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Enercom London - 2013

Enercom London - 2013 - EnerCom | Oil and Gas Consulting, · PDF file · 2015-06-18Flotek is a Houston-based oilfield services company with focus on value-added ... 2013 Flotek Industries,

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Enercom London - 2013

ConclusionsForward Looking Statements Disclaimer

Certain statements and information included in this presentation constitute“forward–looking statements” within the meaning of the Private SecuritiesLitigation Reform Act of 1995. These statements are based on certainassumptions and analyses made by the Company’s management in light of itsexperience and its perception of historical trends, current conditions, expectedfuture developments and other factors it believes are appropriate under thecircumstances. These statements involve known and unknown risks anduncertainties, some of which are outlined in the Company’s most recent 10-Kand subsequent 10-Qs, which may cause the actual performance of Flotek tobe materially different from any future results expressed or implied in thispresentation and the forward-looking statements. Flotek undertakes noobligation to update any of its forward-looking statements for any reason.

ConclusionsThe Flotek PortfolioFlotek is a Houston-based oilfield services company with focus on value-added drilling, completion and

production products. We deliver our services through a network of field offices in key basins across NorthAmerica and through strategic partnerships internationally.

Chemical Technologies and Related Logistics Services add value in the drilling,completion and production stages of oil and gas wells.

Drilling Technologies provide solutions during the drilling stage of oil and gaswells from motors and actuated tools to our best-in-class Teledrift

technologies.

Artificial Lift Technologies address a number of production challenges for oil andgas companies

ConclusionsRecent Developments: Florida Chemical Acquisition• On May 10, 2013 Flotek Industries, Inc. announced the acquisition of Florida Chemical for $49.5

million in cash and 3.28 million shares of Flotek common stock.• Acquisition will drive revenue and market share growth.• Should be accretive to EPS and EBITDA.

• Merger creates global leader in advanced industrial and consumer renewable and sustainablechemistry:

• Florida Chemical is the largest global processor of citrus oils.• The Company has become a leading supplier of raw materials for diverse applications in

the oil and gas industry.• Flotek and Florida Chemical have a long and mutually rewarding 15-year partnership.

• The Florida Chemical acquisition provides security of raw material access and control of inventoryand pricing of key inputs to the chemistry product stream.

• Secures access to d-Limonene, a key component in many key oil & gas chemistrycomponents.

• Creates leading, world-class specialty chemistry research team focused on environmentalinnovation and practical, added-value application.

• Immediately expands product line, including renewed focus on environmentalstewardship.

• Expands customer footprint and depth of offerings.

• Florida Chemical gains access to new growth capital, additional depth in its oil & gas researchefforts and new markets for its oil & gas product offerings.

ConclusionsFlorida Chemical: Renewing Environmental Stewardship• The acquisition of Florida Chemical renews and intensifies Flotek’s commitment to environmental

stewardship.

• Florida Chemical’s FC-PRO operating company provides a plethora of renewable and sustainable oilfieldchemistries that are GREAT and GREEN!

• For example, the combined companies have developed an efficacious substitute for Xylene whicheliminates the need to use harmful toxins in well clean-out.

Product Comparison Chart Citrus TerpeneHydrocarbons

Toluene/. Xylene

Teratogen (reproductive hazard) No YesSuspected Carcinogen No YesSARA Title III (Section 313) Not Subject SubjectGRAS (Generally Regarded As Safe) Yes NoRegulated Drinking Water Contaminant No YesFederal Biobased Products Preferred ProcurementProgram 100% compliant Not compliant

Flashpoint (ºF) > 100 < 100

ConclusionsFlorida Chemical: Research & Development Integration

• The research and development teams at Flotek and Florida Chemical have a long,outstanding relationship dating back over 15 years with a common theme forenvironmental innovation and efficacious oilfield chemistries.

• The combined research team will work seamlessly to identify new applications andformulations to meet the increasingly complex needs of the oil and gas industry and arenewed focus on environmentalism.

• The combined research team will continue to grow to meet the needs of the oil & gas,industrial and consumer staple industries.

• The combination of Flotek and Florida Chemical bringscomplementary research acumen together: FloridaChemical’s unique focus on environmental innovation andFlotek’s practical applications of cutting-edge oilfieldchemistries. This combination creates a world-classresearch operation for oilfield, industrial and consumerstaple specialty chemistry.

ConclusionsFlorida Chemical: Diversity in Specialty Chemicals

• The acquisition of Florida Chemical provides Flotekwith unique and exciting new opportunities towork in a variety of new industries with a varietyof new customers, not only in the oil and gasindustry.

• Flotek intends to leverage the vast expertise ofFlorida Chemical to expand its footprint into newindustrial and consumer applications.

• Specifically, it provides unique diversification intothe flavor and fragrance industry, including manycurrent customers with global footprints.

• The Flavor and Fragrance market is estimated to bebetween $18-$20 Billion, with steady annualgrowth.

ConclusionsRecent Initiatives: Oman/Gulf Energy Joint Venture

• Flotek signed a Letter of Intent with Gulf Energy of Oman toconstruct a specialty oilfield chemical production anddistribution facility, as well as a research and developmentcenter in Oman.

• Extends Flotek’s reach into a region in need of advancedchemistry solutions that Flotek provides.

• Strategically positions Flotek to serve the Middle East and NorthAfrica, amongst the most prolific oil and gas producing regionsin the world.

• Independent surveys suggest unconventional resourcedevelopment will quintuple in MENA region in the next decadewith over three-quarters of such development coming in Omanand Saudi Arabia.

ConclusionsChemical Technologies Business Drivers

• Continued trend toward unconventional resources plays in North America and in internationalmarkets.

• New product innovations: Research & development commitment leading to the “nextgeneration” Complex nano-FluidsTM and other “on demand” chemistry solutions. CnF® 2.0

• New markets: Liquids growth, enhanced oil recovery applications and basin-specific solutions.

• International markets: Continued growth from Basin Supply partnership and additionalopportunities.

• Marketing penetration to both service companies and E&P end-users that convey compellingeconomic benefits of the CnF technology.

• Environmental focus: Flotek filed first patent onenvironmentally friendly products in 2003. A key driverbehind the Florida Chemical acquisition.

• Commitment to Research: Enhanced by the FloridaChemical acquisition.

ConclusionsDrilling Technologies Business Drivers

• Downhole tool growth in key regions includingOklahoma and Eagle Ford

• Improvement in market share and pricing indrilling motors – focus on key regions includingBarnett, Bakken & Eagle Ford.

• Teledrift focus: Continued growth in domesticmarkets. Pricing strength in Permian Basin.Remote technology should enhance Teledriftpricing and market share.

• International expansion. Focus on SaudiArabia and Middle East, Central & SouthAmerica, Russian Federation.

• Technology Focus: Remote view of Teledriftresults.

ConclusionsArtificial Lift Business Drivers

• Key customer relationships in Powder River CBM. Flotek improved key customerrelationships in 2011 which provided additional service revenue in 2012 even asnatural gas prices tumbled..

• New pump system technology and partnerships assisting in oil basin growth.• We have made significant progress in growing our oil exposure:

• Successful installation of Petrovalve in the Niobrara with mainstreamparticipants. Repeat business beginning to build.

• ESP brand recognition growing. We are competing for major ESP jobs with grossmargins in the 50% range.

• New significant customer in theBakken establishes new territory for Flotek..

• International sales of Petrovalve providesignificant upside.

ConclusionsPerformance & Value Creation

Flotek’s rejuvenation is evident both financially andoperationally. Flotek’s market cap increased from$32.4 million at the beginning of 2010 to over $600million by the end of 2012 and nearly $800 milliontoday.

• Flotek’s stock price increased 810% since thebeginning of 2010. That compares to a medianincrease of 14% for other companies in theirpeer group. The NYSE composite index gained18% and the OSX gained 13% in that timeperiod.

• Flotek’s stock price appreciated 22% in 2012,more than any other of the 15 companies intheir peer group. The median loss for Flotek’speer group in 2012 was -15%.

• Flotek also outperformed the NYSE CompositeIndex and the OSX. Flotek’s stock price gained22% in 2012, while the NYSE composite indexgained only 13% and the OSX only gained 2%.

810%

18% 13%

-100%

0%

100%

200%

300%

400%

500%

600%

700%

800%

900%Stock Performance 2010-2012

Return Median (14%)

22%

13%

2%

-50%

-40%

-30%

-20%

-10%

0%

10%

20%

30% Stock Performance 2012

Return Median (-15%)

ConclusionsPerformance & Value CreationFlotek continues its strong operational and financialperformance. As you can see, Flotek is in the midstof a significant transformation from post financialcrisis levels.

• Total revenue has more than doubled from2010 and increased over 20% from 2011.Revenue in 2012 was the highest in companyhistory.

• Chemical Revenue increased 30% over 2011levels.

• Operating income in 2012 was $58.6 million, a20% increase over 2011 levels.

$-

$50,000

$100,000

$150,000

$200,000

2008 2009 2010 2011 2012

Rev

enue

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Chemical & Logistics Revenue

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$50,000

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$150,000

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2008 2009 2010 2011 2012

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enue

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2008 2009 2010 2011 2012

Ope

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Operating Income

ConclusionsConcluding Thoughts• The acquisition of Florida Chemical is transformational for Flotek:

Creates global leader in advanced industrial and consumer renewable and sustainablechemistry.

Drives revenue and market share growth; immediately accretive to EPS and EBITDA. Renews Flotek’s commitment to leadership in environmental stewardship.

• Continued focus on improved marketing efforts : Key objective to reach ultimate beneficiaries of property CnF chemistries. Combination

of working with service companies and working independent of service companies tosell E&P companies on economic benefits of the CnF technology.

Increased emphasis on “depth” of relationships along with “breadth” of relationships.“Is Flotek in your well” provides multiple touch point opportunities.

Focus on new opportunities, especially international growth and new applications ofchemistry technology, including Enhanced Oil Recovery

• Continued focus on “making a difference”: Product validation will improve visibility of Flotek’s ability to add value to customer

production projects. Acute focus on returns for our stakeholders through optimal capital allocation.

Conclusions

For More Information:Christopher S. Edmonds

Senior Director – Corporate Finance & Strategy713-726-5376

[email protected]