Investing in Oilfield Services and Equipment Discussion · · 2017-05-18Investing in Oilfield...

Investing in Oilfield Services and Equipment Discussion May 17, 2017

SIMMONS & COMPANY INTERNATIONAL | ENERGY SPECIALISTS OF PIPER JAFFRAY 2

U.S. Commodity Outlook Shows Continued Recovery

¹ Source: Baker Hughes. As of May 12, 2017. ² Source: Spears and Associates. As of April 2017. ³ Source: Bloomberg. As of May 15, 2017.

Historical U.S. Land Rig Count¹

Projected U.S. Land Rig Count² Historical WTI Price³

Historical and Projected WTI Price and U.S. Land Rig Count (Rigs) ($/bbl)

Consensus WTI Projection³

1,724 1,796

1,842 1,856

1,354

876 833

728

515

397 465

567 734

843 864 877 933 1,005 1,043

1,069

$0.00

$20.00

$40.00

$60.00

$80.00

$100.00

$120.00

0

200

400

600

800

1,000

1,200

1,400

1,600

1,800

2,000

Q1'14

Q2'14

Q3'14

Q4'14

Q1'15

Q2'15

Q3'15

Q4'15

Q1'16

Q2'16

Q3'16

Q4'16

Q1'17

Q2'17

Q3'17

Q4'17

Q1'18

Q2'18

Q3'18

Q4'18

3 SIMMONS & COMPANY INTERNATIONAL | ENERGY SPECIALISTS OF PIPER JAFFRAY

OFS IPO Versus M&A Market

U.S. OFS IPO and M&A Activity (Number of U.S. OFS C-Corp IPOs)

¹ Source: Simmons, Capital IQ, Bloomberg and Dealogic. As of May 15, 2017. ² Includes deals where target is a U.S. company.

1

3

0

2

15

0

100

200

300

0

10

20

30

2013 2014 2015 2016 YTD 2017Annualized

Number of U.S. OFS C-Corp IPOs¹

Number of U.S. OFS M&A Transactions²

(Number of U.S. OFS M&A Transactions)


OFS M&A Activity Has Been More Volatile Than Overall U.S. Since 2009

¹ Source: Simmons internal database. Includes deals where target is a U.S. company. ² Source: Institute for Merger, Acquisitions and Alliance (IMAA). Figures represent announced transactions.

U.S. OFS and Overall M&A Activity Since 2009

0

20

40

60

80

100

120

140

2009 2010 2011 2012 2013 2014 2015 2016

OFS M&A Activity¹

U.S. M&A Activity²

(Indexed to 100 as of 2009)


$550 $545$505

$580$640

$705

$820

$0

$200

$400

$600

$800

$1,000

2010 2011 2012 2013 2014 2015 2016

NAM Dry Powder

Abundance of Dry Powder Remains To Invest In OFS Space

NAM Dry Powder¹ (Dollars in billions)

¹ Source: Preqin.

Energy Private Capital Raises and Dry Powder¹ (Dollars in billions)

$28$20

$34

$51$64 $67

$54

$20

$79$68 $72

$80

$100$115

$125

$145

$0

$40

$80

$120

$160

$200U.S.-Focused Energy Private Capital Raises

Energy-Focused Dry Powder


Pre-IPO Net Debt:

$81.4 million

Eight OFS IPOs Have Priced Since Downturn¹

Pre-IPO Net Debt²:

$94.2 million

Pre-IPO Net Debt:

$235.3 million

Pre-IPO Net Debt:

$45.8 million

Pre-IPO Net Debt:

$11.0 million

Pre-IPO Net Debt:

$70.9 million

2016A EBITDA:

$41.2 million

2016A EBITDA:

$28.3 million

2016A EBITDA:

$0.4 million

2016A EBITDA:

$7.5 million

2016A EBITDA:

$16.6 million

2016A EBITDA:

$8.9 million

Share Price Performance

Since IPO:

28%


Since IPO:

21%


Since IPO:

(24)%


Since IPO:

(7)%


Since IPO:

9%


Since IPO:

24%

¹ Source: Capital IQ. As of May 15, 2017. EBITDA excludes share-based compensation. ² Includes redeemable Series A Preferred Stock.

Pre-IPO Net Debt:

$(0.4) million

Pre-IPO Net Debt:

$2,556.0 million

2016A EBITDA:

$6.8 million

2016A EBITDA:

$337.2 million


Since IPO:

(2)%


Since IPO:

10%


Review of Recent M&A Activity

has announced the accquisition of


has announced a Joint Venture with

has agreed to acquire

has acquired


Three Jackup Drilling Rigs from


has agreed to acquire

Pending Pending Pending Pending May 2017 May 2017 April 2017 April 2017

has acquired

(Arsenal Capotal Partners)

has acquired

Private Regional Sand Produced and Affilied Proppanted Logistics

Companies

have raised minority interest equity capital

has acquired

has acquired

Permian Basin Sand

has been acquired by

has acquired

GRR Entities

has acquired the Pipeline and Chemicals division

of

April 2017 April 2017 March 2017 March 2017 March 2017 March 2017 March 2017 February 2017

has acquired majority interest in

has made an equity investment in

has acquired Directional Drilling & LWD Technology

from

has acquired the Equipment and Response

business of

has acquired

has acquired



SPL Holdings

February 2017 January 2017 January 2017 January 2017 January 2017 October 2016 October 2016 September 2016


OFS High Yield Activity Is Making A Comeback

$0

$2,000

$4,000

$6,000

$8,000

$10,000 Loan Volume ($ millions) HY Volume ($ millions)

Source: LCD and Bloomberg.

Oil & Gas High Yield vs. Loan Volume Since January 2016


Energy High Yield Markets Have Returned To Parity With Overall U.S.

15.4% 16.1%

0.0%

5.0%

10.0%

15.0%

20.0%

25.0% S&P U.S. Dollar Global High Yield Corporate Bond Energy Index

S&P U.S. High Yield Corporate Bond Energy Index

Source: LCD and Bloomberg.

Energy High Yield Index – Yield To Worst Since January 2016


Pace Of Oilfield Services Bankruptcies Has Slowed In Recent Months

1 4 6 7 9 15 16 19

26 31 34

39 41 44 53

61 70

79 85

93 99

108 109 111 117 119

124 127

0

20

40

60

80

100

120

140

2015-2017 Cumulative North American Oilfield Services Bankruptcy Filings¹

¹ Source: Haynes and Boone. As of May 2017.


Total OFS Bankruptcy Debt Exceeds $27 Billion

$252 $350 $424

$3,348$4,944

$7,471

$9,413$11,110

$16,423$17,323

$169 $193$1,567

$1,964$2,787

$4,638 $5,093

$7,687

$9,425 $10,040

$421 $543

$1,991

$5,312

$7,732

$12,109

$14,506

$18,797

$25,848$27,363

$0

$5,000

$10,000

$15,000

$20,000

$25,000

$30,000

Q1 '15 Q2 '15 Q3 '15 Q4 '15 Q1 '16 Q2 '16 Q3 '16 Q4 '16 Q1 '17 Q2 '17

Secured Debt

Unsecured Debt

Total Debt

2015-2017 Cumulative North American Oilfield Services Bankruptcy Debt¹ (Dollars in millions)

¹ Source: Haynes and Boone. As of May 2017.


Previously Bankrupt OFS Companies Are Relisting

12/15 – Emerged from bankruptcy

Approximately $694 million of debt was eliminated through Chapter 11

$250 million of debt remains on the balance sheet

12/16 – Resumed trading on the NYSE


Eliminated $1.4B in debt through Chapter 11

Raised $200 million through rights offering to retire debtor-in-possession financing

3/6 – Resumed trading on the NYSE


Raised $125 million of new capital and debt level reduced by $775 million

12/27 - Resumed trading on the NYSE

3/11 – Entered into restructuring support agreement with senior notes holders

5/1 – Filed Chapter 11 petition for reorganization

Post Chapter 11 Post Chapter 11 Post Chapter 11 Chapter 11 Chapter 11

1/22 – Commenced voluntary reorganization under Chapter 11

Anticipate exchanging $280 million of debt for equity

3/29 – Court approval of Chapter 11 plan

4/13 – Chapter 11 effective date


E&P Capital Spending Budgets Are Expanding

¹ Source: Spears and Associates.

$77.2

$90.1$99.6

$112.0

$77.5

$43.3

$85.6

$108.6

$130.9

$144.4 $148.8

$0.0

$20.0

$40.0

$60.0

$80.0

$100.0

$120.0

$140.0

$160.0 Historical Drilling and Completion Spend

Projected Drilling and Completion Spend

Historical and Projected U.S. Drilling and Completion Spending¹


$0

$10

$20

$30

$40

$50

$60

$70

$80

$90

$100Breakeven (Assumes 30% IRR)

Current WTI Price ($48.85)²

WTI Breakeven By Oil Play¹ (Dollar amounts in millions)

Permian Basin Plays

¹ Source: Simmons Research. ² Source: Bloomberg. As of May 15, 2017.


0

50

100

150

Jun-14 Sep-14 Dec-14 Mar-15 Jun-15 Sep-15 Dec-15 Mar-16 Jun-16 Sep-16 Dec-16 Mar-17

Permian E&P Index² E&P Index (Ex. Permian)³

(8)%

(76)%

Permian E&P Has Outperformed Non-Permian E&P During Downturn

68% Outperformance

(Indexed to 100 Since June 1, 2014)

Indexed Performance Since June 1, 2014¹

¹ Source: Capital IQ. As of May 15, 2017. ² Includes: Approach Resources, Concho Resources, Callon Petroleum, Diamondback, Energer, Laredo Petroleum, Parsley Energy, Pioneer Natural Resources, RSP Permian and Cimarex. ³ Includes U.S. E&P operators excluding those included in Permian E&P index.


0%

10%

20%

30%

40%

50%

60%

70%

80%

90%

100%

$0

$1,000

$2,000

$3,000

$4,000

$5,000

$6,000

$7,000 PermianAll Other²% Permian

Permian Basin Has Dominated E&P Capital Raising

Public Equity Capital Raised By Area¹ (Dollar amounts in millions)

¹ Source: Capital IQ. As of May 15, 2017. ² Includes DJ Basin, Appalachia, Eagle Ford, Bakken, Diversified, Mid-Con, MLP.

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Investing in Oilfield Services and Equipment Discussion · · 2017-05-18Investing in Oilfield...

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