Blair Goertzen - Toromont Industries Ltd.

1
Blair Goertzen
President & CEO
2
World Leading Pure-Play Supplier of
Natural Gas Production and Processing Equipment
Sales & Service
Locations
Revenue*
$1.5 Billion
Employees
Sales and Service
Locations
Countries
3,000
>60
14
* 2009 Pro forma
Calgary, Alberta
Nisku, Alberta
Casper, Wyoming
Houston, Texas
Rijsenhout, Netherlands
Perth
Strong Growth Platform in Key Global Markets
Brisbane
3
New Enerflex Investment Highlights
•
World leading pure-play supplier of natural gas compression and
production and processing equipment
•
Strong growth platform in North American shale gas, Australian CSG to
LNG and Middle East conventional gas
•
Early stages of industry recovery with growing order bookings and backlog
•
Highly diversified revenues by geography, customer and application
•
Strong balance sheet with direct access to growth capital
•
Experienced management team with a proven track record
Positioned to Deliver Superior Shareholder Value
4
Wide Range of Specialty Customized Equipment
Natural Gas Compression
•
•
•
Reciprocating and rotary screw
compression applications
Small to large horsepower
(200 hp – 10,000 hp)
Conventional and unconventional
plays
Production and Processing
•
•
•
•
Systems for gas plants (dew point)
and refrigeration systems
Amine systems (H2S and CO2
removal)
Dehydration units and CO2 facilities
Modular design for fast tracking
projects
Maximizing throughput and Minimizing Operating Costs
5
Wide Range of Specialty Customized Equipment
• Pipeline and storage facilities
• Power generation
• Petrochemical
Service Offering
• Mechanical for gas engine
compressors and power
generators
• Construction product installation
• Equipment operating business
Preferred Single Source Supplier
6
Balanced and Diversified Revenue
Geographic Distribution
Product Distribution
Rentals
International
4%
Canada
Parts &
Services
28%
32%
Fabrication
25%
72%
40%
32%
US
2009 $1.5 Billion
2009 $1.5 Billion
Significant
International Expansion
Parts and Service and Rental
are Key Growth Opportunities
Pro forma
7
Growing Order Bookings and Backlog
Enerflex (Pro Forma)
($ millions)
1,200
1,000
800
600
400
200
0
Q1
Q2
Q3
2007
Q4
Q1
Q2
Q3
2008
Backlog
Q4
Q1
Q2
Q3
Q4
2009
Q1
Q2
Q3
2010
Bookings
Early Stages of Industry Recovery
8
Management and Governance
Management
Board of Directors
Blair Goertzen
President &
CEO
Stephen J. Savidant
James
Harbilas
(Current Toromont Board Member)
Vice President
Finance &
CFO
Carol Ionel
J. Blair Goertzen
Director,
Human
Resources
Robert S. Boswell
(Current Toromont Board Member)

Chairman Designate

Chairman ─ ProspEx Resources Ltd.

Director ─ Empire Company Limited

Former President & CEO ─ Esprit Energy Trust
and Canadian Hunter Exploration

President & CEO ─ Enerflex Ltd.

Director, Chairman & CEO ─ Laramie Energy
LLC

Director ─ Complete Production Services inc.

Former Chairman & CEO ─ Forest Oil
Corporation

Former EVP ─ Toromont Industries Ltd.

CEO & President ─ Fortis Inc.

Director, Chairman ─ Fortis Inc.

Director, Chairman ─ Terasen Gas Inc.

Director ─ Conference Board of Canada

Additional independent members to be added
Greg Stewart
Vice President
& CIO
Wayne S. Hill
(Current Toromont Board Member)
H. Stanley Marshall
(Current Toromont Board Member)
Jerry
Fraelic
Ivan
Heidecker
Bill
Moore
President ,
Southern
U.S.
President,
Canada and
Northern
U.S.
President ,
International
Other Directors
Proven and Experienced Leadership
9
10
Ivan D. Heidecker
President, Canada &
Northern United States
11
Agenda
 Division Overview
 Equipment Manufacturing
 Service Business
 Integration and Rationalization Activities
 Strategic Goals
12
Division Overview
Markets We Serve
Specialize in Cold Weather Application
of Enerflex Technologies
13
Division Overview
Operational Responsibilities
Compression
and Power
Production and
Processing
Rentals
Retrofit
Mechanical Service
14
World Class Customers
Canada
15
Strategic Advantages of Merger
• Broader geographical
coverage within Canada
• Combining of the Canadian
and Northern USA
Waukesha distributorships
• Amplified market strength
• Largest rental fleet in
Canada
• Vastly increased project
capacity
16
Equipment Manufacturing
Barlow, Calgary
34th Street, Calgary
Nisku, Alberta
Casper, Wyoming
17
Equipment Manufacturing
• Leading supplier of
compression equipment into
the Canadian and Northern
USA market
• Enerflex has won the majority
of contracts for high-horse
power installations in the
Canadian market
• Proven market capabilities
18
Equipment Manufacturing: Horn River
Shale Gas Play
Northeast BC Gas Pipelines & Facilities
N.W.T
Cordova
Embayment
BC
Slave Point
Platform
Cabin
Alberta
mbia
British Colu
B
Fau ovie
lt S
yste
m
North
Maxhamish
Loop
Cabin 0.4 Bcf/d,
2.4 Bcf/d Ultimate
4th Qtr. 2011
Horn River
Basin
Ft. Nelson
SK
Fort McMurray
Demand Region
North Central
Corridor
Horn River Pipeline
0.6 Bcf/d Committed
2nd Qtr. 2012
Ft. Nelson
Gas Plant
AB
Woodenhouse
Meikle River
McMahon
Spectra Energy
0.8 Bcf/d Committed
Gathering & Processing
Staged In-service 2012 - 2013
Station 2
Ft. St. John
McMahon
Gas Plant
aw
D
n
so
Sunrise
Swan
Lake
Su
South Peace Pipeline
North Maxhamish Loop
TCPL Alberta System
Spectra Energy
Gas Process Plant
Proposed Gas Plant
p
Tu
nd
ow
n
Spectra Projects
Pouce
Coupe
Growing Supply Basins
Parkland
Pine River
Gas Plant
Alberta
Groundbirch
1.1 Bcf/d
4th QTR. 2010
Groundbirch
South Peace
0.2 Bcf/d
British Columbia
Dawson 0.2 Bcf/d,
staged in-service
2011-2013
Station 2
Pine River
Montney Play
Taylor
r
pe
Compressor Station
TransCanada Projects
North Central Corridor
Groundbirch Mainline
Horn River Mainline
Pacific Trail
Pipelines
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Equipment Manufacturing: Horn River
EnCana Cabin Gas Processing Plant
• Six phase build
• Awarded Phase I - a contract
value of $80M with a delivery
of 2011
• Recently awarded the solesource contract for the Amine
Modules for Phase II with a
contract value of $60M
• Final 4 Phases expected to
commence one per year
starting in 2013
20
Equipment Manufacturing: Horn River
Spectra Energy Gas Processing Plant
Horn River Shale Gas
• $25 M project
• Awarded Phase I which
included 7 modules
• Phase II will be awarded in 2011
with remaining phases coming in
2012 and 2013
• Horn River very significant source
of long term revenues
21
Equipment Manufacturing: Horn River
Pre-Manufactured Modules for Spectra Energy
• Inlet Separation
• Amine Processing
• Dehydration
• Dew Point Reduction
• Acid Gas Injection
• Vapor Recovery
• Stabilizer Overheads
22
Equipment Manufacturing: Horn River
Contracts Signed to Date
23
Equipment Manufacturing: Montney
Large Tight Gas Play
British Columbia
• South of Horn River
extending into Alberta
• Access to infrastructure
• Providing high volumes of
compression and
processing facilities
• Liquid rich formation
requiring additional
equipment
Greater
Sierra
Hybrid
&
Shale
Gas
Presents new opportunities
Extended
Deep Basin
094A
Farrell
Altares
Talisman
Low Gas
Concentration
Tight Gas
Conventional
Montney Gas & Oil
Calgary
British
Columbia
Alberta
Fort St. John
Septimus
Crew
094B
Parkland
Storm
Monias
Sunrise
Groundbirch
Shell
Dawson Pouce Coupe
Birchcliff
ARC
Talisman
Dawson Creek
Pouce Coupe
South
Swan Lake
Glacier
Encana
Advantage
Valhalla
Sundown
La Glace
Tupper
Murphy
Sinclair
Hythe
093O
–
Alberta
Grand Prairie
093P
Low Gas
Concentration
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Equipment Manufacturing: Montney
Contracts Signed to Date
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Equipment Manufacturing
Northeast BC Production by Basin
Bcf/d
History
Bcf/d
Future
5.2
5
5
50%
4
3
2.5
Horn River
5%
13%
2
19%
23%
3
1% New Play
23%
Montney
BC Deep Basin
2
8%
BC Foothills
1
4
1
10%
0
2000
40%
2005
2010
8%
BC Plains & Jean-Marie
2015
2020
0
2025
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Rentals
Leader in Rental Equipment
• Largest gas compression rental company in Canada
• Currently have 570 units in our rental fleet generating
180,000 horsepower.
27
Service Business
Largest OEM Service Provider in Canada
• Canadian market leader
• Largest distributor of parts
for Waukesha engines
• Enerflex also distributes
Altronic, Ariel, Champion,
Gemini and Frick products
30 Service Branches and 220 Service Vehicles
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Service Business - Central Services
• Built new 55,000 sq.ft.
distribution and re-manufacturing
facility in Leduc, Alberta
• Central Warehouse to distribute
parts to branches as required
• Improve efficiency
Leduc, Alberta
29
Integration
• The Canadian Sales, Service,
Rentals and Retrofit businesses
have been fully integrated
• Calgary manufacturing,
engineering and administrative
personnel have been merged
• Currently working on
consolidating our ERP systems
30
Rationalization
$32 Million in Annual Cost Savings Realized to Date
• Eliminated 310 employee positions
• Closed 10 overlapping service locations
• Exited 4 manufacturing facilities
• Removed 320,000 sq.ft of excess capacity by
closing 47th Street facility
• Removed 55,000 sq.ft of excess capacity by
consolidating retro-fit business
• Sold Stettler and North facilities
• Substantially reduced product inventories
• Sold Syntech operation
31
Summary
Rationalization
+
Ongoing Cost Controls
Reduce Capital Employed and
Create Additional Cost Savings
32
Strategic Goals
• Maximize our participation in Horn River and Montney gas plays
• Continue to rationalize operations to remove overlap
• Continue aggressively reducing inventories of new equipment
• Sell idle equipment in our rental fleet
• Maintain the leading market position
• Grow contract maintenance revenue as a percentage of business
• Expand capability to serve engine rebuild and exchange market
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Jerry Fraelic
President, Southern United States
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Agenda
 Division Overview
 Equipment Manufacturing Role
 Southern and Eastern U.S. Activities
 Latin America Activities
 2011 Expectations
36
Division Overview
Markets We Serve
• South and East US and Latin America
– Houston main location (Packaging and Service)
– 4 remote sales offices
– 5 remote service offices
• Strategic Advantage of Merger
– Tidewater Location for International
– Lower Manufacturing Cost Base to Support
International Sales Effort
– Leverage Knowledge for Field Installations
Division Least Affected by Merger
37
Division Overview
Global Industries
Products
• Special Gases and Fuel Gas Compressors
(H2, N2, CO2, etc.)
• Natural Gas Reciprocating and Screw
Compressors
Natural Gas Compression
– Engine and electric drive
– 200 to 10,000 HP
• Gas Processing Equipment
–
–
–
–
Dew Point Plants
Amine Plants (CO2 and H2S absorption)
Dehydration Systems (TEG and Mole Sieve)
Refrigeration
Natural Gas Processing
38
Division Overview
Fabrication and Packaging
• Pipeline and Storage are
generally large HP units
• Growth area as gas demand
increases and production
comes on line in new regions
• Well positioned for large
horsepower compression
units
39
Division Overview
Fabrication and Packaging
• Fully Integrated
–
–
–
–
Sales and Applications
Engineering
Fabrication and Packaging
Service and Merchandize
• Manufacturing facility
in Houston located on
30 acres of land
• 22 bays for assembly
• Approximately 380 people
on site and 500 total
Houston Assembly Plant
40
Division Overview
Fabrication and Packaging
Houston Facility
41
Division Overview
2010 Accomplishments
• 193 modules shipped
• 415,000 HP shipped
• 87 percent compression
• Balance process equipment
• 650,000 production hours
• Inventory Reduction
Serialized reduced 76% or by $21.2M
Typical Gas Compression Site
42
Southern and Eastern U.S.
Fayetteville
gas field
Fabrication Plants
Shale Gas Plays
Marcellus
gas field
20 trillion cubic
feet of
recoverable gas
262 trillion cubic
feet of
recoverable gas
Eagle Ford
Haynesville
shale field
sizeable quantities
of oil, lean gas and
rich gas
•
•
•
•
•
•
Sale & Service Locations
250 trillion cubic
feet of
recoverable gas
Significant focus on unconventional (shale) gas
Significant opportunities for Enerflex as gas comes online for both compression and processing
Last week Horizontal Rigs all time high in lower 48 (continued pressure on gas price)
Gas consumption running at very high rates 65 BCF
LNG import capable 18.5 BCF / actual 1.5 BCF, CDN imports down
Storage levels at all time high at 3.8TCF above 5 year average high of 3.5TCF
43
Significant Customers
44
Latin America
Venezuela
•
•
South America 14% of contract
bookings (sales organization)
Risk Management
– Resellers (positive cash and before ship)
– Letters of credit
– US product if possible
Colombia
Peru
Chile
Venezuela
Bolivia
Argentina
•
•
•
•
National Oil Companies
Columbia recently active (BP)
Venezuela active (PdVSA)
Peru (PlusPetrol)
45
Latin America
Venezuela
• Second-largest natural gas reserves in
Western Hemisphere
– 176 trillion cubic feet of proven reserves
• Opportunities due to infrastructure issues
• Supply full range of equipment:
–
–
–
–
–
Fuel gas compressors
Standard compression modules
Processing modules for amine and dew point
Gathering equipment
Plus all related parts and services
46
Productivity
Management Initiatives
It’s all about the People
Continuous Improvement
Quality and Competitive Price
• Combines leadership training with
process improvement
– Correct information to correct people
in a timely manner
– Connect front-line to bottom-line
Lean Manufacturing
HSE
• Optimize operational efficiency
by identifying inefficiencies and
eliminating waste
• Health, Safety and
Environmental Goal is 50% of
industry average
Results are Measurable
47
Outlook
• Gas Compression
– Revenues in U.S. markets steady
– Expect higher business volumes in Latin America
• Gas Processing
– Expect increase across all markets
• Expect continued orders for fuel gas systems
• Expect increased international manufactured product
• Able to expand systems & facilities to meet demanded
48
49
Bill Moore
President, International
50
Agenda
 Division Overview
 Equipment Manufacturing
 Regional Operations Reports
 Outlook for 2011
51
Division Overview
Markets We Serve
52
Division Overview
Specialized Goods and Services
• Engineering Design
• Equipment Fabrication
• Onsite Construction
• Project Management
• Maintenance and
Operation Services
53
Division Overview
Most Active Categories
Production
and Processing
Compression
and Power
Combined Heat
and Power
Integrated
Solutions
54
Manufacturing and Fabrication
Australia
• New Eagle Farm reassembly facility in Brisbane
• Build on and expand as required in the future
• Recently opened Roma Service facility
55
Manufacturing and Fabrication
Summary
• Significant capacity to meet the manufacturing and
fabrication requirements of our customers with export
of our products and through local footprint
• As business volumes increase in the future, excess
capacity at our plants will be taken up as required
56
Market Regions
Australasia
• Most important single region
• Solid market presence
• Our projects include:
– Gas-gathering infrastructure
for LNG plants on Australia’s
northwest shelf
– Coal-seam gas compression
systems
for Queensland’s local gas demand
and upstream LNG development
– Compression booster stations
along most of Australia’s pipeline
network
57
Market Regions
Australasia
Australia Major Basin Activity
58
Market Regions
Australasia
• Global financial crisis decelerated
project work in Australia resulting
in several delays
• Queensland Gas Corporation
awarded Enerflex their first LNG
compression and processing
order in October
– 82 modular gas compressor
packages and 3 modular TEG
dehydration packages valued at
$193 million
– Leading edge of a major ramp-up
in Australian coal seam gas
production
59
Market Regions
Australasia
• 4 multi-billion projects under
development
Gladstone LNG
– QGC and Santos well advanced
• Gorgon offshore project,
booked metering station on
west coast
• Epic Wullumbilla expansion
booked $30 million of
compression installation during
the third quarter
GLNG
2 1
4 3
QCLNG
Queensland
APLNG
Major CSG to LNG Projects
1.Santos (GLNG)
2.Shell (Gladstone LNG)
3.Origin (APLNG)
4.QGC (QCLNG)
60
Market Regions
Australasia
Gas Production Growth
Demand expected to double in 10 Years
Planned
LNG
Projects
Carbon Driven Fuel Switching
10 Year Historic Average
…driven by government carbon policy and LNG export
61
Market Regions
Europe/CIS
• Over 2 decades of strong presence
in Europe
• Traditional market in the Benelux
countries has been
– Combined Heat and Power (CHP)
packages
– Limited growth opportunities
• To grow in Europe:
– Take advantage of diversity of product
applications
– Strengthen service base
62
Market Regions
Europe/CIS
Growth strategy includes markets:
• Power Generation
• CHP
• Natural Gas Compression
• CO2 Production
• Refrigeration Systems
Rijsenhout, Netherlands
63
Market Regions
Europe/CIS Infrastructure Investments
Netherlands
consolidated operations into
one facility in Risjenhout
UK
integrated regional sales
office with European team
Turkey
established a branch office to
support CHP plus gas compression
offerings
64
Market Regions
Middle East North Africa
• Smallest share of
revenue today
• Expected to lead the world
in natural gas production
over the next 20 years
• Region holds a total of
2,658 trillion cubic feet of
natural gas
• 44% of world’s proven gas
reserves
65
Market Regions
Middle East North Africa
MENA Production and Reserves
Middle East
Middle East
No-OECD Asia
Eurasia
Africa
No-OECD Europe/Eurasia
2,658
2,170
Asia
539
Africa
495
Central/South America
North America**
United States
161
Europe
Other OECD
-5
5
15
World Total:
6,609 trillion cubic feet
267
Central/South America
Australia/New Zealand
319
0
1000 2000 3000
*Graph shows change in world natural gas production and reserves by region 2010 to 2035 (Tcf)
Source: Oil & Gas Journal66
**Does not include unconventional gas reserves in North America.
Market Regions
Middle East North Africa
•
Growth will be driven by:
–
–
–
–
•
•
•
LNG
Power Generation
Fertilizer
Water Desalination
Abu Dhabi office with sales,
engineering and operations
management
Oman reached the
commencement of our BOOM
contract for BP’s Khazzan
Makarem
Awarded a $34 million
compression order in Bahrain
with Tatweer Petroleum
Kuwait
Egypt
Bahrain
Qatar
UAE
Oman
67
Market Regions
International Clients
68
Strategic Goals
• Establish and implement an international strategy
for gas compression and processing equipment
including risk management
– Australasia
– MENA
• Complete the pre-qualification process for turnkey
projects
–
–
–
–
–
Emirates
Oman
Kuwait
Egypt
Client prospects include Gasco, BP, Kuwait Oil
Company and Shell Egypt
69
Strategic Goals
• Australia - Queensland Gas contract
– Gas compression
– TEG dehydration packages
– Potentially construction and installation works
• Middle East - BP Oman project
• Europe/CIS
– Reduce our reliance on the Benelux market for CHP
– Focus on other expanding European markets
– Grow our presence in natural gas market through
development of sales office in Moscow
70
Summary
• Provision of both equipment and support services
produces attractive margins and forges close ties with
our customers
• Strategy to improve volume of higher margin business
from recurring revenue streams
• Strong relationships lead to further business and
enhances overall stability through all phases of the
business cycle
• Risk management – geographic, customer, contracts
71
72
Summary
Well Positioned as a Pure Play Supplier of Natural Gas
and Processing Equipment
74