Investor Presentation Johnson Rice Energy Conference September - - PowerPoint PPT Presentation

Investor Presentation

Johnson Rice Energy Conference September 24-25, 2019

1

Forward-Looking Statements

Important factors that may affect Basic’s expectations, estimates or projections include:

• A decline in or substantial volatility of oil and gas prices, and any related

changes in expenditures by its customers

• The effects of future acquisitions on its business
• Changes in customer requirements in markets or industries it serves
• Competition within its industry
• General economic and market conditions
• Its access to current or future financing arrangements
• Its ability to replace or add workers at economic rates
• Environmental and other governmental regulations

Non-GAAP Financial Measures This presentation contains certain non-GAAP financial measures. A reconciliation of each such measure to the most comparable GAAP measure is presented in the Appendix hereto. We use “EBITDA” and “Adjusted EBITDA“ non-GAAP financial measures, for internal reporting and providing guidance on future results. These measures are not measures of financial performance under GAAP. We strongly advise investors to review

• ur financial statements and publicly filed reports in their entirety and not

rely on any single financial measure. See the Appendix for a reconciliation

• f these measures to GAAP.

This presentation contains forward-looking statements. Basic has based these forward-looking statements largely on its current expectations and projections about future events and financial trends affecting the financial condition of its business. These forward-looking statements are subject to a number of risks, uncertainties and assumptions, including, among other things, the risk factors discussed in this presentation and other factors, most

• f which are beyond Basic’s control.

The words “believe,” “may,” “estimate,” “continue,” “anticipate,” “intend,” “plan,” “expect” and similar expressions are intended to identify forward- looking statements. All statements other than statements of current or historical fact contained in this presentation are forward-looking statements. Although Basic believes that the forward-looking statements contained in this presentation are based upon reasonable assumptions, the forward- looking events and circumstances discussed in this presentation may not

• ccur and actual results could differ materially from those anticipated or

implied in the forward-looking statements. Additional important risk factors that could cause actual results to differ materially from expectations are disclosed in Item 1A of Basic’s Form 10-K for the year ended December 31, 2018 and subsequent Form 10-Qs filed with the SEC. While Basic makes these statements and projections in good faith, neither Basic nor its management can guarantee that anticipated future results will be achieved. Basic’s forward-looking statements speak

• nly as of the date of this presentation. Unless otherwise required by law,

Basic undertakes no obligation to publicly update or revise any forward- looking statements, whether as a result of new information, future events or

• therwise.

Company Overview

3

Our Basic Story

2018 Re-…

• Realignment
• Refine investment plans

and capital discipline

• Re-team and re-group
• Refinancing / Replenish

Liquidity

• Refine incentive structure

2019 Optimize

• Focus on the Human Factor /

Improve Safety

• Efficiency excellence with

Technology

• Protect liquidity; exercise

capital discipline

• Investments in wholly-owned

Agua Libre Midstream and 24- hour packages

• Pursue opportunistic M&A to

de-lever and scale business

2020 Vision

• Increased liquidity and

trading volume

• Technology

differentiation visible

• Maintain capital

discipline

• Discerning M&A

Investing in our business to capture efficiencies and modernize how we work and engage with customers and employees, along with targeted investments in our midstream water disposal business with a focus on continuing to de-lever the Company while opportunistically participating in OFS consolidation is our Basic story.

4

Balanced & Diversified Product Portfolio

• Well servicing and water logistics levered to production, with upside from completions
• Completions & remedial levered to new drilling and well recompletions
• Strong presence in most prolific U.S. oil basins

Improved Liquidity with No Near-Term Debt Maturities

• 2018 refinancing extends debt maturity profile with $300 million senior secured notes due 2023
• October 2018 refinancing freed up $47 million in restricted cash with new ABL facility1
• $53.7 mm in cash as of June 30, 2019, with no borrowings on the ABL currently

Core Business Strengthening

• Growing number of producing wells results in increasing maintenance work
• Well service rig is an increasingly preferred completion tool for long lateral wells
• Increasing production volumes result in increasing water disposal requirements

Capital & Strategic Initiatives Drive Increasing Efficiencies

• Investments targeting core businesses with strong return profiles
• Ongoing share repurchase initiative driving value to shareholders
• De-lever through retained cash flows and investment discipline

Basic Energy Services – At a Glance

1As of October 2, 2018

5

Extensive Footprint in Prolific Basins

2 1 6 3 4 5

Core Areas

(in descending order of 1H19 revenue) 1

Permian

2

Eagle Ford

3

Mid-Continent

4

PRB / Niobrara

5

Williston

6

California

Significant exposure to oil basins with a best-in-class Permian position representing over 40% of 1H19 revenue

6

Company Overview

Overview by Segment

• 307 workover rigs
• Leading high-spec workover fleet of 273 rigs
• Utilization of 70% in 2Q19
• Equipped for high-intensity completions activity
• Vertically-integrated cost savings and flexibility with

in-house maintenance and refurbishment capabilities

• Agua Libre Midstream (wholly-owned subsidiary):

86 SWDs with connections to an extensive third- party pipeline network

• Pipelines contributed ~32% of total Agua Libre SWD

water volumes and ~60% of Permian water volumes in 1H19

• Basic: 814 trucks and 2,764 fluid storage tanks
• 15 rental & fishing tool stores, 36 snubbing units

and 17 coiled tubing units (10 units 2” diameter or larger)

• ~479k hydraulic horsepower (“HHP”) focused on

Mid-Continent and SCOOP/STACK

% of Total Direct Margin by Activity* (1H19)

Diversified Business Across the Well Lifecycle C&R Direct Margin Breakdown

Rental and Fishing Tools1 55%

(19% of total company direct margin

Hydraulic Fracturing 11%

(4% of total company direct margin

Well Servicing 29% Water Logistics 37% Other Services <1% Completion and Remedial Services 35%

Well Services (31% of 1H19 Revenue) Water Logistics (28% of 1H19 Revenue) Completion and Remedial (40% of 1H19 Revenue)

Coiled Tubing 13%

(4% of total company direct margin

Cement & Acid 21%

(8% of total company direct margin

Note: Equipment and asset counts as of 6/30/19 *Calculated as revenue minus direct operating costs

1Includes nitrogen and snubbing

7

Production Service Businesses

Scaled Production Businesses Seeing Steady Demand

Well Service Rig Hours

Avg. # of Rigs

310*

Agua Libre Disposal Volumes

310 310

Rig hours (‘000s) Rig utilization(1) Total SWD disposal volumes (MMBbls) Pipeline disposal volume (MMBbls) Source: Company Filings *On December 31, 2017, we classified 111 rigs from our current fleet as “cold-stacked”, reducing our total active rig fleet to 310 rigs, and removed these rigs from the active rig count

1Based on a 55-hour week 2During 2Q19, two rigs were removed from the active rig count, with a third removed from the count in July.

8.1 8.4 8.6 9.3 8.0 9.0 9.2 9.9 9.8 10.0 1.6 1.2 1.6 1.9 1.6 2.1 2.5 3.2 3.1 3.2 1Q17 2Q17 3Q17 4Q17 1Q18 2Q18 3Q18 4Q18 1Q19 2Q19

*

310 421 421 421 421 310 3082

158 162 165 160 169 182 180 160 165 155 52% 54% 55% 72% 76% 82% 82% 72% 74% 70%

1Q17 2Q17 3Q17 4Q17 1Q18 2Q18 3Q18 4Q18 1Q19 2Q19

8

Operational Update

2Q19 1Q19 4Q18 Well servicing rig hours 155,200 165,000 159,600 Well servicing utilization rate (average) 70% 74% 72% Number of well servicing rigs (end of period) 308 310 310 Revenue per rig hour (excluding manufacturing) $375 $367 $368 Fluid services truck hours 403,200 424,100 438,500 Number of fluid service trucks (average) 814 818 837 Total Disposal Water Volumes (in thousands) 10,024 9,822 9,880 Pipeline Water Volumes (bbls in thousands) 3,208 3,050 3,221 Total pressure pumping HHP1 (end of period) 479,000 489,000 513,000 Coiled tubing units (end of period) 17 17 18 Rental and fishing tool stores 15 15 16

1Reduction includes 17 hydraulic pumps moved from pumping services to RAFT to support well service operations

9

Core Business Trends and Outlook

• Well Servicing utilization has averaged 72% in 1H19, holding relatively steady in a difficult

market environment

• Pricing remains solid, with revenue per rig hour up 2% sequentially in 2Q to $375
• Number of 24-hour packages remains steady in mid- to high-teens, with production maintenance

work remaining relatively stable

• Equipment rentals associated with completions and larger workovers can double or triple overall

rate paid on jobs (booked as C&R segment revenue)

• Overall volumes for Agua Libre set a record in 2Q19
• Transition of water disposal volumes to pipe continues in Agua Libre Midstream, with pipelines

contributing ~32% of total produced water volumes and ~60% of Permian produced water disposal volumes in 2Q19

• Margins for entire segment, inclusive of Basic trucks, holding steady at over 30% in 2Q
• Significant margin increase in 2Q of over 600 bps to 24% due to more efficient operations post

strategic re-alignment and cost savings

• Stable outlook for coiled tubing activity, focused on drilling out frac plugs, along with cementing,

acid and snubbing

• Segment maintenance capex running at 6%-7% of revenue, an improvement over prior periods

Well Servicing Water Logistics Completion and Remedial

Segment Detail

11

Well Servicing Fleet Overview

*On December 31, 2017, we classified 111 rigs from our current fleet as “cold-stacked”, reducing our total active rig fleet to 310 rigs, and removed these rigs from the active rig count. We have removed a further three rigs from the active count in 2019.

Fleet Distribution by Class Active Rig Class by Region

Larger, late model equipment deployed in most active basins

Fleet Metrics

• 307 Well Service Rigs
• Fleet ranges from 200HP-900HP rigs
• 273 rigs or 89% of the fleet are late model Class IV

(102’ Mast or taller / 210k lb hook load capacity or greater), Class V, and Class VI rigs

• All Class IV and V rigs are capable of longer lateral

horizontal projects

• 87% of the Class IV / V / VI and 79% of the total fleet

are Taylor brand rigs

4 27 242 28 2 4 50 100 150 200 250 Class VI Class V Class IV Class III Class II Class 1

*As of 6/30/2019

273 Class IV or Larger Rigs

*As of 6/30/2019

30 60 90 120 150 Permian Central Rocky Mtn. Gulf Coast California Class VI Class V Class IV Class III Class II Class I

12

Well Service Company of Choice

Source: Public filings, Company press releases Note: 4Q18 normal seasonal decline exacerbated by weather impact and asset moves completed in Q4

BAS operates the largest domestic fleet of active high-spec well service rigs

80% 90% 100% 110% 120% 130% 140% 150% 160% 170% 180% 1Q16 2Q 3Q 4Q 1Q17 2Q 3Q 4Q 1Q18 2Q18 3Q18 4Q18 1Q19 2Q19

Quarterly Rig Hours Indexed to 1Q16 vs Public US Peers

BAS Peer 1 Peer 2

13

Water Logistics

$0 $10 $20 $30 $40 $50 $60 $70 $80 $90 $100 1Q14 3Q14 1Q15 3Q15 1Q16 3Q16 1Q17 3Q17 1Q18 3Q18 1Q19

Millions

0% 5% 10% 15% 20% 25% 30% 35% $0 $5 $10 $15 $20 $25 $30 1Q14 3Q14 1Q15 3Q15 1Q16 3Q16 1Q17 3Q17 1Q18 3Q18 1Q19

Millions

Gross Profit Gross Margin

• Wholly-owned Agua Libre has one of the largest

networks of SWDs in the industry with a significant concentration in the Permian Basin

• Agua Libre also includes water treatment, source

water, brine water, recycling, and chemical treatment

• Basic has 814 fluid service trucks delivering

produced water to Agua Libre Midstream and other third-parties

Revenue Segment Direct Margin*

*Calculated as revenue minus direct operating costs

86 SWDs by Market Area

Rocky Mountains Mid-Continent Gulf Coast Ark-La-Tex Permian Basin

32 SWDs 5 SWDs 13 SWDs 11 SWDs 25 SWDs

Note: As of 6/30/19

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Specialized Completion & Production Services

• Support drilling, workover and production

processes

• Fishing tools and rental equipment for drilling

and workover processes, including 24-hour packages

• Coiled tubing and nitrogen services for

completion, remedial and P&A applications

• 17 coiled tubing units, including 10, 2” diameter
• r larger
• Snubbing services to allow “live-well”

completion and workover operations

• Tubular services
• Pumping services for cementing, acidizing,

squeeze-cementing (workover), fracturing and re-fracturing activities

• ~479k total HHP

C&R Revenue by Service Line

$0 $20,000 $40,000 $60,000 $80,000 $100,000 $120,000 1Q16 3Q16 1Q17 3Q17 1Q18 3Q18 1Q19

(in 000s)

Frac Cementing Acid Coil RAFT

Segment Direct Margin Progression*

12.4% 9.3% 18.5%14.2%16.4% 24.4% 31.7% 30.0% 23.8% 20.3 22.6%21.3% 17.4% 23.6%

• 15.0%
• 10.0%
• 5.0%

0.0% 5.0% 10.0% 15.0% 20.0% 25.0% 30.0% 35.0% 1Q16 3Q16 1Q17 3Q17 1Q18 3Q18 1Q19 Frac Cementing Acid Coil RAFT

Note: Equipment and asset counts as of 6/30/2019 *Calculated as revenue minus direct operating costs

Financial Overview

16

CapEx and Liquidity Update

Note: Dollars in millions

Cash Flow From Investing Activities Cash Flow From Operations

• Capital expenditures (including capital leases) for 2Q19 totaled $18.3 million
• Maintenance/sustaining expenditures were $11.2 million
• Expansion projects and other totaled $7.0 million
• At June 30, 2019, our cash balance was $53.7 million, with no borrowings on the ABL
• With fewer trucks needed due to focus on pipeline volumes, the Company is effectively de-levering through capital lease reductions,

down $34 mm from 6/30/18 to 6/30/19

• Expect to reduce capital leases by another $12 mm in 2H19, less any additions
• Ongoing $5 million board-authorized share repurchase program

($4.1) ($6.1) ($10.0) ($9.3) ($24.8) ($4.0) ($11.7)($13.1)($15.2)($13.9)($12.1) ($9.7) ($16.2)($12.1)

($100.0) ($80.0) ($60.0) ($40.0) ($20.0) $0.0 $20.0 $40.0

1Q16 2Q16 3Q16 4Q16 1Q17 2Q17 3Q17 4Q17 1Q18 2Q18 3Q18 4Q18 1Q19 2Q19

($21.0)($21.0) ($30.0) ($80.0) ($12.9) ($0.5) $15.2 $24.1 $4.5 $19.0 $27.4 $23.4 $1.8 $9.4

($100.0) ($80.0) ($60.0) ($40.0) ($20.0) $0.0 $20.0 $40.0

1Q16 2Q16 3Q16 4Q16 1Q17 2Q17 3Q17 4Q17 1Q18 2Q18 3Q18 4Q18 1Q19 2Q19 Majority of growth CapEx spent on long-lived water midstream assets

17

• A more challenging environment than a year ago
• 1H ‘19 – weak start from sub-$50/bbl oil environment and uncertainty
• 2H ‘19 – activity has not rebounded, with revenue levels likely to remain

relatively flat to down, with holiday seasonal impact potentially stronger than typical

• Margins remaining steady despite the revenue pullback
• We expect the third quarter revenue to be flat to down 4% from second

quarter levels

• All business segments should see flat to low single-digit decreases in

revenue during Q3; pricing to remain steady in core businesses

• Agua Libre Midstream expected to continue to have strong volume progression

due to solid business fundamentals

• The 24-hour rig package count to remain stable in the mid- to high-teens
• Fourth quarter revenue could see a stronger holiday/seasonal impact

than usual

• Capex spend remains flexible and can be quickly decreased to match

the market outlook

• Still expect to finish 2019 with approximately $50 million in cash on hand

2H19 Outlook

18

Basic Investment Highlights

• Diversified service offerings for U.S. oil and natural gas producers
• Modern and maintained fleet routinely outperforms on reliability
• The largest active high-spec well service rig fleet
• Wholly-owned subsidiary Agua Libre Midstream has one of the largest networks of SWDs

in the Permian and other prolific U.S. oil basins

• Providing a safe work environment is a top priority

Appendix

20

Non-GAAP Reconciliation

This presentation contains references to the non-GAAP financial measure of earnings (net income) before interest, taxes, depreciation and amortization, or “EBITDA.” This presentation also contains references to the non-GAAP financial measure of earnings (net income) before interest, taxes, depreciation, amortization, retention expense, due diligence for M&A activities, restructuring costs, and the gain or loss on disposal of assets or “Adjusted EBITDA.” EBITDA and Adjusted EBITDA should not be considered in isolation or as a substitute for operating income, net income or loss, cash flows provided by operating, investing and financing activities, or other income or cash flow statement data prepared in accordance with GAAP.

OUR LIFE’S WORK IS THE WORK OF THE WELLTM