/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, Aug.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 June 30,
2015.
Tim Braun, High Arctic's Chief
Executive Officer, stated: "Full utilization of Rig's 103,104
and 115 for the quarter, along with stronger than anticipated
Canadian utilization operating under a reduced cost structure,
allowed the Corporation to deliver improved quarter over quarter
results. With the recent arrival of Rig 116 into PNG, the
percentage of revenue generated from drilling services will
continue to increase and we remain on track to deliver improved
year over year results. The announcement by the PRL 15 joint
venture participants of the potential development of a second PNG
facility named the Papua LNG Project is a positive indicator for
additional development in the country despite the current global
commodity prices."
Highlights
- Adjusted EBITDA was $14.1 million
for the three months ended June 30,
2015 (2014 - $11.1 million),
the Corporation's most successful second quarter in its
history.
- Increases in PNG's drilling services and the effects of a
stronger U.S. dollar offset lower PNG rentals and Canadian revenues
resulting in an 11% increase in revenues for the first half of 2015
of $93.4 million (2014 - $84.3 million). Revenues earned in the
second quarter of 2015 increased by 22% to $48.7 million (Q2 2014 - $39.8 million).
- The Corporation expects growth in both revenues and EBITDA to
continue in 2015 as a result of its investment in two heli-portable
drilling rigs. The first rig commenced earning moving rate
revenues in mid-March and spudded its first well in mid-June.
The second rig has recently arrived in PNG and will commence
earning stand-by revenues upon completion of customs
clearance.
- Canadian results were positively affected by rationalization of
equipment and personnel initiated in the first quarter.
- High Arctic declared monthly dividends totaling $5.5 million during the first six months of 2015
representing a trailing twelve month dividend payout of 27.3% of
Funds Provided from Operations (2014 - $4.3
million; 19.1%).
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
June
30
|
|
Six Months
Ended
June
30
|
|
$ millions (except
per share amounts)
|
2015
|
2014
|
Change
|
%
|
|
2015
|
2014
|
Change
|
%
|
|
|
Revenue
|
48.7
|
39.8
|
8.9
|
22
|
|
93.4
|
84.3
|
9.1
|
11
|
|
|
EBITDA(1)
|
13.4
|
11.5
|
1.9
|
17
|
|
22.9
|
25.7
|
(2.8)
|
(11)
|
|
|
Adjusted
EBITDA(1)(2)
|
14.1
|
11.1
|
3.0
|
27
|
|
24.5
|
26.2
|
(1.7)
|
(6)
|
|
|
Operating
earnings
|
9.9
|
7.6
|
2.3
|
30
|
|
16.8
|
19.4
|
(2.6)
|
(13)
|
|
|
Net
earnings
|
7.2
|
6.7
|
0.5
|
7
|
|
12.0
|
16.0
|
(4.0)
|
(25)
|
|
|
per share
(basic)(3)
|
0.13
|
0.13
|
-
|
|
|
0.22
|
0.32
|
(0.10)
|
(31)
|
|
|
per share
(diluted)(3)
|
0.13
|
0.13
|
-
|
|
|
0.22
|
0.32
|
(0.10)
|
(31)
|
|
|
Funds provided
from operations(1)
|
10.5
|
9.8
|
0.7
|
7
|
|
18.7
|
22.9
|
(4.2)
|
(18)
|
|
|
per share
(basic)(3)
|
0.19
|
0.20
|
(0.01)
|
(5)
|
|
0.34
|
0.46
|
(0.12)
|
(26)
|
|
|
per share
(diluted)(3)
|
0.19
|
0.19
|
-
|
-
|
|
0.33
|
0.45
|
(0.12)
|
(27)
|
|
|
Dividends
|
2.8
|
2.3
|
0.5
|
22
|
|
5.5
|
4.3
|
1.2
|
28
|
|
|
Capital
expenditures
|
15.5
|
2.7
|
12.8
|
|
|
36.6
|
4.2
|
32.4
|
|
|
|
Working
Capital
|
|
|
|
|
|
20.4
|
56.6
|
(36.2)
|
(64)
|
|
|
Total
assets
|
|
|
|
|
|
211.0
|
151.4
|
59.6
|
39
|
|
|
Total non-current
financial liabilities
|
|
|
|
|
|
-
|
6.7
|
(6.7)
|
(100)
|
|
|
Net cash, end of
period (1)
|
|
|
|
|
|
25.6
|
47.2
|
(21.6)
|
(46)
|
|
|
Shares outstanding
- end of period(3)
|
|
|
|
|
|
55.3
|
50.4
|
4.9
|
10
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
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)
|
Jun
30,
2015
|
Mar
31,
2015
|
Dec
31,
2014
|
Sep
30,
2014
|
Jun
30,
2014
|
Mar
31,
2014
|
Dec
31,
2013
|
Sep
30,
2013
|
|
|
|
|
|
|
|
|
|
|
Revenue
|
48.7
|
44.7
|
46.2
|
41.3
|
39.8
|
44.5
|
38.7
|
36.3
|
|
|
|
|
|
|
|
|
|
|
Adjusted
EBITDA
|
14.1
|
10.4
|
13.3
|
9.8
|
11.1
|
15.1
|
12.5
|
9.8
|
|
|
|
|
|
|
|
|
|
|
Net
earnings
|
7.2
|
4.8
|
8.5
|
3.7
|
6.7
|
9.3
|
6.4
|
7.7
|
|
per share –
basic
|
0.13
|
0.09
|
0.15
|
0.07
|
0.13
|
0.19
|
0.13
|
0.16
|
|
per share –
diluted
|
0.13
|
0.09
|
0.15
|
0.07
|
0.13
|
0.18
|
0.13
|
0.16
|
|
|
|
|
|
|
|
|
|
|
Funds provided
from operations
|
10.5
|
8.2
|
12.8
|
7.6
|
9.8
|
13.1
|
10.8
|
8.2
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Outlook
While the low global commodity price environment has created a
new paradigm for the broader oil and gas industry, 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 its ancillary camp and equipment, commenced
drilling in the Gulf province of PNG in June
2015, after arriving in the country in March and then being
transported to the first well site where recommissioning and
inspections occurred. There have been no significant
operational issues arise on the start-up of the rig. The rig
is expected to operate throughout the remainder of 2015 and through
2016 under a two year take or pay contract that runs through to
June, 2017.
Rig 116 recently arrived in PNG and upon clearing customs will
be mobilized to a yard where it will stay until the customer
completes their assessment of several different drilling locations
to determine the first well site. The rig will collect
stand-by revenue in accordance with the terms of the contract until
it commences drilling, which is expected in early in 2016, at which
time the two year contracted term will begin.
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
remainder of 2015. Thereafter, the rig is expected to revert
back to its primary customer and recommence drilling activities
under the existing contract which runs through to June, 2016.
Rig 104 continues to operate in the PNG highlands and it is
expected that the rig will be fully utilized through much of the
third quarter of 2015 for its contracted customer. After which, the
rig will be assigned to a new customer to drill two wells in the
Western province of PNG before reverting back to the contracted
customer for additional drilling in 2016.
Our fleet 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 near 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 winds down. A number of these
mats will be redeployed under a new contract in the third quarter
of 2015 and early 2016. Management continues to evaluate new
markets for expansion and redeployment of our rental
assets.
The steps taken to rationalize our Canadian marketed fleet and
associated infrastructure in the first quarter of 2015 resulted in
strong margin performance in the traditionally weakest quarter of
the year and should allow the business to deliver positive margins
throughout the year. Management continues to expect activity
levels in Canada to remain low
through the remainder of 2015 and 2016 and not experience the usual
second half improvement.
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 and six months ended June
30:
|
|
|
|
|
|
|
|
|
|
|
Three
months
ended
|
|
Three
months
ended
|
|
Six months
ended
|
|
Six months
ended
|
|
($
millions)
|
|
June 30,
2015
|
|
June 30,
2014
|
|
June 30,
2015
|
|
June 30,
2014
|
|
Net earnings for the
period
|
|
7.2
|
|
6.7
|
|
12.0
|
|
16.0
|
|
Add:
|
|
|
|
|
|
|
|
|
|
Interest and finance
expense
|
|
0.1
|
|
0.1
|
|
0.2
|
|
0.3
|
|
Income
taxes
|
|
2.6
|
|
1.5
|
|
4.3
|
|
3.2
|
|
Amortization
|
|
3.5
|
|
3.2
|
|
6.4
|
|
6.2
|
|
EBITDA
|
|
13.4
|
|
11.5
|
|
22.9
|
|
25.7
|
|
Add:
|
|
|
|
|
|
|
|
|
|
Share-based
compensation
|
|
0.4
|
|
0.3
|
|
1.0
|
|
0.6
|
|
Loss on sale of
assets
|
|
0.3
|
|
-
|
|
0.3
|
|
-
|
|
Foreign exchange
(gain) loss
|
|
-
|
|
(0.7)
|
|
0.3
|
|
(0.1)
|
|
Adjusted
EBITDA
|
|
14.1
|
|
11.1
|
|
24.5
|
|
26.2
|
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 six months ended June 30:
|
|
|
|
|
|
|
|
|
|
|
Three
months
ended
|
|
Three
months
ended
|
|
Six months
ended
|
|
Six months
ended
|
|
|
|
($
millions)
|
|
June 30,
2015
|
|
June 30,
2014
|
|
June 30,
2015
|
|
June 30,
2014
|
|
Net cash generated
from operating activities
|
|
18.5
|
|
17.6
|
|
31.6
|
|
28.8
|
|
Less:
|
|
|
|
|
|
|
|
|
|
Net changes in items
of non-cash working capital
|
|
(8.0)
|
|
(7.8)
|
|
(12.9)
|
|
(5.9)
|
|
Funds provided
from operations
|
|
10.5
|
|
9.8
|
|
18.7
|
|
22.9
|
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.
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 June 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 June 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.