Flotek Industries, Inc. · NYSE:FTK
Flotek Industries — Investor Presentation (December 2018)
36 slides from Flotek Industries's investor presentation, December 2018
Slide 1: Investor Presentation, December 2018
Investor Presentation, December 2018 | NYSE: FTK 1
Slide 2: Forward Looking Statements Disclaimer & Disclosures
FORWARD LOOKING STATEMENTS DISCLAIMER & DISCLOSURES Certain statements and information included in this presentation Contained in this slide deck are transactional and financial reporting constitute “forward–looking statements” within the meaning of the information. Private Securities Litigation Ref
Slide 3: About Flotek: Who We Are
ABOUT FLOTEK: WHO WE ARE NYSE: FTK Flotek® develops and delivers Recent Stock Price: $1.41 prescriptive chemistry-based Recent Market Cap: $80 mil. technology, including specialty 30 Day Average Trading Volume: 1,456,065 shares chemicals, to clients in the energy, Outstanding Shares: 57.0 mil. consu
Slide 4: Strategic Initiatives Update
STRATEGIC INITIATIVES UPDATE Continued focus to reduce cash and non-cash SG&A across the organization. Protect borrowing capacity, maximize financial flexibility through proactive lender communication. Maximize gross margin performance through logistics and manufacturing improvements. Reduce balance
Slide 5: Business Update
BUSINESS UPDATE Energy Chemistry Technologies (“ECT”) • Fourth quarter revenues to decline less than 10% sequentially (no change from previous guidance). • Over 75% of PCM clients utilizing value-added chemistry, compared to less than 50% one year ago. • Experiencing increasing international interes
Slide 6: Operating Segments
OPERATING SEGMENTS Energy Chemistry Technologies (ECT) Consumer and Industrial Chemistry Flotek's Energy Chemistry Technologies division Technologies (CICT) provides oilfield specialty chemicals and logistics Flotek’s Consumer and Industrial Chemistry as well as reservoir characterization and Techno
Slide 7: Locations and Global Client Reach
International Reach LOCATIONS AND • Calgary, AB Canada, Offices/Chemistry Lab GLOBAL CLIENT REACH • Abu Dhabi, UAE, Regional Distribution • Dubai, UAE, Sales Office • Netherlands, Sales Office • Y-TEC Collaboration in Argentina • Collaboration with Anton in China • Japan, CICT Sales Office • Global
Slide 8: SG&A Reduction Initiatives Ongoing
SG&A REDUCTION INITIATIVES ONGOING Cash SG&A* Reductions and Run-Rate Target $20.0 $18.0 Quarterly Cash SG&A $16.0 Exceeded our initial 20% reduction target in 4Q17, $14.0 ongoing reduction in action. $12.0 $10.0 4Q16 1Q17 2Q17 3Q17 4Q17 1Q18 2Q18 3Q18 *Cash SG&A defined as SG&A less stock compensat
Slide 9: Energy Chemistry Technologies (ECT)
ENERGY CHEMISTRY TECHNOLOGIES (ECT) 9
Slide 10: Macro Trends
MACRO TRENDS • EIA completions have continued to increase YTD 2018. EIA DPR Completions 2,400 • Technology and innovation are reducing break-evens. EIA, Monthly DPR Regions Completions • Commodity volatility is prioritizing returns over production. 2,000 • Mechanical completion methods showing dimin
Slide 11: Chemistry Offerings, for the Lifecycle
CHEMISTRY OFFERINGS, FOR THE LIFECYCLE Initial frac and stimulation Remediation and re-treatment • We have 50+ formulations of Complex nano-Fluid® (CnF®) technologies, and growing. • Of which, 30+ are regularly commercialized due to activity concentration. • We offer 100+ chemistry solutions for all
Slide 12: ECT Client Trends: Building Depth and Breadth
ECT CLIENT TRENDS: BUILDING DEPTH AND BREADTH Major* Domestic Client Base Average Revenue per Domestic Client Domestic ECT Revenue per Client Major* DOM Clients 1Q15 2Q15 3Q15 4Q15 1Q16 2Q16 3Q16 4Q16 1Q17 2Q17 3Q17 4Q17 1Q18 2Q18 3Q18 *Major clients defined as having purchased >1% of LT average on
Slide 13: Expansive Footprint to Serve Our Clients
EXPANSIVE FOOTPRINT TO SERVE OUR CLIENTS Marcellus/Utica Regional Support Canada Research & Innovation Center Calgary Regional Support Calgary, CA Canonsburg, PA Mid-Con Regional Support & Manufacturing Texas Gulf Coast Regional Support & Manufacturing Marlow, OK Permian Regional Support & Manufactu
Slide 14: Complex Nano-Fluid Technology vs. Conventional Surfactant
COMPLEX NANO-FLUID® (“CnF®”) TECHNOLOGY VS. CONVENTIONAL SURFACTANT: INCREASING CONNECTIVITY CnF® Composition Conventional Surfactant SOLVENT CORE Made from orange oils to SURFACTANT increase fluid mobility COMPONENTS MULTIPLE SURFACTANT TYPES VS Water soluble portion Patented & customized Efficient
Slide 15: CnF: Delivering Capillary Pressure, Demulsification & Solvency
CnF®: DELIVERING CAPILLARY PRESSURE, DEMULSIFICATION & SOLVENCY TO THE RESERVOIR Water Phase Hydrocarbon Layer Reservoir Face CnF® traveling CnF® CnF® delivery to through the interaction with reservoir fluids and reservoir matrix reservoir fluids reservoir surface Source: UrTeC:2154925, “Insights in
Slide 16: Eagle Ford: Karnes County
EAGLE FORD: KARNES COUNTY (VOLATILE OIL) PRESCRIPTIVE CHEMISTRY DELIVERING IMPROVED PRODUCTION AVERAGE PRODUCTION CURVES PRODUCTIVITY NORMALIZED FOR PROPPANT INTENSITY CnF® (57 wells) Without CnF® (41 wells) 3 month BOE per 1000’ of lateral BOE/Proppant intensity [lbs/ft] 10,850 BOE/1000’ CnF® Wells
Slide 17: Midland Basin Completions Effectiveness
MIDLAND BASIN COMPLETIONS EFFECTIVENESS 3-Month Cumulative BOE per 1000’ vs Completion variables 3 month BOE cumulative volumes per 1000’ 2016 2017 2017 2016 2017 2016 2015 2015 2014 2013 2013 2018 2018 2018 2015 2014 2014 2013 2012 2012 2012 Proppant intensity [lbs/ft] Fluid intensity [bbl/ft] Late
Slide 18: Delaware Basin Completion Effectiveness
DELAWARE BASIN COMPLETION EFFECTIVENESS 3-Month Cumulative BOE per 1000’ vs Completion variables 3 month BOE cumulative volumes per 1000’ 2017 2017 2017 2016 2015 2015 2015 2013 2013 2013 2016 2016 2014 2018 2014 2018 2014 2018 2012 2012 2012 Proppant intensity [lbs/ft] Fluid intensity [bbl/ft] Late
Slide 19: Delaware Basin: Wolfcamp A Breaking Out of the Plateau
DELAWARE BASIN: WINKLER, WARD & REEVES COUNTIES Wolfcamp A: Breaking Out of the Plateau Avg. 3 month cumulative BOE vs Avg. proppant intensity by year Flotek 2017 PCM® optimized fluid design 3 month cumulative BOE per 1000’ 2016 2017 2013 2015 2016 2018 2012 2014 Data source: RS Energy Proppant Inte
Slide 20: Wolfcamp B: More Favorable GOR with CnF
DELAWARE BASIN: WINKLER, WARD & REEVES COUNTIES Wolfcamp B: More Favorable GOR with CnF® GasRatio Gas Oil Oil Ratio CnF® Non CnF® Type Curve Cubic feet/bbl 33 CnF® wells 393 Non CnF® wells Wells with first prod. date of 01/2012 or later Data source: RS Energy Total months on production 20
Slide 21: Wolfcamp B: Breaking Out of the Plateau
DELAWARE BASIN: WINKLER, WARD & REEVES COUNTIES Wolfcamp B: Breaking out of the Plateau Avg. 3 month cumulative BOE vs. Avg. proppant intensity by year 3 month cumulative BOE per 1000’ Average 2012-2018 37% Average 2012-2018 CnF® Technology Without CnF® Data source: RS Energy Proppant Intensity [lbs
Slide 22: Consumer & Industrial Chemistry Technologies (CICT)
CONSUMER & INDUSTRIAL CHEMISTRY TECHNOLOGIES (CICT) 22
Slide 23: Consumer & Industrial Chemistry Technologies (CICT)
CONSUMER & INDUSTRIAL CHEMISTRY TECHNOLOGIES (CICT) • Consumers are demanding natural flavors that are “from the named fruit” in beverages and foods. • Expansion into non-thermal manufacturing and varietal diversification will enhance growth opportunities. • Nutraceutical, pharmaceutical and agricul
Slide 24: CICT Is Ideally Positioned
CICT IS IDEALLY POSITIONED Vertical Opportunities • Our ability to utilize the entire citrus molecule, opens the door for new opportunities in markets Oil & Gas we have not yet penetrated. • We have the ability to leverage increasing energy market demand for d-Limonene in our patented Industrial & F
Slide 25: CICT Moving Along the Value Chain
CICT MOVING ALONG THE VALUE CHAIN • We are positioned to begin moving further across the value chain, where other components can be utilized in higher margin end markets. ECT demand of d-Limonene for CnF® is only one component of the citrus oil chain. • Florida Chemical is a leader in orange oil pro
Slide 26: Commitment to Innovation & Protecting Our Positioning
COMMITMENT TO INNOVATION & PROTECTING OUR POSITIONING 26
Slide 27: Commitment to Innovation: Patent Portfolio
COMMITMENT TO INNOVATION: PATENT PORTFOLIO Total Patent Assets Florida Chemical Our patent portfolio continues to grow, with six patents Flotek Industries, Company, Inc., 3 Inc., 4 granted in 2017. Twenty-two patents have been granted in 2018 and at least ten additional patents are expected to grant
Slide 28: Product Life Cycle, Delivering Technology to Industry
PRODUCT LIFE CYCLE, DELIVERING TECHNOLOGY TO INDUSTRY 2017 CnF® Sales by Formulation Year • Flotek’s investments in new chemistry technology have 50.0% 45.0% been a differentiator for our energy clients. Contribution to Annual Revenue by 40.0% 35.0% Formulation Year • In 2017, share of revenue from
Slide 29: Appendix
APPENDIX 29
Slide 30: CnF: Increasing Production in the Delaware Basin
CnF®: INCREASING PRODUCTION IN THE DELAWARE BASIN • In a Delaware Basin Case Study, CnF® wells showed 1-Year Avg. Daily Oil Production Rates 100 a 12% increase and a 76% increase in daily oil 90 Average 365-Day Oil Production 76% production rates through the first year of a well’s life 80 70 when no
Slide 31: CnF: Unlocking Oil in the Midland Basin
CnF®: UNLOCKING OIL IN THE MIDLAND BASIN • In a Midland Basin case study analyzing more than 425 wells targeting the Wolfcamp B in Martin, Midland and Upton Counties, CnF® treated wells meaningfully outperformed offset wells (adjusted for proppant and lateral length). • BOE/d normalized production r
Slide 32: Prescriptive Chemistry Management (PCM) Opportunity
PRESCRIPTIVE CHEMISTRY MANAGEMENT (PCM ) OPPORTUNITY ® ® • Our customized PCM® offering delivers significant value to our clients by establishing a complete chemistry. • PCM® creates more permanent relationships and CnF® selling opportunities, adds to our database and provides greater scale. • Incre
Slide 33: Global ECT Product Trends
GLOBAL ECT PRODUCT TRENDS • Product portfolios in ECT have shown resiliency over Conventional Chemistry Revenues vs. Completions CnF® Revenues vs. Completions the past 4 years. Conventional ECT Revenue (Left Axis) US EIA DPR Completions (Right Axis) CnF® Revenue (Left Axis) US EIA DPR Completions (R
Slide 34: CnF: Value Proposition
CnF®: VALUE PROPOSITION The line of Complex nano-Fluid® technologies offers a number of performance-enhancing features including solvency, contact angle which impacts wettability, outstanding demulsification properties, reduction of capillary pressures and interfacial tension (IFT) that are designed
Slide 35: Reconciliation to Non-GAAP Measures
RECONCILIATION TO NON-GAAP MEASURES Schedule 1 Schedule 2 Flotek Industries, Inc. Flotek Industries, Inc. Unaudited Reconciliation of Non-GAAP Items and Non-Cash Items Impacting Earnings Unaudited Reconciliation of Non-GAAP Items and Non-Cash Items Impacting Earnings GAAP Segment Net Income and Reco
Slide 36: Contact Us
CONTACT US CORPORATE HEADQUARTERS: 10603 W. Sam Houston Pkwy. N. Suite 300 Houston, TX 77064 INVESTOR RELATIONS: Email: [email protected] Phone: (713) 726-5367 36
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