Attached files
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| 8-K - FORM 8-K - C&J Energy Services, Inc. | h85673e8vk.htm |
Exhibit 99.1
| C&J Energy Services, Inc. Investor PresentationNovember 15, 2011 |
| Forward-Looking StatementsCertain statements and information in this presentation may constitute "forward-looking statements" within the meaning of Section 27A of the Securities Act of 1933, as amended, Section 21E of the Securities Exchange Act of 1932, as amended, and the Private Securities Litigation Reform Act of 1995. The words "believe," "expect," "anticipate," "plan," "intend," "foresee," "should," "would," "could" or other similar expressions are intended to identify forward-looking statements, which are generally not historical in nature. These forward-looking statements are based on our current expectations and beliefs concerning future developments and their potential effect on us. While management believes that these forward-looking statements are reasonable as and when made, there can be no assurance that future developments affecting us will be those that we anticipate. All comments concerning our expectations for future revenues and operating results are based on our forecasts for our existing operations and do not include the potential impact of any future acquisitions. Our forward-looking statements involve significant risks and uncertainties (some of which are beyond our control) and assumptions that could cause actual results to differ materially from our historical experience and our present expectations or projections. Known material factors that could cause our actual results to differ from our projected results are described in our filings with the Securities and Exchange Commission ("SEC"), including but not limited to the final prospectus dated July 29, 2011 (File No. 333-173177) relating to our initial public offering and Quarterly Report on Form 10-Q for the period ended September 30, 2011.All readers are cautioned not to place undue reliance on forward-looking statements, which speak only as of the date hereof. We undertake no obligation to publicly update or revise any forward-looking statements after the date they are made, whether as a result of new information, future events or otherwise.Non-GAAP Financial MeasuresWe use both GAAP and certain non-GAAP financial measures to assess performance. Generally, a non-GAAP financial measure is a numerical measure of a company's performance, financial position or cash flows that either excludes or includes amounts that are not normally excluded or included in the most directly comparable measure calculated and presented in accordance with GAAP. C&J management believes that these non-GAAP measures provide useful supplemental information to investors in order that they may evaluate our financial performance using the same measures as management. These non- GAAP financial measures should not be considered as a substitute for, or superior to, measures of financial performance prepared in accordance with GAAP. In evaluating these measures, investors should consider that the methodology applied in calculating such measures may differ among companies and analysts. Reconciliation of non-GAAP results to GAAP results for historic periods can be found on slide 35 of this presentation and in our filings with the SEC, as applicable. 2 Disclaimer |
| Company Overview |
| 4 Founded by current Chairman and CEO Josh ComstockWell-positioned to benefit from many of the most important trends in drilling and completionFocused on complex, technically demanding completions that deliver superior returnsOperates modern, high-pressure rated equipmentIntegrated manufacturing capabilitiesRecent rapid growth through penetration of prominent E&P customersUnique financial business model through "take-or-pay plus" contracts that combine visibility with spot upside optionality C&J is a Differentiated Energy Services Company |
| 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 5 Josh Comstock founded C&J Introduced stand- alone pressure pumping services Ordered first hydraulic fracturing fleet Added 5 coiled tubing units, bringing total to 13Geographic expansion into East Texas with Marshall facilityLaunched hydraulic fracturing service Contracted Fleets 1 and 2Ordered Fleets 3, 4 and 5 Evolution of C&J Introduced coiled tubing services C&J Timeline Key Customers Closed Total Acquisition Coiled tubing count reaches 16 units Contracted Fleets 3, 4, 5 and 6Ordered Fleets 7, 8 |
| 6 C&J Investment Highlights Operational expertise in service- intensive basins Visible revenue growth Modern, high- specification equipment High-quality service Focused on technically-demanding, service-intensive basinsGenerate higher revenue per unit of horsepower relative to peers Customized solutions through extensive front-end technical analysis and planningDesign engineers and job supervisors involved throughout project execution Exclusive focus on high-pressure rated equipment (all rated up to 15,000 psi)Modern fracturing fleet, all entered into service in the past four yearsAcquisition of Total provides specialized, in-house manufacturing capability Substantial hydraulic fracturing and completion services experienceVested executive team with significant ownership Experienced management Scheduled equipment deliveries to support sustained growthTerm contracts provide visibility with flexibility for spot market upside |
| Industry Trends |
| Ongoing development of existing and emerging unconventional resource basinsIncreased horizontal drillingGreater service intensityStrong North American supply-demand fundamentalsIncreased demand for expertise to execute complex completionsHigh levels of asset utilization and constrained supply growth Spread of North American unconventional drilling and completion techniquesConventional field redevelopment applicationsEmerging international opportunities 8 Key Industry Themes Driving C&J Opportunity |
| Source: Unconventional Drilling data as of September 2011 and Baker Hughes Rig Count data as of November 04, 2011. Strong Drilling Outlook Drives Completion Demand U.S. Horizontal Rig Count (CHART) % Horizontal / Directional Nov-07 Nov-08 Nov-09 Nov-10 Nov-11 (CHART) Rig Count Change Since 6/09 by Shale Play 9 Significant increase in rig count and horizontal drilling activityIncreased service intensity of horizontal wells |
| 10 Source: Goldman Sachs Equity Research, management estimates.Note: Dark blue bars denote current C&J basin of operation. Advances in Completion Techniques Driving Demand Average Fracturing Stages Per Well Average Horsepower Per Well (000's of HP) Longer laterals More frac stages Higher pressure wells |
| 11 Favorable Supply / Demand Fundamentals Demand-Side Drivers Supply-Side Drivers Continued increase in horizontal drilling Longer laterals Growing number of fracturing stages per wellImproved drilling efficienciesHigh-pressure environmentsCustomized approach to the completion of complex, technically demanding wellsRedevelopment of conventional fields Older equipment not well-suited to meet demanding completion requirementsSignificant increase in attrition and maintenance downtime24-hour continuous serviceMore aggressive sand / proppant useMore demanding operating conditions in higher pressure formationsSupply chain constraints in obtaining new equipmentLimited industry experience executing the most complex completions |
| Business Overview |
| 13 Overview of Service Offerings Services Hydraulic Fracturing Pressure Pumping Coiled Tubing Provide highly customized services for technically challenging basinsEngineering staff offers extensive front-end technical evaluationDemonstrated efficiency gains to client allows for premium pricing Ability to handle heavy-duty jobs across a wide spectrum of environmentsLeverage CT business to expand into additional fracturing opportunitiesProvides various functions associated with well completion and well servicing Diverse portfolio of value-added servicesRoutinely performed in conjunction with coiled tubing services Often provides advanced knowledge of potential coiled tubing work Focus on most complex projects in most challenging basins |
| 14 Highly Experienced Management Team Josh Comstock Founder, Chairman and CEO Randy McMullen EVP, CFO and Treasurer Brett Barrier COO John Foret VP, Coiled Tubing Billy Driver VP, Hydraulic Fracturing Brandon Simmons VP, Coiled Tubing Pat WinsteadVP, Marketing Ted Moore VP, General Counsel Industry Experience20+ years Industry Experience20+ years Industry Experience10+ years Industry Experience20+ years Industry Experience25+ years Industry Experience18+ years Industry Experience25+ years Industry Experience9+ years |
| 15 Modern, High-Specification Equipment Currently operates five modern 15,000 psi pressure rated hydraulic fracturing fleetsCurrent aggregate 162,000 horsepower further increasing to 194,000 by end of 2011 and to 258,000 after delivery of fleet 8 in second half of 2012Specifically designed to handle well completions with long lateral segments and multiple fracturing stages in high pressure formationsAlso operates a fleet of 16 coiled tubing units, 19 double-pump pressure pumps and 9 single-pump pressure pumpsAdditional 2 coiled tubing units and 2 double-pump pressure pumps to be delivered by the end of 201116 of the 18 coiled tubing units will be 2-inch dimensionVertical integration through acquisition of Total E&S ("Total") Premium Hydraulic Fracturing Fleets Premium Hydraulic Fracturing Fleets Premium Hydraulic Fracturing Fleets Premium Hydraulic Fracturing Fleets Premium Hydraulic Fracturing Fleets Current Fleets Year Built On-Time Delivery Number of Pressure Pumps Horsepower Capacity 1 2007 ? 17 34,000 2 2010 ? 12 24,000 3 2010 ? 16 32,000 4 2011 ? 20 40,000 5 2011 ? 16 32,000 Expected Fleets Expected Delivery Date On-Time Delivery Number of Pressure Pumps Horsepower Capacity 6 4Q 2011 16 32,000 7 1H 2012 16 32,000 8 2H 2012 16 32,000 Total 129 258,000 |
| 16 Geographically Focused in Attractive Basins ? = C&J Customer Relationship Granite Wash Eagle Ford Shale Haynesville Shale = Basin where C&J is currently active Existing relationships provide platform for future growthProminent shales are in reach of C&J's existing service centers |
| Offer customized solutions on a job-by-job basisEngineers and fleet managers onsite throughout processCulture of flexibility and collaboration Completed thousands of fracturing stages in Eagle Ford and HaynesvilleOperating team with 20+ years of in-basin experienceRelationships with several proppant and chemical suppliersTechnical proficiency and front-end analysis The Result is Enhanced Economics for Our Customers Superior customer service New, highly capable equipment Exceptional execution High-quality service provider Minimize cycle time and limit pump downtimeDesign fluids that perform well in various environmentsFocus on maintaining performance data that is used to supplement and increase effectiveness of future assignments We Offer an Attractive Value Proposition to Our Customers All fracturing fleets less than 4 years old; rated for 15,000 psiOptimized configuration of fleet according to basin specific requirementsCustom-designed equipment maximizes efficiency and durabilitySpecific competence in fracturing fluid design and local application 17 |
| Current Service Offerings Current Service Offerings Current Service Offerings Current Service Offerings Current Service Offerings Customer Stand Alone Pressure Pumping Coiled Tubing Hydraulic Fracturing Term Frac Contract ? ? ? ? ? ? ? ? ? ? ? ? ? ? ? ? ? ? ? ? ? ? ? ? ? ? ? ? ? ? ? ? ? ? ? ? ? ? ? ? 18 Relationships with Industry Leaders (Through mid-2012) (Through mid-2012) (Through early 2013) (Through mid-2014) (Through mid-2013) Large operators have embraced C&J's technical capabilities (Early 2014) |
| 19 Outperformance Through Efficiency Pre-job best practices Pumping procedures Motivated workforce Rig-up flexibility More frequent communication with customers during well design processContinuity of technical staff to avoid repetition and save customers' timeLab fluids testing in advance for optimal well design Develop best layout for job site to maximize Hydration Unit and Blender performanceOrganize crew into focused teams to complete multiple tasks simultaneouslyConduct field fluid tests during rig process to confirm lab resultsEngineers and blender operators on site during rig up to "jump start" technical review Real-time monitoring of equipment to spot potential problems earlyOn-site maintenance of pump units as soon as each one is offlineProactive replacement of wear items rather than waiting for a failureStreamline paperwork requirements to allow supervisors to focus on efficiency and planning Empowering employees and promoting best practices produces a proud and highly motivated workforce |
| 20 Strategy for Continued Growth Capitalize on growth in development of shale and other resource playsLeverage customer relationships to geographically expandFurther expansion into Permian BasinEvaluating opportunities to expand operations into new areas throughout the U.S.Pursue additional term hydraulic fracturing contractsCurrently seeking term contracts for Fleets 7 and 8Maintain flexibility to pursue spot market workRetains upside revenue potential at prevailing market rates |
| Financials |
| 22 Key Drivers of Financial Performance Business Model Financial Model VisibilityGrowthVertical integrationRisk management Hourly rates under take-or-pay contractsSpot market optionalityUtilization drives modelBalance sheet strength |
| 23 Significant Historical Growth (CHART) Growth in HHP (period end) Avg. Monthly Revenue / HHP (CHART) Adjusted EBITDA ($mm) (CHART) Revenue ($mm) 2008 - 2010 CAGR: 104% 2008 - 2010 CAGR: 98% 2009 - 2012E CAGR: 97% (CHART) 173% increase 177% increase Annual Quarterly Annual Quarterly 1 Assumes timely delivery of Fleets 6 - 8. |
| 24 Strong Margin Profile (CHART) EBITDA Margin1 Annual Quarterly 1 EBITDA margin based on Adjusted EBITDA. Margins driven by utilization, not price |
| 25 More demanding wells drive higher hourly rates and higher revenues from chemicals and proppantMore frac stages per well keep fleets onsite longer, allowing more pumping hours per monthDemonstrated shorter time per completion permits us to negotiate premium rates with customersLess redundant pumping capacity boosts utilizationAverage monthly revenue per unit of horsepower:^ $331 in 2010^ $387 YTD September 30, 2011 ROCE of 43% in 2010 and 47% YTD September 30, 2011 Operational Strategy Drives Strong Financial Performance Regional focus and operating efficiency generate higher revenues per unit of horsepower |
| 26 Contract Coverage for Fracturing Fleets 2011 2011 2011 2011 2012 2012 2012 2012 Operating Regions Operating Regions Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Fleet 1 Haynesville/Eagle Ford/Granite wash Fleet 2 Eagle Ford Fleet 3 Eagle Ford Fleet 4 Haynesville Fleet 5 Eagle Ford Fleet 6 Permian Fleet 7 (Uncontracted) Fleet 8 (Uncontracted) Fleet Under Contracts Expected Delivery of Future Fleets Delivery 1H 2012 Delivery 2H 2012 Fracturing Term Contracts Provide Visible Growth |
| 27 Overview of Term Contracts 1 - 3 year contract lifeRevenues under term contracts are derived from:Mandatory monthly payments for minimum hoursPre-agreed amounts for each hour of service in excess of the contracted minimumService charge to customers for chemicals and proppant materialsTake or payOptionality to deploy equipment when not utilizedContractual protections for term |
| 28 Total E&S Acquisition Facilitates Growth Strategy Total E&S is a manufacturer of hydraulic fracturing equipment, coiled tubing, pressure pumping and other equipment used in the energy services industry and one of C&J's largest suppliers of machinery and equipmentAcquisition closed April 28, 2011Aggregate purchase price of approximately $33.0mmReceived $5.4mm cash as part of acquisition, for net transaction value of $27.5mm $25.0mm financed through incremental revolver borrowings Remainder funded through cash on handStrategic benefits includeInternal control over supply chainSignificantly reduces exposure to third-party supply constraintsShorter cycle times for the delivery of new equipment and replacement partsProvides for greater potential control of costs associated with new equipmentAcquisition has reduced C&J's procurement costs from TotalAbility to delay, or indefinitely postpone, delivery time of equipmentPlatform for R & D, continued equipment design improvements |
| Strong Balance Sheet and Liquidity Flexible balance sheet with strong liquidity position$200mm revolving credit facility 29 1 Summary Capital Structure, as of 9/30/2011 ($ in thousands) Reported Cash and Cash Equivalents $ 50,640 Long-term Debt Five-Year $200mm Credit Facility Total Long-Term Debt Shareholders' Equity $ 338,312 Total Capitalization $ 338,312 $ $ 0 1 The credit facility remains undrawn today, leaving the full $200.0 million available for borrowing. 0 |
| 30 C&J Investment Highlights Operational expertise in service- intensive basins Visible revenue growth Modern, high- specification equipment High-quality service Focused on technically-demanding, service-intensive basinsGenerate higher revenue per unit of horsepower relative to peers Customized solutions through extensive front-end technical analysis and planningDesign engineers and job supervisors involved throughout project execution Exclusive focus on high-pressure rated equipment (all rated up to 15,000 psi)Modern fracturing fleet, all entered into service in the past four yearsAcquisition of Total provides specialized, in-house manufacturing capability Substantial hydraulic fracturing and completion services experienceVested executive team with significant ownership Experienced management Scheduled equipment deliveries to support sustained growthTerm contracts provide visibility with flexibility for spot market upside |
| Appendix |
| Income Statements 32 Year Ended December 31, Nine Months Ended September 30, ($ in thousands except per share amounts) 2007 2008 2009 2010 2010 2011 Statement of Operations Data Revenue $28,022 $62,441 $67,030 $244,157 $158,361 $538,403 Cost of Sales 14,227 42,401 54,242 154,297 102,872 318,949 Gross Profit $13,795 $20,040 $12,788 $89,860 $55,489 $219,454 Selling, General and Administrative Expenses 7,427 8,950 9,533 17,998 11,384 36,219 Loss (Gain) on Sale / Disposal of Assets 129 397 920 1,571 1,582 (20) Operating Income $6,239 $10,693 $2,335 $70,291 $42,523 $183,255 Other Income (Expense) Interest Income $50 $5 $4 $9 $7 $1 Interest Expense (5,786) (6,913) (4,712) (17,350) (13,451) (3,825) Lender Fees (341) (511) (391) (322) (97) (42) Loss on early extinguishment of debt - - - - - (7,605) Other Income - - - 163 106 3 Other Expense (17) (68) (52) (150) (47) (1) Total Other Expenses $(6,094) $(7,487) $(5,151) $(17,650) $(13,482) $(11,469) Income (Loss) Before Income Taxes $145 $3,206 $(2,816) $52,641 $29,041 $171,786 Provision (Benefit) for Income Taxes 868 2,085 (386) 20,369 11,271 63,189 Net Income (Loss) $(723) $1,121 $(2,430) $32,272 $17,770 $108,597 Basic Net Income (Loss) per Share $(0.02) $0.02 $(0.05) $0.70 $0.38 $2.24 Diluted Net Income (Loss) per Share (0.02) 0.02 (0.05) 0.67 0.37 2.18 (Unaudited) |
| Cash Flows 33 Year Ended December 31, Nine Months Ended September 30, 2006 2007 2008 2009 2010 2010 2011 Statement of Cash Flows Data Capital Expenditures $9,282 $30,152 $21,526 $4,301 $44,473 $18,647 $106,471 Cash Flow Provided by (Used in) Operating Activities $855 $8,377 $8,611 $12,056 $44,723 $27,769 $141,190 Investing Activities (108,760) (30,054) (20,673) (4,254) (43,818) (18,622) (131,312) Financing Activities 106,700 21,305 11,921 (6,733) 734 (3,217) 37,945 (Unaudited) ($ in thousands) |
| Balance Sheets 34 As of December 31, As of September 30 ($ in thousands) 2006 2007 2008 2009 2010 2011 Balance Sheet Data Cash and Cash Equivalents $622 $250 $109 $1,178 $2,817 Accounts Receivable, Net 5,557 4,409 13,362 12,668 44,354 Inventories, Net 440 581 861 2,463 8,182 Property, Plant and Equipment, Net 31,593 57,991 71,441 65,404 88,395 Total Assets $111,467 $133,711 $155,212 $150,231 $226,088 Accounts Payable 690 1,705 6,519 10,598 13,084 Long-term Debt and Capital Lease Obligations, Excluding Current Portion 51,700 56,773 25,041 60,668 44,817 Total Stockholders' Equity $56,265 $66,797 $68,099 $65,799 $109,446 (Unaudited) $50,640 88,678 26,954 188,782 $462,475 51,298 - $338,312 |
| EBITDA Reconciliation 35 Note: EBIT, EBITDA and Adjusted EBITDA are non-GAAP financial measures, and when analyzing C&J's operating performance, investors should use EBIT, EBITDA and Adjusted EBITDA in addition to, and not as an alternative for, operating income and net (loss) income (each as determined in accordance with GAAP). C&J uses EBIT, EBITDA and Adjusted EBITDA as supplemental financial measures. EBIT is defined as net income (loss) before interest expense (net) and income taxes. EBITDA is EBIT adjusted for depreciation and amortization. Adjusted EBITDA is EBITDA further adjusted for certain other items which are not indicative of future performance or cash flow, including lender fees, other non-operating expenses and loss on sale/disposal of property, plant and equipment. C&J believes EBIT, EBIDA and Adjusted EBITDA are useful supplemental indicators of its performance. EBIT, EBITDA and Adjusted EBITDA, as used and defined by C&J, may not be comparable to similarly titled measures employed by other companies and are not measures of performance calculated in accordance with GAAP. |