Observations on Oilfield Services Trends

  • Given current market conditions, capital needs, and relative costs of capital among small- and mid- cap players, the oilfield services industry is ripe for consolidation.
  • Fragmentation continues to be highest in the sand, pressure pumping, equipment, land drilling, and well services sub-sectors.
  • Financial buyers continue to shift focus towards capital light and differentiated products, seeking a defensive play against low oil prices and volatile markets.
  • Many investors remain cautiously optimistic entering 2019, expecting short-term uncertainty and volatility before a global expansion takes hold in the second half of the year amid an international oil price rebound, offshore recovery, and increased E&P spending.

Case Study: DrillingInfo

HW’s EPI Group advised DrillingInfo on its acquisition by Genstar Capital

screen_shot_2019-02-13_at_10.06.27_am.pngCompany Overview

DrillingInfo is the leading, fully integrated SaaS-based data analytics platform, providing strategic insights across the entire energy value chain. The Company is the first, largest, and fastest growing decision-support SaaS platform serving the global energy industry.

DrillingInfo’s purpose-built solutions deliver business-critical insights that address the complex and rapidly evolving workflow requirements of the energy industry. Utilizing innovative modules, the Company delivers specialized analytics deployed through mobile, web, and desktop platforms to drive actionable intelligence.

The Company’s upstream platform enables a diverse set of users to forecast and maximize production, perform due diligence, and find new business leads, while its trading and risk platform helps improve trading decisions, automate workflows, and monitor portfolio risk with real-time data, forecasting, curve construction, and integrated data management.

 

Select HW Transactions

screen_shot_2019-02-13_at_10.09.04_am.pngProvider of integrated software, data, and analytics solutions to the global energy industry

 

 

 

 

screen_shot_2019-02-13_at_10.09.34_am.pngLeading provider of non-destructive testing and inspection services for oil and gas tubular products

 

 

 

 

screen_shot_2019-02-13_at_10.10.14_am.pngProvider of specialized laboratory and field services to the upstream oil and gas industry

 

 

 

 

screen_shot_2019-02-13_at_10.10.43_am.pngIndependent wireline services provider with a presence in major oil and gas plays throughout the continental U.S.

 

 

 

 

screen_shot_2019-02-13_at_10.11.11_am.pngProvider of comprehensive natural gas and oil production equipment and services, including, repair, testing, on-site support, and consulting

 

 

 

 

screen_shot_2019-02-13_at_10.12.01_am.pngProvider of oil and gas optimization solutions for compression and vapor recovery applications

 

 

 

 

screen_shot_2019-02-13_at_10.12.26_am.pngProvider of specialized plunger lift products and services that allow for uninterrupted production

 

 

 

 

screen_shot_2019-02-13_at_10.12.53_am.pngProvider of cased hole wireline solutions, including logging, perforation, mechanical, plug, and abandonment services

 

 

 

 

screen_shot_2019-02-13_at_10.13.22_am.pngMarket leading provider of engineering and geomatics services for the oil and gas industry in Western Canada

 

 

 

 

screen_shot_2019-02-13_at_10.13.51_am.pngProvider of manufactured gas pressure control products and lifecycle support solutions

Select Oilfield Services M&A Transactions1,2

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CSL Capital Management acquires Weatherford Laboratories

Laboratory Services and Geological Analysis

  • Weatherford International plc signed a definitive agreement to sell its laboratory services (“Weatherford Laboratories”) business to a group led by CSL Capital Management
  • Weatherford Laboratories provides a comprehensive suite of field and laboratory services to the oil and gas sector, including wellsite, exploration, appraisal, production, and management analyses
  • Under the agreement, Weatherford will divest its laboratory and geological analysis business, including personnel and associated contracts, after which it will maintain a close, collaborative relationship with CSL Capital that will enable it to continue to provide services to their joint customers
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Blackstone Acquires Controlling Stake of Ulterra Drilling Technologies

PDC Drill Bits and Technology

  • Blackstone Energy Partners has acquired a controlling, majority interest in Ulterra Drilling Technologies (“Ulterra”) from affiliates of American Securities LLC
  • Ulterra is the largest and fastest growing pure-play, independent supplier of polycrystalline diamond compact (“PDC”) drill bits to the oil and gas industry, having doubled total revenue since 2016
  • The company has has nearly 250,000 sq. ft. of engineering, manufacturing, and service space, which it uses to develop new, application-specific drill bits and technologies with significantly shortened delivery times
  • Blackstone will partner with American Securities and the Ulterra team as the company pursues growth through service and equipment line expansion as well as add-on acquisitions
 
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Nine Energy Services Acquires Magnum Oil Tools

Dissolvable Downhole Completions Products

  • Nine Energy Services Inc. (“Nine”) has completed its acquisition of Magnum Oil Tools International (“Magnum”)
  • Magnum is a market-leading provider of downhole completion technologies and products to the global oil and gas industry, including a comprehensive range of patented proprietary dissolvable and composite frac plugs
  • The acquisition allows Nine to enter the dissolvable frac plugs market with a demonstrated market leader, positioning the company as a premier provider of completion-focused technology
  • The partnership is expected to help operators reduce risk and cycle times as completions continue to become more complex with longer laterals, more stages, and mega-well pads

Public Market Observations1,2

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Strategic M&A Activity1,2

Acquirers of OFS Assets by Volume

(total # of transactions)

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  • Strategic acquirers represented 77% of OFS M&A transaction volume in 2018
  • Strategic acquirers completed 67 transactions in 2018, down slightly from 69 in 2017 and remaining well below the 107 transactions completed in 2014
  • Since trough M&A activity levels in 2015, private equity buyers are beginning to show increased investment appetite for OFS assets

Note: Does not include add-on transactions or minority purchases

Annual Sub-Sector M&A Activity by Volume

(as a % of total transactions)

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  • ProPetro’s recent acquisition of Pioneer Natural Resources’ pressure pumping assets is an indicator of a larger market consolidation theme that is likely to materialize in late 2019 
  • In conjunction with the continued consolidation of wellsite service providers, water and environmental assets are experiencing growing interest from both strategic and private equity buyers

Note: Includes only major NAM and EUR transactions

Public OFS Valuation Multiples by Sector1

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Select HW EPI Transactions

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1. FactSet 

2. PitchBook

 

 

 

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