Thank you for standing by. This is the conference operator. Welcome to Total Energy's Q1 2024 Results Conference Call and Webcast. As a reminder, all participants are in listen-only mode and the conference is being recorded. After the presentation, there will be an opportunity to ask questions. To join the question queue, you may press star then 1 on your telephone keypad. Should you need assistance during the conference call, you may signal an operator by pressing star and 0. I would now like to turn the conference over to Daniel Halyk, President and CEO of Total Energy Services, Inc. Please go ahead. Thank you and good morning. Welcome to Total Energy Services' Q1 2024 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 March 31, 2024. We will then provide an outlook for our business and open up the phone lines for questions. Yuliya, please go ahead. Thank you, Dan. During the course of this conference call, information may be provided containing forward-looking information concerning Total's projected operating results, anticipated capital expenditure trends, and projected activity in the oil and gas industry. Actual events or results may differ materially from those reflected in Total's forward-looking statements due to a number of risks, uncertainties, and other factors affecting Total's businesses and the oil and gas service industry in general. These risks, uncertainties, and other factors are described under the heading Risk Factors and elsewhere in Total's most recently filed annual information form and other documents filed with Canadian Provincial 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 yesterday. Unless otherwise indicated, all financial information in this conference call is presented in Canadian dollars. Total Energy's financial results for the three months ended March 31, 2024, reflect relatively stable industry conditions in Canada, lower drilling activity in the United States, and extended wet weather in Australia that significantly reduced field activity levels compared to the Q1 of 2023 despite stable industry conditions. On March 7, 2024, Total Energy completed acquisition of Saxon Energy Services Australia Pty Ltd. for a total purchase price of approximately CAD 50 million. CAD 47.4 million was paid on completion, and CAD 2.7 million less any post-completion adjustments is payable on March 7, 2025. During the Q1 of 2024, the company paid CAD 19.7 million of income taxes and related interests and penalties arising from a Canadian income tax reassessment related to Total Energy's conversion from an income trust in 2009. While Total Energy has appealed the tax court decision, all amounts pursuant to such reassessment have been paid in full. Consolidated revenue for the Q1 of 2024 was 14% lower compared to Q1 2023. This was due primarily to lower drilling activity in the United States, restricted field activity in Australia due to wet weather, and lower fabrication sales in the CPS segment. Modest price increases and cost management mitigated the decline in revenue such that Q1 consolidated EBITDA decreased by 11% compared to 2023. Geographically, 50% of Q1 revenue was generated in Canada, 39% in the United States, and 11% in Australia as compared to the Q1 of 2023 when 46% of consolidated revenue was generated in Canada, 44% in the United States, and 10% in Australia. By business segment, contract drilling services generated 40% of Q1 consolidated revenue, followed by the CPS segment at 38%, Well Servicing at 12%, and RTS segment at 11%. In comparison, for the Q1 of 2023, the CPS segment contributed 41% of consolidated revenue, contract drilling services 35%, and Well Servicing 14%, followed by RTS segment at 10%. Q1 consolidated gross margin was 28% as compared to 25% from the prior year. Margin improvement in our CDS, RTS, and CPS segments offset a decrease in Well Servicing segment. Relatively stable drilling activity in Canada and acquisition of Saxon on March 7, 2024, partially offset an industry-wide decline in U.S. drilling activity and a negative impact of wet weather on Australian activity with the result that the CDS segment experienced a 3% decline in Q1 operating days as compared to 2023. Despite a modest increase in revenue per operating day, lower activity resulted in a 2% year-over-year decrease in the CDS segment's Q1 revenue. Price increases arising from rig upgrades, a change in the mix of equipment operating, and cost management resulted in a 10% year-over-year increase in the Q1 CDS segment EBITDA. In Canada, market share gains and the relocation of a triple rig from the U.S. in 2023 contributed to a 5% year-over-year increase in the Q1 operating days. Increased operating days combined with a 2% year-over-year increase in Canadian revenue per operating day resulted in a 6% year-over-year increase in Q1 Canadian drilling revenue relative to 2023. In the United States, Q1 revenue declined by 40% as lower U.S. drilling activity and the transfer of the triple drilling rig to Canada in the Q2 of 2023 contributed to a 39% decrease in operating days. Revenue per operating day declined by 1% due primarily to the mix of equipment operating. Efficient operations and cost management more than offset the decrease in revenue such that the Q1 operating income more than doubled compared to 2023. In Australia, operating days increased with the addition of Saxon on March 7, 2024. Partially offsetting this increase was a general reduction in field activity levels due to extended wet weather conditions. Revenue per operating day increased 2% as a result of rig upgrades and the addition of heavier Saxon drilling rigs. Revenue in the RTS segment decreased compared to Q1 of 2023 as a result of lower industry activity, particularly in the United States. Modest pricing increases in the mix of equipment operating contributed to a slight year-over-year increase in the Q1 segment EBITDA. Q1 revenue in total CPS segment decreased by 21% as compared to 2023 due primarily to lower fabrication sales and the impact of lower natural gas prices on parts and service activity. The decrease in fabrication sales was primarily due to a significant portion of fabrication activity in the CPS segment directed towards the construction of new compression rental units rather than fabrication sales as evidenced by a 35% increase in compression horsepower and rent in the United States during the Q1 of 2024. Utilization of the rental fleet was slightly lower on a year-over-year basis due to the deployment of several newly constructed rental units late in the Q1 of 2024. Improved fabrication sales margins and increased rental revenue contributed to an 8% year-over-year increase in the Q1 CPS segment EBITDA margin. This increased margin partially offset the 21% decrease in revenue such that segment EBITDA declined by 13%. The quarter-end fabrication sales backlog decreased to CAD 185.7 million compared to the CAD 227.4 million backlog at March 31, 2023. Sequentially, the quarter-end sales backlog increased by CAD 22.9 million during the Q1 of 2024. Q1 Well Servicing segment revenue decreased by 28% compared to 2023 as utilization and revenue per service hour decreased 26% and 2% respectively. This was due to lower activity in all jurisdictions. Australian activity was impacted by extended wet weather conditions while lower well abandonment activity contributed to lower Canadian activity. Segment EBITDA and EBITDA margin declined as a result of lower activity as well as lower pricing in the United States. From a consolidated perspective, Total Energy's financial position remains very strong. At March 31, 2024, Total Energy had CAD 124.4 million of positive working capital, including CAD 45 million of cash. During the Q1, Total Energy borrowed CAD 50 million to complete Saxon acquisition and paid CAD 19.7 million arising from a Canadian income tax reassessment, which resulted in a CAD 25.4 million of net debt at March 31, 2024. Total Energy's bank covenants consist 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. At March 31, 2024, the company's senior bank debt to bank EBITDA ratio was 0.41, and the bank interest coverage ratio was 10.05 times. Excluding CAD 10.5 million of non-recurring interest expense relating to the income tax reassessment, the interest coverage ratio was 30.77 times. Thank you, Yuliya. We are pleased with our Q1 results. Despite a significant year-over-year decline in U.S. industry activity levels, our U.S. businesses performed reasonably well, particularly our U.S. drilling group, which did an excellent job managing their operations in a slower environment. In the context of relatively stable industry conditions and our strong financial position and having regard to our future prospects, the board of directors of Total approved a 13% increase to our dividend during the Q1 as earlier press released. As Yuliya mentioned, our CPS segment made a significant investment in growing its compression rental fleet during the Q1. This is the most significant growth of the fleet in many years and is a result of improving market conditions, in part likely due to higher interest rates. While this investment reduced Q1 CPS segment revenue and EBITDA, the return on such investment will be realized over the next several years. We are excited about the addition of Saxon to our Australian drilling business. The addition of the 11 Saxon rigs substantially increases the operational capacity of our Australian drilling fleet. For example, during the Q1, Saxon Rig 185 drilled the longest horizontal coal seam gas well ever drilled in Queensland at a total measured depth of 5,020 meters. The rig requirements to drill this well were beyond the capacity of our pre-Saxon Australian drilling fleet. Saxon had no significant bottom-line impact during the Q1 given the timing of closing and the expenses incurred to complete the acquisition. Rather, the impact of the Saxon acquisition will begin to be realized in the Q2, particularly should recently improved weather conditions continue. The full impact won't be realized until we complete the integration and realize the efficiencies of the combined operation, which we expect to complete by the end of this year. In addition to Saxon, our Australian operations expect a newly constructed drilling rig to commence operations in the Q3 and two upgraded service rigs in late Q2 and Q4 respectively. All three rigs will be operating under long-term contracts. As such, we expect the income statement contribution from our significant investment in Australia will increase substantially over the next several quarters. As such investment was made without the issuance of any new equity, the impact will be amplified on a per-share basis. Investment opportunities also exist in North America as evidenced by the CAD 19.8 million increase to Total Energy Services' 2024 capital expenditure budget announced yesterday. 8.3 million of this increase is targeting North American growth opportunities, including CAD 6.4 million allocated to purchasing new rental equipment for the RTS segment. Total Energy's investment in upgrading its equipment fleet over the past few years has not only provided a reasonable return for our owners but it has also increased the capacity and performance of our equipment for the benefit of our customers. A highlight occurred in April when we drilled the longest Montney well ever drilled in Canada at a total measured depth of 8,006 meters. The well was drilled by Savanna rig 653, an AC electric telescopic double rig, in just 19.2 days. Our safety performance during the Q1 was commendable, and I would like to thank all of our employees for their continued commitment to operating in a safe and efficient manner. Several of our operating segments achieved a zero Total Recordable Injury Frequency in the Q1, which resulted in a 0.90 consolidated TRIF for the quarter and a 12-month rolling TRIF of 1.34. A special shout-out goes to the employees of Total Oilfield Rentals, who achieved a zero TRIF for the past 12 months in respect of our entire North American RTS segment operations. Congratulations on a job well done. Finally, I'd like to invite you to attend our annual general meeting that is being held this coming Tuesday, May 14, at 10:00 A.M. at the Calgary Petroleum Club. I would now like to open up the phone lines for any questions. Thank you. To join the question queue, you may press star and one on your telephone keypad. You will hear a tone acknowledging your request. If you're using a speakerphone, please pick up your handset before pressing any keys. To withdraw your question, please press star and two. We will pause for a moment as callers join the queue. Our first question today comes from Cole Pereira with Stifel. Please go ahead. Hi. Good morning, all. Dan, you provided a few comments on the Saxon acquisition thus far. I mean, wondering if you could just add any color on how things are progressing relative to your expectations, any surprises, positive or negative, etc.? Things are progressing well. I would say we're very happy with the acquisition. I think the fit is good. In terms of the equipment and personnel, I would say generally what we're finding is more positive relative to expectations. What I'm seeing is a group that's happy to be part of our company. We're excited to be in the land drilling business, and we're excited to grow the business. I think that excitement is shared by the Saxon employees that are now part of our company. I'm quite excited to see where our Australian business will go over the next several quarters. Great. That's helpful. Thanks. And can you just provide an outlook on how you're thinking about the Well Servicing segment and what the outlook is there, call it, for the next few quarters? So Canada, we had a bit of a flat line. Less abandonment work certainly impacted. There was some customer consolidation that impacted programs a bit in Q1, although our sales group there is working to broaden the customer base. With healthy oil prices, the differential, and heavy oil tightening here, we're reasonably optimistic on the Canadian business. The U.S. side had a tough quarter. I think industry consolidation, there were a number of significant consolidation events. Those always are preceded by a drop in activity. I think the group struggled to manage their labor force, keeping employees in anticipation of activity, and that didn't materialize. Again, the focus is on broadening the customer base, and with healthy oil prices, we expect that business to improve going forward. Australia was really about weather. As I mentioned, as part of our 2024 capital budget, we are deploying three service rigs, one of which was deployed here about a month ago. I commented on the other two. That'll be in late Q2 and the other one in Q4. We'll see a nice pickup in our service rig activity in Australia over the balance of the year here. So as long as oil prices remain stable, that business should be okay. Okay. Great. That's helpful. Thanks. And Yuliya, just outside of anything from the CRA, how should we be thinking about Total's cash taxes going forward? Well, this is a binary problem. It's good when you don't pay taxes, have enough losses, and it's bad when you're actually paying taxes, but when you're profitable enough to be paying taxes. So I guess we're going to deal with that problem as we go. We have disclosed our available losses in the U.S. and Canada, so our income won't be translated in cash taxes in the near future, but some of it will. So just the way you look at it, you look at the year-end disclosure, and you can project the cash based on that. The one comment I would make is the CAD 10 million+ of interest that was paid on the reassessment was not tax deductible, which is why a bit of a strange anomaly here the past couple of quarters. So you're going to see the wages looking a bit higher is because that CAD 10 million wasn't deductible. A couple of things to think about. U.S. is that in the U.S., you can only apply 80% of your income to available losses. So that will definitely factor into what amount will be cash taxable. Got it. Okay. Great. That's all from me. Thanks. I'll turn it back. Thanks, Cole. Thank you. And as a reminder to ask a question, please press star and one. Our next question comes from Tim Monachello with ATB Capital. Please go ahead. Hey. Good morning. Good morning, Tim. Tim calling in for Tom. So in Australia, I'm just curious. Weather was a big impact. How much—I don't know how you want to quantify it—revenue or activity did you lose because of weather in Australia, both on the drilling and Well Servicing side? There was a lot of standby, with crew, standby without crew. We haven't done the exact math, and even if we did, we'd probably I hate blaming weather too much, but literally, Q1 is always the slow time in Australia due to their wet weather season. This year was exceptionally wet. Literally, we had helicopters having to retrieve crews off of rigs because you could not access them by ground. When I think things are bad, though, I was reminded by two of our directors who were founders of Savanna that when they first moved to Australia, they literally lost two rigs, were totally destroyed by flooding, so it could be worse. So like I said, Q1 there is always the wet season. It's kind of their breakup season, but the weather's improved, and hopefully, that continues. And if it does, we expect to have a pretty solid operation there. Can you speak how many rigs are running in Australia today? Drilling rig-wise, I think we're in that 9 range. Yeah. It is. Yeah. Okay. And service rigs? Probably 4 or 5. 4. Four? Yeah. Okay. That's helpful. Were there any one-time costs in Q1 just related to the integration of Saxon that weren't called out in the MD&A? Acquisition, about CAD 500,000. Okay. And then I was curious about the CPS segment. Good to see that utilization ticking up alongside higher fleet size. Are you through that build now for 2024, or are you going to continue to be utilizing floor space for internal buildings? There's always rental activity. What we saw beginning in Q4, culminating in Q1, was the largest build we've seen in quite a few years. It's literally a timing issue where we had a couple of large rental orders that were deployed to the U.S. So that was definitely a bit of an exceptional situation. We normally wouldn't comment too much on the breakdown in terms of production activity, but it was meaningful enough to highlight that. Going forward, that's really dependent on customer preference at any point in time. So we're not going to try and forecast that. But what I would say generally is the rental business has improved, I think, in large part due to a higher cost of capital, which has now taken some of the financial players out of the market. We offer a true operating lease, which means we take residual risk at the end of the lease term as opposed to a finance lease. So the asset stays in our balance sheet, and we take residual risk. And we expect to be compensated for that risk for quite a few years, likely due to low interest rates. The market, in our judgment, was under pricing risk. That's normalized a little bit. And if there's good opportunities to deploy capital in growing the rental fleet, we'll pursue it. If there's not, we won't. Okay. Just in terms of the capital budget that's been allocated to that, and there's some carryover from 2023 and the 2024 budget, how far are you through the allocation to CPS rentals? A lot of that 2023 carryforward was the compression rental build. And so you can see in Q1, there was about CAD 10.5 million of capital expenditures within the CPS segment. That's virtually all rental fleet additions. Keeping in mind, the Q4 would have also been, and I don't have that number in front of me, the setup for that build. So anyways, we don't build compression rental units on spec. And typically, what we will do is increase our rental budget for any major new projects. We did allocate CAD 5 million in our preliminary budget this year to the rental build or the rental fleet. A lot of that's simply when units come back off rent, you've got to do some retrofit and modifications to make them suitable for new projects. Basically, you modify the equipment in response to new rental opportunities. That would not be kind of net new additions to the fleet. We don't approve those until we have opportunities that are acceptable. Okay. Can you speak to the level of demand that you're seeing in terms of third-party orders for compression and process services? I would say right now, North America is all about infrastructure build. So what we're seeing is, I would say, the demand is primarily driven by pipeline and midstream companies. Or can you give some indication of direction that you're seeing that? Is it improving flat line? I would say it's pretty steady. Obviously, the backlog went up during Q1, so that speaks for itself. Okay. And then I'm curious if you're getting a sense that your customers are planning more or less growth than they would have been planning for the back half of the year in Canada relative to three months ago? I think it's. I would call it a stable market. We're in breakup right now, which is always a difficult time to kind of assess. It's really going to depend on oil price stability, recovery in gas prices. Obviously, we're going into 2025 when LNG Canada will fire up. You get different views on what that means exactly. But I would say generally, we expect and we're planning for a relatively stable market. Okay. Great. I'll turn it back. Thanks for the details. Thank you. As a final reminder, please press star and one if you have a question. Our next question comes from Josef Schachter with Schachter Energy Research. Please go ahead. Good morning, Dan. And Yuliya, thanks for taking my question. I'm just wondering, Dan, if you're seeing for the latter part of this year and into 2025, in each of your business lines, a pickup for our orders related to build-out drilling and build-out for LNG projects between LNG Canada, and we're seeing Rockies moving ahead. Are you starting to see discussions and orders? And is the size of the equipment, let's say, for compression, getting bigger? And of course, are they more complicated and therefore potentially more profitable for you? So definitely, as I mentioned earlier, Joseph, infrastructure build is driving North American demand, the material demand for compression process equipment. And so definitely, the answer to your question, are we seeing continued demand there? It's yes. It is bigger horsepower equipment. Some of it's electric, and depending again on the location, we expect that demand to be relatively stable over the next couple of years. And it's, again, driven by the requirements to feed all of these LNG plants that are coming online in North America. I would say most of it is tied to the gathering system level at this point. What I would expect to see as we get closer to in-service dates would be more field compression, which would likely mean a bit smaller horsepower and more from the producer level. That remains to be seen, but that's typically how these things go. As we get closer to in-service dates, again, you'd expect gas drilling to pick up and completion activity. Clearly, right now, there's a lot of gas in North America. We've definitely seen some shifts away from gas towards oil. Again, the next couple of quarters will be interesting as we get closer to in-service dates on LNG. And you, again, hear different numbers about how much is needed to fill these things. But I would say kind of what's driving the drilling business in Canada right now is certainly the recent commissioning and in-service of Trans Mountain. We're seeing some pretty strong demand for our AC doubles and super single class of rigs for liquids-directed activity. And that'll pull our rental business as well as our service rig business with it. And just to follow up on that, do you have enough capacity across the system, let's say, for compression, or is it going to be, are you going to have to do some major construction once you start seeing more contracts coming your way? I would be hesitant to add more capacity. I think we've always found a way to increase throughput, and there's different ways to do it, both by being creative in the way you use your physical floor space, adding shifts, night shifts. So I would say within the CPS segment, we're fine for physical capacity. It'd be labor ramp-ups primarily. In the drilling business, if you want an AC double and a high-spec single today, good luck post-breakup. Those are tight markets in Canada. The U.S., I think we've seen, hopefully, knock on wood, our rig count bottom. And again, our guys have done a wonderful job down there managing their business. And with oil prices holding and some of this LNG kicking in, hopefully, that'll see a ramp-up in U.S. drilling over the back half of the year. Our rental group is obviously short certain lines of equipment. I won't give specifics for competitive reasons, but we just made a significant investment to add some brand new equipment there. Again, the type of equipment will tend to pull other lines of equipment that we have ample now. So like I said, all in all, I think we're reasonably optimistic. Again, it's a strange macro environment, so I don't take things for granted. But we'll enjoy the activity as it plays out, and we're not going to put ourselves in a position that if things slow down materially, we're going to be at risk. Super. Thanks for the caller. I appreciate that. Thank you. Have a. You're welcome. Our next question comes from Ernest Wong with Baskin Wealth Management. Please go ahead. Hi. Good morning, Dan and Yuliya. Good morning, Ernest. I just want to stay on the topic of LNG. Maybe on a big picture, how do you think about the ability of the industry overall in Canada to meet the upcoming demand and expected production increase in gas? Well, there's going to have to be more investment both in infrastructure and drilling and completion. We're seeing that play out on a steady basis within the CPS segment, but there's more to go. On the drilling front, we expect you've seen a pretty significant uptick in BC drilling over the past year. Some of that was related to restrictions on drilling due to some Aboriginal issues there that have now been resolved. We think there's a relatively healthy demand for infrastructure and gas supply that'll play out here over the next couple of years as Canada gets ready to finally start exporting LNG. The global LNG market is generally fairly healthy. Pricing is moderated somewhat from the extreme levels over the past year or so. Honestly, we see that as a good thing. Extremely high pricing discourages investment in future infrastructure built around using natural gas. I think our kind of general view is pricing today is sufficient to see investment in developing and producing LNG. Australia is a prime example. Their national government just issued a policy here earlier this week that's very pro-natural gas and pro-LNG development, which we see that as reassuring, given it's typically been seen as somewhat of a hostile regime towards natural gas development. So you're seeing the reality. Physics and economics always dictate outcomes. And the reality is the world needs more energy, and they're increasingly turning to natural gas to supply that. I tend to be a relatively bullish person on natural gas in the medium to long term, whether it's North America, Australia, or elsewhere. Got it. You guys raise CapEx, obviously, but is there any change in terms of how you think about excess capital deployment, whether it be for capital returns or M&A or debt paydown? We continue to take a balanced approach. I don't like hard and fast rules. We use our balance sheet when it makes sense, and we pay down debt at any time in between. We used our balance sheet to do what we see as an attractive acquisition with Saxon. Effectively, the rest of our CapEx is paid with cash. And given kind of how we're trending here, I expect debt repayment will not take too long to deal with. And we increased our dividend effective Q1. We'll continue to look at share buybacks. And our board reviews our dividends on a quarterly basis. But we also don't like to. We like sustainability and a balanced approach to shareholder returns. But we've given a lot of capital back to our owners over the years. In fact, we've given more back through dividends and share buybacks than we've raised. We'll continue. I think anyone who's followed the company and been a shareholder for a long time knows that we don't talk about shareholder returns. We just do it. Sounds good. Thank you. You're welcome. Ladies and gentlemen, this concludes our question and answer session. I'd like to turn the conference back over to Mr. Halyk for closing remarks. Thank you, everyone, for participating. We look forward to hopefully seeing some of you at our AGM and speaking with you after our Q2. Have a good weekend. Thank you, sir. This concludes today's conference call. We thank you all for attending today's presentation. You may now disconnect your lines and have a wonderful day.