Deep Down

Subsea Service and Technology Innovative Deepwater Solutions OTCBB: DPDW Forward-looking Statements This Presentation includes "forward-looking statements" within the meaning of the Private Securities Litigation Reform Act of 1995. All statements, other than statements of historical facts included in this Presentation regarding the Company's financial position future revenues, net income, potential evaluations, business strategy and plans and objectives for future operations are "forward-looking statements." These forward-looking statements are commonly identified by the use of such terms and phrases as "intends,” "estimates," "expects" and “believes". Although the Company believes that the assumptions upon which such forward-looking statements are based are reasonable, it can give no assurance that such assumptions will prove to be correct. All forward-looking statements in this Presentation are expressly qualified by the cautionary statements and by reference to the underlying assumptions that may prove to be incorrect. Table of Contents • Company Overview • Subsea Oil & Gas Industry Outlook • Value-added Products & Services • Financial Summary DPDW Overview INDUSTRY: Energy – Worldwide Offshore Oil & Gas Services, Subsea/Deepwater Services, and Marine Support Services and Products Since 1997, Deep Down has provided subsea oilfield services specializing in: – subsea/deepwater distribution system installation service and technology solutions, – distributed and deepwater riser buoyancy, – ROVs, tooling, & crews, – offshore equipment rental services, and – advanced electronic marine automation. DPDW - Snapshot • • • Deep Down was founded in 1997. Deep Down became a public company in December 2006. Deep Down’s business strategy is to be a service and technology leader in the ultra-deepwater exploration & production market through internal growth and acquisitions of technology driven companies. Recent Acquisitions: • – Marine automation & control (ElectroWave USA) – ROV services & rentals (Mako Technologies) – Deepwater buoyancy and flotation products & technology (Flotation Technologies) • Strong, highly experienced, and diverse management team. Core Services and Products Subsea (Umbilical) Distribution Systems • Subsea services to bring wells online  Deepwater engineering & consulting  Subsea installation  Innovation of deepwater technology Recently a finalist in the ASME International Petroleum Technology Institute’s Woelfel Best Mechanical Engineering Achievement Award  Final Commissioning Buoyancy Products • Engineered flotation systems • Riser buoyancy products • Distributed Buoyancy Remotely Operated Vehicle Services • ROVs, ROV tooling, & crews Engineering Services Installation Equipment Increasing Subsea Presence Offshore Equipment Marine Automation & Control Installation Carousels SeaStax® Pump & Testing Compliant Umbilical Splice Glycount™ Fluid Particle Counters Proteus™ Active Heave-compensators BS Latchers® & Bend Stiffeners Drilling Riser Buoyancy Pipeline, Flowline, Riser & Umbilical Buoyancy Subsea Accumulator Module Now producing in ocean depths of more than 10,000 feet. ROV’s Subsea Deployment Baskets (SDB) Engineered Buoyancy Intervention Tooling Installation Buoyancy Bend Limiters & Terminations Loose-Tube Steel Flying Leads Moray® Deep Down Customers • • • • • • • • • • • • • • • • • • ABB Vetco Acute Technologies Agip Allison Marine Amerada Hess Anadarko BP British Gas Cabett Services Cal Dive Cameron Chevron Technip Canyon Express DMT Duco EEX Corporation Emerson • • • • • • • • • • • • • • • • • Exxon Mobil • Gilmore Valve • Global industries • Halliburton • Subsea 7 • JDR Cable Systems • Kerr-McGee (Anadarko) • Kvaerner • KOS • LLOG • Marathon • Nexans Oceaneering • OII/OIE/OPG • OMUK/OMUS Petrobras Precision Tube Samedan ENI GeoBird Shell Schlumberger Saipem Stolt Offshore (Acergy) Subsea Ventures Texaco (Chevron) Thermotite Transocean Unocal (Chevron) Veolia Deep Down Serves Most Major Operators 2009 - 2011 Forecast Production Awards 900 800 700 Top 20 Operators – 1,760 / 1,956 Awards Africa/Medit. 23% # Subsea Trees 600 500 400 300 200 100 0 - Denotes Deep Down Customer South America 45% Asia Pacific/Middle East 11% North America 10% North Sea/Arctic 11% T al Ch ota St Du evr l at tc on oi h/ lH Sh yd e Ex ro ll xo AS nM A ob W oo il ds En id i N eP EX e H es EN tro s Pe leu tr m o H le u us m M ky N urp Oil ob h le y O En il e C G rg on a y oc zpr oP om hi lli p B IN s H P PE N B au ill X tic Fo ito al r e n P st et r o Oil le um Source: Quest Subsea Forecast Awards -- February 2009 Pe t ro br a R oy bp s Operators DPDW Team Ronald E. Smith, CEO and director Mr. Smith co-founded Deep Down in 1997. Mr. Smith graduated from Texas A&M University with a Bachelor of Science degree in Ocean Engineering in 1981, and has worked both onshore and offshore (logging over 5000 days at sea) in management positions for Ocean Drilling and Exploration Company (ODECO), Oceaneering, Mustang Engineering and Kvaerner before founding Deep Down. Mr. Smith’s expertise includes offshore technology, deepwater installations, nautical innovations, state-ofthe-art communications, diving technology, hydromechanics, naval architecture, offshore structures dynamics, diving technology and marketing of new or innovative concepts. Mr. Smith is responsible for the creation and development of many innovative solutions for the offshore industry, including the first loose-tube steel flying lead, which is commonly used in deepwater installations today, and hold numerous subsea patents. OTCBB: DPDW DPDW Team Eugene L. Butler, Chief Financial Officer, director Mr. Butler served in various capacities as a director, president, chief executive officer (CEO), chief financial officer (CFO), and chief operating officer (COO) for Weatherford International, Inc., a multibillion dollar multinational service and equipment corporation serving the worldwide energy market, from 1974 to 1991. He was elected to Weatherford’s board of directors in May of 1978, elected president and COO in 1979, and president and CEO in 1984. He successfully developed and implemented a turnaround strategy eliminating debt and returning the company to profitability during a severe energy recession. Mr. Butler also expanded operations into international markets allowing Weatherford to become a major worldwide force with its offshore petroleum products and services. OTCBB: DPDW Table of Contents • Company Overview • Subsea Oil & Gas Industry Outlook • Value-added Products & Services • Financial Summary Industry Overview Petroleum Industry in Flux • State of the industry has been in disarray since last year. The global economy appears to be in an economic and financial recession, oil prices have fallen and now are significantly lower from the high, set last year. Deep Down’s opportunities ARE NOT tied to the constantly fluctuating prices of oil Deep Down’s opportunities ARE tied closely to committed capital expenditures in subsea projects already underway. Quest’s latest subsea capital expenditure forecast, released during February 2009, indicated capital expenditures for subsea developments between 2009 and 2014 would reach $81.1 billion. • • • Industry Overview Deepwater Demand Forecast Remains Healthy • Another indication of the strength of deepwater subsea production is provided by Energy business analysts Douglas-Westwood in its recently released The World Deepwater Market Report 2009-2013 in December 2008. Despite current oil price concerns, deepwater oil & gas sector will spend an average of over $27 billion annually during the period 2009 to 2013 (includes exploration and production). • Industry Overview Deepwater Service is our Focus • In addition to servicing standard subsea projects, Deep Down’s area of expertise for 12 years has been installation and new technological innovations for deepwater, and ultra-deepwater production. Deep Down is one of only a “handful” of deepwater service companies specializing in ultradeepwater projects. • Industry Overview Deep Down’s Market Outlook Subsea Tree • Although Deep Down does not manufacture subsea trees, it is a key indicator of the health of the subsea services sector, and directly relates to our opportunities. The following chart shows our subsector remaining strong over the next three years due to major subsea projects that have already been funded and will likely soon be completed. • Photo Courtesy of Ocean Flow International Source: Quest Offshore Resources, HolyGrail_December 2008.xls World Subsea Capital Expenditures Forecast spending 2009-2014e $74.5 bn Source: Quest Offshore Resources, May 2009 25000 1200 20000 1000 $MM or Km of SPU 800 15000 600 10000 400 5000 200 0 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 0 2014 Onstream Year $MM - subsea production um bilicals installed $MM - tree control pkg (flying leads, jum per, MCS, HPU, UTA, J-Plate) No. subsea trees (w ell com pletions) by onstream year $MM - subsea m anifolds $MM - subsea trees & control pod: (chokes, sensor pkg.) Km - subsea production um bilicals installed No. Subsea Trees Industry Overview Healthy Umbilical Installations Scheduled • • Although Deep Down does not manufacture umbilicals, it is another key indicator of the health of our subsector. Deep Down’s market in this area may be challenging in 2009; however, the outlook remains relatively stable for our umbilical services work. Industry Overview Healthy ROV Market for Deep Down • Deep Down’s is also capitalizing on the increased need for ROVs, ROV tooling, and the crews that operate them. 2007 operational expenditure in the global ROV market was just under $1.5 billion. ROV expenditures are forecast to increase to $2.4 billion by the end of 2012. This area of our service is provided through Mako Technologies. • • • Industry Overview Healthy Buoyancy Opportunities for Deep Down • Deep Down is also capitalizing on the increased need for buoyancy, particularly drill riser buoyancy. • The massive pressures in ultradeepwater, and the great weight of the drill riser itself, have presented significant engineering challenges to deepwater drilling. Buoyancy is provided through Flotation Technologies, which was acquired in June of 2008. We have made important technological advances in the use of syntactic foam buoyancy solutions for ultra-deepwater drilling. • • Table of Contents • Company Overview • Subsea Oil & Gas Industry Outlook • Value-added Services & Products • Financial Summary Deep Down Service & Technology Overview Schedule of Current Capabilities and Expertise • Deepwater Engineering/Consulting • Deepwater Installation Management • Subsea Distribution System Service and Commissioning • Conceive, Design, and Produce Innovative Exploration and Production Support Technologies • Offshore Flotation & Drill Riser Buoyancy • ROVs, ROV Tooling, & Crews • Offshore Oil & Gas Equipment Rentals • Marine Monitoring/Automation OTCBB: DPDW Deep Down Service & Technology Overview Deep Down is an offshore service and technology company, solution driven, developing and installing innovative subsea technologies for complex subsea and deepwater oilfield projects between the drilling or platform and the wellhead on the ocean floor, for most major integrated oil and gas companies, large independents, and foreign national companies. . Service & Technology Overview Service and Support Consulting • • • • • • • • Installation Support ROV, Tooling, & Crews Distribution System Commissioning Pumping Services SIT / FAT Spooling Support Testing Equipment Umbilical Termination • • • • • • • • • • • • • • • • Project Engineering Project Management Storage Management Loose-tube Steel Flying Leads Moray® (cobra) Deepwater Buoyancy J-plates Bend Stiffener Latchers Subsea Deployment Baskets Mud Mats Subsea Accumulator Module Bend Limiters Compliant Umbilical Splice SeaStax® Proteus™ Active Heavecompensators Subsea Installation Aids Technology Loose-tube Steel Flying Leads • Connects subsea trees to the umbilical. Bend Limiters / Bend Stiffener Latchers Bend Limiter • • • • • Designed, built, and tested in two weeks “Save the day” response for BP Aspen Requires only standard flange on end of Itube Can be made for any size No kink-point between BS and Bullnose Bend Stiffener Latcher -> • • • • • Designed to fit flying leads Mold designed in house, local fabrication Parts manufactured in Texas Quick availability, better prices Steel bend limiters for larger umbilicals OTCBB: DPDW Marine Automation & Control Deep Down offers services and products in the field of electrical and electronic engineering to the energy, military, marine, and commercial business sectors through ElectroWave USA. Below: USCG Mackinaw GLIB - Complete MPCMS Top: Crosco’s Zahgreb 1 - Ballast Below: Staten Island Ferries - Remote CCTV ROV Services, Crews, Rentals, & Tooling Deep Down provides the offshore industry with rentals of ROVs, ROV tooling, & the crews that operate them, together with reliable offshore equipment; plus, first-class services to support topside projects and diving operations. ROV Deepwater Buoyancy We design and manufacture deepwater buoyancy systems; specializing in Flotec™ syntactic foam and polyurethane elastomer products and provide quick turnaround, costeffective buoyancy and elastomer products to the worldwide Offshore, Seismic, Oceanographic, and Military markets. Table of Contents • Company Overview • Subsea Oil & Gas Industry Outlook • Value-added Products & Services • Financial Summary Historical Balance Sheet Cash and Equivalents Other Current Assets Total Current Assets Property and Equipment Other Assets and Goodwill Total Assets Current Liabilities Long-Term Liabilities Series E Redeemable Exchangeable Preferred Stock Series G Redeemable Exchangeable Preferred Stock Tax Deferred Liabilities Total Liabilities Series D Redeemable Convertible Preferred Stock Series F Redeemable Convertible Preferred Stock Total Temporary Equity Series C Convertible Preferred Stock Common Stock Paid In Capital Retained Earnings Total Stockholders' Equity Total Liabilities and Stockholders' Equity $ $ 12/31/2008 2,495,464 13,828,567 16,324,031 13,799,196 49,896,847 63,696,043 7,016,349 1,718,475 1,125,945 9,860,769 177,351 60,328,124 (6,670,201) 53,835,274 63,696,043 $ $ 12/31/2007 2,206,220 12,426,722 14,632,942 5,172,804 30,878,885 36,051,689 7,958,700 10,698,818 386,411 19,043,929 4,419,244 4,419,244 85,977 14,849,847 (2,347,308) 12,588,516 36,051,689 $ $ $ $ Income Statement Revenues Cost of Sales Gross Profit Operating Expenses: Selling, General & Administrative Depreciation Total Operating Expenses Operating Income (Loss) Gain on Disposal of Assets Gain (Loss) on Debt Extinguishment Interest Income Interest Expense Other Income (Expense) Total Other Income (Expense) Income (Loss) from Continuing Operations Income Tax Benefit (Expense) Net Income (Loss) Basic earnings per share Share used in computing diluted per share amounts Diluted earnings per share Share used in computing basic per share amounts Historical Year Ended 2008 $ 35,769,705 21,686,033 14,083,672 14,290,440 1,285,079 15,575,519 (1,491,847) (446,412) 110,504 (3,511,177) (26,333) (3,873,418) (5,365,265) 1,042,372 (4,322,893) (0.03) 142,906,616 (0.03) 142,906,616 Year Ended 2007 $ 19,389,730 13,306,086 6,083,644 4,284,553 141,247 4,425,800 1,657,844 2,000,000 92,664 (2,430,149) 1,823 (335,662) 1,322,182 (369,673) 952,509 0.01 73,917,190 0.01 104,349,455 $ $ $ $ $ $ Q1 2009 Balance Sheet First Quarter 2009 3/31/2009 Cash and Equivalents Other Current Assets Total Current Assets Property and Equipment Other Assets and Goodwill Total Assets Current Liabilities Long-Term Liabilities Series E Redeemable Exchangeable Preferred Stock Series G Redeemable Exchangeable Preferred Stock Tax Deferred Liabilities Total Liabilities Series D Redeemable Convertible Preferred Stock Series F Redeemable Convertible Preferred Stock Total Temporary Equity Series C Convertible Preferred Stock Common Stock Paid In Capital Retained Earnings (Accumulated Deficit) Total Stockholders' Equity Total Liabilities and Stockholders' Equity $ $ 6,260,939 10,142,518 16,403,457 14,806,223 50,119,739 64,925,962 6,121,881 3,358,435 2,310,728 11,791,044 179,701 60,355,193 (7,399,976) 53,134,918 64,925,962 $ $ Q1 2009 Income Statement First Quarter 2009 Ended 3/31/09 Revenues Cost of Sales Gross Profit Operating Expenses: Selling, General & Administrative Depreciation Total Operating Expenses Operating Income (Loss) Gain on Disposal of Assets Gain (Loss) on Debt Extinguishment Interest Income Interest Expense Other Income (Expense) Total Other Income (Expense) Income (Loss) from Continuing Operations Income Tax Benefit (Expense) Net Income (Loss) Basic earnings per share Share used in computing diluted per share amounts Diluted earnings per share Share used in computing basic per share amounts $ 7,102,589 4,798,788 2,303,801 2,843,776 406,097 3,249,873 (946,072) 2,228 (48,344) (2,910) (49,026) (995,098) 265,323 (729,775) 176,150,630 176,150,630 $ $ $ Historical EBITDA reconciliation (Dollars in thousands) Year Ended December 31, 2007 As Pro Forma1 Reported Revenue Gross profit EBITDA Non-recurring expenses Adjusted Pro Forma EBITDA 1. 2. 3. Year Ended December 31, 2008 As Pro Forma1 Reported $ 35,770 14,084 2,667 2 $ 19,390 6,084 2,272 $ 38,294 14,572 7,067 73 $ 7,140 $ 41,711 16,020 3,636 3,156 $ 6,792 3 Pro forma results reflect full year contribution from Mako and Flotation Technologies operations, which were acquired in December 2007 and May 2008, respectively 2007 adjustments for non-recurring costs relate primarily to professional fees associated with Mako acquisition 2008 adjustments for non-recurring costs relate primarily to professional fees associated with Flotation Technologies acquisition, equity private placement and SEC registration process History of Growth 35.8 (In millions of U.S. Dollars) ? 19.4 8.8 2 3.3 5 5.2 3.6 5.6 7.1 Q1 ended 3/31/09 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 Privately-held Publicly-held (DPDW) Corporate Strategy Deep Down’s strategy is to be a service and technology leader in the ultra-deepwater exploration & production market through internal growth and acquisitions of technology driven companies. Contact Information Corporate Offices: 8827 W. Sam Houston Pkwy N. Suite #100 Houston, TX 77040 Tel: (281) 517-5000 Fax: (281) 517-5001 www.deepdowncorp.com