INVESTOR PRESENTATION JUNE 2015
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.
Mission: “Changing the way clients think about producing energy” 9 Years of Service 25 Employees 0 2014 TRIF Largest ESP Supplier (Gillette WY gas wells) 6.5% Inside Ownership “DVG” $0.12 - $0.54 $37.3 million 93,160,090 TSX-V Symbol 52 Week Range* Market Capitalization* Shares Outstanding *As at June 1, 2015
2014 Canadian Well Targets 1 � Industry is dominated by horizontal drilling for oil. Gas 10% � Divergent is… Oil focused. • Developing pumps suited to horizontal wells • Linear Electric Submersible Pump (“Pump”). • Not dependent on drilling activity. Oil • 90% � Divergent currently has… 2014 Canadian Well Types 2 One Pump installed; • Made significant progress in furthering its control • Vertical systems software; 12% Finalized the commercial design of the Pump; • Begun moving towards the production phase; • Received an initial order for the commercial • version of the Pump from our industry partner. Horizontal 1. Source: PSAC 2. Source: CAODC
Alberta 1 Saskatchewan 1 Manitoba 1 Viking Bakken Spearfish (Amaranth) • • • Cardium Viking • • Slave Point Shaunavon • • 1. Oil plays that are being developed using horizontal drilling techniques, and rely heavily on pump jacks to produce oil. This creates a ready-made market for Divergent’s Pump sales.
Since 2006 we have specialized in electric submersible pumps. Divergent’s Wyoming operation is… Cashflow positive • The largest Electric Submersible Pump provider for gas producers in the Powder River Basin. • Ideally located to introduce the Linear Electric Submersible Pumps . • Our strong focus on sales and operational excellence has offset the overall decline in industry activity due to weak oil and gas prices. Market Share 10% 15% 15% 10% 15% 25% 20% 30% 35% 60% 40% 25% 2013 2014 2015 Divergent Competitor 1 Competitor 2 Competitor 3 Source: Internal Estimates of ESP Products & Services for dewatering Powder River Basin gas wells
Wyoming North Dakota Colorado Niobrara Shale Oil - a Bakken Shale Oil - nearly Niobrara Shale Oil - highly • • • prominent oil play that 100% of wells use rod developed and relies relies heavily on rod pumps pumps as production heavily on rod pumps Coalbed Methane - the volumes decline • core of our operation for 9 years
Veracruz Tabasco Tamaulipas Linear Pump Construction Financing Flexible Pipe Sales • • • Poza Rica Field. We do not anticipate We do not anticipate • • • 750+ candidate wells having the necessary having the necessary • identified by Pemex. credit facility to bid on credit facility to bid on High failure rate using projects in 2015. projects in 2015. • rod pumps.
Divergent’s Linear Electric Submersible Pump... � Is powered by permanent magnets made from rare earth metals. Efficient Power. � Uses magnetic fields to create thrust from the motor section - only one moving part. Simple. � Is a reciprocating pump - similar to conventional rod pumps used in pumping jack applications i.e. linear motion - it does not spin. Permanent magnets hold their field almost indefinitely, losing only 1% of their magnetism over a ten year period.
Divergent’s Linear Electric Submersible Pump… � Eliminates Surface Lifting equipment - smaller footprint means reduced construction costs, lower environmental impact, and lower impact on farm/ranching lands. � Eliminates Sucker rods - worn and broken sucker rods can cost clients up to $168,000 annually to maintain. Cash flow suffers when oil is not being produced during failures. � Eliminates leaking wellheads from how the sucker rods exit the wellhead (known as a stuffing box). This is a chronic environmental issue with pumpjack operations. Annual Rod Pump Costs Service Rig $60,000 Assumptions in Calculating Annual Rod Pump Costs: New Rods Rod Strings $20 per meter ; 10% of string replaced after a failure • event; $96,000 Service Rig $12,000 per day ; 2 days per failure event; • Lost Oil Non-producing Days – 5 days lost production per rod failure; • Oil price of $60/bbl; • Production Production rate of 50 bbl/day; • $12,000 Rod string failure rate of 4 failures annually. •
Divergent’s Linear Electric Submersible Pump delivers… � Remote adjustments to pump rates - as your wellbore changes, so does your pump. � Remote monitoring - watch your production 24/7. � Can be landed in horizontal, deviated, or vertical wells.
Resolving Old Problems: Yesterday’s solutions are not a fit for today’s wells Target Market 65% of wells that require some form of artificial lift use rod pumps. 750,000 Rod Pumps in North America MATURE DEMAND FOR LIMITS ON OPPORTUNIT FIELDS PUMPS TECHNOLOGY Y North American Market Penetration Based on early estimates of wellbore suitability. 1% Initially Canada Market Potential 5,000 Bakken and 2,500 Shaunavon wells meet wellbore criteria.* 7,500 Pumps Initially *Depth and casing size
2015 Growth by Product Type Linear Electric Submersible Pump (“LESP”) sales are expected to make the greatest impact to our revenue, accounting for 88% of our growth. ESP ESPCP Commercial production of the LESP in 2015 • Electric Submersible Pump (“ESP”) sales from our Gillette, WY operation are expected to grow organically as market share continues to climb. Untapped growth potential for ESP sales in • LESP oil wells in Wyoming and North Dakota. Electric Submersible Progressing Cavity Pump (“ESPCP”) sales will see a modest improvement. Potential development of submersible • electro-magnetic rotating motors based on our LESP technology. Opportunity for the Conventional “Cold • Flow” Heavy Oil market.
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