Changing the way clients think about producing energy. INVESTOR PRESENTATION December 2014

Transcription

1 Changing the way clients think about producing energy INVESTOR PRESENTATION December 2014

2 Forward Looking Statements This Corporate Presentation contains certain forward-looking statements and forward-looking information (collectively referred to herein as forward-looking statements ) within the meaning of applicable securities laws. All statements other than statements of present or historical fact are forward-looking statements. Forward-looking information is often, but not always, identified by the use of words such as could, should, can, anticipate, expect, believe, will, may, projected, sustain, continues, strategy, potential, projects, grow, take advantage, estimate, well positioned or similar words suggesting future outcomes. In particular, this Corporate Presentation contains forward-looking statements relating to future opportunities, business strategies and competitive advantages. The forward-looking statements regarding the Company are based on certain key expectations and assumptions of the Company concerning anticipated financial performance, business prospects, strategies, the sufficiency of budgeted capital expenditures in carrying out planned activities, the availability and cost of labour and services and the ability to obtain financing on acceptable terms, all of which are subject to change based on market conditions and potential timing delays. Although management of the Company consider these assumptions to be reasonable based on information currently available to them, they may prove to be incorrect. By their very nature, forward-looking statements involve inherent risks and uncertainties (both general and specific) and risks that forward-looking statements will not be achieved. Undue reliance should not be placed on forward-looking statements, as a number of important factors could cause the actual results to differ materially from the beliefs, plans, objectives, expectations and anticipations, estimates and intentions expressed in the forward-looking statements, including among other things: inability to meet current and future obligations; inability to implement the Company s business strategy effectively in Canada, Mexico and the United States; inability of the Company to continue meet the listing requirements of the TSX Venture Exchange; general economic and market factors, including business competition, changes in government regulations; access to capital markets; interest and currency exchange rates; technological developments; general political and social uncertainties; lack of insurance; delay or failure to receive board or regulatory approvals; changes in legislation; timing and availability of external financing on acceptable terms; and lack of qualified, skilled labour or loss of key individuals. Readers are cautioned that the foregoing list is not exhaustive. The forward-looking statements contained herein are expressly qualified in their entirety by this cautionary statement. The forward-looking statements included in this Corporate Presentation are made as of the date of this Corporate Presentation and the Company does not undertake and is not obligated to publicly update such forward-looking statements to reflect new information, subsequent events or otherwise unless so required by applicable securities laws.

3 Corporate Profile Mission: Changing the way clients think about producing energy Eight Years of Service 25 Employees TRIF Largest ESP Supplier (Gillette WY gas wells) 6.6% Inside Ownership DVG TSX-V Symbol $ $ Week Range* $ 19.6million Market Capitalization* 91,402,090 Shares Outstanding *As at December 1, 2014

4 Corporate Profile Vision: The North American leader in cost effective, innovative technologies and solutions for Artificial Lift and the movement of hydrocarbons Artificial Lift Canada, USA Linear Electric Submersible Pumps Electric Submersible Pumps Electric Submersible Progressing Cavity Pumps Flexible Pipe Mexico Flexible Steel Pipe 2 through 8 Installation Services Project Financing Mexico Oilfield construction Lease roads Wellsites Innovation Focused Service Oriented Value Driven

5 Evolution of DIVERGENT Service Oriented: Getting it Done Right the First Time Field staff are the foundation of great service. Our staff in Gillette WY continue to set the industry standard for delivering quality and exceeding their customer s expectations. 15% 25% 15% 25% 15% 40% 35% (est.) 30% Divergent Competitor 1 Competitor 2 Competitor 3 Source: Internal Estimates of ESP Products & Services for dewatering Powder River Basin gas wells

6 Evolution of DIVERGENT Innovation Focused: Cost Effective, Innovative Technologies & Solutions The Linear Electric Submersible Pump Duplicates rod pump movement without rod strings or surface lifting equipment All moving parts are contained within the submersible pump housing Hangs on the bottom end of the production tubing Eliminates rod and tubing wear How it works driven by a linear synchronous permanent magnet motor generates thrust from a magnetic field and permanent magnet mover Features Reduced footprint on surface Lower operating cost Adjustable stroke length and rate Low noise No oil leakage from stuffing box Remote monitoring and adjustments Applications Vertical, Slant, and Horizontal Wells Up to 100 bbls/day Landed depths to 1500 m

7 What s Next? Value Driven: Focused and Sustainable Growth Corporate Head Office Operations Viking Shaunavon Bakken With roughly 750,000 rod pumps working in North America, DIVERGENT is focused on deploying the Linear Pump into key oil resource plays that continue to experience the high cost of rod and tubing wear. Calgary Kalama Estevan Estevan Gillette Reynosa Powder River Niobrara Uinta Burgos Southeastern Villahermosa

8 What s Next? ValueDriven:Reducing the Life Cycle Costof Producing Oil & Gas Canadian Well Counts Vertical Wells Drilled Horizontal Wells Drilled With all moving parts contained internally, DIVERGENT s Linear Pump is ideal for placement in horizontal wells, eliminating rod and tubing wear. Canada s energy industry is focused on oil, creating thousands of new candidate wells for the Linear Pump every year. Sources: 1. Data Central: June Warren-Nickle s Energy Group 2. CAODC 100% 80% 60% 40% 20% 0% Canadian Well Distribution Other Gas Oil

9 What s Next? Value Driven: Return on Investment(ROI) of Linear Pump Installations ROI (,000's) ROI (,000 s) $600 $400 $200 $0 -$200 $1,000 $500 $0 -$500 Year 1 Year 2 Year 3 Year 4 Year 5 60 bpd 80 bpd 100 bpd Year 1 Year 2 Year 3 Year 4 Year 5 1x per year 2x per year 4x per year Oil production rates impact the Linear Pump s ROI significantly due to the amount oftimethewell is downwaiting for a service rig to repair broken and worn sucker rods. Frequency of sucker rod failures is highly dependent on well conditions. A highly deviated well may experience rod failures four or more times per year, making the Linear Pump s ROI rise sharply. Assumptions in ROI Calculations: Rod Strings $20 per meter ; 10% of string replaced after a failure event. Tubing $20 per meter ; 10% of string replaced after a failure event. Service Rig $12,000 per day ; 2 days per failure event. Non-producing Days 5 days lost production per rod failure. Oil Price of $75/bbl. Production Rate of 80 bpd for Variable Rod String Failure Rate Chart. Rod String Failure Rate of 2 per year used for Variable Oil Production Rate Chart.

10 Growth Drivers Demand for Artificial Lift: The global market for artificial lift was estimated to be $9.3 billion in 2012 and is expected to reach $16.0 billion by 2018, growing at an annualized growth rate of 9.5%. North America dominated the global artificial lift market, accounting for 45.5% of the global artificial lift market revenue in (source: marketsandmarkets.com) Mature Oil Fields: About 70% of the global crude oil production is from mature fields, of which, most require artificial lift equipment. More than 60 percent of producing oil wells require some type of assisted lift technology to produce the recoverable oil. (source: pumpsandsystems.com) Limitations in Existing Lift Technology: Roughly two-thirds of the producing oil wells around the world use rod pumps. Limitations to rod pumps arise with deeper, highly deviated, and horizontal wells. (source: pumpsandsystems.com) Mexico s Energy Reform The energy reforms, ending a 75 year monopoly of state-owned Pemex, could increase Mexico s long-term oil production by 75%. By introducing foreign investment, Mexico s overall activity levels are expected to increase.

11 International Operations Flexible Pipe: Distribution and installation services for flexible steel pipe products. The Mexican oil and gas pipeline infrastructure has a rising demand for both new installations and remediation of older pipelines. The new energy reforms of Mexico are opening the door to expansive opportunity. Sales & Distribution API 17J certified Up to 21 Mparating (3000psi) Sizes from 2 to 8 Installation Services API 15S Swaging Connectors High tension rating for longer pulls No product failures to date

12 International Operations Project Financing: Providing working capital and project management for oilfield construction projects in Mexico. Projects include well sites and access roads, and the clients are large multi-national oilfield service companies under turnkey contracts to Pemex. Project Management Financing 3% administration fee 20% finance fee Client s receivables assigned to Divergent

13 Financial Results Comparative Results: All amounts in USD thousands, except per share amounts and as noted. Three Months Ended September % Change Revenue $1,698 $1,625 4% Gross Profit $428 $735 (42%) Net Earnings (Loss) ($1,438) ($333) (332%) Earnings (Loss) per share - Basic and Diluted ($0.01) $0.00 Nine Months Ended September % Change Revenue $4,773 $4,353 10% Gross Profit $1,510 $1,707 (12%) Net Earnings (Loss) ($3,569) ($1,134) (163%) Earnings (Loss) per share - Basic and Diluted ($0.04) ($0.01)

14 Balance Sheet and Capitalization All amounts in USD thousands, except per share amounts and as noted. As at September 30, Cash and Cash Equivalents $2,352 Working Capital $2,841 Long Term Finance Contract and Loan Receivable $1,966 Property, Equipment and Trademark $876 Debentures (in CAD, due December 31, 2014) $5, Current Ratio 1.57 Debt-Equity Ratio As at December 1, Shares 91,402,090 Warrants 13,158,200 Options 5,300,000 Fully Diluted 109,860,290 Market Cap. ($CAD) $19.6 million

15 Our future is what we make it Divergent Energy Services Corp. Corporate Office 1170, th Ave SW Calgary Alberta T2P 3G3 T: F: TSX-V: DVG