Pyramid Drilling Company, LLC A $60,000,000 LIMITED LIABILITY CORPORATION - PowerPoint PPT Presentation

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Pyramid Drilling Company, LLC A $60,000,000 LIMITED LIABILITY CORPORATION

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  1. Pyramid DrillingCompany, LLC A $60,000,000 LIMITED LIABILITY CORPORATION CONFIDENTIAL PRESENTATION February 2012 This Presentation has not been approved or disapproved by the Securities and Exchange Commission, any state securities commission or any other regulatory authority, nor have any of the foregoing authorities passed upon or endorsed the merits of this offering or the accuracy or adequacy of this Information Memorandum. Any representation to the contrary is a criminal offense. An investment in the Company is speculative and involves a high degree of risk. Investors must be prepared to bear the economic risk of their investment for an indefinite period and be able to withstand the total loss of their investment.

  2. Disclaimers NOTICE TO POTENTIAL INVESTORS This Confidential Information Memorandum (the “Memorandum”), based upon information supplied by Pyramid Drilling Company, LLC (“Pyramid” or the “Company”) and its managing member, Firemoon Energy, LLC (the “Managing Member” or “Firemoon”), is being furnished solely for the consideration of eligible investors who have the knowledge and experience in financial and business matters and the capability to conduct their own due diligence investigation and evaluation in connection with the investment described herein (the “Potential Investors”). This information is supplied by the Company, solely for use by Potential Investors in connection with their consideration of an investment of $15,000,000 in the Company. This Confidential Information Memorandum presents information with respect to the Company as of the date hereof. The Company does not intend to update or otherwise revise this Amendment following its distribution, and Potential Investors should not expect the Company to do so. Neither the Company nor any of their respective affiliates, employees, or representatives make any representation or warranty, expressed or implied, as to the accuracy or completeness of any of the information contained in this Confidential Information Memorandum or any other information (whether communicated in written or oral form) transmitted or made available to prospective investors, and each such person, expressly disclaim any and all liabilities relating to or resulting from the use of this Memorandum or any other such information by perspective investor, their affiliates or representatives. Sigma Capital Group has not independently verified the information contained herein. Only those particular representations or warranties, if any, which may be made by the Company to the investor in a definitive, written Private Placement Memorandum (“Private Placement Memorandum”), and subject to such limitations and restrictions as may be specified therein, will have any legal effect. CONFIDENTIALITY Each recipient agrees that the subject matter hereof and all of the information contained herein is of a confidential nature and that the recipient will treat it in a confidential manner and that they will not, directly or indirectly, use for any purpose, disclose or permit its affiliates or representatives to use for any purpose or disclose any information regarding its receipt hereof or any information contained herein to any other person, or to reproduce this Memorandum, in whole or in part, without the prior written consent of the Company. FORWARD-LOOKING STATEMENTS The market analysis and financial projections presented in this Memorandum represent the subjective views of the management of the Company and are management’s current estimates of future performance based on various assumptions which management believes are reasonable, but which may or may not prove to be correct. There can be no assurance that management’s views are accurate or that the projections will be realized and actual results may vary from those shown. Industry experts may disagree with these assumptions and with the management views of the market and prospects for the Company. NO SOLICITATION This Memorandum does not constitute an offer to sell or solicitation of any offer to buy any securities. The purpose of this Memorandum is to assist prospective investors in deciding to proceed with a further investigation and evaluation of the Company in conjunction with their consideration of the investment in the Company. This Memorandum does not propose to contain all information that may be material to an investor ad recipients of this Memorandum should conduct their own independent evaluation of the Company. This Memorandum has not been filed or reviewed by, and the securities offered have not been registered with or approved by, the Securities and Exchange Commission (“SEC”) or any securities regulatory authority, or any state, nor has the SEC or any authority passed upon the accuracy or the adequacy of this Memorandum. CONTACT INFORMATION No person has been authorized to provide any information to Potential Investors with respect to the Company or the proposed offering except the information contained herein. Disinterested party should immediately return the information to the address listed below. Neither the Company nor any of its representatives should be contacted directly, and all communications, inquiries and requests for information should be directed to the following individual: Sigma Capital Group, LLC Bruce Woodry, Chairman and CEO 906-483-0406

  3. Introduction Table Of Contents • Summary • Oil Shale Overview • Market and Competition • Pyramid Drilling Strategy • Pyramid Operations • Investment Opportunity

  4. Summary This presentation outlines an original concept initiated by Everett Toombs and Gary Van Cleave and previously used by Peak Energy. Pyramid focuses on the Bakken, one of the largest (possibly the largest) continuous oil accumulations in the world. Advances in horizontal drilling has made the Bakken oil shale possible Mr. Toombs Everett is known as one of the preeminent horizontal drilling experts having drilled 20K ft. wells with 10K ft. laterals and very knowledgeable of the Bakken shale play. Pyramid is seeking $60m to purchase rigs, upgrade for cold weather use, purchase tubulars, establish a man camp, and working capital.

  5. Table Of Contents Summary Oil Shale Overview Market and Competition Pyramid Drilling Strategy Pyramid Operations Investment Opportunity

  6. Oil Shale Overview America is unable to provide supply it’s own energy US Petroleum Consumption vs. Domestic Supply 1950 to 2020F • US has imported over 50% of it’s petroleum fuel requirements since 1993 • By 2020 imports are forecast to grow to 58% • Traditional domestic energy production has failed to meet the growing US demand for energy • New sources, wells and rig are needed if the US wishes to maintain energy security Million barrels / day 1993 50% imports 2020 shortfall 8.5 mbbl/day Source: EIA Estimated 10 year demand for development investment $__ to $__ billion dollars

  7. Oil Shale Overview Drilling in the Williston/ Bakken is key to closing the production gap Growth in Bakken Production by State Barrels/Day 2011 to 2010F • Wells are 9-10,000 ft in depth in a basin of 25,000 sq mi. with 40 API oil. • The transferring of long horizontal wells with multi-staged fracture technologies from the Barnett shale in Texas, • Typical wells now produce initial rates in excess of 1000 bopd and up to 500,000 recoverable barrels of oil. Source: EIA and Sigma Capital Analysis Estimated 10 year demand for E & P investment $18 to 45 billion dollars

  8. Oil Shale Overview Bakken Formation The Bakken Formation was initially produced in the 1950's on the western edge of the basin. In April 2008, the U.S. Geologic Survey raised its estimates of recoverable oil reserves in the Bakken Formation of North Dakota and Montana as high as 4.3 billion barrels of oil, represented about a 2,400% increase over earlier estimates Technical studies in the overlying Three Forks formation identified a clastic-silt, low porosity/ low permeabiltiy zone nearly doubling reserves per well. Pyramid focuses on the Bakken, one of the largest (possibly the largest) continuous oil accumulations in the world.

  9. Bakken is the Premier shale oil play in North America Oil Shale Overview Management has selected fast growing areas of oil shale industry The Bakken North Dakota Average Monthly Production 2005- September 2011 Source: EIA Source: Lux Research, Inc Bakken Rig Operators Source: AWEA Source: Bloomberg New Energy Finance

  10. Oil Shale Overview Fracturing is the key to improved production in oil shale US Oil Shale Production MBOE 2005-09 Billion US Dollars Pyramid is investing in an underserved segment of the fastest growing area of renewables

  11. Oil Shale Overview Fracturing is the key to improved production in oil shale

  12. Table Of Contents Summary Oil Shale Overview Market and Competition Pyramid Drilling Strategy Pyramid Operations Investment Opportunity

  13. Market & Competition Management has selected fast growing areas of oil shale industry Bakken Rig Count North Dakota Average Monthly Production 2005- September 2011 Source: EIA Source: Lux Research, Inc Competitive Rig Count by Developer Competitors Source: AWEA Source: Bloomberg New Energy Finance

  14. Introduction Table Of Contents • Summary • Oil Shale Overview • Market and Competition • Pyramid Drilling Strategy • Pyramid Operations • Investment Opportunity

  15. Pyramid StrategyFour Part Strategy Leverage deal flow of Management Leverage Shale Oil Drilling Expertise of Mr. Toombs Leverage Relationships to accelerate for Success Structure projects for optimum returns Same highly successful strategy as Mr. Van Cleave and Mr. Toombs initiated at Peak

  16. Oil Shale Overview Leverage deal flow of Management • RTS • Gary Van Cleave • Everett Toombs Source: Clean Energy Pipeline Pyramid is entering into the fastest growing, most profitable area of E & P in the US

  17. Pyramid StrategyLeverage Shale Oil / Bakken Drilling Expertise of Mr. Toombs Experience in Bakken Deep wells (x to y ‘) Wide radials (a to b’) Fracturing (Fracking) completion Bakken play, known geologies Low cost driller . Pyramid is able to drill difficult wells cost effectively

  18. Pyramid Operations Pyramid benefits from affiliated companies Pyramid Paint Rock RTS • Drilling Speak • Lease and Drilling funding • People Speak Mutually Reinforcing Expertise Affiliates generate deal flow at low cost Strong operational talent pool Pyramid benefits from affiliated companies

  19. Pyramid Drilling StrategyPyramid: Drill in program Anticipated value at financial exit Retained Equity stake allows participation in ongoing operations Valuation / investment Unimproved Leases Drilling Capital Time Operation Development Drill Program Discussion Cost Margin Capital ROI

  20. Pyramid Drilling StrategyPyramid: Farmout program Anticipated value at financial exit Retained Equity stake allows participation in ongoing operations Valuation / investment Unimproved Leases Drilling Capital Time Operation Development Drill Program Discussion Cost Margin Capital ROI

  21. Pyramid Drilling StrategyPyramid: Contract program Anticipated value at financial exit Retained Equity stake allows participation in ongoing operations Valuation / investment Unimproved Leases Drilling Capital Time Operation Development Drill Program Discussion Cost Margin Capital ROI

  22. Introduction Table Of Contents • Summary • Oil Shale Overview • Market and Competition • Pyramid Drilling Strategy • Pyramid Operations • Investment Opportunity

  23. Pyramid Operations Experienced management team is poised for growth Bruce Woodry Managing Member • . Founder, Chairman and Chief Executive Officer of Sigma Capital Group, Inc. 14 years of increasing responsibility with industrial conglomerates includes Sperry Univac, and General Electric. Founded several entrepreneurial companies, and currently serves on the board of several energy companies BS Electrical Engineering, selected for advanced coursework in marketing and finance at General Electric’s Crotonville Campus where he was given the P.E.A.K Award for outstanding contribution.

  24. Advisory Board Role Board of Directors Role Pyramid Operations Board of Directors • Board of Directors • Authorized [5] person board • Gary Van Cleave, CEO • Everett Toombs, President • Bruce Woodry, Chairman • Investor • Investor • Advisory Board Members • Vinton Rollins • Lynn Van Cleave

  25. Pyramid Operations Readiness for rapid deployment based on year of operating experience Readiness for Projects and Drilling

  26. Market & Competition Drill screening and decision process is in place Project Screening • Inbound Transaction: • Deal flow by Gary Van Cleave, RTS & Sigma Capital • Project Screening • Geography, geology, type of well, in-house availability of resource, duration of project • Maintain tight industry focus to avoid pitfalls • Evaluation • “Is this the most lucrative use of our resources?” • Due Diligence • Appropriate, detailed but aggressive due diligence • Go Forward Decision • Fast decisions are critical to react to market opportunities • Contract • Finalize contracts • Mitigate risk Inbound Transaction Request for drilling Project Screening Initial review to determine project viability • Evaluation • Management & Financial Due Diligence True Status of contracts, technology, permitting etc… Go Forward Decision (Yea or Nay) Finalize Contracts

  27. Market & CompetitionInvestment criteria • Business model and deal economics consistent with the Company’s target return profile. • Are within the Company’s geographic investment focus. Unless an exceptional opportunity is available, the Company will primarily consider investment in projects that fulfill the following minimum criteria.

  28. Pyramid Operations Economics Billing/Day • Bill rate: • $29000/date, typical Margin/Day

  29. Pyramid Operations Organization 4 crew 4 drillers 4 Derrick men 4 motormen 8 floor hands 4 crew 4 drillers 4 Derrick men 4 motormen 8 floor hands Summary

  30. Pyramid Operations Rigs Why National Oilwell Varco? New Rigs High Horsepower Mobile to reduce mobilization costs Selection of options Delivery times Transport to Site Price and Terms See budget, following

  31. Pyramid Operations Timeline Equipment Order trucks Funding complete Mar Apr May June July Aug Sept Oct Nov Dec Jan Feb Mar Apr May June July Order rigs Rigs Arrive Trucks Arrive People Start Hiring Select Man Camp SIte Funding complete Mar Apr May June July Aug Sept Oct Nov Dec Jan Feb Mar Apr May June July Permits Regulatory and Siting

  32. Pyramid Operations Income Statement

  33. Pyramid Operations Balance Sheet

  34. Pyramid Operations Cashflow

  35. Pyramid Operations Rig Budget • Discussion

  36. Pyramid Operations Man Camp Budget • Discussion

  37. Introduction Table Of Contents • Summary • Oil Shale Overview • Market and Competition • Pyramid Drilling Strategy • Pyramid Operations • Investment Opportunity

  38. Market & Competition Investment structure provides multiple cash flows and rolling principal FIX Pyramid Company Capital Carried Equity in Project Carried Equity Equity Returns Convertible Development Loan Loan Interest Regular cash flow to investors Loan Principal Investor Returns Principal returned for reinvestment • Initial Investment: Investment structured as convertible loan and carried equity • Loan interest planned to be 30% of investment amount for <12 months, prorate monthly at same rate for development lasting over 12 months • Carried equity planned to be 5% of total project equity • Financial Close: Development complete and loan repaid through project finance • Loan interest repaid to investors on project close • Loan Principal returned as Pyramid capital to be reinvested • Ongoing Operations: Construction completed and plant operating normally • Equity position in individual projects provides ongoing cash flow for individual projects • Anticipated Returns: • With losses included the aggregate return from loan interest is anticipated to be 12-15% • With equity returns included return is expected to be north of 25% over the life of the Company

  39. Investment Overview Pyramid Ownership Structure Pyramid Ownership Structure Members Pyramid Drilling Company, LLC $15,000,000 Private Equity Ownership: 80% Members 20% Managing Member Managing Member Firemoon Energy, LLC Individual Projects Individual Projects Company: LLC, Wyoming Managing Member: LLC, Wyoming Individual Projects Individual Projects

  40. Investment Overview Sources and Uses of Funds

  41. Investment Overview Proposed Company Term and Goals

  42. Pyramid Operations Control will be maintained during holding period Reporting to Investers Mitigating Risk • Pyramid Management and/or affiliated companies will play an active role in the placement of project finance and, if required, project management. • Financial statements and construction draws will be reviewed monthly, quarterly and audited year end financial statements will be required during the life of the investment. • Unaudited quarterly financial reports will be issued to all members monthly • Audited annual financial reports will be issued to all members at year end closing

  43. Investment Overview Investment Returns

  44. Investment Overview Investment Timing

  45. Investment Overview Exit Strategy

  46. The Right Play The Right Market The Right Rigs The Right Team The Right Investment The Time is NOW… Investment Overview Summary Pyramid Drilling, LLC Bruce Woodry, Woodry@SigmaCapital.net 906-483-0406