Presentation on theme: "2 The following presentation contains 'forward-looking statements' within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section."— Presentation transcript:
2 The following presentation contains 'forward-looking statements' within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Act of 1934, as amended. There are risks and uncertainties that could cause future events and results to differ materially from those anticipated by management in the forward-looking statements included in this presentation. For further information regarding these and other factors, risks and uncertainties affecting Newpark, please refer to the risk factors set forth in the Prospectus included in Newparks Registration Statement on Form S-3 filed on May 8, 2002 (File No. 333-87840), and to the section entitled Forward Looking Statements on page 17 of that Prospectus. Newparks SEC filings can be obtained at no charge at www.sec.gov, as well as through our Website, www.newpark.com. www.sec.govwww.newpark.com Disclaimer
3 Newpark Resources is a niche provider of high-performance, environmentally focused services and products to the exploration and production industry. What is Newpark Resources?
4 Corporate Profile NYSE: NR Shares outstanding, MM 83.7 Float, MM79.4 Market capitalization, $MM$460 Management ownership5% Institutional ownership92% Daily trading volume*223,000 * January-February 2004 average
5 Presentation Summary Since 1997, Newpark has diversified beyond its historic Gulf Coast-based business Geographic Diversification New Products and Services
7 First Time Revenue Greater Than The Rig Count! Newparks Historic Market Gulf Coast Revenue and Rig Activity Rig Activity Source: Baker Hughes, Inc.
8 +30% +20% Revenue New Markets Revenue (E) Estimate Historic Gulf Coast Oil and Gas Market Revenue
9 The Rig Count Source: Baker Hughes, Inc. Non-Gulf Coast Rig Count
10 Operating Income Historic Gulf Coast Market (E) Estimate New Markets 50% was first year mat sales
11 Industry Trend: Dealing with Increased Risk Drilling deeper geologically Moving to deeper water Into frontier areas Into more hostile environments Facing tightening environmental regulations Finding cost is rising
12 Leverage to Deeper Drilling Newparks Revenue Opportunity Per Rig Increases with Depth Drilling Fluids Mat Rental E&P Waste 10,000'12,000'14,000'16,000'18,000'20,000' R E V E N U E
13 Business Segments % of Revenue 20032004(E) Drilling Fluids58%50% Mat Sales and Rentals24%30% E&P Waste Disposal18%20%
16 Drilling Fluids Strategy Focused on high-performance water-based products - DeepDrill and FlexDrill - and related software and fluids engineering services.
17 Drilling Fluids - 2004 16 Customers - Represent >40% revenue growth in Gulf Coast market 15 Customers - Technology driven, using DeepDrill and FlexDrill 10 Customers - New relationships for 2004 5 Customers - Major Oil Companies Newpark has contracts in place or is the preferred provider for 22 Customers for 2004
18 Deeper Drilling - The Growth Driver In the Gulf Coast Market, Newpark is focused on premium projects.
19 Western Canada Gulf Coast Rockies West Texas Oklahoma Drilling Fluid Markets Albania Italy Tunisia Algeria Libya Romania Croatia
20 Drilling Fluid Markets Revenue20022003Change2004(E) Central Region44.859.533% Canada14.226.083% Mediterranean / N. Africa21.936.768% Other 3.9 4.721% Non-Gulf Coast84.8126.950%+20% Gulf Coast98.588.6-10%+40% Total183.3215.518%+30% Revenue by Market
21 Drilling Fluids Revenue and Income RevenueOperating Income +30% 30% operating leverage on incremental revenue
22 +20% +40% Drilling Fluids Revenue Gulf Coast ($ million) Non- Gulf Coast ($ million) All amounts in millions
24 Mat Strategy n Further develop the worldwide market for the DuraBase composite mat system. Expand sales in those key countries and markets. n Expand rental market beyond the historic Gulf Coast oilfield rental business. n Develop selected foreign rental opportunities, including Mexico in 2004.
25 Sale of wooden rental mats in Canada Mats and Integrated Services Revenue (millions) 35 7 53 30% of Revenue is from Non-Gulf Coast Markets
26 Mat Rentals and Sales Revenue North America - RentalsComposite Mat Sales All amounts in millions
27 Mat Rentals and Sales Revenue Rental Volume (million square feet) Rental Pricing (dollars per square feet) +34% Gulf Coast Market
28 Mats and Integrated Services Operating Income Key Factors in Improved Earnings Outlook: nIncreased pricing due to contraction of industry capacity nIncreased composite mat sales
29 How are Mats Used? n Temporary access roads and worksites n All-weather access to drilling sites n Improves productivity n Extend the drilling or working season n Meet environmental protection regulations n Protect equipment and supplies on job site
30 Dura-Base® Composite Mats n Proprietary interlocking temporary work site or road surface n 8 by 14 high density polyethylene (HDPE) sections n Internal honeycomb structure - nominal weight 1,050 pounds n Anti-static properties throughout materials n Lock securely together with quarter-turn fasteners n Useful life over 20 years
31 Dura-Base® Mat Sales History 2000 through 2003 n Nine Major Markets n Units Sold35,236 n Average Price$1,500 (million) n Revenue $52.7 n Margin 27.0 n SG&A Expense 7.0 n Contribution$20.0
32 Dura-Base® Mat Sales History Lessons Learned n Dura-Base® is the premier mat system in the world. n The manufacturing plants pressure molding capabilities are unique. n Some markets will only support rentals, not sales. n New rental market opportunities include Mexico, the U.S. utilities, and Canada. n The Dura-Base® mat is overbuilt and over-priced in most applications. n The long-term life of the Dura-Base® mat is at odds with the short-term planning horizons used in the oilfield industry.
33 Dura-Base® Mat Product Family Current Dura-Base® Mat Lighter Weight (internally welded) Lower Tolerance Plastic Resins (more moderate temperatures) Market Size COSTCOST
34 Mat Sales New Product: Bravo Lightweight Mats n Easily portable n Weighs 50 to 60 pounds n Installs without mechanical assistance n Designed for personnel, pedestrian and equipment traffic
35 Non-Oilfield Applications Logistics access to concert site in Tennessee 2003 U. S. Open Golf Tournament, site access for truck traffic Electric utility construction project access Street bypass for construction, University of Illinois
36 Mexico n Increases rig productivity in marsh and soft soils n Accelerates multi-year gas development project n A rental market Peru and South America n Minimizes disturbance to rain forest environment n Long-term site for multi-well drilling and production project International Markets Western Canada n Increases productivity in muskeg and tundra conditions n Extends drilling season
37 International Markets Sakhalin Island/Russia Project n Logistics access where no infrastructure exists n Multi-year field development project Indonesia n Safe, all weather work sites in jungle and soft soil conditions n Multi-year projects planned
38 Non-Oilfield Applications Nationwide Permit Expedited Through Matting Section 404 of the Clean Water Act (1972, 1975 & 1977) gave the U.S. Army Corps of Engineers jurisdiction over all navigable waters of the U.S., including wetlands. Current changes to the interpretation of these legislative acts have involved additional federal, state and local agency intervention in the wetland permitting process, often resulting in costly project delays. The U.S. Army Corps of Engineers has determined that with the use of composite matting boards for roads and pads, the issuance of the Nationwide Permit 6 authorization is appropriate... State of Alaska, Department of Natural Resources, Office of Permitting
40 E&P Waste Strategy n Focus on the premium E&P waste market where customers require quality, safety and certainty of environmental performance. n Growth in the market will be driven by new regulations, deeper, more complex wells, and demand for premium services. n Integrate with drilling fluids business where possible. n Let competitors defend the commodity end of the market.
41 E&P Waste - Key Market Factors n New regulations n Increasing depth of drilling n Environmentally sensitive areas opening n All solutions are local solutions
42 Waste Management in North America Wyoming Composting Freeze/Thaw Western Canada Composting Eastern Canada Composting Underground Injection West Texas Recycling for Reuse & Underground Injection Gulf Coast
43 Gulf Coast Injection Wells n Key differentiation from other providers n Low pressure methodology n High environmental safety n High capacity n Low cost n A permanent solution to customers waste problem
44 Gulf Coast Leadership n 23 years in the Gulf Coast market n Handled over 50 million barrels of E&P waste n Zero environmental incidents n High operating leverage to volume n Integrates with other products and services
45 Canada and U.S. Rockies: Composting E&P Waste Management
46 E&P Waste Disposal n J onah-Pinedale Trend n 400 Wells to Date n Only 2 Non-Productive n Potentially 10,000 Wells n 15 TCF of Gas Reserves n Challenges Include: n Tight Sandstone Requires Fracturing n Produces Large Volume of Saltwater n Off-site Disposal Required n Newparks Freeze-Thaw Facility Opened August 2003 Pinedale Field Newpark Jonah Field
48 +15% E&P Waste Segment Revenue Revenue (millions) Approximately 30% of segment revenue is derived from markets outside of the Gulf Coast. Operating Income 50% Operating Leverage
49 E&P Waste Margins Gulf Coast EBIT margins have recently improved due to operating leverage and reduction of fixed costs. EBIT Margin
50 Waste Disposal - New Markets n Expansion in Jonah-Pinedale Trend n Saltwater Disposal Facility n Integrates With Fluids Business n Oilfield: All forms of water markets are the next opportunity n Industrial NORM Permitting Underway n New Market Should Develop Over Several Years
51 n Mat Sales è Further develop worldwide Dura-Base® sale market. è Bravo Mats broaden the product line. n Mat Rentals è Improving Gulf Coast rental pricing è Increasing domestic non-oilfield revenue. è Pursue selected foreign rental markets (Mexico). n Drilling Fluids è Contracts and preferred vendor status should sustain 25% growth. n E&P Waste è Oilfield water is the next growth opportunity. è More complex and deeper drilling projects lead volume growth. è Industrial NORM driven by litigation. 2004 Objectives
52 Newpark Summary Newpark will maintain moderate leverage in keeping with its revenue mix. n Debt to Capital Ratio
A Cyclical Growth Company Positioned for the Coming Cycle