CALGARY, Canada – May 12, 2022, High Arctic Energy Services Inc. (TSX: HWO) (the “Corporation” or “High Arctic”) released its’ first quarter results today.
Mike Maguire, Chief Executive Officer commented:
“High Arctic built on its strong 2021 closing position this quarter, continuing the trend of increasing revenue and earnings, and coupled this with raises to contract pricing. The increased activity in PNG and growing contribution from the ongoing deployment of our refurbished and enhanced automated hydraulic catwalks in Canada were notable highlights.
We were pleased with the successful return to operation of Rig-115 in Papua New Guinea. The legacy exploration well was professionally capped and abandoned fulfilling a key ESG commitment and added to High Arctic’s record of 5+ years of recordable safety incident free work in PNG. We look forward to increasing activity in PNG, where we anticipate activity levels in the coming years have potential to exceed our past peaks. We expect further announcements about advancement of the Papua LNG project, and the development of P’nyang and other PNG-LNG fields, among other projects to increase oil and gas production.
Also noteworthy was the three-year contract renewal we recently announced with one of our largest and longest standing customers for the provision of well servicing rigs in Cold Lake, Alberta, on substantially improved terms and pricing. The strong demand for our services and current labour driven constraints are positive for the continuation of pricing increases and margin growth in our Canadian production services.
Macro market conditions and business fundamentals support a very positive outlook for High Arctic into the second half of 2022 and beyond, and we are pleased to make the first payment under our reinstated monthly dividend this week.”
Highlights
The following highlights the Corporation’s results for Q1-2022:
- First quarter revenue of $28.7 million, EBITDA of $2.9 million, compared to $17.8 million and $1.2 million respectively in Q1-2021 and an improvement over Q4-2021 with $23.6 million and $1.2 million respectively.
- High Arctic recommenced drilling services activity in PNG during Q1-2022. PNG activity was the primary driver for growth in the Quarter as consolidated revenues rose by $10.9 million and 62% over Q1-2021.
- Oilfield operating services margin as a percent of revenue was modestly lower in Q1-2022 at 18.5% (Q1-2021 – 18.9%). Drilling and Ancillary services segments experienced improved margins, however, profitability decreased in High Arctic’s Canadian Production Services segment primarily due to cost inflation, elimination of Canadian Emergency Wage Subsidy (CEWS), and non-capital cost of preparing equipment for service.
- In April 2022 High Arctic announced a 3-year renewal of a key Production Services contract which includes a 20% increase to the base hours rig rate, increases to ancillary equipment and service pricing, provisions for fuel adjustments, and alignment of parameters to current market conditions.
- High Arctic announced recommencement of a monthly dividend payment of $0.005 per share commencing in May 2022.
- Strong liquidity with a working capital balance of $30.6 million, cash of $11.4 million, increasing access to funds under the revolving credit facility covenants and long-term debt of $7.7 million.
Strategy
Our 2022 strategic priorities build on the platform we created in 2021 and include:
- Safety excellence and quality service,
- Actions aimed at generating free cash flow including:
- Increased utilization of Corporation’s world-class fleet of equipment,
- Improved efficiency and work force productivity, and
- Operating cost control
- Development of new and existing employees to grow our workforce to meet demand,
- Pursuit of opportunities that secure the Corporation’s future as a lower emissions energy services provider,
- Pursuit of opportunities for growth and corporate transactions in well understood markets that enhance shareholder value, and
- Disciplined capital stewardship to improve returns including, divestitures, dividends and common share buybacks.——————–
The unaudited interim consolidated financial statements (“Financial Statements”) and management discussion & analysis (“MD&A”) for the quarter ended March 31, 2022 will be available on SEDAR at www.sedar.com, and on High Arctic’s website at www.haes.ca. Non-IFRS measures, such as EBITDA, Adjusted EBITDA, EBITDA for purposes of long-term debt covenants, Adjusted net earnings (loss), Oilfield services operating margin, Operating margin %, Percent of revenue, Funds provided from operations, Working capital and Net cash are included in this News Release. See Non-IFRS Measures section, below. All amounts are denominated in Canadian dollars (“CAD”), unless otherwise indicated.
Within this News Release, the three-months ended March 31, 2022 may be referred to as the “Quarter” or “Q1-2022”. The comparative three-months ended March 31, 2021 may be referred to as “Q1-2021”. References to other quarters may be presented as “QX-20XX” with X being the quarter/year to which the commentary relates. All amounts are expressed in thousands of Canadian dollars, unless otherwise noted.