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Total Energy Services Inc. Announces Q2 2013 Results

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CALGARY, ALBERTA -- (Marketwired) -- 08/12/13 -- Total Energy Services Inc. ("Total Energy" or the "Company") (TSX: TOT) announces its consolidated financial results for the three and six months ending June 30, 2013.

Financial Highlights

($000's except per share data)

---------------------------------------------------------------------------- Three Months Ended June 30 Six Months Ended June 30 (unaudited) (unaudited) % % 2013 2012 Change 2013 2012 Change----------------------------------------------------------------------------Revenue $ 60,668 $ 54,332 12% $163,579 $155,781 5%Operating Earnings (1) 1,455 3,778 (61)% 24,933 37,436 (33)%EBITDA (1) 7,471 9,120 (18)% 39,048 49,255 (21)%Cashflow (1) (5) 5,203 9,550 (46)% 17,557 49,655 (65)%Net Income 114 3,250 (96)% 17,505 27,711 (37)%Per Share Data (Diluted) (2)EBITDA (1) $ 0.22 $ 0.29 (24)% $ 1.14 $ 1.41 (19)%Cashflow (1) (5) $ 0.15 $ 0.30 (50)% $ 0.51 $ 1.42 (64)%Net Earnings $ 0.00 $ 0.10 (100)% $ 0.56 $ 0.85 (34)%---------------------------------------------------------------------------- June 30 Dec. 31 2013 2012 (unaudited) (audited) % Change----------------------------------------------------------------------------Financial PositionTotal Assets $ 473,500 $ 476,591 (1)%Long-Term Debt, Convertible Debentures and Obligations Under Finance Leases (excluding current portion) 66,020 65,417 1%Working Capital (3) 91,010 90,708 -Net Debt (4) Nil Nil -Shareholders' Equity 319,854 306,069 5%Shares Outstanding (000's)Basic 30,603 30,600 -Diluted (2) 34,118 34,300 (1)%----------------------------------------------------------------------------



Notes 1 through 5 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 six months ended June 30, 2013 reflect continued growth in the Company's Compression and Process Services division offset by a decline in oil and natural gas drilling and completion activity in Western Canada as compared to the first half of 2012 that negatively impacted the Contract Drilling Services and the Rentals and Transportation Services divisions.

Total Energy's Contract Drilling Services division achieved 16% utilization during the second quarter of 2013, recording 227 operating days (spud to release) with a fleet of 16 rigs, compared to 277 operating days, or 20% utilization, during the second quarter of 2012 with a fleet of 15 rigs. Revenue per operating day decreased 12% for the second quarter of 2013 relative to the prior year comparable period due to reduced pricing and the mix of equipment operating. The Rentals and Transportation Services division achieved a utilization rate on major rental equipment of 21% during the second quarter of 2013 as compared to a 36% utilization rate during the second quarter of 2012. The Compression and Process Services division generated revenues of $41.9 million for the three months ended June 30, 2013 compared to $26.3 million for the same period in 2012, an increase of 59%. The 2013 second quarter financial results from this division include results from the process equipment fabrication business that was acquired on January 1, 2013. This division exited the second quarter of 2013 with a $58.2 million backlog of fabrication sales orders as compared to $28.8 million at June 30, 2012. Included in the June 30, 2013 fabrication sales order backlog is $45.3 million of compression sales backlog and $12.9 million of process equipment sales backlog. At June 30, 2013, approximately 30,500 horsepower of compression equipment was on rent compared to 28,500 horsepower on rent at June 30, 2012. The gas compression rental fleet operated at an average utilization rate of 84% for the second quarter of both 2013 and 2012.

Negatively impacting cash flow for the first half of 2013 was the payment of $15.3 million of income taxes during the first quarter that related to 2012, as income tax installment payments were not required in 2012. Total Energy is required to make monthly income tax installment payments in 2013.

During the second quarter, Total Energy declared a quarterly dividend of $0.05 per share to shareholders of record on June 28, 2013. This dividend was paid on July 31, 2013. 193,700 common shares were purchased under the Company's normal course issuer bid during the three months ended June 30, 2013 at an average price of $14.59 per share (including commissions).

Outlook

Overall drilling and completion activity in Western Canada during the second quarter of 2013 was lower than the second quarter of 2012, due in part to wet weather conditions that extended into July. In the context of continuing strong oil prices and improved natural gas prices from a year ago, current indications are that drilling and completion activity levels in Western Canada will improve during the second half of 2013. The substantial fabrication sales backlog enjoyed by the Compression and Process Services division reflects continued demand for compression and process equipment.

Total Energy has increased its 2013 capital expenditure budget to $78.6 million. This $10.0 million increase will be directed towards continued expansion of the gas compression rental fleet, with $20 million now budgeted for expansion of the Company's compression rental fleet in 2013. To June 30, 2013, $31.1 million of capital expenditures have been made.

Total Energy's financial condition remains solid with a long-term debt (including convertible debentures) to long-term debt plus equity ratio of 0.18 to 1.0, $91.0 million of positive working capital and no net debt as at June 30, 2013. Total Energy's $35 million operating facility is currently fully available and undrawn. Total Energy continues to evaluate several investment opportunities and the Company's financial position provides significant capacity and flexibility to pursue further growth opportunities that meet the Company's investment expectations.

Conference Call

At 2:30 p.m. MST today, Total Energy will conduct a conference call and webcast to discuss its second quarter financial results. Daniel Halyk, President & Chief Executive Officer, will host the conference call. The call is open to Shareholders and all other interested persons. 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) 226-1792 or (416) 340-2216. 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 August 19, 2013 by dialing (800) 408-3053 (passcode 2914992).

Selected Financial Information

Selected financial information relating to the three and six month periods ended June 30, 2013 and 2012 is attached to this news release. This information should be read in conjunction with the condensed unaudited interim 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 second quarter report.

Condensed Interim Consolidated Statements of Financial Position

(in thousands of Canadian dollars)

---------------------------------------------------------------------------- June 30, December 31, 2013 2012---------------------------------------------------------------------------- (unaudited) (audited)AssetsCurrent assets: Cash and cash equivalents $ 34,236 $ 50,052 Accounts receivable 53,870 63,511 Inventory 33,124 33,240 Income taxes receivable 3,964 - Prepaid expenses and deposits 4,498 2,547---------------------------------------------------------------------------- 129,692 149,350Property, plant and equipment 339,755 323,188Goodwill 4,053 4,053---------------------------------------------------------------------------- $ 473,500 $ 476,591----------------------------------------------------------------------------Liabilities & Shareholders' EquityCurrent liabilities: Accounts payable and accrued liabilities 27,756 $ 32,523 Deferred revenue 7,096 6,971 Income taxes payable - 15,098 Dividends payable 1,530 1,530 Current portion of obligations under finance leases 2,300 2,520---------------------------------------------------------------------------- 38,682 58,642Obligations under finance leases 2,469 2,723Convertible debentures 63,551 62,694Deferred tax liability 48,944 46,463Shareholders' equity: Share capital 78,021 76,890 Contributed surplus 6,632 5,160 Equity portion of convertible debenture 4,601 4,601 Retained earnings 230,600 219,418---------------------------------------------------------------------------- 319,854 306,069---------------------------------------------------------------------------- $ 473,500 $ 476,591----------------------------------------------------------------------------



Condensed Interim Consolidated Statements of Comprehensive Income

(in thousands of Canadian dollars except per share amounts)

---------------------------------------------------------------------------- Three months ended Six months ended June 30 June 30 2013 2012 2013 2012---------------------------------------------------------------------------- (unaudited) (unaudited) (unaudited) (unaudited)Revenue $ 60,668 $ 54,332 $ 163,579 $ 155,781 Cost of services 45,748 38,323 108,503 91,257 Selling, general and administration 6,793 6,420 15,170 14,830 Share-based compensation 780 553 1,913 931 Depreciation 5,892 5,258 13,060 11,327----------------------------------------------------------------------------Results from operating activities 1,455 3,778 24,933 37,436 Gain on sale of property, plant and equipment 124 84 1,055 492 Finance costs (1,428) (1,240) (2,715) (2,529)----------------------------------------------------------------------------Net income before income taxes 151 2,622 23,273 35,399 Current income tax expense 683 2,823 3,287 4,170 Deferred income tax expense (recovery) (646) (3,451) 2,481 3,518----------------------------------------------------------------------------Total income tax expense (recovery) 37 (628) 5,768 7,688Net income and total comprehensive income for the period $ 114 $ 3,250 $ 17,505 $ 27,711----------------------------------------------------------------------------Earnings per share Basic earnings per share $ - $ 0.10 $ 0.57 $ 0.89 Diluted earnings per share $ - $ 0.10 $ 0.56 $ 0.85----------------------------------------------------------------------------



Condensed Interim Consolidated Statements of Cash Flows

(in thousands of Canadian dollars)

---------------------------------------------------------------------------- Three months ended Six months ended June 30 June 30 2013 2012 2013 2012---------------------------------------------------------------------------- (unaudited) (unaudited) (unaudited) (unaudited)Cash provided by (used in):Operations: Net income for the period $ 114 $ 3,250 $ 17,505 $ 27,711 Add (deduct) items not affecting cash: Depreciation 5,892 5,258 13,060 11,327 Share-based compensation 780 553 1,913 931 Gain on sale of property, plant and equipment (124) (84) (1,055) (492) Finance costs 1,428 1,240 2,715 2,529 Current income tax expense 683 2,823 3,287 4,170 Deferred income tax expense (recovery) (646) (3,451) 2,481 3,518 Income taxes paid (2,924) (39) (22,349) (39)---------------------------------------------------------------------------- 5,203 9,550 17,557 49,655 Changes in non-cash working capital items: Accounts receivable 42,850 44,435 9,641 39,480 Inventory (152) (907) 3,070 894 Prepaid expenses and deposits (247) 93 (1,951) (232) Accounts payable and accrued liabilities (7,887) (8,558) (239) (7,122) Deferred revenue 1,993 808 125 2,650---------------------------------------------------------------------------- 41,760 45,421 28,203 85,325Investments: Purchase of property, plant and equipment (10,656) (17,179) (17,072) (41,421) Acquisition of business - - (16,954) - Proceeds on disposal of property, plant and equipment 293 721 3,510 1,747 Changes in non-cash working capital items 36 420 (4,223) (4,186)---------------------------------------------------------------------------- (10,327) (16,038) (34,739) (43,860)Financing: Repayment of obligations under finance leases (699) (852) (1,484) (1,743) Dividends to shareholders (1,538) (1,566) (3,068) (2,820) Issuance of common shares 316 512 1,428 1,197 Repurchase of common shares (2,838) (6,262) (3,993) (9,797) Interest paid (147) (155) (2,163) (2,080)---------------------------------------------------------------------------- (4,906) (8,323) (9,280) (15,243)----------------------------------------------------------------------------Change in cash and cash equivalents 26,527 21,060 (15,816) 26,222Cash and cash equivalents, beginning of period 7,709 40,820 50,052 35,658----------------------------------------------------------------------------Cash and cash equivalents, end of period $ 34,236 $ 61,880 $ 34,236 $ 61,880----------------------------------------------------------------------------



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 Compression and Process Services, which includes the fabrication, sale, rental and servicing of natural gas compression and process equipment.

As at and for the three Contract Rentals and Compression months ended Drilling Transportation and ProcessJune 30, 2013 Services Services Services Other(1) Total----------------------------------------------------------------------------Revenue $ 4,285 $ 14,516 $ 41,867 $ - $ 60,668Cost of services 3,931 9,712 32,105 - 45,748Selling, general and administration 654 2,901 2,177 1,061 6,793Share-based compensation - - - 780 780Depreciation 512 3,831 1,313 236 5,892----------------------------------------------------------------------------Results from operating activities (812) (1,928) 6,272 (2,077) 1,455Gain on sale of property, plant and equipment 10 70 44 - 124Finance costs (203) (548) (237) (440) (1,428)----------------------------------------------------------------------------Net income (loss) before income taxes (1,005) (2,406) 6,079 (2,517) 151----------------------------------------------------------------------------Goodwill - 2,514 1,539 - 4,053Total assets 100,120 218,456 142,780 12,144 473,500Total liabilities 15,511 38,391 31,706 68,038 153,646----------------------------------------------------------------------------Capital expenditures (2) $ 472 $ 3,925 $ 5,722 $ 537 $ 10,656----------------------------------------------------------------------------As at and for the three Contract Rentals and Compression months ended Drilling Transportation and ProcessJune 30, 2012 Services Services Services Other(1) Total----------------------------------------------------------------------------Revenue $ 5,935 $ 22,093 $ 26,304 $ - $ 54,332Cost of services 4,880 11,582 21,865 (4) 38,323Selling, general and administration 671 3,089 1,398 1,262 6,420Share-based compensation - - - 553 553Depreciation 635 3,658 957 8 5,258----------------------------------------------------------------------------Results from operating activities (251) 3,764 2,084 (1,819) 3,778Gain (loss) on sale of property, plant and equipment (15) 102 (3) - 84Finance costs (253) (583) (69) (335) (1,240)----------------------------------------------------------------------------Net income (loss) before income taxes (519) 3,283 2,012 (2,154) 2,622----------------------------------------------------------------------------Goodwill - 2,514 1,539 - 4,053Total assets 90,476 215,129 91,137 54,503 451,245Total liabilities 16,406 48,362 23,113 71,116 158,997----------------------------------------------------------------------------Capital expenditures $ 2,323 $ 10,185 $ 4,652 $ 19 $ 17,179----------------------------------------------------------------------------As at and for the six months Contract Rentals and Compression ended Drilling Transportation and ProcessJune 30, 2013 Services Services Services Other(1) Total----------------------------------------------------------------------------Revenue $ 22,915 $ 53,717 $ 86,947 $ - $163,579Cost of services 14,698 25,685 68,120 - 108,503Selling, general and administration 1,568 6,798 4,283 2,521 15,170Share-based compensation - - - 1,913 1,913Depreciation 2,310 7,692 2,584 474 13,060----------------------------------------------------------------------------Results from operating activities 4,339 13,542 11,960 (4,908) 24,933Gain (loss) on sale of property, plant and equipment (22) 235 842 - 1,055Finance costs (404) (1,096) (417) (798) (2,715)----------------------------------------------------------------------------Net income before income taxes 3,913 12,681 12,385 (5,706) 23,273----------------------------------------------------------------------------Goodwill - 2,514 1,539 - 4,053Total assets 100,120 218,456 142,780 12,144 473,500Total liabilities 15,511 38,391 31,706 68,038 153,646----------------------------------------------------------------------------Capital expenditures (2) $ 1,731 $ 7,402 $ 21,393 $ 546 $ 31,072----------------------------------------------------------------------------As at and for the six months Contract Rentals and Compression ended Drilling Transportation and ProcessJune 30, 2012 Services Services Services Other(1) Total----------------------------------------------------------------------------Revenue $ 27,114 $ 71,441 $ 57,226 $ - $155,781Cost of services 14,807 28,854 47,600 (4) 91,257Selling, general and administration 1,796 7,654 2,873 2,507 14,830Share-based compensation - - - 931 931Depreciation 2,284 7,166 1,857 20 11,327----------------------------------------------------------------------------Results from operating activities 8,227 27,767 4,896 (3,454) 37,436Gain on sale of property, plant and equipment 44 269 179 - 492Finance costs (506) (1,157) (193) (673) (2,529)----------------------------------------------------------------------------Net income before income taxes 7,765 26,879 4,882 (4,127) 35,399----------------------------------------------------------------------------Goodwill - 2,514 1,539 - 4,053Total assets 90,476 215,129 91,137 54,503 451,245Total liabilities 16,406 48,362 23,113 71,116 158,997----------------------------------------------------------------------------Capital expenditures $ 7,289 $ 20,137 $ 12,181 $ 1,814 $ 41,421----------------------------------------------------------------------------(1) Other includes the Company's corporate activities, accretion of convertible debentures and obligations pursuant to long-term credit facilities.(2) Includes January 1, 2013 acquisition of a process equipment fabrication business included in Compression and Process Services segment.



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.

For further information, please contact Daniel Halyk, President & Chief Executive Officer at (403) 216-3921 or Mark Kearl, 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 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. (5) Cashflow for the six months ended June 30, 2013 is net of $15.3 million of income taxes paid during the period that relates to 2012 taxable income as a result of the Company not having been required to make income tax installment payments during 2012.



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



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