Enercom's Oil & Gas Conference August 2017

Transcription

1 Enercom's Oil & Gas Conference August 2017

2 Safe Harbor provision This presentation contains statements about future events and expectations that can be characterized as forward-looking statements, including, in particular, statements about the Company s plans, strategies and prospects. The use of the words anticipate, plan, seek, intend, estimate, expect, may, should, could, project, believe and similar expressions are intended to identify forward looking statements. Examples of forward-looking statements include, but are not limited to, all statements we make relating to revenue, earnings, margins, profitability, growth rates, and other financial results for future periods. By their nature, forward-looking statements speak only as of the date they are made; are not statements of historical fact or guarantees of future performance; and are subject to risks, uncertainties, assumptions or changes in circumstances that are difficult to predict or quantify. Although the Company believes that the plans, intentions and expectations reflected in or suggested by such forward-looking statements are reasonable, they do involve certain assumptions, risks and uncertainties, and the Company cannot assure you that those expectations will prove to have been correct. Actual results could differ materially from those anticipated in these forwardlooking statements as a result of factors described in this presentation and other risks, including the risks identified in the Company's Annual Report on Form 10-K for the period ended December 31, 2016 and other risks identified in the Company's Quarterly Report on Form 10-Q for the period ended March 31, Many of these factors are beyond the Company s ability to control or predict. The Company cannot assure you that its future results will meet its expectations and investors are cautioned not to place undue reliance on any forward-looking statement made by the Company or its authorized representatives. All subsequent written and oral forward-looking statements attributable to the Company and persons acting on its behalf are qualified in their entirety by the cautionary statements contained in this paragraph, elsewhere in this presentation, and in the Company's periodic reports on file with the Securities and Exchange Commission. The Company does not have any obligation or undertaking to disseminate any updates or revisions to any forward-looking statement contained in this presentation or the admission document to reflect any change in the Company s expectations about the statement or any change in events, conditions or circumstances on which the statement is based. 2

3 Investment highlights Poised for Growth through Recent Contract Awards and Increased Utilization Debt Free Balance Sheet Significant Discount to Peers Based on Enterprise Value to Hydraulic Horsepower (HHP) Experienced Management Team with Committed Investors Currently Working in Leading Unconventional Markets in the U.S. and Argentina Attractive Technologies with Multi-Fuel Turbine Pumps and Down Hole Diagnostics Capability 3

4 Technology-driven, growth platform in leading plays Company Overview Headquartered in Houston, Texas Total capacity: currently ~100,000 HHP, with an agreement to purchase additional 45,000 HHP High-growth oilfield service company providing well stimulation, coiled tubing, and reservoir field management services Strategic growth-focused sponsor in Fir Tree Partners ~67% ownership post equity raises Commenced U.S. Operations in Oklahoma One year contract in place; started in May 2017 Second contract signed in July 2017; to start in October 2017 Exploring potential for 3 rd crew to be added from cash flow in 2018 U.S. capacity: currently ~77,000 HHP, ability to scale to ~122,000 HHP upon close of equipment purchase Initial Operation in Argentina Started with conventional market and transitioned to tight gas market in 2016; signed two year contract starting 4/1/2017 ~23,000 HHP in Argentina; more equipment to be added upon receipt of profitable contractual commitments Differentiated, Proven Technologies Turbine Powered Equipment Reduce footprint, horsepower required and capital cost Emissions well below required Tier 4; among the lowest methane escape engines in the industry Lower fuel costs versus traditional diesel powered engine technologies (1) U.S. EIA June 2013 STACK / SCOOP Leading unconventional plays Argentina holds the world s 3 rd largest technically recoverable shale gas resources and 4 th largest technically recoverable shale oil resources (1) 4

5 Seasoned management team Relevant Experience J. Chris Boswell President, CEO and Co-Founder 28+ years senior management oilfield experience Barry Ekstrand Chief Operating Officer 35+ years senior management oilfield experience Bobby Chapman VP Business Development 35+ years senior management oilfield experience Alexander Nickolatos Chief Financial Officer and Assistant Secretary 15+ years experience in finance and accounting Carlos A. Fernandez Sr. VP, Corp. Development General Mgr., Latin America and Co-Founder 35+ years senior management experience in Latin America Miguel Di Vincenzo VP, Sales & Technology 28 years oilfield services experience in Latin America 5

6 Recent history 8/8/17: Closed $28mm private placement at $1.43 per share (market price) 7/27/17: Signed agreement to purchase 45,000 HHP to support new contract in OK 7/19/17: Signed new contract in OK to support 2 nd well stimulation spread 7/7/17: Closed $15mm private placement at $1.50 per share 6/20/17: Notes converted to common equity at $1.40 per share, leaving debt free balance sheet 5/30/17: Commenced work in OK under one year contract 5/3/17: Announced 2-year contract in Argentina 3/6/17: Completed Recapitalization of Company 1/26/17: Secured 1 st contract in US EcoStim has emerged from the dramatic decline in commodity prices debt free, and well positioned to capitalize on recoveries in the U.S. and Argentina 6

7 Contracts awarded with multiple customers Management has demonstrated its ability to execute during a period of market instability with three contracts awarded since Q The Company capitalizing on growing activity in the best North America shale plays and an improving pricing environment and a long-term contract with the largest operator in Argentina Schedule of Customer Agreements Year Month YPF Midstates July 2017 Contract YPF Midstates July 2017 Contract Commitment Take or pay contract on initial 10 stages per month Commitment to first call on 100% of completions activity Commitment to first call on completions activity in STACK / SCOOP Agreement Expiration April 2019 Contract expires May 2018 Customer option to extend 2nd year Contract expires one year from declaration of readiness, estimated to be October 2018 Customer option to extend 2nd year 7

8 New contract anchors second crew & offers accelerated growth Active Fleets Average Monthly Revenue ($ in MM) 3 Argentina U.S. 3 Argentina U.S. $10 $ $8 1 $6 $5.0 $8.0 1 $4 $ $2 0 $2.0 $2.0 $0.7 $0.9 $0 (1) (2) 4Q2016A 1Q2017A July 2017 Pro Forma 4Q2016A 1Q2017A July 2017E (1) Pro Forma (2,3) (1) First U.S. contract operational on 5/23/17 (2) Second U.S. contract signed on 7/19/17 estimated to begin operations by 10/1/17 (3) October 2017 pro forma estimate assumes that the second U.S. contract supports 2nd well stimulation spread; incremental revenues assume utilization in line with first spread for the month of July 2017, assuming that customers continue their current build out plans 8

9 Attractive value relative to peers based on an enterprise value to HHP basis Total Enterprise Value ($MM) Total Enterprise Value / Total Current HHP ($) (1) $2,500 $2,500 $2,000 $1,500 $1,000 $1,943 $1,697 $1,016 $2,000 $2,070 $2,185 $500 $0 (2) (3) $120 $100 (4) $1,500 $1,677 1,400 1,200 1,159 Total Current HHP (k) (1, 4) $1,000 $827 1, $ $ $0 (2) (3) (4) Note: Enterprise Value reflects 3/31/2017 balance sheet adjusted for footnoted proformaevents, and July 25, 2017 market prices courtesy of FactSet. (1) Total current HHP excludes fleets awaiting delivery. Keane HHP adjusted for RockPileEnergy Services acquisition on 7/3/17, C&J HHP disclosed in 10-Q filing as of 3/31/17, ProPetroHHP disclosed in Q earnings call on 5/11/17 (2) C&J TEV adjusted for 4/21/17 follow-on equity offering (3) EcoStim TEV and HHP includes 16.6mm shares from the offering, $22.7mm of net proceeds. Assumes $40mm unfunded capital expenditures. EcoStim HHP is proforma assuming application of net proceeds 9

10 Opportunities in Oklahoma North Central Oklahoma Highlights The STACK, SCOOP, Merge, Springer formations are among the leading unconventional plays in North America with a low breakeven point 13 Acre Base in Fairview also offers access to Miss Lime, Anadarko, Cleveland and other active basins The STACK, SCOOP, MERGE, SPRINGER plays can deliver strong returns even at lower oil prices - Eco-Stim base of operation 160 Oklahoma Monthly Rig Count (2) Jan '16 Feb Mar Apr '16 '16 '16 May Jun '16 '16 Jul '16 Aug '16 Sep '16 Oct '16 Nov Dec Jan Feb Mar Apr '16 '16 '17 '17 '17 '17 May Jun '17 '17 Jul '17 STACK / SCOOP Other OK Rigs (1) Oil and Gas Investor November 18, 2016 (2) Baker Hughes Rig Count as of July 21,

11 Offering Argentina s Summary growth opportunity is unique Key Selection Criteria For International Shale Market Opportunities 1. Geology Resource produces economic hydrocarbons 2. Pace of activity Sufficient wells to maintain good equipment utilization 3. Demand for hydrocarbons Production consumed locally or export potential 4. Infrastructure Roads, housing, fuel, pipelines and support services 5. Local knowledge Feet on the ground; local network 6. Business risk Regulations, taxes, security, culture, ethics, etc. Source: EIA and Accenture. 11

12 Opportunities in Argentina Most major US shale plays consume million HHP Argentina is importing a significant volume of gas at high prices Supply / Demand equation should favor much stronger prices as activity ramps to full manufacturing mode ESES is well positioned Drilling days per horizontal well 12

13 What has changed in Argentina following Kirchner? New pro-business, free markets President in Macri Natural Gas prices set at $7.50 declining to $6.00 in 2021 Currency controls removed New trade agreement with US & rejoins IMF New deal between government, labor unions, and energy companies to reduce cost and double investment Every sup 13

14 Mature oil producing country with strong customer base E&P Companies Operating in Argentina Source: Management research 14

15 Supermajors taking large positions 15

16 Argentina now focused on growing gas production; high prices locked in rigs starting back to work, barriers to entry remain Barriers to Entry: Importation of new stimulation equipment is still challenging Any new equipment into country must be negotiated with at least 3 agencies (Ministry of Industry, Department of Trade, and Customs Office) Matching agreements need to be negotiated with local vendors Government still favors protectionist policies to support local industry Repatriation of dollars has been difficult historically; still scares some competitors 16

17 Technology

18 Offering You can t Summary manage what you don t measure Eco-Stim conducts its horizontal stimulation services within a systematic methodology Leverages fiber-optic technology and predictive modeling (how many stages don t actually produce hydrocarbons?) Enables Eco-Stim to efficiently predict stimulation effectiveness and understand the shale in real-time Proprietary process to efficiently predict sweet spots in shale plays Learn best producing areas of the formation in a given area and incorporate information into next geophysical prediction 1. Predict 5. Update Model 2. Execute Stimulate all planned stages as designed Compare prediction of sweet spots to actual production 4. Evaluate Prediction 3. Measure Downhole technologies to determine which stages are actually producing Predict, Execute, Measure, Evaluate, Re-Predict 18

19 Geophysical & Geo-mechanical predictive tools to identify Offering Summary sweet spots in higher cost shale formations Technology used primarily in high cost regions Targeted Sweet Spots + - Using proprietary technology for accurate well placement and stimulation stage planning Maps produced in less than three weeks at minimal cost Over 350 shale projects completed in U.S. shale plays Over 25 projects completed in Argentina Curvature Attributes Flares correlate with Geo- Predict sweet spot mapping confirming the effectiveness of Geo-Predict s methodology 4 Ft Flare Ft Flare Ft Flare Ft Flare Ft Flare Ft Flare Ft Flare 7610 Mud logs on this horizontal well show flare markers that confirm predictive fracture maps 19

20 Offering MEASURE Summary & EVALUATE - Confirmation of producing zones.. Derived from Fiber Optic Acoustic Signatures TIME Gas + Water Production from zone 8 Gas Production from zone 6 20

21 UPDATE MODEL & CALIBRATE - Target completion stages Offering Summary based on technology & empirical data in high cost regions 32 $100k / Stage = $3.2 Million 16 $200k / Stage = $1.6 Million 21

22 Combined fleet offers technology well suited to reduce cost and emissions Portion of Fleet Has Competitive Advantage 145,000 HHP available within ESES; over 54,000 HHP (27,000 HHP currently in use) represents differentiated technology to reduce cost and emissions: Capable of running on 100% natural gas Runs on multiple fuel sources including natural gas, CNG, LNG and Diesel Delivers emissions 65% below EPA Tier 4 requirements Delivers high HHP from a light weight engine As only current operator of this type of equipment, significant operational knowhow and trade secrets being developed 22

23 Investment Highlights Poised for Growth through Recent Contract Awards and Increased Utilization Debt Free Balance Sheet Significant Discount to Peers Based on Enterprise Value to Hydraulic Horsepower (HHP) Experienced Management Team with Committed Investors Currently Working in Leading Unconventional Markets in the U.S. and Argentina Attractive Technologies with Multi-Fuel Turbine Pumps and Down Hole Diagnostics Capability 23

24 2930 W. Sam Houston Pkwy N., Suite 275 Houston, TX NASDAQ ESES