DIVERGENT Energy Services Announces Release of Q3 Interim Results

NOT FOR DISSEMINATION IN THE UNITED STATES OF AMERICA

CALGARY, Alberta, Nov. 24, 2017 (GLOBE NEWSWIRE) — DIVERGENT Energy Services Corp. (“Divergent” or the Corporation) (TSX-V:DVG) has released its financial results for the three and nine month periods ended September 30, 2017 and provides the following highlights.

FINANCIAL AND OPERATING HIGHLIGHTS

Gross margins increased to 28% from 14% year over year in the quarter as a result of improved pricing and operational efficiencies, with year to date demand for services based on job counts remaining unchanged year over year.  The Corporation successfully negotiated a four-year extension of its debenture and anticipates being able to service the debt with cash flow from its operations in the United States.  A key component to the ongoing US operations is the award of a three-year exclusive services contract in Wyoming, a contract that will provide a stable base of cash flow from which the Corporation can expand its operations.

Select Financial Information for the three and nine month periods ending September 30, 2017 is summarized as follows:

RESULTS OF OPERATIONS
Select Financial Information

(Unaudited)

Statement of Loss (summarized)    
     
  Three months ended
September 30,
  Nine months ended
September 30,
 
In United States Dollars, (000`s)   2017     2016     2017     2016  
Revenue $  1,778   $ 3,969   $ 6,081   $ 8,728  
Cost of sales   1,282     3,376     4,336     7,165  
Gross profit   496     593     1,745     1,563  
Selling, general and administrative expenses   654     738     2,153     2,146  
Stock based compensation   38     52     149     211  
    (692 )   (790 )   (2,302 )   (2,357 )
 Results from operating activities   (196 )   (197 )   (557 )   (794 )
  Product development   49     25     281     246  
  (Gain) loss on disposal of assets       (25 )   (2 )   46  
  Net finance expense (income)    882     (137 )   1,729     628  
    (931 )   137     (2,008 )   (920 )
Net loss from continuing operations   (1,127 )   (60 )   (2,565 )   (1,714 )
Net loss per share continuing operations – Basic   (0.01 )   (0.00 )   (0.02 )   (0.02 )
                         

Statement of Financial Position (summarized)    
In United States Dollars, (000`s) September 30, 2017 December 31, 2016
     
ASSETS    
Current assets $ 2,640   $ 3,514  
  Long-term assets    422      386  
  $ 3,062   $ 3,900  
Liabilities    
Liabilities   8,860     8,893  
 Shareholders’ deficit    (5,798 )    (4,993 )
Liabilities and shareholders’ deficit   3,062     3,900  
Working capital ratio   0.30     0.39  
             

The Corporation’s complete set of September 30, 2017 financial statements and corresponding management’s discussion and analysis have been filed on the SEDAR website at www.sedar.com and are also available on the Corporation’s website at www.divergentenergyservices.com.

OUTLOOK

OPERATIONS

The recent signing of a three-year exclusive services contract with a client in the Powder River Basin will provide a strong base of activity and revenue from the methane-based market in Wyoming.  We anticipate that the contract is of sufficient value to support the entire Corporation and allow the sales team to focus on new growth opportunities.  The improved margins posted in all three quarters of 2017 are expected to continue and will provide the necessary cash flow for the expansion of the business. Demand is growing and immediate opportunities are available within Wyoming and can be serviced from the existing facility in Gillette Wyoming.   The main barrier to growth has been a limited inventory of motors and pumps for use in oil wells, however with the successful extension of our debenture for four years, we anticipate that our supply chain partners will support our growth by bringing on increased inventory levels in Gillette, WY.  Future opportunities for growth may include Kansas, Oklahoma, Texas, North Dakota, and Utah in the United States.

PRODUCT DEVELOPMENT

We continue to make progress with the Linear Pump technology with our overseas partner.  The exclusivity agreement currently in place that provides Divergent with the rights to deploy the technology is currently being re-negotiated.  Our partner is undergoing a corporate restructuring and will be creating a new corporate entity to continue the development and commercialization of the product.  In the interim while the new entity is being registered, we have agreed to enter into a letter of intent to extend the exclusivity once the new entity is registered and the new company is able to sign off on the new exclusivity agreement.

The Linear Pump project continues to seek candidate wells for the next phase of testing.  The well that had been supplied by our client partner has fulfilled its purpose and the focus has now turned to a well that produces a larger percentage of oil versus water, and may be at a depth and pumping rate that is different from the previous test.  We also continue to pursue installations of the Linear Pump with other clients that have expressed an interest in providing Divergent with an oil well to further test the Linear Pump so that they can validate its numerous benefits.  Based on the lead-time for delivery of certain components, any installation will most likely occur after the 2017 holiday season.  The next round of testing will be focused on delivering results of extending operating time and proving out the cost reduction benefits of the pump:

  • Operating cost reductions through reduced service rig interventions to repair worn and broken sucker rods.
  • Capital cost reductions through reduced tubing wear caused by the reciprocating motion of the sucker rods.
  • Reduced power consumption using a high efficiency electromagnetic motor vs surface lifting equipment (pump jack).
  • Increased production rates when installed lower in the well – a challenging installation for conventional rod pumps.  The linear pump can be installed vertically, slant, or horizontal which allows for the pump to be placed lower in the well.  The deeper a pump is installed, the lower the fluid level can be drawn down resulting in increased oil production.
  • Reduced environmental impact with the elimination of surface lifting equipment.
  • Lower carbon footprint with the reduction of steel used.

Pricing on the Linear Pump system is competitive to most rod pumping applications and the Corporation has numerous “pay for performance” incentive plans for early adopters.

The outlook for the remainder of 2017 and throughout 2018 is as follows:

  • Additional Linear Pump installations are expected in both Canada and the United States.
  • Complete the formation of a Technical Advisory Committee comprised of subject matter experts that will provide additional guidance from design and fabrication to control systems and automation.
  • Increasing activity and revenue from conventional ESP products in Wyoming and Colorado.  Stable oil prices and improved access to a wider range inventory will allow us to capitalize on the demand that currently exists within our existing geographical service areas.
  • Continue to attract highly skilled and motivated people who increase the depth of our service offering and enable us to grow our business, including the expansion of our service into neighboring states

The Corporation’s vision is to be a premier supplier of submersible pumping products that increase production while reducing costs and carbon footprint.  The commercialization of our Linear Pump is complementary to our existing electric submersible pump (“ESP”) business, and will provide oil and gas companies the opportunity to capitalize on the Linear Pump’s many benefits while differentiating Divergent within a competitive and growing market.

ABOUT DIVERGENT ENERGY SERVICES CORP.

Headquartered in Calgary, Alberta, DIVERGENT Energy Services Corp. provides an array of Artificial Lift products and services that are used in the oil and gas industry.  Products include Electromagnetic Pumps, Electric Submersible Pumps, and Electric Submersible Progressing Cavity Pumps.

For Further Information regarding this news release contact:  Ken Berg, President and Chief Executive Officer; or Scott Hamilton, Chief Financial Officer.

DIVERGENT Energy Services Corp., 1500, 715 – 5th Ave SW, Calgary, AB T2P 2X6, (403) 543-0060, (403) 543-0069 (fax), www.divergentenergyservices.com

Neither the TSX Venture Exchange nor its Regulation Services Provider (as that term is defined in the policies of the TSX Venture Exchange) accepts responsibility for the adequacy or accuracy of this release.

This press release contains forward-looking statements, including, without limitation, statements pertaining to operational updates.  All statements included herein, other than statements of historical fact, are forward-looking information and such information involves various risks and uncertainties.  There can be no assurance that such information will prove to be accurate, and actual results and future events could differ materially from those anticipated in such information.  A description of assumptions used to develop such forward-looking information and a description of risk factors that may cause actual results to differ materially from forward-looking information can be found in the Corporation’s disclosure documents on the SEDAR website at www.sedar.com.  Forward-looking statements are based on estimates and opinions of management of the Corporation at the time the information is presented.  The Corporation may, as considered necessary in the circumstances, update or revise such forward-looking statements, whether as a result of new information, future events or otherwise, but the Corporation undertakes no obligation to update or revise any forward-looking statements, except as required by applicable securities laws.

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