High Arctic Updates Restructuring Activity


    RED DEER, AB, June 10 /CNW/ - High Arctic Energy Services Inc. (TSX: HWO)
("High Arctic" or the "Corporation") is pleased to announce substantial
progress on its restructuring plan. High Arctic has recently announced an
extension to the senior credit facilities, a rig sale for $11 million, and a
new contract in Papua New Guinea. EBITDA met expectations during 2008 through
April and the Corporation expects this to continue through the second quarter
in spite of a very long spring break up. Due to an improved second quarter
compared to 2007 High Arctic also expects the consolidated leverage ratio of
its senior credit facilities to improve materially as of June 30, 2008,
compared to March 31, 2008.
    High Arctic previously announced the formation of a restructuring
committee (the "Committee") with the primary mandate of dealing with the
Corporation's lenders and taking the necessary actions to put the Corporation
back on a sound financial footing. The Committee is composed of Michael
Binnion, Chairman of the Board; Jed Wood, President and Chief Executive
Officer; and Dennis Sykora, Executive Vice President and General Counsel. Much
progress has been made by the Committee and there is much work left to do to
put the Senior Credit Facilities on to normalized terms and to restore
confidence in the equity. We are optimistic about our plans to overcome the
challenges remaining.
    An extension to the senior credit facilities was announced in a June 6,
2008 press release. Gaining the support of the lenders was a very important
step in the restructuring process. Going forward, the focus will be on
continuing to improve the earnings by focusing on the core profitable
activities and to sell the underutilized and underperforming assets to meet
the requirements in the credit facilities to reduce the debt. The recent
contract awards in Papua New Guinea are consistent with the strategy of
building our business in our core operating areas. In Canada there is renewed
optimism in the oilfield services sector as higher commodity prices are
expected to lead to increased activity in the second half of 2008. All of that
bodes well for increasing operating earnings. In a press release dated May 30,
2008, High Arctic announced it had entered into an agreement to sell one RAPAD
Rig for $11 million. The Corporation is actively marketing the other assets
identified for sale and remains optimistic that it will achieve the asset
sales target of at least $50 million by January 31, 2009.
    Related to the restructuring plan, the members of the Committee executed
a Pooling Agreement effective on June 6, 2008 whereby they agreed to pool all
of their shares of High Arctic solely for purposes of voting on the election
of directors of the Corporation. The purpose of the Pooling Agreement is to
create confidence for the Lenders in the stability of the board and management
to execute the restructuring plan. The execution of the Pooling Agreement was
a condition of the extension agreement for the Lenders. The pooled shares will
be voted as one block based on the decision of the majority of the three
Committee members. The Pooling Agreement will be effective until the earlier
of January 31, 2010 or the normalization of the Corporation's credit
facilities, including the senior debt leverage ratio. The completion of the
Pooling Agreement reflects the commitment to the restructuring by Mr. Jed
Wood, who directly and indirectly holds approximately 41.7% of the outstanding
shares of the Corporation.
    An immediate challenge ahead is to develop an incentive plan to attract
and retain key individuals and to provide an incentive for the directors,
officers, key employees and consultants to contribute to the future success
and prosperity of the Corporation. The Lenders' support of the restructuring
plan is based on them being satisfied that the Committee and key employees
will be retained. The added challenges of the current financial circumstances
of the Corporation make employee retention that much more difficult. The
current stock option plan is not effective as almost all of the options have
been awarded at prices substantially higher than the current share price. The
stock option plan does not provide the required incentive and enthusiasm among
the employees. The Corporation's recent attempt to re-price the options and
reserve additional options did not gain the support of the shareholders. The
Corporation indicated in its Information Circular dated April 22, 2008 that if
the new option plan was not approved, a cash based Stock Appreciation Rights
("SAR") plan could be implemented. A SAR plan may be implemented to provide
cash payments to the holders, based on the growth in the share price of High
Arctic above $0.75 per share, and may be structured as a long term incentive
plan. On June 6, 2008, the Board of Directors passed a resolution to authorize
the Committee to prepare a SAR plan on terms and conditions that the Committee
determines are reasonable. The Committee will need the approval of its Lenders
to implement a SAR plan that gives confidence regarding retention and
incentive for management while not prejudicing the Lenders' interests.
    The Corporation has also signed employment agreements with Jed Wood,
President and Chief Executive Officer; and Dennis Sykora, Executive Vice
President and General Counsel. The Agreements formalize the terms of their
employment but do not change their responsibilities or salaries other than to
implement the bonus applicable to members of the Committee as detailed in High
Arctic's Information Circular dated April 22, 2008. The agreements provide for
termination rights of 18 months salary applicable in certain circumstances
including a termination without cause and certain changes of control. The term
of each agreement ends on February 28, 2010
    Jed Wood said "I am very pleased that we have been able to gain the
confidence of our Lenders', customers, management and employees. The
underlying strength of the High Arctic franchise has much to do with this. I
look forward to now working with the restructuring committee to maximize the
value to the equity shareholders."

    Forward-Looking Statements

    This news release may contain forward-looking statements relating to
expected future events and financial and operating results of the Corporation
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 Corporation's Management
Discussion and Analysis for the year ended December 31, 2007 and in High
Arctic's Annual Information Form for the year ended December 31, 2007 and High
Arctic's Information Circular dated April 22, 2008, all found on SEDAR
(www.sedar.com). Due to the potential impact of these factors, the Corporation
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

    The Corporation, through its subsidiaries, is a global provider of
specialized oilfield equipment and services, including drilling, completion
and workover operations. Based in Red Deer, High Arctic has domestic
operations in Alberta, British Columbia and the Northwest Territories.
International operations are currently active in Mexico, the Middle East,
Northern Africa and Asia.

    The TSX has not reviewed and does not accept responsibility for the
    adequacy or accuracy of this news release.

    %SEDAR: 00025582E

For further information:

For further information: Jed Wood, President and Chief Executive
Officer, High Arctic Energy Services Inc., Tel: (403) 340-9825,

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