Dale Dusterhoft - President and Chief Executive Officer Mike Baldwin - Senior Vice President of Finance and Chief Financial Officer

Sean Meakim - JPMorgan Mike Mazar - BMO Capital Markets Scott Treadwell - TD Securities Jon Morrison - CIBC World Markets Ian Gillies - First Energy Jeff Fetterly - Peters & Co

Thank you very much. Good morning, ladies and gentlemen.

I would like to thank you for attending the Trican Well Service conference call for the first quarter of 2016. Here is a brief outline of how we intend to conduct the call.

First of all, Mike Baldwin, our Senior Vice President of Finance and CFO, will give an overview of the quarterly results. I will then address issues around current operating conditions and near-term outlook.

We will then open the call up for questions. Joining us today, and also available to address questions is Jason Cockerill, our Senior Finance Director and Treasury.

I would now like to turn the call over to Mr. Baldwin to discuss the overview of the financial results.

Thanks, Dale. Before we begin, I would like to point out that this conference call may contain forward-looking statements and other information based on current expectations or results for the company.

Certain material factors or assumptions were applied in drawing a conclusion or making a forecast or a projection, as reflected in the forward-looking Information. A number of business risks and uncertainties could cause the actual results to differ materially from these forward-looking statements and financial outlook.

These risks and uncertainties include, but are not limited to, fluctuating prices for crude oil and natural gas, changes in drilling activity, general global economic, political and business conditions, weather conditions, regulatory changes, the successful exploitation and integration of technology, customer acceptance of technology, success in obtaining issued patents, the potential development of competing technologies by market competitors, and availability of products qualified personnel, manufacturing capacity, and raw materials. Among the risks are the ability of the oil and gas companies to finance their operations and other unforeseen factors.

Please refer to our 2015 Annual Information Form dated March 29, 2016 for a more complete description of business risks and uncertainties facing Trican. Our first quarter results were released yesterday, and are available on our website at www.tricanwellservice.com.

Please note that the comparatives to fourth quarter 2015 are for our continuing operations, and we have backed out the discontinued and disposed portions of our business. As noted in our press release, consolidated revenue for the first quarter of 2016 was $111.8 million, a decrease of 34% compared to the fourth quarter of 2015.

The adjusted operating loss was $16.8 million, and adjusted diluted loss per share was $0.21, compared to an adjusted operating income of $1.5 million, and adjusted diluted loss per share of $0.43 in the fourth quarter. Funds used in operations were $37.1 million, compared to $62.7 million for the fourth quarter of 2015.

Canadian revenue in the first quarter of 2016 decreased by 36% compared to the fourth quarter of 2015, largely due to a decrease in pricing combined with a significant drop in activity that was pronounced in March. The job count decreased by 15% sequentially, as continued reductions in capital spending and an early spring breakup lead to a decline in the number of jobs completed.

We continue to have 35% of our equipment idle during the quarter. Utilization was choppy on the remaining operational equipment during the quarter, which affected profitability, as we would have one week of full utilization followed by a week of low utilization.

Utilization in March dropped to 25% as breakup conditions limited work in this month. Revenue per job also decreased 26% sequentially due to a higher proportion of smaller cement jobs and an average decline in pricing of approximately 6%.

The adjusted Canadian operating loss for the first quarter was $8.7 million as compared to an adjusted operating income of $11.5 million for the fourth quarter of 2015. The reduction in profitability is a result of lower activity levels and demand for our services, combined with decreased pricing resulting in a decrease in operating leverage on our fixed cost structure.

Canadian margins have also been negatively impacted by costs in the first quarter of 2016, such as severance-related workforce reductions, while repairs and maintenance spending was not significantly lowered as we continue to keep our equipment in good working order, and have not scavenged equipment during the downturn. Our Canadian region continued to focus on reducing costs and have significantly adjusted its cost structure during March and April.

We estimate the Canadian operations variable costs will be reduced between 6 to 8 percentage points of revenue during the remainder of the year. The Canadian operations fixed cost structure has also been reduced, with an estimated reduction in these costs of between $20 million and $25 million for the remainder of the year.

These cost savings are largely driven by a 30% reduction in headcount, reductions to employee compensation and benefits, expected reductions in product and chemical pricing, product substitution, and a reduction in repairs and maintenance expenses. Employee compensation has been reduced by implementing salary rollbacks across the board during the second quarter, the implementation of a dayrate structure and reductions in bonuses.

Current second quarter activity is poor, and our visibility on activity post spring breakup remains limited, however we believe we have taken the appropriate steps to reduce our Q2 cost structure as much as possible, and we are currently evaluating whether post breakup activity levels and revenue are sufficient to justify the current cost structure, or whether further cost reductions are necessary. Management is committed to ensuring our cost structure matches the near-term level of activity in the field, in order to return to profitability post spring breakup.

Following the sale of our U.S. pressure pumping business late in the first quarter, our remaining U.S.

operations now only include our completions business. U.S.

operations revenue decreased 21% on a sequential basis and our U.S. operations continued to reduce its operating loss by an additional $1.3 million compared to the fourth quarter of 2015, and posted a small loss of $125,000.

Management expects the financial results of the U.S. completions operations to continue to gradually improve during the remainder of the year, as a result of the adjusted cost structure implemented during the first quarter, and modestly improving outlook for the remainder of the year.

Our international operations include financial results for our Russian and Norwegian completion tools businesses. All other international businesses have been ceased, and are now considered discontinued operations as management has committed to sell its operating assets in each of Saudi Arabia, Kazakhstan and Colombia.

International revenue increased by 14% sequentially, as key customers increased work plans primarily in Russia. Activity in the Norwegian and Russian completion tools markets remain solid relative to activity levels experienced in North America.

As a result, the international segments operating income margin was 13% during the first quarter. Activity levels for the Norwegian and Russian completion tools business is expected to modestly increase during the remainder of the year, as our customers have provided us with reasonable visibility on their work scope for the second and third quarters.

Corporate expenses for Q1 2016 were $1.5 million higher relative to the fourth quarter of 2015, largely as a result of higher share unit costs due to the increase in our share price, combined with mark to market accounting for this share-based compensation. Corporate expenses excluding the impact of share-based compensation expenses are expected to be reduced by $2 million per quarter relative to Q1 2016 primarily as a result of headcount reductions and a meaningful reduction in IT expenses.

Management continues to review the corporate costs relative to the company's transformation to a largely Canadian based company, from a company that operated in many foreign jurisdictions. Additional corporate cost savings are expected, however some costs, such as public company expenses are more difficult to reduce in the near-term.

We ended the first quarter with approximately $110 million of cash and available debt. Managing cash flow and strengthening our balance sheet has been a primary focus for Trican for over a year now, and we will continue to focus on this for the duration of this downturn.

Capital expenditures for the first three months of 2016 totaled $200,000, compared with $6.6 million for the first quarter of 2015. With the decline in commodity prices and North American demand, capital expenditures will be kept to a bare minimum until operating conditions improve.

A substantial amount of equipment is expected to remain parked throughout 2016, which is expected to meaningfully reduce the amount of repairs and maintenance expenses and capital expenditures required during 2016. Additionally, capital expansion initiatives will not be considered during the current economic environment in order to preserve current liquidity levels.

Based on existing commitments, spending on capital projects is currently limited, and expected to be funded primarily through cash flow from operations on our revolving credit facility. Trican regularly reviews its capital equipment requirements, and will continue to follow its policy of adjusting the capital budget on a quarterly basis, to reflect changing operating conditions and capital equipment needs.

As announced on March 16, 2016, we successfully closed the sale of our U.S. pressure pumping business to the Keane Group.

The transaction involved the sale of all pressure pumping and select related assets and the assumption of certain liabilities of Trican Well Service LP for proceeds of US$200 million, along with a 10% ownership interest in the Keane Group Holdings LLC. Trican will also receive certain economic interests in Keane that represent an additional 20% economic participation above certain thresholds upon a Keane liquidity event.

We applied the net cash proceeds from this transaction to further reduce outstanding debt, paying down our revolver and senior notes on a pro-rata basis. Trican has been dedicated to reducing our debt levels throughout this downturn, and after the application of the U.S.

sale proceeds, our outstanding net debt balance is approximately $240 million as at March 31, 2016. As mentioned previously, we do not have debt covenants in place during the first and second quarters of 2016.

Commencing in Q3 2016 an interest coverage covenant of 2 times, and a leverage ratio covenant of 5 times will be in place, but calculated on an annualized basis until the end of Q1 2017. We continue to believe that our reduced cost structure and focus on profitability, along with the recent amendment to our debt agreements and our reduced debt levels, put the company in a solid financial position to endure this downturn and come out the other side as stronger company.

I will now turn the call over to Dale, who will be providing comments on operating conditions and strategic outlook.

Thanks, Mike. As commodity prices dropped in early 2016, the Canadian rig count also dropped about 45% to 50% in the quarter, which resulted in choppy utilization and a very slow March as customers reduced programs.

Pricing also fell further than anticipated, resulting in EBITDA margins below expectations, as costs could not be reduced quick enough to adjust to the lower activity experienced. Rig count has remained low in Canada, and is currently 51% below 2015 levels, and 70% below the five-year average.

Activity in Canada will remain low – remain at very low levels during this quarter until the seasonal recovery takes place, and we start moving out of breakup. As a result, Q2 revenue is expected to be down on a year-over-year basis.

Operating income, however, is anticipated to be improved year-over-year, due to the efforts of cost controls in all aspects of our business. We anticipate third quarter activity to improve from second quarter levels, but be lower year-over-year, as we believe the rig count will be about half of that seen in Q3 2015.

Similar to previous years, we expect an increase in fracturing in the third quarter from wells completed in the summer that were drilled in the winter, which will result in our revenue dropping less than the rig count. As a result of this increased fracturing activity, and compared to the slow March and early breakup which affected our first quarter, we expect Q3 revenues to be better than that seen in the first quarter, and be down about 35% year-over-year.

Our customer base has remained strong, and some of our core customers have indicated that although they're cutting back from last year's levels, they are still running strong programs in the second half of the year, as they have had hedged some gas, and are anticipating an improvement in oil prices as the year progresses. We do not yet have good visibility on the remainder of our customer base, and anticipate that they will finalize their programs after their current board meetings are completed.

Overall the recent movement in oil prices has resulted in more positive discussions with our customers about increased programs in 2017, which is encouraging. Saying this, we believe it will take a few quarters for the majority of our customers to increase drilling completion spending, and we are planning on a slow second half of this year, and our right-sizing our operations, and reducing costs to reflect this.

We have parked additional equipment this quarter, and plan on having about 50% of our equipment parked for the remainder of the year. We are not seeing additional pricing pressure at this time, and we believe that pricing has gone as low as it can be in our sector.

Pricing is anticipated to improve from that seen in the second quarter, and return back to Q1 levels. We will focus on cost reduction going into the second half of the year, and reduce costs substantially in the second quarter.

We have closed two locations, reduced staff to match activity levels, and have implemented Q2 salary reductions and switched our field staff from below the supervisor level to a variable pay system. Switched to variable labor for the majority of our field people will cushion us in fluctuations in activity levels, if we experience utilization that is choppy or under our expectations.

Saying that the key to profitability in this low-price environment is to correctly size our operations to the anticipated activity levels, and running close to full utilization on the equipment that we are operating. We will continue to review our operations and appropriately size our Canadian operations if we see variations in our planned work scale.

We have also made additional progress on reducing our supply chain costs, partially due to improvements in the Canadian dollar, partially due to lowering costs, and the introduction of some new lower cost products developed in our research center. We will continue to work on reducing our spend in this area.

We are confident that these cost reductions combined with our forecasted revenue during the quarter will result in us being able to meet our EBITDA targets during the third quarter and into the second half of the year. Our completion tools business in the U.S., Norway and Russia have become our primary international operation since the sale of our Russian pressure pumping business in the third quarter of 2015.

Both the Norwegian and Russian completion tools business are anticipated to see moderate growth in 2016 as we continue to grow market share in these regions. Our North American completion tool business has remained strong in the U.S.

from a market share perspective and combined with the cost controls already established is anticipated to have improved year-over-year results. We will continue to work on improving the profitability from our Canadian completion tool business.

We are now primarily a Canadian focused company and are rightsizing our infrastructure and corporate costs to fit the size of our company going forward. Our main focus in the near term will be to continue to reduce costs, increase profitability, and manage our debt levels and are committed to staying on side of our amended debt covenants.

This downturn has been sharper and deeper and more prolonged than previous ones. We have however been very proactive in our actions to manage through this downturn, including fixing our balance sheet and positioning the remaining part of our company to generate good operating income in a low activity environment.

We remain confident in our ability to execute on the strategy needed to manage through this downturn and expect to emerge as a stronger organization with a low cost structure, which will position us to generate significant margins once a recovery takes place. As we announced on our last call, Don Luft, our President and COO, has decided to retire from the company.

Don has been with us since inception, and has been a key contributor to the growth of Trican over the last nineteen and a half years. We wish to thank Don, and wish him and Rose all the best as he enters a new phase of his life.

I would also like to thank all of our employees who have reduced their compensation, and have worked extraordinarily hard to position Trican to ride out this downturn, and be very successful coming out of it. I thank you for your attention today and your interest in Trican, and I would like to turn the call over to the operator for any questions.

Hi, good morning.

Hi, Sean.

Dale, you noted in your prepared remarks an expectation from on the part of your customers for better oil price in the second half, a good amount of hedging on the gas side you said. Just curious how much flex you think you could see in terms of activity in the second half depending on commodity prices.

And how responsive activity would be in the second half to changes in the commodity prices?

Yes. Right now we think Q3 is still going to be pretty muted, so I don’t think you will see a lot of spending transferred into Q3.

As I indicated we have a couple of our core customers that are actually trying to finalize their programs and they're healthy programs for this environment, they're down year-over-year, but they're not down near to the extent where we believe the rig count will be down. And so we have a couple of customers there, but I think the majority of the customers are still going to have pretty slow Q3 programs as they kind of get better visibility on where commodity prices are going.

The discussions we have had with our customers in relation to the improvement in commodity prices, I would say right now are more to late 2016 going into early 2017. So our view is that we may see a little bit of an improvement in Q4, but we're not really planning on it at this present time, so it's more of a 2017 event than it is a 2016.

In terms of flex, it is a little hard to say. I don't think our customers have that defined yet.

They are just kind of monitoring things right now. They're encouraged by what they have seen on oil prices in particular.

We don't think the spot on gas has been that encouraged, but the oil price movement has encouraged, but no one wants to get [hedges] right now, and in some cases they're waiting to put a little bit of cash on the balance sheet, and a few other things too, before they start commit to go spending.

Understood. And that makes sense.

And then just you laid out in pretty good detail how you plan to make sure that you're within your covenants for the second half. I guess if we were to see perhaps retransferring the commodity price, let’s say things get tougher in the second half than you anticipate, just curious how you view the options available to you if there is some form of relief that ends up being required again?

Right. Yes.

So I think that kind of consistent with what we have said is we will continue to work on the cost control side of it, if we see a scale down in activity to make sure we keep our EBITDA margins up. I think we still have some levers to pull on that side and in particular around rightsizing our equipment base and making sure that we can run high utilization on it, because we know our pricing.

We know our pricing is going to shakeout during the quarter. We are far enough into some discussions there.

So it's just a matter of kind of adjusting your cost structure around that. So I think that gives is some comfort that we will be able to generate enough EBITDA to get through the quarter.

We will continue to look at de-levering our balance sheet in any way we can. We basically do have the Kazakhstan, Saudi assets still for sale, a little bit more of the Colombia stuff has to be sold, so we will continue to work on executing upon those in the near term.

And as everyone knows, we do have an equity option. It's not something that we want to undertake but it's available to us if we need it.

Fair enough. Yes.

Thank you for all the detail, Dale.

Sure. Thank you.

Hey. Good morning guys.

Just kind of on a high level here how would you characterize the level of interaction between yourselves and your new major shareholder? And is there any kind of color you can give us, as far as what your belief or expectations are, as far as what their plans are, as far as working together as the company goes forward?

Sure, Mike. Yes.

Good relationship with the Wilkes Brothers, that's who you are referring to. We talked to them really at our initialization as much as anything.

They're a strong supporter of Trican. They have bought Trican for investment purposes and I would say that they are very supportive of what we have done to date in our business and believe that they're going to get a substantial return on their investment and that's basically - it's a strong relationship that we have with them.

Okay. And any desire for them to have Board seat as far as you're concerned or have they not approached you about that?

We haven't had any discussions in relation to that. I think being blocked out as much as our Board is, is always an issue so.

True. That's all I had really.

Thanks.

Thanks. Good morning guys.

I wanted to follow-up on Mike's question little bit. By the terms of the sale are there any restrictions on Trican's ability to further sell on the noncash interest you received in Keane as part of that deal?

Sorry. To further what, Scott?

I lost you there.

Can you guys turnaround and sell your 10% interest in Keane and the associated options with it without restriction or is there a Rofer, or some sort of hold period involved with that?

Hey Scott, it's Mike. Yes, there are some reductions that I think are customary for an agreement like that.

I think we do have some ability to sell that if necessary, but it likely look would be back to Keane more so than anywhere else at this stage. So yes, there are some restrictions that are pretty typical for an agreement like that.

Okay. Perfect.

The second one for me without maybe spelling it out too much, can you just give me a sense of how much of the U.S. tool business is driven by activity levels with what is now Keane, and how much of it is with say other third parties?

Yes. It's pretty well all other third parties.

So that business isn't tied to Deane's business. They certainly look at deploying it when they can, but Keane also has a perforating division and plug and perf division that they run primarily with their frac crews, so just about, well, I would say all of that tool business is tied to Keane.

Okay. Okay.

Perfect. Last one for me.

Mike, I just want to make sure that the notes that came due at the end of April, those were fully retired as per the terms?

Yes.

Perfect. That's all I have got, guys.

Appreciate the color.

Thanks, Scott.

Morning all. I was surprised at the level of color that you guys gave around Q3, and can you give any color around what gives you the belief that industry pricing will ultimately be higher in Q3 than it was in Q1?

And why utilization should drive up Q3 over Q1?

Yes. Sorry.

Just to clarify what we said is Q3 pricing improves over Q2, but it will be consistent with Q1, and so just so it's clear on that. And the reason for that is we give special pricing in Q2 to drive additional volume in Q2, and so that's why we see a drop in Q2, and Q3 pricing being consistent with Q1 is where we're pricing our work going into the quarter, so that's why we believe we're not seeing any further degradation.

That combined with the fact that I think prices are at a level that's unsustainable in our sector to take any more hits. And I believe that our competitors and us all feel like that, that there really isn't any more to give as you saw from our results, we're negative EBITDA and I think a lot of our competitors are having tough quarters as well, and there just isn't a lot there.

So that's a big reason why we don't believe we're going to see a lot of degradation on pricing. In terms of the revenue drop, that is in discussions with our customers.

Some of it is a little farther along than others. Combined with the fact that we do see, there are a number of wells that were drilled in the winter that are going to get completed in the summer, and so you can combine that with sort of the broad level discussions with our customers, and that's why we anticipate revenue to be where we think it is, and the qualifier of that is that these are not all finalized plans yet.

There's just a few that are starting to finalize. So we still need to see finalized plans in the next month or two, before we get really confident on those numbers.

Can you give any sense of what the seasonal discounts are that are being given in Q2 at this point relative to Q1?

Yes. They would be 2 percentage point to 3 percentage points that kind of range.

Okay. What type of operating or field margin would you need to see on work being bid in the future to ultimately reactivate equipment and put crews back to work?

Yes. I think we're at a level that we need to see some pretty substantial margin improvement now, so in the mid-teens or key customers coming to us with an increased program that you know you are going to get there.

You have some visibility that you're coming out of this, or overall if we just start seeing some visibility that the industry is starting to improve, you may put it on little bit earlier than that, but if you just looked at it from an EBITDA percentage you want to be above 15% before you start adding equipment back in the market.

Okay. Mike, how confident are you in the value being given to Keane Group at this point, just given the size of the losses that were realized in the quarter?

You mean the valuation that we have on our balance sheet for the Keane Group?

Yes. Exactly.

The $78 million.

It's very difficult to put a value on it. The accounting rules require us to what's called fair value the investment.

Typically with fair valuing, you want to be able to point to public market comps. So if it was an investment in a public company, it's very easy to do because you have got a share price and that type of thing.

When you're dealing with a private company, it becomes a lot more difficult and I would say that there's probably a lot more art than science in that valuation. That being said, taking a look at it and all of the work that we did throughout the transaction as well as the work post-transaction to fair value that, I feel pretty comfortable that's a reasonable valuation for the Keane Group.

And I think the other point that you need to understand is that we now own 10% of their company as well, and I would generally say the financial performance of their company relative to ours in 2015 and Q1 of 2016 was probably quite a bit better than what we put up.

Okay. Do your covenants that kick-in in Q3 and Q4 allow you to used adjusted numbers, or is it simply headline numbers that we should take into consideration?

We tried to get the adjusted numbers to be as close to the what the debt covenant calculations would be. So those are good benchmarks to use what we are required to use for the calculation for debt covenants.

Okay. Are you comfortable with the carrying value on all your discontinued operations, and is there any reason to believe that ultimately selling those in the next three to four quarters wouldn't be feasible?

In this market selling things is obviously very difficult, so it's difficult to say exactly what we get for it. I think the net assets held for sale, so you take the assets and liabilities that are held for sale, $10 million, it is a pretty low number now.

Based on again work that we have done and the knowledge that we have we feel comfortable and confident with that valuation, but it's frankly an ugly market, so time will tell, but the fact that the number is pretty low, you get dramatically different numbers. Not so sure we would.

I think if we were looking at something like that where we were going to get dramatically low numbers, we would probably consider not selling them at this stage, but would just have those assets parked but wouldn't operate them, and basically the majority of them are already in that state any way. So our optionality really is can we sell them for a price that is close to what is carried on the books or maybe slightly higher versus just completely parking them.

Okay. Last one from me, Dale, just a point of clarification.

In the release you talked about expectation for higher utilization in Q3 over Q1. Is that reflective of having a larger degree of assets parked, or you think absolute activity levels might be a touch higher in Q3 than Q1?

I think that both, so we he parked more equipment, and then you don't, March was brutal, in terms of activity levels our utilization level was in the 25% range, and so we don't anticipate having another month like that in Q3. So on a full quarter basis, it's absolute activity up as well as just higher utilization of what we have left.

Okay. Appreciate the color.

I'll turn it back.

Okay. Thanks.

Good Morning guys.

Hi, Ian.

Are you able to provide a sense of what you think the drilled and uncompleted count may be in Canada this year compared to last year, and whether I guess, and how that is affecting your optimism for Q3 at this point?

Yes. I don't have a comparison actually compared to last year.

I think it's - my gut feel is that it's very similar to last year. I have heard stories or maybe not stories is the right thing.

I have heard some conversation that it might be a bit higher with some customers, but you really don't have any facts to back that up at this point in time.

Okay. And with respect to the cost cutting initiatives, I mean if we were to apply some of those cost savings to the results you just reported in Q1, do you think you're operating margins could have, would they have been higher than breakeven?

Do you think they possibly would have been as high as high single digits?

Yes, I do. I think they definitely would be higher than breakeven.

I think the ballpark that you're talking about makes sense to me.

Okay. Thanks guys.

That's all I have.

Good afternoon guys. This is Wes filling in for Greg Colman this morning.

Thanks for taking the questions. Just had a quick question.

I have noticed last couple quarters we have seen some earlier payments on the senior notes and the revolving credit facility. It looks like right now there's about $195 million Canadian still outstanding on the senior notes.

To what extent do you expect early pre-payment on the remaining senior notes over the next coming years, or is the maturity profile something that we can rely on?

At this stage you can rely on that maturity profile. We obviously had some senior notes that came due in April 28, so a few days ago that we repaid which was scheduled, and that's based on obviously the revised amounts.

We don't have any plans at this stage to pre-pay the notes further, and obviously with the revolver as our cash flow goes up and down, the revolver will go up and down because if we have excess cash, we sweep it to the revolver generally. So you will see some movement in the revolver but in the notes at this stage we don't have any plans to pre-pay anything.

Okay. That $16 million of the current portion of debt, would that be sort of the second traunch of that revolver payment which you guys have sort of indicated in the Annual Information Form that would be put against the revolver maybe in the second quarter?

Yes. So that amount represents the notes that were due and that we paid a few days ago at the end of April.

Okay.

So the way that you should think of it is that the notes get paid down by that amount but the revolver would largely have gone up. There would have been some cash applied to that as well so it wouldn't be a perfect one-to-one, but a large portion of that payment of the notes would have been drawn on the revolver.

Okay. Understand.

Another quick question for you guys. Trying to firm up on our covenant forecast here, looks like you guys had suggested that pricing you expect to be roughly equivalent to Q1, activity levels will pick up a little bit but kind of embedded in that forecast is from continuation operations like positive EBITDA in the $5 million to $7 million range in Q3, you annualized that it brings you to roughly $20 million.

Aside from I recognize that you gets the add-backs for the discontinued operations in the capital calculation, but can you walk through some of the key underlying assumptions that allow you to feel comfortable upholding the covenants when they are reinstated in the third quarter?

Yes. I think the first comment is, I mean these are forecasts, so putting an exact number on the forecasts is almost near impossible.

I am sure as an analyst in this business you understand that pretty well. So I think you really have to take a look at it from a range perspective.

A lot of the guidance that we have given on our operating results, in relation to pricing and activity levels and cost reductions really is the guidance that we can provide to indicate where we think our numbers are going to come out. So as a result of all of those factors that we have already gone through in pretty heavy detail in our press release as well as on the conference call, we think that we do get to a stage along with the add-backs that you have mentioned, that do marginally pass the covenant levels.

Obviously when you're in a situation like this and you're dealing with a forecast, you can't have absolute confidence that it will pass, because the numbers are just too tight. But given the way we see things playing out, we do believe we will pass and we will continue to monitor our financial results as well as take a look at what other options we have to be able to pass those covenants.

And as Dale mentioned, we have a few more levers that potentially could come into play most notably the equity cure if necessary, and just to emphasize that point we have no plans at this point in time to exercise that, but that is a lever that we always have in place to pull, which could also help pass those covenants. So I think where we get confident is not so much necessarily in the forecast numbers and saying with absolute certainty we can pass those, but in the number of other levers that we have give us some cushion that we can play with.

Understood. That's it for me.

Thanks a lot.

Thank you.

Morning, guys. Some clarifications building off of some of the previous questions.

So just trying to understand the cost reduction measures and the go forward impact. In terms of the corporate segment, do you have a feel for what run-rate in that component is going to look like pro forma all of these changes going forward?

Yes. I mean as mentioned previously, I think what you can do is you can take the adjusted operating income that we disclosed in the Q1 results, and then knock those costs down by about $2 million, and that's kind of the run-rate.

The real wild card in those corporate numbers is that is where the bulk of our share-based compensation expense occurs, and those represent our season that type of thing, which are mark-to-market accounting. So you have to have a prediction of what our share price is going to do through the quarter to be able to nail down what that cost can be.

I think in Q1 we saw that hit our books by about $1.5 million. At this stage that's a noncash based entry.

It does get paid at the end, a third, a third, a third as the RSUs [ph] vest, but it's still a significant thing in that creates some volatility in the corporate expenses that is difficult to predict.

Just to clarify, so the $8.9 million adjusted operating loss that you reported in Q1 take $2 million off of that is a good estimate?

Yes. That's a good estimate, yes.

Okay. You talked about minimal capital spending going forward.

Can you better define what minimal might look like?

We spent about $200,000 in Q1 and I don't expect it to be significantly higher than that.

For quarter going forward?

That's right.

So how do you think about equipment obsolescence and cannibalization, given you're spending less than $1 million this year?

The vast majority of our equipment repairs are in the R&M budget on our P&L, so we just don't have a lot of big repairs. Our big costs items that go through that, on the capital cost side of it, plus we have got some stuff in inventory that we are trying to use up, and trying to manage our inventory as much as possible.

So you combine that all together, and that's one of the bit reasons why we can keep our capital costs as low as we can.

So your comment earlier about being able to reactivate equipment quickly if you saw associated demand in economics, do you have a feel for how much capital would be required either in terms of investment directly in equipment, or investment in working capital, given as you said you're drawing down on it today?

No. I don't have an estimated number for that.

When we do park equipment, we're not scavenging equipment, but we are not going to completely fix a unit, and then park it against the fence. So there are some units that we parked that have some repairs, but the repairs are relatively minor.

They're not major things where you're missing big motors or pumps or fluid ends or power ends or radiators, or things like that. For the most part there's some R&M that has to go into restoring equipment.

Some R&M even on the stuff that was parked operating, that has to go into getting it back up to speed, but I don't really have a firm number on that, Jeff. That's something that we have some internal ideas on, but we need to finalize that.

Okay. But safe to say that's not a number that's likely in the tens of millions?

That is correct.

Okay. Based on the forecast commentary that you have put out, what do you expect in terms of working capital specifically, do you expect to be able to pull some more working capital off the balance sheet this year?

Yes. We expect to pull some, a little bit more, but I think you will see that come more in Q2, and then Q3 with activity levels and the business getting back busy again, you will probably see that build come back.

So I think for the most part once, you will see some of that seasonality between Q2 and Q3, but for the most part it should stay pretty flat.

Okay. Dale, your comment earlier about the threshold to reactivate equipment, when you say a 15% EBITDA margin, is that call it the operating margin you report for the Canadian business?

Yes.

So is it safe to assume then if you have idled incremental capacity in Q2, your assumption for the second half of the year is that operating margins in Canada will be lower than that 15% threshold?

Yes.

Okay. So I guess it comes back to some of the previous questions.

Your margin for error the context of the existing covenants is to put it mildly, razor thin?

Yes. I think that as Mike alluded to, I don't know if razor is the right word, but yes.

It is tight. Absolutely.

Okay. Great.

Thank you, guys. Appreciate the clarity.

Okay.

Yes. Thank you very much for your interest in Trican today.

We appreciate talking to you, and look forward to talking to you again in mid-summer after our second quarter call. Thank you.