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Investor Presentation January 2015
This presentation contains information that is "forward-looking" in that it describes events and conditions ENSERVCO reasonably expects to occur in the future. Expectations for the future performance of ENSERVCO are dependent upon a number of factors, and there can be no assurance that ENSERVCO will achieve the results as contemplated herein. Certain statements contained in this release using the terms "may," "expects to," and other terms denoting future possibilities, are forward-looking statements. The accuracy of these statements cannot be guaranteed as they are subject to a variety of risks, which are beyond ENSERVCO's ability to predict, or control and which may cause actual results to differ materially from the projections or estimates contained herein. Among these risks are those set forth in ENSERVCO’s Form 10-K filed on March 20, 2014, and in its reports subsequently filed with the Securities and Exchange Commission, all of which are available at www.enservco.com, and in addition to the other risks and caveats included in this presentation. It is important that each person reviewing this presentation understand the significant risks attendant to the operations of ENSERVCO. ENSERVCO disclaims any obligation to update any forward-looking statement made herein.
In addition, we would point out that our ability to respond to questions at this meeting is limited by SEC Regulation FD. In short, Regulation FD prohibits us from making selective disclosure of material non-public information. Where we believe that Regulation FD prevents us from responding, we will answer the question with “no comment” or a similar phrase. When we believe it is appropriate to announce material non-public information, we will publish press releases or file reports with the SEC.
*Note on non-GAAP Financial Measures This presentation also includes a discussion of Adjusted EBITDA, which is a non-GAAP financial measures provided as a complement to the results provided in accordance with generally accepted accounting principles ("GAAP"). The term "EBITDA" refers to a financial measure that we define as earnings plus or minus net interest plus taxes, depreciation and amortization. Adjusted EBITDA excludes from EBITDA stock-based compensation and, when appropriate, other items that management does not utilize in assessing ENSERVCO’s operating performance. None of these non-GAAP financial measures are recognized terms under GAAP and do not purport to be an alternative to net income as an indicator of operating performance or any other GAAP measure.
Cautionary Statement on Forward-looking Information
Symbol (NYSE: MKT)52-week rangeRecent price*Avg. volume (3 mo.)
Shares - outstandingShares - fully dilutedMarket cap* Fiscal year end
ENSV$1.17 - $4.02
$1.60184,00037.1 M41.0 M
$59.3 M December 31
Key Data
ENSV 1-year price performance
Financial Results (TTM at 9/30/14)Revenue $53.4 MAdjusted EBITDA $8.4 M
Russell 3000 Index member
Analyst Coverage• William Blair • Maxim Group• Northland Capital Markets • Sidoti• Barrington • Zacks• Euro Pacific Capital • Casimir Capital
*Recent price and market cap data as of January 5, 2015, and subject to change.
ENSV Shareholder Overview
ENSERVCO’s institutional shareholder count grewfrom 1 at January 1, 2014, to 40 at December 31, 2014
Partial list of ENSERVCO’s institutional shareholders as of January 5, 2015, based on SEC reporting:Institution Shares HeldCross River Capital Management 5,183,100Granahan Investment Management 1,501,700Hunter Associates 1,000,000Driehaus Capital Management 832,200Wellington Management 616,000EAM Investors 487,400North Star Investment Management 423,800Vanguard 354,400Morgan Stanley 338,300Edmunds White Partners 325,800William Blair Investment Management 239,000Advisory Research 233,600KCG Holdings 187,000Perritt Capital Management 145,100GSA Capital Partners 103,200Fidelity Management & Research 37,400
Company Overview
Leading provider of well stimulation and fluid management services to domestic onshore conventional and unconventional oil and gas customers
Primary Services: Frac Water Heating • Hot Oiling • Acidizing • Fluid Mgmt.
Only national provider of frac water heating, hot oiling and well acidizing
Operations in seven of nation’s most active oil and gas fields
45% of revenue derived from recurring, maintenance-related work
Master service agreements (MSAs) with many of America’s leading exploration and production companies
Mobile equipment fleet allows for rapid redeployment to address regional shifts in demand
Strong relationship with PNC Bank supports growth
Investment Considerations
Benefitting from rapid growth of U.S. unconventional oil and gas plays
Ability to fund 30%+ revenue CAGR from operating cash flow alone
Capacity and geographic expansion initiatives underway
Focused on reducing seasonality with more balanced, high-margin revenue model emphasizing recurring, year-round maintenance work
Reduced reliance on drilling activity insulates against oil price swings
Broader exposure from NYSE MKT listing and expanded analyst coverage
Rick Kasch – President and CEO; Co-Founder• Responsible for ENSERVCO operations since Company inception in 2006• Executed acquisitions of ENSERVCO’s predecessor businesses• Extensive operating, financial management, capital formation and public company experience with
companies ranging from startups to NYSE listed
Austin Peitz – Vice President, Field Operations• More than 18 years of operational experience with ENSERVCO• Responsible for all Heat Waves and Dillco field operations• Designed proprietary heating systems used in ENSERVCO’s frac water heaters and hot oiling trucks• Managed opening of all Company locations
Bob Devers – Chief Financial Officer• Joined Company in 2013 with more than 20 years of financial management experience• Broad industry background includes oil and gas and natural resource sectors • Spent 2007 - 2011 as CFO of mineral exploration Company traded on NYSE MKT• Formerly senior director of financial analysis and internal audit of The Broe Companies Inc., a multi-
billion dollar international holding company with investments in real estate, transportation, mining, and oil and gas exploration.
Experienced Leadership Team
Notable Events in Company History
Becomes a public companyCommences operations in Marcellus Shale region
Acquisition of 35-year-old Dillco Fluid Services, the leading provider of water hauling, fluid disposal, frac tank rental, and well-site construction services in the Hugoton Basin
2006
2007
2010
2011 Opens major operation centers in Bakken Shale and northern Niobrara Shale fields
Service territory expanded into Utica Shale and Mississippi Lime regions 2012
Acquisition of Heat Waves Hot Oil Service, a 10-year-old provider of hot oiling, frac water heating, acidizing, pressure testing & water hauling
2013Full-year revenue up 48% YOY to record $46.5 millionFull-year adjusted EBITDA up 121% to record $10.9 million Service territory expanded into Wyoming’s Jonah Field, Powder River & Green River Basins
2014
$3.7 million asset acquisition expands fleet & footprint into northern Bakken Shale$16 million Capex program facilitating major expansion of service fleetCommercializes LNG, CNG and well-gas fueling options for frac water heating units PNC Bank approves $40 million credit facilityFirst quarter revenue an all-time quarterly record $25.2 millionUp-listed to NYSE MKT; named Rocky Mountain Region’s Service Company of the Year for 2013
Operating Subsidiaries
88% of 2013 consolidated revenue
Primary services: • Frac water heating• Hot oiling• Acidizing• Pressure testing
Service area: Colorado, Pennsylvania,
North Dakota, Montana, Wyoming,
Nebraska, West Virginia, Ohio, Kansas,
New Mexico, Oklahoma, Texas & Nevada
12% of 2013 consolidated revenue Primary services:
• Fluid hauling• Fluid disposal• Frac tank rental• Well-site construction
Service area: Colorado, Kansas, Oklahoma & Texas
Heat Waves Hot Oil Service Dillco Fluid Service
Service Overview – Frac Water Heating
Frac water heating is the process of heating the water used to hydraulically fracture oil and natural gas wells. This process ensures fluid temperatures meet the requirements of the customer’s frac design.
A majority of ENSERVCO’s burner boxes are bi-fuel, meaning they can be fueled with propane, liquefied natural gas, compressed natural gas or dry well-gas with the flip of a switch. Bi-fuel capability is a competitive advantage, offering customers a “green” alternative and lower operating costs.
Trucks come configured as single burners (bobtail), double-burners and “mega” heaters (pictured).
Service Overview – Hot OilingHot oiling involves heating and circulating oil or similar fluids down a well bore, where the fluid dissolves and dislodges paraffin and other hydrocarbon deposits.
Hot oiling is also used to heat the contents of oil storage tanks, a process that melts ice and/or eliminates water and other soluble waste that can reduce the operator’s revenue at the refinery.
Hot oiling is a recurring, maintenance-related service, and is performed throughout the life of a well.
ENSERVCO’s hot oilers are capable of generating up to 12 million BTUs, and are also used in pressure testing applications.
Service Overview – Acidizing
Acidizing involves pumping specially formulated acids and/or chemicals into a well to dissolve materials blocking the flow of the oil or natural gas.
Acidizing is used for increasing permeability throughout the formation, cleaning formation damage near the wellbore and removing the buildup of materials restricting the flow in the formation.
Acidizing is a recurring, maintenance-related service, and can be performed throughout the life of a producing well.
Fluid Management Services
ENSERVCO’s Fluid Management business transports water to fill frac tanks or reservoirs at well locations, transports contaminated production water to disposal wells, moves drilling and completion fluids to and from well locations, and transports flow-back fluids from the well site to disposal wells.
The Fluid Management services are utilized during both the drilling and long-term maintenance of a well.
Service Assets and Capex Initiatives August 2014 appraisal of rolling stock + 2014 Capex + North Dakota asset
acquisition total $50 million in fair market value (excluding real estate)
2014 Capex and North Dakota assets expected to add $41 million in annual revenue potential
2015 Capex plan will be formulated in Q2 after discussion with key customers
Fleet Expansion OverviewEnd of
2013/2014 Season
End of 2014/2015
Season*
Frac Water Heating Unit Equivalents** 42 81
Hot Oiling units 27 59
Acid Transport 3 7
* Includes equipment commissioned under the 2014 capital expenditure plan and effects of November 2014 asset acquisition** Mega Frac Water Heaters have twice the heating and revenue capacity of a standard heating unit, and therefore are counted as two units.
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Service Territory – Demand-driven Expansion
Colorado1. DenverHeadquarters2. PlattevilleD-J Basin & Niobrara ShaleKansas3. Garden CityMississippi LimeNorth Texas4. HugotonNorth Dakota5. Killdeer6. TiogaBakken Shale
Pennsylvania7. CarmichaelsMarcellus Shale & Utica ShaleWyoming8. Rock SpringsJonah Field &Powder River Basin9. Casper Powder River Basin10. San AntonioEagle Ford ShaleNevada11. Elko County
ENSERVCO LocationsColorado
Pennsylvania
North Dakota
Kansas
Wyoming
1 2
34
5
7
9
Existing territoriesExpansion opportunity
10
11
6
Revenue by Service Territory
Replace with bar chart
Bars reflect 12-month periods from April 1 - March 31, encompassing a full heating season
$ in millions
2009/10 2010/11 2011/12 2012/13 2013/14 $-
$10.0
$20.0
$30.0
$40.0
$50.0
$60.0
Hugoton/Miss. Lime Marcellus/Utica Bakken DJ - Niobrara Powder River/Green River Other
Selected Customers
Competitive Landscape
Industry consists primarily of small “mom and pop” and regionally focused service providers
Many providers operate aging equipment with limited capacity
ENSERVCO’s Competitive Advantages:
Only national provider of hot oiling, well acidizing, frac water heating
Modern equipment fleet outperforms most competing providers
MSAs with leading exploration and production companies
Low employee turnover
Under-leveraged with strong balance sheet and cash flows and excellent banking relationship
$ in thousands 2011 2012 2013 9 Mo. 2014
Revenue $23,904 $31,498 $46,474 $38,286
% growth 34% 32% 48%
Gross profit $6,076 $7,953 $14,530 $9,077
% margin 25% 25% 31% 24%
Operating income (loss) ($1,628) $1,701 $8,370 $3,219
Income after tax (loss) ($1,598) $401 $4,376 $1,487
Adjusted EBITDA $3,183 $4,940 $10,931 $6,028
% margin 13% 16% 24% 16%
Financial Highlights
Financial Highlights (continued)
$ in thousands September 30, 2014
December 31, 2013
Cash & Accts. Rec. $5,553 $13,554
Current assets $7,819 $15,129
Total assets $36,697 $33,422
Working capital $3,509 $8,174
LT debt, net of current portion* $14,574 $11,200
Total liabilities $21,314 $20,577
Total liabilities/equity 1.4:1 1.6:1
LT debt/equity 0.9:1 0.9:1
*September 30 figure includes long-term debt plus senior revolving credit facility.
Bullish Outlook for Domestic Energy Production
Growing tight-oil production is expected to drive U.S. output toward historical highs ENSERVCO derives approximately 75% of its revenue from domestic tight-oil market U.S. onshore completions have surpassed 37,000 and are expected to reach 45,000 in
2016. Nearly 50,000 U.S. onshore wells expected by 2020.*
*Douglas-Westwood forecast
Growth Strategy
Two pronged approach – Organic and Acquisitions
Parameters1. Balance revenue streams between recurring maintenance and drill bit2. Reduce seasonality3. Diversify service offerings4. Maintain high gross profit margins
Organic• CAPEX – e.g. 2014 Plan• Geographic expansion – e.g. Wyoming• Both satisfy parameters 1, 2, 4
Acquisitions• Opportunistic but prudent approach in current oil price environment• Recent $3.7M asset acquisition satisfied parameters 1, 2, 4• Strong balance sheet, bank relationship, cash flow
Execution of Growth Strategy
Capitalize on continued increase in strong demand for well enhancement services in Rocky Mountain and Northeastern service territories
Leverage early-mover status with LNG, CNG and well-gas fueling options for frac water heaters
Pursue expansion into new regions, including Texas and Nevada, where opportunities exist with current customers
Leverage MSAs to capture new business as E&Ps narrow their vendor lists
Jay PfeifferPfeiffer High Investor Relations
Contacts:
Rick KaschPresident & CEO
ENSERVCO Corporation303-333-3678
Bob DeversChief Financial Officer
ENSERVCO Corporation720-974-3408