Investor Presentation April 2017

Transcription

1 Investor Presentation April

2 Safe Harbor Provision This presentation contains statements about future events and expectations that can be characterized as forward-looking statements, including, in particular, statements about the Company s plans, strategies and prospects. The use of the words anticipate, estimate, expect, may, project, believe and similar expressions are intended to identify forward looking statements. Although the Company believes that the plans, intentions and expectations reflected in or suggested by such forward-looking statements are reasonable, they do involve certain assumptions, risks, and uncertainties, and the Company cannot assure you that those expectations will prove to have been correct. Actual results could differ materially from those anticipated in these forward-looking statements as a result of the factors described in this presentation. Many of these factors are beyond the Company s ability to control or predict. The Company cannot assure you that its future results will meet its expectations and investors are cautioned not to place undue reliance on any forward-looking statement made by the Company or its authorized representatives. All subsequent written and oral forward-looking statements attributable to the Company and persons acting on its behalf are qualified in their entirety by the cautionary statements contained in this paragraph and elsewhere in this presentation. The Company does not have any obligation or undertaking to disseminate any updates or revisions to any forward-looking statement contained in this presentation or the admission document to reflect any change in the Company s expectations about the statement or any change in events, conditions or circumstances on which the statement is based. 2

3 EcoStim Investment Thesis Refinanced company establishing two market platform to balance risk; maintain upside in Argentina Provide superior equipment and operations team at lowest cost Rely on technology to drive efficiency and cost advantage Focus on markets with best geology & strongest return opportunity Focus on natural gas development in Argentina 3

4 Refinanced Company In early March 2017 Fresh cash injection of $17 million to repay debt, finance capex and working capital Total debt of $41 million to be converted into equity at $1.40 per share, if shareholders approve at next meeting (June/July) Goal is to create a debt free company to pursue growth in two solid and expanding markets Description Actual at 12/31/2016 Proforma for Fir Tree Transaction Proforma for Fir Tree Conversion Cash $ 1.8 $ 15.8 $ 15.8 Debt $ 24.0 $ 41.4 $ - Shares Outstanding Fir Tree Partners - $10 billion fund with focus on growth & now 2 nd largest shareholder; largest shareholder following debt conversion Nasdaq listing a priority for Fir Tree and the Company 4

5 Technology-driven, growth platform in solid markets Emerging growth, technology-driven independent oilfield service company Well stimulation; Coiled tubing; and Reservoir field management services Proprietary proven technologies and processes to: Reduce footprint, horsepower and capital cost; Emissions well below required Tier 4; Methane escape best in industry Use less fuel or lower cost fuel Initial Operation in Argentina Started with conventional market Transitioned to tight gas market in 2016 Argentina business should move to cash flow neutral status 22,500 HHP remain in Argentina in 2016; more equipment to be added with contractual commitments Entering US Market in Oklahoma One year contract in place; Start in Q Base established in strategic location Vaca Muerta World s 3 rd largest shale resource basin Customer expanding; solid growth opportunity 5

6 Blender Data Van Sand King Blender Hydration Sand King Blender Blender Sand King Hydration Blender Blender TPUs EcoStim Rolling Stock Equipment Distribution Moving from 10,000 HHP in 2015 to over 100,000 HHP in 2017 Argentina Flex Crew - 14 pumps (31,500 HHP) Oklahoma Crew #1-16 pumps (35,000 HHP) Palmero Unit Lease Unit Lease Unit Lease Unit Hydration Hydration Lease Unit Data Van Data Van Data Van Crew #2 & Redundancy -24 pumps (54,000 HHP) 26 Tractors & 10 Light Trucks Sand & Chemical Handling Equipmnet - Owned & Ready to Operate - To be Upgraded - To be purchased - Lease option in place 6

7 Evercore Research shows that when our equipment is put to work, we should be able to more than triple the value of the Company 7

8 Seasoned leadership team with local and international experience Relevant Experience Bjarte Bruheim Chairman and Founder 30+ years international management experience J. Chris Boswell President, CEO and Founder 28 years experience in the oilfield service industry Bobby Chapman Chief Operating Officer 35+ years senior management oilfield experience Barry Ekstrand Sr. VP, Operations 35+ years senior management oilfield experience Alexander Nickolatos Chief Financial Officer and Assistant Secretary 15+ years experience in finance and accounting Carlos A. Fernandez Sr. VP, Corp. Development General Mgr., Latin America 35+ years senior management experience in Latin America Miguel Di Vincenzo VP, Sales & Technology 28 years oilfield services experience in Latin America 8

9 Management team has consistent track record of building profitable energy & energy service platforms Co-founded by Bjarte Bruheim in 1991; served as President until 2001 Chris Boswell CFO from ; directed >$3 billion in growth capital Grew from 2 ships to 33% share of the marine seismic market by 1998 Now has 16 marine seismic vessels, with 33 offices in 25 countries Developed in 1995 by Bjarte Bruheim, Chris Boswell and others utilizing PGS seismic library as seed capital Initially funded by Warburg Pincus Completed $116 million IPO in 1999 Acquired by Norsk Hydro ASA (now Statoil ASA) for $2.45 billion in 2005 Deepwater exploration venture initially capitalized by Bjarte Bruheim and Warburg Pincus Acquired certain electromagnetic technologies from Statoil ASA in 2004 Completed IPO in 2007 valuing the company at ~$1.6 billion Bjarte Bruheim named Executive Chairman of financially troubled seismic equipment designer in 2002 Successfully arranged new investor capital to help turn around company Sold to Rolls-Royce in 2009 for approximately $200 million Co-founded by Bjarte Bruheim in 2009 as an E&P vehicle to utilize EMGS technology to de-risk offshore targets Sold to Tullow Oil in 2012 for up to $672 million total consideration Norwegian marine seismic venture cofounded by Bjarte Bruheim in 2005 Listed on Oslo Stock Exchange in 2007 Signed contracts for construction of 6 advanced 12-streamer 3D vessels Acquired by Schlumberger in 2007 for $838 million in cash consideration Co-founded by Bobby Chapman in 2005 with backing from Soros and ESS Grew to 6 crews and 130,000 HHP by the second half of 2007 Contracts in place for 3 additional crews at 56,000 HHP Sold to Trican Well Service in 2007 for $256 million In 2009, Chris Boswell was hired as CFO to re-set strategy and divest assets for a distressed silicon valley backed oilfield technology company Mr. Boswell and Carlos Fernandez successfully farmed 5 blocks in Neuquén province of Argentina Arranged $60 million in expansion capital from new investors in 2011, including Microsoft founder Bill Gates and Energy Capital Group Five exits valued at +$4.5 billion; Three ongoing entities valued at $2+ billion 9

10 Establishing two strong positions in high growth markets with long term contracts Argentina s Neuquén Province Tight Gas and Vaca Muerta shale Oklahoma s Mississippian/Stack/Scoop Plays 10

11 Contract signed with well established operator in Oklahoma Contract is for one year beginning on readiness date (estimated Q2 of 2017) Investment is relatively light to achieve readiness; much of the equipment is available or has been secured ESES to execute all well stimulation stages performed monthly (estimated to be stages until second rig is added) utilizing approximately 25% of capacity Customer expects to add second rig in second half of 2017; doubling stage count Work will not require sand and only light chemical package; little working capital In discussion with other operators in area to secure additional wells/stages Area is becoming more active 11

12 Expansion to the US starts in North Central Oklahoma to position EcoStim to service the growing regional market - ESES base of operation 12

13 Operators & Rigs as of January 2017; OK rig count up by 60% since March 2016 Midstates - Woods 1 Comanche - Major 1 Chesapeake Major 1 Kirkpatrick Major 1 Tapstone - Woodward 1 Devon Woodward - 1 Sandridge Woodward 1 PPP Petroleum Ellis 1 Logan Red Bluff Resources 1 White Star Payne - 1 Dewey 6 Blaine 19 Kingfisher 17 Canadian - 8 Custer 5 Washita 0 Caddo 0 Grady 14 Beckham - 5 Major Operators in Stack/Scoop Devon Chesapeake Continental Cimarex Marathon Newfield Linn Energy Gastar Oklahoma Energy Carrera Energy Chaparral Hinkle Council Oaks Resources Super Heaters, LLC 13

14 OK rig count up further in March 2017; New base in close proximity to Blaine/Kingfisher counties 14

15 Argentina s growth opportunity is unique Key Selection Criteria For International Shale Market Opportunities 1. Geology Resource produces economic hydrocarbons 2. Pace of activity Sufficient wells to maintain good equipment utilization 3. Demand for hydrocarbons Production consumed locally or export potential 4. Infrastructure Roads, housing, fuel, pipelines and support services 5. Local knowledge Feet on the ground; local network 6. Business risk Regulations, taxes, security, culture, ethics, etc. Source: EIA and Accenture. 15

16 Summary from YPF s Recent Earnings Webcast Shale Oil Benchmarking Vaca Muerta Well Productivity Compared To Best in USA Wolfcamp Vaca Muerta Bone Springs Eagle Ford Bakken EUR / Foot of Lateral Length Source: WoodMackenzie / YPF 16

17 What has changed in Argentina? New pro-business, free markets President Natural Gas prices set at $ through 2021 Currency controls removed New trade agreement with US & rejoins IMF New deal between government, labor unions, and energy companies expected to double investment Shell signs new exploration deal with YPF Tecpetrol commits $2.3B to Vaca Muerta and Tight Gas 17

18 Drilling efficiency gains Eagle Ford vs Vaca Muerta 120 Drilling days per horizontal well Source: Management Estimates & YPF Public Data Eagle Ford Vaca Muerta 18

19 Mature oil producing country with strong customer base E&P Companies Operating in Argentina Source: Management research 19

20 Major Investments Now Being Made 20

21 Review of past business and new contract opportunities for EcoStim 2015 Customers And Partners New Customers New Contracts

22 Argentina market oversupplied in 2016 due to rig count reduction. Rigs starting back to work, prices improving; barriers to entry remain Barriers to Entry: Importation of new stimulation equipment is still challenging Any new equipment into country must be negotiated with at least 3 agencies (Ministry of Industry, Department of Trade, and Customs Office) Matching agreements need to be negotiated with local vendors Government still favors protectionist policies to support local industry Repatriation of dollars has been difficult historically; still scares some competitors 22

23 Neuquén Offices and Operational Base 2 OFFICES IN NEUQUEN AND 1 OFFICE IN BA ACTUAL YARD AT THE PIN NEUQUEN AND FUTURE YARD IN PLOTTIER 23

24 Argentina Operations Team TEAM OF 74 PEOPLE IN ARGENTINA 24

25 Operations in Neuquén Argentina 25

26 III. Technology 26

27 EXECUTION - Technology well suited to reduce cost and environmental impact Only pumping unit in the world capable of: running on 100% natural gas can run on multiple fuel sources including natural gas, CNG, LNG and Diesel delivering emissions 65% below EPA Tier 4 requirements delivering 4500 HHP from a single trailer with engines weighing ~ 800 pounds each Proprietary control system modified & enhanced with automated functions CNG tube trailer 2200 psi Heater to avoid freeze up during decompression Gas conditioning skid to remove liquids 4500 HHP on one trailer 27

28 EXECUTION - Technologies Integration Traditional EcoStim Multiple Natural Gas Fueling Options First Frac Operation with TPU in Argentina 28

29 You can t manage what you don t measure Eco-Stim conducts its horizontal stimulation services within a systematic methodology Leverages fiber-optic technology and predictive modeling (how many stages don t actually produce hydrocarbons?) Enables Eco-Stim to efficiently predict stimulation effectiveness and understand the shale in real-time Proprietary process to efficiently predict sweet spots in shale plays Learn best producing areas of the formation in a given area and incorporate information into next geophysical prediction 1. Predict 5. Update Model 2. Execute Stimulate all planned stages as designed Compare prediction of sweet spots to actual production 4. Evaluate Prediction 3. Measure Downhole technologies to determine which stages are actually producing Predict, Execute, Measure, Evaluate, Re-Predict 29

30 Example of sweet spot PREDICTION; largely based on the identification of micro-fracture swarms or natural fracturing Technology used primarily in high cost regions Targeted Sweet Spots + - Using proprietary technology for accurate well placement and stimulation stage planning Maps produced in less than three weeks at minimal cost Over 350 shale projects completed in U.S. shale plays Over 25 projects completed in Argentina Curvature Attributes Flares correlate with Geo- Predict sweet spot mapping confirming the effectiveness of Geo-Predict s methodology 4 Ft Flare Ft Flare Ft Flare Ft Flare Ft Flare Ft Flare Ft Flare 7610 Mud logs on this horizontal well show flare markers that confirm predictive fracture maps 30

31 MEASURE & EVALUATE - Confirmation of producing zones.. (It is generally accepted that only one of three stages produce hydrocarbons) Derived from Fiber Optic Acoustic Signatures TIME Gas + Water Production from zone 8 Gas Production from zone 6 31

32 UPDATE MODEL & CALIBRATE - Target completion stages based on technology & empirical data 32 $100k / Stage = $3.2 Million 16 $100k / Stage = $1.6 Million 32

33 EcoStim Investment Thesis Refinanced company establishing two market platform to balance risk; maintain upside in Argentina Provide superior equipment and operations team at lowest cost Rely on technology to drive efficiency and cost advantage Focus on markets with best geology & strongest return opportunity Focus on natural gas development in Argentina 33