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OIL AND GAS SERVICE Isaac Nelson OIL AND GAS SERVICE Isaac Nelson

OIL AND GAS SERVICE Isaac Nelson - PowerPoint Presentation

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OIL AND GAS SERVICE Isaac Nelson - PPT Presentation

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

oil drilling president gas drilling oil gas president precision services management water contract rig company vice business operations high

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Slide1

OIL AND GAS SERVICE

Isaac Nelson

Andrie

Lesmana

Greg Alexander

Wilson Xiao

Slide2

Overview

Precision Drilling Trust

Transocean Inc.

Major Drilling Group

Slide3

Oilfield 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

Slide4

Value Chain

Oil & Gas Industry

Upstream:

Exploration

Production

Downstream:

Refining

Distribution

Marketing

Slide5

Overview

Slide6

Terminology

Directional Drilling

Slide7

Onshore

Drilling

Slide8

Deep Water

Drilling

Slide9

Jackups

Midwater Semisubmersible

Drillship

Deepwater Semisubmersible

Floaters

Fleet

Slide10

Jack 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.

Slide11

Drillships

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

Slide12

Semisubmersibles

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

.

Slide13

Contract Drillers

Transocean Ltd.

Deepwater drilling

Precision Drilling Trust

Onshore drilling

Directional drilling

Major Drilling Corp.

Onshore drilling

Directional drilling

Slide14

Competitive 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

Slide15

Proven Oil Reserves

www.bp.com

Slide16

Proven Crude Oil Reserves

Slide17

Proven Natural Gas Reserves

Slide18

Proven Natural Gas Reserves

Slide19

Oil Production By Country

Slide20

Competitive 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

Slide21

Canada Oil sands

Slide22

Crude Oil and Natural Gas

Slide23

Oil and Gas Price Volatility

Slide24

Rotary 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.

Slide25

Slide26

Slide27

Slide28

Precision Drilling Trust

Slide29

Stock 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

Slide30

5-yr Stock Price Snap Shot

Slide31

5-yr Stock

vs. S&P/TSX Capped Energy Trust Index

Slide32

5-yr vs. S&P/TSX Index

Slide33

1-yr Stock Price Snap Shot

Slide34

1-yr Stock vs. S&P/TSX Capped Energy Trust Index

Slide35

1-yr vs. S&P/TSX Index

Slide36

Company Info

Slide37

History

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.

Slide38

Business

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.

Slide39

Business

Slide40

Business

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.

Slide41

Business

units

Slide42

Business units

On average, the contract drilling segment generates 70% of the revenue, and the completion and production segment generates the remaining 30%.

Slide43

Management

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.

Slide44

Management

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.

Slide45

External 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.

Slide46

Muskeg

Summer:

Winter:

Slide47

External risks

Energy prices

Typically when energy prices are high, demand for Precision’s services increases.

Markets for oil and NG are becoming more separate.

Slide48

External risks

Weak overall demand for oilfield services in North America due to:

Uncertain capital markets

Uncertainty regarding future natural gas prices

Weak USD

Slide49

Performance - 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%

Slide50

Performance

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.

Slide51

Strategy

“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)

Slide52

Strategy

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

Slide53

Future

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.

Slide54

Financial Statements

Slide55

Consolidated Balance

sheet

Slide56

Statements of Earnings and Retained Earnings

Slide57

Segment Review of Contract Drilling Services

Slide58

Segment Review of Completion and Production Services

Slide59

Statements of Cash Flow

FCF = 311,294K

Slide60

Fisher analysis

Slide61

Recommendation

$ 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.

Slide62

Slide63

World’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.”

Slide64

Provides: 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

Slide65

1 year Rig

Slide66

5 year Rig

Slide67

Rig 10 year

Slide68

Price of Rig to Price of Crude Oil

Slide69

Management

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

Slide70

Management

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.

Slide71

Management

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.

Slide72

Firsts and Records

Slide73

History of Mergers

Slide74

History

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.

Slide75

History

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.

Slide76

Major Clients

Slide77

Worldwide operations

Slide78

Worldwide operations

Slide79

Jackups

Midwater Semisubmersible

Drillship

Deepwater Semisubmersible

Floaters

Fleet

Slide80

Fleet

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

Slide81

Fleet

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

Slide82

Fleet

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

Slide83

Financial Statements

Slide84

Slide85

Slide86

Slide87

Slide88

Slide89

Slide90

Slide91

Slide92

Slide93

Operating Revenues and Long-Lived Assets by Country

Slide94

Recommendation

BUY

Slide95

“The Company is well positioned to face the challenges and opportunities ahead ”

Slide96

Based 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

Slide97

Stock 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/

Slide98

1 Year Chart

Slide99

5 Year Chart

Slide100

5 year MDI vs. Oil & Gas Index

Slide101

Corporate StrategyDominate specialized drilling and expand effective capacity

Modernize conventional fleet Keep debts at minimum levelsBe the best of class in safety and human resources

Slide102

Services

Slide103

Specialized 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

Slide104

Conventional 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

Slide105

Underground DrillingIt takes on greater importance in the latter stages of the mining cycle as clients develop underground mines

Growth is relatively flat

Slide106

Acquisitions-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

Slide107

Acquisitions -1

Slide108

Acquisitions -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

Slide109

Acquisition -2

Slide110

Acquisitions -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.

Slide111

Acquisition -3

Slide112

Drilling Operations in the world

Acquisition- 1

Acquisition- 2

Acquisition- 3

Slide113

Revenues by Areas

Slide114

Top 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.

Slide115

Top 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.

Slide116

Top 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

Slide117

Financial Statements

Slide118

Consolidated Statements of Operations

Slide119

Consolidated statements

Slide120

Consolidated Balance Sheets

Slide121

Consolidated Statements of Cash Flows

Slide122

Notes to Consolidated Financial Statements

Slide123

Foreign Currency Risks

Slide124

Historical Summary

Slide125

RecommendationBuy

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.