the global alternativeresearch.criterionrsch.com/investor_presentations/.../tesco.pdf · by tesco...

© 2016 Tesco Corporation. All rights reserved.© 2016 Tesco Corporation. All rights reserved.

March 23rd, 2016

The Global AlternativeHoward Weil Energy Conference

© 2016 Tesco Corporation. All rights reserved. 2

Forward Looking Statement

The presentation referred to above contains “forward-looking statements” within the meaning of the USPrivate Securities Litigation Reform Act of 1995. These statements include any statements that are nothistorical facts, such as our financial targets and other forecasts or expectations regarding businessoutlook; growth for Tesco Corporation as a whole and for each of its segments (and for specifiedproducts or geographic areas within each segment); oil and natural gas demand and production growth;oil and natural gas prices; improvements in operating procedures and technology; capital expendituresby Tesco Corporation and the oil and gas industry; the business strategies of Tesco Corporation’scustomers; future global economic conditions; Tesco Corporation’s stock repurchase program; dividendplans; and future results of operations. These statements are subject to risks and uncertainties,including, but not limited to, global economic conditions; changes in exploration and productionspending by Tesco Corporation’s customers and changes in the level of oil and natural gas explorationand development; Tesco Corporation’s future cash flows; general economic, political and businessconditions in key regions of the world, including in Russia; pricing erosion; weather and seasonalfactors; operational delays; production declines; changes in government regulations and regulatoryrequirements, including those related to offshore oil and gas exploration, chemicals, hydraulic fracturingservices and climate-related initiatives; the inability of technology to meet new challenges inexploration; and other risks and uncertainties detailed in our Forms 10-K, 10-Q, and 8-K filed with orfurnished to the Securities and Exchange Commission. If one or more of these or other risks oruncertainties materialize (or the consequences of such a development changes), or should underlyingassumptions prove incorrect, actual outcomes may vary materially from those reflected in our forward-looking statements. The forward-looking statements speak only as of the date of the presentation, andTesco Corporation disclaims any intention or obligation to update publicly or revise such statements,whether as a result of new information, future events or otherwise.


2 Businesses, 4 Offerings, 1 Platform

Tesco at a Glance

REVENUE ($M) TTM Q4 ‘15 by Segment

Total: $280M

Total: $280M

REVENUE ($M) TTM Q4 ‘15 by Geography

NASDAQ: TESO

Headquartered in Houston, Texas

Stock Price: $8.66 (as of 3/16/16)

Market Capitalization: $338 million

Business Segments: Tubular Services & Top Drive

1,300+ employees in 16 countries

Products$43

TD Rentals$64TD AMSS

$39

Tubular Services

$134

US$82

Canada$19Latin

America$85

Asia Pacific

$33

EMAE$48

Russia$13


Market Outlook

Competitor attrition driving

market share gains

Unsustainable pricing in North America / Additional international risk

New business models & technologies required

Q1 revenue expected to decline in line with market

Addressing “Deeper for Longer” Downturn


Addressing the Downturn

Headcount down 40% and payroll costs 60% from peak

$50M annual cost savings from restructuring

Closing entities in small markets while moving to 3rd party sales channels

Capex $3-5M w/ incremental linked to contract wins

$15-20M cash from working capital with opportunities from asset sales

Rationalization to Preserve and Generate Cash


Relative Performance

Managing Decrementals Through a Difficult Market

BAS

CRR

DRQ

FTK

GIFIGLF

HLX

PKD

NR

HP

PES

RES

SLCA

TS

TTI

SLB

HAL

BHI

WFT

NOV

CAM

CLBFI

SPN

OIS

HOS

NBR

PTENFET

KEG

TESO

0%

10%

20%

30%

40%

50%

60%

70%

80%

0% 10% 20% 30% 40% 50% 60% 70%

De

crem

enta

l EB

ITD

A I%

Revenue Decrease Change %

Decremental EBITDA v Revenue Change- Q3 14 vs. Q4 15


New Product Sales

• Manage for short lead-time intra-quarter orders

• Utilize global footprint for assembly

• Inventory drainage through targeted sales

Short Term Tactics

• Higher-torque TD models (EXI 800)

• Gen 2 Catwalks

• New pipe handling technologies (PDS & DSD)

Innovation

Long Term Strategy

• Integrated suite of automated pipe handling equipment

• Integrated rig controls with equipment

• Gain market share from added offerings

New Products

50%+ of ‘15 sales from recently developed

products (NT5)

New Products Target New & Upgrade Rig Markets


Automating Every Rig

Land Rig Automation


After Market Sales & Service

• Streamline global footprint & increase 3rd-party market channels

• Commercialize phase 1 ARC

• Inventory drainage through better supply chain management

Short Term Tactics

• Position ARC as an integrated drilling performance platform

• ARC Phase 2 & rig controls

• Continued EHM integration

Innovation

Long Term Strategy

• Expand 3rd-party to include all rig floor and pipe handling products

• Higher share of 3rd-party TD and other pipe handling products

• Technical/Drilling support

AMSS

ARC works on most TD models & provides

high ROIC

ARC is Our Entry Into Rig Controls


Rentals

• Improve utilization from fleet sales

• Greater use of 3rd-party market channels

• Increased use of EHM for man-less rentals

Short Term Tactics

• Add new pipe handling products to rental fleet

• Increased use of rental units for AMSS swing units

• Achieve overall 50-60% utilization

Long Term Strategy

Fleet Size

RENTALS

Targeted Downsizing of Rental Fleet

80

100

120

140

Q2 14 Q3 14 Q4 14 Q1 15 Q2 15 Q3 15 Q4 15 Target

TD Rental Fleet Size (Q2 14 to Target)

Rental TD Target


Tubular Services - Land

• Gain share in critical mass markets

• Increase of use of 3rd party channels in small markets

• Additional customer trials of Evolution Model

Short Term Tactics

• Side Entry Cement Swivel & Multi-Plug Launcher

• Compact CDS (“CCDS”)

• Testtork sub with interlock functionality

Innovation

Long Term Strategy

• Greater integration with/into rig contractor operations

• Higher focus on automated-only offering

• Greater adoption of technology through product sales

TS Land

Converting the Market to Automated Technology

New products complete automated

offering


Land Evolution Model

Tesco’s Current Proposition


Tubular Services - Offshore

• Focus on market share in core markets

• Manage short term costs in strategic start-up markets

• Maximize utilization of current assets

Short Term Tactics

• Fully automated rig floor

• Different pricing strategies (i.e. fixed monthly fees)

• Scoping / bundling equipment & personnel

Innovation

Long Term Strategy

• Achieve critical mass in chosen markets

• Monetize other int. locations through 3rd-party channels

• Rationalize equipment baskets & utilization

TS Offshore

Using Innovation to Differentiate


Offshore Tubular Services Market Share

Targeted Markets: GOM (US &

Mexico), Malaysia and North Sea

Customers want an alternative

Impeccable track record

Customized value proposition

Tesco TS Offshore Revenue VS Rig Count

• Since 4Q14 TS Offshore revenue declining ~34% vs segmented rig count decline of ~43%, which implies market share gains

Gaining Market Share in a Challenging Market

$10.0 $9.8

$8.7

$7.4

$6.6

137

124

99

83

78

70

80

90

100

110

120

130

140

150

$6.0

$6.5

$7.0

$7.5

$8.0

$8.5

$9.0

$9.5

$10.0

$10.5

4Q14 1Q15 2Q15 3Q15 4Q15

BH

I W

orl

d O

ffsh

ore

Rig

Co

un

t

Rev

en

ue (

$ i

n M

)

TS Rev Offshore TESO Key Markets Rig Count


Conservative Balance Sheet

• $51.5M in cash at Year End

• No outstanding debt

• Dividend suspension adds ~$8M in annual cash flow

• Credit facility Under temporary waiver to cover Letters-of-Credit

No current borrowing capacity

Focused on Liquidity


Conclusion

Addressing the downturn

Focused on liquidity

Strategy is happening

Positioning for recovery

Tesco IS the Drilling Innovation Company

the global alternativeresearch.criterionrsch.com/investor_presentations/.../tesco.pdf · by tesco...

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