INVESTOR UPDATE NOVEMBER 2016 TSX: SES SECURE-ENERGY.COM

Transcription

1 INVESTOR UPDATE NOVEMBER 2016 TSX: SES SECURE-ENERGY.COM MIDSTREAM, ENVIRONMENTAL & TECHNICAL SOLUTIONS 1

2 A Unique Suite of Integrated Services All three integrated divisions working together to provide 90+ service solutions at all stages of the oilfield lifecycle. Processing, Recovery & Disposal (PRD) Processing oil and gas by-products Maximizing the recycling of oil Recycling and disposal of waste fluids Crude oil treatment with pipeline and rail access OnSite Services (OS) Pipeline integrity Environmental services Integrated fluid solutions Drilling & Production Services (DPS) Drilling and completion fluids Fluids and solids control equipment Innovative products and systems Production chemicals and chemical EOR products 2

3 PRD Full Service Terminals Full Service Terminals (FST) (19 Facilities) Equipped for crude oil treating and terminalling, deep well injection and oilfield waste processing. Drilling and Completions Drill cuttings/mud Frac sand/fluids Completion waste Midstream and Production Crude oil emulsions/dry oil Clean oil terminalling/blending/storage Tank and vessel residual solids Plant waste Workover waste Abandonments/spill clean-up La Glace FST 3

4 PRD Standalone Water Disposal and Landfills Standalone Water Disposal (SWD) (7 Facilities) Scaled back versions of Full Service Terminals for deep well injection of produced and waste waters. Approved to dispose of Class 1b fluids: Produced fluids Drilling and completion fluids Workover fluids Landfills (8 Locations) Engineered oilfield landfill cells have a high quality, multi-layer liner and environmental monitoring programs. Types of non-hazardous waste: Contaminated soils Treated FST solids Sulphur waste Drill cuttings Frac sand 4

5 PRD Full Service Rail (FSR) Enbridge AB Clipper Spectra Express Full Service Rail Strategy 100,000 bbls/day supplemental capacity for enhanced market access SECURE will optimize pipelines and rail options to meet customers needs Ability to ship raw crude to optimize price FSR facilities will combine treating and storage solutions with rail access TransCanada Keystone Kinder Morgan Trans Mountain Enbridge Mainline Existing Pipeline Takeaway Capacity Proposed Pipeline Takeaway Capacity Forecasted Canadian Oil Supply (CAPP) Source: Internal estimates. 5

6 PRD Canadian & US Footprint 39 FACILITIES Full Service Terminals (19) Full Service Rail (4) Stand Alone Water Disposal Facilities (7) Landfills (8) Crude Oil Terminalling Facility (1) 6

7 Organic and Acquisition Growth Fueling Organic Projects ($45MM) Completed: Kakwa FST Big Mountain SWD expansion North Dakota pipeline connection South GP landfill expansion Under Construction: Kaybob SWD expansion (Dec./16) Fox Creek landfill expansion (Nov./16) Kindersley FST expansion (Dec./16) 2016 Acquisitions ($88MM) PetroLama Energy Canada Inc. Acquired all operating assets including the Alida crude oil terminalling facility JV Interests Increased ownership at Judy Creek and La Glace FST s to 100% 7

8 OS Environmental Services Full cycle pipeline integrity services Technical and environmentally challenging projects Well abandonment and compliance Full cycle remediation and reclamation services 8

9 OS Integrated Fluid Solutions Success = Technology + Storage + Logistics/Transportation Sourcing Pumping, transfer and transportation Heating Storage Recycling Disposal Small and large scale projects 9

10 Average Depth per Well Drilling Fluids Revenue per Operating Day DPS Drilling Industry Trends The shift to horizontal drilling has resulted in: Metres drilled per well have increased year over year Demand for more complex and technical drilling fluid systems ~90% of wells drilled in Western Canada are horizontal Fluid costs for horizontal wells are 5-10% of well costs Increased infrastructure requirements and technology demands High levels of support to the operator and specialized equipment 3,000 2,800 2,600 2,400 Average Depth per Well vs. Drilling Fluids Revenue per Operating Day $8,000 $7,000 $6,000 $5,000 2,200 $4,000 2, YTD $3,000 Average Depth per Well Drilling Fluids Revenue per Operating Day 10

11 DPS Integrated Drilling Solutions LEADER IN DRILLING FLUID SOLUTIONS INFRASTRUCTURE INTEGRATED DRILLING EQUIPMENT SOLUTIONS INNOVATION Market share leader in high revenue wells in Western Canada (>30%) Working for the top operators Patented OBM and Brine solutions for the Duvernay and Montney plays Patented SAGD, Silicate, OBM and brine solutions Strategically located Oil- Based Mud & Silicate blending facilities Can easily add infrastructure within PRD footprints WCSB s only significant Barite blending facility Specialized solids control equipment Patented OBM storage systems Over 600 rentable assets The only company in Western Canada that can integrate full cycle 7,000 sq. ft. research lab in Calgary Supports Drilling Fluids, Chemical EOR and Production Chemicals >15 expert scientists developing patented products and systems 11

12 Chemical EOR & Production Chemicals Solutions Chemical EOR ~$340 million market in Canada ~95% market share held by SNF Mature fields transitioning from primary to secondary production Cost effectively improve oil production/recovery factor Providing chemicals to three EOR schemes Production Chemicals ~$900 million market in Canada ~75% market share held by NALCO (Champion), Halliburton and Baker Hughes Conventional resource plays require new chemical solutions Aging wells mean increased water production which require additional chemicals Leverage existing infrastructure from PRD/DPS Have developed over 100 proprietary products 12

13 Long-Term Business Drivers 1 Increasingly stringent environment and regulatory standards Increase in waste and water volumes 2 Activity focused on high impact conventional resource plays with long-term production 3 Well density and produced water volumes are increasing 4 Longer and technically more challenging wells Increase in byproducts and chemical volumes Increase in drilling fluid and waste volumes 13

14 Value Creation & Strategy Working with customers and partners to reduce overall costs, encourage outsourcing and provide new innovative services DRILLING Reduces days to drill COMPLETIONS Reduce transportation & fresh water usage PRODUCTION Facility expansions (reduce transportation) WELL WORKOVER & PRODUCTION ENHANCEMENT Production/EOR chemicals (recover more oil) WELL ABANDONMENT & FACILITY DECOMMISSION Remediation & reclamation (reduce environmental liabilities) 14

15 Q3 Financial Performance by Division Revenue (in $000 s) Operating Adj. EBITDA (3) Margin (2) (in $000 s) Q3 16 Q3 15 % Change Q3 16 Q3 16 Q3 15 % Change PRD (1) 50,669 60,881 (17%) 54% 24,024 27,042 (11%) DPS 26,824 48,688 (4) (45%) 19% 2,555 5,129 (50%) OS 22,667 36,042 (37%) 28% 4,548 6,804 (33%) (1) Revenue excludes oil purchase and resale. (2) Figures indicated are operating margin as a percentage of revenue. Operating margin is calculated as the difference between revenue less non-recurring items and direct expenses less non-recurring items. See Non-GAAP Measures herein. (3) Adjusted EBITDA is defined as earnings before finance costs, taxes, depreciation, depletion, amortization, non-cash impairments, unrealized gain or losses on mark to market transactions, sharebased compensation and other income/expense. It also removes the impact of other adjustments that are considered non-recurring in nature. See Non-GAAP Measures herein. (4) Excludes US Revenue. 15

16 Corporate Financials Financials for the Nine Months Ended September 30, ($000 s except per share data) YTD 2016 YTD 2015 % Change Total Revenue (1) 268, ,128 (38%) Direct Operating Exp. (1) (173,200) (292,740) (41%) G&A Exp. (33,181) (49,272) (33%) Business Development Exp. (4,136) (9,238) (55%) Adjusted EBITDA (2) 61,054 94,844 (36%) Adjusted EBITDA/Basic Share (44%) Wtd. Avg. Shares Outstanding (Basic) 152,715, ,992,359 16% Adjusted EBITDA by Division for the Nine Months Ended September 30, (2)(3) (in 000's) 180, , , , ,000 80,000 60,000 40,000 20,000 10% 29% 61% 16% 11% 73% 14% 3% (1) Excludes oil purchase and resale. (2) Adjusted EBITDA is defined as earnings before finance costs, taxes, depreciation, depletion, amortization, non-cash impairments,, unrealized gains or losses on mark to market transactions, share-based compensation, and other income/expense. It also removes the impact of other adjustments that are considered non-recurring in nature. See Non-GAAP Measures herein. (3) Excludes Corporate costs. - YTD 2014 YTD 2015 YTD 2016 PRD DPS OS 16

17 Strong Balance Sheet Total Credit Facility: $700 MM (1) $462 MM Available 2017 Capital Forecast $65 million Capital Growth and Expansion $50MM Sustaining $15MM $36 MM $202 MM 2.1X Debt/EBITDA (2) 3.5X MAX COVENANT ON SR. DEBT/EBITDA 5.0X MAX COVENANT ON TOTAL DEBT/EBITDA Available Credit Facility Letters of Credit Amount Drawn on Credit Facility Note: Current interest rate is less than 3% (1) $700 million 4 year term credit facility - $100 million accordion feature. Matures September 26, (2) Twelve month trailing EBITDA and debt as of September 30, Senior debt includes amounts drawn on our credit facility and financial leases. Total debt includes senior debt and any unsecured borrowings. 17

18 Corporate Profile & Analyst Coverage (all values as at November 3, 2016 with the exception of enterprise value which contains debt at September 30, 2016) Market Capitalization (in millions) $1,264 Enterprise Value (in millions) $1,472 Basic Shares Outstanding (in millions) Dividend Yield ~3% Annualized Dividend per Share $0.24 Firm Analyst Phone AltaCorp Capital Inc. Mark Westby BMO Capital Markets Michael Mazar Canaccord Genuity Corp. John Bereznicki CIBC World Markets Inc. Jon Morrison Cormark Securities Jason Zhang GMP FirstEnergy Ian Gillies National Bank Financial Greg Colman Paradigm Capital Jason Tucker Peters & Co. Limited Jeff Fetterly Raymond James Ltd. Andrew Bradford Scotia Capital Inc. Vladislav C. Vlad TD Securities Scott Treadwell

19 Forward-Looking Statements and Information This presentation contains "forward-looking statements" and/or "forward-looking information" within the meaning of applicable securities laws (collectively referred to as "forward-looking statements"). Forward looking statements included or implied herein may include: corporate strategy, long-term business drivers; environmental and regulatory standards; general market conditions; the oil and natural gas industry; activity levels in the oil and gas sector; drilling levels; commodity prices for oil, NGLs and natural gas; growth in oil and gas production in western Canada; demand for the Corporation's services and products; market share and market expansion; western Canadian oil supply and pipeline capacity; drilling industry trends; expansion strategy; full service rail services; acquisition strategy; the amounts of 2016 and 2017 capital expenditure programs and the intended use thereof; debt service; capital expenditures; future capital needs; and access to capital. Forward-looking statements concerning expected operating and economic conditions are based upon prior year results as well as assumptions that levels of market activity and growth will be consistent with industry activity in Canada and the U.S. and similar phases of previous economic cycles. Forward-looking statements concerning the availability of funding for future operations are based upon assumptions that sources of funding which the Corporation has relied upon in the past will continue to be available to the Corporation on terms favorable to the Corporation and that future economic and operating conditions will not limit the Corporation's access to debt and equity markets. Forward-looking statements concerning the relative future competitive position of the Corporation are based upon assumptions that economic and operating conditions, including commodity prices, crude oil and natural gas storage levels, interest rates, the regulatory framework regarding oil and natural gas royalties, environmental matters, the ability of the Corporation to successfully market the Corporation s services, and drilling and production activity in North America will lead to sufficient demand for the Corporation's services, that the current business environment will remain substantially unchanged, and that present and anticipated programs and expansion plans of other organizations operating in the energy industry may change the demand for the Corporation's services. Forward-looking statements concerning the nature and timing of growth are based on past factors affecting the growth of the Corporation, past sources of growth and expectations relating to future economic and operating conditions. Forward-looking statements in respect of the costs anticipated to be associated with the acquisition and maintenance of equipment and property are based upon assumptions that future acquisition and maintenance costs will not significantly increase from past acquisition and maintenance costs. Many of these factors, expectations and assumptions are based on management's knowledge and experience in the industry and on public disclosure of industry participants and analysts relating to anticipated exploration and development programs of oil and natural gas producers, the effect of changes to regulatory, taxation and royalty regimes, expected industry equipment utilization in the WCSB and North Dakota, and other matters. The Corporation believes that the material factors, expectations and assumptions reflected in the forward-looking statements are reasonable; however, no assurances can be given that these factors, expectations and assumptions will prove to be correct. Forward-looking statements involve significant risks and uncertainties, should not be read as guarantees of future performance or results, and will not necessarily be accurate indications of whether such results will be achieved. A number of factors could cause actual results to differ materially from the results discussed in these forward-looking statements, including, but not limited to, those factors discussed below and under the heading "Risk Factors" in the Corporation's Annual Information Form dated December 31, 2015 and in the MD&A for the year ended December 31, 2015 and in the MD&A of our most recent interim financial statements as well as any material change reports and news releases. Although forward-looking statements contained in this presentation are based upon what the Corporation believes are reasonable assumptions, the Corporation cannot assure investors that actual results will be consistent with these forward-looking statements and readers are cautioned not to place undue reliance on them. The forward-looking statements in this document are expressly qualified by this cautionary statement. Unless otherwise required by law, SECURE does not intend, or assume any obligation, to update these forwardlooking statements. Non-GAAP Measures: Certain supplementary measures in this presentation do not have any standardized meaning as prescribed under IFRS and, therefore, are considered non-gaap measures. These measures are described and presented in order to provide information regarding the Corporation s financial results, liquidity and its ability to generate funds to finance its operations. These measures should not be used as an alternative to IFRS measures because they may not be consistent with calculations of other companies. These non-gaap measures, and certain operational definitions used by the Corporation, are further explained in the Corporation's MD&A for the year ended December 31, 2015 and in the MD&A of our most recent interim financial statements. Capital Expenditures: Expansion, growth or acquisition capital are capital expenditures with the intent to expand or restructure operations, enter into new locations or emerging markets, or complete a business acquisition. Sustaining capital refers to capital expenditures in respect of capital asset additions, replacements or improvements required to maintain ongoing business operations. The determination of what constitutes sustaining capital expenditures versus expansion capital involves judgment by management. 19