High Arctic Energy Services Inc T.HWO

RIG 104 is a Santos rig and no longer contracted

[Resilience2]

It's pretty much 100% off any obligations and won't be used.

Santos required HWO to use their RIGS and only contracted 103.

Our own RIGS are similar and can do any other contracts and only require $ 1 mln - $ 2.5 mln to upgrade depending on customers needs.

This is now a $ 0,42 option on 2 companies that are worth ~ $ 1,50 and $ 170 mln tax shield.

SP ex capital return is $ 0,48/share

 

Assets ex cash are $ 1,42 / share ($ 69,4 mln)

 

Revenue per share is ~ $ 0,78 - this is with the PNG RIG only having started end Q1. 

 

• Achieved oilfield services operating margins as a percent of revenue of 32.3% on revenues of $9.5 million.

Further quarter are more like going to be $ 15 mln.

This pretty much a recession proof option on a potentially high divvy paying cash monster with some undetermined extra upside in Canada. 

This is a great deal still.

R.

[AVALONSHARK]

PNG business is the crown jewel and should be worth atleast $50 million and the Canadian business along with the tax losses at say $20 mil. All in all $2-$2.10 per share is what we should expect as total return. Am I being way off here? 

[impega]

You are on the mark. Still less than book value.

[JonathanJSmith]

Avalon, Your assessments are good however, I opine that the PNG business should be valued much higher than $50MM. When operating at or near full utilization, the cash flow generated is substantive. Looking at the numbers, they received $8.1MM from PNG for drilling which began late in the Q. Assuming $15MM per Q and extrapolating for 4 rigs for the full year, we're still looking at ~$240MM in

[JonathanJSmith]

Yes, to corroborate your point, from MD&A, pg 2 (found on Sedar): ---------------- Drilling Services The Drilling Services segment consists of High Arctic’s drilling services in PNG including the provision of personnel to assist our customer’s drilling related operations within the country. High Arctic has operated in PNG since 2007 and controls the largest fleet of tier-1 heli-portable

[AVALONSHARK]

Valuing PNG business at $100 million which is quite feasible translates to $2 just for the PNG business plus 0.78 cash for plus 25 mil for Canadian business = $ 0.5 per share. Which translates to a total company valuation of $ 3.28 = $ 159 mil How reasonable or far fletched does this sound?

[Tradestay]

From what I have seen, this seems reasonable to me. People that buy now are lucky than long term holders given the big upcoming payout for immediate return, never the less all shareholders will get that payout. 

[AVALONSHARK]

Any other opinions on this? I'm really curious to see if someone can let me know if Im exaggerating the estimates in any way.