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)

		Three months ended March 31
			2023		2022	Change
Revenue		$	228,724	$	161,452	42	%
Operating income			28,020		3,690	659	%
EBITDA (1)			48,475		24,314	99	%
Cashflow			48,672		22,551	116	%
Net income			24,038		2,467	874	%
Attributable to shareholders			24,040		2,472	872	%
Per Share Data (Diluted)
EBITDA (1)		$	1.15	$	0.56	105	%
Cashflow		$	1.16	$	0.52	123	%
Attributable to shareholders:
Net income		$	0.57	$	0.06	850	%
Common shares (000’s)(4)
Basic			41,322		42,713	(3	%)
Diluted			42,048		43,423	(3	%)
			March 31		December 31
Financial Position at			2023		2022	Change
Total Assets		$	910,408	$	878,615	4	%
Long-Term Debt and Lease Liabilities (excluding current portion)			122,714		127,628	(4	%)
Working Capital (2)			111,312		112,154	(1	%)
Net Debt (3)			11,402		15,474	(26	%)
Shareholders’ Equity			534,576		522,023	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 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”)

			Three months ended March 31
			2023			2022		Change
Revenue		$	73,483		$	60,062		22	%
EBITDA (1)		$	20,269		$	11,441		77	%
EBITDA (1) as a % of revenue			28%			19%		47	%
Operating days(2)			2,869			2,683		7	%
Canada			1,920			1,625		18	%
United States			590			701		(16	%)
Australia			359			357		–
Revenue per operating day(2), dollars		$	25,622		$	22,386		14	%
Canada			22,306			20,343		10	%
United States			29,107			21,839		33	%
Australia			37,554			32,759		15	%
Utilization			34%			31%		10	%
Canada			28%			23%		22	%
United States			50%			60%		(17	%)
Australia			80%			79%		1	%
Rigs, average for period			94			95		(1	%)
Canada			76			77		(1	%)
United States			13			13		–
Australia			5			5		–

^{(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”)

			Three months ended March 31
			2023			2022		Change
Revenue		$	24,413		$	15,400		59	%
EBITDA (1)		$	9,650		$	5,593		73	%
EBITDA (1) as a % of revenue			40%			36%		11	%
Revenue per utilized piece of equipment, dollars		$	13,600		$	9,627		41	%
Pieces of rental equipment			9,455			9,400		1	%
Canada			8,555			8,520		0	%
United States			900			880		2	%
Rental equipment utilization			19%			17%		12	%
Canada			16%			15%		7	%
United States			46%			30%		53	%
Heavy trucks			70			71		(1	%)
Canada			48			48		–
United States			22			23		(4	%)

^{(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”)

			Three months ended March 31
			2023			2022		Change
Revenue		$	98,118		$	58,565		68	%
EBITDA (1)		$	12,599		$	3,258		287	%
EBITDA (1) as a % of revenue			13%			6%		117	%
Horsepower of equipment on rent at period end			44,719			29,670		51	%
Canada			19,209			12,825		50	%
United States			25,510			16,845		51	%
Rental equipment utilization during the period (HP)(2)			78%			52%		50	%
Canada			74%			37%		100	%
United States			81%			74%		9	%
Sales backlog at period end, $ million		$	227.4		$	180.7		26	%

^{(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”)

			Three months ended March 31
			2023			2022		Change
Revenue		$	32,710		$	27,425		19	%
EBITDA (1)		$	8,279		$	6,548		26	%
EBITDA (1) as a % of revenue			25%			24%		4	%
Service hours(2)			33,246			30,839		8	%
Canada			17,491			16,449		6	%
United States			6,644			4,155		60	%
Australia			9,111			10,235		(11	%)
Revenue per service hour(2), dollars		$	984		$	889		11	%
Canada			984			828		19	%
United States			1,003			818		23	%
Australia			970			1,017		(5	%)
Utilization(3)			39%			34%		15	%
Canada			34%			32%		6	%
United States			67%			42%		60	%
Australia			35%			39%		(10	%)
Rigs, average for period			79			80		(1	%)
Canada			56			57		(2	%)
United States			11			11		–
Australia			12			12		–

^{(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)

			March 31				December 31
				2023				2022
			(unaudited)				(audited)
Assets
Current assets:
Cash and cash equivalents			$	28,228			$	34,061
Accounts receivable				171,520				154,581
Inventory				102,417				91,614
Prepaid expenses and deposits				18,210				18,847
Income taxes receivable				216				496
Current portion of lease asset				243				378
				320,834				299,977
Property, plant and equipment				578,451				567,515
Income taxes receivable				7,070				7,070
Goodwill				4,053				4,053
			$	910,408			$	878,615
Liabilities & Shareholders’ Equity
Current liabilities:
Accounts payable and accrued liabilities			$	130,945			$	114,274
Deferred revenue				68,122				63,895
Dividends payable				3,242				2,490
Current portion of lease liabilities				5,210				5,173
Current portion of long-term debt				2,003				1,991
				209,522				187,823
Long-term debt				112,488				117,997
Lease liabilities				10,226				9,631
Deferred income tax liability				43,596				41,141
Shareholders’ equity:
Share capital				254,975				261,109
Contributed surplus				3,158				3,590
Accumulated other comprehensive loss				(17,650	)			(17,032	)
Non-controlling interest				550				552
Retained earnings				293,543				273,804
				534,576				522,023
			$	910,408			$	878,615

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

			Three months ended March 31
				2023			2022
Revenue			$	228,724		$	161,452
Cost of services				168,933			129,798
Selling, general and administration				11,433			8,786
Other income				(6	)		(190	)
Share-based compensation				389			220
Depreciation				19,955			19,148
Operating income				28,020			3,690
Gain on sale of property, plant and equipment				500			1,476
Finance costs, net				(1,703	)		(1,806	)
Net income before income taxes				26,817			3,360
Current income tax expense (recovery)				324			(463	)
Deferred income tax expense				2,455			1,356
Total income tax expense				2,779			893
Net income			$	24,038		$	2,467
Net income (loss) attributable to:
Shareholders of the Company			$	24,040		$	2,472
Non-controlling interest				(2	)		(5	)
Income per share
Basic			$	0.58		$	0.06
Diluted			$	0.57		$	0.06

Condensed Interim Consolidated Statements of Comprehensive Income (Loss)

			Three months ended March 31
				2023			2022
Net income for the period			$	24,038		$	2,467
Unrealized foreign currency translation				(618	)		97
Total other comprehensive income (loss) for the period				(618	)		97
Total comprehensive income			$	23,420		$	2,564
Total comprehensive income (loss) attributable to:
Shareholders of the Company			$	23,422		$	2,569
Non-controlling interest				(2	)		(5	)

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

			Three months ended March 31
				2023			2022
Cash provided by (used in):
Operations:
Net income for the period			$	24,038		$	2,467
Add (deduct) items not affecting cash:
Depreciation				19,955			19,148
Share-based compensation				389			220
Gain on sale of property, plant and equipment				(500	)		(1,476	)
Finance costs, net				1,703			1,806
Unrealized loss (gain) on foreign currencies translation				352			(190	)
Current income tax expense (recovery)				324			(463	)
Deferred income tax expense				2,455			1,356
Income taxes paid				(44	)		(317	)
Cashflow				48,672			22,551
Changes in non-cash working capital items:
Accounts receivable				(17,004	)		(24,848	)
Inventory				(10,803	)		(6,527	)
Prepaid expenses and deposits				637			58
Accounts payable and accrued liabilities				4,012			16,669
Deferred revenue				4,227			37,052
Cash provided by operating activities				29,741			44,955
Investing:
Purchase of property, plant and equipment				(30,329	)		(11,553	)
Proceeds on disposal of property, plant and equipment				1,303			3,039
Changes in non-cash working capital items				12,733			1,343
Cash used in investing activities				(16,293	)		(7,171	)
Financing:
Repayment of long-term debt				(5,497	)		(20,653	)
Repayment of lease liabilities				(1,617	)		(1,062	)
Dividends to shareholders				(2,490	)		–
Repurchase of common shares				(8,014	)		(3,528	)
Interest paid				(1,663	)		(1,745	)
Cash used in financing activities				(19,281	)		(26,988	)
Change in cash and cash equivalents				(5,833	)		10,796
Cash and cash equivalents, beginning of period				34,061			33,365
Cash and cash equivalents, end of period			$	28,228		$	44,161

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)

	Contract			Rentals and			Compression			Well			Corporate (1)			Total
	Drilling			Transportation			and Process			Servicing
	Services			Services			Services
Revenue	$	73,483		$	24,413		$	98,118		$	32,710		$	–		$	228,724
Cost of services		50,365			12,903			81,972			23,693			–			168,933
Selling, general and administration		2,985			2,058			3,577			844			1,969			11,433
Other income		–			–			–			–			(6	)		(6	)
Share-based compensation		–			–			–			–			389			389
Depreciation		9,048			4,872			2,623			3,147			265			19,955
Operating income (loss)		11,085			4,580			9,946			5,026			(2,617	)		28,020
Gain on sale of property, plant and equipment		136			198			30			106			30			500
Finance costs, net		(15	)		(18	)		(121	)		(16	)		(1,533	)		(1,703	)
Net income (loss) before income taxes		11,206			4,760			9,855			5,116			(4,120	)		26,817
Goodwill		–			2,514			1,539			–			–			4,053
Total assets		370,833			184,392			272,071			83,330			(218	)		910,408
Total liabilities		79,568			23,838			124,109			7,632			140,685			375,832
Capital expenditures		23,824			1,538			2,509			2,458			–			30,329

	Canada			United States			Australia			Other			Total
Revenue	$	75,310		$	128,770		$	24,644		$	–		$	228,724
Non-current assets (2)		386,242			146,475			49,787			–			582,504

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

	Contract			Rentals and			Compression			Well			Corporate (1)			Total
	Drilling			Transportation			and Process			Servicing
	Services			Services			Services
Revenue	$	60,062		$	15,400		$	58,565		$	27,425		$	–		$	161,452
Cost of services		46,994			8,847			54,333			19,624			–			129,798
Selling, general and administration		1,602			1,626			1,794			1,268			2,496			8,786
Other income		–			–			–			–			(190	)		(190	)
Share-based compensation		–			–			–			–			220			220
Depreciation		8,877			4,909			1,913			3,202			247			19,148
Operating income (loss)		2,589			18			525			3,331			(2,773	)		3,690
Gain (loss) on sale of property, plant and equipment		(25	)		666			820			15			–			1,476
Finance costs, net		(2	)		(16	)		(72	)		(5	)		(1,711	)		(1,806	)
Net income (loss) before income taxes		2,562			668			1,273			3,341			(4,484	)		3,360
Goodwill		–			2,514			1,539			–			–			4,053
Total assets		338,397			180,381			227,657			94,335			6,252			847,022
Total liabilities		64,475			12,874			90,416			5,282			181,282			354,329
Capital expenditures		10,182			234			1,070			56			11			11,553

Three months ended March 31, 2022	Canada			United States			Australia			Other			Total
Revenue	$	88,193		$	43,644		$	29,615		$	–		$	161,452
Non-current assets (2)		375,077			137,036			58,604			–			570,717

^{(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

(1)		EBITDA means earnings before interest, taxes, depreciation and amortization and is equal to net income (loss) before income taxes plus finance costs plus depreciation. EBITDA is not a recognized measure under IFRS. Management believes that in addition to net income (loss), EBITDA is a useful supplemental measure as it provides 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 EBITDA 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 EBITDA may differ from other organizations and, accordingly, EBITDA 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 lease liabilities plus current liabilities minus current assets. Management believes this measure provides a useful indication of the Company’s liquidity.
(4)		Basic and diluted shares outstanding reflect the weighted average number of common shares outstanding for the periods. See note 5 to the Company’s Condensed Interim Consolidated Financial Statements.

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.