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COMPANY OVERVIEW May 2019 FORWARD LOOKING STATEMENTS ADVISORY - - PowerPoint PPT Presentation

COMPANY OVERVIEW May 2019 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


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SLIDE 1

COMPANY OVERVIEW

May 2019

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SLIDE 2

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 Enerflex.

  • This presentation contains forward-looking information within the meaning of applicable Canadian securities laws. These statements relate to management’s expectations about future

events, results of operations and the Company’s future performance (both operational and financial) and business prospects. All statements other than statements of historical fact are forward-looking statements. The use of any of the words “anticipate”, “plan”, “contemplate”, “continue”, “estimate”, “expect”, “intend”, “propose”, “might”, “may”, “will”, “shall”, “project”, “should”, “could”, “would”, “believe”, “predict”, “forecast”, “pursue”, “potential”, “objective” and “capable” and similar expressions are intended to identify forward-looking information. In particular, this presentation includes (without limitation) forward-looking information pertaining to: anticipated financial performance; future capital expenditures, including the amount and nature thereof; bookings and backlog; oil and gas prices and the impact of such prices on demand for Enerflex products and services; development trends in the oil and gas industry; seasonal variations in the activity levels of certain oil and gas markets; business prospects and strategy; expansion and growth of the business and operations, including market share and position in the energy service markets; the ability to raise capital; the ability of existing and expected cash flows and other cash resources to fund investments in working capital and capital assets; the impact of economic conditions on accounts receivable; expectations regarding future dividends; expectations and implications of changes in government regulation, laws and income taxes; and other such matters.

  • All forward-looking information in this presentation is subject to important risks, uncertainties, and assumptions, which are difficult to predict and which may affect the Company’s
  • perations, including, without limitation: the impact of economic conditions including volatility in the price of oil, gas, and gas liquids, interest rates and foreign exchange rates; industry

conditions including supply and demand fundamentals for oil and gas, and the related infrastructure including new environmental, taxation and other laws and regulations; the ability to continue to build and improve on proven manufacturing capabilities and innovate into new product lines and markets; increased competition; insufficient funds to support capital investments required to grow the business; the lack of availability of qualified personnel or management; political unrest; and other factors, many of which are beyond the Company's

  • control. Readers are cautioned that the foregoing list of assumptions and risk factors should not be construed as exhaustive. While the Company believes that there is a reasonable

basis for the forward-looking information and statements included in this presentation, as a result of such known and unknown risks, uncertainties and other factors, actual results, performance, or achievements could differ materially from those expressed in, or implied by, these statements. The forward-looking information included in this presentation should not be unduly relied upon.

  • The forward-looking information contained herein is expressly qualified in its entirety by the above cautionary statement. The forward-looking information included in this presentation

is made as of the date of this presentation and, other than as required by law, the Company disclaims any intention or obligation to update or revise any forward-looking information, whether as a result of new information, future events or otherwise.

  • This presentation and its contents should not be construed, under any circumstances, as investment, tax or legal advice.

Any person accepting delivery of this presentation acknowledges the need to conduct their own thorough investigation into Enerflex before considering any investment in its securities. More complete information pertaining to Enerflex, in particular historical financial information, can be accessed through the SEDAR website (www.sedar.com) or at the Company’s website (www.enerflex.com).

  • All figures in Canadian funds unless otherwise indicated.
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SLIDE 3

Transforming Natural Gas to Meet The World’s Energy Needs

  • Complementary product lines and regions driving balanced revenue growth
  • Growing Asset Ownership to increase and stabilize margins
  • Strong balance sheet and free cash flow generation through the cycles
  • Increased dividend by over 75% since 2011
  • Proud history dating back to 1980

PROVEN TRACK RECORD OF VALUE CREATION

ENERFLEX OVERVIEW

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SLIDE 4

GLOBAL PRIMARY ENERGY CONSUMPTION

Global natural gas consumption is expected to increase by over 69% from 2015 to 2050. Macro shift to cleaner fuel sources is underway.

Source: US Energy Information Administration, International Energy Outlook 2017, Case:Reference.

0.0 100.0 200.0 300.0 400.0 500.0 600.0 700.0 800.0 900.0

2015 2020 2025 2030 2035 2040 2045 2050

Projected Global Energy Consumption (Tcf/yr)

Liquids Natural gas Coal Nuclear Other

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SLIDE 5

COMPLEMENTARY PRODUCT LINES AND REGIONS

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SLIDE 6

GLOBAL NATURAL GAS PRODUCTION

2017 Global Production = 128,000 bcf/year

28,000 bcf bcf

Source: US Energy Information Administration, International Energy Outlook 2017.

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SLIDE 7

GLOBAL PLATFORM DELIVERING NATURAL GAS SOLUTIONS

Canada

  • Eng. Systems

$224 MM Service $65 MM Rental $10 MM Total Revenue $299 MM Fleet: ~70,000 HP

Rest of World

  • Eng. Systems

$161 MM Service $145 MM Rental $116 MM Total Revenue $422 MM Fleet: ~355,000 HP

USA

  • Eng. Systems

$872 MM Service $152 MM Rental $57 MM Total Revenue $1,081 MM Fleet: ~240,000 HP

Business Overview

Revenue $1,802 MM Employees ~2,500 Operating Locations 53 Manufacturing Facilities 3 Countries 16

Revenue Overview

  • Eng. Systems

$1,257 MM Service $362 MM Rental $183 MM Total Revenue $1,802 MM Fleet: ~665,000 HP

Enerflex BOOM Assets Enerflex Operating Location Enerflex Manufacturing Facility

*Trailing twelve-months for the period ended March 31, 2019.

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SLIDE 8

FOCUSED REGIONAL PRESENCE

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SLIDE 9

UNITED STATES

Growing demand for natural gas infrastructure driven by associated gas from US Shale Plays Enerflex is strategically positioned to grow its asset ownership and after-market services platforms in key plays

Enerflex Operating Location Enerflex Manufacturing Facility

20 bcf/d 0 bcf/d Source: US Energy Information Administration, International Energy Outlook 2017.

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USA

  • Eng. Systems

$872 MM Service $152 MM Rental $57 MM Total Revenue $1,081 MM Fleet: ~240,000 HP

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SLIDE 10

LATIN AMERICA

TBD

Natural gas production in the region is expected to grow by approximately 80% by 2040 Continued limited capital lends itself to higher margin contract compression

  • pportunities

Continued success with ITK, BOOM, and recurring revenue projects is expected to lead Enerflex’s growth

Enerflex BOOM Assets Enerflex Operating Location

4 bcf/d 0 bcf/d Source: US Energy Information Administration, International Energy Outlook 2017.

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Rest of World

  • Eng. Systems

$161 MM Service $145 MM Rental $116 MM Total Revenue $422 MM Fleet: ~355,000 HP

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SLIDE 11

MIDDLE EAST / AFRICA

TBD

The Middle East accounts for more than 30% of the world’s proven gas reserves* Approximately 100,000 horsepower of owned and installed gas compression and processing facilities Positioned for growth in key markets including Oman, Bahrain, and Kuwait

Enerflex BOOM Assets Enerflex Operating Location

20 bcf/d 0 bcf/d Source: US Energy Information Administration, International Energy Outlook 2017.

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Rest of World

  • Eng. Systems

$161 MM Service $145 MM Rental $116 MM Total Revenue $422 MM Fleet: ~355,000 HP

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SLIDE 12

CANADA

Growing demand for natural gas infrastructure in liquids-rich basins Petrochemical projects will increase domestic consumption of NGLs Electric power

  • pportunities remain

attractive

Enerflex Operating Location Enerflex Manufacturing Facility

11 bcf/d 0 bcf/d Source: Wood Mackenzie.

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Canada

  • Eng. Systems

$224 MM Service $65 MM Rental $10 MM Total Revenue $299 MM Fleet: ~70,000 HP

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SLIDE 13

DIVERSIFIED CAPABILITIES AND REVENUES

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SLIDE 14

SOLUTIONS FROM THE WELLHEAD TO PIPELINE

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SLIDE 15

EXECUTING ON A POWERFUL STRATEGY

Recurring Revenues

Asset Ownership

Engineered Systems

Customized offerings for:

  • Gas Compression
  • Gas Processing Plants
  • Cryogenic Plants
  • Electric Power Generation

Integrated Turnkey

Turnkey Engineered Systems, with local construction and installation capabilities

After-Market Services

  • Full after-market services for all products
  • Production installation and commissioning
  • Contract operations and maintenance

Rental compression and processing of any Engineered System product in all target markets

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SLIDE 16

REVENUE GROWTH THROUGH COMPLEMENTARY OFFERINGS

70% 20% 10%

C$ in millions

2018 2019

70% 20% 10%

Service Engineered Systems Rentals

Exposure to several markets protects against spending fluctuations in any one particular segment.

$422.5 $603.8 $590.4 $761.6 $678.2 $466.1 $779.1 $980.5 $1,081.5 $360.6 $397.5 $376.4 $405.2 $456.6 $431.7 $355.7 $422.8 $421.7 $444.0 $500.4 $438.2 $529.4 $494.2 $232.8 $418.6 $299.9 $299.2

$1,227.1 $1,501.7 $1,405.0 $1,696.2 $1,629.0 $1,130.6 $1,553.4 $1,703.3 $1,802.4 2011 2012 2013 2014 2015 2016 2017 2018 TTM Q1 2019 United States of America Rest of World Canada

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SLIDE 17

$0 $400 $800 $1,200 $1,600 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 2016 2017 2018 2019

Backlog

USA ROW Canada

$0 $200 $400 $600 $800 2016 2017 2018 2019

Bookings

STRONG ACTIVITY THROUGH 2019

Bidding activity for Engineered Systems remains strong, particularly in the USA. Backlog provides visibility for Engineered Systems revenue through 2019 and early 2020. Backlog has grown by over 250% since Q1 2016.

C$ in millions C$ in millions

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SLIDE 18

GROWTH IN RECURRING REVENUE

Recurring revenue growth through

  • rganic investment

and strategic M&A.

321.0 323.5 375.0 486.4 537.2 471.5 461.7 521.1 544.8 $0 $100 $200 $300 $400 $500 $600 2011 2012 2013 2014 2015 2016 2017 2018 TTM Q1 2019

Recurring Revenue C$ in millions Service Revenue Rental Revenue

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SLIDE 19

DIVERSIFICATION REDUCES COMMODITY PRICE IMPACT

C$ in millions

Low Sensitivity to North American Gas Prices

* Adjusted EBITDA as disclosed in the MD&A C$/ GJ

Complementary regions and product lines reduce dependency of EBITDA growth on North American gas prices.

127.0 156.8 126.9 193.7 176.8 190.3 214.1 225.2 248.1 $0.00 $1.00 $2.00 $3.00 $4.00 $5.00 $6.00 $7.00 $8.00 $9.00 $10.00

  • 50.0

100.0 150.0 200.0 250.0 2011 2012 2013 2014 2015 2016* 2017* 2018* TTM Q1 2019* EBITDA AECO Spot Henry Hub Spot

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SLIDE 20

GROWING ASSET OWNERSHIP TO INCREASE AND STABILIZE MARGINS

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SLIDE 21

8.8% 13.3% 9.7% 12.2% 6.2% 6.1% 9.4% 9.8% 11.5%

$0 $100 $200 $300 $400 $500 $600 2011 2012 2013 2014 2015 2016* 2017* 2018* TTM Q1 2019*

Acquisition Rental Additions PP&E Additions ROCE

DISCIPLINED INVESTMENT IN ASSETS

* ROCE calculated using Adjusted EBIT calculated using adjusting amounts disclosed in the MD&A

CAPEX, M&A and ROCE

Over C$1 billion reinvested in organic growth and M&A

  • pportunities over the

past eight years. Investment in recurring revenue sources promotes sustained earning power.

Leads To

Organic Investment

Leads To

M&A Opportunities

Leads To

Organic Investment M&A Opportunities

C$ in millions

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SLIDE 22

SUSTAINED FOCUS ON FREE CASH FLOW AND BALANCE SHEET MANAGEMENT

101.4 72.4 55.4 81.8 (39.8) 117.1 123.0 87.9 83.1

(60.0) (40.0) (20.0)

  • 20.0

40.0 60.0 80.0 100.0 120.0 140.0 2011 2012 2013 2014 2015 2016 2017 2018 TTM Q1 2019

*Amounts presented exclude M&A capex and are available in the financial statements and accompanying notes for the respective years. See Appendix for reconciliation. ** Calculated using Adjusted EBITDA as disclosed in the MD&A.

C$ in millions

0.30 (0.31) (0.70) 1.79 2.38 1.19 1.09 0.52 0.16 2011 2012 2013 2014 2015 2016** 2017** 2018** 2019**

Net Debt to EBITDA Free Cash Flow*

Free cash flows fuel debt repayment,

  • rganic growth, M&A, and dividend

growth. Balance sheet strength with a net debt to EBITDA of 0.16

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SLIDE 23

STABLE MARGIN GROWTH…

127.0 156.8 126.9 193.7 176.8 190.3 214.1 225.2 248.1

10.4% 10.4% 9.0% 11.4% 10.9% 16.8% 13.8% 13.2% 13.8%

  • 50.0

100.0 150.0 200.0 250.0 300.0 350.0 2011 2012 2013 2014 2015 2016* 2017* 2018* TTM Q1 2019*

EBITDA EBITDA Margin %

* Adjusted EBITDA as disclosed in the MD&A

C$ in millions

EBITDA and EBITDA Margin

Approximately $100 million increase in EBITDA since 2011 coupled with increasing EBITDA margins. 23

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…AND SUSTAINED DIVIDEND GROWTH

Annually (C$/share)

$0.24 $0.28 $0.30 $0.34 $0.34 $0.34 $0.38 $0.42 $0.42

$0.20 $0.25 $0.30 $0.35 $0.40 2011 2012 2013 2014 2015 2016 2017 2018 2019*

Dec-11 Dec-12 Dec-13 Dec-14 Dec-15 Dec-16 Dec-17 Dec-18 TTM Mar-19 Dividend Paid 0.24 0.25 0.29 0.31 0.34 0.34 0.35 0.39 0.40 Year-End Yield % 1.36 2.09 1.9 1.89 2.56 1.99 2.28 2.44 2.10

Dividend Amount is calculated using the ex-dividend date

75% increase in dividend since 2011.

* Annualized

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SLIDE 25

IGNITING THE FUTURE OF ENERGY

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WHAT’S NEXT FOR ENERFLEX

  • Current geographic platform provides the

foundation for incremental growth in each

  • perating region.
  • Focus remains on profitably growing each
  • f the Engineered Systems, After-Market

Services, and Asset Ownership product lines in all regions.

  • Asset

Ownership remains the best

  • pportunity to stabilize earnings through

the cycles.

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CAPITAL ALLOCATION PRIORITIES

Organic growth of Asset Ownership platform in all Regions. Opportunistic Inorganic growth  right assets, right places, right long term returns. Dividend Growth

  • Dividend has grown or been maintained each

year since 2011.

  • Enerflex is committed to maintaining this

focus through the cycles. 27

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SLIDE 28

EXECUTING ON A POWERFUL STRATEGY

EBITDA growth has a low correlation to fluctuations in North American gas prices

Proven track record of creating shareholder value through Growth and Dividend Income

  • Strong balance sheet and free cash flow allows Enerflex to pursue strategic growth
  • pportunities to further expand the business.
  • Revenues derived from complementary product lines and geographies.
  • Improving margins from recurring revenue growth.
  • Sustained value creation characterized by positive ROCE, healthy Free Cash Flow and

dividend increases of 75% since 2011.

  • Proud history dating back to 1980.

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SLIDE 29
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SLIDE 30

APPENDIX

RECONCILIATIONS

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FREE CASH FLOW

EBITDA growth has a low correlation to fluctuations in North American gas prices

Dec-11 Dec-12 Dec-13 Dec-14 Dec-15 Dec-16 Dec-17 Dec-18 TTM Q1 2019 Cash provided by operating activities 134,795 134,208 69,024 64,611 104,173 91,792 179,251 242,868 340,107 Net change in non-cash working capital and other 48,243 15,531 (28,929) (61,053) (55,251) (41,385) 9,736 38,208 114,215 86,552 118,677 97,953 125,664 159,424 133,177 169,515 204,660 225,892 Add back: Net finance costs 7,011 5,661 5,518 9,771 15,310 14,056 12,727 19,145 18,536 Current income tax expense 17,293 22,435 23,256 45,949 32,097 20,742 27,525 20,871 21,633 Deduct: Net interest paid (8,525) (6,356) (5,408) (8,999) (13,657) (13,116) (11,957) (18,373) (17,805) Net cash taxes (paid) received (25,642) (16,723) (26,801) (34,667) (39,839) (15,089) (31,580) (2,273) (10,723) Dividends paid (9,266) (18,606) (21,798) (23,499) (26,804) (26,921) (30,066) (33,676) (34,614) Net capital spending 33,993 (32,706) (17,365) (32,401) (166,318) 4,244 (13,159) (102,457) (119,861) Free cash flow 101,416 72,382 55,355 81,818 (39,787) 117,093 123,005 87,897 83,058

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