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Savanna Energy Services Corporate Presentation September 2009


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Savanna Energy Services Corp. Investor Relations Presentation.

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Savanna Energy Services Corporate Presentation September 2009

  1. 1. S E P T E M B E R 2 0 0 9
  2. 2. Forward-looking Information <ul><li>This presentation contains statements that constitute forward-looking statements within the meaning of applicable securities legislation. These forward-looking statements include, among others, the Company’s prospects, expected capital expenditures, equipment builds, developments and strategies for its operations, and other expectations, beliefs, plans, goals, objectives, assumptions, information and statements about possible future events, conditions, results of operations or performance. In some cases, these forward-looking statements can be identified by the use of terms or phrases such as “anticipate”, “achieve”, “achievable”, “believe”, “estimate”, “expect”, “intend”, “plan”, “planned”, and other similar terms or phrases. Any statements in this presentation that may be considered forward-looking are based on certain factors and assumptions including current expectations that involve a number of risks and uncertainties. These risks and uncertainties include, but are not limited to, international, national and regional economic conditions, oil and gas prices, regulatory changes, weather conditions, product and equipment availability, and the availability of qualified personnel. Also included is the ability of oil and gas companies to raise capital or other unforeseen factors. Any of these factors could cause the Company’s results to differ materially from current expectations. </li></ul><ul><li>Consequently, all of the forward-looking statements made in this presentation are qualified by this cautionary statement and there can be no assurance that the actual results or developments anticipated by the Company will be realized or, even if substantially realized, that they will have the expected consequences to or effects on the Company or its business or operations. Except as may be required by law, the Company assumes no obligation to update publicly any such forward-looking information and statements, whether as a result of new information, future events, or otherwise. </li></ul>
  3. 3. Corporate Snapshot <ul><ul><li>Common shares </li></ul></ul><ul><ul><ul><li>Basic 79.1 million </li></ul></ul></ul><ul><ul><ul><li>Diluted 81.5 million </li></ul></ul></ul><ul><ul><li>Share price range (52 weeks) $3.96 – 16.53 </li></ul></ul><ul><ul><li>Market capitalization $ 520 million (1) </li></ul></ul><ul><ul><li>NBV fixed assets $ 901 million (2) </li></ul></ul><ul><ul><li>Annual dividend $ 0.10 </li></ul></ul><ul><li>At September 2009 </li></ul><ul><li>At June 30 2009 </li></ul>Savanna possesses one of the most modern, technologically advanced drilling, well servicing and oilfield rental fleets in North America. We remain Canadian focused, but are moving quickly to establish an international presence.
  4. 4. A Brief Savanna History <ul><li>Founded with current management team. VC start-up </li></ul><ul><li>Pioneered the hybrid drilling rig (12 rigs) </li></ul><ul><li>Listed on the TSX (33 rigs) </li></ul><ul><li>100% organic growth (88 rigs) </li></ul><ul><li>Added conventional drilling depth and expertise (139 rigs) </li></ul><ul><li>Entered U.S. market – 3 separate basins </li></ul><ul><li>Entered Mexico market, new U.S. basin (181 rigs) </li></ul><ul><li>Savanna remains a growth-oriented company </li></ul>2001 2002 2004 2005 2009 TODAY 2006 2007
  5. 5. Savanna Today <ul><li>Strong history of innovation and growth </li></ul><ul><ul><li>One of the fastest growing drilling and well servicing contractors in North America since inception (45+ % annualized growth in fleet) </li></ul></ul><ul><ul><li>Proprietary, innovative drilling and service rig designs </li></ul></ul><ul><ul><ul><li>Hybrid drilling rigs </li></ul></ul></ul><ul><ul><ul><li>Leading edge conventional drilling rigs </li></ul></ul></ul><ul><ul><ul><li>Automated service rigs </li></ul></ul></ul><ul><ul><li>Substantial geographic base to grow from within North America </li></ul></ul><ul><ul><li>Industry leading First Nations partnerships </li></ul></ul>
  6. 6. Savanna Today <ul><li>Opportunity rich </li></ul><ul><ul><li>Very high leverage to a recovery in N. American drilling </li></ul></ul><ul><ul><ul><li>Strong geographic, equipment and operational platforms </li></ul></ul></ul><ul><ul><li>Homogeneous drilling and well servicing fleets </li></ul></ul><ul><ul><li>Substantial international expansion opportunities </li></ul></ul><ul><li>Balance sheet capacity exists </li></ul><ul><ul><li>Now and as market turns – timing will be critical </li></ul></ul>
  7. 7. Expanding Geographic Coverage Nisku Blackfalds, Lacombe Medicine Hat Carlyle North Dakota Midland Weatherford Haughton Houston Poza Rica Drilling Field Locations Pennsylvania Quebec A HISTORY OF INNOVATION AND EXECUTION NEW HORIZONS Grande Prairie
  8. 8. Equipment Fleet - Drilling * 8 rigs are owned in 50/50 partnerships with various Aboriginal communities 103* 107 10 46 49 2 Fleet 2,500 Hybrid drilling rigs 4,000 Telescoping double drilling rigs Total rigs (gross) Total rigs (net)* 1,000 5,000 Rated Depth Capacity (metres) Single and coring delineation rigs Triple drilling rigs Drilling Equipment
  9. 9. Equipment Fleet - Well Services * 4 rigs are owned in 50/50 partnerships with various Aboriginal communities 72 Total rigs / units (net) 74 Total rigs / units (gross) 8 Coiled tubing service units 66 Service rigs Fleet Size Equipment
  10. 10. Rental Division <ul><li>Drilling and well servicing rentals </li></ul><ul><ul><li>Complementary to existing businesses </li></ul></ul><ul><ul><li>Will operate stand-alone or to leverage rig use </li></ul></ul><ul><li>Recent expansion into North Dakota to support well servicing </li></ul><ul><li>Significant acquisition and organic growth potential </li></ul>
  11. 11. Near Term Challenges <ul><li>The world’s most efficient shallow drilling rig technology, but shallow drilling has collapsed in North America </li></ul><ul><ul><li>Savanna operates higher than average ratio of shallow drilling rigs </li></ul></ul><ul><li>Low contracted status of fleet relative to peers – spot market remains weak </li></ul><ul><ul><li>Core “major” customers severely curtailed programs since Q1, 2008 </li></ul></ul><ul><ul><li>Shallow gas is “just in time”; very price dependent </li></ul></ul><ul><li>Overall North American drilling and well servicing slowdown </li></ul><ul><li>Growth / expansion timing still uncertain </li></ul>
  12. 12. Fleet Mix Percentage of fleet rated 2,500 meters or deeper* * Excludes coring/pre-set
  13. 13. Measured Responses <ul><li>Shallow drilling will recover </li></ul><ul><ul><li>Alberta DRC should provide traction in 2H, 2010 </li></ul></ul><ul><ul><li>Timing and degree of recovery is uncertain - we aren’t just waiting </li></ul></ul><ul><li>Minimal fleet modification to access alternative markets </li></ul><ul><ul><li>Casing drilling (no retrofit) </li></ul></ul><ul><ul><li>Coring (no retrofit) </li></ul></ul><ul><ul><li>Enhanced directional capability </li></ul></ul><ul><li>International opportunities to deploy hybrid technology where it can excel </li></ul><ul><ul><li>Minimal reconfiguration for most regions </li></ul></ul>
  14. 14. Contract Status <ul><li>Little interest in new contracts </li></ul><ul><ul><li>day rates at or near bottom </li></ul></ul><ul><li>customers are being selective in open market </li></ul><ul><ul><li>As existing contracts rollover, we expect to gather “more than our share” as in the past based on technology, quality, efficiency </li></ul></ul><ul><li>Will not happen overnight, but Q1 2010 should start to show turn on industry contract status </li></ul>
  15. 15. Field Employees Scalable <ul><li>Retain core (highly skilled) personnel </li></ul>
  16. 16. Savanna Strengths - People <ul><li>Senior management has navigated through cycles before </li></ul><ul><li>Sales and operations driven organization </li></ul><ul><ul><li>Practical / economic R&D </li></ul></ul><ul><ul><li>Equal focus on people and equipment ensures superior operations and execution in the field </li></ul></ul><ul><li>Operations and training processes second to none </li></ul><ul><ul><li>Aboriginal focused training </li></ul></ul><ul><ul><li>COACH program </li></ul></ul><ul><ul><ul><li>Safety training </li></ul></ul></ul><ul><ul><ul><li>Operations training for green hands </li></ul></ul></ul><ul><ul><li>Consistent WCB rating superior to industry average </li></ul></ul>
  17. 17. Savanna Strengths - Fleet <ul><li>No. Max Depth Capacity </li></ul><ul><li>Coring / delineation rigs 9 1,000 m (3,300’) </li></ul><ul><li>Hybrid rigs 46 2,500 m (8,250’) </li></ul><ul><li>Conventional rigs 52 5,000 m (16,500’) </li></ul>L E A D I N G E D G E D R I L L I N G R I G F L E E T
  18. 18. Savanna Strengths - Fleet L E A D I N G E D G E D R I L L I N G R I G F L E E T Coring / delineation rigs <ul><li>Trailer mounted </li></ul><ul><li>Top drives </li></ul><ul><li>Full drilling/coring capability </li></ul>
  19. 19. Savanna Strengths - Fleet L E A D I N G E D G E D R I L L I N G R I G F L E E T Hybrid rigs <ul><li>Highly efficient conventional </li></ul><ul><ul><li>Top drives </li></ul></ul><ul><ul><li>Mobile </li></ul></ul><ul><ul><li>Range 3 pipe </li></ul></ul><ul><ul><li>Automated pipe-handling </li></ul></ul><ul><li>Coil drilling optionality for speed/efficiency </li></ul>
  20. 20. Savanna Strengths - Fleet L E A D I N G E D G E D R I L L I N G R I G F L E E T Conventional rigs <ul><li>Top drives and pipe skates </li></ul><ul><li>Automated pipe handling </li></ul><ul><li>Fully AC powered </li></ul><ul><li>Moving systems </li></ul><ul><li>Dual shakers and light plants on all </li></ul><ul><li>Highly mobile </li></ul><ul><li>Superior hookload and pumping for rig size </li></ul>
  21. 21. Savanna Strengths - Fleet <ul><li>No. </li></ul><ul><li>Mobile singles 32 </li></ul><ul><li>Mobile doubles 34 </li></ul><ul><li>Coil workover units 8 </li></ul>S T A T E O F T H E A R T W E L L S E R V I C I N G F L E E T (96% free standing)
  22. 22. Savanna Strengths - Fleet Mobile singles S T A T E O F T H E A R T W E L L S E R V I C I N G F L E E T (96% free standing) <ul><li>Highly mobile, lightweight design </li></ul><ul><li>PLC controlled </li></ul>
  23. 23. Savanna Strengths - Fleet Mobile doubles S T A T E O F T H E A R T W E L L S E R V I C I N G F L E E T (96% free standing)
  24. 24. Savanna Strengths - Fleet Coil workover units S T A T E O F T H E A R T W E L L S E R V I C I N G F L E E T (96% free standing)
  25. 25. Strong Bases From Which to Grow <ul><li>Drilling – over 45% of fleet deployed in oil- or shale-biased areas </li></ul><ul><ul><li>Canada </li></ul></ul><ul><ul><ul><li>Alberta – core area, Montney, Peace River Arch </li></ul></ul></ul><ul><ul><ul><li>Saskatchewan, BC, Quebec expansion </li></ul></ul></ul><ul><ul><li>United States </li></ul></ul><ul><ul><ul><li>Permian Basin (Midland/Odessa) – 6 rigs (April 2007) </li></ul></ul></ul><ul><ul><ul><li>Barnett Shale (Weatherford) – 3 rigs (October 2007) </li></ul></ul></ul><ul><ul><ul><li>Hayneville Shale (Houston) – 5 rigs (July 2008) </li></ul></ul></ul><ul><ul><ul><li>Appalachia (Pennsylvania) – 1 rig (August 2009) </li></ul></ul></ul><ul><ul><li>Mexico (Poza Rica) – 4 rigs (August 2009) </li></ul></ul><ul><li>Well Servicing </li></ul><ul><ul><li>Canada – Saskatchewan – oil focused </li></ul></ul><ul><ul><li>United States – North Dakota – oil focused </li></ul></ul>
  26. 26. Mexico <ul><li>Multinational IPM is customer, working for Pemex </li></ul><ul><li>Chicontepec very active area currently with substantial growth prospects </li></ul><ul><ul><li>SVY looking to add more rigs </li></ul></ul><ul><li>100% utilization for 4 rigs for 18-20 months (170 wells) </li></ul><ul><li>Rigs transferred in on “permanent” status – we expect to stay </li></ul><ul><li>All rigs utilizing moving systems for pad drilling </li></ul><ul><li>All rigs AC powered </li></ul>
  27. 27. 2010e Revenue Split Canada US Mexico Drilling Well Servicing By Area By Category
  28. 28. Balance Sheet Onside for Growth <ul><li>$126.8 million equity offering @ $6.30/share </li></ul><ul><ul><ul><li>Closed June 3, 2009 </li></ul></ul></ul><ul><ul><ul><li>Substantially improved financial flexibility </li></ul></ul></ul><ul><li>Syndicated bank term debt renewal in September 2009 </li></ul><ul><ul><li>$50 million currently drawn on $250 million revolver </li></ul></ul><ul><ul><li>September renewal on similar terms anticipated </li></ul></ul><ul><ul><ul><li>Reduced maximum (to reflect access) </li></ul></ul></ul><ul><ul><ul><li>Increased covenant capacity </li></ul></ul></ul><ul><ul><ul><li>Acquisitions to be funded using acquisition debt </li></ul></ul></ul>
  29. 29. Limited Remaining 2009 Capex Commitments <ul><li>Remaining to spend on committed capital program* </li></ul><ul><ul><li>$8 million </li></ul></ul><ul><li>2009 maintenance capex </li></ul><ul><ul><li>$8 -10 million (scalable based on utilization) </li></ul></ul>* At August 31, 2009
  30. 30. Revenue 2001 – 2010e NOTE: Savanna does not provide guidance, these are analyst estimates only $ Millions
  31. 31. Cash Flow 2002 – 2010e NOTE: Savanna does not provide guidance, these are analyst estimates only $ Millions
  32. 32. Standing Firm, but Not Standing Still <ul><li>2009/10 Focus </li></ul><ul><ul><li>Access new markets domestically and internationally </li></ul></ul><ul><ul><li>Re-invigorate drilling technology </li></ul></ul><ul><ul><ul><li>Basin-specific design and equipment </li></ul></ul></ul><ul><ul><ul><li>Enhance existing platforms </li></ul></ul></ul><ul><ul><li>Process improvement during slowdown </li></ul></ul><ul><ul><ul><li>Brand consolidation – Savanna </li></ul></ul></ul><ul><ul><ul><li>Systems integration </li></ul></ul></ul><ul><ul><ul><li>Field / HO efficiencies </li></ul></ul></ul><ul><ul><ul><li>Recruiting / Training </li></ul></ul></ul>
  33. 33. Prepare for Next Upswing <ul><li>Select growth opportunities </li></ul><ul><ul><li>Additional North American expansion as market allows </li></ul></ul><ul><ul><li>International expansion focus </li></ul></ul><ul><ul><ul><li>Savanna has the right technology </li></ul></ul></ul><ul><ul><ul><li>Capital and time required to build international base </li></ul></ul></ul><ul><li>Overall service industry costs must adjust to low natural gas prices </li></ul><ul><ul><ul><li>Costs are moving down </li></ul></ul></ul><ul><ul><ul><li>Savanna will be a solution for producers in this environment through </li></ul></ul></ul><ul><ul><ul><ul><li>Superior equipment offering </li></ul></ul></ul></ul><ul><ul><ul><ul><li>Better field efficiencies and processes </li></ul></ul></ul></ul><ul><ul><ul><ul><li>Creative operating structures – modified footage, turnkey </li></ul></ul></ul></ul><ul><li>Organic and acquisition growth opportunities exist, but timing is critical </li></ul>
  34. 34. 1800, 311 - 6 Avenue SW, Calgary, Alberta T2P 3H2 Tel 403.503.9990