investor presentation june 2017 - trinidad … day 2017.pdf · it's about performance 5...

IT'S ABOUT PERFORMANCE 1

INVESTOR PRESENTATIONJune 2017


Certain information in this document is forward-looking and is subject to important risks and uncertainties. The results or events predicted in this information may differ from actual results or events.

Factors which could cause actual results or events to differ materially from current expectations include, among other things, the ability of Trinidad Drilling Ltd. to improve margins and returns, maintain or grow market share, expand international operations, add new revenue lines, use technology to improve performance and increase EBITDA, to re-crew rigs, to achieve capital payback expectations, to fund capital program as expected, the availability and price of energy commodities, regulatory environment, competitive factors in the natural gas and oil extraction industries and the prevailing economic conditions in North America.

While the company is exploring a number of options with respect to its operations and growth strategies, there can be no assurance or certainty that any particular action will be undertaken, that the options currently identified by the company will be available on terms acceptable to the company at all or that the taking of any particular action will have the impact on the company’s operational and financial position currently anticipated by management

For additional information on these and other factors, see the reports filed by Trinidad Drilling Ltd. with Canadian securities regulators. Trinidad Drilling Ltd. disclaims any intention or obligation to update or revise any forward-looking statements, whether as a result of new information, future events or otherwise.

Forward Looking Information


This document contains references to certain financial measures and associated per share data that do not have any standardized meaning prescribed by IFRS and may not be comparable to similar measures presented by other companies. These financial measures are computed on a consistent basis for each reporting period and include Adjusted EBITDA, Net Debt to EBITDA, Operating days, Operating income – net percentage, ROCE, ROA and ROA. These non-GAAP measures are identified and defined as follows:

Adjusted EBITDA is used by management and investors to analyze the Company's profitability based on the Company's principal business activities prior to how these activities are financed, how assets are depreciated and amortized and how the results are taxed in various jurisdictions. Additionally, in order to focus on the core business alone, amounts are removed related to foreign exchange, share-based payment expense, impairment expenses, the sale of assets, and fair value adjustments on financial assets and liabilities, as the Company does not deem these to relate to the core drilling business. Adjusted EBITDA also takes into account the Company’s portion of the principal activities of the joint venture arrangements by removing the (gain) loss from investment in joint ventures and including adjusted EBITDA from investment in joint ventures. Adjusted EBITDA is not intended to represent net (loss) income as calculated in accordance with IFRS. Adjusted EBITDA is calculated using 100% of the related amounts from all entities controlled by Trinidad where Trinidad may not hold 100% of the outstanding shares.

Net Debt to EBITDA is defined as net debt (long-term debt plus short term portion of long-term debt less cash-on-hand) divided by adjusted EBITDA.

Operating days is defined as moving days (move in, rig up and tear out) plus drilling days (spud to rig release).

Operating income - net percentage is used by management and investors to analyze overall and segmented operating performance excluding third party recovery and third party costs, as well as inter-segment revenue and inter-segment operating costs, as these revenue and expenses do not have an effect on consolidated net (loss) income. Operating income - net percentage is calculated from the consolidated statements of operations and comprehensive (loss) income and from the segmented information in the notes to the consolidated financial statements. Operating income -net percentage is defined as operating income less third party G&A expenses divided by revenue net of operating and G&A third party costs.

ROCE (Return on Capital Employed) – is used by management and investors to measure the profitability and the efficiency with which capital is employed. ROCE is calculated as net income before interest and taxes divided by average shareholders’ equity and debt.

ROA (Return on Assets) is used by management and investors to measure profitability relative to its total assets. ROA is calculated as net income divided by average total assets.

ROE (Return on Equity) is used by management and investors to measure profitability relative to its shareholders’ equity. ROE is calculated as net income divided by average shareholders’ equity.

Non-GAAP Measures Definitions

Welcome and Overview

Brent ConwayPresident & Chief Executive Officer


Trinidad Investor Day - Overview

Changing Industry Conditions

2017 Areas of Focus

Market OverviewCanada, United States, International

Operational Overview People & Safety Financial Review


Executive team

• Brent Conway – President and CEO

• Adrian Lachance – COO

• Lesley Bolster – CFO

• Randy Hawkings – EVP

• Other members of the senior management team also present

• Confident we have the right team in place with the skills and experience to successfully guide Trinidad

Management Team


Changes in the industry

• Drilling deeper, longer wells

• Customers demanding better efficiency

Trinidad sharing the benefits of improved performance

• Innovative contracts to reward performance

• Using technology to improve performance and add EBITDA

• Integrating services to generate additional revenue

Changing Industry Conditions


2017 Areas of Focus

Market share• Maximize utilization,

but not at any cost• Upgrade fleet to

meet demand• Specific customer

targeting

Margins• Monitor costs as

activity ramps up• Maintain existing

efficiency gains • Innovative contracts• Contract only as

thresholds are met

Capital Discipline• Strategic capital

spending to enhance Adj. EBITDA1

• Return-focused investment

• Debt refinancing and reduction

Int’l Expansion• Joint venture

contract extensions• Future opportunity

evaluation – both joint venture and independent

1 See Non-GAAP definitions

Operational Overview

Adrian LachanceChief Operating Officer


Customers focused on drilling deeper and more efficiently

• Increased measured depth and lateral length

• Driven by various play types, including shale

• Low commodity price environment driving efficiency gains

• Technology playing a larger part in future efficiency gains

Changing Drilling Environment

Changing customer demands driving upgraded rig specifications


Increased well depth has changed the rig specs customers want

Customer Demands Driving Equipment Changes

IncreasedDepth

Capacity

High Torque Top Drives and Drill

Pipe

Additional Generators

Increased Pumping Capacity

Expanded Racking Capacity


More pumping capacity allows the rig to pump mud into longer laterals and maintain flowrates• Customers want 7,500 PSI and a third mud pump

may be required• Drives enhancements to mud circulating system

and fluid ends to manage increased pressure and volume



• Provides back-up in case of maintenance issues

• Typical cost: ~US$1 to $3 million depending on scope of upgrade


Higher pumping pressure requires increased power

• Drives the need for a fourth generator

• Provides ability to power additional equipment

• Typical cost: US$400,000 – $600,000




Drilling longer laterals drives need to rack more pipe

• Increases racking capacity from 18,000 to 25,000 feet

• Done through increasing the strength of the substructure

• Initial Trinidad rig design allows for easily upgradeable substructures

• Rigs without sufficient ability to rack pipe are less efficient

• Typical cost: US$100,000

Expanded Racking Capacity

ExpandedRacking Capacity


Longer laterals require more torque

• Can upgrade existing top drives to higher torque

• Well design may require dual shouldered drill pipe

High Torque Top Drives and Drill Pipe

High Torque Top Drives and

Pipe

• Typical cost: Drill pipe – one third more than regular pipeTop drive – US$150,000 to $300,000


Volatile commodity prices put greater emphasis on improving efficiency

Need for Operating Efficiencies Driving Changes

Increased

Efficiencies

Moving Systems

Advanced Festoon Systems

Bi-fuel Option

Bigger Diameter Drill Pipe

Technology Integration


Growing use of pad drilling dramatically increases importance of moving systems

• Moving systems save time and money• Pipe remains in the mast, saves rig down and lay down time

• Ability to move the backyard with full mud tanks

• Rig move times go from days to hours

• Forward and reverse – 4 feet per minute

• Side to side – 2 feet per minute

• Typical cost: US$0.5 - $2 million

Moving Systems

Moving Systems


Time-Lapse of Can-Drill 1500 Pad Move

Moving Systems


Rig 57 has an advanced moving system, where the entire rig and backyard can move in tandem

Trinidad Mega-Pad Rig 57

Moving Systems


Offers flexibility on multi-pad drilling projects

• Can move 180 to 200 feet without moving the backyard, significantly reducing move times

• Reduced maintenance with fewer connections and quick couplers

• Reduced rig up time

• High quality communication between controls over longer distances

• Cables protected from the elements and suitcases reduce theft




Allows rigs to run on a combination of diesel and natural gas

• Drives cost efficiency between commodity prices

• Lowers the rig’s environmental impact

• Gas can be trucked in or field gas can be used

• Typical cost: US$500,000

Bi-fuel – Diesel and Natural Gas

Bi-fuel Option


Customers moving towards 5 – 5 ½” drill pipe

• Increased rate of penetration and better hole cleaning allows for faster drilling speeds

• Need to increase setback (racking capacity)

• May drive modifications to monkeyboard

• More commonly driven by US customers

• Typical cost:US$1 – 1.5 million per 25,000 feet of drill pipe




Why is the integration of our technology important?

• Superior control of rig equipment

• Ability to read and react with equipment

• Auto driller + greater pump and torque control = Greater ROP

• Creates a safer environment

• Cleaner MWD signal

• Ability to predict and prevent maintenance

• Reduced human error

• Quiet rig floor

• New technology attracts better people



Technology integration allows predictability, repeatability and consistency

ROP – Rate of Penetration, MWD – Measurement While Drilling


Leverage off Trinidad’s control system

• Proprietary design

• Trinidad’s autopilot drilling system

• Trinidad’s synchronized pumping capabilities

• Trinidad’s automated equipment and self protection

Utilizes downhole and above-ground data to enhance performance

• Integrates with downhole technology (RSS, LWD, and MWD1)

I.R.I.S. – Intelligent Rig Information System

1 RSS – Rotary Steerable System; LWD – Logging While Drilling; MWD – Measurement While Drilling


I.R.I.S. – Key Benefits

Improved control over:• Weight on bit,

differential pressure, drill bit control

• Bridge protection• Over pull protection• Integrated alarms

Improved Performance for Customers

• Predictive and preventative maintenance to monitor equipment including top drive and mud pumps

• Rig zone management

Reduced Non-Productive Time (NPT)

• Clean drilling times• Efficient connection

times• Less pressure surge

Potential for Improved Well Production

• Predictive tools for additional services

• Automated geo-steering

• Bit guidance

Additional Revenue


How Increased Efficiencies Benefit Customers

✓ Increased rate of penetration

✓ Integrated technology drives better results

✓ Faster drilling times reduces overall well costs

✓ Minimizing non-productive time / down time

✓ Less time spent tripping

Improved efficiency lowers costs for our customers


How Increased Efficiencies Benefit Trinidad

✓ Increased demand for high spec equipment

✓ Drives ongoing improvement

✓ Worldwide KPI implementation for consistency

✓ Performance contracts provide upside

✓ Operational performance a differentiator

Improved efficiencies drive higher demand and higher dayrates for our rigs


70 Rigs in Canadian Fleet

Canadian Fleet

9%

79%

13%

HORIZONTAL DEPTH (METRES)

0 - 4,000

4,001 - 6,999

7,000 + 80%

20%

HOOKLOAD* (LBS)

> 350,001

< 350,000

Trinidad’s Canadian fleet is well suited to Canadian drilling requirements

76%

16%

9%

RIG TYPE

Singles

Triples

Doubles /HD

* Pro forma for 2017 upgrade program


69 Rigs in US and International Fleet

US and International Fleet

50%

18%

32%

SPEC*

Mech

High Spec

Ultra-highSpec 57%

16%

28%

RIG TYPE*

AC

SCR

Mech

The US and international fleet will be 50% ultra-high spec by year-end 2017

71%

9%

20%

HORSEPOWER

> = 1,500

1,000 -1,499

< 1,000

* Pro forma for 2017 upgrade program


80%

20%

RIG TYPE

Mech

AC

10 Rigs in Joint Venture Fleet

Joint Venture Fleet

40%

40%

20%

HORSEPOWER

Other

2,000 + HP

3,600 HP

60%

40%

COUNTRIES

Saudi Arabia

Mexico

The joint venture fleet has some of the world’s largest, most advanced rigs


The rig design is only part of the performance equation. Good rigs run by well-trained crews generate great performance.

Rig Design + People = Performance

Canadian Market Overview

Jay McNeilVice President, Sales and Marketing – Canadian Drilling


• Continued momentum through 2017, and into 2018

• Some limited pull back recently following commodity price softness

• Trinidad regaining market share now that dayrates are rising

Canadian Industry Conditions

0

200

400

600

800

CANADIAN INDUSTRY ACTIVE RIG COUNT

5 year range 2015 2016 2017

0%

5%

10%

15%

20%

25%

30%

CANADIAN MARKET SHARE

Akita Western Nabors Trinidad

Ensign Precision Savanna


Canadian Trends by Rig Type

Singles• Some specific niche markets in Manitoba• Limited other opportunities for singles• Limited opportunities to increase dayrates

Doubles• Dayrates are increasing modestly• 7,500 PSI, higher hookload and 1,600 HP pumps are

commanding the largest increases• Versatile rigs work well in many parts of WCSB

Triples• Largest incremental dayrate increases• 7,500 PSI, walking rigs command the highest rates• Smaller part of the Canadian market, mainly work in

the Duvernay, Montney and Deep Basin

WCSB – Western Canadian Sedimentary Basin


Customers mainly focused in key plays

• Big Three Plays: Deep Basin, Montney, Duvernay

• Activity also in Cardium, Bakken / Torquay, Viking

Strategically targeting customers with

• Steady programs in the “Big Three”

• Solid balance sheets and strong liquidity

• Customers who value operational performance

Canadian Customer Trends


Challenges facing the Canadian market

US momentum• Driving stronger economics, higher dayrates in the US• Canada challenged to compete, two Trinidad rigs moved to the

US in 2017

Seasonality• Reduced number of available operating days• Partly mitigated through increased use of moving systems

Political concerns• Increased uncertainty, volatility and costs associated with

pipelines, carbon taxes, environmental concerns

Competition • Lack of pricing discipline amongst industry participants

People • Ability to crew rigs as activity levels grow

Commodity price• Impacts project economics and drives ongoing need for

improved efficiencies

Canadian Challenges


We are drilling wells longer and faster for our customers, and improving their project economics

Case study of two key areas

• In past two years, a customer has lowered total well costs:

• Reducing average drilling costs per metre by 38%

• Reducing average drilling costs per lateral metre by 40%

The Impact of Efficiencies

$0

$500

$1,000

$1,500

$2,000

$2,500

$3,000

2015 2016 2017

CUSTOMER DEEP BASIN AREA 2

Avg Drilling Costs per metre Avg Drilling Costs per lateral metre

$0

$500

$1,000

$1,500

$2,000

$2,500

$3,000

2015 2016 2017

CUSTOMER DEEP BASIN AREA 1

Avg Drilling Costs per metre Avg Drilling Costs per lateral metre

Data Source: Company Reports


• Strong operational performance

• Well-trained people and strong safety performance

• In-demand, high spec equipment

• Recent M&A activity puts land in new hands, with new plans

• Ability to add new revenue lines through technology and expanded service lines

• Create partnerships to foster “in-it-together” relationships

• Driving efficiencies and cost savings for customers

Canadian Opportunities

US Market Overview

Tom HortonVice President, Business Development and Contracts


Rig count continues to increase

• Permian Basin is leading the way, but all areas adding rigs from the low point of the downturn in 2016

Rig type that is in demand• 1,500 HP; walking; AC; 7,500 PSI• Continued requests for third pump, fourth generator, larger set back

US Industry Conditions

0%

5%

10%

15%

20%

25%

US MARKET SHARE (IN TRINIDAD OPERATING AREAS)

Trinidad Patterson H&P Nabors Nomac

Precision Unit Pioneer Cactus EnsignData Source: Rig Data


US Trends by Rig Type

Tele-doubles• Rates have increased 15% in past year• Term is now part of the discussion

Non-walking or SCR-walking rigs• Rates have increased 22% in past year• Term in the six month range

AC - walking - 7,500 PSI• Rates have increased 35% in past year• Term deals now being offered for one to two years

Continued discussion with additional rates/terms for upgrades, additional equipment:• 7,500 PSI, adding walking systems • Fourth generator• Third pump • Added technology – stick slip mitigation


West Texas continues to grow

• Increasing lateral length - rigs need to change to drill these wells

• Trinidad’s market share has grown as a result of having the right rigs and strong operational performance

US Customer Trends

0%

2%

4%

6%

8%

10%

May-14 May-15 May-16 May-17

TRINIDAD PERMIAN MARKET SHARE

0

2,000

4,000

6,000

8,000

2014 2015 2016 2017

Feet

LATERAL LENGTH

Midland DelawareData Sources: Rig Data


US Challenges

Challenges facing the US market

People

Recruit – Train – Retain• Bringing our people back

• Cost of labour has increased• Focus on training and HSE to ensure we are working safely

and efficiently• Promotion from within

• Utilizing our T.E.S.T. program to check the competency in position and give crews a career path

Equipment• Vendors inventory is being depleted. The backlog of work with

equipment manufacturers and fabricators is growing

Customer requirements

• Longer laterals needs more equipment, which leads to increasing capital expenditure needs


US rig count has increased and TRIR has decreased

Trinidad has maintained its excellent safety and low downtime performance despite a strong ramp up in activity

US Enhancing Operational Performance

Downtime has decreased during rig re-activations

0.0

0.2

0.4

0.6

0.8

1.0

1.2

1.4

1.6

0

10

20

30

40

50

60

Oct

-14

Dec

-14

Feb

-15

Ap

r-1

5

Jun

-15

Au

g-1

5

Oct

-15

Dec

-15

Feb

-16

Ap

r-1

6

Jun

-16

Au

g-1

6

Oct

-16

Dec

-16

Feb

-17

Ap

r-1

7

TRIR

Rig

Co

un

t

TDG Rig Count TRIR

TRIR – Total Recordable Incident Rate

0.0%

0.2%

0.4%

0.6%

0.8%

1.0%

1.2%

1.4%

1.6%

0

10

20

30

40

50

60

14

-Oct

14

-Dec

15

-Fe

b

15

-Ap

r

15

-Ju

n

15

-Au

g

15

-Oct

15

-Dec

16

-Fe

b

16

-Ap

r

16

-Ju

n

16

-Au

g

16

-Oct

16

-Dec

17

-Fe

b

17

-Ap

r

Do

wn

tim

e

Rig

Co

un

t

TDG Rig Count Downtime


West Texas

• We are partnered with the right customers• Large acreage positions

• Massive inventories of wells to drill

• Willing to pay for performance

• 26% of our contracts have a performance bonus

Haynesville and Barnett Shale

• Drilling programs with longevity• Gas price stability

• LNG export activity

South Texas – Eagle Ford

• Great partners and potential growth

US Opportunities

0 100 200 300 400

Permian

South Texas

Haynesville

Mid-Continent

TRINIDAD AREAS OF OPERATIONS

Industry Rig Count


West Texas

• 81% of our rigs working in West Texas

• Downtime = 0.79% (less than our total fleet downtime of 0.92%)

South & East Texas

• Six rigs running

• Contracts in the works for additional rigs in the area

US Opportunities

CustomersWest Texas

AcreageTotal Rig

CountTDG Rig Count

Occidental 2,500,000 10 1

Chevron 2,000,000 12 0

Exxon/XTO 1,750,000 15 4

Apache 1,700,000 18 1

Devon 1,000,000 6 0

Concho 960,000 21 1

EOG 795,000 11 0

Pioneer 785,000 21 4

Shell 600,000 5 0

Cimarex 340,000 9 0

Parsley 300,000 13 6

Anadarko 235,000 16 3

Energen 226,000 7 0

Diamondback 189,000 7 0

EP Energy 178,000 2 0

Encana 140,000 4 2

Laredo 126,000 4 0

ConocoPhillips 123,000 3 1Data Sources: Company Reports and Rig Data – May 26, 2017

International Market Overview

Nial ShepherdSenior Vice President,International


• Low oil prices drive more efficient and performance-driven contracting models

• Stable growth expected 2018 – 2021 in Kuwait, Saudi Arabia, and Argentina

• Moderate growth expected in Algeria and South Iraq, but sufficient idle rigs in country to support growth

• Operators expected to move towards Lump Sum Turnkey and Integrated Project Management style contracts

International Industry Conditions

LSTK – Lump Sum Turnkey, IPM – Integrated Project Management


• Growth in Saudi Arabia and Kuwait, driven largely by gas development for domestic use and some oil development for export

• Beginning to switch existing older equipment for newer, more efficient AC rigs which provides opportunities for Trinidad

Market Outlook - MENA

0

20

40

60

80

100

120

Kuwait Iraq Oman KSA Algeria

RIG

CO

UN

T

MENA GROWTH OUTLOOK

2017 2018 2019 2020 2021

$0

$1,000

$2,000

$3,000

$4,000

$5,000

$6,000

$7,000

Kuwait Iraq Oman KSA Algeria

MENA ANNUAL SPEND (US$ Millions)

2017 2018 2019 2020 2021

Data Sources: Baker Hughes, Spears and AssociatesMENA – Middle East and North Africa


• Growth in spending and activity expected in India and other parts of Asia. Not currently a key area of focus for Trinidad due mainly to pricing challenges.

Market Outlook - ASIA

0

10

20

30

40

50

60

70

80

90

India Indonesia Pakistan

RIG

CO

UN

T

ASIA GROWTH OUTLOOK

2017 2018 2019 2020 2021

$0

$500

$1,000

$1,500

$2,000

$2,500

$3,000

$3,500

$4,000

India Indonesia Pakistan

ASIA ANNUAL SPEND (US$ Millions)

2017 2018 2019 2020 2021

Data Sources: Baker Hughes, Spears and Associates


• Argentinian growth is driven by growing shale gas development. New business friendly environment is providing opportunities

• Declining Mexican production needs to be addressed, political environment causing some challenges

Market Outlook – South America

Data Sources: Baker Hughes, Spears and Associates

0

10

20

30

40

50

60

70

80

90

100

Argentina Columbia Equador Mexico Venezuela

RIG

CO

UN

T

SOUTH AMERICA GROWTH OUTLOOK

2017 2018 2019 2020 2021

$0

$500

$1,000

$1,500

$2,000

$2,500

$3,000

$3,500

$4,000

$4,500

Argentina Columbia Equador Mexico Venezuela

SOUTH AMERICA ANNUAL SPEND (US$ Millions)

2017 2018 2019 2020 2021

Colombia Colombia


International Dayrate Trends

• Saudi Arabia, Kuwait and Argentina are moving towards high performance rigs to replace older rigs. Pricing for these rigs is higher but typically requires capital investment.

• Saudi Arabia and Kuwait open to both dayrate and lump-sum, turnkey contracts; most other countries offer dayrate style contracts.

• Pricing for lower-end equipment is driven by Chinese contractors and can be very competitive.


Country Focus & Priorities

Price Safety Compliance KPIPerformance /

EfficiencyContractor Reliability

Saudi Arabia

Oman

Kuwait

Algeria

Argentina

Mexico

Pakistan

India

Customer Trends – National Oil Companies

✓ ✓ ✓ ✓ ✓

✓ ✓ ✓

✓ ✓ ✓ ✓ ✓

✓ ✓ ✓

✓ ✓

✓

✓

✓ ✓

✓ ✓ ✓


• Operators interested in performance contracts where partnership with driller lowers total well costs

• Operators willing to incentivize contractor for good performance, focused on value rather than cost

• Stagnant oil prices expected to drive increasing popularity for performance contracts driven on KPI targets

Customer Trends – Western/Int’l Oil Companies


Business evaluation process

International Growth Strategy

• Long-term or stable growth forecast

• Reputable and credit-worthy clients

• Attractive competitive environment

Thorough evaluation of opportunities reduces risk

Market

• Guaranteed contract term

• Ability to gain critical mass

• Commencement date achievability

Opportunity

• Industry standard liability and indemnity provisions

• No catastrophic or downhole pollution liability

• Reasonable contractual penalties

Contract Risk

• Taxation and tax escalation protection

• Payment terms and credit rating of the client

• Investment and financial recovery evaluation

Commercial

Opportunity


Challenges facing the International market

Taxation• Develop the optimal tax model and rig “lease-in” options• Ensure contracts protect for tax escalation and law changes

Nationalization• An increasing requirement in the MENA market• Mitigate through hiring locals, procuring locally

Liquidated damages

• Most contracts have a liquidated damages penalty clause• Mitigate through lowering the liquidated damages value,

excluding situations outside control, limit overall exposure• Tight operational controls during the mobilization phase

Investmentrecovery

• Negotiate contracts with term to recover investment• Ensure early termination fees compensate for early cancellation

Sales cycle extension

• Ensure adequate engagement with clients well in advance

International Challenges


International growth allows Trinidad to gain:

• Exposure to new markets

• Increased diversification of our assets

• Market share with reliable national or international oil companies

• Typically longer-term contracts and increased stability

Potential growth options:

• Strategic and structured growth

• Joint ventures with local players

• Acquisition of drilling contractors

International Growth

Human Resources

Ron ParentVice President, Human Resources, HSE & QMS


Activity dependent labour force provides flexibility through the cycles

Adapting to Industry Demand

0

500

1,000

1,500

2,000

2,500

3,000

3,500

4,000

4,500

Dec 31, 2014 Dec 31, 2015 Dec 31, 2016 May 30, 2017

HEADCOUNT

Field Office


Employee Demographics

6

4

0

1

2

3

4

5

6

7

Office Field

AVERAGE YEARS OF SERVICE

65%

100%

35%

Office Field

GENDER

Male Female

4435

0

5

10

15

20

25

30

35

40

45

50

Office Field

AVERAGE AGE

Long-term, experienced employees drive Trinidad’s success


People Strategies

✓ Business upcycle response

✓ Develop strong leaders

✓ Develop Trinidad’s employment brand

✓ Ensure competitive pay and benefits

✓ Continued focus on performance management

✓ Develop a strong corporate culture

Investing in our people to drive our business


Anticipate crew staffing pressures as industry utilization levels grow

• Canada – utilization above 50%

• US – utilization above 40%

Crew Staffing During the Cycle

31%

49%

20%

51%

30%

19%

0%

10%

20%

30%

40%

50%

60%

Left Industry Avail. for Longer-termProjects

Avail. for Short-term / Seasonal

REHIRE POOL

Canada US


• Successfully crewed rigs through the 2016/2017 winter drilling season

• Ability to crew for 2017/2018 winter season will depend on industry utilization levels

• Well prepared to meet potential challenges

Canadian Recruitment Update


• Crew staffing pressures developed in Q1/Q2 2017 as industry utilization levels increased

• Responded with a crew wage adjustment in May of approximately 10%

• Demand largely West Texas based

United States Recruitment Update


• Some individuals chose to work internationally because of the lack of work in North America

• As more opportunities are available closer to home, we may see challenges attracting and retaining quality expats

International Recruitment Update


• Office staff pressures typically lag the field by about six months

• We are hiring earlier in some areas to match increased activity levels• Recruiters, payroll admin

• Accounts payable/receivable

• Safety

Office Staff


Manage compensation and benefits with the recovery

• Cost reduction initiatives implemented during downturn:

• Two rounds of salary reductions

• Benefit program reductions

• Short-term bonus program cap implemented for the 2015, 2016 and 2017

• Rig manager bonus program suspended

• Compensation and benefits reinstated in-line with recovery

• Phased in salary add-backs (2017/2018)

• Selective benefits reinstatement (2017)

• Short-term bonus program cap still in place

• Reinstate revised rig manager bonus program (2018 for 2017 plan year)

Compensation and Benefits


• Addresses our high volume, seasonal and geographical hiring needs

• Responds quickly to changing needs

• Cost efficient

• Ensures brand alignment

• Targeted to the skills and people we need

• Measurable results

Recruitment Strategies

Online micro recruitment campaigns (social media based)


Onboarding and Orientation Platform

Remote capability

Tracking for reporting of certifications and training

Easily updated materials

Consistent messaging

Content tailored for employees

Flexibility and cost effectiveness

Online platform allows fast, effective orientation

✓

✓

✓

✓

✓

✓


Company-wide, competency program to train our rig crews to a higher standard of performance

T.E.S.T. has four levels:

• Driller, Derrickhand, Motorhand, and Floorhand

T.E.S.T. describes:

• WHAT each person must be able to do,

• HOW it is to be done, and

• WHY it is important

Trinidad Essential Skills Training T.E.S.T.


Improves SAFETY

• Reinforces procedures, processes and best practices

• Fewer incidents, reduces injuries, keeps your people safe

Improves PERFORMANCE

• Common agreement on expectations and standards

• Increased equipment and process reliability

• Improved efficiency saves time and money

Impact on PEOPLE

• Builds stronger, more skilled crews

• Clear career path for motivated individuals

• Higher employee retention

• Growing our own future leaders for sustainability

Benefits of T.E.S.T.

Health, Safety & Environment Overview

Ron ParentVice President, Human Resources, HSE & QMS

Derek HibbardGlobal General Manager, HSE


Safety is our Priority

Health, Safety & Environment is a Core Value

Evaluating processes and equipment

Training Minimizing our impact on the environment

Investigating and analyzing any incidents


• Proactive management drives reliable and predictable results

• Managing risk allows us to avoid managing incidents

Trinidad’s Safety Culture - Reliability Triangle

*97% of accidents are caused by unsafe acts / behaviors


Improving Safety Performance

0.50

0.00

0.50

1.00

1.50

2.00

2.50

3.00

3.50

4.00

TRINIDAD 12-MONTH ROLLING TRIR

IADC TRIR TDG TRIR

Lowest TRIR’s in Trinidad History

TRIR – Total Recordable Incident RateIADC – International Association of Drilling Contractors


100% reporting of all unplanned events

• Reporting is no fault and mandatory, regardless of outcome

Company-wide safety management system

• Provides proactive processes and tools

• Consistent implementation

• Maintenance of world-class operational standards

Visible commitment from management

• Drives accountability and performance

Proactive Safety Strategy Drives Culture

Rig 134 – Five Year Safety Milestone


Step Changes in Trinidad Safety Performance

• Automated tubular handling• Smart control systems• Top drives• Iron roughnecks

Technology and Engineering Investment

• Observation and intervention programs driven at every level

Behaviour-based Systems• Systematic field standards and

procedures drive best practice, measurement and continual improvement

Process Driven Management Systems


Where do we go from here?

• Standardized worksite inspections and compliance audits

• Internal system audits to drive efficiency and improvement

• Standardized quarterly scorecards to identify underperforming rigs

• Managed with specific plans to deliver operational excellence

• Investment in human capital - training and competency assurance programs

• Investigation, analysis and correcting all sources of failure to prevent recurrence, share learnings and drive best practice

Continual Safety Improvement


Focus on the Future

✓ Continually improving systems to proactively identify risks for failure

✓ Continue to drive a culture based on a seamless integration of HSE and operations

✓ Eliminating paperwork at the rig site to improve team efficiency and data retention

✓Alignment with international quality, health and safety standards to optimize standardization and efficiency

✓ Evaluating equipment and tool design to ‘engineer’ hazards out

HSE driven initiatives to increase efficiency and promote safety

Financial Review

Lesley BolsterChief Financial Officer


Diversified Operations

1 At March 31, 2017

44%

47%

9%

OPERATING DAYS (TTM) 1

US Canada JV

48%

45%

7%

RIG COUNT (TTM) 1

US Canada JV

42%

31%

27%

REVENUE (TTM) 1

US Canada JV

Geographic diversification provides stability, optionality and growth opportunities


Focus on Margins - Dayrates

Performance / commodity based contracts provide

upside to dayrates. Additional revenue

items

Economic criteria used to evaluate

contracts – forecast margins, capital

payback, IRR

Early termination payments protect

revenue through the cycle

Balance of long-term and spot contracts,

provide stability and upside


Innovative contract terms provide stability while also allowing upside

Commodity-price based contracts

• Minimum dayrate agreed to by both parties

• Provide ability to step up dayrate at pre-determined WTI levels

Performance contracts

• Minimum dayrate agreed to by both parties

• Specific rates for portions of the well, incentive to maximize higher-rate operations

• Specific parameters set for certain aspects provide an incentive to outperform

Providing Contract Upside


Labour is our biggest cost

• Labour costs make up about 60% of operating costs

• Market driven cost, particularly in the US

• Typically able to pass through labour rate changes to customers

Focus on Margins – Cost Control

Other includes materials and supplies, insurance, safety, etc.

60%

15%

25%

Labour Repair & Maintenance Other

TYPICAL OPERATING COST BREAK DOWN


Focus on the costs we can impact

Focus on Margins – Cost Control

• Maintain efficiency gains achieved in the downturn

• Monitor performance rig by rig

Operational Control

• Carefully manage costs as activity grows

G&A Control

• Maximize benefits of centralized purchasing

• Implementing thorough processes

• Ensure high quality maintained

Procurement

Continued focus on cost control in every aspect of our business

• Global supply management to provide consistency in pricing

Suppliers


Historical and future margins

• Last 12 months margins positively impacted by early termination revenue

• No additional early termination revenue currently expected

• Maintain strong margins through combination of actively pushing dayrates and cost management

Focus on Margins

Peer average

-40%

-20%

0%

20%

40%

ADJUSTED EBITDA AS A % OF REVENUE (TTM)1,2

Peer average

0%

10%

20%

30%

40%

50%

OPERATING INCOME –NET PERCENTAGE (TTM)1,2

1 At March 31, 20172 See Non GAAP Measures DefinitionsTrinidad’s peer group includes H&P, Ensign, Nabors, Patterson, Pioneer, Precision, Savanna, Western, and Xtreme


Trinidad is focused on improving returns

• Historical returns have been middle of the peer group, need improvement

• We recognize the importance of strong returns

• Focused on driving growing per-share value for shareholders

Focus on Returns

Peer average

(20%)

(10%)

0%

10%

20%

ROCE - 5 YEAR AVERAGE1

Peer average

(10%)

(5%)

0%

5%

10%ROA - 5 YEAR AVERAGE1

Peer average

(20%)

(10%)

0%

10%

20%

ROE -5 YEAR AVERAGE1

Trinidad’s peer group includes H&P, Ensign, Nabors, Patterson, Pioneer, Precision, Savanna, Western, and Xtreme1 See Non GAAP Measures Definitions


Dayrate Enhancement

• Performance and commodity-based contracts provide dayrate upside

• Additional revenue lines added

Margin Optimization

• Cost management in all areas

Capital Discipline

• Internal return thresholds for contracts and capital projects

• Spending aligned with strategic growth

• Risk management on turnkey, performance work

• Project lookbacks and analysis

Driving Improved Returns


Demonstrates capital discipline

• Strategic upgrades improve future marketability of fleet and enhance future cash flow generation

• Upgrades largely backed by customer commitments

• Capital payback on investment expected in 2.5 years

• Funded largely with cash from operations, JV distribution and cash on hand, minimal revolver usage expected

Focus on Returns - 2017 Capital Budget


Accretive impact of debt reduction, equity issue and capital program

• Contracted revenue with increased dayrates

• 2.5x Adj. EBITDA payback

• Lower interest rate

• Less debt outstanding

Focus on Returns

Adjusted EBITDA Funds Flow Net Income

-$0.25

$0.15

$0.55

$0.95

Per Share

2016 RESULTS PRO FORMAEQUITY RAISE AND CAPITAL PROGRAM

2016 Actual

♦ Impact of Equity Raise – pro forma 2016 actuals with equity financing of 48 mm common shares for gross proceeds of $150 million

✖ Impact of Equity Raise and Capital Program – pro forma 2016 actuals with impact of equity raise and $175 million capital budget


Focus on Leverage Reduction – Debt Refinancing

1 Annual interest expense on senior notes only

Outstanding Debt Interest Rate Maturity

From US$450 million to US$350 million

From 7 ⅞ % to 6 ⅝ % From 2019 to 2025

Equates to US$121 million interest savings annually


Focus on Leverage Reduction

Peer average

(5.0)

0.0

5.0

10.0

15.0

20.0

NET DEBT TO ADJUSTED EBITDA1

1 At March 31, 2017Trinidad’s peer group includes H&P, Ensign, Nabors, Patterson, Pioneer, Precision, Savanna, Western, and Xtreme

Trinidad has a solid balance sheet and strong financial flexibility


Credit facility

• Renewal due in late 2018

• C$100 million and US$100 million facility

• 15% drawn, ~$200 million available1

• Well within covenant levels

Focus on Financial Flexibility

(1) At March 31, 2017

0.34

Senior Debt to BankEBITDA

2.14

Bank EBITDA to CashInterest Expense

Max of 2.5x

Min of 1.5x

CREDIT FACILITY COVENANTS1


Net debt/EBITDA long-term target of 1.0 – 2.0 times

• Lower leverage expected to be achieved through:

• EBITDA growth

• Building cash balances

• Ongoing capital discipline

Focus on Conservative Leverage

Based on consensus net debt and consensus EBITDA on FactSet. Inclusion of consensus metrics does not imply Trinidad’s agreement, Trinidad takes no responsibility to update consensus numbers as they change

3.23.4

2.1

0.9

0.0

1.0

2.0

3.0

4.0

Q1 2017A Consensus2017

Consensus2018

Consensus2019

NET DEBT/EBITDA


Challenges Addressed by

Ongoing demand for increased efficiency

• Performance-based contracts• Performance drilling and I.R.I.S.• Focus on capital discipline• Revenue upside driven by strong performance

Demonstrating international growth

• Increasing exposure to key customers• Growing international reputation• Thorough analysis of opportunities• Qualified to grow in new countries

Fair valuation

• Increasing exposure to investors• Maintaining strong operating margins• Generating stronger returns• Maintaining conservative leverage

2017 and Beyond


• Strong operational performance

• Well-trained people and strong safety performance

• In-demand, high-spec equipment

• Strategic geographic footprint and optionality

• Solid balance sheet and strong liquidity

Trinidad’s Strengths


INVESTOR PRESENTATIONJune 2017

investor presentation june 2017 - trinidad … day 2017.pdf · it's about performance 5...

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