INVESTOR PRESENTATION January 2019 FORWARD LOOKING STATEMENTS This - - PDF document

INVESTOR PRESENTATION

January 2019

FORWARD LOOKING STATEMENTS

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This document contains statements that constitute forward-looking statements within the meaning of applicable securities legislation. These forward-looking statements include, among others, the Company’s prospects, expected revenues, expenses, profits, expected developments and strategies for its operations, and other expectations, beliefs, plans, goals, objectives, assumptions, information and statements about possible future events, conditions, results of

• perations or performance. These forward-looking statements are identified by their use of terms and phrases such

as “anticipate,” “achieve”, “achievable,” “believe,” “estimate,” “expect,” “intend”, “plan”, “planned”, and other similar terms and phrases. Forward-looking statements are based on current expectations, estimates, projections and assumptions that involve a number of risks and uncertainties, which could cause actual results to differ materially from those anticipated. These risks and uncertainties include: fluctuating prices for crude oil and natural gas; changes in drilling activity; general global economic, political and business conditions; weather conditions; regulatory changes; and availability of products, qualified personnel, manufacturing capacity and raw materials. If any of these uncertainties materialize, or if assumptions are incorrect, actual results may vary materially from those expected.

TRICAN & INDUSTRY OVERVIEW

INVESTMENT SUMMARY

• Largest Canadian pressure pumping company
• Industry-leading fracturing and cementing service lines
• Shareholder returns through NCIB
• Repurchased 10% of the Company’s shares from October 2017

through October 2018

• Renewed the NCIB program effective October 3, 2018 to

purchase 10% of the Company’s shares

• Purchased ~12 million shares (approximately 4%) in Q4
• Existing idle equipment provides opportunity for incremental

returns upon a market recovery (minimal investment required for reactivations – just staffing)

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INVESTMENT SUMMARY

• Substantial leverage on existing infrastructure and fixed

cost structure

• Excellent balance sheet provides access to capital for
• pportunistic investment
• Experienced and motivated work force supported by an

executive leadership team with extensive experience managing oilfield services cycles

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INVESTMENT SUMMARY

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• Company valuation approaching cyclical low valuation
• Company has significantly improved asset coverage relative to 2015

cyclical low

0.0x 0.2x 0.4x 0.6x 0.8x 1.0x 1.2x 1.4x 1.6x 1.8x 2.0x

• 0.20

0.40 0.60 0.80 1.00 1.20 Q1/15 Q2/15 Q3/15 Q4/15 Q1/16 Q2/16 Q3/16 Q4/16 Q1/17 Q2/17 Q3/17 Q4/17 Q1/18 Q2/18 Q3/18

Price to Tangible Book Value Debt / Tangible Equity

Price to Tangible Book Value vs. Leverage Profile

Debt to Tangible Equity (LHS) Price to Tangible Book (RHS)

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• Trican is a Canadian-

focused, energy services company, which provides an array of specialized products, equipment and services for the drilling and completions cycle of

• il and gas

exploration and development.

Customer Full Cycle Technical Expertise

Engineering Support Reservoir Expertise Laboratory Services

Drilling Cycle

Cementing Services

Completion Cycle

Fracturing Coil Tubing Nitrogen Fluid Management Acidizing

Production Cycle

Coil Tubing Acidizing Pipeline Services Industrial Services Chemical Services Remedial Cementing

WHAT WE DO

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Market Leading Positions

• Canadian market leader in fracturing services (based on

adjusted EBITDA margin and market share)

• Canadian market leader in cementing services

(based on market share – no competitor margin data available)

• Supporting service lines: coil tubing, nitrogen, acid, water

management services, pipeline and industrial services Strong Financial Position

• Trailing 12-month revenues of $1.0 billion
• Market capitalization $400 million (January 7, 2019)
• Total debt of $117 million (at September 30, 2018), which

excludes the approximate $72 million received from the disposition of our Keane investment in December 2018

Fracturing, 72% Cementing, 15% Acid, Coil, Nitrogen, 8% Fluid Management, 4% Industrial, 2%

OUR CANADIAN MARKET AND FINANCIAL POSITION

Trailing 12 Month Revenues: Service Line Breakdown

OUR FOCUS

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To achieve top quartile ROIC in our sector

• Maintain market leading position in Fracturing and Cementing service lines
• Strengthen auxiliary service lines (Coiled Tubing, Nitrogen, Water Management)
• Growth in existing or complimentary, less capital intensive, less cyclical

services lines (i.e. Production & Pipeline Services)

• Leverage strong technical expertise into additional markets or services
• Disciplined investment into future growth – ensure ROIC hurdle rates are met
• Return value to shareholders through Normal Course Issuer Bid (share

buyback program)

• Reduce costs for ourselves and our clients through efficiency improvements and

scale Strengthen Existing Business Growth Share- holder Return Cost Control & Efficiency Gains

FOCUSED GEOGRAPHIC COVERAGE

10 Horn River Shale Montney Shale Bakken Shale Cardium Tight Oil Viking Tight Oil Lower Shaunavon Tight Oil

GRANDE PRAIRIE WHITECOURT

HINTON

FORT ST. JOHN NISKU LLOYDMINSTER RED DEER BROOKS ESTEVAN

British Columbia Alberta Saskatchewan

Deep Basin Duvernay Shale

DRAYTON VALLEY CALGARY

Manitoba

Spearfish

MEDICINE HAT

CANADIAN INDUSTRY DYNAMICS – INCREASING WELL INTENSITY

• 2018 well count 38% below 2014 levels
• 7,000 – 8,000 wells today equates to 2014 well count levels in terms of fracturing equipment demand
• We expect well service intensity to remain flat in 2019 to 2018 levels
• Tonnes of proppant placed per / meter grew by approximately 25% in 2018 relative to 2017
• 1.5 tonnes/m in 2018 vs. 1.2 tonnes/m in 2017
• 2018 data included above is limited and therefore weighted to higher well service intensity wells

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Source: Canadian Discovery Source: GMP First Energy 10,853 10,924 5,376 3,963 6,959 6,803

• 2,000

4,000 6,000 8,000 10,000 12,000 2013 2014 2015 2016 2017 2018E

WCSB - Wells Drilled

647 813 1,329 1,384 1,855 2,851

• 500

1,000 1,500 2,000 2,500 3,000 2013 2014 2015 2016 2017 2018

WCSB - Tonnes / Well

CANADIAN INDUSTRY DYNAMICS – FRACTURING COMPETITIVE LANDSCAPE

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Source: Competitor company reports, internal company data, and internal estimates

Hydraulic Horsepower (HHP) Capacity Idled Available Active Crewed Trican 671,850 8,100 663,750 464,000 Competitor A 355,000 28,000 327,000 327,000 Competitor B 297,500 72,500 225,000 225,000 Competitor C 270,000

• 270,000

135,000 Competitor D 250,000

• 250,000

145,000 Competitor E 240,000

• 240,000

175,000 Competitor F 80,000

• 80,000

50,000 Competitor G 50,000

• 50,000

50,000 2,214,350 108,600 2,105,750 1,571,000

• Estimated industry demand of ~ 1,300,000 HHP in Q1 2019
• Internal estimate of 20% - 25% of equipment in Canada is not suited for higher

well service intensity plays (Montney, Duvernay and Deep Basin)

CANADIAN INDUSTRY DYNAMICS – TRICAN’S COMPETITIVE POSITIONING

• More than 50% of Trican’s fleet is continuous duty pumps,

most efficient style of fracturing pump, designed for higher well service intensity plays:

• Positions Trican to service growing, higher well service intensity

plays

• Supports Trican’s continued leading Canadian fracturing market

position as measured by both market share and margin

• Fracturing gross margins of 18% in Q3 2018 (23% with fluid ends

removed to compare with our peers capitalization of fluid ends)

• Fracturing gross margins of 21% YTD (25% with fluid ends removed

to compare with our peers capitalization of fluid ends)

• Allows Trican to continue to efficiently operate in the highest

well service intensity resource plays: Montney, Duvernay and Deep Basin (estimated to account for ~ 80% of the required HHP demand in Canada)

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OPERATING ENVIRONMENT – PRICING, LABOUR & REPAIRS EXPENSE

Pricing:

• Q4 2018 pricing dropped slightly sequentially

as activity decreased in the quarter

• Slight recovery in Q1 2019 pricing relative to

Q4 2018

• Passed on sand savings to clients resulting in

client savings of 7%-10% relative to Q3 2018

• Further demand improvements, or supply

contraction, will be required for pricing to improve:

• Increased customer budgets
• West Coast LNG
• Improvement in commodity prices and / or

Canadian commodity price differentials

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Indexed to 2014 pricing levels. Based on equipment revenue per tonne of proppant pumped.

• 80
• 70
• 60
• 50
• 40
• 30
• 20
• 10

2014 2015 2016 2017 2018

Pricing Index

OPERATING ENVIRONMENT – PRICING, LABOUR & REPAIRS EXPENSE

Labour Wage Rates for Field Staff:

• Labour wage rates in-line with

industry

• Will adjust field labour levels going

forward to utilization levels

• Variable pay for field staff in 2019
• Well size and operating efficiencies

allow more efficient labour rates

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Indexed to 2014. Based on personnel expenses per tonne of proppant pumped (component of ‘cost of sales – other’ within the statement of income).

• 60
• 50
• 40
• 30
• 20
• 10

2014 2015 2016 2017 2018

Labour Index

• 100
• 90
• 80
• 70
• 60
• 50
• 40
• 30
• 20
• 10

2014 2015 2016 2017 2018

R&M Index

OPERATING ENVIRONMENT – PRICING, LABOUR & REPAIRS EXPENSE

Repairs and Maintenance Expense:

• Increased intensity equals increased

expense, built into our pricing models

• Stainless steel fluid ends are expensed,

not depreciated

• Reduced 2018 annual capital

expenditures by $25 to $30 million and expected to increase cash operating expense by the same amount

• Decreases fracturing gross margins by

4%

• Only Canadian company expensing fluid

ends (estimate that > 80% of US listed public pressure pumping companies expense fluid ends)

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Indexed to 2014. Based on repairs and maintenance expense per tonne of proppant pumped, a component of ‘cost of sales – other’ within the statement of income.

Changed to cash expense

• f fluid ends, previously

depreciation

PERFORMANCE – ROIC and ADJUSTED EBITDA %

• Corporate Adjusted EBITDA margin of 18% or

greater supports project level ROIC hurdles

• To improve adjusted EBITDA margins:
• Continue to optimize costs
• Recovery in utilization of existing fracturing fleet:

adjusted EBITDA margin improvement when utilization at >80%

• Generate revenue from idled equipment
• Improve coil profitability: added 2 coil crews so far in

Q4/18 and plan to add 2 more in 2019

• Leverage existing IP and technology into new
• pportunities: sell chemicals and technology in US

and internationally

• Pricing improvements

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OUTLOOK & TRICAN ADVANTAGE

Q4 2018

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• Significant slow down in customer activity
• Reduced oil / gas cash flow of clients due to lower

commodity prices and high differentials

• Budget exhaustion
• Fracturing utilization below 50%
• Cement and coil utilization at normal levels in October

and November with early December slow down

• Pricing competitive in Q4 2018
• Gave some modest discounts for fourth quarter work

(7% drop from Q3 2018)

• Added 2 coil crews in the quarter

OUTLOOK – 2019

• Activity strong in Q1 2019
• 95% of active fracturing equipment is hard booked for January and

February

• Fracturing utilization of 70% on active equipment in January and

February due to smaller pad sizes and more move / rig-up days

• 35% drop year-over-year in pumping days per fracturing fleet
• Cement and coil anticipated to be at full utilization on active equipment
• How long our customers operate into March will impact Q1 2019 results
• Approximately 4 fracturing fleets active but not staffed (120,000 HP)
• Poor visibility past Q1 2019
• Approximately 60% of fracturing equipment committed in 2H 2019
• Customers will adjust programs quarterly based on commodity prices

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CAPITALIZATION – POSITIONED FOR OPPORTUNITIES

• Strong balance sheet allows for opportunistic

investment:

• Keane Monetization: December 2018 monetization of

Keane for approximately $72 million further strengthens our financial position

• Continued return to shareholders, active NCIB:

repurchased approximately 14% of the outstanding Trican shares in the past 14 months (at November 7, 2018)

• Fleet upgrades: can further strengthen our

market leading fracturing fleet through selective upgrades

• Invest in supporting service lines: target increased

market share in coil and other supporting service lines

• M&A Opportunities: low leverage levels allow

cost effective funding options for acquisition opportunities

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• 0.10

0.20 0.30 0.40 0.50 0.60 Q1/15 Q2/15 Q3/15 Q4/15 Q1/16 Q2/16 Q3/16 Q4/16 Q1/17 Q2/17 Q3/17 Q4/17 Q1/18 Q2/18 Q3/18

Debt / Tangible Capital

COMPETITIVE ADVANTAGE – PERSONNEL DEVELOPMENT

• One third of employees with more than 5 years of experience
• Career progression is an attraction to entry level employees
• Employee experience key to training and customer service

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Technical, Support

• r Administrative

Position Manager Level Position Field Supervisor Field Technical Field Entry Level 0 to 1 Years 27% 1 to 3 Years 30% 3 to 5 Years 10% 5+ Years 33%

Employee Headcounts by Years of Service

COMPETITIVE ADVANTAGE - PEOPLE AND CUSTOMER SERVICE

Leveraging more than 20 years of Canadian expertise:

• Safety: LTI rate of 0.16
• Efficiency: Working to increase fracturing pumping

hours per day to 16-20 from 10-12 hours per day

• Development: Industry-leading training programs
• Total Training Hours;
• 2017: 75,837
• To Q3 2018: 59,499

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• Canadian geographic focus: Canadian focus

allows potential for expansion of existing service lines or adding services lines within

• ur current infrastructure
• Improving our operating leverage: Building
• n our existing infrastructure and adding
• perationally focused personnel while

maintaining G&A support levels

Dec-15 5.5 Dec-16 4.4 Dec-17 6.5 Nov-18 8.6 1 2 3 4 5 6 7 8 9 10 Dec-15 Mar-16 Jun-16 Sep-16 Dec-16 Mar-17 Jun-17 Sep-17 Dec-17 Mar-18 Jun-18 Sep-18

Field and Shared Service / SG&A Employee

Field & Shared Service / G&A Year Avg Field & Shared Service / G&A Linear (Field & Shared Service / G&A)

COMPETITIVE ADVANTAGE – INNOVATION

Leveraging innovation for new opportunities:

• Scale allows targeted investment into internally developed

IP and new technologies

• Patented MVP

TM fracturing fluids; case studies indicate:

• 30% increased production in the Montney
• 20% increased production in the Cardium
• Global technology reputation allows new markets for IP and

technology

• Initial licensing agreement signed in the US for MVP Frac

TM

• CleanTRACK

TM patented dust control product field tested and

will be commercial in 2019

• 3rd party interest in customer facing applications platform
• International technical service agreement opportunities

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SUMMARY

• Strong financial position to:
• Withstand near-term cyclical weakness
• Evaluate opportunistic growth
• Largest Canadian pressure pumping

company (based on market share in Fracturing and Cement services)

• Existing equipment complement

provides opportunity for incremental returns upon a market recovery

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APPENDIX

APPENDIX 1: EQUIPMENT AS OF DECEMBER 2018

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Service Line Total Equipment Active, Manned Active, Maintenance, Unmanned Idled ~ Market Share Fracturing (HHP) 671,850 428,350 235,400 8,100 30% Cementing (trucks) 69 32 8 29 37% Coil Tubing (units) 28 8 4 16 n/a Nitrogen (units) 80 17 24 39 n/a

• Given the industry slow down, increased amount of fracturing hydraulic horse power is

expected to be parked

• We will explore opportunities to monetize equipment that is no longer anticipated to be

competitive in the WCSB

INVESTOR PRESENTATION

January 2019