First Quarter Highlights
- The Corporation’s adjusted EBITDA(1) excluding share-based compensation increased to
$18.4 million . - Consolidated revenue of
$112.1 million is the second highest first quarter revenue in the Corporation’s history, an increase of 60 percent over the comparative 2021-quarter. - PHX Energy’s US division generated the highest quarterly revenue in the Corporation’s history,
$81.8 million , 73 percent of consolidated revenue. - The 2022 capital expenditure program is now anticipated to be
$85 million , which is targeted to be allocated towards expanding the fleet of premium equipment for increased forecasted activity in late 2022 and 2023. - Quarterly dividend of
$0.075 per common share was paid onApril 18, 2022 , which is triple the dividend per share declared in the first quarter of 2021. - The Corporation maintained a strong financial position, with cash and cash equivalents less loans and borrowings equating to
$7.5 million , and working capital(1) of$53.6 million . - PHX Energy intends to protect and preserve its balance sheet strength, capitalize on unique growth strategies and continue to reward its shareholders.
- The Corporation recognized impairment and other write-offs of
$2 million related to its Russian entity.
(Stated in thousands of dollars except per share amounts, percentages and shares outstanding)
Three-month periods ended | ||||||||||
2022 | 2021 | % Change | ||||||||
Operating Results | (unaudited) | (unaudited) | ||||||||
Revenue | 112,126 | 70,106 | 60 | |||||||
Net earnings (loss) | (4,223 | ) | 4,865 | n.m. | ||||||
Earnings (loss) per share – diluted | (0.09 | ) | 0.10 | n.m. | ||||||
Adjusted EBITDA excluding share-based compensation (1) | 18,432 | 16,632 | 11 | |||||||
Adjusted EBITDA excluding share-based compensation per share – diluted (1) | 0.37 | 0.33 | 13 | |||||||
Adjusted EBITDA (1) | 6,360 | 13,950 | (54 | ) | ||||||
Adjusted EBITDA excluding share-based compensation as a percentage of revenue (1) | 16 | % | 24 | % | ||||||
Cash Flow | ||||||||||
Cash flows from (used in) operating activities | (4,157 | ) | 1,388 | n.m. | ||||||
Funds from operations (1) | 2,884 | 11,331 | (75 | ) | ||||||
Funds from operations per share – diluted (1) | 0.06 | 0.22 | (73 | ) | ||||||
Dividends paid per share | 0.05 | 0.025 | 100 | |||||||
Dividends paid | 2,482 | 1,266 | 96 | |||||||
Capital expenditures | 18,206 | 6,890 | 164 | |||||||
Free cash flow (1) | (3,720 | ) | 7,732 | n.m. | ||||||
Financial Position (unaudited) | ||||||||||
Working capital (1) | 53,644 | 57,872 | (7 | ) | ||||||
Net Debt (1) | (7,535 | ) | (24,829 | ) | (70 | ) | ||||
Shareholders’ equity | 135,670 | 134,432 | 1 | |||||||
Common shares outstanding | 50,367,051 | 47,978,662 | 5 |
n.m. – not meaningful
Outlook
In the first quarter our operations generated strong operating results, supported by the continued industry growth and our premium suite of technology, Velocity, Atlas and PowerDrive Orbit RSS. We believe that the positive industry momentum will continue, and this environment provides a unique opportunity for us as we believe we are, and will continue to be, competitively positioned.
- We are one of a few providers who have a sizable fleet of premium technologies and the balance sheet strength to continue to grow capacity in an inflationary period.
- We are currently operating at fleet capacity and anticipate that our proactive capital strategy that began in 2021 will alleviate some of the strain on the fleet with past orders being delivered through 2022.
- Although our sector is competitive, the major Operators insist on utilizing only premium technologies. PHX possesses these technologies that drive drilling efficiencies and currently there is a shortage of this equipment in the entire sector due to high demand and supply chain disruptions.
- We have implemented strategies to mitigate some of the supply chain challenges, such as long lead times for materials and have had success offsetting inflationary cost. We will continue to implement efficiencies and strategies that can aid in protecting our margins.
- Our 2022 capital expenditures budget is expected to be
$85 million , with the recently announced$37.3 million increase expected to be allocated toward purchasing up to 100 Atlas motors, 30 Velocity kits and additional PowerDrive Orbit RSS for delivery late in 2022 and into 2023. - The intent of this increase is to equip our North American operations with more premium equipment to capture market share next year when we forecast there could be 1,000 rigs operating in
North America . - With 2022 capital expenditures weighted toward growth, we are projecting in 2023 the capital expenditures will be reduced and primarily focused on maintenance capital and growth if opportunities arise.
- We will continue to maintain our strong financial position, with no or minimal bank debt and remain positioned to withstand future volatility.
- Rewarding our shareholders remains a priority and we are focused on operational strategies that allow us this ability in all industry cycles.
Given the favourable conditions and the successes of our technology development and financial management, we are cautiously pursuing future growth as we are optimistic about the opportunities that our strategic initiatives will create.
Financial Results
Reporting the second highest first quarter revenue in the Corporation’s history, PHX Energy’s consolidated revenue in the first quarter of 2022 grew by 60 percent to
For the three-month period ended
For the three-month period ended
Similarly, PHX Energy’s Canadian division’s activity and revenue improved significantly in the first quarter with strong industry demand, particularly for PHX Energy’s drilling expertise and technologies. The Corporation’s Canadian segment revenue for the 2022-quarter was
As at
Dividends
In February of 2022, the Board approved a 50 percent increase to the Corporation’s quarterly dividend effective for the dividend payable to shareholders of record at the close of business on
Capital Spending
In the first quarter of 2022, the Corporation spent
As at
The Corporation currently possesses approximately 511 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, 98 Velocity systems, and 39 PowerDrive Orbit RSS, the largest independent fleet in
Responding to the 2022 Russian-Ukrainian War
On
- difficulty obtaining material and parts which could limit revenue and operating activities;
- increased risk of non-payment of accounts receivable and customer defaults in the Russian entity; and,
- volatility in revenue and expense forecasting.
The situation is dynamic and the ultimate duration and magnitude of the impact on the economy and the financial effect on the Corporation is not known at this time.
Uncertainties regarding the political, legal, tax or regulatory environment, including the potential for adverse and retroactive changes with respect to the Corporation’s operations in
PHX Energy is currently evaluating courses of action for
Shares Held in Trust
For the three-month period ended
Normal Course Issuer Bid
During the third quarter of 2021, the TSX approved the renewal of PHX Energy’s Normal Course Issuer Bid (“NCIB”) to purchase for cancellation, from time-to-time, up to a maximum of 3,679,797 common shares, representing 10 percent of the Corporation’s public float of common shares outstanding as at
PHX Energy continues to use NCIBs as an additional tool to enhance total long-term shareholder returns in conjunction with management’s disciplined capital allocation strategy.
Responding to COVID-19
In the 2022-quarter, government responses to COVID-19 continued to have a material impact on businesses worldwide. Despite easing of restrictions by most governments which led to improved industry and economic conditions in the period, the situation remains dynamic and the ultimate duration and magnitude of the impact on the economy and the financial effect on the Corporation is not known at this time. Supply chain challenges continue to create shortages and inflation related to the products and services required within the energy sector, including within the Corporation’s supply chain. PHX Energy has been proactive with efforts to lessen the supply chain disruptions’ impact on its operations.
PHX Energy has and will continue to preserve a solid financial position and retain financial flexibility through substantial liquidity on its credit facilities. As at
Non-GAAP Measures
Throughout this Press Release, PHX Energy uses certain measures to analyze operational and financial performance that do not have standardized meanings prescribed under Canadian generally accepted accounting principles (“GAAP”). These non-GAAP measures include adjusted EBITDA, adjusted EBITDA excluding share-based compensation, adjusted EBITDA excluding share-based compensation per share, adjusted EBITDA excluding share-based compensation as a percentage of revenue, gross profit as a percentage of revenue excluding depreciation and amortization and government grants, selling, general and administrative (“SG&A”) costs excluding share-based compensation as a percentage of revenue, funds from operations, funds from operations per share, free cash flow, 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 Measures” section following the Outlook section of this Press Release for applicable definitions, rationale for use, method of calculation and reconciliations where applicable.
Revenue
(Stated in thousands of dollars)
Three-month periods ended | ||||||
2022 | 2021 | % Change | ||||
Revenue | 112,126 | 70,106 | 60 |
For the three-month period ended
Crude oil prices continued to rise in the 2022-quarter, with Western Texas Intermediate (“WTI”) averaging USD
Operating Costs and Expenses
(Stated in thousands of dollars except percentages)
Three-month periods ended | |||||||||||
2022 | 2021 | % Change | |||||||||
Direct costs | 94,412 | 56,153 | 68 | ||||||||
Depreciation & amortization drilling and other equipment (included in direct costs) | 7,413 | 6,232 | 19 | ||||||||
Depreciation & amortization right-of-use asset (included in direct costs) | 836 | 836 | - | ||||||||
Gross profit as a percentage of revenue excluding depreciation & amortization and government grants(1) | 23 | % | 26 | % |
Direct costs are comprised of field and shop expenses and include depreciation and amortization on the Corporation’s equipment and right-of-use assets. For the three-month period ended
The Corporation’s depreciation and amortization on drilling and other equipment for the three-month period ended
In the first quarter of 2022, gross profit as a percent of revenue excluding depreciation and amortization and government grants(1) ( was 23 percent compared to 26 percent in the first quarter of 2021. The decrease in gross profitability in 2022 relative to the corresponding 2021-quarter is mainly due to inflationary pressures. In addressing inflation, management continues to take a proactive approach by leveraging volume purchases, quick pay discounts, and other strategies to soften the impact of rising material and service costs.
(Stated in thousands of dollars except percentages)
Three-month periods ended | ||||||||||
2022 | 2021 | % Change | ||||||||
Selling, general and administrative (“SG&A”) costs | 22,564 | 9,384 | 140 | |||||||
Share-based compensation (included in SG&A costs) | 12,072 | 2,682 | n.m. | |||||||
SG&A costs excluding share-based compensation as a percentage of revenue (1) | 9 | % | 10 | % |
n.m. – not meaningful
For the three-month period ended
No government grants were recognized in SG&A in the first quarter of 2022 (2021 -
Share-based compensation mainly relates to retention awards which are measured at fair value and the increase in the 2022-quarter was primarily due to increases in the Corporation’s share price.
(Stated in thousands of dollars)
Three-month periods ended | ||||||||
2022 | 2021 | % Change | ||||||
Research and development expense | 757 | 560 | 35 |
Research and development (“R&D”) expenditures for the three-month period ended
(Stated in thousands of dollars)
Three-month periods ended | |||||||||
2022 | 2021 | % Change | |||||||
Finance expense | 113 | 164 | (31 | ) | |||||
Finance expense lease liability | 507 | 548 | (7 | ) |
Finance expense mainly relates to interest charges on the Corporation’s long-term and short-term bank facilities. In the 2022-quarter, finance charges decreased by 31 percent to
Finance expense lease liability relates to interest expenses incurred on lease liabilities and decreased by 7 percent in the period.
(Stated in thousands of dollars)
Three-month periods ended | |||||||||
2022 | 2021 | ||||||||
Net gain on disposition of drilling equipment | (3,830 | ) | (2,820 | ) | |||||
Foreign exchange loss | 49 | - | |||||||
Other income | (3,781 | ) | (2,820 | ) |
For the three-month periods ended
Net gain on disposition of drilling equipment is comprised of gains on disposition of drilling equipment that typically result from insurance programs undertaken whereby proceeds for the lost equipment are at current replacement values, which are higher than the respective equipment’s book value. 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 and self-insured downhole equipment losses. In the 2022-quarter, more instances of downhole equipment losses occurred as compared to the 2021-quarter, resulting in higher net gain on disposition of drilling equipment.
The Corporation recognized foreign exchange losses of
(Stated in thousands of dollars)
Three-month periods ended | ||||||||
2022 | 2021 | % Change | ||||||
Impairment and other write-offs | 1,967 | - | n.m. |
n.m. – not meaningful
Due to severe economic sanctions against
(Stated in thousands of dollars except percentages)
Three-month periods ended | ||||||||
2022 | 2021 | |||||||
Provision for (recovery of) income taxes | (190 | ) | 1,251 | |||||
Effective tax rates | 4 | % | 20 | % |
For the three-month period ended
Segmented Information
The Corporation reports four operating segments on a geographical basis throughout the Canadian provinces of
(Stated in thousands of dollars)
Three-month periods ended | ||||||||
2022 | 2021 | % Change | ||||||
Revenue | 27,139 | 15,446 | 76 | |||||
Reportable segment profit before tax (1) | 3,494 | 2,326 | 50 |
(1) Includes adjustments to intercompany transactions.
PHX Energy’s Canadian revenue for the three-month period ended
With a higher volume of active rigs operating in 2022, the Canadian division continued to be a prominent player in this market, maintaining its market share and a well-diversified client base. During the 2022-quarter, PHX Energy was active in the
The Canadian operations’ reportable segment profit before tax for the first quarter of 2022 was
(Stated in thousands of dollars)
Three-month periods ended | |||||||||
2022 | 2021 | % Change | |||||||
Revenue | 81,795 | 53,101 | 54 | ||||||
Reportable segment profit (loss) before tax (1) | 6,445 | 7,221 | (11 | ) |
(1) Includes adjustments to intercompany transactions.
The US industry continues to provide significant growth opportunities for the Corporation. In the first quarter of 2022, the US operations’ momentum continued, recording the highest level of quarterly divisional revenue in the Corporation’s history. For the three-month period ended
Horizontal and directional drilling represented 96 percent of the industry’s average number of rigs running on a daily basis during the first quarter of 2022, which was consistent with the percentage in the 2021-quarter. For the three-month period ended
In the 2022-quarter, the Corporation realized reportable segment income before tax of
International
(Stated in thousands of dollars)
Three-month periods | ||||||||||||
2022 | 2021 | % Change | ||||||||||
Revenue | 397 | - | n.m. | |||||||||
Reportable segment loss before tax | (163 | ) | (327 | ) | (50 | ) |
n.m. – not meaningful
The Corporation’s International segment revenue, which is comprised of revenue from
(Stated in thousands of dollars)
Three-month periods | ||||||||||||
2022 | 2021 | % Change | ||||||||||
Revenue | 2,796 | 1,559 | 79 | |||||||||
Reportable segment loss before tax | (152 | ) | (479 | ) | (68 | ) |
PHX Energy’s Russian operations also saw an improvement in revenue primarily due to higher operating days. For the three-month period ended
Due to the impact of global economic sanctions against
Investing Activities
PHX Energy used net cash in investing activities of
$8 million downhole performance drilling motors,$9.6 million in MWD systems and spare components and RSS; and$0.6 million in machinery and equipment and other assets.
The capital expenditure program undertaken in the period was primarily financed from cash and cash equivalents and the US operating facility. Of the total capital expenditures in the 2022-quarter,
During the three-month period ended
The change in non-cash working capital balances of
Financing Activities
For the three-month period ended
- 314,600 common shares were purchased by an independent trustee in the open market for
$2 million to be held in trust for the potential future settlement of restricted awards granted under the Corporation’s RAP; - dividends of
$2.5 million were paid to shareholders; - payments of
$0.9 million were made towards lease liability; - 899,372 common shares were issued from treasury for proceeds of
$1.6 million upon the exercise of share options; and, $3.7 million was drawn against the US operating facility.
Capital Resources
As of
As at
Cash Requirements for Capital Expenditures
Historically, the Corporation has financed its capital expenditures and acquisitions through cash flows from operating activities, debt and equity. On
These planned expenditures are expected to be financed from cash flow from operations, cash and cash equivalents, and / or the Corporation’s unused credit facilities, if necessary. However, if a sustained period of market uncertainty and financial market volatility persists, 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
About
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 to oil and natural gas exploration and development companies principally in
PHX Energy’s Canadian directional drilling operations are conducted through
The common shares of PHX Energy trade on the
For further information please contact:
Suite 1400,
Tel: 403-543-4466
Fax: 403-543-4485
www.phxtech.com
Condensed Consolidated Statements of Financial Position
(unaudited) | |||||||||
ASSETS | |||||||||
Current assets: | |||||||||
Cash and cash equivalents | $ | 11,283,545 | $ | 24,828,830 | |||||
Trade and other receivables | 90,200,873 | 76,478,093 | |||||||
Inventories | 40,600,980 | 36,691,141 | |||||||
Prepaid expenses | 3,537,767 | 2,814,272 | |||||||
Current tax assets | 329,298 | 346,554 | |||||||
Total current assets | 145,952,463 | 141,158,890 | |||||||
Non-current assets: | |||||||||
Drilling and other long-term assets | 84,398,890 | 76,363,001 | |||||||
Right-of-use asset | 25,426,781 | 25,708,177 | |||||||
Intangible assets | 15,997,488 | 16,137,024 | |||||||
Investments | 3,000,500 | 3,000,500 | |||||||
Deferred tax assets | 105,601 | 126,133 | |||||||
Total non-current assets | 128,929,260 | 121,334,835 | |||||||
Total assets | $ | 274,881,723 | $ | 262,493,725 | |||||
LIABILITIES AND SHAREHOLDERS' EQUITY | |||||||||
Current liabilities: | |||||||||
Trade and other payables | $ | 85,544,239 | $ | 77,571,887 | |||||
Lease liability | 2,974,006 | 3,232,503 | |||||||
Dividends payable | 3,790,543 | 2,482,060 | |||||||
Total current liabilities | 92,308,788 | 83,286,450 | |||||||
Non-current liabilities: | |||||||||
Lease liability | 32,550,123 | 32,638,819 | |||||||
Loans and borrowings | 3,748,800 | - | |||||||
Deferred tax liability | 9,193,288 | 9,346,426 | |||||||
Other | 1,410,686 | 2,789,786 | |||||||
Total non-current liabilities | 46,902,897 | 44,775,031 | |||||||
Equity: | |||||||||
Share capital | 249,330,905 | 235,463,414 | |||||||
Contributed surplus | 7,015,849 | 9,462,091 | |||||||
Deficit | (129,585,775 | ) | (121,721,790 | ) | |||||
Accumulated other comprehensive income | 8,909,059 | 11,228,529 | |||||||
Total equity | 135,670,038 | 134,432,244 | |||||||
Total liabilities and equity | $ | 274,881,723 | $ | 262,493,725 |
Condensed Consolidated Statements of Comprehensive Income (Loss)
(unaudited) | Three-month periods ended | ||||||||||
2022 | 2021 | ||||||||||
Revenue | $ | 112,126,412 | $ | 70,105,791 | |||||||
Direct costs | 94,412,201 | 56,152,697 | |||||||||
Gross profit | 17,714,211 | 13,953,094 | |||||||||
Expenses: | |||||||||||
Selling, general and administrative expenses | 22,564,305 | 9,384,384 | |||||||||
Research and development expenses | 756,559 | 560,101 | |||||||||
Finance expense | 113,108 | 164,156 | |||||||||
Finance expense lease liability | 507,016 | 548,474 | |||||||||
Other income | (3,780,655 | ) | (2,820,253 | ) | |||||||
Impairment and other write-offs | 1,966,848 | - | |||||||||
22,127,181 | 7,836,862 | ||||||||||
Earnings (loss) before income taxes | (4,412,970 | ) | 6,116,232 | ||||||||
Provision for (Recovery of) income taxes | |||||||||||
Current | (188,079 | ) | 7,755 | ||||||||
Deferred | (1,946 | ) | 1,243,457 | ||||||||
(190,025 | ) | 1,251,212 | |||||||||
Net earnings (loss) | (4,222,945 | ) | 4,865,020 | ||||||||
Other comprehensive loss | |||||||||||
Foreign currency translation | (2,319,470 | ) | (1,181,371 | ) | |||||||
Total comprehensive earnings (loss) for the period | $ | (6,542,415 | ) | $ | 3,683,649 | ||||||
Earnings (loss) per share – basic | $ | (0.09 | ) | $ | 0.10 | ||||||
Earnings (loss) per share – diluted | $ | (0.09 | ) | $ | 0.10 |
Condensed Consolidated Statements of Cash Flows
(unaudited) | Three-month periods ended | |||||
2022 | 2021 | |||||
Cash flows from operating activities: | ||||||
Earnings (loss) from continuing operations | $ | (4,222,945 | ) | $ | 4,865,020 | |
Adjustments for: | ||||||
Depreciation and amortization drilling and other equipment | 7,412,544 | 6,232,149 | ||||
Depreciation and amortization right-of-use asset | 836,046 | 835,899 | ||||
Provision for (recovery of) income taxes | (190,025 | ) | 1,251,212 | |||
Unrealized foreign exchange loss (gain) | (63,208 | ) | 54,460 | |||
Gain on disposition of drilling equipment | (3,830,074 | ) | (2,819,611 | ) | ||
Equity-settled share-based payments | 334,714 | 68,501 | ||||
Finance expense | 113,108 | 164,156 | ||||
Provision for inventory obsolescence | 527,017 | 679,343 | ||||
Interest paid | (52,235 | ) | (52,304 | ) | ||
Income taxes received (paid) | 205,356 | (12,339 | ) | |||
Impairment and other write-offs | 1,966,848 | - | ||||
Change in non-cash working capital | (7,194,617 | ) | (9,878,408 | ) | ||
Net cash from (used in) operating activities | (4,157,471 | ) | 1,388,078 | |||
Cash flows from investing activities: | ||||||
Proceeds on disposition of drilling equipment | 5,544,740 | 3,785,322 | ||||
Acquisition of drilling and other equipment | (18,206,230 | ) | (6,889,517 | ) | ||
Acquisition of intangible assets | (411,275 | ) | - | |||
Change in non-cash working capital | 3,635,012 | 2,304,501 | ||||
Net cash used in investing activities | (9,437,753 | ) | (799,694 | ) | ||
Cash flows from financing activities: | ||||||
Proceeds from loans and borrowings | 3,748,800 | - | ||||
Proceeds from issuance of share capital | 1,642,187 | 395,271 | ||||
Purchase of shares held in trust | (2,000,000 | ) | - | |||
Dividends paid to shareholders | (2,482,060 | ) | (1,265,648 | ) | ||
Payments of lease liability | (858,988 | ) | (791,366 | ) | ||
Repurchase of shares under the NCIB | - | (1,204,133 | ) | |||
Net cash from (used in) financing activities | 49,939 | (2,865,876 | ) | |||
Net decrease in cash and cash equivalents | (13,545,285 | ) | (2,277,492 | ) | ||
Cash and cash equivalents, beginning of period | 24,828,830 | 25,745,911 | ||||
Cash and cash equivalents, end of period(1) | $ | 11,283,545 | $ | 23,468,419 |
(1) As at
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 impact of COVID-19 on the Corporation’s operations, results and the Corporation’s planned responses thereto, potential for further impact of the Russian-Ukrainian war on the Corporation’s operations, results and the Corporation’s planned responses thereto including the continued examination of opportunities to sell, transfer or wind down the division, which is expected to occur in the second quarter of 2022, the anticipated impact of global supply chain disruptions on the Corporation’s operations, results, and the Corporation’s planned responses thereto; the anticipated increase in demand for the Corporations services and technologies in
The above are stated under the headings: “Financial Results”, “Responding to COVID-19”, “Responding to the 2022 Russian-Ukrainian War”, “Capital Spending”, “Dividend”, “Shares Held in Trust”, “Segmented Information”, and “Cash Requirements for Capital Expenditures”. In addition, all information contained under the headings "Outlook” sections of this Press Release may contains forward-looking statements.
In addition to other material factors, expectations and assumptions which may be identified in this Press Release and other continuous disclosure documents of the Corporation referenced herein, assumptions have been made in respect of such forward-looking statements and information regarding, among other things: the Corporation will continue to conduct its operations in a manner consistent with past operations; the general continuance of current industry conditions; anticipated financial performance, business prospects, impact of competition, strategies, the general stability of the economic and political environment in which the Corporation operates; the continuing impact of COVID-19 and the Russian-Ukrainian war on the global economy, specifically trade, manufacturing, supply chain and energy consumption, among other things and the resulting impact on the Corporation’s operations and future results which remain uncertain, exchange and interest rates; the continuance of existing (and in certain circumstances, the implementation of proposed) tax, royalty and regulatory regimes; the sufficiency of budgeted capital expenditures in carrying out planned activities; the availability and cost of labour and services and the adequacy of cash flow; debt and ability to obtain financing on acceptable terms to fund its planned expenditures, which are subject to change based on commodity prices; market conditions and future oil and natural gas prices; and potential timing delays. Although management considers these material factors, expectations, and assumptions to be reasonable based on information currently available to it, no assurance can be given that they will prove to be correct.
Readers are cautioned that the foregoing lists of factors are not exhaustive. Additional information on these and other factors that could affect the Corporation's operations and financial results are included in reports on file with the Canadian Securities Regulatory Authorities and may be accessed through the SEDAR website (www.sedar.com) or at the Corporation's website. The forward-looking statements and information contained in this document are expressly qualified by this cautionary statement. The Corporation does not undertake any obligation to publicly update or revise any forward-looking statements or information, whether as a result of new information, future events or otherwise, except as may be required by applicable securities laws.
Non-GAAP Measures
Adjusted EBITDA
Adjusted EBITDA, defined as earnings before finance expense, finance expense lease liability, income taxes, depreciation and amortization, impairment losses on drilling and other equipment and goodwill and other write-offs, loss on remeasurement, severance payouts relating to the Corporation’s restructuring cost, and unrealized foreign exchange gains or losses, does not have a standardized meaning and is not a financial measure that is recognized under GAAP. However, Management believes that adjusted EBITDA provides supplemental information to net earnings that is useful in evaluating the results of the Corporation’s principal business activities before considering certain charges, how it was financed and how it was taxed in various countries. Investors should be cautioned, however, that adjusted EBITDA should not be construed as an alternative measure to net earnings determined in accordance with GAAP. PHX Energy’s method of calculating adjusted EBITDA may differ from that of other organizations and, accordingly, its adjusted EBITDA may not be comparable to that of other companies.
Adjusted EBITDA excluding share-based compensation is calculated by adding share-based compensation to adjusted EBITDA.
The following is a reconciliation of net earnings to adjusted EBITDA and adjusted EBITDA excluding share-based compensation:
(Stated in thousands of dollars)
Three-month periods ended | |||||||||
2022 | 2021 | ||||||||
Net earnings (loss): | (4,223 | ) | 4,865 | ||||||
Add: | |||||||||
Depreciation and amortization drilling and other equipment | 7,413 | 6,232 | |||||||
Depreciation and amortization right-of-use asset | 836 | 836 | |||||||
Provision for (recovery of) income taxes | (190 | ) | 1,251 | ||||||
Finance expense | 113 | 164 | |||||||
Finance expense lease liability | 507 | 548 | |||||||
Unrealized foreign exchange (gain) loss | (63 | ) | 54 | ||||||
Impairment and other write-offs | 1,967 | - | |||||||
Adjusted EBITDA | 6,360 | 13,950 | |||||||
Add: | |||||||||
Share-based compensation | 12,072 | 2,682 | |||||||
Adjusted EBITDA excluding share-based compensation | 18,432 | 16,632 |
Adjusted EBITDA excluding share-based compensation per share - diluted is calculated using the treasury stock method whereby deemed proceeds on the exercise of the share options are used to reacquire common shares at an average share price. The calculation of adjusted EBITDA excluding share-based compensation per share - dilutive is based on the adjusted EBITDA excluding share-based compensation as reported in the table above divided by the diluted number of shares outstanding.
Adjusted EBITDA excluding share-based compensation as a percentage of revenue is calculated by dividing the adjusted EBITDA excluding share-based compensation as reported in the table above by revenue as stated on the Consolidated Statements of Comprehensive Income (Loss).
Funds from Operations
Funds from operations is defined as cash flows generated from operating activities before changes in non-cash working capital, interest paid, and income taxes paid. This non-GAAP measure does not have a standardized meaning and is not a financial measure recognized under GAAP. Management uses funds from operations as an indication of the Corporation’s ability to generate funds from its operations before considering changes in working capital balances and interest and taxes paid. Investors should be cautioned, however, that this financial measure should not be construed as an alternative measure to cash flows from operating activities determined in accordance with GAAP. PHX Energy’s method of calculating funds from operations may differ from that of other organizations and, accordingly, it may not be comparable to that of other companies.
The following is a reconciliation of cash flows from operating activities to funds from operations:
(Stated in thousands of dollars)
Three-month periods ended | |||||||
2022 | 2021 | ||||||
Cash flows from (used in) operating activities | (4,157 | ) | 1,388 | ||||
Add (deduct): | |||||||
Changes in non-cash working capital | 7,194 | 9,879 | |||||
Interest paid | 52 | 52 | |||||
Income taxes paid (received) | (205 | ) | 12 | ||||
Funds from operations | 2,884 | 11,331 |
Funds from operations per share - diluted is calculated using the treasury stock method whereby deemed proceeds on the exercise of the share options are used to reacquire common shares at an average share price. The calculation of funds from operations per share - diluted is based on the funds from operations as reported in the table above divided by the diluted number of shares outstanding.
Free Cash Flow
Free cash flow is defined as funds from operations (as defined above) less maintenance capital expenditures and cash payment on leases. This non-GAAP measure does not have a standardized meaning and is not a financial measure recognized under GAAP. Management uses free cash flow as an indication of the Corporation’s ability to generate funds from its operations to support operations and maintain the Corporation’s drilling and other equipment. This performance measure is useful to investors for assessing the Corporation’s operating and financial performance, leverage and liquidity. Investors should be cautioned, however, that this financial measure should not be construed as an alternative measure to cash flows from operating activities determined in accordance with GAAP. PHX Energy’s method of calculating free cash flow may differ from that of other organizations and, accordingly, it may not be comparable to that of other companies.
The following is a reconciliation of cash flows from operating activities to free cash flow:
(Stated in thousands of dollars)
Three-month periods ended | ||||||||
2022 | 2021 | |||||||
Cash flows from (used in) operating activities | (4,157 | ) | 1,388 | |||||
Add (deduct): | ||||||||
Changes in non-cash working capital | 7,194 | 9,879 | ||||||
Interest paid | 52 | 52 | ||||||
Income taxes paid (received) | (205 | ) | 12 | |||||
Maintenance capital expenditures | (5,238 | ) | (2,259 | ) | ||||
Cash payment on leases | (1,366 | ) | (1,340 | ) | ||||
Free cash flow | (3,720 | ) | 7,732 |
Working Capital
Working capital is defined as the Corporation’s current assets less its current liabilities and is used to assess the Corporation’s short-term liquidity. This non-GAAP measure does not have a standardized meaning and is not a financial measure recognized under GAAP. Management uses working capital to provide insight as to the Corporation’s ability to meet obligations as at the reporting date. PHX Energy’s method of calculating working capital may differ from that of other organizations and, accordingly, it may not be comparable to that of other companies.
The following is a reconciliation of current assets and current liabilities to working capital:
(Stated in thousands of dollars)
As at: | ||||||||
Current assets | 145,952 | 141,159 | ||||||
Deduct: | ||||||||
Current liabilities | (92,309 | ) | (83,287 | ) | ||||
Working capital | 53,644 | 57,872 |
Net Debt
Net debt is defined as the Corporation’s operating facility and loans and borrowings less cash and cash equivalents. This non-GAAP measure does not have a standardized meaning and is not a financial measure recognized under GAAP. Management uses net debt to provide insight as to the Corporation’s ability to meet obligations as at the reporting date. PHX Energy’s method of calculating net debt may differ from that of other organizations and, accordingly, it may not be comparable to that of other companies.
The following is a reconciliation of operating facility, loans and borrowings, and cash and cash equivalents to net debt:
(Stated in thousands of dollars)
As at: | |||||||||
Operating facility | - | - | |||||||
Loans and borrowings | 3,749 | - | |||||||
Total loans and borrowings | 3,749 | - | |||||||
Deduct: | |||||||||
Cash and cash equivalents | (11,284 | ) | (24,829 | ) | |||||
Net debt | (7,535 | ) | (24,829 | ) |
Gross Profit as a Percentage of Revenue Excluding Depreciation & Amortization and Government Grants
Gross profit as a percentage of revenue excluding depreciation & amortization and government grants is defined as the Corporation’s gross profit excluding depreciation and amortization and government grants divided by revenue and is used to assess operational profitability. This non-GAAP measure does not have a standardized meaning and is not a financial measure recognized under GAAP. PHX Energy’s method of calculating gross profit as a percentage of revenue may differ from that of other organizations and, accordingly, it may not be comparable to that of other companies.
The following is a reconciliation of revenue, direct costs, depreciation and amortization, government grants and gross profit to gross profit as a percentage of revenue excluding depreciation and amortization and government grants:
(Stated in thousands of dollars)
Three-month periods ended | ||||||||||||
2022 | 2021 | |||||||||||
Revenue | 112,126 | 70,106 | ||||||||||
Direct costs | 94,412 | (56,153 | ) | |||||||||
Gross profit | 17,714 | 13,953 | ||||||||||
Depreciation & amortization drilling and other equipment (included in direct costs) | 7,413 | 6,232 | ||||||||||
Depreciation & amortization right-of-use asset (included in direct costs) | 836 | 836 | ||||||||||
Government grants | - | (3,051 | ) | |||||||||
25,963 | 17,970 | |||||||||||
Gross profit as a percentage of revenue excluding depreciation & amortization and government grants | 23 | % | 26 | % |
SG&A Costs Excluding Share-Based Compensation as a Percentage of Revenue
SG&A costs excluding share-based compensation as a percentage of revenue is defined as the Corporation’s SG&A costs excluding share-based compensation divided by revenue and is used to assess the impact of administrative costs excluding the effect of share price volatility. This non-GAAP measure does not have a standardized meaning and is not a financial measure recognized under GAAP. PHX Energy’s method of calculating SG&A costs excluding share-based compensation as a percentage of revenue may differ from that of other organizations and, accordingly, it may not be comparable to that of other companies.
The following is a reconciliation of SG&A costs, share-based compensation, and revenue to SG&A costs excluding share-based compensation as a percentage of revenue:
(Stated in thousands of dollars)
Three-month periods ended | ||||||||
2022 | 2021 | |||||||
SG&A Costs | 22,564 | 9,384 | ||||||
Deduct: | ||||||||
Share-based compensation | (12,072 | ) | (2,682 | ) | ||||
10,492 | 6,702 | |||||||
Revenue | 112,126 | 70,106 | ||||||
SG&A costs excluding share-based compensation as a percentage of revenue | 9 | % | 10 | % |
SG&A costs excluding share-based compensation and government grants as a percentage of revenue is defined as the Corporation’s SG&A costs excluding share-based compensation and government grants as quantified in the respective periods divided by revenue.
(1) Non-GAAP 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 Measures section of this Press Release.
Source:
2022 GlobeNewswire, Inc., source