Total Energy Services Inc.
TSX : TOT

Total Energy Services Inc.

March 10, 2011 12:52 ET

Total Energy Services Inc. Announces 2010 Results

CALGARY, ALBERTA--(Marketwire - March 10, 2011) - Total Energy Services Inc. (TSX:TOT) ("Total Energy" or the "Company"), announces its consolidated financial results for the three and twelve-month periods ending December 31, 2010.



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

Three Months Ended Twelve Months Ended
Dec. 31 Dec. 31
(Unaudited) (Unaudited)
% %
2010 2009 Change 2010 2009 Change
-------------------------------------------------------
Revenue $ 72,716 $ 27,298 166% $221,640 $106,509 108%
Operating Earnings
(1) 18,573 1,122 1,555% 44,042 9,741 352%
EBITDA (1) 24,356 5,363 354% 67,623 24,058 181%
Cashflow (1) 24,392 4,702 419% 65,473 25,366 158%
Net Earnings 16,541 2,131 676% 39,955 11,640 243%

Per Share Data
(Diluted)
EBITDA (1) $ 0.77 $ 0.19 305% $ 2.15$ 0.83 159%
Cashflow (1) 0.77 0.16 381% 2.08 0.87 139%
Net Earnings 0.52 0.07 643% 1.27 0.40 218%

Dec. 31 Dec. 31
2010 2009 %
(Audited) (Audited) Change
Financial Position
Total Assets $ 346,597 $ 234,774 48%
Long-Term Debt and
Obligations Under
Capital Leases 75,514 35,713 111%
Working Capital (2) 70,409 29,493 139%
Net Debt (3) 5,105 6,220 (18)%
Shareholders' Equity 207,438 155,629 33%

Shares Outstanding
(000's)
Basic 31,425 29,176 8%
Diluted 32,096 29,176 10%


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 2010 represent record fourth quarter financial results for the Company. The acquisition of DC Energy Services LP in January 2010 and improving performance in all three business segments contributed to achieving these results.

Total Energy's Contract Drilling Services division achieved 58% utilization during the fourth quarter of 2010, recording 743 operating days (spud to release) with a fleet of 14 rigs, compared to 532 operating days, or 41% utilization, during the fourth quarter of 2009 with the same fleet. Revenue per operating day increased 29% for the fourth quarter of 2010 relative to the prior year comparable period due primarily to improved pricing and the addition of two owned top drives to the fleet during 2010. For the twelve months ended December 31, 2010, the Contract Drilling Services division achieved 2,714 operating days (53% utilization), compared to 1,169 operating days (24% utilization) for 2009. The Rentals and Transportation Services division achieved a utilization rate on major rental equipment of 69% during the fourth quarter of 2010 as compared to a 33% utilization rate during the fourth quarter of 2009. For 2010, rental equipment utilization averaged 56% as compared to 34% for 2009. The Gas Compression Services division generated revenues of $23.1 million for the three months ended December 31, 2010 compared to $8.4 million for the same period in 2009, an increase of 175%. For 2010, the Gas Compression Services division generated revenues of $62.3 million compared to $38.6 million in 2009. This division exited 2010 with a $35.3 million backlog of fabrication sales orders as compared to $11.3 million at December 31, 2009. At December 31, 2010, approximately 21,200 horsepower of compression equipment was on rent compared to 17,600 horsepower on rent at December 31, 2009. The gas compression rental fleet operated at an average utilization rate of 73% for 2010 as compared to 82% for 2009.

During the fourth quarter, Total Energy declared a quarterly dividend of $0.04 per share to shareholders of record on December 31, 2010. This dividend was paid on January 31, 2011.

Outlook

2010 saw a significant recovery of industry activity levels in Western Canada compared to 2009, driven by horizontal drilling and multi-stage fracturing completion activity targeting oil and liquids rich natural gas. Canadian oil and natural gas producers have generally increased their capital spending plans for 2011 relative to 2010. All 14 of Total Energy's drilling rigs have been drilling steadily during the first quarter of 2011. Increased industry drilling rig utilization has resulted in improving drilling rig spot market pricing and Total Energy presently does not have any drilling rigs on long term contract. Increased drilling, completion and production activity is contributing to increased demand for equipment and services provided by the Rentals and Transportation Services division. The Gas Compression Services division continues to focus on increasing its share of the Canadian natural gas compression market, including in the parts and service business. Increasing market awareness and acceptance of the NOMAD™ line of patented large horsepower mobile natural gas compression is expected to continue benefit this division despite challenging natural gas prices. Total Energy's previously announced 2011 preliminary capital budget of $21.3 million includes $10.4 million for expansion of the natural gas compression rental fleet, with demand for the NOMAD™ expected to lead the growth of such 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 0.26 to 1.0, $70.4 million of positive working capital and $5.1 million of net debt as at December 31, 2010. As previously announced, on February 9, 2011 Total Energy completed the public offering of $69 million of convertible unsecured subordinated debentures. In connection with the completion of this financing, Total Energy has replaced its $90 million bank credit facilities with a $35 million operating facility, which facility is secured by cash on hand, inventory and accounts receivable.

Total Energy has increased its 2011 capital expenditure budget by $7.0 million to $28.3 million. This increase will be directed to the construction of approximately 190 pieces of rental equipment, with delivery scheduled to be completed in the third quarter. The addition of this equipment will bring Total Energy's rental fleet to approximately 8,200 pieces, net of equipment that was disposed of during the fourth quarter of 2010 due to low utilization. Cashflow from operations and Total Energy's existing credit facility will be used to finance the 2011 capital expenditure budget. The Company's 2011 capital expenditure budget is subject to further change depending on industry conditions and business opportunities.

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 (877) 240-9772. Those who are unable to listen to the call live may listen to a recording of it by calling (800) 408-3053 (passcode 2033365). The recording will be available until March 17, 2011.

Selected Financial Information

Selected financial information relating to the three and twelve-month periods ended December 31, 2010 and 2009 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 2010 annual report.



Consolidated Balance Sheets
(in thousands of Canadian dollars)
December 31, December 31,
2010 2009
----------------------------------------------------------------------------
(audited) (audited)

Assets
Current assets:
Cash and cash equivalents $ 228 $ -
Accounts receivable 69,236 22,104
Inventory 36,385 28,408
Income tax receivable 118 2,848
Prepaid expenses and deposits 2,129 2,309
---------------------------
108,096 55,669

Property, plant and equipment 234,448 175,052

Goodwill 4,053 4,053

---------------------------
$ 346,597 $ 234,774
---------------------------
---------------------------

Liabilities & Shareholders' Equity
Current liabilities:
Accounts payable and accrued liabilities $ 28,285 $ 12,975
Deferred revenue 4,942 3,001
Dividends payable 1,257 875
Current portion of long-term debt - 8,737
Current portion of obligations under capital
leases 3,203 588
---------------------------
37,687 26,176

Long-term debt 72,500 34,950

Obligations under capital leases 3,014 763

Future income taxes 21,811 5,681

Deferred tax credit 4,147 11,575

Shareholders' equity:
Share capital 76,268 60,777
Contributed surplus 1,769 1,174
Retained earnings 129,401 93,678
---------------------------
207,438 155,629

---------------------------
$ 346,597 $ 234,774
---------------------------
---------------------------

Supplemental Information:
Number of common shares outstanding (000's) -
Basic 31,425 29,176
Number of common shares outstanding (000's) -
Diluted 32,096 29,176


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
2010 2009 2010 2009
----------------------------------------------------------------------------
(unaudited) (unaudited) (audited) (audited)

Revenue $ 72,716 $ 27,298 $ 221,640 $ 106,509
Expenses:
Operating 40,318 17,833 126,902 65,492
Selling, general
and administration 6,945 3,975 25,698 15,262
Share-based
compensation 434 294 1,289 1,283
Depreciation 5,572 3,659 20,377 13,211
Other interest 68 165 190 599
Interest on long-
term debt 806 250 3,142 921
--------------------------------------------------------
54,143 26,176 177,598 96,768

--------------------------------------------------------
Operating earnings 18,573 1,122 44,042 9,741

Reorganization
costs - - - (890)
Gain (loss) on
disposal of
equipment (663) 167 (128) 476
--------------------------------------------------------

Earnings before
income taxes 17,910 1,289 43,914 9,327

Income tax expense
(recovery)
Current 187 373 235 (2,021)
Future 1,182 (1,215) 3,724 (292)
--------------------------------------------------------
1,369 (842) 3,959 (2,313)

--------------------------------------------------------
Net earnings 16,541 2,131 39,955 11,640
--------------------------------------------------------

Retained earnings,
beginning of period 114,117 92,431 93,678 87,349

Dividends (1,257) (876) (4,050) (1,748)
Trust distributions - - - (3,486)
Repurchase and
cancellation of
common shares
in excess of stated
capital - (8) (182) (77)

--------------------------------------------------------
Retained earnings,
end of period $ 129,401 $ 93,678 $ 129,401 $ 93,678
--------------------------------------------------------
--------------------------------------------------------

Earnings per share:
Basic $ 0.53 $ 0.07 $ 1.30 $ 0.40
Diluted $ 0.52 $ 0.07 $ 1.27 $ 0.40


Consolidated Statements of Cash Flows
(in thousands of Canadian dollars)
Three months ended Year Ended
December 31 December 31
2010 2009 2010 2009
----------------------------------------------------------------------------
(unaudited) (unaudited) (audited) (audited)

Cash provided by
(used in):

Operations:
Net earnings $ 16,541 $ 2,131 $ 39,955 $ 11,640
Add (deduct) items
not affecting
cash:
Depreciation 5,572 3,659 20,377 13,211
Share based
compensation 434 294 1,289 1,283
Loss (gain) on
disposal of
equipment 663 (167) 128 (476)
Future income
taxes 1,182 (1,215) 3,724 (292)
--------------------------------------------------------
24,392 4,702 65,473 25,366

Changes in non-cash
working capital
items:
Accounts
receivable (17,057) (6,383) (47,132) 15,170
Inventory (6,019) 706 (7,211) 5,428
Income taxes
receivable - - 2,730 (2,848)
Prepaid expenses
and deposits 563 437 157 (990)
Deferred revenue 1,941 (3,238) 1,941 (3,238)
Accounts payable
and accrued
liabilities 5,756 7,696 15,057 (4,401)
Income taxes
payable - - - (2,336)
--------------------------------------------------------
9,576 3,920 31,015 32,151
Investments:
Purchase of
property, plant
and equipment (6,350) (5,877) (27,690) (19,212)
DC Energy Services
LP acquisition - - (31,714) -
Proceeds on
disposal of
equipment 1,095 1,787 3,621 3,981
Transaction with
Biomerge
Industries Ltd. - - - (3,639)
Changes in non-
cash working
capital items (2,935) (857) 253 (5,522)
--------------------------------------------------------
(8,190) (4,947) (55,530) (24,392)
Financing:
Advances of long-
term debt - 19,869 47,538 31,869
Repayments of
long-term debt (1,225) (2,600) (18,725) (9,703)
Repayment of
obligations under
capital leases (795) 274 (2,540) (172)
Dividends to
Shareholders (1,257) (876) (4,050) (1,748)
Dividends payable 325 3 382 875
Distributions to
Unitholders - - - (3,486)
Distributions
payable - - - (872)
Issuance of common
shares 1,794 466 2,377 466
Repurchase of
trust units - - - (27)
Repurchase of
common shares - (16) (239) (131)
Increase/(decrease)
in bank
indebtedness - (16,093) - (24,830)
--------------------------------------------------------
(1,158) 1,027 24,743 (7,759)
--------------------------------------------------------

Change in cash 228 - 228 -

Cash, beginning of
period - - - -

--------------------------------------------------------
Cash, end of period $ 228 $ - $ 228 $ -
--------------------------------------------------------
--------------------------------------------------------

Supplemental
information:
Interest paid $ 942 $ 415 $ 3,109 $ 1,596
Income taxes paid
(received) $ 187 $ 373 $ (2,495)$ 3,163


Segmented Information

The Company 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, Rentals and Transportation Services, which includes the rental and transportation of equipment used in drilling, completion 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, 2010 (unaudited)



Contract Rentals and Gas
Drilling Transportation Compression
Services Services Services Other(3) Total
----------------------------------------------------------------------------

Revenue $ 13,066 $ 36,578 $ 23,072 $ - $72,716
Operating earnings 2,980 14,739 2,274 (1,420) 18,573
Depreciation 1,593 3,385 586 8 5,572
Assets 80,001 188,961 74,413 3,222 346,597
Goodwill - 2,514 1,539 - 4,053
Capital
expenditures 927 3,565 1,855 3 6,350

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

Contract Rentals and Gas
Drilling Transportation Compression
Services Services Services Other(3) 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 year ended December 31, 2010 (audited)


Contract Rentals and Gas
Drilling Transportation Compression
Services Services Services Other(3) Total

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

Revenue $ 41,127 $ 118,259 $ 62,254 $ - $221,640
Operating earnings 5,219 38,066 6,253 (5,496) 44,042
Depreciation 5,574 12,819 1,954 30 20,377
Assets 80,001 188,961 74,413 3,222 346,597
Goodwill - 2,514 1,539 - 4,053
Capital
expenditures (2) 3,656 15,412 8,592 30 27,690

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


Contract Rentals and Gas
Drilling Transportation Compression
Services Services Services Other(3) 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 5,333 3,290 10,589 - 19,212


(1) Operating earnings (loss) are earnings before reorganization costs,
gain (loss) on disposal of equipment and income taxes.
(2) Excludes the acquisition of DC Energy Services LP.
(3) Other includes the Company's corporate activities.


Total Energy Services Inc. is a growth oriented energy services corporation involved in contract drilling services, rentals and transportation services and the fabrication, sale, rental and servicing of natural gas compression equipment. The common 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
andcashflow 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
andcashflow 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