High Arctic Energy Services Corporate Presentation

High Arctic Energy ServicesCorporate Presentation

Symbol: HWO

Disclaimer

This presentation may contain information which is forward-looking and is subject to important risks and uncertainties. The results or events predicted in this information may differ from actual results or events.

Actual results may differ materially from management expectations, as projected in such forward looking statements for a variety of factors, including market and general economic conditions and the risks and uncertainties detailed in the most recent Interim Financial Statements along with the Corporation’s Management Discussion and Analysis and the Annual Information form for the year ended December 31, 2013. These documents can be found on SEDAR (www.sedar.com).

Due to the potential impact of these factors, the Corporation disclaims any intention or obligation to update or revise any forward looking statements, whether as a result of new information, future events, or otherwise, unless required by applicable law.

http://www.sedar.com/

Corporate Strategy

To safely provide specialized technical oil field services to customers operating in challenging environments,

delivering sustainable growth and strong returns for shareholders.

Snubbing & N2 Services

Matting & Equipment Rentals

Drilling Services

Stability & Growth

Locations

Calgary

Grande Prairie

Red Deer

Singapore

Papua New Guinea

Sydney

Snubbing, Nitrogen & Rentals

Drilling & Rentals

Service Locations

Canada• Leading provider of snubbing services

in the Western Canadian Sedimentary Basin (WCSB)

• A leading provider of low rate nitrogen services in the WCSB

• Strategically positioned to capitalize on servicing longer horizontal high pressure wells for both gas & oil

• Will benefit from LNG export development

• Looking to expand service offerings and/or service locations

Papua New Guinea• The leading oil field service provider

in PNG• Services include;

– Drilling services & Camp management– Matting, Camp and Equipment rentals

• Strategically positioned to capitalize on the rapidly expanding capital investments being made in PNG

• The preferred service partner to Oil Search Ltd. (OSL) – with opportunities to leverage services into new markets

• Existing service contracts with all major operators

• Expanding client base

Papua New Guinea

Papua New Guinea • Recognized as the 10th fastest growing economy in the world in 2012• Independent, established democracy and a stable business jurisdiction• Part of the British Commonwealth with a Parliamentary Government• Welcoming to foreign capital and investment • No restrictions on repatriation of foreign profits• Currently experiencing rapid growth from resource exports

PNG Growth Opportunity

• Commenced in 2010 with first LNG sales on track for 2014• Project budget: $19.0 USD billion for 2 train liquefaction plant• Exxon is the operator (33.2%) and partners include:

– OSL (29.0%)– PNG government (16.8%)– Santos Ltd. (13.5%)– Nippon Oil (Japan) (4.7%)– PNG landowners (2.8%)

• 6.9 million tonnes per annum (mtpa) of LNG are fully contracted to TEPCO, Osaka Gas, CPC from Taiwan and Sinopec

• Over the project’s expected 30 year timeframe, total forecast production includes 9.0 tcf of natural gas and 200+ million bbls of associated liquids

• Significant growth opportunity for aggregating gas reserves for a third LNG train

PNG OSL / Exxon - LNG Project

PNG Drilling

• Operate and manage 2 Heli-portable drilling rigs (rigs #103 and #104) for OSL, contracted through June 30, 2016

• Own and manage the only Heli-portable hydraulic workover rig in PNG (rig #102) contracted through May 2014

• With expansion of the LNG plant there are opportunities for growth with additional Heli-portable drilling rigs and associated services.

Dura-Base Matting• Exit 2013 with over 10,000 mats on rental• PNG distributor rights• The largest rental supplier of Dura-Base

mats outside of the USA• Evaluating expansion into similar countries

with challenging environments

Equipment Rentals

Camp services – 5 camps contracted• HWO operates and manages

• Two 93 man Heli-portable drilling rig camps • Two 32 man Heli-portable leap frog camps (under contract - OSL owned)

• HWO deployed a new double-deck 104 man Heli-portable drilling rig camp in January 2013

(under contract - HWO owned)

Rental equipment owned by HWO and under contract includes;

• cranes (ranging from 30 ton to 160 ton)

• rig moving trucks• forklifts• river pumps • light towers• Dura-Base and Rhino matting

Yavo Staging Site Improvements

With High Arctic

Before High Arctic

In 2013 High Arctic was awarded an 18 month “Material Handling Contract” with a major Canadian Oil company to supply Cranes, Forklifts, Trucks, Light Towers, Personnel, Training, and Materials Handling expertise.

PNG Revenue Performance

Rental services has experienced a Cumulative Average Growth Rate of

34% over the past 4 years.CAGR

Drilling and related services have experienced moderate steady growth over the past 4 years.

Drilling Revenue ($M)

Rental Revenue ($M)

PNG Customers

• Public oil and gas exploration company (OSH-A) headquartered in Sydney, Australia

• Market capitalization of $9.5 billion ($USD) • Operating in PNG since 1929• PNG’s largest producer and most active

operator - 6.38M BOE annual production• PNG government is one of OSL’s largest

shareholders (15% of OSL’s outstanding shares)

• HWO is OSL’s exclusive PNG drilling contractor• www.oilsearch.com

http://www.oilsearch.com/

Canada

WCSB Drilling & Completion Trends

• The Western Canadian Sedimentary Basin (“WCSB”) has experienced 3 consecutive years of reduced drilling and well completions.

• This is largely due to high natural gas storage levels, reduced demand and associated low commodity prices.

• There is growing optimism for increased activity associated with an increase in expected demand from both domestic industrial consumption and significant LNG export opportunities.

Oil YTD Gas YTD Total YTD0

2,000

4,000

6,000

8,000

10,000

12,000

14,0002011 2012 2013

WC

SB W

ell C

ompl

etio

ns B

y C

omm

odity

WCSB Well Completions By Commodity

Source: CIBC World Markets

BC LNG Growth Opportunities

Asian LNG Imports (2000 to 2025)

JKT

India

China

New

0

50

100

150

200

250

300

350

2000 2005 2010 2015 2020 2025

mtp

a

CAGR2000 -2010

6.2% pa

CAGR2010-2025

5.9% pa

Source: Wood Mackenzie

Shipping Costs to Tokyo

$1.12$1.30

$1.97

$2.89

$0.00

$0.50

$1.00

$1.50

$2.00

$2.50

$3.00

$3.50

Western Canada Australia Qatar US Gulf Coast

Cost

s in

$/M

cf

Source: Unit Economics

• Demand for LNG product in Asia continues to increase.

• As such, there are currently over 8 proposals to build LNG liquefaction plants on the BC coast where natural gas from north east BC and Alberta would be compressed for shipment to Asia.

• Western Canada is well positioned to capitalize on this demand due to low shipping costs and low cost of supply.

http://engage.gov.bc.ca/lnginbc/files/2013/04/Betsy-Spomer-of-BG-Group.pdf

Snubbing Growth Opportunities• Petronas has committed to invest $36B over 30 years into BC LNG exports• This includes terminals, ships, pipelines & development of supply• Shell has also proposed a similar investment strategy in BC LNG • These commitments are evidenced by the well licences purchased in 2013• High Arctic is well positioned to provide the needed services for the

completion of these wells to our existing clients.

Company Aug YTD % of total

Shell 169 30%

Progress 112 20%

Encana 58 10%

CNRL 39 7%

Tourmaline 26 5%

Others 24 18%

Total 571 100%

HWO top clients

BC Well Licence Authorizations for 2013

These wells will require snubbing

services

What is Snubbing

PIPE

SLIPS

PRESSURE

FRICTION

HYDRAULIC FORCE

BOP

• Snubbing is the use of hydraulic force to push pipe against the snub force created by the well pressure.

• Snubbing permits live operations without killing the well thus avoiding formation damage and bringing the well on stream faster.

• Jointed pipe snubbing is stronger than coiled tubing snubbing and allows the unit to rotate the drill string.

• It is used both as a completion technique and to work on producing wells under pressure.

• More high pressure wells using multi-stage fracturing completion techniques, drive demand for snubbing services.

Jointed Pipe Snubbing

Jointed Pipe and/or Coiled Tubing

Jointed Pipe Snubbing Coiled TubingEither

• Run production tubing

• Drilling & Milling plugs

• Work-overs

• Cleanouts

• Fishing

• Fracturing through coil

• Placing packers & plugsCompetitive Advantage:• Faster tripping speed• Faster rig up times

Competitive Advantage:• Long depths achieved > 7000m• Greater push / pull strength

120K lbs – 250K lbs• Rotating pipe better overcomes

friction in tight holes• Broader range of pipe

diameters (1.7” – 5.5”)

• Acidizing through coil

Canadian Snubbing Services15 Stand Alone & 3 Rig Assist Units

14 Active Crews3 UB 250k Units

UB 250k Opportunity

Canadian Nitrogen Services9 Low Rate Nitrogen Pumpers

5 Nitrogen Transports

1 High Rate N2 Pumper

Nitrogen Services

Snubbing Support;• Wellbore displacements• Well head pressure testing• Underbalanced milling & drilling

Other Completions work;• Nitrified acid stimulation• Wellbore fracturing and stimulation• Coiled tubing support

Plant & Pipeline Applications;• Pressure testing• Plant purges• Plant turnarounds• Accelerated cool downs

Applications:Characteristics:

• Inert gas (non-reactive)• Non-corrosive• Non-explosive• Suitable for higher risk

environments

Canadian Equipment Rentals• 15 K BOP packages;

• Double gate BOP’s• Single gate BOP’s• Blind shear rams• High temp pipe rams

• 10 K BOP packages;• Double gate BOP’s• Single gate BOP’s• Blind shear rams• High temp pipe rams

• Boilers• Pumps• Class III Support Trailers

Growth opportunity to support the increase in

high pressure wells.

Canadian Revenue Performance

2009 2010 2011 2012 2013 -

5,000,000

10,000,000

15,000,000

20,000,000

25,000,000

30,000,000

35,000,000

40,000,000

45,000,000

50,000,000

Rentals N2

Snubbing

Canadian Customers

Working with large domestic and multi-national producers provides stability throughout oil and gas pricing cycles

Corporate Strategy Summary

1. Continue to invest free cash flow into organic growth opportunities delivering strong financial returns including;

• Expanding Dura-Base matting client base, • Increasing equipment rental service offering both in Canada and PNG• Maintaining leading edge snubbing technology through continuous investment• Returning profits to shareholders by way of monthly dividends

2. Use our strong balance sheet and unutilized debt capacity for potential acquisition opportunities, such as;

• Complementary services in Canada• Additional equipment in PNG• Expansion into new locations

Investment Highlights

Shares outstanding: 50,045,592Share Price (as at Mar 20, 2014): $4.50Market Cap : $225.2 millionNet Cash*: $26.9 million Enterprise Value: $198.3 millionTrailing 12 Month EBITDA: $41.5 millionEV / EBITDA Multiple: 4.78xAnnual Dividend: $0.18Payout Ratio 25%Canadian Tax Losses: ~$90.0 millionAverage Daily Trading Volume: 65,157Insiders’ Ownership (as at Mar 20, 2014): 68%

* Cash less debt

41% Cyrus Capital16% Former founder11% Directors / Officers

Peer Range: 4x - 8x

Historical Financial SummaryFinancial Performance – TTM

(in $ CDN millions) Mar, 2012 Jun, 2012 Sep, 2012 Dec, 2012 Mar, 2013 Jun, 2013 Sep, 2013 Dec, 2013

CDN Revenue 50.1 50.2 52.2 47.2 43.4 43.5 38.9 40.8

PNG Revenue 83.4 88.0 92.5 99.0 105.4 108.6 113.7 111.9

Total Revenue 133.5 138.2 144.7 146.2 148.8 152.1 152.6 152.7

EBITDA 37.2 38.5 40.6 39.6 37.9 39.3 39.0 41.5

CFFO 33.0 33.7 37.1 34.9 32.7 34.4 33.2 35.3

Net Income 21.4 27.2 30.7 28.8 26.5 22.9 24.1 24.6

Net Cash* 6.5 12.8 7.8 13.7 9.7 19.7 22.0 26.9

PP&E 50.6 54.2 60.9 61.3 65.3 67.7 70.9 72.1

Shareholders’ Equity 73.8 80.5 83.4 88.6 96.9 99.5 104.0 111.8

Shares Outstanding (mm) 49.6 49.7 49.8 49.8 49.8 49.8 49.9 50.0

*Net Cash: Cash – Bank Debt

Contact Info

High Arctic Energy Services Inc.8112 Edgar Industrial Drive

Red Deer, AB Canada T4P 3R2Website: www.haes.ca

Dennis Sykora, CEO Ken Olson, CFOPh: (403) 340-9825 Ph: (403) 340-9825 Email: [email protected] Email: [email protected]

Trading Symbol: HWO - TBanker: HSBC Bank of CanadaAuditors: PriceWaterhouseCoopers LLPLegal: Davis LLP

http://www.haes.ca/

mailto:[email protected]

mailto:[email protected]

High Arctic Energy Services Corporate Presentation

Documents

Transcript of High Arctic Energy Services Corporate Presentation