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Allis-Chalmers Energy Inc.

Wed, 3 Dec 2008|



Thank you very much and good morning. Thanks for joining us this morning. Alice Chalmers energy many view depending upon your age miracle miles -- a tractor company -- was actually founded in 1913. That company was acquired its shell remain so required 2001. And in 2002 we began to require him build. -- multifaceted. World service company. And the strategy was initially to acquire businesses we're getting the segments that we thought would -- -- the recount. And three initials businesses that we were and we still are very very strong way directional -- And as you -- know fifty reasonable wells currently are rightfully -- -- real. And lot of the -- shale plays -- or racially oriented. Secondly was under balanced or compressed air ruling. And there was case improving services. -- after we've built the business by acquiring in late 2006. The second largest. Drooling and completion company in Argentina. We're now operating in Argentina and live view long term contracts. And then later on we also acquired in large rental company providing. -- field rental items such as well prevent errors and premium group life. And also then we wired and built. Cool to -- units. And rental items related to production -- -- to get more into the pre production orient the production stimulation kind of business posted this ruling. -- strategy has been a balanced approach. In or -- shoot mitigate that risk between drilling and production. Have a balance between domestic and international. Rental -- services and rent we have high margin. Low labor and services you have a lower margin -- intensive -- labor situation from cruise. And also natural gas sources who -- And that's the reason we went -- and national. Was to have -- balance between -- natural gas domestic in the US. Versus oil base economies or will based businesses -- -- nationally and also the availability of long term contracts. Over last three to four years we have been spent about 200 and a fifth 85 million. In capital expenditures to grow organically. And replied the best equipment that we threw it toward customers in -- in the latest technology. And also we're we think that there's a trend we see it of course -- nationally but -- trend domestically. Particularly in the -- where you have maybe lower infrastructure. To provide more integrated services are services such. Wouldn't provide rent analyze them they're providing directional grueling. As well as though under bounced ruling. So we have grown. Last fortified -- through a combination of acquisitions. And -- complimented with capital expenditures. On new equipment. We're in three segments. Persons -- -- services segment and that's basically. Directional drilling. That is providing. Casing and tubing services we don't provide actual -- for the case we provide the cruise. And the equipment to install casing and -- Provide -- ruling services. The hammer and bit services and manufacturer owned synthetic diamond enhance -- for. Camera bid grueling. An air drilling and also would provide production services through our whole proving units that we have. Rental services again the other segment is. We have a large inventory of premium drill pipe. And -- banners and other surface equipment we do that both domestically as well as internationally with international rentals now in. For example Libya and Colombia Malaysia Mexico. And drooling completion as I mentioned earlier is from. Our company in Argentina. Which is now operating both in Argentina. As well as now in Bolivia and Brazil. This -- -- diversity that we have in terms of our cash flow of stream and revenues and and and that he did -- on a segment by segment basis. And value conceive them look back here because drilling guys are good enough to see this the numbers here. But basically about 40% of or even -- currently. Is generated from the international segment. And 45%. Of our revenues so in in and with the possibility of a down market here domestically. Of the growth that we see next year internationally. In terms of our revenue and you've been we think -- gonna help -- quite a bit in 2009. And that's specifically what we've got into the international business and that is. That they -- you have the capability of obtaining long term contracts. 124. Year contracts typically. So 45% of revenues 40% you've -- -- International is a good thing. These days. The rest -- there you've been -- comes from 41%. Is -- food services segment and also than our drilling and completion segment self. Rental services about 31% or -- -- -- for the nine months. -- -- over the segments very briefly. Under wolf who -- -- mentioned we have four divisions directional under balance services tubular services. And production services which primarily. Quote moving units which are used for both completion and the work over of of existing wells. And you can see either the performance of wolf and services segment. The last three years and also the last four quarters. We had growth and good results in the third quarter of -- wait. In spite of the hurricanes. You know September. That impacted as we think but two and a -- going to be good the third quarter of -- -- to visit impacted. The quarter and in sort of east Texas and -- western Louisiana. Going up the border there. We think we've completed we have completed the bulk of -- capital expenditures. In oilfield services. From the standpoint that. This last quarter we took delivery of six new cool to be units and the casing and tubing segment we took delivery over the course of -- wait. On ten with a call casing running tools which will enhance her margin quite a bit in our -- -- services division. We also added additional foam units with a call phone units in -- under balanced -- segment but that's those are seeing very high utilization -- in the Rockies. We've got our major capital expenditures behind us. Who have completed -- capex program overall for the company about a 150 million this year. And we think that rule help -- quite a bit during the challenges that we may face next year 2009. This touching base very quickly on the different. Divisions. Directional drilling. We have we're very active directional drill -- when most active on in Texas and Louisiana and of the Rockies. We have but 130 directional drillers. We have our own down -- motors 350 down -- motors. And about 3538. Measurement while drilling kids -- we provided -- service. For directional drilling two operators were currently operating. And in the Rockies in Texas. We're working in the haynesville we -- five -- them in the Marcellus. -- -- -- this business gonna hold up fairly well given. A lot of the show plays required directional drilling. And I'm gonna go through this pretty quickly because -- time tubular services. And basically there were providing casing and tubing services. This is that that's the division Paul is more closely tied to the recount. In that every well requires. -- and running equipment. The biggest thing about this division for cost is about half of our revenues and and you've -- come from long term contracts in Mexico. So while the domestic side of the business is very competitive in this segment. We have about four contracts. I'm we've had have had for many years in Mexico operating both offshore as well as on land in Mexico college generate about ten -- -- -- off. From Mexico annually about half of the of the dolphins division. It's from Mexico so again long term contracts. Internationally. I mentioned earlier that we -- delivery this year casing running tools. There's an automated system that basically takes the crews on the on the -- war. Doing case in two to being installation work from 41 or forward to the lowers cost as a rule -- -- -- safety feature. We added eight of those domestically and two in -- Mexican operation. Does an attempt to different differentiate ourselves and improve our margins in this business. We've seen. But particularly good market for example in this business and of course I mentioned Mexico but also in in Oklahoma. Under balance services that we provide compressed air equipment. Drilling bits hammers chemicals on a package bases we have fleet of -- -- 62 compressors. This is a under balanced -- is useful for sensitive mature gas basins. And also were active in the geothermal market providing compressed they're ruling. And for example of Fayetteville NC received a lot of success in the Fayetteville grueling -- With with air -- going to become so we see this as a growing market in terms of the overall retail. Where -- were first in the industry in terms of percussion drilling we manufacture -- own. Bits that have the inserts that are diamond -- and -- diamond inserts. -- just entered into a joint venture to manufacture those in China. And bring them -- -- and then put them into our bids -- start to sell those to third parties and that's improving our margins quite a bit in the they're balanced segment. Production services we have thwart fourteen cool to -- -- is with the but on points actress. We have for -- -- packages and fourteen and we decided six in the third quarters that's gonna help us -- -- the fourth quarter and 2009. From the touch briefly on rental services again high margin above 5560%. -- -- margins business. It's are -- -- thrust Theres been to grow the international component of rentals and also the land component. -- we saw the Gulf of Mexico shelf went down to reposition lot of our inventory. You know to take advantage of land plays as well as the international. Does the touch on the drilling completion segment. This is a we generate approximately. -- believe -- 25 point 8% of or -- -- from Argentina and Bolivia. We just completed a major capital program here in 2000 -- last month or so. We added. Eighteen new rigs under long term contracts in Argentina. Sixteen work over rigs and through new drilling rigs they would just begin now to where they're all working. To just give a significant. Additional. Rope -- for the fourth quarter and for next year's we expect to see significant growth in this segment. In the coming year. We just cut two new contracts and Bolivia we had reached we had worked in Bolivia for by the year. And now we're prepared for Ross as well last for what -- Russell. In Bolivia. We expect go to work bid next year -- another read and Bolivia's well so. Again long term contracts. About 55% of our revenues -- long term contract here. I want to touch on our. Historical. Revenue and you've been UPS right there. We did about. -- of 2007 UPS would dollar 45 just -- you could maybe five million. And you see for the last three quarters of growth in revenues and -- -- we expect this also to occur in the fourth quarter. And -- -- balance sheet we. Have about fifties to sixty million available on our core revolver. We or or capital or debt consists largely filed under five -- a senior notes -- -- bonds that are due in fourteen and seventeen. No principal payments in the meantime interest only. We have only about 38 million in bank that out of -- Millon dollar revolver. So we have very low current maturities. -- eight million for the year. So a lot of flexibility in terms of being the reinvest -- cash flow. Thank you very much I think were. In the car would normally through the break. Thank you.

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