High Arctic Earns $2.2 million for the Quarter ended September 30, 2010
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RED DEER, AB, Nov. 10 /CNW/ - High Arctic Energy Services Inc. (TSX: HWO) ("High Arctic" or the "Corporation") today announced its results for the three and nine months ended September 30, 2010.
Commenting on the results, Bruce Thiessen, CEO, said, "I am pleased that we have been able to record three consecutive quarters of positive earnings. The results indicate that management remains focused on maintaining a competitive cost structure and improving operating efficiencies. Revenue, net earnings, EBITDA and operating earnings from continuing operations all improved in the third quarter of this year as compared to last year. The progress that has been made so far positions us favourably for the remainder of 2010".
Selected Comparative Financial Information
The following is a summary of selected financial information of the Corporation:
Three Months Ended September 30 |
Nine Months Ended September 30 |
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$ millions | 2010 | 2009 | Change | 2010 | 2009 | Change | ||
Revenue | ||||||||
Canada | 9.2 | 4.4 | 4.8 | 27.0 | 19.5 | 7.5 | ||
International | 19.8 | 18.5 | 1.3 | 59.0 | 76.4 | (17.4) | ||
Total Revenue | 29.0 | 22.9 | 6.1 | 86.0 | 95.9 | (9.9) | ||
Net earnings (loss) from continuing operations | 2.3 | (1.1) | 3.4 | 9.5 | (1.6) | 11.1 | ||
Per share (basic) | $0.01 | $(0.02) | $0.03 | $0.07 | ($0.04) | $0.11 | ||
Net Income (loss) | 2.2 | (4.3) | 6.5 | 9.2 | (5.0) | 14.2 | ||
Per share (basic) | $0.01 | $(0.09) | $0.10 | $0.07 | ($0.11) | $0.18 | ||
EBITDA(1) | - continuing operations | 6.8 | 1.3 | 5.5 | 22.4 | 16.2 | 6.2 | |
|
- discontinued operations | (0.1) | (2.2) | 2.1 | (0.3) | - | (0.3) | |
|
- total | 6.7 | (0.9) | 7.6 | 22.1 | 16.2 | 5.9 | |
Operating earnings (loss) | ||||||||
|
- continuing operations | 4.8 | (1.0) | 5.8 | 16.5 | 8.8 | 7.7 |
Overview of Results for Three Months Ended September 30, 2010
The Canadian operation's revenue enjoyed an increase of $4.8 million (109%) to $9.2 million in the third quarter of 2010 compared to $4.4 million in the same quarter of 2009. The increase was attributable to much improved industry conditions and the deployment of one 250K UB rig during the quarter. The industry saw a 66% increase in well completions in Canada in the third quarter of 2010 as compared to the very weak third quarter of 2009. The increase in industry activity should carry on into the fourth quarter despite the weak natural gas prices.
Revenue from continuing international operations increased by $1.3 million (7%) to $19.8 million for the quarter ended September 30, 2010 as compared to revenue of $18.5 million during the quarter ended September 30, 2009. The increase reflects the start of activity for a new customer in Papua New Guinea under a firm two well contract.
Overall, the Corporation generated $29.0 million in revenue from continuing operations during the quarter ended September 30, 2010; an increase of $6.1 million (27%) from revenue of $22.9 million in the quarter ended September 30, 2009.
Operating earnings from continuing operations was $4.8 million for the quarter ended September 30, 2010 as compared to an operating loss of $1.0 million in the quarter ended September 30, 2009, largely reflecting improved industry conditions in Canada. Continuing operations had EBITDA(1) of $6.8 million in the third quarter of 2010 compared to $1.3 million in the third quarter of 2009. The Corporation recorded net income of $2.2 million ($0.01 per share) in the third quarter of 2010, as compared to a net loss of $4.3 million ($0.09 per share) in the same period of 2009. Continuing operations had a net income of $2.3 million ($0.01 per share) during the third quarter of 2010 as compared to a net loss of $1.1 million ($0.02 per share) in the third quarter of 2009.
The Corporation continues to successfully reduce its debt, paying down its term loan by $2.1 million to $41.8 million in the third quarter of 2010. Before consideration of working capital adjustments, cash generated by operating activities from continuing operations in the quarter ended September 30, 2010 was $5.1 million, compared to cash used in operating activities from continuing operations of $1.6 million in the quarter ended September 30, 2009.
Overview of Results for Nine Months Ended September 30, 2010
Revenue from continuing operations decreased by $9.9 million (10%) to $86.0 million in the nine months ended September 30, 2010, as compared to revenue of $95.9 million during the same period of 2009. Revenue in Canada showed a healthy $7.5 million (38%) increase to $27.0 million in the nine months ended September 30, 2010 as compared to $19.5 million in during the nine months ended September 30, 2009. The increase in revenue in Canada is mainly the result of increased industry activity.
Revenue from continuing international operations decreased by $17.4 million (23%) from $76.4 million during the first nine months of 2009 to $59.0 million during the first nine months of 2010. This decrease was the result of the Corporation's hydraulic workover rig in Papua New Guinea being on a stacked rate and not working during the first three quarters of 2010 and the Corporation operating one drilling rig and one leap frog rig in Papua New Guinea in the first nine months of 2010 as compared to operating on average two drilling rigs in the first nine months of 2009.
The Corporation recorded net earnings of $9.2 million ($0.07 per share) in the nine months ended September 30, 2010, which was a $14.2 million improvement over the 2009 net loss of $5.0 million ($0.11 per share). Continuing operations had net earnings of $9.5 million ($0.07 per share) during the nine months ended September 30, 2010 as compared to a net loss of $1.6 million ($0.04 per share) in the same period of 2009. Continuing operations had EBITDA(1) of $22.4 million in the nine months ended September 30, 2010 compared to EBITDA(1) of $16.2 million during the same period of 2009. Operating earnings from continuing operations were $16.5 million for the nine months ending September 30, 2010; an increase of $7.7 million from operating earnings of $8.8 million for the same period of 2009.
Outlook
The CAODC and the Petroleum Services Association of Canada have both recently announced their forecasts for the 2011 Canadian drilling activity. They are forecasting that overall well completions will be similar to 2010 and in the range of 11,800 to 12,000 wells. They are predicting a shift to more oil well drilling and less gas well drilling. Natural gas drilling and completions activity in Canada could decrease from current levels if the price for natural gas remains low. High Arctic's Canadian activity levels are impacted to a greater degree by natural gas drilling than oil well drilling. The Corporation is in a relatively strong position given its relationships and first call commitments with some of the natural gas industry's most active customers. Management hopes to maintain the gain in market share realized in the first nine months of 2010 and remains focused on maintaining a competitive cost structure and improving operating efficiencies. Activity for High Arctic should continue to be strongest in the northern foothills areas of Alberta and in northeastern British Columbia where the focus will be on providing services for non-conventional shale and tight gas plays.
Several oil and gas companies have recently invested in Papua New Guinea which is leading to additional work during 2010. The Corporation has an agreement with a new customer in Papua New Guinea to use Rig 103 to drill two firm wells with an option for up to an additional two wells. Mobilization of the rig began in the third quarter of 2010 and drilling should begin in the fourth quarter of 2010. As a result, both Rig 103 and Rig 104 should be actively drilling during the fourth quarter of 2010 and into 2011. Rig 102 continues to be stacked with an uncertain call up date. The Corporation is currently negotiating with the customer to possibly put Rig 102 back to work in the first half of 2011.
The primary contracts related to Papua New Guinea expire at the end of 2010 and the Corporation has begun renewal negotiations. It is too early to know the outcome of those negotiations but the Corporation expects to obtain some form of an extension.
Non-GAAP Measure
EBITDA (being earnings before the deduction of depreciation, amortization, interest expense, income taxes, gain on restructuring transactions and other items) is not a recognized measure under GAAP. Management believes that, in addition to net earnings, EBITDA is a useful supplemental measure of the Corporation's performance prior to consideration of how operations are financed or how results are taxed. Investors are cautioned that this should not be construed as an alternative to net earnings determined in accordance with GAAP as an indicator of the Corporation's performance. The Corporation's method of calculating EBITDA may differ from the methods used by other issuers and, accordingly, it may not be comparable to similarly titled measures used by other issuers.
Forward-Looking Statements
This news release may contain forward-looking statements relating to expected future events and financial and operating results of the Corporation that involve risks and uncertainties. Actual results may differ materially from management expectations, as projected in such forward-looking statements for a variety of reasons, including market and general economic conditions and the risks and uncertainties detailed in both the Corporation's Management Discussion and Analysis for the year ended December 31, 2009 and in the Annual Information Form for the year ended December 31, 2009 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.
About High Arctic
The Corporation, through its subsidiaries, is a global provider of specialized oilfield equipment and services, including drilling, completion and workover operations. Based in Red Deer, Alberta, High Arctic has domestic operations throughout Western Canada. International operations are currently active in Papua New Guinea.
(1) EBITDA is a Non-GAAP measure
For further information:
Morley Myden
Chief Financial Officer
(403) 340-9825
[email protected]
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