Oil Well Completion and Workover Services. Overview. The Company provides a
better, faster, cheaper method to drill, complete, and workover oil wells using.
Executive Summary AS-138920 Rev: $7.5 million EBITDA: $4.0 million
Oil Well Completion and Workover Services Overview The Company provides a better, faster, cheaper method to drill, complete, and workover oil wells using underbalanced drilling techniques. The Company provides and operates equipment (air, air foam, and nitrogen foam packages) used to pull material out of oil wells in completion and workover projects. The technique draws oil and gas out of the formation along with drilling and fracking material, increasing post project oil and gas production. It also speeds up the project allowing it to be completed in less time thereby reducing costs.
The Company is located in the Permian Basin which is experiencing a “boom” in oil well drilling and workover projects with the discovery of several new formations located under existing oil producing fields. New finds hold an estimated 80 billion barrels in recoverable oil and will cost an estimated $220 billion to develop. This results in a sharp increase in demand for completion services in the near term and an expanded base to provide ongoing workover services (i.e. maintenance) in the future.
Financials & Transaction Two of the Company’s partners are looking to exit the business. The third is looking for a partner to help him grow the business. The ideal partner will be able to assist in the transition for management and also provide at least some liquidity to the partner(s) wanting to stay. From 2009 to 2012, revenues and EBITDA increased 140% and 230% respectively. Preliminary 2013 figures show gains of 32% and 86% in revenue and adjusted EBITDA. Management has added additional equipment and personnel to meet demand which will result in 2014 revenue and EBITDA of $7.5 million and $4.0 million respectively. Revenues
EBITDA
$12
$6
$10
$5
$8
$4
$6
$3
$4
$2
$2
$1
$0
$0 2010
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©Allegiance Capital Corporation, 2014; Company Confidential
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KEY INVESTMENT CONSIDERATIONS
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Experienced team – most experienced operations and management team in underbalanced drilling
Underutilized technology – huge opportunity to capture market share from fluid drilling
Permian basin discoveries – $220 billion will be spent to access and estimated 80 billion barrels of oil
Well maintenance – services particularly suited to well maintenance so the opportunity extends beyond near term drilling
50%+ EBITDA margins – high margins are sustainable because it’s a better value all other techniques
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Industry The company is currently concentrated in the Permian Basin in West Texas and New Mexico. Recently, four new plays, the Wolfcamp, Cline, Spraberry and Bone Spring, have been discovered in the Permian that hold in excess of 80 billion barrels of recoverable oil making it one of the world’s largest discoveries. Customers fall into two categories: production and exploration. The company’s services can drastically reduce the cost of drilling making exploration more viable. Additionally, reduced costs and increase production make the company’s service doubly attractive to well owners facing a workover project.
Sales & Marketing
Historically, the Company relied on its reputation and word of mouth for business. In 2011, it hired its first sales person. The result has been an increasing awareness of underbalanced drilling and greatly increased demand for their services. Currently, the Company has more opportunity than it can service with its existing equipment and personnel so it is in the process of acquiring more of both.
Growth Strategy
Although the Company’s equipment is being fully utilized, management is continuing to invest in additional equipment and personnel to accelerate growth. The first goal will be to add equipment to provide additional services as well as expand the sales team to keep equipment fully utilized. The second goal is to broaden awareness of underbalanced drilling benefits throughout the production and exploration sectors to capture greater market share. Management estimates that underbalanced drilling is only used in 10% of the wells drilled and 20% of the well workovers; greater than 50% of the wells drilled and 80% of the well workovers would benefit from underbalanced drilling. The third goal is to enter new plays and enter related markets such as industrial maintenance, pipeline testing and maintenance, geothermal drilling, and fire-fighting, to reduce the Company’s exposure to the local and global oil and gas industry. For additional information on this company please complete the attached Confidentiality Agreement, and return to/contact: Jeffrey Gross:
[email protected], 214-217-7756, or Coyn Mateer:
[email protected], 214-217-7744
©Allegiance Capital Corporation, 2014; Company Confidential
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