Enerflex Ltd.

Ladies and gentlemen, thank you for standing by, and welcome to the first quarter 2020 Interflex earnings conference call. At this time, all participant lines are in listen-only mode. After the speaker's presentation, there will be a question and answer session. To ask a question during the session, you will need to press star, then 1 on your touchtone telephone. Please be advised that today's conference may be recorded. If you require any further assistance, please press star, then 0 to reach an operator. I'd now like to hand the conference over to your speaker today, Mr. Stephen Alley, Director of Investor Relations. Please go ahead, sir.

And thanks for joining us. Here with me virtually are Mark Rossiter, Enerflex's President and Chief Executive Officer, Sanjay Bishnoi, Enerflex's Senior Vice President and Chief Financial Officer, and Ben Park, Enerflex's Vice President, Corporate Controller. During this call, we'll be providing our financial results for the three months ended March 31, 2020, a brief commentary on the performance of our three business segments, and a summary of our financial position. Today's discussion will include forward-looking statements regarding Enerflex's expectations for future performance and business prospects. Forward-looking information involves risks and uncertainties, and the stated expectations could differ materially from actual results or performance. Please see the advisory comments within our news release, MD&A, and other regulatory filings for more information on forward-looking statements and associated risk factors, including those related to potential impacts of the COVID-19 pandemic. Approximately one hour following the completion of this call, a recording will be available on our website under the Investors section. During this call, unless otherwise stated, we'll be referring to the three months ended March 31, 2020, compared to the same period of 2019. We'll proceed on the basis that you've all taken the opportunity to read yesterday's press release. I will now turn the call over to Mark.

Thanks, Stephan, and good morning, everyone. Before discussing the quarter, I want to first thank Interflex employees who have worked tirelessly to maintain a high level of operational integrity and for both Enerflex and its customers. I'm proud of their resilience, performance, and positivity in an otherwise challenging environment. Our quarter is a reflection of their strength. Enerflex's first quarter results reflected the continued execution of high margin engineered systems projects in our backlog and growing contributions from our asset ownership platform. Like most others in the sector, the COVID-19 pandemic has created much uncertainty in the market. The health and safety of our employees is of paramount importance, and I'm happy to report that we've yet to experience a COVID-19 case among all of our employees who operate across 17 countries. Each of our facilities and assets under contract continue to operate without disruption, and we remain vigilant in our health and safety efforts. We've implemented several business continuity measures to mitigate potential impacts of COVID-19. including social distancing measures to dilute personnel density in our shops and in the field, implemented additional cleaning measures for communal spaces, instituted additional PPE protocols, requiring certain people to participate in temperature checks and health questionnaires, and installed additional hand washing stations. For office employees, we've also implemented work from home strategies to minimize physical presence in our offices. Globally, The challenge we're currently seeing is around maintaining unrestricted access to active construction sites, particularly within geographies where governmental restrictions on movement are impacting site access. We have two sites in Canada that are still progressing and remain relatively unaffected, but we are more closely monitoring our international boom sites that are under construction. Our work site in Argentina was restricted for a few weeks, and we are now back on site. Similar access restrictions occurred at one of our Brazilian sites, which has slowed our progress, but which we continue to advance. Most impacted has been a site in the Middle East as a result of restrictions on in-country logistics and trucking. Overall, the three previously announced boom projects that we anticipated would commence operations through to mid-2020 are now more likely to commence operations in mid to late 2020, provided that no additional restrictions are imposed. In addition to COVID-19, the sector is also impacted by the severe downturn in oil prices. Typically, our business lags commodity price action and associated impacts at the drill bit by four to six months. We are still in the early stages of assessing adverse impacts from this downturn. That said, while we had a relatively healthy first quarter, we've seen continued pressure on engineered systems business in North America, where the big pipeline is not as strong as what we were seeing two months ago. Earlier in the year, we were cautiously optimistic that we would see an improvement in bookings as the year progressed, but that sentiment has changed in lockstep with current macro picture for energy. As a result, we expect Engineer Systems in Canada to be very quiet, while the USA will also be slow, but somewhat better. Ultimately, Engineer Systems is a business that is tied to the CapEx of our customers. So with reductions across the space, we expect this business to be pressured for at least the remainder of this year and until we see an improving supply and demand picture for oil and gas. For our global asset ownership platform, revenues and utilization were strong during the quarter, and we entered 2020 with a healthy demand indicators for the U.S. and the rest of the world regions. In the USA, clients' demand signals were tempered as the macro picture deteriorated. Consequently, we anticipated a reduction in that demand and halted capital spending appropriately. This decision prioritized balance sheet strength during a time of great uncertainty. As the macro picture remains uncertain, our teams have been actively engaging with customers to gain visibility on how fleet utilization might change going forward. In the current commodity price environment, rentals will see pressure as oil wells are shut in and associated gas volumes are reduced. The positive is that our rental fleet is mostly fungible and can be directed towards gas play and cost-advantaged shale basins throughout the U.S. and the rest of world regions. LATAM and MEA have a different set of drivers. In LATAM, many of our natural gas projects and assets are focused on domestic electricity demand and are not directly correlated to Brent or WTI crude pricing. Similarly, Middle East projects are developed by customers mostly NOCs and IOCs, specifically to increase the role of natural gas in regional electricity generation. Our clients continue to indicate that our natural gas projects and assets are critical to their overall development plans. The investments we made in our asset ownership platform are sound and will continue adding stability and predictability to our financial profile. But the current macro picture has driven the industry into uncharted waters, and we would be remiss to speculate as to what the ultimate ramifications to our rental business could be. We will instead focus our efforts on what we can control, taking action to protect returns on our investments, maintain customer relationships, preserve fleet utilization, and keep our customers' assets performing as promised, all of which can assist in mitigating pressure to our asset ownership business. Aftermarket service, AMS for short, has performed well for the past several quarters, and has been resilient in the early stages of the pandemic. AMS is an OPEX-oriented business and will be most impacted by production shut-ins. If wells are flowing, equipment needs to be serviced to run reliably. We have service personnel in all major basins in North America and all of our operating regions globally. This diversification should provide defensiveness through the remainder of the year. The current operating environment has created challenges the likes of which few industry participants have seen. It will be a difficult year for the engineered systems business, and the demand destruction for crude oil has created uncertainties for other Enerflex products and services. We expect 2020's financial performance to be underpinned by our asset ownership and AMS businesses, both of which may see some pressure, but which we anticipate will carry us through this downturn. Our focus is to maintain a defensive balance sheet as we navigate the cycle. We've run several analyses to plan for a broad range of industry activity and will continue to monitor and make cost reduction decisions accordingly. Being proactive in this regard should keep us well positioned to weather this downturn and succeed as the industry recovers. I will now turn things over to Sanjay to review our financial results. Thanks, Mark.