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Operator
Welcome to TSX Quarterly, the podcast that brings you publicly available earnings calls from companies listed on the Toronto Stock Exchange in one convenient location. Gone are the days of looking through confusing websites. You'll find the important information right here. Enjoy the call.
Joseph
Thank you for standing by. This is the conference operator. Welcome to Total Energy's third quarter results conference call. As a reminder, all participants are in listen-only mode and the conference is being recorded. After the presentation, there'll be an opportunity to ask questions. To join the question queue, you may press star then one on your telephone keypad. Should you need assistance during the conference call, you may signal an operator by pressing star and zero. I would now like to turn the conference over to Daniel Halleck, President and CEO of Total Energy Services. Please go ahead.
Daniel Halleck
Thank you. Good morning and welcome to Total Energy Services third quarter 2021 conference call. Present with me is Yulia Gorbache, Total's VP Finance and CFO. We will review with you Total's financial and operating highlights for the three months ended September 30th, 21. and then provide an outlook for our business and open up the phone lines for questions. Julia, please proceed.
Yulia Gorbache
Thank you, Dan. During the course of this conference call, information may be provided containing forward-looking information concerning total projected operating results, anticipated capital expenditure trends, and projected drilling activity in the oil and gas industry. Actual events or results may differ materially from those reflected in total forward-looking statements, due to a number of risks, uncertainties, and other factors affecting Total's businesses and oil and gas industry in general. These risks, uncertainties, and other factors are described under the heading Risk Factors and also in Total's most recently filed Annual Information Form and other documents filed with Canadian Provincial Securities Authorities that are available to the public at www.cira.com. Our discussions during this conference call are qualified with reference to the notes to the financial highlights contained in the news release issued yesterday. Unless otherwise indicated, all financial information in this conference call is presented in Canadian dollars. Total Energy's financial results for the three months ended September 30, 2021 reflect improving industry conditions in North America, particularly in Canada, and lower activity levels in Australia as compared to the third quarter of 2020. Higher North American activity and the reactivation of two drilling rigs in Australia contributed to a significant year-over-year improvement in total third quarter financial results and a return to profitability with third quarter net income of $4.3 million as compared to a net loss of $4.6 million in 2020. Third quarter consolidated EBITDA increased 51% from $17.9 million in Q3 of 2020 to $27 million in the third quarter of 2021. Excluding COVID-19 relief funds, third quarter EBITDA increased 115% on a year-over-year basis. Total geographical diversification continued to be a stabilizing factor for our financial performance. Geographically, as the year-over-year industry activity levels in Australia decline, activity levels in North America continue to recover from the historic lows experienced during the second quarter of 2020. This is evident by North America contributing 82% of consolidated revenue in the third quarter of 2021 as compared to 68% in the third quarter of 2020. Within North America, the recovery in Canada was more pronounced compared to United States, with a relative contribution from Canada to consolidate a third quarter revenue increase in 15 percentage points compared to Q3 of 2020. Third quarter revenue contribution from the United States decreased by two percentage points on a year-over-year basis, and Australia's contribution declined by 14 percentage points as compared to 2020. By business segment, contract drilling services was the largest contributor to consolidated revenue, generating 36% of 2021 third quarter consolidated revenues, followed by compression and process services at 32%, well servicing at 21%, rentals and transportation services contributing 10%. This compares to Q3 of 2020 when CPS contributed 42% of consolidated revenue, while servicing 30%, contract drilling services 21, and the RTS segment 8%. While third quarter 2021 consolidated revenue increased by 54% as compared to Q3 2020, EBITDA increased by 100% after adjusting to exclude COVID-19 relief funds and unrealized foreign exchange gains and translation of interest company working capital balances. resulting in an adjusted quarterly EBITDA margin of 19% as compared to 14% in the third quarter of 2020. The $4.5 million of COVID-19 relief funds recorded during the third quarter of 2021 reduced cost of services by $4 million and its GNA by $0.5 million. This compares to $7.4 million of COVID-19 relief funds in Q3 of 2020 which reduced cost of services by $6.4 million and SG&A by $1 million. Consolidated third quarter gross margin excluding COVID-19 funds was four percentage points higher as compared to 2020. This was primarily due to modest price increase in North America necessary to offset rising labor and material costs. Excluding COVID-19 relief funds, Gross margin percentage of revenue improved to 25% for the third quarter of 2021 as compared to 21 in Q3 of 2020. Sale and general administration expenses for the third quarter of 2021 increased by $1.6 million or 27% compared to Q3 of 2020 as employee compensation was reinstated to pre-COVID levels and the contribution of COVID-19 fund decreased by $0.5 million or 50% compared to the prior year comparable quarter. The improvement in North America drilling activity and the reactivation of two Australian drilling rigs contributed to an over three-fold increase in total operating drilling days in total CDS segment. This resulted in 213% increase in consolidated drilling utilization during the third quarter of 2021. as compared to prior year. Despite a 14% decrease in revenue per operating day as a result of lower North American day rates and changes in the geographic revenue mix, high activity resulted in a 68% year-over-year increase in third quarter CDS segment revenue. Third quarter CDS segment EBITDA increased 263% compared to 2020 as a result of cost management and changes in the mix of equipment operating in North America. An increase in Canadian drilling activity resulted in a 254% increase in third quarter operating days in Canada compared to 2020. Recovering industry conditions and market share gains contributed to a 380% year-over-year increase in third quarter United States operating days. which in turn drove a 406% year-over-year increase in third quarter U.S. drilling revenue. Third quarter operating days in Australia increased 34% compared to 2020 as two drilling rigs returned to service following the completion of recertifications and upgrades. One Australian rig was removed from operation during the third quarter for recertifications and upgrades and is expected to return to service in the first quarter of 2022. Improving industry conditions and the commencement of several major projects in Canada that were previously delayed contributed to 86% increase in third quarter equipment utilization within RTS segment as compared to 2020. Third quarter RTS revenue increased 107% on the year-over-year basis, which in turn drove and 82% increase in segment EBITDA. EBITDA increased at slightly lower pace than revenue due to the mix of equipment operating, cost inflation not being fully offset by price increases, and lower year-over-year COVID-19 assistance being received. Third quarter revenue in total CPS segment increased 18% compared to 2020. and this segment saw a fourth consecutive quarterly increase to its fabrication sales backlog, which was 158% higher on a year-over-year basis. Higher natural gas prices also provided support for CPS segment's parts and service business, and utilization of the compression rental fleet continued to improve for the third consecutive quarter, increasing 18% from December 31st of 2020. Operating income for the third quarter of 2021 increased 12% on a year-over-year basis, primarily as a result of ongoing cost management and increased overhead absorption with the high production activity. Third quarter revenue increased 10% in our well servicing segment compared to 2020. While service hours increased 15% during the third quarter, revenue per service hour decreased 4% due primarily to the geographical revenue mix and lower pricing in Australia. Continued strength of oil prices and increased oil abandonment activity in Canada contributed to a substantial increase in North American activity that was partially offset by low utilization in Australia. This segment's EBITDA margin decreased seven percentage points in the third quarter of 2021. as compared to the same quarter last year due primarily to cost inflation in North America that was not fully recovered through price increases. Total energy's financial and liquidity positions remain very strong. At September 30, 2021, the weighted average interest rate on outstanding bank debt was 2.8% as compared to 2.85% at September 30, 2020. This lower interest rate combined with lower outstanding debt balances contributed to a 20% year-over-year decrease in third quarter finance costs. Total net debt position at September 30, 2021 is the lowest since we completed the acquisition of Savannah in June of 2017, as we remain focused on continuous repayment of debt. Total energy exited the third quarter of 2021 with over $145.6 million of liquidity consisting of $25.6 million of cash and $120 million of available credit under the company revolving credit facilities. Total Energy's bank governance consists of maximum senior debt to 312 months bank EBITDA of three times and a minimum bank defined EBITDA to interest expense of three times. At September 30th, 2021, Company senior bank debt to bank EBITDA ratio was 1.6, and the bank interest coverage ratio was 14.45 times.
Daniel Halleck
Thank you, Yulia. Improving North American industry conditions underpinned a significant year-over-year improvement in total energy's third quarter financial performance. While industry activity levels remained below pre-COVID levels in all geographic regions where Total operates, Continued efforts to manage operating and overhead costs in response to challenging industry conditions were effective in restoring corporate profitability. Total's diversified business model has proven resilient once again and has allowed us to generate significant free cash flow even during the most difficult of times. For the first nine months of 2021, after funding capital expenditures, capital lease and interest obligations, and working capital requirements, total energy generated $44.2 million of free cash flow, or $1.01 per share, outstanding at September 30, 2021. This free cash flow was directed towards continued debt repayment and share buybacks. Notwithstanding continued strength in commodity prices, many oil and gas producers have been hesitant to substantially increase capital budgets. At current commodity prices, Total Energy expects that oil and natural gas drilling and completion activity will continue to moderately increase, led by private producers not under the same pressure to curtail their capital investment programs. Demand for equipment and services provided by our CPS segment continues to strengthen as investment in global energy infrastructure recovers from the pandemic collapse. Total Energy's track record of fiscal discipline and maintaining a sound financial position allows us to respond to opportunities that are arising in a recovering energy services market. In response to increasing demand for drilling rigs and compression rental equipment, our Board of Directors has approved a $6.5 million increase to our 2021 capital budget, which now stands at $33.2 million. We intend to fund the remainder of our 2021 capital budget with cash on hand. Enhancing shareholder returns, including through debt repayment and share repurchases remains a corporate priority. As we look forward to better times for our business, I would like to take this opportunity to thank all of our employees for their perseverance and dedication over the past 18 months. Together, we worked to get through a severe industry downturn and a global health pandemic and came out a stronger and more innovative organization. I would now like to open up the phone lines for any questions.
Joseph
Thank you. We will now begin the question and answer session. To join the question queue, you may press star then one on your telephone keypad. You will hear a tone acknowledging your request. If you are using a speakerphone, please pick up your handset before pressing any keys. To withdraw your question, please press star, then two. Once again, to join the question queue, please press star, then one now. Our first question comes from Cole Pereira of Stiefel. Please go ahead.
Cole Pereira
Hey, good morning, everyone.
Joseph
Good morning, Cole.
Cole Pereira
Maybe to start, so obviously good rebound in earnings, the balance sheet's in pretty good shape, and Getting more active with the buyback, but how are you thinking about other capital allocation priorities, namely M&A and resuming the dividend?
Daniel Halleck
The same way we've always thought about allocation of capital. We'll deploy capital to the highest risk-adjusted opportunities.
Cole Pereira
I guess maybe phrased in a different way, do you see Just the returns from debt and share buybacks just being much higher than M&A and a dividend at this point?
Daniel Halleck
Certainly, our share buyback is an extremely compelling investment in this market. There's zero integration risk. you know, you've got a fairly good idea of what your earnings capacity is going forward. So, you know, that certainly ranks high. Debt repayment, again, we continue to be methodical in bringing down the total debt. You know, on a net debt basis, so net of working capital, you know, we're now at the point where, you know, it's certainly going to... invite other thoughts and discussions, but those will be at a board level. On the M&A front, we see a lot of different opportunities, but we rank those against share buybacks, and it's difficult to make a lot of those work.
Cole Pereira
Okay, perfect. That's helpful. Thanks. So contract drilling looked pretty strong overall, but the U.S. business in particular had a lot of market share capture. Can you just talk about some of the drivers behind that and what you see as the near-term outlook for that business?
Daniel Halleck
Well, first of all, our U.S. drilling group has done a wonderful job in capturing market share through providing quality equipment in a safe and efficient manner. I think what we're seeing in the US, and I expect we'll see it up in Canada, is a move towards lighter, more efficient rigs as opposed to bringing the biggest rig possible to the well site. And I think there's a number of drivers for that, but not the least of which is operational and move efficiencies. And so we're... We have three triples in the U.S. and those are all working, but definitely our quality fleet of doubles and singles is enjoying some strong utilization.
Cole Pereira
Okay, great. That's helpful. Thanks. And so one of your compression peers cautioned on margins over the next few quarters due to pricing pressure and supply chain issues. I mean, do you see some of those same margin risks for totals compression business?
Daniel Halleck
Well, certainly we're in an inflationary environment. You know, we're seeing that in all divisions. You know, one of the benefits that our CPS segment had coming into this rebound is, you know, a significant inventory of major components. And so both from a cost inflation and a procurement risk, you know, physical supply risk perspective, you know, we feel... quite comfortable in where we stand in the marketplace.
Cole Pereira
Okay, great. That's all for me. I'll turn it back. Thank you. Thank you.
Joseph
Our next question comes from Tim Monticello of ATB Capital Markets. Please go ahead.
Tim Monticello
Hey, good morning. Good morning. I think Cole sort of asked a couple of my questions, but I guess just when you look across your platform, as diversified as it is, and with a view to, you know, probably a pretty tight market in Canada in Q1, and maybe, you know, a tightening market in the U.S. through the next few quarters, which business lines do you see the most optimism in? And where do you think there might be challenges in terms of, you know, capacity of the industry to meet demand?
Daniel Halleck
I'm optimistic on all four divisions for various reasons. And I think we're certainly going to see, particularly in Canada in Q1, what the true capacity of our industry is, both from an equipment and personnel perspective. And I'm not sure, time will tell, but I'm not sure the market fully appreciates the limited supply capability on the service side. And, you know, as we wrap up in Q1, you know, we'll find out together what that means. But the capacity that exists today is not even close to what it was five years ago. And I would say that's across the board.
Tim Monticello
Okay, that's helpful for sure.
Daniel Halleck
And I just don't see an environment where you're going to see capital come in and try and increase that capacity.
Tim Monticello
What are you seeing from the labour standpoint? Any challenges there?
Daniel Halleck
Labour's tight. Again, I think more on the field services front. But we always find a way to get the job done. So, you know, I'm pleased with our various divisions and their efforts to you know, procure labour. And at the end of the day, you know, we tried to carry as many through a tough time as we could, had to make some tough calls, but feel quite comfortable with how we position ourselves coming into this recovery and the fact that we're able to invest capital to ensure that, you know, our employees and our customers, you know, have the best equipment that's fit for duty and ready to go to work, and that's part of it. you know, providing your employees with the proper equipment and good, safe operations. So, you know, we'll find a way, but I think it's definitely going to be a little more, well, certainly more challenging than a year ago.
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Tim Monticello
You know, pricing increases haven't kept up with cost inflation. In the tightening market, do you see that? See pricing starting to overcome cost inflation in the coming quarters?
Daniel Halleck
Well, we're certainly hoping so. You know, the directive to all of our divisions is to, you know, we're not going to hopefully see margins contract in an $80 oil environment.
Tim Monticello
Yeah, I would hope not.
Daniel Halleck
We're in a bit of an adjustment period here, weeding ourselves, the industry weeding itself off of COVID assistance. Again, you still have a pretty modest rig, North American rig count and an Australian rig count for that matter. We're finding equilibrium, but my sense generally speaking to... producers, they understand that the service sector pricing is not sustainable and most reasonable customers are willing to work with you to come up with something that's fair that works for both sides.
Tim Monticello
With oil prices, you know, in the mid 80s, we're starting to see activity outside the Permian accelerate. Is that helping to tighten some of some of those business lines like US rentals?
Daniel Halleck
Certainly, yes, you know, the rig count drives all four divisions. Ultimately, it's a good leading indicator. So, you know, recovery across the board in all basins in the U.S. is positive for all of our divisions.
Tim Monticello
Okay, and then last one for me. I was just wondering if you could talk to the progression and some of the, I guess, energy transition or non-traditional and market business lines and opportunities that you're seeing.
Daniel Halleck
We're at the front of that. The reality is it's not a big component today, but we're in line and if and when those opportunities become significant, we'll get our fair share. We take a pragmatic approach to those opportunities. At the end of the day, it's really not complex. A lot of the engineering and design are off-the-shelf technologies. The reality is capital has to flow in a significant way into those opportunities, and when it does, we'll be ready to get our fair share.
Tim Monticello
Is the US rental fleet, as you build that out in terms of compression, are you looking at electric at all?
Daniel Halleck
Is that a component? Oh, very much so. We've been doing electric for 20 years.
Joseph Schachter
Okay.
Daniel Halleck
Electric, there's no magic to it. We've been doing electric drive compression for 20-plus years.
Tim Monticello
Okay, yeah, I just wanted to – there's some details from a few of the U.S. competitors around it, so I was just curious what your stance was in that couple.
Daniel Halleck
Yeah, no, we're – at the end of the day, a lot of it depends on – a lot of it depends on your sources and availability of electricity. A good example is one of our heavy – AC Doubles is drilling actually fairly close to the city of Calgary. We tried to put it on high line power, but there was insufficient power in the grid to power the rig. That goes to the reality of trying to transition too quickly. The grid is simply not capable of providing enough electricity to power a double drilling rig. you know, we generate the electricity through diesel power generators, but if we could, we could plug it into Highline. Interesting.
Tim Monticello
I'll turn it back, thanks. Thanks.
Joseph
Our next question comes from Joseph Schachter of Schachter Energy. Please go ahead.
Joseph Schachter
Good morning, Dan and Ilya, and congratulations on the nicely improved quarter. Three questions for me. The first one is on the service business. Are you seeing a pickup in the abandonment programs where people are taking advantage of the program that expires in 22? Or is the focus more on getting volumes up so they're looking at more re-completions? Maybe any idea you have of, you know, do you think in 2022 will that be busier while the funds are still available?
Daniel Halleck
So, Joseph, we've seen a pretty significant increase in abandonment work over the past year. You know, the reality is, you know, the government of programs were announced probably close to two years ago, and for the first nine months, nothing happened. And just as oil prices were recovering, funds started flowing. So I would say what you're seeing is a competition now between abandonment and production work, such that we've probably... skewed more towards the production side than the abandonment, but there's good, strong demand. And frankly, we have more work than service rigs, crude service rigs right now. So that's a challenge. Okay.
Joseph Schachter
Does that help in margins and pricing going forward? It better. It's better. Yeah. It better help. Yeah. But what about competitors or competitors? are competitors not as tight as you and therefore the pricing is still a problem?
Daniel Halleck
I think it depends on the area and the specific competitive landscape. But at the end of the day, when you have more demand than supply over the medium term, that'll drive pricing.
Joseph Schachter
Second question for me is net debt's now at $64 million down from $100 million in December. Is there a target in your mind to get that down to zero before you start looking at alternatives? Do you have a number in mind for net debt?
Daniel Halleck
So we look at our debt, kind of there's two components. One's our mortgage debt, which to me personally would be kind of permanent debt. And then there's the line, the revolving credit facilities, which on a gross basis was $135 million. you know, net basis, what, about 110 or so. So, you know, we're quite comfortable keeping the mortgage debt as permanent debt. You know, we rolled a $50 million mortgage. We picked up a $17 million mortgage when we bought Savannah. To us, that's kind of permanent. It'll keep rolling. We're focused on the revolving side. You know, as that comes down, we'll likely... contract our facility. You know, we don't pay for things we don't need. And certainly as we, you know, when you have no debt left to pay, you know, you look at other options. But, you know, I won't steal the board's thunder. Certainly, you know, I'm personally a fan of a dividend. I know our board is. And, you know, at some point when it's the right time, I would expect that we will revisit that.
Joseph Schachter
Okay, super. Last one for me, this is kind of a crazy one. You know, the COP26, we heard that they're going to be cutting off funding, and countries have signed off for international energy investments. With your Australian operations, does that affect the financial capability of your clients, and is that something that you guys are concerned about in terms of working in the international environment?
Daniel Halleck
Well, I think last I checked, Asian countries, LNG prices were north of $30 in MCF. So the financial capacity of our customers there, which are all major, you know, LNG participants is, from what I can tell, fairly solid. You know, we'll see how this plays out. The reality is, you know, we're going into winter in the Northern Hemisphere and, you know, you're seeing some energy crises playing out. At the end of the day, you know, Food, clothing, and shelter are fundamentals, and shelter includes a warm shelter. I'm reasonably bullish on natural gas. I think in the medium to long term, it has a very bright future, particularly as we realize the limitations of the current accelerated attempt to displace it. And physics and economics ultimately prevail, and I'm quite comfortable saying playing in the natural gas space, which is primarily the market for us in Australia. At the end of the day, I think there's no doubt that capital will be restrained, but that just further reinforces my views on supply and demand, both within the production side and the service side, which is part of the reason why we're quite focused on... paying down debt and like we have been for 25 years, we've not really ever been dependent on equity markets to fund our business. It's been not cashful.
Joseph Schachter
Yeah. Good. That does it for me. Thanks very much. And again, congratulations on a nicely improved quarter. Thanks, Joseph.
Joseph
Our next question comes from John Gibson of BMO Capital Markets. Please go ahead.
Daniel Halleck
Thanks. And again, congrats on the strong quarter. I just have two. The first one kind of leads on what Cole was asking. I may be asking a different way. So I'm just wondering if you could speak to margins that are currently churning through your system, which I'm guessing were kind of signed early in the pandemic versus maybe new orders signed today and how they may differ. And maybe just keeping, you know, the fact that you have a fairly large inventory out of the equation. So one thing that hit our margins in the CPS segment in Q3 was we took an $800,000 provision. So if you back that out, basically our margins were fairly flat year over year despite reduced COVID funds. And so what we're seeing and certainly your observation on timing of the order versus completion is correct. you know, we are moving into an inflationary environment, and certainly I know all divisions, including CPS, are cognizant of that. And, you know, as you're pricing new bids, you know, you're certainly factoring that in. So I would say generally I have a high degree of confidence in our CPS management to, you know, to price appropriately. And, you know, obviously it's a competitive marketplace, but... At the end of the day, it's a commodity and low cost gets the best margins. So as much as you focus on price, we also focus very much on manufacturing efficiencies, overhead efficiencies and the like. I think one of the other things that hopefully will play out to our advantage here in all of our divisions is as part of our kind of restructuring during the last two years, we really made an effort to displace lease facilities with OWNED, and we're almost done that for the most part as leases came off. And, you know, for example, in our CPS segment, you know, we had the opportunity to vacate lease premises and relocate into OWNED, you know, as we were converting, say, RTS branches into CPS branches. Likewise, you know, putting two groups in one building. So, you know, we're being fairly innovative in in trying to keep our costs under control and both through cost management and price strategy, continue to maintain and ultimately grow margins. I don't know if that answers your question, John. No, it does. I appreciate the answer. The second one for me, and you've obviously benefited from various COVID relief programs, as has everybody. I'm just wondering if you could maybe put some specific goalposts around what you expect to receive in 2022. At this point, zero. Okay. Okay, great. Again, congrats on the quarter. I'll turn it back. Thanks, John.
Joseph
Our next question comes from John Bereznicki of Canaccord Genuity. Please go ahead.
John Bereznicki
Yeah, thanks. Morning, everybody. Morning, John.
Joseph
Good morning.
John Bereznicki
I just want to focus on CPS for a second. Obviously, the backlog growth pretty meaningful in Q3. Broad brush, can you give us a sense of kind of where that came from, either geographically or product-wise?
Daniel Halleck
I'm hesitant to do that for competitive reasons, but we sell to the world, John.
John Bereznicki
Okay. Okay, fair enough. I won't push on that one any further, but looking at the numbers, it still looks like U.S. has obviously skewed more rentals, Canadian market to sales. Any signs that that's changing, given capital allocation with your customers, or is that kind of a trend you're factoring on here as you move forward?
spk02
Sorry, didn't quite get your… U.S. rentals?
John Bereznicki
Oh, just within CPS, you know, looking through the numbers, it looks like rentals are, you know, a bigger component in the U.S. versus sales in Canada.
Daniel Halleck
Yeah, I think generally part of it's just a, you know, much, much, much larger market. Certainly there's, I think, culturally and economically different reasons to rent versus own. But We're seeing good demand for the rental, steady redeployment. It was Q4 last year, a bankruptcy of a U.S. customer that resulted in a fairly significant return of equipment. We're steadily putting that back to work. Our expectation is going into Q1, we should see a reasonable pickup in in compression both sides of the border as particular Canada where customers are wanting to put on winter drilled wells onto production before a breakup. So, seasonally Q1 is usually a fairly good time for rental demand.
John Bereznicki
So... Okay, that's helpful, thanks. And then just... Yeah, that's helpful. Sorry, go on.
Daniel Halleck
I was just going to say it's throwing darts at a dartboard though. Demand for rentals can be very unique and it sort of comes when it comes. And again, we're not into the, I think some of our competitors are in the boom market. Ours are dry rentals.
John Bereznicki
Right, right. No, I appreciate it. That's helpful. Just looking at Australia, it looks like you were able to put the two upgrade rigs to work in the third quarter, sequential uptake and activity. Things looked a little flatter on the well servicing side. Just wondering if that trend has continued through the fourth quarter, kind of what you're seeing in that market right now.
Daniel Halleck
I think generally Australia lagged North America by a year, nine months to a year. So we saw the rig count come off. You know, we had some company-specific issues, as you just noted, taking two out of the five rigs out of service. You know, we're currently operating four out of five, and the fifth is out of service for upgrade and recert, and it'll be back in service in Q1. Certainly on the well servicing side, you know, similar to the overall rig count in Australia, we saw a bit of a pullback, you know, in part, though, due to weather. They've had quite a wet spring and going into summer, but overall I think just like North America, producers are cautious, but the flip side is they're enjoying a fairly significant increase in commodity prices there, so we'll see how it plays out. you know, we feel reasonably comfortable with our market position, both in drilling and well servicing there.
John Bereznicki
Okay, appreciate the color. That's it for me. Thanks for squeezing me in. Thanks, John.
Joseph
Once again, if you have a question, please press star, then one. Our next question comes from Akshay Thill, a private investor. Please go ahead.
Akshay
Hey, good morning, everyone. I had a question on the rentals and transportation services. We noticed that the revenue went up substantially compared to the same time last month, last year. However, I noticed among all the segments, this one has the lowest utilization, even though that it's doubled compared to the same time last year. What, in your opinion, is a good utilization rate? And is there any plans to right-size the assets further to get to that number?
Daniel Halleck
Good question. I think historically full utilization in that division would be 60 to 65%. Just the nature of the assets, you constantly have assets moving back and forth to jobs, being cleaned, repaired. So 60 to 65% utilization would be peak utilization. It's not the same as a drilling rig that sits on a well, you know, just constant. A lot of this stuff is, you know, used to contain solids, liquids, has to be cleaned, repaired. So you're never going to see the utilization in our other, in that line of equipment, as you will, in other divisions. So certainly last year, you know, with the collapse in the North American rig count, you had extremely low demand Utilizations, historically we needed 20 to 25% utilization to generate pre-tax income through our restructuring and basically we shrank our footprint in Canada fairly substantially. We've lowered that utilization threshold to achieve profitability significantly such that Q3, we came quite close to pre-tax profitability, again, at a pretty low utilization. And that's just simply the leverage we have to activity. You have a high fixed cost structure in that business relative to your other ones. And once you kind of get over your fixed costs, you get pretty significant drop down to the bottom line. So we ran, just looking at the number here for, 11%, pardon me, 10%, 13% overall North American utilization. And we were pretty close to pre-tax profitability, whereas that number historically had to be kind of 20, 25%. So we're excited to see what happens as we hopefully get busier there.
Akshay
Okay, thank you. Also, I think you briefly touched base on this, but can you talk a little bit about opportunities at OPSCO and how you see that business line going in the future?
Daniel Halleck
So, OPSCO has been around a long time, since the 60s. They've been involved in conventional oil and gas as well as some fairly interesting emerging opportunities. OBSCO was originally involved in the construction of the original carbon trunk line in Alberta, the first CO2 capture major project in Alberta quite a few years ago. So I think our prospects there are both your conventional oil and gas infrastructure, but also emerging opportunities, whether it's carbon capture, hydrogen, you know, bio gas or what have you. At the end of the day, gas is gas. The chemistry is a little different for each type of gas, but, you know, we build things to handle gas of whatever nature. So, you know, OBSCO and BIDEL certainly give us good exposure to any significant infrastructure investment, you know, globally in some of these alternative energy opportunities.
spk09
Okay, thank you. That's it on my end. Have a good day. Thank you. You too.
Joseph
This concludes the question and answer session. I would like to turn the conference back over to Mr. Halleck for any closing remarks.
Daniel Halleck
Thank you all for participating in our conference call and look forward to speaking with you after we release our year-end results. Have a good day.
Joseph
This concludes today's conference call. You may disconnect your lines. Thank you for participating and have a pleasant day.
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Operator
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