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Press release from Marketwire

Total Energy Services Inc. Announces Q3 2012 Results

Monday, November 12, 2012

Total Energy Services Inc. Announces Q3 2012 Results09:00 EST Monday, November 12, 2012CALGARY, ALBERTA--(Marketwire - Nov. 12, 2012) - Total Energy Services Inc. ("Total Energy" or the "Company") (TSX:TOT), announces its consolidated financial results for the three and nine month periods ending September 30, 2012. Financial Highlights($000's except per share data)Three Months Ended Sept 30Nine Months Ended Sept 30(unaudited)(unaudited)20122011% Change20122011% ChangeRevenue$73,517$87,882(16)%$229,298$235,146(2%)Operating Earnings (1)12,97928,821(55)%50,41565,027(22%)EBITDA (1)20,07834,734(42)%69,33383,426(17%)Cashflow (1)20,18435,020(42)%69,83983,529(16%)Net Income9,45620,603(54)%37,16745,825(19%)Per Share Data (Diluted) (2)EBITDA (1)$0.58$0.98(41)%$1.99$2.38(16%)Cashflow (1)$0.58$0.99(41)%$2.01$2.39(16%)Net Earnings$0.30$0.61(51)%$1.16$1.38(16%)Sept 30Dec. 312012 (unaudited)2011 (audited)% ChangeFinancial PositionTotal Assets$458,776$434,6176%Long-Term Debt, Convertible Debentures and Obligations Under Finance Leases (excluding current portion)65,09663,8532%Working Capital (3)105,044120,786(13%)Net Debt (4)NilNiln/mShareholders' Equity297,424275,3218%Shares Outstanding (000's)Basic30,70031,375(2)%Diluted (2)34,41735,261(2)%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, 2012 reflect lower activity levels in Western Canada as compared to the third quarter of 2011. Expenses incurred with the establishment of Rental and Transportation Services branches in Minot, North Dakota and Slave Lake, Alberta and the startup of Spectrum Process Systems Inc. negatively impacted operating margins as revenue from these start up initiatives was nominal during the third quarter. Increased relative revenue contribution from the Gas Compression Services division, which has lower operating margins than the Contract Drilling Services and Rentals and Transportation Services divisions, also contributed to a lower consolidated operating earnings margin in the third quarter of 2012 compared to 2011.Total Energy's Contract Drilling Services division achieved 49% utilization during the third quarter of 2012, recording 677 operating days (spud to release), compared to 855 operating days, or 66% utilization during the third quarter of 2011. Revenue per operating day realized during the third quarter of 2012 decreased 1% compared to the third quarter of 2011. The Rentals and Transportation Services division achieved a utilization rate on major rental equipment of 44% during the third quarter of 2012 as compared to a 74% utilization rate during the third quarter of 2011. The Gas Compression Services division generated revenues of $30.2 million for the three months ended September 30, 2012 compared to $28.6 million for the third quarter of 2011. At September 30, 2012 the Gas Compression Services division had a fabrication sales backlog of approximately $35.2 million compared to $40.3 million at September 30, 2011 and $28.8 million at June 30, 2012. At September 30, 2012 approximately 28,300 horsepower of compression equipment was on rent compared to 21,700 horsepower on rent at September 30, 2011. The gas compression rental fleet operated at an average utilization rate of 83% during the first nine months of 2012 as compared to 78% for the same period in 2011.During the third quarter, Total Energy declared a quarterly dividend of $0.05 per share to shareholders of record on September 28, 2012. This dividend was paid on October 31, 2012. During the first nine months of 2012, Total Energy repurchased 902,500 common shares at an average price of $15.11 (including commissions) pursuant to its normal course issuer bid.OutlookNotwithstanding relatively strong oil prices, the increase in Canadian drilling and completion activity coming out of the seasonally slow second quarter has been moderate as compared to 2011. Oil and gas exploration and production companies have generally taken a cautious approach to capital spending, with many capital programs being deferred to the first quarter of 2013. Total Energy entered the third quarter with an operating capacity higher that what was required, particularly in the Rentals and Transportation Services division, and the Company has taken steps to adjust its operating cost structure to reflect the current operating environment without compromising its capacity to service what is expected to be a relatively busy first quarter of 2013.Total Energy's Contract Drilling Services division continues to see reasonably strong demand for its heavy telescopic double rigs. Completion of construction of its 16th rig, a 3,600 meter telescopic double, and the upgrade of one of its two conventional singles is scheduled for December 2012. Both rigs are expected to commence drilling upon completion.Total Energy's Rentals and Transportation Services division is directly impacted by drilling and completion activity. With a significant deferral of capital programs during the third quarter, current indications are that the upcoming winter will be busy. While this division's relatively high fixed cost structure negatively impacted operating earnings margins in the third quarter, delivery of approximately 400 pieces of new rental equipment pursuant to the 2012 capital expenditure budget during the fourth quarter combined with increased winter activity levels and a right sized operating capacity are expected to improve the financial performance of this division. The Rentals and Transportation Services division will be entering the Canadian solids control market this winter with the introduction of centrifuges to its product offering.Total Energy's Gas Compression Services division continues to see strong demand for its products and services. The purchase of the previously rented 58,000 square foot main fabrication facility on October 1, 2012 will increase annual EBITDA from this division by over $0.8 million. Spectrum Process Systems Inc., Total Energy's entry into the oil and gas process equipment fabrication business, took occupancy of a new 20,000 square foot leased manufacturing facility in mid-October of 2012, two months behind schedule due to construction delays. Spectrum is currently staffing and equipping the facility for production and is expected to be fully operational by the first quarter of 2013.Total Energy's financial condition remains solid with a long-term debt (including convertible debentures) to long-term debt plus equity ratio of 0.19 to 1.0, $105.0 million of positive working capital (including $55.4 million of cash) and no net debt as at September 30, 2012. Total Energy's $35 million operating facility is currently fully available and undrawn. The Company's balance sheet strength provides significant capacity and flexibility to pursue further growth opportunities that may arise.Conference CallAt 2:30 p.m. MST today, Total Energy will conduct a conference call 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. If you wish to participate, call (877) 440-9795. Those who are unable to listen to the call live may listen to a recording of it by calling (800) 408-3053 (passcode 8265529). The recording will be available until November 19, 2012.Selected Financial InformationSelected financial information relating to the three and nine-month periods ended September 30, 2012 and 2011 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 third quarter report.Condensed Consolidated Statements of Financial Position(in thousands of Canadian dollars)September 30,December 31,20122011(unaudited)(audited)AssetsCurrent assets:Cash and cash equivalents$55,394$35,658Accounts receivable59,82194,556Inventory34,85437,147Income taxes receivable-118Prepaid expenses and deposits2,7531,795152,822169,274Property, plant and equipment301,901261,290Goodwill4,0534,053$458,776$434,617Liabilities & Shareholders' EquityCurrent liabilities:Accounts payable and accrued liabilities$30,723$41,556Deferred revenue3,6083,064Income taxes payable9,368-Dividends payable1,5351,255Current portion of obligations under finance leases2,5442,61347,77848,488Obligations under finance leases2,8212,763Convertible debentures62,27561,090Deferred tax liability48,47846,955Shareholders' equity:Share capital77,14777,917Contributed surplus4,1182,472Equity portion of convertible debenture4,6014,601Retained earnings211,558190,331297,424275,321$458,776$434,617Condensed Interim Consolidated Statements of Comprehensive Income(in thousands of Canadian dollars except per share amounts)Three months ended September 30Nine months ended September 302012201120122011(unaudited)(unaudited)(unaudited)(unaudited)Revenue$73,517$87,882$229,298$235,146Cost of services46,56945,725137,826130,356Selling, general and administration6,7647,12621,59421,167Share-based compensation1,0923682,0231,046Depreciation6,1135,84217,44017,550Results from operating activities12,97928,82150,41565,027Gain on sale of property, plant and equipment986711,478849Finance costs(1,149)(1,351)(3,678)(3,922)Net income before income taxes12,81627,54148,21561,954Current income tax expense5,355119,52594Deferred income tax (recovery) expense(1,995)6,9271,52316,035Total income tax expense3,3606,93811,04816,129Net income and total comprehensive income for the period$9,456$20,603$37,167$45,825Earnings per shareBasic earnings per share$0.31$0.65$1.19$1.46Diluted earnings per share$0.30$0.61$1.16$1.38Condensed Interim Consolidated Statements of Cash Flows(in thousands of Canadian dollars)Three months ended September 30Nine months ended September 302012201120122011(unaudited)(unaudited)(unaudited)(unaudited)Cash provided by (used in):Operations:Net income for the period$9,456$20,603$37,167$45,825Add (deduct) items not affecting cash:Depreciation6,1135,84217,44017,550Share-based compensation1,0923682,0231,046Gain on sale of property, plant and equipment(986)(71)(1,478)(849)Finance costs1,1491,3513,6783,922Current income tax expense5,355119,52594Deferred income tax (recovery) expense(1,995)6,9271,52316,035Income taxes paid-(11)(39)(94)20,18435,02069,83983,529Changes in non-cash working capital items:Accounts receivable(4,745)(15,923)34,735(16,510)Inventory1,399(2,795)2,293(6,510)Prepaid expenses and deposits(726)(1,397)(958)(1,362)Accounts payable and accrued liabilities(484)5,454(7,606)(69)Deferred revenue(2,106)2,8305447,66613,52223,18998,84766,744Investments:Purchase of property, plant and equipment(18,870)(15,557)(60,291)(31,347)Proceeds on disposal of property, plant and equipment4,4605716,2074,109Changes in non-cash working capital items2,2862,318(1,900)3,984(12,124)(12,668)(55,984)(23,254)Financing:Issuance of convertible debenture, net of issue costs---65,927Repayment of long-term debt---(72,500)Repayment of obligations under finance leases(757)(933)(2,500)(2,742)Dividends to shareholders(1,550)(1,261)(4,370)(3,779)Issuance of common shares--1,197948Repurchase of common shares(3,837)(2,215)(13,634)(3,627)Interest paid(1,740)(1,977)(3,820)(3,215)(7,884)(6,386)(23,127)(18,988)Change in cash and cash equivalents(6,486)4,13519,73624,502Cash and cash equivalents, beginning of period61,88020,59535,658228Cash and cash equivalents, end of period$55,394$24,730$55,394$24,730Segmented 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 and process equipment. Amounts presented in the following tables are in thousands of Canadian dollars.As at and for the three months ended September 30, 2012 (unaudited) As at and for the three months ended September 30, 2012Contract Drilling ServicesRentals and Transportation ServicesGas Compression Services Other(1) TotalRevenue$12,782$30,563$30,172$-$73,517Cost of services7,51614,03025,022146,569Selling, general and administration7603,3061,6281,0706,764Share-based compensation---1,0921,092Depreciation1,3203,78799796,113Results from operating activities3,1869,4402,525(2,172)12,979Gain on sale of property, plant and equipment21140825-986Finance costs(254)(583)(69)(243)(1,149)Net income before income taxes2,9538,9973,281(2,415)12,816Goodwill-2,5141,539-4,053Total assets95,887223,83092,64446,415458,776Total liabilities18,46047,57319,36975,950161,352Capital expenditures$5,144$11,409$2,291$26$18,870As at and for the three months ended September 30, 2011 (unaudited)As at and for the three months ended September 30, 2011Contract Drilling ServicesRentals and Transportation ServicesGas Compression ServicesOther(1)TotalRevenue$16,274$43,020$28,588$-$87,882Cost of services7,95913,89323,873-45,725Selling, general and administration8353,9111,3641,0167,126Share-based compensation---368368Depreciation1,4683,531830135,842Results from operating activities6,01221,6852,521(1,397)28,821Gain (loss) on sale of property, plant and equipment-81(10)-71Finance costs(254)(597)(153)(347)(1,351)Net income before income taxes5,75821,1692,358(1,744)27,541Goodwill-2,5141,539-4,053Total assets81,418205,77387,61229,351404,154Total liabilities17,29039,36727,68765,019149,363Capital expenditures$3,689$9,603$2,216$49$15,557As at and for the nine months ended September 30, 2012 (unaudited) As at and for the nine months ended September 30, 2012Contract Drilling ServicesRentals and Transportation ServicesGas Compression Services Other(1) TotalRevenue$39,896$102,004$87,398-$229,298Cost of services22,32342,88472,622(3)137,826Selling, general and administration2,55610,9604,5013,57721,594Share-based compensation---2,0232,023Depreciation3,60410,9532,8542917,440Results from operating activities11,41337,2077,421(5,626)50,415Gain on sale of property, plant and equipment654091,004-1,478Finance costs(760)(1,740)(262)(916)(3,678)Net income before income taxes10,71835,8768,163(6,542)48,215Goodwill-2,5141,539-4,053Total assets95,887223,83092,64446,415458,776Total liabilities18,46047,57319,36975,950161,352Capital expenditures$12,433$31,546$14,472$1,840$60,291As at and for the nine months ended September 30, 2011 (unaudited) As at and for the nine months ended September 30, 2011Contract Drilling ServicesRentals and Transportation ServicesGas Compression Services Other(1) TotalRevenue$41,370$113,962$79,814$-$235,146Cost of services22,75240,19367,411-130,356Selling, general and administration2,29411,7943,9983,08121,167Share-based compensation---1,0461,046Depreciation4,04511,0952,3723817,550Results from operating activities12,27950,8806,033(4,165)65,027Gain on sale of property, plant and equipment7271571-849Finance costs(720)(1,776)(432)(994)(3,922)Net income before income taxes11,56649,3756,172(5,159)61,954Goodwill-2,5141,539-4,053Total assets81,418205,77387,61229,351404,154Total liabilities17,29039,36727,68765,019149,363Capital expenditures$8,968$16,460$5,867$52$31,347(1)Other includes the Company's corporate activities, accretion of convertible debentures and obligations pursuant to long-term credit facilities.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. 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. 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: The Toronto Stock Exchange has neither approved nor disapproved of the information contained herein. Contact Information: Total Energy Services Inc.Daniel HalykPresident & Chief Executive Officer(403) 216-3921Total Energy Services Inc.Mark KearlVice-President Finance and Chief Financial Officer(403) 216-3920investorrelations@totalenergy.cawww.totalenergy.ca