Papua New Guinea - High Arctic Energy Services

Report
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.
Page 2
Corporate Focus
To safely provide specialized technical oilfield 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
Calgary
Papua New Guinea
Canada:
Snubbing & Nitrogen Services
& Equipment Rentals
Singapore
Papua New Guinea:
Drilling Services &
Equipment Rentals
Sydney
Page 4
Papua New Guinea
Page 5
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 6
PNG OSL / Exxon - LNG Project
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Exxon announced on April 29th 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:
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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 7
PNG LNG future development…
P’nyang :
Highlands – Hides, Juha, Kutubu
Elk/Antelope :
Exxon/OSL - Reserves
for LNG expansion
Exxon / OSL – Supporting current LNG Plant
InterOil, Total, OSL
Reserves for major LNG
expansion
Forelands :
Talisman, Santos, Mitsubishi, Heritage, Horizon
Potential source for third LNG expansion
Page 8
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 9
Purchase of New Drilling Rigs
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Purchased 2 Heli-portable drilling
rigs (rigs #115 & #116)
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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
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•
subject to closing of acquisition
Allows for various helicopter options
Total cost estimated at $52M USD
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Rigs $29M
Shipping $6M
Refurbishment & Spare Parts $17M
Page 10
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 11
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 12
PNG Drilling Customers
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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 - 6.38M BOE annual production
PNG government owns 15% outstanding
shares
HWO is OSL’s exclusive PNG drilling
contractor
www.oilsearch.com
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Public integrated oil and gas company
(IOC-NYSE) headquartered in Port
Moresby & Singapore
Market capitalization of $3 billion (USD)
Operates oil refinery and largest
network of PNG petrol stations
Over 4 million acres of exploration rights
in PNG including Elk-Antelope gas field
Recent joint-venture arrangements with
Total & Oil Search
www.interoil.com
Page 13
Dura-Base Matting
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Over 10,000 rental mats in PNG
PNG distributor rights
The largest rental supplier of Dura-Base
mats outside of the USA
Possible expansion into similar countries
with challenging environments
Page 14
Equipment Rentals
Camp services – 5 camps contracted
•
HWO operates and manages
• Two 93 man Heli-portable drilling rig camps
• Two 32 man Heli-portable leap frog camps
(under contract - OSL owned)
•
HWO deployed a new double-deck 104 man Heliportable drilling rig camp in January 2013
(under contract with OSL - HWO owned)
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Additional camp is required for the new InterOil
contract.
Additional rental equipment owned by HWO;
•
cranes (ranging from 30 ton to 160 ton)
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rig moving trucks
forklifts
river pumps
light towers
Page 15
Staging Site Management
In 2013 High Arctic was awarded an 18 month “Material
Handling Contract” with a major Canadian Oil company
to supply Cranes, Forklifts, Trucks, Light Towers,
Personnel, Training, and Materials Handling expertise.
With High Arctic
Before High Arctic
Page 16
PNG Revenue Performance
Drilling Revenue ($M)
Drilling and related services have
experienced moderate steady
growth over the past 4 years.
Rental Revenue ($M)
CAGR
New rigs can add $30M of
revenue per year per rig with full
utilization
Rental services has experienced a
Cumulative Average Growth Rate
of 34% over the past 4 years.
Page 17
PNG Equipment Rental Customers
Page 18
Canada
Page 19
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
Page 20
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 21
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.
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 22
Canadian Snubbing Services
15 Stand Alone & 3 Rig Assist Units
14 Active Crews
2013 Annualized Utilization 36%
Page 23
Canadian Nitrogen Services
9 Low Rate Nitrogen Pumpers
Applications:
Snubbing Support;
• Wellbore displacements
• Well head pressure testing
• Underbalanced milling & drilling
5 Nitrogen Transports
1 High Rate N2 Pumper
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
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
Investment Highlights
Shares outstanding:
Share Price (as at May 12, 2014):
Market Cap :
Net Cash*:
Enterprise Value:
Trailing 12 Month EBITDA:
EV / EBITDA Multiple:
Annual Dividend:
Payout Ratio
Yield
Canadian Tax Losses:
Average Daily Trading Volume:
Insiders’ Ownership (as at May 15, 2014):
Expected max net debt post rig acquisition
50,242,692
$5.36
$269.3 million
$36.2 million
$233.1 million
$44 million
5.3x (12 months trailing)
$0.18
25%
4.0%
~$90.0 million
95,202
66%
$25 million
41% Cyrus Capital
14% Former founder
11% Directors / Officers
* Cash less debt
Page 28
Dividend History
Payout Ratio
Approx. 22%
Payout Ratio
Approx. 18%
Payout Ratio
Approx. 25%
Conservative Payout Ratio
Page 29
Historical Financial Summary
Financial Performance – TTM
(in $ CDN millions)
Jun, 2012
Sep, 2012
Dec, 2012
Mar, 2013
Jun, 2013
Sep, 2013
Dec, 2013
Mar, 2014
CDN Revenue
50.2
52.2
47.2
43.4
43.5
38.9
40.8
40.9
PNG Revenue
88.0
92.5
99.0
105.4
108.6
113.7
111.9
111.5
Total Revenue
138.2
144.7
146.2
148.8
152.1
152.6
152.7
152.4
EBITDA
38.5
40.6
39.6
37.9
39.3
39.0
41.5
44.0
CFFO
33.7
37.1
34.9
32.7
34.4
33.2
35.3
37.2
Net Income
27.2
30.7
28.8
26.5
22.9
24.1
24.6
25.5
Net Cash*
12.8
7.8
13.7
9.7
19.7
22.0
26.9
36.2
PP&E
54.2
60.9
61.3
65.3
67.7
70.9
72.1
71.8
Shareholders’ Equity
80.5
83.4
88.6
96.9
99.5
104.0
111.8
122.8
Shares Outstanding (mm)
49.8
49.8
49.8
49.8
49.8
49.9
50.0
50.1
*Net Cash: Cash – Bank Debt
Page 30
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 2013. Following service in the British Royal Navy, Mr. Doran
began his career at Deutag Drilling in 1979. 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 31
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 1998. 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 32
Appendix B - Directors
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Michael Binnion, Chairman
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Daniel Bordessa, Independent
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Independent Businessman. Previous VP, Operations of Sylogist Ltd.
Steven Vasey, Independent
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Partner of the law firm Warren Sinclair LLP in Red Deer, AB.
Simon Batcup, Independent
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Former President & CEO of Iroc Energy Services.
Christopher Warren, Independent
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Partner, Cyrus Capital Partners LP and Managing Director, Cyrus Capital Partners Europe
Thomas Alford, Independent
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President and CEO of Questerre Energy Corporation (QEC-T)
Independent geophysical consultant.
Dennis Sykora, Interim CEO
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See slide 28.
Page 33
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: [email protected]
Ken Olson, CFO
Ph: (403) 340-9825
Email: [email protected]
Trading Symbol:
HWO - T
Banker:
Auditors:
Legal:
HSBC Bank of Canada
PriceWaterhouseCoopers LLP
Davis LLP
Page 34

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