Action Notes

Oil & Gas Services

Recommendation: Prior: Risk: 12-Month Target Price: Prior: 12-Month Total Return:
Market Data (C$)
Current Price 52-Wk Range Mkt Cap (f.d.)($mm) Mkt Cap (basic)($mm) EV ($mm) Dividend per Share Dividend Yield Avg. Daily Trading Vol. (3mths) $15.10 $13.44-$26.73 $2,328.4 $2,218.2 $2,518.0 $0.30 2.0% 1,031,098 December 154.2 146.9 -$299.8 15.0%

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Scott Treadwell, P. Eng.

BUY ACTION LIST BUY HIGH C$23.00 C$28.00 54.3%

Ian Thies, (Associate)

Trican Well Service Ltd.

(TCW-T) C$15.10

Removing from Action List

Event With the rollout of our updated commodity deck, we have updated our forecast for the Oilfield Services Sector (OFS). With growing uncertainty in U.S. pressure pumping operations, we have lowered our expectations for Trican both in terms of top-line drivers and profitability. Impact NEGATIVE. Our long-term outlook continues to be strong for the space; however, in the near term we expect Q1 and Q2 to be materially below recent results for Trican, as lower utilization affects profitability in addition to pricing and cost pressures. We expect a rebound toward the 25% EBITDA level in Q3 and beyond, as start-up issues are dealt with. With our updated forecasts, our target price for Trican reduces to $23.00 from $28.00 still based on 5.5x our 2012/2013 EV/EBITDA estimates. With a 54% return to target, we rate Trican BUY (prior Action List Buy). Outlook As noted in our industry pieces, the Canadian winter season has ended in a normal timeframe, but completion activity was delayed in ramping up for Q1. The result is broadly a 10% reduction in activity potential for the pressure pumpers, driven by fewer wells available. Going ahead, we believe that spending reductions by producers will continue and as such have lowered our 2012 capital forecast to $3.0 billion below 2011 levels. With WCSB production weighted to gas and nearly full Canadian storage, we see further risk to the downside, but see that it is currently offset by less capital flowing to land sales and stronger oil prices. In the U.S., we believe that there are two noisy quarters ahead, where pricing and margins will be weaker. We believe that the market currently prices in a much more severe down leg than is likely, and continue to believe that the pressure pumping market will, in the long term, remain robust and require incremental capital investment.

Financial Data (C$)

Fiscal Y-E Shares O/S (f.d.)(mm) Shares O/S (basic)(mm) Float Shares (mm) Net Debt ($mm) Net Debt/Tot Cap

Estimates (C$)
Year Sales ($mm) Sales (old)($mm) EBITDA ($mm) EBITDA (old)($mm) EPS (f.d.) EPS (f.d.)(old) 2010A 2011A 2012E 2013E 1,478.3 2,309.6 2,574.9 3,087.7 --- 2,785.6 3,209.2 330.4 614.5 619.2 838.4 --753.5 916.2 1.09 2.31 1.93 2.73 --2.55 3.09

Valuations
Year P/E (f.d.) Est. EV/EBITDA Year Wells Drilled Gas $US/mmBTU Oil $US/bbl 2010A 13.9x 6.8x 2010A 12,062 $4.37 $79.45 2011A 6.5x 4.1x 2012E 7.8x 4.1x 2013E 5.5x 3.0x

Supplemental Data (C$)

2011A 2012E 2013E 12,892 11,500 12,250 $3.98 $2.60 $3.50 $95.00 $105.00 $105.00

All figures in C$, unless otherwise specified.

Please see the final pages of this document for important disclosure information.

Company Profile Trican is a pressure pumper with operations in western Canada, Russia, the U.S. and a small operation in Algeria. Trican performs fraccing, cementing, coiled tubing and nitrogen services in western Canada and Russia, fraccing and cementing in the U.S. and coil tubing in Algeria.

TCW-T: Price 30 25 20 15 10 5 2009 2010 2011 30 25 20 15 10 5

Action Notes
Exhibit 1: Changes to forecast
2012 2011A Revenue-$mm Canada Russia United States Revenue-$mm EBITDA-$mm Canada Russia United States Corp. EBITDA-$mm EBITDA Margin-% Canada Russia United States EBITDA Margin-% Net Income - $mm per Share (dil.) Cash Flow - $mm per Share (diluted) CAPEX - $mm Exit Net Debt - $mm 1,283 291 739 2,310 465 26 191 -64 614.5 36.2% 9.0% 25.8% 26.6% 340.5 $2.31 605.7 $4.12 583.4 299.8 Est. Prior Chng -9% -4% -6% -8% -14% -15% -23% 0% -18% Est. 2013 Prior

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Chng -4% -1% -4% -4% -6% -10% -11% 0% -8%

1,550 1,405 319 305 917 865 2,574.9 2,785.6 484 32 171 -68 619.2 34.5% 10.3% 19.8% 24.0% 285.9 $1.93 533.6 $3.59 600.0 334.5 562 37 222 -68 753.5 36.2% 11.7% 24.2% 27.0% 378.1 $2.55 639.2 $4.31 600.0 295.4

1,733 1,659 329 327 1,147 1,101 3,087.7 3,209.2 590 41 278 -70 838.4 35.6% 12.4% 25.2% 27.2% 629 45 312 -70 916.2 36.3% 13.7% 27.2% 28.5% 458.3 $3.09 773.0 $5.21 400.0 9.3

-24% -24% -17% -17% 0% 13%

405.5 $2.73 712.5 $4.80 400.0 119.0

-12% -12% -8% -8% 0% 1175%

Source: Company Reports, TD Securities

Valuation At current levels, Trican trades within 15% of our estimate of replacement cost likely the maximum downside in the short term. As more negative industry comments arrive, the market will continue to overestimate the downside, and likely present a strong buying opportunity for longer-term investors. In the short term, we believe that Q1 will be messy, with some spillover into Q2; so we do not see material upside for the space in general until some improved visibility on second-half activity is apparent. Justification of Target Price Our target price calculation method concentrates primarily on forward-year EV/EBITDA estimates. We continue to use historical multiples as goalposts, but set our target prices for our universe as being defined by a multiple range. In the case of Trican, the range is between 5.0x and 5.5x down from our prior 5.5x-6.0x range, on our updated 2012/2013 forecasts. Our $23.00 target price is based on the higher-end of that range and we rate Trican a BUY, down from Action List Buy.

Action Notes
Exhibit 2: Industry Comparibles
Ticker 28-Mar Price Mkt. Cap ($mm) $1,275 $2,218 EV ($mm) $1,594 $2,518 2010A EPS 2011A 2012E

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2013E

2010A

P/E 2011A 2012E

2013E

Pressure Pumpers CFW-T TCW-T $28.70 $15.10 $1.23 $1.09 $4.22 $2.31 $3.96 $1.93 $4.65 $2.73 23.3x 13.9x 31.7x 18.6x 27.2x 49.1x 34.0x EBITDA ($mm) Yield 3.5% 2.0% 2010A $185 $330 2011A $413 $615 2012E $412 $619 2013E $490 $838 2010A 7.2x 6.8x 6.9x 7.0x 8.0x 7.3x 7.3x 6.8x 6.5x 12.3x 6.7x 32.6x 14.6x 17.0x 7.2x 7.8x 8.2x 7.5x 14.1x 12.2x 10.7x 6.2x 5.5x 6.8x 5.9x 10.5x 7.8x 7.8x

Sub-segment Averages Drillers Pressure Pumpers Transportation, Logistics & Infrastructure Small Cap Oilfield Services Group Average Current Ticker Pressure Pumpers CFW-T Div. $1.00

EV/EBITDA 2011A 4.1x 4.1x 5.8x 4.1x 10.6x 13.9x 9.1x 2012E 4.1x 4.1x 4.7x 4.1x 6.9x 5.6x 5.4x 2013E 3.4x 3.0x 4.1x 3.2x 5.7x 4.1x 4.3x

TCW-T $0.30 Sub-segment Averages Drillers Pressure Pumpers Transportation, Logistics & Infrastructure Small Cap Oilfield Services Group Average
Source: Company Reports, TD Securities

Key Risks to Target Price Weakness in commodity prices Unseasonable weather Finding, training and retaining qualified staff Availability of equipment and parts Changes in legislation/regulation pertaining to fracturing operations Foreign country risk Investment Conclusion We have adjusted our estimates for Trican based on a slightly weaker-than-expected Canadian winter completions season, as well as for better clarity on the weakness in U.S. operation. In the U.S. Tricans exposure to dry gas plays in the Southern regions has resulted in (and will continue to cause) utilization and cost impacts that are unlikely to be resolved until Q3/12. However, with over 60% of its U.S. fleet under contract into Q1/13, we expect a return to high utilization and more typical margins in the second-half of 2012. We believe that Tricans prudent adjustments to its growth plan as well as its dividend increase bode well not only for a sustainable business model, but also one that should continue to grow in the long term. We rate Trican BUY (prior Action List Buy) with a $23.00 price target, down from $28.00.

Action Notes
(TCW, BUY, Target price: C$23.00) Price Assumption Oil-WTI Gas-Henry Hub Gas-AECO US$/C$ Rig Count Assumptions WCSB Wells Rig Released WCSB Drilling Rig Op Days WCSB Drilling Rig Utilization Income Statement Revenues Operating Costs % of revenues EBITDA % of revenues Depreciation & Amortization EBIT % of revenues Interest & taxes Non-recurring items Net Income Reported EPS (basic) Reported EPS (diluted) Dividend Per Share 2010 $79.45 $4.37 $3.88 $0.97 2010 12,062 112,389 38% 2010 1478.3 1078.4 72.9 330.4 22.4 110.8 219.6 14.9 9.1 0.0 151.6 1.10 1.09 0.10 2011 $95.00 $3.98 $3.62 $1.01 2011 12,892 151,880 52% 2011 2309.6 1598.5 69.2 614.5 26.6 126.6 487.9 21.1 108.2 0.0 340.5 2.34 2.31 0.10 2012E $105.00 $2.60 $2.00 $1.00 2012E 11,500 144,554 49% 2012E 2574.9 1852.4 71.9 619.2 24.0 194.1 425.1 16.5 104.5 0.0 285.9 1.95 1.93 0.30 2013E $105.00 $3.50 $2.90 $1.00 2013E 12,250 154,691 52% 2013E 3087.7 2141.8 69.4 838.4 27.2 234.9 603.5 19.5 145.4 0.0 405.5 2.76 2.73 0.30 Valuation P/E P/CF Enterprise Value EV/EBITDA Dividend Yield P/BV P/TBV $/b $/mmbtu C$/mcf $

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x x m x % x x

2010 13.9 6.3 2,253.9 6.8 0.7 2.2 2.3

2011 6.5 3.7 2,518.3 4.1 0.7 1.6 1.7

2012E 7.8 4.2 2,518.3 4.1 2.0 1.3 1.4

2013E 5.5 3.1 2,518.3 3.0 2.0 1.1 1.1

m m % m % m m % m m m

Cashflow Analysis Cash Flow from Operations Chgs in Working Cap Net Cash Flow from Operations Cash Flow from Investing Cash Flow from Financing Increase in Cash Free Cash Flow Capital Expenditures CFOPS Capex/Cash Flow Payout Ratio

m m m m m m m m % %

2010 331.7 -139.3 192.5 -257.5 202.1 55.0 154.3 -284.1 2.39 -85.6 4.1

2011 605.7 -281.9 323.8 -597.7 319.5 44.8 245.7 -583.4 4.12 -96.3 2.4

2012E 533.6 -41.5 492.1 -600.0 69.8 -38.1 404.0 -600.0 3.59 -112.4 8.3

2013E 712.5 -52.9 659.6 -400.0 -44.1 215.5 557.8 -400.0 4.80 -56.1 6.2

Quarterly Forecast Revenues EBITDA % of revenues DD&A Operating Income Non-recurring items Net Income Reported EPS (basic) Reported EPS (diluted)

m m % m m m m

1Q12 631.1 158.6 25.1 41.8 116.8 0.0 84.7 0.58 0.57

2Q12 485.2 61.9 12.8 46.9 15.0 0.0 0.2 0.00 0.00

3Q12 697.1 183.0 26.3 51.5 131.6 0.0 93.7 0.64 0.63

4Q12 761.4 215.6 28.3 53.9 161.7 0.0 107.2 0.73 0.72

Basic WA Shs OS Diluted WA Shs OS Balance Sheet Cash Debt Net Debt Net Debt/Equity Debt/Equity Total Assets Total Liabilities Total S/H Equity Ratios Analysis ROA ROCE ROE

m m

144.6 153.8 2010 81.1 102.1 18.4 1.8 10.1 1,451 442 1,009 2010 12.2 17.4 18.3 1.8 5.6 7.34 6.88

146.9 154.2 2011 125.9 400.3 299.8 22.0 29.3 2,217 852 1,365 2011 18.6 26.8 28.7 22.0 48.8 9.36 9.06

146.9 154.2 2012E 87.7 422.2 334.5 20.0 25.2 2,627 954 1,673 2012E 11.8 16.7 18.8 20.0 54.0 11.40 11.10

146.9 154.2 2013E 303.2 422.2 119.0 5.8 20.6 3,088 1,040 2,048 2013E 14.2 20.5 21.8 5.8 14.2 13.95 13.66

m m m % % m m m

Revenue Growth EBITDA Growth EPS Growth Basic WA Shs OS Diluted WA Shs OS

% % % m m

18.0 9.1 1.4 146.9 154.2

15.1 -20.9 -99.3 146.9 154.2

5.8 -5.5 -16.1 146.9 154.2

9.7 9.3 -7.3 146.9 154.2

% % %

Net Debt/Equity % Net Debt/EBITDA % Book Value / Share $ Tangible Book Value / Share $ Source: Company Reports, TD Securities