Trican Well Service Ltd. · TSX:TCW
Trican Well Service — Investor Presentation (March 2016)
37 slides from Trican Well Service's investor presentation, March 2016
Slide 1: Investor Presentation
INVESTOR PRESENTATION March 2016
Slide 2: Forward Looking Statements
FORWARD LOOKING STATEMENTS 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 development
Slide 3: Overview of Trican - Current
OVERVIEW OF TRICAN - CURRENT Full service, Canadian pressure YEAR TO DATE DECEMBER 31, 2015 pumping company Revenue by Service Line 2% 3% 2% 440,000 HP available fracturing 9% capacity 17% Completions Tools business active in North America, Norway and Russia 67% Fracturing Coiled Tubing Focu
Slide 4: Sale of U.S. Business
SALE OF U.S. BUSINESS 645,000 HP fracturing equipment 14 Cementing units 7 Coiled Tubing units Property, personnel, and ongoing work commitments 4
Slide 5: Sale of U.S. Business
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) 5
Slide 6: Sale of U.S. Business
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 6
Slide 7: Debt Reduction and Covenant Relief
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 7
Slide 8: Covenant Relief
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 8
Slide 9: Covenant Relief
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 9
Slide 10: U.S. Sale - Strategic Rationale
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 hav
Slide 11: U.S. Sale - Strategic Rationale
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 operation
Slide 12: Canada
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Slide 13: 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) Trica
Slide 14: Canada - Safety and Technical Advantage
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 sha
Slide 15: Geographic Coverage
GEOGRAPHIC COVERAGE Horn River FORT NELSON HIGH LEVEL Shale British Columbia Alberta Saskatchewan Manitoba Montney FORT ST. JOHN Shale RED EARTH GRANDE PRAIRIE Duvernay Shale WHITECOURT HINTON NISKU LLOYDMINSTER DRAYTON VALLEY Viking RED DEER PROVOST Tight Oil DRUMHELLER Tight Gas CALGARY BRANDON BR
Slide 16: Canada Equipment
CANADA EQUIPMENT Canadian HP Growth Current available Canadian fleet 500,000 450,000 • 440,000 fracturing HP 400,000 350,000 • 55 Cementing units 300,000 250,000 • 38 N2 Pumpers 200,000 150,000 • 19 Acid Units 100,000 50,000 0 • 16 Coil Units 2008 2009 2010 2011 2012 2013 2014 2015 2016* * Anticip
Slide 17: Canada - Outlook
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 sub
Slide 18: Canada - Outlook
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 18
Slide 19: Canada - Cost Reductions
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 19
Slide 20: Completion Tools
COMPLETION TOOLS
Slide 21: 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 Grown Norwegian and Russi
Slide 22: International
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 work
Slide 23: Getting Through the Downturn
GETTING THROUGH THE DOWNTURN
Slide 24: 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 24
Slide 25: Positives After the Downturn
POSITIVES AFTER THE DOWNTURN Strong earnings on reduced cost structure as utilization and pricing improve Competitive landscape changing • Baker-Halliburton merger will create opportunities in all of our markets • Competitive landscape will change - Smaller competitors struggling to survive - Me
Slide 26: Coming Out of the Downturn
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
Slide 27: Innovation
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Slide 28: Innovation - MVP Frac
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 • Recent case studies show 20% incre
Slide 29: Innovation - TriVert Diverting Agent
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 29
Slide 30: Trican Reservoir Solutions
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 30
Slide 31: Sustainable Innovation
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
Slide 32: Financial Overview
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Slide 33: Post USA Balance Sheet
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
Slide 34: Cash Flow
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 34
Slide 35: Investment Advantages
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 num
Slide 36: Summary
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 36
Slide 37: Investor Presentation
INVESTOR PRESENTATION March 2016
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