Investor Presentation
EnerCom’s
The 2008 Oil & Gas Conference
August 12, 2008
The 2008 Oil & Gas Conference
August 12, 2008
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Forward-Looking Statements
u This presentation contains forward-looking statements.
u Forward-looking statements are based on management
assumptions and analyses.
assumptions and analyses.
u Actual experience may differ and such differences may be
material.
material.
u Backlog consists of written orders and estimates for our services
which we believe to be firm. In many instances contracts are
cancelable by customers so we may never realize some or all of
our backlog, which may lead to lower than expected financial
performance.
which we believe to be firm. In many instances contracts are
cancelable by customers so we may never realize some or all of
our backlog, which may lead to lower than expected financial
performance.
u Forward-looking statements are subject to uncertainties and
risks which are disclosed in Geokinetics’ Annual Report on Form
10-K.
risks which are disclosed in Geokinetics’ Annual Report on Form
10-K.
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Market Data (at 8/1/2008)
• Exchange/Ticker: AMEX/GOK
• Market Capitalization: $181.6MM
• Enterprise Value $331.7MM*
Trading Data (at 8/1/2008)
• Common Shares Out. 10.3 MM
• Average Volume 31,715 shares/day
• Institutional Ownership 55%
Key Financial Data (at 6/30/2008)
• Cash $16.7MM
• Debt $103.3MM
• Debt to Total Cap 34.5%
* Debt, Preferred Equity and Cash as of 6/30/08
Corporate Information
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About Geokinetics
u Large North America footprint
u Strong presence in profitable U.S. land seismic market
u Technology leader in Canada
u Significant international experience and diversity
u Industry leader in international transition zone
u Extensive recent investments in new multi-component
recording systems, both land and shallow water
recording systems, both land and shallow water
u Strong and diverse customer base
u Recent expansion into Africa and emerging OBC market
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Source: Lehman Brothers The Original E&P Spending Survey
International Exploration and Production Expenditures ($B)
Industry Dynamics
u Global energy demand growth driving commodity prices
u Improved E&P economics = larger exploration budgets
u Technical advances are bringing new activity in regions
with known hydrocarbon systems
with known hydrocarbon systems
u U.S. shale plays
u Large discoveries are increasingly international and offshore
u Increasing demand for seabed seismic data acquisition
(Transition Zone, Ocean Bottom Cable and 4D)
(Transition Zone, Ocean Bottom Cable and 4D)
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Exploit
Seismic Data Acquisition and Processing
Needed at All Stages of the E&P Cycle
¿ Increase drilling success rates
¿ Reduce finding and development costs
E&P Project Cycle
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OBC
Streamer
The Value of Seismic Technology
“With 3-D seismic, we can understand the detailed geology much better than before. And
that translates to opportunities to drill new wells to bolster production in mature fields.”
that translates to opportunities to drill new wells to bolster production in mature fields.”
- ExxonMobil, The Lamp (2007 - Number 4)
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u U.S. and Canada
combined are 27% of
global market
combined are 27% of
global market
u 73% of seismic market is
outside North America
outside North America
u Geokinetics operates in
five out of eight major
regions
five out of eight major
regions
Chart Source: IHS Energy.
Global Seismic Crew Count
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u Consistent demand
outside of U.S.
outside of U.S.
u International prospects
focused on oil
focused on oil
u International E&P
spending in 2008
expected to rise 22% to
$293 billion*
spending in 2008
expected to rise 22% to
$293 billion*
Chart Source: Baker Hughes, WorldOil.com, Bloomberg.
*Source: Lehman Brothers The Original E&P Spending Survey - Midyear Update
*Source: Lehman Brothers The Original E&P Spending Survey - Midyear Update
International Seismic Market
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u Technology increases
crew productivity (channel
growth vs. crew growth)
crew productivity (channel
growth vs. crew growth)
u Drilling activity tightly
linked to natural gas
prices
linked to natural gas
prices
u U.S. land is a steady and
profitable business
profitable business
u U.S. E&P spending in
2008 expected to rise 15%
to $98 billion*
2008 expected to rise 15%
to $98 billion*
Chart Source: Baker Hughes, WorldOil.com, Bloomberg.
*Source: Lehman Brothers The Original E&P Spending Survey - Midyear Update
*Source: Lehman Brothers The Original E&P Spending Survey - Midyear Update
U.S. Seismic Market
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Company | Data Acquisition | M-C Data Library | Data Proc & Interp | Eqpmt. | Land Seismic Crews | ||||
Marine Streamer | Land | TZ | OBC | Intl | US | ||||
Geokinetics | | | | | | | |||
Dawson | | | | ||||||
Tidelands | | | | ||||||
PGS | | | | | | | |||
BGP | | | | | | | |||
CGGVeritas (Sercel) | | | | | | | | | |
WesternGeco (Schlumberger) | | | | | | | | | |
Mitcham | | ||||||||
ION Geophysical | | | | ||||||
Bolt Technologies | | ||||||||
OYO Geospace | | ||||||||
Geophysical Market Overview
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Competitive Advantage
u Significant base in profitable U.S. land seismic market
u Significant international exposure
u Specialized expertise in transition zone niche
u Ability to operate in difficult, frontier environments
u Early entrant into emerging ocean bottom cable market
u Complementary data processing and interpretation
capabilities
capabilities
u Proven track record in health, safety and environment
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Choice of Leading Operators
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Grow Customer Base
& Expand into New
Markets
& Expand into New
Markets
Strengthen
Complementary
Service Offerings
Complementary
Service Offerings
¿ Leverage competitive advantage and expertise in
difficult land environments and offshore shallow
water zones to maximize profitability.
difficult land environments and offshore shallow
water zones to maximize profitability.
¿ Better assist customers with full range of
seismic services, from acquisition and
processing to interpretation and management.
seismic services, from acquisition and
processing to interpretation and management.
¿ Presence in 20 of 194 countries worldwide.
Further expand geographic presence and
services offered.
Further expand geographic presence and
services offered.
¿ Continue to monitor opportunities for prudent
expansion.
expansion.
Capture New Market
Opportunities
Opportunities
¿ Leverage operational expertise to pursue
opportunities in complementary markets such
as OBC
opportunities in complementary markets such
as OBC
Continue to Leverage
Competitive Advantage
Competitive Advantage
Pursue Strategic
Acquisitions / Alliances
As Appropriate
Acquisitions / Alliances
As Appropriate
Growth Strategy
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Lower | Higher |
Business Strength
u Reinvest cash flows generated from North American land seismic
u Penetrate fast-growing international land markets
u Look for TZ and OBC opportunities in international markets
Strategic Growth Plan
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u Channel growth drives increases in revenue
104% CAGR
(Revenue)
(Revenue)
Growth Focus
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u Penetrating High-Growth Markets via TZ and OBC
International Revenue Rising
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Global Operations Map
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U.S. Operations
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There’s No “Average” Job
u North America:
§ Energy Sources: Vibrator Trucks vs. Dynamite
§ Contract Types: Term vs. Turnkey
§ Third party
u International:
§ Crew customized to job
§ Highly variable crew size (#’s of people and equipment):
• New Zealand - 1,400 channels : 50 people : $2MM job
• Bolivia - 9,500 channels : 1,200 people : $20MM job
• Bangladesh - 6,500 channels : 1,800 people : $10MM job
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From Deepwater
150 feet
150 feet
To Shallow
Up the
Escarpment
Escarpment
To Level
Ground
Ground
Elements of Transition Zone
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Leader in Transition Zone
u Purpose-built vessels designed for cost-effective mobilization by air,
land or sea
land or sea
§ Up to 65’ in length,
ultra shallow draft vessels
ultra shallow draft vessels
§ Fit into 40’ containers
§ Capable of operating
150 ft. water depth
150 ft. water depth
§ 3 Active Crews
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Emerging OBC Market
u Launched OBC operations Q4 2007
u Sole provider of Sercel SeaRay (2 Systems)
u Offshore capabilities up to 500 ft. water depth
u Expanding OBC capabilities near-term
§ Enhancing operating efficiency
§ Expanding operations
§ One active crew, potential to split
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Processing & Interpretation
Capabilities
Capabilities
u Full suite of onshore and offshore proprietary seismic data processing services
and interpretation products
and interpretation products
§ Geophysical processing
§ Interpretation / well log analysis (existing database)
§ Software
§ Consulting Services
u Advanced Technologies for processing new data and reprocessing
old data with new methods
old data with new methods
§ AVO, pre-stack time and depth imaging
§ Multi-component and 4D
u Global Reach
§ Offices in US and UK
§ P&I services stretch to all regions of the globe
u Complements data acquisition services
§ GROWTH OPPORTUNITY for follow on work to Company field crews;
currently less than 5%
currently less than 5%
Financial Highlights
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12/31/2006 | 12/31/2007 | 6/30/2008 | |
Cash, equivalents and restricted cash (1) | $ 22,059 | $ 16,843 | $ 16,710 |
Long-term debt and capital leases (including current portion): | |||
Credit facility | 0 | 40,537 | 60,334 |
Floating rate notes | 110,000 | 0 | 0 |
Other debt | 7,169 | 39,375 | 42,960 |
Total debt | 117,169 | 79,912 | 103,294 |
Debt as % capitalization | 58.1% | 29.4% | 34.4% |
Convertible preferred stock | 56,077 | 60,926 | 63,496(2) |
Stockholders’ equity | 28,595 | 130,965 | 133,106 |
Total capitalization | $201,841 | $271,803 | $299,896 |
(1) Includes $1.7 million, $1.3 million and $1.2 million of restricted cash at 12/31/06, 12/31/07 and 6/30/08, respectively.
(2) Completed the sale of 120,000 additional shares of convertible preferred stock and 240,000 warrants for gross proceeds of $30.0 million on July 28, 2008.
(2) Completed the sale of 120,000 additional shares of convertible preferred stock and 240,000 warrants for gross proceeds of $30.0 million on July 28, 2008.
Capitalization
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Note: Adjusted EBITDA reflects $727k of Grant’s Abandoned IPO expenses and $12.9 million of expenses related to the Grant Acquisition consisting primarily of investment
advisor and professional fees, payout under phantom stock plan and completion bonuses which are added back in 2006 as well as $3.2 million of one-time severance costs
in 2007.
advisor and professional fees, payout under phantom stock plan and completion bonuses which are added back in 2006 as well as $3.2 million of one-time severance costs
in 2007.
Adjusted Revenue and
EBITDA Growth
EBITDA Growth
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Note: Adjusted EBITDA reflects $727k of Grant’s Abandoned IPO expenses and $12.9 million of expenses related to the Grant Acquisition consisting primarily of investment advisor
and professional fees, payout under phantom stock plan and completion bonuses which are added back in 3Q06 as well as $3.2 million of one-time severance costs in 3Q07.
and professional fees, payout under phantom stock plan and completion bonuses which are added back in 3Q06 as well as $3.2 million of one-time severance costs in 3Q07.
Pro Forma Quarterly Revenue ($MM)
Pro Forma Adjusted EBITDA ($MM)
Quarterly Results
u Seasonality is prevalent in operations
§ Results from a variety of factors including Canadian working season in 1Q and thaw in
2Q, Colombian rainy season in Q2 and budgeting cycle of international companies
2Q, Colombian rainy season in Q2 and budgeting cycle of international companies
u 2Q07 impacted primarily by severe weather in the U.S. and a job being declared force
majeure
majeure
u Quarterly volatility reflects varying crew profitability due to fluctuations in size, job, location,
utilization of crews and the timing of crew moves
utilization of crews and the timing of crew moves
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u Solid seismic data
acquisition and data
processing backlog
of $412 million as of
June 30, 2008
acquisition and data
processing backlog
of $412 million as of
June 30, 2008
u Substantial amount
of 2008 covered by
current backlog,
remainder to be
completed in 2009
and 2010
of 2008 covered by
current backlog,
remainder to be
completed in 2009
and 2010
*Includes a $59 million job in Argentina which has been removed from current backlog due to continued delays
and uncertainty.
and uncertainty.
412
417
411
381
321
283
311
Rising Backlog
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$50.7 MM
YTD
Spending
YTD
Spending
$80.0
$94.7
$158.0
$24.5
Investing for Growth
u 2008 capital budget recently increased 24% to $80MM
u Investments in transition zone, OBC markets, international markets
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Sercel SeaRay
Capital Investments
u Invested $95 million in 2007:
§ New state-of-the-art equipment
(67% received in second half of year)
(67% received in second half of year)
§ Upgraded U.S. crews
§ Expanded recording capacity
§ Entered OBC market
u 2008 capital expenditure budget
of $80 million, $51 million invested in 1H08
of $80 million, $51 million invested in 1H08
§ Focus on increasing international channel
count and seabed acquisition capacity
count and seabed acquisition capacity
u Maintenance CAPEX averages 3% to 4%
of revenues
of revenues
u Capital investment decisions are based
on an average expected payback of
less than three years EBITDA
on an average expected payback of
less than three years EBITDA
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Why Buy GOK?
u Robust backlog provides visible growth through 2008 and into 2009
u Strong presence in profitable North American land seismic market
u High degree of international exposure
u Leader in high-value transition zone
u Penetrating strategic growth markets with long-term visibility
u Improving data acquisition operating margins
u Integration of acquired companies substantially complete
u Recent investments of $145 million in crew upgrades
and additional revenue-generating capacity
and additional revenue-generating capacity