ANNUAL REPORT 2014 - Basin Holdings

ANNUALR E P O RT2 0 1 4

A GLOBAL ENERGY HOLDING COMPANY

MANAGEMENT OWNEDBasin is a privately held company. Executive management and non-executive board members own 90% of Basin Holdings. At our division and operating unit levels, executive management teams own equity interests directly in the businesses that they manage. As a result, the interests of our shareholders and management are fully aligned throughout the enterprise. We are focused on equity value creation through increasing returns on capital employed and per share distributable cash earnings growth.

LONG -TERM GROWTHWe are only interested in long-term growth and therefore invest in opportunities that provide earnings growth potential over a long period of time. We are not trend followers or asset traders. We are interested in compounding the growth of distributable cash earnings. Our patience and foresight is a distinct advantage in a competitive, and often short-term oriented, industry.

INTERNATIONAL FOOTPRINTBasin was founded by executives with extensive management experience in emerging energy markets. Our strategy is predicated on our ability to utilize our diverse geographic experience to exploit inefficiency in the global market for energy and industrial equipment and services. Such opportunities tend to exist across international markets. Our network of 73 corporate locations across 18 countries enables us to offer global sale prospects to companies that we create or purchase.

2Basin Holdings | 2014 Annual Report

S T R AT E G Y

D I V I S I O N S

Letter from the Chairman 04

2014 Development Timeline 07

Management 08

Platform Overview 10

Distribution Network 13

Start-Up Incubator 14

Acquisitions 15

Shared Services 16

Basin Supply 18

Basin Tools 22

Basin Services 25

Basin Industries 28

Basin Finance 30

TABLE OF CONTENTS

Left: The OTS TPCR is a fixed blade underreaming tool known in the drilling industry for its reliability and durability.

Previous Page: A Basin Supply employee tallies pipe in one of our 38 North American pipeyards.

Dear Shareholders:

2014 was a formative year for Basin. We achieved record financial results from operations, expanding revenue 55% year-over-year to $637 million. The majority of this growth was delivered organically, with the remainder added through six acquisitions completed during the year. Reflecting organic operating leverage, our operating EBITDA expanded 147% year-over-year to $92 million.

In 2014, the partial sale of two operating units in our manufacturing division generated proceeds that were 26 times greater than our investment basis and implied a far higher return on our capital employed than we expected to achieve through continued ownership. The $324 million net proceeds from this transaction were primarily used to repay debt and fund a special year-end dividend to shareholders.

Our business grew more complex during the year. We added a new operating division (Industries) and consolidated two others (Services and Rentals). We completed six new acquisitions and co-founded three new operating units. These additions expanded our reach into adjacent products and services within the oil and gas industry, most notably those focused on hydrocarbon production rather than development spending. In addition, Basin Industries and Basin Services both added meaningfully to our industrial manufacturing and equipment rental exposure beyond oilfield applications.

Value was created from the simultaneous application of three strategies involving different, and often competing, competencies: (i) the implementation of operating efficiencies; (ii) the completion of opportunistic acquisitions and divestitures; and (iii) the launching of start-up companies. Our ability to pursue all three growth strategies is particularly important in an increasingly dynamic and unpredictable energy industry.

Along the way, we added many talented new Basin team members in both operational and functional capacities. Our total headcount expanded from 672 to 1,186 during 2014. My enthusiasm for our future is based primarily on my confidence in the growing ranks of extraordinary people who now call Basin their own.

Basin Tools expanded revenue 142% year-over-year to $188 million, of which 94% was organic growth and the balance achieved through the addition of acquisitions. Tools added two new equipment manufacturing businesses to its portfolio. In March, we completed the acquisition of drill bit manufacturer OTS International and in November we completed the acquisition of pressure control equipment manufacturer FHE. Both acquisitions were initially financed with cash on hand. In addition, Tools divested of three businesses. In October, we completed the sale of 81% of our equity interests in BasinTek and Ascent for cash consideration of $324 million and total transaction value of $364 million (including our retained interests). We started these businesses in 2012 and had a total of $15 million of cumulative invested capital in them. In addition, in December Tools completed the sale of its rental business within Wenzel Downhole Tools to Basin Services, where it is being combined with similar equipment rental businesses.

LETTER FROM THECHAIRMAN

JOHN FITZGIBBONSChairman & CEO

Basin Holdings


Basin Supply expanded revenue 30% year-over-year to $417 million, of which 95% was organic growth and the balance achieved through the addition of acquisitions. We observed continuing strength in our U.S. supply business and completed two acquisitions of adjacent oilfield equipment suppliers. In December 2013, we acquired Permian Pump and Supply in West Texas and in November 2014 we acquired Beck Oilfield Supply in Oklahoma. Internationally, our organic growth has been sluggish relative to expectations, and over the course of 2014, we shifted our resources from organic growth to regional acquisitions. In November, we completed the first of these by acquiring Driltools International in the United Arab Emirates, providing critical growth momentum to a key strategic region. Meanwhile, by mid-year it was clear that the supply business we had established in Russia was going to materially contract with the ruble devaluation, and we spent the latter half of the year reducing costs.

Basin Services expanded revenue 160% year-over-year to $30 million, of which 76% was organic growth and the balance achieved through the addition of acquisitions. In June, we completed the acquisition of Pinnacle Oilfield Inspection Services, a Louisiana-based company that provides inspection services to the oil industry. In addition to the Wenzel rentals acquisition mentioned previously, in August we launched Ranger Directional Rentals in Texas through a joint partnership with Tolteq, a leader in measurement-while-drilling (MWD) equipment manufacturing, to provide rental and support services to existing and new users of Tolteq products. In August, we also launched Basin FloWell to provide flowback and well-testing services to drilling operators in Ohio and Pennsylvania.

In September, we launched Basin Industries with an experienced former Caterpillar executive at the helm. Our focus is to expand more broadly into industrial manufacturing, where we can utilize energy industry experience with less commodity price exposure. One of our unique competitive advantages is access to proprietary intellectual capital that includes a set of management tools called a Production System. Our strategy is to acquire industrial manufacturing businesses that will materially benefit from the application of a more sophisticated set of management tools. In September, we acquired SteelTech, an Indiana-based manufacturer of material handling equipment. In October, we contributed to Industries our interests in Cowin Global, a China-based manufacturer of similar material handling equipment. We have already begun to realize revenue and cost synergies between the two operating units.

In 2013, we began issuing privately placed high-yield subordinated notes to syndicated investors as a partial funding source in select transactions. In 2014, we consolidated this portfolio of loans under a new division called Basin Finance, and we increased the aggregate portfolio size to nearly $50 million by the end of the year. Going forward, we will issue both equity and debt at Finance in order to further expand the portfolio of loans both to Basin operating units as well as select unaffiliated borrowers. Our operating businesses provide proprietary sourcing opportunities and management capability with immaterial additional

Letter from the Chairman, Continued

5

BASIN HOLDINGS OWNERSHIP

BASIN HOLDINGS OWNERSHIP

VALUE GROWTHBASIN PER SHARE

$0

$25

$50

$75

$100

$125

$150

$175

2014201320122011

This value includes a special distribution of $43 per share.

*

*

63% 27%10%Management Board of

Directors& Incentive

CompensationThird PartyInvestors

Basin Holdings | 2014 Annual Report

cost. Finance represents a new way for us to exploit an existing competitive advantage, particularly as the oil and gas markets experience turbulence in 2015.

Finally, in 2014 we focused our attention on the creation of a shared service management resource at Holdings that can add value to Basin divisions and operating units. Now numbering over 20 experienced professionals, this team offers all affiliates functional support in corporate development, accounting, treasury management, financing, legal, human resources, and information technology. This capability is critical to the start-up incubation element of the Basin growth strategy, because access to this suite of functions is essential to entrepreneurial success.

We began 2014 with an estimated valuation of $111 per Basin Holdings Unit (equivalent to a share of stock). Following the activity and results described above, we added value of $57 per Unit (an annual increase of 51%) and paid out $43 per Unit to shareholders in a dividend. As a result, we closed the year with an estimated value of $125 per Unit. The primary driver enabling net equity value creation was the partial cash sale of BasinTek and Ascent at a valuation that materially exceeded our carrying value.

As our attention shifts from acknowledging historical performance to planning for the future, we are concerned about the impact that the recent commodity price collapse will have on our business. Lower oil and gas prices will lead to less capital investment in the development of hydrocarbon reserves, which will result in less demand for oilfield services and equipment. Individual suppliers will compete aggressively for that declining demand by reducing price to protect market share, and all suppliers will feel the compounding pressure of simultaneous volume and price reductions. Many oilfield service companies and oilfield equipment manufacturers will not survive. I am confident, however, that Basin is sufficiently well positioned not only to survive but to take advantage of industry weakness in order to improve competitiveness and relative value.

We look forward to this challenge.

Sincerely,John B. Fitzgibbons

Letter from the Chairman, Continued

6

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Basin Holdings | 2014 Annual Report

2014 DEVELOPMENT TIMELINE

2014

2015

OTS INTERNATIONALMARCH 2014

Acquisition of:

PINNACLE OILFIELD INSPECTION SERVICESJUNE 2014

JUNE 2014

AUGUST 2014

SEPTEMBER 2014

OCTOBER 2014

NOVEMBER 2014

DECEMBER 2014

SEPTEMBER 2014

NOVEMBER2014

NOVEMBER2014

NOVEMBER 2014

AUGUST 2014Acquisition of:

BASIN FINANCEFormation of:

BASIN FLOWELLFormation of:

RANGER DIRECTIONAL RENTALS

Formation of:

BASIN INDUSTRIESFormation of:

STEELTECHAcquisition of:

BASINTEK ANDASCENT

Sale of:

DRILTOOLSINTERNATIONAL

Acquisition of:

BECK OILFIELDSUPPLY

WENZEL RENTALBUSINESS

Acquisition of:

Formation of:

FHE Acquisition of:

BASIN SERVICES AND BASIN RENTALS

Merger of:


MANAGEMENT

Basin Holdings is led by its Board of Directors and division presidents. The leadership team has experience in energy, manufacturing, and finance, and has a history of starting and growing businesses internationally.

From left to right: Ashton Valente, Jim Waters, Leif Syversen, Rod Beeler, John Fitzgibbons, Ayman Khattab, Antonio Campo, Charles Laurey, Tyler Hassen

SENIOR LEADERSHIP

JOHN FITZGIBBONSFounder, Chairman, & CEO

ROD BEELERPresident, Basin Services

ANTONIO CAMPOVice-Chairman

TYLER HASSENPresident, Basin Finance

CFO, Basin Holdings

AYMAN KHATTABPresident, Basin Supply

CHARLES LAUREYManaging Director

LEIF SYVERSENPresident, Basin Tools

ASHTON VALENTEGeneral Counsel, Basin Holdings

JIM WATERSPresident, Basin Industries


BOARD OF DIRECTORS

JOHN FITZGIBBONSFounder, Chairman, & CEOJohn Fitzgibbons is the founder, chairman, and CEO of Basin Holdings. Mr. Fitzgibbons has served as chairman of Integra Group since founding the company in 2004. In 1993, he co-founded Khanty Mansiysk Oil Corporation and served as its president and CEO until its acquisition by Marathon Oil in 2003. In addition, Mr. Fitzgibbons is a founder and chairman of Brookline Real Estate Holdings, Global Guardian, and Hudson Valley Harvest. Mr. Fitzgibbons is also a co-founder and director of Deerpath Capital and manages a wide variety of investments through his family office. Mr. Fitzgibbons is chairman of the SUNY Research Foundation and co-chairman of the Cancer Research Institute. He is also a member of the Council on Foreign Relations and a trustee of Milton Academy.

ANTONIO CAMPOVice-ChairmanAntonio Campo serves as vice-chairman of Basin Holdings. Mr. Campo was CEO of Integra Group from 2010 to 2012. He joined Integra after spending 30 years at Schlumberger, serving as president of Latin America (2008-2010); president of Europe, Africa, and the CIS (2005-2008); and president of Global Integrated Project Management (2003-2005). From 1980 to 2003, he held various management positions at the company.

NEIL GASKELLChairman of the Audit CommitteeNeil Gaskell serves as a non-executive director and chairman of the audit committee of Basin Holdings. Mr. Gaskell served as a non-executive director and chairman of the audit committee of Integra Group (2005-2014) and several other oil and financial services companies. Mr. Gaskell was group treasurer of Royal Dutch Shell from 2000 to 2003. From 1997 to 2000, he was deputy group treasurer of Royal Dutch Shell and CEO of Finance Services. Mr. Gaskell began his career with Royal Dutch Shell in 1969 and held various management positions during his 34-year career with the company.

FRANKLIN “FRITZ” HOBBSNon-Executive DirectorFritz Hobbs serves as a non-executive director of Basin Holdings. Mr. Hobbs was CEO of the investment bank Houlihan Lokey Howard & Zukin from 2002 to 2003. He

spent 25 years at Dillon Read & Co. and served as CEO of the firm from 1992 to 1997. When Dillon Read merged with SBC Warburg, and subsequently with Union Bank of Switzerland (UBS), Mr. Hobbs continued as chairman of the resulting UBS Warburg until 1999.

WALTER MCCORMACKNon-Executive DirectorWalter McCormack serves as a non-executive director of Basin Holdings. Mr. McCormack is the managing member of Granite Capital. Prior to founding Granite Capital, he served as lead investigator for white collar crime in the Manhattan District Attorney’s office. From 1999 to 2002, he was vice president and general manager of Red Hat Inc. and from 1996 to 1999 he worked as an investment banker with Goldman Sachs. Mr. McCormack began his career at A.T. Kearney in 1991.

GENERAL PETER J. SCHOOMAKERNon-Executive DirectorPeter Schoomaker serves as a non-executive director of Basin Holdings. General Schoomaker came out of retirement in 2003 to serve a four-year term as the 35th chief of staff of the U.S. Army and as a member of the U.S. Joint Chiefs of Staff. From 1997 until his retirement in 2000, he was commander in chief of the U.S. Special Operations Command (USSOCOM) and was commanding general of the U.S. Army Special Operations Command (USASOC) from 1996 to 1997. He was commanding general of the Joint Special Operations Command (JSOC) from 1994 to 1996, and served in various other command and staff assignments from 1969 to 1994.

GARY WENDTNon-Executive DirectorGary Wendt serves as a non-executive director of Basin Holdings. Mr. Wendt is chairman of Deerpath Capital, a company he co-founded in 2008. He was chairman and CEO of Conseco from 2000 to 2002. He joined Conseco after a 24-year career at GE Capital, where he was chairman and CEO (1984-1999) after holding various management positions.


SOUTH AMERICA

54 Locations 5 Locations

BASIN GLOBAL PLATFORM

IN 18 COUNTRIES

73LOCATIONS

Basin Tools

Basin Supply

Basin Services

Basin Industries

Basin Finance

Basin Holdings

76% GROWTH IN 2014

1,186EMPLOYEES

NORTHAMERICA


CONSOLIDATED REVENUES IN 2014

$637MILLION

MIDDLE EAST& AFRICA

EUROPE FSU & ASIA

3 Locations

2 Locations 9 Locations

BASIN GLOBAL PLATFORM

IN 5 DIVISIONS

15OPERATINGCOMPANIES

Basin Tools

Basin Supply

Basin Services

Basin Industries

Basin Finance

Basin Holdings


DISTRIBUTION NETWORK ................... 13

START-UP INCUBATOR .......................... 14

ACQUISITIONS ........................................... 15

SHARED SERVICES .................................. 16

STRATEGY


The Basin distribution network provides a global sales channel to companies serving the energy industry. The tools and services used to extract hydrocarbons have experienced tremendous technological improvements over the last decade. Lagging behind these improvements is an inefficient distribution network unable to service the global energy market.

Our goal is to create a full service distribution platform that provides leading technologies to international customers. By creating an international network supported by a single brand, Basin offers its operating companies access to underserved but emerging hydrocarbon markets. Our customers are looking for a vendor with superior customer service for many of their oilfield technology and equipment needs. We see Basin becoming the supplier of choice.

The Basin platform encompasses a variety of businesses. Through Basin Supply, we offer oilfield supply procurement and distribution. With 463 employees in 47 locations and $417 million of revenue in 2014, the division is one of the largest privately owned supply networks in the world. Basin Tools manufactures and delivers specialized oilfield tools and equipment. Basin Services offers a variety of services and rentals solutions, all focused on providing proven technologies to drilling programs worldwide.

DISTRIBUTION NETWORK

A Basin FloWell technician performs maintenance on a well-testing tool in the Norwich, Ohio service facility.

Basin provides energy and industrial businesses a globally integrated platform to sell their products and services.


Accompanying the growth of the products and services offered to oil & gas exploration companies has been the opportunity to start new companies and scale operations in a compressed timeline. Enhanced technologies and production methods have few barriers to entry apart from access to capital and management expertise. Basin joins high quality managers with the experience, skills, and relationships needed to successfully start companies in the targeted sectors.

We believe our ability to provide capital and business building expertise has driven, and will continue to drive, value creation due to the increasing need for innovation in the energy sector. We provide our managers with a shared services platform designed to streamline start-up processes and minimize costs. These valuable advantages have allowed us to start eight new companies in the past four years. These start-ups generated over $130 million of gross revenues in 2014, making Basin one of the most effective energy and industrial company incubators in the world.

START-UP INCUBATOR

A Basin Tools machinist disassembles and services a drilling motor after a rental deployment.

8 $130 289NEW COMPANIES

FOUNDEDMILLION

AGGREGATE REVENUE

NEW JOBSCREATED


Basin’s acquisition strategy is driven by our global network of 150 industry executives. We acquire companies that can utilize the Basin platform to leverage sales and benefit from our manufacturing skills and experience. We invest at attractive valuations due to our demonstrable strategic value, and we target companies that offer products and services in high-demand markets. We focus on businesses that operate in complementary markets, and we partner with management teams who want to maximize the growth of their businesses.

Basin and its management are in full alignment as 90% of the company is owned by senior leadership and management. We create value through growth and operating leverage, not financial engineering. Basin subsidiaries have access to capital that can be used to launch new business initiatives, make game-changing acquisitions, and upgrade technologies and systems to support long-term expansion.

ACQUISITIONS

A Basin Supply employee gathers equipment commonly used in a well hook-up at our Perryton, Texas facility.

10 6 150COMPLETED

ACQUISITIONSSINCE INCEPTION

ACQUISITIONSIN 2014

BASIN MANAGERS SOURCING

ACQUISITIONS


The Shared Services group provides a variety of financial, strategic, and functional support services to minimize the operational costs of current operating companies and help streamline the creation of new businesses. Now numbering over 20 experienced professionals, the team has executive level HR, legal, accounting, IT, and corporate development experience. Shared Services is focused on removing all operational barriers to entry for companies built on the Basin platform and has helped launch eight businesses ranging from oilfield service providers to equipment manufacturers. As Basin continues to attract high-quality management teams, the group will be a valuable resource in reducing costs and improving the speed of new business development.

OPERATIONAL SUPPORTThe Shared Services team has experience in establishing new office locations, accounting & finance systems, procurement processes, HSE & ESG programs, HR & IT systems, and sales collateral. We offer highly trained CFOs and seasoned legal counsel to all our operating companies. Members of the Shared Services team have management and strategy experience from past executive roles at large public industrial companies.

CORPORATE DEVELOPMENTBasin Holdings has a team of experienced financial analysts who can assist with financial strategy, including building financial models, performing industry research, constructing operating company projections, and conducting acquisition diligence. The finance team is comprised of individuals with experience from leading investment banks and private equity firms.

SALES AND NEW BUSINESS DEVELOPMENTThe Basin platform is best suited for entrepreneurs who wish to launch and scale their business quickly. Our international reach and broad network provide introductions in North American and international markets. Basin has 73 office locations worldwide with experienced sales professionals capable of selling a variety of products.

BASIN SHARED SERVICES


SUPPLY ................ 18

TOOLS ................. 22

SERVICES ........... 25

INDUSTRIES ..... 28

FINANCE ............. 30

DIVISIONS


LOCATIONS

EMPLOYEES

2014 REVENUE

47

463

$417MILLION

2014 HIGHLIGHTS

Basin Supply is a global distributor of oilfield equipment. The division is built to provide procurement, sales, and distribution

services to oil & gas companies. We supply Maintenance, Repair and Operations (MRO) products, Oil Country Tubular Goods

(OCTG), and capital items such as drilling, production, and workover equipment. Basin Supply serves customers in the

emerging and developed oilfield markets and offers an international sales network to all Basin operating companies.

BASIN SUPPLY


Basin Supply was launched to provide equipment distribution services to the international oil & gas industry. The supply network in emerging drilling markets is inefficient. Organically established relationships between operators and equipment providers in developed markets rarely exist in emerging economies where language barriers, cultural differences, and a lack of business precedent present challenges. We created Basin Supply to service customers in these growing markets.

Our first objective was to hire an international sales team comprising local employees with pre-existing relationships in the industry. Currently, we have 47 sales, procurement, and supply centers located in North America, the Middle East, South America, Former Soviet Union, and Africa. In 2014, we grew our sales team from 246 to 463 employees, and added Kazakhstan and Argentina to the list of countries in which we operate.

Our second objective was to create a corporate infrastructure and establish North American vendor relationships. In 2012, we acquired WB Supply, a 45-year-old family owned oilfield supply company with 12 locations and an exceptional management team. Today, WB Supply has grown to 32 locations and more than doubled its revenue. WB Supply’s relationships and Basin’s international resources have helped facilitate the global expansion of Basin Supply.

Our objective in 2014 was to increase revenue and build our customer base. During the year, Basin Supply revenue expanded 30% from $320 million to $417 million. Internationally, we completed the acquisition of Driltools International, a Dubai-based oilfield services provider, which will aid our expansion in the Middle East and North Africa (MENA).

Basin Supply now serves as the international sales network for Basin, providing other operating companies a channel through which to market their products and services.

DIVISION OVERVIEW

Basin Supply procures and distributes oilfield products through a global network of 2,500+ vendors.

“WB Supply began as a two-man pump shop with a

focus on the customer. Basin has been a great fit as

their management team shares a similar commitment

to the high level of service that our company was

founded on 45 years ago.” — Ron Hess

Founder, WB Supply



DRILTOOLS INTERNATIONALIn November 2014, Basin Supply acquired Driltools International, a 17-year-old oilfield supply company servicing customers in the Middle East, Asia, and Africa through its Dubai office. The acquisition provides Basin Supply with 18 highly qualified employees and a stronger presence in MENA through new customer accounts and local procurement expertise.

Basin Supply’s international strategy is focused on developing our global footprint in attractive oil-producing markets with inefficient distribution networks. In 2014, we expanded our reach into two additional countries and acquired a supply company servicing MENA. Our acquisition strategy targets bolt-on opportunities that will complement our existing platform and accelerate Basin Supply’s growth internationally.

Basin Supply is growing into one of the largest privately owned oilfield distribution platforms in the world due to our focus on customer service and our wide range of procurement capabilities. While 2015 will be a challenging year for supply companies, we will emerge with stronger customer relationships and greater market share.

“

AYMAN KHATTABPRESIDENT, BASIN SUPPLY

INTERNATIONAL GROWTH

A Basin Supply employee stacks downhole pumps at one of our 16 North American artificial lift service facilities.

”

In late 2013, Basin Supply implemented an aggressive acquisition strategy focused on acquiring companies with like-minded management teams that would benefit from Basin’s financial capabilities, purchasing power, and strong reputation. This strategy resulted in two acquisitions in the United States by WB Supply, Basin’s North American operating subsidiary, increasing our domestic presence from 12 to 32 locations.

In December 2013, WB Supply acquired Permian Pump and Supply, a 20-year-old oilfield supply and artificial lift service company operating in the Permian Basin with 12 locations across West Texas and New Mexico. Following the acquisition, Basin injected growth capital to boost inventory that, aided by an impressive sales effort, increased same-store revenue 39%, from $50 million at year-end 2013 to $69 million at year-end 2014.

In November 2014, WB Supply acquired Beck Oilfield Supply, a 45-year-old oilfield supply company with six locations across Oklahoma, Texas, and Pennsylvania. This acquisition provides Basin entrance into the Marcellus Shale and the South Central Oklahoma Oil Province (SCOOP). In 2014, Beck’s revenue expanded 65% from $18 million to $29 million.

PERMIAN PUMP AND SUPPLY BECK OILFIELD SUPPLY

NORTH AMERICAN GROWTH


201312 LOCATIONS

201432 LOCATIONS

BASIN TOOLS

MILLION2014 REVENUE

SERVICE LOCATIONS

BUSINESSESON PLATFORM

$188

5

14 INTERNATIONAL

2014 HIGHLIGHTS

Basin Tools is a manufacturer of specialized oilfield equipment. The division is built to manufacture leading technologies for

global oil & gas customers. Our products include mud motors, drilling jars, rotors & stators, drill bits, reamers, and customized

pressure control equipment. In addition, Tools specializes in tungsten carbide coating, polishing, and other related services

for downhole oilfield equipment. Basin Tools leverages the Basin distribution network to sell products into markets outside of

North America.


Basin Tools was launched to manufacture specialized oilfield tools and equipment for the global energy industry. Our objective is to create a group of independently branded manufacturing businesses primarily based in North America that sell globally through the Basin platform. Many North American manufacturers produce high-quality equipment with global market applications but lack international sales capabilities. By acquiring and starting businesses that offer proven technologies, Basin Tools can capitalize on increasing demand from emerging, higher margin markets.

Basin Tools comprises five operating units: Wenzel, FHE, OTS, BasinTek, and Ascent. In 2014, we sold an 81% interest in Ascent and BasinTek and acquired FHE and OTS. Our sale of BasinTek and Ascent generated $324 million of cash proceeds. We started these businesses in 2012 and had a total of $15 million of cumulative invested capital in them.

We look for opportunities to buy or build companies that have the following characteristics:

PROVEN TECHNOLOGYBasin seeks to avoid technology risk. We manufacture products well known in the global oilfield market. When building companies that provide new technologies, we ensure that the targeted market has adequate customer demand.

LIMITED GLOBAL ACCESSWe look for businesses that have limited exposure to emerging markets. We introduce our operating companies to new markets and customers, which creates immediate top-line growth with low marginal cost.

STRONG MANAGEMENTWe partner with strong management teams that can add value across the Basin platform. Basin maximizes the growth potential of operating companies by pairing our operational expertise and strategic capital with high-caliber management teams.

DIVISION OVERVIEW

Above: A Basin Tools technician prepares a drilling motor mandrel for magnetic particle inspection.

Previous Page: A Wenzel senior engineer applies specialized coating to a flex sub to improve drilling durability.


OTS INTERNATIONALIn March 2014, Basin Tools acquired OTS International, a manufacturer of PDC drill bits, reamers, core bits, downhole tools and special design tools. The company was founded in 2004 and provides products and services for geothermal and oil & gas drilling through its manufacturing and service facility in Conroe, Texas.

FHEIn November 2014, Basin Tools acquired FHE, a provider of customized pressure control & grease injection equipment, perforating products, lube trailers, and sheaves & accessories. The company was founded in 2007 and employs 70 people at its locations in Fruita, Colorado and San Antonio, Texas. FHE is run by an exceptional management team with an established presence in an attractive market.

ACQUISITIONS

Basin Tools is focused on designing and providing leading products and technologies to drilling operators worldwide. Our goal is to provide a growing offering of oilfield tools and equipment. The products we manufacture are known for their quality and durability and our people are the best in the business.

“

LEIF SYVERSENPRESIDENT, BASIN TOOLS

”24Basin Holdings | 2014 Annual Report

The Edmonton, Canada Wenzel manufacturing facility houses a state-of-the-art carbide coating system.

BASIN SERVICES

2014 HIGHLIGHTS

Basin Services is a provider of diversified oilfield services and rental equipment. The division is built to provide best-in-

class services and high-end rental equipment to oil & gas operators. Services specializes in providing drill pipe and tubing

inspection, as well as flowback and well testing services. In addition, the division offers diversified oilfield and industrial rental

equipment with a focus on drill pipe and measurement-while-drilling equipment. We have extensive experience in launching

and acquiring new businesses and our management’s operating experience makes us a value-add partner to entrepreneurs

and business owners.


Basin Services was launched to provide oilfield services and equipment rentals to North American and international customers. The oilfield services and rental market will continue to experience growth driven by increasing levels of international exploration and production activities. The services market has expanded as operators increasingly focus on drilling efficiency, improved analytics, and safety. The rental market is experiencing tailwinds as new players with limited access to capital choose to rent rather than purchase expensive oilfield equipment.

Generally, we launch and acquire companies in North American markets. Once initial scale is reached and operating procedures are established, we utilize the Basin platform as a sales channel for international expansion.

BLACK DIAMOND OILFIELD RENTALSBasin Services’ first business, Black Diamond Oilfield Rentals, was founded in 2012 with an industry leading management team. The company rents and services drill pipe, landing strings, heavy-weight drill pipe, drill collars, tubing, blow out preventers, and tooling. Black Diamond is recognized for providing customers with best-in-class rental equipment, immediate response times, customized equipment, and technical advice and support. The company is now active in seven states, the Gulf of Mexico, and Mexico. Our rental fleet includes 150 miles of drill pipe and we are able to service 40 active rigs simultaneously. The leadership team at Black Diamond averages over 20 years of industry experience. In December 2014, Basin launched Black Diamond Deepwater, a subsidiary of Black Diamond Oilfield Rentals. Black Diamond Deepwater brings the same customer service and technical expertise to the deepwater drill pipe market. We have assembled an experienced team, expanded into new facilities, and built inventory to meet our customers’ needs. We are confident that customizing the Black Diamond formula for customers operating in deepwater will result in another successful business.

DIVISION OVERVIEW

Above: A Basin Services technician rebuilds a frac tree component.

Previous Page: A Basin FloWell employee adjusts a phase separator.


We believe that our focus on customer service provides superior value. Underlying this is the technical expertise of our people and high-quality equipment. Our goal is to grow our current companies and opportunistically augment our service offering through the acquisition and creation of businesses that meet and exceed customer expectations.

“

ROD BEELERPRESIDENT, BASIN SERVICES

DIVISION OVERVIEW, CONTINUED

PINNACLE OILFIELD INSPECTION SERVICESIn June 2014, we acquired Pinnacle Oilfield Inspection Services, a full-service drill pipe and tubing inspection company with both onshore and deepwater capabilities. Pinnacle was founded in 1985 by an experienced manager who continues to serve as president of the business. The company provides inspection, hardbanding, machining, and maintenance & prevention services. The company will focus on expansion into Mexico, increased offshore inspection work, and operational improvements in 2015.

RANGER DIRECTIONAL RENTALSIn August 2014, Basin launched Ranger Directional Rentals. Ranger provides measurement-while-drilling (MWD) equipment rental and support as the preferred lessor and renter of all Tolteq manufactured tools and technologies. The company is in early stages of development and is focused on establishing operational procedures, identifying customers, and deploying service offerings.

WENZEL RENTALS BUSINESSIn December 2014, Basin Services acquired Wenzel’s rental business. The new operating unit is focused on expanding and improving Wenzel’s current rental service offering.

BASIN FLOWELLIn August 2014, Basin launched Basin FloWell to provide flowback and well testing services, initially targeting growth markets in the Utica and Marcellus shales. FloWell is headquartered in a 25,000-square-foot facility in Norwich, Ohio. Founded by two former managers of a leading oilfield service company, FloWell identified customers, purchased equipment, and built a team of 15 employees in less than four months. By utilizing Basin’s Shared Services team, FloWell was able to outsource its legal, financial, accounting, and HR functions, allowing the team to focus on growing their business.


BASIN INDUSTRIES

2014 HIGHLIGHTS

Basin Industries is a manufacturer of industrial equipment and equipment components. The division is built to provide high

quality equipment and components and value-add manufacturing services. Industries offers world-class manufacturing

expertise and a proprietary Production System based on lean manufacturing, helping its operating companies better serve

their customers, improve relationships with suppliers, and maximize operational efficiencies. Our products are typically sold in

the following equipment markets: heavy construction and off-highway, hydraulics, agriculture, and material handling.


Basin Industries was launched to acquire and operate lower- to middle-market industrial equipment manufacturers. Many manufacturing companies can create significant value by improving efficiency, productivity, and safety. Industries is led by a management team with deep operating expertise and experience in implementing a proprietary Production System based on lean manufacturing principles.

Outside of leading large-cap companies, few manufacturers have access to the materials and management expertise associated with the Industries Production System. The Production System concepts, materials, and execution are crucial to minimize waste, maximize efficiency, and eliminate inconsistency in the manufacturing process. Few installable packages exist in the market today and the creation of a similar system is a labor-intensive and expensive task. The Production System includes a suite of proven materials similar to those successfully implemented at major industrial manufacturing companies.

STEELTECHIn September 2014, Industries acquired SteelTech, an industrial fabrication company specializing in high-volume, customized racking and container solutions supporting global automotive and industrial customers. Centrally located in Mitchell, Indiana, SteelTech has over 100,000 square feet of manufacturing space with design, prototype, and repair capabilities. Basin acquired the business to build out a material handling equipment platform in coordination with existing Cowin Global assets.

COWIN GLOBALIn October 2014, Cowin Global, a China-based manufacturer of material handling equipment, joined the Industries Division. In 2014, we restructured the management team and saw improved operating and financial performance. Basin continues to work with Cowin on a number of strategic initiatives, including the potential to expand the company’s manufactured product portfolio and target new North American customers.

Basin Industries is a preferred partner for North American manufacturers. Our management team has the experience to provide value-add operational support to our companies. Our division is run by senior executives from large industrial manufacturers and with the help of the larger Basin platform, we take manufacturing companies to the next level.

“

JIM WATERSPRESIDENT, BASIN INDUSTRIES

DIVISION OVERVIEW

ASSET EFFICIENCY MOTOR ASSEMBLYEFFICIENCY

15% 33%IMPROVEMENT INCREASE

Elements of the Production System have been successfully implemented at Wenzel’s Edmonton, Canada manufacturing location. After completing an introductory stage of the Production System modular elements, Wenzel’s service shop saw 25 safety and quality improvements, a 33% increase in motor assembly efficiency, and a 15% asset efficiency improvement.


BASIN FINANCE

2014 HIGHLIGHTS

Basin Finance is a financing vehicle focused on debt investments in North American energy and industrial businesses. The

division provides financing solutions, including subordinated or unitranche debt and bridge loans, to industrial and energy

equipment manufacturing and services companies. The division has historically funded acquisitions and provided growth

capital for Basin subsidiaries and is expanding its diversified loan portfolio to include investments in non-Basin businesses.


Basin Finance was launched to provide financing alternatives to independently managed affiliates of Basin Holdings. Our diversified loan portfolio currently includes investments in seven North American businesses within Basin Holdings, including businesses within each of our operating divisions.

We have recently expanded our scope to include investments in companies operating in the North American industrial and energy equipment manufacturing & services sectors that are outside of Basin Holdings’ current operations. Our strategy is to capitalize on Basin’s extensive operating experience both to originate lending opportunities on a proprietary basis and manage risks. Basin Holdings currently employs over 150 executives and sales managers across North America who are incentivized to source investment opportunities. By focusing on businesses that operate within the same or complementary markets to those in which Basin operates, we are able to allocate time and attention to the operations of our investments.

With loans typically ranging in size from $5 million to $20 million, Basin Finance is able to structure its investments to suit the specific requirements of each business. We employ a disciplined investment focus and seek to avoid both technology risk and exposure to countries outside North

America. We offer flexibility on many investment components, including maturity, security, and forms of equity participation.

Basin Finance is well positioned in the current commodity price environment, which we believe will create significant high-yield investment opportunities that require management expertise and value-add partners.

DIVISION OVERVIEW

Basin Finance provided $5 million of growth capital to launch FloWell. The company was fully operational within four months.

“ Basin Finance continues to build its diversified energy and industrial loan portfolio. With Basin’s deep operational expertise and proprietary sourcing capability, Basin Finance is well-positioned to find and capitalize on opportunity in this challenging market environment.”

TYLER HASSENPRESIDENT, BASIN FINANCE


DISCLAIMER

THIS REPORT CONTAINS FORWARD-LOOKING STATEMENTS, WHICH CAN BE IDENTIFIED BY WORDS LIKE “ANTICIPATE”, “BELIEVE”, “PLAN”, “HOPE”, “GOAL”, “INITIATIVE”, “EXPECT”, “FUTURE”, “INTEND”, “WILL”, “COULD” AND “SHOULD” AND BY SIMILAR EXPRESSIONS. OTHER INFORMATION IN THIS REPORT, INCLUDING ANY ESTIMATED, TARGETED OR ASSUMED INFORMATION, MAY ALSO BE DEEMED TO BE, OR TO CONTAIN, FORWARD-LOOKING STATEMENTS. ACTUAL RESULTS COULD DIFFER MATERIALLY FROM THOSE REFERRED TO IN FORWARD-LOOKING STATEMENTS FOR MANY REASONS, INCLUDING REASONS THAT MAY NOT BE DISCUSSED IN THIS REPORT. FORWARD-LOOKING STATEMENTS ARE NECESSARILY SPECULATIVE IN NATURE, AND IT CAN BE EXPECTED THAT SOME OR ALL OF THE ASSUMPTIONS UNDERLYING ANY FORWARD-LOOKING STATEMENTS WILL NOT MATERIALIZE OR WILL VARY SIGNIFICANTLY FROM ACTUAL RESULTS. VARIATIONS OF ASSUMPTIONS AND RESULTS MAY BE MATERIAL.

WITHOUT LIMITING THE GENERALITY OF THE FOREGOING, THE INCLUSION OF FORWARD-LOOKING STATEMENTS IN THIS REPORT SHOULD NOT BE REGARDED AS A REPRESENTATION BY THE COMPANY, ANY DIRECTOR OR OFFICER OF THE COMPANY, OR ANY OF THEIR RESPECTIVE REPRESENTATIVES, AGENTS, OR AFFILIATES AS TO THE RESULTS THAT WILL ACTUALLY BE ACHIEVED BY THE COMPANY. NONE OF THE FOREGOING PERSONS HAS ANY OBLIGATION TO UPDATE OR OTHERWISE REVISE ANY FORWARD-LOOKING STATEMENTS, INCLUDING ANY REVISION TO REFLECT CHANGES IN ANY CIRCUMSTANCES ARISING AFTER THE DATE OF THIS REPORT RELATING TO ANY ASSUMPTIONS OR OTHERWISE.


Documents

ANNUAL REPORT 2014 - Basin Holdings