TSX:CFW. CALFRAC WELL SERVICES LTD. Investor Presentation January 2017

Transcription

1 TSX:CFW CALFRAC WELL SERVICES LTD. Investor Presentation January 2017

2 Forward Looking Statement Certain information contained within this presentation and statements made in conjunction with this presentation constitute forward-looking statements. These statements relate to future events or the future performance of the Company. All statements other than statements of historical fact may be forward-looking statements. Forward-looking statements are often, but not always, identified by the use of words such as seek, anticipate, plan, continue, estimate, expect, may, will, project, predict, potential, targeting, intend, could, might, should, believe, forecast, can and similar expressions. In particular, forward-looking statements in this presentation include, but are not limited to, statements with respect to future capital expenditures, future financial resources, anticipated equipment utilization levels, future oil and gas well activity, projections of market prices and costs, outcomes of specific events and trends in the oil and gas industry. The forward-looking statements within this presentation and made in conjunction with this presentation are derived from certain assumptions and analyses made by the Company based on its experience and perception of historical trends, current conditions, expected future developments and other factors that it believes are appropriate in the circumstances, including assumptions and analyses relating to: the economic and political environment in which the Company operates; the Company s expectations for its customers capital budgets and geographical areas of focus; the effect unconventional oil and gas projects have had on supply and demand fundamentals for oil and natural gas; the Company s existing contracts and the status of current negotiations with key customers and suppliers; the effectiveness of cost reduction measures instituted by the Company; and the likelihood that the current tax and regulatory regime will remain substantially unchanged. Forward-looking statements are subject to a number of known and unknown risks and uncertainties that could cause actual results to differ materially from the Company s expectations. Such risks and uncertainties include the items discussed under the heading Business Risks in the Company s 2015 Annual Report and under the heading Risk Factors in the Company s most recently filed Annual Information Form. Consequently, all of the forward-looking statements contained within this presentation and made in conjunction with this presentation are qualified by these cautionary statements and there can be no assurance that actual results or events anticipated by the Company will be realized or that they will have the expected consequences or effects on the Company or its business or operations. Other than as required by applicable securities laws, the Company assumes no obligation to update publicly any such forward-looking statements, whether as a result of new information, future events or otherwise. Calfrac Well Services Ltd. 2

3 Company Snapshot TSX Stock Symbol: CFW Share Price* $ Day Average Volume* 1,930,000 Market Capitalization* $687.3 million Enterprise Value* $1.5 billion Shares Outstanding* million Insider Ownership ~25% * As at 16:00:00 ET 1/6/2017 Calfrac Well Services Ltd. 3

4 Number of Onshore Rigs Number of Offshore Rigs Number of Rigs Number of Active WCSB Land Rigs Active Rig Counts: North America & International 2,000 1,800 1,600 1,400 1,200 1, /3/2014 7/3/2014 1/3/2015 7/3/2015 1/3/2016 7/3/2016 1/3/ Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec Lower 48 Active Land Rig Count 1,100 1,050 1, U.S. land rig count up ~260 rigs from trough - WCSB active rig count strengthening - International rig count remains down ~30% from peak International Land Rig Count International Offshore Rig Count Source: Baker Hughes Calfrac Well Services Ltd. 4

5 Full Service Pressure Pumping Canada Fleet: 410,000 Horsepower 13 Coiled Tubing Crews As at September 30, 2016 U.S. Fleet: 611,000 Horsepower 11 Cementing Crews 5 Coiled Tubing Crews Russia Fleet: 70,000 Horsepower 7 Coiled Tubing Crews Latin America Fleet: 131,000 Horsepower 14 Cementing Crews 7 Coiled Tubing Crews Calfrac Well Services Ltd. 5

6 Our License to Operate HSE QUALITY TECHNOLOGY SUPPLY CHAIN Plan Do Assess Adjust Monitor Refine Execute Improve Research Develop Test Refine Evaluate Negotiate Finalize Implement Calfrac employee on a Canadian hydraulic fracturing job. Calfrac Well Services Photo Calfrac sand terminal in Whitecourt, Alberta. Calfrac Well Services Photo Calfrac Well Services Ltd. 6

7 Canada Market Update Calfrac Market Positioning Positioned in key areas of frac demand Montney, Duvernay, Deep Basin, Cardium and Viking Diversified customer base gives us exposure to all key areas of the worldclass Montney resource play Calfrac has highest market share in Montney Pricing & Utilization Modest pricing increases in Q4/16 More meaningful improvement expected in Q1/17 ~50% of horsepower parked 6 of 13 coil units idled Market Trends Stages per well increasing Frac spacing tightening Operators focusing on highest quality plays and assets Larger pads Greater proportion of 24-hour operations Market Outlook Full utilization of active equipment expected through to spring breakup Market for available horsepower expected to remain tight in Q1/17 Visibility for Q2/17 improving Calfrac Well Services Ltd. 7

8 United States Market Update Calfrac Market Positioning Focus on customers that are financially strong and intend to remain active in key plays across the U.S. Continuing to broaden customer base Positioned in key areas of frac demand: Bakken, Marcellus, Rockies, Utica, Eagle Ford Pricing & Utilization Pricing gaining momentum Increase expected in Q1/17 ~60% of horsepower parked Temporarily suspended coiled tubing and cementing operations Market Trends Stages per well increasing Frac spacing tightening Larger pads Majority of work 24-hour operations Market Outlook Majority of active frac spreads locked up for 2017 Incremental work awarded to Calfrac would require reactivation of equipment Increased opportunities in the Bakken and Rockies Calfrac Well Services Ltd. 8

9 Argentina Market Update Calfrac Market Positioning One of the largest pressure pumping companies in Argentina Customer expansion to IOCs and domestic players Contracts based in USD Awarded two year frac contract for PAE in the Vaca Muerta shale play Leader in annular fracturing Market Outlook Rig count down ~30% year-over-year Shift towards gas-focused activity Union strikes negatively impacting activity Country focused on reducing reliance on imported energy Medium-to-longer term upside potential following reforms by new President Macri Argentina Fleet: 108,250 Horsepower 13 Cementing Crews 6 Coiled Tubing Crews Calfrac Well Services Ltd. 9

10 Russia Market Update Calfrac Market Positioning Horizontal fracturing in conventional reservoirs is a significant amount of Calfrac s activity Rouble devaluation has negatively impacted reported financial results Market Outlook 2017 activity and pricing expected to be largely consistent with 2016 Change in customer mix Introduction of multi-stage annular fracture treatments is a market differentiator Russia Fracturing Crew (2015). Calfrac Well Services Photo Calfrac Well Services Ltd. 10

11 NAVIGATING THROUGH THE DOWNTURN Calfrac Well Services Ltd. 11

12 Margin Erosion To Below Breakeven Source: Company Reports, Morgan Stanley Calfrac Well Services Ltd. 12

13 North American Pressure Pumping Supply Number of competitors decreasing through both bankruptcies and consolidation Supply of horsepower decreasing as a result of cannibalization of equipment, lack of R&M and fleet retirements Fracturing Operation (2015) Calfrac Well Services Photo Expect ~5-6 million horsepower to permanently exit the U.S. pumping market (~30% of peak supply) Expect Canadian supply to decrease by ~200k HHP Calfrac Well Services Ltd. 13

14 Positioned For Recovery Strong management team and Board of Directors that have been through multiple downturns Optimized cost structure and developed operational efficiencies Maintained core customer and supplier relationships Strong existing employee base and recruiting capabilities Well maintained equipment initial fleet reactivations require minimal time and cost License To Operate upheld through downturn Sustained focus on technology developed more cost effective solutions for our customers [CalVisc, diverter systems, etc.] Proceeds from equity financing, second lien term loan and undrawn credit facilities provide the liquidity needed to fund incremental working capital requirements associated with a recovery Calfrac Well Services Ltd. 14

15 Proppant per well (MM lbs) Service Intensity Continues To Increase Permian Eagle Ford Bakken Mid-con Niobrara Marcellus Utica Source: Frac Database, Peters&Co., Rystad Energy, Morgan Stanley Calfrac Well Services Ltd. 15

16 FINANCIAL HIGHLIGHTS Calfrac Well Services Ltd. 16

17 The Balance Sheet Term Debt US$600 mm with an interest rate of 7.5% Matures in 2020 Second Lien Term Loan $200 mm with an interest rate of 9% Matures in 2020 Credit Facilities Loan facility $300 mm (largely undrawn) Matures in 2018 Recent Equity Financing Raised $60 million, proceeds used to fund second equity cure ($25 million) and provide additional liquidity Capital Program 2016 capital budget set at $40 million Includes $30 mm of carryover Neuquén, Argentina Frac Operation (2014). Calfrac Well Services Photo Calfrac Well Services Ltd. 17