Quarterly Oilfield Services Sector Review - 1Q 2019

• 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.

Select Oilfield Services M&A Transactions^1,2

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

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

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

Strategic M&A Activity^1,2

Acquirers of OFS Assets by Volume

(total # of transactions)

• 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)

• 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

1. FactSet 

2. PitchBook

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