SafeBlend Tech

Safeblend
Technologies
PRESENTED BY: YUSUF AKTAN, WILLIAM CHEN, DAVID GU & KYRON RICHARD

Price Contracts & Competition

!

Goals for Safeblend:

!

Stay afloat until 2014, keep majority marketshare

Recommendation:
!

Competitive Pricing to eliminate Floatwise

Industry
Analysis

Competitive
Analysis

Financial
Analysis

Price
Proposal

Five Forces Analysis: Fracking

Customers:

Suppliers:

BNG (High)
AOG (Low)

NEGLIGIBLE

Rivalry:

GG (Med)
Bixon (Low)
Float (High)

Threat of
New
Entrants:
Industry
Analysis

LOW

Substitutes:

ALT. ENERGY

Fracking Fluid Suppliers Have Power

!

Barriers to entry are high and a lack of substitutes mean suppliers are powerful.

Competition and rivalry are intense.

Strategy: weed out competition for as long as possible.

Industry
Analysis

Industry
Analysis

Competitive
Analysis

Financial
Analysis

Price
Proposal

Main Industry Competitors

Floatwise

Safeblend

Privately held, $20 million revenue

Offering aggressive pricing to BNG

Privately held, $44 million revenue

60% of AOGs Fluid

GG Works

Bixon

Privately held, $25 million revenue

Providing 40% of AOGs Fluid

Publicly held oil and gas

$75 million revenue
Proprietary blend

Competitive
Analysis

Floatwise > Biggest Comp. in 2012

!

Bixon is proprietary & GG has lower profits without business

Floatwise is Biggest Competitor:

!

Advantages: Proven industry supplier and Floatwise is

unable to quickly mobilize.

Competitive
Analysis

Industry
Analysis

Competitive
Analysis

Financial
Analysis

Price
Proposal

How Low Can You Go?

!

Break-even point: When Profit = 0

Profit = Contribution Margin - Fixed Cost

Contribution margin = Fixed Cost

Financial
Analysis

Fixed Costs and AOG Revenues

!

SG&A as Fixed Costs

!

Estimate using 2012 FC using 2011 and

adjusting for 3% inflation

AOG Revenue
!

Estimate using 2012 Price Agreement; 60%

of 2560000 units at $ .4 / unit

$1,194,091 * 1.03

-= $1229913.73

2,560,000* .60 *$.40

Financial
Analysis

-=$614400

CM Needed from BNG?

!

CM needed from BNG depends on portion of the business

Break-even price is Unit CM in addition to Variable Costs

Unit CM = $615513 /(50% * 4640000)

Unit CM = $615513 /(75% * 4640000)
Unit CM = $615513 /(100% * 4640000)

Unit CM = $.13 +$.40

Unit CM = $.18 +$.40

Unit CM = $.27 +$.40

-$.53
$0.58
$0.67

Industry
Analysis

Competitive
Analysis

Financial
Analysis

Price
Proposal

Pricing Recommendation > Keep

BNG
!

Pricing strategy: delay Floatwises seizing portions of BNGs business

Most competitive pricing at 75%, discourage use of Floatwise as a supplier

2012

2013

2014

0.50

1392000

1560000

2088000

0.75

3132000

3510000

4698000

1.00

1392000

3120000

4176000

Price
Proposal

Future > Post-Recommendation

!

If Floatwise is kept from BNG, SB can obtain a higher marketshare in 2013

Kettle can be a client option in 2014

2012

2013

2014

AOG

614400

700000

880000

BNG

1392000

3510000

2436000

Kettle

1500000

TOTAL

2006400

4210000

4816000

Price
Proposal

Results of Alternate Price Strategies

2012

2013

2014

2012

2013

2014

AOG

614400

700000

880000

AOG

614400

700000

880000

BNG

3132000

1560000

522000

BNG

1044000

780000

522000

Kettle

1500000

Kettle

1500000

TOTAL

3746400

2260000

2902000

TOTAL

1658400

1480000

2902000

If they move to other competitors, it will hurt the business.

If you shoot low, the price will stay low.

Price
Proposal

Future Steps for Safeblend

!

Inorganic Growth through M&A

Partnership with Bixon

Long-term contracts with major clients

Offer complimentary products

Final Price Contracts & Competition

!

Recommendation:
!

Pricing is the strategy and were ready to sign!

Any Questions?
!

Goals?

Pricing Strategy?

Competition?

Industry Factors?