Bruce Thiessen is breathing a little easier these days.
The CEO of High Arctic Energy Services Inc. (TSX: HWO) has watched his company grow leaner, slash its debt load and emerge from the recession with renewed prospects in Canada and abroad.
“We’ve been profitable every quarter (in 2010),” said Thiessen.
“We’re in a position where we can finally start looking at growth again.”
It’s a refreshing change from 2008, when deep losses and high debt forced High Arctic to restructure. Thiessen, who had been with the company since 1993 and was vice-president of marketing, was thrust into the role of interim CEO when High Arctic founder Jed Wood resigned later that year.
The company — which specializes in underbalanced, well control and snubbing services — sold off equipment and pulled out of markets like the Middle East, Tunisia and India. It converted debt into shares and slashed expenses — cutting staff and relocating from its 8133 Edgar Industrial Cl. headquarters to much smaller premises at 8112 Edgar Industrial Dr.
“That facility over there was costing us, I would say, 100 per cent more per month — probably 130 per cent more.”
It was a painful process, said Thiessen — who became High Arctic’s permanent CEO last summer — but 2010 proved to be a turn-around year. Canada’s energy sector lurched back to life and High Arctic negotiated a number of service contracts, including with industry heavyweights Encana and Shell Canada.
The outlook is also bright in Papua New Guinea, where High Arctic has been active for a number of years.
Exxon Mobil Corp. is developing a $15-billion liquefied natural gas plant in the southwest Pacific country. Thiessen said High Arctic’s primary client there has a major stake in the project, which is expected to supply natural gas to energy-hungry Asia.
“The cost of doing business in this country is very high,” he said, pointing to Papua New Guinea’s rough topography and the challenges of training and learning to work with the indigenous population. “But the rewards are very high because the wells are prolific.”
Last year, said Thiessen, Papua New Guinea accounted for about $80 million of High Arctic’s revenues — double that of its Canadian operations. The company recently announced a new contract and a contract extension for drilling and support services in Papua New Guinea.
Continued low natural gas prices in North America have not allowed High Arctic — whose services are gas-specific — to enjoy the revenue growth of its oil-focused counterparts. But its equipment has proven effective in servicing the increasingly popular multi-stage fracs in gas plays, said Thiessen.
Specifically, a rotary system allows pipe with a bit on the end to drill through the composite plugs between frac zones, and then pressure up and go into production. The resulting increased efficiency can reduce production timelines from about five days to three, equating to savings of about $90,000 per wellbore, he said.
Thiessen added that horizontal drilling distances are reaching the limits of coil tubing, but not High Arctic’s biggest underbalanced rig.
He’s hopeful gas prices will increase, particularly with the economic downturn at an apparent end. The commodity’s low cost and relatively low environmental impact also bode well for future demand and pricing, he added.
“I’m very optimistic.”
The greatest challenge for High Arctic right now is labour, said Thiessen.
“We’ve got equipment sitting at the fence right now that I could have utilized throughout this year, but just couldn’t get to because of the people situation.
“In Canada right now, we could use another 100 people.”
Many skilled workers left the energy sector during the downturn and are now working elsewhere, he said. And it costs about $5,000 to train a green person to work in the field — an investment that’s lost if the employee jumps to a competitor.
Nonetheless, High Arctic plans to aggressively train staff to every competency level, said Thiessen.
“The manpower is our first issue,” he said, adding that only then will the company look seriously at expansion.