Investor Presentation. August 2017

Transcription

1 Investor Presentation August 2017

2 Disclaimer Forward-Looking Statements The information in this presentation includes forward-looking statements. All statements, other than statements of historical fact included in this presentation, regarding our strategy, future operations, financial position, estimated revenues and losses, projected costs, prospects, plans and objectives of management are forward-looking statements. When used in this presentation, the words could, believe, anticipate, intend, estimate, expect, project and similar expressions are intended to identify forward-looking statements, although not all forward-looking statements contain such identifying words. These forwardlooking statements are based on Solaris current expectations and assumptions about future events and are based on currently available information as to the outcome and timing of future events. When considering forward-looking statements, you should keep in mind the risk factors and other cautionary statements described under the heading Risk Factors included in Solaris final prospectus dated May 11, 2017, filed in connection with its initial public offering pursuant to Rule 424(b) under the Securities Act of 1933, as amended, with the Securities and Exchange Commission on May 15, We caution you that these forwardlooking statements are subject to all of the risks and uncertainties, most of which are difficult to predict and many of which are beyond our control, incident to the transportation, storage and delivery of proppant. These risks include, but are not limited to, the level of domestic capital spending by the oil and natural gas industry, natural or man-made disasters and other external events that may disrupt our manufacturing operations, volatility of oil and natural gas prices, changes in general economic and geopolitical conditions, large or multiple customer defaults including defaults resulting from actual or potential insolvencies, technological advancements in well service technologies, competitive conditions in our industry and our ability to fully protect our intellectual property rights. Should one or more of these risks or uncertainties occur, or should underlying assumptions prove incorrect, our actual results and plans could differ materially from those expressed in any forward-looking statements. You are cautioned not to place undue reliance on any forward-looking statements, which speak only as of the date of this presentation. Except as otherwise required by applicable law, we disclaim any duty to update and do not intend to update any forward-looking statements, all of which are expressly qualified by the statements in this section, to reflect events or circumstances after the date of this presentation. Industry and Market Data This presentation has been prepared by Solaris and includes market data and other statistical information from third-party sources, including independent industry publications, government publications or other published independent sources. Although Solaris believes these third-party sources are reliable as of their respective dates, Solaris has not independently verified the accuracy or completeness of this information. Some data are also based on the Solaris s good faith estimates, which are derived from its review of internal sources as well as the third-party sources described above. Trademarks and Logos Solaris owns or has rights to various trademarks, service marks and trade names that is uses in connection with the operation of its business. This presentation also contains trademarks, service marks and trade names of third parties, which are the property of their respective owners. Solaris use or display of third parties trademarks, service marks, trade names or products in this presentation is not intended to and does not imply, a relationship with Solaris or an endorsement or sponsorship by or of Solaris. Solely for convenience, the trademarks, service marks and trade names referred to in this presentation may appear without the, TM or SM symbols, but the omission of such references is not intended to indicate, in any way, that Solaris will not assert, to the fullest extent under applicable law, its rights or the right of the applicable owner of these trademarks, service marks and trade names. 1

3 Market Summary Ticker Exchange SOI New York Stock Exchange Share Price (1) $12.57 Diluted Shares Outstanding (2) ~43.7 million Market Capitalization ~$550 million (1) As of August 2, (2) Includes Class A and Class B shares. Includes 804,926 restricted shares and net dilutive effect of 591,261 options. 2

4 Summary of August 2 nd Press Release and Today s Prepared Remarks New Transloading Logistics Services Natural expansion through supply chain Long-term contract with major operator underpins launch of strategic expansion; increases contracted revenue backlog and earnings visibility underscoring capital management discipline Located directly on Union Pacific Railroad covering 300 acres in central Oklahoma near STACK/SCOOP Discussions underway with other major operators and service providers in STACK/SCOOP for long-term contracts Kingfisher Phase One to be completed within one year Increased Mobile Proppant Management Systems Outlook Growing market share 48 total systems today; all deployed to customers Increased year-end projection for total systems to a range of 68-72; up from Selective outsourcing accelerates build schedule to meet growing customer demand Revised 2017 Capital Expenditure Outlook 2017 capex outlook increases to $75-$95 million from $40-$55 million Driven by development of Kingfisher Facility and more proppant management systems being delivered 3

5 Kingfisher Facility Timeline August 2017 Commence Phase 1 Development and Construction ($40 million of capital expenditures) Engineering and site preparation 8,000 feet unit train loop 18,000 feet of side track 30,000 tons of silo storage January 2018 First Proppant Delivery Rail-to-truck transloading operations commence for E&P Operator Continued build-out of unit train loop and silo storage August 2018 Phase 1 Complete High-speed silo transloading and storage operations commence for E&P Operator Run-rate annual revenue of $13 million associated with E&P Operator s minimum volume commitment 4

6 Kingfisher Facility Strategic Expansion into Transloading Logistics Development of a New High-Capacity Transload Facility The first independent, high-speed, unit-train capable transload facility dedicated to the STACK/SCOOP 300 acres directly on the Union Pacific Railroad First proppant delivery scheduled for January 2018 Within 50 miles of > 75 active horizontal rigs (1) (1) Source: IHS Enerdec. Central to Current STACK / SCOOP Rig Activity Long-Term Contract with Leading STACK E&P Operator Seven-year agreement Minimum quarterly proppant volume commitment Rail-to-truck operations commencing January 2018; Dedicated unit train loop and 30,000 tons of silo storage commencing August 2018 Operator is a current Solaris Mobile Proppant Management System customer Proximity to Operators Acreage Will Reduce Supply Chain Costs 50 mile radius 100 mile radius 50 mile radius 100 mile radius Source: Baker Hughes North America Rotary Rig Count. Source: 1Derrick. 5

7 Growth Driven by Secular Trends Solaris facilitates increased per well and industry wide proppant consumption levels......yet uniquely positioned to capitalize on an oversupplied sand market Innovate logistics solutions that save our customers money and time 48 patent protected Mobile Proppant Management Systems deployed today 15% market share (1) More storage, smaller footprint, simplified operations and safer well sites Facilitate flow and transportation flexibility...not selling a commodity via owned channels Real-time inventory data available in the cloud Vertically integrated manufacturing Mobile Proppant Management System Quarterly System Revenue Days (2) Customer adoption and secular trends driving growth 2,627 1, Q Average 2016 Average 1Q 17 Growing market share and earnings, but we are not dependent on increasing sand margins (1) Management estimates. (2) Revenue days defined as the combined number of days Solaris Systems earned revenues. 6

8 Leading Independent Provider of Proppant Logistics Solutions Mobile Fleet Active in Key Basins Well Site Systems SCOOP / STACK Systems 4 (8%) Kingfisher Transload Facility Marcellus / Utica System 1 (2%) Solaris Manufacturing Facility Mobile Proppant Management Systems addresses challenges related to the transportation, storage and delivery of proppant Manufacture and rent Systems directly to leading E&P operators and pressure pumpers > 80% of fleet deployed to customers with multiple Systems System users include leading EOG Resources, Inc., Devon Energy, Apache Corporation and ProPetro Services Permian Basin Systems 28 (58%) Eagle Ford Systems 11 (23%) Haynesville Systems 4 (8%) Demand for Systems exceeds our fleet size Expect to increase fleet to Systems by end of 2017 Expansion Into Transloading Logistics Developing Kingfisher Facility High-capacity, unit train capable transload facility in Kingfisher, Oklahoma supporting STACK/SCOOP Underpinned with seven-year contract with leading STACK E&P operator Integrated supply chain information from terminal to wellhead utilizing our Mobile Proppant Management Systems and our realtime inventory and throughput management application, PropView Expect to deploy additional Mobile Proppant Management Systems to the STACK/SCOOP 7

9 Framing Solaris Market Opportunity Market Share Based on U.S. Frac Fleet Size Historical Current Future <20% >95% Sand King type solutions are industry standard Several new technology solutions designed in % Solaris and other new technologies take market share in the downturn New product category created with independent proppant logistics offerings >40% Solaris and other new technologies take significant market share Drivers Completion designs Manufacturing style operations; i.e. pad drilling HS&E / OSHA compliance 15% >40% 15% < 5% 2014 Q Other New Technologies Sand King Type Solution Note: Management estimates. All numbers are approximations. Referenced Future column represents management s view of potential future market share. 8

10 Proppant Demand Continues to Increase New U.S. Horizontal Wells (1) Recovering commodity prices have driven increased drilling and completion activity 23.7 E&P operators have increasingly focused on using larger amounts of proppant in an effort to drive single-well estimated ultimate recovery rates and returns Trend of increasing proppant per lateral foot expected to continue E 2018E 2019E New U.S. Horizontal Wells (thousands) Proppant demand increases expected to amplify supplychain bottlenecks, increase cost and add complexity to last mile logistics We provide solutions for the industry s increasing proppant usage and intensity Increases in equipment demand and acute proppant scarcity drive demand for our business Millions of Short Tons (Total Demand for Proppant) (1) Spears & Associates Hydraulic Fracturing Market, , published Fourth Quarter Increasing Total and Per Well Proppant Demand (1) E 2018E 2019E Proppant Demand (Millions of Short Tons) Proppant per Horizontal Well (Short Tons) 8,000 7,000 6,000 5,000 4,000 3,000 2,000 1,000 0 Proppant Short Tons per Well 9

11 Proppant Logistics are Complex and Prone to Bottlenecks Illustrative 20 Million lb. Completion Requirements SAND MINE ~10,000 tons of sand Proppant mined and stored in mine storage (silos or domes) RAIL TO BASIN ~100 railcars Proppant loaded into unit train and delivered to basin TRANSLOAD STORAGE FACILITY ~10,000 tons of throughput High capacity transloads with ability to unload unit train in 24 hours Proppant transloaded into storage facility (large silos) or directly to truck DELIVERY TO THE WELLSITE WELLSITE STORAGE AND DELIVERY ~400 truck loads ~2.5 million lbs / 6 silos Highest variability in supply chain Subject to congestion and bottlenecks 2.5 million lbs of storage capacity Assuming 4 day completion, System turned 2x every 24 hours Storage at demand center reduces down time for waiting on sand Solaris Provides Key Buffers Along Supply Chain 10

12 Bringing Order to Chaos Issues with Traditional Offerings Inadequate on-site inventory and offloading capacity Complicated operations and expansive well site footprint Opaque inventory information and limited communication HS&E issues, including silica dust Traditional Sand Kings Our Solution Rolling Storage Supply chain buffer Greater storage and proppant accessibility More accessible unloading points Enclosed system with fewer moving parts and dust suppression Efficient use of space Fully automated Real-time data Solaris Mobile Proppant Management System Solaris Solution 11

13 Elegant Solution to a Complicated Problem Simple, modern, fully-integrated control system High volume input and output capacity Mobile and flexible equipment High Capacity Throughput Supply Chain Savings Increased on-site inventory / access to inventory Increased truck offloading points Smaller truck fleet size required to deliver proppant Decreased truck demurrage Real-time inventory levels and consumption rates Seamless Rig-Up and Integration Well Site Savings Increased inventory stage execution efficiency Built-in dust control Lower labor requirements Proppant inventory loss savings Reduced fuel requirements Increased asset utilization PropView TM : Real-Time Supply Chain Mobile App [Redacted customer well name] 12

14 Scalable, Vertically Integrated Manufacturing Capability Manufacturing Facility Overview Over 100,000 square feet of covered manufacturing facility on 10.8 acre lot in Early, Texas Facility Footprint Centrally located to Permian, Eagle Ford, Haynesville and STACK/SCOOP Integration Benefits Vertical integration provides flexibility to adjust manufacturing activity levels to both meet customer demand and react to market conditions Currently manufacturing more than four Systems per month Can increase output through selective subcomponent outsourcing 13