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Total Energy Services Sees High Compression Demand

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Total Energy Services Inc. has announced its consolidated financial results for the three and nine months ending September 30, 2014.

Total Energy's results for the three and nine months ended September 30, 2014 reflect a seasonal increase in field activity levels within the Contract Drilling Services and Rentals and Transportation Services divisions coming out of spring breakup. Continued growth within the Compression and Process Services division was tempered by the sale of approximately 23,900 horsepower of rental compression during the first half of 2014 upon the exercise of purchase options by customers.

Total Energy's Contract Drilling Services division achieved 55% utilization during the third quarter of 2014, recording 863 operating days (spud to release) with a fleet of 17 rigs, compared to 798 operating days, or 54% utilization, during the third quarter of 2013 with a fleet of 16 rigs. Rig 17 was completed and commenced operations in late August of 2014. Revenue per operating day increased 5% for the third quarter of 2014 relative to the prior year comparable period due primarily to the mix of equipment operating. Despite operating earnings margins for the third quarter of 2014 being negatively impacted by significant non-routine rig repair costs, year to date operating earnings margins in the Contract Drilling Services division have increased by 13% as compared to 2013.

The Rentals and Transportation Services division achieved a utilization rate on major rental equipment of 40% during the third quarter of 2014, which was consistent with the third quarter of 2013. Divisional revenue per utilized rental piece increased 17% for the third quarter of 2014 compared to the same period in 2013, due primarily to the mix of equipment utilized. Revenues in the Compression and Process Services division increased 26% to $61.4 million for the three months ended September 30, 2014 compared to $48.8 million for the same period in 2013. This division exited the third quarter of 2014 with a $78.6 million backlog of fabrication sales orders as compared to $57.6 million at September 30, 2013. Excluded from the September 30, 2014 sales backlog is approximately $11.5 million (10,900 horsepower) of compression equipment that was sold during the third quarter but converted to rentals subsequent to September 30, 2014. At September 30, 2014, approximately 35,500 horsepower of compression equipment was on rent compared to 35,700 horsepower on rent at September 30, 2013. The gas compression rental fleet operated at an average utilization rate of 86% for the third quarter of 2014 as compared to 85% during the same period in 2013.

During the third quarter, Total Energy declared a quarterly dividend of $0.06 per share to shareholders of record on September 30, 2014. This dividend was paid on October 31, 2014. 268,900 common shares were purchased under the Company's normal course issuer bid during the three months ended September 30, 2014 at an average price of $21.15 per share (including commissions).

Outlook

While activity levels in Western Canada during the third quarter of 2014 were generally higher than the third quarter of 2013, recent declines in global oil prices and associated market volatility give rise to uncertainty as to oil and gas producers' future capital spending plans. In this uncertain environment, Total Energy is focused on completing its 2014 capital expenditure program and efficiently managing its operations during the upcoming seasonally active winter season.

Construction of the Company's 18th rig, a 4,200 meter (vertical depth rating) AC electric telescopic double with a top drive, is on time and on budget and such rig is expected to be completed and commence operations during the first quarter of 2015. There is significant customer interest in this rig and discussions are underway in regards to contracting the rig upon completion.

Well completion activity levels in Western Canada increased significantly during the third quarter and have carried on into the fourth quarter. The Rentals and Transportation Services division is focused on completing its 2014 capital equipment build program and increasing its equipment utilization as the industry enters the seasonally busy winter drilling season.

Demand for compression and process equipment remains strong. To accommodate increased demand for natural gas compression equipment rentals, including the recent conversion of 10,900 horsepower of compression sales to rentals, Total Energy has increased its 2014 capital budget by $5.0 million to $93.1 million. This increase will bring the Company's 2014 capital budget for compression rental fleet expansion to $32.9 million, which includes $7.9 million carried forward from 2013. Offsetting this capital budget increase has been the receipt of $31.5 million from the sale of property, plant and equipment during the first nine months of 2014, a significant portion of which was received upon the sale of approximately 28,160 horsepower of compression rental equipment upon the exercise of purchase options by customers.

To September 30, 2014, $56.2 million of 2014 capital expenditures had been made, with the remaining approximate $36.9 million expected to be expended by the first quarter of 2015. With no significant capital expenditure commitments beyond its 2014 capital budget, Total Energy will continue to evaluate market conditions with a view to pursuing opportunities that meet the Company's investment expectations.

Total Energy's financial condition remains solid with a long-term debt (including convertible debentures) to long-term debt plus equity ratio of 0.17 to 1.0, $97.6 million of positive working capital and no net debt as at September 30, 2014. Total Energy's $35 million operating facility is currently fully available and undrawn.