Total Energy Services Inc.
TSX : TOT

Total Energy Services Inc.

May 11, 2011 10:22 ET

Total Energy Services Inc. Announces Q1 2011 Results

CALGARY, ALBERTA--(Marketwire - May 11, 2011) - Total Energy Services Inc. ("Total Energy" or the "Company") (TSX:TOT), announces its consolidated financial results for the three months ending March 31, 2011.


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

                                       Three Months Ended March 31          
                                               (Unaudited)                  
                                         2011           2010      % Change  
                               ---------------------------------------------
Revenue                           $    85,105    $    58,838            45% 
Operating Earnings (1)                 26,446         14,522            82% 
EBITDA (1)                             33,191         19,953            66% 
Cashflow (1)                           33,201         19,857            67% 
Net Income                             18,830         10,209            84% 

Per Share Data (Diluted)                                                    
EBITDA (1)                        $      0.97    $      0.66            47% 
Cashflow (1)                      $      0.97    $      0.65            49% 
Net Income                        $      0.57    $      0.34            68% 

                                     March 31        Dec. 31                
                                         2011           2010                
                                   (Unaudited)      (Audited)     % Change  
Financial Position                                                          
Total Assets                      $   366,786    $   342,834             7% 
Long-Term Debt, Convertible                                                 
 debentures and Obligations                                                 
 Under Finance Leases                  66,064         78,717           (16%)
Working Capital (2)                    90,725         64,446            41% 
Net Debt (3)                                -          5,026            nm  
Shareholders' Equity                  232,717        209,845            11% 

Shares Outstanding (000's)                                                  
Basic                                  31,520         31,425             -% 
Diluted                                35,574         32,096            11% 


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

Total Energy is reporting its financial results in accordance with International Financial Reporting Standards ("IFRS") effective January 1, 2011, the changeover date set by the Canadian Accounting Standards Board. IFRS compliant comparative financial information for one year prior to the effective date is required. A description of the impact of the implementation of IFRS on the Company's financial results is contained in the Company's Unaudited Interim Consolidated Financial Statements and related Management Discussion and Analysis as at and for the three months ended March 31, 2011, which documents will be filed with regulators and available on SEDAR in due course.

Total Energy's results for the first quarter of 2011 represent record quarterly revenue, EBITDA and cashflow, driven by continued improvement in industry conditions in Western Canada and the impact of approximately $84 million of net capital investments made by the Company during 2009 and 2010.

Total Energy's Contract Drilling Services division achieved 78% utilization during the first quarter of 2011, recording 979 operating days (spud to release) with a fleet of 14 rigs, compared to 922 operating days, or 73% utilization, during the first quarter of 2010. Revenue per operating day increased 28% for the first quarter of 2011 relative to the prior year comparable period due primarily to improved pricing and the addition of two owned top drives to the fleet subsequent to March 31, 2010. The Rentals and Transportation Services division achieved a utilization rate on major rental equipment of 74% during the first quarter of 2011 as compared to a 61% utilization rate during the first quarter of 2010. The Gas Compression Services division generated revenues of $22.6 million for the three months ended March 31, 2011 compared to $10.2 million for the same period in 2010, an increase of 122%. Operating earnings margin in this division was negatively impacted by increased overhead costs associated with the significant expansion of the Western Canadian parts and service business that began in the second half of 2010. This division exited the first quarter of 2011 with a $33.9 million backlog of fabrication sales orders as compared to $18.9 million at March 31, 2010. At March 31, 2011, approximately 21,200 horsepower of compression equipment was on rent compared to 18,700 horsepower on rent at March 31, 2010. The gas compression rental fleet operated at an average utilization rate of 74% for the first quarter of 2011 as compared to 75% during the first quarter of 2010.

During the first quarter, Total Energy declared a quarterly dividend of $0.04 per share to shareholders of record on March 31, 2011. This dividend was paid on April 29, 2011.

Outlook

The first quarter of 2011 saw continued improvement of industry activity levels in Western Canada, 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. Increased equipment utilization has resulted in improving pricing in both the Contract Drilling and the Rentals and Transportation Services divisions. 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 where a significant investment has been made over the past nine months to increase the capabilities of this business. Total Energy expects to begin to realize a return on this investment with the commencement of the annual turnaround season that typically begins in the latter part of the second quarter.

Total Energy's balance sheet remains strong with a long-term debt (including $69 million of principal amount of convertible debentures issued in February 2011) to long-term debt plus equity ratio of 0.23 to 1.0, $90.7 million of positive working capital and no net debt as at March 31, 2011. The Company's $35 million secured bank facility is currently fully available and unutilized.

Total Energy's current 2011 capital budget is $37.8 million, of which $4.9 million has been expended to March 31, 2011. The Company's balance sheet strength provides significant capacity and flexibility to pursue further growth opportunities that may arise.

Conference Call

At 2:30 p.m. MST today, Total Energy will conduct a conference call to discuss its first 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 5344011). The recording will be available until May 18, 2011.

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 Monday, May 16, 2011 at the Calgary Petroleum Club, 319 - 5th Avenues S.W., Calgary, Alberta.

Selected Financial Information

Selected financial information relating to the three month period ended March 31, 2011 and 2010 is attached to this news 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 Company's first quarter report.


Consolidated Statements of Financial Position                               
(in thousands of Canadian dollars)                                          
                                                    March 31,   December 31,
                                                        2011           2010 
----------------------------------------------------------------------------
                                                  (unaudited)      (audited)

Assets                                                                      
Current assets:                                                             
 Cash and cash equivalents                       $     6,407    $       228 
 Accounts receivable                                  87,909         70,983 
 Inventory                                            36,629         33,488 
 Income taxes receivable                                 118            118 
 Prepaid expenses and deposits                         1,322          1,818 
                                              ------------------------------
                                                     132,385        106,635 

Property, plant and equipment                        230,348        232,146 

Goodwill                                               4,053          4,053 

                                              ------------------------------
                                                 $   366,786    $   342,834 
                                              ------------------------------
                                              ------------------------------

Liabilities & Shareholders' Equity                                          
Current liabilities:                                                        
 Accounts payable and accrued liabilities             32,738         28,353 
 Deferred revenue                                      4,583          3,334 
 Dividends payable                                     1,257          1,257 
 Current portion of long-term debt                         -          6,042 
 Current portion of obligations under finance                               
  leases                                               3,082          3,203 
                                              ------------------------------
                                                      41,660         42,189 

Long-term debt                                             -         66,458 

Obligations under finance leases                       3,008          3,014 

Convertible debentures                                59,974              - 

Deferred tax liability                                29,427         21,328 

Shareholders' equity:                                                       
 Share capital                                        76,889         76,268 
 Contributed surplus                                   1,850          1,769 
 Equity portion of convertible debenture               4,601              - 
 Retained earnings                                   149,377        131,808 
                                              ------------------------------
                                                     232,717        209,845 

                                              ------------------------------
                                                 $   366,786    $   342,834 
                                              ------------------------------
                                              ------------------------------

Consolidated Statements of Comprehensive Income                             
(in thousands of Canadian dollars except per share amounts)                 
                                                    Three months ended      
                                                         March 31           
                                                        2011           2010 
----------------------------------------------------------------------------
                                                  (unaudited)    (unaudited)

Revenue                                          $    85,105    $    58,838 


 Cost of services                                     44,235         32,843 
 Selling, general and administration                   7,625          6,138 
 Share-based compensation                                220            322 
 Depreciation                                          6,579          5,013 

                                              ------------------------------
Results from operating activities                     26,446         14,522 

 Gain on sale of property, plant and equipment           166            418 
 Finance costs                                        (1,189)          (835)
                                              ------------------------------

Net income before income taxes                        25,423         14,105 

 Current income tax expense                               44              - 
 Deferred income tax expense                           6,549          3,896 
                                              ------------------------------
Total income tax expense                               6,593          3,896 

                                              ------------------------------
Net income and total comprehensive income             18,830         10,209 
                                              ------------------------------

Retained earnings, beginning of period               131,808        103,114 

 Dividends                                            (1,261)          (931)

                                              ------------------------------
Retained earnings, end of period                 $   149,377    $   112,392 
                                              ------------------------------
                                              ------------------------------

Earnings per share:                                                         
 Basic                                           $      0.60    $      0.34 
 Diluted                                         $      0.57    $      0.34 

Consolidated Statements of Cash Flows                                       
(in thousands of Canadian dollars)                                          
                                                    Three months ended      
                                                         March 31           
                                                        2011           2010 
----------------------------------------------------------------------------
                                                  (unaudited)    (unaudited)

Cash provided by (used in):                                                 

Operations:                                                                 
 Net income for the period                       $    18,830    $    10,209 
 Add (deduct) items not affecting cash:                                     
  Depreciation                                         6,579          5,013 
  Share-based compensation                               220            322 
  Gain on sale of property, plant and                                       
   equipment                                            (166)          (418)
  Interest expense                                     1,189            835 
  Income tax expense                                      44              - 
  Deferred income tax expense                          6,549          3,896 
 Income taxes paid                                       (44)             - 
                                              ------------------------------
                                                      33,201         19,857 

Changes in non-cash working capital items:                                  
 Accounts receivable                                 (16,926)       (30,577)
 Inventory                                            (3,141)         2,605 
 Prepaid expenses and deposits                           496            322 
 Accounts payable and accrued liabilities              4,149         20,843 
 Deferred revenue                                      1,249         (1,568)
                                              ------------------------------
                                                      19,028         11,482 
Investments:                                                                
 Purchase of property, plant and equipment            (4,930)        (3,969)
 DC Energy Services LP acquisition                         -        (31,093)
 Proceeds on disposal of property, plant and                                
  equipment                                            1,209          1,927 
 Changes in non-cash working capital items               440           (116)
                                              ------------------------------
                                                      (3,281)       (33,251)
Financing:                                                                  
 Advances under long-term debt                             -         51,182 
 Issuance of convertible debenture, net of                                  
  issue costs                                         65,927              - 
 Repayment of long-term debt                         (72,500)        (5,000)
 Repayment of obligations under finance leases        (1,021)          (591)
 Dividends to shareholders                            (1,261)          (931)
 Dividends payable                                         -             56 
 Issuance of common shares                               482            302 
 Repurchase of common shares                               -              - 
 Interest paid                                        (1,195)          (835)
 Decrease in bank indebtedness                             -        (19,869)
                                              ------------------------------
                                                      (9,568)        24,314 
                                              ------------------------------

Change in cash and cash equivalents                    6,179          2,545 

Cash and cash equivalents, beginning of period           228              - 

                                              ------------------------------
Cash and cash equivalents, end of period         $     6,407    $     2,545 
                                              ------------------------------
                                              ------------------------------


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 March 31, 2011 (unaudited)


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

Revenue               $ 17,582       $ 44,895    $ 22,628 $      - $ 85,105 
Cost of services         9,974         15,041      19,220        -   44,235 
Selling, general and                                                        
 administration            792          4,443       1,222    1,168    7,625 
Share-based                                                                 
 compensation                -              -           -      220      220 
Depreciation             1,708          4,129         729       13    6,579 
----------------------------------------------------------------------------
Results from                                                                
 operating activities    5,108         21,282       1,457   (1,401)  26,446 
Gain on sale of                                                             
 property, plant and                                                        
 equipment                  15             16         135        -      166 
Finance costs             (212)          (587)       (127)    (263)  (1,189)
----------------------------------------------------------------------------
Net income before                                                           
 income taxes            4,911         20,711       1,465   (1,664)  25,423 
----------------------------------------------------------------------------

Goodwill                     -          2,514       1,539        -    4,053 
Total assets            83,120        202,376      72,664    8,626  366,786 
Total liabilities       18,728         37,287      17,921   60,133  134,069 
----------------------------------------------------------------------------
Capital expenditures     1,683          2,141       1,104        2    4,930 
----------------------------------------------------------------------------

As at and for the three months ended March 31, 2010 (unaudited)             

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

Revenue               $ 12,933       $ 35,730    $ 10,175 $      - $ 58,838 
Cost of services         8,930         16,007       7,806      100   32,843 
Selling, general and                                                        
 administration            555          3,946         841      796    6,138 
Share-based                                                                 
 compensation                -              -           -      322      322 
Depreciation             1,524          2,982         500        7    5,013 
----------------------------------------------------------------------------
Results from                                                                
 operating activities    1,924         12,795       1,028   (1,255)  14,522 
Gain on sale of                                                             
 property, plant and                                                        
 equipment                   -            106         312        -      418 
Finance costs             (141)          (574)        (90)     (30)    (835)
----------------------------------------------------------------------------
Net income before                                                           
 income taxes            1,783         12,327       1,250   (1,255)  14,105 
----------------------------------------------------------------------------

Goodwill                     -          2,514       1,539        -    4,053 
Total assets            75,236        180,088      55,848    1,628  312,800 
Total liabilities       14,151         42,366      12,726   56,090  125,333 
----------------------------------------------------------------------------
Capital                                                                     
 expenditures(1)           913            276       2,769       11    3,969 
----------------------------------------------------------------------------

(1) Excludes the acquisition of DC Energy Services LP.                      
(2) Other includes the Company's corporate activities, accretion of         
    convertible debentures and obligations pursuant to long-term credit     
    facilities.                                                             

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 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) Working capital equals current assets minus current liabilities.        

(3) Net Debt equals long-term debt plus obligations under finance leases    
    plus convertible debentures 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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