Slide 1: Company Overview November 2020
COMPANY OVERVIEW November 2020
Slide 2: Forward Looking Statements Advisory
FORWARD LOOKING STATEMENTS ADVISORY This presentation is issued by Enerflex Ltd. (“Enerflex” or the “Company”). This presentation is for information purposes only and is not intended to, and should not be construed to, constitute an offer to sell or the solicitation of an offer to buy securities of
Slide 3: Executive Management Team
EXECUTIVE MANAGEMENT TEAM Marc Rossiter Sanjay Bishnoi David Izett President & CEO SVP, Chief Financial Officer SVP, General Counsel Greg Stewart Patricia Martinez Phil Pyle President, USA President, Latin America President, International 3
Slide 4: Transforming Natural Gas to Meet The World's Energy Needs
Transforming Natural Gas to Meet The World’s Energy Needs PROVEN TRACK RECORD OF VALUE CREATION • Complementary product lines and regions driving balanced revenue growth. • Investing in recurring revenue sources to increase and stabilize margins. • Strong balance sheet and free cash flow generation
Slide 5: Energy Access Is Fundamental to Social Progress
ENERGY ACCESS IS FUNDAMENTAL TO SOCIAL PROGRESS 5
Slide 6: Consumption Tracks GDP Growth
CONSUMPTION TRACKS GDP GROWTH Global Gross Domestic Product Global Aggregate Energy Consumption trillion 2010 US dollars (‘000 bcf equivalent) 300 High Economic History Projections 1,000 Growth History Projections non-OECD 250 800 Reference 200 Low Economic non-OECD Growth 600 150 High Economic 400
Slide 7: Global Energy Demand Satisfied by a Diverse Fuel Mix
GLOBAL ENERGY DEMAND SATISFIED BY A DIVERSE FUEL MIX Projected Global Energy Consumption (‘000 bcf equivalent per year) 1000 Natural gas is the world’s +42% 900 (~ 57,000 bcf) fastest growing source of 800 fossil fuel 700 600 500 400 Global natural gas 191.4 300 consumption is projected to 134.7 inc
Slide 8: With Gas Consumption Increasing Across All Sectors
WITH GAS CONSUMPTION INCREASING ACROSS ALL SECTORS… Global Natural Gas Consumption by Sector ('000 bcf) 250 200 History Projections Over time, natural gas use is expected to accelerate 150 from increased industrial activity, natural gas-fired 100 electricity generation, and transportation fueled by
Slide 9: Supporting a Less Carbon-Intensive World
…SUPPORTING A LESS CARBON-INTENSIVE WORLD… Pounds of CO2 emitted per thousand cubic feet Up to Core products support a global transition 49% toward lower carbon fuel sources 229 Ancillary products support decarbonization 215 214 fewer CO2 emissions 206 vs. other fossil fuels1 161 157 Flare gas recap
Slide 10: Including During an Energy Transition
…INCLUDING DURING AN ENERGY TRANSITION Electricity generation from selected fuels (AEO2020 Reference case) billion kilowatthours 2019 Global energy demand will 6,000 continue to grow, primarily in the form of electricity history projections 5,000 4,000 36% Demand will likely be satisfied by 37% Natu
Slide 11: Positioned for Growth
POSITIONED FOR GROWTH ENERFLEX
Slide 12: All Produced Gas Requires Compression and Processing
ALL PRODUCED GAS REQUIRES COMPRESSION AND PROCESSING (‘000 bcf) +57 200 191.4 Projected consumption increase 150 134.7 of ~57,0001 bcf by 2050 requires $billions 100 of compression, processing, and maintenance 50 investments 0 2020 2050 1 Based on EIA International Energy Outlook 2019, Case: Referen
Slide 13: Global Leader in Delivering Natural Gas Solutions
GLOBAL LEADER IN DELIVERING NATURAL GAS SOLUTIONS Business Overview* Revenue: $1,393 MM Employees: ~2,100 Operating Locations: 57 Manufacturing Facilities: 3 Countries: 17 Fleet HP: ~715,000 0 Manufacturing Facility 90 bcf/d bcf/d** Operating Location Owned, Operated and Maintained Gas Infrastructur
Slide 14: Complementary Offerings on a Global Scale
COMPLEMENTARY OFFERINGS ON A GLOBAL SCALE Engineered Systems Vertically Integrated Customized offerings for: Gas Compression, Gas platform Processing Plants, refrigeration solutions, Cryogenic Plants, Electric Power Generation, CO2 facilities Focused on growth and Integrated Turnkey (“ITK”) maintena
Slide 15: Solutions from the Wellhead to Pipeline
SOLUTIONS FROM THE WELLHEAD TO PIPELINE 15
Slide 16: Diversification Strategy
DIVERSIFICATION STRATEGY Complementary offerings of USA diversified product lines in Canada diversified geographies ROW Vertically Integrated platform provides differentiation Engineered Systems Focused on growth and AMS maintenance of gas Asset Ownership production volumes 16
Slide 17: Additional Focus on Recurring Revenue Growth
ADDITIONAL FOCUS ON RECURRING REVENUE GROWTH Recurring revenues stabilize financial performance Higher margins versus manufacturing Strategic goal of generating ≥ 50% of revenue from recurring sources Asset Ownership Any product on a leased or Build-Own-Operate- Maintain (“BOOM”) basis in all target
Slide 18: What Is Asset Ownership?
WHAT IS ASSET OWNERSHIP? 1 2 Products engineered, built, Leased to Customers for and owned by Enerflex Asset Ownership varying durations on a = take-or-pay basis Contract Compression + BOOM 4 3 Contracted revenues provide May include long-term valuable source of stable, operations & maintenance pred
Slide 19: Rationale for Asset Ownership
RATIONALE FOR ASSET OWNERSHIP C$ in millions Asset ownership stabilizes and $800 balances financial performance against a cyclical manufacturing business $600 $400 $200 $0 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 2012 2013 2014 2015 201
Slide 20: Contract Compression
CONTRACT COMPRESSION Contract Compression = leasing of necessary upstream gas compression infrastructure Demand is driven by both new production and maintenance of existing volumes Take-or-pay arrangements oriented toward customer opex 20
Slide 21: Strong U.S. Contract Compression Fundamentals
STRONG U.S. CONTRACT COMPRESSION FUNDAMENTALS US Contract Compression Market1 (million horsepower) 16.0 Changing field conditions 14.0 History Projections require continual equipment modification, making rental 12.0 7.6% an attractive alternative to 10.0 CAGR purchasing 8.0 Demand is expected to gro
Slide 22: Capturing Opportunities in a Supportive Market
CAPTURING OPPORTUNITIES IN A SUPPORTIVE MARKET Low >160% 81% 39% High 44% Mid 17% Growth of US fleet from USA contract Diversified horsepower ~130,000 hp to compression fleet profile across contract > 350,000 hp since 2017 utilization %1 compression fleet2 1 Average utilization for the three months
Slide 23: Build-Own-Operate-Maintain BOOM
BUILD-OWN-OPERATE-MAINTAIN BOOM Any Engineered System or ITK product on a Build- Build-Own- Own-Operate-Maintain Operate-Maintain (“BOOM”) basis in all target markets Larger scale compression and processing facilities Longer-term contracts vs. Engineering Fabrication Installation & Operations & Main
Slide 24: BOOM Portfolio Continues to Grow
BOOM PORTFOLIO CONTINUES TO GROW Early Compression Development Facility, Bahrain Facility, Oman Early Production Compression Compression Compression Gas Compression Facility, Gas Gathering Compression Facility, USA Facility, Oman Facility, Colombia Argentina Facility, Colombia Facility, Oman 2009 20
Slide 25: Priority to Grow Recurring Revenues
PRIORITY TO GROW RECURRING REVENUES Recurring Revenue C$ in millions +8% CAGR1 $596.9 $600 $570.3 $537.2 $521.1 $500 $486.4 $471.5 $461.7 Recurring revenue growth through $400 $375.0 394.6 363.8 Recurring organicrevenue has investment $321.0 $323.5 384.6 298.7 345.1 grown andby $250 million strategi
Slide 26: Asset Ownership Risks
ASSET OWNERSHIP RISKS 01 Counterparty Credit 03 Asset Performance 02 Well basin and/or dynamics Risks mitigated when paired with financial + basin due diligence and Enerflex AMS 26
Slide 27: Optimized Platform Positioned for Growth
OPTIMIZED PLATFORM POSITIONED FOR GROWTH VERTICAL INTEGRATION FINANCIAL STRENGTH 1 Differentiated global platform with product Manufacturing cash flows fund investment 2 line synergies in Asset Ownership platform DIVERSE OFFERINGS VALUE CREATION 3 Growing all product offerings in all Growing profita
Slide 28: Committed to Safety
COMMITTED TO SAFETY 2019 Global Consolidated Safety Record:1 0.09 0.55 0.28 LTI TRIR MVIR Total # of Lost Total Recordable Motor Vehicle Time Incidents Injury Rate per Incidents per per 200,000 200,000 exposure 1,000,000 km exposure hours. hours. driven. 2019 Target = 0.00 2019 Target = 0.62 2019 Ta
Slide 29: Enhancing and Strengthening Communities
ENHANCING AND STRENGTHENING COMMUNITIES Corporate citizenship through wellness and community development initiatives is an integral part of Enerflex’s vision 29
Slide 30: Focused Regional Presence
FOCUSED REGIONAL PRESENCE
Slide 31: United States
UNITED STATES USA1 Eng. Systems $556 MM Service $163 MM Rental $ 89 MM Gas infrastructure Total Revenue $808 MM Fleet: ~350,000 HP demand driven by Average Fleet Utilization: 81%2 gas production from US shale plays Enerflex is positioned % of Consolidated Revenues1 to grow its asset ownership and af
Slide 32: Rest of World – Latin America
REST OF WORLD – LATIN AMERICA Rest of World1 Eng. Systems $ 29 MM Service $144 MM Regional gas production is Rental $110 MM TBD Total Revenue $283 MM expected to grow by Fleet: ~310,000 HP approximately 80% by 2040 % of Consolidated Revenues1 Continued success with ITK, BOOM, and recurring Canada 21
Slide 33: Rest of World – Middle East / Africa
REST OF WORLD – MIDDLE EAST / AFRICA TheTBD Middle East accounts for > 35% of the world’s proven gas reserves* ~ 100,000 horsepower of owned and installed gas Rest of World1 compression and Eng. Systems $ 29 MM % of Consolidated Revenues1 Service $144 MM processing facilities Rental $110 MM Enerflex
Slide 34: Canada
CANADA % of Consolidated Revenues1 Canada1 Canada NGL recovery drives Eng. Systems $238 MM 21.7% infrastructure demand Service $ 56 MM USA Rental $ 8 MM Total Revenue $302 MM ROW 58.0% in liquids-rich basins Fleet: ~55,000 HP 20.3% Petrochemical projects will increase domestic consumption of NGLs El
Slide 35: Financial Overview and Prospects
FINANCIAL OVERVIEW AND PROSPECTS
Slide 36: Revenue Growth Through Complementary Offerings
REVENUE GROWTH THROUGH COMPLEMENTARY OFFERINGS C$ in millions $2,045.4 TTM Q3 2020 2019 15% 10% 19% $1,696.2 $1,703.3 502.9 26% 59% $1,629.0 $1,553.4 71% $1,501.7 299.9 $1,405.0 $1,392.6 529.4 494.2 346.8 $1,227.1 418.6 500.4 438.2 $1,130.6 422.8 301.8 Engineered Systems Service Rentals 444.0 232.8
Slide 37: Disciplined Growth Through Strategic Investments
DISCIPLINED GROWTH THROUGH STRATEGIC INVESTMENTS CAPEX, M&A and ROCE Product Organic Stable sale cash Reinvestment investment Leads to Growth + flows + M&A Returns ~$1.5B reinvested over the past nine years C$ in millions $600 17.5% > 90% of growth capex 13.3% invested in recurring $500 $400 9.7% 12
Slide 38: Business Mix Drives Profitability
BUSINESS MIX DRIVES PROFITABILITY… EBITDA and EBITDA Margin C$ in millions Over $100 million increase in EBITDA 400.0 16.8% 16.9% since 2011 coupled with increasing 16.3% EBITDA margins 350.0 13.8% 13.2% 345.8 Supported by an asset ownership platform underpinned by take-or- 300.0 10.9% 11.4% pay arr
Slide 39: Gross Margin Profile
GROSS MARGIN PROFILE Revenues (C$ in millions) and Gross Margin %1 by Product Line Q3 2020 Q3 2019 Q3 2020 Q3 2019 YTD YTD Engineered Revenue 127.9 398.3 502.5 1,128.7 Systems Gross Margin % 17.7% 22.0% 19.8% 18.5% Revenue 61.1 60.5 187.6 183.5 Rentals Gross Margin % 67.2% 64.5% 64.7% 61.8% After-Ma
Slide 40: Positive Free Cash Flow and Balance Sheet Strength
POSITIVE FREE CASH FLOW AND BALANCE SHEET STRENGTH Free Cash Flow Before Net Capital Spending* Net Debt to EBITDA C$ in millions 300.0 250.0 240.8 200.0 190.4 2.38 136.2 144.7 150.0 126.5 1.79 105.1 114.2 112.8 1.31 100.0 1.19 1.09 67.4 72.7 0.97 50.0 0.52 0.30 - 2011 2012 2013 2014 2015 2016 2017 2
Slide 41: Dividend History
DIVIDEND HISTORY Annually (C$/share) History Projections $0.50 $0.46 $0.45 $0.42 $0.40 The Company has $0.38 $0.34 $0.34 $0.34 maintained a dividend through $0.35 $0.30 $0.30 $0.28 the cycles since $0.25 $0.24 2011 $0.20 $0.18 $0.15 $0.10 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020* * Annualiz
Slide 42: Igniting the Future of Energy
IGNITING THE FUTURE OF ENERGY
Slide 43: Capital Allocation Priorities
CAPITAL ALLOCATION PRIORITIES Balance Sheet strength preserving liquidity to weather downturns. Organic growth of Asset Ownership platform in all Regions. Opportunistic Inorganic growth right assets, right places, right long-term returns.
Slide 44: Additional Organic + Inorganic Reinvestment
ADDITIONAL ORGANIC + INORGANIC REINVESTMENT… C$ in millions 453.3 Up to 79% increase in EBITDA1 from next $1B of reinvestment 100.0 79% 100.0 3-year average EBITDA1 $253.3M 253.3 Next $1B of CAPEX @10x EBITDA multiple $100M @5x EBITDA multiple $200M --------------------------------- $353.3M $453.3M
Slide 45: With Option to Consolidate a Fragmented Market
…WITH OPTION TO CONSOLIDATE A FRAGMENTED MARKET US Contract Compression Market (total horsepower, 000’s) 4,500 US contract compression market 4,000 consists of 4 to 5 large players and several small players 3,500 3,000 Roll-up of smaller players may 2,500 accelerate growth 2,000 1,500 1,000 500 350
Slide 46: Pivot to Recurring Revenues Supports Valuation
PIVOT TO RECURRING REVENUES SUPPORTS VALUATION EV/NTM EBITDA Multiples1: 10.0 9.0 8.0 Implied multiple 7.0 expansion with 6.0 continued growth of 5.0 recurring revenue 4.0 product lines 3.0 2.0 1.0 0.0 Sep-19 Dec-19 Mar-20 Jun-20 Sep-20 EFX Average Pure Play Contract Compression Peer 1 EV/NTM EBITDA
Slide 47: What's Next for Enerflex
WHAT’S NEXT FOR ENERFLEX • Current geographic platform provides the foundation for incremental growth in each operating region. • Focus remains on profitably growing each of the Engineered Systems, After-Market Services, and Asset Ownership product lines in all regions. • Asset Ownership remains the
Slide 48: Executing on a Powerful Strategy
EXECUTING ON A POWERFUL STRATEGY Proven track record of Creating Shareholder Value • Strong balance sheet and free cash flow allows Enerflex to pursue strategic growth opportunities to further expand the business. • Revenues derived from complementary product lines and geographies. • Improving margi
Slide 49: Slide 49
Slide 50: Appendix – Reconciliations
APPENDIX RECONCILIATIONS
Slide 51: Free Cash Flow
FREE CASH FLOW TTM Q3 Dec-11 Dec-12 Dec-13 Dec-14 Dec-15 Dec-16 Dec-17 Dec-18 Dec-19 2020 Cash provided by operating activities 134,795 134,208 69,024 64,611 104,173 91,792 179,251 242,868 54,169 82,638 Net change in non-cash working capital and other 48,243 15,531 (28,929) (61,053) (55,251) (41,385
Slide 52: Gross Margin Profile by Product Line (Three Months)
GROSS MARGIN PROFILE BY PRODUCT LINE1 1 For the three months ended September 30, 2020 versus the prior year period. 52
Slide 53: Gross Margin Profile by Product Line (Nine Months)
GROSS MARGIN PROFILE BY PRODUCT LINE1 1 For the nine months ended September 30, 2020 versus the prior year period. 53
Slide 54: Composition of Borrowings
COMPOSITION OF BORROWINGS ($ Canadian thousands) September 30, 2020 December 31, 2019 Drawings on Bank Facility1 106,214 121,328 Senior Notes due June 22, 2021 40,000 40,000 Senior Notes due December 15, 20241 155,060 151,374 Senior Notes due December 15, 20271 123,373 120,916 Deferred transaction c