INVESTOR PRESENTATION OCTOBER 2014

Transcription

1 INVESTOR PRESENTATION OCTOBER 2014

2 ASSUMPTIONS AND FORWARD-LOOKING STATEMENTS! This presentation contains certain statements and information that may constitute forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended. All statements, other than statements of historical facts that address activities, events or developments that we expect, believe or anticipate will or may occur in the future are forward-looking statements. The words anticipate, believe, ensure, expect, if, intend, plan, estimate, project, forecasts, predict, outlook, aim, will, could, should, potential, would, may, probable, likely, and similar expressions, and the negative thereof, are intended to identify forward-looking statements. Without limiting the generality of the foregoing, forward-looking statements contained in this press release specifically include statements, estimates and projections regarding our business outlook and plans, future financial position, liquidity and capital resources, operations, performance, acquisitions, returns, capital expenditure budgets, costs and other guidance regarding future developments. Forward-looking statements are not assurances of future performance. These forward-looking statements are based on management s current expectations and beliefs, forecasts for our existing operations, experience, and perception of historical trends, current conditions, anticipated future developments and their effect on us, and other factors believed to be appropriate. Although management believes that the expectations and assumptions reflected in these forward-looking statements are reasonable as and when made, no assurance can be given that these assumptions are accurate or that any of these expectations will be achieved (in full or at all). Moreover, our forward-looking statements are subject to significant risks and uncertainties, many of which are beyond our control, which may cause actual results to differ materially from our historical experience and our present expectations or projections which are implied or expressed by the forward-looking statements. Important factors that could cause actual results to differ materially from those in the forward-looking statements include, but are not limited to, risks relating to economic conditions; volatility of crude oil and natural gas commodity prices; delays in or failure of delivery of current or future orders of specialized equipment; the loss of or interruption in operations of one or more key suppliers or customers; oil and gas market conditions; the effects of government regulation, permitting and other legal requirements, including new legislation or regulation of hydraulic fracturing; operating risks; the adequacy of our capital resources and liquidity; weather; litigation; competition in the oil and natural gas industry; and costs and availability of resources.! For additional information regarding known material factors that could cause our actual results to differ from our present expectations and projected results, please see our filings with the Securities and Exchange Commission, including our Current Reports on Form 8-K that we file from time to time, Quarterly Reports on Form 10-Q, Annual Report on Form 10-K and the Information Statement included as Exhibit 99.1 to our Form 10 (Commission File No ) filed on June 16, 2014.! Readers are cautioned not to place undue reliance on any forward-looking statement which speaks only as of the date on which such statement is made. We undertake no obligation to correct, revise or update any forward-looking statement after the date such statement is made, whether as a result of new information, future events or otherwise, except as required by applicable law. 2

3 COMPANY FACTS Spun off from CHK July 1, Traded on NYSE under SSE Annual Revenues of $2.0 B Over 5000 employees 3

4 BUSINESS SEGMENTS AND OUTLOOK Description Q Q Adjusted Adjusted Adjusted EBITDA Revenue EBITDA¹ Margin Business Outlook Drivers Drilling q Provides land drilling and drilling-related services, including directional drilling and mudlogging q Marketed fleet includes 22 Tier 1 rigs, including 12 fit-for-purpose PeakeRigs, 57 Tier 2 rigs and 3 Tier 3 rigs % q 4 new contracted rigs by YE 2014 q 10 new contracted rigs by YE 2015 Hydraulic Fracturing q Provides high-pressure hydraulic fracturing services q 9 hydraulic fracturing fleets with an aggregate of 360,000 horsepower % q 1 additional spread by YE 2014 (40,000 additional HP) q Flat pricing in 2015 q Other non CHK expansion Oilfield Rentals q Provides premium rental tools and specialized services for land-based oil and natural gas drilling, completion and workover activities q Provides water transport and disposal solutions % q Other non CHK expansion Oilfield Trucking q Provides drilling rig relocation and logistics services % q Other non CHK expansion Note: $mm 1 Adjusted EBITDA is a non-gaap financial measure that we define as net income before interest expense, income tax expense, depreciation and amortization, as further adjusted to add back impairments and gain or loss on sale of property and equipment; Nomac Drilling reflects EBITDA net of rig rental expense of $4mm (EBITDAR); Total SSE reflects sum of segment EBITDA net of Other Segment net loss from G&A and D&A of $34mm, Interest Expense of $24mm, Other Segment Tax Benefit ($23mm), and Other Non-Cash Comp of $9mm; Total net adjustments are approximately ($24mm). See pages of this presentation for a reconciliation of GAAP measures to comparable financial measures calculated in accordance with GAAP. 4

5 SSE IS AMONG THE LEADING NORTH AMERICAN SERVICES COMPANIES! SSE has significant scale to effectively compete with its North American peers! 2013 Revenue (in billions) NBR SPN HP PTEN SSE TCW ESI PD RES KEG CFW BAS CJES PES PKD TDG FRC 0.3 Source: Bloomberg 5

6 CUSTOMER DIVERSIFICATION STRATEGY! Replicate Nomac success in winning other non CHK business with PTL and Great Plains Selected Customers Increased Nomac non CHK rigs to 42% today from 9% at beginning of 2012! Build business development team Increasing business development staff Focusing on significant industry experience Building out Great Plains sales team in second half of 2014; focus on growth without material additional capital outlay 6

7 BACKLOG AND SERVICE CONTRACT SUMMARY! As of September 30, 2014, our contractual backlog¹ was approximately $2.6B, ~10% of which was related to contracts with operators other than Chesapeake Backlog expected to provide 50% to 60% of revenue from Sept to Sept. 2015! Backlog includes new services contracts entered into with Chesapeake in connection with the spin-off under which Chesapeake committed to use the services described below, subject to its rights to terminate the contracts in specified circumstances Nomac rig-specific daywork drilling contracts for a term ranging from three months to three years as set forth below: 1 year term 10 Rigs 2 year term 5 rigs 3 year term 25 Rigs Three month terms plus three month auto renewal option 11 Rigs PTL hydraulic fracturing services agreement that provides Chesapeake will utilize the lesser of (i) the number of crews set forth below: Year 1 7 Crews Year 2 5 Crews Year 3 3 Crews or (ii) percent (50%) of the total number of all pressure pumping crews working for Chesapeake in all of its operating regions during the respective year.! Recent non CHK customer contract wins for PTL and Great Plains Contracted Revenues by Business Segment $mm $2.6B Backlog 1, Year 1 Year 2 Year 3 Nomac CHK Nomac Non CHK PTL CHK ¹ We calculate our contract drilling backlog by multiplying the day rate under our contracts by the number of days remaining under the contract. We calculate our hydraulic fracturing backlog by multiplying the rate per stage by the number of guaranteed stages remaining under the contract. The backlog calculation does not include any reduction in revenues related to mobilization or demobilization, nor does it include potential reductions in rates for unscheduled standby or during periods in which the rig is moving, on standby or incurring maintenance and repair time in excess of what is permitted under the drilling contract. In addition, many of our contracts are subject to termination by the customer on short notice and provide for an early termination payment to us in the event that the contract is terminated by the customer. As a result, revenues could differ materially from the backlog amounts presented. 7

8 Industry leading HSE performance - Five consecutive quarters with TRIR < th largest driller in the US 4400 wells drilled since 2007 World record 24 HR lateral length 87 Operated rigs All rigs have top drives and over 70% are padcapable, being equipped with skidding or walking systems Delivering 14 new PeakeRigs TM 14-15

9 NOMAC DRILLING!! Currently the 4th largest drilling rig contractor in the U.S.¹ Utica Shale (7 - CHK, 11 - Other) Nomac has 87 active rigs which operate across unconventional plays (50 operating for CHK; 37 operating for other parties)² Marcellus Shale Powder River and DJ Basins (4 - CHK, 0 Other) (3 - CHK, 2 - Other) Haynesville Shale Anadarko Basin (13 - CHK, 17 - Other) (7 - CHK, 0 Other) Barnett Shale (0 - CHK, 1 Other) Permian Basin (0 - CHK, 5 - Other) Eagle Ford Shale (16 - CHK, 1 - Other) ¹ Based on RigData active rig count as of 9/26/2014 ² Rig count from the 9/30/2014 Nomac report: excludes refurbished, stacked, training and under construction rigs Nomac Operating Areas (Bubble Size by Nomac Rig Count) 9

10 EVOLUTION OF OUR FLEET! Improving tier mix contributes to higher operating margin, continuing to increase with rig newbuilds, conversions, and removal of Tier 3 rigs! Based on contracted newbuilds, we expect to have 95 rigs by YE 2015 with 38% Tier 1 rigs 13 PeakeRig newbuilds over next 15 months Number of Rigs - Year End 160 Fleet Evolution and Operating Margin YTD Q Operating Margin 42% 40% % 36% 57 34% % E 2015E 30% 1 Operating Margin through YTD Q3 2014; rig count as of year end Tier 1 Tier 2 Tier 3 Operating Margin 1 10

11 NOMAC RIG FLEET COMPARED TO PEERS! Working to convert fleet to meet longterm drilling needs of all customers! Currently 91% of our Tier 1 rigs and 63% of our Tier 2 rigs are multi-well pad-ready and able to meet the robust demands of E&P customers focused on unconventional resource development! Placed 3 proprietary PeakeRigs into service this year, fabricating 3 additional which are expected to be delivered by the end of the year with an additional 10 rigs expected to be delivered in % 23% 23% US Land Rig Fleet Mix Sep 2014¹ 90% 57% 54% 44% 42% 34% 24% 18% 13% 49% 58% 32% 34% 64% 32% 50% 82% 2% 49% 50%! Total US Land Rig Fleet Mix¹ Tier 1 38% Tier 2 25% Tier 3 37% PEERS 10% 9% 7% A B C D Nomac 2015E E Tier 1 Tier 2 Tier 3 12% Nomac² 5% F G H ¹ Source: RigData Weekly Locations and Operators Report list as of 9/18/2014, internal estimates 2 Nomac rig total based on marketed rigs, excludes cold stacked and rigs held for sale 11

12 9 Frac spreads 360K HHP 10 th spread deploying Q Average fleet age - ~ 2 years 80 plus stages/month Company owned sand terminals Unit train capable State of the art process controlled operation

13 PERFORMANCE TECHNOLOGIES Utica Shale 3 spreads operating Anadarko Basin 1 spreads operating Barnett Shale 1 spread operating Eagle Ford Shale 4 spreads operating PTL Operating Areas (Bubble Size by Spread Count) As of 9/30/

14 HYDRAULIC FRACTURING SUPPLY CHAIN INTEGRATION Storage and Distribution Facilities! Own and operate two strategically positioned sand storage and trans load facilities, one in Oklahoma with storage capacity of 140 million pounds and one in south Texas with 80 million pound capacity Transloading Facilities South Texas facility accepts multi-unit trains which secures more favorable rail rates and significantly reduces the number of rail car leases required to manage inventory! Executed JV with a dedicated hydraulic fracturing sand carrier to ensure adequate truck transportation services for hauling hydraulic fracturing sand from regional distribution points to the well site! Long term rail car leases procured for the bulk transportation of Rail Cars hydraulic fracturing sand by rail from the mine to regional distribution hubs! Own mineral mining leases totaling approximately 2,000 acres at Sand Reserves multiple sand mining sites in Wisconsin; plan to self source a majority of sand supply by 2016 helping to mitigate future impact of sand price volatility 14

15 World class equipment, less than 5 years old Rental equipment Drill Pipe, Tubing, Mud Tanks, Matting, Frac Tanks, Acid Tanks, Light Plants, Blowout Preventers, Containment Water Transfer Engineered water transfer, layflat hose systems, trailer mounted booster pumps 150 water transport trucks Air Drilling Boosters, compressors, and personnel for various air drilling applications

16 GREAT PLAINS ASSET BASE AND SERVICES! Great Plains provides premium rental tools and specialized services for land-based oil and natural gas drilling, completion, and workover activities Air Package! Tool Rental Downhole tubular products including high-torque, premium-connection drill pipe, drill collars, and tubing Surface rental equipment including blowout preventers, frac tanks, mud tanks, and environmental containment Tanks! Services Water transfer services offering lay-flat hose and leveraging Great Plains surface rental asset base Air drilling services in the Marcellus and Utica Flowback and pressure control 16

17 SEVENTY SEVEN TRUCKING ASSETS! Great Plains provides water transport and disposal service solutions Water Hauling Truck As of Sept. 30, 2014, we owned a fleet of 148 water transport trucks that haul water to and from wells in the Anadarko Basin and the Eagle Ford, Marcellus, and Utica Shales Truck Fleet! Hodges has provided drilling rig relocation and logistics services for over 80 years As of Sept. 30, 2014, we owned a fleet of 261 rig relocation trucks and 68 cranes and forklifts Transportation Truck Hodges Crane Oilfield Trucking Assets Units Transporta4on Trucks 195 Water Hauling Trucks 148 Crane & ForkliA 68 Rig Up 66 17

18 Leading HSE performance TRIR 60% below competitor average 260 rig relocation trucks 67 rig cranes Averaged over 100 rig moves/month Asset base average age 4 years Truck pushers average 10 years with company

19 MATURITY AND DEBT SERVICE SCHEDULES Maturity Schedule $275 $650 $374 $500 $2 $4 $4 $4 $4 $4 $ %¹ 3.750%³ 6.500% %² Term Loan Sr. Notes ABL Credit Facilty Interest Schedule 5 $76 $76 $76 $76 $76 $59 $33 $33 $8 $15 $15 $15 $14 $14 $14 $7 $ ¹ 4.00% base rate; 1.75% letter of credit ² 6.625% Senior Notes due 2019; first call price at 103%.313 on 11/15/2015 ³ 3.00% + LIBOR with 75bps LIBOR floor % Senior Notes due 2022; first call price at % on 7/15/2017 Term Loan Sr. Notes 5 Assumes Term Loan interest of 3.75% and no early call on Sr. Notes. / The $500 Senior Notes and Term Loan have issue dates as of 6/26/14 and 6/25/2014 respectively. 19

20 MANAGEMENT TEAM Jerry Winchester, CEO Cary D. Baetz, CFO q q q Served for thirteen years as the President and CEO of Boots & Coots International Well Control, Inc. which was acquired by Halliburton in September 2010 Started his career with Halliburton in 1981 as a fracturing equipment operator and served in positions of increasing responsibility, most recently as Global Manager over Well Control, Coil Tubing and Special Services 29 years of industry experience q Served as Senior Vice President and Chief Financial Officer of Atrium Companies, Inc. From November 2010 to December 2011 q Served with Mr. Winchester as Chief Financial Officer of Boots & Coots from August 2008 to September 2010 q Served as Vice President of Finance, Treasurer, and Assistant Secretary of Chaparral Steel Company from 2005 to 2008 q 26 years of industry experience Karl Blanchard, COO q Joined SSE in June 2014 q Previously served as Vice President of Production Enhancement of Halliburton Company q Began his career at Halliburton in 1981, also serving as Vice President of Cementing, Vice President of Testing and Subsea, and President Director of PT Halliburton Indonesia Jay Minmier, President - Nomac Drilling q President since June 2011 q Previously served as Vice President and General Manager for Precision Drilling Corporation q More than 20 years experience with drilling contractors, notably Grey Wolf Inc. and Helmerich & Payne, Inc. William R. Stanger, President Performance Technologies (PTL) q President since 2011 q Joined Chesapeake Energy in January 2010 as President of Great Plains Oilfield Rentals q A former Vice President of Schlumberger with more than twenty-five years experience in oilfield services Jerome Loughridge, President Great Plains Oilfield Rental q President since September 2012 q Previously served as President of Black Mesa Energy Services, the oilfield investment arm of private equity firm Ziff Brothers Ventures; Executive Chairman of completions service provider Legend Energy Services; and Chief Operating Officer of Great White Energy Services q Eight years of oilfield management experience 20

21 CORPORATE INFORMATION SSE HEADQUARTERS! 77nrg.com! 777 NW 63rd St. Oklahoma City, OK CORPORATE CONTACTS! Bob Jarvis Senior Director Investor Relations and Marketing