Key Energy Services. Changing The Way You Think About Well Servicing. Investor Presentation. June 2011

Transcription

1 Key Energy Services Changing The Way You Think About Well Servicing Investor Presentation June 2011

2 Safe Harbor Language This presentation may contain forward-looking statements within the meaning of the Private Securities Litigation Reform Act of Any matters that are not of historic fact are forward-looking statements. These forward-looking statements are based on Key's current expectations, estimates and projections about Key, its industry, its management s beliefs and certain assumptions made by management, and include statements regarding expected increases in activity, anticipated margin improvement and expected financial performance. No assurance can be given that such expectations, estimates or projections will prove to have been correct. Whenever possible, these forward-looking statements are identified by words such as expects, believes, anticipates and similar phrases. Readers and any audience are cautioned that any such forward-looking statements are not guarantees of future performance and are subject to certain risks, uncertainties and assumptions that are difficult to predict, including, but not limited to: risks affecting activity levels for Key s services, including the possibility that the perceived cyclical recovery or future growth opportunities in Key s industry may not materialize and may not result in activity increases; risks that Key s customers may not increase, or may even decrease, their activity levels; risks relating to changes in the demand for or the price of oil and natural gas; risks relating to increases in costs of labor, fuel, equipment and supplies employed and used in Key's businesses; risks relating to compliance with environmental, health and safety laws and regulations, as well as actions by governmental and regulatory authorities; risks associated with recently completed transactions, including the risk that Key may be unable to achieve the benefits contemplated under these transactions; risks related to integration of the acquired operations; risks affecting Key s foreign operations, including risks related to activity levels in Mexico, other risks affecting Key s operations in Argentina and Russia, risks associated with expanding operations in Colombia and Bahrain, and risks that Key may not be able to achieve its overall international growth and mobilization strategy; risks that Key may not be able to execute its existing capital expenditure program or any additional capital expenditures that may be identified beyond its existing program and/or that any such capital expenditure investments, if made, will not generate adequate returns; and other risks affecting Key s ability to maintain or improve operations, including its ability to maintain prices for services under market pricing pressures, weather risks, and the impact of potential increases in general and administrative expenses. Because such statements involve risks and uncertainties, Key's actual results and performance may differ materially from the results expressed or implied by such forward-looking statements. Given these risks and uncertainties, readers are cautioned not to place undue reliance on such forward-looking statements. Other important risk factors that may affect Key's business, results of operations and financial position are discussed in its most recently filed Annual Report on Form 10-K, recent Quarterly Reports on Form 10-Q, recent Current Reports on Form 8-K and in other Securities and Exchange Commission filings. Unless otherwise required by law, Key also disclaims any obligation to update its view of any such risks or uncertainties or to announce publicly the result of any revisions to the forward-looking statements made here. However, readers should review carefully reports and documents that Key files periodically with the Securities and Exchange Commission. 2

3 Market Dynamics Cyclical recovery Oil remains a major driver of Key s increasing activity. Liquids-rich plays are driving additional activity increases. Improving efficiency and pricing should help drive expanding margins. Secular growth opportunities With our larger rig assets, fluid management capabilities, long-lateral capable coiled tubing units, and unique technologies, we believe that Key is well positioned to benefit from: early cycle horizontal shale well completions. later cycle heavy-duty workovers and well remediation. Key continues to grow its exposure to under-exploited exploited oil fields internationally. 3

4 U.S. Business Overview Rig Services: Heavy Workover Horizontal Well Completions Re-completions Specialty Drilling Repair & Maintenance Plugging & Abandonment FY Q 2011 U.S. Lines Of Business Revenue Percent Of Revenue Percent Of (In millions) Total U.S. (In millions) Total U.S. Rig Services $562 58% $162 49% Fluid Management (FMS) $228 24% $87 26% Intervention (Coiled Tubing) $88 9% $54 17% Fishing & Rental (FRS) $83 9% $27 8% Total U.S. Revenue $ % $ % Intervention Services: Wellbore Cleanout Multi-stage Frac Plug & Packer Milling Plug & Packer Setting & Retrieval Logging & Perforating Tool Deployment Remedial Wellbore Repair & Maintenance FY 2010 U.S. Revenue Split 1Q 2011 U.S. Revenue Split Fluid Management Services: Fluid Transportation Fluids Disposal Storage Tank Rental Total Field Fluid Logistics Management CT 9% FMS 24% FRS 9% Rigs 58% CT 17% FMS 26% FRS 8% Rigs 49% Wellbore Cleanout Fishing & Rental Services: Downhole Tool Retrieval Drill Pipe & Tubing Rental Handling & Downhole Tools Pipe Recovery 2Q09 4

5 U.S. Activity Trends 2,300 2,100 # of Active Rigs % Horizontal U.S. Drilling Rig Count 1,900 % Oil Directed 1,700 1,500 1,300 1, % 60% 50% 40% 30% 20% 10% 0% Jan 03 Mar 03 May 03 Jul 03 Sep Nov 03 Jan 04 Mar 04 May 04 Jul 04 Sep Nov 04 Jan 05 Mar 05 May 05 Jul 05 Sep Nov 05 Jan 06 Mar 06 May 06 Jul 06 Sep Nov 06 Jan 07 Mar 07 May 07 Jul 07 Sep Nov 07 Jan 08 Mar 08 May 08 Jul 08 Sep Nov 08 Jan 09 Mar 09 May 09 Jul 09 Sep Nov 09 Jan 10 Mar 10 May 10 Jul 10 Sep Nov 10 Jan 111 Mar 11 1 May 111 Source: Baker Hughes; 1/3/2003 through 5/27/2011. Oil activity is being driven by higher oil prices (cyclical). Horizontal activity is being driven by technology (secular). 5

6 U.S. Market Total Service Locations: 162 Rig Service Locations: 75 Rig Service Rigs: 787 FMS Service Locations: 57 Fluid Trucks: 1,000+ Storage Tanks: 3,400+ Disposal Wells: 65 U S Rig Market Share U.S. Key 29% Coiled Tubing Service Locations: 9 Coiled Tubing Units: 43 Others Oth 71% FRS Service Locations: 21 As of December 31, Source: AESC Well Service Rig Count as of Apr 30, 2011, for Active and Available Rigs. Facilities represented on map as of November

7 Key s Global Presence Is Growing Well Servicing, g, Workover, Drilling & Completion Well Servicing, g, Workover, Drilling & Completion Fluid Management Reservoir Engineering Coiled Tubing Fishing g & Rental 18% Well Servicing, Workover & C Completion l ti Well Servicing, Workover & Completion 33% Well Servicing, Workover & Completion Well Servicing, Workover, Drilling & Completion Key Historical International Revenue Growth $250 $197 $200 $192 Key Presence In Millions $176 $150 $106 $100 $78 Oil Producing O oduc g Countries Cou t es $60 $50 $40 $ Source: Key Energy Services, Inc

8 Horizontal Well Secular Trends Horizontal wells require: 3-5 times overall service intensity vs conventional wells. Larger drilling/completion, workover, and well servicing rigs for: New well drilling and completions. Later life maintenance, repair, and workovers. Long-lateral l capable coiled tubing units. Larger well fluid volumes; overall higher level of fluid logistics management; many more frac tanks. Higher level of pressure control management. Increased use of rental pipe and tools. 8

9 Rig Services Largest onshore, rig-based well servicing contractor with over 860 well service rigs worldwide. Bifurcated market: Complex live well intervention, horizontal completions, heavy workovers, and specialized drilling activity. Lower-end repair and maintenance services. Investing in quality, efficiency & safety of assets. Differentiating technologies drive more value to Key and its customers. 9

10 Differentiating Technologies BASE BEAM HYDRAULIC RIG FLOOR RESERVOIR AND FIELD ENGINEERING 10

11 Fluid Management Services More horizontal well completions drive higher overall well fluid demands. Tightening g regulatory environment leads to increased logistical challenges requiring experience. Disposal well capacity and location are critical. Total fluids management opportunities are evolving. Patented SandX technology enables separation of solids and can lower customer disposal costs. 11

12 Coiled Tubing --- Why It Fits With Key Secular growth trend usefulness of coiled tubing as an oilfield tool is still evolving. Multiple uses are still growing: Historically Limited to remedial work such as wellbore washout and acid placement; complementary to well servicing. Now Logging and perforating conveyance, packer and plug milling, specialized drilling, frac placement, pre and post-frac well prep, fishing. Many uses are driven by new completions. Also employed in later-life, well remediation. Coiled tubing is a useful tool for providing early and late cycle high pressure well intervention services. Key s next steps: Increase capacity? Coiled tubing deployed tools? International expansion? 12

13 Fishing & Rental Services Horizontal wellbore designs are driving higher demand for premium, high-torque drill pipe. More complex completions and customer focus on safety is driving higher demand for our premium, high-pressure blowout preventers. Complexity in wellbore design is increasing Key s fishing and rental revenue opportunity per well. Expanding presence in shale markets. 13

14 Financial Strength to Execute Growth Strategy Balance Sheet - As of March 31, 2011 (1) In millions, except for percentage Cash $13.2 Net Property and Equipment $ Total Debt $583.6 Total Equity $970.9 Net Debt to Total Capitalization 36.7% (1) Derived from Key's condensed consolidated balance sheet as of March31, Estimated Base Capital Spending Budget: $315 Million Growth Opportunities ~77% U.S. FMS & FRS ~30% International / Other ~20% Maintenance & Equipment Upgrades ~23% U.S. Rig & CT ~50% We have identified additional opportunities that could materialize in 2011, which could result in another $100 million of capital investment. 14

15 Key Energy Services Changing The Way You Think About Well Servicing