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Oilfield Technology & Trading Company. PSAC 1998 Oilfield Services Investment Symposium June 19, 1998. About OTATCO. An oil services growth and technology company focused on new and unique business areas and international markets. Business Realities, 1998.
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Oilfield Technology & Trading Company PSAC 1998 Oilfield Services Investment Symposium June 19, 1998
About OTATCO An oil services growth and technology company focused on new and unique business areas and international markets
Business Realities, 1998 • Oil prices down, heavy oil has collapsed • Western Canada is a high-cost basin • OTATCO has already adjusted to an 84% reduction in cashflow from product sales (first four months of 98 vs. 97) • Domestic E&P companies more focused on enhancing existing assets • International markets more active because of lower finding and operating costs
Response - A Major Restructuring • All R&D terminated or suspended • Software products sold • Services, technology, instruments merged • Fewer divisions, new managers • Marketing expenses reduced • Administrative costs reduced • Office, shops consolidated or sublet • Major international acquisition • Focus on cashflow businesses only
Estimated cost reductions (FY) • Software Development - $ 1,000,000 • Administration - $ 105,000 • Marketing - $ 375,000 • Instruments, Managers - $ 470,000 • Office & Shop Space - $ 135,000 • Total Reductions - $ 2,085,000 • Only staff additions revenue creators
Main Business Units OTATCO INC. 100% 100% 100% PRODUCTION SOLUTIONS -Oil & Gas Well Management Services PRODUCTS -Oil Tools -Artificial Lift Systems -Well Diagnostic Instruments IINTERNATIONAL DIVISION -Oilfield Equipment Sales & Rentals -Trading
Key Business Areas: Services Well performance and productivity analysis Oil & gas well optimization AEUB compliance management & testing Production engineering Artificial lift analysis and design
Counter-Cyclical Growth In Enhanced Production Services • Steady revenue and capacity growth since oil prices began declining in 1997 • YTD (May 31) revenues up 162% • YTD cashflow up 285% • Cautiously adding capacity • Global opportunities because of advanced technology, specialized services and expertise
Real Time Well Analysis Worldwide Via The Internet Collected data is transmitted via the Internet to our engineering department for analysis from anywhere in the world
Production Versus Exploration & Development:Where Producers Spend Their Money Producing Asset Life Cycle 1 YEAR ASSET CREATION Seismic Geology Mineral License Surface Rights Lease & Roads Drilling Testing Completion Battery/Facilities Tie-In (Tank/Pipeline) Total Cost $ 750,000 5-50 YEARS ASSET MANAGEMENT Field Administration Artificial Lift & Repairs Engineering and Analysis Power Water Handling and Disposal Supervision Chemicals, Maintenance Production Accounting, G&A Total Cost $ 1,500,000 2 DAYS ASSET ABANDONMENT Service Rig Cement Plug Wireline/Services Lease Cleanup Reclamation Total Cost $ 30,000 1995 Expenditures, North America $ 35 billion
AN OIL COMPANY’S MOST PROFITABLE INVESTMENT Increased Production From Existing Wells 5 wells, 195 b/d incremental, 105 day payout
AN OIL COMPANY’S MOST PROFITABLE INVESTMENTIncreased Production From Existing Wells 67 wells, 450 b/d incremental, 45 day payout
How Optimization Improves ProfitsReduced lifting and operating costs 35 b/d BEFORE OPTIMIZATION $6.20/BARREL 35 b/d AFTER OPTIMIZATION $4.19/BARREL Supervision $0.76 Power $0.31 Supervision $0.76 Rods & Equipment $0.58 Power $0.84 Rods & Equipment $0.35 Water Disposal $1.00 Workovers $1.88 Water Disposal $1.00 Workovers $0.63 Chemicals $0.19 Chemicals $0.19 G & A $0.95 G & A $0.95 • 90-day payout on a $6,300 investment • $2/bbl saving created through artificial lift optimization
Key Business Areas: Products • Artificial lift equipment • Patented and proprietary oil tools • Well diagnostic instruments • Extensive distributor network
New and Patented Production Products • PC Pump Anchor - tool sales and patent licensing income • Rotor Seating Nipple - successful one year field test of new tool to reduce PC pump costs • Instruments - leading edge technologies for well performance analysis • High Technology - new, low cost pressure transducer with broad applications
Key Business Area: International • Oilfield equipment sales and service • Oilfield equipment rentals • Singapore operations base • International trading and procurement
Established Earnings, Exciting New Markets • 60% of consolidated revenues in $US from international markets • Established infrastructure, operations base in Singapore • Thousands of oilwells requiring new methods and technology in SE Asia • First major production services contract underway in Sumatra • Access to new markets in Australia, Malaysia, Myanmar, Brunei, Vietnam, China, Thailand, Indonesia
1998 Forecast, $ 000 1997 Revenue 7,227 COGS 3,996 Gross Profit 3,231 G&A 2,379 Marketing 1,017 D&A 1,004 Interest 112 Net Income (1,281) EBITDA 165 1998 Revenue 10,928 COGS 5,704 Gross Profit 5,224 G&A 3,177 Marketing 299 D&A 2,633 Interest 118 Net Income (1,183) EBITDA 1,752
Working Capital At May 31, 1998 Current Assets $9,690,884* Current Liabilities $5,857,201 Working Capital $3,883,683 Per Share $0.08 Less Inventory $1,589,853 Cash, Net Recievables $2,243,830 Per Share $0.05 *Includes recent private placement of $750,000
Who Owns OTATCO 40% of shares held by directors, managers and employees
Staff Breakdown 74 employees in Canada & SE Asia
How the Oilfield Service Industry is Changing Service & Supply Companies The Solution Zone E & P Companies Buyers Sellers Proactive New relationships are emerging between producers and suppliers with services and technologies that add value
The Future • Strong balance sheet to endure tough times for 1998, possibly 1999 • Continuing growth in production services • Expansion of all business units in international markets • Positive cashflow from all divisions • Cautious exploitation of OTATCO’s valuable technology base • Writedowns to reflect restructuring, non-performing investments
Oilfield Technology & Trading Company Alberta Stock Exchange - “OTI”