OUR LIFE S WORK IS THE LIFE OF THE WELL TM NYSE: BAS. Pritchard Capital 2009 Energize Conference San Francisco, CA January 13, 2009

Transcription

1 OUR LIFE S WORK IS THE LIFE OF THE WELL TM NYSE: BAS Pritchard Capital 2009 Energize Conference San Francisco, CA January 13, 2009

2 Forward Looking Statements This presentation contains forward-looking statements. Basic has based these forward-looking statements largely on its current expectations and projections about future events and financial trends affecting the financial condition of its business. These forward-looking statements are subject to a number of risks, uncertainties and assumptions, including, among other things, the risk factors discussed in this presentation and other factors, most of which are beyond Basic s control. The words believe, may, estimate, continue, anticipate, intend, plan, expect and similar expressions are intended to identify forwardlooking statements. All statements other than statements of current or historical fact contained in this presentation are forward-looking statements. Although Basic believes that the forward-looking statements contained in this presentation are based upon reasonable assumptions, the forwardlooking events and circumstances discussed in this presentation may not occur and actual results could differ materially from those anticipated or implied in the forward-looking statements. Important factors that may affect Basic s expectations, estimates or projections include: a decline in or substantial volatility of oil and gas prices, and any related changes in expenditures by its customers; the effects of future acquisitions on its business; changes in customer requirements in markets or industries it serves; competition within its industry; general economic and market conditions; its access to current or future financing arrangements; its ability to replace or add workers at economic rates; and environmental and other governmental regulations. Basic s forward-looking statements speak only as of the date of this presentation. Unless otherwise required by law, Basic undertakes no obligation to publicly update or revise any forward-looking statements, whether as a result of new information, future events or otherwise. This presentation includes market share, industry data and forecasts that Basic obtained from internal company surveys (including estimates based on its knowledge and experience in the industry in which it operates), market research, consultant surveys, publicly available information, industry publications and surveys. These sources include Oil & Gas Journal magazine, World Oil magazine, Baker Hughes Incorporated, the Association of Energy Service Companies, and the Energy Information Administration of the U.S. Department of Energy. Industry surveys, publications, consultant surveys and forecasts generally state that the information contained therein has been obtained from sources believed to be reliable. Although Basic believes such information is accurate and reliable, it has not independently verified any of the data from third-party sources cited or used for its management's industry estimates, nor has it ascertained the underlying economic assumptions relied upon therein. For example, the number of onshore well servicing rigs in the U.S. could be lower than Basic s estimate to the extent its two larger competitors have continued to report as stacked rigs equipment that is not actually complete or subject to refurbishment. Statements as to Basic s position relative to its competitors or as to market share refer to the most recent available data. 1

3 Overview of Basic Energy Services WELL SERVICING 414 rigs 40 service points COMPLETION & REMEDIAL SVS 134k HP pressure pumping capacity 21 Rental & Fishing Tool stores 15 cased-hole wireline units 38 service points Headquartered in Midland, TX FLUID SERVICES 819 trucks 2,300 frac tanks 62 disposal wells 55 service points CONTRACT DRILLING 9 drilling rigs Located in West Texas and Southeastern New Mexico LTM 9/30/08 Revenue - $985 million Contract Drilling LTM 9/30/08 Segment Profits - $389 million Contract Drilling 4% 3% Completion & Remedial Services 30% 36% Well Servicing 36% 34% Well Servicing 30% 27% Fluid Services Fluid Services 2

4 Diversified Sources of Revenue Commodity Mix 50% Gas 50% Oil Gas Geographic Spread Regional Over 100 Service Points in 11 States Oil National Range of Services New Well Drilling 6 Service Lines Maintain Production Customer Base Concentrated No Single Customer Accounted for More than 5% of Revenue Diversified 3

5 Services Required Throughout Life of the Well Basic s Segments New Well Drilling Life-cycle of the Well Existing Well Production Maintenance Periodic Workover Plug & Abandon Well Servicing Fluid Services Completion & Remedial Contract Drilling Basic s business model is built upon existing oil and gas well count. There are approximately 600,000 active oil and gas wells in Basic s operating footprint. Well servicing is a small % of our customers direct operating costs 4

6 Market Drivers Oil and natural gas prices drive overall activity levels Current commodity prices still provide rapid payback of maintenance expenditures Field level margin (volume x realized price lifting costs) determines specific field activity levels regardless of WTI or NYMEX prices Permian Basin breakeven point estimated to be below $20/bbl Perception of the direction and/or stability of commodity prices influence capital spending plans for workover, development drilling, enhanced recovery and exploration projects 5

7 Oil Price Impact on Well Servicing Demand Management s Estimate of Activity Levels vs Potential Demand at Various Oil Prices during a Stable Environment 100% MAINTENANCE 100% WORKOVER Estimated Activity Levels 80% 60% 40% 20% Estimated Activity Levels 80% 60% 40% 20% 0% $40+ $35 $30 $25 $20 <$15 Crude Oil Price ($/bbl) 0% $40+ $35 $30 $25 $20 <$15 Crude Oil Price ($/bbl) 100% COMPLETION 100% P&A Estimated Activity Levels 80% 60% 40% 20% Estimated Activity Levels 80% 60% 40% 20% 0% $40+ $35 $30 $25 $20 <$15 Crude Oil Price ($/bbl) 0% $40+ $35 $30 $25 $20 <$15 Crude Oil Price ($/bbl) Oil prices at current level have a minimal impact on maintenance and plugging and abandonment activities 6

8 Extensive Footprint in Prolific Basins Portfolio approach expanding suite of services within several active geographic regions Significant exposure to major oil and gas producing markets - 50/50 exposure to oil/gas Core operations in established oil and gas markets provide more stable demand Expansion opportunities in developing markets Operating Map Basic s Well Servicing Rig Market Share 1 Bakken Market Share % & Well Count Oil/Gas Well Count % South Texas 46, % 49% Piceance Permian Basin 113, % 21% Mid-Continent 260, % 35% Woodford Fayetteville Ark-La-Tex 68, % 55% Barnett Haynesville Rocky Mountains 98, % 63% Market share 0% 10% 20% 30% 1 Based on number of active rigs as of December 31,

9 Footprint Allows for Organic Growth Opportunities Rocky Mountains WS, FS, PP&W, RAFT 37% Oil 63% Gas SERVICE LINES WS = Well Servicing FS = Fluid Servicing PP&W = Pressure Pumping & Wireline RAFT = Rental and # Fishing 2 of 7 Tools CD = Contract Drilling # 2 of 12 Permian Basin WS, FS, PP&W, RAFT & CD 79% Oil 21% Gas Mid- Continent WS, FS, PP&W, RAFT 65% Oil 35% Gas South Texas WS & FS 51% Oil 49% Gas Ark-La-Tex WS, FS & PP&W 45% Oil 55% Gas # 2 of 33 # 2 of 16 # 4 of 13 # 4 of 16 8

10 Capital and Operating Strategy for 2009 Capital Spending No newbuild well servicing and drilling rig, pressure pumping or wireline unit capacity planned Limited expansion of disposal facilities and selected rental and fishing tool equipment Replacement spending controlled to meet current market environment Maintenance capital to average 4-5% of revenue Operations Rates adjusted quickly to protect market share Less efficient and under utilized equipment stacked as dictated by regional demand Labor force is right-sized mainly through attrition; new hire wages rolled back Purchasing power of Basic leveraged to obtain more favorable pricing from vendors Corporate Acquisition strategy placed on hold pending lower seller expectations Stock buybacks evaluated on a day to day basis Targeting a 5% - 7% decrease in G&A from

11 Segment Overviews

12 Well Servicing Rigs Facilitate Down Hole Activity 414 Rigs by Market Area South Texas Mid- Continent 21% 12% 41% Permian Basin Service Work - routine maintenance of down-hole equipment to return well to production Rocky Mtns. 15% 11% Ark-La-Tex Completion - well preparation for production after successful drilling of well Workover - periodic major maintenance and renovation to sustain or improve production P&A - plugging and abandonment of depleted wells Well servicing rigs are required throughout the life of the well 11

13 Room for Further Consolidation WELL SERVICING RIG OWNERSHIP at 12/31/08 (Total Marketable Rigs) OTHERS OTHERS Ownership KEGconsists of 141 companies 32% 27% KEG CPX BAS NBR 2% 16% PDC 5 % FRB 7% 11% CPX BAS NBR 3,600 Rigs Current environment will promote further consolidation of the industry Sources: Company estimates and publicly available information. 12

14 Well Servicing Revenue per Rig Hour Trends $373 $412 $407 $411 $415 $414 $409 $400 $418 $398 $292 $199 $ LTM 9/08 Revenue Per Well Servicing Rig Hour 1Q07 2Q 3Q 4Q 1Q08 2Q 3Q Recent Revenue per Rig Hour Trends We have seen rates come under pressure in certain markets since 3Q08 13

15 Rig Utilization Rates Had Improved in 2008 but Rig Utilization Rate 100% 90% 80% 70% 60% 50% Indexed Oil Price Indexed Nat Gas Price 700% 600% 500% 400% 300% 200% 100% 0% 1Q 2Q 3Q 4Q We saw a decline in activity levels beyond seasonal factors in 4Q08 14

16 Newbuild Program Modernized Well Servicing Fleet Status of current newbuild program 132 newbuilds rigs have been delivered since 2004 Two newbuild rigs remain to be delivered 85 rigs have undergone major refurbishment since 2000 Internal capacity to refurbish 20 rigs per year At 12/31/08, over 50% of our well servicing fleet was comprised of rigs with year models of 2000 or newer and rigs remanufactured since 2000 Well Servicing Rig Fleet by Year Model 1 Remanufactured since 2000 Before Average age of rig fleet is 19 years 1 Based on well servicing rigs as of December 31, Excludes rigs that have been remanufactured since 2000 Blended fleet age of old and new equipment results in low average capital employed that allows maximum flexibility during price competitive market conditions 15

17 Basic Provides a Full Range of Fluid Handling 819 Trucks by Market Area South Texas Mid- Continent 10% 15% 31% Permian Basin Transportation and disposal of salt water produced as a by-product of oil and gas production Sale, transportation, storage and disposal of drilling and workover fluids Rocky Mtns. 11% 33% Ark-La-Tex Rental of portable frac tanks and test tanks Oilfield (non-hazardous) wastewater disposal wells Well site construction services Full range of services provides maximum flexibility during price competitive market conditions 16

18 Specialized Completion & Remedial Services Provides support to drilling, workover and production processes Pressure pumping for cementing, acidizing, squeeze- cementing (workover), fracturing and re-fracturing Fishing tools and rental equipment for drilling and workover processes Cased-hole wireline services for tool deployment, perforating and re-perforating Underbalanced circulating systems for drilling, remedial and well clean-out operations Focused on smaller markets traditionally underserved by major competitors Revenue by Service Line 1 Wireline Services 10% 3% Underbalanced Drilling Rental & Fishing Tools 30% 57% Pressure Pumping 1 Based on LTM 9/30/08 17

19 Contract Drilling Diversifies Service Offering Fleet of nine drilling rigs focus on infill drilling programs that are relatively active throughout the cycle Typical drilling rig locations Low spec, vertical wells allow simple and fastmoving rigs Three rigs built in 2006/2007 particularly suited to horizontal re-entry Low cost structure 3 rigs capable to drill depth of 11,500 feet 6 rigs capable to drill depth of 8,500 feet Current utilization rates in mid 60% range 18

20 Financial Overview

21 Strong Balance Sheet and Liquidity Capitalization as of September 30, 2008 $ in millions Matures 12/2010 Matures 04/2016 Cash and cash equivalents $ 81 Revolver Ba1/BB+ by Moody s/s&p $ 180 $225 million 7 1/8% Senior Notes B1/BB- by Moody s/s&p 225 Other debt and capital leases 67 Total debt $ 472 Shareholders' Equity 599 Total Capitalization $ 1,071 Net debt $ 391 Total liquidity 1 $ 110 EBITDA / Net Interest Expense Total Debt / EBITDA Net Debt / EBITDA 10.3 x 1.7 x 1.4 x Debt / Capitalization 44% 1 Defined as cash and cash equivalents plus availability under revolver, net of $16 million of outstanding letters of credit under the revolver. 20

22 Proven Profitability and Cash Flow Summary Financials $ in millions, except per share data LTM /30/08 Revenues $ 312 $ 460 $ 730 $ 877 $ 985 Segment profit $ 99 $ 177 $ 315 $ 358 $ 389 % of revenue 32% 38% 43% 41% 40% EBITDA 1 $ 59 $ 121 $ 231 $ 259 $ 280 % of revenue 19% 26% 32% 29% 28% Net income $ 13 $ 45 $ 101 Diluted EPS $ 0.42 $ 1.35 $ $ 88 $ 89 $ 2.13 $ Cash flow from operations $ 47 $ 99 $ 146 $ 199 $ 198 Capital expenditures: Property & equipment $ 56 $ 83 $ 105 $ 99 $ 85 Acquisitions, net of cash acquired $ 19 $ 25 $ 136 $ 200 $ See reconciliation of EBITDA to net income on last page of presentation. 2 Excludes $1.7 million after-tax charge, or $.05 per share, for loss on early extinguishment of debt 3 Excludes $5.0 million after-tax charge, or $.10 per share, for merger related expenses 21

23 Impressive Record of Growth $millions REVENUE $millions EBITDA CAGR of 48% $730 $877 $ CAGR of 73% $460 $181 $312 $231 $259 $ LTM 9/08 Well servicing Completion & remedial Fluid services Contract drilling $29 $59 $ LTM 9/08 Balanced strategy of internal expansion and acquisition driving growth 22

24 Quarterly Segment Data Well Servicing $120 $100 Revenues $60 $50 Segment Profit 50% 45% $millions $80 $60 $40 $millions $40 $30 $20 40% 35% 30% $20 $10 25% $0 1Q04 1Q05 1Q06 1Q07 1Q08 $0 1Q04 1Q05 1Q06 1Q07 1Q08 20% $millions Fluid Services $90 $80 $70 $60 $50 $40 $30 $20 $10 $0 Revenues Westall acquisition LeBus acquisition Azurite purchase closed in late 9/08 1Q04 1Q05 1Q06 1Q07 1Q08 $millions $35 $30 $25 $20 $15 $10 $5 $0 $ % of rev Segment Profit 1Q04 1Q05 1Q06 1Q07 1Q08 $ % of rev 40% 35% 30% 25% 20% 23

25 $millions Quarterly Segment Data Completion & Remedial Services $100 $80 JetStar $60 G&L Tool acquisition acquisition $40 $20 $0 1Q04 1Q05 1Q06 1Q07 1Q08 Contract Drilling $20 Revenues Revenues $millions $50 $40 $30 $20 $10 $0 1Q04 1Q05 1Q06 1Q07 1Q08 $ % of rev $6 Segment Profit Segment Profit 60% 50% 40% 30% 20% 50% $millions $15 $10 $5 Sledge acquisition $millions $4 $2 $0 40% 30% 20% 10% $0 1Q04 1Q05 1Q06 1Q07 1Q08 -$2 1Q04 1Q05 1Q06 1Q07 1Q08 0% $ % of rev 24

26 Compelling Investment Considerations Diversified Service Offering Throughout The Well Life Provides stable cash flow at any point in cycle Extensive Footprint And Leadership Positions In Prolific U.S. Basins Provides opportunities for organic growth at any point in cycle Solid Balance Sheet And Liquidity Proven Growth Strategy Expect high level of deal flow in 2009 as sellers experience problems Commitment to Modernize Fleet Good mix of newer equipment and older, lower capital cost equipment Experienced Management Team With Demonstrated Ability To Grow The Business Throughout The Cycle 25

27 Explanatory Information EBITDA means earnings before interest, taxes, depreciation and amortization. EBITDA is used a a supplemental financial measure by our management and directors and by external users of our financial statements, such as investors, to assess: the financial performance of our assets without regard to financing methods, capital structure or historical cost basis; the ability of our assets to generate cash sufficient to pay interest on our indebtedness; and our operating performance and return on invested capital as compared to those of other companies in the well services industry, without regard to financing methods and capital structure. EBITDA has limitations as an analytical tool and should not be considered an alternative to net income, operating income, cash flow from operating activities or any other measure of financial performance or liquidity presented in accordance with generally accepted accounting principles (GAAP). EBITDA excludes some, but not all, items that affect net income, and these measures may vary among other companies. Limitations to using EBITDA as an analytical tool include: EBITDA does not reflect our current or future requirements for capital expenditures or capital commitments; EBITDA does not reflect changes in, or cash requirements necessary to service interest or principal payments on, our debt; EBITDA does not reflect income taxes; although depreciation and amortization are non-cash charges, the assets being depreciated and amortized will often have to be replaced in the future, and EBITDA does not reflect any cash requirements for such replacements; and other companies in our industry may calculate EBITDA differently than we do, limiting its usefulness a a comparison measure. EBITDA Reconciliation to Net Income (Loss) Year Year Year Year Year Ended Ended Ended Ended Ended LTM $millions 12/31/ /31/ /31/ /31/ /31/2007 9/30/2008 Net income (loss) $ 2.8 $ 12.8 $ 44.8 $ 98.8 $ 87.7 $ 83.9 Income taxes $ 2.8 $ 8.0 $ 26.7 $ 54.7 $ 52.8 $ 51.2 Net interest expense $ 5.2 $ 9.6 $ 12.7 $ 15.5 $ 25.1 $ 25.0 Depreciation & amortization $ 18.2 $ 28.7 $ 37.1 $ 62.1 $ 93.0 $ Merger related costs $ - $ - $ - $ - $ - $ 7.9 EBITDA $ 29.0 $ 59.1 $ $ $ $