Total Energy Services Inc.
TSX : TOT

Total Energy Services Inc.

March 04, 2010 12:58 ET

Total Energy Services Inc. Announces 2009 Results

CALGARY, ALBERTA--(Marketwire - March 4, 2010) - Total Energy Services Inc. ("Total Energy" or the "Company") (TSX:TOT), announces its consolidated financial results for the three and twelve-month periods ending December 31, 2009.



Financial Highlights
($000's except per unit data)

Three Months Ended Dec. 31 Twelve Months Ended Dec. 31
(Unaudited) (Unaudited)
2009 2008 % Change 2009 2008 % Change
-------------------------------------------------------------
Revenue $ 27,298 $ 49,712 (45)% $ 106,509 $ 154,482 (31)%
Operating
Earnings 1,122 10,908 (90)% 9,741 30,806 (68)%
EBITDA (1) 5,363 14,816 (64)% 24,058 47,097 (49)%
Cashflow (1) 4,702 13,675 (66)% 25,366 42,412 (40)%
Net Earnings 2,131 8,862 (76)% 11,640 25,333 (54)%

Per Share Data
(Diluted)
EBITDA (1) $ 0.19 $ 0.51 (63)% $ 0.83 $ 1.60 (48)%
Cashflow (1) 0.16 0.46 (65)% 0.87 1.44 (40)%
Net Earnings 0.07 0.30 (77)% 0.40 0.86 (53)%


Dec. 31 Dec. 31
2009 2008
(Unaudited) (Audited) % Change
Financial Position
Total Assets $234,774 $ 247,515 (5)%
Long-Term Debt and Obligations
Under Capital Leases 35,713 13,521 164%
Working Capital (2) 29,493 7,254 307%
Net Debt (3) 6,220 6,267 (1)%
Shareholders' Equity 155,629 147,376 6%
Shares Outstanding (000's)
Basic and diluted 29,176 29,057 nil

Notes 1 through 3 please refer to the Notes to the Financial Highlights set
forth at the end of this release.


Total Energy's results for the fourth quarter of 2009 reflect continued challenging industry conditions in Western Canada. While activity levels improved marginally from the third quarter, industry drilling activity in Western Canada remained weak by historical standards. Competitive industry conditions also resulted in continued pressure on pricing.

Total Energy's Contract Drilling Services division achieved 41% utilization during the fourth quarter of 2009, recording 532 operating days (spud to release) with a fleet of 14 rigs, compared to 590 operating days, or 49% utilization, during the fourth quarter of 2008 with a fleet of 13 rigs. Revenue per operating day decreased 19% for the fourth quarter of 2009 relative to the prior year comparable period due primarily to lower spot market pricing. For the twelve months ended December 31, 2009, the Contract Drilling Services division achieved 1,169 operating days (24% utilization), compared to 2,328 operating days (49% utilization) for 2008. The Drilling and Production Rentals division achieved a utilization rate on major rental equipment of 33% during the fourth quarter of 2009 as compared to a 58% utilization rate during the fourth quarter of 2008. For 2009, rental equipment utilization averaged 34% as compared to 53% for 2008. The Gas Compression Services division generated revenues of $8.4 million for the three months ended December 31, 2009 compared to $19.1 million for the same period in 2008, a decrease of 56%. Fourth quarter revenue from this division increased 12% from the third quarter of 2009. For 2009, the Gas Compression Services division generated revenues of $38.6 million compared to $47.1 million in 2008. At December 31, 2009 the Gas Compression Services division had a fabrication backlog of approximately $11.3 million, compared to a backlog of $19.3 million at December 31, 2008 and $8.4 million at September 30, 2009. At December 31, 2009, approximately 17,600 horsepower of compression equipment was on rent compared to 14,600 horsepower on rent at December 31, 2008 and 16,800 at September 30, 2009. The gas compression rental fleet operated at an average utilization rate of 82% for 2009 as compared to 75% for 2008.

During the fourth quarter, Total Energy declared a quarterly dividend of $0.03 per share to shareholders of record on December 31, 2009. This dividend was paid on January 29, 2010.

OUTLOOK

2009 was a very challenging year for the energy services industry in Canada. While the difficult environment presented challenges, it also presented opportunities. During the course of the year, Total Energy examined several growth opportunities and during the fourth quarter of 2009 announced an agreement to purchase a significant competitor to its Drilling and Production Rentals division, DC Energy Services LP ("DC Energy"). The acquisition of DC Energy, which was completed effective January 1, 2010, increased Total Energy's rental fleet by approximately 80% and the heavy truck fleet by 27%. This acquisition also resulted in the addition of new locations in Drayton Valley and Red Deer, Alberta that better positions Total Energy to service the emerging Pembina oil play.

Current drilling activity levels in Western Canada have increased significantly from the fourth quarter of 2009. While there has been a continued focus on unconventional oil and natural gas resource plays in northeast British Columbia and Saskatchewan, Total Energy has seen a significant improvement in drilling activity in Alberta, particularly in northwestern and west central Alberta where operators are applying directional drilling and multi-stage fracturing technologies to oil targets. Increased drilling rig utilization has resulted in improving drilling rig spot market pricing. The Drilling and Production Rentals division's significantly larger asset base and expanded presence in northwestern and west central Alberta arising from the acquisition of DC Energy, is expected to benefit from this increased drilling and completion activity. The Gas Compression Services division is focused on substantially increasing its share of the Canadian natural gas compression market following the recent merger of its two largest Canadian-based competitors. Increasing market awareness of the NOMAD™ line of large horsepower mobile natural gas compression and the substantial cost savings arising from the deployment of this patented technology is also expected to continue benefit this division despite a challenging natural gas market. Total Energy's previously announced 2010 preliminary capital budget of $13.5 million includes $9.0 million for expansion of the natural gas compression rental fleet. It is expected that continued demand for the NOMAD™ will lead the growth of the compression rental fleet.

Total Energy's balance sheet remains strong with a long-term debt (including current portion) to long-term debt plus equity ratio of 0.22 to 1.0, $29.5 million of positive working capital and $6.2 million of net debt as at December 31, 2009. As previously announced, in January 2010 Total Energy entered into a $90 million revolving credit facility with a syndicate of Canadian chartered banks in replacement of its previous $65 million credit facility to fund the approximate $32 million cash required to close the DC Energy acquisition. In addition, the $12.5 million convertible debenture issued in connection with the acquisition of DC Energy was converted into 1.786 million common shares of the Company on March 1, 2010.

CONFERENCE CALL

At 2:30 p.m. MST today, Total Energy will conduct a conference call to discuss its fourth quarter financial results. Daniel Halyk, President & Chief Executive Officer, will host the conference call. The call is open to Shareholders and all other interested persons. If you wish to participate, call (800) 952-4972. Those who are unable to listen to the call live may listen to a recording of it by calling (800) 408-3053 (passcode 3205300). The recording will be available until March 11, 2010.

SELECTED FINANCIAL INFORMATION

Selected financial information relating to the three and twelve-month periods ended December 31, 2009 and 2008 is attached to this press release. This information should be read in conjunction with the unaudited consolidated financial statements of Total Energy and the attached notes to the consolidated financial statements and management's discussion and analysis to be issued in due course and reproduced in the Corporation's third quarter report.



Consolidated Balance Sheets
(in thousands of Canadian dollars)

December 31, December 31,
2009 2008
----------------------------------------------------------------------------
(audited) (audited)

Assets
Current assets:
Accounts receivable $ 22,104 $ 37,274
Inventory 28,408 33,836
Income tax receivable 2,848 -
Prepaid expenses and deposits 2,309 1,319
-----------------------------
55,669 72,429

Property, plant and equipment 175,052 171,033

Goodwill 4,053 4,053

-----------------------------

$ 234,774 $ 247,515
-----------------------------
-----------------------------

Liabilities & Shareholders' Equity
Current liabilities:
Bank indebtedness $ - $ 24,830
Accounts payable and accrued liabilities 15,976 29,137
Dividends Payable 875 -
Distributions payable - 872
Income taxes payable - 2,336
Current portion of long-term debt 8,737 8,000
Current portion of obligations
under capital leases 588 -
-----------------------------
26,176 65,175

Long-term debt 34,950 13,521

Obligations under capital leases 763 -

Future income taxes 5,681 21,443

Deferred tax credit 11,575 -

Shareholders' equity:
Share capital 60,777 -
Trust Unit capital - 60,027
Contributed surplus 1,174 -
Retained earnings 93,678 87,349
-----------------------------
155,629 147,376

-----------------------------
$ 234,774 $ 247,515
-----------------------------
-----------------------------

Supplemental Information:
Number of common shares outstanding (000's)
- Basic and diluted 29,176 29,057



Consolidated Statements of Earnings and Retained Earnings
(in thousands of Canadian dollars except per share amounts)

Three months ended Year Ended
December 31 December 31
2009 2008 2009 2008
----------------------------------------------------------------------------
(unaudited) (unaudited) (audited) (audited)

Revenue $ 27,298 $ 49,712 $ 106,509 $ 154,482

Expenses:
Operating 17,833 29,979 65,492 89,786
Selling, general and
Administration 3,975 4,576 15,262 17,491
Share based compensation 294 - 1,283 -
Depreciation 3,659 3,735 13,211 13,889
Other interest 165 292 599 1,257
Interest on long-term debt 250 222 921 1,253
------------------------------------------
26,176 38,804 96,768 123,676
------------------------------------------
Operating earnings 1,122 10,908 9,741 30,806

Reorganization costs - - (890) -
Gain (loss) on disposal
of equipment 167 (341) 476 (108)
------------------------------------------

Earnings before income taxes 1,289 10,567 9,327 30,698

Income tax expense (recovery)
Current 373 968 (2,021) 2,283
Future (1,215) 737 (292) 3,082
------------------------------------------
(842) 1,705 (2,313) 5,365

------------------------------------------
Net earnings 2,131 8,862 11,640 25,333
------------------------------------------

Retained earnings, beginning
of period 92,431 81,554 87,349 73,812

Dividends (876) - (1,748) -

Trust distributions - (2,639) (3,486) (10,591)
Repurchase and cancellation
of common shares and trust
units in excess of stated capital (8) (428) (77) (1,205)
------------------------------------------

Retained earnings, end of period $ 93,678 $ 87,349 $ 93,678 $ 87,349
------------------------------------------
------------------------------------------

Earnings per share:
Basic and diluted $ 0.07 $ 0.30 $ 0.40 $ 0.86



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

Three months ended Year Ended
December 31 December 31
2009 2008 2009 2008
----------------------------------------------------------------------------
(unaudited) (unaudited) (audited) (audited)

Cash provided by (used in):

Operations:
Net earnings $ 2,131 $ 8,862 $ 11,640 $ 25,333
Add (deduct) items not
affecting cash:
Depreciation 3,659 3,735 13,211 13,889
Share based compensation 294 - 1,283 -
Loss (gain) on disposal
of equipment (167) 341 (476) 108
Future income taxes (1,215) 737 (292) 3,082
--------------------------------------------
4,702 13,675 25,366 42,412

Changes in non-cash working
capital items:
Accounts receivable (6,383) (5,510) 15,170 (8,990)
Inventory 706 (2,004) 5,428 (1,927)
Income taxes receivable - - (2,848) 5,742
Prepaid expenses and deposits 437 436 (990) 261
Accounts payable and accrued
liabilities 4,458 4,156 (7,639) 7,518
Income taxes payable - 968 (2,336) 2,336
--------------------------------------------
3,920 11,721 32,151 47,352

Investments:
Purchase of property, plant
and equipment (5,877) (9,473) (20,735) (30,240)
Proceeds on disposal of
equipment 1,787 780 3,981 2,259
Transaction with Biomerge
Industries Ltd. - - (3,639) -
Changes in non-cash working
capital items (857) 1,401 (5,522) 5,214
--------------------------------------------
(4,947) (7,292) (25,915) (22,767)

Financing:
Advances of long-term debt 19,869 - 31,869 3,000
Repayments of long-term debt (2,600) (1,980) (9,703) (10,862)
Advances of obligations
under capital leases - - 1,523 -
Repayment of obligations
under capital leases 274 (62) (172) (408)
Issuance of common shares 466 - 466 -
Repurchase of common shares (16) - (131) -
Repurchase of trust units - (1,018) (27) (2,162)
Dividends to Shareholders (876) - (1,748) -
Dividends payable 3 - 875 -
Distributions to Unitholders - (2,639) (3,486) (10,591)
Distributions payable - (12) (872) (13)
Increase (decrease) in bank
indebtedness (16,093) 1,282 (24,830) (3,549)
--------------------------------------------
1,027 (4,429) (6,236) (24,585)
--------------------------------------------

Change in cash - - - -

Cash, beginning of period - - - -

--------------------------------------------
Cash, end of period $ - $ - $ - $ -
--------------------------------------------
--------------------------------------------

Supplemental information:
Interest paid $ 415 $ 468 $ 1,596 $ 2,595
Income taxes paid (received) $ 373 $ - $ 3,163 $ (5,795)


SEGMENTED INFORMATION

The Corporation operates in three main industry segments, which are substantially in one geographic segment. These segments are Contract Drilling Services, which includes the contracting of drilling equipment and the provision of labour required to operate the equipment, Drilling and Production Rentals, which includes the rental and transportation of equipment used in drilling and production operations and Gas Compression Services, which includes the fabrication, sale, rental and servicing of natural gas compression equipment.



As at and for the three months ended December 31, 2009 (unaudited)

Contract Drilling and Gas
Drilling Production Compression
Services Rentals Services Other(2) Total
----------------------------------------------------------------------------

Revenue $ 7,135 $ 11,774 $ 8,389 $ - $27,298
Operating earnings
(loss) (1) 463 1,187 604 (1,132) 1,122
Depreciation 1,067 2,176 409 7 3,659
Assets 72,946 101,060 56,676 4,092 234,774
Goodwill - 2,514 1,539 - 4,053
Capital expenditures 406 1,844 3,631 (4) 5,877


As at and for the three months ended December 31, 2008 (unaudited)

Contract Drilling and Gas
Drilling Production Compression
Services Rentals Services Other(2) Total
----------------------------------------------------------------------------

Revenue $ 9,929 $ 20,686 $ 19,097 $ - $49,712
Operating earnings
(loss) (1)(3) 2,032 7,895 1,548 (567) 10,908
Depreciation and
amortization 1,091 2,296 340 8 3,735
Assets 70,243 116,218 59,812 1,242 247,515
Goodwill - 2,514 1,539 - 4,053
Capital expenditures 2,204 5,384 1,885 - 9,473


As at and for the year ended December 31, 2009 (audited)

Contract Drilling and Gas
Drilling Production Compression
Services Rentals Services Other(2) Total
----------------------------------------------------------------------------

Revenue $ 18,304 $ 49,624 $ 38,581 $ - $106,509
Operating earnings
(loss) (1) 1,809 9,159 3,077 (4,304) 9,741
Depreciation 2,547 9,122 1,515 27 13,211
Assets 72,946 101,060 56,676 4,092 234,774
Goodwill - 2,514 1,539 - 4,053
Capital expenditures 6,074 4,072 10,589 - 20,735


As at and for the year ended December 31, 2008 (audited)

Contract Drilling and Gas
Drilling Production Compression
Services Rentals Services Other(2) Total
----------------------------------------------------------------------------

Revenue $ 37,148 $ 70,208 $ 47,126 $ - $154,482
Operating earnings
(loss) (1) (3) 6,636 22,845 4,556 (3,231) 30,806
Depreciation and
amortization 4,059 8,533 1,266 31 13,889
Assets 70,243 116,218 59,812 1,242 247,515
Goodwill - 2,514 1,539 - 4,053
Capital expenditures 6,936 17,017 6,287 - 30,240


(1) Operating earnings (loss) are earnings before reorganization costs,
gain (loss) on disposal of equipment and income taxes.
(2) Other includes the Company's corporate activities and in 2009 "Assets"
includes income taxes receivable of $2.8 million.


Total Energy Services Inc. is a growth oriented energy services corporation involved in contract drilling services, drilling and production rentals and natural gas compression equipment fabrication, sales, rental and service. The shares of Total Energy are listed and trade on the TSX under the symbol TOT.



Notes to Financial Highlights

(1) Operating earnings are earnings before reorganization costs, gain
(loss) on disposal of equipment and income taxes. EBITDA means earnings
before interest, taxes, depreciation and amortization and is equal to
earnings before income taxes plus interest on long-term debt plus other
interest plus depreciation. Cashflow means cash provided by operations
before changes in non-cash working capital items. Operating earnings,
EBITDA and cashflow are not recognized measures under Canadian
generally accepted accounting principles ("GAAP"). Management believes
in addition to net earnings, operating earnings, EBITDA and cashflow
are useful supplemental measures as they provide an indication of the
results generated by the Corporation'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 Corporation's primary business activities without
consideration of the timing of the monetization of non-cash working
capital items. Investors should be cautioned, however, that operating
earnings, EBITDA and cashflow should not be construed as an alternative
to net earnings determined in accordance with GAAP as an indicator of
Total Energy's performance. Total Energy's method of calculating
operating earnings, EBITDA and cashflow may differ from other
organizations and, accordingly, operating earnings, EBITDA and
cashflow 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 capital leases
plus current liabilities minus current assets.


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. 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. Such factors include fluctuations in the market for oil and natural gas and related products and services, political and economic conditions, the demand for products and services provided by Total Energy, Total Energy's ability to attract and retain key personnel and other factors. 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 Toronto Stock Exchange has neither approved nor disapproved of the information contained herein.

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