Download - 10 08 Investor Presentation
1
T-3 Energy Services, Inc. T-3 Energy Services, Inc. Management PresentationManagement Presentation
During the course of this presentation, participants may make certain forward-looking statements regarding various matters related to our business and company that are not historical facts, including future financial performance, operating results, and the prospects for the oil and gas services business.
It is difficult to make projections or other forward-looking statements in a cyclical industry; such as the risks, assumptions, and uncertainties involved in these forward-looking statements include the level of crude oil and natural gas prices, rig demand, and operational and other risks which are described in the
company’s most recent Form 10-K and other filings with the U.S. Securities and Exchange Commission. The forward looking statements are based upon management’s expectations and beliefs and, although these statements are based upon reasonable assumptions, actual results might differ materially from
expected results due to a variety of factors.
The Company assumes no obligation to update publicly any forward-looking statements whether as a result of new information, future events or otherwise. For a discussion of additional risks and uncertainties that could impact the Company’s results, please review the T-3 Energy Services’ Quarterly Report on Form 10-Q
for the period ending June 30, 2008.
October 2008October 2008
2
Gus Halas hired as
CEO
Turn Around Phase
Cost reductions, hired new senior management, and facilities rationalization.
Strategic Growth Phase
OEM product development and engineering plan, geographic (domestic and international) expansion, manufacturing capacity expansion, cost-controls,
company-wide process improvements.
Service Company Roots
Gulf Coast leading provider of pressure and flow control
equipment aftermarket services.
Capitalized by
2001 20022000 2003 2004 2005 2006 2007
Sold Products Segment
Sold Distribution Segment
First Reserve Sells all T-3 Energy Common Shares in a
Series of Block Trades.
2008 2009
History of T-3 EnergyHistory of T-3 Energy
EEC / HPT
Acquisition
T3 India and Aswan
JV
Edmonton, Canada
Acquisition
Rock Springs
Acquisition
Pinnacle Wellhead
Acquisition
3
Company & Products OverviewCompany & Products Overview
We design, manufacture, repair, and service products used in the We design, manufacture, repair, and service products used in the drilling and completion of new oil and gas wells, the workover of drilling and completion of new oil and gas wells, the workover of
existing wells, and the production and transportation of oil and gas.existing wells, and the production and transportation of oil and gas.
ProductionPhase
DrillingPhase
Crown &
Standpipe Manifold
Choke & Kill Blowout
Master Bushing
Remote Control System Panel
Surface Control System
Manifold
Blowout Preventer
Stack
Remote Control System Panel
Surface Control System
Wellhead & Production
Tree Pipeline Valves
Transmission& Processing
Phase
WellheadProducts
Pressure and FlowControl Products
Pipeline Valve Products
Revenues as of 6/30/08
14%
73%
13%
2
3
1
4 5
Remanufacture / Repair
Low Pressure O.E.M.
High Pressure O.E.M.
Sub Sea OEM
Prod
uct C
ompl
exity
Rated W
orking Pressure
4
Demand is correlated to the new rig market and rig refurbishment market; while demand Demand is correlated to the new rig market and rig refurbishment market; while demand for aftermarket repair services is driven by utilization levels on drilling rigs.for aftermarket repair services is driven by utilization levels on drilling rigs.
Drilling & Well Servicing Chokes,
Valves, and Choke and Kill
Manifolds
Crown &
Standpipe Manifold
Choke & Kill Blowout
Master Bushing
Remote Control System Panel
Surface Control System
Manifold
Blowout Preventer
Stack
Remote Control System Panel
Surface Control System
Blowout Preventer Hydraulic Control
Systems
Blowout Preventers and Non-Metallic Seals
2
1
2
3
1
Drilling Phase ProductsDrilling Phase ProductsPCG PCG
BOP36.1%
Manifolds15.0%
Control Systems
3.6%
Valves23.5%
BOP Repair10.5%
Other Repair10.5%
Field Service0.8%
YTD 6/30/08 PCG Revenue Make-Up
3
5
1
Drilling Phase ProductsDrilling Phase ProductsBOPs and AccessoriesBOPs and Accessories
Model 6011i Economy Ram BOP
Model 6031 Cold-Weather Ram BOP
Model 6012 Sub-Sea Ram Isolation BOP
Model 6012 Sub-Sea Shearing BOP
Model 7072 Sub-Sea Annular BOP
29 ½” 500 PSI 7012 Annular Diverter BOP
Model 6012 Premium Ram BOP
Model 7082 Annular BOP
Model 7022L Annular BOP
Excluder OExcluder O--ring for Subsea Applicationsring for Subsea Applications
Design Innovation To Enhance Bonnet Sealing Consistency & Reduce Risk By Eliminating Higher Bonnet Bolt Torque Requirements
No separate tools needed for removal.
Qualified to API 16A Ram Access Test:
•200 Access Cycles•10 Wellbore Pressure Cycles
Excluder OExcluder O--ring for Subsea Applicationsring for Subsea Applications
Design Innovation To Enhance Bonnet Sealing Consistency & Reduce Risk By Eliminating Higher Bonnet Bolt Torque Requirements
No separate tools needed for removal.
Qualified to API 16A Ram Access Test:
•200 Access Cycles•10 Wellbore Pressure Cycles
Ram BOP Wear Plates
Variable Bore Inverted Rams
Model 6000 Shear Rams
Casing Shear Rams
Low Torque Ram BOP Bonnet Seals
BOP Rams and Seals
High Pressure Land BOPs
High Pressure Sub-Sea BOPs
Low Pressure Land BOPs
6
3
Drilling Phase ProductsDrilling Phase ProductsValves and ChokesValves and Chokes
T3-COT Mud Valve
CH2M Standard Production Choke
HPTTM Sub-Sea Production Valve
HPTTM Sub-Sea Drilling Valve
Sub-Sea DF Gate Valve
Drilling Check Valve
HXETM Drilling Choke
T3-FC Gate Valve
Double Acting Hydraulic Actuator
Torque Reduction Manual Operator Actuator
Fail Safe Actuator
Sub-Sea Actuator
Available Valve Actuation
HPTTM Drilling Gate Valve
High Pressure Valves & Chokes
High Pressure Sub-Sea Valves
Low Pressure Valves & Chokes
7
4
Production Phase ProductsProduction Phase ProductsWPS SolutionsWPS Solutions
TimeSaverTM Wellhead System
TimeSaverTM Wellhead System with DDV System
Dual Block Wellhead System
Thru-Diverter Wellhead System
Demand is a function of drilling & completion activity, particularly Demand is a function of drilling & completion activity, particularly activity in “resource plays”, such as the Barnett Shale.activity in “resource plays”, such as the Barnett Shale.
HPTTM Manual Production Gate Valve
HPTTM Manual Production Gate Valve
with Ball Screw
T3 Diamond Series D5TM Gate Valve
T3 Diamond Series D10TM Gate Valve
Wellhead Production Solutions - Land
Wellhead Production Valves - Land
8
5
Demand is a function of the levels of overall production and pipeline construction activity, particularly gathering systems requiring ball Demand is a function of the levels of overall production and pipeline construction activity, particularly gathering systems requiring ball valves and gate valves. valves and gate valves.
Transmission Phase ProductsTransmission Phase ProductsPVS ValvesPVS Valves
T-3 RSB Rising Stem Ball Valve
T-3 CFT Trunnion Mounted Ball Valve
T-3 T1-EX Expanding Gate Valve
T3 Diamond Series D10TM Gate Valve
Gate Valves - Land
Ball Valves - Land
9
2004
Drilling Phase (PCG) Engineering
2005 2006 2007
Production Phase (WPS) Product Engineering
Transmission Phase (PVS) Product Engineering
Drilling Phase (FCG) Engineering
2 Engineering Team Members
25 Engineering Team Members
Pa
ten
ted
Model 6000 Shearing Sealing Ram (7,207,382)
Threaded Union Safety Device (6,557,577)
Oil Field Choke (5,241,980)
Multiple Sleeve Valve Assembly (6,283,152)
Well Production Hub (7,219,740 B2)
Valve Seal Assemblies & Methods (6,664,572 B2)
Hydraulic Failsafe Valve Actuator (6,487,960 B1)
Hydraulic Double-Acting Actuator (6,659,419)
Subsea Hydraulic Actuator with Built-in Pressure Compensator (6,783,107 B2)
DDV Wellhead System
Pa
ten
t-P
en
din
g
Subsea Dual Bore Well Jumper
Subsea Jumper Deployment Method
Subsea Light Weight Stab Plate Connector
Subsea HIPPS “Device, Method, and Apparatus”
Machined Bore “Method”
D5 and D10 Production Gate Valves
Po
ss
ible
P
ate
nts
18 3/4” 15,000 BOP Sealing Architecture
T3 Tubing Hanger Metal Seal
T3 Two-Stage Through Diverter System
Frac Isolation System
EngineeringEngineeringDesigning Name-Brand ProductsDesigning Name-Brand Products
2008
Supply Chain Engineering
Introduced 113 new customer-driven products and dozens of product enhancements.Introduced 113 new customer-driven products and dozens of product enhancements.
10
$ in
Mil
lio
ns
OEM ProductsOEM ProductsGrowing Name-Brand RecognitionGrowing Name-Brand Recognition
46%57%
65%76% 80%
Percent New Manufactured
Product
Aftermarket Services vs. New Manufactured Products
90% OEMIncrease
79% OEMIncrease
58% OEMIncrease
11
$0
$2
$4
$6
$8
$10
$12
$14
2002 2003 2004 2005 2006 2007 2008
Billio
ns (
$ U
SD
)
$0.0
$0.5
$1.0
$1.5
$2.0
$2.5
$3.0
$3.5
$4.0
2002 2003 2004 2005 2006 2007 2008
Billio
ns (
$ U
SD
)
32,910
16,728
19.9 20.0 19.5 19.0 19.3 19.9
0
5,000
10,000
15,000
20,000
25,000
30,000
35,000
2002 2003 2004 2005 2006 2007
U.S
. Na
tura
l Ga
s W
ells
Dri
lled
0.0
5.0
10.0
15.0
20.0
25.0
30.0
35.0
U.S
. Na
tura
l Ga
s P
rod
uc
tion
(Tc
f)
Wells Drilled
Gas Production
Sources: 1January 2008 Spears & Reed Rig Census. 2Energy Information Administration.
Rig Equipment Spending1 Surface Equipment Spending1
U.S. natural gas production remains flat despite a significant increase in the number of gas U.S. natural gas production remains flat despite a significant increase in the number of gas wells drilled over the past decade.wells drilled over the past decade.
Natural Gas Depletion2New International Land Rigs1
China and Russia to add approximately 200 new rigs per year.China and Russia to add approximately 200 new rigs per year.149 new offshore rigs to be built between 2008 and 2011.149 new offshore rigs to be built between 2008 and 2011.
Industry DynamicsIndustry DynamicsSpending & ConstructionSpending & Construction
0
20
40
60
80
100
120
140
2003 2004 2005 2006 2007 2008
Net Assembled
New Build
12
Pressure & Flow Control
Strong Customer BaseStrong Customer Base
Wellhead Pipeline
13
Quarter End Shipments $18.8 $18.9 $32.6 $45.2 $64.4 $67.7
Growing backlog along with increasing quarter end shipments demonstrates
brand name acceptance and increasing OEM market share.
$64.8$63.3
$30.1
$3.4 $3.3
$80.7
$0
$20
$40
$60
$80
$100
2003 2004 2005 2006 2007
Mill
ion
s
Note: Excludes discontinued operations.
Production phase product commitments received are not included in Production phase product commitments received are not included in T-3 Energy’s quoted back-log numbers.T-3 Energy’s quoted back-log numbers.
6/30/2008
Strong and Growing BacklogStrong and Growing Backlog
6/30/08 Quote Backlog Regional Make-Up
30%
70%
Quoted Product
(6/30/08)
Amount (Millions $USD)
BOP $ 63.8
Choke $ 53.6
Control Systems
$ 24.0
Control Valves $ 0.4
DSA $ 3.3
Flow Fitting $ 4.2
Manifold $ 33.4
Misc. $ 7.1
Production Valve
$ 24.9
Grand Total:
214.7$
International
North America
Strong quote backlog supported with a large percentage of international
opportunities demonstrates growing international market penetration.
Drilling Phase Product Sales Opportunities
Africa3%
Asia6%
United Kingdom
8%
North America30%
Other1%
Europe8%
Former Soviet Union5%
Middle East30%
Central America
5%
South America4%
14
Sales GrowthSales GrowthInternational and Offshore SalesInternational and Offshore Sales
53%40% 36%
18%
10%4%
8%
15%
12%
20%34%
49%
0%
10%
20%
30%
40%
50%
60%
70%
80%
90%
100%
2006 2007 2008 (H1)
United States Canada Mexico International
The above chart represents sales related to T-3 Energy’s drilling-phase pressure control and flow
control products. Wellhead and Pipeline Valve sales are essentially domestic.
67%57% 52%
26%36%
31%
7% 7%17%
0%
10%
20%
30%
40%
50%
60%
70%
80%
90%
100%
2006 2007 2008 (H1)
Offshore (Floaters and Subsea)Offshore (Fixed Platform)Land
The offshore products encompass products for drillships, semi-submersibles, or other type of floating
facility. These products include surface or subsea BOPs, C&K manifolds, stand-pipe manifolds, diverter
valves, subsea stack mounted valves, subsea flow-line valves, boarding valves, etc.
PCG Product Destination by Region PCG Product Sales Markets
15
Global New Manufactured BOP Market
13%
Growing Market ShareGrowing Market Share
Global Pipeline
Valve Market
Global BOP Elastomers
Market
~1%
Global Land BOP Control
System Market
16% ~1%
U.S. Surface Wellhead
Market
~3%
0% 0% ~1.4% ~0.2%2003 2003 2003 2003
0%2003
As a percentage of the entire new installed
market base between 2005 and 2007.
As a percentage of the entire new installed
market base between 2005 and 2007.
Of the $1.1 billion United States
domestic surface wellhead market.
Of the $1.9 billion global pipeline and transmission valve
market.
Of the estimated $150 million global pressure
control seal and elastomer market
16
2005
Initiate Facilities Rationalization and Lean Manufacturing
2006 2007 2008
Phase II – New BOP Manufacturing Capacity Initiative
Houston, Texas
Phase I - New BOP Manufacturing
Capacity Initiative
Houma, Louisiana
Phase I – BOP Re-Manufacturing Capacity Initiative
Rock Springs, Wyoming
Phase II – BOP Re-Manufacturing Capacity Initiative,
Cypress, Texas
Manufacturing Capacity ExpansionManufacturing Capacity Expansion
Low-Cost Sourcing Capacity
Initiative
Mumbai, India
Doubled revenue capacity with less than Doubled revenue capacity with less than $22M in growth capital since 2005.$22M in growth capital since 2005.
Geographic Expansion
Capacity Expansion
Acquisition / Partnership
Growth Strategy
17
Nisku, Alberta (PCG)
Houston (3 PCG / WPS / PVS)
Robstown (WPS)
Odessa (WPS)
Perryton (WPS)
Jennings (PCG)
Houma (2 PCG)
Lafayette (WPS)
Shreveport (WPS)
Indianapolis (PVS)
Buffalo (PVS)
Tyler (WPS)
Rock Springs (PCG / WPS)
Casper (WPS/PVS)
Conway (WPS)
Cardenas, Mexico
Dallas (WPS)
OKC (WPS)
Denver (WPS)
W. Virginia (WPS)
Grand Junction (WPS)
Pennsylvania (WPS)
Atlanta (PVS)
Farmington (WPS)
Venicia (PVS)
Long Beach (PVS)
Williston (WPS)
Domestic Operational ExpansionDomestic Operational Expansion
Fort Smith (WPS)
18
Continued focus on expanding existing international footprint Continued focus on expanding existing international footprint through joint ventures, authorized repair facilities and agents.through joint ventures, authorized repair facilities and agents.
1Effective September 1st, 2008, T-3 Opens Dubai Service Center as a Joint Venture with Aswan International Engineering Company LLC ("Aswan"). 2On May 29th, 2008, T-3 Exercised its Option to Purchase the Assets of the India-Based Manufacturing Operation of HP&T Products, Inc.
International ExpansionInternational Expansion
T3 Dubai / Aswan1
T3 Mexico / Grupo R
T3 India2
Existing T3 Energy Operation
Focus for Continued International Growth
Capacity Expansion
Acquisition / Partnership
19
Geographic Expansion
Product Growth
Product Complements
Product GrowthDo acquired products fill out
T-3 Energy’s current product offering?
Product ComplementDo acquired products provide
new products that may complement current T3 Energy
product offerings?
Geographic ExpansionDoes the potential acquisition present an opportunity to obtain greater geographic
presence domestically and/or internationally?
T3 Energy’s acquisition strategy T3 Energy’s acquisition strategy targets geographic expansion, targets geographic expansion,
product growth, and addition of product growth, and addition of complementary products.complementary products.
Acquisition Model
Growth Through AcquisitionGrowth Through Acquisition
Geographic Expansion
Capacity Expansion
Acquisition / Partnership
Growth Strategy
20
FinanceFinance
Certain information discussed in this presentation is considered non-GAAP financial measures. Non-GAAP financial measures should be viewed in addition to, and not as an alternative for, the Company’s reported results.
21
Q2 2007 operating results include a charge of $2.5 million related to a change in control provision. Q2 2007 operating results would be as follows with this add-back; SG&A $8,918 (17.2%), EBITDA $11,532 (22.2%), EBIT $10,457 (20.1%), net income $7,242, and Diluted EPS $0.60. Q2 2008 operating results include $2.5 million in costs related to the pursuit of strategic alternatives for the company. Q2 2008 operating results would be as follows with this add-back; SG&A $11,950 (17.7%), EBITDA $16,029 (23.7%), EBIT $13,770 (20.3%), net income $9,122, and Diluted EPS $0.70.
Q2 2008 Q2 2007 Delta
Revenues 67,690$ 51,933$ 15,757$
Gross Profit 27,979$ 20,450$ 7,529$ Gross Profit Margin 41.3% 39.4% 2.0%
SG&A 14,421$ 11,440$ 2,981$ SG&A % 21.3% 22.0% -0.7%
EBITDA 13,558$ 9,010$ 4,548$ EBITDA % 20.0% 17.3% 2.7%
EBIT 11,299$ 7,935$ 3,364$ EBIT % 16.7% 15.3% 1.4%
Net Income (Continuing Operations) 7,516$ 5,313$ 2,203$
Diluted EPS 0.58$ 0.44$ 0.14$
22ndnd Quarter Financial Performance Quarter Financial Performance
22
Improving Revenue & EarningsImproving Revenue & Earnings
$4.3$3.4
$4.4
$6.2 $6.7
$8.1 $7.7$8.9
$7.9
$10.6
$13.4$14.4
$11.3
$1.6
8.1%
17.2%
13.2% 13.5%
17.4% 17.6% 18.3%17.0%
18.6%
15.2%
19.9%20.8% 20.8%
16.7%
$-
$2
$4
$6
$8
$10
$12
$14
Q1 2
005
Q2 2
005
Q3 2
005
Q4 2
005
Q1 2
006
Q2 2
006
Q3 2
006
Q4 2
006
Q1 2
007
Q2 2
007
Q3 2
007
Q4 2
007
Q1 2
008
Q2 2
008 0%
4%
8%
12%
16%
20%
24%
Q2 2007 operating results include charge of $2.5 million related to a change of control provision; Q2 operating income would be $10.5 million or 20.1% and Diluted EPS would be $0.60 excluding this charge. Q2 2008 operating results include $2.5 million in costs related to the pursuit of strategic alternatives for the Company. Q2 2008 operating income would be $13.8 million or 20.3% and Diluted EPS would be $0.70 excluding these costs.
$19.8$25.0 $25.8
$32.6$35.7 $38.1
$44.2 $45.2 $47.9$51.9 $53.2
$64.4$69.2 $67.7
$-
$10
$20
$30
$40
$50
$60
$70
$80
Reven
ue (
$ M
illio
ns)
240% Increase
Diluted EPS
Quarterly Revenue
Quarterly Operating Income
Net
Inco
me
($ M
illio
n) N
et Inco
me P
ercentag
e
0.06$ 0.22$ 0.20$ 0.27$ 0.36$ 0.40$ 0.46$ 0.46$ 0.51$ 0.44$ 0.58$ 0.67$ 0.75$ 0.58$
23
Disciplined Capital SpendingDisciplined Capital Spending
$ 0.8 $ 0.8 $ 0.8 $ 0.8 $ 0.8 $ 0.8$ 0.9
$ 1.0$ 1.0
$ 1.1
$ 1.8
$ 2.2$ 2.3
$ 0.4$ 0.3 $ 0.3
$ 1.5
$ 2.5
$ 2.7
$ 2.2
$ 1.6
$ 0.7
$ 1.6
$ 2.1
$ 2.7
$ 3.4
$ 2.2
$ 1.1
$0.0
$0.5
$1.0
$1.5
$2.0
$2.5
$3.0
$3.5
Q1 2
005
Q2 2
005
Q3 2
005
Q4 2
005
Q1 2
006
Q2 2
006
Q3 2
006
Q4 2
006
Q1 2
007
Q2 2
007
Q3 2
007
Q4 2
007
Q1 2
008
Q2 2
008
Historical maintenance CapEx has been approximately $1 million annually.
CapEx versus Depreciation
$ M
illio
n D
olla
rs
EEC / HPT Acquisition
24
As of 12/31/07
As of 6/30/08
Capitalization ($ in Millions)
Cash $ 9.5 $ 6.8
Total Debt $ 61.5 $ 39.1
Stockholders' Equity $ 190.6 $ 214.5
Total Capitalization: $ 252.1 $ 253.6
Liquidity ($ in Millions)
Cash $ 9.5 $ 6.8
Revolving Line of Credit $ 180.0 $ 180.0
Less: Amount Outstanding $ (61.4) $ (39.0)
Less: Letters of Credit $ (0.5) $ (0.5)
Total Available Liquidity: $ 127.6 $ 147.3
Strong Balance SheetStrong Balance Sheet
25
Record Backlog Continues to GrowRecord Backlog Continues to Grow
$12
$19 $21
$30
$45
$57$61
$63
$70
$62$59
$65$59
$81
$93
$0$10
$20$30
$40$50
$60$70
$80$90
$100Q
1 20
05
Q2
2005
Q3
2005
Q4
2005
Q1
2006
Q2
2006
Q3
2006
Q4
2006
Q1
2007
Q2
2007
Q3
2007
Q4
2007
Q1
2008
Q2
2008
8/19
/200
8
675% Increase
$ M
illio
n D
olla
rs
26
Financial Management
Continued disciplined
approach with focus on
fundamentals.
6A-0202 6A-0041 6A-0564 6A-0386 6A-0253 6A-0756 16A-0087 16A-0026 16A-0131 16A-0171 16C-0032 16D-0018 6D-0462
Growth and Acquisition
Continue to pursue growth
opportunities via acquisition, geographic
expansion, and capacity
improvement.
New Product Introductions
Continue development of
new name-branded and engineered
products in all three product
sectors.
Supply Chain and Sourcing
Enhance sourcing pipeline
and technical resource team to
support new product
introductions and improved
margins.
Process Improvement
Continue to focus on process
improvements and lean
manufacturing opportunities
throughout the organization.
Growth TrajectoryGrowth Trajectory
Geographic Expansion
Product Growth
Product Complements
Acquisition Model