Estrella International Energy Services Ltd.

Transcription

1 Estrella International Energy Services Ltd. Annual General Meeting Toronto, Ontario, Canada July 25, 2012 TSX V: EEN.V

2 Disclaimer: Forward Looking Statements Certain statements included or incorporated by reference in this presentation constitute forward looking statements or forward looking information under applicable securities legislation. Such forward looking statements or information are provided for the purpose of providing information about management's current expectations and plans relating to the future. Readers are cautioned that reliance on such information may not be appropriate for other purposes, such as making investment decisions. Forward looking statements or information typically contain statements with words such as "anticipate", "believe", "expect, "plan", "intend", "estimate", "propose", "project, seek, continue, forecast, may, will, potential, could, should or similar words suggesting future outcomes or statements regarding an outlook. Forward looking statements or information in this presentation include, but are not limited to, statements or information with respect to: business strategy and objectives; acquisition plans and the timing thereof; capital expenditures; net revenue; operating and other costs; and taxes. Forward looking statements or information are based on a number of factors and assumptions that have been used to develop such statements and information but which may prove to be incorrect. Although Estrella International Energy Services Ltd. (the Company ) believes that the expectations reflected in such forward looking statements or information are reasonable, undue reliance should not be placed on forward looking statements because the Company can give no assurance that such expectations will prove to be correct. In addition to other factors and assumptions which may be identified in this presentation, assumptions have been made regarding, among other things: the impact of increasing competition; the general stability of the economic and political environment in which the Company operates or plans to operate; the timely receipt of any required regulatory approvals; and the ability of the Company to obtain qualified staff, and equipment in a timely and cost efficient manner. Forward looking statements or information are based on current expectations, estimates and projections that involve a number of risks and uncertainties which could cause actual results to differ materially from those anticipated by the Company and describedin the forward looking statements or information. The forward looking statements or information contained in this presentation are made as of the date hereof and the Company undertakes no obligation to update publicly or revise any forward looking statements or information, whether as a result of new information, future events or otherwise unless required by applicable securities laws. The forwardlooking statements or information contained in this presentation are expressly qualified by this cautionary statement. 2

3 Disclaimer: Privileged Information This presentation may contain information concerning Estrella of a material nature that has not been generally disclosed. This information is being provided to you in the necessary course of the business of Estrella in connection with proposed business or professional activities to be conducted between Estrella and you. You understand that this information is being provided to you on the understanding that you are considered a person or company which is in a special relationship with Estrella, as defined in the applicable securities laws, andas such, you may not purchase or sell any securities of Estrella with knowledge of a material information, nor disclose any material information concerning Estrella, that has not been generally disclosed. Any failure to adhere to such prohibitions against such trading and tipping could expose you to criminal and civil liability. 3

4 4 Message from the Chairman & CEO Estrella was founded in 2005, initially operating in Argentina. In the last seven years we have grown the business to operate in Chile, Peru, Bolivia and Colombia and listed the company on the Toronto Stock Venture Exchange. Today we operate a fleet of nineteen drilling and workover rigs, directional drilling equipment and provide engineering and consulting services to operators around the region. This growth has not come without its challenges. Our strategy to grow our footprint in Colombia via the acquisition of three local companies took much more time, energy and costs than we had originally hoped. We now have the acquisitions completed and have made good advances in consolidating our operations in Colombia. Whilewehavemanagedtogrowthetoplinerevenuesofthebusinesseveryyear, even in , financial results have not followed as quickly. Major challenges interrupted our operations in Chile, Bolivia and Colombia late in We are committed to improving our the cost of running our businesses and made major strides in the first quarter of this year with a reduction of over $600,000 in SG&A costs from the previous quarter. Growth in our consulting and directional businesses and improved utilization in Colombia will help drive growth again in We also have repaid over $8.5 million of our $32 million senior debt facility in the last six months. Collectively these efforts are helping to strengthen the balance sheet of the Company. Estrella is committed to Ser mejor, hacer mas (Be better, do more) and will continue to strive to set the standard of excellence by which all other service companies in Latin America are measured Warren Levy Chairman & CEO

5 Latin American OFS company, growing consistently since 2005 operating in 6 countries with 500 employees TSX.V:EEN Latin America based bi lingual and bicultural management Operate at the highest level of service quality Operate with global experience and local know how Vision To set the standard of excellence by which all other service companies in Latin America are measured 5 Ser mejor, hacer mas

6 6 Estrella Overview

7 Diversified Service Offering Drilling and Workover Rigs HP modern rig fleet of 19 rigs Modern, portable, self erecting rigs (no cranes required) Automation High efficiency, low emission engines Tools and Services: Directional Drilling & Tool Rental Completion and Workover Engineering & Consulting Well design and engineering Project management and field operations management 7

8 Operations Canada Toronto Admin & Public Listing Barranca Argentina Buenos Aires Headquarters Neuquen Operations Base Comodoro Operations Base. Chile Santiago Sales Office and Operations Base Punta Arenas Operations Base Peru Bolivia Lima Sales Office Talara Operations Base Santa Cruz de la Sierra Sales Office and Operations Base. Colombia Bogota Sales Office Tibitoc Operations Base Barranca Bermeja Operations Base Yopal Storage Yard 8 Punta Arenas Paraguay Asuncion Sales Office

9 Rig Count Drilling Workover Colombia Peru Bolivia Rig Fleet HP Workover On Contract HP Workover Mobilizing to Arg HP Workover On Contract HP Workover Mobilizing to Arg HP Workover Marketing HP Drilling On Contract HP Drilling Marketing HP Drilling On Contract HP Drilling/WO Marketing HP Drilling/WO Marketing HP Drilling Marketing HP Drilling/WO On Contract HP Workover Mobilizing HP Drilling On Contract. Chile HP Drilling Mobilizing to Arg Modern portable fleet: 16 of 19 rigs built 2007 or later Five drilling rigs fully automated No cranes required for rig up Argentina HP Workover On Contract HP Workover On Contract HP Workover On Contract HP Drilling On Contract 9

10 Directional Drilling Alliance Agreement with 2012 Year End Expected Number of Kits Country MWD GR / Gyro APWD Argentina 6 2 / 2 2 Chile 3 1 / 1 Peru 3 3 / 3 2 Colombia 3 3 / 3 2 Bolivia 1 1 / 1 SDI supplies Gyro / MWD and LWD Estrella provides directional tools and operates the services in region Latin America Wide Exclusivity Operating bases in 4 countries 10

11 Consulting & Engineering Services Well Engineering and Project Management Hostile and Remote Environment Expertise Production Enhancement Fit for Purpose Rig & Equipment Design Pad Drilling Development Plans Country Oil &Gas Geothermal Solution Mining 11 Argentina Chile Peru Colombia Canada Kenya

12 World Class O.F.S. Team Management Title Experience Warren Levy Chairman & CEO 16 years of global OFS experience (SLB) Hernan Montoya CFO 15 years of corporate finance. 5 years as Estrella Controller Doug Parker VP Operations 35 years experience with drilling contractors (Parker Nabors BHI) Ex Parker LatAm General Manager Matthew Holdeman VP Geothermal 26 years of experience in DD, IPM, QHSE (SLB & BHI ) Gary Pidcock VP Consulting 29 years of experience, onshore and offshore, (SLB, BP, Gulf, PlusPetrol) Camisea Project Manager Luis Aviles VP Sales & Marketing 28 years (SLB) in operational & management roles Nelsy Carreno Director SSMACD 16 years of HSE experience with drilling contractors Michelle Grandjean Director HR 14 years of regional HR management Giovanni Rios GM Peru 16 years of experience(slb, Oxy), 17 countries MWD/LWD Fernando Lopez GM Col 15 years of experience. Ex Tesco manager for Per/Col/Ecu Alejandro Biagiola GM Arg 16 years in operations roles (SLB) Eduardo Llaneza GM Bolivia 18 years in industry in various operations roles (Halliburton). Directors Title Warren Levy Chairman & CEO Andrew Fentress Director Partner, Medley Capital (Shareholder nominated director) Gustavo Garrido Director Managing Partner at premiere M&A law firm in Buenos Aries Phil MacDonnell Director Board experience at over 14 public and private cos. Chair and co founder of Insurance pay (sold to Macquarie capital in 2008). C.A. Remo Mancini Director Former Minister of Revenue for Ontario, 30 years of experience in business/government 12

13 13 Latin American Market

14 Stable Growing Rig Market Region has much lower volatility than other markets Exploration and Production (E&P) operators have > $10 billion in commitments in 2012 on land Democratization of block bidding has facilitated entry of smaller players. Numerous remote and challenging projects, antiquated equipment and increasing customer demands to improve Huge resource potential in a growing economic environment Must have a regional footprint to take advantage of sustained growth Latin American rig market up 100% in 10 years Rig Count Latin America and World Rig Count Ex LatAm Other Venezuela* Peru Mexico Ecuador Colombia Chile Brazil Bolivia Argentina Source: Baker Hughes 14

15 Target Market Colombia The Hottest Little Market in Latin America Continued strong activity by juniors and Ecopetrol have kept rig count up Nearing the elusive goal of 1,000,000 bbls/day of production Large number of projects still in exploration phase Slow to develop infrastructure is restricting pace of growth Security and social concerns have lost some ground after major improvements over the last 10 years Activity outlook remains strong Rig 553 outside of Bogota Drilling Rigs Operating Workover Rigs Operating Active Drilling Contractors 67 Approx. 150 Over 30 Source: Baker Hughes 15

16 Target Market Argentina Government take over of YPF sets the tone for massive non conventional potential Government take over of 51% of YPF has set a negative investment sentiment for outsiders unfamiliar with the market but is likely to spur rapid drilling increases Massive shale gas and oil potential (EIA rates Argentina s gas resource potential as third highest in the world behind the US and China Infrastructure and workforce are in place to support a boom, but import and investment environment could be improved to help speed the entry of the required equipment into the country Growing negative energy trade balance is forcing rapid action in the sector Government has started to work to improve the labour situation Rig 551 has drilled 180+ wells in four years in Argentina Drilling Rigs Operating Workover Rigs Operating Active Drilling Contractors 65 Approx. 250 Over 10 Source: Baker Hughes 16

17 Target Market Chile Niche Market for Remote Operations Country lacks sufficient domestic energy supply and is pushing on all fronts Looking to diversify driving growth in geothermal development in the high Andes Challenging remote operations Small oil and gas activity in south of country Home to one of the worlds largest methanol plants going wanting due to lack of Argentine gas supply Most attractive fiscal and investment regime in the region Rig 1201 operating in the Andes buried in snow Drilling Rigs Operating Workover Rigs Operating Active Drilling Contractors ENAP Source: Baker Hughes 17

18 Secondary Market Peru Three markets in one Talara marginal fields Offshore platform developments Jungle heli rig operations Long awaiting jungle developments finally getting green light from government Offshore activity also set to increase with new capital coming into key player Will remain a small market, but with attractive long term contracting opportunities Rig 201 After Upgrades Drilling Rigs Operating Workover Rigs Operating Active Drilling Contractors Source: Baker Hughes 18

19 Secondary Market Bolivia Market that has mixed reviews, but with real potential Bolivia is home to some of the most prolific gas resources in the world Government involvement in the industry had increased, but has now scaled back to be more operator friendly Operators that remain in Bolivia are good counterparties (Petrobras, PlusPetrol, Oxy etc..) Small often overlooked market, with activity returning to strong levels Rig 1001 Operating outside Santa Cruz Drilling Rigs Operating Workover Rigs Operating Active Drilling Contractors 8 Approx.18 6 Source: Baker Hughes 19

20 The Geothermal Market Global Production Base US, Indonesia, Philippines, Mexico, New Zealand, Italy, Kenya, Central America 10.7 GW of installed capacity Steady growth for the last 30+ years Sustainable Growth Each 40 MW plant requires 8-15 wells Virtually zero carbon footprint Long plant life and excellent baseload power (>95% uptime on production) Latin American Potential Current developments in Central America and Chile, greenfields projects in Peru, Argentina and Bolivia First projects in development stage in Chile and Argentina Source: US Geological Survey Only part of the Ring of Fire without current geothermal production Global Geothermal Production 30 years of steady growth 20 Source: Bertani, 2010

21 Loyal Customer Base Long term, sustained customer relations Many of our new country entries have been facilitated by existing customers Buenos Aires continues to be a hub for regional oil companies YEAR Customers > 1 MM in Revenue PRC / Oxy 2008 PRC / Oxy / PetroAndina / Maple / March 2009 PRC / Oxy / PetroAndina / ENAP / ENG / Maple 2010 PRC / Oxy / PetroAndina / ENAP / ENG / GeoPark / PlusPetrol / Ecopetrol 2011 PRC / Oxy / PetroAndina / ENAP / ENG / GeoPark / PlusPetrol / Ecopetrol/Pac. Rubiales 21

22 22 Progress and Objectives

23 Objectives Reduction in SG&A to < 11% of revenues Rationalization and replacement of expats with locals in key management positions Promotion from within to replace key departures Elimination of many one time costs assocated with ineffecient capital raising Reduced SG&A in Q by 938k over 2011 averages Consolidation of position in Colombia One Estrella image Completed Zigma acquisition Converted problematic PL acquisition into a clean asset purchase One unified operation Reduced admin positions by > 50% Reduced operating bases from seven to three Utilization of rigs > 80% Swapped rigs between Colombia Peru onto long term contracts Diversification of customer base in Colombia Focus on long term contracts Work required to secure higher percentage of long term contracts 23 Debt Reduction Renegotiation of Petroland deal to reduce assumed debt from $6 million to $1.7 Million Repaid over $8 million of senior debt facility over the last six months

24 Objectives SSMACD Excellence (Safety, Security, Environment and Quality System) Change out of staff and fundamental change in focus has started to make game changing improvements Build off of excellence in Colombia Second consecutive year to win the coveted Cruz Esmerelda award given by the Colombian government for companies that score outstanding results on the annual government led audit scored 98% Growth in Consulting Business Three new contracts signed in Q1 Expected growth in consulting revenues by more than 2x year on year Growth in Directional Business Alliance with SDI starting to fuel substantial growth 2010 (Pre SDI) 2012 Year End Target MWD Kits Gyro APWD/GR MWD Gyro APWD/GR Argentina Chile Peru Colombia Bolivia

25 Highlights The 5 Pillars Client Negotiated Extension on 8 key contracts (4 rigs, 3 services, 1 consulting) Diversifying customer base in Colombia. Entry into new markets Environment Waste classification and separation at all rig sites Carbon footprint study launched Quality Awarded 98% on quality certification in Colombia Launched Trigpoint maintenance management system People and Presence Expanded into Colombia, Bolivia Promotions of senior local staff into executive roles Safety 1 year completely accident free on two rigs in Argentina Awarded Cruz Esmerelda award by the Colombian Saftey Council Incident frequency and severity down substantially post changes in SSMACD team 25 Ser mejor, Hacer mas Be better, do more

26 Key Milestones 4 Acqusitions Location Date Description Purchase Price EBITDA Capacity Rig 1201 Mar 2010 Acquired single rig operating entity in Chile from partner $24.5 $5 STS de los Andes Nov 2010 Colombian based 5 rig workover company. Added 2 workover rigs and sold off small pulling unit post transaction $20 >$4 Zigma Petroland 2012 Colombia rig company that had 5 rigs + extensive stock of materials and peripherals Upgraded 1000 HP and 550 HP drilling rigs to meet Estrella standards Used peripherals to arm the two additional workover rigs from STS Over $1 million in spares Sold off older rig centerpieces and junk Original plan was to purchase company, and assume roughly $6 Million in debt Uncovered substantial contingencies and the company underperformed Converted purchase to an asset purchase of 3 x 550 HP drilling/workover rigs + $1 million in additional peripheral assets $10.5 >$3 $8.2 > $3 26 Notes: Values quoted are in millions of USD. Purchase price inclusive of debt cancellation or assumption

27 27 Financial Results

28 A History of Consistent Growth Revenues US$ MM E CAGR : 90% CAGR : 91% 28

29 Ownership June 30, 2012 Insider Ownership Common Shares controlled by Management and Insiders (excluding Medley Capital) Common Shares controlled by Medley Capital Approx 15.0 Million (1) 39.6 Million 1. 14,500,000 of these common shares are escrowed against price performance of the Common shares with 4 million vesting at $1.30, 6 million vesting at $1.40 and the reminder vesting at $2.00. Capitalization Current Issued and Outstanding Common Shares 132,809,783 (1) Non voting convertible preference shares outstanding 4,125,000 Series A Preference Shares (2) Outstanding Warrants 41,784,650 (3) Current Trading Price $0.08 (5) Current Market Capitalization $10.6 Million (5) Long Term Debt $24 Million Credit Suisse Credit Facility $7 Million Local Colombian Bank Debt $15 Million Outstanding Convertible Debentures (4) Excludes 3,125,000 contingent common shares to be issued to the sellers of Zigma Petroleum Services S.A. 2. Excludes 1,250,000 contingent Series B Preference Shares to be issued to the sellers of Zigma Petroleum Services S.A. 3. Includes warrants exercisable for 38,712,500 common shares at CDN$1.50 per share expiring July 25, 2015; warrants issued to Credit Suisse in conjunction with the long term debt facility exercisable for 3,072,000 common shares at US$0.91 per share expiring December 1, 2015; and 150 warrants exercisable for 1,875,000 common shares at a price of CDN$0.80 per share until January 21, Due December 31, 2015, with an annual interest rate of 12% per annum. Redeemable, in whole or in part, at the option of the Corporation on 60 days notice if the 20 day trading price of the Common Shares is greater than or equal to $1.50. Convertible at the holder s option, into fully paid common shares in the capital of the Issuer at any time prior to maturity at a conversion price of $1.00 per common share for every $1.00 of principal. 5. Based on the closing price of the common shares on the TSXV on Jun 30, 2012.

30 Priorities for Successful Integration of Petroland and Zigma Has been completed Secure long term rig contracts to get utilization back over 80% Improvement in profitability for Argentina Rig 551 is seeing good demand, and services are expected to improve substantially with roll out of SDI directional equipment and non conventional resource developments Focus on growth and development of consulting business Targeting more than 2x growth year on year Focus on free cash flow generation and reduce debt Have repaid over 8 Million in 32 million senior facility in last six months and reduced debt assumption in Colombia with Petroland renegotiation Continue to amortize debt over coming quarters Substantial SG&A reduction as a function of revenue 30

31 Why Estrella? Close to our customers and our communities We live where we work We develop our international experience and our home grown talent Unrivaled experience in remote and non standard projects 7 years of sustained growth, via customer driven solutions Partnerships with our Customers, Suppliers and our Communities We are relentless in the pursuit of setting the standard for quality, safety and environmental performance 31 Be better, do more

32 Estrella International Energy Services Ltd. Warren Levy Chairman & CEO Hernan Montoya CFO Phone: Fax:

33 33 Case Studies

34 Diversified Market Presence Only active rig and directional player in the rapidly growing Geothermal Market Central America / Mexico / Colombia / Peru / Argentina / Bolivia all with active projects Estrella Rig 1201 drilling a geothermal well in northern Chile at 4500 m of altitude Proved that a modern automated rig can outperform in remote geothermal operations 34

35 Geothermal Challenges Extreme snow and wind conditions required massive modifications to rig operations. 35

36 Case Study Full Service Capabilities Rio Tinto / Vale Potash Development Mendoza Province, Argentina Estrella got involved in late 2005 Initial work to evaluate feasibility of a directionally drilled development, Later to design and have fabricated a custom built, fully automated 1000 HP AC walking rig Field taken to 16 well pads, saving hundreds of millions on infrastructure costs and being featured in Rio Tinto s quarterly update to investors as a case study in reduced environmental impact 5 years later Estrella continues to supervise the rig operation and provide engineering support Now engaged in phase II rig construction project to design and build two additional rigs and assisted Vale in completing early engineering work on a Canadian project Manipulator Crane Each circle is 2 wells 1000 x 16 well pads 36 Walking Automated Rig

37 Southern Cross Transaction Summary 37

38 Southern Cross Southern Cross is a private equity firm with operations throughout Latin America since Southern Cross was created to make value oriented, control investments in Latin American companies that have significant potential for improved performance and growth. The Southern Cross funds include four funds, the latest of which is SCLAPEF IV, raised in 2010 with capital commitments of approximately $1.68 billion. Ringo Holding L.P. is an Ontario Limited Partnership of which SCLAPEF IV is the sole limited partner and whose general partners are three recently incorporated corporations owned by principals of Southern Cross. 38

39 Transaction Summary 166,666,667 units at a price of CAD$0.15 per unit Each unit entitled to 1 common share and 0.4 warrants 18 month warrants prices at CAD$0.15 for the first six months, beyond which if the stock trades over CAD$0.25, the warrant price converts to being 90% share price CAD$25 in initial proceeds, with the potential of CAD$10 million additional capital to follow Use of Proceeds Reduce indebtedness with Credit Suisse to $14 Million (roughly $10 million repayment) Reduce other indebtedness by $4 5 Million Working capital and general corporate purposes 39

40 Ownership Post Transaction Insider Ownership Common Shares controlled by Management and Insiders (excluding Medley Capital) Common Shares controlled by Medley Capital Approx 15.0 Million (1) 39.6 Million 1. 14,500,000 of these common shares are escrowed against price performance of the Common shares. Capitalization Current Issued and Outstanding Common Shares 299,476,450 (1) Non voting convertible preference shares outstanding 4,125,000 Series A Preference Shares (2) Outstanding Warrants 38,712,680 (3) Current Trading Price $0.13 (5) 40 Current Market Capitalization $38.9 Million (5) Long Term Debt $14 Million Credit Suisse Credit Facility $7 Million Local Colombian Bank Debt $15 Million Outstanding Convertible Debentures (4) 1. Excludes 3,125,000 contingent common shares to be issued to the sellers of Zigma Petroleum Services S.A. 2. Excludes 1,250,000 contingent Series B Preference Shares to be issued to the sellers of Zigma Petroleum Services S.A. 3. Includes warrants exercisable for 38,712,500 common shares at CDN$1.50 per share expiring July 25, 2015; and 150 warrants exercisable for 1,875,000 common shares at a price of CDN$0.80 per share until January 21, The warrants issued to Credit Suisse in conjunction with the long term debt facility exercisable for 3,072,000 common shares at US$0.91 per share expiring December 1, 2015 will be cancelled as part of the reduction in the Credit Suisse debt. 4. Due December 31, 2015, with an annual interest rate of 12% per annum. Redeemable, in whole or in part, at the option of the Corporation on 60 days notice if the 20 day trading price of the Common Shares is greater than or equal to $1.50. Convertible at the holder s option, into fully paid common shares in the capital of the Issuer at any time prior to maturity at a conversion price of $1.00 per common share for every $1.00 of principal. 5. Based on the closing price of the common shares on the TSXV on Jul 24, 2012.

41 New Board Composition Directors Title Warren Levy Chairman & CEO 16 years of global OFS experience (SLB) Horacio Reyser Director Partner at Southern Cross, with over 18 years of management, investment and M&A experience in Latin America. Ricardo Rodriguez Director Founding partner of Southern Cross. 30 years of Latin American investment experience Diego Acevedo Director Head of Southern Cross Bogota office. Over 10 years of management consulting and investment experience. Phil MacDonnell Director Board experience at over 14 public and private cos. Chair and co founder of Insurance pay (sold to Macquarie capital in 2008). C.A. Remo Mancini Director Former Minister of Revenue for Ontario, 30 years of experience in business/government Daniel Kokogian Director 30+ year petroleum industry veteran. Ex President for Argentina of successful Canadian junior PetroAndna. Current director of CGC hydrocarbons. Extensive M&A, management and operations experience. Gustavo Garrido * Counsel Managing Partner at premiere M&A law firm in Buenos Aries Mr Garrido will serve as oustide counsel to the corporation 41