Total Energy Services (TSE:TOT) reported record quarterly and annual results for the three and 12 months ended December 31, 2025, as strong demand for natural gas compression and process equipment in North America and higher activity from upgraded equipment in Australia more than offset weaker North American drilling and completion activity.
Record results driven by compression demand and Australia upgrades
Vice President Finance and CFO Yuliya Gorbach said consolidated fourth-quarter revenue increased 22% year over year. Fourth-quarter EBITDA rose by CAD 15.7 million compared to 2024, which management attributed to increased activity and improved fabrication margins in the company’s CDS segment and the deployment of upgraded rigs at higher day rates in Australia.
By segment, management said the compression and process services (CPS) segment contributed 54% of fourth-quarter revenue, followed by CDS at 29%, Well Servicing at 11%, and RTS at 6%. In the prior-year quarter, CPS accounted for 47% of revenue, CDS 34%, Well Servicing 11%, and RTS 8%.
Margins and segment performance
Total’s consolidated gross margin in the fourth quarter was 22%, down 130 basis points from 2024. Gorbach said the decline was driven in part by a higher contribution from CPS and Well Servicing, which historically generate lower margins than CDS and RTS. Increased CPS and Australian margins partially offset weaker results in RTS and in North American CDS and Well Servicing.
- CDS: Fourth-quarter segment revenue increased 5% year over year. Management said a 22% decline in North American operating days was partially offset by a 24% increase in Australian operating days. Revenue per operating day increased 15%, primarily due to higher pricing on upgraded rigs in Australia, partially offset by equipment mix changes and competitive pricing in certain North American markets. Segment EBITDA increased 3%, with improved Australian results partly offset by weaker North American performance, and EBITDA margin was consistent with 2024 due to higher pricing and cost management offsetting fewer operating days.
- RTS: Fourth-quarter revenue rose 3% year over year, which the company attributed to stable utilization and an expanded U.S. rental fleet following a June 2025 acquisition, plus higher revenue per utilized rental due to equipment mix. However, RTS segment EBITDA fell 27% and segment EBITDA margin declined by 12 percentage points due to higher costs from equipment mix, competitive conditions, and a relatively high fixed-cost structure.
- CPS: Fourth-quarter revenue increased 39% year over year, driven by increased fabrication sales, higher parts and service activity, and stable rental fleet utilization. CPS segment EBITDA increased by CAD 10.6 million, or 61%. Management said CPS EBITDA margins improved sequentially by 526 basis points compared to the third quarter of 2025 as certain legacy low-margin fabrication projects were substantially completed.
- Well Servicing: Fourth-quarter revenue increased 18% year over year, reflecting a 2% increase in revenue per service hour and a 15% increase in operating hours. Management said increased Australian and stable Canadian activity was partly offset by a substantial decline in U.S. activity. The company highlighted a 722% increase in fourth-quarter Australian operating income driven by higher pricing and increased utilization after rig upgrades, while North American operating income declined due to competitive pricing and lower U.S. activity. Segment EBITDA increased 123% year over year, led by Australia.
Backlog reaches record level
Total’s fabrication sales backlog in the CPS segment totaled CAD 446.7 million at December 31, 2025. Gorbach said this was CAD 257.7 million, or 136%, higher than the CAD 189 million backlog at December 31, 2024, and CAD 65.9 million, or 17%, higher than the CAD 380.8 million backlog at September 30, 2025.
During the Q&A session, CEO Daniel Halyk said demand in the business remains strong, but deliverability is becoming an increasing constraint as lead times extend and production capacity is limited by major components. He specifically cited Caterpillar engine availability, saying delivery times for 3600 series engines were out to 115 weeks. Halyk said the company has been making investments to support a pipeline of major components, including engines, and noted that the year-end backlog provides visibility into 2027.
Balance sheet strength and capital allocation
Management emphasized a strong financial position entering 2026. At December 31, 2025, Total had CAD 108 million of positive working capital, including CAD 59.6 million of cash. Cash exceeded bank debt by CAD 4.6 million, which Gorbach said was the first time this had occurred since the company’s Savanna acquisition in June 2017.
Total also highlighted its covenant position, noting bank covenants of maximum senior debt to trailing 12-month bank-defined EBITDA of 3x and minimum EBITDA to interest expense of 3x. At year-end, the company’s senior bank debt to bank EBITDA ratio was 0.03, and interest coverage was 44.4x.
Halyk said the company was “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. He also said Total announced a CAD 31.6 million increase to its 2026 capital budget, directing that capital toward upgrading two drilling rigs—one active rig in Australia and one idle rig in Canada.
Operational updates: LNG Canada tone shift, U.S. well servicing exit, and rig upgrades
Asked about potential drilling impacts tied to LNG Canada approaching capacity, Halyk said the “tone has shifted in a positive way” in recent weeks. He said the most immediate opportunity appeared to be in Well Servicing, where the company is seeing chances to put equipment to work to capitalize on strong spot prices, while acknowledging that breakup season makes near-term drilling activity harder to gauge.
Halyk also discussed the company’s decision to exit the U.S. Well Servicing business, describing it as consistent with Total’s capital discipline and full-cycle return framework. He said the company sold 12 U.S. service rigs in February and has a deal to sell the associated real estate expected to close before the end of the second quarter. Halyk said management expects to record a meaningful gain on sale given low carrying values, and emphasized the decision was as much about freeing up management time and capital for higher-return opportunities as it was about market conditions.
On the drilling side, Halyk referenced the company’s upgraded AC triple rig in Canada, saying operational performance has been “exceptional” and that customer demand supported proceeding with another upgrade project—approved by the board—converting an idle mechanical double into an AC triple on a speculative basis. In Australia, he said the company is upgrading an operating rig through a major hook-load and related upgrade that will require about two months out of service when the new centerpiece is installed, expected midyear depending on the customer’s drilling program timing. Halyk characterized weather-related impacts in Australia’s first quarter as normal seasonal conditions.
About Total Energy Services (TSE:TOT)
Total Energy Services Inc is an energy services company. The operating segments of the company are Contract Drilling Services, Rentals & Transportation Services, Compression & Process Service, Well servicing, and Corporate. The company’s operations are conducted in Canada, the United States of America, and Australia.
