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Market Recommendation: Buy
September 26, 2013
Analysis by: William Carver
9x 7x Mul$ple Expansion Capital Advisors, L.L.C
Presenta6on Road Map
Market Backdrop
Company Overview
Valua6on
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Market Backdrop
9x 7x Mul$ple Expansion Capital Advisors, L.L.C
§ Vola6le year-‐to-‐year revenue growth § Divergent energy prices
§ Mature life cycle stage § Stable demand for industry services
§ Heavy regula6on level § Regulatory concerns may constrain future
produc6on § Compe66ve environment
§ Major players well established § Barriers to entry
§ Vary depending on services provided § High capital intensity and High globaliza6on
Market Segment Revenue 2013
Products and Services Segmenta6on 2013 Industry Structure Nonmetalic ore mining support
1%
Metallic ore mining support
2%
Coal mining support
3%Natural gas drilling
services8%
Natural gas well support services
17%
Oil drilling services22%
Oilfield support services47%
Oil and Gas Field Service Overview
9x 7x Mul$ple Expansion Capital Advisors, L.L.C
Well Count
Service Intensity
Input Costs Star6ng to Ease
Pricing Pressure
Observa6ons
Key External Drivers
• Con6nued high levels of drilling in the companies core basins, driven by aYrac6ve economics • Improved midstream infrastructure • AYrac6ve commodity profiles
• Significant por6on of RES business levered to well count, not rig count • Drilling efficiencies expected to con6nue
• Operators are drilling longer laterals and increasing the number of stages • Trend not relegated to select basins
• RES maintains significant market share • Pricing pressure within pressure pumping business
• Ability to control costs has allowed RES to con6nue genera6ng significant cash flow • Pricing pressure star6ng to be felt in the coiled tubing business
• Guar costs down significantly • Frac sand availability has increased
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9x 7x Mul$ple Expansion Capital Advisors, L.L.C
Industry Revenue
2006 2007 2008 2009 2010 2011 2012 201320
40
60
80
100
120
140
160
107.33
2006 2007 2008 2009 2010 2011 2012 2013
2
4
6
8
10
12
14
16
3.42
North America Rotary Rig Count
WTI Crude Oil Spot Price ($/barrel) Henry Hub Natural Gas($/MMbtu)
Industry Trends
9x 7x Mul$ple Expansion Capital Advisors, L.L.C
(40%)
(30%)
(20%)
(10%)
0%
10%
20%
30%
40%
50%
2001 2003 2005 2007 2009 2011 2013
Growth %
§ Improving worldwide financial condi6ons
§ Projected posi6ve demand for support
services
§ Expanding global energy demand and increasing
crude oil prices
§ Expected to underpin growth in domes6c
oil drilling
§ Industry revenue expected to increase
§ Regulatory concerns
§ Compe66ve environment
§ Stable long-‐term demand for industry operators
Pressure Pumping Services Revenue
Industry Revenue Growth Key Observa6ons
Industry Outlook
$0
$10,000
$20,000
$30,000
$40,000
$50,000
$60,000
2005 2006 2007 2008 2009 2010 2011 2012 2013
Millions
Company Overview
9x 7x Mul$ple Expansion Capital Advisors, L.L.C
9x 7x Mul$ple Expansion Capital Advisors, L.L.C
Execu6ve Summary
§ Headquarters in Atlanta, GA
§ Large Inside Ownership
§ Strong Balance Sheet
§ Generates Healthy Cash Flows
§ High ROIC
§ Recent Share Price $15.76
§ Annual Dividend 2.7%
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9x 7x Mul$ple Expansion Capital Advisors, L.L.C
53%
14%
11%
5%
4%4%
9%
Service Line RevenuePressure Pumping
Thru Tubing Solutions
Coiled Tubing
Rental Tools
Snubbing -‐ HydraulicWorkover
Nitrogen
§ Services primarily provided in the Permian, Eagle Ford and Marcellus, three of the most ac6ve basins in NAM
§ Pressure pumping business levered to well count
q ~8,800 wells were drilled in 2Q13, up 3% from 1Q13
q An average of 5.2 wells were drilled per rig versus 5.0 the prior quarter
q Wall Street research es6mates the well count to improve moderately and frac intensity to rise sufficiently
§ Top of the line margins rela6ve to peers, resul6ng in an aYrac6ve free cash flow profile
q Cash flow profile has allowed management to return capital to shareholders through dividends
§ AYrac6ve balance sheet rela6ve to peers
q Minimal debt and desire to run business debt free
q Lack of leverage offers poten6al to materially accelerate growth if opportunity presents itself (organic or M&A)
RPC Company Highlights
Valua6on
9x 7x Mul$ple Expansion Capital Advisors, L.L.C
9x 7x Mul$ple Expansion Capital Advisors, L.L.C
A B C D E F G H I J K L M N O
Stock Diluted Price Revenue Debt/
Price @ Equity Enterprise EPS CFPS EV/EBITDA EBITDA Margin Growth EBITDA EBITDA
Company 8/13/13 Value Value 2013E 2014E 2013E 2014E 2013E 2014E 2013E 2014E 2013E - 2014E 2013E 2013E
C&J Energy Services 20.93 1,138 1,269 13.4x 11.6x 6.6x 6.2x 5.9x 5.3x 20% 20% 9% 0.7x $213
Calfrac Well Services 32.28 1,485 1,934 26.7x 11.9x 8.7x 5.6x 9.1x 6.1x 14% 18% 14% 2.3x $220
Superior Well Services 25.64 4,091 5,853 13.9x 10.4x 4.5x 4.0x 4.9x 4.2x 25% 27% 10% 1.5x $1,197
Trican Well Service 13.90 2,070 2,643 NA 15.0x 9.8x 6.2x 10.6x 6.4x 12% 16% 17% 2.5x $257
Median $1,778 $2,289 13.9x 11.8x 7.6x 5.9x 7.5x 5.7x 17% 19% 12% 1.9x $238
Mean $2,196 $2,925 18.0x 12.2x 7.4x 5.5x 7.6x 5.5x 18% 20% 12% 1.8x $472
Low $1,138 $1,269 13.4x 10.4x 4.5x 4.0x 4.9x 4.2x 12% 16% 9% 0.7x $213
High $4,091 $5,853 26.7x 15.0x 9.8x 6.2x 10.6x 6.4x 25% 27% 17% 2.5x $1,197
RPC Inc. 14.52 3,203 3,280 18.6x 14.5x 8.2x 6.9x 6.6x 5.7x 27% 30% 8% 0.2x $495
Aug-11 Oct-11 Dec-11 Feb-12 Apr-12 Jun-12 Aug-12 Oct-12 Dec-12 Feb-13 Apr-13 Jun-13
50%
60%
70%
80%
90%
100%
110%
(30%)
(23%)
(22%)
0%
(13%)
Equity Performance
Trading Comparables
RPC
CFW
CJES
SPN
TCW
9x 7x Mul$ple Expansion Capital Advisors, L.L.C
0x
2x
4x
6x
8x
10x
12x
14x
16x
Jan
-08
Mar
-08
May
-08
Jul-
08
Sep-
08
Nov
-08
Jan
-09
Mar
-09
May
-09
Jul-
09
Sep-
09
Nov
-09
Jan
-10
Mar
-10
May
-10
Jul-
10
Sep-
10
Nov
-10
Jan
-11
Mar
-11
May
-11
Jul-
11
Sep-
11
Nov
-11
Jan
-12
Mar
-12
May
-12
Jul-
12
Sep-
12
Nov
-12
Jan
-13
Mar
-13
May
-13
Jul-
13
TCW-CA CFW-CA CJES SPN RES Peer Median Multiple
Rolling EV / NTM EBITDA Mul6ple
RES trades in-‐line with its peers despite best-‐in-‐class EBITDA margins, high single digit top line growth and the ability to accelerate
Current 5-yr Median % Premium / (Discount) to 5-yr
Trican 9.0x 7.0x 27.6%
Calfrac 7.4x 6.3x 17.4%
CJES 5.7x 3.6x 58.1%
SPN 4.6x 4.6x (0.4%)
RPC 6.1x 5.2x 16.3%
Current Mul6ple Not Indica6ve of Fundamentals
9x 7x Mul$ple Expansion Capital Advisors, L.L.C
A B C D E F G H I J K L M N O
Stock Diluted Price Revenue Debt/
Price @ Equity Enterprise EPS CFPS EV/EBITDA EBITDA Margin Growth EBITDA EBITDA
Company 8/13/13 Value Value 2013E 2014E 2013E 2014E 2013E 2014E 2013E 2014E 2013E - 2014E 2013E 2013E
C&J Energy Services 20.93 1,138 1,269 13.4x 11.6x 6.6x 6.2x 5.9x 5.3x 20% 20% 9% 0.7x $213
Calfrac Well Services 32.28 1,485 1,934 26.7x 11.9x 8.7x 5.6x 9.1x 6.1x 14% 18% 14% 2.3x $220
Superior Well Services 25.64 4,091 5,853 13.9x 10.4x 4.5x 4.0x 4.9x 4.2x 25% 27% 10% 1.5x $1,197
Trican Well Service 13.90 2,070 2,643 NA 15.0x 9.8x 6.2x 10.6x 6.4x 12% 16% 17% 2.5x $257
Median $1,778 $2,289 13.9x 11.8x 7.6x 5.9x 7.5x 5.7x 17% 19% 12% 1.9x $238
Mean $2,196 $2,925 18.0x 12.2x 7.4x 5.5x 7.6x 5.5x 18% 20% 12% 1.8x $472
Low $1,138 $1,269 13.4x 10.4x 4.5x 4.0x 4.9x 4.2x 12% 16% 9% 0.7x $213
High $4,091 $5,853 26.7x 15.0x 9.8x 6.2x 10.6x 6.4x 25% 27% 17% 2.5x $1,197
RPC Inc. 14.52 3,203 3,280 18.6x 14.5x 8.2x 6.9x 6.6x 5.7x 27% 30% 8% 0.2x $495
9%
14%
10%
17%
8%
C&J EnergyServices
Calfrac WellServices
Superior WellServices
Trican WellService
RPC Inc.
13-'14 E Median: 9.8%
20%
14%
25%
12%
27%
20% 18%
27%
16%
30%
C&J EnergyServices
Calfrac WellServices
Superior WellServices
Trican WellService
RPC Inc.
2013E 2014E 2013E Median 2014E Median
Growth EBITDA Margin
Stable Growth and Unmatched Margins
9x 7x Mul$ple Expansion Capital Advisors, L.L.C
§ 7/1/2013 valua6on date § Mid-‐year conven6on for discoun6ng § Value includes
§ 5 years of discounted cash flows § Terminal value based upon 2018E
EV / EBITDA mul6ple § Financial projec6ons used based upon
assump6ons previously presented § Marginal tax rate of 35%
§ No NOLs / company assumed to pay cash taxes
§ Net debt of $77 MM § 217 MM shares outstanding (adj. for
dilu6on)
Exit EV / EBITDA
$17.42 5.0x 6.0x 7.0x
9.0% $14.56 $16.89 $19.21
10.0% $14.06 $16.30 $18.53
11.0% $13.59 $15.74 $17.89
12.0% $13.13 $15.20 $17.27Disc
ount
Rat
e (%
)
Assump6ons Valua6on
$661
$495
$580 $543
$693 $713
$175 $127 $152 $125
$215 $222
2012A 2013A 2014A 2015A 2016A 2017A
EBITDA Unlevered Free Cash Flow
Cash Flow Profile
Discounted Cash Flow Analysis
9x 7x Mul$ple Expansion Capital Advisors, L.L.C
Oilfield Services Investment Risks § Demand for services dependent upon vola6le oil and natural gas prices § Strength of global economy and its impact on global demand for oil and natural gas § Regulatory changes § Upstream budget fluctua6ons that directly impact demand for services
Risk Factors
Company Specific Risks § Maintaining compe66ve posi6on
amongst larger OFS peers § Lack of diversifica6on in revenue
genera6ng services § High cost of comple6ng wells in
unconven6onal shale plays
9x 7x Mul$ple Expansion Capital Advisors, L.L.C
Market Recommendation: Buy
September 19, 2013
Ques6ons?
Analysis by: William Carver
9x 7x Mul$ple Expansion Capital Advisors, L.L.C
§ We expect to have revenue of $320 MM and EBITDA of $137 MM in 2013E
§ Expect 3% revenue growth from 2014E onward
q Revenue growth assumed to equal well count growth
§ EBITDA margins based on 2013E with 10bps annual escala6on to reflect increased market share / pricing power
§ D&A assumed at 25% of sales
§ Maintenance cap ex was $50 MM in 2012 and we expect it to grow in-‐line with infla6on
§ For Every $10 increase in sales, we use $1 in Working Capital
Overview of Assump6ons
$1,945 $1,815
$1,954 $1,978 $2,037 $2,160
$2,289
2012A 2013E 2014E 2015E 2016E 2017E 2018E
$329
$264
$300 $304 $313 $322
2012A 2013E 2014E 2015E 2016E 2017E
Revenue Projec6ons
Capex Projec6ons