NINE ENERGY SERVICE INVESTOR PRESENTATION AUGUST 2018
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DISCLAIMER Forward-Looking Statements & Non-GAAP Financial Measures Certain statements in this presentation are forward-looking statements that are subject to a number of risks and uncertainties, many of which are beyond our control. All statements, other than statements of historical fact included in this presentation, regarding our strategy, future operations, financial position, estimated revenues and losses, projected costs, prospects, plans and objectives of management are forward-looking statements. When used in this presentation, the words “could,” “believe,” “anticipate,” “intend,” “estimate,” “expect,” “may,” “continue,” “predict,” “potential,” “project” and similar expressions are intended to identify forward-looking statements, although not all forward-looking statements contain such identifying words. Forward- looking statements may include statements about the volatility of future oil and natural gas prices; our ability to successfully manage our growth, including risks and uncertainties associated with integrating and retaining key employees of the businesses we acquire; availability of skilled and qualified labor and key management personnel; our ability to accurately predict customer demand; competition in our industry; governmental regulation and taxation of the oil and natural gas industry; environmental liabilities; our ability to implement new technologies and services; availability and terms of capital; general economic conditions; operating hazards inherent in our industry; our financial strategy, budget, projections, operating results, cash flows and liquidity; and our plans, business strategy and objectives, expectations and intentions that are not historical. Although we believe that our plans, intentions and expectations reflected in or suggested by the forward-looking statements contained herein are reasonable, we can give no assurance that these plans, intentions or expectations will be achieved. For additional information regarding known material factors that could affect our operating results and performance, please see our final IPO prospectus, Current Reports on Form 8-K, Annual Report on Form 10-K and Quarterly Reports on Form 10-Q which are available at the SEC’s website, http://www.sec.gov. Should one or more of these known material risks occur, or should the underlying assumptions change or prove incorrect, our actual results, performance, achievements or plans could differ materially from those expressed or implied in any forward-looking statement. Readers are cautioned not to place undue reliance on forward-looking statements, which speak only as of the date hereof. All subsequent written or oral forward-looking statements concerning us are expressly qualified in their entirety by the cautionary statements above. We undertake no obligation to publicly update or revise any forward-looking statements after the date they are made, whether as a result of new information, future events or otherwise, except as required by law. All information in this presentation is as of June 30, 2018 or December 31, 2017 as indicated unless otherwise noted. In addition to reporting financial results in accordance with GAAP, the Company has presented Adjusted EBITDA, Adjusted EBITDA margin and return on invested capital (ROIC). These are not recognized measures under, or an alternative to, GAAP. The Company’s management believes that this presentation provides useful information to management, analysts and investors regarding certain additional financial and business trends relating to its results of operations and financial condition. In addition, management uses these measures for reviewing the financial results of the Company. These non-GAAP measures are intended to provide additional information only and do not have any standard meaning prescribed by GAAP. Use of these terms may differ from similar measures reported by other companies. In particular, because of its limitations, Adjusted EBITDA should not be considered as a measure of discretionary cash available to use to reinvest in growth of the Company’s business, or as a measure of cash that will be available to meet the Company’s obligations. These non-GAAP measures have limitations as an analytical tool, and you should not consider them in isolation or as a substitute for analysis of the Company’s results as reported under GAAP. Industry and Market Data This presentation includes market data and other statistical information from third party sources, including independent industry publications, government publications and other published independent sources. Although the Company believes these third party sources are reliable as of their respective dates, the Company has not independently verified the accuracy or completeness of this information. 2
NINE COMPANY OVERVIEW OUR COMPANY • Focused on ROIC – 2018 target of 8% • 100% onshore North America with leverage to increasing completion intensity • Super lateral, deep reach capable service offering and focus • Agnostic to completion style – plug and perf (94%1 of horizontal market) and sleeve completions (6%1 of horizontal market) SIGNIFICANT EARNINGS POTENTIAL 100% ONSHORE NAM EXPOSURE Stage count and lateral length levered H1 2018 Revenue by segment2 $846 Adj. EBITDA Production Solutions Margin $544 Adj. 10% 28% EBITDA Margin $239 11% $60 Completion Solutions Revenue Adj. EBITDA Revenue Adj. EBITDA 90% 2 2H 2014A Annualized ($mm) 2017 1Spears and Associates. 2Revenue and Adjusted EBITDA annualized by doubling second half 2014. Second half 2014 annualized information is presented for informational purposes only to reflect the impact of Crest Pumping Technologies, Dak-Tana, RedZone Coil Tubing and Big Lake Services, LLC for a full 12-month period. We believe that presenting investors with the annualized information for the six months ended December 31, 2014 provides a representative period of the profitability of our business in a high demand environment, including six months of results from the acquisitions of Dak-Tana Wireline, Crest Pumping Technologies and RedZone Coil Tubing and the results of the acquisition of Big Lake Services, LLC from August 29, 2014 4 through December 31, 2014. Such information does not reflect the actual results for 2014 had such transactions been consummated on any particular date. Adjusted EBITDA and Adjusted EBITDA margin are not measures calculated in accordance with GAAP. See appendix for an Adjusted EBITDA reconciliation; 2Financials based on Q1 2018 and Q2 2018 revenue.
TECHNOLOGY-DRIVEN COMPLETIONS OFFERING Nine is capable of addressing 100% of the onshore wells drilled in North America, regardless of completion type PRE & POST STIMULATION HORIZONTAL LATERAL TOE OF THE WELL Large Diameter Coil + Memory Tools Long-string Cementing Offering includes tools & equipment capable of Extremely reliable in super completing super laterals (10,000 ft.+) laterals (10,000 ft.+) Proprietary Liner Hanger Tools Scorpion Composite Plug– EON Ball Drop Sleeve System– SmartStart – Strategic alliance Owned IP Strategic Alliance Scorpion Dissolvable Plug– Coil Activated Frac Sleeve – Owned IP Strategic Alliance FlowGun – Owned IP BreakthruTM Casing Flotation Device - Strategic Alliance MorphPackers StormTM Re-frac Packer – Strategic Alliance 2018E New US HZ Wells Drilled: 20,6751 2018E US Stage Count: 988,6561 2018E New US HZ Wells Drilled: 20,6751 1Spears & Associates. 5
MULTI-WELL PADS CONCENTRATE RISK Barriers to entry continue to increase SINGLE-WELL PAD COMPLETIONS MULTI-WELL PAD COMPLETIONS LONGER LATERALS TIGHTER SPACING PAD DRILLING l l Concentration of dollars / pad + exponential impact of Non-Productive Time = highly selective customers • Total well cost: $5-$7mm • Total pad cost: $30-$42mm • ~8,000 feet of lateral length completed • ~48,000 feet of lateral length completed • 40 stages • 240 stages • 12mm pounds of sand • 72mm pounds of sand • 1,000 boe/d oil produced • 6,000 boe/d oil produced E&P Revenue/Day = ~$65,0001 E&P Revenue/Day = ~$390,0001 Increased capital efficiency Source: Spears & Associates and Company Estimates, 1Assumes IP rates of 1,000 boe/d at $65 WTI 6
SUSTAINABLE VALUE PROPOSITION OF SERVICE & TECHNOLOGY Service and technology drives efficiencies and lowers total cost of ownership for operators SERVICE/TECHNOLOGY PERFORMANCE DAYS SAVED REVENUE GENERATION FOR OPERATORS1 Scorpion Composite Plug 122 plugs drilled out ~2.5 days per 6 well pad = $975K with 1 drill-bit. well Eliminated a bit trip 21 well pad = $3.4mm Toe Valves Prep and stimulate ~1 day per 6 well pad = 390k stage 1 in under 5 hours well 21 well pad = $1.4mm Nine Wireline 10+ stages per day with ~1.75 days2 6 well pad = $683k 99% success rate per well 21 well pad = $2.4mm Illustrative Days Saved ~5.25 days 6 well pad = $2.1mm and Revenue Generated per well 21 well pad = $7.2mm 1Assumes IP rates of 1,000 boe/d at $65 WTI. 2Assumes 70 stages per well with competitive comparison at 8 stages per day. 7
3-PRONGED STRATEGY TO TECHNOLOGY ACQUISITION INTERNAL R&D IP ACQUISITION STRATEGIC ALLIANCES Keep It Simple Deliberate & Careful Distribution Hub • Focus on creating tools that • Used to secure technology that • Requires broad NAM footprint lower operator costs and is prolific in the wellbore and service offering to secure increase production today and tomorrow volume for partners • Less “bells and whistles” and • Valuations must be right due • Focused and technical sales more assurance on successful to rapidly evolving technology team coupled with marketing deployment at 30,000+ feet with shortening payback times effort downhole • Customer relationships and • Small team of engineers track-record of successful thinking about customer conveyance needs, profitability and practicality • Surgical spend on high- volume tools 8
BROAD FOOTPRINT ENABLES TECHNOLOGY LEADERSHIP FOOTPRINT IN EVERY MAJOR NAM BASIN – Canada 4% significant benefit to potential strategic partners through distribution volume EXCELLENT NAM REACH Bakken 5% CAPABILITY – proximity to the field, customer Rockies 4% and acreage Marcellus / Utica 19% LOCALIZED TEAMS WITH REGIONAL KNOWLEDGE – share best practices MidCon 10% internally and with customers Permian 38% Barnett 2% Haynesville 9% Service Coverage Area and Revenue by Region1 Eagle Ford 9% Major Unconventional Basins 1 YTD as of 12/31/2017. 9
BARRIERS TO ENTRY THROUGH TECHNOLOGY AND SERVICE HOW DOES NINE BUILD MOATS AROUND THE BUSINESS? Service + technology / equipment + people to service the longest laterals today and tomorrow COMPLETION SOLUTIONS PERFORMANCE BARRIERS EQUIPMENT BARRIERS → FIT FOR “DEEP REACH” Cementing Services • ~13,000 cementing jobs with on-time • High-quality dedicated Midland, Delaware and Eagle rate of ~90%1 Ford labs (to API specs) with testing capabilities to cement laterals over 10,000’ long → Redundant pumps with 1,000 HP and dual-sided bulk plants Completion Tools • ~136,000 isolation and stage 1 tools • Owned IP of one of the most critical and prolific and ~22,000 frac sleeves deployed2 isolation tools for laterals reaching beyond 10,000’ → Highly dependable “toe” solutions Wireline Services • ~88,000 stages with a success rate • Conveying greaseless wireline with less friction in super over 99%1 laterals • Longest wireline completion of 19,000+ feet in lateral Coiled Tubing Services • ~6,700 jobs and ~136 million running • ~ 75% of coil fleet is “Big Pipe” deep reach (≥2.375” feet of coiled tubing with a success rate diameter) → coupled with high HP frac pumps to push greater than 99%3 (Average lateral coil further downhole length/job +20,000 feet) PRODUCTION SOLUTIONS PERFORMANCE BARRIERS EQUIPMENT BARRIERS → FIT FOR “DEEP REACH” Well Services • 65% utilization rate compared to 51% • Fit for purpose fleet industry average4 • ~40% of fleet capable of performing completion- oriented work 1Management estimates for time period from January 2014 to June 30, 2018; 2Management estimates for time period from March 2011 to June 30, 2018; 3Management estimates for time period from April 2014 to June 30, 2018; 4Industry average based on Association of Energy Service Companies; period from January 2015 to June 30, 2018. 10
PROOF OF PERFORMANCE Majority Of Nine’s Completion Work Is Long Laterals Has Led To Increased Efficiencies And Higher Barriers To Entry 9% 80% 48 14.7 78% 167% 5% 27 5.5 2014 Q2 2018 2014 2017 2014 Q2 2018 2 Nine US Wireline & Completion 1 Nine Avg. Stages Completed Per Well Stages / Employee / Month 2 Tools % of stages completed Nine Holds a Competitive Advantage in US Cementing Leading to Significant Market Share Gains 2 2 Nine % rigs followed – South Texas Nine % rigs followed – West Texas 20% 12% 33% 10% 94% 17% YE 2014 6/30/2018 YE 2014 6/30/2018 Source: 1Management estimates of Nine frac stages relative to industry frac stages based on Spears & Associates; 2Company Information. 11
CUSTOMERS WHO TRUST US Diverse, blue-chip customer base with minimal concentration COMPLETION PRODUCTION 12
BUSINESS MANAGED FOR STRONG RETURN ON CAPITAL Better OFS returns through cycle dictate a careful blend of capital intensity COMPLETION TOOLS WIRELINE WELL SERVICE CEMENTING COILED TUBING EQUIPMENT, PEOPLE & CAPEX LESS INTENSIVE MORE INTENSIVE 2014 ROIC 18% 16% 13% 9% 7% 6% 5% 3% 3% 1% Large Cap Nine Large Cap Large Cap Pres Pump Div Pres Pump Div Other Pres Pump Div Div (1%) (7%) 13 See appendix for ROIC reconciliation
RETURNS-FOCUSED GROWTH PHILOSOPHY Balance of Organic Growth and Strategic M&A: Augment technology portfolio + Enhance NAM footprint ORGANIC GROWTH DISCIPLINED M&A • Strategic expansion of existing service lines within NAM • Continue to consolidate highly fragmented industry basins • Target only best-in-class companies and management • Deployment of capex for high-quality and differentiated teams equipment and facilities within the most active basins • Competitive advantage securing and sourcing non- • Market share gains through service and technology marketed deals • Securing and maintaining best talent in the industry • Entrepreneurs want to partner and stay with “like- minded” and nimble management team NINE PRESENCE Permian Midcon Northeast Bakken Rockies Canada Eagle Ford Haynesville Wireline Cementing Completion Tools Coiled Tubing Well Service 14
FINANCIAL OVERVIEW 15
2018 FINANCIAL PERFORMANCE COMMENTARY 2018 QUARTERLY RESULTS ($MM) • Nine’s first half growth driven by Revenue Adjusted EBITDA significant increase in activity (stages/# of jobs) in Completion Solutions segment • Cementing jobs completed in Q2 $205.5 $30.6 +~18% +~27% increased ~32% versus Q4 2017 $173.8 $24.1 • Wireline stages completed in Q2 increased ~39% versus Q4 2017 • Coiled Tubing utilization increased ~8% percentage points versus Q4 2017 Q1 18 Q2 18 Q1 18 Q2 18 • Penetration of completion tool market share has helped drive both revenue and EBITDA growth ROIC Net Income • Total stages completed in Q2 increased ~66% versus Q4 2017 • Strategic price increases continue with $9.0 +~429% the significant increases through H1 8% coming in wireline at ~16% YTD +~167% 3% • Net income and ROIC tracking very well $1.7 quarter over quarter while 2018 ROIC target of 8% remains on track Q1 18 Q2 18 Q1 18 Q2 18 16 See appendix for Adjusted EBITDA and ROIC reconciliation.
BALANCE SHEET & LIQUIDITY POSITION PRO FORMA CAPITALIZATION COMMENTARY As of June 30, 2018 • Nine has a total liquidity position of ($MM) $120.2mm as of 6/30/18 Cash $70.9 • Nine will be disciplined with capital deployment, with a ROIC-focused philosophy Debt New Revolving Credit Borrowings 0.0 New Term Loan 115.3 Total debt 115.3 Net Debt $44.4 Total cash $70.9 RCF availability 49.3 Total liquidity $120.2 17
UNIQUE VALUE PROPOSITION FOR INVESTORS 18
CLOSE TO PERFECTION. FAR FROM ORDINARY. DRIVEN TO SUCCEED.
APPENDIX
2017 FINANCIAL PERFORMANCE REVENUE 2017 OPERATIONAL PERFORMANCE ($ in millions) • Completion Solutions – revenue increased by $544 approximately 110% year over year Q4 17 − Cementing jobs for 2017 increased approximately 75% over 2016. The average blended revenue per job for the full year 2017 increased approximately 45% $282 Q3 17 from 2016 +93% Q2 17 − Wireline stages completed in 2017 increased by approximately 65% over 2016 Q1 17 − Completion tool stages completed in 2017 increased by approximately 243% over 2016 FY 2016 FY 2017 − Coiled tubing total days worked for 2017 increased by approximately 48% over 2016 with the average ADJUSTED EBITDA blended dayrate for 2017 increasing by approximately 39% ($ in millions) $60 Q4 17 • Production Solutions – revenue for the full year 2017 increased by approximately 28% year over year − Total rig hours worked for 2017 increased by Q3 17 approximately 26% over 2016 +506% $10 Q2 17 Q1 17 FY 2016 FY 2017 See appendix an Adjusted EBITDA reconciliation 21
EBITDA AND ADJ. EBITDA RECONCILIATION Six months Six months Three Months Ended Three months ended Year ended December 31 ended ended June 30, December ($ mm unless otherwise noted) 30-Jun-18 31-Mar-18 31-Dec-17 30-Sep-17 30-Jun-17 31-Mar-17 2017 2016 2015 2014 20141 31, 20141 EBITDA Reconciliation Net income (loss) $9.0 $1.68 ($29.81) ($5.10) ($12.10) ($20.70) ($67.68) ($70.90) ($39.10) $48.00 $27.10 $20.90 Interest expense $1.8 2.9 3.9 4.1 3.9 3.8 15.7 14.2 9.9 9.6 2.8 6.7 Depreciation 13.2 13.1 13.1 13.2 13.6 13.6 53.4 55.3 58.9 40.2 13.1 27.1 Amortization 1.9 1.9 2.2 2.2 2.2 2.2 8.8 9.1 8.7 6.4 2.1 4.3 Provision (benefit) from income taxes .65 0.09 -8.0 0.8 - 2.2 -5.0 -26.3 -14.3 44.5 17 27.6 EBITDA $26.6 $19.71 ($18.55) $15.20 $7.70 $1.00 $5.26 ($18.70) $24.00 $148.60 $62.00 $86.60 Adjusted EBITDA Reconciliation EBITDA 26.6 $19.71 ($18.55) $15.20 $7.70 $1.00 $5.26 ($18.70) $24.00 $148.60 $62.00 $86.60 Impairment of goodwill and other intangible assets - - 35.3 - - - 35.3 12.2 35.5 - - - Transaction expenses - 0.4 0.2 0.1 0.4 3 3.6 - 0.2 3.9 2.8 1.1 Loss from discontinued operations2 - - - - - - - - 0.9 28.2 2 26.2 Loss or gains from the revaluation of contingent liabilities3 0.6 1.1 0.0 0.3 0.1 0.1 0.4 1.7 -0.3 - - - Loss on equity investment 0.1 .08 0.1 0.1 0.2 - 0.4 - - - - - Non-cash stock-based compensation expense 4.0 2.2 1.2 2.2 2.7 1.5 7.6 5.7 5.5 5.4 1.9 3.5 Loss or gains on sale of assets (0.9) 0.4 -0.1 0.1 4.4 0.2 4.7 3.3 2 1 - 0.9 Legal fees and settlements4 0.2 0.3 0.2 0.2 0.4 0.2 1.0 4.1 - - - - Inventory writedown - - 0.3 - 1 - 1.4 0.3 2.8 1 - 1 Restructuring costs - - - - - - - 1.1 3.3 - - - Adjusted EBITDA $30.6 $24.1 $18.71 $18.10 $16.70 $6.10 $59.58 $9.80 $73.90 $188.20 $68.80 $119.40 Revenue 205.5 173.8 154.28 148.2 135.9 105.4 543.7 282.4 478.5 663.2 240 423.2 % Adj. EBITDA margin 15% 14% 12% 12% 12% 6% 11% 3% 15% 28% 29% 28% (1) Nine closed the acquisitions of Crest Pumping Technologies on June 30, 2014 and Dak-Tana Wireline on April 30, 2014 and Beckman closed the acquisitions of RedZone Coil Tubing on May 2, 2014 and Big Lake Services, LLC on August 29, 2014. As a result, financial results relating to each acquisition for periods prior to the close of each of the aforementioned acquisitions are not reflected in the full year 2014 results. We believe that presenting investors with the annualized information for the six months ended December 31, 2014 provides a representative period of the profitability of our business in a high demand environment, including six months of results from the acquisitions of Dak-Tana Wireline, Crest Pumping Technologies and RedZone Coil Tubing and the results of the acquisition of Big Lake Services, LLC from August 29, 2014 through December 31, 2014. For comparative purposes, we have also included such information for the six months ended June 30, 2014. (2) For 2014, represents a non-cash impairment charge related to the divestiture of certain assets of a subsidiary whose primary focus was conventional completions. (3) Loss or gain related to the revaluation of liability for contingent consideration relating to our acquisition of Scorpion to be paid in shares of Company common stock and in cash, contingent upon quantities of Scorpion Composite Plugs sold during 2016 and gross margin related to the product sales for three years following the acquisition. (4) Amount represents fees and legal settlements associated with legal proceedings 22 brought pursuant to the Fair Labor Standards Act and/or similar state laws.
ROIC RECONCILIATION Three Months Ended Three Months Ended Year Ended December 31 ($ MM UNLESS OTHERWISE NOTED) 30-Jun-18 31-Mar-18 2014 After-tax net operating profit reconciliation: Income (loss from continuing operations net of tax) $9.0 $1.7 $76.2 Add back: Interest expense 1.8 2.9 9.6 Exclude: Taxes on interest (0.4) (0.6) (3.5) After-tax net operating profit $10.5 $4.0 $82.2 Total capital as of prior period-end:1 Total stockholders' equity $459.4 $287.4 $192.5 Total debt 115.3 242.2 140.8 Less: Cash and cash equivalents (72.9) (17.5) (18.5) Total capital $501.8 $512.1 $314.8 Total capital as of period-end: Total stockholders' equity $472.2 $459.4 $389.6 Total debt 115.3 115.3 379.7 Less: Cash and cash equivalents (70.9) (72.9) (24.2) Total capital $516.6 $501.8 $745.1 Average total capital $509.2 $506.9 $529.9 ROIC 8% 3% 16% ROIC is defined as after-tax net operating profit divided by average total capital. After-tax net operating profit is defined as income (loss) from continuing operations (net of tax) plus interest expense, less taxes on interest. Total capital is defined as book value of equity plus the book value of debt less balance sheet cash and cash equivalents. Book value of equity is average of current and prior year total equity balances. Book value of net debt is average of current and prior period-end net debt balances. 1 For 2014, total capital as of prior year-end is based on Beckman and Nine combined unaudited historical financial information. 23
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