Key Energy Services Inc · OTC:KEGX
Key Energy Services — Scotia Howard Weil 2018 Energy Conference
31 slides from Key Energy Services's conference presentation, Mar 27, 2018
Slide 1: Scotia Howard Weil 2018 Energy Conference
Scotia Howard Weil 2018 Energy Conference March 2018 Robert Drummond President and Chief Executive Officer Exhibit 99.1
Slide 2: Safe-Harbor Language
Safe-Harbor Language This presentation contains forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. Statements that are not historical in nature or that relate to future events and conditions are, or may be deemed to be, forward-looking statements.
Slide 3: Q1 2018 Update
Q1 2018 Update First quarter 2018 consolidated revenues expected to increase 5 to 7 percent from fourth quarter 2018 US Rig Services revenues expected to increase 5 to 7 percent from fourth quarter 2018 Coiled Tubing Services revenues expected to increase 20 to 25 percent from fourth quarter 2018 Th
Slide 4: Company Overview
Company Overview
Slide 5: Key Service Offering Overview
Key Service Offering Overview Rig Services Fishing & Rental Tools Rig Services Coiled Tubing Fishing & Rental Tools Fluid Management Services Rig Services Coiled Tubing Fishing & Rental Tools Fluid Management Services Rig Services Coiled Tubing Fishing & Rental Tools Fluid Management Services Rig Se
Slide 6: Evolution of Fixed Cost Structure
Evolution of Fixed Cost Structure Structural cost reductions via organizational restructuring and support structure efficiencies Actions have yielded ~$100 million of annualized cost improvements Key believes these cost improvements to be structural and expects to proactively manage support costs in
Slide 7: Service Line and Geographic Exposure
Service Line and Geographic Exposure Production-driven services revenue comprises ~75% of 2017 revenue Growth in Coiled Tubing driving expansion of completion-driven revenue Meaningful exposure to every major U.S. oil & gas producing region Significant Permian exposure, comprising over one-third of
Slide 8: U.S. Rig Services Overview
U.S. Rig Services Overview Largest well service rig fleet in the U.S. Completion of newly-drilled horizontal and vertical wellbores Recompletion of existing wellbores Maintenance of producing wellbores Workover of existing wellbores to enhance production Plugging and abandonment of wellbores at the
Slide 9: Conventional and Unconventional Capabilities
Conventional and Unconventional Capabilities (1) Represents “Active” or “Warm Stacked’ Rigs. 358 Rigs 521 Rigs 250 Available Rigs(1) 281 Available Rigs(1) Specification 1-3 4+ Derrick Height >102ft. O P Hook load Capacity >200k lbs O P Horsepower >450HP O P Total Well Service Rig Fleet by AESC Class
Slide 10: Commodity Price Uplift and Demand Normalization Impact
Commodity Price Uplift and Demand Normalization Impact Demand driver via “demand normalization”, i.e. a return to historical average activity level Implied Rig Demand increases from ~1,500 rigs at $45 oil to ~1,800 rigs at $55 oil and to ~2,200 rigs at $75 oil Implied Rig Demand increases ~700 rigs,
Slide 11: The Evidence Can Be Seen in NAM Production
…The Evidence Can Be Seen in NAM Production Source: DrillingInfo, Key Energy Services, Inc. Note: 2017 data through June 2017. As operators have reduced the working well service rig count relative to implied demand, oil production has fallen materially Natural decline rates and “shut-in” wells are p
Slide 12: Aging Horizontal Oil Well Backlog Provides New, Secular Tailwind
Aging Horizontal Oil Well Backlog Provides New, Secular Tailwind Source: DrillingInfo. Note: Utilizes the same job frequency and utilization assumptions described on slide 23 and are applied to the Future Cumulative HZ Wells >4 Years Old shown in the chart above. Proliferation of HZ oil wells has cr
Slide 13: Fishing & Rental Service Overview
Fishing & Rental Service Overview Extensive array of rental equipment and services including: Tubular handling systems Drill pipe Work string and tubulars Pumps Sand-X system Blowout preventers and accumulators Locations in all major oil & gas producing regions Fishing services utilize a wide range
Slide 14: Fluid Management Services Overview
Fluid Management Services Overview Transportation of fluids used in the drilling and completion process Transportation of frac flowback and produced water from completed or producing wellbores Disposal of flowback and produced water in saltwater disposal wells ~60 SWD’s, brine and freshwater station
Slide 15: Water Demand Overview
Water Demand Overview Significant growth in water volume per completed well driving total fresh water and flowback water demand Continued growth in water volumes employed on a per-well basis to drive water transfer demand Frac Water Demand(1) Per Wells Fargo Securities. Water per Completion Demand(1
Slide 16: Coiled Tubing Services Overview
Coiled Tubing Services Overview Completion of newly drilled horizontal wellbores pre and post hydraulic fracturing Maintenance of producing wellbores Plugging and abandonment of depleted wellbores at the end of their productive lives Expanded large-diameter operations into 3 new markets in Q1 2018 2
Slide 17: Coiled Tubing Market Overview
Coiled Tubing Market Overview DUC Inventory by Market(1) Total Frac Stages(2) DUC inventory yields visibility for coiled tubing frac plug mill-out opportunities Significant growth in total frac stages along with increasing well counts yields secular tailwind for coiled tubing demand Per EIA Drilling
Slide 18: Balance Sheet & Liquidity
Balance Sheet & Liquidity Significant liquidity position with no near-term debt maturities provides financial flexibility Covenant coverage well in excess of thresholds Strong balance sheet allows for earnings growth in market recovery (1) Reflects a borrowing base of $60.3 million and $35.6 million
Slide 19: Final Thoughts
Final Thoughts Well positioned for future growth through exposure to secular growth and cyclical recovery Completions driving demand for Coiled Tubing, Fluid Management and U.S. Rig Services Growing population of aging horizontal wells to provide new, incremental demand for production services Recov
Slide 20: Appendix
Appendix
Slide 21: Market and Service Demand Overview
Market and Service Demand Overview
Slide 22: Conventional Vertical Well Services Opportunity
Conventional Vertical Well Services Opportunity An increase from $40 oil to $55 oil results in a 35% increase in the U.S. population of “Economic” oil wells Source: DrillingInfo, Key Energy Services. Note: ‘Economic’ defined as an oil well in which the payback associated with the cost of a well serv
Slide 23: Market Opportunity Overview
Market Opportunity Overview Multiple growth drivers identified moving forward Conventional Well Services Demand via Commodity Price Recovery Well Service Demand Normalization Deferred Maintenance “Catch-up” Effect Aging Horizontal Oil Wells Completion-driven Rig Demand Source: AESC, DrillingInfo, Wa
Slide 24: Commodity Recovery to Drive Conventional Demand Expansion
Commodity Recovery to Drive Conventional Demand Expansion Oil price directly drives demand for well services Recent oil prices (~$55) yield an Implied Rig Demand for vertical oil wells of 1,791 well service rigs Demand elasticity to oil prices drives meaningful market growth opportunity in a range-b
Slide 25: Commodity Price Uplift and Demand Normalization Impact
Commodity Price Uplift and Demand Normalization Impact Demand driver via “demand normalization”, i.e. a return to historical average activity level Implied Rig Demand increases from ~1,500 rigs at $45 oil to ~1,800 rigs at $55 oil and to ~2,200 rigs at $75 oil Implied Rig Demand increases ~700 rigs,
Slide 26: Increased Deferred Maintenance Driving Demand Backlog
Increased Deferred Maintenance Driving Demand Backlog… Deferred maintenance oil well population increased from ~0 to ~49,000 since January 2015 Key believes a significant drop in working rigs relative to implied rig demand has created a backlog of “deferred maintenance” (“DeM”) vertical oil wells Un
Slide 27: The Evidence Can Be Seen in NAM Production
…The Evidence Can Be Seen in NAM Production Source: DrillingInfo, Key Energy Services, Inc. Note: 2017 data through June 2017. As operators have reduced the working well service rig count relative to implied demand, oil production has fallen materially Natural decline rates and “shut-in” wells are p
Slide 28: Compelling Returns via Maintenance of Existing Oil Wells
Compelling Returns via Maintenance of Existing Oil Wells Source: Key Energy Services, Inc. Note: The above chart utilizes the same payback assumptions described on slide 21 of this presentation. Only depicts payback periods of approximately one year. Existing installed base of Economic oil wells pro
Slide 29: Aging Horizontal Oil Well Backlog Provides New, Secular Tailwind
Aging Horizontal Oil Well Backlog Provides New, Secular Tailwind Source: DrillingInfo, Key Energy Services, Inc. Note: Utilizes the same job frequency and utilization assumptions described on slide 23 and are applied to the Future Cumulative HZ Wells >4 Years Old shown in the chart above. Proliferat
Slide 30: Multi-Purpose Assets Benefit from Completions Activity
Multi-Purpose Assets Benefit from Completions Activity Source: Baker Hughes North American Rig Count, Heikkinen Energy Advisors, Key Energy Services, Inc. (1) Assumes a 4:1 ratio of drilling rigs to completions-focused well service rigs. Majority of work performed by well service rigs is production-
Slide 31: Multiple Drivers for Significant Demand Growth
Multiple Drivers for Significant Demand Growth Commodity price recovery drives nominal market growth Normalization of well maintenance activity provides added layer of demand growth “Catch-up” effect of DeM wells can provide for added upside Horizontal well backlog provides for new feature of demand
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