High Arctic announces results for periods ended September 30, 2013
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 High Arctic Reports consistent year over year EBITDA Red Deer, Canada – November 14, 2013 – 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, 2013. Highlights During the first nine months of 2013 the Corporation’s efforts resulted in the following achievements: The Corporation completed its negotiations for the extensions of contracts that cover the drilling operations for Rigs 103 and 104 in PNG and the drilling support services related to the supply of personnel and rental equipment to support the related drilling. The extensions are effective July 1, 2013 for a three year term to June 30, 2016. High Arctic entered into a contract with a major Canadian global upstream oil and gas company to provide equipment and services to their primary staging area in the southern forelands of PNG for a minimum of one year. Revenues from rentals were $20.2 million for the nine months ended September 30, 2013, a 37% increase from the $14.5 million received for the same period in 2012. By year end, the Corporation will have over 10,000 Dura-Base® mats in PNG, virtually all under contract. Revenues increased by 6% to $114.0 million for the first nine months of 2013 as compared to the nine months ended September 30, 2012. Adjusted EBITDA stayed consistent for the first nine months of 2013 as compared to the same period in 2012 at $29.0 million (2012 – $29.6 million) and was $9.8 million for the three months ended September 30, 2013 as compared to $10.1 million for the same period in 2012 and would have been higher if not for a fire which occurred on the UB250K unit. High Arctic increased its monthly dividend to $0.0125 per share in March, 2013. The annual dividend could total approximately $7.5 million, which represents an annualized rate of 21% of funds provided from operations during the trailing twelve months ended September 30, 2013. Commenting on the results, Dennis Sykora, High Arctic’s Chief Executive Officer, stated: “Our diversified services offerings in PNG have continued to be beneficial for the Company throughout 2013. The growth that we’ve seen in PNG this year has been sufficient to offset the challenging Canadian market and the loss of revenues from the UB250K rig through the first nine months of the year. In spite of these challenges, we have been able to deliver consolidated results consistent with last year.” Revenues for the first nine months of 2013 increased by 6% to $114.0 million compared to $107.6 million for the nine months ended September 30, 2012. The growth in revenue for the period was driven by increased activity in PNG with revenues of $85.9 million compared to $71.2 million for the first nine months of 2012 ($27.7 million for the three months ended September 30, 2013; $22.6 million for the three months ended September 30, 2012) as a result of having a second active drilling rig and a larger fleet of rental equipment in 2013. Revenues derived from PNG’s rental fleet contributed approximately $20.2 million for the first nine months of 2013 (2012 – $14.5 million). The operations in PNG generated significantly higher revenue in the first nine months of 2013 which offset the slower activity levels in the Canadian operation. Despite increased revenues, adjusted EBITDA decreased slightly to $29.0 million for the nine months ended September 30, 2013 from $29.6 million for the same period in 2012 due primarily to a reduction in the Canadian operating margin attributable to overall reduced industry activity levels. Revenue for Canada was $8.6 million for the third quarter of 2013 (2012 – $13.2 million). For the first nine months of 2013, revenues decreased by $8.3 million (23%) from the same period in 2012 due to reduced revenue levels from both the core snubbing and nitrogen businesses which was consistent with the overall industry activity slowdown. The operating margins in Canada were adversely affected by the reduced revenue levels and by competitive pricing conditions primarily in the nitrogen operations. Consolidated oilfield services operating margins continued to be strong at 32% of revenue for the nine months but fell slightly from 34% earned for the nine months ended September 30, 2012. The percentage was affected by the higher rig rental costs associated with operating an additional active rig in PNG for the first half of 2013 and the lower operating margins in Canada which caused the overall reduction of $0.5 million in the operating margin. 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”): 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: Outlook The PNG LNG project continues to be on schedule to deliver first gas towards the end of 2014 which remains the focus of our main customer and their partners in the facility. The long term outlook in PNG continues to be favourable as the LNG production will be an important cash flow stream available to be invested in new projects. High Arctic continues to pursue potential drilling opportunities with other operators in PNG and is awaiting updates by our main customer regarding their drilling program for 2014. The realization of such opportunities could mean a return to two rigs operating at some point in 2014. In the interim, our customer continues to operate one drilling rig full time. Rig 102 was active throughout 2012 and through the first nine months of 2013. Indications from our customer are that Rig 102 will continue working through much of the fourth quarter of 2013 and then stacked at a … Read more