investor presentation - december 2014 [read-only] profile vision: “the north american leader in...
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INVESTOR PRESENTATIONDecember 2014
Changing the way clients think about producing energy
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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.
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Corporate Profile
Mission: “Changing the way clients think about producing energy”
“DVG”TSX-V Symbol
91,402,090Shares Outstanding
$0.20 - $0.4052 Week Range*
$ 19.6millionMarket Capitalization*
25Employees
EightYears of Service
02014 TRIF
LargestESP Supplier
(Gillette WY gas wells)
6.6%Inside Ownership
*As at December 1, 2014
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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
Value
Driven
Service
Oriented
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40%
30%
15%
15%
Divergent Competitor 1 Competitor 2 Competitor 3
25%
35%
25%
15%
Evolution of DIVERGENT
Service Oriented: “Getting it Done Right the First Time”
Source: Internal Estimates of ESP Products & Services for dewatering Powder River Basin gas wells
2013 2014 (est.)
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.
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Evolution of DIVERGENT
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
Applications
• Vertical, Slant, and Horizontal Wells
• Up to 100 bbls/day
• Landed depths to 1500 m
Innovation Focused: “Cost Effective, Innovative Technologies & Solutions”
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
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What’s Next?Value Driven: “Focused and Sustainable Growth”
� Estevan
� Calgary� Kalama
� Gillette
� Reynosa
� Villahermosa
� Corporate Head Office
� Operations
� Estevan
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.
Viking
Shaunavon
Bakken
Powder River
Niobrara
Uinta
Burgos
Southeastern
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What’s Next?
Value Driven: Reducing the Life Cycle Cost of Producing Oil & Gas
0
2000
4000
6000
8000
10000
2009 2010 2011 2012 2013
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.
Canadian Well Counts1
Canadian Well Distribution2
Sources:
1. Data Central: June Warren-Nickle’s Energy Group
2. CAODC
0%
20%
40%
60%
80%
100%
2010 2011 2012 2013
Other
Gas
Oil
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What’s Next?
Value Driven: Return on Investment (ROI) of Linear Pump Installations
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 production rates…
impact the Linear Pump’s ROI
significantly due to the amount
of time the well is down waiting
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.
-$200
$0
$200
$400
$600
Year 1 Year 2 Year 3 Year 4 Year 5
RO
I (,
00
0’s
)
60 bpd 80 bpd 100 bpd
-$500
$0
$500
$1,000
Year 1 Year 2 Year 3 Year 4 Year 5
RO
I (,
00
0's
)
1x per year 2x per year 4x per year
• 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.
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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 2012.(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 ReformThe 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.
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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.
• API 17J certified
• Up to 21 Mpa rating (3000psi)
• Sizes from 2” to 8”
• API 15S Swaging Connectors
• High tension rating for longer pulls
• No product failures to date
Sales & Distribution Installation Services
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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.
• 3% administration fee • 20% finance fee
• Client’s receivables assigned to
Divergent
Project Management Financing
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Nine Months Ended September 30
2014 2013 % 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)
Financial Results
Three Months Ended September 30
2014 2013 % 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
Comparative Results: All amounts in USD thousands, except per share amounts and as noted.
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Balance Sheet and Capitalization
As at September 30, 2014 2014
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) $5,750
As at December 1, 2014 2014
Shares 91,402,090
Warrants 13,158,200
Options 5,300,000
Fully Diluted 109,860,290
Market Cap. ($CAD) $19.6 million
All amounts in USD thousands, except per share amounts and as noted.
1.37Current Ratio
1.57Debt-Equity Ratio
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Our future is what we make it
Divergent Energy Services Corp.Corporate Office
1170, 800 – 6th Ave SWCalgary Alberta T2P 3G3
T: 403.543.0060F: 403.543.0069
www.divergentenergyservices.com
TSX-V: DVG