PHX Energy Announces All-Time Record Revenue, and Strong Profitability

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CALGARY, Alberta, May 06, 2025 (GLOBE NEWSWIRE) --

First Quarter Highlights

• For the three-month period ended March 31, 2025, PHX Energy's consolidated revenue increased to an all-time quarterly record of $193.7 million, which is 17 percent higher than the $166.1 million generated in the first quarter of 2024 and 8 percent greater than the previous quarterly record of $178.7 million generated in the fourth quarter of 2024. Consolidated revenue in the 2025-quarter included $11.7 million of motor rental revenue and $2.6 million of revenue generated from the sale of motor equipment and parts (2024 - $8.2 million and $2.8 million, respectively).
• In the first quarter of 2025, adjusted EBITDA⁽¹⁾ was $40.7 million, 21 percent of consolidated revenue⁽¹⁾, which represents a 16 percent increase from the $35 million, 21 percent of consolidated revenue, in the same 2024-quarter. Included in the 2025-quarter's adjusted EBITDA is $2.7 million in cash-settled share-based compensation expense (2024 - $5.7 million). Adjusted EBITDA excluding cash-settled share-based compensation expense⁽¹⁾ in the first quarter of 2025 was $43.3 million, 22 percent of consolidated revenue⁽¹⁾ (2024 - $40.7 million, 25 percent of consolidated revenue). The strong profitability in the 2025-quarter mainly resulted from growth in the Corporation's high margin Rotary Steerable Systems ("RSS”) and motor rental revenue streams in the US and in Canada, and the reduction of equipment rentals particularly associated with RSS.
• Earnings in the 2025 three-month period were $20.2 million, $0.44 per share, as compared to $17.5 million, $0.37 per share, in the same 2024-period. Earnings in the 2025-period included depreciation and amortization expenses on drilling and other equipment of $12.6 million (pre-tax) which increased by 22 percent compared to $10.3 million (pre-tax) in the corresponding 2024-quarter as a result of fixed asset additions throughout 2024 and in the first quarter of 2025.
• In the 2025-quarter, PHX Energy's US division achieved record quarterly revenue of $136.1 million, 19 percent higher than the $114.2 million generated in the first quarter of 2024 and 3 percent greater than the previous quarterly record of $132.3 million generated in the fourth quarter of 2024. US division revenue in the 2025-quarter represented 70 percent of consolidated revenue (2024 - 69 percent).
• PHX Energy's Canadian division reported $57.6 million of quarterly revenue, 11 percent higher compared to $52 million in the 2024-quarter and the highest level of quarterly revenue for the Canadian division since 2014.
• In the 2025 three-month period, the Corporation generated excess cash flow⁽²⁾ of $18.2 million, after deducting net capital expenditures⁽²⁾ of $13.8 million (2024 - $7.4 million and $17.3 million, respectively).
• On March 14, 2025, the Corporation declared a dividend of $0.20 per share or $9.1 million, paid on April 15, 2025 to shareholders of record on March 31, 2025. In the first quarter of 2025, dividends paid were 4 percent less than in the same 2024-quarter, as a result of common shares being repurchased and canceled under the Corporation's NCIB during the 2024-year. There were no common shares purchased under the current NCIB in the 2025 three-month period.
• The Board has approved a $10 million increase to the previously approved 2025 capital expenditure budget of $55 million, which was approved in February 2025. The additional capital expenditures are largely expected to be directed towards growing the Corporation's RSS fleet and Real Time RSS Communications technology. PHX Energy now anticipates spending $65 million in capital expenditures during 2025.
• As at March 31, 2025, the Corporation had working capital⁽²⁾ of $90.6 million and net debt⁽²⁾ of $12.2 million.

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Financial Highlights

(Stated in thousands of dollars except per share amounts, percentages and shares outstanding)

n.m. - not meaningful

Outlook

Our strong first-quarter momentum has continued into the spring, with robust activity levels in both Canada and the US. Although we are experiencing strong activity, there are some uncertainties that have the potential to disrupt industry activity levels, such as a global recession driven by various nations' trade policies and OPEC+ production strategies. Oil prices have declined and if these low oil prices persist, they may lead operators to scale back their drilling programs, which could impact our activity levels and create pricing pressures. Additionally, if significant tariffs are implemented for a prolonged period, they could have an adverse impact on our cost structure and future profitability. Looking forward, we believe we have the potential to outperform industry trends.

Our strategic focus in both Canada and the US will remain on the advancement and deployment of cutting-edge technology, specifically RSS. Even with fluctuating industry conditions, we anticipate continued strong demand for RSS and we are advantageously positioned in this higher margin business. Since acquiring our initial 6 RSS tools in 2018, we have grown to be one of the top 3 RSS providers in North America. When we receive the additional RSS tools on order, we anticipate our fleet will be comprised of approximately 100 PowerDrive Orbit and iCruise tools as well as our proprietary Real Time RSS Communication technologies. We believe the powerful combination of our premium technologies, Velocity, Atlas, RSS and Real-Time RSS Communications, and ability to deliver operational efficiencies, will drive growth in a steady 2025 market and shelter us if a slower industry environment materializes.

Our capital allocation strategy remains focused on creating shareholder returns and preserving our balance sheet strength. This is primarily achieved through the high margin areas of our business, and we have increased our 2025 capital expenditure budget to fund RSS activity. Due to our strong financial results over the last number of years, we are in the enviable position of being able to proactively place orders for the majority of our revised $65 million budget without jeopardizing our financial stability in a time of uncertainty.

Our focus on premium technologies, high margins and balance sheet strength allows us to execute our Return of Capital Strategy ("ROCS”), in which we leverage dividends and NCIB purchases to reward our shareholders. We will prioritize the current dividend program while taking advantage of opportunistic market conditions for NCIB purchases where possible. Our strategic focus on technology, client needs, and efficient capital allocation will enable us to sustain our high level of performance and shareholder returns. We will remain diligent in monitoring the evolving economic and industry conditions and will respond in the best interest of our shareholders.

Michael Buker, President & CEO

May 6, 2025

Overall Performance

In the first quarter of 2025, PHX Energy achieved an all-time record level of quarterly consolidated revenue for the second consecutive quarter and strong profitability results with 15 percent growth in earnings and 16 percent increase in adjusted EBITDA⁽¹⁾.

During the 2025-period, the Corporation maintained its focus on growing its high-margin RSS and motor rental revenue streams and making strategic capital acquisitions targeted at displacing equipment rentals where possible. These allowed PHX Energy to grow its activity and improve profitability amidst the relatively static and competitive market conditions in both Canada and US. For the three-month period ended March 31, 2025, the Corporation generated consolidated revenue of $193.7 million, the highest level of quarterly revenue in its history and a 17 percent gain over the $166.1 million of consolidated revenue in the same 2024-quarter. In the 2025 three-month period, earnings increased by 15 percent to $20.2 million (2024 - $17.5 million), adjusted EBITDA⁽¹⁾ increased by 16 percent to $40.7 million (2024 - $35 million), and adjusted EBITDA as a percentage of consolidated revenue⁽¹⁾ was 21 percent (2024 - 21 percent). Earnings in the 2025-period included depreciation and amortization expenses on drilling and other equipment of $12.6 million (pre-tax) which increased by 22 percent compared to $10.3 million (pre-tax) in the corresponding 2024-quarter as a result of fixed asset additions throughout 2024 and in the first quarter of 2025. Included in the 2025 three-month period adjusted EBITDA is cash-settled share-based compensation expense of $2.7 million (2024 - $5.7 million). For the three-month period ended March 31, 2025, adjusted EBITDA excluding cash-settled share-based compensation expense was $43.3 million (2024 - $40.7 million).

For the three-month period ended March 31, 2025, the Corporation's US division's revenue grew by 19 percent to a record $136.1 million compared to $114.2 million in the same 2024-quarter and increased by 3 percent compared to the previous record of $132.3 million in the fourth quarter of 2024. The US industry's rig count declined by 6 percent compared to the first quarter of 2024. In comparison, PHX Energy's US operating days⁽³⁾ saw an increase of 9 percent to 4,549 days from 4,168 in the 2024-quarter. The US division's average revenue per day⁽³⁾ for directional drilling services increased by 9 percent quarter-over-quarter. Without the impact of foreign exchange, the average revenue per day for directional drilling services was up 5 percent. In the 2025-quarter, the Corporation's US motor rental division successfully expanded its market share and grew its motor rental revenue by 39 percent to $11 million from $7.9 million in the 2024-quarter. In the 2025 three-month period, the US division generated $2.6 million of revenue from motor equipment and parts sold (2024-quarter - $2.8 million). Revenue from the Corporation's US division in the 2025-quarter represented 70 percent of consolidated revenue (2024 - 69 percent).

The Corporation's Canadian division generated its highest level of quarterly revenue since 2014 in the 2025 three-month period. The $57.6 million achieved is an 11 percent increase from $52 million in the same 2024-period and is only 3 percent lower than the all-time quarterly record reported in the fourth quarter of 2014. The Canadian segment recorded 4,052 operating days in the 2025-quarter, a 5 percent increase from the 3,858 operating days realized in the comparable 2024-quarter which is slightly above the Canadian industry drilling activity's 3 percent gain (measured by horizontal and directional drilling days) quarter-over-quarter. Average revenue per day⁽³⁾ realized by the Canadian division improved by 5 percent to $14,037 in the 2025-quarter, as compared to $13,390 in the corresponding 2024-quarter and the Corporation's Canadian motor rental division generated $0.7 million of revenue in the 2025-period (2024 - $0.3 million).

As at March 31, 2025, the Corporation had working capital⁽²⁾ of $90.6 million and net debt⁽²⁾ of $12.2 million. The Corporation also has CAD $71.5 million and USD $18 million available to be drawn from its credit facilities.

Dividends and ROCS

On March 14, 2025, the Corporation declared a dividend of $0.20 per share payable to shareholders of record on March 31, 2025. An aggregate of $9.1 million was paid on April 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 three-month period ended March 31, 2025, excess cash flow increased primarily due to higher funds from operations⁽²⁾ and lower capital expenditures. Management continued to prioritize shareholder returns while protecting its financial position and less than 70 percent of excess cash flow was distributed for shareholder returns under ROCS. The Corporation maintained its current level of dividends, paying $9.1 million in dividends to shareholders, and no NCIB purchases were made. As a result, the remaining distributable balance under ROCS⁽²⁾ in the 2025-period was $3.6 million. The Corporation will target the level of excess cash flow to be used for shareholder returns to stay within the 70 percent threshold for the rest of the 2025-year, particularly given the uncertainty related to economic and industry conditions in light of weak commodity prices and global trade polices.

(Stated in thousands of dollars)

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 current NCIB, no common shares were purchased by the Corporation and cancelled in the three-month period ended March 31, 2025.

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 weaknesses.

Capital Spending

For the three-month period ended March 31, 2025, the Corporation spent $24.7 million in capital expenditures, of which $15.6 million was spent on growing the Corporation's fleet of drilling equipment, $7.8 million was spent to replace retired assets, and $1.3 million was spent to replace equipment lost downhole during drilling operations. With proceeds on disposition of drilling and other equipment of $10.9 million, the Corporation's net capital expenditures⁽²⁾ for the 2025-period were $13.8 million. Capital expenditures in the 2025-quarter were primarily directed towards Atlas High Performance motors ("Atlas”), Velocity Real-Time systems ("Velocity”), and 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)

As at March 31, 2025, the Corporation had capital commitments to purchase drilling and other equipment for $33.2 million, $24.4 million of which is growth capital allocated as follows: $10.2 million for Velocity systems, $6.5 million for performance drilling motors, $5.8 million for RSS systems, and $1.9 million for other equipment. Equipment on order is expected to be delivered within the second quarter of 2025.

In February 2025, the Board approved an increase to the 2025 capital expenditure budget from $50 million to $55 million and in May 2025 approved an additional $10 million in capital expenditures which largely relate to growing the Corporation's RSS fleet and Real Time RSS Communications technology. PHX Energy now anticipates spending $65 million in capital expenditures during 2025. Of the total expenditures, $40 million is anticipated to be spent on growth and the remainder 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 909 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 133 Velocity systems. The Corporation also possesses the largest independent RSS fleet in North America with 93 RSS tools and the only fleet currently comprised of both the PowerDrive Orbit and iCruise systems.

Global Trade and Supply Chain Risks Update

Since coming into office in January this year, the US Administration has announced and implemented various tariffs against Canada and other nations, including China. The effective dates of some of these new tariffs have been postponed and some of the new tariffs have come into effect briefly, before being subsequently paused. In response to the new US tariffs, the Canadian government as well as the governments of other nations have announced and/or implemented retaliatory tariffs. These new tariffs and any changes to these tariffs or imposition of any additional tariffs, taxes or import or export restrictions or prohibitions, could have material impacts on global economies, the Canadian and US oil and natural gas industries, interest and inflation rates, and the Corporation's supply chains. The resulting higher levels of volatility and uncertainty could result in actual results being different from management's current estimates and those differences could be material.

The Corporation leverages certain market advantages and internal capabilities in its Canadian and US operations as part of its servicing, manufacturing and procurement processes that could be specifically impacted in an adverse manner. As a result, current and future tariffs, as well as the risk that tariffs imposed by the US on other countries including China has the potential to trigger an even broader global trade war, could have a material adverse impact on oil and gas industry activity levels in general, as well as a direct impact on the Corporation's own cost structure and supply chain.

The Corporation's supply chain and procurement team has been actively monitoring tariffs and working on strategies to help mitigate their impact which include, but are not limited to, negotiating with current suppliers, diversifying local and international supply chains, and increasing shipments of equipment and inventory required for its US operations cross-border prior to the effective date of such tariffs. Although the Corporation believes such strategies will somewhat mitigate the impact of tariffs, if significant tariffs affecting the Corporation are implemented for a prolonged period their impact on the Corporation's operations and results may be material to the Corporation.

Non-GAAP and Other Financial Measures

Throughout this press release, 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 press release for applicable definitions, rationale for use, method of calculation and reconciliations where applicable.

Footnotes throughout this document reference: