Total Energy Services Inc. Announces Q1 2021 Results

2021-05-12

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CALGARY, Alberta, May 12, 2021 (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, 2021. Financial Highlights ($000’s except per share data) Notes 1 through 4 please refer to the Notes to the Financial Highlights set forth at the end of this release. “nm” – calculation not meaningful Total Energy’s results for the three months ended March 31, 2021 reflect continued challenging industry conditions in North America and lower Australian activity levels. Included in the financial results for the three months ended March 31, 2021 was $2.9 million of incremental depreciation expense resulting from a change in depreciation estimates in the Contract Drilling Services segment effective April 1, 2020, $0.4 million of non-recurring equipment relocation costs and a $0.2 million increase to the Company’s allowance for doubtful accounts. $5.9 million was received during the first quarter of 2021 under various COVID-19 relief programs. Contract Drilling Services (“CDS”) (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. Drilling activity for the first quarter of 2021 was lower compared to 2020 in all geographic areas. Australian activity levels were significantly lower on a year over year basis due to reduced drilling programs and prolonged wet weather conditions that restricted field activity for much of the quarter. Two Australian drilling rigs remained out of service during the first quarter of 2021 for recertifications and upgrades. First quarter revenue per operating day for 2021 was lower than 2020 due primarily to the geographic revenue mix and the mix of equipment operating. $0.4 million of non-recurring equipment relocation costs were incurred during the first quarter of 2021 to complete the consolidation of United States drilling operations in West Texas. Despite the year over year decline in revenue and EBITDA, the quarterly segment EBITDA margin increased in 2021 as a result of cost management efforts and the receipt of COVID-19 funds. Rentals and Transportation Services (“RTS”) (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 was lower in 2021 as compared to 2020 due to lower North American drilling and completion activity. The RTS segment’s Canadian financial performance was also negatively impacted by several major project delays due to COVID-19 and other health and safety concerns unrelated to the Company’s operations or personnel. These delays were unanticipated and implemented after the RTS segment had begun significant mobilization efforts. Despite a substantial decline in revenue, first quarter segment EBITDA margin increased in 2021 as a result of efforts to right-size this segment’s operating infrastructure in response to prolonged reduced industry activity levels in Canada and the receipt of COVID-19 funds. In addition, a substantial portion of the heavy truck fleet continued to be out of service during 2021 to reduce operating costs and equipment wear and tear until such time as North American industry conditions warrant placing such units back into service. Compression and Process Services (“CPS”) (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 decrease in the CPS segment’s first quarter revenue was due primarily to lower fabrication sales and rental fleet utilization. Rental fleet utilization was negatively impacted with the return of 6,500 horsepower of rental compression in late 2020 following the bankruptcy of a United States customer. Competitive market conditions as well as lower production levels and rental fleet utilization contributed to the year over year decline in the quarterly EBITDA margin. The fabrication sales backlog continued to recover during the first quarter of 2021 from the $37.0 million low reached at September 30, 2020, with a further $3.8 million, or 9% increase from December 31, 2020. Well Servicing (“WS”) (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. WS segment revenue decreased in the first quarter of 2021 as compared to 2020 as a result of lower activity levels in United States and Australia. Increased well abandonment activity in Canada was the primary driver of a modest year over year increase in first quarter activity. Prolonged wet weather conditions during the first quarter of 2021 exacerbated the decline in Australian service rig activity that began to moderate in the third quarter of 2020. Corporate Total Energy remained focused on the safe and efficient operation of its business and the preservation of its balance sheet strength and financial liquidity during the first quarter of 2021. Bank debt was reduced by $10.6 million during the first three months of 2021 and the Company resumed share buybacks under its normal course issuer bid with the purchase and cancellation of 81,300 shares at an average price of $4.03 (including commissions). Total Energy’s financial condition and liquidity remains strong. The Company exited the first quarter of 2021 with $135.3 million of positive working capital (including $20.7 million of cash) and $95 million of available credit under its $255 million of revolving bank credit facilities. The weighted average interest rate on the Company’s outstanding debt at March 31, 2021 was 2.73%. Outlook Despite a recovery in oil and natural gas prices over the past year, producers remained cautious and disciplined with their capital expenditure budgets during the first quarter as evidenced by the significant year over year decrease in North American industry activity levels. While the first quarter is typically the rainy season in Australia, 2021 saw prolonged periods of rain that materially impacted field activity levels. Continued strength in oil and natural gas prices and a substantial increase in industry cash flow is beginning to contribute to higher activity levels. Current drilling rig activity in North America is now higher than at the same time a year ago. Total Energy currently has 13 drilling rigs operating in North America as compared to one rig drilling a year ago. In Australia, field conditions have improved over the past few weeks which has contributed to more steady activity levels. One of the two drilling rigs removed from service in the third quarter of 2020 for recertification and upgrades was completed and commenced drilling in late April such that three drilling rigs are currently active. The second rig is scheduled to be completed and commence drilling operations in July. During the first quarter of 2021, the RTS segment incurred significant costs to mobilize equipment and personnel for several Canadian projects that it had been awarded work on. While project delays had a negative impact on first quarter financial performance in the RTS segment, such projects are expected to begin when ground conditions permit and COVID-19 restrictions are lifted. The CPS segment’s fabrication sales backlog continued to slowly recover during the first quarter of 2021 and while the March 31, 2021 sales backlog remains relatively low by historical comparison, for the first time since the fourth quarter of 2018 the quarter end sales backlog was higher on a year over year basis. The Well Servicing segment is experiencing a recovery in demand, particularly in Canada as funding under the federal government’s well abandonment program has begun to accelerate. While current indications are that activity levels will continue to modestly improve, industry sentiment remains volatile and uncertain. As such, Total Energy will remain focused on the efficient operation of its existing businesses and the disciplined use of its free cash flow. Debt repayment will remain a priority. Conference Call At 9:00 a.m. (Mountain Time) on May 13, 2021 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 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, 2021 by dialing (855) 669-9658 (passcode 6598). Annual Meeting of Shareholders Shareholders are reminded that Total Energy’s annual meeting of Shareholders will take place on Tuesday, May 18, 2021 at 10:00 a.m. (Mountain Time). Due to public health measures implemented in response to the COVID-19 pandemic, attendance at such meeting will be strictly limited as detailed in the Company’s news release issued on May 7, 2021. The Meeting will be broadcast live via audio-only webcast and can be accessed through Total Energy’s website at . Selected Financial Information Selected financial information relating to the three months ended March 31, 2021 and 2020 is attached to 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 the Company’s 2020 Annual report. Consolidated Statements of Financial Position(in thousands of Canadian dollars) Consolidated Statements of Comprehensive Income (Loss)(in thousands of Canadian dollars except per share amounts)(unaudited) Consolidated Statements of Comprehensive Income (Loss)(unaudited) Consolidated Statements of Cash Flows(in thousands of Canadian dollars)(unaudited) 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, 2021 (unaudited, in thousands of Canadian dollars) As at and for the three months ended March 31, 2020 (unaudited, in thousands of Canadian dollars) 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 Notes to the Financial Highlights 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 ) for a discussion of such risks and uncertainties. The TSX has neither approved nor disapproved of the information contained herein.

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