Total Energy Services TSE: TOT reported higher first-quarter revenue and EBITDA for 2026, as strong demand for compression and process equipment and upgraded rig deployments in Australia and Canada offset weaker North American drilling and completion activity.
On a conference call reviewing results for the three months ended March 31, 2026, Vice President of Finance and Chief Financial Officer Yuliya Gorbach said consolidated revenue rose 25% year over year. The increase included CAD 58.4 million of additional revenue from the Compression and Process Services, or CPS, segment, CAD 6.1 million from the Contract Drilling Services, or CDS, segment, and CAD 2 million from Well Servicing.
First-quarter EBITDA increased by CAD 4.7 million from the prior year, driven by higher activity and improved fabrication margins in CPS, along with the deployment of upgraded rigs and higher day rates in Australia and Canada, Gorbach said.
Share-Based Compensation Weighs on Results
Gorbach said first-quarter results were negatively affected by a CAD 6.5 million year-over-year increase in share-based compensation expense, tied to a 52% increase in the company’s share price during the quarter. CAD 6.3 million of the CAD 6.6 million in share-based compensation expense recorded in the quarter was non-cash, she said.
The impact was partially offset by a CAD 2.9 million year-over-year increase in gains on the sale of property, plant and equipment, following the sale of well servicing equipment in the United States in February 2026.
President and Chief Executive Officer Daniel Halyk said the results would have represented record quarterly financial results, excluding the substantial non-cash share-based compensation expense.
“The substantial investment we have made over the past two years reactivating Australian and Canadian equipment and supporting the inventory needs of our CPS segment continued to bear fruit and position us well for the future,” Halyk said.
Compression Segment Leads Revenue Mix
By geography, Total Energy generated 46% of first-quarter revenue in Canada, 32% in the United States and 22% in Australia. A year earlier, Canada represented 47% of revenue, the United States 31% and Australia 20%.
By segment, CPS accounted for 52% of consolidated revenue in the first quarter, up from 42% in the prior-year period. CDS contributed 31%, Well Servicing 11% and Rentals and Transportation Services, or RTS, 6%.
Consolidated gross margin was 22%, down 260 basis points from the first quarter of 2025. Gorbach said the decline reflected a larger revenue contribution from CPS, which historically generates lower margins than the company’s other segments. Higher CPS and Australian margins partially offset lower margins in RTS and North American CDS and Well Servicing.
CPS revenue rose 55% year over year, driven by higher fabrication sales and increased parts and service activity. CPS EBITDA rose CAD 6.1 million, or 39%, though the segment’s EBITDA margin declined by 2 percentage points because of a greater relative contribution from lower-margin fabrication sales.
The CPS fabrication sales backlog totaled CAD 446.9 million at March 31, up 68% from CAD 265.4 million a year earlier and slightly above the CAD 446.7 million backlog at year-end 2025.
Drilling, Rentals and Well Servicing Show Mixed Trends
CDS revenue increased 7% from the prior year. Gorbach said an 18% decline in North American operating drilling days was partly offset by a 38% increase in Australian operating days. Revenue per operating day rose 11%, primarily due to higher pricing on upgraded rigs in Australia and Canada, partially offset by equipment mix changes and competitive pricing in the United States.
CDS EBITDA declined 5%, with the segment EBITDA margin down 3 percentage points. Gorbach cited competitive pricing, costs to reactivate U.S. equipment and low utilization in Canada, partially offset by improved Australian results.
RTS revenue decreased 15% year over year, reflecting lower industry activity and lower revenue per utilized fee related to the mix of equipment operating. Segment EBITDA declined 23%, while the EBITDA margin fell 4 percentage points.
Well Servicing revenue increased 6%, as a 2% increase in revenue per service hour combined with a 4% increase in operating hours. Gorbach said increased Australian and Canadian activity was partly offset by a substantial decline in U.S. activity following the discontinuance of U.S. well servicing operations in January 2026. Well Servicing EBITDA was up 110%, supported by improved Australian and Canadian results and the end of U.S. operating losses.
Balance Sheet Remains in Net Cash Position
Total Energy ended the quarter with CAD 113.4 million of working capital, including CAD 91.4 million of cash. Gorbach said cash on hand exceeded bank debt by CAD 46.4 million as of March 31.
The company’s senior bank debt-to-bank-defined EBITDA ratio was negative 0.19 times, reflecting its net cash position, while its bank interest coverage ratio was 51.1 times. Total Energy’s bank covenants require maximum senior debt to trailing 12-month bank-defined EBITDA of 3 times and minimum bank-defined EBITDA to interest expense of 3 times.
Halyk said the company funded working capital needs, lease payments, CAD 20.7 million of capital expenditures and CAD 6.5 million of dividends and share buybacks during the quarter. It also repaid CAD 10 million of bank debt and increased quarter-end cash to CAD 91.3 million, or CAD 2.49 per outstanding share.
Management Points to Growth Projects and Improving Activity
Halyk said an upgraded Australian service rig began operations in early May, bringing the company’s current Australian active rig count to 13 drilling rigs and eight service rigs. One active drilling rig is expected to be taken out of service during the third quarter for about two months for upgrades before starting a new long-term contract. A new Australian service rig is under construction and expected to begin operating in the first quarter of 2027.
In Canada, Total Energy is upgrading a second idle mechanical double drilling rig into an AC electric triple pad rig, with completion expected by the first quarter of 2027. Halyk said demand for that rig style is strong and that the company expects its active Canadian drilling rig count after spring breakup to exceed last year’s level.
In the United States, Halyk said the company is seeing signs of improvement, with four active U.S. drilling rigs and a recent increase in inquiries to return additional rigs to work. He also said recent oil price strength is supporting demand for high-spec service rigs in Canada.
For CPS, Halyk said demand remains strong, supported by North American LNG infrastructure and natural gas-fired power generation projects. He said the record backlog provides visibility well into 2027, though longer lead times for major components, including engines, have made managing the business more challenging.
Total Energy is expanding its U.S. fabrication capacity in Weirton, West Virginia, with completion expected by the first quarter of 2027. Halyk said the expansion is expected to nearly double the company’s U.S. compression fabrication capacity once completed and fully staffed.
During the question-and-answer session, Halyk said wet weather in Australia affected first-quarter performance, particularly in the Cooper Basin, where some heavier rigs were placed on standby for extended periods. He also said U.S. drilling reactivation costs affected the quarter, though additional operating days would help spread those costs if activity continues to rise.
Asked about mergers and acquisitions, Halyk said Total Energy remains active in evaluating internal and external opportunities but will remain disciplined, comparing potential investments against organic opportunities and share buybacks.
About Total Energy Services TSE: TOT
Total Energy Services Inc is an energy services company. The operating segments of the company are Contract Drilling Services, Rentals & Transportation Services, Compression & Process Service, Well servicing, and Corporate. The company's operations are conducted in Canada, the United States of America, and Australia.
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