OUR LIFE S WORK IS THE LIFE OF THE WELL TM

Transcription

1 Jefferies Global Energy Conference November 11, 2014 OUR LIFE S WORK IS THE LIFE OF THE WELL TM NYSE: BAS

2 Company Data and Forward-Looking Statements This presentation contains forward-looking statements. Basic has based these forwardlooking statements largely on its current expectations and projections about future events and financial trends affecting the financial condition of its business. These forwardlooking 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 forward-looking 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 forward-looking 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. Additional important risk factors that could cause actual results to differ materially from expectations are disclosed in Item 1A of Basic s Form 10-K for the year ended December 31, 2013 and subsequent Form 10-Q s filed with the SEC. While Basic makes these statements and projections in good faith, neither Basic nor its management can guarantee that the transactions will be consummated or that anticipated future results will be achieved. 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. Company Data: NYSE Ticker: BAS Share price (11/07/14): $12.13 Shares outstanding: 43.2 million Market capitalization: $524.0 million Average daily volume (3 mos): 1.9 million Website: 2

3 Proven Growth Strategy Our Life s Work is the Life of the Well TM Basic Energy Services supports its customers well site activities from cradle to grave Diversified service offering poised for future growth opportunities The right fleet, the right people and operations in the right basins to support long-term shareholder returns 3

4 Production Our Life s Work is the Life of the Well TM Every Well is a Potential Life-Long Customer Basic s Strategy for Success 1. Rate of Returns Driven 2. Proven Management with Ability to Weather Cycles 3. Diversified Service Offerings Years BAS Service Segments Fluid Services Well Servicing Contract Drilling Completion and Remedial Services 4

5 Diversified Oil Service Company Completion and Remedial Services 44% of revenue Fluid Services 26% of revenue Contract Drilling 4% of revenue Well Servicing 26% of revenue Revenue percentages are for LTM ended September 30,

6 Extensive Footprint in Prolific Basins Significant Exposure to Major Oil and Gas Markets 70% Revenue Exposure to Oil and Liquids Activity BAKKEN Appalachia 190,000+ Gross Wells (10% oil) APPALACHIA Rocky Mountains 130,000+ Gross Wells (35% oil) Mid-Continent 250,000+ Gross Wells (70% oil) Ark-La-Tex 75,000+ Gross Wells (45% oil) PICEANCE NIOBRARA GRANITE WASH Permian Basin 160,000+ Gross Wells (80% oil) PERMIAN WOODFORD FAYETTEVILLE BARNETT HAYNESVILLE EAGLE FORD Basic Field Operations South Texas/Gulf Coast 70,000+ Gross Wells (55% oil) Sources: Well count and relative percentage weighting of oil wells is from U.S. Energy Information Administration data. 6

7 Significant Presence in the Permian Basin Artesia Carlsbad Loco Hills Hobbs Eunice Kermit Pecos Ft. Stockton Denver City Odessa Crane Levelland Seminole Andrews Midland Big Lake Snyder Big Spring Sonora Knox City San Angelo Well Servicing Rigs Fluid Trucks / Frac Tanks SWDs Rental & Fishing Tool Stores Pumping Services Drilling Represents about 45% of BAS current revenue stream BAS presence in the Permian Basin dates to its founding in 1992 Provides a significant market for the full range of services BAS offers 198 Well Servicing rigs 12 Drilling Rigs 475 Fluid Services Trucks 1,256 Frac Tanks 32 SWDs 10 Rental & Fishing Tool Stores 133,700 HHP of pumping capacity Drilling economics are competitive with any major U.S. Basin Low breakeven price; multiple pay zones Currently more than 25% of the U.S. land drilling rigs were located in the Permian Basin Pronounced shift in number of rigs drilling horizontally continues 7

8 Diverse Customer Mix Revenue by Our Customer Group 31% 14% 55% Customer Grouping Large Medium Revenue to Basic > $6 mm > $65 k < $6 mm Active Rigs by Well Type Lower 48 19% 6% 27% 73% 75% Small < $65 k Directional Vertical Horizontal Oil Gas Current Permits* 13% Active Wells* 12% 26% 61% 27% 73% 62% 26% Directional Vertical Horizontal Oil Gas Directional Horizontal Vertical *Approved Permits, not yet drilled. Filed on/after 1/1/2014 Rig, Permit, and Well Data Source: DrillingInfo as of October 2014 *Active Wells, producing Oil, Gas, or both 8

9 Diversified Customer Base Top Ten Customers Represent 34% of Revenues Top Ten Customers for LTM ending September 30, 2014 North American E&P Company Spending (1) E Increasing E&P expenditures creates revenue growth opportunities for Basic (1) Sources: Estimated based on Barclay s 2014 E&P Spending Outlook report on December 9,

10 Capital Expenditure Budget 2014 Plan Financial Flexibility to Adjust Capital Investments Based on Market Conditions Total 2014 Budget: $315 million $millions $8 Expansion Budget Components $11 $4 $122 $185 $35 $135 Expansion Projects Maintenance Infrastructure and IT Completion & Remedial Services Fluid Services Well Servicing Contract Drilling 10

11 How We Manage Through Cycles Invest in new equipment Expand into new markets Maximize utilization to increase market share Develop new service offerings Upcycle Match CapEx to cash flow Maximize utilization to protect market share Right size workforce and cost structure Move equipment to higher demand areas Downcycle Basic s business segments are Scalable, most assets are Mobile, and Cash Flow is Maximized throughout the Energy Industry Cycles. 11

12 Equipment Matched to Market Needs By Maintaining a Modern and Active Asset Base, We Are Better Able to Earn Our Customers Business While Reducing the Risk of Potential Downtime Our Modern Fleet Operate a modern fleet matched to the needs of the local markets in each of our business segments Focused on efficiencies, reliability and safety Established program to routinely monitor and evaluate the condition of our equipment Since 2003, we have obtained annual independent reviews and evaluations of substantially all of our assets, which confirm the location and condition of these assets Our Employees We train all employees with skills and education required for specific roles Throughout every training course, we follow BASICs to Success our company s proprietary standards of operation 12

13 Disciplined Approach to Acquisitions Recent Strategic Acquisitions and Expansions 2011 ($216.4 million) Plugging Water recycling Salt water disposal wells Coil tubing Stimulation Trucks 2012 ($85.0 million) Plugging Rental tools Salt water disposal wells Completion and remedial services 2013 ($21.5 million) Salt water disposal wells and water recycling 2014 ($16.0 million) Enhances Existing Suite of Services Established Base of Wells to Support Life-Long Services Compatible Culture that Minimizes Integration Risk Investment Rental tools 13

14 1Q04 1Q05 1Q06 1Q07 1Q08 1Q09 1Q10 1Q11 1Q12 1Q13 1Q14 1Q04 1Q05 1Q06 1Q07 1Q08 1Q09 1Q10 1Q11 1Q12 1Q13 1Q14 Specialized Completion & Remedial Services Focused on Markets Traditionally Underserved by Larger Competitors Millions Millions $250 $200 $150 $100 $50 $0 Revenue Segment Profits $80 60% $70 50% $60 $50 40% $40 30% $30 20% $20 $10 10% $0 0% Support drilling, workover and production processes Pumping services for cementing, acidizing, squeeze-cementing (workover), fracturing and re-fracturing activities Fishing tools and rental equipment for drilling and workover processes Snubbing services to allow live-well completion and workover operations Coil tubing and nitrogen services for completion, remedial and P&A applications Gross Profit Gross Margin 14

15 1Q08 2Q 4Q 1Q09 2Q 4Q 1Q10 2Q 4Q 1Q11 2Q 4Q 1Q12 2Q 4Q 1Q13 2Q 4Q 1Q14 2Q Millions Number of Jobs Quarterly Pumping Services Jobs & Revenue $140 2,500 $120 $100 2,000 $80 1,500 $60 $40 $20 1, $0 0 Revenue* Cementing Acid & General Pumping Frac * Revenue is sum of cementing, acid & general pumping and frac services only. 15

16 Pumping Services HHP Allocation 297,000 Total HHP 435,600 Total HHP Dec 31, 2013 HHP by District 40,200 6,700 Ark-La-Tex Mid-Con 67, ,900 Permian Basin Rocky Mountain Dec 31, 2014 HHP by District* 53,100 6,800 Ark-La-Tex 133,700 Mid-Con 242,000 PBU RMR Dec 31, 2013 HHP by LOB 23,300 27,400 24, ,300 Cement Acid Frac Coil/Nitrogen Redeployment + Expansion 31, ,900 Dec 31, 2014 HHP by LOB* 32,900 22,900 Cement Acid Frac Coil/Nitrogen *Forecasted amounts based on current deployment plan 16

17 1Q04 1Q05 1Q06 1Q07 1Q08 1Q09 1Q10 1Q11 1Q12 1Q13 1Q14 1Q04 1Q05 1Q06 1Q07 1Q08 1Q09 1Q10 1Q11 1Q12 1Q13 1Q14 Fluid Services Basic Continues to Grow Integrated Fluid Service Business Anchored by SWD Expansion Millions Millions $120 $100 $80 $60 $40 $20 $0 $40 $35 $30 $25 $20 $15 $10 $5 $0 Segment Profits Gross Profit Revenue Gross Margin 45% 40% 35% 30% 25% 20% 15% 10% 5% 0% Transportation and disposal of salt water produced as a by-product of oil and gas production Sale, transportation, storage and disposal of fluids used in fracturing, workover and drilling activity Rental of portable frac and test tanks used in fracturing, workover, drilling and industrial applications Oilfield wastewater (state-regulated, nonhazardous) disposal wells Gulf Coast 16% 1,040 Trucks by Market Area Ark-La-Tex 17% Mid- Continent 7% Rocky Mtns. 14% Permian Basin 46% 17

18 Truck Hours Average Number of Trucks Fluid Service Truck Hours/Average # of Trucks 255,000 1, , , , , , ,000 1,050 1, ,000 Jan09 Jan10 Jan11 Jan12 Jan13 Jan Truck Hours Average Number of Trucks 18

19 Truck Hours Number of Salt Water Disposal Wells Fluid Service Truck Hours/# of SWD Wells 255, , , , , , , ,000 Jan09 Jan10 Jan11 Jan12 Jan13 Jan14 55 Truck Hours Number of Salt Water Disposal Wells 19

20 1Q04 1Q05 1Q06 1Q07 1Q08 1Q09 1Q10 1Q11 1Q12 1Q13 1Q14 1Q04 1Q05 1Q06 1Q07 1Q08 1Q09 1Q10 1Q11 1Q12 1Q13 1Q14 Well Servicing Rigs Facilitate Down Hole Activity Millions Millions $120 $100 $80 $60 $40 $20 $0 $45 $40 $35 $30 $25 $20 $15 $10 $5 $0 Revenue Segment Profits 50% 45% 40% 35% 30% 25% 20% 15% 10% 5% 0% Service Work - routine maintenance of downhole equipment to return well to production Workover - periodic major maintenance and renovation to sustain or improve production Completion - well preparation for production after successful drilling of well P&A - plugging and abandonment of depleted wells Ark-La-Tex 9% Gulf Coast 10% Mid- Continent 11% 421 Rigs by Market Area Stacked 7% Marcellus 2% Rocky Mtns. 14% Permian Basin 47% Gross Profit Gross Margin 20

21 Rig Hours Utilization Rate Well Servicing Rig Utilization Rates Steady Activity Levels in Oil and Liquid-Directed Markets Continue to Drive Demand 85,000 90% 75,000 65,000 80% 70% 60% 55,000 50% 40% 45,000 30% 35,000 20% 10% 25,000 Jan09 Jan10 Jan11 Jan12 Jan13 Jan14 0% Rig Hours Utilization Rate 21

22 1Q04 1Q05 1Q06 1Q07 1Q08 1Q09 1Q10 1Q11 1Q12 1Q13 1Q14 1Q04 1Q05 1Q06 1Q07 1Q08 1Q09 1Q10 1Q11 1Q12 1Q13 1Q14 Millions Millions $18 $16 $14 $12 $10 $8 $6 $4 $2 $0 $7 $6 $5 $4 $3 $2 $1 $0 -$1 -$2 Contract Drilling 12 Rig Fleet Customized to the Permian Basin Market Area Revenue Segment Profits 45% 40% 35% 30% 25% 20% 15% 10% 5% 0% Fleet of 12 drilling rigs in the Permian Basin One pre-set casing rig Six shallow-depth mechanical rigs Depth Ratings (Feet) Two 1,200HP SCR rigs >12,500' 8,500' - 12,500' 5,000' - 8,500' <5,000' Three 1,000HP rigs Gross Profit Gross Margin 22

23 7.75% Senior Notes 7.75% Senior Notes $MM Cash Cycle-Tested Balance Sheet That Funds Growth $500 $450 $400 $350 $300 $250 $200 $150 $100 $50 $0 Revolver Availability Cash Disciplined Approach to Capital Deployment Debt Maturity Distribution Debt Ratios at September 30, 2014 Adjusted EBITDA / Interest Expense Total Debt / Adjusted EBITDA Net Debt / Adjusted EBITDA 4.70 x 3.00 x 2.81 x Total Debt / Capitalization 71% Balance Sheet Accounts September 30, 2014 Cash and Cash Equivalents $57 Debt Senior Notes (B2/B+) $776 Other Debt and Capital Leases $134 Total Debt $910 Shareholders' Equity $364 Total Capitalization $1,274 Net Debt $853 Total Liquidity $240 23

24 BAS Financial Policy Disciplined Growth Strategy with Capital Structure in Mind Capital expenditures paid through existing cash balances and cash flow Acquisitions under $25 million paid through existing cash balance Acquisitions over $25 million will include an equity component Maintain Minimum Cash Balance of $50 million on Balance Sheet Leverage Target total debt to EBITDA ratio under 3 times Currently 3.0 times and expect to be under 3 times at December 31, 2014 Target debt-to-book capitalization of 50% Currently 71% and expect to be slightly under 70% by year-end Significant deleveraging will have to come via an acquisition that includes a large equity component 24

25 Quarterly Financial Performance High Operating Leverage Drives Cash Flow $450 35% $400 $350 $300 $250 30% 25% 20% $200 $150 $100 $50 15% 10% 5% $0 1Q09 1Q10 1Q11 1Q12 1Q13 1Q14 0% Revenue Adjusted EBITDA Adjusted EBITDA Margin 25

26 Back to Basics Diversified service offerings for both vertical and horizontal activity Returns driven through the cycles Operating in basins with high liquid yields and attractive economics Providing a safe work environment is a top priority Modern fleet matched to market needs Proven management team and local field leadership 26

27 Explanatory Information Adjusted EBITDA means earnings before interest, taxes, depreciation, amortization., gain or loss of disposal of assets and any non-recurring items. Adjusted EBITDA is used as an 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. Adjusted 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). Adjusted EBITDA excludes some, but not all, items that affect net income, and these measures may vary among other companies. Limitations to using Adjusted 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 Adjusted EBITDA differently than we do, limiting its usefulness a comparison measure. Adjusted EBITDA Reconciliation to Net Income (Loss) Year ended December 31, YTD $millions /30/14 Net income (loss) $ 88 $ 68 $ (254) $ (43) $ 47 $ 21 $ (36) $ 10 Income taxes (88) (25) (20) 8 Net interest expense Depreciation & amortization Terminated merger income - (12) Loss on early retirement of debt Gain on bargain purchase (2) - (1) - - Corporate relocation costs Sales and use tax assessment (Gain) loss of disposal of assets Loss on expected legal settlement Goodwill impairment Adjusted EBITDA $ 259 $ 277 $ 34 $ 114 $ 335 $ 306 $ 235 $