Nine Energy Service, Inc. · AMEX:NINE
Nine Energy Service — Q3 2018 Earnings Presentation
27 slides from Nine Energy Service's earnings presentation, 2018
Slide 1: Nine Energy Service Investor Presentation Q3 2018
NINE ENERGY SERVICE INVESTOR PRESENTATION Q3 2018 1
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
COMPANY OVERVIEW
Slide 4: Nine Company Overview
NINE COMPANY OVERVIEW OUR COMPANY • Focused on ROIC • Leveraged to increasing completion intensity including mega-well pads, lateral lengths and stage count • Super lateral, deep reach capable service offering and focus • Agnostic to completion style – plug and perf (94%1 of horizontal market) and s
Slide 5: Technology-Driven Completions Offering
TECHNOLOGY-DRIVEN COMPLETIONS OFFERING Nine is capable of addressing 100% of the onshore wells drilled in North America, regardless of completion type PRE & POST STIMULATION HORIZONTAL LATERAL TOE OF THE WELL Large Diameter Coil + Memory Tools Long-string Cementing Offering includes tools & equipmen
Slide 6: Premier Isolation Tool Provider
PREMIER ISOLATION TOOL PROVIDER • Able to serve the entire addressable isolation tool (isolation tool = plug) market with proven dissolvable and composite offerings (1 frac stage = 1 plug) • 2019E NA Stage Count: 775,0081 • # 2 market share in dissolvable frac plugs and #1 in polymer-based (plastic)
Slide 7: Sustainable Value Proposition of Service & Technology
SUSTAINABLE VALUE PROPOSITION OF SERVICE & TECHNOLOGY Service and technology drives efficiencies and lowers total cost of ownership for operators SERVICE/TECHNOLOGY PERFORMANCE DAYS SAVED REVENUE GENERATION FOR OPERATORS1 ScorpionTM Composite Plug 144 plugs drilled out with 6 well pad = $5.9mm ~2.5
Slide 8: Multi-Well Pads Concentrate Risk
MULTI-WELL PADS CONCENTRATE RISK BARRIERS TO ENTRY CONTINUE TO INCREASE SINGLE-WELL PAD COMPLETIONS MULTI-WELL PAD COMPLETIONS LONGER LATERALS TIGHTER SPACING PAD DRILLING l l Concentration of dollars / pad + exponential impact of Non-Productive Time = highly selective customers • Total well cost: $
Slide 9: Broad Footprint Enables Technology Leadership
BROAD FOOTPRINT ENABLES TECHNOLOGY LEADERSHIP FOOTPRINT IN EVERY MAJOR NAM BASIN – significant benefit to potential strategic partners through distribution volume Canada 4% EXCELLENT NAM REACH CAPABILITY – proximity to the field, customer Bakken 8% and acreage Rockies 5% LOCALIZED TEAMS WITH Marcell
Slide 10: Barriers to Entry Through Technology and Service
BARRIERS TO ENTRY THROUGH TECHNOLOGY AND SERVICE HOW DOES NINE BUILD MOATS AROUND THE BUSINESS? Service + technology / equipment + people to service the longest laterals today and tomorrow COMPLETION SOLUTIONS PERFORMANCE BARRIERS EQUIPMENT BARRIERS → FIT FOR “DEEP REACH” Cementing Services • ~14,00
Slide 11: Proof of Performance
PROOF OF PERFORMANCE Majority Of Nine’s Completion Work Is Long Laterals Has Led To Increased Efficiencies And Higher Barriers To Entry 16% 167% 48 14.5 78% 164% 27 6% 5.5 2014 Q3 2018 2014 2017 2014 Q3 2018 2 Nine US Wireline & Completion 1 Nine Avg. Stages Completed Per Well Stages / Employee / Mo
Slide 12: Customers Who Trust Us
CUSTOMERS WHO TRUST US Diverse, blue-chip customer base with minimal concentration COMPLETION PRODUCTION 12
Slide 13: Professionalized HSE Program
PROFESSIONALIZED HSE PROGRAM IMPROVED HSE REPORTING AND PERFORMANCE ACROSS SERVICE LINES Nine TRIR1 2.47 67% Reduction 1.50 1.44 1.26 0.8 2014 2015 2016 2017 2018 YTD (Q3) 1Does not include Magnum 13
Slide 14: Returns-Focused Growth Philosophy
RETURNS-FOCUSED GROWTH PHILOSOPHY Balance of Organic Growth and Strategic M&A: Augment technology portfolio + Enhance NAM footprint ORGANIC GROWTH DISCIPLINED M&A • Strategic expansion of existing service lines within NAM • Continue to consolidate highly fragmented industry basins • Target only best
Slide 15: Financial Overview
FINANCIAL OVERVIEW 15
Slide 16: Nine Standalone 2018 Financial Performance
NINE STANDALONE 2018 FINANCIAL PERFORMANCE 2018 QUARTERLY RESULTS – LEGACY NINE ($MM) Revenue Adjusted EBITDA +~6% $218 $38 +~25% $206 +~27% +~18% $31 $174 $24 Q1 18 Q2 18 Q3 18 Q1 18 Q2 18 Q3 18 Adj. EBITDA 14% 15% 18% Margin Net Income ROIC $14 +~51% +~50% 12% +~429% $9 +~167% 8% 3% $2 Q1 18 Q2 18
Slide 17: Magnum Oil Tools Overview
MAGNUM OIL TOOLS OVERVIEW • On October 25, 2018 Nine acquired Magnum Oil Tools • Transaction is accretive to EPS, margins and long-term ROIC, and will significantly enhance Nine’s free cash flow generation while reducing capital and labor intensity • Provides patented, market-leading downhole comple
Slide 18: Pro Forma Financial Overview
PRO FORMA FINANCIAL OVERVIEW ($mm) NINE MAGNUM PRO FORMA1 $903 $759 $544 $633 REVENUE $283 $340 $57 $90 $145 2016 2017 1H 2018 2016 2017 1H 2018 2016 2017 1H 2018 ADJUSTED EBITDA $153 $109 $83 $60 $44 $10 $2 $23 $12 2016 2017 1H 2018 2016 2017 1H 2018 2016 2017 1H 2018 % Margin: 3% 11% 14% 4% 26% 31
Slide 19: Pro Forma Capitalization (10/25/18)
PRO FORMA CAPITALIZATION (10/25/18) In conjunction with the Magnum transaction, which closed on October 25, 2018, Nine put a new capital structure in place with long-dated maturities and enhanced financial flexibility PRO FORMA CAPITALIZATION COMMENTARY As of October 25, 2018 • Total upfront conside
Slide 20: Unique Value Proposition
UNIQUE VALUE PROPOSITION Completions focused Technology and service differentiation Ability to service the most technically demanding wells Returns-focused business philosophy Access to entire addressable market Leading market position across broad geographic footprint Entrepreneurial, highly incent
Slide 21: Close to Perfection. Far From Ordinary. Driven to Succeed.
CLOSE TO PERFECTION. FAR FROM ORDINARY. DRIVEN TO SUCCEED. 21
Slide 22: Appendix
APPENDIX
Slide 23: Nine Standalone Adj. EBITDA Reconciliation
NINE STANDALONE ADJ. EBITDA RECONCILIATION Six months Six months Three Months Ended Year ended December 31 ended ended June 30, December 31, ($ mm unless otherwise noted) 30-Sep-18 30-Jun-18 31-Mar-18 2017 2016 2015 2014 20141 20141 EBITDA Reconciliation Net income (loss) $13.7 $9.0 $1.68 ($67.68) (
Slide 24: Nine Standalone ROIC Reconciliation
NINE STANDALONE ROIC RECONCILIATION Three Months Ended Three Months Ended Three Months Ended Year Ended December 31 ($ MM UNLESS OTHERWISE NOTED) 30-Sep-18 30-Jun-18 31-Mar-18 2014 After-tax net operating profit reconciliation: Income (loss from continuing operations net of tax) $13.7 $9.0 $1.7 $76.
Slide 25: Magnum Standalone Adj. EBITDA Reconciliation
MAGNUM STANDALONE ADJ. EBITDA RECONCILIATION ($ mm unless otherwise noted) 2016 2017 1H'18 EBITDA Reconciliation Net income (loss) $1 $22 $21 Interest expense 0 0 0 Depreciation 1 1 0.4 Income tax expense (benefit) 0 0 1 EBITDA $2 $23 $22 Adjusted EBITDA Reconciliation EBITDA $2 $23 $22 Transaction
Slide 26: Nine Pro Forma Adj. EBITDA Reconciliation
NINE PRO FORMA ADJ. EBITDA RECONCILIATION ($ mm unless otherwise noted) 2017 1H'18 EBITDA Reconciliation Net income (loss) ($71) $15 Interest expense 36 18 Depreciation 55 27 Amortization 19 9 Income tax expense (benefit) (7) 3 EBITDA $31 $72 Adjusted EBITDA Reconciliation EBITDA $31 $72 Impairment
Slide 27: Balance Sheet & Liquidity Position (9/30/18)
BALANCE SHEET & LIQUIDITY POSITION (9/30/18) CAPITALIZATION COMMENTARY As of September 30, 2018 • Nine has a total liquidity position of ($MM) $136.0mm as of 9/30/18 Cash $86.5 • Nine will be disciplined with capital deployment, with a ROIC-focused philosophy Debt New Revolving Credit Borrowings 0.0