November 8, 2018 - 5:00 PM EST
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Total Energy Services Inc. Announces Q3 2018 Results

CALGARY, Alberta, Nov. 08, 2018 (GLOBE NEWSWIRE) -- Total Energy Services Inc. (“Total Energy” or the “Company”) (TSX:TOT) announces its consolidated financial results for the three and nine months ended September 30, 2018.

Financial Highlights
($000’s except per share data)

 Three Months Ended September 30 Nine Months Ended September 30
    
  2018 2017Change  2018 2017 Change
Revenue$232,925$185,15826% $631,963$424,432 49%
Operating Income (Loss) 14,294 6,871108%  25,810 (6,475)n/m 
EBITDA (1) 34,632 27,35627%  85,513 41,875 104%
Cashflow 34,799 30,04416%  78,420 48,768 61%
Net Income (Loss) 8,655 3,737132%  15,645 (10,257)n/m 
        
Attributable to shareholders 8,910 4,307107%  15,903 (8,111)n/m 
        
        
Per Share Data (Diluted)        
EBITDA (1)$0.75$0.5927% $1.85$1.03 80%
Cashflow$0.75$0.6515% $1.70$1.20 42%
Net Income (Loss) attributable to shareholders$0.19$0.09111% $0.34$(0.20)n/m 
        
        
     September 30,
2018
December 31,
2017
Change
Financial Position       
Total Assets    $1,063,813$1,066,781 0%
Long-Term Debt and Obligations Under Finance Leases (excluding current portion)   295,545 257,845 15%
Working Capital (2)     117,586 54,892 114%
Net Debt (3)     177,959 202,953 (12%)
Shareholders’ Equity     549,238 546,574 0%
        
Common Shares (000’s)(4)       
Basic and Diluted 46,099 46,2380%  46,186 40,523 14%

“n/m” – calculation not meaningful
Notes 1 through 4 please refer to the Notes to the Financial Highlights set forth at the end of this release.


Total Energy’s financial results for the three months ended September 30, 2018 represent the fifth consecutive profitable quarter for the Company.  Underlying these results were improving energy service industry conditions in the United States and Australia, the realization of efficiencies of scale and cost synergies arising from the integration of Savanna Energy Services Corp. (“Savanna”) and improved discipline in declining unprofitable work.  Included in 2018 third quarter selling, general and administrative expenses was $0.6 million of legal expenses related to two claims made against Savanna following the takeover of Savanna by the Company.

Total Energy’s Contract Drilling Services segment (“CDS”) achieved 27% utilization during the third quarter of 2018, recording 2,836 operating days (spud to rig release) with a fleet of 116 drilling rigs, compared to 3,153 operating days, or 29% utilization, during the third quarter of 2017 with a fleet of 119 drilling rigs.  Revenue per operating day for the third quarter of 2018 was $20,341, a 9% increase from the prior year comparable period.  During the third quarter of 2018, the CDS segment had 1,687 operating days in Canada with a fleet of 86 rigs (21% utilization), 783 days in the United States with a fleet of 25 rigs (34% utilization) and 366 days in Australia with a fleet of 5 rigs (80% utilization). 

The Rental and Transportation Services segment (“RTS”) achieved a utilization rate on major rental equipment of 24% during the third quarter of 2018 which was consistent with the third quarter of 2017.  Segment revenue per utilized rental piece decreased 2% during the third quarter of 2018 compared to the same period in 2017 due to a change in mix of equipment operating.  This segment exited the third quarter of 2018 with approximately 11,000 pieces of major rental equipment (excluding access matting) and 112 heavy trucks as compared to 11,700 rental pieces and 125 heavy trucks at September 30, 2017.

Revenue in the Compression and Process Services segment (“CPS”) increased 70% to $114.8 million for the three months ended September 30, 2018 compared to $67.7 million for the same period in 2017.  This increase was primarily due to higher international activity levels, including increasing contribution from the Weirton, West Virginia compression fabrication facility.  This segment exited the third quarter of 2018 with a $236.7 million backlog of fabrication sales orders as compared to $160.7 million at September 30, 2017 and $216.9 million at June 30, 2018.  At September 30, 2018, there was 45,500 horsepower in the compression rental fleet, of which approximately 31,500 horsepower was on rent as compared to 20,200 horsepower on rent at September 30, 2017 and 24,800 horsepower at June 30, 2018.  The gas compression rental fleet operated at an average utilization rate of 69% during the third quarter of 2018 as compared to 46% during the third quarter of 2017.

Total Energy’s Well Servicing segment (“WS”) generated $41.0 million of revenue during the third quarter of 2018 on 44,447 service hours, or $922 per service hour, with a fleet of 83 service rigs that were located in Canada (57 rigs), the United States (14 rigs) and Australia (12 rigs).  This compares to $39.3 million of revenue during the third quarter of 2017 on 41,256 service hours, or $952 per service hour.  Service rig utilization for the three months ended September 30, 2018 was 39% in Canada, 37% in the United States and 71% in Australia. 

During the third quarter of 2018 Total Energy repurchased 200,000 common shares at an average price (including commissions) of $11.69 per share pursuant to its normal course issuer bid and declared a quarterly dividend of $0.06 per share to shareholders of record on September 30, 2018.  This dividend was paid on October 31, 2018.  For Canadian income tax purposes, all dividends paid by Total Energy on its common shares are designated as “eligible dividends” unless otherwise indicated.

Outlook

Oil and natural gas industry activity levels continued to recover in the United States and Australia during the third quarter and current expectations are that such markets will remain relatively strong compared to 2017.  Industry conditions remain stagnant in Canada, where oil and natural gas price discounts continue to be exacerbated by insufficient pipeline capacity.  Current indications are that upcoming Canadian winter activity will be similar to last year.

In response to increasing domestic and international demand, as evidenced by its record fabrication sales backlog, the CPS segment recently leased a 84,400 square foot fabrication facility in Calgary, Alberta that will replace an existing 24,800 square foot leased facility.  This facility will increase Canadian fabrication space by approximately 30% to 246,600 square feet and plant production is expected to ramp up over the next two quarters.

Given continued weakness in Canadian oil and natural gas drilling and completion activity combined with higher labour, fuel and utility costs arising from regulatory changes in Alberta, five RTS branch locations have or will be closed by the end of 2018.  These RTS branch closures are the first in Total Energy’s 22-year history and are necessary to reduce this segment’s fixed cost structure given persistently lower Canadian industry activity levels and the inability to fully pass on higher operating costs to customers.  Following these closures, the RTS segment will operate from 20 branches in western Canada. 

Total Energy’s working capital position at September 30, 2018 was $117.6 million, including $27.9 million of cash and marketable securities.  During the first nine months of 2018, the Company has reduced the principal amount of debt outstanding by $32.1 million and at September 30, 2018 $236.0 million was drawn on the Company’s $295.0 million of revolving bank credit facilities.  Total Energy was in compliance with all debt covenants at September 30, 2018 and able to fully draw on the remaining amounts available under its credit facilities.  Total Energy’s primary credit facility provides the Company with the option to increase such facility by $75 million subject to certain terms and conditions including the agreement of the lenders to increase their commitments.

Conference Call

At 9:00 a.m. (Mountain Time) on November 9, 2018 Total Energy will conduct a conference call and webcast to discuss its third quarter financial results.  Daniel Halyk, President & Chief Executive Officer, will host the conference call.  A live webcast of the conference call will be accessible on Total Energy’s website at www.totalenergy.ca by selecting “Webcasts”.  Persons wishing to participate in the conference call may do so by calling (855) 327-6838 or (416) 915-3239.  Those who are unable to listen to the call live may listen to a recording of it on Total Energy’s website.  A recording of the conference call will also be available until December 8, 2018 by dialing (855) 669-9658 (passcode 2663).


Selected Financial Information

Selected financial information relating to the three and nine months ended September 30, 2018 and 2017 is attached to this news release.  This information should be read in conjunction with the condensed interim consolidated financial statements of Total Energy and the notes thereto as well as management’s discussion and analysis to be issued in due course and reproduced in the Company’s 2018 third quarter report.


Consolidated Statements of Financial Position
(in thousands of Canadian dollars)

   September 30, December 31,
   2018
 2017 
   (unaudited)  (audited)
Assets     
Current assets:     
Cash and cash equivalents  $   24,414  $21,154 
Accounts receivable   146,792   150,990 
Inventory   93,594   68,266 
Income taxes receivable   -   1,176 
Other assets   3,486   4,631 
Prepaid expenses and deposits   16,449   15,148 
    284,735   261,365 
      
Property, plant and equipment   765,728   793,464 
Income taxes receivable   7,070   7,070 
Deferred tax asset   2,227   829 
Goodwill   4,053   4,053 
   $ 1,063,813  $1,066,781 
      
Liabilities & Shareholders' Equity     
Current liabilities:     
Accounts payable and accrued liabilities  $   118,079  $108,421 
Deferred revenue   39,665   21,625 
Income taxes payable   1,526   - 
Dividends payable   2,760   2,774 
Current portion of obligations under finance leases   2,055   1,595 
Current portion of long-term debt   3,064   72,058 
    167,149   206,473 
      
Long-term debt   292,554   255,640 
      
Obligations under finance leases   2,991   2,205 
      
Onerous lease liability   1,488   2,734 
      
Deferred tax liability   50,393   53,155 
      
Shareholders' equity:     
Share capital   289,862   291,317 
Contributed surplus   5,785   4,550 
Accumulated other comprehensive loss   (13,214)  (10,194)
Non-controlling interest   122   1,196 
Retained earnings   266,683   259,705 
    549,238   546,574 
      
   $ 1,063,813  $1,066,781 
          



Consolidated Statements of Comprehensive Income (Loss)
(in thousands of Canadian dollars except per share amounts)
(unaudited)
   

  Three months ended
September 30
Nine months ended
September 30
   2018  2017  2018  2017 
      
Revenue $  232,925  $185,158 $  631,963   $424,432 
      
Cost of services  184,750  144,353  505,089  346,596 
Selling, general and administration  13,904  12,915   41,543   35,168 
Share-based compensation  499  709   1,798   1,193 
Depreciation  19,478  20,310   57,723   47,950 
Operating income (loss)  14,294  6,871  25,810  (6,475)
      
Gain on sale of property, plant and equipment  860  175  1,980  400 
Finance costs  (2,940) (3,053) (10,293) (10,296)
Net income (loss) before income taxes  12,214  3,993  17,497  (16,371)
      
Current income tax expense (recovery)  2,963  1,802  5,737  (3,156)
Deferred income tax expense (recovery)  596  (1,546) (3,885) (2,958)
Total income tax expense (recovery)  3,559  256  1,852  (6,114)
      
Net income (loss) for the period $  8,655 $3,737 $  15,645 $(10,257)
      
Net income (loss) attributable to:     
Shareholders of the Company $  8,910 $4,307 $   15,903 $(8,111)
Non-controlling interest  (255) (570) (258) (2,146)
      
Income (loss) per share     
Basic and diluted $  0.19 $0.09 $   0.34 $(0.20)
      

Condensed Interim Consolidated Statements of Comprehensive Income (Loss)
(unaudited)

  Three months ended
September 30
Nine months ended
September 30
   2018  2017  2018  2017 
      
Net income (loss) for the period $  8,655 $3,737 $  15,645 $(10,257)
      
Changes in fair value of long-term investment  -  -  -  665 
Realized gain on long-term investment  -  -  -  (665)
Foreign currency translation adjustment  (6,994) (6,069) (3,295) (10,820)
Deferred tax effect  680  1,639  275  2,922 
      
Total other comprehensive loss for the period  (6,314) (4,430) (3,020) (7,898)
      
Total comprehensive income (loss) $  2,341 $(693)$  12,625 $(18,155)
      
Total comprehensive income (loss) attributable to:     
      
Shareholders of the Company $  2,596 $(123)$  12,883 $(16,009)
Non-controlling interest  (255) (570) (258) (2,146)
 



Consolidated Statements of Cash Flows
(in thousands of Canadian dollars)
(unaudited)

  Three months ended
September 30
Nine months ended
September 30
   2018  2017  2018  2017 
      
Cash provided by (used in):     
      
Operations:     
Net income (loss) for the period $  8,655 $3,737 $  15,645 $(10,257)
Add (deduct) items not affecting cash:     
Depreciation  19,478  20,310  57,723  47,950 
Share-based compensation  499  709  1,798  1,193 
Gain on sale of property, plant and equipment  (860) (175) (1,980) (400)
Finance costs  1,987  2,742  9,115  10,296 
Unrealized loss (gain) on foreign currencies translation  394  253  (2,698) 4,949 
Current income tax expense (recovery)  2,963  1,802  5,737  (3,156)
Deferred income tax expense (recovery)  596  (1,546) (3,885) (2,958)
Income taxes recovered (paid)  1,087  2,212  (3,035) 1,151 
Cashflow  34,799  30,044  78,420  48,768 
Changes in non-cash working capital items:     
Accounts receivable  (18,061) (32,570) 2,806  (15,978)
Inventory  (11,326) (913) (25,328) 4,523 
Prepaid expenses and deposits  (291) (4,488) 781  (10,654)
Accounts payable and accrued liabilities  3,250  5,590  11,574  7,009 
Onerous leases  (201) (227) (1,246) (270)
Deferred revenue  11,758  235  18,040  4,259 
Cash provided by (used in) operating activities  19,928  (2,329) 85,047  37,657 
Investing:     
Purchase of property, plant and equipment  (7,425) (8,874) (28,502) (22,306)
Acquisitions  -  -  -  (26,830)
Cash acquired  -  -  -  16,167 
Proceeds on sale of other assets  954  143  1,181  258 
Proceeds on disposal of property, plant and equipment  1,695  1,814  3,798  2,842 
Changes in non-cash working capital items  344  418  (1,675) 205 
Cash used in investing activities  (4,432) (6,499) (25,198) (29,664)
Financing:     
Advances on long-term debt  -  6,023  50,000  210,023 
Repayment of long-term debt  (2,237) (4,178) (82,080) (210,076)
Repayment of obligations under finance leases  (601) (433) (1,669) (1,377)
Dividends to shareholders  (2,772) (2,774) (8,247) (6,961)
Issuance of common shares  -  -  -  2,289 
Repurchase of common shares  (2,122) -  (2,719) - 
Partnership distributions  -  -  (475) - 
Purchase of Partners’ share in limited partnership  (332) -  (332) - 
Interest paid  (3,087) (2,850) (11,067) (14,735)
Cash used in financing activities  (11,151) (4,212) (56,589) (20,837)
      
Change in cash and cash equivalents  4,345  (13,040) 3,260  (12,844)
      
Cash and cash equivalents, beginning of period  20,069  16,112  21,154  15,916 
      
Cash and cash equivalents, end of period $  24,414 $3,072 $  24,414 $3,072 
      



Segmented Information

The Company provides a variety of products and services in the oil and natural gas industry through five reporting segments, which operate substantially in three geographic segments.  These reporting segments are Contract Drilling Services, which includes the contracting of drilling equipment and the provision of labour required to operate the equipment, Rentals and Transportation Services, which includes the rental and transportation of equipment used in drilling, completion and production operations, Compression and Process Services, which includes the fabrication, sale, rental and servicing of natural gas compression and oil and natural gas process equipment and Well Servicing, which includes the contracting of service rigs and the provision of labour required to operate the equipment.  Corporate includes activities related to the Company’s corporate and public issuer affairs.

As at and for the three months ended September 30, 2018 (unaudited)

 ContractRentals andCompressionWell CorporateTotal
 DrillingTransportationand ProcessServicing  
 ServicesServicesServices   
       
Revenue$  57,687  $  19,462  $  114,811 $  40,965 $  -   $  232,925 
       
Cost of services 45,287  12,474  98,215  28,774   -    184,750 
Selling, general and administration 1,836  3,359  3,262  1,120  4,327  13,904 
Share-based compensation  -     -     -     -    499  499 
Depreciation 8,544  4,070  1,874  4,965  25  19,478 
Operating income (loss) 2,020  (441) 11,460  6,106  (4,851) 14,294 
       
Gain (loss) on sale of property, plant and equipment 298  (144) 193  513   -    860 
Finance costs (17) (18) (10) (26) (2,869) (2,940)
       
Net income (loss) before income taxes 2,301  (603) 11,643  6,593  (7,720) 12,214 
       
Goodwill  -     2,514    1,539   -   -     4,053  
Total assets 432,267  240,689  234,413  134,966  21,478  1,063,813 
Total liabilities 50,497  39,190  103,835  4,061  316,992  514,575 
Capital expenditures   2,114    2,916    2,062    333     -     7,425 


 CanadaUnited StatesAustraliaOtherTotal
      
Revenue$  125,404 $  68,713$    38,714$  94$  232,925
Non-current assets (1)   534,879  154,279 80,623  769,781

As at and for the three months ended September 30, 2017 (unaudited)

 ContractRentals andCompressionWellCorporateTotal
 DrillingTransportationand ProcessServicing  
 ServicesServicesServices   
       
Revenue$58,634 $19,535 $67,707 $39,282 $- $185,158 
       
Cost of services 48,271  10,783  56,542  28,757  -  144,353 
Selling, general and administration 2,774  3,136  2,357  1,664  2,984  12,915 
Share-based compensation -  -  -  -  709  709 
Depreciation 10,854  4,519  1,852  2,898  187  20,310 
Operating income (loss) (3,265) 1,097  6,956  5,963  (3,880) 6,871 
       
Gain on sale of property, plant and equipment 5  84  56  (14) 44  175 
Finance costs (117) (173) (94) (1) (2,668) (3,053)
       
Net income (loss) before income taxes (3,377) 1,008  6,918  5,948  (6,504) 3,993 
       
Goodwill -  2,514  1,539  -  -  4,053 
Total assets 444,009  239,014  174,744  133,647  65,124  1,056,538 
Total liabilities 59,066  44,339  60,881  14,678  332,927  511,891 
Capital expenditures 2,377  3,894  1,843  444  316  8,874 


 CanadaUnited StatesAustraliaOtherTotal
      
Revenue$91,739$58,405$34,981$33$185,158
Non-current assets (1) 578,765 138,208 94,150 - 811,123

As at and for the nine months ended September 30, 2018 (unaudited)

 ContractRentals andCompressionWellCorporateTotal
 DrillingTransportationand ProcessServices  
 ServicesServicesServices   
       
Revenue$  156,930  $  56,656 $  305,082 $  113,295 $  -   $  631,963 
       
Cost of services 126,280  36,494  261,397  80,918   -    505,089 
Selling, general and administration 6,285  10,579  9,545  3,357  11,777  41,543 
Share-based compensation  -     -     -     -    1,798  1,798 
Depreciation 24,134  13,012  5,465  15,051  61  57,723 
Operating income (loss) 231  (3,429) 28,675  13,969  (13,636) 25,810 
       
Gain on sale of property, plant and equipment 425  218  431  906   -    1,980 
Finance costs (44) (74) (30) (104) (10,041) (10,293)
       
Net income (loss) before income taxes 612  (3,285) 29,076  14,771  (23,677) 17,497 
       
Goodwill  -     2,514    1,539    -     -     4,053  
Total assets 432,267  240,689  234,413  134,966  21,478  1,063,813 
Total liabilities 50,497  39,190  103,835  4,061  316,992  514,575 
Capital expenditures   10,574     8,064    7,263    2,594    7     28,502 


 CanadaUnited StatesAustraliaOtherTotal
      
Revenue$ 317,839 $  198,585$  115,445 $  94  $  631,963
Non-current assets (1)   534,879  154,279 80,623  769,781

As at and for the nine months ended September 30, 2017 (unaudited)

 ContractRentals andCompressionWellCorporateTotal
 DrillingTransportationand ProcessServicing  
 ServicesServicesServices   
Revenue$106,634 $50,468 $193,163 $74,167 $- $424,432 
       
Cost of services 94,367  30,413  167,214  54,602  -  346,596 
Selling, general and administration 6,424  9,096  6,145  3,244  10,259  35,168 
Share-based compensation -  -  -  -  1,193  1,193 
Depreciation 20,378  13,548  5,497  7,472  1,055  47,950 
Operating income (loss) (14,535) (2,589) 14,307  8,849  (12,507) (6,475)
       
Gain on sale of property, plant and equipment 5  279  86  (14) 44  400 
Finance costs (305) (530) (281) (1) (9,179) (10,296)
       
Net income (loss) before income taxes (14,835) (2,840) 14,112  8,834  (21,642) (16,371)
       
Goodwill -  2,514  1,539  -  -  4,053 
Total assets 444,009  239,014  174,744  133,647  65,124  1,056,538 
Total liabilities 59,066  44,339  60,881  14,678  332,927  511,891 
Capital expenditures 7,618  8,595  4,309  777  1,007  22,306 


 CanadaUnited StatesAustraliaOtherTotal
      
Revenue$251,421$102,458$70,509$44$424,432
Non-current assets (1) 578,765 138,208 94,150 - 811,123

(1)      Includes property, plant and equipment and goodwill.


Total Energy Services Inc. is a growth oriented energy services corporation involved in contract drilling services, rentals and transportation services, the fabrication, sale, rental and servicing of natural gas compression and oil and natural gas process equipment and well servicing.  The common shares of Total Energy are listed and trade on the TSX under the symbol TOT. 

For further information, please contact Daniel Halyk, President & Chief Executive Officer at (403) 216-3921 or Yuliya Gorbach, Vice-President Finance and Chief Financial Officer at (403) 216-3920 or by e-mail at:  [email protected] or visit our website at www.totalenergy.ca

Notes to the Financial Highlights

  1. EBITDA means earnings before interest, taxes, depreciation and amortization and is equal to net income before income taxes plus finance costs plus depreciation.  EBITDA is not a recognized measure under IFRS. Management believes that in addition to net income, EBITDA is useful supplemental measure as it provides an indication of the results generated by the Company’s primary business activities prior to consideration of how those activities are financed, amortized or how the results are taxed in various jurisdictions as well as the cash generated by the Company’s primary business activities without consideration of the timing of the monetization of non-cash working capital items. Readers should be cautioned, however, that EBITDA should not be construed as an alternative to net income determined in accordance with IFRS as an indicator of Total Energy’s performance. Total Energy’s method of calculating EBITDA may differ from other organizations and, accordingly, EBITDA may not be comparable to measures used by other organizations.
     
  2. Working capital equals current assets minus current liabilities.
     
  3. Net Debt equals long-term debt plus obligations under finance leases plus current liabilities minus current assets.
     
  4. Basic and diluted shares outstanding reflect the weighted average number of common shares outstanding for the periods. See note 6 to the Company’s condensed interim consolidated financial statements for the three and nine months ended September 30, 2018.

             

Certain statements contained in this press release, including statements which may contain words such as "could", "should", "expect", "believe", "will" and similar expressions and statements relating to matters that are not historical facts are forward-looking statements.  Forward-looking statements are based upon the opinions and expectations of management of Total Energy as at the effective date of such statements and, in some cases, information supplied by third parties. Although Total Energy believes the expectations reflected in such forward-looking statements are based upon reasonable assumptions and that information received from third parties is reliable, it can give no assurance that those expectations will prove to have been correct.

In particular, this press release contains forward-looking statements concerning industry activity levels, expectations regarding Total Energy's market share and future compression and process production activity, Total Energy's expectations of future interest rates and its corresponding ability to realize substantial interest expense savings, expectations as to the Company’s ability to realize cost efficiencies and synergies arising from the acquisition of Savanna as well as other expected benefits of the acquisition.  Such forward-looking statements are based on a number of assumptions and factors including fluctuations in the market for oil and natural gas and related products and services, political and economic conditions, central bank interest rate policy, the demand for products and services provided by Total Energy, Total Energy’s ability to attract and retain key personnel and other factors. Such forward-looking statements involve known and unknown risks and uncertainties which may cause the actual results, performances or achievements of Total Energy to be materially different from any future results, performances or achievements expressed or implied by such forward-looking statements.  Reference should be made to Total Energy’s most recently filed Annual Information Form and other public disclosures (available at www.sedar.com) for a discussion of such risks and uncertainties.

The TSX has neither approved nor disapproved of the information contained herein.

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Source: GlobeNewswire (November 8, 2018 - 5:00 PM EST)

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