Investor Presentation | March 2015
Right People, Right Rigs, Right Partners, Right Attitude
Advisory
This presentation of CanElson Drilling Inc. (the “Company”) contains certain statements and information that are
forward looking statements or information within the meaning of applicable securities law, and which are collectively
referred to herein as “forward looking statements”. Forward looking statements in this presentation include, but are
not limited to, management’s assessment of future plans, operations, development activities and expansion activities.
Readers are cautioned not to place undue reliance on the forward looking statements, as there can be no assurance
that the plans, intentions or expectations upon which they are based will occur. By their nature, forward looking
statements involve numerous assumptions as well as known and unknown risks and uncertainties, both general to the
industry as a whole and specific to the Company and its proposed projects and strategies, some of which are beyond
the Company’s control. These assumptions, risks and uncertainties include, among other things, the Company’s ability
to successfully implement strategic initiatives or acquisitions and whether such initiatives or acquisitions yield the
expected benefits and results, dependence on existing management, financial activities, benefits from previous
acquisitions, general domestic and global economic conditions, fluctuations in the supply and demand for oil and
natural gas, changes in federal or provincial income tax laws, impact of industry conditions, volatility of commodity
prices, currency and interest rate fluctuations, imprecision of internal estimates, environmental risks, political risks,
competition from other industry participants, lack of availability of qualified personnel or management, stock market
volatility and ability to access sufficient capital from internal and external sources. Readers are cautioned that the
foregoing list of important factors is not exhaustive. Actual results, performance or achievement could differ materially
from those expressed in, or implied by any forward looking statements in this presentation, and accordingly, no
assurance can be given that any of the events anticipated by the forward looking statements will transpire, or if any of
them do so, what benefits that the Company will derive therefrom.
Furthermore, the forward looking statements contained in this document are made as at the date of this presentation
or the dates specifically referenced herein and unless expressly required by law the Company disclaims any intention or
obligation to update or revise any forward looking statements contained herein, whether as a result of new
information, future events or otherwise. All forward looking statements contained in this presentation are expressly
qualified by this cautionary statement.
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Right People, Right Rigs, Right Partners, Right Attitude
CanElson Financial Overview
Common Shares2
93.0 million
Current Share Price1
$4.04 / share
Market Capitalization
$376 million
Debt (less cash)2
$48 million
Enterprise Value
$424 million
Positive Working Capital (excludes cash and debt)2
$39 million
Capital Assets2
$496 million
Undrawn credit facility 2
$72 million
Tangible Book Value/Share2
$4.29
Quarterly dividend
$0.03 / share
Percentage of basic shares outstanding owned by Management, Directors and insiders
6%
Average daily volume (90 day trailing) 1
323,590
CDI Average Trading Day Value (90 day trailing) 1
1As
$1.4 million
at March 5, 2014
on December 31, 2014 Financial Statements
2Based
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Right People, Right Rigs, Right Partners, Right Attitude
Founder Profiles| A Long History of Drilling Company Operations Experience
Donald R. Seaman
Director
Elson J. McDougald
Executive Chairman
Randy Hawkings
President & CEO, Director
•
•
•
•
•
•
Founding director of Western Lakota Energy
Services
Founder, principal shareholder and Chairman
of Artisan Drilling Ltd.
President of Bow Valley Resource Services
•
Founding CEO and Chairman of Western
Lakota Energy Services, Tetonka Drilling Inc.
& Laredo Drilling Inc.
Promoted from Roughneck to Administration
Manager Westburne Drilling
•
COO of Western Lakota Energy Services
Worked as a drill site, drilling, completion and
reservoir engineer
Engineer at Bow Valley Resource Services
OVER 150 YEARS OF COMBINED INDUSTRY EXPERIENCE
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Right People, Right Rigs, Right Partners, Right Attitude
Geographic Position & Outlook
British Columbia
Alberta
Saskatchewan
North Dakota
Texas
Mexico
5 Rigs
11 Rigs
13 Rigs
6 Rigs
15 Rigs
2 Rigs (2 Svc)
• We expect low
activity until late
in Q3 2015,
followed by
gradual
improvement in
utilization, based
on conversations
with customers,
forward crude oil
strip pricing, and
a lower overall
cost structure
relative to the ND
Bakken.
• Based on northern
crude oil pricing
differentials, we
expect that there
will only be a
minimal level of
activity in North
Dakota for the
remainder of
2015.
•
CanElson
recently added
Rig #49, an AC
tele-double
under a long
term contract.
• NGL pricing has
decreased along
with crude and
play economics
for many
producers have
been negatively
impacted.
• CanElson has a
diverse customer
mix ranging, with
strong relative
play economics..
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• CanElson has
migrated the terms
of its contracts for
Rig #47, Rig #48,
Rig #103 and Rig
#104 to existing
drilling rigs
• Our approach is to
remain flexible:
commencement of
operations in the
Delaware Basin and
a reduction in
performance based
contracts.
• Proposed industry
reform in Mexico
will open the
country to foreign
investment,
however, shortterm visibility
remains
challenged.
• Our JV with a local
oilfield services
company uniquely
positions us for
growth when
activity levels
recover.
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Right People, Right Rigs, Right Partners, Right Attitude
Balance Sheet Strength & Proactive Measures
Balance Sheet Strength:
• CanElson exited 2014 with debt less cash of $48.4 million. This excludes its positive
working capital balance of $38.5 million.
• Trailing twelve month net debt to funds flow ratio of less than 0.5 times.
• CanElson has the balance sheet to act opportunistically if approached with an
acquisition opportunity.
Proactive Measures to Preserve Balance Sheet Strength:
CanElson has taken proactive steps toward maintaining a strong balance sheet. These
steps include:
• Reducing our original 2015 capital program by $46.0 million, or ~70%.
• Reducing our annual dividend commitment by $11.2 million, or 50%.
• Reducing executive salaries and Board of Directors compensation by 20%.
• Actively taking steps toward reducing variable direct operating costs and administrative
expenses.
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Right People, Right Rigs, Right Partners, Right Attitude
2014 Revenue Breakdown by Customer Composition
6%
5%
11%
US Private - 25%
US Large Cap - 21%
Canadian Intermediate Cap - 19%
Canadian Large Cap & NOC - 13%
Canadian Private - 10%
Canadian Junior Cap - 6%
US Junior Cap - 5%
25%
13%
21%
19%
Source: CanElson Drilling Inc.
Note: Market Capitalization Ranges - Large > $10 B, Intermediate $1 B to $10 B, Junior < $1 B. Private companies range between Large and Junior.
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Right People, Right Rigs, Right Partners, Right Attitude
Drilling Rig Fleet | Vertical Depth & Operating Areas
0
3,300
9,900
13,200
16,500
19,800
BC (5)
Alberta (11)
Saskatchewan/Manitoba (13)
Texas (15)
ND (6)
23,100
MX (2)
Tele-double fleet capable of drilling 6,000+ metres (20,000+ feet) measured depth
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Feet
Meters
6,600
Right People, Right Rigs, Right Partners, Right Attitude
Canadian Utilization Statistics | 2012 - 2014
100%
90%
80%
70%
60%
50%
40%
30%
20%
CanElson Drilling
10%
CAODC Industry Average
0%
2012
2013
2014
Source: CAODC, CanElson Drilling Inc.
Note: Market Capitalization Ranges - Large > $10 B, Intermediate $1 B to $10 B, Junior < $1 B. Private companies range between Large and Junior.
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Right People, Right Rigs, Right Partners, Right Attitude
US Utilization Statistics | 2012-2014
100%
90%
80%
70%
60%
50%
40%
CanElson Drilling
US Industry Average
30%
2012
2013
2014
Source: Baker Hughes, NOV Rig Census, CanElson Drilling Inc.
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Right People, Right Rigs, Right Partners, Right Attitude
Return on Invested Capital | Canadian Drilling Contractors
Note: Peer comparative figures excludes two Canadian drillers in Q4/14, as they have not yet reported Q4/14 results
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Right People, Right Rigs, Right Partners, Right Attitude
Corporate Directory
Head Office
Analyst Coverage
700, 808 4th Avenue SW
Calgary, AB T2P 3E8
•
•
•
•
•
•
•
•
•
Auditors
Deloitte
Legal
Borden Ladner Gervais LLP
Syndicate of Lenders
HSBC (Lead / Agent)
Syndicate Members – Scotiabank, RBC, ATB
AltaCorp Capital Inc.
Canaccord Genuity
Cormark Securities
FirstEnergy Capital Corp.
National Bank
Paradigm Capital Inc.
Peters & Co. Limited
PI Financial
Scotia Capital
Dana Benner
John Bereznicki
Jason Zhang
Kevin Lo
Sean Wetmore
Jason Tucker
Jeff Fetterly
Brian Purdy
Vladislav Vlad
Website
Contacts
www.canelsondrilling.com
Randy Hawkings, President & CEO
Robert Skilnick, CFO
TSX
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Appendix 1: Experienced Board
•
•
Founding CEO and Chairman of Western Lakota Energy Services Inc.
Founding CEO and Chairman of Tetonka Drilling Inc. & Laredo Drilling Inc.
•
•
Founding director of Western Lakota Energy Services
Founder, principal shareholder and Chairman of Artisan Drilling Ltd.
•
•
Partner at Borden Ladner Gervais LLP, Calgary AB
Experience in private and public offerings and mergers and acquisitions
•
•
Director of TransAlta and director and chairman of Seven Generations
Chairman and CEO of La Jolla Resources International Ltd.
•
•
Prior experience as non-executive chair of a listed financial services
Prior experience as officer/directors of Tri-Ocean Engineering
Director since June 2009
•
•
Former managing partner of the Calgary office of BDO Canada LLP
Financial advisor consultant to various public and private organizations
Scott Bratt
•
24 years experience in the energy sector including 15 years with FirstEnergy
Capital Corp, most recently as Managing Director and Co-Head Corporate Finance
Appointed in May 2014
•
•
Current President & CEO of Peace Hills Insurance
Board Member of NAIT – Chair of HR Committee, Board of Insurance Bureau of Canada
Randy Hawkings
•
See Randy’s bio on next slide (management)
Elson J. McDougald
Executive Chairman
Donald R. Seaman
Director since inception
Daniel G. Kolibar
Director since inception
C. Kent Jespersen
Director since January 2009
Dale Johnson
Director since June 2009
Rodger Hawkins
Director since March 2013
Diane Brickner
President & CEO
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Appendix 2: Experienced Management Team
Randy Hawkings,
P.Eng,
President, CEO & Director
Robert Skilnick, CA
CFO
Bill Kosich
COO
Lawrence Kolasa
VP Construction
Ryan Hawkings
VP Operations
Mike Smith
VP GM Saskatchewan & Rocky
Mountains
• COO of Western Lakota Energy Services Inc.
• Over 35 years of domestic and international E&P and services experience
• Worked as drill site engineer, drilling, completion and reservoir engineer
• Over 15 years experience in corporate finance, accounting and auditing
• Controller, junior international E&P company
• Over 35 years experience in the oil and gas industry
• Practical and technical drilling & completion experience for senior and junior
E&P companies
• Over 30 years experience including both field and management experience
• Over 30 years domestic, US and international experience
• Worked for both drilling contractors and 12 years with E & P companies
• Over 30 years experience primarily focused in South East Saskatchewan
• Field experience with a large South East Saskatchewan drilling company
 The team is supported by 1000 + dedicated employees working in 3 different countries
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Appendix 3: Financial Results
For the three months ended December 31,
Full Year
For the year ended December 31,
2014
2013
% Change
2014
2013
% Change
2012
Services Revenue
$90.6
$81.7
12%
$339.5
$257.0
32 %
$218.4
Adjusted EBITDA
$29.3
$26.2
12 %
$105.1
$85.8
23 %
$83.1
Share of profit of unconsolidated joint
venture
-$0.2
$0.7
nm
$2.7
$1.8
51 %
$1.1
Net income attributable to shareholders
$10.8
$10.6
2%
$42.6
$35.6
20 %
$43.6
Basic
$0.12
$0.12
-%
$0.46
$0.44
5%
$0.58
Diluted
$0.12
$0.12
-%
$0.46
$0.43
7%
$0.58
Cash dividends per share
$0.06
$0.06
-%
$0.24
$0.23
4%
$0.20
Funds flow
$29.4
$25.8
14 %
$105.2
$85.4
23 %
$83.2
Gross Margin (services)
$36.0
$31.4
14 %
$131.4
$105.6
24 %
$98.5
93.1
90.4
3%
93.3
82.5
13 %
75.5
Net income per share
Weighted average diluted shares
outstanding
Note: All amounts in millions except per share amounts
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Appendix 4: EBITDA per Share Growth & Key Milestones
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Appendix 5: Return on Equity – Canadian Drilling Contractors
Note: Peer comparative figures excludes two Canadian drillers in Q4/14, as they have not yet reported Q4/14 results
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