NBCFM Research | Daily Bulletin

Energy Equipment & Services

Industry Rating: Overweight (NBF Economics & Strategy Group)
April 24, 2022

Trican Well Service Ltd. STOCK DATA

52-Week High and Low ($) 4.60-2.02
Upgrade; Rate of Change Coming
Dividend per Share ($) 0.00
Dividend Yield (%) 0.0
TCW (TSX) STOCK RATING TARGET EST. TOTAL RETURN
C$4.31 Outperform C$6.25 45.0% Shares Outstanding (Mln) 232.0
(Was Sector Perform) (Was C$4.00) Market Capitalization ($Mln) 999.8
Net Debt ($Mln) (32.7)

Rating Upgrade & Target Change Enterprise Value ($Mln) 955.5

NBCFM ESTIMATES & VALUATION

Revised Outlook Support an Expanded Value Thesis
Fiscal Y/E December 2021A 2022E 2023E
In association with our Q1/22 OFS preview (LINK), we have updated our
estimates, and as a result of improving visibility to high-rate of change value Revenue ($Mln) 562.5 730.2 1,005.6
fundamentals, are upgrading our rating to Outperform from Sector Perform. EBITDA ($Mln) 101.6 133.0 204.2
EBITDA Margin (%) 18.1 18.2 20.3
For Q1/22, our estimates are generally aligned with consensus, projecting
34% sequential revenue expansion to $210 mln (vs. consensus $213 mln) Net Debt / EBITDA (x) (0.3) (0.3) (0.5)
and associated 38% EBITDA growth to $39 mln (vs. consensus $42 mln), Interest Coverage (x) 51.5 323.9 497.5
to imply a margin of 18% (FLAT Q/Q). During the quarter, we expect the Capex ($Mln) (54) (65) (40)
company maintained solid utilization (<7 spreads vs. ~6 prior quarter),
FCF / Share ($) 0.33 0.39 0.69
while expectations remain for activity and pricing to press forward through
the back half of ’22 as levering off of extremely tight capacity of high EV/EBITDA (x) 10.2 7.2 4.0
quality equipment (largely sold out), as complemented by the expected Target EV/EBITDA (x) 15.0 10.5 6.0
deployment of its second Tier 4 (low-emissions spread), to drive pricing and Target EV/Horsepower 2,650 2,450 2,175
margin improvement (with inflation being passed through to date) towards
($)
sustainable long-term levels in the mid-20%s.
Canada Rig Count 130 175 170
All figures in C$ unless otherwise noted
Rating Upgraded to Outperform (from Sector Perform) &
Source: Company Reports, Refinitiv and NBF
Target to $6.25 (from $4.00)
The compounding outlook continues to support a solid backdrop for free cash
flow generation, adding to a stout cash balance, and provides optionality
to likely return of capital initiatives (through an active NCIB, institution of
a base dividend, SIB or special divided; in that order of priority). On that
STOCK PERFORMANCE (Source: FactSet)
basis, with the stock trading at 4.0x 2023e EV/EBITDA (vs. peers 5.4x), we
(P) (V 100000)
are upgrading TCW to Outperform (from Sector Perform) with a $6.25/sh 5 70

target price (was $4.00/sh) that is based on a 6.0x 2023e multiple (vs. prior 4.5 60
4 50
5.8x 2022e multiple) and supports 45% returns (arguably higher risk-reward
3.5 40
than PD). 3 30
2.5 20
2 10

Apr-21 Jul-21 Oct-21 Jan-22 Apr-22

COMPANY PROFILE
Trican Well Service Ltd. (“TCW” or “Trican”) is the largest pure-play
Canadian fracer with nearly 570K HHP of capacity (roughly a third of
available supply) across fracturing, cementing, coil tubing and other
services lines. TCW was incorporated in 1979 and began trading publicly
in 1996.

Analyst  Dan Payne, CFA ● (403) 290-5441 ● dan.payne@nbc.ca For required disclosures, please refer to the end of the document.
Associate  Nick Stevenson ● (403) 441-0928 ● nick.stevenson@nbc.ca
Associate  Trevor Martensson ● (403) 290-5624 ● trevor.martensson@nbc.ca
 Trican Well Service Ltd.
NBCFM Research | April 24, 2022

Revised Outlook Support an Expanded Value Thesis

In association with our Q1/22 OFS preview (LINK), we have updated our estimates, and as a result of
improving visibility to high-rate of change value fundamentals, are upgrading our rating to Outperform from
Sector Perform.
For Q1/22, our estimates are generally aligned with consensus, projecting 34% sequential revenue expansion
to $210 mln (vs. consensus $213 mln) and associated 38% EBITDA growth to $39 mln (vs. consensus $42 mln),
to imply a margin of 18% (FLAT Q/Q). During the quarter, we expect the company maintained solid
utilization (<7 spreads vs. ~6 prior quarter), while expectations remain for activity and pricing to press
forward through the back half of ’22 as levering off of extremely tight capacity of high quality equipment
(largely sold out), as complemented by the expected deployment of its second Tier 4 (low-emissions spread),
to drive pricing and margin improvement (with inflation being passed through to date) towards sustainable
long-term levels in the mid-20%s.

Our Estimates
In connection with the update, we have made the following changes to our forecast.

Exhibit 1: NBF Annual Estimates

2022E 2023E

2019A 2020A 2021A Previous Revised % Chg Previous New % Chg

Operational Summary

Canada
Total HHP 583,000 570,000 573,100 573,100 573,100 0% 573,100 573,100 0%
Active HHP 334,500 219,250 222,325 352,750 321,625 -9% 385,000 429,000 11%
Active Frac Crews 9 5 6 9 8 -9% 9 10 11%
Revenue/HHP 2,333 2,380 2,573 $2,285 $2,270 -1% $2,297 $2,288 0%
Financial Summary

Revenue (mln) $655.1 $397.0 $562.5 $805.5 $730.2 -9% $905.6 $1,005.6 11%
Operating Expenses (mln) $577.3 $331.2 $434.9 $624.8 $564.2 -10% $711.3 $769.4 8%
Gross Margin 12% 17% 23% 22% 23% 0% 21% 23% 2%

SG&A (mln) $45.1 $44.3 $28.2 $33.0 $33.0 0% $32.0 $32.0 0%

Adjusted EBITDA (mln) $30.6 $30.6 $101.6 $147.7 $133.0 -10% $162.3 $204.2 26%
EBITDA Margin 5% 8% 18% 18% 18% 0% 18% 20% 2%
Net Debt (mln) $39.0 ($22.6) ($29.5) ($36.9) ($44.3) 20% ($103.0) ($109.9) 7%
Source: NBF, Company Reports

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Upgraded to Outperform (from Sector Perform) & Target to $6.25 (from $4.00)
The compounding outlook continues to support a solid backdrop for free cash flow generation, adding to a
stout cash balance, and provides optionality to likely return of capital initiatives (through an active NCIB,
institution of a base dividend, SIB or special divided; in that order of priority). On that basis, with the stock
trading at 4.0x 2023e EV/EBITDA (vs. peers 5.4x), we are upgrading TCW to Outperform (from Sector
Perform) with a $6.25/sh target price (was $4.00/sh) that is based on a 6.0x 2023e multiple (vs. prior 5.8x
2022e multiple) and supports 45% returns (arguably higher risk-reward than PD).

Exhibit 2: Trican; Peer Comparables

Company Ticker Mkt. Cap Net Debt EV HHP EV/HHP EBITDA EV/EBITDA Net Debt /EBITDA P/TBV FCF Yield
(mln) (mln) (mln)

Canadian Fracturing Peers 2022E 2023E 2022E 2023E 2022E 2023E 2022E 2023E

Calfrac Well Services CFW.TO $192 US$404 $596 1,345,000 $450 $131.4 $177.0 4.5x 3.1x 3.1x 2.0x 1.5x 6% 11%
STEP Energy Services Ltd. STEP.TO $277 US$168 $445 490,000 $900 $112.7 $130.9 3.9x 3.0x 1.5x 0.9x 1.5x 10% 16%
Canadian Average (excl. boxed outliers) $675 4.2x 3.1x 2.3x 1.5x 1.5x 8% nmf

Company Ticker Mkt. Cap Net Debt EV HHP EV/HHP EBITDA EV/EBITDA Net Debt /EBITDA P/TBV FCF Yield
(mln) (mln) (mln)
U.S. Fracturing Peers 2022E 2023E 2022E 2023E 2022E 2023E 2022E 2023E
Halliburton HAL US$33,942 US$5,586 US$39,528 3,200,000 US$12,350 US$3,641.0 US$4,493.3 10.9x 8.5x 1.5x 0.9x 6.6x 4% 6%
Liberty Oilfield Services LBRT.K US$3,136 US$123 US$3,259 2,500,000 US$1,300 US$423.6 US$612.1 7.7x 5.0x 0.3x -0.2x 2.3x -1% 7%
Mammoth Energy Services TUSK.O US$113 nmf nmf 292,000 nmf nmf nmf nmf nmf nmf nmf nmf nmf nmf
NexTier Oilfield Solutions NEX US$2,548 US$170 US$2,717 2,260,000 US$1,200 US$359.5 US$491.2 7.6x 5.0x 0.5x -0.2x 6.6x 5% 11%
Propetro Holding Corp PUMP.K US$1,489 (US$95) US$1,395 1,415,000 US$975 US$265.8 US$347.4 5.2x 3.8x -0.4x -0.5x 1.7x -1% 9%
RPC, Inc. RES.N US$2,379 (US$75) US$2,304 735,000 US$3,125 US$198.3 US$235.4 11.6x 9.6x -0.4x -0.5x 3.5x nmf nmf
U.S. Average (excl. boxed outliers) US$1,325 8.6x 6.4x 0.3x -0.1x 4.1x 2% 8%
North American Average (exlc. boxed outliers) 7.4x 5.4x 0.9x 0.4x 3.4x 4% 10%

Trican Well Services TCW.TO $999.8 ($44.3) $955.5 573,100 $1,675 $133.0 $204.2 7.2x 4.0x -0.3x -0.5x 2.1x 8% 9%

Source: NBF, Company Reports, Refinitiv

Exhibit 3: Trican; NBF vs. Consensus

NBF Consensus
Q1/22 2022 2023 Q1/22 %∆ 2022 %∆ 2023 %∆
Revenue (mln) $210.0 $730.2 $1,006 $213 -2% $750 -3% $832 21%
Adjusted EBITDA (mln) $38.8 $133.0 $204.2 $42 -7% $147 -10% $169 21%
EBITDA Margin 18% 18% 20% 20% 20% 20%
Source: NBF, Company Reports, Refinitiv

Exhibit 4: Trican; Consensus Forward EV/EBITDA

+/- 1 St. Deviation (EV/EBITDA) EV/EBITDA Share Price
30.0x $6

25.0x $5
Consensus Forward EV/EBITDA

20.0x $4
Share Price

15.0x $3

10.0x $2

5.0x $1

0.0x $0
2018 2019 2020 2021 2022

Source: NBF, Bloomberg

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NBCFM Research | April 24, 2022

Trican Well Services - TCW

STOCK/RISK RATING Outperform Current Share Price $4.31

TARGET PRICE $6.25 52 Week High/Low $4.60 - $2.02
YIELD 0.0% Market Cap ($ mln) $999.8
TOTAL RETURN 45% Enterprise Value ($ mln) $955.5

KEY DRIVERS ASSET FOOTPRINT

Calendar year-end 2018 2019 2020 2021 2022e 2023e

Canada
Average Active HHP # 423,000 334,500 219,250 222,325 321,625 429,000
Revenue/HHP $/HHP 2,321 2,333 2,380 2,573 2,270 2,288
Revenue Mix
Frac % 68% 71% 73% 75% 74% 74%
Cementing % 16% 16% 17% 16% 15% 15%
Coiled tubing % 4% 7% 9% 8% 10% 10%
Other % 16% 7% 2% 1% 1% 1%

Share Count (mln) # 301.5 271.5 255.7 247.0 232.0 217.0

FINANCIAL SUMMARY FREE CASH FLOW PROFILE

(in $C mln, except shares) 2018 2019 2020 2021 2022e 2023e (in $C mln, except per share) 2018 2019 2020 2021 2022e 2023e
Revenue $900.6 $655.1 $397.0 $562.5 $730.2 $1,005.6 Revenue $900.6 $655.1 $397.0 $562.5 $730.2 $1,005.6
EBITDA $89.8 $30.6 $30.6 $101.6 $133.0 $204.2
Less: Cash taxes ($27.8) ($32.7) ($31.5) ($0.1) $13.6 $29.6
Operating Expenses $764.2 $577.3 $331.2 $434.9 $564.2 $769.4 Less: Interest $13.7 $4.7 $3.3 $2.0 $0.4 $0.4
Gross Profit $136.4 $77.8 $65.9 $127.6 $166.0 $236.2 Less: Other ($4.4) ($32.0) ($38.5) $2.8 $1.9 $4.7
Gross Margin (%) 15% 12% 17% 23% 23% 23% Cash from Operations $99.6 $26.6 $20.3 $102.5 $120.8 $178.9
Less: Maintenance capex $40.0 $30.0 $15.5 $20.0 $30.0 $30.0
SG&A $48.7 $45.1 $44.3 $28.2 $33.0 $32.0 Cashl avbl. for div./growth $59.6 ($3.4) $4.8 $82.5 $90.8 $148.9
EBITDA $89.8 $30.6 $30.6 $101.6 $133.0 $204.2 Less: Growth capex $38.8 $3.2 ($2.7) $33.9 $35.0 $10.0
EBITDA Margin (%) 10% 5% 8% 18% 18% 20% Free Cash Flow $20.8 ($6.7) $7.5 $48.6 $55.8 $138.9
FCF/sh $0.20 ($0.01) $0.02 $0.33 $0.39 $0.69
Less: Dividend $0.0 $0.0 $0.0 $0.0 $0.0 $0.0
Add (less): Change in working capital $1.4 $2.1 $50.5 ($28.4) ($11.0) ($43.3)
Surplus (deficit) $22.1 ($4.6) $58.0 $20.2 $44.8 $95.7
QUARTERLY EBITDA per share $0.07 ($0.02) $0.23 $0.08 $0.19 $0.44
(in $C mln) 2018 2019 2020 2021 2022e 2023e Shares Outstanding 301.5 271.5 255.7 247.0 232.0 217.0
Q1 $54.9 $26.3 $24.8 $27.3 $38.8 $59.4
Q2 ($1.5) ($14.3) ($6.8) $14.2 $9.8 $14.1 Net Debt $37.7 $39.0 ($22.6) ($29.51) ($44.28) ($109.94)
Q3 $36.7 $4.0 ($2.6) $32.1 $45.2 $63.3 Net Debt/TTM EBITDA nmf 1.3x -0.7x -0.3x -0.3x -0.5x
Q4 ($0.3) $14.6 $15.2 $28.0 $39.2 $67.4 Credit Facility $175.0 $227.3 $275.0 $275.0 $175.0 $275.0
Annual $89.8 $30.6 $30.6 $101.6 $133.0 $204.2 Utilization 80% 18% 17% 17% 0% 0%

FINANCIAL COVENANTS VALUATION & COMPS

2021e Q1/22e Q2/22e Q3/22e Q4/22e 2023e 2022e 2023e 30x $6
+/- 1σ EV/EBITDA Share Px
Leverage Ratio Max 3.5x 3.5x 3.5x 3.5x 3.5x 3.5x EV/EBITDA 7.2x 4.0x
NBF Estimate nmf nmf nmf nmf nmf nmf Peers 7.3x 5.4x 25x
$5
FCF Yield 9% 16% 20x
Cons. 1Y FWD EVEBITDA

Interest Coverage Min 2.5x 2.5x 2.5x 2.5x 2.5x 2.5x Peers 4% 10% $4
NBF Estimate 51.5x 68.9x 79.8x 130.8x 323.9x 374.2x Net Debt/EBITDA -0.3x -0.5x 15x

Share Price
Peers 0.9x 0.4x 10x $3

CANADA RIG COUNT P/TBV 2.1x 5x

$2
2018 2019 2020 2021 2022e 2023e Peers 3.4x
0x
Q1 273 185 195 138 200 200 ROCE 9%
$1
Q2 105 83 25 73 110 110 Peers 7% -5x
Q3 208 131 48 150 190 185 EV/HHP $1,675
-10x $0
Q4 177 139 92 161 200 195 Peers $1,150 2017 2018 2019 2020 2021 2022
Annual 191 135 90 131 175 170
Source: NBF, Company Reports, Baker Hughes, Bloomberg, Refinitiv

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NBCFM Research | April 24, 2022

Disclosures
PRICE, RATING AND TARGET HISTORY: I = Initiation, OP = Outperform, SP = Sector Perform, UP = Underperform, UR = Under Review, R = Restricted; T = Tender (Source: Factset, NBF)

Trican Well Service Ltd. Rating History as of 04/22/2022

OP:$2.00 OP:$1.70 OP:$1.40 OP:$1.10 OP:$1.85 OP:$1.60 SP:$1.25 SP:$0.75 SP:$0.90 SP:$1.00 SP:$1.30 SP:$1.50
08/01/2019 08/14/2019 10/01/2019 11/24/2019 01/26/2020 02/27/2020 03/09/2020 04/06/2020 07/05/2020 07/31/2020 10/15/2020 11/06/2020
5

Price (CAD)
2

0
Jul 19 Oct 19 Jan 20 Apr 20 Jul 20 Oct 20 Jan 21 Apr 21 Jul 21 Oct 21 Jan 22 Apr 22
SP:$2.00 SP:$2.25 SP:$2.75 SP:$3.25 SP:$3.50 SP:$4.00
01/05/2021 02/18/2021 05/13/2021 06/16/2021 07/28/2021 10/27/2021

Closing Price

RISKS:
Commodity Prices: Demand, pricing and terms for Trican services depend significantly upon the level of expenditures made by oil and gas companies, which are directly related to the demand for,
and price of oil and gas.

Seasonality: Trican operations in Canada are susceptible to weather volatility, as heavy rains, warmer winters and typical “spring break-up” weather can limit access to well sites.

Regulatory: Trican is subject to stringent environmental laws and regulations, some of which may provide for strict liability for damages to natural resources or threats to public health or safety.

ADDITIONAL COMPANY RELATED DISCLOSURES

Trican Well Service Ltd. 10
Precision Drilling Corporation 2, 3, 4, 5, 7, 9

LEGEND FOR COMPANY RELATED DISCLOSURES:

2 National Bank Financial Inc. has acted as an underwriter with respect to this issuer within the past 12 months.
3 National Bank Financial Inc. has provided investment banking services for this issuer within the past 12 months.
4 National Bank Financial Inc. or an affiliate has managed or co-managed a public offering of securities with respect to this issuer within the past 12 months.
5 National Bank Financial Inc. or an affiliate has received compensation for investment banking services from this issuer within the past 12 months.
6 National Bank Financial Inc. or an affiliate has a non-investment banking services related relationship during the past 12 months.
7 The issuer is a client, or was a client, of National Bank Financial Inc. or an affiliate within the past 12 months.
8 National Bank Financial Inc. or its affiliates expects to receive or intends to seek compensation for investment banking services from this issuer in the next 3 months.
9 As of the end of the month immediately preceding the date of publication of this research report (or the end of the second most recent month if the publication date is less than 10 calendar days after
the end of the most recent month), National Bank Financial Inc. or an affiliate beneficially own 1% or more of any class of common equity securities of this issuer.
10 National Bank Financial Inc. makes a market in the securities of this issuer, at the time of this report publication.
11 A partner, director, officer or research analyst involved in the preparation of this report has, during the preceding 12 months provided services to this issuer for remuneration other than normal
course investment advisory or trade execution services.
12 A research analyst, associate or any other person (or a member of their household) directly involved in preparing this report has a financial interest in the securities of this issuer.
13 A partner, director, officer, employee or agent of National Bank Financial Inc., is an officer, director, employee of, or serves in any advisory capacity to the issuer.
14 A member of the Board of Directors of National Bank Financial Inc. is also a member of the Board of Directors or is an officer of this issuer.
15 A redacted draft version of this report has been shown to the issuer for fact checking purposes and changes may have been made to the report before publication.

RATING DISTRIBUTION

Outperform Sector Perform Underperform

Coverage Universe Ratings Distribution 66% 32% 0%

Investment Banking Distribution 71% 63% 50%

DISCLOSURES

Ratings And What They Mean: PRIMARY STOCK RATING: NBF has a three-tiered rating system that is relative to the coverage universe of the particular analyst. Here is a brief description of each:
Outperform (OP) – The stock is expected to outperform the analyst’s coverage universe over the next 12 months; Sector Perform (SP) – The stock is projected to perform in line with the sector over

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the next 12 months; Underperform (UP) – The stock is expected to underperform the sector over the next 12 months. SECONDARY STOCK RATING: Under Review (UR) − Our analyst has withdrawn
the rating because of insufficient information and is awaiting more information and/or clarification; Tender (T) − Our analyst is recommending that investors tender to a specific offering for the company’s
stock; Restricted (R) − Because of ongoing investment banking transactions or because of other circumstances, NBF policy and/or laws or regulations preclude our analyst from rating a company’s stock.
INDUSTRY RATING: NBF has an Industry Weighting system that reflects the view of our Economics & Strategy Group, using its sector rotation strategy. The three-tiered system rates industries as
Overweight, Market Weight and Underweight, depending on the sector’s projected performance against broader market averages over the next 12 months. RISK RATING: As of June 30, 2020, National
Bank Financial discontinued its Below Average, Average and Above Average risk ratings. We continue to use the Speculative risk rating which reflects higher financial and/or operational risk.

GENERAL: This Report was prepared by National Bank Financial Inc. (NBF), a Canadian investment dealer, a dealer member of IIROC and an indirect wholly owned subsidiary of National Bank of
Canada. National Bank of Canada is a public company listed on the Toronto Stock Exchange.

The particulars contained herein were obtained from sources which we believe to be reliable but are not guaranteed by us and may be incomplete and may be subject to change without notice. The
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