Total Energy Services Inc. Announces Q2 2010 Results
AUG 11, 2010 - 11:17 ET
CALGARY, ALBERTA--(Marketwire - Aug. 11, 2010) - Total Energy Services Inc. (TSX:TOT) ("Total Energy" or the "Company"), announces its consolidated financial results for the three and six-month periods ending June 30, 2010.
Financial Highlights
($000's except per share data)
Three Months Ended June 30 Six Months Ended June 30
(Unaudited) (Unaudited)
%
2010 2009 % Change 2010 2009 Change
--------------------------------------------------------------
Revenue $ 35,875 $ 14,722 144% $ 93,687 $59,207 58%
Operating
Earnings
(loss) (1) 845 (2,264) n/m 14,635 7,997 83%
EBITDA (1) 6,271 92 6,716% 26,516 14,550 82%
Cashflow (1) 5,657 3,534 60% 24,971 15,972 56%
Net Earnings 809 (1,236) n/m 13,854 7,324 89%
Per Share Data
(Diluted)
EBITDA (1) $ 0.20 $ 0.00 n/m $ 0.85 $ 0.50 70%
Cashflow (1) 0.18 0.12 50% 0.80 0.55 45%
Net Earnings 0.03 (0.04) n/m 0.45 0.25 80%
June 30 Dec.31
2010 2009
(Unaudited) (Audited) % Change
Financial
Position
Total Assets $ 301,102 $ 234,774 28%
Long-Term Debt
and
Obligations
Under Capital
Leases 45,262 35,713 27%
Working
Capital (2) 19,780 29,493 (33)%
Net Debt (3) 25,482 6,220 310%
Shareholders'
Equity 181,037 155,629 16%
Shares
Outstanding
(000's)
Basic 31,027 29,176 6%
Diluted 31,743 29,176 9%
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, 2010 reflect improving industry conditions within the seasonally weak period in Western Canada and the impact of the acquisition of DC Energy Services LP ("DC Energy") on January 15, 2010.
Total Energy's Contract Drilling Services division achieved 34% utilization during the second quarter of 2010, recording 427 operating days (spud to release) with a fleet of 14 rigs, compared to 56 operating days, or 5% utilization during the second quarter of 2009. The Rentals and Transportation Services division achieved a utilization rate on major rental equipment of 39% during the second quarter of 2010 as compared to a 23% utilization rate during the second quarter of 2009. The Gas Compression Services division generated revenues of $12.8 million for the three months ended June 30, 2010 compared to $6.7 for the second quarter of 2009. At June 30, 2010 the Gas Compression Services division had a fabrication backlog of approximately $13.7 million compared to a backlog of $8.9 million as at June 30, 2009. At June 30, 2010 18,700 horsepower of compression equipment was on rent compared to 18,000 horsepower on rent at June 30, 2009. The gas compression rental fleet operated at an average utilization rate of 77% during the first six months of 2010.
During the second quarter, Total Energy declared a quarterly dividend of $0.03 per share to shareholders of record on June 30, 2010. This dividend was paid on July 30, 2010.
OUTLOOK
Industry activity levels during the second quarter were significantly improved as compared to the prior year despite prolonged wet weather conditions throughout many parts of Western Canada. With improving weather conditions, drilling and completion activities have continued to improve, driven primarily by the application of horizontal drilling and multi-stage fracturing technologies to conventional oil reservoirs and unconventional oil and natural gas resource development.
Total Energy has increased its 2010 capital expenditure budget by $6.7 million to $33.8 million. Included in this increase is $3.0 million for the addition of rental equipment and $1.4 million for the purchase of real estate to displace leased premises in the Rental and Transportation Services division and $2.3 million of additional equipment, including a top drive, for the Contract Drilling Services division.
The integration of DC Energy within Total Energy's Rentals and Transportation Services division continued during the second quarter. Cost synergies realized to date on an annualized basis are approximately $4.8 million, including expected general and administrative cost synergies following the consolidation of accounting and administration functions that occurred in June. While there remains additional cost synergies to be realized upon expiry of certain real estate leases that were assumed on the purchase of DC Energy, the integration of DC Energy is substantially complete.
Total Energy's Gas Compression Services division continues to execute its growth strategy, with the immediate focus on the expansion of its Western Canadian parts and service business. Service locations have recently been opened in Fort St. John, British Columbia, and Lloydminster, Saskatchewan and its operations in Grande Prairie, Alberta have been expanded. A major parts and service center will be opened in Red Deer, Alberta during the third quarter and additional branch locations are expected to be opened over the next several quarters in response to specific market opportunities and as needed to support its growing fabrication and rental business.
Total Energy's balance sheet remains strong with a long-term debt (including current portion) to long-term debt plus equity ratio of 0.24 to 1.0 and $25.5 million of net debt as at June 30, 2010. As at June 30, 2010, $32.5 million was available under the Company's credit facilities.
CONFERENCE CALL
At 2:30 p.m. MST today, Total Energy will conduct a conference call to discuss its second 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. If you wish to participate, call (877) 240-9772. Those who are unable to listen to the call live may listen to a recording of it by calling (800) 408-3053 (passcode 5804287). The recording will be available until August 18, 2010.
SELECTED FINANCIAL INFORMATION
Selected financial information relating to the three and six-month periods ended June 30, 2010 and 2009 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 Corporation's second quarter report.
Consolidated Balance Sheets June 30, December 31,
(in thousands of Canadian dollars) 2010 2009
----------------------------------------------------------------------------
(unaudited)
Assets
Current assets:
Cash and cash equivalents $ 2,101 $ -
Accounts receivable 31,804 22,104
Inventory 32,874 28,408
Income taxes receivable 2,675 2,848
Prepaid expenses and deposits 1,627 2,309
----------------------------
71,081 55,669
Property, plant and equipment 225,968 175,052
Goodwill 4,053 4,053
----------------------------
$ 301,102 $ 234,774
----------------------------
----------------------------
Liabilities & Shareholders' Equity
Current liabilities:
Accounts payable and accrued liabilities 32,777 15,976
Dividends payable 931 875
Current portion of long-term debt 15,000 8,737
Current portion of obligations under capital
leases 2,593 588
----------------------------
51,301 26,176
Long-term debt 42,500 34,950
Obligations under capital leases 2,762 763
Future income taxes 14,263 5,681
Deferred tax credit 9,239 11,575
Shareholders' equity:
Share capital 73,650 60,777
Contributed surplus 1,717 1,174
Retained earnings 105,670 93,678
----------------------------
181,037 155,629
----------------------------
$ 301,102 $ 234,774
----------------------------
----------------------------
Supplemental Information:
Number of common shares outstanding (000's) -
Basic 31,027 29,176
Number of common shares outstanding (000's) -
Diluted 31,743 29,176
Consolidated Statements of Earnings and Retained Earnings
(in thousands of Canadian dollars except per share amounts)
Three months ended Six months ended
June 30 June 30
2010 2009 2010 2009
----------------------------------------------------------------------------
(unaudited) (unaudited) (unaudited) (unaudited)
Revenue $ 35,875 $ 14,722 $ 93,687 $ 59,207
Expenses:
Operating 23,187 9,571 54,712 35,273
Selling, general
and administration 6,242 3,411 12,380 7,979
Share-based
compensation 292 758 614 758
Depreciation 4,568 2,913 9,770 6,458
Other interest 3 139 54 328
Interest on long-
term debt 738 194 1,522 414
--------------------------------------------------------
35,030 16,986 79,052 51,210
--------------------------------------------------------
Operating earnings
(loss) 845 (2,264) 14,635 7,997
Reorganization
costs - (890) - (890)
Gain on disposal of
equipment 117 - 535 243
--------------------------------------------------------
Earnings (loss)
before income taxes 962 (3,154) 15,170 7,350
Income tax expense
(recovery)
Current 48 (3,017) 48 (1,649)
Future 105 1,099 1,268 1,675
--------------------------------------------------------
153 (1,918) 1,316 26
--------------------------------------------------------
Net earnings (loss) 809 (1,236) 13,854 7,324
--------------------------------------------------------
Retained earnings,
beginning of period 105,792 93,282 93,678 87,349
Dividends (931) (1,862)
Trust distributions - (871) - (3,486)
Repurchase and
cancellation of
trust units
in excess of stated
trust unit capital - - - (12)
--------------------------------------------------------
Retained earnings,
end of period $ 105,670 $ 91,175 $ 105,670 $ 91,175
--------------------------------------------------------
--------------------------------------------------------
Earnings per share:
Basic $ 0.03 $ (0.04) $ 0.46 $ 0.25
Diluted $ 0.03 $ (0.04) $ 0.45 $ 0.25
Consolidated Statements of Cash Flows
(in thousands of Canadian dollars)
Three months ended Six months ended
June 30 June 30
----------------------------------------------------------------------------
2010 2009 2010 2009
----------------------------------------------------------------------------
(unaudited) (unaudited) (unaudited) (unaudited)
Cash provided by (used
in):
Operations:
Net earnings (loss) $ 809 $ (1,236) $ 13,854 $ 7,324
Add (deduct) items
not affecting cash:
Depreciation 4,568 2,913 9,770 6,458
Share based
compensation 292 758 614 758
Gain on disposal of
equipment (117) - (535) (243)
Future income taxes 105 1,099 1,268 1,675
--------------------------------------------------
5,657 3,534 24,971 15,972
Changes in non-cash
working capital items:
Accounts receivable 21,313 22,598 (9,700) 24,887
Inventory (5,370) 3,228 (3,700) 3,353
Income taxes
receivable 210 (2,224) 173 (2,224)
Prepaid expenses and
deposits 501 (565) 682 (662)
Accounts payable and
accrued liabilities (5,825) (6,529) 15,017 (11,567)
Income taxes payable - (1,035) - (2,336)
--------------------------------------------------
16,486 19,007 27,443 27,423
Investments:
Purchase of property,
plant and equipment (5,160) (6,880) (8,818) (10,896)
DC Energy Services LP
acquisition - - (31,714) -
Proceeds on disposal
of property, plant and
equipment 237 239 2,164 1,490
Transaction with
Biomerge Industries Ltd. - (3,639) - (3,639)
Changes in non-cash
working capital items 1,900 49 1,784 (4,670)
--------------------------------------------------
(3,023) (10,231) (36,584) (17,715)
Financing:
Advances of long-term
debt - 7,000 31,313 12,000
Repayments of
long-term debt (12,500) (2,326) (17,500) (4,503)
Repayment of
obligations under
capital leases (476) (192) (1,068) (313)
Dividends to
Shareholders (931) - (1,862) -
Dividends payable - - 56 -
Distributions to
Unitholders - (871) - (3,486)
Distributions payable - (872) - (872)
Issuance of common
shares - - 303 -
Repurchase of trust
units - - - (27)
Decrease in bank
indebtedness - (11,515) - (12,507)
--------------------------------------------------
(13,907) (8,776) 11,242 (9,708)
Change in cash (444) - 2,101 -
Cash, beginning of
period 2,545 - - -
--------------------------------------------------
Cash, end of period $ 2,101 $ - $ 2,101 $ -
--------------------------------------------------
--------------------------------------------------
Supplemental
information:
Interest paid $ 515 $ 333 $ 1,350 $ 818
Income taxes paid
(received) $ (162) $ 242 $ (162) $ 2,911
SEGMENTED INFORMATION
The Corporation 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 equipment.
As at and for the three months ended June 30, 2010 (unaudited)
Contract Rentals and Gas
Drilling Transportation Compression
Services Services Services Other (2) Total
----------------------------------------------------------------------------
Revenue $ 5,957 $ 17,089 $ 12,829 $ - $ 35,875
Operating
earnings
(loss) (1) (208) 784 1,392 (1,123) 845
Depreciation 934 3,175 452 7 4,568
Assets 72,830 164,331 60,286 3,655 301,102
Goodwill - 2,514 1,539 - 4,053
Capital
expenditures(3) 1,090 3,837 217 16 5,160
As at and for the three months ended June 30, 2009 (unaudited)
Contract Rentals and Gas
Drilling Transportation Compression
Services Services Services Other (2) Total
----------------------------------------------------------------------------
Revenue $ 869 $ 7,135 $ 6,718 $ - 14,722
Operating earnings
(loss) (1) (550) (591) 440 (1,563) (2,264)
Depreciation 171 2,352 383 7 2,913
Assets 66,211 100,902 55,718 3,964 226,795
Goodwill - 2,514 1,539 - 4,053
Capital
expenditures 1,438 201 5,241 - 6,880
As at and for the six months ended June 30, 2010 (unaudited)
Contract Rentals and Gas
Drilling Transportation Compression
Services Services Services Other (2) Total
----------------------------------------------------------------------------
Revenue $ 18,890 $ 52,819 $ 21,978 $ - 93,687
Operating
earnings (loss)(1) 1,282 13,648 2,084 (2,379) 14,635
Depreciation 2,709 6,169 878 14 9,770
Assets 72,830 164,331 60,286 3,655 301,102
Goodwill - 2,514 1,539 - 4,053
Capital
expenditures (3) 1,819 4,113 2,859 27 8,818
As at and for the six months ended June 30, 2009 (unaudited)
Contract Rentals and Gas
Drilling Transportation Compression
Services Services Services Other (2) Total
----------------------------------------------------------------------------
Revenue $ 7,885 $ 28,631 $ 22,691 $ - 59,207
Operating earnings
(loss) (1) 812 7,632 1,813 (2,260) 7,997
Depreciation 1,022 4,701 721 14 6,458
Assets 66,211 100,902 55,718 3,964 226,795
Goodwill - 2,514 1,539 - 4,053
Capital
expenditures 4,082 1,159 5,655 - 10,896
(1) Operating earnings (loss) are earnings before gain on disposal of
equipment and income taxes.
(2) Other includes the Company's corporate activities.
(3) Excludes the acquisition of DC Energy.
Total Energy Services Inc. is a growth oriented energy services corporation involved in contract drilling services, rentals and transportation services and natural gas compression equipment fabrication, sales, rental and service. The shares of Total Energy are listed and trade on the TSX under the symbol TOT.
Notes to Financial Highlights
(1) Operating earnings are earnings before reorganization costs, 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 Corporation'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 Corporation'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
FOR FURTHER INFORMATION PLEASE CONTACT:
Total Energy Services Inc.
Daniel Halyk
President & Chief Executive Officer
(403) 216-3921
or
Total Energy Services Inc.
Mark Kearl
Vice-President Finance and Chief Financial Officer
(403) 216-3920
This e-mail address is being protected from spambots. You need JavaScript enabled to view it
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