Drift business plan.docx

MIAMI BRANCH OFFICE DRIFT

1. Business Overview

Drift, based in Miami (Florida), is a company focused on providing services to the oil industry in environmental matters, solids control, drilling mud dewatering, waste treatment, water treatment allowing recovery and disposal of them, ensuring satisfaction of entirely customer needs. Always working with the highest quality standard, process, technology and infrastructure. Innovating traditional strategies offered in the oil industry and generating brand new and profitable proposals in the whole operations. Drift incorporates high quality service and technology support to improve the service. Drift promotes the economic sector and generates social inclusion in the region by creating direct and indirect employment. Drift respects the environment through environmentally responsible practices in all its processes. In this way, reaches and reinforces competitiveness and market positioning in the highest levels. We are a company focused on oil sector providing high quality integrated services, aimed at minimizing environmental impacts and the provision of equipment, in the exploration, exploitation and transportation of hydrocarbons. The orientation of our efforts in providing services is in benefit to our clients, because they are the most important thing for the company, and their satisfaction is for us the greatest value. We contribute to the socioeconomic development of the country where we operate, generating sources of employment in the regions where our operations are conducted, providing the best possible health and safety conditions at work, conserving natural resources and environment. The investigation, innovation and optimization are essential parts of our daily activities, seeking to provide services which promote the unconditional loyalty of our customers.

1.1. Business Areas

1.1.1. Solids Control

Specialized equipment to maintain proper drilling fluid conditions.

Centrifuges HGS & LGS

Storage Selective Flocculation Reconditioning of drilling fluids Recovery of barite Disposal of solids with low and high density.

1.1.2. Dewatering of Drilling fluids

Is the separation of liquid and solid phase of the drilling fluid. This separation is performed when the operation fluid is discarded, either by contamination of fluid or the end of any phase of oil well.

Equipment used:

Dewatering Unit Pumping equipment Decanter centrifuge

1.1.3. Handling of Cuttings and Wastewater

The company will supply the equipment and qualified personnel to carry out the treatment of drilling cuts from wells drilled and wastewater generated. The cuts are handled by dilution with fresh soil and to treat wastewater is made physicochemical processes in order to be discharged into the environment or reused in the operation. The management of these wastes and their disposal parameters are governed by the law of each country.

1.1.4. Maintenance and Washing of Storage Tanks

It will feature rental services, cleaning services, preventive and corrective maintenance on storage tanks for the fluids used in oil fields.

1.1.5. Fluid Treatment with High Bsw (Slop Oil)

Hydrocarbon treatment system with high water and solid content. Centrifuging processes to separate water, oil and solids.

2. Market analysis

2.1. Oil industry in the US

America has an extraordinary ability to reinvent itself in different industries. The oil manufacturing sector in the 1970’s it seemed inevitable to decline, whereby the big multinational oil companies have opted for a globalized strategy to survive the American market perspectives in terms of hydrocarbons industry.

The history of oil in the US has been increasingly positive, through time has been introduced over the oil industry becoming one of the biggest oil producers worldwide. Despite of also being a major consumer of oil has remained in balance because every time production is higher and his rising trend is positive.

In recent years the United States has used a process called "fracking" (hydraulic fracturing) due to this method, the oil production has increased considerably settling in third place worldwide as one of the largest oil producers in 2014.

The collapse in oil prices have affected economically and politically the world order, a spin on the wheel of fortune that strengthened the interests of the United States and led to financial crisis several of the largest oil exporters, especially those whom are hostile with West, such as Russia, Iran and Venezuela. It is a huge boost for the US, three of its four most active opponents are seriously debilitated and their incomes have been severely reduced.

It is expected that between 2015 and 2017 United States will be the largest oil producer in the world overtaking Russia and Saudi Arabia, approaching to energy efficiency.

It can be seen below an average of how America has been growing in recent years:

Table No.1. US Oil Production

Year 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014Oil Reserves(billion barrels)Oil Production per day (thousand Barrels)

7552 7868 8892 10003 9020

22315 25181 28950 33403 36520

6903 6828 6862 6783 7263

22592 23019 22311 22812 20554

Source: Reuters

2.2. The Petroleum Industry in the US

In America there are many companies dedicated in the oil industry always focusing on high-tech processes in exploration and exploitation, seismic processing and crude oil treatment. Among major US companies in oil sector we list the following:

Operating oil companies

BP PLC Occidental Petroleum Corporation PJP4 Texaco Petroleum Co Marathon Oil Apache Corp. Chevron Corporation Conoco Phillips Hunt oil company

Seismic Companies

Seabird exploration Tesla Exploration Schlumberger DAWSON Geokinetics Knowledge revealed

Crude Oil Treatment Companies

RWL Water Aquatech Veolia Altela.

Is estimated positive growth in the hydrocarbons sector by facilitating the entry into the sector and expecting good signs of development in the field of exploration, allowing Drift to get a position in oil market, economic stability and maximum ROI

Table No.2. Matrix of Competition Analysis

Key Factor Weighting Rating Result

Business rivalries 0,1 -1 -0,1

Substitute services 0 -1 0

Suppliers 0,3 2 0,6

New Rivals 0,1 -1 -0,1

Market 0,5 2 1

Total 1 1 1,4

Source: Own Calculations

2.3 SWOT Analysis:

The SWOT analysis provides an opportunity to examine the internal strengths and weaknesses Drift be addressed. It also allows us to examine the opportunities presented to the company as well as potential threats. Also the strengths include the wide range of action and its clear vision of market needs.

Strengths Opportunities• The strong US market in terms of products and prices.

• Increased investment in the sector, especially with the development of non-conventional technologies. Increasing possibilities to share a segment in market in the US.

• The extensive experience of its owners on the needs of the productive sector.

• Permanent Technical assistance by the team of specialists from the owners

• Strategic alliances with medium and small companies in the sector. Increase possibilities of market penetration.• Technical and financial

backing of owners, and employees.

Weaknesses Threats

• Dependence on operating companies to meet customer requirements, they may have problems with delivery times, quality, guarantees, etc.

• An important variable as the price of oil will determine many political and economic dynamics globally.

• In relation to new customers who may be competing with companies offering equipment for oil and gas and have their headquarters in the country where their operations are present.

• The process of devaluation of Latin American currencies, thereby increasing the internal cost of the machinery required in production processes. Our investments come from LA market.• The global economy and drastic changes in the exchange rates of the United States.

Table 2.1. SWOT Analysis.

2.3.1 Competitive Advantage

The competitive advantage of Drift is that offers independent management of drilling fluid, solids control and waste management under a single plan. We contribute to operations, engineering and environmental controls by surveying operations, program planning and execution and optimization programming with our team of project managers, fluid specialists, solids control, and waste management technicians.

Our services also include developing waste strategies, well studies, fluid programs, technical evaluations, training, waste management selection, fluid and solids analysis, risk management, regulatory liaison, waste treatment, planning and execution.

2.3.2 Specific Market Summary

Waste is an inevitable by-product of drilling activities in the form of cuttings and mud. The increasing demand of energy and growing environmental concern is driving the solids control equipment market. Solids control equipment optimizes the drilling efficiencies by reducing fluid losses. The American Petroleum Institute (API) has estimated that approximately 1.21 barrels of total drilling waste fluids are generated for every foot drilled.

Drilling fluids and cuttings are the largest potential waste stream generated during drilling operations. Solids control equipment separated the solids cuttings from the fluid and processed further for treatment and disposal. On the drilling rig, solids control equipment applies different technologies to remove unwanted solids and recover drilling mud for reuse.The global solids control equipment market is segmented on the basis of its major types which include shale shakers & screen, mud centrifuges, hydrocyclones, mud cleaner, and others. Also, the market is segmented on the basis of its applications which include onshore and offshore.

3. DRIFT Certifications

Drift has the following certifications:

ISO 9001 ISO 14001 OHSAS 18000 RUC score 96

4. Drift Contracts

Since December 27, 2012, Drift has a signed contract with the company Metapetroleum Corp, whose purpose is the provision of treatment sludge production.

5. Team Work and Organizational Structure

DRIFT is composed of a group of professionals with expertise in each of their areas and graduate level training. The team has complementary skills and expertise of the service offered, it is necessary for the work team to possess specific expertise.

Personal plant consists of five persons as follows:

No.6 Organization Chart

6. Staff Profile

The professional training of Drift officials is:

GILBERTO CAICEDO BATTISTON

Professional Training:

Petroleum Engineering Universidad de AméricaBogota, Colombia (2005)

Degree in Project ManagementUniversidad de la SabanaBogota, At present

Professional Profile:

High capacity professional for teamwork, good interpersonal relationships, commitment, dedication, honesty and leadership, ethical, capacity domain of a group and project management in the oil sector. With experience in the administrative and operational aspects of the hydrocarbon sector.

FRANK DARIO MARTINEZ SEPULVEDA


Petroleum Engineering Universidad Industrial De SantanderColombia, (1979)

Postgraduate in Financial ManagementUniversidad De SantanderColombia, (1998)


Petroleum Engineer with extend experience in planning and Technique, Administrative and Financial Direction in the petroleum and gas sector. Decision making, projects dinamization and personnel management.

ANDREY FERNANDO ACOSTA SALAZAR


Petroleum Engineering Universidad Nacional de ColombiaMedellín (Antioquia) (2003- 2009)

Master of Business Administration (Executive MBA)At present, EUDE

Msc. Financial Markets and Risk At present, EUDE.


Petroleum engineer with 5 years of technical and operational experience, expertise in areas of business development, sales-services, operations logistics-service companies and operators for the hydrocarbon industry in drilling, completion, workover & well design. Skills in strategic planning, monitoring and operations management, project implementation and team management.

JOHN JAIRO CORREA RODRIGUEZ


EconomistUniversidad del ValleColombia,(2004)

Master in Economics and Finance Universidad Torcuato Di TellaArgentina, (2007)

PhD. Finance(T)CEMAArgentina, (2010)


Specialized in the construction, validity and interpretation of financial modeling, risk management, derivates, asset valuation and investment banking. Linked with companies dedicated to the structuring and project promotion, investment banking, business valuation, risk analysis and structuring investment portfolios.

7. Business Strategy

The company strategy is to grow based on contracts to be obtained. During the first year of operations in the United States, was appointed as responsible for giving the opening to the US market a Board member, that person will evaluate opportunities and according to these, begin the hiring process.

By the end of the first year there must be at least 5 employees, of which 3 must be professionals with oil industry experience and two others, not professionals, for general services and other tasks that would be required, once take place the startup for different contracts, more employees will be hired according to the requirements of the contractor. 7.1 Marketing Strategy

One common market penetration strategy is to make price adjustments. By lowering prices, the business hopes to generate more sales volume by increasing the number of units purchased and to make prices more appealing to consumers when compared to the competition. In our particular case Drift is willing to get a market quote by proposing best quality services and lowest cost per service using manufacturing contracts in Latin America.

The promotional and advertising strategy as a strategic dimension of the business plan, design and establishment of strategic relationships and focusing on positioning , according to the strategic plan , in those niche markets where greater acceptance and dissemination meaning in better volumes of income for Drift LLC

The promotion will aim to present our products and services; such are solids control and waste management, positioning itself as the best alternative in the hydrocarbon sector in the US

The initial proposal of advertising to reach potential customers will be:

• Advertising through magazines and journals of the American oil industry.• Through Brochure folders for advertising.• Promotion through portals specialized for services in the oil and gas sector of the United States.• Public relations of share holders and employees.• Exhibition in oil fairs such as the OTC in Texas.• Constant communication with potential customers and suppliers to obtain the best market shares. The company will determine the stages of development of the company according to the level of sales, profits and capital works achieved characteristics and market trends, expectations and agreements between partners.

The corporate marketing plan will contain a clear definition of the overall market, the target market and the market share is expected to achieve. Thereby it can be supported by the design of strategies, operation and monitoring of the business, defining processes and corporate procedures during the operations of the company in the US market.

8. Economical and Financial Plan

8.1. Assumptions

To make projections, the following assumptions were made:

1. Structure of equity and debt are constant.2. Growth rates for each item are indexed to the inflation forecast.3. Growth of salaries, personnel and other expenses are indexed to the Consumer Price

Index (CPI).

8.2. Fixed Investment - Investment Required

The company Drift LLC, requires for startup an initial investment of $ 1.70 million USD to purchase equipment to the development its objective such as office equipment necessary for the development of the operation. Additionally, $ 500,000 USD is required for pre-operating and installation costs.

In total the fixed investment required for the project is $ 1.75 million USD

8.3. Cost Structure

To Drift LLC, the following direct costs structure is defined:

Table No.3. Direct Costs and Expenses

Item Year 1 Year 2 Year 3 Year 4 Year 5

Direct Labor 15,00% 15,00% 15,00% 15,00% 15,00%

Miscellaneous 0,19% 0,19% 0,19% 0,19% 0,19%

Taxes 0,49% 0,49% 0,49% 0,49% 0,49%

Leases 10,00% 10,00% 10,00% 10,00% 10,00%

Services 1,04% 1,04% 1,04% 1,04% 1,04%

Travel Expenses 0,24% 0,24% 0,24% 0,24% 0,24%

Transportation 19,52% 19,52% 19,52% 19,52% 19,52%

Maintenance Repair and Spare Parts 10,00% 10,00% 10,00% 10,00% 10,00%

Mud and Chemicals 4,25% 4,25% 4,25% 4,25% 4,25%

HSE & Environment 0,23% 0,23% 0,23% 0,23% 0,23%

Fuels and Lubricants 1,50% 1,50% 1,50% 1,50% 1,50%

Source: Own calculations

The direct labor, costs of transport and the item of maintenance, repair and services, are the items most relevant at 15%, 19.52% and 10%, respectively.

Chart No.1. Direct Costs


Indirect costs contemplated are salaries and benefits for personnel working in the administrative area, also insurance and needed tools. Likewise, leases, utilities, advertising, depreciation and others. In that way the indirect costs are:

Table No.4. Indirect Costs and Expenses

Item Year 1 Year 2 Year 3 Year 4 Year 5

Administrative Expenses 3,00% 3,00% 3,00% 3,00% 3,00%

Overhead costs 2,00% 2,00% 2,00% 2,00% 2,00%

Provisión 1,00% 1,00% 1,00% 1,00% 1,00%

Indirect Labor & Administratives 7,00% 7,00% 7,00% 7,00% 7,00%


The costs and indirect costs represent 13% of total costs. The most representative item represents the labor indirect and administrative with 7% of the total.

Chart No.2. Indirect Costs

Source: Own calculations

3.4. Projected Sales

The sales budget is done based in the equipment operating at 50% the first year to reach 100% at year 5. The number of teams and rates for the services provided are taken into account: slop oil and solids control.

Table No 5. Revenue Projection Assumptions

ITEM Year 1 Year 2 Year 3 Year 4 Year 5

OCCUPATION of service 50% 60% 75% 75% 100%

No. EQUIPMENT 1 1 1 1 1

DAYS 360 360 360 360 360

BBL per YEAR 700 770 847 932 1025

RATE per BBL 6,250$ 6,250$ 6,250$ 6,250$ 6,250$

RATE per YEAR S.C. 3.750,000$ 3.750,000$ 3.750,000$ 3.750,000$ 3.750,000$


The estimated value for the first year is $ 2,250,000 USD, of which $ 1,575,000 USD correspond to Slop Oil and $ 675,000 USD to control solids. For years 4 and 5, the total revenue amounted to $ 3,108,825 USD and $ 3,655,958 USD, respectively.

Table No.6. Sales forecast

ITEM Year 1 Year 2 Year 3 Year 4 Year 5

Slop Oil 1.575.000$ 1.732.500$ 1.905.750$ 2.096.325$ 2.305.958$

Solids control 675.000$ 810.000$ 1.012.500$ 1.012.500$ 1.350.000$

Total Income 2.250.000$ 2.542.500$ 2.918.250$ 3.108.825$ 3.655.958$


The estimated sales are subject to the installed capacity of the company. The growth projection for the year is 67%.

Chart No.3. Sales Forecast


3.5. Revenue Projection

Drift LLC, has the following financial projection for the first five years:

Table No.7. Operating Income

Year 1 Year 2 Year 3 Year 4 Year 5GENERATION OF OPERATING FUNDS (EBIDA)

Operating Income 4.500.000$ 5.085.000$ 5.836.500$ 6.217.650$ 7.311.915$ slop Oil 1.575.000$ 1.732.500$ 1.905.750$ 2.096.325$ 2.305.958$ Solids Control 2.925.000$ 3.352.500$ 3.930.750$ 4.121.325$ 5.005.958$

Operating Costs and Expenses 2.809.997$ 3.175.297$ 3.644.567$ 3.882.573$ 4.565.880$

GENERATION TOTAL OPERATING FUNDS 1.690.003$ 1.909.703$ 2.191.933$ 2.335.077$ 2.746.035$ % 38% 38% 38% 38% 38%

Other Non-Operating Income -$ -$ -$ -$ -$ Non Operational -$ -$ -$ -$ -$

Other Non-Operating Costs and Expenses 585.000$ 661.050$ 758.745$ 808.295$ 950.549$

TOTAL FUNDS AVAILABLE FOR INVESTMENT 1.105.003$ 1.248.653$ 1.433.188$ 1.526.782$ 1.795.486$ % 25% 25% 25% 25% 25%

FCLO DRIFT LLC


Drift LLC operating income is $ 1,690,003 for the first year of operation. For years 4 and 5, will ascend to $ 2,335,077 USD and $ 2,746,035 USD, respectively.

Chart No.4. Operating Income


Cash flow available for investment in Drift LLC amounts to $ 1,105,003 USD for the first year of investment and $ 1,795,486 for the fifth year of the projection. This is the cash available from the company to make investments in current and non-current assets and to repay principal and interest of financial creditors.

Chart No.5. Operating Cash Flow


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Drift business plan.docx