PHX Energy Announces Record Second Quarter Financial Results
CALGARY, Alberta, Aug. 08, 2023 (GLOBE NEWSWIRE) --
*Second Quarter Highlights*
· For the three-month period ended June 30, 2023, PHX Energy generated consolidated revenue of $155.6 million, the highest level of second quarter revenue on record and the third highest level of quarterly revenue in the Corporation’s history despite the second quarter being typically slow in Canada due to spring break-up. Revenue in the first quarter of 2023 and fourth quarter of 2022 are the first and second highest quarterly revenue on record, respectively.
· Earnings from continuing operations increased to $18.1 million, an increase of 41 percent over the second quarter of 2022, and adjusted EBITDA^(1) from continuing operations increased to $34.8 million, which represented 22 percent of consolidated revenue^(1). Earnings and adjusted EBITDA from continuing operations are the best second quarter results on record. Additionally, adjusted EBITDA is the Corporation’s second highest quarterly level in its history. Included in the 2023-quarter’s adjusted EBITDA is $2.6 million in cash-settled share-based compensation expense. Excluding cash-settled share-based compensation expense, adjusted EBITDA from continuing operations^(^1^) in the second quarter of 2023 was $37.4 million, 24 percent of consolidated revenue^(^1^).
· PHX Energy’s US division revenue in the second quarter of 2023 was $125 million, 19 percent higher than the second quarter of 2022 and just slightly below the records achieved in the previous two quarters. US division revenue in the 2023-quarter represented 80 percent of consolidated revenue.
· PHX Energy’s Canadian division reported $29.4 million of quarterly revenue, its highest level of second quarter revenue on record.
· The US dollar continued to have a favorable impact on the 2023-quarter’s financial results. In the 2023 three-month period, the average US dollar to Canadian dollar foreign exchange rate was 1.34 compared to 1.28 in the 2022-period. Albeit, the US dollar has weakened compared to the first quarter of 2023.
· The Corporation generated excess cash flow^(2) of $25.5 million in the 2023 three-month period, after deducting for maintenance capital expenditures from asset retirements, maintenance capital expenditures from downhole equipment losses, and growth capital expenditures of $3.9 million, $3.3 million, and $4.9 million, respectively.
· In the 2023-quarter, PHX Energy paid $7.7 million in dividends which is double the dividend amount paid in the same 2022-quarter. On June 15, 2023, the Corporation declared a dividend of $0.15 per share^(^3^) or $7.6 million, paid on July 17, 2023 to shareholders of record on June 30, 2023.
· PHX Energy delivered additional returns to shareholders through the use of its current NCIB, purchasing and cancelling 267,800 common shares for $1.6 million in the second quarter of 2023. Subsequent to June 30, 2023, the Corporation purchased and cancelled 1,242,000 common shares for $8.1 million.
· As at June 30, 2023, the Corporation had working capital^(^2^) of $111 million and net debt^(^2^) of $7.6 million with credit facility capacity in excess of $52 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,
*2023* 2022 % Change *2023* 2022 % Change
*Operating Results – Continuing Operations* *(unaudited)* (unaudited) *(unaudited)* (unaudited)
Revenue *155,618* 126,238 23 *321,641* 235,568 37
Earnings *18,108* 12,818 41 *40,526* 10,504 286
Earnings per share – diluted *0.35* 0.25 40 *0.77* 0.21 267
Adjusted EBITDA ^(1) *34,802* 25,084 39 *71,804* 31,528 128
Adjusted EBITDA per share – diluted ^(^1^) *0.66* 0.49 35 *1.35* 0.63 114
Adjusted EBITDA as a percentage of revenue ^(^1^) *22* *%* 20 % *22* *%* 13 %
*Cash Flow – Continuing Operations*
Cash flows from (used in) operating activities *22,633* 11,449 98 *26,341* 7,740 240
Funds from operations ^(^2^) *30,248* 21,821 39 *56,985* 24,703 131
Funds from operations per share – diluted ^(^3^) *0.57* 0.43 33 *1.07* 0.49 118
Dividends paid per share ^(^3^) *0.15* 0.075 100 *0.30* 0.125 140
Dividends paid *7,656* 3,791 102 *15,292* 6,273 144
Capital expenditures *12,072* 15,214 (21 ) *30,654* 33,420 (8 )
Excess cash flow ^(^2^) *25,508* 9,116 180 *44,743* (2,277 ) n.m.
*Financial Position * *Jun 30 ‘23* Dec 31 ‘22
Working capital ^(^2^) *110,963* 94,339 18
Net debt ^(^2^) *7,605* 4,484 70
Shareholders’ equity *196,750* 176,878 11
Common shares outstanding *50,801,138* 50,896,175 n.m.
n.m. – not meaningful
*Outlook*
In the second quarter we continued to produce strong financial and operating results despite a softening market. These results are testament to our talented team and leading-edge technology that allow us to deliver the superior operational performance that Operators demand.
· We remain cautiously optimistic for the second half of 2023. We expect the softening US rig count to stabilize with the recent strengthening of oil commodity prices and tightening supply. Additionally, we anticipate the Canadian industry activity will continue to trend above the levels seen in the prior year.
· In the US we may continue to see lighter activity than 2022 and expect levels to remain relatively consistent with those seen in the second quarter. We anticipate that the premiums generated from our technology offering, particularly RSS, will continue to offset the subtle decline in activity. Additionally, we believe our motor rental and sales division will continue to see growth in the remainder of the year and these streams will also contribute to improved revenue and margins year-over-year.
· In Canada we expect our activity to continue to show an improvement over 2022 and revenues to track accordingly. The second quarter was a record spring break up period for our Canadian division and currently this division is very active.
· We believe the delivery of the additional equipment on order will be adequate to meet the volume of forecasted activity for the remainder of 2023. We will assess future capital requirements in the upcoming months for anticipated growth in 2024 and will likely place early orders for certain materials and items that still have long lead times for delivery.
· In line with our strategy to expand our Atlas sales business, we recently entered into an Atlas sales agreement with an existing international client. We have already seen an upside in the second quarter from this new business line and will continue to pursue opportunities for expansion.
· We continue to leverage our business strengths to reward our shareholders through the various mechanism of ROCS, including our base dividend program, share buy backs and the ability to trigger special dividends with excess cash. We have bought back 19% of our shares since 2017, including the purchase and cancellation of 1.5 million shares through the current NCIB thus far in 2023. Through our dividend program we have paid $36.7 million to shareholders since reinstating the program in December 2020.
Through the remainder of the year, we will continue to provide attractive shareholder returns while maintaining our balance sheet strength and funding operational growth by investing in new technology development and capital expenditures.
Michael Buker, President
August 8, 2023
*Financial Results*
In the second quarter of 2023, market uncertainties continued. North American drilling activity was flat compared to the same quarter in 2022 and has declined from the first quarter of 2023. Despite these market trends, PHX Energy’s consolidated revenue grew by 23 percent to $155.6 million (2022 - $126.2 million), the highest second quarter revenue on record.
For the three-month period ended June 30, 2023, in line with North American industry activity, PHX Energy’s consolidated activity levels were relatively flat at 6,526 operating days compared to 6,486 operating days in the 2022-period. The Corporation continued to leverage its premium technologies and strength in marketing and operations, and as a result, improved its average consolidated revenue per day^(3) for directional drilling services by 15 percent quarter-over-quarter.
In the 2023 three-month period, PHX Energy’s US division revenue grew by 19 percent to $125 million as compared to $105.4 million in the same 2022-period. Compared to the record in the first quarter of 2023, the US division’s revenue was relatively flat despite the decline in the rig count in the 2023-quarter. US operating days decreased by 7 percent from 4,707 in the second quarter of 2022 to 4,364 in the second quarter of 2023 while US average revenue per day^(3) for directional drilling services improved by 18 percent quarter-over-quarter. Revenue from the Corporation’s US segment represented 80 percent of consolidated revenue in the 2023 three-month period (2022 – 83 percent).
Similar to the US division, the momentum of the strong first quarter results in Canada continued in the second quarter of 2023, and the Corporation’s Canadian division generated revenue of $29.4 million, a 49 percent increase from $19.7 million in the same 2022-quarter. Following the record revenue in the first quarter, this is the highest level of second quarter Canadian division revenue on record. In the 2023 three-month period, Canadian industry activity held steady compared to the same 2022-period while the Corporation’s Canadian operating days grew by 23 percent to 2,076 days from the 1,688 operating days in the comparable 2022-period. Average revenue per day realized by the Canadian segment also improved by 19 percent quarter-over-quarter.
Earnings from continuing operations and adjusted EBITDA^(1) generated in the 2023-quarter are the best second quarter results in the Corporation’s history. For the three-month period ended June 30, 2023, earnings from continuing operations increased to $18.1 million from $12.8 million in the comparable 2022-period, an increase of 41 percent. Adjusted EBITDA from continuing operations increased to $34.8 million (22 percent of revenue) which is 39 percent higher than the adjusted EBITDA reported in the same 2022-period of $25.1 million (20 percent of revenue). Included in the 2023 three-month period adjusted EBITDA from continuing operations is cash-settled share-based compensation expense of $2.6 million (2022 - $0.7 million). For the three-month period ended June 30, 2023, excluding cash-settled share-based compensation expense, adjusted EBITDA from continuing operations^(1) is $37.4 million, 24 percent of consolidated revenue (2022 - $25.8 million).
PHX Energy maintained its strong financial position and had working capital^(2) of $111 million and net debt^(2) of $7.6 million with available credit facilities in excess of $52 million as at June 30, 2023.
*Dividends and ROCS*
On June 15, 2023, the Corporation declared a dividend of $0.15 per share payable to shareholders of record at the close of business on June 30, 2023. An aggregate of $7.6 million was paid on July 17, 2023. This is double the dividend declared in the 2022-quarter.
The Corporation remains committed to enhancing shareholder returns through its Return of Capital Strategy (“ROCS”) that includes multiple options including the dividend program and the Normal Course Issuer Bid (“NCIB”).
*Normal Course Issuer Bid *
Pursuant to PHX Energy’s current NCIB it is entitled to purchase for cancellation, from time-to-time, up to a maximum of 3,622,967 common shares, representing 10 percent of the Corporation’s public float of common shares at the time of its approval by the TSX. The NCIB commenced on August 16, 2022, and will terminate on August 15, 2023. Pursuant to the current NCIB, 267,800 common shares were purchased by the Corporation for $1.6 million and cancelled in the second quarter of 2023. Subsequent to June 30, 2023, the Corporation purchased and cancelled 1,242,000 common shares for $8.1 million. Pursuant to the Corporation's current NCIB, the Corporation purchased in the open market through the facilities of the TSX and through other alternative Canadian trading platforms and cancelled an aggregate of 1,509,800 common shares of the Corporation at an average price paid of $6.39 per common share. For the three-month period ended June 30, 2022, the Corporation did not repurchase shares through its previous NCIB.
The Corporation has made an application to the TSX for renewal of its NCIB for a further one-year term. The anticipated renewal of the NCIB is subject to the review and approval of the TSX.
*Capital Spending*
In the second quarter of 2023, the Corporation spent $12.1 million in capital expenditures, of which $4.9 million was spent on growing the Corporation’s fleet of drilling equipment, $3.9 million was spent to replace retired assets, and $3.3 million was spent to replace equipment lost downhole during drilling operations. With proceeds on disposition of drilling and other equipment of $8.6 million, the Corporation’s net capital expenditures^(2) for the 2023-quarter were $3.5 million. Capital expenditures in the 2023-quarter were primarily directed towards Atlas High Performance motors (“Atlas”), Velocity Real-Time systems (“Velocity”), and PowerDrive Orbit Rotary Steerable Systems (“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 period ended June 30,
Six-month period ended June 30, *2023* *2023*
Growth capital expenditures *4,931* *14,885*
Maintenance capital expenditures from asset retirements *3,860* *8,718*
Maintenance capital expenditures from downhole equipment losses *3,281* *7,051* *12,072* *30,654*
Deduct:
Proceeds on disposition of drilling equipment *(8,589* *)* *(21,007* *)*
Net capital expenditures^(2) *3,483* *9,647*
The approved capital expenditure budget for the 2023-year, excluding proceeds on disposition of drilling equipment, is $61.5 million, which includes $11.5 million of carryover from the 2022 budget. Of the total expenditures, $38.5 million is expected to be allocated to growth capital and the remaining $23 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 maintenance capital amount could increase throughout the year should there be more downhole equipment losses than forecasted. These increases would likely be funded by proceeds on disposition of drilling equipment.
As at June 30, 2023, the Corporation has capital commitments to purchase drilling and other equipment for $28.4 million, $21.5 million of which is growth capital and includes $20.7 million for performance drilling motors and $0.8 million for other equipment. Equipment on order as at June 30, 2023 is expected to be delivered within 2023.
The Corporation currently possesses approximately 680 Atlas motors, comprised of various configurations including its 5.13", 5.25", 5.76", 6.63", 7.12", 7.25", 8" and 9" Atlas motors, 113 Velocity systems, and 51 PowerDrive Orbit RSS, the largest independent fleet in North America.
*Sale and Licensed Use of Atlas Motors *
On May 3, 2023, PHX Energy entered into a sales agreement for the sale and licensed use of its Atlas High Performance Drilling Motors. PHX Energy will be providing a fleet of Atlas motors to a purchaser in the US market (referred to as the “Purchaser”). Under the agreement, the Purchaser must exclusively use components manufactured by the Corporation for the maintenance of their fleet of Atlas motors. PHX Energy anticipates delivering a fleet of Atlas motors amounting to $3.8 million to the Purchaser by the third quarter of 2023 and anticipates ongoing orders for parts to maintain their fleet throughout the remainder of the year. In addition, the Purchaser could potentially place subsequent orders for additional Atlas motors in the latter part of the year. In the 2023 three-month period, $3.2 million of motors and parts were sold as part of this agreement.
On July 27, 2023, PHX Energy agreed upon the sale and licensed use of its Atlas High Performance Drilling Motors to an existing international client. PHX Energy will be providing a fleet of Atlas motors and parts amounting to approximately $5 million with delivery anticipated to be completed by the end of 2023.
*Supply Chain and Inventory*
Inflation and shortages related to the products and services required within the energy sector, including those within the Corporation’s supply chain, continued in the second quarter 2023 although it had less of an impact. Due to these shortages, lead times remain extended and turn-around times for servicing the Corporation’s premium technologies remain longer than usual. Inflationary pressures also carried through 2023 and the resulting overall cost increases continued to negatively impact the Corporation’s margins.
PHX Energy has remained diligent and proactive with efforts to lessen the supply chain disruptions’ impact on its operations. Specifically, the Corporation continues to maintain higher minimum safety stock levels and take advantage of pre-ordering materials to manufacture technology and obtain bulk discounts. These supply chain strategies continue to result in higher inventory levels, which have increased by 8 percent from $63.1 million at the end of 2022 to $68.4 million at June 30, 2023. Higher inventory levels were also partly due to lower than forecasted activity in the 2023-quarter. The Corporation continues to pursue pricing increases where it deems necessary to mitigate the impact of inflationary costs and to protect its margins.
Additional information regarding certain material risks and uncertainties, and their impact on the Corporation’s business can be found throughout this Press Release, including under the headings “Capital Spending”, “Operating Costs and Expenses”, “Segmented Information” and “Outlook”.
*Shares Held in Trust*
For the three-month period ended June 30, 2023, the Corporation equity settled a portion of its outstanding Retention Awards (“RA”) granted under its Retention Award Plan (the “RAP”). Pursuant to RA settlements, 53,594 common shares were released from the independent trustee in the 2023-quarter to settle $0.4 million in RAP liabilities. The independent trustee acquires common shares on the open market from time-to-time for the potential settlement of future share-based compensation obligations of the Corporation. For the three-month period ended June 30, 2023, the trustee did not repurchase common shares. As at June 30, 2023, 3,301 common shares were held in trust for purposes of the RAP.
*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 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, and working capital. 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 Press Release for applicable definitions, rationale for use, method of calculation and reconciliations where applicable.
*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. Recently, the revenue generated from the rental and sale of motors has grown and this is expected to continue in future periods.
(Stated in thousands of dollars)
Three-month periods ended June 30, Six-month periods ended June 30, *2023* 2022 % Change *2023* 2022 % Change
Directional drilling services *140,970* 120,101 17 *297,062* 223,518 33
Motor rental *11,427* 6,137 86 *20,669* 12,050 72
Sale of motor equipment and parts *3,221* - n.m. *3,910* - n.m.
Total revenue *155,618* 126,238 23 *321,641* 235,568 37
n.m. – not meaningful
In the second quarter of 2023, PHX Energy’s consolidated revenue was $155.6 million, a 23 percent increase compared to the $126.2 million in the second quarter of 2022 and a 6 percent decrease compared to the $166 million in the first quarter of 2023. A decrease from the first quarter to the second quarter is typical due to Canadian spring break up and additionally wildfires in Alberta also affected the Corporation’s Canadian drilling activity in the 2023-quarter. For the six-month period ended June 30, 2023, the Corporation generated consolidated revenue of $321.6 million, an increase of 37 percent as compared to the same 2022-period which generated consolidated revenue of $235.6 million. Higher revenue in both the 2023 three and six-month periods was mainly driven by stronger average consolidated revenue per day^(3) realized through increased capacity in the Corporation’s fleet of high performance technologies, the cumulative impact of previous and recent pricing increases carried out to mitigate the effects of inflationary costs, and the strengthening of the US dollar relative to the 2022-quarter.
For the three and six-month period ended June 30, 2023, average consolidated revenue per day^(3^) for directional drilling services increased by 15 percent and 20 percent, respectively. Average consolidated revenue per day increased to $21,603 in the 2023 three-month period from $18,782 in the same 2022-period and increased to $20,515 in the 2023 six-month period from $17,086 in the same 2022-period.
During the second quarter of 2023, the US industry rig count averaged 700 rigs operating per day, which is only 2 percent greater than the average of 687 rigs in the second quarter of 2022. US rig count has been decreasing since the fourth quarter of 2022 and is 6 percent lower in the second quarter of 2023 compared to the average of 742 rigs in the first quarter of 2023. In Canada, the average rig count for the 2023 three-month period increased 4 percent to 117 rigs from 113 rigs in the second quarter of 2022 (Source: Baker Hughes, North American Rotary Rig Count, Jan 2000 – Current, https://rigcount.bakerhughes.com/na-rig-count). In comparison, the Corporation’s consolidated operating days were relatively flat at 6,526 days in the second quarter of 2023 compared to 6,486 days in the second quarter of 2022. For the six-month period ended June 30, 2023, consolidated operating days increased by 9 percent to 14,480 from 13,281 days in the corresponding 2022-period.
PHX Energy’s revenue from motor rentals grew by 86 percent to $11.4 million in the 2023-quarter from $6.1 million in the same 2022-quarter and increased by 72 percent to $20.7 million in the 2023 six-month period from $12.1 million in the same 2022-period. Higher motor rental revenue in both 2023-periods primarily resulted from the continued focus on marketing Atlas technology as a stand-alone product line and expanded capacity in the Corporation’s Atlas motor fleet.
In the 2023-quarter, PHX Energy sold $3.2 million in Atlas motors and parts. With the two sales agreements in place, the Corporation expects to grow this business line in future periods.
*Operating Costs **and Expenses*
(Stated in thousands of dollars except percentages)
Three-month periods ended June 30, Six-month periods ended June 30,
*2023* 2022 % Change *2023* 2022 % Change
Direct costs *1**19,870* 100,520 19 *251,858* 192,466 31
Depreciation & amortization drilling and other equipment (included in direct costs) *9,621* 7,823 23 *18,938* 15,099 25
Depreciation & amortization right-of-use asset (included in direct costs) *827* 849 (3 ) *1,235* 1,685 (27 )
Gross profit as a percentage of revenue excluding depreciation & amortization^(1) *30* *%* 27 % *28* *%* 25 %
Direct costs are comprised of field and shop expenses, costs of motors and parts sold, and include depreciation and amortization of the Corporation’s equipment and right-of-use assets. For the three-month period ended June 30, 2023, direct costs increased by 19 percent to $119.9 million from $100.5 million in the 2022-period. For the 2023 six-month period, direct costs increased by 31 percent to $251.9 million from $192.5 million in the same 2022-period. Higher direct costs in both 2023 periods were mainly driven by greater depreciation and amortization expenses on drilling and other equipment, higher motor repairs associated with growth in motor rental activity, greater costs of motors and parts sold, and increased overall costs related to personnel, repair parts, and equipment rentals as a result of inflation and activity growth in the first half of 2023. The Corporation’s depreciation and amortization on drilling and other equipment increased by 23 percent and 25 percent, respectively, in the 2023 three and six-month periods due to the volume of fixed assets acquired as part of PHX Energy’s capital expenditure program in the first half of 2023.
In the three and six-month periods of 2023, gross profit as a percentage of revenue excluding depreciation and amortization improved to 30 percent and 28 percent, respectively, compared to 27 percent and 25 percent in the corresponding 2022-periods. Greater profitability in both periods was largely driven by the higher average consolidated revenue per day^(3) achieved and various strategies implemented by PHX Energy over the past year to gain cost efficiencies and soften the impact of rising costs caused by inflation. Margins from the rental and sale of Atlas motors also contributed to the increase in gross profits in the 2023 periods.
(Stated in thousands of dollars except percentages)
Three-month periods ended June 30, Six-month periods ended June 30, *2023* 2022 % Change *2023* 2022 % Change
Selling, general and administrative (“SG&A”) costs *15,522* 11,836 31 *31,078* 33,947 (8 )
Cash-settled share-based compensation (included in SG&A costs) *2,556* 715 n.m. *3,930* 12,452 (68 )
Equity-settled share-based compensation (included in SG&A costs) *186* (75 ) n.m. *287* 260 10
SG&A costs excluding share-based compensation as a percentage of revenue^(^1^) *8* *%* 9 % *8* *%* 9 %
n.m. – not meaningful
For the three-month period ended June 30, 2023, SG&A costs were $15.5 million, an increase of 31 percent as compared to $11.8 million in the corresponding 2022-period. Higher SG&A costs in the 2023-quarter were largely due to rising personnel-related costs mainly attributable to inflation and the increase in the compensation expenses related to cash-settled share-based awards. In the 2023 six-month period, SG&A costs decreased by 8 percent to $31.1 million from $33.9 million in the corresponding 2022-period. Lower SG&A costs in the first half of 2023 were primarily driven by the decline in the compensation expenses related to cash-settled share-based awards.
Cash-settled share-based compensation relates to the Corporation’s retention awards and are measured at fair value. For the three and six-month periods ended June 30, 2023, the related compensation expense recognized by PHX Energy was $2.6 million (2022 - $0.7 million) and $3.9 million (2022 - $12.5 million), respectively. Changes in cash-settled share-based compensation expense in the 2023-periods were mainly driven by fluctuations in the Corporation’s share price, the number of awards granted in the period, and changes in the estimated payout multiplier for performance awards. There were 2,100,746 retention awards outstanding as at June 30, 2023 (2022 – 3,425,196). Excluding share-based compensation, SG&A costs as a percentage of revenue for both the 2023 three and six-month periods improved to 8 percent as compared to 9 percent in the corresponding 2022 periods.
(Stated in thousands of dollars)
Three-month periods ended June 30, Six-month periods ended June 30, *2023* 2022 % Change *2023* 2022 % Change
Research and development expense *1,314* 873 51 *2,571* 1,630 58
PHX Energy’s research and development (“R&D”) expenditures for the three and six-month periods ended June 30, 2023, were $1.3 million (2022 - $0.9 million) and $2.6 million (2022 - $1.6 million), respectively. Higher R&D expenditures in both 2023 periods were mainly due to increased prototype expenses and more personnel necessary to support the greater number of ongoing initiatives to continuously improve the reliability of equipment, reduce costs to operations, and develop new technologies.
(Stated in thousands of dollars)
Three-month periods ended June 30, Six-month periods ended June 30, *2023* 2022 % Change *2023* 2022 % Change
Finance expense *7**09* 262 171 *1,376* 374 268
Finance expense lease liabilities *564* 501 13 *1,140* 1,008 13
Finance expenses mainly relate to interest charges on the Corporation’s credit facilities. For the three and six-month periods ended June 30, 2023, finance expenses increased to $0.7 million (2022 - $0.3 million) and $1.4 million (2022 - $0.4 million), respectively, mainly due to higher drawings on the credit facilities that were used to fund PHX Energy’s capital spending. Additionally, variable interest rates on the Corporation’s operating and syndicated facilities continued to trend upwards and contributed to higher finance expenses in the 2023 periods.
Finance expense lease liabilities relate to interest expense incurred on lease liabilities. For the three and six-month periods ended June, 2023, finance expense lease liabilities increased by 13 percent in both periods primarily due to new premise leases entered in the fourth quarter of 2022 and first quarter of 2023 for a new facility in Midland, Texas and additional head office space in Calgary, Alberta.
(Stated in thousands of dollars)
Three-month periods ended June 30, Six-month periods ended June 30,
*2023* 2022 *2023* 2022
Net gain on disposition of drilling equipment *5,593* 3,060 *15,549* 6,642
Foreign exchange gains (losses) *897* (64 ) *920* (76 )
Bad debts *(1,223* *)* - *(1,223* *)* -
Other *-* 512 *-* 512
Other income *5,267* 3,508 *15,246* 7,078 For the three and six-month periods ended June 30, 2023, the Corporation recognized other income of $5.3 million $15.2 million, respectively (2022 - $3.5 million and $7.1 million, respectively). In both periods, other income was mainly comprised of net gain on disposition of drilling equipment.
Net gain on disposition of drilling equipment is comprised of gains on disposition of drilling equipment and proceeds from insurance programs. The recognized gain is net of losses, which typically result from asset retirements that were made before the end of the equipment’s useful life. In the 2023 periods, more instances of high dollar valued downhole equipment losses occurred as compared to the corresponding 2022 periods which resulted in higher proceeds and gains. The Corporation will use capital expenditure funds, including the proceeds from disposition of drilling equipment, to replace this equipment and these amounts will be added to the capital expenditures in 2023.
The Corporation recognized foreign exchange gains of $0.9 million in both the 2023 three and six-month periods (2022 - $0.1 million foreign exchange losses) primarily due to the settlement of a USD-denominated receivable as a result of a reorganization in Luxembourg.
In the 2023 periods, PHX Energy provisioned for bad debt for $1.2 million (2022 - nil) which relates mainly to one client.
(Stated in thousands of dollars except percentages)
Three-month periods ended June 30, Six-month periods ended June 30, *2023* 2022 *2023* 2022
Provision for income taxes *4,797* 2,934 *8,338* 2,717
Effective tax rates^(3) *21* *%* 19 % *17* *%* 21 %For the three-month period ended June 30, 2023, the Corporation reported income tax provision of $4.8 million (2022 - $2.9 million), of which, $5.3 million was current and a recovery of $0.5 million was deferred. For the six-month period ended June 30, 2023, PHX Energy recognized provision for income taxes of $8.3 million (2022 - $2.7 million), of which, $8 million was current. Increased current taxes in both 2023 periods mainly resulted from improved taxable income in the US. PHX Energy’s effective tax rate was 21 percent in the 2023-quarter and 17 percent in the 2023 six-month period which is lower than the combined US federal and state corporate income tax rate of 21 percent and the combined Canadian federal and provincial corporate 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 three operating segments on a geographical basis throughout the Gulf Coast, Northeast and Rocky Mountain regions of the US; throughout the Western Canadian Sedimentary Basin, and internationally in Albania.
*United States*
(Stated in thousands of dollars)
Three-month periods ended June 30, Six-month periods ended June 30, *2023* 2022 % Change *2023* 2022 % Change
Directional drilling services *110,778* 99,481 11 *227,143* 175,634 29
Motor rental *10,955* 5,886 86 *19,568* 11,528 70
Sale of motor equipment and parts *3,221* - n.m. *3,910* - n.m.
Total US revenue *124,954* 105,367 19 *250,621* 187,162 34
Reportable segment profit before tax ^(^i^) *24,037* 16,885 42 *39,959* 23,331 71
^(^i^) Includes adjustments to intercompany transactions.
n.m. – not meaningful
For the three-month period ended June 30, 2023, total US revenue increased by 19 percent to $125 million as compared to $105.4 million in the 2022-quarter. The strong second quarter revenue generated followed the record revenue trend set in the previous two quarters, with a slight decrease as compared to the first quarter of 2023 due to a slowdown in industry activity. With two consecutive strong quarters in 2023, US revenue for the first half of 2023 increased 34 percent to $250.6 million from $187.2 million in the 2022-period.
In the second quarter of 2023, the Corporation’s US drilling activity decreased by 7 percent to 4,364 operating days compared to 4,707 days in the second quarter of 2022 and has decreased by 9 percent as compared to the 4,820 days in the first quarter of 2023. In comparison, the US industry horizontal and directional rig count in the second quarter of 2023 only increased 2 percent with 700 active rigs per day as compared to 687 rigs per day in the second quarter of 2022 and decreased by 6 percent when compared to an average of 742 active horizontal and directional rigs per day in the first quarter of 2023. (Source: Baker Hughes, North American Rotary Rig Count, Jan 2000 – Current, https://rigcount.bakerhughes.com/na-rig-count). For the six-month period ended June 30, 2023, PHX Energy’s US drilling activity increased 5 percent to 9,184 operating days as compared to 8,753 days in the same 2022-period. This increase was mainly a result of strong activity in the first quarter of 2023.
Horizontal and directional drilling continued to represent the majority of rigs running on a daily basis in both 2023 periods. Phoenix USA was active in the Permian, Scoop/Stack, Marcellus, Utica, Bakken, and Niobrara basins in the first half of 2023.
For the three-month period ended June 30, 2023, average revenue per day^(3) for directional drilling services rose to $25,388 from $21,135 in the second quarter of 2022, a 20 percent increase. In the 2023 six-month period, average revenue per day for directional drilling services increased 23 percent to $24,734 from $20,067 in the same 2022-period. Higher average revenue per day in both 2023 periods was realized as a result of continued strong demand for the Corporation’s premium technologies, superior operational performance of personnel and equipment, and increased capacity and utilization in the Corporation’s premium technologies. The strong US dollar in both 2023 periods also supported the increase in average revenue per day. Omitting the impact of foreign exchange, the average revenue per day for directional drilling services increased by 14 percent and 16 percent, respectively, in the 2023 three and six-month periods.
In the second quarter of 2023, PHX Energy’s motor rental business continued to grow. US motor rental revenue in the 2023-quarter was $11 million as compared to $5.9 million in the same 2022-quarter, an increase of 86 percent. In the first half of 2023, US motor rental revenue was $19.6 million, a 70 percent increase compared to $11.5 million in the same 2022-period. During the 2023-quarter, PHX Energy also sold motor equipment and parts to a customer and generated $3.2 million of revenue from this new line of business.
For the three and six-month periods ended June 30, 2023, the US segment realized reportable segment income before tax of $24 and $40 million, respectively, which are 42 percent and 71 percent higher than the corresponding 2022-periods. Higher average revenue per day and growth in the rental and sale of Atlas motors greatly contributed to improved profitability in both 2023 periods.
*Canada *
(Stated in thousands of dollars)
Three-month periods ended June 30, Six-month periods ended June 30,
*2023 * 2022 % Change *2023 * 2022 % Change
Directional drilling services *28,970* 19,453 49 *67,572* 46,321 46
Motor rental *472* 251 88 *1,101* 522 111
Total Canadian revenue *29,442* 19,704 49 *68,673* 46,843 47
Reportable segment profit (loss) before tax ^(^i^) *1,677* (16 ) n.m. *9,565* 3,450 177
^(^i^) Includes adjustments to intercompany transactions.
n.m. – not meaningful
In the three-month period of 2023, PHX Energy’s Canadian operations continued to generate strong quarterly revenues, trending with the first quarter of 2023. For the three-month period ended June 30, 2023, PHX Energy’s Canadian division generated a second quarter record of $29.4 million in revenue, an increase of 49 percent compared to $19.7 million in the 2022-quarter. In the 2023 six-month period, Canadian division revenue was $68.7 million, an increase of 47 percent as compared to $46.8 million in the same 2022-period.
For the three and six-month periods ended June 30, 2023, operating days improved by 23 percent and 16 percent to 2,076 and 5,127, respectively, compared to 1,688 days and 4,418 days in the corresponding 2022-periods. In comparison, industry horizontal and directional drilling activity (as measured by drilling days) was relatively the same as the previous year’s quarter with 10,243 days in the second quarter of 2023, and increased by 6 percent to 28,119 days in the first half of 2023 (Source: Daily Oil Bulletin, hz-dir days 230331). PHX Energy’s Canadian operating segment remains a leader in this market being among the top three service providers. During the 2023-quarter, the Corporation was active in the Duvernay, Montney, Glauconite, Frobisher, Cardium, Viking, Bakken, Torquay, Colony, Clearwater, Deadwood, and Scallion basins.
Throughout the first half of 2023, the Canadian market remained highly competitive but through successful marketing efforts, strong operational performance, and deployment of more premium technology, average revenue per day^(3) for directional drilling services increased by 19 percent to $13,954 in the 2023-quarter from $11,692 in the corresponding 2022-quarter and increased by 24 percent to $13,181 in the 2023 six-month period compared to $10,604 in the same 2022-period.
For the three and six-month periods ended June 30, 2023, the Corporation’s Canadian division recognized reportable segment profit before tax of $1.7 million (2022 – loss of $16 thousand) and $9.6 million (2022 - $3.5 million), respectively. Improved levels of profitability in the 2023 periods were mainly driven by increased volume of activity and higher average revenue per day realized in both 2023 periods.
*International – Continuing Operations*
(Stated in thousands of dollars)
Three-month periods ended June 30, Six-month periods ended June 30,
*2023 * 2022 % Change *2023 * 2022 % Change
Revenue *1,222* 1,167 5 *2,347* 1,563 50
Reportable segment profit (loss) before tax *490* 523 (6 ) *897* 361 148The Corporation’s international segment revenue is comprised of revenue from Albania. For the three and six-month periods ended June 30, 2023, the international segment’s revenue was $1.2 million (2022 - $1.2 million) and $2.3 million (2022 - $1.6 million), respectively. Albania operations remain consistent with one rig which resumed operations in the first quarter of 2022.
The international segment generated reportable segment profit before tax of $0.5 million in the 2023 three-month period, flat against the same 2022-period, and $0.9 million in the 2023 six-month period, more than double compared to the same 2022-period.
*Investing Activities *
Net cash used in investing activities for the period ended June 30, 2023 was $5.7 million as compared to $14.5 million in the 2022-period. During the second quarter of 2023, the Corporation spent $4.9 million (2022 - $10 million) to grow the Corporation’s fleet of drilling equipment and $7.1 million (2022 - $5.2 million) was used to maintain capacity in the Corporation’s fleet of drilling and other equipment and replace equipment lost downhole during drilling operations. With proceeds on disposition of drilling and other equipment of $8.6 million (2022 - $3.9 million), the Corporation’s net capital expenditures^(2) for the 2023-quarter were $3.5 million (2022 - $11.3).
(Stated in thousands of dollars)
Three-month periods ended June 30, Six-month periods ended June 30,
*2023* 2022 *2023* 2022
Growth capital expenditures *4,931* 10,046 *14,885* 23,014
Maintenance capital expenditures *7,141* 5,168 *15,769* 10,406
Total capital expenditures *12,072* 15,214 *30,654* 33,420
Deduct:
Proceeds on disposition of drilling equipment *(8,589* *)* (3,883 ) *(21,007* *)* (9,180 )
Net capital expenditures^(2) *3,483* 11,331 *9,647* 24,240 The 2023-period capital expenditures comprised of:
· $4.6 million in downhole performance drilling motors;
· $6.5 million in MWD systems and spare components and RSS; and
· $1 million in machinery and equipment and other assets.
The change in non-cash working capital balances of $2.2 million (use of cash) for the three-month period ended June 30, 2023, relates to the net change in the Corporation’s trade payables that are associated with the acquisition of capital assets. This compares to $2.9 million (use of cash) for the three-month period ended June 30, 2022.
*Financing Activities *
For the three-month period ended June 30, 2023, net cash used in financing activities was $12 million as compared to $10.4 million generated from financing activities in the 2022-period. In the 2023-period:
· dividends of $7.7 million were paid to shareholders;
· $2.2 million net repayments were made towards the Corporation’s syndicated credit facility;
· 267,800 common shares were purchased by the Corporation for $1.6 million and cancelled under the NCIB;
· payments of $0.7 million were made towards lease liabilities; and
· 33,500 common shares were issued from treasury for proceeds of $0.1 million upon the exercise of share options.*Capital Resources *
As of June 30, 2023, the Corporation had CAD $27.7 million drawn on its Canadian credit facilities, nothing drawn on its US operating facility, and a cash balance of $20.1 million. As at June 30, 2023, the Corporation had CAD $37 million and USD $15 million available from its credit facilities. The credit facilities are secured by substantially all of the Corporation’s assets and mature in December 2025.
As at June 30, 2023, the Corporation was in compliance with all its financial covenants.
*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. In order to continue the advantageous strategy of placing advanced orders and continue to mitigate the supply chain issues expected to continue throughout 2023, the Board has approved a 2023 capital expenditure program of $61.5 million. Of the 2023 capital expenditures, $23 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, and $38.5 million is expected to be allocated to growth capital. 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 2023, 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, 2023, the Corporation has commitments to purchase drilling and other equipment for $28.4 million. Delivery is expected to occur within 2023.
*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. (“Phoenix USA”), 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 administrative offices in Nicosia, Cyprus and Luxembourg City, Luxembourg. The Corporation also supplies technology to the Middle East regions through an arrangement with National Energy Services Reunited Corp.
In July 2023, Phoenix USA appointed two new executive officers to provide further leadership dedicated to growth in the US market and executing strategic initiatives for the US operations. Garrett Wright was appointed Vice President of US Operations and David Raines was appointed Vice President US Sales and Marketing. Both individuals have long tenure with Phoenix USA and have played key roles in the growth thus far.
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 1K3
Tel: 403-543-4466 Fax: 403-543-4485 www.phxtech.com*Consolidated Statements of Financial Position
*(unaudited)
*June 30, 2023**
* December 31, 2022
ASSETS * * * *
Current assets: * * * *
Cash and cash equivalents *$* *20,079,623* $ 18,247,376
Trade and other receivables *120,308,340* 125,836,273
Inventories *68,418,478* 63,119,489
Prepaid expenses *3,226,639* 3,024,166
Total current assets *212,033,080* 210,227,304
Non-current assets: * *
Drilling and other long-term assets *121,124,658* 115,945,060
Right-of-use assets *28,357,351* 29,336,163
Intangible assets *14,539,520* 15,668,180
Investments *3,000,500* 3,000,500
Other long-term assets *1,172,348* 993,112
Deferred tax assets *53,869* 53,869
Total non-current assets *168,248,246* 164,996,884
Total assets *$* *380,281,326* $ 375,224,188
LIABILITIES AND SHAREHOLDERS' EQUITY * *
Current liabilities: * *
Trade and other payables *$* *83,066,680* $ 104,688,901
Dividends payable *7,620,665* 7,636,085
Lease liability *2,955,057* 2,906,708
Current tax liabilities *7,428,078* 656,499
Total current liabilities *101,070,480* 115,888,193
Non-current liabilities: * *
Lease liability *35,426,216* 36,768,003
Loans and borrowings *27,684,591* 22,731,389
Deferred tax liability *17,809,463* 18,496,619
Other *1,540,812* 4,461,531
Total non-current liabilities *82,461,082* 82,457,542
Equity: * *
Share capital *250,600,043* 251,344,809
Contributed surplus *7,189,773* 7,044,317
Deficit *(87,020,775* *)* (112,120,484 )
Accumulated other comprehensive income *25,980,723* 30,609,811
Total equity *196,749,764* 176,878,453
Total liabilities and equity *$* *380,281,326* $ 375,224,188
*Condensed Consolidated Statements of Comprehensive Income
*(unaudited)
Three-month periods ended June 30, Six-month periods ended June 30,
* * *2023* 2022 *2023* 2022
Revenue *$* *155,618,401* $ 126,237,557 *$* *321,640,520* $ 235,568,256
Direct costs *119,869,868* 100,520,480 *251,858,067* 192,466,162
Gross profit *35,748,533* 25,717,077 *69,782,453* 43,102,094
Expenses:
Selling, general and administrative expenses *15,522,116* 11,836,064 *31,078,242* 33,947,420
Research and development expenses *1,314,356* 873,207 *2,570,775* 1,629,766
Finance expense *709,320* 262,188 *1,376,160* 373,984
Finance expense lease liability *563,759* 501,385 *1,140,145* 1,008,401
Other income *(5,266,643* *)* (3,508,490 ) *(15,246,492* *)* (7,077,881 ) *12,842,908* 9,964,354 *20,918,830* 29,881,690
Earnings from continuing operations before income taxes *22,905,625* 15,752,723 *48,863,623* 13,220,404
Provision for (recovery of) income taxes
Current *5,251,592* (13,775 ) *7,975,233* (229,272 )
Deferred *(454,209* *)* 2,948,037 *362,700* 2,946,091 *4,797,383* 2,934,262 *8,337,933* 2,716,819
Earnings from continuing operations *18,108,242* 12,818,461 *40,525,690* 10,503,585
Discontinued operations
Net loss from discontinued operations, net of taxes *-* (12,649,964 ) *-* (14,558,032 )
Net earnings (loss) *18,108,242* 168,497 *40,525,690* (4,054,447 )
Other comprehensive income
Foreign currency translation *(4,522,004* *)* 4,144,053 *(4,629,088* *)* 1,824,583
Total comprehensive earnings (loss) for the period *$* *13,586,238* $ 4,312,550 *35,896,602* (2,229,864 )
Earnings (loss) per share – basic
Continuing operations *$* *0.35* $ 0.25 *0.79* 0.21
Discontinued operations *$* *-* $ (0.25 ) *-* (0.29 )
Net earnings (loss) *$* *0.35* $ (0.00 ) *0.79* (0.08 )
Earnings (loss) per share – diluted
Continuing operations *$* *0.35* $ 0.25 *0.77* 0.21
Discontinued operations *$* *-* $ (0.25 ) *-* (0.29 )
Net earnings (loss) *$* *0.35* $ (0.00 ) *0.77* (0.08 )
*Condensed Consolidated Statements of Cash Flows*
(unaudited)
Three-month periods ended June 30,
Six-month periods ended June 30,
*2023* 2022 *2023* 2022
Cash flows from operating activities:
Earnings from continuing operations *$* *18,108,242* $ 12,818,461 *40,525,690* 10,503,585
Adjustments for:
Depreciation and amortization *9,620,667* 7,822,953 *18,938,023* 15,099,473
Depreciation and amortization right-of-use asset *827,396* 848,681 *1,234,835* 1,684,727
Provision for income taxes *4,797,383* 2,934,262 *8,337,933* 2,716,819
Unrealized foreign exchange gain *(9,617* *)* (27,999 ) *(35,928* *)* (118,526 )
Net gain on disposition of drilling equipment *(5,593,260* *)* (3,059,873 ) *(15,549,425* *)* (6,641,623 )
Equity-settled share-based payments *186,114* (74,706 ) *286,916* 260,008
Finance expense *709,320* 262,188 *1,376,160* 373,984
Finance expense lease liability *563,759* 501,385 *1,140,145* 1,008,401
Provision for bad debts *1,222,764* - *1,222,764* -
Provision for inventory obsolescence *378,710* 297,639 *648,106* 824,656
Interest paid on lease liability *(563,759* *)* (501,385 ) *(1,140,145* *)* (1,008,401 )
Interest paid *(520,993* *)* (127,248 ) *(1,033,597* *)* (178,171 )
Income taxes received (paid) *(1,323,848* *)* 14,880 *(1,458,010* *)* 219,130
Change in non-cash working capital *(5,770,373* *)* (10,259,827 ) *(28,152,043* *)* (17,003,987 )
Continuing operations *22,632,505* 11,449,411 *26,341,424* 7,740,075
Discontinued operations *-* (520,334 ) *-* (1,254,859 )
Net cash from operating activities *22,632,505* 10,929,077 *26,341,424* 6,485,216
Cash flows from investing activities:
Proceeds on disposition of drilling equipment *8,589,174* 3,883,133 *21,006,626* 9,179,549
Acquisition of drilling and other equipment *(12,071,525* *)* (15,213,688 ) *(30,654,445* *)* (33,419,918 )
Acquisition of intangible assets *-* (206,930 ) *-* (618,205 )
Change in non-cash working capital *(2,193,966* *)* (2,924,122 ) *(1,052,669* *)* 710,890
Continuing operations *(5,676,317* *)* (14,461,607 ) *(10,700,488* *)* (24,147,684 )
Discontinued operations *-* (316,392 ) *-* (68,068 )
Net cash used in investing activities *(5,676,317* *)* (14,777,999 ) *(10,700,488* *)* (24,215,752 )
Cash flows from financing activities:
Proceeds from (Repayment of) loans and borrowings *(2,157,398* *)* 16,359,192 *5,168,129* 20,107,992
Proceeds from exercise of options *82,965* 169,666 *349,450* 1,811,853
Dividends paid to shareholders *(7,655,810* *)* (3,790,543 ) *(15,291,896* *)* (6,272,603 )
Repurchase of shares under the NCIB *(1,578,742* *)* - *(1,578,742* *)* -
Payments of Lease Liability *(693,049* *)* (872,923 ) *(1,455,275* *)* (1,731,911 )
Purchase of shares held in trust *-* (1,500,000 ) *(612,000* *)* (3,500,000 )
Continuing operations *(12,002,034* *)* 10,365,392 *(13,420,334* *)* 10,415,331
Discontinued operations *-* - *-* -
Net cash from (used in) financing activities *(12,002,034* *)* 10,365,392 *(13,420,334* *)* 10,415,331
Net increase (decrease) in cash and cash equivalents *4,954,154* 6,516,470 *2,220,602* (7,315,205 )
Cash and cash equivalents, beginning of period *15,501,672* 11,283,545 *18,247,376* 24,828,830
Effect of movements in exchange rates on cash held *(376,203* *)* 171,319 *(388,355* *)* 457,709
Cash and cash equivalents, end of period *$* *20,079,623* $ 17,971,334 *20,079,623* 17,971,334
*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 anticipated industry activity and demand for the Corporation’s services and technologies in North America, the Corporation’s intent to preserve balance sheet strength and continue to reward shareholders, including through dividend program, the ROCS Program and NCIB, PHX Energy's intentions with respect to the NCIB and purchases thereunder and the effects of repurchases under the NCIB; the projected capital expenditures budget 2023 and how the budget will be allocated and funded, the timeline for delivery of equipment on order, the anticipated delivery of assets under the Atlas sales agreement and the potential for ongoing parts orders and subsequent asset orders, the expectation that the Corporation will be able to expand its motor rentals and sales and that revenue will continue to grow in in future periods and that this will also enhance profitability, the anticipated impact of global supply chain disruptions and inflation on the Corporation’s operations, results, and the Corporation’s planned responses thereto, 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”, Sales and Licensed Use of Atlas Motors” “Supply Chain Disruption and Inflation”, “Revenue”, and “Cash Requirements for Capital Expenditures”. 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 2023 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 eco