Total Energy Services Inc. Announces Q2 2018 results « TotalEnergy

Total Energy Services Inc. Announces Q2 2018 results

CALGARY, Alberta, Aug. 09, 2018 (GLOBE NEWSWIRE) — Total Energy Services Inc. (TSX:TOT) (“Total Energy” or the “Company”) announces its consolidated financial results for the three and six months ended June 30, 2018.

Financial Highlights
($000’s except per share data)
Three Months Ended June 30 Six Months Ended June 30
   
2018 2017 Change 2018 2017 Change
Revenue $    193,823 $   154,922 25 % $    399,038 $    239,274 67 %
Operating Income (Loss)  3,956  (13,105 ) n/m  11,516  (13,346 ) n/m
EBITDA (1)  23,226  6,577 253 %  50,881  14,519 250 %
Cashflow  22,472  10,903 106 %  43,621  18,724 133 %
Net Income (Loss)  3,662  (13,141 ) n/m  6,990  (13,994 ) n/m
Attributable to shareholders 3,829  (11,565 ) n/m  6,993  (12,418 ) n/m
Per Share Data (Diluted)      
EBITDA (1) $    0.50 $  0.15 233 % $   1.10 $  0.39 182 %
Cashflow $    0.49 $    0.25 96 % $   0.94 $    0.50 88 %
Net Income (Loss) attributable to shareholders $    0.08 $  (0.26 ) n/m $    0.15 $    (0.33 ) n/m
 
             
        June 30
2018
December 31
2017
 

Change

Financial Position
Total Assets $   1,050,740 $   1,066,781 (2 %)
Long-Term Debt and Obligations Under Finance Leases (excluding current portion) 295,914 257,845  15 %
Working Capital (2)  103,113  54,892 88 %
Net Debt (3)  192,801  202,953 (5 %)
Shareholders’ Equity  551,612  546,574 1 %
 
Common Shares (000’s)(4)
Basic 46,223 43,718 6 %  46,231  37,617 23 %
Diluted  46,223  43,718  6 %  46,232  37,617 23 %

“n/m” – calculation not meaningful
Notes 1 through 4 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, 2018 reflect improving energy service industry conditions in the United States and Australia offset by relative weakness in Canada that was exacerbated by the seasonal decline in activity levels known as “spring break-up.” Operating efficiencies of scale and cost synergies arising from the integration of Savanna Energy Services Corp. (“Savanna”) contributed to a meaningful increase in quarterly EBITDA margins on a year over year basis and a fourth consecutive profitable quarter.

Total Energy’s Contract Drilling Services segment (“CDS”) achieved 15% utilization during the second quarter of 2018, recording 1,593 operating days (spud to rig release) with a fleet of 116 drilling rigs, compared to 2,021 operating days, or 20% utilization, during the second quarter of 2017 with a fleet of 119 drilling rigs. Revenue per operating day for the second quarter of 2018 was $24,019. During the second quarter of 2018, the CDS segment had 539 operating days in Canada with a fleet of 85 rigs (7% utilization), 703 days in the United States with a fleet of 26 rigs (30% utilization) and 351 days in Australia with a fleet of 5 rigs (77% utilization). During the second quarter a drilling rig was relocated from Canada to the United States.

The Rental and Transportation Services segment (“RTS”) achieved a utilization rate on major rental equipment of 19% during the second quarter of 2018 as compared to 18% during the second quarter of 2017. Segment revenue per utilized rental piece increased 6% for the second quarter of 2018 compared to the same period in 2017 due to a modest increase in pricing. This segment exited the second quarter of 2018 with approximately 11,000 pieces of major rental equipment (excluding access matting) and 112 heavy trucks as compared to 11,700 rental pieces and 125 heavy trucks at June 30, 2017.

Revenue in the Compression and Process Services segment (“CPS”) increased 61% to $105.2 million for the three months ended June 30, 2018 compared to $65.4 million for the same period in 2017. This segment exited the second quarter of 2018 with a $216.9 million backlog of fabrication sales orders as compared to $149.3 million at June 30, 2017 and $207.0 million at March 31, 2018. At June 30, 2018, there was 43,800 horsepower in the compression rental fleet, of which approximately 24,800 horsepower was on rent as compared to 19,000 horsepower on rent at June 30, 2017 and 18,500 horsepower at March 31, 2018. The gas compression rental fleet operated at an average utilization rate of 57% during the second quarter of 2018 as compared to 46% during the second quarter of 2017.

Total Energy’s Well Servicing segment (“WS”) generated $35.5 million of revenue during the second quarter of 2018 on 36,472 service hours, or $974 per service hour, with a fleet of 84 service rigs that were located in Canada (57 rigs), the United States (15 rigs) and Australia (12 rigs). This compares to $34.9 million of revenue during the second quarter of 2017 on 34,935 service hours, or $999 per service hour. Service rig utilization for the three months ended June 30, 2018 was 25% in Canada, 38% in the United States and 69% in Australia.

During the second quarter of 2018 Total Energy repurchased 30,936 common shares at an average price (including commissions) of $11.96 per share pursuant to its normal course issuer bid and declared a quarterly dividend of $0.06 per share to shareholders of record on June 30, 2018. This dividend was paid on July 31, 2018. For Canadian income tax purposes, all dividends paid by Total Energy on its common shares are designated as “eligible dividends” unless otherwise indicated.

OUTLOOK

Oil and natural gas industry conditions continued to improve during the second quarter of 2018 with the exception of Canada where spring break up resulted in the usual seasonal decline in activity levels. Current indications are that activity levels will remain relatively strong in the international markets in which Total Energy competes for the near term. Activity levels in Canada have increased following spring break up and are expected to remain consistent with prior year levels in the near term provided oil prices remain stable. The record fabrication sales backlog enjoyed by the CPS segment at June 30, 2018 provides visibility for the remainder of 2018 and into the first quarter of 2019. The sales backlog continues to be driven by the Company’s increasing international business.

Total Energy’s Board of Directors has approved an increase to the Company’s 2018 capital expenditure budget to $54.0 million. This $6.0 million increase has been directed primarily to continued growth of the CPS and RTS segments in the United States. To June 30, 2018, $21.1 million of capital expenditures have been incurred.

Total Energy’s working capital position at June 30, 2018 was $103.1 million, including $24.4 million of cash and marketable securities. During the second quarter of 2018 Total Energy repaid $67.5 million principal amount of 7.0% senior unsecured notes previously issued by Savanna plus $2.3 million of accrued interest thereon with a $50 million draw on the Company’s credit facilities and $19.8 million of cash on hand. During the first half of 2018, the Company has reduced the principal amount of debt outstanding by $29.8 million and at June 30, 2018 $236.0 million was drawn on the Company’s $295.0 million of revolving bank credit facilities. Total Energy was in compliance with all debt covenants at June 30, 2018 and able to fully draw on the remaining amounts available under its credit facilities. Total Energy’s primary credit facility also provides the Company with the option to increase such facility by $75 million subject to certain terms and conditions including the agreement of the lenders to increase their commitments.

CONFERENCE CALL

At 9:00 a.m. (Mountain Time) on August 10, 2018 Total Energy will conduct a conference call and webcast to discuss its second quarter financial results. Daniel Halyk, President & Chief Executive Officer, will host the conference call. A live webcast of the conference call will be accessible on Total’s website at www.totalenergy.ca by selecting “Webcasts”. Persons wishing to participate in the conference call may do so by calling (800) 319-4610 or (416) 915-3239. 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 September 10, 2018 by dialing (855) 669-9658 (passcode 2445).

SELECTED FINANCIAL INFORMATION

Selected financial information relating to the three and six months ended June 30, 2018 and 2017 is attached to this news release. This information should be read in conjunction with the interim condensed consolidated financial statements of Total Energy and the attached notes to the interim condensed consolidated financial statements and management’s discussion and analysis to be issued in due course and reproduced in the Company’s 2018 second quarter report.

Consolidated Statements of Financial Position

(in thousands of Canadian dollars)
  June 30,   December 31,
2018   2017
(unaudited)   (audited)
Assets  
Current assets:  
Cash and cash equivalents $   20,069   $   21,154
Accounts receivable 129,650   150,990
Inventory 82,268   68,266
Income taxes receivable 2,524   1,176
Other assets 4,334   4,631
Prepaid expenses and deposits 14,993   15,148
253,838   261,365
 
Property, plant and equipment 783,228   793,464
Income taxes receivable 7,070   7,070
Deferred tax asset 2,551   829
Goodwill 4,053   4,053
  $   1,050,740   $ 1,066,781
   
Liabilities & Shareholders’ Equity    
Current liabilities:    
Accounts payable and accrued liabilities $     113,814   $     108,421
Deferred revenue 27,907   21,625
Dividends payable 2,772   2,774
Current portion of obligations under finance leases 1,818   1,595
Current portion of long-term debt 4,414   72,058
150,725   206,473
   
Long-term debt 293,441   255,640
   
Obligations under finance leases 2,473   2,205
   
Onerous lease liability 1,688   2,734
   
Deferred tax liability 50,801   53,155
   
Shareholders’ equity:    
Share capital 290,905   291,317
Contributed surplus 5,286   4,550
Accumulated other comprehensive loss (6,900 )   (10,194 )
Non-controlling interest 718   1,196
Retained earnings 261,603   259,705
551,612   546,574
   
$   1,050,740   $ 1,066,781

 

Consolidated Statements of Comprehensive Income (Loss)

(in thousands of Canadian dollars except per share amounts)
(unaudited)
  Three months ended
June 30
Six months ended
June 30
2018 2017 2018 2017
Revenue $ 193,823 $ 154,922 $ 399,038 $ 239,274
Cost of services 156,362 133,528 320,339 202,243
Selling, general and administration 14,002 14,633 27,639 22,253
Share-based compensation 858 255 1,299 484
Depreciation 18,645 19,611 38,245 27,640
Operating income (loss) 3,956 (13,105 ) 11,516 (13,346 )
Gain on sale of property, plant and equipment 625 71 1,120 225
Finance costs (3,497 ) (6,646 ) (7,353 ) (7,243 )
Net income (loss) before income taxes 1,084 (19,680 ) 5,283 (20,364 )
Current income tax expense (recovery) 1,939 (229 ) 2,774 (4,958 )
Deferred income tax recovery (4,517 ) (6,310 ) (4,481 ) (1,412 )
Total income tax recovery (2,578 ) (6,539 ) (1,707 ) (6,370 )
Net income (loss) for the period $ 3,662 $ (13,141 ) $ 6,990 $ (13,994 )
Net income (loss) attributable to:
Shareholders of the Company $ 3,829 $ (11,565 ) $ 6,993 $ (12,418 )
Non-controlling interest (167 ) (1,576 ) (3 ) (1,576 )
Income (loss) per share
Basic and diluted $ 0.08 $ (0.26 ) $ 0.15 $ (0.33 )
     

Condensed Interim Consolidated Statements of Comprehensive Income (Loss) 

(unaudited)
  Three months ended
June 30
Six months ended
June 30
2018 2017 2018 2017
Net income (loss) for the period $   3,662 $ (13,141 ) $   6,990 $ (13,994 )
   
Changes in fair value of long-term investment 395 665
Realized gain on long-term investment (665 ) (665 )
Foreign currency translation adjustment 144 (4,775 ) 3,699 (4,751 )
Deferred tax effect (13 ) 1,319 (405 ) 1,283
Total other comprehensive income (loss) for the period 131 (3,726 ) 3,294 (3,468 )
Total comprehensive income (loss) $   3,793 $ (16,867 ) $  10,284 $ (17,462 )
     
Total comprehensive income (loss) attributable to:    
Shareholders of the Company $   3,960 $ (15,291 ) $   10,287 $ (15,886 )
Non-controlling interest (167 ) (1,576 ) (3 ) (1,576 )

 

Consolidated Statements of Cash Flows

(in thousands of Canadian dollars)
(unaudited)
  Three months ended
June 30
Six months ended
June 30
  2018 2017 2018 2017
 
Cash provided by (used in):
Operations:
Net income (loss) for the period $   3,662 $ (13,141 ) $  6,990 $ (13,994 )
Add (deduct) items not affecting cash:    
Depreciation 18,645 19,611 38,245 27,640
Share-based compensation 858 255 1,299 484
Gain on sale of property, plant and equipment (625 ) (71 ) (1,120 ) (225 )
Finance costs 3,497 6,957 7,128 7,554
Unrealized loss (gain) on foreign currencies translation (525 ) 4,511 (3,092 ) 4,696
Current income tax expense (recovery) 1,939 (229 ) 2,774 (4,958 )
Deferred income tax recovery (4,517 ) (6,310 ) (4,481 ) (1,412 )
Income taxes paid (462 ) (680 ) (4,122 ) (1,061 )
Cashflow 22,472 10,903 43,621 18,724
Changes in non-cash working capital items:    
Accounts receivable 19,178 27,555 20,867 16,592
Inventory (4,428 ) 1,465 (14,002 ) 5,436
Prepaid expenses and deposits (2,308 ) (4,998 ) 1,072 (6,166 )
Accounts payable and accrued liabilities 2,674 (818 ) 8,324 1,419
Onerous leases (142 ) (43 ) (1,045 ) (43 )
Deferred revenue 4,889 11,223 6,282 4,024
Cash provided by operating activities 42,335 45,287 65,119 39,986
Investing:    
Purchase of property, plant and equipment (13,472 ) (10,504 ) (21,077 ) (13,432 )
Acquisitions (13,030 ) (26,830 )
Cash acquired 16,167 16,167
Proceeds on sale of other assets 227 115
Proceeds on disposal of property, plant and equipment 864 111 2,103 1,028
Changes in non-cash working capital items (578 ) 550 (2,019 ) (213 )
Cash used in investing activities (13,186 ) (6,706 ) (20,766 ) (23,165 )
Financing:    
Advances on long-term debt 50,000 204,000 50,000 204,000
Repayment of long-term debt (68,661 ) (205,419 ) (79,843 ) (205,898 )
Loans collected 2,997
Repayment of obligations under finance leases (539 ) (497 ) (1,068 ) (944 )
Dividends to shareholders (2,701 ) (2,331 ) (5,475 ) (4.187 )
Issuance of common shares 2,289 2,289
Repurchase of common shares (597 ) (597 )
Partnership distributions (475 ) (475 )
Interest paid (5,510 ) (11,421 ) (7,980 ) (11,885 )
Decrease in bank indebtedness (12,087 )
Cash used in financing activities (28,483 ) (22,469 ) (45,438 ) (16,625 )
   
Change in cash and cash equivalents 666 16,112 (1,085 ) 196
   
Cash and cash equivalents, beginning of period 19,403 21,154 15,916
Cash and cash equivalents, end of period $   20,069 $ 16,112 $   20,069 $ 16,112

SEGMENTED INFORMATION

The Company provides a variety of products and services in the oil and natural gas industry through five reporting segments, which operate substantially in three geographic segments. These reporting 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, Compression and Process Services, which includes the fabrication, sale, rental and servicing of natural gas compression and oil and natural gas process equipment and Well Servicing, which includes the contracting of service rigs and the provision of labour required to operate the equipment. Corporate includes activities related to the Company’s corporate and public issuer affairs.

As at and for the three months ended June 30, 2018 (unaudited)

  Contract Rentals and Compression Well Corporate Total
  Drilling Transportation and Process Servicing    
  Services Services Services      
             
Revenue $ 38,263 $ 14,882 $ 105,153 $ 35,525 $ $ 193,823
 
Cost of services 31,474 10,195 88,886 25,807 156,362
Selling, general and administration 2,096 3,281 3,584 1,060 3,981 14,002
Share-based compensation 858 858
Depreciation 7,401 4,375 1,815 5,036 18 18,645
Operating income (loss) (2,708 ) (2,969 ) 10,868 3,622 (4,857 ) 3,956
 
Gain (loss) on sale of property, plant and equipment 77 311 238 (1 ) 625
Finance costs (34 ) (25 ) (11 ) (37 ) (3,390 ) (3,497 )
 
Net income (loss) before income taxes (2,665 ) (2,683 ) 11,095 3,584 (8,247 ) 1,084
 
Goodwill 2,514 1,539 4,053
Total assets 440,103 238,414 208,471 140,518 23,234 1,050,740
Total liabilities 54,376 36,651 88,987 3,172 315,942 499,128
Capital expenditures $ 5,448 $ 3,027 $ 3,407 $ 1,583 $ 7 $ 13,472
Three months ended June 30, 2018 Canada United States Australia Other Total
           
Revenue $ 88,244 $ 62,773 $ 42,806 $ –  $ 193,823
Non-current assets (2) 543,091 157,785 86,405 –  787,281

As at and for the three months ended June 30, 2017 (unaudited)

Contract Rentals and Compression Well Corporate Total
Drilling Transportation and Process Servicing
Services Services Services
Revenue $ 41,304 $ 13,377 $ 65,356 $ 34,885 $ $ 154,922
Cost of services 41,283 9,204 57,196 25,845 133,528
Selling, general and administration 3,129 2,910 2,002 1,580 5,012 14,633
Share-based compensation 255 255
Depreciation 7,507 4,869 1,812 4,574 849 19,611
Operating income (loss) (10,615 ) (3,606 ) 4,346 2,886 (6,116 ) (13,105 )
Gain on sale of property, plant and equipment 71 71
Finance costs (97 ) (176 ) (92 ) (6,281 ) (6,646 )
Net income (loss) before income taxes (10,712 ) (3,711 ) 4,254 2,886 (12,397 ) (19,680 )
Goodwill 2,514 1,539 4,053
Total assets 440,920 237,074 168,260 138,581 68,467 1,053,302
Total liabilities 51,704 45,440 54,456 9,917 344,380 505,897
Capital expenditures(1) $ 4,779 $ 3,283 $ 1,418 $ 333 $ 691 $ 10,504
Three months ended June 30, 2017 Canada United States Australia Other Total
Revenue $ 89,724 $ 35,589 $ 29,609 $ 154,922
Non-current assets (2) 586,699 144,493 100,129 831,321

As at and for the six months ended June 30, 2018 (unaudited)

  Contract Rentals and Compression Well Corporate Total
  Drilling Transportation and Process Services    
  Services Services Services      
Revenue $ 99,243 $ 37,194 $ 190,271 $ 72,330 $ $ 399,038
 
Cost of services 80,993 24,020 163,182 52,144 320,339
Selling, general and administration 4,449 7,220 6,283 2,237 7,450 27,639
Share-based compensation 1,299 1,299
Depreciation 15,590 8,942 3,591 10,086 36 38,245
Operating income (loss) (1,789 ) (2,988 ) 17,215 7,863 (8,785 ) 11,516
 
Gain on sale of property, plant and equipment 127 362 238 393 1,120
Finance costs (27 ) (56 ) (20 ) (78 ) (7,172 ) (7,353 )
 
Net income (loss) before income taxes (1,689 ) (2,682 ) 17,433 8,178 (15,957 ) 5,283
 
Goodwill 2,514 1,539 4,053
Total assets 440,103 238,414 208,471 140,518 23,234 1,050,740
Total liabilities 54,376 36,651 88,987 3,172 315,942 499,128
Capital expenditures $ 8,460 $ 5,148 $ 5,201 $ 2,261 $ 7 $ 21,077
Six months ended June 30, 2018 Canada United States Australia Other Total
           
Revenue $ 192,435 $   129,872 $   76,731 $   –  $   399,038
Non-current assets (2) 543,091   157,785 86,405   787,281

As at and for the six months ended June 30, 2017 (unaudited)

Contract Rentals and Compression Well Corporate Total
Drilling Transportation and Process Servicing
Services Services Services
Revenue $ 48,000 $ 30,933 $ 125,456 $ 34,885 $ $ 239,274
Cost of services 46,096 19,630 110,672 25,845 202,243
Selling, general and administration 3,650 5,960 3,788 1,580 7,275 22,253
Share-based compensation 484 484
Depreciation 9,524 9,029 3,645 4,574 868 27,640
Operating income (loss) (11,270 ) (3,686 ) 7,351 2,886 (8,627 ) (13,346 )
Gain on sale of property, plant and equipment 195 30 225
Finance costs (188 ) (357 ) (187 ) (6,511 ) (7,243 )
Net income (loss) before income taxes (11,458 ) (3,848 ) 7,194 2,886 (15,138 ) (20,364 )
Goodwill 2,514 1,539 4,053
Total assets 440,920 237,074 168,260 138,581 68,467 1,053,302
Total liabilities 51,704 45,440 54,456 9,917 344,380 505,897
Capital expenditures(1) $ 5,241 $ 4,701 $ 2,466 $ 333 $ 691 $ 13,432
Six months ended June 30, 2017 Canada United States Australia Other Total
Revenue $ 159,682 $ 44,053 $ 35,528 $ 11 $ 239,274
Non-current assets (2) 586,699 144,493 100,129 831,321

(1) Does not include the acquisition of Savanna 
(2) Includes property, plant and equipment and goodwill.

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

For further information, please contact Daniel Halyk, President & Chief Executive Officer at (403) 216-3921 or Yuliya Gorbach, Vice-President Finance and Chief Financial Officer at (403) 216-3920 or by e-mail at: investorrelations@totalenergy.ca or visit our website at www.totalenergy.ca

Notes to the Financial Highlights

(1) EBITDA means earnings before interest, taxes, depreciation and amortization and is equal to net loss before income taxes plus finance costs plus depreciation. EBITDA is not a recognized measure under IFRS. Management believes that in addition to net loss, EBITDA is useful supplemental measure as it provides 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 EBITDA should not be construed as an alternative to net loss determined in accordance with IFRS as an indicator of Total Energy’s performance. Total Energy’s method of calculating EBITDA may differ from other organizations and, accordingly, EBITDA 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 finance leases plus current liabilities minus current assets.
(4) Basic and diluted shares outstanding reflect the weighted average number of common shares outstanding for the periods. See note 6 to the Company’s Interim Consolidated Financial Statements for the three and six months ended June 30, 2018.

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. Forward-looking statements are based upon the opinions and expectations of management of Total Energy as at the effective date of such statements and, in some cases, information supplied by third parties. Although Total Energy believes the expectations reflected in such forward-looking statements are based upon reasonable assumptions and that information received from third parties is reliable, it can give no assurance that those expectations will prove to have been correct.

In particular, this press release contains forward-looking statements concerning industry activity levels, expectations regarding Total Energy’s market share and future compression and process production activity, Total Energy’s expectations of future interest rates and its corresponding ability to realize substantial interest expense savings, expectations as to the Company’s ability to realize cost efficiencies and synergies arising from the acquisition of Savanna as well as other expected benefits of the acquisition. Such forward-looking statements are based on a number of assumptions and factors including fluctuations in the market for oil and natural gas and related products and services, political and economic conditions, central bank interest rate policy, the demand for products and services provided by Total Energy, Total Energy’s ability to attract and retain key personnel and other factors. 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. 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 TSX has neither approved nor disapproved of the information contained herein.

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Date Dec 31, 1969