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Press release from Marketwire

CORRECTION FROM SOURCE: Total Energy Services Inc. Announces Q1 2010 Results

Wednesday, May 12, 2010

CORRECTION FROM SOURCE: Total Energy Services Inc. Announces Q1 2010 Results12:53 EDT Wednesday, May 12, 2010 CALGARY, ALBERTA--(Marketwire - May 12, 2010) - Total Energy Services Inc. ("Total Energy" or the "Company") (TSX:TOT) announces its consolidated financial results for the three months ending March 31, 2010. Financial Highlights ($000's except per share data) Three Months Ended March 31 (Unaudited) 2010 2009 % Change ------------------------------------------- Revenue $ 57,812 $ 44,485 30% Operating Earnings (1) 13,790 10,261 34% EBITDA (1) 20,245(4) 14,458 40% Cashflow (1) 19,314(4) 12,438 55% Net Earnings 13,045(4) 8,560 52% Per Share Data (Diluted) EBITDA (1) $ 0.66 $ 0.50 32% Cashflow (1) 0.63 0.43 47% Net Earnings 0.43 0.29 48% Mar. 31 Dec. 31 2010 2009 (Unaudited) (Audited) % Change Financial Position Total Assets $ 317,151 $ 234,774 35% Long-Term Debt 55,000 34,950 57% Working Capital (2) 33,306 29,493 13% Net Debt (3) 24,708 6,220 297% Shareholders' Equity 180,867 155,629 16% Shares Outstanding (000's) Basic 31,027 29,176 6% Diluted 31,713 29,176 9% 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 March 31, 2010 reflect increased activity levels in the Contract Drilling Services and the Rentals and Transportation Services divisions as compared to the prior year comparable period and the impact of the acquisition of DC Energy Services LP ("DC Energy") on January 15, 2010. Offsetting the impact of increased year over year industry drilling activity levels was lower average pricing in the Contract Drilling Services and Rentals and Transportation Services divisions as the impact of lower spot market pricing that began in early 2009 was fully realized in the first quarter of 2010. Continued weakness in natural gas prices resulted in lower revenues from the Gas Compression Services division as compared to the prior year period. Excluded from the first quarter financial results is $0.8 million ($0.03/share diluted) of EBITDA, cashflow and net earnings for DC Energy for the period from January 1, 2010 to January 14, 2010. This amount has been recorded as a reduction to the purchase price paid for DC Energy, which acquisition was effective January 1, 2010 and was completed on January 15, 2010.Total Energy's Contract Drilling Services division achieved 922 operating days (spud to release) with an average fleet of 14 rigs operating during the first quarter of 2010, which translates into a utilization rate of 73%, as compared to 409 operating days (35% utilization) with a fleet of 13 rigs during the first quarter of 2009. Over two thirds of Total Energy's drilling rig fleet was involved in oil well drilling activity during the first three months of 2010. The Rentals and Transportation Services division achieved a utilization rate on rental equipment of 61% during the first three months of 2010 as compared to a 54% utilization rate during the first quarter of 2009. The revenue reported from Total Energy's Gas Compression Services division during the first quarter of 2010 decreased to $9.1 million compared to $16.0 million achieved during the same period in 2009. At March 31, 2010 the Gas Compression Services division had a fabrication backlog of approximately $20.4 million compared to a backlog of $9.1 million as at March 31, 2009 and there was approximately 18,700 horsepower of compression equipment on rent as compared to approximately 13,200 at March 31, 2009. The gas compression rental fleet operated at an average utilization rate of 75% during the first three months of 2010 (based on fleet horsepower).During the first quarter, Total Energy declared a quarterly dividend of $0.03 per share to shareholders of record on March 31, 2010. This dividend was paid on April 30, 2010.OUTLOOKTotal Energy is cautiously optimistic as to industry conditions for 2010. Industry activity levels during the first quarter exceeded expectations as well as the prior year comparable period, driven primarily by oil directed drilling and completion activity. Continued strength of crude oil prices and recent industry capacity contraction and consolidation in the natural gas compression industry give rise to such optimism although the Company is cognizant of global economic and financial market uncertainties.Activity levels in Total Energy's Contract Drilling Services division during the second quarter to date have increased significantly as compared to 2009. While the second quarter is typically the slowest quarter due to spring breakup, during the month of April 2010 the Contract Drilling Services division generated more operating days than the entire second quarter of 2009.Effective March 1, 2010, the operations of DC Energy and Total Energy's drilling and production rental division were combined and now operate as Total Oilfield Rentals Limited Partnership. Going forward, this business division will be referred to as the Rentals and Transportation Services division. Total Energy has been focused on the integration of DC Energy and cost savings realized to date on an annualized basis are approximately $2.0 million. In addition, at least $1.9 million of revenue synergies (being the displacement of third party equipment and service) were realized during the first quarter of 2010. Additional potential revenue synergies have been identified, particularly in regards to an expansion of the Company's heavy truck fleet, and Total Energy is currently evaluating these opportunities.Despite a challenging natural gas price environment, the opportunity exists to grow Total Energy's Gas Compression Services division, Bidell Gas Compression. Beginning in the first quarter of 2010, Total Energy took steps to substantially bolster the senior management team at Bidell in all areas, including corporate, sales and parts and service. With the addition of management capacity, Bidell has taken steps to increase its fabrication and parts and service capacity, including the recent addition of 18,000 square feet of leased fabrication space in Calgary which represents an approximate 40% increase to existing fabrication capacity.Total Energy's balance sheet remains strong with a long-term debt (including current portion) to long-term debt plus equity ratio of 0.28 to 1.0, $33.3 million of positive working capital and $24.7 million of net debt as at March 31, 2010. On March 1, 2010, the $12.5 million convertible debenture issued in connection with the acquisition of DC Energy was converted into 1.79 million common shares of Total Energy.CONFERENCE CALLAt 2:30 p.m. MST today, Total Energy will conduct a conference call to discuss its Q1 2010 financial results. Daniel Halyk, President and Chief Executive Officer will host the conference call. The call is open to shareholders and other interested persons. If you wish to participate, call (877) 240-9772. Those who are unable to listen to the call live may listen to a recording of it by calling (800) 408-3053 (password 5804287). The recording will be available until May 19, 2010.ANNUAL AND SPECIAL MEETING OF SHAREHOLDERSShareholders and other interested persons are invited to attend the annual and special meeting of Shareholders which will commence at 10:00 a.m. (Calgary time) on Monday, May 17, 2010 at the Calgary Petroleum Club, 319 - 5th Avenue S.W., Calgary, Alberta.SELECTED FINANCIAL INFORMATIONSelected financial information relating to the three month period ended March 31, 2010 and 2009 is attached to this press release. This information should be read in conjunction with the unaudited interim consolidated financial statements of Total Energy and the attached notes to the unaudited interim consolidated financial statements and management's discussion and analysis to be issued in due course and reproduced in the Corporation's first quarter report. Consolidated Balance Sheets (in thousands of Canadian dollars) March 31, December 31, 2010 2009 ---------------------------------------------------------------------------- (unaudited) Assets Current assets: Cash and cash equivalents $ 2,545 $ - Accounts receivable 53,117 22,104 Inventory 27,504 28,408 Income tax receivable 2,885 2,848 Prepaid expenses and deposits 2,128 2,309 ------------------------------- 88,179 55,669 Property, plant and equipment 224,919 175,052 Goodwill 4,053 4,053 ------------------------------- $ 317,151 $ 234,774 ------------------------------- ------------------------------- Liabilities & Shareholders' Equity Current liabilities: Accounts payable and accrued liabilities 36,702 15,976 Dividends Payable 931 875 Current portion of long-term debt 15,000 8,737 Obligations under capital leases 2,240 588 ------------------------------- 54,873 26,176 Long-term debt 55,000 34,950 Obligations under capital leases 3,014 763 Future income taxes 14,580 5,681 Deferred tax credit 8,817 11,575 Shareholders' equity: Share capital 73,650 60,777 Contributed surplus 1,425 1,174 Retained earnings 105,792 93,678 ------------------------------- 180,867 155,629 Contingencies and commitments ------------------------------- $ 317,151 $ 234,774 ------------------------------- ------------------------------- Supplemental Information: Number of common shares outstanding (000's) - Basic 31,027 29,176 Number of common shares outstanding (000's) - Diluted 31,713 29,176 Consolidated Statements of Earnings and Retained Earnings (in thousands of Canadian dollars except per share amounts) Three months ended March 31 2010 2009 ---------------------------------------------------------------------------- (unaudited) (unaudited) Revenue $ 57,812 $ 44,485 Expenses: Operating 31,525 25,702 Selling, general and administration 6,138 4,568 Share-based compensation 322 - Depreciation 5,202 3,545 Other interest 51 189 Interest on long-term debt 784 220 ------------------------------- 44,022 34,224 ------------------------------- Operating earnings 13,790 10,261 Gain on disposal of equipment 418 243 ------------------------------- Earnings before income taxes 14,208 10,504 Income tax expense Current - 1,368 Future 1,163 576 ------------------------------- 1,163 1,944 ------------------------------- Net earnings 13,045 8,560 ------------------------------- Retained earnings, beginning of period 93,678 87,349 Dividends (931) - Trust distributions - (2,615) Repurchase and cancellation of trust units in excess of stated trust unit capital - (12) ------------------------------- Retained earnings, end of period $ 105,792 $ 93,282 ------------------------------- ------------------------------- Earnings per share: Basic $ 0.44 $ 0.29 Diluted $ 0.43 $ 0.29 Consolidated Statements of Cash Flows (in thousands of Canadian dollars) Three months ended March 31 2010 2009 ---------------------------------------------------------------------------- (unaudited) (unaudited) Cash provided by (used in): Operations: Net earnings $ 13,045 $ 8,560 Add (deduct) items not affecting cash: Depreciation 5,202 3,545 Share-based compensation 322 - Gain on disposal of equipment (418) (243) Future income taxes 1,163 576 ------------------------------- 19,314 12,438 Changes in non-cash working capital items: Accounts receivable (31,013) 2,289 Inventory 1,670 125 Income taxes receivable (37) - Prepaid expenses and deposits 181 (97) Accounts payable and accrued liabilities 20,842 (5,038) Dividends payable 56 - Income taxes payable - (1,301) ------------------------------- 11,013 8,416 Investments: Purchase of property, plant and equipment (3,658) (4,016) DC Energy Services LP acquisition (31,714) - Proceeds on disposal of property, plant and equipment 1,927 1,251 Changes in non-cash working capital items (116) (4,719) ------------------------------- (33,561) (4,484) Financing: Advances of long-term debt 31,313 5,000 Repayments of long-term debt (5,000) (2,177) Repayment of obligations under capital leases (592) (121) Repurchase of trust units - (27) Dividends to Shareholders (931) - Distributions to Unitholders - (2,615) Issuance of common shares 303 - Decrease in bank indebtedness - (992) ------------------------------- 25,093 (932) ------------------------------- Change in cash 2,545 - Cash and cash equivalents, beginning of period - - ------------------------------- Cash and cash equivalents, end of period $ 2,545 $ - ------------------------------- ------------------------------- Supplemental information: Interest paid $ 835 $ 485 Income taxes paid $ - $ 2,669 SEGMENTED INFORMATIONThe Corporation operates in three main industry segments, which are substantially in one geographic segment. These segments are Contract Drilling Services, which includes the contracting of oil and natural gas 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 oil and natural gas drilling, completion and production operations and Gas Compression Services, which includes the fabrication, sale, rental and servicing of natural gas compression equipment. As at and for the three months ended March 31, 2010 (unaudited) Contract Rentals and Gas Drilling Transportation Compression Services Services Services Other (2) Total ---------------------------------------------------------------------------- Revenue $ 12,933 $ 35,730 $ 9,149 $ - $ 57,812 Operating earnings (loss) (1) 1,490 12,864 692 (1,256) 13,790 Depreciation 1,775 2,994 426 7 5,202 Assets 77,707 180,697 57,119 1,628 317,151 Goodwill - 2,514 1,539 - 4,053 Capital expenditures (3) 729 276 2,642 11 3,658 As at and for the three months ended March 31, 2009 (unaudited) Contract Rentals and Gas Drilling Transportation Compression Services Services Services Other (2) Total ---------------------------------------------------------------------------- Revenue $ 7,016 $ 21,496 $ 15,973 $ - $ 44,485 Operating earnings (loss) (1) 1,362 8,223 1,373 (697) 10,261 Depreciation 851 2,349 338 7 3,545 Assets 71,510 118,011 55,348 1,235 246,104 Goodwill - 2,514 1,539 - 4,053 Capital expenditures 2,261 941 414 - 4,016 (1) Operating earnings (loss) are earnings before gain on disposal of equipment and income taxes. (2) Other includes the Company's corporate activities. (3) Excludes the acquisition of DC Energy. Total Energy Services Inc. is a growth oriented energy services corporation involved in contract drilling services, rentals and transportation services and natural gas compression equipment fabrication, sales, rental and service. The shares of Total Energy are listed and trade on the TSX under the symbol TOT.Notes to the Financial Highlights(1) Operating earnings are earnings before reorganization costs, gain (loss) on disposal of equipment and income taxes. EBITDA means earnings before interest, taxes, depreciation and amortization and is equal to earnings before income taxes plus interest on long-term debt plus other interest 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 Canadian generally accepted accounting principles ("GAAP"). Management believes in addition to net earnings, operating earnings, EBITDA and cashflow are useful supplemental measures as they provide an indication of the results generated by the Corporation'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 Corporation's primary business activities without consideration of the timing of the monetization of non-cash working capital items. Investors should be cautioned, however, that operating earnings, EBITDA and cashflow should not be construed as an alternative to net earnings determined in accordance with GAAP 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) Working capital equals current assets minus current liabilities.(3) Net Debt equals long-term debt plus obligations under capital leases plus current liabilities minus current assets.(4) Excludes $0.8 million ($0.03 per share diluted) of EBITDA, cashflow and net earnings of DC Energy for the period from January 1 to January 14, 2010. This amount was recorded as a reduction to the purchase price of DC Energy, which acquisition was effective January 1, 2010 and was completed on January 15, 2010.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.FOR FURTHER INFORMATION PLEASE CONTACT: Total Energy Services Inc. Daniel Halyk President & Chief Executive Officer (403) 216-3921 or Total Energy Services Inc. Mark Kearl Vice-President Finance and Chief Financial Officer (403) 216-3920 investorrelations@totalenergy.ca www.totalenergy.ca The Toronto Stock Exchange has neither approved nor disapproved of the information contained herein.