CJES Presentation (May 22, 2012)

7/31/2019 CJES Presentation (May 22, 2012)

1/33

C&J Energy Services, Inc.

Investor PresentationMay 22, 2012


2/33

Forward-Looking StatementsCertain statements and information in this presentation may constitute forward-looking statements within the meaning of

Section 27A of the Securities Act of 1933, as amended, Section 21E of the Securities Exchange Act of 1934, as amended, and thePrivate Securities Litigation Reform Act of 1995. The words believe, expect, anticipate, plan, intend, foresee,should,would, could or other similar expressions are intended to identify forward-looking statements, which are generally not historical innature. These forward-looking statements are based on our current expectations and beliefs concerning future developments andtheir potential effect on us. While management believes that these forward-looking statements are reasonable as and when made,there can be no assurance that future developments affecting us will be those that we anticipate. All comments concerning ourexpectations for future revenues and operating results are based on our forecasts for our existing operations and do not include thepotential impact of any future acquisitions. Our forward-looking statements involve significant risks and uncertainties (some of whichare beyond our control) and assumptions that could cause actual results to differ materially from our historical experience and ourpresent expectations or projections. Known material factors that could cause our actual results to differ from our projected results

are described in our filings with the Securities and Exchange Commission (SEC), including but not limited to our Annual Report onForm 10-K for the fiscal year ended December 31, 2012 and Quarterly Report on Form 10-Q for the period ended March 31, 2012.

All readers are cautioned not to place undue reliance on forward-looking statements, which speak only as of the date hereof. Weundertake no obligation to publicly update or revise any forward-looking statements after the date they are made, whether as a resultof new information, future events or otherwise.

Non-GAAP Financial MeasuresWe use both GAAP and certain non-GAAP financial measures to assess performance. Generally, a non-GAAP financial measure isa numerical measure of a company's performance, financial position or cash flows that either excludes or includes amounts that arenot normally excluded or included in the most directly comparable measure calculated and presented in accordance with GAAP. C&J

management believes that these non-GAAP measures provide useful supplemental information to investors in order that they mayevaluate our financial performance using the same measures as management. These non-GAAP financial measures should not beconsidered as a substitute for, or superior to, measures of financial performance prepared in accordance with GAAP. In evaluatingthese measures, investors should consider that the methodology applied in calculating such measures may differ among companiesand analysts. Reconciliation of non-GAAP results to GAAP results for historic periods can be found on slide 33 of this presentationand in our filings with the SEC, as applicable.

2

Disclaimer


3/33

Company Overview


4/33

4

Founded by current Chairman and CEO Josh Comstock

Well-positioned to benefit from many of the most important trends in drilling and completion

Focused on complex, technically demanding completions that deliver superior returns

Operates modern, high-pressure rated equipment

Integrated manufacturing capabilities

Recent rapid growth through penetration of prominent E&P customers

Unique financial business model through take-or-pay plus contracts covering a majority offleets that combine visibility with spot upside optionality

C&J is a Differentiated Energy Services Company


5/33

1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011

5

JoshComstock

founded C&J

Introduced stand-alone pressure

pumping services

Ordered firsthydraulic

fracturing fleet

Added 5 coiled tubing units, bringing total to 13

Geographic expansion into East Texas

Launched hydraulic fracturing service

Contracted Fleets 1 and 2

Ordered Fleets 3, 4 and 5

Evolution of C&J

Introducedcoiled tubing

services

C&J Timeline

Key Customers

Closed Total Acquisition

Coiled tubing count reaches 18 units

Contracted Fleets 3, 4, 5 and 6

Ordered Fleets 7, 8, 9

2012

Deployed Fleet 7Ordered 6 additionalcoiled tubing units


6/33

6

C&J Investment Highlights

Operationalexpertise in service-

intensive basins

Visible revenuegrowth

Modern, high-

specificationequipment

High-qualityservice

Focused on technically-demanding, service-intensive basins

Generate higher revenue per unit of horsepower relative to peers

Concentrated in oily and liquids-rich basins

Customized solutions through extensive front-end technical analysis andplanning

Design engineers and job supervisors involved throughout project execution

Superior logistics management of inputs and supplies

Exclusive focus on high-pressure rated equipment (all rated up to 15,000 psi)

Modern fracturing fleet, averaging two years old and all entered into servicein the past five years

Acquisition of Total provides specialized, in-house manufacturing capability

Substantial hydraulic fracturing and completion services experience

Vested executive team with significant ownership

Experiencedmanagement

Scheduled equipment deliveries to support sustained growth

Term contracts provide visibility with flexibility for spot market upside


7/33

Industry Trends


8/33

Ongoing development of existing and emerging unconventional resource basins

Increased horizontal drilling

Greater service intensity

FavorableNorth American supply-demand fundamentals Increased demand for expertise to execute complex completions

High levels of asset utilization

Spread of North American unconventional drilling and completion techniques

Conventional field redevelopment applications

Emerging international opportunities

Actively pursuing coiled tubing and fracturing opportunities with multiplepotential customers in the Middle East

8

Key Industry Themes Driving C&J Opportunity

High oil prices continues to bolster strong industry fundamentals


9/33

0 %

10 %

20 %

30 %

40 %

50 %

60 %

70 %

80 %

0

500

1000

1500

2000

2500

Jun-07 Aug-08 Nov-09 Jan-11 Apr-12

Oil-directed drilling rigs Gas-directed drilling rigs

% Horizontal / Directional

+ 6 %

+ 20 %

+ 57 %

Granite Wash Permian Eagle FordCurrent

Rig Count 20331187

Source: Left-side chart from Unconventional Drilling Report as of February 23, 2012; right-side chart from Baker Hughes Rig Count data as of April 05, 2012

Strong Drilling Outlook Drives Completion Demand

U.S. Horizontal Rig CountRig Count Change Since Q1 2011

9

Significant increase in rig count and horizontal drilling activity

Increased service intensity of horizontal wells


10/3310

Source: Goldman Sachs Equity ResearchNote: Dark blue bars denote current C&J basin of operation.

Advances in Completion Techniques Driving Demand

Average Fracturing Stages Per WellAverage Horsepower Per Well (000s of HP)

Longer laterals More frac stages Higher pressure wells

4038

30

25

11

Permian EagleFord

GraniteWash

OtherUnconventional

Median

Conventional

16 16

12

13

3

Permian EagleFord

GraniteWash

OtherUnconventional

Median

Conventional


11/3311

Favorable Long-Term Supply / Demand Fundamentals

Demand-Side Drivers Supply-Side Drivers

Continued increase in horizontal drilling

Longer laterals

Growing number of fracturing stages per well

Improved drilling efficiencies

High-pressure environments

Customized approach to the completion of

complex, technically demanding wells

Redevelopment of conventional fields

High oil prices largely offsetting low natural

gas prices

Older equipment not well-suited to meet

demanding completion requirements

Significant increase in attrition and

maintenance downtime

24-hour continuous service More aggressive sand / proppant use

More demanding operating conditions in

higher pressure formations

Limited industry experience executing the

most complex completions


12/33

Business Overview


13/3313

Overview of Service Offerings

Services

HydraulicFracturing

PressurePumping

Coiled Tubing

Provide highly customized services fortechnically challenging basins

Engineering staff offers extensivefront-end technical evaluation

Demonstrated efficiency gains to clientallows for premium pricing

Ability to handle heavy-duty jobs acrossa wide spectrum of environments

Provides various functions associatedwith well completion and well servicing

Leverage CT business to expand intoadditional fracturing opportunities

Diverse portfolio of value-addedservices

Routinely performed in conjunction withcoiled tubing services

Often provides advanced knowledge ofpotential coiled tubing work

Focus on mostcomplex projects in

most challengingbasins


14/3314

Highly Experienced Management Team

Josh Comstock

Founder,Chairman and CEO

Randy McMullenEVP,

CFO and Treasurer

Brett BarrierCOO

John ForetVP, Coiled

Tubing

Billy DriverVP, Hydraulic

Fracturing

BrandonSimmonsVP, Coiled

Tubing

Pat WinsteadVP, Marketing

Ted MooreVP, General

Counsel

Industry

Experience20+ years

IndustryExperience20+ years






IndustryExperience

9+ years

Mike McCoyVP, Coiled

Tubing



15/3315

Modern, High-Specification Equipment

Operates seven modern 15,000 psi pressure rated hydraulic fracturing fleets with aggregateof 242,000 horsepower

Designed for well completions with long lateral segments and multiple fracturing

stages in high pressure formationsOperates a fleet of 18 coiled tubing units, primarily 2-inch dimension

Additional six coiled tubing units scheduled for deployment to new geographic basinsin the second half of 2012

Operates a fleet of 28 pressure pumping units primarily double pump

Vertical integration of manufacturing capability through acquisition of Total E&S (Total)

Premium Hydraulic Fracturing FleetsCurrent Fleets Year Built On-Time Delivery Number of Pressure Pumps Horsepower Capacity

1 2007 17 34,000

2 2010 12 24,000

3 2010 16 32,000

4 2011 20 40,000

5 2011

16 32,0006 2011 / 2012 24 48,000

7 2Q 2012 16 32,000

Expected Fleets Expected Delivery Date On-Time Delivery Number of Pressure Pumps Horsepower Capacity

8 3Q 2012 16 32,000

9 4Q 2012 16 32,000

Total 153 306,000


16/33

16

Geographically Focused in Attractive Basins

= Basin where C&J is currently active

Existing relationships provide platform for future growth in current andnew geographic areas

Prominent shales are in reach of C&Js existing service centers

100% of hydraulic fracturing equipment is currently operating in oily &liquids-rich basins


17/33

Offer customized solutions on

a job-by-job basis

Engineers and fleet managers

onsite throughout process

Culture of flexibility and

collaboration

Completed thousands of

fracturing stages in Eagle

Ford, Permian and

Haynesville

Operating team with 20+

years of in-basin experience

Relationships with several

proppant and chemical

suppliers

Technical proficiency and

front-end analysis

The Result is Enhanced Economics for Our Customers

Superior

customer

service

New, highly

capable

equipment

Exceptional

execution

High-quality

service

provider

Minimize cycle time and limit

pump downtime

Design fluids that perform well

in various environments

Focus on maintaining

performance data that is used

to supplement and increaseeffectiveness of future

assignments

We Offer an Attractive Value Proposition to Our Customers

Average age of fracturingfleets is two years; rated for15,000 psi

Optimized configuration of fleetaccording to basin specificrequirements

Custom-designed equipmentmaximizes efficiency anddurability

Specific competence infracturing fluid design and localapplication

17


18/33

Current Service Offerings

CustomerStand Alone

Pressure PumpingCoiled Tubing

HydraulicFracturing

Term Frac Contract

18

Relationships with Industry Leaders

(Through Q3 2012)

(Through Q3 2013)

(Through early 2013)

(Through mid-2014)*

(Through mid-2013)

Large operators have embraced C&Js technical capabilities

(Early 2014)

*Under contract but currently deployed to Eagle Ford to different customers.

EXCO retains contractual ability to call fleet back to Haynesville with propernotice.


19/33

19

Outperformance Through Efficiency

Pre-job

bestpractices

Pumpingprocedures

Motivatedworkforce

Rig-upflexibility

More frequent communication with customers during well design process

Continuity of technical staff to avoid repetition and save customers time

Lab fluids testing in advance for optimal well design

Develop best layout for job site to maximize Hydration Unit and Blender performance

Organize crew into focused teams to complete multiple tasks simultaneously

Conduct field fluid tests during rig-up process to confirm lab results

Engineers and blender operators on site during rig up to jump start technical review

Real-time monitoring of equipment to spot potential problems early

On-site maintenance of pump units as soon as each one is offline

Proactive replacement of wear items rather than waiting for a failure

Streamline paperwork requirements to allow supervisors to focus on efficiency and

planning

Empowering employees and promoting best practices produces a proud and highlymotivated workforce


20/33

20

Strategy for Continued Growth

Capitalize on growth in development of shale and other resource plays

Leverage customer relationships and reputation for excellence to expand

Expand position in current basins

Evaluating opportunities to expand operations into new areas throughout the U.S. andinternationally

Evaluating opportunities to expand into complementary oil service business lines

Pursue additional term hydraulic fracturing contracts

Currently seeking term contracts for Fleets 7, 8 and 9

Maintain flexibility to pursue spot market work

C&J has strong cash flow and a debt free balance sheet to pursue attractiveorganic and acquisitive growth opportunities it has identified


21/33

Financials


22/33

22

Key Drivers of Financial Performance

Business Model Financial Model

Visibility

Growth

Vertical integration

Risk management

Hourly rates under take-or-pay contracts

Spot market optionality

Utilization drives model

Balance sheet strength


23/33

23

Significant Historical Growth

Growth in HHP Avg. Monthly Revenue / HHP

Adjusted EBITDA ($mm)Revenue ($mm)

$285.0

1 Assumes timely delivery of Fleets 8 & 9

$758.5


24/33

24

More demanding wells drive higher hourly rates and higher revenues from

chemicals and proppant

More frac stages per well keep fleets onsite longer, allowing more pumping hours

per month

Demonstrated shorter time per completion permits us to negotiate premium rates

with customers

Less redundant pumping capacity boosts utilization

ROCE of 42% in 2010 and 57% in 2011

Operational Strategy Drives Strong Financial Performance

Regional focus and operating efficiency generate higher revenues per unit of horsepower


25/33

25

Strong Margin Profile

EBITDA Margin

1 EBITDA margin based on Adjusted EBITDA.

Margins driven by utilization, not price

In 2011 generated $285MM in Adjusted EBITDA


26/33

26

Contract Coverage for Fracturing Fleets

Fracturing Term Contracts Provide Visible Growth

* Under contract but currently deployed to Eagle Ford with

different customers. EXCO retains contractual ability tocall fleet back to Haynesville with proper notice.


27/33

27

Overview of Term Contracts Covering Fleets 1-6

1 3 year contract life

Revenues under term contracts are derived from:

Mandatory monthly payments for minimum hours*

Pre-agreed amounts for each hour of service in excess of the contracted

minimum

Service charge to customers for chemicals and proppant materials

Take or pay

Optionality to deploy equipment when not utilized

Contractual protections for term

*While Fleet 4 is working for non-contractual customers outside of the Haynesville, C&J is not collecting from the Haynesville contractualcustomer.

Take or Pay contracts provide revenue visibility


28/33

Strong Balance Sheet and Liquidity

Flexible balance sheet with strong liquidity

$200mm revolving credit facility

28

.

6/30/2011 12/31/2011 3/31/2012

Cash and Cash Equivalents 7,634$ 46,780$ 78,200$

Long Term Debt 105,000$ -$ -$

Shareholder Equity 176,039$ 395,055$ 448,526$

Total Capitalization 281,039$ 395,055$ 448,526$

Improved Balance Sheet($ in thousands)


29/33

Appendix


30/33

Detailed Historical Financials Income Statement

30

($ in thousands, except per share amounts) 2008 2009 2010 2011 Q1'2012

Statement of Operations Data (Unaudited)Revenue 62,441$ 67,030$ 244,157$ 758,454$ 239,052$

Cost of sales 42,401 54,242 154,297 443,556 144,363

Gross profit 20,040 12,788 89,860 314,898 94,689

Selling, general and administrat ive expenses 8,950 9,533 17,998 52,737 18,330

Loss (gain) on disposal of assets 397 920 1,571 (25) 397

Operating income 10,693 2,335 70,291 262,186 75,962

Other income (expense):

Interest expense, net (6,908) (4,708) (17,341) (4,221) (380)

Lender fees (511) (391) (322) - -

Loss on early extinguishment of debt - - - (7,605) -

Other income (expense) (68) (52) 13 (40) (72)

Total other expense (7,487) (5,151) (17,650) (11,866) (452)

Income (loss) before income taxes 3,206 (2,816) 52,641 250,320 75,510

Provision (benefit) for income taxes 2,085 (386) 20,369 88,341 26,131Net income (loss) 1,121$ (2,430)$ 32,272$ 161,979$ 49,379$

Basic net income (loss) per share 0.02$ (0.05)$ 0.70$ 3.28$ 0.95$

Diluted net income (loss) per share 0.02$ (0.05)$ 0.67$ 3.19$ 0.92$

Year Ended December 31,


31/33

Detailed Historical Financials Cash Flow

31

Cash Flow Data

($ in thousands) 2007 2008 2009 2010 2011 Q1'2012

(Unaudited) (Unaudited)

Capital expenditures 30,152$ 21,526$ 4,301$ 44,473$ 140,723$ 38,759$

Cash flow provided by (used in)

Operating activities 8,377 8,611 12,056 44,723 171,702 69,486

Investing activities (30,054) (20,673) (4,254) (43,818) (165,545) (38,642)

Financing activities 21,305$ 11,921$ (6,733)$ 734$ 37,806$ 576$

Year Ended December 31,


32/33

Detailed Historical Financials Balance Sheet

32

Balance Sheet Data

($ in thousands) 2007 2008 2009 2010 2011 Q1'2012(Unaudited) (Unaudited)

Cash and cash equivalents 250$ 109$ 1,178$ 2,817$ 46,780$ 78,200$

Accounts receivable, net 4,409 13,362 12,668 44,354 122,169 125,136

Inventories, net 581 861 2,463 8,182 45,440 63,190

Property, plant and equipment, net 57,991 71,441 65,404 88,395 213,697 246,876

Total assets 133,711$ 155,212$ 150,231$ 226,088$ 537,849$ 616,779$

Accounts payable 1,705$ 6,519$ 10,598$ 13,084$ 57,564$ 59,011$

Long-term debt and capital leaseobligations, excluding current portion 56,773 25,041 60,668 44,817 - -

Total stockholders' equity 66,767$ 68,099$ 65,799$ 109,446$ 395,055$ 448,526$

As of December 31,


33/33

Adjusted EBITDA Reconciliation

Note:EBITDA and Adjusted EBITDA are non-GAAP financial measures, and when analyzing C&Js operating performance, investors should use EBITDA andAdjusted EBITDA in addition to, and not as an alternative for, operating income and net income (loss)(each as determined in accordance with GAAP). C&J usesEBITDA and Adjusted EBITDA as supplemental financial measures because we believe they are useful indicators of our performance. EBITDA is defined as netincome (loss) before interest expense (net), income taxes, depreciation and amortization. Adjusted EBITDA is EBITDA further adjusted for certain other items whichare not indicative of future performance or cash flow, including loss on early extinguishment of debt and loss (gain) on sale/disposal of property, plant and equipment.EBITDA and Adjusted EBITDA, as used and defined by C&J, may not be comparable to similarly titled measures employed by other companies and are not measuresof performance calculated in accordance with GAAP.

($ in thousands) 2008 2009 2010 2011 Q1'2012

(Unaudited)

Net income (loss) 1,121$ (2,430)$ 32,272$ 161,979$ 49,379$

Interest expense, net 6,908 4,708 17,341 4,221 380

Provision (benefit) for income taxes 2,085 (386) 20,369 88,341 26,131

Depreciation and amortization 8,836 9,828 10,711 22,919 7,845

EBITDA 18,950$ 11,720$ 80,693$ 277,460$ 83,735$

Adjustments to EBITDA

Loss on early extinguishment of debt - - - 7,605 -

Loss (gain) on disposal of assets 397 920 1,571 (25) 397

Adjusted EBITDA 19,347$ 12,640$ 82,264$ 285,040$ 84,132$

CJES Presentation (May 22, 2012)

Documents

Transcript of CJES Presentation (May 22, 2012)