Total Energy Services Inc.

Hello and thank you for standing by. My name is Regina and I will be your conference operator today. At this time, I'd like to welcome everyone to the Total Energy Service's third quarter 2025 results conference call. All lines have been placed on mute to prevent any background noise. After the speaker's remarks, there will be a question and answer session. If you'd like to ask a question during this time, simply press star then the number 1 on your telephone keypad. To withdraw your question, press star 1 again. I would now like to turn the conference over to Daniel Halleck, President and CEO. Please go ahead.

Thank you. Good morning and welcome to Total Energy Services' third quarter 2025 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, 2025, and then provide an outlook for our business and open up the phone lines for questions. Yuliya, please go ahead.

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 activity in 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 businesses and the oil and gas service industry in general. These risks, uncertainties, and other factors are described under the heading Risk Factors and L3 in Totals, most recently filed annual information form and other documents filed with Canadian Provincial Securities Authority that are available to the public at www.siraplus.ca. 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, 2025, reflect improved Australian financial results following the deployment of upgraded equipment and continued strong North American demand for compression and process equipment. Upsetting these tailwinds was lower North American drilling and completion activity. On a year-over-year basis, consolidated third quarter revenue increased by 8%. Contributing to this increase was $15.2 million of increased CPS segment revenue, $6.2 million from well servicing, and $1.6 million from RTS segments. Third quarter EBITDA decreased by $7.6 million as compared to 2024 due primarily to the relative increase in lower margin CPS and well-servicing segment revenues to the consolidated revenue. A $1.8 million year-over-year negative foreign exchange impact on CPS segment results and $1.5 million year-over-year increase in share-based compensation due to increase in the market price of total energy shares. Geographically, 48% of third quarter revenue was generated in Canada, 27% in the United States, and 25% in Australia, as compared to the third quarter of 2024, when 49% of consolidated revenue was generated in Canada, 34% in the United States, and 17% in Australia. By business segment, the compression and process services segment contributed 48% of third quarter consolidated revenue, followed by the CDS segment at 32%, while servicing at 12%, and the RTS segment at 8%. In comparison, for the third quarter of 2024, the compression and process services segment generated 46% of third quarter consolidated revenue, followed by CDS at 36%. wealth servicing is 10%, and RTS segment is 8%. Third quarter consolidated gross margin was 22% in 2025, which was 409 basis points lower than 2024. Contributing to this decline was a 417 basis points year-over-year increase in third quarter revenue contribution from CPS and wealth servicing segments. as these business segments historically generate lower margins than the CDS and RGS segments. The year-over-year decline in North American-driven third-quarter gross margin percentage in all business segments was partially upset by improved Australian results. Third-quarter CDS segment revenue decreased 5% compared to 2024. The 33% year-over-year decline in third-quarter North American operating days was partially offset by a 32% increase in Australian days. Segment revenue per operating day increased 16% during the third quarter of 2025 due primarily to increased pricing on upgraded rigs in Australia that was partially offset by change in equipment operating and competitive pricing in certain areas of Canadian market. Third quarter CDS segment EBITDA decreased by 3% compared to 2024 future of North American German TV that was partially upset by higher activity and pricing in Australia. TVS segment EBITDA margin during Q3 of 2025 was consistent with 2024 as the overall decrease in third quarter operating days was upset by higher pricing for upgraded rigs and cost management. RTS segment revenue for the third quarter increased 8% compared to 2024. This was the result of stable utilization and an increased U.S. rental fleet following a June acquisition combined with a higher revenue per utilized rental fees due to a change in the mix of equipment operating. Higher costs associated with a change in the mix of equipment operating and competitive market conditions that did not allow for the price increases necessary to offset cost inflation resulted in a 7% year-over-year decrease in the third quarter RTS EBITDA and 585 basis points decrease in segment EBITDA margin. Third quarter revenue in total CPS segment was 14% higher compared to 2024. Increased fabrication sales more than offset a 3% year-over-year decline in rental fleet utilization. Third quarter CPS segment EBITDA declined $4.2 million with 22% compared to 2024. $1.8 million of this decline was due to increase in cost of services resulting from a weakening Canadian dollar relative to the US dollar. Also contributing to this decline with the commencement of certain low-margin fabrication projects awarded in 2024 when industry conditions were weaker and cost inflation arising from tariff-related supply chain challenges that were not fully passable to the customers. The fabrication sales backlog at September 30, 2025 was $380.8 million, which is $76.9 million, or 25% increase and it's higher compared to $303.9 million backlog at June 30, 2025. In-world servicing, a 5% increase in revenue per service hour combined with 19% increase in operating hours resulted in a 24% year-over-year increase in third-quarter segment revenue. Increased Australian engineering activity was partially offset by a substantial decline in U.S. activity. Higher pricing and increased fleet utilization following the upgrade of several rigs over the past year contributed to a 162 percent increase in third-quarter Australian operating income. Offsetting this increase was a decline in North American operating income due to competitive pricing and substantially lower U.S. activity levels. Segment EBITDA. for the third quarter of 2025 was 4% lower compared to 2024. Due to lower pricing in Canada and substantially lower utilization in the U.S., there was only partial upset by increased Australian utilization and pricing realized through the reactivated, upgraded rate. From a consolidated perspective, Total Energy's financial position remains very strong. At September 30, 2025, Total Energy had $115.5 million of positive working capital, including $57.1 million of cash. Bank debt, less cash on hand, was $32.9 million at September 30, 2025. Total Energy's bank governance consists of maximum senior debt, 2 trillion 12-month bank-defined EBITDA of three times, and the minimum bank-defined EBITDA to interest expense of three times. At September 30th, the company's senior bank debt to bank EBITDA ratio was 0.25, and the bank interest coverage ratio was 36.47 times.