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Caspian Services Inc.

Mon, 15 Dec 2008|

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Transcript

Good afternoon everybody and always -- -- in the final presented on the final day. Appreciate. -- you know it's in your smiling faces I think I've got a somewhat different. Type of story telling -- Caspian services. Oilfield service company based in. With all of its employees in all of its assets. In the republic of -- -- which is part of the former Soviet Union. -- their -- the FCC. Because they I do a lot of these presentations in the US in your vendors not generally speaking high level of understanding. The environment. Where we work and it's not a good idea to give you some sort of -- baseline. For. The investment environment. If you follow the the region hall you've probably come across the word -- again or -- -- case you know which is a consortium of seven gas companies developing. And offshore project in the northeast Caspian. It's been in the news mostly because of the dispute between the government of conflicts on and the consortium itself. Her -- was supposed to be in 2005. They're now saying late 2012. Possibly here in 2013. 136. Billion dollar development project with another hundred billion and operating expenses over the life of the project. It certainly puts its probably in the top five. -- And it is certainly been the driver of the group of growth of our company. But also the growth the services industry -- on in general. But what a lot of people don't recognizes there's. Today right now five other projects by other offshore projects. Under way in the Caspian in the northeast Caspian. Which to some degree or another required similar investment -- and -- similar development plan. We certainly look at that is a driver for growth for our business we're very excited for the -- -- Caspian services has essentially three separate business lines we do -- marine vessels. Which are all associated with infrastructure construction in the because -- sector the Caspian. We also deal with. Marine and onshore seismic acquisition. And third crown jewel is actually our infrastructure division where we are building -- marine facility. On the -- of the coastline. And we'll talk a little bit about each of those throughout. Currently if you if you did account the the -- -- vessels in the house in the housing sector casting right now you. -- come in and around 150. Those additional offshore projects I mentioned earlier are gonna grow that fleet probably around 30325. By 2012. Part of that will be growth of our own fleet part of it will be the growth we're competitors. And quite likely. New competitors coming in the mark as well. The unsure seismic market is is very well developed. The Soviet Union. Covered -- it's done with -- land based seismic. Over a number of years. The market we figures about a 120 million dollars -- -- in 20072008. We will see that -- -- we think about a 180 million all in. And -- was particularly the western projects. With the involvement of companies like Chevron. And -- you'll see more 384 components seismic surgeries done. In the coming years primary -- virus or maximize nation that drive to replace reserves. And then again they are -- and -- -- -- Exxon was left nuclear weapons it's that was not laugh. The infrastructure to support an offshore oil industry there was no offshore history. At the time so what we're looking at now is very much of Greenfield environment. And where one of the first private companies to address that -- Not only for our own vessel needs but also for third parties. So that's the environment within which we work what's the investment case -- services. Other then like I think just about every other person that's come up this podium the last couple of days our share prices certainly take. Us awhile. Think from through actions -- but -- issue apparently it's markets right now. We certainly have the right assets in the right place. You couldn't ask for a better time than to being -- right now. And we are well positioned to benefit from the significant investments. Currently being made but more importantly what's yet to come. The three business lines of vessels the seismic and infrastructure. Allows him to approach clients. With these with the intent on not selling them -- servers excellent read it allows us to deliver a suite of services to our clients. Which again differentiates us significantly. From the people that are -- are able to go to them with one or possibly services. We have a rather large. Client base now primarily western clients. -- -- very pleased with us. More importantly if you're all familiar with organization. Here -- European thing. Of reconstruction and development. Which was a multi government agency that was set up after the -- me. With its mandate being to invest in infrastructure projects in the -- -- They have come on board with our base project not only as a primary lender. But also with significant equity stake in the company itself. It's very much like if if you're going around in Europe speaking to funds agencies seeing -- -- -- -- it. -- -- in due diligence. But upon us by eat your heart mean this is very much it's -- -- sealed. So certainly Unionists Atlantic it's very helpful. -- 2007 our fiscal years September we're actually in the promises but if you -- -- -- I can't speak to that yet obviously so -- I think by anybody's yardstick those those numbers. 51%. -- 650 cent. And it's it's obviously. A growth story. Track. -- -- As -- -- again. The dotted line down the middle of the lineage of that -- the Caspian Sea. To date. The vast majority of our work has been -- -- -- sector. If you noticed that that the north east part of the cast very. It's colored. Little -- -- geography geology here. The reason for the discoloration is that at its deepest point in that green areas the water would not he has he rumors hitting it right. Currently most of the expiration in my -- mysteries happening water's not -- -- podium and Stan. So if you're thinking Gulf of Mexico which is what we've heard a great deal about the last couple days. Forget it you would be bottomed out. -- one. The reality is. Most of the expirations -- meter. Which creates a very strong need. For the kind of vessels and bring it. Revenue by business again the three service lines of the port is under construction right now it's not -- generated by that right now. We'll have seen historically is that seismic different land seismic. Has been the driver. On the revenue side -- vessels. Picking up the slack. Of that 60%. In 2007. Inside. Recorders it came from and his size with the balance being transition anymore. What we have seen over 2008 and what we expected to see and policy going forward is. As a contributing factor land seismic will decrease with green and transitions. As revenues. -- -- -- This is -- we have a total of fifteen vessels eleven of which -- The restaurant -- charter basis with Dutch company. And of this. Here's. The company actually started with this vessel appearance all the -- contract. 127 metres long it's 27 meters wide. And it's essentially floating hotel. As well as -- work -- no reason I pointed out. It up until very recently was the largest us and in the Caspian and 127 meters in mind it draws fully loaded. One point two meters. Which is not as tall -- put humans and why that's significant is it can essentially go into any part of the Caspian it's flat bottom. The Caspian is not title but it is subject to. -- driven by -- I have not seen this but I have been told that you move on a Monday -- the stake in the ground come back and Friday in the water will be twenty miles away. And -- have been injured by the winds. So the vessel passed of the capabilities of armaments. Bottom until such times as the water comes back and that -- and certainly do it that's where the company started in 1999. We now fifteen this week. The most recent acquisition was this -- right here. It's the what we call that have experience fighter NC shallow draft cable -- The cache again development the large projects. When fully developed will have seventy islands. Again you know bringing Jack average of building -- is that true drilling rigs on. Each one needing to be connected to the other this is the first vessel into the Caspian is capable of doing -- work. It was a six million dollars spent last year. Four million dollars for the vessel. Two million dollars to outfitted it was actually it's on a two year contract right now with -- and and 141000. Heroes day. When Saipan actually identified the vessel for us -- -- you're gonna need to change the the crew accommodations because it was four to six acres. The words if you will site him standard was. -- -- -- -- -- -- -- -- -- -- -- -- They actually. It was a two million dollar refit for the vessels of which site and picked up half. So it actually made him a million dollar investment in our asset. I fully expect to be retired and playing golf before that this -- There's again. Of the seventy islands just for cash again only seven bills today. So there's an immense amount of work for -- just do umbilical -- -- aliens and on the commissioning activities. The last that's what we -- is in the middle. It's on the Caspian cure. It is a seismic source -- -- The seismic -- for a position. What's key to that vessel is the way we haven't configured it can actually -- the water two meters deep and effectively. Generate some -- and that's that's a rather unique. Set up for anyone else. -- talked a little bit about this this is this is the -- -- case -- territories 5600. Square kilometers. When people talk about. Cash and cash -- -- action groups. -- -- again is actually just that -- feel right there thirteen million barrels recoverable thirty. 3436. In place him from doing recoverable. To -- all of the attention all of the expenditure has been just on that one field. There are four other field and licensed territory. -- it really. And focused on. Much has been written about it late. I think the most encouraging thing that Exxon has now taken over -- will be taken -- throwing it. Love him or hate him the one thing -- the next thing project to do it again. That's very very encouraging for. -- certainly for our business. -- it has been too much. Too many delays. They. The other projects -- -- so. Is in the seismic stage right now that's a project that involves rap -- Madrid. Move Moscow and has my gas because -- -- has moved against national. Yes -- because it's on. Dark on. I understand just before -- left that feels very -- being done where the Chinese will be taking on that project. Herman Ghazi is half rosneft out of Moscow and has movement against. Two paragon is all lukoil. And then down at the bottom we have Nursultan. We're project and dances like the -- -- -- -- consultants presidents' names -- Country and be where it is now that that will be a project that we will be inviting ConocoPhillips and probably 2009 they're not really sure what it is right now whether -- gas well. A lot of work in them. I've saved form on pearls for the last this is very important problems for us to show project essentially majority. They started a marine seismic project this year 895. Square kilometers. Our company one that -- We're very pleased of that because of the again I use the term that -- keeping seal of approval. If you can meet -- company like shelves HSB requirements. It makes it extremely easy to go to the next western oil company. And meet their standards we've already experienced -- learning curve which puts -- significantly ahead. Of any potential competitor for future proprietary work in the past. The word and -- actually very pleased we finish 215 square kilometers. When we expected to finish a hundred square kilometers. This season. Because the Caspian is so shallow places up wintertime so you or business in marine business mr. -- class. Since the drug memory now. We finished again 250 square kilometers. I just. I just finished reviewing this graph for 2008 school year and we now have eight different colors on it as opposed before that you -- in front of us here. The reason I say that is it to three years ago we were rightfully criticized for being too highly exposed one client. We have diversified and the client base significantly. And I think it's probably safe to say we say no. Two people more often and say yes. Simply because of her assets are degree -- -- -- Fully utilized through. 2000 and already there are very -- -- 2000. And probably half of is already booked for 2010. If you. Play with your eyes a little bit differentiate between the colors you'll see they're -- going in the right direction. The the reality is. Unlike what you heard from other companies over the last couple of days where. Realizations are going down periods are going down it's the exact opposite intelligence and right now. On the vessel side where. Because of the demand utilization and -- -- are going up significantly. We for. Vessels that have gone off contract -- -- you contract for him here. We've moved rates roughly 30%. And that's all commander. And that's unlikely to change regardless of what the oil price does. Some because these projects are too large. They are. -- their time horizons. -- well -- cyclical effect. Of the price of wells of these projects go -- Numbers well below. The fifty. Or -- so. Today. These. We tend towards the conservative. I know for a fact. Numbers probably. What -- see. Early in 2009. But again the the reality is that -- rates are going up and this has faced this is based on. The vessels that we have the fleet today has not taken consideration and that's what positions. That we may do in 200910. It's just fun. We have today and where we know -- ago. The drivers for growth again mentioned in this is probably the only take away that you have from from all of -- -- On the presentation is that there are more projects. Five more projects. -- in the -- in addition to the large cache again project. And now that simple fact alone drive. Revenue growth. Second to that is. -- in 2007. We it was the first time we were able to take some over obsolescence. And put them to work in the Turkmen sector Caspian. The Turkmen sector being for -- open -- Exxon does not ice in winter time. And it has very very similar geological geographic conditions and section -- What it's allowing us to do is take an asset that would otherwise. Be on a -- standby rate which is typically thirty cents. 30% of -- it's operational rates. Flip it to the open waters of the Turkmen sector capture those operational rates. And then bring it back for the started work season in the housing sector all of a sudden our calendar has twelve months instead of seven as far as -- vessels. That would shift that will materially shift the revenue line vessel business. To the positive and we're we're we're developing that relationship. With two clients down there right now we expect. To be -- when it means again this coming winter as we did. The relationship we have with our clients. And understanding the business environment that is because it's -- When my favorite things here is people come down from Moscow. And business in Moscow for five years works because excellent. There's nothing more laughable. And that because there to vastly different. And we have very solid understanding him environment work. The second prong of the company's memory the seismic division. We have to seismic that is one which is -- -- it focuses purely. And these seismic. Our second company has achieved physics. -- and he. Focuses on transition zone and -- -- Again the size remarking on the Lan side it's fairly stable. You're seeing a lot of reissues of old site. From the Soviet days certain amount of new territory. And again the the addition of the higher end 3-D four components -- -- companies like. An organization a church again act which is essentially -- -- British gas yes currency project was houses. They are looking to -- 34 cancer and we have been invited to. Participated man. And again the offshore which is really where we -- our future. Again the two companies. He. One correction that would make this is it has -- -- as we've just recently completed. By one of the major shareholders. We know believers and and the reason for that really is. It's. It is the joint venture partners we see here. And very very important project which is over past has. Because tech sector of the past and cities for 2000 square kilometers. Of that roughly 25000. Square kilometers what's -- opening. It does not it has not been licensed to it does and anybody's one. The yellow areas that you see on the map here represent the open acreage. We. Through our joint venture cast cast and struck an agreement with the government because -- four years ago. To be to have the exclusive rights to acquire and market seismic data. For the opening -- on behalf of the government public causes. We just finished third year of that project. And what we always knew what when I was told investors. Is very simple will build the data thing. And that's important to monetize it analysts we needed was for cause it's on host an additional licensing round for new territories. In the housing sector. In June of this year because it's on announced that it is going to hold a licensing round for new territory -- That will allow us again to take three years seismic data we already have and monetize -- because if you are. Oil company acts and wish to participate in the licensing round you have to buy this size. From marketing venture. Now owning 80% of the company that has a 50% interest -- that was all the expenses are recovered off. That -- essentially fall from the bottom line of Caspian services. And I would point noted it is not included those revenues are not included in any of the financial projections here. Or. I don't know -- handles congress and it's. It's free money. On the seismic side. You might notice rather quickly that something's gone askew in this graph and it's called credit crisis. What has happened in because it's done on the -- side most of our clients were -- Small. Local oil and gas companies who over the years have been very used to going to local banks. Taking a five million dollar line of credit in instituting a seismic program moment license area. Well the reality is they've not been able to when he and that's what you're seeing in programs. Front of you right now. We view it as. It is cyclical we know the credit crisis will will end at some point. I guess the smart people -- -- country -- just -- that end point is. In 'cause -- generally speaking. The feeling is its third quarter on nine before things return to normal. We certainly hope so because it has again being the largest contributor to both revenue and profitability. In 2007. It is certainly impacted us in 2008. Again going forward -- 2010. You see. It's it it should be good higher than that happen again we do tend towards the conservative because I'd rather sit across table from an analyst. And explain good news then try to explain -- -- what happened. Again it's just the philosophy that we use going forward since since beginning -- The marine base this is the third. On the company's view of these infrastructure division. Again -- -- point -- This is this story is again because the shelves. Pretty -- while. There. It's called the -- can -- ridge and it's a drop off. If you get over that -- and the water maximum five meters. And I needed to the shoreline here. You've had a fifty miles metered water. Most of the oil industry right now it's. Focuses attention in this area here the -- -- about -- it's the very tip of that -- well. Strategically it is key because it is a the closest jumping off point for the oil industry during the work season. B it's the closest safe harbor. For the oil and gas industry. When the winner -- sets. There's only a handful of vessels that are -- -- certified. That we'll continue to operate during that in turn causes everything else isn't safe harbor. The -- fresh marine base our project it's an eighty million dollar capital spend. To create Marines port facility. -- and for our fleet but for those 150 to 300 vessels girls there. Will be out there we've just we're just coming up on the end of the first year construction facility itself should -- open and operational at the end of 2009. Again there's absolutely there has been nothing and there. To support the booming offshore oil industry. Certainly not from a private company perspective and this is this is really our first. Effort to address that. Satellite photo showing you the red is the footprint of our facility. This territory right here. He is the pageant days that is a facility dedicated only to the -- -- -- and project. So you're working on -- pearls if you're working on jump myself or anything else you do not have access of that facility it's close so. This territory here is being developed right now but -- has in the -- -- means which is a daughter company of cosmic dance. -- same situation where it is. Facility that will only be open to as my -- projects. Again. You take a look at some the other projects that are coming on line. The obvious question is where they go for everything from refueling to taking on drinking water taking on supplies -- -- crew. -- facility. There. Is where they will be going it also opens up a number joint venture opportunities. However as mentioned earlier they've -- approaches they have the mud plan. To. KOCO facility. They've been asked to move it. Are you talking about at length about taking a piece of our property we have no eleven hectare. Piece property there. And they're looking footprint where they put them -- these kinds of venture opportunities. We fully expect this -- so four. The most importantly gives -- control. A key asset to make sure that are vessel -- Continues to deliver what it's promised to deliver to our clients. Again eighty million dollars 38 of it through cash flow from our own company the balance 32 million dollars in debt from -- DRG. They liked it so much they also took ten million dollars state in the film company itself which gave them 22%. Just a couple. Pictures prove that were actually filming and. It will ramp up in terms of utilization and therefore it will ramp up in terms of revenue generated. What we're looking at by 2013. 2014. -- -- thirty million dollar revenue stream. From the base itself. The margin on each of the individual. Components of the thirty million dollar revenues mean. It varies and obviously. The largest part is going to be generated by the provision. You'll. Currently. In order to refuel vessel at the -- you know you're filling -- tanker truck. In the town -- house which is 200 kilometers of the so. Driving an upper road that is best described as a collection of pieces of bashful. And filling up your vessels it's not efficient. It's not safe. We believe strongly that by the inclusion me a tank farm. On our facility that we would simply be. The local gas station if you will and we intend on charging him handling -- if you will. Every time -- themselves and the -- market. And that's with them the majority of the revenue that you're seeing represented by who -- -- -- bars that's where that's coming. Total revenues until 2010 just over a hundred million dollars of an -- Forty million. Again I would point -- this does not take into consideration any of -- revenues generated that sells. Associated with because -- plant licensing program. If you've ever. Seen. A write up on how these projects where it's it's a wonderful -- and where you which -- so the same data over and over and over to. Clients and you can do -- year after year after year until such time as somebody actually licenses territory. We've been waiting for this -- We built it into the negotiations -- the deal itself. And we think is going to pay significant. Dividends to us going forward. What I've done years is broken down by news service line in the yellow represents the marine base again ramping up. Room utilization over 2013. 1014. -- -- seismic again not taking in consideration revenues it just. And that sort. It's a very very simple company understand it's it's not complicated different jurisdictions and whatnot. It has roughly 600 employees. Most of -- yours -- have split between. The marine division in two seismic company. I used to stand up here and talk but share prices paid to the brave men who -- here right graph like that. These days as one of the guys -- -- and rural. World to share price graphs like that. We used to be accused of being expensive based on revenues multiples. That argument on its head right now -- it like many companies you know last days. -- -- -- Opportunity and extremely cheap right now based on what 2008009. Looks like. But I think what what has hurt us the market. Paranoia. Certainly there's been a lack of enthusiasm there's no humor -- while. Going still think that a good story. And good growth opportunity should overcome that. I think a lot of people watch what happened in Russia would starting with -- -- -- and mr. Borkowski. What's happened with BP -- and K and a number of other companies I think we were guilty by association. And -- -- -- is actually very very stable place to do business legislation. Though not always clear. They do respect it. It's not me a tool used against foreign investors. And I think we are young business and not. -- not a long history of delivering on promises. But I think as we -- over the next couple years and we mourn the story we're going. Again I can only speak to 2007 results but I think if you look at them it revenue. And so on. They -- -- improvements based on anybody's expectations. In conclusion. Again I would say we are extremely well positioned to capitalize on the immense. Direct investments being made us so it's an issue particularly in the -- The seismic. Project I mentioned earlier that we -- we just finished. Part of -- show. Back contract value over the course of one year is almost twice our market cap right now. I challenge you to find a company that has one contract that has contract value people place America. The demand. For the services were provided to leave the show. Vessels. It's only it's only increasing. You cannot bring vessels for instance from the -- -- Gulf of Mexico into the Caspian but that work simply function. That is going to need to drive rates higher and higher again -- clients and servers for. The -- marine in transition zone. More proprietary work. Keep in mind when -- -- -- does have a licensing -- and they finally do licensed territory two company acts. The natural assumption would be that they would then begin their own seismic program. We are extremely well positioned to pick up the proprietary work for company -- Having done speculative work. The marine base it's certainly positions. Caspian services as. The one stop shop if you will for services and -- -- Controlling the marine base facility. Georgia vessels and the ability to acquire marine seismic there is no other company in the region that has all three and can. Can address clients' needs that way. And that ladies and gentlemen please say is that. I'm not sure the -- romance I do hope I see someone who's there you've made it all the way to the end remind you don't. And thank you for your time.

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