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Information Memorandum
CSG BOREMASTER
This information memorandum (the “Information Memorandum”) has been prepared in
connection with the raising of equity finance by CSG Boremaster (“CSG Boremaster” or the
“Company”) to exploit opportunities in the drilling and production of coal bed methane (“CBM”)
and other conventional and unconventional oil and gas resources in Indonesia and elsewhere. The
funds will be used to acquire CSG Exploration and Production Ltd. (“CSG”), purchase drilling rigs
and ancillary equipment, and for additional capital and operating expenditures in order to provide
resource concession holders with an integrated set of drilling, engineering and geological solutions
to maximize the potential of their assets.
In reviewing this Information Memorandum, you should carefully consider the matters described
in Section 4 “Risk Factors” beginning on page 10.
25 October 2013
ii
IMPORTANT NOTICE
This Information Memorandum has been prepared in connection with the Company’s plan to raise
equity financing (the “Equity Financing”) in the amount of up to US$25,000,000 (say twenty-‐five
million US Dollars) to be used in stages for business acquisitions, asset purchases, and operational
costs, as a primary investment in a venture focused on providing integrated drilling, engineering
and geological services and equipment to the CBM industry in Indonesia and elsewhere.
The Company has furnished the information in this Information Memorandum, and unless
otherwise indicated, the source of information included in this Information Memorandum is the
Company. The Company makes no representation or warranty, express or implied, as to the
accuracy or completeness of such information, and nothing contained in this Information
Memorandum is, or shall be relied upon as, a promise or representation by the Company.
All inquiries relating to this Information Memorandum should be directed to the Company. No
other person has been authorized to give any information about, or make any representation on
behalf of, the Company in connection with the Information Memorandum, and, if given or made,
such other information or representation must not be relied upon as having been authorized by
the Company.
An investment in the Company involves inherent risks. Potential investors should carefully
consider the risk factors set out in section 3 “Risk Factors” in addition to the other information
contained herein before making any investment decision. An investment in the Company is
suitable only for investors who understand the risk factors associated with this type of investment
and who can afford a loss of all or part of their investment. The contents of this Information
Memorandum are not to be construed as legal, business or tax advice. Any prospective investors
should consult with their own legal adviser, business adviser and tax adviser as to legal, business
and tax advice.
The delivery of this Information Memorandum shall under no circumstance create any implication
that the information contained herein is correct as of any time subsequent to the date of this
Information Memorandum.
The Company reserves the right to negotiate with one or more parties at any time and to enter into
a definitive agreement in connection with the Equity Financing or any part thereof at any time
without prior notice. The Company reserves the right to terminate at any time solicitations of
interest or the further participation in the Company by any potential strategic partners or private
investors. Further, the Company reserves the right to modify, at any time, any procedures relating
to the Equity Financing process without assigning any reason therefore.
iii
By accepting this Information Memorandum, potential investors acknowledge and agree that this
Information Memorandum and all the information contained herein is subject to the terms of the
confidentiality agreement (the “Confidentiality Agreement”) previously executed by the potential
investors in favor of the Company and thus constitutes Confidential Information for the purpose of
that Confidentiality Agreement.
The distribution of this Information Memorandum in certain jurisdictions may be restricted by
law. The Company requires persons in possession of this Information Memorandum to inform
themselves about and to observe any such restrictions. This Information Memorandum does not
constitute an offer to buy, subscribe or sell any of the securities described herein, and no securities
are being offered or sold pursuant to it.
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TABLE OF CONTENTS
IMPORTANT NOTICE ........................................................................................................... ii
TABLE OF CONTENTS ......................................................................................................... iv
1. THE ASIA PACIFIC RIG MARKET ............................................................................ 1 1.1 Asia Pacific Rig Count – Land and Offshore Jan 1985 – Jan 2013 ....................................... 1 1.2 Indonesia Rig Count – Land and Offshore ............................................................................ 2
2. COAL BED METHANE – AN OVERVIEW .............................................................. 3 2.1 What is CBM? ............................................................................................................................. 3 2.2 How is CBM extracted? ............................................................................................................ 3 2.3 How do CBM wells produce? .................................................................................................. 3 2.4 What countries are major producers? ..................................................................................... 4 2.5 The Indonesian CBM Opportunity ......................................................................................... 5
3. RISK FACTORS .................................................................................................................. 6 3.1 Risks related to CSG Boremaster’s business ..................................................................... 6
4. RESPONSIBILITY FOR THE INFORMATION MEMORANDUM ........................... 23
5. CAUTIONARY NOTE REGARDING FORWARD-LOOKING STATEMENTS ...... 24
6. PRESENTATION OF CSG BOREMASTER ................................................................... 25 6.1 Strategic Objective ................................................................................................................... 25 6.2 Growth ...................................................................................................................................... 26 6.3 Services ...................................................................................................................................... 26 6.4 Competitive strengths ............................................................................................................. 30 6.5 Key Management Personnel .................................................................................................. 31 6.6 Trend Information ................................................................................................................... 33
7. CURRENT PROJECT OUTLOOK ................................................................................... 36 7.1 Santos CBM Project – CBM Management and Services .................................................... 40 7.2 Energi Mega Persada Kalimantan CBM Program Management – Project Management
and Consultancy Services ....................................................................................................... 40 7.3 Pama Resources 5MW Syngas Power Plant – Geological Analysis, Drilling and
Development ............................................................................................................................ 40 7.4 Cooper Energy Sumatra CBM Project .................................................................................. 41 7.5 Petrobanga CBM Exploration and Production for 5 Coal Fields and 3x50MW Syn-Gas
Power Stations; UCG Development including Gelogical Analysis, Drilling and Development. ........................................................................................................................... 41
7.6 Turkish Government and TKI-50MW Power Plant (plus 5 more power plants and diesel production facility, if successful); Gelogical Analysis, Drilling and Development .................................................................................................................................................... 42
7.7 Black Gold 50MW Syn-gas Power Plant Development; Gelogical Analysis, Drilling and Development .................................................................................................................... 42
7.8 Dart Energy CBM Drilling Program; 7+ Exploration Wells ............................................. 42 7.9 Dart Energy Perforation and Diagnostic Fracture Injection Test ..................................... 43 7.10 BUT-DIL Kalimantan CBM Drilling Program; 10 Well Program for CBM Prospectivity
Assessment ............................................................................................................................... 43 7.11 Pertamina CBM Drilling Project with Wirana Energy; 10 Well Program for CBM
Prospectivity Assessment ....................................................................................................... 43 7.12 Trinergy Mandiri International; CSG Shale Gas Project .................................................... 44 7.13 Aboitiz Power Manila UCG Project ....................................................................................... 44
v
7.14 Myanmar MOGE ...................................................................................................................... 44 7.15 China UCG Project Partnership .......................................................................................... 45 7.16 Pakistan UCG Project ........................................................................................................... 45
8. FINANCIAL PROJECTIONS ........................................................................................... 46
Appendix One – Rig Specifications ........................................................................................ 50 Automated Hydraulic Single (“AHS”) Rig ..................................................................................... 50 Detailed Rig Specifications ................................................................................................................ 52
Appendix Two – SK MIGAS Approved CBM Operators - 2013 ........................................ 59
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1. THE ASIA PACIFIC RIG MARKET
Asia, which has an estimated 2,065 capable drilling rigs, could see a 13% increase within five years. Australasia, where the report said most rigs are designed for drilling at shallow depths, could experience a 22% increase. The region currently has about 364 capable drilling rigs.
Velda Addison, Hart Energy
September 17, 2013
The above statement equates to a need for an additional 268 rigs in Asia over the next five years,
including demand for an additional 80 CBM rigs and a global need for an additional 1,303 rigs.
Even if the forecast is only fifty percent accurate, demand will exceed supply unless someone
supplies the rigs and whoever supplies the rigs can predict a stable need for energy in Asia for the
next ten years.
1.1 Asia Pacific Rig Count – Land and Offshore Jan 1985 – Jan 2013
0
50
100
150
200
250
300
350
1/82
1/83
1/84
1/85
1/86
1/87
1/88
1/89
1/90
1/91
1/92
1/93
1/94
1/95
1/96
1/97
1/98
1/99
1/00
1/01
1/02
1/03
1/04
1/05
1/06
1/07
1/08
1/09
1/10
1/11
1/12
1/13
2
1.2 Indonesia Rig Count – Land and Offshore
Baker Hughes Rig Count -‐ August 2013
0
10
20
30
40
50
60
70
80
1/82 1/84 1/86 1/88 1/90 1/92 1/94 1/96 1/98 1/00 1/02 1/04 1/06 1/08 1/10 1/12
L O
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2. COAL BED METHANE – AN OVERVIEW
As Asia struggles to cope with rising natural gas prices, many producers are shifting their attention to unconventional gas resources. One of the main areas of interest in the hunt for more affordable energy is coal bed methane. CBM, called coal seam gas in some parts of the world, is a naturally occurring methane gas with characteristics similar to those of conventional natural gas. Coal mine degasification and safety techniques were first developed in the United States during the 1970s. Since then, the CBM sector has become commercially established, with ongoing advancements in extraction and production techniques allowing successful CBM production to be recorded across a wide range of coal types, ages and geological settings. That said, the sector’s success depends on certain criteria, namely: favorable geologic conditions (good coal thickness, gas content/saturation, permeability); low capital and operating costs; and favorable gas markets and sales prices. Coal Bed Methane producers are flocking to Indonesia, which is possibly the best place in the world to do business. Land costs are still quite reasonable. Indonesia has ample Coal Bed Methane supplies, it’s the largest exporter of thermal coal in the world. Unlike Australia, a more mature market, Indonesia is emerging as a major player AND it’s much closer to key Asian end markets.
Reuters, April 9, 2013
2.1 What is CBM?
As coal is formed, the decomposing organic material produces methane gas, as well as nitrogen,
carbon dioxide and other gases. The burial process puts pressure on the coal, which keeps much of
the gas contained. It is this production process that makes CBM an unconventional gas: it is
contained in difficult-‐to-‐produce reservoirs that require special completion, stimulation and/or
production techniques to achieve economically viable production.
2.2 How is CBM extracted?
CBM and natural gas rely on similar extraction methods: namely, both are obtained by drilling a
well into a coal seam. The sides of the well are then cased with cemented steel pipe; after that,
small holes, known as perforations, are created in the wall of the casing to allow the CBM to flow
through into the well bore and up the casing to the surface. Seams are often stimulated, or
“fractured,” to allow the CBM to flow more freely, and in some cases, wells are drilled horizontally.
When drilling holes into seams, CBM operators pump out groundwater. Removing this
groundwater from the formation is necessary as it reduces pressure and produces flowing natural
gas by allowing the methane to be released from the coal.
2.3 How do CBM wells produce?
In general, CBM wells go through three stages during a production cycle. During the dewatering
stage, more water than gas is initially created; however, as production continues, the volume of
water decreases as the volume of methane grows. At that point, a stable production stage is
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reached. During this period, maximum methane is produced and water production becomes stable.
When the decline stage begins, the amount of methane produced declines until it becomes
uneconomic to continue production.
2.4 What countries are major producers?
CBM production is still a largely region-‐specific practice. Global production totals 5.8 billion cubic
feet (“Bcf”) per day from 15 basins in the United States, Canada, Australia, China and India,
according to the latest available statistics. The US still dominates global output with nearly 5.0 Bcf
per day of production and about 20.0 trillion cubic feet (“Tcf”) produced to date; however,
production is expected to fall in the long-‐term as a result of resource maturity and depletion, as
well as falling North American gas prices. Australia is considered a frontrunner to displace the US
as the top-‐ranked producer.
While CBM production in China and India remains low, at 150 and 10 million cubic feet per day
respectively, there has been a shift in focus to increasing production as natural gas prices in Asia
continue to rise. Production in the region is expected to reach 346Tcf by 2020, with Australia
expected to contribute over 60 percent of this total; China and India are the next major
contributors.
Asian potential is gaining in stature, and while the companies producing CBM in North America are
largely well known, many investors are shifting their attention to the progress being made in Asia.
The region hosts some of the most highly industrialized countries in the world, including Japan,
South Korea and China, while India and China are two of the most highly populated and energy-‐
demanding countries. The sector’s market potential was highlighted last month, when China
confirmed its plans to allocate more funds — and encourage private capital to exploit — its large
CBM reserves. The announcement was made by the country’s National Energy Administration,
which estimates China’s CBM reserves at 1,299 trillion cubic feet, according to a China Daily report.
That gives the country the third-‐largest reserves in the world after Russia and Canada. China plans
to complete construction of two major CBM production bases in the central and western regions by
2015 and will increase that number to three to five within another 10 years.
Asia-‐Pacific is a major natural gas market, with the potential to become the largest gas market in the world in the future. The existence of substantial coal reserves, particularly in Australia, China and India, provides opportunities for companies to undertake CBM exploration and development activities.
GlobalData press release
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2.5 The Indonesian CBM Opportunity
Indonesia has one of the largest CBM resources in the world, with a potential 453 Tcf in place, more than double the country’s natural gas reserves. Indonesia, Southeast Asia’s main importer of crude oil and its refined products, is likely to miss its coal bed methane (CBM) output target of 150 million metric standard cubic feet per day (mmscfd) in 2015, a top official has said.
Jakarta Post, April 13, 2013 CBM production forecasts and expectations in Indonesia suffer from the country’s lack of sufficient
drilling rigs and other specialized equipment for CBM exploration and production. While the
process of starting a business and importing the equipment can be long, expensive and frustrating,
of maybe even greater significance is the shortage of experts with the background and knowledge
to recognize and lead the development of the sector. CBM is not as productive as conventional gas
and extraction must therefore be as cost effective as possible. The result for Indonesia’s nascent
CBM industry has been slow development and a long learning curve.
The land acquisition issues as well as the procurement of the CBM rigs remains the main obstacles in developing the unconventional hydrocarbon reserves in the country
Susilo Siswoutomo, Deputy Minister for Energy and Mineral Resources
Jakarta Post April 13 2013
6
3. RISK FACTORS Investing in CSG Boremaster involves inherent risks. Prospective investors should consider, among
other things, the risk factors set out in this Information Memorandum before making an
investment decision. The risks described below are not the only ones facing the Company. While
the Company takes every precaution to mitigate the risks it faces in the normal course of business,
additional risks not presently known to the Company or that the Company currently deems
immaterial may also impair the Company’s business operations and adversely affect the value of
the Company. If any of the risks actually occur, the Company’s business, financial position and
operating results could be materially and adversely affected.
A prospective investor should consider carefully the factors set forth below, and elsewhere in the
Information Memorandum, and should consult his or her own expert advisors as to the suitability
of an investment in the Company. Such an investment is suitable only for investors who
understand the risk factors associated with this type of investment and who can afford a loss of all
or part of the investment.
3.1 Risks related to CSG Boremaster’s business
Global political, economic and market conditions could negatively impact the Company’s business.
CSG Boremaster’s operations will be affected by global political, economic and market conditions.
A worldwide economic downturn could reduce the availability of liquidity and credit to fund the
Company’s business operations and could adversely affect CSG Boremaster’s customers, suppliers
and lenders. In addition, an economic downturn could reduce demand for drilling and production
services and negatively impact CSG Boremaster’s activity levels and pricing for its services,
adversely affecting CSG Boremaster’s financial condition and results from operations. An economic
downturn could lead to a decline in energy consumption, which would have a material and adverse
effect on CSG Boremaster’s results of operations. Continued hostilities in the Middle East and the
occurrence or threat of terrorist attacks against the United States or other countries could
contribute to any economic downturn in the economies of the countries in which CSG Boremaster
will operate. A sustained or deep recession could further limit economic activity and thus result in
an additional decrease in energy consumption, which in turn could cause CSG Boremaster’s
revenues and margins to decline and limit CSG Boremaster’s future growth prospects.
CSG Boremaster’s business depends on the level of activity in the exploration and production
industry, which is significantly affected by volatile oil and natural gas prices. Demand for the
Company’s drilling and production services would be adversely affected by declines in exploration,
7
development and production activity associated with depressed oil and natural gas prices. Even
the perceived risk of a decline in oil or natural gas prices often causes exploration and production
companies to reduce their spending. The worldwide deterioration in the financial and credit
markets, which began in the second half of 2008, resulted in diminished demand for oil and gas
and significantly lower oil and natural gas prices. In addition, higher prices do not necessarily
translate into increased drilling activity, since CSG Boremaster’s clients’ expectations about future
commodity prices will typically drive demand for the Company’s services. Oil and natural gas
prices are extremely volatile. On July 2, 2008 natural gas prices were USD13.31 per million British
thermal unit, or MMBtu, at the Henry Hub. They subsequently declined sharply, reaching a low of
USD1.88 per MMBtu at the Henry Hub on September 4, 2009. As of 30 August 2013, the closing
price of natural gas at the Henry Hub was USD3.57 per MMBtu. The spot price for West Texas
intermediate crude has in the last few years ranged from a high of USD145.29 per barrel as of July
3, 2008, to a low of USD31.41 per barrel as of 22 December 2008, with a closing price of
USD107.98 per barrel on 30 August 2013. Oil and natural gas prices are affected by numerous
factors, including the following:
• the demand for oil and natural gas in Asia and elsewhere;
• the cost of exploring for, developing, producing and delivering oil and natural gas;
• political, economic and weather conditions in Asia and elsewhere;
• advances in exploration, development and production technology;
• the ability of the Organization of Petroleum Exporting Countries, commonly called OPEC, to
set and maintain oil production levels and pricing;
• the level of production in non-‐OPEC countries;
• domestic and international tax policies and governmental regulations;
• the development and exploitation of alternative fuels, and the competitive, social and political
position of natural gas as a source of energy compared with other energy sources;
• the policies of various governments regarding exploration and development of their oil and
natural gas reserves;
• the worldwide military and political environment and uncertainty or instability resulting from
an escalation or additional outbreak of armed hostilities or other crises in the Middle East,
West Africa and other significant oil and natural gas producing regions; and
• acts of terrorism or piracy that affect oil and natural gas producing regions, especially in
Nigeria, where armed conflict, civil unrest and acts of terrorism have recently increased.
8
CSG Boremaster’s industry is highly competitive, with intense price competition. CSG Boremaster’s
inability to compete successfully may reduce its profitability.
CSG Boremaster’s industry is highly competitive. Contracts are traditionally awarded on a
competitive bid basis, with pricing often being the primary factor in determining which qualified
contractor is awarded a job, although each contractor’s technical capability, safety performance
record and reputation for quality also can be key factors in the determination.
Several other oilfield services companies are larger than CSG Boremaster and have resources that
are significantly greater than CSG Boremaster’s resources. These competitors may be able to better
withstand industry downturns, compete on the basis of price, and acquire new equipment and
technologies, all of which could affect CSG Boremaster’s revenues and profitability. These
competitors compete with CSG Boremaster both for customers and for acquisitions of other
businesses. This competition may cause CSG Boremaster’s business to suffer. CSG Boremaster’s
management believes that competition for contracts will continue to be intense in the foreseeable
future.
The oilfield service industry is highly cyclical and lower demand and pricing could result in declines in
CSG Boremaster’s profitability.
Historically, the oilfield service industry has been highly cyclical, with periods of high demand and
favorable pricing often followed by periods of low demand and sharp reduction in pricing power.
Periods of decreased demand or increased supply intensify the competition in the industry. As a
result of the cyclicality of CSG Boremaster’s industry, management expects CSG Boremaster’s
results of operations to be volatile and to decrease during market declines.
A small number of customers may account for a significant portion of CSG Boremaster’s total
operating revenues, and the loss of, or a decline in the creditworthiness of, one or more of these
customers could adversely affect CSG Boremaster’s financial condition and results of operations.
CSG Boremaster’s financial condition and results of operations will be materially adversely
affected if these customers interrupt or curtail their activities, terminate their contracts with CSG
Boremaster, fail to renew their existing contracts or refuse to award new contracts to CSG
Boremaster, and CSG Boremaster is unable to enter into contracts with new customers at
comparable day rates. The loss of any significant customer could adversely affect CSG Boremaster’s
financial condition and results of operations.
Additionally, this concentration of customers may increase CSG Boremaster’s overall exposure to
credit risk. CSG Boremaster’s customers will likely be similarly affected by changes in economic
and industry conditions. CSG Boremaster’s financial condition and results of operations will be
materially adversely affected if one or more of its significant customers fails to pay CSG
9
Boremaster or ceases to contract with CSG Boremaster for its services on terms that are favorable
to CSG Boremaster or at all.
CSG Boremaster would experience reduced profitability if its customers reduce activity levels or
terminate or seek to renegotiate their contracts or if CSG Boremaster experiences downtime,
operational difficulties, or safety-‐related issues.
CSG Boremaster’s drilling services contracts may be day rate contracts, pursuant to which CSG
Boremaster charges a fixed charge per day regardless of the number of days needed to drill the
well, or footage based contracts, where a fixed rate per foot drilled is charged regardless of the
time it takes to drill. During depressed market conditions, a customer may no longer need services
that are currently under contract or may be able to obtain comparable services at a lower daily
rate. As a result, customers may seek to renegotiate the terms of their existing drilling contracts or
avoid their obligations under those contracts. In addition, CSG Boremaster’s customers may have
the right to terminate, or may seek to renegotiate, existing contracts if CSG Boremaster experiences
downtime, operational problems above the contractual limit or safety-‐related issues or in other
specified circumstances, which include events beyond the control of either party.
If CSG Boremaster’s customers cancel or require the Company to renegotiate some of its contracts,
and CSG Boremaster is unable to secure new contracts on substantially similar terms, or if
contracts are suspended for an extended period of time, CSG Boremaster’s revenues and
profitability would be materially reduced.
During depressed market conditions, a customer may no longer need a rig that is currently under
contract or may be able to obtain a comparable rig at a lower daily rate. As a result, customers may
seek to renegotiate the terms of their existing drilling contracts or avoid their obligations under
those contracts. In addition, CSG Boremaster’s customers may have the right to terminate existing
contracts if CSG Boremaster experiences operational problems. The likelihood that a customer may
seek to terminate a contract for operational difficulties is increased during periods of market
weakness. The cancellation of any of CSG Boremaster’s drilling contracts could materially reduce
its revenues and profitability.
An oversupply of comparable rigs in the geographic markets in which CSG Boremaster will compete
could depress the utilization rates and day rates for its rigs and materially reduce its revenues and
profitability.
Utilization rates, which are the number of days a rig actually works divided by the number of days
the rig is available for work, and day rates, which are the contract prices customers pay for rigs per
day, are also affected by the total supply of comparable rigs available for service in the geographic
markets in which CSG Boremaster competes. Improvements in demand in a geographic market
10
may cause CSG Boremaster’s competitors to respond by moving competing rigs into the market,
thus intensifying price competition. Significant new rig construction could also intensify price
competition. In the past, there have been prolonged periods of rig oversupply with
correspondingly depressed utilization rates and day rates largely due to earlier, speculative
construction of new rigs. Improvements in day rates and expectations of longer-‐term, sustained
improvements in utilization rates and day rates for drilling rigs may lead to construction of new
rigs. These increases in the supply of rigs could depress the utilization rates and day rates for the
rigs and materially reduce CSG Boremaster’ revenues and profitability.
CSG Boremaster’s growth strategy includes making acquisitions, but CSG Boremaster may be unable
to complete and finance future acquisitions on acceptable terms. In addition, CSG Boremaster may fail
to successfully integrate assets or businesses it acquires or may incorrectly predict operating results.
As part of its growth strategy, CSG Boremaster may consider future acquisitions that could involve
the payment by CSG Boremaster of a substantial amount of cash, the incurrence of a substantial
amount of debt, the issuance of a substantial amount of equity or a combination of the foregoing. If
CSG Boremaster is restricted from using cash or incurring debt to fund a potential acquisition, CSG
Boremaster may not be able to issue, on terms it finds acceptable, sufficient equity to complete an
acquisition or investment.
Any future acquisitions could present a number of risks, including:
• the risk of incorrect assumptions regarding the future results of acquired operations or assets
or expected cost reductions or other synergies expected to be realized as a result of acquiring
operations or assets;
• the risk of failing to integrate the operations or management of any acquired operations or
assets successfully and timely; and
• the risk of diversion of management’s attention from existing operations or other priorities.
If CSG Boremaster is unsuccessful in integrating its acquisitions in a timely and cost-‐effective
manner, CSG Boremaster’s financial condition and results of operations could be adversely
affected.
The loss of the services of key executives of CSG Boremaster, or CSG Boremaster’s failure to attract
and retain skilled workers and key personnel could hurt CSG Boremaster’s operations.
CSG Boremaster is dependent upon the efforts and skills of certain directors and executives to
manage CSG Boremaster’s business, identify and consummate future acquisitions and obtain and
retain customers.
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In addition, CSG Boremaster and its competitors are dependent upon the available labor pool of
skilled employees. CSG Boremaster’s development and expansion will require additional
experienced management and operations personnel. No assurance can be given that CSG
Boremaster will be able to identify and retain these employees. CSG Boremaster competes with
other oilfield services businesses and other employers to attract and retain qualified personnel
with the technical skills and experience required to provide CSG Boremaster’s customers with the
highest quality service. A shortage of skilled workers, increases in wage rates or changes in
applicable laws and regulations could make it more difficult for CSG Boremaster to attract and
retain personnel and could require CSG Boremaster to enhance its wage and benefits packages.
There can be no assurance that labor costs will not increase. Any increase in CSG Boremaster’s
operating costs could cause its business to suffer.
Severe weather could have a material adverse impact on CSG Boremaster’s business.
CSG Boremaster’s business could be materially and adversely affected by severe weather.
Repercussions of severe weather conditions may include:
• curtailment of services;
• weather-‐related damage to facilities and equipment resulting in suspension of operations;
• inability to deliver materials to job sites in accordance with contract schedules; and
• loss of productivity.
Adverse seasonal weather conditions may limit CSG Boremaster’s access to job sites and its ability
to operate in affected areas. During periods of curtailed activity due to adverse weather conditions,
CSG Boremaster would continue to incur expenses, but its revenues could be delayed or reduced.
CSG Boremaster will operate in jurisdictions whose political and regulatory environments and
compliance regimes differ.
Risks associated with CSG Boremaster’s operations in foreign areas include, but are not limited to:
• political, social and economic instability, war and acts of terrorism;
• potential seizure, expropriation or nationalization of assets;
• damage to CSG Boremaster’s equipment or violence directed at its employees, including
kidnappings and piracy;
• increased operating costs;
• complications associated with repairing and replacing equipment in remote locations;
• repudiation, modification or renegotiation of contracts, disputes and legal proceedings in
international jurisdictions;
• limitations on insurance coverage, such as war risk coverage in certain areas;
12
• import-‐export quotas;
• confiscatory taxation;
• work stoppages or strikes;
• unexpected changes in regulatory requirements;
• wage and price controls;
• imposition of trade barriers;
• imposition or changes in enforcement of local content laws;
• the inability to collect or repatriate currency, income, capital or assets;
• foreign currency fluctuations and devaluation; and
• other forms of government regulation and economic conditions that are beyond CSG
Boremaster’s control.
Part of CSG Boremaster’s strategy is to prudently and opportunistically acquire businesses and
assets that can complement CSG Boremaster’s existing products and services, and expand CSG
Boremaster’s geographic footprint. If CSG Boremaster makes acquisitions in other countries, CSG
Boremaster may increase its exposure to the risks discussed above.
CSG Boremaster’s drilling and production service operations are subject to various laws and
regulations in countries in which CSG Boremaster may operate, including laws and regulations
relating to currency conversions and repatriation, oil and natural gas exploration and
development, taxation of offshore earnings and earnings of expatriate personnel, the use of local
employees and suppliers by foreign contractors and duties on the importation and exportation of
supplies and equipment. Governments in some countries have become increasingly active in
regulating and controlling the ownership of concessions and companies holding concessions, the
exploration for oil and natural gas, and other aspects of the oil and natural gas industries in their
countries. In some areas of the world, this governmental activity has adversely affected the amount
of exploration and development work and may continue to do so. Operations in developing
countries can be subject to legal systems which are not as predictable as those in more developed
countries, which can lead to greater risk and uncertainty in legal matters and proceedings.
In some jurisdictions CSG Boremaster may be subject to foreign governmental regulations favoring
or requiring the awarding of contracts to local contractors or requiring foreign contractors to
employ citizens of, or purchase supplies from, a particular jurisdiction. These regulations may
adversely affect CSG Boremaster’s ability to compete. Additionally, CSG Boremaster’s operations in
some jurisdictions may be significantly affected by union activity and general labor unrest. There
can be no assurance that CSG Boremaster’s operations will not face labor disruptions in the future
13
or that any such disruptions will not have a material adverse effect on CSG Boremaster’s financial
condition or results of operations.
CSG Boremaster’s results of operations may be adversely affected by currency fluctuations.
CSG Boremaster may experience currency exchange losses when revenues are received and
expenses are paid in nonconvertible currencies or when CSG Boremaster does not hedge an
exposure to a foreign currency. CSG Boremaster may also incur losses as a result of an inability to
collect revenues because of a shortage of convertible currency available to the country of
operation, controls over currency exchange or controls over the repatriation of income or capital.
To the extent possible, CSG Boremaster will seek to limit its exposure to local currencies by
matching the acceptance of local currencies to CSG Boremaster’s local expense requirements in
those currencies. Should CSG Boremaster not be able to take these actions, thereby exposing it to
foreign currency fluctuations, CSG Boremaster’s results of operations, financial condition and cash
flows could deteriorate materially.
Limitations on CSG Boremaster’s ability to protect its intellectual property rights, including trade
secrets, could cause a loss in revenue and a reduction in any competitive advantage that CSG
Boremaster may hold.
Some of CSG Boremaster’s products or services, and the processes CSG Boremaster uses to
produce or provide them, have been granted patent protection, have patent applications pending
or are trade secrets. CSG Boremaster’s business may be adversely affected if CSG Boremaster’s
patents are unenforceable, the claims allowed under CSG Boremaster’s patents are not sufficient to
protect the technology, CSG Boremaster’s patent applications are denied, or CSG Boremaster’s
trade secrets are not adequately protected. In addition, CSG Boremaster’s competitors may be able
to develop technology independently that is very similar to CSG Boremaster’s without infringing
on CSG Boremaster’s patents or gaining access to CSG Boremaster’s trade secrets.
CSG Boremaster may be subject to litigation if another party claims that CSG Boremaster has
infringed upon its intellectual property rights.
Third parties could assert that the tools, techniques, methodologies, programs and components
CSG Boremaster uses to provide its services infringe upon the intellectual property rights of others.
Infringement claims generally result in significant legal and other costs and may distract
management from running CSG Boremaster’s core business. Additionally, if any of these claims
were to be successful, developing non-‐infringing technologies and/or making royalty payments
under licenses from third parties, if available, would increase CSG Boremaster’s costs. If a license
were not available CSG Boremaster might not be able to continue to provide a particular service or
14
product, which could adversely affect CSG Boremaster’s financial condition, results of operations
and cash flows.
CSG Boremaster could be adversely affected if it fails to keep pace with technological changes and
changes in technology could have a negative impact on CSG Boremaster’s market share.
CSG Boremaster aims to provide drilling and production services in increasingly challenging
environments. To meet its clients’ needs, CSG Boremaster must continually develop new, and
update existing, technology for the services it provides. In addition, rapid and frequent technology
and market demand changes can render existing technologies obsolete, requiring substantial new
capital expenditures, and could have a negative impact on CSG Boremaster’s market share. Any
failure by CSG Boremaster to anticipate or to respond adequately to changing technology, market
demands and client requirements could adversely affect CSG Boremaster’s business and financial
results.
CSG Boremaster will be subject to numerous governmental laws and regulations, some of which may
impose significant liability on CSG Boremaster for environmental and natural resource damages.
CSG Boremaster will be subject to various laws and regulations, including those relating to the
energy industry in general and the environment in particular, and may be required to make
significant capital expenditures to comply with laws and the applicable regulations and standards
of governmental authorities and organizations. Moreover, the cost of compliance could be higher
than anticipated. It is also possible that existing and proposed governmental conventions, laws,
regulations and standards, including those related to climate and emissions of “greenhouse gases,”
may in the future add significantly to CSG Boremaster’s operating costs or limit CSG Boremaster’s
activities or the activities and levels of capital spending by CSG Boremaster’s customers.
In addition, many aspects of CSG Boremaster’s operations are subject to laws and regulations that
relate, directly or indirectly, to the oilfield services industry, including laws requiring CSG
Boremaster to control the discharge of oil and other contaminants into the environment or
otherwise relating to environmental protection. Failure to comply with these laws and regulations
may result in the assessment of administrative, civil and even criminal penalties, the imposition of
remedial obligations, and the issuance of injunctions that may limit or prohibit CSG Boremaster’s
operations. Laws and regulations protecting the environment have become more stringent in
recent years and may, in certain circumstances, impose strict liability, rendering CSG Boremaster
liable for environmental and natural resource damages without regard to negligence or fault on its
part. These laws and regulations may expose CSG Boremaster to liability for the conduct of, or
conditions caused by, others or for acts that were in compliance with all applicable laws at the time
the acts were performed. The application of these requirements, the modification of existing laws
or regulations or the adoption of new laws or regulations curtailing exploration and production
15
activity could materially limit CSG Boremaster’s future contract opportunities, materially increase
CSG Boremaster’s costs or both.
CSG Boremaster may be subject to claims for personal injury and property damage, which could
materially adversely affect CSG Boremaster’s financial condition and results of operations.
CSG Boremaster’s operations are subject to hazards that are customary for exploration and
production activity, including blowouts, reservoir damage, loss of well control, cratering, oil and
gas well fires and explosions, natural disasters, pollution and mechanical failure. Any of these risks
could result in damage to or destruction of drilling equipment, personal injury and property
damage, suspension of operations, or environmental damage. Litigation arising from an accident at
a location where CSG Boremaster’s products or services are used or provided may cause CSG
Boremaster to be named as a defendant in lawsuits asserting potentially large claims. Generally,
CSG Boremaster’s contracts will provide for the division of responsibilities between CSG
Boremaster and its customer, and consistent with standard industry practice, CSG Boremaster’s
clients will generally assume, and indemnify CSG Boremaster against, some of these risks. In
particular, contract terms will generally provide that CSG Boremaster’s customer, the operator,
will retain liability and indemnify CSG Boremaster for (i) environmental pollution caused by any
oil, gas, or other fluids and pollutants originating from below ground, (ii) damage to customer and
third-‐party equipment and property including any damage to the sub-‐surface and reservoir and
(iii) personal injury to or death of customer personnel. There can be no assurance, however, that
these clients will necessarily be financially able to indemnify CSG Boremaster against all risks. Also,
CSG Boremaster may be effectively prevented from enforcing these indemnities because of the
nature of CSG Boremaster’s relationship with some of its larger clients. Additionally, from time to
time CSG Boremaster may not be able to obtain agreement from its customers to indemnify CSG
Boremaster for such damages and risks.
To the extent that CSG Boremaster is unable to transfer such risks to customers by contract or
indemnification agreements, CSG Boremaster will generally seek protection through customary
insurance to protect its business against these potential losses. However, there is no assurance that
such insurance or indemnification agreements will adequately protect CSG Boremaster against
liability from all of the consequences of the hazards and risks described above. The occurrence of
an event for which CSG Boremaster is not fully insured or indemnified against, or the failure of a
customer or insurer to meet its indemnification or insurance obligations, could result in
substantial losses.
16
CSG Boremaster’s insurance coverage may become more expensive, may become unavailable in the
future, and may be inadequate to cover CSG Boremaster’s losses.
CSG Boremaster’s insurance coverage may not provide full coverage for losses or liabilities
resulting from CSG Boremaster’s operations. In addition, CSG Boremaster may experience
increased costs for available insurance coverage, which may impose higher deductibles and limit
maximum aggregated recoveries. Should liability limits be increased via legislative or regulatory
action, it is possible that CSG Boremaster may not be able to insure certain activities to a desirable
level. If liability limits are increased and/or the insurance market becomes more restricted, CSG
Boremaster’s business, financial condition and results of operations could be materially adversely
affected.
Insurance costs may also increase in the event of ongoing patterns of adverse changes in weather
or climate. CSG Boremaster may not be able to obtain customary insurance coverage in the future,
thus putting CSG Boremaster at a greater risk of loss due to severe weather conditions and other
hazards. Moreover, CSG Boremaster may not be able to maintain adequate insurance in the future
at rates management considers reasonable or be able to obtain insurance against certain risks.
CSG Boremaster’s operations will be subject to a significant number of tax regimes, and changes in
legislation or regulations in any one of the countries in which CSG Boremaster will operate could
negatively and adversely affect CSG Boremaster’s results of operations.
CSG Boremaster may operate in several countries across the world, and CSG Boremaster’s tax
filings would therefore be subject to the jurisdiction of a significant number of tax authorities and
tax regimes, as well as cross-‐border tax treaties between governments. Furthermore, the nature of
CSG Boremaster’s operations will mean that CSG Boremaster must deal with complex tax issues
(such as transfer pricing, permanent establishment or similar issues) as well as competing and
developing tax systems where tax treaties may not exist or where the legislative framework is
unclear. In addition, CSG Boremaster’s operations may be taxed on different bases that vary from
country to country, including net profit, deemed net profit (generally based on turnover) and
revenue based withholding taxes based on turnover.
CSG Boremaster’s management will determine its tax provision based on its interpretation of
enacted local tax laws and existing practices and use assumptions regarding the tax deductibility of
items and recognition of revenue. Changes in these assumptions and practices could impact the
amount of income taxes that CSG Boremaster provides for in any given year and could negatively
and adversely affect the result of CSG Boremaster’s operations.
17
CSG Boremaster’s tax liabilities could increase as a result of adverse tax audits, inquiries or
settlements.
CSG Boremaster’s operations may become subject to audit, inquiry and possible re-‐assessment by
different tax authorities. In accordance with applicable accounting rules relating to contingencies,
management will provide for taxes in the amounts that it considers probable of being payable as a
result of these audits and for which a reasonable estimate may be made. Management may also
separately consider if taxes payable in relation to filings not yet subject to audit may be higher than
the amounts stated in CSG Boremaster’s filed tax return, and make additional provisions for
probable risks if appropriate. As forecasting the ultimate outcome includes some uncertainty, the
risk exists that adjustments will be recognized to CSG Boremaster’s tax provisions in later years as
and when these and other matters are finalized with the appropriate tax authorities.
CSG Boremaster may be subject to litigation that could have an adverse effect on it.
CSG Boremaster may from time to time be involved in litigation. The numerous operating hazards
inherent in CSG Boremaster’s business increase CSG Boremaster’s exposure to litigation, which
may involve, among other things, contract disputes, personal injury, environmental, employment,
tax and securities litigation, and litigation that arises in the ordinary course of business.
Management cannot predict with certainty the outcome or effect of any claim or other litigation
matter. Litigation may have an adverse effect on CSG Boremaster because of potential negative
outcomes, the costs associated with defending the lawsuits, the diversion of CSG Boremaster’s
management’s resources and other factors.
CSG Boremaster’s reputation and its ability to do business may be impaired by corrupt behavior by
employees or agents or those of its affiliates.
CSG Boremaster will operate in countries known to experience governmental corruption. While
CSG Boremaster is committed to conducting business in a legal and ethical manner, there is a risk
that CSG Boremaster’s employees or agents or those of its affiliates may take actions that violate
either the U.S. Foreign Corrupt Practices Act or legislation promulgated pursuant to the 1997 OECD
Convention on Combating Bribery of Foreign Public Officials in International Business
Transactions or other applicable anti-‐corruption regulations. These actions could result in
monetary penalties against CSG Boremaster or its affiliates and could damage CSG Boremaster’s
reputation and, therefore, its ability to do business.
In addition to the risks that arise in countries that have experienced governmental corruption,
there is also a risk that CSG Boremaster will not be able to ensure that its internal control policies
and procedures will protect CSG Boremaster from fraud or other criminal acts committed by CSG
Boremaster’s employees or agents or those of its affiliates.
18
CSG Boremaster may have difficulties managing growth in its business, which could adversely affect
the financial condition and results of operations.
The growth of CSG Boremaster in accordance with CSG Boremaster’s business plan, if achieved,
will place a significant strain on CSG Boremaster’s financial, technical, operational and managerial
resources. As CSG Boremaster expands its activities through both organic growth and acquisitions,
there will be additional demands on financial, technical, operational and management resources.
The failure to continue to upgrade CSG Boremaster’s technical, administrative, operating and
financial control systems or the occurrences of unexpected expansion difficulties, including the
failure to recruit and retain experienced managers, engineers and other professionals in the oil and
natural gas services industry, could have a material adverse effect on CSG Boremaster’s business,
financial condition and results of operations.
If the intended expansion of CSG Boremaster’s business is not successful, the Company’s financial
condition, profitability and results of operations could be adversely affected, and CSG Boremaster may
not achieve the increases in revenue and profitability that it hopes to realize.
A key element of CSG Boremaster’s business strategy involves the expansion of CSG Boremaster’s
geographic presence and customer base. These aspects of the strategy are subject to numerous
risks and uncertainties, including:
• inability to retain or hire experienced crews and other personnel;
• lack of customer demand for the services CSG Boremaster intend to provide;
• inability to secure necessary equipment, raw materials or technology to successfully execute
CSG Boremaster’s expansion plans;
• shortages of water used in CSG Boremaster’s hydraulic fracturing operations;
• equipment downtime due to technical failures might reduce CSG Boremaster’s ability to
achieve the utilization necessary to deliver the estimated financial results,
• unanticipated delays that could limit or defer the provision of services by CSG Boremaster and
jeopardize their relationships with existing customers and adversely affect CSG Boremaster’s
ability to obtain new customers for such services; and
• Competition from new and existing services providers.
Encountering any of these or any unforeseen problems in implementing CSG Boremaster’s planned
expansion could have a material adverse impact on CSG Boremaster’s business, financial condition,
results of operations and cash flows, and could prevent CSG Boremaster from achieving the
increases in revenues and profitability that CSG Boremaster hopes to realize.
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CSG Boremaster’s business depends upon an ability to obtain specialized equipment and parts from
third party suppliers, and CSG Boremaster may be vulnerable to delayed deliveries and future price
increases.
CSG Boremaster will purchase specialized equipment and parts from third party suppliers and
affiliates. Currently, there is a high demand for hydraulic fracturing, coiled tubing and other oil
field services and extended lead times to obtain equipment needed to provide these services.
Further, there are a limited number of suppliers that manufacture the equipment CSG Boremaster
plans to use. Should CSG Boremaster’s current suppliers be unable or unwilling to provide the
necessary equipment and parts or otherwise fail to deliver the products on time and in the
quantities required, any resulting delays in the provision of CSG Boremaster’s services could have
a material adverse effect on CSG Boremaster’s business, financial condition, results of operations
and cash flows. In addition, future price increases for this type of equipment and parts could
negatively impact CSG Boremaster’s ability to purchase new equipment to update or expand the
existing fleet, or to timely repair equipment in the existing fleet.
The loss of or interruption in operations of one or more of CSG Boremaster’s key raw material
suppliers and shortages of water could have a material adverse effect on CSG Boremaster’s
operations.
CSG Boremaster’s reliance on outside suppliers for some of the key raw materials CSG Boremaster
will use in providing its services involves several risks, including limited control over the price,
timely delivery and quality of such materials or equipment. CSG Boremaster will necessarily rely
on a limited number of suppliers for certain raw materials which are critical for certain of CSG
Boremaster’s operations. Any changes in CSG Boremaster’s suppliers could cause material delays
in CSG Boremaster’s operations and increase CSG Boremaster’s costs. In addition, CSG
Boremaster’s suppliers may not be able to meet CSG Boremaster’s future demands as to volume,
quality or timeliness. CSG Boremaster’s inability to obtain timely delivery of key raw materials of
acceptable quality or any significant increases in prices of such materials could result in material
operational delays, increase CSG Boremaster’s operating costs, limit CSG Boremaster’s ability to
service CSG Boremaster’s customers’ wells or otherwise materially and adversely affect CSG
Boremaster’s business and operating results. Further, CSG Boremaster’s hydraulic fracturing
operations require significant amounts of water and may be negatively impacted by shortages of
water, due to droughts or otherwise, in the areas in which CSG Boremaster may operate.
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If CSG Boremaster is unable to employ a sufficient number of skilled and qualified workers, CSG
Boremaster’s capacity and profitability could be diminished and CSG Boremaster’s growth potential
could be impaired.
The delivery of CSG Boremaster’s products and services requires skilled and qualified workers
with specialized skills and experience who can perform physically demanding work. As a result of
the volatility of the oilfield services industry and the demanding nature of the work, workers may
choose to pursue employment in fields that offer a more desirable work environment at wage rates
that are competitive. CSG Boremaster’s ability to be productive and profitable will depend upon
CSG Boremaster’s ability to employ and retain skilled workers. In addition, CSG Boremaster’s
ability to expand CSG Boremaster’s operations depends in part on CSG Boremaster’s ability to
increase the size of CSG Boremaster’s skilled labor force. The demand for skilled workers is high,
and the supply is limited. As a result, competition for experienced oilfield service personnel is
intense and CSG Boremaster faces significant challenges in competing for crews and management
with large and well-‐established competitors. A significant increase in the wages paid by competing
employers could result in a reduction of CSG Boremaster’s skilled labor force, increases in the
wage rates that CSG Boremaster must pay, or both. If either of these events were to occur, CSG
Boremaster’s capacity and profitability could be diminished and CSG Boremaster’s growth
potential could be impaired.
Advancements in technology could have a material adverse effect on CSG Boremaster’s business,
financial condition and results of operations and cash flows.
As new horizontal and directional drilling, pressure pumping, pressure control and other well
service technologies develop, CSG Boremaster may be placed at a competitive disadvantage, and
competitive pressure may force CSG Boremaster to implement new technologies at a substantial
cost. CSG Boremaster may not be able to successfully acquire or use new technologies. New
technologies could render CSG Boremaster’s current products and services obsolete or
significantly reduce demand for CSG Boremaster’s current products and services. As a result, new
advancements in technology could have a material adverse effect on the Company’s business,
financial condition and results of operations and cash flows.
CSG Boremaster may not be able to provide services that meet the specific needs of oil and natural gas
exploration and production companies at competitive prices.
The markets in which CSG Boremaster will operate are generally highly competitive and have
relatively few barriers to entry. The principal competitive factors in CSG Boremaster’s markets are
price, product and service quality and availability, responsiveness, experience, technology,
equipment quality and reputation for safety. CSG Boremaster will compete with large national and
multi-‐national companies that have longer operating histories, greater financial, technical and
21
other resources and greater name recognition than CSG Boremaster. Several of CSG Boremaster’s
competitors provide a broader array of services and have a stronger presence in more geographic
markets. In addition, CSG Boremaster will compete with several smaller companies capable of
competing effectively on a regional or local basis. CSG Boremaster’s competitors may be able to
respond more quickly to new or emerging technologies and services and changes in customer
requirements. As a result of competition, CSG Boremaster may lose market share or be unable to
maintain or increase prices for CSG Boremaster’s present services or to acquire additional business
opportunities, which could have a material adverse effect on CSG Boremaster’s business, financial
condition, results of operations and cash flows.
In addition, some exploration and production companies have begun performing hydraulic
fracturing and directional drilling using their own equipment and personnel. Any increase in the
development and utilization of in-‐house fracturing and directional drilling capabilities by CSG
Boremaster’s customers could decrease the demand for CSG Boremaster’s services and have a
material adverse impact on CSG Boremaster’s business.
Legal requirements, conservation measures and technological advances could reduce demand for oil
and natural gas, which may adversely affect CSG Boremaster’s business, financial condition, results of
operations and cash flows.
Environmental and energy matters have been the focus of increased scientific and political
scrutiny and are subject to various legal requirements. International agreements, national laws
and various regulatory schemes limit or otherwise regulate energy-‐related activities, such as
emissions of greenhouse gases, and additional restrictions are under consideration by
governmental entities. These legal requirements fuel conservation measures, as well as alternative
fuel requirements, increasing consumer demand for alternatives to oil and natural gas,
technological advances in fuel economy and energy generation devices which could reduce
demand for oil and natural gas. CSG Boremaster cannot predict the impact of the changing demand
for oil and gas services and products, and any major changes may have a material adverse effect on
CSG Boremaster’s business, financial condition, results of operations and cash flows.
CSG Boremaster may not have sufficient capital in the future to meet its needs. Future financings to
provide this capital may dilute shareholders’ ownership in the combined company.
CSG Boremaster may raise additional capital in the future through public or private debt or equity
financings by issuing additional common shares or other preferred financing shares, debt or equity
securities convertible into common or preferred shares, or rights to acquire these securities. CSG
Boremaster may need to raise this additional capital in order to (among other things):
• take advantage of expansion or acquisition opportunities;
22
• acquire, form joint ventures with or make investments in complementary businesses,
technologies or products;
• develop new products or services;
• respond to competitive pressures;
• repay debt; or
• respond to a difficult market climate.
CSG Boremaster’s management may issue additional equity securities to fund the acquisition of
additional businesses or pursuant to employee benefit plans. CSG Boremaster may also issue
additional equity securities for other purposes. These securities may have the same rights as CSG
Boremaster’s common shares or, alternatively, may have dividend, liquidation, or other
preferences to CSG Boremaster’s common shares. The issuance of additional equity securities will
dilute the holdings of existing shareholders.
23
4. RESPONSIBILITY FOR THE INFORMATION MEMORANDUM
This Information Memorandum has been prepared by the Company to provide information to
prospective investors in the Company.
The Company accepts responsibility for the information contained in this Information
Memorandum. The management confirm that, after having taken all reasonable care to ensure that
such is the case, the information contained in the Information Memorandum is, to the best of their
knowledge, in accordance with the facts and contains no omission likely to affect its import.
24
5. CAUTIONARY NOTE REGARDING FORWARD-‐LOOKING STATEMENTS
This Information Memorandum and the documents incorporated by reference herein contain
forward-‐looking statements. All statements other than statements of historical facts are statements
that could be deemed forward-‐looking statements, including statements preceded by, followed by
or that include the words “estimate,” “plan,” project,” “forecast,” “intend,” “expect,” “anticipate,”
“believe,” “think,” “view,” “seek,” “target,” “goal,” or similar expressions; any projections of
earnings, revenues, expenses, synergies, margins or other financial items; any statements of the
plans, strategies and objectives of management for future operations; any statements concerning
proposed new products, services, or developments; any statements regarding future economic
conditions or performance; any statements of belief; and any statements of assumptions
underlying any of the foregoing.
Such forward-‐looking statements, whether expressed or implied, are subject to risks and
uncertainties that could cause the actual results of CSG Boremaster to differ materially from those
implied by such forward-‐looking statements, due to a number of factors, many of which are beyond
CSG Boremaster’s control. If any of these risks or uncertainties materializes or any of these
assumptions proves incorrect, results of CSG Boremaster could differ materially from the
expectations in these statements. CSG Boremaster does not undertake any obligation to update
these forward-‐looking statements, except as required by law.
No forward-‐looking statements contained in this Information Memorandum should be relied upon
as predictions of future events. No assurance can be given that the expectations expressed in these
forward-‐looking statements will prove to be correct. Actual results could differ materially from
expectations expressed in the forward-‐looking statements if one or more of the underlying
assumptions or expectations proves to be inaccurate or is unrealized. Some important factors that
could cause actual results to differ materially from those in the forward-‐looking statements are, in
certain instances, included with such forward-‐looking statements and in section 1 “Risk Factors”.
Readers are cautioned not to place undue reliance on the forward-‐looking statements contained in
this Information Memorandum, which represent the best judgment of the Company’s management
as of the date of this Information Memorandum. Except as required by applicable law, the
Company does not undertake responsibility to update these forward-‐looking statements, whether
as a result of new information, future events or otherwise.
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6. PRESENTATION OF CSG BOREMASTER
6.1 Strategic Objective
CSG Boremaster has a four-‐stage plan to provide solutions in two key areas in Asia Pacific that the
Company has identified as market targets:
• Unconventional gas extraction and production with existing operations in Indonesia and
elsewhere; and
• Emerging Myanmar development of oil and gas resources.
CSG Boremaster will be the result of a merger of two companies that already have the knowledge,
history and required licenses and permits in Indonesia to provide fit-‐for-‐purpose drilling rigs, and
all required CBM exploration and production equipment, engineering and analysis – offering the
lease owner all that is needed from planning to the pipeline to produce CBM from their reserves.
CSG Boremaster is positioned to be the solution provider to get Indonesia’s CBM production back
on track.
The Company’s mission is to make every customer the only customer that matters. The Company
will work closely with customers to realize the resource potential by providing them with quality
equipment and service.
In Indonesia, CSG Boremaster aims to be the local provider for CBM, shale gas, and coal gasification
drilling and production, as well as to seek opportunities to production share. The Company will
26
pursue this strategic goal by combining through merger with existing entities and experienced
experts with extensive history in Indonesia, using innovative engineering and fit-‐for-‐purpose
equipment currently unavailable in Indonesia;
• To provide customers a wide range of products and service as detailed below;
• To achieve profitability on a recurring, sustainable basis, and an acceptable market base
margin to claim its market share as a provider of drilling, project management and
equipment-‐related services;
• To position the Company as the only single-‐source provider of equipment for drilling and
producing gas from CBM deposits in Indonesia; and
• To utilize its management’s long-‐standing business relations and global knowledge to
attract those customers seeking the best rather than the cheapest solution.
6.2 Growth
CSG Boremaster plans to grow through a combination of organic and acquisitive growth. Organic
growth can be achieved by investment in additional equipment, increased personnel and by
offering the Company’s services in new geographical regions.
The Company’s ability to better service customers is dependent on the Company’s strategic
alignment with the customers’ key assets. It is therefore vital for CSG Boremaster to continue to
develop the required skills and innovate to be able to continue to improve the Company’s services.
The customers’ focus is to maximize recovery from producing fields, and this can best be achieved
through a combination of increased drilling activity, advanced engineering solutions and
geophysical analysis.
6.3 Services
CSG Boremaster will provide a full range of services for exploration programs and related
activities, including:
• Prospect Evaluation;
• Exploration Program Management;
• Gas Content and Desorption Test;
• GIP Estimations, Prospect Development and Mapping;
• Geological Assessment;
• Well site and Mud Logging Services;
• Rig Services;
• Production Test and Dewatering Services;
• Petro-‐physical Reservoir Analysis;
27
• Basin Analysis; and
• Core logging
CSG Boremaster will use the following data set for technical evaluations of exploration programs,
regional geological and geophysical studies, collection of offset well and field data, and the review
existing data and their interpretation for data analysis:
• Desorption and gas content;
• Methane and carbon dioxide isotherms;
• Gas composition;
• Isotope and water quality;
• Organic petrography and coal quality;
• Maturation and rank;
• DST and permeability;
• Pilot test production;
• Geological & Geophysical (G&G) work plan;
• Rig Provision;
• AFE/Budget preparation;
• Well design;
• Drilling and Operation Reports;
• Contractor selection and tender preparation; and
• Sampling strategy and test program;
Determination of gas content by desorption test is conducted according to the AS3980 standard.
Gas content testing is a very important stage in an exploration program and needs high quality,
reliable data to evaluate the resource potential in a prospect area – CSG Boremaster provides high
quality gas desorption test equipment and procedures for:
• Q1-‐Lost Gas;
• Q2-‐Measurable Gas; and
• Q3-‐Residual Gas
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CSG Boremaster uses the Society of Petroleum Engineers’ guidelines and methodology for Gas-‐in-‐
Place (“GIP”) estimations:
• The GIP calculations are based on definitive polygonal resource estimation techniques over
the extensive drill core, gas content, coal and petro-‐physical data;
• Deterministic and probabilistic resource and reserve estimations methodologies are used
for the prospective areas; and
• Strategic CBM prospect development and mapping
CSG Boremaster will provide comprehensive, advanced geological studies and reports based on
sedimentological, petrophysical and structural analysis of cores, cuttings and other field and well
data:
• Core analysis;
• Geological and structural mapping;
• Basic and detailed petrographic descriptions and reports;
• Thin section evaluation; and
• Rock-‐wireline log calibration for petrophysical evaluation
Underground Coal Gasification Consultancy Services – CSG Boremaster has the technical expertise
to advise on underground coal gasification (“UCG”) projects. The Company will be able to provide
the following services for UCG projects:
• Project Development and market analysis;
• Advance analysis of coal data;
• Coal Resource and Prospect Assessment for UCG;
• Geological and structural analysis for UCG development; and
• Drilling and sampling program for UCG
CSG Boremaster can provide advanced petrophysical log analyses for coal seam gas reservoirs and
their surrounding geology:
• Reservoir analysis for rock typing, petrophysics, formation evaluation and sequence
stratigraphy;
• Volumetric reserve estimation and well log analyses; and
• Software: Schlumberger Interactive Petrophysics; SMT Kingdom; Petrosys; and Crystal Ball
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CSG Boremaster will support coal seam gas drilling operations with the provision of well-‐site
geologists for:
• Sampling and core logging;
• Gas testing and mud logging;
• Supervising the all test services in the field;
• Reporting and communication; and
• Supervising drilling operations (company man)
CSG Boremaster will provide a comprehensive range of rig services:
• Rig selection for drilling program;
• Rig inspection;
• Rig safety audit;
• Contract preparation for drilling rigs;
• Cost estimates and forecasts for drilling programs;
• Daily drilling and operations reports;
• Sidetrack; and
• Directional drilling equipment and services
CSG Boremaster intends to operate drilling rigs with a similar specification to that shown in
Appendix One hereto.
Dewatering and gas production services for CBM and shale gas production provided by CSG
Boremaster will include:
• Production test program preparation;
• Production well and string design;
• Separator, flare, gas and water gathering lines supply;
• PCP/ESP supply with downhole components (Sucker rods, pony rods, stator, rotor);
• Downhole pressure, temperature and water level gauges supply;
• Gas and water sampling and testing; and
• Production testing management
Quantitative basin analysis is an essential tool in advanced coal seam gas explorations. Basin
analysis is based on an understanding of basin formation, sedimentology (size, rate, depositional
environment and mineralogical composition) and stratigraphy. Computer modeling of a CBM basin
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requires a thorough assessment of its geologic evolution and the quantitative description of this
evolution. CSG Boremaster will provide the following data for basin modeling in both one and two
dimensions:
• Burial and thermal history of the basin;
• Coal development and maturation history;
• Gas generation rate, amount and time;
• Tectonic history, uplifts and gas loss in relation to basinal inversions; and
• Better understanding of coal seam gas generation
Brown field development and production enhancement services to be offered by CSG Boremaster
include:
• Re-‐entry;
• Pipe recovery;
• Sidetrack;
• Obstruction removal; and
• Water shutoff
6.4 Competitive strengths
CSG Boremaster believes the following competitive strengths will enable it to capitalize on future
opportunities:
• Global energy demand and the inability of new oil and gas fields to provide sufficient
additional production capacity provide a good foundation for long-‐term further growth;
• Strong relationships with a diversified customer base across various geographic regions.
CSG Boremaster has strong relationships with many of the major and independent oil and
natural gas producers and service companies. CSG Boremaster can broaden its customer
base and geographic footprint by providing customers with advanced technology and
highly skilled operating personnel;
• CSG Boremaster plans to grow both organically and through acquisition of competing
businesses. A successful execution of this growth strategy will expand CSG Boremaster’s
geographic presence and customer base, in turn enabling CSG Boremaster to offer its
technology to a larger number of international exploration and production operators;
• CSG Boremaster aims to operate as a diversified service company through its drilling and
exploration and production services segments. Management believes that this
diversification will provide CSG Boremaster with stable cash flow and the opportunity for
continued further growth; and
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• CSG Boremaster’s executive management team has extensive experience in the energy
sector, and consequently has developed strong and longstanding relationships with many
of the major and independent exploration and production companies.
6.5 Key Management Personnel
Edward P. Bender, President Director and Chief Executive Officer (58)
Mr. Bender is currently Operations Director and a partner of PT Petro Bangun Engineering, a
fishing and intervention services company in Indonesia. He has 38 years of experience in all phases
of the global drilling and work-‐over market, with a particular emphasis on fishing, casing exits and
well remediation. Prior to joining PT Petro Bangun Engineering, Mr. Bender was employed by
Weatherford International for 13 years where he served in a variety of leadership roles from 1996.
From 2006 to 2009, Mr. Bender served as Business Unit Manager for Fishing Re-‐Entry Services in
Indonesia, the company’s largest fishing district in Asia, having been Fishing Tools Supervisor for
Weatherford in Indonesia Between 2005 and 2006. From 2002 to 2005, Mr. Bender held the
position of Fishing & Rental Tool Coordinator for Weatherford Middle East, while between 1996
and 2002, he was a Downhole Service Supervisor for Weatherford and trouble shooter in many
locations.
Between 1991 and 1996, Mr. Bender managed the fishing operations for SLB Sonatrach, Prior to
1991, Mr. Bender worked as a tool pusher, driller, derrick man, and fisherman for companies such
as H&H, Midway, and CPS. Overall, Mr. Bender has spent 38 years in the oil and gas industry. He is
a United States citizen, and 10-‐year resident of Indonesia.
Brian P. Bingham, Director of Operations (58)
Mr. Bingham is currently a Commissioner and partner of PT Petro Bangun Engineering, having
served as that company’s founder and Managing Director between 2009 and 2013. Prior to
establishing PT Petro Bangun Engineering, Mr. Bingham was Asia Pacific Region Intervention
Business Unit Manager of Weatherford International from 2007 to 2009, based in Indonesia.
Between 2004 and 2007, Brian opened and was Country Manager for Owens Oil Tools in
Indonesia, focused on intervention and sales of commodities. Between 2002 and 2004, he opened
the Houston branch and managed Sales and Business Development for Thru Tubing Systems Inc. of
Lake Charles, Louisiana.
Between 2000 and 2002, Mr. Bingham served as Product Line Partner for a joint venture start-‐up
with Grant Prideco designing and fabricating composite materials. From 1998 to 2000 he held the
position of Global Product Line Manager for Intervention at Weatherford International, based in
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their Houston Corporate Office. Between 1996 and 1998, he was a partner and President of Radius
Inc. in Houston and later Anchorage, before selling the company to Weatherford Inc. From 1990 to
1996 Brian opened and was District Manager for Drilex Systems Inc., in Prudhoe Bay Alaska.
Prior to 1990, Brian started as a roustabout and worked through every job to tool pusher and then
fishing tool supervisor. During his 38 years in the oil and gas industry, he has held a number of
oilfield management and ownership positions throughout the world with a history of startup
operations and locations, and has been a pioneer in the field of through tubing well intervention. A
recognized speaker, author, teacher and mentor in his field, he is also a long-‐standing member of
the SPE and ICOTA.
As Partners and Directors of PT Petro Bangun Engineering, Ed and Brian have designed and
manufactured under strict API and ISO guidelines their own branded line of fishing tools, including
jars, overshots, spears etc., under the name PBEOEM Singapore.
Dr. Alan L. Bayrak, Executive Vice President and Chief Technical Officer
Dr. Bayrak is a multi-‐disciplinary exploration geologist with over 20 years of international
experience in oil, gas and coal areas throughout the world, including Queensland, New South
Wales, the Otway Basin, the Irish Midlands, the Thrace Basin, the Western Black Sea and
Carpathians, Kalimantan and Sumatra. Dr. Bayrak has worked across the entire upstream cycle,
undertaking acreage evaluation, field exploration, project instrumentation, operation, discovery,
appraisal and development.
Dr. Bayrak has until now been the Managing Director of CSG, which he founded in Australia five
years ago, providing technical consultancy services to clients throughout the world for exploration,
production, drilling, commercialization, asset portfolio management, field and laboratory test
services, shale gas and underground coal gasification. Prior to forming his own consultancy
company, Dr. Bayrak had held a number of senior exploration and geology positions in Europe and
Australia.
In Australia, between May 2008 to January 2009. Dr. Bayrak served as Exploration Portfolio
Manager for Blue Energy Ltd. Between January 2006 and April 2008, he was the Senior Geologist
and Project Manager for Lucas Energy Pty. Ltd. In 2003, he had served as the Consultant Geologist
to New Hope Coal, Arrow Energy and Anglo Seamgas, and as a Project Geologist for Natural
Reserve and Environment in Victoria. Between 1999 and 2002, Dr. Bayrak was a Project Geologist
at the University of Melbourne and at Esso Australia’s Exploration Group.
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In Europe, Dr. Bayrak served as a Research Geologist at the Zedem Zonguldak Mining Center in
Turkey between 1994 and 1998, and in 1996, he was seconded from the Turkish Petroleum
Company to the Department of Fossil Fuels of the Polish Petroleum Company in Cracow. Prior to
1996, he also worked as a Project Geologist at the Aarhus Geophysical Laboratory in Aarhus,
Denmark.
Dr. Bayrak received his Bachelor’s degree in Geological Engineering from Selcuk University,
Turkey, and his Master’s degree in Petroleum Technology jointly from Metu Technical University,
Ankara and Aarhus University, Denmark. He was conferred a PhD in Exploration Geology by the
University of Melbourne. He is a highly sought after speaker and teacher and a published author on
the subjects of coal gas and the unconventional gas industry. Dr. Bayrak is an Australian citizen
resident in Australia and Indonesia.
Nicholas J. Whittle, Executive Vice President and Chief Financial Officer
Before Joining CSG Boremaster, Mr. Whittle was Chief Financial Officer at Hot-‐Hed International,
with responsibility for eleven oilfield service subsidiaries worldwide. Prior to this, he had held
various financial positions in Europe and Asia.
From 2001 until 2005, Mr. Whittle was a Technical Advisor to the Indonesian Bank Restructuring
Agency in Jakarta, where he led a number of equity and debt engagements to return over US$3
billion to the Republic of Indonesia through asset sales. Between 1999 and 2001, Mr. Whittle held
the position of Senior Corporate Finance manager at Kim Eng Securities in Jakarta.
Between 1994 and 1996, Mr. Whittle served as General Manager of Indobask Limited in Jakarta,
while from 1990 to 1994, he was Regional Manager for South East Asia for Grupo Centunion S.A. of
Spain. From 1988 to 1990, he was an Assistant Portfolio Manager at Midland Montagu Asset
Management Ltd. in London.
Mr. Whittle studied at the University of Cambridge, where he obtained a Master’s degree in
Japanese, and received his Masters of Business Administration from the Graduate School of
Business of Columbia University in New York. Mr. Whittle speaks fluent Indonesian, French,
Spanish and Japanese, and is a British citizen resident in Indonesia.
6.6 Trend Information
CSG Boremaster believes that the following trends in the industry should benefit its operations:
• Increased use of horizontal drilling to develop unconventional resource plays. As a result of
improvements in horizontal drilling and production-‐enhancement technologies, oil and
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natural gas companies are increasingly developing unconventional resources such as tight
sands and shales. Successful and economic production of these unconventional resource
plays frequently requires increased horizontal drilling, fracturing and stimulation
techniques. Drilling related activity for unconventional resources is typically done on
tighter acre-‐spacing and thus requires that more wells be drilled relative to conventional
resources. CSG Boremaster believes that all of these characteristics will drive the demand
for its services;
• New and emerging unconventional resource plays. Exploration and production companies
continue to find new unconventional resources, including oil and liquids-‐based shales. In
certain cases, exploration and production companies have acquired vast acreage positions
that require them to drill and produce hydrocarbons to hold the leased acreage. CSG
Boremaster believe these emerging resource plays will continue to drive demand for its
services, as they typically require the use of extended reach horizontal drilling, multiple
stage fracture stimulation and high pressure completion capabilities;
• Major integrated exploration and production companies have increasingly been allocating
capital and other resources to unconventional oil and natural gas tight sand and shale
resource plays. Over the past four years, exploration and production companies such as
ExxonMobil, BP and Chevron have made strategic acquisitions and/or formed joint
ventures in unconventional resource plays. This focus may intensify as regulatory scrutiny
of oilfield operations increases due to the blowout of BP’s Macondo well and the related oil
spill in the Gulf of Mexico in 2010;
• With the increased maturity of conventional and, in many cases, unconventional resource
plays, oil and natural gas production may be characterized as having steeper initial decline
curves. As a result, CSG Boremaster believes that an increasing number of wells will need
to be drilled to offset production declines. Given average decline rates and demand
forecasts, CSG Boremaster believes that the number of wells drilled is likely to continue to
increase in coming years. Once a well has been drilled, it requires recurring production and
completion services, which CSG Boremaster believes will drive demand for its services; and
• Increased fracturing and other well stimulation services are required for horizontal wells.
Multiple stages of hydraulic fracturing are typically required to enhance hydrocarbon
production in horizontal wells. Water, sand and other additives are used in the fracturing
process. The fractures created in the formation are held open through the use of sand and
other proppants such as resin-‐coated and ceramic particles. The scope of these services for
a horizontal well is greater than for a conventional well. It has been reported in the
industry that the average horsepower, length of the lateral and number of fracture stages
has increased since 2008. The total size of the global hydraulic fracturing market, based on
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revenue, was estimated to be approximately US$18.0 billion in 2010, based on data from a
2011 report by Spears & Associates. Fracturing revenue increased by US$7.5 billion in
2010 as compared to 2009, primarily due to increased drilling activity, higher oil prices
and a greater proportion of horizontal wells relative to vertical wells.
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7. CURRENT PROJECT OUTLOOK The following is a list of projects where CSG Boremaster has either already received a Letter of
Intent, is in Tender phase or is in the negotiation stage of project development. Appendix Two
provides a list of CBM operators in Indonesia that have already had their production plans
approved by the government and are at varied stages of operation. The majority of these
concession holders have yet to begin to drill or tender the services to begin development.
