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Total Energy Services Inc. Announces 2011 Results

11:22 EDT Wednesday, March 14, 2012

CALGARY, ALBERTA--(Marketwire - March 14, 2012) - 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, 2011.

Financial Highlights

($000's except per share data)

Three Months Ended Dec. 31 Twelve Months Ended Dec. 31
(unaudited) (audited)
2011 2010 % Change 2011 2010 % Change
Revenue $ 96,936 $ 72,565 34 % $ 332,082 $ 224,524 48 %
Operating Earnings (1) 31,206 19,320 62 % 96,233 47,903 101 %
EBITDA (1) 38,608 24,057 60 % 122,034 67,596 81 %
Cashflow (1) 37,251 24,967 49 % 120,780 71,508 69 %
Net Income 23,441 13,332 76 % 69,266 32,926 110 %
Per Share Data (Diluted) (2)
EBITDA (1) $ 1.10 $ 0.75 47 % $ 3.49 $ 2.15 62 %
Cashflow (1) 1.06 0.78 36 % 3.46 2.27 52 %
Net Earnings 0.69 0.42 64 % 2.08 1.05 98 %
Dec. 31 Dec. 31
2011

(audited
) 2010

(audited
) % Change
Financial Position
Total Assets $ 434,617 $ 342,834 27 %
Long-Term Debt, Convertible Debentures and Obligations Under Finance Leases 66,466 78,717 (16 )%
Working Capital (3) 120,786 64,446 87 %
Net Debt (4) nil 5,026 n/m
Shareholders' Equity 275,321 209,845 31 %
Shares Outstanding (000's)
Basic 31,375 31,425 n/m
Diluted (2) 35,261 32,096 10 %

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, 2011 represent record fourth quarter and annual financial results for the Company, driven by higher activity levels in all three business divisions.

Total Energy's Contract Drilling Services division achieved 62% utilization during the fourth quarter of 2011, recording 801 operating days (spud to release) with a fleet of 14 rigs, compared to 743 operating days, or 58% utilization, during the fourth quarter of 2010 with the same fleet. Revenue per operating day increased 28% for the fourth quarter of 2011 relative to the prior year comparable period due primarily to improved pricing. For the twelve months ended December 31, 2011, the Contract Drilling Services division achieved 3,042 operating days (60% utilization), compared to 2,714 operating days (53% utilization) for 2010. The Rentals and Transportation Services division achieved a utilization rate on major rental equipment of 72% during the fourth quarter of 2011 as compared to a 69% utilization rate during the fourth quarter of 2010. For 2011, rental equipment utilization averaged 68% as compared to 56% for 2010. The Gas Compression Services division generated revenues of $33.0 million for the three months ended December 31, 2011 compared to $22.9 million for the same period in 2010, an increase of 44%. For 2011, revenues increased by 73% to $112.8 million compared to $65.1 million in 2010. The Gas Compression Services division exited 2011 with a $33.6 million backlog of fabrication sales orders as compared to $31.9 million at December 31, 2010. At December 31, 2011, approximately 25,300 horsepower of compression equipment was on rent compared to 21,200 horsepower on rent at December 31, 2010. The gas compression rental fleet operated at an average utilization rate of 78% for 2011 as compared to 73% for 2010.

During the fourth quarter, Total Energy declared a quarterly dividend of $0.04 per share to shareholders of record on December 31, 2011. This dividend was paid on January 31, 2012.

Outlook

Despite ongoing global economic and financial market uncertainty, Western Canadian industry activity levels were strong during 2011, increasingly driven by activity targeting oil and liquids rich natural gas. Current indications are that Western Canadian oil and natural gas producers' aggregate capital spending plans for 2012 are comparable to 2011 although with low natural gas prices, the focus on oil and liquids rich gas targets is expected to continue. Total Energy's 15th drilling rig was put into service in January 2012 and utilization of Total Energy's drilling rig fleet has been strong through the current winter drilling season. High levels of drilling, completion and production activity is contributing to strong demand for equipment and services provided by the Rentals and Transportation Services division. The Gas Compression Services division continues to focus on increasing its share of all facets of the Canadian natural gas compression market. Continued demand for the NOMAD™ line of patented mobile natural gas compression in Canada and the introduction of a custom-engineered model of the NOMAD™ to the Australian market in the second quarter of 2012 is expected to benefit this division despite challenging North American natural gas prices.

Total Energy's financial condition continues to strengthen with a long-term debt (including convertible debentures) to long-term debt plus equity ratio of 0.20 to 1.0, $120.8 million of positive working capital and no net debt as at December 31, 2011. Total Energy's $35 million operating facility is currently fully available and undrawn.

Total Energy's current 2012 capital expenditure budget is $58.1 million. $18.7 million has been allocated to the Gas Compression Services division, including $15.0 million for expansion of the gas compression rental fleet. $17.2 million has been allocated to the Rentals and Transportation division for the construction of approximately 220 pieces of rental equipment and the replacement and upgrade of five heavy trucks, which will bring Total Energy's fleet to approximately 9,200 rental pieces and 105 heavy trucks with an average age of three years. A portion of this new equipment, including the Company's proprietary Apollo™ modular fluid containment systems, will support this division's current expansion into the North Dakota market. $16.7 million will be directed to Total Energy's Contract Drilling Services division for the construction of a sixteenth rig (with completion scheduled for the fourth quarter of 2012) and for $6.2 million of rig upgrades and ancillary equipment. $5.5 million has been budgeted for capital maintenance spending in all divisions. Cashflow from operations and, if necessary, Total Energy's existing credit facility will be used to finance the 2012 capital expenditure budget, which budget is subject to further change depending on industry conditions and business opportunities.

Conference Call

At 2:30 p.m. MST today, Total Energy will conduct a conference call 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. If you wish to participate, call (800) 335-4959. Those who are unable to listen to the call live may listen to a recording of it by calling (800) 408-3053 (passcode 1387560). The recording will be available until March 21, 2012.

Dividend Increase

Total Energy's Board of Directors has determined to increase the Company's quarterly dividend by $0.01 per share to $0.05 per common share beginning for the quarter ending March 31, 2012. This equates to an annual dividend of $0.20 per common share.

Total Energy's dividend policy is consistent with its primary objective of building sustainable shareholder value, as measured on a diluted per share basis. In particular, Total Energy's dividend policy recognizes the cyclical nature of the Canadian energy services industry and is intended not to impair the Company's ability to continue to finance substantial future growth on reasonable terms, particularly during periods when access to debt or equity markets may be restricted or impaired.

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 Tuesday May 22, 2012 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, 2011 and 2010 is attached to this press 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 2011 annual report.

Consolidated Statements of Financial Position
(in thousands of Canadian dollars)
December 31, December 31,
2011 2010
(audited) (audited)
Assets
Current assets:
Cash and cash equivalents $ 35,658 $ 228
Accounts receivable 94,556 70,983
Inventory 37,147 33,488
Income taxes receivable 118 118
Prepaid expenses and deposits 1,795 1,818
169,274 106,635
Property, plant and equipment 261,290 232,146
Goodwill 4,053 4,053
$ 434,617 $ 342,834
Liabilities & Shareholders' Equity
Current liabilities:
Accounts payable and accrued liabilities 41,556 28,353
Deferred revenue 3,064 3,334
Dividends payable 1,255 1,257
Current portion of long-term debt - 6,042
Current portion of obligations under finance leases 2,613 3,203
48,488 42,189
Long-term debt - 66,458
Convertible debenture 61,090 -
Obligations under finance leases 2,763 3,014
Deferred tax liability 46,955 21,328
Shareholders' equity:
Share capital 77,917 76,268
Contributed surplus 2,472 1,769
Equity portion of convertible debenture 4,601 -
Retained earnings 190,331 131,808
275,321 209,845
$ 434,617 $ 342,834
Consolidated Statements of Comprehensive Income
(in thousands of Canadian dollars except per share amounts)
Three months ended Year ended
December 31 December 31
2011 2010 2011 2010
(unaudited) (unaudited) (audited) (audited)
Revenue $ 96,936 $ 72,565 $ 332,082 $ 224,524
Expenses:
Cost of services 51,875 40,466 182,231 129,813
Selling, general and administration 7,792 6,945 28,959 25,698
Share-based compensation 314 434 1,360 1,289
Depreciation 5,749 5,400 23,299 19,821
Results from operating activities 31,206 19,320 96,233 47,903
Gain (loss) on disposal of property, plant and equipment 1,653 (663 ) 2,502 (128 )
Finance costs (1,358 ) (874 ) (5,280 ) (3,332 )
Net income before income taxes 31,501 17,783 93,455 44,443
Current income tax expense 18 187 112 235
Deferred income tax expense 8,042 4,264 24,077 11,282
Total income tax expense 8,060 4,451 24,189 11,517
Net income and total comprehensive income for the period 23,441 13,332 69,266 32,926
Retained earnings, beginning of period 170,844 119,733 131,808 103,114
Dividends (1,256 ) (1,257 ) (5,032 ) (4,050 )
Repurchase and cancellation of common shares in excess of stated common share capital (2,698 ) - (5,711 ) (182 )
Retained earnings, end of period $ 190,331 $ 131,808 $ 190,331 $ 131,808
Earnings per share :
Basic $ 0.75 $ 0.43 $ 2.20 $ 1.07
Diluted $ 0.69 $ 0.42 $ 2.08 $ 1.05
Consolidated Statements of Cash Flows
(in thousands of Canadian dollars)
Three months ended Year ended
December 31 December 31
2011 2010 2011 2010
(unaudited) (unaudited) (audited) (audited)
Cash provided by (used in):
Operations:
Net income for the period $ 23,441 $ 13,332 $ 69,266 $ 32,926
Add (deduct) items not affecting cash:
Depreciation 5,749 5,400 23,299 19,821
Share-based compensation 314 434 1,360 1,289
(Gain) loss on disposal of property, plant and equipment (1,653 ) 663 (2,502 ) 128
Finance costs 1,358 874 5,280 3,332
Current income tax expense 18 187 112 235
Deferred income tax expense 8,042 4,264 24,077 11,282
Income taxes (paid) received (18 ) (187 ) (112 ) 2,495
37,251 24,967 120,780 71,508
Changes in non-cash working capital items:
Accounts receivable (7,063 ) (18,083 ) (23,573 ) (48,443 )
Inventory 2,851 (5,869 ) (3,659 ) (4,693 )
Prepaid expenses and deposits 1,314 545 (48 ) 172
Accounts payable and accrued liabilities 4,482 6,931 4,413 14,902
Deferred revenue (7,936 ) 2,050 (270 ) 368
30,899 10,541 97,643 33,814
Investments:
Purchase of property, plant and equipment (24,300 ) (6,373 ) (55,647 ) (28,001 )
DC Energy Services LP acquisition - - - (31,093 )
Proceeds on disposal of property, plant and equipment 4,630 1,095 8,739 3,621
Changes in non-cash working capital items 4,037 (2,935 ) 8,021 253
(15,633 ) (8,213 ) (38,887 ) (55,220 )
Financing:
Issuance of convertible debenture, net of issue costs - - 65,927 -
Advances under long-term debt - (1,225 ) - 66,182
Repayment of long-term debt - - (72,500 ) (17,500 )
Repayment of obligations under finance leases (1,132 ) (795 ) (3,874 ) (2,540 )
Payment of dividends (1,255 ) (932 ) (5,034 ) (3,668 )
Issuance of common shares 1,265 1,794 2,213 2,377
Repurchase of common shares (3,234 ) - (6,861 ) (239 )
Interest paid 18 (942 ) (3,197 ) (3,109 )
Decrease in bank indebtedness - - - (19,869 )
(4,338 ) (2,100 ) (23,326 ) 21,634
Change in cash and cash equivalents 10,928 228 35,430 228
Cash and cash equivalents, beginning of period 24,730 - 228 -
Cash and cash equivalents, end of period $ 35,658 $ 228 $ 35,658 $ 228

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 equipment.

As at and for the three months ended December 31, 2011 (unaudited)

Contract Drilling Services Rentals and Transportation Services Gas Compression Services



Other (2
)



Total
Revenue $ 18,066 $ 45,858 $ 33,012 $ - $ 96,936
Cost of services 8,559 16,332 26,984 - 51,875
Selling, general and administration 1,030 4,129 1,644 989 7,792
Share-based compensation - - - 314 314
Depreciation 1,379 3,475 881 14 5,749
Results from operating activities 7,098 21,922 3,503 (1,317 ) 31,206
Gain/(loss) on sale of property, plant and equipment 21 1,629 3 - 1,653
Finance costs (253 ) (591 ) (152 ) (362 ) (1,358 )
Net income before income taxes 6,866 22,960 3,354 (1,679 ) 31,501
Goodwill - 2,514 1,539 - 4,053
Total assets 91,122 227,728 82,160 33,607 434,617
Total liabilities 19,370 54,318 19,383 66,225 159,296
Capital expenditures $ 5,107 $ 16,473 $ 2,542 $ 178 $ 24,300

As at and for the three months ended December 31, 2010 (unaudited)

Contract Drilling Services Rentals and Transportation Services Gas Compression Services



Other (2
)



Total
Revenue $ 13,066 $ 36,578 $ 22,921 $ - $ 72,565
Cost of services 7,652 13,907 18,910 (3 ) 40,466
Selling, general and administration 640 3,974 1,394 937 6,945
Share-based compensation - - - 434 434
Depreciation 1,331 3,375 686 8 5,400
Results from operating activities 3,443 15,322 1,931 (1,376 ) 19,320
Gain/(loss) on sale of property, plant and equipment - (664 ) 1 - (663 )
Finance costs (160 ) (572 ) (98 ) (44 ) (874 )
Net income before income taxes 3,283 14,086 1,834 (1,420 ) 17,783
Goodwill - 2,514 1,539 - 4,053
Total assets 78,267 188,380 72,965 3,222 342,834
Total liabilities 11,177 19,626 17,439 84,747 132,989
Capital expenditures $ 950 $ 3,565 $ 1,855 $ 3 $ 6,373

As at and for the year ended December 31, 2011 (audited)

Contract Drilling Services Rentals and Transportation Services Gas Compression Services



Other (2
)



Total
Revenue $ 59,436 $ 159,820 $ 112,826 $ - $ 332,082
Cost of services 31,311 56,525 94,395 - 182,231
Selling, general and administration 3,324 15,923 5,642 4,070 28,959
Share-based compensation - - - 1,360 1,360
Depreciation 5,424 14,570 3,253 52 23,299
Results from operating activities 19,377 72,802 9,536 (5,482 ) 96,233
Gain/(loss) on sale of property, plant and equipment 28 1,900 574 - 2,502
Finance costs (973 ) (2,367 ) (584 ) (1,356 ) (5,280 )
Net income before income taxes 18,432 72,335 9,526 (6,838 ) 93,455
Goodwill - 2,514 1,539 - 4,053
Total assets 91,122 227,728 82,160 33,607 434,617
Total liabilities 19,370 54,318 19,383 66,225 159,296
Capital expenditures $ 14,075 $ 32,933 $ 8,409 $ 230 $ 55,647

As at and for the year ended December 31, 2010 (audited)

Contract Drilling Services Rentals and Transportation Services Gas Compression Services



Other (2
)



Total
Revenue $ 41,127 $ 118,259 $ 65,138 $ - $ 224,524
Cost of services 27,432 50,309 51,960 112 129,813
Selling, general and administration 2,159 15,419 4,180 3,940 25,698
Share-based compensation - - - 1,289 1,289
Depreciation 4,712 12,779 2,300 30 19,821
Results from operating activities 6,824 39,752 6,698 (5,371 ) 47,903
Gain/(loss) on sale of property, plant and equipment - (440 ) 312 - (128 )
Finance costs (574 ) (2,267 ) (366 ) (125 ) (3,332 )
Net income before income taxes 6,250 37,045 6,644 (5,496 ) 44,443
Goodwill - 2,514 1,539 - 4,053
Total assets 78,267 188,380 72,965 3,222 342,834
Total liabilities 11,177 19,626 17,439 84,747 132,989
Capital expenditures (1) $ 3,840 $ 15,412 $ 8,719 $ 30 $ 28,001

(1) Excludes the acquisition of DC Energy Services LP.

(2) 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 equipment. The common shares of Total Energy are listed and trade on the TSX under the symbol TOT.

Notes to Financial Highlights

(1) Operating earnings means results from operating activities and is equal to net income before income taxes minus gain on sale of property, plant and equipment plus finance costs. EBITDA means earnings before interest, taxes, depreciation and amortization and is equal to net income before income taxes plus finance costs plus depreciation. Cashflow means cash provided by operations before changes in non-cash working capital items. Operating earnings, EBITDA and cashflow are not recognized measures under IFRS. Management believes that in addition to net income, operating earnings, EBITDA and cashflow are useful supplemental measures as they provide an indication of the results generated by the Company's primary business activities prior to consideration of how those activities are financed, amortized or how the results are taxed in various jurisdictions as well as the cash generated by the Company's primary business activities without consideration of the timing of the monetization of non-cash working capital items. Readers should be cautioned, however, that operating earnings, EBITDA and cashflow should not be construed as an alternative to net income determined in accordance with IFRS as an indicator of Total Energy's performance. Total Energy's method of calculating operating earnings, EBITDA and cashflow may differ from other organizations and, accordingly, operating earnings, EBITDA and cashflow may not be comparable to measures used by other organizations.

(2) Per share data (diluted) and the number of common shares outstanding on a diluted basis includes the impact of the approximate 3.1 million common shares issuable upon the entire conversion of the $69 million principal amount of convertible debentures issued by the Company in February 2011.

(3) Working capital equals current assets minus current liabilities.

(4) Net Debt equals long-term debt plus obligations under finance leases plus convertible debentures plus current liabilities minus current assets.

Certain statements contained in this press release, including statements which may contain words such as "could", "should", "expect", "believe", "will" and similar expressions and statements relating to matters that are not historical facts are forward-looking statements. Such forward-looking statements involve known and unknown risks and uncertainties which may cause the actual results, performances or achievements of Total Energy to be materially different from any future results, performances or achievements expressed or implied by such forward-looking statements. Such factors include fluctuations in the market for oil and natural gas and related products and services, political and economic conditions, the demand for products and services provided by Total Energy, Total Energy's ability to attract and retain key personnel and other factors. Reference should be made to Total Energy's most recently filed Annual Information Form and other public disclosures (available at www.sedar.com ) for a discussion of such risks and uncertainties.

FOR FURTHER INFORMATION PLEASE CONTACT:

Daniel Halyk
Total Energy Services Inc.
President & Chief Executive Officer
(403) 216-3921
OR
Mark Kearl
Total Energy Services Inc.
Vice-President Finance and Chief Financial Officer
(403) 216-3920
investorrelations@totalenergy.ca
www.totalenergy.ca

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




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