Conference Presentation delivered by Nick Assef at Excellence in Oil & Gas Conference in Sydney at the Hilton Hotel on 12th March 2014.
Presentation covers a number of Macro Strategy issues pertaining to M & A activity at present - including referring to both deals and valuations
8377087607, Door Step Call Girls In Kalkaji (Locanto) 24/7 Available
Â
Nick Assef Excellence in oil & gas m&a 120314fnl
1. WORKBOOK
WWW.LCC.ASIA | Š Lincoln Crowne & Company12 March 2014
ExcellenceInOil&GasConferencePresentation
Page | 1
Oil & Gas Services M & A
Prepared for 9th Annual Excellence In Oil & Gas Conference, 12th March 2014
Resourceful Events
Nicholas A. Assef LLB (Hons), LLM, MBA
2. WORKBOOK
WWW.LCC.ASIA | Š Lincoln Crowne & Company12 March 2014
ExcellenceInOil&GasConferencePresentation
Workbook Contents
Page | 2
1.⯠Macro Sector & Regional Drivers - Upstream
2.⯠Deal Environment & Drivers
3.⯠Valuation Arbitrage? Cross Border Observations
4.⯠Strategic Due Diligence: Current Deal Challenges
5.⯠Northern Hemisphere Deals: Samples of Specialists
6.⯠Opportunities & Trends
LCC is a specialist M & A Firm that is skilled at leading
Directors and Senior Management through the
complex Strategic, Financial, Governance & Project
Management requirements of Public Transactions
Since 2011 LCC has advised on c. A$500m in closed
M & A transactions, c. A$300m in associated deal
financings and is currently advising on a range of
complex M & A and advisory transactions â including
the renegotiation of a multi decade royalty
arrangement with Life of Royalty value c. A$1.5b
LCCâs weekly market research updates include M & A
activity in the Engineering & Contracting sector in
Australia
3. WORKBOOK
WWW.LCC.ASIA | Š Lincoln Crowne & Company12 March 2014
ExcellenceInOil&GasConferencePresentation
Macro Sector & Regional Drivers - Upstream
Page | 3
Macro Picture Looks Attractive, But Many ChallengesâŚâŚâŚ..
0
5000
10000
15000
20000
25000
30000
Australian Energy Exports
LNG Crude Oil
Announced
Â
9%
Â
Feasibility
Â
21%
Â
Commi7ed
Â
66%
Â
Completed
Â
4%
Â
LNG, Gas, Oil Major Project Pipeline
$294 Billion in âNotionalâ Projects
ĂźďźâŻ Multiple Gas precincts c. Australia Ă⯠Capital deployment priority â cheaper taxing nations ?
ĂźďźâŻ South East Asia demand â effects Fukushima ? Ă⯠US an advanced cheap producer of Oil & Gas (gas glut ?)
ĂźďźâŻ Government desire royalties / cashflows Ă⯠Australian track record hitting timetable / budget ?
Source : BREE, LCC Calculations
Gas Exports Trending Up
4. WORKBOOK
WWW.LCC.ASIA | Š Lincoln Crowne & Company
Company Ticker Market
 Cap
 ($A) TEV
 /
 EBITDA
 (A) Deal
 Count^
SeaDrill NYSE
 :
 SDRL 18,381$
Â
Â
Â
Â
Â
Â
Â
Â
Â
Â
Â
Â
Â
Â
Â
Â
 12.80x 10
Jacobs
 Engineering NYSE
 :
 JEC 9,194$
Â
Â
Â
Â
Â
Â
Â
Â
Â
Â
Â
Â
Â
Â
Â
Â
Â
Â
 11.00x 15 Acquisition
 in
 2013
 of
 SKM
 Consulting
 for
 A$1,300m
Quanta
 Services NYSE
 :
 PWR 7,690$
Â
Â
Â
Â
Â
Â
Â
Â
Â
Â
Â
Â
Â
Â
Â
Â
Â
Â
 9.20x 6 Acquisition
 of
 NACAP
 for
 A$100m
Chicago
 Bridge
 &
 Iron NYSE
 :
 CBI 8,940$
Â
Â
Â
Â
Â
Â
Â
Â
Â
Â
Â
Â
Â
Â
Â
Â
Â
Â
 11.00x 4 Included
 US$4.9bln
 merger
 with
 Shaw
 Group
 in
 2012
McDermott
 International NYSE
 :
 MDR 2,146$
Â
Â
Â
Â
Â
Â
Â
Â
Â
Â
Â
Â
Â
Â
Â
Â
Â
Â
 9.00x 2 Last
 -Ââ
 DEEPSEA
 Group
 offshore
 Oil
 &
 Gas
 Service
Emcor
 Group NYSE
 :
 EME 3,400$
Â
Â
Â
Â
Â
Â
Â
Â
Â
Â
Â
Â
Â
Â
Â
Â
Â
Â
 10.50x 6 Acquisition
 of
 USM
 from
 TSE
 for
 $225m
 in
 June
 2011
10.58xUnweighted
 Mean
Specialist
 Offshore
 Driller.
Â
 US$1,06m
 merger
 with
 Scorpion
 Offshore
 in
 2010
12 March 2014
ExcellenceInOil&GasConferencePresentation
Deal Environment & Drivers
Page | 4
Cross Border / Foreign Direct Investment
â˘âŻ Capitalise on market imperfections & expanding market
opportunities
â˘âŻ Follow local Upstream client cross border
â˘âŻ Seek higher margin markets
â˘âŻ Enter / expand on sustainable Projects
â˘âŻ Deal with Regulatory & Union issues efficiently
ĂźďźâŻ Valuation Arbitrage
ĂźďźâŻ Abundance of Capital in North America
ĂźďźâŻ Overall Deal Momentum Lifting
Domestic M & A Rationale
â˘âŻ Geographic balancing (West & East Coast)
â˘âŻ Institutional Investor sentiment (O & G exposure ?)
â˘âŻ Seek higher margin sub markets (not commoditised)
â˘âŻ Diversify Revenue & Client Base
â˘âŻ Liquidity Events For Smaller Players
â˘âŻ Valuation arbitrage
Ă⯠Limited Debt Financing for M & A
Ă⯠Bidder Valuations Depressed vs Northern Hemisphere
Ă⯠âOpportunismâ vs Strategic Valuations Prevail
Ă⯠Strong Balance Sheet The Priority
Ă⯠PE rotated away from sector â for moment
Mining Boom
Over ?
Large Diversified Engineering & Contractors â Value in A$m
^ Deal Count since 1 January 2010
Source : Company Data, LCC Research
Just Corporate : Also high interest from Offshore PE / Pension Funds M & A back in vogue : In Australia many âToeholdâ deals
Distressed Deals
5. WORKBOOK
WWW.LCC.ASIA | Š Lincoln Crowne & Company12 March 2014
ExcellenceInOil&GasConferencePresentation
Valuation Arbitrage? Cross Border Observations
Page | 5
North American Public Company Sample
Australian Public Company Sample
Company Ticker Market
 Cap
 ($A) TEV
 /
 EBITDA
 (A)
Southern
 Cross
 Electrical ASX
 :
 SXE 130 3.10x Specialist
 Electrical
 Player.
Â
 Valuation
 multiple
 skewed
 because
 c$30m
 Cash
 (Low
 Debt)
WDS
 ASX
 :
 WDS 164$
Â
Â
Â
Â
Â
Â
Â
Â
Â
Â
Â
Â
Â
Â
Â
Â
Â
Â
Â
Â
Â
 3.90x Valuation
 multiple
 skewed
 because
 c.
 $45m
Â
 Cash
 (No
 Debt).
Â
 LCC
 assumes
 circa
 A$32m
 EBITDA
 FY14
AJ
 Lucas ASX
 :
 AJL 260$
Â
Â
Â
Â
Â
Â
Â
Â
Â
Â
Â
Â
Â
Â
Â
Â
Â
Â
Â
Â
Â
 -Ââ Exploration
 &
 Production
 Drilling,
 Pipeline.
Â
Â
 division
 focussed
 CSG
Decmil
 Group ASX
 :
 DCG 362$
Â
Â
Â
Â
Â
Â
Â
Â
Â
Â
Â
Â
Â
Â
Â
Â
Â
Â
Â
Â
Â
 4.20x Acquired
 Eastcoast
 Development
 Engineering
 for
 A$30.12m
 in
 Feb
 2013
Tox
 Free
 Solutions ASX
 :
 TOX 446$
Â
Â
Â
Â
Â
Â
Â
Â
Â
Â
Â
Â
Â
Â
Â
Â
Â
Â
Â
Â
Â
 7.30x Upstream
 &
 downstream
 Oil
 &
 Gas
 waste
 &
 industrial
 services
Mermaid
 Marine ASX
 :
 MRM 554$
Â
Â
Â
Â
Â
Â
Â
Â
Â
Â
Â
Â
Â
Â
Â
Â
Â
Â
Â
Â
Â
 5.50x Marine
 Logistics.
 Itchtys
 Gas
 project
 2
 Platform
 Supply
 Vessel
 deal
 @
 $145m
 contract
Skilled
 Group ASX
 :
 SKE 740$
Â
Â
Â
Â
Â
Â
Â
Â
Â
Â
Â
Â
Â
Â
Â
Â
Â
Â
Â
Â
Â
 10.20x Historically
 Labour
 Hire,
 but
 acquired
 Broadsword
 Marine
 Contracting
 in
 Darwin
 for
 A$72m
 in
 June
 2013
Monadelphous ASX
 :
 MND 1,615$
Â
Â
Â
Â
Â
Â
Â
Â
Â
Â
Â
Â
Â
Â
Â
Â
Â
 6.10x Recently
 won
 large
 Gas
 FM
 project
 -Ââ
 A$150m
 @
 Woodside's
 Karratha
 Gas
 Plant
WorleyParsons ASX
 :
 WOR 4,082$
Â
Â
Â
Â
Â
Â
Â
Â
Â
Â
Â
Â
Â
Â
Â
Â
Â
 9.70x Strong
 Off
 shore
 &
 Onshore
 presence
 in
 Hydrocarbons
 Division
Unweighted
 Mean 5.86x
Company Ticker Market
 Cap
 ($A) TEV
 /
 EBITDA
 (A) Deal
 Count^
SeaDrill NYSE
 :
 SDRL 18,381$
Â
Â
Â
Â
Â
Â
Â
Â
Â
Â
Â
Â
Â
Â
Â
Â
 12.80x 10
Jacobs
 Engineering NYSE
 :
 JEC 9,194$
Â
Â
Â
Â
Â
Â
Â
Â
Â
Â
Â
Â
Â
Â
Â
Â
Â
Â
 11.00x 15 Acquisition
 in
 2013
 of
 SKM
 Consulting
 for
 A$1,300m
Quanta
 Services NYSE
 :
 PWR 7,690$
Â
Â
Â
Â
Â
Â
Â
Â
Â
Â
Â
Â
Â
Â
Â
Â
Â
Â
 9.20x 6 Acquisition
 of
 NACAP
 for
 A$100m
Chicago
 Bridge
 &
 Iron NYSE
 :
 CBI 8,940$
Â
Â
Â
Â
Â
Â
Â
Â
Â
Â
Â
Â
Â
Â
Â
Â
Â
Â
 11.00x 4 Included
 US$4.9bln
 merger
 with
 Shaw
 Group
 in
 2012
McDermott
 International NYSE
 :
 MDR 2,146$
Â
Â
Â
Â
Â
Â
Â
Â
Â
Â
Â
Â
Â
Â
Â
Â
Â
Â
 9.00x 2 Last
 -Ââ
 DEEPSEA
 Group
 offshore
 Oil
 &
 Gas
 Service
Emcor
 Group NYSE
 :
 EME 3,400$
Â
Â
Â
Â
Â
Â
Â
Â
Â
Â
Â
Â
Â
Â
Â
Â
Â
Â
 10.50x 6 Acquisition
 of
 USM
 from
 TSE
 for
 $225m
 in
 June
 2011
10.58xUnweighted
 Mean
Specialist
 Offshore
 Driller.
Â
 US$1,06m
 merger
 with
 Scorpion
 Offshore
 in
 2010
Source : Company Data : LCC Research
6. WORKBOOK
WWW.LCC.ASIA | Š Lincoln Crowne & Company12 March 2014
ExcellenceInOil&GasConferencePresentation
EMCOR Group Inc. (NYSE : EME)
Page | 6
Source : Company data, LCC Calculations, CapitalIQ, Bloomberg
Consistent M & A activity since 2010, including acquisition USM from TSE for c. $230m
7. WORKBOOK
WWW.LCC.ASIA | Š Lincoln Crowne & Company12 March 2014
ExcellenceInOil&GasConferencePresentation
Jacobs Engineering Group Inc. (NYSE : JEC)
Page | 7
11 of 15 deals executed when TEV / EBITDA Multiple Higher than 8.0x (A)
TEV/EBITDAx(A)
Rapid Fire Deal Window
7 Deals in c. 8 Months
âDeal Momentumâ
Source : Company data, LCC Calculations, CapitalIQ, Bloomberg
8. WORKBOOK
WWW.LCC.ASIA | Š Lincoln Crowne & Company12 March 2014
ExcellenceInOil&GasConferencePresentation
Strategic Due Diligence: Current Deal Challenges
Page | 8
Each Deal Is Different : On High Alert For Areas That Can Cause Margin Collapse
Client Lists
Recent CAPEX
Spend
Contract Waterfall
Technology vs
Plain Vanilla
Union & Personnel
Issues
Health & Safety
Issues
Variations &
Claims
Outstanding
â˘âŻ Spread of Clients
â˘âŻ Project Lifecycle
â˘âŻ Client Pedigree
â˘âŻ CAPEX Starved ?
â˘âŻ CAPEX Bubbles
â˘âŻ Current Competitiveness
of Kit â Technology Shift
â˘âŻ Term of Contracts
â˘âŻ Style of Contract
-⯠Fixed
-⯠Open Book
-⯠Cost Reimburse
â˘âŻ How Technical Work ?
â˘âŻ Competitors for Work ?
â˘âŻ Cost of Technology ?
â˘âŻ How Easy To Replace
Contractor on Site ?
1
2
3
45
6
7
â˘âŻ Delays in Payment
â˘âŻ % of Actual Claim or
Variation
â˘âŻ Track record of Sponsor in
Resolving
â˘âŻ Who the Sponsor is
â˘âŻ Safety Standards
â˘âŻ Effect On Insurances
â˘âŻ Harmonisation of Work
Standards
â˘âŻ Union Presence On Site
â˘âŻ Key Personnel - Roles
â˘âŻ Relationships With Client
â˘âŻ Employee Benefits
-⯠Accommodations
â˘âŻ Schedules where FIFO
1
2
3
4
5
6
7
9. WORKBOOK
WWW.LCC.ASIA | Š Lincoln Crowne & Company12 March 2014
ExcellenceInOil&GasConferencePresentation
International Deals : Samples of Specialists
Page | 9
Natural Gas
Partners LLC
www.msenergyservices.com 6.86x **
Onshore gas field Horizontal
Directional Driller (USA)
Alta Disposal www.altadisposal.com 7.00x **
Oilfield Waste Disposal â including
Fracing Water (Canada)
Intertek Group PLC www.int-inspec.com 6.17x
Onshore & Offshore Non Destructive
Testing & Inspection Services
(Norway)
EQT Partners AB www.akersolutions.com 6.9x
Well intervention services including
well casing, testing, metering &
wireline services (Norway)
** Minority Interest Deals
Business Growth Fund
PLC
www.spex-innovation.com 6.14x
Offshore recovery, severing &
explosives operator
(Scotland)
HitecVision AS www.reefsubsea.com 7.81x
Offshore Construction, trenching &
cabling Fleet Operator
(Norway)
OnshoreTransactionsOffshoreTransactions
CSG, Shale & LNG Driven DemandACQUIRER TEV / EBITDA
10. WORKBOOK
WWW.LCC.ASIA | Š Lincoln Crowne & Company12 March 2014
ExcellenceInOil&GasConferencePresentation
Opportunities & Trends
Page | 10
Deal Activity Will Continue â In Particular Cross Border Deal Activity In Marine & Unconventional Gas
Planets are aligned for ongoing Cross Border activity
ĂźďźâŻ Weak AUD compared to 12 months ago
ĂźďźâŻ Ongoing strong Onshore & Offshore Project Pipeline
ĂźďźâŻ Unconventionals (CSG, Shale Oil)
ĂźďźâŻ High International Valuations
ĂźďźâŻ M & AActivity Warming Up In Northern Hemisphere
ĂźďźâŻ High Access To Capital In Northern Hemisphere
ĂźďźâŻ Good Pipeline of Potential Projects
ĂźďźâŻ Weak Domestic Valuations
ĂźďźâŻ Difficulty in Deal Financing (Debt and Equity)
ĂźďźâŻ Reasonable âPublicâ Domestic Balance Sheets (Targets ?)
ĂźďźâŻ Deal âChallengesâ May Go To Value/Structure or Kill Deals
Baytex Energy acquires Aurora Oil & Gas for
A2,316m. Assets include Eagle Ford Shale Belt
in South Texas
(Both complex service delivery areas)
11. WORKBOOK
WWW.LCC.ASIA | Š Lincoln Crowne & Company
PHILANTHROPY lincolncrownefoundation.org
The Lincoln Crowne Foundation is an extension of the Firmâs corporate social
responsibility arm that director, Nicholas Assef initiated.The foundationâs main
purpose is to support and extend partnership development to grass roots
charities.
GOVERNANCE unglobalcompact.org
We are governed by our commitment as a signatory to the UN Global
Compact. The UN Global Compact is a strategic policy initiative for
businesses that are committed to aligning their operations and strategies to
ten universally accepted principles in the areas of human rights, labour,
environment and anti-corruption.
ACADEMIA bond.edu.au
LCC and Bond University has established a relationship around the
importance of success, academic integrity and outstanding performance. To
this end, LCC has sponsored various faculty awards in both the Business and
Law Schools.
SPORT lincolncrownesailing.com.au
LCC has sponsored 12 and 16ft skiffs in Sydney, over numerous sailing
seasons and championships.
In partnership with Variety the Childrenâs Charity, Nicholas Assef proudly
supported the Variety Port Jackson 12ft Skiff Championships. This event
marked the launch of a series of projects committed to raising support for
Alopecia Areata, which is a medical condition of which there is no known cure.
12 March 2014
ExcellenceInOil&GasConferencePresentation
Page | 11
LCCâs Community Focus
12. WORKBOOK
WWW.LCC.ASIA | Š Lincoln Crowne & Company
ExcellenceInOil&GasConferencePresentation
12 March 2014
Contact us
Page | 12
AUSTRALIAN OFFICE
Suite 1, Level 30
Governor Phillip Tower
1 Farrer Place
Sydney NSW 2000
Australia
Correspondence
GPO Box 4154
Sydney NSW 2001
T: +612 9262 2121
F: +612 8088 1239
PRESENTER
Nicholas Assef
naa@lcc.asia
T: +612 8288 8688
HONG KONG REP OFFICE
20/F
One International
Finance Centre
1 Harbour View Street
Central Hong Kong
HONG KONG
T: +852 3960 6532
F: +852 3669 8008
AFSL 278054
ACN 105 807 645
www.lcc.asia
13. WORKBOOK
WWW.LCC.ASIA | Š Lincoln Crowne & Company12 March 2014
ExcellenceInOil&GasConferencePresentation
Page | 13
Important Information
This presentation (âPresentationâ) has been drafted by Lincoln Crowne & Company Pty Limited and/or its affiliates (together, âLCCâ) for the exclusive use of the party to whom LCC delivers this presentation (the âRecipientâ) using information
provided from a variety of sources, including publicly available information and potentially information from the Recipient. You acknowledge and agree LCC has not independently verified the information contained in this Presentation, nor does
LCC make any representation or warranty, either express or implied, as to the accuracy, completeness or reliability of the information contained in this Presentation. This Presentation should not be regarded by the Recipient as a substitute for
the exercise of its own judgment, and the Recipient is expected to rely on its own due diligence, including separate legal, tax and accounting, if it wishes to proceed further in relation to any transaction concept outlined in this Presentation.
The indicative valuations, forecasts, estimates, opinions and projections contained in this Presentation involve elements of subjective judgment and analysis. They are based on facts and data that are often subject to rapid change. Any
opinions expressed in this material are subject to change without notice. This Presentation may contain forward-looking statements, included those reported by various Companies. LCC undertakes no obligation to update these forward-looking
statements for events or circumstances that occur subsequent to such dates or to update or keep current any of the information contained in this Presentation. Any estimates or projections as to events that occur in the future (including
projections of revenue, expense, net income and stock performance) are based upon the best judgment of LCC from the information provided by the Recipient and other publicly available as of the date of this presentation. Any statements,
estimates or projections as to LCCâs fees or other pricing are accurate only as at the date of this presentation. There is no guarantee that any of these estimates or projections will be achieved. Actual results will vary from the projections and
such variations may be material.
Nothing contained in this Presentation is, or shall be relied upon as, a promise or presentation as to the past or the future. LCC, its affiliates, directors, employees and/or agents expressly disclaim any and all liability relating or resulting from
inaccurate or incomplete information and the use or reliance of all or any part of this Presentation or any of the information contained within this Presentation.
By accepting this Presentation, the Recipient acknowledges and agrees that LCC will at all times act as an independent contractor on an armâs-length basis and will not act in any other capacity, including in a fiduciary capacity, with respect to
the Recipient. LCC may provide services to any member of the same group as the Recipient or any other entity or person (a âThird Partyâ), engage in any transaction (on its own account or otherwise) with respect to the Recipient or a Third
Party, or act in relation to any matter for itself or any Third Party, notwithstanding that such services, transactions or actions may be adverse to the Recipient or any member of its group, and LCC may retain for its own benefit any related
remuneration or profit.
This Presentation has been prepared solely for informational purposes and is not to be constructed as a solicitation or an offer to buy or sell any securities or related financial instruments. The Recipient should not construe the contents of this
presentation as legal, tax, accounting or investment advice or a recommendation. The Recipient should consult its own counsel, tax and financial advisors as to legal and related matters concerning any transaction described in this
Presentation. This Presentation does not purport to be all-inclusive or to contain all of the information that the Recipient may require. No investment, divestment or other financial decisions or actions should be based solely on the information in
this Presentation.
This presentation has been prepared on a confidential basis solely for the use and benefit of the Recipient. Distribution of this presentation to any person other than the Recipient and those persons retained to advice the Recipient, who agree
to maintain the confidentiality of this material and be bound by the limitations outlined herein, is not authorized by LCC. LCC specifically prohibits the redistribution or reproduction of this material in whole or in part without the written permission
of LCC and LCC accepts no liability whatsoever for the actions of third parties in this respect
Lincoln Crowne & Company holds a series of registered trademarks in the United States of America and Australia to protect its intellectual property. Those trademarks are âLincoln Crowne & Companyâ: Reg. No. 4,107,955 with the United
States Patent & Trademark Office and the following with the Australian Government as certified by the Registrar of Trade Marks : âLincoln Crowneâ (Trade Mark No. 1423960); âLincoln Crowne & Companyâ (Trade Mark No. 1423961);
âLCCâ (Trade Mark No. 142116) and âlincolncrowneâ (Trade Mark No. 1424175).