Total Energy Services Inc.

Hello and thank you for standing by. My name is Lacey and I will be your conference operator today. At this time, I would like to welcome everyone to the second quarter 2026 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 during this time, simply press star followed by the number one on your telephone keypad. If you would like to withdraw your question, press star 1 again. Thank you. I would now like to turn the call over to Daniel Halyk, President and CEO. Please go ahead.

Thank you and good morning and welcome to Total Energy Services Second Quarter 2026 Conference Call. Present with me is Yuliya Gorbach, Total's VP Finance and CFO. We will review with you Total's financial and operating highlights for the three months ended June 30th, 2026. and then provide an outlook for our business and open up the phone lines for any 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 the oil and gas industry. Actual events or results may differ materially From those reflected in Total's forward-looking statement, due to a number of risks, uncertainties, and other factors affecting Total's businesses and the oil and gas 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 Securities Authorities, that are available to the public at www.crrplus.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 energies results for the three months ended June 30, 2026 represent record quarterly results driven by continuous strong North American demand for natural gas compression and process equipment and the deployment of upgraded drilling and service rigs in Australia and Canada. On a year-over-year basis, consolidated second quarter revenue increased by 31%. Contributing to this increase was $49.1 million of increased CPS segment revenue, $23.5 million from CDS segment, and $3.4 million from well servicing, as well as $2.5 million from RTS segment. Second quarter EBITDA increased $15.5 million compared to 2025, driven by increased activity and improved fabrication margin in the CPS segment and the deployment of upgraded rigs At the higher day rate in Australia and Canada. Positively impacting 2026 second quarter financial results was a $3 million year-over-year increase in game sale property plan equipment following completion of the disposition of the assets related to companies in the United States while servicing business that was discontinued in January 2026. Partially upsetting this gain was the $3 million of non-repairing expenses in the U.S. contract-driven business related to rig reactivation and resolution of several legacy legal disputes. Geographically, 43% of second quarter revenue was generated in Canada, 34% in the United States, and 23% in Australia as compared to the second quarter of 2025. When 38% of consolidated revenue was generated in Canada, 38% in the United States, and 24% in Australia. By business segment, Congressional Process Services contributed 55% of second quarter consolidated revenue, followed by the CDS segment at 29%, while servicing at 10%, and the RTS segment at 6%. In comparison, for the second quarter of 2025, the compression process services segment generated 53% of second quarter consolidated revenue, followed by CDS at 28%, closed servicing at 12%, and RTS segment at 7%. Second quarter consolidated gross margin was 22% in 2026, which was 157 basis points lower than 2025. Contributed to this decline was a 223 basis point increase in second quarter revenue contribution from CDS segment, as this business segment historically generates lower margins than other segments. A year-over-year increase in CDS segment and Australian well-servicing margins partially upset a decline in CDS and RGS segment margins. Second quarter CDS segment revenue increased 33% compared to 2025. A 24% year-over-year increase in operating days was further supported by a 7% increase in segment revenue per operating day. Second quarter pricing increased compared to 2025 due primarily to increased pricing for upgraded railways in Australia and Canada and stable pricing in the United States. Second quarter CDS segment EBITDA increased by 39%, and segment EBITDA margin increased by 110 basis points. Compared to 2025, due to increased utilization and pricing, it was partially offset by $2.3 million of nonrecurring expenses in the United States. Excluding these nonrecurring expenses, second quarter segment EBITDA increased 54% and segment EBITDA margin by 353 basis points compared to 2025. RTS segment revenue for the second quarter increased 16% compared to 2025. This was the result of a U.S. acquisition completed in June of 2025 and increased industry activity in Canada. 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 4% year-over-year decline in the second quarter segment EBITDA and 594 basis point decrease in segment EBITDA margin. Second quarter C.P.A. segment revenue increased by 37% compared to 2025, driven by increased fabrication sales and Higher Parts and Service Activity. Year-over-year second quarter C.P.A. segment in detail increased by $4.7 million, or 21%. In detail, margin during the second quarter of 2026 was 193 basis points lower compared to 2025, primarily due to the year-over-year decline in higher margin rental revenues, following the sale of several rental units in 2025. The fabrication sales backlog at June 30, 2026 was $554.5 million, an 82% increase compared to $303.9 million backlog at June 30, 2025, and 24% higher than $446.9 million backlog at March 31, 2026. In wealth servicing, A 7% increase in revenue per service hour combined with a 4% increase in service hours resulted in an 11% year-over-year increase in second-quarter segment revenue. Increased Australian and Canadian activity was partially set by substantial decline in U.S. activity following the discontinuance of U.S. World Service operations in January 2026. Higher pricing increased fleet utilization and Cost Optimization following the upgrade of several rigs over the past year resulted in a substantial improvement in second-quarter Australian green income, which together with the cessation of green losses in the United States, drove a 194% year-over-year increase in the segment EBITDA. Total Energy's consolidated financial position remains very strong. At June 30, 2026, Total Energy had $81.9 million of positive working capital, including $50.5 million of cash. Cash on hand exceeded bank debt by $25.5 million at June 30, 2026. Dollar Energy's bank governance consists of maximum senior debt to trillion 12-month bank-defined Thank you, Yuliya.