2011 FTS International. All rights reserved.

Transcription

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2 A leading independent provider of oil and natural gas stimulation services with expertise in high-pressure hydraulic fracturing. 2

3 Table of Contents 1. Company Overview 2. Customer Engagement and Footprint 3. Vertical Integration Strategy 3

4 COMPANY OVERVIEW 4

5 Company Drivers Cost savings from vertically integrated business Young and high quality fleet with advanced equipment and products Recent E&P JVs increase capex spending in unconventional resources Blue chip customer base Strong industry fundamentals and demand for our services Leading market share in key basins Levered to horizontal rig count Experienced management team and incentivized work force 5

6 Company Overview Leading independent provider of well stimulation services and products to the U.S. onshore oil and gas industry: Operations focused primarily in the most active unconventional basins: Leading operator in the Haynesville, Marcellus and Eagle Ford shales and the Permian basin During 2011 expanded into Granite Wash and Bakken oil- levered plays Goal is to expand into additional oil-levered regions, including Niobrara Our business is vertically integrated: Hydraulic Stimulation: We provide high-pressure hydraulic fracturing and other services and products that enhance the recovery of hydrocarbons Manufacturing: We own and manufacture heavy duty, high quality, custom designed frac units and frac pumps: 1,467,500 domestic horsepower in 34 fleets as of March 30, 2012 Average equipment age of 3.25 years: 85% built since the beginning of 2006 Proppant: We mine, process and transport frac sand for our in-house hydraulic fracturing services Produce both raw frac-sand and resin-coated frac-sand Chemicals: We also manufacture chemicals and operate a logistics business that supports our integrated operations ($ in millions) Revenue $574 $389 $1,287 $2,339 $ Q1 '12 Stages frac d 3,823 5,055 Operating performance 9,916 17,028 4, Q1 '12 ($ in millions) EBITDA $148 $ Wells frac d 675 $518 $856 1,644 1,374 $ Q1 ' Q1'12 6

7 Business Strategy Enhance vertical integration Further enhance our vertical integration by adding additional complementary service offerings Control critical equipment, maintenance and logistics to avoid bottlenecks Continue to enhance contract terms with customers Allocate more of our fleets on a dedicated contract basis (targeting ~50%) Secure additional long term customer agreements, which provide greater revenue certainty and improve credit profile Focus on operational efficiencies Focus on improving our operational efficiencies to increase our asset utilization and improve our cost structure Emphasis on improved equipment, technology and processes to reduce downtime Increase proppant and manufacturing capacity Increase our raw sand production capacity by expanding processing plants and opening new mines Expand resin coated sand production capacity Expand and consolidate manufacturing capacity Expand geographic footprint Expand operations into other attractive regions including oil directed areas such as the Utica and Niobrara Shales Pursuing strategic international opportunities 7

8 Experienced Management Team Name Position Years of Experience Background Marc Rowland Chief Executive Officer 30+ Joined in November 2010 as Chief Financial Officer and assumed the role of Chief Executive Officer in May Mr. Rowland is the former Executive Vice President and Chief Financial Officer of Chesapeake Energy Corporation. Coy Randle President and Chief Operating Officer 28+ Joined as Southern Division Manager in March 2007 and was appointed to Vice President position in August Prior oilfield services experience includes operation and supervision of cement, stimulation, acid and nitrogen units with BJ Services. Randy Guba Chief Financial Officer 26+ Joined in September 2011, he previously served as Executive Vice President and Chief Financial Officer of Integrated Electrical Services (IES), one of the largest national electrical contractors. He served as CFO at Kraton Ploymers and spent 19 years at General Electric Company where he culminated as manager of GE Energy s global installations and field services division. His career began in public accounting, received his Bachelor of Arts degree from Rutgers University and is a certified public accountant. Kevin Krebs Ross Philo Kevin McGlinch Dan Patterson Charles Veazey Brad Holms Senior Vice President of Manufacturing Executive Vice President of Information Technology Senior Vice President of Finance and Treasurer Chief Accounting Officer, Senior Vice President of Accounting and Corporate Controller Senior Vice President of Operations Senior Vice President of Global Development and Technology 30+ Joined in September 2011, he previously served as the Director of Global Manufacturing and Planning at Baker Hughes, pressure pumping, where he was responsible for the manufacture of oilfield services high pressure pumping fracturing equipment, cementing equipment and related support equipment. Mr. Krebs received his Bachelor of Science degree from the U.S. Military Academy at West Point. 30+ Joined in November 2011, he recently served as Vice President and CIO of Maersk Oil. Prior to which he served as Executive Vice President and CIO of the USPS. And has held various executive positions at Cisco Systems, Visean, Halliburton and Schlumberger. He has extensive international experience from his career in the energy industry, having lived and worked in some 30 countries around the world. Mr. Philo received his Bachelor of Science degree from Imperial College of Science and Technology in London. 19+ Joined in Prior Finance and Accounting experience with leading industry manufacturers such as Sherwin-Williams, Stanley, Newell Rubbermaid and Vought Aircraft. Served in a variety of financial roles including CFO, Corporate Controller and Financial Manager 21+ Joined in Prior experience in various finance, accounting, internal controls and operational roles within Albertsons, Commercial Metals Company, Flowserve Corporation and Super Plaza Stores. Among his prior roles, he has served as Chief Financial Officer, FP&A Manager and Internal Controls Management. Currently holds CPA and CIA certifications. 35+ Joined as Business Development Manager in March Within 6 months, promoted to Mid-Continent Division Manager and subsequently Vice President of Operations. Prior oilfield services experience includes operation and supervision of coil tubing, cement, stimulation, acid and nitrogen units with Halliburton and BJ Services. 34+ Joined in Prior experience in marketing, technology, operations management, global sales and account management with 30 years with Schlumberger and the remaining with the Company. Credited with multiple industry technical papers and innovations. Other Key Personnel William Hicks Sharon Hicks Dr. David Holcomb Jeff Dawson Chris Cummins Larry Cannon General Counsel and Vice President Vice President and Senior Legal Counsel Director of R&D, PhD Manager of Fluids and Product Sr. Vice President of Operations Chief Securities Counsel 8

9 CUSTOMER ENGAGEMENT AND FOOTPRINT 9

10 What We Do for our Customers We provide well stimulation services and products including hydraulic fracturing services: Involves pumping a mixture of water, chemicals and proppants at extremely high pressure into a perforated well to fracture the source rock and stimulate the flow of hydrocarbons This process is typically completed in multiple stages throughout the length of the horizontal, or lateral, portion of a well We are paid per fracturing stage: Number of frac stages per well varies by region (up to 20+ stages per well in some areas) Typically takes 2-4+ hours per stage Invoiced cost per stage is determined by requirements including: Horsepower (varies by pressure and volume requirements Materials consumed (proppant, chemicals, etc.) Mobilization costs 10

11 Demand for our services and products is growing Hydraulic fracturing utilization and prices have increased significantly due to high demand from shale focused oil and gas companies Combined effects of more stages and greater frac volumes is requiring more durable frac equipment and more total hydraulic horsepower More Frac Stages Larger Fracs per Stage Sand volume per stage is increasing Frac stages are being performed closer together further increasing the number of stages per well Longer Laterals Longer well laterals require a greater number of frac stages per well Drilling Efficiency More efficient drilling rigs have reduced the time required to drill wells, thus increasing the number of wells drilled per year for the same rig count As the number of wells drilled per rig increases, demand for hydraulic fracturing increases enabling us to do more business for a given rig count Horizontal Rig Count Technical advances in drilling and completion technologies have made production from shales economically attractive and increased the level of horizontal drilling Newly formed E&P JVs and held by production requirements have flooded the market with foreign and domestic capital helping fund and expand drilling operations 11

12 Geographic Footprint in domestic shale plays Located in Active Drilling Basins Office / Service Center Locations Headquarters: Fort Worth, TX Bakken District Offices: Longview, TX Bryan, TX Odessa, TX Pleasanton, TX Artesia, NM Minot, ND Vernal, UT Washington, PA Williamsport, PA Shreveport, LA Elk City, OK Aledo, TX Antrim Niobrara Marcellus Sales Offices: Fort Worth, TX Houston, TX Tyler, TX Odessa, TX Denver, CO Oklahoma City, OK Sand Mining/Processing Facilities: Granite Wash Fayetteville Perryville, MO Voca, TX Ottawa, IL Oakdale, IL Cutler, IL Birmingham, AL Readfiled, WI Permian Barnett Eagle Ford Haynesville Sand Distribution: Cleburne, TX Monahans, TX Rook, PA Pleasanton, TX Shreveport, LA Glenwood, PA Longview, TX Hughes Springs, TX Equipment Manufacturing: Cisco, TX Fort Worth, TX Aledo, TX Basin Shale Chemicals Mfg. and R&D: Houston, TX Chickasha, OK Denver, CO Our operations serve customers in the most active and prolific shale plays in North America 12

13 Leading Market Share in Key Basins Our operations are strategically focused in challenging areas that will require significant well stimulation services Have gained market share as a result of innovative and durable equipment, value-added services, access to highquality proppant and strong customer relationships We believe we have the largest market share of any hydraulic fracturing service provider in the Haynesville Shale and Marcellus Shale based on number of fleets We are also a leading provider in the Eagle Ford Shale where we have plans to significantly expand our operations We deployed 11 new fleets through 2011 in additional regions with significant oil- and liquids- directed drilling activity (e.g., Bakken, Niobrara Shales and Granite Wash) Haynesville Marcellus Shale Eagle Ford Shale Permian Basin Bakken Other District offices Shreveport, LA Longview, TX Bryan, TX Washington, PA Williamsport, PA Pleasanton, TX Odessa, TX Artesia, NM Minot, ND Elk City Aledo, TX Current fleets Horsepower deployed 325, , , , , ,960 13

14 Blue Chip Customer Base Diverse and well established customer base New contract structures include enhancements such as: Guaranteed minimum revenues 18 to 24+ month terms Price escalators Older customer agreements have historically included: 12 month terms First call service provider arrangement Since October 2010, we have entered into 15 new contracts: Enhancements include 24 hour, 7 day work schedule, minimum usage, and early termination fees 14

15 VERTICAL INTEGRATION STRATEGY 15

16 Unique, Vertically Integrated Business Satisfied Customers Frac Services and Products Distribution & Logistics Pump manufacturing Frac unit manufacturing Maintenance operations Raw sand mining Sand resin coating Chemicals production Our integration enables us to provide Best in Class service 16

17 Benefits from our Vertical Integration Strategy Vertical integration of essential, higher-margin elements of the hydraulic fracturing supply chain creates benefits for Frac Tech, including: Enhanced margins We capture a greater share of the hydraulic fracturing value chain including equipment, parts, sand and chemicals Our equipment costs are typically 30% less than outside suppliers Operating Efficiency Product Development Our proprietary pumps and replacement parts are more durable and thus reduce downtime and maintenance In house maintenance capability and certainty of supply for parts, proppant and chemicals improves asset utilization and customer satisfaction Positive feed back loop from crews experience used to improve frac unit, hydraulic pump and other equipment designs Best practices are shared and implemented across crews Customer Satisfaction Availability of equipment, sand and chemicals on site reduces delays for customers High quality, reliable fleets reduce work stoppages and delays Diversification & Control Margin diversification helps mitigate risks from any single business Provides maximum capital budget flexibility minimizes contract commitments to third parties 17

18 Proppant: Raw & Resin-Coated Sand Raw frac sand Overview Most common types of raw frac sand are Brady ( Brown ) and Ottawa ( White ) sand: Represents ~90% of the fracturing sand utilized in the oil and gas industry Brady sand is mined from the Hickory formation, near Brady, Texas Demand for raw sand is primarily driven by oil and gas demand, particularly in unconventional plays Also used in applications outside of the oil and gas industry, including sports turf, foundry sand, stucco sand and other (nonresin) coating applications Resin coated sand Resin coated sand is processed raw frac sand that has been coated with resin Enhances performance characteristics of raw sand Both Ottawa and Brady sand can be utilized for coating Commonly used throughout the U.S., with market growth driven by unconventional, higher pressure plays Performance / Cost advantage is driving growth relative to raw sand and ceramics Barriers to entry Capital requirements and industry expertise Large scale, greenfield raw frac sand operation is estimated to cost between $50 $75 million for raw frac sand and $20 million for resin coated sand Need access to individuals with technical background and market know how Pressure pumping market intelligence is critical for start up proppant business Timing Time required to identify, permit and construct a mine is 1 3 years Time required to modify/construct a resin sand processing plant can take over a year Permitting Permitting process can take up to 2 years Substantial legal fees Specifications Only certain sand resources meet API specifications Access to raw sand Secure raw sand supply is imperative for a successful resincoating operation 18

19 Proppant: Industry Value Chain Brady or Ottawa Sand Mine Stripping, Drilling & Blasting Raw Frac Sand Processing Plant Loading & Hauling Primary Crushing Coarse Screening Wet Tower Scrubbing Raw Frac Sand Processing Plant (cont.) Loading & Hauling to Dewatering Conveyor to Dryer Dryer & Screen House Loadout Silos Dryer Loadout Resin Sand Coating Plant Resin coated Sand (truck or truck and rail) (1) Field Location 1 2 Processed Raw Frac Sand (truck or truck and rail) (1) Product may stop at sand distribution yard or district office prior to arriving at a field location. 19

20 Proppant: Sand Operations Raw sand We own three raw frac sand mines and lease a fourth mine with ~313 million tons of sand reserves Our raw sand production meets approximately 76% of raw sand supply needs; we buy the balance through both longterm contracts and the spot market. Resin coated sand Acquired a resin sand plant in Birmingham, Alabama in October 2008, and opened a new resin sand plant in Cutler, Illinois during Q Utilize a proprietary resin coating process, which has been lab verified and successfully implemented A new resin production facility in Voca, TX is currently available for production. Our resin coating production meets approximately 57% of resin coated supply needs; we buy the balance in the spot market 20

21 Logistics: Proppant Distribution Central distribution facility in Cleburne, TX (owned) Eight silos with 3.2 million pounds of storage capacity Loading facility and railhead access platform Seven satellite facilities Monahans, TX (owned): 80 railcars with 16.0 million lbs of total storage capacity and 12 silos with 4.2 million lbs of total storage Shreveport, LA (leased): 50 railcars with 10.0 million lbs of total storage capacity and 24 silos with 8.4 million lbs of total storage capacity Rook, PA (leased): 14 railcars with 2.8 million lbs of total storage capacity and 8 silos with 2.8 million lbs of total storage capacity Glenwood, PA (leased): 155 railcars with total of 31.0 million lbs of storage capacity Longview, TX (owned): 12 railcars and 12 silos with 6.0 million lbs of storage capacity Hughes Springs, TX (leased): 45 railcars with 9.0 million lbs storage capacity Pleasanton, TX (owned): 10 silos with 14.4 million lbs of storage capacity and 4 mega silos with 10.8 million lbs of storage capacity 248 bulk hauling trailers Approximately 2,500 rail cars in use or contracted for delivery this year 21

22 Manufacturing: Equipment Frac Unit Manufacturing Manufacture frac units, blenders, and high pressure manifolds in Cisco, TX Ability to produce 30 frac units per month when operating at full capacity We manufactured 246 frac units in 2011 Have entered into cancellable supply agreements for engines and transmissions sufficient to fulfill our announced plans Pump Manufacturing State of the art computer controlled robotic machining operations in Fort Worth, TX Increased production rate and reduced cost versus alternative suppliers Proprietary pump design is optimized for durability and ease of maintenance Intend to increase pump manufacturing capacity through addition of new facilities 22

23 Manufacturing: Equipment Operate an equipment assembly plant and parts distribution center in Cisco, TX Enables equipment cost and quality control Total square footage is 173,000 sq. ft. Manufacture many of the components used in fracturing units, including fuel tanks, structural brackets, hoses, mufflers and trailers Manufacturing complete blenders, sand kings and high pressure manifolds Fracturing Unit Manufacturing

24 Manufacturer and Operator of High Quality, Heavy-duty Frac Units Sample frac unit In-house, custom designed, heavy-duty frac pump 2 Fluid-end designed for greater reliability, longer life and reduced maintenance cost 3 Proprietary valves and seats extend operating life and are field serviceable 4 Heavy-duty frame supports larger, more robust equipment and harsh environments 5 Engine supply agreements with Cummins and Caterpillar 6 Transmission supply agreements with TwinDisc and Caterpillar 7 Proprietary silencer mitigates engine noise Truck supply agreement and distribution / maintenance rights with Mack Trucks 24

25 Manufacturing: Pumps We manufacture our own high pressure pumps and replacement parts at our facility in Fort Worth, TX State of the art facility utilizes CNC and robotic machining operations Increased production rate (1-week delivery schedule vs. 3-4 months for 3 rd party suppliers) Reduced cost versus alternative suppliers Proprietary pump design is optimized for durability and ease of maintenance Able to achieve less frequent valves and seats replacement at lesser cost versus our competitors Wear items (valves / seals) are field replaceable at modest cost (~$3,000 / pump) 25

26 Chemicals & Logistics Chemicals Manufacturing Manufacturing facility located in Chickasha, OK Produce gels and blends 15 employees dedicated to research and development New nano technology product enhances production from depleted reservoirs (patent pending) By blending our own chemicals, in many cases using proprietary formulas, we are able to reduce costs and control quality Logistics Operations Central distribution facility in Cleburne, TX (owned) Eight silos with 3.2 million pounds of storage capacity Loading facility and railhead access platform Eight satellite facilities 248 bulk hauling trailers Approximately 2,500 rail cars in use or contracted for delivery this year Facilitates timely client service, cost reductions and improved asset utilization 26

27 Historic Operating Statistics Hydraulic Fracturing Operations 20,000 17,500 15,000 12,500 10,000 7,500 5,000 2, ,374 1, Wells Frac d 3,823 5,055 9,916 17, Q1'12 4,749 Horsepower 779, , ,250 1,619,500 1,650,500 Average Revenue per Frac Stage $160,000 $140,000 $120,000 $100,000 $80,000 $60,000 $40,000 $20,000 $129,750 $136,326 $94,811 $116,983 $113, Q1 '12 27

28 INTERNATIONAL BUSINESS DEVELOPMENT 28

29 Countries Actively Pursuing China Saudi Arabia Argentina Brazil Source: EIA, CARBMAP 29