Fall 2014 Sector Update
Energy Investment Banking
North America
Joseph M. Niemiec Head of Energy Banking [email protected] +1 312 364 5315 Managing Director Andrew M. Jessen [email protected] Energy Services & Europe+1 312 364 5390 In this Issue:
Equipment Sector Report – ValuationSector Trends Analysis and Insights Matthew B. Gooch – M&A Activity Head of European Banking [email protected] +44 20 7868 4478 Managing Director Matthew M. Zimmer
[email protected] +44 20 7868 4502
William Blair’s investment banking group combines signi�icant transaction experience, rich industry knowledge, and deep relationships to deliver successful advisory and �inancing solutions to our global base of corporate clients. We serve both publicly traded and privately held companies, executing mergers and acquisitions, growth �inancing, �inancial restructuring, and general advisory projects. This comprehensive suite of services allows us to be a long-term partner to our clients as they grow and evolve. About William Blair From 2010-2014, the investment banking group completed more than 330 merger-and- Investment Banking acquisition transactions worth $73 billion in value, involving parties in 36 countries and �ive continents, was an underwriter on more than 20% of all U.S. initial public offerings, and raised nearly $100 billion in public and private �inancing.
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William Blair’s Energy Services & Equipment Contacts
North America
Joseph M. Niemiec Andrew M. Jessen Head of Energy Banking Managing Director Education: Chicago (MBA), Illinois (BS) Education: Chicago (MBA), Middlebury (AB) Contact Info: [email protected] Contact Info: [email protected] +1 312 364 5315 +1 312 364 5390 Joined Blair: 2004 Joined Blair: 2004
Europe
Matthew B. Gooch Matthew M. Zimmer Head of European Banking Managing Director Education: Chicago (MBA), Emory (BA), CFA Education: Columbia (MBA), Notre Dame (BA) Contact Info: [email protected] Contact Info: [email protected] +44 20 7868 4478 +44 20 7868 4502 Joined Blair: 2000 Joined Blair: 2007
Energy Services & Equipment Segment Focus
Oilfield Services & Equipment Midstream / Downstream Alternative / Other
Drilling Products & Services Engineered Systems Alternative Energy Services Oil & Gas Equipment Engineering & Construction Energy Efficiency Infrastructure Installation Pumps, Valves & Pipes Ethanol & Biodiesel
Production & Well Maintenance Testing & Inspection Smart Grid Technology Geophysical Services Transportation, Logistics & Solar & Wind Equipment Distribution
Energy Services & Equipment William Blair’s Energy Services & Equipment Contacts
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William Blair Spotlight – Recent Energy Services & Equipment Transactions
William Blair represented Uintah Engineering & Land Surveying (“UELS”), a portfolio company of Not Disclosed Moelis Capital Partners, in connection with its sale to Norwest Equity Partners Uintah Engineering & Land Surveying is the market-leading provider of information services including has been acquired by surveying, drafting and engineering specializing in the energy industry Norwest Equity Partners Norwest Equity Partners is a leading private equity firm with nearly $5 billion in capital under management that invests in profitable and growing middle market companies August 2014
William Blair acted as a co-manager in the offerings $383,720,581 Hi-Crush Partners is a pure play, low-cost, domestic producer and supplier of premium monocrystalline sand used as a proppant to enhance the recovery rates of hydrocarbons from oil and natural gas wells Follow-on Offerings Hi-Crush Partners produces a range of frac sand sizes for use in all major U.S. shale basins and is one of August 2014 & the few Northern White sand producers with onsite rail capacity for unit trains April 2014
William Blair acted as a co-manager in the offering $401,452,368 Emerge Energy Services is a diversified energy services company that operates in two key segments of the energy industry: Sand Production and Fuel Processing and Distribution Emerge Energy Services’ Sand Production subsidiary produces silica sand that is a key input for the Follow-on Offering hydraulic fracturing of oil and gas wells and Emerge Energy Services’ Fuel Processing and Distribution segment is primarily focused on acquiring, re-refining and selling transportation mixture June 2014
William Blair represented Hobré Instruments B.V., a portfolio company of Parcom Capital Management, Not Disclosed in connection with its sale to AAC Capital Benelux Hobré Instruments is a leading provider of online analyzers, sample systems, and complete turnkey has been acquired by systems and solutions to the oil and gas and process industries AAC is a leading Benelux mid-market buy-out firm, which has to date completed 27 management buyouts, of which 20 have been realized June 2014
William Blair represented MEGTEC Holdings, Inc., a portfolio company of Hamilton Robinson Capital $155,000,000 Partners and Stephens Capital Partners, in conjunction with its sale to The Babcock & Wilcox Company for $155 million
has been acquired by MEGTEC designs, engineers, manufactures and services sophisticated capital equipment for energy efficiency and carbon abatement, as well as for solar panel film and and electric car battery production Babcock & Wilcox Company is a $3.0 billion market cap leader in clean energy technology and services, June 2014 primarily for the nuclear, fossil, and renewable power markets
William Blair represented Dixie Electric, a portfolio company of One Rock Capital Partners, in Not Disclosed connection with its sale to First Reserve Dixie Electric is the market-leading provider of electrical infrastructure materials and services to the has been acquired by energy industry First Reserve is a premier global energy-focused private equity and infrastructure investment firm with over $24 billion of raised capital since 1983 December 2013
Energy Services & Equipment William Blair Spotlight – Recent Energy Services & Equipment Transactions
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Selected Energy Services & Equipment Transactions
Not Disclosed Not Disclosed $155,000,000 $383,388,215 $383,720,581 Not Disclosed
has been acquired by has been acquired by has been acquired by has been acquired by
Norwest Equity The Babcock & Partners AAC Capital Wilcox Company Follow-on Offering Follow-on Offerings First Reserve August 2014 June 2014 June 2014 June 2014 April 2014 December 2013
Surveying, Drafting & O&G Analyzers Capital Equipment Frac Sand / Midstream Frac Sand Electrification Services Engineering Services Logistics
Not Disclosed Not Disclosed Not Disclosed $207,300,000 $485,530,000 Not Disclosed ®
has been acquired by has been acquired by has been acquired by has been acquired by has been acquired by
Wellspring Capital CECO Environmental Management Wabtec Corporation Kelso & Company Corporation Follow-on Offerings Sumitomo Corporation October 2013 September 2013 September 2013 August 2013 Mar. ‘13 & Jun. ‘13 March 2013
Staffing Services Swellable Packers Mobile Onsite Refueling Capital Equipment Frac Sand Energy-Efficiency Motors
$1,723,872,733 $380,800,000 Not Disclosed $130,000,000 Not Disclosed $795,000,000
has been has been acquired by has been acquired by has been acquired by recapitalized by
Initial Public & Initial Public & Charterhouse Capital Sterling Investment Follow-on Offerings Follow-on Offering Partners LLP Partners KRG Capital Indorama Ventures PLC Nov. ’12 & Mar. ’13 March 2012 May ’11 & Sept. ‘12 September 2012 September 2012 August 2012
PVF Distribution Heat Tracing Explosion Proof Equipment Energy-Efficiency Services Security Integration Services Petrochemicals
$47,840,000 Not Disclosed $251,000,000 Not Disclosed Not Disclosed $349,563,000
CONS LIDATED UTILITY SERVICES, IN C. has been acquired by has been acquired by has been acquired by
Follow-on Offering Follow-on Offerings Follow-on Offering US Infrastructure Convertible Notes DuPont Aggreko plc Convertible February 2012 July 2011 November 2010 December 2010 December 2010 September 2010
Petrochemical Equipment Utility Services Solar Products Capital Equipment Equipment Rental Process Optimization Software
$269,107,000 Not Disclosed $74,997,000 Not Disclosed Not Disclosed $778,000,000
GENERAC §363 sale to has been acquired by has been acquired by has been acquired by
Valero Renewable Initial Public Offering Fuels Co. Follow-on Offering CST Industries Nikkiso Co., Ltd. ValueAct Capital February 2010 February 2010 September 2009 September 2009 August 2009 2009
Generators Ethanol Production Heat Exchangers Engineering & Construction O&G Pumps Seismic Services
Energy Services & Equipment Selected Energy Services & Equipment Transactions
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William Blair Energy Services & Equipment Equity Research Coverage
Brandon Dobell – Energy Services
+1 312 364 8773 [email protected]
Chase Jacobson – Engineering & Construction and Engineered Equipment
+1 212 237 2748 [email protected]
Nick Heyman – Diversified Industrials
+1 212 237 2740 [email protected]
To receive research materials on any of the companies or sectors above please contact Jenny Romero ([email protected]).
Energy Services & Equipment William Blair Energy Services & Equipment Equity Research Coverage
William Blair
Table of Contents
Energy Services & Equipment Update ...... 1 Rig Count & Key Economic Data ...... 3 Selected M&A Activity ...... 8 M&A Trends ...... 13 Public Comps ...... 17 Quarterly Market Update – All Industries...... 27 Notes ...... 31 Disclosures ...... 32
Energy Services & Equipment Table of Contents
Energy Services & Equipment Update
William Blair
Energy Services & Equipment Update
The M&A market for energy services & equipment transactions has been robust in 2014. The year-to-date transaction value of approximately $62 billion represents a 35% increase from the corresponding period in 2013; there have been 331 transactions in the sector thus far this year, which is an increase of 35% over the same period in 2013. The surge in M&A activity is attributable to several factors, including: i) accelerated growth in the energy sector, particularly in North America; ii) increased appetite for energy exposure from buyers; iii) strong access to liquidity; and iv) a continuing economic recovery. The energy sector’s accelerated growth has created what we view as a fundamental change in how buyers are viewing the opportunity to deploy capital in a higher growth and relatively more stable market environment. The favorable energy services & equipment market backdrop has resulted in a larger universe of strategic buyers and private equity funds pursuing energy exposure. For example, several recent, notable deals have been completed in the testing & inspection segment by ALS, Bureau Veritas, Mistras, and TÜV SÜD, who are all looking for increased energy-related revenue. This trend is also accentuated by B/E Aerospace’s leap into the market with five completed energy services transactions since 2013. Additionally, we have seen accelerated activity across generalist private equity funds in the sector such as Norwest Equity Partners’ acquisition of UELS and AAC Capital’s acquisition of Hobré Instruments. These funds have had impressive returns and will look to replicate their success in the highly attractive energy market. The trend of generalist private equity funds pursuing energy exposure has resulted in a record number of financial sponsor transactions, which represent 15% of all energy services & equipment transactions year to date, compared to only 6% in 2010. We expect a continued increase in financial sponsor transactions based on: i) a large number of private equity funds that have aggressively pursued energy services & equipment deals, but have not yet completed a transaction; ii) an increase in the number of funds looking for energy exposure; and iii) a significant amount of capital overhang across private equity funds. Additionally, several strategic buyers have been divesting assets to focus on core operations rather than expanding their service offerings, which bodes well for financial buyers to compete in sale processes. For example, Cameron recently agreed to divest its Centrifugal Compression and Reciprocating Compression business divisions, which were viewed as non-core. Additionally, Weatherford has been shedding non-core assets while selectively pursuing M&A opportunities. While the M&A market has seen strong growth in 2014, valuations have remained in line with historical levels. For the year-to-date period the average EV/LTM revenue multiple is 1.52 times, while the average EV/LTM EBITDA multiple is 8.9 times. Despite a robust M&A market, valuations in the energy services & equipment sector have not ballooned as to stymie deal activity. We believe that current valuations are at a level that will continue to attract strong interest from buyers and will see business owners actively considering or pursuing sale processes. Multiples for publicly traded energy services & equipment companies are above the long-term median levels and are currently trading at 9.0 times EV/LTM EBITDA. Public company valuations have continued to increase from a trough in Q3 2012 of 7.4 times EV/LTM EBITDA, which is largely attributable to improving operating performance and an increasingly favorable growth outlook. Public comparables have collectively lagged the S&P 500 both recently and in the longer term. However, there have been certain segments of the market that have performed extraordinarily well, such as small cap services companies that have materially outperformed the broader market.
─ Joe Niemiec Head of Energy Banking
Energy Services & Equipment Energy Services & Equipment Update 1
William Blair
The following is a summary of public company valuation trends for the energy services & equipment sector over the past 5 years and the last 12 months. The energy services & equipment composite (ES&E) represents the public companies highlighted on pages 16 to 25 of this report.
5-Year ES&E Composite vs. S&P 500 12-Month ES&E Composite vs. S&P 500
ES&E +61.4% S&P 500 +94.1% ES&E +13.0% S&P 500 +22.1% (Indexed Price) (Indexed Price) 200% 130%
150% 115%
100% 100%
50% 85%
0% 70% Aug-09 Aug-10 Aug-11 Aug-12 Aug-13 Aug-14 Aug-13 Nov-13 Jan-14 Apr-14 Jun-14 Aug-14 Source: FactSet Research Systems as of August 28, 2014. Source: FactSet Research Systems as of August 28, 2014.
5-Year EV/LTM EBITDA Over Time – ES&E Composite
Median: 8.5x 15.0x
10.4x 9.9x 9.3x 9.1x 9.3x 9.3x 10.0x 8.5x 8.5x 8.5x 8.5x 8.9x 9.0x 7.7x 8.1x 7.8x 7.6x 7.4x 7.8x 7.1x
5.0x
0.0x
Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Current
2010 2011 2012 2013 2014
Median EV/EBITDA Trading Multiples Current 6 Months 1 Year 3 Years 5 Years
Oil & Gas Equipment 9.8x 10.2x 9.9x 8.6x 5.6x
Geophysical Services 4.3x 7.3x 5.4x 6.4x 5.6x
Land Drilling 6.7x 6.6x 6.2x 6.8x 5.1x
Offshore Drilling 6.9x 7.2x 9.0x 8.2x 4.2x
Well Services 9.5x 8.2x 7.5x 7.4x 5.1x
Offshore Services 8.6x 9.0x 10.2x 9.3x 4.9x
Large Cap Services 10.7x 9.6x 8.6x 8.8x 7.2x
Small Cap Services 13.9x 14.5x 11.3x 7.4x 6.2x
Engineering & Construction 9.4x 9.7x 8.9x 7.5x 6.0x
Engineered Equipment 12.4x 12.7x 11.1x 8.3x 5.4x
S&P 500 11.0x 10.8x 10.1x 8.3x 8.6x Source: Capital IQ as of August 28, 2014.
Energy Services & Equipment 2 Energy Services & Equipment Update
Rig Count & Key Economic Data
William Blair
Rig Count & Key Economic Data
Oil & gas activity stands at a near record high with rig counts close to levels experienced prior to the recession in 2008. Year-to-date rig count in the U.S. has increased over 9%. Oil prices remain at attractive levels, which have resulted in a large growth in oil rigs of over 14% in 2014. Gas prices, however, have remained at levels that have not encouraged drilling activity and, as such, gas-related rigs have decreased nearly 9% in 2014. Rig count growth has been skewed to oil rich areas, such as the Permian, Williston, and DJ- Niobrara basins, which collectively have seen over 100 rig additions. We believe that ongoing global conflict will continue to put pressure on oil prices, which will result in continued oil-related drilling activity. We do not foresee a near-term reversal of gas- related activity, but we do have a bullish view in the longer term as capital investment in petrochemicals and natural-gas-fueled infrastructure help to absorb excess gas supply. U.S. Rig Count Data
U.S. Rig Count
2,500
2,000
1,500
1,000
500
0 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014
U.S. Rig Oil / Gas Split U.S. Rig Drilling Type
2,500 Oil Gas 1,500 Directional Horizontal Vertical
2,000 1,200
1,500 900
1,000 600
500 300
0 0
Source: All U.S. and International rig count data provided by Baker Hughes.
Energy Services & Equipment Rig Count & Key Economic Data 3
William Blair
U.S. Rig Count Data (cont’d)
YTD Change in Major U.S. Basins
+4%
+16% (11%)
+24%
+4%
0% (8%) +60% +29% (40%)
5% (24%) +19%
(12%)
U.S. Basin Count Detail
Basin Current(1) Prior Year(2) Jan ‘14(3) YTD Change YoY Change Ardmore Woodford 6 14 10 (40%) (57%)
Arkoma Woodford 8 2 5 60% 300%
Barnett 26 30 34 (24%) (13%)
Cana Woodford 33 28 36 (8%) 18%
DJ-Niobrara 62 49 50 24% 27%
Eagle Ford 200 234 228 (12%) (15%)
Fayetteville 9 11 9 0% (18%)
Granite Wash 67 72 52 29% (7%)
Haynesville 45 44 43 5% 2%
Marcellus 76 87 85 (11%) (13%)
Mississippian 78 70 75 4% 11%
Permian 555 466 468 19% 19%
Utica 44 35 38 16% 26%
Williston 192 182 185 4% 5%
(1): Data as of 8/25/2014. (2): Data as of 8/23/2013. (3): January '14 data as of 1/3/2014. Source: All U.S. and International rig count data provided by Baker Hughes.
Energy Services & Equipment 4 Rig Count & Key Economic Data
William Blair
International Rig Count Data
YTD Change Globally, by Region
+21%
+12%
+7% (1%)
(1%)
+1%
0%
Global Rig Count Detail
Region Land Offshore Oil Gas Total YTD Change YoY Change North America 2,220 61 1,799 479 2,281 12% 9% Latin America 339 68 354 51 407 1% (3%) Europe 98 55 90 42 153 21% 10% Middle East 378 54 349 81 432 7% 14% Africa 91 46 105 21 137 (1%) 7% Asia 126 106 174 56 232 (1%) 3% Australia 14 7 8 13 21 0% 31% Source: All U.S. and International rig count data provided by Baker Hughes.
Energy Services & Equipment Rig Count & Key Economic Data 5
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Key Economic Data Commodity Inputs
WTI and Brent Natural Gas Prices
WTI Brent Current: $4.02 $160.00 $6.00
$120.00 $4.50
$80.00 $3.00
$40.00 Current WTI Price: $94.55 $1.50 Current Brent Price: $102.42 $0.00 $0.00
Source: The Wall Street Journal / Haver Analytics. Source: The Wall Street Journal / Haver Analytics.
Steel Prices U.S. Dollar Exchange Rate and Dollar Index
Current: $440 $ / € Dollar Index $1,000 $1.50 90.0
$750 $1.40 85.0
$500 $1.30 80.0
$1.20 75.0 $250 Current $/€: $1.35 Current Dollar Index: 85.0 $1.10 70.0 $0
Source: Bloomberg. Source: Federal Reserve.
Energy Services & Equipment 6 Rig Count & Key Economic Data
William Blair
Recent U.S. Economic Data
U.S. GDP Growth Rate U.S. Unemployment Rate
12.0% 10.0% Current: 4.2% Current: 6.2%
10.0% 5.0%
0.0% 8.0%
(5.0%) 6.0%
(10.0%) 4.0%
Source: Bureau of Economic Analysis. Source: Bureau of Labor Statistics.
U.S. Average Hours Worked 10-Year U.S. Treasuries Yield and CPI
Current: 38.6 Yield Inflation 40.0 5.0% 39.0 3.0% 38.0 1.0%
37.0 (1.0%) Current Yield: 2.5% 36.0 (3.0%) Current Inflation: 2.0%
Source: U.S. Federal Reserve. Source: Bureau of Economic Analysis.
Energy Services & Equipment Rig Count & Key Economic Data 7
Selected M&A Activity
William Blair
Selected M&A Activity
Energy Services & Equipment Transactions
($ in millions)
Enterprise Value/LTM Date Enterprise Announced Target (Unit Sold) / Business Description Target Nation Buyer Value Revenue EBITDA 08/28/14 The NACHER Corporation United States Mistras Group - - - Provides maintenance services to oil, gas, and petrochemical industries 08/26/14 Uintah Engineering & Land Surveying (UELS) United States Norwest Equity Partners - - - Provider of information services specializing in the energy industry 08/22/14 HDB United States Matrix Service $10 0.50x - Provides construction, fabrication, and turnaround services to energy companies in central California 08/20/14 RCI Consultants United States TÜV SÜD - - - Provides project management and project support services to the energy and petrochemical industry 08/18/14 Analysts United States Bureau Veritas - - - Provides industrial diagnostic evaluations and maintenance solutions 08/18/14 Cameron International (Centrifugal Compression United States Ingersoll-Rand $850 2.15x - Manufacturing Business) Flow equipment products, systems, and services 08/18/14 Recapture Solutions United States Intervale Capital - - - Provides solutions for power and flare needs of oil and gas production companies 07/20/14 Compressor Systems United States Compressco Partners $919 2.96x 11.2x Fabricates, sells, rents, and services natural gas compressors 07/16/14 Cadre Services United States U.S. Silica Holdings $98 - 8.8x Produces frac–sand proppants for oil and natural gas applications 07/01/14 Hobré Instruments Netherlands AAC Capital - - - Designs, manufactures, markets, and maintains on-line analyzers 06/26/14 Petrofac FPSO Holding (80% Stake) United Kingdom First Reserve $530 - - Acquires and holds floating production storage units 06/25/14 EV Offshore United Kingdom Dunedin $117 3.45x - Designs and develops cameras for the oil and gas industry in the United Kingdom and internationally 06/25/14 Nabors Industries (Completion & Production Services Bermuda C&J Energy Services $2,919 1.41x 9.1x Businesses) Creates completion and production services operations 06/01/14 Axip Energy Services United States Enerflex $430 3.36x 7.5x Contract compression, processing and after-market services business 05/28/14 PetroLogistics United States Flint Hills Resources $2,098 2.73x 8.8x Operator of a dehydrogenation facility that produces polymer grade and chemical grade propylene 05/23/14 KUDU Industries Canada Schlumberger $239 - - Manufactures progressing cavity pump solutions for the oil and gas industry 05/13/14 MEGTEC Systems United States The Babcock & Wilcox $155 - - Manufactures capital equipment for process and renewable Company industries 05/08/14 Desert NDT United States ShawCor $260 - 7.9x Provides nondestructive testing solutions 04/08/14 Hi-Crush Augusta United States Hi-Crush Partners $224 - 7.5x Engaged in processing frac sand Sources: Capital IQ and Merger Market.
Energy Services & Equipment Selected M&A Activity 8
William Blair
Energy Services & Equipment Transactions (cont’d)
($ in millions)
Enterprise Value/LTM Date Enterprise Announced Target (Unit Sold) / Business Description Target Nation Buyer Value Revenue EBITDA 03/31/14 Vision Oil Tools United States B/E Aerospace $180 - - Provider of fishing services and oilfield rental tools 03/24/14 Weatherford International (Pipeline and Specialty United States Baker Hughes $241 - - Services Business) Oil and gas pipeline pigs manufacturing and pipeline cleaning, inspection, and maintenance business 03/18/14 Anchor Drilling Fluids USA United States Calumet Lubricants $337 1.09x 10.1x Provides integrated fluids management and customized drilling fluids, and related services solutions 03/14/14 PPI Technology Services United States Cardno Limited $145 1.09x 6.7x Provides upstream, midstream, and downstream oilfield services in the United States and internationally 02/18/14 SeaMex (50% Stake) Mexico Fintech Advisory $976 - - Owns and manages jack-up drillings units in Mexico, and formed as an equally joint venture between Seadrill and Fintech Advisory 01/20/14 Cameron International (Reciprocating Compression United States General Electric Company $550 1.82x 11.0x Business Division) Flow equipment products, systems, and services 01/13/14 Foster Wheeler United Kingdom AMEC $2,752 0.83x 10.6x Operates in engineering and construction, as well as power generating equipment businesses worldwide 01/07/14 Varel International Energy Services United States Sandvik AB $740 2.18x - Manufactures oilfield tools 01/06/14 Wildcat Wireline United States B/E Aerospace $152 - - Provides cased hole electric wireline services to the oil and gas industry 12/23/13 Hoover Energy Partners United States Regency Energy Partners $290 - - Engaged in the construction, acquisition, and optimization of midstream pipelines and plant assets located in the Permian 12/18/13 Dixie Electric United States First Reserve - - - Oilfield electrification services 12/10/13 Innovative Mag-Drive United States Flowserve $79 4.71x 11.7x Designs and manufactures sealless magnetic drive centrifugal pumps 12/09/13 Stream Norway MRC Global $260 - - Provides solutions in the field of valves, piping, electrical, and instrumentation 12/09/13 Valerus Compression Services (Field Solutions Business) United States Kentz $435 0.88x 8.4x An integrated oil and gas surface facility solutions provider 11/22/13 Aker Well Service and Extreme Trading & Mechanical Norway EQT Partners $658 - 9.0x Equipment Supplies wireline, tractor, and cased hole logging services to the oil and gas industries 11/12/13 Carmagen Engineering United States Mistras Group - - - Provides engineering consulting and project management services to the oil and gas industry 11/11/13 Elkhorn Holdings United States John Wood Group $217 0.87x - Operates in industrial construction and fabrication businesses 11/04/13 Swift Technical Services United Kingdom Wellspring Capital - - - Provides manpower to the oil and gas industry globally Management 10/07/13 Outrigger Energy United States Kayne Anderson Energy $200 - - Engaged in providing range of midstream services to crude oil and natural gas producers Sources: Capital IQ and Merger Market.
Energy Services & Equipment 9 Selected M&A Activity
William Blair
Energy Services & Equipment Transactions (cont’d)
($ in millions)
Enterprise Value/LTM Date Enterprise Announced Target (Unit Sold) / Business Description Target Nation Buyer Value Revenue EBITDA 09/19/13 Wildcat Permian Services United States JP Energy Development $213 - - Engaged in oil and gas infrastructure development 08/19/13 Kentz Channel Islands AMEC $855 0.60x 7.1x Provides engineering, procurement, and construction (EPC) services, as well as construction and technical support services 07/27/13 Sevan Drilling (69.5% Stake) Norway Seadrill $1,041 6.00x 19.1x Engaged in offshore ultra deepwater drilling contract 07/16/13 Reservoir Group United Kingdom ALS Limited $533 2.39x 9.7x Provides drilling, completion, and production technologies and services to the oil and gas industry 05/22/13 IronGate Energy Services United States Clearlake Capital Group $244 2.44x 5.4x Provides equipment and services to exploration and production operators for land and offshore markets 05/14/13 D&I Silica United States Hi-Crush Partners $124 1.18x - Provides rail-based bulk materials handling, transportation, warehouse, and distribution services 05/14/13 Troms Offshore Supply Norway Tidewater $395 - 7.3x Owns and operates offshore service vessels and other special vessels related to research and sub sea activities worldwide 04/08/13 Lufkin Industries United States GE Oil & Gas $3,323 2.52x 17.0x Manufactures and supplies oilfield and power transmission products for use in energy infrastructure and industrial applications 02/20/13 Bergen Group Rosenberg Norway WorleyParsons $160 0.60x 5.0x Operates as a contractor in the oil and gas industry, marketing the Norwegian continental shelf 02/11/13 Seadrill (Tender rigs business in Asia) Singapore SapuraKencana Petroleum $2,900 - - Offshore drilling services Berhad 02/06/13 Gulfstar One (49% Stake) United States Marubeni $1,001 - - Constructing a floating platform to be set into production in the Gulf of Mexico 01/29/13 Enovate Systems Limited United Kingdom Aker Solutions $118 5.01x 15.0x Designs, develops, and manufactures well completion and well intervention systems 12/20/12 Mathena United States The Weir Group $385 - - Manufactures mud-gas pressure solutions for the oil and gas industry 11/16/12 Songa Eclipse Norway Seadrill $590 - - Ultra-deepwater semi-submersible rig 11/12/12 GustoMSC Netherlands Parcom Capital $185 - - Manufactures and supplies mobile units/vessels for the Management offshore industry 10/01/12 Thomas Russell United States UOP $593 - - Develops skid-mounted modular plant systems to clients in the processing industry 09/30/12 Acteon Group Limited (52% Stake) United Kingdom Kohlberg Kravis Roberts & $788 - - Provides project management, engineering design, Co.; White Deer Energy equipment and service personnel 09/25/12 Union Drilling United States Sidewinder Drilling $244 0.97x 4.9x Provider of contract drilling services for energy industry companies 09/24/12 Fugro Geoscience Division Netherlands CGG $1,549 1.56x 9.7x Provides seismic services and geophysical and geological services 09/16/12 R3 Treatment United States Waste Connections $1,441 8.83x 21.2x Provides non-hazardous oilfield waste treatment, recovery, and disposal services to oil and gas producers in the United States Sources: Capital IQ and Merger Market.
Energy Services & Equipment Selected M&A Activity 10
William Blair
Energy Services & Equipment Transactions (cont’d)
($ in millions)
Enterprise Value/LTM Date Enterprise Announced Target (Unit Sold) / Target Business Description Target Nation Buyer Value Revenue EBITDA 08/20/12 Pure Energy Services Canada FMC Technologies $310 1.09x 5.4x Provides well completion and production related services to oil and natural gas companies 08/14/12 Ulterra Drilling Technologies United States ESCO $325 1.73x - Provides PDC drill bits for drilling markets worldwide 08/09/12 Robbins & Myers United States National Oilwell Varco $2,439 2.39x 9.4x Manufacturer and supplier of engineered equipment and systems for the pharmaceutical, energy, chemical and industrial markets 07/30/12 The Shaw Group United States Chicago Bridge & Iron $3,382 0.56x 20.4x Provides services to multinational and national oil Company companies, industrial corporations, regulated utilities, and the United States government agencies worldwide 06/29/12 Energy, Safety and Risk Consultants United Kingdom AMEC $218 1.99x - Provides consulting and project solutions to the civil and defense nuclear markets 06/06/12 Casedhole Holdings United States C&J Spec-Rent Services $324 2.52x 10.0x Provides various well-site services to oil and gas drilling and producing companies in the United States 05/30/12 CE Franklin Canada National Oilwell Varco $221 0.40x 8.1x Engages in the distribution of pipes, valves, flanges, fittings, production equipment, tubular products, and other general industrial supplies primarily to the oil and gas industry in Canada 05/21/12 NPS Energy DMCC United Arab Aker Solutions $460 3.96x 11.4x Provides oilfield services Emirates 05/21/12 The Shaw Group (Energy & Chemicals Business) United States Technip SA $298 1.05x - Provides project-related services, including design, engineering, construction, procurement, and technology to chemical and refining industry 04/30/12 Bifold Fluidpower United Kingdom LDC $138 3.38x 15.2x Oil and gas valve manufacturer 04/18/12 TTS Group (drilling equipment business) Norway Cameron International $270 - - Designs, develops, and supplies equipment solutions for the marine and offshore industries worldwide 04/10/12 Wilson International United States National Oilwell Varco $800 0.38x - Distributes pipes, valve and valve automation, fittings, mill and tool supplies, safety products, and artificial lift systems 04/05/12 Production Control Services United States Dover Artificial Lift $222 2.47x - Designs, engineers, and manufactures well deliquification and production optimization products for oil and gas producers 03/20/12 Expro International (connectors and measurements United Kingdom Siemens $610 5.32x 13.1x division) Designs, engineers, and manufactures well deliquification and production optimization products for oil and gas producers 03/19/12 Seajacks International United Kingdom Marubeni; Innovation $850 - - Owner and manager of self-propelled jack-up vessels Network 02/29/12 Tebodin Netherlands Bilfinger $194 0.64x - Provides consulting and engineering services in the Netherlands and internationally 02/29/12 Transocean Pacific Drilling (50% Stake) United States Transocean $1,843 - - Engaged in operating deepwater drillships Sources: Capital IQ and Merger Market.
Energy Services & Equipment 11 Selected M&A Activity
William Blair
Energy Services & Equipment Transactions (cont’d)
($ in millions)
Enterprise Value/LTM Date Enterprise Announced Target (Unit Sold) / Target Business Description Target Nation Buyer Value Revenue EBITDA 02/27/12 Zenith Oilfield Technology United Kingdom Lufkin Industries $135 - - Developer of monitoring and completion technologies 02/23/12 Exterran Holdings (compression and processing assets) United States Exterran Partners $183 - - Compression and processing assets of Exterran Holdings 02/20/12 Flint Energy Services Canada URS $1,489 0.89x 11.0x Provider of integrated products and services for the oil and gas industry 02/03/12 NKT Flexibles Denmark National Oilwell Varco $670 2.53x 12.6x Engaged in designing and manufacturing flexible pipe products and systems for the offshore oil and gas industry Sources: Capital IQ and Merger Market.
Energy Services & Equipment Selected M&A Activity 12
M&A Trends
William Blair
M&A Trends
Annual M&A Trends
Energy Services & Equipment Industry Transaction Volume – Last 10 Years
(# of deals) Median: 404 deals
600 564 510 484 500 449 420 368 386 388 400 331 285 300 245 186 200
100
0 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2013 YTD 2014 YTD
Data as of August 28, 2014. Sources: Capital IQ, Merger Market and William Blair.
Energy Services & Equipment Industry Total Disclosed Transaction Value – Last 10 Years
($ in billions) Median: $82 billion $160 $136 $138 $140 $120 $110 $100 $88 $87 $77 $80 $61 $62 $62 $60 $46 $39 $40 $15 $20 $0 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2013 YTD 2014 YTD
Data as of August 28, 2014. Sources: Capital IQ, Merger Market and William Blair.
Energy Services & Equipment M&A Trends 13
William Blair
Quarterly M&A Trends
Quarterly Transaction Volume
(# of deals) Median: 104 deals 200 144 150 126 124 109 110 105 86 93 98 104 101 108 107 104 95 96 99 83 82 100
50
0
Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Current 2010 2011 2012 2013 2014 Data as of August 28, 2014. Sources: Capital IQ, Merger Market and William Blair.
Quarterly Transaction Value
($ in billions) Median: $21 $45 $37 $33 $34 $35 $28 $30 $24 $27 $20 $20 $21 $21 $21 $18 $14 $12 $15 $14 $12 $10 $8
$0
Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Current 2010 2011 2012 2013 2014 Data as of August 28, 2014. Sources: Capital IQ, Merger Market and William Blair.
Energy Services & Equipment 14 M&A Trends
William Blair
Participant Trends
Breakdown of Acquirers by Type
Percent of Deals Sponsor Strategic
Percent of Deals 100%
80%
60%
40% 100% 60%80% 20%40% 0%20%
0% 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 YTD Sponsor 6% 6% 5% 7% 9% 5% 6% 8% 12% 12% 15% Strategic 94% 94% 95% 93% 91% 95% 94% 92% 88% 88% 85% Data as of August 28, 2014. Sources: Capital IQ, Merger Market and William Blair.
Breakdown of Acquirers by Location
Percent of Deals Domestic Cross-Border
100% Percent of Deals 80%100%
60%80%
40%60%
20%40%
0%20%
0% 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 YTD Domestic 63% 68% 67% 64% 59% 57% 58% 57% 57% 57% 61% Cross-Border 37% 32% 33% 36% 41% 43% 42% 43% 43% 43% 39% Data as of August 28, 2014. Sources: Capital IQ, Merger Market and William Blair.
Energy Services & Equipment M&A Trends 15
William Blair
Valuation Trends
Average Revenue Multiples
EV/Revenue Multiple
2.00x 1.86x 1.86x 1.78x 1.73x 1.74x 1.71x 1.69x 1.54x 1.60x 1.47x 1.52x 1.40x
1.20x
0.80x
0.40x
0.00x 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 YTD Number of Disclosed Deals 26 66 80 105 98 38 76 73 76 57 43
Average EBITDA Multiples
EV/EBITDA Multiple
12.0x 11.0x 11.0x 10.1x 10.2x 9.7x 9.8x 9.8x 10.0x 9.2x 9.0x 8.9x
8.0x 7.5x
6.0x
4.0x
2.0x
0.0x 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 YTD Number of Disclosed Deals 17 35 51 59 44 17 38 47 39 29 25 Note: Data represents global transactions announced in the respective sectors. Note: Transactions with multiples that are not meaningful are categorized as undisclosed. Data as of August 28, 2014. Sources: Capital IQ, Merger Market and William Blair.
Energy Services & Equipment 16 M&A Trends
Public Comps
William Blair
Public Comps
Oil & Gas Equipment
($ in millions, except share price data) 52-Week LTM Metrics Valuation
Current Equity Enterprise EBITDA 2015 EV/ Company Stock Price Low High Value Value (EV) Revenue EBITDA Margin EV/ EBITDA P/E EBITDA 2015 P/E
Aker Solutions ASA $95.70 $78.60 $116.80 $26,035 $30,469 $45,741 $3,154 6.9% 9.6x 16.5x 6.5x 12.5x
Cameron International 74.36 52.50 74.53 15,088 17,975 10,640 1,562 14.7% 11.5x 17.9x 9.3x 14.4x Corporation
CIRCOR International, Inc. 71.00 56.88 83.37 1,255 1,182 848 110 12.9% 10.8x 19.3x 8.9x 16.0x
Dril-Quip, Inc. 100.75 94.99 121.07 4,028 3,685 892 273 30.6% 13.5x 20.1x 10.1x 16.7x
FMC Technologies, Inc. 61.59 47.58 63.92 14,465 15,412 7,582 1,167 15.4% 13.2x 21.9x 10.2x 17.9x
Forum Energy Technologies, Inc. 33.43 24.32 37.03 3,138 3,543 1,616 290 17.9% 11.5x 18.4x 8.5x 14.5x
Hunting plc 9.10 7.19 9.20 1,342 1,495 1,366 244 17.9% 10.5x 15.5x 8.4x 14.1x
National Oilwell Varco, Inc. 85.42 72.67 86.41 36,751 36,100 23,957 4,509 18.8% 7.9x 14.2x 7.2x 12.7x
Oceaneering International, Inc. 69.08 66.00 87.64 7,461 7,438 3,516 796 22.6% 9.3x 17.2x 7.5x 14.9x
Schoeller-Bleckmann Oilfield 80.00 70.53 96.57 1,273 1,305 453 133 29.3% 9.8x 19.3x 7.9x 16.1x Equipment AG
Tenaris SA 16.63 14.78 18.45 19,632 18,803 10,330 2,756 26.7% 9.2x 16.3x 7.8x 14.4x
Tesco Corporation 21.03 15.45 22.50 843 737 536 100 18.6% 7.4x 17.4x 4.9x 12.6x
Vallourec SA 33.32 31.25 51.01 4,248 6,360 5,683 922 16.2% 6.9x 18.5x 6.8x 14.4x
Median $69.08 $52.50 $74.53 $4,248 $6,360 $3,516 $796 17.9% 9.8x 17.9x 7.9x 14.4x
Indexed Stock Performance – Last 5 Years Indexed Stock Performance – Last 12 Months
(Indexed Price) Oil & Gas Equipment +85.0% (Indexed Price) Oil & Gas Equipment +8.7% 250% S&P 500 +94.1% 130% S&P 500 +22.1%
200% 120%
150% 110%
100% 100%
50% 90%
Source: FactSet Research Systems as of August 28, 2014. Source: FactSet Research Systems as of August 28, 2014.
Energy Services & Equipment Public Comps 17
William Blair
Geophysical Services
($ in millions, except share price data) 52-Week LTM Metrics Valuation
Current Equity Enterprise EBITDA 2015 EV/ Company Stock Price Low High Value Value (EV) Revenue EBITDA Margin EV/ EBITDA P/E EBITDA 2015 P/E
CGG $6.79 $6.43 $19.30 $1,197 $3,126 $3,359 $1,146 34.1% 3.9x NM 3.7x 11.4x
Fugro NV 27.57 26.82 49.72 2,273 3,148 2,443 389 15.9% 8.2x 16.6x 6.5x 11.4x
Geospace Technologies 40.73 34.01 107.93 535 476 279 92 33.0% 5.2x 12.1x NM NM Corporation
ION Geophysical Corporation 3.39 2.81 5.52 556 596 565 173 30.6% 4.5x 39.9x 3.0x 13.0x
Petroleum Geo Services ASA 46.70 46.57 83.80 9,999 17,250 1,355 727 53.7% 4.0x 8.3x 3.2x 6.6x
TGS Nopec Geophysical Co. ASA 173.70 138.90 210.70 17,702 16,397 889 747 84.0% 3.6x 11.1x 3.5x 11.3x
Median $34.15 $30.41 $66.76 $1,735 $3,137 $1,122 $558 33.6% 4.3x 12.1x 3.5x 11.4x
Indexed Stock Performance – Last 5 Years Indexed Stock Performance – Last 12 Months
(Indexed Price) Geophysical Services (15.0%) (Indexed Price) Geophysical Services (41.1%) 200% S&P 500 +94.1% 150% S&P 500 +22.1
150% 125%
100% 100%
50% 75%
0% 50%
Source: FactSet Research Systems as of August 28, 2014. Source: FactSet Research Systems as of August 28, 2014.
Energy Services & Equipment 18 Public Comps
William Blair
Land Drilling
($ in millions, except share price data) 52-Week LTM Metrics Valuation
Current Equity Enterprise EBITDA 2015 EV/ Company Stock Price Low High Value Value (EV) Revenue EBITDA Margin EV/ EBITDA P/E EBITDA 2015 P/E
Archer Limited $10.80 $4.48 $12.40 $6,255 $10,913 $2,001 $188 9.4% 9.6x NM 5.7x 16.1x
CanElson Drilling Inc. 7.40 5.91 8.78 685 747 306 95 31.0% 7.6x 13.2x 5.2x 10.3x
Ensign Energy Services Inc. 16.26 15.42 18.44 2,493 3,100 2,215 493 22.3% 6.3x 16.4x 4.8x 12.4x
Helmerich & Payne, Inc. 103.07 62.39 118.95 11,155 10,800 3,599 1,510 42.0% 7.2x 15.9x 5.6x 13.4x
Nabors Industries Ltd. 26.26 15.21 30.24 7,871 11,352 6,365 1,706 26.8% 6.7x 21.5x 5.2x 12.0x
Parker Drilling Co. 6.22 5.54 8.67 757 1,294 965 270 28.0% 4.8x 15.3x 3.7x 8.6x
Patterson-UTI Energy Inc. 33.54 18.83 38.43 4,901 5,468 2,825 920 32.6% 5.9x 21.4x 4.5x 14.1x
Pioneer Energy Services Corp. 15.34 6.72 18.40 969 1,440 981 243 24.7% 5.9x 34.4x 4.6x 20.1x
Precision Drilling Corporation 13.61 9.20 15.65 3,984 5,124 2,203 675 30.7% 7.6x 16.8x 5.1x 11.1x
Median $15.34 $9.20 $18.40 $3,984 $5,124 $2,203 $493 28.0% 6.7x 16.6x 5.1x 12.4x
Indexed Stock Performance – Last 5 Years Indexed Stock Performance – Last 12 Months
(Indexed Price) Land Drilling +91.6% (Indexed Price) Land Drilling +49.4% 250% S&P 500 +94.1% 175% S&P 500 +22.1%
200% 150%
150% 125%
100% 100%
50% 75%
Source: FactSet Research Systems as of August 28, 2014. Source: FactSet Research Systems as of August 28, 2014.
Energy Services & Equipment Public Comps 19
William Blair
Offshore Drilling
($ in millions, except share price data) 52-Week LTM Metrics Valuation
Current Equity Enterprise EBITDA 2015 EV/ Company Stock Price Low High Value Value (EV) Revenue EBITDA Margin EV/ EBITDA P/E EBITDA 2015 P/E
Atwood Oceanics, Inc. $48.88 $44.88 $58.46 $3,145 $4,494 $1,078 $532 49.4% 8.4x 9.4x 5.6x 6.6x
Diamond Offshore Drilling, Inc. 43.78 43.04 65.62 6,004 7,168 2,734 1,045 38.2% 6.9x 14.4x 5.5x 11.5x
Ensco plc 49.75 47.85 62.44 11,659 16,218 5,082 2,400 47.2% 6.8x 8.6x 6.8x 8.6x
Fred Olsen Energy ASA 147.70 138.30 300.40 9,787 17,458 1,107 455 41.2% 6.3x 10.4x 4.3x 6.0x
Hercules Offshore, Inc. 3.33 3.10 7.85 535 1,554 960 347 36.1% 4.5x 17.2x 4.4x 9.7x
Noble Corp. 27.94 26.04 40.66 7,104 13,703 4,607 2,306 50.1% 5.9x 8.9x 7.7x 10.1x
Ocean Rig UDW Inc. 18.47 16.12 20.97 2,436 6,413 1,476 730 49.4% 8.8x 10.5x 6.6x 8.1x
Pacific Drilling S.A. 9.85 9.23 12.25 2,141 4,788 880 436 49.5% 11.0x 12.0x 6.3x 8.4x
Rowan Companies plc 29.87 28.43 38.65 3,719 5,280 1,577 549 34.8% 9.6x 14.5x 5.0x 7.6x
SeaDrill Limited 36.90 32.40 48.09 18,195 30,910 4,805 2,416 50.3% 13.5x 11.4x 9.3x 10.1x
Transocean Ltd. 38.41 37.33 55.74 13,912 22,267 9,603 3,897 40.6% 5.7x 8.4x 7.0x 11.9x
Median $36.90 $32.40 $48.09 $6,004 $7,168 $1,577 $730 47.2% 6.9x 10.5x 6.3x 8.6x
Indexed Stock Performance – Last 5 Years Indexed Stock Performance – Last 12 Months
(Indexed Price) Offshore Drilling (9.5%) (Indexed Price) Offshore Drilling (18.3%) 200% S&P 500 +94.1% 140% S&P 500 +22.1%
150% 120%
100% 100%
50% 80%
0% 60%
Source: FactSet Research Systems as of August 28, 2014. Source: FactSet Research Systems as of August 28, 2014.
Energy Services & Equipment 20 Public Comps
William Blair
Well Services
($ in millions, except share price data) 52-Week LTM Metrics Valuation
Current Equity Enterprise EBITDA 2015 EV/ Company Stock Price Low High Value Value (EV) Revenue EBITDA Margin EV/ EBITDA P/E EBITDA 2015 P/E
Basic Energy Services, Inc. $23.82 $11.29 $29.84 $1,029 $1,809 $1,329 $265 19.9% 6.8x 43.4x 4.5x 15.6x
C&J Energy Services, Inc. 28.57 19.88 34.93 1,581 1,864 1,212 168 13.8% 11.1x 24.6x 5.8x 13.5x
Calfrac Well Services Ltd. 20.44 14.29 22.57 1,937 2,593 1,902 218 11.5% 11.9x 28.5x 5.9x 11.8x
Canyon Services Group, Inc. 16.43 10.43 20.05 1,125 1,140 384 40 10.3% 28.7x 25.2x 5.9x 11.2x
Frank's International N.V. 19.98 19.89 32.70 3,067 2,872 1,090 382 35.1% 7.5x 18.0x 6.0x 15.2x
Key Energy Services Inc. 6.12 5.96 10.52 940 1,635 1,459 211 14.4% 7.8x NM 5.0x 28.8x
Mullen Group Ltd. 28.85 24.30 31.34 2,643 2,974 1,467 300 20.5% 9.9x 18.4x 8.7x 16.7x
RPC Inc. 22.32 14.22 25.15 4,884 4,994 2,063 547 26.5% 9.1x 19.4x 5.6x 13.0x
Superior Energy Services, Inc. 35.64 22.85 37.05 5,513 6,967 4,603 1,045 22.7% 6.7x 19.6x 4.9x 13.8x
Trican Well Service Ltd. 15.62 11.97 18.19 2,337 2,965 2,278 138 6.0% 21.5x NM 6.3x 15.5x
Median $21.38 $14.26 $27.50 $2,137 $2,732 $1,463 $242 17.2% 9.5x 22.1x 5.8x 14.5x
Indexed Stock Performance – Last 5 Years Indexed Stock Performance – Last 12 Months
(Indexed Price) Well Services +119.4% (Indexed Price) Well Services +18.2% 400% S&P 500 +94.1% 145% S&P 500 +22.1%
300% 130%
200% 115%
100% 100%
0% 85%
Source: FactSet Research Systems as of August 28, 2014. Source: FactSet Research Systems as of August 28, 2014.
Energy Services & Equipment Public Comps 21
William Blair
Offshore Services
($ in millions, except share price data) 52-Week LTM Metrics Valuation
Current Equity Enterprise EBITDA 2015 EV/ Company Stock Price Low High Value Value (EV) Revenue EBITDA Margin EV/ EBITDA P/E EBITDA 2015 P/E
Bourbon $22.35 $17.95 $24.36 $1,600 $3,461 $1,312 $411 31.3% 8.4x 22.6x 8.3x 15.2x
Bristow Group, Inc. 73.56 64.10 85.70 2,616 3,446 1,594 313 19.6% 10.9x 14.0x 8.5x 12.6x
CHC Group Ltd. 6.92 5.88 10.25 563 1,851 1,765 210 11.9% 8.5x NM 3.4x NM
Gulfmark Offshore, Inc. 40.00 37.35 53.89 1,055 1,575 497 193 38.9% 8.1x 12.4x 6.6x 9.4x
Helix Energy Solutions Group, Inc. 26.97 19.44 28.00 2,846 2,905 1,006 321 31.9% 9.0x 15.4x 6.9x 13.9x
Hornbeck Offshore Services, Inc. 43.42 37.44 59.93 1,577 2,381 585 265 45.3% 9.0x 15.8x 5.6x 10.4x
PHI Inc. 41.52 33.50 42.70 652 994 891 161 18.1% 6.1x 7.9x NM 8.3x
SEACOR Holdings Inc. 81.01 75.25 99.00 1,606 2,089 1,303 240 18.5% 8.6x 36.8x 7.5x 25.1x
Tidewater Inc. 50.45 45.51 63.22 2,508 3,973 1,487 442 29.7% 8.7x 12.7x 7.2x 10.7x
Median $41.52 $37.35 $53.89 $1,600 $2,381 $1,303 $265 29.7% 8.6x 14.7x 7.0x 11.6x
Indexed Stock Performance – Last 5 Years Indexed Stock Performance – Last 12 Months
(Indexed Price) Offshore Services +42.2% (Indexed Price) Offshore Services (4.2%) 250% S&P 500 +94.1% 160% S&P 500 +22.1%
200% 140%
150% 120%
100% 100%
50% 80%
Source: FactSet Research Systems as of August 28, 2014. Source: FactSet Research Systems as of August 28, 2014.
Energy Services & Equipment 22 Public Comps
William Blair
Large Cap Services
($ in millions, except share price data) 52-Week LTM Metrics Valuation
Current Equity Enterprise EBITDA 2015 EV/ Company Stock Price Low High Value Value (EV) Revenue EBITDA Margin EV/ EBITDA P/E EBITDA 2015 P/E
Baker Hughes Incorporated $69.21 $46.33 $75.64 $30,109 $33,717 $23,313 $4,082 17.5% 8.3x 16.5x 5.8x 12.4x
Halliburton Company 67.38 47.46 74.33 57,309 62,665 30,510 6,428 21.1% 9.7x 16.6x 6.9x 12.6x
Schlumberger Limited 110.16 80.68 118.76 142,815 149,527 46,808 12,707 27.1% 11.6x 19.3x 9.3x 16.1x
Weatherford International plc 23.34 13.07 24.88 18,052 26,979 14,865 2,138 14.4% 12.6x 20.3x 6.9x 13.2x
Median $68.30 $46.90 $74.99 $43,709 $48,191 $26,912 $5,255 19.3% 10.7x 18.0x 6.9x 12.9x
Indexed Stock Performance – Last 5 Years Indexed Stock Performance – Last 12 Months
(Indexed Price) Large Cap Energy Services +95.0% (Indexed Price) Large Cap Energy Services +37.2% 250% S&P 500 +94.1% 160% S&P 500 +22.1%
200% 140%
150% 120%
100% 100%
50% 80%
Source: FactSet Research Systems as of August 28, 2014. Source: FactSet Research Systems as of August 28, 2014.
Energy Services & Equipment Public Comps 23
William Blair
Small Cap Services
($ in millions, except share price data) 52-Week LTM Metrics Valuation
Current Equity Enterprise EBITDA 2015 EV/ Company Stock Price Low High Value Value (EV) Revenue EBITDA Margin EV/ EBITDA P/E EBITDA 2015 P/E
CARBO Ceramics Inc. $108.59 $81.01 $156.00 $2,509 $2,463 $691 $185 26.7% 13.3x 26.3x 9.7x 19.4x
Core Laboratories NV 156.38 143.14 221.00 6,947 7,256 1,080 366 33.9% 19.8x 26.7x 17.2x 23.7x
Emerge Energy Services LP 140.46 27.63 140.49 3,332 3,496 1,040 99 9.5% 35.4x 39.3x 15.4x 19.4x
Exterran Holdings, Inc. 44.89 26.50 45.90 3,008 4,989 2,897 601 20.8% 8.0x 55.0x 6.5x 28.3x
Hi-Crush Partners LP 65.94 23.08 69.25 2,437 2,605 233 92 39.2% 28.5x 20.8x 13.1x 15.3x
Oil States International Inc. 63.98 59.66 113.64 3,460 3,584 2,765 803 29.0% 4.5x 17.5x 7.5x 15.1x
Pason Systems Inc. 35.04 21.01 35.51 2,897 2,753 438 173 39.4% 15.9x 23.7x 9.3x 19.5x
RigNet, Inc. 46.83 34.24 59.06 825 850 272 61 22.5% 13.9x 34.2x 8.8x 23.7x
ShawCor Ltd. 58.69 37.01 60.63 3,535 3,887 1,856 373 20.1% 10.6x NM 8.3x NM
TETRA Technologies, Inc. 11.61 9.25 13.43 924 1,344 935 96 10.3% 13.9x 23.5x 4.6x 12.5x
U.S. Silica Holdings, Inc. 70.72 22.88 71.29 3,808 4,000 680 170 25.1% 23.5x 32.1x 12.5x 21.5x
Median $63.98 $27.63 $69.25 $3,008 $3,496 $935 $173 25.1% 13.9x 26.5x 9.3x 19.4x
Indexed Stock Performance – Last 5 Years Indexed Stock Performance – Last 12 Months
(Indexed Price) Small Cap Energy Services +245.2% (Indexed Price) Small Cap Energy Services +49.2% 400% S&P 500 +94.1% 175% S&P 500 +22.1%
300% 150%
200% 125%
100% 100%
0% 75%
Source: FactSet Research Systems as of August 28, 2014. Source: FactSet Research Systems as of August 28, 2014.
Energy Services & Equipment 24 Public Comps
William Blair
Engineering & Construction
($ in millions, except share price data) 52-Week LTM Metrics Valuation
Current Equity Enterprise EBITDA 2015 EV/ Company Stock Price Low High Value Value (EV) Revenue EBITDA Margin EV/ EBITDA P/E EBITDA 2015 P/E
AMEC plc $11.38 $9.95 $12.71 $3,395 $3,369 $3,841 $302 7.9% 10.5x 13.8x 8.0x 12.1x
Bilfinger SE 57.91 52.00 92.86 2,557 2,807 8,476 425 5.0% 6.3x 12.8x 5.3x 10.5x
Chicago Bridge & Iron Company 63.75 57.54 89.22 6,897 8,976 12,215 1,046 8.6% 8.4x 12.5x 7.1x 10.8x N.V.
Fluor Corporation 74.48 63.17 83.93 11,732 10,058 23,612 1,336 5.7% 7.5x 17.5x 6.6x 14.6x
Foster Wheeler AG 32.54 22.92 34.95 3,257 2,891 3,238 237 7.3% 12.0x 18.0x 7.8x 14.8x
Jacobs Engineering Group Inc. 54.31 49.57 66.88 7,226 7,316 12,619 707 5.6% 10.3x 15.9x 7.6x 13.5x
John Wood Group PLC 7.82 6.10 8.39 2,842 3,111 6,815 559 8.2% 9.4x 12.9x 8.0x 11.7x
KBR, Inc. 22.24 20.42 36.70 3,230 2,335 6,727 149 2.2% 15.7x NM 5.5x 14.9x
Matrix Service Company 28.00 15.52 38.71 740 726 1,154 76 6.6% 9.6x 17.6x 6.7x 14.4x
McDermott International Inc. 7.35 6.58 9.36 1,747 1,976 2,284 (222) (9.7%) NM NM 8.0x 37.8x
Petrofac Limited 11.23 10.57 15.25 3,821 4,526 6,070 968 15.9% 8.0x 10.9x 5.9x 9.0x
Saipem SpA 17.79 14.81 21.00 7,818 13,026 12,976 1,209 9.3% 10.6x 24.7x 7.1x 12.8x
SBM Offshore N.V. 11.57 9.10 16.18 2,426 6,121 5,436 817 15.0% 9.8x 6.6x 8.3x 6.7x
Subsea 7 SA 103.30 101.50 132.50 34,043 34,624 6,723 1,198 17.8% 4.4x 8.3x 4.0x 8.9x
Technip SA 70.01 60.20 92.49 7,885 7,277 10,009 1,011 10.1% 7.2x 15.5x 5.3x 11.4x
Tecnicas Reunidas, S.A. 41.69 33.00 46.62 2,240 1,572 2,930 160 5.4% 10.1x 16.4x 8.2x 14.4x
Willbros Group Inc. 10.71 7.66 13.69 541 776 2,149 100 4.7% 7.7x 16.8x 5.7x 10.2x
WorleyParsons Limited 17.08 14.72 24.54 4,216 4,730 9,561 503 5.3% 9.1x 14.6x 8.1x 13.6x
Median $25.12 $17.97 $35.83 $3,326 $3,947 $6,725 $531 6.9% 9.4x 15.5x 7.1x 12.5x
Indexed Stock Performance – Last 5 Years Indexed Stock Performance – Last 12 Months
(Indexed Price) Engineering & Construction +22.3% (Indexed Price) Engineering & Construction (4.6%) 250% S&P 500 +94.1% 145% S&P 500 +22.1%
200% 130%
150% 115%
100% 100%
50% 85%
Source: FactSet Research Systems as of August 28, 2014. Source: FactSet Research Systems as of August 28, 2014.
Energy Services & Equipment Public Comps 25
William Blair
Engineered Equipment
($ in millions, except share price data) 52-Week LTM Metrics Valuation
Current Equity Enterprise EBITDA 2015 EV/ Company Stock Price Low High Value Value (EV) Revenue EBITDA Margin EV/ EBITDA P/E EBITDA 2015 P/E
Chart Industries Inc. $66.34 $64.05 $130.85 $2,022 $2,159 $1,179 $178 15.1% 12.1x 22.9x 9.9x 18.1x
Flowserve Corp. 75.99 55.64 82.24 10,396 11,449 4,911 859 17.5% 13.2x 19.6x 11.1x 17.2x
Global Power Equipment Group 16.37 14.54 20.98 280 296 471 33 7.0% 9.0x 28.7x 7.1x 14.6x Inc.
Graham Corporation 30.24 26.20 41.94 306 245 102 15 14.5% 16.5x 27.9x 8.5x 19.0x
The Babcock & Wilcox Company 29.16 27.52 36.00 3,134 3,198 2,926 516 17.7% 5.5x 16.5x 7.3x 12.1x
The Weir Group PLC 26.50 20.36 28.48 5,654 6,412 2,375 497 20.9% 12.7x 18.7x 11.1x 16.7x
Median $29.70 $26.86 $38.97 $2,578 $2,678 $1,777 $337 16.3% 12.4x 21.2x 9.2x 16.9x
Indexed Stock Performance – Last 5 Years Indexed Stock Performance – Last 12 Months
(Indexed Price) Engineered Equipment +181.6% (Indexed Price) Engineered Equipment +13.5% 400% S&P 500 +94.1% 130% S&P 500 +22.1%
300% 120%
200% 110%
100% 100%
0% 90%
Source: FactSet Research Systems as of August 28, 2014. Source: FactSet Research Systems as of August 28, 2014.
Energy Services & Equipment 26 Public Comps
Quarterly Market Update – All Industries
William Blair
Quarterly Market Update – All Industries
Domestic M&A Market Summary
U.S. Activity Trends
M&A Activity
Number of Deals Deal Value ($ in billions) 14,634 18,000 12,420 13,340 11,488 12,749 13,397 12,089 12,170 $1,800 8,792 9,934 10,087 9,375 12,000 $1,200 6,000 $600
0 $0 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 LTM Number of Deals >$750M 147 233 281 362 460 228 156 287 262 312 312 347 Middle Market 4,239 4,527 4,453 4,548 4,537 4,766 4,144 6,224 5,360 5,155 4,203 4,051 Undisclosed 4,406 5,174 5,353 7,510 8,343 6,494 5,075 6,238 7,775 9,167 7,574 7,772 Deal Value $688 $992 $1,297 $1,647 $1,750 $1,075 $886 $1,048 $1,174 $1,104 $1,294 $1,712
Middle-Market M&A Activity
Deal Value Number of Deals ($ in millions) 4,537 4,766 10,000 6,224 $600 4,144 5,360 5,155 4,051 4,239 4,527 4,453 4,548 4,203 $400 5,000 $200 0 $0 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 LTM Number of Deals
$250M-$750M 314 402 424 536 627 417 269 457 475 467 512 563 $50M-$250M 1,065 1,218 1,265 1,294 1,333 1,195 791 1,138 1,148 1,151 1,095 1,096 <$50M 2,860 2,907 2,764 2,718 2,577 3,154 3,084 4,629 3,737 3,537 2,596 2,392 Deal Value $292 $351 $364 $421 $466 $355 $239 $370 $383 $380 $387 $406
Private-Equity Activity
Number of Deals Deal Value ($ in billions) 2,316 1,821 $3,000 2,247 1,462 1,976 2,035 2,091 1,979 $800 1,646 1,812 1,749 $2,000 1,200 $400 $1,000
$0 $0 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 LTM Number of Deals >$750M 33 61 84 106 149 64 34 94 88 95 88 106 Middle Market 626 906 859 998 826 788 742 869 698 660 507 564 Undisclosed 541 679 869 1,143 1,341 969 686 1,013 1,249 1,336 1,154 1309 Deal Value $120.4 $224.6 $287.6 $523.7 $644.3 $243.7 $149.3 $272.3 $268.6 $264.5 $282.6 $319.0 Note: Year-to-date as of June 30, 2014. Sources: Dealogic and William Blair’s mergers-and-acquisitions market analysis. Data represents announced deals only.
Energy Services & Equipment Quarterly Market Update – All Industries 27
William Blair
U.S. Valuation Trends
Median EV/EBITDA Multiples
Middle Market Overall Market
15.0x 12.0x 9.0x 6.0x
3.0x 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 LTM
Middle Market 7.5x 7.4x 8.7x 10.1x 10.0x 9.5x 7.9x 6.4x 9.3x 10.0x 9.1x 9.9x 9.7x
Overall Market 7.9x 8.0x 9.1x 10.3x 11.0x 11.2x 9.0x 7.4x 9.9x 10.8x 9.6x 10.0x 10.1x
Median EV/EBITDA Middle-Market Multiples
< $50M $50M-$250M $250M-$750M 16.0x
12.0x
8.0x
4.0x
0.0x 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 LTM < $50M 4.1x 7.1x 6.4x 7.2x 10.2x 7.8x 4.9x 3.9x 8.8x 9.0x 6.8x 8.1x 8.0x $50M-$250M 7.5x 6.9x 8.7x 11.3x 9.5x 10.4x 9.1x 7.1x 9.3x 10.0x 9.2x 11.3x 11.3x $250M-$750M 9.7x 9.2x 9.1x 10.0x 11.0x 9.4x 8.3x 7.9x 9.7x 10.7x 10.2x 12.9x 12.5x
Average Acquisition Premiums
1-Week Premium 4-Week Premium
50%
40%
30%
20% 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 LTM 1-Week Premium 36% 32% 28% 26% 26% 27% 36% 38% 34% 36% 36% 23% 24% 4-Week Premium 38% 40% 32% 31% 31% 29% 37% 41% 38% 39% 39% 30% 31% Notes: Data limited to a range of 1 to 100 and LTM is as of June 30, 2014. Sources: Dealogic and William Blair’s mergers-and-acquisitions market analysis. Data represents announced deals only.
Energy Services & Equipment 28 Quarterly Market Update – All Industries
William Blair
U.S. Equity Capital Markets Summary
Historical IPO Issuance
200 175 139 150 133 105 95 100 71 63 70 54 50 48 56 35 39 50 28 25 13 19 20 21 21 0 2009 2010 2011 2012 2013 2013 2014 1Q 11 2Q 11 Q3 11 Q4 11 Q1 12 Q2 12 Q3 12 Q4 12 Q1 13 Q2 13 Q3 13 Q4 13 Q1 14 Q2 14 YTD YTD
Historical Follow-On Issuance
700 657 564 600 506 470 500 394 380 400 292 300 173 193 198 182 200 135 128 130 127 152 140 86 98 115 100 50 0 2009 2010 2011 2012 2013 2013 2014 1Q 11 2Q 11 Q3 11 Q4 11 Q1 12 Q2 12 Q3 12 Q4 12 Q1 13 Q2 13 Q3 13 Q4 13 Q1 14 Q2 14 YTD YTD
Note: Excludes follow-on offerings for CLEFs, REITs, and SPACs.
IPO Pricings by Sector – Last 4 Quarters: Follow-on Pricings by Sector – Last 4 Quarters:
237 Total Deals 746 Total Deals
19 77 Business Services Business Services 59 146 24 58 Consumer Consumer 21 67 Financial Financial Healthcare Healthcare 29 Industrial 207 Industrial 191 85 Technology Technology
Sources: Dealogic and William Blair’s mergers-and-acquisitions market analysis.
Energy Services & Equipment Quarterly Market Update – All Industries 29
William Blair
Debt Capital Markets Summary
Average Equity Contribution
Less than $50 million EBITDA More than $50 million EBITDA 60%
50% 46%47% 45% 46% 43% 41% 40% 40% 40% 41% 41% 38% 38% 40% 36% 37% 35% 37% 37% 34% 33% 34% 31% 32% 32% 32% 30% 29% 30% 30%
20%
10%
0% 7.0x 3.8x 4.0x 3.6x 5.0x 5.3x 4.1x 7.0x 6.0x 2001 2002 2003 3.5x2004 2005 4.1x2006 20074.4x 2008 4.9x2009 2010 20114.4x 2012 2013 2014 YTD6.0x 4.0x5.0x 3.9x 3.4x 4.0x5.0x 3.0x 3.9x 4.8x 3.0x 2.0x 3.3x 4.4x 3.1x 2.0x 1999 2000 2001 2002 2003 2004 2005 2006 2007 4.6x2008 2009 2010 2011 3.1x 3.2x 3.0x 3.4x 2.4x 3.3x 3.4x (1) Quarterly LBO Debt Multiples – Less Than $50 Million EBITDA
Total Debt/EBITDA Senior Debt/EBITDA
7.0x 7.0x
6.0x 6.0x 4.8x 4.9x 5.0x 5.1x 5.0x 4.2x 5.0x 4.2x 4.4x 3.8x 4.4x 4.0x 5.1x 3.8x 5.0x 3.7x 4.8x 4.0x 3.6x 4.5x 3.4x 4.0x 4.0x 3.8x 3.8x 3.0x 3.7x 3.7x 3.0x 3.3x 3.2x 3.1x 3.0x 2.2x 2.0x 2.0x 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014
Quarterly LBO Debt Multiples – Greater Than $50 Million EBITDA
7.0x 6.8x 7.0x
6.6x 5.5x 6.0x 5.3x 6.0x 5.1x 4.8x 4.9x 5.7x 5.3x 5.0x 4.5x 5.0x 4.8x 4.3x 5.0x 4.1x 4.4x 5.5x 4.0x 4.9x 4.0x 4.0x 4.4x 3.1x 3.9x 4.0x 2.6x 3.0x 3.5x 3.0x 3.1x 2.9x 2.6x 2.9x 2.0x 2.0x 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014
Sources: Dealogic and Standard & Poor’s as of June 30, 2014.
Energy Services & Equipment 30 Quarterly Market Update – All Industries
William Blair
Notes
Energy Services & Equipment Notes 31
William Blair
Disclosures
“William Blair” is a trade name for William Blair & Company, L.L.C., William Blair Investment Management, LLC and William Blair International, Ltd. William Blair & Company, L.L.C. and William Blair Investment Management, LLC are each a Delaware company and regulated by the Securities and Exchange Commission. William Blair & Company, L.L.C. is also regulated by The Financial Industry Regulatory Authority and other principal exchanges. William Blair International, Ltd is authorized and regulated by the Financial Conduct Authority (“FCA”) in the United Kingdom. William Blair only offers products and services where it is permitted to do so. Some of these products and services are only offered to persons or institutions situated in the United States and are not offered to persons or institutions outside the United States.
This material has been approved for distribution in the United Kingdom by William Blair International, Ltd. Regulated by the Financial Conduct Authority (FCA), and is directed only at, and is only made available to, persons falling within COB 3.5 and 3.6 of the FCA Handbook (being “Eligible Counterparties” and Professional Clients). This Document is not to be distributed or passed on at any “Retail Clients.” No persons other than persons to whom this document is directed should rely on it or its contents or use it as the basis to make an investment decision. William Blair & Company | 222 West Adams Street | Chicago, Illinois 60606 | +1 312 236 1600 | williamblair.com September 9, 2014 Energy Services & Equipment 32 Disclosures