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
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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
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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)
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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
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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

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