/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, March 12, 2015 /CNW/ - High Arctic Energy
Services Inc. (TSX: HWO) ("High Arctic" or the "Corporation") today
announced its operating and financial results for the year ended
December 31, 2014.
Tim Braun, High Arctic's Chief
Executive Officer, reports: "2014 was a successful year for High
Arctic. As a company, we achieved a record level of EBITDA
and revenues and laid the foundation for continued growth in our
PNG business unit. Looking forward to 2015, amidst the global
commodity price environment, we anticipate further EBITDA growth
when our two new heli-portable drilling rigs commence operations in
PNG and we rationalize our infrastructure costs in Canada."
Highlights
- Adjusted EBITDA(1)(2) for the year
ended December 31, 2014 grew to
$49.3 million, an increase of 19%
(2013 - $41.5 million). Adjusted
EBITDA increased from $12.5 million
for Q4 2013 by 6% to $13.3 million
for Q4 2014.
- Revenue for 2014 was the highest in High Arctic's history
totalling $171.8 million (2013 -
$152.7 million). Fourth quarter
revenues for 2014 increased by 19% over Q4 2013 from $38.7 million to $46.2
million.
- On July 28, 2014, High Arctic
completed the acquisition of two heli-portable drilling rigs. The
Corporation has signed two year term drilling services contracts
with a large oil and gas operator in PNG for each rig. The well
utilizing the first rig is expected to spud early in Q2 2015; the
second rig is expected to commence drilling in PNG in mid Q3
2015.
- Approximately three quarters of the Corporations 2015 revenue
is contracted and is in US dollars.
- High Arctic paid dividends of $9.4
million during 2014. The Corporation continues to maintain a
strong balance sheet and has a trailing annual dividend payout
ratio of 22%.
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
December
31
|
|
Year
Ended
December
31
|
|
|
$ millions (except
per share amounts)
|
2014
|
2013
|
Change
|
%
|
|
2014
|
2013
|
Change
|
%
|
|
Revenue
|
46.2
|
38.7
|
7.5
|
19
|
|
171.8
|
152.7
|
19.1
|
13
|
|
EBITDA(1)
|
13.2
|
11.6
|
1.6
|
14
|
|
47.2
|
42.7
|
4.5
|
11
|
|
Adjusted
EBITDA(1)(2)
|
13.3
|
12.5
|
0.8
|
6
|
|
49.3
|
41.5
|
7.8
|
19
|
|
Operating
earnings
|
9.5
|
8.2
|
1.3
|
16
|
|
35.3
|
30.8
|
4.5
|
15
|
|
Net
earnings
|
8.5
|
6.4
|
2.1
|
33
|
|
28.2
|
24.6
|
3.6
|
15
|
|
per share
(basic)(3)
|
0.15
|
0.13
|
0.02
|
|
|
0.54
|
0.51
|
0.03
|
|
|
per share
(diluted)(3)
|
0.15
|
0.13
|
0.02
|
|
|
0.53
|
0.50
|
0.03
|
|
|
Funds provided
from operations(1)
|
12.8
|
10.8
|
2.0
|
19
|
|
43.3
|
35.3
|
8.0
|
23
|
|
per share
(basic)(3)
|
0.23
|
0.22
|
0.01
|
|
|
0.82
|
0.73
|
0.09
|
|
|
per share
(diluted)(3)
|
0.23
|
0.22
|
0.01
|
|
|
0.81
|
0.72
|
0.09
|
|
|
Dividends
|
2.7
|
1.9
|
0.8
|
|
|
9.4
|
7.2
|
2.2
|
|
|
Capital
expenditures
|
14.7
|
4.2
|
10.5
|
|
|
55.7
|
21.9
|
33.8
|
|
|
Working
Capital
|
|
|
|
|
|
41.6
|
41.9
|
(0.3)
|
(1)
|
|
Total
assets
|
|
|
|
|
|
188.7
|
137.1
|
51.6
|
38
|
|
Total non-current
financial liabilities
|
|
|
|
|
|
0.4
|
6.7
|
(6.3)
|
|
|
Net cash, end of
period (1)
|
|
|
|
|
|
37.2
|
26.9
|
10.3
|
38
|
|
Shares outstanding
- end of period(3)
|
|
|
|
|
|
55.8
|
50.0
|
5.8
|
|
|
|
|
|
|
|
|
|
|
|
|
(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)
|
Dec
31,
2014
|
Sep
30,
2014
|
Jun
30,
2014
|
Mar
31,
2014
|
Dec
31,
2013
|
Sep
30,
2013
|
Jun
30,
2013
|
Mar
31,
2013
|
|
|
|
|
|
|
|
|
|
|
Revenue
|
46.2
|
41.3
|
39.8
|
44.5
|
38.7
|
36.3
|
32.9
|
44.8
|
|
|
|
|
|
|
|
|
|
|
Adjusted
EBITDA
|
13.3
|
9.8
|
11.1
|
15.1
|
12.5
|
9.8
|
6.6
|
12.6
|
|
|
|
|
|
|
|
|
|
|
Net
earnings
|
8.5
|
3.7
|
6.7
|
9.3
|
6.4
|
7.7
|
2.1
|
8.4
|
|
per share –
basic
|
0.15
|
0.07
|
0.13
|
0.19
|
0.13
|
0.16
|
0.04
|
0.17
|
|
per share –
diluted
|
0.15
|
0.07
|
0.13
|
0.18
|
0.13
|
0.16
|
0.04
|
0.17
|
|
|
|
|
|
|
|
|
|
|
Funds provided
from operations
|
12.8
|
7.6
|
9.8
|
13.1
|
10.8
|
8.2
|
5.1
|
11.2
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Outlook
While the sharp decline in oil prices in the fourth quarter of
2014 has significantly reduced oil field activities in most regions
of the world, High Arctic's operation in PNG has not felt the
effects of these declines as operators in PNG continue to focus on
LNG development. For 2015, approximately three quarters of
the Corporation's revenue is contracted and is in US dollars.
Rig 115 has completed the upgrading process and recently arrived
in PNG. Once the rig is offloaded from the vessel and has cleared
customs, it will then be mobilized to site to commence drilling
operations. Rig 116 is in Houston being upgraded to satisfy the
customers' requirements for operations in PNG. It is anticipated
that the upgrading will be completed by the end of the second
quarter. The rig will then be transported and mobilized in
PNG in the third quarter of 2015 when it is expected to commence
operations under a previously announced two year drilling services
contract.
Rig 103, along with the 103 leap frog rig and ancillary rental
equipment, continues to work in the Gulf Province of PNG.
This work is now expected to continue through the third
quarter of 2015 after which time the rig is expected to re-commence
drilling activities with the primary customer under the existing
contract which runs through to June, 2016.
Rig 104, along with the 104 leap frog rig, continues to operate
in the PNG highlands. It is expected that the rig will be fully
utilized through the third quarter of 2015 with the contracted
customer. The customer has indicated that they may reduce their
oilfield drilling program later in 2015 due to the significant
decline in oil prices. Other companies in PNG are interested
in accessing drilling equipment to help them meet their
commitments.
The existing complement of rental equipment in PNG continues to
be sufficient for the current level of drilling activity. Matting
utilization is expected to be between 60% - 75% throughout 2015,
compared to 2014 where utilization varied between 100% at the
beginning of the year to 60% by year end. In 2015 a matting
rental contract with a major client concludes in stages throughout
the year as their drilling program concludes. A number of
these mats will be redeployed with Rig 116 in the third quarter of
2015. Management continues to evaluate new markets for expansion
and redeployment of our rental assets.
Although activity levels for snubbing and nitrogen services were
strong in Canada in the fourth
quarter of 2014 despite falling oil prices, producers have since
aggressively reduced their capital spending programs for
2015. As such, management expects to see a year over year
decline in its Canadian business similar to the CAODC's forecasted
well completion decline of 40%. This reduction will come from
both declines in activity levels and reductions in pricing for both
snubbing and nitrogen services rendered.
To help mitigate the expected decline in revenues, management is
reducing the number of pieces of snubbing and nitrogen equipment
that will be marketed in the year and is in turn reducing the
support resources required for the equipment fleet. In addition to
these reductions, management has also reviewed the corporate
structure of the Canadian operations and identified areas to
improve efficiencies and reduce the fixed cost structure supporting
the business.
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, 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 months and year ended December
31:
|
|
|
|
|
|
|
|
|
($
millions)
|
Three months
ended
Dec. 31
2014
|
|
Three months
ended
Dec. 31,
2013
|
|
Year ended
Dec. 31,
2014
|
|
Year ended
Dec. 31,
2013
|
|
Net earnings for the
period
|
8.5
|
|
6.4
|
|
28.2
|
|
24.6
|
|
Add:
|
|
|
|
|
|
|
|
|
Interest and finance
expense
|
-
|
|
0.2
|
|
0.4
|
|
0.8
|
|
Income
taxes
|
1.3
|
|
1.1
|
|
5.8
|
|
5.0
|
|
Amortization
|
3.4
|
|
3.9
|
|
12.8
|
|
12.3
|
|
EBITDA
|
13.2
|
|
11.6
|
|
47.2
|
|
42.7
|
|
Add:
|
|
|
|
|
|
|
|
|
Share-based
compensation
|
0.4
|
|
0.4
|
|
1.4
|
|
0.8
|
|
Loss (gain) on sale
of assets
|
-
|
|
-
|
|
(0.2)
|
|
0.3
|
|
Excess of insurance
proceeds over costs
|
-
|
|
-
|
|
-
|
|
(2.7)
|
|
Foreign exchange loss
(gain)
|
(0.3)
|
|
0.5
|
|
0.9
|
|
0.4
|
|
Adjusted
EBITDA
|
13.3
|
|
12.5
|
|
49.3
|
|
41.5
|
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 months and year ended December 31:
|
|
|
|
|
|
|
|
|
|
($
millions)
|
|
Three Months
ended
Dec. 31,
2014
|
|
Three Months
ended
Dec. 31,
2013
|
|
Year ended
Dec. 31,
2014
|
|
Year ended
Dec. 31,
2013
|
|
Net cash generated
from operating activities
|
|
4.1
|
|
9.9
|
|
43.8
|
|
36.8
|
|
Less:
|
|
|
|
|
|
|
|
|
|
Net changes in items
of non-cash working capital
|
|
8.7
|
|
0.9
|
|
(0.5)
|
|
(1.5)
|
|
Funds provided
from operations
|
|
12.8
|
|
10.8
|
|
43.3
|
|
35.3
|
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 December 31:
|
|
|
|
|
($
millions)
|
2014
|
|
2013
|
|
Cash and cash
equivalents
|
37.2
|
|
33.7
|
|
Less:
|
|
|
|
|
Long-term
debt
|
-
|
|
(6.7)
|
|
Net
cash
|
37.2
|
|
27.0
|
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
year ended December 31, 2014 and in
the Annual Information Form for the year ended December 31, 2014 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 Consolidated Financial Statements
for year ended December 31, 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.