Tim Monachello

Tim Monachello asked about the variability of engine lead times across different product lines and horsepower ranges, Enerflex's capacity to book and deliver new compression and processing orders in 2026, potential growth opportunities in the Middle East, and the company's strategy regarding its Normal Course Issuer Bid (NCIB) for 2026.

Answer

Paul Mahoney, President and CEO, clarified that the 120-week lead time is specific to a portion of the higher horsepower product line, with some relief expected from equipment manufacturers' CapEx. Jeff Fetterly, VP of Corporate Development and Investor Relations, confirmed secured capacity for 2026. Preet Dhindsa, SVP & CFO, explained that while Middle East growth is not in current 2026 CapEx, the company actively explores BOOM assets in the region. He also stated that a more prescriptive capital allocation strategy, including NCIB, will be provided after strategic work is completed.

Tim Monachello followed up on engine lead times, asking if the 110-120 week lead time is consistent across Enerflex's entire product line or if it varies by engine size and end market. He also questioned if new compression and processing orders received today could still be delivered in 2026, or if the 2026 outlook is already fully booked. Additionally, he asked for elaboration on potential growth opportunities in the Middle East, how they compare to North American opportunities, and how Enerflex evaluates them against its cost of capital. Finally, he inquired about the company's plans for exhausting its NCIB in 2026.

Answer

Paul Mahoney (President and CEO, Enerflex) clarified that the 120-week lead time applies to a specific portion of the product line, primarily higher horsepower ranges, and that capacity expansion by equipment manufacturers might alleviate this in the future. Jeff Fetterly (VP of Corporate Development and Investor Relations, Enerflex) added that Enerflex has secured capacity for 2026, including book-and-build activities. Preet Dhindsa (SVP & CFO, Enerflex) explained that while 2026 growth capital is largely for the U.S. contract compression fleet, Enerflex is actively exploring BOOM projects in the Middle East (Oman, Bahrain) due to their quality, strong counterparties, and predictable cash flows, though no specific capital is currently allocated. Preet Dhindsa also stated that capital allocation decisions, including NCIB activity, will be more prescriptive after the strategy work is completed in the coming months, noting that the NCIB is open until the end of March.

Tim Monachello asked about Precision Drilling's capital allocation guidance, particularly the future of share repurchases once deleveraging targets are met. He also inquired about the committed portion of the $63 million rig upgrade capital for 2026, the markets for upgrades, and the impact on U.S. contracted status, as well as the U.S. rig count outlook for the back half of 2026 and the source of rigs for the Argentina opportunity.

Answer

Carey Ford, President and CEO, stated that Precision aims to increase direct allocations to shareholders as debt reduces, potentially through buybacks or dividends, depending on market conditions. He noted that only a portion of the 2026 upgrade capital is fully committed, with the rest based on customer conversations, and that maintenance capital includes long-lead items that could shift to upgrades. Dustin Honing, CFO, added that upgrade opportunities are seen in Canada (Montney, heavy oil pad Super Singles) and the U.S. (Marcellus, Haynesville, Permian). Ford indicated that the U.S. rig count outlook is largely six months out, and Argentina rigs would come from idle Super Triple rigs in the U.S. fleet, with capital investments and mobilization contemplated in contract economics.

Tim Monachello inquired about Precision Drilling's capital allocation guidance, specifically the increased share repurchases, and how allocations might change once the deleveraging target is achieved.

Answer

Carey Ford, President and CEO, affirmed the commitment to increasing direct allocations to shareholders (including buybacks and potentially dividends) as debt levels decrease, highlighting the company's significant cash flow generation. Monachello also asked about the $63 million earmarked for rig upgrades in 2026, how much is currently committed, which markets present opportunities, and the potential impact on U.S. contracted status. Carey Ford noted that only a portion (15-30%) is committed, with the rest based on expected customer conversations. Dustin Honing, CFO, specified upgrade opportunities in Canada (Montney, heavy oil Super Singles) and the U.S. (Marcellus, Haynesville, Permian). Monachello further questioned the U.S. rig count stability or potential for growth in the back half of 2026, given the anticipated Q1 oil glut. Carey Ford indicated that customer visibility is generally shorter, mostly six months out, with some looking 1-2 years ahead. Lastly, Monachello asked if the Argentina opportunity would utilize upgraded idle rigs from the U.S. fleet or new builds. Carey Ford confirmed it would involve idle Super Triple rigs from the U.S., with any necessary upgrades and mobilization costs factored into the contract economics.

Tim Monachello of ATB Capital Markets asked for details on the North American manufacturing facility expansion, the CapEx outlook for 2026, the company's competitive time-to-market, the strength in Q2 bookings, the expected margin normalization in Engineered Systems, and the future trend for G&A expenses.

Answer

Interim President & CEO Preet Dhindsa and VP Jeff Fetterly responded. Dhindsa clarified the facility expansion was an acquisition of adjacent land for future optionality. Fetterly noted that 2026 CapEx planning is progressing early due to supply chain lead times. On bookings, Fetterly confirmed Q2 was normalized with no lumpy orders and a book-to-bill of 1.1x. He reiterated that ES margins are expected to trend toward historical averages due to product mix. Dhindsa added that G&A levels are benefiting from synergies and a continued focus on optimization.

Tim Monachello of ATB Capital Markets asked about the North American manufacturing facility expansion, future CapEx outlook, time-to-market advantages, the nature of recent strong bookings, the timing of margin normalization in Engineered Systems, and the forward trend for G&A expenses.

Answer

Interim President & CEO Preet Dhindsa and VP Jeff Fetterly addressed the questions. Dhindsa stated the facility expansion was acquiring land for future optionality, as current capacity is sufficient. Fetterly noted that 2026 CapEx planning is already underway due to supply chain lead times. He confirmed their vertical integration provides a time-to-market advantage and that Q2 bookings were normalized. Regarding margins, Fetterly reiterated guidance for a trend toward historical averages due to product mix shifts. Dhindsa added that G&A levels are benefiting from synergies and remain a key focus for optimization.

Tim Monachello from ATB Capital Markets asked about the mix of customer demand drivers, expectations for Q2 bookings, and the outlook for working capital and operational profitability improvements.

Answer

Executive Jeff Fetterly explained that Enerflex's customer base is weighted towards larger, stable operators focused on long-term drivers like LNG exports. Regarding working capital, he stated that after a strong Q1 recovery, the company expects a modest build for the rest of 2025, aiming for a neutral position for the full year. Interim CEO Preet Dhindsa added that profitability improvements will come from ongoing optimization of the company's footprint and processes, with a strong focus on reducing SG&A post-integration.

Tim Monachello from ATB Capital Markets questioned the strong Q4 Engineered Systems (ES) margins and the expected timeline for their normalization. He also asked about the sustainability of high margins in the U.S. rental compression business, the potential impact of tariffs, and the company's working capital outlook for 2025.

Answer

Executive Jeffrey Fetterly stated that ES margins will normalize progressively through 2025 as the backlog mix shifts to lower-margin compression projects. President and CEO Marc Rossiter affirmed the sustainability of U.S. rental compression margins, citing strong market fundamentals and a high-quality fleet. Regarding tariffs, Rossiter detailed mitigation strategies, viewing it as a manageable supply chain issue. SVP and CFO Preet Dhindsa projected a modest unwind of working capital in Q1 2025, followed by relative stability for the year.

Tim Monachello asked about contractual protections for the Kurdistan project, the timeline for a strategic decision, details of the Oman water solutions project extension, the momentum of Q1's strong bookings, and the impact of recent events on 2024 deleveraging targets.

Answer

President and CEO Marc Rossiter stated it was premature to discuss specific contract details but confirmed the company is in force majeure and focused on protecting its interests without being distracted from strategic priorities like debt reduction. He noted the Oman water project expansion will be operational by mid-2025, with the customer contributing significantly to CapEx. Regarding bookings, he mentioned the impact of the water project's reclassification and two cryo plant orders, while noting a potential slowdown in North American Engineered Systems. On deleveraging, Rossiter reiterated that debt reduction remains a top priority.

Tim Monachello from ATB Capital Markets inquired about Q3 oil sands fleet utilization, the impact of scope reductions at Fort Hills and Syncrude, the expected EBITDA split between Q3 and Q4, and the timing of free cash flow generation in the second half.

Answer

President and CEO Joseph Lambert projected Q3 Canadian utilization in the low 60s, attributing Q2 weakness to severe weather. He noted the new regional services contract has a similar value but shifts to more rental volumes. He stated Q4 EBITDA would be slightly higher than Q3, with most of the second half's free cash flow expected in Q4.