Trican Well Service Ltd.(“Trican” or the “Company”) is pleased to announce its third quarter results for 2024. The following news release should be read in conjunction with Management’s Discussion and Analysis (“MD&A”), the unaudited condensed consolidated interim financial statements and related notes for the three and nine months ended September 30, 2024, as well as the Annual Information Form (“AIF”) for the year ended December 31, 2023. All of these documents are available on SEDAR+ at www.sedarplus.ca.
THIRD QUARTER HIGHLIGHTS
Trican’s results for the third quarter compared to the prior year period were lower based on decreased operating activity resulting from lower natural gas prices.
Revenue was $221.6 million for the three months ended September 30, 2024, a 12% decrease compared to $252.5 million for the three months ended September 30, 2023.
Adjusted EBITDAS1 and adjusted EBITDA1 for the three months ended September 30, 2024 were $53.1 million and $50.2 million, compared to $68.5 million and $65.7 million, respectively, for the three months ended September 30, 2023.
Free cash flow1 and free cash flow per share1 for the three months ended September 30, 2024 were $32.4 million, $0.16 per share basic and diluted compared to $47.7 million, $0.23 per share basic and $0.22 per share diluted for the three months ended September 30, 2023.
Profit and profit per share for the three months ended September 30, 2024 were $24.5 million, $0.12 per share basic and diluted compared to $36.4 million, $0.17 per share basic and diluted for the three months ended September 30, 2023.
The Company’s balance sheet remains strong with positive working capital, including cash, of $136.5 million at September 30, 2024 compared to $153.2 million at December 31, 2023, providing significant financial flexibility. As at September 30, 2024, the Company had a cash balance of $3.0 million (December 31, 2023 – $88.8 million). The decrease in cash is the result of working capital requirements, tax installments, capital expenditures and return of capital initiatives. As at September 30, 2024, the Company had loans and borrowings of $8.2 million (December 31, 2023 – nil).
RETURN OF CAPITAL
The Company continues to be active in its Normal Course Issuer Bid (“NCIB”) program as a key component of its return of capital strategy:
During the three and nine months ended September 30, 2024, Trican purchased and cancelled 7,542,700 common shares and 17,746,800 common shares, respectively, at a weighted average price of $4.83 per share and $4.52 per share, equating to approximately 4% and 8% of the Company’s outstanding shares at December 31, 2023. The 2023-2024 NCIB program was fully completed on October 2, 2024 resulting in the purchase of 21,004,897 common shares at a weighted average price of $4.51 per share.
On October 2, 2024, the Company announced the renewal of its NCIB program, commencing October 5, 2024, to purchase up to 19,010,793 common shares for cancellation before October 4, 2025, subject to the TSX NCIB rules. Subsequent to September 30, 2024, the Company purchased an additional 951,768 common shares.
Since the initiation of our NCIB programs in 2017, Trican has purchased 165,824,618 common shares, equating to approximately 48% of total shares outstanding at the start of the NCIB programs at a weighted average price of $2.77 per share. All common shares purchased under the NCIB are returned to treasury for cancellation.
The Company continues to execute on its return of capital strategy through a quarterly dividend program:
During the three and nine months ended September 30, 2024, the Company paid a cash dividend of $0.045 per share each quarter, or approximately $8.7 million and $27.1 million, respectively, in aggregate to shareholders.
On October 29, 2024, the Company’s board of directors approved a dividend of $0.045 per share reflecting an increase of 12.5% from the prior year quarterly dividend payments of $0.04 per share. The distribution is scheduled to be made on December 31, 2024 to shareholders of record as of the close of business on December 13, 2024.
The dividends are designated as eligible dividends for Canadian income tax purposes.
FINANCIAL REVIEW
HIGHLIGHTS
Capital Expenditures
Capital expenditures for the three and nine months ended September 30, 2024 totaled $15.2 million and $56.4 million, respectively ($27.1 million and $61.0 million for the three and nine months ended September 30, 2023) related primarily to maintenance capital and additional electric ancillary equipment. The Company’s capital budget for 2024 remains at approximately $90 million, to be funded with available cash resources, free cash flow1 and our operating line.
Hydraulic Fracturing Fleet
We developed our fleet by upgrading existing equipment with Tier 4 Dynamic Gas Blending (“DGB”) engine technology and building new fully electric ancillary equipment. The combination of Tier 4 DGB engines and fully electric ancillary equipment can displace up to 90% of the diesel used in a conventional fracturing operation with cleaner burning and less expensive natural gas resulting in lower overall fuel cost and reduced carbon dioxide and particulate matter emissions. Our fracturing fleet upgrades also include industry leading continuous heavy duty pumps (3,000 HHP) and idle reduction technology packages which enable longer pumping times and improved operating efficiencies.
During the first quarter of 2024, Trican’s fifth Tier 4 DGB fleet (42,000 HHP) and second group of electric ancillary equipment was deployed into the field bringing Trican’s total Tier 4 DGB fleet to 210,000 HHP. Upgrades to the third group of electric ancillary equipment is underway and expected to be field ready by the end of the year.
Tier 4 upgrades and electric ancillary equipment are key components of Trican’s operating strategy. Our ongoing initiatives, including fleet upgrades, are intended to improve operating performance, cost efficiency, and reduce our emissions profile, thereby improving the sustainability of our operations while supporting our customers in achieving their goals.
Financial Position
We continue to focus on maintaining a strong balance sheet with significant positive working capital including cash. Our ability to generate strong free cash flow1 and financial flexibility will allow us to execute our strategic plans including ongoing investment in our industry leading fleet, continued execution of our NCIB program and the payment of a quarterly dividend as a part of our disciplined capital allocation strategy which includes a consistent return of capital to our shareholders.
OUTLOOK
Our overall outlook for the next few years remains positive as Canadian market fundamentals continue to be attractive for fracturing, cementing and coiled tubing. Additional Canadian oil and natural gas export capacity is now a reality with the expanded Trans Mountain Pipeline in commercial service, the Coastal GasLink Pipeline completed and the LNG Canada project anticipated to begin operations in 2025. Canada’s new export capacity will allow our customers to sell oil and natural gas at prices more closely linked to global commodity prices ending our status as having landlocked commodities relying almost solely on US demand and prices. We are also encouraged by the progress being made at other LNG export facilities on the West coast of Canada including a positive investment decision for Cedar LNG and development continuing at Woodfibre LNG. Canada’s expanded export capacity for oil and natural gas creates a positive backdrop for drilling and completions activity in the Western Canadian Sedimentary Basin (the “Basin”), and the associated oilfield services required to develop our resources, through 2024 and beyond.
Even though the Basin will always experience periods of reduced field activity due to commodity prices, weather and other factors, we expect overall annual oilfield activity in Canada to grow modestly in the coming years allowing us to continue generating attractive returns for our shareholders.
In particular, the Montney reservoir in Northeast British Columbia and Northwest Alberta is expected to be an increasingly important North American resource play. We expect that the combination of attractive well economics, large drilling inventories, increasing demand from LNG export facilities and British Columbia’s agreements with First Nations should lead to ongoing and growing activity in the play. The Duvernay reservoir continues to see increasing capital allocated to it as customers balance their capital spending programs between weak natural gas pricing and more resilient oil and liquids prices.
As predicted, the Montney and Duvernay plays are proving to be technically complex and very service intensive. These areas require large, high-pressure capable fracturing equipment and large-scale coiled tubing units. The long lateral lengths of well designs in these areas also require large, high volume cement applications. Trican’s high quality assets and significant industry experience should provide opportunities to capture more of this work and support Trican’s core product offerings.
Our Q3 2024 activity was slower than anticipated as certain customers delayed portions of their capital programs. Programs were delayed for various reasons including water restrictions (in some specific cases), well licensing requirements and customers generally managing their capital programs through the last half of the year in the face of a continued challenging commodity price environment, particularly natural gas pricing. The majority of these programs are expected to be undertaken in Q4 2024 resulting in a minimal impact to our 2024 annual financial results. LNG export activities are expected to start in early to mid-2025 which we expect will provide an increasingly solid foundation for the Canadian natural gas market and related industry activity.
Trican continues to build on the investments made in our equipment fleet over the last three years with a focus on pressure pumping technology and design. Trican remains a market leader in Tier 4 DGB technology with our fifth fleet of Tier 4 DGB high pressure fracturing equipment containing continuous duty pumps deployed in the field in early 2024 bringing Trican’s total Tier 4 fleet to 210,000 HHP. Demand for this equipment remains strong and it continues to be sought after technology by customers looking for higher reliability, less downtime and higher capacity equipment for their completion activities. We continue to enhance our equipment offering through the electrification of ancillary equipment required for on-site fracturing operations including the data van, blending, sand handling and other equipment used for fracturing. Upgrades to our third set of electric ancillary equipment is underway and expected to be field ready by the end of the year. These ongoing technological advancements help augment our differentiation strategy and add value for our customers by increasing reliability and reducing both fuel costs and output emissions.
We remain focused on generating attractive returns for our shareholders and returning capital both through our quarterly dividend and our ongoing NCIB program. Trican increased its quarterly dividend per share by 12.5% in Q1 2024 and evaluates its dividend policy as part of its fiscal year end release. On October 2, 2024 Trican announced the successful completion of its 2023-2024 NCIB program which resulted in the repurchase and cancellation of 21.0 million of the Corporation’s outstanding common shares, representing 10% of the Corporation’s public float, as defined by the TSX. Trican renewed its NCIB program which is scheduled to run from October 5, 2024 through October 4, 2025 with investment in this program viewed as an important part of our capital allocation strategy. We believe our ability to deliver a multi-layered return of capital strategy while maintaining a strong balance sheet will lead to long-term value creation for our shareholders.
