Total Energy Services Trust
TSX : TOT.UN

Total Energy Services Trust

August 05, 2005 06:00 ET

Total Energy Services Trust Announces Q2 2005 Results

CALGARY, ALBERTA--(CCNMatthews - Aug. 5, 2005) - Total Energy Services Trust (TSX:TOT.UN) ("Total Energy" or the "Trust"), the public successor to Total Energy Services Ltd. ("TESL"), is pleased to announce its consolidated financial results for the three and six-month periods ending June 30, 2005. On April 29, 2005 the assets and operations of TESL were converted into an income trust pursuant to a Plan of Arrangement. The Plan of Arrangement involved the creation of the Trust, which will be accounted for as a continuity of interest. Therefore, commencing with May 2005, the consolidated financial statements of the Trust reflect the financial position, results of operations and cash flows as if the Trust had always carried on the business formerly carried on by TESL. Units outstanding includes all Units issuable upon conversion of Exchangeable Shares outstanding as at June 30, 2005.



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

Three Months Ended June 30 Six Months Ended June 30
(Unaudited) (Unaudited)
% %
2005 2004 Change 2005 2004 Change
-----------------------------------------------------
Revenue $28,998 $21,836 33% $71,199 $57,129 25%
Operating
Earnings (1) 1,156 1,400 (17)% 14,089 11,751 20%
EBITDA (1) 2,766 2,938 (6)% 18,438 15,308 20%
Cashflow (1) 1,573 2,761 (43)% 13,007 12,638 3%
Net Earnings 1,175 1,027 14% 10,223 7,964 28%

Per Unit Data (Diluted)
EBITDA (1) $ 0.10 $ 0.11 (9)% $ 0.66 $ 0.55 20%
Cashflow (1) 0.06 0.10 (40)% 0.47 0.45 4%
Net Earnings 0.05 0.03 67% 0.37 0.28 32%


June 30 Dec. 31
2005 2004 %
(Unaudited) (Audited) Change
Financial Position
Total Assets $146,496 $135,491 8%
Long-Term Debt
and Obligations
Under Capital
Leases 13,649 15,675 (13)%
Working Capital (2) 7,534 13,070 (42)%
Net Debt (3) 6,115 2,605 135%
Unitholders'
Equity 83,542 74,807 12%

Units Outstanding (000's)
Basic 27,801 27,490 1%
Diluted 27,801 28,098 (1)%



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, 2005 represent record second quarter operating results, driven by strong utilization in the Contract Drilling division, solid performance from the Drilling and Production Rentals division and continued strength in the Gas Compression Services division. Included in the 2005 second quarter results are non-recurring reorganization costs and stock based compensation expense of approximately $4.1 million. Excluding non-recurring expenses, for the three months ended June 30, 2005 the Trust generated EBITDA of $6.8 million ($0.25 per unit diluted), cashflow of $5.6 million ($0.21 per unit diluted) and net earnings of $4.2 million ($0.16 per unit diluted). During the second quarter, Total Energy eliminated all unexercised stock options at a total cash cost of $3.9 million. Going forward, there are no outstanding options to acquire units of Total Energy and, accordingly, no future stock based compensation expense will be incurred. Total Energy has implemented a cash based compensation plan for directors and officers that will be accrued for on a quarterly basis.

Total Energy's Contract Drilling division achieved 437 operating days (spud to release) with a fleet of nine rigs during the second quarter of 2005, which translates into a utilization rate of 53%. During the second quarter of 2004 the Contract Drilling segment operated seven rigs and achieved 131 operating days (spud to release) or 21% utilization. The Drilling and Production Rentals division achieved a utilization rate on major rental equipment of 40% during the second quarter of 2005 as compared to a 37% utilization rate during the second quarter of 2004. The Gas Compression Services division generated revenues of $15.6 million for the three months ended June 30, 2005 compared to $15.3 for the second quarter of 2004. At June 30, 2005 the Gas Compression Services division had a fabrication backlog of approximately $18.7 million, compared to a backlog of $4.5 million as at June 30, 2004, and had over 8,800 horsepower of compression equipment on rent. The gas compression rental fleet operated at an average utilization rate of 82% during the first six months of 2005.

During the second quarter of 2005, Total Energy continued to execute on its $24.5 million capital build program for 2005, with capital equipment additions of approximately $4.8 million ($2.6 million net of disposals). For the first six months of 2005 capital expenditures totaled $19.0 million ($14.4 million net of disposals).

The Trust declared distributions of $0.12 per unit for the three months ended June 30, 2005. Total distributions for the second quarter were $3.2 million.

OUTLOOK

Continued strong commodity prices and resultant high levels of industry activity have contributed to record second quarter operating results for Total Energy. Current drilling activity in Western Canada is at historically high levels. Continued focus on natural gas drilling has resulted in a record fabrication backlog in the Trust's Gas Compression Services division.

On July 15, 2005, Total Energy completed the $8.7 million acquisition of the rental and trucking assets of RIGBOSS Rentals Ltd. of Rocky Mountain House, Alberta. This acquisition, which is in addition to the $24.5 million capital build program, adds a tenth branch to Total Energy's Drilling and Production Rentals division and provides additional exposure to deeper natural gas drilling activity in the central Alberta foothills. The construction of rigs 10 and 11, two telescopic double drilling rigs, is expected to be completed during the third quarter at a total cost of $10.8 million.

In the context of strong second quarter operating results and the anticipated impact of the RIGBOSS acquisition, the Trust increased its monthly distribution 17% from $0.06 to $0.07 per Unit commencing for the month of July 2005.

CONFERENCE CALL

At 9:00 a.m. MST today, Total Energy will conduct a conference call to discuss its second quarter 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 (888) 789-0089. Those who are unable to listen to the call live may listen to a recording of it by calling (866) 518-1010. The recording will be available until August 12, 2005.

SELECTED FINANCIAL INFORMATION

Selected financial information relating to the three and six-month periods ended June 30, 2005 and 2004 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 Trust's second quarter report.



Consolidated Balance Sheets
(in thousands of dollars)
June 30 December 31
2005 2004
(unaudited) (audited)
------------------------------------------------------------------------
Assets
Current assets:
Accounts receivable $ 24,082 $ 26,727
Income taxes recoverable 276 199
Investment tax credit recoverable - 200
Inventory 18,363 15,515
Prepaid expenses and deposits 559 591
--------------------------
43,280 43,232

Property, plant and equipment 99,163 88,206

Goodwill 4,053 4,053

--------------------------
$ 146,496 $ 135,491
--------------------------
--------------------------

Liabilities & Shareholders' Equity
Current liabilities:
Bank indebtedness $ 6,794 $ 6,802
Accounts payable and accrued liabilities 21,012 15,074
Current portion of obligation under
stock based compensation - 153
Current portion of long-term debt 7,182 6,782
Current portion of obligations
under capital lease 758 1,351
--------------------------
35,746 30,162

Long-term debt 13,427 15,219

Obligations under capital lease 222 456

Obligation under stock based compensation - 77

Future income taxes 13,559 14,770

Unitholders' equity:
Unitholders' capital 34,508 -
Exchangeable shares 1,848 -
Share capital - 34,242
Contributed surplus - 440
Accumulated trust distributions (3,162) -
Accumulated earnings 50,348 40,125
--------------------------
83,542 74,807

--------------------------
$ 146,496 $ 135,491
--------------------------
--------------------------

Supplemental Information:
Number of units and exchangeable
shares outstanding (000's) - Basic 27,801 27,490
Number of units and exchangeable
shares outstanding (000's) - Diluted 27,801 28,098



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

Three months ended Six months ended
June 30 June 30
2005 2004 2005 2004
------------------------------------------------------------------------
(unaudited)(unaudited) (unaudited)(unaudited)

Revenue $ 28,998 $ 21,836 $ 71,199 $ 57,129

Expenses
Operating 19,524 16,402 41,919 36,281
Selling, general
and administration 2,932 2,394 6,295 5,397
Stock based compensation 3,214 172 4,285 208
Depreciation 1,874 1,219 3,987 2,923
Other interest 70 56 154 142
Interest on long-term debt 228 193 470 427
--------------------------------------------
27,842 20,436 57,110 45,378

--------------------------------------------
Operating earnings 1,156 1,400 14,089 11,751

Reorganization costs (844) - (844) -
Gain on disposal of
equipment 282 70 582 65

--------------------------------------------
Earnings before income taxes 594 1,470 13,827 11,816

Income tax expense
Current 132 30 4,815 2,244
Future (recovery) (713) 413 (1,211) 1,608
--------------------------------------------
(581) 443 3,604 3,852

--------------------------------------------
Net earnings 1,175 1,027 10,223 7,964
--------------------------------------------

Accumulated earnings,
beginning of period 49,173 31,572 40,125 24,635
--------------------------------------------

--------------------------------------------
Accumulated earnings,
end of period $ 50,348 $ 32,599 $ 50,348 $ 32,599
--------------------------------------------
--------------------------------------------

Earnings per unit:
Basic $ 0.04 $ 0.04 $ 0.37 $ 0.29
Diluted $ 0.05 $ 0.03 $ 0.37 $ 0.28



Consolidated Statements of Cash Flows
(in thousands of dollars)

Three months ended Six months ended
June 30 June 30
2005 2004 2005 2004
------------------------------------------------------------------------
(unaudited)(unaudited) (unaudited)(unaudited)

Cash flows from (used in):

Operations:
Net earnings $ 1,175 $ 1,027 $ 10,223 $ 7,964
Add (deduct) items not
effecting cash:
Depreciation 1,874 1,219 3,987 2,923
Gain on disposal of
equipment (282) (70) (582) (65)
Stock based compensation (481) 172 590 208
Future income taxes
(recovery) (713) 413 (1,211) 1,608
--------------------------------------------
1,573 2,761 13,007 12,638

Changes in non-cash
working capital items:
Accounts receivable 10,899 10,952 2,645 4,653
Inventory (1,595) 531 (2,848) 530
Investment tax credit
recoverable 200 - 200 -
Income taxes recoverable (276) - (77) 741
Prepaid expenses and
deposits 275 242 32 (296)
Accounts payable and
accrued liabilities (4,336) (2,134) 5,938 2,631
Obligation under stock
based compensation (230) - (230) -
Income taxes payable (4,093) (501) - 459
--------------------------------------------
2,417 11,851 18,667 21,356
Investments:
Purchase of property,
plant and equipment (4,768) (2,628) (19,048) (13,158)
Proceeds on disposal of
property, plant and
equipment 2,165 233 4,687 902
--------------------------------------------
(2,603) (2,395) (14,361) (12,256)

Financing:
Advances under long-term
debt 2,000 - 2,000 -
Repayment of long-term
debt (1,733) (1,386) (3,392) (2,757)
Repayment of obligations
under capital leases (414) (294) (828) (589)
Distributions to
unitholders (3,162) - (3,162) -
Issue of common shares 1,053 7 1,084 203
Increase / (decrease)
in bank indebtedness 2,442 (7,783) (8) (5,957)
--------------------------------------------
186 (9,456) (4,306) (9,100)
--------------------------------------------

Change in cash - - - -

Cash, beginning of period - - - -

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

Supplemental information:
Interest paid $ 306 $ 243 $ 629 $ 578
Income taxes paid $ 4,526 $ 61 $ 6,621 $ 1,691



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 June 30, 2005 (unaudited)

Drilling
Contract and Gas
Drilling Production Compression
Services Rentals Services Other(3) Total
------------------------------------------------------------------------

Revenue $ 6,419 $ 6,991 $ 15,588 $ - $ 28,998
Operating
earnings
(loss)(1) 1,369 1,651 2,048 (3,912) 1,156
Depreciation 622 1,012 233 7 1,874
Assets 52,968 55,194 37,959 375 146,496
Goodwill - 2,514 1,539 - 4,053
Capital
expenditures (2) 1,476 1,246 2,046 - 4,768



As at and for the three months ended June 30, 2004 (unaudited)

Drilling
Contract and Gas
Drilling Production Compression
Services Rentals Services Other(3) Total
------------------------------------------------------------------------
Revenue $ 1,692 $ 4,894 $ 15,250 $ - $ 21,836
Operating
earnings
(loss)(1) (255) 294 2,056 (695) 1,400
Depreciation 155 856 200 8 1,219
Assets 38,506 45,212 29,335 206 113,259
Goodwill - 2,514 1,539 - 4,053
Capital
expenditures (2) 1,222 1,065 341 20 2,648



As at and for the six months ended June 30, 2005 (unaudited)

Drilling
Contract and Gas
Drilling Production Compression
Services Rentals Services Other(3) Total
------------------------------------------------------------------------
Revenue $ 16,887 $ 24,029 $ 30,283 $ - $ 71,199
Operating
earnings
(loss)(1) 5,124 10,871 3,710 (5,615) 14,089
Depreciation 1,493 2,010 469 15 3,987
Assets 52,968 55,194 37,959 375 146,496
Goodwill - 2,514 1,539 - 4,053
Capital
expenditures (2) 10,685 4,164 4,197 2 19,048



As at and for the six months ended June 30, 2004 (unaudited)

Drilling
Contract and Gas
Drilling Production Compression
Services Rentals Services Other(3) Total
------------------------------------------------------------------------
Revenue $ 9,244 $ 18,215 $ 29,670 $ - $ 57,129
Operating
earnings
(loss)(1) 2,185 7,143 3,839 (1,416) 11,751
Depreciation 819 1,702 386 16 2,923
Assets 38,506 45,212 29,335 206 113,259
Goodwill - 2,514 1,539 - 4,053
Capital
expenditures (2) 9,717 2,014 1,407 20 13,158


(1) Operating earnings (loss) are earnings before gain (loss) on sale
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 Trust's primary
business activities prior to consideration of how those results are
taxed in various jurisdictions or gains and losses from the sale of
equipment in those businesses. Investors should be cautioned,
however, that operating earnings should not be construed as an
alternative to net earnings determined in accordance with GAAP as an
indicator of the Trust's performance. The Trust's method of
calculating operating earnings may differ from other organizations
and, accordingly, operating earnings may not be comparable to
measures used by other organizations.

(2) Excludes acquisitions.

(3) Other includes the Trust's corporate activities.


Total Energy Services Trust is a growth oriented oil and gas service 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 sale 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. Cashflow means cash flows from 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. 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 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.

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

Contact Information

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