Total Energy Services Inc.

Ladies and gentlemen, thank you for standing by. My name is Krista, and I will be your conference operator today. At this time, I would like to welcome you to the Total Energy Services fourth quarter and full year 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 would like to ask a question at that time, simply press star, then the number one on your telephone keypad. And if you'd like to withdraw your question, again, press star one. Thank you. I would now like to turn the conference over to Mr. Daniel Hellick, President and Chief Executive Officer. Please go ahead.

Thank you, Krista. Good morning and welcome to Total Energy Services' fourth 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 December 31st, 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's projected operating results, anticipated capital expenditure trends, and projected activity in the oil and gas industry. Actual events or results may differ materially from those reflected in TOTAL's forward-looking statements due to a number of risks, uncertainties, and other factors affecting TOTAL's businesses and the oil and gas service industry in general. These risks, uncertainties, and other factors are described under the heading Risk Factors and elsewhere in TOTAL's most recently filed annual information form and other documents filed with Canadian provincial security authorities that are available to the public at www.siraplus.ca. Our discussions during this conference call are qualified with reference to 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 use results for the three and 12 months ended December 31, 2025 represent record quarterly and annual financial results. Strong North American demand for natural gas compression and process equipment and the deployment of upgraded equipment in Australia more than offset lower North American drilling and completion activity. On a year-over-year basis, consolidated fourth quarter revenue increased by 22%. Contributing to this increase was $45.3 million of increased CDF segment revenue, $4.9 million from well servicing, and $4.1 million from CDF segments. Fourth quarter EBITDA increased $15.7 million compared to 2024, driven by increased activity and improved fabrication margins in CDF segments, and the deployment of upgraded rigs at higher day rates in Australia. Geographically, 41% of fourth quarter revenue was generated in Canada, 36% in the United States, and 23% in Australia, as compared to the fourth quarter of 2024, when 48% of consolidated revenue was generated in Canada, 33% in the United States, and 19% in Australia. By business segment, the compression and process services segment contributed 54% of fourth quarter consolidated revenue, followed by the CDS segment at 29%, while servicing 11%, and the RDS segment at 6%. In comparison, for the fourth quarter of 2024, the compression and process services segment generated 47% of fourth quarter consolidated revenue, followed by the CDS at 34%, Wealth servicing at 11% and RDS segment at 8%. Fourth quarter consolidated gross margin was 22% in 2025, which was 130 basis points lower than 2024. Contributing to this decline was an 800 basis points year-over-year increase in fourth quarter revenue contribution from CPF and wealth servicing segments. As these business segments historically generate lower margins, than the CDS and RTS segments. A year-over-year increase in the CDS segment and Australian margins partially offset a decline in RTS and North American CDS and Walter Wilson segment financial results. Fourth quarter CDS segment revenue increased 5% compared to 2024. A 22% year-over-year decline in fourth quarter North American operating base was partially offset by a 24% increase in Australian operating day. Segment revenue per operating day increased 15% during the fourth quarter of 2025. Primarily to increase pricing on upgraded rigs in Australia, there was partial offset by a change in the mix of equipment operating and competitive pricing in certain areas in North American markets. Fourth quarter CDS segment EBITDA increased by 3% compared to 2024. due to improved Australian results that was partially offset by Eureka North American results. CDS segment EBITDA margin during Q4 2025 was consistent with 2024 as the decrease in consolidated segment fourth quarter operating days was offset by higher pricing for upgraded rates and cost management. RTS segment revenue for the fourth quarter increased 3% compared to 2024. This was a result of stable utilization and an increased U.S. rental fleet following the June 2025 acquisition, combined with higher pre-utilized rental fees revenue due to a change in the mix of equipment operating. Higher costs associated with a change in the mix of equipment operating, competitive market conditions, and this segment's relatively high fixed cost structure resulted in a 27% Year-over-year decrease in the fourth quarter RTS segment EBITDA, and a 12% stitch point decrease in segment EBITDA margins. Fourth quarter CPS segment revenue increased 39% compared to 2024, driven by an increased fabrication sales, higher parts and sales service activity, and a stable rental fleet utilization. Year-over-year fourth quarter CPS segment EBITDA increased by $10.6 million for 61%. With a substantial completion of certain legacy low margin fabrication projects, fourth quarter CPS segment EBITDA margin sequentially increased by 526 basis points compared to the third quarter of 2025. The fabrication field backlog at December 31, 2025 was $446.7 million which is $257.7 million, or 136% higher, compared to $189 million backlog at December 31, 2024, and $65.9 million, or 17% higher, compared to $380.8 million backlog at September 30, 2025. In well servicing, a 2% increase in revenue per service hour combined with a 15% increase in operating hours resulted in a 18% year-over-year increase in fourth quarter segment revenue. Increased Australian and stable Canadian activity was partially upset by a substantial decline in U.S. activity. Higher pricing and increased lead utilization following the upgrade of several rigs over the past year contributed to 722% increase in fourth quarter Australian operating income. Upsetting 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 fourth quarter of 2025 was 123% higher compared to 2024 due to improved Australian results. that were partially upset by weaker North American results. From a consolidated perspective, Total Energy's financial position remains very strong. At December 31, 2025, Total Energy had $108 million of positive working capital, including $59.6 million of cash. Cash on hand exceeded bank debt by $4.6 million at December 31, 2025, the first time this has occurred since the acquisition of Savannah in June of 2017. Total energy bank covenant consists of maximum senior debt to trillion 12-month bank-defined EBITDA of three times and a minimum bank-defined EBITDA to interest expense of three times. At December 31, 2025, The company's senior bank debt to bank EBITDA ratio was 0.03, and the bank interest coverage ratio was 44.4 at times.