High Arctic Energy Services (HWO) Q2 2024 earnings summary

Executive summary

• Completed major corporate reorganization, spinning out the PNG business into SpinCo (High Arctic Overseas Holdings Corp.), and returning CAD 0.76 per share or $37.8 million to shareholders as capital return.

• Shareholders now hold shares in both the Canadian-focused entity and SpinCo, each with 12,448,166 shares outstanding.

• Both entities begin independent operations with strong capital, positive working capital, and no long-term debt.

• PNG business classified as discontinued operations in Q2 2024 financials; Canadian rentals business is now the core continuing operation.

Financial highlights

• Q2 2024 revenue from continuing operations (Canadian rentals) was CAD 2.5 million, up 281% year-over-year, driven by the Delta acquisition.

• Operating margins for Q2 2024 were in the high 40% range, with oilfield services margin at 47.5%.

• Adjusted EBITDA from continuing operations was CAD 200,000 for Q2 and CAD 300,000 year-to-date, after excluding CAD 750,000 in non-recurring G&A costs.

• Net loss from continuing operations was $1.71 million in Q2 2024.

• PNG business revenue declined to CAD 10.4 million in Q2 2024 from CAD 16.6 million in Q2 2023 due to cessation of drilling operations.

Outlook and guidance

• Canadian rental business expected to perform strongly for the remainder of 2024, leveraging expanded asset base and Delta integration.

• Anticipates meaningful G&A reductions in the second half of 2024 as the Canadian business right-sizes administrative support post-reorganization.

• SpinCo (PNG business) plans to maintain strong cash reserves for potential restart of drilling and is open to M&A in PNG and nearby regions.

• PNG business to remain idle for drilling through year-end, with ancillary services providing cash flow; major project decisions expected in 2025.