Horn River - Enerflex

Blair GoertzenPresident & CEO2

World Leading Pure-Play Supplier ofNatural Gas Production and Processing EquipmentSales and ServiceLocationsRevenue* $1.5 BillionEmployees 3,000Sales and ServiceLocations >60Countries 14* 2009 Pro formaCalgary, Alberta Nisku, Alberta Casper, Wyoming Houston, Texas Rijsenhout, Netherlands Perth, Australia Brisbane, AustraliaStrong Growth Platform in Key Global Markets3

New Enerflex Investment Highlights• World leading pure-play supplier of natural gas compression andproduction and processing equipment• Strong growth platform in North American shale gas, Australian CSG toLNG and Middle East conventional gas• Early stages of industry recovery with growing order bookings and backlog• Highly diversified revenues by geography, customer and application• Strong balance sheet with direct access to growth capital• Experienced management team with a proven track recordPositioned to Deliver Superior Shareholder Value4

Wide Range of Specialty Customized EquipmentNatural Gas Compression• Reciprocating and rotary screwcompression applications• Small to large horsepower(200 hp – 10,000 hp)• Conventional and unconventionalplaysProduction and Processing• Systems for gas plants (dew point)and refrigeration systems• Amine systems (H 2 S and CO 2removal)• Dehydration units and CO 2 facilities• Modular design for fast trackingprojectsMaximizing throughput and Minimizing Operating Costs5

Wide Range of Specialty Customized Equipment• Pipeline and storage facilities• Power generation• PetrochemicalService Offering• Mechanical for gas enginecompressors and powergenerators• Construction product installation• Equipment operating businessPreferred Single Source Supplier6

Balanced and Diversified RevenueGeographic DistributionInternationalCanada28% 32%Parts &ServicesProduct DistributionRentals25%4%Fabrication40%32%US72%Pro forma2009 $1.5 BillionSignificantInternational Expansion2009 $1.5 BillionParts and Service and Rentalare Key Growth Opportunities7

Growing Order Bookings and Backlog($ millions)Enerflex (Pro Forma)1,2001,0008006004002000Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q32007 2008 2009 2010Backlog BookingsEarly Stages of Industry Recovery8

Management and GovernanceManagementBlair GoertzenPresident &CEOJamesHarbilasVice PresidentFinance & CFOStephen J. Savidant(Current Toromont Board Member)Board of Directors• Chairman Designate• Chairman ─ ProspEx Resources Ltd.• Director ─ Empire Company Limited• Former President & CEO ─ Esprit Energy Trustand Canadian Hunter ExplorationJ. Blair Goertzen • President & CEO ─ Enerflex Ltd.Carol IonelDirector,HumanResourcesGreg StewartVice President& CIORobert S. Boswell(Current Toromont Board Member)Wayne S. Hill(Current Toromont Board Member)• Director, Chairman & CEO ─ Laramie EnergyLLC• Director ─ Complete Production Services inc.• Former Chairman & CEO ─ Forest OilCorporation• Former EVP ─ Toromont Industries Ltd.JerryFraelicIvanHeideckerBillMooreH. Stanley Marshall(Current Toromont Board Member)• CEO & President ─ Fortis Inc.• Director, Chairman ─ Fortis Inc.• Director, Chairman ─ Terasen Gas Inc.• Director ─ Conference Board of CanadaPresident ,Southern U.S.President,Canada andNorthern U.S.President ,InternationalOther Directors • Additional independent members to be addedProven and Experienced Leadership9

Ivan D. HeideckerPresident, Canada &Northern United States11

Agenda• Division Overview• Equipment Manufacturing• Service Business• Integration and Rationalization Activities• Strategic Goals12

Division OverviewMarkets We ServeSpecialize in Cold Weather Applicationof Enerflex Technologies13

Division OverviewOperational ResponsibilitiesCompressionand PowerProduction andProcessingRetrofitRentalsMechanical Service14

World Class CustomersCanada15

Strategic Advantages of Merger• Broader geographicalcoverage within Canada• Combining of the Canadianand Northern USAWaukesha distributorships• Amplified market strength• Largest rental fleet inCanada• Vastly increased projectcapacity16

Equipment ManufacturingBarlow, Calgary34 th Street, CalgaryNisku, AlbertaCasper, Wyoming17

Equipment Manufacturing• Leading supplier ofcompression equipment intothe Canadian and NorthernUSA market• Enerflex has won the majorityof contracts for high-horsepower installations in theCanadian market• Proven market capabilities18

Equipment Manufacturing: Horn RiverShale Gas PlayNortheast BC Gas Pipelines & FacilitiesN.W.TNorthMaxhamishLoopSlave PointPlatformCordovaEmbaymentBCCabinABSKBovieFault SystemHorn RiverBasinFt. NelsonGas PlantCabin 0.4 Bcf/d,2.4 Bcf/d Ultimate4 th Qtr. 2011Horn River Pipeline0.6 Bcf/d Committed2 nd Qtr. 2012British ColumbiaAlbertaFt. NelsonFort McMurrayDemand RegionNorth CentralCorridorWoodenhouseMeikle RiverSpectra Energy0.8 Bcf/d CommittedGathering & ProcessingStaged In-service 2012 - 2013Ft. St. JohnTaylorMcMahonGas PlantMontney PlayMcMahonStation 2Pine RiverStation 2Dawson 0.2 Bcf/d,staged in-service2011-2013GroundbirchPine RiverGas PlantSouth Peace0.2 Bcf/dSundownGroundbirch1.1 Bcf/d4th QTR. 2010SunriseParklandTupperDawsonBritish ColumbiaSwanLakeAlbertaPouceCoupeGrowing Supply BasinsTCPL Alberta SystemSpectra EnergyGas Process PlantProposed Gas PlantCompressor StationSpectra ProjectsSouth Peace PipelineNorth Maxhamish LoopTransCanada ProjectsNorth Central CorridorGroundbirch MainlineHorn River MainlinePacific TrailPipelines19

Equipment Manufacturing: Horn RiverEnCana Cabin Gas Processing Plant• Six phase build• Awarded Phase I - a contractvalue of $80M with a deliveryof 2011• Recently awarded the solesourcecontract for the AmineModules for Phase II with acontract value of $60M• Final 4 Phases expected tocommence one per yearstarting in 201320

Equipment Manufacturing: Horn RiverSpectra Energy Gas Processing Plant• $25 M project• Awarded Phase I whichincluded 7 modules• Phase II will be awarded in 2011with remaining phases coming in2012 and 2013• Horn River very significant sourceof long term revenuesHorn River Shale Gas21

Equipment Manufacturing: Horn RiverPre-Manufactured Modules for Spectra Energy• Inlet Separation• Amine Processing• Dehydration• Dew Point Reduction• Acid Gas Injection• Vapor Recovery• Stabilizer Overheads22

Equipment Manufacturing: Horn RiverContracts Signed to Date23

Equipment Manufacturing: MontneyLarge Tight Gas PlayBritish ColumbiaAlberta• South of Horn Riverextending into Alberta• Access to infrastructure• Providing high volumes ofcompression andprocessing facilities• Liquid rich formationrequiring additionalequipment– Presents new opportunitiesHybrid&ShaleGasFarrellAltaresTalisman094B094ALow GasConcentrationConventionalMontney Gas & OilTight GasFort St. JohnSeptimusCrewParklandDawsonPouce CoupeStormMoniasARCBirchcliffSunriseTalismanGroundbirchDawson CreekPouce CoupeShellSwan LakeGlacierSouthEncanaAdvantageValhallaSundownLa GlaceTupperMurphySinclairHytheGrand Prairie093O093PLow GasConcentrationGreaterSierraExtendedDeep BasinBritishColumbiaCalgaryAlberta24

Equipment Manufacturing: MontneyContracts Signed to Date25

Equipment ManufacturingNortheast BC Production by BasinBcf/dHistoryFutureBcf/d55.25450%432.53Horn River5%1% New Play213%19%Montney23%223%BC Deep Basin8%1BC Foothills110%40% BC Plains & Jean-Marie8%002000 2005 2010 2015 2020 202526

RentalsLeader in Rental Equipment• Largest gas compression rental company in Canada• Currently have 570 units in our rental fleet generating180,000 horsepower.27

Service BusinessLargest OEM Service Provider in Canada• Canadian market leader• Largest distributor of partsfor Waukesha engines• Enerflex also distributesAltronic, Ariel, Champion,Gemini and Frick products30 Service Branches and 220 Service Vehicles28

Service Business - Central Services• Built new 55,000 sq.ft.distribution and re-manufacturingfacility in Leduc, Alberta• Central Warehouse to distributeparts to branches as required• Improve efficiencyLeduc, Alberta29

Integration• The Canadian Sales, Service,Rentals and Retrofit businesseshave been fully integrated• Calgary manufacturing,engineering and administrativepersonnel have been merged• Currently working onconsolidating our ERP systems30

Rationalization$32 Million in Annual Cost Savings Realized to Date• Eliminated 310 employee positions• Closed 10 overlapping service locations• Exited 4 manufacturing facilities• Removed 320,000 sq.ft of excess capacity byclosing 47 th Street facility• Removed 55,000 sq.ft of excess capacity byconsolidating retro-fit business• Sold Stettler and North facilities• Substantially reduced product inventories• Sold Syntech operation31

SummaryRationalization+Ongoing Cost ControlsReduce Capital Employed andCreate Additional Cost Savings32

Strategic Goals• Maximize our participation in Horn River and Montney gas plays• Continue to rationalize operations to remove overlap• Continue aggressively reducing inventories of new equipment• Sell idle equipment in our rental fleet• Maintain the leading market position• Grow contract maintenance revenue as a percentage of business• Expand capability to serve engine rebuild and exchange market33

Jerry FraelicPresident, Southern United States35

Agenda• Division Overview• Equipment Manufacturing Role• Southern and Eastern U.S. Activities• Latin America Activities• 2011 Expectations36

Division OverviewMarkets We Serve• South and East US and Latin America– Houston main location (Packaging and Service)– 4 remote sales offices– 5 remote service offices• Strategic Advantage of Merger– Tidewater Location for International– Lower Manufacturing Cost Base to SupportInternational Sales Effort– Leverage Knowledge for Field InstallationsDivision Least Affected by Merger37

Division OverviewGlobal IndustriesProducts• Special Gases and Fuel Gas Compressors(H 2 , N 2 , CO 2 , etc.)• Natural Gas Reciprocating and ScrewCompressors– Engine and electric drive– 200 to 10,000 HP• Gas Processing Equipment– Dew Point Plants– Amine Plants (CO 2 and H 2 S absorption)– Dehydration Systems (TEG and Mole Sieve)– RefrigerationNatural Gas CompressionNatural Gas Processing38

Division OverviewFabrication and Packaging• Pipeline and Storage aregenerally large HP units• Growth area as gas demandincreases and productioncomes on line in new regions• Well positioned for largehorsepower compressionunits39

Division OverviewFabrication and Packaging• Fully Integrated– Sales and Applications– Engineering– Fabrication and Packaging– Service and Merchandize• Manufacturing facilityin Houston located on30 acres of land• 22 bays for assembly• Approximately 380 peopleon site and 500 totalHouston Assembly Plant40

Division OverviewFabrication and PackagingHouston Facility41

Division Overview2010 Accomplishments• 193 modules shipped• 415,000 HP shipped• 87 percent compression• Balance process equipment• 650,000 production hours• Inventory ReductionSerialized reduced 76% or by $21.2MTypical Gas Compression Site42

Southern and Eastern U.S.Fayettevillegas fieldSale & Service LocationsFabrication PlantsShale Gas PlaysMarcellusgas field20 trillion cubicfeet ofrecoverable gas262 trillion cubicfeet ofrecoverable gasEagle FordHaynesvilleshale fieldsizeable quantitiesof oil, lean gas andrich gas250 trillion cubicfeet ofrecoverable gas• Significant focus on unconventional (shale) gas• Significant opportunities for Enerflex as gas comes online for both compression and processing• Last week Horizontal Rigs all time high in lower 48 (continued pressure on gas price)• Gas consumption running at very high rates 65 BCF• LNG import capable 18.5 BCF / actual 1.5 BCF, CDN imports down• Storage levels at all time high at 3.8TCF above 5 year average high of 3.5TCF43

Significant Customers44

Latin AmericaVenezuelaColombiaPeruChileVenezuelaBoliviaArgentina• South America 14% of contractbookings (sales organization)• Risk Management– Resellers (positive cash and before ship)– Letters of credit– US product if possible• National Oil Companies• Columbia recently active (BP)• Venezuela active (PdVSA)• Peru (PlusPetrol)45

Latin AmericaVenezuela• Second-largest natural gas reserves inWestern Hemisphere– 176 trillion cubic feet of proven reserves• Opportunities due to infrastructure issues• Supply full range of equipment:– Fuel gas compressors– Standard compression modules– Processing modules for amine and dew point– Gathering equipment– Plus all related parts and services46

ProductivityManagement InitiativesIt’s all about the PeopleQuality and Competitive PriceContinuous Improvement• Combines leadership training withprocess improvement– Correct information to correct peoplein a timely manner– Connect front-line to bottom-lineLean Manufacturing • Optimize operational efficiencyby identifying inefficiencies andeliminating wasteHSE • Health, Safety andEnvironmental Goal is 50% ofindustry averageResults are Measurable47

Outlook• Gas Compression– Revenues in U.S. markets steady– Expect higher business volumes in Latin America• Gas Processing– Expect increase across all markets• Expect continued orders for fuel gas systems• Expect increased international manufactured product• Able to expand systems & facilities to meet demanded48

Bill MoorePresident, International50

Agenda• Division Overview• Equipment Manufacturing• Regional Operations Reports• Outlook for 201151

Division OverviewSpecialized Goods and Services• Engineering Design• Equipment Fabrication• Onsite Construction• Project Management• Maintenance andOperation Services52

Division OverviewMost Active CategoriesProductionand ProcessingCompressionand PowerCombined Heatand PowerIntegratedSolutions53

Manufacturing and FabricationAustralia• New Eagle Farm reassembly facility in Brisbane• Build on and expand as required in the future• Recently opened Roma Service facility54

Manufacturing and FabricationSummary• Significant capacity to meet the manufacturing andfabrication requirements of our customers with exportof our products and through local footprint• As business volumes increase in the future, excesscapacity at our plants will be taken up as required55

Market RegionsAustralasia• Most important single region• Solid market presence• Our projects include:– Gas-gathering infrastructurefor LNG plants on Australia’snorthwest shelf– Coal-seam gas compressionsystemsfor Queensland’s local gas demandand upstream LNG development– Compression booster stationsalong most of Australia’s pipelinenetwork56

Market RegionsAustralasiaAustralia Major Basin Activity57

Market RegionsAustralasia• Global financial crisis deceleratedproject work in Australia resultingin several delays• Queensland Gas Corporationawarded Enerflex their first LNGcompression and processingorder in October– 82 modular gas compressorpackages and 3 modular TEGdehydration packages valued at$193 million– Leading edge of a major ramp-upin Australian coal seam gasproduction58

Market RegionsAustralasia• 4 multi-billion projects underdevelopment– QGC and Santos well advanced• Gorgon offshore project,booked metering station onwest coast• Epic Wullumbilla expansionbooked $30 million ofcompression installation duringthe third quarterGladstone LNGQCLNGQueenslandMajor CSG to LNG Projects1.Santos (GLNG)2.Shell (Gladstone LNG)3.Origin (APLNG)4.QGC (QCLNG)2143GLNGAPLNG59

Market RegionsAustralasiaGas Production GrowthDemand expected to double in 10 YearsPlannedLNGProjectsCarbon Driven Fuel Switching10 Year Historic Average…driven by government carbon policy and LNG export60

Market RegionsEurope/CIS• Over 2 decades of strong presencein Europe• Traditional market in the Beneluxcountries has been– Combined Heat and Power (CHP)packages– Limited growth opportunities• To grow in Europe:– Take advantage of diversity of productapplications– Strengthen service base61

Market RegionsEurope/CISGrowth strategy includes markets:• Power Generation• CHP• Natural Gas Compression• CO 2 Production• Refrigeration SystemsRijsenhout, Netherlands62

Market RegionsEurope/CIS Infrastructure InvestmentsNetherlandsconsolidated operations intoone facility in RisjenhoutUKintegrated regional salesoffice with European teamTurkeyestablished a branch office tosupport CHP plus gas compressionofferings63

Market RegionsMiddle East North Africa• Smallest share ofrevenue today• Expected to lead the worldin natural gas productionover the next 20 years• Region holds a total of2,658 trillion cubic feet ofnatural gas• 44% of world’s proven gasreserves64

Market RegionsMiddle East North AfricaMENA Production and ReservesMiddle EastNo‐OECD AsiaMiddle EastEurasia2,1702,658AfricaNo‐OECD Europe/EurasiaCentral/South AmericaUnited StatesAustralia/New ZealandOther OECDAsiaAfricaNorth America**Central/South AmericaEurope319267161539495World Total:6,609 trillion cubic feet‐5 5 150 1000 2000 3000*Graph shows change in world natural gas production and reserves by region 2010 to 2035 (Tcf)**Does not include unconventional gas reserves in North America.Source: Oil & Gas Journal65

Market RegionsMiddle East North Africa• Growth will be driven by:– LNG– Power Generation– Fertilizer– Water Desalination• Abu Dhabi office with sales,engineering and operationsmanagement• Oman reached thecommencement of our BOOMcontract for BP’s KhazzanMakarem• Awarded a $34 millioncompression order in Bahrainwith Tatweer PetroleumEgyptKuwaitBahrainQatarUAEOman66

Market RegionsInternational Clients67

Strategic Goals• Establish and implement an international strategyfor gas compression and processing equipmentincluding risk management– Australasia– MENA• Complete the pre-qualification process for turnkeyprojects– Emirates– Oman– Kuwait– Egypt– Client prospects include Gasco, BP, Kuwait OilCompany and Shell Egypt68

Strategic Goals• Australia - Queensland Gas contract– Gas compression– TEG dehydration packages– Potentially construction and installation works• Middle East - BP Oman project• Europe/CIS– Reduce our reliance on the Benelux market for CHP– Focus on other expanding European markets– Grow our presence in natural gas market throughdevelopment of sales office in Moscow69

Summary• Provision of both equipment and support servicesproduces attractive margins and forges close ties withour customers• Strategy to improve volume of higher margin businessfrom recurring revenue streams• Strong relationships lead to further business andenhances overall stability through all phases of thebusiness cycle• Risk management – geographic, customer, contracts70

ConclusionWell Positioned as a Pure Play Supplier of Natural Gasand Processing Equipment72