High Arctic Energy Services Inc.

High Arctic Energy Services Inc.

November 14, 2005 07:00 ET

High Arctic Announces Third Quarter Results

RED DEER, ALBERTA--(CCNMatthews - Nov. 14, 2005) - High Arctic Energy Services Trust (TSX:HWO.UN)

Highlights for the quarter:

- Successful IPO and TSX listing completed on July 21, 2005

- Revenue for three-month period increased by 65 per cent from last year to $25.2 million

- Adjusted EBITDA of $8.3 million was an increase of 48 per cent

- Distributions to unit holders totalled $4.3 million for a payout ratio of 54 per cent

- Signed a long-term contract to supply international Integrated Project Management services

- Acquired a leading provider of portable air compression services

High Arctic Energy Services Trust (TSX:HWO.UN) (the "Trust") today announced its results for the third quarter ended September 30, 2005.

The Trust commenced operation upon completion of its initial public offering on July 21, 2005. It is reporting its results for the full third quarter commencing July 1, 2005, on a continuing entity basis as required by generally accepted accounting principles.

"The third quarter demonstrated our ability to execute our growth strategy despite significant labour shortages that are affecting the entire industry," said Jed Wood, President and CEO of High Arctic. "We had a very active quarter and are pleased with our financial and operational results. We look forward to further growth ahead, particularly from our increasing integrated project management activities."

Revenue for the three months ended September 30, 2005, was $25.2 million, an increase of 65 per cent or $9.9 million from $15.3 million in the same period last year. Revenue increases during the quarter are attributed to activity from an expanded equipment fleet, the bundling of underbalanced well construction services and new services offered to customers. For the first nine months of 2005, revenue of $50.6 million was an increase of $19.5 million or 63 per cent from $31.1 million in the nine-month period of 2004.

Adjusted EBITDA (earnings before interest, taxes, depreciation and amortization, all as adjusted for certain pre-IPO payments) for the third quarter was $8.3 million compared to $5.6 million in the same period last year, representing a 48 per cent increase. Adjusted EBITDA growth reflected revenue growth along with decreasing costs from economies of scale and higher margins from the international division. Nine-month Adjusted EBITDA increased by 154 per cent to $17.3 million from $6.8 million.

General and administration expenses for the three-month period were $2.8 million, an increase of 87 per cent from $1.5 million in 2004. The increase is a result of increased business activity and costs associated with being a public company.

The Trust declared two cash distributions to unitholders of record during the third quarter, $2.0 million on approximately 9.4 million Class A units and $2.3 million on approximately 11.5 million Class B units, totalling approximately $4.3 million. Distributable cash for the period was $8.1 million, for a payout ratio of 54 per cent.

The Trust invested $22.4 million in capital assets during the quarter compared to $4.1 million in last year's quarter. This increase reflects management's commitment to rapidly growing the company's fleet and revenue base.

Operations highlights

The Trust completed two notable transactions during the third quarter and two subsequent to the end of the quarter.

In August, one of the Trust's wholly owned operating subsidiaries entered into a 36-month agreement with Transeuro Energy Corp. of Vancouver, of which Mr. Wood owns an interest, to provide Integrated Project Management services at Transeuro's worldwide concessions. This contract contributed revenue of $3.5 million during the quarter, along with building expertise and a solid platform for related project management growth.

In September, High Arctic announced its acquisition of Alberta Mobile Air Services, a provider of portable compression services to the drilling and pipeline industries. This acquisition was immediately accretive, contributing revenue of $0.4 million in the quarter.

Subsequent to quarter end, in October the Trust confirmed the March 2006 delivery schedule for five new 250K Combination Drilling, Workover and Snubbing (CDWS) rigs and exercised its option to purchase an additional 10 rigs, with delivery scheduled between July 2006 and May 2007. The rigs are being built by EDM/Sense, a leading designer and manufacturer of drilling and oilfield services equipment based in Norway. On October 27, the Trust announced its purchase of 10 per cent of the outstanding shares of EDM/Sense for approximately $3.0 million.

"All of our transactions from the past few months create part of our foundation for future growth," said Mr. Wood. "Our ability to integrate these strategic activities while producing strong operating results demonstrates how we will continue to build unitholder value."

Conference Call and Webcast

Management will host a conference call to discuss the results on November 14, 2005, at 2 p.m. ET. Please call to 416-644-3424 or 1-800-814-4853 to access the call. The call will be webcast live at www.higharticenergyservices.com/investors.asp and archived on the web site. A replay will be available by telephone until midnight on November 21, 2005.

Non-GAAP measures

Adjusted EBITDA and distributable cash are non-GAAP financial measures, but management believes they are useful in measuring the Fund's performance. Readers are cautioned that these measures should not be construed as alternatives to net income or loss or other comparable measures determined in accordance with GAAP as an indicator of the Fund's performance or as a measure of the Fund's liquidity and cash flow. The Fund's method of calculating non-GAAP measures may differ from the methods used by other issuers and accordingly, the Fund's non-GAAP measures may not be comparable to similarly titled measures used by other issuers.

About High Arctic

The Trust, through its subsidiaries, is a global provider of under balanced well construction services, including drilling, completion, and work over operations and integrated project management. High Arctic's new under balanced drilling technology and equipment is recognized for its ability to improve oil and gas production capabilities and is expected to develop greater acceptance in international markets. Based in Red Deer, High Arctic has domestic operations in Alberta, British Columbia and the Northwest Territories. International operations are currently active in the Middle East and former Soviet Republics.

Forward-Looking Statements

This press release may contain forward-looking statements relating to expected future events and financial and operating results of the Trust 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 the Trust's prospectus filed with the Canadian securities regulatory authorities. Due to the potential impact of these factors, the Trust 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.

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