TETRA Technologies Inc. November 2013

Transcription

1 TETRA Technologies Inc. November 2013

2 Forward-Looking Statements DISCLOSURE Forward-Looking Statements: This presentation includes certain statements that are or may be deemed to be forward-looking statements. Generally, the use of words such as may, will, expect, intend, estimate, projects, anticipate, believe, assume, could, should, plans, targets or similar expressions that convey the uncertainty of future events, activities, expectations or outcomes identify forward-looking statements that we intend to be included within the safe harbor protections provided by the federal securities laws. These forward-looking statements include statements concerning expected results of operational business segments for 2013, anticipated benefits from our acquisitions of assets and businesses, projections concerning our business activities in the Gulf of Mexico, including potential future benefits from increased regulatory oversight of well abandonment and decommissioning activities, financial guidance, estimated earnings, earnings per share, and statements regarding our beliefs, expectations, plans, goals, future events and performance, and other statements that are not purely historical. These forward-looking statements are based on certain assumptions and analyses made in light of our experience and our perception of historical trends, current conditions, expected future developments and other factors we believe are appropriate in the circumstances. Such statements are subject to a number of risks and uncertainties, many of which are beyond our control. Investors are cautioned that any such statements are not guarantees of future performances or results and that actual results or developments may differ materially from those projected in the forward-looking statements. Some of the factors that could affect actual results are described in the section titled Certain Business Risks contained in our Annual Report on Form 10-K for the year ended December 31, 2012, as well as other risks identified from time to time in our reports on Form 10-Q and Form 8-K filed with the Securities and Exchange Commission. Non-GAAP Financial Measures: During the course of this presentation, we may refer to numerical measures that are or may be deemed to be non-gaap financial measures. Supplemental financial disclosures for these measures, including the most directly comparable GAAP measures and associated reconciliations, are included in these presentation materials and available on our website at tetratec.com. Supplemental financial disclosures are not substitutes for financial information prepared in accordance with GAAP and should be considered within the context of our complete audited financial results for the given period, which are also available on our website. Further Disclosure Regarding the Use of Non-GAAP Measures: TETRA defines net debt as the sum of long-term and short-term debt on its consolidated balance sheet, less cash, excluding restricted cash on the consolidated balance sheet and excluding the debt and cash of Compress Partners, L.P. Management views net debt as a measure of our ability to reduce debt, add to cash balances, pay dividends, repurchase stock, and fund investing and financing activities. Management views revenue excluding Maritech, cash from operating activities excluding Maritech, and EBITDA excluding Maritech as useful measures to asses our performance in prior periods following the sale of substantially all of our Maritech segment operations. EBITDA excluding Maritech, a performance measure used by management, is defined as net income (loss) plus: (1) interest expense (net of interest income), (2) income tax provision, and (3) depreciation, depletion, amortization, accretion and impairments, all of which are calculated excluding our Maritech operations. EBITDA excluding Maritech is not defined under GAAP and does not purport to be an alternative to net income or other GAAP financial measures as a measure of operating performance. Because not all companies use identical calculations, our presentation of EBITDA excluding Maritech may not be comparable to other similarly titled measures of other companies. Management views EBITDA excluding Maritech as useful to investors and other external users of our consolidated financial statements as an additional tool to evaluate and compare our operating performance, because EBITDA is widely used by investors to measure a company s operating performance without regard to items such as interest expense, taxes, depreciation, depletion, and amortization, which can vary substantially from company to company. The reconciliation included in the Financial Data Appendix to this presentation is not a substitute for financial information prepared in accordance with GAAP, and should be considered within the context of our complete financial results for the periods indicated, which are available on our website at tetratec.com 2

3 Corporate Profiles COMPANY OVERVIEW Stock Market NYSE: TTI NASDAQ: GSJK Recent Share Price (1) $12.29 $21.62 Market Capitalization (1) $971M $337M Enterprise Value (1) $1,299M $3626M Number of Shares/ Units Outstanding (2) 77.9M 15.6M Average volume (last 3 months) (1) 520,948 11,095 Distribution Annualized (3) $1.72 Distribution Yield (1) 8.0% % Owned by TTI 83% Headquarters The Woodlands, TX Oklahoma City, OK (1) As of 11/7/2013 (2) As of 9/30/2013 (3) Q Annualized 3

4 Business Segments COMPANY OVERVIEW FLUIDS SERVICES The only vertically integrated completion fluids based company for the oil & gas market PRODUCTION TESTING TETRA is the largest North America production testing company COMPRESSCO Maximizing mature field production while expanding its service offering to the oil & gas shale market OFFSHORE SERVICES A leading provider of decommissioning and well abandonment services in Gulf of Mexico MARITECH Targeting to complete the vast majority of its ARO obligations in 2013 $335M Revenue (1) $208M Revenue (1) $109M Revenue (1) $266M Revenue (1) Phasing Out 15% Margin (1,2) 20% Margin (1,2) 19% Margin (1,2) 10% Margin (1,2) (1) 2012 Financials (2) Profit before taxes excluding corporate overhead, interest expense and unusual items 4

5 Broad Service Offering With Competitive Differentiators Life of Well 5

6 Key Market Drivers COMPANY OVERVIEW 50 GoM Working Floaters (1) 1,600 US Unconventional Rig Count (1) 90% 45 1,400 80% 40 1,200 70% 35 1,000 60% 50% % % % % A 2002A 2004A 2006A 2008A 2010A 2012A 2014E 0% 0 U.S. Rig Count -- Horizontal U.S. Rig Count -- Directional Percentage of U.S. Rigs Drilling Deviated (Directional or Horizontal) Wells Highest Gulf of Mexico deepwater floater rig count in 10 years benefits: - Completion fluids and related services - Wellbore clean up Projections reflect continued deepwater activity growth worldwide (1) Source: Barclays - Rig cooling Robust unconventional drilling activity: - Completion fluids and additives - Water management - Production testing - Greywolf and ERS acquisitions - Compressco s vapor recovery Unconventional drilling activity is expected to grow internationally As unconventional wells experience declining rates of production, this will represent opportunities for Compressco 6

7 TETRA is well positioned to leverage synergies and provide services through a global infrastructure 7

8 TETRA s Transformation Recent Investments into Focus Areas International expansion and significant capital investment to expand Production Testing $162M of Production Testing acquisitions Capacity addition to fluids manufacturing IPO Compressco MLP for acquisition currency Acquired 1700-T heavy lift barge for decommissioning Frac water management technology introduced $350 $300 $250 $200 $150 $100 $50 $0 -$50 -$100 -$150 $122 $170 -$95 -$102 -$94 -$ * Proceeds from Sale of MRI ARO Transfer Divestiture of Maritech ($ millions) ARO Cash Settlements *3Q 2013 TTM Aggressively Optimizing the Organization Future Strategic Investments and Growth $19M of cost reductions achieved in Offshore Services $16.5M of targeted G&A cost reductions $87M cash generated in Q from focused initiatives $16M of Offshore asset sales Targeting $80M free cash flow in 2014, $1.00/share TETRA Priorities for Free Cash Flow Accelerate organic growth Acquisitions Returning cash to shareholders Compressco Natural growth in unconventional markets and international expansion Enter into midrange HP capacity 8

9 TETRA is Evolving EVOLUTION AND STRATEGY TETRA is a pure play oilfield services company following the divestiture of Maritech 2009 Revenue (1) $1,100 $1,000 Oilfield Services vs E&P Revenue (1) ($ millions) Compressco 10% Production Testing 9% Maritech 19% $900 $800 Offshore 38% Fluids 24% $700 $ Revenue* (1) $500 Compressco 12% $ * Oilfield Services E&P * 3Q 2013 TTM Production Testing 22% Fluids 40% Fluids, Production Testing and Compressco represent TETRA s highest growth markets with the highest margins. (1) Revenue excludes eliminations Offshore 26% * 3Q 2013 TTM 9

10 Global Footprint, Growing International Presence COMPANY OVERVIEW 2012 Revenue Mix excl. Offshore Services Intl. 38% US 62% 30% International revenue growth from 2011 to 2012 excluding Offshore Services 10

11 Developing Synergies TETRA has evolved into a harmonized infrastructure with multiple service offerings EVOLUTION AND STRATEGY Successfully cross selling services Leveraging local nationals in management to enhance customer relationships One management team for all service and product offerings internationally Shared supply chain, IT, human resources, HS&E, legal and accounting functions Common financial metrics, oversight and governance Expanding geographic footprint provides significant pull-through revenue and margin leverage 11

12 Strategic Evolution Short Term Tactical Right sized Offshore Services and G&A Complete Maritech decommissioning Accelerate growth in Frac water management Reposition Production Testing resources Capital investments targeting IRR rates above WACC 2009: $0.93 Billion (1) Fluids, PT and Compressco 43% Offshore Services 38% E&P Revenue 19% Long Term Strategy Compressco acquisitions Grow Production Testing Leverage Fluids manufacturing capacity for offshore growth Accelerate free cash flow generation for shareholder value creation 2013: $0.97 Billion* (1) Fluids, PT and Compressco 74% Offshore Services 26% (1) Revenue excludes eliminations * 3Q 2013 TTM 12

13 Leveraging the value of the integrated business units and service offerings to the oilfield and other industries

14 Fluids Services Completion Fluids FLUIDS SERVICES Only vertically integrated cost effective solutions provider of high-end clear brine fluids (CBFs) - Manufacturer of calcium bromide, zinc bromide and calcium chloride - Long-term bromine supply agreement provides secure sourcing and cost stability High value fluids franchise effectively competing against SLB, HAL and BHI with a strong GOM position Leveraged to the growing deepwater and North America unconventional onshore markets Water Management Unique cost effective solutions for frac water management Proprietary technology with exclusive supplier agreements Rapid deployment for shorter turnaround time between jobs Units deployed in most of the key shale basins 14

15 Fluids Services Financial Overview Revenue ($ millions) EBITDA ($ millions) and Margin (1) FLUIDS SERVICES $400 $350 $300 $250 $276 $305 $335 $384 $100 $80 $60 $40 $20 16% $44 17% $52 21% $70 25% $94 25% 20% 15% 10% 5% $ * $ * 0% * 3Q 2013 TTM * 3Q 2013 TTM 2012 Revenue Profile Offshore 36% International 35% Onshore 64% United States 65% (1) EBITDA excludes unusual items 15

16 Production Testing Flow back pressure and volume testing provides data to optimize production and minimize reservoir damage PRODUCTION TESTING Production Testing used to access newly available production and extend productive life of wells Well Testing evaluates well performance under various conditions Rig Cooling suppresses heat generated by high-rate flaring One of the largest fleets of onshore flowback well testing in the US, focused on the shale basins Mobile equipment can be repositioned to the gas and liquids markets Acquisitions in 2012 add scale in North America and increases exposure to Offshore market Strong market positions in the US, Canada, Mexico, Argentina, Brazil and Saudi Arabia 16

17 Production Testing Financial Overview PRODUCTION TESTING Revenue ($ millions) EBITDA ($ millions) and Margin (1) $350 $250 $150 $50 -$50 $90 36% 40% $80 31% 35% $213 $70 28% 24% 30% $208 $60 $64 25% $104 $140 $50 $50 20% $40 $51 15% $30 $20 $30 10% $10 5% * $0 0% * * 3Q 2013 TTM * 3Q 2013 TTM 2012 Revenue Profile Offshore 13% Onshore 87% United States 63% International 37% (1) EBITDA excludes unusual items 17

18 Compressco TETRA s publicly traded MLP with TETRA holding the general partner IDR rights Example Production Volume Well Decline Curve COMPRESSCO Enhances production of mature dry gas and liquid loaded gas wells with low formation pressure Fleet of over 3,900 low horsepower (<47 hp) compressors Unconventional services - Vapor recovery gas vapors from oil storage tanks - Casing gas systems that enhance oil production by reducing down-hole pressure Over 29% of our US working units were utilized in liquids related applications, up from 3% in 2008 Vertically integrated compression services provider supported by 160 US field service technicians 18

19 Compressco Financial Overview Revenue ($ millions) EBITDA ($ millions) and Margin COMPRESSCO $150 $125 $100 $75 $81 $96 $109 $121 $50 $40 $30 $20 38% $31 30% $29 33% $36 30% $37 40% 30% 20% $50 $10 10% $25 $0 0% * * * 3Q 2013 TTM * 3Q 2013 TTM 2012 Revenue Profile Liquids and Oil 27% United States 59% International 41% Gas 73% 19

20 Compressco s Distribution Trend FINANCIAL OVERVIEW TETRA is the holder of 83% of the outstanding units of Compressco Additionally TETRA, as the general partner, is entitled to IDR s (Incentive Distribution Rights) $1.75 $1.70 $1.65 $1.60 $1.55 $1.55 Quarterly Distribution (Annualized) $1.72 $1.70 $1.68 $1.59 TETRA s cash distributions from Compressco were $21.7 million on a TTM basis, including $0.5 million of GP IDR s $1.50 $1.45 Q4-11 Q1-12 Q2-12 Q3-12 Q4-12 Q1-13 Q2-13 Q3-13 Compressco s trailing twelve month coverage ratio is 1.22 TETRA is approaching the 15% IDR threshold Compressco Partner s Net Debt/TTM EBITDA of 0.40 $2.50 $2.25 $2.00 $1.75 $1.50 $1.25 $1.00 $0.75 $0.50 TTI General Partner IDR Thresholds $2.33 $1.94 $1.72 $1.78 $1.55 2% 2% 15% 25% 50% Original Current 15% IDR 25% IDR 50% IDR 20

21 Offshore Services A leading GoM provider of decommissioning and well abandonment services OFFSHORE SERVICES - Largest provider of heavy lift platform removals with two derrick barges, including the newly built 1,700-T TETRA Hedron - Leading well plug and abandonment services - Leading provider of diving and cutting services, with three diving vessels including saturation systems Approximately 2,900 platforms on the shelf in the GOM Project management and consulting leverage highly complementary suite of services Expanding in GoM construction and maintenance projects including light subsea construction 21

22 Offshore Services Financial Overview OFFSHORE SERVICES Revenue ($ millions) EBITDA ($ millions) and Margin (1) $350 $300 $250 $200 $150 $100 $50 $0 $274 $287 $266 $ * Revenue Mix Maritech Third Party $60 $50 $40 $30 $20 $10 $0 15% $41 13% $38 16% $42 18% $ * * 3Q 2013 TTM * 3Q 2013 TTM 300 GoM Structures Removed (2) 20% 18% 16% 14% 12% 10% 8% 6% 4% 2% 0% 100% 80% % % 20% 0% * * Estimate (1) EBITDA excludes unusual items As of May, permits have been approved for platform removals 629 platforms fit the criteria of idle iron or are on expired/terminated leases Approx 2,900 production platforms on US Outer Continental Shelf (2) Caissons and Platforms removed (Source: BSEE) 22

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24 Tactical Initiatives Strong focus on cost controls: - Implemented Offshore Services cost reductions of $19 million - Initiated company-wide G&A cost reductions of $16.5 million - Repositioning Production Testing resources and implementing targeted cost reductions FINANCIAL OVERVIEW Focus on generating free cash flow: - Achieved $87 million of cash generation initiatives during Q Implementing process enhancements to improve working capital management and equipment utilization - YTD Q free cash flow of $70 million, excluding Maritech - Targeting $1.00/share free cash flow in 2014 post Maritech - Accelerating completion of Maritech abandonment and decommissioning work Focus on core areas: - Integration and growth of 2012 Production Testing acquisitions - Accelerated capital investments in Frac water management - Manufacturing of completion fluids - Deepwater GoM drilling activity 24

25 2013 Segment TTM FINANCIAL OVERVIEW $ millions Trailing Twelve Months (9/30/2013) Revenue Operating Income Operating Margin % Capital Investments Fluids Division $384 $ % $41 Production Testing $213 $ % $30 Compressco $121 $ % $25 Offshore Services $250 $31 (1) 12.6% (1) $ EPS guidance range, excluding Maritech, of $ $0.75, up 13% over 2012 driven by - Strong offshore fluids and water management - Cost reductions and benefit of 2012 acquisitions - But partially offset by weak North America for production testing Fluids Division - Increased activity in deep-water GoM - Recent investments in manufacturing capacity - Continued investments in water management Production Testing - Weak onshore 2013 US production testing market - Implementing cost reduction actions - Continued international growth through expansion and new service (early production systems) Compressco - Growth from unconventional applications and improving gas price - Growth from 2012 Latin America investments - Benefit from cost reductions and supply chain initiatives Offshore Services - Improved results due to cost reductions - Improvement in issuance of federal permits - Pent-up demand for decommissioning services could drive improved results (1) Operating Income and Margin excludes unusual items of $7.5 Mil incurred in TTM 25

26 Strong Balance Sheet Completing E&P Asset Retirement Obligations with a strong balance sheet Long-term debt at attractive rates of 4%-6% Ample liquidity to fund growth opportunities FINANCIAL OVERVIEW As of Sept. 30, 2013 ($ millions) Total Debt $329 (excluding Compressco Partners debt) Net Debt (1) $310 TTM EBITDA attributable to TTI $188 Stockholders (excluding Maritech) (1) Net Debt/TTM EBITDA 1.65 (excluding Maritech) (1) TETRA Liquidity $254 Annualized Free Cash Flow Q3- $ (excluding Maritech ARO) (1) $100 $80 $60 $40 $20 $0 $305M of Long Term Debt ($ millions) 2013 (2) (3) 2020 (3) (1) Non-GAAP financial measures are reconciled to the nearest GAAP measure in the Financial Data Appendix to this presentation (2) 4% (3) In 2020, two senior notes will mature, one in 04/2020 and the other in 12/

27 TETRA as an Investment Opportunity 2009: $0.93 Billion (1) Q TTM: $0.97 Billion (1) Fluids, PT and Compressco 43% Offshore Services 26% Offshore Services 38% Fluids, PT and Compressco 74% E&P Revenue 19% Investment Highlights Executing on short-term tactical initiatives In the advanced stages of a transformation Macro drivers are deepwater and unconventional activity Transitioning to free cash flow of $1.00/share in 2014 Strong balance sheet with ample liquidity Significant recent insider buying (1) Revenue excludes eliminations and Corporate overhead 27

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29 TETRA Leadership Team Highly qualified management with a broad range of experience from large multi-national and small service companies LEADERSHIP AT TETRA Stu Brightman President & CEO President & CEO since May 2009 COO during years of domestic and international assignments with Cameron Iron Works and Dresser in finance, operations, general management and executive positions Wharton School of Business Elijio Serrano SVP & CFO Joined TTI August, 2012 CFO of 2 private equity energy service companies Public company CFO of a $3.1B high growth global logistics and transportation company 17+ year veteran of Schlumberger with global operations and financial leadership experience Philip Longorio SVP Prod. Testing and Fluids Joined TTI February, years of experience in the oil & gas industry with WellDynamics, Halliburton and Gearhart Industries in operations, general management and executive management positions Edwin Goldman SVP Offshore Services Joined TTI August, years of domestic and international assignments with Kellogg Brown & Root, Heerema Marine Contractors in business strategy and development, operations, general management and executive management positions 29

30 TETRA Leadership Team Highly qualified management with a broad range of experience from large multi-national and small service companies LEADERSHIP AT TETRA Peter Pintar SVP Corporate Development Joined TTI November, years of experience in corporate strategy and development with Smith International and DTE Energy 8 years of experience as a management consultant with McKinsey & Company Ron Foster President of Compressco President Compressco since October 2008 Previously SVP of Sales & Marketing with Compressco Over 30 years of experience with Wood Group, Halliburton and Dresser Bass C. Wallace, Jr. SVP & General Counsel Served as General Counsel since 1994 Practiced law for 11 years J.D. degree from the University of Texas School of Law Elisabeth K. Evans VP Human Resources Joined TTI January, 2013 Over 25 years of human resources and corporate communications experience with Boardwalk Pipeline, AGL Resources, Aramark, British Petroleum 30

31 Appendix (thousands, except per share amounts) Market Capitalization: TTI Market price per share on 11/07/2013 $ Average number of diluted shares outstanding for three months ended 9/30/13 78,963 Market Capitalization $ 970,455 Enterprise Value: TTI Market capitalization based on 11/07/2013 stock price $ 970,455 Total debt, excluding Compressco Partners' debt, as of 9/30/13 328,525 Enterprise Value $ 1,298,980 Market Capitalization: GSJK Market price per unit on 11/07/2013 $ Average number of diluted units outstanding for three months ended 9/30/13 15,597 Market Capitalization $ 337,198 Enterprise Value: GSJK Market capitalization based on 11/07/2013 stock price $ 337,198 Total Compressco Partners' debt, as of 9/30/13 24,373 Enterprise Value $ 361,571 (in thousands) Compressco Partners Distributable Cash Flow FINANCIAL OVERVIEW Nine Months Ended September 30, 2013 Net income $ 11,220 Provision for income taxes 2,478 Depreciation and amortization 10,723 Interest (income) expense, net 303 EBITDA $ 24,724 Less: Current income tax benefit (expense) (2,269) Maintenance capital expenditures (891) Interest expense (303) Plus: Non cash cost of compressors sold 119 Equity compensation 1,030 Distributable cash flow $ 22,410 31

32 Appendix ($ thousands) Reconciliation of Net Debt and Net Debt/Trailing Twelve Month EBITDA Excluding Maritech (1) Net Debt components as of 9/30/2013 Total debt, excluding Compressco Partners' debt $ 328,525 Less: cash, excluding cash held by Compressco Partners (18,574) Net Debt $ 309,951 TTM EBITDA excluding Maritech components as of 9/30/2013 Net income (loss) attributable to TETRA stockholders TTM $ 6,474 Net interest expense TTM 17,172 Equity compensation 7,161 Income tax (benefit) provision TTM 3,160 DD&A (2) TTM 87,819 TTM EBITDA 121,786 Less: Maritech income (loss) before taxes TTM (66,930) Maritech DD&A (2) TTM 207 Maritech net interest (income) expense TTM 99 TTM EBITDA excluding Maritech $ 188,410 Net Debt/TTM EBITDA excluding Maritech 1.65 ($ thousands) ($ thousands) FINANCIAL OVERVIEW Reconciliation of Free Cash Flow TTM 2013 Q3 excluding Maritech (1) 9/30/2013 Cash from operating activities $ 79,020 Add: Decommisioning Liabilities 127,664 Less: Capital Expenditures (100,471) Free Cash Flow 106,213 Reconciliation of Free Cash Flow nine months ended on 2013 Q3 Annualized excluding Maritech (1) 9/30/2013 Cash from operating activities $ 43,907 Add: Decommisioning Liabilities 99,366 Less: Capital Expenditures (73,555) Free Cash Flow 69,718 Annualized Free Cash Flow $ 92,957 (1) See Further Disclosure Regarding the Use of Non-GAAP Measures for additional 32 information (2) DD&A includes asset impairments and oil and gas dry hole costs under successful efforts accounting.

33 Appendix FINANCIAL OVERVIEW Reconciliation of EBITDA Reconciliation of EBITDA Compressco in $ millions * Income(Loss) before Taxes and Disc. Operations $ 18 $ 16 $ 21 $ 20 Interest Expense 0 (0) 0 0 Depreciation Equity Compensation Unusual items EBITDA $ 31 $ 29 $ 36 $ 37 Production Testing in $ millions * Income(Loss) before Taxes and Disc. Operations $ 15 $ 36 $ 40 $ 25 Interest Expense (0) Depreciation Equity Compensation Unusal items 2 (0) EBITDA $ 30 $ 50 $ 64 $ 51 Offshore Services in $ millions * Income(Loss) before Taxes and Disc. Operations $ 5 $ 18 $ 22 $ 24 Interest Expense Depreciation Equity Compensation Unusual items (1) EBITDA $ 41 $ 38 $ 42 $ 45 Fluids in $ millions * Income(Loss) before Taxes and Disc. Operations $ 16 $ 32 $ 51 $ 73 Interest Expense (0) Depreciation Equity Compensation Unusal items 7 0 EBITDA $ 44 $ 52 $ 70 $ 94 * Trailing twelve months 33

34 TETRA Technologies Inc. November 2013