TSX:CFW CALFRAC WELL SERVICES LTD.calfrac.mediaroom.com/file.php/202361/Calfrac... · “Business...
Transcript of TSX:CFW CALFRAC WELL SERVICES LTD.calfrac.mediaroom.com/file.php/202361/Calfrac... · “Business...
TSX:CFW
CALFRAC WELL SERVICES LTD. Investor Presentation – January 2017
Certain information contained within this presentation and statements made in conjunction with this presentation constitute forward-looking statements. These statements relate to future events or the future performance of the Company. All statements other than statements of historical fact may be forward-looking statements. Forward-looking statements are often, but not always, identified by the use of words such as “seek”, “anticipate,” “plan”, “continue”, “estimate”, “expect”, “may”, “will”, “project”, “predict”, “potential”, “targeting”, “intend”, “could”, “might”, “should”, “believe”, “forecast”, “can” and similar expressions. In particular, forward-looking statements in this presentation include, but are not limited to, statements with respect to future capital expenditures, future financial resources, anticipated equipment utilization levels, future oil and gas well activity, projections of market prices and costs, outcomes of specific events and trends in the oil and gas industry.
The forward-looking statements within this presentation and made in conjunction with this presentation are derived from certain assumptions and analyses made by the Company based on its experience and perception of historical trends, current conditions, expected future developments and other factors that it believes are appropriate in the circumstances, including assumptions and analyses relating to: the economic and political environment in which the Company operates; the Company’s expectations for its customers’ capital budgets and geographical areas of focus; the effect unconventional oil and gas projects have had on supply and demand fundamentals for oil and natural gas; the Company’s existing contracts and the status of current negotiations with key customers and suppliers; the effectiveness of cost reduction measures instituted by the Company; and the likelihood that the current tax and regulatory regime will remain substantially unchanged. Forward-looking statements are subject to a number of known and unknown risks and uncertainties that could cause actual results to differ materially from the Company’s expectations. Such risks and uncertainties include the items discussed under the heading “Business Risks” in the Company’s 2015 Annual Report and under the heading “Risk Factors” in the Company’s most recently filed Annual Information Form. Consequently, all of the forward-looking statements contained within this presentation and made in conjunction with this presentation are qualified by these cautionary statements and there can be no assurance that actual results or events anticipated by the Company will be realized or that they will have the expected consequences or effects on the Company or its business or operations.
Other than as required by applicable securities laws, the Company assumes no obligation to update publicly any such forward-looking statements, whether as a result of new information, future events or otherwise.
Forward Looking Statement
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© Calfrac Well Services Ltd. 3
Company Snapshot
TSX Stock Symbol: CFW
Share Price* $5.03
30-Day Average Volume* 1,930,000
Market Capitalization* $687.3 million
Enterprise Value* $1.5 billion
Shares Outstanding* 136.6 million
Insider Ownership ~25%
* As at 16:00:00 ET 1/6/2017
Active Rig Counts: North America & International
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- U.S. land rig count up ~260 rigs from
trough
- International rig count remains down
~30% from peak
Source: Baker Hughes
- WCSB active rig count strengthening
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Full Service Pressure Pumping
Canada Fleet: 410,000 Horsepower
13 Coiled Tubing Crews
U.S. Fleet: 611,000 Horsepower
11 Cementing Crews
5 Coiled Tubing Crews
Latin America Fleet: 131,000 Horsepower
14 Cementing Crews
7 Coiled Tubing Crews
Russia Fleet: 70,000 Horsepower
7 Coiled Tubing Crews
As at September 30, 2016
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Our License to Operate
Plan ▪ Do ▪ Assess ▪ Adjust HSE
QUALITY
SUPPLY CHAIN Evaluate ▪ Negotiate ▪ Finalize ▪ Implement
Monitor ▪ Refine ▪ Execute ▪ Improve
Calfrac employee on a Canadian hydraulic fracturing job. Calfrac Well Services Photo
TECHNOLOGY Research ▪ Develop ▪ Test ▪ Refine
Calfrac sand terminal in Whitecourt, Alberta. Calfrac Well Services Photo
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Calfrac Market Positioning
Positioned in key areas of frac demand
– Montney, Duvernay, Deep Basin, Cardium and Viking
Diversified customer base gives us exposure to all key areas of the world-class Montney resource play
– Calfrac has highest market share in Montney
Pricing & Utilization
Modest pricing increases in Q4/16
– More meaningful improvement expected in Q1/17
~50% of horsepower parked
6 of 13 coil units idled
Market Trends
Stages per well increasing
Frac spacing tightening
Operators focusing on highest quality
plays and assets
Larger pads
Greater proportion of 24-hour operations
Market Outlook
Full utilization of active equipment
expected through to spring breakup
Market for available horsepower
expected to remain tight in Q1/17
Visibility for Q2/17 improving
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Canada – Market Update
Calfrac Market Positioning
Focus on customers that are financially strong and intend to remain active in key plays across the U.S.
Continuing to broaden customer base
Positioned in key areas of frac demand:
– Bakken, Marcellus, Rockies, Utica, Eagle Ford
Pricing & Utilization
Pricing gaining momentum
– Increase expected in Q1/17
~60% of horsepower parked
Temporarily suspended coiled tubing and cementing operations
Market Trends
Stages per well increasing
Frac spacing tightening
Larger pads
Majority of work 24-hour operations
Market Outlook
Majority of active frac spreads locked up
for 2017
– Incremental work awarded to Calfrac
would require reactivation of equipment
– Increased opportunities in the Bakken
and Rockies
United States – Market Update
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Calfrac Market Positioning
One of the largest pressure pumping companies in Argentina
Customer expansion to IOCs and domestic players
Contracts based in USD
Awarded two year frac contract for PAE in the Vaca Muerta shale play
Leader in annular fracturing
Market Outlook
Rig count down ~30% year-over-year
– Shift towards gas-focused activity
Union strikes negatively impacting activity
Country focused on reducing reliance on imported energy
Medium-to-longer term upside potential following reforms by new President Macri
Argentina – Market Update
Argentina Fleet: 108,250 Horsepower
13 Cementing Crews
6 Coiled Tubing Crews
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Calfrac Market Positioning
Horizontal fracturing in conventional reservoirs is a significant amount of Calfrac’s activity
Rouble devaluation has negatively impacted reported financial results
Russia – Market Update
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Russia Fracturing Crew (2015). Calfrac Well Services Photo
Market Outlook
2017 activity and pricing expected to
be largely consistent with 2016
Change in customer mix
Introduction of multi-stage annular
fracture treatments is a market
differentiator
NAVIGATING THROUGH THE DOWNTURN
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Margin Erosion To Below Breakeven
Source: Company Reports, Morgan Stanley
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North American Pressure Pumping Supply
Number of competitors decreasing through both bankruptcies and consolidation
Supply of horsepower decreasing as a result of cannibalization of equipment, lack of R&M and fleet retirements
Expect ~5-6 million horsepower to permanently exit the U.S. pumping
market (~30% of peak supply)
Expect Canadian supply to decrease by ~200k HHP
Fracturing Operation (2015) Calfrac Well Services Photo
Strong management team and Board of Directors that have been through multiple
downturns
Optimized cost structure and developed operational efficiencies
Maintained core customer and supplier relationships
Strong existing employee base and recruiting capabilities
Well maintained equipment – initial fleet reactivations require minimal time and cost
“License To Operate” upheld through downturn
– Sustained focus on technology – developed more cost effective solutions for our customers
[CalVisc, diverter systems, etc.]
Proceeds from equity financing, second lien term loan and undrawn credit facilities provide
the liquidity needed to fund incremental working capital requirements associated with a
recovery
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Positioned For Recovery
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Service Intensity Continues To Increase
Source: Frac Database, Peters&Co., Rystad Energy, Morgan Stanley
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FINANCIAL HIGHLIGHTS
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Term Debt
US$600 mm with an interest rate of 7.5%
Matures in 2020
Second Lien Term Loan
$200 mm with an interest rate of 9%
Matures in 2020
Credit Facilities
Loan facility $300 mm (largely undrawn)
Matures in 2018
Recent Equity Financing
Raised $60 million, proceeds used to fund second equity cure ($25 million) and provide additional liquidity
Capital Program
2016 capital budget set at $40 million
– Includes $30 mm of carryover
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The Balance Sheet
Neuquén, Argentina Frac Operation (2014). Calfrac Well Services Photo