Transcript Flotek`s Presentation at IPAA OGIS San Francisco

IPAA
OGIS San Francisco
2012
September 24, 2012
September, 2012
1
Forward Looking Statement 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.
Flotek’s Focus: A Deleveraging Oilfield Technology Growth Story
Flotek continues to further deleverage
its balance sheet providing the company
the ability to both address its obligations
and fund its current growth from
internally generated capital.
• In the first six months of 2012, Flotek
has reduced its debt by $51 million.
• Since March, 2009, Flotek has reduced
debt by $99 million or 64%.
At the same time, Flotek continues to
increase its cash flow generation.
Debt Balances, 2009-2012
$160,000
$140,000
$120,000
$100,000
$80,000
$60,000
$40,000
$20,000
$1Q09 2Q09 3Q09 4Q09 1Q10 2Q10 3Q10 4Q10 1Q11 2Q11 3Q11 4Q11 1Q12 2Q12
Cash Generation, 2009-2012
• Flotek’s cash balances have increased
from just $600,000 on March 31, 2009
to $19 million as of August 7, 2012.
• During the second quarter, Flotek used
cash on hand to repurchase $15 million
of convertible notes and paid $4 million
in federal and state taxes.
• In August, made tax and interest
payments. Cash remains strong.
$50,000
$45,000
$40,000
$35,000
$30,000
$25,000
$20,000
$15,000
*Cash Balance as of 8/7/2012
$10,000
$5,000
$-
Reduction in Debt PLUS Acceleration of Cash EQUALS Flotek’s Powerful Engine for Future Growth
Financial Performance in Context
Total Revenues
Chemical & Logistics Revenue
(in millions)
(in millions)
$160,000
$140,000
$250,000
Revenues ($mm)
Revenues ($mm)
$300,000
$200,000
$150,000
$100,000
$50,000
$120,000
$100,000
$80,000
$60,000
$40,000
$20,000
$-
$2008
2009
2010
2011
2008
2009
Drilling Products Revenue
Operating Income
(in millions)
(in millions)
$120,000
$50,000
$100,000
$40,000
$80,000
$60,000
$40,000
$20,000
$2008
2009
2010
Year
2011
Year
Operating Income ($mm)
Revenues ($mm)
Year
2010
2011
$30,000
$20,000
$10,000
$$(10,000)
2008
2009
2010
$(20,000)
$(30,000)
$(40,000)
Year
2011
Second Quarter, Continuing 2012 Success
Flotek’s Second Quarter Results Show Continued Compelling Growth Among U.S. Oilfield
Technology Companies
• Revenues for the second quarter, 2012 were $78.3 million, an increase of 40% from second
quarter, 2011 results.
• As reported and excluding non-cash items expenses related to the fair value of warrant liability
and early retirement of debt, Flotek earned ~$0.29 per common share.
• Gross margins remained strong at 42.2%.
• Flotek continues to generate record levels of cash. The Company’s cash balance at the end of
2Q2012 was $10.7 million.
The Flotek Oilfield Technology 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
Our diverse mix of products and services touch every stage of the life cycle of a well. And, while
each technology requires unique technical expertise, all of our technologies share a commitment
to our vision to provide best-in-class technology, cutting-edge innovation to address the everchanging challenges of our customers and exceptional customer service.
Key Technology Drivers: Specialty Chemicals
•
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 Nanofluids (CnF) and other “on demand” chemistry solutions.
•
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 CnF.
•
Environmental focus: Flotek filed first patent on environmentally friendly products in 2003.
•
Commitment to Research: Creating durable client relationships.
Key Technology Drivers: Specialty Chemicals
Flotek’s CnF™ is a Suite of Chemistries that Combines to Enhance Completion
Efficacy and Ultimate Production Economics
Surfactants
Dish Soap
CnF
Shampoo
Solvent
Fruit Juices
Hand Cleaners
Alcohols
Vanilla Flavoring
Mouthwash
Tap Water
Bottled Water
Water
Key Technology Drivers: Specialty Chemicals
The economic impact of our proprietary CnF chemistries can be seen
in the following video demonstration.
This video can be found at www.flotekind.com
Key Technology Drivers: Drilling Tools
• 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.
Key Technology Drivers: Teledrift Remote
• Remote system allows you to
select region and specific jobs.
Also provide the ability to look
at all job details in a single
page.
• Details of well direction can be
seen both graphically and in
chart form. Certification sheet
also provided.
• iPhone & Android apps
available.
Key Technology Drivers: Artificial Lift
• Key customer relationships in Powder River CBM. Flotek improved key
customer relationships in 2010 which provided additional service revenue in
2011 even as natural gas prices tumbled..
• 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.
2012 Business Objectives
• 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 CnF.
 Increased emphasis on “depth” of relationships along with “breadth” of relationships. “Is
Flotek in your well” provides multiple touch point opportunities.
• Introduce the “next generation” of CnF chemistry technologies to the market.
• Continue to focus on more balanced revenue mix: liquids vs. natural gas. Continued to build a
“hydrocarbon agnostic” suite of leading-edge, proprietary technologies.
• Continue to pursue international opportunities through partnerships, established relationships and
key agents.
• Opportunities for Flotek chemical technologies to be utilized in Enhanced Oil Recovery (EOR).
• Consider prudent opportunities to deploy cash balances to enhance long-term growth.
Flotek in 2012: Making a Difference
In short, Flotek’s vision in 2012 is to make a difference in the lives of everyone
we touch: our clients, our employees, our communities, our shareholders and
the environment.
•
We will make a difference for our clients by be the leading provider of specialty oilfield technologies and
remaining committed to our industry-leading position as a provider of innovative solutions for unique
challenges from drilling to production.
•
We will make a difference for our employees by creating a challenging yet supporting work environment full
of excitement and opportunity.
•
We will make a difference for our shareholders by striving to provide industry-leading returns and
accelerating profitable growth across our business
•
We will make a difference in our communities by being good corporate citizens, supporting philanthropic
projects and encouraging our team members to give back to the communities in which they live.
•
We will make a difference to the environment by being good stewards of our natural resources and
remaining committed to creating environmentally friendly solutions to the oilfield challenges we address.
IPAA
OGIS San Francisco
2012
September 24, 2012
September, 2012
15