OILFIELD SERVICES - Stephens Inc. · PDF fileOILFIELD SERVICES August 2016 ... HAL Halliburton...

OILFIELD SERVICES August 2016

Note: All prices as of August 18, 2016 unless otherwise noted.

The analyst primarily responsible for the preparation of the content of this presentation certifies (i) all views expressed in this presentation accurately reflect the analyst’s personal views about the subject company and securities, and (ii) no part of the analyst’s compensation was, is, or will be, directly or indirectly, related to the specific recommendations or views expressed by the analyst in this presentation. See important disclosures and analyst certification on page 35 of this presentation. This presentation constitutes a compendium report (covers six or more subject companies). As such, Stephens Inc. chooses to provide specific disclosures for the companies mentioned by reference. To access current disclosures for the companies in this presentation, clients should refer to https://stephens2.bluematrix.com/sellside/Disclosures.action or contact your Stephens Inc. representative for additional information.

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© 2016 Stephens Inc.

Matthew Marietta, Analyst (713) 993-4211

[email protected]

Brooks Braden, Associate (713) 993-4204

[email protected]

Chris Denison, Associate (713) 993-4205

[email protected]

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2

COVERAGE LIST & VALUATION SUMMARY

Source: Stephens estimates, Company data, FactSet Research Systems

Notes: 1) FactSet Fundamentals estimates used for companies not under coverage, denoted by NR. 2) EPS values adjusted for one-time/unusual items. 3) ATW, HP estimates have been calendarized.

Prices as of 8/18/16.

Price Current Shares Market plus less Net Enterprise EPS EBITDA P/E EV/EBITDA

($ in millions, except per share) Rating Target Price Out Cap Debt Cash Debt Value 2016E 2017E 2018E 2016E 2017E 2018E 2016E 2017E 2018E 2016E 2017E 2018E

Large Cap, Diversified Services

BHI Baker Hughes Incorporated EW 41.00$ 52.05$ 428 22,272$ 3,109$ 3,910$ (801)$ 21,471$ (3.33)$ 0.23$ 1.63$ 158$ 1,530$ 2,527$ n.m. n.m. 32.0 x 135.7 x 14.0 x 8.5 x

HAL Halliburton Company OW 50.00 46.46 860 39,978 12,964 3,108 9,856 49,834 (0.14) 0.76 2.00 2,078 3,269 4,699 n.m. n.m. 23.3 x 24.0 x 15.2 x 10.6 x

SLB Schlumberger NV OW 85.00 83.86 1,391 116,673 21,992 11,192 10,800 127,473 1.16 1.75 3.41 7,097 7,603 10,163 n.m. 47.8 x 24.6 x 18.0 x 16.8 x 12.5 x

WFT Weatherford International plc UW 4.00 5.91 896 5,296 7,297 452 6,845 12,141 (1.06) (0.68) (0.32) 341 785 1,200 n.m. n.m. n.m. 35.6 x 15.5 x 10.1 x

Average n.m. 47.8 x 26.6 x 53.3 x 15.4 x 10.4 x

Small and Mid Cap Services

BAS Basic Energy Services, Inc. EW NE 0.69$ 43 30$ 1,017$ 75$ 942$ 972$ (5.37)$ (4.60)$ (3.11)$ (37)$ 17$ 113$ n.m. n.m. n.m. n.m. n.m. 8.6 x

PKD Parker Dril l ing Company EW 3.00 2.23 124 277 576 109 467 743 (1.31) (0.79) (0.35) 30 81 143 n.m. n.m. n.m. 25.1 x 9.2 x 5.2 x

RES RPC, Inc. EW 11.00 16.21 214 3,473 - 141 (141) 3,332 (0.68) (0.38) 0.18 (29) 82 287 n.m. n.m. n.m. n.m. 40.7 x 11.6 x

SPN Superior Energy Services, Inc. OW 19.00 18.36 152 2,785 1,534 486 1,048 3,833 (2.19) (1.42) (0.38) 101 281 517 n.m. n.m. n.m. 38.1 x 13.6 x 7.4 x

NR Newpark Resources, Inc. NR - 7.70 85 651 171 111 60 711 (0.42) (0.01) 0.31 (6) 42 88 n.m. n.m. 24.6 x n.m. 16.8 x 8.1 x

TTI TETRA Technologies, Inc. NR - 6.67 93 618 788 31 758 1,376 (0.49) (0.05) 0.30 131 187 241 n.m. n.m. 22.3 x 10.5 x 7.3 x 5.7 x

Average n.m. n.m. 23.5 x 24.6 x 17.5 x 7.8 x

Specialty Oilfield Products and Services

CLB Core Laboratories NV EW 96.00$ 119.12$ 44 5,253$ 214$ 15$ 199$ 5,452$ 1.62$ 2.71$ 3.83$ 119$ 173$ 229$ n.m. 44.0 x 31.1 x 45.9 x 31.5 x 23.8 x

FTK Flotek Industries, Inc. OW 20.00 15.03 58 871 43 20 23 894 (0.16) 0.31 0.80 4 43 98 n.m. 48.5 x 18.8 x n.m. 20.9 x 9.1 x

RNET RigNet, Inc. NR - 12.92 18 230 73 60 14 244 (0.44) (0.01) 0.27 31 32 37 n.m. n.m. 47.6 x 7.9 x 7.5 x 6.5 x

Average n.m. 46.3 x 32.5 x 26.9 x 20.0 x 13.2 x

3







Land Drilling

HP Helmerich & Payne, Inc. EW 57.00$ 64.67$ 109 7,022$ 532$ 957$ (424)$ 6,597$ (1.69)$ (1.28)$ 1.22$ 299$ 368$ 780$ n.m. n.m. n.m. 22.1 x 17.9 x 8.5 x

NBR Nabors Industries Ltd. OW 13.00 10.31 277 2,851 3,510 256 3,254 6,106 (1.48) (1.22) (0.10) 524 601 969 n.m. n.m. n.m. 11.7 x 10.2 x 6.3 x

PES Pioneer Energy Services Corp. EW 4.00 3.76 65 244 388 15 373 617 (1.30) (1.10) (0.38) 17 41 105 n.m. n.m. n.m. 36.9 x 15.1 x 5.8 x

PTEN Patterson-UTI Energy, Inc. UW 14.00 21.17 146 3,090 827 210 617 3,707 (2.30) (2.14) (1.42) 183 196 379 n.m. n.m. n.m. 20.3 x 18.9 x 9.8 x

ICD Independence Contract Dril l ing, Inc. NR - 5.25 38 198 17 7 10 208 (0.38) (0.31) 0.00 14 15 31 n.m. n.m. n.m. 15.0 x 13.4 x 6.7 x

PDS Precision Dril l ing Corporation NR - 4.60 293 1,349 1,578 351 1,227 2,576 (0.51) (0.42) (0.14) 183 234 351 n.m. n.m. n.m. 14.1 x 11.0 x 7.3 x

Average n.m. n.m. n.m. 20.0 x 14.4 x 7.4 x

Offshore Drilling

ATW Atwood Oceanics, Inc. OW 16.00$ 9.20$ 65 597$ 1,375$ 199$ 1,176$ 1,772$ 3.45$ (0.71)$ (0.15)$ 481$ 184$ 254$ 2.7 x n.m. n.m. 3.7 x 9.6 x 7.0 x

ESV Ensco plc EW 10.00 8.99 301 2,709 4,911 1,800 3,111 5,820 1.14 0.20 0.18 1,104 793 791 7.9 x 45.0 x 49.0 x 5.3 x 7.3 x 7.4 x

NE Noble Corporation plc EW 9.00 6.50 243 1,581 4,852 823 4,029 5,610 (0.18) (1.61) (1.17) 902 479 590 n.m. n.m. n.m. 6.2 x 11.7 x 9.5 x

RDC Rowan Cos. Plc Class A OW 19.00 14.45 125 1,812 2,645 761 1,884 3,696 1.54 (0.01) (1.47) 781 563 346 9.4 x n.m. n.m. 4.7 x 6.6 x 10.7 x

DO Diamond Offshore Dril l ing, Inc. NR - 20.31 137 2,786 2,308 103 2,204 4,990 1.17 1.02 0.22 684 670 530 17.4 x 19.9 x n.m. 7.3 x 7.4 x 9.4 x

ORIG Ocean Rig UDW Inc NR - 0.90 56 50 3,857 869 2,988 3,038 2.94 (0.40) (3.28) 972 525 242 0.3 x n.m. n.m. 3.1 x 5.8 x 12.6 x

PACD Pacific Dril l ing S.A. NR - 4.53 21 96 3,021 371 2,649 2,745 (3.52) (15.73) (13.06) 389 134 166 n.m. n.m. n.m. 7.1 x 20.5 x 16.5 x

RIG Transocean Ltd. NR - 10.62 365 3,880 8,218 2,513 5,705 9,585 0.60 (0.38) (0.77) 1,652 1,141 955 17.6 x n.m. n.m. 5.8 x 8.4 x 10.0 x

SDRL Seadrill Ltd. NR - 2.79 508 1,419 10,914 1,485 9,429 10,848 1.21 0.11 (0.34) 1,808 1,086 896 2.3 x 25.8 x n.m. 6.0 x 10.0 x 12.1 x

Average 8.2 x 30.2 x 49.0 x 5.5 x 9.7 x 10.6 x

Sand & Proppant Providers

SLCA U.S. Sil ica Holdings, Inc. EW 30.00$ 41.45$ 71 2,928$ 490$ 260$ 231$ 3,158$ (0.66)$ 0.03$ 1.32$ 31$ 110$ 251$ n.m. n.m. 31.4 x n.m. 28.7 x 12.6 x

CRR CARBO Ceramics Inc. NR - 14.72 23 346 88 81 7 353 (3.19) (1.94) (0.72) (59) (18) 30 n.m. n.m. n.m. n.m. n.m. 11.9 x

EMES Emerge Energy Services LP NR - 12.40 24 299 296 21 275 574 (3.88) (2.03) (0.15) (54) (18) 31 n.m. n.m. n.m. n.m. n.m. 18.3 x

FMSA Fairmount Santrol Holdings, Inc. NR - 8.05 191 1,541 1,147 62 1,085 2,626 (0.45) (0.10) 0.41 3 112 249 n.m. n.m. 19.8 x n.m. 23.5 x 10.5 x

HCLP Hi-Crush Partners LP NR - 13.98 56 778 195 40 156 933 (0.95) 0.05 0.83 (6) 37 96 n.m. n.m. 16.9 x n.m. 25.2 x 9.8 x

Average n.m. n.m. 22.7 x n.m. 25.8 x 12.6 x

4







Marine/Subsea Services

HLX Helix Energy Solutions Group, Inc. EW 8.00$ 8.44$ 113 950$ 711$ 492$ 219$ 1,169$ (0.40)$ (0.19)$ 0.11$ 92$ 134$ 180$ n.m. n.m. n.m. 12.8 x 8.8 x 6.5 x

HOS Hornbeck Offshore Services, Inc. EW NE 5.89 36 213 1,077 225 852 1,066 (2.03) (1.70) (0.58) 41 53 119 n.m. n.m. n.m. 26.2 x 20.2 x 9.0 x

OII Oceaneering International, Inc. OW 36.00 29.29 98 2,883 802 393 409 3,292 0.73 0.30 1.23 361 309 447 40.1 x n.m. 23.8 x 9.1 x 10.6 x 7.4 x

CKH SEACOR Holdings Inc. NR - 57.72 17 1,000 1,039 642 397 1,397 (3.02) (0.20) 0.15 114 180 183 n.m. n.m. n.m. 12.3 x 7.8 x 7.6 x

FI Frank's International NV NR - 12.75 156 1,992 2 581 (579) 1,413 (0.43) (0.33) (0.07) 18 31 98 n.m. n.m. n.m. 77.3 x 45.9 x 14.4 x

KNOP KNOT Offshore Partners LP NR - 19.17 27 521 649 26 623 1,144 1.75 1.84 1.88 134 139 146 10.9 x 10.4 x 10.2 x 8.5 x 8.2 x 7.8 x

SUBCY Subsea 7 S.A. NR - 11.60 327 3,797 451 1,222 (770) 3,027 1.01 0.25 0.37 847 523 573 11.5 x 46.5 x 31.1 x 3.6 x 5.8 x 5.3 x

TDW Tidewater Inc. NR - 3.34 47 157 2,041 669 1,373 1,530 (4.07) (3.93) (2.15) 49 55 89 n.m. n.m. n.m. 31.3 x 27.8 x 17.2 x

Average 20.8 x 28.5 x 21.7 x 22.6 x 16.9 x 9.4 x

Capital Equipment & Manufacturing

AROC Archrock Inc. NR - 11.92$ 70 830$ 1,563$ 2$ 1,561$ 2,391$ 0.08$ (0.07)$ (0.04)$ 315$ 304$ 327$ n.m. n.m. n.m. 7.6 x 7.9 x 7.3 x

DRQ Dril-Quip, Inc. NR - 58.64 38 2,203 - 492 (492) 1,711 2.17 0.94 1.37 139 76 100 27.0 x n.m. 42.7 x 12.3 x 22.5 x 17.2 x

ERII Energy Recovery, Inc. NR - 12.53 52 652 0 95 (95) 557 0.73 0.30 0.50 52 28 42 17.1 x 42.0 x 25.3 x 10.7 x 19.7 x 13.2 x

EXTN Exterran Corp. NR - 14.82 35 521 526 31 495 1,016 (0.64) (0.25) 0.30 159 173 204 n.m. n.m. 49.4 x n.m. 5.9 x 5.0 x

FET Forum Energy Technologies, Inc. NR - 18.41 91 1,682 396 137 259 1,941 (0.78) (0.29) 0.48 (20) 50 151 n.m. n.m. 38.2 x n.m. 38.7 x 12.8 x

FTI FMC Technologies, Inc. NR - 28.55 226 6,442 1,326 1,227 100 6,541 0.91 0.98 1.41 562 570 698 31.3 x 29.0 x 20.2 x 11.6 x 11.5 x 9.4 x

NGS Natural Gas Services Group, Inc. NR - 25.40 13 327 0 52 (52) 275 0.51 0.56 0.83 32 33 41 49.6 x 45.6 x 30.6 x 8.7 x 8.4 x 6.8 x

NOV National Oilwell Varco, Inc. NR - 36.09 378 13,629 3,280 1,661 1,619 15,248 (0.93) (0.41) 0.93 245 573 1,300 n.m. n.m. 38.8 x n.m. 26.6 x 11.7 x

OIS Oil States International, Inc. NR - 33.15 51 1,702 84 52 32 1,734 (0.95) (0.55) 0.41 50 80 157 n.m. n.m. n.m. 34.6 x 21.6 x 11.1 x

Average 31.2 x 38.9 x 35.0 x 14.3 x 18.1 x 10.5 x

5

LATEST MACRO THEME: KEEP BIG PICTURE IN CONTEXT

Source: EIA, IEA, BP Statistical Review of World Energy

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Global Rig Count Inflation Adj. Oil Prices

Exploration Cycle - ~10 years

Development Cycle - ~10-15 Years


GLOBAL R/P RATIOS GLOBAL RIG COUNTS & INFLATION ADJUSTED OIL PRICES

The longer-term cycles indicate a period of low commodity prices and depressed rig counts relative to the last ~10 years; may be ahead of energy markets, in our view.

Global exploration activity has ramped the R/P index. Similar to the 10-15 year period from the mid-1980s to the early 2000s, we see a phase in which development of these reserves should once again stabilize the commodity complex and lead to commodity inflation, but only when we clear the market of the reserves that have expanded the R/P index.

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6

MODEL OILFIELD SERVICES PORTFOLIO

OFS COVERAGE STOCK THOUGHTS TOP IDEA PORTFOLIO

Source: Stephens estimates

Offshore Levered

North America Land

Diversified

SPN20%

SLB20%

OII15%

ATW15%

NBR10%

FTK20%

Recent Changes to Top Idea Portfolio

Replaced HLX with NBR based on Int'l exposure vs. U.S. levered peers, CF stability - 8/8/16.

Replaced HAL with OII based on CF stability/differentiated tech./market share position - 4/8/16.

Added HLX based on favorable risk/reward at low entry point, solid LT cash flow outlook - 3/9/16.

Replaced NE with ATW on effective cost controls and operational execution - 3/9/16.

Rating Company Ideas

FTK - Best IdeaSpecialty chemistry technology in CnF, new product introductions has potential to provide

years of growth despite weak drilling tech. business

NBRInternational rig market presence and renewed corporate focus after divestiture of

underperforming assets in NCPS; Middle East growth prospects

SLBLargest service provider with industry-leading margins and returns, see little downside; we

like the CAM acquisition and potential synergies and accretion metrics

HALLargest NAM service provider, could add to portfolio through strategic acquisitions after BHI

merger fallout; however, NAM remains secularly oversupplied with competition

SPNCash + Liquidity in downturn combined with geo/product line diversified model and

valuation, about as high on the SMID cap risk curve as we like right now

OIIStrong market share position, differentiated technologies, and CF generation profile could

offer relative stability while work shift offshore could provide positive catalysts

ATWHigh quality offshore driller with asset valuation support and stable balance sheet; Co.

specific catalysts in the works; high risk/high reward situation

RDCWhile high jackup leverage poses risk, the high spec fleet and FcF profile present an attractive

risk reward at current levels

HPHighest quality land driller with limited downside, currently trading higher vs. our PT and at

~$16 mil. per AC rig - Potential catalysts in international growth prospects

NEFcF profile in downturn keeps NE stable despite very weak offshore market conditions and

lack of catalysts

HLXDe-risking liquidity concerns via capital efficiency, op. execution, asset sales could unlock up

to $12 TBV/sh in niche intervention business; Brazil delays push out LT growth scenario

BHIPreviously downgraded to EW following merger fallout. Period of time required to re-cap U.S.

land business, regain international footing after extended tie-up with HAL

ESVLarge, diversified fleet could reduce lumpiness of over-exposure to a single market, but we

see risk of LT contract terminations and legacy asset attrition

SLCALow cost frac sand provider that can afford to reduce pricing and aggressively pursue market

share; valuation + lack of pricing power keeps us EW

CLBLow capital reqs/high returns have driven leading FcF/ROIC and shareholder returns, but

remain cautious given weak global spending outlook, lack of broad based exploration

RESPressure pumping leverage and risk of prolonged oversupply coupled with valuation keep us

sidelined, but we favor the strong organic growth model and balance sheet

PESTop-of-the-line well service fleet, but smaller diverse rig fleet limits ultimate upside when

markets turn. Could offer high risk high reward opportunity at the right price

PKDRental tools business is favorable; however, severely weakened barge rigs market and

international rig exposure pose executional challenges in the NT

PTENMarket expectations for rig day-rates and sharp turnaround in frac, could see capital efficiency

decline and lack of corporate-wide incrementals may compress multiple

WFTFinancial leverage and corporate communication strategy keeps this stock off the menu for us

at these levels. Too much uncertainty with too much debt

HOSOversupplied OSV market, lack of visibility with >75% of OSV fleet stacked. Debt levels still

could be overwhelming but NT cost reduction and asset value keep us EW

BASPermian leverage to NAM markets provides opportunity to capitalize on key area of activity

recovery, but debt/balance sheet likely needs to be re-structured

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7

STEPHENS U.S. LAND MACRO MODEL

Source: Stephens estimates.

• In the table below we provide some historical data for the U.S. land complex, including overall CapEx spend, horizontal/vertical/directional rig counts, and drilling and completion (D&C) spend. We also offer our high-level modeled assumptions for these U.S. onshore drilling/completion market dynamics, with our key focus on annual average rig count changes as well as D&C spending for both horizontal and vertical/directional operations, which reflect our view that 2016 domestic spending levels could be down as much as 40%+ year-on-year.

2007 2008 2009 2010 2011 2012 2013 2014 2015 2016e 2017e 2018e

CapEx ($ in billions)* 81.5$ 102.0$ 72.0$ 91.0$ 117.0$ 124.0$ 125.5$ 139.4$ 71.0$ 42.8$ 54.7$ 64.6$

YoY Growth % --- 25% -29% 26% 29% 6% 1% 11% -49% -40% 28% 18%

Hztl Rigs - Avg 393 553 454 817 1,072 1,151 1,102 1,275 744 371 435 508

Vertical + Directional Rigs - Avg 1,374 1,325 632 722 803 768 659 586 208 81 99 109

Total Rigs 1,767 1,878 1,085 1,539 1,875 1,919 1,761 1,861 951 452 534 617

Hztl D&C Spend ($ billions) 40.3$ 62.3$ 53.0$ 69.3$ 92.9$ 105.2$ 110.5$ 124.9$ 66.9$ 36.9$ 45.8$ 54.3$

Vertical + Directional D&C Spend 41.2$ 39.7$ 19.0$ 21.7$ 24.1$ 18.8$ 15.0$ 14.5$ 4.2$ 1.5$ 1.9$ 2.1$

% Hztl D&C spending 49% 60% 74% 76% 79% 85% 88% 90% 94% 86% 84% 84%

Hztl Wells Spud 6,147 8,120 5,966 9,858 14,156 15,705 18,111 21,875 13,873 6,354 7,613 8,881

Vertical + Directional Spud 28,572 22,783 15,140 13,979 8,720 8,039 8,819 10,735 13,095 16,468 19,510 22,210

% Wells spud - Hztl 18% 26% 28% 41% 62% 66% 67% 67% 51% 28% 28% 29%

Hztl Completions 4,482 6,372 4,831 8,161 11,852 14,174 16,309 19,336 10,359 7,413 9,160 10,654

Vertical + Directional Completions 33,550 37,355 21,283 25,067 26,229 24,083 20,326 15,736 6,239 2,679 2,779 3,059

Hztl Drilling spend ($ in millions) 20,241$ 30,169$ 16,926$ 32,814$ 36,786$ 32,565$ 28,636$ 31,828$ 16,407$ 6,857$ 7,807$ 9,444$

Hztl Completion spend 20,037$ 32,091$ 36,121$ 36,524$ 56,121$ 72,674$ 81,825$ 93,071$ 50,457$ 30,076$ 37,958$ 44,835$

% Completion spending 50% 52% 68% 53% 60% 69% 74% 75% 75% 81% 83% 83%

Hztl DUC (Completions)/Growth* 212 742 658 908 1,172 275 353 789 2,821 (1,187) (1,700) (1,950)

DUCs - Average balance 293 680 1,367 2,415 3,398 3,958 4,239 4,616 7,174 7,437 5,837 3,974

* DUC completions are included in CapEx figures

8

REVISIONS TO CONSENSUS E&P 2016 CAPEX

Source: Stephens estimates, FactSet Research Systems.

(80.0%)

(70.0%)

(60.0%)

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(40.0%)

(30.0%)

(20.0%)

(10.0%)

0.0%

10.0%

6 Months Ago 3 Months Ago Current

Y/Y

% 2

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NOCs EV > $60 bil. ("Big 6") EV $15 bil. - $60 bil. EV $5 bil. - $15 bil. EV $2 bil. - $5 bil. EV < $2 bil.

(60.0%)

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NOCs IOCs U.S. Land

2016E NOC, U.S. Breakout

6 Mths. 3 Mths. Current

NOCs (2.7%) (6.7%) (8.4%)

EV > $60 bil. ("Big 6") (18.7%) (20.1%) (21.8%)

EV $15 bil. - $60 bil. (46.2%) (56.2%) (54.5%)

EV $5 bil. - $15 bil. (40.4%) (50.4%) (47.8%)

EV $2 bil. - $5 bil. (38.6%) (49.8%) (49.5%)

EV < $2 bil. (53.6%) (62.7%) (74.3%)

Total Weighted Average: (18.0%) (19.7%) (23.4%)

2016E Global Spending Outlook

6 Mths. 3 Mths. Current

U.S. Land (43.7%) (54.5%) (53.7%)

IOCs (18.7%) (20.0%) (21.8%)

NOCs (2.7%) (6.7%) (8.4%)

Consensus 2016E Price Deck

Commodity U.S. Land IOCs NOCs

$ / bbl oil 41.31$ 42.94$ 43.08$

$ / mcf gas 2.19 3.78 4.85

9

REVISIONS TO CONSENSUS E&P 2017 CAPEX

Source: Stephens estimates, FactSet Research Systems.

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NOCs EV > $60 bil. ("Big 6") EV $15 bil. - $60 bil. EV $5 bil. - $15 bil. EV $2 bil. - $5 bil. EV < $2 bil.

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NOCs IOCs U.S. Land

2017E NOC, U.S. Breakout

(in billions, USD) 6 Mths. 3 Mths. Current

NOCs 133.5$ 134.3$ 125.4$

EV > $60 bil. ("Big 6") 109.8 104.2 102.2

EV $15 bil. - $60 bil. 29.2 24.2 26.4

EV $5 bil. - $15 bil. 12.1 10.0 10.8

EV $2 bil. - $5 bil. 6.3 5.4 5.7

EV < $2 bil. 2.6 2.2 2.4

2017E Global Spending Outlook

(in billions, USD) 6 Mths. 3 Mths. Current

U.S. Land 50.3$ 41.8$ 45.5$

IOCs 109.8 104.2 102.2

NOCs 133.5 134.3 125.4

Consensus 2017E Price Deck

Commodity U.S. Land IOCs NOCs

$ / bbl oil 47.42$ 61.82$ 60.48$

$ / mcf gas 2.76 5.07 5.56

10

VALUATION FRAMEWORK, PRICE TARGET RATIONALE

Source: Stephens estimates.

• Our 2018E outlook (mid-cycle for offshore drillers) represents a more normalized operating environment, with our current estimates for spending and rig counts outlined on page 7. Within our valuation framework, we apply multi-year or mid-cycle multiples to the operating conditions in our financial models, applying premiums/discounts to some of the companies within our coverage universe (denoted in far right column).

2017 2018 EBITDA Adj. YE2017 Implied PriceRevenues EBITDA Revenues EBITDA Margin EPS Net Debt EBITDA --or--- EPS Price Target

Large Cap

BHI 11,083$ 1,530$ 12,526$ 2,527$ 20.2% 1.63$ 898$ --- 25.0x 40.65$ 41.00$

HAL 18,672 3,269 21,267 4,699 22.1% 2.00 10,126 --- 25.0x 49.92 50.00

SLB 32,810 7,603 39,602 10,163 25.7% 3.41 9,809 --- 25.0x 85.23 85.00

WFT 6,800 785 7,930 1,200 15.1% (0.32) 6,646 8.50x --- 3.97 4.00 -

Land Drilling

HP (a) 1,586$ 368$ 2,424$ 780$ 32.2% 1.22$ 98$ 8.00x --- 56.57$ 57.00$

NBR (b) 2,320 601 3,332 969 29.1% (0.10) 3,199 7.00x --- 12.96 13.00

PES 374 41 532 105 19.8% (0.38) 402 6.00x --- 3.56 4.00

PTEN 1,220 196 1,724 379 22.0% (1.42) 673 7.00x --- 13.57 14.00

SMID Cap

BAS 671$ 17$ 827$ 113$ 13.6% (3.11)$ 1,092$ 6.00x --- (9.74)$ NE

PKD 529 81 672 143 21.3% (0.35) 545 6.00x --- 2.51 3.00

RES 949 82 1,374 287 20.9% 0.18 (97) 8.00x --- 11.16 11.00

SPN 1,738 281 2,078 517 24.9% (0.38) 1,067 7.50x --- 18.50 19.00

Specialty

CLB (c, d) 695$ 173$ 778$ 229$ 29.4% 3.83$ 193$ 15.00x 25.0x 96.00$ 96.00$

FTK (d) 366 43 483 98 20.3% 0.80 35 12.00x 25.0x 19.83 20.00

Offshore Drilling

ATW (a, d, e) 551$ 184$ 816$ 331$ 40.6% 0.72$ 1,438$ 7.50x --- 16.13$ 16.00$

ESV (d) 2,164 793 2,410 903 37.5% 0.51 2,908 6.50x --- 9.82 10.00

NE (d) 1,492 479 1,837 804 43.8% (0.37) 3,897 7.50x --- 8.76 9.00

RDC (d) 1,405 563 1,301 500 38.4% (0.37) 1,313 7.50x --- 19.41 19.00

Marine/Subsea

HLX 624$ 134$ 732$ 180$ 24.6% 0.11$ 370$ 7.00x --- 7.91$ 8.00$

HOS 246 53 390 119 30.4% (0.58) 903 7.50x --- (0.34) NE

OII 2,248 309 2,581 447 17.3% 1.23 303 8.50x --- 35.50 36.00


SLCA 706$ 110$ 976$ 251$ 25.7% 1.32$ 405$ 10.00x --- 29.76$ 30.00$

(a) Calendarized.

(b) We do not include any contribution from CJES ownership.

(c) In addition to EBITDA and EPS multiples, PT contemplates a variety of other valuations including dividend discount, DCF and discounted LT growth scenarios.

(d) For offshore drillers the 2018 columns represent our mid-cycle potential.

(e) Pro-forma net debt considers remaining newbuild CapEx requirements.

Multiple

11

CURRENT VALUATIONS – WHAT THE MARKET APPEARS TO BE PAYING FOR

Source: Stephens estimates, FactSet Research Systems

• Based on LT group EV/EBITDA multiples, we provide the EBITDA the market is currently paying for within our coverage. On the right, we estimate the E&P CapEx increase needed to generate the incremental implied EBITDA, assuming 25% incremental margins (40% for offshore drillers, marine/subsea services), vs. our estimates. We see risk in realizing the spending increases (and margins) over a 2-year outlook. Prices as of 8/18/16.

Stephens Annual EBITDA EBITDA Implied Cons. EBITDA % Inc. in % Inc. in

Current EV 2014 2015 2016E Multiple EBITDA 2017E 2018E 2017E 2018E 2017E 2018E 2017E 2018E 17E CapEx 18E CapEx

Large Caps

BHI 21,471$ 4,843$ 1,815$ 158$ 11.50x 1,867$ 1,241$ 2,269$ 50.5% (17.7%) 1,530$ 2,527$ 22.0% (26.1%) 12% (21%)

HAL 49,834 7,174 4,156 2,078 11.50x 4,333 3,345 5,373 29.5% (19.4%) 3,269 4,699 32.6% (7.8%) 23% (7%)

SLB 127,559 16,481 12,366 7,097 11.50x 11,092 8,263 11,208 34.2% (1.0%) 7,603 10,163 45.9% 9.1% 43% 9%

WFT 12,141 2,974 1,307 341 8.50x 1,428 880 1,566 62.4% (8.8%) 785 1,200 82.0% 19.0% 38% 11%

Land Drilling

HP (a) 6,597$ 1,622$ 801$ 299$ 8.00x 825$ 420$ 553$ 96.6% 49.0% 368$ 780$ 123.8% 5.7% 115% 7%

NBR 6,106 1,713 1,126 524 7.00x 872 686 976 27.2% (10.7%) 601 969 45.1% (10.0%) 47% (12%)

PES 617 263 105 17 6.00x 103 43 90 140.2% 13.7% 41 105 151.7% (2.5%) 66% (2%)

PTEN 3,707 986 515 183 7.00x 530 253 484 109.7% 9.4% 196 379 170.4% 39.7% 109% 35%

SMID Cap

BAS 972$ 317$ 24$ (37)$ 6.00x 162$ 32$ 114$ 402.7% 42.2% 17$ 113$ 880.8% 43.9% 87% 24%

PKD 743 262 150 30 6.00x 124 66 162 88.0% (23.6%) 81 143 53.8% (13.3%) 33% (11%)

RES 3,332 631 116 (29) 8.00x 416 113 356 269.6% 16.9% 82 287 408.6% 45.3% 141% 38%

SPN 3,833 1,197 422 101 7.50x 511 283 563 80.4% (9.2%) 281 517 81.6% (1.1%) 53% (1%)

Specialty

CLB 5,452$ 374$ 215$ 119$ 17.50x 312$ 168$ 232$ 85.2% 34.6% 173$ 229$ 80.3% 36.2% 80% 43%

FTK 894 98 20 4 12.00x 74 46 95 62.9% (21.9%) 43 98 74.4% (23.9%) 35% (19%)

Offshore Drilling

ATW (a) 1,772$ 603$ 747$ 481$ 7.50x 236$ 142$ 129$ 65.9% 83.2% 184$ 254$ 28.3% (6.9%) 24% (6%)

ESV 5,820 2,421 1,974 1,104 6.50x 895 815 593 9.8% 51.1% 793 791 12.8% 13.2% 12% 11%

NE 5,602 2,011 1,686 902 7.50x 747 574 519 30.1% 43.8% 479 590 55.9% 26.5% 45% 24%

RDC 3,696 707 1,028 781 7.50x 493 542 318 (9.2%) 54.8% 563 346 (12.5%) 42.6% (13%) 31%

Marine/Subsea

HLX 1,169$ 361$ 174$ 92$ 7.00x 167$ 148$ 208$ 12.6% (19.7%) 134$ 180$ 25.0% (7.2%) 13% (4%)

HOS 1,066 284 209 41 7.50x 142 50 93 185.3% 52.0% 53 119 170.0% 19.6% 91% 15%

OII 3,292 858 669 361 8.50x 387 337 409 14.8% (5.3%) 309 447 25.2% (13.3%) 9% (6%)

Sand & Proppant

SLCA 3,158$ 246$ 109$ 31$ 12.00x 263$ 143$ 303$ 84.0% (13.2%) 110$ 251$ 139.2% 5.0% 87% 5% (a) Calendarized

Avg. Prices 2014A 2015A YTD

Nat. Gas 4.26$ 2.63$ 2.25$

WTI 92.90 48.91 40.78

Brent 99.51 53.84 42.30

% Premium/(Disc.) Stephens EBITDA % Premium/(Disc.)

12

U.S. LAND:

Rapidly deteriorating fundamentals, which may persist for an extended period… with a “recovery” to underwhelm….

Rig count has declined 1,403 units (~75%) from the recent peak of 1,864 on 11/21/14.

High cost, challenging oil plays such as the Bakken, MidCon (Miss. Lime, etc.), fringy Permian will be challenged.

Pricing is in favor of E&Ps, consumable deflation likely to be pretty dramatic.

Older assets likely to find the yard, written off as utilization of new assets will be the focus.

E&Ps to focus on “core,” drill best acreage where infrastructure is in place, which may prolong period of production growth.

GULF OF MEXICO/OFFSHORE:

A tale of 2 markets: Solid visibility in the deepwater U.S. GOM, but collapse on the shelf for jack-ups…

Currently 42 floating rigs in the U.S. GOM and 32 contracted rigs, with 40 total marketed rigs, 41 total marketed rigs, and 41 total marketed rigs expected by the end of 2016, 2017, and 2018, respectively.

We expect under-utilized assets to be stacked as oversupply conditions persist. Strong geology may continue to drive investment.

Offshore spending declines largely due to day-rate deflation, coupled with exploratory budget cuts. Projects pushed out to take advantage of lower costs.

INTERNATIONAL:

Slow and steady with regional complications persisting, with prices under $40/bbl (Brent); we see longer-term challenges...

Middle East and select Asia Pacific Regions to remain resilient, with nat gas growth to come.

Brazil, Venezuela, Russia, Mexico, Africa could be regions where investment slows and geopolitical challenges grow.

Generally, longer-term contracts protect service companies for a prolonged period and customer base takes a longer-term approach to managing projects.

CURRENT MARKET OVERVIEW

Source: Stephens Inc., RigLogix, BHI

SOURCES OF REVENUE

13

BAS PKD RES SPN HP** NBR PES PTEN ATW** ESV HLX* HOS NE OII RDC

Rating EW EW EW OW EW OW EW UW OW EW EW EW EW OW OW

Price Target NE 3.00$ 11.00$ 19.00$ 57.00$ 13.00$ 4.00$ 14.00$ 16.00$ 10.00$ 8.00$ NE 9.00$ 36.00$ 19.00$

Total 2017E Revenue 671$ 529$ 949$ 1,738$ 1,417$ 2,320$ 374$ 1,220$ 561$ 2,164$ 624$ 246$ 1,492$ 2,248$ 1,405$

Jack-ups - Drilling 5% 1% 2%

Floaters - Drilling 34% 12% 57% 44%

Offshore Supply Vessels/Liftboats 70%

Intervention 25% 12%

Other 32%

Jack-ups - Drilling 5% 13% 33% 23% 53%

Floaters - Drilling 49% 51% 17%

Offshore Supply Vessels/Liftboats 30%

Intervention 25% 8%

Other 4% 3% 18% 3% 1%

Offshore - Shelf/Shallow 2% 9%

Land - US 1% 14% 73% 23% 42% 60%

Land - Int'l 53% 18% 58% 2%

Rig Equipment 9%

Subsea Tools & Equipment 31%

Drilling Fluids

Wireline 3% 6% 16%

Downhole Tools/Svcs 19% 6% 35%

Tubular Services 15%

Subsea 38%

Fishing & Rental 4% 31% 3% 5%

Other 5%

Pressure Pumping 23% 55% 16% 38%

Completion Equip. 6%

Coiled Tubing 4% 8% 7% 5%

Consumables

Fluid Handling/Disposal 38% 3% 10%

Workover/Snubbing 30% 9% 9%

Artificial Lift 3%

Other/Misc. 12% 2% 11%

tech svcs tech svcs

Notes: *HLX: Other includes prod. facilties, robotics split b/w vessel count. (subsea)

**ATW, HP represent fiscal year 2016E revenues.

Landscape does not include BHI, HAL, SLB, WFT, CLB, FTK, or SLCA.

Sources: Stephens Inc., Company Fil ings.

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Land DrillingSmall Cap Services

Oilfield Services Industry Landscape - Revenue Contribution by Product/Service Line

14

OILFIELD SERVICE STOCK THOUGHTS

Source: FactSet Research Systems, Stephens estimates

Company Ticker Rating Price Target Mkt Cap Stock & Company Thoughts

Large Cap Services

Baker Hughes BHI EW $52.05 $41.00 $22,272

Our $41 target is based on 25x our 2018 EPS of $1.63. 2Q margins, vs. peers, highlighted the bloated cost structure of the Co. which remains the basis of our EW rating but we do

see a multi-year turnaround story with a greatly improved balance sheet (net cash position of $884 mil.) and liquidity of $6.4 bil. ($3.9 bil. cash). BHI should still achieve LT success

but re-focusing the business and removing elevated, merger-related cost structure could take ~1.5 years given the current bottoming process.

Halliburton HAL OW $46.46 $50.00 $39,978

Our $50 target is based on 25x our 2018 EPS of $2.00. HAL remains well positioned for an NAM recovery, particularly with decisions from large competitors to reduce NAM

exposure, and $6.1 bil. of liquidity ($3.1 bil. cash) gives HAL flexibility to execute on strategic acquisitions, specifically artificial lift and production chemicals where they have

runway for growth. Q10 pumps also offer best exposure to NAM frac, although frac replacement costs near auction values of $0.20-$0.30 on the dollar keep barriers to entry low.

Schlumberger SLB OW $83.86 $85.00 $116,759

SLB recently offered some insight into what a recovery might look like in the coming quarters, highlighting conventional oil projects in geologically strong areas (Middle East,

Russia) may begin to recover into 2017. And with persisting oversupply issues in U.S. Land we continue to find SLB's global diversification (75% of revs from International ops.),

extensive services/products offerings, and manufacturing expansion and LT cost synergies through the CAM acquisition as uniquely attractive. Our $85 target is based on a 25x EPS

multiple of our $3.41 2018 EPS estimate, which we view as a normalized earnings level inclusive of CAM.

Weatherford WFT UW $5.91 $4.00 $5,296

We initially downgraded WFT to Underweight following very disappointing 1Q results, and recently lowered our PT from $4.50 to $4 based on ongoing operational struggles,

relative underperformance compared to large cap peers, and yet another revision to 2016E FcF guidance. We continue to see risk to equity value in shares of the Co. based on our

lack of confidence in the Co.'s ability to accurately assess macro/industry trends, longer term balance sheet issues ($7.1 bil. of debt), and potential for multiple compression as we

move beyond '16/'17 and fundamentals become important to investors. Our $4 PT is based on an 8.5x multiple of our ~$1.2 bil. 2018E EBITDA, and incorporates our YE17 capital

structure which includes net debt of ~$6.6 bil.

Small & Mid Cap Services

Basic Energy Svcs BAS EW $0.69 NE $30

We have our PT withdrawn as high financial leverage and declining EBITDA result in extreme variability to a range of targets; at a 6.00x EBITDA multilpe with ~$1.1 bil. in YE17 net

debt, BAS would need >$200 mil. of run rate EBITDA to generate positive equity value in our model (which compares to our 2018 EBITDA est. of $113 mil.). We acknolwedge that

production services (well and fluid servicing) are beginning to show early signs of stabilizations, but frac and pricing across all U.S. land services should be difficult given oversupply

and instability in global oil prices. BAS also has acknowledged debt restructuring necessity, which could be impactful to current equity owners.

Parker Drilling PKD EW $2.23 $3.00 $277

Contracting/utilization for the GOM Barge Rig fleet has become almost non-existent, and Int'l opportunities in both the E. Hemisphere and Latin America remain challenged for the

foreseeable future. With the Rentals business also weighed by depressed activity levels and heightened competition, our outlook on near/medium term earnings potential for PKD

remains pressured. Our $3 target is based on a 6.0x EBITDA multiple of our ~$145 mil. 2018E EBITDA, which we view as a more normalized earnings potential.

RPC Inc. RES EW $16.21 $11.00 $3,473

RES is a best-in-class pumper with a history of industry-leading returns (e.g. ROIC), however we continue to see notable risk potential in the domestic onshore market in the near

term as a susbtantial supply overhang of pressure pumping horsepower and declining customer budgets have weighed on both utilization and pricing across the industry. Ongoing

weakness in NAM has resulted in persisting cost-cutting efforts, with ~51% of RES's ~927k HHP fleet de-crewed. With a conservative debt-free balance sheet, strong operational

track record, and organic growth model, we see RES as one of our better positioned service names, however, NT earnings potential/visibility remains challenged.

Superior Energy Svcs SPN OW $18.36 $19.00 $2,785

Balance sheet, FcF generation and Int'l business model continues to differentiate vs. SMID cap service peers. Covenant concerns were lifted given a Jul-16 credit facility amendment

and $636 mil. of liquidity ($236 mil. cash) will allow SPN to be a first responder to activity upticks, particularly in the horizontal well frac and premium drill pipe businesses where

SPN has deployed capital to maintain and preserve asset integrity. Reorganization of its U.S. ops into geo-segment and bundled offerings are also reducing costs.

Specialty Oilfield Products and Services

Core Laboratories CLB EW $119.12 $96.00 $5,253

CLB is a high-margin, technology focused company that provides reservoir characterization and production enhancment services for E&P's. The capital IQ intensive business model

has allowed CLB to generate consistent free cash flow margins (23% of 2015 revs were converted to FcF) and an employee compensation structure tied to trailing 3-year ROIC has

de-centralized capital spending decisions and prevented overextension on the balance sheet. We are EW with a $96 PT, however, given the risk we see to CLB's confidence in a

sharp "V-bottom" recovery starting this quarter, and valuation using normalized multiples implies values well below our $96 target.

Flotek Industries FTK OW $15.03 $20.00 $871

We believe mgmt. credibility issues have been put to bed given the final results of the MHA reports released alongside 2Q's earnings. While two of the three reports found

evidence of EUR uplift (third was inconclusive), our own analysis has suggested CnF wells outperform by 60%-90% vs. non-CnF wells in the Permian and Eagle Ford and NPV

increases per well can range from ~20% on the lower to the 150%-200% range on the high end. CnF revs/volumes continue to outperform the rig count. Additionally, FTK is focusing

on Prescriptive Chemistry Management, a full life-of-the well chemistry management platform that provides comprehensive, custom chemistry solutions.

Prices as of 8/18/16. Dollars in Millions.

15

OILFIELD SERVICE STOCK THOUGHTS

Source: FactSet Research Systems, Stephens estimates

Prices as of 8/18/16. Dollars in Millions. Company Ticker Rating Price Target Mkt Cap Stock & Company Thoughts

Marine Construction/Subsea

Helix Energy HLX EW $8.44 $8.00 $950

Persisting market activity weakness and diminishing outlook for work opportunities towards YE16 resulted in HLX tempering its 2016 guidance, however largely in-line with our

outlook. With contributions from the Q5000 ramping up, favorable seasonality in the summertime for its N. Sea Well Intervention fleet, and improving Robotics margins should

provide some stability in 2H16. So while we acknowledge a level of financing risk as newbuild commitments come due through YE18, we maintain our favorable view of HLX's

longer term potential as the Co. continues to organically grow its niche Well Intervention fleet. We apply a 7x multiple to our ~$180 mil. 2018E EBITDA to reach our $8 PT, and

incoporate ~$370 mil. of YE17 net debt.

Hornbeck Offshore HOS EW $5.89 NE $213

Though HOS can continued its incremental vessel stacking efforts (now >75% of its OSV fleet), competitors continue to drive down day-rates and accept contract terms that over-

burden the service providers with liability potential, in our view. The Co. noted a go-forward strategy of operating 14 OSVs/6 MPSVs (+2 deliveries in 3Q16 and 2 deliveries in early

'18) at spot market conditions and run the Co. off of FcF, however we now estimate HOS running a quarterly FcF deficit of ($5) - ($10) mil. even at bare minimum maintenance

CapEx spending levels. We reiterate our EW rating as we remain cautious, however our PT is withdrawn due to a lack of visibility, market volatility, and high debt load ($1.1 bil.) .

Oceaneering Intl. OII OW $29.29 $36.00 $2,883

Although the offshore activity outlook remains bearish for the next 12-18+ months as the global market continues to sort through an equipment supply overhang and as oil price

volatility persists, we view OII as one of the few longer term value opportunities in oilfield services based on the Co.'s diversified portfolio of technology-levered subsea products

and services, balance sheet strength, and positive CF generation profile. We base our $36 PT on an 8.5x multiple on our ~$445 mil. 2018E EBITDA, and we also consider our YE17

capital structure which includes ~$300 mil. of net debt.

Offshore Drillers

Atwood Oceanics ATW OW $9.20 $16.00 $596

ATW presents a favorable risk reward in our view, with a low-high range of $2-$34. We do acknowledge the contracting risk and financing risk of the Jun-18 final newbuild

payment, but the stock has been risked as it trades at 0.2x TBV vs. peer group at 0.4x, and marked to market would imply a $19 stock. We recommend exposure ahead of a

potential Brazil contract announcement for the Admiral which mgmt. has reiterated is still likely to happen and any work for the Eagle would be a positive catalyst to ests.

Ensco plc ESV EW $8.99 $10.00 $2,709

We believe the current rollover in prices reflects risk that offshore spending could be pushed out to the right as we approach 2017; ESV has been very proactive about stacking

under-utilized, older assets but we still believe there are a number of older jackups and floaters that present further impairment risk. Our $10 target is based on a 6.5x EBITDA

multiple (1.0x disc. vs. peers given impairment risk) of our $903 mil. mid-cycle est. with YE17 net debt position of $2.9 bil. In our low-high scenarios, ESV trades between $2-$18.

Noble Corp. NE EW $6.50 $9.00 $1,573

In a pressured commodity price outlook with a substantial number of uncontracted newbuilds set to enter the market, we see increasing pressure to contract activity/dayrates as

well as potential early terminations and incremental stackings seen throughout the industry of late. While commodity price uncertainty and rig oversupply will continue to dictate

the contracting activity/the timing of an eventual offshore recovery, NE remains a well positioned offshore driller with strong liquidity (~$3.3 bil. at 2Q end), completed newbuild

program, and lowered cost structure - but await a better entry point. We apply a 7.5x multiple to our ~$805 mil. mid-cycle EBITDA estimate to reach our $9 price target.

Rowan Companies RDC OW $14.45 $19.00 $1,812

Offshore markets continue to face pervasive equipment oversupply issues, decreases/delays of customer spending plans due to commodity price volatility, and persisting low

watermarks in dayrates. However, we remain Overweight as we continue to view the Co.'s $2.3 bil. of liquidity (incl. $760 mil. of cash on-hand), high spec fleet mix, and focus on

adding backlog as positives, and we see favorable risk/reward in shares if contracting activity were to improve in the coming years, especially given the poor sentiment for offshore

drillers.


U.S. Silica Holdings SLCA EW $41.45 $30.00 $2,928

SLCA is well positioned for a U.S. land recovery given its extensive distribution network and favorable well design trends (more sand per well). Recent price accretion in the 2Q16

timeframe has been reflective of 2018/2019 valuations, which has kept us from chasing the stock as we lack the visibility and conviction 2018 will be a return to 2012-2014 hztl.

completions levels. Additionally, recent acquisitions suggest to us that regional sand is gaining share over N. White, which poses concern given SLCA's existing infrastructure.

Land Drilling

Helmerich & Payne HP EW $64.67 $57.00 $7,022

We like HP for its sound balance sheet and its high-spec fleet of nearly all AC rigs and we maintain it is a premier rig operator in the U.S. market. We expect HP will gain market

share through the downturn, but remain EW given the stock is above our $57 PT and we see a period of lower dayrates rolling into the contracted fleet over the NT. Current

valuations are pricing in ~$15 mil. per U.S. AC rig, while we think domestic AC rig valuations are moving towards the $10 mil.-$13 mil. range.

Nabors Industries NBR OW $10.31 $13.00 $2,851

We recently upgraded NBR to OW as we recognize the value and cash flow stability of the international drilling segment. Recent contract wins in the GOM (platform rig), Alaska

and Kazakstahn, all of which were five years in length or more, announced in 2Q worth >$75 mil. in EBITDA backlog highlight the business model diversity. Given the roll-out and

positive reception thus far of the pad-optimized M800 rig design in the U.S., we like NBR as a pair trade against over-valued, U.S. land levered drillers.

Pioneer Energy Svcs PES EW $3.76 $4.00 $244

Lower utilization and day-rate pressure have adversely impacted U.S. drilling operations, with the weakened drilling activity levels flowing through to declines in Production

Services also. Co. expectations for NT drilling utilization headwinds and greater margin compression weigh on our outlook. And though we continue to expect PES to gain market

share in Production Services, pricing/margins are likely to remain challenged as well. Though NT earnings outlook is pressured amid commodity price uncertainty/limited customer

spending visibility, we view PES as a likely survivor based on heightened operational focus, Production Services market position, and prudent focus on preserving liquidity as we

worked through the downturn.

Patterson-UTI PTEN UW $21.17 $14.00 $3,090

While U.S. Land/PTEN rig counts have improved recently, the weakened spot day-rate environment and commodity price volatility weigh on our near/medium term

earnings/margin expectations for the Co.'s drilling operations. And ongoing equipment oversupply issues continue to significantly weigh on U.S. onshore pressure pumping activity

levels/service pricing. Though we have confidence in PTEN's ability to survive the downturn, we remain Underweight as we continue to see valuation as overextended relative to

our view of PP pricing as structurally challenged for the foreseeable future and greater drilling margin erosion in the coming 12-18 months.

STEPHENS VS. CONSENSUS

16

Ticker Stephens 3Q16 Estimates Stephens 2017 Estimates Stephens 2018 Estimates

Sales ($ mil.): 193.8$ Sales ($ mil.): 196.7$ Sales ($ mil.): 561.4$ Sales ($ mil.): 537.3$ Sales ($ mil.): 644.5$ Sales ($ mil.): 543.9$

(a) EBITDA ($ mil.): 97.5 EBITDA ($ mil.): 102.9 EBITDA ($ mil.): 211.0 EBITDA ($ mil.): 181.8 EBITDA ($ mil.): 211.0 EBITDA ($ mil.): 128.9

EPS: 0.54 EPS: 0.59 EPS: (0.28) EPS: (0.70) EPS: (0.64) EPS: (1.68)


EBITDA ($ mil.): (7.5) EBITDA ($ mil.): (9.0) EBITDA ($ mil.): 16.5 EBITDA ($ mil.): 32.2 EBITDA ($ mil.): 112.5 EBITDA ($ mil.): 113.9

EPS: (1.33) EPS: (1.31) EPS: (4.60) EPS: (4.12) EPS: (3.11) EPS: (2.82)

Sales ($ mil.): 2,397.9$ Sales ($ mil.): 2,401.1$ Sales ($ mil.): 11,082.8$ Sales ($ mil.): 11,169.8$ Sales ($ mil.): 12,526.3$ Sales ($ mil.): 13,592.9$

EBITDA ($ mil.): 36.7 EBITDA ($ mil.): 96.7 EBITDA ($ mil.): 1,530.3 EBITDA ($ mil.): 1,240.8 EBITDA ($ mil.): 2,527.2 EBITDA ($ mil.): 2,268.9

EPS: (0.54) EPS: (0.45) EPS: 0.23 EPS: (0.14) EPS: 1.63 EPS: 1.63


EBITDA ($ mil.): 29.4 EBITDA ($ mil.): 29.6 EBITDA ($ mil.): 172.8 EBITDA ($ mil.): 168.2 EBITDA ($ mil.): 228.8 EBITDA ($ mil.): 231.5

EPS: 0.40 EPS: 0.40 EPS: 2.71 EPS: 2.39 EPS: 3.83 EPS: 3.55

Sales ($ mil.): 492.9$ Sales ($ mil.): 548.1$ Sales ($ mil.): 2,164.0$ Sales ($ mil.): 2,023.7$ Sales ($ mil.): 2,273.3$ Sales ($ mil.): 1,878.0$


EPS: (0.01) EPS: 0.13 EPS: 0.20 EPS: 0.26 EPS: 0.18 EPS: (0.31)



EPS: (0.03) EPS: (0.02) EPS: 0.31 EPS: 0.37 EPS: 0.80 EPS: 0.89


EBITDA ($ mil.): 493.4 EBITDA ($ mil.): 463.7 EBITDA ($ mil.): 3,268.7 EBITDA ($ mil.): 3,345.1 EBITDA ($ mil.): 4,699.5 EBITDA ($ mil.): 5,373.5




EPS: 0.00 EPS: 0.03 EPS: (0.19) EPS: (0.13) EPS: 0.11 EPS: 0.21





(a) EBITDA ($ mil.): 62.4 EBITDA ($ mil.): 69.6 EBITDA ($ mil.): 327.3 EBITDA ($ mil.): 359.0 EBITDA ($ mil.): 646.3 EBITDA ($ mil.): 553.3

EPS: (0.52) EPS: (0.40) EPS: (1.53) EPS: (1.33) EPS: 0.41 EPS: (0.16)







(a) For the Company's fiscal quarter ending September 30, and fiscal years ending Sep. '17 and Sep. '18.

All Stephens EPS estimates represent adjusted EPS.

Sources: Stephens Inc., FactSet Research Systems.

HOS

FTK

HAL

HLX

Consensus 2018 EstimatesConsensus 3Q16 Estimates Consensus 2017 Estimates

ATW

BAS

NBR

NE

BHI

HP

ESV

CLB

STEPHENS VS. CONSENSUS

17

Ticker Stephens 3Q16 Estimates Stephens 2017 Estimates Stephens 2018 Estimates
















Sales ($ mil.): 149.2$ Sales ($ mil.): 155.0$ Sales ($ mil.): 949.1$ Sales ($ mil.): 1,035.5$ Sales ($ mil.): 1,374.2$ Sales ($ mil.): 1,581.5$

EBITDA ($ mil.): (3.0) EBITDA ($ mil.): (17.2) EBITDA ($ mil.): 81.9 EBITDA ($ mil.): 112.7 EBITDA ($ mil.): 286.7 EBITDA ($ mil.): 356.3

EPS: (0.17) EPS: (0.21) EPS: (0.38) EPS: (0.27) EPS: 0.18 EPS: 0.48


EBITDA ($ mil.): 1,609.0 EBITDA ($ mil.): 1,609.5 EBITDA ($ mil.): 7,602.8 EBITDA ($ mil.): 8,263.1 EBITDA ($ mil.): 10,162.6 EBITDA ($ mil.): 11,207.8


Sales ($ mil.): 131.7$ Sales ($ mil.): 137.3$ Sales ($ mil.): 705.9$ Sales ($ mil.): 831.0$ Sales ($ mil.): 975.6$ Sales ($ mil.): 1,169.5$







EBITDA ($ mil.): 93.1 EBITDA ($ mil.): 94.8 EBITDA ($ mil.): 785.0 EBITDA ($ mil.): 879.5 EBITDA ($ mil.): 1,200.4 EBITDA ($ mil.): 1,565.6

EPS: (0.26) EPS: (0.25) EPS: (0.68) EPS: (0.51) EPS: (0.32) EPS: 0.05

All Stephens EPS estimates represent adjusted EPS.

Sources: Stephens Inc., FactSet Research Systems.

OII

WFT

PES

SPN

SLB

PKD

PTEN

RES

RDC

SLCA

Consensus 2018 EstimatesConsensus 3Q16 Estimates Consensus 2017 Estimates

MACRO FUNDAMENTALS

18

$20

$35

$50

$65

$80

$95

$110

$125

$140

2011 2012 2013 2014 2015

WTI

Cru

de O

il P

rice

($/

bbl)

-

1

2

3

4

5

6

7

8

9

10

MM

bb

l/d

Lower 48 States Alaska Gulf of Mexico

OIL

19

Source: FactSet Research Systems

ANNUAL FIELD-WIDE DECLINE RATE, BY DATE OF IP

PRODUCTION TRENDS BY REGION

3.9%

5.9%

7.9%

10.6%

12.6%

0.0%

3.0%

6.0%

9.0%

12.0%

15.0%

Pre-1970s 1970s 1980s 1990s 2000s

• Since mid-1990s, global liquids demand has outpaced OPEC capacity growth, driving oil prices secularly higher. • While the supply side has been through a period of shortcomings, U.S. production has ramped, resulting in market imbalance. • Efficiencies through shifts in transportation and developing nations’ desire to grow economies away from liquid fuels has resulted in less per capita demand.

U.S. CRUDE PRODUCTION

5 Yr. WTI SPOT PRICE

Source: EIA Source: EIA

Source: Company presentations

0.0%

1.0%

2.0%

3.0%

4.0%

5.0%

6.0%

7.0%

8.0%

9.0%

0

10

20

30

40

50

60

70

80

90

100

% T

ota

l Su

pp

ly

Sup

ply

(M

Mb

bl/

d)

Total non-OPEC Supply, ex U.S. Land Total OPEC Supply Lower 48, ex GOM % of Total Supply

20

OIL – HISTORICAL TRADING RELATIONSHIPS

USD v OIL PRICES FXI v OIL PRICES

OIH v OIL PRICES SPX v OIL PRICES


• Oil prices trading more in line with Developed Nations (S&P 500 as a proxy) as compared to Emerging markets (FXI as a proxy) last decade. • OIH lags S&P 500 and oil prices, despite offshore weighting. • Correlation (inverse) to the USD seems to be pronounced again given dollar’s recent strength.

$-

$10

$20

$30

$40

$50

$60

$70

$-

$20

$40

$60

$80

$100

$120

Aug-09 Mar-10 Oct-10 May-11 Dec-11 Jul-12 Feb-13 Sep-13 Apr-14 Nov-14 Jun-15 Jan-16

OIH

Oil

($)

Oil OIH

$70.00

$72.50

$75.00

$77.50

$80.00

$82.50

$85.00

$87.50

$90.00

$92.50

$95.00

$97.50

$100.00

$102.50

$-

$20

$40

$60

$80

$100

$120


USD

Oil

($)

Oil USD

$-

$10

$20

$30

$40

$50

$60

$-

$20

$40

$60

$80

$100

$120

Aug-09 Aug-10 Aug-11 Aug-12 Aug-13 Aug-14 Aug-15

FXI

Oil

($)

Oil FXI

$600

$800

$1,000

$1,200

$1,400

$1,600

$1,800

$2,000

$2,200

$2,400

$-

$20

$40

$60

$80

$100

$120


S&P

50

0

Oil

($)

Oil S&P 500

Source: FactSet Research Systems Source: FactSet Research Systems


0

5

10

15

20

25

30

Jan-00 Jan-02 Jan-04 Jan-06 Jan-08 Jan-10 Jan-12 Jan-14 Jan-16

Bcf

/d

Industrial Demand 12 per. Mov. Avg. (Industrial Demand)

NATURAL GAS

21 Source: EIA

INDUSTRIAL CONSUMPTION NATURAL GAS STORAGE

• Storage is becoming less important as productivity of wells coupled with fast lead times have resulted in a supply overhang. • Commodity remains weather driven, but U.S. supply (low prices) certainty should keep industrial demand moving in the right direction. • Structural demand shifts, which include exportation, should help alleviate the supply glut domestically, albeit this will take some time. • Coal/gas switching at low gas prices drove demand through the 2012 injection season; we see this theme with nat gas in the <$3.00/mcf range.

LONG-TERM ELECTRIC POWER TRENDS NATURAL GAS PRICES

1.00

1.20

1.40

1.60

1.80

2.00

2.20

2.40

2.60

2.80

3.00

10

12

14

16

18

20

22

24

26

28

30

2002 2004 2006 2008 2010 2012 2014 2016

mil.

sh

ort

to

ns/

d

Bcf

/d

NG Consumption Coal Consumption

Source: EIA

Source: EIA Source: EIA

$0

$2

$4

$6

$8

$10

$12

$14

$16

Jan-00 Jan-02 Jan-04 Jan-06 Jan-08 Jan-10 Jan-12 Jan-14 Jan-16

$/m

cf

Natural Gas ($/mcf)

500

1,000

1,500

2,000

2,500

3,000

3,500

4,000

4,500

1 4 7 10 13 16 19 22 25 28 31 34 37 40 43 46 49 52

Bcf

Week number

5 Yr Max

5 Yr Min

5 Yr Average

2016

• Gas plays remain a bifurcated market with some operators experiencing high returns even in a <$3.00/mcf world, while others not. • Production remains elevated due to associated gas in oil wells and prolific wells in regions once considered demand regions (Appalachia/Northeast). • We see a battle brewing for TX/LA/AR/OK gas and Marcellus/Utica gas in Gulf Coast markets… will proximity (lower transport costs) or lower breakevens win?

NATURAL GAS - REASONS FOR OPTIMISM, REASONS FOR CONCERN

22 Source: Smith Bits, Stephens estimates

DOMESTIC RIG COUNTS NATURAL GAS PRODUCTION & RIG COUNT

OIL VS. GAS RIG COUNT TEXAS GAS PRODUCTION VS. RIG COUNT

TargetCurrent Rig

Count% of Total

Oil 380 82%

Liquids Rich 18 4%

Natural Gas 61 13%

Other 2 0%

Total U.S. Land Rig Ct. 461 100%

Source: EIA, Smith Bits Source: Baker Hughes


18.00

19.00

20.00

21.00

22.00

23.00

24.00

25.00

0

100

200

300

400

500

600

700

800

2008 2009 2010 2011 2012 2013 2014 2015 2016

Bcf

/d

NG

Rig

Co

un

t

Horizontal Directional Vertical Texas NG Production

0%

10%

20%

30%

40%

50%

60%

70%

80%

90% % Oil vs. % Nat Gas

% Oil % Gas

-

200

400

600

800

1,000

1,200

40.0

45.0

50.0

55.0

60.0

65.0

70.0

75.0

80.0

85.0

Jan

-10

Ap

r-1

0

Jul-

10

Oct-

10

Jan

-11

Ap

r-1

1

Jul-

11

Oct-

11

Jan

-12

Ap

r-1

2

Jul-

12

Oct-

12

Jan

-13

Ap

r-1

3

Jul-

13

Oct-

13

Jan

-14

Ap

r-1

4

Jul-

14

Oct-

14

Jan

-15

Ap

r-1

5

Jul-

15

Oct-

15

Jan

-16

Ap

r-1

6

No

n-G

OM

Na

t G

as

Rig

Ct

Lo

we

r-4

8 P

rdn

(B

cf/

d)

-

200

400

600

800

1,000

1,200

1,400

1,600

Total Horiz.

Oil Horiz.

Gas Horiz.

U.S. LAND - ACTIVITY LEVELS

23 Source: Baker Hughes

WELLS DRILLED PER RIG BY BASIN U.S. RIG ACTIVITY

• Challenging times in downturn that began in late 2014 as a result of oversupplied crude markets. • Rig counts have collapsed with the bottom yet to be determined, however with stability in commodities declines should moderate. • Expect a period of lower rig counts, days of hope we would reach a 2,000 rig market are far behind us and the next peak may be closer to 1,000.

E&P BUDGETS VS OFS REVENUE HORIZONTAL RIG COUNT BY COMMODITY

Source: Baker Hughes

Source: FactSet Research Systems, Stephens Estimates

0

2

4

6

8

10

12

14

16

18

Wel

ls D

rille

d p

er R

ig

Q1 - 2013

Q2 - 2013

Q3 - 2013

Q4 - 2013

Q1 - 2014

Q2 - 2014

Q3 - 2014

Q4 - 2014

17%

-54%

37%

63%

20%2%

-57%

52%

9%49%

94%efficiency increase since Q1'12

Source: Baker Hughes, EIA

Diversified

Oil

Gas Levered

Emerging Plays

2011 2012 2013 2014 2015 2016E

E&P Capita l Budget Growth 36.3% 10.6% -4.6% 15.0% -40.8% -57.6%

OFS Revenue Growth 50.8% 10.4% -1.4% 12.7% -39.7% -45.5%

Large Cap NAM Rev. Growth 52.8% 9.7% -1.6% 13.8% -42.8% -46.0%

Small Cap Rev. Growth 46.5% 11.9% -1.0% 10.1% -32.6% -44.6%

29

32

187

9

11

41

44 3

0

517

0

14 20

$13.9

$13.8

$13.9

$14.0

$14.3

$14.6

$13.9

$13.2

$12.4

$11.9

$18.2

$18.2

$18.2

$18.4

$18.8

$19.2

$17.2

$15.7

$14.3

$13.7

$21.7

$21.4

$21.5

$21.9

$22.4

$22.8

$20.7

$18.8

$17.0

$16.4

$5.0

$7.5

$10.0

$12.5

$15.0

$17.5

$20.0

$22.5

$25.0

1H12 2H12 1H13 2H13 1H14 2H14 1H15 2H15 1H16 2H16 (ToDate)

500-999 HP 1,000-1,499 HP 1,500-1,999 HP

U.S. LAND RIG MARKET

24

LONGER LATERALS, AND MORE FOOTAGE DRILLED PER WELL MARKET SHARE OF U.S. AC TOP DRIVES (~305 EST.)

• Since the discovery and application of horizontal drilling technology in the Barnett shale, the onshore oil and gas industry has revolutionized. This is a trend we believe will accelerate as we look out into the foreseeable future.

• Mechanical rigs were used since the early stages of the oilfield and powered by generators and are connected to the rotary table via chains and large belts. • AC/SCR rigs are rigs that use electricity rather than belts/chains. AC/SCR rigs are equipped with top drives and are generally safer.

NUMBER OF AVERAGE WORKING RIGS BY HP CLASS HISTORICAL AVERAGE DAY-RATE BY HP CLASS

1,149

3,289

4,245

-

500

1,000

1,500

2,000

2,500

3,000

3,500

4,000

4,500

-

2,000

4,000

6,000

8,000

10,000

12,000

14,000

16,000

2003 2010 2013

Tota

l Lat

era

l Le

ngt

h in

Ft.

Tota

l De

pth

in F

t.

Total Depth Lateral Length

Source: DI Desktop, Company Reports, Stephens Estimates

(a) Impact of 48 mechanical rig write off Source: Company Reports, Stephens Estimates

Source: Company Reports, Land Rig Newsletter, Stephens Estimates Source: Land Rig Newsletter

0

100

200

300

400

500

600

700

800

900

Sep-09 Mar-10 Sep-10 Mar-11 Sep-11 Mar-12 Sep-12 Mar-13 Sep-13 Mar-14 Sep-14 Mar-15 Sep-15 Mar-16

Avg

. Wo

rkin

g R

igs

by

HP

Cla

ss

0 - 499 500 - 999 1000 - 1499 1500 - 1999 2000+

HP30%

NBR16%

PTEN17%

PDS (a)15%

PES3%

UNT2%

Others16%

25

INTERNATIONAL SERVICES

25

300

500

700

900

1,100

1,300

1,500

1,700

1,900

2,100

Rig

Co

un

t

Int'l Rig Ct US Rig Ct

26

INTERNATIONAL TRENDS

Expect ongoing weakness in international markets to continue, but not to the degree we believe U.S. markets are experiencing.

The outlook remains for slow and steady long-term increases, and in exporting nations perhaps a desire to ramp output to make up for lost revenue on the pricing side.

Historically, international activity recovers slower than North America but is less volatile in downturns.

International operations tend to have a longer-term approach, better capitalized customers .

NOCs, Majors etc. view projects as multi-year projects vs. U.S. on a well-by-well IRR basis.

This downturn may prove to be more challenging internationally due to duration.

Source: Baker Hughes, FactSet Research Systems

$0

$20

$40

$60

$80

$100

$120

$140

$160

700

800

900

1,000

1,100

1,200

1,300

1,400

1,500

Oil

Pri

ce (

$)

Rig

Co

un

t

Int'l Rig Ct NYMEX - WTI BRENT

INT’L RIG COUNT v. OIL PRICE

INT’L v. U.S. RIG COUNT

Source: Baker Hughes

LARGE CAP COMPARISONS

Large cap international margins remain well below prior levels.

Margin improvements in 2013-2014 were mostly volume driven, however with declines in global activity we expect degradation to occur.

Expectations are for a sharp drop in U.S. markets but more gradual declines elsewhere.

Ongoing country specific challenges (Russia, Mexico, Venezuela) pose identifiable risks, yet tend to be normal course of business rather than anomalies now.

Note: Q1 decline is somewhat seasonal.

27

EUROPE/CIS/AFRICA MIDDLE EAST LATIN AMERICA

-30%

-20%

-10%

0%

10%

20%

30%

Q1

'08

Q3

'08

Q1

'09

Q3

'09

Q1

'10

Q3

'10

Q1

'11

Q3

'11

Q1

'12

Q3

'12

Q1

'13

Q3

'13

Q1

'14

Q3

'14

Q1

'15

Q3

'15

Q1

'16

Op

erat

ing

Mar

gin

BHI HAL SLB WFT avg

0%

5%

10%

15%

20%

25%

30%

35%

Q1

'08

Q3

'08

Q1

'09

Q3

'09

Q1

'10

Q3

'10

Q1

'11

Q3

'11

Q1

'12

Q3

'12

Q1

'13

Q3

'13

Q1

'14

Q3

'14

Q1

'15

Q3

'15

Q1

'16

Op

erat

ing

Mar

gin

BHI HAL SLB WFT avg

-5%

0%

5%

10%

15%

20%

25%

30%

35%

Q1

'08

Q3

'08

Q1

'09

Q3

'09

Q1

'10

Q3

'10

Q1

'11

Q3

'11

Q1

'12

Q3

'12

Q1

'13

Q3

'13

Q1

'14

Q3

'14

Q1

'15

Q3

'15

Q1

'16

Op

erat

ing

Mar

gin

BHI HAL SLB WFT avg

Source: Public filings Source: Public filings Source: Public filings

28

OFFSHORE SERVICES / GULF OF MEXICO

28

STEPHENS OFFSHORE DAY-RATE ASSUMPTIONS

29 Source: Stephens Inc.

• Below is a summary of our modeled offshore day-rate and utilization assumptions, broken down by rig class, specification, as well as specific market assumptions for certain geo-markets. Our modeled declines across the board reflect our offshore thesis that significant equipment supply overhang in both jackup and floater markets will continue to place downward pressure on day-rates in the near/medium term, with our mid-cycle estimates representing a more normalized earnings environment sometime in the late 2017/early 2018 timeframe.

Days

International Jackup

High Spec

350'+ ILC

300' ILC

250' ILC

< 250' ILC

300'+ ILS

< 300' ILS

200'+ MC/MS

< 200' MC/MS

North Sea

JU High Spec - Nor

JU Standard - Nor

JU High Spec - Other

JU Standard - Other

Floater - UK

Floater - Norway

US GOM Jackup

High Spec

350'+ ILC

300' ILC

250' ILC

< 250' ILC

300'+ ILS

< 300' ILS

200'+ MC/MS

< 200' MC/MS, submersible

Semisubmersible

10,000'+

7,500' +

4,000'+

< 4,000'

Drillship Dayrates

10,000'+

7,500' +

4,000'+

Other

Uncontracted Utilization

Deepwater

Midwater

Jackup

2016 2017 2018 Mid-Cycle Peak

1Q 2Q 3Q 4Q 2016 1Q 2Q 3Q 4Q 2017 1Q 2Q 3Q 4Q 2018 1Q 2Q 3Q 4Q Mid-Cycle

90 91 92 92 365 90 91 92 92 365 90 91 92 92 365 90 91 92 92 365

130 130 130 130 130 130 130 130 130 130 130 130 130 130 130 130 130 130 130 130

110 110 110 110 110 110 110 110 110 110 110 110 110 110 110 110 110 110 110 110

100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100

75 75 75 75 75 75 75 75 75 75 75 75 75 75 75 75 75 75 75 75

65 65 65 65 65 65 65 65 65 65 65 65 65 65 65 65 65 65 65 65

60 60 60 60 60 60 60 60 60 60 60 60 60 60 60 60 60 60 60 60

60 60 60 60 60 60 60 60 60 60 60 60 60 60 60 60 60 60 60 60

45 45 45 45 45 45 45 45 45 45 45 45 45 45 45 45 45 45 45 45

45 45 45 45 45 45 45 45 45 45 45 45 45 45 45 45 45 45 45 45

135 135 135 135 135 135 135 145 145 140 145 145 145 145 145 145 145 145 145 145

125 125 125 125 125 125 125 135 135 130 135 135 135 135 135 135 135 135 135 135

100 100 100 100 100 100 100 115 115 108 115 115 115 115 115 115 115 115 115 115

90 90 90 90 90 90 90 90 90 90 90 90 90 90 90 90 90 90 90 90

350 350 350 350 350 350 350 350 350 350 350 350 350 350 350 350 350 350 350 350

475 475 475 475 475 475 475 475 475 475 475 475 475 475 475 475 475 475 475 475

100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100

90 90 90 90 90 90 90 90 90 90 90 90 90 90 90 90 90 90 90 90

80 80 80 80 80 80 80 80 80 80 80 80 80 80 80 80 80 80 80 80

70 70 70 70 70 70 70 70 70 70 70 70 70 70 70 70 70 70 70 70

65 65 65 65 65 65 65 65 65 65 65 65 65 65 65 65 65 65 65 65

65 65 65 65 65 65 65 65 65 65 65 65 65 65 65 65 65 65 65 65

65 65 65 65 65 65 65 65 65 65 65 65 65 65 65 65 65 65 65 65

65 65 65 65 65 65 65 65 65 65 65 65 65 65 65 65 65 65 65 65

60 60 60 60 60 60 60 60 60 60 60 60 60 60 60 60 60 60 60 60

315 315 315 315 315 315 315 315 315 315 315 315 315 315 315 330 330 330 330 330

275 275 275 275 275 275 275 275 275 275 275 275 275 275 275 315 315 315 315 315

250 250 250 250 250 250 250 250 250 250 250 250 250 250 250 250 250 250 250 250

200 200 200 200 200 200 200 200 200 200 200 200 200 200 200 200 200 200 200 200

320 320 320 320 320 320 320 320 320 320 320 320 320 320 320 350 350 350 350 350

290 290 290 290 290 290 290 290 290 290 290 290 290 290 290 325 325 325 325 325

275 275 275 275 275 275 275 275 275 275 275 275 275 275 275 275 275 275 275 275

250 250 250 250 250 250 250 250 250 250 250 250 250 250 250 250 250 250 250 250

50% 52% 10% 10% 31% 30% 40% 55% 55% 45% 60% 60% 70% 70% 65% 80% 80% 80% 80% 80%

35% 37% 10% 10% 23% 25% 30% 45% 45% 36% 50% 50% 60% 60% 55% 70% 70% 70% 70% 70%

35% 37% 10% 10% 23% 30% 45% 50% 55% 45% 60% 60% 70% 70% 65% 75% 75% 75% 75% 75%

-

1,000

2,000

3,000

4,000

5,000

6,000

Brazil U.S. GOM W. Africa

Wat

er D

epth

(in

fee

t)

6/1/2004 6/1/2008 6/1/2012

GLOBAL DEEPWATER MARKET

30 Source: RigLogix, Company data

UDW DAYRATES AVG. WATER DEPTH OF WORKING RIGS

• Operators continue to move into deeper waters across geographies. Nearly half of recent discoveries have been outside of the Golden Triangle. • Significant newbuild cycle is under way, with another 34 floaters (20 are uncontracted) to be delivered by YE ’17. • Market conditions anticipated to improve in the 2017 timeframe as supply is reduced by older rig stackings, exploration budgets slashed.

FLOATING RIG ROLLOVERS NEWBUILD DELIVERIES

$100,000

$200,000

$300,000

$400,000

$500,000

$600,000

$700,000

Jan-04 Jan-05 Jan-06 Jan-07 Jan-08 Jan-09 Jan-10 Jan-11 Jan-12 Jan-13 Jan-14 Jan-15 Jan-16 Jan-17 Jan-18

Source: RigLogix, Stephens estimates

Source: RigLogix, Company data

Source: RigLogix

4

76

2

11

5

14

10

0

5

10

15

20

25

30

35

'73

'74

'75

'76

'77

'78

'79

'80

'81

'82

'83

'84

'85

'86

'87

'88

'89

'90

'91

'92

'93

'94

'95

'96

'97

'98

'99

'00

'01

'02

'03

'04

'05

'06

'07

'08

'09

'10

'11

'12

'13

'14

'15

'16

'17

'18

# o

f R

igs

Semi Ship

0

5

10

15

20

25

30

Q3 '16 Q4 '16 Q1 '17 Q2 '17 Q3 '17

# o

f R

igs

Uncontracted newbuilds

Rollovers (existing rigs)

$0

$20

$40

$60

$80

$100

$120

$140

$160

120

155

190

225

260

295

330

Pri

ce o

f O

il (i

n D

olla

rs)

# o

f R

igs

Contracted Rigs Oil (WTI)

-

40

80

120

160

200

Avg

Day

rate

($

00

0s)

< 250' 250'+ 300'+ 350'+

GLOBAL JACKUP MARKET

31 Source: RigLogix

GLOBAL ACTIVE COUNT BY RIG CLASS OIL PRICES VS. INTERNATIONAL JACKUP RIG COUNT (EXCL. GOM)

• Global jackup demand historically has been driven by oil prices, but SE Asia and N. Sea gas markets should provide relative strength. • Jackup replacement cycle ongoing as newbuilds absorbed at the expense of older assets – commodity declines to accelerate this. • Dayrates are in a freefall, we see a highly competitive, multi-year downturn in jackups coming. • 91 units under construction (to be delivered by YE19) with only 7 contracts on a base of 385 units currently in the marketed fleets and 230 units working (~60%

utilization).

NEWBUILD JACKUP DELIVERIES BY YEAR GLOBAL AVERAGE DAYRATES

Source: FactSet Research Systems, RigLogix Source: RigLogix

Source: RigLogix

-

20

40

60

80

100

120

140

160

180

200

# o

f R

Igs

< 250' 250'+ 300'+ 350'+

37

13

36

41

12

0

10

20

30

40

50

60

70

80

90

'70

'71

'72

'73

'74

'75

'76

'77

'78

'79

'80

'81

'82

'83

'84

'85

'86

'87

'88

'89

'90

'91

'92

'93

'94

'95

'96

'97

'98

'99

'00

'01

'02

'03

'04

'05

'06

'07

'08

'09

'10

'11

'12

'13

'14

'15

'16

'17

'18

# o

f R

igs

-

10

20

30

40

50

60

-

20

40

60

80

100

120

Jun

-00

Dec

-00

Jun

-01

Dec

-01

Jun

-02

Dec

-02

Jun

-03

Dec

-03

Jun

-04

Dec

-04

Jun

-05

Dec

-05

Jun

-06

Dec

-06

Jun

-07

Dec

-07

Jun

-08

Dec

-08

Jun

-09

Dec

-09

Jun

-10

Dec

-10

Jun

-11

Dec

-11

Jun

-12

Dec

-12

Jun

-13

Dec

-13

Jun

-14

Dec

-14

Jun

-15

Dec

-15

Jun

-16

# o

f R

igs

Day

rate

($00

0s)

Total Rigs Active rigs Avg Rate Recent Fixtures -

20

40

60

80

100

120

140

160

180

1970's 1980's 1990's 2000's

Nu

mb

er o

f D

isco

veri

es

< 4,000'

4,000' - 7,500'

7,500'+

U.S. GULF OF MEXICO ACTIVITY

32 Source: BSEE

LINE OF SIGHT RIG DEEPWATER GROWTH U.S. GOM PERMIT AND FLOATER ACTIVITY

• Regulators/industry have adjusted to “new normal,” as permitting bottleneck subsides and activity opportunity returns to pre-Macondo levels. • Based off of newbuild deliveries and rig mobilizations, DW floater count has a gap between supply and current demand. • GOM remains fertile DW market; expansion of UDW activity could provide an additional leg of growth. • Consolidation of E&Ps coupled with weakening oil/liquids activity on the Shelf has rapidly deteriorated fundamentals in jackup market.

U.S. GOM MAT JACKUP RIG COUNT & DAYRATES U.S. GOM DISCOVERIES BY DECADE & WATER DEPTH

0

10

20

30

40

50

60

70

Total Rigs Contracted Rigs

Source: BSEE, RigLogix Source: RigLogix

Source: RigLogix, Company data

40

50

60

+ demand or attrition of GOM

41

-

5

10

15

20

25

30

35

40

45

50

0

10

20

30

40

50

60

Q1

'06

Q3

'06

Q1

'07

Q3

'07

Q1

'08

Q3

'08

Q1

'09

Q3

'09

Q1

'10

Q3

'10

Q1

'11

Q3

'11

Q1

'12

Q3

'12

Q1

'13

Q3

'13

Q1

'14

Q3

'14

Q1

'15

Q3

'15

Q1

'16

# o

f R

igs

Per

mit

s

Permits Rig Ct.

33

M&A MARKET SUMMARY

Public company valuations currently inflated by historical trough standards.

Oil prices may be going through a secular shift as narrative shifts from peak oil to an abundance of crude.

Perception that North American production will rapidly decline may not necessarily be true.

M&A synergies could be a way to limit impact of decrements in a declining market.

Sources: FactSet Research Systems, Stephens estimates

EV Mil. $'s EV Mil. $'s

Feb-10 Schlumberger NV Smith International Inc. 11.0x Jun-12 C&J Energy Services Casedhole Holdings, Inc. 4.3x

Apr-10 Halliburton Company Boots & Coots, Inc. 5.9x Aug-12 National Oilwell Varco Robbins & Myers, Inc. 9.4x

Aug-10 Nabors Industries Ltd. Superior Well Services, Inc. 5.5x 2,200$ Aug-12 FMC Technologies, Inc. Pure Energy Services Ltd. 5.1x

Aug-10 Seawell Ltd. Allis-Chalmers Energy, Inc. 6.2x Sep-12 Heckmann Corp. Badlands Energy LLC 3.4x

Oct-10 General Electric - VetcoGray Wellstream Holdings 16.1x Oct-12 Ecolab Inc. Champion Technologies 11.4x

Oct-10 Robbins & Myers T-3 Energy Services 8.8x Dec-12 Oil States International, Inc. Tempress Technologies, Inc. 6.6x

Feb-11 Ensco PLC Pride International Inc. 10.5x Dec-12 Weir Group PLC Mathena, Inc. 4.9x

Feb-11 Hercules Offshore Seahawk Drilling NM 10.0$ Apr-13 GE Oil & Gas Lufkin Industries Inc. 13.5x

Feb-11 GE Energy Manufacturing, Inc. John Wood Group - Well Support Division 10.5x Apr-13 Parker Drilling Company International Tubular Services 4.5x

Apr-11 Chesapeake Energy Corporation Bronco Drilling Company Inc. 7.8x 14.3$ May-13 Flotek Industries, Inc. Florida Chemical Co., Inc. 7.5x

May-11 Joy Global, Inc. Le Tourneau Technologies, Inc. 10.5x May-13 Clearlake Capital Group, LP Archer Ltd. 5.4x

Jul-11 Ensign Energy Services Inc. Rowan Companies (Land Drilling Division) --- 17.0$ Oct-13 Calfrac Well Services Ltd. Mission Well Services 10.0x

Aug-11 Archer Ltd. (fka Seawell Ltd.) Great White Energy Services 4.0x Mar-14 B/E Aerospace Vision Oil Tools, LLC

Aug-11 Transocean Ltd. Aker Drilling ASA NM 650.0$ Jun-14 C&J Energy Services Nabors' Completions & Productions 5.7x

Sep-11 Technip SA Global Industries, Ltd 7.2x Aug-15 Schlumberger NV Cameron International Corporation 10.6x

Oct-11 Superior Energy Services Complete Production Services 5.0x 2,750$

Jan-12 Pioneer Energy Services Go Coil LLC 4.0x

EBITDA Rig,HPAnnounced Acquiror Target Announced Acquiror Target

EBITDA Rig,HP

Other Public Companies Mentioned

34 Sources: FactSet Research Systems


Public Companies Ticker Price Public Companies Ticker Price Foreign Companies

Archrock Inc. AROC 11.92$ KNOT Offshore Partners LP KNOP 19.17$ Archer Ltd.B/E Aerospace Inc. BEAV 49.08 Nuverra Environmental Solutions, Inc. NES 0.23 Calfrac Well Services Ltd.Chesapeake Energy Corporation CHK 6.20 Natural Gas Services Group, Inc. NGS 25.40 Ensign Energy Services Inc.C&J Energy Services Ltd. CJES 0.33 National Oilwell Varco, Inc. NOV 36.09 Technip SASEACOR Holdings Inc. CKH 57.72 Newpark Resources, Inc. NR 7.70 Weir Group plcCARBO Ceramics Inc. CRR 14.72 Oceaneering International, Inc. OII 29.29

Diamond Offshore Drilling, Inc. DO 20.31 Oil States International, Inc. OIS 33.15 Private Companies

Dril-Quip, Inc. DRQ 58.64 Ocean Rig UDW Inc ORIG 0.90 Clearlake Capital Group LPEcolab Inc. ECL 122.39 Pacific Drilling S.A. PACD 4.53

Emerge Energy Services LP EMES 12.40 Petroleo Brasileiro SA Sponsored ADR PBR 9.44

Energy Recovery, Inc. ERII 12.53 Precision Drilling Corporation PDS 4.60

Ensco plc ESV 8.99 Paragon Offshore plc PGN 0.52

Exterran Corp. EXTN 14.82 Transocean Ltd. RIG 10.62

Forum Energy Technologies, Inc. FET 18.41 RigNet, Inc. RNET 12.92

Frank's International NV FI 12.75 Seadrill Ltd. SDRL 2.79

Fairmount Santrol Holdings, Inc. FMSA 8.05 Subsea 7 S.A. Sponsored ADR SUBCY 11.60

FMC Technologies, Inc. FTI 28.55 Tidewater Inc. TDW 3.34

General Electric Company GE 31.43 Tesco Corporation TESO 7.45

GulfMark Offshore, Inc. Class A GLF 2.78 TETRA Technologies, Inc. TTI 6.67

Hercules Offshore, Inc. HERO 1.21 Unit Corporation UNT 17.47

Hi-Crush Partners LP HCLP 13.98 Vantage Drilling Company VTG 0.01

Independence Contract Drilling, Inc. ICD 5.25 Wells Fargo & Company WFC 48.53

Joy Global Inc. JOY 27.69

OTHER COMPANIES MENTIONED Prices for other companies mentioned can be found on slides 2, 3, 4, and 34.

REQUIRED DISCLOSURES The research analyst principally responsible for preparation of this presentation has received compensation that is based on the firm’s overall revenue with includes investment banking revenue. Rating Definitions: Company Stock Ratings: OVERWEIGHT (O) – The stock’s total return is expected to be greater than the total return of the company’s industry sector, on a risk-adjusted basis, over the next 12 months. EQUAL-WEIGHT (E) – The stock’s total return is expected to be equivalent to the total return of the company’s industry sector, on a risk-adjusted basis, over the next 12 months. UNDERWEIGHT (U) – The stock’s total return is expected to be less than the total return of the company’s industry sector, on a risk-adjusted basis, over the next 12 months. VOLATILE (V) – The stock’s price volatility is potentially higher than that of the company’s industry sector. The company stock ratings may reflect the analyst’s subjective assessment of risk factors that could impact the company’s business. Distribution of Stephens Inc.'s Ratings (as of 6/30/16) % Investment Banking Clients Rating % (Past 12 Months) BUY 55 19 HOLD 43 11 SELL 2 0

OTHER DISCLOSURES This presentation has been prepared solely for informative purposes as of its stated date and is not a solicitation, or an offer, to buy or sell any security. It does not purport to be a complete description of the securities, markets or developments referred to in the material. Information included in the presentation was obtained from internal and external sources which we consider reliable, but we have not independently verified such information and do not guarantee that it is accurate or complete. Such information is believed to be accurate on the date of issuance of the presentation, and all expressions of opinion apply on the date of issuance of the presentation. No subsequent publication or distribution of this presentation shall mean or imply that any such information or opinion remains current at any time after the stated date of the presentation. We do not undertake to advise you of any changes in any such information or opinion. Prices, yields, and availability are subject to change with the market. Nothing in this presentation is intended, or should be construed, as legal, accounting, regulatory or tax advice. Any discussion of tax attributes is provided for informational purposes only, and each investor should consult his/her/its own tax advisors regarding any and all tax implications or tax consequences of any investment in securities discussed in this presentation. Please note that we provide supplemental news and analysis in Quick Takes blogs available to clients on our website. If applicable, when reading research on Business Development Companies, you should consider carefully the investment objectives, charges, risks, fees and expenses on the investment company before investing. The prospectus, and, if available, the summary prospectus, contain this and other information about the investment company. You can obtain a current prospectus, and, if available, a summary prospectus, by calling your financial consultant. Please read the prospectus, and, if available, the summary prospectus, carefully before investing as it contains information about the previous referenced factors and other important information. Also, please note other reports filed with the Securities and Exchange Commission by the relevant investment company at www.sec.gov. Additional information available upon request.

35

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