Total Energy Services Trust
TSX : TOT.UN

Total Energy Services Trust

March 09, 2005 12:55 ET

Total Energy Services Ltd. Announces 2004 Results


NEWS RELEASE TRANSMITTED BY CCNMatthews

FOR: TOTAL ENERGY SERVICES LTD.

TSX SYMBOL: TOT

MARCH 9, 2005 - 12:55 ET

Total Energy Services Ltd. Announces 2004 Results

CALGARY, ALBERTA--(CCNMatthews - March 9, 2005) - Total Energy Services
Ltd. (TSX:TOT) ("Total Energy" or the "Company") is pleased to announce
its consolidated financial results for the three and twelve month
periods ending December 31, 2004.



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

Three Months Ended Twelve Months Ended
December 31, December 31,
(unaudited) (audited)

2004 2003 % change 2004 2003 % change
----------------------------------------------------------
Revenue $ 30,255 $ 22,077 37% $106,291 $ 79,933 33%
Operating
Earnings (1) 8,111 5,354 51% 22,755 15,701 45%
EBITDA (1) 10,461 7,021 49% 30,116 22,740 32%
Cashflow (2) 9,951 6,271 59% 27,258 20,038 36%
Net Earnings 6,054 3,695 64% 15,973 11,505 39%

Per Share Data
(Diluted)

EBITDA (1) $ 0.37 $ 0.26 42% $ 1.08 $ 0.88 23%
Cashflow (2) 0.35 0.23 52% 0.97 0.77 26%
Net Earnings 0.21 0.13 62% 0.57 0.44 30%


Dec. 31, Dec. 31,
(audited)(audited)
2004 2003 % change
-----------------------------
Financial Position

Total Assets $135,491 $109,489 24%
Long-term Debt and Obligations
Under Capital Lease (3) 15,675 15,811 (1%)
Working Capital (4) 13,070 10,005 31%
Net Debt (5) 2,605 5,806 (55%)
Shareholders' Equity 74,807 58,692 27%

Shares Outstanding (000's)

Basic 27,490 27,291 1%
Diluted 28,098 28,213 -


Notes 1 through 5, 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 and twelve months ended
December 31, 2004 reflect strong industry activity levels and a 34%
increase in Total Energy's capital asset base during the year. A
majority of the $23.7 million of net capital asset additions made during
2004 were put into service during the fourth quarter and resulted in a
substantial year over year improvement in fourth quarter financial
performance. Included in the 2004 fourth quarter results is $230,000 of
stock based compensation expense ($0.01 per share, diluted).

Total Energy's Contract Drilling segment achieved 591 operating days
(spud to rig release) during the fourth quarter of 2004, which
translates into a utilization rate of 71%, as compared to 399 operating
days (65% utilization) for the fourth quarter of 2003. For the twelve
months ended December 31, 2004, the Company's Contract Drilling segment
achieved 1506 operating days (spud to rig release) or 53% utilization,
on par with the industry utilization rate. The Drilling and Production
Rentals segment achieved a utilization rate on major rental equipment of
60% during the fourth quarter and 55% for 2004. The Gas Compression
Services segment saw continued demand for its products and services,
where for the three months ended December 31, 2004 revenues increased
17% compared to the fourth quarter of 2003. Fourth quarter operating
earnings remained flat at approximately $1.0 million as lower margin
fabrication revenues constituted a larger percentage of overall revenue
in 2004 compared to 2003. At December 31, 2004 that segment had a build
backlog of approximately $12.4 million and had approximately 10,400
horsepower of compression equipment on rent, compared to a December 31,
2003 build backlog of $12.3 million and 9,900 horsepower of compression
on rent. The compression rental fleet operated at an average utilization
rate of 89% during 2004.

OUTLOOK

Continued strong commodity prices have contributed to record levels of
drilling activity in western Canada during the current winter drilling
season. The high level of drilling activity will directly impact the
performance of Total Energy's Contract Drilling and Drilling and
Production Rentals segments, particularly given the substantial asset
additions made during the fourth quarter of 2004. As well, continued
emphasis on natural gas targets bodes well for the Company's Gas
Compression Services segment, where business activity tends to lag
natural gas drilling activity by three to nine months as newly drilled
natural gas wells are brought on production.

Total Energy's previously announced preliminary capital expenditure
budget for 2005 is $24.5 million, which the Company intends to finance
through operating cash flow and existing credit facilities. Included in
this budget is the construction of two telescopic double drilling rigs
which are expected to be completed during the third quarter of 2005,
$5.5 million for continued expansion of the natural gas compression
rental fleet, $5.4 million of new rental and trucking equipment, the
majority of which is expected to be delivered by the fourth quarter of
2005, and $1.6 million of equipment maintenance and upgrades. The
Company's 2005 capital expenditure budget may be subject to change
during the year depending on industry conditions and business
opportunities.

On February 25, 2005, Total Energy announced that its board of directors
unanimously approved a proposal to reorganize the Company into an income
trust. The proposed reorganization is the foundation of a plan to
enhance shareholder value. Such plan includes the reorganization of the
Company to facilitate its continued disciplined approach to growing its
business by retaining a substantial portion of cash flow from operations
and to provide for the distribution to shareholders of the remaining
portion of cash flow on a tax efficient basis. A special and annual
meeting of shareholders has been set for April 28, 2005 at which time
security holders will be asked to approve such reorganization. An
information circular describing the reorganization will be mailed to
shareholders for the purpose of obtaining security holder approval.

CONFERENCE CALL

At 2:30pm MST today, Total Energy will conduct a conference call to
discuss its 2004 financial results. Messrs. Daniel Halyk, Chief
Executive Officer, Larry Coston, President & Chief Operating Officer,
and David Hawkins, Vice-President Finance & Chief Financial Officer will
host the conference call. The call is open to analysts, investors, and
all interested parties. If you wish to participate, call (800) 769-8320.
Those who are unable to listen to the call live may listen to a
recording of it by calling (888) 509-0082. Such recording will be
available until March 16, 2005.

SELECTED FINANCIAL INFORMATION

Selected financial information relating to the 2004 and 2003 financial
years is attached to this press release. That information should be read
in conjunction with the audited financial statements of the Company and
the attached notes to the financial statements to be issued in due
course and reproduced in the Company's 2004 annual report.



Consolidated Balance Sheets
(in thousands of dollars)
December 31 December 31
2004 2003
------------------------------------------------------------------------

Assets
Current assets:
Accounts receivable $ 26,727 $ 17,491
Income taxes recoverable 199 741
Investment tax credit recoverable 200 720
Inventory 15,515 15,234
Prepaid expenses and deposits 591 545
--------------------------
43,232 34,731

Property, plant and equipment 88,206 70,705

Goodwill 4,053 4,053

--------------------------
$ 135,491 $ 109,489
--------------------------
--------------------------
Liabilities & Shareholders' Equity
Current liabilities:
Bank indebtedness $ 6,802 $ 6,362
Accounts payable and accrued liabilities 15,074 11,643
Current portion of obligation under stock
based compensation 153 -
Current portion of long-term debt 6,782 5,541
Current portion of obligations under capital
lease 1,351 1,180
--------------------------
30,162 24,726

Long-term debt 15,219 14,929

Obligations under capital lease 456 882

Obligation under stock based compensation 77 -

Future income taxes 14,770 10,260

Shareholders' equity:
Share capital 34,242 33,997
Contributed surplus 440 60
Retained earnings 40,125 24,635
--------------------------
74,807 58,692
--------------------------
$ 135,491 $ 109,489
--------------------------
--------------------------
Supplemental Information:
Number of common shares outstanding (000's)
- Basic 27,490 27,291
Number of common shares outstanding (000's)
- Diluted 28,098 28,213


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

Three months ended Year ended
December 31 December 31
2004 2003 2004 2003
------------------------------------------------------------------------
(unaudited)(unaudited)

Revenue $ 30,255 $ 22,077 $106,291 $ 79,933

Expenses
Operating 16,829 12,511 64,853 48,051
Selling, general and
administration 3,088 2,525 11,390 9,470
Depreciation 1,936 1,395 6,233 5,255
Other interest 82 57 245 419
Interest on long-term debt 209 235 815 1,037
-----------------------------------------
22,144 16,723 83,536 64,232

-----------------------------------------
Operating earnings 8,111 5,354 22,755 15,701

Gain on disposal of investment - - - 103
Gain (loss) on disposal of
equipment 123 (20) 68 225

-----------------------------------------
Earnings before income taxes 8,234 5,334 22,823 16,029

Income tax expense
Current (recovery) 325 538 2,340 978
Future 1,855 1,101 4,510 3,546
-----------------------------------------
2,180 1,639 6,850 4,524

-----------------------------------------
Net earnings 6,054 3,695 15,973 11,505
-----------------------------------------

Retained earnings,
beginning of period 34,071 20,945 24,635 13,488

Repurchase and cancellation of
common shares in excess of
stated share capital - (5) (483) (358)

-----------------------------------------
Retained earnings,
end of period $ 40,125 $ 24,635 $ 40,125 $ 24,635
-----------------------------------------
-----------------------------------------

Earnings per share:
Basic $ 0.22 $ 0.14 $ 0.58 $ 0.45
Diluted $ 0.21 $ 0.13 $ 0.57 $ 0.44


Consolidated Statements of Cash Flows
(in thousands of dollars)
Three months ended Year ended
December 31 December 31
2004 2003 2004 2003
------------------------------------------------------------------------
Cash flows provided by
(used in): (unaudited)(unaudited)

Operations:
Net earnings $ 6,054 $ 3,695 $ 15,973 $ 11,505
Add (deduct) items not
effecting cash:
Depreciation 1,936 1,395 6,233 5,255
Future income taxes 1,855 1,101 4,510 3,546
Stock based compensation
expense 229 60 610 60
Gain on disposal of investment - - - (103)
Gain (loss) on disposal of
equipment (123) 20 (68) (225)
-----------------------------------------
9,951 6,271 27,258 20,038

Changes in non-cash working
capital items:
Accounts receivable (14,906) (4,896) (9,236) (8,705)
Inventory (643) (1,933) (282) (4,441)
Income taxes recoverable (199) 585 542 (747)
Prepaid expenses and deposits 159 (324) (47) 251
Accounts payable and accrued
liabilities 3,710 (10) 3,431 4,020
Other liabilities - (109) - (833)
Income taxes payable (425) - - (404)
-----------------------------------------
(2,353) (416) 21,666 9,179
Investments:
Purchase of property,
plant and equipment (9,207) (9,030) (27,826) (23,404)
Proceeds on disposal of
equipment 2,426 1,470 4,161 5,994
Proceeds on disposal of
investment - - - 1,565
Investment tax credit
recoverable 520 (720) 520 (720)
-----------------------------------------
(6,261) (8,280) (23,145) (16,565)
Financing:
Issue of common shares - - 393 8,380
Repurchase of common shares - (8) (631) (630)
Advances under long-term debt 7,000 3,000 7,000 6,000
Repayment of long-term debt (1,319) (1,829) (5,468) (5,394)
Advances of obligations under
capital leases 925 1,294 925 2,061
Repayment of obligations under
capital leases (295) - (1,180) -
Share issue costs - (33) - (540)
Increase (decrease) in bank
indebtedness 2,303 6,272 440 (2,491)
-----------------------------------------
8,614 8,696 1,479 7,386
-----------------------------------------

Increase in cash - - - -

Cash, beginning of year - - - -

-----------------------------------------
Cash, end of year $ - $ - $ - $ -
-----------------------------------------
-----------------------------------------

Supplemental cash flow
information:
Interest paid $ 288 $ 272 $ 1,059 $ 1,451
Income taxes paid $ - $ - $ 1,691 $ 1,688


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, Drilling
and Production Rentals, which includes the rental and transportation of
surface equipment used in drilling and production processes and Gas
Compression Services, which includes the manufacture, sale, rental and
servicing of natural gas compression equipment.



------------------------------------------------------------------------
Drilling
Contract and Gas
Year Ended drilling production compression
December 31, 2004 services rentals services Other(3) Total
------------------------------------------------------------------------

Revenue $ 21,748 $ 36,848 $ 47,695 $ - $106,291
Operating
earnings (1) 5,482 14,300 5,825 (2,852) 22,755
Depreciation and
amortization 1,930 3,439 830 34 6,233
Assets 45,389 56,473 33,410 219 135,491
Goodwill - 2,514 1,539 - 4,053
Capital
expenditures (2) 11,693 11,317 4,796 20 27,826
------------------------------------------------------------------------

------------------------------------------------------------------------
Drilling
Contract and Gas
Year Ended drilling production compression
December 31, 2003 services rentals services Other(3) Total
------------------------------------------------------------------------

Revenue $ 16,920 $ 29,995 $ 32,401 $ 617 $ 79,933
Operating
earnings (1) 3,211 10,342 4,430 (2,282) 15,701
Depreciation and
amortization 1,419 3,128 660 48 5,255
Assets 32,205 46,357 30,824 103 109,489
Goodwill - 2,514 1,539 - 4,053
Capital
expenditures (2) 5,957 9,643 7,748 56 23,404
------------------------------------------------------------------------


(1) Operating earnings are earnings before gain or loss on disposal of
equipment and income taxes. Operating earnings is not a recognized
measure under Canadian generally accepted accounting principles (GAAP).
Management believes in addition to net earnings, operating earnings is a
useful supplemental measure as it provides an indication of the results
generated by the Company's principle business activities prior to
consideration of how those results are taxed in various jurisdictions or
gains or losses from the disposal of equipment in those businesses.
Investors should be cautioned, however, that operating income should not
be construed as an alternative to net earnings determined in accordance
with GAAP as an indicator of the Company's performance. The Company's
method of calculating operating earnings may differ from other companies
and, accordingly, operating income may not be comparable to measures
used by other companies.

(2) Excludes acquisitions.

(3) Other includes the Company's trailer repair business up to March 31,
2003 and the Company's corporate activities.

Total Energy Services Ltd. is a publicly traded energy service company
engaged in contract drilling services, drilling and production rentals
and natural gas compression equipment manufacturing, sales, rental and
service. The common shares of Total Energy are listed and trade on the
Toronto Stock Exchange under the symbol TOT.

Notes to Financial Highlights

(1) Operating earnings are earnings before gain (loss) on disposal of
equipment and income taxes. EBITDA means earnings before interest,
taxes, depreciation and amortization and is equal to earnings before
income taxes plus interest on long-term debt plus other interest expense
plus depreciation. Operating earnings and EBITDA are not recognized
measures under Canadian generally accepted accounting principles (GAAP).
Management believes in addition to net earnings, operating earnings and
EBITDA are useful supplemental measures as they provide an indication of
the results generated by the Company's principle business activities
prior to consideration of how those activities are financed, amortized
or how the results are taxed in various jurisdictions. Investors should
be cautioned, however, that operating earnings and EBITDA 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 and EBITDA may differ from
other companies and, accordingly, operating earnings and EBITDA may not
be comparable to measures used by other companies.

(2) Cashflow equals cash provided by operations before changes in
non-cash working capital items.

(3) Long-term debt and obligations under capital lease excludes the
current portion of long-term debt and the current portion of obligations
under capital lease.

(4) Working Capital equals current assets minus current liabilities.

(5) Net Debt equals long-term debt plus obligations under capital lease
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 gas and related products and services, political and
economic conditions, the demand for services provided by Total Energy,
Total Energy's ability to attract and retain key personnel and other
factors.

-30-

Contact Information

  • FOR FURTHER INFORMATION PLEASE CONTACT:
    Total Energy Services Ltd.
    Mr. Daniel K. Halyk
    Chief Executive Officer
    (403) 216-3921
    or
    Total Energy Services Ltd.
    Mr. David A. Hawkins
    Vice-President Finance and Chief Financial Officer
    (403) 216-3920
    (403) 234-8731 (FAX)
    Email: investorrelations@totalenergy.to
    Website: www.totalenergy.to
    The Toronto Stock Exchange has neither approved nor disapproved of the
    information contained herein.