2 the following presentation contains 'forward-looking statements' within the meaning of...
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 Newpark’s 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. Newpark’s SEC filings can be obtained at no charge at www.sec.gov, as well as through our Website, www.newpark.com.
DisclaimerDisclaimer
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Newpark Resources is a niche provider of
high-performance, environmentally focused
services and products to the exploration and
production industry.
What is Newpark Resources?What is Newpark Resources?
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Corporate ProfileCorporate Profile
NYSE: NR
Shares outstanding, MM 83.7
Float, MM 79.4
Market capitalization, $MM $460
Management ownership 5%
Institutional ownership 92%
Daily trading volume* 223,000
* January-February 2004 average
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Presentation SummaryPresentation Summary
Since 1997, Newpark has diversified beyond its historic Gulf Coast-based business
Geographic Diversification
New Products and Services
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Growing Revenue DiversificationGrowing Revenue Diversification
3%
10%
22%25%
33%
39%
44%47%
$0
$50
$100
$150
$200
$250
1997 1998 1999 2000 2001 2002 2003 2004(P)0%
10%
20%
30%
40%
50%
60%
New Market Revenue % New Market to Total
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First Time Revenue Greater
Than The Rig Count!
Newpark’s Historic MarketNewpark’s Historic Market
Gulf Coast Revenue and Rig Activity
252243
189
252
295
216223 223250
190189
263
187
144
228
208
100
200
300
1997 1998 1999 2000 2001 2002 2003 2004(E)
Rig Activity Revenue ($)
Rig Activity Source: Baker Hughes, Inc.
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+30%
$0
$100
$200
$300
1997 1998 1999 2000 2001 2002 2003 2004(E)
+20%
RevenueRevenue
New Markets Revenue
(E) Estimate
Historic Gulf Coast Oil and Gas Market Revenue
$0
$100
$200
$300
1997 1998 1999 2000 2001 2002 2003 2004(E)
9
The Rig CountThe Rig Count
Source: Baker Hughes, Inc.
691
588
436
666614
809
913
861
300
400
500
600
700
800
900
1000
1997 1998 1999 2000 2001 2002 2003 3/12/04
Non-Gulf Coast Rig Count
10
Operating IncomeOperating Income
$0
$10
$20
$30
$40
$50
2000 2001 2002 2003 2004(E)
Historic Gulf Coast Market
(E) Estimate
$0
$10
$20
$30
$40
$50
2000 2001 2002 2003 2004(E)
New Markets
50% was first year mat sales
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Industry Trend: Dealing with Increased RiskIndustry 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
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Leverage to Deeper DrillingLeverage to Deeper Drilling
Newpark’s Revenue Opportunity Per Newpark’s Revenue Opportunity Per Rig Increases with DepthRig 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
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Business SegmentsBusiness Segments
% of Revenue
2003 2004(E)
Drilling Fluids 58% 50%
Mat Sales and Rentals 24% 30%
E&P Waste Disposal 18% 20%
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Drilling Fluids
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Newpark’s Focus - Premium ProjectsNewpark’s Focus - Premium Projects
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Drilling Fluids StrategyDrilling Fluids Strategy
Focused on high-performance water-based
products - DeepDrill™ and FlexDrill™ - and
related software and fluids engineering
services.
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Drilling Fluids - 2004Drilling 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
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$0
$200,000
$400,000
$600,000
$800,000
$1,000,000
$1,200,000
$1,400,000
$1,600,000
$1,800,000
10,000' 12,000' 14,000' 16,000' 18,000' 20,000'
Deeper Drilling - The Growth DriverDeeper Drilling - The Growth Driver
In the Gulf Coast Market, Newpark is focused on premium projects.
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Western Canada
Gulf Coast
Rockies
West Texas
Oklahoma
Drilling Fluid MarketsDrilling Fluid Markets
Albania
Italy
Tunisia
Algeria
Libya
Romania
Croatia
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Drilling Fluid MarketsDrilling Fluid Markets
Revenue 2002 2003 Change 2004(E)
Central Region 44.8 59.5 33%
Canada 14.2 26.0 83%
Mediterranean / N. Africa 21.9 36.7 68%
Other 3.9 4.7 21%
Non-Gulf Coast 84.8 126.9 50% +20%
Gulf Coast 98.5 88.6 -10% +40%
Total 183.3 215.5 18% +30%
Revenue by Market
21
26
11 12
7
-9
($10.0)
($5.0)
$0.0
$5.0
$10.0
$15.0
$20.0
$25.0
$30.0
$35.0
1999 2000 2001 2002 2003 2004(E)
102
134
205183
216
$0.0
$50.0
$100.0
$150.0
$200.0
$250.0
$300.0
1999 2000 2001 2002 2003 2004(E)
Drilling Fluids Revenue and IncomeDrilling Fluids Revenue and Income
Revenue Operating Income
+30%
30% operating leverage on incremental revenue
22
+20%
+40%
Drilling Fluids RevenueDrilling Fluids Revenue
66
85
133
9989
$0
$40
$80
$120
$160
1999 2000 2001 2002 2003 2004(E)
Gulf Coast ($ million) Non- Gulf Coast ($ million)
36
50
71
85
127
57%
46%
35%35% 37%
52%
$0
$40
$80
$120
$160
1999 2000 2001 2002 2003 2004(E)
0%
10%
20%
30%
40%
50%
60%
Non-Gulf Coast % of Revenue
All amounts in millions
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Mat Sales and Mat Rentals
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Mat StrategyMat Strategy
Further develop the worldwide market for the DuraBase™ composite mat system. Expand sales in those key countries and markets.
Expand rental market beyond the historic Gulf Coast oilfield rental business.
Develop selected foreign rental opportunities, including Mexico in 2004.
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Sale of wooden rental
mats in Canada
Mats and Integrated ServicesMats and Integrated Services
Revenue (millions)
31
77
33
30
37
29
30
$0.0
$25.0
$50.0
$75.0
$100.0
$125.0
2000 2001 2002 2003 2004(E)
Rental / Sales Other Services
35
7
53
30% of Revenue is from Non-Gulf Coast Markets
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Mat Rentals and Sales RevenueMat Rentals and Sales Revenue
North America - Rentals Composite Mat Sales
All amounts in millions
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Mat Rentals and Sales RevenueMat Rentals and Sales Revenue
Rental Volume (million square feet)
Rental Pricing(dollars per square feet)
+34%
Gulf Coast Market
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16
32
3 1$0.0
$10.0
$20.0
$30.0
2000 2001 2002 2003 2004(E)
Mats and Integrated ServicesMats and Integrated Services
Operating Income
Key Factors in Improved Earnings Outlook:
Increased pricing due to contraction of industry capacity
Increased composite mat sales
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How are Mats Used?How are Mats Used?
Temporary access roads and worksites
All-weather access to drilling sites
Improves productivity
Extend the drilling or working season
Meet environmental protection regulations
Protect equipment and supplies on job site
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Dura-Base® Composite MatsDura-Base® Composite Mats
Proprietary interlocking temporary work site or road surface
8’ by 14’ high density polyethylene (HDPE) sections
Internal honeycomb structure - nominal weight 1,050 pounds
Anti-static properties throughout materials
Lock securely together with quarter-turn fasteners
Useful life over 20 years
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Dura-Base® Mat Sales HistoryDura-Base® Mat Sales History
2000 through 2003
Nine Major Markets Units Sold 35,236 Average Price $1,500
(million)
Revenue $52.7 Margin 27.0 SG&A Expense 7.0 Contribution $20.0
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Dura-Base® Mat Sales HistoryDura-Base® Mat Sales History
Lessons Learned Dura-Base® is the premier mat system in the world.
The manufacturing plant’s pressure molding capabilities are unique.
Some markets will only support rentals, not sales.
New rental market opportunities include Mexico, the U.S. utilities, and Canada.
The Dura-Base® mat is “overbuilt” and over-priced in most applications.
The long-term life of the Dura-Base® mat is at odds with the short-term planning horizons used in the oilfield industry.
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Dura-Base® Mat Product FamilyDura-Base® Mat Product Family
Current Dura-Base®
Mat
Lighter Weight(internally welded)
Lower Tolerance Plastic Resins
(more moderate temperatures)
Market Size
C
O
S
T
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Mat SalesMat Sales
New Product: Bravo™ Lightweight Mats
Easily portable
Weighs 50 to 60 pounds
Installs without mechanical assistance
Designed for personnel, pedestrian and equipment traffic
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Non-Oilfield ApplicationsNon-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
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Mexico Increases rig productivity in
marsh and soft soils Accelerates multi-year gas
development project A rental market
Peru and South America Minimizes disturbance to rain
forest environment Long-term site for multi-well
drilling and production project
International MarketsInternational Markets
Western Canada Increases productivity in
muskeg and tundra conditions Extends drilling season
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International MarketsInternational Markets
Sakhalin Island/Russia Project Logistics access where no
infrastructure exists Multi-year field development
project
Indonesia Safe, all weather work sites in
jungle and soft soil conditions Multi-year projects planned
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Non-Oilfield ApplicationsNon-Oilfield Applications
Nationwide Permit Expedited Through MattingSection 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
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E&P Waste Management
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E&P Waste StrategyE&P Waste Strategy
Focus on the premium E&P waste market where customers require quality, safety and certainty of environmental performance.
Growth in the market will be driven by new regulations, deeper, more complex wells, and demand for premium services.
Integrate with drilling fluids business where possible.
Let competitors defend the commodity end of the market.
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E&P Waste - Key Market FactorsE&P Waste - Key Market Factors
New regulations
Increasing depth of drilling
Environmentally sensitive areas opening
All solutions are local solutions
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Waste Management in North AmericaWaste Management in North America
Wyoming Composting Freeze/Thaw
Western CanadaComposting
Eastern CanadaComposting
Underground
Injection
West Texas
Recycling for Reuse &Underground Injection
Gulf Coast
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Gulf Coast Injection WellsGulf Coast Injection Wells
Key differentiation from other providers
Low pressure methodology High environmental safety High capacity Low cost A permanent solution to
customer’s waste problem
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Gulf Coast LeadershipGulf Coast Leadership
23 years in the Gulf Coast market
Handled over 50 million barrels of E&P waste
Zero environmental incidents
High operating leverage to volume
Integrates with other products and services
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Canada and U.S. Rockies: Composting
E&P Waste ManagementE&P Waste Management
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E&P Waste DisposalE&P Waste Disposal
Jonah-Pinedale Trend
400 Wells to Date Only 2 Non-Productive
Potentially 10,000 Wells
15 TCF of Gas Reserves
Challenges Include: Tight Sandstone Requires Fracturing
Produces Large Volume of Saltwater
Off-site Disposal Required
Newpark’s Freeze-Thaw Facility Opened August 2003
Pinedale Field
Newpark
Jonah Field
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E&P Waste DisposalE&P Waste Disposal
Wyoming Freeze - Thaw OperationsWyoming Freeze - Thaw Operations
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+15%
E&P Waste Segment RevenueE&P Waste Segment Revenue
56
73
62
69
$0.0
$20.0
$40.0
$60.0
$80.0
2000 2001 2002 2003 2004(E)
Revenue (millions)
Approximately 30% of segment revenue is derived from markets outside of the Gulf Coast.
18.3
15.9
9.1
12.9
$0.0
$5.0
$10.0
$15.0
$20.0
2000 2001 2002 2003 2004(E)
Operating Income
50% Operating Leverage
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E&P Waste MarginsE&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 MarketsWaste Disposal - New Markets
Expansion in Jonah-Pinedale Trend Saltwater Disposal Facility Integrates With Fluids Business
Oilfield: All forms of water markets are the next opportunity
Industrial NORM Permitting Underway New Market Should Develop Over Several Years
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Mat Sales Further develop worldwide Dura-Base® sale market. Bravo™ Mats broaden the product line.
Mat Rentals Improving Gulf Coast rental pricing Increasing domestic non-oilfield revenue. Pursue selected foreign rental markets (Mexico).
Drilling Fluids Contracts and preferred vendor status should sustain 25% growth.
E&P Waste Oilfield water is the next growth opportunity. More complex and deeper drilling projects lead volume growth. Industrial NORM driven by litigation.
2004 Objectives2004 Objectives
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Newpark SummaryNewpark Summary
Newpark will maintain moderate leverage in keeping with its revenue mix.
32%
46%
53%
44%
36% 36% 37%
0.0%
10.0%
20.0%
30.0%
40.0%
50.0%
60.0%
1997 1998 1999 2000 2001 2002 2003E
Debt to Capital Ratio
A Cyclical Growth CompanyA Cyclical Growth CompanyPositioned for the Coming CyclePositioned for the Coming Cycle