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Press release from Marketwire

Total Energy Services Inc. Announces Q2 2011 Results

Wednesday, August 10, 2011

Total Energy Services Inc. Announces Q2 2011 Results11:04 EDT Wednesday, August 10, 2011CALGARY, ALBERTA--(Marketwire - Aug. 10, 2011) - Total Energy Services Inc. (TSX:TOT) ("Total Energy" or the "Company"), announces its consolidated financial results for the three and six-month periods ending June 30, 2011.Financial Highlights($000's except per share data) Three Months Ended Six Months Ended June 30 June 30 (Unaudited) (Unaudited) % % 2011 2010 Change 2011 2010 Change ------------------------------------------------------Revenue $62,159 $37,061 68% $147,264 $ 95,899 54%Operating Earnings (1) 9,760 1,904 413% 36,206 16,426 120%EBITDA (1) 15,501 6,494 139% 48,692 26,447 84%Cashflow (1) 15,308 6,831 124% 48,509 26,688 82%Net Income 6,392 1,475 333% 25,222 11,684 116%Per Share Data (Diluted)EBITDA (1) $ 0.44 $ 0.21 110% $ 1.40 $ 0.85 65%Cashflow (1) 0.39 0.22 77% 1.40 0.86 63%Net Earnings 0.20 0.05 300% 0.77 0.38 103% June 30 Dec. 31 2011 2010 (Unaudited) (Audited) % ChangeFinancial PositionTotal Assets $370,323 $ 342,834 8%Long-Term Debt, Convertible Debentures and Obligations Under Finance Leases 66,281 78,717 (16)%Working Capital (2) 93,486 64,446 45%Net Debt (3) - 5,026 n/mShareholders' Equity 237,360 209,845 13%Shares Outstanding (000's)Basic 31,525 31,425 n/mDiluted 35,445 32,096 10%Notes 1 through 3 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 June 30, 2011 represent record second quarter operating results despite prolonged wet weather conditions throughout Western Canada that negatively impacted industry activity levels. Contributing to these results were improved pricing in the Contract Drilling Services division, increased equipment utilization in the Rentals and Transportation Services division and improving sequential quarterly performance in the Gas Compression Services division, including an increased contribution from this division's parts and service business.Total Energy's Contract Drilling Services division achieved 32% utilization during the second quarter of 2011, recording 407 operating days (spud to release) with a fleet of 14 rigs, compared to 427 operating days, or 34% utilization during the second quarter of 2010. Revenue per operating day realized during the second quarter of 2011 increased 32% compared to the second quarter of 2010 due primarily to improved pricing. The Rentals and Transportation Services division achieved a utilization rate on major rental equipment of 52% during the second quarter of 2011 as compared to a 39% utilization rate during the second quarter of 2010. The Gas Compression Services division generated revenues of $28.6 million for the three months ended June 30, 2011 compared to $14.0 for the second quarter of 2010. At June 30, 2011 the Gas Compression Services division had a fabrication backlog of approximately $48.3 million compared to a backlog of $11.0 million as at June 30, 2010. At June 30, 2011 approximately 22,700 horsepower of compression equipment was on rent compared to 18,700 horsepower on rent at June 30, 2010. The gas compression rental fleet operated at an average utilization rate of 78% during the first six months of 2011 as compared to 77% for the same period in 2010.During the second quarter, Total Energy declared a quarterly dividend of $0.04 per share to shareholders of record on June 30, 2011. This dividend was paid on July 29, 2011.Total Energy is reporting its financial results in accordance with International Financial Reporting Standards ("IFRS") effective January 1, 2011. A description of the impact of the implementation of IFRS on the Company's financial results is contained in the Company's Unaudited Interim Consolidated Financial Statements and related Management Discussion and Analysis as at and for the three and six months ended June 30, 2011, which documents will be filed with regulators and available on SEDAR in due course.OUTLOOKRelatively strong oil and natural gas liquids prices and a delayed commencement of summer drilling and completion activity in Western Canada due to wet weather have contributed to strong demand for the equipment and services provided by Total Energy. With recently improved weather conditions, industry activity levels have rebounded.Execution of Total Energy's current 2011 capital expenditure budget of $71.3 million is currently on time and on budget, with all equipment expected to be deployed over the second half of 2011 in time for the upcoming winter drilling season. Included in the current capital expenditure budget is $40.5 million for upgrade and expansion of the Rentals and Transportation Services division's equipment fleet, $13.3 million for the construction of Rig 15 and ancillary equipment for the Contract Drilling Services division and $12.4 million for the Gas Compression Services division, including $10.4 million budgeted for expansion of the gas compression rental fleet. Total Energy continues to evaluate additional opportunities to grow its existing businesses.In early July, Total Energy's Gas Compression Services division expanded its fabrication capacity by opening a third fabrication facility in Calgary. This 17,400 square foot facility expands the Company's fabrication capacity by approximately 20% and will be dedicated to fabricating Total Energy's patented NOMADTM line of mobile compression.Total Energy's financial position remains strong with a long-term debt (including $69 million of principal amount of convertible debentures) to long-term debt plus equity ratio of 0.23 to 1.0 and no net debt as at June 30, 2011. The Company's $35 million secured bank facility is currently fully available and unutilized.CONFERENCE CALLAt 2:30 p.m. MST today, Total Energy will conduct a conference call 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. 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 (passcode 4875857). The recording will be available until August 17, 2011.SELECTED FINANCIAL INFORMATIONSelected financial information relating to the three and six-month periods ended June 30, 2011 and 2010 is attached to this news release. This information should be read in conjunction with the unaudited 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 Corporation's second quarter report.Consolidated Statements of Financial Position(in thousands of Canadian dollars) June 30, December 31, 2011 2010---------------------------------------------------------------------------- (unaudited)AssetsCurrent assets: Cash and cash equivalents $ 20,595 $ 228 Accounts receivable 71,570 70,983 Inventory 37,203 33,488 Income taxes receivable 118 118 Prepaid expenses and deposits 1,783 1,818 ------------------------ 131,269 106,635Property, plant and equipment 235,001 232,146Goodwill 4,053 4,053 ------------------------ $ 370,323 $ 342,834 ------------------------ ------------------------Liabilities & Shareholders' EquityCurrent liabilities: Accounts payable and accrued liabilities 25,265 28,353 Deferred revenue 8,170 3,334 Dividends payable 1,261 1,257 Current portion of long-term debt - 6,042 Current portion of obligations under finance leases 3,087 3,203 ------------------------ 37,783 42,189Long-term debt - 66,458Convertible debenture 60,340 -Obligations under finance leases 2,854 3,014Deferred tax liability 31,986 21,328Shareholders' equity: Share capital 77,247 76,268 Contributed surplus 2,175 1,769 Equity portion of convertible debenture 4,601 - Retained earnings 153,337 131,808 ------------------------ 237,360 209,845Contingencies and commitments ------------------------ $ 370,323 $ 342,834 ------------------------ ------------------------Consolidated Statements of Comprehensive Income(in thousands of Canadian dollars except per shareamounts) Three months ended Six months ended June 30 June 30 2011 2010 2011 2010---------------------------------------------------------------------------- (unaudited) (unaudited) (unaudited) (unaudited)Revenue $ 62,159 $ 37,061 $ 147,264 $ 95,899Expenses: Cost of services 40,396 24,150 84,631 56,993 Selling, general and administration 6,416 6,242 14,041 12,380 Share-based compensation 458 292 678 614 Depreciation 5,129 4,473 11,708 9,486 -----------------------------------------------------Results from operating activities 9,760 1,904 36,206 16,426 Gain on disposal of property, plant and equipment 612 117 778 535 Finance costs (1,382) (741) (2,571) (1,576) -----------------------------------------------------Net income before income taxes 8,990 1,280 34,413 15,385 Current income tax expense 39 48 83 48 Deferred income tax expense (recovery) 2,559 (243) 9,108 3,653 -----------------------------------------------------Total income tax expense (recovery) 2,598 (195) 9,191 3,701 -----------------------------------------------------Net income and total comprehensive income for the period 6,392 1,475 25,222 11,684 -----------------------------------------------------Retained earnings, beginning of period 149,377 112,392 131,808 103,114 Dividends (1,261) (931) (2,522) (1,862) Repurchase and cancellation of common shares in excess of stated common share capital (1,171) - (1,171) -----------------------------------------------------Retained earnings, end of period $ 153,337 $ 112,936 $ 153,337 $ 112,936 ----------------------------------------------------- -----------------------------------------------------Earnings per share : Basic $ 0.20 $ 0.05 $ 0.80 $ 0.38 Diluted $ 0.20 $ 0.05 $ 0.77 $ 0.38 Consolidated Statements of Cash Flows(in thousands of Canadian dollars) Three months ended Six months ended June 30 June 30 2011 2010 2011 2010---------------------------------------------------------------------------- (unaudited) (unaudited) (unaudited) (unaudited)Cash provided by (used in):Operations: Net income for the period $ 6,392 $ 1,475 $ 25,222 $ 11,684 Add (deduct) items not affecting cash: Depreciation 5,129 4,473 11,708 9,486 Share-based compensation 458 292 678 614 Gain on sale of property, plant and equipment (612) (117) (778) (535) Finance costs 1,382 741 2,571 1,576 Current income tax expense 39 48 83 48 Future income tax expense (recovery) 2,559 (243) 9,108 3,653 Taxes paid (39) 162 (83) 162 ---------------------------------------------------- 15,308 6,831 48,509 26,688 Changes in non-cash working capital items: Accounts receivable 16,339 20,351 (587) (10,226) Inventory (574) (4,477) (3,715) (1,941) Prepaid expenses and deposits (461) 479 35 687 Accounts payable and accrued liabilities (9,672) (5,490) (5,523) 15,421 Deferred revenue 3,587 (670) 4,836 (2,237) ---------------------------------------------------- 24,527 17,024 43,555 28,392Investments: Purchase of property, plant and equipment (10,860) (5,183) (15,790) (9,037) DC Energy Services LP acquisition - - - (31,093) Proceeds on disposal of property, plant and equipment 2,329 237 3,538 2,164 Changes in non-cash working capital items 1,226 1,900 1,666 1,784 ---------------------------------------------------- (7,305) (3,046) (10,586) (36,182)Financing: Advances under long-term debt - - - 51,182 Issuance of convertible debenture, net of issue costs - - 65,927 - Repayments of long-term debt - (12,500) (72,500) (17,500) Repayment of obligations under finance leases (788) (476) (1,809) (1,068) Dividends to shareholders (1,261) (931) (2,522) (1,862) Dividends payable 4 - 4 56 Issuance of common shares 466 - 948 302 Repurchase of common shares (1,412) - (1,412) - Interest paid (43) (515) (1,238) (1,350) Decrease in bank indebtedness - - - (19,869) ---------------------------------------------------- (3,034) (14,422) (12,602) 9,891 ----------------------------------------------------Change in cash and cash equivalents 14,188 (444) 20,367 2,101Cash and cash equivalents, beginning of period 6,407 2,545 228 - ----------------------------------------------------Cash and cash equivalents, end of period $ 20,595 $ 2,101 $ 20,595 $ 2,101 ---------------------------------------------------- ----------------------------------------------------SEGMENTED INFORMATIONThe 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 Gas Compression Services, which includes the fabrication, sale, rental and servicing of natural gas compression equipment.As at and for the three months ended June 30, 2011 (unaudited) Contract Rentals and Gas Drilling Transportation Compression Services Services Services Other(1) Total----------------------------------------------------------------------------Revenue $ 7,514 $ 26,047 $ 28,598 $ - $ 62,159Cost of services 4,819 11,259 24,318 - 40,396Selling, general and administration 667 3,440 1,412 897 6,416Share-based compensation - - - 458 458Depreciation 869 3,435 813 12 5,129----------------------------------------------------------------------------Results from operating activities 1,159 7,913 2,055 (1,367) 9,760Gain (loss) on sale of property, plant and equipment (8) 174 446 - 612Finance costs (254) (592) (152) (384) (1,382)----------------------------------------------------------------------------Net income before income taxes 897 7,495 2,349 (1,751) 8,990----------------------------------------------------------------------------Goodwill - 2,514 1,539 - 4,053Total assets 74,007 191,268 78,476 26,572 370,323Total liabilities 14,308 32,669 22,615 63,371 132,963----------------------------------------------------------------------------Capital expenditures $ 3,596 $ 4,716 $ 2,547 $ 1 $ 10,860--------------------------------------------------------------------------------------------------------------------------------------------------------As at and for the three months ended June 30, 2010 (unaudited) Contract Rentals and Gas Drilling Transportation Compression Services Services Services Other(1) Total----------------------------------------------------------------------------Revenue $ 5,957 $ 17,089 $ 14,015 $ - $ 37,061Cost of services 4,623 8,516 10,996 15 24,150Selling, general and administration 438 4,097 917 790 6,242Share-based compensation - - - 292 292Depreciation 765 3,168 533 7 4,473----------------------------------------------------------------------------Results from operating activities 131 1,308 1,569 (1,104) 1,904Gain (loss) on sale of property, plant and equipment - 118 (1) - 117Finance costs (124) (517) (80) (20) (741)----------------------------------------------------------------------------Net income before income taxes 7 909 1,488 (1,124) 1,280----------------------------------------------------------------------------Goodwill - 2,514 1,539 - 4,053Total assets 70,573 163,729 59,003 3,655 296,960Total liabilities 14,408 36,729 14,430 43,090 108,657----------------------------------------------------------------------------Capital expenditures $ 1,114 $ 3,837 $ 216 $ 16 $ 5,183--------------------------------------------------------------------------------------------------------------------------------------------------------As at and for the six months ended June 30, 2011 (unaudited) Contract Rentals and Gas Drilling Transportation Compression Services Services Services Other(1) Total----------------------------------------------------------------------------Revenue $ 25,096 $ 70,942 $ 51,226 $ - $ 147,264Cost of services 14,793 26,300 43,538 - 84,631Selling, general and administration 1,459 7,883 2,634 2,065 14,041Share-based compensation - - - 678 678Depreciation 2,577 7,564 1,542 25 11,708----------------------------------------------------------------------------Results from operating activities 6,267 29,195 3,512 (2,768) 36,206Gain on sale of property, plant and equipment 7 190 581 - 778Finance costs (466) (1,179) (279) (647) (2,571)----------------------------------------------------------------------------Net income before income taxes 5,808 28,206 3,814 (3,415) 34,413----------------------------------------------------------------------------Goodwill - 2,514 1,539 - 4,053Total assets 74,007 191,268 78,476 26,572 370,323Total liabilities 14,308 32,669 22,615 63,371 132,963----------------------------------------------------------------------------Capital expenditures $ 5,279 $ 6,857 $ 3,651 $ 3 $ 15,790--------------------------------------------------------------------------------------------------------------------------------------------------------As at and for the six months ended June 30, 2010 (unaudited) Contract Rentals and Gas Drilling Transportation Compression Services Services Services Other(1) Total----------------------------------------------------------------------------Revenue $ 18,890 $ 52,819 $ 24,190 $ - $ 95,899Cost of services 13,553 24,489 18,836 115 56,993Selling, general and administration 993 8,043 1,758 1,586 12,380Share-based compensation - - - 614 614Depreciation 2,289 6,150 1,033 14 9,486----------------------------------------------------------------------------Results from operating activities 2,055 14,137 2,563 (2,329) 16,426Gain on sale of property, plant and equipment - 224 311 - 535Finance costs (265) (1,091) (170) (50) (1,576)----------------------------------------------------------------------------Net income before income taxes 1,790 13,270 2,704 (2,379) 15,385----------------------------------------------------------------------------Goodwill - 2,514 1,539 - 4,053Total assets 70,573 163,729 59,003 3,655 296,960Total liabilities 14,408 36,729 14,430 43,090 108,657----------------------------------------------------------------------------Capital expenditures (2) $ 1,912 $ 4,113 $ 2,985 $ 27 $ 9,037--------------------------------------------------------------------------------------------------------------------------------------------------------(1) Other includes the Company's corporate activities, accretion of convertible debentures and obligations pursuant to long-term credit facilities.(2) 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 the fabrication, sale, rental and servicing of natural gas compression equipment. The common shares of Total Energy are listed and trade on the TSX under the symbol TOT.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) Working capital equals current assets minus current liabilities.(3) Net Debt equals long-term debt plus obligations under finance leases plus convertible debentures plus current liabilities minus current assets.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: Daniel HalykTotal Energy Services Inc.President & Chief Executive Officer(403) 216-3921ORMark KearlTotal Energy Services Inc.Vice-President Finance and Chief Financial Officer(403) 216-3920investorrelations@totalenergy.cawww.totalenergy.caThe Toronto Stock Exchange has neither approved nor disapproved of the information contained herein.