CALGARY, Alberta, Aug. 11, 2020 (GLOBE NEWSWIRE) — Total Energy Services Inc. (“Total Energy” or the “Company”) (TSX:TOT) announces its consolidated financial results for the three and six months ended June 30, 2020.
Financial Highlights
($000’s except per share data)Notes 1 through 4 please refer to the Notes to the Financial Highlights set forth at the end of this release.“nm” – calculation not meaningful
Total Energy’s results for the three months ended June 30, 2020 reflect extremely challenging industry conditions in North America and relatively stable industry conditions in Australia. Included in the financial results for the three months ended June 30, 2020 was $30.5 million of incremental depreciation expense resulting from a change in depreciation estimates in the Contract Drilling Services (“CDS”) segment effective April 1, 2020, of which $26.3 million is non-recurring as it relates to now fully depreciated assets. Also included in the Company’s 2020 second quarter results was $0.5 million of unrealized foreign exchange losses on the translation of intercompany working capital balances of foreign subsidiaries and $4.5 million of grants received under the Canada Emergency Wage Subsidy program.Total Energy’s CDS segment achieved 5% utilization during the second quarter of 2020, recording 440 operating days (spud to rig release) with a fleet of 98 drilling rigs, compared to 1,330 operating days, or 13% utilization, during the second quarter of 2019 with a fleet of 111 drilling rigs. Revenue per operating day was $32,205 in the second quarter of 2020, a 27% increase from the second quarter of 2019. This increase was due to the significant year over year increase in the relative contribution of Australia to consolidated CDS segment revenue. During the second quarter of 2020, the CDS segment had 72 operating days in Canada with a fleet of 80 rigs (1% utilization), 41 days in the United States with a fleet of 13 rigs (3% utilization) and 327 days (including paid standby days) in Australia with a fleet of 5 rigs (72% utilization). Nine drilling rigs were decommissioned during the second quarter of 2020, including seven mechanical double rigs located in the United States and two conventional single rigs located in Canada.The Rentals and Transportation Services (“RTS”) segment achieved a utilization rate on major rental equipment of 5% during the second quarter of 2020 compared to 13% utilization during the second quarter of 2019. Segment revenue per utilized rental piece in the second quarter of 2020 was 20% lower than the second quarter of 2019 due to the mix of equipment operating and lower pricing. This segment exited the second quarter of 2020 with 10,640 pieces of major rental equipment (excluding access matting) and 87 heavy trucks as compared to 10,650 rental pieces and 86 heavy trucks at June 30, 2019. A substantial portion of the heavy truck fleet was taken out of service during the second quarter to reduce operating costs and equipment wear and tear until such time as North American industry conditions warrant placing such units back into service.Revenue in the Compression and Process Services (“CPS”) segment decreased 77% to $30.2 million for the three months ended June 30, 2020 compared to $132.9 million for the same period in 2019. This decrease was primarily due to lower fabrication sales activity. This segment exited the second quarter of 2020 with a $43.8 million backlog of fabrication sales orders as compared to $77.2 million at June 30, 2019 and $44.5 million at March 31, 2020. At June 30, 2020, there was 52,500 horsepower in the compression rental fleet, of which approximately 33,200 horsepower was on rent as compared to 31,800 horsepower on rent at June 30, 2019. The gas compression rental fleet operated at an average utilization rate of 65% during the second quarter of 2020 as compared to 68% in the second quarter of 2019.The Company’s Well Servicing (“WS”) segment generated $21.6 million of revenue during the second quarter of 2020 on 21,497 service hours, or $1,005 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 $30.5 million of revenue during the second quarter of 2019 on 31,109 service hours, or $980 per service hour. Service rig utilization for the three months ended June 30, 2020 was 6% in Canada, 11% in the United States and 64% in Australia. Following the outbreak of the COVID-19 pandemic in March 2020, in order to protect its financial strength and liquidity Total Energy took immediate and decisive action. This included significant operating and administrative cost cuts, suspension of the dividend and a 57% reduction to the 2020 capital expenditure budget from $23 million to $10 million. Excluding $3.7 million of 2019 capital expenditures carried into 2020, for the first half of 2020 capital expenditures totaled $6.5 million. Proceeds from the sale of capital assets to June 30, 2020 were $3.3 million and resulted in a gain on sale of $1.5 million, an approximate 46% premium to the net book value of the disposed assets.During the second quarter of 2020, the Company reduced long term debt by $32.9 million, or approximately 12%. $40.2 million of term debt that matured in April 2020 was refinanced with a five-year $50 million term loan bearing interest at a fixed annual rate of 3.10%. Total Energy exited the second quarter of 2020 with $131.0 million of positive working capital (including $21.1 million of cash) and $110 million available on the Company’s $295 million of revolving bank credit facilities. The weighted average interest rate on the Company’s outstanding debt at June 30, 2020 was 2.96%.OutlookTotal Energy’s foremost concern remains the health and safety of its employees and other stakeholders as well as the public at large as we navigate through these uncertain and challenging times. Protocols have been implemented throughout the Company’s global operations to mitigate the spread of the COVID-19 virus and have been effective thus far.Despite oil prices having recovered somewhat from the lows experienced during the second quarter, North American oil and natural gas drilling and completion activity levels remain at historically low levels. The Company currently has five drilling rigs working in Canada and three in the United States and visibility for the remainder of 2020 is limited.While industry drilling activity levels began to moderate in Australia during the second quarter, this did not have a substantial impact on the Company’s operations. Two of the Company’s five drilling rigs operating in Australia have recently been taken out of service to complete necessary recertifications and customer-specific upgrades that are expected to be completed by the second quarter of 2021.The CPS segment exited the second quarter of 2020 with a flat fabrication sales backlog compared to the first quarter. While quoting activity continues to be reasonably active, customers remain hesitant to commit to new orders. Relatively strong and stable western Canadian natural gas prices have supported demand for field compression maintenance activity.Within the WS segment, North American production related activity has decreased significantly on a year over year basis. While substantial government funding has been announced to accelerate well abandonment activity in Western Canada, to date no significant incremental service rig activity has resulted from such announcements although it is expected that such activity will begin in the near future.
Total Energy’s geographic and business diversification combined with an established track record of conducting its operations and spending its owners’ capital in a focused and disciplined manner has positioned the Company well during these challenging times. Total Energy’s ability to generate free cash flow from operations even during times of severe industry stress was demonstrated during the second quarter of 2020. While future visibility is limited, Total Energy expects that the global energy services industry will emerge from the current downturn with fewer and more disciplined participants which in turn will position the industry for a more sustainable and prosperous future.Conference Call
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