PHX Energy Announces Second Quarter Results and Record Second Quarter Revenue

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In the 2025 three-month period, PHX Energy’s Canadian operating days decreased by 12 percent to 2,362 days from 2,682 days in the same 2024-quarter and its RSS operating days accounted for 13 percent of its activity in the 2025-period (2024 – 6 percent). In comparison, industry horizontal and directional drilling activity, as measured by drilling days, decreased by 6 percent to 10,826 in the second quarter of 2025 from 11,483 in the 2024-quarter. During the 2025-quarter, the Corporation was active in the Duvernay, Montney, Glauconite, Frobisher, Cardium, Viking, Bakken, Torquay, Colony, Ellerslie, Charlie Lake, Cummings, Sparky, Clearwater, and Scallion basins.

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In the 2025 six-month period, PHX Energy’s Canadian segment’s operating days⁽³⁾ decreased slightly by 2 percent to 6,413 days from 6,540 days in the same 2024-period and its RSS operating days accounted for 9 percent of its activity in the 2025-period (2024 – 5 percent). In comparison, industry horizontal and directional drilling activity, as measured by drilling days, decreased by 2 percent to 28,265 in the first half of 2025 from 28,863 in the same 2024-period.

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The Canadian division’s average revenue per day⁽³⁾ for directional drilling services increased by 16 and 9 percent in the three and six-month periods ended June 30, 2025, to $16,409 and $14,911, respectively, as compared to $14,116 and $13,688 in the corresponding 2024-periods. The increases were mainly driven by the growth in RSS activity.

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PHX Energy’s Canadian reportable segment profit decreased by 83 percent to $0.3 million in the 2025-quarter from $2 million in the 2024-quarter. The decrease in profitability in the 2025-quarter was mainly due to increased direct costs and SG&A expenses in the Canadian segment and fewer instances of downhole equipment losses that resulted in lower other income. For the six-month period ended June 30, 2025, PHX Energy’s Canadian reportable segment profit increased by 8 percent to $12.3 million from $11.4 million in the comparable 2024-period. Improved profitability in the 2025 six-month period was mainly attributable to increased activity in the Canadian segment’s high-margin RSS revenue stream, displacement of RSS-related equipment rentals, and higher other income which mainly resulted from more instances of downhole equipment losses.

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Investing Activities

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Net cash used in investing activities for the three-month period ended June 30, 2025 was $17.9 million as compared to $27.7 million in the corresponding 2024-period. During the second quarter of 2025, the Corporation spent $12.4 million (2024 – $24.5 million) to grow the Corporation’s fleet of drilling equipment, $6.4 million (2024 – $2 million) was used to maintain capacity in the Corporation’s fleet of drilling and other equipment, and $2 million (2024 – $0.2 million) was spent to replace equipment lost downhole during drilling operations. With proceeds on disposition of drilling and other equipment of $10.9 million (2024 – $7.4 million), the Corporation’s net capital expenditures for the 2025-period were $9.9 million (2024 – $19.4 million).

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The 2025-quarter capital expenditures comprised of:

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The capital expenditure program undertaken in the year was primarily financed from proceeds on disposition of drilling equipment, cash flows from operating activities, and the Corporation’s credit facilities when required.

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The change in non-cash working capital balances of $6.1 million (use of cash) for the three-month period ended June 30, 2025, relates to the net change in the Corporation’s trade payables that are associated with the acquisition of capital assets (2024 – $8.3 million).

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Financing Activities

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For the three-month period ended June 30, 2025, net cash from financing activities was $4.7 million as compared to $11.3 million net cash used for financing activities in the same 2024-period. In the 2025-quarter:

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Capital Resources

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As of June 30, 2025, the Corporation had CAD $41.7 million drawn on its Canadian credit facilities, nothing drawn on its US operating facility, and a cash balance of $10.7 million. As at June 30, 2025, the Corporation had CAD $53.1 million and USD $20 million available from its credit facilities. The credit facilities are secured by substantially all of the Corporation’s assets and mature in December 2026.

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As at June 30, 2025, the Corporation was in compliance with all its financial covenants. Under the syndicated credit agreement, in any given period, the Corporation’s distributions (as defined therein) cannot exceed its maximum aggregate amount of distributions limit as defined in the Corporation’s syndicated credit agreement. Distributions include, without limitation, dividends declared and paid, cash used for common shares purchased by the independent trustee in the open market and held in trust for potential settlement of outstanding retention awards, as well as cash used for common shares repurchased and cancelled under the NCIB.

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Cash Requirements for Capital Expenditures

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Historically, the Corporation has financed its capital expenditures and acquisitions through cash flows from operating activities, proceeds on disposition of drilling equipment, debt and equity. In May 2025, the Board approved an increase to the 2025 capital expenditure budget from $55 million to $65 million. Of the total expenditures, $47 million is anticipated to be spent on growth and the remainder is anticipated to be spent to maintain capacity in the fleet of drilling and other equipment and replace equipment lost downhole during drilling operations. The amount expected to be allocated towards replacing equipment lost downhole could increase, should more downhole equipment losses occur throughout the year.  
      
These planned expenditures are expected to be financed from cash flow from operating activities, proceeds on disposition of drilling equipment, cash and cash equivalents, and the Corporation’s credit facilities, if necessary. However, if a sustained period of market uncertainty, threat of trade wars, and financial market volatility persists in 2025, 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.

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As at June 30, 2025, the Corporation has entered into commitments to purchase drilling and other equipment for $21 million (2024 – $18.6 million); delivery is largely expected to occur before the end of 2025.

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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.

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PHX Energy’s Canadian directional drilling operations are conducted through Phoenix Technology Services LP. The Corporation maintains its corporate head office, research and development, Canadian sales, service and operational centers in Calgary, Alberta. In addition, PHX Energy has a facility in Estevan, Saskatchewan. PHX Energy’s US operations, conducted through the Corporation’s wholly-owned subsidiary, Phoenix Technology Services USA Inc., is headquartered in Houston, Texas. Phoenix USA has sales and service facilities in Houston, Texas; Midland, Texas; Casper, Wyoming; and Oklahoma City, Oklahoma. Internationally, PHX Energy also supplies technology to the Middle East regions.

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The common shares of PHX Energy trade on the Toronto Stock Exchange under the symbol PHX.

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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

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Consolidated Statements of Financial Position

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Condensed Consolidated Interim Statements of Comprehensive Earnings (Loss)
 (Stated in thousands of dollars except earnings per share, unaudited)

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Condensed Consolidated Interim Statements of Cash Flows
(Stated in thousands of dollars, unaudited)

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Cautionary Statement Regarding Forward-Looking Information and Statements

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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”, “targets” and similar expressions are intended to identify forward-looking information or statements.

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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.

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In particular, forward-looking information and statements contained in this document include without limitation, the Corporation’s intent to preserve balance sheet strength and continue to reward shareholders, including through its ROCS program, intentions for the distributable cash under ROCS to be stay within the targeted at 70 percent of excess cash flow in 2025, PHX Energy’s intentions with respect to the current NCIB, applying to the TSX to renew the NCIB, and purchases thereunder and the effects of repurchases under the NCIB, the potential impact of The H.R.1 – One Big Beautiful Bill Act in future periods,   the anticipated industry activity and demand for the Corporation’s services and technologies in North America, the projected capital expenditures budget for 2025, and how the budget will be allocated and funded, the timeline for delivery of equipment on order, the anticipated continuation of PHX Energy’s quarterly dividend program and the amounts of dividends, the potential material adverse effect on the Canadian and US economy, the Canadian and US oil and natural gas industry and the Corporation and its results that existing or new tariffs, and any changes to these tariffs, taxes or import or export restrictions or prohibitions, could have, the Corporation ability to reduce the impact of potential and existing tariffs in its supply chain, and the impact of OPEC+ production strategies on commodity prices and industry activity.

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The above are stated under the headings: “Financial Results”, “Overall Performance”, “Dividends and ROCS”, “Capital Spending”, and “Capital Resources”. In addition, all information contained under the heading “Outlook” of this document may contain forward-looking statements.

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In addition to other material factors, expectations and assumptions which may be identified in this document and other continuous disclosure documents of the Corporation referenced herein, assumptions have been made in respect of such forward-looking statements and information regarding, without limitation, that: the Corporation will continue to conduct its operations in a manner consistent with past operations; the general continuance of current industry conditions and the accuracy of the Corporation’s market outlook expectations for 2025 and in the future; that future business, regulatory and industry conditions will be within the parameters expected by the Corporation; that there will be no significant adverse tariff events including intentional tariff wars that could have a significant impact on the markets in which the Corporation operates; anticipated financial performance, business prospects, impact of competition, strategies, the general stability of the economic and political environment in which the Corporation operates; the potential impact of trade wars, pandemics, the Russian-Ukrainian war, Middle-East conflict and other world events on the global economy, specifically trade, manufacturing, supply chain, inflation and energy consumption, among other things and the resulting impact on the Corporation’s operations and future results which remain uncertain; exchange and interest rates, and inflationary pressures including the potential for further interest rate hikes by global central banks and the impact on financing charges and foreign exchange and the anticipated global economic response to concerted interest rate hikes; the continuance of existing (and in certain circumstances, the implementation of proposed) tax, royalty and regulatory regimes; the sufficiency of budgeted capital expenditures in carrying out planned activities; the availability and cost of labour and services and the adequacy of cash flow; debt and ability to obtain financing on acceptable terms to fund its planned expenditures, which are subject to change based on commodity prices; market conditions and future oil and natural gas prices; and potential timing delays. Although management considers these material factors, expectations, and assumptions to be reasonable based on information currently available to it, no assurance can be given that they will prove to be correct.

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Readers are cautioned that the foregoing lists of factors are not exhaustive. Additional information on these and other factors that could affect the Corporation’s operations and financial results are included in reports on file with the Canadian Securities Regulatory Authorities and may be accessed through the SEDAR+ website (www.sedarplus.ca) or at the Corporation’s website. The forward-looking statements and information contained in this document are expressly qualified by this cautionary statement. The Corporation does not undertake any obligation to publicly update or revise any forward-looking statements or information, whether as a result of new information, future events or otherwise, except as may be required by applicable securities laws.

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Non-GAAP and Other Financial Measures

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Non-GAAP Financial Measures and Ratios

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Adjusted EBITDA

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Adjusted EBITDA, defined as earnings before finance expense, finance expense lease liability, income taxes, depreciation and amortization, impairment losses on drilling and other equipment and goodwill and other write-offs, equity-settled share-based payments, severance payouts relating to the Corporation’s restructuring cost, and unrealized foreign exchange gains or losses, does not have a standardized meaning and is not a financial measure that is recognized under GAAP. However, Management believes that adjusted EBITDA provides supplemental information to earnings that is useful in evaluating the results of the Corporation’s principal business activities before considering certain charges, how it was financed and how it was taxed in various countries. Investors should be cautioned, however, that adjusted EBITDA should not be construed as an alternative measure to earnings determined in accordance with GAAP. PHX Energy’s method of calculating adjusted EBITDA may differ from that of other organizations and, accordingly, its adjusted EBITDA may not be comparable to that of other companies.

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The following is a reconciliation of earnings to adjusted EBITDA:

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(Stated in thousands of dollars)        

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Adjusted EBITDA Per Share – Diluted

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Adjusted EBITDA per share – diluted is calculated using the treasury stock method whereby deemed proceeds on the exercise of the share options are used to reacquire common shares at an average share price. The calculation of adjusted EBITDA per share – dilutive is based on the adjusted EBITDA as reported in the table above divided by the diluted number of shares outstanding.

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Adjusted EBITDA as a Percentage of Revenue

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Adjusted EBITDA as a percentage of revenue is calculated by dividing the adjusted EBITDA as reported in the table above by revenue as stated on the Condensed Consolidated Interim Statements of Comprehensive Earnings.

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Adjusted EBITDA Excluding Cash-settled Share-based Compensation Expense

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Adjusted EBITDA excluding cash-settled share-based compensation expense is calculated by adding cash-settled share-based compensation expense to adjusted EBITDA as described above. Management believes that this measure provides supplemental information to earnings that is useful in evaluating the results of the Corporation’s principal business activities before considering certain charges, how it was financed, how it was taxed in various countries, and without the impact of cash-settled share-based compensation expense that is affected by fluctuations in the Corporation’s share price.

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The following is a reconciliation of earnings to adjusted EBITDA excluding cash-settled share-based compensation expense:

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(Stated in thousands of dollars)        

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Adjusted EBITDA Excluding Cash-settled Share-based Compensation Expense as a Percentage of Revenue

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Adjusted EBITDA excluding cash-settled share-based compensation expense as a percentage of revenue is calculated by dividing adjusted EBITDA excluding cash-settled share-based compensation expense as reported above by revenue as stated on the Condensed Consolidated Interim Statements of Comprehensive Earnings.

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Gross Profit as a Percentage of Revenue Excluding Depreciation & Amortization

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Gross profit as a percentage of revenue excluding depreciation & amortization is defined as the Corporation’s gross profit excluding depreciation and amortization divided by revenue and is used to assess operational profitability. This Non-GAAP ratio does not have a standardized meaning and is not a financial measure recognized under GAAP. PHX Energy’s method of calculating gross profit as a percentage of revenue may differ from that of other organizations and, accordingly, it may not be comparable to that of other companies.

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The following is a reconciliation of revenue, direct costs, depreciation and amortization and gross profit to gross profit as a percentage of revenue excluding depreciation and amortization:

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(Stated in thousands of dollars)

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SG&A Costs Excluding Share-Based Compensation as a Percentage of Revenue

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SG&A costs excluding share-based compensation as a percentage of revenue is defined as the Corporation’s SG&A costs excluding share-based compensation divided by revenue and is used to assess the impact of administrative costs excluding the effect of share price volatility. This Non-GAAP ratio does not have a standardized meaning and is not a financial measure recognized under GAAP. PHX Energy’s method of calculating SG&A costs excluding share-based compensation as a percentage of revenue may differ from that of other organizations and, accordingly, it may not be comparable to that of other companies.

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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:

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(Stated in thousands of dollars)

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Capital Management Measures

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a)   Funds from Operations

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Funds from operations is defined as cash flows generated from operating activities before changes in non-cash working capital, interest paid, and income taxes paid. This financial measure does not have a standardized meaning and is not a financial measure recognized under GAAP. Management uses funds from operations as an indication of the Corporation’s ability to generate funds from its operations before considering changes in working capital balances and interest and taxes paid. Investors should be cautioned, however, that this financial measure should not be construed as an alternative measure to cash flows from operating activities determined in accordance with GAAP. PHX Energy’s method of calculating funds from operations may differ from that of other organizations and, accordingly, it may not be comparable to that of other companies.

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The following is a reconciliation of cash flows from operating activities to funds from operations:

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(Stated in thousands of dollars)

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b)   Excess Cash Flow

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Excess cash flow is defined as funds from operations (as defined above) less cash payment on leases, growth capital expenditures, and maintenance capital expenditures from downhole equipment losses and asset retirements, and increased by proceeds on disposition of drilling equipment. This financial measure does not have a standardized meaning and is not a financial measure recognized under GAAP. Management uses excess cash flow as an indication of the Corporation’s ability to generate funds from its operations to support operations and grow and maintain the Corporation’s drilling and other equipment. This performance measure is useful to investors for assessing the Corporation’s operating and financial performance, leverage and liquidity. Investors should be cautioned, however, that this financial measure should not be construed as an alternative measure to cash flows from operating activities determined in accordance with GAAP. PHX Energy’s method of calculating excess cash flow may differ from that of other organizations and, accordingly, it may not be comparable to that of other companies.

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The following is a reconciliation of cash flows from operating activities to excess cash flow:

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(Stated in thousands of dollars)

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c)   Working Capital

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Working capital is defined as the Corporation’s current assets less its current liabilities and is used to assess the Corporation’s short-term liquidity. This financial measure does not have a standardized meaning and is not a financial measure recognized under GAAP. Management uses working capital to provide insight as to the Corporation’s ability to meet obligations as at the reporting date. PHX Energy’s method of calculating working capital may differ from that of other organizations and, accordingly, it may not be comparable to that of other companies.

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The following is a reconciliation of current assets and current liabilities to working capital:
(Stated in thousands of dollars)

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d)   Net Debt (Net Cash)

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Net debt is defined as the Corporation’s loans and borrowings less cash. This financial measure does not have a standardized meaning and is not a financial measure recognized under GAAP. Management uses net debt to provide insight as to the Corporation’s ability to meet obligations as at the reporting date. PHX Energy’s method of calculating net debt may differ from that of other organizations and, accordingly, it may not be comparable to that of other companies.

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The following is a reconciliation of loans and borrowings and cash to net debt:

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(Stated in thousands of dollars)

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e)   Net Capital Expenditures

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Net capital expenditures is comprised of total additions to drilling and other long-term assets, as determined in accordance with IFRS, less total proceeds from disposition of drilling equipment, as determined in accordance with IFRS. This financial measure does not have a standardized meaning and is not a financial measure recognized under GAAP. Management uses net capital expenditures to provide insight as to the Corporation’s ability to meet obligations as at the reporting date. PHX Energy’s method of calculating net capital expenditures may differ from that of other organizations and, accordingly, it may not be comparable to that of other companies.

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The following is a reconciliation of additions to drilling and other equipment and proceeds from disposition of drilling equipment to net capital expenditures:

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(Stated in thousands of dollars)

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f)   Remaining Distributable Balance under ROCS

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Remaining distributable balance under ROCS is comprised of 70% of excess cash flow as defined above less repurchases of shares under the Normal Course Issuer Bids in effect during the period and less the dividends paid to shareholders during the period. This financial measure does not have a standardized meaning and is not a financial measure recognized under GAAP. Management uses the remaining distributable balance under ROCS to provide insight as to the Corporation’s ROCS strategy as at the reporting date. PHX Energy’s method of calculating remaining distributable balance under ROCS may differ from that of other organizations and, accordingly, it may not be comparable to that of other companies.

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The following is a reconciliation of excess cash flow as defined above to remaining distributable balance under ROCS:

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(Stated in thousands of dollars)

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Supplementary Financial Measures

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“Average consolidated revenue per day” is comprised of consolidated revenue, as determined in accordance with IFRS, divided by the Corporation’s consolidated number of operating days. Operating days is defined under the “Definitions” section below.
“Average revenue per operating day” is comprised of revenue, as determined in accordance with IFRS, divided by the number of operating days.
“Dividends paid per share” is comprised of dividends paid, as determined in accordance with IFRS, divided by the number of shares outstanding at the dividend record date.
“Dividends declared per share” is comprised of dividends declared, as determined in accordance with IFRS, divided by the number of shares outstanding at the dividend record date.
“Effective tax rate” is comprised of provision for or recovery of income tax, as determined in accordance with IFRS, divided by earnings before income taxes, as determined in accordance with IFRS.
“Funds from operations per share – diluted” is calculated using the treasury stock method whereby deemed proceeds on the exercise of the share options are used to reacquire common shares at an average share price. The calculation of funds from operations per share – diluted is based on the funds from operations as reported in the table above divided by the diluted number of shares outstanding.

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Definitions

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“Operating days” throughout this document, it is referring to the billable days on which PHX Energy is providing services to the client at the rig site.
“Capital expenditures” equate to the Corporation’s total acquisition of drilling and other equipment as stated on the Condensed Consolidated Interim Statements of Cash Flows and Note 6(a) in the Notes to the Financial Statements.
“Growth capital expenditures” are capital expenditures that were used to expand capacity in the Corporation’s fleet of drilling equipment.
“Maintenance capital expenditures” are capital expenditures that were used to maintain capacity in the Corporation’s fleet of drilling equipment and replace equipment that were lost downhole during drilling operations.

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