Investor Day Mandarin Oriental, New York December 8, 2014 2014 Energy Recovery, Inc. All Rights Reserved.
Todays Presenters Tom Rooney President and CEO Joel Gay Chief Financial Officer Ron Gusek Vice President, Technology Liberty Oilfield Services
Tom Rooney President and CEO, Energy Recovery
Todays Agenda 9:30 10:00 AM Introduction 10:00 11:30 AM Introducing VorTeq 11:30 12:30 PM Growth and Existing Markets 12:30 1:30 PM Lunch Break 1:30 2:30 PM Q&A
Corporate Overview NASDAQ: ERII Market Cap 250M IPO in 2008 Headquartered in San Leandro, CA 125+ employees Global presence Strong Balance Sheet (38M* Cash, No debt) As of September 30, 2014 includes cash and cash…
Our First Disruptive Technology - Desalination The PX Pressure Exchanger 15,000 PX Devices Installed Worldwide 3-Month Payback 25-year Life with No Maintenance 90% Market Share Globally 65%+ Gross Margins So disruptive, its…
2011: The Dawn of a New ERI Three - Prong Strategy Regain Cut Costs Market Diversify Share Gross Margins Market Share Underway 2011: 28% 2011: 50% 2013: 60% 2013: 90%
Diversification Why Desalination Market is Small and Lumpy How Ignited a Dormant Innovation Engine A Culture of Innovation (Video)
Investing in Innovation Leads to Explosive IP 50 Number of patent applications filed 40 30 20 10 0 1997 2005 2014
Diversification Why Desalination Market is Small and Lumpy How Ignited a Dormant Innovation Engine Where Large Markets with Strong Value Propositions
5 Billion+ New Addressable Markets Ammonia Desal Gas Processing 50M 627M 1.43B Pipelines Urea 1.05B 399M Fracking 1.4B Annual Recurring TAM 4B
The Fracking Opportunity 2014 Energy Recovery, Inc. All Rights Reserved. 13
To a remarkable extent, this once-obscure oil-field technique defines the nation's economic and environmental future. Russell Gold, Energy Reporter, Wall Street Journal, author of The Boom 14
What is Fracking The Most Important Large Substantial High Growth Geo-political Shift Market Assets Market of the Modern Era The Core of a Global 50+ Billion Global 20+ Billion in Double-digit Mega-trend: Annual Market*…
What is Fracking Sand Water 3D Geo-seismic Imaging Pressure Locate Rock Formations 1-2 Miles Deep Horizontal Directional Drilling Create Wellbore Hydraulic Fracturing Create Cracks in Rock Formations 16 1-2 Miles Wide
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Pain Point Pump Failures are the 1 Operational Challenge Faced by the Industry High Pump Maintenance Costs Abrasive and Sporadic and Excessive Downtime Highly Viscous Frac Fluid (Pump Failures) High Levels of Redundancy…
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Our Solution 20
Possibly the Most Disruptive Product Ever Developed by Energy Recovery 21
Our Solution Introducing the VorTeq: This Changes Everything VorTeq Re-routes VorTeq Will Designed to VorTeq Addresses Hostile Frac Fluid Revolutionize the Isolate and Save Pump Failure at Away From Critical Fracking Pump Frac…
Our Solution: Hydraulic Fracturing Without VorTeq *High Pressure Pumps on Trucks Exposed to Sand 23
Our Solution: Hydraulic Fracturing with the VorTeq 24
Value Proposition: Value Creation Reduced Maintenance Costs 1 Decreased Pump Redundancy/ Lower CAPEX 2 Pumping Paradigm Shift 3 25
Value Proposition: Reduced Maintenance Cost Status-Quo VorTeq Optimized Cost Savings 1M Pump Maintenance VorTeq Rental 4.1M 1.6M Pump Maintenance 1.5M Fleet Impact Per Year ( Based on 2,000 pumping hours p/yr) 26
Approximately Saving the Fracking Industry 850 850 Fleets Globally Million p/Yr 27
Value Proposition: Improved Life Expectancies from the VorTeq Life Expectancy Guide* Status Quo VorTeq Optimized Component Hours Multiple Hours Valve 49 3.0x 148 Seat 54 3.0x 161 WS Packing 86 3.0x 258 Plunger 194 3.0x…
Value Proposition: Redundancy Decreased Pump Redundancy / Lower CAPEX Avg of Redundant Pumps p/fleet: 4 Eliminate Future CAPEX and Maintenance: 2 3M Eliminate Opportunity Cost of Idle Capacity: Avg. Cost 10 14M p/Yr Revenue…
Value Proposition: VorTeq Optimized Paradigm Shift 3-4 Centrifugal Pumps with Gas Turbines Status Quo: 12-20 Plunger Pumps Migrate to a More Dramatically Efficient and Cost Decrease Streamline Effective Pumping Operational…
Market Opportunity: TAM Derivation Revenue Model Fleet Count 1 TAM Procurement Vehicle Operating lease US 531 US 849,600,000 VorTeq Missiles p/Fleet 1 Canada 112 Canada 179,200,000 VortTeq Rental Rate p/Yr 1,600,000 ROW 214 ROW…
N. America Market Segmentation(1) Basin Pressure TAM Permian 9,000 227,166,187 Eagle Ford (incl. Woodbine) 10,000 205,875,046 Strategically Targeting the Anadarko Woodford 10,000 121,914,919 Haynesville (incl. Brown Dense) 12,000…
Timeline: VorTeq Evolution 2.5M VorTeq VorTeq Test Loop Gen-1 Gen-3 Installation Fabricated Fabricated Aug 2013 July 2014 Q1 2015 Q4 2015 Q4 2015 Feb Dec Q1 2016 2014 2014 Original Liberty VorTeq Field Service VorTeq…
The VorTeq Transformation: Manufacturer to Oilfield Services Provider 34
VorTeq Evolution Operating Model Procurement Vehicle Supply Chain Logistics Oilfield Service Operating Phased Basin-specific Provider Lease In-sourcing Service Facilities 35
Strategic Partner Liberty The Right Partner for ERI Nimble Iconic Leadership Known Innovator Collaborative with ERI Respected Well Capitalized Pumper and E&P 36
Conclusion Pain Point of Pump Failures is a Multi-billion Dollar Problem A Powerful, Multi-dimensional and Multi-billion Dollar Value Proposition to the Industry Massive Market Opportunity for ERI Moving Rapidly: Field Validation…
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Growth Markets O&G: Gas Processing 2014 Energy Recovery, Inc. All Rights Reserved. 39
5 Billion+ New Addressable Markets Ammonia Desal Gas Processing 50M 627M 1.43B Pipelines Urea 1.05B 399M Fracking 1.4B Annual Recurring TAM 4B
Oil & Gas Market: Gas Processing Eco-System Refinery Crude Oil NGLS 0% CO2 Pipeline Gas 2% CO2 Residential & Commercial Gathering Raw Sweet Station Gas Gas Gas Processing Electric Power Gas Processing generation…
The Current Amine Process 42
Pain Points Downtime is Costly Excessive High Energy (2.5M/day) Redundancy & Consumption Maintenance Common Denominator: Pumps 43
Our Solution: IsoBoost System Without IsoBoost With IsoBoost 44
Our Solution: IsoBoost System Increased Uptime Reduces Maintenance Reduces Energy Consumption 45
Our Initial Value Proposition: Energy Savings Alone A Strong Value Proposition... Strong Initial value found Selling Price: Customer from just energy Interest savings 3M Annual Energy Savings: 1.5M Payback 2 Years 100M…
The energy savings Sinopec would realize by using the Energy Recovery system is about 25% of total power consumption. In US dollars, thats around 1 million in annual savings. - Mr. Zhou Hanlin General Manager Sinopec Songnan Gas…
A New Game Changing Value Proposition November 2014 Partnered with Aramco June 2014 on 3rd - Party RAM Case study: Saudi Aramco (Reliability, Availability, Fadhili gas plant visits Jackalope Maintainability) study (KSA) Plant,…
Enhanced Value Proposition SELLING PRICE: 3M SELLING PRICE: 27 Extra Runtime Hours Added: 3M Case study: 4.0M Annual Energy Savings: Fadhili Gas Plant Annual Energy Savings: (KSA) 1.5M 1.5M Annual Maintenance Savings: Payback…
The IsoBoost does not affect plant availability. If anything, it runs better. You are not using the big engines, or putting so much strain on electrical equipment. We are saving electricity and emission compliance by not using gas…
Market Opportunity 88 39 253 89 Asia Europe 17 N. America 141 MEA 46 1395 189 9 China 19 India 114 14 13 Oceania S. America 45 128 Amine Gas Plants Worldwide 627+ Addressable Plants Worldwide, 1800 Flow Ranges 50 -…
Market Opportunity: Converting to an Annual TAM One-Time TAM GAS PROCESSING MARKET OPPORTUNITY Region Plants Capacity (MMcf) Market Size ASP North America 253 26,274,632 198,005,706 782,631 South America 114 26,954,982 135,068,934…
IsoBoost: Laying Foundation and Intensifying Value 2011 2012 2013 2014 2015 2016 2017 Developmental Period Commence Sales and Marketing Acceleration Based New Value Prop on New Value Prop Discovered 53
Growth Markets O&G: Pipelines 2014 Energy Recovery, Inc. All Rights Reserved. 54
5 Billion+ New Addressable Markets Ammonia Desal Gas Processing 50M 627M 1.43B Pipelines Urea 1.05B 399M Fracking 1.4B Annual Recurring TAM 4B
The Market: Pipelines Over 2,000 Pipelines Globally Traversing High Elevations Wasted Pressure Energy 56
The Market Choke Valve Choke Valve Choke Valve Vertical Pipelines Must be Depressurized 57 57
Pain Point Wasted Energy 58
The Solution: IsoGen Pressure Generating Power 85% Efficiency Quick Payback Flexible 59
Market Opportunity More than 328 Opportunities Worldwide Global Market 1.05B 60
Market Opportunity Asia Europe 79M 198M N.America China MEA 312M 17M 157M India 31M Global Market Oceania 6M 1.05B S.America 254M There are Over 328 Opportunities Worldwide 61
Market Opportunity: Converting to an Annual TAM One-Time TAM PIPELINES MARKET OPPORTUNITY Region Opportunities Avg Flow (GPM) Market Size ASP North America 78 4,366 311,913,135 3,998,886 South America 67 5,541 253,518,995 3,783,866…
Growth Markets Chemicals: Ammonia 2014 Energy Recovery, Inc. All Rights Reserved. 63
5 Billion+ New Addressable Markets Ammonia Desal Gas Processing 50M 627M 1.43B Pipelines Urea 1.05B 399M Fracking 1.4B Annual Recurring TAM 4B
The Market: Ammonia Refinery Crude Oil NGLS 0% CO2 Pipeline Gas 2% CO2 Residential & Commercial Gathering Raw Sweet Station Gas Gas Gas Processing Electric Power generation Industrial (Syngas) Gasification Ammonia…
The Current Ammonia Process 66
Pain Points Excessive Downtime is Costly Redundancy & High Energy (2.5M/day) Maintenance Consumption Common Denominator: Pumps 67
Our Solution: IsoBoost Issues and Technologies are Almost Identical to Sour Gas Processing 68
Enhanced Value Proposition SELLING PRICE: 3M SELLING PRICE: 27 Extra Runtime Hours Added: 3M Case study: 4.0M Annual Energy Savings: Prototypical Annual Energy Savings: Ammonia Plant 1.5M 1.5M Annual Maintenance Savings: ROI…
Market Opportunity Asia Europe 110M 197M N.America China MEA 461M 133M 168M India 115M Global Market Oceania 21M 1.43B S.America 224M There are Over 735 Addressable Plants Worldwide 70
Market Opportunity- Converting to an Annual TAM Market Growth 156,957 Maintenance Cost 343,586 Replacement Cost 337,688 Total 838,231 Sources: (1) Lucintel Global Fertilizers Industry and Management estimates (2) Statista…
Emerging Markets Chemicals: Urea 2014 Energy Recovery, Inc. All Rights Reserved. 72
5 Billion+ New Addressable Markets Ammonia Desal Gas Processing 50M 627M 1.43B Pipelines Urea 1.05B 399M Fracking 1.4B Annual Recurring TAM 4B
Urea is Used as a Fertilizer for Crops and as Raw Material for Chemicals 74
The Market: Urea Refinery Crude Oil NGLS 0% CO2 Pipeline Gas 2% CO2 Residential & Commercial Gathering Raw Sweet Station Gas Gas Gas Processing Electric Power generation Industrial (Syngas) Gasification Ammonia…
The Solution: Leveraging Co-location of Ammonia & Urea [ Energy Savings ] Ammonia Plant Urea Plant [ Eliminating Pump Failures ] Outside Tulsa, Oklahoma 76
Market Opportunity Asia Europe 110M 48M N.America China MEA 154M 31M 46M India 40M Global Market Oceania 3M 399M S.America 50M There are Over 664 Applicable Plants Worldwide 77
5 Billion+ New Addressable Markets Ammonia Desal Gas Processing 50M 627M 1.43B Pipelines Urea 1.05B 399M Fracking 1.4B Annual Recurring TAM 4B
Conclusion Strong Balance Sheet & Strong Management Team Proven Ability to Disrupt and Dominate a Global Market Vibrant Innovation Engine Diversification Well Underway 3 years into a 5-year initiative Disruptive Value Propositions…
Thank You 2014 Energy Recovery, Inc. All Rights Reserved.
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