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IPAA OGIS WestIPAA OGIS West
Oil & Gas Investment Oil & Gas Investment
SymposiumSymposium
October, 2005October, 2005
2
Corporate InformationCorporate Information
Julio M. QuintanaJulio M. QuintanaPresident andPresident andChief Executive OfficerChief Executive Officer
Michael C. KearneyMichael C. KearneyExecutive Vice President FinanceExecutive Vice President FinanceChief Financial OfficerChief Financial Officer
Tesco CorporationTesco Corporation11330 Brittmoore Park Drive11330 Brittmoore Park DriveHouston, TX 77041Houston, TX 77041Phone: (713) 849-5900Phone: (713) 849-5900Fax: (281) 249-1070Fax: (281) 249-1070Web: www.tescocorp.comWeb: www.tescocorp.com
Investor Relations ContactInvestor Relations Contact
Kristi RectorKristi Rector(281) 721-3970(281) 721-3970
[email protected][email protected]
Forward Looking StatementForward Looking StatementThis presentation contains statements that may constitute This presentation contains statements that may constitute “forward-looking statements” within the meaning of the US “forward-looking statements” within the meaning of the US Private Securities Litigation Reform Act of 1995. These Private Securities Litigation Reform Act of 1995. These statements include, among others, statements regarding statements include, among others, statements regarding expectations of future revenue, activities, capital expenditures, expectations of future revenue, activities, capital expenditures, earnings and technical results. These statements are based on earnings and technical results. These statements are based on current expectations that involve a number of risks and current expectations that involve a number of risks and uncertainties, which could cause actual results to differ from uncertainties, which could cause actual results to differ from those anticipated. These risks include, but are not limited to: those anticipated. These risks include, but are not limited to: the background risks of the drilling services industry (e.g. the background risks of the drilling services industry (e.g. operational risks; potential delays or changes in plans with operational risks; potential delays or changes in plans with respect to customers’ exploration or development projects or respect to customers’ exploration or development projects or capital expenditures; the uncertainty of estimates and capital expenditures; the uncertainty of estimates and projections relating to levels of rental activities; uncertainty of projections relating to levels of rental activities; uncertainty of estimates and projections of costs and expenses; risks in estimates and projections of costs and expenses; risks in conducting foreign operations (e.g. political and fiscal conducting foreign operations (e.g. political and fiscal instability) and exchange rate fluctuations); uncertainty and instability) and exchange rate fluctuations); uncertainty and risks in technical results and performance of technology; and risks in technical results and performance of technology; and other uncertainties. other uncertainties.
3
• Global leader in design and delivery of technology-based Global leader in design and delivery of technology-based solutions for the drilling industrysolutions for the drilling industry• Two segments: Top DrivesTwo segments: Top Drives
Casing ServicesCasing Services
• Founded in 1986; IPO in 1993Founded in 1986; IPO in 1993
• Listed: TSX (TEO)Listed: TSX (TEO)
NASDAQ (TESOF)NASDAQ (TESOF)
• 52 week stock price range 52 week stock price range CAD$10.70-19.90 / US$8.55-16.97CAD$10.70-19.90 / US$8.55-16.97
• 30 day average stock price30 day average stock price CAD$18.02 / US$14.96 CAD$18.02 / US$14.96
• Market Cap (millions)Market Cap (millions) CAD$634 / US$541 CAD$634 / US$541
TESCO at a GlanceTESCO at a Glance
4
TOP DRIVESTOP DRIVES• RentalRental
• SalesSales• Aftermarket Sales and ServiceAftermarket Sales and Service
Business SegmentsBusiness Segments
CASING SERVICESCASING SERVICES• Casing RunningCasing Running
ProprietaryProprietary ConventionalConventional
• CASING DRILLINGCASING DRILLING®®
CasingServices
CasingServices
Top Drive Top Drive
$71.5 $20.4$8.4$34.6
RevenueRevenue Segment Operating IncomeSegment Operating Income
11stst 6 Months 6 Months20052005
Millions $ CADMillions $ CADTotal $106.1Total $106.1 Total $28.8Total $28.8
5
Calgary, CanadaCalgary, Canada
Houston, Freer, KilgoreHouston, Freer, Kilgore & Carthage, Texas & Carthage, Texas Athens & Jena, LouisianaAthens & Jena, Louisiana
Ciudad del Carmen, MexicoCiudad del Carmen, Mexico
El Tigre, VenezuelaEl Tigre, Venezuela
Rio de Janeiro, BrazilRio de Janeiro, Brazil
Buenos Aires & Neuquen,Buenos Aires & Neuquen,ArgentinaArgentina
Moscow, RussiaMoscow, Russia
Dubai, UAEDubai, UAE
Beijing, ChinaBeijing, China
Jakarta, IndonesiaJakarta, Indonesia
Perth, AustraliaPerth, Australia
San Mateus & San Mateus & Natal, BrazilNatal, Brazil
950 Employees in 23 countries950 Employees in 23 countries
Global ReachGlobal Reach
TESCO OfficesTESCO Offices
Aberdeen, ScotlandAberdeen, Scotland
6
Top DrivesTop Drives
• Invented portable Top DriveInvented portable Top Drive• Created Top Drive rental marketCreated Top Drive rental market• Will rent or sell Top DrivesWill rent or sell Top Drives
HydraulicHydraulic ElectricElectric
• Growing Aftermarket SalesGrowing Aftermarket Sales and Service businessand Service business
Units InstalledUnits Installed Rental MarketRental Market
NOVNOVTESCOTESCO
CanrigCanrig
OtherOther
OtherOther
TESCOTESCO
7
Total Offshore RigsTotal Offshore Rigs Total Land RigsTotal Land Rigs
North AmericaNorth America 150 150 2,150 2,150 International International 550 900550 900(Excluding FSU & China)(Excluding FSU & China)
Total Rigs 700 3,050Total Rigs 700 3,050
• Expected offshore replacement / sale market growth of 5% per yearExpected offshore replacement / sale market growth of 5% per year• Expected growth of land rig market 15% per yearExpected growth of land rig market 15% per year• China & FSU are two large markets with minimal complements of top drivesChina & FSU are two large markets with minimal complements of top drives
Top Drive MarketTop Drive Market
Offshore Rigs with Top Drives
95%Land Rigs with Land Rigs with
Top DrivesTop Drives25%25%
Offshore Rigs Offshore Rigs without Top Driveswithout Top Drives
5%5%
Land Rigswithout Top Drives
75%
_______________________Sources: IADC, CAODC, TESCO Research
8
Top DrivesTop Drives
$9.5
$20.4
0
5
10
15
20
25
Mil
lio
ns
$ C
AD
Operating Income
1st 6 Months 2004 1st 6 Months 2005
9
CASING DRILLINGCASING DRILLING®®
• Integrated – drill entire well with retrievable tool systemIntegrated – drill entire well with retrievable tool system
• Interval – drill selected intervals; retrievable or non-retrievableInterval – drill selected intervals; retrievable or non-retrievable
• Partnership with Baker Hughes for EZCase™ solutionPartnership with Baker Hughes for EZCase™ solution
Casing RunningCasing Running
• Proprietary Casing Running ServiceProprietary Casing Running Service Game changing technologyGame changing technology Quantum leap in safety profileQuantum leap in safety profile Near term growth engineNear term growth engine
• Conventional Casing RunningConventional Casing Running Bo Gray and A&M TubularBo Gray and A&M Tubular N.E. Texas / N. LouisianaN.E. Texas / N. Louisiana Recent SE Asia AcquisitionRecent SE Asia Acquisition
Casing ServicesCasing Services
10
Animation of CASING DRILLINGAnimation of CASING DRILLING®® Technology Technology
11
CASING DRILLINGCASING DRILLING®® PROCESSPROCESS
CASING DRILLINGCASING DRILLING®® Technology Technology
CONVENTIONAL CONVENTIONAL DRILLING PROCESSDRILLING PROCESS
What is it?What is it?
• Simultaneously drill and case wellsSimultaneously drill and case wells
• Trip bottom hole assemblies byTrip bottom hole assemblies by wireline instead of drill pipewireline instead of drill pipe
• Combines LWD/MWD and rotaryCombines LWD/MWD and rotary steerable technologysteerable technology
• Developed the only commercialDeveloped the only commercial directional system in the marketdirectional system in the market
• Drilled over 1.75 million feet andDrilled over 1.75 million feet and over 240 wellsover 240 wells
• Drilled onshore and offshore,Drilled onshore and offshore, including 30 directional wellsincluding 30 directional wells
• Deployed on both conventionalDeployed on both conventional and “purpose built” rigsand “purpose built” rigs
AdvantagesAdvantages
• Time savingsTime savings
• Material savingsMaterial savings
• Increases production throughIncreases production through reduced reservoir damagereduced reservoir damage
• Solves wellbore instability problemsSolves wellbore instability problems
12
Casing RunningCasing Running
TESCO’s technology is a “GameTESCO’s technology is a “GameChanging” technology due to:Changing” technology due to:
SafetySafety – Elimination of high risk – Elimination of high risk
““stabber” and power tong positions stabber” and power tong positions
PerformancePerformance – Can rotate casing to – Can rotate casing to
bottom through trouble zones, bottom through trouble zones,
improve cementing resultsimprove cementing results
ReliabilityReliability – Proven performance and – Proven performance and
market acceptancemarket acceptance
FlexibilityFlexibility – Adapts to all Top Drives– Adapts to all Top Drives
EfficiencyEfficiency – Cost reduction – Cost reduction
Manual, Labor IntensiveManual, Labor Intensive MechanizedMechanized
ProprietaryProprietaryConventionalConventional
13
Animation of Proprietary Casing RunningAnimation of Proprietary Casing Running
14
Rapid Acceptance of TESCO’sRapid Acceptance of TESCO’sCasing ServicesCasing Services
0
500,000
1,000,000
1,500,000
2,000,000
2,500,000
3,000,000
3,500,000
Cu
mu
lati
ve F
oo
tag
e R
un
2002 2003 20040
200,000
400,000
600,000
800,000
1,000,000
1,200,000
1,400,000
1,600,000
Cu
mu
lati
ve F
oo
tag
e D
rill
ed
2002 2003 2004
Proprietary Casing RunningProprietary Casing Running CASING DRILLINGCASING DRILLING®®
15
Casing ServicesCasing Services
$2.3
$8.4
0
2
4
6
8
10
Mil
lio
ns
$ C
AD
Operating Income
1st 6 Months 2004 1st 6 Months 2005
16
Financial OverviewFinancial Overview
17
Consolidated Income StatementConsolidated Income Statement
20022002 20032003 20042004
11stst 6 6 Months Months
20042004
11stst 6 6 MonthsMonths
20052005
RevenueRevenue$152.$152.
44 $185.7$185.7 $179.1$179.1 $87.7$87.7$106.$106.
11
Operating incomeOperating income 1.2 1.2 0.10.1 6.56.5 1.21.2 13.113.1
Net Income (loss)Net Income (loss) (1.1)(1.1) (24.4)(24.4) (7.6)(7.6) (1.4)(1.4) 9.09.0
EPS (Basic and EPS (Basic and Diluted)Diluted) (0.03)(0.03) (0.71)(0.71) (0.22)(0.22) 0.000.00 0.260.26
Millions $ CAD, except EPSMillions $ CAD, except EPS
Note: Pre-tax restructuring charges of $28.1 million and $4.9 million in FY 2003 and FY 2004, respectively.Note: Pre-tax restructuring charges of $28.1 million and $4.9 million in FY 2003 and FY 2004, respectively.
18
Strong Balance SheetStrong Balance Sheet
Quarters endedQuarters ended 06/30/0406/30/04 12/31/0412/31/04 06/30/0506/30/05
CashCash $56.1$56.1 $18.9$18.9 $18.5$18.5
DebtDebt 69.369.3 17.9 17.9 11.511.5
Net debt Net debt 13.213.2 (1.0) (1.0) (7.0)(7.0)
EquityEquity 221.5 221.5 219.0219.0 232.1 232.1
Debt / Total CapDebt / Total Cap 23.8%23.8% 7.6%7.6% 4.7%4.7%
Millions $ CADMillions $ CAD
19
Improving Free Cash FlowImproving Free Cash Flow
20022002 20032003 20042004
11stst 6 6 MonthsMonths
20042004
11stst 6 6 MonthsMonths 20052005
Net Income (loss)Net Income (loss) $(1.1)$(1.1) $(24.4)$(24.4) $(7.6)$(7.6) $(1.4)$(1.4) $9.0$9.0
DepreciationDepreciation 12.112.1 16.916.9 18.918.9 9.49.4 9.49.4
Cash FlowCash Flow 11.011.0 (7.5)(7.5) 11.311.3 8.08.0 18.418.4
Capital ExpenditureCapital Expenditure (57.6)(57.6) (24.0)(24.0) (10.1)(10.1) (3.9)(3.9) (7.9)(7.9)
Free Cash FlowFree Cash Flow (46.6)(46.6) (31.5)(31.5) 1.21.2 4.14.1 10.510.5
Millions $ CADMillions $ CAD
Note: Pre-tax restructuring charges of $28.1 million and $4.9 million in FY 2003 and FY 2004, respectively.Note: Pre-tax restructuring charges of $28.1 million and $4.9 million in FY 2003 and FY 2004, respectively.
20
• Refocus Top Drive rental, sales and aftermarket businessRefocus Top Drive rental, sales and aftermarket business
• Capture high value offshore market for CASING DRILLINGCapture high value offshore market for CASING DRILLING®®
• Revolutionize the casing running processRevolutionize the casing running process
• Instill fiscal discipline throughout the organizationInstill fiscal discipline throughout the organization
• Improve return on capital employedImprove return on capital employed
Vision Going Forward Vision Going Forward
IPAA OGIS WestIPAA OGIS West
Oil & Gas Investment Oil & Gas Investment
SymposiumSymposium
October, 2005October, 2005