Total Energy Services Trust
TSX : TOT.UN

Total Energy Services Trust

May 07, 2009 11:47 ET

Total Energy Services Trust Announces Q1 2009 Results

CALGARY, ALBERTA--(Marketwire - May 7, 2009) - Total Energy Services Trust (TSX:TOT.UN) ("Total Energy" or the "Trust") announces its consolidated financial results for the three months ending March 31, 2009.



Financial Highlights
($000's except per unit data)
Three Months Ended March 31
(Unaudited)
2009 2008 % Change
--------------------------------------------
Revenue $ 44,485 $ 43,526 2%
Operating Earnings (1) 10,261 12,441 (18)%
EBITDA (1) 14,458 16,721 (14)%
Cashflow (1) 12,438 13,827 (10)%
Net Earnings 8,560 9,594 (11)%

Per Unit Data (Diluted)
EBITDA (1) $ 0.50 $ 0.57 (12)%
Cashflow (1) 0.43 0.47 (9)%
Net Earnings 0.29 0.33 (12)%


Mar. 31 Dec. 31
2009 2008
(Unaudited) (Audited) % Change
Financial Position
Total Assets 246,104 $ 247,515 (1)%
Long-Term Debt 15,344 13,521 13%
Working Capital (2) 15,541 7,254 114%
Net Debt (3) 679 6,267 (89)%
Unitholders' Equity 153,294 147,376 4%

Units Outstanding (000's)
Basic and diluted 29,050 29,057 nil

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 March 31, 2009 reflect difficult industry conditions in Western Canada. The global economic recession, difficult financial markets and a substantial decline in oil and natural gas prices since mid-2008 contributed to a significant decrease in Canadian oil and natural gas drilling activity. Mitigating the impact of lower industry drilling activity levels was Total Energy's increasing exposure to completion and production related activity in its Drilling and Production Rentals division and increased first quarter contribution from its Gas Compression Services division relative to 2008. Despite challenging industry conditions, Total Energy's balance sheet remains strong with a long-term debt to long-term debt plus unitholder equity ratio of 0.14 to 1.0, $15.5 million of positive working capital and less than $700,000 of net debt as at March 31, 2009.

Total Energy's Contract Drilling Services division achieved 409 operating days (spud to release) with an average fleet of 13 rigs operating during the first quarter of 2009, which translates into a utilization rate of 35%, as compared to 680 operating days (57% utilization) with a fleet of 13 rigs during the first quarter of 2008. The Drilling and Production Rentals division achieved a utilization rate on rental equipment of 54% during the first three months of 2009 as compared to a 59% utilization rate during the first quarter of 2008. The revenue reported from Total's Gas Compression Services division during the first quarter of 2009 increased to $16.0 million compared to $8.8 million achieved during the same period in 2008. At March 31, 2009 the Gas Compression Services division had a fabrication backlog of approximately $9.1 million compared to a backlog of $3.7 million as at March 31, 2008. At March 31, 2009, there was approximately 13,200 horsepower of compression equipment on rent as compared to approximately 10,900 at March 31, 2008. The gas compression rental fleet operated at an average utilization rate of 84% during the first three months of 2009 (based on fleet horsepower).

The Trust declared regular distributions of $0.09 per unit for the three months ended March 31, 2009. Total distributions declared for the first quarter of 2009 were $2.6 million.

OUTLOOK

Weak commodity prices and difficult financial markets resulted in multi-year low first quarter drilling rig utilization during what is typically the most active period of drilling in Western Canada. Current industry conditions in Canada are as challenging as any faced by Total Energy in the past with Western Canadian drilling rig fleet utilization at historic lows. Excess service industry capacity is compounding the negative impact of low activity levels on the Canadian energy services industry. Current high natural gas storage levels in North American are expected to continue to put pressure on natural gas prices in the near term.

In the context of this difficult environment, on March 19, 2009 Total Energy announced its intention to convert back to a corporate structure pursuant to a statutory plan of arrangement. Unitholders of the Trust will be asked to approve the conversion transaction at the Annual and Special Meeting of Unitholders on May 15, 2009. Should Unitholders approve the conversion transaction, it is expected that the conversion would be completed prior to May 31, 2009. An information circular containing detailed information pertaining to the conversion transaction has been mailed to Unitholders and is available at www.sedar.com. The proposed corporate conversion recognizes the inevitable elimination of the benefits arising from the public income trust structure and is also intended to better position Total Energy to capitalize on opportunities that generally arise during difficult times. With a strong balance sheet and increased financial flexibility arising from the proposed corporate conversion, Total will be well positioned to pursue growth opportunities that may arise.

As producers seek to lower their natural gas production costs, Total Energy's Gas Compression Services division, Bidell Equipment, will be introducing its proprietary high horsepower mobile compression unit, the NOMAD™, to the North American and select international markets during the second quarter. With 38,000 horsepower of NOMAD™ mobile compression (36 units) currently in operation in Western Canada and the northeastern United States and with over 620,000 hours of field runtime to date, the substantial cost savings to natural gas producers associated with this unique patent pending technology have been quantified and confirmed. The NOMAD™ is particularly well suited for shale gas wells that experience high initial production decline rates as the NOMAD™ allows producers to right size their compression needs having regard to the production profile of the well without the substantial transportation and mobilization/demobilization costs associated with traditional skid-mounted compression units.

CONFERENCE CALL

At 2:30 p.m. MST today, Total Energy will conduct a conference call to discuss its Q1 2009 financial results. Daniel Halyk, President and Chief Executive Officer will host the conference call. The call is open to unitholders and other interested persons. 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 (password 5142722). The recording will be available until May 14, 2009.

ANNUAL MEETING

Unitholders and other interested persons are invited to attend the annual special and general meeting of Unitholders which will commence at 9:00 a.m. (Calgary time) on May 15, 2009 at the Calgary Petroleum Club, 319 - 5th Avenue S.W., Calgary, Alberta.

SELECTED FINANCIAL INFORMATION

Selected financial information relating to first quarter of 2009 and first quarter of 2008 is attached to this press release. That information should be read in conjunction with the unaudited financial statements of the Trust and the attached notes to the financial statements and management's discussion and analysis to be issued in due course and reproduced in the Trust's first quarter report.



Consolidated Balance Sheets
(in thousands of Canadian dollars)

March 31, December 31,
2009 2008
----------------------------------------------------------------------------
(unaudited)

Assets
Current assets:
Accounts receivable $ 34,985 $ 37,274
Inventory 33,711 33,836
Prepaid expenses and deposits 1,416 1,319
---------------------------
70,112 72,429
---------------------------
Property, plant and equipment 171,939 171,033

Goodwill 4,053 4,053
---------------------------
$ 246,104 $ 247,515
---------------------------
---------------------------

Liabilities & Unitholders' Equity
Current liabilities:
Bank indebtedness $ 23,838 $ 24,830
Accounts payable and accrued liabilities 19,380 29,137
Distributions payable 872 872
Income taxes payable 1,035 2,336
Current portion of long-term debt 9,000 8,000
Current portion of obligations under capital
leases 446 -
---------------------------
54,571 65,175

Long-term debt 15,344 13,521

Obligations under capital leases 876 -

Future income taxes 22,019 21,443

Unitholders' equity:
Trust Unit capital 60,012 60,027
Retained earnings 93,282 87,349
---------------------------
153,294 147,376
---------------------------
$ 246,104 $ 247,515
---------------------------
---------------------------

Supplemental Information:
Number of trust units outstanding
(000's) - Basic and diluted 29,050 29,057


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

Three months ended
March 31
2009 2008
----------------------------------------------------------------------------
(unaudited) (unaudited)

Revenue $ 44,485 $ 43,526

Expenses:
Operating 25,702 22,399
Selling, general and administration 4,568 4,412
Depreciation 3,545 3,452
Other interest 189 395
Interest on long-term debt 220 427
-----------------------------
34,224 31,085
-----------------------------
Operating earnings 10,261 12,441

Gain on disposal of equipment 243 6

-----------------------------
Earnings before income taxes 10,504 12,447

Income tax expense
Current 1,368 2,066
Future 576 787
-----------------------------
1,944 2,853

-----------------------------
Net earnings 8,560 9,594
-----------------------------

Retained earnings, beginning of period 87,349 73,812

Trust distributions (2,615) (2,650)
Repurchase and cancellation of trust units
in excess of stated trust unit capital (12) (143)

-----------------------------
Retained earnings, end of period $ 93,282 $ 80,613
-----------------------------
-----------------------------

Earnings per unit:
Basic and diluted $ 0.29 $ 0.33


Consolidated Statements of Cash Flows
(in thousands of Canadian dollars)
Three months ended
March 31
2009 2008
----------------------------------------------------------------------------
(unaudited) (unaudited)

Cash provided by (used in):

Operations:
Net earnings $ 8,560 $ 9,594
Add (deduct) items not affecting cash:
Depreciation 3,545 3,452
Loss (gain) on disposal of equipment (243) (6)
Future income taxes 576 787
----------------------------
12,438 13,827

Changes in non-cash working capital items:
Accounts receivable 2,289 (9,578)
Inventory 125 (77)
Prepaid expenses and deposits (97) (141)
Accounts payable and accrued liabilities (5,038) 1,150
Income taxes payable (1,301) 2,176
----------------------------
8,416 7,357

Investments:
Purchase of property, plant and equipment (5,459) (2,501)
Proceeds on disposal of property, plant and
equipment 1,251 200
Changes in non-cash working capital items (4,719) (15)
----------------------------
(8,927) (2,316)

Financing:
Advances of long-term debt 5,000 3,000
Repayments of long-term debt (2,177) (2,006)
Advances of obligations under capital leases 1,443 -
Repayment of obligations under capital leases (121) (115)
Repurchase of trust units (27) (251)
Distributions to Unitholders (2,615) (2,650)
Distributions payable - (1)
Increase (decrease) in bank indebtedness (992) (3,018)
----------------------------
511 (5,041)
----------------------------

Change in cash - -

Cash, beginning of period - -
----------------------------
Cash, end of period $ - $ -
----------------------------
----------------------------
Supplemental information:
Interest paid $ 485 $ 969
Income taxes paid (received) $ 2,669 $ (110)


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 fabrication, sale, rental and servicing of natural gas compression equipment.



As at and for the three months ended March 31, 2009 (unaudited)

Contract Drilling and Gas
Drilling Production Compression
Services Rentals Services Other (2) Total
----------------------------------------------------------------------------
Revenue $ 7,016 $ 21,496 $ 15,973 $ - $ 44,485
Operating
earnings
(loss)
(1),(3) 1,362 8,223 1,373 (697) 10,261
Depreciation 851 2,349 338 7 3,545
Assets 71,510 118,011 55,348 1,235 246,104
Goodwill - 2,514 1,539 - 4,053
Capital
expenditures 3,385 1,660 414 - 5,459


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

Contract Drilling and Gas
Drilling Production Compression
Services Rentals Services Other (2) Total
----------------------------------------------------------------------------
Revenue $ 11,604 $ 23,118 $ 8,804 $ - $ 43,526
Operating
earnings
(loss)
(1),(3) 3,113 9,575 974 (1,221) 12,441
Depreciation 1,104 2,034 305 9 3,452
Assets 69,372 110,735 49,805 7,356 237,268
Goodwill - 2,514 1,539 - 4,053
Capital
expenditures 689 787 1,025 - 2,501

(1) Operating earnings (loss) are earnings before gain on disposal of
equipment and income taxes.
(2) Other includes the Trust's corporate activities and in 2008 "Assets"
includes an income tax receivable of $5.7 million.
(3) Included in operating earnings (loss) for each reportable segment in
2009 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.


Total Energy 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. Total Energy, Bidell, Bidell Equipment, Chinook, Chinook Drilling, NOMAD and the Total Energy logo are registered trademarks of Total Energy Services Ltd.

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 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

  • 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