Ma Mark rket O Out utlook ook 2018 North America Perforating - PowerPoint PPT Presentation

Ma Mark rket O Out utlook ook 2018 North America Perforating Symposium Galveston, TX July, 31 2018 Richard Spears & David Otte Spears & Associates

Ot Otte & & Sp Spears a s are b biase sed

Ag Agenda Ov Overview NAM NAM O& O&G/Per erforati ting g Markets ts Back ck to the e Future? e?

Th The e worl orld WANT NTS S sol olar

Bu But it it NEEDS oil il

Gl Glob obal Oil Dem emand Demand grows 1-2 million 105 bbls per day per year 100 Million bpd 95 90 85 80 2012 2013 2014 2015 2016 2017 2018 2019 2020 Drilling and Production Outlook , Spears & Associates

OE OECD Oi D Oil I Inventori ories Because demand 3,100 exceeds supply, oil is pulled from storage 3,000 tanks 2,900 2,800 Million bbl 2,700 2,600 2,500 2,400 2,300 2012 2013 2014 2015 2016 2017 2018 Drilling and Production Outlook , Spears & Associates

US US Oil il Productio tion No more Permian pipeline 18 space until mid 2019 16 NGLs 14 Crude 12 Million bpd 10 8 6 4 2 0 2012 2013 2014 2015 2016 2017 2018 2019 2020 Drilling and Production Outlook , Spears & Associates

Oi Oil P Pri rices $120 Since international oil is worth more than domestic oil, US oil $100 exports will grow $80 $60 $40 WTI $20 Brent $0 2012 2013 2014 2015 2016 2017 2018 2019 2020 Drilling and Production Outlook , Spears & Associates

Glob Gl obal Ga Gas Dem emand Also – the world 80 wants more gas…and the US has LOTS of gas 75 OECD 70 Non-OECD TCF 65 60 55 50 2012 2013 2014 2015 2016 2017 2018 2019 2020 Drilling and Production Outlook , Spears & Associates

US Gas US as Deman emand And despite solar and 85 wind energy, the US still burns a LOT of gas 80 75 70 bcfd 65 60 55 50 2012 2013 2014 2015 2016 2017 2018 2019 2020 Drilling and Production Outlook , Spears & Associates

Of Offshore W Wells D Drilled 3,500 Until international offshore wakes up, US 3,000 land will remain the only game in town 2,500 2,000 1,500 1,000 500 0 2012 2013 2014 2015 2016 2017 2018 2019 2020 Drilling and Production Outlook , Spears & Associates

Her Here’ e’s how boar ards thin ink: k: • Capex discipline assuming $60 oil • Worries about “peak demand” and climate change • No major technological leaps coming • Offshore exploration takes 8-10 years for first oil • Technology-based efficiency gains • Therefore, focus is on SHORT TERM

NA NAM O& O&G/P /Perforating • 2018 provides ~965 thousand Hydraulic Fracturing Stages in NAM from the ~24,000 horizontal wells drilled. Each stage represents a “perforating opportunity” in a plug-n-perf completion. • The US land wireline market is $3.8 billion in 2018 which is more than 6x the GOM market of $.5 billion . There are ~ 500 pump-down wireline units in NAM

Com Commod odity ty Pri rices $100 $5 $80 $4 WEST TEXAS INTERMEDIATE OIL NATURAL GAS SPOT $60 $3 $40 $2 $20 $1 $- $- 2014 2015 2016 2017 2018 2019 2020

NA NAM Rig Rig Activ tivity ity US land drilling improves…Canada, not so much 2,000 1,800 1,600 US 1,400 Canada 1,200 1,000 800 600 400 200 0 2012 2013 2014 2015 2016 2017 2018 2019 2020 Drilling and Production Outlook , Spears & Associates

NA NAM Wells ells Drilled illed Most of these wells are horizontal…80% 50,000 45,000 US 40,000 Canada 35,000 30,000 25,000 20,000 15,000 10,000 5,000 0 2012 2013 2014 2015 2016 2017 2018 2019 2020 Drilling and Production Outlook , Spears & Associates

US US Later erals als <6000' 6000-8000 Extended Reach Ft (millions) 2500 35.0 Fewer lateral count but almost as many feet drilled 30.0 2000 25.0 1500 20.0 15.0 1000 10.0 500 5.0 0 0.0 Q3 14 Q4 14 Q1 15 Q2 15 Q3 15 Q4 15 Q1 16 Q2 16 Q3 16 Q4 16 Q1 17 Q2 17 Q3 17 Q4 17 DrillingInfo

Qu Quarterly US Fr US Frac M c Market Expect growth to continue Worst collapse in history into 2019 as long as oil price holds! $9,000 $8,000 $7,000 $6,000 MILLIONS $5,000 $8,300 $7,865 $4,000 $7,100 $7,007 $6,900 $6,300 $6,207 $6,000 $5,800 $5,600 $5,500 $3,000 $4,700 $4,300 $3,500 $3,400 $2,000 $2,900 $2,500 $2,500 $2,200 $2,000 $1,000 $0 Q1 14 Q1 15 Q1 16 Q1 17 Q1 18 19

NA NAM P Perforating M g Market Frac Stages Perforations 62 1400 52 million global charges 60 55 creates $500 million market 1200 50 46 FRAC STAGES (THOUSANDS) PERFORATIONS (MILLIONS) 1000 40 34 800 32 1293 30 26 600 1155 965 18 20 812 400 740 611 423 10 200 0 0 2014 2015 2016 2017 2018 2019 2020 20

US US Reg egio ional al CH H Wir irelin eline e Mar arkets ts $6,000 2% 2018 - US Cased Hole Mkt - $5,000 $3.8 B 1% 4% So. Texas/Eagle Ford $4,000 Permian Basin 14% 12% $3,000 East Texas/Haynesville MidContinent $2,000 Bakken 8% $1,000 Other Rockies 6% Northeast $0 40% 2011 2012 2013 2014 2015 2016 2017 2018 West Coast 9% GOM $100 $160 $195 $200 $150 $145 $165 $170 Gulf Coast Gulf Coast $216 $249 $288 $350 $129 $63 $52 $39 West Coast $190 $196 $201 $225 $91 $53 $63 $84 GOM 4% Northeast $279 $282 $369 $470 $326 $222 $375 $454 Other Rockies $364 $407 $424 $500 $235 $153 $236 $291 Bakken $553 $651 $728 $870 $490 $215 $179 $225 MidContinent $523 $556 $581 $645 $290 $138 $317 $364 East Texas/Haynesville $291 $172 $107 $140 $81 $39 $112 $162 Permian still dominates Permian Basin $282 $506 $670 $1,221 $783 $536 $1,067 $1,531 So. Texas/Eagle Ford $509 $693 $835 $975 $483 $205 $444 $523 21

NA NAM: A Addressable S Switch ch A Adoption Get onboard or get left behind… Switch By Type - 2020 Switch By Type - 2014 Switch By Type - 2017 23% Addressable Addressable Addressable 31% Switch Switch Switch 43% 57% Mechanical Mechanical Mechanical 69% Switch Switch Switch 77% Adoption of Addressable Switch Over Time 22

Ba Back To o The Futu ture? Global Oilfield Equipment & Service Spending $90,000 $180,000 $80,000 $160,000 NAM Intnl OMR $70,000 $140,000 $60,000 $120,000 $50,000 $100,000 $40,000 $80,000 $30,000 $60,000 $20,000 $40,000 $10,000 $20,000 $0 $0 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 2013 2014 2015 2016 2017 2018 23

Ba Back To o The Futu ture? • Demand will continue to be driven by population growth • Supply will be severely reduced offshore and internationally • The Permian Basin represents almost ALL global oil growth 24