Total Energy Services Inc TOTZF

Ink Research

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June 28, 2023

Morning Report: Insiders keep buying as Total Energy Services continues to outperform

For years, Total Energy Services (TOT) insiders have been betting that investors were undervaluing the company's prospects. In our previous update on January 30th, we noted that the stock had started to beat the broad sector as tracked by the S&P/TSX Capped Energy Index. The outperformance has continued, albeit with a drop of -6.4% compared to -11.8% for the Energy Index. Since the winter report, insiders have continued to buy and the company has been repurchasing shares. The buybacks are in addition to a prospective annual dividend yield of about 3.7% based on a quarterly distribution of $0.08 per share, which in March was increased from $0.06. The next dividend is payable on July 17th to shareholders of record at the close of business on June 30th (the stock will be trading ex-dividend on June 29th).

On May 11th, Total Energy reported Q1 net income of $0.57 per diluted share, up from $0.06 a year earlier. Profit growth was driven by a 42% jump in revenue to $228.7 million compared to a year earlier. All operating segments delivered double-digit revenue growth. Contract Drilling was up 22%, Rentals and Transportation up 59%, Compression & Processing up 68%, and Well Servicing up 19%. Commenting on the outlook, management said, "While continued global economic uncertainty and a relatively warm winter in the northern hemisphere have contributed to oil price volatility and lower natural gas prices, industry conditions generally remain positive. Current indications are that near term industry activity levels will remain stable on a seasonally adjusted basis." Meanwhile, the company cut back on its credit line by $50 million to save on fees. As of Q1, it had drawn $70 million on the reduced $170 million line. Total Energy exited Q1 2023 with $111.3 million of positive working capital and net debt of $11.4 million.

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More in today's Globe & Mail. GLTA As we wind down the first half of 2023, it has been a dismal year so far in the oil patch.  increase   Total Energy Services is a relative bright spot. It is more-or-less flat year-to-date, outperforming the S&P/TSX Capped Energy Index which is down about 9% as of June 28th. Meanwhile, so far this year, at least six Total Energy