Trican Well Service : 2023 Q3 - Press Release

News Release	TSX - TCW
	November 9, 2023

TRICAN REPORTS THIRD QUARTER RESULTS FOR 2023, DECLARES QUARTERLY

DIVIDEND AND APPROVED PRELIMINARY 2024 CAPITAL BUDGET

Calgary, Alberta - November 9, 2023 - Trican Well Service Ltd. ("Trican" or the "Company") is pleased to announce its third quarter results for 2023. The following news release should be read in conjunction with Management's Discussion and Analysis ("MD&A"), the unaudited interim consolidated financial statements and related notes of Trican for the three and nine months ended September 30, 2023, as well as the Annual Information Form ("AIF") for the year ended December 31, 2022. All of these documents are available on SEDAR at www.sedar.com.

THIRD QUARTER HIGHLIGHTS

• Trican's results for the quarter compared to the prior year period were only marginally down despite lower activity and a persistent inflationary environment.
• • Revenue was $252.5 million for the three months ended September 30, 2023, a 2% decrease compared to $258.3 million for the three months ended September 30, 2022.
  • Adjusted EBITDAS1 and adjusted EBITDA1 for the three months ended September 30, 2023 were $68.5 million and $65.7 million, compared to $72.1 million and $70.9 million, respectively, for the three months ended September 30, 2022.
  • Free cash flow1 and free cash flow per share1 for the three months ended September 30, 2023 was $47.7 million, $0.23 per share basic and $0.22 per share diluted compared to $64.9 million, $0.27 per share basic and $0.26 per share diluted for the three months ended September 30, 2022.
  • Profit and profit per share for the three months ended September 30, 2023 was $36.4 million, $0.17 per share basic and diluted compared to $38.2 million, $0.16 per share basic and diluted for the three months ended September 30, 2022.
  • The Company has approved a preliminary capital budget for 2024 of $76 million, funded with available cash resources and free cash flow1.
• The Company's balance sheet remains in excellent shape with positive working capital, including cash, of $143.9 million at September 30, 2023 compared to $169.4 million at December 31, 2022, providing significant financial flexibility.
• Trican operates the newest, most technologically advanced fleet of fracturing equipment in Canada. We developed our fleet by upgrading existing equipment incorporating CAT Tier 4 Dynamic Gas Blending ("DGB") engine technology and building new fully electric ancillary equipment. The combination of Tier 4 DGB engine and fully electric ancillary equipment displaces up to 90% of the diesel used in a conventional pumper 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 duty pumps (3,000 HHP) and idle reduction technology packages which enable longer pumping times and improved operating efficiencies.

• Upgrades to Trican's fifth Tier 4 DGB fleet (42,000 HHP) are underway with the equipment anticipated to be field ready in early 2024 which will bring Trican's total Tier 4 DGB fleet to 210,000 HHP.
• Tier 4 upgrades and electric ancillary equipment are key components of Trican's Environmental, Social and Governance ("ESG") strategy. Our ongoing ESG initiatives, including fleet upgrades, will reduce our environmental impact, improve efficiency and reduce our emissions profile thereby improving the sustainability of our operations and supporting our customers in achieving their ESG goals.

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, 2023, Trican purchased and cancelled 2,708,054 common share and 20,059,654 common shares, respectively, at a weighted average price of $3.71 per share and $3.34 per share, equating to approximately 1% and 9% of the 229,776,553 outstanding shares at December 31, 2022. The 2022-2023 NCIB program was fully completed in Q3 2023 resulting in the purchase of 23,083,554 common shares.
  • On October 2, 2023, the Company announced the renewal of its NCIB program, commencing October 5, 2023, to purchase up to 21,004,897 common shares for cancellation before October 4, 2024, subject to the TSX NCIB rules. All common shares purchased under the NCIB are returned to treasury for cancellation. Subsequent to September 30, 2023, the Company purchased an additional 1,112,429 common shares.
  • Since the initiation of our NCIB programs in 2017, Trican has repurchased 144,340,382 common shares, equating to approximately 42% of total shares outstanding at the start of the NCIB programs.
• In 2023, Trican added an additional component to its return of capital strategy by instituting a quarterly dividend program in 2023:
• • During the three and nine months ended September 30, 2023, the Company paid a cash dividend of $0.04 per share for each quarter, or approximately $8.5 million and $26.0 million, respectively, in aggregate to shareholders.
  • On November 9, 2023, the Company's board of directors approved a dividend of $0.04 per share with distribution to be made on December 29, 2023 to shareholders of record as of the close of business on December 15, 2023. The dividends are designated as eligible dividends for Canadian income tax purposes.

FINANCIAL REVIEW

($ millions, except $ per share amounts. Weighted	Three months ended		Nine months ended
average shares is stated in thousands)
	September	September	June 30,	September	September
(Unaudited)	30, 2023	30, 2022	2023	30, 2023	30, 2022
Revenue	252.5	258.3	168.2	717.8	629.8
Gross profit	59.0	61.2	21.5	152.3	102.1
Adjusted EBITDAS1	68.5	72.1	32.9	184.3	137.7
Adjusted EBITDA1	65.7	70.9	31.9	179.2	129.1
Free cash flow1	47.7	64.9	20.2	122.9	110.0
Per share - basic1	0.23	0.27	0.09	0.56	0.45
Per share - diluted1	0.22	0.26	0.09	0.55	0.44
Cash flow from operations	43.5	33.1	101.3	166.5	84.1
Profit for the period	36.4	38.2	9.8	92.2	53.0
Per share - basic	0.17	0.16	0.05	0.42	0.22
Per share - diluted	0.17	0.16	0.04	0.41	0.21
Dividends paid	8.5	-	8.6	26.0	-
Per share	0.04	-	0.04	0.12	-
Shares outstanding, end of period	211,744	232,610	213,264	211,744	232,610
Weighted average shares outstanding - basic	211,887	241,184	218,614	218,955	244,714
Weighted average shares outstanding - diluted	216,766	245,774	222,694	223,518	250,067

• Refer to the Non-GAAP disclosure section of this news release for further details.

($ millions, unaudited)	As at September 30, 2023	As at December 31, 2022
Cash and cash equivalents	44.5	58.1
Current assets - other	229.5	205.2
Current portion of lease liabilities	3.7	3.0
Current liabilities - other	126.4	90.9
Lease liabilities - non-current portion	12.6	9.6
Non-current loans and borrowings	-	29.8
Total assets	684.8	671.1

		Three months ended
	September	June 30,	March 31,	December	September
(Unaudited)	30, 2023	2023	2023	31, 2022	30, 2022
WTI - Average Price (US$/bbl)	$82.22	$73.67	$75.99	$82.64	$91.43
AECO-C - Spot Average Price (C$/mcf)	$2.48	$2.30	$3.06	$4.94	$4.18
WCS - Average Price (C$/bbl)	$88.83	$80.91	$76.58	$74.32	$92.23
Condensate - Average Price (C$/bbl)	$106.99	$92.94	$106.68	$115.48	$115.19
Average Exchange Rate (US$/C$)	$0.75	$0.74	$0.74	$0.74	$0.77
Canadian Average Drilling Rig Count	190	125	227	201	205

Source: Bloomberg, Bank of Canada, Nickle's Energy Group, Rig Locator

OPERATING HIGHLIGHTS

Capital Expenditures

Capital expenditures for the three and nine months ended September 30, 2023 totaled $27.1 million and $61.0 million, respectively ($24.6 million and $70.4 million for the three and nine months ended September 30, 2022) related primarily to maintenance capital, our Tier 4 DGB fleet upgrade program and additional electric ancillary equipment. The Company's capital budget remains at approximately $114 million, the Company has approved a preliminary capital budget for 2024 of $76 million, funded with available cash resources and free cash flow1.

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 investment in our Tier 4 DGB upgrade program, continued participation in 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 unchanged. We expect annual oilfield activity in Canada to remain relatively stable allowing us to continue generating sector leading returns for our shareholders. Canadian market fundamentals remain strong for fracturing, cementing and coiled tubing services for the remainder of the year and we expect the Canadian fracturing market to remain effectively balanced under the current supply and demand dynamic. Trican saw some work scheduled for the third quarter deferred into the fourth quarter due to the volatility in natural gas prices and weather related events. We anticipate fourth quarter activity to be strong as we wind down into the Christmas season.

Although industry pricing fundamentals improved significantly over the past 12 to 18 months, we have recently experienced some pricing pressure as our competitors positioned themselves aggressively for the winter season. However, we expect disciplined pricing to return to the basin as we move into 2024.

The Montney reservoir in Northeastern British Columbia and Northwest Alberta remains one of the premier resource plays in North America and we expect that the combination of attractive economics, future demand from LNG export facilities and British Columbia's agreements with First Nations should lead to ongoing and growing activity in the play. Montney development requires large, high-pressure fracturing, cementing and coiled tubing services which should directly benefit Trican. Additional Canadian export capacity is in the late stages of construction through the Trans Mountain Pipeline, the Coastal GasLink Pipeline and several LNG export facilities on the west coast of Canada. This creates a positive backdrop for oil and natural gas development activity in Western Canada and the associated oilfield services required as we move through the remainder of 2023 and beyond.

We continue to experience inflationary pressures on specific components throughout our supply chain but generally at a much lower rate compared to 2022. We will work diligently to ensure that we mitigate supply chain challenges such as long lead times on key inputs, parts and components. We continue to face challenges in attracting and retaining qualified personnel to the oilfield services industry and thus expect to see ongoing wage inflation.

Trican continues to build on the investments made in our equipment fleet over the last two years to ensure that we are on the forefront of pressure pumping technology and design in Canada. Demand for our Canadian market- leading low emissions Tier 4 DGB fracturing fleets is very robust and expected to remain strong for 2024. We are currently in the process of upgrading our fifth fleet of Tier 4 DGB fracturing equipment containing high pressure pumps which is anticipated to be field ready in early 2024 bringing Trican's total Tier 4 fleet to an industry leading 210,000 HHP.

To further reduce emissions and fuel costs from diesel consumption, we continue to invest and enhance our equipment offering and have recently developed fully electric versions of certain ancillary equipment required for on- site fracturing operations and are deploying them into our fleets going forward. This equipment includes sand handling, blending and other items used on-site for chemical blending. We believe these ongoing technological advancements will augment our differentiation strategy and add value for our customers. Our ability to generate strong free cash flow1 and our financial flexibility allows for continued progress in our fleet upgrade and electrification program.

We will continue to serve our customers with state-of-the-art equipment and generate industry-leading returns in an environmentally and socially responsible manner. In turn, this will allow Trican to focus on returning capital to our shareholders both through our ongoing NCIB program and our quarterly dividend program. 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.

COMPARATIVE QUARTERLY INCOME STATEMENTS

($ thousands, except total job count, revenue per job and crews; unaudited)

Three months ended	September	Percentage	September	Percentage	June 30,	Percentage
30, 2023	of revenue	30, 2022	of revenue	2023	of revenue
Revenue	252,498	100%	258,275	100%	168,232	100%
Cost of sales
Cost of sales	176,153	70%	177,617	69%	128,122	76%
Cost of sales - depreciation and	17,318	7%	19,493	8%	18,579	11%
amortization
Gross profit	59,027	23%	61,165	24%	21,531	13%
Administrative expenses	10,807	4%	9,986	4%	8,375	5%
Administrative expenses - depreciation	907	-%	881	-%	954	1%
Other income	(937)	-%	(571)	-%	(831)	-%
Results from operating activities	48,250	19%	50,869	20%	13,033	8%
Finance costs	514	-%	557	-%	484	-%
Foreign exchange (gain) / loss	(42)	-%	(45)	-%	155	-%
Profit before income tax	47,778	19%	50,357	19%	12,394	7%
Current income tax expense	10,973	4%	-	-%	2,478	1%
Deferred income tax expense	430	-%	12,163	5%	77	-%
Profit for the period	36,375	14%	38,194	15%	9,839	6%
Adjusted EBITDAS1	68,496	27%	72,093	28%	32,946	20%
Adjusted EBITDA1	65,666	26%	70,936	27%	31,908	19%
Total job count	1,823		2,078		1,337
Revenue per job	138,507		124,290		125,828
Total proppant pumped (tonnes)	347,000		397,000		235,000
Hydraulic pumping capacity (HHP)	521,000		529,000		529,000
Hydraulic fracturing - active crews	7.0		7.0		7.0
Hydraulic fracturing - parked crews	5.0		5.0		5.0

• Refer to the Non-GAAP disclosure section of this news release for further details.

Sales Mix - % of Total Revenue

Three months ended (unaudited)	September 30, 2023	September 30, 2022	June 30, 2023
Fracturing	74%	77%	68%
Cementing	18%	16%	23%
Coiled Tubing	8%	7%	8%
Other	-%	-%	1%
Total	100%	100%	100%

COMPARATIVE YEAR-TO-DATE INCOME STATEMENTS

Continuing Operations

($ thousands, except total job count, revenue per job and crews; unaudited)

Nine months ended	September	Percentage	September	Percentage	Year-over	Percentage
30, 2023	of revenue	30, 2022	of revenue	year change	change
Revenue	717,765	100%	629,822	100%	87,943	14%
Cost of sales
Cost of sales	509,655	71%	470,835	75%	38,820	8%
Cost of sales - depreciation and	55,827	8%	56,912	9%	(1,085)	(2%)
amortization
Gross profit	152,283	21%	102,075	16%	50,208	49%
Administrative expenses	29,412	4%	30,827	5%	(1,415)	(5%)
Administrative expenses - depreciation	2,771	-%	2,557	-%	214	8%
Other income	(2,849)	-%	(3,189)	(1%)	(340)	(11%)
Results from operating activities	122,949	17%	71,880	11%	51,069	71%
Finance costs	1,943	-%	1,574	-%	369	23%
Foreign exchange loss / (gain)	175	-%	(269)	-%	(444)	(165%)
Profit before income tax	120,831	17%	70,575	11%	50,256	71%
Current income tax expense	28,065	4%	-	-%	28,065	-%
Deferred income tax expense	518	-%	17,577	3%	(17,059)	(97%)
Profit for the period	92,248	13%	52,998	8%	39,250	74%
Adjusted EBITDAS1	184,320	26%	137,696	22%	46,624	34%
Adjusted EBITDA1	179,205	25%	129,121	21%	50,084	39%
Total job count	5,249		5,640
Revenue per job	136,743		111,671
Total proppant pumped (tonnes)	1,022,000		1,049,000
Hydraulic pumping capacity (HHP)	521,000		529,000
Hydraulic fracturing - active crews	7.0		7.0
Hydraulic fracturing - parked crews	5.0		5.0

• Refer to the Non-GAAP disclosure section of this news release for further details.

Sales Mix - % of Total Revenue

Nine months ended (unaudited)	September 30, 2023	September 30, 2022
Fracturing	74%	75%
Cementing	19%	16%
Coiled Tubing	7%	8%
Other	-%	1%
Total	100%	100%

NON-GAAP MEASURES

Certain terms in this News Release, including adjusted EBITDA, adjusted EBITDAS, adjusted EBITDA percentage, adjusted EBITDAS percentage and free cash flow, do not have any standardized meaning as prescribed by IFRS and therefore, are considered non-GAAP measures and may not be comparable to similar measures presented by other issuers.

Adjusted EBITDA and Adjusted EBITDAS

Adjusted EBITDA is a non-GAAP term and has been reconciled to profit / (loss) for the applicable financial periods, being the most directly comparable measure calculated in accordance with IFRS. Management utilizes adjusted EBITDA to translate historical variability in the Company's principal business activities into future financial expectations. By isolating incremental items from net income, including income / expense items related to how the Company chooses to manage financing elements of the business, taxation strategy and non-cash charges, management can better predict future financial results from our principal business activities.

Adjusted EBITDAS is a non-GAAP term and has been reconciled to profit / (loss) for the applicable financial periods, being the most directly comparable measure calculated in accordance with IFRS. Management utilizes adjusted EBITDAS as a useful measure of operating performance, cash flow to complement profit / (loss) and to provide meaningful comparisons of operating results.

The items included in this calculation of adjusted EBITDA have been specifically identified as they are non-cash in nature, subject to significant volatility between periods, and / or not relevant to our principal business activities. Items adjusted in the non-GAAP calculation of adjusted EBITDA, are as follows:

• Non-cashexpenditures, including depreciation, amortization, impairment of non-financial assets, and equity-settledshare-based compensation;
• Consideration as to how the Company chose to generate financial income and incur financial expenses, including foreign exchange expenses and finance costs;
• Taxation in various jurisdictions; and
• Other income / expense which generally results from the disposition of equipment, as these transactions generally do not reflect quarterly operational field activity.

The item adjusted in the non-GAAP calculation of adjusted EBITDAS from adjusted EBITDA, is as follows:

• Cash-settledshare-based compensation.

($ thousands; unaudited)	Three months ended		Nine months ended
	September	September	June 30,	September	September
	30, 2023	30, 2022	2023	30, 2023	30, 2022
Profit for the period (IFRS financial measure)	36,375	38,194	9,839	92,248	52,998
Adjustments:
Cost of sales - depreciation and amortization	17,318	19,493	18,579	55,827	56,912
Administrative expenses - depreciation	907	881	954	2,771	2,557
Current income tax expense	10,973	-	2,478	28,065	-
Deferred income tax expense	430	12,163	77	518	17,577
Finance costs and amortization of debt issuance costs	514	557	484	1,943	1,574
Foreign exchange (gain) / loss	(42)	(45)	155	175	(269)
Other income	(937)	(571)	(831)	(2,849)	(3,189)
Administrative expenses - equity-settledshare-based	128	264	173	507	961
compensation
Adjusted EBITDA	65,666	70,936	31,908	179,205	129,121
Administrative expenses - cash-settledshare-based	2,830	1,157	1,038	5,115	8,575
compensation
Adjusted EBITDAS	68,496	72,093	32,946	184,320	137,696

Certain financial measures in this news release - namely adjusted EBITDA, adjusted EBITDAS, adjusted EBITDA percentage, adjusted EBITDAS percentage and free cash flow are not prescribed by IFRS and are considered non-GAAP measures. These measures may not be comparable to similar measures presented by other issuers and should not be viewed as a substitute for measures reported under IFRS. These financial measures are reconciled to IFRS measures in the Non-GAAP disclosure section of this news release. Other non-standard measures are described in the NonStandard Measures section of this news release. Stainless steel fluid ends were historically expensed as depreciation prior to December 2017. Not all hydraulic fracturing companies apply the accounting policy for stainless steel fluid ends consistently.

Adjusted EBITDA % and Adjusted EBITDAS %

Adjusted EBITDA % and adjusted EBITDAS % is determined by dividing adjusted EBITDA and adjusted EBITDAS, respectively, by revenue. The components of the calculations are presented below:

($ thousands; unaudited)	Three months ended		Nine months ended
	September	September	June 30,	September	September
	30, 2023	30, 2022	2023	30, 2023	30, 2022
Adjusted EBITDA	65,666	70,936	31,908	179,205	129,121
Revenue	252,498	258,275	168,232	717,765	629,822
Adjusted EBITDA %	26%	27%	19%	25%	21%
($ thousands, unaudited)	Three months ended		Nine months ended
	September	September	June 30,	September	September
	30, 2023	30, 2022	2023	30, 2023	30, 2022
Adjusted EBITDAS	68,496	72,093	32,946	184,320	137,696
Revenue	252,498	258,275	168,232	717,765	629,822
Adjusted EBITDAS %	27%	28%	20%	26%	22%

Free Cash Flow and Free Cash Flow per Share

Free cash flow and free cash flow per share are non-GAAP terms which Management believes to be key measures of capital management as they demonstrate the Company's ability to generate monies available to fund future growth through capital investments and return capital to our shareholders.

Free cash flow has been reconciled to cash flow from operations for the applicable financial periods, being the most directly comparable measure calculated in accordance with IFRS. Management adjusts for other (income) / loss, realized (gain) / loss, non-cash income tax expense, maintenance capital expenditures included within purchase of

property and equipment from the statement of cash flows, net changes in other liabilities and change in non-cash operating working capital.

Management reconciles free cash flow from adjusted EBITDA for the applicable financial periods by adjusting for interest paid, income taxes, and maintenance capital expenditures included within purchase of property and equipment from the statement of cash flows as they are considered non-discretionary.

In 2023, the Company moved into a cash taxable position due to improved operating results and utilization of its available non-capital loss pools. The Company elected to defer its 2023 current tax installments which are expected to be remitted in Q1 2024. The Company expects to remit current tax installments for 2024 beginning in early 2024. The Company is able to defer its 2023 current tax installments until Q1 2024 but has elected to present these amounts as a reduction of free cash flow in the current periods to clearly show the impact of such non- discretionary items.

Free cash flow per share is calculated by dividing free cash flow by the Company's basic or diluted weighted average common shares outstanding.

Free cash flow and free cash flow per share are not standardized measures and therefore may not be comparable with the calculation of similar measures by other entities.

($ thousands, unaudited)	Three months ended		Nine months ended
	September	September	June 30,	September	September
	30, 2023	30, 2022	2023	30, 2023	30, 2022
Cash flow from operations	43,498	33,144	101,270	166,547	84,087
Other income	(601)	(198)	(449)	(1,798)	(494)
Realized foreign exchange (gain) / loss	(77)	(121)	450	321	(354)
Maintenance capital expenditures	(6,462)	(5,478)	(8,772)	(26,408)	(18,637)
Net changes in other liabilities	(1,623)	66	(667)	(358)	974
Change in non-cash operating working capital	13,007	37,511	(71,635)	(15,443)	44,378
Free cash flow2	47,742	64,924	20,197	122,861	109,954
2 The Company expects to pay the current tax liabilities in Q1 2024, see definition above for more details.
($ thousands, unaudited)	Three months ended		Nine months ended
	September	September	June 30,	September	September
	30, 2023	30, 2022	2023	30, 2023	30, 2022
Adjusted EBITDA	65,666	70,936	31,908	179,205	129,121
Interest paid	(489)	(534)	(461)	(1,871)	(1,503)
Income taxes2	(10,973)	-	(2,478)	(28,065)	973
Maintenance capital expenditures	(6,462)	(5,478)	(8,772)	(26,408)	(18,637)
Free cash flow2	47,742	64,924	20,197	122,861	109,954

• 2023 tax amounts represent current tax liabilities expected to be paid in Q1 2024, see definition above for more details. 2022 amounts represent income taxes received.