Enercom London - 2013

Enercom London - 2013
Conclusions
Forward Looking Statements Disclaimer
Certain statements and information included in this presentation constitute
“forward–looking statements” within the meaning of the Private Securities
Litigation Reform Act of 1995. These statements are based on certain
assumptions and analyses made by the Company’s management in light of its
experience and its perception of historical trends, current conditions, expected
future developments and other factors it believes are appropriate under the
circumstances. These statements involve known and unknown risks and
uncertainties, some of which are outlined in the Company’s most recent 10-K
and subsequent 10-Qs, which may cause the actual performance of Flotek to
be materially different from any future results expressed or implied in this
presentation and the forward-looking statements. Flotek undertakes no
obligation to update any of its forward-looking statements for any reason.
Conclusions
The Flotek Portfolio
Flotek is a Houston-based oilfield services company with focus on value-added drilling, completion and
production products. We deliver our services through a network of field offices in key basins across North
America and through strategic partnerships internationally.
Chemical Technologies and Related Logistics Services add value in the drilling,
completion and production stages of oil and gas wells.
Drilling Technologies provide solutions during the drilling stage of oil and gas
wells from motors and actuated tools to our best-in-class Teledrift
technologies.
Artificial Lift Technologies address a number of production challenges for oil and
gas companies
Conclusions
Recent Developments: Florida Chemical Acquisition
• On May 10, 2013 Flotek Industries, Inc. announced the acquisition of Florida Chemical for $49.5
million in cash and 3.28 million shares of Flotek common stock.
• Acquisition will drive revenue and market share growth.
• Should be accretive to EPS and EBITDA.
• Merger creates global leader in advanced industrial and consumer renewable and sustainable
chemistry:
• Florida Chemical is the largest global processor of citrus oils.
• The Company has become a leading supplier of raw materials for diverse applications in
the oil and gas industry.
• Flotek and Florida Chemical have a long and mutually rewarding 15-year partnership.
• The Florida Chemical acquisition provides security of raw material access and control of inventory
and pricing of key inputs to the chemistry product stream.
• Secures access to d-Limonene, a key component in many key oil & gas chemistry
components.
• Creates leading, world-class specialty chemistry research team focused on environmental
innovation and practical, added-value application.
• Immediately expands product line, including renewed focus on environmental
stewardship.
• Expands customer footprint and depth of offerings.
• Florida Chemical gains access to new growth capital, additional depth in its oil & gas research
efforts and new markets for its oil & gas product offerings.
Conclusions
Florida Chemical: Renewing Environmental Stewardship
•
The acquisition of Florida Chemical renews and intensifies Flotek’s commitment to environmental
stewardship.
•
Florida Chemical’s FC-PRO operating company provides a plethora of renewable and sustainable oilfield
chemistries that are GREAT and GREEN!
•
For example, the combined companies have developed an efficacious substitute for Xylene which
eliminates the need to use harmful toxins in well clean-out.
Citrus Terpene
Hydrocarbons
Toluene/
. Xylene
Teratogen (reproductive hazard)
No
Yes
Suspected Carcinogen
No
Yes
Not Subject
Subject
GRAS (Generally Regarded As Safe)
Yes
No
Regulated Drinking Water Contaminant
No
Yes
100% compliant
Not compliant
> 100
< 100
Product Comparison Chart
SARA Title III (Section 313)
Federal Biobased Products Preferred Procurement
Program
Flashpoint (ºF)
Conclusions
Florida Chemical: Research & Development Integration
• The combination of Flotek and Florida Chemical brings
complementary research acumen together: Florida
Chemical’s unique focus on environmental innovation and
Flotek’s practical applications of cutting-edge oilfield
chemistries. This combination creates a world-class
research operation for oilfield, industrial and consumer
staple specialty chemistry.
• The research and development teams at Flotek and Florida Chemical have a long,
outstanding relationship dating back over 15 years with a common theme for
environmental innovation and efficacious oilfield chemistries.
• The combined research team will work seamlessly to identify new applications and
formulations to meet the increasingly complex needs of the oil and gas industry and a
renewed focus on environmentalism.
• The combined research team will continue to grow to meet the needs of the oil & gas,
industrial and consumer staple industries.
Conclusions
Florida Chemical: Diversity in Specialty Chemicals
•
The acquisition of Florida Chemical provides Flotek
with unique and exciting new opportunities to
work in a variety of new industries with a variety
of new customers, not only in the oil and gas
industry.
•
Flotek intends to leverage the vast expertise of
Florida Chemical to expand its footprint into new
industrial and consumer applications.
•
Specifically, it provides unique diversification into
the flavor and fragrance industry, including many
current customers with global footprints.
•
The Flavor and Fragrance market is estimated to be
between $18-$20 Billion, with steady annual
growth.
Conclusions
Recent Initiatives: Oman/Gulf Energy Joint Venture
•
Flotek signed a Letter of Intent with Gulf Energy of Oman to
construct a specialty oilfield chemical production and
distribution facility, as well as a research and development
center in Oman.
•
Extends Flotek’s reach into a region in need of advanced
chemistry solutions that Flotek provides.
•
Strategically positions Flotek to serve the Middle East and North
Africa, amongst the most prolific oil and gas producing regions
in the world.
•
Independent surveys suggest unconventional resource
development will quintuple in MENA region in the next decade
with over three-quarters of such development coming in Oman
and Saudi Arabia.
Conclusions
Chemical Technologies Business Drivers
•
Continued trend toward unconventional resources plays in North America and in international
markets.
•
New product innovations: Research & development commitment leading to the “next
generation” Complex nano-FluidsTM and other “on demand” chemistry solutions. CnF® 2.0
•
New markets: Liquids growth, enhanced oil recovery applications and basin-specific solutions.
•
International markets: Continued growth from Basin Supply partnership and additional
opportunities.
•
Marketing penetration to both service companies and E&P end-users that convey compelling
economic benefits of the CnF technology.
•
Environmental focus: Flotek filed first patent on
environmentally friendly products in 2003. A key driver
behind the Florida Chemical acquisition.
•
Commitment to Research: Enhanced by the Florida
Chemical acquisition.
Conclusions
Drilling Technologies Business Drivers
• Downhole tool growth in key regions including
Oklahoma and Eagle Ford
• Improvement in market share and pricing in
drilling motors – focus on key regions including
Barnett, Bakken & Eagle Ford.
• Teledrift focus: Continued growth in domestic
markets. Pricing strength in Permian Basin.
Remote technology should enhance Teledrift
pricing and market share.
•
International expansion. Focus on Saudi
Arabia and Middle East, Central & South
America, Russian Federation.
•
Technology Focus: Remote view of Teledrift
results.
Conclusions
Artificial Lift Business Drivers
•
Key customer relationships in Powder River CBM. Flotek improved key customer
relationships in 2011 which provided additional service revenue in 2012 even as
natural gas prices tumbled..
•
New pump system technology and partnerships assisting in oil basin growth.
•
We have made significant progress in growing our oil exposure:
•
•
Successful installation of Petrovalve in the Niobrara with mainstream
participants. Repeat business beginning to build.
•
ESP brand recognition growing. We are competing for major ESP jobs with gross
margins in the 50% range.
•
New significant customer in the
Bakken establishes new territory for Flotek..
International sales of Petrovalve provide
significant upside.
Conclusions
Performance & Value Creation
Flotek’s rejuvenation is evident both financially and
operationally. Flotek’s market cap increased from
$32.4 million at the beginning of 2010 to over $600
million by the end of 2012 and nearly $800 million
today.
900%
Stock Performance 2010-2012
810%
800%
700%
600%
500%
400%
300%
200%
100%
• Flotek’s stock price increased 810% since the
beginning of 2010. That compares to a median
increase of 14% for other companies in their
peer group. The NYSE composite index gained
18% and the OSX gained 13% in that time
period.
• Flotek’s stock price appreciated 22% in 2012,
more than any other of the 15 companies in
their peer group. The median loss for Flotek’s
peer group in 2012 was -15%.
• Flotek also outperformed the NYSE Composite
Index and the OSX. Flotek’s stock price gained
22% in 2012, while the NYSE composite index
gained only 13% and the OSX only gained 2%.
18%
13%
0%
-100%
Return
30%
20%
10%
Median (14%)
Stock Performance 2012
22%
13%
2%
0%
-10%
-20%
-30%
-40%
-50%
Return
Median (-15%)
Conclusions
Performance & Value Creation
Flotek continues its strong operational and financial
performance. As you can see, Flotek is in the midst
of a significant transformation from post financial
crisis levels.
Total Revenue
• Total revenue has more than doubled from
2010 and increased over 20% from 2011.
Revenue in 2012 was the highest in company
history.
• Chemical Revenue increased 30% over 2011
levels.
• Operating income in 2012 was $58.6 million, a
20% increase over 2011 levels.
Revenues ($ mm)
$350,000
$300,000
$250,000
$200,000
$150,000
$100,000
$50,000
$2008
2009
2010
Year
2011
2012
Operating Income
Operating Income ($ mm)
Chemical & Logistics Revenue
Revenues ($ mm)
$200,000
$150,000
$100,000
$50,000
$2008
2009
2010
Year
2011
2012
$60,000
$40,000
$20,000
$2008
2009
2010
$(20,000)
$(40,000)
Year
2011
2012
Conclusions
Concluding Thoughts
• The acquisition of Florida Chemical is transformational for Flotek:
 Creates global leader in advanced industrial and consumer renewable and sustainable
chemistry.
 Drives revenue and market share growth; immediately accretive to EPS and EBITDA.
 Renews Flotek’s commitment to leadership in environmental stewardship.
• Continued focus on improved marketing efforts :
 Key objective to reach ultimate beneficiaries of property CnF chemistries. Combination
of working with service companies and working independent of service companies to
sell E&P companies on economic benefits of the CnF technology.
 Increased emphasis on “depth” of relationships along with “breadth” of relationships.
“Is Flotek in your well” provides multiple touch point opportunities.
 Focus on new opportunities, especially international growth and new applications of
chemistry technology, including Enhanced Oil Recovery
• Continued focus on “making a difference”:
 Product validation will improve visibility of Flotek’s ability to add value to customer
production projects.
 Acute focus on returns for our stakeholders through optimal capital allocation.
Conclusions
For More Information:
Christopher S. Edmonds
Senior Director – Corporate Finance & Strategy
713-726-5376
[email protected]