COMPANY OVERVIEW
August 2020
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; expectations regarding future dividends; expectations and implications of changes in government regulation, laws and income taxes; and other such matters. This forward-looking information is based on assumptions, estimates and analysis made in the light of the Company's experience and its perception of trends, current conditions and expected developments, as well as other factors that are believed by the Company to be reasonable and relevant in the circumstances.
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 operations, 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; business disruptions resulting from the COVID-19 pandemic; 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. For an augmented discussion of the risk factors and uncertainties that affect or may affect Enerflex, the reader is directed to the section entitled "Risk Factors" in Enerflex's most recently filed Annual Information Form, as well as Enerflex's other publicly filed disclosure documents, available through the SEDAR website (www.sedar.com).
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.
2
EXECUTIVE MANAGEMENT TEAM
Marc Rossiter | Sanjay Bishnoi | David Izett | ||||||||
President & CEO | SVP, Chief Financial Officer | SVP, General Counsel | ||||||||
Greg Stewart | Patricia Martinez | Phil Pyle | Andrew Jack |
President, USA | President, Latin America | President, International | President, Canada |
3
Transforming Natural Gas to Meet The World's Energy Needs
PROVEN TRACK RECORD OF VALUE CREATION
• Complementary product lines and regions driving balanced revenue growth.
• Investing in recurring revenue sources to increase and stabilize margins.
• Strong balance sheet and free cash flow generation through the cycles.
• Proud history dating back to 1980.
ENERGY ACCESS IS FUNDAMENTAL TO SOCIAL PROGRESS
U.N. HUMAN DEVELOPMENT INDEX
Per Capita Energy Use vs. United Nations Human Development Index Score
1.00 | Spain | Germany | SwedenAustralia Norway Finland | USA | Canada | ||
0.90 | |||||||
Uruguay | Oman | ||||||
0.80 | Philippines | Saudi | UAE | ||||
Poland | Arabia | ||||||
0.70
0.60 Namibia
Angola
0.50 Nigeria Ethiopia
Mozambique
0.40
Niger
0.30
0 | 1000 | 2000 | 3000 | 4000 | 5000 | 6000 | 7000 | 8000 |
ENERGY USE (KG OF OIL EQUIVALENT PER CAPITA)
5
CONSUMPTION TRACKS GDP GROWTH
Global Gross Domestic Product trillion 2010 US dollars
Global Aggregate Energy Consumption
('000 bcf equivalent)
300
250
200
150
100
HistoryProjections
non-OECD
High Economic
Growth
Reference
Low Economic Growth
High Economic Growth
Reference
1,000
History | Projections | non-OECD |
800
600
400 |
50OECD
0
Low Economic Growth
200 | OECD | |||||||||||
0 |
2010 | 2020 | 2030 | 2040 | 2050 |
2010 | 2020 | 2030 | 2040 | 2050 |
World energy consumption rises over 40% between 2020 and 2050 in the EIA's Reference case
6
GLOBAL ENERGY DEMAND SATISFIED BY A DIVERSE FUEL MIX
Projected Global Energy Consumption
('000 bcf equivalent per year)
Natural gas is the world's fastest growing source of fossil fuel
Global natural gas
consumption is projected to increase by over 40% from 2020 to 2050
1000
900
800
700
600
500
400
300
200
100
0
134.7
+42%
(~ 57,000 bcf)
191.4
2010 | 2015 | 2020 | 2025 | 2030 | 2035 | 2040 | 2045 | 2050 | |||||
Liquids | Natural Gas | Coal | Nuclear | Renewables | |||||||||
7 | ||
Source: EIA International Energy Outlook 2019. | ||
INCREASED GAS CONSUMPTION IN ALL SECTORS…
Global Natural Gas Consumption by Sector
('000 bcf)
250
200 | History | Projections |
150
100
50
0
2010 | 2020 | 2030 | 2040 | 2050 | |||||
Buildings | Transportation | Power Generation | Industrial | ||||||
Over time, natural gas use is expected to accelerate from increased industrial activity, natural gas-fired electricity generation, and transportation fueled by compressed and liquefied
natural gas
8 | ||
Source: EIA International Energy Outlook 2019, Case: Reference. | ||
…WHILE REDUCING CARBON INTENSITY
49% | Pounds of CO2 emitted per thousand cubic feet | |||||
Up to | - 49% | |||||
229 | 215 | 214 | ||||
206 | ||||||
fewer CO2 emissions | 161 | 157 | ||||
vs. other | 139 | |||||
fossil fuels1 | 117 |
Environmental considerations support a shift to natural gas vs. other fossil fuels
Coal | Coal | Coal | Coal | Diesel Fuel Gasoline Propane | Natural |
(Anthracite)(Bituminous) | (Lignite) | (Sub- | and | Gas | |
bituminous) Heating Oil |
9 | ||
1 Source: U.S. Energy Information Administration | ||
ALL PRODUCED GAS REQUIRES COMPRESSION AND PROCESSING
('000 bcf) | ||
+57 | ||
200 | 191.4 | |
Consumption increase | ||
150 | 134.7 | of ~57,0001 bcf by |
2050 requires $billions | ||
of compression, | ||
100 | processing, and | |
maintenance | ||
50 | investments | |
0 | 2020 | 2050 |
10 | ||
1 Based on EIA International Energy Outlook 2019, Case: Reference. | ||
POSITIONED FOR GROWTH
GLOBAL DELIVERY OF NATURAL GAS SOLUTIONS
Business Overview*
Revenue | $1,672 MM | |
Employees | ~2,100 | |
Operating Locations | 57 | |
Manufacturing Facilities | 3 | |
Countries | 17 | |
Fleet: | ~695,000 HP |
0 | 32,000 | Enerflex Manufacturing Facility |
Enerflex Operating Location | ||
bcf | bcf** |
Enerflex BOOM Assets
*Trailing twelve-months for the period ended June 30, 2020. | 12 |
** 2019 Global Production = 140,000 bcf/year. |
EXECUTING ON A POWERFUL STRATEGY
Engineered Systems
Customized offerings for:
- Gas Compression
- Gas Processing Plants
- Cryogenic Plants
- Electric Power Generation
Integrated Turnkey ("ITK")
Turnkey Engineered Systems, with local construction and installation capabilities
After-Market Services
- Full after-market parts and services supply for all products
- Product installation and commissioning
- Contract operations and maintenance
Asset Ownership
Any Engineered
System or ITK product on a leased or Build- Own-Operate-Maintain ("BOOM") basis in all target markets
Recurring Revenues
13
SOLUTIONS FROM THE WELLHEAD TO PIPELINE
14
DIVERSIFICATION STRATEGY
Complementary offerings of diversified product lines in diversified geographies
Vertically Integrated
platform provides
differentiation
Focused on growth and
maintenance of gas production volumes
USA
Canada
ROW
Engineered
Systems
AMS
Asset Ownership
15
ADDITIONAL FOCUS ON GROWING RECURRING REVENUES
Engineered Systems
Integrated Turnkey ("ITK")
After-Market Services
Asset
Ownership
Recurring revenue streams offer greater stability and predictability of financial performance
Higher EBITDA margins versus
manufacturing
Strategic goal of generating
- 50% of revenue from recurring sources
Recurring Revenues
16
ASSET OWNERSHIP
Products engineered, built, and ownedby Enerflex
Contracted revenues provide valuable source of stable, predictable revenues and profits
1 | 2 | Leased to Customers for |
Asset Ownership | varying durations |
=
Contract Compression
+
BOOM
4 3
May include long-term operations & maintenance component
17
RATIONALE FOR ASSET OWNERSHIP
C$ in millions
$800
$600
$400 |
$200 |
$0 |
Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 |
2012 | 2013 | 2014 | 2015 | 2016 | 2017 | 2018 | 2019 | 2020 |
ES Bookings | Trailing 12-Month EBITDA* | |||||||
18 | ||
* Normalized for Goodwill impairments. | ||
STRONG U.S. CONTRACT COMPRESSION FUNDAMENTALS
US Contract Compression Market1 (million horsepower)
Changing field conditions
16.0
14.0
12.0
History Projections
require continual equipment modification, making rental an attractive alternative to
6.4%
10.0CAGR
8.0
6.0
4.0
2.0
0.0
2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 2021 2022 2023 2024 2025
Wellhead | Gas-Lift | Gathering | Processing | |||
purchasing
Demand is expected to grow over the long term from both the maintenance and growth of produced gas volumes
19 | ||
1 Spears & Associates Inc., April 2020. | ||
CAPTURING OPPORTUNITIES IN A SUPPORTIVE MARKET
> 150% | 82% |
High 44%
Low 40%
Growth of US fleet from | USA contract |
~130,000 hp to | compression fleet |
> 335,000 hp since 2017 | utilization %1 |
Mid 16%
Diversified horsepower profile across contract compression fleet2
1 Average utilization for the three months ended June 30, 2020. | 20 |
2 High ≥ 801 horsepower; Mid = 251 - 800 horsepower; Low ≤ 250 horsepower. |
BUILD-OWN-OPERATE-MAINTAIN
BOOM
Build-Own-
Operate-Maintain
Engineering | Fabrication | Installation | Operations & |
& | Maintenance | ||
& Design | |||
Commissioning | |||
Any Engineered System
or ITK product on a
Build-Own-Operate-
Maintain ("BOOM")
basis in all target
markets
Larger scale
compression and
processing facilities
Longer-term contracts
vs. contract compression
21
BOOM PORTFOLIO CONTINUES TO GROW
Early Production
Compression
Facility, Oman
2009
Compression | |
Facility, Bahrain | |
Compression | Compression |
Facility, USA | Facility, Oman |
2014 | 2015 |
Compression | Processing and |
Facility, USA | Compression |
Facility, Oman |
Compression
Facility, Oman
Early
Development
Facility, Oman
Gas Compression | Compression |
Facility, | |
Facility, Colombia | Argentina |
2018 | 2020 |
UPGN Processing
Facility, Brazil
Field Depletion
Compression
Facility, Oman
22
PRIORITY TO GROW RECURRING REVENUES
Recurring Revenue C$ in millions
$600
$500
$400
321.0
$300
$200 262
$100
59
$0
+8%
CAGR1 | 596.9 | 579.1 | ||||||||||||||
537.2 | 521.1 | |||||||||||||||
486.4 | 471.5 | 461.7 | ||||||||||||||
375.0 | 395 | 373 | ||||||||||||||
323.5 | 385 | 299 | 345 | |||||||||||||
388 | 308 | |||||||||||||||
284 | 325 | |||||||||||||||
202 | 206 | |||||||||||||||
173 | 176 | |||||||||||||||
153 | 154 | |||||||||||||||
98 | ||||||||||||||||
50 | ||||||||||||||||
39 |
Recurring revenue
growth through Recurring revenue has
organic investment grown by over $250
and strategic M&A million (8% CAGR1) since
2011
2011 | 2012 | 2013 | 2014 | 2015 | 2016 | 2017 | 2018 | 2019 TTM Q2 |
Asset Ownership Revenue | Service Revenue | 2020 | ||||||
23 | ||
1 Compound annual growth rate period from 2011 - 2019 inclusive. | ||
ASSET OWNERSHIP RISKS
01 CreditCounterparty | 03 PerformanceAsset |
02 | Well and/or |
basin | |
dynamics |
Risks mitigated when paired with financial + basin due diligence and Enerflex AMS
24
OPTIMIZED PLATFORM POSITIONED FOR GROWTH
1
3
VERTICAL INTEGRATION | FINANCIAL STRENGTH | |
Differentiated global | Manufacturing cash | |
platform with product | flows fund investment | |
line synergies | in Asset Ownership | |
platform | ||
DIVERSE OFFERINGS | VALUE CREATION | |
Growing all product | Growing profitability | |
offerings in all | while maintaining | |
geographies - We are | strong returns | |
where the gas is |
2
4
25
COMMITTED TO SAFETY
2019 Global Consolidated Safety Record:1
0.09 0.55 0.28
LTI | TRIR | MVIR |
Total # of Lost | Total Recordable | Motor Vehicle |
Time Incidents | Injury Rate per | Incidents per |
per 200,000 | 200,000 exposure | 1,000,000 km |
exposure hours. | hours. | driven. |
2019 Target = 0.00 | 2019 Target = 0.62 | 2019 Target = 0.25 |
26 | ||
1 As at December 31, 2019. | ||
ENHANCING AND STRENGTHENING COMMUNITIES
Corporate citizenship through
wellness and community
development initiatives is an integral part of Enerflex's vision
27
FOCUSED REGIONAL PRESENCE
UNITED STATES
Enerflex Manufacturing Facility | ||||
Enerflex Operating | ||||
0 bcf/d | 25 bcf/d | |||
Location |
USA1
Eng. Systems | $724 MM |
Service | $171 MM |
Rental | $ 86 MM |
Total Revenue | $981 MM |
Fleet: ~335,000 HP Average Fleet Utilization: 82%2
% of Consolidated Revenues1
Canada 23.9%
USA
ROW 58.7% 17.4%
Gas infrastructure demand driven by associated gas from US shale plays
Enerflex is positioned to grow its asset ownership and after- market services platforms in key plays
Source: BP Statistical Review of World Energy 2020. | 29 |
1 Trailing twelve-months for the period ended June 30, 2020. | |
2 For the three months ended June 30, 2020. |
REST OF WORLD - LATIN AMERICA
Rest of World1
Eng. Systems | $ 37 MM |
Service | $144 MM |
Rental | $110 MM |
Total Revenue $291 MM
Fleet: ~300,000 HP
% of Consolidated Revenues1
Canada 23.9%
USA
ROW 58.7%
17.4%
Enerflex Operating Location | |||
0 bcf/d | |||
4 bcf/d |
Enerflex BOOM Assets
Regional gas production is
TBD
expected to grow by approximately 80% by 2040
Continued success with ITK, BOOM, and recurring revenue projects is expected to lead Enerflex's growth
Source: BP Statistical Review of World Energy 2020. | 30 |
1Trailing twelve-months for the period ended June 30, 2020. |
REST OF WORLD - MIDDLE EAST / AFRICA
Rest of World1 | % of Consolidated Revenues1 | ||
Eng. Systems | $ 37 MM | ||
Service | $144 MM | ||
Rental | $110 MM | ||
Enerflex Operating Location | Total Revenue $291 MM | Canada | |
Enerflex BOOM Assets | Fleet: ~300,000 HP | ||
23.9% | |||
USA
ROW 58.7%
17.4%
0 bcf/d | 23 bcf/d |
TheTBDMiddle East accounts for > 35% of the world's proven gas reserves*
- 100,000 horsepower of owned and installed gas compression and processing facilities
Positioned for growth in key markets including Oman, Bahrain, and Kuwait
*Source: BP Statistical Review of World Energy 2020. | 31 |
1Trailing twelve-months for the period ended June 30, 2020. |
CANADA
Canada1
Eng. Systems $332 MM |
% of Consolidated Revenues1
Canada 23.9%
NGL recovery drives infrastructure demand
Service | $ 58 MM |
Rental | $ 10 MM |
Total Revenue $400 MM
Fleet: ~60,000 HP
ROW 17.4%
USA
58.7%
in liquids-rich basins
Petrochemical projects will increase domestic consumption of NGLs
Electric power
opportunities remain
attractive
0 bcf/d | 12 bcf/d |
Enerflex Manufacturing Facility Enerflex Operating Location
Source: Alberta Energy Regulator, 2020. | 32 |
1Trailing twelve-months for the period ended June 30, 2020. |
FINANCIAL OVERVIEW AND PROSPECTS
REVENUE GROWTH THROUGH COMPLEMENTARY OFFERINGS
C$ in millions
$2,045.4 | ||||||||||||
$1,696.2 | $1,629.0 | $1,703.3 | $503 | $1,671.8 | ||||||||
$1,553.4 | ||||||||||||
$1,501.7 | $300 | |||||||||||
$1,405.0 | ||||||||||||
$400 | ||||||||||||
$529 | ||||||||||||
$494 | $347 | |||||||||||
$1,227.1 | $419 | |||||||||||
$500 | $1,130.6 | |||||||||||
$438 | $423 | |||||||||||
$291 | ||||||||||||
$444 | $405 | $233 | $356 | |||||||||
$457 | ||||||||||||
$398 | $376 | |||||||||||
$361 | $432 | $1,196 | ||||||||||
$981 | $981 | |||||||||||
$604 | $762 | $678 | $779 | |||||||||
$590 | ||||||||||||
$423 | $466 | |||||||||||
2011 2012 | 2013 2014 2015 | 2016 2017 | 2018 | 2019 TTM Q2 | ||||||||
2020 | ||||||||||||
United States of America | Rest of World | Canada | ||||||||||
TTM Q2 2020 | 2019 | ||
22% | 12% | 19% | 10% |
66% | 71% | ||
Engineered Systems | Service | Rentals | ||
Exposure to several markets protects against spending fluctuations in any one particular segment
34
A DISCIPLINED APPROACH TO STRATEGIC GROWTH
CAPEX, M&A and ROCE
Organic | Leads | M&A | Leads | Organic | Leads | M&A | |||||||||
Investment | To | Opportunities | To | Investment | To | Opportunities | |||||||||
C$ in millions | 17.5% | ||||||||||||||
$600 | |||||||||||||||
$500 | 13.3% | 12.2% | |||||||||||||
$400 | 9.7% | 12.2% | 9.4% | 9.8% | |||||||||||
8.8% | |||||||||||||||
$300 | 6.2% | 6.1% | |||||||||||||
$200 | |||||||||||||||
$100 | |||||||||||||||
$0 | |||||||||||||||
2011 | 2012 | 2013 | 2014 | 2015 | 2016* | 2017* | 2018* | 2019* TTM Q2 | |||||||
2020* | |||||||||||||||
Acquisition | Rental Additions | PP&E Additions | ROCE | ||||||||||||
Approximately C$1.5 billion reinvested in organic growth and M&A opportunities over the past nine
years
Over 90% of growth
capex deployed
toward Asset
Ownership platform, promoting sustained earning power from recurring revenues
35 | ||
* ROCE derived from Adjusted EBIT, the latter calculated using adjusting amounts disclosed in the MD&A. | ||
BUSINESS MIX DRIVES PROFITABILITY
EBITDA and EBITDA Margin | ||||||||||
C$ in millions | 16.8% | 16.9% | 16.5% | |||||||
400.0 | ||||||||||
350.0 | 13.8% | 13.2% | 345.8 | |||||||
300.0 | 11.4% 10.9% | 295.8 | ||||||||
10.4% | 10.4% | |||||||||
250.0 | ||||||||||
200.0 | 9.0% | 225.2 | ||||||||
214.1 | ||||||||||
193.7 | 190.3 | |||||||||
150.0 | 176.8 | |||||||||
156.8 | ||||||||||
100.0 | 127.0 | 126.9 | ||||||||
50.0 | ||||||||||
- | 2011 | 2012 | 2013 | 2014 | 2015 | 2016* | 2017* | 2018* | 2019* | TTM Q2 |
2020* |
EBITDA | EBITDA Margin % | |
Over $150 million increase in EBITDA since 2011 coupled with increasing EBITDA margins
36 | ||
* Adjusted EBITDA as disclosed in the MD&A. | ||
GROSS MARGIN PROFILE
Revenues (C$ in millions) and Gross Margin %1 by Product Line
Q2 2020 | Q2 2019 | H1 2020 | H1 2019 | ||
Engineered | Revenue | 149.2 | 385.0 | 374.6 | 730.4 |
Systems | Gross Margin % | 16.6% | 17.7% | 20.5% | 16.7% |
Rentals | Revenue | 61.2 | 64.5 | 126.6 | 123.0 |
Gross Margin % | 64.6% | 60.1% | 63.4% | 60.5% | |
After-Market | Revenue | 77.0 | 92.5 | 152.0 | 173.3 |
Services | Gross Margin % | 24.1% | 21.7% | 23.3% | 21.0% |
37 | ||
1 Gross Margin % is inclusive of depreciation and amortization. See appendix for reconciliation to amounts presented in the MD&A. | ||
POSITIVE FREE CASH FLOW AND BALANCE SHEET STRENGTH
Free Cash Flow Before Net Capital Spending* | Net Debt to EBITDA |
C$ in millions | |||||||||||||||||
300.0 | |||||||||||||||||
250.0 | 240.8 | ||||||||||||||||
200.0 | 190.4 | 193.3 | 2.38 | ||||||||||||||
150.0 | 105.1 | 114.2 126.5 | 112.8 | 136.2 | 1.79 | ||||||||||||
1.30 | |||||||||||||||||
100.0 | 1.19 | ||||||||||||||||
72.7 | 1.09 | ||||||||||||||||
67.4 | 0.97 | ||||||||||||||||
50.0 | 0.30 | 0.52 | |||||||||||||||
- | 2011 | 2012 | 2013 | 2014 | 2015 | 2016 | 2017 | 2018 | 2019 | TTM | 2011 | 2012 | 2013 | 2014 | 2015 2016** 2017** 2018** 2019**TTM Q2 | ||
Q2 | (0.31) | (0.70) | 2020** | ||||||||||||||
2020 |
Free cash flows fuel organic growth, | Balance sheet strength with a net |
M&A, and dividend growth | debt to EBITDA of 1.3 |
*Amounts | presented exclude M&A and net capital spending and are available in the financial statements and accompanying notes for the respective years. See Appendix for | 38 |
reconciliation to Free Cash Flow. | ||
** Calculated using Adjusted EBITDA as disclosed in the MD&A. See Appendix for composition of consolidated borrowings. |
DIVIDEND HISTORY
Annually (C$/share) | ||||||||||
$0.50 | History | Projections | ||||||||
$0.46 | ||||||||||
$0.45 | $0.42 | |||||||||
$0.40 | $0.38 | |||||||||
$0.35 | $0.34 | $0.34 | $0.34 | |||||||
$0.30 | $0.28 | $0.30 | ||||||||
$0.25 | $0.24 | |||||||||
$0.20 | $0.18 | |||||||||
$0.15 | ||||||||||
$0.10 | ||||||||||
2011 | 2012 | 2013 | 2014 | 2015 | 2016 | 2017 | 2018 | 2019 | 2020* |
The Company has
maintained a
dividend through
the cycles since
2011
39 | ||
* Annualized estimated 2020 dividend following March 17, 2020 press release. | ||
IGNITING THE FUTURE OF ENERGY
CAPITAL ALLOCATION PRIORITIES
Balance Sheet strength preserving
liquidity to weather downturns.
Organic growth of Asset Ownership platform in all Regions.
Opportunistic Inorganic growth right assets, right places, right long-term returns.
ADDITIONAL ORGANIC + INORGANIC REINVESTMENT…
Up to 79% increase in EBITDA1 from next | C$ in millions | 453.3 | ||
$1B of reinvestment | 100.0 | |||
79% | ||||
3-year average EBITDA1 | $253.3M | 253.3 | 100.0 | |
Next $1B of CAPEX | $100M | |||
@10x EBITDA multiple | ||||
@5x EBITDA multiple | $200M | |||
--------------------------------- | ||||
$353.3M | ||||
$453.3M | 3-year avg. | $1B CAPEX | $1B CAPEX | |
EBITDA1 | @ 10x | @ 5x | ||
1 Three-year average adjusted EBITDA for the period of 2017 - 2019 inclusive. See adjusted EBITDA as disclosed in the MD&A. | 42 | |||
…WITH OPTION TO CONSOLIDATE A FRAGMENTED MARKET
4,500
4,000
3,500
3,000
2,500
2,000
1,500
1,000
500
0
US Contract Compression Market
(total horsepower, 000's)
335
US contract compression market consists of 4 to 5 large players and several small players
Roll-up of smaller players may accelerate growth
43
PIVOT TO RECURRING REVENUES SUPPORTS VALUATION
EV/NTM EBITDA Multiples1: | ||
10.0 | ||
9.0 | Implied multiple | |
8.0 | ||
7.0 | expansion with | |
6.0 | ||
continued growth of | ||
5.0 | ||
recurring revenue | ||
4.0 | ||
3.0 | product lines | |
2.0 | ||
1.0 | ||
0.0 | ||
EFX | Average Pure Play Contract Compression Peer | 44 |
1 EV/NTM EBITDA multiple for Enerflex and the following companies: Archrock Inc., USA Compression Partners LLC. Source: Bloomberg | ||
WHAT'S NEXT FOR ENERFLEX
- Current geographic platform provides the foundation for incremental growth in each operating region.
- Focus remains on profitably growing each of the Engineered Systems, After-MarketServices, and Asset Ownership product lines in all regions.
- Asset Ownership remains the best opportunity to stabilize earnings through the cycles.
EXECUTING ON A POWERFUL STRATEGY
Proven track record of Creating Shareholder Value
- Strong balance sheet and free cash flow allows Enerflex to pursue strategic growth opportunities 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 and healthy Free Cash Flow.
- Proud history dating back to 1980.
46
APPENDIX
RECONCILIATIONS
FREE CASH FLOW
Dec-11 | Dec-12 | Dec-13 | Dec-14 | Dec-15 | Dec-16 | Dec-17 | Dec-18 | Dec-19 | TTM Q2 | |||
2020 | ||||||||||||
Cash provided by operating activities | 134,795 | 134,208 | 69,024 | 64,611 | 104,173 | 91,792 | 179,251 | 242,868 | 54,169 | 136,589 | ||
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 | (221,749) | (95,784) | ||
86,552 | 118,677 | 97,953 | 125,664 | 159,424 | 133,177 | 169,515 | 204,660 | 275,918 | 232,373 | |||
Add back: | ||||||||||||
Net finance costs | 7,011 | 5,661 | 5,518 | 9,771 | 15,310 | 14,056 | 12,727 | 19,145 | 18,578 | 20,617 | ||
Current income tax expense | 17,293 | 22,435 | 23,256 | 45,949 | 32,097 | 20,742 | 27,525 | 20,871 | 31,720 | 26,977 | ||
Proceeds on the disposal of property, plant and | ||||||||||||
equipment | 22,853 | 9,205 | 9,155 | |||||||||
Proceeds on the disposal of rental equipment | 6,935 | 4,454 | 3,229 | |||||||||
Deduct: | ||||||||||||
Net interest paid | (8,525) | (6,356) | (5,408) | (8,999) | (13,657) | (13,116) | (11,957) | (18,373) | (18,398) | (20,407) | ||
Net cash taxes (paid) received | (25,642) | (16,723) | (26,801) | (34,667) | (39,839) | (15,089) | (31,580) | (2,273) | (29,434) | (27,756) | ||
Additions to property, plant and equipment | (16,920) | (46,322) | (35,877) | |||||||||
Additions to rental equipment: | ||||||||||||
Growth | (102,960) | (208,978) | (178,350) | |||||||||
Maintenance | (12,365) | (8,090) | (7,498) | |||||||||
Dividends paid | (9,266) | (18,606) | (21,798) | (23,499) | (26,804) | (26,921) | (30,066) | (33,676) | (37,548) | (38,472) | ||
Net capital spending | 33,993 | (32,706) | (17,365) | (32,401) | (166,318) | 4,244 | (13,159) | |||||
Free cash flow | 101,416 | 72,382 | 55,355 | 81,818 | (39,787) | 117,093 | 123,005 | 87,897 | (8,895) | (16,009) | ||
Free cash flow before net capital spending | 67,423 | 105,088 | 72,720 | 114,219 | 126,531 | 112,849 | 136,164 | 190,354 | 240,836 | 193,332 | ||
49
GROSS MARGIN PROFILE BY PRODUCT LINE1
Three months ended | |||||||||
June 30, 2020 | |||||||||
Engineered | |||||||||
($ Canadian thousands) | Total | Systems | Service | Rentals | |||||
Revenue | $ | 287,438 | $ | 149,197 | $ | 77,034 | $ | 61,207 | |
Cost of goods sold: | |||||||||
Operating expenses | 204,627 | 124,448 | 58,504 | 21,675 | |||||
Depreciation and amortization | 17,011 | 2,139 | 1,234 | 13,638 | |||||
Gross margin | $ | 65,800 | $ | 22,610 | $ | 17,296 | $ | 25,894 | |
Three months ended | |||||||||
June 30, 2019 | |||||||||
Engineered | |||||||||
($ Canadian thousands) | Total | Systems | Service | Rentals | |||||
Revenue | $ | 541,874 | $ | 384,953 | $ | 92,452 | $ | 64,469 | |
Cost of goods sold: | |||||||||
Operating expenses | 415,013 | 316,921 | 72,364 | 25,728 | |||||
Depreciation and amortization | 16,559 | 1,572 | 679 | 14,308 | |||||
Gross margin | $ | 110,302 | $ | 66,460 | $ | 19,409 | $ | 24,433 | |
50 | ||
1 For the three months ended June 30, 2020 versus the prior year period. |
GROSS MARGIN PROFILE BY PRODUCT LINE1
Six months ended | ||||||||
June 30, 2020 | ||||||||
Engineered | ||||||||
($ Canadian thousands) | Total | Systems | Service | Rentals | ||||
Revenue | $ | 653,178 | $ | 374,590 | $ | 152,010 | $ | 126,578 |
Cost of goods sold: | ||||||||
Operating expenses | 460,622 | 297,781 | 116,556 | 46,285 | ||||
Depreciation and amortization | 33,024 | 4,249 | 2,058 | 26,717 | ||||
Gross margin | $ | 159,532 | $ | 72,560 | $ | 33,396 | $ | 53,576 |
Six months ended | ||||||||
June 30, 2019 | ||||||||
Engineered | ||||||||
($ Canadian thousands) | Total | Systems | Service | Rentals | ||||
Revenue | $ | 1,026,776 | $ | 730,415 | $ | 173,312 | $ | 123,049 |
Cost of goods sold: | ||||||||
Operating expenses | 794,309 | 608,671 | 136,978 | 48,660 | ||||
Depreciation and amortization | 33,395 | 3,058 | 1,333 | 29,004 | ||||
Gross margin | $ | 199,072 | $ | 118,686 | $ | 35,001 | $ | 45,385 |
51 | ||
1 For the six months ended June 30, 2020 versus the prior year period. |
COMPOSITION OF BORROWINGS
($ Canadian thousands) | June 30, 2020 | December 31, 2019 |
Drawings on Bank Facility1 | 142,423 | 121,328 |
Senior Notes due June 22, 2021 | 40,000 | 40,000 |
Senior Notes due December 15, 20241 | 158,094 | 151,374 |
Senior Notes due December 15, 20271 | 125,396 | 120,916 |
Deferred transaction costs | (2,755) | (3,131) |
463,158 | 430,487 | |
52 | ||
1 Includes a US dollar-denominated component and is therefore subject to foreign exchange fluctuations between the US and Canadian dollar. |
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Enerflex Ltd. published this content on 06 August 2020 and is solely responsible for the information contained therein. Distributed by Public, unedited and unaltered, on 06 August 2020 23:03:07 UTC