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CALGARY, Alberta, Nov. 14, 2024 (GLOBE NEWSWIRE) -- High Arctic Energy Services Inc. (TSX: HWO) (the "Corporation” or "High Arctic”) has released its' third quarter financial and operating results. The unaudited consolidated financial statements and management discussion & analysis ("MD&A”) for the three and nine months ended September 30, 2024 will be available on SEDAR+ at www.sedarplus.ca, and on High Arctic's website at www.haes.ca. All amounts are denominated in Canadian dollars ("CAD”), unless otherwise indicated.
Mike Maguire, Interim Chief Executive Officer commented on the Corporation's third quarter 2024 financial and operating results:
"I am very pleased that we completed the strategic re-organization of the Corporation in the third quarter, returning a sizeable amount of capital to our shareholders and spinning out the PNG Business to shareholders via High Arctic Overseas Holdings Corp. listed on the TSX Venture Exchange.
The acquisition and integration of Delta Rental Services has delivered positive adjusted EBITDA and cash generation. We have commenced cost rationalization, particularly focussed on general and administrative costs along with overhead cost reduction initiatives. Combined with our equity investment in Team Snubbing and owned real estate, High Arctic is positioned as an attractive vehicle for future growth and transactions.”
2024 THIRD QUARTER HIGHLIGHTS
- Completed the re-organization of High Arctic including the return of $37.8 million to shareholders and the spin-out of the PNG Business as High Arctic Overseas Holdings Corp., independently listed on the TSX Venture Exchange.
- Increased revenue from operations from $2.3 million to $8.0 million year to date on a comparative basis as a result of the Delta Acquisition.
- Exited Q3 2024 with net positive working capital of $4.9 million and access to $4.1 million of cash at bank.
- Reconciled and took action to reduce general and administrative costs, including a sizeable reduction in board cost and director compensation.
- Progressed post-reorganization transitional arrangements towards establishing dedicated stand-alone leadership of the Corporation.
- Increased revenue from continuing operations by $1,491 or 147% in the quarter when compared to revenue of $1,015 from Q3 2023 as a result of the impact of the Delta Acquisition on the 2024 results.
- Generated net income from continuing operations of $125 in the quarter as compared to $498 in Q3 2023. The decrease is primarily due to the 2023 $615 gain on sale of the nitrogen business, $373 lower interest income with the return of capital to shareholders, and $403 lower equity investment income from Team Snubbing in the quarter.
- Achieved positive Adjusted EBITDA from continuing operations of $383 in the quarter versus negative Adjusted EBITDA for Q3 2023 of $700.
- Production Service's 42% equity investment share of Team Snubbing Services Inc. ("Team Snubbing”) net income returned to positive earnings of $105 in the quarter compared to a loss of $889 in Q2 2024 and earnings of $508 in the comparative third quarter of 2023.
- Similar to the discrete quarter results, High Arctic's revenue from continuing operations increased 242% to $8,027 compared to revenue of $2,347 achieved in the first nine months of 2023 as a result of the Delta Acquisition on 2024 results.
- Generated a net loss from continuing operations of $1,402 in the quarter as compared to $1,208 in Q3 2023. The higher loss, despite an improvement of $1,323 in operating income, is primarily due to the 2023 $615 gain on sale of the nitrogen business, $262 lower interest income with the July 2024 return of capital to shareholders, and $745 lower equity investment income from Team Snubbing in the year-to-date period.
- Achieved strong oilfield services operating margins from continuing operations of 50.6% for the nine months in 2024.
- Production Service's 42% equity investment share of Team Snubbing Services Inc. net loss was $294 for the nine months ended September 30, 2024 as compared to positive net income of $451 in the comparative period in 2023. Regional expansion into Alaska has weighed on earnings during the past twelve months.
- Cash from operating activities from continuing operations was $487 in the quarter and a use of $42 for the nine months ended September 30, 2024, an improvement for the quarter as compared to the respective prior year comparatives of $172 and $359.
- Significantly lowered the use of funds flow from operations from continuing operating activities as the nine months of 2024 generated a use of funds of $46 compared to a use of funds of $957 for the nine months of 2023 driven by strong operational performance from the Delta Acquisition partially offset by the significant additional G&A expenses incurred in 2024 due to the corporate reorganization initiatives.
RESULTS OVERVIEW
The following is a summary of select financial information of the Corporation:
Three months ended September 30 | Nine months ended
September 30 | |||||||
(thousands of Canadian Dollars, except per share amounts) | 2024 | 2023 | 2024 | 2023 | ||||
Operating results from continuing operations: | ||||||||
Revenue - continuing operations | 2,506 | 1,015 | 8,027 | 2,347 | ||||
Net income (loss) - continuing operations | 125 | 498 | (1,402 | ) | (1,208 | ) | ||
Per share (basic & diluted) (1) | 0.01 | 0.04 | (0.11 | ) | (0.10 | ) | ||
Oilfield services operating margin - continuing operations (2) | 1,335 | 634 | 4,064 | 1,394 | ||||
Oilfield services operating margin as a % of revenue (2) | 53.30% | 62.50% | 50.60% | 59.40% | ||||
EBITDA - continuing operations (2) | 528 | 362 | (705 | ) | (1,393 | ) | ||
Adjusted EBITDA - continuing operations (2) | 383 | (700 | ) | 662 | (2,031 | ) | ||
Operating income (loss) - continuing operations (2) | 1 | (1,317 | ) | (2,432 | ) | (3,755 | ) | |
Cash flow from continuing operations: | ||||||||
Cash flow from (used in) continuing operating activities | 487 | 172 | (42 | ) | 359 | |||
Per share (basic & diluted) (1) | 0.04 | 0.01 | 0 | 0.03 | ||||
Funds flow from (used in) continuing operating activities (2) | 640 | (331 | ) | (46 | ) | (957 | ) | |
Per share (basic & diluted) (1) | 0.05 | (0.03 | ) | 0.00 | (0.08 | ) | ||
2024 Return of capital/2023 dividends (3) | 37,842 | 730 | 37,842 | 2,190 | ||||
Capital expenditures | 630 | 80 | 1,445 | 505 | ||||
As at | ||||||||
(thousands of Canadian Dollars, except per share amounts and common shares outstanding) | Sept 30,
2024 |
Dec 31, 2023 | ||||||
Financial position: | ||||||||
Working capital (2) | 4,933 | 62,985 | ||||||
Cash and cash equivalents | 4,106 | 50,331 | ||||||
Total assets | 32,977 | 123,137 | ||||||
Long-term debt (non-current) | 3,222 | 3,352 | ||||||
Shareholders' equity | 23,083 | 99,332 | ||||||
Per share (basic) (1) | 1.87 | 8.16 | ||||||
Per share (fully diluted) (1) | 1.85 | 7.81 | ||||||
Common shares outstanding (4) | 12,448,166 | 12,280,568 |
(1) | The number of common shares used in calculating net loss per share, cash flow from (used in) operating activities, funds flow from operating activities per share, dividend payments per share, and shareholders' equity per share is determined as explained in Note 13 of the Financial Statements (continuing operations). |
(2) | Readers are cautioned that Oilfield services operating margin, EBITDA (Earnings before interest, tax, depreciation, and amortization), Adjusted EBITDA, Operating income (loss), Funds flow from operating activities and Working capital do not have standardized meanings prescribed by IFRS - see the "Non IFRS Measures” section in this MD&A for calculations of these measures. |
(3) | 2023 figures are cash dividends declared. |
(4) | Pursuant to the de facto four-to-one consolidation of the Corporation's outstanding common shares effective August 12, 2024, the number of common shares outstanding and all per-share amounts have been retroactively adjusted to effect the stock consolidation. |
Operating Results
Rental Services segment (previously "Ancillary Services”)
Three months ended Sept 30 | Nine months ended Sept 30 | |||||||
(thousands of Canadian Dollars, unless otherwise noted) | 2024 | 2023 | 2024 | 2023 | ||||
Revenue | 2,506 | 1,015 | 8,027 | 2,347 | ||||
Oilfield services expense | (1,171 | ) | (381 | ) | (3,963 | ) | (953 | ) |
Oilfield services operating margin(1) | 1,335 | 634 | 4,064 | 1,394 | ||||
Operating margin (%) | 53.3% | 62.5% | 50.6% | 59.4% |
(1) | See "Non-IFRS Measures” |
The Rental Services segment consists of High Arctic's oilfield rental equipment in Canada centred upon pressure control equipment and equipment supporting the high-pressure stimulation of oil and gas wells in the WCSB.
The significant increase in revenue for the three- and nine-month periods ended September 30, 2024 versus the comparable periods in 2023 is a direct result of the contribution from the Delta business that was acquired in late 2023. Specifically, revenues increased $1,491 or 147% in the quarter when compared to Q3 2023 and increased $5,680 or 242% when compared to year-to-date revenues from 2023. Operating margins of 53.3% and 50.6% for the three and nine months ended September 30, 2024, respectively, are approximately nine percent lower to the comparable periods in 2023 due to the impact of the Delta Acquisition as Delta utilizes some third-party rental equipment in its operations, increasing operating expenses.
Production Services segment
The Production Services segment operations consist of High Arctic's idled snubbing units in Colorado, U.S., and its equity investments in the Seh' Chene Partnership and Team Snubbing in Canada. Though the Seh' Chene Partnership has experienced limited business activity since the 2022 Canadian sales transactions, the partnership is still active and the Corporation together with its partner look to reposition its customer offerings and explore other avenues for business activity.
Liquidity and capital resources Liquidity and capital resources
Three months ended Sept 30 | Nine months ended Sept 30 | |||||||
(thousands of Canadian Dollars) | 2024 | 2023 | 2024 | 2023 | ||||
Cash provided by (used in) continued operations: | ||||||||
Operating activities | 487 | 172 | (42 | ) | 359 | |||
Investing activities | (461 | ) | 1,155 | (1,276 | ) | 28,798 | ||
Financing activities | (37,382 | ) | (1,336 | ) | (37,640 | ) | (3,012 | ) |
Effect of exchange rate changes on cash | 67 | 142 | 1,186 | 25 | ||||
Increase (decrease) in cash from continuing operations | (37,289 | ) | 133 | (37,772 | ) | 26,170 |
(thousands of Canadian Dollars, unless otherwise noted) | As at Sept 30, 2024 (2) | As at Dec 31, 2023 | ||||
Current assets | 8,375 | 79,438 | ||||
Working capital(1) | 4,933 | 62,985 | ||||
Working capital ratio(1) | 2.4:1 | 4.8:1 | ||||
Cash and cash equivalents | 4,106 | 50,331 | ||||
Net cash(1) | <
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