Q4 2025 Total Energy Services Inc Earnings Call

March 11, 2026

Speaker #3: All lines have been placed on mute to prevent any background noise. After the speakers' 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.

Speaker #3: 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 Halleck, President and Chief Executive Officer; please go ahead.

Speaker #2: Thank you, Krista. Good morning and welcome to Total Energy Services fourth quarter 2025 conference call. Present with me is Yulia Gorbach, Total's VP Finance and CFO.

Speaker #2: 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.

Daniel Halyk: Thank you, Krista. Good morning and welcome to Total Energy Services Q4 2025 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 31 December 2025, and then provide an outlook for our business and open up the phone lines for questions. Yuliya, please go ahead.

Speaker #2: Yulia, please go ahead.

Speaker #3: 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.

Yuliya Gorbach: 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 forms and other documents filed with Canadian provincial securities authorities that are available to the public at www.sedarplus.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.

Speaker #3: Actual events or results may differ materially from those reflected in Total's forward-looking statements due to a number of risks and uncertainties and other factors affecting Total's businesses and the oil and gas service industry in general.

Speaker #3: These risks and uncertainties and other factors are described under the heading Risk Factors and elsewhere in Total most recently filed annual information form and other documents filed with Canadian Provincial Securities Authorities that are available to the public at www.seraplus.ca.

Speaker #3: 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.

Yuliya Gorbach: 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 results for the 3 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.

Speaker #3: Total Energy's results for the three and twelve 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.

Yuliya Gorbach: Total Energy's results for the 3 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 Q4 revenue increased by 22%. Contributing to this increase was CAD 45.3 million of increased CPS segment revenue, CAD 4.9 million from Well Servicing, and CAD 4.1 million from CDS segment. Q4 EBITDA increased CAD 15.7 million compared to 2024, driven by increased activity and improved fabrication margins in CPS segment and the deployment of upgraded rigs at high day rates in Australia.

Speaker #3: On a year-over-year basis, consolidated fourth quarter revenue increased by 22%, contributing to this increase was 45.3 million dollars of increase to DS segment revenue, 4.9 million dollars from well-servicing and 4.1 million dollars from CDS segment.

Yuliya Gorbach: On a year-over-year basis, consolidated Q4 revenue increased by 22%. Contributing to this increase was CAD 45.3 million of increased CPS segment revenue, CAD 4.9 million from Well Servicing, and CAD 4.1 million from CDS segment. Q4 EBITDA increased CAD 15.7 million compared to 2024, driven by increased activity and improved fabrication margins in CPS segment and the deployment of upgraded rigs at high day rates in Australia.

Speaker #3: Fourth quarter EBITDA increased 15.7 million dollars compared to 2024, driven by increased activity and improved fabrication margins in CPS segment and the deployment of upgraded rigs at higher day rates in Australia.

Speaker #3: 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.

Yuliya Gorbach: Geographically, 41% of Q4 revenue was generated in Canada, 36% in the United States, and 23% in Australia as compared to Q4 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 Q4 consolidated revenue, followed by the CDS segment at 29%, Well Servicing 11%, and the RDS segment at 6%. In comparison with Q4 of 2024, the Compression and Process Services segment generated 47% of Q4 consolidated revenue, followed by the CDS at 34%, Well Servicing at 11%, and RDS segment at 8%. Q4 consolidated gross margin was 22% in 2025, which was 130 basis points lower than 2024.

Speaker #3: By business segment, the compression and process services segment contributed 54% of fourth quarter consolidated revenue followed by the CDS segment at 29%, well-servicing 11%, and the RDS segment at 6%.

Speaker #3: 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%, well-servicing at 11%, and RDS segment at 8%.

Speaker #3: 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 point year-over-year increase in fourth quarter revenue contribution from CPS and well-servicing segments.

Speaker #3: As these businesses segments historically generate lower margins than the CDS and RTS segments, a year-over-year increase in CPS segment and Australian margin partially offset a decline in RTS and North American CDS and well-servicing segment financial results.

Yuliya Gorbach: Contributing to this decline was an 800 basis points year-over-year increase in Q4 revenue contribution from CPS and Well Servicing segments. As these business segments historically generate lower margins than the CDS and RTS segments. A year-over-year increase in CDS segment and Australian margins partially offset a decline in RTS and North American CDS and Well Servicing segment financial results. Q4 CDS segment revenue increased 5% compared to 2024. A 22% year-over-year decline in the Q4 North American operating days was partially offset by a 24% increase in Australian operating days. Segment revenue per operating day increased 15% during the Q4 of 2025, due primarily to increased pricing on upgraded rigs in Australia that was partially offset by a change in the mix of equipment operating and competitive pricing in certain areas in North American markets.

Speaker #3: Fourth quarter CDS segment revenue increased 5% compared to 2024. A 22% year-over-year decline in fourth quarter North American operating days was partially offset by a 24% increase in Australian operating days.

Speaker #3: Segment revenue per operating day increased 15% during the fourth quarter of 2025. Primarily to increase pricing on upgraded rigs in Australia that was partially offset by a change in the mix of equipment operating and competitive pricing in certain areas in North American markets.

Speaker #3: Fourth quarter CDS segment EBITDA increased by 3% compared to 2024 due to improved Australian results that was partially offset by a regained North American result.

Speaker #3: 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 rigs and cost management.

Yuliya Gorbach: Q4 CDS segment EBITDA increased by 3% compared to 2024 due to improved Australian results that was partially offset by a weaker North American result. CDS segment EBITDA margin during Q4 2025 was consistent with 2024, as the decrease in consolidated segment Q4 operating days was offset by higher pricing for upgraded rigs and cost management. RTS segment revenue for the Q4 increased 3% compared to 2024. This was a result of stable utilization and an increased US rental fleet following a June 2025 acquisition, combined with higher per utilized rental fees revenue due to a change in the mix of equipment operating.

Speaker #3: RTS segment revenue for the fourth quarter increased 3% compared to 2024. This was the result of stable utilization and an increased US rental fleet following a June 2025 acquisition combined with higher per-utilized rental fees revenue due to a change in the mix of equipment operating.

Speaker #3: Higher cost 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 margin.

Yuliya Gorbach: 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 Q4 RTS segment EBITDA and a 12 percentage point decrease in segment EBITDA margin. Q4 CPS segment revenue increased 39% compared to 2024, driven by increased fabrication sales, higher parts and sales, service activity, and a stable rental fleet utilization. Year-over-year Q4 CPS segment EBITDA increased by CAD 10.6 million or 61%. With the substantial completion of certain legacy low-margin fabrication projects, Q4 CPS segment EBITDA margins sequentially increased by 526 basis points compared to the Q3 of 2025.

Speaker #3: Fourth quarter CPS segment revenue increased 39% compared to 2024, driven by increased fabrication sales, higher parts-than-sales service activity, and stable rental fleet utilization.

Speaker #3: Year-over-year fourth quarter CPS segment EBITDA increased by 10.6 million dollars or 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.

Speaker #3: The fabrication sales backlog at December 31, 2025, was 446.7 million dollars, which is 257.7 million dollars or 136% higher compared to 189 million dollars backlog at December 31, 2024.

Yuliya Gorbach: The fabrication sales backlog at 31 December 2025 was CAD 446.7 million, which is CAD 257.7 million or 136% higher compared to CAD 189 million backlog at 31 December 2024, and CAD 65.9 million or 17% higher compared to CAD 380.8 million backlog at 30 September 2025. In Well Servicing, a 2% increase in revenue per service hour, combined with a 15% increase in operating hours, resulted in an 18% year-over-year increase in Q4 segment revenue. Increased Australian and stable Canadian activity was partially offset by a substantial decline in US activity.

Speaker #3: And $65.9 million, or 17% higher compared to the $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 an 18% year-over-year increase in fourth quarter segment revenue.

Speaker #3: Increased Australian and stable Canadian activity was partially offset by a substantial decline in US activity. Higher pricing and increased fleet utilization following the upgrade of several rigs over the past year contributed to a 722% increase in fourth quarter Australian operating income.

Speaker #3: Offsetting this increase was a decline in North American operating income due to competitive pricing and substantially lower US activity levels. Segment EBITDA for the fourth quarter of 2025 was 123% higher compared to 2024 due to improved Australian results.

Yuliya Gorbach: Higher pricing and increased fleet utilization following the upgrade of several rigs over the past year contributed to 722% increase in Q4 Australian operating income. Offsetting this increase was a decline in North American operating income due to competitive pricing and substantially lower US activity levels. Segment EBITDA for the Q4 of 2025 was 123% higher compared to 2024 due to improved Australian results that were partially offset by weaker North American results. From a consolidated perspective, Total Energy's financial position remains very strong. At 31 December 2025, Total Energy had CAD 108 million of positive working capital, including CAD 59.6 million of cash. Cash on hand exceeded bank debt by CAD 4.6 million at 31 December 2025.

Speaker #3: That were partially offset by weaker North American results. From a consolidated perspective, total Energy Financial Position remained very strong. At December 31, 2025, total energy had 108 million dollars of positive working capital including 59.6 million dollars of cash.

Speaker #3: Cash on hand exceeded bank debt by 4.6 million dollars at December 31, 2025. The first time this has occurred since the acquisition of Savana in June of 2017.

Speaker #3: Total energy buying covenant consists of maximum senior debt to trailing 12-month bank-defined EBITDA of three times and a minimum bank-defined EBITDA to interest expense of three times.

Yuliya Gorbach: The first time this has occurred since the acquisition of Savanna in June 2017. Total Energy Services bank covenants consist of maximum senior debt to trailing twelve-month bank-defined EBITDA of 3 times and a minimum bank-defined EBITDA to interest expense of 3 times. At 31 December 2025, the company's senior bank debt to bank EBITDA ratio was 0.03, and the bank interest coverage ratio was 44.4 times.

Speaker #3: At December 31, 2025, the company's senior bank debt to bank EBITDA ratio was 0.03, and the bank interest coverage ratio was

Speaker #1: Was 44.4 times .

Speaker #2: Thank you . Yulia . The strength and resiliency of Total's business strategy was demonstrated by our ability to generate , record , quarter and annual results .

Speaker #2: Despite persistent global political and economic uncertainty and resulting commodity price volatility . Our substantial investment in Australia over the past two years is beginning to pay dividends Our record fabrication sales backlog at year end reflects our growing position in the vibrant North American natural gas compression market Our ability to generate substantial free cash flow is evidenced by the fact that we were effectively debt free at the end of 2025 , after funding $93.7 million of capital expenditures and returning $38.8 million to shareholders through dividends and share buybacks during the year Totals .

Daniel Halyk: Thank you, Yuliya. The strength and resiliency of Total's business strategy was demonstrated by our ability to generate record quarterly and annual results despite persistent global political and economic uncertainty and resulting commodity price volatility. Our substantial investment in Australia over the past two years is beginning to pay dividends. Our record fabrication sales backlog at year-end reflects our growing position in the vibrant North American natural gas compression market. Our ability to generate substantial free cash flow is evidenced by the fact that we were effectively debt-free at the end of 2025 after funding CAD 93.7 million of capital expenditures and returning CAD 38.8 million to shareholders through dividends and share buybacks during the year.

Speaker #2: Exposure to the world's insatiable and growing demand for energy is broad in scope , and the current situation in the Middle East illustrates the sensitivity of the market to any threat of reduced supply While industry overcapacity continues to weigh on several markets in which we compete .

Daniel Halyk: Total's exposure to the world's insatiable and growing demand for energy is broad in scope, and the current situation in the Middle East illustrates the sensitivity of the market to any threat of reduced supply. While industry overcapacity continues to weigh on several markets in which we compete, Total continues to pursue targeted investment opportunities that are driven by customer demand. This includes a CAD 31.6 million increase to our 2026 capital budget that we announced yesterday. This capital is being directed towards a substantial upgrade of two drilling rigs, one being an active Australian rig and the other an idle Canadian rig. Total entered 2026 in arguably the strongest position it has ever been in since it was founded in November 1996.

Speaker #2: Total continues to pursue targeted investment opportunities that are driven by customer demand . This includes the $31.6 million increase to our 2026 capital budget that we announced yesterday This capital is being directed towards the substantial upgrade of two drilling rigs , one being an active Australian rig and the other in idle Canadian rig Total entered 2026 .

Speaker #2: In arguably the strongest position it has ever been in since it was founded in November of 1996 . The Board of directors and leadership teams at both the Corporate and divisional level are experienced , committed , energized and aligned with shareholders .

Speaker #2: Our balance sheet has never been stronger . Our substantial free cash flow allows for continued growth without unnecessary shareholder dilution . As well as industry leading shareholder returns through dividends and share buybacks That said , having experienced several industry cycles over the past three decades , total remains committed to our founding principles of focused discipline and growth .

Daniel Halyk: The board of directors and leadership teams at both the corporate and divisional level are experienced, committed, energized, and aligned with shareholders. Our balance sheet has never been stronger. Our substantial free cash flow allows for continued growth without unnecessary shareholder dilution, as well as industry-leading shareholder returns through dividends and share buybacks. That said, having experienced several industry cycles over the past three decades, Total remains committed to our founding principles of focus, discipline, and growth. As we enter our thirtieth year in business, on behalf of the board of directors of Total, I would like to acknowledge our many customers, employees, shareholders, suppliers, and other stakeholders that have been essential to our success over the years, and we thank you for your continued trust and support. I would now like to open up the phone lines for any questions.

Speaker #2: As we enter our 30th year in business on behalf of the Board of Directors of Total , I would like to acknowledge our many customers , employees , shareholders , suppliers , and other stakeholders that have been essential to our success over the years and we thank you for your continued trust and support I would now like to open up the phone lines for any questions

Daniel Halyk: As we enter our thirtieth year in business, on behalf of the board of directors of Total, I would like to acknowledge our many customers, employees, shareholders, suppliers, and other stakeholders that have been essential to our success over the years, and we thank you for your continued trust and support. I would now like to open up the phone lines for any questions.

Speaker #3: Thank you . As a reminder , if you would like to ask a question , please press star one on your telephone keypad .

Speaker #3: To raise your hand and join the queue, and if you'd like to withdraw that question again, press star one. Your first question comes from Joseph Shah with Chester Energy Research.

Operator 2: Thank you. As a reminder, if you would like to ask a question, please press star one on your telephone keypad to raise your hand and join the queue. If you'd like to withdraw that question, again, press star one. Your first question comes from Josef Schachter with Schachter Energy Research. Please go ahead.

Operator: Thank you. As a reminder, if you would like to ask a question, please press star one on your telephone keypad to raise your hand and join the queue. If you'd like to withdraw that question, again, press star one. Your first question comes from Josef Schachter with Schachter Energy Research. Please go ahead.

Speaker #3: Please go ahead

Speaker #4: Thank you very much . Good morning , Dan and Julia .

Speaker #2: Good morning , Mr. Schachter .

Speaker #5: Good morning , Mr. Shark

Speaker #4: Good . Good . Good morning and congratulations on 30 years . Two questions this morning . This . There's a report I read that LNG Canada was getting close to the two BCF .

Josef Schachter: Thank you very much. Good morning, Dan and Julia.

Speaker #4: Are you seeing any change in order patterns for drilling activity in north, northwest Alberta? Northeast B.C., as volumes start moving quicker and shipments quicker.

Daniel Halyk: Good morning, Mr. Schachter.

Yuliya Gorbach: Good morning, Mr. Schachter.

Josef Schachter: Good morning, and congratulations on 30 years. 2 questions. This morning, there's a report I read that LNG Canada was getting close to the 2 BCF. Are you seeing any change in order patterns for drilling activity, in, you know, Northwest Alberta, Northeast BC, as volumes start moving quicker and shipments quicker?

Speaker #2: You know , it's a interesting time . We're going into breakup . What I would say generally , Joseph , is the tone has shifted in a positive way in the past Few weeks , I think , where we're seeing immediate opportunity is more on the well servicing side , where we're seeing opportunities to put equipment to work , to capitalize on , on current strong spot prices .

Daniel Halyk: You know, it's an interesting time. We're going into breakup. What I would say generally, Josef, is the tone has shifted in a positive way in the past few weeks. I think where we're seeing immediate opportunity is more on the Well Servicing side, where we're seeing opportunities to put equipment to work to capitalize on current strong spot prices. But definitely, you know, having LNG Canada finally reach close to capacity is definitely going to help. You know, I think the prospect of that, quite frankly, kept Canadian drilling higher than I believe it would have been. Certainly, moving forward, it's important that that operation operate at full capacity.

Speaker #2: But definitely , you know , having LNG Canada finally reach close to capacity is definitely going to help . You know , I think the the prospect of that , quite frankly kept Canadian drilling higher than I believe it would have been , and certainly moving forward , it's important that that operation operate at full capacity .

Speaker #2: So I think it's tough to gauge. It's tough to gauge drilling rig activity going into breakup because it's your normal downturn. But, say, definitely the tone of conversations that we're having is more positive than it would have been two or three months ago.

Daniel Halyk: I think it's tough to gauge drilling rig activity going into breakup 'cause it's your normal downturn. I would say definitely the tone of conversations that we're having is more positive than it would have been two, three months ago.

Speaker #4: How tight are the , you know , the the you know , the super triples , the the singles , you know , the , the the high , high capacity with , you know , all the extras on them in terms of applications .

Speaker #4: Are those are you seeing pricing improvement there because of the shortage of equipment

Josef Schachter: How tight are the, you know, the super triples or the singles, you know, the high capacity, you know, all the extras on them, in terms of applications. Are you seeing pricing improvement there, because of the shortage of equipment?

Speaker #2: Let me put it this way . Our board approved yesterday the upgrade of an existing idle mechanical double to a triple . This is similar to the project we completed last year Joseph , which that upgraded well , it was basically a new rig that triple went to work last November and it succeeded our expectations .

Daniel Halyk: Let me put it this way. Our board approved yesterday the upgrade of an existing idle mechanical double to an AC triple. This is similar to the project we completed last year, Josef. Well, it was basically a new rig. That triple went to work last November, and it succeeded our expectations. Our board has approved substantial capital to do another one, and we're doing it on spec. That tells you what we think of that market.

Speaker #2: And so our board has approved substantial capital to do another one . And we're doing it on spec . So that tells you what we think of that market .

Speaker #4: Yeah . And last one for me , how does the M&A activity look ? Are you looking at more deals or are the bid ask between , you know , what you're willing to pay and what others are willing to sell for ?

Speaker #4: And are they wanting cash or or are they wanting stock ? And are you willing to do deals with using using your your your total paper ?

Josef Schachter: Yeah. Last one for me. How does the M&A activity look? Are you looking at more deals? Are the bid-ask between, you know, what you're willing to pay and what others are willing to sell for? Are they wanting cash or are they wanting stock? Are you willing to do deals with using your total paper?

Speaker #2: So I would say the M&A pipeline is , is vibrant . There's lots there . Quite honestly , our biggest challenge on that front is , is we've always remained disciplined in the sense of , you know , acquisitions have to be accretive to our existing shareholders .

Speaker #2: You know , whether we're paying cash or stock because we can use our cash to buy our shares back . And , you know , we did a lot of that last year .

Daniel Halyk: I would say the M&A pipeline is vibrant. There's lots there. Quite honestly, our biggest challenge on that front is we've always remained disciplined in the sense of, you know, acquisitions have to be accretive to our existing shareholders. You know, whether we're paying cash or stock, because we can use our cash to buy our shares back. You know, we did a lot of that last year, and we continue to evaluate any acquisitions relative to all of our investment opportunities, which includes share buybacks. You know, one of the interesting aspects as we enter this year is the effective elimination of our bank debt. Certainly our capacity to fund acquisitions with cash is substantial. But we're willing to use our shares if it makes sense to existing shareholders.

Speaker #2: And we continue to evaluate any acquisitions relative to all of our investment opportunities , which includes share buybacks . You know , one of the interesting aspects , as we enter this year is the effect of elimination of our bank debt .

Speaker #2: And so certainly our capacity to fund acquisitions with cash is is substantial , but we're willing to use our shares if it makes sense to existing shareholders .

Speaker #2: And I think there's definitely a large portion of the M&A crowd that would love to have shares in our company . But again , it's got to work for our existing shareholders .

Speaker #2: And if that does, our new shareholders will benefit down the road as they have in the past deals. So we're flexible, but we're not going to do anything that doesn't benefit our current shareholders.

Daniel Halyk: I think there's definitely a large portion of the M&A crowd that would love to have shares in our company. But again, it's got to work for our existing shareholders. If that does, our new shareholders will benefit down the road as they have in the past deals. We're flexible, but we're not gonna do anything that doesn't benefit our current shareholders.

Speaker #4: Super . Well . Thanks for taking my questions . And again , congratulations on 30 years in the best position . Now . Thank you

Speaker #2: Thanks , Joseph .

Speaker #3: Your next question comes from the line of Tim Monticello with ATB Cormack Capital Markets. Please go ahead.

Josef Schachter: Super. Well, thanks for taking my questions. Again, congratulations on 30 years in the best position now. Thank you.

Speaker #6: Hey good morning .

Speaker #2: Good morning Tim .

Speaker #6: Nice clear graphs on that, and on 30 years. Thank you. Just wanted to start out and talk a little bit about the decision to exit the US.

Daniel Halyk: Thanks, Josef.

Operator 2: Your next question comes from the line of Tim Monachello with ATB Capital Markets. Please go ahead.

Operator: Your next question comes from the line of Tim Monachello with ATB Capital Markets. Please go ahead.

Speaker #6: Well servicing businesses . You know typically from what I've seen over covering your company , you know , these sort of market downturns and periods of perhaps inefficiency in returns .

Tim Monachello: Hey, good morning.

Daniel Halyk: Good morning, Tim.

Tim Monachello: Nice quarter, guys, on that and congrats on 30 years.

Daniel Halyk: Thank you.

Tim Monachello: Just wanted to start out and just talk a little bit about the decision to exit the US Well Servicing businesses. You know, typically from what I've seen over covering your company, these sort of market downturns and periods of perhaps inefficiency in returns, you sort of used as opportunities to acquire businesses and grow, and typically just been very disciplined in terms of pricing and waded through it. This looks like to be a different situation in US Well Servicing business, and I thought you were looking to get bigger in the US, not smaller. I'm just curious if you can just sort of address those strategic points for me.

Speaker #6: You've sort of used as opportunities to , to acquire businesses and grow and , and typically just been very disciplined in terms of pricing and , and waded through it .

Speaker #6: This looks like to be a different situation in the US , both servicing business . And I had thought you were looking to get bigger in the US , not smaller .

Speaker #6: So I'm just I'm curious if you can just sort of address those strategic points for me .

Speaker #2: Sure . No , I would say what we did was completely consistent with our philosophy . You know , we look at any investment and evaluate on a go forward basis .

Speaker #2: Can we get a return on the capital that's being invested that exceeds our WACC over time? And when we acquired Savanna in 2017, well servicing was new to us.

Daniel Halyk: Sure. No, I would say what we did was completely consistent with our philosophy. You know, we look at any investment, and evaluate on a go-forward basis. Can we get a return on the capital that's being invested that exceeds our WACC over time? When we acquired Savanna in 2017, Well Servicing was new to us. You know, we were pretty open saying we wanted to see what the business looked like, evaluate over the full business cycle and, you know, we would proceed accordingly, either keep it or sell it. If we kept it, we'd like to get bigger. I think we came to the conclusion that there were probably better uses of our time and capital than US Well Servicing. What I would say, we're not afraid of competition, far from it.

Speaker #2: You know , we We're pretty open saying we wanted to see what the business looked like , evaluate over the full business cycle , and , you know , we would proceed accordingly .

Speaker #2: Either keep it or sell it. If we kept it, we'd like to get bigger. I think we came to the conclusion that there were probably better uses of our time.

Speaker #2: And capital than us . Well , servicing what I would say we're not afraid of competition . Far from it . The flip side is , you know , we take a full cycle view and certainly the market that we were in was in a tough spot .

Speaker #2: And quite honestly , it came down to looking forward . Is it better to have our capital and time tied up in that business , or do we deploy it elsewhere ?

Daniel Halyk: The flip side is, you know, we take a full cycle view and certainly the market that we were in was in a tough spot. Quite honestly, it came down to looking forward, is it better to have our capital and time tied up in that business or do we deploy it elsewhere? If we were gonna tie it up, we needed to get bigger. Our view is, there were other opportunities to grow in the US that were probably more compelling. We made the call to exit. We did sell the equipment in February. We have a deal to sell the real estate that'll close before the end of Q2.

Speaker #2: And if we were going to tie it up , we needed to get bigger . But view is there were other opportunities to grow in the US that were probably more compelling .

Speaker #2: And so we made the call to exit . We did sell the equipment in February . We have a deal to sell the real estate that'll close before the end of Q2 , and like I said , our book values .

Speaker #2: There were solid and you'll get the results of that in part of it with the equipment and of with our Q1 numbers . We'll book a gain and like I said , it's it's as much where do you spend your time as your money ?

Daniel Halyk: Like I said, our book values there were solid and you'll get the results of that in part with the equipment and with our Q1 numbers. We'll book again and like I said, it's as much where do you spend your time as your money. Completely consistent with our philosophies. We put our time and money where we see the best returns.

Speaker #2: So completely consistent with our philosophies ? We put our time and money where we see the best returns .

Speaker #6: Okay . I appreciate that . There's a couple of follow ons , but so first , can you just give me an overview of high level overview of what your asset portfolio in that business was like , how many rigs you had and what was the real estate portfolio .

Speaker #2: So there was 12 service rigs involved . We owned real estate , which the total assets , I think we don't break that out per se , but you'll get some an update with Q1 .

Tim Monachello: Okay, I appreciate that. Thanks. A couple follow-ons, first, can you just give me an overview, a high-level overview of what your asset portfolio in that business was like, how many rigs you had, and what was the real estate portfolio?

Speaker #2: I would say on $1 billion balance sheet , it's not material , but I would also say that similar to the decommissioning of our ten drilling rigs in Canada , six service rigs in Canada , which effectively we cut up for scrap metal , we will record a meaningful gain on sale on on that equipment just given our caring values were pretty low .

Daniel Halyk: There was 12 service rigs involved. We owned real estate, which, the total assets, I think, we don't break that out per se, but you'll get an update with Q1. I would say on a billion-dollar balance sheet, it's not material, but I would also say that, similar to the decommissioning of our 10 drilling rigs in Canada, 6 service rigs in Canada, which effectively we cut up for scrap metal, we will record a meaningful gain on sale on that equipment, just given our carrying values were pretty low. We sold it in the context of the market and we were, you know, I think it was a fair deal for both sides. Like I said, going forward, we'll look to deploy that capital elsewhere.

Speaker #2: But we sold it in the context of the market and we were , you know , I think it was a fair deal for both sides .

Speaker #2: And like I said , going forward , we'll look to deploy that capital elsewhere . But honestly , in the big picture on $1 billion balance sheet , not particularly relevant , I think the bigger issue was freeing up our time to focus on things where we believe we can get better returns Yulia , do you want to add anything there ?

Daniel Halyk: Honestly, in the big picture, on a billion-dollar balance sheet, not particularly relevant. I think the bigger issue was freeing up our time to focus on things where we believe we can get better returns. Yuliya, do you wanna add anything there?

Speaker #5: Hey , Tim , if you want a little bit more information , if you look at financial statements , it's there

Speaker #2: In the notes .

Speaker #6: Yes , I saw the stuff on the gain or sorry , the net book value and net income . Is that what you're relating to ?

Speaker #5: Yeah , subsequent events in financial statements .

Yuliya Gorbach: Hey, Tim, if you want a little bit more information, if you look at financial statements, it's there.

Speaker #6: Yeah . There you go .

Speaker #2: Yulia wrote that

Daniel Halyk: In the notes?

Yuliya Gorbach: Yes.

Speaker #6: There's poetry .

Tim Monachello: I saw the stuff on the net book value and the net income. Is that what you're relating to roughly?

Speaker #2: Yes . Beautiful

Speaker #6: So, okay. Good to see that you guys are going to keep that track record of no writedowns intact. That's positive.

Yuliya Gorbach: Yeah. That's subsequent to financial statements.

Tim Monachello: Yeah.

Daniel Halyk: Very cool.

Tim Monachello: Thank you.

Daniel Halyk: Yuliya wrote that book.

Speaker #6: Is there any other businesses that you're looking at today in the context of where the market stands in the basins ? What you're in that , you know , maybe aren't are similar to what you're seeing in the well servicing business where you're just like , you know , the returns on this investment aren't aren't keeping pace with what we see in the opportunity pipeline .

Tim Monachello: It was poetry.

Daniel Halyk: Yeah. Beautiful.

Tim Monachello: Good to see that you guys are able to keep that track record of no write-downs in assets. That's positive. Is there any other businesses that you're looking at today in the context of where the market stands and the basins that you're in that, you know, maybe aren't or are similar to what you're seeing in the Well Servicing business where you're just like, you know, the returns on this investment aren't keeping pace with what we see in the opportunity pipeline?

Speaker #2: No , I would say we're pretty comfortable with our existing businesses . What I would say is we're constantly calling all the equipment .

Speaker #2: You saw it with our Canadian drilling and Canadian well servicing with the decommissionings. Again, we took no impairments or write-downs in respect to that.

Daniel Halyk: No, I would say we're pretty comfortable with our existing businesses. What I would say is we're constantly culling old equipment. You saw with our Canadian drilling and Canadian Well Servicing with the decommissioning. Again, we took no impairments or write-downs in respect to that as the carrying values are approximate the salvage value, which is literally scrap metal. So we will cull the herd as we go through things. No, I would say we're interested in continuing to grow the rest of our business lines.

Speaker #2: As the carrying values are approximate . The salvage value , which is literally scrap metal So we will call the herd as as we go through things and but no , I would say we're interested in continuing to grow the rest of our , our business lines In the country we're in

Speaker #6: Perfect. Can you speak a bit about the first rig that you have deployed? I think it was C and Q, or from public disclosures.

Speaker #6: The AC triple conversion . Can you just say , you know , how does that comparing in the market to , I guess , incumbent AC triples in terms of day rates ?

Tim Monachello: Okay.

Daniel Halyk: in the country we're in.

Tim Monachello: Perfect. Can you tell me a little bit about the first rig that you have deployed? I think it was a CNQ, or from public disclosures, the AC triple conversion. Can you just say how is that comparing in the market to, I guess, incumbent AC triples in terms of day rates, and what's the customer experience been like? What's the contract status on that rig?

Speaker #6: And what's the customer experience been like? What's the contract status on that rig?

Speaker #2: So I'm not going to comment on on rates simply because I don't know what our competitors charge . They won't tell me . If you find out , I'm not sure .

Speaker #2: I'll tell you . You know , that's between us and our customer . What I would say the rig operationally has been exceptional .

Daniel Halyk: I'm not gonna comment on rates simply because I don't know what our competitors charge. They won't tell me. If you find out, I'm not sure I'll tell you. You know, that's between us and our customer. What I would say, the rig operationally has been exceptional. It moved in November, drilled a Montney well or two, I'm not sure if it's one or two, and at the customer's request, it moved into the oil sands drilling, I would say, very high profile wells there. It has shown remarkable range of capability. Literally, the thing, you know, moved up to Grande Prairie from Nisku Edmonton area, you know, moved and rigged up, and it was incredible. I forget the exact amount of time, but operationally, it's performed exceptionally well. Is the customer happy?

Speaker #2: It moved in November , drilled a montney well or two . I'm not sure if it's 1 or 2 . And at the customer's request , it moved into the oil sands drilling .

Speaker #2: I would say very high profile wells there . It has shown remarkable range of capability and literally the thing , you know , moved up to Grand Prairie from from Nisku Edmonton area , you know , moved and rigged up in it was incredible .

Speaker #2: I forget the exact amount of time, but operationally it's performed exceptionally well. And is the customer happy? I haven't had any bad phone calls or anyone screaming at me.

Speaker #2: So that's a good sign. My sense after talking to our people is there would be strong demand for more of that style of rig.

Speaker #2: Our board agreed, and we approved a second one.

Daniel Halyk: I haven't had any bad phone calls or anyone screaming at me, so that's a good sign. My sense after talking to our people is there would be strong demand for more of that style of rig. Our board agreed, and we approved a second one.

Speaker #6: Is this did you get any learnings from the first one in terms of , I guess , construction , any efficiencies on the cost of the second one ?

Speaker #2: I would say our people did a remarkable job , honestly . There's always things you learn , but what it did do was confirm the design and , you know , I kind of look at it and I've called it the Nomad of the triple rig market .

Tim Monachello: Did you get any learnings from the first one in terms of, I guess, construction? Do you get any efficiencies on the cost of the second one?

Daniel Halyk: I would say our people did a remarkable job. Honestly, there's always things you learn, but what it did do was confirm the design and. You know, I kinda look at it, and I've called it the NOMAD of the triple rig market. You know, our compression group years ago developed a NOMAD, which basically was revolutionary insofar as it put relatively high horsepower on a trailer, and that had not been able to be done before. You know, the way I look at this style of rig is it gives us the capacity, hook load, racking capacity of all but the, I'd call it super ultra heavy triples, but it moves like a double. I call it the NOMAD of the triple drilling fleet.

Speaker #2: You know, our Compression Group years ago developed the Nomad, which basically was revolutionary insofar as it put relatively high horsepower on a trailer.

Speaker #2: And that had not been able to be done before . You know , the way I look at this style of rig , is it gives us the capacity , hook , load Rack capacity of , you know , all but the I'd call it super ultra heavy triples .

Speaker #2: But it moves like a double . And so I call it the Nomad of the triple drilling fleet . And it really what the last four months has done is firm that up that the design works .

Speaker #2: There's no fundamental flaws with the design and you know again you want to do one first to make sure that's the case because you never know .

Daniel Halyk: It really, what the last four months has done is firm that up, that the design works. There's no fundamental flaws with the design. You know, again, you wanna do one first to make sure that's the case 'cause you never know. I would say real life has confirmed what we thought it could do theoretically.

Speaker #2: But I would say real life is confirmed . What we thought it could do theoretically

Speaker #6: That's great . Any I guess in Canada . How many rigs do you think you might be able to upgrade to that capacity , and is there any opportunity in some other utilized in Canada and probably under build in the US , like could you upgrade some doubles to these rigs to AC triples in this format ?

Tim Monachello: That's great. I guess in Canada, how many rigs do you think you might be able to upgrade to that capacity? Is there any opportunity, I mean, some underutilized fleet in Canada and probably under scaled in the US. Like, could you upgrade some doubles to these rigs to AC triples in this format and have a market in the US as well?

Speaker #6: And have a park in the U.S. as well?

Speaker #2: You know , I think our focus right now is Canada and largely we have a special rig in the US 802 , which again is patented .

Speaker #2: It was developed by Savannah. It's truly a crane-less rig. Its hook load is not quite the same as the one up here.

Daniel Halyk: You know, I think our focus right now is Canada. Largely, we have a special rig in the US, 802, which again, is patented. It was developed by Savanna. It's truly a craneless rig. Its hook load is not quite the same as the one up here. It's a bit lighter. But what we find in the US, there's a reluctance to take advantage of the true mobility of these triples. In other words, they bring cranes out no matter what. I think until we get a more, how would you say, adventurous customer utilizing those, you don't see the same value proposition in the US as you do Canada, where for whatever reason, we find our Canadian customers more interested in the novelty of being able to move a triple without cranes.

Speaker #2: It's a bit lighter, but what we find in the U.S., there's a reluctance to take advantage of the true mobility of these triples.

Speaker #2: In other words, they bring cranes out no matter what. And I think until we get a more, how would you say, adventurous customer utilizing those, you see the same value proposition in the US as you do in Canada, where, for whatever reason, we find our Canadian customers more interested in the novelty of being able to move a triple without cranes.

Speaker #2: I think part of that could be there's just such a concentration of triple rigs in West Texas that you got trucks all over , so it's not a big deal versus when you're in the middle of the bush and Canada .

Speaker #2: It's it's much more of a compelling proposition to be able to really move these things without cranes . So I think our focus right now is to continue to prove up and build the market in Canada .

Daniel Halyk: I think part of that could be there's just such a concentration of triple rigs in West Texas that you got trucks all over, so it's not a big deal. Versus when you're in the middle of the bush in Canada, it's much more of a compelling proposition to be able to really move these things without cranes. I think our focus right now is to continue to prove up and build the market in Canada. We've got several of the style of mechanical double idle rigs that will suit the purpose here. We're not gonna disclose exactly how many, but. We have filed for patent protection on this as well, so we're closely watching to make sure no one's violating our rights there.

Speaker #2: And we've got several of the style of mechanical double idle rigs that will suit the purpose here . So we're not going to disclose exactly how many , but and we have filed for patent protection on this as well .

Speaker #2: So we're closely watching to make sure no one's violating our rights . There

Speaker #6: Appreciate that . And then switching gears , I mean , what , four quarters in a row of record backlog in CPS ? Can you talk about what you're seeing on the leading edge for demand and kind of bookings as you look into 2026 ?

Speaker #6: And are you—how are you thinking about adding shifts in the Calgary facility in ’26, ahead of the Weirton expansion?

Tim Monachello: Appreciate that. Switching gears, four quarters in a row of record backlog in CPS. Can you talk about what you're seeing on the leading edge for demand, and the kind of bookings as you look into 2026? How are you thinking about adding shifts in the Calgary facility in 2026 ahead of the Wiarton expansion?

Speaker #2: So I would say demand remains very strong as our backlog grows . Our deliverability goes out . We're less competitive on delivery times , and I think you will start to see that impact our ability to win orders later on .

Daniel Halyk: I would say demand remains very strong. As our backlog grows, our deliverability goes out. We're less competitive on delivery times, and I think you will start to see that impact our ability to win orders later on. That's a company specific thing. Again, you know, it's easier on paper to say add 50 people. You know, you start running into in Canada, if you're trying to ramp up materially, you start running into huge quality control issues, things like that. We've always been pretty measured in what we'll do. The other elephant in the room is delivery times on major components, notably Caterpillar engines. You know, we're out now on 3600 series engines to 115 weeks delivery.

Speaker #2: But this that's a company specific thing . Again , you know , it's easier on paper to say at 50 people , you know , you start running into in you know , in Canada , if you're trying to to ramp up materially , you start running into huge quality control issues , things like that .

Speaker #2: Where we've always been pretty measured in what we'll do . The other elephant in the room is delivery times on major components , notably caterpillar engines .

Speaker #2: You know , we're out now on 3600 series engines to 115 weeks delivery . You know , so what we've done over the last year is really methodically .

Speaker #2: And I give our group a lot of credit . There has managed that quite well . But you're effectively , you know , having to make a call on what business looks like two years from now .

Speaker #2: But I can tell you a you need a balance sheet to play in this game . And two , you know , for a startup to start today , you couldn't , you know , what are you going to build .

Daniel Halyk: You know, what we've done over the last year is really methodically, and I give our group a lot of credit there, has managed that quite well. You're effectively, you know, having to make a call on what business looks like two years from now. I can tell you, A, you need a balance sheet to play in this game, and two, you know, for a startup to start today, you couldn't. You know, what are you gonna build? You got no inventory. Part of our production capacity will be limited by inputs. You know, that said, we've made sizable investments and continue to do that to ensure a pipeline of major components, including Caterpillar engines.

Speaker #2: You've got no inventory . So part of our production capacity will be limited by inputs . You know that said we've made sizable investments and continue to do that to ensure a pipeline of of of major components , including caterpillar engines .

Speaker #6: Got it . So you're backlog today like what's the duration of backlog . Is it extending ? Well into 2027 . And perhaps even 28 at this point ?

Speaker #2: You know , the what we'd commented is provides us visibility going into 2027 . Again , I would say our group there is pretty sophisticated .

Tim Monachello: Got it. Your backlog today, like, what's the duration of that backlog? Is it extending well into 2027 and perhaps even 2028 at this point?

Speaker #2: The sales group is very sophisticated . You know , you look to keep level production levels . That's when your efficiencies are greatest , when you've got experienced , you know , production employees working at steady pace and so part of what we do is pivot based on floor availability to other , whether it's other drivers , Waukesha Electric and there's the good thing is we play in all those business lines .

Daniel Halyk: You know, what we had commented is provides us visibility going into 2027. Again, I would say our group there is pretty sophisticated. The sales group is very sophisticated. You know, you look to keep level production levels. That's when your efficiencies are greatest, when you've got experienced, you know, production employees working at steady pace. Part of what we do is pivot based on fleet availability to other, whether it's other drives, Waukesha, electric. The good thing is we play in all those business lines. You know, we're seeing our backlog at year-end gives us visibility into 2027. I would say it's a pretty dynamic perspective in the sense that there's a lot of things moving below the surface.

Speaker #2: So you know we're seeing our backlog at year end gives us visibility into 2027 . I would say it's a pretty dynamic Perspective in the sense that there's a lot of things moving below the surface .

Speaker #2: Again , you know , how do you allocate a scarce resource ? I.e. floor space price . And so , you know , you always maintain some flexibility to accelerate projects , you know , based on willingness to pay and conversely , you know , if people are customers , are flexible , they can probably get a bit more of a deal by giving us that flexibility where we can , you know , manage their projects around our needs .

Daniel Halyk: Again, you know, how do you allocate a scarce resource, i.e., floor space, price? You know, you always maintain some flexibility to accelerate projects, you know, based on willingness to pay. Conversely, you know, if people or customers are flexible, they can probably get a bit more of a deal by giving us that flexibility where we can, you know, manage their projects around our needs on the floor. I would say it's dynamic, but being well managed by our group there.

Speaker #2: On the floor and so I would say it's dynamic , but being , well managed by our group there

Speaker #6: Okay . And then

Speaker #2: A lot of moving parts .

Speaker #6: Yeah I know there's the market is is crazy in terms of what you have to do to to keep pace with it in terms of the lead times and , but I guess for total , specifically with the Weirton facility expansion in early 2027 , do you have inventory or I guess , orders in place to facilitate the growth and expansion of that facility ?

Tim Monachello: Okay.

Daniel Halyk: A lot of moving parts.

Tim Monachello: Yeah, I know the market is crazy in terms of what you have to do to keep pace with it in terms of those lead times. I guess for Total, specifically with the Wiarton facility expansion in early 2027, do you have inventory or I guess orders in place to facilitate the growth and expansion of that facility when it comes online?

Speaker #6: Yes .

Speaker #2: Obviously , you know , when we made the decision to expand last year , part of your expansion is , is planning your inputs .

Speaker #2: You know , you don't want to open a shop and you've got no components . So , you know , both in terms of of majors and employees , and there'll be a gradual ramp up .

Daniel Halyk: Yes. Obviously, you know, when we made the decision to expand last year, part of your expansion is planning your inputs. You know, you don't wanna open a shop and you got no components. You know, both in terms of majors and employees, and there'll be a gradual ramp up. Certainly we factored that additional capacity into our inventory purchase decisions beginning last year. Like I said, thank God we did because it's gone we're up to 115 weeks now.

Speaker #2: But certainly we factored that additional capacity into our inventory purchase decisions beginning last year . And like I said , thank God we did because it's gone .

Speaker #2: We're up to 115 weeks now.

Speaker #6: Okay . And .

Speaker #2: It requires a lot of capital.

Speaker #6: Yeah , we'll continue to get the balance sheet . Are you seeing anything on the power generation side around data centers ? I know it's not a major thing that you've highlighted , but I believe you guys do some packaging and power generation through Vidal .

Tim Monachello: Mm-hmm. Okay. That's helpful.

Daniel Halyk: It requires a lot of capital.

Speaker #6: But yeah , wrong .

Tim Monachello: Yeah. Well, good thing you have a good balance sheet. Are you seeing anything on the power generation side around data centers? I know that's not a major thing that you've highlighted, but I believe you guys do some packaging and power generation through Vital. Is that correct or wrong?

Speaker #2: Yeah . No , we're in that market . We see good demand . Honestly , power generation is easier to build than gas compression .

Speaker #2: To be blunt , our niche has been on . I'd call it the industrial power generation . We're not per se chasing big data centers , really power generation is power generation .

Daniel Halyk: Yep. No, we're in that market. We see good demand. Honestly, power generation is easier to build than gas compression, to be blunt. Our niche has been on, I'd call it the industrial power generation. We're not per se chasing big data centers. Really, power generation's power generation. Where we seem to be having good traction is more on industrial, particularly oil and gas locations where, you know, for example, a customer wants to power a gas plant, you know, electrically, but with natural gas sourced electricity. That's where we're building into. Could that be a data center? For sure. No reason why it couldn't be. We're not in turbines, and we have no intention of getting into turbines. That I would call the ultra-large projects. You know, we can build as large a reciprocating engine power generators, anyone.

Speaker #2: And where we seem to be having good traction is more on industrial , particularly oil and gas locations where , you know , for example , a customer wants to power a gas plant , you know , electrically , but with natural gas sourced electricity , that's where we're building into .

Speaker #2: Could that be a data center for sure ? No reason why it couldn't be . We're not in mines and we have no intention of getting into turbines so that I would call the ultra large projects .

Speaker #2: But you know , we can build as large a reciprocating Engine power generators . Anyone . And so really , it's just one more item on our menu from a technical perspective , it's easy for us to build .

Speaker #2: We build way more complex things . And so far , the quality of what we produce is very good . From what I understand .

Daniel Halyk: Really it's just one more item on our menu. From a technical perspective, it's easy for us to build. We build way more complex things. So far the quality of what we produce is very good from what I understand. You know, we're selling that and we're in that market. It's part of the backlog. It's just one more thing that keeps our welders busy.

Speaker #2: And you know , we're selling that and we're in that market . It's part of the backlog . It's just one more thing that keeps our welders busy

Speaker #6: Got it. But are you in any major RFPs for, like, data centers?

Speaker #2: I wouldn't comment on that. I would say we're not. I wouldn't comment on what we're tendering on. It's just—it's competitive.

Tim Monachello: Got it. Are you in any major RFPs for like data centers?

Speaker #6: Okay , okay .

Speaker #2: We're not in turbine stuff, though. So anything that's turbine, we have no interest in that.

Daniel Halyk: I wouldn't comment on that. I would say I wouldn't comment on what we're tendering on. It's just, it's competitive.

Speaker #6: Yeah . Fair enough . In in Australia things are going pretty well for you . Interesting to see your upgrading in a rig that's already working .

Tim Monachello: Okay.

Daniel Halyk: We're not in turbine stuff though, so anything that's turbine, we have no interest in that.

Speaker #6: Do you rigs that aren't working that are , you know , being contemplated upgrading ? Will I go for a rig that's already working to upgrade ?

Tim Monachello: Yeah, fair enough. In Australia, things are going pretty well for you. Interesting to see you're upgrading a rig that's already working. Do you have any rigs that aren't working that are, you know, being contemplated upgrading? Why go for a rig that's already working to upgrade?

Speaker #2: Yeah . So this this rig was it's a major upgrade . We're already a lot of the work is , is being done now .

Speaker #2: Basically we'll be swapping out the centerpiece . It's a major hook load upgrade . Some other upgrades . Which is why , you know , it's roughly two months to swap it out .

Daniel Halyk: Yeah. This rig is a major upgrade. A lot of the work is being done now. Basically we'll be swapping out the centerpiece. It's a major hook load upgrade, some other upgrades, which is why, you know, it's roughly two months to swap it out. The work more, we're just gonna be swapping in the field. It'll be recontracted with the same customer, but, you know, the existing contract was coming up. You know, on the drilling rig side, we're getting down to, you know, maybe one or two more. The service rig side, we're chewing through that. Yeah. You know, let me put it this way.

Speaker #2: But the work is more we're just going to be swapping in the field . It's it'll be reconstructed with the same customer . But you know , the existing contract was coming up , you drilling rig side , we're getting down to , you know , maybe 1 or 2 more The service rig side , we're chewing through that So , yeah , you know , we're let me put it this way .

Speaker #2: We have existing inventory and we're open to new builds to the extent necessary to support our customers . Where , you know , it works for us as well .

Speaker #2: And , you know , we do have , for example , a new build service rig coming in service . Q1 next year You know , that's being built in Canada .

Daniel Halyk: We have existing inventory and we're open to new builds to the extent necessary to support our customers where, you know, it works for us as well. You know, we do have, for example, a new build service rig coming in service Q1 next year. You know, that's being built in Canada. You know, for the right circumstances, the right customer, we will build new. Yeah, no, we've invested a lot of capital there, Tim, in the last two years and we're starting to, you know, get the benefit of that. If we weren't, I'd have been disappointed because we've invested a lot.

Speaker #2: And so , you know , for the right circumstances , the right customer , we will build new . But yeah , no , we're we've invested a lot of capital there .

Speaker #2: Tim , in the last two years . And we're starting to , you know , get the benefit of that . But if we weren't I'd have been disappointed because we've invested a lot So that should continue .

Speaker #2: You know , it should continue to to proceed in the positive direction there . But again , that's reflective of , you know , the capital commitment we made to grow the business .

Speaker #2: There

Speaker #6: Okay. And then, can you just tell me how many drilling rigs you have running in Australia right now? That rig, I guess, is being upgraded currently.

Tim Monachello: That's the only.

Daniel Halyk: That should continue. You know, it should continue to proceed in the positive direction there. Again, that's reflective of, you know, the capital commitment we've made to grow the business there.

Speaker #6: And when do you expect it to become come back into the fleet ?

Speaker #2: So the one that's being upgraded is actually operating. We're swapping out the centerpiece, so you don't have to take the rig down right now.

Tim Monachello: Okay. Can you just tell me how many drilling rigs you have running in Australia right now? That rig, I guess, is being upgraded currently. When do you expect it to come back into the fleet?

Speaker #2: A lot of the rigs , quite honestly , are down for rain . We're in the middle of the rainy season . The last week has been extremely wet .

Daniel Halyk: The one that's being upgraded is actually operating. We're swapping out the centerpiece, so you don't have to take the rig down. Right now, a lot of the rigs, quite honestly, are down for rain. We're in the middle of the rainy season. The last week has been extremely wet. Thankfully, it looks like it's starting to dry up a bit and we'll get a few rigs moving again. Most of our fleet is on standby with crews as we speak, just heavy rains. That's Q1, it's their breakup. That's pretty normal. Yeah, no, just to be clear, the Australian drilling rig upgrade, we're doing the centerpiece as we speak, which is not the centerpiece that's on the rig that's being upgraded, so that rig can continue to operate.

Speaker #2: Thankfully, it looks like it's starting to dry up a bit, and we'll get a few rigs moving again. But most of our fleet is on standby with crews as we speak.

Speaker #2: Just heavy , heavy rains . But that's Q1 . Is their breakup ? That's pretty normal . But yeah , no , just to be clear , the the Australian drilling rig upgrade , we're doing the centerpiece as we speak , which is not the centerpiece .

Speaker #2: That's on the rig . That's being upgraded . So that rig can can continue to operate . It will be taken out of service for about two months .

Speaker #2: When we take the existing centerpiece out , put the the new one in .

Speaker #6: Got it . And will that happen ?

Speaker #2: And that'll be mid-year . This mid-year this year a lot of it depends on when they kind of wrap up their their drilling program .

Daniel Halyk: It will be taken out of service for about 2 months when we take the existing centerpiece out, put the new one in.

Speaker #2: But yeah , it'll be roughly two months mid-year

Tim Monachello: Got it. Will that happen in-

Speaker #6: And then I guess , can you talk a little bit about the extent of activity impact or revenue impact or anything like that or just given the weather in Australia ?

Daniel Halyk: That'll be midyear this year. A lot of it depends on when they kinda wrap up their drilling program. Yeah, it'll be roughly two months midyear.

Speaker #6: And Q1 ?

Speaker #2: No, there's nothing abnormal. It's a normal Q1 in Australia.

Tim Monachello: I guess, can you talk a little bit about the extent of activity impact or I guess revenue impact or anything like that, just given the weather in Australian Q1?

Speaker #7: Got it .

Speaker #6: All right . Well appreciate all the detailed answers . Turn it back

Speaker #2: No problem . Thanks

Daniel Halyk: No, there's nothing abnormal. It's a normal Q1 in Australia.

Speaker #3: And that concludes our question-and-answer session. I would now like to turn the conference back over to Daniel Hallock for closing comments.

Tim Monachello: Got it. All right. Well, appreciate all the detailed answers. Put it back.

Speaker #2: Well thank you everyone for joining us and have a good rest of your week and look forward to speaking with you after the release of our Q1 results .

Daniel Halyk: No problem. Thanks.

Operator 2: That concludes our question and answer session. I would now like to turn the conference back over to Daniel Halyk for closing comments.

Operator: That concludes our question and answer session. I would now like to turn the conference back over to Daniel Halyk for closing comments.

Speaker #2: Have a good day

Daniel Halyk: Well, thank you everyone for joining us, and have a good rest of your week, and look forward to speaking with you after the release of our Q1 results. Have a good day.

Operator 2: Ladies and gentlemen, this does conclude today's conference call. Thank you for your participation, and you may now disconnect.

Operator: Ladies and gentlemen, this does conclude today's conference call. Thank you for your participation, and you may now disconnect.

Q4 2025 Total Energy Services Inc Earnings Call

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