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CALGARY, Alberta, Nov. 07, 2019 (GLOBE NEWSWIRE) — High Arctic Energy Services Inc. (TSX: HWO) – “High Arctic” or the “Corporation” is pleased to announce its 2019 third quarter results.
Mr. J. Cameron Bailey, High Arctic’s CEO stated: “I’m very proud of the tremendous team we have at High Arctic and the dedication to providing an outstanding quality service with world class safety performance both in North America and Papua New Guinea.
Market conditions in Canada continue to be very challenging, with the average land rig count in the third quarter 37% below last year. By focusing on cross-selling each of our service lines, and increasing penetration in the United States, we were able to increase Production Services revenue by 9%. We expect High Arctic to continue to benefit from relatively consistent Well Servicing activity in the fourth quarter, notwithstanding average rig count in Canada remains significantly below levels experienced in 2018.
In PNG, the expected ramp up of drilling activities in the fourth quarter of 2019 is now pushed into the new year as Operators finalize the gas agreements with the government of PNG expected later in 2019. The expiry of Rig 116 take-or-pay contract in November of 2018 weighs heavily on year over year comparative financial results. Rigs 115 and 116 are available for immediate reactivation.
We made the difficult decision to reduce our support workforce by 10% over the quarter to adjust to more competitive market conditions and have focused on managing our capital expenditures which have been restricted to required repairs and maintenance in order to preserve strong financial position and operate within our cashflow.
I want to thank all of our employees for their efforts and devotion to deliver top quality operations, logistics and safety. For this reason, High Arctic has been able to work for some of the world’s top oil and gas companies, increase market share and maintain high equipment utilization rates in tough market conditions.”
High Arctic generated revenue of $49.6 million in the third quarter 2019, a decrease of $5.1 million or 9% lower than the comparable quarter of 2018. Year to date, revenue was $142.7 million compared to $155.5 million in 2018, an 8% decrease year on year. These results were driven by lower customer demand in Canada carried over from 2018 and the Q4 2018 take or pay contract expiry for Rig 116. Canadian well servicing operating hours were 14% lower compared to the same quarter 2018 and 9% lower on hours year to date with revenue per hour lower by 1% for the third quarter 2019 over the same quarter 2018 and revenue per hour the same year over year for nine months. This was offset with increased activity in the United States operations in both well servicing and snubbing and Canadian snubbing. United States operations generated 8% of the third quarter revenue.
In Drilling Services, Rig 103 worked continuously through the quarter and Rig 104 completed its field work and was demobbed to Moro base to await its next assignment. High Arctic equipment is poised to go to work but does not have a definitive timetable.
Capital expenditures were $3.0 million in the third quarter and $9.9 million in the first nine months of 2019 representing most of the year’s spending on equipment. This is offset by proceeds on sale of equipment of $0.2 million in the quarter and $1.6 million year to date.
The Corporation’s strategic priorities remain targeted on:
- Regional work force development to strengthen safety, expertise, work standards and local communities.
- A strong capital structure to provide liquidity and strength throughout the energy services economic cycles.
- Specialty niche operations with noteworthy barriers to entry.
- Deep value opportunities to consolidate existing markets and diversify into new regions.
- Solidifying customer relationships to gain market share and expand when industry conditions permit.
- Disciplined capital allocation to deliver shareholder value consistent with past performance.
Execution on these strategic priorities led to the following noteworthy developments during the first nine months of 2019:
- Safety excellence, four recordable incidents, and further delivery on training and education initiatives continuing in all operating areas
- PNG completed 3 years and 2 million man-hours Total Recordable Incident Frequency (“TRIF”) free as of 27th September
- Canadian operations have achieved 1 year Lost Time Injury Free as of 25th of September with Cold Lake operations recording 6.2 years and 1.5 million manhours of Total Recordable Incident Free
- High Arctic received the IADC-AC Australasian Safety Statistics Award for 2018, which High Arctic also won in 2017 and 2015
- Continued preservation of a strong capital structure characterized by no long-term debt, an extension of the Facility Letter to August 2021 with fewer covenants.
- High performing operating capabilities in pressure control snubbing and deep heli-portable drilling.
- Further consolidation of the pressure control snubbing business in Canada including acquisition of Precision Drilling snubbing assets and several snubbing units available via auction from a competitor exiting the business.
- Further diversification of revenue with snubbing and well servicing expansion to the United States customer base expanding and have worked in three states (ND, Wyoming and Colorado). High Arctic has two service rigs and six snubbing units in the USA now and in the fourth quarter.
Third Quarter 2019:
- High Arctic reported revenue of $49.6 million ($54.7 million in 2018), net loss of $(1.1) million ($7.5 million earnings in 2018) and Adjusted EBITDA of $6.3 million ($17.4 million in 2018).
- Utilization for High Arctic’s 56 registered Concord Well Servicing rigs was 51% in the quarter for the industry utilization of 36% (source: Canadian Association of Oilwell Drilling Contractors “CAODC”) generating more hours than previous periods and increasing market share while providing safety excellence to our customers.
- PNG activity was lower than last year with Rig 103 working the entire quarter and Rig 104 finishing field work and being stacked mid September until its next assignment. The expiry of the Rig 116 take or pay contract in November 2018 represented a decrease of $4.6 million in EBITDA in the third quarter year over year.
- The company incurred a general and administrative expense of $0.4 million for an uncollectable receivable in Canada, nil in the comparable third quarter of 2018.
- The Company maintained strong working capital through the quarter including an undrawn $45 million line and cash of $12.1 million.
Year to Date 2019:
- High Arctic reported revenue of $142.7 million ($155.5 million in 2018), net loss of $(6.1) million ($13.7 million earnings in 2018) and Adjusted EBITDA of $15.8 million ($45.0 million in 2018).
- Utilization for High Arctic’s 56 registered Concord Well Servicing rigs was 54% year to date versus industry utilization of 36% (source: Canadian Association of Oilwell Drilling Contractors “CAODC”).
- High Arctic declared $7.4 million ($0.148 per share) in dividends year to date. High Arctic repurchased and cancelled 1,397,247 shares with a value of $5.1 million under the Corporation’s NCIB during 2019 resulting in a total of $12.5 million being returned to shareholders via dividends and share repurchases.
- High Arctic continues to maintain a strong financial position with $12.1 million in net cash, an undrawn $45 million credit facility and a positive working capital position of $38.2 million.
|J. Cameron Bailey
Chief Executive Officer
Email: [email protected]
Chief Financial Officer
Email: [email protected]
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