November 2020 Investor Presentation...Excellence in Safety and Service November 2020 Investor...
Transcript of November 2020 Investor Presentation...Excellence in Safety and Service November 2020 Investor...
Excellence in Safety and Service
November 2020 Investor Presentation
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• Corporate Profile | Energy Services
• Vision | Strategic Priorities
• Business Outlook
• Geographic Markets | Service Capability❑ Papua New Guinea (“PNG”)❑ Canada
❑ United States
• Financial Overview
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Excellence in Safety and Service
Readers are cautioned that this Presentation contains certain forward-looking
information and should refer to the disclaimer on slide #17.
Presentation Outline
Shares Outstanding (November 18, 2020): 48.8 million
Share Price (November 18, 2020): $1.22
Market Cap (November 18, 2020): $59.5 million
Shareholders equity per share (September 30, 2020): $3.89
Working Capital (September 30, 2020):1,2,3
$40.6 million
12 months trailing adjusted EBITDA (September 30, 2020):3
$10.9 million
Undrawn debt facility $35.0 million
TSX : HWOShareholder Composition
Cyrus Capital
45%
Insiders
4%
Public
51%
3
1. Includes $33.2 million in cash
2. Includes $10 million drawn from debt facility
3. See Non IFRS Measures at end of presentation
Corporate Profile | Energy Services
Excellence in Safety and Service
Vision
With a relentless focus on quality, be recognized as a trusted provider of energy services.
Strategic Priorities
❑ Safety excellence and focus on quality
❑ Reinforce existing markets through top-tier customer market share
❑ Cost control & position to reactivate and grow
❑ Capital stewardship to drive shareholder value, including share buybacks
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Excellence in Safety and Service
Vision | Strategic Priorities
Business Outlook
Drilling Services in PNG are primarily driven by
LNG fundamentals. While currently inactive,
High Arctic’s hi-tech heli-portable drilling rig fleet is contracted and
poised for quick customer reactivation.
Production Services in Canada has sustained high industry market
share. Service rig activity is expected to rise as customers bring oil
production back online and prioritize well
abandonments.
Ancillary Services
through rentals in Canada and PNG as well as PNG’s only workover rig, is well positioned to benefit from growth in
export potential and customer focus on
existing production.
Geographically and Operationally Diversified Energy Services Company
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Quality Underpins
Everything we do
At High Arctic, it is quality, as
measured by our safe work
statistics and customer
satisfaction, that drives our
business forward.
P N G
C A N ADA
• 2 Years LTI Free across Canada on 29 Sept 2020
• Lloydminster Rig 80, 12 Years Total Recordable Incident Free
• Cold Lake 7.5 Years Total Recordable Incident Free
• HAES Rental Services LTI Free since 2016
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• Winner – IADC –AC Safety Statistics Award 2015, 2017,
2018, 2019
• 4 Years TRI Free across PNG Operations on 24 Aug 2020
• 2.4 Million Recordable Incident Free Man Hours
It is our Mission to:
“Create superior value for investors through the delivery of dependable and innovative energy services consistent with
the best interests of employees, customers and community”.
Geographic Markets |
Service Capability
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) and Canada
P N G
C A N ADA
• Own and operate Canada’s largest fleet of stand alone
and rig-assist snubbing units - original niche market
• Leading tier 1 production services rig provider – working
for large Canadian E&P’s and international supermajors
• Independent Rental services and Nitrogen pumping
• Cornerstone contracts in Western Canada's thermal wells
• Solid platform established for growth
Total Assets
PNG $128.6 m
Canada $120.2 m
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L N G
O i l + N a t u r a l
G a s
US $1.6 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
Dec. 31, 2019Sep 30, 2020
$95.2 m
$126.5 m
$3.5 m
Overview – One of the world’s great emerging markets • Part of the British Commonwealth with a parliamentary democracy
Papua New Guinea
Oil and Gas Activities – Long History, with New Growth• After early years of “Turner Valley-type” exploration, PNG found its Leduc
– World class wells
• Drilling for decades and High Arctic is the dominant provider
• Remote mountainous jungle locations require specialized logistics skills &
experience
• World Record Natural Gas Exploration Well Flow Rate – Antelope Field
Macro Drivers for Growth• Low cost source of LNG to Asian markets
• Recent discovery at Muruk opens new development areas near PNG-LNG
infrastructure
• Large 2019 seismic program completed - long term onshore exploration program
• ExxonMobil, Total, OilSearch and partners announced expansion with three new
LNG trains to develop Elk-Antelope and the P’nyang fields.
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L N G
PNG Development: Building a Country
Oil export platform
PNG LNG: Completed 2014 • ExxonMobil is the operator
• 9.0 tcf of natural gas and 200+ million bbls of associated liquids over 30 years
• 1.0 bcf/d Capacity – 2 trains
• Double Capacity to 2 bcf/d with addition of 3 Trains in 2025/6
• Hides is primary source gas field
Elk-Antelope:
• Ownership: TOTAL, ExxonMobil and OilSearch
• Proven gas reserve of 5.2 tcf
• Discovered by InterOil – acquired by ExxonMobil 2016
• Significant surrounding unexplored acreage
OilSearch: • Average 4 to 6 exploration wells/yr
• Operate all of the discovered Oil Fields
• Muruk gas discovery – confirmation of very good quality reservoir
leading to potential appraisal program
• Focusing investment in PNG to support 10 year growth platform
NATURAL GAS + OIL PRODUCTION
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Western Corridor:
• Significant number of gas discoveries
• Potential to aggregate and develop
Oil export platform
bbl = US barrel; bcf = billion cubic feet; tcf = trillion cubic feet.
Papua New Guinea
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L N G
High Arctic has drilled 70 wells in PNG since 2007
300+ loads to locate a Heli Rig on location
Rigs 101 / 103 / 104 Customer owned – HAES operated Rigs 115 / 116 HAES owned
0
2
4
6
8
10
12
2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019
WE
lls D
rille
d
Annual Well Count
Rig 101 Rig 103 Rig 104 Rig 115 Rig 116
Worksite Matting • Inventory exceeding 5,000 rental mats in PNG
• Game changing productivity improvement in tropical
rainfall environment
PNG, more than drilling
Camp Services • Own and manage two 103 bed Heli-portable camps
• Operate and manage two 93 bed + two 34 bed Heli- portable
camps
• Smaller “Pioneer” – first deployment camps
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L N G
Other Rental Equipment • Cranes (ranging from 30 ton to 160 ton)
• Rig moving trucks and other rolling stock
• Forklifts
• River pumps
• Generators & lighting towers
• Assorted Oilfield Equipment and tubulars
CANADA
Quality Equipment September 30, 2020
Geographical Footprint
• Facilities strategically located to cover major basins in WCSB
• Exposure to heavy oil, light oil and natural gas basins
OUR CUSTOMERS
Majority of Canada revenue derived from contracted arrangements
Providing production, completion and abandonment services
Total Marketed
Service Rigs 49
Snubbing 8
Nitrogen Pumpers 7
Nitrogen Bulkers 4
Rental Equipment 1,050
Montney
Duvernay
Cardium
Whitecourt
Acheson
Lloydminster
Cold Lake
Cold Lake Oil Sands
GEOGRAPHICAL FOOTPRINT
Grande Prairie
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O i l + N a t u r a l G a s
Well Servicing market is primarily based on the number of wells in production
High quality asset base, superior utilization and top tier safety and performance
Operate one of the largest fleets of service rigs in WCSB
Large multi-year contracts with investment grade customers
In Q3 2020 market share of industry hours normalized while increasing our utilization
Utilization figures based on number of registered rigs
Source: CAODC
INDUSTRY LEADING UTILIZATION
13O i l + N a t u r a l G a s
Utilization figures based on number of registered rigs
Source: CAODC
INCREASING MARKET SHARE
CANADA | Service Rigs
0%
10%
20%
30%
40%
50%
60%
70%
Q1-18 Q2-18 Q3-18 Q4-18 Q1-19 Q2-19 Q3-19 Q4-19 Q1-20 Q2-20 Q3-20
Concord Total Market Utilization
9.6%
12.5%10.4% 10.6%
9.1%
12.5%10.9% 10.7% 10.8%
26.3%
13.4%
0.0%
5.0%
10.0%
15.0%
20.0%
25.0%
30.0%
Q1-18 Q2-18 Q3-18 Q4-18 Q1-19 Q2-19 Q3-19 Q4-19 Q1-20 Q2-20 Q3-20
CWC Precision Drilling Concord Savanna Rockwell (Ensign) Eagle (WES)
Largest fleet of snubbing equipment, over 50% of available market in WCSB
High quality asset base, superior design and top tier performance
Consolidated market with acquisition of top two competitors over past 2 years
Client base includes investment grade large global E&P Companies
Positioned well for rebound in natural gas well completions
14O i l + N a t u r a l G a s
CANADA | Snubbing Units
0%
2%
4%
6%
8%
10%
12%
14%
16%
18%
Q1-2019 Q2-2019 Q3-2019 Q4-2019 Q1-2020 Q2-2020 Q3-2020
SNUBBING UTILIZATION
United States | Service Rigs & Snubbing Units
Equipment Footprint
Positioned in US
Service Rigs 2
Snubbing 6
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Greeley, CO
Bakken
Niobrara
• Established presence in 2018 with a smallacquisition
• Moved idle equipment from Canada to positionand gain experience in growth resource plays,the Niobrara and Bakken Basins
• Operation phased down with decline in drillingand shut-in oil production
• Positioned for a resumption once rates andsteady work programs meet target thresholds
Williston, ND
O i l + L i q u i d s
Financial Summary
2020 2019 2018
$ millions
(except per share amounts)9 Months
to Sep 30
12 Months
to Dec 31
12 Months
to Dec 31
Consolidated Revenue 74.2 185.5 203.3
Canada 44.3 90.1 90.7
US 3.0 11.0 2.7
International 26.9 84.4 109.9
Adjusted EBITDA (1) 7.3 19.4 51.6
Adjusted EBITDA (1)as % revenue 10% 10% 25%
Net Earnings (loss) per share (2) (0.29) (0.18) 0.22
Funds from Operations (2) 0.10 0.31 0.71
Dividends per share (3) 0.03 0.20 0.20
Long-term debt, incl current 10.0 - -
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1. See Non IFRS Measures at end of presentation
2. Basic and diluted shares outstanding
3. Dividends were suspended in March 2020
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While every effort is made to provide accurate and complete information, High Arctic Energy Services Inc. does not warrant that
the information in this presentation is free from errors or omissions or is suitable for its intended use. Subject to any terms implied
by law which cannot be excluded, High Arctic Energy Services Inc. accepts no responsibility for any loss, damage, cost or expense
(whether direct or indirect) incurred by you as a result of any error, omission or misrepresentation in information in this
presentation. All information in this presentation is subject to change without notice.
Readers are cautioned that this presentation contained certain forward-looking information which are subject to particular risks
associated with the energy services industry. High Arctic Energy Services Inc. believes there are reasonable grounds for the
expectations on which the statements are based. However actual outcomes could differ materially due to a range of factors
including general economic and business conditions, ability to raise capital and manage debt obligations, demand for and market
prices for the Corporation’s services, commodity prices (particularly oil and gas) and the impact that they have on industry activity,
initiatives to reduce cash outlays, continued safety performance excellence, marketing successfully to current and new customers
and realization of work, ongoing relationship with major customers, treatment under governmental regulatory regimes, other
government issues and approvals, political uncertainty and civil unrest, currency fluctuations, and the impact of COVID-19.
Adjusted EBITDA or (adjusted earnings before interest, tax, depreciation and amortization) and Working Capital (Current assets less
current liabilities) do not have standardized meanings prescribed by IFRS and are presented to provide a more meaningful
understanding of High Arctic Energy Services Inc.’s underlying financial performance. These non-IFRS financial measures are
derived from the financial statements, which have been subject to review by the Group’s auditor and are available on our website
www.haes.ca and are not intended to represent IFRS measures such as net earnings.
Disclaimer and notice of Forward Looking Statements
Contact UsMike Maguire, CEO
Ph: (587) 318-3826
Christopher Ames, VP Finance & CFO
Ph: (587) 318-2218
Analyst CoverageAltaCorp Capital Tim Monachello
Paradigm Capital Adam Gill
Website
www.haes.ca
Email:
Head Office
700 – 2nd Street SW, Suite 500
Calgary, AB Canada T2P 2W1
TSX : HWO
Board of DirectorsMichael Binnion, Board Chair Simon Batcup
Daniel Bordessa Joseph Oliver
Ember Shmitt Doug Strong
Senior ManagementMike Maguire, CEO Steve Lambert, CPO
Christopher Ames, CFO Don Pack, Exec VP