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COMPANY UPDATEOctober 2017Houston, Texas
2Copyright © Gulf Island Fabrication, Inc. All rights reserved.
Since 1985
Company Overview
• A leading fabrication, shipbuilding and construction services provider
• Founded in Louisiana in 1985 with an initial public offering in 1997 (NASDAQ:GIFI)
• Diversified international customer base – delivered some of the largest structures worldwide
• 2016 Financials: Revenues $286 million / EBITDA $26 million / Net Income $4 million
• Balance sheet - no debt / Working Capital $164 million
• Market Capitalization: $180 million (as of 10/24/17)
3Copyright © Gulf Island Fabrication, Inc. All rights reserved.
>>> 2016 Harvest• Project management
discipline• Income statement focused• Profitability• Diminishing upstream oil &
gas wave of investment• Shipyard acquisition /
expansion
2017/8 The “Pivot”• Market diversification• Backlog exhaustion / trough• Balance sheet management• Cash preservation /
breakeven EBITDA• Divestitures• Protect capabilities• “Price taker”• Rebuilding backlog
2019 Growth >>>>• Return to growth• Diversification / new
markets• Income statement focused• Profitability• Capacity constraints• Pricing leverage / margin
expansion• Shareholder returns• Capital investments
2017 – A Season of Transition…
4Copyright © Gulf Island Fabrication, Inc. All rights reserved.
Upstream Oil & Gas
97%
Other3%
2011 Revenues by Market
Our transition into “other” non-upstream oil & gas markets
The Big Market Pivot
Upstream Oil & Gas
8%
Other92%
Future Revenues by Market
Upstream Oil & Gas
84%Other16%
2016 Revenues by Market
5Copyright © Gulf Island Fabrication, Inc. All rights reserved.
Fabrication of complex steel structures for over 30 years
Our Capabilities
6Copyright © Gulf Island Fabrication, Inc. All rights reserved.
Three segments with fabrication, installation and project management expertise to oil & gas, government and various other markets.
Diversification - Fab, Services & Ships
7Copyright © Gulf Island Fabrication, Inc. All rights reserved.
Many first’s in the industry
A Leader in Offshore Fabrication
8Copyright © Gulf Island Fabrication, Inc. All rights reserved.
Production platform topsides, jackets and piles
From Top (Topsides) to Bottom (Piles)
• Built for Walter Oil & Gas• 30,000 ton single-piece jacket• 1,250’ in length• 4,500-ton topsides
9Copyright © Gulf Island Fabrication, Inc. All rights reserved.
Single-point anchor reservoir
1st SPAR Built in the U.S.A. – Tubular Bells
• 7,400-ton topside
• 603’ and 13,000-ton classic SPAR
• 50-POB Living quarters
• Skids and tieback
• On production in the Mississippi Canyon of the Gulf of Mexico in 4000’ water depth
• $300 million project
10Copyright © Gulf Island Fabrication, Inc. All rights reserved.
Largest offshore fabrication capacity in the U.S.A.
Fabrication & Shipbuilding Facilities
Houston, TXCorporate Office
11Copyright © Gulf Island Fabrication, Inc. All rights reserved.
Business Segment Drivers
• Chemical renaissance• Driving new petrochemical plant construction/expansion• Modular construction techniquesFabrication
• Plant-the-Flag Strategy on Fab’s coattails of new projects• >80% of spending occurs post-construction in
petrochemical plants• “…87% of an asset’s lifecycle costs are spent during the
operations phase; less than 13% is attributable to project execution costs (and only 8.7% construction)…”1
Services
• U.S. Jones Act enforcement• Strong shipping demand• Naval reconstruction; military/government• Petrochemical marine demand; product carriers• Offshore wind power service vessels
Shipyards
1“US Downstream Engineering, Construction & Maintenance Market Outlook 2017,” by Martina Asbury, Petrochemical Update, December 2016.
12Copyright © Gulf Island Fabrication, Inc. All rights reserved.
The Shale Revolution in the United States is driving a Chemical Renaissance along the Gulf Coast with reliable and plentiful supplies of oil & gas product flowing from nearby basins.
Shale Oil & Gas Drives Petrochemical Plants
• “It’s a tectonic shift in the hemispherical balance of who makes what…,” said Dow Chief Executive Andrew Liveris
• “…the world’s appetite for plastics is expected to rise for decades to come.”
• “[according to PCI Wood McKenzie] The world consumed more than 147 million metric tons in 2016 of ethylene and will need more than 186 million tons by 2023 to meet global demand…”
- The Wall Street Journal, June 26, 2017
• ExxonMobil Corp.: World's largest ethylene cracker plant will be in South Texas; ExxonMobil Picks Corpus Christi for $10 Billion Ethylene Plant
• Low priced, abundant shale gas supply has created downstream manufacturing renaissance
• U.S. shale boom fueling chemical plant expansions: Exxon is growing the Gulf; Shell is growing the NE
- The Houston Chronicle, April 19, 2017
“…steady interest in new gas-fired power plants domestically (which typically range in size from $500MM to $700MM) …”
- Johnson Rice & Company, 5/22/2017
13Copyright © Gulf Island Fabrication, Inc. All rights reserved.
Module Construction
Modular construction enables efficient utilization of off-site fabrication facilities, enables parallel tasks, reduces on-site risk for the customer and, ultimately, quicker plant startup.
The Shift to Modular Plant Construction
Design & Engineering Site Prep Stick-Building Onsite Commissioning
Design & Engineering Site Prep Module
Install Commissioning
PROJECT DURATION:
Serial Task Method = 6-8 Years to Startup
NEW Method with Parallel Tasks = 4-5 Years to Startup Time savings to begin facility startup can be
substantial.
Year 1 Year 2 Year 3 Year 4 Year 5 Year 6 Year 7
Source: management estimates; industry research.
14Copyright © Gulf Island Fabrication, Inc. All rights reserved.
Upstream Project Managers now employed in petrochemicals are utilizing “offshore” engineering, project management techniques and modular construction
Petrochem Modules Drive Fabrication
September 2017 – SQE Unit for Lake Charles Ethane Cracker (CB&I/Axial Lotte)
15Copyright © Gulf Island Fabrication, Inc. All rights reserved.
Legislation and public policy increasing demand for renewable energy supply with offshore wind providing an alternative to the east coast markets.
Offshore Wind Demand Fundamentals
The U.S. DOE expects offshore wind will produce 86 GW of power by 2050 - about 7% of America’s current electricity demand
23 Projects totaling 16 GW -equivalent to 16 nuclear power plants on the drawing board
16Copyright © Gulf Island Fabrication, Inc. All rights reserved.
European and U.S. equity-backed and U.S. energy generators leading the way. Turbine installations require fixed and/or floating foundations along with an offshore service infrastructure.
Offshore Wind Demand & Participants
0
50
100
150
200
250
300
350
2015 2016 2017 2018 2019 2020 2021 2022
Offshore USA Wind Turbine Installations and Foundations Required
Sources: Statoil Hywind company information, management estimates.
17Copyright © Gulf Island Fabrication, Inc. All rights reserved.
Offshore wind power projects are increasing and require similar structures as offshore upstream oil & gas Gulf of Mexico shelf projects and U.S. Jones Act service vessels.
America’s First Offshore Wind Farm
Source: “Wind Power Takes to the Seas,” by Brian Dumaine, Fortune, March 24, 2017 .
D.E. Shaw's Martin (in a blue shirt with raised fist), Jeffrey Grybowski, CEO of Deepwater Wind (center), Rhode Island Gov. Gina Raimondo (with thumb up), and others celebrate an early construction milestone at Deepwater's wind farm in 2015.Brian Snyder — Reuters
18Copyright © Gulf Island Fabrication, Inc. All rights reserved.
Offshore wind power projects are increasing and require similar structures as offshore upstream oil & gas Gulf of Mexico shelf projects and U.S. Jones Act service vessels.
Deepwater Wind in Rhode Island
19Copyright © Gulf Island Fabrication, Inc. All rights reserved.
A solution for marginal fields ~ supports 30,000 bpd of production
New Products – Flat Plate-30 SPAR FPS
• Pre-engineered
• Standardized
• Singled-sourced
• Quick-to-market (24 months)
• U.S.-built (Houma, LA)
• No overseas transportation
• Cost-effective @ $50 oil price
• Improved NPV & MIRR
Deepwater Solutions
20Copyright © Gulf Island Fabrication, Inc. All rights reserved.
Proprietary design of technologically-advanced offshore supply vessels (completed February 2017)
Shipyard Credentials
21Copyright © Gulf Island Fabrication, Inc. All rights reserved.
Craftsmanship and technical integration below decks (completed February 2017)
Shipyard Credentials
22Copyright © Gulf Island Fabrication, Inc. All rights reserved.
Balance sheet-focused to prepare for period of sustained growth
Corporate Objectives in 2017
Capital Discipline:•Rationalize Assets - Divest South Texas Facilities•Develop Capital Deployment Strategy•No debt outstanding
Protect Liquidity:•New Credit Agreement in June 2017•Conserve cash•Disposition of underutilized assets
Enhance Organization:•Recruiting top talent to enhance team across the organization (corporate and operations)
•Organizational re-alignment
Re-Build Backlog:•Q2 2017 - Highest Reported Backlog since April 2014•Awards in New Markets outside of Upstream Oil & Gas (Oregon, New York)•Develop new marketing channels (renewables/offshore wind, petrochemical, transportation, government)
23Copyright © Gulf Island Fabrication, Inc. All rights reserved.
Thank you!
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