Total Energy Services Inc. Announces Q2 2015 Results and Management Appointment
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E-mailCALGARY, ALBERTA -- (Marketwired) -- 08/12/15 -- Total Energy Services Inc. ("Total Energy" or the "Company") announces its consolidated financial results for the three and six months ending June 30, 2015.
Financial Highlights
($000's except per share data)
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Three Months Ended June 30 Six Months Ended June 30
(unaudited) (unaudited)
% %
2015 2014 Change 2015 2014 Change
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Revenue $ 71,908 $ 83,694 (14)% $164,398 $198,807 (17)%
Operating Earnings
(1) 3,155 6,344 (50)% 17,730 32,004 (45)%
EBITDA (1) 13,276 15,920 (17)% 35,151 51,599 (32)%
Cashflow (1) (5) 6,341 19,871 (68)% 14,329 53,894 (73)%
Net Income 921 7,216 (87)% 10,104 28,244 (64)%
Per Share Data
(Diluted) (2)
EBITDA (1) $0.43 $0.46 (7)% $1.13 $1.48 (24)%
Cashflow (1) (5) $0.20 $0.57 (65)% $0.46 $1.55 (71)%
Net Earnings $0.03 $0.23 (87)% $0.33 $0.87 (62)%
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June 30 Dec. 31
2015 2014
(unaudited) (audited) % Change
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Financial Position
Total Assets $ 547,552 $ 595,906 (8)%
Long-Term Debt, Convertible
Debentures and Obligations
Under Finance Leases
(excluding current portion) 50,688 69,468 (27)%
Working Capital (3) 86,161 82,332 5%
Net Debt (4) Nil Nil n/m
Shareholders' Equity 387,619 382,063 1%
Shares Outstanding (000's)
Basic 31,000 31,005 n/m
Diluted (2) 31,118 34,114 (9)%
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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, 2015 reflect challenging North American industry conditions arising from a substantial decline in oil prices that began in the second half of 2014. Included in the Company's 2015 second quarter results are $4.5 million ($0.14 per share) of non-recurring expenses, which consist of a $3.8 million ($0.12 per share) increase to income tax expense and a $0.7 million ($0.02 per share) non-cash accretion expense arising from the early redemption of $69 million of convertible debentures.
Total Energy's Contract Drilling Services division achieved 8% utilization during the second quarter of 2015, recording 126 operating days (spud to release), compared to 405 operating days, or 28% utilization, during the second quarter of 2014 with a fleet of 18 rigs in 2015 compared to 16 rigs in 2014. Revenue per operating day for the second quarter of 2015 decreased 10% compared to the second quarter of 2014 due primarily to reduced pricing. The Rentals and Transportation Services division achieved a utilization rate on major rental equipment of 19% during the second quarter of 2015 as compared to a 28% utilization rate during the second quarter of 2014. This division exited the second quarter of 2015 with 10,000 pieces of rental equipment and 120 heavy trucks as compared to 9,900 rental pieces and 109 heavy trucks at June 30, 2014. The Compression and Process Services division generated revenues of $56.2 million for the three months ended June 30, 2015, which was in line with the second quarter of 2014. This division exited the second quarter of 2015 with a $68.0 million backlog of fabrication sales orders as compared to $81.9 million at June 30, 2014 and $86.6 million at March 31, 2015. As at June 30, 2015 there was approximately 28,900 horsepower of compression equipment on rent as compared to 35,900 horsepower on rent at June 30, 2014. The gas compression rental fleet operated at an average utilization rate of 69% during the second quarter of 2015 as compared to 89% during the second quarter of 2014.
Cashflow was $6.3 million for the three months ended June 30, 2014, as compared to $19.9 million for the comparable period in 2014. The decrease in cashflow was due to reduced operating earnings and the payment of $4.2 million of income taxes during the second quarter of 2015 compared to $6.2 million of income tax recoveries received during the second quarter of 2014.
On June 29, 2015, the Alberta government enacted a 20% increase to the Alberta corporate income tax rate. This increase resulted in a one-time $3.8 million increase to total income tax expense for the three and six months ended June 30, 2015. $3.6 million of this increase was allocated to deferred income tax expense and resulted from the higher income tax rate being used in the calculation of deferred income tax balances.
During the second quarter of 2015, Total Energy redeemed $69 million of 5.75% convertible debentures, which redemption was financed with a $50 million bank loan and cash on hand. This refinancing will result in annual interest and administrative cost savings of at least $2.5 million. Upon maturity of the loan in May 2020, approximately $40.2 million of principal will be outstanding assuming only regular monthly payments are made. The Company declared a quarterly dividend of $0.06 per share to Shareholders of record on June 30, 2015. This dividend was paid on July 31, 2015. The Company did not repurchase any shares under its normal course issuer bid during the second quarter of 2015.
Outlook
Uncertainty as to the timing and extent of a recovery in North American industry activity levels is expected to result in difficult industry conditions for the remainder of 2015. Compounding the challenges facing energy producers and service providers operating in Alberta is the impact of recently enacted increases to the Alberta corporate income tax rate and carbon emission levies as well as uncertainty arising from the commencement of an Alberta oil and natural gas royalty review. In this challenging environment, Total Energy has taken steps to right-size its operations in response to reduced customer demand. Steps have also been taken to refocus sales efforts and relocate assets to jurisdictions based on current and future expected activity levels. Additional measures to rationalize the Company's operating cost structure and relocate operating assets and personnel will be taken as future industry conditions and customer demand may warrant.
Total Energy's financial condition remains strong with $86.2 million of positive working capital (including $14.0 million of cash or $0.45 of cash per share, basic) and no net debt as at June 30, 2015. Total Energy's bank credit facilities require that the Company maintain a debt to equity ratio below 2.5 to 1.0 and a current ratio of at least 1.3 to 1.0. As at June 30, 2015, Total Energy's debt to equity ratio was 0.11 to 1.0 and the current ratio was 3.31 to 1.0. The Company's $65 million operating facility is currently undrawn and fully available. Total Energy will look to use its financial capacity to pursue investment and consolidation opportunities that may arise during these challenging times.
Management Appointment
Total Energy is pleased to announce the appointment of William Kosich as Vice President, Drilling Services effective immediately. In this newly created position, Mr. Kosich will provide leadership, guidance and support to the Company's Contract Drilling Services division as Total Energy looks to continue to invest in the growth and development of this business line. Mr. Kosich is a seasoned industry executive with over 28 years of experience in oil and gas drilling operations. Most recently, Mr. Kosich served as Chief Operating Officer of a TSX listed Canadian contract drilling company operating in Canada, the United States and Mexico.
Conference Call
At 2:30 p.m. MDT 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 (800) 355-4959 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, 2015 by dialing (800) 408-3053 (passcode 4244949).
Selected Financial Information
Selected financial information relating to the three and six month period ended June 30, 2015 and 2014 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)
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June 30, December 31,
2015 2014
----------------------------------------------------------------------------
(unaudited) (audited)
Assets
Current assets:
Cash and cash equivalents $ 14,019 $ 7,745
Accounts receivable 56,332 98,920
Inventory 59,893 54,348
Prepaid expenses and deposits 3,440 5,576
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133,684 166,589
Property, plant and equipment 399,830 419,991
Other assets 9,985 5,273
Goodwill 4,053 4,053
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$ 547,552 $ 595,906
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Liabilities & Shareholders' Equity
Current liabilities:
Accounts payable and accrued liabilities $ 28,353 $ 59,837
Deferred revenue 11,809 7,430
Income taxes payable 1,395 12,754
Dividends payable 1,860 1,860
Current portion of obligations under finance
leases 2,255 2,376
Current portion of long term debt 1,851 -
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47,523 84,257
Long-term debt 47,846 -
Obligations under finance leases 2,842 3,107
Convertible debentures - 66,361
Deferred tax liability 61,722 60,118
Shareholders' equity:
Share capital 88,884 88,899
Contributed surplus 7,331 6,880
Equity portion of convertible debenture - 4,601
Retained earnings 291,404 281,683
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387,619 382,063
Commitments and contingencies
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$ 547,552 $ 595,906
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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
2015 2014 2015 2014
----------------------------------------------------------------------------
(unaudited) (unaudited) (unaudited) (unaudited)
Revenue $ 71,908 $ 83,694 $ 164,398 $ 198,807
Cost of services 54,337 62,613 117,413 135,306
Selling, general and
administration 7,301 7,528 15,029 15,976
Share-based compensation 323 658 451 1,348
Depreciation 6,792 6,551 13,775 14,173
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Results from operating
activities 3,155 6,344 17,730 32,004
Gain on sale of property,
plant and equipment 3,329 3,025 3,646 5,422
Finance income 262 919 395 2,078
Finance costs (1,313) (1,542) (3,859) (3,044)
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Net income before income
taxes 5,433 8,746 17,912 36,460
Current income tax expense 4,293 2,122 6,663 1,293
Deferred income tax
expense (recovery) 219 (592) 1,145 6,923
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Total income tax expense 4,512 1,530 7,808 8,216
Net income and total
comprehensive income for
the period $ 921 $ 7,216 $ 10,104 $ 28,244
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Earnings per share
Basic earnings per share $ 0.03 $ 0.23 $ 0.33 $ 0.90
Diluted earnings per share $ 0.03 $ 0.23 $ 0.33 $ 0.87
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Condensed Interim Consolidated Statements of Cash Flows
(in thousands of Canadian dollars)
----------------------------------------------------------------------------
Three months ended Six months ended
June 30 June 30
2015 2014 2015 2014
----------------------------------------------------------------------------
(unaudited) (unaudited) (unaudited) (unaudited)
Cash provided by (used in):
Operations:
Net income for the period $ 921 $ 7,216 $ 10,104 $ 28,244
Add (deduct) items not
affecting cash:
Depreciation 6,792 6,551 13,775 14,173
Share-based compensation 323 658 451 1,348
Gain on sale of
property, plant and
equipment (3,329) (3,025) (3,646) (5,422)
Unrealized (gain) loss
on other assets (439) (817) 560 (1,925)
Finance costs 1,752 1,542 3,299 3,044
Current income tax
expense 4,293 2,122 6,663 1,293
Deferred income tax
expense (recovery) 219 (592) 1,145 6,923
Income taxes (paid)
recovered (4,191) 6,216 (18,022) 6,216
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6,341 19,871 14,329 53,894
Changes in non-cash
working capital items:
Accounts receivable 24,406 33,269 42,588 8,803
Inventory 969 (1,707) (5,545) (2,446)
Prepaid expenses and
deposits (348) (4,422) 2,136 (3,074)
Accounts payable and
accrued liabilities (16,532) (7,330) (21,509) (38)
Deferred revenue (2,308) 2,861 4,379 (246)
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12,528 42,542 36,378 56,893
Investments:
Purchase of property,
plant and equipment (2,620) (14,520) (9,113) (34,428)
Acquisition of business - - (1,231) -
Proceeds on sale of other
assets - 289 - 289
Purchase of other assets (197) - (5,272) (2,879)
Proceeds on disposal of
property, plant and
equipment 20,896 14,542 22,124 27,467
Changes in non-cash
working capital items (1,846) 1,558 (9,066) 2,276
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16,233 1,869 (2,558) (7,275)
Financing:
Advances under long term
debt 50,000 - 50,000 -
Repayment of Long-term
debt (303) - (303) -
Repayment of obligations
under finance leases (871) (840) (1,591) (1,730)
Repayment of convertible
debentures (69,000) - (69,000) -
Dividends to shareholders (1,860) (1,876) (3,720) (3,435)
Issuance of common shares - 2,949 - 4,142
Repurchase of common
shares - (2,911) (69) (3,623)
Interest paid (823) (72) (2,863) (2,123)
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(22,857) (2,750) (27,546) (6,769)
----------------------------------------------------------------------------
Change in cash and cash
equivalents 5,904 41,661 6,274 42,849
Cash and cash equivalents,
beginning of period 8,115 4,398 7,745 3,210
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Cash and cash equivalents,
end of period $ 14,019 $ 46,059 $ 14,019 $ 46,059
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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 months ended June 30, 2015 (unaudited)
Contract Rentals and Compression
Drilling Transportation and Process
Services Services Services Other(1) Total
----------------------------------------------------------------------------
Revenue $ 2,125 $ 13,553 $ 56,230 $ - $71,908
Cost of services 1,243 7,805 45,289 - 54,337
Selling, general and
administration 457 3,191 2,335 1,318 7,301
Share-based
compensation - - - 323 323
Depreciation 477 4,139 2,160 16 6,792
----------------------------------------------------------------------------
Results from
operating
activities (52) (1,582) 6,446 (1,657) 3,155
Gain on sale of
property, plant and
equipment 28 327 2,968 6 3,329
Finance income - - - 262 262
Finance costs (173) (360) (238) (542) (1,313)
----------------------------------------------------------------------------
Net income (loss)
before income taxes (197) (1,615) 9,176 (1,931) 5,433
----------------------------------------------------------------------------
Goodwill - 2,514 1,539 - 4,053
Total assets 112,857 236,095 187,633 10,967 547,552
Total liabilities 17,472 45,484 43,339 53,638 159,933
----------------------------------------------------------------------------
Capital
expenditures(2) $ 87 $ 1,272 $ 1,345 $ (84) $ 2,620
----------------------------------------------------------------------------
As at and for the three months ended June 30, 2014 (unaudited)
Contract Rentals and Compression
Drilling Transportation and Process
Services Services Services Other(1) Total
----------------------------------------------------------------------------
Revenue $ 7,625 $ 19,839 $ 56,230 $ - $83,694
Cost of services 6,264 12,637 43,712 - 62,613
Selling, general and
administration 741 3,157 2,574 1,056 7,528
Share-based
compensation - - - 658 658
Depreciation 727 3,855 1,964 5 6,551
----------------------------------------------------------------------------
Results from
operating
activities (107) 190 7,980 (1,719) 6,344
Gain on sale of
property, plant and
equipment 2 48 2,975 - 3,025
Finance income - - - 919 919
Finance costs (204) (525) (266) (547) (1,542)
----------------------------------------------------------------------------
Net income (loss)
before income taxes (309) (287) 10,689 (1,347) 8,746
----------------------------------------------------------------------------
Goodwill - 2,514 1,539 - 4,053
Total assets 115,576 238,031 169,252 36,393 559,252
Total liabilities 24,808 47,512 41,112 78,927 192,359
----------------------------------------------------------------------------
Capital expenditures $ 5,173 $ 5,359 $ 4,837 $ (849)$ 14,520
----------------------------------------------------------------------------
As at and for the six months ended June 30, 2015 (unaudited)
Contract Rentals and Compression
Drilling Transportation and Process
Services Services Services Other(1) Total
----------------------------------------------------------------------------
Revenue $ 7,355 $ 43,424 $ 113,619 $ - $164,398
Cost of services 4,273 23,180 89,960 - 117,413
Selling, general and
administration 1,011 7,141 4,766 2,111 15,029
Share-based
compensation - - - 451 451
Depreciation 1,091 8,337 4,317 30 13,775
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Results from
operating
activities 980 4,766 14,576 (2,592) 17,730
Gain on sale of
property, plant and
equipment 33 254 3,353 6 3,646
Finance income - - - 395 395
Finance costs (377) (799) (542) (2,141) (3,859)
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Net income (loss)
before income taxes 636 4,221 17,387 (4,332) 17,912
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Goodwill - 2,514 1,539 - 4,053
Total assets 112,857 236,095 187,633 10,967 547,552
Total liabilities 17,472 45,484 43,339 53,638 159,933
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Capital expenditures
(2) $ 421 $ 5,938 $ 3,965 $ 20 $ 10,344
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As at and for the six months ended June 30, 2014 (unaudited)
Contract Rentals and Compression
Drilling Transportation and Process
Services Services Services Other(1) Total
----------------------------------------------------------------------------
Revenue $ 29,366 $ 58,467 $ 110,974 $ - $198,807
Cost of services 17,834 30,755 86,717 - 135,306
Selling, general and
administration 1,759 6,959 4,952 2,306 15,976
Share-based
compensation - - - 1,348 1,348
Depreciation 2,593 7,679 3,896 5 14,173
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Results from
operating
activities 7,180 13,074 15,409 (3,659) 32,004
Gain on sale of
property, plant and
equipment 22 92 5,235 73 5,422
Finance income - - - 2,078 2,078
Finance costs (407) (1,047) (518) (1,072) (3,044)
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Net income (loss)
before income taxes 6,795 12,119 20,126 (2,580) 36,460
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Goodwill - 2,514 1,539 - 4,053
Total assets 115,576 238,031 169,252 36,393 559,252
Total liabilities 24,808 47,512 41,112 78,927 192,359
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Capital expenditures $ 13,492 $ 8,854 $ 12,075 $ 7 $ 34,428
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(1) Other includes the Company's corporate activities, accretion of
convertible debentures and obligations pursuant to long-term credit
facilities.
(2) Includes the acquisition of a private oilfield transportation company
based in Casper, Wyoming as described in note 4 to the second quarter
financial statements.
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, minus finance income, 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 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.
2. Per share data (diluted) and the number of common shares outstanding on
a diluted basis includes the impact of the approximate 2.4 million
common shares that were issuable upon the entire conversion of $69
million principal amount of convertible debentures issued in 2011 prior
to the redemption of such convertible debentures on May 19, 2015. The
shares that were issuable upon conversion of convertible debentures were
antidilutive and were excluded from the dilutive shares outstanding
count at June 30, 2015.
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, 2015 is net of $12.7 million
of income taxes paid during the period that relates to 2014 taxable
income as a result of the Company not having been required to make
income tax installment payments during 2014.
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. Yuliya Gorbach Vice-President Finance and Chief Financial Officer (403) 216-3920 [email protected] www.totalenergy.ca
Source: Total Energy Services Inc.
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