What Total Energy Services (TOT) Said on Its Q3 Earnings Call

Key Points

• Q3 revenue rose 32%, while cash from operations hit CAD 112.6 million, including CAD 54.1 million in fabrication-order deposits. Adjusted EBITDA increased 50% year over year.
• Compression fabrication backlog reached a record CAD 733.8 million, providing visibility into 2028. The expanded West Virginia facility remains on schedule and on budget for completion in Q1 2027.
• Drilling and well servicing activity strengthened, lifting segment revenue and EBITDA. Total Energy invested CAD 97.5 million in the business in the first nine months of 2026, returned CAD 41.3 million to shareholders and reduced bank debt by CAD 50 million.

Total Energy Services TSE: TOT reported a 32% increase in third-quarter revenue and record cash provided by operations as demand for compression equipment, stronger drilling activity and improved fabrication margins supported results.

Cash provided by operations reached CAD 112.6 million in the three months ended Sept. 30, although that figure included the benefit of a CAD 54.1 million increase in deferred revenue from deposits on fabrication orders, CFO Yuliya Gorbach said. A CAD 15.9 million share-based compensation expense, stemming from a substantial increase in the company’s share price, weighed on financial results.

Even without excluding that expense, earnings before interest, taxes, depreciation and amortization rose 20% from a year earlier, while cash flow increased 53%, Gorbach said. EBITDA adjusted to exclude share-based compensation expense rose CAD 22.4 million, or 50%.

Compression backlog reaches record

Compression and Process Services, or CPS, contributed half of consolidated revenue during the quarter. Segment revenue increased 36% year over year, helped by higher fabrication sales and parts and sales activity. Segment EBITDA rose CAD 5.9 million, or 39%.

The fabrication sales backlog reached a record CAD 733.8 million at quarter-end, up from CAD 554.5 million at the end of June and CAD 380.8 million a year earlier. President and CEO Daniel Halyk said the backlog provides visibility well into 2028 and that quoting activity remains strong despite market volatility.

Halyk said construction of the company’s expanded U.S. fabrication facility in Weirton, West Virginia, remained on time and on budget, with completion scheduled for the first quarter of 2027. Production is expected to ramp up over several quarters as the company hires staff and receives long-lead components.

Higher production should improve overhead absorption and margins as the U.S. operation ramps up, Halyk said, although some ramp-up expenses will be recognized rather than capitalized. He said the company was not seeing anything that made it uncomfortable with the expansion decision.

Asked about demand following the U.S. midterm elections, Halyk said inquiries had resumed after a pause of a few days. Lead times vary by equipment, but he said orders for large-horsepower reciprocating engines were generally being booked for 2028, while electric-drive lead times were shorter.

Drilling and well servicing activity improves

Contract Drilling Services, or CDS, revenue rose 36% from a year earlier as operating days increased 35% and revenue per operating day edged up 1%. Segment EBITDA increased 40%, supported by higher utilization and pricing.

Gorbach said pricing benefited from upgraded rigs in Australia and Canada and stable U.S. rates, partly offset by a shift in equipment mix as lower-specification Canadian rigs returned to work. Halyk said the Canadian drilling business continued to gain market share.

Well Servicing revenue increased 19%, reflecting an 11% rise in revenue per service hour and a 7% increase in service hours. Greater activity in Australia and Canada was partly offset by lower U.S. activity after the company discontinued U.S. well servicing operations in January 2026. Improved Australian performance and the end of U.S. operating losses contributed to a substantial improvement in segment EBITDA and margin, Gorbach said.

Revenue and EBITDA in the Rentals and Transportation Services segment each rose 9%. Its EBITDA margin remained at 36%, as higher utilization was offset by equipment mix, cost inflation and the segment’s cost structure.

Capital spending and outlook

Total invested CAD 97.5 million in its business during the first nine months of 2026, returned CAD 41.3 million to shareholders through dividends and buybacks, and reduced bank debt by CAD 50 million, Halyk said. The company ended September with CAD 93.4 million in cash and repaid its remaining CAD 5 million of bank debt after quarter-end.

An upgraded Canadian AC triple drilling rig has been contracted to a major producer and is expected to begin drilling when completed in early January 2027. Upgrades to three Canadian service rigs and one Australian drilling rig are also expected to be completed and deployed by January. A new Australian service rig is expected to begin operations in the second quarter of 2027.

Halyk said the company expects to announce a preliminary 2027 capital budget in January. He estimated maintenance spending at roughly CAD 40 million this year and said a similar level could be expected if activity remained flat. Growth spending will depend on opportunities, though he said he would be surprised if none emerged next year.

In Australia, Halyk identified potential federal legislation requiring producers to allocate a fixed portion of production to the domestic market as a risk. He said it was unclear how the proposal would develop or whether producers would change activity in response.

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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