/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. 12, 2015 /CNW/ - High Arctic Energy
Services Inc. (TSX: HWO) ("High Arctic" or the "Corporation") today
announced its operating and financial results for the quarter ended
September 30, 2015.
Tim Braun, High Arctic's Chief
Executive Officer, stated: "The Corporation continues to strengthen
its balance sheet in a challenging period for the energy services
industry. Rig 116 earning revenue in the quarter, coupled
with full utilization of the other 3 rigs in PNG, stable Canadian
utilization, and a stronger US dollar resulted in quarter over
quarter EBITDA growth. High Arctic maintains an enviable
position amongst its peers and is well positioned in the ongoing
cycle of low commodity prices."
Highlights
- 2015's third quarter adjusted EBITDA of $18.7 million was almost double that of the prior
year (2014 - $9.8 million).
- Revenues earned in the third quarter of 2015 increased by 42%
to $58.5 million from the
$41.3 million earned in the same
period in 2014.
- The Corporation expects its investment in two modern
heli-portable drilling rigs to continue to deliver contracted
growth with large independents and major E&P
companies.
- As part of its growth strategy, the Corporation intends to be
an active participant in the consolidation of the oilfield services
market. During the third quarter, High Arctic commenced
investing in select public companies that it believes are strategic
opportunities. With continued soft markets, the Corporation
may add to these positions.
- High Arctic declared monthly dividends totaling $8.2 million during the first nine months of 2015
representing a trailing twelve month dividend payout of 23% of
Funds provided from operations (2014 - $6.7
million; 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)
|
2015
|
2014
|
Change
|
%
|
|
2015
|
2014
|
Change
|
%
|
Revenue
|
58.5
|
41.3
|
17.2
|
42
|
|
151.9
|
125.6
|
26.3
|
21
|
EBITDA(1)
|
14.0
|
8.3
|
5.7
|
69
|
|
36.9
|
34.0
|
2.9
|
9
|
Adjusted
EBITDA(1)(2)
|
18.7
|
9.8
|
8.9
|
91
|
|
43.2
|
36.0
|
7.2
|
20
|
Operating
earnings
|
13.9
|
6.4
|
7.5
|
117
|
|
31.0
|
25.6
|
5.4
|
21
|
Net
earnings
|
6.1
|
3.7
|
2.4
|
65
|
|
18.1
|
19.7
|
(1.6)
|
(8)
|
|
per share
(basic)
|
0.11
|
0.07
|
0.04
|
57
|
|
0.33
|
0.39
|
(0.06)
|
(15)
|
|
per share
(diluted)
|
0.11
|
0.07
|
0.04
|
57
|
|
0.32
|
0.39
|
(0.07)
|
(18)
|
Adjusted net
earnings(1) (3)
|
10.2
|
3.7
|
6.5
|
176
|
|
22.2
|
19.7
|
2.5
|
13
|
|
per share
(basic)(3) (4)
|
0.18
|
0.07
|
0.11
|
157
|
|
0.40
|
0.39
|
0.01
|
3
|
|
per share
(diluted)(3) (4)
|
0.18
|
0.07
|
0.11
|
157
|
|
0.40
|
0.39
|
0.01
|
3
|
|
|
|
|
|
|
|
|
|
|
Funds provided
from operations(1)
|
14.3
|
7.6
|
6.7
|
88
|
|
33.0
|
30.5
|
2.5
|
8
|
|
per share
(basic)(4)
|
0.26
|
0.14
|
0.12
|
86
|
|
0.60
|
0.61
|
(0.01)
|
(2)
|
|
per share (diluted)
(4)
|
0.26
|
0.14
|
0.12
|
86
|
|
0.59
|
0.60
|
(0.01)
|
(2)
|
Dividends
|
2.7
|
2.4
|
0.3
|
13
|
|
8.2
|
6.7
|
1.5
|
22
|
Capital
expenditures
|
2.9
|
36.8
|
(33.9)
|
|
|
39.4
|
41.0
|
(1.6)
|
|
Working
capital
|
|
|
|
|
|
35.5
|
44.8
|
(9.3)
|
(21)
|
Total
assets
|
|
|
|
|
|
239.5
|
178.8
|
60.7
|
34
|
Total non-current
financial liabilities
|
|
|
|
|
|
9.0
|
-
|
9.0
|
|
Net cash, end of
period(1)
|
|
|
|
|
|
12.5
|
46.0
|
(33.5)
|
(73)
|
Shares outstanding
- end of period(4)
|
|
|
|
|
|
54.9
|
55.8
|
(0.9)
|
(2)
|
|
|
|
|
|
|
|
|
|
|
|
(1)
Readers are cautioned that EBITDA, Adjusted EBITDA, Adjusted net
earnings, 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 short term investments, loss on
sale of property and equipment, excess of insurance proceeds over
costs and foreign exchange gains or losses.
|
(3)
Adjusted net earnings is calculated as Net earnings plus an
adjustment for loss on short term investments.
|
(4) 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,
2015
|
Jun
30,
2015
|
Mar
31,
2015
|
Dec
31,
2014
|
Sep
30,
2014
|
Jun
30,
2014
|
Mar
31,
2014
|
Dec
31,
2013
|
|
|
|
|
|
|
|
|
|
Revenue
|
58.5
|
48.7
|
44.7
|
46.2
|
41.3
|
39.8
|
44.5
|
38.7
|
|
|
|
|
|
|
|
|
|
Adjusted
EBITDA
|
18.7
|
14.1
|
10.4
|
13.3
|
9.8
|
11.1
|
15.1
|
12.5
|
|
|
|
|
|
|
|
|
|
Net
earnings
|
6.1
|
7.2
|
4.8
|
8.5
|
3.7
|
6.7
|
9.3
|
6.4
|
|
per share –
basic
|
0.11
|
0.13
|
0.09
|
0.15
|
0.07
|
0.13
|
0.19
|
0.13
|
|
per share –
diluted
|
0.11
|
0.13
|
0.09
|
0.15
|
0.07
|
0.13
|
0.18
|
0.13
|
|
|
|
|
|
|
|
|
|
Adjusted net
earnings
|
10.2
|
7.2
|
4.8
|
8.5
|
3.7
|
6.7
|
9.3
|
6.4
|
|
per share –
basic
|
0.18
|
0.13
|
0.09
|
0.15
|
0.07
|
0.13
|
0.19
|
0.13
|
|
per share –
diluted
|
0.18
|
0.13
|
0.09
|
0.15
|
0.07
|
0.13
|
0.18
|
0.13
|
|
|
|
|
|
|
|
|
|
Funds provided
from operations
|
14.3
|
10.5
|
8.2
|
12.8
|
7.6
|
9.8
|
13.1
|
10.8
|
|
|
|
|
|
|
|
|
|
Outlook
High Arctic's business activities are reasonably resilient in
the ongoing low commodity price environment. The majority of
drilling activity is associated with LNG development in PNG, and
the country's vast reserves of gas are some of the most competitive
globally. A large percentage of the Company's Canadian
activity is with larger exploration and development companies,
which has benefited High Arctic in the current cycle.
There continues to be strong demand for top tier drilling
services in PNG. The Company has a history of contract
renewals over nine years with its customer on the basis of
continuous improvements in quality and value. Management has
proactively begun discussions with its customer for Rig 103 and 104
contract renewals in June 2016.
Rig 103 will be fully utilized through the remainder of 2015
completing its current well in the Gulf Province of PNG and then is
expected to move to a two well project in the Western Province for
a new customer. Rig 104 is currently completing a well in the PNG
Highlands and is then scheduled to move to an additional well in
the Western Province. Thereafter it is anticipated it will be
moved to the P'nyang field in the Western Highlands of PNG.
Rig 115 completed drilling its first well on the customer's
wholly owned lease. The rig has been assigned to drill one
firm and one option well for the customer's joint venture partner
in the Elk/Antelope field. With this assignment, High Arctic
continues to expand its customer base in PNG. Upon completion
of these wells, the rig will revert back to the original customer
under its take or pay contract.
The second heli-portable rig that High Arctic purchased in 2014,
Rig 116, arrived in Papua New
Guinea during the quarter slightly earlier than the Company
had forecasted. The rig is currently in Port Moresby and mobilization to its first
location is expected to commence in mid-2016, once the customer has
finalized their drilling plans. Rig 116 is under a take or
pay contract currently earning standby rates and the contract will
continue until two years after the first well is spudded.
The fleet of rental equipment in PNG continues to be sufficient
for the current level of drilling activity. Matting
utilization is expected to be just over 60% throughout the
remainder of 2015, similar to the utilization during the fourth
quarter of 2015. Utilization in the first half of 2016 will
drop to the mid 50% range as a number of mats will come off their
existing contracts and be waiting to be redeployed when Rig 116
mobilizes to its first location. Management continues to
evaluate new opportunities for expansion and redeployment of rental
assets.
Although year over year Canadian equipment utilization is down,
the Canadian operations are expected to remain profitable in the
fourth quarter as the business infrastructure has been adjusted to
match the current demand for equipment and services.
Looking to 2016, as part of its growth strategy the Company
intends to be an active participant in the consolidation of the
oilfield services market. During the third quarter, High
Arctic commenced investing in select public companies that it
believes are strategic opportunities. With continued soft
markets, the Corporation may add to these positions.
High Arctic's contracted status in Papua New Guinea, the strong US dollar
exchange rate, continued delivery of high quality service, and
similar year over year demand in Canada should result in further EBITDA growth
when compared to 2015.
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 such as "EBITDA", "Adjusted EBITDA", "Adjusted net
earnings", "Adjusted net earnings per share", "Adjusted net
earnings per share – diluted", "Oilfield services operating
margin", "Oilfield services operating margin %", "Percent of
revenue", "Funds provided from operations", "Funds provided from
operations per share", "Funds provided from operations per share –
diluted", "Debt-to-capitalization percentage", "Working capital",
and "Net cash". 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
Adjusted EBITDA is calculated based
on EBITDA (as referred to above) prior to the effect of loss on
short term investments, share-based compensation, gains or losses
on sale of assets or investments, and foreign exchange gains or
losses. Management utilizes Adjusted EBITDA to present financial
performance that is more comparable between periods. Adjusted
EBITDA as presented is not intended to represent net earnings or
other measures of financial performance 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,
2015
|
|
Three Months
Ended
Sept. 30,
2014
|
|
Nine Months
Ended
Sept. 30,
2015
|
|
Nine Months
Ended
Sept. 30,
2014
|
Net earnings for
the period
|
6.1
|
|
3.7
|
|
18.1
|
|
19.7
|
Add:
|
|
|
|
|
|
|
|
Interest and finance
expense
|
0.1
|
|
0.1
|
|
0.3
|
|
0.4
|
Income
taxes
|
3.4
|
|
1.3
|
|
7.7
|
|
4.5
|
Amortization
|
4.4
|
|
3.2
|
|
10.8
|
|
9.4
|
EBITDA
|
14.0
|
|
8.3
|
|
36.9
|
|
34.0
|
Add:
|
|
|
|
|
|
|
|
Loss on short term
investments
|
4.1
|
|
-
|
|
4.1
|
|
-
|
Share-based
compensation
|
0.4
|
|
0.4
|
|
1.4
|
|
1.0
|
Loss (gain) on sale
of assets
|
0.2
|
|
(0.2)
|
|
0.5
|
|
(0.2)
|
Foreign exchange
loss
|
-
|
|
1.3
|
|
0.3
|
|
1.2
|
Adjusted
EBITDA
|
18.7
|
|
9.8
|
|
43.2
|
|
36.0
|
Adjusted Net Earnings
Adjusted net earnings is
calculated based on net earnings prior to the effect of the loss on
short term investments. Management utilizes Adjusted net earnings
to present a measure of financial performance that is more
comparable between periods. Adjusted net earnings as
presented is not intended to represent net earnings or other
measures of financial performance calculated in accordance with
IFRS. Adjusted net earnings per share and Adjusted net
earnings per share – diluted are calculated as Adjusted net
earnings divided by the number of weighted average basic and
diluted shares outstanding, respectively. The following
tables provide a quantitative reconciliation of net earnings to
Adjusted net earnings for the three and nine months ended
September 30:
|
|
|
|
|
|
|
|
($
millions)
|
Three Months
Ended
Sept. 30,
2015
|
|
Three Months
Ended
Sept. 30,
2014
|
|
Nine Months
Ended
Sept. 30,
2015
|
|
Nine Months
Ended
Sept. 30,
2014
|
Net
earnings
|
6.1
|
|
3.7
|
|
18.1
|
|
19.7
|
Add:
|
|
|
|
|
|
|
|
Loss on short term
investments
|
4.1
|
|
-
|
|
4.1
|
|
-
|
Adjusted net
earnings
|
10.2
|
|
3.7
|
|
22.2
|
|
19.7
|
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,
2015
|
|
Three Months
ended
Sept. 30,
2014
|
|
Nine Months
ended
Sept. 30,
2015
|
|
Nine Months
ended
Sept. 30,
2014
|
Net cash generated
from operating activities
|
8.2
|
|
10.9
|
|
39.8
|
|
39.7
|
Less:
|
|
|
|
|
|
|
|
Net changes in items
of non-cash working capital
|
5.1
|
|
(3.3)
|
|
(6.8)
|
|
(9.2)
|
Funds provided
from operations
|
13.3
|
|
7.6
|
|
33.0
|
|
30.5
|
Debt-to-capitalization percentage
Debt-to-capitalization percentage is used by management to assess
its financial structure and determine how the Corporation is
financing its activities. The amount is calculated as total
debt divided by the sum of total debt and shareholders' equity.
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:
|
|
|
|
($
millions)
|
September 30,
2015
|
|
December 31,
2014
|
Cash and cash
equivalents
|
21.5
|
|
37.2
|
Less:
|
|
|
|
Long-term
debt
|
(9.0)
|
|
-
|
Net
cash
|
12.5
|
|
37.2
|
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
quarter ended September 30, 2015 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 quarter ended September 30, 2015
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.