Corporate Presentation May 2016 TSX : HWO 2 DISCLAIMER Certain - - PowerPoint PPT Presentation

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Corporate Presentation

May 2016

TSX : HWO

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DISCLAIMER

These statements are derived from certain assumptions and analyses made by the Corporation based on its experience and perception

• f

historical trends, current conditions, expected future developments and

• ther factors that it believes are appropriate in

the circumstances. These statements

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predictions are subject to a number of known and unknown risks and uncertainties that could cause actual results to differ materially from the Corporation’s expectations. These risks and uncertainties include the items discussed under the heading “Risk Factors” in the Corporations' most recently filed Annual Information Form as well as the Corporation’s

• ther

public disclosure documents located on SEDAR (www.sedar.com). Consequently, all of the forward-looking information contained within this presentation and statements made in conjunction with this presentation are qualified by these cautionary statements and there can be no assurance that actual results

• r developments anticipated by the Company

will be realized or that they will have the expected consequences or effects on the Corporation or its business or operations. Other than as required by applicable securities laws, the Corporation assumes no obligation to update publicly any such forward-looking information or statements, whether as a result

• f new information, future events or otherwise.

Certain information contained within this presentation and statements made in conjunction with this presentation, including information and statements that contain words such as “seek”, “anticipate,” “plan”, “continue”, “estimate”, “expect”, “may”, “will”, “project”, “predict”, “potential”, “targeting”, “intend”, “could”, “might”, “should”, “believe”, “forecast”, “can” and similar expressions, are forward- looking statements. In particular, forward- looking statements in this presentation include, but are not limited to, statements with respect to future capital expenditures, future financial resources, anticipated equipment utilization levels, future oil and gas well activity, projections of market prices and costs,

• utcomes of specific events and trends in the
• il and gas industry.

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Business Overview

High Arctic Energy Services is a market leader with diversified operations in Papua New Guinea (PNG) and Canada.

PNG

• 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.

• Strong track record of 9 years of operations in PNG.
• PNG’s developing LNG industry reduces the impact of

short-term oil & gas price volatility.

Canada

• Owns and operates Canada’s largest fleet of stand

alone snubbing units.

• Opportunity to expand organically or through

acquisition

2015 Revenue

PNG $177.8 mm Canada $32.1 mm

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Shares outstanding (May 10, 2016):

52.6 million

Share Price (May 10, 2016):

$3.83

Market Cap (May 10, 2016):

$204.5 million

Net Cash & Marketable Securities (Mar 31, 2016):

$32.4 million

30 Day Average Daily Trading Volume

94,842 shares

Trailing 12 Month Adjusted EBITDA (Mar 31, 2016):

$75.4 Million

Annual Dividend

$0.198

Dividend Yield

5.17%

CORPORATE SNAPSHOT

Cyrus Capital 42% Insiders 9% Public 49%

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Stable Growth

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 TTM Canadian Revenue PNG Revenue 32 33 40 42 49 64 75.4 27% 26% 27% 27% 29% 30% 34% 10% 15% 20% 25% 30% 35% 20 30 40 50 60 70 80 2010 2011 2012 2013 2014 2015 TTM Adjusted EBITDA Adjusted EBITDA (%)

REVENUE

(as at March 31, 2016)

ADJUSTED EBITDA

(as at March 31, 2016)

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Overview – Stable and Growing

• Independent, established democracy and a stable business jurisdiction.
• Part of the British Common wealth with a parliamentary government.
• Government working with industry to develop nation (even in the current environment)

Papua New Guinea

Oil and Gas Activities – Long History, with New Growth

• Oil exploration activities since 1920’s
• Long-term LNG development commenced in 2008

Macro Drivers for Growth

• Large un-explored resource base
• Low cost source of LNG to Asian markets
• High quality operators with financial strength
• High quality gas (i.e. high heating content)
• Domestic natural gas electricity development to support economic growth

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Overview – Stable and Growing

• Globally contracted LNG supply is expected to be short of total

anticipated demand by 2020

• Largest growth in demand for LNG is expected to come from

Asia resulting from changes in:

• Government policy
• Environmental strategy to replace coal
• PNG’s LNG projects are advantageously situated to

supply Asian buyers

• Large natural gas reserves – current estimates PNG LNG:

9 tcf, Papua LNG: 8.6 tcf, encourages long-term drilling

LNG Development

THE PNG ADVANTAGE

East Africa $8.76 West Africa $8.76 US Gulf Coast $10.76 West Australia $8.73 East Australia $14.49 PNG $7.59

Cost of LNG to Japan

10% return (US$/mmbtu)

Source: Wood Mackenzie

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

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PNG Outlook & Development

P’nyang Juha Kutubu Kumul Gobe Kopi Triceratops InterOil New Discovery PNG LNG Operating Papua LNG Proposed Port Moresby Elk / Antelope Hides and Angore Valve and pigging station Oil/gas fields Oil export platform LNG Facility Oil / gas refinery Proposed pipeline Pipeline

PNG LNG:

• Exxon is the operator.
• Total forecast production includes 9.0 tcf
• f natural gas and 200+ million bbls of

associated liquids over 30 years

• Shipments began Q2 2014
• Exploration to support expansion

(e.g. P’nyang)

Elk / Antelope (Papua LNG):

• Ownership: TOTAL, InterOil and OSL
• Reserve confirmation test underway

to size LNG facility

• Development wells required to feed

LNG facility.

OSL:

• Targeting 4 to 6 exploration wells/yr.
• Focusing investment in PNG to support

10 year growth platform.

• Estimated 5 billion BOE yet to be

discovered in PNG.

InterOil:

• 14,000 unexplored acres.

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NATURAL GAS + OIL PRODUCTION Customer Base

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Drilling Landscape

P A P U A N E W G U I N E A

Rig Type Owner / Operator Details Classification

Heli Portable OSL / High Arctic 2 Rigs (103 /104) Tier 1 High Arctic 2 Rigs (115 /116) Tier 1 Contractor A 1 Rig circa mid 1970's Tier 2 Contractor B 1 Rig modified for limited heli use Tier 2 Heli Portable Work Over Rig High Arctic 1 Rig 102 Tier 1 Land Rigs Contractor C 1 Land based rig Operator 1 Land based rig

High Arctic is the dominant Tier 1 drilling provider in PNG

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PNG Drilling + Work Over Services

Rig 103 / 104 (leased from OSL)

• Drilling services and support contracts with OSL through

mid 2016 (three year term)

• Strong relationship with OSL with a history of two 3-year

contract renewals

Rig 115 / 116 (High Arctic owned)

• AC self-erecting 1500 HP heli-portable triple
• 2 year drilling services contract with InterOil commencing

with spud of first well

• Annualized operating revenue per rig of $30M USD
• including camp

Rig 102 (High Artic owned)

• Only hydraulic work over rig in PNG

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Matting

• Inventory exceeding 10,000 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
• Forklifts
• River pumps

MATTING CONTRACTS

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41% 6% 53%

Term Contract Prospective Idle

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Canadian Operations

Snubbing

• 15 Stand Alone Units
• 3 Rig Assist Units
• Currently marketing 8 units
• 2016 addition of fully guided 285k and 170k units

Nitrogen

• 11 Low Rate Unit
• 1 High Rate N2 Pumper
• 5 Nitrogen Transport

Rentals

• High pressure BOP’s

OUR CUSTOMERS

Dominant Western Canadian Stand Alone Snubbing Position Provides Platform to Expand

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• High Arctic is a market leader for stand alone snubbing in

Western Canada

• Jointed pipe snubbing allows rotation of pipe to over

come friction in extended reach horizontal wells

• Increasing number of high pressure horizontal wells has

resulted in additional demand for higher capacity units

• Snubbing remains a necessary service for completions of

long-reach horizontal wells

Canadian Snubbing Market

# OF SNUBBING UNITS AVAILABLE AVE VERAGE WELL ELL DEP DEPTH (WESTERN CANADA)

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High Arctic Owns and Operates Canada’s Largest Fleet of Stand Alone Snubbing Units

19 11 8 6 2 2 High Arctic Precision Quattro Powerstroke Northern Snub Co.

60% 58% 63% 70%

1,500 1,600 1,700 1,800 1,900 2,000 2,100 0% 20% 40% 60% 80% 100%

2012 2013 2014 2015 Well Depth Well Type (%) Horizontal Vertical Other

• Avg. Depth

Sources: Geoactivity Sources: Company Reports, High Arctic

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$ millions (except per share amounts)

2016 2016 2015

Revenue 54.7 54.7 44.7

22% 22%

Adjusted EBITDA 21.8 21.8 10.4

110% 110%

Adjusted EBITDA % of revenue 40% 40% 23%

74% 74%

Funds From Ops. 18.9 18.9 8.2

130% 130%

Net Earning per share (basic and diluted) 0.21 0.21 0.09

133% 133%

Fund From Ops. per share (basic and diluted) 0.35 0.35 0.15

133% 133%

Dividends per share 0.05 0.05 0.05

• Three months ended March 31,

$44.7 $54.7 $0.0 $20.0 $40.0 2015 2016 $10.4 $21.8 $0.0 $10.0 $20.0 2015 2016 $8.2 $18.9 $0.0 $10.0 2015 2016

REVENUE ADJUSTED EBITDA FUNDS FROM OPS.

Q1 Solid First Quarter Results

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15 $0.07 $0.15 $0.17 $0.20 $0.07 $0.01 $0.00 $0.10 $0.11

2012 2013 2014 2015 2016 YTD* Dividends per share Repurchases per share

Growing Distributions

T R A C K R E C O R D O F

Established history of dividend growth while maintaining conservative payout ratios Additional distributions to shareholders through share repurchases Disciplined distributions, without sacrificing capital resources to execute on growth opportunities

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DISTRIBUTIONS TO SHAREHOLDERS THREE YEAR DIVIDEND GROWTH 1

Canadian Energy Services Yield Cos2

32%

(100%) (80%) (60%) (40%) (20%) 0% 20% 40%

2016 YTD figure shown as at April 30, 2016

HWO

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Balance Sheet

• No Debt

Credit Facility

• Maturity Aug. 31, 2017
• On side with all covenants

Significant Cash Balance

LIQUIDITY

Credit Facility $45.0 million Cash $20.5 million Short-term Investments $11.9 million

(as at March 31, 2016)

Liquidity and Balance Sheet

W E L L P O S I T I O N E D W I T H S O L I D

Total $77.4 Million

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Financial Performance

INDEXED SHARE PRICE PERFORMANCE ENTERPRISE VALUE / EBITDA HISTORICAL RETURN ON EQUITY High Arctic’s share price has historically outperformed industry peers High Arctic consistently delivers strong returns to shareholders High Arctic is trading at the lower end of the industry valuation spectrum

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Sources: Lightyear Capital, Altacorp Comps include AKT.A, ESN, TDG, PD, WRG, SVY, XDC

0% 50% 100% 150% 200% 250% 300% High Arctic Competitors

0% 5% 10% 15% 20% 25% 30% 35% Competitors High / Low High Arctic 0.0 x 1.0 x 2.0 x 3.0 x 4.0 x 5.0 x 6.0 x 7.0 x 8.0 x 9.0 x 10.0 x Competitors High / Low High Arctic

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Growth Strategy

• Depressed North American activity levels may lead to attractive valuations for

acquisition targets.

• Valuation gaps starting to narrow
• Focus on quality operations, consistent with High Arctic’s operating culture.
• Diversification is key to long-term strength of High Arctic
• Geographic – Management team with strong North American and

International experience

• Complementary product lines – capture more of the customer value chain.
• Strong balance sheet and cash flows provide fuel for growth
• Organic growth of Canadian snubbing operations.
• Fit for purpose solutions to meet customer needs.
• Goal is to maintain a solid balance sheet

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Strategically Positioned for 2016 and Beyond

• The leader in PNG for contract drilling, well completions and

rentals

• Exposure to long-term LNG development reduces exposure to

short-term oil and gas volatility

• Conservative balance sheet with no debt
• Positive financial performance despite down-turn
• Positioned for opportunistic growth over next 24 months
• The leader in Canada for snubbing services

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Questio ns