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
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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.
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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
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
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
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
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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,
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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.
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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
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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
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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;
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• 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
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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
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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