High Arctic Announces 2023 First Quarter Results, an Intention to Return Capital and Reorganize

Acheson, Alberta, CANADA


CALGARY, Alberta, May 11, 2023 (GLOBE NEWSWIRE) -- High Arctic Energy Services Inc. (TSX: HWO) (the “Corporation” or “High Arctic”) released its’ first quarter financial and operating results. The unaudited interim consolidated financial statements, and management discussion & analysis (“MD&A”), for the quarter ended March 31, 2023 will be available on SEDAR at www.sedar.com, and on High Arctic’s website at www.haes.ca. All amounts are denominated in Canadian dollars (“CAD”), unless otherwise indicated.

The Corporation announces that the Board of Directors intends to recommend to shareholders a tax-free cash return of capital equal to $38.2 million relating to the sale of Canadian Well Servicing. The Board further intends to recommend a reorganization of the Corporation at a special meeting of the Shareholders to be held before the end of September 2023. The recommendation to reorganize is expected to include the following elements:

  • a spinoff of the international business to shareholders as a private company,
  • maintaining the Canadian publicly listed company focused on growing the Canadian business and utilizing the available $130 million non-capital tax loss carryforwards, and
  • right sizing the general and administrative infrastructure to align with the new structure.

The Corporation is working with DLA Piper as legal advisor on the reorganization plan and is in discussions with financial advisors to facilitate the reorganization, the completion of which is subject to all applicable regulatory approvals.

Mike Maguire, Chief Executive Officer commented:

“I am excited that the Board intends to reorganize the Corporation, starting with a tax efficient return of cash to shareholders. The proposed spin-off of the Papua New Guinean business will allow senior management to concentrate where we have had the most success in the past. The remaining publicly listed company with Canadian assets and tax pools creates an attractive vehicle for future growth and transactions.

Our PNG business has been consistently undervalued by the public market, and we believe that the current market conditions make it appropriate to take steps to unlock value.

I believe our customers and employees in both PNG and Canada will appreciate and benefit from a locally managed business.”


The following highlights the Corporations results for Q1-2023:

  • PNG Rig 103 resumed drilling operations towards end of Quarter under a 3-year contract renewed in August 2022.
  • Achieved oilfield services operating margins as a percent of revenue of 32.3% on revenues of $9.5 million.
  • Generated funds flow from operations of $1.4 million and incurred capital expenditures of $0.4 million.
  • Improved liquidity with a working capital balance of $59.7 million, increased cash balance of $46.7 million, and long-term debt of $4.0 million.
  • After the final payment from the sale of Well Servicing, the Board of Directors is assessing the merit of a substantive cash return to shareholders including the optimal capital and cost structure.


High Arctic’s 2023 Strategic Objectives build on the platform we created in 2022, and include:

  • Safety excellence and quality service delivery,
  • Return idled assets in PNG to service,
  • Scaling our Canadian business,
  • Opportunities for growth and corporate transactions that enhance shareholder value, and
  • Examination of the Corporation’s optimal capital and overhead structure.

In the following discussion, the three months ended March 31, 2023 may be referred to as the “Quarter” or “Q1-2023”. The comparative three months ended March 31, 2022 may be referred to as “Q1-2022”. References to other quarters may be presented as “QX-20XX” with X being the quarter/year to which the commentary relates.


The following is a summary of select financial information of the Corporation:

  For the three-months ended March 31

($ thousands, except per share amounts)2023 2022 
Revenue9,525 28,696 
Net loss(625) (2,671) 
Per share (basic and diluted) (0.01)  (0.05) 
Oilfield services operating margin3,073 5,310 
Oilfield services operating margin as a % of revenue 32.3% 18.5% 
EBITDA1,317 2,944 
Adjusted EBITDA962 2,884 
Adjusted EBITDA as % of revenue 10.1% 10.1% 
Operating loss(1,972) (2,818) 
Cash flow from operating activities373 300 
Per share (basic and diluted) 0.01   0.01  
Funds flow from operations1,356 2,243 
Per share (basic and diluted) 0.03   0.05  
Capital expenditures396 1,582 

 As at

($ thousands, except share amounts)March 31, 2023 December 31, 2022 
Working capital59,678 59,461 
Cash and cash equivalents46,745 19,559 
Total assets132,123 133,957 
Long-term debt3,982 4,028 
Total long-term financial liabilities, excluding long-term debt4,324 4,881 
Shareholders’ equity113,992 115,231 
Per share (basic and diluted) 2.34 2.37 
Common shares outstanding48,673,568 48,691,864 

Three-month period ended March 31, 2023 Summary:

  • For the three-month period ended March 31, 2023, High Arctic’s consolidated revenues declined 67% to $9,525 compared to Q1-2022 as 2023 reflects the elimination of the well servicing and snubbing businesses.
  • A net loss of $625 in Q1-2023 compares to a net loss of $2,671 in Q1-2022 with the reduction mainly due to a smaller operational footprint comprised of returning of rig work in our PNG market, interest income, deferred income tax recovery and investment income earned on the Corporation’s investment in Team Snubbing.
  • Oilfield services operating margins improved as a percent of revenue of from 18.5% in Q1-2022 to 32.3% in the Quarter. This improvement is primarily a result of the Sales Transactions in 2022 that saw the disposal of the underperforming Production Services assets which historically had the lowest operating margins (as a percentage of revenue) for High Arctic.
  • In January 2023, High Arctic received the final cash proceeds of $28,000 from Well Servicing Transaction and as a result the cash and cash equivalents on hand at March 31, 2023 totaled $46,745 an increase of $27,186 from the December 31, 2022 balance of $19,559.

Drilling Services Segment

  Three-months ended March 31

($ thousands, unless otherwise noted)  2023 2022 
Revenue  6,276 9,574 
Oilfield services expense  5,085 7,477 
Oilfield services operating margin  1,191 2,097 
Operating margin (%)  19.0% 21.9% 

Ancillary Services Segment

  Three-months ended March 31

($ thousands, unless otherwise noted)  2023 2022 
Revenue  3,249  4,725 
Oilfield services expense  1,367  1,756 
Oilfield services operating margin  1,882  2,969 
Operating margin (%)  57.9% 62.8% 

Liquidity and Capital Resources

  Three-months ended March 31

($ thousands)  2023 2022 
Cash flow from (used in):    
Operating activities  373  300 
Investing activities   27,768 (418) 
Financing activities   (964) (521) 
Effect of exchange rate changes on cash   9  44 
Increase (decrease) in cash   27,186 (595) 

  As at

($ thousands, unless otherwise noted)  March 31
 December 31
Current assets  69,448 69,278 
Working capital  59,623  59,461 
Working capital ratio  7.1:1 7.1:1 
Cash and cash equivalents  46,745 19,559 
Net cash  42,587 15,345 

The Bank of PNG continues to encourage the use of the local market currency, Kina or PGK. Due to High Arctic’s requirement to transact with international suppliers and customers, High Arctic has received approval from the Bank of PNG to maintain its USD account within the conditions of the Bank of PNG currency regulations. The Corporation continues to use PGK for local transactions when practical. Included in the Bank of PNG’s conditions is for PNG drilling contracts to be settled in PGK, unless otherwise approved by the Bank of PNG for the contracts to be settled in USD. The Corporation has historically received such approval for its contracts with its key customers in PNG. The Corporation will continue to seek Bank of PNG approval for our contracts to be settled in USD on a contract-by-contract basis, however, there is no assurance the Bank of PNG will grant these approvals.

If such approvals are not received, the Corporation’s PNG drilling contracts will be settled in PGK which would expose the Corporation to exchange rate fluctuations related to the PGK. In addition, this may delay the Corporation’s ability to receive USD which may impact the Corporation’s ability to settle USD denominated liabilities and repatriate funds from PNG on a timely basis. The Corporation also requires the approval from the PNG Internal Revenue Commission (“IRC”) to repatriate funds from PNG and make payments to non-resident PNG suppliers and service providers. While delays can be experienced for the IRC approvals, all such approvals have eventually been received in the past.

Operating Activities

In Q1-2023, cash generated from operating activities was $373 comparable to the Q1-2022 cash generated from operating activities of $300. Funds flow from operations totaled $1,356 in the Quarter (Q1-2022: $2,243), see “Non-IFRS Measures”, and $983 cash outflow from working capital changes (Q1-2022: $1,943).

Investing Activities

During Q1-2023, the Corporation’s cash from investing activities was $28,232 (Q1-2022: $418 cash used in investing activities) reflecting the receipt of the final cash proceeds of $28,000 from the Well Servicing Transaction. Capital expenditures were $396 (Q1-2022: $1,582) partially offset by $130 proceeds on disposal of property and equipment (Q1-2022: $1,037), and $34 cash inflow relating to working capital balance changes for capital items (Q1-2022: $127).

Financing Activities

In Q1-2023, the Corporation’s cash used in financing activities was $964 (Q1-2022: $521). During the Quarter, the Corporation paid $730 in dividends (Q1-2022 $nil), $56 (Q1-2022: $54) towards principal payments on its mortgage financing (see “Mortgage Financing below”) and $153 lease liability payments (Q1-2022: $467).

Mortgage Financing

 As atAs at
   March 31, 2023December 31, 2022
Current    176186
Non-current   3,9824,028
Total   4,1584,214

During December 2021, the Corporation entered into a mortgage financing arrangement for $8,100, secured by lands and buildings owned and occupied by High Arctic within Alberta, Canada. The mortgage has an initial term of 5 years with a fixed interest rate of 4.30% and an amortization period of 25 years with payments occurring monthly.

The Well Servicing Transaction included the sale of certain Corporation owned land and buildings. In December 2022, the Corporation repaid mortgage principal of $3,565 associated with these properties. In January 2023 the Corporation transferred title to real estate locations to the purchaser of the Well Servicing business.

The Corporation capitalized $25 in financing fees incurred to set up the loan in 2021 and applied this to the long-term debt liability. Financing fees will be amortized over the expected life of the mortgage financing.


The Corporation exits Q1 2023 with an overcapitalized balance sheet having collected the remaining proceeds from the Well Servicing Transaction. This positions High Arctic with a reduced business footprint compared to a year ago and a substantial working capital position.

High Arctic is at a strategic crossroads. Having liquidated our underperforming well servicing business in Canada, the Company remains focused on the positive opportunities in PNG. Reinvestment in Canada remains competitive in our area of expertise, and further Canadian service sector consolidation is needed to balance supply with customer demand over the business cycle.

Accordingly, the Corporation today has announced an intention to make a $38.2 million cash return of capital to shareholders and an intention to reorganize the legal entity structure.

The opportunities for growth in PNG include: building on the return to drilling operations of Rig 103, deploying idle heli-portable drilling rigs 115 and 116; supply services to the Papua-LNG project; and, the substantive need for workers and machinery necessary for the contemplated major capital and infrastructure projects. Our optimism is underpinned by the advancement of the TotalEnergies led Papua-LNG project with the announcement last week of upstream facilities FEED contract award. The project is expected to be followed by the P’nyang gas field development in the Western Province of PNG, which is anticipated to result in the addition of further gas liquefaction capacity in the world class PNG-LNG export facility. State owned Kumul Petroleum is advancing appraisal of other gas discoveries in PNG and have recently stated their desire to contribute to growing domestic energy needs and additional LNG export processing facilities.

High Arctic maintains a presence in the Canadian market, through its investments in Team Snubbing, HAES rentals and nitrogen pumping operations. Each of these positively contributed to High Arctic’s Q1-2023 results, We continue to evaluate opportunities for investment as they arise in the Canadian market, while remaining attentive to opportunities to best realize a return on the investments in our existing Canadian service lines, and the inactive snubbing assets in the USA.


This News Release contains references to certain financial measures that do not have a standardized meaning prescribed by International Financial Reporting Standards (“IFRS”) and may not be comparable to the same or similar measures used by other companies High Arctic uses these financial measures to assess performance and believes these measures provide useful supplemental information to shareholders and investors. These financial measures are computed on a consistent basis for each reporting period and include Oilfield services operating margin, EBITDA (Earnings before interest, tax, depreciation, and amortization), Adjusted EBITDA, Operating loss, Funds flow from operating activities, Working capital and Long-term financial liabilities. These do not have standardized meanings.

These financial measures should not be considered as an alternative to, or more meaningful than, net income (loss), cash from operating activities, current assets or current liabilities, cash and/or other measures of financial performance as determined in accordance with IFRS.

For additional information regarding non-IFRS measures, including their use to management and investors and reconciliations to measures recognized by IFRS, please refer to the Corporation’s MD&A, which is available online at www.sedar.com and through High Arctic’s website at www.haes.ca.   


This press release contains forward-looking statements. When used in this document, the words “may”, “would”, “could”, “will”, “intend”, “plan”, “anticipate”, “believe”, “seek”, “propose”, “estimate”, “expect”, and similar expressions are intended to identify forward-looking statements. Such statements reflect the Corporation’s current views with respect to future events and are subject to certain risks, uncertainties, and assumptions. Many factors could cause the Corporation’s actual results, performance, or achievements to vary from those described in this press release.

Should one or more of these risks or uncertainties materialize, or should assumptions underlying forward-looking statements prove incorrect, actual results may vary materially from those described in this press release as intended, planned, anticipated, believed, estimated or expected. Specific forward-looking statements in this press release include, among others, statements pertaining to the following: general economic and business conditions which will include, among other things, continued improvement in energy services outlook; continued impact of Russia-Ukraine conflict; the impacts of Covid-19; opportunities to invest and enhance shareholder value; the Corporation’s ability to maintain a USD bank account and conduct its business in USD in PNG; market fluctuations in interest rates, commodity prices, and foreign currency exchange rates; restrictions to repatriate funds held in PGK; expectations regarding the Corporation’s ability to manage its liquidity risk; raise capital and manage its debt finance agreements; projections of market prices and costs; factors upon which the Corporation will decide whether or not to undertake a specific course of operational action or expansion; the Corporation’s ongoing relationship with its major customers; the potential substantive return of capital to the Corporation’s shareholders; the Corporation’s ability to achieve an optimal capital and legal structure; optimism surrounding the opportunities in the PNG energy sector and increasing future demand for our equipment, personnel, and expertise; the eventual construction of the Papau-LNG project and development of the P’nyang gas field; expectations of Rig 103 to operate consistently through the term of its contract; returning idled assets in PNG to service; scaling the Canadian business; executing on one or more corporate transactions and estimated credit risks and the utilization of tax losses.

With respect to forward-looking statements contained in this press release, the Corporation has made assumptions regarding, among other things, its ability to: maintain its ongoing relationship with major customers; successfully market its services to current and new customers; devise methods for, and achieve its primary objectives; source and obtain equipment from suppliers; successfully manage, operate, and thrive in an environment which is facing much uncertainty; remain competitive in all its operations; attract and retain skilled employees; and obtain equity and debt financing on satisfactory terms.

The Corporation’s actual results could differ materially from those anticipated in these forward-looking statements as a result of the risk factors set forth above and elsewhere in this press release, along with the risk factors set out in the most recent Annual Information Form filed on SEDAR at www.sedar.com.

The forward-looking statements contained in this press release are expressly qualified in their entirety by this cautionary statement. These statements are given only as of the date of this press release. The Corporation does not assume any obligation to update these forward-looking statements to reflect new information, subsequent events or otherwise, except as required by law.

About High Arctic Energy Services

High Arctic is an energy services provider. High Arctic is a market leader in Papua New Guinea providing drilling and specialized well completion services and supplies rental equipment including rig matting, camps, material handling and drilling support equipment. In western Canada High Arctic provides nitrogen services and pressure control equipment on a rental basis to exploration and production companies.

For further information contact:

Mike Maguire
Chief Executive Officer
P: +1 (403) 988 4702
P: +1 (800) 688 7143
Lance Mierendorf
Chief Financial Officer
P: +1 (403) 508-7836
P: +1 (800) 688 7143
High Arctic Energy Services Inc.
Suite 2350, 330 – 5th Ave SW
Calgary, Alberta, Canada T2P 0L4
website: www.haes.ca
Email: info@haes.ca