Total Energy Services Inc. ("Total Energy" or the "Company") (TSX:TOT) announces
its consolidated financial results for the three and nine months ending
September 30, 2013.
Financial Highlights
($000's except per share data)
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Three Months Ended Nine Months Ended
September 30 September 30
(unaudited) (unaudited)
% %
2013 2012 Change 2013 2012 Change
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Revenue $ 89,060 $ 73,517 21% $ 252,639 $ 229,298 10%
Operating Earnings
(1) 13,698 12,979 6% 38,631 50,415 (23)%
EBITDA (1) 20,752 20,078 3% 59,800 69,333 (14)%
Cashflow (1) (5) 18,899 20,184 (6)% 36,456 69,839 (48)%
Net Income 9,109 9,456 (4)% 26,614 37,167 (28)%
Per Share Data
(Diluted) (2)
EBITDA (1) $ 0.61 $ 0.58 5% $ 1.76 $ 1.99 (12)%
Cashflow (1) (5) $ 0.55 $ 0.58 (5)% $ 1.07 $ 2.01 (47)%
Net Earnings $ 0.29 $ 0.30 (3)% $ 0.86 $ 1.16 (26)%
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Sept. 30 Dec. 31
2013 2012 %
(unaudited) (audited) Change
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Financial Position
Total Assets $ 494,362 $ 476,591 4%
Long-Term Debt,
Convertible
Debentures and
Obligations Under
Finance Leases
(excluding current
portion) 66,236 65,417 1%
Working Capital (3) 90,440 90,708 -
Net Debt (4) Nil Nil -
Shareholders'
Equity 329,901 306,069 8%
Shares Outstanding
(000's)
Basic 31,091 30,600 2%
Diluted (2) 34,537 34,300 1%
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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 nine months ended September 30, 2013
reflect continued momentum in the Company's Compression and Process Services
division offset by lower completion and well servicing activity in Western
Canada as compared to the first nine months of 2012 that negatively impacted the
Rentals and Transportation Services division. While activity levels in the
Company's Contract Drilling Services division increased during the third quarter
of 2013 as compared to the third quarter of 2012, pricing in this division did
not increase to the extent necessary to offset a 7% increase in cost of
services, resulting in reduced gross margins and divisional profitability.
Total Energy's Contract Drilling Services division achieved 54% utilization
during the third quarter of 2013, recording 798 operating days (spud to release)
with a fleet of 16 rigs, compared to 677 operating days, or 49% utilization,
during the third quarter of 2012 with a fleet of 15 rigs. Revenue per operating
day decreased 2% for the third 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 40% during the third quarter of 2013 as compared to a
44% utilization rate during the third quarter of 2012. Revenue per utilized
rental piece decreased 14% for the third quarter of 2013 compared to the same
period in 2012, due primarily to lower pricing given the current competitive
landscape. The Compression and Process Services division generated revenues of
$48.8 million for the three months ended September 30, 2013 compared to $30.2
million for the same period in 2012, an increase of 62%. The 2013 third 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 third quarter of 2013 with a $57.6 million backlog of fabrication sales
orders as compared to $35.2 million at September 30, 2012. Included in the
September 30, 2013 fabrication sales order backlog is $46.2 million of
compression sales backlog and $11.4 million of process equipment sales backlog.
At September 30, 2013, approximately 35,700 horsepower of compression equipment
was on rent compared to 28,300 horsepower on rent at September 30, 2012. The gas
compression rental fleet operated at an average utilization rate of 85% for the
third quarter of 2013 as compared to 84% during the same period in 2012.
Negatively impacting cash flow for the first nine months 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 that amounted to
approximately $9.5 million for the first nine months of 2013.
During the third quarter, Total Energy declared a quarterly dividend of $0.05
per share to shareholders of record on September 30, 2013. This dividend was
paid on October 31, 2013. 89,200 common shares were purchased under the
Company's normal course issuer bid during the three months ended September 30,
2013 at an average price of $16.14 per share (including commissions).
Outlook
While drilling activity levels in Western Canada during the third quarter of
2013 were modestly higher than the third quarter of 2012, well completion and
well servicing activity continued to lag behind 2012 activity levels, due in
part to extended wet weather conditions during July and the first part of
August. Current demand for the Company's drilling rigs is strong and suggests
the upcoming winter drilling season will be active. While increased drilling
activity in Western Canada is positive for the Rentals and Transportation
Services division, increased completion and well service activity will be
required to substantially improve rental equipment utilization. The substantial
fabrication sales backlog enjoyed by the Compression and Process Services
division reflects continued solid demand for the Company's compression and
process equipment.
Total Energy's financial condition remains solid with a long-term debt
(including convertible debentures) to long-term debt plus equity ratio of 0.17
to 1.0, $90.4 million of positive working capital and no net debt as at
September 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 third 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 November 19, 2013 by dialing
(800) 408-3053 (passcode 4497761).
Selected Financial Information
Selected financial information relating to the three and nine month periods
ended September 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 third quarter report.
Condensed Interim Consolidated Statements of Financial Position
(in thousands of Canadian dollars)
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September 30, December 31,
2013 2012
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(unaudited) (audited)
Assets
Current assets:
Cash and cash equivalents $ 22,191 $ 50,052
Accounts receivable 71,223 63,511
Inventory 34,677 33,240
Income taxes receivable 4,410 -
Prepaid expenses and deposits 5,883 2,547
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138,384 149,350
Property, plant and equipment 351,925 323,188
Goodwill 4,053 4,053
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$ 494,362 $ 476,591
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Liabilities & Shareholders' Equity
Current liabilities:
Accounts payable and accrued liabilities $ 38,495 $ 32,523
Deferred revenue 5,694 6,971
Income taxes payable - 15,098
Dividends payable 1,555 1,530
Current portion of obligations under finance
leases 2,200 2,520
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47,944 58,642
Obligations under finance leases 2,247 2,723
Convertible debentures 63,989 62,694
Deferred tax liability 50,281 46,463
Shareholders' equity:
Share capital 82,051 76,890
Contributed surplus 6,294 5,160
Equity portion of convertible debenture 4,601 4,601
Retained earnings 236,955 219,418
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329,901 306,069
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$ 494,362 $ 476,591
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Condensed Interim Consolidated Statements of Comprehensive Income
(in thousands of Canadian dollars except per share amounts)
----------------------------------------------------------------------------
Three months ended Nine months ended
September 30 September 30
2013 2012 2013 2012
----------------------------------------------------------------------------
(unaudited) (unaudited) (unaudited) (unaudited)
Revenue $ 89,060 $ 73,517 $ 252,639 $ 229,298
Cost of services 60,573 46,569 169,076 137,826
Selling, general and
administration 7,188 6,764 22,358 21,594
Share-based compensation 643 1,092 2,556 2,023
Depreciation 6,958 6,113 20,018 17,440
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Results from operating
activities 13,698 12,979 38,631 50,415
Gain on sale of property,
plant and equipment 96 986 1,151 1,478
Finance costs (1,394) (1,149) (4,109) (3,678)
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Net income before income
taxes 12,400 12,816 35,673 48,215
Current income tax expense 1,954 5,355 5,241 9,525
Deferred income tax
expense (recovery) 1,337 (1,995) 3,818 1,523
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Total income tax expense
(recovery) 3,291 3,360 9,059 11,048
Net income and total
comprehensive income for
the period $ 9,109 $ 9,456 $ 26,614 $ 37,167
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Earnings per share
Basic earnings per share $ 0.30 $ 0.31 $ 0.87 $ 1.19
Diluted earnings per share $ 0.29 $ 0.30 $ 0.86 $ 1.16
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Condensed Interim Consolidated Statements of Cash Flows
(in thousands of Canadian dollars)
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Three months ended Nine months ended
September 30 September 30
2013 2012 2013 2012
----------------------------------------------------------------------------
(unaudited) (unaudited) (unaudited) (unaudited)
Cash provided by (used in):
Operations:
Net income for the period $ 9,109 $ 9,456 $ 26,614 $ 37,167
Add (deduct) items not
affecting cash:
Depreciation 6,958 6,113 20,018 17,440
Share-based compensation 643 1,092 2,556 2,023
Gain on sale of
property, plant and
equipment (96) (986) (1,151) (1,478)
Finance costs 1,394 1,149 4,109 3,678
Current income tax
expense 1,954 5,355 5,241 9,525
Deferred income tax
expense (recovery) 1,337 (1,995) 3,818 1,523
Income taxes paid (2,400) - (24,749) (39)
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18,899 20,184 36,456 69,839
Changes in non-cash
working capital items:
Accounts receivable (17,353) (4,745) (7,712) 34,735
Inventory (1,553) 1,399 1,517 2,293
Prepaid expenses and
deposits (1,385) (726) (3,336) (958)
Accounts payable and
accrued liabilities 6,674 (484) 6,435 (7,606)
Deferred revenue (1,402) (2,106) (1,277) 544
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3,880 13,522 32,083 98,847
Investments:
Purchase of property,
plant and equipment (19,400) (18,870) (36,472) (60,291)
Acquisition of business - - (16,954) -
Proceeds on disposal of
property, plant and
equipment 841 4,460 4,351 6,207
Changes in non-cash
working capital items 5,103 2,286 880 (1,900)
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(13,456) (12,124) (48,195) (55,984)
Financing:
Repayment of obligations
under finance leases (795) (757) (2,279) (2,500)
Dividends to shareholders (1,530) (1,550) (4,598) (4,370)
Issuance of common shares 3,277 - 4,705 1,197
Repurchase of common
shares (1,427) (3,837) (5,420) (13,634)
Interest paid (1,794) (1,740) (4,157) (3,820)
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(2,469) (7,884) (11,749) (23,127)
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Change in cash and cash
equivalents (12,045) (6,486) (27,861) 19,736
Cash and cash equivalents,
beginning of period 34,236 61,880 50,052 35,658
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Cash and cash equivalents,
end of period $ 22,191 $ 55,394 $ 22,191 $ 55,394
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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 Contract Rentals and Compression
September 30, Drilling Transportation and Process
2013 Services Services Services Other(1) Total
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Revenue $ 14,772 $ 25,508 $ 48,780 $ - $ 89,060
Cost of services 9,460 12,248 38,865 - 60,573
Selling, general
and
administration 841 3,250 2,048 1,049 7,188
Share-based
compensation - - - 643 643
Depreciation 1,597 3,722 1,630 9 6,958
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Results from
operating
activities 2,874 6,288 6,237 (1,701) 13,698
Gain on sale of
property, plant
and equipment - (19) 115 - 96
Finance costs (204) (552) (241) (397) (1,394)
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Net income
(loss) before
income taxes 2,670 5,717 6,111 (2,098) 12,400
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Goodwill - 2,514 1,539 - 4,053
Total assets 102,233 224,203 153,071 14,855 494,362
Total
liabilities 19,583 43,570 32,388 68,920 164,461
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Capital
expenditures $ 2,816 $ 5,255 $ 9,855 $ 1,474 $ 19,400
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As at and for
the three
months ended Contract Rentals and Compression
September 30, Drilling Transportation and Process
2012 Services Services Services Other(1) Total
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Revenue $ 12,782 $ 30,563 $ 30,172 $ - $ 73,517
Cost of services 7,516 14,030 25,022 1 46,569
Selling, general
and
administration 760 3,306 1,628 1,070 6,764
Share-based
compensation - - - 1,092 1,092
Depreciation 1,320 3,787 997 9 6,113
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Results from
operating
activities 3,186 9,440 2,525 (2,172) 12,979
Gain on sale of
property, plant
and equipment 21 140 825 - 986
Finance costs (254) (583) (69) (243) (1,149)
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Net income
(loss) before
income taxes 2,953 8,997 3,281 (2,415) 12,816
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Goodwill - 2,514 1,539 - 4,053
Total assets 95,887 223,830 92,644 46,415 458,776
Total
liabilities 18,460 47,573 19,369 75,950 161,352
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Capital
expenditures $ 5,144 $ 11,409 $ 2,291 $ 26 $ 18,870
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As at and for
the nine months Contract Rentals and Compression
ended September Drilling Transportation and Process
30, 2013 Services Services Services Other(1) Total
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Revenue $ 37,687 $ 79,225 $ 135,727 $ - $252,639
Cost of services 24,158 37,933 106,985 - 169,076
Selling, general
and
administration 2,409 10,048 6,331 3,570 22,358
Share-based
compensation - - - 2,556 2,556
Depreciation 3,907 11,414 4,668 29 20,018
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Results from
operating
activities 7,213 19,830 17,743 (6,155) 38,631
Gain (loss) on
sale of
property, plant
and equipment (22) 216 957 - 1,151
Finance costs (608) (1,648) (658) (1,195) (4,109)
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Net income
before income
taxes 6,583 18,398 18,042 (7,350) 35,673
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Goodwill - 2,514 1,539 - 4,053
Total assets 102,233 224,203 153,071 14,855 494,362
Total
liabilities 19,583 43,570 32,388 68,920 164,461
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Capital
expenditures
(2) $ 4,547 $ 12,657 $ 31,248 $ 2,020 $ 50,472
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As at and for
the nine months Contract Rentals and Compression
ended September Drilling Transportation and Process
30, 2012 Services Services Services Other(1) Total
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Revenue $ 39,896 $ 102,004 $ 87,398 $ - $229,298
Cost of services 22,323 42,884 72,622 (3) 137,826
Selling, general
and
administration 2,556 10,960 4,501 3,577 21,594
Share-based
compensation - - - 2,023 2,023
Depreciation 3,604 10,953 2,854 29 17,440
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Results from
operating
activities 11,413 37,207 7,421 (5,626) 50,415
Gain on sale of
property, plant
and equipment 65 409 1,004 - 1,478
Finance costs (760) (1,740) (262) (916) (3,678)
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Net income
before income
taxes 10,718 35,876 8,163 (6,542) 48,215
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Goodwill - 2,514 1,539 - 4,053
Total assets 95,887 223,830 92,644 46,415 458,776
Total
liabilities 18,460 47,573 19,369 75,950 161,352
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Capital
expenditures $ 12,433 $ 31,546 $ 14,472 $ 1,840 $ 60,291
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(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 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 nine months ended September 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.
FOR FURTHER INFORMATION PLEASE CONTACT:
Total Energy Services Inc.
Daniel Halyk
President & Chief Executive Officer
(403) 216-3921
Total Energy Services Inc.
Mark Kearl
Vice-President Finance and Chief Financial Officer
(403) 216-3920
investorrelations@totalenergy.ca
www.totalenergy.ca
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