Divergent Energy Services (TSX:DVG.V) – Jan 25, 2016

 

Full Report: Divergent Energy Services DVG.V – OPTIMA Capital Partners Research by Dave Hammond – Jan 25 2016

Divergent Energy Services Corp. (TSX:DVG.V; “DVG”)

New Down-Hole Artificial Lift Technology Could Trump Conventional Pump Jack and Rod Strings 

Divergent Energy Services Corp. (TSX:DVG.V; “DVG”) is a Calgary based energy services company that has been operating for nearly 10 years in Canada, USA, and Mexico. DVG’s primary growth driver and the basis of this report is the Company’s exclusive rights to market a linear submersible reciprocating pump that is propelled by permanent incased magnets (Linear Electro-Magnetic Submersible Pump, “LEMSP”). This down hole ‘motor and pump’ forms a complete system that duplicates rod pump movement and can be used for tight oil recovery, replacing similarly priced ancient technology, the conventional beam pump (pump jack and rod strings). While the rise of unconventional drilling has unlocked vast quantities of previously uneconomic tight oil, rod string failures (and thereby maintenance costs) are increasing due to directional drilling complexity, opening the door for artificial lift innovation.

DVG’s 1st commercial LEMSP is now being deployed by a large Calgary based E&P Co. in SE Saskatchewan (we expect an update any day). If/as/when initial units are deemed successful (steady-state run time), we expect follow-on orders which will signal game-on. While this motor is already being used in China, DVG is the first to market it here, and is potentially turning the corner toward a broadly accepted technological success. Given the vast market potential, minimal competition, and current weakness in the stock (which we attribute to general aversion to CAD small cap and E&P related equities), we believe this is a very compelling opportunity.

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