tsx:cfw calfrac well services...
TRANSCRIPT
CALFRAC WELL SERVICES LTD.
Investor Presentation – June 2014
TSX:CFW
Forward Looking Statement
Certain information contained within this presentation and statements made in conjunction with this presentation, including information and statements that contain words such as “anticipates,” “can,” “may,” “believe” or “believes,” “forecast,” “will” and similar expressions, are forward-looking statements.
These statements may include, but are not limited to, future capital expenditures, future financial resources, future oil and gas well activity, outcome of specific events and trends in the oil and gas industry. These statements are derived from certain assumptions and analyses made by the Company based on its experience and interpretation of historical trends, current conditions and expected future developments, and other factors that it believes are appropriate in the circumstances. These statements or predictions 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. These risks and uncertainties include the items discussed under the heading “Business Risks” in the Company’s 2013 Annual Report and most recently filed Annual Information Form. Consequently, all of the forward-looking information contained within this presentation and statements made in conjunction with this presentation are qualified by these cautionary statements and there can be no assurance that actual results or developments 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 information or statements, whether as a result of new information, future events or otherwise.
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Company Snapshot
TSX Stock Symbol CFW
Share Price $19.15 (6/3/2014)
Market Capitalization $1.8 billion
Quarterly Dividend $0.125 per share
Dividend Yield 2.6 percent (6/3/2014)
Shares Outstanding 94.2 million (6/2/2014)
30-Day Avg. Volume 513,750 (6/3/2014)
Insider Ownership ~25%
Note: A two-for-one share split was approved and trading in the common shares on a split-adjusted basis commenced on June 2, 2014. The quarterly dividend has been adjusted to reflect the share split.
Suppliers
Calfrac’s Size and Scope
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24 hours ops
80% US
30% Canada
Lab Facilities Sixteen
In Horsepower (North America)
7th Largest
Primary 450
Employees ~4,600
Years of Service Fifteen
1.2 Million Hydraulic Horsepower
Revenue 92% Fracturing 5% Coiled Tubing 3% Cementing
Customers +175 Worldwide
24 Hour 80% United States
Ope
ratio
ns
25% Canada Proppant Pumped +1.2MM Sh
ort T
ons
2013 North America
1.85 2014 TRIF
GROWING OPERATIONAL SCALE
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Full Service Hydraulic Pressure Pumping
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Canada Fleet: 17 Fracturing Spreads
392,000 Hydraulic Horsepower
17 Coiled Tubing Crews
U.S. Fleet: 15 Fracturing Spreads
674,450 Hydraulic Horsepower
18 Cementing Crews
7 Coiled Tubing Crews
Latin America Fleet: 81,000 Hydraulic Horsepower
13 Cementing Crews
3 Coiled Tubing Crews
Russia Fleet: 7 Fracturing Spreads
70,000 Hydraulic Horsepower
7 Coiled Tubing Crews
FACTS Founded 1999
Employees ~4,600
Countries 6
Headquarters Calgary
Horsepower 1.2 Million
Canadian Operations
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One of the Largest Pressure Pumpers by
HHP Market Activity
• Six largest companies control 85% of the market
• Exposure to LNG through strong relationships with a number of key operators in NE B.C. and NW Alberta
• Montney and Duvernay are creating incremental HHP demand
Pricing & Utilization
• Positive pricing momentum
• Activity levels are expected to remain robust in the back half of 2014
Canada – Update
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Calfrac, 18%
Competitor 1, 19%
Other, 15%
Competitor 2, 14%
Competitor 3, 12%
Competitor 4, 11%
Competitor 5, 10%
Source: PacWest Consulting Partners
• Well count is not the only factor for increasing utilization of Calfrac’s equipment
• Market continues to trend towards more stages per well and greater tonnage per stage which positively impacts equipment utilization
• In Canada, 24-hour operations comprise ~25% of the fracturing fleets and the Company believes this can move higher
Canada – Key Trends
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United States Operations
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Growing U.S. Presence Market Approach
• Sustainable and meaningful market share in each operating area
• Target a contracted status of ~70% in the U.S. and an equal mix of oil/gas exposure
• Growing coiled tubing and cementing business
Pricing & Utilization
• Pricing is competitive, but stable
• Positive momentum
• Utilization expected to remain robust
United States – Update
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Source: PacWest Consulting Partners
United States – Regional Update
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Highlights
• Adding a fifth crew in the
Marcellus that will become
active in 2H14
• Leading market share position
in the Fayetteville
• Rockies activity increasing due
to Niobrara exposure
• Growing presence in the Eagle
Ford
• Increasing customer
diversification in North Dakota
Meaningful Market Share (4/30/2014)
Region HHP Crews
Mkt. Share
Rank by
HHP (1)
Marcellus/Utica 262,950 5 3
Eagle Ford 157,500 3 8
Fayetteville 87,750 2 1
Rockies Area 89,750 2 5
U.S. Bakken 76,500 3 8
U.S. Total 674,450 15
(1) Source: PacWest Consulting Partners
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Latin American Operations
Market Activity
• One of the largest pressure pumping companies in Argentina
• Contract win with YPF in fall of 2013 – High rate fracturing crew for tight
gas operations
• Capital spending by IOCs creating opportunities to deploy equipment
Other Considerations
• Contracts based in USD
• 2H14 – Adding 32,000 HHP to meet incremental demand
Argentina – Update
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Argentina Fleet: 68,000 Hydraulic Horsepower*
7 Cementing Crews
3 Coiled Tubing Crews
* Includes 32,000 hhp to be added in 2H14
Market Overview
• Long-term opportunity with the
ongoing reform of the Mexican
energy industry
• Technology Opportunity
– Latest technological
advancement improves
play economics
• One of only two service
providers to perform horizontal
completions work in the
Mexican Eagle Ford trend
• Expect 2014 activity levels to
be lower compared to 2013
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Mexico – Update
Mexico Fleet: 45,000 Hydraulic Horsepower
2 Cementing Crews
Poza Rica
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Russian Operations
Market Overview and Outlook
• 34% of fracturing work on horizontal wells in 2013
• Expect horizontal completions to trend towards 50% of fracturing work in 2014
• Highly contracted status creates stable utilization levels
• Operating margins are expected to improve during the remainder of the year due to a reduction in weather related issues
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Russia – Update
LICENSE TO OPERATE
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Health, Safety & Environment
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Excellent HSE Performance • Outperforming industry benchmark
groups
• US experience modification rate of 0.7 – 30% below industry average for insurance
claims
• Objective is zero incidents
HSE Advancements
• Implementation of SandStorm in
fracturing operations
– Virtually eliminates potential exposure to
respirable crystalline silica
TRIF LTIR
Calfrac Global HSE Performance (2013) 2.00 0.38
Alberta Workers Compensation Board (wcb.ab.ca) 2.66 0.49
Association of Energy Service Companies (aesc.net) 2.29 0.72
US Bureau of Labour Statistics (bls.gov) 1.90 0.60
What is API-Q2?
• A quality management system that reinforces specific guidelines for safety, environmental and regulatory concerns
• API’s goal for Q2 is that service companies will need to be certified in order to work for the major oil and gas companies
Quality Leadership
• Expect to be among the first pressure pumpers in the world to be certified in API-Q2
• Submitted first set of applications for API Spec Q2 in March 2014
Quality Commitment At Calfrac
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Supply Chain and Logistics
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• Provide key direction on network optimization
• Leveraging the supplier landscape to manage growth opportunities
• Managing infrastructure and storage to enhance service levels
• Key suppliers in place to help provide efficient services to our customers
U.S
. To
ns
PROPPANT PUMPED M . M 2 1
2013 North America RAILCARS 12,200 filled with sand
=
PEOPLE WHO MAKE A DIFFERENCE
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The Calfrac Team • Culture of innovation, growth and
continuous improvement
• Build and maintain strong client relationships at all levels
• Commitment to employee safety
Three Es Culture: • Energy, Ethics and Entrepreneurship
Learning & Development • Structured development program from
Field Competencies to Supervisor to Management
People & Service
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TECHNOLOGIES THAT WORK IN THE FIELD
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Develop technologies to:
• Meet and exceed safety and environmental goals
• Continually advance our technical expertise
Engineering & Geoscience:
• In-house multidisciplinary team supports program development and field operations
• Continually advancing our knowledge of reservoirs to optimize productivity and economics
Benefits to this Strategy:
• Allows Calfrac’s customers to complete wells more efficiently
• Production comes on stream earlier
• Production comes on at better rates
• More cash flow to reinvest in additional development
Technology Commitment
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Create Operational Efficiencies
Optimize Fluid Chemistries
Gain a Thorough Reservoir
Understanding
Commitment To Continuous Improvement In Technology
STRONG FINANCIAL PERFORMANCE
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Financial Results
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(C$ millions – except per share amounts)
Income Statement
For the Three Months Ended March 31
2014 2013 % Change
Revenue $548 $423 29
Operating Income $64 $63 2
Net Income $8.9 $24.6 (64)
Earnings Per Share (Diluted) $0.19 $0.54 (65)
Balance Sheet - As at March 31, 2014
Working Capital $339
Total Assets $1,912
Long-Term Debt $667
Total Equity $804
Available Credit Facilities $257
CALFRAC’S OPPORTUNITIES
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• Increase market share in unconventional resource plays
• Grow global footprint
• Expand customer base in key markets where we operate
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Strategic Focus
Top 10 Countries - Technically Recoverable
Shale Oil Resources
Rank Country
Shale oil
(BN BBL)
1 Russia 75
2 U.S. 58
3 China 32
4 Argentina 27
5 Libya 26
6 Australia 18
7 Venezuela 13
8 Mexico 13
9 Pakistan 9
10 Canada 9
World Total 345
Top 10 Countries - Technically Recoverable
Shale Gas Resources
Rank Country
Shale Gas
(TCF)
1 China 1,115
2 Argentina 802
3 Algeria 707
4 U.S 665
5 Canada 573
6 Mexico 545
7 Australia 437
8 South Africa 390
9 Russia 285
10 Brazil 245
World Total 7,299
Source: EIA “Technically Recoverable Shale Oil and Shale Gas Resources,” June 2013
• Optimize return on capital employed for our investors
• Create an environment that fosters dedicated employees
• Develop long-term relationships with our customers
• Cultivate strong supply chain alliances
Value Creation
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• Management team with depth and breadth of experience – Strong operational
backgrounds
– Global experience
• History of capital discipline – Targeted, strategic investments
in equipment and growth
• Geographic and commodity diversification
• Leadership position in the global adoption of unconventional resource development
Investment Advantages
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Ian Gillies
Manager, Investor Relations
403-218-3422
www.calfrac.com
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