Total Energy Services Q3 2024 Update - TOT.to

Quick update after Q3 2024

*Disclosure: I own shares in TOT. I am not a professional. Please do your own due diligence.

Price: $10.58 CAD

MC: 418 million CAD

EV: 499 million

Yield: 3.4%

1 year performance: +25% (not including dividends)

TOT reported yesterday and held a call in the morning. Results were in line with of my expectations and the stock was up 1.7%.

*all numbers in CAD unless stated otherwise

Quarter Recap

• Revenue at 241.94 million vs 232.02 million last year

  o   Up 4% to a new record

• Gross margin of 26% vs 24% last year

• EBITDA at 50.5 vs 45 last year

• Contract drilling

  • Revenue of 86.6 vs 75.8

  • EBITDA at 20.6 vs 21.7

    • EBITDA hit by a rig that was damaged during transit in July. It was returned to service in October.

    • Removing currency the performance was a bit better than last year

• Rentals and Transportation Services

  • Revenue of 19.4 vs 21.1

  • EBITDA of 8.2 vs 7.3

  • Gross margin improvement and managing SG&A helped drive the improved profitability

• Compression and Process Services

  • Revenue of 110.6 vs 111 last year

  • EBITDA of 19.3 vs 14.4 last year

  • Improved fabrication efficiency and increase in compression horsepower on rent contributed to the improvement

  • Backlog at 189 million vs 152.9 last year and 204.6 million in Q2 2024

• Well Servicing

  • Revenue of 25.3 vs 24.1 last year

  • EBITDA of 4.9 vs 5.0 last year

  • Canada and Australia activity strong, US weak

Call Notes

• Australia and Canada operating environment is stable.

• Sounds like the government pivot in Australia should show some increased activity in that region moving forward.

• Potential M&A - the US was mentioned.

• US market is quite competitive here.

Valuation

I have TOT at 2.9x EV/ttm EBITDA and about 2.4x EV/estimated 2025 EBITDA.

Closing Thoughts

They demonstrated that they can maintain profitability when activity levels are muted. I think at some point we see the higher activity levels in the US. Trump favours more US production. A change in government at the federal level (if it happens) next could also boost some confidence in Canada. The valuation is quite low in my opinion for a business this high quality.

I think they raise the dividend in Q1 and continue with the NCIB. I think that if the share price can maintain it’s strength and the bottom doesn’t fall out of WTIC we get a sharp move higher. But who knows.

I continue to hold my shares in my OFS basket.

Thanks for reading.

Dean

* long TOT.to