News Column

Total Energy Services Inc. Announces 2012 Results

Mar 12 2013 12:00AM

Marketwire

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CALGARY, ALBERTA -- (Marketwire) -- 03/12/13 -- Total Energy Services Inc. (TSX: TOT) ("Total Energy" or the "Company") announces its consolidated financial results for the three and twelve-month periods ending December 31, 2012.

Financial Highlights($000's except per share data)-------------------------------------------------------------------------------------------------------------------------------------------------------- Three Months Ended Dec. 31 Twelve Months Ended Dec. 31 (unaudited) (audited) % % 2012 2011 Change 2012 2011 Change----------------------------------------------------------------------------Revenue $ 78,404 $ 96,936 (19)% $ 307,702 $ 332,082 (7)%Operating Earnings (1) 14,806 31,206 (53)% 65,221 96,233 (32)%EBITDA (1) 21,743 38,608 (44)% 91,076 122,034 (25)%Cashflow (1) 22,110 37,251 (41)% 91,949 120,780 (24)%Net Income 10,525 23,441 (55)% 47,692 69,266 (31)%Per Share Data (Diluted) (2)EBITDA (1) $ 0.63 $ 1.10 (43)% $ 2.62 $ 3.49 (25)%Cashflow (1) 0.64 1.06 (40)% 2.65 3.46 (23)%Net Earnings 0.34 0.69 (51)% 1.49 2.08 (28)%-------------------------------------------------------------------------------------------------------------------------------------------------------- Dec. 31 Dec. 31 2012 2011 % (audited) (audited) Change----------------------------------------------------------------------------Financial PositionTotal Assets $ 476,591 $ 434,617 10%Long-Term Debt, Convertible Debentures and Obligations Under Finance Leases 67,937 66,466 2%Working Capital (3) 90,708 120,786 (25)%Net Debt (4) nil nil nilShareholders' Equity 306,069 275,321 11%Shares Outstanding (000's)Basic 30,600 31,375 (2)%Diluted (2) 34,300 35,261 (3)%--------------------------------------------------------------------------------------------------------------------------------------------------------



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 three and twelve months ended December 31, 2012 reflect a more challenging industry environment that began following a record first quarter for the Company. Continued weakness in North American natural gas prices and widening oil price differentials in Western Canada contributed to lower drilling and completion activity during the second half of 2012 compared to the second half of 2011.

Total Energy's Contract Drilling Services division achieved 42% utilization during the fourth quarter of 2012, recording 603 operating days (spud to release) with a fleet of 15 rigs, compared to 801 operating days, or 62% utilization, during the fourth quarter of 2011 with a fleet of 14 rigs. Revenue per operating day decreased 6% for the fourth quarter of 2012 relative to the prior year comparable period due primarily to lower pricing. For the twelve months ended December 31, 2012, the Contract Drilling Services division achieved 2,460 operating days (44% utilization), compared to 3,042 operating days (60% utilization) for 2011. The Rentals and Transportation Services division achieved a utilization rate on major rental equipment of 41% during the fourth quarter of 2012 as compared to a 72% utilization rate during the fourth quarter of 2011. For 2012, rental equipment utilization averaged 47% as compared to 68% for 2011. The Gas Compression Services division generated revenues of $33.9 million for the three months ended December 31, 2012 compared to $33.0 million for the same period in 2011, an increase of 3%. For 2012, revenues increased by 8% to $121.3 million compared to $112.8 million in 2011. The Gas Compression Services division exited 2012 with a $34.5 million backlog of fabrication sales orders as compared to $33.6 million at December 31, 2011. At December 31, 2012, approximately 31,700 horsepower of compression equipment was on rent compared to 25,300 horsepower on rent at December 31, 2011. The gas compression rental fleet operated at an average utilization rate of 87% and 84% for the three and twelve month periods ended December 31, 2012, respectively, as compared to 78% for the same periods in 2011.

During the fourth quarter, Total Energy declared a quarterly dividend of $0.05 per share to shareholders of record on December 31, 2012. This dividend was paid on January 31, 2013.

Outlook

Western Canadian drilling activity started out somewhat slowly during the first part of January 2013. However, drilling activity levels steadily increased and have generally been at or above the five year average since mid-January. With ongoing weak natural gas prices, producers continue to focus their drilling, completion and production activities towards oil and natural gas liquids prospects. In the context of continued global economic uncertainty and unique commodity price challenges facing Canadian producers, the Company remains focused on the quality and efficiency of existing operations and the disciplined deployment of capital. In that regard, Total Energy is pleased to announce that Gerry Crawford was recently appointed Vice President, Field Services. Mr. Crawford has been with Total Energy since 1998 and had previously served as General Manager of the Company's Rentals and Transportation Services division.

Total Energy's previously announced preliminary 2013 capital expenditure plan of $32.7 million provides the Company with significant financial flexibility to pursue additional investment opportunities that may arise. Despite uncertain markets, Total Energy continues to strategically invest in the long term growth of its existing business divisions. The recently completed $14.0 million acquisition of a well-established process equipment fabrication business increases Total's exposure to large North American and international liquids and natural gas infrastructure projects. Total Energy will continue to pursue investment opportunities that will generate acceptable returns on capital.

Total Energy's financial condition remains strong with a long-term debt (including convertible debentures) to long-term debt plus equity ratio of 0.18 to 1.0, $90.7 million of positive working capital and no net debt as at December 31, 2012. Total Energy's $35 million operating facility is currently fully available and undrawn.

Conference Call

At 2:30 p.m. MST today, Total Energy will conduct a conference call and webcast to discuss its fourth 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. A live webcast of the conference call will be accessible on Total's website at www.totalenergy.ca by selecting "Webcasts". Persons wishing to join the conference call live may do so by calling (866) 696-5910 or (416) 340-2217. 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 March 19, 2013 by dialing (800) 408-3053 (passcode 8257802).

Annual Meeting of Shareholders

Shareholders and other interested persons are invited to attend the annual meeting of Shareholders which will commence at 10:00 a.m. (Calgary time) on Wednesday, May 22, 2013 at the Calgary Petroleum Club, 319 - 5th Avenue S.W., Calgary, Alberta.

Selected Financial Information

Selected financial information relating to the three and twelve-month periods ended December 31, 2012 and 2011 is attached to this news release. This information should be read in conjunction with the 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 Company's 2012 annual report.

Consolidated Statements of Financial Position(in thousands of Canadian dollars)-------------------------------------------------------------------------------------------------------------------------------------------------------- December 31, December 31, 2012 2011---------------------------------------------------------------------------- (audited) (audited)AssetsCurrent assets: Cash and cash equivalents $ 50,052 $ 35,658 Accounts receivable 63,511 94,556 Inventory 33,240 37,147 Income taxes receivable - 118 Prepaid expenses and deposits 2,547 1,795---------------------------------------------------------------------------- 149,350 169,274Property, plant and equipment 323,188 261,290Goodwill 4,053 4,053---------------------------------------------------------------------------- $ 476,591 $ 434,617--------------------------------------------------------------------------------------------------------------------------------------------------------Liabilities & Shareholders' EquityCurrent liabilities: Accounts payable and accrued liabilities $ 32,523 $ 41,556 Deferred revenue 6,971 3,064 Dividends payable 1,530 1,255 Income taxes payable 15,098 - Current portion of obligations under finance leases 2,520 2,613---------------------------------------------------------------------------- 58,642 48,488 Obligations under finance leases 2,723 2,763Convertible debentures 62,694 61,090 Deferred tax liability 46,463 46,955Shareholders' equity: Share capital 76,890 77,917 Contributed surplus 5,160 2,472 Equity portion of convertible debenture 4,601 4,601 Retained earnings 219,418 190,331---------------------------------------------------------------------------- 306,069 275,321---------------------------------------------------------------------------- $ 476,591 $ 434,617--------------------------------------------------------------------------------------------------------------------------------------------------------Consolidated Statements of Comprehensive Income(in thousands of Canadian dollars except per share amounts) Three months ended Year ended December 31, December 31, 2012 2011 2012 2011---------------------------------------- ----------- ----------- ----------- (unaudited) (unaudited) (audited) (audited)Revenue $ 78,404 $ 96,936 $ 307,702 $ 332,082Expenses: Cost of services 49,485 51,875 187,311 182,231 Selling, general and administration 6,809 7,792 28,403 28,959 Share-based compensation 1,042 314 3,065 1,360 Depreciation 6,262 5,749 23,702 23,299 ----------- ----------- ----------- -----------Results from operating activities 14,806 31,206 65,221 96,233 Gain on disposal of property, plant and equipment 675 1,653 2,153 2,502 Finance income 248 76 878 161 Finance costs (1,489) (1,434) (5,797) (5,441) ----------- ----------- ----------- -----------Net income before income taxes 14,240 31,501 62,455 93,455Income tax expense (recovery) Current 5,730 18 15,255 112 Deferred (2,015) 8,042 (492) 24,077 ----------- ----------- ----------- -----------Total income tax expense 3,715 8,060 14,763 24,189Net income and total comprehensive income for the period 10,525 23,441 47,692 69,266 ----------- ----------- ----------- -----------Retained earnings, beginning of period 211,558 170,844 190,331 131,808 Dividends (1,530) (1,256) (6,180) (5,032) Repurchase and cancellation of common shares in excess of stated common share capital (1,135) (2,698) (12,425) (5,711) ----------- ----------- ----------- -----------Retained earnings, end of period $ 219,418 $ 190,331 $ 219,418 $ 190,331 ----------- ----------- ----------- ----------- ----------- ----------- ----------- -----------Earnings per share : Basic $ 0.34 $ 0.75 $ 1.54 $ 2.20 Diluted $ 0.34 $ 0.69 $ 1.49 $ 2.08Consolidated Statements of Cash Flows(in thousands of Canadian dollars) Three months ended Year ended December 31, December 31, 2012 2011 2012 2011---------------------------------------- ----------- ----------- ----------- (unaudited) (unaudited) (audited) (audited)Cash provided by (used in):Operations: Net Income for the period $ 10,525 23,441 $ 47,692 $ 69,266 Add (deduct) items not affecting cash: Depreciation 6,262 5,749 23,702 23,299 Share-based compensation 1,042 314 3,065 1,360 Gain on disposal of property, plant and equipment (675) (1,653) (2,153) (2,502) Finance income (248) (76) (878) (161) Finance costs 1,489 1,434 5,797 5,441 Current income tax expense 5,730 18 15,255 112 Deferred income tax expense (2,015) 8,042 (492) 24,077 Income taxes (paid) - (18) (39) (112) ----------- ----------- ----------- ----------- 22,110 37,251 91,949 120,780 Changes in non-cash working capital items: Accounts receivable (5,300) (7,063) 31,045 (23,573) Finance lease receivable 1,610 - - - Inventory 1,614 2,851 3,907 (3,659) Prepaid expenses and deposits 206 1,314 (752) (48) Accounts payable and accrued liabilities 2,055 4,482 (5,551) 4,413 Deferred revenue 3,363 (7,936) 3,907 (270) ----------- ----------- ----------- ----------- 25,658 30,899 124,505 97,643Investments: Purchase of property, plant and equipment (29,074) (24,300) (89,365) (55,647) Proceeds on disposal of property, plant and equipment 2,766 4,630 8,973 8,739 Changes in non-cash working capital items (703) 4,037 (2,603) 8,021 ----------- ----------- ----------- ----------- (27,011) (15,633) (82,995) (38,887)Financing: Issuance of convertible debenture, net of issue costs - - - 65,927 Advances under long-term debt - - - (72,500) Repayment of obligations under finance leases (688) (1,132) (3,188) (3,874) Payment of dividends (1,535) (1,255) (5,905) (5,034) Issuance of common shares 1 1,265 1,198 2,213 Repurchase of common shares (1,393) (3,234) (15,027) (6,861) Interest paid (374) 18 (4,194) (3,197) ----------- ----------- ----------- ----------- (3,989) (4,338) (27,116) (23,326) ----------- ----------- ----------- -----------Change in cash and cash equivalents (5,342) 10,928 14,394 35,430Cash and cash equivalents, beginning of period 55,394 24,730 35,658 228 ----------- ----------- ----------- -----------Cash and cash equivalents, end of period $ 50,052 $ 35,658 $ 50,052 $ 35,658 ----------- ----------- ----------- ----------- ----------- ----------- ----------- -----------



Segmented Information

The 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.

As at and for the three months ended December 31, 2012 (unaudited) Contract Rentals and Gas Drilling Transportation Compression Services Services Services Other(1) Total--------------------------------------------------------------------------------------------------------------------------------------------------------Revenue $ 12,773 $ 31,725 $ 33,906 $ - $ 78,404Cost of services 7,362 15,121 26,999 3 49,485Selling, general and administration 770 3,619 1,809 611 6,809Share-based compensation - - - 1,042 1,042Depreciation 1,241 3,861 1,046 114 6,262----------------------------------------------------------------------------Results from operating activities 3,400 9,124 4,052 (1,770) 14,806Gain on sale of property, plant and equipment 15 325 335 - 675Finance income - - 80 168 248Finance costs (253) (579) (178) (479) (1,489)----------------------------------------------------------------------------Net income before income taxes 3,162 8,870 4,289 (2,081) 14,240Goodwill - 2,514 1,539 - 4,053Total assets 100,758 225,655 102,565 47,613 476,591Total Liabilities 20,220 44,170 23,020 83,112 170,522Capital expenditures $ 5,495 $ 11,361 $ 1,574 $ 10,644 $ 29,074--------------------------------------------------------------------------------------------------------------------------------------------------------As at and for the three months ended December 31, 2011 (unaudited) Contract Rentals and Gas Drilling Transportation Compression Services Services Services Other(1) Total--------------------------------------------------------------------------------------------------------------------------------------------------------Revenue $ 18,066 $ 45,858 $ 33,012 $ - $ 96,936Cost of services 8,559 16,332 26,984 - 51,875Selling, general and administration 1,030 4,129 1,644 989 7,792Share-based compensation - - - 314 314Depreciation 1,379 3,475 881 14 5,749----------------------------------------------------------------------------Results from operating activities 7,098 21,922 3,503 (1,317) 31,206Gain on sale of property, plant and equipment 21 1,629 3 - 1,653Finance Income - - - 76 76Finance costs (253) (591) (152) (438) (1,434)----------------------------------------------------------------------------Net income before income taxes 6,866 22,960 3,354 (1,679) 31,501Goodwill - 2,514 1,539 - 4,053Total assets 91,122 227,728 82,160 33,607 434,617Total Liabilities 19,370 54,318 19,383 66,225 159,296Capital expenditures $ 5,107 $ 16,473 $ 2,542 $ 178 $ 24,300--------------------------------------------------------------------------------------------------------------------------------------------------------As at and for the year ended December 31, 2012 (audited) Contract Rentals and GasAs at and for the year ended Drilling Transportation CompressionDecember 31, 2012 Services Services Services Other(1) Total--------------------------------------------------------------------------------------------------------------------------------------------------------Revenue $ 52,669 $ 133,729 $ 121,304 - $ 307,702Cost of services 29,685 58,005 99,621 - 187,311Selling, general and administration 3,326 14,579 6,310 4,188 28,403Share-based compensation - - - 3,065 3,065Depreciation 4,845 14,814 3,900 143 23,702----------------------------------------------------------------------------Results from operating activities 14,813 46,331 11,473 (7,396) 65,221Gain on sale of property, plant and equipment 80 734 1,339 - 2,153Finance income - - 272 606 878Finance costs (1,013) (2,319) (632) (1,833) (5,797)----------------------------------------------------------------------------Net income before income taxes 13,880 44,746 12,452 (8,623) 62,455----------------------------------------------------------------------------Goodwill - 2,514 1,539 - 4,053Total assets 100,758 225,655 102,565 47,613 476,591Total liabilities 20,220 44,170 23,020 83,112 170,522--------------------------------------------------------------------------------------------------------------------------------------------------------Capital expenditures $ 17,928 $ 42,907 $ 16,046 $ 12,484 $ 89,365--------------------------------------------------------------------------------------------------------------------------------------------------------As at and for the year ended December 31, 2011 (audited) Contract Rentals and GasAs at and for the year ended Drilling Transportation CompressionDecember 31, 2011 Services Services Services Other(1) Total--------------------------------------------------------------------------------------------------------------------------------------------------------Revenue $ 59,436 $ 159,820 $ 112,826 $ - $ 332,082Cost of services 31,311 56,525 94,395 - 182,231Selling, general and administration 3,324 15,923 5,642 4,070 28,959Share-based compensation - - - 1,360 1,360Depreciation 5,424 14,570 3,253 52 23,299----------------------------------------------------------------------------Results from operating activities 19,377 72,802 9,536 (5,482) 96,233Gain on sale of property, plant and equipment 28 1,900 574 - 2,502Finance income - - - 161 161Finance costs (973) (2,367) (584) (1,517) (5,441)----------------------------------------------------------------------------Net income before income taxes 18,432 72,335 9,526 (6,838) 93,455----------------------------------------------------------------------------Goodwill - 2,514 1,539 - 4,053Total assets 91,122 227,728 82,160 33,607 434,617Total liabilities 19,370 54,318 19,383 66,225 159,296----------------------------------------------------------------------------Capital expenditures $ 14,075 $ 32,933 $ 8,409 $ 230 $ 55,647--------------------------------------------------------------------------------------------------------------------------------------------------------



(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 minus finance income. EBITDA means earnings before interest, taxes, depreciation and amortization and is equal to net income before income taxes plus finance costs plus depreciation minus finance income. 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. Reconciliations of these non-IFRS measures to the most directly comparable IFRS measure are outlined below.(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.

The Toronto Stock Exchange has neither approved nor disapproved of the information contained herein.



Contacts:
Total Energy Services Inc.
Daniel Halyk
President & Chief Executive Officer
(403) 216-3921

Total Energy Services Inc.
Mark Kearl
Vice-President Finance and Chief Financial Officer
(403) 216-3920
investorrelations@totalenergy.ca
www.totalenergy.ca





Source: Marketwire


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