/NOT FOR DISTRIBUTION TO U.S. NEWSWIRE SERVICES OR FOR
DISSEMINATION IN THE UNITED STATES. ANY FAILURE TO COMPLY
WITH THIS RESTRICTION MAY CONSTITUTE A VIOLATION OF U.S. SECURITIES
LAW/
CALGARY, Nov. 13, 2014 /CNW/ - High Arctic Energy Services
Inc. (TSX: HWO) ("High Arctic" or the "Corporation") today
announced its operating and financial results for the three and
nine months ended September 30,
2014.
Tim Braun, High Arctic's Chief
Executive Officer, reports: "The outlook for High Arctic's service
offerings in Papua New Guinea
remains buoyant for 2015. We are investing to increase the depth of
the regional management team and to deliver our new rigs to support
future growth initiatives. The Canadian business continues to
strengthen on a year over year basis, and we are anticipating a
solid fourth quarter. Despite the recent downturn in oil prices the
outlook for our market segments remains positive."
Highlights
- Revenues increased by 14% for the third quarter of 2014 to
$41.3 million (Q3 2013 - $36.3 million).
- Adjusted EBITDA(1)(2) was $9.8 million for Q3 2014 (Q3 2013 - $9.8 million). For the nine months ended
September 30, 2014, adjusted EBITDA
increased by 24% to $36.0 million (Q3
2013 - $29.0 million).
- On July 28, 2014, High Arctic
completed the acquisition of two heli-portable drilling rigs.
The Corporation has signed a drilling services contract with a
large oil and gas operator in PNG to utilize one of the rigs.
The two year term commences with the spud of a first well, which is
expected to occur late in Q1 2015.
- On July 2, 2014, High Arctic
welcomed a new CEO and a new President, International on
October 1, 2014; both individuals
bring significant international drilling experience to High
Arctic.
- High Arctic paid dividends of $2.4
million during Q3 2014. The Corporation continues to
maintain a strong balance sheet and has a trailing annual dividend
payout ratio of 21%.
Selected Comparative Financial Information
The following is a summary of selected financial information of
the Corporation. All figures are derived from financial
information that is prepared or presented in accordance with
International Financial Reporting Standards ("IFRS"):
|
Three Months
Ended
September
30
|
|
Nine Months
Ended
September
30
|
|
|
$ millions (except
per share amounts)
|
2014
|
2013
|
Change
|
%
|
|
2014
|
2013
|
Change
|
%
|
|
Revenue
|
41.3
|
36.3
|
5.0
|
14
|
|
125.6
|
114.0
|
11.6
|
10
|
|
EBITDA(1)
|
8.3
|
12.4
|
(4.1)
|
(33)
|
|
34.0
|
31.1
|
2.9
|
9
|
|
Adjusted
EBITDA(1)
|
9.8
|
9.8
|
-
|
-
|
|
36.0
|
29.0
|
7.0
|
24
|
|
Operating
earnings
|
6.4
|
9.4
|
(3.0)
|
(32)
|
|
25.8
|
22.7
|
3.1
|
14
|
|
Net
earnings
|
3.7
|
7.7
|
(4.0)
|
(52)
|
|
19.7
|
18.2
|
1.5
|
8
|
|
per share
(basic)(2)
|
0.07
|
0.16
|
(0.09)
|
|
|
0.39
|
0.38
|
0.01
|
|
|
per share
(diluted)(2)
|
0.07
|
0.16
|
(0.09)
|
|
|
0.39
|
0.37
|
0.02
|
|
|
Funds provided
from operations(1)
|
7.6
|
8.2
|
(0.6)
|
(8)
|
|
30.5
|
24.5
|
6.0
|
24
|
|
per share
(basic)(2)
|
0.14
|
0.17
|
(0.03)
|
|
|
0.61
|
0.51
|
0.10
|
|
|
per share
(diluted)(2)
|
0.14
|
0.17
|
(0.03)
|
|
|
0.60
|
0.50
|
0.10
|
|
|
Dividends
|
2.4
|
1.9
|
0.5
|
|
|
6.7
|
5.3
|
1.4
|
|
|
Capital
expenditures
|
36.8
|
6.9
|
29.9
|
|
|
41.0
|
17.7
|
23.3
|
|
|
Working
Capital
|
|
|
|
|
|
44.8
|
35.7
|
9.1
|
25
|
|
Total
assets
|
|
|
|
|
|
178.8
|
127.9
|
50.9
|
40
|
|
Total non-current
financial liabilities
|
|
|
|
|
|
-
|
6.7
|
(6.7)
|
|
|
Net cash, end of
period (1)
|
|
|
|
|
|
46.0
|
22.0
|
24.0
|
109
|
|
Shares outstanding
- end of period(2)
|
|
|
|
|
|
55.8
|
49.9
|
5.9
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(1) Readers are cautioned
that EBITDA, Adjusted EBITDA, Funds provided from operations, net
cash and working capital do not have standardized meanings
prescribed by IFRS – see "Key Financial Measures".
|
|
(2) Adjusted EBITDA is
calculated as EBITDA plus adjustments for share-based compensation,
loss on sale of property and equipment, excess of insurance
proceeds over costs and foreign exchange gains or
losses.
|
|
(3) The restricted shares
held by a trustee under the Executive and Director Incentive Share
Plan are included in the shares outstanding. The number of
shares used in calculating the net earnings per share amounts is
determined differently as explained in the Financial
Statements.
|
Selected Quarterly Consolidated Financial Information (Three
Months Ended)
The following is a summary of selected financial information of
the Corporation for the last eight completed quarters:
|
$ (millions, except
per share amounts)
|
Sep
30,
2014
|
Jun
30,
2014
|
Mar
31,
2014
|
Dec
31,
2013
|
Sep
30,
2013
|
Jun
30,
2013
|
Mar
31,
2013
|
Dec
31,
2012
|
|
|
|
|
|
|
|
|
|
|
Revenue
|
41.3
|
39.8
|
44.5
|
38.7
|
36.3
|
32.9
|
44.8
|
38.6
|
|
|
|
|
|
|
|
|
|
|
Adjusted
EBITDA
|
9.8
|
11.1
|
15.1
|
12.5
|
9.8
|
6.6
|
12.6
|
10.0
|
|
|
|
|
|
|
|
|
|
|
Net
earnings
|
3.7
|
6.7
|
9.3
|
6.4
|
7.7
|
2.1
|
8.4
|
5.9
|
|
per share –
basic
|
0.07
|
0.13
|
0.19
|
0.13
|
0.16
|
0.04
|
0.17
|
0.12
|
|
per share –
diluted
|
0.07
|
0.13
|
0.18
|
0.13
|
0.16
|
0.04
|
0.17
|
0.12
|
|
|
|
|
|
|
|
|
|
|
Funds provided
from operations
|
7.6
|
9.8
|
13.1
|
10.8
|
8.2
|
5.1
|
11.2
|
8.7
|
|
|
|
|
|
|
|
|
|
Outlook
Rig 104, along with the 104 leap frog rig, continues to operate
with our largest customer in the PNG highlands. It is expected that
the rig will be fully utilized for the remainder of 2014 and
through its contract term which runs to June 2016. Drilling
activities are for both development oil wells to replace depleting
production and gas wells to continue to provide feedstock for the
PNG-LNG liquefaction plant.
Rig 103, along with the 103 leap frog rig and ancillary rental
equipment, continues to work in the Gulf Province of PNG for
another customer. After completion of the drilling services
contract with this customer late in the first quarter of 2015, Rig
103 is expected to re-commence drilling activities with our largest
customer, under the existing contract, which runs through to June,
2016.
Rig 115 is currently undergoing upgrading in Houston, Texas in preparation for its first
two years of contracted work in PNG. The rig is scheduled to
be shipped from Houston late in
the fourth quarter of 2014 and arrive in PNG for mobilization to
site in the first quarter of 2015.
Rig 102 continues to be stacked following the completion of its
last contract in May of 2014. This rig will remain in PNG as
it is the only heli portable hydraulic workover rig currently in
the country available to meet the future demand for workover and
snubbing services from the growing number of production
wells. Presently there is no work contracted for this
rig.
Our existing rental equipment in PNG continues to be sufficient
for the current drilling activity. As such, approximately
$8 million of budgeted capital
expenditures for rental equipment in 2014 has been deferred.
In the third quarter of 2014, rental equipment utilization was
lower than the prior quarter of 2014 due to the completion of a
significant project. The addition of our two new drilling rigs
should generate demand for redeployment of this idle equipment in
2015. Our contract with a second major rental customer will
conclude in stages throughout 2015 as their drilling program is
completed. Management continues to evaluate new markets for
expansion and redeployment of our rental assets.
Activity levels in Canada in
the third quarter of 2014 were improved compared to the prior year,
due to more favourable weather, and stronger demand for completion
and workover services in Northeast
British Columbia. Despite the recent decline in commodity
prices, High Arctic anticipates that activity levels for Q4 2014
will be similar to those of Q4 2013 as customers have remaining
well completion budgets to expend prior to year end. The current
uncertainty surrounding declining commodity prices has not yet
impacted expected activity levels for the upcoming winter
season. Should commodity prices continue to decline, activity
levels in Canada coming out of
spring break up could be negatively affected.
Key Financial Measures
This press release contains references to certain financial
measures that do not have a standardized meaning prescribed by IFRS
and may not be comparable to the same or similar measures used by
other companies. High Arctic uses these financial measures to
assess performance and believes these measures provide useful
supplemental information to shareholders' and investors. These
financial measures are computed on a consistent basis for each
reporting period and include the following:
EBITDA
Management believes that, in addition to net earnings reported
in the consolidated statement of earnings and comprehensive income,
EBITDA (earnings before interest, taxes and depreciation and
amortization) is a useful supplemental measure of the Corporation's
performance prior to consideration of how operations are financed
or how results are taxed or how depreciation and amortization
affects results. EBITDA is not intended to represent net
earnings calculated in accordance with IFRS.
Adjusted EBITDA
This measure is used by management to analyze EBITDA (as
referred to above) prior to the effect of share-based compensation,
gains or losses on sale of assets or investments, excess of
insurance proceeds over costs and foreign exchange gains or losses,
and is not intended to represent net earnings as calculated in
accordance with IFRS.
The following tables provide a quantitative reconciliation of
consolidated net earnings to EBITDA and Adjusted EBITDA for the
three and nine months ended September
30:
|
($
millions)
|
Three
months
ended
Sept. 30,
2014
|
|
Three
months
ended
Sept. 30,
2013
|
|
Nine
months
ended
Sept. 30,
2014
|
|
Nine
months
ended
Sept. 30,
2013
|
|
Net earnings for
the period
|
3.7
|
|
7.7
|
|
19.7
|
|
18.2
|
|
Add:
|
|
|
|
|
|
|
|
|
Interest and finance
expense
|
0.1
|
|
0.2
|
|
0.4
|
|
0.6
|
|
Income
taxes
|
1.3
|
|
1.5
|
|
4.5
|
|
3.9
|
|
Amortization
|
3.2
|
|
3.0
|
|
9.4
|
|
8.4
|
|
EBITDA
|
8.3
|
|
12.4
|
|
34.0
|
|
31.1
|
|
Add:
|
|
|
|
|
|
|
|
|
Share-based
compensation
|
0.4
|
|
0.1
|
|
1.0
|
|
0.4
|
|
Loss (gain) on sale
of assets
|
(0.2)
|
|
0.3
|
|
(0.2)
|
|
0.3
|
|
Excess of insurance
proceeds over costs
|
-
|
|
(2.7)
|
|
-
|
|
(2.7)
|
|
Foreign exchange loss
(gain)
|
1.3
|
|
(0.3)
|
|
1.2
|
|
(0.1)
|
|
Adjusted
EBITDA
|
9.8
|
|
9.8
|
|
36.0
|
|
29.0
|
Oilfield Services Operating Margin
Oilfield services operating margin is used by management to
analyze overall operating performance. Oilfield services
operating margin is not intended to represent operating income nor
should it be viewed as an alternative to net earnings or other
measures of financial performance calculated in accordance with
IFRS. Oilfield services operating margin is calculated as
revenue less oilfield services expense.
Oilfield Services Operating Margin %
Oilfield services operating margin % is used by management to
analyze overall operating performance. Oilfield services
operating margin % is calculated as oilfield services operating
margin divided by revenue.
Percent of Revenue
Certain figures are stated as a percent of revenue and are used
by management to analyze individual components of expenses to
evaluate the Corporation's performance from prior periods and to
compare its performance to other companies.
Funds Provided from Operations
Management believes that, in addition to net cash generated from
operating activities as reported in the consolidated statements of
cash flows, cash flow from operating activities before working
capital adjustments (funds provided from operations) is a useful
supplemental measure as it provides an indication of the funds
generated by High Arctic's principal business activities prior to
consideration of changes in items of working capital.
This measure is used by management to analyze funds provided
from operating activities prior to the net effect of changes in
items of non-cash working capital, and is not intended to represent
net cash generated from operating activities as calculated in
accordance with IFRS.
The following tables provide a quantitative reconciliation of
net cash generated from operating activities to funds provided from
operations for the three and nine months ended September 30:
|
($
millions)
|
|
Three
Months
ended
Sept. 30,
2014
|
|
Three
Months
ended
Sept. 30,
2013
|
|
Nine
Months
ended
Sept. 30,
2014
|
|
Nine
Months
ended
Sept. 30,
2013
|
|
Net cash generated
from operating activities
|
|
10.9
|
|
8.8
|
|
39.7
|
|
26.9
|
|
Less:
|
|
|
|
|
|
|
|
|
|
Net changes in items
of non-cash working capital
|
|
(3.3)
|
|
(0.6)
|
|
(9.2)
|
|
(2.4)
|
|
Funds provided
from operations
|
|
7.6
|
|
8.2
|
|
30.5
|
|
24.5
|
Working capital
Working capital is used by management as another measure to
analyze the operating liquidity available to the Corporation.
It is defined as current assets less current liabilities.
Net cash
Net cash is used by management to analyze the amount by which
cash and cash equivalents exceed the total amount of debt.
The amount, if any, is calculated as cash and cash equivalents less
total long-term debt.
The following tables provide a quantitative reconciliation of
cash and cash equivalents to net cash as at September 30:
|
($
millions)
|
2014
|
|
2013
|
|
Cash and cash
equivalents
|
46.0
|
|
28.7
|
|
Less:
|
|
|
|
|
Long-term
debt
|
-
|
|
(6.8)
|
|
Net
cash
|
46.0
|
|
21.9
|
Forward-Looking Statements
This news release may contain forward-looking statements
relating to expected future events and financial and operating
results of the Corporation that involve risks and
uncertainties. Actual results may differ materially from
management expectations, as projected in such forward-looking
statements for a variety of reasons, including market and general
economic conditions and the risks and uncertainties detailed in
both the Corporation's Management's Discussion and Analysis for the
three and nine months ended September 30,
2014 and in the Annual Information Form for the year ended
December 31, 2013 found on SEDAR
(www.sedar.com). Due to the potential impact of these
factors, the Corporation disclaims any intention or obligation to
update or revise any forward-looking statements, whether as a
result of new information, future events or otherwise, unless
required by applicable law.
About High Arctic
High Arctic is a publicly traded company listed on the Toronto
Stock Exchange under the symbol "HWO". Based in Alberta, the Corporation's principal focus is
to provide drilling and specialized well completion services,
equipment rentals and other services to the oil and gas
industry.
High Arctic's largest operation is in Papua New Guinea where it provides drilling
and specialized well completion services and supplies rig matting,
camps and drilling support equipment on a rental basis. The
Canadian operation provides snubbing services, nitrogen supplies
and equipment on a rental basis to a large number of oil and
natural gas exploration and production companies operating in
Western Canada.
Further Information
A full copy of High Arctic's results including the Management's
Discussion and Analysis and the Condensed Interim Consolidated
Financial Statements for the three and nine months ended
September 30, 2014 and the notes
contained therein, can be found on the Investor Relations page of
High Arctic's website www.haes.ca or at www.sedar.com. The
Corporation's most recent investor presentation can be found at
www.haes.ca.
SOURCE High Arctic Energy Services Inc.