Corporate Presentation

Transcription

1 IT'S ABOUT PERFORMANCE Corporate Presentation November 2015 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 successfully implement its strategic initiatives and whether such strategic initiatives will yield the expected benefits, the availability and price of energy commodities, regulatory environment, competitive factors in the natural gas transportation and natural gas liquids extraction industries and the prevailing economic conditions in North America. 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 Why Invest In Trinidad Trinidad has: High quality fleet Diversified operations Solid plan for the downturn; well positioned for the rebound International expansion opportunities Improved liquidity IT'S ABOUT PERFORMANCE 3

4 Operations Overview Canada 82 rigs US 71 rigs 2 barges Mexico* 6 rigs Saudi* 4 rigs UAE 1 rig IT'S ABOUT PERFORMANCE Rig Manufacturing Innovation & Design * Rigs operating under the JV included at 100 percent; does not include DCM service rigs IT'S ABOUT PERFORMANCE 4

5 week 1 week 4 week 7 week 10 week 13 week 16 week 19 week 22 week 25 week 28 week 31 week 34 week 37 week 40 week 43 week 46 week 49 week 52 week 01 week 04 week 07 week 10 week 13 week 16 week 19 week 22 week 25 week 28 week 31 week 34 week 37 week 40 week 43 week 46 week 49 week 52 North American Industry Update North American activity below previous lows Strong competition and downward pressure on dayrates Cost structure being re-set across the industry, 1000 Canadian Industry Active Rig Count 5 year range US Industry Active Rig Count 5 year range Source: Bloomberg Baker Hughes Oil and Gas Rotary Rig Count IT'S ABOUT PERFORMANCE 5

6 Trinidad Update

7 CanElson Acquisition Udate Overwhelming approval from shareholders Total consideration paid $345 million ($50m cash, 88.7m shares) Integration to be largely complete by year end Larger, more diverse fleet with industry-leading activity Savings through increased scale and operating efficiencies Lower leverage metrics Increased market liquidity, improved cost of capital and future access to capital IT'S ABOUT PERFORMANCE 7

8 Trinidad s Canadian Operations Key Operating Areas Liard Montney Duvernay Cardium Oil sands Lloyd Heavy Oil AB Bakken Frobisher Active in key plays Consistent industry-leading activity Customers waiting to commit to rigs Activity low by historical levels IT'S ABOUT PERFORMANCE 8

9 Trinidad s United States Operations Key Operating Areas Bakken Niobrara US operations less seasonal Dayrates and activity remain under pressure Customers waiting to commit to rigs Mississippi Lime Permian Barnett Haynesville Eagle Ford Eaglebine Tuscaloosa IT'S ABOUT PERFORMANCE 9

10 HAL Joint Venture Saudi Four rigs currently operating in Ghawar field first full year of operations Costs lowering, drilling efficiencies improving Saudi activity levels stronger than North America 120 Saudi Industry Average Active Rig Count Source Baker Hughes International Rig Counts IT'S ABOUT PERFORMANCE 10

11 HAL Joint Venture Mexico Four rigs working; performance exceeding expectations Largest, most technically advanced rigs in country 100 Mexico Average Active Rig Count Source Baker Hughes International Rig Counts IT'S ABOUT PERFORMANCE 11

12 Future International Growth Strong performance leads to opportunities: Replace existing rigs as contracts expire Supply high spec rigs for new projects new builds or existing idle equipment Ability to bring back the cash from the joint venture Q adjusted EBITDA of $8 million Q accumulative adjusted EBITDA of $21 million Growth opportunities through the joint venture and independently IT'S ABOUT PERFORMANCE 12

13 Short Term Plan for the Downturn

14 Consistent Industry Outperformance Trinidad s rigs are more active 70% 60% Canadian Utilization Rates Trinidad s Canadian Utilization TDG US US Average Active Rig Count Trinidad s US Average Active Rig Count US 2,800 2,400 50% ,000 40% ,600 30% 20% Industry Average Industry Average Active Rig Count 1, % % 0 0 Source Canadian Association of Oil Well Drilling Contractors Source Bloomberg US Baker Hughes Rig Counts, Company Reports excludes rigs on Standby IT'S ABOUT PERFORMANCE 14

15 Deep and Modern Fleet In-demand rigs generate higher dayrates and margins In Demand Specifications Rig Fleet Horizontal Depth 23% 67% 10% 0-11,999 ft 7% 22% 12,000-17,999 ft 18,000+ ft 70% Rig Fleet Age Tier 1 - High Hookload, Top Drive, Large Mud Pumps 23% < 5 years Tier 2 - Must have two of the three (High Hookload, Top Drive, Large Mud Pumps) Tier 3 - Mechanical Rigs, Lower HP, Lower Hookload 51% 26% 5-10 years > 10 years Land drilling rigs only IT'S ABOUT PERFORMANCE 15

16 Reduced Cost Structure Synergies and cost cutting measures approximately $30 mm, original estimate of $10 mm Highly variable cost structure Field labour fluctuates with activity Total headcount down approximately 50%, combined with wage rollbacks 2015 G&A $60 million, down 30% from projected 2016 G&A expected to be $50 - $55 million Reduced capital budget IT'S ABOUT PERFORMANCE 16

17 Conservative Capital Program 2015 Capital Budget $185 million (1)(2) Complete US new builds Completed Mexico TDI JV rigs Select upgrades, maintenance capital, and capital inventory 2015 Capital Program ($mm) $34 $60 $39 $12 $40 New Builds Upgrades Capital Inventory Maintenance (1) Joint Venture 2016 capital budget expected to be minimal (1) Joint Venture includes Trinidad s 60% portion of TDI JV capital IT'S ABOUT PERFORMANCE 17 (2) Includes capital budget of $10 mm from CanElson business combination

18 Contract Coverage Still Strong Approx. 30% of fleet on long-term contract We only build rigs under long-term contracts Approx. 1.5 years average term remaining IT'S ABOUT PERFORMANCE 18

19 Improved Liquidity Funds available on credit lines (C$115m/US$200m) Q Debt/EBITDA at 2.37 (1) times Outstanding debt largely non-covenant debt CanElson s trailing 12 months included in covenant calculation Covenant relief for Q and Q of 0.5 times (to 4.5 times as part of the acquisition) Ability to bring cumulative JV EBITDA back (1) Includes accumulated JV EBITDA IT'S ABOUT PERFORMANCE 19

20 Long Term Strategy

21 Future Growth Opportunities When market conditions improve Trinidad has: Expertise, customer base and track record to capture North American market share A good vehicle for international growth through its joint venture Independent international opportunities IT'S ABOUT PERFORMANCE 21

22 Investing in People and Safety Skilled crews drive improved performance and customer demand Experienced, well-trained people our biggest asset Competency training program implemented Industry leading safety processes Retain experienced people through the downturn IT'S ABOUT PERFORMANCE 22

23 Why Invest In Trinidad Trinidad has: High quality fleet Diversified operations Solid plan for the downturn; well positioned for the rebound International expansion opportunities Improved liquidity IT'S ABOUT PERFORMANCE 23

24 APPENDIX IT'S ABOUT PERFORMANCE IT'S ABOUT PERFORMANCE 24

25 Third Quarter Financial Highlights (3) Three months ended September 30, Nine months ended September 30, ($ thousands except share and per share data) % Change % Change Revenue 124, ,538 (49.2) 413, ,988 (37.8) Revenue, net of third party costs 117, ,985 (49.0) 393, ,647 (36.6) Operating income (1) 52,009 80,536 (35.4) 166, ,333 (24.9) Operating income percentage (1) 41.8% 32.9% % 33.3% 20.7 Operating income - net percentage (1) 43.9% 34.7% % 35.4% 18.4 EBITDA (1) (99,112) 67,207 (247.5) (19,902) 153,907 (112.9) Per share (diluted) (2) (0.54) 0.48 (212.5) (0.13) 1.11 (111.7) Adjusted EBITDA (1) 44,953 64,619 (30.4) 139, ,706 (20.1) Per share (diluted) (2) (46.8) (26.2) Cash provided by operations (5,640) 60,143 (109.4) 108, ,662 (27.7) Per share (basic / diluted) (2) (0.03) 0.44 (106.8) (33.0) Funds provided by operations (1) 16,392 46,554 (64.8) 77, ,696 (43.6) Per share (basic / diluted) (2) (73.5) (47.5) Net (loss) earnings (87,618) 19,156 (557.4) (76,955) 20,103 (482.8) Per share (basic / diluted) (2) (0.48) 0.14 (442.9) (0.51) 0.15 (440.0) Adjusted net earnings (1) 1,014 14,602 (93.1) 18,750 36,791 (49.0) Per share (basic / diluted) (2) (90.9) (53.8) Capital expenditures 21, ,453 (78.5) 113, ,246 (44.1) Dividends declared 11,104 6, ,447 20, Shares outstanding - basic (weighted average) (2) 182,574, ,195, ,077, ,168, Shares outstanding - diluted (weighted average) (2) 182,574, ,664, ,077, ,854, As at September 30, December 31, ($ thousands except percentage data) % Change Total assets 2,372,949 1,941, Total long-term liabilities 811, , (1) Readers are cautioned that Operating income, Operating income percentage, Operating income - net percentage, EBITDA, Adjusted EBITDA, Funds provided by operations, Adjusted net (loss) earnings and the related per share information do not have standardized meanings prescribed by IFRS see Non-GAAP Measures and Additional GAAP Measures. (2) Basic shares include the weighted average number of shares outstanding over the period. Diluted shares include the weighted average number of shares outstanding over the period and the dilutive impact, if any, of the number of shares issuable pursuant to the Incentive Option Plan. (3) Excludes CanElson IT'S ABOUT PERFORMANCE 25

26 Debt Overview Debt/EBITDA at 2.65 times at Q3 2015, 2.37 (1) including accumulative JV EBITDA Debt covenants Debt/EBITDA max of 4.5 times (2) Senior Debt/EBITDA max of 3.0 times EBITDA/Cash Interest Expense min of 2.75 times Credit Facility Available Outstanding Q Expiry Revolver C$200 m US$200 m C$84.9 m US$0 m Dec 2018 US$ Senior Notes (7. 785%) US$450 m US$450 m Jan 2019 Total Long-term Debt Cash on Hand C$682 m C$24.7 m (1) Includes accumulated JV EBITDA (2) Relief for two quarters following the closing of the acquisition IT'S ABOUT PERFORMANCE 26

27 Trinidad s International Operations Key Operating Areas Mexico Saudi UAE Joint venture in Saudi Arabia and Mexico with Halliburton (1) (60/40 split) Joint venture with Mexico with DCM (50/50 split) Less affected by volatile commodity prices (1) Halliburton Project Management with 40% interest IT'S ABOUT PERFORMANCE 27

28 Historical Dayrates (1) Dayrates ($CDN) $35,000 Canada Rate Per Operating Day vs Operating Margin 50% Dayrates ($US) $30,000 US Rate Per Operating Day vs Operating Margin 60% $30,000 $25,000 $20,000 $15,000 $10,000 $5,000 40% 30% 20% 10% $25,000 $20,000 $15,000 $10,000 $5,000 50% 40% 30% 20% 10% $0 0% $0 0% Rate per operating day Operating margin Rate per operating day Operating margin Dayrates ($US) $60,000 $50,000 $40,000 $30,000 $20,000 $10,000 $0 Halliburton JV Rate Per Operating Day vs Operating Margin 50% 40% 30% 20% 10% 0% (1) Excludes CanElson Rate per operating day Operating margin IT'S ABOUT PERFORMANCE 28

29 Combined Fleet Expands Diversity Liard Montney Duvernay Deep Basin Cardium AB Bakken CANADA Oil sands Lloyd Heavy Oil Bakken Niobrara MIDDLE EAST TDG Operating Area Permian Mississippi Lime Barnett Woodford Haynesville Tuscaloosa Eagle Bine Eagle Ford MEXICO US Canada US & Int'l JV's Total Trinidad Rigs CanElson Rigs Total JV and partnership rigs included at 100%, excludes barge and service rigs Mutual Operating Area IT'S ABOUT PERFORMANCE 29

30 A Continued Focus on Safety TRIF 4.00 Total Recordable Incident Rates TRIF Total Recordable Injury Frequency, 12 month corporate rolling average Starting August 2015 Pro forma IT'S ABOUT PERFORMANCE 30

31 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 EBITDA (as defined above) prior to the effect of foreign exchange, sharebased payment expense, impairment expenses and the sale of assets. Adjusted EBITDA also takes into account the Company s portion of the principal activities of the joint venture arrangement by removing the loss (gain) from investment in joint venture and including EBITDA from investment in joint venture. Adjusted EBITDA is not intended to represent net earnings as calculated in accordance with IFRS. Adjusted EBITDA provides an indication of the results generated by the Company s principal business activities prior to how these activities are financed, assets are depreciated, amortized and impaired, the impact of foreign exchange, how the results are taxed in various jurisdictions and effects of share-based payment expenses. Total Debt to Bank EBITDA is defined as the consolidated balance of long-term debt, which includes the Senior Debt, Senior Notes Payable and dividends payable at quarter end, to consolidated Bank EBITDA for the TTM. Bank EBITDA used in this financial ratio is calculated as EBITDA plus impairment expense, loss (gain) on sale of property and equipment, loss (gain) from investment in joint venture, share-based payment expense and unrealized foreign exchange. Drilling days is defined as rig days between spud to rig release. Operating days is defined as moving days (move in, rig up and tear out) plus drilling days (spud to rig release). Utilization rate - drilling day is defined as drilling days divided by total available rig days. Utilization rate - operating day is defined as operating days (drilling days plus moving 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). Payout level is defined as annual dividends declared divided by annual funds provided by operations. Cash-on-cash yield is defined as annual dividends declared per share divided by the current share price. Free Cash Flow is defined as annual funds provided by operations minus the sum of annual dividends declared and annual capital expenditures. IT'S ABOUT PERFORMANCE 31

32 Add l GAAP Measures Definitions The Company uses certain additional GAAP financial measures within the financial statements and this document that are not defined terms under IFRS to assess performance. Management believes that these measures provide useful supplemental information to investors, and provide the reader a more accurate reflection of our industry. These financial measures are computed on a consistent basis for each reporting period and include Funds provided by operations, Operating income and Operating income - net percentage or Operating margin. These additional GAAP measures are identified and defined as follows: Funds provided by operations is used by management and investors to analyze the funds generated by Trinidad s principal business activities prior to consideration of working capital, which is primarily made up of highly liquid balances. This balance is reported in the Consolidated Statements of Cash Flows included in the cash provided by operating activities section. Operating income is used by management and investors to analyze overall and segmented operating performance. Operating income is not intended to represent an alternative to net earnings or other measures of financial performance calculated in accordance with IFRS. Operating income is calculated from the consolidated statements of operations and comprehensive income (loss) and from the segmented information contained in the notes to the consolidated financial statements. Operating income is defined as revenue less operating expenses. Operating income - net percentage or operating margin is used by management and investors to analyze overall and segmented operating performance excluding third party recovery and third party costs, as well as inter-segment revenue and inter-segment operating costs, as these revenues and expenses do not have an effect on consolidated net earnings. Operating income - net percentage is calculated from the consolidated statements of operations and comprehensive income (loss) and from the segmented information in the notes to the consolidated financial statements. Operating income - net percentage is defined as operating income less third party G&A expenses divided by revenue net of operating and G&A third party costs. IT'S ABOUT PERFORMANCE 32

33 1000, Avenue S.W. Calgary, AB, Canada T2P 1G1 T IT'S ABOUT PERFORMANCE investors@trinidaddrilling.com IT'S ABOUT PERFORMANCE 33