Bay Street News

Total Energy Services Inc. Announces Q1 2024 Results

CALGARY, Alberta, May 09, 2024 (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, 2024.

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

  Three months ended
March 31
    2024     2023   Change
Revenue $ 204,686   $ 237,777   (14 %)
Operating income   22,030     28,020   (21 %)
EBITDA (1)   43,290     48,475   (11 %)
Cashflow   32,837     48,672   (33 %)
Net income   15,463     24,038   (36 %)
Attributable to shareholders   15,482     24,040   (36 %)
               
Per Share Data (Diluted)              
EBITDA (1) $ 1.06   $ 1.15   (8 %)
Cashflow $ 0.80   $ 1.16   (31 %)
               
Attributable to shareholders:              
Net income $ 0.38   $ 0.57   (33 %)
               
Common shares (000’s)(4)              
Basic   39,971     41,322   (3 %)
Diluted   40,796     42,048   (3 %)
               
    March 31     December 31    
Financial Position at   2024     2023   Change
Total Assets $ 941,690   $ 861,658   9 %
Long-Term Debt and Lease Liabilities (excluding current portion) 149,847     100,834   49 %
Working Capital (2)   124,398     123,439   1 %
Net Debt (3)   25,449       nm
Shareholders’ Equity   543,967     530,758   2 %
               

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 first quarter of 2024 reflect relatively stable industry conditions in Canada and Australia and lower drilling activity levels in the United States. Extended wet weather conditions in Australia negatively impacted field activity levels. Included in results for the first quarter of 2024 is the contribution from Saxon Energy Services Australia Pty Ltd. (“Saxon”) from March 7, 2024 when the acquisition of Saxon was completed. Cashflow for the first quarter of 2024 was negatively impacted by the payment of $9.1 million of income taxes following the reassessment of certain Canadian income tax filings related to the Company’s conversion from an income trust in 2009. An additional $10.6 million of interest and penalties related to such reassessment was also paid during the first quarter of 2024.  

Contract Drilling Services (“CDS”)

   Three months ended
March 31
    2024     2023   Change
Revenue $ 81,211   $ 82,536   (2 %)
EBITDA (1) $ 22,346   $ 20,269   10 %
EBITDA (1) as a % of revenue   28 %   25 % 12 %
Operating days(2)   2,776     2,869   (3 %)
Canada   2,011     1,920   5 %
United States   359     590   (39 %)
Australia   406     359   13 %
Revenue per operating day(2), dollars $ 29,255   $ 28,768   2 %
Canada   27,473     27,021   2 %
United States   28,914     29,107   (1 %)
Australia   38,382     37,554   2 %
Utilization   31 %   34 % (9 %)
Canada   29 %   28 % 4 %
United States   33 %   50 % (34 %)
Australia   56 %   80 % (30 %)
Rigs, average for period   97     94   3 %
Canada   77     76   1 %
United States   12     13   (8 %)
Australia   8     5   60 %

(1)  See Note 1 of the Notes to the Financial Highlights set forth at the end of this release.
(2)  Operating days includes drilling and paid standby days.

The moderation of North American industry drilling activity that began in the third quarter of 2023 continued into the first quarter of 2024, particularly in the United States. Market share gains resulting from rig upgrades mitigated the decline in Canada. United States activity was also negatively impacted by the relocation of one triple rig to Canada in the second quarter of 2023. Saxon contributed $4.9 million of revenue and $0.1 million of operating income to the Australian contract drilling services segment in the first quarter of 2024. Offsetting the Saxon contribution were reduced field activity levels due to extended wet weather conditions and the depreciation of the Australian dollar relative to the Canadian dollar during first quarter of 2024 as compared to the first quarter of 2023.

Rentals and Transportation Services (“RTS”)

   Three months ended
March 31
    2024     2023   Change
Revenue $ 22,379   $ 24,413   (8 %)
EBITDA (1) $ 9,715   $ 9,650   1 %
EBITDA (1) as a % of revenue   43 %   40 % 8 %
Revenue per utilized piece of equipment, dollars $ 13,840   $    13,600   2 %
Pieces of rental equipment   7,700     9,455   (19 %)
Canada   6,790     8,555   (21 %)
United States   910     900   1 %
Rental equipment utilization   21 %   19 % 11 %
Canada   18 %   16 % 13 %
United States   38 %   46 % (17 %)
Heavy trucks   67     70   (4 %)
Canada   46     48   (4 %)
United States   21     22   (5 %)

(1)  See Note 1 of the Notes to the Financial Highlights set forth at the end of this release.

First quarter revenue in the RTS segment decreased as compared to the same period in 2023 due to lower industry activity, particularly in the United States. The higher year over year first quarter EBITDA and EBITDA margin was due to lower equipment mobilization costs in Canada, modestly higher revenue per utilized piece of equipment and the mix of equipment operating.

Compression and Process Services (“CPS”)

   Three months ended
March 31
    2024     2023   Change
Revenue $ 77,526   $ 98,118   (21 %)
EBITDA (1) $ 10,900   $ 12,599   (13 %)
EBITDA (1) as a % of revenue   14 %   13 % 8 %
Horsepower of equipment on rent at period end   48,376     44,719   8 %
Canada   13,856     19,209   (28 %)
United States   34,520     25,510   35 %
Rental equipment utilization during the period (HP)(2)   73 %   78 % (6 %)
Canada   69 %   74 % (7 %)
United States   76 %   81 % (6 %)
Sales backlog at period end, $ million $ 185.7   $ 227.4   (18 %)

(1)  See Note 1 of the Notes to the Financial Highlights set forth at the end of this release.
(2)  Rental equipment utilization is measured on a horsepower basis.

The year over year decrease in the CPS segment’s first quarter revenue was due to lower fabrication sales and the negative impact of low natural gas prices on parts and service activity. The decrease in fabrication sales was primarily due to a significant portion of fabrication activity being directed towards the construction of new compression rental units in response to customer demand. First quarter rental fleet utilization was lower on a year over year basis due to the deployment of several newly constructed rental units late in the first quarter of 2024, which in turn resulted in a 35% increase in horsepower on rent in the United States at March 31, 2024 as compared to December 31, 2023. The fabrication sales backlog decreased to $185.7 million compared to the $227.4 million backlog at March 31, 2023. Sequentially the quarter-end backlog continued to strengthen during the first quarter of 2024, increasing by $22.9 million from December 31, 2023.

Well Servicing (“WS”)

   Three months ended
March 31
    2024     2023   Change
Revenue $ 23,570   $ 32,710   (28 %)
EBITDA (1) $ 4,314   $ 8,279   (48 %)
EBITDA (1) as a % of revenue   18 %   25 % (28 %)
Service hours(2)   24,564     33,246   (26 %)
Canada   15,407     17,491   (12 %)
United States   3,515     6,644   (47 %)
Australia   5,642     9,111   (38 %)
Revenue per service hour(2), dollars $ 960   $ 984   (2 %)
Canada   974     984   (1 %)
United States   851     1,003   (15 %)
Australia   989     970   2 %
Utilization(3)   29 %   39 % (26 %)
Canada   30 %   34 % (12 %)
United States   35 %   67 % (48 %)
Australia   22 %   35 % (37 %)
Rigs, average for period   79     79    
Canada   56     56    
United States   11     11    
Australia   12     12    

(1)  See Note 1 of the Notes to the Financial Highlights set forth at the end of this release.
(2)  Service hours is defined as well servicing hours of service provided to customers and includes paid rig move and standby.
(3)  The Company reports its service rig utilization for its operational service rigs in North America based on service hours of 3,650 per rig per year to reflect standard 10 hour operations per day. Utilization for the Company’s service rigs in Australia is calculated based on service hours of 8,760 per rig per year to reflect standard 24 hour operations.

First quarter WS segment revenue and EBITDA decreased as compared to 2023 due to lower activity in all jurisdictions. Canadian activity was negatively impacted by lower well abandonment activity and reduced customer activity arising from industry consolidation. Activity levels in the United States were significantly lower due to reduced industry activity levels. Extended wet weather conditions in Australia restricted field activity and resulted in a significant year over year decline in service hours.  

Corporate

During the first quarter of 2024, Total Energy remained focused on the safe and efficient operation of its business, execution of its 2024 capital expenditure program and the completion and integration of the Saxon acquisition. $29.6 million of capital expenditures were made during the first three months of 2024.

Total Energy exited the first quarter of 2024 with $124.4 million of positive working capital, including $45.0 million of cash, and $75 million of available credit under its $175 million of revolving bank credit facilities. The weighted average interest rate on the Company’s outstanding debt at March 31, 2024 was 5.70%.

Outlook

Industry conditions remain relatively stable. While North American natural gas spot market price weakness has negatively impacted near term drilling activity, particularly in the United States, relatively strong oil prices and the pending completion of several LNG export facilities have provided tailwinds for the North American energy services industry, particularly in Canada. With the acquisition of Saxon on March 7, 2024 and improved weather conditions, the outlook for Australian activity levels is positive.

The Board of Directors of Total Energy has approved an increase to the Company’s 2024 capital expenditure budget to $66.3 million. This $19.8 million increase includes $8.3 million of growth capital and $11.5 million of maintenance capital. Included in growth capital is $6.4 million of new rental equipment for the RTS segment and the upgrade of a Canadian drilling rig. The $11.5 million of maintenance capital includes new drill pipe for the Canadian CDS segment and Saxon’s 2024 capital maintenance requirements. Total Energy intends to finance its 2024 capital expenditure budget with cash on hand and cashflow.

Conference Call

At 9:00 a.m. (Mountain Time) on May 10, 2024 Total Energy will conduct a conference call and webcast to discuss its first 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 (800) 763-8274 or (647) 484-8814. 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 June 10, 2024 by dialing (855) 669-9658 (passcode 0834).

Selected Financial Information

Selected financial information relating to the three months ended March 31, 2024 and 2023 is included in 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 in the Company’s 2023 Annual Report.

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

  March 31
December 31
  2024  2023
  (unaudited) (audited)
Assets        
Current assets:        
Cash and cash equivalents $ 45,039   $ 47,935  
Accounts receivable   146,166     137,604  
Inventory   112,926     98,179  
Prepaid expenses and deposits   13,023     16,735  
    317,154     300,453  
         
Property, plant and equipment   618,009     557,152  
Deferred income tax asset   2,474      
Goodwill   4,053     4,053  
  $ 941,690   $ 861,658  
         
Liabilities & Shareholders’ Equity        
Current liabilities:        
Accounts payable and accrued liabilities $ 128,126   $ 116,794  
Deferred revenue   46,382     39,321  
Contingent consideration on business acquisition   2,710      
Income taxes payable   3,447     9,771  
Dividends payable   3,596     3,198  
Current portion of lease liabilities   6,425     5,880  
Current portion of long-term debt   2,070     2,050  
    192,756     177,014  
         
Long-term debt   140,419     90,947  
         
Lease liabilities   9,428     9,887  
         
Deferred income tax liability   55,120     53,052  
         
Shareholders’ equity:        
Share capital   251,199     251,283  
Contributed surplus   4,771     4,805  
Accumulated other comprehensive loss   (23,871 )   (25,506 )
Non-controlling interest   302     521  
Retained earnings   311,566     299,655  
    543,967     530,758  
         
  $ 941,690   $ 861,658  


Consolidated Statements of Income

(in thousands of Canadian dollars except per share amounts)
(unaudited)

   Three months ended
March 31
    2024     2023  
         
Revenue $ 204,686   $ 237,777  
         
Cost of services   148,229     177,986  
Selling, general and administration   12,734     11,433  
Other expense (income)   320     (6 )
Share-based compensation   709     389  
Depreciation   20,664     19,955  
Operating income   22,030     28,020  
         
Gain on sale of property, plant and equipment   596     500  
Finance costs, net   (1,832 )   (1,703 )
Net income before income taxes   20,794     26,817  
         
Current income tax expense   3,972     324  
Deferred income tax expense   1,359     2,455  
Total income tax expense   5,331     2,779  
         
Net income $ 15,463   $ 24,038  
         
Net income (loss) attributable to:        
Shareholders of the Company $ 15,482   $ 24,040  
Non-controlling interest   (19 )   (2 )
         
Income per share        
Basic $ 0.39   $ 0.58  
Diluted $ 0.38   $ 0.57  


Consolidated Statements of Comprehensive Income

   Three months ended
March 31
    2024     2023  
         
Net income $ 15,463   $ 24,038  
         
Foreign currency translation   1,635     (618 )
         
Total other comprehensive income (loss) for the period   1,635     (618 )
         
Total comprehensive income $ 17,098   $ 23,420  
         
Total comprehensive income (loss) attributable to:        
         
Shareholders of the Company $ 17,117   $ 23,422  
Non-controlling interest   (19 )   (2 )


Consolidated Statements of Cash Flows

(in thousands of Canadian dollars)
(unaudited)

   Three months ended
March 31
    2024     2023  
         
Cash provided by (used in):        
         
Operations:        
Net income for the period $   15,463   $ 24,038  
Add (deduct) items not affecting cash:        
Depreciation   20,664     19,955  
Share-based compensation   709     389  
Gain on sale of property, plant and equipment   (596 )   (500 )
Finance costs, net   1,832     1,703  
Foreign currency translation   (270 )   352  
Current income tax expense   3,972     324  
Deferred income tax expense   1,359     2,455  
Income taxes paid   (10,296 )   (44 )
Cashflow   32,837     48,672  
Changes in non-cash working capital items:        
Accounts receivable   (8,562 )   (17,004 )
Inventory   (14,747 )   (10,803 )
Prepaid expenses and deposits   3,712     637  
Accounts payable and accrued liabilities   17,332     4,012  
Deferred revenue   7,065     4,227  
Cash provided by operating activities   37,637     29,741  
Investing:        
Purchase of property, plant and equipment   (29,635 )   (30,329 )
Cash paid on acquisition   (47,350 )    
Proceeds on disposal of property, plant and equipment   627     1,303  
Changes in non-cash working capital items   4,006     12,733  
Cash used in investing activities   (72,352 )   (16,293 )
Financing:        
Advancements of long-term debt   60,000      
Repayment of long-term debt   (10,508 )   (5,497 )
Repayment of lease liabilities   (1,629 )   (1,617 )
Dividends to shareholders   (3,198 )   (2,490 )
Repurchase of common shares   (724 )   (8,014 )
Partnership distributions   (200 )    
Interest paid   (11,922 )   (1,663 )
         
Cash from (used in) financing activities   31,819     (19,281 )
         
Change in cash and cash equivalents   (2,896 )   (5,833 )
         
Cash and cash equivalents, beginning of period   47,935     34,061  
         
Cash and cash equivalents, end of period $ 45,039   $ 28,228  


Segmented Information

The Company provides a variety of products and services to the energy and other resource industries through five reporting segments, which operate substantially in three geographic regions. These reporting segments are Contract Drilling Services, which includes the contracting of drilling equipment and the provision of labor required to operate the equipment, Rentals and Transportation Services, which includes the rental and transportation of equipment used in energy and other industrial operations, Compression and Process Services, which includes the fabrication, sale, rental and servicing of gas compression and process equipment and Well Servicing, which includes the contracting of service rigs and the provision of labor 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 March 31, 2024 (unaudited, in thousands of Canadian dollars)

  Contract
Rentals and
Compression
Well
Corporate
Total
  Drilling
Transportation
and Process
Servicing
  (1)      
  Services
Services
Services
           
                         
Revenue $ 81,211   $ 22,379   $ 77,526   $ 23,570   $   $ 204,686  
                         
Cost of services   55,892     10,915     63,551     17,871         148,229  
Selling, general and administration   3,006     2,261     3,126     1,385     2,956     12,734  
Other expense                   320     320  
Share-based compensation                   709     709  
Depreciation   10,343     5,064     2,589     2,399     269     20,664  
Operating income (loss)   11,970     4,139     8,260     1,915     (4,254 )   22,030  
                         
Gain on sale of property, plant and equipment   33     512     51             596  
Finance costs, net   (22 )   (41 )   (102 )   (23 )   (1,644 )   (1,832 )
                         
Net income (loss) before income taxes   11,981     4,610     8,209     1,892     (5,898 )   20,794  
                         
Goodwill       2,514     1,539             4,053  
Total assets   452,036     162,178     259,241     62,321     5,914     941,690  
Total liabilities   87,200     32,233     100,016     6,867     171,407     397,723  
Capital expenditures   12,801     2,785     10,455     3,594         29,635  
    Canada     United States     Australia     Total  
                         
Revenue $ 103,064   $ 79,117   $ 22,505   $ 204,686  
Non-current assets (2)   389,623     137,198     95,241     622,062  


As at and for the three months ended March 31, 2023 (unaudited, in thousands of Canadian dollars)

  Contract Rentals and Compression Well Corporate Total
  Drilling Transportation and Process Servicing   (1)      
  Services Services Services            
                         
Revenue $ 82,536   $ 24,413   $ 98,118   $ 32,710   $   $ 237,777  
                         
Cost of services   59,418     12,903     81,972     23,693         177,986  
Selling, general and administration   2,985     2,058     3,577     844     1,969     11,433  
Other income                   (6 )   (6 )
Share-based compensation                   389     389  
Depreciation   9,048     4,872     2,623     3,147     265     19,955  
Operating income (loss)   11,085     4,580     9,946     5,026     (2,617 )   28,020  
                         
Gain on sale of property, plant and equipment   136     198     30     106     30     500  
Finance costs, net   (15 )   (18 )   (121 )   (16 )   (1,533 )   (1,703 )
                         
Net income (loss) before income taxes   11,206     4,760     9,855     5,116     (4,120 )   26,817  
                         
Goodwill       2,514     1,539             4,053  
Total assets   370,833     184,392     272,071     83,330     (218 )   910,408  
Total liabilities   79,568     23,838     124,109     7,632     140,685     375,832  
Capital expenditures   23,824     1,538     2,509     2,458         30,329  
    Canada     United States     Australia     Total  
                         
Revenue $         108,126   $ 105,007   $ 24,644   $ 237,777  
Non-current assets (2)   386,242     146,475     49,787     582,504  

(1)  Corporate includes the Company’s corporate activities and obligations pursuant to long-term credit facilities.
(2)  Includes property, plant and equipment, lease asset (excluding current portion) and goodwill.

Total Energy provides contract drilling services, equipment rentals and transportation services, well servicing and compression and process equipment and service to the energy and other resource industries from operation centers in North America and Australia. 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: investorrelations@totalenergy.ca 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 (loss) before income taxes plus finance costs plus depreciation. EBITDA is not a recognized measure under IFRS. Management believes that in addition to net income (loss), EBITDA is a 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 lease liabilities plus current liabilities minus current assets. Management believes this measure provides a useful indication of the Company’s liquidity.
     
  (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.

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, including expectations regarding Total Energy’s future activity levels, market share and compression and process production activity. 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, performance 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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