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ANNUAL MEETING JUNE 2, 2015

ANNUAL MEETING JUNE 2, 2015 - Divergent Energy Services · RobJackson Manager,BusinessDevelopment 2014 Prior to DVG: Sales Manager at Lufkin-Pentagon PhilD’Angelo President,MexicoOperations

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Page 1: ANNUAL MEETING JUNE 2, 2015 - Divergent Energy Services · RobJackson Manager,BusinessDevelopment 2014 Prior to DVG: Sales Manager at Lufkin-Pentagon PhilD’Angelo President,MexicoOperations

ANNUAL

MEETING

JUNE 2, 2015

Page 2: ANNUAL MEETING JUNE 2, 2015 - Divergent Energy Services · RobJackson Manager,BusinessDevelopment 2014 Prior to DVG: Sales Manager at Lufkin-Pentagon PhilD’Angelo President,MexicoOperations

This Corporate Presentation contains certain forward-looking statements and forward-looking information (collectively referred to

herein as “forward-looking statements”) within the meaning of applicable securities laws. All statements other than statements of

present or historical fact are forward-looking statements. Forward-looking information is often, but not always, identified by the use

of words such as “could”, “should”, “can”, “anticipate”, “expect”, “believe”, “will”, “may”, “projected”, “sustain”, “continues”,

“strategy”, “potential”, “projects”, “grow”, “take advantage”, “estimate”, “well positioned” or similar words suggesting future

outcomes. In particular, this Corporate Presentation contains forward-looking statements relating to future opportunities, business

strategies and competitive advantages. The forward-looking statements regarding the Company are based on certain key

expectations and assumptions of the Company concerning anticipated financial performance, business prospects, strategies, the

sufficiency of budgeted capital expenditures in carrying out planned activities, 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 conditions and potential

timing delays. Although management of the Company consider these assumptions to be reasonable based on information currently

available to them, they may prove to be incorrect.

By their very nature, forward-looking statements involve inherent risks and uncertainties (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, objectives, expectations and

anticipations, estimates and intentions expressed in the forward-looking statements, including among other things: inability to

meet current and future obligations; inability to implement the Company’s business strategy effectively in Canada, Mexico and the

United States; inability of the Company to continue meet the listing requirements of the TSX Venture Exchange; general economic

and market factors, including business competition, changes in government regulations; access to capital markets; interest and

currency exchange rates; technological developments; general political and social uncertainties; lack of insurance; delay or failure to

receive board or regulatory approvals; changes in legislation; timing and availability of external financing on acceptable terms; and

lack of qualified, skilled labour or loss of key individuals.

Readers are cautioned that the foregoing list is not exhaustive.

The forward-looking statements contained herein are expressly qualified in their entirety by this cautionary statement. The

forward-looking statements included in this Corporate Presentation are made as of the date of this Corporate Presentation and the

Company does not undertake and is not obligated to publicly update such forward-looking statements to reflect new information,

subsequent events or otherwise unless so required by applicable securities laws.

Page 3: ANNUAL MEETING JUNE 2, 2015 - Divergent Energy Services · RobJackson Manager,BusinessDevelopment 2014 Prior to DVG: Sales Manager at Lufkin-Pentagon PhilD’Angelo President,MexicoOperations

Mission: “Changing the way clients think about producing energy”

“DVG”TSX-V Symbol

93,160,090Shares Outstanding

$0.12 - $0.5452 Week Range*

$37.3 millionMarket Capitalization*

25Employees

9Years of Service

02014 TRIF

LargestESP Supplier

(Gillette WY gas wells)

6.5%Inside Ownership

*As at June 1, 2015

Page 4: ANNUAL MEETING JUNE 2, 2015 - Divergent Energy Services · RobJackson Manager,BusinessDevelopment 2014 Prior to DVG: Sales Manager at Lufkin-Pentagon PhilD’Angelo President,MexicoOperations

Positions Held With DVG Since

Scott Berry Chairman of the Board and Director 2009

Ken Bagan Corporate Governance and Nominating Committee

Chair and Director

2012

Ken Berg President, Chief Executive Officer and Director 2012

John Grisdale Health, Safety and Environment Chair and Director 2015

Martin Hall Audit Committee Chair and Director 2013

Robert Riecken Compensation Committee Chair and Director 2014

Bob Tutty Director 2010

NOTE: All directors are considered to be independent with the exception of Mr. Berg by virtue of his position as President and CEO.

Page 5: ANNUAL MEETING JUNE 2, 2015 - Divergent Energy Services · RobJackson Manager,BusinessDevelopment 2014 Prior to DVG: Sales Manager at Lufkin-Pentagon PhilD’Angelo President,MexicoOperations

Positions Held With DVG Since

Ken Berg President, Chief Executive Officer, Director 2012

Prior to DVG: VP Sales at Sanjel Corporation; Drilling Engineer at Amoco Canada

Scott Hamilton Chief Financial Officer, Corporate Secretary 2013

Prior to DVG: CFO for Solana Resources Ltd.; Crossfire Energy Services Inc.; and Brahma

Compression Ltd.

Mitch McClannahan Vice President, Product Development 2014

Prior to DVG: Founder of Karlington Electric

Rob Jackson Manager, Business Development 2014

Prior to DVG: Sales Manager at Lufkin-Pentagon

Phil D’Angelo President, Mexico Operations 2009

Prior to DVG: A number of private and public companies in the disciplines of investment

banking, M&A, corporate restructuring, valuation, and asset management.

Justin Fultz Area Manager, Wyoming 2010

Prior to DVG: Tower worker installing radio communication systems for Emergency Radio

Services.

Page 6: ANNUAL MEETING JUNE 2, 2015 - Divergent Energy Services · RobJackson Manager,BusinessDevelopment 2014 Prior to DVG: Sales Manager at Lufkin-Pentagon PhilD’Angelo President,MexicoOperations
Page 7: ANNUAL MEETING JUNE 2, 2015 - Divergent Energy Services · RobJackson Manager,BusinessDevelopment 2014 Prior to DVG: Sales Manager at Lufkin-Pentagon PhilD’Angelo President,MexicoOperations

� Industry is dominated by horizontal drilling for oil.

� Divergent is…

• Oil focused.

• Developing pumps suited to horizontal wells

• Linear Electric Submersible Pump (“Pump”).

• Not dependent on drilling activity.

� Divergent currently has…

• One Pump installed;

• Made significant progress in furthering its control

systems software;

• Finalized the commercial design of the Pump;

• Began moving towards the production phase;

• Received an initial order for the commercial

version of the Pump from our industry partner.

Oil

90%

Gas

10%

Vertical

12%

Horizontal

2014 Canadian Well Types2

2014 Canadian Well Targets1

1. Source: PSAC

2. Source: CAODC

Page 8: ANNUAL MEETING JUNE 2, 2015 - Divergent Energy Services · RobJackson Manager,BusinessDevelopment 2014 Prior to DVG: Sales Manager at Lufkin-Pentagon PhilD’Angelo President,MexicoOperations

Alberta1

• Viking

• Cardium

• Slave Point

Saskatchewan1

• Bakken

• Viking

• Shaunavon

Manitoba1

• Spearfish (Amaranth)

1. Oil plays that are being developed using horizontal drilling techniques, and rely heavily on pump

jacks to produce oil. This creates a ready-made market for Divergent’s Pump sales.

Page 9: ANNUAL MEETING JUNE 2, 2015 - Divergent Energy Services · RobJackson Manager,BusinessDevelopment 2014 Prior to DVG: Sales Manager at Lufkin-Pentagon PhilD’Angelo President,MexicoOperations
Page 10: ANNUAL MEETING JUNE 2, 2015 - Divergent Energy Services · RobJackson Manager,BusinessDevelopment 2014 Prior to DVG: Sales Manager at Lufkin-Pentagon PhilD’Angelo President,MexicoOperations

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

Since 2006 we have specialized in electric submersible pumps.

Divergent’s Wyoming operation is…

• Cashflow positive;

• The largest Electric Submersible Pump provider for gas producers in the Powder River Basin;

• Ideally located to introduce the Linear Electric Submersible Pumps.

Our strong focus on sales and operational excellence has offset the overall decline in industry

activity due to weak oil and gas prices.

25%40%

60%35%

30%

20%25% 15%10%

15% 15% 10%

2013 2014 2015

Market Share

Divergent Competitor 1 Competitor 2 Competitor 3

Page 11: ANNUAL MEETING JUNE 2, 2015 - Divergent Energy Services · RobJackson Manager,BusinessDevelopment 2014 Prior to DVG: Sales Manager at Lufkin-Pentagon PhilD’Angelo President,MexicoOperations

Wyoming

• Niobrara Shale Oil - a

prominent oil play that

relies heavily on rod pumps

• Coalbed Methane - the

core of our operation for 9

years

North Dakota

• Bakken Shale Oil - nearly

100% of wells use rod

pumps as production

volumes decline

Colorado

• Niobrara Shale Oil - highly

developed and relies

heavily on rod pumps

Page 12: ANNUAL MEETING JUNE 2, 2015 - Divergent Energy Services · RobJackson Manager,BusinessDevelopment 2014 Prior to DVG: Sales Manager at Lufkin-Pentagon PhilD’Angelo President,MexicoOperations
Page 13: ANNUAL MEETING JUNE 2, 2015 - Divergent Energy Services · RobJackson Manager,BusinessDevelopment 2014 Prior to DVG: Sales Manager at Lufkin-Pentagon PhilD’Angelo President,MexicoOperations

Veracruz

• Linear Pump

• Poza Rica Field.

• 750+ candidate wells

identified by Pemex.

• High failure rate using

rod pumps.

Tabasco

• Construction Financing

• We do not anticipate

having the necessary

credit facility to bid on

projects in 2015.

Tamaulipas

• Flexible Pipe Sales

• We do not anticipate

having the necessary

credit facility to bid on

projects in 2015.

Page 14: ANNUAL MEETING JUNE 2, 2015 - Divergent Energy Services · RobJackson Manager,BusinessDevelopment 2014 Prior to DVG: Sales Manager at Lufkin-Pentagon PhilD’Angelo President,MexicoOperations
Page 15: ANNUAL MEETING JUNE 2, 2015 - Divergent Energy Services · RobJackson Manager,BusinessDevelopment 2014 Prior to DVG: Sales Manager at Lufkin-Pentagon PhilD’Angelo President,MexicoOperations

Divergent’s Linear Electric Submersible Pump...

� Is powered by permanent magnets made from rare earth metals. Efficient Power.

� Uses magnetic fields to create thrust from the motor section - only one moving part. Simple.

� Is a reciprocating pump - similar to conventional rod pumps used in pumping jack applications

i.e. linear motion - it does not spin.

Permanent magnets hold their field almost indefinitely, losing only 1% of their magnetism over a

ten year period.

Page 16: ANNUAL MEETING JUNE 2, 2015 - Divergent Energy Services · RobJackson Manager,BusinessDevelopment 2014 Prior to DVG: Sales Manager at Lufkin-Pentagon PhilD’Angelo President,MexicoOperations

$96,000

$12,000

$60,000

Annual Rod Pump Costs

Service Rig

New Rods

Lost Oil

Production

Divergent’s Linear Electric Submersible Pump…

� Eliminates Surface Lifting equipment - smaller footprint means reduced construction costs,

lower environmental impact, and lower impact on farm/ranching lands.

� Eliminates Sucker rods - worn and broken sucker rods can cost clients up to $168,000 annually

to maintain. Cash flow suffers when oil is not being produced during failures.

� Eliminates leaking wellheads from how the sucker rods exit the wellhead (known as a stuffing

box). This is a chronic environmental issue with pumpjack operations.

Assumptions in Calculating Annual Rod Pump Costs:

• Rod Strings $20 per meter ; 10% of string replaced after a failure

event;

• Service Rig $12,000 per day ; 2 days per failure event;

• Non-producing Days – 5 days lost production per rod failure;

• Oil price of $60/bbl;

• Production rate of 50 bbl/day;

• Rod string failure rate of 4 failures annually.

Page 17: ANNUAL MEETING JUNE 2, 2015 - Divergent Energy Services · RobJackson Manager,BusinessDevelopment 2014 Prior to DVG: Sales Manager at Lufkin-Pentagon PhilD’Angelo President,MexicoOperations

Divergent’s Linear Electric Submersible Pump delivers…

� Remote adjustments to pump rates - as your wellbore changes, so does your pump.

� Remote monitoring - watch your production 24/7.

� Can be landed in horizontal, deviated, or vertical wells.

Page 18: ANNUAL MEETING JUNE 2, 2015 - Divergent Energy Services · RobJackson Manager,BusinessDevelopment 2014 Prior to DVG: Sales Manager at Lufkin-Pentagon PhilD’Angelo President,MexicoOperations
Page 19: ANNUAL MEETING JUNE 2, 2015 - Divergent Energy Services · RobJackson Manager,BusinessDevelopment 2014 Prior to DVG: Sales Manager at Lufkin-Pentagon PhilD’Angelo President,MexicoOperations

Resolving Old Problems: Yesterday’s solutions are not a fit for today’s wells

Target Market

750,000 Rod Pumps

in North America

North American

Market Penetration

1% Initially

Canada Market Potential

7,500 Pumps Initially

65% of wells that require some form of artificial lift use rod pumps.

Based on early estimates of wellbore suitability.

5,000 Bakken and 2,500 Shaunavon wells meet wellbore criteria.*

MATURE

FIELDS

DEMAND FOR

PUMPS

LIMITS ON

TECHNOLOGY

OPPORTUNIT

Y

*Depth and casing size

Page 20: ANNUAL MEETING JUNE 2, 2015 - Divergent Energy Services · RobJackson Manager,BusinessDevelopment 2014 Prior to DVG: Sales Manager at Lufkin-Pentagon PhilD’Angelo President,MexicoOperations

2015 Growth by Product Type

Linear Electric Submersible Pump (“LESP”) sales are

expected to make the greatest impact to our revenue,

accounting for 88% of our growth.

• Commercial production of the LESP in 2015

Electric Submersible Pump (“ESP”) sales from our

Gillette, WY operation are expected to grow

organically as market share continues to climb.

• Untapped growth potential for ESP sales in

oil wells in Wyoming and North Dakota.

Electric Submersible Progressing Cavity Pump

(“ESPCP”) sales will see a modest improvement.

• Potential development of submersible

electro-magnetic rotating motors based on

our LESP technology.

• Opportunity for the Conventional “Cold

Flow” Heavy Oil market.

ESPESPCP

LESP

Page 21: ANNUAL MEETING JUNE 2, 2015 - Divergent Energy Services · RobJackson Manager,BusinessDevelopment 2014 Prior to DVG: Sales Manager at Lufkin-Pentagon PhilD’Angelo President,MexicoOperations

Resolving Old Problems: Identifying technology gaps, delivering solutions, and creating

satisfaction.

Client

Needs

Shareholder

Satisfaction

Client

Satisfaction

Team

Satisfaction

Page 22: ANNUAL MEETING JUNE 2, 2015 - Divergent Energy Services · RobJackson Manager,BusinessDevelopment 2014 Prior to DVG: Sales Manager at Lufkin-Pentagon PhilD’Angelo President,MexicoOperations

Year Ended December 31

2014 2013 % Change

Revenue $6,133 $5,673 8%

Gross Profit $1,916 $2,096 (9%)

Net Earnings (Loss) ($5,662) ($1,861) (204%)

Earnings (Loss) per share

- Basic and Diluted ($0.06) ($0.02)

Three Months Ended March 31

2015 2014 % Change

Revenue $1,367 $1,519 (10%)

Gross Profit $570 $621 (8%)

Net Earnings (Loss) ($2,387) ($647) (269%)

Earnings (Loss) per share

- Basic and Diluted ($0.03) ($0.01)

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

Page 23: ANNUAL MEETING JUNE 2, 2015 - Divergent Energy Services · RobJackson Manager,BusinessDevelopment 2014 Prior to DVG: Sales Manager at Lufkin-Pentagon PhilD’Angelo President,MexicoOperations

As at December 31, 2014

Cash and Cash Equivalents $1,371

Working Capital $1,296

Long Term Finance Contract and Loan Receivable $756

Property, Equipment and Trademark $854

Debentures (in CAD, due December 31, 2014) $5,750

As at May 1, 2015

Shares 93,160,090

Warrants 15,400,200

Options 5,700,000

Fully Diluted 114,260,290

Market Cap. ($CAD) $44.7 million

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

1.18Current Ratio

0.48Debt-Equity Ratio

Page 24: ANNUAL MEETING JUNE 2, 2015 - Divergent Energy Services · RobJackson Manager,BusinessDevelopment 2014 Prior to DVG: Sales Manager at Lufkin-Pentagon PhilD’Angelo President,MexicoOperations

Divergent Energy Services Corp.Corporate Office

1170, 800 – 6th Ave SWCalgary Alberta T2P 3G3

T: 403.543.0060F: 403.543.0069

www.divergentenergyservices.comTSX-V: DVG

Changing the way clients think about producing energy