ION Geophysical Corporation ION Analyst Day March 25, 2013
Todays Agenda ION Strategy / Seabed JV Brian Hanson Financial Update Greg Heinlein GeoScience Chris Usher GeoVentures Ken Williamson Recap All 3
Attendees Brian Hanson, President & CEO Greg Heinlein, SVP & CFO Chris Usher, EVP & COO, GeoScience Ken Williamson, EVP & COO, GeoVentures Jacques Leveille, SVP Technology Advisor Colin Hulme, SVP Strategic Marketing Justin…
Bios Brian Hanson, President & CEO Prior to his appointment as CEO, Mr. Hanson served as our Chief Financial Officer from May 2006 until December 2011 Over 25 years of diverse experience in finance and operations leadership…
Bios Chris Usher, EVP & COO, GeoScience Over twenty years of leadership in the geophysical industry and hands- on experience in the fields of seismic data processing and imaging, new product commercialization, and software…
Bios Colin Hulme, SVP, Strategic Marketing Over thirty-eight years experience in the oilfield services industry, including twenty-eight years in seismic. Brings a rich blend of industry experience and market insight Leadership…
Todays Agenda ION Strategy / Seabed JV Brian Hanson Financial Update Greg Heinlein GeoScience Chris Usher GeoVentures Ken Williamson Recap All 8
ION at a Glance Technology company, driven to develop and apply proven, innovative technologies and services to help our clients find and produce hydrocarbons as safely and efficiently as possible Founded in 1968 as Input / Output…
2012 Highlights Grew revenue by 16% and EPS by 160% Largest operating income since 1998, the second largest in company history Generated record multi-client, data processing, and software revenues Entered 3D marine multi-client…
ION Strategy Planning Acquisition Processing Interpretation Technology History of Integrated Participate in company innovation Solutions each stage of Full-wave imaging, Maximize our return the geophysical Bring the whole…
ION Areas of Focus Aligned with Major Industry Growth Areas Challenging Unconventional Basin Complex Environments Reservoirs Exploration Geologies Arctic, Obstructed Shales, Tight Gas, BasinSPAN Data Subsalt, Sub Water, and…
Executing Our Strategy Solving Industry Problems in Unconventional Reservoirs CHALLENGE: Low natural gas prices creating increased pressure on shale operators to locate, complete and produce shale gas more efficiently. IONS SHALE…
Executing Our Strategy Solving Industry Problems in Basin Exploration CHALLENGE: Several recent large discoveries offshore East Africa have created tremendous interest. E&P companies require data to assess the prospectivity of nine…
Executing Our Strategy Solving Industry Problems in Challenging Environments CHALLENGE: Arctic contains an estimated 25-30% of the worlds undiscovered reserves, yet E&P companies lack sufficient data to reduce risk. IONS ARCTIC…
Five Year Key Objectives Exploit new business models to extract the E&P Facing Revenue % value of our technology, moving away 50 % 60 40 from transactional sales 30 70 2012 Achieve 85% of revenues from E&P 2009 customers 20…
Todays Agenda ION Strategy / Seabed JV Brian Hanson Financial Update Greg Heinlein GeoScience Chris Usher GeoVentures Ken Williamson Recap All 17
OBS - Fastest Growing Seismic Segment 20062013: OBS market +250%, Marine market share 613% OBS Acquisition Services Expenditure M 900 Market flattened 800 due to capacity 700 constraints 600 500 Node on a Rope 400 ROV Node…
2013 / 2014 Ocean Bottom Seismic Outlook Current un-awarded projects exceed 1.5B ION Basin Span projects 20
OBS Key Growth Drivers New systems have larger footprints, increasing efficiency Closing cost gap with Towed Streamer Calypso is 2x footprint increasing efficiency vs VSO Moving into deeper water Deep water wells 200M+ support…
OBS Significantly Improved Data Quality vs. Streamer OBS data is lower noise and contains more information Wind & wave noise P-wave energy only (fluids dont support shear-waves) Decreasing background noise P-wave &…
Efficient Full Illumination Multi-azimuth Acquisition v v v v OBS is naturally multi azimuth Towed streamer Full-azimuth first time Single azimuth after first pass Multi-azimuth after multiple passes 23 or complicated geometries
Full Azimuth OBS vs. Towed Streamer High Density OBS VSO Survey Legacy Towed Streamer Survey Improved imaging of reservoir beneath Dipping multiples from over-lying channel channel. Improved resolution elsewhere obscures reservoir…
Increased OBS Demand in Producing Fields 25
Introducing Calypso IONs Next Generation VSO System 26
IONs Ocean Bottom Seismic Systems Superior Imaging Efficient Broad Operating Acquisition Depth Range High quality Cost Effective Reservoir Imaging 27
VSO System Evolution - 9 Year of Continuous Improvement 2013 2007 VSO II Calypso 2006 Next Generation VSO 3rd Generation VSO I 2nd Generation 2004 VSO I 1st Generation 28
Calypso System Elements Buoy Command & Control Source & Source Control MEMS 3C Sensor + Hydrophone Cable Section 29
High System Reliability Maximizes Uptime Continuously acquires data even during radio outages Data is re-synced post radio outage Permits large spreads with long offsets Fault Tolerance in cables allows bypassing bad receiver…
Huge, Efficient Spreads Reduce Costs & Cycle Time Unique buoy architecture enables huge spreads with unlimited arrays Buoy replaces recording vessels, improved HSE & logistics Improves weather window New telemetry system doubles…
Operational Efficiency via Larger Recording Spread Hypothetical 36km X 36km Survey Area: 1296 km2 Typical VSO Spread: 8 arrays X 6 km Typical Calypso Spread: 10 arrays X 12 km 24 25 48 49 72 20 21 2 23 26 47 50 71 2 19 22 3 22 27…
Broadest Operational Performance: 5 - 2,000 m Rugged triple-armored cables with improved vibration isolation handle the extreme tensions at twice the depth New Calypso design quadruples VSO life cycle Backward-compatible with VSO…
Holistic Design From Sensor to Handling System Deep water system Reel-based handling optimizes buoy and cable improves deployment and management, accounting for retrieval efficiency sea conditions, speed, etc Shallow water Deep…
Calypso IONs Next Generation VSO System Proven best image quality: dense, full-azimuth 4C data More efficient operations reduce costs & cycle time Enables selection of superior OBS for more surveys Twice the operating depths…
VSO / Calypso System Exclusivity 2004 2006 2008 2010 2012 VSO 1 VSO 1 VSO 2 CALYPSO Next Generation 1st Generation 2nd Generation 3rd Generation VSO IONs VSO technology, since inception, has been deployed via an exclusive…
Georadar & ION Seabed Seismic JV - GeoRXT A strong Ocean Bottom Seismic Provider provides the full integrated package Technology OBS Seismic OBS Data Multi-Client Interpretation OBS Development Data Processing & Project &…
Georadar & ION Seabed Seismic JV - GeoRXT Georadar brings strong operational experience and strength of GeoRXT ION brings a global geophysical company with equipment manufacturing through 4C data processing & Quantitative…
Georadar & ION Seabed Seismic JV - GeoRXT Georadar and ION have agreed to a joint venture (JV) for the provision of Ocean Bottom Seismic Services ION has 30% ownership & exploring opportunities to expand to 50% JV will be financially…
ION & Georadar Ocean Bottom Seismic JV - GeoRXT Two strong parents providing global fully Integrated solution ION Marine GXT OBS ION Multi- GeoRXT OBS ION GeoRXT- Imaging Data Client Seismic Data Reservoir ION Systems Processing &…
Todays Agenda ION Strategy / Seabed JV Brian Hanson Financial Update Greg Heinlein GeoScience Chris Usher GeoVentures Ken Williamson Recap All 41
IONs Global Footprint Headquarters Data Processing Centers Sales and Service Centers ResSCAN Programs BasinSPAN Programs 42
ION 2012 Global GeoVentures Revenues GeoVentures 2012 record revenues of 235M, up 35% ResSCAN Programs 88M in Data Library sales in 2012 BasinSPAN Marine Programs E&P capex up 10% in 2012; predicted to increase an additional…
Worldwide Exploration & Production Capital Spending to Surpass 640 Billion in 2013, up 7% Canada: +0.6% Europe: +6% Russia: +7% 2013 Budget: 44,696 2013 Budget: 47,670 2013 Budget: 50,346 2012 Budget: 44,431 2012 Budget: 45,012 2012…
Possible Future New Reporting Segments GeoScience this potential new reporting segment would be the combination of our Data Processing business and our Software businesses. Our Software businesses are the combination of Concept…
2012 Revenue Distribution by Segment Current Segments Possible Future New Segments 131,996 Y/Y (14)% 131,996 Y/Y (14)% 351,265 235,431 43,056 Y/Y 33% Y/Y 35% Y/Y 13% 158,889 Y/Y 25% Solutions Software Systems…
2012 Operating Income Distribution by Segment Current Segments Possible Future OI % Margin New Segments OI % Margin 10,132 8% 10,132 8% 88,589 62,677 28,129 25% 27% 65% 54,041 34% Solutions Software Systems GeoVentures…
Segment Margins Excluding One-time Items Current Segments Possible New Segments Years Ended December 31, Y/Y Years Ended December 31, Y/Y 2012 2011 Growth 2012 2011 Growth Gross Profit Gross Profit Solutions 132,950 84,647 57%…
Segment Margins One-time Reconciliation Current Segments Possible New Segments Years Ended December 31, Years Ended December 31, 2012 2011 2012 2011 Gross Profit Gross Profit Systems Systems As reported 50,790 As reported 50,790…
Segment Margins As Reported Current Segments Possible New Segments Years Ended December 31, Y/Y Years Ended December 31, Y/Y 2012 2011 Growth 2012 2011 Growth Gross Profit Gross Profit Solutions 132,950 84,647 57% GeoVentures 83,925…
Todays Agenda ION Strategy / Seabed JV Brian Hanson Financial Update Greg Heinlein GeoScience Chris Usher GeoVentures Ken Williamson Recap All 51
GeoScience Division Strategy ION Analyst Day Naples, Florida Chris Usher (EVP and COO, GeoScience) March 25, 2013
Todays Discussion GeoScience Division Mission New Division Organization 2012 Performance and 2013 Goals Division Technology Strategy for Growth Summary 53
Todays Discussion GeoScience Division Mission New Division Organization 2012 Performance and 2013 Goals Division Technology Strategy for Growth Summary 54
ION Offerings in Geophysical Marketplace Participation by New GeoScience Division Planning Acquisition Processing Interpretation GeoVentures Division Full-scope programs across the entire geophysical cycle, including BasinSPAN 2D…
Who Are We GXT Data Processing and R&D Tier 1 DP & Imaging Player 120 Revenues Strong revenue and op inc 100 80 Millions contribution 60 45% growth 2009-2012 40 Seven sequential quarterly 20 increases 0 2009 2010 2011…
Who Are We Concept Systems Software and Services Significant generator of 50 Revenues operating income with a 45 40 fantastic revenue base 35 Millions 30 25 Major cash generator 20 15 10 Strong demand for Orca 5 0…
Launching a New GeoScience Division Combine great brands and great performance GXT and Concept Systems record 2012 revenue and op inc Making changes to support ION Growth Initiatives As previously articulated, a more E&P-facing…
ION GeoScience Division Focus on Technology Leadership Centralized all of ION Geophysical R&D and Geo-analysis Networks Division encapsulates: Concept Systems: seismic acquisition optimization software & services GX Technology:…
Todays Discussion GeoScience Division Mission New Division Organization 2012 Performance and 2013 Goals Division Technology Strategy for Growth Summary 60
New GeoScience Division Functional Building Blocks and Next Steps Concept Systems moved from MISD Merged with GMG Software to cover planning and optimization Reservoir Services moved from GV to DP&I Centralized R&D and…
GeoScience Division Organization Leadership and Structure for Next Wave of Growth Data Processing ION Innovation High Performance E&P Operational & Interpretation Computing (HPC) Optimization GXT Services The new combination Our…
Todays Discussion GeoScience Division Mission New Division Organization 2012 Performance and 2013 Goals Division Technology Strategy for Growth Summary 63
GeoScience Pro-Forma for 2012 Rolling Up GXT and Concept Systems (CSL), Incl. R&D &Other Overheads 170M+ Division, New Segments Years Ended December 31, Y/Y including intercompany 2012 2011 Growth Net Revenues: multi-client…
GeoScience Key Offerings Leading Brands in E&P Software and Services GXT Imaging Services Concept Systems Software Complex Geologies Streamer Operations Tier 1 Depth Imaging Technology ORCA industry leading command and modeling,…
GXT and Concept Systems Intersect Offshore Polarcus a Large Customer/Partner for Both Working together with Polarcus beyond OBP Marine Fast Tracks Joint WiBand Projects Processing Polarcus Multi-client Data 66
Welling DP Market Survey ION / GXT Clearly in Top Tier And Improving Overall, Key Performance Indicators WesternGeco and CGGVeritas again led the market with the highest association regarding perceived leadership position for a…
DP Market Trends GXT Expands into New Regions and Segments Upside Total Processing Market - 1.55B GXT around 10% of Market (not all addressable) Land 30% Marine high-end continues to Marine Streamer grow 63% Mid East and…
2013 GXT Initiatives Customer Advisory Board 5 key customers Move to new, state-of-the art HPC facility Expanding the ION / GXT cloud Add 15% more TFLOPs Rollout Perseus, next gen data processing platform Launch our…
Concept Systems Competitive Landscape Shifting to New Segments Premier install base in all Example Segment: High End Command and Control software Marine 3D (10+ Streamers) segments Orca Large share of a small pie Sercel…
2013 Concept Systems Initiatives Leverage Command & Control system leadership Manage vertical integration challenge in marine market Rollout SQS-Perseus Automated QC for OBP maturity Increase capacity for more 4D Services, now…
Todays Discussion GeoScience Division Mission New Division Organization 2012 Performance and 2013 Goals Division Technology Strategy for Growth Summary 72
Thinking About Strategy Treacy Diagrams Best product or technology; Market leaders innovation & predominantly focus on one of three breakthrough business strategies technology, with where they aim for advanced dev market…
Where Do You Think We Sit Treacy Diagrams Technology Leadership GXT Culture of leading technologies particular with GoM PSDM. Dedicated customers, with large accounts. Concept Systems Industry leading software products, very…
Technology Leadership & Customer Intimacy Launch Customer Advisory Board (CAB) by end Q1 Top five DP customers GeoVentures ION Distinguished Advisors Demonstrate to key customers that we value them We are interested in retaining…
Portfolio Management and Delivery Funnel of Client Portfolio Requirements, R&D Process aka and Emerging Capacity Technology The Offsite There will be an immediate focus on Portfolio Management process across the GeoScience…
Technology Leadership Priorities Retain high-end Imaging Leadership Push Full Waveform Inversion (FWI) into commercialization Upgrade, and scale, Geo-advisor support WiBandTM rollout for all centers & Polarcus Full case studies…
Keep an Eye on the Core Emphasizing GXT Advanced Imaging Brand Equity Push FWI as RTM Success Follow-On Capture market imagination Add R&D staff HPC upgrade Services rollout campaign Conventional WiBandTM WiBand Over 20…
GXT and Concept Systems Brand Synergies Challenges and Opportunities OBP Service Quality SQS Perseus Automation Instrument Room Log Real-Time Navigation-Merge Seismic QC QC GXT Geophysics IIR IIR Integrated…
Step Up ResSCAN Capabilities Supporting ION GeoVentures Investment in Unconventional Plays Create unique integrated Houston ResSCAN teams Azimuthal P-wave, converted wave, and microseismic processors Dedicated Geo-advisors…
Develop Integrated Seabed Tools Build on Existing Leading Capabilities Gator II & new SW developments GMG Planning scenario integration Subsurface modeling GXT nodal processing strengths Enhance Full-wave toolkit Mirror…
GXT Services and ION Innovation Creating Tier 1 Leadership from Industry Gaps E&P Customer Objectives Optimal illumination & Imaging, Cost, turnaround, interpreter input OPTIMAL PRODUCT, driven by reservoir and science GXT…
GXT Software Stack Proprietary DP and Imaging Infrastructure Phase out 83
GXT Perseus Processing Engine Rolling out in 2013 Improve development, user and computational efficiency A single user environment: Galaxy GXT ownership of complete system A system to exploit current and future hardware…
GXT Perseus Flowbuilder With Built-in Knowledge Management (kBase)
GXT RTM3 What If Depth Modeling Rapid ION Cloud-based scenario testing for clients 86
WiBand Benefits the E&P Asset Team Ground Truth for Broadband Technology Conventional WiBand
Model Updates Models with Borehole Constrained FWI WiBand May Drive Further FWI Accuracy 88
Concept Systems / GMG Software Creating Concept Solutions from Industry Gaps E&P Customer Objectives Optimal repeatability & illumination, Cost, HSE, etc. OPTIMAL PLAN, driven by reservoir and science Concept Technology…
Land Optimization Solutions Solutions for Next Gen Nodal Recording Systems RIO land front-end software system Supports Hawk and other nodal technology Validate data before crews leave the field Stream real-time contextual data…
Concept 4D Solutions Began E&P Value-add Service in 2004 4D technology requirement E&P companies step up use of time-lapse streamer seismic Geometry repeat paramount Require detailed planning & proven experience New Concept…
Concept Systems Orca Planner/Calendar/Optimiser Complex Acquisition Threading the Needle 92
Narwhal Integrated Ice Management Key Application of SimOps Platform Building on Concept Systems core skills Real-time data management, data integration and visualisation Leverages common code toolkit Requirements gathered from…
E&P Services Delivered Via the ION Cloud LightTable Visualization Technology Concept Solutions to GXT Imaging 94
Todays Discussion GeoScience Division Mission New Division Organization 2012 Performance and 2013 Goals Division Technology Strategy for Growth Summary 95
Notional Technology Glidepath Building a Multi-year Organic & Inorganic Technology Plan Oilfield Services M&A Partner pipeline, Partnering software & Portfolio Breadth with niche services technology players Seabed…
Summary GXT and Concept Systems brands had record 2012 Great platform to build the division upon New organization and leadership team Mixture of Division BU, external and GV gene pools Mission: Growth through Technology…
Todays Agenda ION Strategy / Seabed JV Brian Hanson Financial Update Greg Heinlein GeoScience Chris Usher GeoVentures Ken Williamson Recap All 98
ION GeoVentures ION Analyst Day Naples, FL Ken Williamson March 25,2013
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