Nine Energy Service, Inc. · AMEX:NINE
Nine Energy Service — Q2 2024 Earnings Presentation
29 slides from Nine Energy Service's earnings presentation, Sep 5, 2024
Slide 1: Q2 2024 IR Presentation
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Slide 2: Disclaimer
DISCLAIMER Forward-Looking Statements & Non-GAAP Financial Measures Certain statements in this presentation are forward-looking statements that are subject to a number of risks and uncertainties, many of which are beyond our control. All statements, other than statements of historical fact included
Slide 3: Company Overview
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Slide 4: Nine Company Overview
NINE COMPANY OVERVIEW INVESTMENT HIGHLIGHTS REVENUE BY SERVICE LINE1 • Asset, emissions and labor-light business model with strong barriers to entry driving greater cash generation 25% Completion Tools 34% Cementing • ~60% of business driven by technology- based businesses (completion tools & 20% Co
Slide 5: Strategy
STRATEGY Differentiation: ASSET BARRIERS SERVICE Cash flow generation LIGHT TO ENTRY EXECUTION Returns (ROIC) Asset, emissions and labor- Establishing our company as "Stickier" depreciation-based Defensibility light business model drives a technology leader places service lines mitigate greater cash
Slide 6: Technology-Based Service Offering
TECHNOLOGY-BASED SERVICE OFFERING PERFORMANCE Nine’s wide range of advanced technologies will accommodate any type of completion for 100% DELIVERED of wells drilled in the United States and Canada. 6
Slide 7: Asset Light Model Drives More Free Cash Flow
ASSET LIGHT MODEL DRIVES MORE FREE CASH FLOW PRESSURE PUMPING E-LINE Pressure pumping E-line 7
Slide 8: Asset-Light Model Reduces Capex Needs
ASSET-LIGHT MODEL REDUCES CAPEX NEEDS • Nine has fundamentally reduced the capex needs to run the business • Following 2016, Nine’s average 3-year capex from 2017 - 2019 was ~$53mm, versus coming out of 2020, where the 3-year average from 2021 - 2023 is ~$23mm, a reduction of ~57% Nine Annual Capex
Slide 9: Market Share Overview
MARKET SHARE OVERVIEW US COMPLETIONS MARKET SHARE Nine US Wireline & Completion Tools % of stages completed1 21% 20% 20% 17% 18% 17% 2018 2019 2020 2021 2022 2023 Nine IPO US CEMENTING MARKET SHARE Nine U.S. Cementing Market Share in the Eagle Ford, Permian & Haynesville2 19% 16% 17% 14% 15% 14% 201
Slide 10: Geographic and Commodity Diversity
GEOGRAPHIC AND COMMODITY DIVERSITY OUR SERVICES CANADA – 1% Completion Tools BAKKEN – 5% Cementing Services Coiled Tubing Services DJ/NIOBRARA – 1% MARCELLUS/UTICA – 20% Wireline Services ~4% of overall revenue comes from outside NAM MIDCON – 1% PERMIAN – 36% BARNETT – 2% HAYNESVILLE – 14% EAGLE FOR
Slide 11: Continued Excellence in Safety
CONTINUED EXCELLENCE IN SAFETY 2.47 1.5 1.44 1.26 0.88 0.77 0.63 0.30 0.48 0.41 2014 2015 2016 2017 2018 2019 2020 2021 2022 2023 11
Slide 12: Customers Who Trust Us
CUSTOMERS WHO TRUST US DIVERSE, BLUE-CHIP CUSTOMER BASE WITH MINIMAL CONCENTRATION 12
Slide 13: Technology Overview
TECHNOLOGY OVERVIEW
Slide 14: New Generation of Dissolvable Plugs
NEW GENERATION OF DISSOLVABLE PLUGS NINE STINGER DISSOLVABLE PLUG PLUG OVERVIEW • Shorter design, decreasing plug size by over 70% • Predictable and reliable dissolution for entire addressable isolation tool market • Completely dissolvable, eliminating plug drill-out MARKET & FINANCIAL OVERVIEW • Hi
Slide 15: Nine Dissolvable Plug Benefits
NINE DISSOLVABLE PLUG BENEFITS NEUTRAL OR REDUCE AFE INCREASED IRR REDUCED EMISSIONS INCREASED SAFETY WITH FEWER HUMANS AT SURFACE 15
Slide 16: Dissolvable Plug Adoption Increasing
DISSOLVABLE PLUG ADOPTION INCREASING 2023 YTD TOTAL US PLUG MARKET SHARE1 DISSOLVABLE PLUG MARKET SHARE2 ~75% of the US Dissolvable Plug Market share is concentrated among 4 competitors, 15 – 25% including Nine 35-50% 16-34 % Remaining Competitors Dissolvables & Composites 13-17% Competitor C 20-25%
Slide 17: Pincer Hybrid Plug
PINCER HYBRID PLUG An innovative hybrid design integrating composite and dissolvable materials, the Pincer is a considerable advancement in completion tool technology, eliminating geographical constraints and delivering optimal downhole efficiency PLUG OVERVIEW • 47% less material than Scorpion frac
Slide 18: Scorpion Composite Plug
SCORPIONTM COMPOSITE PLUG Over 370,000+ plugs run Delivering secure and dramatically faster mill-out times, Nine offers a wide range of composite frac plugs for the longest and most complex laterals. SCORPION LONG RANGE BRIDGE (GEN 1) Manufactured almost entirely of Designed to pass through damaged
Slide 19: Expanding into New Markets Through Technology
EXPANDING INTO NEW MARKETS THROUGH TECHNOLOGY REFRAC MARKET – ENABLES CUSTOMERS TO GET PRODUCT TO MARKET IN 10-14 DAYS VERSUS TRADITIONAL COMPLETIONS OF ~6 MONTHS Nine has partnered with NewGen Systems and has completed over 300 installations of our Refrac Liner system A refrac boosts total reserves
Slide 20: Expanding Through New ESG Technology
EXPANDING THROUGH NEW ESG TECHNOLOGY DISSOLVABLE PUMPDOWN RINGS Used in conjunction with Nine’s composite or dissolvable plugs, by adding a dissolvable pumpdown ring, the bypass around the plug is greatly reduced while maintaining the needed line tension. Using a dissolvable pumpdown ring has been s
Slide 21: Significant & Scalable Emission Reductions
SIGNIFICANT & SCALABLE EMISSION REDUCTIONS STINGER DISSOLVABLE FRAC PLUG DISSOLVABLE FRAC PLUGS ON A 6-WELL PAD TAKE 84 CARS OFF THE ROAD: ~ 404 METRIC TONS OF CO2E 21 source: ERM; Details and assumptions can be found on Nine’s website at: nineenergyservice.com/assets/files/Environmental-Study-Resul
Slide 22: Cementing & Drilling Solutions
CEMENTING & DRILLING SOLUTIONS SUCCEED IN THE MOST COMPLEX FORMATIONS Deep expertise in North America’s most active shale plays, innovative slurry R&D, modern technology and steadfast service. CEMENT SLURRIES AND ADDITIVES • BLEND27 • FLEX 50H Builds strength 60% faster 16X more acid resistance • FL
Slide 23: Financial Overview
FINANCIAL OVERVIEW
Slide 24: Q2 2024 Financial Snapshot
Q2 2024 FINANCIAL SNAPSHOT Q2 2024 ($MM) Q2 HIGHLIGHTS • Q2 revenue came within Management’s original guidance REVENUE • Since the end of 2023, over 40 additional rigs have come out of $142 $132 the market, following a year in which 150 rigs come out of the market (200 rig decline since end of 2022)
Slide 25: 6/30/2024 Capitalization
6/30/2024 CAPITALIZATION PRO FORMA CAPITALIZATION COMMENTARY H1 24 capital expenditures totaled $8.1mm AS OF JUNE 30, 2024 ($MM) Cash $26.0 Updated 2024 FY Capex guidance to $10mm - $15mm, down from previous guidance of $15mm - $25mm Debt During Q2, sold ~4.2 million shares under the ABL Credit Faci
Slide 26: Close to Perfection. Far from Ordinary. Driven to Succeed.
CLOSE TO PERFECTION. FAR FROM ORDINARY. DRIVEN TO SUCCEED.
Slide 27: Appendix
APPENDIX
Slide 28: Nine Adj. EBITDA Reconciliation
NINE ADJ. EBITDA RECONCILIATION ($ MM UNLESS OTHERWISE NOTED) 30– Jun 24 31– Mar 24 2023 2022 2021 2020 2019 2018 EBITDA Reconciliation Net income (loss) (14.0) (8.1) (32.2) 14.4 (64.6) (378.9) (217.8) (53.0) Interest expense 12.8 12.8 51.1 32.5 32.5 36.8 39.8 22.3 Interest Income (0.2) (0.3) (1.3)
Slide 29: Adjusted ROIC Reconciliation
ADJUSTED ROIC RECONCILIATION ($ MM UNLESS OTHERWISE NOTED) 30– Jun - 24 31 – Mar - 24 2023 2022 After-tax net operating profit reconciliation: Net Income (loss) (14.0) (8.1) (32.2) 14.4 Add back: Interest expense 12.8 12.8 51.1 32.5 Interest Income (0.2) (0.3) (1.3) (0.3) Certain refinancing costs -