Andrie Lesmana Greg Alexander Wilson Xiao Overview Precision Drilling Trust Transocean Inc Major Drilling Group Oilfield Services Provide 45 of the industry revenue Prepare wells for production ID: 807713
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Slide1
OIL AND GAS SERVICE
Isaac Nelson
Andrie
Lesmana
Greg Alexander
Wilson Xiao
Slide2Overview
Precision Drilling Trust
Transocean Inc.
Major Drilling Group
Slide3Oilfield Services
Provide 45% of the industry revenue
Prepare wells for production
Maintain and enhance output
Exploration
Contract Drilling
Provide 35% of the industry revenue
Among the first on the scene
Get contracts from big oil companies
Specialize in drilling
Employ trained staff
Slide4Value Chain
Oil & Gas Industry
Upstream:
Exploration
Production
Downstream:
Refining
Distribution
Marketing
Slide5Overview
Slide6Terminology
Directional Drilling
Slide7Onshore
Drilling
Slide8Deep Water
Drilling
Slide9Jackups
Midwater Semisubmersible
Drillship
Deepwater Semisubmersible
Floaters
Fleet
Slide10Jack Ups
Mobile self-elevating drilling
platforms.
Equipped with legs that are
lowered to the ocean floor for
foundation.
Jacked up above highest waves.
Suited for water depths of 400 ft and less.
Slide11Drillships
Self-propelled and extremely mobile.
Dynamically positioned (High-spec only), does not require anchors.
Great load capacity, ideal for remote locations.
Limited to calmer water conditions.
Dual-activity technology (on recent models).
Midwater
, Deepwater, Ultra-deepwater
Slide12Semisubmersibles
Floating vessels that can be submerged by water ballast system so that lower hulls are under water during drilling operations.
Maintain position through anchors or computer controlled dynamic positioning thrusters.
Moved by propellers or tugging.
Suited for rough water conditions.
Midwater
, Deepwater, Ultra-deepwater
.
Slide13Contract Drillers
Transocean Ltd.
Deepwater drilling
Precision Drilling Trust
Onshore drilling
Directional drilling
Major Drilling Corp.
Onshore drilling
Directional drilling
Slide14Competitive Landscape
Capital-intensive, Highly Skilled, Highly Regulated Bounded by federal, provinces, state, foreign and local laws.
OPEC - Control 75% of the world’s proven reserves and account for 33.3% of the oil production
Slide15Proven Oil Reserves
www.bp.com
Slide16Proven Crude Oil Reserves
Slide17Proven Natural Gas Reserves
Slide18Proven Natural Gas Reserves
Slide19Oil Production By Country
Slide20Competitive Landscape
Biofuel
Unconventional fossil fuel
Oil shale and oil sand
Crude oil and natural gas relationship
Estimated to be 1.57 trillion barrels
How to get all that oil out?
Oil sands are a mixture of bitumen, carbon-rich sludge, sand, water, and clay.
The majority of oil still will come from conventional extraction methods in the foreseeable future.
Canada Oil sands
Slide21Canada Oil sands
Slide22Crude Oil and Natural Gas
Slide23Oil and Gas Price Volatility
Slide24Rotary Rig Count
The rotary rig count is the average number of drilling rigs actively exploring for oil and gas.
Rig count is one of the primary measures of the health of the exploration segment.
It is a measure of the oil & gas industry’s confidence in its own future.
Slide25Slide26Slide27Slide28Precision Drilling Trust
Slide29Stock Price Snap Shot
Traded on NYSE under ticker PDS
Mkt
cap: 2.05B
# of units: 275.52M
Full-time employees: 7,200
Number of trust units outstanding: 275.64M
Slide305-yr Stock Price Snap Shot
Slide315-yr Stock
vs. S&P/TSX Capped Energy Trust Index
Slide325-yr vs. S&P/TSX Index
Slide331-yr Stock Price Snap Shot
Slide341-yr Stock vs. S&P/TSX Capped Energy Trust Index
Slide351-yr vs. S&P/TSX Index
Slide36Company Info
Slide37History
Founded as a private land drilling contractor in Canada in 1951.
Entered a period of high-growth in the 1980s
.
Diversification era of 1990s.
Conversion into an open-ended income trust in 2005
Changed focus towards organic growth and global expansion.
Slide38Business
Onshore contract driller -
one of the largest onshore drilling rig fleets in the world.
Second largest contract driller in North America.
Holds
about 26% of the onshore drilling rig market in Canada, 7% in the US and about 20% of the Canadian service rig
market.
Precision’s fleet can drill virtually all types
of onshore conventional and unconventional oil and natural gas wells in North
America.
Slide39Business
Slide40Business
Vision:
Precision will be recognized as the high performance, high value provider of services for global energy exploration
and development
Precision delivers high performance through passionate people supported by superior systems and equipment designed to maximize and reduce risks; and
Precision creates high value by lowering customer costs, operating safely, developing people, generating financial growth and attracting investment.
Precision
provides contract drilling, well servicing and strategic support services to customers. Precision supplies on-the-ground expertise - people, equipment and knowledge - to provide value to our customers on a daily basis.
Slide41Business
units
Slide42Business units
On average, the contract drilling segment generates 70% of the revenue, and the completion and production segment generates the remaining 30%.
Slide43Management
Doug Strong
Chief Financial Officer
Background:
Bachelor
of Commerce degree from University of Calgary
.
Chartered
Accountant.
Previous positions:
Spent 6 years in public accounting after earning his degree before joining a contract drilling company as International
Controller.
Joined
Cactus Drilling as Controller in 1994, which was later acquired by Precision.
Became
Chief Financial Officer on November 7, 2005.
Slide44Management
Robert L. Phillips
Chairman of the Board
Previous
positions:
President and Chief Executive Officer of
Dreco
Energy Services Ltd. (1994 – 1998).
President and Chief Executive Officer of PTI Group Inc. (1998 – 1999).
Executive Vice President at MacMillan
Bloedel
Limited (1999 – 2001).
President and Chief Executive Officer of BCR Group of Companies (2001 to 2004).Appointed as a Director of Precision in May 2004.
Appointed as Chairman of the Board of Directors in August 2007.
Slide45External risks
Seasonality
Activity level is highly seasonal and dependent upon the severity and duration of winter months. Typically, Q1 has the highest activity level and therefore the most prosperous as winter ground conditions are suitable for moving equipments to otherwise inaccessible drilling sites.
Slide46Muskeg
Summer:
Winter:
Slide47External risks
Energy prices
Typically when energy prices are high, demand for Precision’s services increases.
Markets for oil and NG are becoming more separate.
Slide48External risks
Weak overall demand for oilfield services in North America due to:
Uncertain capital markets
Uncertainty regarding future natural gas prices
Weak USD
Slide49Performance - Contract Drilling
24.5%
24.9%
23.5
23.3
24.9
21.3
24.5%
24.9%
24.3
23.0
26.6
24.7
5.93%
1.21%
Slide50Performance
Precision currently has 213 rigs out of 352 operating (60.5%) – 133 in Canada, 78 in US, 2 in Mexico.
Improvement over Q3: 106 rigs active out of 390 (27.2%)
Expects to have 75 rigs active in North America under term contract in Q1 2010, and 71 in Q2.
For 2010, Precision expects 34 rigs in Canada under term contract, 31 in US, and 1 in Mexico.
For 2011, Precision expects 19 rigs in Canada under existing term contracts, and 17 in US.
Slide51Strategy
“Precision’s high performance, high value strategy is focused on best people, best equipment and best technology to deliver value, diversification and growth.”
Growth:
Globalizing its business and pursuing opportunities outside Canada
Invest in asset growth that generates value for customers
Continue developing its directional drilling market
Diversification:
Developing a broad customer base, and at the same time complementing its core business
Expanding to market outside Canada to reduce seasonality effect and capitalize on drilling opportunities beyond WCSB (unconventional natural gas wells)
Slide52Strategy
Value
High-degree of vertical integration allows Precision to reduce costs and improve margins, attract investment capital
Reputation is evident in financial and operational performance, employee retention, safety and environmental performance, and market share in directional drilling and horizontal applications
Target Zero
Rec. Frequency =
# of injuries x 200,000
Man hours worked
Slide53Future
Precision is expecting an improvement in the market demand for drilling rigs as the global economy improves.
They will be reporting their financial results in accordance with IFRS starting Jan 2011.
Conversion from Trust to Corporation. Estimated to be completed by May 2010.
Slide54Financial Statements
Slide55Consolidated Balance
sheet
Slide56Statements of Earnings and Retained Earnings
Slide57Segment Review of Contract Drilling Services
Slide58Segment Review of Completion and Production Services
Slide59Statements of Cash Flow
FCF = 311,294K
Slide60Fisher analysis
Slide61Recommendation
$ Buy $
EIA short term forecast for Henry Hub natural gas average spot price in 2010 is $5.17 per
MMBtu
($1.22 increase over 2009), $5.65 in 2011.
Crude oil is expected to rise to $82 per barrel by the end of the year, and hitting $85 per barrel by 2011.
Oil and gas consumption will be tied to the state of the global economy. The faster the economic recovery, the faster we can see oil and gas consumption increase.
Slide62Slide63World’s largest provider of offshore contract drilling services for oil and gas wells
“Our mission is to be the premier offshore drilling company providing worldwide rig-based, well-construction services to our customers through the integration of motivated people, quality equipment and innovative technology, with a particular focus on technically demanding environments.”
Slide64Provides: oil and gas drilling management services, engineering, and project management services.
Contract out drilling rigs, equipment and work crews to drill oil and gas wells.
Participates in oil and gas exploration, and production activities.
focuses on deepwater and harsh environment drilling services.
Business model
Slide651 year Rig
Slide665 year Rig
Slide67Rig 10 year
Slide68Price of Rig to Price of Crude Oil
Slide69Management
Steven L. Newman
President and Chief Executive Officer
Before beginning his current position in March 2010, Mr. Newman served as President and Chief Operating Officer from mid-2008 to late 2009 and subsequently as President. Mr. Newman’s prior senior management roles included Executive Vice President of Performance, Executive Vice President and Chief Operating Officer, Senior Vice President of Human Resources, Information Process Solutions, and Treasury, and Vice President of Performance and Technology. He also has served as Regional Manager for the Asia and Australia Region and in international field and operations management positions, including Project Engineer, Rig Manager, Division Manager, Region Marketing Manager and Region Operations Manager. He joined the company in 1994 in the Corporate Planning Department. Mr. Newman holds a Bachelor of Science degree in Petroleum Engineering from the Colorado School of Mines and an MBA from the Harvard University Graduate School of Business
Slide70Management
Ricardo H. Rosa
Senior Vice President and CFO
Before being named to his current position, Mr. Rosa served in management positions, including Senior Vice President of the company's Europe and African Unit, Senior Vice President of the Asia and Pacific Unit (APU), Vice President and Controller and in a variety of international positions in finance for 19 years. Mr. Rosa graduated from Oxford University in the United Kingdom with a Master of Arts degree and subsequently qualified as a Chartered Accountant with the Institute of Chartered Accountants in England and Wales.
Slide71Management
Eric B. Brown Senior Vice President, General Counsel
Mr. Brown served as Vice President and General Counsel since February 1995 and Corporate Secretary since September 1995. He was named a Senior Vice President in February 2001. Prior to assuming his duties with the company, Mr. Brown worked at Coastal Gas Marketing Company and served as its General Counsel. He earned a Bachelor of Arts degree from Hope College in Michigan and a J.D. degree from Indiana University law school.
Slide72Firsts and Records
Slide73History of Mergers
Slide74History
1964
Global Marine first to drill in North Sea.
1966
The Offshore Company designs
jackup
with year-round capabilities.
1969
First semisubmersible rig built by
Forex
Neptune.
1985Schlumberger combines Sedco and
Forex into single company. 1986-1992Global Marine files for Ch. 11 bankruptcy. Reemerges in 1989 with BOD, management and fleet intact; deleveraged by 1992.1996The Offshore Company (now called SODI) acquires Transocean ANA, doubling its fleet size.
Slide75History
1999
Transocean Offshore merges with
Sedco
Forex
(sold by Schlumberger).
2001
Transocean
Sedco
Forex merges with R&B Falcon Corp. and form world’s largest offshore drilling company.
Santa Fe Int’l and Global Marine merge and form world’s second largest drilling company.
2003-2007Transocean breaks several records for depth drilling (10,000 ft of water) and well depth (35,000 ft). 2007Transocean and GlobalSantaFe merge to become the world’s largest offshore driller.2008Moves to Switzerland from Cayman Islands for geographic centrality and tax benefits.
Slide76Major Clients
Slide77Worldwide operations
Slide78Worldwide operations
Slide79Jackups
Midwater Semisubmersible
Drillship
Deepwater Semisubmersible
Floaters
Fleet
Slide80Fleet
Mobile self-elevating drilling platforms.
Equipped with legs that are lowered to the ocean floor for foundation.
Jacked up just above highest waves.
Suited for water depths of 400 ft and less.
Jack ups
Slide81Fleet
Dynamically positioned in that it does not require anchors.
Great load capacity, ideal for remote locations.
Limited to calmer water conditions.
Self-propelled and extremely mobile.
Dual-activity technology (on recent models).
Midwater
, Deepwater, Ultra-deepwater
Drill ships
Slide82Fleet
Floating vessels that can be submerged by water ballast system so that lower hulls are under water during drilling operations.
Maintain position through anchors or computer controlled dynamic positioning thrusters.
Moved by propellers or tugging.
Suited for rough water conditions.
Midwater
, Deepwater, Ultra-deepwater
Semisubmersibles
Slide83Financial Statements
Slide84Slide85Slide86Slide87Slide88Slide89Slide90Slide91Slide92Slide93Operating Revenues and Long-Lived Assets by Country
Slide94Recommendation
BUY
Slide95“The Company is well positioned to face the challenges and opportunities ahead ”
Slide96Based in Moncton, New Brunswick , Canada
One of the world’s largest drilling service companies serving the mining industry
It maintains field operations and offices in Canada, the United States, South and Central America, Asia, Africa and Australia.
Major Drilling provides all types of drilling services including surface and underground coring, directional, reverse circulation, RAB, geotechnical, environmental, water-well and coal-bed methane and shallow gas.
About MDI
Slide97Stock Quote
Current Price
as of Mar 19, 2010
24.60
Day low
24.41
Day high
25.63
Volume
111,308
Market Cap
583.51M
EPS
-0.37
P/E
N/A
Forward P/E
20.28
Annual Dividend
0.40
Yield
1.60
Beta
2.01
Source from www.theglobeandmail.com/
Slide981 Year Chart
Slide995 Year Chart
Slide1005 year MDI vs. Oil & Gas Index
Slide101Corporate StrategyDominate specialized drilling and expand effective capacity
Modernize conventional fleet Keep debts at minimum levelsBe the best of class in safety and human resources
Slide102Services
Slide103Specialized drillingDefined as any drilling project that , by virtue of its scope, technical complexity or location, creates significant barriers to entry for smaller drilling companies
It includes deep-hole drilling, directional drilling, and mobilizations to remote locations or high altitudes
Slide104Conventional drilling It is much more affected by the industry cycle
This part of the industry is highly fragmented and has numerous competitorsSince MDI offers only limited differentiation in this sector, it is not its priority for investment
Slide105Underground DrillingIt takes on greater importance in the latter stages of the mining cycle as clients develop underground mines
Growth is relatively flat
Slide106Acquisitions-1Forage à Diamant Benoît Ltée
Based in Val-d’Or, QuébecAcquired on August 1, 2008Acquired 19 drills rigsIt fits with MDI’s strategic focus on specialized drillingPurchase price was CDN$23.1 million, financed by cash and debt
Slide107Acquisitions -1
Slide108Acquisitions -2 Paragon del Ecuador S.A.
Acquired On October 25, 2007It was the largest mineral exploration drilling contractor in EcuadorAcquired 7 drill rigsPurchase price was CDN$ 5.8 million, financd with cash and debt
Slide109Acquisition -2
Slide110Acquisitions -3Harris y Cia Ltda.
On September 1, 2007Acquired 11 drill rigs conducting mainly specialized drilling in ChileAlso acquired Harris’ existing contracts and retained key management personnelPurchase price was CDN$25.2 million, financed with cash.
Slide111Acquisition -3
Slide112Drilling Operations in the world
Acquisition- 1
Acquisition- 2
Acquisition- 3
Slide113Revenues by Areas
Slide114Top management
Francis P. McGuire
Director, President & Chief Executive Officer
served as Vice President, Business Development of MITI Information Technology Inc. from 1998 to August 2000
served as Deputy Minister of the Department of Economic Development and Tourism of New Brunswick.
He holds a Masters of Arts in International Studies, Trade and Economics from Johns Hopkins University, a diploma in European Politics from the Institut d'Etudes Politiques in Paris and a Bachelor of Arts from Dalhousie University.
Slide115Top management
Denis Larocque
Chief Financial Officer
He was involved in the acquisition and branch office setup in countries like Australia, Argentina, Chile, Mongolia and many more.
Prior to joining Major Drilling in September 1994, Mr. Larocque worked for an accounting firm affiliated with BDO Dunwoody.
Mr. Larocque is a Chartered Accountant and holds a Bachelor of Business Administration, major in Accounting from Laval University.
Slide116Top management
Robert Morgan
V.P. - Business Development and Latin American Operations
Bachelor of Science degree
Rob Newburn
V.P.- North American and African Operations
Ray Baldry
V.P.- Australian and Asian Operations
Slide117Financial Statements
Slide118Consolidated Statements of Operations
Slide119Consolidated statements
Slide120Consolidated Balance Sheets
Slide121Consolidated Statements of Cash Flows
Slide122Notes to Consolidated Financial Statements
Slide123Foreign Currency Risks
Slide124Historical Summary
Slide125RecommendationBuy
In the long run, mining companies continue to deplete the more easily accessible mineral reserves around the world and attractive deposits will be in increasingly remote locations, areas difficult to access and/or deep in the groundExcellent financial position and remained debt-free, net of cashWith rising rig utilization levels industry-wide, its contract pricing power will return in the near future.