Integra: Performance Update. November, 2009

Transcription

1 Integra: Performance Update November, 29

2 Disclaimer This document does not constitute or form part of any offer or invitation to sell or issue, or any solicitation of any offer to purchase or subscribe for, any securities of Integra Group, nor should any part of it nor the fact of its distribution form part of or be relied on in connection with any contract or investment decision relating thereto, nor does it constitute a recommendation regarding the securities of Integra Group. This presentation is furnished on a confidential basis only for the use of the intended recipient and only for discussion purposes, may be amended and/or supplemented without notice and may not be relied upon for the purposes of entering into any transaction. The information presented herein will be deemed to be superseded by any subsequent versions of this presentation. The information in this presentation is being provided by Integra Group. This presentation contains forward looking statements, including statements about Integra Group's beliefs and expectations. These statements are based on Integra Group's current plans, estimates and projections, as well as its expectations of external conditions and events. All projections, valuations and statistical analyses are provided to assist the recipient in the evaluation of the matters described herein. They may be based on subjective assessments and assumptions and may use one among alternative methodologies that produce different results and, to the extent that they are based on historical information, they should not be relied upon as an accurate prediction of future performance. Forward-looking statements involve inherent risks and uncertainties and speak only as of the date they are made. Integra Group does not intend to or undertake any obligation to update these statements to reflect events and circumstances occurring after the date hereof or to reflect the occurrence of uninterrupted events. A number of important factors could cause actual results or outcomes to differ materially from those expressed in any forward-looking statements. Certain information presented herein (including market data and statistical information) has been obtained from various sources which Integra Group considers to be reliable. However, Integra Group makes no representation as to, and accepts no responsibility or liability whatsoever for, the accuracy or completeness of such information. 2

3 Integra at a glance Consolidated Revenue 1H29 - US$ 45MM Adjusted EBITDA 1H29 - US$ 55MM (1) Total Assets as of 3 June 29 - US$ 1.2BN Drilling, Workover, IPM, and Trade House Technology Services Formation Evaluation OFS Equipment Manufacturing Revenues 1H29 Adj. EBITDA 1H29 US$ 184MM US$ 12MM US$ 64MM US$ 24MM US$ 19MM US$ 29MM US$ 54MM US$ 8MM Key Services Drilling rig management Workovers Integrated Project Management Drilling tools manufacturing Coil tubing Directional drilling Cementing Drill bits service Well logging 2-D, 3-D seismic surveys Seismic processing and interpretation Heavy drilling rigs Cementing fleet Other equipment Personnel (2) Ca. 5,3 employees (2) Ca. 3, employees (2) Ca. 5,9 employees (2) Ca. 2,7 employees (2) Production Assets 1H29 22 active drilling rigs 12 workover crews 4 coil tubing units 1 directional drilling crews 8 cementing fleets 25 logging crews 3 drilling tools production sites 42 seismic crews 1 interpretation facility 3 production sites 1 service business unit R&D facilities in Austin, TX and Ekaterinburg Operating Statistics 1H29 89 th meters drilled 1,776 workover operations 431 th seismic shot points 9 rigs in production 1 assembly units in production 4+4 rigs and units completed Key Customers (1) Adjusted EBITDA represents profit (loss) before interest income (expenses), exchange rate translation differences, goodwill impairment, income taxes, depreciation and amortization, share of associates, share-based compensation and minority interest (2) Personnel data as of August, 29 3

4 Corporate governance Board of Directors and key management Change in corporate governance structure John B. Fitzgibbons, Chairman Founder and former CEO, Khanty Mansiysk Oil Corporation (KMOC) Founder and President, J Fitzgibbons LLC and Brookline Partners LLC Antonio Campo, CEO Former President, LatAm Oilfield Services at Schlumberger Antonio Campo Chief Executive Officer Board of Directors Felix Lubashevsky President Iosif Bakaleinik First VP of RUSAL Former First VP of TNK, Head of Economy and Finance John W. Kennedy Chairman, Vetco Int. and Wellstream Int. Ltd Former Executive VP, Halliburton Felix Lubashevsky, President Former Executive VP Oilfield Services and Supply Chain Management, TNK-BP OPERATIONAL Business unit Executive Committee Business unit Business unit STRATEGIC Business unit Neil Gaskell Former Group Treasurer, Shell Former Executive Director, Shell International J. Robert Maguire Former Co-Head and MD of Global Oil and Gas Group at Morgan Stanley Dmitry Avdeev, CFO Former Executive Director at Morgan Stanley Corporate committees Board Level Audit Committee Compensation Committee Neil Gaskell Iosif Bakaleynik Company Level Nominating Committee John Kennedy Non-executive directors Executive directors Executive Committee (Chair: Lubashevsky/Campo) Shareholder structure (post SPO) Management and Board of Directors - 18% Free float - 82% Financial Committee Investment Committee Contract Control Committee Compliance Committee IT Committee Operating Committee 4

5 Positive dynamics in the Russian OFS market Comments Russian oil industry netbacks, US$/bbl Negative export netbacks in October-December 28 led to cancellation or postponement of OFS orders. Long-term payback projects such as seismic and exploration drilling were affected the most From February 29 the operating environment stabilized as upstream economics improved, driven by oil price recovery tax stimulus Ruble depreciation reducing costs Netback (less MET) $/bbl Urals $/bbl Oil prices are broadly at the levels of 3Q 28, reducing he risk of current firm orders being withdrawn, provided no sharp drop in the oil price Jan/8 Mar/8 May/8 Jul/8 Source: Neftyanaya torgovlya, Bloomberg Sep/8 Nov/8 Jan/9 Mar/9 May/9 Exchange rate, upstream operating expenses Jul/9 Sep/9 Nov/9 Netbacks are already higher than those factored in by oil companies at the beginning of the year Development of OFS industry demand in 29 and beyond is expected to be driven by the pace of global economic recovery and in particular, commodity prices 8, 6, 4, 2, Rosneft, US$/boe (lhs) Lukoil, US$/boe (lhs) Average US$/RR exchange rate (rhs) 24,3 24,3 23,6 4,3 4,3 3,9 3,8 3,2 3,3 3,4 34, 27,3 32, (37.1%) 4, (22.5%) 3,1 3,4 2,4 2,5 4, 35, 3, 25, 2, 15, 1, 5,, 1Q8 2Q8 3Q8 4Q8 1Q9 2Q9 Source: Rosneft, Lukoil, Factset, 5

6 Long term Russian OFS market growth story remains intact Russian OFS market fundamentals Vast undeveloped and unexplored resource base Growing sophistication and service intensity of brownfield and greenfield projects Historical underinvestment requires significant incremental spending to sustain current levels of production License obligations are unchanged and the state is likely to begin enforcing them Depreciated oilfield services equipment requires replacement or upgrade, fueling manufacturing demand Drivers and triggers? Stable upstream economics, cashflows and access to capital for producers Tax breaks for greenfield areas and certain highly depleted brownfields with high service intensity Political pressure to increase / stabilize production OFS Market Upside OFS market estimates by Douglas Westwood (26), Russian oil and gas industry capex (29), US$ BN OFS equipment (lhs) Other OFS (lhs) Russian majors capex (rhs) (1) E 28E 29E 21E 211E Russian OFS market drivers identified by Douglas Westwood Sustained oil price Increase in capital expenditures Large oil and gas resources Transition to Western practices New prospective regions Increase in onshore maturity Modernization of existing assets Harsher operating conditions Increase in downhole completion technology capacity? / Source: 26 Douglas Westwood Market Study, Factset (1) Sum of consensus capex forecasts for Rosneft, Lukoil, TNK-BP, Tatneft, Gazprom, Novatek 6

7 Key financial highlights Key financial highlights, US$MM Consolidated Adj. EBITDA and margin Free Cashflow (192) (-23) Chg, % 28/27 n/m 1H 8 1H 9 (111) 3 Chg, % 1H9/1H8 Revenue 1,177 1, % % Adj. EBITDA (1) % % Adj. EBITDA margin 17.9% 11.2% 16.4% 13.6% Adj. EBITDA (before impairments and write offs/ups) Adj. EBITDA margin (before write-offs/ups and impairments) % % 17.5% 14.8% 16.9% 11.6% Net Loss (51) (272) n/m (5) (22) n/m Operating Cashflow (9.7) 135 n/m x Capex % % n/m % 22% 22% 22% 2% 17% 17% 17% 15% 1% 11% 1% 8% 5% % -5% -1% -11% 1Q7 2Q7 3Q7 4Q7 1Q8 2Q8 3Q8 4Q8 1Q9 2Q9 Adj. EBITDA US$MM (lhs) -15% Adj EBITDA Margin (rhs) (1) Adjusted EBITDA represents profit (loss) before interest income (expenses), exchange translation difference, income taxes, depreciation and amortization, goodwill impairment, share-based compensation, share of results of associates and minority interest 7

8 Quarterly earnings dynamics Drilling, Workover, IPM (excl. Trade House) Formation Evaluation % 15% 1% -26% 4% 1Q8 2Q8 3Q8 4Q8 1Q9 2Q9 Share of total Adj. EBITDA 1H8-17% 1H9-16% 9% 2% 15% 1% 5% % -5% -1% -15% -2% -25% -3% % 42% Share of total Adj. EBITDA 1H8-41% 1H9-4% 11% 16% 22% 1Q8 2Q8 3Q8 4Q8 1Q9 2Q9 5% 4% 32% 3% 2% 1% % Technology Services OFS Equipment Manufacturing 25 5% 2 19% 19% 2% % 36% 3% 35% 39% 4% 3% % 13% 16% 11% 16% 12% 1 5 Share of total Adj. EBITDA 1H8-23% 1H9-34% 17% 2% 1% 8 4 Share of total Adj. EBITDA 1H8-19% 1H9-11% 8% 4% 1Q8 2Q8 3Q8 4Q8 1Q9 2Q9 % 1Q8 2Q8 3Q8 4Q8 1Q9 2Q9 % Adj. EBITDA, US$MM (lhs) Adj. EBITDA Margin (rhs) 8

9 Cash flow and working capital trends Working capital by element, US$MM Free Cash Flow, US$MM H H7 2H7 1H8 2H8 1H9 Receivables Inventories Payables Net Working Capital Capex, US$MM E Drilling, Workover, IPM + TS Formation Evaluation Equipment Manufacturing Other Comments Net cash generated from operating activities was US$ 49.8MM (vs. US$ 2.8MM in 1H28) Free cash flow was US$ 3.2 million (vs. negative US$ 111.2MM in 1H28) Capital expenditures for 1H29 were US$ 19.6MM (vs. US $114.MM in 1H28) 9

10 Revenue and cost dynamics Revenue by segment in 1H29 vs. 1H28, US$MM Factors affecting revenues (49%) 211 1H28 FX Price and volume reduction H29 Other Equipment Manufacturing Formation Evaluation Technology Services Drilling, Workover, IPM Ruble depreciation Idling of a significant part of drilling capacity Lower greenfield exploration demand Moderate pricing declines Lower manufacturing orderbook Operating cash costs in 1H29 vs. 1H28, US$MM Cost cutting measures (45%) (9) (142) (238) (157) (153) (258) 1H28 FX effect Cost cutting, lower volumes (6) (138) (61) (153) 1H29 Other cash SG&A Services Materials Employee costs 28% headcount reduction from March 28, including a nearly 3% reduction in the Moscow head office Executive compensation is changed to fixed and variable components. Fixed component was cut 3-5% SG&A expenses reduced significantly (including reduction in rent, travel and 3 rd party consultant expenses) 1

11 Debt profile long term funding in place Debt structure optimization, US$ MM 6 Debt maturity scenarios, US$ MM Repayment of 1% of the issue Retention of 1% of the issue in the market Jun-8 Sep-8 Dec-8 Mar-9 Jun-9 Sep-9 Short term Long term Net Debt Debt interest cost and currency breakdown 1% 8% 6% 4% 2% % 56%, 11.6% interest 44%, 7.1% interest 9.7 % avg. interest 43%, 11.7% interest 57%, 9.3% interest 1.1 % avg. interest 64% 3%, hedged US$ 6% Dec, 28 Sep, 29 Proforma (1% bond USD, EUR RUB rollover) Comments US$ 335 MM of total debt refinanced by long term facilities and equity financing in 9M29 Ruble bond maturing in December 29 will be repaid from accumulated funds (1% of the issue accumulated) or rolled to 211 Equity financing of $95 MM in September, 29 had allowed proportionate reduction in upcoming maturities in and provided immediate liquidity for 21 capex Foreign currency risk is partially hedged by RUB/US$ forward contracts Average interest cost is stable, up from 9.7% to 1.1% 11

12 Order book status Order book as of November 1, 29 (by segment), US$MM Drilling,Workover, IPM 141 Order book 29 (by customer) 6 Tech. Services Total: US$ RR 32/US$ Contracts signed Formation Evaluation OFS Equipment Manufacturing 24 Other Tender won, contracts not yet signed Actual 28 revenue / 29 Order book comparison, RRMM 45, 3, 15, RR 35,977 14,32 5,25 8,31 7,215 1,169 FY28-2% Drilling, WO,IPM Tech. Services Formation Evaluation Manufacturing Other RR 28,772 MM 12,34 4,712 6,45 4, Nov-9-14% -1% -23% -33% -34% Actual 28 revenue / 29 Order book comparison, US$MM TN K-BP, 13% Rosneft, 3% Other independants, 11% Gazprom, 17% Novatek, 5% Surgut, 5% KPO, 5% Severenergia, 3% Other majors, 11% 1,6 1,4 1,2 1, US$ 1,446 MM FY28-38% Drilling, WO,IPM Tech. Services Formation Evaluation Manufacturing Other US$ 899 MM Nov-9 12

13 Integra: well-positioned to capture growth Wide geographical presence in key oil and gas regions of Russia and the CIS. International presence (Venezuela) Experienced engineering team and Integra Research & Development facility (Austin, USA) provide clients with highly complex project solutions (IPM, rig, downhole motor and turbine designs) and increase profitability of the Company Substantial investment in assets upgrade and replacement US$ 5MM of capex in % asset replacement ratio Completed upgrades: Seismic (Sercel vibrators, new channels) Tech. services (GE dir. drilling units) Manufacturing (Pama milling system) Diversified client base, long-term relationships with largest upstream investors Order Book 29 Improved cost and working capital structure allows flexible pricing Significant cost cutting in 1H 29 Strong improvement in working capital management and cash flows Balanced currency structure of revenues and costs reducing FX risk Launch of new services with high margins and short delivery cycles Coil tubing Directional drilling Share of high margin services in revenue structure increased in 1H29 Ongoing transformation of legal and management structure increasing transparency, flexibility and tax efficiency >4 operating entities in operating entities in 29 Management integration completed 13