Total Energy Servics Quick Update - $TOT.to
Quick update after Q3 2023
Price: $7.85 CAD
MC: 321 mil
EV: 400 mil
Yield: 4.1%
1 year performance:
TOT reported last week. Results were in line with my expectations and the stock was flat. It has such sold off with the drop in oil prices.
Quarter Recap
Consolidated revenue was up 12%
EBITDA was up 6%
CDS (Contracted Drilling Services)
Revenue and EBITDA were essentially flat at 75.8 mil and 21.7 mil
Rental and Transportation services
Revenue up 17% to 21.1 mil
EBITDA down 10% to 7.3 mil
Higher mobilization costs were a drag on profitability
CPS (Compression and Processing Services)
Revenue up 28% to 111 mil
EBITDA up 81% to 14.4 mil
Driven by higher US fabrication sales
Backlog down to 152.9 mil from 197.8 last year
Well Servicing
Revenue down 17% to 24.1 mil
EBITDA down 27% to 5 mil
Lower well abandonment in activity in Canada was the main driver
Capex budget was increased by 20 mil
Mostly for build out of the CPD division’s rental fleet driven by demand
Call Notes
Outlook for day rates in Canada is positive for Q4
Though the backlog for CPS is down, they are still building for the rental fleet
New rental fleet equipment backed by take-or-pay commitments
Utilization of the rental fleet should continue to remain strong even as their new equipment comes online
Feel we are in a reasonably stable environment
Closing Thoughts
Not much to report from TOT. They are able to maintain profitability even with the lower activity levels. I am pretty muted with CPS expectations from this point. The backlog continues to tick down, so at some point I assume we see a top in US fabrication sales. How much will be offset by a larger rental fleet? I’m not sure.
I like TOT as part of my OFS basket. I think the capital discipline continues from here. I wouldn’t be surprised with some M&A from them.
In the meantime, we get a 4% dividend while holding a company that trades at 2.5x EV/EBITDA.
Thanks for reading.
Dean
* long TOT.to