Presentation on theme: "High Arctic Energy Services Corporate Presentation Symbol: HWO."— Presentation transcript:
High Arctic Energy Services Corporate Presentation Symbol: HWO
Page 2 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, These documents can be found on SEDAR (www.sedar.com).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.
Page 3 Corporate Focus To safely provide specialized technical oilfield services to customers operating in challenging environments, delivering sustainable growth and strong returns for shareholders. Snubbing & N2 Services Matting & Equipment Rentals Drilling Services Stability & Growth
Page 4 Locations Calgary Grande Prairie Red Deer Singapore Papua New Guinea Sydney Canada: Snubbing & Nitrogen Services & Equipment Rentals Papua New Guinea: Drilling Services & Equipment Rentals
Page 5 Papua New Guinea
Page 6 Papua New Guinea Recognized as the 10 th 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 OSL / Exxon - LNG Project Exxon announced on April 29 th that production had commenced on the first train of the LNG plant The second train should start production sometime in Q2 Project budget: $19.0 USD billion for 2 train liquefaction plant Exxon is the operator (33.2%) and partners include: – 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 LNG future development… Elk/Antelope : InterOil, Total, OSL Reserves for major LNG expansion Highlands – Hides, Juha, Kutubu Exxon / OSL – Supporting current LNG Plant P’nyang : Exxon/OSL - Reserves for LNG expansion Forelands : Talisman, Santos, Mitsubishi, Heritage, Horizon Potential source for third LNG expansion
Page 9 PNG Drilling Services – contracted Rigs Operate 2 Heli-portable drilling rigs (rig #103 & rig #104) for Oil Search Ltd. – Providing services to OSL since 2007 – Have twice renewed the 3 year contracts with OSL – Current contract expires June 30, 2016 – Rig 104 will work for OSL through 2014 – Rig 103 is contracted for approximately 1 year to InterOil for drilling on joint venture lands Own the only Heli-portable hydraulic workover rig in PNG (rig #102) – Contract completed May 2014 – Rig will be stacked for 2014
Page 10 Purchase of New Drilling Rigs Purchased 2 Heli-portable drilling rigs (rigs #115 & #116) – subject to closing of acquisition AC self-erecting 1500 HP triple’s Constructed in 2010/11 with one year of use to date Latest safety designs & automated drilling Can break down into 2700 kg loads – Allows for various helicopter options Total cost estimated at $52M USD – Rigs $29M – Shipping $6M – Refurbishment & Spare Parts $17M
Page 11 Deployment of New Drilling Rigs Rig 115 Signed a 2 year drilling services contract with InterOil for drilling on 100% owned properties Anticipated annualized revenue of $30M USD for one rig with camp Targeted spud date Q4 – 2014 Rig 116 No current contract in place Currently in discussion with various companies regarding potential drilling contracts Rig estimated to be available for use Apr 1, 2015
Page 12 Competitive Drilling Landscape Land Rigs: Nabors Drilling – 2 Super Triples for use in the Hides field Heli-Portable Rigs: High Arctic 2 Rigs (115 & 116) circa 2010 2 Rigs under contract from OSL (103 & 104) circa 2007 1 Work over rig circa 2008 Parker Drilling 1 Rig circa mid 1970’s – they are looking to sell this rig & exit the country Talisman 1 Rig circa mid 1970’s – they are looking to sell this rig. Operated by Parker Drilling InterOil 2 Rigs circa early 1980’s – currently operated by Simmons Drilling Western Drilling 1 Rig circa mid 1980’s – currently no contracts
Page 13 PNG Drilling Customers Public oil and gas exploration company (OSH-A) headquartered in Sydney, Australia Market capitalization of $9.5 billion (USD) Operating in PNG since 1929 PNG’s largest producer and most active operator M BOE annual production PNG government owns 15% outstanding shares HWO is OSL’s exclusive PNG drilling contractor Public integrated oil and gas company (IOC-NYSE) headquartered in Port Moresby & Singapore Market capitalization of $3 billion (USD) Operates oil refinery and largest network of PNG petrol stations Over 4 million acres of exploration rights in PNG including Elk-Antelope gas field Recent joint-venture arrangements with Total & Oil Search
Page 14 Dura-Base Matting Over 10,000 rental mats in PNG PNG distributor rights The largest rental supplier of Dura-Base mats outside of the USA Possible expansion into similar countries with challenging environments
Page 15 Equipment Rentals Camp services – 5 camps contracted HWO operates and manages Two 93 man Heli-portable drilling rig camps Two 32 man Heli-portable leap frog camps (under contract - OSL owned) HWO deployed a new double-deck 104 man Heli- portable drilling rig camp in January 2013 (under contract with OSL - HWO owned) Additional camp is required for the new InterOil contract. Additional rental equipment owned by HWO; cranes (ranging from 30 ton to 160 ton) rig moving trucks forklifts river pumps light towers
Page 16 Staging Site Management With High Arctic Before High Arctic In 2013 High Arctic was awarded an 18 month “Material Handling Contract” with a major Canadian Oil company to supply Cranes, Forklifts, Trucks, Light Towers, Personnel, Training, and Materials Handling expertise.
Page 17 PNG Revenue Performance Rental services has experienced a Cumulative Average Growth Rate of 34% over the past 4 years. CAGR Drilling and related services have experienced moderate steady growth over the past 4 years. Drilling Revenue ($M ) Rental Revenue ($M ) New rigs can add $30M of revenue per year per rig with full utilization
Page 18 PNG Equipment Rental Customers
Page 19 Canada
Page 20 What is Snubbing PIPE SLIPS PRESSURE FRICTION HYDRAULIC FORCE BOP Snubbing is the use of hydraulic force to push pipe against the snub force created by the well pressure. Snubbing permits live operations without killing the well thus avoiding formation damage and bringing the well on stream faster. 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. More high pressure wells using multi- stage fracturing completion techniques, drive demand for snubbing services. Jointed Pipe Snubbing
Page 21 Jointed Pipe and/or Coiled Tubing Jointed Pipe Snubbing Coiled Tubing Either Run production tubing Drilling & Milling plugs Work-overs Cleanouts Fishing Fracturing through coil Placing packers & plugs Competitive Advantage: Faster tripping speed Faster rig up times Competitive Advantage: 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”) Acidizing through coil
Page 22 Snubbing Growth Opportunities Growing number of wells needed to provide future BC LNG feedstock High Arctic is well positioned to provide the needed completion services for these wells to our existing clients. CompanyAug YTD% of total Shell16930% Progress11220% Encana5810% CNRL397% Tourmaline265% Others2418% Total571100% HWO top clients BC Well Licence Authorizations for 2013 These wells will require snubbing services
Page 23 Canadian Snubbing Services 15 Stand Alone & 3 Rig Assist Units 14 Active Crews 2013 Annualized Utilization 36%
Page 24 Canadian Nitrogen Services 9 Low Rate Nitrogen Pumpers 5 Nitrogen Transports 1 High Rate N2 Pumper Snubbing Support; Wellbore displacements Well head pressure testing Underbalanced milling & drilling Other Completions work; Nitrified acid stimulation Wellbore fracturing and stimulation Coiled tubing support Plant & Pipeline Applications; Pressure testing Plant purges Plant turnarounds Accelerated cool downs Applications :
Page 25 Canadian Equipment Rentals 15 K BOP packages; Double gate BOP’s Single gate BOP’s Blind shear rams High temp pipe rams 10 K BOP packages; 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 26 Canadian Revenue Performance
Page 27 Canadian Customers Working with large domestic and multi-national producers provides stability throughout oil and gas pricing cycles
Page 28 Investment Highlights Shares outstanding:50,242,692 Share Price (as at May 12, 2014): $5.36 Market Cap :$269.3 million Net Cash*:$36.2 million Enterprise Value:$233.1 million Trailing 12 Month EBITDA:$44 million EV / EBITDA Multiple:5.3x (12 months trailing) Annual Dividend:$0.18 Payout Ratio25% Yield4.0% Canadian Tax Losses: ~$90.0 million Average Daily Trading Volume: 95,202 Insiders’ Ownership (as at May 15, 2014): 66% Expected max net debt post rig acquisition$25 million * Cash less debt 41% Cyrus Capital 14% Former founder 11% Directors / Officers
Page 29 Dividend History Conservative Payout Ratio Payout Ratio Approx. 18% Payout Ratio Approx. 22% Payout Ratio Approx. 25%
Page 30 Historical Financial Summary Financial Performance – TTM (in $ CDN millions) Jun, 2012Sep, 2012Dec, 2012Mar, 2013Jun, 2013Sep, 2013Dec, 2013Mar, 2014 CDN Revenue PNG Revenue Total Revenue EBITDA CFFO Net Income Net Cash* PP&E Shareholders’ Equity Shares Outstanding (mm) *Net Cash: Cash – Bank Debt
Page 31 Appendix A – Executive Management Dennis Sykora, Interim CEO & Director Dennis Sykora joined High Arctic in April 2007 and has held various executive level roles including; Restructuring Officer, Executive Vice President and General Counsel, and Interim CEO. Mr. Sykora has over 16 years of oilfield services experience, with a focus on international operations. Prior to joining High Arctic, he was president of international operations for a Canadian-based drilling contractor. Prior thereto, he spent 15 years as a lawyer and chartered accountant, specializing in tax planning for the oil industry. Mr. Sykora is a member of both the Law Society of Alberta and the Institute of Chartered Accountants of Alberta. Ken Olson, CFO Ken Olson joined High Arctic in January 2013 as Chief Financial Officer. Mr. Olson has over 21 years of experience as a senior executive in financial and management roles. Prior to joining High Arctic, Mr. Olson was Vice President Finance at Sanjel Corporation, a private global pressure pumping company, and prior thereto Vice President Finance at CSI Wireless Inc.. Prior to, Mr. Olson spent 8 years with PricewaterhouseCoopers. He is a member of the Institute of Chartered Accountants of Alberta. Kevin Doran, President International Kevin Doran joined High Arctic Energy Services in 2006 as the country manager for the PNG operations. He became the Regional Manager for S.E. Asia in 2009, Vice President, International Operations in March 2011, and President International in August Following service in the British Royal Navy, Mr. Doran began his career at Deutag Drilling in He has significant international experience in the North Sea, Gabon, Algeria, Nigeria, UAE, Saudi Arabia, Bahrain, Qatar, Iran, Pakistan, India, Kazakhstan, Thailand, Australia and PNG.
Page 32 Appendix A – Executive Management Daniel Beaulieu, COO Canadian Operations Mr. Beaulieu joined High Arctic in January 2012 as Vice President of Canadian Operations. Prior to joining High Arctic, he held the position of region business unit manager at Weatherford where he managed various integrated product lines throughout Canada. After spending 8 years in the service rig industry, he started D-2 Oilfield Rentals which was sold to a major competitor in Mr. Beaulieu has over 35 years oilfield services experience. Michael Maguire, Vice President International Operations Mr. Maguire joined High Arctic in December 2013 as Vice President International Operations. Mr. Maguire has over 20 years of oil field experience. The last seven years were with Easternwell Group, an Australian oilfield service company, where he held a number of senior management positions. Mr. Maguire holds a Bachelor’s Degree (Hons) in Petroleum Engineering from the University of New South Wales, and is a former Vice Chairman of the Australian chapter of the International Association of Drilling Contractors. Shannon Matthyssen, Corporate Controller & Secretary Ms. Matthyssen joined High Arctic in December 2012 as Corporate Controller and Corporate Secretary. Prior to joining High Arctic, she was Vice President Finance & CFO of Magnum Energy. Ms. Matthyssen has over 27 years of finance experience working for various public and private oil & gas companies. She is a member of the Institute of Chartered Accountants of Alberta.
Page 33 Appendix B - Directors Michael Binnion, Chairman – President and CEO of Questerre Energy Corporation (QEC-T) Daniel Bordessa, Independent – Partner, Cyrus Capital Partners LP and Managing Director, Cyrus Capital Partners Europe Thomas Alford, Independent – Former President & CEO of Iroc Energy Services. Christopher Warren, Independent – Partner of the law firm Warren Sinclair LLP in Red Deer, AB. Simon Batcup, Independent – Independent Businessman. Previous VP, Operations of Sylogist Ltd. Steven Vasey, Independent – Independent geophysical consultant. Dennis Sykora, Interim CEO – See slide 28.
Page 34 Contact Info High Arctic Energy Services Inc Edgar Industrial Drive Red Deer, AB Canada T4P 3R2 Website: Dennis Sykora, CEOKen Olson, CFO Ph: (403) Trading Symbol:HWO - T Banker: HSBC Bank of Canada Auditors: PriceWaterhouseCoopers LLP Legal: Davis LLP