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Onshore Drilling Services Contract advances international growth strategy
RED DEER, AB, Aug. 2 /CNW/ - High Arctic Energy Services Inc. (TSX: HWO)
("High Arctic" or "the Company") today announced that its wholly owned
subsidiary, High Arctic Energy Services PNG Limited, has been awarded an
Onshore Drilling Services Contract (the "Contract") with a subsidiary company
of Oil Search Limited (ASX: OSH) ("OSL") for Rig 103 in Papua New Guinea. Rig
103 is a new heli-portable rig currently under construction by OSL in China.
High Arctic is already providing project management services in China with
respect to the construction and commissioning of the rig and will manage the
mobilization of the rig to Papua New Guinea. The target is to begin operations
in the fourth quarter of 2007. The contract is the largest awarded to High
Arctic to date.
The initial term of the Contract is three years from first spud, with two
further one-year extension options. Revenues for the initial three-year term
are estimated to be over US$78-million. As a condition of the contract, High
Arctic and OSL will enter into a lease agreement under which High Arctic will
lease the rig and assume full management responsibility.
High Arctic previously announced in February 2007 the signing of a
contract with OSL for the management and operation of Rig 101. High Arctic and
OSL are currently negotiating to convert the Rig 101 contract to an Onshore
Drilling Services Contract on similar terms as for Rig 103. If completed on
the proposed terms, the initial term would remain at 18 months with estimated
revenues of US$29-million.
The parties are also close to finalizing contracts for support services
and rental equipment, with potential annual revenues in the range of
Once both Rig 101 and 103 begin drilling operations, the total revenue
for High Arctic is expected to increase by US$62-million per year
(annualized), an amount that approximates 52% of High Arctic's 2006 revenue.
High Arctic will not be required to expend any capital for either Rig 103
or Rig 101, but estimates a total capital investment of about US$15-million
for the support equipment and rental equipment required by the contracts.
"Papua New Guinea is one of the world's premier exploration areas. Beyond
the significant revenue generated from these contracts with OSL, their award
further demonstrates our ability to develop international opportunities for
the benefit of our investors," said Jed Wood, President and Chief Executive
Officer of High Arctic. "High Arctic is well positioned to benefit from OSL's
increased exploration and production activity in Papua New Guinea,
particularly with these recent competitive contract wins against existing
"High Arctic continues to pursue international opportunities in which
equipment utilization can be increased through the redeployment of
Canadian-based assets," said Mr. Wood. "In evaluating the increased activity
in Papua New Guinea, we believe that the bundling of our Air Pumping, Managed
Pressure Drilling and Hydraulic Workover services is an excellent fit."
OSL is the fourth-largest listed exploration and production company on
the Australian Stock Exchange. It is the largest oil and gas exploration and
production company operating in Papua New Guinea, with production currently
averaging 54,000 bbls/per day. OSL has recently announced a record exploration
and production investment program that will require a significant increase in
production support and drilling related services.
This news release may contain forward-looking statements relating to
expected future events and financial and operating results of the Company that
involve risks and uncertainties. Actual results may differ materially from
management expectations as projected in such forward-looking statements for a
variety of reasons, including market and general economic conditions and the
risks and uncertainties detailed in the Company's MD&A and Annual Information
Form available on SEDAR. Due to the potential impact of these factors, the
Company disclaims any intention or obligation to update or revise any
forward-looking statements, whether as a result of new information, future
events or otherwise, unless required by applicable law.
About High Arctic
High Arctic, through its subsidiaries, is a global provider of
specialized oilfield equipment and services, including drilling, completion
and workover operations. High Arctic's new underbalanced drilling technology
and equipment is recognized for its ability to improve oil and gas production
capabilities and is expected to develop greater acceptance in international
markets. Based in Red Deer, Canada, High Arctic has Canadian operations in
Alberta, British Columbia and the Northwest Territories. International
operations are currently active in the Middle East and Asia.
The TSX has not reviewed and does not accept responsibility for the
adequacy or accuracy of this news release.
For further information:
For further information: Jed Wood, President and Chief Executive
Officer, High Arctic Energy Services Inc., Tel: (403) 340-9825,