High Arctic: Transeuro Owes 'Rent' for Equipment

High Arctic Energy Services Inc. announced that certain of its subsidiaries and affiliates have filed a Statement of Defence and a Statement of Counterclaim in the Supreme Court of British Columbia in respect of its ongoing legal dispute with Transeuro Energy Corp. The filings will serve to consolidate the previously announced claim filed by High Arctic Energy Services L.P. in the Court of Queen's Bench of Alberta on May 7, 2007 with the claim filed by Transeuro Energy Corp. on that same date in the Supreme Court of British Columbia. The dispute relates to services provided to Transeuro by subsidiaries of High Arctic in Canada, Armenia, Ukraine and Papua New Guinea.

The previous claim filed by High Arctic Energy Services LP related solely to the activities in Canada whereas the Statement of Counterclaim now makes claims for all areas of dispute.

High Arctic Energy Services LP provided drilling services in late 2006 and 2007 to Transeuro at a well location in the area of Beaver River, British Columbia. The claim for unpaid services is $14.2 million. Transeuro has asserted, among other things, that it has been overcharged for the services.

The claims outside of Canada relate to services provided by High Arctic Energy Service LLC, a subsidiary located in Dubai, United Arab Emirates. In addition to the claims described below, High Arctic Energy Service LLC has claimed about US$2.3 million related to unpaid invoices for services provided and expenses incurred primarily related to personnel on the payroll of High Arctic providing services exclusively to Transeuro.

The claim in Armenia relates to the purchase and refurbishment of a drilling rig. High Arctic Energy Service LLC supplied the funds to purchase the drilling rig and supplied parts and services to refurbish it with the intention that High Arctic would own the rig and use it to complete a drilling program for Transeuro in Armenia. Transeuro has denied High Arctic access to the rig and has been using the rig in its drilling program. High Arctic Energy Service LLC is seeking US$5.4 million as compensation for the rig or delivery of the rig with compensation for its use.

The claim in Ukraine relates primarily to equipment supplied by High Arctic Energy Service LLC for use on a drilling rig contracted by Transeuro.

High Arctic Energy Service LLC has claimed that it is owed rent on the equipment of US$2.9 million to December 31, 2007 or is entitled to the value of the equipment of US$2.1 million.

The claim in Papua New Guinea relates to an agreement to supply a heliportable drilling rig to complete a drilling program for Transeuro. High Arctic proceeded with the purchase of a new build rig and reported an impairment loss of $7.5million in its September 30, 2007 financial statements.

High Arctic Energy Service LLC is seeking damages related to the impairment loss on the rig and cancellation of the drilling contract.

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