Mr. Daniel Halyk reports

TOTAL ENERGY SERVICES INC. ANNOUNCES Q4 2023 RESULTS

Total Energy Services Inc. has released its consolidated financial results for the three months and year ended Dec. 31, 2023.

Total Energy's results for the fourth quarter and year ended Dec. 31, 2023, reflect continued stable industry conditions. North American market share gains resulting from equipment upgrades and modestly improved pricing contributed to improved fourth quarter results in 2023 as compared with 2022. Fourth quarter Australian revenue was lower compared with the prior year due to lower service rig activity. Sixteen million two hundred thousand dollars of non-recurring income tax expense and $10.6-million of related interest and penalties were recorded in the fourth quarter of 2023 as a result of a Tax Court of Canada ruling upholding Canada Revenue Agency reassessments related to the company's 2009 income trust conversion. Despite the $26.8-million reduction in net income resulting from this reassessment, Total Energy achieved record consolidated financial results for 2023.

Contract drilling services (CDS)

CDS segment revenue during the fourth quarter of 2023 was higher compared with the previous-year quarter due to increased revenue per operating day arising from the deployment of upgraded equipment. Negatively impacting utilization in the United States was the transfer of a triple drilling rig to Canada during the second quarter of 2023 and a general slowdown in industry activity, which was partially offset by higher pricing due in part to the mix of equipment operating. Higher utilization following the return to service of an upgraded drilling rig combined with higher revenue per operating day due to rate increases arising from rig upgrades and fewer standby days due to wet weather in 2023 compared with 2022 contributed to improved year over year fourth quarter results in Australia.

Rentals and transportation services (RTS)

Fourth quarter revenue in the RTS segment decreased marginally as compared with the same period in 2022 due to the deferral of certain projects in Canada that was partially offset by market share gains in the United States. Higher year-over-year fourth quarter EBITDA (earnings before interest, taxes, depreciation and amortization) and EBITDA margin were due to improved revenue per utilized piece of equipment. A significant number of underutilized rental pieces were disposed of in Canada during 2023.

Compression and process services (CPS)

The year-over-year increase in the CPS segment's fourth quarter revenue was due primarily to higher United States fabrication sales, increased equipment overhaul activity and improved utilization of the Canadian compression rental fleet. EBITDA and EBITDA margin increased due to improved fabrication sales margins and a greater relative revenue contribution from the higher-margin parts and service business. The fabrication sales backlog decreased to $162.8-million compared with the $219.5-million backlog at Dec. 31, 2022. Sequentially, the quarter-end backlog increased by $9.9-million from Sept 30, 2023.

Well servicing (WS)

Fourth quarter Canadian activity in the WS segment was negatively impacted by reduced well abandonment activity following the conclusion of government incentive programs. Segment EBITDA for the fourth quarter decreased as compared with 2022 due to lower activity in all jurisdictions and competitive North American pricing that was partially offset by increased pricing in Australia.

Corporate

During the fourth quarter of 2023, Total Energy remained focused on the safe and efficient operation of its business and the execution of its 2023 capital expenditure program in preparation for the upcoming North American winter drilling season. Seventy-five million two hundred thousand dollars of capital expenditures were made to Dec. 31, 2023, with $14.2-million of 2023 capital expenditure commitments carried forward into 2024.

Total Energy exited the fourth quarter of 2023 with $123.4-million of positive working capital, including $47.9-million of cash, and $125-million of available credit under its $175-million of revolving bank credit facilities. The weighted average interest rate on the company's outstanding debt at Dec. 31, 2023, was 5.25 per cent.

Outlook

Industry conditions remain relatively stable. Oil and natural gas producers continue to be measured in their drilling and completion programs as they pursue acquisition opportunities and execute shareholder return strategies. While recent North American natural gas spot market price weakness may adversely impact near-term natural gas drilling activity, the pending completion of several LNG (liquefied natural gas) export facilities is expected to provide relief to the North American natural gas market.

Total Energy's previously announced 2024 preliminary capital expenditure budget of $46.5-million includes $22.4-million of growth capital. Included in 2024 growth capital is the recertification and upgrade of three Australian service rigs that are being reactivated under long-term contracts. The first rig was completed and commenced operations in late February and the remaining two rigs are expected to be completed and commence operations during the second and third quarters of 2024, respectively. Included in 2023 capital expenditure commitments carried into 2024 is the completion of an Australian drilling rig that is expected to commence operations in July, 2024, under a long-term contract, as well as several natural gas compression rental units being constructed for deployment in the United States under long-term contracts.

Total Energy's wholly owned subsidiary, Savanna Energy Services Australia Pty. Ltd. (Savanna Australia), today completed the acquisition of Saxon Energy Services Australia Pty. Ltd. (Saxon). Savanna Australia paid $34.8-million (U.S.) cash at closing, with an additional $2.0-million (U.S.) less any applicable postclosing deductions to be paid on the first anniversary of closing. Concurrent with the acquisition of Saxon, Muhammad Yasir Nisar was appointed assistant vice-president, drilling services, of Total Energy.

Dividend increase

The board of directors of Total Energy has declared a dividend of nine cents per common share for the quarter ended March 31, 2024, a 13-per-cent increase from the fourth quarter 2023 dividend. The dividend is payable on April 15, 2024, to shareholders of record at the close of business on March 29, 2024. The ex dividend date is March 28, 2024. Unless otherwise indicated, all dividends declared by the company are eligible dividends within the meaning of Subsection 89(1) of the Income Tax Act (Canada).

Conference call

At 9 a.m. Mountain Time on March 8, 2024, Total Energy will conduct a conference call and webcast to discuss its fourth quarter financial results. Daniel Halyk, president and chief executive officer, will host the conference call. A live webcast of the conference call will be accessible on Total Energy's website 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 April 8, 2024, by dialling 855-669-9658 (passcode 0705).

Selected financial information

Selected financial information relating to the three months and year ended Dec. 31, 2023, and Dec. 31, 2022, is included in this news release. This information should be read in conjunction with the 2023 consolidated financial statements of Total Energy and the notes thereto, as well as the management's discussion and analysis (MD&a) to be issued in due course and in the company's 2023 annual report.

Total Energy provides contract drilling services, equipment rentals and transportation services, well servicing, and compression and process equipment and services 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 Toronto Stock Exchange under the symbol TOT.

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