CALGARY, Alberta, May 06, 2020 (GLOBE NEWSWIRE) — Total Energy Services Inc. (“Total Energy” or the “Company”) (TSX:TOT) announces its consolidated financial results for the three months ended March 31, 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.Total Energy’s results for the three months ended March 31, 2020 reflect continued challenging industry conditions in Canada, a deterioration of industry conditions in the United States and reduced production activity in the Compression and Process Services (“CPS”) segment. This was somewhat offset by relatively stable industry activity levels in Australia.  Included in the financial results for the three months ended March 31, 2020 was $7.9 million of income relating to unrealized foreign exchange gains from translation of working capital balances of foreign subsidiaries as compared to unrealized losses of $1.2 million in the same period in 2019.  Negatively impacting first quarter results for 2020 was a $0.4 million increase to the Company’s allowance for doubtful accounts receivable and $0.4 million of expenses to relocate rental equipment from Canada to the United States.Total Energy’s Contract Drilling Services (“CDS”) segment achieved 22% utilization during the first quarter of 2020, recording 2,166 operating days (spud to rig release) with a fleet of 107 drilling rigs, compared to 2,021 operating days, or 20% utilization, during first quarter of 2019 with a fleet of 114 drilling rigs.  Revenue per operating day was $19,864 in the first quarter of 2020, a 12% decrease from the comparable period in 2019.  This decrease was due primarily to the mix of equipment operating in North America, notably a significant year over year decrease in the utilization of triples with the expiration of contracts and the determination not to work at depressed spot market rates.  During the first quarter of 2020, the CDS segment had 1,457 operating days in Canada with a fleet of 82 rigs (20% utilization), 327 days in the United States with a fleet of 20 rigs (18% utilization) and 382 days (including paid standby days) in Australia with a fleet of 5 rigs (84% utilization).The Rentals and Transportation Services (“RTS”) segment achieved a utilization rate on major rental equipment of 15% during the first quarter of 2020 compared to 23% utilization during the first quarter of 2019.  Segment revenue per utilized rental piece in the first quarter of 2020 was 41% higher than revenue per utilized piece in the first quarter of 2019 due primarily to improved pricing for assets relocated to the United States and the mix of equipment operating during the quarter.  This segment exited the first quarter of 2020 with approximately 10,610 pieces of major rental equipment (excluding access matting) and 87 heavy trucks as compared to 10,660 rental pieces and 91 heavy trucks at March 31, 2019.Revenue in the CPS segment decreased 66% to $40.7 million for the three months ended March 31, 2020 compared to $121.1 million for the same period in 2019.  This decrease was primarily due to lower fabrication sales activity.  This segment exited the first quarter of 2020 with a $44.5 million backlog of fabrication sales orders as compared to $159.8 million at March 31, 2019 and $48.6 million at December 31, 2019. At March 31, 2020, there was 50,400 horsepower in the compression rental fleet, of which approximately 33,900 horsepower was on rent as compared to 30,600 horsepower on rent at March 31, 2019.  The gas compression rental fleet operated at an average utilization rate of 68% during the first quarter of both 2020 and 2019.Total Energy’s Well Servicing (“WS”) segment generated $33.7 million of revenue during the first quarter of 2020 on 41,530 service hours, or $811 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 $36.8 million of revenue during the first quarter of 2019 on 42,649 service hours, or $863 per service hour.  Service rig utilization for the three months ended March 31, 2020 was 32% in Canada, 44% in the United States and 74% in Australia. During the first quarter of 2020 Total Energy repurchased 68,700 common shares at an average price (including commissions) of $6.21 per share pursuant to its normal course issuer bid.  The previously declared 2019 fourth quarter dividend of $0.06 per share was paid on January 31, 2020.  The Company previously announced its determination to suspend payment of a dividend beginning in the first quarter of 2020 until such time as industry conditions stabilize and visibility improves.OutlookOn March 11, 2020 the World Health Organization declared the novel coronavirus (COVID-19) outbreak a global pandemic.  Around the same time, a battle for market share in global oil markets ensued.  The dual shocks of the COVID-19 pandemic and collapse in oil prices have contributed to unprecedented challenges and uncertainty for the global energy industry.  The Canadian energy industry was particularly vulnerable to these unanticipated events given the ongoing lack of oil pipeline capacity and consequential inability to access eastern Canadian and world oil markets.Total Energy’s foremost concern is the health and safety of its employees and other stakeholders as well as the public at large.  Protocols have been implemented throughout the Company’s global operations to mitigate the spread of the COVID-19 virus and Total Energy is pleased that there have been no reported cases of infection in any of its business segments to date.With the collapse in oil prices, North American producers have and are expected to continue to significantly reduce near term capital spending.  This has resulted in a substantial decrease in North American industry activity levels.  A notable exception is the expected increase in Canadian oil and natural gas well abandonment and reclamation activity following the recent announcement of the Canadian federal government to provide $1.7 billion to accelerate such activity.  Total Energy expects to benefit from such increased activity within its WS and RTS segments.While the full magnitude and duration of the current downturn is uncertain, Total Energy has taken immediate and substantial steps to reduce cash outflows and protect its balance sheet and financial liquidity, including the following:suspended its dividend ($10.8 million of annual cash savings);reduced its 2020 capital expenditure budget by $13.0 million to $10.0 million;reduced its North American employee head count to levels below those immediately prior to the Company’s acquisition of Savanna Energy Services in June 2017;reduced director and officer compensation by 10% to 15%;reduced North American employee compensation by a minimum of 10% through salary and wage rollbacks, reduced hours of service and job sharing;reduced and eliminated discretionary North American employee benefit plans;further RTS segment branch closures in Canada and temporary withdrawal from service of a substantial portion of the North American heavy truck fleet;suspended all non-essential travel and discretionary spending; andapplied for all available government assistance programs intended to protect jobs.Activity levels have remained relatively stable in Australia to date and therefore no significant adjustments have yet been made to Australian operations.  However, the Company is monitoring industry conditions closely and will promptly make such adjustments as conditions warrant.Despite the current market conditions, on April 29, 2020 Total Energy completed the refinancing of $40.2 million of term debt that matured with a $50 million five-year term loan bearing interest at an annual fixed rate of 3.10%.  Such loan is amortized over 20 years with blended monthly principal and interest payments.  The additional proceeds from such loan will be used to reduce indebtedness under the Company’s revolving syndicated bank credit facility. Total Energy has demonstrated over its 24-year history the ability to generate free cash flow during previous industry downturns.  While the current downturn is unlike any before, the measures taken by the Company to reduce cash costs are also unprecedented.  These measures, combined with Total Energy’s geographic and business diversification, position the Company not only to survive this downturn but to also increase market share and capitalize on other opportunities that will arise as the energy industry goes through a process of rationalization and consolidation.  While such process is difficult and negatively impacts many stakeholders, it is also necessary to ensure the future sustainability and economic viability of the North American energy service industry.  Conference Call
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