Total Energy Services Q4 2024 Update - $TOT.to

Quick update after Q4 2024

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

Price: $9.24 CAD

MC: 366 million CAD

EV: 445 million CAD

Yield: 4.3% (after dividend increase)

1 year performance: -3%

TOT reported last night and held a call this morning. Revenue was ahead of my expectations, but I was expecting better EBITDA margins this quarter. The stock is essentially flat today.

*all numbers in CAD unless stated otherwise

Quarter Recap

• They increased the dividend from 0.09 to 0.10 per quarter

• Revenue came in at 246.8 million for the quarter

  • This is an increase of 15%

  • 48% of consolidated revenue came from Canada

• EBITDA came in at 40.6 million vs 45.3 million last year

Segments

• CDS (Contract Drilling Services)

  • Revenue of 83.9 million vs 74.7 million yoy

  • EBITDA of 18.6 million vs 23.9 million yoy

  • Lower US activity, longer Canadian holiday than last year and wet weather shutdowns in Australia

  • Higher expenses than last year due to reactivation of upgraded rigs in Australia and Canada

  • Revenue per operating and operating days in Australia seen an increase from the Saxon acquisition

• RTS (Rental and Transport Services)

  • Revenue down 3% to 19 million

  • EBITDA up 13% to 7.8 million

  • Improved mix and increase in Canadian revenue offset weakness in US

• CPS (Compression and Process Services)

  • Revenue up 22% to 116.4 million

  • EBITDA up 23% to 17.4 million

  • Increased fabrication, parts and service in Canada and US as well as increased efficiencies

  • Backlog flat sequentially at 189 million

• WS (Well Servicing)

  • Revenue up 15% to 27.6 million

  • EBITDA down 20% to 3.2 million

  • Increased activity in Canada and Australia

  • lower US activity hurt margins

Call Notes

• There were some additional costs in Australia to reactivate some rigs

• The weather in Australia also had them shut down a couple rigs in the quarter

• A large part of the capital program in Canada is to upgrade rigs

  • Sounds like steady incremental upgrades to the service rigs

  • They are doing a fairly significant upgrade on a drilling rig

    • This will have their intellectual property on it

    • They feel this upgrade will see strong demand

• Buybacks at this price are something they want to prioritize

• Despite all the tariff noise, they market seems stable

Valuation

I have them at 2.6x EV/EBITDA on a trailing basis. I think that barring any significant disruption to activity levels, they should be able to increase revenue and EBITDA this year.

Closing Thoughts

I own TOT in a basket of other OFS cos. I like the diverse set of businesses inside Total and the capital allocation discipline. I am surprised at the valuations for these businesses right now. I think there is room for some expansion of the multiple for Total as they continue to de-lever.

Thanks for reading.

Dean

* long TOT.to