAL TIER 2+ Have the size and scale In-house technology development and innovation capability Technology and service equivalent or better than majors Can quickly adapt tools to customer needs Performance offering aligns with customer requirements Can handle complex jobs September 2017 Investor Presentation / Cathedral Energy Services 22 SUPPLEMENTAL INFORMATION

23 How We Deliver Better Performance Every Day to our Customers Proprietary MWD and Motor Platforms FUSION MWD ndurance Motors Catalyst Engineering Services Collaborate with our customers to facilitate improved drilling performance Experience Culture Training programs Health and Safety Program Financial strength, equipment fleet, geographical footprint September 2017 Investor Presentation / Cathedral Energy Services 23 SUPPLEMENTAL INFORMATION

24 Proprietary Technology - MWD FUSION MWD Technology Platform Electromagnetic (EM) telemetry allows for use in more formations and faster response time Pulse telemetry proprietary designs to reduce plugging and improve transmission capabilities Dual telemetry (EM and Pulse) leverages the strengths of each system Ruggedized equipment to handle extreme drilling conditions September 2017 Investor Presentation / Cathedral Energy Services 24 SUPPLEMENTAL INFORMATION

25 Proprietary Technology - Motors ndurance Drilling Motors Patented design delivers increased torque, proven reliability and higher drilling performance than competitive motors September 2017 Investor Presentation / Cathedral Energy Services 25 SUPPLEMENTAL INFORMATION

26 Drilling Engineering A collaborative, holistic approach with our customers to facilitate improved drilling performance. September 2017 Investor Presentation / Cathedral Energy Services 26 SUPPLEMENTAL INFORMATION

27 Experienced People who Work Smart >450 Employees and consultants across North America >20,000 Wells Drilled >10 Years Average Crew Experience Guiding Principles EXCELLENCE In service and performance HONESTY & INTEGRITY Doing the right thing TEAMWORK Harnessing our collective strengths Culture Alignment with our Guiding Principles Programs Recruitment Training Safety LIVE WELL Safe and healthy work practices CREATING VALUE For our customers community and investors RISK BASED APPROACH TO MANAGING HSE PERFORMANCE AND CORPORATE RISK MITIGATION. September 2017 Investor Presentation / Cathedral Energy Services 27 SUPPLEMENTAL INFORMATION

28 Size and Scale Canadian Operations Calgary (CORPORATE, SALES, MWD) Nisku (MOTORS) Emerald Park (MOTORS) U.S. Operations Denver (CORPORATE, SALES) Oklahoma City (MOTORS, MWD) Houston (MOTORS, MWD) Casper (MOTORS, MWD) Washington (MOTORS, MWD) 750 Drilling Motors 64% Proprietary 126 MWD Kits 78% Proprietary September 2017 Investor Presentation / Cathedral Energy Services 28 SUPPLEMENTAL INFORMATION

29 Systems, Procedures and Programs Tie Everything Together Systems Track information and tasks to enable us to efficiently run our business Procedures Ensure we deliver consistently and reliably Programs Support our ability to deliver our services September 2017 Investor Presentation / Cathedral Energy Services 29 SUPPLEMENTAL INFORMATION

30 Management Team Cathedral s management team has one of the longest tenures of any team currently operating in the directional or flow back business today P. Scott MacFarlane President & CEO with CET since 2001 Randy Pustanyk EVP Directional Drilling Product Lines Cofounder 1998 Appointed President and CEO in December 2013 Cathedral CFO from April 2001 to August 2014 Prior thereto, VP, Finance and CFO for Hanover Maloney Inc. ( ) Co-founder, Cathedral Energy Services Previously, VP, Operations, Cathedral Energy Services Extensive work experience in the directional drilling industry since 1983 Participated in the design of numerous industry leading technologies Michael F. Hill CFO with CET since 2014 Dave Diachok VP, Sales with CET since 2001 Prior experience in investment banking and M&A advisory roles Extensive operating experience in a number of C-suite roles in a variety of industries Strong technology business experience Over 30 years of oil and gas experience Extensive work experience in the directional drilling industry Bogdan Picioreanu VP, Technology with CET since 1999 Extensive work experience in the directional drilling industry. Prior to assuming the VP, R&D role in 2009, Bogdan was Cathedral s MWD Manager Participated in the design of numerous industry leading technologies September 2017 Investor Presentation / Cathedral Energy Services 30 SUPPLEMENTAL INFORMATION

31 Board of Directors Cathedral s board is independent, experienced, and highly focused on creating shareholder value Rod Maxwell Chairman Director since 2000 Managing Director, StoneBridge Merchant Capital Corp. Ian S. Brown Director Director since 2009 Jay Zammit Director Director since 2003 Independent Consultant Partner, Burstall Winger Zammit LLP Scott Sarjeant Director Director since 2003 Dale E. Trembley Director Director since 2015 Former Co-founder and Executive Vice President of AltaGas Former founder and CEO of Western Energy Services, founder and President of Saxon Energy Services, CFO of Precision Drilling Corp. P. Scott MacFarlane Director Director since 2013 Randy Pustanyk Director Director since 2000 See management bio See management bio September 2017 Investor Presentation / Cathedral Energy Services 31 SUPPLEMENTAL INFORMATION

32 Executive Team P. Scott MacFarlane President and CEO Scott joined Cathedral in 2001 as CFO and in 2013 he was appointed President and CEO. Prior to joining Cathedral, Scott was the VP, Finance and CFO for Hanover Maloney Inc. and previously he was Senior Manager with Price Waterhouse. Scott has a Bachelor of Commerce degree from the University of Saskatchewan and achieved his Chartered Accountant designation in Scott provides extensive experience in corporate finance and accounting practices as well as a high level of knowledge of the oil and gas industry. Michael F. Hill CFO Mike joined Cathedral as CFO in Prior to Cathedral, Michael was President of Mission Capital Inc. a financial advisory services company and he served as the Director and COO of Mosaic Capital Corporation along with having various roles as CEO, board member and investor in a number of private companies. Michael was also one of the founders of Acumen Capital Partners, a boutique investment banking firm focused on manufacturing, energy and technology companies. His career began with a B.Sc in Civil Engineering from the University of Alberta and an MBA from the University of Western Ontario. Michael brings to Cathedral over two decades of corporate finance experience, marketing and operational experience with both public and private companies. Over his career, he has been involved in corporate development, operational management, mergers and acquisitions, shareholder communications and strategic planning. Randal H. Pustanyk EVP Directional Drilling Product Lines Randy is an original founder of Cathedral Energy Services and was appointed Executive Vice President and COO in Randy held the position of Executive Vice President and COO of Cathedral since 2013 and prior to that was VP, Operations of Cathedral and its predecessor - Directional Plus Ltd., the predecessor to Cathedral. Randy holds a B.Sc Mechanical Engineering degree from the University of Calgary and is a professional engineer registered with the Association of Professional Engineers and Geoscientists of Alberta (APEGA). He also has many patents for downhole tools and has participated in the design of numerous industry leading technologies. September 2017 Investor Presentation / Cathedral Energy Services 32 SUPPLEMENTAL INFORMATION