Total Energy Services Inc. Announces 2012 Results

Marketwired

CALGARY, ALBERTA--(Marketwire - March 12, 2013) - Total Energy Services Inc. (TOT.TO) ("Total Energy" or the "Company") announces its consolidated financial results for the three and twelve-month periods ending December 31, 2012. 

Financial Highlights  
($000's except per share data)  
           
  Three Months Ended Dec. 31     Twelve Months Ended Dec. 31  
  (unaudited)     (audited)  
  2012 2011   % Change     2012   2011   % Change  
Revenue $ 78,404 $ 96,936   (19 )%   $ 307,702   $ 332,082   (7 )%
Operating Earnings (1) 14,806 31,206   (53 )%   65,221   96,233   (32 )%
EBITDA (1) 21,743 38,608   (44 )%   91,076   122,034   (25 )%
Cashflow (1) 22,110 37,251   (41 )%   91,949   120,780   (24 )%
Net Income 10,525 23,441   (55 )%   47,692   69,266   (31 )%
                         
Per Share Data (Diluted) (2)                        
EBITDA (1) $ 0.63 $ 1.10   (43 )%   $ 2.62   $ 3.49   (25 )%
Cashflow (1) 0.64 1.06   (40 )%   2.65   3.46   (23 )%
Net Earnings 0.34 0.69   (51 )%   1.49   2.08   (28 )%
                         
              Dec. 31   Dec. 31      
              2012
(audited
) 2011
(audited
) % Change  
Financial Position            
Total Assets $ 476,591   $ 434,617   10 %
Long-Term Debt, Convertible Debentures and Obligations Under Finance Leases 67,937   66,466   2 %
Working Capital (3) 90,708   120,786   (25 )%
Net Debt (4) nil   nil   nil  
Shareholders' Equity 306,069   275,321   11 %
             
Shares Outstanding (000's)            
Basic 30,600   31,375   (2 )%
Diluted (2) 34,300   35,261   (3 )%

Notes 1 through 4 please refer to the Notes to the Financial Highlights set forth at the end of this release.

Total Energy's results for the three and twelve months ended December 31, 2012 reflect a more challenging industry environment that began following a record first quarter for the Company. Continued weakness in North American natural gas prices and widening oil price differentials in Western Canada contributed to lower drilling and completion activity during the second half of 2012 compared to the second half of 2011.

Total Energy's Contract Drilling Services division achieved 42% utilization during the fourth quarter of 2012, recording 603 operating days (spud to release) with a fleet of 15 rigs, compared to 801 operating days, or 62% utilization, during the fourth quarter of 2011 with a fleet of 14 rigs. Revenue per operating day decreased 6% for the fourth quarter of 2012 relative to the prior year comparable period due primarily to lower pricing. For the twelve months ended December 31, 2012, the Contract Drilling Services division achieved 2,460 operating days (44% utilization), compared to 3,042 operating days (60% utilization) for 2011. The Rentals and Transportation Services division achieved a utilization rate on major rental equipment of 41% during the fourth quarter of 2012 as compared to a 72% utilization rate during the fourth quarter of 2011. For 2012, rental equipment utilization averaged 47% as compared to 68% for 2011. The Gas Compression Services division generated revenues of $33.9 million for the three months ended December 31, 2012 compared to $33.0 million for the same period in 2011, an increase of 3%. For 2012, revenues increased by 8% to $121.3 million compared to $112.8 million in 2011. The Gas Compression Services division exited 2012 with a $34.5 million backlog of fabrication sales orders as compared to $33.6 million at December 31, 2011. At December 31, 2012, approximately 31,700 horsepower of compression equipment was on rent compared to 25,300 horsepower on rent at December 31, 2011. The gas compression rental fleet operated at an average utilization rate of 87% and 84% for the three and twelve month periods ended December 31, 2012, respectively, as compared to 78% for the same periods in 2011.

During the fourth quarter, Total Energy declared a quarterly dividend of $0.05 per share to shareholders of record on December 31, 2012. This dividend was paid on January 31, 2013.

Outlook

Western Canadian drilling activity started out somewhat slowly during the first part of January 2013. However, drilling activity levels steadily increased and have generally been at or above the five year average since mid-January. With ongoing weak natural gas prices, producers continue to focus their drilling, completion and production activities towards oil and natural gas liquids prospects. In the context of continued global economic uncertainty and unique commodity price challenges facing Canadian producers, the Company remains focused on the quality and efficiency of existing operations and the disciplined deployment of capital. In that regard, Total Energy is pleased to announce that Gerry Crawford was recently appointed Vice President, Field Services. Mr. Crawford has been with Total Energy since 1998 and had previously served as General Manager of the Company's Rentals and Transportation Services division.

Total Energy's previously announced preliminary 2013 capital expenditure plan of $32.7 million provides the Company with significant financial flexibility to pursue additional investment opportunities that may arise. Despite uncertain markets, Total Energy continues to strategically invest in the long term growth of its existing business divisions. The recently completed $14.0 million acquisition of a well-established process equipment fabrication business increases Total's exposure to large North American and international liquids and natural gas infrastructure projects. Total Energy will continue to pursue investment opportunities that will generate acceptable returns on capital.

Total Energy's financial condition remains strong with a long-term debt (including convertible debentures) to long-term debt plus equity ratio of 0.18 to 1.0, $90.7 million of positive working capital and no net debt as at December 31, 2012. Total Energy's $35 million operating facility is currently fully available and undrawn.

Conference Call

At 2:30 p.m. MST today, Total Energy will conduct a conference call and webcast to discuss its fourth 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. A live webcast of the conference call will be accessible on Total's website at www.totalenergy.ca by selecting "Webcasts". Persons wishing to join the conference call live may do so by calling (866) 696-5910 or (416) 340-2217. Those who are unable to listen to the call live may listen to a recording of it on Total Energy's website. A recording of the conference call will also be available until March 19, 2013 by dialing (800) 408-3053 (passcode 8257802).

Annual Meeting of Shareholders

Shareholders and other interested persons are invited to attend the annual meeting of Shareholders which will commence at 10:00 a.m. (Calgary time) on Wednesday, May 22, 2013 at the Calgary Petroleum Club, 319 - 5th Avenue S.W., Calgary, Alberta.

Selected Financial Information

Selected financial information relating to the three and twelve-month periods ended December 31, 2012 and 2011 is attached to this news release. This information should be read in conjunction with the 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 2012 annual report. 

Consolidated Statements of Financial Position  
(in thousands of Canadian dollars)  
           
  December 31,     December 31,  
  2012     2011  
  (audited )   (audited )
Assets          
Current assets:          
    Cash and cash equivalents $ 50,052     $ 35,658  
    Accounts receivable 63,511     94,556  
    Inventory 33,240     37,147  
    Income taxes receivable -     118  
    Prepaid expenses and deposits 2,547     1,795  
  149,350     169,274  
           
Property, plant and equipment 323,188     261,290  
           
Goodwill 4,053     4,053  
  $ 476,591     $ 434,617  
           
Liabilities & Shareholders' Equity          
Current liabilities:          
    Accounts payable and accrued liabilities $ 32,523     $ 41,556  
    Deferred revenue 6,971     3,064  
    Dividends payable 1,530     1,255  
    Income taxes payable 15,098     -  
    Current portion of obligations under finance leases 2,520     2,613  
  58,642     48,488  
           
  Obligations under finance leases 2,723     2,763  
           
Convertible debentures 62,694     61,090  
           
  Deferred tax liability 46,463     46,955  
           
Shareholders' equity:          
    Share capital 76,890     77,917  
    Contributed surplus 5,160     2,472  
    Equity portion of convertible debenture 4,601     4,601  
    Retained earnings 219,418     190,331  
  306,069     275,321  
           
  $ 476,591     $ 434,617  
           
Consolidated Statements of Comprehensive Income  
(in thousands of Canadian dollars except per share amounts)  
   
    Three months ended     Year ended  
    December 31,     December 31,  
    2012     2011     2012     2011  
    (unaudited )   (unaudited )   (audited )   (audited )
                         
Revenue $ 78,404     $ 96,936     $ 307,702     $ 332,082  
                         
Expenses:                      
  Cost of services 49,485     51,875     187,311     182,231  
  Selling, general and administration 6,809     7,792     28,403     28,959  
  Share-based compensation 1,042     314     3,065     1,360  
  Depreciation 6,262     5,749     23,702     23,299  
Results from operating activities 14,806     31,206     65,221     96,233  
                         
  Gain on disposal of property, plant and equipment 675     1,653     2,153     2,502  
  Finance income 248     76     878     161  
  Finance costs (1,489 )   (1,434 )   (5,797 )   (5,441 )
                         
Net income before income taxes 14,240     31,501     62,455     93,455  
                         
Income tax expense (recovery)                      
  Current 5,730     18     15,255     112  
  Deferred (2,015 )   8,042     (492 )   24,077  
Total income tax expense 3,715     8,060     14,763     24,189  
                         
Net income and total comprehensive income for the period 10,525     23,441     47,692     69,266  
                         
Retained earnings, beginning of period 211,558     170,844     190,331     131,808  
                         
  Dividends (1,530 )   (1,256 )   (6,180 )   (5,032 )
                         
  Repurchase and cancellation of common shares in excess of stated common share capital (1,135 )   (2,698 )   (12,425 )   (5,711 )
                         
Retained earnings, end of period $ 219,418     $ 190,331     $ 219,418     $ 190,331  
                         
Earnings per share :                      
  Basic $ 0.34     $ 0.75     $ 1.54     $ 2.20  
  Diluted $ 0.34     $ 0.69     $ 1.49     $ 2.08  
                         
                         
Consolidated Statements of Cash Flows  
(in thousands of Canadian dollars)  
                       
    Three months ended     Year ended     
    December 31,     December 31,     
    2012     2011     2012     2011  
    (unaudited )   (unaudited )   (audited )   (audited )
                         
Cash provided by (used in):                      
                         
Operations:                      
  Net Income for the period $ 10,525     23,441     $ 47,692     $ 69,266  
  Add (deduct) items not affecting cash:                      
  Depreciation 6,262     5,749     23,702     23,299  
  Share-based compensation 1,042     314     3,065     1,360  
  Gain on disposal of property, plant and equipment (675 )   (1,653 )   (2,153 )   (2,502 )
  Finance income (248 )   (76 )   (878 )   (161 )
  Finance costs 1,489     1,434     5,797     5,441  
  Current income tax expense 5,730     18     15,255     112  
  Deferred income tax expense (2,015 )   8,042     (492 )   24,077  
  Income taxes (paid) -     (18 )   (39 )   (112 )
    22,110     37,251     91,949     120,780  
                         
  Changes in non-cash working capital items:                      
  Accounts receivable (5,300 )   (7,063 )   31,045     (23,573 )
  Finance lease receivable 1,610     -     -     -  
  Inventory 1,614     2,851     3,907     (3,659 )
  Prepaid expenses and deposits 206     1,314     (752 )   (48 )
  Accounts payable and accrued liabilities 2,055     4,482     (5,551 )   4,413  
  Deferred revenue 3,363     (7,936 )   3,907     (270 )
    25,658     30,899     124,505     97,643  
Investments:                      
  Purchase of property, plant and equipment (29,074 )   (24,300 )   (89,365 )   (55,647 )
  Proceeds on disposal of property, plant and equipment 2,766     4,630     8,973     8,739  
  Changes in non-cash working capital items (703 )   4,037     (2,603 )   8,021  
    (27,011 )   (15,633 )   (82,995 )   (38,887 )
Financing:                      
  Issuance of convertible debenture, net of issue costs -     -     -     65,927  
  Advances under long-term debt -     -     -     (72,500 )
  Repayment of obligations under finance leases (688 )   (1,132 )   (3,188 )   (3,874 )
  Payment of dividends (1,535 )   (1,255 )   (5,905 )   (5,034 )
  Issuance of common shares 1     1,265     1,198     2,213  
  Repurchase of common shares (1,393 )   (3,234 )   (15,027 )   (6,861 )
  Interest paid (374 )   18     (4,194 )   (3,197 )
    (3,989 )   (4,338 )   (27,116 )   (23,326 )
                         
Change in cash and cash equivalents (5,342 )   10,928     14,394     35,430  
                         
Cash and cash equivalents, beginning of period 55,394     24,730     35,658     228  
                         
Cash and cash equivalents, end of period $ 50,052     $ 35,658     $ 50,052     $ 35,658  
                         

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 and process equipment.

As at and for the three months ended December 31, 2012 (unaudited)  
                     
  Contract Drilling   Rentals and Transportation   Gas Compression          
  Services   Services   Services   Other(1 ) Total  
                     
Revenue $ 12,773   $ 31,725   $ 33,906   $ -   $ 78,404  
                     
Cost of services 7,362   15,121   26,999   3   49,485  
Selling, general and administration 770   3,619   1,809   611   6,809  
Share-based compensation -   -   -   1,042   1,042  
Depreciation 1,241   3,861   1,046   114   6,262  
Results from operating activities 3,400   9,124   4,052   (1,770 ) 14,806  
                     
Gain on sale of property, plant and equipment 15   325   335   -   675  
Finance income -   -   80   168   248  
Finance costs (253 ) (579 ) (178 ) (479 ) (1,489 )
Net income before income taxes 3,162   8,870   4,289   (2,081 ) 14,240  
                     
Goodwill -   2,514   1,539   -   4,053  
                     
Total assets 100,758   225,655   102,565   47,613   476,591  
Total Liabilities 20,220   44,170   23,020   83,112   170,522  
                     
Capital expenditures $ 5,495   $ 11,361   $ 1,574   $ 10,644   $ 29,074  
                     
                     
As at and for the three months ended December 31, 2011 (unaudited)  
                     
  Contract Drilling   Rentals and Transportation   Gas Compression          
  Services   Services   Services   Other(1 ) Total  
                     
Revenue $ 18,066   $ 45,858   $ 33,012   $ -   $ 96,936  
                     
Cost of services 8,559   16,332   26,984   -   51,875  
Selling, general and administration 1,030   4,129   1,644   989   7,792  
Share-based compensation -   -   -   314   314  
Depreciation 1,379   3,475   881   14   5,749  
Results from operating activities 7,098   21,922   3,503   (1,317 ) 31,206  
                     
Gain on sale of property, plant and equipment 21   1,629   3   -   1,653  
Finance Income -   -   -   76   76  
Finance costs (253 ) (591 ) (152 ) (438 ) (1,434 )
Net income before income taxes 6,866   22,960   3,354   (1,679 ) 31,501  
                     
Goodwill -   2,514   1,539   -   4,053  
                     
Total assets 91,122   227,728   82,160   33,607   434,617  
Total Liabilities 19,370   54,318   19,383   66,225   159,296  
                     
Capital expenditures $ 5,107   $ 16,473   $ 2,542   $ 178   $ 24,300  
                     
                     
As at and for the year ended December 31, 2012 (audited)  
                     
  Contract   Rentals and   Gas          
As at and for the year ended Drilling   Transportation   Compression          
December 31, 2012 Services   Services   Services   Other(1 ) Total  
                     
Revenue $ 52,669   $ 133,729   $ 121,304   -   $ 307,702  
Cost of services 29,685   58,005   99,621   -   187,311  
Selling, general and administration 3,326   14,579   6,310   4,188   28,403  
Share-based compensation -   -   -   3,065   3,065  
Depreciation 4,845   14,814   3,900   143   23,702  
Results from operating activities 14,813   46,331   11,473   (7,396 ) 65,221  
                     
Gain on sale of property, plant and equipment 80   734   1,339   -   2,153  
Finance income -   -   272   606   878  
Finance costs (1,013 ) (2,319 ) (632 ) (1,833 ) (5,797 )
                     
Net income before income taxes 13,880   44,746   12,452   (8,623 ) 62,455  
                     
Goodwill -   2,514   1,539   -   4,053  
                     
Total assets 100,758   225,655   102,565   47,613   476,591  
Total liabilities 20,220   44,170   23,020   83,112   170,522  
                     
Capital expenditures $ 17,928   $ 42,907   $ 16,046   $ 12,484   $ 89,365  
                     
                     
As at and for the year ended December 31, 2011 (audited)  
                     
  Contract   Rentals and   Gas          
As at and for the year ended Drilling   Transportation   Compression          
December 31, 2011 Services   Services   Services   Other(1 ) Total  
                     
Revenue $ 59,436   $ 159,820   $ 112,826   $ -   $ 332,082  
Cost of services 31,311   56,525   94,395   -   182,231  
Selling, general and administration 3,324   15,923   5,642   4,070   28,959  
Share-based compensation -   -   -   1,360   1,360  
Depreciation 5,424   14,570   3,253   52   23,299  
Results from operating activities 19,377   72,802   9,536   (5,482 ) 96,233  
                     
Gain on sale of property, plant and equipment 28   1,900   574   -   2,502  
Finance income -   -   -   161   161  
Finance costs (973 ) (2,367 ) (584 ) (1,517 ) (5,441 )
                     
Net income before income taxes 18,432   72,335   9,526   (6,838 ) 93,455  
                     
Goodwill -   2,514   1,539   -   4,053  
                     
Total assets 91,122   227,728   82,160   33,607   434,617  
Total liabilities 19,370   54,318   19,383   66,225   159,296  
                     
Capital expenditures $ 14,075   $ 32,933   $ 8,409   $ 230   $ 55,647  

(1) Other includes the Company's corporate activities, accretion of convertible debentures and obligations pursuant to long-term credit facilities.

Total Energy Services Inc. is a growth oriented energy services corporation involved in contract drilling services, rentals and transportation services and the fabrication, sale, rental and servicing of natural gas compression and process equipment. The common shares of Total Energy are listed and trade on the TSX under the symbol TOT. 

Notes to Financial Highlights

(1) Operating earnings means results from operating activities and is equal to net income before income taxes minus gain on sale of property, plant and equipment plus finance costs minus finance income. EBITDA means earnings before interest, taxes, depreciation and amortization and is equal to net income before income taxes plus finance costs plus depreciation minus finance income. Cashflow means cash provided by operations before changes in non-cash working capital items. Operating earnings, EBITDA and cashflow are not recognized measures under IFRS. Management believes that in addition to net income, 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. Readers should be cautioned, however, that operating earnings, EBITDA and cashflow should not be construed as an alternative to net income determined in accordance with IFRS 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. Reconciliations of these non-IFRS measures to the most directly comparable IFRS measure are outlined below.
   
(2) Per share data (diluted) and the number of common shares outstanding on a diluted basis includes the impact of the approximate 3.1 million common shares issuable upon the entire conversion of the $69 million principal amount of convertible debentures issued by the Company in February 2011.
   
(3) Working capital equals current assets minus current liabilities.
   
(4) Net Debt equals long-term debt plus obligations under finance leases plus convertible debentures 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.

Contact:
Total Energy Services Inc.
Daniel Halyk
President & Chief Executive Officer
(403) 216-3921

Total Energy Services Inc.
Mark Kearl
Vice-President Finance and Chief Financial Officer
(403) 216-3920
investorrelations@totalenergy.ca
www.totalenergy.ca

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