Pason Systems Inc. · TSX:PSI
Pason Systems — Investor Day (May 2024)
42 slides from Pason Systems's investor day presentation, May 30, 2024
Slide 1: Investor Day
INVESTOR DAY May 30, 2024 Calgary, Alberta
Slide 2: Welcome
Welcome Marcel Kessler Chair, Board of Directors
Slide 3: Today's Presenters
Today’s Presenters Jon Faber Celine Boston Kevin Boston President & Chief Financial Officer Vice President, Chief Executive Officer Commercial John Gurski Russell Smith William Standifird President, Vice President, President, Energy Toolbase International Intelligent Wellhead Systems Page 3
Slide 4: Additional Management Team Members
Additional Management Team Members Craig Bye Natalie Fenez Heather Hantos Vice President, Vice President, Vice President, Cloud Platforms & Applications Legal Human Resources Bryce McLean Lars Olesen Ryan van Beurden Vice President, Vice President, Vice President, Operations Product & Technology Rig
Slide 5: Board of Directors
Board of Directors Marcel Kessler* T. Jay Collins Jon Faber* Non-Executive Chair Chair, Human Resources and President & Chief Executive Officer Joined Pason Board in 2012 Compensation Committee Joined Pason Board in 2020 Joined Pason Board in 2012 Sophia Langlois Ken Mullen Laura Schwinn Director Ch
Slide 6: Strategy Overview
Strategy Overview Jon Faber President & Chief Executive Officer
Slide 7: Forward-Looking Information and Non-GAAP Measures
Forward-Looking Information and Non-GAAP Measures Forward-Looking Statements and Information Certain statements contained in this presentation constitute “forward-looking statements” and/or “forward-looking information” under applicable securities laws (collectively referred to as “forward-looking s
Slide 8: Agenda
Agenda Jon Faber Strategy Overview President & CEO Kevin Boston North American Drilling Vice President, Commercial Russell Smith International Drilling Vice President, International William Standifird Intelligent Wellhead Systems (IWS) President, Intelligent Wellhead Systems John Gurski Energy Toolb
Slide 9: Key Messages
Key Messages 1 Success built on a committed leadership team, an engaging culture and a focused strategy 2 Strong growth prospects are not reliant on higher levels of North American land drilling activity 3 Expectations of a less volatile industry environment going forward 4 Favourable industry trend
Slide 10: Success built on a committed leadership team, an engaging culture and a focused strategy
Success built on a committed leadership team, an engaging culture and a focused strategy Committed Leadership Engaging Culture Focused Strategy Jon Faber 10 DELIVERING DATA President & CEO years THAT DRIVES DECISIONS Celine Boston 3 Chief Financial Officer years ▪ End-to-end data management Kevin Bo
Slide 11: Strong growth prospects are not reliant on higher levels of North American land drilling activity
Strong growth prospects are not reliant on higher levels of North American land drilling activity North American Land Rig Count1 vs. Consolidated Revenue GROWTH DRIVERS BEYOND INCREASED NORTH AMERICAN LAND DRILLING ACTIVITY ▪ Increased Revenue per Industry Day in North America, driven by growing use
Slide 12: Expectations of a less volatile industry environment going forward
Expectations of a less volatile industry environment going forward WTI (US$/bbl) vs. North American Land Rig Count1 FACTORS RESULTING IN LOWER VOLATILTY ▪ Capital discipline and return of capital frameworks among E&P companies ▪ Limited access to equity financing capital for E&P companies to fund pr
Slide 13: Supply and demand fundamentals for oil appear constructive for increased drilling and completions activity
Supply and demand fundamentals for oil appear constructive for increased drilling and completions activity Drill Complete Produce Store Use US land rigs US drilled but US oil production US storage of crude Global oil demand uncompleted wells (millions of barrels and petroleum (“DUCs”) per day) produ
Slide 14: Favourable industry trends support meaningful growth opportunities in each operating segment
Favourable industry trends support meaningful growth opportunities in each operating segment Drilling activity based on global energy supply/demand Increasing use of data-driven technologies (including artificial intelligence, machine learning and big data) for automation and analytics Focus on repe
Slide 15: Proven financial strength and superior profitability
Proven financial strength and superior profitability 2019 2023 North American land drilling rigs (average)1 1,050 843 -20% Revenue per Industry Day (North America)2 $665 $950 +43% CAD CAD Revenue $296 $369 +25% C$ Millions C$ Millions Adjusted EBITDA3 $130 $171 +32% C$ Millions C$ Millions Adjusted
Slide 16: North American Drilling
North American Drilling Kevin Boston Vice President, Commercial
Slide 17: The Data Behind Well Construction
The Data Behind Well Construction Capture Aggregate Display Transmit Store Deliver Visualize Leverage Automation Safety Collaboration Reporting Analytics Real-Time Decision Making Page 17
Slide 18: Revenue per Industry Day has grown across industry cycles
Revenue per Industry Day has grown across industry cycles North American Revenue per Industry Day1 Primary Increased product adoption Increased US market share driven largely by Increased product adoption driven growth driven by well complexity large contractor partnerships by growing demand for dat
Slide 19: Revenue per Industry Day since 2019
Revenue per Industry Day since 2019 North American Revenue per Industry Day1 DRIVERS OF FUTURE GROWTH ▪ Growing demand for data (automation and analytics) ▪ Seamless integration with 3rd party / customer cloud analytics platforms ▪ New and advanced technologies (e.g. mud analyzer, automation softwar
Slide 20: International Drilling
International Drilling Russell Smith Vice President, International
Slide 21: Strong International Presence
Strong International Presence Land Drilling Activity Region 20231 2028 Forecast2 Middle Central and South America 139 rigs 151 rigs East Middle East 269 rigs 348 rigs Australia 19 rigs 21 rigs TOTAL 427 rigs 520 rigs Latin America Increasing land drilling activity bolstered by robust well Australia
Slide 22: International Drilling Revenue Since 2019
International Drilling Revenue Since 2019 International Drilling Revenue (CAD millions) DRIVERS OF FUTURE GROWTH ▪ Global unconventional resource exploration and development ▪ Rig fleet additions and upgrades ▪ Increasing demand for, and priority placed on, fast, reliable and complete data Growing d
Slide 23: Intelligent Wellhead Systems
Intelligent Wellhead Systems William Standifird President, Intelligent Wellhead Systems
Slide 24: Automation and Data Management in Completions
Automation and Data Management in Completions Capture Aggregate Display Transmit Store Deliver Visualize Leverage Core IWS capabilities Strengthened with Pason’s experience Automation Safety Collaboration Reporting Analytics Real-Time Decision Making Page 24
Slide 25: Intelligent Wellhead Systems Revenue Since 2019
Intelligent Wellhead Systems Revenue Since 2019 Intelligent Wellhead Systems Revenue1 (CAD millions) DRIVERS OF FUTURE GROWTH ▪ Industry adoption of automation and analytics technology offerings ▪ Increased market share ▪ Growing complexity of completions operations ▪ New product development ▪ Estab
Slide 26: Changing Nature of Completions Operations
Changing Nature of Completions Operations IWS Total Stages Completed by Job Type 2021 2022 2023 12% 23% 21% 36% 65% 42% 100% Standard Zipper Stage Continuous Stage Simultaneous Stage Growing complexity of completions operations is expected to drive wider spread adoption of data and automation techno
Slide 27: Significant Addressable Market in Completions
Significant Addressable Market in Completions US Active Land Rigs1 and Frac Spreads2 IWS REVENUE PER INDUSTRY DAY3 Q1-2024 C$5,026 PASON REVENUE PER INDUSTRY DAY3 Q1-2024 C$1,000 IWS’ daily revenue is more than 3x Pason’s in a market that has a little more than one-third of the number of active site
Slide 28: Energy Toolbase
Energy Toolbase John Gurski President, Energy Toolbase
Slide 29: The Intelligence Layer in the Solar + Energy Storage Industry
The Intelligence Layer in the Solar + Energy Storage Industry Model the site Review energy costs Analyze Incorporate PV Create a proforma and rate switch incentives generation cash flow model scenarios Real-time Control advisory the assets Grid services Electric bill Solar Manual and revenue savings
Slide 30: Energy Toolbase Revenue Since 2019
Energy Toolbase Revenue Since 2019 Energy Toolbase Revenue1 (CAD millions) DRIVERS OF FUTURE GROWTH ▪ Leveraging visibility on project proposals through economic modeling tool ▪ Increased deployment of energy storage assets ▪ Real-time monitoring of solar and storage asset operations and performance
Slide 31: Growing Pipeline of Energy Storage Opportunities
Growing Pipeline of Energy Storage Opportunities Number of Proposals with Energy Storage Included1 DRIVERS OF FUTURE GROWTH ▪ Energy storage equipment costs reductions ▪ Changes in utility rate policy incentivizing greater NEM 3.0 became usage of energy storage (e.g. Inflation Reduction Act effectiv
Slide 32: Financial Overview
Financial Overview Celine Boston Chief Financial Officer
Slide 33: Proven Financial Strength and Superior Profitability
Proven Financial Strength and Superior Profitability 2019 2023 North American land drilling rigs (average)1 1,050 843 -20% Improved financial Revenue $296 $369 +25% fundamentals despite C$ Millions C$ Millions challenging industry Adjusted EBITDA2 $130 $171 +32% conditions C$ Millions C$ Millions Ad
Slide 34: Resilient Balance Sheet Over Time
Resilient Balance Sheet Over Time Total Cash1 Through operating cash flows over the last ten years 3… in CAD millions ▪ Invested $324 million in research & development and $352 million in Net Capital Expenditures2 ▪ Paid $495 million to shareholders in dividends ▪ Repurchased $88 million in outstand
Slide 35: Revenue Growth with Significant Operating Leverage
Revenue Growth with Significant Operating Leverage Revenue1 Adjusted EBITDA2 in CAD millions in CAD millions Investments in mostly fixed cost base will drive margin expansion as revenue grows 1. The Completions segment includes results generated by Intelligent Wellhead Systems (IWS), which were not
Slide 36: Disciplined Approach to Invested Capital
Disciplined Approach to Invested Capital Net Capital Expenditures1 Free Cash Flow2 in CAD millions in CAD millions Investments made to enhance hosting capabilities & leverage software Includes growth capex related to IWS Acquisition & new drilling products Average capex of $25M/year with limited rei
Slide 37: Capital Allocation Priorities
Capital Allocation Priorities 1 Shareholder Returns Over Time Preserve Balance Sheet Strength ➢ Managing end market cyclicality with operating leverage ➢ Ability to pursue attractive growth opportunities 2 Disciplined and Sustainable Shareholder Returns ➢ Exposure to steady growth in the quarterly d
Slide 38: Well Positioned for Meaningful Growth
Well Positioned for Meaningful Growth Significant Momentum with Revenue Growth Opportunities… Coupled with… North American Revenue per Industry Day 1 Intelligent Wellhead Systems Revenue ▪ Largely fixed cost base with high operating leverage ▪ Stable capital intensity with targeted growth- related i
Slide 39: Key Messages
Key Messages 1 Success built on a committed leadership team, an engaging culture and a focused strategy 2 Strong growth prospects are not reliant on higher levels of North American land drilling activity 3 Expectations of a less volatile industry environment going forward 4 Favourable industry trend
Slide 40: Questions and Answers
Questions and Answers
Slide 41: Pason Systems contact details
Pason Systems 6130 Third Street SE Calgary, AB T2H 1K4 Canada Phone: 403.301.3400 Web: — www.pason.com Email: investorrelations@pason.com Page 41
Slide 42: Non-GAAP Measures
Non-GAAP Measures TTM Q1 $CAD 000s 2019 2020 2021 2022 2023 Q1 2024 2024 Net income (loss) 53,803 5,134 31,925 105,726 95,827 69,123 129,496 Add: Income taxes 20,193 4,864 11,738 33,405 34,346 9,057 31,029 Depreciation and amortization 40,830 34,417 25,689 20,842 27,216 11,730 32,330 Stock-based com