www.harriswilliams.de Harris Williams & Co. Ltd is a private limited company incorporated under English law having its registered office at 5th Floor, 6 St. Andrew Street, London EC4A 3AE, UK, registered with the Registrar of Companies for England and Wales under company number 7078852. Directors: Mr. Christopher Williams, Mr. Ned Valentine, Mr. Paul Poggi and Mr. Thierry Monjauze, authorised and regulated by the Financial Conduct Authority. Harris Williams & Co. Ltd Niederlassung Frankfurt (German branch) is registered in the Commercial Register (Handelsregister) of the Local Court (Amtsgericht) of Frankfurt am Main, Germany, under registration number HRB 96687, having its business address at Bockenheimer Landstrasse 33-35, 60325 Frankfurt am Main, Germany. Permanent Representative (Ständiger Vertreter) of the Branch Niederlassung: Mr. Jeffery H. Perkins. ENERGY, POWER & INFRASTRUCTURE INDUSTRY UPDATE │ OCTOBER 2015
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www.harriswilliams.de
Harris Williams & Co. Ltd is a private limited company incorporated under English law having its registered office at 5th Floor, 6 St. Andrew Street, London EC4A 3AE, UK, registered withthe Registrar of Companies for England and Wales under company number 7078852. Directors: Mr. Christopher Williams, Mr. Ned Valentine, Mr. Paul Poggi and Mr. Thierry Monjauze,authorised and regulated by the Financial Conduct Authority.
Harris Williams & Co. Ltd Niederlassung Frankfurt (German branch) is registered in the Commercial Register (Handelsregister) of the Local Court (Amtsgericht) of Frankfurt am Main,Germany, under registration number HRB 96687, having its business address at Bockenheimer Landstrasse 33-35, 60325 Frankfurt am Main, Germany. Permanent Representative(Ständiger Vertreter) of the Branch Niederlassung: Mr. Jeffery H. Perkins.
MMM Group, a portfolio company of OMERS private equity, has been acquired by
WSP Global. MMM is a provider of critical engineering consulting services to a
wide range of clients across Canada and internationally. HW&Co. served as
financial advisor to MMM.Source | Instapaper
Prysmian Group, an Italian based leader in the energy and telecom cable systems
industry, has acquired Gulf Coast Downhole Technologies (GCDT). GCDT is a
Houston based designer and supplier of innovative downhole equipment for the
oil and gas industry.Source | Instapaper
Professional Service Industries (PSI), a portfolio company of Olympus Partners, has been acquired by Intertek Group plc. PSI provides consulting, engineering, and testing services for commercial and industrial clients, as well as public projects.Source | Instapaper
Willbros Group has sold its Professional Services line to TRC Companies, a recognized leader in engineering, consulting, and construction management for energy and infrastructure end markets. The $130 million all-cash acquisition will allow TRC to provide more enhanced integrated services to its clients.Source | Instapaper
ENERGY, POWER & INFRASTRUCTURE
INDUSTRY UPDATE │ OCTOBER 2015
PUBLIC MARKETS | KEY TRADING STATISTICS
Stock Price % Change TEV / EBITDA
1 Month 12 Month Oct-14 Apr-15 Current 2015E 2016P
Energy Services and Equipment
Large Cap Service 3.0% (18.8%) 8.1x 7.6x 7.7x 10.3x 9.8x
Equipment 2.3% (30.8%) 9.0x 7.1x 6.5x 8.4x 10.2x
Small-Cap Service 4.5% (59.8%) 6.6x 7.7x 5.6x 10.1x 9.9x
OCTG 9.8% (58.8%) 6.8x 6.4x 6.4x 7.2x 7.7x
Distribution 5.7% (35.6%) 10.3x 11.5x 16.9x 10.8x 10.4x
According to IHS, 2016 oil price hedges for North American E&Ps will decline to just 11% of total production. The likelyresult is increased pressure for financially stressed operators, particularly those unable to take advantage of higherprices and hedge options in 2Q 2015.IHS| Instapaper
2
OIL & GAS | OVER THE HEDGE
ENERGY, POWER & INFRASTRUCTURE
INDUSTRY UPDATE │ OCTOBER 2015
For those who remember last year’s reports of prominent New York developers entering the Williston real estatemarket, Fuel Fix offered a sobering view of just how quickly markets can change. “After struggling to house thousandsof migrant roughnecks during the boom, the state faces a new real-estate crisis: The frenzied drilling that made it No. 1in personal-income growth and job creation for five consecutive years hasn’t lasted long enough to support the oil-fueled building explosion.”Fuel Fix| Instapaper
OIL & GAS | MAN CAMPS AND NORTH DAKOTA’S “REAL ESTATE CRISIS”
POWER | ONLY IN TEXAS
As coal futures hit $50/ton for the first time since 2008, Goldman Sachs released a new report projecting coal use willpeak by the end of the decade. In short, Goldman believes coal is in terminal decline. "The industry does not requirenew investment given the ability of existing assets to satisfy flat demand, so prices will remain under pressure as thedeflationary cycle continues," Goldman said.Reuters | Instapaper
ENERGY | “PEAK COAL”
BIC reports on the wave of investments in North America’s downstream chemical and petrochemical infrastructure.More than 225 chemical projects, representing more than $140 billion in capital investment, have been announcedand are expected to drive over 700,000 permanent new jobs by 2023. After years of short supply in the upstreamsector, the demand for qualified craftspeople looks set to continue in the downstream market.BIC| Instapaper
OIL & GAS | CONTINUED GROWTH DOWNSTREAM
Bloomberg reported on the rise of renewable power generation in the US and its impact on the capacity factor offossil fuel generation. The article suggests the US has reached a turning point that will continue to incentivize greateradoption of renewables and less investment in fossil fuel generation.Bloomberg| Instapaper
RENEWABLES | A TURNING POINT?
Bloomberg New Energy Finance (BNEF) released a report on the projected impact of extending the investment taxcredit (ITC) on the US solar build. BNEF believes that the end of the ITC in 2016 will result in annual solar capacityadditions averaging 6GW/year from 2017 through 2022, down from an average of 8GW/year from 2014 to 2016. Whilecertainly impactful, the end of the ITC appears to be more disruptive than destructive to the growth of solar in the US.SEIA| Instapaper
SOLAR | LIFE AFTER THE ITC
Daniel Gross’s “The Night They Drove the Price of Electricity Down” profiles the unique attributes of the Texas electricitymarket that led to a night last March when wind electricity producers paid more than $8 per MWH to offload theirpower to the grid. Gross concludes, “In periods of slack overall demand and high wind production, it makes all theeconomic sense in the world for wind-farm owners to offer to sell lots of power into the system at negative prices.Only in Texas, folks. Only in Texas.”Slate | Instapaper
10/15/2015 Spectraseis U.S. based provider of frac monitoring and stimulation evaluation
serv ices.
ESG Solutions
10/14/2015 Retroficiency U.S. based provider of energy efficiency analytics and building
intelligence software solutions.
Ecova
10/14/2015 PSI U.S. based provider of consulting, engineering, and testing serv ices for
commercial and industrial clients, as well as government projects.
Intertek Group
10/9/2015 Enercore Projects Canada based provider of engineering, procurement, and construction
management serv ices for oil sands, upstream, and downstream
projects.
Clough Limited
10/6/2015 Hybrid Tool Solutions U.S. based provider of a patent pending process for conducting frac
plug drill outs for the oil and gas industry.
Hastings Equity Partners
10/6/2015 Canexus Corporation Canada based specialty chemical prov ider and provider of
hydrocarbon transloading serv ices to the oil and gas industry.
Superior Plus Corp.
10/5/2015 Willbros Group,
Professional Serv ices
Segment
U.S. based energy infrastructure contractor serv ing the oil, gas, refining,
petrochemical, and power industries in the U.S.
TRC Companies Inc.
10/2/2015 SSM Solar Canada based developer and operator of solar projects. Canadian Solar
9/30/2015 Chesapeake Waste
Solutions
U.S. based company specializing in waste-to-energy disposal, offering
turnkey solutions for thermal destruction of various waste materials.
Covanta Holding
9/28/2015 President Engineering
Group
U.K. based company engaged in the design and manufacturing of
precision valves for LNG and industrial gas applications.
Parker Hannifin
Corporation
9/28/2015 Plasco Energy Group Canada based company utilizing proprietary technology to convert
municipal solid waste into green power and other products.
RMB Advisory Serv ice
9/25/2015 Gulf Coast Downhole
Technologies
U.S. based manufacturer and supplier of down hole equipment for the
oil and gas industry.
Prysmian S.p.A.
9/8/2015 NEXTracker U.S. based provider of horizontal trackers for large-scale solar projects. Flex
9/2/2015 Ignite Energy Canada based oilfield serv ice company providing fluid production
hauling and management serv ices.
Vertex Resource Group
8/27/2015 Sinopacific Offshore &
Engineering
China based manufacturer and designer of liquid cargo handling
systems.
CIMC Enric Holdings
8/26/2015 Cameron International
Corporation
U.S. based provider of flow equipment products, systems, and serv ices
worldwide.
Schlumberger
8/25/2015 MMM Group Canada based provider of program management, planning,
engineering, geomatics, and environmental and advisory serv ices to
public and private sector clients internationally.
WSP Global Inc.
PAGE |
PUBLIC MARKETS OVERVIEW
4
ENERGY, POWER & INFRASTRUCTURE
INDUSTRY UPDATE │ OCTOBER 2015
Energy Equipment and Services
TEV / LTM EBITDA TEV / 2015E EBITDA
AVERAGE REVENUE GROWTH (2012 – 2014) AVERAGE REVENUE GROWTH (2014 – 2016P)
AVERAGE EBITDA MARGIN (2012 – 2014) AVERAGE EBITDA MARGIN (2014 – 2016P)
4.1x
4.4x
5.6x
5.8x
6.4x
6.5x
7.7x
7.8x
16.9x
Land Drillers
Offshore Drillers
Small Cap Service
Logistics
OCTG
Equipment
Large Cap Service
E&C
Distribution
(3.0%)
(2.8%)
4.6%
5.4%
6.4%
7.8%
8.2%
12.4%
12.6%
E&C
OCTG
Land Drillers
Large Cap Service
Distribution
Small Cap Service
Logistics
Offshore Drillers
Equipment
(21.5%)
(14.4%)
(12.2%)
(11.4%)
(9.3%)
(9.3%)
(8.6%)
(7.9%)
(3.0%)
Land Drillers
Large Cap Services
Equipment
OCTG
Offshore Drillers
Distribution
Small Cap Service
Logistics
E&C
4.9x
5.9x
6.2x
7.2x
7.3x
8.4x
10.1x
10.3x
10.8x
Offshore Drillers
Land Drillers
Logistics
OCTG
E&C
Equipment
Small Cap Service
Large Cap Service
Distribution
6.4%
10.8%
18.6%
19.9%
20.4%
20.7%
30.8%
33.8%
43.3%
Distribution
E&C
OCTG
Small Cap Service
Large Cap Service
Equipment
Land Drillers
Logistics
Offshore Drillers
4.2%
11.7%
13.6%
15.4%
19.6%
20.4%
28.5%
29.6%
39.4%
Distribution
E&C
Small Cap Service
OCTG
Equipment
Large Cap Service
Land Drillers
Logistics
Offshore Drillers
PAGE |
PUBLIC MARKETS OVERVIEW
5
ENERGY, POWER & INFRASTRUCTURE
INDUSTRY UPDATE │ OCTOBER 2015
Power Equipment and Services
9.2x
10.7x
11.3x
Large Cap
Mid and Small-Cap
EE and Cleantech
10.1x
10.2x
12.3x
Large Cap
Mid and Small-Cap
EE and Cleantech
(3.4%)
7.4%
12.5%
Large Cap
Mid and Small-Cap
EE and Cleantech
0.3%
3.8%
20.5%
Large Cap
Mid and Small-Cap
EE and Cleantech
(13.0%)
16.1%
17.1%
EE and Cleantech
Large Cap
Mid and Small-Cap
(12.0%)
15.7%
17.0%
EE and Cleantech
Large Cap
Mid and Small-Cap
TEV / LTM EBITDA TEV / 2015E EBITDA
AVERAGE REVENUE GROWTH (2012 – 2014) AVERAGE REVENUE GROWTH (2014 – 2016P)
AVERAGE EBITDA MARGIN (2012 – 2014) AVERAGE EBITDA MARGIN (2014 – 2016P)
PAGE |
PUBLIC MARKETS OVERVIEW
6
ENERGY, POWER & INFRASTRUCTURE
INDUSTRY UPDATE │ OCTOBER 2015
Infrastructure Services
5.8x
7.7x
8.5x
9.7x
11.3x
Large Cap
Utility Services
Industrial Services
Mid and Small-Cap
Engineering Svc
6.4x
6.8x
6.9x
8.1x
8.1x
Utility Services
Mid and Small-Cap
Large Cap
Engineering Svc
Industrial Services
6.0%
6.2%
8.0%
9.6%
9.6%
Large Cap
Mid and Small-Cap
Industrial Services
Engineering Svc
Utility Services
6.3%
7.2%
7.5%
10.1%
10.8%
Large Cap
Mid and Small-Cap
Industrial Services
Utility Services
Engineering Svc
7.1%
7.9%
11.6%
13.1%
14.2%
Mid and Small-Cap
Large Cap
Utility Services
Engineering Svc
Industrial Services
2.0%
6.1%
6.9%
7.6%
18.4%
Large Cap
Mid and Small-Cap
Industrial Services
Utility Services
Engineering Svc
TEV / LTM EBITDA TEV / 2015E EBITDA
AVERAGE REVENUE GROWTH (2012 – 2014) AVERAGE REVENUE GROWTH (2014 – 2016P)
AVERAGE EBITDA MARGIN (2012 – 2014) AVERAGE EBITDA MARGIN (2014 – 2016P)
PAGE |
INDUSTRY STATISTICS
7
ENERGY, POWER & INFRASTRUCTURE
INDUSTRY UPDATE │ OCTOBER 2015
(Indexed to 100%)
TRAILING TWELVE MONTHS
Commodity Prices
25%
50%
75%
100%
125%
Oct-14 Jan-15 Apr-15 Jul-15 Oct-15
Natural Gas (NYMEX:^NG) Crude Oil (NYMEX:^CL) Coal (NYMEX:^QL)
Price Change From
Current Prior Month Prior Year Prior Month Prior Year
Natural Gas ($ per MMBtu) $2.87 $2.80 $3.98 2.6% (27.8%)
Crude Oil ($ per bbl) 47.16 45.00 81.20 4.8% (41.9%)
Coal (CAPP) ($ per ton) 41.93 42.50 51.83 (1.3%) (19.1%)
PAGE |
INDUSTRY STATISTICS
ENERGY, POWER & INFRASTRUCTURE
INDUSTRY UPDATE │ OCTOBER 2015
U.S. RIG COUNTS INTERNATIONAL RIG COUNTS
Rig Counts3
INTERNATIONAL RIG COUNT BY COUNTRY
U.S. OIL VS. GAS RIG COUNT
U.S. HORIZONTAL/DIRECTIONAL VS. VERTICAL RIG COUNT
0
200
400
600
800
1,000
1,200
1,400
1,600
1,800
'00
'01
'02
'03
'04
'05
'06
'07
'08
'09
'10
'11
'12
'13
'14
'15
Oil
Gas
0
200
400
600
800
1,000
1,200
1,400
1,600
1,800
'00
'01
'02
'03
'04
'05
'06
'07
'08
'09
'10
'11
'12
'13
'14
'15
Horizontal / Directional
Vertical
400
600
800
1,000
1,200
1,400
'00
'01
'02
'03
'04
'05
'06
'07
'08
'09
'10
'11
'12
'13
'14
'15
37
25
47
94
47
55
-
71
62
124
300
266
North Sea
Africa
Europe
Asia Pacific
Middle East
Latin America
Offshore Land
8
0
500
1,000
1,500
2,000
2,500
'00
'01
'02
'03
'04
'05
'06
'07
'08
'09
'10
'11
'12
'13
'14
'15
PAGE |
INDUSTRY STATISTICS
9
ENERGY, POWER & INFRASTRUCTURE
INDUSTRY UPDATE │ OCTOBER 2015
U.S. OIL RIG COUNT BY REGION U.S. GAS RIG COUNT BY REGION
Rig Counts3
% YTD CHANGE IN U.S. OIL RIG COUNT BY REGION % YTD CHANGE IN U.S. GAS RIG COUNT BY REGION
148
0
0
1
2
3
5
5
6
13
22
24
34
65
67
230
Others
Fayetteville
Marcellus
Haynesville
Ardmore Woodford
Barnett
Arkoma Woodford
Utica
Granite Wash
Mississippian
DJ-Niobrara
Gulf of Mexico
Cana Woodford
Williston
Eagle Ford
Permian
(60%)
(82%)
(80%)
(79%)
(78%)
(67%)
(64%)
(64%)
(56%)
(50%)
(45%)
(43%)
(13%)
0%
0%
0%
Others
Mississippian
Barnett
Granite Wash
Utica
Ardmore Woodford
Eagle Ford
Williston
Permian
Haynesville
DJ-Niobrara
Gulf of Mexico
Cana Woodford
Arkoma Woodford
Fayetteville
Marcellus
65
0
0
0
3
3
3
4
5
5
5
7
12
15
23
46
Others
Mississippian
Williston
Ardmore Woodford
Arkoma Woodford
Cana Woodford
Barnett
Fayetteville
Permian
DJ-Niobrara
Granite Wash
Gulf of Mexico
Eagle Ford
Utica
Haynesville
Marcellus
(33%)
(78%)
(72%)
(67%)
(50%)
(50%)
(42%)
(42%)
(40%)
(40%)
(39%)
(29%)
(14%)
0%
0%
0%
Others
Granite Wash
DJ-Niobrara
Barnett
Fayetteville
Cana Woodford
Utica
Gulf of Mexico
Marcellus
Arkoma Woodford
Haynesville
Permian
Eagle Ford
Mississippian
Williston
Ardmore Woodford
PAGE |
OUR GROUP
Harris Williams & Co. is a leading advisor to the energy, power, and infrastructure M&A market. Our Energy, Power &Infrastructure Group has experience across a broad range of sectors, including services, products, and technologiesthat support or enhance energy and power infrastructure.
ENERGY, POWER & INFRASTRUCTURE
INDUSTRY UPDATE │ OCTOBER 2015
SELECT RELEVANT EXPERIENCE
Oil & Gas Equipment and Services
Coal Products and Services
Energy
Power Products and Technology
Electric and Natural Gas Transmission and Distribution
Harris Williams & Co. has a broad range of industry expertise, which creates powerful opportunities. Our clients benefit from our deep-sector experience, integrated industry intelligence and collaboration across the firm, and our commitment to learning what makes them unique. For more information, visit our website.
Harris Williams & Co. (www.harriswilliams.com and www.harriswilliams.com/de) is a preeminent middle market investment bank focused on the advisory needs of clients worldwide. The firm has deep industry knowledge, global transaction expertise, and an unwavering commitment to excellence. Harris Williams & Co. provides sell-side and acquisition advisory, restructuring advisory, board advisory, private placements, and capital markets advisory services.
Harris Williams & Co. Ltd is a private limited company incorporated under English law having its registered office at 5th Floor, 6 St. Andrew Street, London EC4A 3AE, UK, registered with the Registrar of Companies for England and Wales under company number 7078852. Directors: Mr. Christopher Williams, Mr. Ned Valentine, Mr. Paul Poggi and Mr. Thierry Monjauze, authorised and regulated by the Financial Conduct Authority.
Harris Williams & Co. Ltd Niederlassung Frankfurt (German branch) is registered in the Commercial Register (Handelsregister) of the Local Court (Amtsgericht) of Frankfurt am Main, Germany, under registration number HRB 96687, having its business address at Bockenheimer Landstrasse 33-35, 60325 Frankfurt am Main, Germany. Permanent Representative (Ständiger Vertreter) of the Branch Niederlassung: Mr. Jeffery H. Perkins.
The information and views contained in this report were prepared by Harris Williams & Co. (“Harris Williams”). It is not a research report, as such term is defined by applicable law and regulations, and is provided for informational purposes only. It is not to be construed as an offer to buy or sell or a solicitation of an offer to buy or sell any financial instruments or to participate in any particular trading strategy. The information contained herein is believed by Harris Williams to be reliable, but Harris Williams makes no representation as to the accuracy or completeness of such information. Harris Williams and/or its affiliates may be market makers or specialists in, act as advisers or lenders to, have positions in and effect transactions in securities of companies mentioned herein and also may provide, may have provided, or may seek to provide investment banking services for those companies. In addition, Harris Williams and/or its affiliates or their respective officers, directors and employees may hold long or short positions in the securities, options thereon or other related financial products of companies discussed herein. Opinions, estimates and projections in this report constitute Harris Williams’ judgment and are subject to change without notice. The financial instruments discussed in this report may not be suitable for all investors, and investors must make their own investment decisions using their own independent advisors as they believe necessary and based upon their specific financial situations and investment objectives. Also, past performance is not necessarily indicative of future results. No part of this material may be copied or duplicated in any form or by any means, or redistributed, without Harris Williams’ prior written consent.