0900 W Plaza RigNet Inc
Transcription
0900 W Plaza RigNet Inc
Jefferies 2013 Global Energy Conference November 12-13, 2013 Forward-looking Statements Certain statements made over the course of this presentation may constitute "forward-looking statements" within the meaning of the safe harbor provisions of the United States Private Securities Litigation Reform Act of 1995 — that is, statements related to the future, not past, events. Forward-looking statements are based on the current expectations and include any statement that does not directly relate to a current or historical fact. In this context, forward-looking statements often address our expected future business and financial performance, and often contain words such as "anticipate," "believe," "intend," "expect," "plan" or other similar words. These forward-looking statements involve certain risks and uncertainties that ultimately may not prove to be accurate. Actual results and future events could differ materially from those anticipated in such statements. The information regarding the past financial performance of the Inmarsat Energy Broadband business and RigNet’s expectations regarding the future performance of that business is based upon unaudited pro forma financial information provided by Inmarsat regarding its Energy Broadband business. This business has not been operated as a separate stand-alone subsidiary of Inmarsat and does not have its own financials. Such financial information does not necessarily reflect what the business’ financial results would have been on a stand-alone basis or what those results may be in the future as part of RigNet. RigNet’s expectations regarding the future performance of this business is subject to all of the usual risks associated with an acquisition of this type, including RigNet’s ability to successfully integrate this new business into its own, as well as the risks associated with this business and the industry in general. In addition, if there are lengthy delays in obtaining regulatory approvals for any reason, our expectations regarding the future results of the business may be negatively impacted. For further discussion of risks and uncertainties, individuals should refer to RigNet's SEC filings. RigNet undertakes no obligation and does not intend to update these forward-looking statements to reflect events or circumstances occurring after this press release. You are cautioned not to place undue reliance on these forward-looking statements, which speak only as of the date of this press release. All forward-looking statements are qualified in their entirety by this cautionary statement. In addition to U.S. GAAP financials, this presentation includes certain non-GAAP financial measures. These non-GAAP measures are in addition to, not a substitute for or superior to, measures of financial performance prepared in accordance with GAAP. Definitions of these nonGAAP measures and reconciliations between certain GAAP and non-GAAP measures are included in the appendix to this presentation. 2 RigNet Investment Highlights Founded in 2001, RigNet (NASDAQ: RNET) is a leading provider of remote communications, systems integration and collaborative applications to the oil and gas industry, both offshore and onshore, around the world Strong Organic Growth within the Oil and Gas Industry Market Share Growth Growing and Attractive Market Runway Strong balance sheet with significant debt capacity to support growth High Operating Leverage / Free Cash Flow 3 Providing Reliable, Remote Communications for the Life of the Oil Field Communications for the Life of the Oil Field Offshore Rigs Offices The oil and gas industry is remote, mobile and variable, with the reliance on technology greater than ever. RigNet provides managed communications services that free customers to focus on finding and producing oil and gas: • Reliable communications around the world, supporting rig productivity, safety and crew welfare • Technology flexibility – providing best-of-breed solutions that best meet customers’ needs • Local customer support for rapid deployment and resolution Energy Maritime Onshore Rigs Completion and Production 4 RigNet Business Model • Provide mission critical remote communications services to the oil and gas industry, principally on offshore drilling rigs that are mobile and becoming increasingly remote in the search for oil and gas • Majority of revenues from recurring, multi-tenant revenue model under long-term contracts • Revenue growth from sites added as well as ARPU growth from secondary customers and industry-leading value-added services • Provide managed services to 1,000+ sites in 30+ countries on six continents1 • Partner with our customers’ IT departments to serve remote end users, develop new services and allow customers to focus on finding and producing oil and gas • • Purposefully not as backward-integrated as others, which allows for best-of-breed solutions and success-based capex at the edge Low customer churn, stable end-user pricing and high barriers-to-entry U.S. Service Centers Global, Diversified Presence U.S. vs. international revenue split U.S., 23% International, 77% (1) As of December 31, 2012 Note: As of December 31, 2012. 5 Blue-chip Customer Base Drilling Companies Operators Service Companies BruneiShell Diverse customer base with no excessive concentration 6 Overview of Core Drilling Rig Market Offshore (Primary Classes) U.S. Onshore Jackups Semi-submersibles Drillships Rig Description Up to 400 Feet of Water; contracted for 30 days to 5 years Up to 10,000 Feet of Water; contracted for 3 to 5 years Up to 12,000 Feet of Water; contracted for 3 to 5 years Contracted for 30 days to 2 years Rig Day Rate $100,000+ $350,000+ $415,000+ $22,500+ 50 100-200 100-200 20-50 630+ 240+ 170+ 1,700+ Typical Crew Size # of Units Management estimates that RigNet’ ’s communications day rates represent <1% of total rig day rates Note: Offshore # of units includes total unit count from IHS-Petrodata Source: IHS-Petrodata (November, 2013), Spears and Associates (September 2013), Company Estimates 7 Overview of Oil and Gas Step-out Markets Production Description # Active Units Customer Value Proposition Investor Impact Energy Maritime International Land SOIL Fixed Floating Vessels Rigs OFS Corporate Networks Manned and Unmanned installations, MOPU FPSO/FSO, TLP/Spars, Semis, FLNG Supply, Seismic, Support and Construction Land based rigs outside of the United States Man Camps, Remote Offices, Wireline Trucks, etc. Collaborative Oil & Gas Extranet 8,500+ 340+ 3,900+ 3,600+ N/A N/A Provide reliable communications to same customers after the drilling campaign Provide global connectivity for vessels that work specifically in O&G markets Provide enterprise grade communications anywhere our customers drill Allow secure, reliable sharing of information, applications Long term contracts leveraging same infrastructure and solutions Leverage economies of scale in highest margin maritime segment Extend successful US Land model to more stable market segment Differentiated offering Source: IHS-Petrodata (March 2013), Spears and Associates (March 2013), Company estimates 8 Bandwidth Needs Growing at the Edge Total Oil & Gas VSAT Market 2012 – 2017 Bandwidth: Gbps Key drivers • Video-related services • Integrated operations • 7.0 Overseeing and directing offshore activities from onshore decision centers • Safety focus / increased regulatory oversight • Aftermath of BP Macondo spill • Crew welfare 5.3 • 4.1 Keeping crews happy in their off hours • Ultra-deep water exploration • 3.4 3.0 More remote, harsh and complex 2.6 2012 2013 2014 2015 2016 2017 • Average bandwidth per offshore rig expected to increase from 1.0 Mbps in 2012 to 2.2 Mbps in 2017 • Favorable technology changes in downhole communications and satellite backhaul (high-throughput satellites) Source: Various; Company analysis 9 Ultra-Deep Water (UDW) Markets Expanding, Driving the Need for Reliable Remote Communications Current UDW Activity1 Future UDW Rig Supply2 8 2 156 175 165 183 188 29 39 47 52 20 136 136 136 136 136 136 2013 2014 2015 2016 2017 2018 136 145 9 136 2012 2 2 42 1 26 3 8 3 39 Existing UDW Markets RigNet Offices • • • RigNet Teleport Emerging UDW Markets RigNet CoreHUB Delivered Visable supply RigNet POP UDW drilling is more complex and remote with high safety, operational and performance requirements Additional UDW markets are expanding, which requires robust, remote communications in new areas UDW rig supply growing to meet demand (1) Current UDW activity defined as rigs with 7,500+ water depth capability and contracted as of November 5, 2013. (2) Visible supply includes rigs with 7,500+ water depth capability either currently under construction, planned or on order. Source: IHS-Petrodata RigBase Current Activity Data (November 5, 2013) 10 Unconventional shale plays are driving land drilling in the U.S. • Eagle Ford Shale oil production jumped from 183,261 barrels a day in October 2011 to 323,098 bbl/d in October 2012 • Bakken oil production went from 488,066 bbl/d in October 2011 to 747,239 bbl/d in October 2012 • Driven largely by horizontal completions in multiple horizons, production from the venerable Permian Basin, which had fallen to 870,000 bbl/d in 2007, zoomed back to 1.2 million barrels a day last year • Marcellus Shale wells in Pennsylvania and West Virginia were producing 7 billion cubic feet of natural gas a day in December, comprising 25 percent of U.S. shale gas production and double their volume from a year earlier RigNet service center RigNet is well positioned to benefit from strong unconventional drilling trends in the U.S. Source: The American Oil & Gas Reporter; “Conventional Oil Drilling Strength May Be Hiding In Unconventional Activity Trough” January 2013 11 Growth Driven by Market Share Gains Global Market Share – Offshore Rigs 2005 – 2013 Industry Ranking vs. Key Success Criteria ∆ ’05-’13 100% 100% 100% 100% 100% 27% 31% 26% 21% 19% 43% 43% 6% 6% 51% 44% 48% 7% 14% 7% 6% 15% 22% 30% 32% 2005 2007 2009 2011 2013 RigNet • • • Stratos Harris Caprock Global Footprint Strong Value-Added Solutions Strong Network Reliability Strong Customer Support Strong Other RigNet is the only major provider to have grown market share in offshore rigs over the past few years – RigNet’s managed services model is preferred to transport providers RigNet delivers on criteria important to demanding oil and gas customers RigNet is the last remaining independent global provider of remote communications to the oil and gas industry after recent provider consolidation wave Source: Various; Company analysis 12 Market Runway Tripled with Nessco Acquisition On July 05, 2012, announced the acquisition of Nessco Group Holdings Ltd (Nessco) in Aberdeen Acquisition Rationale and Synergies • Nessco is a leader in telecommunications systems integration (SI) for the oil and gas industry, an estimated $300MM market with an 11% growth rate $ in millions $500 $1,100 Production Potential Market • Nessco designs, builds, installs and commissions complex telecommunications systems for offshore and onshore oil and gas production facilities, providing RigNet a key entry point into the offshore production vertical • Nessco’s business to benefit from RigNet’s global footprint, larger scale, customer relationships and access to capital • RigNet strengthens its competitive position with systems integration capabilities and a growth runway into the oil and gas production market $300 $300 Transaction Details • All cash purchase price of $48.9m (£31.1m) or 6.7x FY 2012 EBITDA Rigs Systems Integration • Entered into an amended credit facility that provides both a $66.4m term facility and $10.0m revolving facility • Pro forma EBITDA leverage ratio is approximately 1.5x Source: Various; Company analysis 13 Inmarsat Energy Broadband Acquisition – Deal Highlights Part 1: RigNet to acquire the Energy Broadband business and assets from Inmarsat • RigNet to pay $25MM U.S. in an all cash acquisition to be financed through a new credit facility and cash on hand • Major goal is to raise the acquired business’ margins and growth rates over time to levels more comparable to RigNet existing operations • Combined organization to benefit from scale, robust product offering and best in class customer service • Transaction expected to close during or before Q1’14 Part 2: RigNet to become a key energy distributor for Inmarsat’s Global Xpress • Provides privileged global access to one of the leading new-generation high-throughput satellite platforms ensuring that RigNet will always be positioned to provide the best communications solution to its customers • Greater bandwidth and lower costs for the oil and gas market, enabling more apps at the edge • Global Xpress platform is expected to be globally operational in 2015 Transaction to add new technology, customers and geographies to allow RigNet to better serve Oil and Gas customers around the globe 14 Inmarsat Energy Broadband Acquisition – Segment Overview • Inmarsat Retail Energy Broadband 2012 revenue of $81MM Segment % of 2012 revenue Description Microwave and WiMAX High bandwidth and low latency solutions in the Gulf of Mexico Combines high throughput of microwave service with the mobility of WiMAX service to offer a powerful communications solution VSAT Fits with RigNet core business Provides relationships with new customers Provides entry into new geographies (e.g. Russia) ~70% SCADA / M2M Supervisory Control and Data Acquisition (SCADA) VSAT solution to collect and transmit data from unmanned, remote locations such as pipeline segments Engineering and integration services 10% - 15% Highly complementary to RigNet’s existing systems integration business Single source provider of engineering, procurement, integration, construction services and project management L-Band and other 15% - 20% Highly mobile, easy to use solution ideal for global service companies 15 History of Strong Growth EBITDA and UFCF1 Revenue $ in millions $ in millions $217 $55 $162 $44 $109 $90 $33 $30 $93 $81 $22 $67 $30 $29 $18 $27 $19 $22 $16 $14 $10 2007 2008 2009 2010 2011 2012 2013E 2007 2008 2009 2010 EBITDA 2011 2012 2013E UFCF • High EBITDA margins from operating leverage; favorable free cash flow • Strong balance sheet and debt capacity to support future organic and inorganic growth • All organic growth until Nessco acquired in Q3, 2012 (1) UFCF defined as EBITDA less CapEx Source: Company data, Wall Street Estimates 16 Record Q3’13 performance • Revenue increased to $56.9 million in Q3’13 up 18.6% compared to the same quarter last year • Achieved record quarterly adjusted EBITDA of $14.5 million • UFCF1 of $5.4 million in Q3’13 was about in line with the same quarter last year • Capital expenditures of $9.1MM increased compared to the same quarter last year due primarily to growth opportunities arising from increasing demand for RigNet services Revenue EBITDA $ in millions $ in millions $51.3 $47.9 Q3'13 Q2'13 % of revenue (1) $ in millions $14.5 $56.9 Q3'12 UFCF1 $13.9 $12.4 $7.2 Q3'12 Q3'13 Q2'13 25.9% 25.5% 27.1% Q3'12 15.0% $5.4 $5.4 Q3'13 Q2'13 9.5% 10.5% UFCF defined as EBITDA less capex 17 Outstanding share price performance 1.0 $42.00 12/14/2010: IPO priced at $12 per share $38.00 $36.00 8/20/2013: KKR announced agreement to acquire 27% of RigNet from Cubera $34.00 $32.00 7/5/2012 Announced Nessco acquisition $30.00 Price $28.00 0.9 0.8 0.7 8/1/2013: Announced acquisition of Inmarsat Energy Broadband assets and GX commercial distribution agreement 0.6 $26.00 0.5 $24.00 0.4 $22.00 $20.00 Volume (millions) $40.00 11/5/2013: Up 234% since IPO 0.3 $18.00 0.2 $16.00 $14.00 0.1 $12.00 $10.00 12/15/2010 7/14/2011 2/10/2012 RigNet Volume • • • 9/8/2012 S&P 500 (indexed) 4/7/2013 0.0 11/5/2013 Annotations Share price up over 234% since IPO, despite mid-size market capitalization, limited available float and low trading volume Recent announcement of KKR’s agreement to purchase a minority investment in RigNet Current price targets are $32.00-$42.00 Source: FactSet 18 Growing and Attractive Market Runway Production / Vessels Mega-trends Driving Remote Communications Integrated operations ERP applications at the edge Crew welfare Remote video Heightened safety regulations General Maritime Remote Video Government / Military Number of Rigs TurboNet Service Companies Operators Cumulative Return Pay-Per-Use Mining / Engineering / Construction Wi-Fi Hotspot Drillers Today Future Extend into Adjacent Verticals Increase Horizontal Footprint of Drilling Rigs Increase Penetration of Secondary Customers Expand Penetration of Value Added Services RigNet has multiple runways to grow in the remote communications industry Focus on Growing ARPU Leveraging Organic and Inorganic Opportunities to Grow 19 RigNet Investment Highlights Founded in 2001, RigNet (NASDAQ: RNET) is a leading provider of remote communications, systems integration and collaborative applications to the oil and gas industry, both offshore and onshore, around the world Strong Organic Growth within the Oil and Gas Industry Market Share Growth Growing and Attractive Market Runway Strong balance sheet with significant debt capacity to support growth High Operating Leverage / Free Cash Flow 20 THANK YOU 21 APPENDIX 22 Reconciliation of Net Income to Adj. EBITDA ($ in thousands) 2007 2008 2009 2010 2011 2012 1Q’13 2Q’13 3Q’13 Net income (loss) $(2,121) $10,356 $(19,620) $(15,276) $9,752 $12,021 $3,775 $4,915 $2,407 Interest expense 5,497 2,464 5,146 1,618 1,249 1,552 507 440 432 Depreciation and amortization 9,451 10,519 12,554 14,983 14,584 17,534 4,969 5,249 5,450 0 0 2,898 0 0 0 0 0 0 (27) (92) 111 294 (165) (131) 41 33 93 1,156 (2,461) 21,009 17,190 0 0 0 0 0 Stock based compensation 169 231 277 437 1,534 2,502 817 713 696 Acquisition / initial public offering costs 2,783 3,510 1,261 1,825 0 1,372 0 0 2,791 628 5,882 5,457 8,669 6,502 8,733 2,512 2,552 2,581 $17,536 $30,409 $29,093 $29,740 $33,456 $43,583 $12,621 $13,902 $14,450 Impairment of goodwill (Gain) loss on retirement of property and equipment Change in fair value of preferred stock derivatives Income tax expense Adjusted EBITDA (non-GAAP measure) 23