Slide 1: Company Overview
COMPANY OVERVIEW August 2021 1
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: 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 • Focused on growth, maintenance, and handling of produced gas volumes. • Complementary product lines and regions driving balanced revenue growth. • Investing in recurring revenue sources to increase and
Slide 4: Executive Management Team
EXECUTIVE MANAGEMENT TEAM Marc Rossiter Sanjay Bishnoi Patricia Martinez President & CEO SVP, Chief Financial Officer Chief Energy Transition Officer & President, Latin America David Izett Greg Stewart Phil Pyle Helmuth Witulski SVP, General Counsel President, USA President, International President,
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 5 Source: World Bank DataBank 2019; U.N. Human Development Reports.
Slide 6: Consumption Tracks GDP Growth
CONSUMPTION TRACKS GDP GROWTH Global Aggregate Energy Consumption Global Gross Domestic Product (‘000 bcf equivalent) trillion 2010 US dollars 300 High Economic History Projections 1,000 Growth History Projections non-OECD 250 800 Reference 200 Low Economic Growth 600 non-OECD 150 High Economic 400
Slide 7: Global Energy Demand Is Satisfied by a Diverse Fuel Mix
GLOBAL ENERGY DEMAND IS SATISFIED BY A DIVERSE FUEL MIX Projected Global Energy Consumption (‘000 bcf equivalent per year) 1000 +42% Natural gas is the 900 (~ 57,000 bcf) world’s fastest growing 800 source of fossil fuel 700 600 500 400 Global natural gas 191.4 consumption is projected 300 134.7 to
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 Over time, natural gas use History Projections 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 Core products support a global transition Up to toward lower carbon fuel sources 49% Ancillary products support decarbonization 229 fewer CO2 emissions 215 214 vs. other 206 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 6,000 Global energy demand will continue to grow, primarily in 5,000 the form of electricity 4,000 36% Demand will likely be Natural gas satisfied by a growing 37% 3,000
Slide 11: For Which Enerflex Is Well Positioned
…FOR WHICH ENERFLEX IS WELL POSITIONED Enerflex Cumulative Enerflex Firsts Energy Transition Projects 1982 1st e-Compression plant 150 CCUS projects 1983 1st CCUS plant 5 million tpy CO2 capacity 3 million hp Electric drive compression 2002 1st Hydrogen plant 200,000 hp Hydrogen compression 2003 1st
Slide 12: Positioned for Growth
SN |e |. POSITIONED FOR GROWTH ENERFLEX
Slide 13: All Produced Gas Requires Compression & Processing
ALL PRODUCED GAS REQUIRES COMPRESSION & PROCESSING (‘000 bcf) +57 200 191.4 150 Projected consumption 134.7 increase of ~57,0001 bcf by 2050 requires $billions of compression, 100 processing, and maintenance investments 50 0 2020 2050 13 1 Based on EIA International Energy Outlook 2019, Case: Refere
Slide 14: Global Leader in Delivering Natural Gas Solutions
GLOBAL LEADER IN DELIVERING NATURAL GAS SOLUTIONS Business Overview* Revenue: $972 MM Employees: ~2,000 Operating Locations: 57 Manufacturing Facilities: 3 Countries: 17 Fleet HP: ~780,000 Manufacturing Facility 0 90 bcf/d bcf/d** Operating Location Owned, Operated and Maintained Gas Infrastructure
Slide 15: Complementary Offerings on a Global Scale
COMPLEMENTARY OFFERINGS ON A GLOBAL SCALE Engineered Systems Customized offerings for: Gas Compression and Gas Vertically Integrated platform Processing Plants, refrigeration solutions, Cryogenic Plants, Electric Power Generation, CO2 facilities Focused on growth and Integrated Turnkey (“ITK”) maint
Slide 16: Solutions from the Wellhead to Pipeline
SOLUTIONS FROM THE WELLHEAD TO PIPELINE 16
Slide 17: Diversification Strategy
DIVERSIFICATION STRATEGY USA Complementary offerings of Canada diversified product lines in diversified geographies ROW Vertically Integrated platform provides differentiation Focused on growth and Engineered maintenance of gas production Systems volumes AMS Asset Ownership 17
Slide 18: Additional Focus on Recurring Revenue Growth
ADDITIONAL FOCUS ON RECURRING REVENUE GROWTH Engineered Systems Recurring revenues stabilize financial performance Higher margins versus manufacturing Strategic goal of generating Integrated Turnkey (“ITK”) ≥ 50% of revenue from recurring sources Asset Ownership Any product on a leased or Build-Own-
Slide 19: What Is Asset Ownership?
WHAT IS ASSET OWNERSHIP? 1 Products engineered, built, 2 Leased to Customers for and owned by Enerflex Asset Ownership varying durations on a take-or- = pay basis Contract Compression + BOOM 4 3 Contracted revenues provide May include long-term valuable source of stable, operations & maintenance pre
Slide 20: Rationale for Asset Ownership
RATIONALE FOR ASSET OWNERSHIP C$ in millions Asset ownership stabilizes and 800 100 balances financial performance against 90 a cyclical manufacturing business 700 80 600 70 500 60 400 50 40 300 30 200 20 100 10 0 0 Sep-11 Sep-12 Sep-13 Sep-14 Sep-15 Sep-16 Sep-17 Sep-18 Sep-19 Sep-20 Engineered Sys
Slide 21: 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 21
Slide 22: Strong U.S. Contract Compression Fundamentals
STRONG U.S. CONTRACT COMPRESSION FUNDAMENTALS U.S. Contract Compression Market1 (million horsepower) 16.0 History Projections Changing field conditions 14.0 require continual equipment 12.0 7% modification, making rental an CAGR attractive alternative to 10.0 purchasing. 8.0 6.0 Demand is expected t
Slide 23: Capturing Opportunities in a Supportive Market
CAPTURING OPPORTUNITIES IN A SUPPORTIVE MARKET Low 37% ~190% 85% High 46% Mid 17% Growth of US fleet from USA contract Diversified horsepower ~130,000 hp to compression fleet profile across contract > 380,000 hp since 2017 utilization %1 compression fleet2 1 Average utilization for the three months
Slide 24: BOOM
BUILD – OWN – OPERATE – MAINTAIN BOOM Any Engineered System or Build-Own- ITK product on a Build- Operate-Maintain Own-Operate-Maintain (“BOOM”) basis in all target markets Larger scale compression and processing facilities Engineering Fabrication Installation Operations & Longer-term contracts vs.
Slide 25: BOOM Experience Continues to Grow
BOOM EXPERIENCE CONTINUES TO GROW Early Processing and Compression Development Compression Facility, Bahrain Facility, Oman Facility, Oman Early Production Compression Compression Compression Gas Compression Facility, Gas Gathering Compression Facility, USA Facility, Oman Facility, Colombia Argentin
Slide 26: Priority to Grow Recurring Revenues
PRIORITY TO GROW RECURRING REVENUES Recurring Revenue C$ in millions $700 +8% CAGR1 $618 $610 $597 $600 $537 $521 Recurring revenue $500 $486 $471 $462 growth through organic investment $303 $299 $400 $375 Recurring revenue has and strategic by ~$290M&A $395 $321 $323 $385 $299 $345 grown million (8
Slide 27: Asset Ownership Risks
ASSET OWNERSHIP RISKS 01 Counterparty Credit 03 Asset Performance 02 Well and/or basin dynamics Risks mitigated when paired with financial + basin due diligence and Enerflex AMS 27
Slide 28: 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 in line synergies Asset Ownership platform 3 4 DIVERSE OFFERINGS VALUE CREATION Growing all product Growing profitability offering
Slide 29: Committed to Safety
COMMITTED TO SAFETY 2020 Global Consolidated Safety Record:1 0.04 0.61 0.13 LTI TRIR MVIR Total # of Lost Total Recordable Motor Vehicle Time Incidents per Injury Rate per Incidents per 200,000 exposure 200,000 exposure 1,000,000 km hours. hours. driven. 2020 Target = 0.00 2020 Target = 0.50 2020 Ta
Slide 30: Enhancing and Strengthening Communities
ENHANCING AND STRENGTHENING COMMUNITIES Corporate citizenship through wellness and community development initiatives is an integral part of Enerflex’s vision 30
Slide 31: Focused Regional Presence
FOCUSED REGIONAL PRESENCE 31
Slide 32: USA
USA USA1 Eng. Systems $185 MM Service $139 MM Gas infrastructure Rental $ 91 MM Total Revenue $415 MM Fleet: ~380,000 HP Average Fleet Utilization: 85%2 demand driven by gas production from US shale plays % of Consolidated Revenues1 Enerflex is positioned Canada to grow its asset 16% ownership and a
Slide 33: Rest of World – Latin America
REST OF WORLD – LATIN AMERICA Rest of World1 Eng. Systems $ 46 MM Service $ 100 MM Rental $213 MM Total Revenue $359 MM Fleet: ~350,000 HP Regional gas production is expected to grow by % of Consolidated Revenues1 approximately 80% by 2040 Canada 16% Continued success with ITK, ROW USA BOOM, and rec
Slide 34: Rest of World – Middle East / Africa
REST OF WORLD – MIDDLE EAST / AFRICA The Middle East accounts for > 35% of the world’s proven gas reserves ~ 145,000 horsepower of owned and installed gas Rest of World1 Eng. Systems $ 46 MM % of Consolidated Revenues1 compression and Service Rental $ 100 MM $213 MM processing facilities Enerflex Op
Slide 35: Canada
CANADA % of Consolidated Revenues1 Canada 16% Canada1 Eng. Systems $ 130 MM NGL recovery drives Service Rental $ 61 MM $ 6 MM USA 52% infrastructure demand in liquids-rich basins ROW Total Revenue $ 197 MM 32% Fleet: ~45,000 HP Petrochemical projects will increase domestic consumption of NGLs Electr
Slide 36: Financial Overview and Prospects
FINANCIAL OVERVIEW AND PROSPECTS 36
Slide 37: Revenue Through Complementary Offerings
REVENUE THROUGH COMPLEMENTARY OFFERINGS Regional Revenue C$ in millions TTM Q2 2021 2020 37% 26% 32% 2047.3 49% 25% 31% 1696.2 1703.3 502.9 1628.9 1553.2 1501.7 299.9 1405 Engineered Systems Service Rentals 529.4 494.2 348.8 1227.1 418.6 1217.086 500.4 1130.5 438.2 422.8 231.8 971.6 444 232.8 405.2
Slide 38: Disciplined Growth Through Strategic Investments
DISCIPLINED GROWTH THROUGH STRATEGIC INVESTMENTS CAPEX, M&A and ROCE Less Product Organic cyclicality, sale cash sustained flows Reinvestment investment + M&A Leads to growth + >$1.5B reinvested over returns the past nine years (C$ in millions) $600 20.0% 16.7% 15.8% > 90% of growth capex $500 15.0%
Slide 39: Business Mix Drives Profitability
BUSINESS MIX DRIVES PROFITABILITY… EBITDA and EBITDA Margin % C$ in millions Increased EBITDA coupled with 400 16.8% 16.9% 18.0% higher EBITDA margins 16.1% Supported by an asset ownership 15.7% 350 16.0% 300 13.8% 13.2% 14.0% platform underpinned by take-or-pay 11.4% 10.9% 12.0% arrangements 250 10
Slide 40: Gross Margin Profile
GROSS MARGIN PROFILE Revenues (C$ in millions) and Gross Margin %1 by Product Line Q2 2021 Q2 2020 Engineered Revenue 65.0 149.2 Systems Gross Margin % 20.1% 16.6% Revenue 61.9 61.2 Rentals Gross Margin % 66.5% 64.6% After-Market Revenue 77.6 77.0 Services Gross Margin % 23.7% 24.1% 40 1 Gross Margi
Slide 41: 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 240.8 2.38 190.4 1.79 143.2 1.54 1.60 136.2 126.5 125.3 1.19 114.2 112.8 1.09 105.1 0.97 72.7 0.52 67.4 0.3 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 TTM Q2 -0.31
Slide 42: Dividend History
DIVIDEND HISTORY Annually (C$/share) $0.50 $0.46 $0.45 $0.42 $0.40 $0.38 The Company has maintained a $0.35 $0.34 $0.34 $0.34 $0.30 dividend through the $0.30 $0.28 $0.24 cycles since 2011 $0.25 $0.20 $0.18 $0.15 $0.10 $0.08 $0.05 $0.00 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 2021 42
Slide 43: Igniting the Future of Energy
IGNITING THE FUTURE OF ENERGY 43
Slide 44: Capital Allocation Priorities
CAPITAL ALLOCATION PRIORITIES Balance Sheet strength preserving liquidity to weather downturns. Organic growth of Asset Ownership platform in all Regions. Opportunistic Inorganic growth right assets, right places, right long-term returns. 44
Slide 45: Additional Organic + Inorganic Reinvestment
ADDITIONAL ORGANIC + INORGANIC REINVESTMENT… C$ in millions 454.1 Up to 79% increase in EBITDA1 from next $1B of reinvestment 100.0 79% 100.0 3-year average EBITDA1 $254.1M 254.1 Next $1B of CAPEX @10x EBITDA multiple $100M @5x EBITDA multiple $200M --------------------------------- $354.1M $454.1M
Slide 46: With Option to Consolidate a Fragmented Market
…WITH OPTION TO CONSOLIDATE A FRAGMENTED MARKET US Contract Compression Market (total horsepower, 000’s) 4,500 US contract compression market 4,000 consists of 4 to 5 large players and several small players 3,500 3,000 2,500 Roll-up of smaller players may accelerate growth 2,000 1,500 1,000 500 380
Slide 47: Pivot to Recurring Revenues Supports Valuation
PIVOT TO RECURRING REVENUES SUPPORTS VALUATION EV/NTM EBITDA Multiples1: 10 9 Implied multiple 8 expansion with 7 continued growth of 6 recurring revenue 5 product lines 4 3 2 1 0 Jun-20 Sep-20 Dec-20 Mar-21 Jun-21 Enerflex Average Pure-Play Contract Compression Peer 47 1 EV/NTM EBITDA multiple for
Slide 48: What's Next for Enerflex
WHAT’S NEXT FOR ENERFLEX • Current geographic platform provides the foundation for incremental growth in each operating region. • Focus remains on profitably growing each of the Engineered Systems, After-Market Services, and Asset Ownership product lines in all regions. • Asset Ownership remains the
Slide 49: Executing on a Powerful Strategy
EXECUTING ON A POWERFUL STRATEGY Proven track record of Creating Shareholder Value • Strong balance sheet and free cash flow allows Enerflex to pursue strategic growth opportunities to further expand the business. • Revenues derived from complementary product lines and geographies. • Improving margi
Slide 50: Appendix: Reconciliations
APPENDIX RECONCILIATIONS 50
Slide 51: Free Cash Flow
FREE CASH FLOW TTM Q2 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 2021 Cash provided by operating activities 134,795 134,208 69,024 64,611 104,173 91,792 179,251 242,868 54,169 220,248 235,485 Net change in non-cash working capital and other 48,243 15,531 (28,929) (61,053) (55,251) (41,385) 9,
Slide 52: Gross Margin Profile by Product Line
GROSS MARGIN PROFILE BY PRODUCT LINE 52
Slide 53: Composition of Borrowings
COMPOSITION OF BORROWINGS ($ Canadian thousands) June 30, 2021 December 31, 2020 Drawings on Bank Facility1 37,156 84,369 Drawings on Asset-Based Facility1 43,260 Senior Notes due June 22, 2021 - 40,000 Senior Notes due December 15, 20241 145,137 148,686 Senior Notes due December 15, 20271 116,758 1
Slide 54: Slide 54