Corporate Presentation November 2019 TSX : HWO 2 49.6 million - - PowerPoint PPT Presentation

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Corporate Presentation November 2019 TSX : HWO 2 49.6 million - - PowerPoint PPT Presentation

Dec 28, 2023 135 likes •359 views

Corporate Presentation November 2019 TSX : HWO 2 49.6 million Shares Outstanding (Nov 8, 2019): CORPORATE $2.26 Share Price (Nov 8, 2019): SNAPSHOT $112.5 million Market Cap (Nov 8, 2019): $12.1 million Cash Balances (September 30, 2019):

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SLIDE 1

Corporate Presentation

November 2019

TSX : HWO

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SLIDE 2

Shares Outstanding (Nov 8, 2019):

49.6 million

Share Price (Nov 8, 2019):

$2.26

Market Cap (Nov 8, 2019):

$112.5 million

Cash Balances (September 30, 2019):

$12.1 million

Working Capital (September 30, 2019):

$41.5 million

Adjusted EBITDA (Three Months September 30, 2019):

$6.3 million

Annual Dividend:

$0.198

Dividend Yield (Nov 8, 2019):

8.8%

CORPORATE SNAPSHOT

Cyrus Capital 44% Insiders 4% Public 52% 2

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SLIDE 3

0% 50% 100% 150% 200% 250% 300%

Jan-13 Jul-13 Jan-14 Jul-14 Jan-15 Jul-15 Jan-16 Jul-16 Jan-17 Jul-17 Jan-18 Jul-18 Jan-19 Jul-19

High Arctic Competitors $0.07 $0.15 $0.17 $0.20 $0.20 $0.20 $0.20 $0.15 $0.01 $0.00 $0.10 $0.12 $0.19 $0.10 $- $0.05 $0.10 $0.15 $0.20 $0.25 2012 2013 2014 2015 2016 2017 2018 2019 YTD Distributions per share ($)

Dividends per share Repurchases per share

Shareholder Returns

N O D E B T | F R E E C A S H F L O W | O R G A N I C G R O W T H | D E F E N S I B L E M A R K E T S T R A C K R E C O R D O F

  • High Arctic has maintained disciplined distributions, without sacrificing capital to

execute on growth opportunities

  • High Arctic has delivered industry leading returns to shareholders-
  • Competitors’ share prices have decreased 79% since January 2013

4

DISTRIBUTIONS TO SHAREHOLDERS (per share) INDEXED SHARE PRICE PERFORMANCE

Sources: Company Reports Comps include ESI, PD, TOT, WRG, AKT.A, CWC

3

  • $1.87 per share of Shareholder Distributions over the past 7.5 years
  • $0.84 per Share of Working Capital (as at September 30, 2019)

$2.21 per Share $2.26 per Share

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SLIDE 4

Track Record of Profitable Growth

T I E R 1 S T R A T E G Y : D E F E N S I B L E N I C H E S , B E T T E R M A R G I N , S A F E T Y & P E R F O R M A N C E T I E R 1 R E S U L T S L E A D S T O P E R F O R M A N C E I N T R A C K R E C O R D O F :

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50 100 150 200 250 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 YTD Canadian Revenue PNG Revenue US 32 33 40 42 49 64 71 58 52 16 27% 26% 27% 27% 29% 30% 34% 28% 26% 11% 10% 15% 20% 25% 30% 35% 10 20 30 40 50 60 70 80 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 YTD Adjusted EBITDA Adjusted EBITDA (%)

REVENUE

(as at Sep 30, 2019)

ADJUSTED EBITDA

(as at Sep 30, 2019) 4

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SLIDE 5

Specialty niche operations with significant barriers to entry

Why High Arctic

Ten year history of profitable operations with superior returns on equity Very strong balance sheet with access to in excess of $60 million in liquidity, which includes non-cash Working Capital

5

Continued growth in Canada and recent expansion into the US Seven years of consistent growing dividends with low payout ratio <30%

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SLIDE 6

Business Overview

High Arctic Energy Services is a tier one drilling and service rig provider to the leading exploration and production companies in Papua New Guinea (PNG), Canada and the United States

PNG Canada

  • Owns and operates Canada’s largest fleet of stand alone

snubbing units-original niche market

  • Acquired a tier 1 service rig platform in Q3 2016 that works for

large Canadian E&P’s and international supermajors

  • Solid platform established for growth across completion &

production services landscape

2019 Q3 Revenue

PNG $22.3 m Canada $23.2 m

6

US US

  • In August 2018, High Arctic acquired PowerStroke Well Control,

through which will roll out US expansion plan in North Dakota, Colorado and Pennsylvania

  • In April 2019, High Arctic acquired Precision Drilling’s snubbing

division, which further strengthens High Arctic’s leading position in the snubbing market in Canada and complements PowerStroke’s expansion effort in the US

L N G O i l + L i q u i d s O i l + L i q u i d s

US $4.1 m

  • Dominant

market position for contract drilling, well completion and rental services in PNG

  • Provides services in PNG to super majors and regional energy

companies under long-term contracts

  • PNG’s enviable position as a low cost provider of LNG to Asia

reduces exposure to lower world energy prices.

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SLIDE 7

Canadian Operations

Quali uality Equ quip ipment Geog Geographic ical l Foo

  • otp

tprin int

  • Facilities strategically located to cover

major basins in WCSB

  • Exposure to heavy oil, light oil and

natural gas basins

OUR CUSTOMERS

84% of Canada Revenue derived from Contracted Arrangements 95% Well Servicing Related to Oil Production

Total Marketed Service Rigs 85 59 Snubbing 33 24 Nitrogen Pumpers 12 7 Nitrogen Bulkers 5 3 Rental Equipment 1,050 1,050

Montney Duvernay Cardium

Blackfalds Whitecourt Acheson Lloydminster Cold Lake

Cold Lake Oil Sands

Brooks

GEOGRAPHICAL FOOTPRINT

Grande Prairie

7

O i l + L i q u i d s

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SLIDE 8

Canadia ian In Industry Capit ital l Exp xpenditures

8

Sources: CAPP Statistical Handbook

0.00 10.00 20.00 30.00 40.00 50.00 60.00 70.00 80.00 90.00 100.00 5,000 10,000 15,000 20,000 25,000 30,000

Wellhead Oil Prices $Cdn Capital Spending $millions

Operating Drilling Oil Price

Drilling Cap Ex Peak to Trough down 55% Drilling Cap Ex Peak to Trough down 67% Drilling Cap Ex Peak to Trough down 46% Operating Cap Ex Peak to Trough up 25% Operating Cap Ex Peak to Trough up 15% Operating Cap Ex Peak to Trough down 14%

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SLIDE 9

Well ll Servic icin ing Market – Producin ing Oil il Wells lls

9

Sources: CAPP Statistical Handbook

10,000 20,000 30,000 40,000 50,000 60,000 70,000 80,000 90,000 100,000 1980 1982 1984 1986 1988 1990 1992 1994 1996 1998 2000 2002 2004 2006 2008 2010 2012 2014 2016 2018

Wells

2,000 4,000 6,000 8,000 10,000 12,000 14,000 16,000 1980 1982 1984 1986 1988 1990 1992 1994 1996 1998 2000 2002 2004 2006 2008 2010 2012 2014 2016 2018

Wells

Sources: North Dakota Mineral Resources

  • Well Servicing market is based on the number of existing wells and not as dependent
  • n Rig Count or new well drilling.
  • The Compound Growth Rate over the past 10 years of Oil Wells
  • In Canada – 2% per annum
  • In North Dakota – 13%

Prod

  • ducing Oi

Oil Wel ells In n Can Canada Prod

  • ducing Oi

Oil Wel ells In n Nort North Da Dakota

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SLIDE 10

0.0% 2.0% 4.0% 6.0% 8.0% 10.0% 12.0% 14.0% 16.0% 18.0% Q1-18 Q2-18 Q3-18 Q4-18 Q1-19 Q2-19 Q3-19 CWC Precision Drilling Concord Savanna Rockwell (Ensign) Eagle (WES)

  • High quality asset base, defensive barrier to entry, superior utilization and top tier safety and performance
  • Operates one of the largest fleets of service rigs in WCSB
  • Solid client base that includes international supermajors top tier Canadian E&P companies
  • Operate 6% of rigs available and over 10% of total industry hours
  • Pricing and market fundamentals improving as market supply compresses with labor shortages

Concord Well Servicing

Utilization figures based on number of registered rigs Source: CAODC

IND NDUSTRY LE LEADING G UTIL TILIZATION

10

O i l + L i q u i d s

Utilization figures based on number of registered rigs Source: CAODC

GR GROWING MAR MARKET T SH SHAR ARE

0% 10% 20% 30% 40% 50% 60% 70% Q1-18 Q2-18 Q3-18 Q4-18 Q1-19 Q2-19 Q3-19 Concord Market Utilization

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SLIDE 11

Overview – One of the world’s great emerging markets

  • Part of the British Commonwealth with a parliamentary government

Papua New Guinea

Oil and Gas Activities – Long History, with New Growth

  • After early years of “Turner Valley-type” exploration, PNG found it’s Leduc

– World class wells

  • Drilling for decades and High Arctic is the first mover
  • Remote jungle locations requires specialized logistics skills and experience
  • Largest Natural Gas Well – Elk/Antelope

Macro Drivers for Growth

  • Low cost source of LNG to Asian markets
  • Recent OSL/Exxon discovery at Muruk opens new development area
  • Exxon carrying out large seismic program to support a long term exploration program
  • Exx

ExxonMobil, Tot

  • tal and

and part partners s ann announced exp xpansion with ith thr hree ne new LN LNG trai ains s to

  • de

develop Elk Elk- Antelope and the P’nyang fields.

11

LNG

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SLIDE 12

2 4 6 8 10 12 14 Jun-15 Sep-15 Dec-15 Mar-16 Jun-16 Sep-16 Dec-16 Mar-17 Jun-17 Sep-17 Dec-17 Mar-18 Jun-18 Sep-18 Dec-18 Mar-19 Jun-19 LNG Prices USD per mmbtu Japan China United Kingdom Spain

LNG Development

THE LONG TERM PNG ADVANTAGE

Proximity to growing Asian market’s provides incentive to develop LNG projects despite industry downturn

12

Source: Bluegold Research

L N G

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SLIDE 13

PNG Outlook & De Development: : Build ildin ing a a Cou

  • untry

ry

Oil export platform

PNG LNG: Completed 2014

  • Exxon is the operator
  • 9.0 tcf of natural gas and 200+ million bbls of associated

liquids over 30 years

  • 1.0bcf/d Capacity – 2 trains
  • Double Capacity to 2bcf/d with addition of 3 Trains in 2023

Elk-Antelope:

  • Ownership: TOTAL, Exxon and OSL
  • Proven gas reserve of 5.2tcf

OSL:

  • 4 to 6 exploration wells/yr
  • Ongoing / planned drilling programs in Elk-Antelope, Muruk

and P’nyang

  • Muruk gas discovery – confirmation of very good quality

reservoir leading to potential appraisal program in 2019.

  • Focusing investment in PNG to support 10 year growth

platform

Exxon:

  • Completed acquisition of InterOil 2016
  • Significant unexplored acreage

NATURAL GAS + OIL PRODUCTION

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SLIDE 14

Papua New Guinea

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LNG

  • High Arctic has drilled 70 wells in PNG since 2007
  • Over 300 loads to locate a Heli Rig on location

2 4 6 8 10 12 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 YTD

WElls Drilled

Annual Well Count

Rig 101 Rig 103 Rig 104 Rig 115 Rig 116

Rigs 101 / 103 / 104 Customer owned – HAES operated Rigs 115 / 116 HAES owned

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SLIDE 15

Matting

  • Inventory exceeding 5,000 rental mats in PNG
  • High Arctic has PNG distributor rights
  • Possible expansion into other countries with similar challenging

environments

PNG Equipment Rentals

Camp Services

  • Owns and manages two 103 man Heli-portable man camps
  • Operates and manages two 93 man Heli- portable drilling rig camps

Other Rental Equipment

  • Cranes (ranging from 30 ton to 160 ton)
  • Rig moving trucks and other rolling stock
  • Forklifts
  • River pumps

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L N G

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SLIDE 16

US Operations

Equ quip ipment De Deplo loyment Plan

Currently In n US Moving fr from Can anada Tot

  • tal US

S Plan lanned Service Rigs 2 3 5 Snubbing 6 2 8

EX EXPANSION FOO OOTP TPRINT

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Greeley, CO

Bakken Niobrara

  • Acquired

PowerStroke Well Control Ltd. enabling expansion into the US

  • High Arctic now operates the largest snubbing fleet in

Canada with 33 high-spec snubbing units, of which 6 are being marketed in US

  • Begun deploying Well Service Rigs with 2 currently
  • perating and with 3 additional Rigs being prepared to

move

  • Established fully operational facilities in Williston, ND and

Greeley, CO

Williston, ND

O i l + L i q u i d s

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SLIDE 17

Precision Snubbing Acquisition

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  • On April 16, 2019, High Arctic acquired Precision Drilling’s

snubbing assets for $8.25m

  • Part of a continued growth plan which strengthen High

Arctic’s leading position in the snubbing

  • 12 additional marketed snubbing units as well as certain

patent rights related to the design and spare equipment

  • Post acquisition, High Arctic operates the largest snubbing

fl fleet in in Canada with 33 33 high-spec snubbing units – 60 60% Mark rket share

  • As of Aug 2019, High Arctic has 6 active snubbing units

working in Colorado and North Dakota.

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SLIDE 18

Financial Summary

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2019 2018 $m (except per share amounts) Nine Months Ended Sept 30 % Change Consolidated Revenue 142.7 155.5 (8%) Canada 66.8 69.3 (4%) US 7.4 0.4 1750% International 68.5 86.2 (21%) Adjusted EBITDA 15.8 45 (65%) Adjusted EBITDA % of Revenue 11% 29% (62%) Net Earnings per Share (basic and diluted)

  • 0.08

0.26 (131%) Funds from Operations per Share (basic and diluted) 0.24 0.66 (64%) Dividends per Share 0.15 0.15 0.0% Nine Months Ended Sept 30

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SLIDE 19

Outlook

Solidify High Arctic’s leading position in PNG as the driller of choice Continue organic roll

  • ut opportunities in

Canada and the US Actively pursue accretive acquisition

  • pportunities within

the North American energy services sector

Geographically and and Ope perationally Div Diversifi fied Ene Energy Ser Services Com

  • mpany

19

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SLIDE 20

Contact us

J Cameron Bailey, President & CEO Ph: (587) 318-3826 Email: cam.bailey@haes.ca

Analyst Coverage

AltaCorp Capital Tim Monachello Industrial Alliance Elias Foscolos National Bank Greg Coleman Paradigm Capital Jason Tucker Website www.haes.ca Head Office 700 – 2nd Street SW, Suite 500 Calgary, AB Canada T2P 2W1

TSX : HWO