Welcome to the ESES Board. Ecostim Energy Solutions, Inc. backed into the prior Vision Global Solutions (VIGS) shell which was fully current and reporting with the SEC, and launched its new start-up business as a publicly traded company using the VIGS shell which was publicly traded. They are in a very specialized niche of the non-conventional shale industry, with emphasis on Argentina, and they have indicated they see tremendous opportunity down there given the recent events which have dramatically improved the business climate and currency situation down there. Apparently, oil production in Argentina can yield better margins and can cash flow at lower PPB when the oil markets are depressed. ESES seems to present an opportunity for serious investors going forward as more and more contracts come on-line for the company and the new business ramps up, e.g. Revenue is increasing rapidly from $834,000 in 2014 to $13,755,140 in 2015, per the 10-K's (although that comes with significant costs initially). The following links and description should help you get up and running on your DD. GLTY.
Our Company
We are a technology-driven independent oilfield services company providing well stimulation, coiled tubing and field management services to the upstream oil and gas industry. We are focused on reducing the ecological impact and improving the economic performance of the well stimulation process. We have assembled proven technologies and processes that have the ability to (1) reduce the surface footprint, (2) reduce emissions, and (3) conserve fuel and water during the stimulation process. We will focus on bringing these technologies and processes to the most active shale resource basins outside of North America using our technology to differentiate our service offerings. Our management team has extensive international industry experience. Our first operation is in Argentina, home to the Vaca Muerta, the world’s third-largest shale resource basin as measured by technically recoverable reserves. We also intend to pursue other markets that meet our investment criteria, which may include Colombia and North America as well as other markets where we believe we can offer clear strategic advantages and achieve acceptable financial returns. We may also explore opportunistic acquisitions and/or joint ventures with established companies in target markets.
Our management team has extensive experience in operating well stimulation fleets, coiled tubing units and other downhole completion equipment, as well as providing “sweet spot” analysis in shale resource basins using geophysical predictive modeling combined with real-time feedback from down-hole diagnostic tools. We expect to leverage our management’s experience and historical local relationships in undersupplied markets to pursue profitable long-term contracts or to actively participate in the spot market. We expect to compete for business with a limited number of other service companies based on technical capability, quality of equipment, local experience and existing relationships rather than solely on price. We also believe that we benefit from our association with our largest investors, which are dedicated to the emerging markets and have many established relationships in countries in which we are currently operating and in countries in which we are evaluating opportunities.
2015 was our first full year of operations. Our first pressure pumping fleet commenced operations in the Neuquén province of Argentina in December 2014. This equipment consists of a conventional pressure pumping fleet and various pieces of complementary equipment. We began providing coiled tubing in February, 2015. Furthermore, we have successfully performed field management services for Yacimientos Petroliferos Fiscales S.A. (“YPF”) in Argentina and expect to continue expanding this service offering. These services, which we believe have improved our customers’ understanding of their unconventional reservoir performance, have enhanced our established local relationships while differentiating us from our pressure pumping competitors.
In line with our strategy to pursue technologies with ecological and economic benefits, we are in the process of deploying half of our 54,000 hydraulic horsepower (“HHP”) of the latest generation turbine powered pressure pumping units (“TPUs”) that we purchased in October 2014. Each of these TPUs consists of a high-pressure hydraulic pump, a turbine engine, a gearbox, electrical and hydraulic assemblies, and skids. The TPUs are compliant with the stringent Tier 4 emission standards of the U.S. Environmental Protection Agency (“EPA”) even when run on diesel fuel. We believe these TPUs provide numerous advantages over traditional diesel-powered pumping equipment, including: (1) the ability to operate on 100% natural gas; liquefied natural gas (“LNG”); compressed natural gas (“CNG”) or when necessary on diesel fuel; (2) significantly lower emissions; (3) a 50% smaller operating footprint; and (4) lower fuel and operating costs.
The TPUs were introduced to several North American unconventional shale resource basins in 2011 and established a proven track record with several large independent oil and gas companies, as well as at least one super-major oil and gas company. Using the TPUs and our recently acquired complementary equipment, we expect to assemble a full pressure pumping fleet at a significantly discounted capital cost to a conventional pressure pumping fleet. The complementary equipment consists of a proprietary control system, data vans and blenders. We expect the resulting TPU well stimulation fleet to generate attractive returns while demonstrating our operating capabilities to our prospective international customers.
Our Markets
The “shale revolution” has transformed the economics of oil and gas production in the U.S., reversing 40 years of declining crude oil production and dramatically increasing natural gas supply, a trend with far-reaching implications. The U.S.’s extraordinary success with unconventional resources has prompted many to consider whether other countries with similar unconventional resources could also attain commercial success in developing those resources.
According to the U.S. Energy Information Administration (“EIA”), approximately 80% of global shale resources lie outside the U.S. and more than half of the shale oil is concentrated in Russia, China, Argentina and Libya, while more than half of the shale gas outside the U.S. is concentrated in China, Argentina, Algeria, Canada and Mexico. As one of the top-five countries in the world with technically recoverable shale resources, we believe that Argentina is well-positioned to attract significant new investment in unconventional development. It is also our belief that Argentina represents the country most likely to replicate the success of North American shale basins utilizing proven advanced well stimulation techniques.
We believe the experience of North America during the last ten years provides a model for what is likely to occur in emerging unconventional shale basins such as Argentina. According to Baker Hughes Incorporated (“Baker Hughes”) and management estimates, the drilling rig count in the Eagle Ford shale increased from four rigs and one well stimulation fleet in 2008 to approximately 265 drilling rigs and 87 well stimulation fleets in 2012, a ratio of one well stimulation fleet to every three drilling rigs. The increase in unconventional drilling in the U.S. has had a dramatic impact on domestic oil and natural gas production and has positioned the U.S. to significantly reduce its dependence on foreign energy sources. In addition, efficiencies were developed in the drilling techniques which made the drilling rigs and drilling process more efficient, increased the need for well stimulation fleets and resulted in a significant increase in domestic oil and gas production. This increase in production in 2013, 2014 and 2015 resulted in an oversupply of oil and gas in the global markets which in turn significantly contributed to the dramatic fall in commodity prices. This decrease in commodity prices, particularly the price of oil, has significantly reduced drilling and completion activity in all of North American shale basins. For example, in March 2016, the Eagle Ford shale play in Texas had only 52 drilling rigs operating.
By comparison, we expect the combination of excellent, high-quality liquid-rich shale (comparable to the Eagle Ford in the U.S.), manageable logistics/costs, and improving regulatory framework from a supportive, motivated government to drive a similar increase in Argentina’s shale production. According to Baker Hughes, there were 107 drilling rigs operating in Argentina in April 2015. Based on announcements from several major drilling contractors, there are in excess of 20 shale capable drilling rigs which have arrived in Argentina over the last 18 months to participate in the development of shale resources. YPF has indicated that it is running 11 rigs in its Vaca Muerta field as of March 4, 2016. This is down from 17 rigs in 2015. We are projecting the shale drilling rig count in Argentina to increase in the coming years in a similar manner to the Eagle Ford play in Texas, albeit at a slower rate, thus implying a significant increase in the related demand for well stimulation equipment. In addition, in the Eagle Ford play, the number of days necessary to drill an unconventional horizontal well has been reduced from 100 days in 2007 to less than 10 days in 2016. This implies that more well stimulation crews may be required for each active drilling rig.
We believe that there are approximately five large unconventional well stimulation fleets currently in Argentina capable of completing large multi stage pressure-pumping jobs. If the experience in the Eagle Ford is indicative of what can be expected in Argentina, this would imply a significant increase in demand for the Company’s services in Argentina over the next several years.
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