U.S. Well Services, Inc. Investor Presentation January 9, 2019
Forward Looking Statements and Other Disclaimers Forward-Looking Statements This presentation includes 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, included herein concerning, among other things, the company s financial position and liquidity, results of operations and financial performance for periods not yet completed and for which final financial statements have not been published, business strategy and objectives for future operations, results of discussions with potential customers and planned deployment and operation of fleets, are forward-looking statements. These forward-looking statements may be identified by their use of terms and phrases such as may, expect, guidance, estimate, project, plan, believe, intend, achievable, anticipate, will, continue, potential, should, could, goal, estimated, and similar terms and phrases. Although the company believes that the expectations reflected in these forward-looking statements are reasonable, they do involve certain assumptions, risks and uncertainties, many of which are beyond the company s control. These forward-looking statements represent the company s current expectations or beliefs concerning future events, and it is possible that the results described in this presentation will not be achieved. These forward-looking statements are subject to certain risks, uncertainties and assumptions identified in this presentation or disclosed from time to time in the company s filings with the Securities and Exchange Commission (the SEC ) and other public statements. Factors that could cause actual results to differ from the company s expectations include changes in market conditions, changes in commodity prices, changes in supply and demand for oil and gas and our services, availability of financing and capital, the company s liquidity, the company s compliance with covenants under its credit agreements, geopolitical events, availability of equipment and personnel, finalizing the company s financial statements and results for 2018, and other factors described in the company s filings with the SEC, including those described under Risk Factors in the Current Report on Form 8-K filed with the SEC on November 16, 2018. As a result of these factors, actual results may differ materially from those indicated or implied by forward-looking statements. Any forward-looking statement speaks only as of the date on which it is made, and, except as required by law, the company does not undertake any obligation to update or revise any forward- looking statement, whether as a result of new information, future events or otherwise. New factors emerge from time to time, and it is not possible for us to predict all such factors. Non-GAAP Financial Measures EBITDA and Adjusted EBITDA are non-gaap financial measures and should not be considered as a substitute for net income (loss), operating income (loss) or any other performance measure derived in accordance with United States generally accepted accounting principles ( GAAP ) or as an alternative to net cash provided by operating activities as a measure of USWS profitability or liquidity. USWS management believes EBITDA and Adjusted EBITDA are useful because they allow external users of its consolidated financial statements, such as industry analysts, investors, lenders and rating agencies, to more effectively evaluate its operating performance, compare the results of its operations from period to period and against USWS peers without regard to USWS financing methods, hedging positions or capital structure and because it highlights trends in USWS business that may not otherwise be apparent when relying solely on GAAP measures. USWS presents EBITDA and Adjusted EBITDA because it believes EBITDA and Adjusted EBITDA are important supplemental measures of its performance that are frequently used by others in evaluating companies in its industry. Because EBITDA and Adjusted EBITDA exclude some, but not all, items that affect net income (loss) and may vary among companies, the EBITDA and Adjusted EBITDA USWS presents may not be comparable to similarly titled measures of other companies. USWS defines EBITDA as earnings before interest, income taxes, depreciation and amortization. USWS defines Adjusted EBITDA as EBITDA excluding the following: loss on disposal of assets; non- productive time; unit-based compensation; fleet start-up and relocation costs; restructuring and transaction related costs; and impairment loss. Industry and Market Data Certain information contained in this presentation has been derived from sources prepared by third parties believed by USWS to be reliable, including independent industry publications, government publications, public disclosures by other companies or other published independent sources. Although USWS believes these sources are reliable, it has not independently verified the information, and the company cannot guarantee, nor does it make any representation regarding, its accuracy and completeness. 2
U.S. Well Services Current Company Snapshot $429 Million Market Cap¹ $536 Million Enterprise Value¹, ² 630,000 Hydraulic Horsepower³ 13 Frac Fleets³ Corporate Headquarters District Office Northeast Regional Office Basins of Operation 7,000+ Electric Frac Stages Completed⁴ USWS Is One Of The Pioneers Of Electric Frac Technology ¹ Market capitalization based on share price of $7.02 and 61.1 million effective shares outstanding as of January 9, 2019. ² Balance sheet data estimated as of December 31, 2018 assumes $136 million of total debt and $29 million of cash and cash equivalents. ³ Reflects 481,000 HHP as of January 3, 2019 across 10 active fleets plus 148,500 HHP across 3 contracted newbuild fleets. ⁴ As of January 9, 2019. 3
Recent Company Milestones U.S. Well Services, Inc. ( USWS ) has continued its evolution since the announcement of the merger transaction in July 2018 Merger transaction announced 1 st newbuild electric fleet contract signed Merger transaction closed; USWS listed on NASDAQ Announced increased liquidity through second lien delayed draw term loan facility July 16 th October 26 th November 9 th December 17 th October 1 st October 31 st December 11 th 11 th fleet deployed; exclusive generator supply agreement signed 2 nd newbuild electric fleet contract announced 3 rd newbuild electric fleet contract announced 4
U.S. Well Services Is Executing On Its Strategy USWS has made tremendous progress since announcing the merger transaction and continues to work towards delivering on key strategic objectives Review Of Key Strategic Initiatives USWS Stated Goal: Progress Achieved Management Commentary: Strengthen USWS Balance Sheet Improve Electric Fleet with Gen 2 Design Support Fleet Expansion With Customer Contracts Continue Driving Electric Frac Adoption Continued Focus in 2019 Completed transformational go-public transaction Repaid outstanding borrowings with transaction proceeds Extended 1 st lien credit facility and secured a new 2 nd lien delayed draw term loan to support fleet growth initiatives Increased HHP per fleet to meet customer demands Shortened mobilization times to be in-line with conventional fleet Reduced total cost by ~25% relative to first generation electric fleets on a $ / HHP basis Executed 3 contracts for electric fleets to begin working in 2019 Active customer dialog for additional new fleet contracts as industry is expected to accelerate adoption of electric frac technology Expanding customer demand for electric frac services continues to support planned fleet additions 100% of newbuilds are electric 5
Disciplined Growth Strategy Continues Amid Market Volatility USWS continues to pursue a disciplined through-cycle growth plan and will carefully match capex with customer demand Disciplined Fleet Growth Demand for our electric frac fleets is strengthening; fuel cost savings and operational efficiency are expected to be more impactful in a challenging commodity price environment USWS electric frac fleet growth will be balanced by customer demand and a need to achieve favorable full-cycle newbuild economics Diversifying Areas of Operations USWS has expanded its geographic footprint in order to better serve the strongest demand markets for frac services Expanded geographic focus allows USWS to serve markets that account for over 60% of total U.S. land rig activity and reduces customer concentration risk 1 Contracts Help Mitigate Downside Risk Monthly rental contracts help mitigate financial impact of industry volatility Contracts helped USWS remain EBITDA positive through last industry downturn USWS has an unprecedented opportunity to drive industry adoption and market share for its proprietary electric frac technology 1 Source: Baker Hughes rig count data as of December 14, 2018. 6
Strategic Realignment Is Underway USWS has successfully transitioned from a pure-play, conventional Appalachian Basin pressure pumper to a multi-basin service provider and one of the pioneers of the electric frac revolution Rig Count¹ Appalachia Other 18% 7% Haynesville Mid-Con 5% 8% Bakken DJ 5% 3% Eagle Ford 8% 47% Permian Geographic Diversification Expected To Continue In 2019 Eagle Ford Eagle Ford 30% 38% USWS 2016 USWS Q2 2018 USWS Q4 2019E 100% Appalachia ¹ Source: Rig count per Baker Hughes as of December 14, 2018. 60% Appalachia 10% Permian Appalachia 15% 47% Permian 7
Electric Fleets Offer Significant Benefits Over Conventional Fleets Longer useful life Reduced equipment vibration and improved integrity Electric Fleet Benefit To Customer USWS Community Cost Reduced fuel costs (~$18 million per year)¹ Reduced exposure to commodity price volatility Reduced maintenance spending Reduced carbon and Nox emissions Reduced Noise Pollution (69% reduction) Environmental & Safety Zero hot-fueling or ignition sources near the wellhead (reduced risk of fire and/or explosions) Reduced footprint at the wellhead Elimination of truck fuel delivery to wellsite (road traffic 75-100 truckloads per month) Reduction of onsite mechanical repairs (climbing on equipment) ¹ Reflects cost savings of $1.5 million per month based on 25 day work month with 7 stages per day with 4,000 gallons of diesel at $2.50 per gallon to power diesel fleet and 3,600 Mcf/d at $2.00 per MMBtu required to power electric fleet. 8
Clean Fleet Delivers Substantial Fuel Cost Savings USWS management pioneered electric frac fleet technology in 2013 to combat emissions regulations, drawing on their experience using electric power systems in the marine industry Our mobile electric turbines utilize field natural gas which provide direct power to our electric motors and hydraulic pumps Unlike existing dual-fuel solutions, our electric fleets do not require any diesel engines thereby eliminating the associated maintenance costs of transmission and radiator repairs and oil changes Pump units do not require oil changes or other routine maintenance associated with conventional frac diesel engines Electric power not only provides for superior reliability, but also offers immense fuel cost savings The inherent reliability of electric powered equipment has led to widespread adoption in related industries, including the land drilling market, marine, metals and mining Using natural gas fuel in the field can generate fuel cost savings of ~$1.5mm per month relative to diesel Illustrative Fuel Cost Savings 1 Comparison Daily Fuel Cost Conventional Electric Fleet Fuel Type Diesel Field Gas Fuel Consumed Fuel Cost 4,000 Gallons Per Stage $2.50 / gal. (delivered) 3,600 Mcf/d $2.00 / Mcf (E&P netback) Cost Per Stage $10,000 $1,029 $70,000 90% Savings Stages Per Day 7 7 Work Days Per Month 25 25 Cost per Day $70,000 $7,200 Fuel Savings Per Day ($) $62,800 Fuel Savings (%) 90% Conventional $7,200 Electric ¹ Illustrative example based on recent customer discusons. Savings will vary depending on commondiy prices, and completion design factors 9
USWS Game Changing Electric Frac Fleets Continue To Evolve Gen I Pump Trailer Gen II Advancements The Next Generation of electric fleets are more powerful, mobile, and scalable while also costing less than the original design Increased power and scalability New FT8 Gas Turbine MOBILEPAC Unit manufactured by PW Power Systems provides 30 MW of nameplate capacity on site, ~30% increase Standard configuration consists of one PW Generator with the ability to incrementally scale up to 60 MW of power Provides USWS with runway to meet customer demands and increasing service intensity Mobility enhancements PW MOBILEPAC configuration significantly reduces generator mobilization times New trailer configuration removes one pump from each trailer and replaces it with the transformer Cables reduced by ~80% Shortened mobilization times to be in-line with conventional fleet Reduced cost Power generation cost per fleet reduced by ~20% Team continues to work with vendors to further reduce capital costs 10
Appendix
Illustrative Fully Diluted Share Count And Ownership As of December 17, 2018, USWS has 61,053,093 effective Class A and Class B common shares outstanding effective share count excludes 1,609,677 Class A common shares subject to cancellation¹, ² Additional performance shares & warrants consist of: 0.5 million performance shares issued to management which vest once share price exceeds $12.00 Public Warrants exercisable for 16.25 million shares and Sponsor Warrants exercisable for 7.75 million shares at $11.50 exercise price 3 USWS Share Price Shareholder Group¹ $10.00 $11.00 $12.00 $13.00 $14.00 $15.00 Legacy USWS Owners & Management 4 27.8 27.8 28.3 28.3 28.3 28.3 Crestview Partners 3,5 20.3 20.3 20.4 20.7 20.9 21.1 MPAC Sponsor Shares 1,3,6 3.6 3.6 3.8 4.1 4.3 4.6 MPAC Sponsor Shares Subject to Cancellation 2 - - 1.0 1.0 1.6 1.6 Public Shareholders 3,7 9.4 9.4 10.1 11.3 12.3 13.2 Total 61.1 61.1 63.6 65.4 67.5 68.8 ¹ Share ownership as disclosed in Form 8-K filed on November 16, 2018, adjusted for repurchase of 0.8 million Class A and 0.6 million Class B shares as reported on Form 8-K filed December 17, 2018. ² Includes 1,000,000 shares and 609,677 shares subject to transfer restrictions and potential cancelation unless the VWAP of the Class A Common Stock has equaled or exceeded $12.00 and $13.50, respectively, for any 20 trading days within any 30 trading day period within five years. ³ Public and private placement warrants are exercisable for ½ share. Owners must exercise warrants for full shares. ⁴ Includes 13,937,333 class B shares held by Non-Blocker Shareholders which are convertible into class A shares and 530,000 shares issued under the LTIP. One-third of the LTIP shares vest on each of the first, second and third anniversaries of the grant date; provided, however, that the closing share price has been $12.00 or greater for 20 trading days in any period of 30 consecutive trading days commencing after the Grant Date (the Trading Condition ). In the event the shares do not vest on the applicable anniversary date, such shares will vest on the date the Trading Condition is met (but in no event prior to the applicable anniversary date). ⁵ Includes warrants exercisable for 3,625,000 shares with a exercise price of $11.50 per share assuming the treasury stock method 6 Includes warrants exercisable for 4,125,000 shares with a exercise price of $11.50 per share assuming the treasury stock method 7 Includes all registered and unrestricted shares and warrants exercisable for 16,250,000 million shares with an exercise price of $11.50 per share, accounted for using the treasury stock method 12
Annex A Non-GAAP Financial Measures EBITDA and Adjusted EBITDA are non-gaap financial measures and should not be considered as a substitute for net income (loss), operating income (loss) or any other performance measure derived in accordance with United States generally accepted accounting principles ( GAAP ) or as an alternative to net cash provided by operating activities as a measure of USWS profitability or liquidity. USWS management believes EBITDA and Adjusted EBITDA are useful because they allow external users of its consolidated financial statements, such as industry analysts, investors, lenders and rating agencies, to more effectively evaluate its operating performance, compare the results of its operations from period to period and against USWS peers without regard to USWS financing methods, hedging positions or capital structure and because it highlights trends in USWS business that may not otherwise be apparent when relying solely on GAAP measures. USWS presents EBITDA and Adjusted EBITDA because it believes EBITDA and Adjusted EBITDA are important supplemental measures of its performance that are frequently used by others in evaluating companies in its industry. Because EBITDA and Adjusted EBITDA exclude some, but not all, items that affect net income (loss) and may vary among companies, the EBITDA and Adjusted EBITDA USWS presents may not be comparable to similarly titled measures of other companies. USWS defines EBITDA as earnings before interest, income taxes, depreciation and amortization. USWS defines Adjusted EBITDA as EBITDA excluding the following: loss on disposal of assets; non- productive time; unit-based compensation; fleet start-up and relocation costs; restructuring and transaction related costs; and impairment loss. 13
Contact Kyle O Neill, Chief Financial Officer koneill@uswellservices.com (832) 562-3730 Corporate Headquarters 770 South Post Oak Lane Suite 405 Houston, Texas 77056