Project Lynx April 26, 2017 AGM Corporate Update

Transcription

1 April 26, 2017Project Lynx AGM Corporate Update

2 Forward Looking FORWARD-LOOKING INFORMATION This presentation may contain certain statements or disclosures relating to Xtreme Drilling Corp. ( Xtreme ) that are based on the expectations of its management as well as assumptions made by and information currently available to Xtreme which may constitute forward looking information under applicable securities laws. All such statements and disclosures, other than those of historical fact, which address activities, events, outcomes, results or developments that Xtreme anticipates or expects may, or will occur in the future (in whole or in part) should be considered forward-looking information. In some cases, forward looking information can be identified by terms such as forecast, future, may, will, expect, anticipate, believe, potential, enable, plan, continue, contemplate, pro -forma, or other comparable terminology. Forward looking information contained in this presentation includes, among other things, the 2017 Budgeted Capital Expenditures, market trends, and utilization and customer demand. Completing those anticipated expenditures assumes that Xtreme s cash flow will be sufficient and is subject to known and unknown risks, uncertainties and other factors that could influence Xtreme s actual results and cause actual results to differ materially from those stated, anticipated or implied in the forward looking information. As such, readers are cautioned not to place undue reliance on the forward looking information, as no assurance can be provided as to future results, levels of activity or achievements. The risks, uncertainties, material assumptions and other factors that could affect actual results are discussed in more detail in Xtreme s Annual Information Form and other documents available at and include risks associated with the oil and gas industry and demand for drilling rigs. Past performance of Xtreme referred to in this presentation is shown for illustrative purposes only, does not guarantee future results of Xtreme and is not meant to forecast, imply or guarantee the future performance of Xtreme, which will vary. The forward looking information is made as of the date of this presentation and Xtreme does not undertake any obligation to update or revise any of the included forward- looking information, whether as a result of new information, future events or otherwise, except as required by applicable law. The forward looking information contained in this presentation is expressly qualified by this cautionary statement. These reports are available at: 2

3 Corporate Snapshot TICKER: XDC (Toronto Stock Exchange) Market Cap¹: $202mm 3 Month Average Daily Volume: 91,700 Shares Outstanding: 85.1mm Public Float: 42mm Directors & Management: 4% Greater than 10% Shareholders: 45% Total Assets²: $365.7 mm Employees²: 199 United States Canada Williston Basin / Bakken 2 Drilling Rigs DJ Basin/Niobrara 12 Drilling Rigs Anadarko Basin 2 Drilling Rigs Headquarters: Houston, Texas and Calgary, Alberta Alberta 2 Drilling Rigs Website: Saskatchwan 1 Drilling Rig 1. Market Cap as of 4/25/17 2. As of 12/31/16 Territory Key Headquarters Drilling Rig Support Facility Current / Prior Resource Play Operations 3

4 2016 Corporate Review Completed the sale of the XSR coiled tubing segment to Schlumberger for $205 million. Decrease debt by $90 million over the course of year and ended 2016 with $115 million cash balance. Guided the Company through significant industry downturn with trough utilization on drilling fleet at 19% in the second quarter of Implemented XDR 500 rig optimization program to increase capacity and competiveness of ten rig XDR 500 fleet. Developed the design for the next generation Super Spec rig 850XE. 4

5 Xtreme: Historic Margin and Utilization Xtreme s fleet generated significant operating margin in the periods prior to the recent sale of the coiled tubing division. Q represented the low point in XDR utilization at 19% and increased to 25% by year end Utilization will pick up before pricing/margin expansion is realized. Pursuing utilization opportunities where our assets are fit-for-purpose and have bifurcated our fleet for target marketing: 850XE: Upgrade of XDR 400 to marketing leading design with focus on efficiency and automation. Targeted for major resource plays in the United States. XDR500: upgrades and optimization to be primarily completed by Q XDR 200/300: International markets provide the opportunity for superior economic returns based on the ability to earn a technology premium. Actively looking at opportunities to sell these rigs as well. $30 $25 $20 $15 $10 $5 $0 92% 92% 86% 75% 73% $21.4 $ % $ % $12.9 $12.9 $ % $11.9 $7.7 25% 25% 19% 22% $5.0 $2.4 $0.3 $1.1 Q1 '14 Q2 '14 Q3 '14 Q4 '14 Q1 '15 Q2 '15 Q3 '15 Q4 '15 Q1 '16 Q2 '16 Q3 '16 Q4 '16 100% 80% 60% 40% 20% 0% ¹ In 000,000 s of $CAD XDR Qtrly Operating Margin¹ (left axis) Fleet Qtrly Utilization (right axis) 5

6 US Land Market Update Rig Data US rig count has increased to 819 active rigs from bottom in Q of 350 active rigs. Legacy rig replacement cycle will continue as operators look to high grade fleet. 65% of active rigs now AC as compared to 39% two years prior. Approximately 850 AC rigs in the US with 700 being 1,500hp or greater with approximately 200 still idle. Need for Super Spec rigs driven by operators continually extending laterals and pumping requirements. Larger hole diameter and lateral requires greater pumping capacity; both volume and pressure Multiple wells drilled from single pad will continue to increase Continuous quest to improve efficiency/reduce NPT. Anticipate accelerating pricing differential between high spec AC rigs and other capacity drilling rigs in ,000 1,800 1,600 1,400 1,200 Q Rig Count: 1,880 Active US Land Drilling Rig Count by Type 9/30/2014 to Current 1, Current Rig Count: Q Rig Count: Q Q Q Q Q Q Q Q Q Q Q Recent Source: RigData AC Rigs (Tier 1: <1,500hp) AC Rigs (Tier 1: 1,500hp<) SCR Rigs (Tier 2) Mechanical Rigs (Tier 3) 6

7 Xtreme Today Clear Vision: Focused US drilling contractor building on legacy of technological innovation. Operations centered in leading US resource plays and Canada with experience working in Mexico, Saudi Arabia and India. 100% AC electric fleet is one of the youngest high specification fleets in the land drilling industry average age of 5.5 years. Technological Innovation: Meeting marketplace demand and remaining at leading edge of rig technology. Informed, customer focused development based on current market demand. Optimized drilling and mobilization efficiencies through 100% AC driven rigs. Optimization strategy to selectively upgrade rigs in order to meet latest customer demands. Xtreme designed, engineered and assembled all 21 of the rigs in the fleet. Balance Sheet Strength: Flexibility to optimize fleet as well as evaluate growth opportunities. Year end cash balance of C$115mm and zero debt 2017 rig upgrade and optimization budget anticipated to be C$60mm to C$65mm. Focused on delivering value to shareholders through share repurchase program. 7

8 Xtreme Strategy: XDR 500 Optimization Developed strategy in 2016 to optimize the XDR 500 rigs through upgrades to fluid system, topdrives and walking system where necessary. Spent approximately $12mm in 2016 and will spend an additional $5mm in 2017 capital budget. Optimized nine of ten XDR 500 fleet to make ideal for US Resource plays: 7,500 PSI Mud system w/ 3 rd pump New drilling motor design allows Higher Pressures Drilling with higher pressure increase s ROP, reduced pressure loss at bit and increase in hydraulics. Mono-bore well designs at longer lengths require a higher ECD for hole cleaning.(ecd= Equivalent Circulating Density) Higher Torque Capacity on Top Drive Well design (Mono-bores ),with no intermediate casing set, increases torque through build section. Larger Hole size, 8-3/4 increases torque Aggressive PDC bit technology Drill string 5 make up torque with friction factor of 1.1 =38,000ft / lbs on NC-50 Connection, 5 DS connection as high as 59,000ft/lbs As of April 2017 eight of ten XDR 500 rigs are contracted which is up from three of ten at the same time in

9 Xtreme Strategy: Innovation (850XE) The 850 XE ( Xtreme Efficiency ) will be the fastest-moving Super Spec rig in the marketplace outfitted with industry-first componentry that drives Xtreme Efficiency. 850XE will reinforce Xtreme s ability to innovate in a capital disciplined manner. The three upgrades will be performed on existing lower capacity rigs (XDR 400) at a capital cost of $12.5mm USD per rig. In addition to 850,000 lb. hook load capacity (vs. the 750,000 lb. Super Spec standard), these rigs will improve efficiency by up to 20% with new technology including: Reel Rig Power distribution for faster rig in/down time and less cabling Offline Stand Builder (patent pending) allows continuous pipe fitting during drilling process X-Pad Optimizer (patent pending) X/Y walking system powered by GPS Determines most efficient multi-well pad layout in collaboration with operator Remote condition monitoring of all key components Over 700 sensors provide live data to Xtreme and customers Integrates with X-Drill software to enable real-time adjustments Informs predictive maintenance program to prevent NPT Catwalk option to run drill pipe traditionally or from driller s side of sub first in North America 9

10 Xtreme Strategy: Capital Deployment Evaluate strategic options for shallow depth AC electric XDR 200 and 300 Rigs Actively discussing with several parties the potential sale of the four XDR 200 rigs, primarily in the Canadian market. Continue to pursue international pre-qualification on the four XDR 300 rigs in conjunction with discussions to potentially sell. Targeting indications of interest by the end of May with goal of closing any transaction in Intend to re-deploy this idle capital in core US resource play business if successful in monetizing assets Implement a Substantial Issuer Bid in the amount of $25 million Announced price range of $2.40 to $2.80 conducted through a modified Dutch Auction process. Expected to close offering on June 1, 2017 Re-purchase provides liquidity to shareholders and allows Xtreme to buy back shares at an attractive valuation level. Deploy capital into US resource plays through optimization of ten XDR 500 fleet and upgrade of three rigs to new 850XE Design The US market provides the best global combination of higher activity levels and relatively lower risk. The actions taken will focus Xterme as a high spec US focused driller. Focus on returns on capital should improve financial performance of Company relative to historic results. 10

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