Total Energy Services’ Earnings Call: Record Year Amid Challenges

Total Energy Services ((TSE:TOT)) has held its Q4 earnings call. Read on for the main highlights of the call.

Total Energy Services recently held an earnings call that painted a mixed picture of its financial performance. The company celebrated a record year with robust cash flow and strategic investments, particularly in Australia. However, challenges in the U.S. market and operational issues in Australia led to decreased margins and revenue in certain segments. Despite these hurdles, Total Energy’s strong financial standing and increased dividend reflect confidence in its future prospects.

Record Year for Total Energy

2024 marked a milestone for Total Energy Services, as the company reported a record year with significant free cash flow. This financial strength allowed the company to reduce its bank debt by $25.5 million and return $7.1 million to shareholders through dividends and share buybacks, showcasing a commitment to shareholder value.

Strong Financial Position

As of December 31, 2024, Total Energy maintained a robust financial position with $78.7 million in positive working capital, including $38.4 million in cash. The company’s senior bank debt-to-EBITDA ratio stood at a low 0.25 times, highlighting its financial stability and capacity to weather market challenges.

Australian Market Expansion

The acquisition of Saxon significantly boosted Total Energy’s operations in Australia, with fourth-quarter operating days increasing by 110%. This expansion led to a remarkable 173% year-over-year revenue increase in the region, underscoring the strategic importance of the Australian market to the company’s growth.

Dividend Increase

Reflecting its confidence in future cash flows and financial stability, Total Energy’s Board of Directors approved an 11% increase in the dividend. This move signals the company’s commitment to returning value to its shareholders and its optimistic outlook on future performance.

Decrease in U.S. Activity

Total Energy faced challenges in the U.S. market, with fourth-quarter consolidated EBITDA falling by $4.7 million compared to 2023. This decline was primarily due to reduced activity levels, resulting in a 60% decrease in CPS revenue and an operating loss in the region.

Weather and Operational Challenges in Australia

Extended wet weather conditions in Australia posed significant operational challenges, leading to delays and increased costs. Despite higher revenue, these conditions resulted in operating losses, highlighting the impact of external factors on the company’s performance.

Gross Margin Decline

The company’s gross margin decreased to 23% in the fourth quarter, down from 27% in 2023. This decline was attributed to lower operating margins in the CPS and Well Servicing segments, reflecting the competitive pressures and operational challenges faced by Total Energy.

Foreign Exchange Impact

Total Energy’s Canadian CPS segment experienced a negative impact of $4.1 million on operating income due to foreign exchange translation differences. This highlights the financial risks associated with currency fluctuations in international operations.

Forward-Looking Guidance

Looking ahead, Total Energy Services reported a 15% increase in consolidated revenue for the fourth quarter of 2024, driven by the Saxon acquisition, despite lower U.S. drilling activity. The company plans a capital budget of $61.9 million for 2025, focusing on equipment upgrades and maintenance. While market uncertainties persist, strong demand in the CPS segment and favorable conditions in the Australian LNG market provide a positive outlook for the company’s future.

In summary, Total Energy Services’ earnings call reflected a year of significant achievements and challenges. The company’s record financial performance and strategic investments were tempered by operational hurdles and market pressures. Nevertheless, Total Energy’s strong financial position and increased dividend underscore its confidence in navigating future challenges and capitalizing on growth opportunities.