Second Quarter
Highlights
- For the three-month period ended June 30, 2024, PHX Energy
generated consolidated revenue of $154.2 million, only 1 percent
lower than the record second quarter consolidated revenue of $155.6
million generated in 2023. Strong Canadian segment revenue and
activity continued which helped partially offset the impact of the
lower US rig count on the Corporation’s US results. Consolidated
revenue in the 2024-quarter included $10 million of motor rental
revenue and $1.1 million of motor equipment and parts sold (2023 -
$12.6 million and $3.2 million, respectively).
- In the second quarter of 2024, adjusted EBITDA(1) was $30
million, 19 percent of consolidated revenue(1), as compared to
$34.8 million, 22 percent of consolidated revenue, in the same
2023-quarter. Included in the 2024-quarter’s adjusted EBITDA is
$1.4 million of cash-settled share-based compensation expense (2023
- $2.6 million). Adjusted EBITDA excluding cash-settled share-based
compensation expense(1) in the second quarter of 2024 was $31.5
million, 20 percent of consolidated revenue(1) (2023 - $37.4
million, 24 percent of consolidated revenue).
- Earnings in the 2024 three-month period were $12.9 million,
$0.26 per share, as compared to $18.1 million, $0.35 per share, in
the same 2023-period.
- For the three-month period ended June 30, 2024, PHX Energy’s US
division generated revenue of $116 million, 7 percent lower than
the $125 million in the 2023-quarter and 2 percent higher than the
$114.2 million in the first quarter of 2024. The continued strong
demand for the Corporation’s premium technologies and strength of
the US division’s team of operating and marketing personnel
sheltered the US segment from the full impact of the industry
declines. The US rig count was down 16 percent second
quarter-over-second quarter and 4 percent compared to the first
quarter of 2024. US division revenue in the 2024-quarter
represented 75 percent of consolidated revenue (2023 – 80 percent
of consolidated revenue).
- PHX Energy’s Canadian division reported $38.2 million of
quarterly revenue, 25 percent higher compared to $30.7 million in
the 2023-quarter and the highest level of second quarter revenue on
record. In comparison, the Canadian rig count increased by 16
percent quarter-over-quarter.
- The stronger US dollar had a favorable impact on the
2024-quarter’s financial results. In the 2023 three-month period,
the average US dollar to Canadian dollar foreign exchange rate was
1.37 compared to 1.34 in the 2023-period.
- For the three-month period ended June 30, 2024, the Corporation
generated excess cash flow(2) of $3.5 million, after deducting net
capital expenditures(2) of $19.4 million ($26.8 million of capital
expenditures offset by proceeds on disposition of drilling and
other equipment of $7.4 million).
- In the 2024 three-month period, PHX Energy paid $9.5 million in
dividends which is 24 percent higher than the dividend amount paid
in the same 2023-period. On June 14, 2024, the Corporation declared
a dividend of $0.20 per share or $9.4 million payable on July 15,
2024.
- There were 358,300 common shares purchased for $3.1 million and
cancelled under the current NCIB in the three-month period ended
June 30, 2024 (2023 – 267,800 shares, $1.6 million).
- From the second quarter of 2017 up to June 30, 2024, a total of
14.5 million common shares have been purchased and cancelled under
PHX Energy’s previous and current NCIB’s. This represents 25
percent of common shares outstanding as of June 30, 2017.
- The Corporation intends to make an application to the TSX for
renewal of its NCIB for a further one-year term and, subject to TSX
approval, it is the Corporation’s intention to continue the current
strategy of leveraging the NCIB to its fullest as a tool to further
reward shareholders under ROCS.
- As at June 30, 2024, the Corporation had working capital(2) of
$75.1 million and net cash(2) of $4.1 million.
Financial Highlights
(Stated in thousands of dollars except per share
amounts, percentages and shares outstanding)
| |
Three-month periods
ended June 30, |
Six-month periods
ended June 30, |
|
|
2024 |
2023 |
% Change |
2024 |
|
2023 |
|
% Change |
|
Operating Results |
(unaudited) |
(unaudited) |
|
(unaudited) |
|
(unaudited) |
|
|
|
Revenue |
154,230 |
155,618 |
(1 |
) |
320,353 |
|
321,641 |
|
- |
|
|
Earnings |
12,913 |
18,108 |
(29 |
) |
30,366 |
|
40,526 |
|
(25 |
) |
| Earnings per
share – diluted |
0.26 |
0.35 |
(26 |
) |
0.64 |
|
0.77 |
|
(17 |
) |
| Adjusted
EBITDA(1) |
30,049 |
34,802 |
(14 |
) |
65,082 |
|
71,804 |
|
(9 |
) |
| Adjusted
EBITDA per share – diluted(1) |
0.62 |
0.66 |
(6 |
) |
1.37 |
|
1.35 |
|
1 |
|
|
Adjusted EBITDA as a percentage of revenue(1) |
19% |
22% |
|
20% |
|
22% |
|
|
| Cash
Flow |
|
|
|
|
|
|
| Cash flows
from operating activities |
39,317 |
22,633 |
74 |
|
50,484 |
|
26,341 |
|
92 |
|
| Funds from
operations(2) |
24,313 |
30,248 |
(20 |
) |
50,453 |
|
56,985 |
|
(11 |
) |
| Funds from
operations per share – diluted(3) |
0.50 |
0.57 |
(12 |
) |
1.06 |
|
1.07 |
|
(1 |
) |
| Dividends
paid per share(3) |
0.20 |
0.15 |
33 |
|
0.40 |
|
0.30 |
|
33 |
|
| Dividends
paid |
9,498 |
7,656 |
24 |
|
18,951 |
|
15,292 |
|
24 |
|
| Capital
expenditures |
26,780 |
12,072 |
122 |
|
56,420 |
|
30,654 |
|
84 |
|
|
Excess cash flow(2) |
3,546 |
25,508 |
(86 |
) |
10,976 |
|
44,743 |
|
(75 |
) |
|
Financial Position |
|
|
|
June 30 ‘24 |
|
Dec 31
‘23 |
|
|
| Working
capital(2) |
|
|
|
75,052 |
|
93,915 |
|
(20 |
) |
| Net debt
(Net cash)(2) |
|
|
|
(4,149 |
) |
(8,869 |
) |
(53 |
) |
|
Shareholders’ equity |
|
|
|
223,871 |
|
209,969 |
|
7 |
|
|
Common shares outstanding |
|
|
|
47,179,705 |
|
47,260,472 |
|
|
| |
|
|
|
|
|
|
|
|
Outlook
- In the third quarter the US rig count continues to soften, and
our outlook for the US division is slightly more cautious than at
the beginning of the year. We are the only provider in the market
to offer two leading RSS technologies and we will continue to
leverage this advantage along with our strong operational
performance. We believe our unique technology offering and position
as a market leader will continue to provide resilience to any
pressures and assist in growing our market share.
- Our strategies for growing and expanding our motor sales and
rental division, Atlas Downhole Technology, continue. We believe
the experienced marketing and operations personnel will be able to
deploy the additional assets purchased as part of our 2024 capital
expenditures budget and we will see increased revenues and healthy
margins in upcoming quarters.
- In Canada, the rig count remains above the 5-year average, and
we foresee the Canadian division continuing to generate strong
results in this positive environment. Our ability to outpace the
industry’s growth is driven by our strong market share in the
deeper basins and premium technology offering, which has recently
been strengthened with the deployment of RSS. Increased RSS
activity in this division is an area of focus, and in the first
half of the year we began to see the benefits, even with it
presently representing a small percentage of our operating days. We
have more initiatives in place to expand this portion of our
Canadian business in upcoming quarters. Additionally, we anticipate
the deployment of other recently commercialized technologies to
provide further opportunities for growth in other basins, such as
the Clearwater basin.
- With capital expenditures of $65 million and $75 million in
2023 and 2024, respectively, we have now built a fleet of premium
technology which we believe will be able to support our North
American growth in a flat or contracting industry environment. As
such, we anticipate requiring a lower level of growth capital
expenditures for this market in 2025.
- We do anticipate growth in the MENA region over the next few
years, however with our strategic partnership and agreement
currently in place, this revenue growth is not likely to require
material capital expenditures to fulfill our obligations.
- With the likelihood of fewer capital requirements and lower
spending in 2025, we foresee an opportunity to produce additional
excess cash flow that will allow us to continue to leverage our
ROCS program to create rewards for shareholders. We will continue
to prioritize maintaining our balance sheet strength with low debt
and to leverage this position to continue both our dividend and
NCIB programs to create shareholder value. We intend to make
an application to the TSX to renew our NCIB for another year.
Michael Buker,
President August 6,
2024
Financial Results
In the second quarter of 2024, PHX Energy
generated consolidated revenue of $154.2 million which is only
marginally lower compared to the $155.6 million generated in the
same 2023-period.
For the three-month period ended June 30, 2024,
the Corporation’s US division’s revenue decreased by 7 percent to
$116 million as compared to $125 million in the same 2023-period.
The US industry’s rig count declined 16 percent as compared to the
second quarter of 2023 while PHX Energy’s US operating days only
declined by 5 percent from 4,364 in the second quarter of 2023 to
4,146 in the 2024-quarter. Average revenue per day(3)
for directional drilling services increased by 1 percent
quarter-over-quarter and the Corporation’s US motor rental and
sales divisions generated $9.6 million and $1.1 million of revenue,
respectively in the second quarter of 2024 (2023 - $12.2 million
and $3.2 million, respectively). Revenue from PHX Energy’s US
segment represented 75 percent of consolidated revenue in the 2024
three-month period (2023 - 80 percent).
In the 2024 three-month period, the
Corporation’s Canadian division generated revenue of $38.2 million,
which is the highest level of second quarter revenue in the
Corporation’s history and is 25 percent greater than the $30.7
million generated in the same 2023-period. During the 2024-quarter,
Canadian industry activity increased by 17 percent while PHX
Energy’s Canadian operating days grew by 24 percent to 2,682 days
from the 2,162 operating days in the comparable 2023-quarter. In
the second quarter of 2024, the Canadian segment’s Rotary Steerable
System (“RSS”) activity and client base continued to grow, and this
primarily contributed to the 17 percent improvement in the
division’s average revenue per day over the second quarter of
2023.
For the three-month period ended June 30, 2024,
earnings were $12.9 million (2023 - $18.1 million), adjusted
EBITDA(1) was $30 million (2023 - $34.8 million), and adjusted
EBITDA represented 19 percent of consolidated revenue(1) (2023 – 22
percent). Included in the 2024 three-month period adjusted EBITDA
is cash-settled share-based compensation expense of $1.4 million
(2023 - $2.6 million). For the three-month period ended June
30, 2024, adjusted EBITDA excluding cash-settled share-based
compensation expense(1) is $31.5 million, 20 percent of
consolidated revenue (2023 - $37.4 million, 24 percent of
consolidated revenue).
As at June 30, 2024, the Corporation had working
capital(2) of $75.1 million and net cash(2) of $4.1 million. The
Corporation also has CAD $85 million and USD $20 million available
to be drawn from its credit facilities.
Dividends and
ROCS
On June 14, 2024, the Corporation declared a
dividend of $0.20 per share payable to shareholders of record at
the close of business on June 28, 2024. This is 33 percent higher
than the dividend of $0.15 per share declared in the 2023-quarter.
An aggregate of $9.4 million was paid on July 15, 2024.
The Corporation remains committed to enhancing
shareholder returns through its Return of Capital Strategy (“ROCS”)
which will potentially allow up to 70 percent of 2024 excess cash
flow to be used for shareholder returns and includes multiple
options including the dividend program and the Normal Course Issuer
Bid (“NCIB”). In the second quarter of 2024, $9.5 million (2023 -
$7.7 million) was paid in dividends to shareholders and $3.1
million (2023 - $1.6 million) was used to repurchase and cancel
shares under the current NCIB. In the 2024-quarter, 70 percent of
PHX Energy’s excess cash flow(2) was $2.5 million (2023 - $17.9
million). The remaining distributable balance under ROCS(2) was
negative $10.2 million in the 2024 three-month period (2023 -
positive $8.6 million) due to a decrease in excess cash flow, which
was mainly due to higher capital expenditures spent in the 2024
three-month period. We expect that future cash flow will compensate
for the negative balance in the quarter and anticipate the
remaining distributable balance under ROCS to be positive in the
latter half of the year.
(Stated in thousands of dollars)
| |
Three-month periods
ended June 30, |
Six-month periods
ended June 30, |
|
|
2024 |
|
2023 |
|
2024 |
|
2023 |
|
| Excess cash
flow |
3,546 |
|
25,508 |
|
10,976 |
|
44,743 |
|
| 70% of
excess cash flow |
2,482 |
|
17,856 |
|
7,683 |
|
31,320 |
|
| |
|
|
|
|
| Deduct: |
|
|
|
|
|
Dividends paid to shareholders |
(9,498 |
) |
(7,656 |
) |
(18,951 |
) |
(15,292 |
) |
|
Repurchase of shares under the NCIB |
(3,143 |
) |
(1,579 |
) |
(3,143 |
) |
(1,579 |
) |
|
Remaining Distributable Balance under ROCS |
(10,159 |
) |
8,621 |
|
(14,411 |
) |
14,449 |
|
| |
|
|
|
|
|
|
|
|
Normal Course Issuer
Bid
During the third quarter of 2023, the TSX
approved the renewal of PHX Energy’s NCIB to purchase for
cancellation, from time-to-time, up to a maximum of 3,552,810
common shares, representing 10 percent of the Corporation’s public
float of Common Shares as at August 2, 2023. The NCIB commenced on
August 16, 2023 and will terminate on August 15, 2024. Purchases of
common shares are to be made on the open market through the
facilities of the TSX and through alternative trading systems. The
price which PHX Energy is to pay for any common shares purchased is
to be at the prevailing market price on the TSX or alternate
trading systems at the time of such purchase.
Pursuant to the current NCIB, 358,300 common
shares were purchased by the Corporation for $3.1 million and
cancelled in the six-month period ended June 30, 2024 (2023 –
267,800 shares, $1.6 million).
The Corporation intends to make application to
the TSX for renewal of its NCIB for a further one-year term and,
subject to TSX approval, it is the Corporation’s intention to
continue the current strategy of leveraging the NCIB to its fullest
as a tool to further reward shareholders under ROCS.
Capital Spending
In the second quarter of 2024, the Corporation
spent $26.8 million in capital expenditures, of which $24.5 million
was spent on growing the Corporation’s fleet of drilling equipment,
$2 million was spent to replace retired assets, and $0.2 million
was spent to replace equipment lost downhole during drilling
operations. With proceeds on disposition of drilling and other
equipment of $7.4 million, the Corporation’s net capital
expenditures(2) for the 2024-quarter were $19.4 million. Capital
expenditures in the 2024-quarter were primarily directed towards
Atlas High Performance motors (“Atlas”), Velocity Real-Time systems
(“Velocity”), and RSS. 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 June 30, |
Six-month periods
ended June 30, |
|
|
2024 |
|
2023 |
|
2024 |
|
2023 |
|
| Growth
capital expenditures(3) |
24,513 |
|
4,931 |
|
48,737 |
|
14,885 |
|
| Maintenance
capital expenditures(3) from asset retirements |
2,029 |
|
3,860 |
|
6,170 |
|
8,718 |
|
|
Maintenance capital expenditures(3) from downhole equipment
losses |
238 |
|
3,281 |
|
1,513 |
|
7,051 |
|
| |
26,780 |
|
12,072 |
|
56,420 |
|
30,654 |
|
| Deduct: |
|
|
|
|
|
Proceeds on disposition of drilling equipment |
(7,409 |
) |
(8,589 |
) |
(19,710 |
) |
(21,007 |
) |
|
Net capital expenditures(2) |
19,371 |
|
3,483 |
|
36,710 |
|
9,647 |
|
As at June 30, 2024, the Corporation had capital
commitments to purchase drilling and other equipment for $18.6
million, $14.1 million of which is growth capital allocated as
follows: $3.6 million for performance drilling motors, $3 million
for Velocity systems, $4 million for RSS, and $3.5 million for
other equipment. The majority of equipment on order as at June 30,
2024 is expected to be delivered within the year.
The approved capital expenditure budget for the
2024-year, excluding proceeds on disposition of drilling equipment,
is $75 million, which includes $5 million of carryover from the
2023 budget. Of the total expenditures, $62.8 million is expected
to be allocated to growth capital and the remaining $12.2 million
is expected to be allocated towards maintenance of the existing
fleet of drilling and other equipment and replacement of equipment
lost downhole during drilling operations.
The Corporation currently possesses
approximately 832 Atlas motors, comprised of various configurations
including its 5.13", 5.25", 5.76", 6.63", 7.12", 7.25", 8.12",
9.00”, 9.62", and 12.00” Atlas motors, and 128 Velocity systems.
The Corporation also possesses the largest independent RSS fleet in
North America with 73 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 are commonly 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:
- 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.
- 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.
- 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.
Industry data cited throughout this press
release is sourced from Baker Hughes North American rig counts
(https://rigcount.bakerhughes.com/na-rig-count) and custom reports
from Geologic Systems for Canadian industry operating days.
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 June 30, |
|
Six-month periods
ended June 30, |
|
|
|
2024 |
2023 |
% Change |
|
2024 |
2023 |
% Change |
|
|
Directional drilling services |
143,084 |
139,756 |
2 |
|
298,142 |
294,229 |
1 |
|
|
Motor rental |
10,012 |
12,641 |
(21 |
) |
18,258 |
23,502 |
(22 |
) |
|
Sale of motor equipment and parts |
1,134 |
3,221 |
(65 |
) |
3,953 |
3,910 |
1 |
|
|
Total revenue |
154,230 |
155,618 |
(1 |
) |
320,353 |
321,641 |
- |
|
| |
|
|
|
|
|
|
|
|
In the second quarter of 2024, the Corporation’s
consolidated revenue was $154.2 million, a 1 percent decrease as
compared to the second quarter record of $155.6 million achieved in
2023. For the six-month period ended June 30, 2024, the Corporation
generated consolidated revenue of $320.4 million, relatively flat
as compared to the same 2023-period which generated consolidated
revenue of $321.6 million.
The second quarter of 2024 saw a slight
softening in the US industry rig count. There was an average of 586
horizontal and directional rigs operating per day, 4 percent lower
compared to the daily average of 610 horizontal and directional
rigs in the first quarter of 2024; and quarter-over-quarter the
daily average decreased 16 percent from 701 rigs in the second
quarter of 2023. In Canada, industry horizontal and directional
drilling activity (as measured by drilling days) was 11,693 days in
the 2024-quarter, a 17 percent increase from 10,028 days in the
same 2023-quarter. With both the Canadian and US division
generating improved activity over the industry trends, and the
strength in Canadian industry activity offsetting the impacts of
the softer US rig count, PHX Energy’s consolidated activity levels
for the three-month ended June 30, 2024 increased by 5 percent to
6,828 days compared to 6,526 days in the same 2023 period. For the
six-month period ended June 30, 2024, consolidated operating days
increased by 3 percent to 14,853 from 14,480 days in the
corresponding 2023-period.
In both the three and six-month periods of 2024,
average consolidated revenue per day(3) for directional drilling
services were relatively flat. Quarter-over-quarter, average
consolidated revenue per day(3) declined by 2 percent to $20,957
from $21,417 and in the first half of the 2024-year, average
consolidated revenue per day decreased 1 percent to $20,074 from
$20,320 in same 2023-period. In both 2024-periods, PHX Energy’s
Canadian activity increased as a portion of its consolidated
activity and as a result, a greater percentage of consolidated
activity was at the lower average revenue per day for directional
drilling services in Canada.
In the 2024 three-month period, revenue
generated by the Atlas motor rental division declined by 21 percent
to $10 million from $12.6 million in the same 2023-period. In the
2024 six-month period, revenue generated by the Atlas motor rental
division declined by 22 percent to $18.3 million from $23.5 million
in the same 2023-period. These decreases were largely driven by the
softer US industry rig count.
For the three and six-month periods ended June
30, 2024, revenue of $1.1 million and $4 million, respectively,
were generated from the sale of Atlas motors and parts (2023 – $3.2
million and $3.9 million, respectively).
Operating Costs and
Expenses
(Stated in thousands of dollars except
percentages)
|
|
Three-month periods
ended June 30, |
Six-month periods
ended June 30, |
|
|
2024 |
2023 |
% Change |
2024 |
2023 |
% Change |
| Direct
costs |
126,456 |
119,870 |
5 |
255,500 |
251,858 |
1 |
| Depreciation
& amortization drilling and other equipment (included in direct
costs) |
11,142 |
9,621 |
16 |
21,461 |
18,938 |
13 |
| Depreciation
& amortization right-of-use asset (included in direct
costs) |
857 |
827 |
4 |
1,706 |
1,235 |
38 |
|
Gross profit as a percentage of revenue excluding depreciation
& amortization(1) |
26% |
30% |
|
27% |
28% |
|
| |
|
|
|
|
|
|
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.
In the 2024 three-month period, direct costs
increased by 5 percent to $126.5 million from $120 million in the
corresponding 2023-period. Apart from higher depreciation and
amortization expenses on drilling and other equipment, greater
direct costs in the 2024-quarter were largely due to increased
equipment rentals associated with RSS activity in Canada and
greater equipment repair costs. In the first half of the 2024-year,
direct costs, like consolidated revenue, were relatively flat
compared to the corresponding 2023-period.
For the three and six-month periods ended June
30, 2024, depreciation and amortization expenses on drilling and
other equipment increased by 16 percent and 13 percent,
respectively. The increase in both 2024-periods was primarily
driven by the volume of fixed assets acquired as part of PHX
Energy’s 2023 and 2024 capital expenditure program.
In the three and six-month periods of 2024,
gross profit as a percentage of revenue excluding depreciation and
amortization(1) declined to 26 percent and 27 percent,
respectively, from 30 percent and 28 percent in the corresponding
2023-period. Lower overall average revenue per day and higher
equipment repair costs and rentals mainly contributed to the
decrease in profitability in both 2024-periods.
(Stated in thousands of dollars except percentages)
|
|
Three-month periods
ended June 30, |
Six-month periods
ended June 30, |
|
|
2024 |
2023 |
% Change |
2024 |
2023 |
|
% Change |
|
Selling, general and administrative (“SG&A”) costs |
13,824 |
15,522 |
(11 |
) |
34,841 |
31,078 |
|
12 |
|
| Cash-settled
share-based compensation (included in SG&A costs) |
1,403 |
2,556 |
(45 |
) |
7,113 |
3,930 |
|
81 |
|
|
Equity-settled share-based compensation (included in SG&A
costs) |
181 |
186 |
(3 |
) |
281 |
287 |
|
(2 |
) |
|
SG&A costs excluding share-based compensation as a percentage
of revenue(1) |
8% |
8% |
|
9% |
8% |
|
|
| |
|
|
|
|
|
|
|
For the three-month period ended June 30, 2024,
SG&A costs were $13.8 million, a decrease of 11 percent as
compared to $15.5 million in the corresponding 2023-period. Lower
SGA costs in the 2024 three-month period are mainly attributable to
the 45 percent decrease in cash-settled share-based compensation
expense when compared to the 2023-quarter. For the six-month period
ended June 30, 2024, SG&A costs were $34.8 million, an increase
of 12 percent as compared to $31.1 million in the corresponding
2023-period. Higher SG&A costs in the 2024 six-month period
were primarily due to greater cash-settled share-based compensation
and personnel-related costs in the first quarter of 2024.
Cash-settled share-based compensation relates to
the Corporation’s retention awards and is measured at fair value.
For the three and six-month periods ended June 30, 2024, the
related compensation expense recognized by PHX Energy was $1.4
million (2023 - $2.6 million) and $7.1 million (2023 - $3.9
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 1,563,114 retention awards
outstanding as at June 30, 2024 (2023 – 2,100,746). Excluding
share-based compensation, SG&A costs as a percentage of
revenue(1) in the 2024 three and six-month periods were 8 percent
and 9 percent, respectively, as compared to 8 percent in both
corresponding 2023-periods.
(Stated in thousands of dollars)
|
|
Three-month periods
ended June 30, |
Three-month periods
ended June 30, |
|
|
2024 |
2023 |
% Change |
2024 |
2023 |
% Change |
|
Research and development expense |
1,409 |
1,314 |
7 |
2,612 |
2,571 |
2 |
| |
|
|
|
|
|
|
For the three and six-month periods ended June
30, 2024, PHX Energy’s research and development (“R&D”)
expenditures were $1.4 million (2023 - $1.3 million) and $2.6
million (2023 - $2.6 million), respectively. Increased R&D
expenditures in the 2024 three month-period were mainly due to
greater prototype expenses incurred to support key projects and
rising personnel related costs.
(Stated in thousands of dollars)
|
|
Three-month periods
ended June 30, |
Six-month periods
ended June 30, |
|
|
2024 |
2023 |
% Change |
2024 |
2023 |
% Change |
|
Finance expense |
467 |
709 |
(34 |
) |
801 |
1,376 |
(42 |
) |
|
Finance expense lease liabilities |
531 |
564 |
(6 |
) |
1,072 |
1,140 |
(6 |
) |
| |
|
|
|
|
|
|
|
|
Finance expenses mainly relate to interest
charges on the Corporation’s credit facilities. For the three and
six-month periods ended June 30, 2024, finance expenses decreased
to $0.5 million (2023 - $0.7 million) and $0.8 million (2023 - $1.4
million), respectively, mainly due to lower amounts of loans and
borrowings outstanding in both 2024-periods.
Finance expense lease liabilities relate to
interest expense incurred on lease liabilities. For the three and
six-month periods ended June 30, 2024, finance expense lease
liabilities decreased by 6 percent in both periods, primarily due
to expired leases.
(Stated in thousands of dollars)
|
|
Three-month periods
ended June 30, |
|
Six-month periods
ended June 30, |
|
|
|
2024 |
|
2023 |
|
2024 |
|
2023 |
|
| Net gain on
disposition of drilling equipment |
5,401 |
|
5,593 |
|
14,287 |
|
15,549 |
|
| Foreign
exchange gains (losses) |
(159 |
) |
897 |
|
(287 |
) |
920 |
|
| Bad
debts |
- |
|
(1,223 |
) |
- |
|
(1,223 |
) |
|
Other income |
5,242 |
|
5,267 |
|
13,999 |
|
15,246 |
|
| |
|
|
|
|
|
|
|
|
For the three and six-month periods ended June
30, 2024, the Corporation recognized other income of $5.2 million
and $14 million, respectively (2023 - $5.3 million and $15.2
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 both 2024-periods, similar instances of high dollar valued
downhole equipment losses occurred as compared to the corresponding
2023-periods which resulted in comparable levels of net gains on
disposition of drilling and other equipment recognized.
Foreign exchange losses of $0.2 million and $0.3
million in the three and six-month periods of 2024, respectively
(2023 – gains of $0.9 million in both periods), were primarily due
to the revaluation of USD-denominated trade and other payables.
(Stated in thousands of dollars except
percentages)
|
|
Three-month periods
ended June 30, |
Six-month periods
ended June 30, |
|
|
2024 |
2023 |
2024 |
2023 |
|
Provision for income taxes |
3,872 |
4,797 |
9,160 |
8,338 |
|
Effective tax rates(3) |
23% |
21% |
23% |
17% |
| |
|
|
|
|
For the three-month period ended June 30, 2024,
the Corporation reported income tax provision of $3.9 million (2023
- $4.8 million), of which, $8.1 million was current and a recovery
of $4.2 million was deferred. For the six-month period ended June
30, 2024, PHX Energy recognized provision for income taxes of $9.2
million (2023 - $8.3 million), of which, $10.1 million was current
and a recovery of $0.9 million was deferred. In both 2024-periods,
PHX Energy’s effective tax rate(3) is 23 percent which is in line
with the combined US federal and state corporate income tax rate of
24.5 percent and combined Canadian federal and provincial income
tax rate of 23 percent. In the 2023 three and six-month periods,
PHX Energy’s effective tax rate of 21 percent and 17 percent,
respectively, are lower than the combined US federal and state
corporate income tax rate 24.5 percent and combined Canadian
federal and provincial income tax rate of 23 percent, due to the
recognition of previously unrecognized deferred tax assets that
were applied to income for tax purposes in Canada.
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 this MD&A 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 June 30, |
Six-month periods
ended June 30, |
|
|
2024 |
2023 |
% Change |
2024 |
2023 |
% Change |
|
Directional drilling services |
105,226 |
109,564 |
(4 |
) |
208,632 |
224,310 |
(7 |
) |
|
Motor rental |
9,630 |
12,169 |
(21 |
) |
17,555 |
22,401 |
(22 |
) |
|
Sale of motor equipment and parts |
1,134 |
3,221 |
(65 |
) |
3,953 |
3,910 |
1 |
|
|
Total US revenue |
115,990 |
124,954 |
(7 |
) |
230,140 |
250,621 |
(8 |
) |
|
Reportable segment profit before tax |
14,223 |
24,037 |
(41 |
) |
30,818 |
39,959 |
(23 |
) |
| |
|
|
|
|
|
|
|
|
In the second quarter and first half of 2024, US
industry rig count continued to soften and trended lower than its
five-year average. This softening led to weakened levels of
drilling and motor rental activities for the US division and
consequently to lower levels of revenue and profitability. For the
three and six-month periods ended June 30, 2024, the US segment’s
revenue was $116 million and $230.1 million, a decline of 7 percent
and 8 percent as compared to $125 million and $250.6 million in the
corresponding 2023-periods.
The US division’s activity in both 2024-periods
did not contract to the same extent as the industry, and this
resilience was driven by the reliable performance, strong demand
and reputation of the Corporation’s premium technologies and team
of operating and marketing personnel. In the 2024-quarter, there
were 586 active horizontal and directional rigs per day in the US
industry which is a 16 percent decrease from the 701 rigs per day
in the second quarter of 2023 and 4 percent lower than the industry
activity recorded in the first quarter of 2024. The Corporation’s
US directional drilling activity in the second quarter was only
down 5 percent, 4,146 operating days, when compared to 4,364 days
in the same 2023-quarter and 1 percent as compared to the 4,168
days in the first quarter of 2024. For the six-month period ended
June 30, 2024, PHX Energy’s US drilling activity decreased 9
percent to 8,313 operating days as compared to 9,184 days in the
same 2023-period whereas US industry horizontal and directional rig
count decreased by 17 percent. In the first half of 2024, the US
division was active in the Permian, Scoop/Stack, Marcellus, Utica,
and Bakken basins.
In both the three and six-month periods of 2024,
the US division’s average revenue per day(3) for directional
drilling services was relatively flat. Quarter-over quarter, the US
division’s average revenue per day for directional drilling
services marginally increased by 1 percent to $25,383 compared to
$25,109 and in the 2024 six-month period, average revenue per day
for directional drilling services increased 3 percent to $25,097
from $24,425 in the same 2023-period. The strong US dollar in both
2024-periods favorably affected the average revenue per day.
Omitting the impact of foreign exchange, the average revenue per
day for directional drilling services decreased by 1 percent and
increased by 2 percent in the 2024 three and six-month periods,
respectively.
In the second quarter and first half of 2024, in
line with the softening US rig count, the US segment’s Atlas motor
rental activity was weaker. The Corporation generated motor rental
revenue of $9.6 million and $17.6 million in the three and
six-month periods of 2024, respectively. This represents decreases
of 21 percent and 22 percent, respectively, from the $12.2 million
and $22.4 million generated in the corresponding 2023-periods.
In the 2024 three and six-month periods, PHX
Energy generated revenue of $1.1 million and $4 million from the
sale of Atlas motors and parts (2023 - $3.2 million and $3.9
million, respectively).
For the three and six-month periods ended June
30, 2024, the US segment’s reportable segment income before tax
were $14.2 million and $30.8 million, a decrease of 41 percent and
23 percent as compared to $24 million and $40 million in the
corresponding 2023-periods. Apart from lower activity, the decline
in profitability was primarily due to rising personnel-related
costs, higher equipment repairs and rentals, and greater
depreciation expenses in the 2024-periods.
Canada
(Stated in thousands of dollars)
|
|
Three-month periods
ended June 30, |
Six-month periods
ended June 30, |
|
|
2024 |
2023 |
% Change |
2024 |
2023 |
% Change |
|
Directional drilling services |
37,858 |
30,192 |
25 |
|
89,510 |
69,919 |
28 |
|
|
Motor rental |
382 |
472 |
(19 |
) |
703 |
1,101 |
(36 |
) |
|
Total Canadian revenue |
38,240 |
30,664 |
25 |
|
90,213 |
71,020 |
27 |
|
|
Reportable segment profit before tax |
2,549 |
2,167 |
18 |
|
11,223 |
10,462 |
7 |
|
| |
|
|
|
|
|
|
|
|
In the 2024-quarter, the Corporation’s Canadian
operations generated revenue of $38.2 million, its highest level of
second quarter revenue on record and a 25 percent increase compared
to $30.7 million generated in the 2023-quarter. In the 2024
six-month period, Canadian division revenue was $90.2 million, a 27
percent increase as compared to $71 million in the 2023-period.
In both 2024-periods, PHX Energy’s Canadian
segment’s activity growth far outpaced that of the industry. For
the three and six-month periods ended June 30, 2024, the Canadian
segment’s operating days grew by 24 percent and 23 percent to 2,682
days and 6,540 days, respectively, as compared to 2,162 days and
5,297 days in the corresponding 2023-periods. In comparison,
industry horizontal and directional drilling activity (as measured
by drilling days) increased by 17 percent to 11,693 days in the
2024 three-month period and by 4 percent to 29,065 days in the 2024
six-month period. Activity growth in the 2024-periods were largely
attributable to the Canadian segment’s increased RSS activity and
client base expansion. In the first half of 2024, the Corporation
was active in the Duvernay, Montney, Glauconite, Frobisher,
Cardium, Viking, Bakken, Torquay, Colony, Ellerslie, Charlie Lake,
and Scallion basins.
For the three and six-month period ended June
30, 2024, the Canadian division’s average revenue per day(3) for
directional drilling services increased by 17 percent and 10
percent, respectively, to $16,303 and $14,585 from $13,964 and
$13,201 in the corresponding 2023-periods. These increases were
mainly due to greater RSS activity in both 2024-periods.
In the second quarter and first half of 2024,
the Corporation’s Canadian division recognized reportable segment
profit before tax of $2.5 million (2023 – $2.2 million) and $11.2
million (2023 – $10.5 million), respectively. Despite increased
revenue and activity, the increase in profitability was only
marginal mainly due to higher depreciation expenses, greater
equipment repair costs, and increased rentals associated with RSS
activity growth.
Investing Activities
Net cash used in investing activities for the
three-month period ended June 30, 2024 was $27.7 million as
compared to $5.7 million in the 2023-period. During the second
quarter of 2024, the Corporation spent $24.5 million (2023 - $4.9
million) to grow the Corporation’s fleet of drilling equipment, $2
million (2023 - $3.9 million) was used to maintain capacity in the
Corporation’s fleet of drilling and other equipment, and $0.2
million was used to replace equipment lost downhole during drilling
operations (2023 - $3.3 million). With proceeds on disposition of
drilling and other equipment of $7.4 million (2023 - $8.6 million),
the Corporation’s net capital expenditures(2) for the 2024-quarter
were $19.4 million (2023 - $3.5 million).
(Stated in thousands of dollars)
| |
Three-month periods
ended June 30, |
|
Six-month periods
ended June 30, |
|
|
|
2024 |
|
2023 |
|
2024 |
|
2023 |
|
| Growth
capital expenditures(3) |
24,513 |
|
4,931 |
|
48,737 |
|
14,885 |
|
| Maintenance
capital expenditures(3) from asset retirements |
2,029 |
|
3,860 |
|
6,170 |
|
8,718 |
|
|
Maintenance capital expenditures(3) from downhole equipment
losses |
238 |
|
3,281 |
|
1,513 |
|
7,051 |
|
| |
26,780 |
|
12,072 |
|
56,420 |
|
30,654 |
|
| Deduct: |
|
|
|
|
| Proceeds on
disposition of drilling equipment |
(7,409 |
) |
(8,589 |
) |
(19,710 |
) |
(21,007 |
) |
|
Net capital expenditures(2) |
19,371 |
|
3,483 |
|
36,710 |
|
9,647 |
|
| |
|
|
|
|
|
|
|
|
The 2024-period capital expenditures comprised
of:
- $11.6 million in downhole performance drilling motors;
- $7.8 million in RSS;
- $6.3 million in MWD systems and spare components; and
- $1.1 million in machinery and equipment and other assets.
The change in non-cash working capital balances
of $8.3 million (use of cash) for the three-month period ended June
30, 2024, relates to the net change in the Corporation’s trade
payables that are associated with the acquisition of capital
assets. This compares to $2.2 million (use of cash) for the
three-month period ended June 30, 2023.
Financing Activities
For the three-month period ended June 30, 2024,
net cash used in financing activities was $11.3 million as compared
to $12 million in the 2023-period. In the 2024-period:
- dividends of $9.5 million were paid to shareholders;
- 358,300 shares were repurchased and cancelled under the NCIB
for $3.1 million;
- payments of $0.9 million were made towards lease
liabilities;
- $2.1 million net drawings were made from the Corporation’s
syndicated credit facility; and
- 50,000 common shares were issued from treasury for proceeds of
$0.1 million upon the exercise of share options.
Capital Resources
As of June 30, 2024, the Corporation had CAD
$9.7 million drawn on its Canadian credit facilities, nothing drawn
on its US operating facility, and a cash balance of $13.8 million.
As at June 30, 2024, the Corporation had CAD $85 million and USD
$20 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 June 30, 2024, the Corporation was in
compliance with all its financial covenants. 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 $5 million carried over from the
2023 capital expenditure budget and the previously announced
preliminary 2024 capital expenditure program of $70 million, PHX
Energy anticipates spending $75 million of capital expenditures in
2024. Of the total expenditures, $62.8 million is targeted to be
spent on growth and $12.2 million 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 and financial market
volatility persists in 2024, 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 June 30, 2024, the Corporation has
commitments to purchase drilling and other equipment for $18.6
million. The majority of deliveries are expected to occur
throughout the remainder of the 2024-year.
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 sales offices and service
facilities in Albania, and an administrative office in Nicosia,
Cyprus. The Corporation also supplies technology to the Middle East
regions.
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
Condensed Consolidated Interim
Statements of Financial Position
(Stated in thousands of dollars, unaudited)
|
|
June 30, 2024 |
December 31, 2023 |
|
ASSETS |
|
|
|
|
|
|
Current assets: |
|
|
|
|
|
|
|
Cash |
$ |
13,798 |
|
|
$ |
16,433 |
|
| |
Trade and other receivables |
|
114,756 |
|
|
|
121,334 |
|
|
|
Inventories |
|
63,727 |
|
|
|
63,173 |
|
|
|
Prepaid expenses |
|
4,154 |
|
|
|
2,409 |
|
|
|
Current tax assets |
|
- |
|
|
|
3,691 |
|
| |
Total current assets |
|
196,435 |
|
|
|
207,040 |
|
| Non-current
assets: |
|
|
|
|
|
| |
Drilling and other long-term assets |
|
162,063 |
|
|
|
128,263 |
|
|
|
Right-of-use assets |
|
26,014 |
|
|
|
27,056 |
|
|
|
Intangible assets |
|
13,292 |
|
|
|
14,200 |
|
|
|
Investments |
|
2,171 |
|
|
|
3,001 |
|
|
|
Other long-term assets |
|
1,332 |
|
|
|
1,284 |
|
|
|
Deferred tax assets |
|
8,066 |
|
|
|
4,650 |
|
|
|
Total non-current assets |
|
212,938 |
|
|
|
178,454 |
|
|
Total assets |
$ |
409,373 |
|
|
$ |
385,494 |
|
|
LIABILITIES AND SHAREHOLDERS' EQUITY |
|
|
|
|
|
|
Current liabilities: |
|
|
|
|
|
|
|
Trade and other payables |
$ |
103,086 |
|
|
$ |
100,438 |
|
|
|
Dividends payable |
|
9,437 |
|
|
|
9,453 |
|
|
|
Lease liability |
|
3,386 |
|
|
|
3,234 |
|
|
|
Current tax liability |
|
5,474 |
|
|
|
- |
|
| |
Total current liabilities |
|
121,383 |
|
|
|
113,125 |
|
|
Non-current liabilities: |
|
|
|
|
|
|
|
Lease liability |
|
32,884 |
|
|
|
33,972 |
|
|
|
Loans and borrowings |
|
9,649 |
|
|
|
7,564 |
|
|
|
Deferred tax liability |
|
19,927 |
|
|
|
16,822 |
|
|
|
Other |
|
1,659 |
|
|
|
4,042 |
|
| |
Total non-current liabilities |
|
64,119 |
|
|
|
62,400 |
|
| Equity: |
|
|
|
|
|
| |
Share capital |
|
220,633 |
|
|
|
222,653 |
|
| |
Contributed surplus |
|
7,147 |
|
|
|
7,168 |
|
| |
Deficit |
|
(34,264 |
) |
|
|
(45,695 |
) |
|
|
Accumulated other comprehensive income |
|
30,355 |
|
|
|
25,843 |
|
| |
Total equity |
|
223,871 |
|
|
|
209,969 |
|
|
Total liabilities and equity |
$ |
409,373 |
|
|
$ |
385,494 |
|
| |
|
|
|
|
|
|
|
Condensed Consolidated Interim Statements of
Comprehensive Earnings
(Stated in thousands of dollars except earnings
per share, unaudited)
|
|
Three-month periods ended June 30, |
|
Six-month periods ended June 30, |
|
|
|
|
2024 |
|
|
2023 |
|
|
2024 |
|
|
2023 |
|
|
Revenue |
$ |
154,230 |
|
$ |
155,618 |
|
$ |
320,353 |
|
$ |
321,641 |
|
|
Direct costs |
|
126,456 |
|
|
119,870 |
|
|
255,500 |
|
|
251,858 |
|
|
Gross profit |
|
27,774 |
|
|
35,748 |
|
|
64,853 |
|
|
69,783 |
|
|
Expenses: |
|
|
|
|
|
|
|
|
|
Selling, general and administrative expenses |
|
13,824 |
|
|
15,523 |
|
|
34,841 |
|
|
31,078 |
|
|
Research and development expenses |
|
1,409 |
|
|
1,314 |
|
|
2,612 |
|
|
2,571 |
|
|
Finance expense |
|
467 |
|
|
709 |
|
|
801 |
|
|
1,376 |
|
|
Finance expense lease liability |
|
531 |
|
|
564 |
|
|
1,072 |
|
|
1,140 |
|
|
Other income |
|
(5,242 |
) |
|
(5,267 |
) |
|
(13,999 |
) |
|
(15,246 |
) |
|
|
|
10,989 |
|
|
12,843 |
|
|
25,327 |
|
|
20,919 |
|
|
Earnings before income taxes |
|
16,785 |
|
|
22,905 |
|
|
39,526 |
|
|
48,864 |
|
|
|
|
|
|
|
|
|
|
|
|
Provision for income taxes |
|
|
|
|
|
|
|
|
|
Current |
|
8,067 |
|
|
5,251 |
|
|
10,053 |
|
|
7,975 |
|
|
Deferred |
|
(4,195 |
) |
|
(454 |
) |
|
(893 |
) |
|
363 |
|
|
|
|
3,872 |
|
|
4,797 |
|
|
9,160 |
|
|
8,338 |
|
|
Net earnings |
|
12,913 |
|
|
18,108 |
|
|
30,366 |
|
|
40,526 |
|
|
|
|
|
|
|
|
|
|
|
|
Other comprehensive income |
|
|
|
|
|
|
|
|
|
Foreign currency translation, net of tax |
|
1,769 |
|
|
(4,522 |
) |
|
5,342 |
|
|
(4,629 |
) |
|
Equity investment loss through AOCI |
|
(830 |
) |
|
- |
|
|
(830 |
) |
|
- |
|
|
Total comprehensive earnings |
$ |
13,852 |
|
$ |
13,586 |
|
$ |
34,878 |
|
$ |
35,897 |
|
|
|
|
|
|
|
|
|
|
|
|
Earnings per share – basic |
$ |
0.27 |
|
$ |
0.35 |
|
$ |
0.64 |
|
$ |
0.79 |
|
|
Earnings per share – diluted |
$ |
0.26 |
|
$ |
0.35 |
|
$ |
0.64 |
|
$ |
0.77 |
|
| |
|
|
|
|
|
|
|
|
|
|
|
|
Condensed Consolidated Interim Statements of Cash
Flows
(Stated in thousands of dollars, unaudited)
| |
Three-month periods
ended June 30, |
|
Six-month periods
ended June 30, |
|
|
|
|
2024 |
|
|
2023 |
|
|
2024 |
|
|
2023 |
|
| Cash flows
from operating activities: |
|
|
|
|
|
|
|
|
|
Earnings |
$ |
12,913 |
|
$ |
18,108 |
|
$ |
30,366 |
|
$ |
40,526 |
|
| Adjustments
for: |
|
|
|
|
|
|
|
|
|
Depreciation and amortization |
|
11,142 |
|
|
9,621 |
|
|
21,461 |
|
|
18,938 |
|
|
Depreciation and amortization right-of-use asset |
|
857 |
|
|
827 |
|
|
1,706 |
|
|
1,235 |
|
|
Provision for income taxes |
|
3,872 |
|
|
4,797 |
|
|
9,160 |
|
|
8,338 |
|
|
Unrealized foreign exchange (gain) loss |
|
86 |
|
|
(10 |
) |
|
234 |
|
|
(36 |
) |
|
Net gain on disposition of drilling equipment |
|
(5,401 |
) |
|
(5,593 |
) |
|
(14,287 |
) |
|
(15,549 |
) |
|
Equity-settled share-based payments |
|
181 |
|
|
186 |
|
|
281 |
|
|
287 |
|
|
Finance expense |
|
467 |
|
|
709 |
|
|
801 |
|
|
1,376 |
|
|
Finance expense lease liability |
|
531 |
|
|
564 |
|
|
1,072 |
|
|
1,140 |
|
|
Provision for bad debts |
|
- |
|
|
1,223 |
|
|
- |
|
|
1,223 |
|
|
Provision for inventory obsolescence |
|
196 |
|
|
379 |
|
|
731 |
|
|
648 |
|
|
Interest paid on lease liability |
|
(531 |
) |
|
(564 |
) |
|
(1,072 |
) |
|
(1,140 |
) |
|
Interest paid |
|
(283 |
) |
|
(521 |
) |
|
(488 |
) |
|
(1,034 |
) |
|
Income taxes paid |
|
(545 |
) |
|
(1,324 |
) |
|
(729 |
) |
|
(1,458 |
) |
|
Change in non-cash working capital |
|
15,832 |
|
|
(5,770 |
) |
|
1,248 |
|
|
(28,152 |
) |
|
Net cash from operating activities |
|
39,317 |
|
|
22,632 |
|
|
50,484 |
|
|
26,342 |
|
| Cash flows
from investing activities: |
|
|
|
|
|
|
|
|
|
Proceeds on disposition of drilling equipment |
|
7,409 |
|
|
8,589 |
|
|
19,710 |
|
|
21,007 |
|
|
Acquisition of drilling and other equipment |
|
(26,780 |
) |
|
(12,071 |
) |
|
(56,420 |
) |
|
(30,654 |
) |
|
Change in non-cash working capital |
|
(8,287 |
) |
|
(2,194 |
) |
|
4,182 |
|
|
(1,053 |
) |
|
Net cash used in investing activities |
|
(27,658 |
) |
|
(5,676 |
) |
|
(32,528 |
) |
|
(10,700 |
) |
| Cash flows
from financing activities: |
|
|
|
|
|
|
|
|
|
Dividends paid to shareholders |
|
(9,498 |
) |
|
(7,656 |
) |
|
(18,951 |
) |
|
(15,292 |
) |
|
Repurchase of shares under the NCIB |
|
(3,143 |
) |
|
(1,579 |
) |
|
(3,143 |
) |
|
(1,579 |
) |
|
Payments of lease liability |
|
(865 |
) |
|
(693 |
) |
|
(1,695 |
) |
|
(1,455 |
) |
|
Net proceeds from (net repayment of) loans and borrowings |
|
2,060 |
|
|
(2,157 |
) |
|
2,000 |
|
|
5,168 |
|
|
Proceeds from exercise of options |
|
110 |
|
|
83 |
|
|
821 |
|
|
349 |
|
|
Purchase of shares held in trust |
|
- |
|
|
- |
|
|
- |
|
|
(612 |
) |
|
Net cash used in financing activities |
|
(11,336 |
) |
|
(12,002 |
) |
|
(20,968 |
) |
|
(13,421 |
) |
| Net increase
(decrease) in cash |
|
323 |
|
|
4,954 |
|
|
(3,012 |
) |
|
2,221 |
|
| Cash,
beginning of period |
|
13,380 |
|
|
15,502 |
|
|
16,433 |
|
|
18,247 |
|
|
Effect of movements in exchange rates on cash held |
|
95 |
|
|
(376 |
) |
|
377 |
|
|
(388 |
) |
|
Cash, end of period |
$ |
13,798 |
|
$ |
20,080 |
|
$ |
13,798 |
|
$ |
20,080 |
|
| |
|
|
|
|
|
|
|
|
|
|
|
|
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"
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 expectations related to future cash flows and the impact on the
remaining distributable balance under ROCS, the Corporation’s
intent to preserve balance sheet strength and continue to reward
shareholders, including through its dividend program, the ROCS
program and NCIB, PHX Energy's intentions with respect to the NCIB,
its renewal, 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 2024, and how the budget
will be allocated and funded, the timeline for delivery of
equipment on order, and the anticipated continuation of PHX
Energy’s quarterly dividend program and the amounts of
dividends.
The above are stated under the headings:
“Financial Results”, “Dividends and ROCS”, “Capital Spending”, 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 2024 and in the future; that future business, regulatory and
industry conditions will be within the parameters expected by the
Corporation; 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 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 June 30, |
|
Six-month periods
ended June 30, |
|
|
|
2024 |
2023 |
|
2024 |
2023 |
|
|
Earnings: |
12,913 |
18,108 |
|
30,366 |
40,526 |
|
| Add: |
|
|
|
|
|
Depreciation and amortization drilling and other equipment |
11,142 |
9,621 |
|
21,461 |
18,938 |
|
|
Depreciation and amortization right-of-use asset |
857 |
827 |
|
1,706 |
1,235 |
|
|
Provision for income taxes |
3,872 |
4,797 |
|
9,160 |
8,338 |
|
|
Finance expense |
467 |
709 |
|
801 |
1,376 |
|
|
Finance expense lease liability |
531 |
564 |
|
1,072 |
1,140 |
|
|
Equity-settled share-based payments |
181 |
186 |
|
281 |
287 |
|
|
Unrealized foreign exchange loss (gain) |
86 |
(10 |
) |
234 |
(36 |
) |
|
Adjusted EBITDA |
30,049 |
34,802 |
|
65,081 |
71,804 |
|
| |
|
|
|
|
|
|
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 at the period end.
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 Condensed Consolidated Interim
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 June 30, |
|
Six-month periods
ended June 30, |
|
|
|
2024 |
2023 |
|
2024 |
2023 |
|
|
Earnings: |
12,913 |
18,108 |
|
30,366 |
40,526 |
|
| Add: |
|
|
|
|
|
Depreciation and amortization drilling and other equipment |
11,142 |
9,621 |
|
21,461 |
18,938 |
|
|
Depreciation and amortization right-of-use asset |
857 |
827 |
|
1,706 |
1,235 |
|
|
Provision for income taxes |
3,872 |
4,797 |
|
9,160 |
8,338 |
|
|
Finance expense |
467 |
709 |
|
801 |
1,376 |
|
|
Finance expense lease liability |
531 |
564 |
|
1,072 |
1,140 |
|
|
Equity-settled share-based payments |
181 |
186 |
|
281 |
287 |
|
|
Unrealized foreign exchange loss (gain) |
86 |
(10 |
) |
234 |
(36 |
) |
|
Cash-settled share-based compensation expense |
1,403 |
2,556 |
|
7,113 |
3,930 |
|
|
Adjusted EBITDA excluding cash-settled share-based compensation
expense |
31,452 |
37,358 |
|
72,194 |
75,734 |
|
| |
|
|
|
|
|
|
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 Condensed Consolidated Interim 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 June 30, |
Six-month periods
ended June 30, |
|
|
2024 |
2023 |
2024 |
2023 |
| Revenue |
154,230 |
155,618 |
320,353 |
321,641 |
|
Direct costs |
126,456 |
119,870 |
255,500 |
251,858 |
| Gross
profit |
27,774 |
35,748 |
64,853 |
69,783 |
|
Depreciation & amortization drilling and other equipment
(included in direct costs) |
11,142 |
9,621 |
21,461 |
18,938 |
|
Depreciation & amortization right-of-use asset (included in
direct costs) |
857 |
827 |
1,706 |
1,235 |
|
|
39,773 |
46,196 |
88,020 |
89,956 |
|
Gross profit as a percentage of revenue excluding depreciation
& amortization |
26% |
30% |
27% |
28% |
| |
|
|
|
|
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 June 30, |
Six-month periods
ended June 30, |
|
|
2024 |
2023 |
2024 |
2023 |
| SG&A
Costs |
13,824 |
15,522 |
34,841 |
31,078 |
| Deduct: |
|
|
|
|
|
Share-based compensation (included in SG&A) |
1,584 |
2,742 |
7,394 |
4,217 |
|
|
12,240 |
12,780 |
27,447 |
26,861 |
|
Revenue |
154,230 |
155,618 |
320,353 |
321,641 |
|
SG&A costs excluding share-based compensation as a percentage
of revenue |
8% |
8% |
9% |
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 June 30, |
Six-month periods
ended June 30, |
|
|
2024 |
|
2023 |
2024 |
|
2023 |
| Cash flows
from operating activities |
39,317 |
|
22,633 |
50,484 |
|
26,341 |
| Add
(deduct): |
|
|
|
|
|
Changes in non-cash working capital |
(15,832 |
) |
5,770 |
(1,248 |
) |
28,152 |
|
Interest paid |
283 |
|
521 |
488 |
|
1,034 |
|
Income taxes paid |
545 |
|
1,324 |
729 |
|
1,458 |
|
Funds from operations |
24,313 |
|
30,248 |
50,453 |
|
56,985 |
| |
|
|
|
|
|
|
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 June 30, |
|
Six-month periods
ended June 30, |
|
|
|
2024 |
|
2023 |
|
2024 |
|
2023 |
|
| Cash flows
from operating activities |
39,317 |
|
22,633 |
|
50,484 |
|
26,341 |
|
|
Add (deduct): |
|
|
|
|
|
Changes in non-cash working capital |
(15,832 |
) |
5,770 |
|
(1,248 |
) |
28,152 |
|
|
Interest paid |
283 |
|
521 |
|
488 |
|
1,034 |
|
|
Income taxes paid |
545 |
|
1,324 |
|
729 |
|
1,458 |
|
| Cash payment on leases |
(1,396 |
) |
(1,257 |
) |
(2,767 |
) |
(2,595 |
) |
|
|
22,917 |
|
28,991 |
|
47,686 |
|
54,390 |
|
|
|
|
|
|
|
|
Proceeds on disposition of drilling equipment |
7,409 |
|
8,589 |
|
19,710 |
|
21,007 |
|
|
Maintenance capital expenditures to replace downhole equipment
losses and asset retirements |
(2,267 |
) |
(7,141 |
) |
(7,683 |
) |
(15,769 |
) |
|
Net proceeds |
5,142 |
|
1,448 |
|
12,027 |
|
5,238 |
|
| |
|
|
|
|
| Growth
capital expenditures |
(24,513 |
) |
(4,931 |
) |
(48,737 |
) |
(14,885 |
) |
|
Excess cash flow |
3,546 |
|
25,508 |
|
10,976 |
|
44,743 |
|
| |
|
|
|
|
|
|
|
|
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)
|
|
June 30, 2024 |
|
December 31, 2023 |
|
|
Current assets |
196,435 |
|
207,040 |
|
| Deduct: |
|
|
|
Current liabilities |
(121,383 |
) |
(113,125 |
) |
|
Working capital |
75,052 |
|
93,915 |
|
| |
|
|
|
|
d) Net Debt
(Net Cash)
Net debt is defined as the Corporation’s loans
and borrowings less cash and cash equivalents. 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 and cash equivalents to net debt:
(Stated in thousands of dollars)
|
|
June 30, 2024 |
|
December 31, 2023 |
|
|
Loans and borrowings |
9,649 |
|
7,564 |
|
| Deduct: |
|
|
|
Cash and cash equivalents |
(13,798 |
) |
(16,433 |
) |
|
Net debt (Net cash) |
(4,149 |
) |
(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 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 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 June 30, |
|
Six-month periods
ended June 30, |
|
|
|
2024 |
|
2023 |
|
2024 |
|
2023 |
|
| Growth
capital expenditures |
24,513 |
|
4,931 |
|
48,737 |
|
14,885 |
|
| Maintenance
capital expenditures from asset retirements |
2,029 |
|
3,860 |
|
6,170 |
|
8,718 |
|
|
Maintenance capital expenditures from downhole equipment
losses |
238 |
|
3,281 |
|
1,513 |
|
7,051 |
|
| |
26,780 |
|
12,072 |
|
56,420 |
|
30,654 |
|
| Deduct: |
|
|
|
|
|
Proceeds on disposition of drilling equipment |
(7,409 |
) |
(8,589 |
) |
(19,710 |
) |
(21,007 |
) |
|
Net capital expenditures |
19,371 |
|
3,483 |
|
36,710 |
|
9,647 |
|
| |
|
|
|
|
|
|
|
|
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 June 30, |
|
Six-month periods
ended June 30, |
|
|
|
2024 |
|
2023 |
|
2024 |
|
2023 |
|
| Excess cash
flow |
3,546 |
|
25,508 |
|
10,976 |
|
44,743 |
|
| 70% of
excess cash flow |
2,482 |
|
17,856 |
|
7,683 |
|
31,320 |
|
| |
|
|
|
|
| Deduct: |
|
|
|
|
|
Dividends paid to shareholders |
(9,498 |
) |
(7,656 |
) |
(18,951 |
) |
(15,292 |
) |
|
Repurchase of shares under the NCIB |
(3,143 |
) |
(1,579 |
) |
(3,143 |
) |
(1,579 |
) |
|
Remaining Distributable Balance under ROCS |
(10,159 |
) |
8,621 |
|
(14,411 |
) |
14,449 |
|
| |
|
|
|
|
|
|
|
|
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 at period
end.
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
Condensed Consolidated Statements of Cash Flows and Note 6(a) in
the Notes to the Condensed Consolidated 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.
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