www.flotekind.com Flotek Industries, Inc. A Technology-Driven Growth Company Jerry Dumas, Chairman & CEO Houston Energy Financial Forum November 18-20, 2008 Exhibit 99.2 |
2 Flotek Overview Flotek’s business is comprised of three segments Drilling Products Segment Leading provider of downhole rental tools to the energy and mining industries Complete bottom hole assembly including motores, MWD and stabilization tools Chemicals & Logistic Segment Provide chemicals for drilling, cementing, stimulation, acidizing and production Our chemicals improve production and well economics Operate automated bulk handling/loading facilities Artificial Lift Provide pumping system components to produce oil and gas |
3 Flotek Growth Engines Sustainable Earnings Growth Growth Strategy: Diversified revenue base with low capital requirements Attractive acquisitions in strategic markets Organic growth through R&D Aggressive focus thru Flotek International Focus on Fundamentals: Employee recruiting and retention Management team growth Field operating profit target of 25% Core Business Growth: Specialized products for unconventional oil & gas Artificial lift—a $6.6B market * Stimulation chemicals—a $4.1B, high-margin market * Drilling tools—a $1.8B market* *Spears Oilfield Market Report, Oct. 2008 |
4 Focused, Balanced Growth Strategy We take a balanced approach to growth of our three business segments Acquisitions and organic growth Demonstrated acquisition track record – Completed 12 acquisitions since 2001 Significant organic growth – 65% of revenue growth for 2006 – 64% of revenue growth for 2007 Domestic vs. International Expand into selected North American basins Expand international – Middle East, North Sea Gas vs. Oil Increase exposure to oil projects Petrovalve applicable to Canadian SAGD oil sands Production vs. Drilling Increase exposure to production-oriented activities Grow recurring revenue base Quarterly Revenue (By Segment) $0 $10 $20 $30 $40 $50 $60 $70 Chemicals & Logistics Drilling Products Artificial Lift In $M |
Third Quarter 2008 Financial Highlights 3Q 2008 vs. 3Q 2007 – 50% revenue growth – 49% increase EBITDA – 42% growth in income from operations – 16% increase in net income; 15% increase in diluted earning per share – Gross profit margin of 45% in 08 vs. 43% in 07 5 8.5 5.0 41.7 10.1 5.8 62.8 15.7 12.1 16% 49% 50% 42% 0 10 20 30 40 50 60 70 Total Revenue EBITDA Income from Operations Net Income 0% 5% 10% 15% 20% 25% 30% 35% 40% 45% 50% 2007 2008 Difference 2007 vs. 2008 In $M |
Third Quarter 2008 Product Highlights New Technologies – StimLube & StimLube CAT friction reducers – AMB-100 biocide – New TeleShot MWD tool – Flotek Shock Subs and Drilling Jars – Field Testing TelePulse MWD for use in directional drilling 6 8.5 5.0 41.7 10.1 5.8 62.8 15.7 12.1 16% 49% 50% 42% 0 10 20 30 40 50 60 70 Total Revenue EBITDA Income from Operations Net Income 0% 5% 10% 15% 20% 25% 30% 35% 40% 45% 50% 2007 2008 Difference 2007 vs. 2008 In $M |
7 Proprietary, Technology-Driven Products Flotek continues to shift offerings toward specialty, away from commodity Focus on high market growth Deliver strong profitability Customer-focused R&D efforts in chemistry and mechanical areas Solid pipeline of new products; dedicated science and technical professionals Acquisitions target technology- oriented products and select vertical integration 41.5% 40.9% 42.7% 42.9% 22.6% 21.6% 23.5% 17.1% 0% 10% 20% 30% 40% 50% 2004 2005 2006 2007 0% 10% 20% 30% 40% 50% Gross Margin % EBITDA Margin % Historical Margins |
8 Drilling Products Segment Complementary technologies – motors, telemetry and drill string components Teledrift: Leading designer and manufacturer of wireless survey and measurement while drilling (MWD) tools Increases our offering of proprietary, technology-oriented downhole rental tools CAVO Drilling Motors: Complete line of high performance mud motors Particularly applicable in directional and workover applications Tool Rental: Stabilizers, drill collars, reamers, wipers, jars and shock subs (also sales of centralizers and drill bits) $21.9 $56.8 $3.3 $36.8 $0 $10 $20 $30 $40 $50 $60 2004 2005 2006 2007 Flotek Revenue In $M |
Teledrift Extraordinary technology Compliments mud motor technology Aggressive directional rental opportunity “Franchise” technology – a proven industry standard Gross profit and EBITDA margins 9 |
10 Chemicals & Logistics Segment We offer a full spectrum of specialty chemicals for drilling and cementing, stimulation, acidizing and production Proprietary Specialty Chemicals For drilling, cementing, completion and production: 75% specialty products by revenue Customers include major service companies, independents and drilling contractors Value-based pricing Substantial In-House R&D Efforts Woodlands, Texas, R&D center opened August 2007 Expanded capacity for custom product development Collaboration with key customers on new products Includes 7 PhDs, 125 years combined experience Logistics Business Design, project manage and operate automated bulk handling/loading facilities Facilities handle and blend sand, cement and other materials for oilfield operations $29.6 $50.5 $18.0 $86.3 $0 $20 $40 $60 $80 $100 2004 2005 2006 2007 Other Products 25% Proprietary / Patent-Pending 75% Revenue In $M |
11 Chemicals Group Growing global demand for oilfield chemicals* 5.9% yearly demand increase for oilfield chemicals – $14.5B market by 2010 Largest market is North America – Nearly 60% of total demand in 2010 North Sea demand for high value, environmental products – Biodegradable capillary foamer – Micro-emulsion (ME) offshore approval pending – Manufacturing capability established in The Netherlands * The Freedonia Group, Inc.-World Oilfield Chemicals # 2162 |
Key Technology Patented Micro-emulsion chemistry for drilling, fracturing and acidizing “Green” chemicals enhance unconventional gas production* Well economics/viability Actual production rates Recoverable reserves Well lifecycle 12 Flotek MICRO-emulsions flow more readily than standard MACRO- emulsions. Frac job clean-up is improved for better production. * The Oil & Gas Journal, “Trends in Unconventional Gas” Dec 17, 2007 |
Micro-emulsion (ME) Performance Independent 24-well Green River Basin, Wyoming study* ME clearly outperformed non-ME wells Effective fracture half-length over 1.5 times longer 20 year estimated gas recovery 33% more Estimated NPV 40% more Shut-in wells recovered 100% of prior production vs. losses up to 50% without ME 13 $2 $4 $8 $26 $56 $0 $10 $20 $30 $40 $50 $60 2003 2004 2005 2006 2007 * 2008 Performance Sciences, Inc., Dr. Jim Crafton PhD ME Gross Revenue Growth In $M |
14 Artificial Lift Segment We provide pumping system components widely used in unconventional horizontal and coalbed methane wells Petrovalve optimizes rod pumping efficiency: Increase flow per stroke Producer can slow pump rate while maintaining production volume Can be placed at production zone within vertical and horizontal completions Improves well economics, extends the economic life Especially applicable in unconventional plays (heavy oil, high gas to liquids ratio wells) to eliminate gas locking $1.4 $14.9 $0.6 $13.3 $0 $5 $10 $15 $20 2004 2005 2006 2007 Revenue In $M |
15 Artificial Lift – Coal Bed Methane Gas Separator – Patented downhole technology to enhance production and improve efficiency of coal bed methane wells. Improves production by reducing solution gas lost in water recovery Reduces environmental impact water/gas separator |
16 $3.70 $12.00 $21.70 $37.10 $0 $10 $20 $30 $40 2004 2005 2006 2007 Strong Revenue and EBITDA Growth... Revenue EBITDA $158.0 $100.6 $52.9 $21.9 $0 $20 $40 $60 $80 $100 $120 $140 $160 2004 2005 2006 2007 In $M In $M |
17 ...Has Led To Strong Earnings and EPS Growth $0.88 $0.61 $0.47 $0.15 $0.00 $0.10 $0.20 $0.30 $0.40 $0.50 $0.60 $0.70 $0.80 $0.90 $1.00 2004 2005 2006 2007 $2.2 $7.7 $11.4 $16.7 $0 $5 $10 $15 $20 2004 2005 2006 2007 In $M Annual EPS Net Income |
18 EBITDA Reconciliation ($ in millions) 2004 2005 2006 2007 Net Income $2.2 $7.7 $11.4 $16.7 Interest Expense 0.7 0.8 1.0 3.5 Income Taxes 0.2 1.7 6.6 10.4 Depreciation and Amortization 0.7 1.8 2.8 6.5 EBITDA $3.7 $12.0 $21.7 $37.1 |
19 Forward Looking Statements and Non-GAAP Disclosures Certain statements and information included in this presentation constitute “forward–looking statements” within the meaning of the Private Securities Litigation Reform Act of 1995. These statements are based on certain assumptions and analyses made by the Company’s management in light of its experience and its perception of historical trends, current conditions, expected future developments and other factors it believes are appropriate under the circumstances. These statements involve known and unknown risks and uncertainties, some of which are outlined in the Company’s 10-K, which may cause the actual performance of Flotek to be materially different from any future results expressed or implied in this presentation and the forward-looking statements. Flotek undertakes no obligation to update any of its forward-looking statements for any reason. Flotek has used the non-GAAP financial measure of earnings before interest, taxes, depreciation and amortization (EBITDA) in this presentation. We have used this because we believe that EBITDA provides useful information to investors as it represents the measure of pre-tax cash flow of Flotek, prior to any debt service requirements. A non-GAAP financial measure is a numerical measure of financial performance, financial position, or cash flows that either 1) excludes amounts, or is subject to adjustments that have the effect of excluding amounts, that are included in the most directly comparable measure calculated and presented in accordance with GAAP in the statement of income, balance sheet or statement of cash flows, or 2) includes amounts, or is subject to adjustments that have the effect of including amounts, that are excluded from the most directly comparable measure so calculated and presented. |
20 Contact Us Flotek Industries, Inc. 2930 W. Sam Houston Parkway N. Suite 300 Houston, Texas 77043 713-849-9911 www.flotekind.com Brian Shannon, Investor Relations Manager At Flotek Industries, our mission is to provide the customers we serve with the best value to enhance their performance. This will be done with the utmost dignity, integrity, and character. Character of the organization and its people matters greatly at Flotek where values will not be compromised. We will strive daily to achieve the highest standards of quality, loyalty, and service to be, with God’s grace, the best in our industry. This is our commitment to our customers, stockholders and ourselves. |