Midstream Infrastructure Environmental Solutions Technical Solutions Innovation

Transcription

1 Midstream Infrastructure Environmental Solutions Technical Solutions Innovation

2 TSX : SES Market Capitalization (billions) $1.4 Enterprise Value (billions) $1.7 Common Shares Outstanding (millions) Dividend Yield ~3% Annualized Dividend per Share $0.255 Senior Debt to EBITDA (Trailing 12 Months) 1.8 to 1 All table values as at June 30, 2017 Processing, Recovery & Disposal (PRD) Processing oil & gas by-products Maximizing the recycling of oil Recycling & disposal of waste fluids/solids Midstream facilities with pipeline access & rail solutions Drilling & Production Services (DPS) Drilling & completion fluids Fluids & solids control equipment Production chemicals EOR chemicals OnSite Service (OS) Pipeline integrity Environmental services Abandonment & reclamation Integrated fluids solutions 2

3 » Proven Management Team Ten years of successful execution and growth» Midstream Infrastructure Facilities strategically positioned in high impact resource plays across Western Canada and North Dakota Tanks, terminals, feeder pipelines and rail transportation options Drives steady and reoccurring production volumes and revenues» Environmental & Technical Solutions Helping customers operate in a sustainable way with a focus on protecting the environment Increasing environmental changes and regulations Providing technical knowledge, skills and expertise to optimize solutions in the oil sands and resource plays» Innovation Making significant and ongoing investments in new technologies, processes and methods to address the ever-changing needs and challenges of our customers 3

4 Competitive Advantage:» 49 strategically located facilities in high impact resource plays» Facilities close to the customers production (reduced transportation)» Multiple services offered in one location» Pipeline and rail transportation options Driving Growth in 2017 & 2018:» Increased activity in Western Canada and North Dakota» Ten new facilities added August 1, 2017 via Ceiba acquisition» Rail opportunities increasing in H2 2017» Spending up to $100 million on organic projects 4

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6 Overview:» Light oil feeder pipeline system and receipt terminal in the Kindersley-Kerrobert region of Saskatchewan» Expected to be operational in Q4 2018» Total project cost of ~$75 million, with $50 million being spent in 2017» Contracted volumes on an annual and cumulative basis over 10 years Strategic Rationale:» Supports SECURE s long-term growth strategy of expanding midstream infrastructure» Supports customer focused approach of providing value added services» Pursuing project as a strategic partnership with key Viking light oil producers» Increases SECURE s cashflow and asset value and contribute to the Canadian oil and gas transportation system 6

7 Overview:» SECURE acquired all outstanding shares of Ceiba at $0.205 per share» Paid $35.5 million in cash (including outstanding debt) and issued 189,965 common shares for an aggregate transaction value of ~$37 million» Closed August 1, 2017 Acquisition Rationale:» Expands SECURE s PRD network with 10 additional facilities» Accelerates growth and expansion opportunities» Operational and administrative synergies» Non-Capital Losses can be utilized by SECURE 7

8 Thousands barrels per day 5,000 4,500 4,000 3,500 3,000 2,500 Western Canadian Crude Oil Takeaway Capacity vs. Supply Forecast Pipeline capacity constraints Enbridge AB Clipper Enbridge Line 3 (est. 2020*) Spectra Alberta Express Clipper Spectra Express TransCanada Keystone TransCanada Keystone Kinder Morgan Trans Mountain Kinder Morgan Trans Mountain Enbridge Mainline Enbridge Mainline Enbridge Line 3 (est. 2019) 2, » Oil supply forecast to grow by 1.5 million barrels per day by 2030 (CAPP)» Supply growth outpacing pipeline takeaway capacity from 2017 to 2021+» Crude by rail provides a buffer for pipeline capacity constraints» Full Service Rail (FSR) facilities: Combine treating and storage solutions with rail access Ability to ship raw heavy, light sour, and light sweet crude Current FSR facilities have capacity for 100,000 bbls/day Existing Pipeline Takeaway Capacity Proposed Pipeline Takeaway Capacity Forecasted Western Canadian Oil Supply (CAPP) + Forecasted SAGD Production from Recently Announced Projects Note: Post 2021, additional pipeline capacity could be added from the Trans Mountain Expansion, Keystone XL and Energy East pipelines 8

9 Competitive Advantage:» Multiple patents, innovative chemical solutions, customized programs for drilling fluids & production chemicals» Technical expertise in long & deep horizontal wells drilling fluids systems» Chemical EOR product and service offering vs. competition» Ability to leverage off PRD infrastructure» Two best in class labs in Alberta Driving Growth in 2017 & 2018:» Increased drilling activity will drive increased revenue» Trend towards drilling longer and more complex wells» Growing production chemicals market share with recent acquisition» New products launched» Expanding Production Chemicals, Fracturing Chemicals and Chemical EOR product offering 9

10 Overview:» Acquired Production Chemicals business for ~$30 million in April 2017» Integrated into existing business line» 88 highly qualified employees joined SECURE» Products: flow assurance, asset integrity, production optimization, and completion products Acquisition Rationale:» Enhances service offerings, creates synergies and strengthens existing service lines» Adds highly valued customer base and accelerates market share growth» Adds >100 proprietary products to existing suite of products» First class blending facility in Red Deer, AB and additional lab in Edmonton, AB (H2S) 10

11 Competitive Advantage:» Focused on technically challenging projects with higher margins: Pipeline integrity replacement/remediation over water crossings or highly sensitive areas Decommissioning and reclamation Abandonment and remediation Manage spills near water ways Provide full-cycle frac water management solutions Operate large scale waste management Driving Growth in 2017 & 2018:» Pipeline integrity replacement/remediation services: 450,000km of pipelines in Alberta alone» Expanding services in the Fort McMurray area» Expanding NORM service offering» Increasing demand for frac hub solutions» Increasing environmental regulatory standards Ex. Licensee Liability Rating (LLR) program in Alberta 11

12 1 Increasingly stringent environmental and regulatory standards 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 more technically challenging wells 12

13 Completed Length per Well (Metres) Total Proppant Placed per Well (tonnes) Frac Stages per Well Fluid Pumped per Well (m3) Frac Stages per Well (Trailing 6 Month Average) 18,000 16,000 14,000 12,000 Average Fluid Pumped per Well (Trailing 6 Month Average) 20 10, ,000 6,000 4,000 2, ,200 Completed Length per Well (Trailing 6 Month Average) 2,000 3,000 2,500 Total Proppant Placed per Well (Trailing 6 Month Average) 1,800 2,000 1,600 1,500 1,400 1,000 1, ,000 0 Source: Raymond James 13

14 Metres (millions) Annual Metres Drilled in Western Canada ( e) Historical Average» 2016 resulted in the lowest metres drilled in 25 years» Metres drilled in H already at full year 2016 levels 10 5» Increased activity will benefit all three divisions - Actual Metres Drilled Forecast Metres Drilled Source: GMP FirstEnergy, Nickels Data Central, CAPP 14

15 Q (% change vs. Q2 2016) Revenue (in $000 s) YTD 2017 (% change vs. YTD 2016) Operating Adj. EBITDA (3) Margin (2) (in $000 s) YTD 2017 Q (% change vs. Q2 2016) YTD 2017 (% change vs. YTD 2016) PRD (1) 60,278 (+61%) 127,748 (+48%) 56% 26,771 (+78%) 62,711 (+63%) DPS 33,921 (+202%) 84,389 (+82%) 16% -1,512 (+120%) 6,640 (+2019%) OS 21,173 (+21%) 43,948 (+23%) 22% 2,052 (-19%) 5,563 (-6%) (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 and direct expenses. 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, share-based compensation and other income/expense. It also removes the impact of other adjustments that are considered nonrecurring in nature. See Non-GAAP Measures herein. 15

16 (000 s) $80,000 $70,000 $60,000 $50,000 $40,000 $30,000 $20,000 $10,000 $0 -$10,000 (1) Adjusted EBITDA 7% 15% 9% 10% 7% 13% 84% 75% 87% YTD 2015 YTD 2016 YTD 2017 PRD DPS OS (1) Excluding corporate costs» Achieved 135% increase in EBITDA vs. Q and 85% increase vs. H1 2016» EBITDA positively impacted by: Increased drilling & completion activity vs Q2 2016: 142% increase in industry rig count 215% increase in industry metres drilled 10% increase in average crude oil prices quarter over quarter Ongoing production related volumes and increased volumes from acquisitions Investments in facility growth and expansions totaling $47 million in

17 70% 60% 50% 40% 30% 20% 10%» Significant operating margin improvement in PRD and DPS vs resulting from: Increased volumes, higher revenue, and streamlined processes» OS margins fluctuate with volume and type of projects completed: Q3/Q4 provide a better indication for margin in this division» Continued room for margin improvement in each division 0% YTD 2014 YTD 2015 YTD 2016 YTD 2017 PRD OS DPS 17

18 (1) Excludes Letters of Credit, which currently reduces availability by $40 million. 18

19 » $100 Million on growth and expansion projects allocated primarily to PRD: New feeder pipeline; New SWD in the Montney in Q3 17 with facility construction to start in Q4 17; Capacity expansions at existing facilities and landfills; and Long lead items and engineering costs on various projects.» Responding to customer demand» Targeting highest rates of return projects» Maintaining prudent approach to capital spending 19

20 » Increased industry activity in all three divisions» Previous capital spent in 2016 will contribute to 2017/2018 EBITDA» Producers continuing to outsource services» Growing midstream infrastructure via development of new feeder pipeline» Ten facilities added to existing PRD network via Ceiba Acquisition» Rail opportunities increasing after Q2 17» Expanding production and EOR chemical service lines Recent production chemicals acquisition closed in April 2017» Growing frac water hubs and water recycling projects» 2017 organic growth capital of $100 million and dividend increased by 6% 20

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22 Firm Analyst Phone AltaCorp Capital Inc. TBA TBA BMO Capital Markets Michael Mazar Canaccord Genuity Corp. John Bereznicki CIBC World Markets Inc. Jon Morrison Cormark Securities Jason Zhang GMP FirstEnergy Ian Gillies Industrial Alliances Securities Inc. Elias Foscolos National Bank Financial Greg Colman Paradigm Capital Jason Tucker Peters & Co. Limited Jeff Fetterly Raymond James Ltd. Andrew Bradford RBC Capital Markets Benjamin Owens Scotia Capital Inc. Vladislav C. Vlad

23 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 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 March 1, 2017 and in the MD&A for the year ended December 31, 2016 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 forward-looking 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, 2016 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. 23