Total Energy Services Inc. Announces Q3 2018 Results
November 8, 2018 - 5:00 PM EST
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Total Energy Services Inc. Announces Q3 2018 Results
CALGARY, Alberta, Nov. 08, 2018 (GLOBE NEWSWIRE) -- Total Energy Services Inc. (“Total Energy” or the “Company”) (TSX:TOT) announces its consolidated financial results for the three and nine months ended September 30, 2018.
Financial Highlights ($000’s except per share data)
Three Months Ended September 30
Nine Months Ended September 30
2018
2017
Change
2018
2017
Change
Revenue
$
232,925
$
185,158
26
%
$
631,963
$
424,432
49
%
Operating Income (Loss)
14,294
6,871
108
%
25,810
(6,475
)
n/m
EBITDA (1)
34,632
27,356
27
%
85,513
41,875
104
%
Cashflow
34,799
30,044
16
%
78,420
48,768
61
%
Net Income (Loss)
8,655
3,737
132
%
15,645
(10,257
)
n/m
Attributable to shareholders
8,910
4,307
107
%
15,903
(8,111
)
n/m
Per Share Data (Diluted)
EBITDA (1)
$
0.75
$
0.59
27
%
$
1.85
$
1.03
80
%
Cashflow
$
0.75
$
0.65
15
%
$
1.70
$
1.20
42
%
Net Income (Loss) attributable to shareholders
$
0.19
$
0.09
111
%
$
0.34
$
(0.20
)
n/m
September 30, 2018
December 31, 2017
Change
Financial Position
Total Assets
$
1,063,813
$
1,066,781
0
%
Long-Term Debt and Obligations Under Finance Leases (excluding current portion)
295,545
257,845
15
%
Working Capital (2)
117,586
54,892
114
%
Net Debt (3)
177,959
202,953
(12
%)
Shareholders’ Equity
549,238
546,574
0
%
Common Shares (000’s)(4)
Basic and Diluted
46,099
46,238
0
%
46,186
40,523
14
%
“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 September 30, 2018 represent the fifth consecutive profitable quarter for the Company. Underlying these results were improving energy service industry conditions in the United States and Australia, the realization of efficiencies of scale and cost synergies arising from the integration of Savanna Energy Services Corp. (“Savanna”) and improved discipline in declining unprofitable work. Included in 2018 third quarter selling, general and administrative expenses was $0.6 million of legal expenses related to two claims made against Savanna following the takeover of Savanna by the Company.
Total Energy’s Contract Drilling Services segment (“CDS”) achieved 27% utilization during the third quarter of 2018, recording 2,836 operating days (spud to rig release) with a fleet of 116 drilling rigs, compared to 3,153 operating days, or 29% utilization, during the third quarter of 2017 with a fleet of 119 drilling rigs. Revenue per operating day for the third quarter of 2018 was $20,341, a 9% increase from the prior year comparable period. During the third quarter of 2018, the CDS segment had 1,687 operating days in Canada with a fleet of 86 rigs (21% utilization), 783 days in the United States with a fleet of 25 rigs (34% utilization) and 366 days in Australia with a fleet of 5 rigs (80% utilization).
The Rental and Transportation Services segment (“RTS”) achieved a utilization rate on major rental equipment of 24% during the third quarter of 2018 which was consistent with the third quarter of 2017. Segment revenue per utilized rental piece decreased 2% during the third quarter of 2018 compared to the same period in 2017 due to a change in mix of equipment operating. This segment exited the third 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 September 30, 2017.
Revenue in the Compression and Process Services segment (“CPS”) increased 70% to $114.8 million for the three months ended September 30, 2018 compared to $67.7 million for the same period in 2017. This increase was primarily due to higher international activity levels, including increasing contribution from the Weirton, West Virginia compression fabrication facility. This segment exited the third quarter of 2018 with a $236.7 million backlog of fabrication sales orders as compared to $160.7 million at September 30, 2017 and $216.9 million at June 30, 2018. At September 30, 2018, there was 45,500 horsepower in the compression rental fleet, of which approximately 31,500 horsepower was on rent as compared to 20,200 horsepower on rent at September 30, 2017 and 24,800 horsepower at June 30, 2018. The gas compression rental fleet operated at an average utilization rate of 69% during the third quarter of 2018 as compared to 46% during the third quarter of 2017.
Total Energy’s Well Servicing segment (“WS”) generated $41.0 million of revenue during the third quarter of 2018 on 44,447 service hours, or $922 per service hour, with a fleet of 83 service rigs that were located in Canada (57 rigs), the United States (14 rigs) and Australia (12 rigs). This compares to $39.3 million of revenue during the third quarter of 2017 on 41,256 service hours, or $952 per service hour. Service rig utilization for the three months ended September 30, 2018 was 39% in Canada, 37% in the United States and 71% in Australia.
During the third quarter of 2018 Total Energy repurchased 200,000 common shares at an average price (including commissions) of $11.69 per share pursuant to its normal course issuer bid and declared a quarterly dividend of $0.06 per share to shareholders of record on September 30, 2018. This dividend was paid on October 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 activity levels continued to recover in the United States and Australia during the third quarter and current expectations are that such markets will remain relatively strong compared to 2017. Industry conditions remain stagnant in Canada, where oil and natural gas price discounts continue to be exacerbated by insufficient pipeline capacity. Current indications are that upcoming Canadian winter activity will be similar to last year.
In response to increasing domestic and international demand, as evidenced by its record fabrication sales backlog, the CPS segment recently leased a 84,400 square foot fabrication facility in Calgary, Alberta that will replace an existing 24,800 square foot leased facility. This facility will increase Canadian fabrication space by approximately 30% to 246,600 square feet and plant production is expected to ramp up over the next two quarters.
Given continued weakness in Canadian oil and natural gas drilling and completion activity combined with higher labour, fuel and utility costs arising from regulatory changes in Alberta, five RTS branch locations have or will be closed by the end of 2018. These RTS branch closures are the first in Total Energy’s 22-year history and are necessary to reduce this segment’s fixed cost structure given persistently lower Canadian industry activity levels and the inability to fully pass on higher operating costs to customers. Following these closures, the RTS segment will operate from 20 branches in western Canada.
Total Energy’s working capital position at September 30, 2018 was $117.6 million, including $27.9 million of cash and marketable securities. During the first nine months of 2018, the Company has reduced the principal amount of debt outstanding by $32.1 million and at September 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 September 30, 2018 and able to fully draw on the remaining amounts available under its credit facilities. Total Energy’s primary credit facility 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 November 9, 2018 Total Energy will conduct a conference call and webcast to discuss its third 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 (855) 327-6838 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 December 8, 2018 by dialing (855) 669-9658 (passcode 2663).
Selected Financial Information
Selected financial information relating to the three and nine months ended September 30, 2018 and 2017 is attached to 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 reproduced in the Company’s 2018 third quarter report.
Consolidated Statements of Financial Position (in thousands of Canadian dollars)
September 30,
December 31,
2018
2017
(unaudited)
(audited)
Assets
Current assets:
Cash and cash equivalents
$
24,414
$
21,154
Accounts receivable
146,792
150,990
Inventory
93,594
68,266
Income taxes receivable
-
1,176
Other assets
3,486
4,631
Prepaid expenses and deposits
16,449
15,148
284,735
261,365
Property, plant and equipment
765,728
793,464
Income taxes receivable
7,070
7,070
Deferred tax asset
2,227
829
Goodwill
4,053
4,053
$
1,063,813
$
1,066,781
Liabilities & Shareholders' Equity
Current liabilities:
Accounts payable and accrued liabilities
$
118,079
$
108,421
Deferred revenue
39,665
21,625
Income taxes payable
1,526
-
Dividends payable
2,760
2,774
Current portion of obligations under finance leases
2,055
1,595
Current portion of long-term debt
3,064
72,058
167,149
206,473
Long-term debt
292,554
255,640
Obligations under finance leases
2,991
2,205
Onerous lease liability
1,488
2,734
Deferred tax liability
50,393
53,155
Shareholders' equity:
Share capital
289,862
291,317
Contributed surplus
5,785
4,550
Accumulated other comprehensive loss
(13,214
)
(10,194
)
Non-controlling interest
122
1,196
Retained earnings
266,683
259,705
549,238
546,574
$
1,063,813
$
1,066,781
Consolidated Statements of Comprehensive Income (Loss) (in thousands of Canadian dollars except per share amounts) (unaudited)
Three months ended September 30
Nine months ended September 30
2018
2017
2018
2017
Revenue
$
232,925
$
185,158
$
631,963
$
424,432
Cost of services
184,750
144,353
505,089
346,596
Selling, general and administration
13,904
12,915
41,543
35,168
Share-based compensation
499
709
1,798
1,193
Depreciation
19,478
20,310
57,723
47,950
Operating income (loss)
14,294
6,871
25,810
(6,475
)
Gain on sale of property, plant and equipment
860
175
1,980
400
Finance costs
(2,940
)
(3,053
)
(10,293
)
(10,296
)
Net income (loss) before income taxes
12,214
3,993
17,497
(16,371
)
Current income tax expense (recovery)
2,963
1,802
5,737
(3,156
)
Deferred income tax expense (recovery)
596
(1,546
)
(3,885
)
(2,958
)
Total income tax expense (recovery)
3,559
256
1,852
(6,114
)
Net income (loss) for the period
$
8,655
$
3,737
$
15,645
$
(10,257
)
Net income (loss) attributable to:
Shareholders of the Company
$
8,910
$
4,307
$
15,903
$
(8,111
)
Non-controlling interest
(255
)
(570
)
(258
)
(2,146
)
Income (loss) per share
Basic and diluted
$
0.19
$
0.09
$
0.34
$
(0.20
)
Condensed Interim Consolidated Statements of Comprehensive Income (Loss) (unaudited)
Three months ended September 30
Nine months ended September 30
2018
2017
2018
2017
Net income (loss) for the period
$
8,655
$
3,737
$
15,645
$
(10,257
)
Changes in fair value of long-term investment
-
-
-
665
Realized gain on long-term investment
-
-
-
(665
)
Foreign currency translation adjustment
(6,994
)
(6,069
)
(3,295
)
(10,820
)
Deferred tax effect
680
1,639
275
2,922
Total other comprehensive loss for the period
(6,314
)
(4,430
)
(3,020
)
(7,898
)
Total comprehensive income (loss)
$
2,341
$
(693
)
$
12,625
$
(18,155
)
Total comprehensive income (loss) attributable to:
Shareholders of the Company
$
2,596
$
(123
)
$
12,883
$
(16,009
)
Non-controlling interest
(255
)
(570
)
(258
)
(2,146
)
Consolidated Statements of Cash Flows (in thousands of Canadian dollars) (unaudited)
Three months ended September 30
Nine months ended September 30
2018
2017
2018
2017
Cash provided by (used in):
Operations:
Net income (loss) for the period
$
8,655
$
3,737
$
15,645
$
(10,257
)
Add (deduct) items not affecting cash:
Depreciation
19,478
20,310
57,723
47,950
Share-based compensation
499
709
1,798
1,193
Gain on sale of property, plant and equipment
(860
)
(175
)
(1,980
)
(400
)
Finance costs
1,987
2,742
9,115
10,296
Unrealized loss (gain) on foreign currencies translation
394
253
(2,698
)
4,949
Current income tax expense (recovery)
2,963
1,802
5,737
(3,156
)
Deferred income tax expense (recovery)
596
(1,546
)
(3,885
)
(2,958
)
Income taxes recovered (paid)
1,087
2,212
(3,035
)
1,151
Cashflow
34,799
30,044
78,420
48,768
Changes in non-cash working capital items:
Accounts receivable
(18,061
)
(32,570
)
2,806
(15,978
)
Inventory
(11,326
)
(913
)
(25,328
)
4,523
Prepaid expenses and deposits
(291
)
(4,488
)
781
(10,654
)
Accounts payable and accrued liabilities
3,250
5,590
11,574
7,009
Onerous leases
(201
)
(227
)
(1,246
)
(270
)
Deferred revenue
11,758
235
18,040
4,259
Cash provided by (used in) operating activities
19,928
(2,329
)
85,047
37,657
Investing:
Purchase of property, plant and equipment
(7,425
)
(8,874
)
(28,502
)
(22,306
)
Acquisitions
-
-
-
(26,830
)
Cash acquired
-
-
-
16,167
Proceeds on sale of other assets
954
143
1,181
258
Proceeds on disposal of property, plant and equipment
1,695
1,814
3,798
2,842
Changes in non-cash working capital items
344
418
(1,675
)
205
Cash used in investing activities
(4,432
)
(6,499
)
(25,198
)
(29,664
)
Financing:
Advances on long-term debt
-
6,023
50,000
210,023
Repayment of long-term debt
(2,237
)
(4,178
)
(82,080
)
(210,076
)
Repayment of obligations under finance leases
(601
)
(433
)
(1,669
)
(1,377
)
Dividends to shareholders
(2,772
)
(2,774
)
(8,247
)
(6,961
)
Issuance of common shares
-
-
-
2,289
Repurchase of common shares
(2,122
)
-
(2,719
)
-
Partnership distributions
-
-
(475
)
-
Purchase of Partners’ share in limited partnership
(332
)
-
(332
)
-
Interest paid
(3,087
)
(2,850
)
(11,067
)
(14,735
)
Cash used in financing activities
(11,151
)
(4,212
)
(56,589
)
(20,837
)
Change in cash and cash equivalents
4,345
(13,040
)
3,260
(12,844
)
Cash and cash equivalents, beginning of period
20,069
16,112
21,154
15,916
Cash and cash equivalents, end of period
$
24,414
$
3,072
$
24,414
$
3,072
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 September 30, 2018 (unaudited)
Contract
Rentals and
Compression
Well
Corporate
Total
Drilling
Transportation
and Process
Servicing
Services
Services
Services
Revenue
$
57,687
$
19,462
$
114,811
$
40,965
$
-
$
232,925
Cost of services
45,287
12,474
98,215
28,774
-
184,750
Selling, general and administration
1,836
3,359
3,262
1,120
4,327
13,904
Share-based compensation
-
-
-
-
499
499
Depreciation
8,544
4,070
1,874
4,965
25
19,478
Operating income (loss)
2,020
(441
)
11,460
6,106
(4,851
)
14,294
Gain (loss) on sale of property, plant and equipment
298
(144
)
193
513
-
860
Finance costs
(17
)
(18
)
(10
)
(26
)
(2,869
)
(2,940
)
Net income (loss) before income taxes
2,301
(603
)
11,643
6,593
(7,720
)
12,214
Goodwill
-
2,514
1,539
-
-
4,053
Total assets
432,267
240,689
234,413
134,966
21,478
1,063,813
Total liabilities
50,497
39,190
103,835
4,061
316,992
514,575
Capital expenditures
2,114
2,916
2,062
333
-
7,425
Canada
United States
Australia
Other
Total
Revenue
$
125,404
$
68,713
$
38,714
$
94
$
232,925
Non-current assets (1)
534,879
154,279
80,623
-
769,781
As at and for the three months ended September 30, 2017 (unaudited)
Contract
Rentals and
Compression
Well
Corporate
Total
Drilling
Transportation
and Process
Servicing
Services
Services
Services
Revenue
$
58,634
$
19,535
$
67,707
$
39,282
$
-
$
185,158
Cost of services
48,271
10,783
56,542
28,757
-
144,353
Selling, general and administration
2,774
3,136
2,357
1,664
2,984
12,915
Share-based compensation
-
-
-
-
709
709
Depreciation
10,854
4,519
1,852
2,898
187
20,310
Operating income (loss)
(3,265
)
1,097
6,956
5,963
(3,880
)
6,871
Gain on sale of property, plant and equipment
5
84
56
(14
)
44
175
Finance costs
(117
)
(173
)
(94
)
(1
)
(2,668
)
(3,053
)
Net income (loss) before income taxes
(3,377
)
1,008
6,918
5,948
(6,504
)
3,993
Goodwill
-
2,514
1,539
-
-
4,053
Total assets
444,009
239,014
174,744
133,647
65,124
1,056,538
Total liabilities
59,066
44,339
60,881
14,678
332,927
511,891
Capital expenditures
2,377
3,894
1,843
444
316
8,874
Canada
United States
Australia
Other
Total
Revenue
$
91,739
$
58,405
$
34,981
$
33
$
185,158
Non-current assets (1)
578,765
138,208
94,150
-
811,123
As at and for the nine months ended September 30, 2018 (unaudited)
Contract
Rentals and
Compression
Well
Corporate
Total
Drilling
Transportation
and Process
Services
Services
Services
Services
Revenue
$
156,930
$
56,656
$
305,082
$
113,295
$
-
$
631,963
Cost of services
126,280
36,494
261,397
80,918
-
505,089
Selling, general and administration
6,285
10,579
9,545
3,357
11,777
41,543
Share-based compensation
-
-
-
-
1,798
1,798
Depreciation
24,134
13,012
5,465
15,051
61
57,723
Operating income (loss)
231
(3,429
)
28,675
13,969
(13,636
)
25,810
Gain on sale of property, plant and equipment
425
218
431
906
-
1,980
Finance costs
(44
)
(74
)
(30
)
(104
)
(10,041
)
(10,293
)
Net income (loss) before income taxes
612
(3,285
)
29,076
14,771
(23,677
)
17,497
Goodwill
-
2,514
1,539
-
-
4,053
Total assets
432,267
240,689
234,413
134,966
21,478
1,063,813
Total liabilities
50,497
39,190
103,835
4,061
316,992
514,575
Capital expenditures
10,574
8,064
7,263
2,594
7
28,502
Canada
United States
Australia
Other
Total
Revenue
$
317,839
$
198,585
$
115,445
$
94
$
631,963
Non-current assets (1)
534,879
154,279
80,623
-
769,781
As at and for the nine months ended September 30, 2017 (unaudited)
Contract
Rentals and
Compression
Well
Corporate
Total
Drilling
Transportation
and Process
Servicing
Services
Services
Services
Revenue
$
106,634
$
50,468
$
193,163
$
74,167
$
-
$
424,432
Cost of services
94,367
30,413
167,214
54,602
-
346,596
Selling, general and administration
6,424
9,096
6,145
3,244
10,259
35,168
Share-based compensation
-
-
-
-
1,193
1,193
Depreciation
20,378
13,548
5,497
7,472
1,055
47,950
Operating income (loss)
(14,535
)
(2,589
)
14,307
8,849
(12,507
)
(6,475
)
Gain on sale of property, plant and equipment
5
279
86
(14
)
44
400
Finance costs
(305
)
(530
)
(281
)
(1
)
(9,179
)
(10,296
)
Net income (loss) before income taxes
(14,835
)
(2,840
)
14,112
8,834
(21,642
)
(16,371
)
Goodwill
-
2,514
1,539
-
-
4,053
Total assets
444,009
239,014
174,744
133,647
65,124
1,056,538
Total liabilities
59,066
44,339
60,881
14,678
332,927
511,891
Capital expenditures
7,618
8,595
4,309
777
1,007
22,306
Canada
United States
Australia
Other
Total
Revenue
$
251,421
$
102,458
$
70,509
$
44
$
424,432
Non-current assets (1)
578,765
138,208
94,150
-
811,123
(1) 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
EBITDA means earnings before interest, taxes, depreciation and amortization and is equal to net income before income taxes plus finance costs plus depreciation. EBITDA is not a recognized measure under IFRS. Management believes that in addition to net income, 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 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.
Working capital equals current assets minus current liabilities.
Net Debt equals long-term debt plus obligations under finance leases plus current liabilities minus current assets.
Basic and diluted shares outstanding reflect the weighted average number of common shares outstanding for the periods. See note 6 to the Company’s condensed interim consolidated financial statements for the three and nine months ended September 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.
