One of the few quality businesses in the oilfield services (OFS) sector

More of a specialty chemicals company than an OFS business

>75% of EBITDA tied to production - recurring, longer duration revenue

CHX generates mid-teens ROIC including adding back covid-era impairment

CHX has consistently out-performed peers on key metrics like ROIC, margins, FCF conversion, working capital intensity

FCF conversion above peers, despite smaller size, yet trades at discount to peers:

CHX's business is tied to production, not drilling - that gives it longer duration vs peer OFS companies where 80%+ of sales is tied to drilling and completions capex

This makes CHX unique: peers are tied to O&G capex vs. CHX which is tied to opex

This link to production has led to less significant positive earnings revisions than other OFS companies over the last two years, but will also be more defensive in a downturn

Terminal value is a big issue for OFS companies but less of an issue for CHX where reveues are tied to total liquids production globally (oil + water)

CHX organic growth exceeds oil demand growth by ~3x from mix shift to harder to produce bbls

CHX's most valuable asset is Nalco Energy Services - the leader in offshore oilfield chemicals

CHX’s Offshore division is the technology leader in offshore O&G chemicals – a legacy of when predecessor Nalco dominated the deepwater chemicals industry for decades.

Nalco’s Energy division was acquired by Ecolab for 10.9x NTM EBITDA (1.8x Sales) in 2011

Nalco's technical expertise is critical to offshore production, customers bring in Nalco years before production begins - this drives close relationship, high visibility for CHX

Visibility on customer production ramps drives CHX mgmt confidence in HSD organic growth for Chemicals (we estimate MSD)

Nalco was the technical advisor responsible for starting up over 2/3 of all Offshore fields producing today

Offshore is CHX's best business:

• Duopoly with BKR (~40-50% share on Deepwater vs. 26% of global OFS chems market)

• CHX technical abilities far above BKR- BKR often brought in for security of supply diversification

• Rational competition - some gains/losses for each but no significant competition on price

• CHX's superior service has led to them gaining share in key geographies from BKR

• High growth: Deepwater production growing mid-teens CAGR

• Highest margins: we estimate over 10% higher margins than Onshore (mid-20%s vs. low-to-mid-teens for onshore)

• BKR formers: CHX's customers care more about technical expertise and service than price - different customers than BKR

CHX can grow sales organically mid-single digits in most oil price environments

Structural growth drivers:

1) Deepwater + Ultra Deepwater

• 40% of PCT is Offshore growing double-digits… growing offshore % of mix will boost margins (+1000bps higher margins than Onshore)

2) MidEast onshore unconventionals

• Jafurah: $100bn onshore gas project in Saudi

3) Growth of artificial lift from maturing shale fields

• Increasing intensity of artificial lift per well as resevoirs becomes less productive - requiring more lift to make up for the loss

4) CHX sells to majors in US onshore whose production growth is expected to exceed the NAM average of ~flat to LSD %

MSD sales growth leads to mid-double digit FCF growth incl. capital return (%) - high-teens total return

With lower sales growth, working capital outflow should abate and FCF conversion should improve

Upside from leading emissions monitoring and Digital Oilfield products

Digital (Oilfield IoT) has seen very strong growth and now represents 25% of PAT sales

85% of segment sales are edge hardware for the monitoring of production assets

15% of sales is production optimization software

Management sees digital as a 20% growth opportunity as a segment and will likely separate it into its own segment

Formers framed the growth algorithm as MSD to HSD price and 5 to 15% volume growth from new customers and expansions

Resilient growth even in the face of weaker completions - digital expected to grow 17% in 2023 despite double digit decline in NAM rig counts

CHX owns a leading emissions monitoring service, which benefits from a growing focus on methane emissions in O&G production - a major GHG contributor

• Market leader in emissions monitoring by installed base

• Potential for regulations to significantly accelerate growth

• Currently $20mm of revenues, upside case is $100mm in 5-years as management expects 30 to 40% growth

These businesses have been immaterial but are starting to become positive variance for margins next year

Digital as a whole is accretive to PAT, and the software business is even higher margin

We estimate Digital has 500-1000bps higher margins than current segment average (23% EBITDA margins)

CHX has attractive, predictable capital allocation, FCF conversion and shareholder return

CHX deserves premium multiple on clear capital allocation, no M&A risk, high shareholder return (~80% of FCF recently)

CHX FCF conversion very strong vs. peers - strong working capital mgmt vs. other OFS business

We estimate CHX can buyback 4-5% of shares per year growing sales MSD

We estimate top-line growth of MSD improves CHX FCF conversion to low-60% of EBITDA on lower WC investment requirements: