2 NOMAD - Aqua Pure Ventures Inc.

Report
Leadership in Oil & Gas Shale Wastewater Recycling
Investor Presentation
LD Micro Invitational October 2, 2013
1
Safe Harbor Statement
The statements contained in this presentation that are not purely historical are forward-looking statements
within the meaning of applicable securities laws. Forward-looking statements include statements regarding
our “expectations,” “anticipation,” “intentions,” “beliefs,” or “strategies” regarding the future, whether or
not those words are used. Forward-looking statements also include statements regarding revenue, margins,
expenses, anticipated levels of future revenues and earnings from operations, projected costs and expenses
related to our operations, liquidity, capital resources, and availability of future equity capital on
commercially reasonable terms. Forward-looking statements in this presentation are based upon a number
of assumptions, some of which may not materialize, and unanticipated events may occur which could affect
the actual results achieved by the Company during the periods covered by the forward-looking
statements. All forward-looking statements included in this presentation are based on information available
to us as of the date of the presentation, and we assume no obligation to update any such forward-looking
statements. Our actual results could differ materially from the forward-looking statements.
Aqua Pure Ventures Inc. (AQE.V)
135 Commercial Drive – Unit 1
Calgary, Alberta T3Z 2A7
www.aqua-pure.com
2
Corporate Profile
We provide environmentally sustainable, cost-effective wastewater treatment
for the oil & gas fracking industry.
Aqua-Pure is an oilfield engineering and services firm that has developed
and commercialized patented technology for wastewater treatment,
transforming wastewater from a liability to an asset.
Fountain Quail Water Management, 100% wholly owned subsidiary and primary
operating unit of Aqua-Pure, deploys state-of-the-art mobile treatment units in shale
oil and gas plays across North America, delivering high efficiency, cost-effective and
environmentally sustainable alternatives to wastewater disposal that utilizes patented
and proprietary technologies, processes and equipment. Over the last decade, Fountain
Quail has become a global leader in recycling shale gas flowback and produced water
into clean saltwater for re-use or fresh water for disposal re-use/discharge.
THE TECHNOLOGY
Chemical precipitation/filtration
process to clean Saltwater for Re-Use
Evaporative process that produces pure
distilled water for re-use.
3
Snap Shot
Headquarters /R&D center:
Operations / Service:
Business Development:
Employee Count:
Calgary, Canada
Roanoke, TX
Houston, TX
40 (5 employees in Calgary)
TSX Venture Exchange:
AQE
Market Cap:
$20 million (@$0.22 per share)
Shares Outstanding / Fully Diluted:
91.5 million / 124.5 million
Options/Warrants:
6.8 million (Avg. $0.25) / 6.2 million (Avg. $0.35)
Insider Ownership:
57.1% fully diluted
Estimated Market Value of Equipment: $25+ million
NOLs:
$29 million – expire 2026-2032
Patents:
63 (plus 2 pending) – expire 2018-2025
 In 2004 - FIRST company to begin a fresh water recycling process in the Barnett Shale (first shale gas play in the U.S.)
 Aqua-Pure has recycled approximately 20 million barrels of contaminated wastewater.
2013 Financial Goals
2010
2011
2012
$6.8
$5.8
$6.5
EBITDA (mil)
$(11.4)
$(2.6)
$(3.3)
Net Income (mil)
($14.5)
$(2.2)
$(5.6)
Net Revenue (mil)




Revenue growth rate accelerates Q4
Q4E revenue: $2.5 million - $3 million
Gross Margins: 35 - 40%
EBITDA:
Q4 B/E+
2014 Financial Goals
 Full Year Revenue growth rate: 50%+
 Gross Margins: 35 - 40%
 EBITDA Margin: 20%+
4
Key Developments - History
Key Developments
9/03/13
Aqua-Pure and Select Energy Activate Joint Venture Following Highly Successful ROVER Commercial Launch.
8/08/13
Aqua-Pure Secured US $1.5 Million from the Sale of Convertible Debentures ($0.30 conversion).
6/27/13
Announces Contract with Pioneer for 2-Nomad Installation (2nd E&P Operator contract in Permian).
3/06/13
Closes financing–US $2.15 million 8% Secured Convertible Debentures ($0.30 conversion) in private placement.
2/20/13
Expands operations into the Permian Basin with the installation of two NOMADS.

09/18/12 30-year industry veteran, Broderick, joins Aqua-Pure as Head of Corporate Development.
09/13/12
Aqua-Pure selected by The Artemis Project™ as 2012 Top 50 Water Company / honored for the third consecutive year.
HISTORY
1992
1994
1996
1997
1998
1999
2000
2001
2003
2004
2007
2008
2010
2011
– Founded – Company Develops Prototype Evaporator Technology in Kelowna, BC.
– First Patent Issued for Prototype System.
– Aqua-Pure Completes IPO and Begins Trading on Vancouver Stock Exchange.
– Colt Engineering Hired to Evaluate Prototype Design. Modifications Completed.
– Filed Worldwide Process Patent. Aqua-Pure Builds the First Oilfield Evaporator in Alberta Heavy Oil.
– Colt Engineering Formalizes Agreement with Aqua-Pure.
– Jake Halldorson Accepts Position as CEO. Insider investment over $40 million at approximately $0.40/share
– Signs Joint Technology Agreement with EnCana – for use in the thermal heavy oil recovery process.
– BP (Amoco) Awards Contract to Supply a Brine Concentrator.
– Receives Patent for the Compact Rising Film Evaporator (CRFE) Technology.
– Aqua-Pure Contacted by Delzon Elenburg (Barnett Shale, TX) Regarding Recycling of Shale Gas Flowback Water.
– NOMAD 1 is Installed Near Decatur, TX. Work Begins with Devon Energy.
– 9th NOMAD Installed. Granted Long-term Operating Permit from Railroad Commission of Texas.
– Devon & Fountain Quail Awarded ‘08 Chairman’s Stewardship for Wastewater Recycling Operations.
– Entry into Marcellus Shale with 3 NOMAD Units Installed at Eureka Resources’ Williamsport, PA.
– Expanded Operations into the Eagle Ford Shale in South Texas. ROVER System was Introduced (October).
5
Well Positioned for Market Trends
REGULATORY
Water usage, disposal wells,
time to permit, etc.
ECONOMIC
Cost of trucking,
lack of access to
disposal, water, etc.
ENVIRONMENTAL
public perception,
water availability, legal
liability, trucking costs and
concerns.
PROVEN TECHNOLOGY
MARKET ACCESS
Recent agreement with Select
engages an additional 100 person
Technical Sales force.
Processed almost 20 million barrels
of oil field waste water. Patents
issued in over 40 countries
and new patents pending.
6
Patents & Approvals
Rover & Nomad Systems
Cutting-edge, cost-effective technologies that recycles hard-to-treat wastewater into
re-useable fresh water, thus creating an environmentally sustainable water cycle.
Clear Solutions
 Aqua-Pure holds 65 patents (63 issued and 2 pending) covering 40 countries.
 Patents focus - unique configured, forced convection heat recovery and transfer circuit,
combined with conventional vapor recompression circuitry, to maximize heat transfer to
produce purified water.
 This MVR process is complex, yet extremely efficient, requiring significantly less energy to
produce one pound of steam, a 90+% reduction in energy from conventional methods.
 High level of regulatory acceptance:





Holder of permits in key shale gas states: TX, AR, PA
Received first long term TX recycling permit
Unblemished record with the TX RRC
First operation to meet new PA DEP discharge rules
First NPDES discharge permit in AR for Fayetteville Shale water
7
Two Key Product Lines
Both Mobile
Cleans Saltwater for Re-Use
Pure Distilled Water for Re-Use
Removes suspended solids and soluble organics.
All-in cost to customer approximately $1/barrel.
Leaves behind all dissolved contaminants in concentrated form.
All-in cost to customer less than $4/barrel
Since 2004, Fountain Quail has built and operated 14 turnkey shale water recycling
facilities processing approximately 20 million barrels of contaminated water.
8
Nomad System
COMMERICALLY LAUNCHED 2004
 Semi-mobile, oil field designed brine concentrator that utilizes a distillation process to produce
fresh water from flowback and produced water.
 Equipment placement at/or near well site, uses well-head gas as its energy source.
Significantly reduces downtime (cleaning and/or maintenance) due to modular system design.
 Serious alternative to deep saltwater injection disposal wells, which permanently removes
water from the hydrological cycle.
 Heavily tested in extreme environments and highly variable feed waters from Canada’s oil
sands to North Texas shale plays.
 At full capacity (2,000 bbl/d), generates revenue of approximately $2.5 million/year.
Low cost, high efficiency MVR (Mechanical Vapor Recompression) system.
9
Rover Systems
COMMERICALLY LAUNCHED Q1 2013
Rover recycles water on-demand near the wellhead, removes suspended solids and
soluble organics from wastewater, and returns clean brine that can be blended for re-use
as hydraulic fracturing fluid.




Primary treatment of frac flowback wastewater
Rugged, self contained MOBILE system – small footprint (30X55 foot pad)
Proven high capacity (10,000 bbl/d)
At full capacity generates revenue of approximately $1 million/year
Rover significantly reduces costs of water sourcing, storage, disposal and transport.
10
Competitive Advantages
11
Industry Recognition
 Fountain Quail’s cost and treatment model has been validated by the Gas Technology Institute (gti).
 Featured company in the “The Barnett - Powering Progress” ad campaign.
 Devon - Winner of the Interstate Oil and Gas Compact Commission (IOGCC) Chairman’s “Stewardship
Award” in 2011 for recycling work (mainly with Fountain Quail). Fountain Quail later won the same
award in 2011 for work in the Marcellus Shale (PA).
 Devon recently filmed a segment about Fountain Quail on their "Culture of Achievement" video
series entitled "Pioneering Water Recycling."
 Showcased on Bloomberg’s “EnergyNow” program.
 Named to The Artemis Project’s 2012 “Top 50” Water Tech List for the third consecutive year,
recognizing Aqua-Pure as among the most innovative and promising companies in the water
technologies industry.
 Also named by The Artemis Project as one of five most-promising “Early Market Leaders”,
among companies with revenues over US $5 million per year.
12
Equipment Deployment
Devon Energy Site (Barnett Shale)
13
Barnett
 Fountain Quail has migrated to
10 different Devon sites since
2004, following the customer’s
production activity.
 Fountain Quail has hosted over
100 Devon-approved site tours
including media, government
officials (DoE, EPA, Texas RRC,
Canadian Consulate, etc.).
 Fountain Quail was featured as
a corporate partner in Devon’s
2012 “Culture of Achievement”
video series.
Devon has become Fountain Quail’s
best sales reference.
14
Permian
 February 20, 2013 - Fountain Quail contracted with a large
independent publicly traded E&P operator for 2 NOMADS.
Processing commenced in late third quarter 2013.
 June 27, 2013 - Fountain Quail secured a second contract in the
Permian basin for Pioneer Natural Resources to install 2 NOMAD
units.
Processing to begin by early fourth quarter 2013.
 First half 2013, Fountain Quail successfully piloted and
commercially tested its second product, ROVER with a large
publicly traded E&P operator.
15
Marcellus
 Eureka Resources is a leading
provider of Marcellus Shale
wastewater treatment solutions.
 June 2010, Eureka Resources
purchased 3 NOMADS, with
annual licensing payments to
AQE, and opened its 60,000 sf
water treatment facility in
Williamsport, PA.
 The facility recycles up to
300,000 gallons of wastewater
daily from customers that include
Range Resources, XTO Energy
and Chesapeake Energy.
Exclusive NOMAD relationship in
NW Pennsylvania.
16
Joint Venture Partner
Select Energy Services
17
Select Energy Services
 Select Energy Services (“Select”) was
founded in 2007 as Peak Oilfield Services in
Gainesville, TX.
 Headquartered in Houston, Select has
grown to a $1 billion+ company providing
services to over 400 customers in every
major shale play in North America.
 Private Company founded by John Schmitz,
a lifelong entrepreneur who has founded
and developed numerous successful
businesses in the oil and gas industry
including HEP Oil Company, Complete
Production Services and Brammer Supply.
 Delivers end-to-end water solutions and
well site services to clients through two
primary divisions:
 WaterOne
 WellOne
Founded:
2007
Headquartered:
Houston, TX
Employees:
Over 5,500
18
JV Partnership
FQS Venture, LLC
50-50 Partnership between Fountain Quail and Select Energy Services
 Strategic Partners in multiple bids/plays, leveraging complementary strength
 Fountain Quail: Excellent reputation, bundling of all water related services into
complete water solution.
Strengths: Technology, Water Chemistry and Operating Expertise.
 Select Energy Services: Excellent reputation, bundling of all water related services
into complete water solution, business development network and presence in every
major US shale play.
Strengths: Ancillary Oilfield Support Services, Secondary Containment, Water Transfer,
Localized Permitting Experience, Local Field Support, business development network and
presence in every major US shale play.
19
Leadership – Financials
Growth Strategy
20
Management Team
Jacob Halldorson, Aqua-Pure – Chief Executive Officer (2002) and Director (1998)
 Previously, senior executive and founding partner of Colt Engineering Corporation (Calgary ), founded in 1973 – acquired by
Worley Parsons for $1.3 Billion.
 Served as a director of Net Shepherd Inc., Axia NetMedia Corporation, and Hallmark Resources Ltd.
Karim Teja, Aqua-Pure – Chief Financial Officer (2007)
 Served as an officer of Imaging Dynamics Company Ltd., a TSX listed company.
 Formerly Chief Financial Officer and Chief Operating Officer of Erasoft Technologies Inc., a private software company, where he
helped negotiate a successful acquisition by Viasoft Inc., a NASDAQ listed company.
 B.S. (Business) with honors - Simon Fraser University; honors certificate from the Canadian Securities Institute; Certified
General Accountant (CGA) in 1992.
Brent Halldorson, Aqua-Pure – Chief Operating Officer and Director (2006)
 Manages Aqua-Pure’s US-based service company, Fountain Quail Water Management
 Key developer of Aqua-Pure’s mobile NOMAD evaporator treatment system for shale gas operations and other mobile
treatment solutions for oil and gas operations throughout North America.
 Member of APEGGA (Alberta's Association of Professional Engineers). Served on the Town of Flower Mound's Oil & Gas
Advisory Board. B.S. Electrical Engineering - University of Calgary.
Rich Broderick, Fountain Quail – Vice President of Corporate Development (2012)
 30+ years of oilfield experience with Schlumberger as Global Leader, O&G for Schlumberger Water Services.
 Recognized as an expert in the arena of oilfield water management.
 Currently serves as Chairman of the Fountain Quail – Select Energy JV.
Harold Lauman, Aqua-Pure – President (1996) and Director (1997)
 Former President of Haron Research Corp., the founders of Aqua-Pure’s primary technology, since 1992.
 Served as District Manager for Browning Ferris Industries from 1989-1995 and GM for Cenoka Industries., from 1977-1989.
Delzon “Possum” Elenburg, Fountain Quail – President (2002) and Director (2011)
 Founded Fountain Quail Water Management - water treatment options for the Barnett Shale from 1999-2001.
 Previously Vice President of Finance for Elenburg Exploration and Founder of Circle Seven Drilling and Circle Seven Production.
21
Board of Directors
Richard Magnus, Chair of the Board (2002)
 4-term Member of the Legislative Assembly of the Government of Alberta.
 Member of the Standing Policy Committee on Agriculture and Municipal Affairs (1993-2008).
 Alberta's first representative on Executive Committee, US Energy Council.
Alan Hallman, Independent Director (2009) – Audit Committee Chair
 President of Alan Hallman and Associated Incorporated, a public relations consulting company (1997 to Present).
 Government experience includes serving in the offices of the Premier of Alberta, the Federal Minister of Natural
Resources, Government Leader of the Yukon and Provincial Ministry of Energy, Labor, and Career Development;
served as Campaign Chairman for Premier Klein’s re-election bids in 1993, 1997, 2001 and 2004.
 Member of the Board of Directors of Petro Reef Resources Ltd., a TSXV listed company.
Randy Oberlag, Independent Director (2006)
 30 years+ environmental experience and currently serves as president of S.T. Cooling Towers.
 Previously, president of Enviro & Emergency Management Services, Inc.
 B.S. - Columbia University School of Engineering, a B.A. in physics and a Juris Doctorate in Law.
 Member of the Society of American Military Engineers, the National Association of Corrosion Engineers and the
American Bar Association.
Richard Stroup, Independent Director (2006)
 Co-President and Co-CEO of Alan Ritchey, Inc., Registered Chemical Engineer, MBA.
22
Financial Highlights
C$ in 000s
Revenue
2010
2012
$6,767
$5,813
$6,500
$650
$(99)
$960
$(11,400)
$(2,600)
$(3,300)
Gross Margin
EBITDA
2011
2013 Financial Goals Revenue: Growth accelerates Q4
Q4E Revenue: $2.5 million - $3 million
Gross Margins : 35 - 40%
EBITDA:
B/E+ in Q4
2014 +Targets Revenue: 50+% growth
Gross Margins: 35-40%
EBITDA Margin: 20%+
Current Capacity:
Expected Capacity year end 2013:
9 NOMAD + 1 ROVER
15 NOMAD + 3 ROVER
2012 Equipment Deployment:
Barnett – 2 NOMAD
Marcellus – 3 NOMAD*
2013 Equipment Deployment:
Barnett – 2 NOMAD
Permian – 4 NOMAD + 1 ROVER
Marcellus – 3 NOMAD*
2014 Equipment Deployment:
(targeted including J.V.)
Barnett – 2 NOMAD
Permian – 8 NOMAD + 3 ROVER
Marcellus – 3 NOMAD*
*Operated by Eureka Resources – Aqua-Pure Receives Royalty Payments Only
23
Select P&L Quarterly Comparisons
3Q12
Revenue
4Q12
1Q13*
2Q13
C$ 1,874,742
C$ 977,972
(1,595,515)
(927,633)
(639,368)
(800,022)
279,227
50,339
246,661
465,585
Operating Expenses
1,111,583
1,428,006
1,098,637
1,041,192
Loss from Operations
(832,356)
(1,377,667)
(851,956)
(575,607)
Other Income/(Loss)
124,622
(136,058)
(850)
-
Financing Costs
310,617
356,455
481,228
534,194
Cost of Sales
Gross Profit
C$ 886,049 C$ 1,265,607
Comprehensive net
income (loss)
C$(1,018,351) C$(1,870,180) C$(1,060,055) C$ (544,747)
* Q1 2013 revenue decline expected as a result of moving assets from Eagle Ford to Permian.
24
Summary Balance Sheet
June 30, 2013
Cash
Receivables
Inventory
Prepaid expenses
Discontinued operations
Property, plant and equipment*
Intangibles assets
Total Assets
Bank indebtedness
Accounts and accrued liabilities
Deferred revenue (current portion)
Current Portion of debt**
Liabilities of discontinued operations
Total Current Liabilities
Deferred revenue
Long-term debt**
Derivative liability
Convertible debentures**
Total Liabilities
Stockholders’ Equity
Total Liabilities and Stockholders’ Equity
C$
C$
C$
C$
407,043
442,081
446,437
134,601
118,664
16,756,047
37,687
18,342,562
215,619
3,721,415
713,109
6,403,634
152,126
11,205,906
1,380,796
504,624
857,544
7,836,621
21,785,491
(3,442,929)
18,342,562
* Recent transaction values equipment at approximately $25+ million.
** Significant portion of the Company debt is held by insiders. During August 2013, $3.7 million of current debt was renegotiated into long term debt to mature in 2017.
 August 8, 2013 - Aqua-Pure secured $2.2 million in an 8% per annum senior secured convertible debentures (US$0.30 per share conversion), of which,
$1.5 million was purchased by international investors, remaining from the conversion of an existing demand loan held by Aqua-Pure's controlling shareholder.
In addition, 2.2 million 2-year warrants, convertible common stock at $0.45 per share were issued to investors.
25
Capitalization Table
As of September 30, 2013
Directors and
Executive Officers
J. Halldorson, CEO*
Avg.
Avg.
Common
Exercise
Exercise
Shares Warrants Price Options Price
Fully
Conv. Convert Notes Conv. Diluted
%
Price
Price Shares Ownership
Conv.
Notes
48.9m
0.9m
$0.34
0.7m
$0.27
Board (non-exec)
7.7m
-
-
2.0m
$0.25
-
Exec. Management
0.9m
-
-
2.0m
$0.25
-
57.5m
0.9m
$0.34
4.7m
$0.25
-
-
-
2.1m
$0.25
-
-
34.0m
5.1m
$0.35
-
-
-
-
91.5m
6.0m
$0.35
6.8 m
$0.25
Sub-Total
Employees
Public Held Shares
Total Outstanding
5.6m $1.25
-
5.6m $1.25
5.6m $1.25
2.3m $0.30
58.5m
47.0%
-
-
9.7m
7.8%
-
-
2.9m
2.3%
2.3m $0.30
72.4m
56.7%
-
2.1m
1.7%
12.2m $0.30
51.3m
41.2%
14.5m $0.30 124.5m
100.0%
-
* Average cost of CEO shares is $0.40 per share
Enterprise Value Calculation
Current Share Price
Shares Outstanding (Mil)
Market Value of Equity (Mil)
$
$
0.22
93.20
20.50
Plus Total Debt (Mil)
Less Cash (Mil)
Enterprise Value (Mil)
$
$
$
17.50
0.75
37.25
52 Week Stock Price High:
$
0.30
52 Week Stock Price Low:
$
0.04
Average Daily Volume:
27,689
26
Investment Highlights
Aqua-Pure is an investment with all the elements of success:
Experienced industry leader in
the treatment of frac and
produced water

Two commercialized product
lines with outstanding
performance records

Accelerated growth through
joint venture with leading
oilfield service provider

Strong sales pipeline provides
solid underpinning for
profitable growth

Proven management team
with oil & gas sector
experience and credibility









Fountain Quail is a proven recycler of oil & gas wastewater in North America today – processing
over 20 million barrels of contaminated water.
Working with leading producers since 2004, garnering impressive industry recognition.
Achieving a high level of regulatory acceptance that forms a significant barrier to entry.
Two complementary mobile systems enable the Company to offer total water treatment
solutions, whether for recycling or discharge.
Both ROVER and NOMAD are efficient and low cost systems, built to be rugged and durable.
Proven in dealing with highly variable feed waters across a number of major shale plays.
Select Energy Services is a $1 billion+ (revenue) company providing end-to-end water
management solutions and well site services in every major North American shale play.
Partnership allows companies to leverage complementary strengths, combine bid pipelines.
Provides revenue potential through both equipment sales and treatment royalties.
Current pipeline provides Company with confidence that mid-term growth projections are
realistic and achievable.
Majority of bids are based on model of service payments (treatment per barrel with
minimums).
Halldorson family maintains significant holding in the business, ensuring commitment to long
term performance.
Fountain Quail management has significant experience and credibility in the oil & gas sector,
enabling them to “speak the language” of their clients.
27
Thank You for Your Time
and Consideration
Contacts:
Karim Teja, CFO
403-301-4123 ext.26
[email protected]
Yvonne Zappulla, IR
212-681-4108
[email protected]
28

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