Industry Insights and Happenings - …capstoneheadwaters.com/sites/default/files/Energy...

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June 2016

E n e r g y E q u i p m e n t & S e r v i c e s

Industry Insights and Happenings

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Report SummaryINDUSTRY COMMENTARY

• Crude prices continue to dominate the industry’s outlook

– Recent rally in prices driven by outages and strong crude demand have led to projections for a potential bottoming in services activity

• 1Q results in the OFS space were downbeat, but management teams ex-pressed optimism that a recovery is in its early stages and may begin to be realized in 2017

– Despite the rally in commodity prices, producers are largely prioritizing balance sheet stabilization over incremental drilling activity

– However, maintenance capital expenditures have remained relatively in-sulated from spending cuts

• On the M&A front, the big news in May was the termination of the planned Halliburton-Baker Hughes merger less than a month after the US DOJ sued to block the transaction. HAL paid BHI a $3.5B termination fee

– More generally, M&A activity seems to have picked up via PE-backed restructurings

– Cerberus-backed Keane acquired Trican’s US business for in excess of 30% of replacement cost

TABLE OF CONTENTS:

• Recent Transactions

• Articles We enjoyed

• Commodity Prices

• Rig Counts

• Public Comparables

CONTACTS:

Ted KinsmanManaging [email protected](303) 572-6013

Samuel L. Hill Managing Directorhill@headwatersmb. com214.457.4832

Tim McEuenSr. Vice [email protected](303) 962-5778

Luis Moya Vice [email protected]

www.headwatersmb.com

% of High % of Low 6 Mos. Ago Current 2016E 2017P

Oilfield Services & EqupmentLarge-Cap 74% 123% 8.5x 12.6x 18.1x 12.8xMid-and Small-Cap 35% 171% 4.5x 7.4x 6.6x 9.7xOil & Gas Equipment 72% 132% 6.2x 5.8x 11.6x 11.5xLand Drillers 63% 163% 4.4x 3.7x 7.3x 13.1x

Power Services & EqupmentLarge-Cap 86% 125% 10.5x 9.2x 10.3x 9.6xMid- and Small-Cap 91% 131% 11.3x 10.3x 11.3x 10.8xClean Tech and Solar 60% 135% 9.7x 15.6x 12.9x 7.6x

Infrastructure & Industrial ServicesLarge-Cap Infrastructure 84% 127% 6.4x 6.4x 6.3x 6.6xMid- and Small-Cap Infrastructure 83% 150% 7.3x 7.5x 8.9x 6.8xUtility Services 73% 134% 6.7x 8.6x 8.0x 6.3xIndustrial Services 84% 119% 9.4x 7.6x 7.7x 7.4x

Forward MultiplesEV/EBITDA52-Week Perf.

LTM MultiplesEV/LTM EBITDA as of

Stock Performance

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Industry UpdateRECENT TRANSACTIONS

Date Seller/Target Description AcquirerMay-16 Tercel Oilfield Products Designs and manufactures products for E&P drilling, completion, and

production operationsRubicon Oilfield International Holdings

Mar-16 Five Companies Combined OFS, transportation, and environmental operations of five portfolio companies of CCNG Energy Partners LP

Guggenheim Capital Funding LLC

Jan-16 Trican Well Service Ltd Provides pressure pumping and other general well and production services

Keane Group Holdings

Jan-16 CC American Oilfield LLC

Designs, manufactures, repairs and services oil and gas pressure vessels, as well as fuel scrubbers, filter separators, production skids and other wellsite equipment

CSE Global Ltd

Dec-15 Pioneer Energy Services Three non-walking SCR drilling rigs and one walking SCR drilling rig Undisclosed buyer

Dec-15 New Source Energy Partners

Operates ~110 flowback tanks and 50 three-phase production units, and provides services in the areas of drill outs, coil tubing, production and flare jobs

Erick's Holdings LLC

Dec-15 EMAS Offshore Ltd Owns and operates three jack-up drilling rigs, FPSO Perisai Kamelia and MOPU Rubicone, three anchor handling tug supply vessels, three anchor handling tugs, three crew boats, and one derrick

Ezra Holdings Limited

Nov-15 Archer Limited Provides pressure pumping, directional drilling, pressure control and wireline services

Quintana Energy Services LP

Nov-15 Fluid Inclusion Technologies Inc

Specializes in laboratory analysis of trapped fluids in rock material, and advanced borehole gas analysis on drilling wells

Schlumberger Ltd

Nov-15 Ultra Fab Industries Ltd Designs and manufactures customized solutions and specialized chemical injection systems for use in unconventional drilling

Ecolab Inc

Oct-15 Fraser Hydraulic Power Ltd

Designs and builds systems for laying subsea cables and umbilicals with tracked engines and tensioners

Royal IHC

Oct-15 CWC Energy Services Specializes in well testing and other non-core production services Undisclosed buyer

Oct-15 Digital Petrodata LLC Provides customized integrated GIS data and cloud solutions to the oil and gas industry

TGS-NOPEC Geophysical Company

Oct-15 Spectraseis Inc Offers microseismic fracture monitoring and stimulation evaluation services, including real time monitoring, fracture mapping and microseismic interactive data archiving

Spectris plc

Oct-15 Hybrid Tool Solutions LLC

Provides frac plug drill outs, stick pipe drill outs and tube ups solutions in the Marcellus Shale, Utica Shale and Midcontinent regions

Hastings Equity Partners LLC

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M&A Report 1Q 2016 | Add-Ons Hit Record Level

As PE firms have looked lower in the value chain to find plat-form deals, add-ons have continued to make up a larger and larger share of buyouts, climbing consecutively each. As PE firms have looked lower in the value chain to find platform deals, add-ons have continued to make up a larger and larg-er share of buyouts, climbing consecutively each of the last 7 years and now up to 59.1% in the recent quarter. Median deal size of add-on acquisitions nearly halved in the quarter to $35.3 million, on the low side of recent history, again speaking to a shift from GPs to hunt for smaller deals they can combine to build well-rounded companies.

Pitchbook | M&A Report 1Q 2016

Residential Solar | In Search of Sustainable Funding Model

The residential solar industry has deployed various funding strategies, from tax equity structures to solar securitizations. As the largest players are gaining scale, the next logical step is the monetization of their equity stake in the portfolio of assets, and we think that it is coming. With the public market for Yieldco type structures in flux, we think residential solar players will try to go down a different path and monetize the assets by selling them to private investors, in transactions sim-ilar to SCTY’s John Hancock asset sale.

Guggenheim Securities | Residential Solar: Value Creation Through Cost Management

Oilfield Services | Labor & Attrition to Inhibit Shale Recovery

We continue to espouse our view that the shale recovery will take longer than most anticipate. This notion is grounded on a few simple premises; 1) Attrition is underestimated within the services sector and 2) labor constraints will delay the in-dustry’s ability to ramp up production. When activity picks up, ready-to-go equipment will be in relatively short supply and the companies that have maintained their equipment despite the elevated costs will have an early mover advantage. E

J.P. Morgan | Oil Services & Equipment, 1Q Earnings: Thoughts and Observations

Onshore Equipment | Order Metrics Signaling the Turn?

With the market valuing stocks on through-cycle earnings potential, order metrics have returned to precedence over operating results (particularly margin profile). The ~20% q/q improvement in onshore orders and relatively steady ~0.75-1.0x book:bill suggest backlog deflation is approaching equilib-rium, though we note the relatively low base of both orders and outbound revenue from backlog recognition contribut-ing to these “healthy” metrics. Customer conversations have picked up and E&P guidance suggests potential for incremen-tal spending in 2H16…

Evercore ISI | Global Oilfield Services, Equipment & Drilling Monthly: May 2016

Oil Services & Equipment | Investment Thesis

With earnings revisions still risked to the downside for 2017 and 2018, we believe it is too early to invest in the group. A (sustained) oil price rally is a predicate for any improvement in oil services fundamentals, and history indicates a 1-2 quar-ter lag in E&P activity is likely (therefore pushing the recovery to 2017), though we suspect the market could be tryingto an-ticipate the ramp now.

J.P. Morgan | Oil Services & Equipment, 1Q Earnings: Thoughts and Observations

ARTICLES WE ENJOYED

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1 Year WTI and Henry Hub Prices

Source: Capital IQ

COMMENTARY:

• DOE data show improving fundamentals: strong demand and a continued reduction in domestic supply

- Cushing unexpectedly added inventory for the fifth time in seven weeks, but overall crude stocks drew down ~900k bbls, less than expected

- US production fell for a 12th straight week to ~8.7m bbl/day

- Implied US gasoline demand reached an all-time record, very early in the calendar year, although re-fined product gluts remain

- Refiner demand increased ~200k bbl/day

• Near-term prices continue to be supported by wildfire-re-lated outages in Alberta (estimated to disrupt ~1m bbl/day) and political unrest in Venezuela, Nigeria, and Algeria

• On the trading side, Brexit anxiety dominated markets this week, and the dollar strengthened considerably against the pound and the euro, causing a decline in WTI despite a favorable supply/demand forecast from the EIA

- Producers and funds both largely remained on the sidelines, with net hedge length remaining virtually unchanged

COMMODITY PRICE UPDATE

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U.S. Rig Count International Rig Count

U.S. Directional vs. VerticalU.S. Oil vs. Gas Rig Count

U.S. Rig Count by Play

Source: Baker Hughes

RIG COUNT UPDATE

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Other Permian Williston DJ-Niobrara Eagle Ford Haynesville

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Public ComparablesLARGE-CAP OILFIELD SERVICES

5-Year Trading vs. S&P 5001-Year Trading vs. S&P 500

Historical EV/LTM EBITDA

Source: Capital IQ

Market Data

Stock Performance LTM Multiple Evolution Forward Multiples

Change From 52-Week Performance EV/LTM EBITDA as of EV/EBITDA

Mkt. Cap EV 1 Month 1 Year % of High % of Low 1 Yr. Ago 6 Mos. Ago Current 2016E 2017P Large-Cap Oilfield Services

Schlumberger Limited $109,711 $116,793 5% (10%) 89% 132% 8.3x 8.2x 13.4x 17.7x 14.4x Halliburton Company $38,370 $44,108 8% 1% 96% 161% 6.2x 7.0x 12.8x 21.6x 13.3x Baker Hughes Incorporated $20,407 $22,262 4% (25%) 74% 124% 7.3x 8.8x 16.0x na 14.6x Weatherford International plc $5,544 $12,138 23% (53%) 46% 131% 7.0x 9.9x na na 12.9x

Min 4% (53%) 46% 124% 6.2x 7.0x 12.8x 17.7x 12.9x Median 6% (18%) 81% 132% 7.2x 8.5x 13.4x 19.6x 13.9x Max 23% 1% 96% 161% 8.3x 9.9x 16.0x 21.6x 14.6x

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Large-Cap Oilfield Services -19.1% S&P 500 -1.0%

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Large-Cap Oilfield Services -25.4% S&P 500 +64.7%

10-year avg: 9.7x13.1x

10.6x 9.4x

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2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 YTD

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Market Data



Source: Capital IQ

MID-CAP OILFIELD SERVICES



Mkt. Cap EV 1 Month 1 Year % of High % of Low 1 Yr. Ago 6 Mos. Ago Current 2016E 2017P Mid-Cap Oilfield Services

Superior Energy Services, Inc. $2,933 $3,988 20% (8%) 90% 235% 4.1x 4.6x 16.7x na 14.2x TETRA Technologies, Inc. $526 $1,341 12% (6%) 62% 126% 12.1x 7.7x 6.8x 10.5x 7.0x Ensign Energy Services Inc. $1,097 $1,786 na (41%) 57% 152% 4.5x 5.0x 6.6x 10.0x 8.5x Calfrac Well Services Ltd. $405 $1,201 na (56%) 42% 330% 4.5x 7.2x na na 19.2x Basic Energy Services, Inc. $81 $1,023 1% (74%) 24% 124% 4.2x 8.4x na na 24.8x Key Energy Services Inc. $39 $849 (16%) (86%) 12% 139% 14.6x na na na 16.6x Trican Well Service Ltd. $428 $698 na (45%) 49% 657% 6.5x 10.0x na na 13.8x

Min (16%) (86%) 12% 124% 4.1x 4.6x 6.6x 10.0x 7.0x Median 6% (45%) 49% 152% 4.5x 7.4x 6.8x 10.2x 14.2x Max 20% (6%) 90% 657% 14.6x 10.0x 16.7x 10.5x 24.8x

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Mid-Cap Oilfield Services -32.5% S&P 500 -1.0%

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Mid-Cap Oilfield Services -71.8% S&P 500 +64.7%

10-year avg: 9.1x

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6.8x 7.3x 5.4x

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10.0x12.0x14.0x16.0x18.0x20.0x

2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 YTD

9



Source: Capital IQ

OIL & GAS EQUIPMENT

Market Data



Mkt. Cap EV 1 Month 1 Year % of High % of Low 1 Yr. Ago 6 Mos. Ago Current 2016E 2017P Oil & Gas Equipment

National Oilwell Varco, Inc. $13,450 $15,070 13% (27%) 72% 139% 4.7x 5.2x 11.9x na 24.1x FMC Corp. $6,452 $8,488 2% (13%) 87% 150% 13.3x 9.8x 13.1x 12.2x 11.0x Oil States International Inc. $1,691 $1,738 3% (15%) 83% 153% 5.2x 5.2x 13.5x na 22.7x Dril-Quip, Inc. $2,302 $1,878 2% (19%) 78% 124% 7.3x 6.3x 7.3x 11.7x 18.6x

Min 2% (27%) 72% 124% 4.7x 5.2x 7.3x 11.7x 11.0x Median 2% (17%) 81% 144% 6.2x 5.8x 12.5x 12.0x 20.7x Max 13% (13%) 87% 153% 13.3x 9.8x 13.5x 12.2x 24.1x

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Oil & Gas Equipment -17.1% S&P 500 -1.0%

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Oil & Gas Equipment -23.9% S&P 500 +64.7%

10-year avg: 9.1x

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2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 YTD

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Source: Capital IQ

LAND DRILLERS

Market Data



Mkt. Cap EV 1 Month 1 Year % of High % of Low 1 Yr. Ago 6 Mos. Ago Current 2016E 2017P Land Drillers

Nabors Industries Ltd. $2,983 $6,351 32% (25%) 72% 215% 4.5x 4.6x 9.3x 11.2x 9.7x Helmerich & Payne, Inc. $7,343 $6,932 15% (8%) 93% 167% 4.4x 3.7x 8.4x 15.9x 18.4x Patterson-UTI Energy Inc. $3,110 $3,764 22% 6% 95% 193% 3.7x 3.6x 8.3x 19.9x 15.4x Precision Drilling Corporation $1,982 $3,549 na (19%) 79% 198% 6.1x 6.2x 13.8x 13.9x 11.2x Pioneer Energy Services Corp. $279 $648 45% (32%) 64% 455% 3.1x 3.0x 8.5x na 11.6x


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Land Drillers -34.3% S&P 500 +64.7%

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Land Drillers -8.6% S&P 500 -1.0%

10-year avg: 5.9x

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2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 YTD

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Source: Capital IQ

LARGE-CAP POWER SERVICES & EQUIPMENT

Market Data



Mkt. Cap EV 1 Month 1 Year % of High % of Low 1 Yr. Ago 6 Mos. Ago Current 2016E 2017P Large-Cap Power Services & Equipment

Siemens Aktiengesellschaft $77,768 $93,432 3% (0%) 95% 124% 9.6x 9.0x 10.8x 9.4x 8.4x Honeywell International Inc. $92,456 $100,044 4% 11% 99% 135% 11.6x 10.2x 12.7x 11.9x 11.0x ABB Ltd. $44,408 $46,035 0% (1%) 98% 129% 9.8x 8.6x 10.3x 9.9x 8.9x Schneider Electric SE $33,414 $38,004 2% (12%) 86% 127% 12.6x 9.3x 9.7x 9.5x 8.9x Emerson Electric Co. $34,194 $38,166 5% (9%) 92% 129% 8.9x 7.7x 9.5x 9.9x 9.5x Eaton Corporation plc $28,491 $36,571 3% (12%) 88% 134% 11.2x 9.5x 11.1x 11.0x 10.6x


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Large-Cap Power Services & Equipment +0.5%

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Large-Cap Power Services & Equipment +28.8%

S&P 500 +64.7%

10-year avg: 9.7x

9.8x 10.9x

8.6x 7.3x

9.7x 9.2x 9.0x

10.9x 10.9x 10.1x 9.9x

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2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 YTD

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Source: Capital IQ

MID-CAP POWER SERVICES & EQUIPMENT

Market Data



Mkt. Cap EV 1 Month 1 Year % of High % of Low 1 Yr. Ago 6 Mos. Ago Current 2016E 2017P Mid-Cap Power Services & Equipment

Ametek Inc. $10,910 $12,741 (2%) (15%) 80% 108% 13.1x 12.8x 11.9x 12.1x 11.4x Hubbell Inc. $5,611 $6,267 (3%) (8%) 91% 126% 10.4x 8.6x 10.5x 10.8x 10.1x Valmont Industries, Inc. $3,130 $3,503 4% 11% 93% 148% 8.3x 7.6x 11.2x 10.0x 9.6x Littelfuse Inc. $2,634 $2,734 8% 19% 94% 141% 12.2x 10.9x 14.0x 12.2x 10.7x AZZ incorporated $1,552 $1,838 5% 14% 97% 132% 9.8x 9.6x 10.8x 11.0x 9.9x Badger Meter Inc. $1,055 $1,106 (0%) 13% 92% 140% 15.1x 14.7x 15.9x 16.0x 14.2x ESCO Technologies Inc. $1,039 $1,099 5% 5% 97% 128% 12.9x 12.1x 12.5x 11.0x 9.5x Thermon Group Holdings, Inc. $679 $688 12% (12%) 81% 148% 9.8x 9.4x 11.1x 10.9x 11.0x

Min (3%) (15%) 80% 108% 8.3x 7.6x 10.5x 10.0x 9.5x Median 4% 8% 93% 136% 11.3x 10.3x 11.5x 11.0x 10.4x Max 12% 19% 97% 148% 15.1x 14.7x 15.9x 16.0x 14.2x

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Mid-Cap Power Services & Equipment +3.2%

S&P 500 -1.0%

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Mid-Cap Power Services & Equipment +81.5%

S&P 500 +64.7%

10-year avg: 10.9x

11.9x 12.1x 10.7x

9.3x 10.1x 9.6x

10.7x 11.6x 11.6x 11.3x 11.5x

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2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 YTD

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Source: Capital IQ

ENERGY EFFICIENCY & CLEANTECH

Market Data



Mkt. Cap EV 1 Month 1 Year % of High % of Low 1 Yr. Ago 6 Mos. Ago Current 2016E 2017P Energy Efficiency & CleanTech

SolarCity Corporation $1,966 $4,857 (34%) (68%) 32% 123% (23.2x) (15.4x) (8.8x) (8.1x) (9.3x)Itron, Inc. $1,550 $1,791 2% 12% 95% 146% 9.7x 12.4x 13.6x 9.2x 8.3x Silver Spring Networks, Inc. $665 $540 (11%) (4%) 80% 135% (18.2x) 18.9x 12.2x 31.2x 16.3x Ameresco, Inc. $213 $408 (2%) (38%) 57% 117% 12.2x 10.5x 9.2x 7.6x 6.7x OPOWER, Inc. $589 $528 40% (9%) 79% 194% (10.0x) (10.3x) (14.5x) (57.4x) 184.7x Sunworks, Inc. $45 $42 (19%) (57%) 43% 111% 218.8x 22.3x 14.2x 6.0x 3.8x EnerNOC, Inc. $192 $199 (1%) (31%) 60% 232% 5.8x (4.8x) (4.4x) (5.7x) (10.7x)

Min (34%) (68%) 32% 111% (23.2x) (15.4x) (14.5x) (57.4x) (10.7x)Median (2%) (31%) 60% 135% 5.8x 10.5x 9.2x 6.0x 6.7x Max 40% 12% 95% 232% 218.8x 22.3x 14.2x 31.2x 184.7x

0%20%40%60%80%

100%120%

Jun-

15

Jul-1

5

Aug-

15

Sep-

15

Oct

-15

Nov

-15

Dec-

15

Jan-

16

Feb-

16

Mar

-16

Apr-

16

May

-16

Jun-

16

Energy Efficiency & CleanTech -1.7% S&P 500 +1.9%

0%

50%

100%

150%

200%

Jun-

11

Oct

-11

Feb-

12Ju

n-12

Oct

-12

Feb-

13Ju

n-13

Oct

-13

Feb-

14Ju

n-14

Oct

-14

Feb-

15Ju

n-15

Oct

-15

Feb-

16

Energy Efficiency & CleanTech -40.7% S&P 500 +66.6%

10-year avg: 24.8x

13.9x

23.8x

16.3x

44.3x 40.7x

11.0x

19.0x

48.5x

12.3x

31.1x

12.2x

0.0x

10.0x

20.0x

30.0x

40.0x

50.0x

60.0x

2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 YTD

14



Source: Capital IQ

LARGE-CAP INFRASTRUCTURE SERVICES

Market Data



Mkt. Cap EV 1 Month 1 Year % of High % of Low 1 Yr. Ago 6 Mos. Ago Current 2016E 2017P Large-Cap Infrastructure Services

Chicago Bridge & Iron Company N.V. $3,898 $5,729 3% (37%) 62% 118% 5.5x 4.9x 4.9x 5.6x 5.8x Fluor Corporation $6,966 $6,792 (5%) (15%) 84% 127% 5.4x 4.4x 6.3x 6.6x 6.6x Jacobs Engineering Group Inc. $6,061 $6,034 16% 12% 97% 142% 7.2x 6.4x 8.8x 9.2x 8.4x SNC-Lavalin Group Inc. $7,757 $6,779 10% na 99% 144% 9.6x 12.2x 10.5x 10.9x 9.5x KBR, Inc. $2,002 $1,238 (4%) (24%) 68% 121% (59.2x) 16.9x 3.5x 4.2x 4.4x

Min (5%) (37%) 62% 118% (59.2x) 4.4x 3.5x 4.2x 4.4x Median 3% (19%) 84% 127% 5.5x 6.4x 6.3x 6.6x 6.6x Max 16% 12% 99% 144% 9.6x 16.9x 10.5x 10.9x 9.5x

0%20%40%60%80%

100%120%

Jun-

15

Jul-1

5

Aug-

15

Sep-

15

Oct

-15

Nov

-15

Dec-

15

Jan-

16

Feb-

16

Mar

-16

Apr-

16

May

-16

Jun-

16

Large-Cap Infrastructure Services -6.0% S&P 500 +1.9%

0%

50%

100%

150%

200%

Jun-

11

Oct

-11

Feb-

12Ju

n-12

Oct

-12

Feb-

13Ju

n-13

Oct

-13

Feb-

14Ju

n-14

Oct

-14

Feb-

15Ju

n-15

Oct

-15

Feb-

16

Large-Cap Infrastructure Services -7.4% S&P 500 +66.6%

10-year avg: 10.9x

16.5x 18.1x

15.0x

6.9x 7.2x 9.1x

7.3x

10.1x 10.8x 12.0x

7.0x

0.0x2.0x4.0x6.0x8.0x

10.0x12.0x14.0x16.0x18.0x20.0x

2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 YTD

15



Source: Capital IQ

MID-CAP INFRASTRUCTURE SERVICES

Market DataStock Performance LTM Multiple Evolution Forward Multiples


Mkt. Cap EV 1 Month 1 Year % of High % of Low 1 Yr. Ago 6 Mos. Ago Current 2016E 2017P Mid-Cap Infrastructure Services

Amec Foster Wheeler plc $1,768 $2,728 1% (47%) 52% 141% 13.9x 10.7x 7.6x 7.9x 7.8x Tutor Perini Corporation $1,164 $1,899 11% 0% 100% 232% 6.9x 8.0x 11.1x 6.7x 6.2x Granite Construction Incorporated $1,735 $1,511 8% 16% 90% 154% 9.3x 7.2x 9.5x 8.4x 6.7x Primoris Services Corporation $1,001 $1,166 (10%) (2%) 77% 121% 6.2x 8.3x 8.4x 6.6x 5.7x Aecon Group Inc. $1,008 $1,132 na 41% 98% 171% 6.6x 7.4x 7.7x 6.4x 5.9x Great Lakes Dredge & Dock Corporation $291 $642 13% (20%) 78% 162% 9.4x 7.1x 7.5x 6.9x 5.7x Willbros Group Inc. $182 $221 (6%) 84% 85% 430% na na na 12.1x 7.4x Orion Group Holdings, Inc. $144 $260 10% (28%) 68% 162% 7.3x 7.5x 11.1x 4.9x 4.3x

Min (10%) (47%) 52% 121% 6.2x 7.1x 7.5x 4.9x 4.3x Median 8% (1%) 81% 162% 7.3x 7.5x 8.4x 6.8x 6.1x Max 13% 84% 100% 430% 13.9x 10.7x 11.1x 12.1x 7.8x

0%20%40%60%80%

100%120%

Jun-

15

Jul-1

5

Aug-

15

Sep-

15

Oct

-15

Nov

-15

Dec-

15

Jan-

16

Feb-

16

Mar

-16

Apr-

16

May

-16

Jun-

16

Mid-Cap Infrastructure Services -11.4% S&P 500 -1.0%

0%

50%

100%

150%

200%

Jun-

11

Oct

-11

Feb-

12Ju

n-12

Oct

-12

Feb-

13Ju

n-13

Oct

-13

Feb-

14Ju

n-14

Oct

-14

Feb-

15Ju

n-15

Oct

-15

Feb-

16

Mid-Cap Infrastructure Services -1.9% S&P 500 +64.7%

10-year avg: 10.9x21.6x

19.0x

8.5x

5.2x 6.8x

9.4x 11.1x 10.4x 10.4x

9.0x 8.7x

0.0x

5.0x

10.0x

15.0x

20.0x

25.0x

2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 YTD

16



Source: Capital IQ

UTILITY SERVICES

Market Data



Mkt. Cap EV 1 Month 1 Year % of High % of Low 1 Yr. Ago 6 Mos. Ago Current 2016E 2017P Utility Services

Quanta Services, Inc. $3,549 $3,802 3% (23%) 77% 140% 8.7x 8.8x 8.3x 6.6x 6.0x MasTec, Inc. $1,951 $2,960 6% 10% 96% 190% 6.7x 8.6x 13.0x 7.0x 6.3x MYR Group, Inc. $451 $426 2% (19%) 75% 134% 6.3x 5.6x 5.6x 5.7x 5.2x


0%

50%

100%

150%

200%

Jun-

11

Oct

-11

Feb-

12Ju

n-12

Oct

-12

Feb-

13Ju

n-13

Oct

-13

Feb-

14Ju

n-14

Oct

-14

Feb-

15Ju

n-15

Oct

-15

Feb-

16

Utility Services +18.9% S&P 500 +64.7%

0%20%40%60%80%

100%120%

Jun-

15

Jul-1

5

Aug-

15

Sep-

15

Oct

-15

Nov

-15

Dec-

15

Jan-

16

Feb-

16

Mar

-16

Apr-

16

May

-16

Jun-

16

Utility Services -10.2% S&P 500 -1.0%

10-year avg: 9.7x15.6x 15.6x

11.5x

9.0x 8.4x 9.1x 8.1x 7.6x 7.6x

6.8x 7.6x

0.0x2.0x4.0x6.0x8.0x

10.0x12.0x14.0x16.0x18.0x

2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 YTD

17



Source: Capital IQ

INDUSTRIAL SERVICES

Market Data



Mkt. Cap EV 1 Month 1 Year % of High % of Low 1 Yr. Ago 6 Mos. Ago Current 2016E 2017P Industrial Services

EMCOR Group Inc. $2,962 $2,881 6% (0%) 93% 118% 8.4x 7.8x 7.9x 7.8x 7.0x Bilfinger SE $1,265 $1,388 (24%) (13%) 63% 102% 8.5x 6.2x 6.1x 5.4x 5.6x Team, Inc. $806 $1,155 8% (34%) 57% 126% 10.3x 8.6x 16.1x 9.6x 7.8x Aegion Corporation $649 $907 (1%) 3% 86% 121% 6.9x 6.2x 7.7x 7.5x 6.4x Mistras Group, Inc. $747 $833 3% 24% 94% 197% 11.1x 7.4x 11.7x 9.9x 9.4x Matrix Service Company $426 $357 (0%) (14%) 61% 114% 13.7x 13.3x 4.9x 5.7x 4.5x

Min (24%) (34%) 57% 102% 6.9x 6.2x 4.9x 5.4x 4.5x Median 1% (7%) 75% 120% 9.4x 7.6x 7.8x 7.6x 6.7x Max 8% 24% 94% 197% 13.7x 13.3x 16.1x 9.9x 9.4x

0%

50%

100%

150%

200%

Jun-

11

Oct

-11

Feb-

12Ju

n-12

Oct

-12

Feb-

13Ju

n-13

Oct

-13

Feb-

14Ju

n-14

Oct

-14

Feb-

15Ju

n-15

Oct

-15

Feb-

16

Industrial Services +22.5% S&P 500 +64.7%

0%20%40%60%80%

100%120%

Jun-

15

Jul-1

5

Aug-

15

Sep-

15

Oct

-15

Nov

-15

Dec-

15

Jan-

16

Feb-

16

Mar

-16

Apr-

16

May

-16

Jun-

16

Industrial Services -6.3% S&P 500 -1.0%

10-year avg: 9.3x12.8x

11.5x

9.5x

7.8x 7.3x 7.9x 8.0x

9.3x 10.0x 9.4x 9.0x

0.0x

2.0x

4.0x

6.0x

8.0x

10.0x

12.0x

14.0x

2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 YTD

18

Recent Successes

WE ACTED AS SOLE ADVISOR TO THE SELLER

HAS BEEN ACQUIRED BY

A PORTFOLIO COMPANY OF



TO BE COMBINED WITH


WE ACTED AS SOLE ADVISOR TO THE COMPANY

HAS SECURED SENIOR TERM FINANCING

$6,300,000

Oilfield ServicesFuel Distribution

Transaction Type:Sale of SubsidiaryBuyer DescriptionPE-backed strategic

Oilfield ServicesWaste & Container Solutions

Transaction Type:Private saleBuyer DescriptionPE-backed strategic

Industrial/OFSIndustrial tools and lighting

Transaction Type:PE SaleBuyer DescriptionPrivate Equity

Oil & GasOffshore E&P

Transaction Type:Capital RaiseBuyer DescriptionInstitutional Investor



Energy Equipment & Services Update

Energy Equipment & Services Transactions Currently in Market

Testing/ diagnostic service provider serving the oil & gas, power, and petrochemsectors.

Closing expected 3Q16.

Equipment Rental and Technical/Diagnostic

Services

Oilfield Services

ProjectBlue

SOLE ADVISOR TO THE SELLER

Capabilities and Experience

M&A Capital Formation Project Finance

– Sell-side advisory– Buy-side advisory– Strategic alternatives

– Debt / Equity / Mezz– Recapitalization– Restructuring

– Infrastructure development– Construction/term finance

The professionals in Headwaters Energy & Services practice have collectively closed more than $10 billion intransactions across the upstream, midstream, downstream, services, and P&U sectors. This experience helps our teamunderstand market dynamics and consistently achieve outlier results for our clients.

Landman Services and Proprietary Land

Management Software

Oilfield Services

ProjectPurple


Residential Solar Installation

Power Services

ProjectOrange


Landman services and land management software for use in O&G exploration.


Residential and commercial solar panel distribution and installation services.


Energy Equipment & Services Update

Energy Equipment & Services Transactions Currently in Market

Testing/ diagnostic service provider serving the oil & gas, power, and petrochemsectors.


Equipment Rental and Technical/Diagnostic

Services

Oilfield Services

ProjectBlue


Capabilities and Experience

M&A Capital Formation Project Finance

– Sell-side advisory– Buy-side advisory– Strategic alternatives

– Debt / Equity / Mezz– Recapitalization– Restructuring

– Infrastructure development– Construction/term finance

The professionals in Headwaters Energy & Services practice have collectively closed more than $10 billion intransactions across the upstream, midstream, downstream, services, and P&U sectors. This experience helps our teamunderstand market dynamics and consistently achieve outlier results for our clients.

Landman Services and Proprietary Land

Management Software

Oilfield Services

ProjectPurple


Residential Solar Installation

Power Services

ProjectOrange






Recent Successes






TO BE COMBINED WITH


WE ACTED AS SOLE ADVISOR TO THE COMPANY

HAS SECURED SENIOR TERM FINANCING

$6,300,000

Oilfield ServicesFuel Distribution

Transaction Type:Sale of SubsidiaryBuyer DescriptionPE-backed strategic

Oilfield ServicesWaste & Container Solutions

Transaction Type:Private saleBuyer DescriptionPE-backed strategic

Industrial/OFSIndustrial tools and lighting

Transaction Type:PE SaleBuyer DescriptionPrivate Equity

Oil & GasOffshore E&P

Transaction Type:Capital RaiseBuyer DescriptionInstitutional Investor



ENERGY EQUIPMENT & SERVICES UPDATE

Testing/ diagnostic service provider serving the oil & gas, power, and petrochem sectors.







H A S B E E N A C Q U I R E D B Y


A P O R T F O L I O C O M PA N Y O F


T O B E C O M B I N E D W I T H



A P O R T F O L I O C O M PA N Y O F

SEN IOR TERM NOTE

WE ACTED AS SOLE ADVISOR

19

Disclosure: This newsletter is a periodic compilation of certain economic and corporate information, as well as completed and announced merger and acquisition activity. Information contained in this newsletter should not be construed as a recommendation to sell or buy any security. Any reference to or omission of any reference to any company in this newsletter should not be construed as a recommendation to buy, sell or take any other action with respect to any security of any such company. We are not soliciting any action with respect to any security or company based on this newsletter. The newsletter is published solely for the general information of clients and friends of Headwaters MB, LLC. It does not take into account the particular investment objectives, financial situation or needs of individual recipients. Certain transactions, including those involving early-stage companies, give rise to substantial risk and are not suitable for all investors. This newsletter is based upon information that we consider reliable, but we do not represent that it is accurate or complete, and it should not be relied upon as such. Prediction of future events is inherently subject to both known and unknown risks and other factors that may cause actual results to vary materially. We are under no obligation to update the information contained in this news-letter. Opinions expressed are our present opinions only and are subject to change without notice. Additional information is available upon request. The companies mentioned in this newsletter may be clients of Headwaters MB, LLC. The decisionsto include any company in this newsletter is unrelat-ed in all respects to any service that Headwaters MB, LLC may provide to such company. This newsletter may not be copied or reproduced in any form, or redistributed without the prior written consent of Headwaters MB, LLC. The information contained herein should not be construed as legal advice.

About Headwaters MB:Headwaters MB is an independent, middle-market investment banking firm providing strategic merger and acquisition, corporate finance, and merchant banking services through proprietary sources of capital. Named “Investment Bank of the Year” by the M&A Advisor in 2014, Headwaters MB is headquartered in Denver, CO, with six regional offices across the United States and partnerships with 18 firms covering 30 countries. For more information, visit www.headwatersmb.com

To learn more about how the Headwaters MB team can help you grow from opportunities in the Energy Equipment & Services sector, please contact:

Te d K i n s m a n | M a n a g i n g D i re c t o rE n e rg y E q u i p m e n t & S e r v i c e s3 0 3 .5 7 2 .6 01 3 t k i n s m a n @ h e a d w a t e r s m b. c o m

Ti m M c E u e n | S r. V i c e P re s i d e n tE n e rg y E q u i p m e n t & S e r v i c e s3 0 3 .9 6 2 .5 7 7 8 t m c e u e n @ h e a d w a t e r s m b. c o m

S a m u e l L . H i l l | M a n a g i n g D i re c t o rE n e rg y E q u i p m e n t & S e r v i c e s2 1 4 . 4 5 7. 4 8 3 2 h i l l @ h e a d w a t e r s m b. c o m

L u i s M o y a | V i c e P re s i d e n tE n e rg y E q u i p m e n t & S e r v i c e s2 1 4 . 8 1 4 .5 6 8 4 l m o y a @ h e a d w a t e r s m b. c o m

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