*Disclosure: I own shares in TOT.to. I am not a professional. Please do your own due diligence.
Price: $13.33
Shares: 37.8 million
Market Cap: 504 million CAD
Enterprise Value: 576 million CAD.
1 year performance: +37% (not including dividends)
I’ve owned Total in various sizes since late 2022. At the time, oil had pulled back roughly 30–40% from its highs, and I started poking around. Despite the macro timing, the position has performed well. You can check out my original post here.
Why this opportunity exists (and what the market is missing)
Earnings have grown while the multiple has compressed: TTM EBITDA is up roughly 91% over three years, yet EV/EBITDA has drifted from ~3.3× to ~2.7×.
I think there is a combination of reasons that the market is not giving TOT a higher bid:
Macro sentiment is heavy. US rigs/frac spreads are down, jobs data is soft, OPEC+ supply headlines persist, and EV adoption in China fuels “peak oil demand” narratives. There is going to be a oil surplus in the immediate term, but how much we aren’t sure. I think right now the market thinks it will be a large build.
ESG “ick” + AI FOMO. Energy services screens poorly with some investors just as megacap tech enjoy business momentum and multiple expansion.
Counterpoints:
Demand has been resilient. Global oil use hasn’t collapsed, and North American land activity looks capped at current levels.
Discipline is holding. Industry pricing hasn’t rushed to the bottom this cycle; better fleets still command decent day rates.
LNG optionality. The North American LNG build-out is large and visible; TOT has real exposure, especially through compression and fabrication.
Cash over narratives. As cycles normalize, cash conversion and allocation should matter more than headlines.
What They Do (and Where)
Total Energy Services is a diversified energy services company operating in Canada, the U.S., and Australia across four segments:
Contract Drilling Services (CDS)
This segment operates 74 rigs in Canada, 12 in the U.S. (all in Texas), and 17 in Australia. The North American fleet is modern and efficient, consisting of 3 AC Triples, 17 AC Doubles, 35 Mechanical Doubles, and 44 TDS and Singles.
As noted in my oil and gas update, the rig and frac spread counts have declined even as production has held steady. The industry increasingly favors higher-horsepower, more efficient rigs and is willing to pay reasonable day rates for them. Smaller, less efficient operators have felt the pinch, while larger and more diversified participants like TOT have fared better.
The acquisition of Saxon in Australia provided international diversification and another avenue to deploy capital at attractive prices.
Rental and Transportation Services (RTS)
Total Energy provides drilling, completion, and production rental equipment and oilfield transportation services in western Canada through Total Oilfield Rentals Ltd., and in the United States through Total Oilfield Rentals, Inc.
Recently, they expanded the fleet by 30% with the $6.4 million USD purchase of surface rental equipment in Oklahoma. The total fleet now exceeds 8,000 units and includes rig matting.
Compression and Process Services (CPS)
Total Energy operates its natural gas compression business through Bidell Gas Compression Ltd. in Canada and Bidell Gas Compression Inc. in the U.S.
Bidell designs, fabricates, sells, leases, and services natural gas compression equipment. Historically, most revenue has come from the sale of compressor units. The current backlog for CPS is over $300 million—a record.
Well Servicing (WS)
Total entered the well servicing business through its acquisition of Savanna. Operations are run through Savanna Well Servicing Inc. (Canada), Savanna Well Servicing Corp. (U.S.), and Savanna Australia. The fleet totals about 80 service rigs.
CDS and CPS remain the largest drivers of the top line.
What sets them apart?
As a generalist, I like the four-segment model. It provides diversification within a cyclical industry and adds geographical balance.
The rig fleet includes both high- and lower-spec rigs. High-spec rigs (AC doubles and triples) have been in steady demand this cycle as operators prioritize efficiency amid lower commodity prices. The mechanical and single rigs provide optional leverage to an eventual recovery, though this may be more muted than in prior cycles due to the remaining acreage mix.
The CPS segment is a key differentiator, with meaningful exposure to the LNG build-out. Bidell is one of Canada’s largest natural gas compression fabrication and design businesses, and there will be significant capital investment in this space over the next decade.
Some business highlights
Overall industry activity has stagnated in the last several years. Despite this they have grown the top line and maintained consistent margins.
Balance Sheet
The balance sheet is in strong shape. Debt from the Savanna acquisition (2017) has been worked down, and net debt to TTM EBITDA is now below 0.6×.
Capex
I’m just going to paste the language from the last earnings release:
Total Energy’s Board of Directors has approved a $19.5 million increase to the Company’s 2025 capital expenditure budget to $102.4 million. This increase is directed primarily towards the expansion of the CPS segment’s United States compression fabrication capacity. The planned expansion will increase the Company’s U.S. plant capacity by at least 75% and is expected to be completed by the first quarter of 2027. In addition, an idle Australian service rig will be upgraded and put into service by the end of the first quarter of 2026 under a minimum 12 month contract. Including this increase, approximately 70% of the Company’s 2025 capital budget is targeting growth opportunities. Total Energy intends to finance the remaining $58.2 million of 2025 capital expenditure commitments with cash on hand and cashflow.
Share Structure & Ownership
There is about 37.4 million shares outstanding.
The CEO and founder owns 8% (3 million) of the common.
The other management teams listed owns about 400,000 shares.
The board owns about 235,000 shares or about 0.6%.
Major institutions own quite a bit. Some notable ones are Edgepoint at 12.2%, Foyston, Gordon & Payne at 11.9%, and Invesco at 11.5%.
Management & Compensation
CEO Daniel Halyk founded Total in 1997 and remains at the helm. He’s a disciplined operator with multiple cycles under his belt. Acquisitions have been opportunistic and reasonably priced. Over time, he’s positioned the business for durability and optionality.
This policy from the MIC is something that caught my eye.
The Corporation mandates that the Chief Executive Officer purchase and hold Shares equivalent in value to five times his annual base salary, as at the time of purchase, and that the Chief Financial Officer, the Vice President, Operations, the Vice President, Legal and General Counsel and the Vice President, Drilling Services each purchase and hold Shares equivalent in value to three times their annual base salary, as at the time of purchase. As of the record date, all officers satisfy the minimum ownership requirements.
As of the record date, all officers met this requirement except Jeremy Busch-Howell (VP Legal/GC/Secretary), who has been out of compliance for several years but is expected to meet the threshold by the end of next year. It’s worth watching whether this policy is consistently enforced.
Board
The board consists of six members, the majority of whom are independent. Collectively, they bring capital markets, legal, industry, and governance expertise. Like many small-cap boards, ownership is low (0.6%). I’d prefer to see directors with larger positions in the company.
Risks
Here are the risks to the business and the stock that I could think of:
There is of course commodity price risk here. If oil demand goes down (for whatever reason), Total will not be immune to it.
Though like the commodity demand risk, I want to call out the risk to the broader industry behavior. So far, we have not seen a race to the bottom in day rates and all participants have been consistent. This is due to getting burned in prior cycles and the capital markets shunning these types of companies.
I am not sure if this qualifies as a completely separate risk, but the LNG buildout could be delayed or somehow less than anticipated which TOT is exposed to.
Though the current Liberal government in Canada seems a marked step better than the Trudeau government (aka our press release Prime Minister), there is always ESG risk with these companies. I see this as a small risk from here.
There is some key person risk here. The CEO has been at the helm almost 30 years. Given how much of the common he owns, I cannot see him picking a poor successor if he decides it is time to lower his commitments to the business. I personally don’t have this as something likely; succession is not always a priority in a business of Total’s size.
Not a risk to the business, but a risk to the stock is the broad exposure of TOT leaves if vulnerable to weakness and strength in different markets. So, they could see some strength in one geography and weakness in another or in one segment of the business and weakness in another. This would lead to muted growth which the market may not appreciate.
Valuation
TOT currently trades at about 3x EV/EBITDA (ttm) and less than 3x EV/EBITDA (forward). Though it is best to by a cyclical business when it has negative earnings, I do not see that in the near term for TOT. The valuation is at the low end of its historical range. It’s also cheaper than most of it’s peers and I believe it is of better quality than most in the industry.
Capital Allocation
Total has a clean balance sheet and has demonstrated that they can generate cash in this environment. I could see them deploying capital via M&A. They do have some opportunty to invest in the business and grow it organically as well.
In the meantime they pay a dividend (current yield of 2.9%) and they buyback shares consistently. There are about 6% less shares outstanding than this time last year. They will probably continue to delever as well if they don’t find an M&A candidate.
They are also consistently buying back stock. And they actually have a lower share count.
Closing Thoughts
For whatever reason you want to insert, the industry has shown a surprising amount of discipline with regards to pricing. Participants have avoided a race to the bottom in day rates and deploying capital into equipment before it had contracts. This bodes well for margins as activity increases.
Total is not the most torque-y name in the OFS space, but I believe it has a good risk/reward here. I think TOT is a decent way to get some OFS exposure.
Thanks for reading.
Dean
*disclosure – long TOT.to
Very well written. Thank you.
Thanks for writing this, it clarifies alot, and that 'ESG ick + AI FOMO' bit really nails how investor sentiment shifts.