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Investor Presentation
October 2016
TSX : HWO
Investor Presentation October 2016 TSX : HWO 2 DISCLAIMER - - PowerPoint PPT Presentation
1 Investor Presentation October 2016 TSX : HWO 2 DISCLAIMER Certain information contained within this These statements are derived from certain this presentation and statements made in presentation and statements made in
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October 2016
TSX : HWO
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These statements are derived from certain assumptions and analyses made by the Corporation based
its experience and perception
historical trends, current conditions, expected future developments and
the circumstances. These statements
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
public disclosure documents located
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
will be realized or that they will have the expected consequences
effects
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
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
and gas well activity, projections
market prices and costs,
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Executive Leadership Change Executive Leadership Change Executive Leadership Change Executive Leadership Change
was appointed the interim President & CEO by the Board of Directors
title of President and CEO at IROC Energy Services and Bonus Resource Services Corporation
Tervita Tervita Tervita Tervita Corporation's Production Services Division Corporation's Production Services Division Corporation's Production Services Division Corporation's Production Services Division – – – – 6 Weeks In 6 Weeks In 6 Weeks In 6 Weeks In
service rigs (59 currently marketed) and a substantial inventory of rental equipment
High Arctic, resulting in approximately 400 employees in Canada
in Cold Lake, Drayton Valley, Lloydminster, Blackfalds, Acheson and Whitecourt
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High Arctic Energy Services is a market leader with diversified operations in Papua New Guinea (PNG) and Canada
PNG PNG PNG PNG
completion and rental services in PNG
energy companies under long-term contracts
short-term oil & gas price volatility
Canada Canada Canada Canada
alone snubbing units
acquisition
2016 TTM Revenue
PNG $187.1 mm Canada $27.6 mm
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Shares outstanding (Oct 11, 2016):
52.6 million
Share Price (Oct 11, 2016):
$4.50
Market Cap (Oct 11, 2016):
$236.8 million
Net Cash & Marketable Securities (June 30, 2016):
$50.5 million
30 Day Average Trading Volume
96,188
Trailing 12 Month Adjusted EBITDA (June 30, 2016):
$76.4 Million
Annual Dividend
$0.198
Dividend Yield
4.40%
Cyrus Capital 42% Insiders 9% Public 49%
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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 76.4 27% 26% 27% 27% 29% 30% 36% 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 June 30, 2016)
ADJUSTED EBITDA
(as at June 30, 2016)
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Overview – Stable and Growing
current environment)
Oil and Gas Activities – Long History, with New Growth
Macro Drivers for Growth
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Overview – Stable and Growing
Asian buyers
Papua LNG: 8.6 tcf, encourages long-term drilling
anticipated demand by 2020
Asia resulting from changes in:
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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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:
tcf of natural gas and 200+ million bbls
(e.g. P’nyang)
Elk / Antelope (Papua LNG):
and OSL
to size LNG facility
LNG facility
OSL:
support 10 year growth platform
Exxon:
LNG capacity in PNG
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NATURAL GAS + OIL PRODUCTION Customer Base
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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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Rig 103 / 104 (leased from OSL)
to Oct 31, 2016. Discussions ongoing for longer extensions
contract renewals
Rig 115 / 116 (High Arctic owned)
$30M USD
with spud of first well
Rig 102 (High Artic owned)
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Matting
Camp Services
Other Rental Equipment
MATTING CONTRACTS
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41% 6% 53%
Term Contract Prospective Idle
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Service Rigs Service Rigs Service Rigs Service Rigs
Snubbing Snubbing Snubbing Snubbing
Nitrogen Nitrogen Nitrogen Nitrogen
Rentals Rentals Rentals Rentals
OUR CUSTOMERS
Strong Western Canadian Service Rig and Snubbing Presence Provides Platform to Expand
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Western Canada
come friction in extended reach horizontal wells
resulted in additional demand for higher capacity units
higher capacity units
long-reach horizontal wells
# OF SNUBBING UNITS AVAILABLE AVERAGE WELL DEPTH AVERAGE WELL DEPTH AVERAGE WELL DEPTH AVERAGE WELL DEPTH (WESTERN CANADA)
(WESTERN CANADA) (WESTERN CANADA) (WESTERN CANADA)
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High Arctic Owns and Operates Canada’s Largest Fleet of Stand Alone Snubbing Units
18 11 8 6 2 2 High Arctic Precision Quattro Powerstroke Northern Snub Co.
60% 58% 63% 70%
20% 24% 21% 19% 20% 18% 16% 11% 1,500 1,600 1,700 1,800 1,900 2,000 2,100 0% 20% 40% 60% 80% 100%
2012 2013 2014 2015 Well Depth Well Type (%) Horizontal Vertical Other
Sources: Geoactivity Sources: Company Reports, High Arctic
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$ millions (except per share amounts)
2016 2016 2016 2016 2015
% Change Revenue 98.2 98.2 98.2 98.2 93.4 5% 5% 5% 5% Adjusted EBITDA 36.9 36.9 36.9 36.9 24.5 51% 51% 51% 51% Adjusted EBITDA % of revenue 38% 38% 38% 38% 26% 43% 43% 43% 43% Net Earning per share (basic and diluted)(1) 0.33 0.33 0.33 0.33 0.22 50% 50% 50% 50% Fund From Ops. per share (basic)(1) 0.61 0.61 0.61 0.61 0.34 79% 79% 79% 79% Fund From Ops. per share (diluted)(1) 0.60 0.60 0.60 0.60 0.33 82% 82% 82% 82% Dividends per share(1) 0.10 0.10 0.10 0.10 0.10
$48.7 $43.5 $0.0 $20.0 $40.0 2015 2016 $14.1 $15.1 $0.0 $10.0 $20.0 2015 2016 $10.5 $13.4 $0.0 $5.0 $10.0 $15.0 2015 2016
REVENUE ADJUSTED EBITDA FUNDS FROM OPS.
(1) The restricted shares held by a trustee under the Executive and Director Incentive Share Plan are included in the shares outstanding. The number of shares used in calculating the net earnings per share amounts is determined differently as explained in the Financial Statements.
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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% 5% 10% 15% 20% 25% 30% 35% Competitors High / Low High Arctic 0% 50% 100% 150% 200% 250% 300% High Arctic Competitors 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
17 $0.07 $0.15 $0.17 $0.20 $0.12 $0.01 $0.00 $0.10 $0.12
$- $0.05 $0.10 $0.15 $0.20 $0.25
2012 2013 2014 2015 2016 YTD*
Distributions per Share ($)
Dividends per share Repurchases per share
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 (per share) DISTRIBUTION TO SHAREHOLDER ($ Millions)
2016 YTD figure shown as at July 31, 2016
$3.5 $7.2 $9.1 $10.9 $6.1 $0.5 $0.2 $5.7 $6.3
0% 5% 10% 15% 20% 25% 30% 35% 40% 45% 2 4 6 8 10 12
2012 2013 2014 2015 2016 YTD*
Payout Ratio (including repurchases) Distributions ($ Millions)
Dividends Repurchases Payout Ratio
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W E L L P O S I T I O N E D W I T H S O L I D * High Arctic’s debt facility was initially utilized to fund the acquisition.
$ millions
Liquidity Liquidity Liquidity Liquidity
Cash $37.7 Short Term Investments $12.8 Debt Facility $45.0 Liquidity (June 30, 2016) Liquidity (June 30, 2016) Liquidity (June 30, 2016) Liquidity (June 30, 2016) $95.5 $95.5 $95.5 $95.5 Less: Acquisition* $42.8 Post Post Post Post Acquisition Acquisition Acquisition Acquisition Pro Pro Pro Pro F F F Forma Liquidity
$52.7 $52.7 $52.7 $52.7
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acquisition targets
experience
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and gas volatility
equipment and infrastructure at extreme discount to replacement value
product line and expand geographical coverage
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Daniel Bordessa
Independent
Thomas Alford Steven Vasey
Independent
Christopher Warren
Independent
Simon Batcup
Independent
Michael Binnion
Chairman of the Board
Dennis Sykora
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Joe Oliver
Independent
Ember Shmitt
Independent
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Thomas Alford
Interim President & CEO Board Member
Brian Peters, CA
CFO
Michael Maguire
VP, International
Daniel Beaulieu
COO, Canada
Services Corporation
Technicoil Corporation
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Thomas Alford, CEO Ph: (587) 318-3826 Email: tom.alford@haes.ca Brian Peters, CFO Ph: (587) 318-2218 Email: brian.peters@haes.ca
Analyst Coverage
Acumen Capital Brian Pow AltaCorp Capital Inc. Aaron MacNeil Industrial Alliance Elias Foscolos National Bank Greg Coleman PI Financial Brian Purdy
Website www.haes.ca Head Office 444 – 5th Avenue SW, Suite 2010 Calgary, AB Canada T2P 2T8
TSX : HWO