Great Prairie Energy Services (GPE-V)

Transcription

1 (GPE-V) New Oilfield Services Consolidator Poised to Continue Rapid Growth July 9, 2014 Michael Mills, CFA (902) Ted Bobier, Associate (587) We are initiating coverage of Great Prairie Energy Services with a BUY rating and a 12-month price target of $0.75. This consolidator of high margin oilfield service companies in Saskatchewan and Alberta is expected to grow rapidly over the next few years. Great Prairie has burst onto the scene, completing its qualifying transaction in October 2013 and completing two subsequent acquisitions. GPE is involved in rentals, hauling, and fluid management from four operating branch locations. The three deals to date have been priced at an average of 3x trailing EBITDA and been immediately accretive to earnings. The Company has financed deals through a combination of cash and stock, and we expect additional capital to be raised to fund growth. The pipeline of prospective deals is strong, with due diligence being performed on a handful of opportunities at the moment. While the current operations have an annual run-rate EBITDA of ~$14 million, we believe this could double over the next months. We factor in a $10 million equity raise and a $12 million acquisition into our forecast (modeled in Q414), though activity could be greater and/or happen sooner. This acquisitive growth, coupled with capital to grow organically, generates a F2015 EBITDA forecast of $18.4 million. We use 6.5x F2015 EBITDA and 11x F2015 EPS to derive our 12-month price target of $0.75. Trading below the comp universe, despite an above average growth profile and seasoned management team, we believe this small cap growth story represents a compelling buy. Initiating Coverage BUY $0.75 Previous Close (C$) 12-month Target Price (C$) Potential Return YE: Dec 31 FY13A FY14E FY15E Revenue ($MM) $2.5 $24.0 $38.1 Adj. EBITDA ($MM) $1.1 $12.4 $18.4 FD EPS -$0.01 $0.05 $0.07 FY13A FY14E FY15E P/Sales 24.5x 2.6x 1.6x EV/EBITDA 73.2x 6.4x 4.3x P/E n/a 10.1x 7.4x Shares Outstanding FD Market Cap (C$) FD $61.6 Net Debt Enterprise Value $79.0 $17.5 (post Calmena) $0.50 $ % 52 W eek Price Range (C$) $0.10-$0.60 Stock Data (MM) About the Company Great Prairie is a Canadian energy serv ices company focused on serv icing oil and gas activ ity in Saskatchewan and Alberta. The Company is in a rapid growth period, and is focused on creating v alue for its inv estors through both organic and acquisition growth. The Company s head office is in Calgary and was founded in Estimates Valuation All prices in C$ unless otherwise stated Stock Performance Volume (Millions) Price (CAD) Oct Nov Dec Jan Feb Mar Apr May Jun $0.60 $0.50 $0.40 $0.30 $0.20 $0.10 $0.00 Beacon Securities Ltd. 66 Wellington Street West, Suite 4050, Toronto, Ontario, M5K 1H

2 Table of Contents Investment Thesis... 3 Company Overview... 4 Growth Summary... 5 Competitors... 7 Customers... 7 Energy Plays in Focus... 8 Financial Results Recap Outlook & Forecast Recommendation and Valuation Key Risks Appendix A Appendix B Appendix C July 9, 2014 Page 2

3 Investment Thesis Great Prairie Energy Services (Great Prairie, GPE, or the Company) is a new oilfield services consolidator that completed its qualifying transaction in Q The Company, led by an experienced team of executives and backed by a very strong Board, has completed three acquisitions to date. These acquisitions, completed at an average trailing 12-month EBITDA multiple of 3x, has established GPE in the oilfield rentals, oilfield hauling and frac fluid management segments. Operations are focused in Alberta and Saskatchewan, with four operating bases to date. Head office is in Calgary. We believe Great Prairie will continue to grow rapidly over the next few years as management seek to acquire high margin service businesses that are dealing with succession planning and/or capital growth constraints. The Company is focusing on several energy plays, including the Viking, Cardium, Montney, Saskatchewan Bakken, and Shaunavon, with the ability to mobilize equipment to the more active regions. We believe the business will scale quickly (it already has over 950 pieces of rental equipment) and become a dominant player in its targeted areas. The opportunity is to establish a position in this Company before it is well known. There is no Street research (until now) and Great Prairie has only reported two quarters as an operating entity. The Company intends to reinvest the significant cash flows generated into both organic and acquisitive growth. Since completing its first acquisition at the end of October 2013, the Company has spent $2.5 million adding equipment to existing operations. This is on top of the nearly $42 million (including all earn-outs) committed toward the three business acquisitions to date. While the current operations have an annual run-rate EBITDA of ~$14 million, we believe this could double over the next months. Activity levels have been on the rise in the WCSB in 2014 and we believe service names continue to be a great way to play the oil and gas sector. The industry remains highly fragmented, with many acquisition targets identified. We look for GPE to continue to source deals in the 3x-3.5x EBITDA range and have factored in one $12 million deal (for EBITDA of $4 million) into our projections. This is very conservative with management having very aggressive growth ambitions over our forecast period. Ultimately, we believe this Company could grow to a $100+ million a year topline and $40+ million EBITDA business within 2-4 years. We are initiating coverage with a BUY rating and 12-month target price of $0.75. July 9, 2014 Page 3

4 Company Overview Great Prairie Energy Services (GPE-V) provides general oilfield hauling, rig moving and equipment rental services to the oil and gas industry in Western Canada. The strategy is to identify strong operating businesses within select oilfield services verticals with owners looking for a succession partner but are not ready to retire. GPE management are not looking to operate the individual businesses, but rather provide guidance and capital in order to grow them under the watchful eye of hands-on operators. The operators are incentivized to maximize the opportunity through earn-outs tied to profitability. Great Prairie, as of October 2013, completed its qualifying transaction with the acquisitions of Good to Go Rentals Ltd. and Neigum Hot Oilers (1992) Ltd. (collectively, Good to Go) which are oilfield rental and general oilfield hauling companies based out of Kindersley, Saskatchewan. The Good to Go acquisition provided Great Prairie with 578 units of quality surface lease rental equipment, custom manufacturing, and 64 units of trucking and hauling services, focused in the Viking oil play area. These businesses have been around for more than 15 years and have long-standing customer relationships. Exhibit 1: Current GPE Operations Source: Company presentation July 9, 2014 Page 4

5 Since that time, Great Prairie has acquired Green Dawg Inc., a Calgary based company, in Q1/FY14. Green Dawg rents automated catwalks for work in Western Canada and currently has 12 catwalks in their inventory. These are pipe-handling systems used to stack, load and unload well drilling pipe more safely and efficiently. Exhibit 2: Green Dawg Automated Catwalk (seen in foreground) Source: Company website (greendawg.ca) Most recently, GPE acquired the oilfield rentals, hauling and frac fluids management assets from Calmena Energy Services (CEZ-V; not rated). These assets are located in Drumheller, Sundre and Valleyview, Alberta, as well as Kindersley, Saskatchewan. As further described below, Great Prairie has paid an average of about 3x trailing EBITDA for the three businesses acquired over the past nine months. Growth Summary: February The Company was incorporated as a CPC (DevCorp Capital). September The Company completed a private placement of 50 million Subscription Receipts at a price of $0.20/Subscription Receipt, for gross proceeds of $10 million. The Subscription Receipts were subsequently converted to common shares on a 1:1 basis upon completion of the qualifying transaction. July 9, 2014 Page 5 October The Company completed its qualifying transaction by acquiring all the shares of Good to Go Rentals and Neigum Hot Oilers for consideration of $24 million, plus up to $4 million in performance bonuses. The purchase price was 3.1x TTM EBITDA. Up-front cash and shares were

6 transacted for $14 million. All shares were issued at a price of $0.20, with earnouts to be paid after 12 and 24 months depending on realized EBITDA performance (see chart below). Exhibit 3: Good to Go Purchase Consideration Source: Company reports There are additional performance bonuses of up to $2 million in cash and shares in each of year one and two to former Good to Go shareholders if EBITDA exceeds $9 million and a 40% return on capital employed hurdle is achieved. If these hurdles are met, total earn-out/performance consideration would be $14 million. As of the end of Q1, the discounted and risked liability for contingent consideration is accounted as $8.664 million. December The Company changed its name from DevCorp Capital Inc. to Great Prairie Energy Services Inc. (GPE-V). March Great Prairie acquired Green Dawg Inc. for $3.8 million in cash, with $1.05 million of this amount subject to achieving EBITDA of $1.275 million over the first 12-month period. GPE paid 3.0x EBITDA, assuming performance hurdles are met. GPE management see significant growth opportunities in the automated catwalk market. May Great Prairie closed an asset purchase agreement with Calmena Energy Services for $10 million, or a 2.9x 2013 EBITDA multiple. We estimate that over 300 pieces of rental equipment and over 50 hauling units were July 9, 2014 Page 6

7 added to the fleet from this deal. Financing was provided by Great Prairie s credit facilities and working capital. At the time of the deal, GPE increased its term credit facility to $18 million (from $6 million). In addition to the acquisitive growth, GPE has, to date, invested approximately $2.5 million in new equipment to generate organic growth among its operations. Exhibit 4: Equipment List as of June 2014 Source: Company presentation Competitors There are lots of competitors within the oilfield rentals and hauling segments, both larger public companies and many small mom and pop operations. Some of the public comps include Precision Drilling (rentals division), Total Energy Services, Strad Energy Services, Mullen Group, and Aveda Transportation and Energy Services (BUY, $8.00 target). Ultimately, this is a relationship driven business and this speaks to the importance of maintaining the existing management teams in place. Good equipment and service and fair pricing has allowed GPE businesses to develop long-standing customer relationships. Customers GPE s businesses service many of the largest oil & gas players in western Canada, including names such as Husky, Cenovus, Crescent Point, Whitecap Resources, MEG Energy and PennWest. July 9, 2014 Page 7

8 Energy Plays in Focus Great Prairie has a focused serviced territory that stretches across southern Saskatchewan and Alberta, touching active energy plays such as the Viking (from Kindersley, SK to Drumheller, AB) and the Cardium (Sundre, AB). In addition, the recent Calmena asset purchase has given the Company a toehold into northwest Alberta with operations in Valleyview to service the Montney play. We expect expanded operations to focus on heavy oil around Lloydminster on the AB/SK border and in southern SK with Bakken and Shaunavon oil activity. Exhibit 5: Plays in Western Canada Source: National Energy Board Below is a brief recap of the key plays that GPE services or intends to service in the near-term. A listing of active E&P companies in each area can be found in the appendix of this report. The Viking Formation The Viking oil play is an active region that has produced oil and gas from conventional reservoirs since the 1950 s. This play has been delineated by over 8,000 vertical wells and Viking oil remains one of the most economic light oil plays in the WCSB. GPE services the Viking out of Kindersley and Drumheller. The formation covers a large part of Western Canada, with mostly July 9, 2014 Page 8

9 gas being produced in the Alberta sections and oil being produced in Saskatchewan (where GPE s operations are focused). The Viking is divided into two zones: the Upper zone which ranges from 2-3 meters in thickness and has produced oil from vertical wells, and a Lower zone that is 3-9 meters thick and was previously considered to be un-economic to produce until new drilling and fracking technology made it economic to do so. At this point in Great Prairie s development, the Viking is the single most important play to financial results. The Cardium The Cardium formation, comprised mainly of sandstone and shale, contains natural gas and light oil. The reservoir spans 1,000 km across the Western half of Alberta, running north-south along the eastern edge of the Alberta foothills. Canada s National Energy Board (NEB) has published estimates of 10.6 billion barrels of oil originally in place (OOIP), with more than 60% of it located in the region known as Pembina field. As you move from east-west, the Cardium tends to get deeper and thus the cost for drilling increases as well. The change in depth between east and west can range from 500m-1,000m+. Northern Cardium tends to see higher gas to oil ratios (GOR) while the South is more light oil. From , 1.5 billion barrels of oil were produced and petroleum reserve engineers have estimated 2P reserves of 130 million barrels of oil, of which, only 17% of the reserves have been recovered. GPE services the Cardium out of its Sundre, Alberta location acquired with the Calmena deal. The Montney The Montney formation which extends from Mid-Western Alberta to North- Eastern B.C., has been a focal point for oil and gas exploration since the 1950 s. Industry traditionally focused on the Montney s conventional sandstone and dolostone reservoirs. Such reservoirs are closed in by siltstone which is a thick rock containing oil and gas. Until 2005, the siltstones remained untouched, until the advancements of horizontal drilling and fracking, which then made the unconventional siltstone economic to drill. The siltstones of the Montney are believed to contain 449 Tcf of natural gas, 14.5 million barrels of NGL s and 1.1 million barrels of oil. GPE services the Montney from its Valleyview location acquired with the Calmena deal. Saskatchewan s Bakken Formation The Bakken formation which covers South-Eastern Saskatchewan, Manitoba, North Dakota and a North-Eastern section of Montana, has produced oil since It is estimated that there is ~100 billion barrels in place in Saskatchewan s portion of the Bakken alone. Production from Saskatchewan s Bakken has gone from 945 bbl/d (2004) to 70,000 bbl/d in The production growth in the Bakken is attributed mainly to the development of horizontal drilling and completing techniques as the oil in the July 9, 2014 Page 9

10 Bakken is contained largely in siltstone and sandstone reservoirs which are extremely tight in nature and locks the oil in. GPE currently does not have operations in the Bakken, but we believe this region is a top target for future expansion plans. The same is true of the Shaunavon and Lloydminster plays, summarized below. The Shaunavon Formation This formation resides in South-West Saskatchewan and consists of an Upper and Lower section, both comprised mainly of limestone, shale and sandstone. The Upper has been a target for conventional drilling since the 1950 s while the Lower is just recently emerging as an unconventional tight oil play. The Lower play is ~20-35 meters thick and eventually decreases to zero at the northern erosional edge of the formation. Industry has estimated ~4 billion bbls of oil is in place, and companies have publicly reported ~93 million bbls of reserves are in place. Lloydminster Heavy Oil The Mannville oil formation occurs in the sub-surface of Central Alberta and extends East-West from Edmonton to Lloydminster, and then North-South from the Deep Basin to the U.S. border. The formation ranges from zero-25 meters in thickness. Significant heavy oil reserves occur in the upper sandy part of the formation. Industry estimates a resource base of 350 billion barrels and 75 billion barrels of recoverable reserves. Lloydminster Heavy is broken down into 11 sub-sections with varying degrees of thickness. Exhibit 6: Lloydminster Area Highlighted in Yellow Source: Alberta Geological Survey July 9, 2014 Page 10

11 Financial Results Recap With the Company closing its qualifying transaction in late 2013, operational comparisons are irrelevant as the company had no previous operations. Q4/FY13 saw Great Prairie generate results from two months of contribution from the Good to Go acquisition. Sales were $2.5 million, adjusted EBITDA was $1.1 million and net loss was $0.2 million or $0.01 per share. Expenses primarily stemmed from operating costs, professional fees, filing and regulatory costs for listing on the exchange, and the completion of the qualifying transaction. The Q1 results were issued at the end of May, reflecting a full quarter of contribution from Good to Go, as well as one month from Green Dawg. Consolidated revenue was $5.3 million, with 58% attributed to equipment rentals and 42% from the hauling segment. Hauling operations are largely related to movement of GPE equipment, but billed directly to the customer. GPE had a gross margin of 63.3% and generated EBITDA of $3.0 million (57.1% margin). The bottom line was profit of $1.4 million or $0.015 per share. The cash position stood at $2.4 million against long term debt of $2.75 million. There was also money due to vendors and contingent consideration for earnouts totalling $12 million. We include the cash earn-out consideration in our net debt calculation, which stood at $8 million at the end of Q1. Great Prairie has recently increased its term component of its credit facility to $18 million (from $6 million) while the operating line remains unchanged at $2 million. The term loan bears interest at Prime %, while the operating line is at Prime %. At the end of Q1/14, $2.75 million was outstanding on the term loan and zero on the operating line. Subsequent to quarter-end, the Calmena asset purchase was financed with the increase term loan (acquisitions are 100% financeable and repayable over three years). Exhibit 7: Current Capital Structure Shares Issued Prior to Qualifying Transaction 6,735,000 Private placement of sub $ ,000,000 Shares issued with Good to Go 60,000,000 Agents options exercised 165,000 Total March 31/14 116,900,000 Agent options exercised 255,000 Options outstanding 5,990,000 Current Fully Diluted Share Count 123,145,000 Source: Company reports, Beacon Securities July 9, 2014 Page 11

12 Outlook & Forecast Great Prairie is in an enviable position, having grown from scratch to approximately $14 million in annual run-rate EBITDA in less than nine months. This is based on a published 2013 pro forma EBITDA amount of roughly $12 million and the additional equipment that has since been added to the businesses. The exhibit below breaks down the EBITDA contribution. Exhibit 8: Estimated EBITDA Potential 2013 Achieved Good to Go $8.0 million Green Dawg $0.8 million Calmena Assets $3.4 million Total $12.2 million 2014 Organic Growth $1.8 million Current Run Rate EBITDA $14.0 million Source: Company reports, Beacon Securities We expect Q2 results to show typical WCSB seasonal weakness, but there will be a full quarter of contribution from Green Dawg and half a quarter of contribution from the Calmena assets. The majority of the acquired assets were already running at a high level of utilization, therefore growth will come from new equipment additions and minor pricing changes. Overall, we forecast relatively stable pricing, with new equipment matching up with demand. Oilfield Rentals The Company is investing capital in additional equipment to support rental demand. This is the highest margin business and the core focus for management. We expect the majority of capital expenditures will go towards adding equipment such as tanks, tank cradles, light towers and rig matting. We have witnessed improved rig activity levels in AB and SK year-to-date (see Appendix), helping drive demand for rental equipment. In addition, wells are increasingly more complex, using horizontal drilling techniques, including multi-stage fracking. These wells require a greater number of support equipment and use greater amounts of downhole fluids during the drilling and fracking stages. Some of the strongest demand is coming from the 400 and 1,000 barrel tanks used to hold water and frac fluids. GPE now has over 100 of the 1,000 bbl tanks, having added 20+ since acquiring Good to Go last Fall. There is also very strong demand for automated catwalk units from Green Dawg. When acquired there were 11 units, but another has been delivered and we expect another couple of new units by year-end. Each new unit costs approximately $250k, but generates very high margins with initial pay-back periods of less than 2 years. July 9, 2014 Page 12

13 Oilfield Hauling As previously mentioned, the majority (70%+) of hauling revenues are generated from moving GPE equipment to and from worksites at the cost to the customer. We expect this side of the business to grow with the rental fleet, but hauling is a lower margin contributor, with EBITDA margins of 20%-25% versus 50%+ from rentals. Frac Fluids Management This business line was acquired as part of the Calmena asset acquisition. Fluids management is conducted out of Sundre and Valleyview, AB and Drumheller and Kindersley (recent addition), SK. Available fluids include frac oils, water, clay stabilized water and methanol. GPE plans to leverage their well site rentals visibility into greater work in management of frac fluids. According to a 2012 report from the Auditor General of Canada, the average shale gas well requires 11 million litres of water during the fracturing process. US data suggests 2-4 million gallons per well, but with multi-stage fracking technology, these numbers can be many times larger. The actual amount of water used can vary significantly, depending on underground formation and depth of well. Currently, GPE only provides transportation of fluids to the well site and fluids storage. There could be an opportunity to haul well produced fluids to disposal sites in the future. This is lower margin work, and is the driver of lower margins in our forecast. More Acquisitions Our forecast builds in one further acquisition later this year (assumes paying $12 million for a $4 million EBITDA operation). We assume this acquisition is funded with a $10 million equity raise at $0.50 per share, plus current debt facilities. Management has described a pipeline of acquisition opportunities, with expectations of further deal-making in We do not normally model unknown acquisitions, but feel that given the aggressive growth nature of this management team, it is prudent in this case. Our assumptions are likely to be proven to be very conservative. We build in no further acquisitions in achieving a F2015 EBITDA forecast of $18.4 million. July 9, 2014 Page 13

14 Recommendation and Valuation We are initiating coverage with a BUY rating and 12-month price target of $0.75. Our target is based on 6.5x F2015 EBITDA (including our modeled equity raise and acquisition) and 11x F2015 EPS. As the exhibit below denotes, GPE currently trades at a significant discount to the peer group. We believe this valuation gap will narrow, as despite its small size and newly acquired operations, Great Prairie has a superior growth profile, seasoned management team, and above average profitability ratios. We expect the business to grow rapidly over the next couple of years. In fact, we believe Great Prairie could grow to a $100+ million a year topline and $40+ million EBITDA business within 2-4 years. At some point, the Company is likely to become a take-over target for one of the larger oilfield services competitors. We note management and a director of the Company have been recent buyers of the stock, with insiders buying over 425k shares, priced between $0.45 and $0.49, over the past three weeks. Exhibit 9: Peer Comparables Revenues EBITDA EPS EV/EBITDA Price/Earnings Company Last Price Enterprise Value (Millions) Market Capitalization (Millions) Dividend Yield CFY NFY CFY NFY CFY NFY CFY NFY CFY NFY Great Prairie Energy Services, Inc. GPE-CA $0.50 $79 $62 0% $24.0 $38.1 $12.4 $18.4 $0.05 $ x 4.3x 10.1x 7.4x Aveda Transportation & Energy Services, Inc AVE-CA $5.26 $183 $110 0% $153.3 $187.5 $29.7 $40.6 $0.55 $ x 4.5x 9.5x 6.6x Black Diamond Group Limited BDI-CA $33.26 $1,590 $1, % $444.7 $495.9 $167.0 $198.3 $1.66 $ x 8.0x 20.0x 16.5x Contrans Group Inc. Class A CSS-CA $14.75 $636 $ % $604.0 $620.9 $81.8 $85.4 $0.99 $ x 7.4x 15.0x 13.6x Entrec Corp. ENT-CA $1.52 $329 $171 0% $237.1 $269.8 $49.5 $66.0 $0.08 $ x 5.0x 19.2x 9.5x Horizon North Logistics Inc. HNL-CA $7.22 $915 $ % $528.5 $610.2 $128.6 $161.1 $0.45 $ x 5.7x 16.1x 11.7x Mullen Group Ltd. MTL-CA $30.82 $3,239 $2, % $1,536.8 $1,648.7 $328.1 $362.0 $1.66 $ x 8.9x 18.6x 15.5x Petrowest Corporation Class A PRW-CA $1.31 $264 $ % $262.5 $296.6 $44.9 $55.2 $0.09 $ x 4.8x 14.9x 10.4x Precision Drilling Corporation PD-CA $14.99 $5,642 $4, % $2,387.1 $2,702.6 $802.8 $959.2 $0.84 $ x 5.9x 17.8x 13.0x Strad Energy Services Ltd. SDY-CA $4.93 $230 $ % $208.9 $232.1 $46.7 $56.0 $0.39 $ x 4.1x 12.8x 9.6x Total Energy Services Inc. TOT-CA $22.78 $865 $ % $406.5 $458.5 $107.4 $130.6 $1.64 $ x 6.6x 13.9x 10.9x TransForce Inc. TFI-CA $24.35 $3,276 $2, % $3,586.8 $3,920.4 $400.5 $480.2 $1.58 $ x 6.8x 15.4x 12.0x Trimac Transportation Ltd. Class A TMA-CA $6.40 $311 $ % $432.5 $450.0 $52.6 $56.8 $0.59 $ x 5.5x 10.8x 9.6x Peer Average *Estimates for Great Prairie, Aveda and Petrowest are from Beacon Securities Source: Beacon Securities, FactSet 7.3x 6.1x 15.3x 11.6x July 9, 2014 Page 14

15 Key Risks Volatility of Industry - Great Prairie s success is directly affected by the level of industry activity for oil and natural gas exploration, development and production activities carried on by its customers. Industry conditions are dictated by numerous factors which Great Prairie has no control over such as: - Global energy pricing - Cost of exploring for, producing and delivering oil and gas - Declining rates of current production - Discovery rates of new oil and gas reserves - Available pipelines and transportation vehicles Competitive Environment - The Company faces competition from established large multinational and small local energy services firms for contract bids. Safety, reputation, timely delivery and pricing are key drivers for success. Weather and Seasonal Factors - The level of activity in the oilfield services industry in Canada is heavily influenced by seasonal weather patterns. This is especially evident during Q2 spring break-up where the spring thaw leads municipalities and transportation departments to enforce road bans, reducing drilling and well servicing activity levels. Acquisition and Development - As part of Great Prairie s business strategy to grow, the Company is expected to grow via further acquisitions. The Company may not effectively select acquisition candidates and there can be no guarantee that completed acquisitions will ultimately benefit Great Prairie. Dependence on Suppliers - The Company sources its equipment from a variety of suppliers. Failure of suppliers to deliver on time could impact the Company s ability to generate and retain customers. Interest Rates - The Company relies on credit facilities that carry variable interest costs. Though rates remain low, at some point rates are likely to rise, impacting on profitability. July 9, 2014 Page 15

16 Appendix A Management and Directors Sidney Dutchak, QC, President, CEO & Director: Mr. Dutchak is a Calgary businessman and partner in Storm Mountain Capital Partners Inc., a corporate finance services company. He has served in various senior executive roles and as Director of publicly traded companies in several sectors including oilfield services and technology. Mr. Dutchak served as Attorney General and Minister of Aboriginal Affairs in the Government of Saskatchewan. Mr. Dutchak graduated from the University of Saskatchewan with a degree in law. Alex Jackson, CFO: Mr. Jackson became Chief Financial Officer of Great Prairie following an extensive background as an energy focused financial analyst. Mr. Jackson has experience in resource development evaluation and modeling, risk assessment, and negotiating and structuring transactions. He began his career with the Royal Bank of Canada in London, England. When he returned to Calgary, Mr. Jackson joined Enerplus Corporation where he worked for eight years in the acquisition and divestments team. Mr. Jackson further acted as Director of Business Development of a private equity fund, prior to establishing Storm Mountain Capital Partners Inc. Mr. Jackson is a Chartered Financial Analyst Charterholder. Norm Neigum, VP Operations: Mr. Neigum is a founder of the Good to Go companies which he and his wife, Darla Dorsett, have successfully managed since Starting originally with a hauling and hot oiler operation, Mr. Neigum and Ms. Dorsett expanded their offering into oilfield rentals in 2005, forming Good to Go Rentals. Prior to forming Good to Go, Mr. Neigum spent 17 years working in the oil patch in both Alberta and Saskatchewan as a rig manager. Exhibit 10: Great Prairie Board of Directors Name Position Director Since Shares Controlled Robert Jepson* Chairman GPE, Former CEO Vault Energy Trust Feb ,300,000 (1.9%) Sidney Dutchak Partner of Storm Mountain Capital Partners Inc. Feb ,100,000 (0.9%) Michael Kohut* CFO Trilogy Energy Corp Feb ,020,000 (0.8%) James Riddell* President & CEO Paramount Resources Feb ,250,000 (1.8%) Greg Fisher* Former CFO of Performance Services Ltd. Feb ,000 (0.7%) Sean Monaghan* Senior officer of Lethbridge Industries, Columbia Industries, Inspira Manufacturing and Promac Industries Feb ,300,000 (1.1%) Gregory Peterson* Partner with Gowling Lafleur Henderson LLP Feb ,100,000 (0.9%) Christopher Doll* President & CEO of Nuguru Business and Marketing Dec Nil Source: sedi.ca, Beacon Securities *Independent directors Percentage ownership based on million fully diluted shares outstanding, ownership includes options and warrants held July 9, 2014 Page 16

17 Appendix B Weekly Rig Counts Source: Baker Hughes, Beacon Securities Annual Activity by Province Source: CAPP and Beacon Securities July 9, 2014 Page 17

18 Significant E&P Players in Targeted GPE Regions The Viking Saskatchewan Company Ticker Whitecap Resources WCP Surge Energy SGY Husky Energy HSE Crescent Point Energy Corp. CPG Raging River RRX The Bakken Saskatchewan Company Ticker Baytex Energy BTE Crescent Point Energy Corp. CPG Light Stream Resources LTS Painted Pony Petroleum PPY Questerre Energy Corp. QEC Arc Resources ARX Legacy Oil and Gas LEG Loydminster Heavy Company Ticker Canadian Natural Resources Ltd. CNQ Devon Energy Corp. DVN Baytex Energy Corp. BTE Twin Butte Energy Ltd. TBE Marquee Energy Ltd. MQL The Shaunavon Company Ticker Crescent Point Energy Corp. CPG Surge Energy SGY Husky Energy HSE Bonterra Energy BNE The Cardium Company Ticker PennWest PWT Bonavista Energy Corp. BNP Peyto Exploration and DevelopmePEY Light Stream Resources LTS Bellatrix Exploration Ltd. BXE The Montney Company Encana Corp. Trilogy Energy Corp. Arc Resources Birchcliff Energy Ltd. Bonavista Energy Corp. Ticker ECA TET ARX BIR BNP July 9, 2014 Page 18

19 Appendix C Great Prairie Energy Services Inc CAD Dec YE YE2013 YE 2014E YE 2015E Statement of Income Revenue 2,516,904 23,980,201 38,125,000 Expenses Operating costs 1,007,208 9,626,883 16,796,250 Gross Profit 1,509,696 14,353,318 21,328,750 Gross margin 60.0% 59.9% 55.9% General and administrative 282,825 1,907,476 2,926,079 Transaction costs 448, Interest 8, , ,926 Fair value adjustment on contingent consideration 147,143 (48,647) - Share-based compensation 45, , ,000 Amortization 228,000 1,467,781 1,850,000 Depreciation 265,165 2,219,425 2,917,374 Total expenses 1,425,512 6,097,021 8,211,379 Adjusted EBITDA (ex transaction costs) 1,079,728 12,445,842 18,402,671 EBITDA margin 42.9% 51.9% 48.3% Earnings (loss) before income taxes 84,184 8,256,297 13,117,371 Total Tax 298,634 2,329,692 3,410,516 Tax rate 355% 28% 26% Net and comprehensive loss for the year (214,450) 5,926,604 9,706,855 Shares Outsdanding FD 28,492, ,932, ,145,000 EPS - FD (0.01) July 9, 2014 Page 19

20 Great Prairie Energy Services Inc CAD Dec YE YE2013 YE 2014E YE 2015E Balance Sheet ASSETS Current assets Cash 3,127, , ,378 Accounts receivable 2,904,379 6,800,000 8,940,000 Due from related parties 462, , ,977 Prepaid expenses 13,828 30,608 30,608 6,509,021 8,210,314 10,245,963 Non-current assets Property and equipment 7,750,430 34,314,070 35,546,696 Intangible assets 10,741,000 10,398,219 10,398,219 Goodwill 4,789,922 8,852,926 8,852,926 Total Assets 29,790,373 61,775,529 65,043,804 LIABILITIES Current liabilities Accounts payable and accrued liabilities 963,950 2,917,200 4,228,620 Income taxes payable 1,330,978 1,591,014 1,591,014 Due to vendors - 2,712,751 2,712,751 Current portion contingent consideration 4,544,949 5,046,019 3,796,545 Term loans 834, , ,667 7,674,026 13,183,651 13,245,597 Non-current liabilities Terms loans 10,333,333 8,083,333 Contingent consideration 4,266,194 4,250,526 - Deferred tax liability 3,010,973 3,137,266 3,137,266 Total Liabilities 14,951,193 30,904,776 24,466,196 Shareholders equity Share capital 14,798,862 24,849,862 24,849,862 Contributed surplus 364, , ,920 Retained earnings (324,633) 5,601,971 15,308,826 14,839,180 30,870,753 40,577,608 Total Liabilities and Shareholders Equity 29,790,373 61,775,529 65,043,804 July 9, 2014 Page 20

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