Red Deer, Canada – November 14, 2012 – High Arctic Energy Services Inc. (TSX: HWO) (“High Arctic” or the “Company”) today announced its operating and financial results for the third quarter of 2012.
High Arctic continued its strong year over year growth in revenue, EBITDA and net earnings in the third quarter of 2012. Adjusted EBITDA increased 28% to $10.1 million in the quarter and by 33% to $29.6 million for the nine months ended September 30, 2012 as compared to the same periods of last year. Papua New Guinea generated higher revenue and contributed to the strong showing in the quarter as the Company continued to benefit from the capital additions made during 2011 and early 2012.
Highlights
- Net earnings for the quarter and nine months improved to $6.5 million and $22.9 million, respectively, more than doubling the $3.0 million and $10.2 million reported in the same periods for 2011.
- Consolidated revenue for the third quarter increased 22% to $35.8 million compared to $29.3 million for the quarter last year. Year to date revenues of $107.6 million are up 19% compared to 2011.
- Consolidated operating margins continued strong at 33% for the quarter, the same as in 2011 and to 33% for 2012 year to date compared to 31% last year. The margins benefited from the favourable returns generated during 2012 on capital invested in new rental equipment offset somewhat by lower margins during 2012 on nitrogen sales and the supply of additional personnel services in PNG carrying a lower margin.
- The strong growth in revenue for the quarter was driven by increased activity in PNG and by the deployment of a 250K UB Unit in Canada. In PNG, the third quarter revenue was $22.6 million compared to $18.1 million in 2011, the 25% increase primarily from the growth in the matting and equipment rental business and from supplying additional personnel services as part of the start up of a second drilling crew. Year to date revenues in PNG of $71.2 million are up 21% for the same reasons plus from the operation of Rig 102 for the full nine months of 2012 compared to four months in 2011.
- Revenue for Canada was also strong, up 18% to $13.2 million for the quarter compared to $11.2 million in 2011. The quarter saw flat revenue levels in the core snubbing business, but benefited from the deployment of a 250K UB unit from mid-June to mid-September that generated $3.0 million of revenue during the third quarter. The nitrogen business did see a drop in revenue for the quarter as both nitrogen and snubbing activities were softer during September as overall industry activity was down. Year to date, Canadian revenue of $36.4 million in 2012 was up 17% compared to $31.2 million last year, driven by the 250K UB unit and strong activity levels during the first quarter in the liquids rich natural gas plays in Alberta and British Columbia.
- High Arctic continues to be in a very strong financial position. At September 30, 2012, the Company had $22.7 million of cash on hand, well in excess of its debt of $15.0 million.
- The Company continues to generate strong cash flows from its operations. For the third quarter, High Arctic generated $9.4 million (2011- $6.0 million) of cash flows provided by operations and $26.2 million (2011 – $19.1 million) year to date. The 12 months trailing Adjusted EBITDA was $40.6 million at September 30, 2012 compared to $31.8 million for the 12 months ended September 30, 2011.
- As a result of its strong financial position, High Arctic instituted a monthly dividend of $0.01 per share and the first monthly dividend was paid on June 14, 2012. At that monthly rate, the annual dividend will total $6.0 million, which leaves the Company with most of its current operating cash flow available for investment in its business.
High Arctic, with its strong cash position and available debt facilities is well positioned to take advantage of strategic growth and acquisition opportunities to enhance shareholder value. The Company expects to commit most of the remaining portion of its 2012 capital budget of nearly $30 million though some of the commitments may spill into 2013. In addition, High Arctic has committed to the purchase of a 5.8 acre parcel of land in Grande Prairie and plans to construct a regional office and support facility. The total budgeted costs for the land and building is $5.4 million to be spread out over the next 12 months.
“We have continued to demonstrate our ability to grow revenue and EBITDA despite the challenging conditions in the Canadian industry”, commented Bruce Thiessen, Chief Executive Officer of High Arctic. “Looking ahead to 2013, we expect to continue to see our best investment opportunities in PNG as the country continues to develop its energy reserves.”
Further Information
A full copy of High Arctic’s third quarter results including Management’s Discussion and Analysis, Consolidated Financial Statements and Notes to the Consolidated Financial Statements can be found on the Investor Relations page of High Arctic’s website haes.ca or at www.sedar.com.
Dennis Sykora
Executive Vice President and General Counsel
Phone: 403 340 9825
Email: dennis.sykora@dev.haes.ca
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