Total Energy Services Inc.
TSX : TOT

Total Energy Services Inc.

August 05, 2009 12:00 ET

Total Energy Services Inc. Announces Q2 2009 Results

CALGARY, ALBERTA--(Marketwire - Aug. 5, 2009) - Total Energy Services Inc. (TSX:TOT) ("Total Energy" or the "Company"), announces its consolidated financial results for the three and six-month periods ending June 30, 2009.

            
Financial Highlights                      
($000's except per unit data)                      
 
    Three Months Ended June 30   Six Months Ended June 30
    (Unaudited)     (Unaudited)  
    2009    2008% Change   2009   2008% Change
          
Revenue   $14,722    $23,978(39)%$ 59,207$ 67,504(12)%
Operating Earnings (loss) (1)   (2,264)    4         n/m   7,997   12,445(36)%
EBITDA (1)   92    3,567 (97)%   14,550   20,288(28)%
Cashflow (1)   3,534    4,343(19)%   15,972   18,170(12)%
Net Earnings   (1,236)    797
         n/m   7,324   10,391(30)%
 
Per Share Data (Diluted)                      
EBITDA (1)$0.00 $0.12(100)%$0.50$0.69(28)%
Cashflow (1)   0.12    0.15(20)%   0.55   0.62(11)%
Net Earnings   (0.04)    0.02         n/m   0.25   0.35(29)%
 
    June 30    Dec. 31            
    2009    2008            
  (Unaudited)     (Audited) % Change          
Financial Position                      
Total Assets$226,795 $ 247,515(8)%          
Long-Term Debt and Obligations                      
Under Capital Leases   19,332    13,52143%          
Working Capital (2)   11,036    7,25452%          
Net Debt (3)   8,296    6,26732%          
Shareholders' Equity   152,201    147,376 3%          
 
Shares Outstanding (000's)                      
Basic   29,107    29,057nil          
Diluted   29,107    29,057nil          

Notes 1 through 3 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 June 30, 2009 reflect difficult industry conditions within the seasonally weak period in Western Canada. Included in the 2009 second quarter financial results are non-recurring re- organization costs of $0.9 million incurred in connection with Total Energy's conversion from an income trust structure to a corporate structure that was completed on May 20, 2009. In connection with its corporate conversion, Total Energy implemented a stock option plan that was approved by shareholders and $0.8 million of stock-based compensation expense was recorded in the second quarter in respect of stock options granted pursuant to such plan.

Total Energy's Contract Drilling Services division achieved 5% utilization during the second quarter of 2009, recording 56 operating days (spud to release) with a fleet of 13 rigs, compared to 286 operating days, or 24% utilization during the second quarter of 2008. The Drilling and Production Rentals division achieved a utilization rate on major rental equipment of 23% during the second quarter of 2009 as compared to a 39% utilization rate during the second quarter of 2008. The Gas Compression Services division generated revenues of $6.7 million for the three months ended June 30, 2009 compared to $9.8 for the second quarter of 2008. At June 30, 2009 the Gas Compression Services division had a fabrication backlog of approximately $8.9 million, compared to a backlog of $6.5 million as at June 30, 2008. At June 30, 2009, over 18,000 horsepower of compression equipment was on rent compared to 8,700 horsepower on rent at June 30, 2008 and 13,200 horsepower on rent at March 31, 2009. This substantial increase in horsepower on rent was driven primarily by rental demand for Total Energy's proprietary NOMADTM line of large horsepower mobile compression units. The gas compression rental fleet operated at an average utilization rate of 87% during the first six months of 2009.

During the second quarter, Total Energy declared and paid a distribution of $0.03 per share. Following its conversion to a corporation, Total Energy has implemented a quarterly dividend of $0.03 per share ($0.12 per share per annum), with the first dividend to be paid in respect of the third quarter of 2009 on October 30, 2009 to shareholders of record at the close of business on September 30, 2009.

OUTLOOK

Low natural gas prices combined with excess service industry capacity have made for difficult industry conditions that are expected to continue for the near term. Total Energy has responded to these challenging industry conditions by right sizing its operations to the realities of current market conditions and prudently managing its cost structure in order to achieve additional savings and efficiencies.

During the second quarter, Total Energy's Gas Compression division launched a North American marketing program to introduce to the market the NOMADTM line of large horsepower natural gas compression and the substantial cost savings to natural gas producers arising from the deployment of this proprietary technology in wells exhibiting steep initial production declines. The initial response to such marketing program has been positive and a recovery in natural gas prices is expected to stimulate additional demand for the NOMADTM. The Company's Contract Drilling Services division recently completed the construction of its fourteenth rig, a 3,400 meter telescopic double complete with top drive. This rig has been contracted to July 2010.

Total Energy's balance sheet remains strong with a long-term debt (including current portion) to long-term debt plus equity ratio of 0.16 to 1.0 and $8.3 million of net debt as at June 30, 2009. Total Energy's primary lender recently completed its annual review of the Company's credit facilities and confirmed the availability of the Company's $35 million revolving evergreen facility and $30 million operating line of credit. The $35 million facility bears interest at the primary lender's prime rate of interest plus 1.50% and the operating line at the prime rate plus 1.25%. As at June 30, 2009, $23.7 million was available under the Company's credit facilities subject to normal margining requirements.

CONFERENCE CALL

At 2:30 p.m. MST today, Total Energy will conduct a conference call to discuss its second 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 (866) 226-1792. Those who are unable to listen to the call live may listen to a recording of it by calling (800) 408-3053 (passcode 3336264). The recording will be available until August 12, 2009.

SELECTED FINANCIAL INFORMATION

Selected financial information relating to the three and six-month periods ended June 30, 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 second quarter report.

     
Consolidated Balance Sheets        
(in thousands of Canadian dollars)        
  June 30, December 31,
  2009   2008
  (unaudited)    
 
Assets        
Current assets:        
       Accounts receivable $ 12,387 $ 37,274
       Inventory   30,483   33,836
       Income tax receivable   2,224   -
       Prepaid expenses and deposits   1,981   1,319
    47,075   72,429
 
Property, plant and equipment   175,667   171,033
 
Goodwill   4,053   4,053
 
  $ 226,795 $ 247,515
 
Liabilities & Shareholders' Equity        
Current liabilities:        
       Bank indebtedness $ 12,323 $ 24,830
       Accounts payable and accrued liabilities   12,900   29,137
       Distributions payable   -   872
       Income taxes payable   -   2,336
       Current portion of long-term debt   10,400   8,000
       Current portion of obligations under capital leases   416   -
    36,039   65,175
 
Long-term debt   18,618   13,521
 
Obligations under capital leases   714   -
 
Future income taxes   3,781   21,443
 
Deferred tax credit   15,442   -
 
Shareholders' equity:        
               Share capital   60,268   -
               Trust Unit capital   -   60,027
               Contributed surplus   758   -
               Retained earnings   91,175   87,349
    152,201   147,376
 
  $ 226,795 $ 247,515
 
Supplemental Information:        
       Number of common shares outstanding (000's) - Basic and diluted   29,107   29,057
     
       
Consolidated Statements of Earnings and Retained            
Earnings                  
(in thousands of Canadian dollars except per share amounts)              
    Three months ended     Six months ended
      June 30       June 30
    2009   2008     2009   2008
    (unaudited)(unaudited)   (unaudited)(unaudited)
 
Revenue$14,722$23,978$59,207$67,504
 
Expenses:                  
 Operating   9,571   16,465     35,273   38,864
 Selling, general and administration   3,411   4,025     7,979   8,437
 Share based compensation   758   -     758   -
 Depreciation   2,913   2,855     6,458   6,307
 Other interest   139   307     328   702
 Interest on long-term debt   194   322     414   749
    16,986   23,974     51,210   55,059
 
Operating earnings (loss)   (2,264)   4     7,997   12,445
 
 Reorganization costs   (890)   -     (890)   -
 Gain on disposal of equipment   -   79     243   85
 
Earnings (loss) before income taxes   (3,154)   83     7,350   12,530
 
Income tax expense (recovery)                  
 Current   (3,017)   (1,484)     (1,649)   582
 Future   1,099   770     1,675   1,557
    (1,918)   (714)     26   2,139
 
 
Net earnings (loss)   (1,236)   797     7,324   10,391
 
Retained earnings, beginning of period   93,282   80,613     87,349   73,812
 
 Trust distributions   (871)   (2,651)     (3,486)   (5,301)
 Repurchase and cancellation of trust units                  
  in excess of stated trust unit capital   -   -     (12)   (143)
 
Retained earnings, end of period$91,175$78,759   $91,175$78,759
                                                                              
Earnings per share:                  
 Basic and diluted$(0.04)$0.02$0.25$0.35
         
          
Consolidated Statements of Cash Flows                  
(in thousands of Canadian dollars)                    
    Three months ended     Six months ended
                         June 30                    June 30  
       2009     2008        2009   2008
  (unaudited)   (unaudited)   (unaudited)    (unaudited)
 
Cash provided by (used in):                    
 
Operations:                    
   Net earnings (loss) $ (1,236)          $ 797        $ 7,324  $ 10,391
   Add (deduct) items not affecting cash:                    
     Depreciation   2,913     2,855     6,458   6,307
     Share based compensation   758     -     758   -
     Gain on disposal of equipment   -     (79)     (243)   (85)
     Future income taxes   1,099     770     1,675   1,557
    3,534     4,343     15,972   18,170
 
   Changes in non-cash working capital items:                    
       Accounts receivable   22,598     15,788     24,887   6,210
       Inventory   3,228     (932)     3,353   (1,009)
       Income taxes receivable   (2,224)     1,563     (2,224)   1,563
       Prepaid expenses and deposits   (565)     327     (662)   186
       Accounts payable and accrued liabilities   (6,529)     (3,529)     (11,567)   (2,379)
       Income taxes payable   (1,035)     (1,522)     (2,336)   654
    19,007     16,038     27,423   23,395
Investments:                    
   Purchase of property, plant and equipment   (6,880)     (4,129)     (12,339)   (6,630)
   Proceeds on disposal of property, plant and equipment   239     508     1,490   708
   Transaction with Biomerge Industries Ltd.   (3,639)     -     (3,639)   -
   Changes in non-cash working capital items   49     452     (4,670)   437
    (10,231)     (3,169)     (19,158)   (5,485)
Financing:                    
   Advances of long-term debt   7,000     -     12,000   3,000
   Repayments of long-term debt   (2,326)     (4,869)     (4,503)   (6,875)
   Advances of obligations under capital leases   -     -     1,443   -
   Repayment of obligations under capital leases   (192)     (115)     (313)   (230)
   Repurchase of trust units   -     (533)     (27)   (784)
   Distributions to Unitholders   (871)     (2,651)     (3,486)   (5,301)
   Distributions payable   (872)     -     (872)   (1)
   Increase (decrease) in bank indebtedness   (11,515)     (4,701)     (12,507)   (7,719)
    (8,776)     (12,869)     (8,265)   (17,910)
 
Change in cash   -     -     -   -
 
Cash, beginning of period   -     -     -   -
 
Cash, end of period $ -    $ -    $ -  $ -
 
Supplemental information:                    
   Interest paid $ 333          $ 621        $ 818  $ 1,590
   Income taxes paid (received) $ 242          $ (1,525)        $ 2,911  $ (1,635)
         

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 June 30, 2009 (unaudited)            
                 ContractDrilling andGas        
    DrillingProductionCompression        
    ServicesRentalsServices    Other (2)   Total
 
  Revenue              $ 869 $ 7,135 $ 6,718   $ - $ 14,722
  Operating earnings (loss) (1)   (550)   (591)   440   (1,563)   (2,264)
  Depreciation   171   2,352   383   7   2,913
  Assets   66,211   100,902   55,718   3,964   226,795
  Goodwill   -   2,514   1,539   -   4,053
  Capital expenditures   1,438   201   5,241   -   6,880
 
        
  As at and for the three months ended June 30, 2008 (unaudited)            
    ContractDrilling andGas        
    DrillingProductionCompression        
    ServicesRentalsServices    Other (2)   Total
 
  Revenue              $ 4,323 $ 9,875 $ 9,780   $ - $ 23,978
  Operating earnings (loss) (1)   (801)   39   1,293   (527)   4
  Depreciation   499   2,047   301   8   2,855
  Assets   65,593   99,473   50,664   5,637   221,367
  Goodwill   -   2,514   1,539   -   4,053
  Capital expenditures   2,191   1,366   572   -   4,129
 
        
  As at and for the six months ended June 30, 2009 (unaudited)            
    ContractDrilling andGas        
    DrillingProductionCompression        
    ServicesRentalsServices    Other (2)   Total
 
  Revenue              $ 7,885 $ 28,631 $ 22,691   $ - $ 59,207
  Operating earnings (loss) (1)   812   7,632   1,813   (2,260)   7,997
  Depreciation   1,022   4,701   721   14   6,458
  Assets   66,211   100,902   55,718   3,964   226,795
  Goodwill   -   2,514   1,539   -   4,053
  Capital expenditures   4,823   1,861   5,655   -   12,339
 
       
As at and for the six months ended June 30, 2008 (unaudited)            
    ContractDrilling andGas        
    DrillingProductionCompression        
    ServicesRentalsServices    Other (2)   Total
 
  Revenue              $ 15,927 $ 32,993 $ 18,584   $ - $ 67,504
  Operating earnings (loss) (1)   2,312   9,614   2,267   (1,748)   12,445
  Depreciation   1,603   4,081   606   17   6,307
  Assets   65,593   99,473   50,664   5,637   221,367
  Goodwill   -   2,514   1,539   -   4,053
  Capital expenditures   2,880   2,153   1,597   -   6,630
            
  1. Operating earnings (loss) are earnings before reorganization costs, gain on disposal of equipment and income taxes.
  2. Other includes the Company's corporate activities and in 2009 and 2008 "Assets" includes income taxes receivable of $2.2 million and $4.2 million respectively.

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.

For further information, please contact Daniel Halyk, President & Chief Executive Officer at (403) 216-3921 or Mark Kearl, 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 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.

Contact Information

  • Total Energy Services Inc.
    Daniel Halyk
    President & Chief Executive Officer
    (403) 216-3921

    or

    Total Energy Services Inc.
    Mark Kearl
    Vice-President Finance and Chief Financial Officer
    (403) 216-3920
    Email: investorrelations@totalenergy.ca
    Website: www.totalenergy.ca