A Snapshot of ION Geophysical Corp. Barclays Capital Investor Day Houston, Texas USA 1 October 2008
Todays Agenda 12351255 An Overview of ION Bob Peebler [President & CEO] 12551315 ION Land Systems Chuck Ledet [COO, ION Systems Group] [The Right Tools for the Job] 13151330 ION Streamer Systems Jeff Cunkelman [VP, Marine…
Forward-looking Statement Todays presentation may contain forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. These forward-looking statements include statements as to expectations,…
An Overview of ION Presented to Barclays Capital Investor Day Participants By Bob Peebler, President and CEO 1 October 2008
Todays Discussion Overview of the Company and Our Core Businesses Our Three-segment Business Strategy Introduction to the Future of Seismic Full-wave Imaging Overview of Financial Highlights Questions [5]
An Overview of ION Business: Advanced geophysical hardware, software, imaging services, and data libraries across the seismic workflow Mission: Unlock value by attacking the most challenging problems in geophysics Emphasize…
Blue-Chip Customer Base Top Customers 2007 Revenue by Customer National Oil Company 9.0% Global Seismic Contractor 8.5% Global Seismic Contractor 4.8% Global Seismic Contractor 4.3% Regional Seismic Contractor 3.9% Regional…
Our Systems Businesses Recognized Leaders in Seismic Acquisition Technology Land Imaging Systems Driving efficient, high-station count, full-wave acquisition Energy source (Vibroseis) and source control systems Analog geophones and 3C…
Our Solutions Businesses Services that Provide Best-in-Class Images of the Subsurface GXT Imaging Solutions Advanced data processing services for complex reservoirs Leaders in PreSDM and full-wave imaging Award-winning tools for…
Our Solutions Businesses Game-Changing Approaches to Full-wave Imaging FireFly Solutions A next-generation approach to land imaging Centered upon the cableless FireFly acquisition platform Enables highly productive, HSE-friendly…
Our Strategy Approach the Business as a Portfolio of Three Segments Mature businesses: benefit from the rising tide in the industry Fixer-uppers: gain market share with new products / positioning (or M&A events, if appropriate)…
R&D and Revenue Changes Building Long-Term Earnings Power ( Millions) R&D (1) Revenues R&D(1) Revenues 60.0 800.0 713.1 Million 50.0 49.6 Million 16% 600.0 40.0 20% 49% +131% 30.0 400.0 20.3 Million 20.0 33% 64% 51% +277%…
Conventional Seismic Imaging Based on Analog, Coil-spring Geophones Geophone Source Energy Wave front Rock Layer [ 13 ]
The Future of Seismic: Full-wave Imaging Multicomponent (3C) Sensors Record the Full Seismic Wavefield VectorSeis VectorSeis Source Energy e av e Do v S-W wa wn P- go oing g in ing go Up…
Business Proposition for Full-wave & VectorSeis Image Quality and Productivity Benefits Full-wave imaging addresses the most challenging seismic acquisition and processing situations Complex acquisition environments, including…
Financial Results and Business Mix 16 Since the Inception of Our New Strategy in 2003 Consolidated Revenues Mix of Business by Segment ( Millions) (Revenue distribution for the last 18 months) 900 100% = 1.2 Billion 800 CAGR = 48%…
Growing Shareholder Value Via Prudent Technology Investments & Business Diversification ( Millions) 1,600 140 1,400 120 1,200 100 TEV at Period End LTM EBITDA 1,000 80 800 60 600 40 400 20 200 - 0 (20) Q1…
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[Right Tool for the Job] ION Technology for Land Seismic Surveys Presented to Barclays Capital Investor Day Participants By Chuck Ledet, EVP and Chief Operating Officer ION Imaging Systems 1 October 2008
Todays Discussion Context on the Land Systems Market The [Right Tool] Approach Updates on FireFly and ARAM IONs Strategy for Land Systems Go-forward Revenue Forecast Questions [ 20 ]
The Context within ION Revenue Distribution Last 18 Months 100% 1.2 Billion Focus of Presentation Land Systems ARAM Other Land Technology* Towed Streamer Seabed Concept Systems GXT Data Processing ISS - Data Libraries *…
The Context within the Market Relative Segment Sizes Annual Revenue Potential 100% 1 Billion / year Other* Vibroseis Vehicles (AHV-IV, X-Vib) Analog Geophones 100% = 1 Billion / year (Sensors SM-24) Cableless Recording…
Conceptual Land Survey Schematic Cable-based Recording System (Scorpionor ARIES) [ 23 ]
Conceptual Land Survey Schematic Cableless Recording System (FireFly) [ 24 ]
Forces at Work Land Systems Segment Tailwinds Headwinds Highly fragmented Highly fragmented industry structure industry structure Ongoing addition of Large competitor new crews installed base Increasing channel IONs recent…
The Land Acquisition Market Present State Illustrative: Market Segment Sizes Sensor Type Digital, 3C MEMS Legacy Land Systems Market Dominated by Analog Geophone Cable-based Systems and Analog Geophones Cable-based…
The Land Acquisition Market Why Might the Full-wave (3C) Segment Expand Illustrative: Market Segment Sizes Sensor Type Digital, 3C MEMS Analog Geophone Cable-based Cableless _________________________________________…
Reasons to Consider a Full-wave Survey Enhanced bandwidth 3C MEMS sensors capture lower lows and higher highs, which translates into improved reservoir resolution Improved reservoir characterization full-wave seismic data lets one…
An Example of the Value of Full-wave Imaging Characterize Lithology and Fracturing to Identify The Best Well in the Province Productive well Same reservoir horizon Unproductive well Intensive fracturing Same reservoir horizon No…
The Results Full-wave Solution Identifies Best Well in the Province Excerpts from Press Release Local Chinese Newspaper GAS DRAGON RISING FROM THE DEPTHS OF THE SICHUAN BASIN Best well in the entire Sichuan Province…
The Land Acquisition Market Why Might the Cableless Segment Expand Illustrative: Market Segment Sizes Sensor Type Digital, 3C MEMS Analog Geophone Cable-based Cableless _________________________________________…
Reasons to Consider Cableless Reduced HSE risk allows surveys to be conducted in access- restricted or environmentally sensitive areas, and with fewer personnel Improved productivity integrated command & control software eliminates…
Accessing Restricted Areas with FireFly Areas with Livestock, Wildlife, or Culture
Reduced HSE Risk with FireFly Sensor Deployment Would Be Risky with Cables
Improved Productivity with FireFly An Example Involving Software-driven Surveying Traditional Surveying Stakeless Surveying with FireFly Slow, Inaccurate & Manpower Intensive Accurate and Highly Automated via Concept Systems Software
Improved Image Quality with FireFly Cableless is More Efficient for High Station Count Deployment Acquisition Cost Index* (100 = A 5,000 Station Cable-based Survey) 700 600 500 400 Cabled Cableless 300 200 100 0 5,000…
Why ARAM Cost-Advantaged Supplier in an Industry with Long Adoption Cycles Long technology adoption cycles in the E&P industry IONs disadvantaged relative Relative COGS (Illustrative per Station) cost position A B ION…
The Land Acquisition Market Potential Future State for ION The Right Tools for the Job Illustrative: Market Segment Sizes Sensor Type Digital, 3C MEMS Analog Geophone Cable-based Cableless…
Our Strategy for Land Systems Offer a portfolio of Right Tools Analog geophones and digital, full-wave VectorSeis across the adoption cycle ARIES and Scorpion, along with cableless FireFly Drive the adoption of full-wave…
Projected Growth in the Land Systems Segment ION Revenues (2012 vs. 2007) Revenues, (Millions) 700 600 CAGR = 20% 500 400 300 200 100 0 2007 2012 Estimates based on the 2008 ION Consolidated Plan (developed DEC-2007)…
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[Intelligent Acquisition] ION Technology for Towed Streamer Seismic Surveys Presented to Barclays Capital Investor Day Participants By Jeff Cunkelman, VP Product Marketing Marine Imaging Systems Division 1 October 2008
Todays Discussion Context on the Towed Streamer Market The [IA] Approach IONs Strategy for Marine Towed Streamer Go-forward Revenue Forecast Questions [ 43 ]
The Context within ION Revenue Distribution Last 18 Months 100% 1.2 Billion Focus of Presentation Land Systems ARAM Other Land Technology* Towed Streamer Seabed Concept Systems GXT Data Processing ISS - Data Libraries…
The Context within the Market Relative Segment Sizes Annual Revenue Potential 100% 800 Million / year Command & Control Software (Orca) Positioning & Streamer Control Systems (DigiFIN, DigiRANGE II, DigiBIRD) Source & Source…
A Matter of Perspective 16 x 12km Spread Configuration Overlaid on Manhattan 16 x 12 towed streamer spread configuration [ 46 ]
Forces at Work Marine Towed Streamer Segment Tailwinds Headwinds New entrants and Off-limits contractors new-build vessels Consolidation More and longer Backward integration streamers IONs legacy weakness Increasing survey in…
The [Intelligent Acquisition] Approach In a Nutshell Traditional Industry Approach [Intelligent Acquisition] Simple survey geometries Complex survey geometries Single vessel operations Multi-vessel operations Disparate streamer…
Analogy: Commercial Air Travel vs. Towed Streamer Operational Planning Commercial Air Travel Towed Streamer [IA] Flight Plan Survey Plan [ 49 ]
Analogy: Commercial Air Travel vs. Towed Streamer Operational Command & Control Intelligence Commercial Air Travel Towed Streamer [IA] Auto Pilot Orca [ 50 ]
Analogy: Commercial Air Travel vs. Towed Streamer Dynamic Operational Execution Commercial Air Travel Towed Streamer [IA] Dynamic Horizontal Control Tail rudder DigiFIN Dynamic Vertical Control Wing flaps…
[IA] in Action Orca Software Controlling the Streamer Spread via DigiFIN [ 52 ]
Our Strategy for Towed Streamer Commercialize the core, Orca (2Q06) component technologies DigiFIN (3Q07) DigiSTREAMER (2Q08) Pursue software-led integration Ongoing development and to deliver the intelligence integration of…
Projected Growth in the Streamer Segment ION Revenues (2012 vs. 2007) Revenues, (Millions) 300 CAGR = 12% 250 200 150 100 50 0 2007 2012 Estimates based on the 2008 ION Consolidated Plan (developed DEC-2007) Streamer…
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ArcticSPAN Basin-scale Data Library Presented to Barclays Capital Investor Day Participants By Joe Gagliardi - Project Manager, Arctic Program Development 1 October 2008
Todays Discussion Some Context on BasinSPANs TM ArcticSPAN Case Study The Future of ArcticSPAN [ 57 ]
The Context within ION Revenue Distribution Last 18 Months 100% = 1.2 Billion Focus of Presentation Land Systems ARAM Other Land Technology* Towed Streamer Seabed Concept Systems GXT Data Processing ISS - Data…
Overview of a BasinSPAN Program Comprehensive view of the petroleum system Integrates geology and geophysics Ultra-deep view Source rock deposition Migration pathways Sediment fairways Customized program design Acquisition…
Advantages of a SPAN New Basin-scale Understanding of Known Hydrocarbon Provinces Conventional Data 0.0 99 100 km 88 84 0.0 5.0 5.0 10.0 10.0 100 Km 5 sec water…
Why the Arctic High Potential in the Region Estimates place 25% of all remaining undiscovered reserves in the Arctic. Source: USGS, World Petroleum Assessment
Why Interest in the Arctic Now Several Factors Lining Up Access to acreage Assess to markets Pipelines Arctic markets Stable Tax regimes Geo-politics Commodity prices Thinning polar ice
Whos Committed to the Arctic Big Players in the Region
Where Does ION ISS Fit into The Mix Arctic exploration is characterized by: Long project life cycles High environmental exposure Large untapped reserve potential Players are those companies with: Deep pockets A long term view…
Building ArcticSPAN Two Key Phases CompletedAnother Under Way
New Insights into the Arctic Petroleum System High-Quality Datasets -0 sec - - - - -5 sec - - - - -10 sec - - - - -15 sec -
Arctic Operational Expertise Wildlife Obstacles
Arctic Operational Expertise Weather Obstacles
ArcticSPAN - ION Value Proposition & Linkages By being the Go-to Frontier Arctic Service Provider, we are hoping to expand the value chain: New markets for ION products Arctic focused equipment New markets for ION services…
Program Economics for a BasinSPAN Investment & Return Phase III Phase II Phase I Conceptual Financials Library sale Library sale Library sale Library 0 sale Investment Underwriters
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