barclays ceo energy-power conference - solaris oilfield/media/files/s... · 9/7/2017  · barclays...

23
Barclays CEO Energy-Power Conference September 7, 2017

Upload: others

Post on 20-Jun-2020

2 views

Category:

Documents


0 download

TRANSCRIPT

Page 1: Barclays CEO Energy-Power Conference - Solaris Oilfield/media/Files/S... · 9/7/2017  · Barclays CEO Energy-Power Conference September 7, 2017. Disclaimer. 1 Forward-Looking Statements

Barclays CEO Energy-Power ConferenceSeptember 7, 2017

Page 2: Barclays CEO Energy-Power Conference - Solaris Oilfield/media/Files/S... · 9/7/2017  · Barclays CEO Energy-Power Conference September 7, 2017. Disclaimer. 1 Forward-Looking Statements

Disclaimer

1

Forward-Looking Statements

The information in this presentation includes “forward-looking statements.” 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,” “project” and similar expressions are intended to identify forward-looking statements, although not all forward-looking statements contain such identifying words. These forward-looking statements are based on Solaris’ current expectations and assumptions about future events and are based on currently available information as to the outcome and timing of future events. When considering forward-looking statements, you should keep in mind the risk factors and other cautionary statements described under the heading “Risk Factors” included in Solaris’ final prospectus dated May 11, 2017, filed in connection with its initial public offering pursuant to Rule 424(b) under the Securities Act of 1933, as amended, with the Securities and Exchange Commission on May 15, 2017. We caution you that these forward-looking statements are subject to all of the risks and uncertainties, most of which are difficult to predict and many of which are beyond our control, incident to the transportation, storage and delivery of proppant. These risks include, but are not limited to, the level of domestic capital spending by the oil and natural gas industry, natural or man-made disasters and other external events that may disrupt our manufacturing operations, volatility of oil and natural gas prices, changes in general economic and geopolitical conditions, large or multiple customer defaults including defaults resulting from actual or potential insolvencies, technological advancements in well service technologies, competitive conditions in our industry and our ability to fully protect our intellectual property rights. Should one or more of these risks or uncertainties occur, or should underlying assumptions prove incorrect, our actual results and plans could differ materially from those expressed in any forward-looking statements.

You are cautioned not to place undue reliance on any forward-looking statements, which speak only as of the date of this presentation. Except as otherwise required by applicable law, we disclaim any duty to update and do not intend to update any forward-looking statements, all of which are expressly qualified by the statements in this section, to reflect events or circumstances after the date of this presentation.

This presentation includes financial measures that are not presented in accordance with generally accepted accounting principles ("GAAP"), including EBITDA and Adjusted EBITDA. While management believes such measures are useful for investors, they do not have any standardized meaning and are therefore unlikely to be comparable to similar measures presented by other companies. The presentation of non-GAAP financial measures should not be used as a replacement for, and should not be considered in isolation from, financial measures that are in accordance with GAAP. Please see the Appendix for reconciliations of those measures to comparable GAAP measures.

Industry and Market Data

This presentation has been prepared by Solaris and includes market data and other statistical information from third-party sources, including independent industry publications, government publications or other published independent sources. Although Solaris believes these third-party sources are reliable as of their respective dates, Solaris has not independently verified the accuracy or completeness of this information. Some data are also based on the Solaris’s good faith estimates, which are derived from its review of internal sources as well as the third-party sources described above.

Trademarks and Logos

Solaris owns or has rights to various trademarks, service marks and trade names that is uses in connection with the operation of its business. This presentation also contains trademarks, service marks and trade names of third parties, which are the property of their respective owners. Solaris’ use or display of third parties’ trademarks, service marks, trade names or products in this presentation is not intended to and does not imply, a relationship with Solaris or an endorsement or sponsorship by or of Solaris. Solely for convenience, the trademarks, service marks and trade names referred to in this presentation may appear without the ©, TM or SM symbols, but the omission of such references is not intended to indicate, in any way, that Solaris will not assert, to the fullest extent under applicable law, its rights or the right of the applicable owner of these trademarks, service marks and trade names.

Page 3: Barclays CEO Energy-Power Conference - Solaris Oilfield/media/Files/S... · 9/7/2017  · Barclays CEO Energy-Power Conference September 7, 2017. Disclaimer. 1 Forward-Looking Statements

Company Overview

2

Page 4: Barclays CEO Energy-Power Conference - Solaris Oilfield/media/Files/S... · 9/7/2017  · Barclays CEO Energy-Power Conference September 7, 2017. Disclaimer. 1 Forward-Looking Statements

Quarterly System Revenue Days (2)

Growing market share and earnings, but we are not dependent on increasing sand margins

Growth Driven by Secular Trends

3

Solaris facilitates increased per well and industry wide proppant consumption levels...

...Yet uniquely positioned to capitalize on an oversupplied sand market

174

645

1,436

3,375

2Q 14 2015 Average 2016 Average 2Q 17

Innovate logistics solutions that save our customers money and time

More storage, smaller footprint, simplified operations and safer well sites

Real-time inventory data available in the cloud

Customer adoption and secular trends driving growth

Mobile Proppant Management System

54 patent protected Mobile Proppant Management Systems deployed today ~ 15% market share (1)

Facilitate flow and transportation flexibility...not selling a commodity via owned channels

Vertically integrated manufacturing

(1) Management estimates.(2) Revenue days defined as the combined number of days Solaris’ Systems earned revenues.

Page 5: Barclays CEO Energy-Power Conference - Solaris Oilfield/media/Files/S... · 9/7/2017  · Barclays CEO Energy-Power Conference September 7, 2017. Disclaimer. 1 Forward-Looking Statements

Mobile Proppant Management Systems addresses challenges related to the transportation, storage and delivery of proppant

Manufacture and rent Systems directly to leading E&P operators and pressure pumpers

−> 90% of fleet deployed to customers with multiple Systems

System users include leading EOG Resources, Inc., Devon Energy, Apache Corporation and ProPetroServices

Demand for Systems exceeds our fleet size

− Expect to increase fleet to 68-72 Systems by end of 2017

Well Site Systems

Leading Independent Provider of Proppant Logistics Solutions

4

Mobile Fleet Active in Key Basins

SCOOP / STACK

Systems 6 (11%)

Permian Basin

Systems 31 (57%)

Haynesville

Systems 5 (9%)

Eagle Ford

Systems 11 (20%)

Marcellus / Utica

System 1 (2%)

Kingfisher Transload Facility

Solaris Manufacturing Facility

Expansion Into Transloading Logistics

Developing Kingfisher Facility

− High-capacity, unit train capable transload facility in Kingfisher, Oklahoma supporting STACK/SCOOP

− Underpinned with seven-year contract with leading STACK E&P operator

Integrated supply chain information from terminal to wellhead utilizing our Mobile Proppant Management Systems and our real-time inventory and throughput management application, PropView™

− Expect to deploy additional Mobile Proppant Management Systems to the STACK/SCOOP

Page 6: Barclays CEO Energy-Power Conference - Solaris Oilfield/media/Files/S... · 9/7/2017  · Barclays CEO Energy-Power Conference September 7, 2017. Disclaimer. 1 Forward-Looking Statements

Solaris Mobile Proppant Management System Video

5

Page 7: Barclays CEO Energy-Power Conference - Solaris Oilfield/media/Files/S... · 9/7/2017  · Barclays CEO Energy-Power Conference September 7, 2017. Disclaimer. 1 Forward-Looking Statements

Market Drivers

6

Page 8: Barclays CEO Energy-Power Conference - Solaris Oilfield/media/Files/S... · 9/7/2017  · Barclays CEO Energy-Power Conference September 7, 2017. Disclaimer. 1 Forward-Looking Statements

5%

15%

>40%15%

95%

70%

2014 Q2 2017 2018+

Market Share Based on U.S. Frac Fleet SizeFraming Solaris’ Market Opportunity

7

Note: Management estimates. All numbers are approximations. Referenced “Future” column represents management’s view of potential future market share.

“Sand King” type solutions are industry standard

Several new technology solutions designed in 2013-2014

Solaris and other new technologies take market share in the downturn

New product category created with independent proppant logistics offerings

Solaris and other new technologies take significant market share

Drivers

−Completion designs

− “Manufacturing” style operations; i.e. pad drilling

− HS&E / OSHA compliance

>95%

<

Historical Current Future

Other New Technologies Sand King Type Solution

>40%

<20%

Page 9: Barclays CEO Energy-Power Conference - Solaris Oilfield/media/Files/S... · 9/7/2017  · Barclays CEO Energy-Power Conference September 7, 2017. Disclaimer. 1 Forward-Looking Statements

Recovering commodity prices have driven increased drilling and completion activity

E&P operators have increasingly focused on using larger amounts of proppant in an effort to drive single-well estimated ultimate recovery rates and returns

Trend of increasing proppant per lateral foot expected to continue

Proppant demand increases expected to amplify supply-chain bottlenecks, increase cost and add complexity to last mile logistics

We provide solutions for the industry’s increasing proppant usage and intensity

Increases in equipment demand and acute proppant scarcity drive demand for our business

New U.S. Horizontal Wells(1)

20.2

23.7

16.0

8.210.5

12.7

15.8

2013 2014 2015 2016 2017E 2018E 2019E

New U.S. Horizontal Wells (thousands)

58

74

54

36

65

85

113

0

1,000

2,000

3,000

4,000

5,000

6,000

7,000

8,000

0

20

40

60

80

100

120

2013 2014 2015 2016 2017E 2018E 2019E

Proppant Demand (Millions of Short Tons)

Proppant per Horizontal Well (Short Tons)

Increasing Total and Per Well Proppant Demand(1)

Proppant Demand Continues to Increase

8(1) Spears & Associates’ “Hydraulic Fracturing Market, 2005-2017”, published Fourth Quarter 2016.

Proppant Short Tons per

Well

Millions of Short Tons (Total Demand for Proppant)

Page 10: Barclays CEO Energy-Power Conference - Solaris Oilfield/media/Files/S... · 9/7/2017  · Barclays CEO Energy-Power Conference September 7, 2017. Disclaimer. 1 Forward-Looking Statements

Illustrative 20 Million lb. Completion Requirements

Proppant Logistics are Complex and Prone to Bottlenecks

9

2.5 million lbs of storage capacity Assuming 4 day completion, System turned 2x every 24

hours Storage at demand center reduces down time for waiting on

sand

High capacity transloads with ability to unload unit train in 24 hours

Proppant transloaded into storage facility (large silos) or directly to truck

RAIL TO BASIN

TRANSLOAD STORAGE FACILITY

DELIVERY TO THE WELLSITE

WELLSITE STORAGE AND DELIVERY

SAND MINE

Proppant loaded into unit train and delivered to basin

Proppant mined and stored in mine storage (silos or domes)

Highest variability in supply chain

Subject to congestion and bottlenecks

~10,000 tons of sand

~100 railcars

~10,000 tons of throughput

~400 truck loads

~2.5 million lbs / 6 silos

Solaris Provides Key Buffers Along Supply Chain

Page 11: Barclays CEO Energy-Power Conference - Solaris Oilfield/media/Files/S... · 9/7/2017  · Barclays CEO Energy-Power Conference September 7, 2017. Disclaimer. 1 Forward-Looking Statements

Secular Trends and Adoption Driving Solaris’ Increased Activity Levels

10Source: Baker Hughes North America Rotary Rig Count and U.S. Energy Information Administration.Note: Revenue days defined as the combined number of days Solaris’ Systems earned revenues. U.S. Rig Count and WTI represents average figures throughout stated period.

174 309

424 446

687 696 750

1,104 994

1,512

2,135

2,627

3,375

100.0% 102.8% 102.9%

73.9%

49.0% 46.8%

40.7%

29.8% 22.8% 25.9%

31.8%

40.1%

48.4%

100.0%

94.3%

70.8%

47.3%

56.0%

45.3%

40.7% 32.5%

44.0% 43.6% 47.6%

50.1%

46.8%

2Q 3Q 4Q 1Q 2Q 3Q 4Q 1Q 2Q 3Q 4Q 1Q 2Q

Solaris Proppant System Revenue Days

201620152014 2017

Revenue Days

Key

Indexed WTIIndexed U.S. Rig Count

Rig count: 1,852WTI: $103.10

Page 12: Barclays CEO Energy-Power Conference - Solaris Oilfield/media/Files/S... · 9/7/2017  · Barclays CEO Energy-Power Conference September 7, 2017. Disclaimer. 1 Forward-Looking Statements

Solaris’ Solutions to Industry’s Challenge

11

Page 13: Barclays CEO Energy-Power Conference - Solaris Oilfield/media/Files/S... · 9/7/2017  · Barclays CEO Energy-Power Conference September 7, 2017. Disclaimer. 1 Forward-Looking Statements

Supply chain buffer

Greater storage and proppant accessibility

More accessible unloading points

Enclosed system with fewer moving parts and increased dust suppression

Efficient use of space

Fully automated

Real-time data

Inadequate on-site inventory and offloading capacity

Complicated operations and expansive well site footprint

Opaque inventory information and limited communication

HS&E issues, including silica dust

Bringing Order to Chaos

12

Solaris’ Mobile Proppant Management System

Issues with Traditional Offerings

Our Solution

Traditional Sand Kings

Rolling Storage

Solaris’ Solution

Page 14: Barclays CEO Energy-Power Conference - Solaris Oilfield/media/Files/S... · 9/7/2017  · Barclays CEO Energy-Power Conference September 7, 2017. Disclaimer. 1 Forward-Looking Statements

PropViewTM: Real-Time Supply Chain Mobile AppSeamless Rig-Up and Integration

Simple, modern, fully-integrated control system

High volume input and output capacity

Mobile and flexible equipment

High Capacity Throughput

Elegant Solution to a Complicated Problem

13

Supply Chain Savings

Increased on-site inventory / access to inventory

Increased truck offloading points

Smaller truck fleet size required to deliver proppant

Decreased truck demurrage

Well Site Savings

Increased inventory stage execution efficiency

Built-in dust control

Lower labor requirements

Reduced fuel requirements

Proppant inventory loss savings

Increased asset utilizationReal-time inventory levels and consumption rates

[Redacted customer well name]

Page 15: Barclays CEO Energy-Power Conference - Solaris Oilfield/media/Files/S... · 9/7/2017  · Barclays CEO Energy-Power Conference September 7, 2017. Disclaimer. 1 Forward-Looking Statements

Kingfisher FacilityStrategic Expansion into Transloading Logistics

14

Central to Current STACK / SCOOP Rig Activity Proximity to Operators’ Acreage Will Reduce Supply Chain Costs

Development of a New High-Capacity Transload Facility Long-Term Contract with Leading STACK E&P Operator

The first independent, high-speed, unit-train capable transload facility dedicated to the STACK/SCOOP

300 acres directly on the Union Pacific Railroad

First proppant delivery scheduled for January 2018

Within 50 miles of > 75 active horizontal rigs (1)

Seven-year agreement

Minimum quarterly proppant volume commitment

Rail-to-truck operations commencing January 2018; Dedicated unit train loop and 30,000 tons of silo storage commencing August 2018

Operator is a current Solaris Mobile Proppant Management System customer

Source: Baker Hughes North America Rotary Rig Count. Source: 1Derrick.

100 mile radius

50 mile radius

100 mile radius

50 mile radius

(1) Source: IHS Enerdec.

Page 16: Barclays CEO Energy-Power Conference - Solaris Oilfield/media/Files/S... · 9/7/2017  · Barclays CEO Energy-Power Conference September 7, 2017. Disclaimer. 1 Forward-Looking Statements

Financial Performance

15

Page 17: Barclays CEO Energy-Power Conference - Solaris Oilfield/media/Files/S... · 9/7/2017  · Barclays CEO Energy-Power Conference September 7, 2017. Disclaimer. 1 Forward-Looking Statements

$5.0

$7.6

$13.9

4Q 16 1Q 17 2Q 17

$7.3

$10.3

$13.4

4Q 16 1Q 17 2Q 17

16

Continued Growth in Solaris’ Financial Performance

Quarterly Adjusted EBITDA and Margin ($ in Millions)

Quarterly Revenue and Revenue Days ($ in Millions)

$4.1

$6.1

$7.5

4Q 16 1Q 17 2Q 17

Capex ($ in Millions)

Q2 2017 Performance Commentary

57% 59%Margin: 56%

2,135 2,627Revenue Days: 3,375

2Q 2017 revenue and Adjusted EBITDA grew 30% and 22%, respectively, versus 1Q 2017

Growth in revenue and Adjusted EBITDA are primarily attributable to an increase in revenue days

− 2Q 17 revenue days grew to 3,375, a 28% sequential increase

Added 9 systems to the fleet in 2Q 2017

− Ended quarter with 44 systems in fleet; system count increased by >90% since 2Q 2016

30 35Ending

Fleet Size:

44

Page 18: Barclays CEO Energy-Power Conference - Solaris Oilfield/media/Files/S... · 9/7/2017  · Barclays CEO Energy-Power Conference September 7, 2017. Disclaimer. 1 Forward-Looking Statements

17

Attractive Adjusted EBITDA Margin vs. Peers

First Half 2017 Adjusted EBITDA Margin

Source: Company filings.Note: Note: See Appendix for Solaris EBITDA reconciliation.

57.3%

33.4%

20.8%

12.9% 12.7% 7.1% 3.8%

(20.0%)

SOI MINI CLB WEIR FTI NOV HTG FET

Page 19: Barclays CEO Energy-Power Conference - Solaris Oilfield/media/Files/S... · 9/7/2017  · Barclays CEO Energy-Power Conference September 7, 2017. Disclaimer. 1 Forward-Looking Statements

18

Strong Balance Sheet and Financial Flexibility

Total Debt / Capitalization(1)

Source: Company filings. (1) Total debt / capitalization as of latest reported filing, shown pro forma where applicable.

Net cash position, with >$90 million of liquidity as of end of Q2 2017

High return on invested capital and strong cash flow generation as a result of capital efficient business model

− System maintenance is minimal and is primarily expensed

Conservative financial philosophy provides flexibility

− Strong liquidity and net cash position

− Returns-focused business model

Active focus on operational excellence and cost efficiencies

Ownership and control over manufacturing process

– 2.3%

18.6% 20.3% 21.8%

46.0% 53.7%

60.7%

SOI HTG NOV FET FTI WEIR MINI CLB

Average: 30.9%

Page 20: Barclays CEO Energy-Power Conference - Solaris Oilfield/media/Files/S... · 9/7/2017  · Barclays CEO Energy-Power Conference September 7, 2017. Disclaimer. 1 Forward-Looking Statements

Appendix

19

Page 21: Barclays CEO Energy-Power Conference - Solaris Oilfield/media/Files/S... · 9/7/2017  · Barclays CEO Energy-Power Conference September 7, 2017. Disclaimer. 1 Forward-Looking Statements

20

Ticker SOI

Exchange New York Stock Exchange

Share Price (1) $14.75

Diluted Shares Outstanding (1)(2) ~44.2 million

Market Capitalization ~$650 million

Market Summary

(1) As of September 5, 2017.(2) Includes Class A and Class B shares. Includes 1,228,663 restricted shares and net dilutive effect of 591,261 options.

Page 22: Barclays CEO Energy-Power Conference - Solaris Oilfield/media/Files/S... · 9/7/2017  · Barclays CEO Energy-Power Conference September 7, 2017. Disclaimer. 1 Forward-Looking Statements

21

EBITDA and Adjusted EBITDA Reconciliation

(1) Income taxes include add-back for franchise tax.(2) Certain non-recurring organizational and transaction costs associated with Solaris’ initial public offering and the Kingfisher facility.(3) One-time cash bonuses of $3.1 million and restricted stock awards with one-year vesting of $0.4 million were paid or granted to certain employees and consultants in connection with Solaris’

initial public offering.(4) Represents unit-based compensation costs of $0.2 million related to restricted stock awards, with three-year vesting. Also includes $0.1 million and $0.2 million for the three and six months

ended June 30, 2017, respectively, related to options under the Solaris’ Long-term Incentive Plan.

T hree m onths ended Six m onths ended June 30,

($ in 000s) June 30, 2017 March 31, 2017 Decem ber 31, 2016 2017 2016

Net income (loss) $1,062 $4,7 82 $3,023 $5,844 ($931)

Depreciation and amortization 1,37 0 1 ,164 1 ,053 2,534 1 ,7 80

Interest expense, net 22 22 9 44 9

Income taxes (1 ) 498 22 17 520 12

EBIT DA $2,952 $5,990 $4,102 $8,942 $87 0

Non-recurring organizational costs (2) 258 90 - 348 —

IPO bonuses (3) 3,523 - - 3,523 —

Loss on disposal of assets 384 - - 409 —

Unit-based compensation expense (4) 341 32 19 37 3 7 2

Adjusted EBIT DA $7 ,458 $6,112 $4,121 $13,595 $942

EBIT DA and Adjusted EBIT DA Margins:

EBITDA $2,952 $5,990 $4,102 $8,942 $87 0

÷ Revenue 13,389 10,324 7 ,289 23,7 13 6,120

EBIT DA Margin 22% 58% 56% 38% 14%

Adjusted EBITDA $7 ,458 $6,112 $4,121 $13,595 $942

÷ Revenue 13,389 10,324 7 ,289 23,7 13 6,120

Adjusted EBIT DA Margin 56% 59% 57 % 57 % 15%

Page 23: Barclays CEO Energy-Power Conference - Solaris Oilfield/media/Files/S... · 9/7/2017  · Barclays CEO Energy-Power Conference September 7, 2017. Disclaimer. 1 Forward-Looking Statements

Our Patented Design

22

Silo

Shuttle Conveyor Belt

GravityDual Conveyor Belts

BlenderShuttle Conveyor Belt

Generator

Base unit

GeneratorAerial View of SystemSilo Loading and Delivery Process

Silos

Electrically driven belts

Single point of control for the entire system

Six silos per System

Four fill tubes per silo

2.5 million lbs of inventory available at the blender

~50,000 pounds of proppant per truckload

Two issued patents; one utility patent application and two provisional patent applications relating to Systems, services and other technologies