Q4 2020 High Arctic Energy Services Inc Earnings Call
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This conference is being recorded.
But of course, the homes that don't go as you see.
All the participants your meeting is ready to begin.
Good morning, ladies and gentlemen, and welcome to the high Arctic Energy Services 2020, Q4 results conference call.
I would now like to turn the meeting over to Mike Mcguire. Please go ahead Mr. Mcguire.
Thank you Justin and good morning, everyone and welcome to my average fourth quarter year end conference call.
Today I'll be providing an update on the press release, we issued off the market last night.
And following my remarks, Chris <unk>, Chief Financial Officer will be discussing our financial performance for the period.
Yeah.
After our formal comments, we'll open the call the answer the questions before.
Before we begin though I'd like to remind you that certain information presented today.
Include forward looking statements and.
Such statements reflect high Arctic <unk> current expectations estimates projections and assumptions.
These forward looking statements and not guarantees of future performance and the.
The subject to certain risks, which could cause actual performance and financial results to materially vary from those contemplated in the forward looking statements.
For additional information on these risks please take a look at out of annual information form under the heading risk factors.
Well I believe that most would agree and in 2020 was very trying for the energy industry as the world Coped with the global health pandemic and and all commodity price crosses the route back in March.
High Arctic demonstrated resilience and leadership and mitigating the impacts of and extremely difficult. Yes that was characterized by tremendous oil pricing stability and record low customer demand.
We set ourselves the target to reduce certain cash outflows by at least $25 million over the prior year to 2019 levels and crucially, we exceeded on this with the $35 1 million dollar result, comprising of $18 2 million dollar reduction and capital expenditures.
We're out of 2020 capital spending of just under $5 million compares to 2019 capital spending of just over $23 million.
The necessary downsizing of our workforce, eliminating a layer of executive and senior management by combining our North American and international management teams, reducing overheads and increasing efficiencies resulted in approximately 45% head count reductions at the executive management and support personnel levels.
This decrease the salary and related costs by $8 $6 million and 2021.
The suspension of monthly shareholder dividends and March decreased cash outflows by $8 3 million and general restraint and the use of the are normal course issuer bid into light and the year delivered of $4 $3 million reduction and share buyback expenses, helping to preserve our pre pandemic net cash balance, allowing us to exit the year with 22.
$6 million of positive net cash at bank.
In the fourth quarter, we saw across the board utilization increases in our Canadian production services segment.
We're out of Concord, well servicing fleet utilization rose to 44% and the quarter compared to an industry utilization of 30.
Representing and increased utilization of 16% over third quarter, and 40% above the lows experienced in quarter two.
High Arctic Snubbing fleet utilization increased 71% on the third quarter and of nitrogen and fleet utilization rose 51% on previous quarter.
With the combined without Canadian and ancillary services segment to offset a reduction in non drilling related activity and Papua New Guinea and finished the year on a positive note, adding $1 $2 million of adjusted EBITDA for 2020, and for 2020, adjusted EBITDA of $8 $5 million and an exceptionally difficult economic.
<unk>.
Some key achievements in 2020 I'd like to highlight include the renewal of key customer contracts in Canada, where we were proactive and providing solutions to continue with the provision of reliable and high quality services that were essential to our customers.
The success was built on demonstrating and ongoing ability to create a safe working environment controlling crew movements, maintaining the health and wellbeing of our personnel and the people that they interact with.
And our consultative approach, where we listen to our customers' needs and pass through of achievable cost savings and an environment of low and volatile oil and gas prices.
Another key achievement has been the maintaining of our equipment and the state of readiness, both in Canada, and Papua New Guinea capable of being deployed by our customers is best called upon.
Perhaps the our proudest achievement has been the consolidation of the people and how varied service lines and geographic diverse great geographical locations into one single cohesive and efficient working team.
This team is universally adopted best practices and embraced the quality centric operating model, where we set benchmark that except nothing short of repeatable actions that deliver on customer satisfaction and safety outcomes for all involved.
Insights D and quality of this past year, we continue the total recordable incident free rounding Papua New Guinea, and exited 2020 with for and a half years and $2 4 million man hours of incident free work we.
And we were recognized for the fourth time in the past five years, one of the local International Association of drilling contractors chapter.
We also added to our long L toy LTI free run and Canada with the second lost time incident free.
You know rod.
And we extended the round of total recordable and some for using our cold like well servicing operation out well beyond seven years.
With that I'd like to now pass the call over to Chris to discuss our financial results in more detail.
Thanks, Mike.
And the fourth quarter, we saw the benefit from our continued focus on overhead cost reduction and associated efficiencies net of restructuring costs incurred which help offset the lower activity and both our north American production services, and our Papa New Guinea drilling service segments compared to 2019.
Overall high Arctic generated $1 2 million and adjusted EBITDA during the quarter and $8 5 million year to date.
This compares to $3 6 million and $19 4 million and adjusted EBITDA for the comparable periods in 2019.
Which benefited from stronger North American services, and Papua New Guinea drilling activity.
High Arctic was also eligible for various government subsidies during 2020, which amounted to approximately $6 1 million during the 2020 fiscal year.
The Corporation will continue to monitor and apply for programs for eligibility criteria are met however, the continuity of these programs as well as higher <unk> ability to access these may change and 2021, depending on how criteria of established and are changed.
Revenue and our production services segment decreased 43% to.
And to $13 8 million from $24 3 million and the fourth quarter of 2019.
This decrease was driven by industry wide reduction and hours year over year due to the pandemic and the simultaneous commodity price collapse as well as our decision to idle our U S operations.
The Canadian well service rigs generated $11 $7 million and revenue during the quarter on 2070 operating hours with an average revenue per hour rate of $581 per hour.
Our average fleet of 50 registered Concord service rigs achieved of 44% utilization and the quarter versus the 30% utilized and utilization generated by the Canadian Association of oil well drilling contractors registered rigs in the quarter.
Conversely, our cost reduction initiatives and government.
Canadian employment and wage subsidy.
Subsidies combined to raise operating margins as a percentage of revenue, which increased to 20% and the quarter from 7% and the fourth quarter of 2019.
Canadian Snubbing service operating hours decreased in Q4 of 2020 and year to date, 2020 by 45% and 42% respectively compared compared to the same periods in 2019 for.
The most part gas well drilling with subdued during 2020 and customers deferred discretionary spending on well completions and technically complex well workovers.
Okay.
Due to poor market conditions high Arctic made the decision and the third quarter to idle operations, and North Dakota and Colorado.
During the fourth quarter of 2020, our idle U S operations incurred just under 100000 and suspension related costs compared to revenues of $3 7 million and the corresponding quarter and 2019.
And 2020.
Our production services segment generated $57 8 million and revenue compared to $92 $4 million and 2019 the <unk>.
Production services segment generated $10 1 million and operating margin, which is of 55% increase from the $6 5 million and operating margin generated in 2019.
In 2020, the Canadian well service rigs experienced an average of 43% utilization and 79683 operating hours.
This compares strongly with the 24% utilization utilization generated the generated by the Canadian Association of oil well drilling contractors registered rigs over the same period.
Revenue for our drilling services segment declined to $1 6 million and in the fourth quarter from $13 5 million and the same quarter in 2019.
This decrease was due to the continued cessation of drilling activity activity and Papua New Guinea.
Compared to the third quarter of 2020 revenue.
<unk>, 66% as minor services performed for our customers relating to critical activity was completed and travel restrictions relaxed and.
Their own personnel to finally travel into and within the Papua New Guinea.
During the quarter.
Rigs one of three 100 for $1 15, and $1 16, all remained cold stacked, whereas during the fourth quarter of 2019 rig 103 was operating and rig 100 for was partially operational.
And 2020 of the drilling services segment generated 25, 4 million and revenue and $6 6 million and operating margin.
Compared to $71 5 million and revenue and $15 1 million and operating margin in 2019.
During 2020 the corporation operated rig 103 for part of the first quarter, whereas during 2019 rig 103 operated throughout the year and rig 100 for operated throughout most of 2019.
Revenues generated in 2020 included the provision of manpower and services to support essential customer operations and.
Impacted by travel restrictions on foreign workers and contractors due to COVID-19.
Revenue for the ancillary services segment declined to $1 $7 million and the quarter from $5 $6 million and the fourth quarter of 2019.
This decline was largely driven by significant reduction.
And well site work activity and the quarter, and particularly and well site associated rentals, and Papua New Guinea, including the contraction in the Worksite matting needs.
Operating margin as a percentage of revenue declined to 47% from 52% and the fourth quarter of 2019.
And 2020 of the ancillary services segment generated $9 4 million and revenue and $4 6 million and operating margin versus $24 6 million and $13 6 million, respectively and 2019.
General and administrative costs decreased to $2 7 million and the quarter versus $3 $7 million and the fourth quarter of 2019 the.
Overall decrease of $1 million and general and administrative costs for the quarter compared to the fourth quarter of 2019 is mainly due to reduced compensation costs. As a result of reduced the administration administrative personnel and the organization.
During the quarter compared to Q4 2019 gross personnel costs decreased by $1 1 million.
Canadian employment wage subsidy reduced general and administrative costs by approximately 100000 and various other general and admin and categories decreased by also 100000, and this was offset by an incremental 300000 and related to restructuring costs.
2020 general and administrative costs decreased by $3 million over the prior year gross personnel costs decreased.
By $3 2 million Canadian and employment wage subsidy.
Reduced general and administrative costs by 800000, offset by an incremental 800000 of restructuring costs and increased legal costs of approximately 200000 year over year, particularly related to the two of 2020 Covid related annual general meeting requirements.
As reflected in the reduced and.
The reduction of in General and administration costs high Arctic remains committed to ensuring that these costs are managed and balanced with the overall strategic plan for the corporation.
As a result of increased depreciation adjusted.
Adjusted net loss increased to 11 5 million or <unk> 23 per share from $2 seven from of $2 $7 million loss of <unk> <unk> per share and the fourth quarter of 2019.
Decreased income tax expense was mainly associated with a decrease and withholding taxes related to intercompany dividends as well as an increase in deferred income tax recoveries.
Depreciation expense on property plant and equipment and right of use of assets totaled $12 5 million and Q4, 2020, and $35 5 million in the full year 2020, compared to $7 3 million and $28 3 million during Q4, 2019 and full year 2019, respectively.
Increases are due to the corporation's review of its depreciation policy, specifically as it related to salvage value estimates.
As a result of this exercise incremental depreciation was recorded the best reflect management's estimates as it relates to higher depreciation policy.
High Arctic had a $25 9 million net loss for the year of 2020 or 52 per share compared to an $8 $8 million net loss of our 18th <unk> 18 per share and 2019.
We continue to maintain a strong balance sheet and exited the quarter with $32 6 million and cash and $10 million drawn on our debt facilities for a net cash balance of $22 6 million.
We also reinforced our liquidity with the extension of our 45 million bank loan facility through August and.
2023, unfavorable terms and achieved cash flow outflow reductions of $35 1 million against the $25 million target when compared to 2000 22019 levels.
With that let me turn things back over to Mike.
Thank you Chris.
Building all the things that we have achieved last year, we enter 2021 prime to take advantage of improved market conditions, we have of competent settled and cohesive team using and leaner and more efficient management systems.
We opened the year with nearly $45 million and working capital, including $22 6 million net cash at bank and access to our recently renewed $45 million revolving credit facility.
We have not compromised on frontline worker compensation training supervision of field <unk> support and this is aimed at high Arctic being from positioned for and increasing activity. We are experienced well servicing personnel will become a constraining factor.
Stabilizing commodity prices of seen oil and gas companies undertaking more well site work during the fourth quarter and into the start of 2021.
Which combined with work from the government's well abandonment programs has improved the utilization of assets and the corporation's production services and ancillary services segments.
The Sochi and a partnership has secured its first projects for the long term customer of high optics and has added more work sites and the beginning of 2021.
The extreme cold experienced across North America and February you had the short term effect of shutting down our operations for several days, but it has Conversely also resulted in a meaningful drawdown of oil and gas storage through extreme energy demand and shut in production.
We remain optimistic for continued increase in activity for all of our Canadian service lines, and 2021, driven and the near term by buoyant commodity prices restoration of shutting customer production and the well abandonment stimulus programs.
Oil and gas activity and investments in the U S of recently been increasing and we continue to watch this market and look for sustainable opportunities to deploy our idled operations in Colorado and North Dakota.
We currently view of these markets is too unstable to cost effectively reactivate at this time.
In Papua New Guinea, and recent developments are very encouraging for the progression of the total Energy's led Papua LNG project.
The Papua New Guinea Parliament enacted into legislation and the key elements of the Papua LNG gas agreement.
Further positive developments include the signing of a fiscal stability agreement on February the noise and the renewal of total energies and the partners retention license over the large elk antelope gas field that will feed the LNG plant.
The corporation's drilling services remain suspended.
However, we're still providing skilled personnel and rental equipment to assist our customers and their essential operations.
We maintained ongoing dialogue with our major customers and P&G towards planning and effective return to work amid ongoing travel constraints and the second Covid wife.
Leveraging off of our demonstrated recent and long term capacity as of Papua New Guinea specialist contract out.
That concludes my comments and.
I'll now turn the conference over to just Dana who will open the line for questions.
Hello, Justin and are you there.
Okay.
Yes.
Hello.
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Apologies, we seem to be suffering of technical difficult here at the moment.
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Hi, This is Steve Boston.
Hi, Mike and Chris just had a quick one for.
Few quick questions for.
For more.
And for general questions as opposed to what happened and the last quarter.
Would you be able to talk with the I guess since since high Arctic purchased.
Concord, and we really haven't been in AR and AP.
And the healthy.
Energy environment, and Canada can you just can you talk about what type of and just generally what type of operating and financial metrics. You would expect from the division in the healthy Canadian energy environment and things like utilization revenue potential.
And what type of margins and healthy environment, you would look for from that division.
Yes, Thanks, Steve.
Yeah, Youre right and our acquisition of Concord, well servicing was in 2016 and with the.
The western Canadian industry has been and a longer downturn dating back from 2015 and.
And we did start to see some increased utilization and some green shoots at the beginning of 2020.
And we had a lot of optimism for the have the.
Concord unit was going to perform through the year. Unfortunately.
Macro events without sort of controls managed to a dent that somewhat but I think based on the performance that we did across the year with the amount of 43% utilization it would not be unreasonable to state that you know the utilization levels of maybe 50% of more higher than that.
And would be expected in a buoyant market.
And of course.
And as Bina sustained downturns of pricing has been suppressed.
And we would expect to see pricing lifting and potentially in the near future driven by both the tightening and the market from lack of available and ready to work of equipment and we think we're front foot there and also availability of skilled and experienced personnel, which we also believe we will front footed on.
So we see of tightening coming what those margins were able to increase too is unclear at this point, but given that we would have.
A front footed position, we would expect to be the.
Well placed to see how margins lift and by a meaningful amount.
And it sounds good thank you and.
And I understand the air and with such high we're in.
And such a questionable and an uncertain environment.
And I'm not asking of at all for any type of forecast could you maybe talk about historically.
Looking for so as opposed to the future, but looking back to the to the past the win.
And the Concorde within a healthy and vibrant their margins were.
Like I'm sure you know when the company was looking at.
The Concorde the had a sense of what they thought.
I thought the kind of at the end of the division could earn in and of normalized type environment.
I think it would be fair to say that.
At the time of acquisition, we definitely had a view that that we can do more with Concord, well servicing and the proven through the difficult environment of the last five years and particularly this year.
That said, nor the Chris nor I will revolve and the acquisition, we basically picked up the management of the business last year.
Don't have the numbers to hand, and Couldnt speculate on what the expectations were at the time of acquisition.
Understood. Thanks.
And if I could shift to P&G can you just and you guys discussed this a bit but what is the current status of it sounded as though there was some lifting of the restrictions in terms of internal travel what what is the current status regarding travel to the country for contractors and.
And personnel.
Yes sure.
These things are always a little more complicated and you can some of and a few seconds about the.
The current circumstances and P&G as the borders are open to travel, but people traveling and internationally must have approval of the controller for of the <unk>.
Covid emergency. So it is we the approval that you can enter into the country. There is of a mandatory self isolation on arrival.
And there are some controls.
Provincially.
In areas, where COVID-19 and started the second wife.
The second wife kicked off probably only about 7% to 10 days ago.
And it easing in some key locations in the country.
And we uncertain as to what the government may do in response to the second wife.
We did see that they close the borders both externally and internally back in April last year and the that ran through until September October.
And there is a possibility they may need to go back that way to control of the second wife before they can open up travel further than one of these at the moment.
The relaxed.
The travel conditions in the.
Final quarter of last year, you did see that some of our personnel, who would state and country and some of our local citizen workforce, who would stayed within.
Provinces of work rather than returning to their home.
We had guys who were finally released after seven months of a more of continuous work engagement as the our customers were able to start bringing some of the people backing it's uncertain at the moment, if there'll be changes in net.
And in the near term, but with the rollout of the vaccines that we're seeing in the worldwide scale the commitment of local and regional governments to financially support and financially and logistically support Papua New Guinea, and other Pacific Island Nations with the rollout of vaccines, we are optimistic that in.
The mid to longer term those travel restrictions will.
We will relax to the point, where we will be able to deploy reliably deploy drilling services again.
Great. Thank you and that's that's very helpful and and would you say that the and obviously its a lot going on at <unk>.
Covid and then you have the energy and the.
Energy pricing, what would you say that the that the it's the suspension of travel that it is the major cause currently.
And your suspension of drilling is it something that why not why not lift again, given if the market work and if LNG and natural gas and Asia work for continuous strength would you expect there to be a significant uptick and the nearer term once the once that travel was permitted or are there other issues and.
Well I think the best guide I can take for that is what we'll be doing and March last year. So we love and March last year, we were actively drilling on one well. So we were actively moving a rig to drill another well saw and and we were planning on the <unk> for a third location and and the Spice of a very short period in March.
Went to resulted and suspension of drilling and mid well while drilling the well we were on and the suspension of movement to and further activity for wells that were planned to be commence soon and.
And that was driven by travel restrictions and the borders were announced that theyre going to be closed we have a very clear understanding that the travel would be would be impossible and that.
Keeping those activities and keeping drilling activities of life would not be would not be feasible.
So I think when we look back at that there is a good expectation that we were strong expectation we would have that once the travel restrictions removed the return too.
Planned drilling activities would also return.
Thanks, that's really that's a great way of looking at it and and more generally what's the drilling or I guess looking forward with your customers.
Generally need that drilling in order to fulfill their delivery commitments or or is the drilling more of for future growth, which obviously is something that they are all working on.
And.
Or is it necessary sort of in the nearer term in terms of just fulfilling the commitments they've already made on that and planned.
Yeah. Good question good question Steve.
And in reflecting upon the the drilling activities, we do with the for Hilli rigs and <unk>.
We do a smorgasbord of of our drilling activity. Some of it is production maintenance some of it is exploration and some of it is step out and the prices also in.
In general the these drilling needs of our very much needed on the long term basis short term basis, I don't have figures to hand, but I know the their customers do publish their production and.
Sure that if you had to look at and some of our customers of Papua New Guinea and produces quarterly reporting and annual reporting you'd be able to draw a line as to what the impact of non drilling is having there.
And it makes sense, thank you and.
And just one last quick question for Chris.
And just sort of a technical question in terms of.
Guys had mentioned in your reports over the years that there are and that there are tax consequences of repatriating cash from P&G and just want.
And what the if and if maybe it's not a simple answer but I was wondering if there are sort of a tax rate or some way that we can think about that.
On on withdrawing of cash is there a simple way to the sort of think of that through.
Yeah. That's a great question, yeah, it's a very straightforward and repatriation of the funds would be dividend it out of Papua New Guinea into Canada, and I believe the current rates right now are approximately 15% on dividends flowing out of Papua New Guinea to Canada.
Great.
And in Canada, you guys aren't the tax loss position and so there would be no no Canadian tax consequences of that.
That would be very little impact, yes, that's a good assumption.
Okay. Thank you very much and I appreciate it.
Okay.
Thank you.
And we will take the next question. Please state your full name and the go ahead. Your line is now open.
And Patrick Tang here with <unk> capital markets.
Few questions here so.
And just in regards to the depreciation study that was conducted and should we expect depreciation to be elevated going forward or is this more of a onetime catch up charge.
Great question and Patrick It was really a onetime catch up we've had the opportunity as the new management team to go through our fixed assets, especially in Canada with the with the acquisition that was made and.
And that was referenced earlier and the call and.
It is of one one time deal at this point, but we will constantly be looking at our asset base and our policies, but yes. The one time.
Okay and.
First of all of these because I might have missed something but should we expect the government wage subsidy is to be down materially from Q4 levels into the the new year here.
And to the new year.
That they will be we see them coming rolling off probably late in Q1, they are coming down somewhat as the rules continually change and the metrics and we compare year over year 2021 out of 2020 that.
That we had the significant downturn in Q.
Two specifically in 2020 that we hoped to be above those levels that yes, those those numbers should come down.
Okay. Thank you and you might have already touched on this but just looking for a little bit.
Of more of a substantive outlook so relative to three months ago. What is your outlook on well servicing look like I mean in particular is the.
And well abandonment program accelerated in line with your previous thinking or the outpacing that are falling behind.
Are you seeing that right now.
Yeah, a couple of great questions there Patrick.
I think I'll address just generally the well servicing activity.
Our outlook years into the 2021 is good.
And based on the the quarter on quarter growth and utilization.
And we.
For the 16% increase and and the number of hours billable hours and we booked Q4 over Q3, we're anticipating a similar result can be coming into Q1 and and we believe the.
Back to the usual seasonal downturn and Q2.
We're feeling good about the sum.
So you read as well talking and then moving to the question on the on the.
Well abandonments.
So we we were the.
The frustrated with the pace of the award of turning of turning the stimulus program into actual boots on the ground work.
Last year.
Some of <unk>, we did start to see and increasing number of approvals coming through and the fourth quarter.
Well over 100 approved wells at the moment that we've got.
<unk> actively working on we have applications in for in excess of thousands of more wells and we actually have a high degree of confidence of of a substantive.
However of those thousands of wells being awarded to us.
Awesome.
Last question for me.
Might be a little hard to say, but.
From my understanding and correct me, if I'm wrong, the PNG LNG project for virus Exxon to negotiate a deal with the government to go ahead Oliver.
The number is there any possibility of high Arctic taking part in the pre development work in before that happens, especially as the total how the gas agreement in place and separately.
And the region and is there any demand for rig 102 or is that still kind of parked right now.
Okay. So a couple of questions. There so let me let.
All of our own address them in order.
The first up the <unk>.
And G LNG, we need to be cleared and PNG, LNG and Papua LNG and two distinctly separate projects. However, the Papua LNG project contemplates the expansion of the PNG LNG facility to accommodate.
Culminate gets processing trains.
Slightly different participants in the two joint ventures, although there are common participants in Exxon Mobil is named and and oil search.
And of course, the state of the government of pumping and Guinea.
The total project is.
<unk> is expected to pay.
Our seed.
Just as recently as February when the.
The.
For the month.
The fiscal the fiscal stability agreement was signed the.
<unk> total and its partners and the government.
Total CEO Patrick two yon told reporters the ease of project that has the priority for the group. So we're expecting that project to progress independent of anything that happens with pump the PNG LNG.
Pausing, there and then moving back to PNG LNG.
Thank you.
And your questions based a lot on the PNG.
PNG LNG has also been contemplating and expansion and that would be fed from gas from a different field.
That's our and by the PNG LNG partners that agreement and that gas agreement has not been executed yet so we don't.
Don't have any.
Visibility on a timeline associated with that expansion, but notwithstanding that we still very confident about the doubling of capacity and P of of LNG capacity of the P&G through the Papua LNG project does that answered that part of your question Patrick.
Yeah.
Hard to keep all of the statements such similar and project names.
Yeah, Yeah, I think that it's the thing that I'm constantly explaining because they ask the similarly named.
Okay, and just the last part there with rig and one or two and is there any any updates on how demand is looking for that.
Yeah. So we were we were in the midst of of.
And of and upgrade and refurbishment of rig 102, when the when the when the crisis hit in March and we suspended that work.
We have continued discussion with our customers on on the work that we were that we were planning to deploy that unit to do.
And those.
<unk> of knock on Hawaii, but they may be changing and more of being modified and it may be.
They may need to accommodate some some changes and their customers.
The outlook and scope so at the moment we are not.
Not.
Finishing that refurbishment work, but we very much heavily and are right at the complete.
The <unk> head of deployment and when and when we're able to secure and operation for it.
Alright, that's it for me thanks for taking my questions.
Thanks, Patrick.
Thank you.
And once again, please press star one if you have a question.
And we will take the next question. Please thank.
My name and go ahead.
Does this mean.
I'm not sure.
And as Tim Marcellus ATB hypermarkets.
The.
Hello.
Hello, Timothy from here Okay.
I'm not sure it doesn't tell you and it's the airline that built in and just the.
The lines open.
You for.
Okay.
Would you say I guess I had a question of follow up on PNG here.
And following upon on Patrick's question, and Youre sort of explanation around the two projects.
If you had copper LNG and the.
PNG LNG expansion go ahead, and simultaneously how would that level of drilling.
Compare to the initial build out of the LNG capacity.
The <unk> and Papua New Guinea.
Yes, Great question, Tim and certainly if we were looking at a parallel expansion project and similar timelines and then drilling would be occurring.
Two distinctly different locations in PNG, and we would expect to see.
The proportional amount of of drilling activity drilling work in that time period associated with the to.
Be my expectation that is.
If both projects would proceed and hypothetically to proceed together.
And on the same timeline that with the rigs we have and country, both owned and leased and we would have the capacity to be able to satisfy both projects at the same time.
We get the excess capacity or would that use of Keith.
And could get them all working at launch.
I would think that would get.
And I think that would get us to pretty much all of them being being active and one capacity or another.
Okay, and then I guess, a follow up to the previous line of question from Steven.
Just around the.
And the PNG, where you guys haven't built and it has sort of cold.
Cold stacked for a for.
Few months now.
And.
And a lot of that work historically and or my understanding of it anyway is that it was production maintenance and some various size and seismically active.
The area do you think theres a backlog of work once you'll be able to get back into the field.
Yes, I think Tim it would be reasonable to expect.
Given there's been no no activity for and you know that there will be of backlog that we need to be addressed.
When we're able to start executing on that is the thing that is still very difficult to see.
Okay.
Switching gears here to the U S.
What are you guys and you can see in terms of the Kpis too.
Besides the either permanently exit that business or to reactivate.
Yeah.
Yes, another great question.
For the thing that we're looking for at the moment is cash.
Customers that.
We are happy to go work for and and in that regard and we have some relations from the customer base that we were working for back in the early part of last year.
Those customers returning to work with the with reasonable growth programs that would be and we would then have confidence to talk with our work force and.
And to reactivate our rigs.
As a reminder, we will providing predominantly Canadian crews to operate our equipment in the U S. When we were operating before so we would need to have some some confidence with regards to the travel back and forth across the border which has had.
Some issues and problems for some travelers and less so for others, but we.
We would need to see that there would be a sustainable amount of work that would be worth is investing in the effort as well as the cost to get up and running.
So is that and.
The incurred 65.
The barrel, it's about where it was last year.
Is the issue that the the customers arent working yet or that you can't get the crews down there or a combination.
Yeah, So what we're seeing and the moment, even here in Canada res or is that the.
The the broader customer base, even with the.
The the buoyant commodity prices are only modestly increasing the capital spend.
So the amount of actual work being conducted is while it's better than where it was it's not at levels that we saw just over a year ago with oil prices at a similar a similar high.
We're seeing the same thing happening.
Happening and the U S and in the areas, where we worked cash.
Some of that probably being a little bit more reserved with regards to deployment of additional drilling returned to well servicing and bringing wells back online that the have shut in production at the moment.
Compared to some of the other basins in the U S. So we watch.
<unk>, particularly the the DJ and the Bakken and we're looking for indicators, there with regards to upticks and production and increases in drilling activities.
How much of that work before you shut it operations and production management and how much of the sort of D&C or oriented.
I would say the the majority of the work we were doing was production maintenance with them in the Bakken and in the DJ was more completions related.
Okay.
And then last question for you.
Just curious where youre my internet and in terms of capital out of capital allocation.
Patient and balance sheet is clean and.
The purchase program sort of slowed.
And.
And so I guess whats the priority through 2021 EPC activity starts to rebound.
Where's the Where's the marginal dollar bill.
Yeah and a fan.
Ask the question and glad you asked.
The.
So in the last quarter of last year, having having looked at several.
<unk> acquisition opportunities and not progressing with the own any we turned our attention more to organic growth and we have got a large pipeline of potential and and very interesting and attractive work too.
To work towards fall too far out from speculating on any success rates and things at this point, but.
So that's kind of taken and the front of mind at the moment.
But we're also conscious that in the last couple of months, we've seen a lot more.
M&A activity amongst our customer base and the in the E&P companies.
<unk> and the we feel there is a natural progression here towards more consolidation and the energy services that will fall off and and.
And we're keeping our heads up and looking for opportunities that will fit our profile strategic.
And strategically align with the our objectives.
And provide a accretive.
Cash flow and.
And and potentially bring us into new markets, but within the service lines that we specialize in.
Okay.
So youre looking within Canada, primarily the perhaps new markets outside of Canada is that sort of I think of it.
Yes.
I think it would be fair to think the we've got our eyes open where we are today and where are we were in Canada. The U S, albeit idled and Papua New Guinea, and Australasia and.
And in those areas are very familiar with the service lines of what we provide drilling well servicing snubbing nitrogen other energy services lines.
And.
Our specialty so we got a heads up for for opportunities in those spaces and in those markets.
Okay great.
It for me thanks, guys.
Thanks, Tim.
Thank you.
And once again, please press star one at this time, if you have a question.
There are no further questions at this time.
Well and then I would just like to wrap up by saying. Thank you to everybody who participated in the call today and for the good quality questions. We received thank you adjusting of for being our operator and handling the call and.
That concludes the high Arctic Energy services, and Q4 conference call.
Thank you the <unk>.
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