Mr. Mike Maguire reports

HIGH ARCTIC ANNOUNCES 2023 SECOND QUARTER RESULTS

High Arctic Energy Services Inc. has released its second quarter financial and operating results. The unaudited interim consolidated financial statements and management's discussion and analysis for the quarter ended June 30, 2023, will be available on SEDAR+ and on High Arctic's website.

Mike Maguire, chief executive officer, commented: "In [Papua New Guinea], we have had our first full quarter of drilling activity with Rig 103. In Canada, we have closed the divestment of the nitrogen pumping business for a modest gain, and have aligned our [general and administrative] costs towards our reduced business footprint.

"We are working with our advisers to complete the work to reorganize the corporation and deliver the tax-efficient return of cash to shareholders. The proposed spinoff of the Papua New Guinean business addresses the inefficiencies in managing two small businesses with few synergies. The remaining publicly listed company with Canadian assets and tax pools creates a potentially attractive vehicle for future growth.

"I look forward to presenting details of the reorganization to shareholders in the coming months."

Highlights

The following highlights the corporation's results for second quarter 2023:

• Achieved full drilling utilization of PNG Rig 103 during the quarter, pursuant to a three-year contract that was renewed in August, 2022;
• Generated EBITDA (earnings before interest, taxes, depreciation and amortization) from continuing operations of $3.8-million on revenues of $17.2-million, funds flow from continuing operations of $3.9-million and incurred capital expenditures of $700,000;
• Improved liquidity with a working capital balance of $61.8-million, which includes a cash balance of $45.4-million and long-term debt of $4.0-million;
• Announced the sale of the corporation's Canadian nitrogen transportation, hauling and pumping service business for cash consideration of $1.35-million.

2023 strategic objectives

High Arctic's 2023 strategic objectives build on the platform the company created in 2022 and include:

• Safety excellence and quality service delivery;
• Return idled assets in PNG to service;
• Scaling its Canadian business;
• Opportunities for growth and corporate transactions that enhance shareholder value;
• Examination of the corporation's optimal capital and overhead structure.

Results overview

The attached table is a summary of select financial information of the corporation.

Outlook

High Arctic is in a position to refocus its Canadian business. The rental business is generating solid margins and a high level of utilization, which the company anticipates continuing into the traditionally busier winter period. Opportunities to gain scale and underlying net profitability are a priority. Team Snubbing has utilized the customary spring breakup period to prepare additional equipment for deployment in Canada and to establish operations in Alaska through its 50-per-cent-owned Team Snubbing international partnership. Both Alaskan snubbing packages are working, with a growing order book of customer activity.

Energy security, evolving attitudes to carbon sequestration, and the longevity of Canada's oil and gas industry, as well as growing alternative energy industries, provide opportunities for the corporation to prudently invest in businesses positioned to benefit. These considerations and opportunities are supported by the long-awaited pipeline expansion to tidewater, which is close to being realized for both oil liquids and natural gas production. It is a positive development and sets up a favourable backdrop for relatively sustained upstream energy service demand as the world accelerates a transition to responsible production and lower emission energy consumption.

In the immediate term, the current monetary policy environment is delivering high-yield fixed-interest income for investment of surplus cash. The corporation is moving forward to establish new leadership in Canada to seize high-margin opportunities and set a new direction.

Papua New Guinea-focused High Arctic International is maintaining cost discipline while preparing for the anticipated upswing in activity in the years ahead. Rig 103 has completed its first full quarter of drilling activity since returning to work under its operations and management contracts. In return for utilizing the rig, High Arctic International pays the customer a daily rig lease rate, and generates revenue based on the level of activity and services provided. The contract for Rig 103 was extended in 2022 to August, 2025, with two one-year options for the customer to extend the term.

The opportunities for growth in PNG include: building on drilling operations by deploying idle heli-portable drilling rigs 115 and 116, supply services to the Papua-LNG project, and the substantive need for workers and machinery necessary for the contemplated major capital and infrastructure projects.

The company awaits the final investment decision of the TotalEnergies-led Papua-LNG project expected later this year. That project is anticipated to stimulate other exploration and appraisal activity, and is expected to be followed by the P'nyang gas field development in the Western province of PNG. State-owned Kumul Petroleum is advancing appraisal of other gas discoveries in PNG, and discussions continue with other exploration companies toward future work.

About High Arctic Energy Services Inc.

High Arctic is an energy service provider. High Arctic is a market leader in Papua New Guinea, providing drilling and specialized well completion services, and supplies rental equipment, including rig matting, camps, material handling and drilling support equipment. In Western Canada, High Arctic provides pressure control equipment on a rental basis to exploration and production companies.

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