Revolu'onizing Pump Technology INVESTOR PRESENTATION A Neodymium magnet is the most widely used and strongest type of permanent, rare-earth magnet commercially NOVEMBER 2015 available TSXV: DVG
This Corporate PresentaAon contains certain forward ‑ looking statements and forward ‑ looking informaAon (collecAvely referred to herein as “ forward ‑ looking statements ”) within the meaning of applicable securiAes laws. All statements other than statements of present or historical fact are forward ‑ looking statements. Forward ‑ looking informaAon is oTen, but not always, idenAfied by the use of words such as “could”, “should”, “can”, “anAcipate”, “expect”, “believe”, “will”, “may”, “projected”, “sustain”, “conAnues”, “strategy”, “potenAal”, “projects”, “grow”, “take advantage”, “esAmate”, “well posiAoned” or similar words suggesAng future outcomes. In parAcular, this Corporate PresentaAon contains forward ‑ looking statements relaAng to future opportuniAes, business strategies and compeAAve advantages. The forward ‑ looking statements regarding the Company are based on certain key expectaAons and assumpAons of the Company concerning anAcipated financial performance, business prospects, strategies, the sufficiency of budgeted capital expenditures in carrying out planned acAviAes, 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 condiAons and potenAal Aming delays. Although management of the Company consider these assumpAons to be reasonable based on informaAon currently available to them, they may prove to be incorrect. By their very nature, forward ‑ looking statements involve inherent risks and uncertainAes (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, objecAves, expectaAons and anAcipaAons, esAmates and intenAons expressed in the forward ‑ looking statements, including among other things: inability to meet current and future obligaAons; inability to implement the Company’s business strategy effecAvely in Canada, Mexico and the United States; inability of the Company to conAnue meet the lisAng requirements of the TSX Venture Exchange; general economic and market factors, including business compeAAon, changes in government regulaAons; access to capital markets; interest and currency exchange rates; technological developments; general poliAcal and social uncertainAes; lack of insurance; delay or failure to receive board or regulatory approvals; changes in legislaAon; Aming and availability of external financing on acceptable terms; and lack of qualified, skilled labour or loss of key individuals. Readers are cauAoned that the foregoing list is not exhausAve. The forward ‑ looking statements contained herein are expressly qualified in their enArety by this cauAonary statement. The forward ‑ looking statements included in this Corporate PresentaAon are made as of the date of this Corporate PresentaAon and the Company does not undertake and is not obligated to publicly update such forward ‑ looking statements to reflect new informaAon, subsequent events or otherwise unless so required by applicable securiAes laws.
ü High-growth, publicly-traded technology firm (TSXV: DVG) ü Advancing innovaAve ArAficial LiT systems for the oil & gas industry: – RevoluAonary Electromagne'c Submersible Pump – AlternaAve to tradiAonal pump jack – Powered by a permanent magnet motor (1) – Offers lower costs, reduced maintenance and minimal environmental footprint – CommercializaAon anAcipated in 2016, iniAally in Western Canada ü ExisAng cash flow posiAve business unit in Gillehe, WY – ConvenAonal electric submersible pumps ( ESP ): – Increasing market share – Improved gross margins year-over-year (2) ü Near-term catalysts as the next generaAon ElectromagneAc Pump nears commercializaAon (1) Referred to as a Linear Motor in the permanent magnet motor industry. (2) Footnotes included in Appendix as endnotes
Mission: “Changing the way clients produce energy” 9 Years in business 0 1 # ESP Supplier* Safety incidents YTD 5 . 6 25 % Employees Insider Owned TSXV: DVG $23.5MM $0.12 - $0.54 94.8MM 52 week range Market cap as at Nov 20 ‘15 Shares outstanding *Gillehe, WY - Powder River Basin gas wells; based on internal esAmates
The Pump Near commercializaAon with no immediate compeAAon • Lower capital cost and operaAng cost when compared with pump jacks • The Market Nearly 20,000 Oil wells (Bakken, Shaunavon, Cardium, Viking, Niobrara, etc.) where pump jacks • are used to produce oil have been idenAfied as candidates In Canada alone, 90% of all new wells are drilled for oil and 88% of all new wells are drilled • horizontally 750,000 pump jacks already in use in North America • The Opportunity Exposure to a high growth company with pivotal operaAonal catalysts on the horizon • Agreement in place with large oil company and first commercial version of the Pump to be • installed late 2015 / early 2016 Ongoing discussions with other clients to install addiAonal ElectromagneAc Pumps •
Increases in direcAonal drilling, and horizontal wells in parAcular, have created new challenges: • Bends in the well create points of contact between the rod string and the producAon tubing; • Rod string suffers excessive wear as it cycles up and down 3 million Ames per year, leading to eventual failure of the rods and occasionally the producAon tubing; • Limited advancements in pumping technology are creaAng rising costs to produce oil. CriFcal points of contact in oil wells that result in excessive wear and eventual failure of rod strings.
The Linear Pump: ü No immediate compeAAon for this technology ü ReciprocaAng pump is a modified industry standard rod-pump ü Powered by permanent magnet motor - magnets lose only 1% of magneAsm over 10 year period ü No external moving parts; everything moves internally in the Pump housing ü 2 nd GeneraAon Pump improved with 25% more power & 50% less fric'on than prototypes ü Ideal for light oil, shallow horizontal wells - can be set inside the horizontal secAon in a well
The Linear Pump effec'vely: ü Eliminates surface liZing equipment (pump jack) Smaller footprint means reduced construcAon costs, lower environmental impact, and lower impact on farming and ranching. ü Eliminates sucker rods Worn and broken sucker rods can cost clients up to $153,000 (2) annually to maintain, including the oil not being produced during failures. ü Eliminates leaking wellheads Wellheads typically leak oil at the ‘stuffing box’ (the seal around the sucker rod). This is a chronic environmental issue with pump jack operaAons. (2) Footnotes included in Appendix as endnotes
• Low cost manufacturing, ahracAve margins, and ability to quickly scale-up • Simple installaAon in the field & limited maintenance required for producers • Compelling in oil price downturn - lower cost installaAon and maintenance compared to pump jacks • Divergent’s management team has hands-on experience building companies and generaAng value for owners; supported by strong and commihed board Ini$al Target Markets in North America 7,500 Viking, Cardium, candidate wells idenAfied Slave Point Bakken, Viking, Shaunavon, in Saskatchewan Spearfish 9,500 Uinta Basin Niobrara, Powder River Basin candidate wells idenAfied in North Dakota Poza Rica
Divergent’s Wyoming Electric Submersible Pump (ESP) operaAon is… ü Cash flow posi've for the past 11 consecuAve quarters ü Improved gross margins year-over-year despite market condiAons (1) ü Exceeding expected acAvity levels during the current industry slowdown ü Largest Provider* of ESP’s for gas producers in the Powder River Basin ü Increasing market share each quarter Market Share 2013 2014 2015 Divergent CompeAtor 1 CompeAtor 2 CompeAtor 3 *Source: Internal EsFmates of ESP Products & Services for dewatering Powder River Basin gas wells (1) Footnotes included in Appendix as endnotes
2015 Pump Lands in SK Staging Yard à InstallaAon of first commercial Debenture Pump Installed Linear Pump at client well ResoluAon à Results of Linear Pump performance Pump Results à Debenture resoluAon Pump TesAng by à ConAnue operaAons in Wyoming AddiAonal Clients and potenAal introducAon of the Linear Pump in Powder River Basin CommercializaAon & Ramp Up à ConAnued business development to operators in other oil fields Pump Orders Increase à Agreements with addiAonal new Client Base operators to test and install the Expansion Linear Pump à Expansion of Linear Pump inventory based on increased client demand à Clear line of sight to profitability 2016 & Beyond
• Approaching commercializaAon PUMP • Cost-effecAve & efficient • Low environmental footprint • All horizontal oil plays will need arAficial liT • Sizeable & growing target market (7,500 MARKET wells in SK & 9,500 in ND) • ApplicaAon in other basins & plays globally • Significant near-term catalysts • First commercial version of Linear Pump to OPPORTUNITY be installed by end of 2015 • Agreement with large oil company + discussions ongoing with others
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