Release Date: November 07, 2024
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
Positive Points
- Total Energy Services Inc (TOTZF, Financial) reported record quarterly financial results for Q3 2024, with a 4% increase in consolidated revenue compared to Q3 2023.
- The acquisition of Saxon Energy Services significantly boosted operations in Australia, leading to a 93% increase in operating days and a 42% year-over-year increase in Australian revenue per operating day.
- The company demonstrated effective cost management across all segments, contributing to a 12% increase in EBITA compared to the previous year.
- Total Energy Services Inc (TOTZF) maintained a strong financial position with $97.3 million in positive working capital, including $61.9 million in cash.
- The CPS segment experienced a 34% year-over-year increase in EBITA, driven by increased rental fleet utilization and improved fabrication sales margins.
Negative Points
- Total Energy Services Inc (TOTZF) faced a year-over-year decline in U.S. drilling and completion activity, impacting overall revenue.
- The Canadian CD segment saw a 5% decrease in revenue due to a 7% decline in operating days, partially offset by a 2% increase in revenue per day.
- The U.S. market remains highly competitive, with pricing pressures affecting the drilling and well servicing segments.
- A damaged drilling rig in Canada negatively impacted operating days and revenue during Q3 2024.
- The well servicing segment experienced a 2% decrease in EBITA and a 5% decrease in EBITA margin due to lower activity in the U.S. and reactivation costs in Australia.
Q & A Highlights
Q: Can you provide insights into the increased activity and investment in Australia? Is there a specific play driving this growth?
A: The increased activity in Australia is primarily due to a shortage of gas and a shift in the federal government's policy to promote natural gas development. This change has encouraged production and investment, particularly in onshore natural gas, which is part of the Asian LNG story. Our acquisition of Saxon has also positioned us well to capitalize on these opportunities. (Daniel Halyk, President & CEO)
Q: What are your thoughts on M&A opportunities, especially in the US, given the current market conditions?
A: We see numerous opportunities, particularly in the US, but we remain disciplined regarding price and asset quality. We are actively working to identify and pursue M&A opportunities that align with our core business focus. (Daniel Halyk, President & CEO)
Q: How many rigs are you currently operating in Australia, and what are your expectations for rig activity by the end of Q1 2025?
A: We are currently running 10 drilling rigs in Australia and expect to add two more by the end of Q1 2025. On the well servicing side, we are running five rigs, with plans to increase to seven by Q1 2025. These rigs are being upgraded and deployed under long-term contracts. (Daniel Halyk, President & CEO)
Q: Can you comment on the US industry dynamics across your business lines? Are you seeing pricing stabilize?
A: In the US, we are seeing competitive pricing, particularly in the Permian and North Dakota. The rental side has held up better due to the quality of our equipment and reduced competition. Overall, the market is stabilizing, but it remains competitive. (Daniel Halyk, President & CEO)
Q: How is the board considering the dividend and its growth over the next few quarters?
A: The dividend is reviewed quarterly by the board. We aim for it to be rock solid and sustainable, balancing it with share buybacks and reinvestment opportunities. While I can't predict future decisions, the dividend is currently stable and secure. (Daniel Halyk, President & CEO)
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
