High Arctic Energy Services Inc Q1 2023 Earnings Call
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This conference is being recorded so it goes to the homes that don't have as you see.
All participants please standby your conference is now ready to begin.
Yeah.
Good afternoon, ladies and gentlemen, and welcome to the high Arctic Energy services 'twenty 'twenty Q1 results conference call.
I would now like to turn the meeting over to high Arctic Chief Executive Officer, Mike Mcguire.
Please go ahead Mr Mcguire.
Thank you Paul and good afternoon welcome.
Welcome to high Opex first.
The conference call.
Today I'll be providing.
An update on the press release, we issued yesterday.
<unk>.
Okay.
I'll hand, the call over to our chief.
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Lance.
We will be discussing our financial performance for the first quarter of 2023.
As usual.
Formal comments, we will open the call to answer any.
Questions that you might have.
Before we begin though I'd like to remind you that certain information presented today may include forward looking statements.
Such statements reflect high Arctic.
Expectations estimates projections and assumptions.
These forward looking statements are not guarantees of future performance.
And they are subject to certain risks, which could cause actual performance and financial results to vary materially from those contemplated in the forward looking statements.
For additional information on these risks please take a look at our management's discussion and analysis.
And the 2022 annual information form.
Which are available on our website.
Oh.
Look under the heading risk factors.
Following the collection last quarter, if the final $28 million payment associated with the sale of our Canadian well servicing business, we exited Q1 with an over capitalized balance sheet and high Arctic placed out of strategic crossroads.
Having liquidated.
We're performing well servicing business the company remains focused on the positive opportunities in Papua New Guinea.
Reinvestment in Canada remains competitive.
Expertise and we believe that some other Canadian sector service sector consolidation is needed to balance supply with customer demand customer demand over the business cycle.
But yesterday, the corporation announced an intention to make at $38.2 million of cash return of capital to shareholders.
Intention to reorganize the legal entity structure.
The recommendation to reorganize is expected to include the following elements.
One <unk>.
Spin off of the international business to shareholders as a private company.
Hmm, maintaining the Canadian publicly listed company focused on growing the Canadian business and utilizing the available 130 million dollar non capital tax loss carryforwards.
And three right sizing the general and administrative infrastructure to align with the new corporate structure.
The high Arctic Board of directors intends to recommend the reorganization of the corporation at a special meeting of the shareholders to be held before the end of September 2023.
Turning to operations.
During the first quarter rig 103 was placed on through the contract operational REIT structure and commenced drilling operations during March.
Drilling of the first well has now been completed and we are moving to the next location.
High Arctic anticipates rig 103 will operate consistently through the term of the contract which runs through to July 2025.
As well as the return to full drilling operations with rig 103, we have steadily increased deployment of rental assets month on month through the quarter.
While the deferral of other projects pushed the redeployment of 115 out from this year.
There is a growing catalog of projects under discussion for potential redeployment in 2024 and beyond.
Our optimism for the future for future drilling in PNG is underpinned by the advancement of the total energy led Papua LNG project.
Which announced last week.
Upstream facilities feed contract award.
<unk> the progress towards a final investment decision expected later this year.
Project is expected to be followed by the pin young gas field development in the western provinces of PNG, which is anticipated to result in the addition of further gas liquefaction capacity in the World class PNG LNG export facility.
State owned cream will petroleum is advancing appraisal of all the gas discoveries in PNG and have recently stated their desire to contribute to growing domestic energy needs and additional LNG export processing facilities.
These LNG projects and other large scale mining and infrastructure projects moving through the pipeline.
Will require tens of thousands of new workers and more skilled and supervisory personnel that do not exist in PNG today.
Through pimm's.
PNG industry manpower solutions.
We've added the provision of recognized safety training competency verification and equipment licensing services.
We have long provided these training and competency solutions in house.
It is also taps into a large pool of talent to provide manpower skilled and semiskilled labor trades qualified personnel and professionals in PNG.
We are excited to be playing a significant role in preparing PNG citizens to be job ready.
In Canada, our operations were marginally impacted by severe cold weather events. However, delivered a result, consistent with our expectations.
Our pressure control focused rentals is fielding inquiries from an increasingly broad range of customers and we look we took up it to mystic decision to invest in additional blowout prevent us to augment our rental offerings.
Team snubbing as Canada's largest snubbing provider and we have a 42% equity stake in team.
You have almost tripled their active Canadian snubbing activity since the transaction with high Arctic last July .
They have used their dominant position coupled with great customer relations to deliver both market share growth and increased pricing.
Team has a 50% interest in an international partnership marketed under the name team Snubbing International.
This partnership commenced their first services this week under our contract to a large U S independent in Alaska.
We're two snubbing units have now being domiciled.
I would now like to pass the call over to Lance to discuss key financial highlights from the quarter in more detail.
And good afternoon to those call joining me on the call today.
Looking at our first quarter results on a consolidated basis high Arctic generated revenues of $9 5 million.
Third a net loss of $625000 or a loss of <unk> <unk> per share.
Thank you you mentioned the commencement of the full drilling operations of customer owned rigs 103 occurred in March and this activity will have a significant impact on revenues and earnings during Q2 and for the remainder of 2000.
During the first quarter high Arctic mobilized a significant amount of equipment and personnel to support this drilling campaign.
Arthur also provided materials handling equipment rental equipment, including 100 man camp and a large quantity of well site to support ongoing field activities with our two main customers.
Oil field service operating margins were higher in Q1, 2000, 2032, 3% compared to 18, 5% in Q1 of 2022.
The increase is primarily related.
Related to the corporation's shift to higher margin.
Businesses in Canada after the sales transactions in Q3 2022.
What was the startup of rig 103 operations during the quarter and an increase in the supply of technical and operational manpower services to customers in PNG.
G&A costs were $2 1 million in Q1 lower than the $2 4 million experienced in the previous quarter.
It's still.
Relatively high in the quarter at 21, 7% of revenue, which we expect will decrease and trend lower as we move throughout 2023 as higher revenues realized from our operations in PNG.
And we will continue to evaluate G&A cost and right size the support to align with the expected operations in both Canada and Pn.
Adjusted EBITDA was $1 $3 million in Q1 or 10% of revenue.
<unk> to $2 9 million or 10% of revenue in Q1.
The largest revenue contributed to high Arctic during the quarter of course was our drilling segment drilling services activity accounted for $6 $3 million of revenue.
Compared to $9 6 million in Q1 of 2022 rig 115%.
Q1, 'twenty three 'twenty three operating margins were 19% in line with the 21, 9%.
Our ancillary services segment spreads across both PNG in Canada.
It used to be our highest margin operating margin generator.
58% operating margin on $3 $2 million revenues in Q1, compared to 63% margin on $4 $7 million of revenue.
Q1 of 2022.
That's that Q1 margins and the activity levels that delivered these this highly profitable segment to continue throughout the remainder of 2023.
During the quarter capital expenditures were $400000 and focus mainly on the growth in our pressure control rentals equipment in Canada.
We expect to continue with modest capital spending in 2020, we'll.
Mostly directed at maintaining and growing our rental fleet in both Canada and PNG.
We ended the quarter with $46 $7 million of cash on hand, with approximately $35 million invested in secure interest bearing short term investments.
We generated $417000 during the quarter.
Interest income partially funded our monthly half cents a share dividend.
We evaluate the best use of the excess funds following receipt of the $28 million.
Final payments cash payment for the Concord, well servicing sale that took place in January .
Working capital position remained unchanged during the quarter and it sat around $60 million at March 31.
The only source of debt as mortgage financing of $4 2 million on our land and buildings.
I'll pass it back over to Mike.
Thank you Lance.
I'm excited about the reorganization of the corporation, starting with the tax efficient return of cash to shareholders.
The proposed spin off of the Papua New Guinea and business will allow senior management to concentrate where we have had the most success in the past.
The remaining publicly listed company with Canadian assets in tax pools creates an attractive vehicle for future growth in transactions now.
Our PNG business is being consistently undervalued by the public market and we believe that the current market conditions make it appropriate to take steps to unlock value.
We intend to put the recommendation to shareholder vote before the end of September .
I believe our customers and employees in both PNG and Canada will appreciate and benefit from a locally managed business.
I'll now turn the conference back over to poll the operator.
Who will open the line for questions.
Thank you, yes, we will now take questions from the telephone lines.
And if you have a question or you're using a speaker phone. Please lift your handset before making a selection.
If you have a question. Please press star one on your devices keypad.
What prompted by the system. Please clearly state your name to register your questions.
You make absolutely a question at any time by pressing star two.
Yeah.
Oh.
Please press star one at this time, if you have a question there will be a brief pause while the participants register.
We thank you for your patience.
We now have a first question.
The first question is from.
Josef Schachter. Please go ahead your line is open.
Thank you very much.
Mike and.
Thanks for taking my questions my to assume that.
If this is approved with the shareholder meeting in September that will going to be getting a number one a very significant dividend you know 78 with.
Interests that may be more and then are we going to get two pieces a public paper.
Listed on Canadian exchanges or will the Papa New Guinea company no longer be listed in Canada.
Thanks, Joseph glad to take your questions and I can confirm that.
In September .
Our intent will be to put to vote.
The return of capital and the spin off of the PNG business or.
More specifically our international business.
Which is focused on PNG the manner of that is not finalized at this time, we are working through the most tax efficient and appropriate mechanism to deliver upon it and once we have concluded those investigations and prepare the documentation we will.
Issue them to shareholders. So that they can contemplate those ahead of the vote.
And just adding to it if if if.
If you're still looking at the options are you looking at.
Keeping of our having let's say a venture relationship for the Papa New Guinea as well as an Aussie public listing and does Papua New Guinea have a stock exchange as well.
Good questions, Oh, I'm going to answer them in reverse order, Papua New Guinea does have a stock exchange. It's the it's the Palm Sox P. O M. S N <unk> Port Moresby stock exchange.
At this time, we do not.
We have any intention of listing any entity on any other stock exchange.
Okay. Good.
If you know the upside that we have.
We're all optimistic about for PNG occurs will you need to have a certain amount of capital in the spinoff company of some magnitude to provide for.
Upgrading of equipment.
Paying bills.
While there is a ramp up in <unk>.
Putting more equipment to work.
Really good question the the our anticipation of a return to work in Papua New Guinea. He continues to be slow.
We're anticipating that we will operate this year with rigs 103, but we're not anticipating returning any additional rigs to work during 2023 and 2024, we are optimistic about the return to work of of one or possibly more rigs in Papua New Guinea, the rigs that we are contemplating.
That may be cold to return to service have been maintained in very good condition, while they've been idle and we do not anticipate any substantive refurbishment costs to return them to service that.
That said those projects may require specific upgrades or modifications to suit customer program intentions drilling program intentions, and it would be our intention to align al.
Pricing to recoup any such modification cost at the time of mobilization.
This should mean that we do not need to retain a substantive amount of access to capital to return the rigs to work.
However, we continue to explore our options for access to capital both sources of capital and debt to.
To ensure that the company will have an adequate line.
To to liquid to illiquid liquidity.
Okay, well I'll look forward to seeing the documents when it comes out and hopefully Canadians will be able to participate on a Canadian exchange and the growth potential of the PNG in the years ahead.
That's it for me thanks, very much Mike.
Thanks for your comments and questions Joseph.
Thank you.
The next question is from Brian coat Jankovic. Please go ahead your line is open.
Oh, good afternoon gentlemen.
I think I think Joseph kind of asked some of the stuff I was going to.
Oscar on but I'm.
I was sort of assuming that's being a private company.
There wouldn't be a listing but I was curious if you're aware of whether there was any possible you know liquidity avenues available like I know in Canada, we used to have an over the counter listing.
Where companies didn't have the full you know public status, but some of these.
Things could still be trade it in and out there.
Thank you Brian I. Appreciate your question at this point in time, we have not got a we're not able to provide any guidance on how we may arrive at and the spin off all possible avenues of liquidity. We may however have.
Other information that we can including the shareholder circular that will be distributed once we're ready to do to call for a vote.
Okay and then my guess my other question was the international operations, which.
Third it looks like the old high Arctic tell me, which was a.
You know a good cash flow machine and dividends to shareholders could you see that sort of.
And Kent with the company there that.
You know, even if it's private at sort of our income generating.
Vehicle for investors.
I think Brent or the the thing that I can do to try to address that question is to reflect on the performance of the pumping of Guinea in operation back in the East through say 2010 to 2017, 2018, where it generate a substantial amount of free.
Free cash flow.
And that that free cash flow essentially financed out share buybacks and dividends in Canada.
I would anticipate that if we are able to realize the level of activity that we've seen in the past, which we do expect management does expect in the latter years of this decade as these projects move forward, we expect that we could be as busy as or busier than we are.
Ever been before and under such circumstances, I'd expect that shareholders could expect a reasonable return on their investment.
Okay.
Great. Thanks, very much I think that's all for me and good luck going forward. Thanks.
Thank you Branco and to you too.
Thank you.
The next question is from Dave.
Please go ahead your line is open.
I think Frank on just sort of asked my question I'm not.
[noise] sophisticated an investor, but if I end up with shares in a private company based on Papa New Guinea.
How do I get rid of them, if I don't want them.
Yeah, It's a very straightforward question, you've asked there Dave and at the moment I cannot give you a direct answer to that question. The if there is a buyer in there as a seller a transaction can be made as far as an intermediary to potentially facilitate such transaction that.
It's something I'm, not I'm not able to answer at this time.
Okay, and then we'll move on to that to a couple of other questions yesterday at the annual meeting.
You mentioned eight or nine large bore.
Wells being drilled.
What would be the revenue from each one of those wells.
Yeah.
But that would be speculating I guess.
My My my answer to that question is that I haven't speculated on that internally, let alone to speculate on it externally, but I can inform you that the time taken to drill the wells at hides, which we expect to be there.
The Antelope wells will be designed in a similar manner and coupon average between between between 65 to 100 days.
And if you look at our drilling services reporting you can probably make some form of estimate then of what that might look at it as total revenue.
Okay, and I think I have another question.
I can't remember it at the moment.
So I'll pass the line over to somebody else.
I'm sure that Paul would be happy to return to you. If you are you think of your question again Yep. Thank you.
Yes, no problem at all thank you very much.
Great. So we'll get to the next question. The next question is from a private investor.
Go ahead your line is open.
Hey, guys. My question. The first question is will our current dividends remain in place.
The current dividend, we've not had made any decision to cancel that at this point in time, So I would say our expectations current dividend will continue until such time as the directors deem. It it is not appropriate to continue that might be something that they contemplate when issuing the.
Information memorandum to shareholders for the purpose of vote.
Okay, and with regard to the Scottish plan, because I'm not sure if there's any boardman tried it but all the time.
Maybe you can answer or maybe one of them.
I should go surprised it was that planned to buy as much of the PNG chefs as possible, which I want to uphold that 45%.
Out there are no direct is here with us at the moment M and I'm at this time unable to comment as to the intentions of any particular directors or shareholders. However that may be that may be revealed as part of the year the documentation issue.
When calling for calling for the special meeting to have have a vote on the intention to proceed.
Okay, maybe I can ask answer the technical question is there a maximum percentage threshold size can buy shares yoga market before they need to make an offer.
Before they need to make an offer with sorry.
Instead of a percent.
Yeah exactly.
Elaborates, almost well basically theyre not only 45%, let's say they keep buying instead of shipping thresholds that they can pass before they need to make an offer to everyone.
Right the compulsory acquisition.
Jackie.
I'm going to hand over to Lance I don't know the answer to that if I just take a step back.
Our largest shareholder.
Its ownership percentage retained are maintained for a significant period of time and they're not active right now to changing that ownership structure.
So they're not participating if anything is left up to the company to participate with.
With the IP that we have that even with our repurchases. It will not result in them being over 50%.
Over 50%.
As a as a threshold, which will require them to.
Net change in the investment in the in the in a public company. So it will require them it would be a change in control of high Arctic. So that is certainly not contemplated hasnt been contemplated or discussed at all in the past so I don't see that being a trigger between now and when we.
Put forth this.
Reservoir this information to shareholders as it relates to this transaction we're talking about.
Okay, and then if you can stay with you that Lance.
You look at the current quarter and its about $8 million for PNG.
It's just with the rig only stocking and last a quarter or.
So what.
B F, which quarter, you know go back with $8 million with.
With the rig running full time in the quarter.
I think we're I think youre right. It started at the latter part we were building it up building up activity in PNG up leading up to that to our COO.
You mentioned a full drilling operations. So there is.
Revenue generator throat.
The first quarter related to rig 103, I can see that stepping up at full activity youre going to be upwards of U S. Dollars I think $10 million topline revenue for a quarter. So I anticipate our revenue to be up between $13 million to $15 million.
Up from its whats now 9.95 consolidated revenue Canadian dollars.
Up to 2014 and $15 million of revenue Canadian dollars consolidated for quarters going forward.
Okay that makes sense and then my last question because I don't know what.
Dutch and I I don't always get the sharp shocks, so but with regard to international people and with everything going on in ultimate team to transfer it over let's say that the price of company how will that work, although you come back to that.
So oh.
I'm in the same boat as you.
I'm not I'm not touch on Australia.
Ed.
I know they get along Wow that's good.
Yeah, Yeah. Some of my best friends of the people of Dutch to Sin Oh, that's good.
Yeah I'm in the same boat as you and I and I'd be changing to be too to ensure that all of our international shareholders have adequate time to receive the documentation to participate in the voting.
Okay. Okay.
Well that's clear thank you for all your answers.
Thanks I appreciate your questions.
Okay. Thank you.
Yeah.
You too.
Thank you once again, please press star one on devices keypad, if you have a question.
The next question is from <unk>.
They've read retail Investor. Please go ahead your line is open.
Hi, guys and thanks for giving us the time for the calls I think this.
This was touched on a little bit earlier, it sounds like Theres a lot of elements to this that aren't aren't fully defined but you.
You must have some color from from Cirrus in terms of what their you know their long term plan is or are they hoping too.
To make an offer to take out the minority shareholders or you know what is the what is sort of the plan as we go towards I do know you need to flush out the details, but what's sort of the superstructure of the plan.
Yeah. Thanks, Dave Thanks for the question.
I'm unable to answer on behalf of Sars and what their intentions might be and they've not indicated to me or to the board have any intent to take out minority shareholders and any discussions we've had them related to the announcement from yesterday or it or in any other manner.
But they are not controlled by high Arctic and so they would like all shareholders I believe make their.
Their own decision with regards to the voting intentions, when we tabled the resolution.
Two to shareholders.
Well we are.
Just historically Cyrus as being a shareholder balance for well over a decade and Sars is twice participated in.
In capital Raisings in that period, as well and they've been a long term supporter of high Arctic.
And they've had directors on our board for many years I find working with desirous directors to be rewarding and and and and also informative, but certainly I don't know what their voting intentions would be.
I'm I'm not surprised.
But I had to ask the question Nonetheless.
Hum.
Well, yes, I anticipated your response in any event I'm.
Just to get some sort of co and it was good to hear that they were.
Long term investors that was actually my next question. So let me ask you in and then in the numerous.
Buybacks that we've done over the last four or five well certainly not in the last two years, but say in the previous five years.
Did they tender in line or did they did they stick and slowly see their percentage rise.
Yes.
Yeah.
Yeah, I'm not a I cannot recall Sars actively participating in selling the holding in and CIB in recent years, albeit in recent years, we have not done a substantive amount of buybacks with the NCI b.
We have been active we have issued instruction and the <unk>.
Board of directors do consider that instruction when they meet and we have adjusted our instructions to our bankers from time to time based on the board's view of value for the Corporation.
But yeah I would just come back to the early part of the answer.
Count recall them participating there holding has slowly ticked up not in a meaningful amount, but that bill. So is due to the fact that we haven't bought back a meaningful amount of chassis, though.
Sure well.
You know I.
I guess the elephant in the room and I'll go ahead and say it.
We've.
Shareholders have held out over the last three years, because we know fundamentally that this is a sound business, particularly with respect to PNG I mean, one only needs to look at the gross margin differential on a dollar of revenue and here we are going into in your own words, a pretty substantial uptick in revenue over the next couple of years I assure you.
Only thing not not sure is how many rigs get activated in 2020 for it it appears exceptionally opportunistic and while I don't expect you to provide any kind of response to this because you're in a delicate position I want it clearly stated for the record and I'm sure Sirius is listening.
That that there is.
Definitely a view that this is exceptionally opportunistic so I'm going to be looking very closely at what I provided.
And and making decisions from that point forward, so just putting that out there and the most respectful way possible while Mike.
Yes.
Thanks for your comments Dave.
Fair enough. Thanks, that's my comments.
Thank you.
The next question is from David Palmer. Please go ahead your line is open.
I remember in my question.
You announced the distribution of $38 2 million in cash right.
And the market reaction basically was about $9 million, yeah, a reaction to that.
Well I'm I'm pleased to see that our that the there's a lot of buying in our shares a lot of appetite for buying out she is today and for the past few weeks.
I've been an investor and we don't know who they are who has been selling into the market and did see the price push down substantially pleased to see the price returning back to <unk>.
I think there's still some movement that could it could be more movement, there, but are pleased to see the price.
Moving back in the right direction.
Part of the reason that we articulated our position he is having having looked at opportunities to deploy these cash.
Two to grow the business and into improved returns for shareholders and not coming not being able to get to the finish line on something that made sense. We thought it was appropriate that we pointed out to the market that we're not going to just sit on it and and in doing so make it very clear it.
That there's a lot of value in that business that hasnt been unlocked when you look at the share price. It was trading at only a handful of days ago.
Can I say that I hope that our shareholders who are on the call today and we're not in a blackout did get the opportunity to take advantage of buying into a high Arctic stock at very attractive prices through that period, but I do know as of today. The volumes are somewhere in the realm of 160000 shares turning over and.
Even in the in the selling period, there that we were averaging only around 35000 shares per day and prior to that our sellout getting into the market and disposing of this year as we were averaging around 15000 shares a day.
And trading between about $1 40, and $1 55 and.
I think there's still room day for that price to appreciate given the announcement, we've made as investors look at what we've put put put out into the public domain and do their own calculations on value of the components of high Arctic and and and and and I'm, hoping that pretty soon that I'll be able to get back in and buy some as we exit.
Blackout here this week.
People, we'd be watching you on that and I just hope it's a typical small cap.
L lag on news.
Yeah.
Thank you any other questions Dave.
Thank you have a good week alright, thank you Doug.
You too.
Thank you sorry.
Sorry. The next question is from Mike <unk>.
Go ahead your line is open.
Yeah, Hi, guys can you hear me okay.
Yeah hear you loud and clear Luke.
Perfect Yeah.
I just wanted to say congrats on the announcements and obviously you guys have been thinking long and hard about what to do with the capital.
My question I guess is regarding I'm I'm, not I'm, not a lawyer and I don't pretend to be one but I. Just was wondering from a governance standpoint, how high Arctic will kind of review this whether you'll set up kind of an independent committee, whether there's a requirement for a fairness opinion.
And I'll apologize in advance I joined the call about 10 minutes late so if you've addressed SaaS just just say so.
No good questions Luc.
And are you a full disclosure I'm not a lawyer and whatnot there is lance as well.
We will be getting a valuation done on the Papua New Guinea and business to and we'll be disclosing that as part of the.
Information memorandum when it gets distributed as far as whether I and independent committee on the board or a <unk> or a fairness opinion as needed we will take our advice also from from our legal advisers.
It probably is going to be dependent upon the mechanism or mechanisms that are finally arrived on once we complete the full review here, if the most tax efficient and effective way.
Completing this transaction for the benefit of the shareholders and the other thing I'd just like to add is and B.
B, our intention that all shareholders are treated equally.
Yeah. Thanks.
An unrelated follow up question on let's call it the Canadian or North American operations and in recognition that there's some substantial residual tax losses.
What what kind of has to happen in order for you guys to be able to.
Realize on on that as a very real asset on the balance sheet.
Yeah excellent question and it's something that we have been doing a bit of research on and and and and and bearing in mind again with as I said I'm not a lawyer and things too. So this is not legal advice, but my understanding here is that just a few rules that we will need to stay on side with to ensure that we do.
Damage that data via the availability of those tax losses capital, our capital and operating tax losses.
<unk>.
Two of them that that's sneak immediately in my mind that we need to maintain an essentially similar business. So.
So that we can utilize those.
Tax losses, and they can't be in a quiet change of control.
And and so we'll be we'll be team to make sure we stay on side with those as we detailed at our business plans.
That's great. Thank you so much I don't have any other questions, but just I. Appreciate what you guys are doing and going through them in.
This transaction whatever falls in the future.
Thanks for those kind words, Luke you have a good weekend.
Thank you. The next question is from Murray.
Please go ahead your line is open.
Hey, Mike and I think you answered the question one of the gentlemen.
Earlier, I think it was a day.
Saying this transaction.
Could be seen as very opportunistic for.
Cyrus and I don't.
I don't understand the thought process that because in your comment and you answered it but I'm just talking about it for a second you.
You said that all shareholders would be treated equally so just thinking out loud here I create spin co spin co goes into private cow.
I as a shareholder get my pro rata shares private cow.
Hi, Rez get their pro rata shares of private cow I E, 45%, so unless I'm missing something and I guess yeah.
Education me if I am.
But how do you anticipate it today and I know you have to flush a bunch of things out I would end up owning.
My number is you know 100000 shares.
Whatever the number ends up being in private co representing the same percentage I own today.
In public health and Cyrus what also 45% of <unk>.
So on that transaction, there's no you're not going through a process, where cyrus can come in and acquire off no.
100% of the company each shareholder collectively owns the same percentage.
Post transaction and am I correct in my understanding.
Yeah, Marty as you as you said, we still to work through some of the finer details, but in a in essence, yes, what you've outlined is in line with what we are contemplating.
We don't we don't we're not.
Contemplating putting something out there that would see one shareholder have the ability for have preferential treatment over another.
Yeah.
Right, Okay that was my understanding as well.
And you know.
As I understand this transaction, there's really three components to it there's cash everybody get their pro rata share of the cash.
Is there is a.
Public company listing, which has a $130 million in tax pools, not capital tax pools in it and to your point. The the answer there is you cannot.
Trigger and acquisition of control, which is different than a change in control that can be a change of control you just can't have an acquisition of control.
And if you don't you don't necessarily have to have the same line of business.
If you trigger and acquisition of control it screens those tax pools. So that they can only be used in the same type of business I know, it's a nuance, but that that is how CRA is going to look at it.
So the three components again, our cash we all get pro rata.
A ownership in an entity, which maybe dealt listed on the T. S X Senior board the venture exchange May have requirement in there. That's a you don't meet certain thresholds. So you get pushed from the senior team.
Is that to the junior board, but again.
That will be in the details.
And the third component is a piece of PNG cow. So again, everybody every shareholder.
One is the same thing today.
Or after the transaction as they do currently it's just in different buckets is that is my understanding correct or not.
Thanks Maury.
I'll address the two points or so.
So yes. Thank you for clarifying on the acquisition of control and you can do.
The use of.
Forward you solve that.
The non capital tax loss carryforwards.
And on that second point.
I agree that is a reasonable read of what we have announced is that essentially every shareholder will have what they have today, but it will be in the form of cash.
Listed public car and she is in private PNG Coke.
Okay. Thank you no further questions.
Thank you Mary.
Thank you.
There are no further questions registered at this time I will turn the call back to Mr. Mcguire. Please go ahead.
And based on today's questions, both the number of them and in the number of people asking them and the number of people who are on the call I can getting a lot of understanding there's tremendous amount of interest in what we've announced.
Triste, both from those who analyze and advisor in our business and those who are shareholders of it today I'd like to thank you for participating in today's call and for the questions that you posed I look forward to taking this forward and then bringing to shareholders. The information memorandum to enable us to move forward to a vote.
Thank you and good week, a good week and a good weekend.
Thank you the conference has now ended.
Please disconnect your lines at this time.
And we thank you for your participation.
Okay.