october 2014 - trinidaddrilling.com 2014... · 17 solid capital structure capital structure meets...

October 2014

IT’S ABOUT PERFORMANCE

Forward Looking Information

Certain information in this document is forward-looking and is subject to

important risks and uncertainties. The results or events predicted in this

information may differ from actual results or events.

Factors which could cause actual results or events to differ materially from

current expectations include, among other things, the ability of Trinidad Drilling

Ltd. to successfully implement its strategic initiatives and whether such strategic

initiatives will yield the expected benefits, the availability and price of energy

commodities, regulatory environment, competitive factors in the natural gas

transportation and natural gas liquids extraction industries and the prevailing

economic conditions in North America.

For additional information on these and other factors, see the reports filed by

Trinidad Drilling Ltd. with Canadian securities regulators. Trinidad Drilling Ltd.

disclaims any intention or obligation to update or revise any forward-looking

statements, whether as a result of new information, future events or otherwise.

2IT'S ABOUT PERFORMANCE

Well Positioned for Growth

IT'S ABOUT PERFORMANCE 3

Trinidad has:

– In-demand asset base

– Proven operational expertise

– Extensive growth opportunities

– Financial flexibility to support growth

Growing Diversification


Mexico1

7 rigs

Rig manufacturing

Innovation & design

Canada1

62 rigsUS

5 barges 59 rigs

Mexico1

4 rigs

Saudi1

4 rigs

1 – includes rigs under construction, JV rigs included at 100 percent

More Rigs that Customers Want


>85% of Trinidad’s Rigs are

Modern, High Performance Rigs

0%

10%

20%

30%

40%

50%

60%

70%

2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013-80%

-60%

-40%

-20%

0%

20%

40%

60%

Q208

Q408

Q209

Q409

Q210

Q410

Q211

Q411

Q212

Q412

Q213

Q413

Q214

Trinidad’s Canadian Utilization

Source – Canadian Association of Oil Well Drilling Contractors, to Dec 31st, 2013

Source – Rig Data, Tudor Pickering Holt, at August 15th, 2014

Rig Data considers 10/03/08 the industry peak with 2,374 active rigs

Industry Average

IT'S ABOUT PERFORMANCE6

Consistent Industry Outperformance

TDG

Industry Average

Trinidad’s rigs are more activeCanadian Utilization Rates US Active Rig Count (Change from 10/3/08)


Solid Canadian Operations

CANADAUSA

Forecasted rig locations post break-upIncludes 2014 rig build program

− Active in key plays

− Broad customer base

− Demand stable

− LNG development drives future growth

Liard2

Montney13 Oil

sands1

Viking 1

Frobisher 5

Duvernay6

Cardium4

AB Bakken

3

Canadian Growth - LNG


LNG - a perfect fit for Trinidad

– Existing relationships with key LNG players

– The right equipment and experience

– Constructing Liard new build for LNG

– Expect growth in coming years


Stable Operations in United States

ClevelandTonkawa

10

Bakken4

Niobrara2

Permian16

Eagle Ford

8

Barnett4

Eaglebine2

Haynesville6

− US operations less seasonal

− Demand increasing

− US activity and dayratesimproving

Includes rigs under construction.

Demand for Upgraded Equipment


Industry shift plays into Trinidad’s strategy

– Strong reputation as a high performance driller

– Upgrades to our fleet maintain market share and marketability

– Five new rigs for US operations, delivery in the first three quarters of 2015

– Additional new build opportunities for 2015 and beyond

Trinidad Drilling International - JV


provides

• Customer relationships

• International know-how

• Logistical support

• Infrastructure40% partner

provides

• High-performance rigs

• Innovative technology

• Operational excellence

• Rig manufacturing60% partner


Joint Venture – First Steps

CANADA

Drilling(68 Rigs)

93%

Saudi entry; four rigs in 2014 (3 upgraded US rigs and 1 new build)

Four new builds for Mexico to be delivered in late 2014/early 2015


JV - Saudi Operations Begin

CANADA

Drilling(68 Rigs)

93%

– First three rigs operating

– Fourth rig in Middle East

– Office space established

– 250 employees hired to date


International Growth – Joint Venture

More than 100 rigs operating globally for HAL

– First look at all HAL international opportunities, outside North America

– Trinidad can say “no” to any deal

– Capital exposure limited to 60%

Skilled, Safety Focused Crews

− Our safety performance is better than the industry and keeps improving

− High performance rigs attract the best people


We lower our risk by only building rigs under

long-term contracts

~50% of fleet on long-term contract

>1.5 years average term remaining

16

Customer Backed Growth

IT'S ABOUT PERFORMANCE

17

Solid Capital Structure

Capital structure meets our needs

• Currency balance, extended maturity and financial flexibility

• Nov 2013 equity offering improves ability to fund growth


Credit Facility Available Outstanding Q2 2014

Expiry

Revolver C$200mUS$100m

C$0mUS$0m

Dec 2017

US$ Senior Notes (7. 785%) US$450m US$450m Jan 2019

Total Long-term Debt(1) C$471m(1) Includes long-term debt and short-term portion of long-term debt, US$ debt is translated to CAD$ at quarter-end exchange rate

0.0

0.5

1.0

1.5

2.0

2.5

3.0

3.5

4.0

2007 2008 2009 2010 2011 2012 2013 Q2-14 Long termtarget

(times)

Total/Net Debt to EBITDA*

Total Debt to EBITDA

Net Debt to EBITDA

Debt Reduction Almost Complete

18

*Based on current debt covenants

2014 Capital Program


Total 2014 capital budget of $315 million

• New builds and JV related(1) - $200 million– LNG new build

– JV related new builds – 5 rigs

– JV related rig upgrades – 3 rigs

– Five US contracted new builds (completed in 2015)

• Upgrades to 30 rigs - $75 million (completed in 2015)

– Improve marketability and maintain market share

– Add moving systems, AC packages, increase pumping capacity

• Maintenance and infrastructure capital - $40 million

(1) This figure is net of the 40% of the value of the rigs Trinidad receives when it transfers rigs into the joint venture

An Exciting New Era for Trinidad


Free cash flow provides many opportunities

• Upgrade existing rigs

• Build new rigs, expand operations

• Alignment with HAL opens new doors

• Build cash for future cycles

• Return value to shareholders

21

Invest in Trinidad

Trinidad has:

– The right rigs for today and tomorrow

– Exciting growth opportunities

– Financial flexibility to fund growth


APPENDIX

www.trinidaddrilling.com

Canadian Industry Strengthening

23

– Current activity ahead of 2013

– Dayrates and activity stable for high performance rigs

0

200

400

600

800

week01

week05

week09

week13

week17

week21

week25

week29

week33

week37

week41

week45

week49

Canadian Industry Active Rig Count

5 year range Total 2012 Total 2013 Total 2014

Source: Bloomberg Baker Hughes Oil and Gas Rotary Rig Count Data

24

US Industry Conditions Improving

– US active rig count increasing

– Rig mix changing, driving improving conditions

0

400

800

1200

1600

2000

2400

week01

week05

week09

week13

week17

week21

week25

week29

week33

week37

week41

week45

week49

US Industry Active Rig Count

5 year range Total 2012 Total 2013 Total 2014Source: Bloomberg Baker Hughes Oil and Gas Rotary Rig Count Data

Summary of Second Quarter Results


FINANCIAL HIGHLIGHTS

($ thousands except share and per share data) 2014 2013 % Change 2014 2013 % Change

Revenue 168,945 165,447 2.1 420,450 412,633 1.9

Revenue, net of third party costs 159,644 156,171 2.2 390,662 383,548 1.9

Operating income 45,605 55,651 (18.1) 140,797 154,010 (8.6)

Operating income - net percentage 28.3% 35.6% (20.5) 35.9% 40.2% (10.7)

Adjusted EBITDA 30,644 39,941 (23.3) 110,086 124,777 (11.8)

Per share (di luted) 0.22 0.33 (33.3) 0.79 1.03 (23.3)

Funds provided by operations 30,285 39,124 (22.6) 91,142 104,067 (12.4)

Per share (bas ic / di luted) 0.22 0.32 (31.3) 0.66 0.86 (23.3)

Net (loss ) earnings (24,815) 347 (7,251.3) 947 33,095 (97.1)

Per share (bas ic / di luted) (0.18) 0.00 - 0.01 0.27 (96.3)

Operating days

Canada 1,430 1,434 (0.3) 5,507 5,632 (2.2)

United States and International 4,441 4,578 (3.0) 8,752 9,031 (3.1)

Rate per operating day

Canada (CDN$) 26,338 25,511 3.2 25,655 25,429 0.9

United States and International (US$) 20,819 22,436 (7.2) 21,716 22,461 (3.3)

Utilization rate - operating day

Canada 26% 26% - 50% 52% (3.8)

United States and International 80% 73% 9.6 78% 73% 6.8

As at June 30, December 31,

($ thousands except percentage data) 2014 2013 % Change

Total long-term debt 471,123 468,670 0.5

Three months ended June 30, Six months ended June 30,

Historical Dayrates


0%

10%

20%

30%

40%

50%

$0

$5,000

$10,000

$15,000

$20,000

$25,000

$30,000

Q1

-10

Q2

-10

Q3

-10

Q4

-10

Q1

-11

Q2

-11

Q3

-11

Q4

-11

Q1

-12

Q2

-12

Q3

-12

Q4

-12

Q1

-13

Q2

-13

Q3

-13

Q4

-13

Q1

-14

Q2

-14

US Rate Per Operating Day vs Operating Margin

Rate per operating day Operating margin

Dayrates($US)

0%

10%

20%

30%

40%

50%

60%

70%

80%

90%

100%

$0

$5,000

$10,000

$15,000

$20,000

$25,000

$30,000

$35,000

$40,000

Q1

-10

Q2

-10

Q3

-10

Q4

-10

Q1

-11

Q2

-11

Q3

-11

Q4

-11

Q1

-12

Q2

-12

Q3

-12

Q4

-12

Q1

-13

Q2

-13

Q3

-13

Q4

-13

Q1

-14

Q2

-14

Barge Rate Per Operating Day vs Utilization

Rate per operating day Utilization %

Utilization

Dayrate($US)

0%

10%

20%

30%

40%

50%

$0

$5,000

$10,000

$15,000

$20,000

$25,000

$30,000

Q1

-10

Q2

-10

Q3

-10

Q4

-10

Q1

-11

Q2

-11

Q3

-11

Q4

-11

Q1

-12

Q2

-12

Q3

-12

Q4

-12

Q1

-13

Q2

-13

Q3

-13

Q4

-13

Q1

-14

Q2

-14

Canada Rate Per Operating Day vs Operating Margin

Rate per operating day Operating margin

Utilization


Consistent Dividend

− Consistently paid a dividend for past 10 years,

throughout industry cycles and economic downturns

− Sustainable payout level at approx. 15% of 2014

consensus cash flow

− Current dividend of $0.05 per share per quarter

provides cash-on-cash yield(1) of 2.3%

(1) Yield at September 29th, 2014

Advanced, Deep and Modern Fleet


9%6%

84%

0 - 5,999ft

6,000- 7,999ft

8,000ft+

Rig Fleet Depth

Includes rigs under construction, land drilling rigs only

Rig Fleet Age

17%

57%

23%< 5 years

5-10 years

> 10 years

Technically Advanced Fleet

88%

4%12%

High performance, high mobility, advanced drilling controls

Top drive, some automation, horizontal capable

Conventional rig, mechanical controls, predominantely shallow drilling

In-demand rigs generate higher dayrates and margins

29

Contracts Provide Stability


0.0

1.0

2.0

3.0

0%

25%

50%

75%

100%

YE 2008 YE 2009 YE 2010 YE 2011 YE 2012 YE 2013 Current

Average term remaining (years)

Fleet under contract

Contracted rigs - Canada Contracted rigs - US & international

Short term or spot rigs Average term remaining

Typically 40 to 60% of our fleet is under contract

Includes rigs under construction

Trinidad’s experience and high performance saves customers’ time and costs


Drilling Efficiency Saves Money

Trinidad's Efficiency Capabilities1

First Entry Current

Days to Drill Typical Well 65 40

Cost of Rig 2 $1,462,500 $900,000

Ancillary Equipment 3 $2,193,750 $1,350,000

Total Well Savings 25 Days | $1,406,250

2 Dayrate at $22,500 per day

3At 60% of day costs

1Example shown for Haynesville Shale

Top Drive

Moving System Integrated Control System

• Automated pipe handling automates

moving drill pipe and other tubulars

to and from drill floor. Improves

efficiency and safety

• Iron roughneck automates making

connections with drill pipe and other

tubulars; keeps rig hands away from

high risk activity and improves

efficiency

• Trinidad’s patented design provides

increased torque and ability to perform

at faster speeds

• Provides improved control and better

drilling results

• Allows rig to skid from one well

location to the next without the use

of trucks

• Vastly reduces downtime between

wells

• Reduces seasonal impact on drilling

and improves utilization levels

• Improved efficiency increases

economics for customers

• Integrates all the pieces of equipment

and allows central control from driller’s

cabin

• Displays real-time graphical information

• Provides enhanced control, focus and

design-making ability

• Increases rig safety and efficiency


Automation – Pipe Handling, Iron Roughneck

31

Key Technological Advances

A Continued Focus on Safety

0.00

1.00

2.00

3.00

4.00

5.00

6.00

Mar

-09

May

-09

Jul-

09

Sep

-09

No

v-0

9

Jan

-10

Mar

-10

May

-10

Jul-

10

Sep

-10

No

v-1

0

Jan

-11

Mar

-11

May

-11

Jul-

11

Sep

-11

No

v-1

1

Jan

-12

Mar

-12

May

-12

Jul-

12

Sep

-12

No

v-1

2

Jan

-13

Mar

-13

May

-13

Jul-

13

Sep

-13

No

v-1

3

Jan

-14

Mar

-14

May

-14

Jul-

14

TRIF – Total Recordable Injury Frequency, 12 month corporate

rolling average

TRIF

32

Non-GAAP Measures definition

This document contains references to certain financial measures and associated per share data that do not have any standardized meaning prescribed by IFRS and may not be comparable to similar measures presented by other companies. These financial measures are computed on a consistent basis for each reporting period and include Adjusted EBITDA, Total Debt to EBITDA, drilling days, operating days, utilization rate - drilling day, utilization rate - operating day, and rate per operating day. These non-GAAP measures are identified and defined as follows:

“Adjusted EBITDA” is used by management and investors to analyze EBITDA (as defined above) prior to the effect of foreign exchange, share-based payment expense, impairment expenses and the sale of assets. Adjusted EBITDA also takes into account the Company’s portion of the principal activities of the joint venture arrangement by removing the loss (gain) from investment in joint venture and including EBITDA from investment in joint venture. Adjusted EBITDA is not intended to represent net earnings as calculated in accordance with IFRS. Adjusted EBITDA provides an indication of the results generated by the Company’s principal business activities prior to how these activities are financed, assets are depreciated, amortized and impaired, the impact of foreign exchange, how the results are taxed in various jurisdictions and effects of share-based payment expenses.

“Total Debt to Bank EBITDA” is defined as the consolidated balance of long-term debt, which includes the Senior Debt, Senior Notes Payable and dividends payable at quarter end, to consolidated Bank EBITDA for the TTM. Bank EBITDA used in this financial ratio is calculated as EBITDA plus impairment expense, loss (gain) on sale of property and equipment, loss (gain) from investment in joint venture, share-based payment expense and unrealized foreign exchange.

“Drilling days” is defined as rig days between spud to rig release.

“Operating days” is defined as moving days (move in, rig up and tear out) plus drilling days (spud to rig release).

“Utilization rate - drilling day” is defined as drilling days divided by total available rig days.

“Utilization rate - operating day” is defined as operating days (drilling days plus moving days) divided by total available rig days.

“Rate per operating day” or “Dayrate” is defined as operating revenue (net of third party costs) divided by operating days (drilling days plus moving days).

“Payout level” is defined as annual dividends declared divided by annual funds provided by operations.

“Cash-on-cash yield” is defined as annual dividends declared per share divided by the current share price.

“Free Cash Flow” is defined as annual funds provided by operations minus the sum of annual dividends declared and annual capital expenditures.


Additional GAAP Measures Definitions

The Company refers to certain additional GAAP financial measures within this document that are not defined terms under IFRS to

assess performance. Management believes that these measures provide useful supplemental information to investors. These financial

measures are computed on a consistent basis for each reporting period and include Funds provided by operations, Operating income

and Operating income - net percentage or Operating margin. These additional GAAP measures are identified and defined as follows:

“Funds provided by operations” is used by management and investors to analyze the funds generated by Trinidad’s principal business

activities prior to consideration of working capital, which is primarily made up of highly liquid balances. This balance is reported in the

Consolidated Statements of Cash Flows included in the cash provided by operating activities section.

“Operating income” is used by management and investors to analyze overall and segmented operating performance. Operating

income is not intended to represent an alternative to net earnings or other measures of financial performance calculated in

accordance with IFRS. Operating income is calculated from the consolidated statements of operations and comprehensive income

(loss) and from the segmented information contained in the notes to the consolidated financial statements. Operating income is

defined as revenue less operating expenses.

“Operating income - net percentage” or “operating margin” is used by management and investors to analyze overall and segmented

operating performance excluding third party recovery and third party costs, as well as inter-segment revenue and inter-segment

operating costs, as these revenues and expenses do not have an effect on consolidated net earnings. Operating income - net

percentage is calculated from the consolidated statements of operations and comprehensive income (loss) and from the segmented

information in the notes to the consolidated financial statements. Operating income - net percentage is defined as operating income

less third party G&A expenses divided by revenue net of operating and G&A third party costs.


2500, 700 – 9 Avenue S.W.

Calgary, AB, Canada | T2P 3V4

T 403.265.6525

E [email protected]

www.trinidaddrilling.com

october 2014 - trinidaddrilling.com 2014... · 17 solid capital structure capital structure meets...

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