Investor Presentation MAY 2017 TSXV: DVG Changing the Way Clients Produce Energy
Forward Looking Statements Some matters discussed in this presentation may be considered to be forward- looking statements. Such statements include declarations regarding management’s intent, belief or current expectations. Prospective investors are cautioned that any such forward- looking statements are not guarantees of future performance and involve a number of risks and uncertainties. Actual results could differ materially from those indicated by such forward-looking statements. Such risks and uncertainties include: the possible unavailability of financing, risks related to the uncertainty inherent in the oil and gas services industry, the impact of energy price fluctuations, the seasonal nature of business, the dependence on third party suppliers and contractors, changes in government regulation, the impact of competition, the successful commercialization of certain technologies, the dependence upon competent employees including senior management, and fluctuations in currency exchange rates and interest rates. 2
Corporate Snapshot “We provide cost effective, innovative technologies and solutions for submersible pumping to benefit our stakeholders” 11 Years in business 0 1 Recordable Safety # ESP Supplier* Incidents YTD 8 . 0 33 Employees % Insider Owned 13.2% Fully Diluted TSXV: DVG $0.12 - $0.28 $21MM 99.9MM 52 week range Market cap as at MAY 1 ‘17 Shares outstanding 3 *Gillette, WY - Powder River Basin gas wells; based on internal estimates
Opportunity “A premier supplier of submersible pumping products that increase production while reducing operating costs and carbon footprint” Upside of Emerging Technology Linear Electromagnetic Submersible Pump (the “Linear Pump”) is a revolutionary concept for artificial lift that is disruptive to existing technology. Sizeable and Expanding Market for artificial lift and for the Linear Pump. Agreement in place with large oil company to advance commercialization. Downside Protection Through Existing Business Existing submersible pump operation servicing Wyoming and Colorado continues to grow and provide increasing cashflow. Market recovery and strategic positioning provide ability to grow existing business. 4
Protection from the Downside Changing the way clients produce energy
Demonstrated Growth & Recovery The US Artificial Lift Operation is … Cash flow positive Revenue Growth - 111% increase in 2016 vs. 2015 Increased margins - 33% in Q1 2017 vs 21% in Q1 2016 $14,000 Annual Revenue (USD ,000's) $12,000 $10,000 $8,000 $6,000 $4,000 $2,000 $0 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 Revenue Gross Profit 6
Demonstrated Growth & Recovery The US Artificial Lift Operation in 2016 … Doubled in size Moved into a new facility 3x larger Acquired state of the art pump testing equipment 7
Upside of Emerging Technology Changing the way clients produce energy
The Problem Directionally drilled and horizontal wells have created new challenges: • Bends in the well create points of contact between the rod string and the production tubing; • Rod string suffers excessive wear as it cycles up and down millions of times per year, leading to eventual failure of the rods and occasionally the production tubing; • Limited advancements in pumping technology are creating rising costs to produce oil. Critical points of contact in oil wells that result in excessive wear and eventual failure of rod strings. 9
The Solution • • Disruptive technology - an alternative to Smaller footprint on surface • conventional pump jack installations Eliminates leaking wellheads • • High efficiency electromagnetic motor Reduces carbon footprint • Modified industry standard rod pump • Reduced Operating Costs by as much as • $153,000 annually (2) Oil wells to 3100m depth • • Increases Production Rates when able to Rates to 200 bbl/d • set the Linear Pump lower in the well vs. Suitable for vertical, deviated, and conventional pumps horizontal wells 10
Demonstrated Progress and Results No issues have been associated with the current generation motor. • Original pumps were provided by an overseas manufacturer. • One pump failed when wellbore solids filled the pump, causing it to seize. • One pump failed due to being fabricated with a lower strength steel than required. Current pumps are fabricated in Canada. No further pump issues. • Using industry standard submersible pump cable. • Electrical shorts were occurring at random depths. • No definitive cause; suspected tubing movement causing the damage. Integrated an industry standard tubing anchor in March 2017. Tubing movement has been eliminated. No further cable issues. 11
Anticipated Milestones Pumps Installed Test Results Additional installations. Improvements Pump Installed into the horizontal Pump Re-installed section of a well. Pump Results Clear line of sight to full commercialization Additional Linear Pumps Installed Debenture Resolution Continued growth in Commercialization Wyoming and Colorado & Ramp Up Client Base Open facility in Colorado Expansion Clear line of sight to profitability 2017 & Beyond 12
Sizeable and Expanding Market *based on narrow search criteria in small geographic regions; further research, product results and product improvements will define the full market. 9,000* candidate wells identified in Canada 9,500* candidate wells identified in United States
Benefits to the Environment - based on reducing the steel used in fabrication 3 The reduction in greenhouse gas emissions or CO2 emissions* when fabricating one Linear Pump vs one Pump Jack is equivalent to: 91,599 40,784 88.5 1,355 Barrels of oil Incandescent Miles driven Pounds of consumed lamps by an average coal burned -or- -or- -or- -or- switched to passenger LED’s vehicle 5.6 36.2 24,200 1,562 Propane Homes’ Acres of Pounds of cylinders used electricity use forests waste -or- -or- -or- for home for one year sequestering recycled barbeques carbon instead of landfilled *Source www.epa.gov/energy/greenhouse-gases-equivalencies-calculator-calculations-and-references
Why Invest? • Participation in the upside of a high-tech growth OPPORTUNITY story offering improved environmental impacts and supported by a growing, cash-flow positive division • All North American oil wells will need artificial lift GROWTH • Sizeable & growing target market • Applications in other basins & plays globally • Growing ESP business that generates positive PROTECTION cash flow with track record of increasing revenue • Near term geographic expansion potential 15
Appendices
Experienced and Committed Team Decades of experience in the energy services arena Ideal backgrounds to commercialize product and capture market Alignment with shareholders and strong corporate governance Ken Berg , P.Eng. – President & CEO Kenneth Bagan - Chairman Previous - Sanjel, Amoco Petroleum, Dome Petroleum Director of Trican Well Services, past Director of PSAC, Member ICD Cam Barton Scott Hamilton , CPA, CA – CFO Financial Consultant and Independant Director Previous - Solana Resources, Crossfire Energy Services, Inc., Brahma Compression Ltd . Ken Berg President & CEO, Divergent Martin Hall Past Sr VP Finance & CFO of Tesco Corporation Robert Riecken VP Drilling, Completions, Construction, and Supply Chain, Repsol 17
90 Years of Stalled Innovation Rod Pump Drawbacks Linear Pump Benefits Surface lifting equipment (Pump Jack*) has a The Linear Pump has a lower capital cost, reduces high capital cost and requires a large footprint construction costs due to no surface lifting equipment Rod strings in deviated and horizontal wells No external moving parts means that the Linear Pump can cause excessive wear due to rubbing against the be placed in deviated and horizontal wells as easily as tubing vertical wells Rods strings wear from the 3,000,000 annual up/down cycles, which can cost up to $153,000 (2) No rod string, no external moving parts. Everything moves annually to maintain, including the oil not being internally in the pump’s housing produced during failures Mechanical inefficiencies and variable power Permanent magnet motors run on low Amps with no draw can lead to high electricity costs mechanical gears to reduce efficiency Leaking wellheads around the rod (from the Seal not an issue - no moving parts exit the wellhead “stuffing box”) is common * The Pumpjack was invented in 1925 by Walter Trout, an employee of Lufkin Foundry and Machine 18
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