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CALGARY, May 8, 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
March 31, 2015.
Tim Braun, High Arctic's Chief
Executive Officer, stated: "The value of geographical
diversification has certainly been demonstrated in our first
quarter results. Rig 115 successfully cleared customs and commenced
mobilization to the wellsite in March, and Rig 103 and 104 had full
utilization throughout the quarter. This helped to offset the
reduction in PNG rental revenues we have experienced year over
year. In Canada, we have
resized our marketed equipment fleet and restructured our
organization to match current utilization levels, and we are
prepared to revisit this further if activity levels remain below
our expectations. These actions, combined with the delivery of Rig
116 to PNG in the third quarter, should allow us to deliver an
increase in EBITDA this year."
Highlights
- Increases in PNG's drilling services offset lower Canadian
revenues resulting in first quarter revenues for 2015 of
$44.7 million (2014 - $44.5 million).
- The Corporation continues to invest in its business with a 2015
capital expenditure program of approximately $45 million to be paid from cash resources.
The Company expects growth in both revenues and EBITDA in 2015.
- The first High Arctic owned heli-portable drilling rig arrived
in PNG during the quarter and commenced earning moving rate
revenues in mid-March. The second rig is scheduled to
commence drilling in PNG in Q3 2015.
- Adjusted EBITDA was $10.4 million
for the three months ended March 31,
2015 (2014 - $15.1
million). This reflects primarily the reduced activity
levels in Canada. It was also partly impacted by PNG revenue
increases from lower margin drilling services and reductions in
higher margin rental revenue.
- High Arctic declared dividends of $2.7
million during the first three months of 2015 representing a
trailing twelve month dividend payout of 26.5% of funds provided
from operations (Q1 2014 - $2.0
million; 19.7%).
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
March
31
|
|
$ millions (except
per share amounts)
|
2015
|
2014
|
Change
|
%
|
|
Revenue
|
44.7
|
44.5
|
0.2
|
-
|
|
EBITDA(1)(2)
|
9.5
|
14.2
|
(4.7)
|
(33)
|
|
Adjusted
EBITDA(1)(2)
|
10.4
|
15.1
|
(4.7)
|
(31)
|
|
Operating
earnings
|
6.9
|
11.8
|
(4.9)
|
(42)
|
|
Net
earnings
|
4.8
|
9.3
|
(4.5)
|
(48)
|
|
|
per share
(basic)(3)
|
0.09
|
0.19
|
(0.10)
|
|
|
|
per share
(diluted)(3)
|
0.09
|
0.18
|
(0.09)
|
|
|
Funds provided
from operations(1)
|
8.2
|
13.1
|
(4.9)
|
(37)
|
|
|
per share (basic and
fully diluted)(3)
|
0.15
|
0.26
|
(0.11)
|
|
|
Dividends
|
2.7
|
2.0
|
0.7
|
|
|
Capital
expenditures
|
21.1
|
1.5
|
19.6
|
|
|
Working Capital
(1)
|
27.4
|
53.3
|
(25.9)
|
|
|
Total
assets
|
207.4
|
149.3
|
58.1
|
|
|
Total non-current
financial liabilities
|
-
|
6.7
|
(6.7)
|
|
|
Net cash, end of
period (1)
|
28.4
|
36.2
|
(8.1)
|
|
|
Shares outstanding
- end of period(3)
|
55.3
|
50.1
|
|
|
|
(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)
|
Mar
31,
2015
|
Dec
31,
2014
|
Sep
30,
2014
|
Jun
30,
2014
|
Mar
31,
2014
|
Dec
31,
2013
|
Sep
30,
2013
|
Jun
30,
2013
|
|
|
|
|
|
|
|
|
|
|
Revenue
|
44.7
|
46.2
|
41.3
|
39.8
|
44.5
|
38.7
|
36.3
|
32.9
|
|
|
|
|
|
|
|
|
|
Adjusted
EBITDA
|
10.4
|
13.3
|
9.8
|
11.1
|
15.1
|
12.5
|
9.8
|
6.6
|
|
|
|
|
|
|
|
|
|
Net
earnings
|
4.8
|
8.5
|
3.7
|
6.7
|
9.3
|
6.4
|
7.7
|
2.1
|
|
per share –
basic
|
0.09
|
0.15
|
0.07
|
0.13
|
0.19
|
0.13
|
0.16
|
0.04
|
|
per share –
diluted
|
0.09
|
0.15
|
0.07
|
0.13
|
0.18
|
0.13
|
0.16
|
0.04
|
|
|
|
|
|
|
|
|
|
Funds provided
from operations
|
8.2
|
12.8
|
7.6
|
9.8
|
13.1
|
10.8
|
8.2
|
5.1
|
|
|
|
|
|
|
|
|
|
Outlook
While the low global commodity price environment has created a
new paradigm for the broader oil and gas industry and the Canadian
industry continues to struggle with commodity price differentials,
High Arctic's operations in PNG have not been affected to the same
degree as our North American peers, as our clients continue to
focus on LNG development. Demand for our services in PNG –
which are contracted in US dollars – remains stable.
Rig 115, with the ancillary camp and equipment, completed
customs clearance into PNG and is currently being rigged up on the
first drilling site in preparation to spud in mid-May. Rig 116 is
in Houston being upgraded to meet
the contractual requirements for operations in PNG. The upgrades
are expected to be completed by the end of the second quarter
followed by mobilization to PNG. Rig 116 will then commence
its initial two year contracted term upon the spudding of the first
well, anticipated to occur in late August, 2015.
Rig 103, along with the 103 leap frog rig and ancillary rental
equipment, is expected to continue to be fully utilized under an
assignment agreement in the Gulf Province of PNG through the third
quarter of 2015. Thereafter, the rig is expected to revert to
its primary customer and recommence drilling activities 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 and it is expected that the rig will be fully
utilized through the third quarter of 2015. The customer has
indicated that they may reduce their oilfield drilling program
later in 2015 due to the significant decline in oil prices.
However, other operators in PNG have expressed interest in securing
drilling equipment to allow them to meet their petroleum lease
retention commitments.
Our fleet of rental equipment in PNG continues to be sufficient
for the current level of drilling activity. With the recently
announced matting supply contract, matting utilization is expected
to be between 60% - 75% throughout 2015, compared to 2014 where
utilization varied between 100% at the start 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 under
the new contract in the third quarter of 2015. Management continues
to evaluate new markets for expansion and redeployment of our
rental assets.
In the first quarter of 2015, High Arctic's Canadian operation
experienced its lowest utilization levels in the past ten years.
Looking forward to the remainder of the 2015, management continues
to expect activity levels to remain low. Steps were taken to
rationalize our marketed fleet and associated infrastructure in the
first quarter of 2015 in response to the new market
environment. Management will vigilantly monitor activity
levels and respond further in the second half of the year, if
warranted.
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 ended March 31:
|
|
|
|
($
millions)
|
2015
|
|
2014
|
Net earnings for
the period
|
4.8
|
|
9.3
|
Add:
|
|
|
|
Interest and finance
expense
|
0.1
|
|
0.2
|
Income
taxes
|
1.7
|
|
1.7
|
Amortization
|
2.9
|
|
3.0
|
EBITDA
|
9.5
|
|
14.2
|
Add:
|
|
|
|
Share-based
compensation
|
0.6
|
|
0.3
|
Foreign exchange
loss
|
0.3
|
|
0.6
|
Adjusted
EBITDA
|
10.4
|
|
15.1
|
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 ended March
31:
|
|
|
|
($
millions)
|
2015
|
|
2014
|
Net cash generated
from operating activities
|
13.1
|
|
11.2
|
Add:
|
|
|
|
Net changes in items
of non-cash working capital
|
(4.9)
|
|
1.9
|
Funds provided
from operations
|
8.2
|
|
13.1
|
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 as at March 31:
|
|
|
|
($
millions)
|
2015
|
|
2014
|
Cash and cash
equivalents
|
28.4
|
|
42.9
|
Less:
|
|
|
|
Long-term
debt
|
-
|
|
(6.7)
|
Net
cash
|
28.4
|
|
36.2
|
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 March 31, 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 March 31, 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.