CALGARY, Alberta, Aug. 08, 2022 (GLOBE NEWSWIRE) — Total Energy Services Inc. (“Total Energy” or the “Company”) (TSX:TOT) announces its consolidated financial results for the three and six months ended June 30, 2022.

Total Energy’s results for the three months ended June 30, 2022 reflect the continued recovery of the global energy industry, particularly in North America. Prolonged wet weather conditions in Australia during the second quarter of 2022 restricted field activity and resulted in a substantial year over year increase in drilling and service rig paid standby days. The Company did not receive any COVID-19 relief funds during the quarter as compared to $8.1 million received in the second quarter of 2021.

Second quarter 2022 drilling activity in North America continued to increase with relatively strong oil and natural gas prices. Continued recovery of Canadian industry activity levels from the historic lows of 2020 and market share gains in the United States drove a significant year over year increase in North American operating days and increased revenue per operating day.   In Australia, activity levels improved in the second quarter of 2022 compared to 2021 as two drilling rigs returned to service following the completion of recertifications and upgrades although a substantial year over year increase in lower rate paid stand-by days due to wet weather contributed to lower revenue per operating day but also lower operating costs. The second quarter EBITDA margin was consistent on a year over year basis with increased pricing offsetting the absence of COVID-19 relief funds and operating cost inflation.

Second quarter revenue in the RTS segment increased as compared to the same period in 2021 due to higher equipment utilization and modestly improved pricing. Increased equipment utilization as well as higher revenue per utilized piece of equipment contributed to the year over year increase in second quarter EBITDA. Second quarter EBITDA margin was lower compared to the same period in 2021 due to the absence of COVID-19 relief assistance combined with significant operating cost inflation that was not fully recovered through price increases.

The year over year increase in the CPS segment’s second quarter revenue was due primarily to higher fabrication sales, increased equipment overhaul activity and $7.4 million of contract cancellation revenue. Compression rental fleet utilization continued to recover during the second quarter of 2022. The absence of COVID-19 relief assistance and general operating cost inflation contributed to a lower second quarter EBITDA margin in 2022 as compared to 2021. Improved pricing following the completion during the first quarter of 2022 of lower margin fabrication orders received in 2021 contributed to a substantial sequential quarterly improvement in segment margins.   The fabrication sales backlog continued to grow during the second quarter of 2022, increasing by $34.2 million, or 23%, compared to the $147.5 million backlog at December 31, 2021 and $1.0 million from the $180.7 million backlog at March 31, 2022 after deducting the cancelled contracts.

Second quarter WS segment revenue increased in 2022 as compared to 2021 due primarily to improved North American activity, higher pricing and the mix of equipment operating. EBITDA for the second quarter of 2022 was lower compared to the same period last year primarily due to Australia where field activity was limited due to prolonged wet weather conditions that resulted in a substantial year over year increase in lower rate paid stand-by. Also impacting the WS segment’s EBITDA and EBITDA margin for the second quarter of 2022 compared to 2021 was the absence of COVID-19 relief funds and significant operating cost inflation.

Corporate

During the second quarter of 2022, Total Energy remained focused on the safe and efficient operation of its business and improving the overall financial performance of the Company in a challenging cost environment. The $13.2 million of second quarter cash flow remaining after funding net capital expenditures and lease and interest payments was directed towards $10.7 million of debt reduction and $2.4 million of share repurchases under the Company’s normal course issuer bid.

For the six months ended June 30, 2022, after changes in non-cash working capital items and funding $21.1 million of net capital expenditures, $3.4 million of interest payments and $2.3 million of lease payments, Total Energy has generated $43.2 million of free cash flow. This free cash flow has been allocated as to $31.3 million of debt repayment, $5.9 million of share repurchases and payment of a $0.06 per share quarterly dividend to shareholders of record on June 30, 2022 that was paid on July 15, 2022.

Total Energy exited the second quarter of 2022 with $122.0 million of positive working capital, including $42.3 million of cash, and $115 million of available credit under its $225 million of revolving bank credit facilities.   The weighted average interest rate on the Company’s outstanding debt at June 30, 2022 was 3.39%.

Outlook

Total Energy’s consolidated financial results for the second quarter exceeded first quarter results, which is an exceptional occurrence given the seasonality of Canadian operations. Despite market and commodity price volatility, energy service industry fundamentals continue to improve. Total Energy’s active drilling rig count in Canada currently exceeds the peak rig count reached during the first quarter of 2022 and provides optimism for activity levels for the remainder of 2022. Industry equipment and personnel constraints have begun to appear, which has supported continued pricing recovery in all business segments.

In response to increasing activity levels and longer lead times for certain equipment, Total Energy has increased its 2022 capital expenditure budget to $56.2 million. Included in this $14.1 million increase is $10.0 million for new equipment and equipment upgrades in the CDS, RTS and WS segments and $4.1 million of light duty vehicles for use in all business segments. The Company intends to finance its 2022 capital expenditure budget with cash on hand and, in respect of the light duty vehicles, $4.1 million of capital leases.

After funding its capital expenditure commitments, Total Energy expects to generate significant free cash flow for the remainder of 2022. Given current market conditions, debt repayment and share buybacks remain attractive opportunities for deployment of such free cash flow. The Company also continues to evaluate consolidation opportunities within its existing business segments.

Conference Call

At 9:00 a.m. (Mountain Time) on August 9, 2022 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 Energy’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 9, 2022 by dialing (855) 669-9658 (passcode 9194).

Selected Financial Information

Selected financial information relating to the three and six months ended June 30, 2022 and 2021 is included in this news release. This information should be read in conjunction with the condensed interim consolidated financial statements of Total Energy and the notes thereto as well as management’s discussion and analysis to be issued in due course and in the Company’s 2021 Annual report.

Segmented Information

The Company provides a variety of products and services to the energy and other resource industries through five reporting segments, which operate substantially in three geographic regions. 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 energy and other industrial operations, Compression and Process Services, which includes the fabrication, sale, rental and servicing of gas compression and 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.

Total Energy provides contract drilling services, equipment rentals and transportation services, well servicing and compression and process equipment and service to the energy and other resource industries from operation centers in North America and Australia. 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 income (loss) before income taxes plus finance costs plus depreciation. EBITDA is not a recognized measure under IFRS. Management believes that in addition to net income (loss), EBITDA is a 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 income 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 lease liabilities plus current liabilities minus current assets. Management believes this measure provides a useful indication of the Company’s liquidity.

(4) Basic and diluted shares outstanding reflect the weighted average number of common shares outstanding for the periods. See note 5 to the Company’s Condensed Interim Consolidated Financial Statements.

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, including expectations regarding Total Energy’s future activity levels, market share and compression and process production activity. 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, performance 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.