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 2022Change
Revenue $228,724$161,45242%
Operating income  28,020 3,690659%
EBITDA (1)   48,475 24,31499%
Cashflow  48,672 22,551116%
Net income  24,038 2,467874%
Attributable to shareholders  24,040 2,472872%
       
Per Share Data (Diluted)      
EBITDA (1) $ 1.15 $0.56105%
Cashflow $ 1.16 $0.52123%
       
Attributable to shareholders:      
Net income $ 0.57 $0.06850%
       
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 2022Change
Total Assets $910,408$878,6154%
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  534,576 522,0232%

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 – 5th 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)

 ContractRentals andCompressionWellCorporate (1)Total
 DrillingTransportationand ProcessServicing  
 ServicesServicesServices   
       
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  


 CanadaUnited StatesAustraliaOtherTotal
      
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)

 ContractRentals andCompressionWellCorporate (1)Total
 DrillingTransportationand ProcessServicing  
 ServicesServicesServices   
       
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, 2022CanadaUnited StatesAustraliaOtherTotal
      
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.