High Arctic Energy Services Inc.
TSX : HWO

High Arctic Energy Services Inc.

November 10, 2008 19:00 ET

High Arctic Announces Third Quarter Results

RED DEER, ALBERTA--(Marketwire - Nov. 10, 2008) -

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High Arctic Energy Services Inc. (TSX:HWO) (the "Corporation" or "High Arctic") today announced its results for the third quarter ended September 30, 2008.

Third Quarter Highlights:

- A $12.8 million increase (44%) in revenue to $41.8 million compared to $29.0 million in the quarter ending September 30, 2007.

- A $5.7 million increase (150%) in EBITDA to $8.8 million compared to $3.1 million in the quarter ending September 30, 2007.

- Operating earnings were $4.1 million during the third quarter of 2008; an improvement of $7.0 million as compared to an operating loss of $2.9 million during the same period in 2007.

- The Corporation continues to monetize excess and underutilized assets to reduce its overall leverage. There has been a net debt reduction of $27.6 million from June 6, 2008 to September 30, 2008. The Corporation's senior consolidated leverage ratio at September 30, 2008 was 3.54 to 1 which was within the required level of 4.20 to 1 but higher than the normalized level of 2.75. The Corporation anticipates that it will require more time to reduce its senior consolidated leverage ratio to the levels required by its lending agreement. It is in discussions with its lenders regarding waivers or amendments to allow a reasonable amount of time to continue to reduce its leverage.

- The Corporation had a Canadian equipment utilization rate of 42% for the three month period ended September 30, 2008, compared to 35% for the same period in 2007. These are compared to the Canadian Association of Oilfield Drilling Contractors ("CAODC") rig utilization averages of 46% and 38% for the three month periods ended September 30, 2008 and September 30, 2007, respectively.

Third Quarter Review:

- Revenue from Canadian operations increased by $0.5 million to $12.3 million for the quarter ended September 30, 2008, compared to domestic revenues of $11.8 million for the quarter ended September 30, 2007. The minor increase in revenue can be attributed to slightly higher rig activity during the period.

- International revenue increased by $12.3 million (72%) to $29.5 million for the quarter ended September 30, 2008, compared to $17.2 million for the quarter ended September 30, 2007.

- The increase in international revenue was primarily attributable to the Corporation's growing business activities in Papua New Guinea. Over the past year the Corporation has been awarded additional contracts for drilling, workover and other services which have expanded the operations beyond the one drilling rig operation which was active in the third quarter of 2007.

- Revenue from the Papua New Guinea operations increased by $13.6 million to $24.6 for the quarter ended September 30, 2008, compared to revenues of $11.0 million for the quarter ended September 30, 2007.

- Optimal Pressure Drilling Services, a joint venture with the Schlumberger group, began operations in Mexico on January 1, 2008. The Corporation's 51% share of revenue from the joint venture was $2.0 million in the 3rd quarter of 2008 and $5.1 million on a year-to-date basis. Revenue has been below expectations due to a much slower than expected ramp-up of underbalanced drilling activity in Mexico.

- Revenue from other international areas decreased by $2.4 million to $2.9 million in the quarter ending September 30, 2008 as compared to $5.3 million during the same period in 2007. The decrease is mainly due to the continued efforts to eliminate activities in all non-core areas.

- The Corporation recorded a net loss of $3.2 million ($0.07 per share) in the third quarter of 2008 compared to net loss of $13.4 million ($0.31 per share) during the same period in 2007. On a year-to-date basis, the Corporation has a net loss of $14.7 million ($0.35 per share) in 2008 compared to a net loss of $14.4 million ($0.39 per share) during the same period in 2007. The slightly increased year-to-date loss in 2008 is attributable primarily to higher financing costs of $13.3 million associated with increased debt levels and a tax benefit of $7.9 million recorded in 2007 in respect of expected future tax recoveries in future periods largely offset by greatly improved operating earnings.

The outlook for overall Canadian oilfield business activity has been somewhat downgraded, as the recent declines in oil and gas prices and the state of the capital markets will affect capital spending. The Corporation expects the Canadian oilfield activity levels over the next quarter to be slightly lower than the same period last year. The outlook in Papua New Guinea remains strong as one drilling rig successfully finished its contract during the quarter and a replacement rig is expected to come on stream in the fourth quarter.

"We continue to concentrate on service quality and profitability in our core operating areas and are pleased with the Corporation's performance this quarter," said Jed Wood, President and Chief Executive Officer of the Corporation. "In the upcoming quarters, the Corporation will continue to focus its attention on reducing debt levels through the sale of underutilized assets."

The Financial Statements and Management Discussion and Analysis dated November 10, 2008 can be viewed on SEDAR at www.sedar.com under High Arctic Energy Services Inc.

Non-GAAP Measure

EBITDA (being earnings before the deduction of depreciation, amortization, interest expense and income taxes) 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 the Corporation's Management Discussion and Analysis for the three months ended September 30, 2008 and in the Corporation's Annual Information Form for the year ended December 31, 2007, all 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 in Alberta, British Columbia and the Northwest Territories. International operations are currently active in the Middle East region, Asia and Mexico.

The TSX has not reviewed and does not accept responsibility for the adequacy or accuracy of this news release.

Contact Information

  • High Arctic Energy Services Inc.
    Morley Myden
    Chief Financial Officer
    (403) 340-9825
    Email: morley.myden@haes.ca