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Slide1
High Arctic Energy Services
Corporate Presentation
Symbol: HWOSlide2
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.Slide3
Corporate Strategy
To safely provide specialized technical oil field services to customers operating in challenging environments, delivering sustainable growth and strong returns for shareholders.
Snubbing & N2 Services
Matting & Equipment Rentals
Drilling Services
Stability & GrowthSlide4
Locations
Calgary
Grande Prairie
Red Deer
Singapore
Papua New Guinea
Sydney
Snubbing, Nitrogen
& Rentals
Drilling & RentalsSlide5
Service Locations
Canada
Leading provider of snubbing services in the Western Canadian Sedimentary Basin (WCSB)
A leading provider of low
r
ate
n
itrogen 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
Papua New Guinea
The leading oil field service provider in PNG
Services include;
Drilling services & Camp management
Matting,
C
amp and Equipment rentals
Strategically positioned to capitalize on the rapidly expanding capital investments being made in PNG
T
he preferred service partner to Oil Search Ltd. (OSL) – with opportunities to leverage services into new marketsExisting service contracts with all major operatorsExpanding client baseSlide6
Papua New GuineaSlide7
Papua New Guinea
Recognized as the 10th
fastest growing economy in the world in 2012Independent, established democracy and a stable business jurisdictionPart of the British Commonwealth with a Parliamentary GovernmentWelcoming to foreign capital and investment No restrictions on repatriation of foreign profitsCurrently experiencing rapid growth from resource exportsSlide8
PNG Growth Opportunity
Commenced in 2010 with first LNG sales on track for 2014
Project budget: $19.0 USD billion for 2 train liquefaction plantExxon 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 SinopecOver 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
PNG OSL / Exxon - LNG ProjectSlide9
PNG Drilling
Operate and manage 2 H
eli-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 2014With expansion of the LNG plant there are opportunities for growth with additional Heli-portable drilling rigs and associated services.Slide10
Dura-Base Matting
Exit 2013 with over 10,000 mats on rentalPNG distributor rights
The largest rental supplier of Dura-Base mats outside of the USAEvaluating expansion into similar countries with challenging environmentsSlide11
Equipment Rentals
Camp services – 5 camps contracted
HWO operates and managesTwo 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 - HWO owned)Rental equipment owned by HWO and under contract includes;cranes
(ranging from 30 ton to 160 ton)rig moving trucks
forklifts
river pumps
light towers
Dura-Base and Rhino mattingSlide12
Yavo Staging Site Improvements
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.Slide13
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
m
oderate steady growth over the past 4 years.
Drilling Revenue ($M
)
Rental Revenue ($M
)Slide14
PNG Customers
Public oil and gas exploration company (OSH-A) headquartered in Sydney, Australia
Market capitalization of $9.5 billion ($USD) Operating in PNG since 1929PNG’s largest producer and most active operator - 6.38M BOE annual productionPNG government is one of OSL’s largest shareholders (15% of OSL’s outstanding shares) HWO is OSL’s exclusive PNG drilling contractorwww.oilsearch.com Slide15
CanadaSlide16
WCSB Drilling & Completion Trends
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.
WCSB Well Completions By Commodity
Source: CIBC World MarketsSlide17
BC LNG Growth Opportunities
Asian LNG Imports (2000 to 2025
)
Source:
Wood Mackenzie
Demand for LNG product in Asia continues to increase.
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.Slide18
Snubbing Growth Opportunities
Petronas has committed to invest $36B over 30 years into BC LNG exports
This includes terminals, ships, pipelines & development of supplyShell has also proposed a similar investment strategy in BC LNG These commitments are evidenced by the well licences purchased in 2013High Arctic is well positioned to provide the needed services for the completion of these wells to our existing clients.CompanyAug YTD% of total
Shell169
30%
Progress
112
20%
Encana
58
10%
CNRL
39
7%
Tourmaline
26
5%
Others
2418%Total571
100%
HWO top clientsBC Well Licence Authorizations for 2013These wells will require snubbing servicesSlide19
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 SnubbingSlide20
Jointed Pipe and/or Coiled Tubing
Jointed Pipe Snubbing
Coiled Tubing
Either
R
un production tubing
D
rilling & Milling plugs
W
ork-overs
Cleanouts
F
ishing
Fracturing through coil
Placing packers & plugs
Competitive Advantage:
Faster tripping speed
Faster rig up times
Competitive Advantage:
Long depths achieved > 7000m
Greater push / pull strength120K lbs – 250K lbsRotating pipe better overcomes friction in tight holesBroader range of pipe diameters (1.7” – 5.5”)
Acidizing through coilSlide21
Canadian Snubbing Services
15 Stand Alone & 3
Rig Assist Units14 Active Crews3 UB 250k UnitsSlide22
UB 250k OpportunitySlide23
Canadian Nitrogen Services
9
Low Rate Nitrogen Pumpers 5 Nitrogen Transports
1 High Rate N2 Pumper
Slide24
Nitrogen Services
Snubbing Support;
Wellbore displacementsWell head pressure testingUnderbalanced milling & drillingOther Completions work;Nitrified acid stimulationWellbore fracturing and stimulationCoiled tubing supportPlant & Pipeline Applications;Pressure testingPlant purgesPlant turnaroundsAccelerated cool downs
Applications:
Characteristics
:
Inert gas (non-reactive)
Non-corrosive
Non-explosive
Suitable for higher risk environmentsSlide25
Canadian Equipment Rentals
15 K BOP packages;
Double gate BOP’sSingle gate BOP’sBlind shear ramsHigh temp pipe rams10 K BOP packages;Double gate BOP’s
Single gate BOP’sBlind shear rams
High temp pipe rams
Boilers
Pumps
Class III Support Trailers
Growth opportunity to support the increase in high pressure wells
.Slide26
Canadian
Revenue PerformanceSlide27
Canadian Customers
Working with large domestic and multi-national producers provides stability throughout oil and gas pricing cyclesSlide28
Corporate Strategy Summary
Continue to invest free cash flow into organic growth opportunities delivering strong financial returns including;
Expanding Dura-Base matting client base, Increasing equipment rental service offering both in Canada and PNGMaintaining leading edge snubbing technology through continuous investmentReturning profits to shareholders by way of monthly dividendsUse our strong balance sheet and unutilized debt capacity for potential acquisition opportunities, such as;Complementary services in Canada
Additional equipment in PNGExpansion into new locationsSlide29
Investment Highlights
Shares
outstanding: 50,045,592Share Price (as at Mar 20, 2014): $4.50Market Cap : $225.2 millionNet Cash*: $26.9 million Enterprise Value: $198.3 millionTrailing 12 Month
EBITDA: $41.5 million
EV / EBITDA Multiple:
4.78x
Annual Dividend:
$
0.18
Payout Ratio
25
%
Canadian Tax
Losses:
~$
90.0 million
Average Daily Trading
Volume: 65,157Insiders’ Ownership (as at Mar 20, 2014): 68% * Cash less debt 41% Cyrus Capital16% Former founder11% Directors / Officers
Peer Range: 4x - 8xSlide30
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
50.252.247.243.4
43.538.940.8PNG Revenue83.488.0
92.599.0105.4108.6113.7111.9Total Revenue133.5138.2144.7146.2
148.8152.1152.6152.7
EBITDA37.238.540.639.637.939.339.041.5CFFO33.033.737.134.932.734.433.2
35.3Net Income21.427.230.728.826.522.924.1
24.6Net Cash*6.512.87.813.79.719.722.026.9PP&E50.6
54.260.961.365.367.770.972.1Shareholders’ Equity
73.880.583.488.696.999.5104.0111.8Shares Outstanding (mm)49.649.749.849.849.849.849.950.0*Net Cash: Cash – Bank DebtSlide31
Contact Info
High Arctic Energy Services Inc.
8112 Edgar Industrial DriveRed Deer, AB Canada T4P 3R2Website: www.haes.ca Dennis Sykora, CEO Ken Olson, CFO Ph: (403) 340-9825 Ph: (403) 340-9825 Email: dennis.sykora@haes.ca Email: ken.olson@haes.ca Trading Symbol: HWO - T Banker: HSBC Bank of Canada
Auditors: PriceWaterhouseCoopers LLP Legal: Davis LLP