NINE ENERGY SERVICE INVESTOR PRESENTATION AUGUST 2018 1
DISCLAIMER Forward-Looking Statements & Non-GAAP Financial Measures Certain statements in this presentation are forward-looking statements that are subject to a number of risks and uncertainties, many of which are beyond our control. All statements, other than statements of historical fact included in this presentation, regarding our strategy, future operations, financial position, estimated revenues and losses, projected costs, prospects, plans and objectives of management are forward-looking statements. When used in this presentation, the words “could,” “believe,” “anticipate,” “intend,” “estimate,” “expect,” “may,” “continue,” “predict,” “pote nti al,” “project” and similar expressions are intended to identify forward-looking statements, although not all forward-looking statements contain such identifying words. Forward- looking statements may include statements about the volatility of future oil and natural gas prices; our ability to successfully manage our growth, including risks and uncertainties associated with integrating and retaining key employees of the businesses we acquire; availability of skilled and qualified labor and key management personnel; our ability to accurately predict customer demand; competition in our industry; governmental regulation and taxation of the oil and natural gas industry; environmental liabilities; our ability to implement new technologies and services; availability and terms of capital; general economic conditions; operating hazards inherent in our industry; our financial strategy, budget, projections, operating results, cash flows and liquidity; and our plans, business strategy and objectives, expectations and intentions that are not historical. Although we believe that our plans, intentions and expectations reflected in or suggested by the forward-looking statements contained herein are reasonable, we can give no assurance that these plans, intentions or expectations will be achieved. For additional information regarding known material factors that could affect our operating results and performance, please see our final IPO prospectus, Current Reports on Form 8-K, Annual Report on Form 10-K and Quarterly Reports on Form 10- Q which are available at the SEC’s website , http://www.sec.gov. Should one or more of these known material risks occur, or should the underlying assumptions change or prove incorrect, our actual results, performance, achievements or plans could differ materially from those expressed or implied in any forward-looking statement. Readers are cautioned not to place undue reliance on forward-looking statements, which speak only as of the date hereof. All subsequent written or oral forward-looking statements concerning us are expressly qualified in their entirety by the cautionary statements above. 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, except as required by law. All information in this presentation is as of June 30, 2018 or December 31, 2017 as indicated unless otherwise noted. In addition to reporting financial results in accordance with GAAP, the Company has presented Adjusted EBITDA, Adjusted EBITDA margin and return on invested capital (ROIC). These are not recognized measures under, or an alternative to, GAAP. The Company’s management believes that this presentation provides useful information to management, analysts and investors regarding certain additional financial and business trends relating to its results of operations and financial condition. In addition, management uses these measures for reviewing the financial results of the Company. These non-GAAP measures are intended to provide additional information only and do not have any standard meaning prescribed by GAAP. Use of these terms may differ from similar measures reported by other companies. In particular, because of its limitations, Adjusted EBITDA should not be considered as a measure of discretionary cash available to use to reinvest in growth of the Company’s business, or as a measure of cash that will be ava ila ble to meet the Company’s obligations. These non-GAAP measures have limitations as an analytical tool, and you should not consider them in isolation or as a substitute for analysis of the Company’s results as reported under GAAP . Industry and Market Data This presentation includes market data and other statistical information from third party sources, including independent industry publications, government publications and other published independent sources. Although the Company believes these third party sources are reliable as of their respective dates, the Company has not independently verified the accuracy or completeness of this information. 2
COMPANY OVERVIEW
NINE COMPANY OVERVIEW OUR COMPANY • Focused on ROIC – 2018 target of 8% • 100% onshore North America with leverage to increasing completion intensity • Super lateral, deep reach capable service offering and focus • Agnostic to completion style – plug and perf (94% 1 of horizontal market) and sleeve completions (6% 1 of horizontal market) SIGNIFICANT EARNINGS POTENTIAL 100% ONSHORE NAM EXPOSURE Stage count and lateral length levered H1 2018 Revenue by segment 2 $846 Adj. Production EBITDA Solutions Adj. Margin $544 10% EBITDA 28% Margin 11% $239 Completion $60 Solutions Revenue Adj. EBITDA Revenue Adj. EBITDA 90% 2 2H 2014A Annualized ($mm) 2017 1 Spears and Associates. 2 Revenue and Adjusted EBITDA annualized by doubling second half 2014. Second half 2014 annualized information is presented for informational purposes only to reflect the impact of Crest Pumping Technologies, Dak-Tana, RedZone Coil Tubing and Big Lake Services, LLC for a full 12-month period. We believe that presenting investors with the annualized information for the six months ended December 31, 2014 provides a representative period of the profitability of our business in a high demand environment, including six months of results from the acquisitions of Dak-Tana Wireline, Crest Pumping Technologies and RedZone Coil Tubing and the results of the acquisition of Big Lake Services, LLC from August 29, 2014 4 through December 31, 2014. Such information does not reflect the actual results for 2014 had such transactions been consummated on any particular date. Adjusted EBITDA and Adjusted EBITDA margin are not measures calculated in accordance with GAAP. See appendix for an Adjusted EBITDA reconciliation; 2 Financials based on Q1 2018 and Q2 2018 revenue.
TECHNOLOGY-DRIVEN COMPLETIONS OFFERING Nine is capable of addressing 100% of the onshore wells drilled in North America, regardless of completion type PRE & POST STIMULATION HORIZONTAL LATERAL TOE OF THE WELL Large Diameter Coil + Memory Tools Long-string Cementing Offering includes tools & equipment capable of Extremely reliable in super completing super laterals (10,000 ft.+) laterals (10,000 ft.+) Proprietary Liner Hanger Tools Scorpion Composite Plug – EON Ball Drop Sleeve System – SmartStart – Strategic alliance Owned IP Strategic Alliance Coil Activated Frac Sleeve – Scorpion Dissolvable Plug – FlowGun – Owned IP Strategic Alliance Owned IP Breakthru TM Casing Flotation Device - Strategic Alliance MorphPackers Storm TM Re-frac Packer – Strategic Alliance 2018E New US HZ Wells Drilled: 20,675 1 2018E US Stage Count: 988,656 1 2018E New US HZ Wells Drilled: 20,675 1 1 Spears & Associates. 5
MULTI-WELL PADS CONCENTRATE RISK Barriers to entry continue to increase SINGLE-WELL PAD COMPLETIONS MULTI-WELL PAD COMPLETIONS LONGER LATERALS l TIGHTER SPACING l PAD DRILLING Concentration of dollars / pad + exponential impact of Non-Productive Time = highly selective customers • Total well cost: $5-$7mm • Total pad cost: $30-$42mm • ~48,000 feet of lateral length completed • ~8,000 feet of lateral length completed • 40 stages • 240 stages • 12mm pounds of sand • 72mm pounds of sand • 6,000 boe/d oil produced • 1,000 boe/d oil produced E&P Revenue/Day = ~$65,000 1 E&P Revenue/Day = ~$390,000 1 Increased capital efficiency 6 6 Source: Spears & Associates and Company Estimates, 1 Assumes IP rates of 1,000 boe/d at $65 WTI
SUSTAINABLE VALUE PROPOSITION OF SERVICE & TECHNOLOGY Service and technology drives efficiencies and lowers total cost of ownership for operators REVENUE GENERATION FOR OPERATORS 1 SERVICE/TECHNOLOGY PERFORMANCE DAYS SAVED Scorpion Composite Plug 122 plugs drilled out ~2.5 days per 6 well pad = $975K with 1 drill-bit. well 21 well pad = $3.4mm Eliminated a bit trip Toe Valves Prep and stimulate ~1 day per 6 well pad = 390k stage 1 in under 5 hours well 21 well pad = $1.4mm Nine Wireline 10+ stages per day with ~1.75 days 2 6 well pad = $683k 99% success rate per well 21 well pad = $2.4mm Illustrative Days Saved ~5.25 days 6 well pad = $2.1mm and Revenue Generated per well 21 well pad = $7.2mm 7 1 Assumes IP rates of 1,000 boe/d at $65 WTI. 2 Assumes 70 stages per well with competitive comparison at 8 stages per day.
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