Total Energy Services Trust
TSX : TOT.UN

Total Energy Services Trust

March 05, 2009 12:08 ET

Total Energy Services Trust Announces 2008 Results

CALGARY, ALBERTA--(Marketwire - March 5, 2009) - Total Energy Services Trust (TSX:TOT.UN) ("Total Energy" or the "Trust") announces its consolidated financial results for the three and twelve month periods ending December 31, 2008.



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

Three Months Ended Dec. 31 Twelve Months Ended Dec. 31
(Unaudited) (Audited)
2008 2007 % Change 2008 2007 % Change
--------------------------------------------------------------
Revenue $ 49,712 $ 41,528 20% $ 154,482 $ 135,584 14%
Operating
Earnings (1) 10,908 7,082 54% 30,806 25,437 21%
EBITDA (1) 14,816 11,104 33% 47,097 39,682 19%
Cashflow
(1) 13,675 11,822 16% 42,412 42,160 1%
Net
Earnings 8,862 10,415 (15%) 25,333 30,858 (18%)

Per Unit Data
(Diluted)
EBITDA (1) $ 0.51 $ 0.37 38% $ 1.60 $ 1.33 20%
Cashflow (1) 0.46 0.40 15% 1.44 1.42 1%
Net Earnings 0.30 0.35 (14%) 0.86 1.04 (17%)

Dec. 31 Dec. 31
2008 2007
(Audited) (Audited) % Change
Financial
Position
Total
Assets $ 247,515 $ 228,617 8%
Long-Term
Debt 13,521 21,383 (37%)
Working
Capital (2) 7,254 13,438 (46%)
Net Debt
(3) 6,267 7,945 (21%)
Unitholders
' Equity 147,376 134,796 9%

Units
Outstanding
(000's)
Basic and
diluted 29,057 29,500 (2%)

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 and twelve months ended December 31, 2008 reflect a volatile year in the Canadian energy services industry. A substantial rise in commodity prices during the first half of the year followed by increasing global financial and economic challenges and declining commodity prices resulted in challenging industry conditions in Western Canada. The implementation of substantial increases to oil and natural gas royalties in Alberta added to the challenges and uncertainty facing the industry. Total Energy's significant investment and relocation of assets into British Columbia and Saskatchewan that began in 2007 offset the continued deterioration of industry conditions in Alberta during 2008. Net earnings for 2008 were negatively impacted by an income tax expense for 2008 as compared to an income tax recovery for 2007 arising from the substantial reduction in the monthly distribution implemented in November 2007.

Total Energy's Contract Drilling Services division achieved 590 operating days (spud to release) with an average fleet of 13 rigs operating during the fourth quarter of 2008, which translates into a utilization rate of 49%. During the fourth quarter of 2007 the Contract Drilling Services division operated 13 rigs and achieved 476 operating days (spud to release) or 40% utilization. For the twelve months ended December 31, 2008, the Contract Drilling Services division achieved 2,328 operating days (spud to rig release) or 49% utilization, compared to 1,660 operating days and 36% utilization during 2007. The Drilling and Production Rentals division achieved a utilization rate on rental equipment of 58% during the fourth quarter of 2008 as compared to a 38% utilization rate during the fourth quarter of 2007. For 2008, equipment utilization averaged 53% as compared to 36% for 2007. Relocation of equipment into Saskatchewan and British Columbia significantly improved the year over year equipment utilization in this division. The revenue reported from Total's Gas Compression Services division decreased to $19.1 million in the fourth quarter of 2008 as compared to $20.9 million achieved during the same period in 2007. For 2008, the Gas Compression Services division generated revenues of $47.1 million as compared to $54.1 million for 2007. At December 31, 2008 the Gas Compression Services division had a fabrication backlog of approximately $19.3 million compared to a backlog of $3.1 million as at December 31, 2007. At December 31, 2008, there was approximately 14,600 horsepower of compression equipment on rent compared to approximately 12,500 horsepower on rent as at December 31, 2007. The gas compression rental fleet operated at an average utilization rate of 75% during 2008.

The Trust declared regular distributions of $0.09 per unit for the three months ended December 31, 2008. The trust declared total distributions of $0.36 per unit during 2008.

OUTLOOK

Given the difficult global economic and financial environment and current weakness in commodity prices, Total Energy expects 2009 to be a challenging year. Total Energy will be focused on the prudent management of its existing operations and preservation of its balance sheet strength.

Total Energy's previously announced 2009 preliminary capital expenditure budget of $9.9 million includes $8.9 million for expansion of the natural gas compression rental fleet and $1.0 million of equipment maintenance and upgrades. Driving the budgeted expansion of Total Energy's natural gas compression rental fleet will be the focused marketing of its proprietary large horsepower mobile compression package to North American unconventional natural gas plays as well as the introduction of this technology to select international markets. The Trust's preliminary capital expenditure budget is also intended to provide substantial flexibility as difficult industry conditions are expected to give rise to increased investment opportunities within the Trust's existing business divisions.

Total Energy's balance sheet remains very strong with net debt of $6.3 million and a long-term debt (including current portion) to long-term debt plus equity ratio of 0.13 to 1.0 as at December 31, 2008. The Trust's $65 million of credit facilities, that includes a $30 million operating line of credit and a $35 million revolving term facility, were reviewed and renewed in November 2008. As at December 31, 2008, Total Energy had drawn 71% of its available credit facilities.

2008 CANADIAN INCOME TAX INFORMATION

Distributions received by Canadian residents during 2008 outside of tax-deferred plans will be 100% taxable as income. Olympia Trust Company will issue T3 Supplementary Information forms directly to registered unitholders in due course. Non-registered unitholders can expect to receive T3 Supplementary Information forms directly from their broker or intermediary. Unitholders are advised to consult their personal tax advisors with respect to their particular circumstances.

CONFERENCE CALL

At 2:30 p.m. MST today, Total Energy will conduct a conference call to discuss its 2008 financial results. Daniel Halyk, President and Chief Executive Officer, will host the conference call. The call is open to unitholders and other interested parties. If you wish to participate, call (866) 542-4241. Those who are unable to listen to the call live may listen to a recording of it by calling (800) 408-3053 (passcode 3281810). The recording will be available until March 12, 2009.

SELECTED FINANCIAL INFORMATION

Selected financial information relating to the three and twelve month periods ended December 31, 2008 and 2007 is attached to this press release. This information should be read in conjunction with the audited 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 Trust's 2008 annual report.



Consolidated Balance Sheets
(in thousands of Canadian dollars)

2008 2007
----------------------------------------------------------------------------
(audited) (audited)
Assets
Current assets:
Accounts receivable $ 37,274 $ 28,284
Inventory 33,836 31,909
Income taxes receivable - 5,742
Prepaid expenses and deposits 1,319 1,580
---------------------------
72,429 67,515

Property, plant and equipment 171,033 157,049

Goodwill 4,053 4,053
---------------------------
$ 247,515 $ 228,617
---------------------------
---------------------------

Liabilities & Unitholders' Equity
Current liabilities:
Bank indebtedness $ 24,830 $ 28,379
Accounts payable and accrued liabilities 29,137 16,405
Distributions payable 872 885
Income taxes payable 2,336 -
Current portion of long-term debt 8,000 8,000
Obligations under capital leases - 408
---------------------------
65,175 54,077

Long-term debt 13,521 21,383

Future income taxes 21,443 18,361

Unitholders' equity:
Trust Unit capital 60,027 60,984
Retained earnings 87,349 73,812
---------------------------
147,376 134,796
---------------------------
$ 247,515 $ 228,617
---------------------------
---------------------------

Supplemental Information:
Number of units outstanding (000's) - Basic and
diluted 29,057 29,500


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

Three months ended Twelve months ended
December 31 December 31
2008 2007 2008 2007
----------------------------------------------------------------------------
(unaudited) (unaudited) (audited) (audited)
Revenue $ 49,712 $ 41,528 $ 154,482 $ 135,584

Expenses:
Operating 29,979 26,621 89,786 81,507
Selling, general and
administration 4,576 3,829 17,491 15,001
Depreciation 3,735 3,000 13,889 11,255
Other interest 292 432 1,257 1,017
Interest on long-term
debt 222 564 1,253 1,367
-----------------------------------------------------
38,804 34,446 123,676 110,147

-----------------------------------------------------
Operating earnings 10,908 7,082 30,806 25,437

Gain (loss) on
disposal of equipment (341) 26 (108) 606

-----------------------------------------------------
Earnings before
income taxes 10,567 7,108 30,698 26,043

Income tax expense
(recovery)
Current 968 (1,740) 2,283 (5,468)
Future 737 (1,567) 3,082 653
-----------------------------------------------------
1,705 (3,307) 5,365 (4,815)

-----------------------------------------------------
Net earnings 8,862 10,415 25,333 30,858
-----------------------------------------------------

Retained earnings,
beginning of period 81,554 68,731 73,812 74,847

Trust distributions (2,639) (4,599) (10,591) (29,842)
Repurchase and
cancellation of trust
units in excess of
stated trust unit
capital (428) (735) (1,205) (2,051)

-----------------------------------------------------
Retained earnings,
end of period $ 87,349 $ 73,812 $ 87,349 $ 73,812
-----------------------------------------------------
-----------------------------------------------------

Earnings per unit:
Basic and Diluted $ 0.30 $ 0.35 $ 0.86 $ 1.04


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

Three months ended Twelve months ended
December 31 December 31
2008 2007 2008 2007
(unaudited) (unaudited) (audited) (audited)
Cash provided by
(used in):

Operations:
Net earnings $ 8,862 $ 10,415 $ 25,333 $ 30,858
Add (deduct) items
not effecting cash:
Depreciation 3,735 3,000 13,889 11,255
Loss (gain) on
disposal of
equipment 341 (26) 108 (606)
Future income taxes 737 (1,567) 3,082 653
-----------------------------------------------------
13,675 11,822 42,412 42,160

Changes in non-cash
working capital
items:
Accounts receivable (5,510) (6,624) (8,990) 5,973
Inventory (2,004) 5,942 (1,927) (5,985)
Income taxes
receivable - - 5,742 -
Prepaid expenses and
deposits 436 1,390 261 (547)
Accounts payable and
accrued liabilities 5,557 (2,298) 12,732 (8,431)
Income taxes payable 968 (1,532) 2,336 (8,321)
-----------------------------------------------------
13,122 8,700 52,566 24,849

Investments:
Purchase of
property, plant and
equipment (9,473) (13,896) (30,240) (22,803)
Proceeds on disposal
of property, plant
and equipment 780 53 2,259 3,486
-----------------------------------------------------
(8,693) (13,843) (27,981) (19,317)
Financing:
Advances (repayment)
of long-term debt (1,980) 654 (7,862) 11,135
Advances (repayment)
of obligations under
capital leases (62) (114) (408) (675)
Repurchase of trust
units (1,018) (1,235) (2,162) (2,906)
Distributions to
Unitholders (2,639) (4,599) (10,591) (29,842)
Distributions payable (12) (1,939) (13) (5,379)
Increase (decrease)
in bank indebtedness 1,282 12,376 (3,549) 22,135
-----------------------------------------------------
(4,429) 5,143 (24,585) (5,532)
-----------------------------------------------------

Change in cash - - - -

Cash, beginning of
period - - - -

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

Supplemental
information:
Interest paid $ 468 $ 838 $ 2,595 $ 2,232
Income taxes paid $ - $ (208) $ (5,795) $ 2,853


SEGMENTED INFORMATION

The Trust 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 manufacturing, sale, rental and servicing of natural gas compression equipment.



As at and for the three months ended December 31, 2008 (unaudited)

Contract Drilling and Gas
Drilling Production Compression
Services Rentals Services Other (2) Total
----------------------------------------------------------------------------
Revenue 9,929 20,686 19,097 - 49,712
Operating
earnings (loss)
(1), (3) 2,032 7,895 1,548 (567) 10,908
Depreciation
and amortization 1,091 2,296 340 8 3,735
Assets 70,243 116,218 59,812 1,242 247,515
Goodwill - 2,514 1,539 - 4,053
Capital
expenditures 2,204 5,384 1,885 - 9,473


As at and for the three months ended December 31, 2007 (unaudited)

Contract Drilling and Gas
Drilling Production Compression
Services Rentals Services Other (2) Total
----------------------------------------------------------------------------
Revenue $ 7,852 $ 12,751 $ 20,925 $ - $ 41,528
Operating
earnings (loss)
(1), (3) 1,929 2,271 3,796 (914) 7,082
Depreciation
and amortization 813 1,893 282 12 3,000
Assets 68,029 100,335 53,158 7,095 228,617
Goodwill - 2,514 1,539 - 4,053
Capital
expenditures(4) (50) 10,266 3,677 3 13,896


As at and for the year ended December 31, 2008 (audited)

Contract Drilling and Gas
Drilling Production Compression
Services Rentals Services Other (2) Total
----------------------------------------------------------------------------
Revenue 37,148 70,208 47,126 - 154,482
Operating
earnings (loss)
(1), (3) 6,636 22,845 4,556 (3,231) 30,806
Depreciation
and amortization 4,059 8,533 1,266 31 13,889
Assets 70,243 116,218 59,812 1,242 247,515
Goodwill - 2,514 1,539 - 4,053
Capital
expenditures 6,936 17,017 6,287 - 30,240


As at and for the year ended December 31, 2007 (audited)
Contract Drilling and Gas
Drilling Production Compression
Services Rentals Services Other (2) Total
----------------------------------------------------------------------------
Revenue $ 29,062 $ 52,396 $ 54,126 $ - $ 135,584
Operating
earnings (loss)
(1), (3) 6,696 15,138 7,684 (4,081) 25,437
Depreciation
and amortization 2,753 7,430 1,033 39 11,255
Assets 68,029 100,335 53,158 7,095 228,617
Goodwill - 2,514 1,539 - 4,053
Capital
expenditures (4) 1,665 14,015 7,014 109 22,803

(1) Operating earnings (loss) are earnings before gain on disposal of
equipment and income taxes.
(2) Other includes the Trust's corporate activities and for 2007 "Assets"
includes an income taxes receivable of $5.7 million.
(3) Included in operating earnings (loss) for the three and nine month
periods ending December 31, 2008 is interest expense paid on the Trust's
operating line of credit, which interest expense is disclosed as "Other
interest" in the Trust's financial statements. This interest is
allocated to each reportable segment based on the relative amount of
capital each segment employs.
(4) Included in capital expenditures in the Drilling and Production Rentals
division for 2007 is the $9.4 million purchase of the operating assets
of a private company.


Total Energy Services Trust is a growth oriented energy services income trust involved in contract drilling services, drilling and production rentals and natural gas compression equipment fabrication, sales, rental and service. The trust units of Total Energy are listed and trade on the TSX under the symbol TOT.UN.

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 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 Trust'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 Trust'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 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

  • Total Energy Services Trust
    Daniel Halyk
    President and Chief Executive Officer
    (403) 216-3921
    or
    Total Energy Services Trust
    Mark Kearl
    Vice-President Finance and Chief Financial Officer
    (403) 216-3920
    Email: investorrelations@totalenergy.ca
    Website: www.totalenergy.ca