Npk International Inc. · NYSE:NPKI
Npk International — Newpark Resources — Investor Day (November 2018)
63 slides from Npk International's investor day presentation, Nov 29, 2018
Slide 1: Newpark Resources Presentation November 2018
NEWPARK RESOURCES PRESENTATION NOVEMBER 2018
Slide 2: Forward Looking Statements
FORWARD LOOKING STATEMENTS This presentation contains “forward-looking statements” within the meaning of the Private Securities Litigation Reform Act of 1995, as amended. All statements that address expectations or projections about the future, including Newpark's strategy for growth, product develo
Slide 3: Non-GAAP Financial Measures
NON-GAAP FINANCIAL MEASURES To help understand the Company’s financial performance, the Company has supplemented its financial results that it provides in accordance with generally accepted accounting principles (“GAAP”) with the non-GAAP financial measure of earnings before interest, taxes, depreci
Slide 4: Company Overview
COMPANY OVERVIEW Consolidated Revenues $1,400 . Revenue recovery driven by oilfield Full Year $1,200 $1,118 activity increase and end-market $1,042 First Nine Months diversification initiatives $1,000 $800 $748 Balanced income contribution from $677 . $600 $699 two operating segments: $471 $543 Reve
Slide 5: Fluids System - Overview
FLUIDS SYSTEM - OVERVIEW Total Segment Revenues . Expanding IOC & NOC $1,200 relationships have been key to Full Year $1,000 $965 global market share growth: $926 First Nine Months $800 – Approx. 1/3 of 2018 Fluids Systems $616 revenues generated from IOC/NOC $600 $581 customer base $395 $538 $400 $
Slide 6: Completion Fluids
COMPLETION FLUIDS F sewnanx
Slide 7: Expanding Product Lines – Completion Fluids
EXPANDING PRODUCT LINES – COMPLETION FLUIDS $9bn Drilling and Completion Fluids Market . Natural product line extension from drilling fluids Drilling – Transition from drilling, prepare Fluids for completion Completion Fluids – Customer-driven bundling in GOM and International markets . Operationall
Slide 8: Completion Fluids – Consists of Three Product Groups
COMPLETION FLUIDS – CONSISTS OF THREE PRODUCT GROUPS . Reservoir Drill-in Fluids (RDIF) WBCU ~ 20% of spend (Tools) 9% – Non-damaging fluid for open-hole completions Filtration 10% . Wellbore Cleanup (WBCU) ~ 20% of spend Clear Brine WBCU Fluids (Chemicals) – Chemical, mechanical 49% 12% & software
Slide 9: Completion Fluids – Spend Varies by Geography
COMPLETION FLUIDS – SPEND VARIES BY GEOGRAPHY Spend distribution by geography* Gulf of Mexico International Offshore International Land Average spend per well ($Mil) Average spend per well ($Mil) Average spend per well ($Mil) $1.3 $0.9 $0.3 $3.1 $2.5 $0.8 Completion Fluids Completion Fluids Completi
Slide 10: Competitive Advantage in Diversification
COMPETITIVE ADVANTAGE IN DIVERSIFICATION Leverage complementary drilling & completion fluids capabilities . Cost efficiencies through scale and improved facility utilization . Influence purchasing decisions on fully integrated projects . Brand identity . More fully optimize facilities Technical Manu
Slide 11: Fourchon Facility Conversion Underway
FOURCHON FACILITY CONVERSION UNDERWAY Strategic facility . Well positioned in Port Fourchon . Facility conversion underway, to be operational by end of year . Robust and visible HSE program . 17,000 bbls capacity . 2 DW rigs 11
Slide 12: Gulf of Mexico Go to Market Plan
GULF OF MEXICO GO TO MARKET PLAN Portfolio Expansion Strategic Brand Facility Identity (Fourchon 2) Supply Customer Partnership Engagement Training & Market Study Competency Strategic GO TO Early Wins, Vision MARKET Momentum In Process Substantially Completed 12
Slide 13: Stimulation Chemicals
STIMULATION CHEMICALS F sewnanx
Slide 14: Expanding Product Lines – Stimulation Chemicals
EXPANDING PRODUCT LINES – STIMULATION CHEMICALS Frac Spread Count for week ending Nov 16th 2018 was 476 14
Slide 15: U.S. Market Opportunity – Stimulation Chemicals
U.S. MARKET OPPORTUNITY– STIMULATION CHEMICALS . The U.S. Market Frac Spread count has been above 400 YTD 2018* . ~ $12m - $13m of chemical purchases annually per Frac spread; $6-7B total market size** . 47% of US Fracturing Chemical market Source Primary Vision is accessible to Newpark*** – 31% of
Slide 16: U.S. Stimulation Chemicals – Growing Trends
U.S. STIMULATION CHEMICALS – GROWING TRENDS Larger volumes of fluid translates to higher Well laterals are getting To achieve greater To place more proppant chemical usage longer as operators seek reservoir drainage (EUR), into each well, operators greater reservoir drainage operators are seeking to
Slide 17: U.S. Competitive Landscape – Stimulation Chemicals
U.S. COMPETITIVE LANDSCAPE– STIMULATION CHEMICALS Competitive Chemical Purchasing Criteria Of Significance Unbundled E&Ps Medium & Small PPS Bundled E&Ps Cost Per Stage Price Per Gallon Full Service Capability Availability Of Pressure Wellsite Delivery Local Inventory Pumping Equipment Technical Lab
Slide 18: Stimulation Chemistry Categories
Hydraulic Fracturing Matrix Acidizing Chemistry need capitalizes on existing fl need capitalizes on Chemistry Delayed Wormhole Crosslinked Gels Standard Acid Linear Gels Slickwater Acid STIMULATIONCATEGORIESLINE: MAJORCOMPONENT Iron Control Agents Anti-Sludge Agents Corrosion Inhibitors Hydration Bu
Slide 19: Infrastructure – Stimulation Chemicals
INFRASTRUCTURE– STIMULATION CHEMICALS Fluids infrastructure in place to support Stimulation Chemicals Distribution Manufacturing Technical Fluids operating location Basin 19
Slide 20: U.S. Go to Market Plan – Stimulation Chemicals
U.S. GO TO MARKET PLAN – STIMULATION CHEMICALS Stimulation Chemicals Manufacturing Sales Staff Market Study Facilities Local Customer Warehousing Engagement Build Full Brand Identity Product Line Strategic GO TO Field Trials/ Vision MARKET Momentum In Process Substantially Completed 20
Slide 21: Mats & Integrated Services - Overview
MATS & INTEGRATED SERVICES - OVERVIEW Total Segment Revenues . Leading provider of engineered worksite and access solutions $180 Full Year $160 $153 First Nine Months – In early phases of global market $161 $140 $132 penetration, where our patented $120 $116 systems reduce operators’ costs and $100
Slide 22: High Level Overview General Introduction
MATS – HIGH LEVEL OVERVIEW GENERAL INTRODUCTION
Slide 23: High Level Overview: Access Alternatives
MATS – HIGH LEVEL OVERVIEW Access alternatives Longer Duration, Low Remediation Requirement Shorter Duration, High Remediation Requirement 23
Slide 24: High Level Overview: Services & Containment
MATS – HIGH LEVEL OVERVIEW Services & containment Site evaluation, planning Containment and spill ROW clearing, hydro and layout design prevention seeding Storm Water Pollution Impoundments Mat fleet management Prevention Plan/BMP 24
Slide 25: Core Market Overview
MATS – CORE MARKET OVERVIEW Exploration & Production Pipeline SIZE SIZE PENETRATION PENETRATION HISTORY HISTORY Transmission & Distribution Construction & Other SIZE SIZE PENETRATION PENETRATION HISTORY HISTORY 25
Slide 26: Strong Foundations
MATS – STRONG FOUNDATIONS Mats & Integrated Services Revenue and Operating Income $250 $80 Revenue Op Income $70 $200 $60 Oil Price $50 $150 Collapse Global Financial $40 Crisis $30 $100 Revenue ($MIL) Revenue $20 Operating Income ($MIL) $50 $10 $- $- $(10) 2003 2004 2005 2006 2007 2008 2009 2010 20
Slide 27: High Level Overview: Changing Matting Landscape
MATS – HIGH LEVEL OVERVIEW Changing matting landscape Pre 2007 Today Timber Composite Demonstrating Value and Capturing Share 27
Slide 28: Value Proposition
MATS – VALUE PROPOSITION Lower Customer Operating Risk Safety Scale & Reliability Efficiency Environmental Sustainability 28
Slide 29: Unique History Provides Success Foundations
MATS – UNIQUE HISTORY PROVIDES SUCCESS FOUNDATIONS Belief in Innovation . Introduced the world to Composite matting technology . 20 Years of DURA-BASE as the industry standard . Continual investment in technology & productivity Scaled to Succeed . Operating largest fleet of DURA-BASE mats in the w
Slide 30: Mats & Integrated Services Market Opportunity
MATS & INTEGRATED SERVICES MARKET OPPORTUNITY
Slide 31: Exploration & Production
MATS – EXPLORATION & PRODUCTION Annual Spend Annual Growth 2013-18 Forecast Growth 2018-23 $76.7bn* -11.8%* 4.1%* $7.30 $12.40 Other Support Natural Gas Services Key Demand Drivers Well Support Services . Global O&G prices $15.30 . Producers drive for efficiency Oil Drilling . Regulatory / Environme
Slide 32: Exploration & Production – NA Market Opportunity
MATS – EXPLORATION & PRODUCTION Annual Spend Annual Growth 2013-18 Forecast Growth 2018-23 $76.7bn* -11.8%* 4.1%* Other OtherSupport NA Market Support NaturalNatural Gas Gas Services Well SupportWell SupportServices Opportunity ServicesServices ** Oil DrillingOil Drilling Services Oilfield Services
Slide 33: Exploration & Production – Gravity Fed Proppant Delivery
MATS – EXPLORATION & PRODUCTION Growth of gravity fed proppant delivery U.S. Frac Spread Count ~440 ~370 ~150 ~50 ~320 ~290 CY’17 CY’18 Source: Internal Estimates . Significant YoY growth in gravity fed proppant systems Gravity Fed Pneumatic / Other . Dynamic load conditions demand a durable interlo
Slide 34: Exploration & Production – Major Shale Basins
MATS – EXPLORATION & PRODUCTION Servicing Major Shale Basins Targeted Customer Base . E&P companies . Pressure Pumping companies . Service companies Key Success Factors . Large-scale fit-for-purpose fleet . Expert service and product offering . Ability to provide Partner operating location products/
Slide 35: Utility Transmission and Distribution
MATS – UTILITY TRANSMISSION AND DISTRIBUTION Annual Spend Annual Growth 2012-17 Forecast Growth 2017-22 $46.3bn* -0.9%* 4.0%* $7.30 $15.10 Key Demand Drivers Telco Construction (for Access Products) & Repair Transmission . Aging infrastructure, grid hardening Construction Power & Repair . Substation
Slide 36: Utility Transmission and Distribution – NA Opportunity
MATS – UTILITY TRANSMISSION AND DISTRIBUTION Annual Spend Annual Growth 2012-17 Forecast Growth 2017-22 $46.3bn* -0.9%* 4.0%* $15.10 NA Access Telco Construction Market Opportunity & Repair Transmission Construction Power & Repair Plant ** Construction & Repair $1.0bn Other Construction & Services $
Slide 37: Utility Transmission & Distribution – Spend by State
MATS – UTILITY TRANSMISSION & DISTRIBUTION % Of Total Market Spend By State* Targeted Customer Base . Utility Companies . EPC Companies . Construction Service Companies Key Success Factors . Large-scale fleet . Expert service and product offering . Ability to provide products/services in diverse loc
Slide 38: Pipeline
MATS – PIPELINE Annual Spend Annual Growth 2013-18 Forecast Growth 2018-23 $54.6bn* 2.6%* 2.9%* $4.00 $6.00 New Key Demand Drivers <1000MMcf/d (for Access Products) Maintenance . Government policy Additions . Regulatory framework $7.50 & Alterations (inspection/integrity) . Environmental regulations
Slide 39: Pipeline – NA Market Opportunity
MATS – PIPELINE Annual Spend Annual Growth 2013-18 Forecast Growth 2018-23 $54.6bn* 2.6%* 2.9%* $4.00 $6.00 New NA Access <1000MMcf/d Market Opportunity Maintenance Additions ** $7.50 & Alterations $1.0bn New >1000MMcf/d *Source: IBISWorld Industry Report 23712 – Oil & Gas Construction in the U.S. –
Slide 40: Pipeline – Spend by State
MATS – PIPELINE % Of Total Market Spend By State* Targeted Customer Base . Pipeline Operators . EPC Companies . Integrity/Inspection Companies . Construction Service Companies Key Success Factors . Large-scale fleet . Expert service and product offering . Ability to provide Partner operating locatio
Slide 41: General Construction
MATS – GENERAL CONSTRUCTION Annual Spend Annual Growth 2013-18 Forecast Growth 2018-23 $28.1bn* -0.9%* -0.5%* $4.03 $7.25 Tunnel, Outdoor, Key Demand Drivers Harbor (for Access Products) $2.50 & port Mass transit & railroad . Population growth Conservation & infrastructure demand $3.00 . Environment
Slide 42: General Construction – NA Market Opportunity
MATS – GENERAL CONSTRUCTION Annual Spend Annual Growth 2013-18 Forecast Growth 2018-23 $28.1bn* -0.9%* -0.5%* $4.03 $7.25 Tunnel, NA Access Outdoor, Harbor Market Opportunity $2.50 & port Mass transit & railroad Conservation ** $3.00 Hydro‐electric $0.5bn Marine Other $6.02 $5.30 *Source: IBISWorld
Slide 43: Market Summary
MATS –MARKET SUMMARY NA Access Market Opportunity $2.5bn - $3.0bn* *Internal estimates
Slide 44: Mats & Integrated Services Built to Succeed
MATS & INTEGRATED SERVICES BUILT TO SUCCEED OPERATING FOOTPRINT BUSINESS MODEL ENVIRONMENTAL SUSTAINABILITY INNOVATION PIPELINE
Slide 45: Operations Locations
MATS - OPERATIONS LOCATIONS Well positioned operations centers to service target markets . Established, scaled network of operating locations . Largest DURA-BASE fleet in North America . Focused on core growth markets . National reach and capabilities . Strategic partners in select locations Partne
Slide 46: Revenues from Product Sales 2011-2017
MATS– REVENUES FROM PRODUCT SALES 2011-2017 Positioned as recognized global brand ~$10M ~ $150M ~$60M ~$15M ~$15M 46
Slide 47: Operations Locations International
MATS - OPERATIONS LOCATIONS INTERNATIONAL UK operations provides access to EU markets LATVIA LITHUANIA IRELAND . Established UK operations UNITED KINGDOM supporting EU markets POLAND NETHERLANDS GERMANY . Largest DURA-BASE BELGIUM CZECH LUX. REPUBLIC fleet in Europe SLOVAKIA . Focused on T&D, FRANC
Slide 48: Organization
MATS – ORGANIZATION Focused on industry needs to drive growth E&P UTILITIES PIPELINE . Experienced industry North experts focused on customer needs West . Dedicated resources delivering value proposition to expanded customer Midwest base . Strong adoption to date Texas . Supported by best in class r
Slide 49: Business Model
MATS – BUSINESS MODEL Organized around our customers needs Rental & Services Design & Manufacturing INNOVATION Customer / Industry led innovation pipeline Best In Class Safety, Quality & Efficiency Highest Quality Product Portfolio Driven by Innovation & 20 Years With Leveraging technology, footprin
Slide 50: Manufacturing
MATS – MANUFACTURING Strategically advantaged manufacturing facility U.S. HDPE Production Capacity . Strategically located to key raw material corridor . 20+ years of production know how . Highly automated process driving 6 quality & lean efficiency . Adequate capacity to meet sales & rental fleet
Slide 51: Business Model: Flexible Options to Suit Ownership Preferences
MATS – BUSINESS MODEL Flexible options to suit ownership preferences Purchase Preference Rental Preference . Ownership Mindset . Project Mindset . Long Term / Multi Project . Shorter Term / Single Requirements Project Usage . Value Brand Promise, . Value Safety, Service System Compatibility Quality
Slide 52: Business Model: Purchase, Rental and Hybrid Options
MATS – BUSINESS MODEL Flexible options to suit ownership preferences Purchase Preference Rental Preference Hybrid . Ownership Mindset . Project Mindset . Long Term / Multi Project . Shorter Term / Single . Ownership of “Base Project Usage Requirements Need” Fleet . Value Safety, Service . Value Bran
Slide 53: Sustainability
MATS - SUSTAINABILITY Engineered for sustainability . DURA-BASE mats & pins 100% recyclable . 100% of process water recycled during manufacturing . Composite matting requires 75 – 95% less energy than timber mat during manufacturing* . 20 – 80** years to grow and produce timber mat for 2 – 3 year l
Slide 54: Our Innovation Drivers
MATS – OUR INNOVATION DRIVERS Lower Customer Operating Risk Safety Scale & Reliability Efficiency Environmental Sustainability 54
Slide 55: Innovation: T-Rex Mobile Mat Washer
MATS & INTEGRATED SERVICES - INNOVATION Invasive species cost US agriculture $120bn* p.a. T-Rex Mobile Mat Washer . Timber mats organic & open structure conducive to transport of invasive species . DURA-BASE Closed, impervious design removes risk . Closed loop high pressure water system eliminates
Slide 56: Innovation: Equipotential Zone System
MATS & INTEGRATED SERVICES - INNOVATION Minimizing worker risk Equipotential Zone System (EPZ) . Engineered modular system providing rapid construction of an equipotential zone. . Flexible design to optimize site configurations . Easy visual indication of system integrity . Utilizes DURA-BASE matti
Slide 57: Innovation: Modular Above Ground Storage Tank
MATS & INTEGRATED SERVICES - INNOVATION Water management for E&P and Pipeline is a growing issue Modular Above Ground Storage Tank (AST) . Utilizing DURA-BASE matting, modular design enables multiple size configurations to support site design limitations . Industry leading 80,000 Bbl. max capacity
Slide 58: Innovation: ENVIROBASE Recycled Mats
MATS & INTEGRATED SERVICES - INNOVATION Helping customers manage environmental impacts “In 2015, 850,000 tons of E&P waste was disposed of in Pennsylvania landfills” Arlene Karidis, Waste 360, Oct 2017 ENVIROBASE . Utilizes 100% recycled HDPE liner as raw material for mat . Dimensionally consistent
Slide 59: More than just a mat
MATS & INTEGRATED SERVICES - INNOVATION More than just a mat… a system to solve any problem 59
Slide 60: Extensive IP Portfolio Protecting Innovation
MATS – EXTENSIVE IP PORTFOLIO PROTECTING INNOVATION 60
Slide 61: Mats & Integrated Services – Value Proposition
MATS & INTEGRATED SERVICES – VALUE PROPOSITION Strong growth pathway . Industry leading technology and manufacturing expertise . Proven history of converting markets and delivering value . Significant share capture available in scale markets . Strong, sustainable value proposition . Sustained growth
Slide 62: Appendix - Non-GAAP Financial Measures (Unaudited)
APPENDIX - NON-GAAP FINANCIAL MEASURES (UNAUDITED) To help understand the Company’s financial performance, the Company has supplemented its financial results that it provides in accordance with generally accepted accounting principles (“GAAP”) with the non-GAAP financial measure of earnings before i
Slide 63: Appendix - Non-GAAP Financial Measures (Unaudited)
APPENDIX - NON-GAAP FINANCIAL MEASURES (UNAUDITED) Nine Months Ended September Fluids Systems Twelve Months Ended December 31, 30, (In thousands) 2013 2014 2015 2016 2017 2018 Operating income (loss) (GAAP) (2) $ 72,604 $ 95,600 $ (86,770) $ (43,631) $ 27,580 $ 32,092 Depreciation and amortization 2