Red Deer, Canada – March 20, 2012 – High Arctic Energy Services Inc. (TSX: HWO) (“High Arctic” or the “Company”) today announced its operating and financial results for the fourth quarter and year ended December 31, 2011.
High Arctic generated revenue of $127.2 million, compared to $119.3 million in 2010, representing a 6.6% increase. This increase was driven by a $7.9 million, or 20.2% increase in Canadian revenue. Adjusted EBITDA was $33.4 million compared to $33.3 million in 2010.
Net earnings for 2011 of $18.0 million ($0.40 per share), increased by $3.5 million, representing an increase of 24.1% compared to $14.5 million ($0.46 per share) in 2010.
Commenting on the results, Bruce Thiessen, High Arctic’s Chief Executive Officer, stated:
“I am very pleased with the results for 2011, especially considering the challenges facing the Company heading into the year, namely an extremely weak natural gas price environment in North America and the significant pricing concessions granted to our major customer in PNG at the start of 2011. The strong performance in the Canadian division demonstrates that our high pressure well completion services are well suited for the liquids rich plays that are expected to remain the primary gas targets for 2012. The continued decline in gas prices is concerning but I am confident in our relationships with our major customers and our ability to adapt to their emerging needs. During the year, we strengthened our relationship with our main customer in PNG and invested significantly in our rental fleet as part of our strategy to expand our revenue base in the country. The operation in PNG offers excellent investment opportunities while providing diversification away from the oil and natural gas prices in North America. High Arctic has a strong balance sheet and we are positioned to take advantage of strategic growth opportunities which may present themselves.”
The strong performance of the Canadian operations reflects the high activity levels in the unconventional shale gas and liquid rich plays in Alberta and British Columbia and the improved day rates in Canada. In PNG, the benefit of capital investments made to expand the matting and equipment rental business combined with increased drilling rig activity associated with several new customers and the startup of the Rig 102 workover rig offset the revenue loss from the pricing concessions granted as part of the contract extensions that took effect at the start of the year.
The Company invested $13.3 million in net capital expenditures in 2011, the majority of which were expansion of PNG’s matting and equipment rental business. These investments typically have higher operating margins, are supported by long-term contracts and are part of the strategy to diversify the Company’s revenue base in PNG. The results are expected to have a greater positive impact in 2012 due to the full year benefit of the matting and equipment rental acquisitions. Recently negotiated pricing improvements that took effect on January 1, 2012 are also anticipated to improve the results for PNG in 2012 and are expected to offset recent wage increases.
High Arctic completed a number of strategic milestones in 2011 which provide a strong foundation for the Company moving forward.
Some of the significant accomplishments during 2011 include:
- Total debt was reduced from $36.5 million at the start of the year to $17.2 million at year end. The Company moved from a demand facility to a $30.0 million committed credit facility of which only $17.2 million was outstanding at year end. After deducting the $16.5 million of cash on hand, High Arctic exited 2011 with a net debt position of $0.7 million compared to $12.2 million as at December 31, 2010.
- In PNG, High Arctic completed the long term extensions for the drilling contracts and support services for Rig 103 and 104 that now run until December 17, 2013. In addition, it successfully started up Rig 102 in the second quarter, following a major upgrade, under a contract that runs to May, 2014.
- High Arctic was able to significantly expand its rental business in PNG as part of its strategy to diversify both its revenue sources and customer base. As an example, High Arctic was awarded its largest matting contract to date for the drilling program of a super major operator in PNG. The contract is for an 18 month term with monthly revenue expected to be approximately $400,000 or $7.2 million over the 18 month term. Most of those mats went on full contract rate in the first quarter of 2012.
- Two year extensions for first call status were negotiated with two significant producers in Canada with improvement in pricing, which is indicative of the support from our valued customers and demand for our services.With a strong balance sheet and available credit facilities, High Arctic is well positioned to take advantage of strategic growth opportunities to enhance shareholder value. On January 31, 2012, the Company announced a $23.0 million capital budget for 2012, of which $7.0 million is maintenance capital and $16.0 million is budgeted for growth capital. These capital expenditures are anticipated to be funded from operating cash flows. These investments, in addition to the investments made in 2011 are anticipated to provide the impetus for further revenue and cash flow growth in 2012.
About High Arctic
The Company is a global provider of specialized oilfield equipment and services, including drilling, completion and workover operations. Based in Red Deer, Alberta, High Arctic has domestic operations throughout western Canada. International operations are currently active in Papua New Guinea.
Further Information
A full copy of High Arctic’s fourth quarter and 2011 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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