high arctic energy services corporate presentation symbol: hwo

High Arctic Energy ServicesCorporate 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.

http://www.sedar.com/

Corporate Focus

To safely provide specialized technical oilfield services to customers operating in challenging environments,

delivering sustainable growth and strong returns for shareholders.

Snubbing & N2 Services

Matting & Equipment Rentals

Drilling Services

Stability & Growth

Locations

Calgary

Grande Prairie

Red Deer

Singapore

Papua New Guinea

Sydney

Canada:Snubbing & Nitrogen Services

& Equipment Rentals

Papua New Guinea:Drilling Services & Equipment Rentals

Papua New Guinea

Papua New Guinea • 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

PNG OSL / Exxon - LNG Project

• 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:

– 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

PNG LNG future development…Elk/Antelope :InterOil, Total, OSL Reserves for major LNG expansion

Highlands – Hides, Juha, Kutubu Exxon / OSL – Supporting current LNG Plant

P’nyang :Exxon/OSL - Reserves for LNG expansion

Forelands :Talisman, Santos, Mitsubishi, Heritage, HorizonPotential source for third LNG expansion

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

Purchase of New Drilling Rigs

• Purchased 2 Heli-portable drilling rigs (rigs #115 & #116) – subject to closing of acquisition

• 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

– Allows for various helicopter options

• Total cost estimated at $52M USD– Rigs $29M– Shipping $6M– Refurbishment & Spare Parts $17M

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

Competitive Drilling LandscapeLand 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

PNG Drilling Customers

• 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

• 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

http://www.oilsearch.com/

http://www.oilsearch.com/

Dura-Base Matting• 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

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 Heli-portable drilling rig camp in January 2013

(under contract with OSL - HWO owned)

• Additional camp is required for the new InterOil contract.

Additional rental equipment owned by HWO;• cranes (ranging from 30 ton to 160 ton)

• rig moving trucks• forklifts• river pumps • light towers

Staging Site Management

With High Arctic

Before High Arctic

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.

PNG Revenue Performance

Rental services has experienced a Cumulative Average Growth Rate

of 34% over the past 4 years.

CAGR

Drilling and related services have experienced moderate steady growth over the past 4 years.

Drilling Revenue ($M)

Rental Revenue ($M)

New rigs can add $30M of revenue per year per rig with full

utilization

PNG Equipment Rental Customers

Canada

What is Snubbing

PIPE

SLIPS

PRESSURE

FRICTION

HYDRAULIC FORCE

BOP

• Snubbing is the use of hydraulic force to push pipe against the snub force created by the well pressure.

• Snubbing permits live operations without killing the well thus avoiding formation damage and bringing the well on stream faster.

• 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.

• More high pressure wells using multi-stage fracturing completion techniques, drive demand for snubbing services.

Jointed Pipe Snubbing

Jointed Pipe and/or Coiled Tubing

Jointed Pipe Snubbing Coiled TubingEither

• Run production tubing

• Drilling & Milling plugs

• Work-overs

• Cleanouts

• Fishing

• Fracturing through coil

• Placing packers & plugsCompetitive Advantage:• Faster tripping speed• Faster rig up times

Competitive Advantage:• 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”)

• Acidizing through coil

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.

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

BC Well Licence Authorizations for 2013

These wells will require snubbing

services

Canadian Snubbing Services

15 Stand Alone & 3 Rig Assist Units

14 Active Crews

2013 Annualized Utilization 36%

Canadian Nitrogen Services9 Low Rate Nitrogen Pumpers

5 Nitrogen Transports

1 High Rate N2 Pumper

Snubbing Support;• Wellbore displacements• Well head pressure testing• Underbalanced milling & drilling

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

Applications:

Canadian Equipment Rentals• 15 K BOP packages;

• Double gate BOP’s• Single gate BOP’s• Blind shear rams• High temp pipe rams

• 10 K BOP packages;• 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.

Canadian Revenue Performance

2009 2010 2011 2012 2013 -

5,000,000

10,000,000

15,000,000

20,000,000

25,000,000

30,000,000

35,000,000

40,000,000

45,000,000

50,000,000

Rentals N2

Snubbing

Canadian Customers

Working with large domestic and multi-national producers provides stability throughout oil and gas pricing cycles

Investment Highlights

Shares outstanding: 50,242,692Share Price (as at May 12, 2014): $5.36Market Cap : $269.3 millionNet Cash*: $36.2 million Enterprise Value: $233.1 millionTrailing 12 Month EBITDA: $44 millionEV / EBITDA Multiple: 5.3x (12 months trailing)

Annual Dividend: $0.18Payout Ratio 25%Yield 4.0%Canadian Tax Losses: ~$90.0 millionAverage Daily Trading Volume: 95,202Insiders’ Ownership (as at May 15, 2014): 66%Expected max net debt post rig acquisition $25 million

* Cash less debt

41% Cyrus Capital14% Former founder11% Directors / Officers

Dividend History

Conservative Payout Ratio

Payout Ratio Approx. 18%



Historical Financial SummaryFinancial 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

Appendix A – Executive ManagementDennis 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, CFOKen 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 InternationalKevin 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.

Appendix A – Executive ManagementDaniel 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 OperationsMr. 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 & SecretaryMs. 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.

Appendix B - Directors

• Michael Binnion, Chairman – President and CEO of Questerre Energy Corporation (QEC-T)

• Daniel Bordessa, Independent– Partner, Cyrus Capital Partners LP and Managing Director, Cyrus Capital Partners Europe

• Thomas Alford, Independent– Former President & CEO of Iroc Energy Services.

• Christopher Warren, Independent – Partner of the law firm Warren Sinclair LLP in Red Deer, AB.

• Simon Batcup, Independent – Independent Businessman. Previous VP, Operations of Sylogist Ltd.

• Steven Vasey, Independent – Independent geophysical consultant.

• Dennis Sykora, Interim CEO– See slide 28.

Contact Info

High Arctic Energy Services Inc.8112 Edgar Industrial Drive

Red Deer, AB Canada T4P 3R2Website: www.haes.ca

Dennis Sykora, CEO Ken Olson, CFOPh: (403) 340-9825 Ph: (403) 340-9825 Email: [email protected] Email: [email protected]

Trading Symbol: HWO - TBanker: HSBC Bank of CanadaAuditors: PriceWaterhouseCoopers LLPLegal: Davis LLP

http://www.haes.ca/

mailto:[email protected]

mailto:[email protected]

high arctic energy services corporate presentation symbol: hwo

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