Total Energy Services Inc. Announces 2013 Results

Marketwired

CALGARY, ALBERTA--(Marketwired - Mar 10, 2014) - Total Energy Services Inc. ("Total Energy" or the "Company") (TOT.TO) announces its consolidated financial results for the three and twelve-month periods ending December 31, 2013.

Financial Highlights
($000's except per share data)
Three Months Ended Dec. 31 Twelve Months Ended Dec. 31
(unaudited) (audited)
2013 2012 % Change 2013 2012 % Change
Revenue $ 86,940 $ 78,404 11 % $ 339,579 $ 307,702 10 %
Operating Earnings (1) 16,149 14,806 9 % 54,780 65,221 (16 ) %
EBITDA (1) 23,152 21,743 6 % 82,952 91,076 (9 ) %
Cashflow (1)(5) 23,990 22,110 9 % 60,446 91,949 (34 ) %
Net Income 10,694 10,525 2 % 37,308 47,692 (22 ) %
Per Share Data (Diluted) (2)
EBITDA (1) $ 0.67 $ 0.63 6 % $ 2.43 $ 2.62 (7 ) %
Cashflow (1) 0.69 0.64 8 % 1.77 2.65 (33 ) %
Net Earnings 0.34 0.34 nil 1.20 1.49 (19 ) %
Dec. 31 Dec. 31
2013 (audited) 2012 (audited) % Change
Financial Position
Total Assets $ 518,782 $ 476,591 9 %
Long-Term Debt, Convertible Debentures and Obligations Under Finance Leases 69,598 67,937 2 %
Working Capital (3) 73,512 90,708 (19 ) %
Net Debt (4) nil nil nil
Shareholders' Equity 340,612 306,069 11 %
Shares Outstanding (000's)
Basic 31,176 30,600 2 %
Diluted (2) 34,838 34,300 2 %
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 twelve months ended December 31, 2013 reflect continued growth in the Company's Compression and Process Services division and increased drilling activity during the fourth quarter that positively impacted the Contract Drilling Services division. Moderate well completion and work over activity in Western Canada combined with lower pricing and the inability to pass on increased operating costs due to competitive market conditions weighed upon the Rentals and Transportation Services division's performance during 2013.

Total Energy's Contract Drilling Services division achieved 60% utilization during the fourth quarter of 2013, recording 881 operating days (spud to release) with a fleet of 16 rigs, compared to 603 operating days, or 42% utilization, during the fourth quarter of 2012 with a fleet of 15 rigs. Revenue per operating day decreased 2% for the fourth quarter of 2013 relative to the prior year comparable period due to lower pricing and the mix of equipment operating. For the twelve months ended December 31, 2013, the Contract Drilling Services division achieved 2,814 operating days (48% utilization), compared to 2,460 operating days (44% utilization) for 2012. The Rentals and Transportation Services division achieved a utilization rate on major rental equipment of 43% during the fourth quarter of 2013 as compared to a 41% utilization rate during the fourth quarter of 2012. For 2013, rental equipment utilization averaged 38% as compared to 47% for 2012. The Rentals and Transportation Services division exited 2013 with approximately 9,700 pieces of rental equipment and 100 heavy trucks as compared to 9,800 rental pieces and 106 heavy trucks at the end of 2012. The Compression and Process Services division generated revenues of $39.0 million for the three months ended December 31, 2013 compared to $33.9 million for the same period in 2012, an increase of 15%. For 2013, revenues increased by 44% to $174.7 million compared to $121.3 million in 2012. The Compression and Process Services division exited 2013 with a $60.1 million backlog of fabrication sales orders as compared to $34.5 million at December 31, 2012. Included in the December 31, 2013 fabrication sales backlog is $47.7 million of gas compression equipment orders and $12.4 million of process equipment orders. At December 31, 2013, approximately 43,900 horsepower of compression equipment was on rent compared to 31,700 horsepower on rent at December 31, 2012. The gas compression rental fleet operated at an average utilization rate of 87% and 86% for the three and twelve month periods ended December 31, 2013, respectively, as compared to 87% and 84% for the same periods in 2012.

During the fourth quarter, Total Energy declared a quarterly dividend of $0.05 per share to shareholders of record on December 31, 2013. This dividend was paid on January 31, 2014.

Outlook

Western Canadian drilling activity strengthened during the fourth quarter of 2013 and continues to remain robust during the first quarter of 2014. Continued strength of oil prices, recent near term strength in natural gas prices and a lower Canadian dollar relative to the United States dollar provide support for relatively high Canadian drilling activity levels. Current expectations are that well completion and work over activity will increase as winter drilling programs are completed.

In February 2014, the Company's natural gas compression business, Bidell Gas Compression, moved into a newly constructed 41,000 sq. ft. fabrication facility which is located immediately adjacent to Bidell's main 58,000 sq. ft. fabrication facility in southeast Calgary. Bidell will be vacating a leased 17,000 sq. ft. facility during the second quarter, resulting in approximately 123,000 sq. ft. of fabrication space of which 80% is owned. Going forward, Bidell's fabrication capacity is expected to increase by at least 20%.

During the second quarter of 2014, Total Energy's Contract Drilling Services division, Chinook Drilling, will complete the construction of a 4,200 meter (vertical depth rating) AC electric telescopic double drilling rig complete with top drive and the upgrade of an existing conventional single. The completion of this capital program is on time and on budget and will increase Chinook's rig fleet to 17 rigs, of which 15 are telescopic doubles with vertical depth ratings of 3,000 meters or greater and two rigs are extended reach singles with integrated top drives and vertical depth ratings of 1,800 meters. Chinook has an owned top drive fleet of 10 units.

As part of the Company's previously announced 2013 capital expenditure program, the Rental and Transportation Services division disposed of, replaced and upgraded a significant number of pieces in its rental equipment and heavy truck fleets. The net impact of this capital program was a slight reduction in size of the rental equipment and heavy truck fleets during the fourth quarter of 2013. Subsequent to December 31, 2013, the rental equipment fleet has increased to 9,900 pieces and the heavy truck fleet to 109 units with the delivery of new equipment during the first quarter of 2014.

Total Energy's financial condition remains strong with a long-term debt (including convertible debentures) to long-term debt plus equity ratio of 0.17 to 1.0, $73.5 million of positive working capital and no net debt as at December 31, 2013. 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) 226-1792 or (416) 340-2216. 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 17, 2014 by dialing (800) 408-3053 (passcode 9395642).

Dividend increase

Total Energy's Board of Directors has determined to increase the Company's quarterly dividend by $0.01 per share to $0.06 per common share beginning for the quarter ending March 31, 2014. This equates to an annual dividend of $0.24 per common share. All dividends declared and paid by Total Energy are eligible dividends for Canadian tax purposes unless otherwise indicated.

Total Energy's dividend policy is consistent with its primary objective of building sustainable shareholder value, as measured on a diluted per share basis. Total Energy's dividend policy recognizes the cyclical nature of the Canadian energy services industry and is intended not to impair the Company's ability to continue to finance substantial future growth on reasonable terms and without unnecessary dilution to existing shareholders, particularly during periods when access to debt or equity markets may be restricted or impaired.

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 Thursday, May 22, 2014 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, 2013 and 2012 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 2013 annual report.

Consolidated Statements of Financial Position
(in thousands of Canadian dollars)
December 31, December 31,
2013 2012
(audited) (audited)
Assets
Current assets:
Cash and cash equivalents $ 3,210 $ 50,052
Accounts receivable 78,130 63,511
Inventory 38,858 33,240
Income taxes receivable 2,402 -
Prepaid expenses and deposits 9,782 2,547
132,382 149,350
Property, plant and equipment 382,347 323,188
Goodwill 4,053 4,053
$ 518,782 $ 476,591
Liabilities & Shareholders' Equity
Current liabilities:
Accounts payable and accrued liabilities $ 46,224 $ 32,523
Deferred revenue 8,710 6,971
Dividends payable 1,559 1,530
Income taxes payable - 15,098
Current portion of obligations under finance leases 2,377 2,520
58,870 58,642
Obligations under finance leases 2,775 2,723
Convertible debentures 64,446 62,694
Deferred tax liability 52,079 46,463
Shareholders' equity:
Share capital 83,243 76,890
Contributed surplus 6,677 5,160
Equity portion of convertible debenture 4,601 4,601
Retained earnings 246,091 219,418
340,612 306,069
$ 518,782 $ 476,591
Consolidated Statements of Comprehensive Income
(in thousands of Canadian dollars except per share amounts)
Three months ended Year ended
December 31, December 31,
2013 2012 2013 2012
(unaudited) (unaudited) (audited) (audited)
Revenue $ 86,940 $ 78,404 $ 339,579 $ 307,702
Expenses:
Cost of services 55,882 49,485 224,958 187,311
Selling, general and administration 7,058 6,809 29,416 28,403
Share-based compensation 680 1,042 3,236 3,065
Depreciation 7,171 6,262 27,189 23,702
Results from operating activities 16,149 14,806 54,780 65,221
Gain (loss) on disposal of property, plant and equipment (168 ) 675 983 2,153
Finance income 43 248 385 878
Finance costs (1,514 ) (1,489 ) (5,965 ) (5,797 )
Net income before income taxes 14,510 14,240 50,183 62,455
Income tax expense (recovery)
Current 2,018 5,730 7,259 15,255
Deferred 1,798 (2,015 ) 5,616 (492 )
Total income tax expense 3,816 3,715 12,875 14,763
Net income and total comprehensive income for the period 10,694 10,525 37,308 47,692
Retained earnings, beginning of period 236,955 211,558 219,418 190,331
Dividends (1,558 ) (1,530 ) (6,181 ) (6,180 )
Repurchase and cancellation of common shares in excess of stated common share capital - (1,135 ) (4,454 ) (12,425 )
Retained earnings, end of period $ 246,091 $ 219,418 $ 246,091 $ 219,418
Earnings per share :
Basic $ 0.34 $ 0.34 $ 1.21 $ 1.54
Diluted $ 0.34 $ 0.34 $ 1.20 $ 1.49
Consolidated Statements of Cash Flows
(in thousands of Canadian dollars)
Three months ended Year ended
December 31, December 31,
2013 2012 2013 2012
(unaudited) (unaudited) (audited) (audited)
Cash provided by (used in):
Operations:
Net Income for the period $ 10,694 $ 10,525 $ 37,308 $ 47,692
Add (deduct) items not affecting cash:
Depreciation 7,171 6,262 27,189 23,702
Share-based compensation 680 1,042 3,236 3,065
Gain (loss) on disposal of property, plant and equipment 168 (675 ) (983 ) (2,153 )
Finance income (43 ) (248 ) (385 ) (878 )
Finance costs 1,514 1,489 5,965 5,797
Current income tax expense 2,018 5,730 7,259 15,255
Deferred income tax expense (recovery) 1,798 (2,015 ) 5,616 (492 )
Income taxes paid (10 ) - (24,759 ) (39 )
23,990 22,110 60,446 91,949
Changes in non-cash working capital items:
Accounts receivable (6,907 ) (3,690 ) (14,619 ) 31,045
Inventory (4,181 ) 1,614 (2,664 ) 3,907
Prepaid expenses and deposits (38 ) 206 (3,374 ) (752 )
Accounts payable and accrued liabilities 6,950 2,055 13,385 (5,551 )
Deferred revenue 3,016 3,363 1,739 3,907
22,830 25,658 54,913 124,505
Investments:
Purchase of property, plant and equipment (38,557 ) (29,074 ) (75,029 ) (89,365 )
Acquisition of business - - (16,954 ) -
Proceeds on disposal of property, plant and equipment 2,223 2,766 6,574 8,973
Changes in non-cash working capital items (4,040 ) (703 ) (3,160 ) (2,603 )
(40,374 ) (27,011 ) (88,569 ) (82,995 )
Financing:
Repayment of obligations under finance leases (722 ) (688 ) (3,001 ) (3,188 )
Payment of dividends (1,554 ) (1,535 ) (6,152 ) (5,905 )
Issuance of common shares 894 1 5,599 1,198
Repurchase of common shares 1 (1,393 ) (5,419 ) (15,027 )
Interest paid (56 ) (374 ) (4,213 ) (4,194 )
(1,437 ) (3,989 ) (13,186 ) (27,116 )
Change in cash and cash equivalents (18,981 ) (5,342 ) (46,842 ) 14,394
Cash and cash equivalents, beginning of period 22,191 55,394 50,052 35,658
Cash and cash equivalents, end of period $ 3,210 $ 50,052 $ 3,210 $ 50,052

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 three months ended December 31, 2013 (unaudited)
Contract Rentals and Compression
Drilling Transportation and Process Other
Services Services Services (1) Total
Revenue $ 18,266 $ 29,683 $ 38,991 $ - $ 86,940
Cost of services 10,204 15,786 29,892 - 55,882
Selling, general and administration 922 3,482 1,904 750 7,058
Share-based compensation - - - 680 680
Depreciation 1,644 3,742 1,777 8 7,171
Results from operating activities 5,496 6,673 5,418 (1,438 ) 16,149
Gain/(loss) on sale of PP&E 10 (185 ) - 7 (168 )
Finance income - - - 43 43
Finance costs (204 ) (554 ) (241 ) (515 ) (1,514 )
Net income before income taxes 5,302 5,934 5,177 (1,903 ) 14,510
Goodwill - 2,514 1,539 - 4,053
Total assets 107,206 234,343 161,342 15,891 518,782
Total Liabilities 20,057 49,700 37,974 70,439 178,170
Capital expenditures $ 4,854 $ 14,624 $ 16,618 $ 2,461 $ 38,557
As at and for the three months ended December 31, 2012 (unaudited)
Contract Rentals and Compression
Drilling Transportation and Process Other
Services Services Services (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/(loss) 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 year ended December 31, 2013 (audited)
Contract Rentals and Compression
Drilling Transportation And Process Other
Services Services Services (1) Total
Revenue $ 55,953 $ 108,908 $ 174,718 $ - $ 339,579
Cost of services 34,362 53,719 136,877 - 224,958
Selling, general and administration 3,331 13,530 8,235 4,320 29,416
Share-based compensation - - - 3,236 3,236
Depreciation 5,551 15,156 6,445 37 27,189
Results from operating activities 12,709 26,503 23,161 (7,593 ) 54,780
Gain/(loss) on sale of property, plant and equipment (12 ) 31 957 7 983
Finance income - - 53 332 385
Finance costs (812 ) (2,202 ) (952 ) (1,999 ) (5,965 )
Net income before income taxes 11,885 24,332 23,219 (9,253 ) 50,183
Goodwill - 2,514 1,539 - 4,053
Total assets 107,206 234,343 161,342 15,891 518,782
Total liabilities 20,057 49,700 37,974 70,439 178,170
Capital expenditures (2) $ 9,401 $ 27,281 $ 47,866 $ 4,481 $ 89,029
As at and for the year ended December 31, 2012 (audited)
Contract Rentals and Compression
Drilling Transportation and Process Other
Services Services Services (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
(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.

For further information, please visit our website at www.totalenergy.ca.

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.
(5) Cashflow for the year ended December 31, 2013 is net of $15.3 million of income taxes paid during the year 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.

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

Rates

View Comments (0)