Eco-Stim Energy Solutions (OTCQB: ESES) is an environmentally focused oilfield service and technology company providing proprietary field management technologies and well stimulation and completion services to oil and gas producers drilling in the rapidly expanding international unconventional shale markets. Currently, the company is focused in Argentina.
1. Alexander, it’s great to catch up with you since LD Micro. Can you please give an overview of Eco-Stim and an update since we spoke with you in December 2014?
Despite the collapse in international oil prices, we have been extremely active. Our first pressure pumping fleet commenced operations in the Neuquén province of Argentina in late December 2014. This equipment consists of a 10,000 hydraulic horsepower pressure (HHP) pumping fleet and various pieces of complementary equipment, including a coiled tubing (CT) unit. We have been pre-approved by many different operators in the region and the market remains quite healthy. We have now performed services for four different customers and expect to get our company qualified for several others allowing us to further increase our utilization and revenue. The government of Argentina has established price setting mechanisms for crude oil produced in the region which are currently $77 per barrel for high quality crude and $7.50 per mcf for natural gas to encourage continued investment. YPF, the state-owned oil company, has recently finalized additional joint ventures with Sinopec and Petronas, totaling over $1 billion in future capital expenditure commitments. Currently, the market we serve operates primarily as an “on-call” business although we have a contract with one company for all of their wells in 2015 and 2106. They will not become active with their drilling program until March and therefore we have had the opportunity to pick up several jobs for other customers which will ultimately help us maintain better utilization and generate more revenues and better margins.
Our CT unit also began operations in February and will continue to build its customer base as more and more customers seek quality CT operations. We also completed a field management project for a major international oil company whereby we deployed downhole fiber optic strings to collect data regarding the Vaca Muerta reservoir to help our customers better understand and interpret the behavior of the reservoir. We expect to continue promoting this service and helping our customers reduce risk and cost as they learn more about the productive capabilities of the Vaca Muerta formation and other oil or gas producing formations in the region.
In October, to support our growth, we purchased 54,000 HHP of the latest generation turbine-powered pressure pumping equipment and are now upgrading and re-configuring this equipment to be used in our core markets. With the substantial decline in US oilfield activity, we have prudently decided to delay any introduction of this equipment into the US market.
And finally, we conducted a three day roadshow and completed the sale of a little over one million shares of our common stock in late February through a registered offering, raising almost $6 million in gross proceeds. Our major investment partner, Albright Capital, purchased $1 million of this offering.
2. For our audience, what are the different types of oilfield services and technology that you provide to your clientele?
We are an environmentally – focused oilfield service and technology company that provides well stimulation and completion services; coiled tubing equipment for well work over and downhole tool services; and what we refer to as field management services: proprietary reservoir interpretation processing to help the operator predict high probability zones in the shale formations, and then confirm those predictions through the use of the latest generation down-hole diagnostic tools. Ultimately, once our customers gain confidence in the predicted sweet spots, they will be able to focus their stimulation efforts on the sweet spots rather than carpet bombing the entire length of the horizontal well. We believe this will allow our customers to gain the same or more production with less than half the number of stimulation stages.
3. In a press release on December 16th, 2014, you announced, “Eco-Stim Energy Solutions & Y-TEC Sign Joint Technology Development Agreement.” Can you explain the nature of this agreement?
Y-TEC is the technology arm of YPF, Argentina’s 51% owned integrated oil & gas company. This agreement positions us to work together with the largest operator in the country to jointly develop and deploy technologies that are expected to benefit YPF’s ongoing drilling and completion efforts in country by increasing efficiency and reducing the environmental impact.
Y-TEC is owned 51% by YPF and 49% by the National Council of Scientific and Technical Research. Together, we hope to develop and utilize processes and practices to most economically and ecologically develop the country’s resources.
4. In our interview, you stated, “We’re just about to start our first operation in December, and so really, within the next week or two, we should have an operation starting. So, we’re going to start seeing some real revenue in the first quarter, and I think that after that, we’re going to continue to grow this business. I’m really excited about where we’re at, and getting starting with this company.” Then on February 4th, 2015, you published a press release stating, “Eco-Stim Energy Solutions Achieves Major Revenue Milestone.” Can you comment on the Eco-Stim’s current progress?
We announced that since the company’s equipment became operational in mid-December, we generated over $1 million in oilfield service revenue, while executing stimulation jobs for three separate customers. The work related to these jobs took about 7 days.
If we use this as a reference point, it is reasonable that a comparable well stimulation fleet could get close to $3 million in revenue a month, assuming full utilization. Additionally, a comparable CT unit can typically perform 6-8 jobs per month, or approximately $500,000 in potential revenue per month. The field management operations can add to these totals but these type of jobs are not recurring each month and can be lumpy.
As I mentioned earlier, the country established a price setting mechanism to encourage investment in the development of oil and gas properties. We operated in a somewhat protected market with high barriers to entry, and we have an exceptional management team with extensive experience.
We will look to increase our utilization for the well stimulation and CT equipment by adding more customers and performing more field work. We also have another well stimulation spread on order and anticipate placing it into service toward the end of this year, or earlier as demand continues to ramp up.
5. The company is focused on business development in Argentina. Right now, when you look up information about Argentina, the first news that comes up is the political scandal involving the country’s President. What is going on in Argentina and how does this affect Eco-Stim?
Undoubtedly, Argentina is a challenging place to work which actually provides some competitive advantages. Nevertheless, the country has one of the largest potential oil and gas shale basins outside of North America, an oil and gas infrastructure of pipelines, refineries, and skilled personnel. Several major international oil companies, including Exxon Mobil, Royal Dutch Shell, BP, Chevron, Petrobras, Sinopec, Petronas have committed substantial capital to the development of these resources. We have a knowledgeable executive team with extensive experience in dealing with the issues of currency fluctuations, capital movements, and importation of equipment into the country, and we also have an equity partner, Albright Capital Management, that has very good insights into the political landscape.
So in summary, we have a seat at the table in one of the most productive shale plays in the world, a protected pricing structure the government has implemented to encourage oil and gas investment, a strong financial and strategic partner, and a company led by experienced executives.
For more information about Eco-Stim Energy Solutions, Inc., check out their website: www.Ecostim-ES.com
The company paid consideration to SNN or its affiliates for this article.
© 2017 Stock News Now
Supported by Superior Web Solutions