Calgary, Alberta, October 15, 2020 – High Arctic Energy Services Inc. (TSX: HWO) (“High Arctic” or the “Corporation”) is pleased to announce the two-year extension of its current credit facility with HSBC (the “Credit Facility”). The Credit Facility maturity date is extended to August 31, 2023 with enhanced flexibility and similar underlying financial covenants and borrowing capacity.
In addition to the Corporation’s existing cash balance, which was $33.5 million on June 30, 2020, the available Credit Facility capacity provides additional liquidity for both future operating and capital requirements. Chris Ames, CFO noted “This extension demonstrates our lenders confidence in High Arctic and our business model. Ongoing availability of the Credit Facility and disciplined cost control are cornerstones of our goal to take advantage of business opportunities as we emerge from the current market conditions. We continue to exercise capital discipline while pursuing our strategy to increase value for our shareholders.”
The Corporation has drawn $10.0 million of the $45.0 million revolving loan facility available, which now matures on August 31, 2023. The Credit Facility terms continue to include two financial covenants stipulating that the Funded Debt to EBITDA Ratio shall not exceed 3.00 to 1.00 and EBITDA to Interest Expense Ratio shall remain below 3.00 to 1.00. The facility is renewable with the lender’s consent and is secured by a general security agreement over the Corporation’s assets. The calculation of the Corporation’s borrowing base remains unchanged and is limited to 60% of the net book value of the Canadian fixed assets plus 85% of investment grade receivables, 75% of acceptable accounts receivable, plus 90% of insured receivables; less priority payables as defined in the Credit Facility agreement. The bank defined EBITDA covenant now includes an add back of restructuring costs up to $1 million in any given trailing 12-month period. The new arrangement also includes a backstop feature that provides $5 million availability in the event the above two financial covenants are not met.
Operational Update and Safety Performance
The Corporation is also pleased to report on outstanding continued operational safety performance. On August 24th, 2020, High Arctic’s Papua New Guinea (“PNG”) operations reached the world-class milestone of four years Total Recordable Incident Free operations and on September 29th, 2020, High Arctic’s Canadian operations celebrated a total of twenty four months Lost Time Injury Free operations. This sustained performance, culminated in High Arctic again being awarded the Australasian Safety Statistics Award (Onshore) for 2019 at the recent Annual General Meeting of the International Association of Drilling Contractors – Australasian Chapter (IADC-AC), which High Arctic has now won 4 out of the last 5 years.
Mike Maguire, CEO commented “Safety performance and service quality are principal focuses of our operations and both our PNG and North American operations have delivered record results. Many companies have aspirational zero targets for safety, High Arctic has achieved this target which it has been able to sustain. We understand that these achievements do not come by luck. Hard work, dedication to safe work initiatives and skills development through internationally recognized training of our personnel are fundamental to this result. This could not have been achieved or maintained without a dedicated workforce, stable long-term suppliers and supportive customers.”
In PNG significant travel restrictions remain in place and the number of reported COVID-19 cases is growing. The Corporation remains engaged with our customers with personnel deployed to assist with their essential operations while we position for a return to drilling activity. We are encouraged by the announcement on September 21 from the Prime Minister that the “National Government will continue to make additional concessions for an acceptable pathway to all parties to get the US$9.2 billion P’nyang gas project off the ground.”
In Canada the corporation has deployed plant and personnel to deliver our first services under the Alberta Site Rehabilitation Program and we now have received a modest but increasing number of project approvals under both the Alberta and the Saskatchewan Programs. We are working with our customers to optimize the scheduling of this work.
As a result of an internal review of the US market High Arctic have now mothballed our operations in Colorado and North Dakota. Having worked with our customers to finish ongoing commitments we concluded our final operation in the US in early September. The Corporation will monitor the market for signs of improvement that could see operations resume.
About High Arctic
High Arctic is a publicly traded company listed on the Toronto Stock Exchange under the symbol “HWO”. 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 is a market leader providing drilling and specialized well completion services and supplies rig matting, camps and drilling support equipment on a rental basis in Papua New Guinea. The North American operations provide well servicing, well abandonment, snubbing and nitrogen services and equipment on a rental basis to a large number of oil and natural gas exploration and production companies.
For further information contact:
Michael J. Maguire
Chief Executive Officer
VP Finance & Chief Financial Officer