investor presentation - trican well service ir... · cementing . nitrogen . coiled tubing ... •...
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INVESTOR PRESENTATION March 2016
FORWARD LOOKING STATEMENTS
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This document contains statements that constitute forward-looking statements within the meaning of applicable securities legislation. These forward-looking statements include, among others, the Company’s prospects, expected revenues, expenses, profits, expected developments and strategies for its operations, and other expectations, beliefs, plans, goals, objectives, assumptions, information and statements about possible future events, conditions, results of operations or performance. These forward-looking statements are identified by their use of terms and phrases such as “anticipate,” “achieve”, “achievable,” “believe,” “estimate,” “expect,” “intend”, “plan”, “planned”, and other similar terms and phrases. Forward-looking statements are based on current expectations, estimates, projections and assumptions that involve a number of risks and uncertainties, which could cause actual results to differ materially from those anticipated. These risks and uncertainties include: fluctuating prices for crude oil and natural gas; changes in drilling activity; general global economic, political and business conditions; weather conditions; regulatory changes; and availability of products, qualified personnel, manufacturing capacity and raw materials. If any of these uncertainties materialize, or if assumptions are incorrect, actual results may vary materially from those expected.
OVERVIEW OF TRICAN - CURRENT
Full service, Canadian pressure pumping company
440,000 HP available fracturing capacity
Completions Tools business active in North America, Norway and Russia
Focus on safety, technology, and operational performance
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Revenue by Service Line
Fracturing
Cementing
Nitrogen
Coiled Tubing
Acid & Specialty Chemicals
Industrial & Pipeline Services
YEAR TO DATE DECEMBER 31, 2015
67%
17%
9% 2% 3% 2%
SALE OF U.S. BUSINESS
645,000 HP fracturing equipment
14 Cementing units
7 Coiled Tubing units
Property, personnel, and ongoing work commitments
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SALE OF U.S. BUSINESS
Sold to Keane Group
Approximately $285 million (CAD) cash
10% retained ownership in Keane
Potential 20% upside from certain economic interests upon Keane liquidity event
Total transaction value between $352 and $405 million (CAD)
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SALE OF U.S. BUSINESS
Trican retains ownership of technology
Keane has a non-exclusive license to Trican technology
Trican will market certain technology to others in U.S. and to markets in which we no longer have equipment
Expected closing: March 15, 2016
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DEBT REDUCTION AND COVENANT RELIEF
Proceeds from U.S. sale will be used to pay down debt
Debt post transaction of approximately $235 million
$140 million of long-term notes
$95 million drawn on $308 million revolver
Will continue to explore further debt reduction
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COVENANT RELIEF
Amended covenants allow Trican to ride out the downturn
All financial covenants eliminated until Q3 2016
Leverage covenant of 5x and interest coverage of 2x will start in Q3 and will be calculated in Q3 as four times Q3 EBITDA
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COVENANT RELIEF
LTM calculations will not commence until Q2 2017
Normalized covenant of 3x Debt/EBITDA by Q1 2018
Equity cure provision allows us to apply 50% of any equity raise towards EBITDA in covenant calculations
Equity cure can be used twice per year up to a maximum of $20 million
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U.S. SALE - STRATEGIC RATIONALE
Covenant relief and strengthened balance sheet puts Trican in a strong position to weather the downturn
Fair deal in this market • $546 to $628 / HP • 67% to 77% of PPE
Retained ownership allows us to participate in U.S. recovery
Combined Trican-Keane will have lower cost structure and good balance sheet to ride out the downturn and size to compete in U.S. going forward
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U.S. SALE - STRATEGIC RATIONALE
Keane intends to continue to grow the business to be a major player in the U.S. market
Trican has a 2-year non-compete and first right to purchase the business should we decide to re-enter the U.S.
Trican technology and engineering will augment Keane’s operations
Trican will license our technology to others going forward
Allows Trican to focus on our core markets
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CANADA
CANADA
Trican is the largest pressure pumper in Canada
Trican offers full services in Canadian market which balances revenue and profitability
• Large cementing market share • Strong market share in other
services
Canadian market has fewer competitors (6 vs. over 30 in the U.S. market)
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Trican has a strong customer base in Canada • Numerous long-term clients
Canadian dollar to U.S. dollar exchange rate helps producer economics
CANADA
Strong safety record
Technical advantage in Canadian market which pays off in downturn
• MVP FracTM system
• Geological and reservoir services integrated into frac designs
• Lightweight cement blends
• Numerous engineers embedded in client offices
• Technology retains and grows market share and improves returns in a downturn
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GEOGRAPHIC COVERAGE
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Horn River Shale
Montney Shale
Bakken Shale
Cardium Tight Oil
Viking Tight Oil
Lower Shaunavon Tight Oil
HIGH LEVEL
RED EARTH
GRANDE PRAIRIE
WHITECOURT HINTON
FORT ST. JOHN
NISKU LLOYDMINSTER
RED DEER PROVOST DRUMHELLER
BROOKS
MEDICINE HAT
ESTEVAN
British Columbia Alberta Saskatchewan
FORT NELSON
Tight Gas
Duvernay Shale
DRAYTON VALLEY
CALGARY
Manitoba
BRANDON
Spearfish
CANADA EQUIPMENT
Current available Canadian fleet
• 440,000 fracturing HP
• 55 Cementing units
• 38 N2 Pumpers
• 19 Acid Units
• 16 Coil Units
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* Anticipated HP at year-end based on approved budgets, which are subject to change
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50,000
100,000
150,000
200,000
250,000
300,000
350,000
400,000
450,000
500,000
2008 2009 2010 2011 2012 2013 2014 2015 2016*
Canadian HP Growth
CANADA - OUTLOOK
35% of equipment parked during 2015
Parked equipment ring fenced and ready to go to work when activity improves
Will right size fleet up or down to maximize utilization and profits
Pricing down 30% from 2014 peak levels
Customer base strong
Cost cutting measures have substantially improved second half results in 2015
• Still working on additional cost savings
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CANADA - OUTLOOK
Utilization below expectations in Q1 (70%)
A warm March could hurt quarter
Pricing down in Q1 2016
Q2 2016 slow due to normal spring breakup
Poor visibility at this time on Q3 2016 • No adjustments up or down
Anticipate slower Q3 2016 vs. previous year
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CANADA - COST REDUCTIONS
Reduce active fleets to match Q3 anticipated activity
Exploring closing locations
Reduce fixed costs further to match size of market
Significant reductions in corporate costs as business becomes Canadian-focused
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COMPLETION TOOLS
COMPLETION TOOLS
Operations in Norway, Russia, USA and Canada
Offer multistage frac tools, completion and intervention tools for both open hole and cemented installations
Competitive advantage with patented completion system that has capacity for 240 cemented stages
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Grown Norwegian and Russian revenue and profitability in 2015 due to market share growth
2016 demand still challenged in North America and anticipate continued strong performance in Norway and Russia
INTERNATIONAL
Closed sale of Russian business for $195 million CDN
• Includes first tranche of working capital adjustment
• Sold for 6.4x 2014 EBITDA
Closed Saudi Arabia and Australia as scale not large enough to sustain International infrastructure
Kazakhstan sale in progress • Currently working with potential
buyers
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GETTING THROUGH THE DOWNTURN
GETTING THROUGH THE DOWNTURN
Improve balance sheet
Keep utilization high and costs low in remaining operations
Reduce fixed costs as business centralizes to Canada
Maintain customer relationships
Provide differentiating safety, efficiency and technology
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POSITIVES AFTER THE DOWNTURN
Competitive landscape changing
• Baker-Halliburton merger will create opportunities in all of our markets
• Competitive landscape will change
- Smaller competitors struggling to survive
- Mergers of mid-sized companies improves market
- Equipment attrition will be significant
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Strong earnings on reduced cost structure as utilization and pricing improve
COMING OUT OF THE DOWNTURN
We will focus on: • Being on the leading edge of cost
and operational efficiencies
• Achieving cost advantages through size and scale in Canada
• Separating ourselves through technology, safety, service quality and innovation
Long term, need to lower cost to producers without lowering our margins
• More efficient, lower cost fracturing business through equipment designs, technology and reductions in costs
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Will look to expand service lines in Canada upon recovery to leverage on our strong business
INNOVATION
INNOVATION
Trican focuses on separating itself with technology
Technology must reduce $/BOE for our customers or lower our costs
MVP FracTM
• Patented chemical solution that reduces proppant settling in slick water fracs
• Strong market acceptance in Canada
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• Recent case studies show 20% increased production in the Cardium and 30% increased production in the Montney
• Will market MVP in US and other regions
INNOVATION
TriVertTM Diverting Agent
• Can be used in new completions or refracturing treatments
• Redirects fluid into new sections of the wellbore
• Contains particles that dissolve with time and temperature
• Expected to result in increased production without further well intervention
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TRICAN RESERVOIR SOLUTIONS
Geological Solutions • Offer unconventional rock analysis,
core testing and rock mechanics
Reservoir Solutions • Reservoir model that integrates
geological and frac data to optimize long-term reservoir recoverability
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SUSTAINABLE INNOVATION
EcoClean Fluids • Continuing to expand our line of
environmentally friendly fracturing fluids
Water Management and Reduction • Developed a 100% recycled water
crosslinked fluid solution with no mechanical treatment
• Recycled water used on most fracturing projects in the U.S.
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FINANCIAL OVERVIEW
POST USA BALANCE SHEET
Net book value of assets approximately $475 million
$115 million drawn on $306 million revolving credit facility
$306 million revolving credit facility is committed until 2018
• Max utilization capped at $175 million until Q3 2016
$142 million of notes • $43 million is due in April 2016 • All note amounts are net of
currency swaps
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CASH FLOW
Managing cash flow and liquidity a key focus in 2016
Dividend suspended until financial performance improves
Total capital spend in 2016 expected to be approximately $20 million
• No expansion initiatives will be considered until financial performance improves
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INVESTMENT ADVANTAGES
Trading substantially below book value
Significant earnings potential on existing assets
High leverage on low cost structure coming out of downturn
Strong Canadian business that is generating industry leading margins
Strong management team that has managed through numerous cycles
Equipment base not scavenged and ready to go when activity increases
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SUMMARY
Number of Outstanding Shares (as of February 29, 2016):
• 148.9 million
Average Daily Volume (one month period):
• 859,559 (as of February 29, 2016)
Directors/Officers Ownership: • 2.0% (approx. - diluted basis)
Market Cap: • $198 million as of February 29, 2016
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INVESTOR PRESENTATION March 2016