Koil Energy Solutions Inc. (KLNG)

[spec machine]

Energy Capital Week presentation transcript

-> A couple of weeks ago I transcribed the audio from the presentation vid that is online - http://www.energycapitalweek.com/feed/
some said they were unable to view the vid but the reason I transcribed it was for convenience in my notes

my two comments on Gene's presentation -
first, there are some important comments on the accounting in the balance sheet that is still misunderstood by many and
second, the elusive "guidance" which we all know can come in many forms, is spelled out where even the blind can trip over it

The powerpoint for this presentation -http://www.docstoc.com/docs/6847850/Deep-Down
(Gene's presentation starts on page 31 of 38 in the powerpoint)

Gene Butler - CFO Deep Down Inc

"I can probably get done in 5 minutes.

I applaud Steve, he’s jumped into this job. Ron Smith who’s the CEO and quite an innovative guy you would enjoy meeting him, is actually on a plane right now, hopefully is not (inaudible)…….. contract for us….(inaudible).

From my standpoint, I’ll give you a quick history of where we are and what we’re doing today but basically – we’re in our formative years, we became public in Dec2006, Ron asked me to come over here and help straighten out the financial side of it, help do the financing of acquisitions and basically I do the acquisitions also, and in the last two years we’ve acquired three companies. I think two last year and one in june, I’ve done a PIPE, we registered $40 million dollars worth of stock through an S-1, the S-1 went effective in April so to some degree we got started in a reverse takeover of a small shell company and now we’re a legitimate company, all of the financials have been “blessed” by the SEC and what you see here are the historical financials, actually the 2006 stuff is probably meaningless but you can see where we are beginning to take shape.

Our balance sheet is taking shape. You will see our retained earnings here is going negative but that doesn’t mean that our operations are losing money. What happens today in the accounting world is such that most of your acquisition costs can’t be capitalized anymore, all of your registration statement costs aren’t capitalized so we’re now expensing practically everything that used to be capitalized.

The one thing we’ll show you going forward….. ..(inaudible)

We do have a stockholder’s equity of about $53 Million right now

This is the income statement, and I’ll show you the history but.., we doubled our revenues this year and that’s because we made an acquisition of Flotec for part of the time, about 6 months, included a little less than 6 months, that will help us next year. We will continue to grow.

We have very little debt on the books right now and if you look at our operating margins here, our gross profit margins, 14 million on 35 million and 6 on 19, the gross margins are very good because we’re in the deep water sector and now my job is to get the G&A and everything straightened out and get on track. So we’re starting to look like a legitimate company.

Here’s the first quarter we had, balance sheet as you can see, is pretty clean now there’s only one type of security, still around $50+M of net worth, liquidity ratios are excellent, we have cash and we’re fine at this point in time. We’re going to continue to look for acquisitions but we’ll finance those as we go. The revenues for the first quarter are a little low, we’ve had a low couple of quarters around 7 million, but having said that we expect to exceed our revenues for last year which were $35 million, because we’ll have FloTec for the whole year and we have announced some very large contract for Delba Drilling for $11 million on flotation that’s just now getting kicked off so, it’s gonna do fine.

G&A here is about $2.8 million, I’m trying to get it below 25% to 20% mark for a service company, it was pretty high last year $14 million, but again, it was one time charges. Here is the EBITDA we had under these conditions, I did back out some of the non-recurring expenses as you can see, but we did about $7million dollars so, if we had those big losses we wouldn’t be generating cash. But we are generating cash and the company is doing fine we fully expect we’ll be profitable in the very near future.

But we are (section lost due to background noise)

Here’s the quick history, you won’t see it in our financial statements with the SEC. (page 36 of 38 in powerpoint)

Ron started this service company back in 97 , struggled, was getting better, was beginning to develop products and when I got involved at 8.8 million we went to 19.4, 35.8, clearly we’ll exceed the 35.8 this year. And hopefully our EBITDA will exceed the 10 million mark or maybe even higher.

I think we are in the last sector, we’re the deep water sector and all the funds for those rigs are committed. And so those projects are working and Ron is working, literally working his tail off right now.

Most of the products that Steve showed you a while ago, that go on a tree, he (Ron Smith) created, developed, and has patented so it’s not consumer type products, because we do the commissioning and kick off, we’re really the ones who are developing these products and we have a commanding percentage of that market. What we need to do is expand it and get the capabilities to grow. Flotation is a market that we expect to also have a large market share before it’s over.

That’s all I have

If I can have the lights, we’ll be in the break down room."