Slide 1: Company Overview May 2020
COMPANY OVERVIEW May 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 Andrew Jack President, USA President, Latin America President, International President, Canada 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 Per Capita Energy Use vs. United Nations Human Development Index Score 1.00 Sweden Germany Australia Norway Finland USA Canada Spain 0.90 U.N. HUMAN DEVELOPMENT INDEX Uruguay Oman Saudi Philippines UAE 0.80 Arabia Poland 0.70 Namibia 0.60 Angola 0.50 N
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 +42% Natural gas is the world’s 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: Increased Gas Consumption in All Sectors
INCREASED GAS CONSUMPTION IN 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 50 compres
Slide 9: While Reducing Carbon Intensity
…WHILE REDUCING CARBON INTENSITY Pounds of CO2 emitted per thousand cubic feet 49% Up to - 49% 229 215 214 206 fewer CO2 emissions 161 157 vs. other 139 fossil fuels1 117 Environmental considerations support a shift to natural gas vs. other fossil fuels Coal Coal Coal Coal Diesel Fuel Gasoline Propa
Slide 10: All Produced Gas Requires Compression and Processing
ALL PRODUCED GAS REQUIRES COMPRESSION AND PROCESSING (‘000 bcf) +57 200 191.4 Consumption increase 150 of ~57,0001 bcf by 134.7 2050 requires $billions of compression, 100 processing, and maintenance investments 50 0 2020 2050 10 1 Based on EIA International Energy Outlook 2019, Case: Reference.
Slide 11: Positioned for Growth
POSITIONED FOR GROWTH ENERFLEX
Slide 12: Global Delivery of Natural Gas Solutions
GLOBAL DELIVERY OF NATURAL GAS SOLUTIONS Business Overview* Revenue $1,926 MM Employees ~2,200 Operating Locations 57 Manufacturing Facilities 3 Countries 17 Fleet: ~685,000 HP Enerflex Manufacturing Facility 0 28,000 bcf bcf** Enerflex Operating Location Enerflex BOOM Assets *Trailing twelve-months
Slide 13: Executing on a Powerful Strategy
EXECUTING ON A POWERFUL STRATEGY Engineered Systems Customized offerings for: - Gas Compression - Gas Processing Plants - Cryogenic Plants - Electric Power Generation Any Engineered System or ITK product Integrated Turnkey (“ITK”) on a leased or Build- Turnkey Engineered Systems, with local construc
Slide 14: Solutions from the Wellhead to Pipeline
SOLUTIONS FROM THE WELLHEAD TO PIPELINE 14
Slide 15: Diversification Strategy
DIVERSIFICATION STRATEGY Complementary offerings of USA diversified product lines in Canada diversified geographies ROW Vertically Integrated platform provides differentiation Engineered Systems Focused on growth and AMS maintenance of gas Asset Ownership production volumes 15
Slide 16: Additional Focus on Growing Recurring Revenues
ADDITIONAL FOCUS ON GROWING RECURRING REVENUES Recurring revenue streams offer Engineered Systems greater stability and predictability of financial performance Integrated Turnkey Asset Higher EBITDA margins versus (“ITK”) Ownership manufacturing Strategic goal of generating After-Market Services ≥ 5
Slide 17: Asset Ownership
ASSET OWNERSHIP 1 2 Products engineered, built, Leased to Customers for and owned by Enerflex Asset Ownership varying durations = Contract Compression + BOOM 4 3 Contracted revenues provide May include long-term valuable source of stable, operations & maintenance predictable revenues and profits com
Slide 18: Rationale for Asset Ownership
RATIONALE FOR ASSET OWNERSHIP C$ in millions $800 $600 $400 $200 $0 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 2012 2013 2014 2015 2016 2017 2018 2019 2020 ES Bookings Trailing 12-Month EBITDA* * Normalized for Goodwill impairments. 18
Slide 19: Strong U.S. Contract Compression Fundamentals
STRONG U.S. CONTRACT COMPRESSION FUNDAMENTALS US Contract Compression Market1 (million horsepower) 16.0 Changing field conditions 14.0 History Projections require continual equipment modification, making rental 12.0 6.4% an attractive alternative to 10.0 CAGR purchasing 8.0 6.0 Demand is expected to
Slide 20: Capturing Opportunities in a Supportive Market
CAPTURING OPPORTUNITIES IN A SUPPORTIVE MARKET Low > 100% 87% 41% High 45% Mid 14% Growth of US fleet from USA contract Diversified horsepower ~130,000 hp to compression fleet profile across contract > 325,000 hp since 2017 utilization %1 compression fleet2 1 As at March 31, 2020. 2 High ≥ 801 horse
Slide 21: Build, Own, Operate & Maintain
BUILD, OWN, OPERATE & MAINTAIN BOOM Any Engineered System or ITK product on a Build, Own, Build-Own-Operate- Operate, Maintain Maintain (“BOOM”) basis in all target markets Larger scale compression and processing facilities Engineering & Installation Operations & Fabrication Design & Commissioning M
Slide 22: BOOM Portfolio Continues to Grow
BOOM PORTFOLIO CONTINUES TO GROW Early Compression Development Facility, Bahrain Facility, Oman Early Production Compression Compression Compression Gas Compression Facility, Compression Facility, USA Facility, Oman Facility, Colombia Argentina Facility, Oman 2009 2014 2015 2018 2020 Compression Pro
Slide 23: Priority to Grow Recurring Revenues
PRIORITY TO GROW RECURRING REVENUES Recurring Revenue C$ in millions +8% CAGR1 596.9 597.8 $600 537.2 521.1 $500 486.4 471.5 461.7 Recurring revenue growth through Recurring revenue has $400 375.0 395 390 organic investment grown by over $275 321.0 323.5 385 345 and strategic M&A $300 388 299 308 mi
Slide 24: 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 24
Slide 25: Optimized Platform Positioned for Growth
OPTIMIZED PLATFORM POSITIONED FOR GROWTH 1 2 VERTICAL INTEGRATION FINANCIAL STRENGTH Differentiated global Manufacturing cash platform with product flows fund investment line synergies in Asset Ownership platform 3 4 DIVERSE OFFERINGS VALUE CREATION Growing all product Growing profitability offering
Slide 26: Committed to Safety
COMMITTED TO SAFETY 2019 Global Consolidated Safety Record:1 0.09 0.55 0.28 LTI TRIR MVIR Total # of Lost Time Total Recordable Motor Vehicle Incidents per Injury Rate per Incidents per 200,000 exposure 200,000 exposure 1,000,000 km hours. hours. driven. 2019 Target = 0.00 2019 Target = 0.62 2019 Ta
Slide 27: Enhancing and Strengthening Communities
ENHANCING AND STRENGTHENING COMMUNITIES Corporate citizenship through wellness and community development initiatives is an integral part of Enerflex’s vision 27
Slide 28: Focused Regional Presence
FOCUSED REGIONAL PRESENCE
Slide 29: United States
UNITED STATES USA Eng. Systems $873 MM Service Rental $174 MM $83 MM Gas infrastructure Total Revenue $1,130 MM demand driven by associated gas from Fleet: ~325,000 HP Fleet Utilization: 87% US shale plays Enerflex is positioned % of Consolidated Revenues1 to grow its asset ownership and after- Cana
Slide 30: Rest of World – Latin America
REST OF WORLD – LATIN AMERICA Rest of World Eng. Systems $57 MM Service $152 MM Regional gas production is Rental $114 MM TBD Total Revenue $323 MM expected to grow by Fleet: ~300,000 HP approximately 80% by 2040* % of Consolidated Revenues1 Continued success with ITK, Canada BOOM, and recurring 24.
Slide 31: Rest of World – Middle East / Africa
REST OF WORLD – MIDDLE EAST / AFRICA TheTBD Middle East accounts for > 30% of the world’s proven gas reserves* ~ 100,000 horsepower of owned and installed gas Rest of World compression and Eng. Systems $57 MM % of Consolidated Revenues1 Service $152 MM processing facilities Rental $114 MM Enerflex O
Slide 32: Canada
CANADA % of Consolidated Revenues1 Canada Canada NGL recovery drives Eng. Systems $399 MM Service $63 MM 24.5% infrastructure demand Rental $11 MM USA Total Revenue $473 MM ROW 58.7% in liquids-rich basins Fleet: ~60,000 HP 16.8% Petrochemical projects will increase domestic consumption of NGLs Elec
Slide 33: Financial Overview and Prospects
FINANCIAL OVERVIEW AND PROSPECTS
Slide 34: Revenue Growth Through Complementary Offerings
REVENUE GROWTH THROUGH COMPLEMENTARY OFFERINGS C$ in millions $2,045.4 TTM Q1 2020 2019 $1,926.3 11% 10% $1,696.2 $1,703.3 $503 20% 19% $1,629.0 $1,553.4 $473 69% 71% $1,501.7 $300 $1,405.0 $529 $494 $347 $419 $1,227.1 $323 $500 $438 $1,130.6 $423 Engineered Systems Service Rentals $444 $233 $405 $3
Slide 35: A Disciplined Approach to Strategic Growth
A DISCIPLINED APPROACH TO STRATEGIC GROWTH CAPEX, M&A and ROCE Approximately C$1.5 Organic Leads To M&A Leads Organic Leads To M&A billion reinvested in Investment Opportunities To Investment Opportunities organic growth and C$ in millions M&A opportunities $600 17.5% 16.1% over the past nine $500 1
Slide 36: Business Mix Drives Profitability
BUSINESS MIX DRIVES PROFITABILITY EBITDA and EBITDA Margin C$ in millions 400.0 16.8% 16.9% 18.0% 350.0 13.8% 13.2% 345.8 345.8 300.0 11.4% 10.9% Over $200 million 250.0 10.4% 10.4% increase in EBITDA 200.0 9.0% 214.1 225.2 since 2011 coupled 193.7 176.8 190.3 with increasing 150.0 156.8 EBITDA marg
Slide 37: Gross Margin Profile
GROSS MARGIN PROFILE Revenues (C$ in millions) and Gross Margin %1 by Product Line Q1 2020 Q1 2019 Revenue 225.4 345.5 Engineered Systems Gross Margin % 23.1 15.5 Revenue 53.7 47.9 Rentals Gross Margin % 65.4 63.3 After-Market Revenue 86.7 91.5 Services Gross Margin % 26.0 23.6 37 1 Gross Margin % i
Slide 38: 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 300.0 250.0 240.8 242.7 200.0 190.4 2.38 150.0 136.2 126.5 1.79 105.1 114.2 112.8 100.0 1.19 1.09 1.16 67.4 72.7 0.97 50.0 0.52 0.30 - 2011 2012 2013 2014 2015 2016 2017 2
Slide 39: Dividend History
DIVIDEND HISTORY Annually (C$/share) History Projections $0.50 $0.46 $0.45 $0.42 $0.40 The Company has $0.38 maintained a $0.34 $0.34 $0.34 dividend through $0.35 $0.30 $0.30 $0.28 the cycles since $0.25 $0.24 2011 $0.20 $0.18 $0.15 $0.10 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020* 39 * Annua
Slide 40: Igniting the Future of Energy
IGNITING THE FUTURE OF ENERGY
Slide 41: Capital Allocation Priorities
CAPITAL ALLOCATION PRIORITIES Balance Sheet strength preserving liquidity to weather downturns. Organic growth of Asset Ownership platform in all Regions. Opportunistic Inorganic growth right assets, right places, right long-term returns.
Slide 42: Additional Organic + Inorganic Reinvestment
ADDITIONAL ORGANIC + INORGANIC REINVESTMENT… C$ 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 43: 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 2,500 Roll-up of smaller players may 2,000 accelerate growth 1,500 1,000 500 310
Slide 44: 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 6.0 expansion with 5.0 continued growth of 4.0 recurring revenue 3.0 product lines 2.0 1.0 0.0 EFX Average Pure Play Contract Compression Peer 1 EV/NTM EBITDA multiple for Enerflex and the foll
Slide 45: 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 46: 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 47: Slide 47
Slide 48: Appendix: Reconciliations
APPENDIX RECONCILIATIONS
Slide 49: Free Cash Flow
FREE CASH FLOW TTM Q1 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 (58,832) Net change in non-cash working capital and other 48,243 15,531 (28,929) (61,053) (55,251) (41,3
Slide 50: Gross Margin Profile by Product Line
GROSS MARGIN PROFILE BY PRODUCT LINE1 1 For the three months ended March 31, 2020 versus the prior year period. 50
Slide 51: Composition of Borrowings
COMPOSITION OF BORROWINGS ($ Canadian thousands) March 31, 2020 December 31, 2019 Drawings on Bank Facility1 144,167 121,328 Senior Notes due June 22, 2021 40,000 40,000 Senior Notes due December 15, 20241 163,964 151,374 Senior Notes due December 15, 20271 129,309 120,916 Deferred transaction costs