Revolu'onizing Pump Technology INVESTOR PRESENTATION A Neodymium - - PowerPoint PPT Presentation

INVESTOR PRESENTATION

NOVEMBER 2015

A Neodymium magnet is the most widely used and strongest type of permanent, rare-earth magnet commercially available

Revolu'onizing Pump Technology

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

• f 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

• utcomes. 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

• f 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

Mission: “Changing the way clients produce energy”

Market cap as at Nov 20 ‘15 *Gillehe, WY - Powder River Basin gas wells; based on internal esAmates

9 Years in business 25

Employees Safety incidents YTD ESP Supplier*

1

#

Insider Owned

5.6

%

TSXV: DVG $0.12 - $0.54 $23.5MM 94.8MM

52 week range Shares outstanding

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

• f contact in
• il 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 2nd 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

• peraAons.

• 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

7,500

candidate wells idenAfied in Saskatchewan

9,500

candidate wells idenAfied in North Dakota

Viking, Cardium, Slave Point Bakken, Viking, Shaunavon, Spearfish Uinta Basin Niobrara, Powder River Basin Poza Rica

Ini$al Target Markets in North America

*Source: Internal EsFmates of ESP Products & Services for dewatering Powder River Basin gas wells

2013 2014 2015 Market Share Divergent CompeAtor 1 CompeAtor 2 CompeAtor 3

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

à InstallaAon of first commercial Linear Pump at client well à Results of Linear Pump performance à Debenture resoluAon à ConAnue operaAons in Wyoming and potenAal introducAon of the Linear Pump in Powder River Basin à ConAnued business development to operators in other oil fields à Agreements with addiAonal new

• perators to test and install the

Linear Pump à Expansion of Linear Pump inventory based on increased client demand à Clear line of sight to profitability

Pump Results Pump Orders Increase

Pump Lands in SK Staging Yard

Pump Installed CommercializaAon & Ramp Up

2015 2016 & Beyond

Debenture ResoluAon Pump TesAng by AddiAonal Clients Client Base Expansion

PUMP MARKET OPPORTUNITY

• Approaching commercializaAon
• Cost-effecAve & efficient
• Low environmental footprint
• All horizontal oil plays will need arAficial liT
• Sizeable & growing target market (7,500

wells in SK & 9,500 in ND)

• ApplicaAon in other basins & plays globally
• Significant near-term catalysts
• First commercial version of Linear Pump to

be installed by end of 2015

• Agreement with large oil company +

discussions ongoing with others

Divergent Energy Services Corp. Corporate Office 1170, 800 – 6th Ave SW Calgary Alberta T2P 3G3 T: 403.543.0060 F: 403.543.0069 www.divergentenergyservices.com

Changing the way clients produce energy

TSXV: DVG

APPENDICES

1. The Linear Pump uses a modified industry standard reciprocaAng pump currently used with pump jacks, known as a rod pump. The pump is driven by an electromagneAc motor that uses permanent magnets to create thrust to move the shaT of the motor in a reciprocaAng, or linear, moAon. Permanent magnets maintain their strength almost indefinitely, losing approximately 1% of their strength every 10 years. 2. Gross Margins improved to 30% from 23% in the nine months ended in 2015 and 2014 respecAvely. 3. Annual Rod Pump Cost AssumpAons:

• Rod Strings $20 per meter;
• 10% of string replaced aTer a failure event;
• Service Rig $12,000 per day, 2 days per failure event;
• 5 days lost producAon per rod failure;
• rod string failure rate of 4 failures annually.
• Oil price of $45/bbl and producAon rate of 50 bbl/day;

Current Technology Drawbacks Linear Pump Benefits

Surface liTing equipment (Pump Jack) has a high capital cost and requires a large footprint The submersible pump has a lower capital cost, reduces construcAon costs due to no surface liTing equipment Rod strings in deviated and horizontal wells cause excessive wear due to rubbing against the tubing No external moving parts means that the Linear Pump can be placed in deviated and horizontal wells as easily as verAcal wells Rods strings wear from the 3,000,000 annual up/ down cycles, which can cost up to $153,000(3) annually to maintain, including the oil not being produced during failures No rod string, no external moving parts. Everything moves internally in the Pump housing Mechanical inefficiencies and variable power draw can lead to high electricity costs Permanent magnet motors run on low Amps with no mechanical gears to reduce efficiency Leaking wellheads around the rod (from the “stuffing box”) is common Seal not an issue - no moving parts exit the wellhead

Electro-Magne'c Submersible Pump (The Pump) Permanent magnet motor technology. ReciprocaAng pump (similar to rod pumps). Ideally suited for deviated and horizontal oil wells. An alternaAve to convenAonal pump jack installaAons. Electric Submersible Pump (ESP) ConvenAonal pump technology. RotaAng pump with mulAple impellers. Pumps moderate to high volumes of fluids. 24 m3/d (150 bbl/d) to 24,600 m3/d (150,000 bbl/d). Electric Submersible Progressing Cavity Pump Also called screw or Moineau pumps. Heavy oil, high sand producAon, gassy wells. Now deployed as a submersible pump system. Eliminates surface motors and costly rod string wear.

Nine Months Ended September 30 2015 2014 % Change Revenue $3,799 $4,773 (20%) Gross Profit $1,315 $1,510 (13%) Net Earnings (Loss) ($4,430) ($3,569) (24%) Earnings (Loss) per share

• Basic and Diluted

($0.04) ($0.04) Three Months Ended September 30 2015 2014 % Change Revenue $1,192 $1,698 (30%) Gross Profit $321 $428 (25%) Net Earnings (Loss) ($882) ($1,438) (39%) Earnings (Loss) per share

• Basic and Diluted

($0.01) ($0.01)

ComparaFve Results: All amounts in USD thousands, except per share amounts and as noted.

As at September 30, 2015 Cash and Cash Equivalents $287 Property, Equipment and Trademark $751 Debentures (in CAD, due December 31, 2015) $5,750 As at November 20, 2015 Shares 94,848,820 Warrants 5,750,000 OpAons 5,700,000 Fully Diluted 106,298,820 Market Cap. ($CAD) $23.5 million

All amounts in USD thousands, except per share amounts and as noted.

Ken Berg – President & CEO

Previous - Sanjel, Amoco Petroleum, Dome Petroleum

Scol Hamilton, CA – CFO & Corporate Secretary

Previous - Solana Resources, Crossfire Energy Services, Inc., Brahma Compression Ltd.

Mitch McClannahan – VP Product Development

Previous - Karlington Electric

Management Team Board of Directors

ü Management team brings decades of experience in the energy services arena ü Background of the team ideal to move product to commercializaAon and capture ongoing market share from exisAng and outdated pump jack technology ü Alignment with shareholders and strong corporate governance

Scol Berry – Chairman

Past ExecuFve Director of Empowering Minds

Kenneth Bagan

Director of Trican Well Services, past Director of PSAC, Member ICD

John Grisdale

Past President of CanAir Nitrogen; Past President of US Division, Calfrac

Mar'n Hall

Director of Karnalyte; Past Sr VP Finance & CFO of Tesco CorporaFon

Robert Riecken

VP Drilling, CompleFons, ConstrucFon, and Supply Chain, Talisman Energy / Repsol

Ken Berg

President & CEO, Divergent

$0.00 $0.10 $0.20 $0.30 $0.40 $0.50 $0.60

2013 2015 2014

Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4

Aug 2014: Q2 results + 5 DVG Pumps ready to ship to

• Canada. New BD

Manager hired Dec 2014: Extends maturity

• f outstanding

debentures to Dec 31, 2015 Aug 2015: Q2 Results reported; WY activity levels & market share beat estimates Dec 2013: $5MM Debenture Issue Announced Nov 2015: DVG Pump lands in SK for client installation June 2015 Ops update + SK operations facility identified Dec 2013: Revocation of Cease Trade Order & resumption of trading after management’s concerns resolved Mar 2014: Final tranche of Debenture ($597k); total gross proceeds of $5.75MM Jun 2014: Shareholders approve name change to Divergent (previously Canadian Oilfield Solutions Corp) Dec 2014: Signed 3 year extension to exclusive rights to Linear Motor technology with manufacturer Feb 2015: Signed 5 year service agreement for Linear Pump with large oil company; 1st candidate well identified Mar 2015: DVG Pump test commences New management requests a Cease Trade Order to address disclosure concerns in previously released financial statements.

Divergent Energy Services Corp. Corporate Office 1170, 800 – 6th Ave SW Calgary Alberta T2P 3G3 T: 403.543.0060 F: 403.543.0069 www.divergentenergyservices.com TSX-V: DVG

Changing the way clients produce energy