Basic Energy Services' CEO Presents At Barclays CEO Energy-Power Conference (Transcript)

Basic Energy Services, Inc. (BAS)

Barclays CEO Energy-Power Conference Call

September 6, 2012 11:05 am ET

Executives

Kenneth V. Huseman – President, Chief Executive Officer and Director

Presentation

Unidentified Analyst

All right everyone. We’ll move right along here. Next up this morning is Basic Energy Services, a leading North America well service company. Speaking for the company this morning is Ken Huseman, the President and CEO. Ken has had a long history in the well service industry and has been President and CEO since joining the company in 1999. Prior to his involvement with Basic, Ken was the Chief Operating Officer at Key Energy Services from 1996 to 1999, following positions at both Pool Energy Services and WellTech. During his time at Key Energy, he executed over 50 acquisitions and grew the companies well service rig fleet from 200 to over 1,400 rigs.

Ken had bought on a similar strategy when he joined Basic through strategic acquisitions, adding well service rigs, trucking and drilling operations, moving the company into pressure pumping and coiled tubing and establishing a presence in most of the major U.S. basins. Please help me welcome back to the CEO Energy Conference Ken Huseman. Ken?

Kenneth V. Huseman

Thanks, Jack, and thanks to Barclays for allowing us to present. We appreciate the opportunity, it’s always well attended, one of the big deals of the year as far as the conferences. Of course we need you to go through the forward-looking statements that you’ve seen all this before; it’s the same as everybody else, just be aware; I may say something that doesn’t come true.

Those of you who are familiar with Basic know that we’ve been known primarily as a well servicing or a work over company and a Fluid Services company. Over the last several years, we’ve diversified our service offering extensively to allow us to participate in virtually every stage of the wells life from drilling through completion, ongoing production and plugging at the end of its life.

So, our two traditional business lines now each account for about a fourth of our business, our revenue stream. Our completion of Remedial segment is now our largest segment. It includes an array of services, bit more technically oriented services including a pressure pumping fleet involved in frac, cementing, acidizing, et cetera, a network of rental and fishing tool stores, snubbing, most recently coiled tubing along with some other specialized services that are smaller such as underbalanced drilling, et cetera. And then our smaller segment is now our contract drilling business, all situated in West Texas, focused on the vertical, more of the shallower horizons that are still being drilled very actively in West Texas.

We do have an extensive footprint in most of the – in all of the more active oil and gas basins in the U.S. with the exception of California. The orange dots on this map represent our service points. We tend to be focused in areas with a large well count. I think it’s always important to remember that while there are about 2,000 drilling rigs running in the U.S. there are almost a million existing producing oil and gas wells throughout the country that require ongoing maintenance throughout their life and it’s also important to realize, I think that these wells stay in production for 10s of years.

We routinely work on wells throughout the country particularly in West Texas that were drilled in the 1940s and 1950s. So, the spend by our customers to keep those wells in production is pretty significant and represents probably around a half of our revenue stream throughout the cycle. But we’re also located each of those service points also give us good access to the more active drilling areas, which are highlighted in green on this map, it’s the same equipment that can support ongoing production, it’s the same equipment that supports new well drilling frac activity completions, et cetera.

So, we are involved throughout the life of the well and it is important an ongoing production related work as an important anchor to our business. The graphic on the right shows the well count, existing well count in each of those markets and that tends to be our anchor in any business. You won’t see us be the first to show up in a new drilling play unless there is a significant well count in the area.

We also are fairly evenly split depending on which part of the cycle you’re on between oil and gas exposure right now, probably 70% of our business on oil-directed projects. Two years ago, we’ve felt like we’re more evenly split when gas drilling was a little bit busier and there were more work over projects in the gas fields.

So right now, with the slump in gas prices, we’ve naturally gravitated more to the oil portions of our footprint. We’ve been able to move, relocate a lot of equipment out of the East Texas and Barnett Shale markets to the busier parts of the Eagle Ford in South Texas, as well as the Permian Basin and parts of the Rockies that are oil oriented.

The Permian Basin is where the company started back in ’92. It’s been the largest revenue generator for our business since then and currently represents about 40% of our revenue stream. I think it’s – we’ve been in the Permian as I say before the Permian was cool, it’s always been the largest oilfield market in the U.S. and with the recent shale plays and the new frac technologies that’s opening up a lot of the old reservoirs, it’s really become an important part of the business for everybody in the U.S.

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