Operations - Estrella International Energy Services Ltd.
Operations - Estrella International Energy Services Ltd.
Operations - Estrella International Energy Services Ltd.
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<strong>Estrella</strong> <strong>International</strong><br />
<strong>Energy</strong> <strong>Services</strong> <strong>Ltd</strong>.<br />
Annual General Meeting<br />
Toronto, Ontario, Canada<br />
July 25, 2012<br />
TSX‐V: EEN.V
Disclaimer: Forward Looking Statements<br />
Certain statements included or incorporated by reference in this presentation constitute forward‐looking statements or<br />
forward‐looking information under applicable securities legislation. Such forward–looking statements or information<br />
are provided for the purpose of providing information about management's current expectations and plans relating to<br />
the future. Readers are cautioned that reliance on such information may not be appropriate for other purposes, such as<br />
making investment decisions. Forward‐looking statements or information typically contain statements with words such<br />
as "anticipate", "believe", "expect“, "plan", "intend", "estimate", "propose", "project“, “seek”, “continue”, “forecast”,<br />
“may”, “will”, “potential”, “could”, “should” or similar words suggesting future outcomes or statements regarding an<br />
outlook. Forward‐looking statements or information in this presentation include, but are not limited to, statements or<br />
information with respect to: business strategy and objectives; acquisition plans and the timing thereof; capital<br />
expenditures; net revenue; operating and other costs; and taxes.<br />
Forward‐looking statements or information are based on a number of factors and assumptions that have been used to<br />
develop such statements and information but which may prove to be incorrect. Although <strong>Estrella</strong> <strong>International</strong> <strong>Energy</strong><br />
<strong>Services</strong> <strong>Ltd</strong>. (the “Company”) believes that the expectations reflected in such forward‐looking statements or<br />
information are reasonable, undue reliance should not be placed on forward‐looking statements because the Company<br />
can give no assurance that such expectations will prove to be correct. In addition to other factors and assumptions<br />
which may be identified in this presentation, assumptions have been made regarding, among other things: the impact<br />
of increasing competition; the general stability of the economic and political environment in which the Company<br />
operates or plans to operate; the timely receipt of any required regulatory approvals; and the ability of the Company to<br />
obtain qualified staff, and equipment in a timely and cost‐efficient manner.<br />
Forward‐looking statements or information are based on current expectations, estimates and projections that involve a<br />
number of risks and uncertainties which could cause actual results to differ materially from those anticipated by the<br />
Company and described in the forward‐looking statements or information.<br />
The forward‐looking statements or information contained in this presentation are made as of the date hereof and the<br />
Company undertakes no obligation to update publicly or revise any forward‐looking statements or information, whether<br />
as a result of new information, future events or otherwise unless required by applicable securities laws. The forwardlooking<br />
statements or information contained in this presentation are expressly qualified by this cautionary statement.<br />
2
Disclaimer: Privileged Information<br />
This presentation may contain information concerning <strong>Estrella</strong> of a material nature that has not been generally<br />
disclosed. This information is being provided to you in the necessary course of the business of <strong>Estrella</strong> in connection<br />
with proposed business or professional activities to be conducted between <strong>Estrella</strong> and you. You understand that this<br />
information is being provided to you on the understanding that you are considered a person or company which is in a<br />
“special relationship” with <strong>Estrella</strong>, as defined in the applicable securities laws, and as such, you may not purchase or sell<br />
any securities of <strong>Estrella</strong> with knowledge of a material information, nor disclose any material information concerning<br />
<strong>Estrella</strong>, that has not been generally disclosed. Any failure to adhere to such prohibitions against such trading and<br />
tipping could expose you to criminal and civil liability.<br />
3
4<br />
Message from the Chairman & CEO<br />
<strong>Estrella</strong> was founded in 2005, initially operating in Argentina. In the last seven years<br />
we have grown the business to operate in Chile, Peru, Bolivia and Colombia and listed<br />
the company on the Toronto Stock Venture Exchange. Today we operate a fleet of<br />
nineteen drilling and workover rigs, directional drilling equipment and provide<br />
engineering and consulting services to operators around the region.<br />
This growth has not come without its challenges. Our strategy to grow our footprint<br />
in Colombia via the acquisition of three local companies took much more time, energy<br />
and costs than we had originally hoped. We now have the acquisitions completed and<br />
have made good advances in consolidating our operations in Colombia.<br />
Whilewehavemanagedtogrowthetoplinerevenuesofthebusinesseveryyear,<br />
even in 2008‐2009, financial results have not followed as quickly. Major challenges<br />
interrupted our operations in Chile, Bolivia and Colombia late in 2011.<br />
We are committed to improving our the cost of running our businesses and made<br />
major strides in the first quarter of this year with a reduction of over $600,000 in<br />
SG&A costs from the previous quarter. Growth in our consulting and directional<br />
businesses and improved utilization in Colombia will help drive growth again in 2012.<br />
We also have repaid over $8.5 million of our $32 million senior debt facility in the last<br />
six months. Collectively these efforts are helping to strengthen the balance sheet of<br />
the Company.<br />
<strong>Estrella</strong> is committed to “Ser mejor, hacer mas” (Be better, do more) and will<br />
continue to strive to set the standard of excellence by which all other service<br />
companies in Latin America are measured<br />
Warren Levy<br />
Chairman & CEO
Latin American OFS company, growing consistently<br />
since 2005 operating in 6 countries with<br />
500 employees<br />
TSX.V:EEN ‐ Latin America based bi‐lingual and bicultural<br />
management<br />
‐ Operate at the highest level of service quality<br />
‐ Operate with global experience and local know how<br />
‐ Vision<br />
To set the standard of excellence by which all other<br />
service companies in Latin America are measured<br />
5<br />
Ser mejor, hacer mas
6<br />
<strong>Estrella</strong> Overview
Diversified Service Offering<br />
Drilling and Workover Rigs<br />
• 350 –1500 HP modern rig<br />
fleet of 19 rigs<br />
• Modern, portable, self erecting<br />
rigs (no cranes required)<br />
• Automation<br />
• High efficiency, low emission<br />
engines<br />
Tools and <strong>Services</strong>:<br />
• Directional Drilling & Tool<br />
Rental<br />
• Completion and Workover<br />
Engineering & Consulting<br />
• Well design and engineering<br />
• Project management and<br />
field operations management<br />
7
<strong>Operations</strong><br />
Canada<br />
Toronto –Admin & Public Listing<br />
Barranca<br />
Argentina<br />
Buenos Aires – Headquarters<br />
Neuquen –<strong>Operations</strong> Base<br />
Comodoro –<strong>Operations</strong> Base<br />
.<br />
Chile<br />
Santiago – Sales Office and <strong>Operations</strong><br />
Base<br />
Punta Arenas –<strong>Operations</strong> Base<br />
Peru<br />
Bolivia<br />
Lima – Sales Office<br />
Talara –<strong>Operations</strong> Base<br />
Santa Cruz de la Sierra – Sales Office and<br />
<strong>Operations</strong> Base<br />
.<br />
Colombia<br />
Bogota – Sales Office<br />
Tibitoc –<strong>Operations</strong> Base<br />
Barranca Bermeja –<strong>Operations</strong> Base<br />
Yopal –Storage Yard<br />
8<br />
Punta Arenas<br />
Paraguay<br />
Asuncion – Sales Office
20<br />
18<br />
16<br />
14<br />
12<br />
10<br />
8<br />
6<br />
4<br />
2<br />
0<br />
Rig Count<br />
Drilling<br />
Workover<br />
2006 2007 2008 2009 2010 2011 2012<br />
Colombia<br />
Peru<br />
Bolivia<br />
Rig Fleet 202 440 HP Workover On Contract<br />
203 350 HP Workover Mobilizing to Arg<br />
205 375 HP Workover On Contract<br />
206 350 HP Workover Mobilizing to Arg<br />
207 350 HP Workover Marketing<br />
552 550 HP Drilling On Contract<br />
553 550 HP Drilling Marketing<br />
554 550 HP Drilling On Contract<br />
555 550 HP Drilling/WO Marketing<br />
556 550 HP Drilling/WO Marketing<br />
1002 1000 HP Drilling Marketing<br />
201 350 HP Drilling/WO On Contract<br />
204 350 HP Workover Mobilizing<br />
1001 1000 HP Drilling On Contract<br />
.<br />
Chile<br />
1201 1200 HP Drilling Mobilizing to Arg<br />
• Modern portable fleet: 16 of 19 rigs built 2007 or later<br />
• Five drilling rigs fully automated<br />
• No cranes required for rig up<br />
Argentina<br />
101 350 HP Workover On Contract<br />
102 350 HP Workover On Contract<br />
103 350 HP Workover On Contract<br />
551 550 HP Drilling On Contract<br />
9
Directional Drilling<br />
Alliance Agreement with<br />
2012 Year End<br />
Expected Number of Kits<br />
Country MWD GR / Gyro<br />
APWD<br />
Argentina 6 2 / 2 2<br />
Chile 3 1 / 1<br />
Peru 3 3 / 3 2<br />
Colombia 3 3 / 3 2<br />
Bolivia 1 1 / 1<br />
‐ SDI supplies Gyro / MWD and<br />
LWD<br />
‐ <strong>Estrella</strong> provides directional<br />
tools and operates the services<br />
in region<br />
‐ Latin America Wide Exclusivity<br />
‐ Operating bases in 4 countries<br />
10
Consulting & Engineering <strong>Services</strong><br />
• Well Engineering and Project Management<br />
• Hostile and Remote Environment Expertise<br />
• Production Enhancement<br />
• Fit for Purpose Rig & Equipment Design<br />
• Pad Drilling Development Plans<br />
Country Oil &Gas Geothermal<br />
Solution<br />
Mining<br />
11<br />
Argentina <br />
Chile <br />
Peru<br />
Colombia<br />
Canada<br />
Kenya
World Class O.F.S. Team<br />
Management Title Experience<br />
Warren Levy Chairman & CEO 16 years of global OFS experience (SLB)<br />
Hernan Montoya CFO 15 years of corporate finance. 5 years as <strong>Estrella</strong> Controller<br />
Doug Parker VP <strong>Operations</strong> 35 years experience with drilling contractors (Parker Nabors<br />
BHI) Ex Parker LatAm General Manager<br />
Matthew Holdeman VP Geothermal 26 years of experience in DD, IPM, QHSE (SLB & BHI )<br />
Gary Pidcock VP Consulting 29 years of experience, onshore and offshore, (SLB, BP, Gulf,<br />
PlusPetrol) ‐ Camisea Project Manager<br />
Luis Aviles VP Sales & Marketing 28 years (SLB) in operational & management roles<br />
Nelsy Carreno Director SSMACD 16 years of HSE experience with drilling contractors<br />
Michelle Grandjean Director HR 14 years of regional HR management<br />
Giovanni Rios GM Peru 16 years of experience(SLB, Oxy), 17 countries ‐ MWD/LWD<br />
Fernando Lopez GM Col 15 years of experience. Ex Tesco manager for Per/Col/Ecu<br />
Alejandro Biagiola GM Arg 16 years in operations roles (SLB)<br />
Eduardo Llaneza GM Bolivia 18 years in industry in various operations roles (Halliburton).<br />
Directors<br />
Title<br />
Warren Levy Chairman & CEO<br />
Andrew Fentress Director Partner, Medley Capital (Shareholder nominated director)<br />
Gustavo Garrido Director Managing Partner at premiere M&A law firm in Buenos Aries<br />
Phil MacDonnell Director Board experience at over 14 public and private cos.<br />
Chair and co‐founder of Insurance pay (sold to Macquarie<br />
capital in 2008). C.A.<br />
Remo Mancini Director Former Minister of Revenue for Ontario, 30 years of experience<br />
in business/government<br />
12
13<br />
Latin American Market
Stable Growing Rig Market<br />
• Region has much lower<br />
volatility than other markets<br />
• Exploration and Production<br />
(E&P) operators have > $10<br />
billion in commitments in 2012<br />
on land<br />
• Democratization of block<br />
bidding has facilitated entry of<br />
smaller players.<br />
• Numerous remote and<br />
challenging projects, antiquated<br />
equipment and increasing<br />
customer demands to improve<br />
• Huge resource potential in a<br />
growing economic environment<br />
• Must have a regional footprint<br />
to take advantage of sustained<br />
growth<br />
• Latin American rig market up<br />
100% in 10 years<br />
Rig Count<br />
3500<br />
3000<br />
2500<br />
2000<br />
1500<br />
1000<br />
500<br />
Latin America and World Rig<br />
Count<br />
0<br />
0<br />
1995 1997 1999 2001 2003 2005 2007 2009 2011<br />
3500<br />
3000<br />
2500<br />
2000<br />
1500<br />
1000<br />
500<br />
Ex LatAm<br />
Other<br />
Venezuela*<br />
Peru<br />
Mexico<br />
Ecuador<br />
Colombia<br />
Chile<br />
Brazil<br />
Bolivia<br />
Argentina<br />
Source: Baker Hughes<br />
14
Target Market ‐ Colombia<br />
The Hottest Little Market in Latin<br />
America<br />
• Continued strong activity by juniors<br />
and Ecopetrol have kept rig count up<br />
• Nearing the elusive goal of 1,000,000<br />
bbls/day of production<br />
• Large number of projects still in<br />
exploration phase<br />
• Slow to develop infrastructure is<br />
restricting pace of growth<br />
• Security and social concerns have lost<br />
some ground after major<br />
improvements over the last 10 years<br />
• Activity outlook remains strong<br />
Rig 553 outside of Bogota<br />
Drilling Rigs<br />
Operating<br />
Workover Rigs<br />
Operating<br />
Active Drilling<br />
Contractors<br />
67 Approx. 150 Over 30<br />
Source: Baker Hughes<br />
15
Target Market ‐ Argentina<br />
Government take over of YPF sets the<br />
tone for massive non conventional<br />
potential<br />
• Government take over of 51% of YPF has<br />
set a negative investment sentiment for<br />
outsiders unfamiliar with the market but is<br />
likely to spur rapid drilling increases<br />
• Massive shale gas and oil potential (EIA<br />
rates Argentina’s gas resource potential as<br />
third highest in the world behind the US<br />
and China<br />
• Infrastructure and workforce are in place<br />
to support a boom, but import and<br />
investment environment could be<br />
improved to help speed the entry of the<br />
required equipment into the country<br />
• Growing negative energy trade balance is<br />
forcing rapid action in the sector<br />
• Government has started to work to<br />
improve the labour situation<br />
Rig 551 has drilled 180+ wells in four<br />
years in Argentina<br />
Drilling Rigs<br />
Operating<br />
Workover Rigs<br />
Operating<br />
Active Drilling<br />
Contractors<br />
65 Approx. 250 Over 10<br />
Source: Baker Hughes<br />
16
Target Market ‐ Chile<br />
Niche Market for Remote<br />
<strong>Operations</strong><br />
• Country lacks sufficient domestic<br />
energy supply and is pushing on<br />
all fronts<br />
• Looking to diversify – driving<br />
growth in geothermal<br />
development in the high Andes<br />
• Challenging remote operations<br />
• Small oil and gas activity in south<br />
of country<br />
• Home to one of the worlds largest<br />
methanol plants – going wanting<br />
due to lack of Argentine gas<br />
supply<br />
• Most attractive fiscal and<br />
investment regime in the region<br />
Rig 1201 operating in the Andes<br />
buried in snow<br />
Drilling Rigs<br />
Operating<br />
Workover Rigs<br />
Operating<br />
Active Drilling<br />
Contractors<br />
4 3 3 + ENAP<br />
Source: Baker Hughes<br />
17
Secondary Market ‐ Peru<br />
Three markets in one<br />
• Talara – marginal fields<br />
• Offshore – platform developments<br />
• Jungle – heli rig operations<br />
• Long awaiting jungle<br />
developments finally getting<br />
green light from government<br />
• Offshore activity also set to<br />
increase with new capital coming<br />
into key player<br />
• Will remain a small market, but<br />
with attractive long term<br />
contracting opportunities<br />
Rig 201 After Upgrades<br />
Drilling Rigs<br />
Operating<br />
Workover Rigs<br />
Operating<br />
Active Drilling<br />
Contractors<br />
7 15 4<br />
Source: Baker Hughes<br />
18
Secondary Market ‐ Bolivia<br />
Market that has mixed reviews,<br />
but with real potential<br />
• Bolivia is home to some of the<br />
most prolific gas resources in the<br />
world<br />
• Government involvement in the<br />
industry had increased, but has<br />
now scaled back to be more<br />
operator friendly<br />
• Operators that remain in Bolivia<br />
are good counterparties<br />
(Petrobras, PlusPetrol, Oxy etc..)<br />
• Small often overlooked market,<br />
with activity returning to strong<br />
levels<br />
Rig 1001 Operating outside Santa Cruz<br />
Drilling Rigs<br />
Operating<br />
Workover Rigs<br />
Operating<br />
Active Drilling<br />
Contractors<br />
8 Approx.18 6<br />
Source: Baker Hughes<br />
19
The Geothermal Market<br />
Global Production Base<br />
• US, Indonesia, Philippines, Mexico,<br />
New Zealand, Italy, Kenya, Central America<br />
• 10.7 GW of installed capacity<br />
• Steady growth for the last 30+ years<br />
Sustainable Growth<br />
• Each 40 MW plant requires 8-15 wells<br />
• Virtually zero carbon footprint<br />
• Long plant life and excellent baseload power<br />
(>95% uptime on production)<br />
Latin American Potential<br />
• Current developments in Central America and Chile,<br />
greenfields projects in Peru, Argentina and Bolivia<br />
• First projects in development stage in Chile and Argentina<br />
Source: US Geological Survey<br />
Only part of the<br />
“Ring of Fire”<br />
without current<br />
geothermal<br />
production<br />
Global Geothermal Production<br />
30 years of steady growth<br />
20<br />
Source: Bertani, 2010
Loyal Customer Base<br />
• Long term, sustained customer relations<br />
• Many of our new country entries have been facilitated by existing<br />
customers<br />
• Buenos Aires continues to be a hub for regional oil companies<br />
YEAR<br />
Customers > 1 MM in Revenue<br />
2005 ‐<br />
2006 ‐<br />
2007 PRC / Oxy<br />
2008 PRC / Oxy / PetroAndina / Maple / March<br />
2009 PRC / Oxy / PetroAndina / ENAP / ENG / Maple<br />
2010 PRC / Oxy / PetroAndina / ENAP / ENG /<br />
GeoPark / PlusPetrol / Ecopetrol<br />
2011 PRC / Oxy / PetroAndina / ENAP / ENG /<br />
GeoPark / PlusPetrol / Ecopetrol/Pac. Rubiales<br />
21
22<br />
Progress and Objectives
Objectives<br />
Reduction in SG&A to < 11% of revenues<br />
• Rationalization and replacement of expats with locals in key management positions<br />
• Promotion from within to replace key departures<br />
• Elimination of many one time costs assocated with ineffecient capital raising<br />
• Reduced SG&A in Q1 2012 by 938k over 2011 averages<br />
Consolidation of position in Colombia –One <strong>Estrella</strong> image<br />
• Completed Zigma acquisition<br />
• Converted problematic PL acquisition into a clean asset purchase<br />
• One unified operation<br />
• Reduced admin positions by > 50%<br />
• Reduced operating bases from seven to three<br />
Utilization of rigs > 80%<br />
• Swapped rigs between Colombia –Peru onto long term contracts<br />
• Diversification of customer base in Colombia<br />
• Focus on long term contracts<br />
• Work required to secure higher percentage of long term contracts<br />
23<br />
Debt Reduction<br />
• Renegotiation of Petroland deal to reduce assumed debt from $6 million to $1.7<br />
Million<br />
• Repaid over $8 million of senior debt facility over the last six months
Objectives<br />
SSMACD Excellence (Safety, Security, Environment and Quality System)<br />
• Change out of staff and fundamental change in focus has started to make game<br />
changing improvements<br />
• Build off of excellence in Colombia<br />
• Second consecutive year to win the coveted “Cruz Esmerelda” award given<br />
by the Colombian government for companies that score outstanding results<br />
on the annual government led audit –scored 98%<br />
Growth in Consulting Business<br />
• Three new contracts signed in Q1<br />
• Expected growth in consulting revenues by more than 2x year on year<br />
Growth in Directional Business<br />
• Alliance with SDI starting to fuel substantial growth<br />
2010 (Pre SDI) 2012 Year End Target<br />
MWD Kits Gyro APWD/GR MWD Gyro APWD/GR<br />
Argentina 4 ‐ ‐ 6 2 2<br />
Chile 2 ‐ ‐ 3 1 1<br />
Peru ‐ ‐ ‐ 3 2 3<br />
Colombia ‐ ‐ ‐ 3 2 3<br />
Bolivia ‐ ‐ ‐ 1 1 1<br />
24
Highlights –The 5 Pillars<br />
• Client<br />
• Negotiated Extension on 8 key<br />
contracts (4 rigs, 3 services, 1<br />
consulting)<br />
• Diversifying customer base in<br />
Colombia.<br />
• Entry into new markets<br />
Environment<br />
• Waste classification and separation<br />
at all rig sites<br />
• Carbon footprint study launched<br />
Quality<br />
• Awarded 98% on quality<br />
certification in Colombia<br />
• Launched Trigpoint<br />
maintenance management<br />
system<br />
People and Presence<br />
• Expanded into Colombia, Bolivia<br />
• Promotions of senior local staff<br />
into executive roles<br />
Safety<br />
• 1 year completely accident free on<br />
two rigs in Argentina<br />
• Awarded Cruz Esmerelda award by<br />
the Colombian Saftey Council<br />
• Incident frequency and severity<br />
down substantially post changes in<br />
SSMACD team<br />
25<br />
Ser mejor, Hacer mas ‐ Be better, do more
Key Milestones –4 Acqusitions<br />
Location Date Description Purchase<br />
Price<br />
EBITDA<br />
Capacity<br />
Rig 1201 Mar 2010<br />
Acquired single rig operating entity in<br />
Chile from partner<br />
$24.5 $5<br />
STS de los<br />
Andes<br />
Nov<br />
2010<br />
Colombian based 5 rig workover<br />
company.<br />
Added 2 workover rigs and sold off<br />
small pulling unit post transaction<br />
$20 >$4<br />
Zigma 2011‐12<br />
Petroland 2012<br />
Colombia rig company that had 5 rigs +<br />
extensive stock of materials and<br />
peripherals<br />
Upgraded 1000 HP and 550 HP drilling<br />
rigs to meet <strong>Estrella</strong> standards<br />
Used peripherals to arm the two<br />
additional workover rigs from STS<br />
Over $1 million in spares<br />
Sold off older rig centerpieces and junk<br />
Original plan was to purchase company,<br />
and assume roughly $6 Million in debt<br />
Uncovered substantial contingencies<br />
and the company underperformed<br />
Converted purchase to an asset<br />
purchase of 3 x 550 HP drilling/workover<br />
rigs + $1 million in additional peripheral<br />
assets<br />
$10.5 >$3<br />
$8.2 > $3<br />
26<br />
Notes:<br />
Values quoted are in millions of USD.<br />
Purchase price inclusive of debt cancellation or assumption
27<br />
Financial Results
A History of Consistent Growth<br />
Revenues US$ MM<br />
90<br />
80<br />
70<br />
60<br />
50<br />
40<br />
30<br />
20<br />
10<br />
0<br />
2007<br />
2008<br />
2009<br />
2010<br />
2011<br />
2012E<br />
CAGR 2007-2010: 90%<br />
CAGR 2007-2011: 91%<br />
28
Ownership –June 30, 2012<br />
Insider Ownership<br />
Common Shares controlled by Management and Insiders<br />
(excluding Medley Capital)<br />
Common Shares controlled by Medley Capital<br />
Approx 15.0 Million (1)<br />
39.6 Million<br />
1. 14,500,000 of these common shares are escrowed against price performance of the Common shares with 4 million<br />
vesting at $1.30, 6 million vesting at $1.40 and the reminder vesting at $2.00.<br />
Capitalization<br />
Current Issued and Outstanding Common Shares 132,809,783 (1)<br />
Non‐voting convertible preference shares outstanding 4,125,000 Series A Preference Shares (2)<br />
Outstanding Warrants 41,784,650 (3)<br />
Current Trading Price $0.08 (5)<br />
Current Market Capitalization $10.6 Million (5)<br />
Long Term Debt<br />
$24 Million –Credit Suisse Credit Facility<br />
$7 Million –Local Colombian Bank Debt<br />
$15 Million – Outstanding Convertible<br />
Debentures (4)<br />
29<br />
1. Excludes 3,125,000 contingent common shares to be issued to the sellers of Zigma Petroleum <strong>Services</strong> S.A.<br />
2. Excludes 1,250,000 contingent Series B Preference Shares to be issued to the sellers of Zigma Petroleum <strong>Services</strong> S.A.<br />
3. Includes warrants exercisable for 38,712,500 common shares at CDN$1.50 per share expiring July 25, 2015; warrants issued to Credit<br />
Suisse in conjunction with the long term debt facility exercisable for 3,072,000 common shares at US$0.91 per share expiring December<br />
1, 2015; and 150 warrants exercisable for 1,875,000 common shares at a price of CDN$0.80 per share until January 21, 2016.<br />
4. Due December 31, 2015, with an annual interest rate of 12% per annum. Redeemable, in whole or in part, at the option of the<br />
Corporation on 60 days notice if the 20 day trading price of the Common Shares is greater than or equal to $1.50. Convertible at the<br />
holder’s option, into fully‐paid common shares in the capital of the Issuer at any time prior to maturity at a conversion price of $1.00<br />
per common share for every $1.00 of principal.<br />
5. Based on the closing price of the common shares on the TSXV on Jun 30, 2012.
Priorities for 2012‐3<br />
Successful Integration of Petroland and Zigma<br />
‐ Has been completed<br />
Secure long term rig contracts to get utilization back over<br />
80%<br />
Improvement in profitability for Argentina<br />
‐ Rig 551 is seeing good demand, and services are expected to<br />
improve substantially with roll out of SDI directional equipment and<br />
non‐conventional resource developments<br />
Focus on growth and development of consulting business<br />
‐ Targeting more than 2x growth year on year<br />
Focus on free cash flow generation and reduce debt<br />
‐ Have repaid over 8 Million in 32 million senior facility in last six<br />
months and reduced debt assumption in Colombia with Petroland<br />
renegotiation<br />
‐ Continue to amortize debt over coming quarters<br />
Substantial SG&A reduction as a function of revenue<br />
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Why <strong>Estrella</strong> ?<br />
Close to our customers and our communities<br />
• We live where we work<br />
• We develop our international experience and our home grown talent<br />
• Unrivaled experience in remote and non‐standard projects<br />
• 7 years of sustained growth, via customer driven solutions<br />
• Partnerships with our Customers, Suppliers and our Communities<br />
• We are relentless in the pursuit of setting the standard for quality,<br />
safety and environmental performance<br />
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Be better,<br />
do more
<strong>Estrella</strong> <strong>International</strong> <strong>Energy</strong> <strong>Services</strong> <strong>Ltd</strong>.<br />
Warren Levy<br />
Chairman & CEO<br />
wlevy@estrellasp.com<br />
Hernan Montoya<br />
CFO<br />
hmontoya@estrellasp.com<br />
Phone: +5411 5217 5250<br />
Fax: +5411 5217 5280<br />
www.estrellasp.com<br />
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Case Studies
Diversified Market Presence<br />
• Only active rig and directional player in the rapidly growing<br />
Geothermal Market<br />
• Central America / Mexico / Colombia / Peru / Argentina / Bolivia all<br />
with active projects<br />
<strong>Estrella</strong> Rig 1201 drilling a<br />
geothermal well in northern<br />
Chile at 4500 m of altitude<br />
Proved that a modern<br />
automated rig can<br />
outperform in remote<br />
geothermal operations<br />
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Geothermal ‐ Challenges<br />
Extreme snow and<br />
wind conditions<br />
required massive<br />
modifications to<br />
rig operations.<br />
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Case Study – Full Service Capabilities<br />
• Rio Tinto / Vale ‐ Potash Development –Mendoza Province, Argentina<br />
• <strong>Estrella</strong> got involved in late 2005<br />
– Initial work to evaluate feasibility of a directionally drilled development, Later to design and have<br />
fabricated a custom built , fully automated 1000 HP AC walking rig<br />
– Field taken to 16 well pads, saving hundreds of millions on infrastructure costs and being featured in Rio<br />
Tinto’s quarterly update to investors as a case study in reduced environmental impact<br />
• 5 years later‐ <strong>Estrella</strong> continues to supervise the rig operation and provide engineering support<br />
• Now engaged in phase II rig construction project to design and build two additional<br />
rigs and assisted Vale in completing early engineering work on a Canadian project<br />
Manipulator Crane<br />
Each circle is 2 wells<br />
1000 x 16 well pads<br />
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Walking Automated Rig
Southern Cross<br />
Transaction Summary<br />
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Southern Cross<br />
‐ Southern Cross is a private equity firm with operations<br />
throughout Latin America since 1998. Southern Cross was<br />
created to make value oriented, control investments in Latin<br />
American companies that have significant potential for<br />
improved performance and growth. The Southern Cross<br />
funds include four funds, the latest of which is SCLAPEF IV,<br />
raised in 2010 with capital commitments of approximately<br />
$1.68 billion.<br />
‐ Ringo Holding L.P. is an Ontario Limited Partnership of which<br />
SCLAPEF IV is the sole limited partner and whose general<br />
partners are three recently incorporated corporations owned<br />
by principals of Southern Cross.<br />
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Transaction Summary<br />
‐ 166,666,667 units at a price of CAD$0.15 per unit<br />
‐ Each unit entitled to 1 common share and 0.4 warrants<br />
‐ 18 month warrants prices at CAD$0.15 for the first six months,<br />
beyond which if the stock trades over CAD$0.25, the warrant<br />
price converts to being 90% share price<br />
‐ CAD$25 in initial proceeds, with the potential of<br />
CAD$10 million additional capital to follow<br />
‐ Use of Proceeds<br />
‐ Reduce indebtedness with Credit Suisse to $14 Million (roughly<br />
$10 million repayment)<br />
‐ Reduce other indebtedness by $4‐5 Million<br />
‐ Working capital and general corporate purposes<br />
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Ownership – Post Transaction<br />
Insider Ownership<br />
Common Shares controlled by Management and Insiders<br />
(excluding Medley Capital)<br />
Common Shares controlled by Medley Capital<br />
Approx 15.0 Million (1)<br />
39.6 Million<br />
1. 14,500,000 of these common shares are escrowed against price performance of the Common shares.<br />
Capitalization<br />
Current Issued and Outstanding Common Shares 299,476,450 (1)<br />
Non‐voting convertible preference shares outstanding 4,125,000 Series A Preference Shares (2)<br />
Outstanding Warrants 38,712,680 (3)<br />
Current Trading Price $0.13 (5)<br />
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Current Market Capitalization $38.9 Million (5)<br />
Long Term Debt<br />
$14 Million –Credit Suisse Credit Facility<br />
$7 Million –Local Colombian Bank Debt<br />
$15 Million – Outstanding Convertible<br />
Debentures (4)<br />
1. Excludes 3,125,000 contingent common shares to be issued to the sellers of Zigma Petroleum <strong>Services</strong> S.A.<br />
2. Excludes 1,250,000 contingent Series B Preference Shares to be issued to the sellers of Zigma Petroleum <strong>Services</strong> S.A.<br />
3. Includes warrants exercisable for 38,712,500 common shares at CDN$1.50 per share expiring July 25, 2015; and 150 warrants<br />
exercisable for 1,875,000 common shares at a price of CDN$0.80 per share until January 21, 2016. The warrants issued to Credit Suisse<br />
in conjunction with the long term debt facility exercisable for 3,072,000 common shares at US$0.91 per share expiring December 1,<br />
2015 will be cancelled as part of the reduction in the Credit Suisse debt.<br />
4. Due December 31, 2015, with an annual interest rate of 12% per annum. Redeemable, in whole or in part, at the option of the<br />
Corporation on 60 days notice if the 20 day trading price of the Common Shares is greater than or equal to $1.50. Convertible at the<br />
holder’s option, into fully‐paid common shares in the capital of the Issuer at any time prior to maturity at a conversion price of $1.00<br />
per common share for every $1.00 of principal.<br />
5. Based on the closing price of the common shares on the TSXV on Jul 24, 2012.
New Board Composition<br />
Directors<br />
Title<br />
Warren Levy Chairman & CEO 16 years of global OFS experience (SLB)<br />
Horacio Reyser Director Partner at Southern Cross, with over 18 years of management,<br />
investment and M&A experience in Latin America.<br />
Ricardo Rodriguez Director Founding partner of Southern Cross. 30 years of Latin American<br />
investment experience<br />
Diego Acevedo Director Head of Southern Cross Bogota office. Over 10 years of<br />
management consulting and investment experience.<br />
Phil MacDonnell Director Board experience at over 14 public and private cos.<br />
Chair and co‐founder of Insurance pay (sold to Macquarie<br />
capital in 2008). C.A.<br />
Remo Mancini Director Former Minister of Revenue for Ontario, 30 years of experience<br />
in business/government<br />
Daniel Kokogian Director 30+ year petroleum industry veteran. Ex President for Argentina<br />
of successful Canadian junior PetroAndna. Current director of<br />
CGC hydrocarbons. Extensive M&A, management and<br />
operations experience.<br />
Gustavo Garrido * Counsel Managing Partner at premiere M&A law firm in Buenos Aries<br />
• Mr Garrido will serve as oustide counsel to the corporation<br />
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