Magseis ASA Acquisition of Fairfields Seismic Technologies Business - - PowerPoint PPT Presentation

Magseis ASA

Acquisition of Fairfield’s Seismic Technologies Business

30th October, 2018

Disclaimer

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Transaction overview Magseis Fairfield highlights Integration and transaction considerations Introduction to Fairfield Seismic Technologies Appendix

AGENDA

Magseis to acquire Fairfield’s Seismic Technologies business for an enterprise value of USD 233 million

4

Global scale and reach Diversified and asset light business model Demonstrated track-record and solid backlog Positioned for accelerated growth

   

Creating the technology leader in the new generation of marine seismic

Magseis and Fairfield at a glance

5

• Technology leader with MASS-family of nodes and

handling systems

• Node pool: 14,000
• Q3 YTD 2018 revenue and EBITDA of USD 60.3m and

USD 15.0m, respectively

• USD 175m backlog incl. BGP award(3)
• Approximately 200 full-time employees
• Headquartered in Oslo

Technology champion

• Strong performance track-record and industry leading

client base

• Node pool: 20,700(1)
• Q3 YTD 2018 revenue and EBITDA of USD 172.4m and

USD 37.9m, respectively(2)

• USD 180m backlog incl. TGS and Schlumberger award(3)
• Approximately 230 full-time employees
• Headquartered in Houston

Pioneer and largest player with global presence

(1) As of October 2018 and excludes Z100 and Zland nodes (2) Carve-out financials for Fairfield Seismic Technologies and including WGP Group. Excludes financial impact of Libra contract. See appendix for further details (3) Backlog for contracts and projects from January 1, 2019 and onward. Fairfield backlog includes USD ~25m to be completed in 2020

Transaction overview

• Enterprise value of USD 233 million(1)
• USD 165 million in cash and issuance of 33.5 million Magseis

shares (based on USD 85 million and NOK 21.00 per share)

• USD 50 million debt financing facility committed by DNB
• USD 115 million expected to be financed by new equity
• Expected to be accretive to Magseis shareholders
• Magseis to be renamed Magseis Fairfield
• Charles “Chuck” Davison (Fairfield CEO) to be nominated as

Executive Chairman

• Per Christian Grytnes to be CEO and Tom Henrik Sundby to be

CFO

• Major existing shareholders of Magseis, representing more

than 50% of the shares outstanding, have communicated their support of the Transaction

• Closing of the Transaction is expected to take place by the end
• f Q4 2018 and is subject to regulatory approval and certain
• ther customary conditions

6

(1) In addition to the consideration payable at closing of the Transaction, Magseis will issue 18.25 million 5-year warrants to Fairfield Industries and provide certain earn-out rights related to a project in the Middle East.

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Transaction overview Magseis Fairfield highlights Integration and transaction considerations Introduction to Fairfield Seismic Technologies Appendix

AGENDA

The OBS pioneer, with 40 years of innovation, strong performance track-record and industry leading client base

Long history with key milestones

• Fairfield Seismic Technologies is a global, leading provider of

marine ocean bottom nodal seismic systems

• First deepwater nodal survey performed in 2005 and has since

developed a leading industry position

• Owns the proprietary, patented Z-Technology
• In-house R&D, engineering and manufacturing
• Performed 45 OBS surveys(1)
• Extensive portfolio of IP for both OBS, land and PRM solutions
• Headquartered in Houston, with approximately 230 full-time

employees and 250 contracted personnel

• A division of Fairfield Geotechnologies, which also engages in

data licensing and data processing / geoscience

Overview

ZXPLR Z700 Z3000 Z100

(1) Does not include repeat surveys

1974 1974

Formed through merger of Aquatronics and Select International

1977 1977

Introduced Telseis for transition zone and shallow-water surveys

1990 1990

1st large scale 3D spec in Gulf of Mexico

1998 1998

Launched BOX marine and land seismic nodes to replace Telseis

2005 & 2005 & 2009 2009

Launched Z3000 and Z700

2010 2010

Launched 1st Gen Zland

2014 2014

Launched 2nd Gen Zland

2015 2015

Launched Z100

2015 2015 - 2017 2017

Reorganization to asset light business model

2016 & 2016 & 2017 2017

Launched ZXPLR and ZLOF

2018 2018

Acquired WGP Group ZMobile 8

Three attractive and complementary businesses

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Data Acquisitions Systems WGP Group

• Traditional Data Acquisition projects using

ZXPLR, Z3000 and Z700 technology offerings

• Employs and contracts highly trained acquisition

crews

• Asset-light vessel contracting strategy
• Significant installed base – key to repeat surveys
• Can be operated in challenging shallow waters,

as well as around deep water production facilities

Fairfield Seismic Technologies

• Systems sales and rentals of offshore and land-

based nodes

• Offering early version technologies such as

Zland, Z100 and Z700

• Zland and Z100 are offered for sale
• Z700 is offered for rental
• In-house R&D, engineering, assembly and

testing

• Significant sales growth last two years with

attractive margins on sales and rentals

• Leading provider of portable modular source

systems and a wide range of services, including 4D life of field seismic, seabed seismic and hi-res 3D seismic

• Ideal for permanent reservoir monitoring
• Two large contracts with Equinor and

ConocoPhillips, opportunity for global expansion

• Based in the United Kingdom and acquired by

Fairfield in January 2018

• Draws on the Fairfield expertise and synergistic

capabilities

Represents share of 2017 revenue. Carve-out financials for Fairfield Seismic Technologies including WGP revenue. See appendix for further details

57% 32% 11%

Strong activity in 2018 across all business segments

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• Expanded from a two crew
• peration to three in late 2017
• All three crews fully booked

through the year

• The Z700 fleet is booked until

August 2019 on a project in the Middle East

• Since introduction to market,

ZXPLR has been fully booked on projects in Gulf of Mexico Awarded contracts in 2018(1)

10 8 7

2 4 6 8 10

Various universities El Nusa

(1) For more detailed information on awarded contracts see appendix

Data Acquisitions Systems WGP Group Commentary

# of awarded contracts

Transformation into an asset light company completed, robust and improving underlying financials

11

• Transformed business following the oil

price downturn:

• New CEO in mid 2015
• Asset light business model
• Restructured long-term vessel leases

and sold all ships

• Reduced employee headcount
• Strong growth in revenues year-to-date in

2018 on the back of positive industry fundamentals and addition of ZXPLR crew

Commentary

162,6 172,4 2017 Q3 YTD 2018

EBITDA (USDm)

43,8 37,9 Q3 YTD 2018 2017

Capex (USDm) Revenue (USDm)

34,7 9,0 4,6 5,2 2017 14.3 39.2 Q3 YTD 2018

Note: Carve-out financials for Fairfield Seismic Technologies and including WGP Group. Excludes financial impact of Libra contract. See appendix for further details

Growth capex Maintenance capex

12

Transaction overview Magseis Fairfield highlights Integration and transaction considerations Introduction to Fairfield Seismic Technologies Appendix

AGENDA

Creating the technology leader in the new generation of marine seismic

13

Globa bal s l scale a le and d reach Diversif ified ied a and d asset et l ligh ght b busine iness model del Demonstrated ed track-reco ecord and solid b id backlo log Posit itio ioned f d for acceler elerated ed g growth

• Global reach and presence through complementary geographical footprints
• Combined client base includes the world’s largest E&P companies
• Industry-leading nodal inventory and multiple crews give significant scale advantages
• Increased focus on role as technology provider, with a scalable and asset light strategy

centered around efficient nodal technologies

• State-of-the-art technology platform with complementary IP, providing ability to meet client

requirements, regardless of geography, water depth and acquisition methodology

• Excellent operational track record with demonstrated capabilities across all segments
• Significant backlog provides near-term visibility and enables sound integration
• Strong cash flow generation from existing operations
• Continued shift towards OBS on the back of client need of high-quality data, technological

improvements and reduced costs

• Leading position in the next generation of marine seismic with customer relations, premier

technology, flexible business model and financial ability to capitalize on growth opportunities 1 2 3 4

Global presence with combined client base comprising the world’s largest E&P companies

14

Global footprint through local presence enables enhanced node utilization New opportunities from combined client base

Magseis Fairfield historical operations

1

Scalable and asset light strategy centered around efficient nodal technologies

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Node technology pool

Cus ustomer r relationshi hips and nd expe perienc nce f from da data acqui quisitions ena nabl ble s suc uccessful ul t techn hnology s segment

Ability to meet client requirements, regardless of geography, water depth and acquisition methodology

Asse sset l light Scalabl ble Technology Data acquisition

2

Excellent operational track record with demonstrated capabilities across all segments

16

Operational experience

Magseis Fairfield

Suite of technologies Acquisition systems Track record

Small and flexible node for all water depths and deployment methods Technology pioneers with extensive intellectual property for nodal technology Industry leading technology offering across all segments Proven record of high quality data and superior reliability of nodes and automated handling system Recognized nodal pioneers with superior performance, safety, reliability and customer relationships Highly regarded brand and reputation with clients – known for delivering superior and consistent quality Flexible node for cable, ROV and rope from shallow water to ultra deep deployment Most extensive experience in land, shallow water and ultra deep Ability to service all client requirements Continued operations and repeat surveys Established history of superior

• perational performance

Most extensive experience in the industry across various geographies and project types

3

Significant backlog provides near-term visibility and strong expected cash flows

17

Combined backlog ensures significant coverage in 2019

175 330 500 155 170 Combined 2019 backlog Magseis 2019 backlog Fairfield 2019 backlog 2019 revenue guidance 2019 "gap to close"

Solid historical EBITDA margins(1)

3

35,4% 24,9% 27,0% 22,0% Q3 2018 YTD 2017 Magseis Fairfield

2019 revenue guidance: USD 500 million Preliminary 2019 maintenance and R&D capex guidance: USD 15 million Preliminary 2019 growth capex guidance: USD 50 million

Positive industry trends

(USDm)

(1) Fairfield figures exclude impact of Libra contract

Continued shift towards OBS on the back of technological improvements and reduced costs

18

Data quality

1960s ~1990 2005-10 Today

Exploration Field Development and IOR

Narrow Azimuth Multi Azimuth Wide Azimuth

Full Azimuth

3D streamer OBS OBS industry drivers

IOR f focus Increa easin ing g g geolo logic ical l focus Techno nolo logy gy dev evel elopmen ent Customer er c confiden ence e and a adoption    

4

Magseis Fairfield positioned for accelerated growth

19

Magseis Fairfield is competitive on size and scale… …while offering a differentiated product through an attractive business model

50 100 150 500 200 550 450 600 Revenue H1 18 (USDm) Magseis Fairfield

• Superior image quality



• Unique access in obstructed areas



• Enables easy repositioning and continuous

recording



• Asset light and more flexible business model



4

Taking pole position in next generation seismic with capabilities to capitalize on future opportunities

20

Positive sentiment for OBS and overall marine seismic industry

0% 5% 10% 15% 20% 400 800 1 200 1 600 2 000 2 400 2016 2015 2012 2009 2010 2011 2014 2013 2017 2018E 2019E 2020E 2021E OBS services (USDm) OBS services as share of marine seismic industry

Source: Arkwright (September 2017) and Rystad (January 2017)

1

Further increase in share of marine seismic industry

2

Execute on growth strategy to capture attractive OBS outlook

4

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Transaction overview Magseis Fairfield highlights Integration and transaction considerations Introduction to Fairfield Seismic Technologies Appendix

AGENDA

Magseis Fairfield integration and corporate structure

22

Integration strategy

• Complementary geographical and technology focus enables a

light touch approach to secure ongoing momentum in both entities

• Clear organizational structure with Eastern (Magseis) and

Western (Fairfield) as operational divisions with P&L responsibility

• Western Hemisphere Operations will cover the Americas with

legacy Fairfield nodes. Two to three parallel operations mainly with ZXPLR nodes

• Eastern Hemisphere Operations will cover EMEA and APAC with

two to three parallel operations with mainly MASS nodes

• Technology Organization will cover technology development as

well as sales and rental of node systems

• Leverage best practices and common processes

Corporate structure of the combined company

DATA A ACQ CQUISI SITION SA SALES, S, R RENTAL & & SERV RVICE CEO Eastern Hemisphere Operations Western Hemisphere Operations Technology

Transaction details

23

Cons nsid ider eratio ion t to Fairfie ield ld

• Enterprise value of USD 233 million on a cash and debt free basis with normalized working capital payable at closing of the transaction
• USD 165 million in cash and issuance of 33.5 million Magseis shares(1)
• In addition to the consideration payable at closing of the Transaction, Magseis will issue 18.25 million 5-year warrants to Fairfield Industries and

provide certain earn-out rights related to a project in the Middle East(2)

Fina nanc ncin ing

• Significant financing package in place:
• USD 50 million debt financing facility committed by DNB
• USD 115 million remaining cash consideration and additional funding established in conjunction with the Transaction expected to be

financed by new equity

• When deciding on the total amount of equity being raised, Magseis will ensure to maintain a substantial liquidity buffer and solid balance sheet

with limited leverage to provide a robust basis for further growth and investments

Other er k key ey aspects

• Major existing shareholders of Magseis, representing more than 50% of the shares outstanding, have communicated their support of the

Transaction

• Closing of the Transaction is expected to take place by the end of Q4 2018 and is subject to regulatory approval, Magseis being able to raise the

required funds, and certain other customary conditions, such as completion of confirmatory due diligence and no material breach of warranties

Corporate matters

• Magseis to be renamed Magseis Fairfield
• Charles “Chuck” Davison (Fairfield Geotechnologies CEO) to be nominated as Executive Chairman of the combined company
• Per Christian Grytnes to be CEO and Tom Henrik Sundby to be CFO
• Kevin Crosby (Fairfield Geotechnologies CFO) to be nominated as Chief Integration Officer for a period of 6 to 9 months

(1) Number of shares issued to Fairfield calculated based on USD 85 million and NOK 21.00 per share. The consideration shares are subject to a customary lock up undertaking with Magseis for 18 months from the closing date (2) The exercise price for the warrants will be set at 150% of the lower of i) the Subscription Price in the contemplated equity offering and ii) the highest of NOK 21.00 and 80% of the Subscription

• Price. The warrants can be exercised at any time in the 5 year period. Any share issued on the basis of the warrants will be subject to a customary lock-up undertaking with Magseis for a period
• f 6 months from the date the warrant is exercised

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Key milestones towards closing of the transaction

November 2018 December 2018

Information Memorandum published late November Investor roadshows and marketing activities Financing commitments expected to be secured before end-November Competition authority approvals Extraordinary General Meeting expected to occur early December Closing of transaction

Expec ected b before D e Dec ecem ember Expe pected a d around und year-end nd

Announcement Confirmatory due diligence

25

The only listed pure-play OBS investment opportunity

The technology leader in the new generation of marine seismic

Glo lobal s l scale a and r reach Diversified a and a nd asset l light b bus usine ness m mode del De Demonstrated t track-record a and s solid id b backlo log Positioned ed for a accel eler erated ed g growth

26

Transaction overview Magseis Fairfield highlights Integration and transaction considerations Introduction to Fairfield Seismic Technologies Appendix

AGENDA

Develop and operate proprietary technology to be applied in seismic acquisition operations Headquarter in Oslo, Norway with

• ffices in Bergen, Stockholm,

Singapore and Houston ~200 employees of which ~50%

• ffshore

Geophysical company founded in 2009 with first operation in 2013 OSE:MSEIS Market Cap: USD ~160 million Revenue Guidance 2018: USD 100m Node Pool: 14,000 MASS I

Magseis corporate snapshot

27

$

Source: Magseis

Magseis corporate snapshot

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Business model Key goal By 2020

• Increase addressable

market, efficiencies &

• perational excellence
• Technology champion –

nodes, handling systems and source

• Efficient nodes
• Modular handling systems
• Modular deployment

systems – cable, ROV and & rope

• Vessels @ opportunity
• Node pool of >30 000

nodes

• 4-6 containerised handling

and deployment systems

• Deliver leading source

technology

Developing Magseis into the OBS industry leader

Source: Magseis

Fairfield Seismic Technologies: product inventory and specifications

29

ZXPLR Z700 Z3000 Z100(1) Depth (Meters) 4000 700 3000 300 Diameter 15.1 in 17 in 21 in 12 in Height (w/o cleats) 4 in 4.3 in 9.5 in 3.5 in Storage Space 1128 in3 1734 in3 4410 in3 580 in3 Weight (air) 50 lbs 65 lbs 220 lbs 27 lbs 2ms Acq Time 100 days 60 days 200 days 30 days Business Model Acquisition Acquisition & Rental Acquisition Sale Current Inventory 3,500 15,200 2,000

• (1) Built and sold 9,500 Z100 units over the life of the product

Fairfield Seismic Technologies: awarded contracts in 2018

30

Data Acquisitions Systems WGP Group

Project Technology Customer Middle East Z700 NOC Mad Dog ZXPLR BP Flambeau Z700 Shell SECC Z700 EOG Stampede ZXPLR Hess BHP Western GOM 3D ZXPLR BHP Golden Eagle Z700 Nexen Mad Dog VSP ZXPLR BP Libra Z3000 Petrobras Sparse Node ZXPLR TGS Project Technology Customer Z100 sale Z100 BGP Z100 sale Z100 El Nusa Z700 rental Z700 BGP Zland lease Zland Geokinetics Zland lease Zland Dawson Zland sale Zland Nodal Seismic Zland sale Zland HD Geophys. Zland sale Zland Various universities Project Technology Customer Sverdrup source & PRM WGP kit Equinor Ekofisk WGP kit CP Snorre PRM WGP kit Equinor Grane PRM WGP kit Equinor Equipment purchase WGP kit Equinor Systems installation WGP kit Equinor R&E source WGP kit Equinor

(1) Contract excluded from transaction

(1)

31

Fairfield Seismic Technologies and WGP selected financial information

Non-current assets and working capital (USDm)(1)(2) Selected earnings figures and capex (USDm)(1)

(1) Entities to be acquired comprise the Acquisition and Systems divisions (adjusted for certain activities which will not be part of the transaction) to be carved out of Fairfield Industries Incorporated and 100% of the shares of WGP Group in the UK. The Acquisition and Systems division carve out information has been prepared by Fairfield management based on Fairfield's accounting principles and US GAAP. The WGP information has been prepared by Fairfield management based on WGP's accounting principles and IFRS. The full year 2017 information for the carved out entities has been extracted from the audited financial statements of Fairfield Industries Incorporated. The information for the 9 months to 30 September 2018 has been extracted from unaudited management accounts. Fairfield acquired WGP through an asset acquisition on 1 January 2018. Information for WGP for 2017 has been extracted by Fairfield management from the unaudited management accounts of the previous owner. Carve out information may not reflect what the results of operations and financial position would have been had the carved

• ut entities been separate, stand-alone entities during the periods presented. Further, this information may not be indicative of the results of operations and financial position of the combined

company in the future (2) Working capital = current assets (excluding cash balances) less current liabilities (excluding interest bearing debt).

FY 2017 2017 Q3 2018 Y 3 2018 YTD Revenue 162.6 172.4 EBITDA 43.8 37.9 EBIT 6.5 14.6 Growth capex 34.7 9.0 Maintenance capex 4.6 5.2 Total capex 39.2 14.3

• Dec. 31 2017

31 2017

• Sep. 30 2018

30 2018 Equipment 65.1 69.1 Intangible assets 10.5 11.2 Total non-current assets 75.6 80.3 Working capital 26.2 25.8