EPS Beat / Poised for Aggressive Expansion

Following a $7M bought-deal financing in Q1, debt/capital decreased 11 pp QoQ to 45%. CAPEX increased 84% YoY to $5M, driven by heightened client demand necessitating new equipment purchases. The company is building a new facility in Fort St. John, B.C., for equipment storage and maintenance, as part of its expansion efforts in the province. Per consensus estimates, growth in North American oil and gas CAPEX will ease to 2.2% in 2024, down from 19% in 2023, driven by slower GDP growth, and higher lending rates. We believe the company's expanded rental equipment fleet will help mitigate the sector-wide slowdown. We anticipate 13% revenue growth in 2024 (unchanged) vs 25% in 2023.

Price and Volume (1-year)

YTD 12M E <td style="border-width: 1px; border-style: solid; border-color: #cccccc #000000 #000000 #cccccc; border-image: initial; overflow: hidden; padding: 2px 3px; vertical-align: bottom; background-color: #ededed; font-family: Manrope; font-size: 11pt; font-weight: normal; text-align: center;" data-sheets-value="{&quot;1&quot;:3,&quot;3&quot;:0.63}" data-sheets-numberformat="{&quot;1&quot;:3,&quot;2&quot;:&quot;0%&quot;,&quot;3&quot;:1}">63% <td style="border-width: 1px; border-style: solid; border-color: #cccccc #000000 #000000 #cccccc; border-image: initial; overflow: hidden; padding: 2px 3px; vertical-align: bottom; background-color: #ededed; font-family: Manrope; font-size: 11pt; font-weight: normal; text-align: center;" data-sheets-value="{&quot;1&quot;:3,&quot;3&quot;:2.02}" data-sheets-numberformat="{&quot;1&quot;:3,&quot;2&quot;:&quot;0%&quot;,&quot;3&quot;:1}">202% TSX <td style="border-width: 1px; border-style: solid; border-color: #cccccc #000000 #000000 #cccccc; border-image: initial; overflow: hidden; padding: 2px 3px; vertical-align: bottom; background-color: #ededed; font-family: Manrope; font-size: 11pt; font-weight: normal; text-align: center;" data-sheets-value="{&quot;1&quot;:3,&quot;3&quot;:0.07}" data-sheets-numberformat="{&quot;1&quot;:3,&quot;2&quot;:&quot;0%&quot;,&quot;3&quot;:1}">7% <td style="border-width: 1px; border-style: solid; border-color: #cccccc #000000 #000000 #cccccc; border-image: initial; overflow: hidden; padding: 2px 3px; vertical-align: bottom; background-color: #ededed; font-family: Manrope; font-size: 11pt; font-weight: normal; text-align: center;" data-sheets-value="{&quot;1&quot;:3,&quot;3&quot;:0.09}" data-sheets-numberformat="{&quot;1&quot;:3,&quot;2&quot;:&quot;0%&quot;,&quot;3&quot;:1}">9% *See important disclosures at the bottom of this report rating and risk definitions. All figures in US$ unless otherwise specified.

Enterprise vs Larger Players E is up 202% YoY, and is the best performing stock on our list of oilfield services companies

Gross margins are higher than the sector average, while debt/capital is lower

In 2024, we anticipate E&rsquo;s revenue will grow by 13%, outpacing sector growth by 2 pp

Financials Gross margins improved by 5 pp YoY, and were 2 pp higher than our estimate

*Sector: Oil &amp; Gas Machinery Rental and Leasing. Source: FRC / Company

G&amp;A expenses were down 28% YoY, and 15% lower than our estimate, primarily due to reduced employee bonuses

EPS was up 42% YoY, beating our estimate by 6% . CAPEX increased 84% YoY to $5M, driven by heightened client demand necessitating new equipment purchases

Following a $7M bought-deal financing in Q1, debt/capital decreased 11 pp QoQ to 45%. Can raise up to $5.93M from in-the-money options and warrants

Oil &amp; Gas Price Outlook Consensus price forecasts (near and long-term) are well above historic averages, implying a positive outlook for the oilfield services sector

E's revenue generally tracks changes in oil and gas prices, and sector CAPEX spending. Historically, a 1% increase in oil and gas prices, and CAPEX spending, has led to a 2.5% increase in E's revenue

Conversely, a 1% decrease in these factors has resulted in a 1.3% decline in E&rsquo;s revenue

FRC Projections and Valuation Based on consensus CAPEX spending, and oil/gas prices forecasts, we anticipate 5% organic revenue growth in 2024 (unchanged)

Source: FRC

As Q1 margins were higher than expected, we are raising our 2024 EPS estimate by 6%. We are also raising our long-term revenue/EPS forecasts to account for CAPEX-driven growth

As a result, our DCF valuation increased from $2.08 to $2.44/share. Sector valuations are up 14% since our previous report

E&rsquo;s forward EV/Revenue and EV/EBITDA are 21% higher than sector averages. We believe E&rsquo;s premium is justified, given its higher margins, lower debt/capital, and higher 2024 revenue growth estimate

We are maintaining our BUY rating, and raising our fair value estimate from $1.33 to $1.62/share. Upcoming catalyst includes revenue growth stemming from the deployment of newly acquired equipment.

Risks We believe the company is exposed to the following key risks (not exhaustive):

The oil/gas field services market is highly dependent on oil and gas prices Operates in a competitive space As the company uses leverage, a downturn in business activities can negatively impact its balance sheet We are maintaining our risk rating of 3 (Average

Appendix

Metrics	Value
Current Price	CAD $1.24
Fair Value	CAD $1.62
Risk	3
Week Range	CAD $0.39-1.30
Shares O/S (M)	58
Market Cap. (M)	CAD $72
Current Yield (%)	N/A
P/E (forward)	10.0
P/B	1.0

Metrics	Value
Current Price	CAD $1.24
Fair Value	CAD $1.62
Risk	3
Week Range	CAD $0.39-1.30
Shares O/S (M)	58
Market Cap. (M)	CAD $72
Current Yield (%)	N/A
P/E (forward)	10.0
P/B	1.0

Enterprise Group, Inc.

EPS Beat / Poised for Aggressive Expansion

Highlights