Total Energy Services Inc. Announces Q1 2023 Results

CALGARY, Alberta, May 11, 2023 (GLOBE NEWSWIRE) -- Total Energy Services Inc. (“Total Energy” or the “Company”) (TSX:TOT) announces its consolidated financial results for the three months ended March 31, 2023.

Financial Highlights
($000’s except per share data)

Notes 1 through 4 please refer to the Notes to the Financial Highlights set forth at the end of this release.

Total Energy’s results for the first quarter ended March 31, 2023 represent record quarterly financial results that were driven by improved North American industry conditions compared to the first quarter of 2022 and the deployment of equipment upgraded pursuant to the Company’s 2022 capital expenditure program.

Contract Drilling Services (“CDS”)

^{(1)   See Note 1 of the Notes to the Financial Highlights set forth at the end of this release.
(2)   Operating days includes drilling and paid stand-by days.}

North American drilling activity continued to recover during the first quarter of 2023 as compared to 2022, particularly in Canada. Increased activity and pricing drove a significant year over year improvement in Canadian first quarter financial performance. Despite lower utilization, increased day rates contributed to higher revenue in the United States of America (the “United States” or the “U.S.”). In Australia, increased day rates and stable utilization improved first quarter revenue and operating income on a year over year basis.

Rentals and Transportation Services (“RTS”)

^{(1)   See Note 1 of the Notes to the Financial Highlights set forth at the end of this release.}

First quarter revenue in the RTS segment increased as compared to the same period in 2022 due to higher equipment utilization and improved pricing. Increased equipment utilization, improved pricing and this segment’s significant leverage to higher equipment utilization given its relatively high fixed cost structure contributed to a year over year increase in first quarter segment EBITDA and EBITDA margin.

Compression and Process Services (“CPS”)

^{(1)   See Note 1 of the Notes to the Financial Highlights set forth at the end of this release.
(2)   Rental equipment utilization is measured on a horsepower basis.}

The year over year increase in the CPS segment’s first quarter revenue was due primarily to higher fabrication sales, increased equipment overhaul activity and the continued recovery in utilization of the compression rental fleet. Improved pricing on fabrication sales, increased overhead absorption due to higher production levels and higher rental fleet utilization all contributed to a significant year over year improvement in first quarter segment EBITDA and EBITDA margin. The fabrication sales backlog continued to grow during the first quarter of 2023, increasing by $46.7 million to $227.4 million compared to the $180.7 million backlog at March 31, 2022 and by $7.9 million, or 4%, from the $219.5 million backlog at December 31, 2022.

Well Servicing (“WS”)

^{(1)   See Note 1 of the Notes to the Financial Highlights set forth at the end of this release.
(2)   Service hours is defined as well servicing hours of service provided to customers and includes paid rig move and standby.
(3)   The Company reports its service rig utilization for its operational service rigs in North America based on service hours of 3,650 per rig per year to reflect standard 10 hour operations per day. Utilization for the Company’s service rigs in Australia is calculated based on service hours of 8,760 per rig per year to reflect standard 24 hour operations.}

First quarter WS segment revenue and EBITDA increased in 2023 as compared to 2022 due to improved North American activity and pricing. Partially offsetting the improved North American results was weaker Australian results resulting from lower activity levels and a reduced effective hourly rate due to relatively higher standby hours as compared to the first quarter of 2022. Contributing to lower Australian activity levels during the first quarter of 2023 was the removal of one service rig for required recertifications. This rig is expected to be redeployed later in 2023.

Corporate

During the first quarter of 2023, Total Energy was focused on the safe and efficient operation of its business, the deployment of equipment upgraded pursuant to its 2022 capital program and the execution of its preliminary 2023 capital expenditure program. After funding $30.3 million of capital expenditures and $3.8 million of debt, lease and interest obligations, Total Energy generated $14.6 million of free cash flow during the quarter that was directed towards funding working capital requirements as well as $5.0 million of voluntary debt reduction, $8.0 million of share repurchases and $2.5 million of dividends.

Total Energy exited the first quarter of 2023 with $111.3 million of positive working capital, including $28.2 million of cash, and $150 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 March 31, 2023 was 5.15%.

Outlook

While continued global economic uncertainty and a relatively warm winter in the northern hemisphere have contributed to oil price volatility and lower natural gas prices, industry conditions generally remain positive. Current indications are that near term industry activity levels will remain stable on a seasonally adjusted basis, with the CPS segment’s significant fabrication backlog providing visibility for that segment for the remainder of 2023. In this environment, Total Energy remains focused on the safe and efficient operation of its business, the disciplined deployment of capital and opportunities to enhance shareholder value.

On April 12, 2023, Total Energy’s syndicated revolving credit facility was extended to November 10, 2026. In order to reduce finance costs, Total Energy requested such facility be reduced by $50 million to $170 million. With $70 million drawn on this facility, $100 million of additional credit is currently available to the Company. In addition, a subsidiary of the Company maintains a $5.0 million revolving credit facility that remains undrawn and fully available.

Total Energy’s Board of Directors has approved a $14.4 million increase to the Company’s 2023 capital expenditure budget to $66.1 million, of which $30.3 million has been expended to March 31, 2023. This increase is primarily directed towards equipment upgrades and recertifications. Included in the increased capital budget is the recertification and retrofitting of an AC triple drilling rig that the Company has recently moved to Canada from the United States. Such rig has been contracted on a take or pay basis and is expected to commence operations in June 2023. Total Energy intends to fund the remaining $35.8 million of its increased 2023 capital expenditure program with cash on hand and cash flow.

Annual Meeting of Shareholders

Shareholders and other interested persons are invited to attend Total Energy’s annual meeting of Shareholders which will take place on Tuesday, May 16, 2023 at 10:00 am (Mountain Time) at the Calgary Petroleum Club, 319 – 5^th Avenue S.W., Calgary, Alberta.  

Conference Call

At 9:00 a.m. (Mountain Time) on May 12, 2023 Total Energy will conduct a conference call and webcast to discuss its first 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 June 12, 2023 by dialing (855) 669-9658 (passcode 0057).

Selected Financial Information

Selected financial information relating to the three months ended March 31, 2023 and 2022 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 2022 Annual report.

Consolidated Statements of Financial Position
(in thousands of Canadian dollars)

Consolidated Statements of Comprehensive Income
(in thousands of Canadian dollars except per share amounts)
(unaudited)

Condensed Interim Consolidated Statements of Comprehensive Income (Loss)

Consolidated Statements of Cash Flows
(in thousands of Canadian dollars)
(unaudited)

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.

As at and for the three months ended March 31, 2023 (unaudited, in thousands of Canadian dollars)

As at and for the three months ended March 31, 2022 (unaudited, in thousands of Canadian dollars)

^{(1)   Corporate includes the Company’s corporate activities and obligations pursuant to long-term credit facilities.
(2)   Includes property, plant and equipment, lease asset (excluding current portion) and goodwill.}

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

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.