Investor Presentation. March 2017

Transcription

1 Investor Presentation March 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 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 Investor Presentation / Cathedral Energy Services 2 COMPANY OVERVIEW

3 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 2017 Investor Presentation / Cathedral Energy Services 3 COMPANY OVERVIEW

4 Cathedral Snapshot TSX: CET (March 2017) 2016 Financial Performance 1 $ 81 Million Revenue $ 7.5 Million EBITDAS Market Statistics Recent share price $ week high / low $1.44 / $0.28 Shares outstanding (basic) 48.9 million Valuation Metrics Current market value Enterprise value 2 $54 million $50 million Tangible book value per share $1.81 TTM EV/EBITDAS multiple 6.7x Ownership Insiders 5.7% Institutions ~40% Notes: 1. Revenue and EBITDAS are from Continuing Operations 2. No Bank Debt Pro forma Cash of $4 million 2017 Investor Presentation / Cathedral Energy Services 4 COMPANY OVERVIEW

5 Directional Drilling Overview TVD < 6,000 (< 2,000m) TVD > 10,000 ( > 3,000m) TD < 10,000 (< 3,000m) TD > 20,000 ( > 6,000m) Cathedral provides the services and equipment to get the wellbore from surface to the formation of interest: Accurately Efficiently Cost effectively 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 2017 Investor Presentation / Cathedral Energy Services 5 DIRECTIONAL DRILLING OVERVIEW

6 Directional Drilling Customer Needs Yesterday Today $80 to $100 Oil Price Era Theme WAS Quickly bring on production $40 to $60 Oil Price Era Theme IS Reduce capital costs Today s New Reality plays to our advantages! We have technology, services and people that can offer customers a performance advantage Our services have demonstrated significant savings that reduce overall program costs BETTER PERFORMANCE EVERY DAY 2017 Investor Presentation / Cathedral Energy Services 6 VALUE PROPOSITION

7 Select Recent Performance Achievements 2017 Investor Presentation / Cathedral Energy Services 7 VALUE PROPOSITION

8 How We Deliver Better Performance Every Day to our Customers Proprietary MWD and Motor Platforms Interactive approach with customers to improve performance Experience Culture Training programs Health and Safety Program Financial strength, equipment fleet, geographical footprint 2017 Investor Presentation / Cathedral Energy Services 8 VALUE PROPOSITION

9 Proprietary Technology 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 2017 Investor Presentation / Cathedral Energy Services 9 VALUE PROPOSITION

10 Proprietary Technology Our directional drilling tools are designed, manufactured and tested in-house with a strong focus on quality control and quality assurance to provide our customers with equipment that is durable and reliable. ndurance Drilling Motors Patented design delivers increased torque, proven reliability and higher drilling performance than competitive motors 2017 Investor Presentation / Cathedral Energy Services 10 VALUE PROPOSITION

11 Drilling Engineering PLAN DO REVIEW IMPROVE Establish well/program objectives and expectations Develop well plan and BHA design configurations using experience in area supported by modelling software 24 hour real-time monitoring and continuous analysis of drilling parameters with recommendations to improve performance Post well drilling performance report and recommended improvements for next well/program 2017 Investor Presentation / Cathedral Energy Services 11 VALUE PROPOSITION

12 Experienced People who Work Smart Culture Alignment with our Guiding Principles Programs Recruitment Training Safety >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 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 2017 Investor Presentation / Cathedral Energy Services 12 VALUE PROPOSITION

13 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 2017 Investor Presentation / Cathedral Energy Services 13 VALUE PROPOSITION

14 Past 2 Years - Cathedral Business Environment US Rig Count Down 70% 14,000 Pricing Squeezed 35% DD Revenue Day Rates WTI Price Decline 60% US Active Rig Count 12,000 10,000 8,000 6,000 35% Active Rigs % 4,000 2, Q Q Q Q Q Q Q Q Q4 Cdn drill (CND) US drill (USD) 60% 0 Canadian Active Rig Count Active Rigs % 3,000 2,500 2,000 1,500 DD Activity Days 75% 1, CDN Rig Count Down 60% Q Q Q Q Q Q Q Q Q4 Canada US Activity Days Down 75% 2017 Investor Presentation / Cathedral Energy Services REVIEW

15 2015/2016 Corporate Accomplishments Significant cost reductions and efficiencies achieved in our business Wind-up of Venezuelan operations (finalized in Feb 2016) Settlement of outstanding legal contingent liabilities Seven credit facility amendments and restructuring our lending syndicate to include EDC Sale of our Flowback and Production Testing assets (finalized Jan 2017) Focus on strategic initiatives in all areas of our business to position us to capitalize on an industry turnaround 2017 Investor Presentation / Cathedral Energy Services REVIEW

16 Market Share Accomplishments USA Directional Market Share as % of Active Rigs 2014 to 2016 Doubled our market share in the U.S. Percentage of Market Week Maintained market share in Canada despite a contracting and very competitive Percentage of Market Canadian Directional Market Share as % of Active Rigs 2014 to 2016 market Week Investor Presentation / Cathedral Energy Services REVIEW

17 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 $ 25.7 Million EBITDAS $ 53 Million NET DEBT Financial Performance $ 106 Million Revenue $ 5.3 Million EBITDAS $ 33 Million NET DEBT 2016 Financial Performance $ 81 Million Revenue $ 7.5 Million EBITDAS $ 0 Million DEBT Pro forma F&PT sale and Financing 3 Notes: 1. Revenue and EBITDAS are from Continuing Operations 2. Net Debt includes third party liabilities excluding LCs net of Cash 3. $4 million of cash pro-forma after effect of sale and financing at December 31, Investor Presentation / Cathedral Energy Services REVIEW

18 2016 Revenue Sources Canada % % U.S % % Notes: 1. Revenue in CAD 2017 Investor Presentation / Cathedral Energy Services REVIEW

19 2017 Market Outlook WTI (±$5) $75 $50 $45 $35 $25 Strong industry activity conditions Stronger customers very active Uncertainty zone - highly basin economic dependent Ugly zone??? Expect continuing oil price volatility Tight labor availability as many people have permanently left the industry as a result of the prolonged downturn Heightened pressure on costs in all areas of our business Potential price increases from E&P companies as service industry capacity is constrained 2017 Investor Presentation / Cathedral Energy Services OUTLOOK

20 2017 Strategic Priorities Fiscal Management - Continue to balance our cost structure and revenue prospects to ensure we maintain a strong balance sheet and position the company to have sustainable cash flow and opportunities for future growth OUR BRAIN TRUST Retaining Our Key Employees Ensure we can attract, retain and reward a team of talented, driven and accountable people to enable us to grow our business Operational Excellence - Continue to pursue operational improvements to ensure we deploy our equipment and resources effectively to deliver Better Performance Every Day to our customers Sales Effectiveness Improve our ability to target the key clients in each of the basins we operate to generate profitable revenue and grow our market share Investor Presentation / Cathedral Energy Services OUTLOOK

21 Strategic Initiatives Key Financial Objectives Profitable Revenue Growth Improve EBITDA Margins Improve Return on Assets Enhanced sales and marketing Improved internal financial reporting and job costing Continue to develop drilling optimization capability Working with Clients to optimize drilling performance Implementation of product line function Continued technology enhancements Strategic industry partnerships Expanding product offerings Motor rental Drilling optimization Reduce personnel on site Upgrading people, planning and processes operational excellence Organizational alignment Continue to live our: Work Smart Live Well risk management philosophy 2017 Investor Presentation / Cathedral Energy Services OUTLOOK

22 2016 Fourth Quarter Results 2016 Q4 Financial Performance 1 $ 0 Million $ 28 Million Revenue $ 4.4 Million EBITDAS BANK DEBT Pro forma F&PT sale and Financing 2 Notes: 1. Revenue and EBITDAS are from Continuing Operations 2. $4 million of cash pro-forma after effect of sale and financing at December 31, 2016 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 Q4 Canada US Cdn drill (CND) US drill (USD) 2017 Investor Presentation / Cathedral Energy Services 22 QUARTERLY REVIEW

23 January 2017 Financing $14.1 million in gross proceeds $12.9 million bought deal of 11.5 million shares Oversubscribed and upsized $1.25 million insider private placement of 1.12 million shares $1.12 offering price Use of proceeds: Initially repay debt Equipment upgrades and CapEx to increase job capacity Fund working capital associated with increased activity 2017 Investor Presentation / Cathedral Energy Services 23 QUARTERLY REVIEW

24 Investment Highlights Cathedral has high upside leverage to improving industry fundamentals Technological leader with distinctive competitive advantages Continued focus on improving and growing the business Strong balance sheet facilitates future growth opportunities 2015/2016 achievements demonstrate management capabilities 2017 Investor Presentation / Cathedral Energy Services 24 INVESTMENT HIGHLIGHTS

25 By the Numbers +$ $4 MILLION $7.5 MILLION $4.4 MILLION Cash flow positive throughout downturn Cash - pro forma YE giving effect to FP&T sale and financing 2016 EBITDAS from continuing operations 2016 Q4 EBITDAS from continuing operations 48.9 MILLION 72% $1.81 $1.10 Shares outstanding 2016 Revenues from U.S. in $CAD Proforma NTAV following sale and financing Current share price range 2017 Investor Presentation / Cathedral Energy Services 25 INVESTMENT HIGHLIGHTS

26 Thank you