SERVICE SECTOR / Total Energy Services Ltd. Third Quarter Report
CALGARY, Nov. 13 /CNW/ - The third quarter continued to prove challenging
for Total. Sustained low oil prices continued to adversely impact the cash
flows of our customers, resulting in low capital expenditures by oil and gas
companies. High levels of uncertainty regarding the debt and equity financing
capabilities of our customers continued throughout the third quarter, also
contributing to decreased activity.
Utilization for our drilling rental assets averaged 25% for the third
quarter of 1998 as compared to 30% for the second quarter of 1998. As
promised in the second quarter report, these persistently low utilization
rates have caused us to reduce our operating and overhead structures. By the
end of September, drilling rental personnel had been reduced by approximately
15%, improved cost control measures were implemented, a program to dispose of
surplus non-core assets was initiated, and a renewed marketing focus was
implemented.
Fortunately, Bidell Equipment Inc., the gas compression business that
Total acquired in July, experienced an active quarter. Bidell generated
strong earnings due to prior sales commitments from the first half of 1998 for
low horsepower, gas compression packages for Northern Alberta. We have
started implementing a plan to prudently build the infrastructure for a near
to long term expansion of this business.
Financial Results
Three months ended Nine months ended
September 30 September 30
(Unaudited, $000's except
per share amounts) 1998 1997 1998 1997
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Revenue $ 7,272 $ 232 $ 15,713 $ 233
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Net earnings (loss) 150 (20) 709 (39)
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Basic earnings (loss)
per share $ 0.00 $ (0.00) $ 0.05 $ (0.00)
Fully diluted earnings
(loss) per share $ 0.00 $ (0.00) $ 0.04 $ (0.00)
Fully diluted cash flow
per share $ 0.06 $ (0.00) $ 0.20 $ (0.00)
Fully diluted EBITDA
per share $ 0.07 $ (0.00) $ 0.26 $ (0.00)
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The nine months ended September 30, 1997 only included two months of
Total's trailer repair operations while the nine months ended September 30,
1998 include nine months of Total's trailer repair operations, nine months of
Total's drilling rentals operations and three months of Total's gas
compression operations.
Drilling rental operations contributed revenues of $2.2 million and $9.7
million for the three months and nine months ended September 30, 1998,
respectively. Gas compression services contributed $4.7 million of revenue
for the three months ended September 30, 1998. Trailer repairs contributed
revenues of $330 thousand and $1.3 million for the three months and nine
months ended September 30, 1998, respectively compared to $232 thousand for
the two and one-half months ended September 30, 1997.
Acquisitions
The acquisition of the shares of Bidell Equipment Inc. was completed for
$4.5 million on September 4, 1998, with an effective date of July 1, 1998.
Bidell is a Calgary-based supplier of natural gas compression equipment to
Canadian-based oil and gas producers and has been in operation since 1988.
Bidell's product line consists of ''low to mid-range'' compressor packages
ranging from 100 to 1,000 hp. Bidell is the Western Canadian distributor of a
line of screw compressors manufactured by the Sullair Corporation of Michigan
City, Indiana.
The acquisition of the shares of Daval Industries Inc. was cancelled on
October 16, 1998. The combination of weak drilling activity and capital
required to expand Bidell resulted in Total electing not to incur any
additional acquisition related debt.
Outlook
Despite a strong short and near term outlook for natural gas, both in
terms of pricing and volumes, fluctuating crude oil prices continue to
adversely impact our industry. Low oil prices continue to create reduced cash
flows, which in turn causes delays or cancellations of drilling programs and
compression package orders. Uncertainties surrounding the range of crude
prices for the balance of 1998 and into 1999 continue to create a negative
environment for debt and equity financings.
We expect October and November to be weak months for our drilling rental
business until the winter drilling programs commence in December. The deferral
of many of these drilling programs from the third and fourth quarters may
results in a more active first quarter of 1999 than initially expected. We
also expect the current soft market conditions in the compression business to
extend throughout the fourth quarter with winter-access only factors driving
the activity in the first quarter of 1999. Implementing effective cost control
measures combined with positioning the businesses to respond to activity level
increases are our primary objectives for the balance of 1998.
The common shares of Total Energy Services Ltd. trade on The Alberta
Stock Exchange under the symbol ''TOT''.
The Alberta Stock Exchange has neither approved nor disapproved the
information contained herein. |
