CALGARY, Canada – May 11, 2023, High Arctic Energy Services Inc. (TSX: HWO) (the “Corporation” or “High Arctic”) released its’ first quarter financial and operating results. The unaudited interim consolidated financial statements, and management discussion & analysis (“MD&A”), for the quarter ended March 31, 2023 will be available on SEDAR at www.sedar.com, and on High Arctic’s website at www.haes.ca. All amounts are denominated in Canadian dollars (“CAD”), unless otherwise indicated.
The Corporation announces that the Board of Directors intends to recommend to shareholders a tax-free cash return of capital equal to $38.2 million relating to the sale of Canadian Well Servicing. The Board further intends to recommend a reorganization of the Corporation at a special meeting of the Shareholders to be held before the end of September 2023. The recommendation to reorganize is expected to include the following elements:
– a spinoff of the international business to shareholders as a private company,
– maintaining the Canadian publicly listed company focused on growing the Canadian business and utilizing the available $130 million non-capital tax loss carryforwards, and
– right sizing the general and administrative infrastructure to align with the new structure.
The Corporation is working with DLA Piper as legal advisor on the reorganization plan and is in discussions with financial advisors to facilitate the reorganization, the completion of which is subject to all applicable regulatory approvals.
Mike Maguire, Chief Executive Officer commented:
“I am excited that the Board intends to reorganize the Corporation, starting with a tax efficient return of cash to shareholders. The proposed spin-off of the Papua New Guinean business will allow senior management to concentrate where we have had the most success in the past. The remaining publicly listed company with Canadian assets and tax pools creates an attractive vehicle for future growth and transactions.
Our PNG business has been consistently undervalued by the public market, and we believe that the current market conditions make it appropriate to take steps to unlock value.
I believe our customers and employees in both PNG and Canada will appreciate and benefit from a locally managed business.”
The following highlights the Corporations results for Q1-2023:
• PNG Rig 103 resumed drilling operations towards end of Quarter under a 3-year contract renewed in August 2022.
• Achieved oilfield services operating margins as a percent of revenue of 32.3% on revenues of $9.5 million.
• Generated funds flow from operations of $1.4 million and incurred capital expenditures of $0.4 million.
• Improved liquidity with a working capital balance of $59.7 million, increased cash balance of $46.7 million, and long-term debt of $4.0 million.
• After the final payment from the sale of Well Servicing, the Board of Directors is assessing the merit of a substantive cash return to shareholders including the optimal capital and cost structure.
High Arctic’s 2023 Strategic Objectives build on the platform we created in 2022, and include:
• Safety excellence and quality service delivery,
• Return idled assets in PNG to service,
• Scaling our Canadian business,
• Opportunities for growth and corporate transactions that enhance shareholder value, and
• Examination of the Corporation’s optimal capital and overhead structure.