High Arctic Energy Services
Corporate 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.
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Corporate Strategy
To safely provide specialized technical oil field services
to customers operating in challenging environments,
delivering sustainable growth and strong returns for
shareholders.
Stability & Growth
Drilling Services
Snubbing & N2 Services
Matting & Equipment Rentals
Page 3
Locations
Grande Prairie
Red Deer
Snubbing, Nitrogen
& Rentals
Calgary
Papua New Guinea
Singapore
Drilling & Rentals
Sydney
Page 4
Service Locations
Papua New Guinea
Canada
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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
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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
Page 5
Papua New Guinea
Page 6
Papua New Guinea
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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
Page 7
PNG Growth Opportunity
PNG OSL / Exxon - LNG Project
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•
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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:
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–
–
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–
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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
Page 8
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.
Page 9
Dura-Base Matting
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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
Page 10
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 Heliportable 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)
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rig moving trucks
forklifts
river pumps
light towers
Dura-Base and Rhino matting
Page 11
Yavo Staging Site Improvements
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.
With High Arctic
Before High Arctic
Page 12
PNG Revenue Performance
Drilling Revenue ($M)
Drilling and related services have
experienced moderate steady
growth over the past 4 years.
Rental Revenue ($M)
CAGR
Rental services has experienced a
Cumulative Average Growth Rate of
34% over the past 4 years.
Page 13
PNG Customers
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Public oil and gas exploration company (OSHA) 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
Page 14
Canada
Page 15
WCSB Drilling & Completion Trends
WCSB Well Completions By Commodity
•
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.
14,000
WCSB Well Completions By Commodity
2011
2012
2013
12,000
10,000
8,000
6,000
4,000
2,000
0
Oil YTD
Source: CIBC World Markets
Gas YTD
Total YTD
Page 16
BC LNG Growth Opportunities
•
Demand for LNG product in Asia continues to
increase.
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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.
Shipping Costs to Tokyo
Asian LNG Imports (2000 to 2025)
350
$3.50
CAGR
2000 -2010
CAGR
2010-2025
6.2% pa
5.9% pa
$2.89
$3.00
300
200
China
150
India
$2.50
Costs in $/Mcf
New
mtpa
250
$1.97
$2.00
$1.50
$1.30
$1.12
$1.00
100
JKT
$0.50
50
$0.00
Western Canada
0
2000
2005
Source: Wood Mackenzie
2010
2015
2020
Australia
Qatar
US Gulf Coast
2025
Source: Unit Economics
Page 17
Snubbing Growth Opportunities
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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.
BC Well Licence Authorizations for 2013
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
These wells will
require snubbing
services
Page 18
What is Snubbing
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Jointed Pipe Snubbing
Snubbing is the use of hydraulic force to
push pipe against the snub force created
by the well pressure.
PIPE
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Snubbing permits live operations without
killing the well thus avoiding formation
damage and bringing the well on stream
faster.
SLIPS
BOP
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.
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More high pressure wells using multistage fracturing completion techniques,
drive demand for snubbing services.
HYDRAULIC
FORCE
PRESSURE
FRICTION
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Jointed Pipe and/or Coiled Tubing
Jointed Pipe Snubbing
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Either
Run production tubing
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Competitive Advantage:
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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”)
Coiled Tubing
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Fracturing through coil
Cleanouts
Work-overs
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Acidizing through coil
Placing packers & plugs
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Competitive Advantage:
Drilling & Milling plugs
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Faster tripping speed
Faster rig up times
Fishing
Page 20
Canadian Snubbing Services
15 Stand Alone & 3 Rig Assist Units
14 Active Crews
3 UB 250k Units
Page 21
UB 250k Opportunity
Page 22
Canadian Nitrogen Services
9 Low Rate Nitrogen Pumpers
1 High Rate N2 Pumper
5 Nitrogen Transports
Page 23
Nitrogen Services
Applications:
Snubbing Support;
• Wellbore displacements
• Well head pressure testing
• Underbalanced milling & drilling
Other Completions work;
• Nitrified acid stimulation
• Wellbore fracturing and stimulation
• Coiled tubing support
Characteristics:
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Inert gas (non-reactive)
Non-corrosive
Non-explosive
Suitable for higher
environments
risk
Plant & Pipeline Applications;
• Pressure testing
• Plant purges
• Plant turnarounds
• Accelerated cool downs
Page 24
Canadian Equipment Rentals
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15 K BOP packages;
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10 K BOP packages;
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Double gate BOP’s
Single gate BOP’s
Blind shear rams
High temp pipe rams
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.
Page 25
Canadian Revenue Performance
50,000,000
45,000,000
40,000,000
35,000,000
30,000,000
Rentals
25,000,000
N2
20,000,000
Snubbing
15,000,000
10,000,000
5,000,000
2009
2010
2011
2012
2013
Page 26
Canadian Customers
Working with large domestic and multi-national producers provides stability
throughout oil and gas pricing cycles
Page 27
Corporate Strategy Summary
1. Continue to invest free cash flow into organic growth opportunities delivering strong
financial returns including;
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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;
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Complementary services in Canada
Additional equipment in PNG
Expansion into new locations
Page 28
Investment Highlights
Shares outstanding:
Share Price (as at Mar 20, 2014):
Market Cap :
Net Cash*:
Enterprise Value:
Trailing 12 Month EBITDA:
EV / EBITDA Multiple:
Annual Dividend:
Payout Ratio
Canadian Tax Losses:
Average Daily Trading Volume:
Insiders’ Ownership (as at Mar 20, 2014):
50,045,592
$4.50
$225.2 million
$26.9 million
$198.3 million
$41.5 million
4.78x
$0.18
25%
~$90.0 million
65,157
68%
Peer Range: 4x - 8x
41% Cyrus Capital
16% Former founder
11% Directors / Officers
* Cash less debt
Page 29
Historical Financial Summary
Financial 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
Page 30
Contact Info
High Arctic Energy Services Inc.
8112 Edgar Industrial Drive
Red Deer, AB Canada T4P 3R2
Website: www.haes.ca
Dennis Sykora, CEO
Ph: (403) 340-9825
Email: dennis.sykora@haes.ca
Ken Olson, CFO
Ph: (403) 340-9825
Email: ken.olson@haes.ca
Trading Symbol:
HWO - T
Banker:
Auditors:
Legal:
HSBC Bank of Canada
PriceWaterhouseCoopers LLP
Davis LLP
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