Divergent Energy Services (TSX:DVG.V) – Jan 27, 2016

 

Full Report: Divergent Energy Services DVG.V – OPTIMA Capital Partners Research by Dave Hammond – Jan 27 2016

DVG’s 1st Gen-2 Pump is Downhole & Running Like a Swiss Watch; Now We Look for Steady State Run-time

DVG’s 1st commercial Linear Electro-Magnetic Submersible Pump (Gen-2 model) was deployed on Jan 22nd in SE Saskatchewan without incident and has since been operating continuously. Currently running like a Swiss Watch and producing ~120 b/d of fluids. DVG and the partner will monitor the well and are aiming to provide an update following 90 days of steady state run-time.

We’re not out of the woods yet but this is a huge positive. Our official ‘game on’ comes when we see meaningful sales which is likely to follow an unknown duration of steady state run-time on at least a few pumps. We think 3-6 months of hitch-free run time is probably needed before we start to realistically anticipate progress on the PO-front. In our base case scenario, we model 30 pumps sold in ‘16E; to achieve this we’ll need to see developments by around end of Q3/16E.

We expect DVG will take delivery of additional pumps in the coming 60 days (up to 10 are inbound, 6 likely headed to SE Sask., and 4 to Wyoming), and we suspect efforts are well underway to secure additional business, perhaps a producer in the Wyoming area.