Fourth Quarter Highlights
- For the
three-month period ended December 31, 2024, PHX Energy generated
consolidated revenue of $178.7 million, the highest level of fourth
quarter revenue on record and the highest level of quarterly
revenue in the Corporation’s history. Consolidated revenue in the
2024-quarter included $10 million of motor rental revenue and $5.3
million of revenue generated from the sale of motor equipment and
parts (2023 - $10.3 million and $0.9 million, respectively).
- PHX Energy’s US
division revenue in the fourth quarter of 2024 was $132.3 million,
8 percent higher than the $122.1 million generated in the fourth
quarter of 2023 and the highest level of US quarterly revenue on
record. US division revenue in the 2024-quarter represented 74
percent of consolidated revenue (2023 – 74 percent).
- PHX Energy’s
Canadian division reported $46.3 million of quarterly revenue, 7
percent higher compared to $43.3 million in the 2023-quarter and
the highest level of fourth quarter revenue for the Canadian
division since 2014.
- In the fourth
quarter of 2024, adjusted EBITDA(1) was $29.6 million, 17 percent
of consolidated revenue(1) as compared to $35.4 million, 21 percent
of consolidated revenue, in the same 2023-quarter. Included in the
2024-quarter’s adjusted EBITDA is a $2.2 million write-down of
inventory to its net realizable value at the end of the
2024-period. Additionally, adjusted EBITDA in the 2024-quarter
included $2.2 million in cash-settled share-based compensation
expense (2023 - $4.6 million). Adjusted EBITDA excluding
cash-settled share-based compensation expense(1) in the fourth
quarter of 2024 was $31.8 million, 18 percent of consolidated
revenue(1) (2023 - $40 million, 24 percent of consolidated
revenue). Despite higher revenue generated in the 2024-quarter,
profitability declined mainly due to generally higher equipment
repair expenses, weaker activity in the Corporation’s high margin
RSS and motor rental revenue streams in the US, and lower net gain
on disposition of drilling equipment realized in the
2024-quarter.
- Earnings in the
2024 three-month period were $14.1 million, $0.30 per share, as
compared to $33.1 million, $0.68 per share, in the same
2023-period. Earnings in the 2024-period included a provision for
income tax of $1.7 million while earnings in the 2023-period
included a $9.5 million recovery of income taxes that resulted
primarily from the recognition and utilization of previously
unrecognized deferred tax assets in the Canadian jurisdiction.
Additionally, as a result of fixed asset additions throughout 2024,
depreciation and amortization expenses on drilling and other
equipment increased by 18 percent to $11.8 million (pre-tax) in the
2024-quarter from $10.1 million (pre-tax) in the corresponding
2023-quarter.
- In the 2024
three-month period, the Corporation generated excess cash flow(2)
of $17.3 million (2023 - $22.3 million), after deducting net
capital expenditures(2) of $5.7 million.
- For the
three-month period ended December 31, 2024, PHX Energy purchased
and canceled 493,000 common shares for $4.9 million through its
current Normal Course Issuer Bid (“NCIB”).
- In the fourth
quarter of 2024, PHX Energy paid $9.2 million in dividends which is
26 percent more than the dividend amount paid in the same
2023-quarter. On December 13, 2024, the Corporation declared a
dividend of $0.20 per share or $9.1 million, paid on January 15,
2025 to shareholders of record on December 31, 2024.
Year End Highlights
- For the year
ended December 31, 2024, the Corporation generated annual
consolidated revenue of $659.7 million which is the highest annual
revenue in the Corporation’s history (2023 - $656.3 million).
Consolidated revenue in the 2024-year included $38.4 million of
motor rental revenue (2023 - $47 million) and $11.2 million of
revenue generated from the sale of motor equipment and parts (2023
– $11 million).
- The
Corporation’s US division achieved annual revenue of $479.5
million, only 3 percent lower than the record $496.5 million set in
2023. US division revenue in the 2024-year represented 73 percent
of consolidated revenue (2023 – 76 percent).
- PHX Energy’s
Canadian division generated annual revenue of $180.2 million (2023
- $159.8 million), the highest level achieved since 2014.
- For the
year-ended December 31, 2024, adjusted EBITDA(1) was $123.7
million, 19 percent of consolidated revenue and the second highest
level in the Corporation’s history, as compared to the record
$150.7 million, 23 percent of consolidated revenue in 2023.
Included in the 2024-year’s adjusted EBITDA is $24.6 million of net
gain on disposition of drilling equipment, a decrease compared to
$31.3 million in 2023, and a $2.2 million write-down of inventory
to its net realizable value at the end of 2024. Apart from the
lower net gain on disposition of drilling equipment and write-down
of inventory, the decline in profitability in the 2024-year was
primarily due to generally increased equipment repair costs, weaker
activity in the Corporation’s high margin RSS and motor rental
revenue streams in the US, and lower margins realized from the sale
of motor equipment and parts. For the year-ended December 31, 2024,
the Corporation recognized cash-settled share-based compensation
expense of $11.8 million (2023 - $13.5 million). Adjusted EBITDA
excluding cash-settled share-based compensation expense(1) in the
2024-year was $135.5 million, 21 percent of consolidated revenue
(2023 - $164.2 million, 25 percent of consolidated revenue).
- In the
2024-year, earnings were $54.6 million, $1.16 per share as compared
to $98.6 million, $1.96 per share in 2023. For the year-ended
December 31, 2024, the Corporation recorded a tax provision of
$15.7 million, an increase compared to $5.1 million in 2023.
Additionally, depreciation and amortization expenses in the 2024
twelve-month period increased by 15 percent to $44.8 million
(pre-tax) from $38.9 million (pre-tax) in 2023.
- For the year
ended December 31, 2024, PHX Energy generated excess cash flow(2)
of $47.6 million, after deducting net capital expenditures(2) of
$46.5 million.
- In the 2024
twelve-month period, through its previous and current NCIB, the
Corporation purchased and canceled 2,141,232 common shares for
$20.6 million.
- Since the second
quarter of 2017 to December 31, 2024, a total of 16.3 million
common shares have been purchased and cancelled under PHX Energy’s
various NCIB’s. This represents 28 percent of common shares
outstanding as of June 30, 2017. It is the Corporation’s intention
to continue the current strategy of leveraging the NCIB as a tool
to further reward shareholders through its Return of Capital
Strategy (‘ROCS”).
- PHX Energy paid
$37.6 million in dividends in the 2024-year which is 24 percent
higher than the dividend amount paid in 2023.
- The Board
previously approved a preliminary 2025 capital expenditure budget
of $50 million. With $2 million of the 2024 capital expenditure
budget carried forward into 2025 and an additional $3 million in
capital expenditures expected, the Corporation now anticipates
spending $55 million in capital expenditures during 2025, which was
recently approved by the Board.
- As at December
31, 2024, the Corporation had working capital(2) of $84.5 million
and net debt(2) of $2.7 million.
Financial Highlights (Stated in thousands of
dollars except per share amounts, percentages and shares
outstanding)
|
|
Three-month periods ended December 31, |
|
Years ended December 31, |
|
|
2024 |
|
2023 |
|
% Change |
|
2024 |
|
2023 |
|
% Change |
|
Operating Results |
|
|
|
|
|
|
|
|
Revenue |
178,676 |
|
165,332 |
|
8 |
|
|
659,663 |
|
656,341 |
|
1 |
|
|
Earnings |
14,098 |
|
33,134 |
|
(57 |
) |
|
54,622 |
|
98,580 |
|
(45 |
) |
|
Earnings per share – diluted |
0.30 |
|
0.68 |
|
(56 |
) |
|
1.16 |
|
1.96 |
|
(41 |
) |
|
Adjusted EBITDA (1) |
29,638 |
|
35,388 |
|
(16 |
) |
|
123,734 |
|
150,717 |
|
(18 |
) |
|
Adjusted EBITDA per share – diluted (1) |
0.63 |
|
0.70 |
|
(10 |
) |
|
2.63 |
|
2.86 |
|
(8 |
) |
|
Adjusted EBITDA as a percentage of revenue (1) |
17 |
% |
21 |
% |
|
|
19 |
% |
23 |
% |
|
|
Cash Flow |
|
|
|
|
|
|
|
|
Cash flows from operating activities |
17,676 |
|
36,754 |
|
(52 |
) |
|
96,898 |
|
96,723 |
|
- |
|
|
Funds from operations (2) |
24,305 |
|
28,167 |
|
(14 |
) |
|
99,695 |
|
119,317 |
|
(16 |
) |
|
Funds from operations per share – diluted (3) |
0.51 |
|
0.56 |
|
(9 |
) |
|
2.12 |
|
2.26 |
|
(6 |
) |
|
Dividends paid per share (3) |
0.20 |
|
0.15 |
|
33 |
|
|
0.80 |
|
0.60 |
|
33 |
|
|
Dividends paid |
9,183 |
|
7,277 |
|
26 |
|
|
37,570 |
|
30,189 |
|
24 |
|
|
Capital expenditures (3) |
15,714 |
|
15,474 |
|
2 |
|
|
83,277 |
|
64,932 |
|
28 |
|
|
Excess cash flow (2) |
17,263 |
|
22,347 |
|
(23 |
) |
|
47,569 |
|
92,813 |
|
(49 |
) |
|
Financial Position, December 31, |
|
|
|
|
|
|
|
|
Working capital (2) |
|
|
|
|
84,545 |
|
93,915 |
|
(10 |
) |
|
Net debt (Net cash) (2) |
|
|
|
|
2,664 |
|
(8,869 |
) |
n.m. |
|
|
Shareholders’ equity |
|
|
|
|
222,205 |
|
209,969 |
|
6 |
|
|
Common shares outstanding |
|
|
|
|
45,506,773 |
|
47,260,472 |
|
(4 |
) |
n.m. – not meaningful
Outlook
- In the first two
months of 2025, our US division is operating at robust activity
levels. With our unique suite of technology and strong reputation,
we believe our US operations will continue to produce strong
financial results as we continue to focus on increased RSS
utilization and our proprietary Real Time RSS Communication
technology. In addition, we anticipate a slight uptick in the US
rig count which will also be beneficial for growth in the year
ahead.
- In 2025 we will
continue to dedicate resources towards our Atlas motor rental
business and believe we will see growth as we expand our fleet
capacity further beyond the demand within our full-service
division. Additionally, the division’s reputation will become more
established as more operators experience the reliability and power
advantages of our Atlas motors. In the sales division of our Atlas
business, we foresee incremental increases in revenue in line with
our customers’ 2024 fleet expansion as their part requirements will
increase. Although the timing of orders for parts is difficult to
predict as it is based on customers’ activity levels and service
cycles.
- Thus far in the
first quarter of 2025, our Canadian operations have seen higher
activity levels and the first quarter is typically the strongest
for this division. With this promising start to the year, we are
cautiously optimistic that our Canadian operations will continue to
produce strong results in 2025, especially with the addition of
owned RSS technology and the associated Real Time RSS Communication
technology. We have held an enviable market share position in
Canada for numerous years and believe we will be able to maintain
this position while also increasing the high margin RSS portion of
activity as in the first quarter we have already seen more
demand.
- In 2025, we will
strive to improve our profitability through our high margin
businesses and internal efficiencies. Although, the potential of
tariffs and changes to the global trade environment could impact
our supply chain and demand for services. We are monitoring the
situation closely and our team is developing contingency plans
where possible in our supply chain to reduce the impact of tariffs
that may be enacted.
- We will remain
committed to our ROCS to reward shareholders, leveraging our
dividend and NCIB programs. We have paid $184 million in dividends
since 2011 which equates to $4.93 per share. Under our NCIB
programs, 28 percent of common shares outstanding as at June 30,
2017 have been purchased and cancelled. It is our intention to
continue the current strategy of leveraging the NCIB as a tool to
further reward shareholders and there are approximately 2.3 million
shares remaining for purchase prior to its expiry in August of this
year.
- We foresee
generating improved excess cash flow in the 2025-year and therefore
anticipate distributions made under ROCS will remain within the 70
percent of excess cash flow target.
Michael Buker,
President February
25, 2025
Overall
Performance
In the fourth quarter of 2024, PHX Energy
reported its highest level of quarterly revenue in the
Corporation’s history, generating consolidated revenue of $178.7
million (2023-quarter - $165.3 million). With increased capacity in
its premium technology fleet and continued strong demand for the
Corporation’s unique technology offering, activity in both the US
and Canadian divisions outperformed industry activity trends, which
helped drive the 8 percent gain in revenue.
For the three-month period ended December 31,
2024, the Corporation’s US division’s revenue increased by 8
percent to a record $132.3 million compared to $122.1 million in
the same 2023-quarter. The US industry’s rig count declined by 6
percent compared to the fourth quarter of 2023. In comparison, PHX
Energy’s US operating days(3) saw a modest increase of 8 percent to
4,438 days from 4,114 in the 2023-quarter. The US division’s
average revenue per day(3) for directional drilling services
slightly decreased by 2 percent quarter-over-quarter. Without the
impact of foreign exchange, the average revenue per day for
directional drilling services was down 6 percent. Softer industry
activity levels in the 2024-period had a more direct impact on the
Corporation’s US motor rental activity and partly caused the US
motor rental revenue to decrease to $9.2 million from $9.9 million
in the same period in 2023. In the 2024-quarter, the US division
generated $5.3 million of revenue from motor equipment and parts
sold (2023-quarter - $0.9 million). Revenue from the Corporation’s
US division in the 2024-quarter represented 74 percent of
consolidated revenue (2023 – 74 percent).
The Corporation’s Canadian division generated
its highest level of fourth quarter revenue since 2014. Canadian
division revenue in the 2024 three-month period grew to $46.3
million, a 7 percent increase from $43.3 million in the same
2023-period. The Canadian segment recorded 3,369 operating days in
the 2024-quarter, a 6 percent increase from the 3,164 operating
days realized in the comparable 2023-quarter which is slightly
above the Canadian industry drilling activity’s 4 percent gain
quarter-over-quarter. Average revenue per day(3) realized by the
Canadian division was flat at $13,538 in the 2024-quarter, as
compared to $13,522 in the corresponding 2023-quarter and the
Corporation’s Canadian motor rental division generated $0.8 million
of revenue in the 2024-period (2023 - $0.5 million).
For the three-month period ended December 31,
2024, earnings were $14.1 million (2023 - $33.1 million), adjusted
EBITDA(1) was $29.6 million (2023 - $35.4 million), and adjusted
EBITDA represented 17 percent of consolidated revenue(1) (2023 – 21
percent). In the 2024-quarter, the Corporation recorded a tax
provision of $1.7 million whereas in the 2023-quarter earnings
there was a $9.5 million recovery of income taxes that primarily
resulted from the recognition and utilization of previously
unrecognized deferred tax assets in the Canadian jurisdiction.
Additionally, as a result of fixed asset additions throughout 2024,
depreciation and amortization expenses on drilling and other
equipment increased by 18 percent to $11.8 million (pre-tax) in the
2024-quarter from $10.1 million (pre-tax) in the corresponding
2023-quarter. Included in the 2024 three-month period adjusted
EBITDA is cash-settled share-based compensation expense of $2.2
million (2023 - $4.6 million). For the three-month period ended
December 31, 2024, adjusted EBITDA excluding cash-settled
share-based compensation expense was $31.8 million (2023 - $40
million). Despite higher revenue generated in the 2024-quarter,
profitability declined mainly due to generally higher equipment
repair expenses, weaker activity in the Corporation’s high margin
RSS and motor rental revenue streams in the US, and lower net gain
on disposition of drilling equipment. In the 2024 three-month
period, the Corporation also recognized a $2.2 million write-down
of inventory to its net realizable value.
In all four quarters of 2024, PHX Energy
realized strong quarterly revenue which either exceeded or was
slightly below the record-breaking quarters seen in 2023.
Particularly, the record revenue achieved in the fourth quarter of
2024 resulted in the 2024 annual revenue surpassing the annual
revenue realized in 2023. For the year ended December 31, 2024, the
Corporation’s consolidated revenue increased by 1 percent to $659.7
million from $656.3 million in 2023.
Earnings for the 2024-year were $54.6 million
(2023 - $98.6 million) and adjusted EBITDA(1) was $123.7 million,
19 percent of consolidated revenue (2023 - $150.7 million, 23
percent of consolidated revenue). In the 2024-year, the Corporation
recorded a tax provision of $15.7 million, an increase compared to
$5.1 million in 2023. Additionally, depreciation and amortization
expenses in the 2024 twelve-month period increased by 15 percent to
$44.8 million (pre-tax) from $38.9 million (pre-tax) in 2023.
Included in the 2024-year’s earnings and adjusted EBITDA is $24.6
million (pre-tax) of net gain on disposition of drilling equipment,
a decrease compared to $31.3 million (pre-tax) in 2023. Apart from
the lower net gain on disposition of drilling equipment realized,
the decline in profitability in the 2024-year was partly due to
generally higher equipment repair expenses, weaker activity in the
Corporation’s high margin RSS and motor rental revenue streams in
the US, and higher costs of motor equipment and parts sold. In the
2024-year, the Corporation also recognized a $2.2 million
write-down of inventory to its net realizable value.
Included in the 2024 twelve-month period
adjusted EBITDA is cash-settled share-based compensation expense of
$11.8 million (2023 - $13.5 million). Adjusted EBITDA excluding
cash-settled share-based compensation expense(1) in the 2024-year
was $135.5 million, 21 percent of consolidated revenue (2023 -
$164.2 million, 25 percent of consolidated revenue).
As at December 31, 2024, the Corporation had
working capital(2) of $84.5 million and net debt(2) of $2.7
million. The Corporation also has CAD $83.6 million and USD $16
million available to be drawn from its credit facilities.
Dividends and ROCSOn December
13, 2024, the Corporation declared a dividend of $0.20 per share
payable to shareholders of record on December 31, 2024. An
aggregate of $9.1 million was paid on January 15, 2025.
The Corporation remains committed to enhancing
shareholder returns through its Return of Capital Strategy (“ROCS”)
which targets up to 70 percent of annual excess cash flow to be
used for shareholder returns and includes multiple options
including the dividend program and the NCIB. For the year ended
December 31, 2024, excess cash flow declined primarily due to
higher capital expenditures and lower proceeds on disposition of
drilling equipment, however, Management continued to prioritize
shareholder returns while protecting its financial position and
over 70 percent of excess cash flow was distributed for shareholder
returns under ROCS. The Corporation maintained its current level of
dividends, paying $37.6 million in dividends to shareholders, and
continued NCIB purchases, spending $20.6 million to repurchase
shares under the immediately preceding and current NCIB as it
believed the stock price was opportunistic. As a result, the
remaining distributable balance under ROCS(2) in the 2024-year was
negative $24.9 million. The Corporation will target the level of
excess cash flow to be used for shareholder returns to stay within
the 70 percent threshold in 2025.
(Stated in thousands of dollars)
|
|
Three-month periods ended December 31, |
Years ended December 31, |
|
|
2024 |
|
2023 |
|
2024 |
|
2023 |
|
|
Excess cash flow |
17,263 |
|
22,347 |
|
47,569 |
|
92,813 |
|
| 70% of excess cash
flow |
12,084 |
|
15,643 |
|
33,298 |
|
64,969 |
|
| |
|
|
|
|
| Deduct: |
|
|
|
|
|
Dividends paid to shareholders |
(9,183 |
) |
(7,277 |
) |
(37,570 |
) |
(30,189 |
) |
|
Repurchase of shares under the NCIB |
(4,859 |
) |
(11,264 |
) |
(20,614 |
) |
(30,366 |
) |
|
Remaining distributable balance under ROCS |
(1,958 |
) |
(2,898 |
) |
(24,886 |
) |
4,414 |
|
|
|
|
|
|
|
|
|
|
|
Normal Course Issuer Bid During
the third quarter of 2024, the TSX approved the renewal of PHX
Energy’s NCIB to purchase for cancellation, from time-to-time, up
to a maximum of 3,363,845 common shares, representing 10 percent of
the Corporation’s public float of Common Shares as at August 7,
2024. The NCIB commenced on August 16, 2024 and will terminate on
August 15, 2025. Purchases of common shares are to be made on the
open market through the facilities of the TSX and through other
alternative Canadian trading platforms. The price which PHX Energy
is to pay for any common shares purchased is to be at the
prevailing market price at the time of such purchase.
Pursuant to the immediately preceding and
current NCIB, 2,141,232 common shares were purchased by the
Corporation for $20.6 million including incremental transaction
costs, and cancelled for the year ended December 31, 2024 (2023 –
4,032,600 shares, $30.4 million). Of the 2,141,232 common shares
purchased and cancelled, 1,069,121 common shares were purchased
under the immediately preceding NCIB and 1,072,111 common shares
were purchased under the current NCIB.
It is the Corporation’s intention to continue
the current strategy of leveraging the NCIB as a tool to further
reward shareholders under ROCS especially during times of market
industry weaknesses.
Capital SpendingFor the year
ended December 31, 2024, the Corporation spent $83.3 million in
capital expenditures, of which $73.4 million was spent on growing
the Corporation’s fleet of drilling equipment, $5.3 million was
spent to replace retired assets, and $4.6 million was spent to
replace equipment lost downhole during drilling operations. With
proceeds on disposition of drilling and other equipment of $36.7
million, the Corporation’s net capital expenditures(2) for the
2024-year were $46.5 million. Capital expenditures in the 2024-year
were primarily directed towards Atlas High Performance motors
(“Atlas”), Velocity Real-Time systems (“Velocity”), and Rotary
Steerable Systems (“RSS”), both PowerDrive Orbit and iCruise. PHX
Energy funded capital spending primarily using proceeds on
disposition of drilling equipment, cash flows from operating
activities, and its credit facilities when required.
(Stated in thousands of dollars)
|
|
Three-month periods ended December 31, |
Years ended December 31, |
|
|
2024 |
|
2023 |
|
2024 |
|
2023 |
|
| Growth
capital expenditures |
13,580 |
|
7,026 |
|
73,378 |
|
34,382 |
|
|
Maintenance capital expenditures from asset retirements |
- |
|
3,066 |
|
5,289 |
|
14,609 |
|
|
Maintenance capital expenditures to replace downhole equipment
losses |
2,134 |
|
5,382 |
|
4,610 |
|
15,941 |
|
|
Total capital expenditures |
15,714 |
|
15,474 |
|
83,277 |
|
64,932 |
|
|
Deduct: |
|
|
|
|
|
Proceeds on disposition of drilling
equipment |
(10,057 |
) |
(10,997 |
) |
(36,741 |
) |
(43,686 |
) |
|
Net capital expenditures |
5,657 |
|
4,477 |
|
46,536 |
|
21,246 |
|
|
|
|
|
|
|
|
|
|
|
As at December 31, 2024, the Corporation had
capital commitments to purchase drilling and other equipment for
$44 million, $26.8 million of which is growth capital allocated as
follows: $9 million for performance drilling motors, $8.1 million
for Velocity systems, $7 million for RSS systems, and $2.7 million
for other equipment. Equipment on order as at December 31, 2024 is
expected to be delivered within the first half of 2025.
The Board approved a preliminary 2025 capital
expenditure program of $50 million. With $2 million of the 2024
capital expenditure budget carried forward into 2025 and an
additional $3 million in capital expenditures expected, the
Corporation now anticipates spending $55 million in capital
expenditures during 2025. Of the total expenditures, approximately
half is anticipated to be spent on growth, including additional RSS
systems and Real Time RSS Communications technology. The remaining
half is anticipated to be spent to maintain capacity in the fleet
of drilling and other equipment and replace equipment lost downhole
during drilling operations.
The Corporation currently possesses
approximately 896 Atlas motors, comprised of various configurations
including its 5.25", 5.76", 6.63", 7.12", 7.25", 8.12", 9.00",
9.62", and 12.00” Atlas motors, and 135 Velocity systems. The
Corporation also possesses the largest independent RSS fleet in
North America with 89 RSS tools and the only fleet currently
comprised of both the PowerDrive Orbit and iCruise systems.
Non-GAAP and Other Financial
Measures
Throughout this document, PHX Energy uses
certain measures to analyze financial performance, financial
position, and cash flow. These Non-GAAP and Other Specified
Financial Measures do not have standardized meanings prescribed
under Canadian generally accepted accounting principles (“GAAP”)
and include Non-GAAP Financial Measures and Ratios, Capital
Management Measures and Supplementary Financial Measures
(collectively referred to as “Non-GAAP and Other Financial
Measures”). These Non-GAAP and Other Specified Financial Measures
include, but are not limited to, adjusted EBITDA, adjusted EBITDA
per share, adjusted EBITDA excluding cash-settled share-based
compensation expense, adjusted EBITDA as a percentage of revenue,
gross profit as a percentage of revenue excluding depreciation and
amortization, selling, general and administrative (“SG&A”)
costs excluding share-based compensation as a percentage of
revenue, funds from operations, funds from operations per share,
excess cash flow, net capital expenditures, net debt (net cash),
working capital, and remaining distributable balance under ROCS.
Management believes that these measures provide supplemental
financial information that is useful in the evaluation of the
Corporation’s operations and may be used by other oil and natural
gas service companies. Investors should be cautioned, however, that
these measures should not be construed as alternatives to measures
determined in accordance with GAAP as an indicator of PHX Energy’s
performance. The Corporation’s method of calculating these measures
may differ from that of other organizations, and accordingly, such
measures may not be comparable. Please refer to the “Non-GAAP and
Other Financial Measures” section of this document for applicable
definitions, rationale for use, method of calculation and
reconciliations where applicable.
Footnotes throughout this document
reference:
|
(1) |
Non-GAAP financial measure or ratio that does not have any
standardized meaning under IFRS and therefore may not be comparable
to similar measures presented by other entities. Refer to Non-GAAP
and Other Financial Measures section of this document. |
|
(2) |
Capital management measure that
does not have any standardized meaning under IFRS and therefore may
not be comparable to similar measures presented by other entities.
Refer to Non-GAAP and Other Financial Measures section of this
document. |
|
(3) |
Supplementary financial measure
that does not have any standardized meaning under IFRS and
therefore may not be comparable to similar measures presented by
other entities. Refer to Non-GAAP and Other Financial Measures
section of this document |
| |
|
Revenue The Corporation
generates revenue primarily through the provision of directional
drilling services which includes providing equipment, personnel,
and operational support for drilling a well. Additionally, the
Corporation generates revenue through the rental and sale of
drilling motors and associated parts, particularly Atlas.
(Stated in thousands of dollars)
|
|
Three-month periods ended December 31, |
Years ended December 31, |
|
|
2024 |
2023 |
% Change |
2024 |
2023 |
% Change |
|
Directional drilling services |
163,392 |
154,125 |
6 |
|
609,994 |
598,339 |
2 |
|
|
Motor rental |
9,966 |
10,332 |
(4 |
) |
38,436 |
47,009 |
(18 |
) |
|
Sale of motor equipment and parts |
5,318 |
875 |
n.m. |
|
11,233 |
10,993 |
2 |
|
|
Total revenue |
178,676 |
165,332 |
8 |
|
659,663 |
656,341 |
1 |
|
|
|
|
|
|
|
|
|
|
|
n.m. – not meaningful
For the three-month period and year ended
December 31, 2024, PHX Energy achieved its highest level of
quarterly and annual revenue in its history. Consolidated revenue
in the fourth quarter of 2024 increased by 8 percent to $178.7
million compared to $165.3 million in the corresponding
2023-quarter and annual consolidated revenue increased by 1 percent
to $659.7 million compared to $656.3 million in 2023.
In the fourth quarter of 2024, both PHX Energy’s
US and Canadian divisions’ activity outperformed industry activity
trends. The average number of horizontal and directional rigs
operating per day in the US declined by 6 percent to 571 in the
2024 three-month period from 608 in the corresponding 2023-period.
In Canada, industry horizontal and directional drilling activity
(as measured by drilling days) was 16,498 days in the 2024-quarter,
a 4 percent increase from 15,895 days in the same 2023-quarter. In
comparison, the Corporation’s US and Canadian operating days(3)
grew by 8 percent and 6 percent respectively in the 2024
three-month period. PHX Energy’s consolidated operating days
increased by 7 percent to 7,807 days in the 2024-quarter from 7,277
days in the 2023-quarter.
For the year-ended December 31, 2024, PHX Energy
recorded 29,877 consolidated operating days(3) which is 2 percent
more than the 29,192 days in the 2023-year. The US rig count
declined by 13 percent whereas the Canadian industry horizontal and
directional drilling activity (as measured by drilling days)
increased by 5 percent year-over-year. In comparison, in the 2024
twelve-month period, Phoenix USA operating days declined by 4
percent and PHX Energy’s Canadian operating days grew by 12
percent. In both the 2024 and 2023-year, the Corporation’s RSS
activity represented 20 to 25 percent of its US activity and 2 to 4
percent of its Canadian activity.
Average consolidated revenue per day(3) for
directional drilling services period-over-period held relatively
consistent with a marginal decline of 1 percent to $20,930 in the
2024-quarter (2023 – $21,178) and virtually no change at $20,418 in
the 2024-year (2023 – $20,497).
Partially due to the softer US rig count,
revenue generated by the Corporation’s Atlas motor rental division
declined by 4 percent to $10 million in the 2024-quarter (2023 -
$10.3 million) and 18 percent to $38.4 million in the 2024-year
(2023 - $47 million). Additionally, the US division’s motor rental
activities were also negatively impacted by constraints on the
servicing facility’s capacity which delayed turnaround times.
For the three-month period and year ended
December 31, 2024, revenue of $5.3 million and $11.2 million,
respectively, were generated from the sale of Atlas motors and
parts (2023 – $0.9 million and $11 million, respectively). In the
2024-quarter, there was a large customer order for motors as they
added to their fleet capacity whereas in the corresponding
2023-quarter, revenue was mainly generated through the sale of
parts to maintain these fleets. Due to the sporadic and cyclical
nature of the customers’ ordering frequency, it is expected that
revenue from this line of business will fluctuate between
periods.
Operating Costs and
Expenses
(Stated in thousands of dollars except
percentages)
|
|
Three-month periods ended December 31, |
Years ended December 31, |
|
|
2024 |
|
2023 |
|
% Change |
2024 |
|
2023 |
|
% Change |
|
Direct costs |
148,003 |
|
129,240 |
|
15 |
535,169 |
|
506,236 |
|
6 |
|
Depreciation & amortization drilling and other equipment
(included in direct costs) |
11,846 |
|
10,056 |
|
18 |
44,822 |
|
38,861 |
|
15 |
|
Depreciation & amortization right-of-use asset (included in
direct costs) |
867 |
|
841 |
|
3 |
3,787 |
|
2,898 |
|
31 |
|
Gross profit as a percentage of revenue excluding depreciation
& amortization (1) |
24 |
% |
28 |
% |
|
26 |
% |
29 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
Direct costs are comprised of field and shop
expenses, costs of motors and parts sold, and include depreciation
and amortization of the Corporation’s equipment and right-of-use
assets. For the three-month period and year ended December 31,
2024, direct costs increased by 15 percent to $148 million (2023 -
$129.2 million) and 6 percent to $535.2 million (2023 - $506.2
million), respectively.
For the 2024 three and twelve-month periods, the
Corporation’s depreciation and amortization on drilling and other
equipment increased by 18 percent and 15 percent, respectively,
mainly as a result of the additions to fixed assets throughout
2024. Apart from higher depreciation and amortization expenses on
drilling and other equipment, higher direct costs in both
2024-periods primarily resulted from greater equipment repair
expenses and increased costs of motor equipment and parts sold.
Direct costs in both 2024-periods also included $2.2 million of
write-down of inventory to its net realizable value.
For the three-month period and year ended
December 31, 2024, gross profit as a percentage of revenue
excluding depreciation and amortization(1) was 24 percent and 26
percent, respectively, compared to 28 percent and 29 percent in the
corresponding 2023-periods. The decrease in profitability in both
2024 periods is largely attributable to weaker activity in the
Corporation’s high-margin motor rental business in the US, rising
equipment servicing costs, and lower margins realized from the sale
of motor equipment and parts.
In both 2024-periods, greater equipment repair
expenses primarily resulted from rising costs of materials and
services, aging fleet, increasing demands from customers on
components, and higher RSS-related repair and rental costs which
partly resulted from the diversification and enhancement of the RSS
fleet and its related ancillary technologies. With the softer US
industry activity in 2024 and extremely competitive Canadian
market, the pricing environment has been inelastic which has not
allowed the Corporation to implement increases to recuperate these
costs, thus these costs impacted overall profitability. The
Corporation currently has ongoing research and development
(“R&D”) initiatives aimed at reducing costs to maintain
equipment, and Management believes these will aid in improving
profitability once implemented successfully.
(Stated in thousands of dollars except
percentages)
|
|
Three-month periods ended December 31, |
Years ended December 31, |
|
|
2024 |
|
2023 |
|
% Change |
2024 |
|
2023 |
|
% Change |
|
Selling, general and administrative (“SG&A”) costs |
17,567 |
|
18,004 |
|
(2 |
) |
68,294 |
|
68,915 |
|
(1 |
) |
|
Cash-settled share-based compensation (included in SG&A
costs) |
2,190 |
|
4,572 |
|
(52 |
) |
11,774 |
|
13,470 |
|
(13 |
) |
|
Equity-settled share-based compensation (included in SG&A
costs) |
59 |
|
60 |
|
(2 |
) |
480 |
|
491 |
|
(2 |
) |
|
SG&A costs excluding share-based compensation as a percentage
of revenue(1) |
9 |
% |
8 |
% |
|
8 |
% |
8 |
% |
|
| |
|
|
|
|
|
|
|
|
|
|
For the three-month period and year ended
December 31, 2024, SG&A costs were $17.6 million and $68.3
million, respectively, as compared to $18 million and $68.9 million
in the corresponding 2023-periods. In the 2024-quarter, the
decrease in SG&A costs of 2 percent was mainly due to lower
cash-settled share-based compensation expense during the period
compared to the 2023-quarter. In the 2024-year, SG&A costs
decreased slightly by 1 percent as increases in personnel-related
costs were offset by decreases in compensation expenses related to
cash-settled share-based awards.
Cash-settled share-based compensation relates to
the Corporation’s retention awards and is measured at fair value.
For the three-month period and year ended December 31, 2024, the
related compensation expense recognized by PHX Energy was $2.2
million (2023 - $4.6 million) and $11.8 million (2023 - $13.5
million), respectively. Changes in cash-settled share-based
compensation expense in the 2024-periods were mainly driven by
fluctuations in the Corporation’s share price and the number of
awards granted in the period. There were 1,599,094 retention awards
outstanding as at December 31, 2024 (2023 – 2,160,151). SG&A
costs excluding share-based compensation as a percentage of
revenue(1) for the 2024 three-month period marginally increased to
9 percent (2023 – 8 percent) and in the twelve-month period was
flat at 8 percent (2023 – 8 percent).
(Stated in thousands of dollars)
|
|
Three-month periods ended December 31, |
Years ended December 31, |
|
|
2024 |
2023 |
% Change |
2024 |
2023 |
% Change |
|
Research and development expense |
1,333 |
1,393 |
(4 |
) |
5,337 |
5,210 |
2 |
|
|
|
|
|
|
|
|
|
For the three-month period and year ended
December 31, 2024, PHX Energy’s R&D expenditures of $1.3
million and $5.3 million, respectively, were largely comparable to
the $1.4 million and $5.2 million spent in the corresponding
2023-periods. The Corporation’s R&D department remains focused
on improving the design of existing technologies to further enhance
reliability, reduce costs to operate, and continue displacing
certain equipment rentals.
(Stated in thousands of dollars)
|
|
Three-month periods ended December 31, |
Years ended December 31, |
|
|
2024 |
2023 |
% Change |
2024 |
2023 |
% Change |
|
Finance expense |
527 |
448 |
18 |
|
1,948 |
2,422 |
(20 |
) |
|
Finance expense lease liabilities |
512 |
551 |
(7 |
) |
2,213 |
2,245 |
(1 |
) |
|
|
|
|
|
|
|
|
|
|
Finance expenses mainly relate to interest
charges on the Corporation’s credit facilities. For the three-month
period and year ended December 31, 2024, finance expenses increased
to $0.5 million (2023 - $0.4 million) and decreased to $1.9 million
(2023 - $2.4 million), respectively. The increase in finance
expenses in the 2024-quarter was primarily due to higher drawings
on the credit facilities in the period. In the 2024-year, finance
expenses decreased mainly due to lower amounts of loans and
borrowings outstanding for the most part of the 2024-year compared
to 2023. Additionally, variable interest rates on the Corporation’s
operating and syndicated facilities decreased during the 2024
twelve-month period as compared to the corresponding
2023-period.
Finance expense lease liabilities relate to
interest expense incurred on lease liabilities. For the three and
twelve-month periods ended December 31, 2024, finance expense lease
liabilities stayed consistent at $0.5 million and $2.2 million,
respectively (2023 - $0.6 million and $2.2 million, respectively),
as no new significant leases were entered into both periods.
(Stated in thousands of dollars)
|
|
Three-month periods ended December 31, |
Years ended December 31, |
|
|
|
2024 |
|
2023 |
2024 |
|
2023 |
|
|
Net gain on disposition of drilling equipment |
|
6,021 |
|
7,444 |
24,648 |
|
31,347 |
|
|
Foreign exchange gains (losses) |
|
(946 |
) |
533 |
(1,070 |
) |
1,107 |
|
|
Provision for bad debts |
|
- |
|
- |
- |
|
(117 |
) |
|
Other income |
|
5,075 |
|
7,977 |
23,578 |
|
32,337 |
|
|
|
|
|
|
|
|
|
|
|
For the three-month period and year ended
December 31, 2024, the Corporation recognized other income of $5.1
million and $23.6 million, respectively (2023 - $8 million and
$32.3 million, respectively). In both periods, other income was
mainly comprised of net gain on disposition of drilling equipment.
The recognized gain is net of losses, which typically result from
asset retirements that were made before the end of the equipment’s
useful life. In the 2024 quarter and year, fewer instances of high
dollar valued downhole equipment losses occurred as compared to the
corresponding 2023-periods resulting in lower levels of net gain on
disposition of drilling equipment recognized. Fewer instances of
high dollar valued downhole equipment losses can be attributed to
operators generally improving their drilling practices and
continuous improvements in the Corporation’s technology design to
avoid such instances.
Foreign exchange losses of $0.9 million and $1.1
million in the three and twelve-month periods of 2024, respectively
(2023 – gains of $0.5 million and $1.1 million, respectively), were
primarily due to the settlement of CAD-denominated intercompany
receivables in the US.
(Stated in thousands of dollars except
percentages)
|
|
Three-month periods ended December 31, |
Years ended December 31, |
|
|
2024 |
|
2023 |
|
2024 |
|
2023 |
|
|
Provision for (Recovery of) income taxes |
1,711 |
|
(9,460 |
) |
15,658 |
|
5,070 |
|
|
Effective tax rates (3) |
11 |
% |
n.m. |
|
22 |
% |
5 |
% |
n.m. – not meaningful
For the three-month period and year ended
December 31, 2024, the Corporation reported a provision for income
tax of $1.7 million (2023 – recovery of income taxes of $9.5
million), and $15.7 million (2023 - $5.1 million), respectively. In
the 2024-quarter, PHX Energy’s effective tax rate(3) was 11 percent
which is lower than the combined US federal and state corporate
income tax rate of 24.5 percent and the combined Canadian federal
and provincial corporate income tax rate of 23 percent mainly due
to the recovery of income taxes relating to prior periods. In the
2024-year, PHX Energy’s effective tax rate(3) of 22 percent is
relatively in line with the combined US federal and state corporate
income tax rate of 24.5 percent and the combined Canadian federal
and provincial corporate income tax rate of 23 percent. Recovery of
income taxes in the 2023-quarter and lower provision for income
taxes in the 2023-year were primarily attributable to the
recognition and utilization of previously unrecognized deferred tax
assets in the Canadian jurisdiction.
(Stated in thousands of dollars except per share
amounts and percentages)
|
|
Three-month periods ended December 31, |
Years ended December 31, |
|
|
2024 |
|
2023 |
|
% Change |
2024 |
|
2023 |
|
% Change |
|
Operating Results |
|
|
|
|
|
|
|
Earnings |
14,098 |
|
33,134 |
|
(57 |
) |
54,622 |
|
98,580 |
|
(45 |
) |
|
Earnings per share – diluted |
0.30 |
|
0.68 |
|
(56 |
) |
1.16 |
|
1.96 |
|
(41 |
) |
|
Adjusted EBITDA (1) |
29,638 |
|
35,388 |
|
(16 |
) |
123,734 |
|
150,717 |
|
(18 |
) |
|
Adjusted EBITDA per share – diluted (1) |
0.63 |
|
0.70 |
|
(10 |
) |
2.63 |
|
2.86 |
|
(8 |
) |
|
Adjusted EBITDA as a percentage of revenue (1) |
17 |
% |
21 |
% |
|
19 |
% |
23 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
For the three-month period and year ended
December 31, 2024, the Corporation’s earnings decreased by 57
percent to $14.1 million (2023 - $33.1 million) and by 45 percent
to $54.6 million (2023 - $98.6 million), respectively. Earnings in
the 2024 three and twelve-months period included a provision for
income tax of $1.7 million and $15.7 million, respectively, while
earnings in the 2023 three and twelve-month periods included a $9.5
million of recovery of income taxes and $5.1 million of provision
for income taxes, respectively. Recovery of income taxes in the
2023-quarter and lower provision for income taxes in the 2023-year
were primarily attributable to the recognition and utilization of
previously unrecognized deferred tax assets in the Canadian
jurisdiction. Additionally, as a result of fixed asset additions
throughout 2024, depreciation and amortization expenses on drilling
and other equipment increased to $11.8 million (pre-tax) in the
2024-quarter and $44.8 million (pre-tax) in the 2024-year
(2023-quarter - $10.1 million, 2023-year - $38.9 million).
In the fourth quarter of 2024, adjusted EBITDA
decreased by 16 percent to $29.6 million, 17 percent of revenue,
from $35.4 million, 21 percent of revenue in the corresponding
2023-quarter. In the 2024-year, adjusted EBITDA decreased by 18
percent to $123.7 million, 19 percent of revenue, from $150.7
million, 23 percent of revenue in 2023. The decrease in
profitability in both 2024-periods were primarily driven by
increasing equipment repair costs, weaker RSS and motor rental
activity in the US, lower margins from the sale of motor equipment
and parts, as well as fewer instances of high dollar valued
downhole equipment losses. Additionally, the Corporation recognized
a $2.2 million write-down of inventory to its net realizable value
in both 2024-periods.
Segmented Information
The Corporation reports two operating segments
on a geographical basis throughout the Gulf Coast, Northeast and
Rocky Mountain regions of the US and throughout the Western
Canadian Sedimentary Basin (refer to the “Changes in Material
Accounting Policies” section of the Corporation’s 2024 Annual
Report filed on SEDAR+(www.sedarplus.com) for the change in
operating segments). Revenue generated through the Corporation’s
technology partnership and sales and lease agreement for the Middle
East and North Africa (“MENA”) regions are included in the US
division’s results.
United States
(Stated in thousands of dollars)
|
|
Three-month periods ended December 31, |
Years ended December 31, |
|
|
2024 |
|
2023 |
|
% Change |
2024 |
|
2023 |
|
% Change |
|
Directional drilling services |
117,811 |
|
111,350 |
|
6 |
|
431,675 |
|
440,385 |
|
(2 |
) |
|
Motor rental |
9,213 |
|
9,853 |
|
(6 |
) |
36,557 |
|
45,145 |
|
(19 |
) |
|
Sale of motor equipment and parts |
5,318 |
|
875 |
|
n.m. |
|
11,233 |
|
10,993 |
|
2 |
|
|
Total revenue |
132,342 |
|
122,078 |
|
8 |
|
479,465 |
|
496,523 |
|
(3 |
) |
| Direct
costs |
108,155 |
|
93,240 |
|
16 |
|
384,878 |
|
380,020 |
|
1 |
|
|
Gross profit |
24,187 |
|
28,838 |
|
(16 |
) |
94,587 |
|
116,503 |
|
(19 |
) |
| Expenses: |
|
|
|
|
|
|
|
Selling, general and administrative expenses |
8,283 |
|
9,326 |
|
(11 |
) |
30,746 |
|
30,042 |
|
2 |
|
|
Research and development expenses |
- |
|
- |
|
|
- |
|
- |
|
- |
|
|
Finance expense |
- |
|
- |
|
|
- |
|
- |
|
- |
|
|
Finance expense lease liability |
200 |
|
223 |
|
(10 |
) |
943 |
|
929 |
|
2 |
|
| Other
income |
(2,548 |
) |
(5,292 |
) |
(52 |
) |
(16,286 |
) |
(26,992 |
) |
(40 |
) |
|
Reportable segment profit before income taxes |
18,252 |
|
24,581 |
|
(26 |
) |
79,184 |
|
112,524 |
|
(30 |
) |
n.m. – not meaningful
In 2024, PHX Energy’s US operations were
resilient to the weak industry activity as a result of its strong
operational performance and the reputation of its premium
technologies. In the 2024 three-month period, the US division
generated its highest level of quarterly revenue in its history,
$132.3 million, 8 percent higher than the $122.1 million generated
in the fourth quarter of 2023. For the year ended December 31,
2024, the Corporation’s US division’s revenue was $479.5 million,
only 3 percent lower than the record $496.5 million set in
2023.
In the fourth quarter of 2024, the average
number of active horizontal and directional rigs per day in the US
industry declined by 6 percent to 571 compared to an average of 608
rigs per day in the 2023-quarter. In comparison, the
Corporation’s US operating days(3) increased by 8 percent to 4,438
days from 4,114 days in the 2023-quarter. The US division’s RSS
activity represented 22 percent of its operating days which is
lower compared to 26 percent represented in the 2023-quarter. For
the year ended December 31, 2024, the average number of horizontal
and directional rigs running on a daily basis in the US industry
decreased by 13 percent to 585 rigs from 671 rigs in 2023. In
comparison, the US segment’s operating days were 16,667 in the
2024-year compared to 17,347 in 2023; a decrease of 4 percent. The
US division’s RSS activity represented 21 percent of its annual
operating days which is slightly lower compared to 22 percent
represented in the 2023-year.
In 2024, the Corporation continued to focus on
differentiating its RSS fleet with R&D efforts directed towards
its proprietary Real Time RSS Communications technologies. With
this unique advantage, the Corporation expects the percentage of
activity represented by the high margin RSS business line to grow
further.
Horizontal and directional drilling continued to
represent the majority of rigs running on a daily basis during the
fourth quarter and year ended 2024. During the 2024-year, Phoenix
USA was active in the Permian, Eagleford, Scoop/Stack, Marcellus,
Utica, and Bakken basins. Additionally, Phoenix USA was involved
with carbon capture and gas storage projects in Indiana, Michigan,
Louisiana and Texas.
For the three-month period ended December 31,
2024, the US division’s average revenue per day(3) for directional
drilling services declined slightly by 2 percent to $26,546 from
$27,069 in the 2023-quarter. For the year ended December 31, 2024,
average revenue per day for directional drilling services grew
slightly by 2 percent to $25,901 from $25,387 in 2023. Omitting the
impact of foreign exchange, the average revenue per day for
directional drilling services decreased by 6 percent in the
2024-quarter and 1 percent in the 2024-year. The strong US dollar
favorably affected the average revenue per day in both
2024-periods. Without the impact of foreign exchange, average
revenue per day for directional drilling services declined in both
2024-periods primarily due to the decrease in RSS activity as a
percentage of its operating days.
Unlike the Corporation’s US directional drilling
activity, the US division’s motor rental activities were more
directly impacted by the softened rig count. For the three-month
period and year ended December 31, 2024, US motor rental revenue
declined by 6 percent and 19 percent, respectively, to $9.2 million
in the 2024-quarter and $36.6 million in the 2024-year (2023 - $9.9
million and $45.1 million, respectively). Aside from the slowdown
in industry activity, the US division’s motor rental activities
were also negatively impacted by constraints on the servicing
facility’s capacity which delayed turnaround times. The Corporation
continues to see the potential for growth for this business line
and will be adding resources to support this division and its
operations.
In the 2024 three and twelve-month periods, PHX
Energy’s US operations generated $5.3 million and $11.2 million of
revenue from the sale of motors and parts compared to $0.9 million
and $11 million in the respective 2023-periods. In the
2024-quarter, there was a large customer order for motors as they
added capacity to their fleet whereas in the corresponding
2023-quarter, revenue was mainly generated through the sale of
parts. Due to the sporadic and cyclical nature of the customers’
ordering frequency, it is expected that revenue from this line of
business will fluctuate between periods.
For the three-month period ended December 31,
2024, the US segment’s reportable segment income before tax
decreased by 26 percent to $18.3 million from $24.6 million in the
same 2023-period. In the 2024-year, the US segment’s reportable
segment income before tax declined by 30 percent to $79.2 million
from $112.5 million in 2023. Lower profitability in both
2024-periods primarily resulted from higher depreciation expenses,
decreases in the US division’s high margin RSS and motor rental
activities, greater equipment repair expenses, higher costs of
motor equipment and parts sold, and fewer instances of high dollar
valued downhole equipment losses.
Canada
(Stated in thousands of dollars)
|
|
Three-month periods ended December 31, |
Years ended December 31, |
|
|
2024 |
|
2023 |
|
% Change |
2024 |
|
2023 |
|
% Change |
|
Directional drilling services |
45,581 |
|
42,775 |
|
7 |
|
178,319 |
|
157,954 |
|
13 |
|
|
Motor rental |
753 |
|
479 |
|
57 |
|
1,879 |
|
1,864 |
|
1 |
|
|
Total revenue |
46,334 |
|
43,254 |
|
7 |
|
180,198 |
|
159,818 |
|
13 |
|
| Direct
costs |
39,848 |
|
36,001 |
|
11 |
|
150,291 |
|
126,216 |
|
19 |
|
|
Gross profit |
6,486 |
|
7,253 |
|
(11 |
) |
29,907 |
|
33,602 |
|
(11 |
) |
| Expenses: |
|
|
|
|
|
|
|
Selling, general and administrative expenses |
4,248 |
|
2,535 |
|
68 |
|
15,548 |
|
11,303 |
|
38 |
|
|
Research and development expenses |
- |
|
- |
|
- |
|
- |
|
- |
|
- |
|
|
Finance expense |
- |
|
- |
|
- |
|
- |
|
- |
|
- |
|
|
Finance expense lease liability |
293 |
|
306 |
|
(4 |
) |
1,193 |
|
1,241 |
|
(4 |
) |
| Other
income |
(2,527 |
) |
(2,686 |
) |
(6 |
) |
(7,292 |
) |
(5,345 |
) |
36 |
|
|
Reportable segment profit before income taxes |
4,472 |
|
7,098 |
|
(37 |
) |
20,458 |
|
26,403 |
|
(23 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
For the three-month period and year ended
December 31, 2024, PHX Energy’s Canadian operations generated
revenue of $46.3 million (2023 - $43.3 million) and $180.2 million
(2023 - $159.8 million), respectively, the highest level of fourth
quarter and annual revenue since 2014.
In the 2024 three-month period, PHX Energy’s
Canadian segment’s operating days(3) grew by 6 percent to 3,369
days from 3,164 days in the same 2023-quarter and its RSS operating
days accounted for 5 percent of its activity in the 2024-period
(2023 – 2 percent). In comparison, industry horizontal and
directional drilling activity, as measured by drilling days,
increased by 4 percent to 16,498 in the fourth quarter of 2024 from
15,895 in the 2023-quarter. For the year ended December 31, 2024,
there were 62,759 horizontal and directional drilling days realized
in the Canadian industry, compared to the 59,809 days realized in
2023, a 5 percent increase. In comparison, the Canadian segment’s
activity improved by 12 percent from 11,845 operating days in 2023
to 13,210 days in 2024. Additionally, the Canadian division’s RSS
operating days in the 2024-year increased to 4 percent of the
segment’s activity from 2 percent in 2023. In both 2024-periods,
revenue growth was driven by the successful expansion of the
Corporation’s client base and increased RSS activity. During the
2024-year, the Corporation was active in the Duvernay, Montney,
Glauconite, Frobisher, Cardium, Viking, Bakken, Torquay, Colony,
Ellerslie, Charlie Lake, Cummings, Sparky, Clearwater, and Scallion
basins.
The Canadian division’s average revenue per
day(3) for directional drilling services was flat at $13,538 in the
2024-quarter, as compared to $13,522 in the corresponding
2023-quarter and increased slightly by 1 percent to $13,500 in the
2024-year from $13,336 in 2023.
PHX Energy’s Canadian reportable segment profits
decreased by 37 percent to $4.5 million in the 2024-quarter (2023 -
$7.1 million) and 23 percent to $20.5 million in the 2024-year
(2023 - $26.4 million). The decline in profitability in both
2024-periods were mainly due to higher depreciation expenses,
rising personnel-related costs, greater equipment repairs, and
increased RSS-related equipment rentals. In the second half of
2024, the Canadian division took delivery of additional PowerDrive
Orbit RSS systems and with the additional capacity in its owned RSS
fleet, the Corporation expects to reduce equipment rentals and
improve RSS profitability in the upcoming year.
Investing Activities
Net cash used in investing activities for the
year ended December 31, 2024 was $49.2 million as compared to $20.3
million in 2023. During 2024, the Corporation spent $73.4 million
(2023 - $34.4 million) to grow the Corporation’s fleet of drilling
equipment, $5.3 million (2023 - $14.6 million) was used to maintain
capacity in the Corporation’s fleet of drilling and other
equipment, and $4.6 million (2023 - $15.9 million) was spent to
replace equipment lost downhole during drilling operations. With
proceeds on disposition of drilling and other equipment of $36.7
million (2023 - $43.7 million), the Corporation’s net capital
expenditures for 2024 were $46.5 million (2023 - $21.2
million).
(Stated in thousands of dollars)
|
|
Three-month periods ended December 31, |
Years ended December 31, |
|
|
2024 |
|
2023 |
|
2024 |
|
2023 |
|
| Growth
capital expenditures |
13,580 |
|
7,026 |
|
73,378 |
|
34,382 |
|
|
Maintenance capital expenditures from asset retirements |
- |
|
3,066 |
|
5,289 |
|
14,609 |
|
|
Maintenance capital expenditures to replace downhole equipment
losses |
2,134 |
|
5,382 |
|
4,610 |
|
15,941 |
|
|
Total capital expenditures |
15,714 |
|
15,474 |
|
83,277 |
|
64,932 |
|
|
Deduct: |
|
|
|
|
|
Proceeds on disposition of drilling equipment |
(10,057 |
) |
(10,997 |
) |
(36,741 |
) |
(43,686 |
) |
|
Net capital expenditures |
5,657 |
|
4,477 |
|
46,536 |
|
21,246 |
|
|
|
|
|
|
|
|
|
|
|
The 2024-year capital expenditures comprised
of:
- $31 million in
RSS;
- $27 million in
downhole performance drilling motors;
- $20.3 million in
MWD systems and spare components; and
- $5 million in machinery and equipment
and other assets.
The capital expenditure program undertaken in
the year was primarily financed from proceeds on disposition of
drilling equipment, cash flows from operating activities, and the
Corporation’s credit facilities when required.
The change in non-cash working capital balances
of $0.4 million (use of cash) relates to the net change in the
Corporation’s trade payables that are associated with the
acquisition of capital assets. This compares to $1.7 million source
of cash in 2023.
Financing Activities
For the year ended December 31, 2024, net cash
used in financing activities was $51.1 million as compared to $77.9
million in 2023. In the 2024-year:
- dividends of
$37.6 million were paid to shareholders;
- 2,141,232 common
shares were repurchased and cancelled under the NCIB for $20.6
million;
- payments of $3.4
million were made towards lease liabilities;
- $9.1 million net
drawings were made from the Corporation’s syndicated credit
facility; and
- 387,533 common
shares were issued from treasury for proceeds of $1.3 million upon
the exercise of share options.
As of December 31, 2024, the Corporation had CAD
$11.1 million drawn on its Canadian credit facilities, USD $4
million drawn on its US operating facility, and a cash balance of
$14.2 million. As at December 31, 2024, the Corporation had CAD
$83.6 million and USD $16 million available from its credit
facilities. The credit facilities are secured by substantially all
of the Corporation’s assets and mature in December 2026.
As at December 31, 2024, the Corporation was in
compliance with all its financial covenants as follows:
|
Ratio |
Covenant |
|
As at December 31, 2024 |
|
Debt to covenant EBITDA(i) |
<3.0x |
|
0.14 |
|
Interest coverage ratio(i) |
>3.0x |
|
60.66 |
(i) Definitions for these terms are included in
the credit agreement filed on SEDAR+ under the heading "Material
Contracts – Credit Agreements”.
Under the syndicated credit agreement, in any
given period, the Corporation’s distributions (as defined therein)
cannot exceed its maximum aggregate amount of distributions limit
as defined in the Corporation’s syndicated credit agreement.
Distributions include, without limitation, dividends declared and
paid, cash used for common shares purchased by the independent
trustee in the open market and held in trust for potential
settlement of outstanding retention awards, as well as cash used
for common shares repurchased and cancelled under the NCIB.
Cash Requirements for Capital
Expenditures
Historically, the Corporation has financed its
capital expenditures and acquisitions through cash flows from
operating activities, proceeds on disposition of drilling
equipment, debt and equity. With $2 million of the 2024 capital
expenditure budget carried forward into 2025, an additional $3
million of capital expenditures expected, and the previously
approved preliminary 2025 capital expenditure program of $50
million, the Corporation now anticipates spending $55 million in
capital expenditures during 2025, which was recently approved by
the Board. Of the total expenditures, approximately half is
targeted to be spent on growth and approximately half is expected
to be allocated to maintain capacity in the existing fleet of
drilling and other equipment and replace equipment lost downhole
during drilling operations. The amount expected to be allocated
towards replacing equipment lost downhole could increase, should
more downhole equipment losses occur throughout the
year.
These planned expenditures are expected to be
financed from cash flow from operating activities, proceeds on
disposition of drilling equipment, cash and cash equivalents, and
the Corporation’s credit facilities, if necessary. However, if a
sustained period of market uncertainty, threat of trade wars, and
financial market volatility persists in 2025, the Corporation's
activity levels, cash flows and access to credit may be negatively
impacted, and the expenditure level would be reduced accordingly
where possible. Conversely, if future growth opportunities present
themselves, the Corporation would look at expanding this planned
capital expenditure amount.
As at December 31, 2024, the Corporation has
commitments to purchase drilling and other equipment for $44
million. Delivery is expected to occur within the first half of
2025.
About PHX Energy Services
Corp.
PHX Energy is a growth-oriented, public oil and
natural gas services company. The Corporation, through its
directional drilling subsidiary entities provides horizontal and
directional drilling services and technologies to oil and natural
gas exploration and development companies principally in Canada and
the US. In connection with the services it provides, PHX Energy
engineers, develops and manufactures leading-edge technologies. In
recent years, PHX Energy has developed various new technologies
that have positioned the Corporation as a technology leader in the
horizontal and directional drilling services sector.
PHX Energy’s Canadian directional drilling
operations are conducted through Phoenix Technology Services LP.
The Corporation maintains its corporate head office, research and
development, Canadian sales, service and operational centers in
Calgary, Alberta. In addition, PHX Energy has a facility in
Estevan, Saskatchewan. PHX Energy’s US operations, conducted
through the Corporation’s wholly-owned subsidiary, Phoenix
Technology Services USA Inc., is headquartered in Houston, Texas.
Phoenix USA has sales and service facilities in Houston, Texas;
Midland, Texas; Casper, Wyoming; and Oklahoma City, Oklahoma.
Internationally, PHX Energy has an administrative office in
Nicosia, Cyprus and also supplies technology to the Middle East
regions. At the end of 2024, the Corporation has substantially
completed the wind up of its operations in Albania.
As at December 31, 2024, PHX Energy had 924
full-time employees (2023 – 920) and the Corporation utilized over
139 additional field consultants in 2024 (2023 – over 175).
The common shares of PHX Energy trade on the
Toronto Stock Exchange under the symbol PHX.
For further information please contact:
John Hooks, CEO; Michael Buker, President; or
Cameron Ritchie, Senior Vice President Finance and CFO
PHX Energy Services Corp.Suite 1600, 215 9th
Avenue SW, Calgary Alberta T2P 1K3Tel: 403-543-4466 Fax:
403-543-4485 www.phxtech.com Consolidated Statements
of Financial Position
|
(Stated in thousands of dollars) |
|
December 31, 2024 |
December 31, 2023 |
|
ASSETS |
|
|
|
|
|
|
|
Current assets: |
|
|
|
|
|
|
|
|
Cash |
|
$ |
14,163 |
|
|
$ |
16,433 |
|
|
|
Trade and other receivables |
|
|
133,589 |
|
|
|
121,334 |
|
|
|
Inventories |
|
|
63,135 |
|
|
|
63,173 |
|
|
|
Prepaid expenses |
|
|
2,628 |
|
|
|
2,409 |
|
|
|
Current tax assets |
|
|
502 |
|
|
|
3,691 |
|
|
|
Total current assets |
|
|
214,017 |
|
|
|
207,040 |
|
|
Non-current assets: |
|
|
|
|
|
|
|
|
Drilling and other long-term assets |
|
|
166,081 |
|
|
|
128,263 |
|
|
|
Right-of-use assets |
|
|
24,943 |
|
|
|
27,056 |
|
|
|
Intangible assets |
|
|
14,611 |
|
|
|
14,200 |
|
|
|
Investments |
|
|
2,171 |
|
|
|
3,001 |
|
|
|
Other long-term assets |
|
|
1,463 |
|
|
|
1,284 |
|
|
|
Deferred tax assets |
|
|
- |
|
|
|
4,650 |
|
|
|
Total non-current assets |
|
|
209,269 |
|
|
|
178,454 |
|
|
Total assets |
|
$ |
423,286 |
|
|
$ |
385,494 |
|
|
LIABILITIES AND SHAREHOLDERS' EQUITY |
|
|
|
|
|
|
|
Current liabilities: |
|
|
|
|
|
|
|
|
Trade and other payables |
|
$ |
116,668 |
|
|
$ |
100,438 |
|
|
|
Dividends payable |
|
|
9,102 |
|
|
|
9,453 |
|
|
|
Current lease liabilities |
|
|
3,702 |
|
|
|
3,234 |
|
|
|
Current tax liabilities |
|
|
- |
|
|
|
- |
|
|
|
Total current liabilities |
|
|
129,472 |
|
|
|
113,125 |
|
|
Non-current liabilities: |
|
|
|
|
|
|
|
|
Lease liabilities |
|
|
31,650 |
|
|
|
33,972 |
|
|
|
Loans and borrowings |
|
|
16,827 |
|
|
|
7,564 |
|
|
|
Deferred tax liabilities |
|
|
19,792 |
|
|
|
16,822 |
|
|
|
Other |
|
|
3,340 |
|
|
|
4,042 |
|
|
|
Total non-current liabilities |
|
|
71,609 |
|
|
|
62,400 |
|
|
Equity: |
|
|
|
|
|
|
|
|
Share capital |
|
|
203,841 |
|
|
|
222,653 |
|
|
|
Contributed surplus |
|
|
7,189 |
|
|
|
7,168 |
|
|
|
Deficit |
|
|
(28,291 |
) |
|
|
(45,695 |
) |
|
|
Accumulated other comprehensive income (AOCI) |
|
|
39,466 |
|
|
|
25,843 |
|
|
|
Total equity |
|
|
222,205 |
|
|
|
209,969 |
|
|
Total liabilities and equity |
|
$ |
423,286 |
|
|
$ |
385,494 |
|
|
|
|
|
|
|
|
|
|
|
Consolidated Statements of Comprehensive
Earnings (Stated in thousands of dollars except
earnings per share)
|
Three-month periods ended December 31, |
Years ended December 31, |
|
|
|
2024 |
|
|
2023 |
|
|
2024 |
|
|
2023 |
|
|
|
|
(Unaudited) |
|
|
(Unaudited) |
|
|
|
|
|
|
Revenue |
$ |
178,676 |
|
$ |
165,332 |
|
$ |
659,663 |
|
$ |
656,341 |
|
|
Direct costs |
|
148,003 |
|
|
129,240 |
|
|
535,169 |
|
|
506,236 |
|
|
Gross profit |
|
30,673 |
|
|
36,092 |
|
|
124,494 |
|
|
150,105 |
|
|
Expenses: |
|
|
|
|
|
|
|
|
|
Selling, general and administrative expenses |
|
17,567 |
|
|
18,003 |
|
|
68,294 |
|
|
68,915 |
|
|
Research and development expenses |
|
1,333 |
|
|
1,393 |
|
|
5,337 |
|
|
5,210 |
|
|
Finance expense |
|
527 |
|
|
448 |
|
|
1,948 |
|
|
2,422 |
|
|
Finance expense lease liability |
|
512 |
|
|
551 |
|
|
2,213 |
|
|
2,245 |
|
|
Other income |
|
(5,075 |
) |
|
(7,977 |
) |
|
(23,578 |
) |
|
(32,337 |
) |
|
|
|
|
14,864 |
|
|
12,418 |
|
|
54,214 |
|
|
46,455 |
|
|
Earnings before income taxes |
|
15,809 |
|
|
23,674 |
|
|
70,280 |
|
|
103,650 |
|
|
|
|
|
|
|
|
|
|
|
|
|
Provision for (recovery of) income taxes |
|
|
|
|
|
|
|
|
|
Current |
|
(3,452 |
) |
|
(3,157 |
) |
|
9,273 |
|
|
10,435 |
|
|
Deferred |
|
5,163 |
|
|
(6,303 |
) |
|
6,385 |
|
|
(5,365 |
) |
|
|
|
|
1,711 |
|
|
(9,460 |
) |
|
15,658 |
|
|
5,070 |
|
|
Net earnings |
|
14,098 |
|
|
33,134 |
|
|
54,622 |
|
|
98,580 |
|
|
|
|
|
|
|
|
|
|
|
|
Other comprehensive income (loss) |
|
|
|
|
|
|
|
|
|
|
Foreign currency translation, net of tax |
|
11,328 |
|
|
(3,752 |
) |
|
14,453 |
|
|
(4,767 |
) |
|
|
Equity investment revaluation through AOCI |
|
- |
|
|
- |
|
|
(830 |
) |
|
- |
|
|
Total comprehensive earnings |
$ |
25,426 |
|
$ |
29,382 |
|
$ |
68,245 |
|
$ |
93,813 |
|
|
|
|
|
|
|
|
|
|
|
|
Earnings per share – basic |
$ |
0.31 |
|
$ |
0.69 |
|
$ |
1.17 |
|
$ |
1.98 |
|
|
Earnings per share – diluted |
$ |
0.30 |
|
$ |
0.68 |
|
$ |
1.16 |
|
$ |
1.96 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Consolidated Statements of Cash
Flows
|
(Stated in thousands of dollars) |
Three-month periods ended December 31, |
Years ended December 31, |
|
|
|
|
2024 |
|
|
2023 |
|
|
2024 |
|
|
2023 |
|
|
|
|
(Unaudited) |
|
|
(Unaudited) |
|
|
|
|
|
|
|
|
Cash flows from operating activities: |
|
|
|
|
|
|
|
|
|
|
|
Earnings |
$ |
14,098 |
|
$ |
33,134 |
|
$ |
54,622 |
|
$ |
98,580 |
|
|
Adjustments for: |
|
|
|
|
|
|
|
|
|
Depreciation and amortization |
|
11,846 |
|
|
10,056 |
|
|
44,822 |
|
|
38,861 |
|
|
Depreciation and amortization right-of-use asset |
|
867 |
|
|
841 |
|
|
3,787 |
|
|
2,898 |
|
|
Provision for income taxes |
|
1,711 |
|
|
(9,460 |
) |
|
15,658 |
|
|
5,070 |
|
|
Unrealized foreign exchange loss |
|
18 |
|
|
(242 |
) |
|
204 |
|
|
150 |
|
|
Net gain on disposition of drilling equipment |
|
(6,021 |
) |
|
(7,444 |
) |
|
(24,648 |
) |
|
(31,347 |
) |
|
Equity-settled share-based payments |
|
59 |
|
|
60 |
|
|
480 |
|
|
491 |
|
|
Finance expense |
|
527 |
|
|
448 |
|
|
1,948 |
|
|
2,422 |
|
|
Finance expense lease liability |
|
512 |
|
|
551 |
|
|
2,213 |
|
|
2,245 |
|
|
Provision for bad debts |
|
- |
|
|
- |
|
|
- |
|
|
117 |
|
|
Provision for inventory obsolescence |
|
1,200 |
|
|
773 |
|
|
2,822 |
|
|
2,075 |
|
|
Interest paid on lease liability |
|
(512 |
) |
|
(551 |
) |
|
(2,213 |
) |
|
(2,245 |
) |
|
Interest paid |
|
(355 |
) |
|
(555 |
) |
|
(1,241 |
) |
|
(2,061 |
) |
|
Income taxes paid |
|
(3,400 |
) |
|
(6,325 |
) |
|
(5,972 |
) |
|
(14,859 |
) |
|
Change in non-cash working capital |
|
(2,874 |
) |
|
15,468 |
|
|
4,416 |
|
|
(5,674 |
) |
|
Net cash from operating activities |
|
17,676 |
|
|
36,754 |
|
|
96,898 |
|
|
96,723 |
|
|
Cash flows from investing activities: |
|
|
|
|
|
|
|
|
|
Proceeds on disposition of drilling equipment |
|
10,057 |
|
|
10,997 |
|
|
36,741 |
|
|
43,686 |
|
|
Acquisition of drilling and other equipment |
|
(15,714 |
) |
|
(15,474 |
) |
|
(83,277 |
) |
|
(64,932 |
) |
|
Acquisition of intangible assets |
|
(863 |
) |
|
(686 |
) |
|
(2,228 |
) |
|
(686 |
) |
|
Change in non-cash working capital |
|
4,778 |
|
|
(480 |
) |
|
(400 |
) |
|
1,670 |
|
|
Net cash used in investing activities |
|
(1,742 |
) |
|
(5,643 |
) |
|
(49,164 |
) |
|
(20,262 |
) |
|
Cash flows from financing activities: |
|
|
|
|
|
|
|
|
|
Repurchase of shares under the NCIB |
|
(4,859 |
) |
|
(11,264 |
) |
|
(20,614 |
) |
|
(30,366 |
) |
|
Dividends paid to shareholders |
|
(9,183 |
) |
|
(7,277 |
) |
|
(37,570 |
) |
|
(30,189 |
) |
|
Net proceeds from (net repayment of) loans and borrowings |
|
(873 |
) |
|
(10,500 |
) |
|
9,107 |
|
|
(14,731 |
) |
|
Payments of lease liability |
|
(2,393 |
) |
|
(792 |
) |
|
(3,377 |
) |
|
(3,013 |
) |
|
Purchase of shares held in trust |
|
- |
|
|
- |
|
|
- |
|
|
(612 |
) |
|
Proceeds from exercise of options |
|
469 |
|
|
200 |
|
|
1,343 |
|
|
964 |
|
|
Change in non-cash working capital |
|
- |
|
|
414 |
|
|
- |
|
|
- |
|
|
Net cash used in financing activities |
|
(16,839 |
) |
|
(29,219 |
) |
|
(51,111 |
) |
|
(77,947 |
) |
|
Net decrease in cash |
|
(905 |
) |
|
1,892 |
|
|
(3,377 |
) |
|
(1,486 |
) |
|
Cash, beginning of year |
|
14,203 |
|
|
14,845 |
|
|
16,433 |
|
|
18,247 |
|
|
Effect of movements in exchange rates on cash held |
|
865 |
|
|
(304 |
) |
|
1,107 |
|
|
(328 |
) |
|
Cash, end of year |
$ |
14,163 |
|
$ |
16,433 |
|
$ |
14,163 |
|
$ |
16,433 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cautionary Statement Regarding
Forward-Looking Information and Statements
This document contains certain forward-looking
information and statements within the meaning of applicable
securities laws. The use of "expect", "anticipate", "continue",
"estimate", "objective", "ongoing", "may", "will", "project",
"could", "should", "can", "believe", "plans", "intends",
"strategy", “targets” and similar expressions are intended to
identify forward-looking information or statements.
The forward-looking information and statements
included in this document are not guarantees of future performance
and should not be unduly relied upon. These statements and
information involve known and unknown risks, uncertainties and
other factors that may cause actual results or events to differ
materially from those anticipated in such forward-looking
statements and information. The Corporation believes the
expectations reflected in such forward-looking statements and
information are reasonable, but no assurance can be given that
these expectations will prove to be correct. Such forward-looking
statements and information included in this document should not be
unduly relied upon. These forward-looking statements and
information speak only as of the date of this document.
In particular, forward-looking information and
statements contained in this document include without limitation,
the Corporation’s intent to preserve balance sheet strength and
continue to reward shareholders, including through its ROCS
program, intentions for the distributable cash under ROCS to be
targeted at 70 percent of excess cash flow and staying within this
target in 2025, PHX Energy's intentions with respect to the NCIB
and purchases thereunder and the effects of repurchases under the
NCIB, the anticipated industry activity and demand for the
Corporation’s services and technologies in North America, the
projected capital expenditures budget for 2025, and how the budget
will be allocated and funded, the timeline for delivery of
equipment on order, the ability of current R&D projects to
improve reliability, reduce maintenance costs and displace certain
rentals and the impact that these initiatives will aide
profitability, the anticipated continuation of the revenue and
growth generated by both the Atlas sales and rental divisions, the
ability to increase RSS utilization and percentage of activity RSS
represents along with its impact that this will have on
profitability particularly in the Canadian division, the
anticipated continuation of PHX Energy’s quarterly dividend program
and the amounts of dividends, and the anticipated impact of
potential new or increased tariffs that may be imposed by the US
administration and any retaliatory actions that may be taken by
Canada or other nations, and the Corporation ability to reduce this
impact in its supply chain.
The above are stated under the headings:
“Financial Results”, “Overall Performance”, “Dividends and ROCS”,
“Capital Spending”, “Revenue”, “Segmented Information” and “Capital
Resources”. In addition, all information contained under the
heading “Outlook” of this document may contain forward-looking
statements.
In addition to other material factors,
expectations and assumptions which may be identified in this
document and other continuous disclosure documents of the
Corporation referenced herein, assumptions have been made in
respect of such forward-looking statements and information
regarding, without limitation, that: the Corporation will continue
to conduct its operations in a manner consistent with past
operations; the general continuance of current industry conditions
and the accuracy of the Corporation’s market outlook expectations
for 2025 and in the future; that future business, regulatory and
industry conditions will be within the parameters expected by the
Corporation; that there will be no adverse tariff events including
intentional tariff wars that could have a significant impact on the
markets in which the Corporation operates; anticipated financial
performance, business prospects, impact of competition, strategies,
the general stability of the economic and political environment in
which the Corporation operates; the potential impact of trade wars,
pandemics, the Russian-Ukrainian war, Middle-East conflict and
other world events on the global economy, specifically trade,
manufacturing, supply chain, inflation and energy consumption,
among other things and the resulting impact on the Corporation’s
operations and future results which remain uncertain; exchange and
interest rates, and inflationary pressures including the potential
for further interest rate hikes by global central banks and the
impact on financing charges and foreign exchange and the
anticipated global economic response to concerted interest rate
hikes; the continuance of existing (and in certain circumstances,
the implementation of proposed) tax, royalty and regulatory
regimes; the sufficiency of budgeted capital expenditures in
carrying out planned activities; the availability and cost of
labour and services and the adequacy of cash flow; debt and ability
to obtain financing on acceptable terms to fund its planned
expenditures, which are subject to change based on commodity
prices; market conditions and future oil and natural gas prices;
and potential timing delays. Although management considers these
material factors, expectations, and assumptions to be reasonable
based on information currently available to it, no assurance can be
given that they will prove to be correct.
Readers are cautioned that the foregoing lists
of factors are not exhaustive. Additional information on these and
other factors that could affect the Corporation’s operations and
financial results are included in reports on file with the Canadian
Securities Regulatory Authorities and may be accessed through the
SEDAR+ website (www.sedarplus.ca) or at the Corporation’s website.
The forward-looking statements and information contained in this
document are expressly qualified by this cautionary statement. The
Corporation does not undertake any obligation to publicly update or
revise any forward-looking statements or information, whether as a
result of new information, future events or otherwise, except as
may be required by applicable securities laws.
Non-GAAP and Other Financial
Measures
Non-GAAP Financial Measures and
Ratios
a) Adjusted
EBITDA
Adjusted EBITDA, defined as earnings before
finance expense, finance expense lease liability, income taxes,
depreciation and amortization, impairment losses on drilling and
other equipment and goodwill and other write-offs, equity-settled
share-based payments, severance payouts relating to the
Corporation’s restructuring cost, and unrealized foreign exchange
gains or losses, does not have a standardized meaning and is not a
financial measure that is recognized under GAAP. However,
Management believes that adjusted EBITDA provides supplemental
information to earnings that is useful in evaluating the results of
the Corporation’s principal business activities before considering
certain charges, how it was financed and how it was taxed in
various countries. Investors should be cautioned, however, that
adjusted EBITDA should not be construed as an alternative measure
to earnings determined in accordance with GAAP. PHX Energy’s method
of calculating adjusted EBITDA may differ from that of other
organizations and, accordingly, its adjusted EBITDA may not be
comparable to that of other companies.
The following is a reconciliation of earnings to
adjusted EBITDA:
(Stated in thousands of
dollars)
|
|
Three-month periods ended December 31, |
Years ended December 31, |
|
|
2024 |
2023 |
|
2024 |
2023 |
|
Earnings: |
14,098 |
33,134 |
|
54,622 |
98,580 |
|
Add: |
|
|
|
|
|
Depreciation and amortization drilling and
other equipment |
11,846 |
10,056 |
|
44,822 |
38,861 |
|
Depreciation and amortization right-of-use
asset |
867 |
841 |
|
3,787 |
2,898 |
|
Provision for (recovery of) income taxes |
1,711 |
(9,460 |
) |
15,658 |
5,070 |
|
Finance expense |
527 |
448 |
|
1,948 |
2,422 |
|
Finance expense lease liability |
512 |
551 |
|
2,213 |
2,245 |
|
Equity-settled share-based payments |
59 |
60 |
|
480 |
491 |
|
Unrealized foreign exchange loss (gain) |
18 |
(242 |
) |
204 |
150 |
|
Adjusted EBITDA |
29,638 |
35,388 |
|
123,734 |
150,717 |
|
|
|
|
|
|
|
b) Adjusted EBITDA Per
Share - Diluted
Adjusted EBITDA per share - diluted is
calculated using the treasury stock method whereby deemed proceeds
on the exercise of the share options are used to reacquire common
shares at an average share price. The calculation of adjusted
EBITDA per share - dilutive is based on the adjusted EBITDA as
reported in the table above divided by the diluted number of shares
outstanding as quantified in Note 10(b) in the Notes to the
Consolidated Financial Statements.
c) Adjusted EBITDA as a
Percentage of Revenue
Adjusted EBITDA as a percentage of revenue is
calculated by dividing the adjusted EBITDA as reported in the table
above by revenue as stated on the Consolidated Statements of
Comprehensive Earnings.
d) Adjusted EBITDA
Excluding Cash-settled Share-based Compensation
Expense
Adjusted EBITDA excluding cash-settled
share-based compensation expense is calculated by adding
cash-settled share-based compensation expense to adjusted EBITDA as
described above. Management believes that this measure provides
supplemental information to earnings that is useful in evaluating
the results of the Corporation’s principal business activities
before considering certain charges, how it was financed, how it was
taxed in various countries, and without the impact of cash-settled
share-based compensation expense that is affected by fluctuations
in the Corporation’s share price.
The following is a reconciliation of earnings to
adjusted EBITDA excluding cash-settled share-based compensation
expense:
(Stated in thousands of
dollars)
|
|
Three-month periods ended December 31, |
Years ended December 31, |
|
|
2024 |
2023 |
|
2024 |
2023 |
|
Earnings: |
14,098 |
33,134 |
|
54,622 |
98,580 |
|
Add: |
|
|
|
|
|
Depreciation and amortization drilling and other equipment |
11,846 |
10,056 |
|
44,822 |
38,861 |
|
Depreciation and amortization right-of-use asset |
867 |
841 |
|
3,787 |
2,898 |
|
Provision for (recovery of) income taxes |
1,711 |
(9,460 |
) |
15,658 |
5,070 |
|
Finance expense |
527 |
448 |
|
1,948 |
2,422 |
|
Finance expense lease liability |
512 |
551 |
|
2,213 |
2,245 |
|
Equity-settled share-based payments |
59 |
60 |
|
480 |
491 |
|
Unrealized foreign exchange loss |
18 |
(242 |
) |
204 |
150 |
|
Cash-settled share-based compensation expense |
2,190 |
4,572 |
|
11,774 |
13,470 |
|
Adjusted EBITDA excluding cash-settled share-based compensation
expense |
31,828 |
39,960 |
|
135,508 |
164,187 |
|
|
|
|
|
|
|
e) Adjusted EBITDA
Excluding Cash-settled Share-based Compensation Expense as a
Percentage of Revenue
Adjusted EBITDA excluding cash-settled
share-based compensation expense as a percentage of revenue is
calculated by dividing adjusted EBITDA excluding cash-settled
share-based compensation expense as reported above by revenue as
stated on the Consolidated Statements of Comprehensive
Earnings.
f) Gross Profit as a
Percentage of Revenue Excluding Depreciation &
Amortization
Gross profit as a percentage of revenue
excluding depreciation & amortization is defined as the
Corporation’s gross profit excluding depreciation and amortization
divided by revenue and is used to assess operational profitability.
This Non-GAAP ratio does not have a standardized meaning and is not
a financial measure recognized under GAAP. PHX Energy’s method of
calculating gross profit as a percentage of revenue may differ from
that of other organizations and, accordingly, it may not be
comparable to that of other companies.
The following is a reconciliation of revenue,
direct costs, depreciation and amortization and gross profit to
gross profit as a percentage of revenue excluding depreciation and
amortization:
(Stated in thousands of dollars)
|
|
Three-month periods ended December 31, |
Years ended December 31, |
|
|
|
2024 |
|
2023 |
|
2024 |
|
2023 |
|
|
Revenue |
|
178,676 |
|
165,332 |
|
659,663 |
|
656,341 |
|
|
Direct costs |
|
148,003 |
|
129,240 |
|
535,169 |
|
506,236 |
|
|
Gross profit |
|
30,673 |
|
36,092 |
|
124,494 |
|
150,105 |
|
| Depreciation &
amortization drilling and other equipment (included in direct
costs) |
|
11,846 |
|
10,056 |
|
44,822 |
|
38,861 |
|
| Depreciation &
amortization right-of-use asset (included in direct costs) |
|
867 |
|
841 |
|
3,787 |
|
2,898 |
|
|
|
|
43,386 |
|
46,989 |
|
173,103 |
|
191,864 |
|
|
Gross profit as a percentage of revenue excluding depreciation
& amortization |
|
24 |
% |
28 |
% |
26 |
% |
29 |
% |
|
|
|
|
|
|
|
|
|
|
|
g) SG&A Costs
Excluding Share-Based Compensation as a Percentage of
Revenue
SG&A costs excluding share-based
compensation as a percentage of revenue is defined as the
Corporation’s SG&A costs excluding share-based compensation
divided by revenue and is used to assess the impact of
administrative costs excluding the effect of share price
volatility. This Non-GAAP ratio does not have a standardized
meaning and is not a financial measure recognized under GAAP. PHX
Energy’s method of calculating SG&A costs excluding share-based
compensation as a percentage of revenue may differ from that of
other organizations and, accordingly, it may not be comparable to
that of other companies.
The following is a reconciliation of SG&A
costs, share-based compensation, and revenue to SG&A costs
excluding share-based compensation as a percentage of revenue:
(Stated in thousands of dollars)
|
|
Three-month periods ended December 31, |
Years ended December 31, |
|
|
|
2024 |
|
2023 |
|
2024 |
|
2023 |
|
|
SG&A Costs |
|
17,567 |
|
18,004 |
|
68,294 |
|
68,915 |
|
|
Deduct: |
|
|
|
|
|
|
Share-based compensation (included in
SG&A) |
|
2,249 |
|
4,632 |
|
12,254 |
|
13,961 |
|
|
|
|
15,318 |
|
13,372 |
|
56,040 |
|
54,954 |
|
|
Revenue |
|
178,676 |
|
165,332 |
|
659,663 |
|
656,341 |
|
|
SG&A costs excluding share-based compensation as a percentage
of revenue |
|
9 |
% |
8 |
% |
8 |
% |
8 |
% |
|
|
|
|
|
|
|
|
|
|
|
Capital Management Measures
a) Funds from
Operations
Funds from operations is defined as cash flows
generated from operating activities before changes in non-cash
working capital, interest paid, and income taxes paid. This
financial measure does not have a standardized meaning and is not a
financial measure recognized under GAAP. Management uses funds from
operations as an indication of the Corporation’s ability to
generate funds from its operations before considering changes in
working capital balances and interest and taxes paid. Investors
should be cautioned, however, that this financial measure should
not be construed as an alternative measure to cash flows from
operating activities determined in accordance with GAAP. PHX
Energy’s method of calculating funds from operations may differ
from that of other organizations and, accordingly, it may not be
comparable to that of other companies.
The following is a reconciliation of cash flows
from operating activities to funds from operations:
(Stated in thousands of dollars)
|
|
Three-month periods ended December 31, |
Years ended December 31, |
|
|
2024 |
2023 |
|
2024 |
|
2023 |
|
Cash flows from operating activities |
17,676 |
36,754 |
|
96,898 |
|
96,723 |
|
Add (deduct): |
|
|
|
|
|
Changes in non-cash working capital |
2,874 |
(15,467 |
) |
(4,416 |
) |
5,674 |
|
Interest paid |
355 |
555 |
|
1,241 |
|
2,061 |
|
Income taxes paid |
3,400 |
6,325 |
|
5,972 |
|
14,859 |
|
Funds from operations |
24,305 |
28,167 |
|
99,695 |
|
119,317 |
|
|
|
|
|
|
|
|
b) Excess Cash
Flow
Excess cash flow is defined as funds from
operations (as defined above) less cash payment on leases, growth
capital expenditures, and maintenance capital expenditures from
downhole equipment losses and asset retirements, and increased by
proceeds on disposition of drilling equipment. This financial
measure does not have a standardized meaning and is not a financial
measure recognized under GAAP. Management uses excess cash flow as
an indication of the Corporation’s ability to generate funds from
its operations to support operations and grow and maintain the
Corporation’s drilling and other equipment. This performance
measure is useful to investors for assessing the Corporation’s
operating and financial performance, leverage and liquidity.
Investors should be cautioned, however, that this financial measure
should not be construed as an alternative measure to cash flows
from operating activities determined in accordance with GAAP. PHX
Energy’s method of calculating excess cash flow may differ from
that of other organizations and, accordingly, it may not be
comparable to that of other companies.
The following is a reconciliation of cash flows
from operating activities to excess cash flow:
(Stated in thousands of dollars)
|
|
Three-month periods ended December 31, |
Years ended December 31, |
|
|
2024 |
|
2023 |
|
2024 |
|
2023 |
|
|
Cash flows from operating activities |
17,676 |
|
36,754 |
|
96,898 |
|
96,723 |
|
|
Add (deduct): |
|
|
|
|
|
Changes in non-cash working capital |
2,874 |
|
(15,467 |
) |
(4,416 |
) |
5,674 |
|
|
Interest paid |
355 |
|
555 |
|
1,241 |
|
2,061 |
|
|
Income taxes paid (received) |
3,400 |
|
6,325 |
|
5,972 |
|
14,859 |
|
|
Cash payment on leases |
(1,385 |
) |
(1,343 |
) |
(5,590 |
) |
(5,258 |
) |
|
|
22,920 |
|
26,824 |
|
94,105 |
|
114,059 |
|
|
|
|
|
|
|
|
Proceeds on disposition of drilling equipment |
10,057 |
|
10,997 |
|
36,741 |
|
43,686 |
|
|
Maintenance capital expenditures to replace downhole equipment
losses and asset retirements |
(2,134 |
) |
(8,448 |
) |
(9,899 |
) |
(30,550 |
) |
|
Net proceeds |
7,923 |
|
2,549 |
|
26,842 |
|
13,136 |
|
|
|
|
|
|
|
|
Growth capital expenditures |
(13,580 |
) |
(7,026 |
) |
(73,378 |
) |
(34,382 |
) |
|
|
|
|
|
|
|
Excess cash flow |
17,263 |
|
22,347 |
|
47,569 |
|
92,813 |
|
c) Working
Capital
Working capital is defined as the Corporation’s
current assets less its current liabilities and is used to assess
the Corporation’s short-term liquidity. This financial measure does
not have a standardized meaning and is not a financial measure
recognized under GAAP. Management uses working capital to provide
insight as to the Corporation’s ability to meet obligations as at
the reporting date. PHX Energy’s method of calculating working
capital may differ from that of other organizations and,
accordingly, it may not be comparable to that of other
companies.
The following is a reconciliation of current
assets and current liabilities to working capital:
(Stated in thousands of dollars)
|
|
|
December 31, |
|
|
|
|
|
2024 |
|
2023 |
|
|
Current assets |
|
|
|
214,017 |
|
207,040 |
|
|
Deduct: |
|
|
|
|
|
|
Current liabilities |
|
|
|
(129,472 |
) |
(113,125 |
) |
|
Working capital |
|
|
|
84,545 |
|
93,915 |
|
|
|
|
|
|
|
|
|
|
d) Net
Debt (Net Cash)
Net debt is defined as the Corporation’s loans
and borrowings less cash. This financial measure does not have a
standardized meaning and is not a financial measure recognized
under GAAP. Management uses net debt to provide insight as to the
Corporation’s ability to meet obligations as at the reporting date.
PHX Energy’s method of calculating net debt may differ from that of
other organizations and, accordingly, it may not be comparable to
that of other companies.
The following is a reconciliation of loans and
borrowings and cash to net debt:
(Stated in thousands of dollars)
|
|
|
December 31, |
|
|
|
|
2024 |
|
2023 |
|
|
Loans and borrowings |
|
|
16,827 |
|
7,564 |
|
|
Deduct: |
|
|
|
|
|
Cash |
|
|
(14,163 |
) |
(16,433 |
) |
|
Net debt (Net cash) |
|
|
2,664 |
|
(8,869 |
) |
|
|
|
|
|
|
|
|
e) Net
Capital Expenditures
Net capital expenditures is comprised of total
additions to drilling and other long-term assets, as determined in
accordance with IFRS, less total proceeds from disposition of
drilling equipment, as determined in accordance with IFRS. This
financial measure does not have a standardized meaning and is not a
financial measure recognized under GAAP. Management uses net
capital expenditures to provide insight as to the Corporation’s
ability to meet obligations as at the reporting date. PHX Energy’s
method of calculating net capital expenditures may differ from that
of other organizations and, accordingly, it may not be comparable
to that of other companies.
The following is a reconciliation of additions to
drilling and other equipment and proceeds from disposition of
drilling equipment to net capital expenditures:
(Stated in thousands of dollars)
|
|
Three-month periods ended December 31, |
Years ended December 31, |
|
|
2024 |
|
2023 |
|
2024 |
|
2023 |
|
| Growth
capital expenditures |
13,580 |
|
7,026 |
|
73,378 |
|
34,382 |
|
|
Maintenance capital expenditures from asset retirements |
- |
|
3,066 |
|
5,289 |
|
14,609 |
|
|
Maintenance capital expenditures to replace downhole equipment
losses |
2,134 |
|
5,382 |
|
4,610 |
|
15,941 |
|
|
Total capital expenditures |
15,714 |
|
15,474 |
|
83,277 |
|
64,932 |
|
|
Deduct: |
|
|
|
|
|
Proceeds on disposition of drilling equipment |
(10,057 |
) |
(10,997 |
) |
(36,741 |
) |
(43,686 |
) |
|
Net capital expenditures |
5,657 |
|
4,477 |
|
46,536 |
|
21,246 |
|
|
|
|
|
|
|
|
|
|
|
f) Remaining
Distributable Balance under ROCS
Remaining distributable balance under ROCS is
comprised of 70% of excess cash flow as defined above less
repurchases of shares under the Normal Course Issuer Bids in effect
during the period and less the dividends paid to shareholders
during the period. This financial measure does not have a
standardized meaning and is not a financial measure recognized
under GAAP. Management uses the remaining distributable balance
under ROCS to provide insight as to the Corporation’s ROCS strategy
as at the reporting date. PHX Energy’s method of calculating
remaining distributable balance under ROCS may differ from that of
other organizations and, accordingly, it may not be comparable to
that of other companies.
The following is a reconciliation of excess cash
flow as defined above to remaining distributable balance under
ROCS:
(Stated in thousands of dollars)
|
|
Three-month periods ended December 31, |
Years ended December 31, |
|
|
2024 |
|
2023 |
|
2024 |
|
2023 |
|
|
Excess cash flow |
17,263 |
|
22,347 |
|
47,569 |
|
92,813 |
|
|
70% of excess cash flow |
12,084 |
|
15,643 |
|
33,298 |
|
64,969 |
|
|
|
|
|
|
|
|
Deduct: |
|
|
|
|
|
Dividends paid to shareholders |
(9,183 |
) |
(7,277 |
) |
(37,570 |
) |
(30,189 |
) |
|
Repurchase of shares under the NCIB |
(4,859 |
) |
(11,264 |
) |
(20,614 |
) |
(30,366 |
) |
|
Remaining Distributable Balance under ROCS |
(1,958 |
) |
(2,898 |
) |
(24,886 |
) |
4,414 |
|
|
|
|
|
|
|
|
|
|
|
Supplementary Financial
Measures“Average consolidated revenue per
day” is comprised of consolidated revenue, as determined
in accordance with IFRS, divided by the Corporation’s consolidated
number of operating days. Operating days is defined under the
“Definitions” section below.“Average revenue per operating
day” is comprised of revenue, as determined in accordance
with IFRS, divided by the number of operating days.
“Dividends paid per share” is
comprised of dividends paid, as determined in accordance with IFRS,
divided by the number of shares outstanding at the dividend record
date.“Dividends declared per
share” is comprised of dividends
declared, as determined in accordance with IFRS, divided by the
number of shares outstanding at the dividend record
date.“Effective tax rate” is
comprised of provision for or recovery of income tax, as determined
in accordance with IFRS, divided by earnings before income taxes,
as determined in accordance with IFRS.“Funds from
operations per share – diluted” is calculated using the
treasury stock method whereby deemed proceeds on the exercise of
the share options are used to reacquire common shares at an average
share price. The calculation of funds from operations per share -
diluted is based on the funds from operations as reported in the
table above divided by the diluted number of shares outstanding as
quantified in Note 10(b) in the Notes to the Consolidated Financial
Statements.
Definitions
“Operating days” throughout
this document, it is referring to the billable days on which PHX
Energy is providing services to the client at the rig site.
“Capital expenditures” equate to the Corporation’s
total acquisition of drilling and other equipment as stated on the
Consolidated Statements of Cash Flows and Note 5(b) in the Notes to
the Financial Statements.“Growth capital
expenditures” are capital expenditures that were used to
expand capacity in the Corporation’s fleet of drilling
equipment.“Maintenance capital expenditures” are
capital expenditures that were used to maintain capacity in the
Corporation’s fleet of drilling equipment and replace equipment
that were lost downhole during drilling operations.
PHX Energy Services (TSX:PHX)
과거 데이터 주식 차트
부터 2월(2) 2025 으로 3월(3) 2025
PHX Energy Services (TSX:PHX)
과거 데이터 주식 차트
부터 3월(3) 2024 으로 3월(3) 2025
