Total Energy Services Inc. Announces 2012 Results

CALGARY, ALBERTA--(Marketwire - March 12, 2013) - 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, 2012.

Financial Highlights
($000's except per share data)
	Three Months Ended Dec. 31						Twelve Months Ended Dec. 31
	(unaudited)						(audited)
	2012	2011		% Change			2012		2011		% Change
Revenue	$ 78,404	$ 96,936		(19	)%		$ 307,702		$ 332,082		(7	)%
Operating Earnings (1)	14,806	31,206		(53	)%		65,221		96,233		(32	)%
EBITDA (1)	21,743	38,608		(44	)%		91,076		122,034		(25	)%
Cashflow (1)	22,110	37,251		(41	)%		91,949		120,780		(24	)%
Net Income	10,525	23,441		(55	)%		47,692		69,266		(31	)%
Per Share Data (Diluted) (2)
EBITDA (1)	$ 0.63	$ 1.10		(43	)%		$ 2.62		$ 3.49		(25	)%
Cashflow (1)	0.64	1.06		(40	)%		2.65		3.46		(23	)%
Net Earnings	0.34	0.69		(51	)%		1.49		2.08		(28	)%
							Dec. 31		Dec. 31
							2012 (audited	)	2011 (audited	)	% Change
Financial Position
Total Assets							$ 476,591		$ 434,617		10	%
Long-Term Debt, Convertible Debentures and Obligations Under Finance Leases							67,937		66,466		2	%
Working Capital (3)							90,708		120,786		(25	)%
Net Debt (4)							nil		nil		nil
Shareholders' Equity							306,069		275,321		11	%
Shares Outstanding (000's)
Basic							30,600		31,375		(2	)%
Diluted (2)							34,300		35,261		(3	)%

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, 2012 reflect a more challenging industry environment that began following a record first quarter for the Company. Continued weakness in North American natural gas prices and widening oil price differentials in Western Canada contributed to lower drilling and completion activity during the second half of 2012 compared to the second half of 2011.

Total Energy's Contract Drilling Services division achieved 42% utilization during the fourth quarter of 2012, recording 603 operating days (spud to release) with a fleet of 15 rigs, compared to 801 operating days, or 62% utilization, during the fourth quarter of 2011 with a fleet of 14 rigs. Revenue per operating day decreased 6% for the fourth quarter of 2012 relative to the prior year comparable period due primarily to lower pricing. For the twelve months ended December 31, 2012, the Contract Drilling Services division achieved 2,460 operating days (44% utilization), compared to 3,042 operating days (60% utilization) for 2011. The Rentals and Transportation Services division achieved a utilization rate on major rental equipment of 41% during the fourth quarter of 2012 as compared to a 72% utilization rate during the fourth quarter of 2011. For 2012, rental equipment utilization averaged 47% as compared to 68% for 2011. The Gas Compression Services division generated revenues of $33.9 million for the three months ended December 31, 2012 compared to $33.0 million for the same period in 2011, an increase of 3%. For 2012, revenues increased by 8% to $121.3 million compared to $112.8 million in 2011. The Gas Compression Services division exited 2012 with a $34.5 million backlog of fabrication sales orders as compared to $33.6 million at December 31, 2011. At December 31, 2012, approximately 31,700 horsepower of compression equipment was on rent compared to 25,300 horsepower on rent at December 31, 2011. The gas compression rental fleet operated at an average utilization rate of 87% and 84% for the three and twelve month periods ended December 31, 2012, respectively, as compared to 78% for the same periods in 2011.

During the fourth quarter, Total Energy declared a quarterly dividend of $0.05 per share to shareholders of record on December 31, 2012. This dividend was paid on January 31, 2013.

Outlook

Western Canadian drilling activity started out somewhat slowly during the first part of January 2013. However, drilling activity levels steadily increased and have generally been at or above the five year average since mid-January. With ongoing weak natural gas prices, producers continue to focus their drilling, completion and production activities towards oil and natural gas liquids prospects. In the context of continued global economic uncertainty and unique commodity price challenges facing Canadian producers, the Company remains focused on the quality and efficiency of existing operations and the disciplined deployment of capital. In that regard, Total Energy is pleased to announce that Gerry Crawford was recently appointed Vice President, Field Services. Mr. Crawford has been with Total Energy since 1998 and had previously served as General Manager of the Company's Rentals and Transportation Services division.

Total Energy's previously announced preliminary 2013 capital expenditure plan of $32.7 million provides the Company with significant financial flexibility to pursue additional investment opportunities that may arise. Despite uncertain markets, Total Energy continues to strategically invest in the long term growth of its existing business divisions. The recently completed $14.0 million acquisition of a well-established process equipment fabrication business increases Total's exposure to large North American and international liquids and natural gas infrastructure projects. Total Energy will continue to pursue investment opportunities that will generate acceptable returns on capital.

Total Energy's financial condition remains strong with a long-term debt (including convertible debentures) to long-term debt plus equity ratio of 0.18 to 1.0, $90.7 million of positive working capital and no net debt as at December 31, 2012. Total Energy's $35 million operating facility is currently fully available and undrawn.

Conference Call

At 2:30 p.m. MST today, Total Energy will conduct a conference call and webcast 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. 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 (866) 696-5910 or (416) 340-2217. 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 March 19, 2013 by dialing (800) 408-3053 (passcode 8257802).

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 Wednesday, May 22, 2013 at the Calgary Petroleum Club, 319 - 5^th Avenue S.W., Calgary, Alberta.

Selected Financial Information

Selected financial information relating to the three and twelve-month periods ended December 31, 2012 and 2011 is attached to this news 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 2012 annual report.

Consolidated Statements of Financial Position
(in thousands of Canadian dollars)
			December 31,			December 31,
			2012			2011
			(audited	)		(audited	)
Assets
Current assets:
		Cash and cash equivalents	$ 50,052			$ 35,658
		Accounts receivable	63,511			94,556
		Inventory	33,240			37,147
		Income taxes receivable	-			118
		Prepaid expenses and deposits	2,547			1,795
			149,350			169,274
Property, plant and equipment			323,188			261,290
Goodwill			4,053			4,053
			$ 476,591			$ 434,617
Liabilities & Shareholders' Equity
Current liabilities:
		Accounts payable and accrued liabilities	$ 32,523			$ 41,556
		Deferred revenue	6,971			3,064
		Dividends payable	1,530			1,255
		Income taxes payable	15,098			-
		Current portion of obligations under finance leases	2,520			2,613
			58,642			48,488
	Obligations under finance leases		2,723			2,763
Convertible debentures			62,694			61,090
	Deferred tax liability		46,463			46,955
Shareholders' equity:
		Share capital	76,890			77,917
		Contributed surplus	5,160			2,472
		Equity portion of convertible debenture	4,601			4,601
		Retained earnings	219,418			190,331
			306,069			275,321
			$ 476,591			$ 434,617

Consolidated Statements of Comprehensive Income
(in thousands of Canadian dollars except per share amounts)
		Three months ended						Year ended
		December 31,						December 31,
		2012			2011			2012			2011
		(unaudited	)		(unaudited	)		(audited	)		(audited	)
Revenue		$ 78,404			$ 96,936			$ 307,702			$ 332,082
Expenses:
	Cost of services	49,485			51,875			187,311			182,231
	Selling, general and administration	6,809			7,792			28,403			28,959
	Share-based compensation	1,042			314			3,065			1,360
	Depreciation	6,262			5,749			23,702			23,299
Results from operating activities		14,806			31,206			65,221			96,233
	Gain on disposal of property, plant and equipment	675			1,653			2,153			2,502
	Finance income	248			76			878			161
	Finance costs	(1,489	)		(1,434	)		(5,797	)		(5,441	)
Net income before income taxes		14,240			31,501			62,455			93,455
Income tax expense (recovery)
	Current	5,730			18			15,255			112
	Deferred	(2,015	)		8,042			(492	)		24,077
Total income tax expense		3,715			8,060			14,763			24,189
Net income and total comprehensive income for the period		10,525			23,441			47,692			69,266
Retained earnings, beginning of period		211,558			170,844			190,331			131,808
	Dividends	(1,530	)		(1,256	)		(6,180	)		(5,032	)
	Repurchase and cancellation of common shares in excess of stated common share capital	(1,135	)		(2,698	)		(12,425	)		(5,711	)
Retained earnings, end of period		$ 219,418			$ 190,331			$ 219,418			$ 190,331
Earnings per share :
	Basic	$ 0.34			$ 0.75			$ 1.54			$ 2.20
	Diluted	$ 0.34			$ 0.69			$ 1.49			$ 2.08

Consolidated Statements of Cash Flows
(in thousands of Canadian dollars)
		Three months ended						Year ended
		December 31,						December 31,
		2012			2011			2012			2011
		(unaudited	)		(unaudited	)		(audited	)		(audited	)
Cash provided by (used in):
Operations:
	Net Income for the period	$ 10,525			23,441			$ 47,692			$ 69,266
	Add (deduct) items not affecting cash:
	Depreciation	6,262			5,749			23,702			23,299
	Share-based compensation	1,042			314			3,065			1,360
	Gain on disposal of property, plant and equipment	(675	)		(1,653	)		(2,153	)		(2,502	)
	Finance income	(248	)		(76	)		(878	)		(161	)
	Finance costs	1,489			1,434			5,797			5,441
	Current income tax expense	5,730			18			15,255			112
	Deferred income tax expense	(2,015	)		8,042			(492	)		24,077
	Income taxes (paid)	-			(18	)		(39	)		(112	)
		22,110			37,251			91,949			120,780
	Changes in non-cash working capital items:
	Accounts receivable	(5,300	)		(7,063	)		31,045			(23,573	)
	Finance lease receivable	1,610			-			-			-
	Inventory	1,614			2,851			3,907			(3,659	)
	Prepaid expenses and deposits	206			1,314			(752	)		(48	)
	Accounts payable and accrued liabilities	2,055			4,482			(5,551	)		4,413
	Deferred revenue	3,363			(7,936	)		3,907			(270	)
		25,658			30,899			124,505			97,643
Investments:
	Purchase of property, plant and equipment	(29,074	)		(24,300	)		(89,365	)		(55,647	)
	Proceeds on disposal of property, plant and equipment	2,766			4,630			8,973			8,739
	Changes in non-cash working capital items	(703	)		4,037			(2,603	)		8,021
		(27,011	)		(15,633	)		(82,995	)		(38,887	)
Financing:
	Issuance of convertible debenture, net of issue costs	-			-			-			65,927
	Advances under long-term debt	-			-			-			(72,500	)
	Repayment of obligations under finance leases	(688	)		(1,132	)		(3,188	)		(3,874	)
	Payment of dividends	(1,535	)		(1,255	)		(5,905	)		(5,034	)
	Issuance of common shares	1			1,265			1,198			2,213
	Repurchase of common shares	(1,393	)		(3,234	)		(15,027	)		(6,861	)
	Interest paid	(374	)		18			(4,194	)		(3,197	)
		(3,989	)		(4,338	)		(27,116	)		(23,326	)
Change in cash and cash equivalents		(5,342	)		10,928			14,394			35,430
Cash and cash equivalents, beginning of period		55,394			24,730			35,658			228
Cash and cash equivalents, end of period		$ 50,052			$ 35,658			$ 50,052			$ 35,658

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 and process equipment.

As at and for the three months ended December 31, 2012 (unaudited)
	Contract Drilling		Rentals and Transportation		Gas Compression
	Services		Services		Services		Other(1	)	Total
Revenue	$ 12,773		$ 31,725		$ 33,906		$ -		$ 78,404
Cost of services	7,362		15,121		26,999		3		49,485
Selling, general and administration	770		3,619		1,809		611		6,809
Share-based compensation	-		-		-		1,042		1,042
Depreciation	1,241		3,861		1,046		114		6,262
Results from operating activities	3,400		9,124		4,052		(1,770	)	14,806
Gain on sale of property, plant and equipment	15		325		335		-		675
Finance income	-		-		80		168		248
Finance costs	(253	)	(579	)	(178	)	(479	)	(1,489	)
Net income before income taxes	3,162		8,870		4,289		(2,081	)	14,240
Goodwill	-		2,514		1,539		-		4,053
Total assets	100,758		225,655		102,565		47,613		476,591
Total Liabilities	20,220		44,170		23,020		83,112		170,522
Capital expenditures	$ 5,495		$ 11,361		$ 1,574		$ 10,644		$ 29,074
As at and for the three months ended December 31, 2011 (unaudited)
	Contract Drilling		Rentals and Transportation		Gas Compression
	Services		Services		Services		Other(1	)	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 on sale of property, plant and equipment	21		1,629		3		-		1,653
Finance Income	-		-		-		76		76
Finance costs	(253	)	(591	)	(152	)	(438	)	(1,434	)
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 year ended December 31, 2012 (audited)
	Contract		Rentals and		Gas
As at and for the year ended	Drilling		Transportation		Compression
December 31, 2012	Services		Services		Services		Other(1	)	Total
Revenue	$ 52,669		$ 133,729		$ 121,304		-		$ 307,702
Cost of services	29,685		58,005		99,621		-		187,311
Selling, general and administration	3,326		14,579		6,310		4,188		28,403
Share-based compensation	-		-		-		3,065		3,065
Depreciation	4,845		14,814		3,900		143		23,702
Results from operating activities	14,813		46,331		11,473		(7,396	)	65,221
Gain on sale of property, plant and equipment	80		734		1,339		-		2,153
Finance income	-		-		272		606		878
Finance costs	(1,013	)	(2,319	)	(632	)	(1,833	)	(5,797	)
Net income before income taxes	13,880		44,746		12,452		(8,623	)	62,455
Goodwill	-		2,514		1,539		-		4,053
Total assets	100,758		225,655		102,565		47,613		476,591
Total liabilities	20,220		44,170		23,020		83,112		170,522
Capital expenditures	$ 17,928		$ 42,907		$ 16,046		$ 12,484		$ 89,365
As at and for the year ended December 31, 2011 (audited)
	Contract		Rentals and		Gas
As at and for the year ended	Drilling		Transportation		Compression
December 31, 2011	Services		Services		Services		Other(1	)	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 on sale of property, plant and equipment	28		1,900		574		-		2,502
Finance income	-		-		-		161		161
Finance costs	(973	)	(2,367	)	(584	)	(1,517	)	(5,441	)
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

⁽¹⁾ 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 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 plus finance costs minus finance income. 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. Reconciliations of these non-IFRS measures to the most directly comparable IFRS measure are outlined below.
(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.