Total Energy Services Trust
TSX : TOT.UN

Total Energy Services Trust

August 07, 2008 11:38 ET

Total Energy Services Trust Announces Q2 2008 Results

CALGARY, ALBERTA--(Marketwire - Aug. 7, 2008) - Total Energy Services Trust ("Total Energy" or the "Trust") (TSX:TOT.UN), announces its consolidated financial results for the three and six-month periods ending June 30, 2008.



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

Three Months Ended June 30 Six Months Ended June 30
(Unaudited) (Unaudited)
2008 2007 % Change 2008 2007 % Change
--------------------------------------------------------
Revenue $23,978 $16,175 48% $67,504 $69,661 (3)%
Operating
Earnings (loss) (1) 4 (2,136) n/m 12,445 14,164 (12)%
EBITDA (1) 3,567 725 392% 20,288 20,781 (2)%
Cashflow (1) 4,343 4,032 8% 18,170 21,709 (16)%
Net Earnings 797 1,321 (40)% 10,391 15,253 (32)%

Per Unit Data
(Diluted)
EBITDA (1) $ 0.12 $ 0.03 300% $ 0.69 $ 0.70 (1)%
Cashflow (1) 0.15 0.14 7% 0.62 0.73 (15)%
Net Earnings 0.02 0.04 (50)% 0.35 0.51 (31)%



June 30 Dec. 31
2008 2007
(Unaudited) (Audited) % Change
Financial Position
Total Assets $ 221,367 $ 228,617 (3)%
Long-Term Debt and Obligations
Under Capital Leases 17,508 21,383 (18)%
Working Capital (2) 15,726 13,438 17%
Net Debt (3) 1,782 7,945 (78)%
Unitholders' Equity 139,102 134,796 3%

Units Outstanding (000's)
Basic 29,450 29,500 nil
Diluted 29,450 29,500 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 financial results for the three months ended June 30, 2008 reflect improving industry conditions within the seasonally weak period in Western Canada. Record oil prices and strengthening natural gas prices contributed to improved financial results during the second quarter of 2008 as compared to the second quarter of 2007. Total Energy's entry into southeast Saskatchewan and further expansion in northeast British Columbia during the fourth quarter of 2007 also contributed to improved second quarter performance relative to 2007.

Total Energy's Contract Drilling Services division achieved 24% utilization during the second quarter of 2008, recording 286 operating days (spud to release) with a fleet of 13 rigs. During the second quarter of 2007 the Contract Drilling division operated 12 rigs and achieved 22 operating days (spud to release) or 2% utilization. Significant rig maintenance and repair activities were completed during the second quarter in advance of expected increased utilization levels for the remainder of 2008. As well, a telescopic double was relocated into southeast Saskatchewan further diversifying the geographic and commodity exposure of the Trust's drilling rig fleet. The Drilling and Production Rentals division achieved a utilization rate on major rental equipment of 39% during the second quarter of 2008 as compared to a 21% utilization rate during the second quarter of 2007. Equipment utilization was increased by the relocation of equipment and personnel into Saskatchewan and British Columbia. The Gas Compression Services division generated revenues of $9.8 million for the three months ended June 30, 2008 compared to $9.1 for the second quarter of 2007. At June 30, 2008 the Gas Compression Services division had a fabrication backlog of approximately $6.5 million, compared to a backlog of $9.6 million as at June 30, 2007, and had approximately 8,700 horsepower of compression equipment on rent. The gas compression rental fleet operated at an average utilization rate of 77% during the first six months of 2008.

The Trust declared distributions of $0.09 per Unit for the three months ended June 30, 2008. Total distributions for the second quarter were $2.7 million. Late in the second quarter, the Trust purchased 60,000 Units at an average price of $8.88 per Unit, including commission, under its normal course issuer bid ("NCIB") for settlement and cancellation in July 2008. Year to date, the Trust has purchased 110,000 Units at an average price of $7.13, including commission, pursuant to its NCIB.

OUTLOOK

While some uncertainly exists in the energy markets due to global economic issues, strong oil prices and improved natural gas prices give rise to increased optimism for the second half of 2008. Total Energy is well positioned to service unconventional natural gas drilling and production activity in northeast British Columbia and northwest Alberta. Improvement in the western Canadian natural gas market is evidenced by increased demand for compression equipment since the second quarter. For example, in early July a single order for over $13 million of compression equipment was received for delivery to northeast British Columbia beginning in the fourth quarter. Despite the improved outlook, Total Energy remains focused on the efficient operation of its existing businesses and the relocation of underutilized assets. Total Energy is also focused on the execution of its $26.8 million 2008 capital expenditure budget, a significant portion of which is being directed to increasing the Trust's presence in southeast Saskatchewan. Total Energy will also pursue further growth opportunities in each of its three business divisions as such arise.

Total Energy's balance sheet remains very strong with a long-term debt (including current portion) to long-term debt plus equity ratio of 0.15 to 1.0 and $1.8 million of net debt as at June 30, 2008.

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 Unitholders and all other interested persons. If you wish to participate, call (866) 542-4270. Those who are unable to listen to the call live may listen to a recording of it by calling (800) 408-3053 (passcode 3265760). The recording will be available until August 14, 2007.

SELECTED FINANCIAL INFORMATION

Selected financial information relating to the three and six-month periods ended June 30, 2008 and 2007 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 Trust's second quarter report.



Consolidated Balance Sheets
(in thousands of Canadian dollars)

June 30, December 31,
2008 2007
----------------------------------------------------------------------------
(unaudited)

Assets
Current assets:
Accounts receivable $ 22,074 $ 28,284
Inventory 32,918 31,909
Income taxes receivable 4,179 5,742
Prepaid expenses and deposits 1,394 1,580
-----------------------------
60,565 67,515

Property, plant and equipment 156,749 157,049

Goodwill 4,053 4,053
-----------------------------
$ 221,367 $ 228,617
-----------------------------
-----------------------------

Liabilities & Unitholders' Equity
Current liabilities:
Bank indebtedness $ 20,660 $ 28,379
Accounts payable and accrued liabilities 14,463 16,405
Distributions payable 884 885
Income taxes payable 654 -
Current portion of long-term debt 8,000 8,000
Obligations under capital leases 178 408
-----------------------------
44,839 54,077

Long-term debt 17,508 21,383

Future income taxes 19,918 18,361

Unitholders' equity:
Trust Unit capital 60,343 60,984
Retained earnings 78,759 73,812
-----------------------------
139,102 134,796

-----------------------------
$ 221,367 $ 228,617
-----------------------------
-----------------------------

Supplemental Information:
Number of trust units outstanding (000's)
- Basic and diluted 29,450 29,500


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

Three months ended Six months ended
June 30 June 30
2008 2007 2008 2007
----------------------------------------------------------------------------
(unaudited) (unaudited) (unaudited) (unaudited)

Revenue $ 23,978 $ 16,175 $ 67,504 $ 69,661

Expenses:
Operating 16,465 12,819 38,864 41,531
Selling, general
and administration 4,025 2,868 8,437 7,673
Depreciation 2,855 2,191 6,307 5,434
Other interest 307 182 702 341
Interest on
long-term debt 322 251 749 518
-------------------------------------------------------
23,974 18,311 55,059 55,497

-------------------------------------------------------
Operating earnings
(loss) 4 (2,136) 12,445 14,164

Gain on disposal of
equipment 79 237 85 324

-------------------------------------------------------
Earnings before
income taxes 83 (1,899) 12,530 14,488

Income tax expense
(recovery)
Current (1,484) (3,977) 582 (2,111)
Future 770 757 1,557 1,346
-------------------------------------------------------
(714) (3,220) 2,139 (765)

-------------------------------------------------------
Net earnings 797 1,321 10,391 15,253
-------------------------------------------------------

Retained earnings,
beginning of period 80,613 80,169 73,812 74,847

Trust distributions (2,651) (8,417) (5,301) (16,756)
Repurchase and
cancellation of
trust units in
excess of stated
trust unit capital - (547) (143) (818)

-------------------------------------------------------
Retained earnings,
end of period $ 78,759 $ 72,526 $ 78,759 $ 72,526
-------------------------------------------------------
-------------------------------------------------------

Earnings per unit:
Basic and diluted $ 0.02 $ 0.04 $ 0.35 $ 0.51


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

Three months ended Six months ended
June 30 June 30
2008 2007 2008 2007
----------------------------------------------------------------------------
(unaudited) (unaudited) (unaudited) (unaudited)

Cash provided by
(used in):

Operations:
Net earnings $ 797 $ 1,321 $ 10,391 $ 15,253
Add (deduct) items
not effecting cash:
Depreciation 2,855 2,191 6,307 5,434
Gain on disposal of
equipment (79) (237) (85) (324)
Future income taxes 770 757 1,557 1,346
-----------------------------------------------------
4,343 4,032 18,170 21,709

Changes in non-cash
working capital
items:
Accounts receivable 15,788 27,611 6,210 22,153
Inventory (932) (6,069) (1,009) (4,999)
Income taxes
receivable 1,563 - 1,563 -
Prepaid expenses and
deposits 327 (1,024) 186 (1,048)
Accounts payable and
accrued liabilities (3,077) (4,916) (1,942) (7,939)
Income taxes payable (1,522) (3,983) 654 (5,050)
-----------------------------------------------------
16,490 15,651 23,832 24,826

Investments:
Purchase of property,
plant and equipment (4,129) (2,533) (6,630) (7,136)
Proceeds on disposal
of property, plant
and equipment 508 1,623 708 1,873
-----------------------------------------------------
(3,621) (910) (5,922) (5,263)

Financing:
Advances (repayment)
of long-term debt (4,869) (1,174) (3,875) (2,349)
Repayment of
obligations under
capital leases (115) (196) (230) (392)
Repurchase of trust
units (533) (669) (784) (1,005)
Distributions to
Unitholders (2,651) (8,417) (5,301) (16,756)
Distributions
payable - 39 (1) (3,432)
Increase (decrease)
in bank indebtedness (4,701) (4,324) (7,719) 4,371
-----------------------------------------------------
(12,869) (14,741) (17,910) (19,563)

Change in cash - - - -

Cash, beginning of
period - - - -

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

Supplemental
information:
Interest paid $ 621 $ 433 $ 1,590 $ 859
Income taxes paid
(received) $ (1,525) $ 5 $ (1,635) $ 2,938


SEGMENTED INFORMATION

The Trust 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 Drilling
months ended Contract and Gas
June 30, 2008 Drilling Production Compression
(unaudited) Services Rentals Services Other (2) Total
----------------------------------------------------------------------------

Revenue $ 4,323 $ 9,875 $ 9,780 $ - $ 23,978
Operating
earnings
(loss)
(1) (3) (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 three Drilling
months ended Contract and Gas
June 30, 2007 Drilling Production Compression
(unaudited) Services Rentals Services Other (2) Total
----------------------------------------------------------------------------

Revenue $ 386 $ 6,686 $ 9,103 $ - $ 16,175
Operating
earnings
(loss)
(1) (3) (1,829) (356) 1,048 (999) (2,136)
Depreciation 79 1,845 256 11 2,191
Assets 61,869 89,119 45,632 3,546 200,166
Goodwill - 2,514 1,539 - 4,053
Capital
expenditures 1,048 490 961 34 2,533


As at and for
the six Drilling
months ended Contract and Gas
June 30, 2008 Drilling Production Compression
(unaudited) Services Rentals Services Other (2) Total
----------------------------------------------------------------------------

Revenue $ 15,927 $ 32,993 $ 18,584 $ - $ 67,504
Operating
earnings
(loss)
(1) (3) 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


As at and for
the six Drilling
months ended Contract and Gas
June 30, 2007 Drilling Production Compression
(unaudited) Services Rentals Services Other (2) Total
----------------------------------------------------------------------------

Revenue $ 14,858 $ 27,955 $ 26,848 $ - $ 69,661
Operating
earnings
(loss)
(1) (3) 3,393 9,363 3,612 (2,204) 14,164
Depreciation 1,239 3,685 492 18 5,434
Assets 61,869 89,119 45,632 3,546 200,166
Goodwill - 2,514 1,539 - 4,053
Capital
expenditures 1,502 3,353 2,180 101 7,136

(1) Operating earnings (loss) are earnings before gain on disposal of
equipment and income taxes.
(2) Other includes the Trust's corporate activities and for June 30, 2008
"Assets" includes an income taxes receivable of $4.2 million.
(3) Included in operating earnings (loss) for the three and six month
periods ending June 30, 2008 is interest expense paid on the Trust's
operating line of credit, which interest expense is disclosed as "Other
interest" in the Trust's financial statements. This interest is
allocated to each reportable segment based on the relative amount of
capital each segment employs.


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

Notes to Financial Highlights

(1) Operating earnings are earnings before 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 Trust'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 Trust'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 Trust
    Daniel Halyk
    President & Chief Executive Officer
    (403) 216-3921
    or
    Total Energy Services Trust
    Mark Kearl
    Vice-President Finance and Chief Financial Officer
    (403) 216-3920
    Email: investorrelations@totalenergy.ca
    Website: www.totalenergy.ca