investor presentation - december 2014 [read-only] profile vision: “the north american leader in...

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

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Page 1: Investor Presentation - December 2014 [Read-Only] Profile Vision: “The North American leader in cost effective, innovative technologies and solutionsforArtificialLiftandthemovementofhydrocarbons”

INVESTOR PRESENTATIONDecember 2014

Changing the way clients think about producing energy

Page 2: Investor Presentation - December 2014 [Read-Only] Profile Vision: “The North American leader in cost effective, innovative technologies and solutionsforArtificialLiftandthemovementofhydrocarbons”

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.

Page 3: Investor Presentation - December 2014 [Read-Only] Profile Vision: “The North American leader in cost effective, innovative technologies and solutionsforArtificialLiftandthemovementofhydrocarbons”

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

Page 4: Investor Presentation - December 2014 [Read-Only] Profile Vision: “The North American leader in cost effective, innovative technologies and solutionsforArtificialLiftandthemovementofhydrocarbons”

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

Page 5: Investor Presentation - December 2014 [Read-Only] Profile Vision: “The North American leader in cost effective, innovative technologies and solutionsforArtificialLiftandthemovementofhydrocarbons”

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.

Page 6: Investor Presentation - December 2014 [Read-Only] Profile Vision: “The North American leader in cost effective, innovative technologies and solutionsforArtificialLiftandthemovementofhydrocarbons”

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

Page 7: Investor Presentation - December 2014 [Read-Only] Profile Vision: “The North American leader in cost effective, innovative technologies and solutionsforArtificialLiftandthemovementofhydrocarbons”

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

Page 8: Investor Presentation - December 2014 [Read-Only] Profile Vision: “The North American leader in cost effective, innovative technologies and solutionsforArtificialLiftandthemovementofhydrocarbons”

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

Page 9: Investor Presentation - December 2014 [Read-Only] Profile Vision: “The North American leader in cost effective, innovative technologies and solutionsforArtificialLiftandthemovementofhydrocarbons”

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.

Page 10: Investor Presentation - December 2014 [Read-Only] Profile Vision: “The North American leader in cost effective, innovative technologies and solutionsforArtificialLiftandthemovementofhydrocarbons”

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.

Page 11: Investor Presentation - December 2014 [Read-Only] Profile Vision: “The North American leader in cost effective, innovative technologies and solutionsforArtificialLiftandthemovementofhydrocarbons”

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

Page 12: Investor Presentation - December 2014 [Read-Only] Profile Vision: “The North American leader in cost effective, innovative technologies and solutionsforArtificialLiftandthemovementofhydrocarbons”

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

Page 13: Investor Presentation - December 2014 [Read-Only] Profile Vision: “The North American leader in cost effective, innovative technologies and solutionsforArtificialLiftandthemovementofhydrocarbons”

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.

Page 14: Investor Presentation - December 2014 [Read-Only] Profile Vision: “The North American leader in cost effective, innovative technologies and solutionsforArtificialLiftandthemovementofhydrocarbons”

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

Page 15: Investor Presentation - December 2014 [Read-Only] Profile Vision: “The North American leader in cost effective, innovative technologies and solutionsforArtificialLiftandthemovementofhydrocarbons”

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