CommentaryAccording to their 10Q:
---- Three-Months Period Ended June 30, 2022 Summary:
- High Arctic continues to see improved activity levels in PNG, driving increases in Drilling Services and Ancillary Service revenues to $6,101 and $4,205, respectively (Q2-2021 revenues: $893 and $2,572, respectively).
- PNG activity also drove consolidated oilfield services operating margin as a percentage of revenue up to 23.1% from 20.0% in Q2-2021. Improved profitability is partially offset by the removal of Canadian emergency wage subsidies (“CEWS”) in 2022 (Q2-2021 $848 of CEWS received).
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So, they made around $10.3MM this Q on one rig (incl. ancillary), a rig that is still being prepped for drilling. Extrapolating this number for when the rig is actually drilling is closer to $15-$20MM per Q. Using $15MM as a baseline, for one rig we get around $60MM/yr. Assuming all 4 drilling rigs come into operation, there's around $240MM/yr in annual revenues. As per another 10-Q comment:
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All the rigs under High Arctic’s care in PNG have been maintained during the Covid-19 induced drilling suspension and are in good preservation for quick redeployment into service. These include our principal customer’s other heli-portable Drilling Rig 104, High Arctic’s own versatile heli-portable Drilling Rigs 115 & 116 and our high-capacity heli-portable hydraulic workover unit Rig 102. High Arctic is focused on working with customers in PNG to schedule the return to work for all of these rigs.
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If rig 102 (HWO) goes into service, we're looking at additional revs - I'm guessing between $20-50MM/yr. Consequently, should all 5 rigs be operational, we might peak at $260 - $300MM in annual revenues. With a 20%+ margin, it's safe to say that HWO will be making reasonable free cash flow, notwithstanding capex requirements.
Today's valuation still surprises me. I guess others are in a wait and see mode. I shall continue to accumulate. :)
Cheers and good luck,
JJ