Total Energy Services Inc.
TSX : TOT

Total Energy Services Inc.

August 10, 2011 11:04 ET

Total Energy Services Inc. Announces Q2 2011 Results

CALGARY, ALBERTA--(Marketwire - Aug. 10, 2011) - 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, 2011.


Financial Highlights
($000's except per share 
 data)                       Three Months Ended            Six Months Ended
                                        June 30                     June 30
                                     (Unaudited)                 (Unaudited)
                                              %                           %
                         2011      2010  Change      2011      2010  Change
                      ------------------------------------------------------
Revenue               $62,159   $37,061      68% $147,264  $ 95,899      54%
Operating Earnings (1)  9,760     1,904     413%   36,206    16,426     120%
EBITDA (1)             15,501     6,494     139%   48,692    26,447      84%
Cashflow (1)           15,308     6,831     124%   48,509    26,688      82%
Net Income              6,392     1,475     333%   25,222    11,684     116%

Per Share Data (Diluted)
EBITDA (1)            $  0.44   $  0.21     110% $   1.40  $   0.85      65%
Cashflow (1)             0.39      0.22      77%     1.40      0.86      63%
Net Earnings             0.20      0.05     300%     0.77      0.38     103%

                                                June 30   Dec. 31
                                                   2011      2010
                                             (Unaudited) (Audited) % Change
Financial Position
Total Assets                                   $370,323 $ 342,834         8%
Long-Term Debt, Convertible
 Debentures and Obligations Under
 Finance Leases                                  66,281    78,717      (16)%
Working Capital (2)                              93,486    64,446        45%
Net Debt (3)                                          -     5,026       n/m
Shareholders' Equity                            237,360   209,845        13%

Shares Outstanding (000's)
Basic                                            31,525    31,425       n/m
Diluted                                          35,445    32,096        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 financial results for the three months ended June 30, 2011 represent record second quarter operating results despite prolonged wet weather conditions throughout Western Canada that negatively impacted industry activity levels. Contributing to these results were improved pricing in the Contract Drilling Services division, increased equipment utilization in the Rentals and Transportation Services division and improving sequential quarterly performance in the Gas Compression Services division, including an increased contribution from this division's parts and service business.

Total Energy's Contract Drilling Services division achieved 32% utilization during the second quarter of 2011, recording 407 operating days (spud to release) with a fleet of 14 rigs, compared to 427 operating days, or 34% utilization during the second quarter of 2010. Revenue per operating day realized during the second quarter of 2011 increased 32% compared to the second quarter of 2010 due primarily to improved pricing. The Rentals and Transportation Services division achieved a utilization rate on major rental equipment of 52% during the second quarter of 2011 as compared to a 39% utilization rate during the second quarter of 2010. The Gas Compression Services division generated revenues of $28.6 million for the three months ended June 30, 2011 compared to $14.0 for the second quarter of 2010. At June 30, 2011 the Gas Compression Services division had a fabrication backlog of approximately $48.3 million compared to a backlog of $11.0 million as at June 30, 2010. At June 30, 2011 approximately 22,700 horsepower of compression equipment was on rent compared to 18,700 horsepower on rent at June 30, 2010. The gas compression rental fleet operated at an average utilization rate of 78% during the first six months of 2011 as compared to 77% for the same period in 2010.

During the second quarter, Total Energy declared a quarterly dividend of $0.04 per share to shareholders of record on June 30, 2011. This dividend was paid on July 29, 2011.

Total Energy is reporting its financial results in accordance with International Financial Reporting Standards ("IFRS") effective January 1, 2011. 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 and six months ended June 30, 2011, which documents will be filed with regulators and available on SEDAR in due course.

OUTLOOK

Relatively strong oil and natural gas liquids prices and a delayed commencement of summer drilling and completion activity in Western Canada due to wet weather have contributed to strong demand for the equipment and services provided by Total Energy. With recently improved weather conditions, industry activity levels have rebounded.

Execution of Total Energy's current 2011 capital expenditure budget of $71.3 million is currently on time and on budget, with all equipment expected to be deployed over the second half of 2011 in time for the upcoming winter drilling season. Included in the current capital expenditure budget is $40.5 million for upgrade and expansion of the Rentals and Transportation Services division's equipment fleet, $13.3 million for the construction of Rig 15 and ancillary equipment for the Contract Drilling Services division and $12.4 million for the Gas Compression Services division, including $10.4 million budgeted for expansion of the gas compression rental fleet. Total Energy continues to evaluate additional opportunities to grow its existing businesses.

In early July, Total Energy's Gas Compression Services division expanded its fabrication capacity by opening a third fabrication facility in Calgary. This 17,400 square foot facility expands the Company's fabrication capacity by approximately 20% and will be dedicated to fabricating Total Energy's patented NOMADTM line of mobile compression.

Total Energy's financial position remains strong with a long-term debt (including $69 million of principal amount of convertible debentures) to long-term debt plus equity ratio of 0.23 to 1.0 and no net debt as at June 30, 2011. The Company's $35 million secured bank facility is currently fully available and unutilized.

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 (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 4875857). The recording will be available until August 17, 2011.

SELECTED FINANCIAL INFORMATION

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


Consolidated Statements of Financial Position
(in thousands of Canadian dollars)
                                                       June 30, December 31,
                                                          2011         2010
----------------------------------------------------------------------------
                                                    (unaudited)
Assets
Current assets:
 Cash and cash equivalents                           $  20,595    $     228
 Accounts receivable                                    71,570       70,983
 Inventory                                              37,203       33,488
 Income taxes receivable                                   118          118
 Prepaid expenses and deposits                           1,783        1,818
                                                    ------------------------
                                                       131,269      106,635
Property, plant and equipment                          235,001      232,146
Goodwill                                                 4,053        4,053
                                                    ------------------------
                                                     $ 370,323    $ 342,834
                                                    ------------------------
                                                    ------------------------
Liabilities & Shareholders' Equity
Current liabilities:
 Accounts payable and accrued liabilities               25,265       28,353
 Deferred revenue                                        8,170        3,334
 Dividends payable                                       1,261        1,257
 Current portion of long-term debt                           -        6,042
 Current portion of obligations under finance leases     3,087        3,203
                                                    ------------------------
                                                        37,783       42,189
Long-term debt                                               -       66,458
Convertible debenture                                   60,340            -
Obligations under finance leases                         2,854        3,014
Deferred tax liability                                  31,986       21,328
Shareholders' equity:
 Share capital                                          77,247       76,268
 Contributed surplus                                     2,175        1,769
 Equity portion of convertible debenture                 4,601            -
 Retained earnings                                     153,337      131,808
                                                    ------------------------
                                                       237,360      209,845
Contingencies and commitments
                                                    ------------------------
                                                     $ 370,323    $ 342,834
                                                    ------------------------
                                                    ------------------------

Consolidated Statements of Comprehensive Income
(in thousands of Canadian dollars except per share
amounts)
                            Three months ended             Six months ended
                                       June 30                      June 30
                             2011         2010         2011            2010
----------------------------------------------------------------------------
                       (unaudited)  (unaudited)  (unaudited)     (unaudited)

Revenue                  $ 62,159     $ 37,061    $ 147,264        $ 95,899

Expenses:
 Cost of services          40,396       24,150       84,631          56,993
 Selling, general 
  and administration        6,416        6,242       14,041          12,380
 Share-based compensation     458          292          678             614
 Depreciation               5,129        4,473       11,708           9,486
                       -----------------------------------------------------
Results from operating 
 activities                 9,760        1,904       36,206          16,426
 Gain on disposal of 
  property, plant and 
  equipment                   612          117          778             535
 Finance costs             (1,382)        (741)      (2,571)         (1,576)
                       -----------------------------------------------------
Net income before income 
 taxes                      8,990        1,280       34,413          15,385

 Current income tax expense    39           48           83              48
 Deferred income tax 
  expense (recovery)        2,559         (243)       9,108           3,653
                       -----------------------------------------------------
Total income tax 
 expense (recovery)         2,598         (195)       9,191           3,701
                       -----------------------------------------------------
Net income and total 
 comprehensive income 
 for the period             6,392        1,475       25,222          11,684
                       -----------------------------------------------------
Retained earnings, 
 beginning of period      149,377      112,392      131,808         103,114

 Dividends                 (1,261)        (931)      (2,522)         (1,862)
 Repurchase and 
  cancellation of 
  common shares             
  in excess of stated 
  common share capital     (1,171)           -       (1,171)
                       -----------------------------------------------------
Retained earnings, 
 end of period          $ 153,337    $ 112,936    $ 153,337       $ 112,936
                       -----------------------------------------------------
                       -----------------------------------------------------

Earnings per share :
 Basic                  $    0.20    $    0.05    $    0.80       $    0.38
 Diluted                $    0.20    $    0.05    $    0.77       $    0.38 



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

                            Three months ended             Six months ended
                                       June 30                      June 30
                              2011        2010         2011            2010
----------------------------------------------------------------------------
                        (unaudited) (unaudited)  (unaudited)     (unaudited)

Cash provided by (used in):

Operations:
 Net income for the 
  period                   $ 6,392     $ 1,475     $ 25,222        $ 11,684
 Add (deduct) items not 
  affecting cash:
  Depreciation               5,129       4,473       11,708           9,486
  Share-based compensation     458         292          678             614
  Gain on sale of property, 
   plant and equipment        (612)       (117)        (778)           (535)
  Finance costs              1,382         741        2,571           1,576
  Current income tax expense    39          48           83              48
  Future income tax expense 
   (recovery)                2,559        (243)       9,108           3,653
 Taxes paid                    (39)        162          (83)            162
                        ----------------------------------------------------
                            15,308       6,831       48,509          26,688

 Changes in non-cash 
  working capital items:
  Accounts receivable       16,339      20,351         (587)        (10,226)
  Inventory                   (574)     (4,477)      (3,715)         (1,941)
  Prepaid expenses and 
   deposits                   (461)        479           35             687
  Accounts payable and 
   accrued liabilities      (9,672)     (5,490)      (5,523)         15,421
  Deferred revenue           3,587        (670)       4,836          (2,237)
                        ----------------------------------------------------
                            24,527      17,024       43,555          28,392

Investments:
 Purchase of property, 
  plant and equipment      (10,860)     (5,183)     (15,790)         (9,037)
 DC Energy Services LP 
  acquisition                    -           -            -         (31,093)
 Proceeds on disposal of 
  property, plant and 
  equipment                  2,329         237        3,538           2,164
 Changes in non-cash 
  working capital items      1,226       1,900        1,666           1,784
                        ----------------------------------------------------
                            (7,305)     (3,046)     (10,586)        (36,182)

Financing:
 Advances under long-term 
  debt                           -           -            -          51,182
 Issuance of convertible 
  debenture, net of issue 
  costs                          -           -       65,927               -
 Repayments of long-term 
  debt                           -     (12,500)     (72,500)        (17,500)
 Repayment of obligations 
  under finance leases        (788)       (476)      (1,809)         (1,068)
 Dividends to shareholders  (1,261)       (931)      (2,522)         (1,862)
 Dividends payable               4           -            4              56
 Issuance of common shares     466           -          948             302
 Repurchase of common 
  shares                    (1,412)          -       (1,412)              -
 Interest paid                 (43)       (515)      (1,238)         (1,350)
 Decrease in bank 
  indebtedness                   -           -            -         (19,869)
                        ----------------------------------------------------
                            (3,034)    (14,422)     (12,602)          9,891
                        ----------------------------------------------------
Change in cash and cash 
 equivalents                14,188        (444)      20,367           2,101

Cash and cash equivalents, 
 beginning of period         6,407       2,545          228               -
                        ----------------------------------------------------
Cash and cash equivalents, 
 end of period            $ 20,595     $ 2,101     $ 20,595         $ 2,101
                        ----------------------------------------------------
                        ----------------------------------------------------

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 June 30, 2011 (unaudited)

                      Contract    Rentals and         Gas
                      Drilling Transportation Compression
                      Services       Services    Services Other(1)    Total
----------------------------------------------------------------------------
Revenue                $ 7,514       $ 26,047    $ 28,598 $     -  $ 62,159

Cost of services         4,819         11,259      24,318       -    40,396
Selling, general 
 and administration        667          3,440       1,412     897     6,416
Share-based 
 compensation                -              -           -     458       458
Depreciation               869          3,435         813      12     5,129
----------------------------------------------------------------------------
Results from operating 
 activities              1,159          7,913       2,055  (1,367)    9,760
Gain (loss) on sale of 
 property, plant and
 equipment                  (8)           174         446       -       612
Finance costs             (254)          (592)       (152)   (384)   (1,382)
----------------------------------------------------------------------------
Net income before 
 income taxes              897          7,495       2,349  (1,751)    8,990
----------------------------------------------------------------------------
Goodwill                     -          2,514       1,539       -     4,053
Total assets            74,007        191,268      78,476  26,572   370,323
Total liabilities       14,308         32,669      22,615  63,371   132,963
----------------------------------------------------------------------------
Capital expenditures   $ 3,596        $ 4,716     $ 2,547 $     1  $ 10,860
----------------------------------------------------------------------------
----------------------------------------------------------------------------


As at and for the three months ended June 30, 2010 (unaudited)

                      Contract    Rentals and         Gas
                      Drilling Transportation Compression
                      Services       Services    Services Other(1)    Total
----------------------------------------------------------------------------
Revenue                $ 5,957       $ 17,089    $ 14,015 $     -  $ 37,061

Cost of services         4,623          8,516      10,996      15    24,150
Selling, general 
 and administration        438          4,097         917     790     6,242
Share-based compensation     -              -           -     292       292
Depreciation               765          3,168         533       7     4,473
----------------------------------------------------------------------------
Results from operating 
 activities                131          1,308       1,569  (1,104)    1,904
Gain (loss) on sale of 
 property, plant and
 equipment                   -            118          (1)      -       117
Finance costs             (124)          (517)        (80)    (20)     (741)
----------------------------------------------------------------------------
Net income before 
 income taxes                7            909       1,488  (1,124)    1,280
----------------------------------------------------------------------------
Goodwill                     -          2,514       1,539       -     4,053
Total assets            70,573        163,729      59,003   3,655   296,960
Total liabilities       14,408         36,729      14,430  43,090   108,657
----------------------------------------------------------------------------
Capital expenditures   $ 1,114       $  3,837       $ 216 $    16  $  5,183
----------------------------------------------------------------------------
----------------------------------------------------------------------------


As at and for the six months ended June 30, 2011 (unaudited)

                      Contract    Rentals and         Gas
                      Drilling Transportation Compression
                      Services       Services    Services Other(1)    Total
----------------------------------------------------------------------------
Revenue               $ 25,096       $ 70,942    $ 51,226 $     - $ 147,264

Cost of services        14,793         26,300      43,538       -    84,631
Selling, general and 
 administration          1,459          7,883       2,634   2,065    14,041
Share-based compensation     -              -           -     678       678
Depreciation             2,577          7,564       1,542      25    11,708
----------------------------------------------------------------------------
Results from operating 
 activities              6,267         29,195       3,512  (2,768)   36,206
Gain on sale of property, 
 plant and
 equipment                   7            190         581       -       778
Finance costs             (466)        (1,179)       (279)   (647)   (2,571)
----------------------------------------------------------------------------
Net income before 
 income taxes            5,808         28,206       3,814  (3,415)   34,413
----------------------------------------------------------------------------
Goodwill                     -          2,514       1,539       -     4,053
Total assets            74,007        191,268      78,476  26,572   370,323
Total liabilities       14,308         32,669      22,615  63,371   132,963
----------------------------------------------------------------------------
Capital expenditures  $  5,279       $  6,857    $  3,651 $     3  $ 15,790
----------------------------------------------------------------------------
----------------------------------------------------------------------------


As at and for the six months ended June 30, 2010 (unaudited)

                      Contract    Rentals and         Gas
                      Drilling Transportation Compression
                      Services       Services    Services Other(1)    Total
----------------------------------------------------------------------------
Revenue               $ 18,890       $ 52,819    $ 24,190 $     -  $ 95,899

Cost of services        13,553         24,489      18,836     115    56,993
Selling, general and 
 administration            993          8,043       1,758   1,586    12,380
Share-based compensation     -              -           -     614       614
Depreciation             2,289          6,150       1,033      14     9,486
----------------------------------------------------------------------------
Results from operating 
 activities              2,055         14,137       2,563  (2,329)   16,426
Gain on sale of 
 property, plant and
 equipment                   -            224         311       -       535
Finance costs             (265)        (1,091)       (170)    (50)   (1,576)
----------------------------------------------------------------------------
Net income before 
 income taxes            1,790         13,270       2,704  (2,379)   15,385
----------------------------------------------------------------------------
Goodwill                     -          2,514       1,539       -     4,053
Total assets            70,573        163,729      59,003   3,655   296,960
Total liabilities       14,408         36,729      14,430  43,090   108,657
----------------------------------------------------------------------------
Capital expenditures 
 (2)                  $  1,912       $  4,113    $  2,985 $    27  $  9,037
----------------------------------------------------------------------------
----------------------------------------------------------------------------

(1) Other includes the Company's corporate activities, accretion of
    convertible debentures and obligations pursuant to long-term credit
    facilities.

(2) Excludes the acquisition of DC Energy.

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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