Ma Mark rket O Out utlook ook 2018 North America Perforating - - PowerPoint PPT Presentation

Ma Mark rket O Out utlook

• ok

2018 North America Perforating Symposium Galveston, TX

July, 31 2018

Richard Spears & David Otte Spears & Associates

Ot Otte & & Sp Spears a s are b biase sed

Ag Agenda

Ov Overview NAM NAM O& O&G/Per erforati ting g Markets ts Back ck to the e Future? e?

Th The e worl

• rld WANT

NTS S sol

• lar

Bu But it it NEEDS oil il

Gl Glob

• bal Oil Dem

emand

80 85 90 95 100 105 2012 2013 2014 2015 2016 2017 2018 2019 2020 Million bpd

Drilling and Production Outlook, Spears & Associates

Demand grows 1-2 million bbls per day per year

OE OECD Oi D Oil I Inventori

• ries

2,300 2,400 2,500 2,600 2,700 2,800 2,900 3,000 3,100 2012 2013 2014 2015 2016 2017 2018 Million bbl

Drilling and Production Outlook, Spears & Associates

Because demand exceeds supply, oil is pulled from storage tanks

US US Oil il Productio tion

2 4 6 8 10 12 14 16 18 2012 2013 2014 2015 2016 2017 2018 2019 2020 Million bpd NGLs Crude

Drilling and Production Outlook, Spears & Associates

No more Permian pipeline space until mid 2019

Oi Oil P Pri rices

$0 $20 $40 $60 $80 $100 $120 2012 2013 2014 2015 2016 2017 2018 2019 2020 WTI Brent

Drilling and Production Outlook, Spears & Associates

Since international oil is worth more than domestic oil, US oil exports will grow

Gl Glob

• bal Ga

Gas Dem emand

50 55 60 65 70 75 80 2012 2013 2014 2015 2016 2017 2018 2019 2020 TCF OECD Non-OECD

Drilling and Production Outlook, Spears & Associates

Also – the world wants more gas…and the US has LOTS of gas

US US Gas as Deman emand

50 55 60 65 70 75 80 85 2012 2013 2014 2015 2016 2017 2018 2019 2020 bcfd

Drilling and Production Outlook, Spears & Associates

And despite solar and wind energy, the US still burns a LOT of gas

Of Offshore W Wells D Drilled

500 1,000 1,500 2,000 2,500 3,000 3,500 2012 2013 2014 2015 2016 2017 2018 2019 2020

Drilling and Production Outlook, Spears & Associates

Until international

• ffshore wakes up, US

land will remain the

• nly game in town

Her Here’ e’s how boar ards thin ink: k:

• Capex discipline assuming $60 oil
• Worries about “peak demand” and climate change
• No major technological leaps coming
• Offshore exploration takes 8-10 years for first oil
• Technology-based efficiency gains
• Therefore, focus is on SHORT TERM

NA NAM O& O&G/P /Perforating

• 2018 provides ~965 thousand Hydraulic Fracturing Stages in NAM from

the ~24,000 horizontal wells drilled. Each stage represents a “perforating

• pportunity” in a plug-n-perf completion.
• The US land wireline market is $3.8 billion in 2018 which is more than 6x

the GOM market of $.5 billion. There are ~ 500 pump-down wireline units in NAM

Com Commod

• dity

ty Pri rices

$- $1 $2 $3 $4 $5 $- $20 $40 $60 $80 $100 2014 2015 2016 2017 2018 2019 2020 NATURAL GAS SPOT WEST TEXAS INTERMEDIATE OIL

NA NAM Rig Rig Activ tivity ity

200 400 600 800 1,000 1,200 1,400 1,600 1,800 2,000 2012 2013 2014 2015 2016 2017 2018 2019 2020 US Canada

Drilling and Production Outlook, Spears & Associates

US land drilling improves…Canada, not so much

NA NAM Wells ells Drilled illed

5,000 10,000 15,000 20,000 25,000 30,000 35,000 40,000 45,000 50,000

2012 2013 2014 2015 2016 2017 2018 2019 2020

US Canada

Drilling and Production Outlook, Spears & Associates

Most of these wells are horizontal…80%

US US Later erals als

0.0 5.0 10.0 15.0 20.0 25.0 30.0 35.0 500 1000 1500 2000 2500 Q3 14 Q4 14 Q1 15 Q2 15 Q3 15 Q4 15 Q1 16 Q2 16 Q3 16 Q4 16 Q1 17 Q2 17 Q3 17 Q4 17 <6000' 6000-8000 Extended Reach Ft (millions)

DrillingInfo

Fewer lateral count but almost as many feet drilled

Qu Quarterly US Fr US Frac M c Market

19 $6,207 $7,007 $7,865 $8,300 $5,500 $4,300 $3,500 $2,900 $2,500 $2,000 $2,200 $2,500 $3,400 $4,700 $5,600 $5,800 $6,000 $6,300 $6,900 $7,100 $0 $1,000 $2,000 $3,000 $4,000 $5,000 $6,000 $7,000 $8,000 $9,000 Q1 14 Q1 15 Q1 16 Q1 17 Q1 18 MILLIONS

Worst collapse in history Expect growth to continue into 2019 as long as oil price holds!

NA NAM P Perforating M g Market

20 812 611 423 740 965 1155 1293 34 26 18 32 46 55 62 10 20 30 40 50 60 200 400 600 800 1000 1200 1400 2014 2015 2016 2017 2018 2019 2020 PERFORATIONS (MILLIONS) FRAC STAGES (THOUSANDS) Frac Stages Perforations

52 million global charges creates $500 million market

US US Reg egio ional al CH H Wir irelin eline e Mar arkets ts

21

2011 2012 2013 2014 2015 2016 2017 2018 GOM $100 $160 $195 $200 $150 $145 $165 $170 Gulf Coast $216 $249 $288 $350 $129 $63 $52 $39 West Coast $190 $196 $201 $225 $91 $53 $63 $84 Northeast $279 $282 $369 $470 $326 $222 $375 $454 Other Rockies $364 $407 $424 $500 $235 $153 $236 $291 Bakken $553 $651 $728 $870 $490 $215 $179 $225 MidContinent $523 $556 $581 $645 $290 $138 $317 $364 East Texas/Haynesville $291 $172 $107 $140 $81 $39 $112 $162 Permian Basin $282 $506 $670 $1,221 $783 $536 $1,067 $1,531

• So. Texas/Eagle Ford

$509 $693 $835 $975 $483 $205 $444 $523 $0 $1,000 $2,000 $3,000 $4,000 $5,000 $6,000

14% 40% 4% 9% 6% 8% 12% 2% 1% 4%

2018 - US Cased Hole Mkt - $3.8 B

• So. Texas/Eagle Ford

Permian Basin East Texas/Haynesville MidContinent Bakken Other Rockies Northeast West Coast Gulf Coast GOM

Permian still dominates

22

Adoption of Addressable Switch Over Time

NA NAM: A Addressable S Switch ch A Adoption

23% 77%

Switch By Type - 2014

Addressable Switch Mechanical Switch

43% 57%

Switch By Type - 2017

Addressable Switch Mechanical Switch

69% 31%

Switch By Type - 2020

Addressable Switch Mechanical Switch

Get onboard or get left behind…

Ba Back To

• The Futu

ture?

23 $0 $20,000 $40,000 $60,000 $80,000 $100,000 $120,000 $140,000 $160,000 $180,000 $0 $10,000 $20,000 $30,000 $40,000 $50,000 $60,000 $70,000 $80,000 $90,000 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 2013 2014 2015 2016 2017 2018

Global Oilfield Equipment & Service Spending

NAM Intnl OMR

Ba Back To

• The Futu

ture?

24

• Demand will continue to be driven by population growth
• Supply will be severely reduced offshore and internationally
• The Permian Basin represents almost ALL global oil growth