RE:CommentaryJonathanJSmith wrote: According 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
I had a chat with the CFO today and he said if they get rigs 103 & 104 up and running they are looking at 50-60 million USD a year for the two rigs which is roughly 70-80 million CAD
If you go back and look at financials from years past it kind of aligns with what he told me. The MD&A from 2013 had this statement
"Revenue for the PNG operations for the year ended December 31, 2013 increased by 13% to $111.9 million (2012 - $99.0) as a result of having two active drillings rigs operating more frequently in 2013 as compared to 2012. Higher matting and equipment rental revenues (2013 - $24.9 million; 2012 - $19.1million) due to new equipment placed in service during 2012 and 2013 also contributed to the increase in revenues."
So with two rigs in service they pulled in 86 million in 2013 if you subtract out the matting and equipment rental services.
The CFO mentioned that with the sector downturn and with Covid a lot of competition that used to be in PNG is no longer there. HWO kept boots on the ground throughout the entire time. I'm assuming if PNG gets busy and they hypothetically landed contracts for all 5 rigs it would be looking like upwards of 200 million in annual revenue