the presentation

TSX:CFW
CALFRAC WELL SERVICES LTD.
Investor Presentation June 2016
Forward Looking Statement
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.
© Calfrac Well Services Ltd.
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Active Rig Counts: North America & International
Number of Active WCSB Land Rigs
2,000
1,800
Number of Rigs
1,600
1,400
1,200
1,000
800
600
400
200
0
1/4/2013
1/4/2014
1/4/2015
1/4/2016
1,050
340
1,000
320
300
280
260
240
800
220
750
200
700
180
International Land Rig Count
© Calfrac Well Services Ltd.
International Offshore Rig Count
Number of Offshore Rigs
Number of Onshore Rigs
360
850
600
500
400
300
200
100
0
Feb Mar
2012
1,100
900
700
Jan
Lower 48 Active Land Rig Count
950
800
Apr May
2013
Jun
Jul
2014
Aug
Sep
Oct
2015
Nov
Dec
2016
- U.S. land rig count down ~80% from
peak
- WCSB active rig count down ~50% Y/Y
- International rig count down ~30% from
peak
Source: Baker Hughes
3
Global Supply/Demand
10,000
Weekly Lower 48 Oil Production
000's Bbls/d
 Global oil demand growth continues
9,000
 U.S. oil production declines
8,000
accelerating and expected to
7,000
continue into 2017
6,000
 U.S. inventories remain at record
5,000
highs, will need to see a sustained
4,000
1/6/2012
1/6/2013
1/6/2014
drawdown to move prices higher
 Global oversupply overstated – unreliable data
 Market rebalancing still possible (and likely more sustainable)
without OPEC intervention
 Expect a more balanced market in H2/16 driven by price
© Calfrac Well Services Ltd.
1/6/2015
1/6/2016
Source: Bloomberg
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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
Fracturing Operation (2015) Calfrac Well Services Photo
 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
© Calfrac Well Services Ltd.
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Company Snapshot
TSX Stock Symbol: CFW
Share Price*
$3.17
30-Day Average Volume*
1,040,000
Market Capitalization*
$366.4 million
Enterprise Value*
$1.2 billion
Shares Outstanding*
115.6 million
Insider Ownership
~25%
* As at 16:00:00 ET on 6/15/2016
- On February 24, 2016 Calfrac’s Board of
Directors suspended the dividend until further
notice
Canada Frac Crew Operator (2012). Calfrac Well Services Photo
© Calfrac Well Services Ltd.
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Full Service Pressure Pumping
As at March 31, 2016
Canada Fleet:
410,000 Horsepower
13 Coiled Tubing Crews
U.S. Fleet:
615,000 Horsepower
11 Cementing Crews
5 Coiled Tubing Crews
Russia Fleet:
70,000 Horsepower
7 Coiled Tubing Crews
Latin America Fleet:
131,000 Horsepower
14 Cementing Crews
7 Coiled Tubing Crews
© Calfrac Well Services Ltd.
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Committed To Safety, Quality And Flawless Execution
GLOBALLY DIVERSE OPERATIONS
© Calfrac Well Services Ltd.
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Canadian Operations
Canada Fleet:
410,000 Horsepower
13 Coiled Tubing Crews
© Calfrac Well Services Ltd.
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Canada – Market Update
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
 Greater proportion of 24-hour operations
Pricing & Utilization
 Pricing fell ~10-15% sequentially in Q1/16,
potential for further pricing decreases but
largely stabilized
 ~50% of horsepower parked
 9 of 13 coil units idled
© Calfrac Well Services Ltd.
Market Trends
 Stages per well increasing
 Frac spacing tightening
 Operators refocusing on highest quality
plays and assets
Market Outlook
 Rig count down ~50% Y/Y Q2/16 quarterto-date
 Minimal activity throughout spring break-up
 Visibility for H2/16 is limited
 Customer capex is expected to be
meaningfully lower than 2015
10
United States Operations
U.S. Fleet:
615,000 Horsepower
11 Cementing Crews
5 Coiled Tubing Crews
© Calfrac Well Services Ltd.
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United States – Market Update
Calfrac Market Positioning
 Focus on customers that are financially
strong and intend to remain active in key
plays across the U.S.
 Target an equal mix of oil/gas exposure
 Positioned in key areas of frac demand:
– Bakken, Marcellus, Rockies, Utica,
Eagle Ford (temporarily suspended)
 ~90% of work is 24-hour operations
Pricing & Utilization
 Pricing largely stabilized but remains down
~40% from peak
 ~65% of horsepower parked
 Temporarily suspended coiled tubing and
cementing operations
© Calfrac Well Services Ltd.
Market Trends
 Stages per well increasing
 Frac spacing tightening
Market Outlook
 U.S. land rig count continues to decrease
 Visibility for H2/16 is limited
 Customer capex is expected to be
meaningfully lower than 2015
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Managing The Downturn
 Service Line Strategy
– Equipment has been idled when operating margins do not meet the company’s return requirements
►
►
Canada - 50% of horsepower and 9 of 13 coiled tubing units idled
U.S. - 65% of horsepower idled and all coiled tubing units and cementing units idled
– Optimized completion methods
 Utilization and Maintenance Planning
– More efficient equipment utilization and maintenance schedules
– Unnecessary discretionary spending has been eliminated
 Logistics and Supplier Initiatives
– Transload facilities in key locations and increase in rail car fleet
– Supplier costs have been reduced
►
Proppant costs down ~40%, chemical costs down ~10%-40% and third-party subcontractor rates down ~25%
 Working Capital
– Focus has been on improving working capital management
– We are appropriately managing and maintaining lower levels of inventory (sand, chemicals and spare
parts)
© Calfrac Well Services Ltd.
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Workforce & Fixed Cost Optimization
 Canada
–
–
–
–
Reduced field workforce by ~60% from January 1, 2015
Fixed costs down ~50% Y/Y
Further compensation reductions as of January 1, 2016
Transportation group and the majority of frac and coiled tubing groups transitioned to variable
pay structure
– Closed Medicine Hat District
 U.S.
–
–
–
–
–
Reduced field workforce by ~70% from January 1, 2015
Fixed costs down ~60% Y/Y
Closed district in Arkansas
Temporarily suspended fracturing operations in San Antonio
Suspended all coiled tubing and cementing operations
© Calfrac Well Services Ltd.
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Latin America Operations
Neuquén, Argentina Frac Operation (2014). Calfrac Well Services Photo
© Calfrac Well Services Ltd.
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Argentina – Market Update
Calfrac Market Positioning
 One of the largest pressure pumping
companies in Argentina
 Customer expansion to IOCs and
domestic players
 First company to complete 12 fractures in
under 8 hours on a horizontal well
 Contracts based in USD
Argentina Fleet:
108,250 Horsepower
13 Cementing Crews
7 Coiled Tubing Crews
Market Outlook
 Country focused on reducing reliance on
imported energy
 Third fleet added in Q1/16
 Shift towards gas-focused activity
 Medium-to-longer term upside potential
following reforms by new President Macri
© Calfrac Well Services Ltd.
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Mexico – Market Update
Calfrac Market Positioning
 Long-term opportunity due to
Mexican energy industry reforms
– Low oil prices will limit
immediate impact
 Round One tenders are ongoing
Market Outlook
 Limited near-term activity
 Right-sized business to reflect
current activity levels
© Calfrac Well Services Ltd.
Mexico Fleet:
22,500 Horsepower
1 Cementing Crew
1 Coiled Tubing Crew
17
Russia Operations
Siberia, Russia Frac Crew (2006). Calfrac Well Services Photo
© Calfrac Well Services Ltd.
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Russian Operations
Russia Fleet:
7 Fracturing Spreads
70,000 Horsepower
7 Coiled Tubing Crews
© Calfrac Well Services Ltd.
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Russia – Market Update
Calfrac Market Positioning
 Horizontal fracturing in conventional reservoirs is a significant amount of Calfrac’s activity
 Rouble devaluation has negatively impacted reported financial results
Market Outlook
 2016 activity expected to be down
modestly from 2015
 Change in customer mix
 Introduction of multi-stage annular
fracture treatments is a market
differentiator
Russia Fracturing Crew (2015). Calfrac Well Services Photo
© Calfrac Well Services Ltd.
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Committed To Safety, Quality And Flawless Execution
LICENSE TO OPERATE
© Calfrac Well Services Ltd.
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Our License to Operate
HSE
QUALITY
Plan ▪ Do ▪ Assess ▪ Adjust
Monitor ▪ Refine ▪ Execute ▪ Improve
TECHNOLOGY
Research ▪ Develop ▪ Test ▪ Refine
SUPPLY CHAIN
Evaluate ▪ Negotiate ▪ Finalize ▪ Implement
Calfrac employee on a Canadian hydraulic fracturing job. Calfrac Well Services Photo
© Calfrac Well Services Ltd.
Calfrac sand terminal in Whitecourt, Alberta. Calfrac Well Services Photo
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FINANCIAL HIGHLIGHTS
© Calfrac Well Services Ltd.
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The Balance Sheet
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
 Recently renegotiated facility structure and
covenants
 Loan facility $300 mm
 Matures in 2018
Capital Program
 2016 capital budget set at $40 million
– Includes $30 mm of carryover
© Calfrac Well Services Ltd.
Neuquén, Argentina Frac Operation (2014). Calfrac Well Services Photo
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Relaxation Of Covenants (Credit Facility)
 Funded Debt/EBITDA covenant
amendments including two periods of
waivers
 Introduction of Equity Cure:
– Applicable up to December 31, 2017
– Not to exceed the greater of 50% of total EBITDA over the prior twelve month period
or $25 million per cure
– Positively impacts both EBITDA and Funded Debt
– Can be utilized twice during period of covenant relief
– Can not be utilized in consecutive quarters
 The Total Debt to Capitalization ratio removed
 Funded Debt to Capitalization ratio introduced - 30% (does not include Calfrac’s
unsecured senior notes or second lien term loan)
© Calfrac Well Services Ltd.
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Second Lien Term Loan
 On June 10, 2016, AIMCo provided Calfrac a $200 million second lien senior secured
term loan facility maturing in September 2020.
– 9% interest rate paid quarterly with option to pay interest “in kind” at 12% rate (8 quarters max)
– ~6.9 mm warrants were issued to AIMCo priced at $4.14/share exercisable prior to June 10, 2019
 The proceeds of the term loan will be used by Calfrac for working capital needs and
general corporate purposes, including:
– Repayment of all of Calfrac’s current bank indebtedness under its syndicated revolving credit facility
and all borrowings of Calfrac Well Services (Argentina) S.A.
 Positions Calfrac to assess opportunities to repurchase some of its unsecured senior
notes due 2020
– Currently limited to $200 million
– Subject to a minimum liquidity requirement of $100 million
– Repurchase of notes must result in a reduction of annual net interest costs (dollar for dollar basis)
 Following this financing, Calfrac still has $200 million of second lien capacity.
 Overall, this financing leaves Calfrac well-positioned to navigate this period of market
weakness and capitalize on the opportunities expected to arise as market conditions
recover.
© Calfrac Well Services Ltd.
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