Industry Insights and Happenings - capstoneheadwaters.com Equipment... · Manufactures downhole...

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January 2017

E n e r g y E q u i p m e n t & S e r v i c e s

Industry Insights and Happenings

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Report SummaryINDUSTRY COMMENTARY

• Crude prices have been largely range-bound in the low $50s since OPEC announced coordinated production cuts in early December 2016

– Market continues to monitor for OPEC compliance with cuts

– Recent rumors of key OPEC countries open-ness to extending cuts by 6 months have boosted sentiment

– As U.S. production has rebounded, some analysts express concern over long-term price ceiling

• US Rig counts continue to improve

– Total rig count up 72% on lows reached in late May 2016

• Continued uncertainty regarding U.S. energy policy and regulatory environment

– Prospective pullback in support for renewables could prompt additional state-level action

TABLE OF CONTENTS:

• Recent Transactions

• Articles We Enjoyed

• Commodity Prices

• Rig Counts

• Public Comparables

CONTACTS:

Ted KinsmanManaging [email protected](303) 572-6013

Samuel L. Hill Managing Directorhill@headwatersmb. com214.457.4832

Tim McEuenSenior Vice [email protected](303) 962-5778

Luis Moya Senior Vice [email protected]

www.headwatersmb.com

Source: Capital IQ

% of High % of Low 6 Mos. Ago Current 2017E 2018P

Oilfield Services & EqupmentLarge-Cap 94% 154% 12.5x 20.3x 20.4x 16.9xMid-and Small-Cap 90% 219% 8.9x 11.4x 11.8x 14.1xOil & Gas Equipment 93% 169% 10.4x 11.8x 13.5x 12.7xLand Drillers 93% 240% 6.3x 18.6x 19.2x 16.8x

Power Services & EqupmentLarge-Cap 99% 144% 9.5x 11.6x 11.3x 11.1xMid- and Small-Cap 95% 141% 10.3x 13.1x 13.1x 12.7xClean Tech and Solar 85% 138% 11.0x 10.1x 12.3x 9.6x

Infrastructure & Industrial ServicesLarge-Cap Infrastructure 91% 140% 6.2x 9.3x 9.6x 8.7xMid- and Small-Cap Infrastructure 89% 148% 7.7x 9.2x 8.7x 7.4xUtility Services 91% 210% 10.9x 11.6x 8.9x 7.8xIndustrial Services 88% 156% 7.0x 10.4x 9.9x 8.5x

Forward MultiplesEV/EBITDA52-Week Perf.

LTM MultiplesEV/LTM EBITDA as of

Stock Performance

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Industry UpdateRECENT TRANSACTIONS

Source: Capital IQ

Date Seller/Target Description AcquirerJan-17 Exclusive Energy

ServicesChemical mixing and delivery for coil tubing, work-over, and fracjobs in oil and gas industry

Greenwell Energy Solutions

Jan-17 OilPatch Technologies Focuses on definition, specification, design, analysis, manufacture, and testing of subsea and production development systems

Dril-Quip Inc.

Dec-16 Frontier Integrity Solutions

Offers oil and gas pipeline inspection and integrity services to U.S. pipeline operators

Atar Capital

Dec-16 Seventy Seven Energy Provides a diversified range of wellsite services and equipment to land-based E&P companies

Patterson-UTI Energy

Dec-16 Kemper Valve & Fittings

Manufactures, supplies, and sells pressure pipe unions and related oilfield fluid control products

Caterpil lar Oil & Gas

Nov-16 C.I. Agent Solutions Designs, manufactures, and installs secondary containment solutions and oil containment systems

Justrite Manufacturing Co.

Nov-16 Smartworks Oilfield Maintenance

Operates oilfield service trucks and provides maintenance services for oil and gas drilling rigs and pumping and hydraulic equipment

Petrocapita Processing

Nov-16 Stewart Tubular Products

Manufactures downhole tubular accessories and support equipment for the oil and gas industry

Aterian Investment Partners

Nov-16 Top-Co Products Designs, manufactures, and distributes float equipment, casing cementing equipment, and accessories for the oil and gas industry

Rubicon OilfieldInternational

Oct-16 Animas Well Services Workover rigs, fishing tools, coiled-tubing units, and P&A services Cogent Energy Solutions

Oct-16 Blackhawk Group Designs, manufactures, rents, and sells cementing equipment and products

Frank’s International

Sep-16 Kel-Tech and X-Chem Manufacturer and supplier of specialty chemical products and specialty oilfield chemicals

Clariant

Sep-16 US Rotary Dril l ing Tools

Processing of oil and gas tubular goods Tubos Reunidos

Sep-16 John Crane Production Solutions

Designs, installs, services, and repairs downhole rod pumps and fiberglass and steel sucker rods

Endurance Lift Solutions

Sep-16 Extreme Plastics Plus Environmental l inings, above-ground storage tanks, secondarysteel wall containment systems, rig mats, and rig vacs

BW EPP Holdings

Sep-16 Applied-Cleveland Holdings

Third-party inspection services for oil and gas transmission and distribution systems and other similar facilities

First Reserve

Sep-16 Top Notch Energy Services

Thru-tubing fishing and milling services to the oil and gas industry Team Oil Tools

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Rig Counts | Permian Activity Continuing to Pick Up

“After two years of being battered by low commodity prices, the Permian Basin oil and gas industry is showing increased signs of recovery. Although November’s Texas Permian Basin Petroleum Index figures came in 17.5 percent below November 2015 levels, Amarillo Economist Karr Ingham, who prepares the index, said the index was higher than October levels and has shown month-over-month increases three out of the last four months. Strengthening commodity prices have helped lift the area’s oil and gas economy in recent months.”

Hearst Communications | Permian Oil Fields Continue to Re-cord Rising Activity Levels

Oil Production | OPEC Cuts Unlikely to Last Beyond June

“OPEC probably won’t need to prolong output cuts beyond the agreed six-month term given the level of compliance with the reductions and the outlook for an increase in global con-sumption, Saudi Minister of Energy and Industry Khalid Al-Fa-lih said. “Based on my judgment today, I think it’s unlikely that we will need to continue” production curbs beyond June be-cause the market will have rebalanced, Al-Falih told reporters in Abu Dhabi. Even so, OPEC will reassess the situation when it meets again in May and “all players have indicated their will-ingness to extend, if necessary,” he said.

Bloomberg | Saudis Say Output Cuts Unlikely to Last Beyond June

Renewables Investment | National Grid Partners with SunRun

“National Grid, which operates electricity networks in Britain and the US, is making its first move into solar power with a $100m investment in a partnership with Sunrun, the largest independent rooftop solar company in the US. The joint ven-ture will sell solar power systems to homes and businesses, and develop products and services for a power grid adapting to a new model of smallscale local generation. The deal is the latest example of how electric utilities are reassessing their businesses as the industry shifts from a traditional model of largescale centralised generation to one in which many more businesses and homes produce and store their own power.”

Financial Times | National Grid Invests $100m in US Solar Venture

Power Prices | 2016 Prices Fall Due to Low Natural Gas Prices

“Average wholesale electricity prices fell across the United States during 2016, mostly due to the sustained lower cost of natural gas. The U.S. Energy Information Administration’s report indicated monthly prices ranged from $20 to $45 per MWh. Natural gas prices averaged $2.78 per million Btus, or 17 percent lower than 2015 for the first 10 months of 2016. Milder winter weather in early 2016 kept costs low during that period. Because of the lower cost, natural gas became the top source of U.S electricity generation on an annualized basis for the first time. An estimated 34 percent of power came from natural gas, compared to 30 percent from coal."

Power Engineering | Federal Judge Orders EPA to Assess Job Losses From Clean Air Act Actions

U.S. Drilling | Activity Projected to Continue Ramping Up

“Drillers will have to begin pouring cash back into oil fields around the world by the end of the year to prevent a global oil-production shortage in coming years, the CEO of Schlum-berger said Friday. That’s why the world’s top oil field services company is gearing up for a global recovery in oil and gas drill-ing. In a bid for higher service prices, the company recently began renegotiating contracts for hydraulic fracturing and directional drilling technology in the United States, one of the first signs of a new investment cycle in the oil industry.”

FuelFix | Schlumberger Chief: Drilling Recovery “Is On Its Way in All Markets”

ARTICLES WE ENJOYED

http://www.power-eng.com/articles/2016/10/federal-judge-orders-epa-to-assess-job-losses-from-clean-air-act-actions.html

http://www.power-eng.com/articles/2016/10/federal-judge-orders-epa-to-assess-job-losses-from-clean-air-act-actions.html

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COMMENTARY: • Crude has been range-bound in the low

$50s since OPEC’s announcement of a production-limiting deal

– Long-term concern over prices being effectively capped by U.S. unconventional mobilization

– Rig counts continued to run higher, up 72% since its low in May 2016

– Inventories remain elevated, as the market waits on reports of OPEC compliance with cuts

– U.S. crude production has begun to rebound in response to higher commodity prices, trailing rig count recovery, at 8.95m barrels – the highest in 9 months

1 Year WTI and Henry Hub Prices

Source: Capital IQ

• U.S. crude stocks added more than 4m barrels week-over-week as PADD III imports jumped to a 4-year high, offsetting modest declines in PADD II and at Cushing

• Traders largely held steady in the crude market, but repositioned in refined products, with net length rising substantially in RBOB and heating oil

COMMODITY PRICE UPDATE

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Crude (left) Natural Gas (right)

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U.S. Rig Count International Rig Count

U.S. Directional vs. VerticalU.S. Oil vs. Gas Rig Count

U.S. Rig Count by Play

Source: Baker Hughes

RIG COUNT UPDATE

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Other Permian Williston Marcellus-Utica Eagle Ford Haynesville

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Public ComparablesLARGE-CAP OILFIELD SERVICES

5-Year Trading vs. S&P 5001-Year Trading vs. S&P 500

Historical EV/LTM EBITDA (Annual Averages)

Source: Capital IQ

Market Data

Stock Performance LTM Multiple Evolution Forward Multiples

$000s Change From 52-Week Performance EV/LTM EBITDA as of EV/EBITDA

Mkt. Cap EV 1 Month 1 Year % of High % of Low 1 Yr. Ago 6 Mos. Ago Current 2017E 2018P Large-Cap Oilfield Services

Schlumberger Limited $120,763 $131,122 0% 42% 98% 137% 11.5x 12.1x 20.3x 20.4x 17.3x Halliburton Company $49,049 $57,417 3% 98% 99% 202% 10.6x 12.5x na na 16.6x Baker Hughes Incorporated $26,269 $25,555 (4%) 59% 90% 162% 10.6x 17.9x na na 17.3x Weatherford International plc $5,317 $12,369 9% (3%) 64% 145% 12.3x na na na 15.8x

Min (4%) (3%) 64% 137% 10.6x 12.1x 20.3x 20.4x 15.8x Median 2% 51% 94% 154% 11.0x 12.5x 20.3x 20.4x 16.9x Max 9% 98% 99% 202% 12.3x 17.9x 20.3x 20.4x 17.3x

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La rge-Cap Oilfield Services +57.6% S&P 500 +22.2%

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La rge-Cap Oilfield Services +7.4% S&P 500 +71.3%

10-year avg: 11.4x 5-year avg: 12.9x 2-year avg: NM

10.6x 9.4x

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11.4x 10.8x

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NM NM

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2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 YTD

8

Market Data



Source: Capital IQ

MID-CAP OILFIELD SERVICES



Mkt. Cap EV 1 Month 1 Year % of High % of Low 1 Yr. Ago 6 Mos. Ago Current 2017E 2018P Mid-Cap Oilfield Services

Superior Energy Services, Inc. $2,740 $3,746 7% 100% 91% 219% 7.0x 12.8x na na 19.1x TETRA Technologies, Inc. $571 $1,364 (10%) (18%) 58% 105% 7.8x 8.9x 12.2x 11.9x 9.1x Ensign Energy Services Inc. $1,445 $2,115 (2%) 52% 90% 199% 5.7x 7.3x 10.5x 11.7x 9.1x Calfrac Well Services Ltd. $653 $1,514 2% 303% 89% 448% 10.0x na na na 23.8x Trican Well Service Ltd. $1,007 $1,172 16% 750% 94% 708% 12.5x na na na na

Min (10%) (18%) 58% 105% 5.7x 7.3x 10.5x 11.7x 9.1x Median 2% 100% 90% 219% 7.8x 8.9x 11.4x 11.8x 14.1x Max 16% 750% 94% 708% 12.5x 12.8x 12.2x 11.9x 23.8x

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Mid-Cap Oilfie ld Services +89.6% S&P 500 +22.2%

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Mid-Cap Oilfie ld Services -43.9% S&P 500 +71.3%


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2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 YTD

9



Source: Capital IQ

OIL & GAS EQUIPMENT

Market DataStock Performance LTM Multiple Evolution Forward Multiples


Mkt. Cap EV 1 Month 1 Year % of High % of Low 1 Yr. Ago 6 Mos. Ago Current 2017E 2018P Oil & Gas Equipment

National Oilwell Varco, Inc. $14,760 $16,466 1% 31% 90% 152% 6.5x 12.8x na na na FMC Corporation $8,098 $9,944 5% 73% 99% 187% 14.2x 9.9x 14.8x 13.9x 12.7x Oil States International, Inc. $2,055 $2,068 2% 60% 96% 187% 7.9x 10.9x na na na Dril-Quip, Inc. $2,378 $1,836 3% 20% 91% 135% 7.9x 7.3x 8.8x 13.1x na

Min 1% 20% 90% 135% 6.5x 7.3x 8.8x 13.1x 12.7x Median 3% 46% 93% 169% 7.9x 10.4x 11.8x 13.5x 12.7x Max 5% 73% 99% 187% 14.2x 12.8x 14.8x 13.9x 12.7x

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Oil & Ga s Equipment +45.6% S&P 500 +22.2%

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Oil & Ga s Equipment -19.4% S&P 500 +71.3%


9.5x 8.7x

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NM

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2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 YTD

10



Source: Capital IQ

LAND DRILLERS



Mkt. Cap EV 1 Month 1 Year % of High % of Low 1 Yr. Ago 6 Mos. Ago Current 2017E 2018P Land Drillers

Nabors Industries Ltd. $5,018 $8,294 5% 218% 96% 329% 5.9x 8.8x 18.7x 13.7x 11.6x Helmerich & Payne, Inc. $8,558 $8,100 (2%) 82% 91% 178% 5.5x 6.0x 13.8x 21.1x 22.4x Patterson-UTI Energy, Inc. $4,131 $4,708 2% 137% 93% 240% 4.8x 6.0x 18.6x 24.3x 17.5x Precision Drilling Corporation $2,270 $3,923 4% 95% 94% 227% 7.7x 11.6x na 17.3x 12.4x Pioneer Energy Services Corp. $467 $857 (2%) 475% 85% 592% 4.8x 6.3x na na 16.8x

Min (2%) 82% 85% 178% 4.8x 6.0x 13.8x 13.7x 11.6x Median 2% 137% 93% 240% 5.5x 6.3x 18.6x 19.2x 16.8x Max 5% 475% 96% 592% 7.7x 11.6x 18.7x 24.3x 22.4x

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La nd Drillers +151.1% S&P 500 +22.2%

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La nd Drillers +7.6% S&P 500 +71.3%


4.7x 5.7x 4.2x

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2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 YTD

11



Source: Capital IQ

LARGE-CAP POWER SERVICES & EQUIPMENT



Mkt. Cap EV 1 Month 1 Year % of High % of Low 1 Yr. Ago 6 Mos. Ago Current 2017E 2018P Large-Cap Power Services & Equipment

Siemens Aktiengesellschaft $94,498 $112,436 2% 45% 99% 147% 10.2x 9.6x 11.4x 10.9x 10.2x Honeywell International Inc. $91,232 $98,493 1% 22% 98% 122% 11.2x 9.5x 12.6x 12.4x 11.4x ABB Ltd $48,763 $51,119 6% 42% 100% 143% 9.9x 9.2x 11.6x 11.2x 10.4x Schneider Electric S.E. $39,404 $45,079 3% 47% 100% 149% 12.2x 9.1x 11.6x 11.5x 10.7x Emerson Electric Co. $37,973 $41,437 3% 38% 99% 139% 13.8x 11.8x 11.2x 11.1x 13.1x Eaton Corporation plc $30,783 $38,526 0% 43% 97% 144% 11.7x 10.0x 11.8x 11.8x 11.5x

Min 0% 22% 97% 122% 9.9x 9.1x 11.2x 10.9x 10.2x Median 3% 43% 99% 144% 11.5x 9.5x 11.6x 11.3x 11.1x Max 6% 47% 100% 149% 13.8x 11.8x 12.6x 12.4x 13.1x

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La rge-Cap Power Services & Equipment +35.9%

S&P 500 +22.2%

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La rge-Cap Power Services & Equipment +49.1%

S&P 500 +71.3%

10-year avg: 9.9x 5-year avg: 10.6x 2-year avg: 10.9x

10.9x

8.6x 7.3x

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2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 YTD

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Source: Capital IQ

MID-CAP POWER SERVICES & EQUIPMENT

Market Data



Mkt. Cap EV 1 Month 1 Year % of High % of Low 1 Yr. Ago 6 Mos. Ago Current 2017E 2018P Mid-Cap Power Services & Equipment

AMETEK, Inc. $11,812 $13,521 3% 9% 97% 119% 12.8x 13.1x 13.2x 13.7x 13.2x Hubbell Incorporated $6,569 $7,187 (0%) 36% 98% 141% 10.4x 8.8x 12.1x 12.5x 12.0x Valmont Industries, Inc. $3,182 $3,590 (3%) 39% 90% 141% 9.7x 8.9x 11.9x 10.8x 10.0x Littelfuse, Inc. $3,414 $3,656 (2%) 59% 95% 158% 12.2x 9.9x 17.3x 15.8x 14.1x AZZ incorporated $1,527 $1,825 (10%) 20% 86% 125% 9.1x 9.2x 11.2x 10.9x 11.7x Badger Meter, Inc. $1,102 $1,141 (1%) 40% 94% 142% 15.3x 13.0x 15.5x 15.8x 14.2x ESCO Technologies Inc. $1,451 $1,507 (2%) 72% 96% 175% 12.7x 10.7x 14.9x 15.1x 12.2x Thermon Group Holdings, Inc. $628 $638 (3%) 20% 88% 138% 10.9x 11.3x 12.9x 10.1x 14.6x

Min (10%) 9% 86% 119% 9.1x 8.8x 11.2x 10.1x 10.0x Median (2%) 37% 95% 141% 11.5x 10.3x 13.1x 13.1x 12.7x Max 3% 72% 98% 175% 15.3x 13.1x 17.3x 15.8x 14.6x

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Mid-Cap Power Services & Equipment +36.3%

S&P 500 +22.2%

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Mid-Cap Power Services & Equipment +91.3%

S&P 500 +71.3%


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Historical EV/LTM Revenue (Annual Averages)

Source: Capital IQ

ENERGY EFFICIENCY & CLEANTECH

Market Data



Mkt. Cap EV 1 Month 1 Year % of High % of Low 1 Yr. Ago 6 Mos. Ago Current 2017E 2018P Energy Efficiency & CleanTech

Itron, Inc. $2,351 $2,548 (5%) 100% 92% 200% 12.8x 9.4x 11.4x 12.3x 10.6x Silver Spring Networks, Inc. $679 $566 (3%) 14% 85% 136% 11.6x 11.9x 7.6x na 21.8x Ameresco, Inc. $248 $474 (13%) 5% 86% 138% 11.7x 10.1x 10.1x 9.0x 8.5x Sunworks, Inc. $53 $48 10% (13%) 65% 121% na 16.7x na 12.9x 3.6x EnerNOC, Inc. $167 $200 (7%) 57% 73% 155% na na na na na

Min (13%) (13%) 65% 121% 11.6x 9.4x 7.6x 9.0x 3.6x Median (5%) 14% 85% 138% 11.7x 11.0x 10.1x 12.3x 9.6x Max 10% 100% 92% 200% 12.8x 16.7x 11.4x 12.9x 21.8x

0%

50%

100%

150%

Jan-

16

Feb-

16

Mar

-16

Apr-

16

May

-16

Jun-

16

Jul-1

6

Aug-

16

Sep-

16

Oct

-16

Nov

-16

Dec

-16

Jan-

17

Energy Efficiency & CleanTech +25.6% S&P 500 +22.2%

0%

50%

100%

150%

200%

Jan-

12

Jun-

12

Nov

-12

Apr-

13

Sep-

13

Feb-

14

Jul-1

4

Dec

-14

May

-15

Oct

-15

Mar

-16

Aug-

16

Energy Efficiency & CleanTech -14.3% S&P 500 +71.3%

5-year avg: 1.4x 2-year avg: 1.0x

0.0x

0.5x

1.0x

1.5x

2.0x

2.5x

3.0x

2012 2013 2014 2015 2016 2017 YTD

14


Historical EV/LTM EBITDA

Source: Capital IQ

LARGE-CAP INFRASTRUCTURE SERVICES



Mkt. Cap EV 1 Month 1 Year % of High % of Low 1 Yr. Ago 6 Mos. Ago Current 2017E 2018P Large-Cap Infrastructure Services

Chicago Bridge & Iron Company N.V. $3,169 $4,952 (11%) (6%) 76% 121% 5.6x 5.3x 4.8x 5.2x 5.5x Fluor Corporation $7,354 $7,132 (3%) 28% 91% 129% 6.1x 5.0x 8.4x 9.1x 7.4x Jacobs Engineering Group Inc. $6,976 $6,708 (2%) 56% 90% 165% 7.9x 7.0x 10.2x 10.1x 10.1x SNC-Lavalin Group Inc. $8,607 $7,982 (3%) 51% 96% 152% 12.3x 8.2x 13.0x 13.9x 10.5x

Min (11%) (6%) 76% 121% 5.6x 5.0x 4.8x 5.2x 5.5x Median (3%) 40% 91% 140% 7.0x 6.2x 9.3x 9.6x 8.7x Max (2%) 56% 96% 165% 12.3x 8.2x 13.0x 13.9x 10.5x

0%

50%

100%

150%

Jan-

16

Feb-

16

Mar

-16

Apr-

16

May

-16

Jun-

16

Jul-1

6

Aug-

16

Sep-

16

Oct

-16

Nov

-16

Dec

-16

Jan-

17

La rge-Cap Infrastructure Services +2 8.0%

S&P 500 +22.2%

0%

50%

100%

150%

200%

Jan-

12

Jun-

12

Nov

-12

Apr-

13

Sep-

13

Feb-

14

Jul-1

4

Dec

-14

May

-15

Oct

-15

Mar

-16

Aug-

16

La rge-Cap Infrastructure Services -3.7% S&P 500 +71.3%


19.9x 17.1x

7.9x 7.9x 10.0x

7.7x

10.8x 10.8x

6.9x 7.8x 9.3x

0.0x

5.0x

10.0x

15.0x

20.0x

25.0x

2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 YTD

15



Source: Capital IQ

MID-CAP INFRASTRUCTURE SERVICES



Mkt. Cap EV 1 Month 1 Year % of High % of Low 1 Yr. Ago 6 Mos. Ago Current 2017E 2018P Mid-Cap Infrastructure Services

Amec Foster Wheeler plc $1,852 $2,928 1% 37% 75% 148% 12.4x 10.4x 8.4x 8.6x 9.0x Tutor Perini Corporation $1,384 $2,007 (3%) 119% 92% 274% 9.5x 9.4x 9.0x 7.1x 6.3x Granite Construction Incorporated $2,213 $2,000 (2%) 36% 90% 156% 8.3x 6.6x 11.8x 11.9x 9.0x Primoris Services Corporation $1,166 $1,285 (5%) 14% 89% 140% 7.5x 7.7x 10.4x 9.5x 7.4x KBR, Inc. $2,344 $2,474 (5%) 15% 92% 142% 11.5x 4.9x 11.8x 14.6x 7.5x Great Lakes Dredge & Dock Corporation $277 $653 1% 49% 89% 150% 7.1x 7.6x 9.2x 8.7x 6.6x Aecon Group Inc. $915 $1,061 6% 19% 82% 121% 5.9x 7.9x 7.8x 6.9x 6.2x


0%

50%

100%

150%

Jan-

16

Feb-

16

Mar

-16

Apr-

16

May

-16

Jun-

16

Jul-1

6

Aug-

16

Sep-

16

Oct

-16

Nov

-16

Dec

-16

Jan-

17

Mid-Cap Infrastructure Services +33.2% S&P 500 +22.2%

0%

50%

100%

150%

200%

Jan-

12

Jun-

12

Nov

-12

Apr-

13

Sep-

13

Feb-

14

Jul-1

4

Dec

-14

May

-15

Oct

-15

Mar

-16

Aug-

16

Mid-Cap Infrastructure Services +14.9% S&P 500 +71.3%

10-year avg: 8.7x 5-year avg: 9.4x 2-year avg: 10.0x12.6x

7.2x

4.8x 6.3x

8.7x

7.0x

9.1x 10.5x

12.1x

8.3x 9.5x

0.0x

2.0x

4.0x

6.0x

8.0x

10.0x

12.0x

14.0x

2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 YTD

16



Source: Capital IQ

UTILITY SERVICES



Mkt. Cap EV 1 Month 1 Year % of High % of Low 1 Yr. Ago 6 Mos. Ago Current 2017E 2018P Utility Services

Quanta Services, Inc. $5,241 $5,611 (1%) 96% 94% 207% 10.1x 11.3x 11.9x 10.1x 8.2x MasTec, Inc. $3,066 $4,073 (5%) 169% 91% 299% 9.1x 10.9x 11.6x 8.9x 7.8x MYR Group Inc. $614 $652 (4%) 92% 90% 210% 6.4x 6.7x 9.0x 8.8x 7.6x

Min (5%) 92% 90% 207% 6.4x 6.7x 9.0x 8.8x 7.6x Median (4%) 96% 91% 210% 9.1x 10.9x 11.6x 8.9x 7.8x Max (1%) 169% 94% 299% 10.1x 11.3x 11.9x 10.1x 8.2x

0%50%

100%150%

200%250%

Jan-

16

Feb-

16

Mar

-16

Apr-

16

May

-16

Jun-

16

Jul-1

6

Aug-

16

Sep-

16

Oct

-16

Nov

-16

Dec

-16

Jan-

17

Utility Services +117.7% S&P 500 +22.2%

0%50%

100%150%

200%250%

Jan-

12

Jun-

12

Nov

-12

Apr-

13

Sep-

13

Feb-

14

Jul-1

4

Dec

-14

May

-15

Oct

-15

Mar

-16

Aug-

16

Utility Services +92.5% S&P 500 +71.3%

10-year avg: 9.4x 5-year avg: 8.3x 2-year avg: 8.7x15.6x

11.5x

9.0x 8.4x 9.1x 8.1x 7.6x 7.6x

6.8x 8.8x

10.7x

0.0x2.0x4.0x6.0x8.0x

10.0x12.0x14.0x16.0x18.0x

2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 YTD

17



Source: Capital IQ

INDUSTRIAL SERVICES



Mkt. Cap EV 1 Month 1 Year % of High % of Low 1 Yr. Ago 6 Mos. Ago Current 2017E 2018P Industrial Services

EMCOR Group, Inc. $4,146 $4,165 (6%) 60% 93% 163% 8.0x 7.5x 10.4x 10.4x 9.7x Bilfinger SE $1,715 $1,185 4% 3% 88% 155% na na na 11.5x 8.3x Team, Inc. $976 $1,327 (10%) 43% 86% 157% 10.2x 10.0x 20.0x 13.4x 8.7x Aegion Corporation $717 $984 (13%) 29% 84% 134% 7.0x 6.6x 9.0x 9.4x 6.8x Mistras Group, Inc. $691 $775 (11%) 12% 88% 118% 10.4x 6.2x 10.7x 9.2x 9.6x Matrix Service Company $585 $567 (2%) 23% 94% 156% 10.5x 7.0x 9.1x 9.1x 7.5x


0%

50%

100%

150%

Jan-

16

Feb-

16

Mar

-16

Apr-

16

May

-16

Jun-

16

Jul-1

6

Aug-

16

Sep-

16

Oct

-16

Nov

-16

Dec

-16

Jan-

17

Industrial Services +30.9% S&P 500 +22.2%

0%

50%

100%

150%

200%

Jan-

12

Jun-

12

Nov

-12

Apr-

13

Sep-

13

Feb-

14

Jul-1

4

Dec

-14

May

-15

Oct

-15

Mar

-16

Aug-

16

Industrial Services +40.0% S&P 500 +71.3%


11.5x

9.5x

7.8x 7.3x 7.9x 8.0x

9.3x 10.0x 9.4x 9.1x

10.1x

0.0x

2.0x

4.0x

6.0x

8.0x

10.0x

12.0x

14.0x

2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 YTD

18

Recent Successes

WE ACTED AS SOLE ADVISOR TO THE SELLER

HAS BEEN ACQUIRED BY

A PORTFOLIO COMPANY OF



TO BE COMBINED WITH


WE ACTED AS SOLE ADVISOR TO THE COMPANY

HAS SECURED SENIOR TERM FINANCING

$6,300,000

Oilfield ServicesFuel Distribution

Transaction Type:Sale of SubsidiaryBuyer DescriptionPE-backed strategic

Oilfield ServicesWaste & Container Solutions

Transaction Type:Private saleBuyer DescriptionPE-backed strategic

Industrial/OFSIndustrial tools and lighting

Transaction Type:PE SaleBuyer DescriptionPrivate Equity

Oil & GasOffshore E&P

Transaction Type:Capital RaiseBuyer DescriptionInstitutional Investor



Energy Equipment & Services Update

Energy Equipment & Services Transactions Currently in Market

Testing/ diagnostic service provider serving the oil & gas, power, and petrochemsectors.

Closing expected 3Q16.

Equipment Rental and Technical/Diagnostic

Services

Oilfield Services

ProjectBlue

SOLE ADVISOR TO THE SELLER

Capabilities and Experience

M&A Capital Formation Project Finance

– Sell-side advisory– Buy-side advisory– Strategic alternatives

– Debt / Equity / Mezz– Recapitalization– Restructuring

– Infrastructure development– Construction/term finance

The professionals in Headwaters Energy & Services practice have collectively closed more than $10 billion intransactions across the upstream, midstream, downstream, services, and P&U sectors. This experience helps our teamunderstand market dynamics and consistently achieve outlier results for our clients.

Landman Services and Proprietary Land

Management Software

Oilfield Services

ProjectPurple


Residential Solar Installation

Power Services

ProjectOrange


Landman services and land management software for use in O&G exploration.


Residential and commercial solar panel distribution and installation services.


Energy Equipment & Services Update

Energy Equipment & Services Transactions Currently in Market

Testing/ diagnostic service provider serving the oil & gas, power, and petrochemsectors.


Equipment Rental and Technical/Diagnostic

Services

Oilfield Services

ProjectBlue


Capabilities and Experience

M&A Capital Formation Project Finance

– Sell-side advisory– Buy-side advisory– Strategic alternatives

– Debt / Equity / Mezz– Recapitalization– Restructuring

– Infrastructure development– Construction/term finance

The professionals in Headwaters Energy & Services practice have collectively closed more than $10 billion intransactions across the upstream, midstream, downstream, services, and P&U sectors. This experience helps our teamunderstand market dynamics and consistently achieve outlier results for our clients.

Landman Services and Proprietary Land

Management Software

Oilfield Services

ProjectPurple


Residential Solar Installation

Power Services

ProjectOrange


Landman services and land management software for use in O&G exploration.


Residential and commercial solar panel distribution and installation services.


Recent Successes






TO BE COMBINED WITH


WE ACTED AS SOLE ADVISOR TO THE COMPANY

HAS SECURED SENIOR TERM FINANCING

$6,300,000

Oilfield ServicesFuel Distribution

Transaction Type:Sale of SubsidiaryBuyer DescriptionPE-backed strategic

Oilfield ServicesWaste & Container Solutions

Transaction Type:Private saleBuyer DescriptionPE-backed strategic

Industrial/OFSIndustrial tools and lighting

Transaction Type:PE SaleBuyer DescriptionPrivate Equity

Oil & GasOffshore E&P

Transaction Type:Capital RaiseBuyer DescriptionInstitutional Investor



ENERGY EQUIPMENT & SERVICES UPDATE

Testing/ diagnostic service provider serving the oil & gas, power, and petrochem sectors.


Residential and com-mercial solar panel engineering and instal-lation services.


Retail fuel distribution equipment distributor and installer.



I n f r a s t r u c t u r e S e r v i c e s

E q u i p m e n t R e n t a l a n dTe c h n i c a l / D i a g n o s t i c

S e r v i c e s

P r o j e c t B l u e


R E N E WA B L E S S E R V I C E S

R e s i d e n t i a l a n d c o m m e r c i a l s o l a r p a n e l e n g i n e e r i n g a n d

i n s t a l l a t i o n s e r v i c e s

P r o j e c t S i e r r a


I N F R A S T R U C T U R E S E R V I C E S

R e t a i l f u e l d i s t r i b u t i o n e q u i p m e n t d i s t r i b u t o r

a n d i n s t a l l e r

P r o j e c t C a s c a d e


H A S B E E N A C Q U I R E D B Y


A P O R T F O L I O C O M PA N Y O F


T O B E C O M B I N E D W I T H



A P O R T F O L I O C O M PA N Y O F

SEN IOR TERM NOTE

WE ACTED AS SOLE ADVISOR

19

Disclosure: This newsletter is a periodic compilation of certain economic and corporate information, as well as completed and announced merger and acquisition activity. Information contained in this newsletter should not be construed as a recommendation to sell or buy any security. Any reference to or omission of any reference to any company in this newsletter should not be construed as a recommendation to buy, sell or take any other action with respect to any security of any such company. We are not soliciting any action with respect to any security or company based on this newsletter. The newsletter is published solely for the general information of clients and friends of Headwaters MB, LLC. It does not take into account the particular investment objectives, financial situation or needs of individual recipients. Certain transactions, including those involving early-stage companies, give rise to substantial risk and are not suitable for all investors. This newsletter is based upon information that we consider reliable, but we do not represent that it is accurate or complete, and it should not be relied upon as such. Prediction of future events is inherently subject to both known and unknown risks and other factors that may cause actual results to vary materially. We are under no obligation to update the information contained in this news-letter. Opinions expressed are our present opinions only and are subject to change without notice. Additional information is available upon request. The companies mentioned in this newsletter may be clients of Headwaters MB, LLC. The decisionsto include any company in this newsletter is unrelat-ed in all respects to any service that Headwaters MB, LLC may provide to such company. This newsletter may not be copied or reproduced in any form, or redistributed without the prior written consent of Headwaters MB, LLC. The information contained herein should not be construed as legal advice.

About Headwaters MB:Headwaters MB is an independent, middle-market investment banking firm providing strategic merger and acquisition, corporate finance, and merchant banking services through proprietary sources of capital. Named “Investment Bank of the Year” by the M&A Advisor in 2014 - 2016, Headwaters MB is headquartered in Denver, CO, with seven regional offices across the United States and partnerships with 18 firms covering 30 countries. For more information, visit www.headwatersmb.com

To learn more about how the Headwaters MB team can help you grow from opportunities in the Energy Equipment & Services sector, please contact:

Te d K i n s m a n | M a n a g i n g D i re c t o rE n e rg y E q u i p m e n t & S e r v i c e s3 0 3 .5 7 2 .6 01 3 t k i n s m a n @ h e a d w a t e r s m b. c o m

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