Total Energy Services Inc.
TSX : TOT

Total Energy Services Inc.

March 12, 2015 11:17 ET

Total Energy Services Inc. Announces 2014 Results

CALGARY, ALBERTA--(Marketwired - March 12, 2015) - 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, 2014.

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

Three Months Ended Dec. 31 Twelve Months Ended Dec. 31
(unaudited) (audited)
2014 2013 % Change 2014 2013 % Change
Revenue $ 121,109 $ 86,940 39% $ 428,149 $ 339,579 26%
Operating Earnings (1) 21,954 16,149 36% 70,220 54,780 28%
EBITDA (1) 29,338 23,152 27% 105,533 82,952 27%
Cashflow (1)(5) 30,279 23,990 26% 108,357 60,446 79%
Net Income 13,309 10,694 24% 53,305 37,308 43%
Per Share Data (Diluted) (2)
EBITDA (1) $ 0.85 $ 0.67 27% $ 3.04 $ 2.43 25%
Cashflow (1) 0.88 0.69 28% 3.12 1.77 76%
Net Earnings 0.42 0.34 24% 1.66 1.20 38%
Dec. 31 Dec. 31
2014
(audited)
2013
(audited)
% Change
Financial Position
Total Assets $ 595,906 $ 518,782 15%
Long-Term Debt, Convertible Debentures and Obligations Under Finance Leases 71,844 69,598 3%
Working Capital (3) 82,332 73,512 12%
Net Debt (4) nil nil
Shareholders' Equity 382,063 340,612 12%
Shares Outstanding (000's)
Basic 31,005 31,176 (1%)
Diluted (2) 34,114 34,838 (2%)
Notes 1 through 5 please refer to the Notes to the Financial Highlights set forth at the end of this release.

Total Energy's results for the three and twelve months ended December 31, 2014 reflect continued growth in the Company's Compression and Process Services division and moderately higher Western Canadian oil and natural gas drilling and completion activity as compared to 2013. An unanticipated and substantial reduction in the drilling program of a significant customer during the fourth quarter of 2014 negatively impacted Total Energy's Contract Drilling Services division.

Total Energy's Contract Drilling Services division achieved 49% utilization during the fourth quarter of 2014, recording 755 operating days (spud to release) with a fleet of 17 rigs, compared to 881 operating days, or 60% utilization, during the fourth quarter of 2013 with a fleet of 16 rigs. Revenue per operating day increased 4% for the fourth quarter of 2014 relative to the prior year comparable period due to higher pricing and the mix of equipment operating. For the twelve months ended December 31, 2014, the Contract Drilling Services division achieved 3,038 operating days (51% utilization), compared to 2,814 operating days (48% utilization) for 2013. The Rentals and Transportation Services division achieved a utilization rate on major rental equipment of 44% during the fourth quarter of 2014 as compared to a 43% utilization rate during the fourth quarter of 2013. For 2014, rental equipment utilization averaged 41% as compared to 38% for 2013. The Rentals and Transportation Services division exited 2014 with approximately 10,000 pieces of rental equipment and 109 heavy trucks as compared to 9,700 rental pieces and 100 heavy trucks at the end of 2013. The Compression and Process Services division generated revenues of $68.6 million for the three months ended December 31, 2014 compared to $39.0 million for the same period in 2013, an increase of 76%. For 2014, revenues increased by 38% to $241.0 million compared to $174.7 million in 2013. The Compression and Process Services division exited 2014 with a $108.0 million backlog of fabrication sales orders as compared to $60.1 million at December 31, 2013. At December 31, 2014, approximately 45,000 horsepower of compression equipment was on rent compared to 43,000 horsepower on rent at December 31, 2013. The gas compression rental fleet operated at an average utilization rate of 89% for the three and twelve month periods ended December 31, 2014, respectively, as compared to 87% and 86% for the same periods in 2013.

During the fourth quarter, Total Energy declared a quarterly dividend of $0.06 per share to shareholders of record on December 31, 2014. This dividend was paid on January 30, 2015.

OUTLOOK

The precipitous decline in oil prices that began in late 2014 has resulted in substantial announced decreases to 2015 capital expenditure plans by North American oil and natural gas producers. As such, Total Energy expects that 2015 will be a challenging year for energy services providers. The Company has taken steps to right-size operations in response to reduced customer demand, particularly in the Contract Drilling Services and Rentals and Transportation Services divisions, and additional measures to rationalize the Company's operating cost structure will be taken as future industry conditions may warrant. While the challenging industry conditions are expected to weigh upon the Company's Compression and Process Services division, a record fabrication backlog at year end provides some measure of support for 2015 activity levels.

Total Energy's financial condition remains strong with a long-term debt (including convertible debentures) to long-term debt plus equity ratio of 0.15 to 1.0, $82.3 million of positive working capital and no net debt as at December 31, 2014. Total Energy's $35 million operating facility was recently renewed to June 2017 and is currently fully available and undrawn.

On January 16, 2015, Total Energy announced its preliminary capital expenditure budget for 2015 of $13.6 million. The expenditure of this budget is discretionary and no substantial capital expenditure commitments have been made to date. Total Energy's strong financial position, prudent dividend policy and minimal capital expenditure commitments positions the Company well to capitalize on any opportunities that may arise during this challenging and uncertain period.

CONFERENCE CALL

At 2:30 p.m. MST today, Total Energy will conduct a conference call and webcast 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. A live webcast of the conference call will be accessible on Total's website at www.totalenergy.ca by selecting "Webcasts". Persons wishing to join the conference call live may do so by calling (800) 355-4959 or (416) 340-2216. 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 March 19, 2015 by dialing (800) 408-3053 (passcode 451323).

ANNUAL MEETING OF SHAREHOLDERS

Shareholders and other interested persons are invited to attend the annual meeting of Shareholders which will commence at 10:00 a.m. (Calgary time) on Thursday, May 21, 2015 at the Calgary Petroleum Club, 319 - 5th Avenue S.W., Calgary, Alberta.

SELECTED FINANCIAL INFORMATION

Selected financial information relating to the three and twelve-month periods ended December 31, 2014 and 2013 is attached to this news release. This information should be read in conjunction with the 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 Company's 2014 annual report.

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

December 31, December 31,
2014 2013
Assets
Current assets:
Cash and cash equivalents $ 7,745 $ 3,210
Accounts receivable 98,920 78,130
Inventory 54,348 38,858
Income taxes receivable - 2,402
Prepaid expenses and deposits 5,576 5,921
166,589 128,521
Property, plant and equipment 419,991 382,347
Other assets 5,273 3,861
Goodwill 4,053 4,053
$ 595,906 $ 518,782
Liabilities & Shareholders' Equity
Current liabilities:
Accounts payable and accrued liabilities $ 59,837 $ 46,224
Deferred revenue 7,430 8,710
Dividends payable 1,860 1,559
Income taxes payable 12,754 -
Current portion of obligations under finance leases 2,376 2,377
84,257 58,870
Obligations under finance leases 3,107 2,775
Convertible debentures 66,361 64,446
Deferred tax liability 60,118 52,079
Shareholders' equity:
Share capital 88,899 83,243
Contributed surplus 6,880 6,677
Equity portion of convertible debenture 4,601 4,601
Retained earnings 281,683 246,091
382,063 340,612
Commitments and contingencies
$ 595,906 $ 518,782

Consolidated Statements of Comprehensive Income
(in thousands of Canadian dollars except per share amounts)

Three months ended Year ended
December 31, December 31,
2014 2013 2014 2013
(unaudited) (unaudited) (audited) (audited)
Revenue $ 121,109 $ 86,940 $ 428,149 $ 339,579
Expenses:
Cost of services 83,006 55,882 294,479 224,958
Selling, general and administration 8,069 7,058 32,036 29,416
Share-based compensation 333 680 1,857 3,236
Depreciation 7,747 7,171 29,557 27,189
Results from operating activities 21,954 16,149 70,220 54,780
Gain (loss) on disposal of property, plant and equipment (363) (168) 5,756 983
Finance income 409 43 914 385
Finance costs (3,765) (1,514) (6,505) (5,965)
Net income before income taxes 18,235 14,510 70,385 50,183
Current income tax expense 4,982 2,018 9,041 7,259
Deferred income tax (recovery) expense (56) 1,798 8,039 5,616
Total income tax expense 4,926 3,816 17,080 12,875
Net income and total comprehensive income for the period 13,309 10,694 53,305 37,308
Retained earnings, beginning of period 272,665 236,955 246,091 219,418
Dividends (1,861) (1,558) (7,486) (6,181)
Repurchase and cancellation of common shares in excess of stated common share capital (2,430) - (10,227) (4,454)
Retained earnings, end of period $ 281,683 $ 246,091 $ 281,683 $ 246,091
Earnings per share:
Basic earnings per share $ 0.43 $ 0.34 $ 1.71 $ 1.21
Diluted earnings per share $ 0.42 $ 0.34 $ 1.66 $ 1.20

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

Three months ended Year ended
December 31, December 31,
2014 2013 2014 2013
(unaudited) (unaudited) (audited) (audited)
Cash provided by (used in):
Operations:
Net Income for the period $ 13,309 $ 10,694 $ 53,305 $ 37,308
Add (deduct) items not affecting cash:
Depreciation 7,747 7,171 29,557 27,189
Share-based compensation 333 680 1,857 3,236
Loss (gain) on disposal of property, plant and equipment 363 168 (5,756) (983)
Finance income (73) (43) (306) (385)
Finance costs 3,765 1,514 6,505 5,965
Current income tax expense 4,982 2,018 9,041 7,259
Deferred income tax (recovery)expense (56) 1,798 8,039 5,616
Income taxes recovered (paid) (91) (10) 6,115 (24,759)
30,279 23,990 108,357 60,446
Changes in non-cash working capital items:
Accounts receivable (1,120) (6,907) (20,790) (14,619)
Inventory (9,428) (4,181) (15,490) (2,664)
Prepaid expenses and deposits 1,878 (38) 270 (3,374)
Accounts payable and accrued liabilities 3,191 6,950 10,874 13,385
Deferred revenue (2,208) 3,016 (1,280) 1,739
22,592 22,830 81,941 54,913
Investments:
Purchase of property, plant and equipment (35,039) (38,557) (91,239) (75,029)
Acquisition of business - - - (16,954)
Proceeds on sale of other assets 377 1,399 -
Purchase of other assets - - (2,879) -
Proceeds on disposal of property, plant and equipment 485 2,223 31,994 6,574
Changes in non-cash working capital items 5,192 (4,040) 4,004 (3,160)
(28,985) (40,374) (56,721) (88,569)
Financing:
Repayment of obligations under finance leases (698) (722) (3,135) (3,001)
Payment of dividends (1,871) (1,554) (7,185) (6,152)
Issuance of common shares - 894 5,791 5,599
Repurchase of common shares (2,835) 1 (11,941) (5,419)
Interest paid (208) (56) (4,215) (4,213)
(5,612) (1,437) (20,685) (13,186)
Change in cash and cash equivalents (12,005) (18,981) 4,535 (46,842)
Cash and cash equivalents, beginning of period 19,750 22,191 3,210 50,052
Cash and cash equivalents, end of period $ 7,745 $ 3,210 $ 7,745 $ 3,210

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 Compression and Process Services, which includes the fabrication, sale, rental and servicing of natural gas compression and process equipment.

As at and for the three months ended December 31, 2014 (unaudited)

Contract
Drilling
Services
Rentals
and
Transportation
Services
Compression
and
Process
Services
Other(1) Total
Revenue $ 16,234 $ 36,285 $ 68,590 $ - $ 121,109
Cost of services 9,476 19,802 53,728 - 83,006
Selling, general and administration 871 3,818 2,548 832 8,069
Share-based compensation - - - 333 333
Depreciation 1,580 4,048 2,109 10 7,747
Results from operating activities 4,307 8,617 10,205 (1,175) 21,954
Gain/(loss) on sale of property, plant and equipment (341) (24) - 2 (363)
Finance income - - - 409 409
Finance costs (206) (541) (261) (2,757) (3,765)
Net income before income taxes 3,760 8,052 9,944 (3,521) 18,235
Goodwill - 2,514 1,539 - 4,053
Total assets 125,992 261,089 199,903 8,922 595,906
Total liabilities 22,936 57,823 49,135 83,949 213,843
Capital expenditures $ 9,408 $ 6,756 $ 18,760 $ 115 $ 35,039

As at and for the three months ended December 31, 2013 (unaudited)

Contract
Drilling
Services
Rentals
and
Transportation
Services
Compression
and
Process
Services
Other(1) Total
Revenue $ 18,266 $ 29,683 $ 38,991 $ - $ 86,940
Cost of services 10,204 15,786 29,892 - 55,882
Selling, general and administration 922 3,482 1,904 750 7,058
Share-based compensation - - - 680 680
Depreciation 1,644 3,742 1,777 8 7,171
Results from operating activities 5,496 6,673 5,418 (1,438) 16,149
Gain/(loss) on sale of PP&E 10 (185) - 7 (168)
Finance income - - - 43 43
Finance costs (204) (554) (241) (515) (1,514)
Net income before income taxes 5,302 5,934 5,177 (1,903) 14,510
Goodwill - 2,514 1,539 - 4,053
Total assets 107,206 234,343 161,342 15,891 518,782
Total liabilities 20,057 49,700 37,974 70,439 178,170
Capital expenditures $ 4,854 $ 14,624 $ 16,618 $ 2,461 $ 38,557

As at and for the year ended December 31, 2014 (audited)

Contract
Drilling
Services
Rentals
and
Transportation
Services
Compression
and
Process
Services
Other(1) Total
Revenue $ 62,358 $ 124,840 $ 240,951 $ - $ 428,149
Cost of services 38,766 65,449 190,264 - 294,479
Selling, general and administration 3,502 14,178 9,969 4,387 32,036
Share-based compensation - - - 1,857 1,857
Depreciation 5,863 15,672 7,998 24 29,557
Results from operating activities 14,227 29,541 32,720 (6,268) 70,220
Gain on sale of property, plant and equipment (319) 173 5,827 75 5,756
Finance income - - - 914 914
Finance costs (819) (2,119) (1,039) (2,528) (6,505)
Net income before income taxes 13,089 27,595 37,508 (7,807) 70,385
Goodwill - 2,514 1,539 - 4,053
Total assets 125,992 261,089 199,903 8,922 595,906
Total liabilities 22,936 57,823 49,135 83,949 213,843
Capital expenditures $ 27,691 $ 22,772 $ 40,636 $ 140 $ 91,239

As at and for the year ended December 31, 2013 (audited)

Contract
Drilling
Services
Rentals
and
Transportation
Services
Compression
And
Process
Services(2)
Other(1) Total
Revenue $ 55,953 $ 108,908 $ 174,718 $ - $ 339,579
Cost of services 34,362 53,719 136,877 - 224,958
Selling, general and administration 3,331 13,530 8,235 4,320 29,416
Share-based compensation - - - 3,236 3,236
Depreciation 5,551 15,156 6,445 37 27,189
Results from operating activities 12,709 26,503 23,161 (7,593) 54,780
Gain on sale of property, plant and equipment (12) 31 957 7 983
Finance income - - 53 332 385
Finance costs (812) (2,202) (952) (1,999) (5,965)
Net income before income taxes 11,885 24,332 23,219 (9,253) 50,183
Goodwill - 2,514 1,539 - 4,053
Total assets 107,206 234,343 161,342 15,891 518,782
Total liabilities 20,057 49,700 37,974 70,439 178,170
Capital expenditures $ 9,401 $ 27,281 $ 47,866 $ 4,481 $ 89,029
(1) Other includes the Company's corporate activities, accretion of convertible debentures and obligations pursuant to long-term credit facilities.
(2) Includes January 1, 2013 acquisition of a process equipment fabrication business included in Compression and Process Services segment.

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 and process 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 means results from operating activities and is equal to net income before income taxes minus gain on sale of property, plant and equipment plus finance costs. EBITDA means earnings before interest, taxes, depreciation and amortization and is equal to net income before income taxes plus finance costs 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 IFRS. Management believes that in addition to net income, operating earnings, EBITDA and cashflow are useful supplemental measures as they provide 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 operating earnings, EBITDA and cashflow 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 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) Per share data (diluted) and the number of common shares outstanding on a diluted basis includes the impact of the approximate 3.1 million common shares issuable upon the entire conversion of the $69 million principal amount of convertible debentures issued by the Company in February 2011.
(3) Working capital equals current assets minus current liabilities.
(4) Net Debt equals long-term debt plus obligations under finance leases plus convertible debentures plus current liabilities minus current assets.
(5) Cashflow for the year ended December 31, 2013 is net of $15.3 million of income taxes paid during the period that relates to 2012 taxable income as a result of the Company not having been required to make income tax installment payments during 2012.

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