Presentation on theme: "Leadership in Oil & Gas Shale Wastewater Recycling Investor Presentation LD Micro Invitational October 2, 2013 1."— Presentation transcript:
Leadership in Oil & Gas Shale Wastewater Recycling Investor Presentation LD Micro Invitational October 2, 2013 1
2 The statements contained in this presentation that are not purely historical are forward-looking statements within the meaning of applicable securities laws. Forward-looking statements include statements regarding our “expectations,” “anticipation,” “intentions,” “beliefs,” or “strategies” regarding the future, whether or not those words are used. Forward-looking statements also include statements regarding revenue, margins, expenses, anticipated levels of future revenues and earnings from operations, projected costs and expenses related to our operations, liquidity, capital resources, and availability of future equity capital on commercially reasonable terms. Forward-looking statements in this presentation are based upon a number of assumptions, some of which may not materialize, and unanticipated events may occur which could affect the actual results achieved by the Company during the periods covered by the forward-looking statements. All forward-looking statements included in this presentation are based on information available to us as of the date of the presentation, and we assume no obligation to update any such forward-looking statements. Our actual results could differ materially from the forward-looking statements. Aqua Pure Ventures Inc. (AQE.V) 135 Commercial Drive – Unit 1 Calgary, Alberta T3Z 2A7 www.aqua-pure.com Aqua Pure Ventures Inc. (AQE.V) 135 Commercial Drive – Unit 1 Calgary, Alberta T3Z 2A7 www.aqua-pure.com Safe Harbor Statement
Corporate Profile Aqua-Pure is an oilfield engineering and services firm that has developed and commercialized patented technology for wastewater treatment, transforming wastewater from a liability to an asset. Fountain Quail Water Management, 100% wholly owned subsidiary and primary operating unit of Aqua-Pure, deploys state-of-the-art mobile treatment units in shale oil and gas plays across North America, delivering high efficiency, cost-effective and environmentally sustainable alternatives to wastewater disposal that utilizes patented and proprietary technologies, processes and equipment. Over the last decade, Fountain Quail has become a global leader in recycling shale gas flowback and produced water into clean saltwater for re-use or fresh water for disposal re-use/discharge. THE TECHNOLOGY We provide environmentally sustainable, cost-effective wastewater treatment for the oil & gas fracking industry. 3 Chemical precipitation/filtration process to clean Saltwater for Re-Use Evaporative process that produces pure distilled water for re-use.
Headquarters /R&D center: Calgary, Canada Operations / Service: Roanoke, TX Business Development: Houston, TX Employee Count: 40 (5 employees in Calgary) TSX Venture Exchange: AQE Market Cap: $20 million (@$0.22 per share) Shares Outstanding / Fully Diluted: 91.5 million / 124.5 million Options/Warrants: 6.8 million (Avg. $0.25) / 6.2 million (Avg. $0.35) Insider Ownership: 57.1% fully diluted Estimated Market Value of Equipment: $25+ million NOLs: $29 million – expire 2026-2032 Patents: 63 (plus 2 pending) – expire 2018-2025 Snap Shot In 2004 - FIRST company to begin a fresh water recycling process in the Barnett Shale (first shale gas play in the U.S.) Aqua-Pure has recycled approximately 20 million barrels of contaminated wastewater. In 2004 - FIRST company to begin a fresh water recycling process in the Barnett Shale (first shale gas play in the U.S.) Aqua-Pure has recycled approximately 20 million barrels of contaminated wastewater. 4 2013 Financial Goals Revenue growth rate accelerates Q4 Q4E revenue: $2.5 million - $3 million Gross Margins: 35 - 40% EBITDA: Q4 B/E+ 2014 Financial Goals Full Year Revenue growth rate: 50%+ Gross Margins: 35 - 40% EBITDA Margin: 20%+
Key Developments - History Key Developments - History 1992 1994 1996 1997 1998 1999 2000 2001 2003 2004 2007 2008 2010 2011 HISTORY – Founded – Company Develops Prototype Evaporator Technology in Kelowna, BC. – First Patent Issued for Prototype System. – Aqua-Pure Completes IPO and Begins Trading on Vancouver Stock Exchange. – Colt Engineering Hired to Evaluate Prototype Design. Modifications Completed. – Filed Worldwide Process Patent. Aqua-Pure Builds the First Oilfield Evaporator in Alberta Heavy Oil. – Colt Engineering Formalizes Agreement with Aqua-Pure. –Jake Halldorson Accepts Position as CEO. Insider investment over $40 million at approximately $0.40/share –Signs Joint Technology Agreement with EnCana – for use in the thermal heavy oil recovery process. –BP (Amoco) Awards Contract to Supply a Brine Concentrator. –Receives Patent for the Compact Rising Film Evaporator (CRFE) Technology. –Aqua-Pure Contacted by Delzon Elenburg (Barnett Shale, TX) Regarding Recycling of Shale Gas Flowback Water. –NOMAD 1 is Installed Near Decatur, TX. Work Begins with Devon Energy. –9 th NOMAD Installed. Granted Long-term Operating Permit from Railroad Commission of Texas. –Devon & Fountain Quail Awarded ‘08 Chairman’s Stewardship for Wastewater Recycling Operations. –Entry into Marcellus Shale with 3 NOMAD Units Installed at Eureka Resources’ Williamsport, PA. –Expanded Operations into the Eagle Ford Shale in South Texas. ROVER System was Introduced (October). Key Developments 9/03/13 Aqua-Pure and Select Energy Activate Joint Venture Following Highly Successful ROVER Commercial Launch. 8/08/13Aqua-Pure Secured US $1.5 Million from the Sale of Convertible Debentures ($0.30 conversion). 6/27/13Announces Contract with Pioneer for 2-Nomad Installation (2 nd E&P Operator contract in Permian). 3/06/13 Closes financing–US $2.15 million 8% Secured Convertible Debentures ($0.30 conversion) in private placement. 2/20/13 Expands operations into the Permian Basin with the installation of two NOMADS. 09/18/12 30-year industry veteran, Broderick, joins Aqua-Pure as Head of Corporate Development. 09/13/12 Aqua-Pure selected by The Artemis Project™ as 2012 Top 50 Water Company / honored for the third consecutive year. 5
6 REGULATORY Water usage, disposal wells, time to permit, etc. MARKET ACCESS Recent agreement with Select engages an additional 100 person Technical Sales force. PROVEN TECHNOLOGY Processed almost 20 million barrels of oil field waste water. Patents issued in over 40 countries and new patents pending. ENVIRONMENTAL public perception, water availability, legal liability, trucking costs and concerns. ECONOMIC Well Positioned for Market Trends Cost of trucking, lack of access to disposal, water, etc.
Patents & Approvals 7 Rover & Nomad Systems Cutting-edge, cost-effective technologies that recycles hard-to-treat wastewater into re-useable fresh water, thus creating an environmentally sustainable water cycle. Aqua-Pure holds 65 patents (63 issued and 2 pending) covering 40 countries. Patents focus - unique configured, forced convection heat recovery and transfer circuit, combined with conventional vapor recompression circuitry, to maximize heat transfer to produce purified water. This MVR process is complex, yet extremely efficient, requiring significantly less energy to produce one pound of steam, a 90+% reduction in energy from conventional methods. Clear Solutions High level of regulatory acceptance: Holder of permits in key shale gas states: TX, AR, PA Received first long term TX recycling permit Unblemished record with the TX RRC First operation to meet new PA DEP discharge rules First NPDES discharge permit in AR for Fayetteville Shale water High level of regulatory acceptance: Holder of permits in key shale gas states: TX, AR, PA Received first long term TX recycling permit Unblemished record with the TX RRC First operation to meet new PA DEP discharge rules First NPDES discharge permit in AR for Fayetteville Shale water
8 Since 2004, Fountain Quail has built and operated 14 turnkey shale water recycling facilities processing approximately 20 million barrels of contaminated water. Two Key Product Lines Both Mobile Cleans Saltwater for Re-Use Removes suspended solids and soluble organics. All-in cost to customer approximately $1/barrel. Pure Distilled Water for Re-Use Leaves behind all dissolved contaminants in concentrated form. All-in cost to customer less than $4/barrel
9 Low cost, high efficiency MVR (Mechanical Vapor Recompression) system. Semi-mobile, oil field designed brine concentrator that utilizes a distillation process to produce fresh water from flowback and produced water. Equipment placement at/or near well site, uses well-head gas as its energy source. Significantly reduces downtime (cleaning and/or maintenance) due to modular system design. Serious alternative to deep saltwater injection disposal wells, which permanently removes water from the hydrological cycle. Heavily tested in extreme environments and highly variable feed waters from Canada’s oil sands to North Texas shale plays. At full capacity (2,000 bbl/d), generates revenue of approximately $2.5 million/year. Nomad System COMMERICALLY LAUNCHED 2004
Rover recycles water on-demand near the wellhead, removes suspended solids and soluble organics from wastewater, and returns clean brine that can be blended for re-use as hydraulic fracturing fluid. Primary treatment of frac flowback wastewater Rugged, self contained MOBILE system – small footprint (30X55 foot pad) Proven high capacity (10,000 bbl/d) At full capacity generates revenue of approximately $1 million/year 10 Rover Systems COMMERICALLY LAUNCHED Q1 2013 Rover significantly reduces costs of water sourcing, storage, disposal and transport.
Fountain Quail’s cost and treatment model has been validated by the Gas Technology Institute (gti). Featured company in the “The Barnett - Powering Progress” ad campaign. Devon - Winner of the Interstate Oil and Gas Compact Commission (IOGCC) Chairman’s “Stewardship Award” in 2011 for recycling work (mainly with Fountain Quail). Fountain Quail later won the same award in 2011 for work in the Marcellus Shale (PA). Devon recently filmed a segment about Fountain Quail on their "Culture of Achievement" video series entitled "Pioneering Water Recycling." Showcased on Bloomberg’s “EnergyNow” program. Named to The Artemis Project’s 2012 “Top 50” Water Tech List for the third consecutive year, recognizing Aqua-Pure as among the most innovative and promising companies in the water technologies industry. Also named by The Artemis Project as one of five most-promising “Early Market Leaders”, among companies with revenues over US $5 million per year. 12 Industry Recognition
14 Devon has become Fountain Quail’s best sales reference. Fountain Quail has migrated to 10 different Devon sites since 2004, following the customer’s production activity. Fountain Quail has hosted over 100 Devon-approved site tours including media, government officials (DoE, EPA, Texas RRC, Canadian Consulate, etc.). Fountain Quail was featured as a corporate partner in Devon’s 2012 “Culture of Achievement” video series. Barnett
15 February 20, 2013 - Fountain Quail contracted with a large independent publicly traded E&P operator for 2 NOMADS. Processing commenced in late third quarter 2013. June 27, 2013 - Fountain Quail secured a second contract in the Permian basin for Pioneer Natural Resources to install 2 NOMAD units. Processing to begin by early fourth quarter 2013. First half 2013, Fountain Quail successfully piloted and commercially tested its second product, ROVER with a large publicly traded E&P operator. Permian
16 Exclusive NOMAD relationship in NW Pennsylvania. Eureka Resources is a leading provider of Marcellus Shale wastewater treatment solutions. June 2010, Eureka Resources purchased 3 NOMADS, with annual licensing payments to AQE, and opened its 60,000 sf water treatment facility in Williamsport, PA. The facility recycles up to 300,000 gallons of wastewater daily from customers that include Range Resources, XTO Energy and Chesapeake Energy. Marcellus
Select Energy Services (“Select”) was founded in 2007 as Peak Oilfield Services in Gainesville, TX. Headquartered in Houston, Select has grown to a $1 billion+ company providing services to over 400 customers in every major shale play in North America. Private Company founded by John Schmitz, a lifelong entrepreneur who has founded and developed numerous successful businesses in the oil and gas industry including HEP Oil Company, Complete Production Services and Brammer Supply. Delivers end-to-end water solutions and well site services to clients through two primary divisions: WaterOne WellOne 18 Founded:2007 Headquartered:Houston, TX Employees:Over 5,500 Select Energy Services
Strategic Partners in multiple bids/plays, leveraging complementary strength Fountain Quail: Excellent reputation, bundling of all water related services into complete water solution. Strengths: Technology, Water Chemistry and Operating Expertise. Select Energy Services: Excellent reputation, bundling of all water related services into complete water solution, business development network and presence in every major US shale play. Strengths: Ancillary Oilfield Support Services, Secondary Containment, Water Transfer, Localized Permitting Experience, Local Field Support, business development network and presence in every major US shale play. 19 JV Partnership FQS Venture, LLC 50-50 Partnership between Fountain Quail and Select Energy Services
Jacob Halldorson, Aqua-Pure – Chief Executive Officer (2002) and Director (1998) Previously, senior executive and founding partner of Colt Engineering Corporation (Calgary ), founded in 1973 – acquired by Worley Parsons for $1.3 Billion. Served as a director of Net Shepherd Inc., Axia NetMedia Corporation, and Hallmark Resources Ltd. Karim Teja, Aqua-Pure – Chief Financial Officer (2007) Served as an officer of Imaging Dynamics Company Ltd., a TSX listed company. Formerly Chief Financial Officer and Chief Operating Officer of Erasoft Technologies Inc., a private software company, where he helped negotiate a successful acquisition by Viasoft Inc., a NASDAQ listed company. B.S. (Business) with honors - Simon Fraser University; honors certificate from the Canadian Securities Institute; Certified General Accountant (CGA) in 1992. Brent Halldorson, Aqua-Pure – Chief Operating Officer and Director (2006) Manages Aqua-Pure’s US-based service company, Fountain Quail Water Management Key developer of Aqua-Pure’s mobile NOMAD evaporator treatment system for shale gas operations and other mobile treatment solutions for oil and gas operations throughout North America. Member of APEGGA (Alberta's Association of Professional Engineers). Served on the Town of Flower Mound's Oil & Gas Advisory Board. B.S. Electrical Engineering - University of Calgary. Rich Broderick, Fountain Quail – Vice President of Corporate Development (2012) 30+ years of oilfield experience with Schlumberger as Global Leader, O&G for Schlumberger Water Services. Recognized as an expert in the arena of oilfield water management. Currently serves as Chairman of the Fountain Quail – Select Energy JV. Harold Lauman, Aqua-Pure – President (1996) and Director (1997) Former President of Haron Research Corp., the founders of Aqua-Pure’s primary technology, since 1992. Served as District Manager for Browning Ferris Industries from 1989-1995 and GM for Cenoka Industries., from 1977-1989. Delzon “Possum” Elenburg, Fountain Quail – President (2002) and Director (2011 ) Founded Fountain Quail Water Management - water treatment options for the Barnett Shale from 1999-2001. Previously Vice President of Finance for Elenburg Exploration and Founder of Circle Seven Drilling and Circle Seven Production. Management Team 21
Richard Magnus, Chair of the Board (2002) 4-term Member of the Legislative Assembly of the Government of Alberta. Member of the Standing Policy Committee on Agriculture and Municipal Affairs (1993-2008). Alberta's first representative on Executive Committee, US Energy Council. Alan Hallman, Independent Director (2009) – Audit Committee Chair President of Alan Hallman and Associated Incorporated, a public relations consulting company (1997 to Present). Government experience includes serving in the offices of the Premier of Alberta, the Federal Minister of Natural Resources, Government Leader of the Yukon and Provincial Ministry of Energy, Labor, and Career Development; served as Campaign Chairman for Premier Klein’s re-election bids in 1993, 1997, 2001 and 2004. Member of the Board of Directors of Petro Reef Resources Ltd., a TSXV listed company. Randy Oberlag, Independent Director (2006) 30 years+ environmental experience and currently serves as president of S.T. Cooling Towers. Previously, president of Enviro & Emergency Management Services, Inc. B.S. - Columbia University School of Engineering, a B.A. in physics and a Juris Doctorate in Law. Member of the Society of American Military Engineers, the National Association of Corrosion Engineers and the American Bar Association. Richard Stroup, Independent Director (2006) Co-President and Co-CEO of Alan Ritchey, Inc., Registered Chemical Engineer, MBA. Board of Directors 22
3Q124Q121Q13*2Q13 Revenue C$ 1,874,742 C$ 977,972C$ 886,049C$ 1,265,607 Cost of Sales (1,595,515) (927,633)(639,368)(800,022) Gross Profit 279,227 50,339246,661465,585 Operating Expenses 1,111,583 1,428,0061,098,6371,041,192 Loss from Operations (832,356) (1,377,667)(851,956)(575,607) Other Income/(Loss) 124,622 (136,058)(850)- Financing Costs 310,617 356,455481,228534,194 Comprehensive net income (loss) C$(1,018,351) C$(1,870,180) C$(1,060,055)C$ (544,747) Select P&L Quarterly Comparisons 24 * Q1 2013 revenue decline expected as a result of moving assets from Eagle Ford to Permian.
CashC$ 407,043 Receivables 442,081 Inventory 446,437 Prepaid expenses134,601 Discontinued operations118,664 Property, plant and equipment* 16,756,047 Intangibles assets 37,687 Total Assets C$ 18,342,562 Bank indebtednessC$ 215,619 Accounts and accrued liabilities3,721,415 Deferred revenue (current portion) 713,109 Current Portion of debt**6,403,634 Liabilities of discontinued operations 152,126 Total Current Liabilities 11,205,906 Deferred revenue1,380,796 Long-term debt** 504,624 Derivative liability857,544 Convertible debentures** 7,836,621 Total Liabilities 21,785,491 Stockholders’ Equity (3,442,929) Total Liabilities and Stockholders’ Equity C$ 18,342,562 June 30, 2013 Summary Balance Sheet 25 * Recent transaction values equipment at approximately $25+ million. ** Significant portion of the Company debt is held by insiders. During August 2013, $3.7 million of current debt was renegotiated into long term debt to mature in 2017. August 8, 2013 - Aqua-Pure secured $2.2 million in an 8% per annum senior secured convertible debentures (US$0.30 per share conversion), of which, $1.5 million was purchased by international investors, remaining from the conversion of an existing demand loan held by Aqua-Pure's controlling shareholder. In addition, 2.2 million 2-year warrants, convertible common stock at $0.45 per share were issued to investors.
Avg. Fully Directors andCommon Exercise Conv. Convert NotesConv.Diluted% Executive OfficersSharesWarrantsPriceOptionsPriceNotesPrice SharesOwnership J. Halldorson, CEO*48.9m0.9m$0.34 0.7m $0.27 5.6m$1.252.3m$0.30 58.5m47.0% Board (non-exec)7.7m--2.0m $0.25 ---9.7m7.8% Exec. Management 0.9m - - 2.0m $0.25 - - - - 2.9m2.3% Sub-Total 57.5m0.9m$0.34 4.7m $0.255.6m$1.252.3m$0.30 72.4m56.7% Employees - -- 2.1m $0.25 ----2.1m1.7% Public Held Shares 34.0m 5.1m$0.35 - - - - 12.2m$0.30 51.3m41.2% Total Outstanding 91.5m 6.0m$0.35 6.8 m $0.25 5.6m$1.25 14.5m$0.30 124.5m100.0% As of September 30, 2013 * Average cost of CEO shares is $0.40 per share Enterprise Value Calculation Capitalization Table Current Share Price $ 0.22 Shares Outstanding (Mil) 93.20 Market Value of Equity (Mil) $ 20.50 Plus Total Debt (Mil) $ 17.50 Less Cash (Mil) $ 0.75 Enterprise Value (Mil) $ 37.25 52 Week Stock Price High: $ 0.30 52 Week Stock Price Low: $ 0.04 Average Daily Volume:27,689 26
27 Experienced industry leader in the treatment of frac and produced water Strong sales pipeline provides solid underpinning for profitable growth Accelerated growth through joint venture with leading oilfield service provider Select Energy Services is a $1 billion+ (revenue) company providing end-to-end water management solutions and well site services in every major North American shale play. Partnership allows companies to leverage complementary strengths, combine bid pipelines. Provides revenue potential through both equipment sales and treatment royalties. Fountain Quail is a proven recycler of oil & gas wastewater in North America today – processing over 20 million barrels of contaminated water. Working with leading producers since 2004, garnering impressive industry recognition. Achieving a high level of regulatory acceptance that forms a significant barrier to entry. Two commercialized product lines with outstanding performance records Two complementary mobile systems enable the Company to offer total water treatment solutions, whether for recycling or discharge. Both ROVER and NOMAD are efficient and low cost systems, built to be rugged and durable. Proven in dealing with highly variable feed waters across a number of major shale plays. Current pipeline provides Company with confidence that mid-term growth projections are realistic and achievable. Majority of bids are based on model of service payments (treatment per barrel with minimums). Halldorson family maintains significant holding in the business, ensuring commitment to long term performance. Fountain Quail management has significant experience and credibility in the oil & gas sector, enabling them to “speak the language” of their clients. Proven management team with oil & gas sector experience and credibility Proven management team with oil & gas sector experience and credibility Aqua-Pure is an investment with all the elements of success: Investment Highlights
Thank You for Your Time and Consideration Contacts: Karim Teja, CFO 403-301-4123 ext.26 firstname.lastname@example.org Yvonne Zappulla, IR 212-681-4108 email@example.com 28