Total Energy Services Inc. Announces Q2 2013 Results

Marketwired

Mon, Aug 12, 2013, 7:30 AM

CALGARY, ALBERTA--(Marketwired - Aug 12, 2013) - Total Energy Services Inc. ("Total Energy" or the "Company") (TOT.TO) announces its consolidated financial results for the three and six months ending June 30, 2013.

Financial Highlights

($000's except per share data)

	Three Months Ended June 30						Six Months Ended June 30
	(unaudited)						(unaudited)
	2013		2012		% Change		2013		2012		% Change
Revenue	$	60,668	$	54,332	12	%	$	163,579	$	155,781	5	%
Operating Earnings ⁽¹⁾		1,455		3,778	(61	)%		24,933		37,436	(33	)%
EBITDA ⁽¹⁾		7,471		9,120	(18	)%		39,048		49,255	(21	)%
Cashflow ^{(1) (5)}		5,203		9,550	(46	)%		17,557		49,655	(65	)%
Net Income		114		3,250	(96	)%		17,505		27,711	(37	)%

Per Share Data (Diluted) ⁽²⁾
EBITDA ⁽¹⁾	$	0.22	$	0.29	(24	)%	$	1.14	$	1.41	(19	)%
Cashflow ^{(1) (5)}	$	0.15	$	0.30	(50	)%	$	0.51	$	1.42	(64	)%
Net Earnings	$	0.00	$	0.10	(100	)%	$	0.56	$	0.85	(34	)%

	June 30		Dec. 31
	2013 (unaudited)		2012 (audited)		% Change
Financial Position
Total Assets	$	473,500	$	476,591	(1	)%
Long-Term Debt, Convertible Debentures and Obligations Under Finance Leases (excluding current portion)		66,020		65,417	1	%
Working Capital ⁽³⁾		91,010		90,708	-
Net Debt ⁽⁴⁾		Nil		Nil	-
Shareholders' Equity		319,854		306,069	5	%

Shares Outstanding (000's)
Basic		30,603		30,600	-
Diluted⁽²⁾		34,118		34,300	(1	)%

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 six months ended June 30, 2013 reflect continued growth in the Company's Compression and Process Services division offset by a decline in oil and natural gas drilling and completion activity in Western Canada as compared to the first half of 2012 that negatively impacted the Contract Drilling Services and the Rentals and Transportation Services divisions.

Total Energy's Contract Drilling Services division achieved 16% utilization during the second quarter of 2013, recording 227 operating days (spud to release) with a fleet of 16 rigs, compared to 277 operating days, or 20% utilization, during the second quarter of 2012 with a fleet of 15 rigs. Revenue per operating day decreased 12% for the second quarter of 2013 relative to the prior year comparable period due to reduced pricing and the mix of equipment operating. The Rentals and Transportation Services division achieved a utilization rate on major rental equipment of 21% during the second quarter of 2013 as compared to a 36% utilization rate during the second quarter of 2012. The Compression and Process Services division generated revenues of $41.9 million for the three months ended June 30, 2013 compared to $26.3 million for the same period in 2012, an increase of 59%. The 2013 second quarter financial results from this division include results from the process equipment fabrication business that was acquired on January 1, 2013. This division exited the second quarter of 2013 with a $58.2 million backlog of fabrication sales orders as compared to $28.8 million at June 30, 2012. Included in the June 30, 2013 fabrication sales order backlog is $45.3 million of compression sales backlog and $12.9 million of process equipment sales backlog. At June 30, 2013, approximately 30,500 horsepower of compression equipment was on rent compared to 28,500 horsepower on rent at June 30, 2012. The gas compression rental fleet operated at an average utilization rate of 84% for the second quarter of both 2013 and 2012.

Negatively impacting cash flow for the first half of 2013 was the payment of $15.3 million of income taxes during the first quarter that related to 2012, as income tax installment payments were not required in 2012. Total Energy is required to make monthly income tax installment payments in 2013.

During the second quarter, Total Energy declared a quarterly dividend of $0.05 per share to shareholders of record on June 28, 2013. This dividend was paid on July 31, 2013. 193,700 common shares were purchased under the Company's normal course issuer bid during the three months ended June 30, 2013 at an average price of $14.59 per share (including commissions).

Outlook

Overall drilling and completion activity in Western Canada during the second quarter of 2013 was lower than the second quarter of 2012, due in part to wet weather conditions that extended into July. In the context of continuing strong oil prices and improved natural gas prices from a year ago, current indications are that drilling and completion activity levels in Western Canada will improve during the second half of 2013. The substantial fabrication sales backlog enjoyed by the Compression and Process Services division reflects continued demand for compression and process equipment.

Total Energy has increased its 2013 capital expenditure budget to $78.6 million. This $10.0 million increase will be directed towards continued expansion of the gas compression rental fleet, with $20 million now budgeted for expansion of the Company's compression rental fleet in 2013. To June 30, 2013, $31.1 million of capital expenditures have been made.

Total Energy's financial condition remains solid with a long-term debt (including convertible debentures) to long-term debt plus equity ratio of 0.18 to 1.0, $91.0 million of positive working capital and no net debt as at June 30, 2013. Total Energy's $35 million operating facility is currently fully available and undrawn. Total Energy continues to evaluate several investment opportunities and the Company's financial position provides significant capacity and flexibility to pursue further growth opportunities that meet the Company's investment expectations.

Conference Call

At 2:30 p.m. MST today, 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. 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 August 19, 2013 by dialing (800) 408-3053 (passcode 2914992).

Selected Financial Information

Selected financial information relating to the three and six month periods ended June 30, 2013 and 2012 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 second quarter report.

Condensed Interim Consolidated Statements of Financial Position

(in thousands of Canadian dollars)

		June 30,		December 31,
		2013		2012
		(unaudited)		(audited)
Assets
Current assets:
	Cash and cash equivalents	$	34,236	$	50,052
	Accounts receivable		53,870		63,511
	Inventory		33,124		33,240
	Income taxes receivable		3,964		-
	Prepaid expenses and deposits		4,498		2,547
			129,692		149,350

Property, plant and equipment			339,755		323,188

Goodwill			4,053		4,053
		$	473,500	$	476,591

Liabilities & Shareholders' Equity
Current liabilities:
	Accounts payable and accrued liabilities		27,756	$	32,523
	Deferred revenue		7,096		6,971
	Income taxes payable		-		15,098
	Dividends payable		1,530		1,530
	Current portion of obligations under finance leases		2,300		2,520
			38,682		58,642

Obligations under finance leases			2,469		2,723

Convertible debentures			63,551		62,694

Deferred tax liability			48,944		46,463

Shareholders' equity:
	Share capital		78,021		76,890
	Contributed surplus		6,632		5,160
	Equity portion of convertible debenture		4,601		4,601
	Retained earnings		230,600		219,418
			319,854		306,069

		$	473,500	$	476,591

Condensed Interim Consolidated Statements of Comprehensive Income

(in thousands of Canadian dollars except per share amounts)

		Three months ended June 30						Six months ended June 30
		2013			2012			2013			2012
		(unaudited)			(unaudited)			(unaudited)			(unaudited)


Revenue		$	60,668		$	54,332		$	163,579		$	155,781

	Cost of services		45,748			38,323			108,503			91,257
	Selling, general and administration		6,793			6,420			15,170			14,830
	Share-based compensation		780			553			1,913			931
	Depreciation		5,892			5,258			13,060			11,327
Results from operating activities			1,455			3,778			24,933			37,436

	Gain on sale of property, plant and equipment		124			84			1,055			492
	Finance costs		(1,428	)		(1,240	)		(2,715	)		(2,529	)
Net income before income taxes			151			2,622			23,273			35,399

	Current income tax expense		683			2,823			3,287			4,170
	Deferred income tax expense (recovery)		(646	)		(3,451	)		2,481			3,518
Total income tax expense (recovery)			37			(628	)		5,768			7,688

Net income and total comprehensive income for the period		$	114		$	3,250		$	17,505		$	27,711

Earnings per share
	Basic earnings per share	$	-		$	0.10		$	0.57		$	0.89
	Diluted earnings per share	$	-		$	0.10		$	0.56		$	0.85

Condensed Interim Consolidated Statements of Cash Flows

(in thousands of Canadian dollars)

			Three months ended June 30						Six months ended June 30
			2013			2012			2013			2012
			(unaudited)			(unaudited)			(unaudited)			(unaudited)
Cash provided by (used in):

Operations:
	Net income for the period		$	114		$	3,250		$	17,505		$	27,711
	Add (deduct) items not affecting cash:
		Depreciation		5,892			5,258			13,060			11,327
		Share-based compensation		780			553			1,913			931
		Gain on sale of property, plant and equipment		(124	)		(84	)		(1,055	)		(492	)
		Finance costs		1,428			1,240			2,715			2,529
		Current income tax expense		683			2,823			3,287			4,170
		Deferred income tax expense (recovery)		(646	)		(3,451	)		2,481			3,518
	Income taxes paid			(2,924	)		(39	)		(22,349	)		(39	)
				5,203			9,550			17,557			49,655
	Changes in non-cash working capital items:
		Accounts receivable		42,850			44,435			9,641			39,480
		Inventory		(152	)		(907	)		3,070			894
		Prepaid expenses and deposits		(247	)		93			(1,951	)		(232	)
		Accounts payable and accrued liabilities		(7,887	)		(8,558	)		(239	)		(7,122	)
		Deferred revenue		1,993			808			125			2,650
				41,760			45,421			28,203			85,325
Investments:
	Purchase of property, plant and equipment			(10,656	)		(17,179	)		(17,072	)		(41,421	)
	Acquisition of business			-			-			(16,954	)		-
	Proceeds on disposal of property, plant and equipment			293			721			3,510			1,747
	Changes in non-cash working capital items			36			420			(4,223	)		(4,186	)
				(10,327	)		(16,038	)		(34,739	)		(43,860	)
Financing:
	Repayment of obligations under finance leases			(699	)		(852	)		(1,484	)		(1,743	)
	Dividends to shareholders			(1,538	)		(1,566	)		(3,068	)		(2,820	)
	Issuance of common shares			316			512			1,428			1,197
	Repurchase of common shares			(2,838	)		(6,262	)		(3,993	)		(9,797	)
	Interest paid			(147	)		(155	)		(2,163	)		(2,080	)
				(4,906	)		(8,323	)		(9,280	)		(15,243	)

Change in cash and cash equivalents				26,527			21,060			(15,816	)		26,222

Cash and cash equivalents, beginning of period				7,709			40,820			50,052			35,658

Cash and cash equivalents, end of period			$	34,236		$	61,880		$	34,236		$	61,880

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 June 30, 2013	Contract Drilling Services			Rentals and Transportation Services			Compression and Process Services			Other⁽¹⁾			Total

Revenue	$	4,285		$	14,516		$	41,867		$	-		$	60,668

Cost of services		3,931			9,712			32,105			-			45,748
Selling, general and administration		654			2,901			2,177			1,061			6,793
Share-based compensation		-			-			-			780			780
Depreciation		512			3,831			1,313			236			5,892
Results from operating activities		(812	)		(1,928	)		6,272			(2,077	)		1,455

Gain on sale of property, plant and equipment		10			70			44			-			124
Finance costs		(203	)		(548	)		(237	)		(440	)		(1,428	)

Net income (loss) before income taxes		(1,005	)		(2,406	)		6,079			(2,517	)		151

Goodwill		-			2,514			1,539			-			4,053

Total assets		100,120			218,456			142,780			12,144			473,500
Total liabilities		15,511			38,391			31,706			68,038			153,646

Capital expenditures ⁽²⁾	$	472		$	3,925		$	5,722		$	537		$	10,656

As at and for the three months ended June 30, 2012	Contract Drilling Services			Rentals and Transportation Services			Compression and Process Services			Other⁽¹⁾			Total

Revenue	$	5,935		$	22,093		$	26,304		$	-		$	54,332

Cost of services		4,880			11,582			21,865			(4	)		38,323
Selling, general and administration		671			3,089			1,398			1,262			6,420
Share-based compensation		-			-			-			553			553
Depreciation		635			3,658			957			8			5,258
Results from operating activities		(251	)		3,764			2,084			(1,819	)		3,778

Gain (loss) on sale of property, plant and equipment		(15	)		102			(3	)		-			84
Finance costs		(253	)		(583	)		(69	)		(335	)		(1,240	)

Net income (loss) before income taxes		(519	)		3,283			2,012			(2,154	)		2,622

Goodwill		-			2,514			1,539			-			4,053

Total assets		90,476			215,129			91,137			54,503			451,245
Total liabilities		16,406			48,362			23,113			71,116			158,997

Capital expenditures	$	2,323		$	10,185		$	4,652		$	19		$	17,179


As at and for the six months ended June 30, 2013	Contract Drilling Services			Rentals and Transportation Services			Compression and Process Services			Other⁽¹⁾			Total

Revenue	$	22,915		$	53,717		$	86,947		$	-		$	163,579

Cost of services		14,698			25,685			68,120			-			108,503
Selling, general and administration		1,568			6,798			4,283			2,521			15,170
Share-based compensation		-			-			-			1,913			1,913
Depreciation		2,310			7,692			2,584			474			13,060
Results from operating activities		4,339			13,542			11,960			(4,908	)		24,933

Gain (loss) on sale of property, plant and equipment		(22	)		235			842			-			1,055
Finance costs		(404	)		(1,096	)		(417	)		(798	)		(2,715	)

Net income before income taxes		3,913			12,681			12,385			(5,706	)		23,273

Goodwill		-			2,514			1,539			-			4,053

Total assets		100,120			218,456			142,780			12,144			473,500
Total liabilities		15,511			38,391			31,706			68,038			153,646

Capital expenditures ⁽²⁾	$	1,731		$	7,402		$	21,393		$	546		$	31,072


As at and for the six months ended June 30, 2012	Contract Drilling Services			Rentals and Transportation Services			Compression and Process Services			Other⁽¹⁾			Total

Revenue	$	27,114		$	71,441		$	57,226		$	-		$	155,781

Cost of services		14,807			28,854			47,600			(4	)		91,257
Selling, general and administration		1,796			7,654			2,873			2,507			14,830
Share-based compensation		-			-			-			931			931
Depreciation		2,284			7,166			1,857			20			11,327
Results from operating activities		8,227			27,767			4,896			(3,454	)		37,436

Gain on sale of property, plant and equipment		44			269			179			-			492
Finance costs		(506	)		(1,157	)		(193	)		(673	)		(2,529	)

Net income before income taxes		7,765			26,879			4,882			(4,127	)		35,399

Goodwill		-			2,514			1,539			-			4,053

Total assets		90,476			215,129			91,137			54,503			451,245
Total liabilities		16,406			48,362			23,113			71,116			158,997

Capital expenditures	$	7,289		$	20,137		$	12,181		$	1,814		$	41,421


⁽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 contact Daniel Halyk, President & Chief Executive Officer at (403) 216-3921 or Mark Kearl, 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 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.

	(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 six months ended June 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.

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