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Good afternoon, ladies and gentlemen. Welcome to the High Arctic Energy Services 2022 Q3 Results Conference Call. I would now like to turn the meeting over to High Arctic's Chief Executive Officer, Mike Maguire. Please go ahead, Mr. Maguire.
Thank you, Michael, and good morning, everyone, or good afternoon if you're in Canada. Welcome to High Arctic's Third Quarter conference call. Today, I'll be providing an update on the press release we issued earlier this morning, November 11. Following my remarks, I'll hand the call over to our Chief Financial Officer, Lance Mierendorf. Lance will be discussing our financial performance for the third quarter of 2022. After our formal comments, we'll open the call to answer any questions that you may have.
Before we begin, I'd like to remind you that certain information presented today may include forward-looking statements. Such statements reflect High Arctic's current 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 2021 Annual Information Form available on our website or on SEDAR. Look under the heading Risk Factors. Well, early in the third quarter or on July 27 to be precise, High Arctic closed 2 independent transactions to divest certain assets in Canada. The sale transactions represented the effective divestment of our Production Services segment, allowing us to focus on putting the drilling rigs in our Drilling Services segment back to work in Papua New Guinea. EMG is a market where we have a dominant energy services position. a history of high profit margins and free cash flow generation. Papua New Guinea is now central to High Arctic's long-term business strategy.
Recapping the sale transactions. The well servicing sale to Precision Drilling Corporation included High Arctic's Canadian well servicing and workover rig fleet marketed under the Concord Well Servicing brand as well as some oilfield rental equipment associated with Well Servicing, including the 17 hydraulic catwalks we purchased in 2021. The transaction saw the transfer of High Arctic's well-servicing employees and the large majority of Canadian support personnel to Precision. The consideration included $10.2 million, which was received at closing, and a $28 million payment, which is payable next January.
Precision has assumed the lease obligations for High Arctic properties in Cold Lake and Acheson. Entitled to 4 Alberta real estate locations owned by High Arctic will transfer to Precision on final payment. The snubbing business was sold to Team Snubbing Services Inc., a private snubbing specialist headquartered in Red Deer. It included the transfer of High Arctic's Canadian snubbing fleet, underbalanced hoists, associated support equipment and High Arctic snubbing employees to team. High Arctic acquired 42% of the post-closing shares in team and appointed 2 directors to the 5-person Board.
Additionally, High Arctic will receive a $3.4 million convertible promissory note from team. Post closing, High Arctic retained owned Alberta properties in Whitecourt and Clermont, with an affiliate company of team entered into a 5-year lease of the Clermont property. High Arctic retained its Canadian nitrogen pumping business and a smaller rentals business focused on pressure control equipment marketed under the HAES Rental Services branding. High Arctic also retains its snubbing assets in Colorado, U.S.A. These businesses are grouped into our ancillary services segment and are supported from our White Port, Alberta facility. The corporation retains a small corporate headquarters here in Calgary.
Pivoting now to Papua New Guinea. Effective August 1, 2022, and High Arctic commenced services under a 3-year contract renewal with our principal customer in PNG for customer-owned heli-portable drilling Rig 103 and High Arctic services related to the supply of personnel, camp accommodation and rental equipment. The contract includes 2, 1-year options to extend further out beyond on the same terms and conditions beyond July 31, 2025. This customer has large stakes in the 2 LNG projects in Papua New Guinea as well as operatorship of all producing PNG oilfields and several gas fields supplying the existing PNG LNG export facility.
Work is underway to prepare Rig 103 for service, which includes an upgrade of its top drive. And while we are confident in our readiness, the overall project has not been immune from the supply chain challenges experienced around the world this year. As a result, our customer has informed us of intentions to defer the start of drilling out towards the end of the first quarter of 2023. High Arctic anticipates Rig 103 will then operate consistently through the term of the contract.
I'd now like to pass the call over to Lance to discuss key financial highlights from the quarter in more detail.
Thank you, Mike, and good afternoon to those of you on the call today. As Mike mentioned, our third quarter results reflect the impact of the disposition of our Production Services segment in July. Both the Canadian Well Servicing and Canadian Snubbing Businesses inclusive of field personnel, support staff, lease premises and certain company-owned land and buildings formed 2 separate sales transactions. Cash consideration from the sale of our well servicing business to Precision Drilling was $38.2 million. In advance of receipt of a final payment of $28 million in January, the company will repay $3.6 million of mortgage debt associated with this line and billing, which are included in this transaction. The book value of the assets and associated liabilities was $47 million, resulting in a noncash impairment of $8.9 million, of which, $700,000 was recognized during Q3.
The company retained positive working capital generated from the well servicing business of a little over $5 million at the time of closing the transaction. We've harvested $3 million in Q3. We anticipate the remaining outstanding receivables will be collected before the end of the year. With the transition of the business over to Precision Drilling essentially complete. We are now focusing on growing the HAES Rental Services Brand in Canada and leveraging off of a long history of servicing customers in this market.
As Mike mentioned early -- highlighted earlier, the sale of the snubbing business saw High Arctic received noncash consideration of $11.1 million in the form of 42% ownership and team snubbing and a $3.4 million long-term receivable. The value of this transaction was generally in line with the carrying value yet resulted in a noncash impairment of $700,000, of which, $200,000 is now reflected in our Q3 results. Team snubbing now has the largest fleet of snubbing equipment in Canada and has already increased its market share with deploying snubbing packages at the end of Q3, exceeding the sum of the 2 parts in Q2. Additionally, Team has plans to expand internationally for which we will participate as a shareholder. The investment in Team is accounted for as an equity investment with a share of the net earnings being reflected in our records. During the 2 months since the combining of our assets, Team has generated profits in excess of $600,000. $275,000 has been equity accounted for in High Arctic's third quarter results.
In addition, the carrying value of the long-term receivable from Team snubbing was determined by discounting the timing of future cash flows associated with that note. This resulted in a onetime noncash initial accretion charge of $900,000 recorded in the quarter. With a significant reduction in our Canadian presence, the corporation's ability to access the large pool of accumulated Canadian loss carryforwards in the near future is limited. Therefore, a related $7.9 million noncash deferred tax asset value has been written down to nothing to nil.
Moving over to our activities in P&G. After experiencing a very challenging 2021, our Drilling Services segment is seeing increased activity driven by the provision of drilling personnel and related equipment to customers to assist with various types of activity. Early in the first quarter of 2022, Rig 115 completed the abandonment of a legacy exploration well for a key customer, after which the rig was relocated to our port base to be preserved and maintained in preparation for future deployment. During the second and third quarters of 2022, High Arctic provides personnel, materials handling equipment and associated rental equipment, including a 100-man well site camp and a large quantity of durable matting in support of field -- customer field activities. These activities continued throughout Q3 and as to the provision of manpower and equipment for a production facility maintenance shutdown project.
As we move through Q3 and extending into Q4, we are working with our principal customer to prepare Rig 103 for the recommencement of development drilling and operations in 2023. These activities combined generated almost $5 million in revenue during Q3 and we surpassed $20 million in drilling services revenue year-to-date. Drilling segment operating margins have increased year-over-year, reaching 23.7% in Q3 2022 and 22.9% year-to-date, up from single-digits experienced during the first 9 months of 2021.
Our Ancillary Services segment spreads across both P&G and Canada and continues to be the highest operating margin generator, where we achieved 50% margins in Q3 and 57% year-to-date basis on revenues of $2.9 million and $11.9 million, respectively. With increased drilling services activities in P&G and consistent demand for pressure control rentals and nitrogen services in Canada, we see this segment continuing to experience revenue growth as we enter into 2023. On a consolidated basis, the company continues to see improved margins, achieving 24.7% during the quarter compared to 21% in the third quarter of 2021.
The company generated EBITDA of $600,000 in the quarter and $6.5 million year-to-date, which is double the amount we generated during the first 9 months of 2021. Capital expenditures were limited to $700,000 during the quarter and $4 million year-to-date, and we expect minimal capital expenditures to be incurred for the remainder of 2022. The company did experience a loss of $0.09 per share in the quarter, of which, $0.03 per share relates to noncash impairments and noncash carrying value adjustment to the note receivable from Team snubbing that I mentioned earlier.
The company continues to be prudent with its capital management and maintains a strong balance sheet. During the quarter, the significant impact -- with the significant impact on the cash proceeds from the sale of the Well Servicing business, the company grew its cash on hand by $8.3 million and ended the quarter with $23.4 million of cash on hand. Inclusive of the precision receivable, our working capital ratio is 5.7:1.
With the receipt of the remaining $28 million in January, the corporation anticipates holding a substantial cash balance early in the new year. We have advanced our investigations into possible future sources of debt financing for both growth and our projected capital needs in Papua New Guinea. Corporation has a history of returning surplus cash to shareholders and we'll continue to consider capacity to distribute surplus funds to shareholders, while exploring opportunities to reinvest in strategic growth and activities and initiatives as they emerge.
With that, I'll turn it back over to Mike.
Thanks, Lance. High Arctic has taken transformative actions this quarter, which will allow the corporation to focus on the emerging opportunities to deploy drilling assets in Papua New Guinea, while maintaining exposure to the Canadian energy services market. High Arctic believes that the fundamentals for sustained high LNG demand, particularly in Asia, positions PNG for substantive liquefied natural gas export growth and the drilling required to realize this has the potential to exceed our past activity peaks. The advancement of the total energy led Papua LNG project into front-end engineering and design continues to progress and has recently included public forums outlining plans for early works and the overall project time lines around the final investment decision on the 2-train Papua LNG project in the second half of 2023. Earlier this year, ExxonMobil operator of the PNG LNG joint venture, announced the signing of a gas agreement for the development of the P'nyang gas field in the Western province of PNG which is anticipated to result in the addition of another train to the world-class PNG LNG export facility.
Rig 103 is confirmed to commence work soon. And while the contract for customer-owned Rig 104 was not renewed. High Arctic is optimistic for future contracts with third-party customers in the coming activity cycle associated with the major project advancements. High Arctic maintains active dialogue with the management of all active energy companies in PNG towards understanding their project time frames and plans for drilling activity and the potential for the utilization of Rig 104 and High Arctic's owned Rigs 102, 115 and 116. We expect an additional drilling rig deployment in the first half of 2023, and are optimistic about further activity increases by the end of next year.
I'll now turn the conference back over to Michael, the operator, who will open the line for questions.
[Operator Instructions] And the first question is from Josef Schachter.
Mike and Lance. I wanted to ask about the PNG. You show that you have 200 employees there now. Are you training more people because, of course, as you get more equipment being used, is there going to end up being a shortest like, of course, we've had in Canada and the States for equipment and people in the field. Are you working with the local community so that you'll be able to use your -- all of your equipment going forward?
Yes. Josef, thank you for your question. I would say, succinctly, the answer is yes and with a little more detail. High Arctic has a company in our structure in PNG called PNG Industry Manpower Solutions or PIMS for short. PIMS is out marketing at the moment to provide training services for what we believe is going to be a cycle of extensive increase in need of capable and work-ready employees associated, not just with the activities that High Arctic conducts on remote well sites but also in the construction of pipeline and LNG plant and facilities as well as other nation-building projects, including the establishment of reliable electricity supply to over 70% of the populous. For context, today, it's estimated that only between 13% and 15% of Papua New Guinea citizens have access to reliable electricity. We see that this is going to mean the need for a massive amount of training and development to prepare personnel for it to be work ready and at High Arctic, given our 15 years of experience in PNG, we're taking people who have had no work experience and turning them into valued employees capable of contributing to the operation of high-tech and complex remote plant and equipment. It puts us in a strong position to be able to support not only the growth of our workforce, but the growth of the collective Papua New Guinea workforce.
A second question from me. The top driver that's being -- that they're looking for to be put on. And is that paid for by the owner of the Rig? And going forward, if you start using your own equipment, then they need bigger top drives, bigger motors of other equipment. Are you looking to have that upfronted by the user or the contractor? Or do you have it game plan of amortizing it over the life of a contract?
Yes. Good questions again. Thanks, Josef. So yes, the top drive upgrade on Rig 103 is being paid for by the customer. We are acting as the project manager for the procurement delivery, installation and commissioning of that equipment. It is in Papua New Guinea as we speak, and we anticipate having it installed over the coming weeks. Talking about then the maintaining of our own equipment and it is modern miss, maybe I invented a word just then, but keeping it current with technology is important to us, and we do factor into our capital plans, our capital expenditure plans, the refurbishment as well as upgrade and replacement of key components.
As far as commercial modeling, I'm going to give an answer to say all of the above scenarios that you outlined are on the table with us certain upgrades that are necessary to meet customer requirements are generally done on the basis being compensated in the term of the contract, if not as an upfront part of commitment to the rig. But the ongoing maintenance of the equipment and keeping it modern is generally conducted by High Arctic and amortized across our -- across the lifetime of the asset.
Okay. Good. One last one for me. Given the significant amount of work that's going to happen if the trains are approved. Have you seen competitors mobilizing, bringing in equipment? Or are you really in an enviable position still as being the only one with equipment and manpower in country?
Yes. So we do expect to see another contractor mobilized the contractor who delivered the original development wells for PNG LNG Phase 1 back in 2011 to '14. We do expect to see them to be mobilized at some stage here in the coming year or 2 to conduct some further drilling. This is drilling of wells that are outside the scope of the rig capacity of High Arctic. Aside from that though, we are the only contractor who have remained in the country where you have the only job-ready drilling equipment in country. And crucially, we're the only contractor who has heavy transportable equipment.
And as those who are familiar with Papua New Guinea would know there is a distinct lack of infrastructure in the country. And having the ability to move equipment using the river systems and then helicopters flying through the mountains and over the rain forest is the only way to be able to move a piece of mobile plant from one place to another. So we believe that our position and protection of our market is strong, but we're not surprised by -- would not be surprised by, in fact, we'd be quite happy to see the operator of the PNG LNG project, bringing back to -- into service a rig capable of adding some further development wells in those fields.
[Operator Instructions] There are no further questions at the moment, Mr. Maguire.
Very good. And I think, Michael, we will wish everybody a good afternoon. Thank you for joining us on the High Arctic Energy Services third quarter results call.
Certainly, sir. Ladies and gentlemen, your conference has now ended. All callers are asked to disconnect their lines at this time, and thank you for joining today's call.