PHX Energy Announces All-Time Record Quarterly Results, 33% Increase to Dividend and 2023 & 2024 Capital Expenditures
CALGARY, Alberta, Nov. 07, 2023 (GLOBE NEWSWIRE) --
*Third Quarter Highlights*
· For the three-month period ended September 30, 2023, PHX Energy generated consolidated revenue of $169.4 million, the highest level of quarterly revenue in the Corporation’s history. With the first quarter of 2023 being the second highest level on record, the 2023-year is tracking to be a record year for PHX Energy. Consolidated revenue in the 2023-quarter included $11.9 million of motor rental revenue and $6.2 million of motor equipment and parts sold.
· Earnings from continuing operations, adjusted EBITDA^(1) from continuing operations, and adjusted EBITDA as a percentage of consolidated revenue are the best level of quarterly results on record. Earnings from continuing operations increased to $24.9 million ($0.50 per share), an increase of 85 percent over the third quarter of 2022, and adjusted EBITDA from continuing operations increased to $43.5 million ($0.88 per share), which represented 26 percent of consolidated revenue^(1). Included in the 2023-quarter’s adjusted EBITDA is $5 million in cash-settled share-based compensation expense. Excluding cash-settled share-based compensation expense, adjusted EBITDA from continuing operations^(1) in the third quarter of 2023 was $48.5 million, 29 percent of consolidated revenue^(1).
· PHX Energy’s US division revenue in the third quarter of 2023 was $123.8 million, 12 percent higher than the third quarter of 2022 and represented 73 percent of consolidated revenue. This level of revenue is only 1 percent less than the record achieved by the US segment in the fourth quarter of 2022.
· PHX Energy’s Canadian division reported $44.4 million of quarterly revenue which is the highest level since the fourth quarter of 2014.
· In light of the continued strong demand for the Corporation’s premium technologies, the Board approved to increase the 2023 capital expenditure budget to $80 million from the previous $61.5 million. The Board also approved a preliminary 2024 capital expenditure budget of $70 million.
· As at September 30, 2023, the Corporation had working capital^(2) of $101.3 million and net debt^(2) of $3.5 million.
· In November 2023, the Corporation increased the borrowing amounts in the syndicated facility from CAD $50 million to CAD $80 million and in the US operating facility from USD $15 million to USD $20 million. The Corporation also extended the maturity date of the syndicated loan agreement to December 12, 2026. With the increased borrowing amounts, the Corporation has approximately CAD $76.5 million and USD $20 million available to be drawn from its credit facilities. Currently, debt levels are low and this increase is intended to provide PHX Energy flexibility to take advantage of lucrative opportunities when presented in the future.
· In the 2023 three-month period, the Corporation generated excess cash flow^(2) of $25.7 million, after deducting capital expenditures of $18.8 million offset by proceeds on disposition of drilling and other equipment of $11.7 million.
· During the 2023-quarter, PHX Energy continued to deliver additional returns to shareholders through its previous and current NCIB, purchasing and cancelling 2,442,700 common shares for $17.5 million. In the 2023 nine-month period, the Corporation purchased and cancelled 2,710,500 common shares for $19.1 million.
· For the three-month period ended September 30, 2023, PHX Energy paid $7.6 million in dividends which is double the dividend amount paid in the same 2022-period. On September 15, 2023, the Corporation declared a dividend of $0.15 per share^(3) or $7.3 million, paid on October 16, 2023 to shareholders of record on September 30, 2023.
· With three consecutive quarters of strong financial performance, the Board has approved an increase to the quarterly dividend to $0.20 per share effective for the dividend payable to shareholders of record at the close of business on December 31, 2023. This is 33 percent higher than the dividend declared on September 15, 2023 and the fifth dividend increase since the dividend program was reinstated in December 2020.*Financial Highlights *
(Stated in thousands of dollars except per share amounts, percentages and shares outstanding)
Three-month periods ended September 30, Nine-month periods ended September 30, *2023* 2022 % Change *2023* 2022 % Change
*Operating Results – Continuing Operations* *(unaudited)* (unaudited) *(unaudited)* (unaudited)
Revenue *169,368* 142,418 19 *491,008* 377,987 30
Earnings *24,921* 13,475 85 *65,447* 23,978 173
Earnings per share – diluted *0.50* 0.27 85 *1.28* 0.48 167
Adjusted EBITDA ^(1) *43,524* 27,315 59 *115,330* 58,845 96
Adjusted EBITDA per share – diluted ^(1) *0.88* 0.53 66 *2.17* 1.16 87
Adjusted EBITDA as a percentage of
revenue ^(1) *26* *%* 19 % *23* *%* 16 %
*Cash Flow – Continuing Operations*
Cash flows from (used in) operating activities *33,628* 21,627 55 *59,969* 29,367 104
Funds from operations ^(2) *34,166* 22,711 50 *91,150* 47,413 92
Funds from operations per share – diluted ^(3) *0.69* 0.44 57 *1.71* 0.94 82
Dividends paid per share ^(3) *0.15* 0.075 100 *0.45* 0.200 125
Dividends paid *7,621* 3,797 101 *22,913* 10,069 128
Capital expenditures *18,804* 18,631 1 *49,458* 52,051 (5 )
Excess cash flow ^(2) *25,724* 9,121 182 *70,465* 6,843 n.m.
*Financial Position * *Sep 30 ‘23* Dec 31 ‘22
Working capital ^(2) *101,271* 94,339 7
Net debt ^(2) *3,457* 4,484 (23 )
Shareholders’ equity *201,043* 176,878 14
Common shares outstanding *48,508,438* 50,896,175 (5 )
n.m. – not meaningful
*Outlook*
In the third quarter we continued to build off the strong momentum we have achieved thus far in 2023, setting all-time records for quarterly revenue, earnings, adjusted EBITDA, and adjusted EBITDA as a percentage of consolidated revenue.
· Despite the lower US rig count impacting our directional drilling activity levels, we have continued to produce strong results, maintain market share and work for 12 of the top 15 US operators. The primary drivers of these successes were our technology offering, particularly our rotary steerable (“RSS”) capabilities, and expansion of our Atlas rental and sales divisions. We foresee further growth in both areas for the remainder of 2023 and into 2024 and are directing the new capital expenditures announced towards these objectives.
· We recently added a second brand of RSS technology to our US fleet. The iCruise technology developed by Halliburton will compliment our fleet of Schlumberger PowerDrive Orbit RSS technology and we are uniquely positioned as the only provider in North America that can offer two superior RSS options for owned systems. Additionally, our Engineering group has commercialized supplementary technologies that work in conjunction with our RSS and Velocity fleets that are already in high demand. Both of these technology developments will continue to differentiate us and further solidify our reputation as a technology leader.
· In Canada, our marketing team has successfully expanded our client base and our results show improved activity and revenue in a slightly slower to flat industry. We expect current activity levels to continue for the remainder of the year and into the first quarter of 2024. We may see some incremental increases in revenue per day as a result of the commercialization of new value added technologies that supplement the premium fleet and the planned fleet expansion.
· We will continue to execute on the strategic objective aimed at expanding our Atlas sales and rental businesses, which allows us to penetrate the portion of the US market that is not accessible through our full service offering. The rental division has shown promising growth thus far in 2023 and we anticipate that it will continue to generate a similar level of activity and revenue in the near-term. Additionally, the revenue from the sale of Atlas motors aided the US division in achieving strong revenue and profitability in the quarter. Over the next few quarters, we will look to expand our infrastructure to drive further growth and we plan to dedicate a portion of the Atlas motors acquired through the 2024 capital expenditures program to the rental business.
· During the quarter, the Corporation continued to deliver on its commitment to our Return of Capital Strategy (“ROCS”) and leveraged our renewed NCIB to further reduce the shares outstanding. We have bought back 21 percent of our shares since 2017, including the purchase and cancellation of 2.7 million shares through the NCIBs thus far in 2023. Through our dividend we have paid $44 million to shareholders since reinstating the program in December 2020 and due to our strong performance and outlook the Board has approved the fifth increase to our dividend since its re-instatement. Effective for the dividend payable to shareholders of record at the close of business on December 31, 2023 a quarterly dividend to $0.20 per share will be payable, a 33 percent increase over the current dividend.Global concerns around the possibility of a recession in North America, issues surrounding the economy in China plus regional conflicts in Europe and the Middle East provide a backdrop of uncertainty for the near to mid-term. Despite this, we are optimistic that our operating and financial performance will remain strong through the deployment of our premium fleet of technology, particularly RSS. We will remain diligent with protecting our balance sheet and deliver on our commitment to continue to reward our shareholders.
Michael Buker, President
November 7, 2023
*Financial Results*
In the third quarter of 2023, PHX Energy generated an all-time record level of revenue, earnings from continuing operations, adjusted EBITDA from continuing operations, and adjusted EBITDA as a percentage of consolidated revenue.
For the three-month period ended September 30, 2023, PHX Energy’s consolidated revenue was $169.4 million as compared to $142.4 million in the same 2022-period, an increase of 19 percent. Despite the declining North American rig count, the Corporation achieved higher revenue by leveraging the increased capacity in its premium technology fleets and its strong reputation and operations expertise. In addition, the Corporation’s strong activity in Canada and growth in its US motor rental and sales divisions contributed to the record revenue achieved in the quarter.
In the 2023-quarter, the US rig count continued to soften. PHX Energy’s US operating days decreased by 13 percent from 4,653 in the third quarter of 2022 to 4,050 in the third quarter of 2023. Despite the decline in activity, the Corporation’s US division’s revenue grew by 12 percent to $123.8 million as compared to $110.2 million in the same 2022-period. In the 2023 three-month period, RSS services accounted for a larger percentage of the division’s activity and this growth was a primary driver of the 17 percent improvement in the average revenue per day^(3) for directional drilling services quarter-over-quarter. Additionally, the Corporation’s US motor rental and sales divisions generated $11.6 million and $6.2 million of revenue, respectively in the third quarter of 2023 (2022-quarter - $7.4 million and nil, respectively). Revenue from PHX Energy’s US segment represented 73 percent of consolidated revenue in the 2023 three-month period (2022-quarter – 77 percent).
In the 2023 three-month period, the Corporation’s Canadian division generated revenue of $44.4 million, which is the highest level since the fourth quarter of 2014 and is 43 percent greater than the $31 million generated in the same 2022-period. During the 2023-quarter, despite a quarter-over-quarter decline in Canadian industry activity, PHX Energy’s Canadian operating days grew by 16 percent to 3,301 days from the 2,835 operating days in the comparable 2022-quarter. Average revenue per day realized by the Canadian segment also improved by 22 percent over the third quarter of 2022.
For the three-month period ended September 30, 2023, earnings from continuing operations was $24.9 million (2022 - $13.5 million) and adjusted EBITDA from continuing operations^(1) was $43.5 million (2022 - $27.3 million), 26 percent of consolidated revenue. These levels of earnings from continuing operations, adjusted EBITDA from continuing operations, and adjusted EBITDA as a percentage of consolidated revenue, are the best quarterly results in the Corporation’s history. Higher margins generated from PHX Energy’s premium technologies, Atlas motor rentals, and the sale of Atlas motors and parts primarily drove these record results. Included in the 2023 three-month period adjusted EBITDA from continuing operations is cash-settled share-based compensation expense of $5 million (2022 - $5.2 million). For the three-month period ended September 30, 2023, excluding cash-settled share-based compensation expense, adjusted EBITDA from continuing operations^(1) is $48.5 million, 29 percent of consolidated revenue (2022 - $32.5 million).
PHX Energy maintained its strong financial position and had working capital^(2) of $101.3 million and net debt^(2) of $3.5 million with available credit facilities in excess of $61.5 million as at September 30, 2023.
In November 2023, the Corporation increased the borrowing amounts in the syndicated facility from CAD $50 million to CAD $80 million and in the US operating facility from USD $15 million to USD $20 million. The Corporation also extended the maturity date of the syndicated loan agreement to December 12, 2026. With the increased borrowing amounts, the Corporation has approximately CAD $76.5 million and USD $20 million available to be drawn from its credit facilities.*Dividends and ROCS*
On September 15, 2023, the Corporation declared a dividend of $0.15 per share payable to shareholders of record at the close of business on September 30, 2023. An aggregate of $7.3 million was paid on October 16, 2023. This is 50 percent higher than the dividend of $0.10 per share declared in the 2022-quarter.
In November 2023, the Board approved an increase to the quarterly dividend to $0.20 per share effective for the dividend payable to shareholders of record at the close of business on December 31, 2023. This is 33 percent higher than the dividend declared on September 15, 2023 and the fifth dividend increase since the dividend program was reinstated in December 2020.
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”).
(Stated in thousands of dollars)
*Nine-month period ended September 30, 2023*
Excess cash flow *70,465*
70% of excess cash flow *49,326*
Deduct:
Repurchase of shares under the NCIB *(19,102* *)*
Dividends paid to shareholders *(22,913* *)*
Remaining distributable balance under ROCS^(2) *7,311*
*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 previous and current NCIB, 2,442,700 common shares were purchased by the Corporation for $17.5 million and cancelled in the third quarter of 2023. In the 2023 nine-month period, PHX Energy purchased and cancelled 2,710,500 common shares for $19.1 million.
*Capital Spending*
In the third quarter of 2023, the Corporation spent $18.8 million in capital expenditures, of which $12.5 million was spent on growing the Corporation’s fleet of drilling equipment, $2.8 million was spent to replace retired assets, and $3.5 million was spent to replace equipment lost downhole during drilling operations. With proceeds on disposition of drilling and other equipment of $11.7 million, the Corporation’s net capital expenditures^(2) for the 2023-quarter were $7.1 million. Capital expenditures in the 2023-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 period ended
September 30, 2023* *Nine-month period ended
September 30, 2023*
Growth capital expenditures *12,471* *27,356*
Maintenance capital expenditures from asset retirements *2,825* *11,543*
Maintenance capital expenditures from downhole equipment losses *3,508* *10,559* *18,804* *49,458*
Deduct:
Proceeds on disposition of drilling equipment *(11,682* *)* *(32,689* *)*
Net capital expenditures^(2) *7,122* *16,769*
In light of the continued strong demand for the Corporation’s premium technologies, the approved capital expenditure budget for the 2023-year, excluding proceeds on disposition of drilling equipment, was increased to $80 million from the previous $61.5 million. The increase of $18.5 million in the 2023 capital expenditure budget will be directed mainly towards growing and maintaining PHX Energy’s RSS and Atlas motor fleets. Of the total expenditures, $45 million is expected to be allocated to growth capital and the remaining $35 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 September 30, 2023, the Corporation has capital commitments to purchase drilling and other equipment for $33.8 million, $20.3 million of which is growth capital and includes $19.4 million for performance drilling motors and $0.9 million for other equipment. Equipment on order as at September 30, 2023 is expected to be delivered within 2023 and the first quarter of 2024.
With the outlook that the Corporation’s 2023-momenteum will continue into the upcoming year and that the declining rig counts in North America will level off, the Board has approved a preliminary 2024 capital expenditure program of $70 million, of which $42 million is anticipated to be spent on growth. The growth capital expenditures are expected to be allocated towards: building larger fleets of recently commercialized supplementary technologies that create value added capabilities within the premium fleet and are already in high demand; additional motor capacity to grow the Atlas rental division; and add required Velocity systems, RSS and Atlas motors to continue to meet demand for full service operations. The remaining $28 million is anticipated to be spent on maintenance of the fleet of drilling and other equipment and replacement of equipment lost downhole during drilling operations.
The Corporation currently possesses approximately 734 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, and 118 Velocity systems. The Corporation also possesses the largest independent RSS fleet in North America with 54 RSS tools and the only fleet currently comprised of both the PowerDrive Orbit and iCruise systems.
*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. Subsequently on July 27, 2023, PHX Energy agreed upon the sale and licensed use of its Atlas motors to an existing international client. Under these agreements, the purchasers must exclusively use components manufactured by the Corporation for the maintenance of their fleets of Atlas motors. As of September 30, 2023, $10.1 million of motors and parts were sold. PHX Energy anticipates ongoing orders for parts and the purchasers could potentially place subsequent orders for additional Atlas motors late in 2023 and through the upcoming year.
*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, 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 MD&A for applicable definitions, rationale for use, method of calculation and reconciliations where applicable.
Footnotes throughout this document reference:
(1) Non-GAAP financial measure or ratio that does not have any standardized meaning under IFRS and therefore may not be comparable to similar measures presented by other entities. Refer to Non-GAAP and Other Financial Measures section of this document.
(2) Capital management measure that does not have any standardized meaning under IFRS and therefore may not be comparable to similar measures presented by other entities. Refer to Non-GAAP and Other Financial Measures section of this document.
(3) Supplementary financial measure that does not have any standardized meaning under IFRS and therefore may not be comparable to similar measures presented by other entities. Refer to Non-GAAP and Other Financial Measures section of this document
*Revenue *
The Corporation generates revenue primarily through the provision of directional drilling services which includes providing equipment, personnel, and operational support for drilling a well. Additionally, the Corporation generates revenue through the rental and sale of drilling motors and associated parts, particularly Atlas.
(Stated in thousands of dollars)
Three-month periods ended September 30, Nine-month periods ended September 30, *2023* 2022 % Change *2023* 2022 % Change
Directional drilling services *151,241* 134,725 12 *448,302* 358,244 25
Motor rental *11,919* 7,693 55 *32,588* 19,743 65
Sale of motor equipment and parts *6,208* - n.m. *10,118* - n.m.
Total revenue *169,368* 142,418 19 *491,008* 377,987 30
n.m. – not meaningful
In the third quarter of 2023, PHX Energy generated its highest level of quarterly revenue on record, surpassing the previous records set in the first quarter of 2023. For the three-month period ended September 30, 2023, the Corporation’s consolidated revenue was $169.4 million, a 19 percent increase compared to the $142.4 million in the third quarter of 2022. For the nine-month period ended September 30, 2023, the Corporation generated consolidated revenue of $491 million, an increase of 30 percent as compared to the $378 million generated in the same 2022-period.
Average consolidated revenue per day^(3) increased 13 percent to $20,343 in the 2023 three-month period from $18,008 in the same 2022-period and in the 2023 nine-month period increased 17 percent to $20,457 from $17,421 in the same 2022-period. In both 2023-periods, PHX Energy increased capacity and utilization in its fleet of premium technologies, particularly additional RSS systems that were acquired in the fourth quarter of 2022, and this, along with the cumulative impact of previous pricing increases to mitigate the effects of inflationary costs, greatly contributed to the stronger average consolidated revenue per day^(3) realized in both periods. The favorable impact of the strong US dollar also supported the increases in average consolidated revenue per day.
The US industry rig count continued to soften in the third quarter of 2023, averaging 632 horizontal and directional rigs operating per day, which is a 14 percent decrease from the average of 733 rigs in the third quarter of 2022 and 10 percent lower compared to the average of 700 rigs in the second quarter of 2023. In Canada, the average rig count for the 2023 three-month period decreased 6 percent to 188 rigs from 199 rigs in the third 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 slightly decreased by 2 percent to 7,435 days in the third quarter of 2023 compared to 7,578 days in the same 2022-quarter. For the nine-month period ended September 30, 2023, consolidated operating days increased by 5 percent to 21,915 from 20,859 days in the corresponding 2022-period.
Throughout 2023, the Corporation continued to increase capacity in its Atlas motor fleet and as a result, in the 2023 three and nine-month periods, revenue generated from PHX Energy’s motor rental division grew by 55 percent and 65 percent, respectively. Motor rental revenue increased to $11.9 million in the 2023 three-month period from $7.7 million in the same 2022-period and increased to $32.6 million in the 2023 nine-month period from $19.7 million in the same 2022-period. PHX Energy remains focused on marketing Atlas technology as a stand-alone product line. With additional Atlas motors on order, the Corporation expects this business line to continue to grow in future periods.
For the three and nine-month periods ended September 30, 2023, revenue of $6.2 million and $10.1 million, respectively, were generated from the sale of Atlas motors and parts under PHX Energy’s two existing sales agreements. As the Corporation continues to support its customers’ owned fleet of Atlas motors, a steady stream of revenue is expected to continue for this business line.
*Operating Costs **and Expenses*
(Stated in thousands of dollars except percentages)
Three-month periods ended September 30, Nine-month periods ended September 30, *2023 * 2022 % Change *2023 * 2022 % Change
Direct costs *125,138* 111,734 12 *376,996* 304,200 24
Depreciation & amortization drilling and other
equipment (included in direct costs) *9,867* 8,143 21 *28,805* 23,243 24
Depreciation & amortization right-of-use asset
(included in direct costs) *822* 745 10 *2,057* 2,430 (15 )
Gross profit as a percentage of revenue excluding
depreciation & amortization^(1) *32* *%* 28 % *30* *%* 26 %
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 September 30, 2023, direct costs increased by 12 percent to $125.1 million from $111.7 million in the 2022-period. For the 2023 nine-month period, direct costs increased by 24 percent to $377 million from $304.2 million in the same 2022-period.
In both 2023-periods, higher direct costs are partly attributable to greater servicing costs and equipment rental expenses associated with increased RSS activity. Growth in Atlas motor rental activity also resulted in higher motor repairs. In addition, there were greater depreciation and amortization expenses on drilling and other equipment in both 2023-periods due to the volume of fixed assets acquired as part of PHX Energy’s 2023 capital expenditure program. The Corporation’s depreciation and amortization on drilling and other equipment increased by 21 percent and 24 percent, respectively, in the 2023 three and nine-month periods. Additionally, overall costs related to personnel, repair parts, and equipment rentals increased partly as a result of inflation.
In the 2023 three and nine-month periods, gross profit as a percentage of revenue excluding depreciation and amortization improved to 32 percent and 30 percent, respectively, compared to 28 percent and 26 percent in the corresponding 2022-periods. Greater profitability in both periods was largely driven by the higher margins from the Corporation’s premium technologies as well as increased profits from PHX Energy’s growing Atlas motor rental and sales divisions. In addition, the Corporation remained diligent in executing various strategies to gain cost efficiencies and mitigate the impact of higher costs caused by inflation and this continued to have a positive impact on the Corporation’s margins.
(Stated in thousands of dollars except percentages)
Three-month periods ended September 30, Nine-month periods ended September 30, *2023* 2022 % Change *2023* 2022 % Change
Selling, general and administrative (“SG&A”)
costs *19,833* 15,589 27 *50,911* 49,536 3
Cash-settled share-based compensation
(included in SG&A costs) *4,969* 5,178 (4 ) *8,899* 17,630 (50 )
Equity-settled share-based compensation
(included in SG&A costs) *144* 133 8 *431* 393 10
SG&A costs excluding share-based compensation as a percentage of revenue^(^1) *9* *%* 7 % *8* *%* 8 %
For the three-month period ended September 30, 2023, SG&A costs were $19.8 million, an increase of 27 percent as compared to $15.6 million in the corresponding 2022-period. In the 2023 nine-month period, SG&A costs were $50.9 million, an increase of 3 percent as compared to $49.5 million in the corresponding 2022-period. Higher SG&A costs in both 2023 periods were primarily due to greater costs associated with increasing revenue and activity and rising personnel-related costs.
Cash-settled share-based compensation relates to the Corporation’s retention awards and are measured at fair value. For the three and nine-month periods ended September 30, 2023, the related compensation expense recognized by PHX Energy was $5 million (2022 - $5.2 million) and $8.9 million (2022 - $17.6 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 2,135,283 retention awards outstanding as at September 30, 2023 (2022 – 3,293,538). Excluding share-based compensation, SG&A costs as a percentage of revenue in the 2023 three and nine-month periods were 9 percent and 8 percent, respectively, as compared to 7 percent and 8 percent in the corresponding 2022 periods.
(Stated in thousands of dollars)
Three-month periods ended September 30, Nine-month periods ended September 30, *2023* 2022 % Change *2023* 2022 % Change
Research and development expense *1,246* 909 37 *3,817* 2,539 50
PHX Energy’s research and development (“R&D”) expenditures for the three and nine-month periods ended September 30, 2023, were $1.2 million (2022 - $0.9 million) and $3.8 million (2022 - $2.5 million), respectively. Higher R&D expenditures in both 2023 periods were mainly due to increased prototype expenses and greater personnel-related costs. The Corporation remained focused on supporting new and ongoing initiatives to continuously improve the reliability of equipment and reduce costs of operations. In addition, new technologies are continually being developed, particularly projects that are critical in sustaining operational growth and create value added capabilities within the premium fleet to further profitability.
(Stated in thousands of dollars)
Three-month periods ended September 30, Nine-month periods ended September 30, *2023* 2022 % Change *2023* 2022 % Change
Finance expense *598* 499 20 *1,974* 873 126
Finance expense lease liabilities *554* 498 11 *1,695* 1,507 12
Finance expenses mainly relate to interest charges on the Corporation’s credit facilities. For the three and nine-month periods ended September 30, 2023, finance expenses increased to $0.6 million (2022 - $0.5 million) and $2 million (2022 - $0.9 million), respectively, mainly due to increased drawings on the credit facilities to fund PHX Energy’s capital spending. In both 2023 periods, higher finance expenses also resulted from rising variable interest rates on the Corporation’s operating and syndicated facilities.
Finance expense lease liabilities relate to interest expense incurred on lease liabilities. For the three and nine-month periods ended September 30, 2023, finance expense lease liabilities increased by 11 percent and 12 percent respectively, 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 September 30, Nine-month periods ended September 30, *2023* 2022 *2023* 2022
Net gain on disposition of drilling equipment *8,354* 4,157 *23,903* 10,799
Foreign exchange gains (losses) *(347* *)* (205 ) *574* (281 )
Recovery of (provision for) bad debts *1,106* 2 *(117* *)* 2
Other *-* - *-* 512
Other income *9,113* 3,954 *24,360* 11,032
For the three and nine-month periods ended September 30, 2023, the Corporation recognized other income of $9.1 million and $24.4 million, respectively (2022 - $4 million and $11 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 both 2023 periods, a larger percentage of PHX Energy’s activity involved utilizing premium technologies, particularly RSS. As a result, 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 for the remainder of 2023 and for 2024.
For the three-month period ended September 30, 2023, the Corporation recognized foreign exchange losses of $0.3 million (2022 - $0.2 million) which primarily resulted from the revaluation of CAD-denominated intercompany receivables in the US. In the 2023 nine-month period, foreign exchange gains of $0.6 million (2022 - $0.3 million foreign exchange losses) was primarily due to the settlement of a USD-denominated receivable as a result of a reorganization in Luxembourg.
In the third quarter of 2023, PHX Energy reversed the amounts previously provisioned for bad debt in the amount of $1.1 million (2022 – $2 thousand recovery) which relates mainly to one client.
(Stated in thousands of dollars except percentages)
Three-month periods ended September 30, Nine-month periods ended September 30, *2023* 2022 *2023* 2022
Provision for income taxes *6,191* 3,667 *14,529* 6,384
Effective tax rates^(3) *20* *%* 21 % *18* *%* 21 %
For the three-month period ended September 30, 2023, the Corporation reported income tax provision of $6.2 million (2022 - $3.7 million), of which, $5.6 million was current and $0.6 million was deferred. For the nine-month period ended September 30, 2023, PHX Energy recognized provision for income taxes of $14.5 million (2022 - $6.4 million), of which, $13.6 million was current and $0.9 million was deferred. Increased current taxes in both 2023 periods mainly resulted from higher taxable income in the US. PHX Energy’s effective tax rate was 20 percent in the 2023-quarter and 18 percent in the 2023 nine-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 September 30, Nine-month periods ended September 30, *2023* 2022 % Change *2023* 2022 % Change
Directional drilling services *105,980* 102,806 3 *333,123* 278,440 20
Motor rental *11,636* 7,422 57 *31,204* 18,950 65
Sale of motor equipment and parts *6,208* - n.m. *10,118* - n.m.
Total US revenue *123,824* 110,228 12 *374,445* 297,390 26
Reportable segment profit before tax ^(i) *25,494* 17,056 49 *65,453* 40,387 62
^(i) Includes adjustments to intercompany transactions.
n.m. – not meaningful
For the three-month period ended September 30, 2023, total US revenue increased by 12 percent to $123.8 million as compared to $110.2 million in the 2022-quarter. The increase in revenue was primarily driven by increased RSS activity, motor rental growth, and Atlas motor and parts sales, and was achieved despite the slowdown in US industry activity. With three consecutive strong quarters in 2023, US revenue for the nine-month period ended September 30, 2023 increased 26 percent to $374.4 million from $297.4 million in the 2022-period.
Throughout the year, the demand for PHX Energy’s premium technologies was robust and with the additional RSS systems added in the fourth quarter of 2022 and third quarter of 2023, RSS services accounted for a larger percentage of the US segment’s activity. This greater volume of RSS activity, along with increased capacity and utilization in the Corporation’s premium technologies, primarily drove improvements in the US division’s average revenue per day^(3). For the three-month period ended September 30, 2023, average revenue per day for directional drilling services rose to $26,168 from $22,425 in the third quarter of 2022, a 17 percent increase. In the 2023 nine-month period, average revenue per day for directional drilling services increased 18 percent to $25,173 from $21,324 in the same 2022-period. The strong US dollar in both 2023 periods also supported the increase in the average revenue per day. Omitting the impact of foreign exchange, the average revenue per day for directional drilling services increased by 9 percent and 13 percent, respectively, in the 2023 three and nine-month periods.
In the third quarter of 2023, the Corporation’s US directional drilling activity decreased by 13 percent to 4,050 operating days compared to 4,653 days in the third quarter of 2022 and has decreased by 7 percent as compared to the 4,364 days in the second quarter of 2023. In comparison, the US industry horizontal and directional rig count in the third quarter of 2023 decreased 14 percent with 632 active rigs per day as compared to 733 rigs per day in the third quarter of 2022 and decreased by 10 percent when compared to an average of 700 active horizontal and directional rigs per day in the second quarter of 2023. (Source: Baker Hughes, North American Rotary Rig Count, Jan 2000 – Current, https://rigcount.bakerhughes.com/na-rig-count). For the nine-month period ended September 30, 2023, PHX Energy’s US drilling activity was relatively flat at 13,234 operating days as compared to 13,405 days in the same 2022-period which is in line with the industry trend over the same period.
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 nine-month period ended September 30, 2023.
In the 2023 three-month period, PHX Energy increased the capacity of its motor rental fleet which allowed the business to grow its revenue 57 percent to $11.6 million from $7.4 million in the same 2022-period. In the nine-month period ended September 30, 2023, US motor rental revenue was $31.2 million, a 65 percent increase compared to $19 million in the same 2022-period. During the 2023-quarter, PHX Energy also sold Atlas motor equipment and parts to certain customers and generated $6.2 million of revenue from this line of business. In the 2023 nine-month period, $10.1 million of Atlas motors and parts have been sold.
For the three and nine-month periods ended September 30, 2023, the US segment realized reportable segment income before tax of $25.5 million and $65.5 million, respectively, which are 49 percent and 62 percent higher than the corresponding 2022-periods. Greater margins from premium technologies and growth in the rental and sale of Atlas motors largely contributed to increased profitability in both 2023 periods.
*Canada*
(Stated in thousands of dollars)
Three-month periods ended September 30, Nine-month periods ended September 30, *2023 * 2022 % Change *2023 * 2022 % Change
Directional drilling services *44,145* 30,725 44 *111,716* 77,046 45
Motor rental *283* 271 4 *1,384* 793 75
Total Canadian revenue *44,428* 30,996 43 *113,100* 77,839 45
Reportable segment profit before tax ^(i) *8,263* 4,479 84 *17,828* 7,930 125
^(i) Includes adjustments to intercompany transactions.
In the third quarter of 2023, PHX Energy’s Canadian operations generated revenue of $44.4 million, its highest level of quarterly revenue since the fourth quarter of 2014 and 43 percent higher compared to $31 million generated in the 2022-quarter. In the 2023 nine-month period, Canadian division revenue was $113.1 million, an increase of 45 percent as compared to $77.8 million in the same 2022-period. Strong quarterly revenue generated throughout 2023 was largely driven by higher average revenue per day^(3) for directional drilling services which increased by 22 percent to $13,375 in the 2023-quarter from $10,926 in the corresponding 2022-quarter and increased by 24 percent to $13,257 in the 2023 nine-month period compared to $10,733 in the same 2022-period. Targeted marketing efforts, strong operational expertise, and increased deployment of premium technologies primarily contributed to the improved average revenue per day realized in both 2023-periods.
For the three and nine-month periods ended September 30, 2023, operating days improved by 16 percent in both periods to 3,301 and 8,427, respectively, compared to 2,835 days and 7,252 days in the corresponding 2022-periods. In comparison, industry horizontal and directional drilling activity (as measured by drilling days) declined by 4 percent to 16,261 days in the third quarter of 2023, and slightly increased by 1 percent to 44,093 days in the first three quarters of 2023 (Source: Daily Oil Bulletin, hz-dir days 230331). PHX Energy’s activity far exceeding that of the industry is a testament to the Corporation’s strong reputation and presence in the Canadian market. During the 2023-quarter, the Corporation was active in the Duvernay, Montney, Glauconite, Frobisher, Cardium, Viking, Bakken, Torquay, Colony, Clearwater, Deadwood, Ellerslie, and Scallion basins.
For the three and nine-month periods ended September 30, 2023, the Corporation’s Canadian division recognized reportable segment profit before tax of $8.3 million (2022 – $4.5 million) and $17.8 million (2022 - $7.9 million), respectively. The greater volume of activity and higher average revenue per day drove the improvements in profitability in both 2023 periods.
*International – Continuing Operations*
(Stated in thousands of dollars)
Three-month periods ended September 30, Nine-month periods ended September 30, *2023 * 2022 % Change *2023 * 2022 % Change
Revenue *1,116* 1,194 (7 ) *3,463* 2,758 26
Reportable segment profit before tax *351* 420 (16 ) *1,248* 781 60
The Corporation’s international segment revenue is comprised of revenue from Albania. For the three and nine-month periods ended September 30, 2023, the international segment’s revenue was $1.1 million (2022 - $1.2 million) and $3.5 million (2022 - $2.8 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 $0.4 million in the 2023 three-month period, same level as the corresponding 2022-period, and $1.2 million in the 2023 nine-month period, almost double compared to the same 2022-period.
*Investing Activities *
Net cash used in investing activities for the three-month period ended September 30, 2023 was $3.9 million as compared to $12.8 million in the 2022-period. During the third quarter of 2023, the Corporation spent $12.5 million (2022 - $10.2 million) to grow the Corporation’s fleet of drilling equipment and $6.3 million (2022 - $8.4 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 $11.7 million (2022 - $6.3 million), the Corporation’s net capital expenditures^(2) for the 2023-quarter were $7.1 million (2022 - $12.4 million).
(Stated in thousands of dollars)
Three-month periods ended September 30, Nine-month periods ended September 30, *2023* 2022 *2023* 2022
Growth capital expenditures *12,471* 10,191 *27,356* 33,205
Maintenance capital expenditures *6,333* 8,440 *22,102* 18,846
Total capital expenditures *18,804* 18,631 *49,458* 52,051
Deduct:
Proceeds on disposition of drilling equipment *11,682* 6,274 *32,689* 15,454
Net capital expenditures^(2) *7,122* 12,357 *16,769* 36,597
The 2023-period capital expenditures comprised of:
· $6.8 million in downhole performance drilling motors;
· $11.5 million in MWD systems and spare components and RSS; and
· $0.5 million in machinery and equipment and other assets.
The change in non-cash working capital balances of $3.2 million (source of cash) for the three-month period ended September 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 $0.4 million (use of cash) for the three-month period ended September 30, 2022.
*Financing Activities *
For the three-month period ended September 30, 2023, net cash used in financing activities was $35.3 million as compared to $0.3 million in the 2022-period. In the 2023-period:
· dividends of $7.6 million were paid to shareholders;
· $9.4 million net repayments were made towards the Corporation’s syndicated credit facility;
· 2,442,700 common shares were purchased by the Corporation for $17.5 million and cancelled under the NCIB;
· payments of $0.8 million were made towards lease liabilities; and
· 150,000 common shares were issued from treasury for proceeds of $0.4 million upon the exercise of share options.*Capital Resources *
As of September 30, 2023, the Corporation had CAD $18.3 million drawn on its Canadian credit facilities, nothing drawn on its US operating facility, and a cash balance of $14.8 million. As at September 30, 2023, the Corporation had CAD $46.5 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 September 30, 2023, the Corporation was in compliance with all its financial covenants.
In November 2023, the Corporation increased the borrowing amounts in the syndicated facility from CAD $50 million to CAD $80 million and in the US operating facility from USD $15 million to USD $20 million. The Corporation also extended the maturity date of the syndicated loan agreement to December 12, 2026. With the increased borrowing amounts, the Corporation has approximately CAD $76.5 million and USD $20 million available to be drawn from its credit facilities.*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. The Board approved an increase of the 2023 capital expenditure program to $80 million. Of the 2023 capital expenditures, $35 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 $45 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.
As demand for the Corporation’s premium technologies continues to grow, and the outlook that the declining rig counts in North America will level off, the Board has approved a preliminary 2024 capital expenditure program of $70 million, of which $42 million is anticipated to be spent on growth. The growth capital expenditures are expected to be allocated towards: building larger fleets of recently commercialized supplementary technologies that create value added capabilities within the premium fleet and are already in high demand; additional motor capacity to grow the Atlas rental and sales division; and add required Velocity systems, RSS and Atlas motos to continue to meet demand for full service operations. The remaining $28 million is anticipated to be spent on maintenance of the fleet of drilling and other equipment.
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 September 30, 2023, the Corporation has commitments to purchase drilling and other equipment for $33.8 million. Deliveries are expected to occur throughout the rest of the 2023-year and into the first quarter of 2024.
*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 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 1K3
Tel: 403-543-4466 Fax: 403-543-4485 www.phxtech.com
*Condensed Consolidated Interim Statements of Financial Position*
(unaudited)
*September 30, 2023* December 31, 2022
ASSETS * * * *
Current assets: * * * * Cash and cash equivalents *$* *14,845,393* $ 18,247,376 Trade and other receivables *128,588,190* 125,836,273 Inventories *63,569,528* 63,119,489 Prepaid expenses *2,989,717* 3,024,166 Total current assets *209,992,828* 210,227,304
Non-current assets: * * Drilling and other long-term assets *127,753,169* 115,945,060 Right-of-use assets *27,978,171* 29,336,163 Intangible assets *14,111,652* 15,668,180 Investments *3,000,500* 3,000,500 Other long-term assets *1,645,473* 993,112 Deferred tax assets *53,869* 53,869 Total non-current assets *174,542,834* 164,996,884
Total assets *$* *384,535,662* $ 375,224,188
LIABILITIES AND SHAREHOLDERS' EQUITY * *
Current liabilities: * * Trade and other payables *$* *92,021,042* $ 104,688,901 Dividends payable *7,276,760* 7,636,085 Lease liability *3,229,737* 2,906,708 Current tax liabilities *6,194,933* 656,499 Total current liabilities *108,722,472* 115,888,193
Non-current liabilities: * * Lease liability *34,909,196* 36,768,003 Loans and borrowings *18,302,454* 22,731,389 Deferred tax liability *18,719,720* 18,496,619 Other *2,838,630* 4,461,531 Total non-current liabilities *74,770,000* 82,457,542
Equity: * * Share capital *233,646,892* 251,344,809 Contributed surplus *7,178,466* 7,044,317 Deficit *(69,376,356* *)* (112,120,484 ) Accumulated other comprehensive income *29,594,188* 30,609,811 Total equity *201,043,190* 176,878,453
Total liabilities and equity *$* *384,535,662* $ 375,224,188 *Condensed Consolidated Interim Statements of Comprehensive Earnings*
(unaudited)
Three-month periods ended September 30, Nine-month periods ended September 30, * * *2023* 2022 *2023* 2022
Revenue *$* *169,367,911* $ 142,418,326 *$* *491,008,431* $ 377,986,582
Direct costs *125,137,605* 111,734,015 *376,995,672* 304,200,177
Gross profit *44,230,306* 30,684,311 *114,012,759* 73,786,405
Expenses:
Selling, general and administrative expenses *19,832,791* 15,589,015 *50,911,033* 49,536,435
Research and development
expenses *1,245,826* 909,169 *3,816,601* 2,538,935
Finance expense *597,898* 499,461 *1,974,058* 873,445
Finance expense lease liability *554,405* 498,239 *1,694,550* 1,506,640
Other income *(9,113,282* *)* (3,953,620 ) *(24,359,774* *)* (11,031,501 ) *13,117,638* 13,542,264 *34,036,468* 43,423,954
Earnings from continuing operations before income taxes *31,112,668* 17,142,047 *79,976,291* 30,362,451
Provision for income taxes
Current *5,616,371* 625,922 *13,591,604* 396,650
Deferred *575,118* 3,041,401 *937,818* 5,987,492 *6,191,489* 3,667,323 *14,529,422* 6,384,142
Earnings from continuing operations *24,921,179* 13,474,724 *65,446,869* 23,978,309
Discontinued operations
Net loss from discontinued
operations, net of taxes *-* - *-* (14,558,032 )
Net earnings *24,921,179* 13,474,724 *65,446,869* 9,420,277
Other comprehensive income Foreign currency translation *3,613,465* 8,739,048 *(1,015,623* *)* 10,563,631 Reclassification of foreign
currency translation loss on
disposition *-* - *-* 10,560,954
Total comprehensive earnings for the period *$* *28,534,644* $ 22,213,772 *$* *64,431,246* $ 30,544,862
Earnings (loss) per share – basic
Continuing operations *$* *0.50* $ 0.27 *$* *1.29* $ 0.48
Discontinued operations *$* *-*
$ - *$* *-* * * $ (0.29 )
Net earnings *$* *0.50* $ 0.27 *$* *1.29* * * $ 0.19
Earnings (loss) per share – diluted * *
Continuing operations *$* *0.50* $ 0.27 *$* *1.28* * * $ 0.48
Discontinued operations *$* *-* $ - *$* *-* * * $ (0.29 )
Net earnings *$* *0.50* $ 0.27 *$* *1.28* * * $ 0.19 *Condensed Consolidated Interim Statements of Cash Flows*
(unaudited)
Three-month periods ended September 30, Nine-month periods ended September 30, *2023* 2022 *2023* 2022
Cash flows from operating activities:
Earnings from continuing operations *$* *24,921,179* $ 13,474,724 *$* *65,446,869* $ 23,978,309
Adjustments for:
Depreciation and amortization *9,866,881* 8,143,257 *28,804,904* 23,242,730
Depreciation and amortization right-of-use asset *822,190* 744,876 *2,057,025* 2,429,603
Provision for income taxes *6,191,489* 3,667,323 *14,529,422* 6,384,142
Unrealized foreign exchange gain *427,482* 155,128 * 391,554* 36,602
Net gain on disposition of drilling equipment *(8,353,639* *)* (4,157,247 ) *(23,903,064* *)* (10,798,870 )
Equity-settled share-based payments *144,193* 133,034 *431,109* 393,042
Finance expense *597,898* 499,461 *1,974,058* 873,445
Finance expense lease liability *554,405* 498,239 *1,694,550* 1,506,640
Provision for (recovery of) bad debts *(1,106,245* *)* (1,501 ) *116,519* (1,501 )
Provision for inventory obsolescence *653,716* 51,868 *1,301,822* 876,524
Interest paid on lease liability *(554,405* *)* (498,239 ) *(1,694,550* *)* (1,506,640 )
Interest paid *(472,654* *)* (413,530 ) *(1,506,251* *)* (591,701 )
Income taxes received (paid) *(7,075,749* *)* 9,461 *(8,533,759* *)* 228,591
Change in non-cash working capital *7,011,213* (679,450 ) *(21,140,830* *)* (17,683,437 )
Continuing operations *33,627,954* 21,627,404 *59,969,378* 29,367,479
Discontinued operations *-* - *-* (1,254,859 )
Net cash from operating activities *33,627,954* 21,627,404 *59,969,378* 28,112,620
Cash flows from investing activities:
Proceeds on disposition of drilling equipment *11,682,392* 6,274,079 *32,689,018* 15,453,628
Acquisition of drilling and other equipment *(18,803,529* *)* (18,631,230 ) *(49,457,974* *)* (52,051,148 )
Acquisition of intangible assets *-* (74,189 ) *-* (692,394 )
Change in non-cash working capital *3,203,370* (370,923 ) *2,150,701* 339,967
Continuing operations *(3,917,767* *)* (12,802,263 ) *(14,618,255* *)* (36,949,947 )
Discontinued operations *-* - *-* (68,068 )
Net cash used in investing activities *(3,917,767* *)* (12,802,263 ) *(14,618,255* *)* (37,018,015 )
Cash flows from financing activities:
Dividends paid to shareholders *(7,620,665* *)* (3,796,793 ) *(22,912,561* *)* (10,069,396 )
Repurchase of shares under the NCIB *(17,523,151* *)* - *(19,101,893* *)* -
Proceeds from (repayment of) loans and borrowings *(9,399,518* *)* 3,892,008 *(4,231,389* *)* 24,000,000
Payments of Lease Liability *(765,891* *)* (734,273 ) *(2,221,166* *)* (2,466,184 )
Purchase of shares held in trust *-* - *(612,000* *)* (3,500,000 )
Proceeds from exercise of options *414,500* 359,032 *763,950* 2,170,885
Change in non-cash working capital *(414,500* *)* - *(414,50