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transcript
The Power of ONE
IPAA Oil and Gas Investment Symposium
April 19, 2004
2
QUICK FACTS
Business
• Primary focus on the wellhead through well intervention services, rental tools and liftboats
• Production-related solutions that provide cost savings over conventional rig-based methods– Rigless and riserless
Strategy
• Moving from a primarily Gulf of Mexico provider to select international locations
• Enhancing utilization through property acquisitions
Other Data
• Ticker: SPN
• Market Cap: $750 million
• Ratings (Moody’s / S&P): B1 / BB-
3
STARTED AS A RIGLESS P&A COMPANY
Avg. Stock Price: $2.53
5-person crew
3 basic servicesSlicklinePumping
Electric line
No rig required
4
MOVED FURTHER UPSTREAM
Avg. Stock Price: $6.57
Acquired complementary assets to support drilling and production in the shallow waterGulf of Mexico market
Brand-name rental tools
Basic well intervention services
Industry’s largest & most diverse liftboats
Field management & environmental services
5
WELL INTERVENTION PROJECTS
Primary equipment
Secondary equipment
ProjectCoiledTubing
ElectricLine
Pumping &Stimulation
MechanicalWireline
HydraulicWorkover
Initial completions
Sidetrack drilling
Stimulation
Major rig intervention (1)
Thru-tubing remedial (2)
P&A
(1) Includes re-completions and workovers(2) Includes plugbacks, cleanouts and zone shifts
6
ADDED LARGE LIFTBOATS TO DELIVER BUNDLED SERVICES PACKAGE
Avg. Stock Price: $9.09
Coiled tubing
Electric Line
P&A Spread
Slickline
General project types:
Sidetrack drilling
Initial completions
Workover and re-entry
Construction work
Plug & abandonment
8
Other20%
Rental Tools28%
Well Intervention
38%
Marine14%
BALANCED MIX OF OPERATIONS
Revenue by Segment2003
EBITDA by Segment
2003
$500.6 million $117.2 million
Well Intervention
31%
Marine11%
Rental Tools54%
Other4%
See Appendix for reconciliation between net income and EBITDA
9
PRIMARY FOCUS ON PRODUCTION
2003 Revenue Breakdown
10
GROWTH STRATEGY
• International expansion
11
SUPERIOR’S ESTIMATEDGOM vs. GLOBAL MARKET SHARE
Source: Company estimates; Spears & Associates, Liftboats.com
Product line% of 2003
SPN RevenueGOM
Market ShareGlobal
Market Share
Mechanical Wireline 8% 60% 9%
Rig-less P&A 6% 60% NA (1)
Coiled Tubing Services 6% 30% 6%
Liftboats 14% 27% 23%
Rental and Fishing Services 28% 25% 6%
62%
(1) Most markets outside the GOM still use rig-based methods
Room to grow internationally in key product and service lines
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WORLDWIDE DRILLING AND COMPLETION SPENDING (2000 –
2005E)
$-
$10
$20
$30
$40
$50
$60
$70
$80
$90
2000 2001 2002 2003 2004 2005
Drilli
ng
& C
ompl
etio
n S
pendi
ng
($ in
bill
ions)
U.S.International
1% CAGR
7% CAGR
Source: Spears & Associates
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SUPERIOR’S INTERNATIONAL BUSINESS
5.3%
11.3%
8.8%
0%
2%
4%
6%
8%
10%
12%
2001 2002 2003
International revenue as % of total revenue
14
1
2
34
5
7
8
6
INTERNATIONAL EXPANSION
5 North Sea & Continental Europe
6 Middle East7 West Africa8 Australia
1 Offshore eastern Canada2 Mexico3 Trinidad4 Venezuela
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INTERNATIONAL EXPANSION POTENTIAL
Australia
Liftboats
Services
Rental tools
Venezuela
Liftboats
Services
Rental tools
North Sea/Europe
Rental tools
MexicoLiftboatsServices
Rental tools
Middle East
Rental tools
Liftboats
Eastern Canada
Rental tools
West Africa
Liftboats
Rental tools
TrinidadLiftboatsServices
Rental tools
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ESTIMATED GROWTH IN DRILLING AND COMPLETION SPENDING BY MARKET
Source: Spears & Associates
’03 – ’04 Growth
’02 – ’05 CAGR
New Orleans
600 miles
Trinidad11%2%Venezuela
33%
6%
Mexico
35%
23%
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GROWTH STRATEGY
• International expansion
• Increase asset utilization and efficiencies by working on acquired GOM properties
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SPN RESOURCES PROPERTY PROFILE
SeismicExploration and Development
Well Intervention(Operational, remediation, workover)
Production
Maturity
SPN ResourcesProperty Profile
Abandonment
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SPN RESOURCES:3 SOURCES OF OPPORTUNITY
• Production– Produce more from existing wells
• Production-related service work– Existing assets will service producing
wells– Well intervention services, liftboats,
rental tools and property management– Gain efficiencies through timing of
work
• Abandonment and decommissioning work– Turnkey opportunity
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OWNED VS. MANAGED PROPERTIES
SPN Resources
17 fields on 24 blocks
33 structures
97 wells (15 producing wells)
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SPN RESOURCES
Est. production, historical LOE & potential backlog acquired from three transactions
Daily Production (net) 9,000 mcfe/day
Historical Lease Operating Expenses per year
$7,800,000 Includes several services offered by Superior,
including contract operations, well / facility maintenance, transportation, supplies & rentals.
Other production-related services work
$4,000,000
Includes well intervention services required for optimizing production from current zones,
recompletions to new zones, sidetracking, and other production-enhancement services.
Abandonment and decommissioning work
$80,000,000 Turnkey opportunity. Profit potential contingent upon successful project execution.
Production Economics
Incremental Opportunities for Superior
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SPN RESOURCES TO UTILIZE WELL INTERVENTION SERVICES OFFERED BY
SUPERIOR
Primary equipment
Secondary equipment
ProjectCoiledTubing
ElectricLine
Pumping &Stimulation
MechanicalWireline
HydraulicWorkover
Initial completions
Sidetrack drilling
Stimulation
Major rig intervention (1)
Thru-tubing remedial (2)
P&A
(1) Includes re-completions and workovers(2) Includes plugbacks, cleanouts and zone shifts
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GROWTH STRATEGY
• International expansion
• Increase asset utilization and efficiencies by working on acquired GOM properties
• Innovation
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INNOVATION
Subsea Intervention Lubricator System
COILTAC™
Pipeline cleaning thruster system
Subsea Completion Market
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71.7
117.7
173.5149.8
257.5
500.6
449.0 443.1
$0
$100
$200
$300
$400
$500
$600
'96 '97 '98 '99 '00 '01 '02 '03
18.6
38.046.8
31.7
65.6
138.4
98.5
117.2
$0
$20
$40
$60
$80
$100
$120
$140
$160
'96 '97 '98 '99 '00 '01 '02 '03
32.0% CAGR
30.1% CAGR
PROVEN RESULTS
(1) Results for the years 1996, 1997, 1998 and 1999 reflect a full year’s results for both Cardinal and Superior. (2) Results for all acquisitions are included from the date of acquisition.
See Appendix for reconciliation between net income and EBITDA
Revenue (1)(2) EBITDA (1)(2)
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2003 & 2004 ESTIMATED FREE CASH FLOW
2003 2004E
Net Income $30.5 $36.0D&A 48.9 53.0 Deferred taxes 15.2 12.0 Capital expenditures (50.1) (50.0)
Free Cash Flow $44.5 $51.0
Capital Expenditures 2003 2004E
Expansion $30.8 $34.0Maintenance 10.5 14.0 Facilities 8.8 2.0
Total Capital Expenditures $50.1 $50.0
Source: 2004 net income based on analysts estimates of $0.48
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INVESTMENT HIGHLIGHTS
Leading Gulf of Mexico market positions
Long-standing relationships with blue chip
customers
Seeking growth by utilizing existing assets in new
markets
- International expansion
- SPN Resources
- Innovation
Focused on achieving high returns relative to peers
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DISCLOSURES
Use of Forward looking statementsIn addition to historical information, our presentation materials include certain forward-looking statements about the Company’s future performance, growth opportunities, outlook, plans, alternatives, strategies, expectations and objectives. These statements are based on certain assumptions and analyses made by the Company’s management in light of its experience and its perception of historical trends, current conditions, expected future developments and other factors it believes are appropriate under the circumstances. Such forward-looking statements are subject to uncertainties that could cause the Company’s actual results to differ materially from such statements. Such uncertainties include but are not limited to: volatility of the oil and gas industry, including the level of offshore exploration, production and development activity; risks of the Company’s growth strategy, including the risks of rapid growth and the risks inherent in acquiring businesses; changes in competitive factors affecting the Company’s business operations; operating hazards, including the significant possibility of accidents resulting in personal injury, property damage or environmental matters; seasonality of the offshore industry in the Gulf of Mexico; the Company’s dependence on certain customers; and the potential shortage of skilled workers. These and other uncertainties related to the business are described in detail in the Company’s Annual Report on From 10-K for the Company’s last completed fiscal year. Although the Company believes that the expectations reflected in such forward-looking statements are reasonable, it can give no assurance that such expectations will prove to be correct. You are cautioned not to place undue reliance on these forward-looking statements, which speak only as of the date hereof. The Company undertakes no obligation to update any of its forward-looking statements for any reason.
Use of Non-GAAP Financial MeasuresIn this presentation, Superior has included certain financial measures (EBITDA and Free Cash Flow) which are not calculated in accordance with generally accepted accounting principles (GAAP). You should not consider these measures in isolation from or as a substitute for measures prepared in accordance with GAAP. Additionally, these financial measures may not be comparable to other similarly titled measures of other companies. Descriptions of these non-GAAP financial measures and management’s reasons for discussing them are provided in the following appendix to the presentation.
APPENDIX
NON-GAAP RECONCILIATION
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RECONCILIATION BETWEENNET INCOME AND EBITDA
Earnings before interest, taxes depreciation and amortization (EBITDA) is a non-GAAP financial measurement. Management uses EBITDA because it believes that such a measurement is a widely accepted financial indicator used by investors and analysts to analyze and compare companies on the basis of operating performance and that this measurement may be used by some investors and others to make informed investment decisions. In addition, EBITDA is used in the financial ratios included in the Company’s Credit Agreement and Senior Notes Indenture. You should not consider it in isolation from or as a substitute for net income or cash flow measures prepared in accordance with generally accepted accounting principles or as a measure of profitability or liquidity. EBITDA calculations by one company may not be comparable to EBITDA calculations made by another company. The following table provides a reconciliation between net income (loss) (a GAAP financial measure) and EBITDA (a non-GAAP financial measure) for the Company’s segments and on a consolidated basis:
Slide 8Reconciliation of Net Income (Loss) to EBITDAFor year ending December 31, 2003(in thousands)
WellIntervention Marine Rental tools Other Unallocated
Consolidatedtotal
Net Income (Loss) $24,389 $9,031 $37,075 $595 ($40,576) $30,514
Add: Interest, net 22,268 22,268 Income taxes 18,308 18,308 Depreciation and Amortization 12,362 6,665 25,696 4,130 48,853
Less: Other income (2,762) (2,762)
EBITDA $36,751 $12,934 $62,771 $4,725 $0 $117,181
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RECONCILIATION BETWEENNET INCOME AND EBITDA
Slide 25
(1) The EBITDA calculation for the fiscal years ending December 31, 1996, 1997, 1998 and 1999 reflect the summation of audited financial statements for Superior Energy Services, Inc. and Cardinal Holding Corp.
When we acquired Cardinal Holding Corp. on July 15, 1999, the transaction was treated for accounting purposes as if Cardinal acquired us. Because we were the Company being “acquired” for accounting purposes, financial information in our financial statements and filings with the Securities and Exchange Commission for periods prior to the merger represents the results of Cardinal’s operations, and financial information for periods following the merger represents the results of the combined companies. Cardinal’s historical results were substantially different than ours for the same periods and reflected substantial non-cash and extraordinary charges associated with a recapitalization and refinancing.
Reconciliation of Net Income to EBITDA(in thousands)
1996 (1) 1997 (1) 1998 (1) 1999 (1) 2000 2001 2002 2003
Income before extraordinary loss andcumulative effect of change in accounting principle $6,826 $13,776 ($2,905) $311 $19,881 $51,187 $21,886 $30,514
Add: Interest, net 3,575 6,186 14,696 13,617 10,180 18,195 21,354 22,268 Income taxes 3,391 9,411 6,128 826 13,298 35,571 13,701 18,308 Depreciation and Amortization 4,832 7,479 14,016 16,911 22,255 33,446 41,595 48,853 Merger termination, net of gain on sale of sub 1,061 Other expense 1,150 Special charges 13,763
Less: Other income (2,762)
EBITDA $18,624 $38,002 $46,759 $31,665 $65,614 $138,399 $98,536 $117,181
For fiscal year ending December 31,
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Slide 26
Free cash flow is a non-GAAP financial measurement. Management uses free cash flow because it believes that such a measurement is a widely accepted financial indicator used by investors and analysts to analyze and compare companies on the basis of operating performance and that this measurement may be used by some investors and others to make informed investment decisions, though their definitions may vary. Management uses the free cash flow measure in analyzing the Company’s liquidity. This non-GAAP financial measure should not be considered in isolation or as an alternative to net income or operating income (GAAP financial measures) as an indicator of the Company’s operating performance (see the accompanying consolidated statements of income), or to net cash provided by operating activities (a GAAP financial measure) as a measure of the Company’s liquidity (see the accompanying consolidated statements of cash flow). Free cash flow calculations by one company may not be comparable to free cash flow calculations made by another company.
FREE CASH FLOW