Total Energy Services Inc. Announces Q3 2014 Results

Marketwired
0

CALGARY, ALBERTA--(Marketwired - Nov 12, 2014) - Total Energy Services Inc. ("Total Energy" or the "Company") (TOT.TO) announces its consolidated financial results for the three and nine months ending September 30, 2014.

Financial Highlights

($000's except per share data)

Three Months Ended
September 30

Nine Months Ended
September 30

(unaudited)

(unaudited)

2014

2013

%
Change

2014

2013

%
Change

Revenue

$

108,233

$

89,060

22%

$

307,040

$

252,639

22%

Operating Earnings (1)

16,262

13,698

19%

48,266

38,631

25%

EBITDA (1)

24,596

20,752

19%

76,195

59,800

27%

Cashflow (1) (5)

24,184

18,899

28%

78,078

36,456

114%

Net Income

11,752

9,109

29%

39,996

26,614

50%

Per Share Data (Diluted) (2)

EBITDA (1)

$

0.70

$

0.61

15%

$

2.19

$

1.76

24%

Cashflow (1) (5)

$

0.69

$

0.55

25%

$

2.24

$

1.07

109%

Net Earnings

$

0.37

$

0.29

28%

$

1.24

$

0.86

44%

Sept. 30

Dec. 31

2014
(unaudited

)

2013
(audited

)

%
Change

Financial Position

Total Assets

$

574,119

$

518,782

11%

Long-Term Debt, Convertible Debentures and Obligations Under Finance Leases (excluding current portion)

68,732

67,221

2%

Working Capital (3)

97,624

69,651

40%

Net Debt (4)

Nil

Nil

-

Shareholders' Equity

372,913

340,612

9%

Shares Outstanding (000's)

Basic

31,174

31,176

-

Diluted (2)

34,744

34,838

-

Notes 1 through 5 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 nine months ended September 30, 2014 reflect a seasonal increase in field activity levels within the Contract Drilling Services and Rentals and Transportation Services divisions coming out of spring breakup. Continued growth within the Compression and Process Services division was tempered by the sale of approximately 23,900 horsepower of rental compression during the first half of 2014 upon the exercise of purchase options by customers.

Total Energy's Contract Drilling Services division achieved 55% utilization during the third quarter of 2014, recording 863 operating days (spud to release) with a fleet of 17 rigs, compared to 798 operating days, or 54% utilization, during the third quarter of 2013 with a fleet of 16 rigs. Rig 17 was completed and commenced operations in late August of 2014. Revenue per operating day increased 5% for the third quarter of 2014 relative to the prior year comparable period due primarily to the mix of equipment operating. Despite operating earnings margins for the third quarter of 2014 being negatively impacted by significant non-routine rig repair costs, year to date operating earnings margins in the Contract Drilling Services division have increased by 13% as compared to 2013. The Rentals and Transportation Services division achieved a utilization rate on major rental equipment of 40% during the third quarter of 2014, which was consistent with the third quarter of 2013. Divisional revenue per utilized rental piece increased 17% for the third quarter of 2014 compared to the same period in 2013, due primarily to the mix of equipment utilized. Revenues in the Compression and Process Services division increased 26% to $61.4 million for the three months ended September 30, 2014 compared to $48.8 million for the same period in 2013. This division exited the third quarter of 2014 with a $78.6 million backlog of fabrication sales orders as compared to $57.6 million at September 30, 2013. Excluded from the September 30, 2014 sales backlog is approximately $11.5 million (10,900 horsepower) of compression equipment that was sold during the third quarter but converted to rentals subsequent to September 30, 2014. At September 30, 2014, approximately 35,500 horsepower of compression equipment was on rent compared to 35,700 horsepower on rent at September 30, 2013. The gas compression rental fleet operated at an average utilization rate of 86% for the third quarter of 2014 as compared to 85% during the same period in 2013.

During the third quarter, Total Energy declared a quarterly dividend of $0.06 per share to shareholders of record on September 30, 2014. This dividend was paid on October 31, 2014. 268,900 common shares were purchased under the Company's normal course issuer bid during the three months ended September 30, 2014 at an average price of $21.15 per share (including commissions).

Outlook

While activity levels in Western Canada during the third quarter of 2014 were generally higher than the third quarter of 2013, recent declines in global oil prices and associated market volatility give rise to uncertainty as to oil and gas producers' future capital spending plans. In this uncertain environment, Total Energy is focused on completing its 2014 capital expenditure program and efficiently managing its operations during the upcoming seasonally active winter season.

Construction of the Company's 18th rig, a 4,200 meter (vertical depth rating) AC electric telescopic double with a top drive, is on time and on budget and such rig is expected to be completed and commence operations during the first quarter of 2015. There is significant customer interest in this rig and discussions are underway in regards to contracting the rig upon completion.

Well completion activity levels in Western Canada increased significantly during the third quarter and have carried on into the fourth quarter. The Rentals and Transportation Services division is focused on completing its 2014 capital equipment build program and increasing its equipment utilization as the industry enters the seasonally busy winter drilling season.

Demand for compression and process equipment remains strong. To accommodate increased demand for natural gas compression equipment rentals, including the recent conversion of 10,900 horsepower of compression sales to rentals, Total Energy has increased its 2014 capital budget by $5.0 million to $93.1 million. This increase will bring the Company's 2014 capital budget for compression rental fleet expansion to $32.9 million, which includes $7.9 million carried forward from 2013. Offsetting this capital budget increase has been the receipt of $31.5 million from the sale of property, plant and equipment during the first nine months of 2014, a significant portion of which was received upon the sale of approximately 28,160 horsepower of compression rental equipment upon the exercise of purchase options by customers.

To September 30, 2014, $56.2 million of 2014 capital expenditures had been made, with the remaining approximate $36.9 million expected to be expended by the first quarter of 2015. With no significant capital expenditure commitments beyond its 2014 capital budget, Total Energy will continue to evaluate market conditions with a view to pursuing opportunities that meet the Company's investment expectations.

Total Energy's financial condition remains solid with a long-term debt (including convertible debentures) to long-term debt plus equity ratio of 0.17 to 1.0, $97.6 million of positive working capital and no net debt as at September 30, 2014. 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 third 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 (800) 766-6630 or (416) 340-8530. 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 November 20, 2014 by dialing (800) 408-3053 (passcode 6885693).

Selected Financial Information

Selected financial information relating to the three and nine month periods ended September 30, 2014 and 2013 is attached to this news release. This information should be read in conjunction with the condensed unaudited interim 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 third quarter report.

Condensed Interim Consolidated Statements of Financial Position

(in thousands of Canadian dollars)

September 30,

December 31,

2014

2013

(unaudited)

(audited)

Assets

Current assets:

Cash and cash equivalents

$

19,750

$

3,210

Accounts receivable

97,800

78,130

Inventory

44,920

38,858

Income taxes receivable

-

2,402

Prepaid expenses and deposits

7,454

5,921

169,924

128,521

Property, plant and equipment

392,508

382,347

Other assets

7,634

3,861

Goodwill

4,053

4,053

$

574,119

$

518,782

Liabilities & Shareholders' Equity

Current liabilities:

Accounts payable and accrued liabilities

$

50,658

$

46,224

Deferred revenue

9,638

8,710

Income taxes payable

7,863

-

Dividends payable

1,870

1,559

Current portion of obligations under finance leases

2,271

2,377

72,300

58,870

Obligations under finance leases

2,871

2,775

Convertible debentures

65,861

64,446

Deferred tax liability

60,174

52,079

Shareholders' equity:

Share capital

89,100

83,243

Contributed surplus

6,547

6,677

Equity portion of convertible debenture

4,601

4,601

Retained earnings

272,665

246,091

372,913

340,612

$

574,119

$

518,782

Condensed Interim Consolidated Statements of Comprehensive Income

(in thousands of Canadian dollars except per share amounts)

Three months ended
September 30

Nine months ended
September 30

2014

2013

2014

2013

(unaudited)

(unaudited)

(unaudited)

(unaudited)

Revenue

$

108,233

$

89,060

$

307,040

$

252,639

Cost of services

76,167

60,573

211,473

169,076

Selling, general and administration

7,991

7,188

23,967

22,358

Share-based compensation

176

643

1,524

2,556

Depreciation

7,637

6,958

21,810

20,018

Results from operating activities

16,262

13,698

48,266

38,631

Gain on sale of property, plant and equipment

697

96

6,119

1,151

Finance income

110

107

2,188

342

Finance costs

(1,379

)

(1,501

)

(4,423

)

(4,451

)

Net income before income taxes

15,690

12,400

52,150

35,673

Current income tax expense

2,766

1,954

4,059

5,241

Deferred income tax (recovery) expense

1,172

1,337

8,095

3,818

Total income tax expense

3,938

3,291

12,154

9,059

Net income and total comprehensive income for the period

$

11,752

$

9,109

$

39,996

$

26,614

Earnings per share

Basic earnings per share

$

0.38

$

0.30

$

1.28

$

0.87

Diluted earnings per share

$

0.37

$

0.29

$

1.24

$

0.86

Condensed Interim Consolidated Statements of Cash Flows

(in thousands of Canadian dollars)

Three months ended
September 30

Nine months ended
September 30

2014

2013

2014

2013

Cash provided by (used in):

Operations:

Net income for the period

$

11,752

$

9,109

$

39,996

$

26,614

Add (deduct) items not affecting cash:

Depreciation

7,637

6,958

21,810

20,018

Share-based compensation

176

643

1,524

2,556

Gain on sale of property, plant and equipment

(697

)

(96

)

(6,119

)

(1,151

)

Finance income

9

(107

)

(1,916

)

(342

)

Finance costs

1,379

1,501

4,423

4,451

Current income tax expense

2,766

1,954

4,059

5,241

Deferred income tax (recovery) expense

1,172

1,337

8,095

3,818

Income taxes recovered (paid)

(10

)

(2,400

)

6,206

(24,749

)

24,184

18,899

78,078

36,456

Changes in non-cash working capital items:

Accounts receivable

(28,473

)

(17,353

)

(19,670

)

(7,712

)

Inventory

(3,616

)

(1,553

)

(6,062

)

1,517

Prepaid expenses and deposits

1,466

(1,385

)

(1,608

)

(3,336

)

Accounts payable and accrued liabilities

7,721

6,674

7,683

6,435

Deferred revenue

1,174

(1,402

)

928

(1,277

)

2,456

3,880

59,349

32,083

Investments:

Purchase of property, plant and equipment

(21,772

)

(19,400

)

(56,200

)

(36,472

)

Acquisition of business

-

-

-

(16,954

)

Proceeds on sale of other assets

733

-

1,022

-

Purchase of other assets

-

-

(2,879

)

-

Proceeds on disposal of property, plant and equipment

4,042

841

31,509

4,351

Changes in non-cash working capital items

(3,464

)

5,103

(1,188

)

880

(20,461

)

(13,456

)

(27,736

)

(48,195

)

Financing:

Repayment of obligations under finance leases

(707

)

(795

)

(2,437

)

(2,279

)

Dividends to shareholders

(1,879

)

(1,530

)

(5,314

)

(4,598

)

Issuance of common shares

1,649

3,277

5,791

4,705

Repurchase of common shares

(5,483

)

(1,427

)

(9,106

)

(5,420

)

Interest paid

(1,884

)

(1,994

)

(4,007

)

(4,157

)

(8,304

)

(2,469

)

(15,073

)

(11,749

)

Change in cash and cash equivalents

(26,309

)

(12,045

)

16,540

(27,861

)

Cash and cash equivalents, beginning of period

46,059

34,236

3,210

50,052

Cash and cash equivalents, end of period

$

19,750

$

22,191

$

19,750

$

22,191

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 Compression and Process Services, which includes the fabrication, sale, rental and servicing of natural gas compression and process equipment.

As at and for the

Contract

Rentals and

Compression

three months ended

Drilling

Transportation

and Process

September 30, 2014

Services

Services

Services

Other(1)

Total

Revenue

$

16,758

$

30,088

$

61,387

$

-

$

108,233

Cost of services

11,456

14,892

49,819

-

76,167

Selling, general and administration

872

3,401

2,469

1,249

7,991

Share-based compensation

-

-

-

176

176

Depreciation

1,690

3,945

1,993

9

7,637

Results from operating activities

2,740

7,850

7,106

(1,434

)

16,262

Gain on sale of property, plant and equipment

-

105

592

-

697

Finance income

-

-

-

110

110

Finance costs

(206

)

(531

)

(260

)

(382

)

(1,379

)

Net income (loss) before income taxes

2,534

7,424

7,438

(1,706

)

15,690

Goodwill

-

2,514

1,539

-

4,053

Total assets

121,325

245,996

184,426

22,372

574,119

Total liabilities

24,198

51,386

48,000

77,622

201,206

Capital expenditures

$

4,791

$

7,162

$

9,801

$

18

$

21,772

As at and for the

Contract

Rentals and

Compression

three months ended

Drilling

Transportation

and Process

September 30, 2013

Services

Services

Services

Other(1

)

Total

Revenue

$

14,772

$

25,508

$

48,780

$

-

$

89,060

Cost of services

9,460

12,248

38,865

-

60,573

Selling, general and administration

841

3,250

2,048

1,049

7,188

Share-based compensation

-

-

-

643

643

Depreciation

1,597

3,722

1,630

9

6,958

Results from operating activities

2,874

6,288

6,237

(1,701

)

13,698

Gain on sale of property, plant and equipment

-

(19

)

115

-

96

Finance income

-

-

-

107

107

Finance costs

(204

)

(552

)

(241

)

(504

)

(1,501

)

Net income (loss) before income taxes

2,670

5,717

6,111

(2,098

)

12,400

Goodwill

-

2,514

1,539

-

4,053

Total assets

102,233

224,203

153,071

14,855

494,362

Total liabilities

19,583

43,570

32,388

68,920

164,461

Capital expenditures

$

2,816

$

5,255

$

9,855

$

1,474

$

19,400

As at and for the

Contract

Rentals and

Compression

nine months ended

Drilling

Transportation

and Process

September 30, 2014

Services

Services

Services

Other(1

)

Total

Revenue

$

46,124

$

88,555

$

172,361

$

-

$

307,040

Cost of services

29,290

45,647

136,536

-

211,473

Selling, general and administration

2,631

10,360

7,421

3,555

23,967

Share-based compensation

-

-

-

1,524

1,524

Depreciation

4,283

11,624

5,889

14

21,810

Results from operating activities

9,920

20,924

22,515

(5,093

)

48,266

Gain on sale of property, plant and equipment

22

197

5,827

73

6,119

Finance income

-

-

-

2,188

2,188

Finance costs

(613

)

(1,578

)

(778

)

(1,454

)

(4,423

)

Net income (loss) before income taxes

9,329

19,543

27,564

(4,286

)

52,150

Goodwill

-

2,514

1,539

-

4,053

Total assets

121,325

245,996

184,426

22,372

574,119

Total liabilities

24,198

51,386

48,000

77,622

201,206

Capital expenditures

$

18,283

$

16,016

$

21,876

$

25

$

56,200

As at and for the

Contract

Rentals and

Compression

nine months ended

Drilling

Transportation

and Process

September 30, 2013

Services

Services

Services

Other(1

)

Total

Revenue

$

37,687

$

79,225

$

135,727

$

-

$

252,639

Cost of services

24,158

37,933

106,985

-

169,076

Selling, general and administration

2,409

10,048

6,331

3,570

22,358

Share-based compensation

-

-

-

2,556

2,556

Depreciation

3,907

11,414

4,668

29

20,018

Results from operating activities

7,213

19,830

17,743

(6,155

)

38,631

Gain (loss) on sale of property, plant and equipment

(22

)

216

957

-

1,151

Finance income

-

-

53

289

342

Finance costs

(608

)

(1,648

)

(711

)

(1,484

)

(4,451

)

Net income before income taxes

6,583

18,398

18,042

(7,350

)

35,673

Goodwill

-

2,514

1,539

-

4,053

Total assets

102,233

224,203

153,071

14,855

494,362

Total liabilities

19,583

43,570

32,388

68,920

164,461

Capital expenditures (2)

$

4,547

$

12,657

$

31,248

$

2,020

$

50,472

(1)

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

(2)

Includes January 1, 2013 acquisition of a process equipment fabrication business included in Compression and Process Services segment.

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. EBITDA means earnings before interest, taxes, depreciation and amortization and is equal to net income before income taxes plus finance costs 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 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.

  1. 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.

  1. Working capital equals current assets minus current liabilities.

  1. Net Debt equals long-term debt plus obligations under finance leases plus convertible debentures plus current liabilities minus current assets.

  1. Cashflow for the nine months ended September 30, 2013 is net of $15.3 million of income taxes paid during the period that relates to 2012 taxable income as a result of the Company not having been required to make income tax installment payments during 2012.

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.

Advertisement

Recommended Stories