Investor Presentation. December 2018

Transcription

1 Investor Presentation December 2018

2 Forward-looking Statements We include the following cautionary statement to take advantage of the "safe harbor" provisions of the Private Securities Litigation Reform Act of 1995 for any forward-looking statement made by us, or on our behalf. The factors identified in this cautionary statement are important factors (but not necessarily all of the important factors) that could cause actual results to differ materially from those expressed in any forward-looking statement made by us, or on our behalf. You can typically identify forward-looking statements by the use of forward-looking words such as "may," "will," "could," "project," "believe," "anticipate," "expect," "estimate," "potential," "plan," "forecast," and other similar words. Forward-looking statements may include statements regarding our future financial position, budgets, capital expenditures, projected costs, plans and objectives of management for future operations and possible future acquisitions. Where any such forward-looking statement includes a statement of the assumptions or bases underlying such forward-looking statement, we caution that, while we believe such assumptions or bases to be reasonable and make them in good faith, assumed facts or bases almost always vary from actual results. The differences between assumed facts or bases and actual results can be material, depending upon the circumstances. Where, in any forward-looking statement, we, or our management, express an expectation or belief as to the future results, such expectation or belief is expressed in good faith and believed to have a reasonable basis. However, there can be no assurance that the statement of expectation or belief will result or be achieved or accomplished. Taking this into account, the following are identified as important factors that could cause actual results to differ materially from those expressed in any forward-looking statement made by, or on behalf of, our company: the level of demand for and supply of oil and gas, fluctuations in the current and future prices of oil and gas, the level of drilling activity, the level of offshore oil and gas developmental activities, general economic conditions, our ability to find and retain skilled personnel, the availability of capital, and the other factors discussed within the "Business" and "Risk Factors" sections of the Company s Annual Report on Form 10-K for the year ended December 31, 2017, Periodic Reports on Form 8-K and Quarterly Reports on Form 10-Q. Readers are cautioned not to place undue reliance on forward-looking statements, which speak only as of the date hereof, and, except as required by law, the Company undertakes no obligation to update those statements or to publicly announce the results of any revisions to any of those statements to reflect future events or developments. 2

3 Technology-Focused, Pure-Play Energy Services Company Well Site Services provides service equipment and personnel primarily for completion and production operations o U.S. shale focused (88% of 3Q 2018 Completion Services revenues) o GOM and international markets (12% of 3Q 2018 Completion Services revenues) o Acquired Falcon Flowback Services on February 28, 2018 (approximately 400 service personnel and equipment complimentary to current Completion Services offerings) Downhole Technologies (GEODynamics, Inc. acquisition; new reportable segment) researcher, developer and manufacturer of consumable engineered products for completion applications o U.S. shale market represents over 90% of TTM revenues Offshore/Manufactured Products designs, manufactures and sells capital equipment utilized on floating production systems, subsea pipelines, and offshore drilling rigs and vessels along with shorter-cycle products o Activity drivers: Long-term, technology-focused business driven by investments in global deepwater capital equipment Shorter-cycle products (consumables) driven primarily by U.S. onshore shale activities ($ in Millions) 3Q 2018 Financial Snapshot Downhole Technologies 21% Offshore/ Manufactured Products 33% Well Site Services 47% Downhole Technologies 28% Offshore/ Manufactured Products 32% Well Site Services 40% Total Revenue: $275 Segment EBITDA (1) : $39 (2) Segment EBITDA excludes corporate costs; see non-gaap reconciliation on slides

4 Global Footprint with Blue-Chip Customer Base Oil States broad and growing global footprint provides diversification through the cycle and significant growth potential o Products and services provided to a blue-chip customer base o U.S. locations positioned in the most active basins Number of Locations Completion Services: 47 Drilling Services: 2 Downhole Technologies: 14 Offshore/Manufactured Products: 28 4

5 Disciplined Financial Position Closed four acquisitions in the last 22 months: o Acquired Falcon Flowback Services for $84 million (net of cash acquired) on February 28, 2018 (acquisition funded by borrowings under the revolving credit facility) o GEODynamics: a leading researcher, developer and manufacturer of engineered solutions to connect the wellbore with the formation in oil and gas well completions (valued at $615 million upon closing in January 2018) o Riser inspection technology to be deployed at customer locations globally (April 2017) o Intellectual property and assets complementary to our existing crane offerings (January 2017) In connection with the GEODynamics acquisition in January 2018: o $295 million cash portion of the purchase price was funded by borrowings under the revolving credit facility o Issued 8.66 million shares of the Company s common stock (valued at $295 million at closing) o Issued a $25 million promissory note to sellers due July 2019 o Issued $200 million principal amount of 1.50% convertible senior notes due February 2023 to repay a portion of the borrowings outstanding under the revolving credit facility o Amended and extended $350 million revolving credit facility (January 2022) 2018 capex investments forecasted at $85-$90 million ($71 million YTD through 3Q 2018) Share repurchase program extended to July 2019 with $120.5 million remaining under authorization Continue our disciplined approach of capital allocation for organic capital expenditures, M&A or share repurchases to realize highest returns on invested capital 5

6 Well Site Services

7 Well Site Services Drilling Completion Services Drilling Wireline/ Coiled Tubing Support Frac/Pressure Pumping Support Flowback Well Testing Own and operate 34 land drilling rigs in the Permian Basin (24 rigs) and the Rockies (10 rigs) Rigs are highly mobile, reducing the mobilization time and the necessary crew size Rig specifications: o <500 HP- 4 o 500 HP- 17 o >500 HP- 13 3Q 2018 utilization 31% Proprietary, technology-driven, HPHT equipment which is well suited for increasingly complex completion requirements hold over 230 patents Leading market position in oil and gas shale plays, primarily U.S. onshore Network of over 40 locations in U.S. and Canada and operate in over 20 countries on a rotating/consignment basis Wireline, coiled tubing and gravel pack support equipment and personnel Wellhead isolation equipment and services which are integral to stage frac operations Downhole proprietary extended reach technology and thru tubing (drill-outs and fishing) Flowback separation equipment and services, well testing, production testing equipment, and service personnel (Falcon) 7

8 Broad North American Coverage Region # Locations U.S. Rig Count (1) S. Texas, Permian Northeast 6 73 Mid- Continent Gulf Coast 6 23 (2) Rockies 6 85 Manufacturing Kilgore / OKC Corporate/ Other Total 43 1,076 Source: Baker Hughes (1) Rig count as of 11/30/2018. (2) Gulf of Mexico offshore rig count. 8

9 Oil States Completion Services Offerings Completion Services offers differentiated proprietary technology, expertise and know-how from wireline support, frac stacks, isolation tools, Tempress and ball launchers Wireline Support Hydraulic Annular Valves Grease Injection Packages / Units Flanges & Swages Pump In Subs Wireline Valves - Tool Traps - Quick Test Subs Lubricators Head Catchers Velocity Ball Check Valves Grease Heads Slick Line Stuffing Boxes Line Wipers Pressure Test Units Frac Stacks Frac Valves Manifolds Ball Catchers Sand Knockout Units BOPs Plug catchers Chokes Isolation Tools Casing Isolation Tools Wellhead Isolation Tools Tubing Isolation Tools Tempress Ball Launchers HydroPull Extended Reach Tools Proprietary Automatic Launchers Pulsed Cleanout & Stimulation Tools Motor Gas Separators MGS Water Bypass Sub Jet Rotor High-Pressure Rotary Jet NitroBlast Acoustic Well Stimulation Tools Production Services Well Service & Test Pumps Integral Iron Packages Spacer Spools Gas Buster, Mixing, Sand, & Frac Tanks - Tool & Pipe Baskets Cranes Flowback Combination Test Units Test Separators Flare Stacks Line Heaters Flow Iron Dual Plug Catchers Under Balanced Drilling Sand Separators Flowback Manifolds Thru Tubing Hydraulic Motors Bottom Hole Assemblies Circulating Subs Torque Knuckle Joints Over Shots Wash Tools Mills Tubing Cleaners Sand Control Wash Pipe Tool Baskets Handling Equipment Frac Heads CoFlex Hoses Hydraulic Chokes TCP Heads Hydraulic Frac Manifolds 9

10 Leverage to Activity-Based Incrementals Will Drive Near-Term Results Shale Well Completion Attributes and Benefits Wireline Support Frac Stacks Isolation Tools Tempress Ball Launchers Production Services Well Testing Thru Tubing Drivers Longer Laterals Higher Sand Concentrations More Frac Stages Pad Drilling More days on location, best-in-class extended reach technology including drill-out operations. Isolation Tool ideal for finer grain sand sizes and higher volumes due to full-bore access and plug valve configuration. Well testing and flowback requirements are higher. Isolation Tool provides signficant efficiencies for switching between pressure pumping and wireline operations. Higher density frac stages provide more days on location for a given length lateral and by offering support for both ball and sleeve and plug and perf operations. Quality equipment is critical in multistage completions due to proximity of service providers. Zipper Manifolds Significant efficiences and cost savings for customers. 10

11 Acquisition of GEODynamics (New reportable segment named Downhole Technologies )

12 GEODynamics Overview Founded in 2004 as a researcher, developer and manufacturer of consumable engineered products for completion applications Technology leader for oil and gas well perforating systems, downhole completion, intervention, and wireline conveyed solutions Product innovation driven internally by engineering personnel at its manufacturing and testing facilities as well as through collaborative relationships with E&P operators Over 40 issued patents Headquartered in Millsap, Texas (near Fort Worth) on a 280-acre campus supporting its engineering, product testing, manufacturing, sales and administrative functions Employs approximately 500 personnel in 14 locations 12

13 GEODynamics Product Offerings Engineered Perforation Solutions o Pioneered advancements in perforation technology using patented and proprietary systems combined with advanced modeling and analysis tools Hole size, depth and quality of tunnels are key factors for optimal production Perforating Gun and Charges (inset) Completion Products and Technology o Proprietary toe valve and frac plug products Focused on zonal isolation for hydraulic fracturing of horizontal wells SmartStart PLUS Toe Valve Evolv + FracTrap Composite Plug Legacy Oil Tools o Broad range of consumable products used in completion, intervention and decommissioning applications Power Charges and Ignitors Setting Equipment Bi-Directional Booster Bridge Plug Jet Cutter Cement Retainer 13

14 Strategic Rationale for Acquisition of GEODynamics Provider of proprietary consumable completion products o Supports recurring revenue streams at attractive margins o Supplies products with relatively high barriers to entry due to strict regulatory compliance associated with safe handling of explosive materials Proven track record of growth through technological innovation o Strong engineering culture supported by an R&D facility and both in-house and outsourced manufacturing o Offers robust growth pipeline of technologies complementary to Oil States current product lines with opportunities to expand domestically and internationally Direct technical relationships with blue-chip customer base Management team brings a combined 100 years of industry experience Strong brand recognition 14

15 Industry Drivers On-Going Completion Intensity in North America Implementation of technology for complex well completions, coupled with sustained WTI prices above $50+/Bbl are delivering top-tier well results and economics Driving increased completions activity by E&P operators in U.S. shale plays Modern completion practices driving increased demand for GEODynamics consumable completion products include longer lateral lengths, increased frac stages and more perforation clusters for improved unconventional well productivity Increasing Well Completion Design and Product Requirements Over Time (1) Typical Permian Basin Well in 2014 Typical Permian Basin Well in 2017 Leading Edge Permian Basin Well in 2018 Lateral length: 6,000 ft. Frac Stages: 25 Perforating Clusters: 100 Products Required Per Well: Perforating Charges: 1,250 Perforating Guns: 100 Frac Plugs: 25 Lateral length: 8,200 ft. Frac Stages: 40 Perforating Clusters: 280 Products Required Per Well: Perforating Charges: 2,000 Perforating Guns: 280 Frac Plugs: 40 Lateral length: 10,000 ft.+ Frac Stages: 70+ Perforating Clusters: 1,200+ Products Required Per Well: Perforating Charges: 3,600+ Perforating Guns: 1,200+ Frac Plugs: 70+ (1) Source: well design data are Company management estimates. 15

16 Offshore/Manufactured Products

17 Offshore/Manufactured Products Diversified Products Major project content opportunities for floating production facilities (FPSO s, TLP s and Spars), subsea pipelines and tiebacks along with shorter-cycle products (primarily destined for U.S. land applications), newbuild rig and vessel equipment Over 25 manufacturing and service locations globally, including four Engineering Centers of Excellence providing global technical support to the offshore industry 17

18 Historical Backlog and Bookings Trends Exposure to deepwater production infrastructure and large development projects has mitigated some of the commodity price volatility in recent years as these deepwater projects are generally longer-term in nature and are normally based on through-cycle economics Major project backlog awards/fid s have been weak for the last 2-3 years, but project award activity is improving Book-to-bill ratio totaled 1.1x (YTD through 3Q 2018) $700 (U.S. dollars in millions) $1,100 Backlog and Bookings $600 $500 $400 $300 $200 $100 $1,000 $900 $800 $700 $600 $500 $400 $300 $200 $100 TTM Revenue $0 $0 2Q'08 2Q'09 2Q'10 2Q'11 2Q'12 2Q'13 2Q'14 2Q'15 2Q'16 2Q'17 2Q'18 Quarter-end Backlog Quarterly Bookings TTM Revenue Note: As of 9/30/

19 Macroeconomic Drivers Offshore Field Developments Engineered Equipment for Production Platforms Subsea Pipeline Equipment Primarily for Export Systems Offshore Drilling OEM Capital Equipment and Consumables Onshore O&G Consumables for Completion, Drilling & Workover Aftermarket - Maintenance, Service and Repair on OEM and CEM Equipment 19

20 Offshore/Manufactured Products Revenue Components Total backlog of $175 million at September 30, 2018 provides Project Driven revenue visibility through 2018 Short-cycle products experiencing increased demand: o Elastomer consumables (composite frac plug used primarily in onshore applications) o Valve products (onshore and offshore applications) Service and Other Products, including military Offshore/Manufactured Products Revenue Breakout 30% $1,000 25% Revenue ($millions) $800 $600 $400 $200 30% 12% 58% 26% 26% 25% 19% 13% 16% 62% 58% 55% 26% 14% 60% 25% 17% 58% 28% 29% 39% 37% 20% 15% 10% 5% Adjusted EBITDA Margin $0 33% 34% TTM 0% Note: As of 9/30/2018. Project Driven Short Cycle Services & Other Products EBITDA % 20

21 Industry Drivers- Offshore Exposure Provides Long-Cycle Growth Attractive opportunity to participate in the early stages of the offshore recovery Major project backlog awards/fid s have been weak for the last 2-3 years, but project award activity is improving as the industry is exiting trough levels of activity In a $60-$70 Brent oil environment, visibility is developing towards 9-12 project sanctions and equipment/floating production facility awards per year for Industry Floating Production Facility Awards by Geography E 2019E 2020E North America South America North Sea/Arctic Africa/Medit. Asia Pacific/Middle East Source: Company management, Wells Fargo, Wood Mackenzie (May latest available) 21

22 Conclusion

23 Key Drivers of Future Profitability Well Site Services o North American land market has improved, with the total U.S. rig count up 672 rigs (166%) since the rig count troughed in May 2016 (as of November 30, 2018) o Service intensity is robust and being driven by horizontal drilling, longer laterals, higher sand concentrations, more frac stages and clusters, along with pad drilling o We remain focused on higher-end and proprietary completion offerings Technology and service quality are key differentiators o Historically, we have enjoyed strong through-cycle margin performance o Cost structure was reset in response to cyclical downturn Downhole Technologies o Demand for consumable completion products driven by longer lateral lengths, increased frac stages and more perforation clusters for improved unconventional well productivity Offshore/Manufactured Products o Backlog at September 30, 2018 totaled $175 million o Market-leading book-to-bill ratio of 1.1x YTD through 3Q 2018 o Strong short-cycle products sales; 38% YTD through 3Q 2018 segment revenues o Final investment decisions for major offshore production-oriented projects recovering due to the steady improvement in oil prices coupled with lower industry costs achieved through re-engineering of projects which improves customer economics 23

24 Outlook for Oil States Longer-term positive outlook for North America bodes well for Well Site Services and Downhole Technologies Improved major offshore project FID outlook for Quality customer base o Partnering with customers to design customized downhole completion solutions Strong balance sheet position Opportunity to continue to deploy capital for strategic acquisitions Ability to execute opportunistic share repurchases Highly experienced management team to navigate the current economic environment and capitalize on opportunities to strengthen Oil States for the long-term (executive team has over 60 years of experience with the Company) Goal to create long-term stockholder value through strategic growth and returns on invested capital 24

25 Appendix

26 Strong Financial Position (USD in millions, except percentages and ratios) 9/30/2018 Actual Net Working Capital $ Current Debt 25.5 Revolving Credit Facility (Matures January 2022) Convertible Senior Notes (Due February 2023) Other Debt 5.1 Total Debt Stockholders' Equity 1,449.7 Total Capitalization $ 1,804.1 Total Debt / Total Capitalization 19.6% Total Net Debt to TTM EBITDA 2.3x Total Senior Secured Debt to TTM EBITDA 1.3x Credit Facility Availability $ Total Cash 36.3 Total Liquidity $

27 Non-GAAP EBITDA Reconciliation Oil States International, Inc. Non-GAAP Reconciliation (USD in millions) 27 For The Year Ending December 31, Three Months Ending /31/18 6/30/18 9/30/18 Well Site Services Operating Income (Loss) $ 157 $ 150 $ 178 $ (44) $ (108) $ (59) $ (7) $ (2) $ (5) Other Income Depreciation and Amortization Expense Segment EBITDA (13) Severance and Other Downsizing Charges Insurance Proceeds (3) Adjusted Segment EBITDA $ 232 $ 241 $ 282 $ 63 $ (11) $ 25 $ 13 $ 19 $ 16 Downhole Technologies Operating Income $ 8 $ 12 $ 6 Other Income (Expense) (0) - 0 Depreciation and Amortization Expense Segment EBITDA Transaction-Related Charges Adjusted Segment EBITDA $ 12 $ 16 $ 11 Offshore/Manufactured Products Operating Income $ 134 $ 157 $ 199 $ 146 $ 87 $ 38 $ 12 $ 13 $ 7 Other Income (Expense) (0) Depreciation and Amortization Expense Segment EBITDA Severance and Other Downsizing Charges Adjusted Segment EBITDA $ 149 $ 175 $ 222 $ 177 $ 114 $ 64 $ 19 $ 18 $ 13 Oil States International, Inc. Net Income (Loss) $ (3) $ 3 $ (4) Income Tax Provision (Benefit) (1) 2 (4) Net Interest Expense Depreciation and Amortization Expense Consolidated EBITDA Severance and Other Downsizing Charges Transaction-Related Charges Adjusted Consolidated EBITDA $ 32 $ 40 $ 28

28 Non-GAAP EBITDA Reconciliation (Continued) The terms Segment EBITDA and Adjusted Segment EBITDA consist of operating income (loss) plus depreciation and amortization expense, and certain other items. Segment EBITDA and Adjusted Segment EBITDA are not measures of financial performance under generally accepted accounting principles and should not be considered in isolation from or as a substitute for operating income (loss) or cash flow measures prepared in accordance with generally accepted accounting principles or as a measure of profitability or liquidity. Additionally, Segment EBITDA and Adjusted Segment EBITDA may not be comparable to other similarly titled measures of other companies. The Company has included Segment EBITDA and Adjusted Segment EBITDA as a supplemental disclosure because its management believes that Segment EBITDA and Adjusted Segment EBITDA provide useful information regarding its ability to service debt and to fund capital expenditures and provides investors a helpful measure for comparing its operating performance with the performance of other companies that have different financing and capital structures or tax rates. The Company uses Segment EBITDA and Adjusted Segment EBITDA to compare and to monitor the performance of its business segments to other comparable public companies and as a benchmark for the award of incentive compensation under its annual incentive compensation plan. The tables above set forth reconciliations of Segment EBITDA and Adjusted Segment EBITDA to operating income (loss), which is the most directly comparable measure of financial performance calculated under generally accepted accounting principles. The terms Consolidated EBITDA and Adjusted Consolidated EBITDA consist of net (loss) income plus net interest expense, taxes, depreciation and amortization expense, and certain other items. Consolidated EBITDA and Adjusted Consolidated EBITDA are not measures of financial performance under generally accepted accounting principles and should not be considered in isolation from or as a substitute for net (loss) income or cash flow measures prepared in accordance with generally accepted accounting principles or as a measure of profitability or liquidity. Additionally, Consolidated EBITDA and Adjusted Consolidated EBITDA may not be comparable to other similarly titled measures of other companies. The Company has included Consolidated EBITDA and Adjusted Consolidated EBITDA as a supplemental disclosure because its management believes that Consolidated EBITDA and Adjusted Consolidated EBITDA provide useful information regarding its ability to service debt and to fund capital expenditures and provides investors a helpful measure for comparing its operating performance with the performance of other companies that have different financing and capital structures or tax rates. The Company uses Consolidated EBITDA and Adjusted Consolidated EBITDA to compare and to monitor the performance of the Company and its business segments to other comparable public companies and as a benchmark for the award of incentive compensation under its annual incentive compensation plan. The table above sets forth a reconciliation of Consolidated EBITDA and Adjusted Consolidated EBITDA to net (loss) income, which is the most directly comparable measure of financial performance calculated under generally accepted accounting principles. 28

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