Total Energy Services Inc.
TSX : TOT

Total Energy Services Inc.

November 10, 2010 12:09 ET

Total Energy Services Inc. Announces Q3 2010 Results

CALGARY, ALBERTA--(Marketwire - Nov. 10, 2010) - Total Energy Services Inc. (TSX:TOT) ("Total Energy" or the "Company"), announces its consolidated financial results for the three and nine-month periods ending September 30, 2010.



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

Three Months Ended Sept 30 Nine Months Ended Sept 30
(Unaudited) (Unaudited)
% %
2010 2009 Change 2010 2009 Change
--------------------------------------------------------------
Revenue $ 55,237 $ 20,004 176% $148,924 $ 79,211 88%
Operating
Earnings (1) 10,834 622 1,642% 25,469 8,619 195%
EBITDA (1) 16,751 4,145 304% 43,267 18,695 131%
Cashflow (1) 16,110 4,692 243% 41,081 20,664 99%
Net Earnings 9,560 2,185 338% 23,414 9,509 146%

Per Share Data
(Diluted)
EBITDA (1) $ 0.53 $ 0.14 279% $ 1.38 $ 0.64 116%
Cashflow (1) 0.51 0.16 219% 1.31 0.71 85%
Net Earnings 0.30 0.08 275% 0.75 0.33 127%

Sept. 30 Dec. 31
2010 2009 %
(Unaudited) (Audited) Change
Financial
Position
Total Assets $ 323,541 $ 234,774 38%
Long-Term
Debt and
Obligations
Under
Capital
Leases 67,060 35,713 88%
Working
Capital (2) 43,576 29,493 48%
Net Debt (3) 23,484 6,220 278%
Shareholders'
Equity 189,926 155,629 22%

Shares
Outstanding
(000's)
Basic 31,055 29,176 6%
Diluted 31,759 29,176 9%


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 third quarter of 2010 reflect improving industry conditions in Western Canada, the impact of the acquisition of DC Energy Services LP ("DC Energy") on January 15, 2010 and the Company's leverage to higher activity levels. Despite prolonged wet weather conditions that hampered field operations throughout much of Western Canada and continued weakness in natural gas prices, activity levels increased significantly in all three of Total Energy's business divisions during the third quarter relative to the prior year comparable period. During the third quarter of 2010, the Company incurred a $0.4 million non-recurring expense related to the realignment of its senior management team within the Gas Compression Services division.

Total Energy's Contract Drilling Services division achieved 48% utilization during the third quarter of 2010, recording 623 operating days (spud to release) with a fleet of 14 rigs, compared to 172 operating days, or 14% utilization, during the third quarter of 2009. Excluding a $0.9 million payment received in the third quarter of 2009 relating to the termination of a one year take or pay contract, revenue per operating day for the third quarter of 2010 increased by 6% compared to the third quarter of 2009. The Rentals and Transportation Services division achieved a utilization rate on major rental equipment of 57% during the third quarter of 2010 as compared to 27% during the third quarter of 2009. The Gas Compression Services division generated revenues of $17.2 million for the three months ended September 30, 2010 compared to $7.5 million for the same period in 2009. This division exited the third quarter of 2010 with a $25.7 million backlog of fabrication sales orders as compared to $8.4 million as at September 30, 2009. As at September 30, 2010 the total horsepower of compressors on lease was approximately 18,900 as compared to approximately 16,800 as at September 30, 2009. The compression rental fleet experienced an average utilization of 74% (based on fleet horsepower) for the first nine months of 2010 as compared to 84% for the same period in 2009.

Total Energy's financial condition remains strong with a long-term debt (including current portion) to long-term debt plus equity ratio of 0.28 to 1.0 and $23.5 million of net debt as at September 30, 2010. During the first nine months of 2010, shareholders' equity has increased by $34.3 million, or 22%, to $189.9 million.

During the third quarter, Total Energy declared a quarterly dividend of $0.03 per share to shareholders of record on September 30, 2010, which dividend was paid on October 29, 2010. 27,115 common shares were purchased at an average price of $8.80 (including commissions) and cancelled under the Company's normal course issuer bid during the quarter.

Outlook

The continued application of horizontal drilling and multi-stage fracturing technologies to oil and natural gas liquids rich targets in Western Canada has resulted in a significant improvement in industry activity levels in Western Canada compared to 2009. Demand for telescopic double drilling rigs, which constitutes 86% of Total Energy's drilling rig fleet, is strong and all 14 of the Company's drilling rigs are committed for the upcoming winter drilling season. Total Energy's leverage to improving activity levels within its Rentals and Transportation Services division was illustrated during the third quarter and current indications are that activity levels will be relatively strong during the upcoming winter drilling season. This division entered the fourth quarter of 2010 with approximately 8,300 pieces of rental equipment and a fleet of 100 heavy trucks as compared to 4,500 rental pieces and 74 heavy trucks at September 30, 2009, increases of 84% and 35% respectively. In early October 2010, this division completed the acquisition of approximately 60 rental pieces from a small private competitor for $900,000. Total Energy's Gas Compression Services division remains focused on increasing its share of the Canadian natural gas compression market. Since September 30, 2010, the backlog of fabrication sales orders to be delivered subsequent to September 30, 2010 has increased to approximately $37.9 million, resulting in this division's fabrication capacity currently being fully utilized. As a result, construction and delivery of a NOMAD™ mobile compression unit engineered for the Australian marketplace has been deferred into 2011 pending available floor space.

Conference Call

At 2:30 p.m. MST today, Total Energy will conduct a conference call to discuss its third 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 (866) 226-1792. Those who are unable to listen to the call live may listen to a recording of it by calling (800) 408-3053 (passcode 4188715). The recording will be available until November 17, 2010.

Selected Financial Information

Selected financial information relating to the three and nine-month periods ended September 30, 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 Company's third quarter report.



Consolidated Balance Sheets
(in thousands of Canadian dollars)
September 30, December 31,
2010 2009
----------------------------------------------------------------------------
(unaudited)
Assets
Current assets:
Accounts receivable $ 52,179 $ 22,104
Inventory 30,366 28,408
Income tax receivable 118 2,848
Prepaid expenses and deposits 2,692 2,309
------------------------------
85,355 55,669

Property, plant and equipment 234,133 175,052

Goodwill 4,053 4,053

------------------------------
$ 323,541 $ 234,774
------------------------------
------------------------------

Liabilities & Shareholders' Equity
Current liabilities:
Accounts payable and accrued liabilities $ 28,465 $ 15,976
Dividends Payable 932 875
Current portion of long-term debt 9,667 8,737
Current portion of obligations under
capital leases 2,715 588
------------------------------
41,779 26,176

Long-term debt 64,058 34,950

Obligations under capital leases 3,002 763

Future income taxes 17,509 5,681

Deferred tax credit 7,267 11,575

Shareholders' equity:
Share capital 73,917 60,777
Contributed surplus 1,892 1,174
Retained earnings 114,117 93,678
------------------------------
189,926 155,629

------------------------------
$ 323,541 $ 234,774
------------------------------
------------------------------
Supplemental Information:
Number of common shares outstanding
(000's) - Basic 31,055 29,176
Number of common shares outstanding
(000's) - Diluted 31,759 29,176


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

Three months ended Nine months ended
September 30 September 30
2010 2009 2010 2009
----------------------------------------------------------------------------
(unaudited) (unaudited) (unaudited) (unaudited)

Revenue $ 55,237 $ 20,004 $ 148,924 $ 79,211

Expenses:
Operating 31,872 12,386 86,584 47,659
Selling, general and
administration 6,373 3,308 18,753 11,287
Share based compensation 241 231 855 989
Depreciation 5,035 3,094 14,805 9,552
Other interest 68 106 122 434
Interest on long-term
debt 814 257 2,336 671
--------------------------------------------------
44,403 19,382 123,455 70,592

--------------------------------------------------
Operating earnings 10,834 622 25,469 8,619

Reorganization costs - - - (890)
Gain on disposal of
equipment - 66 535 309
--------------------------------------------------

Earnings before income
taxes 10,834 688 26,004 8,038

Income tax expense
(recovery)
Current - (745) 48 (2,394)
Future 1,274 (752) 2,542 923
--------------------------------------------------
1,274 (1,497) 2,590 (1,471)

--------------------------------------------------
Net earnings 9,560 2,185 23,414 9,509
--------------------------------------------------

Retained earnings,
beginning of period 105,670 91,175 93,678 87,349

Dividends (931) (872) (2,793) (872)
Trust distributions - - - (3,486)
Repurchase and
cancellation of common
shares in excess of
stated common share
capital (182) (57) (182) (69)

--------------------------------------------------
Retained earnings, end
of period $ 114,117 $ 92,431 $ 114,117 $ 92,431
--------------------------------------------------
--------------------------------------------------

Earnings per share:
Basic $ 0.31 $ 0.08 $ 0.76 $ 0.33
Diluted $ 0.30 $ 0.08 $ 0.75 $ 0.33


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

Three months ended Nine months ended
September 30 September 30
2010 2009 2010 2009
----------------------------------------------------------------------------
(unaudited) (unaudited) (unaudited) (unaudited)

Cash provided by (used in):

Operations:
Net earnings $ 9,560 $ 2,185 $ 23,414 $ 9,509
Add (deduct) items not
affecting cash:
Depreciation 5,035 3,094 14,805 9,552
Share based compensation 241 231 855 989
Gain on disposal of
equipment - (66) (535) (309)
Future income taxes 1,274 (752) 2,542 923
------------------------------------------------
16,110 4,692 41,081 20,664

Changes in non-cash
working capital items:
Accounts receivable (20,375) (3,334) (30,075) 21,553
Inventory 2,508 1,369 (1,192) 4,722
Income taxes receivable 2,557 (624) 2,730 (2,848)
Prepaid expenses and
deposits (1,088) (765) (406) (1,427)
Accounts payable and
accrued liabilities (5,716) (530) 9,301 (12,097)
Income taxes payable - - - (2,336)
------------------------------------------------
(6,004) 808 21,439 28,231
Investments:
Purchase of property,
plant and equipment (12,522) (2,439) (21,340) (13,335)
DC Energy Services LP
acquisition - - (31,714) -
Proceeds on disposal of
property, plant and
equipment 362 704 2,526 2,194
Transaction with Biomerge
Industries Ltd. - - - (3,639)
Changes in non-cash
working capital items 1,404 5 3,188 (4,665)
------------------------------------------------
(10,756) (1,730) (47,340) (19,445)
Financing:
Advances of long-term debt 16,225 - 47,538 12,000
Repayments of long-term
debt - (2,600) (17,500) (7,103)
Repayments of obligations
under capital leases (677) (133) (1,745) (446)
Dividends to Shareholders (931) (872) (2,793) (872)
Dividends payable 1 872 57 872
Distributions to
Unitholders - - - (3,486)
Distributions payable - - - (872)
Issuance of common shares 280 - 583 -
Repurchase of trust units - - - (27)
Repurchase of common
shares (239) (115) (239) (115)
Increase (decrease) in
bank indebtedness - 3,770 - (8,737)
------------------------------------------------
14,659 922 25,901 (8,786)
------------------------------------------------

Change in cash (2,101) - - -

Cash, beginning of period 2,101 - - -

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

Supplemental information:
Interest paid $ 817 $ 363 $ 2,167 $ 1,181
Income taxes paid
(received) $ (2,520) $ (121) $ (2,682) $ 2,790


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 September 30, 2010 (unaudited)
Contract Rentals and Gas
Drilling Transportation Compression
Services Services Services Other (2) Total
----------------------------------------------------------------------------

Revenue $ 9,171 $ 28,862 $ 17,204 $ - $ 55,237
Operating
earnings
(loss) (1) 957 9,679 1,895 (1,697) 10,834
Depreciation 1,272 3,265 490 8 5,035
Assets 75,156 179,074 68,274 1,037 323,541
Goodwill - 2,514 1,539 - 4,053
Capital
expenditures
(3) 910 7,734 3,878 - 12,522

As at and for the three months ended September 30, 2009 (unaudited)
Contract Rentals and Gas
Drilling Transportation Compression
Services Services Services Other (2) Total
----------------------------------------------------------------------------

Revenue $ 3,284 $ 9,219 $ 7,501 $ - $ 20,004
Operating
earnings
(loss) (1) 534 340 660 (912) 622
Depreciation 458 2,245 385 6 3,094
Assets 68,809 100,769 54,758 4,600 228,936
Goodwill - 2,514 1,539 - 4,053
Capital
expenditures 845 287 1,303 4 2,439

As at and for the nine months ended September 30, 2010 (unaudited)
Contract Rentals and Gas
Drilling Transportation Compression
Services Services Services Other (2) Total
----------------------------------------------------------------------------

Revenue $ 28,061 $ 81,681 $ 39,182 $ - $ 148,924
Operating
earnings
(loss) (1) 2,239 23,327 3,979 (4,076) 25,469
Depreciation 3,981 9,434 1,368 22 14,805
Assets 75,156 179,074 68,274 1,037 323,541
Goodwill - 2,514 1,539 - 4,053
Capital
expenditures
(3) 2,729 11,847 6,737 27 21,340

As at and for the nine months ended September 30, 2009 (unaudited)
Contract Rentals and Gas
Drilling Transportation Compression
Services Services Services Other (2) Total
----------------------------------------------------------------------------

Revenue $ 11,169 $ 37,850 $ 30,192 $ - $ 79,211
Operating
earnings
(loss) (1) 1,346 7,972 2,473 (3,172) 8,619
Depreciation 1,480 6,946 1,106 20 9,552
Assets 68,809 100,769 54,758 4,600 228,936
Goodwill - 2,514 1,539 - 4,053
Capital
expenditures 4,927 1,446 6,958 4 13,335


(1) Operating earnings (loss) are earnings before reorganization costs, gain
on disposal of equipment and income taxes.
(2) Other includes the Company's corporate activities.
(3) 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 natural gas compression equipment fabrication, sales, rental and service. The 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 on
disposal of equipment and income taxes. EBITDA means earnings before
interest, taxes, depreciation and amortization and is equal to earnings
before income taxes plus interest on long-term debt plus other interest
plus depreciation. Cashflow means cash provided by operations before
changes in non-cash working capital items. Operating earnings, EBITDA
and cashflow are not recognized measures under Canadian generally
accepted accounting principles ("GAAP"). Management believes in addition
to net earnings, operating earnings, EBITDA and cashflow are useful
supplemental measures as they provide an indication of the results
generated by the 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.
Investors should be cautioned, however, that operating earnings, EBITDA
and cashflow should not be construed as an alternative to net earnings
determined in accordance with GAAP as an indicator of Total Energy's
performance. Total Energy's method of calculating operating earnings,
EBITDA and cashflow may differ from other organizations and,
accordingly, operating earnings, EBITDA and cashflow may not be
comparable to measures used by other organizations.
2. Working capital equals current assets minus current liabilities.
3. Net Debt equals long-term debt plus obligations under capital leases
plus current liabilities minus current assets.


Certain statements contained in this press release, including statements which may contain words such as "could", "should", "expect", "believe", "will" and similar expressions and statements relating to matters that are not historical facts are forward-looking statements. Such forward-looking statements involve known and unknown risks and uncertainties which may cause the actual results, performances or achievements of Total Energy to be materially different from any future results, performances or achievements expressed or implied by such forward-looking statements. Such factors include fluctuations in the market for oil and natural gas and related products and services, political and economic conditions, the demand for products and services provided by Total Energy, Total Energy's ability to attract and retain key personnel and other factors. Reference should be made to Total Energy's most recently filed Annual Information Form and other public disclosures (available at www.sedar.com) for a discussion of such risks and uncertainties.

The Toronto Stock Exchange has neither approved nor disapproved of the information contained herein.

Contact Information