CALGARY, Alberta, Nov. 04, 2025 (GLOBE NEWSWIRE) —
Third Quarter Highlights
- For the three-month period ended September 30, 2025, PHX Energy generated consolidated revenue of $164.3 million, which is 2 percent higher than the $160.6 million generated in the third quarter of 2024. Consolidated revenue in the 2025-quarter included $11.9 million of motor rental revenue and $0.3 million of revenue generated from the sale of motor equipment and parts (2024 – $10.2 million and $2 million, respectively).
- In the third quarter of 2025, adjusted EBITDA(1) was $27.9 million, 17 percent of consolidated revenue(1), a decrease of 4 percent from the $29 million, 18 percent of consolidated revenue, in the same 2024-quarter. In 2025, equipment parts and repair services costs have increased overall partly due to PHX Energy owning a more diverse fleet of Rotary Steerable Systems (“RSS”) compared to prior periods. Lower profitability was also attributable to the decrease in the Corporation’s high-margin revenue streams particularly RSS activity and motor equipment and parts sales.
- Earnings in the 2025 three-month period were $8.5 million, $0.16 per share, as compared to $10.2 million, $0.22 per share, in the same 2024-period. Earnings in the 2025-period included depreciation and amortization expenses on drilling and other equipment of $16.3 million (pre-tax) which is a 42 percent increase when compared to the $11.5 million (pre-tax) in the corresponding 2024-quarter. This increase is the result of ongoing fixed asset additions as well as $3 million in additional depreciation relating to a change in the estimated useful life of certain primary components of motors.
- In the 2025-quarter, PHX Energy’s US division’s revenue was $120.2 million, 3 percent higher than the $117 million generated in the third quarter of 2024. In comparison, the average number of active horizontal and directional rigs per day in the US industry declined by 7 percent quarter-over-quarter. US division revenue in both the 2025 and 2024 quarters represented 73 percent of consolidated revenue.
- PHX Energy’s Canadian division reported $44.1 million of quarterly revenue, flat compared to $43.7 million in the 2024-quarter. In comparison, in the 2025 three-month period, Canadian industry drilling days declined by 12 percent compared to the same 2024-period.
- For the three-month period ended September 30, 2025, the Corporation generated excess cash flow(2) of $12.6 million, after deducting net capital expenditures(2) of $7.4 million (2024 – $19.3 million and $4.2 million, respectively).
- On September 15, 2025, the Corporation declared a dividend of $0.20 per share or $9 million, paid on October 15, 2025 to shareholders of record on September 30, 2025.
- During the third quarter of 2025, 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 4,035,757 common shares, representing 10 percent of the Corporation’s public float of Common Shares as at August 5, 2025. The NCIB commenced on August 18, 2025 and will terminate on August 17, 2026. In the 2025 three-month period, 279,000 common shares were purchased by the Corporation and cancelled for $2.3 million under the previous Normal Course Issuer Bid. No common shares have been purchased under the current NCIB.
- In September 2025, the Corporation increased the borrowing amounts in the syndicated facility from CAD $80 million to CAD $95 million and in the US operating facility from USD $20 million to USD $25 million. The Corporation also extended the maturity date of the syndicated loan agreement to December 12, 2028. With the increased borrowing amounts, the Corporation has approximately CAD $67 million and USD $25 million available to be drawn from its credit facilities. This increase is intended to provide PHX Energy flexibility to take advantage of lucrative opportunities when presented in the future.
- As at September 30, 2025, the Corporation had a working capital(2) of $102.2 million and net debt(2) of $34.5 million.
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, | ||||||||||||
| 2025 | 2024 | % Change | 2025 | 2024 | % Change | ||||||||
| Operating Results | |||||||||||||
| Revenue | 164,333 | 160,634 | 2 | 525,707 | 480,987 | 9 | |||||||
| Earnings | 8,461 | 10,160 | (17 | ) | 37,143 | 40,527 | (8 | ) | |||||
| Earnings per share – diluted | 0.16 | 0.22 | (27 | ) | 0.78 | 0.86 | (9 | ) | |||||
| Adjusted EBITDA (1) | 27,903 | 29,018 | (4 | ) | 95,945 | 94,100 | 2 | ||||||
| Adjusted EBITDA per share – diluted (1) | 0.61 | 0.60 | 2 | 2.07 | 1.93 | 7 | |||||||
| Adjusted EBITDA as a percentage of revenue (1) | 17 | % | 18 | % | 18 | % | 20 | % | |||||
| Cash Flow | |||||||||||||
| Cash flows from operating activities | 20,065 | 28,740 | (30 | ) | 41,475 | 79,225 | (48 | ) | |||||
| Funds from operations (2) | 21,341 | 24,941 | (14 | ) | 75,297 | 75,395 | – | ||||||
| Funds from operations per share – diluted (3) |
0.46 | 0.52 | (12 | ) | 1.62 | 1.55 | 5 | ||||||
| Dividends paid per share (3) | 0.20 | 0.20 | – | 0.60 | 0.60 | – | |||||||
| Dividends paid | 9,092 | 9,437 | (4 | ) | 27,306 | 28,388 | (4 | ) | |||||
| Capital expenditures (3) | 16,525 | 11,143 | 48 | 62,812 | 67,563 | (7 | ) | ||||||
| Excess cash flow (2) | 12,554 | 19,334 | (35 | ) | 39,192 | 30,311 | 29 | ||||||
| Financial Position | Sept 30 ‘25 |
Dec 31 ‘24 | |||||||||||
| Working capital (2) | 102,232 | 84,545 | 21 | ||||||||||
| Net debt (2) | 34,535 |
2,664 | n.m. | ||||||||||
| Shareholders’ equity | 223,170 | 222,205 | – | ||||||||||
| Common shares outstanding | 45,177,773 | 45,506,773 | (1 | ) | |||||||||
| n.m. – not meaningful |
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Outlook
Through the weaker industry environment that has persisted in 2025, our superior customer service and our industry leading drilling technology have created some resilience amidst the lower rig counts. In the final quarter of 2025, we expect to continue this trend in activity and revenue relative to the market conditions. However, we anticipate that the global instability and higher cost environment, including factors such as lower oil prices and implementation of tariffs, may further weaken profitability in future quarters.
The Board has approved a preliminary 2026 capital expenditure budget of $60 million, which the growth portion is anticipated to be directed toward continuing to expand our high margin technologies, including RSS and supporting greater activity in the Atlas rental division. However, with the current industry outlook being downgraded, we will be cautious when committing to further 2026 expenditures as the year progresses. Therefore the 2026 capital expenditures may be lower than anticipated.
RSS remains the key driver for our success and at the forefront of our strategy and capital investment priorities. We recently had our first successful RSS run in the 7 7/8 hole size, which is an application that Operators in the Permian are focused on to further drive drilling efficiency. We foresee demand for technology that is suited to this hole size to continue to grow and we anticipate adding more RSS to our fleet to meet this demand. We already have a dominant position in the Permian basin, which is the largest basin in North America, and believe we have a competitive advantage in this growing segment of the market.
With the progress of LNG projects in both Canada and the US, the natural gas directed rig activity is a market where we expect to see the rig counts increase. We believe there could be future opportunities to expand into these gas markets, such as the Haynesville and Marcellus, and anticipate dedicating resources towards technology development and marketing that will allow us to break into these markets.
Another area we see providing resilience to the weaker industry conditions that could persist in 2026 is our high margin Atlas rental business. We have expanded the Atlas team, and the additional operations and marketing supports along with the reputation of our motor technology we believe this division will continue to grow in 2026.
We possess a technology fleet that is successfully creating faster and more efficient drilling operations for our clients and has set us apart as a top tier directional provider. It is this operational strength that we can leverage in more challenging cycles to maintain a strong financial position, and sustain the high level of shareholder rewards under our ROCS, including our quarterly dividend. Since reinstating our dividend in December 2020, the Corporation has paid $116.5 million in dividends to shareholders. Additionally, from the second quarter of 2017 to present a total of 16.6 million common shares have been purchased and cancelled under PHX Energy’s various NCIB’s. This represents 28 percent of common shares outstanding as of June 30, 2017.
Michael Buker, President & CEO
November 4, 2025
Overall Performance
Despite softer industry drilling activity in both the US and Canada quarter-over-quarter, for the three-month period ended September 30, 2025, PHX Energy generated consolidated revenue of $164.3 million which is 2 percent higher than the $160.6 million generated in the same period of 2024.
In the third quarter of 2025, the Corporation’s US division’s revenue grew by 3 percent to $120.2 million compared to $117 million in the same 2024-quarter. PHX Energy’s US operating days(3) saw an increase of 9 percent to 4,286 days in the 2025 three-month period from 3,916 in the same 2024-period while the US industry’s rig count declined by 7 percent quarter-over-quarter. For the three-month period ended September 30, 2025, RSS activity represented 20 percent of the division’s operating days, down from 24 percent in the same 2024-period. The US division’s average revenue per day(3) for directional drilling services decreased by 6 percent quarter-over-quarter. The decrease is mainly attributable to the lower percentage of RSS days relative to total operating days(3). In the 2025 three-month period, the Corporation’s US motor rental division’s revenue grew by 16 percent to $11.4 million from $9.8 million in the same 2024-period and the US division generated $0.3 million of revenue from motor equipment and parts sold (2024 – $2 million). Revenue from the Corporation’s US division in both the 2025 and 2024 quarters represented 73 percent of consolidated revenue.
For the three-month period ended September 30, 2025, the Corporation’s Canadian segment generated revenue of $44.1 million, relatively flat compared to $43.7 million in the same 2024-period. The Canadian division recorded 3,128 operating days in the 2025-quarter, a 5 percent decrease from the 3,302 operating days realized in the comparable 2024-quarter. In comparison, the Canadian industry drilling activity decreased by 12 percent quarter-over-quarter. In the third quarter of 2025, RSS activity represented 4 percent of the Canadian segment’s operating days, up from 3 percent in the same 2024-quarter. Average revenue per day(3) for directional drilling services realized by the Canadian division improved by 6 percent to $13,932 in the 2025-quarter, as compared to $13,091 in the corresponding 2024-quarter. The improvement was largely driven by the Canadian division’s clients’ higher utilization of the Corporation’s premium technologies, including RSS. PHX Energy’s Canadian motor rental division generated $0.5 million of revenue in the 2025-period (2024 – $0.4 million).
In the 2025 three-month period, earnings were $8.5 million (2024 – $10.2 million), adjusted EBITDA(1) was $27.9 million (2024 – $29 million), and adjusted EBITDA as a percentage of consolidated revenue(1) was 17 percent (2024 – 18 percent). Earnings in the 2025-period included depreciation and amortization expenses on drilling and other equipment of $16.3 million (pre-tax) which increased by 42 percent as compared to $11.5 million (pre-tax) in the corresponding 2024-quarter. This increase is the result of ongoing fixed asset additions as well as $3 million in additional depreciation relating to a change in the estimated useful life of certain primary components of motors. Profitability in the 2025 three-month period was negatively affected by an overall increase in equipment parts and repair services costs that were driven by several factors including inflation, additional tariffs implemented late in the first quarter of 2025, and more aggressive drilling practices from operators. Additionally, with PHX Energy owning a more diverse RSS fleet compared to prior periods, the related servicing costs have also increased.
In September 2025, the Corporation increased the borrowing amounts in the syndicated facility from CAD $80 million to CAD $95 million and in the US operating facility from USD $20 million to USD $25 million. The Corporation also extended the maturity date of the syndicated loan agreement to December 12, 2028. With the increased borrowing amounts, the Corporation has approximately CAD $67 million and USD $25 million available to be drawn from its credit facilities.
As at September 30, 2025, the Corporation had working capital(2) of $102.2 million and net debt(2) of $34.5 million.
Dividends and ROCS
On September 15, 2025, the Corporation declared a dividend of $0.20 per share payable to shareholders of record on September 30, 2025. An aggregate of $9 million was paid on October 15, 2025.
The Corporation remains committed to enhancing shareholder returns through its Return of Capital Strategy (“ROCS”) which targets up to 70 percent of annual excess cash flow(2) to be used for shareholder returns and includes multiple options including the dividend program and the NCIB. For the three-month period ended September 30, 2025, excess cash flow decreased primarily due to lower cash flows from operating activities and higher net capital expenditures(2). The Corporation continued to prioritize shareholder returns while protecting its financial position and in the third quarter, maintained its current level of dividends, paying $9 million in dividends to shareholders, and repurchased and cancelled 279,000 common shares for $2.3 million under the previous NCIB. During the first three quarters of 2025 more than 70 percent of the excess cash flow was distributed for shareholder returns under ROCS. Net capital expenditures to be spent for the remainder of the year are anticipated to be lower than previous quarters and this would allow for sufficient level of excess cash flows to be used for shareholder returns and stay within the 70 percent threshold for the rest of the 2025-year.
(Stated in thousands of dollars)
| Three-month periods ended September 30, | Nine-month periods ended September 30, | |||||||
| 2025 | 2024 | 2025 | 2024 | |||||
| Excess cash flow(2) | 12,554 | 19,334 | 39,192 | 30,311 | ||||
| 70% of excess cash flow | 8,788 | 13,534 | 27,434 | 21,218 | ||||
| Deduct: | ||||||||
| Dividends paid to shareholders | (9,092 | ) | (9,437 | ) | (27,306 | ) | (28,388 | ) |
| Repurchase of shares under the NCIB | (2,339 | ) | (12,612 | ) | (3,250 | ) | (15,756 | ) |
| Remaining distributable balance under ROCS(2) | (2,643 | ) | (8,515 | ) | (3,122 | ) | (22,926 | ) |
Normal Course Issuer Bid
During the third quarter of 2025, the TSX approved the renewal of PHX Energy’s Normal Course Issuer Bid to purchase for cancellation, from time-to-time, up to a maximum of 4,035,757 common shares, representing 10 percent of the Corporation’s public float of Common Shares as at August 5, 2025. The NCIB commenced on August 18, 2025 and will terminate on August 17, 2026. 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 NCIB, 379,000 common shares were purchased by the Corporation and cancelled for $3.3 million in the nine-month period ended September 30, 2025. (2024 – 1,648,232 common shares were purchased and cancelled for $15.8 million). No common shares have been purchased under the current NCIB.
Capital Spending
For the three-month period ended September 30, 2025, the Corporation spent $16.5 million in capital expenditures, of which $13.8 million was spent on growing the Corporation’s fleet of drilling equipment, $1.4 million was spent to replace retired assets, and $1.4 million was spent to replace equipment lost downhole during drilling operations. With proceeds on disposition of drilling and other equipment of $9.1 million, the Corporation’s net capital expenditures(2) for the 2025-period were $7.4 million. Capital expenditures in the 2025-quarter were primarily directed towards Velocity Real-Time systems (“Velocity”), Atlas High Performance motors (“Atlas”), and RSS, both PowerDrive Orbit and iCruise. PHX Energy funded capital spending primarily using proceeds on disposition of drilling equipment, cash flows from operating activities, and its credit facilities when required.
(Stated in thousands of dollars)
| Three-month periods ended September 30, | Nine-month periods ended September 30, | |||||||
| 2025 | 2024 | 2025 | 2024 | |||||
| Growth capital expenditures | 13,760 | 11,061 | 42,597 | 59,798 | ||||
| Maintenance capital expenditures from asset retirements | 1,402 | 82 | 15,602 | 6,252 | ||||
| Maintenance capital expenditures to replace downhole equipment losses | 1,363 | – | 4,613 | 1,513 | ||||
| Total capital expenditures | 16,525 | 11,143 | 62,812 | 67,563 | ||||
| Deduct: | ||||||||
| Proceeds on disposition of drilling equipment | (9,127 | ) | (6,973 | ) | (30,932 | ) | (26,683 | ) |
| Net capital expenditures | 7,398 | 4,170 | 31,880 | 40,880 | ||||
As at September 30, 2025, the Corporation had capital commitments to purchase drilling and other equipment for $13.9 million, $9.3 million of which is growth capital allocated as follows: $5.3 million for performance drilling motors, $1.2 million for Velocity systems, $0.9 million for RSS systems, and $1.9 million for other equipment. Equipment on order is largely expected to be delivered within the first quarter of 2026.
The expected capital expenditure budget for the 2025-year, excluding proceeds on disposition of drilling equipment, is $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.
For 2026, the expected preliminary capital expenditure program is $60 million, of which approximately half is anticipated to be spent on growth. The Corporation believes that its current fleet of MWD systems and motors will support its forecasted 2026-activity and the 2026 growth capital expenditures are expected to be mainly focused on further expanding the RSS fleets and Atlas motor rental fleets. The remaining half is anticipated to be spent on maintenance of the fleet of drilling and other equipment and replacement of equipment lost downhole during drilling operations. Of the 2026 expected capital expenditures, approximately half has been committed and anticipated to be delivered within the first quarter of 2026. The remainder will be reviewed and adjusted relative to market and industry conditions.
The Corporation currently possesses approximately 914 Atlas motors, comprised of various configurations including its 5.25″, 5.76″, 6.63″, 7.12″, 7.25″, 8.12″, 9.00″, and 12.00”, and 130 Velocity systems. The Corporation also possesses the largest independent RSS fleet in North America with 104 RSS tools and was the first of a few competitors to have a fleet comprised of both the PowerDrive Orbit and iCruise systems.
Non-GAAP and Other Financial Measures
Throughout this press release, PHX Energy uses certain measures to analyze financial performance, financial position, and cash flow. These Non-GAAP and Other Specified Financial Measures do not have standardized meanings prescribed under Canadian generally accepted accounting principles (“GAAP”) and include Non-GAAP Financial Measures and Ratios, Capital Management Measures and Supplementary Financial Measures (collectively referred to as “Non-GAAP and Other Financial Measures”). These Non-GAAP and Other Specified Financial Measures include, but are not limited to, adjusted EBITDA, adjusted EBITDA per share, adjusted EBITDA excluding cash-settled share-based compensation expense, adjusted EBITDA as a percentage of revenue, gross profit as a percentage of revenue excluding depreciation and amortization, selling, general and administrative (“SG&A”) costs excluding share-based compensation as a percentage of revenue, funds from operations, funds from operations per share, excess cash flow, net capital expenditures, net debt (net cash), working capital, and remaining distributable balance under ROCS. Management believes that these measures provide supplemental financial information that is useful in the evaluation of the Corporation’s operations and may be used by other oil and natural gas service companies. Investors should be cautioned, however, that these measures should not be construed as alternatives to measures determined in accordance with GAAP as an indicator of PHX Energy’s performance. The Corporation’s method of calculating these measures may differ from that of other organizations, and accordingly, such measures may not be comparable. Please refer to the “Non-GAAP and Other Financial Measures” section of this press release for applicable definitions, rationale for use, method of calculation and reconciliations where applicable.
Footnotes throughout this document reference:
- Non-GAAP financial measure or ratio that does not have any standardized meaning under IFRS and therefore may not be comparable to similar measures presented by other entities. Refer to Non-GAAP and Other Financial Measures section of this press release.
- 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 press release.
- 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 press release.
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, | ||||||||||||
| 2025 | 2024 | % Change | 2025 | 2024 | % Change | ||||||||
| Directional drilling services | 152,109 | 148,460 | 2 | 485,371 | 446,602 | 9 | |||||||
| Motor rental | 11,926 | 10,212 | 17 | 36,433 | 28,470 | 28 | |||||||
| Sale of motor equipment and parts | 298 | 1,962 | (85 | ) | 3,903 | 5,915 | (34 | ) | |||||
| Total revenue | 164,333 | 160,634 | 2 | 525,707 | 480,987 | 9 | |||||||
For the three-month period ended September 30, 2025, PHX Energy generated consolidated revenue of $164.3 million, which is 2 percent higher than the $160.6 million generated in the third quarter of 2024. For the nine-month period ended September 30, 2025, the Corporation generated consolidated revenue of $525.7 million, a 9 percent increase as compared to the same 2024-period which generated consolidated revenue of $481 million.
In the third quarter of 2025, softer industry conditions continued with commodity prices trending lower and the US industry rig count continuing to decline. The US rig count averaged 513 horizontal and directional rigs operating per day in the third quarter, which is 6 percent lower than the daily average of 544 in the second quarter of 2025 and 7 percent lower compared to the same quarter in 2024. In Canada, industry horizontal and directional drilling activity (as measured by drilling days) was 15,270 days in the 2025-quarter, a 12 percent decrease from 17,398 days in the same 2024-quarter. In comparison, the Corporation’s consolidated operating days increased by 3 percent to 7,413 days in the 2025-quarter as compared to 7,218 days in the 2024-quarter. For the nine-month period ended September 30, 2025, consolidated operating days increased by 4 percent to 22,861 from 22,070 days in the corresponding 2024-period. In both 2025-periods, PHX Energy’s consolidated activity remained resilient to the impacts of the weaker industry environment through the continued strong demand for the Corporation’s premium technology offerings and expertise in providing services.
In the three-month period of 2025, average consolidated revenue per day(3) for directional drilling services stayed flat at $20,519 (2024 – $20,572) while in the 2025 nine-month period, it improved by 5 percent to $21,232 (2024 – $20,237). The improvement in the 2025 nine-month period was largely driven by customers’ increased utilization of PHX Energy’s premium technologies, particularly, RSS and the Corporation’s proprietary Real Time RSS Communications technologies.
In the 2025 three and nine-month periods, revenue generated by PHX Energy’s Atlas motor rental division increased by 17 percent to $11.9 million (2024 – $10.2 million) and 28 percent to $36.4 million (2024 – $28.5 million), respectively. Throughout the first three quarters of 2025, the Corporation’s US motor rental division successfully grew its client base through increased marketing efforts and additional resources dedicated to support the division.
For the three and nine-month periods ended September 30, 2025, revenue of $0.3 million and $3.9 million, respectively, was generated from the sale of motor equipment and parts (2024 – $2 million and $5.9 million, respectively). Due to the intermittent and cyclical nature of the customers’ ordering frequency, it is expected that revenue from this line of business will fluctuate between periods.
Operating Costs and Expenses
(Stated in thousands of dollars except percentages)
| Three-month periods ended September 30, | Nine-month periods ended September 30, | |||||||||||
| 2025 | 2024 | % Change | 2025 | 2024 | % Change | |||||||
| Direct costs | 146,637 | 131,666 | 11 | 443,496 | 387,166 | 15 | ||||||
| Depreciation & amortization drilling and other equipment (included in direct costs) | 16,346 | 11,516 | 42 | 41,528 | 32,977 | 26 | ||||||
| Depreciation & amortization right-of-use asset (included in direct costs) | 862 | 1,214 | (29 | ) | 2,613 | 2,920 | (11 | ) | ||||
| Gross profit as a percentage of revenue excluding depreciation & amortization(1) | 21 | % | 26 | % | 24 | % | 27 | % | ||||
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, 2025, direct costs increased by 11 percent to $146.6 million from $131.7 million in the same 2024-period. For the nine-month period ended September 30, 2025, direct costs increased 15 percent to $443.5 million from $387.2 million in the same 2024-period.
In the 2025 three and nine-month periods, the Corporation’s depreciation and amortization on drilling and other equipment increased by 42 percent and 26 percent, respectively, mainly as result of ongoing fixed asset additions as well as $3 million in additional depreciation recorded in the 2025-quarter relating to a change in the estimated useful life of certain primary components of motors. Apart from depreciation and amortization expenses on drilling and other equipment, higher direct costs in both periods primarily resulted from greater equipment repair expenses. Throughout the first three quarters of 2025, the costs of equipment parts and services have increased overall and were impacted by several factors including inflation, additional tariffs implemented late in the first quarter of 2025, and equipment being subject to more aggressive drilling practices from operators. Additionally, with PHX Energy owning a more diverse RSS fleet, the related servicing costs have also increased.
For the three and nine-month periods ended September 30, 2025, gross profit as a percentage of revenue excluding depreciation and amortization(1) declined to 21 percent and 24 percent respectively, compared to 26 percent and 27 percent in the corresponding 2024-periods. Rising equipment servicing costs largely contributed to the decline in profitability in both 2025-periods. In the 2025 three-month period, lower profitability was also partly attributable to the decrease in the Corporation’s high-margin revenue streams particularly RSS activity and motor equipment and parts sales. In both 2025-periods, equipment rentals decreased and this helped partially shelter the Corporation’s margins from the negative impacts of rising equipment servicing costs. Reduced equipment rentals were the result of increased capacity in PHX Energy’s RSS fleet including its Real Time Communication technologies, and successful efforts in arranging pricing concessions with equipment rental vendors.
(Stated in thousands of dollars except percentages)
| Three-month periods ended September 30, | Nine-month periods ended September 30, | |||||||||||
| 2025 |
2024 | % Change | 2025 |
2024 | % Change | |||||||
| Selling, general and administrative (“SG&A”) costs | 12,661 | 15,885 | (20 | ) | 48,476 | 50,726 | (4 | ) | ||||
| Cash-settled share-based compensation (included in SG&A costs) | 772 | 2,471 | (69 | ) | 4,621 | 9,584 | (52 | ) | ||||
| Equity-settled share-based compensation (included in SG&A costs) | 117 | 140 | (16 | ) | 357 | 422 | (15 | ) | ||||
| SG&A costs excluding share-based compensation as a percentage of revenue(1) | 7 | % | 8 | % | 8 | % | 8 | % | ||||
For the three-month period ended September 30, 2025, SG&A costs were $12.7 million, a 20 percent decrease as compared to $15.9 million in the corresponding 2024-period. For the nine-month period ended September 30, 2025, SG&A costs were $48.5 million, a 4 percent decrease as compared to $50.7 million in the corresponding 2024-period. Lower SG&A costs in both 2025-periods were primarily due to decreases in cash-settled share-based compensation expense.
Cash-settled share-based compensation relates to the Corporation’s retention awards and is measured at fair value. For the three-month period ended September 30, 2025, the related compensation expense recognized by PHX Energy was $0.8 million (2024 – $2.5 million). For the nine-month period ended September 30, 2025, the related compensation expense recognized by PHX Energy was $4.6 million (2024 – $9.6 million). Changes in cash-settled share-based compensation expense in the 2025-periods were mainly driven by fluctuations in the Corporation’s share price, estimated payout multipliers, and the number of awards granted in the period. There were 1,501,286 retention awards outstanding as at September 30, 2025 (2024 – 1,587,459). SG&A costs excluding share-based compensation as a percentage of revenue(1) were generally flat period-over-period at 7 percent and 8 percent in the three and nine-month periods ended September 30, 2025, respectively (2024 – 8 percent in both periods).
(Stated in thousands of dollars)
| Three-month periods ended September 30, | Nine-month periods ended September 30, | ||||||||||||
| 2025 | 2024 | % Change | 2025 | 2024 | % Change | ||||||||
| Research and development expense | 1,743 | 1,392 | 25 | 5,131 | 4,004 | 28 | |||||||
For the three and nine-month periods ended September 30, 2025, PHX Energy spent $1.7 million and $5.1 million on research and development (“R&D”) expenditures, an increase of 25 and 28 percent as compared to $1.4 million and $4 million spent in the corresponding 2024-periods. Higher R&D expenditures in the 2025-periods are mainly attributable to rising personnel related costs and greater prototype and equipment parts expenses incurred to support key R&D projects during the period.
(Stated in thousands of dollars)
| Three-month periods ended September 30, | Nine-month periods ended September 30, |
||||||||||||
| 2025 |
2024 | % Change | 2025 |
2024 | % Change | ||||||||
| Finance expense | 866 | 620 | 40 | 2,175 | 1,421 | 53 | |||||||
| Finance expense lease liabilities | 471 | 628 | (25 | ) | 1,460 | 1,700 | (14 | ) | |||||
Finance expenses mainly relate to interest charges on the Corporation’s credit facilities. For the three and nine-month periods ended September 30, 2025, finance expense increased to $0.9 million and $2.2 million, respectively (2024 – $0.6 million and $1.4 million). The increase in finance expenses in both 2025-periods was primarily due to higher drawings on the credit facilities in the periods.
Finance expense lease liabilities relate to interest expense incurred on lease liabilities. For the three and nine-month periods ended September 30, 2025, finance expense lease liabilities declined to $0.5 million and $1.5 million, respectively (2024 – $0.6 million and $1.7 million) due to leases that expired in the 2025 nine-month period.
(Stated in thousands of dollars)
| Three-month periods ended September 30, | Nine-month periods ended September 30, | ||||||||
| 2025 | 2024 | 2025 | 2024 | ||||||
| Net gain on disposition of drilling equipment | 6,668 | 4,340 | 22,180 | 18,627 | |||||
| Miscellaneous other income | 617 | – | 618 | – | |||||
| Foreign exchange gains (losses) | 458 | 164 | 42 | (124 | ) | ||||
| Other income | 7,743 | 4,504 | 22,840 | 18,503 | |||||
For the three and nine-month periods ended September 30, 2025, the Corporation recognized other income of $7.7 million and $22.8 million, respectively (2024 – $4.5 million and $18.5 million, respectively). In both periods, other income was mainly comprised of net gain on disposition of drilling equipment. The recognized gain is net of losses, which typically result from asset retirements that were made before the end of the equipment’s useful life. In both 2025-periods, more instances of high dollar valued downhole equipment losses occurred as compared to the corresponding 2024-periods, resulting in higher levels of net gain on disposition of drilling equipment recognized.
In the 2025 three and nine-month periods, the miscellaneous other income of $0.6 million pertains to sundry and occasional transactions, such as proceeds from the sale of scrapped metal and machining services for a third party.
Foreign exchange gains of $0.5 million and $42 thousand in the three and nine-month periods of 2025 (2024 – $0.2 million and loss of $0.1 million), were primarily due to the revaluation and settlement of CAD-denominated intercompany payables in the US.
(Stated in thousands of dollars except percentages)
| Three-month periods ended September 30, | Nine-month periods ended September 30, |
|||||||
| 2025 | 2024 | 2025 | 2024 | |||||
| Provision for income taxes | 1,237 | 4,787 | 10,666 | 13,946 | ||||
| Effective tax rates (3) | 13 | % | 32 | % | 22 | % | 26 | % |
For the three and nine-month periods ended September 30, 2025, the Corporation reported a provision for income tax of $1.2 million and $10.7 million, respectively (2024 – $4.8 million and $13.9 million, respectively). In both the 2025 three and nine-month periods, PHX Energy’s effective tax rate(3) of 13 percent and 22 percent, respectively, are lower than the combined US federal and state corporate income tax rate of 24.5 percent and the combined Canadian federal and provincial corporate income tax rate of 23 percent mainly due to the recognition of previously unrecognized international deferred tax assets.
Segmented Information
The Corporation reports two operating segments on a geographical basis throughout the Gulf Coast, Northeast and Rocky Mountain regions of the US and throughout the Western Canadian Sedimentary Basin. Revenue generated through the Corporation’s technology partnership and sales and lease agreement for the Middle East and North Africa (“MENA”) regions are included in the US division’s results.
United States
(Stated in thousands of dollars)
| Three-month periods ended September 30, | Nine-month periods ended September 30, | |||||||||||
| 2025 |
2024 | % Change | 2025 |
2024 | % Change | |||||||
| Directional drilling services | 108,538 | 105,232 | 3 | 346,179 | 313,864 | 10 | ||||||
| Motor rental | 11,393 | 9,789 | 16 | 34,368 | 27,344 | 26 | ||||||
| Sale of motor equipment and parts | 298 | 1,962 | (85 | ) | 3,903 | 5,915 | (34 | ) | ||||
| Total revenue | 120,229 | 116,983 | 3 | 384,450 | 347,123 | 11 | ||||||
| Direct costs | 107,967 | 94,906 | 14 | 324,965 | 276,723 | 17 | ||||||
| Gross profit | 12,262 | 22,077 | (44 | ) | 59,485 | 70,400 | (16 | ) | ||||
| Expenses: | ||||||||||||
| Selling, general and administrative expenses | 7,237 | 7,126 | 2 | 22,700 | 22,463 | 1 | ||||||
| Research and development expenses | – | – | – | – | – | – | ||||||
| Finance expense | – | – | – | – | – | – | ||||||
| Finance expense lease liability | 169 | 312 | (46 | ) | 543 | 743 | (27 | ) | ||||
| Other income | (6,416 | ) | (2,666 | ) | 141 | (18,154 | ) | (13,738 | ) | 32 | ||
| Reportable segment profit before income taxes | 11,272 | 17,305 | (35 | ) | 54,396 | 60,932 | (11 | ) | ||||
For the three and nine-month periods ended September 30, 2025, PHX Energy’s US division generated revenue of $120.2 million and $384.5 million, respectively, an increase of 3 and 11 percent as compared to $117 million and $347.1 million in the corresponding 2024-periods.
Throughout the first three quarters of 2025, the Corporation’s US operations have been resilient to the slower industry environment in the US. This was achieved through increased capacity in PHX Energy’s premium technology fleet and steady market share growth. For the three-month period ended September 30, 2025, US operating days(3) were 4,286, a 9 percent increase compared to 3,916 days in the 2024-quarter. In comparison, in the third quarter of 2025, the average number of active horizontal and directional rigs per day in the US industry declined by 7 percent to 513 compared to an average of 551 rigs per day in the 2024-quarter. The US division’s RSS activity represented 20 percent of its operating days, a decline compared to 24 percent in the 2024-quarter. RSS technology is typically deployed in the lateral section of a well. In the 2025-quarter, the wells the Corporation was providing services to were at stages where they were drilling sections that didn’t require this technology. For the nine-month period ended September 30, 2025, US operating days(3) were 13,320, a 9 percent increase compared to 12,229 days in the corresponding 2024-period. In comparison, the average number of active horizontal and directional rigs per day in the US industry declined by 5 percent period-over-period. RSS activity was 22 percent of operating days in the first three quarters of 2025, a slight increase compared to 21 percent in the same 2024-period.
Horizontal and directional drilling continued to represent the majority of rigs running on a daily basis during the third quarter of 2025. During the 2025-quarter, Phoenix USA was active in the Permian, Eagleford, Scoop/Stack, Uinta, Fayetteville, and Marcellus basins. Additionally, Phoenix USA was involved with gas storage projects in Louisiana and Texas.
For the three-month period ended September 30, 2025, the US division’s average revenue per day(3) for directional drilling services decreased by 6 percent to $25,327 (2024 – $26,876). Omitting the impact of foreign exchange, the average revenue per day for directional drilling services also decreased by 6 percent in the 2025-quarter. This decrease was mainly due to the decline in the proportion of RSS operating days as a percentage of total days, as well as the pricing pressures that resulted from weaker industry conditions. For the nine-month period ended September 30, 2025, the US division’s average revenue per day was relatively flat at $25,989 as compared to $25,667 in the corresponding 2024-period. Omitting the impact of foreign exchange, the average revenue per day for directional drilling services marginally decreased by 1 percent.
For the three and nine-month periods ended September 30, 2025, US motor rental revenue increased by 16 and 26 percent, respectively, to $11.4 million and $34.4 million (2024 – $9.8 million and $27.3 million). Throughout the first three quarters of 2025, with added resources dedicated to this line of business, the Corporation’s US motor rental division was successful in further penetrating the motor rental market and continued to grow its client base.
In the three and nine-month periods of 2025, PHX Energy’s US operations generated $0.3 million and $3.9 million of revenue from the sale of motors and parts compared to $2 million and $5.9 million in the corresponding 2024-periods. Due to the sporadic and cyclical nature of the customers’ ordering frequency, it is expected that revenue from this line of business will fluctuate between periods.
For the three and nine-month periods ended September 30, 2025, the US segment’s reportable segment income before tax decreased by 35 percent to $11.3 million and by 11 percent to $54.4 million, respectively (2024 – $17.3 million and $60.9 million, respectively). In both 2025 three and nine-month periods, the gains in revenue, mainly driven by increased operating days, were offset by higher direct costs that mainly resulted from rising costs of equipment parts and repair services. Additionally, lower gross profit margin in the 2025-quarter was partly attributable to the decline in the US division’s high-margin revenue streams, particularly RSS activity and motor equipment and parts sales. Higher other income generated from downhole equipment losses did somewhat lessen the decrease in gross profit margins in both 2025-periods.
Canada
(Stated in thousands of dollars)
| Three-month periods ended September 30, | Nine-month periods ended September 30, | |||||||||||
| 2025 |
2024 | % Change | 2025 |
2024 | % Change | |||||||
| Directional drilling services | 43,571 | 43,228 | 1 | 139,192 | 132,738 | 5 | ||||||
| Motor rental | 533 | 423 | 26 | 2,065 | 1,126 | 83 | ||||||
| Total revenue | 44,104 | 43,651 | 1 | 141,257 | 133,864 | 6 | ||||||
| Direct costs | 38,670 | 36,760 | 5 | 118,531 | 110,443 | 7 | ||||||
| Gross profit | 5,434 | 6,891 | (21 | ) | 22,726 | 23,421 | (3 | ) | ||||
| Expenses: | ||||||||||||
| Selling, general and administrative expenses |
3,265 | 3,823 | (15 | ) | 11,051 | 11,299 | (2 | ) | ||||
| Research and development expenses | – | – | – | – | – | – | ||||||
| Finance expense | – | – | – | – | – | – | ||||||
| Finance expense lease liability | 283 | 297 | (5 | ) | 859 | 899 | (4 | ) | ||||
| Other income | (1,327 | ) | (1,838 | ) | (28 | ) | (4,686 | ) | (4,765 | ) | (2 | ) |
| Reportable segment profit before income taxes |
3,213 | 4,609 | (30 | ) | 15,502 | 15,988 | (3 | ) | ||||
For the three and nine-month periods ended September 30, 2025, PHX Energy’s Canadian operations generated revenue of $44.1 million and $141.3 million, respectively, an increase of 1 and 6 percent as compared to $43.7 million and $133.9 million in the corresponding 2024-periods.
In the 2025 three-month period, PHX Energy’s Canadian operating days decreased by 5 percent to 3,128 days from 3,302 days in the same 2024-quarter and its RSS operating days accounted for 4 percent of its activity in the 2025-period (2024 – 3 percent). In comparison, industry horizontal and directional drilling activity, as measured by drilling days, declined by 12 percent to 15,270 in the third quarter of 2025 from 17,398 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, and Scallion basins.
In the 2025 nine-month period, PHX Energy’s Canadian segment’s operating days(3) decreased slightly by 3 percent to 9,541 days from 9,842 days in the same 2024-period and its RSS operating days accounted for 7 percent of its activity in the 2025-period (2024 – 4 percent). In comparison, industry horizontal and directional drilling activity, as measured by drilling days, decreased by 6 percent to 43,535 in the first three quarters of 2025 from 46,261 in the same 2024-period.
The Canadian division’s average revenue per day(3) for directional drilling services increased by 6 and 8 percent in the three and nine-month periods ended September 30, 2025, to $13,932 and $14,590, respectively, as compared to $13,091 and $13,488 in the corresponding 2024-periods. The improvements were largely driven by the higher client demand for the Corporation’s premium technologies, including RSS.
For the three and nine-month periods ended September 30, 2025, the Canadian segment’s reportable segment income before tax decreased by 30 percent to $3.2 million and by 3 percent to $15.5 million, respectively (2024 – $4.6 million and $16 million, respectively). In both 2025-periods, the decline in profitability was mainly attributable to higher direct costs and fewer instances of downhole equipment losses that resulted in lower other income.
Investing Activities
Net cash used in investing activities for the three-month period ended September 30, 2025 was $12.1 million as compared to $14.9 million in the corresponding 2024-period. During the third quarter of 2025, the Corporation spent $13.8 million (2024 – $11.1 million) to grow the Corporation’s fleet of drilling equipment, $1.4 million (2024 – $0.1 million) was used to maintain capacity in the Corporation’s fleet of drilling and other equipment, and $1.4 million (2024 – nil) was spent to replace equipment lost downhole during drilling operations. With proceeds on disposition of drilling and other equipment of $9.1 million (2024 – $7 million), the Corporation’s net capital expenditures for the 2025-period were $7.4 million (2024 – $4.2 million).
The 2025-quarter capital expenditures comprised of:
- $6.4 million in RSS;
- $5.7 million in MWD systems and spare components;
- $3.8 million in downhole performance drilling motors; and
- $0.6 million in machinery and equipment and other assets.
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.
The change in non-cash working capital balances of $4.7 million (use of cash) for the three-month period ended September 30, 2025, relates to the net change in the Corporation’s trade payables that are associated with the acquisition of capital assets (2024 – $9.4 million).
Financing Activities
For the three-month period ended September 30, 2025, net cash used in financing activities was $11.3 million as compared to $13.3 million in the same 2024-period. In the 2025-quarter:
- dividends of $9.1 million were paid to shareholders;
- 279,000 shares were purchased and cancelled under the NCIB for $2.3 million;
- payments of $0.9 million were made towards lease liabilities; and
- $1.1 million net drawings were made from the Corporation’s syndicated credit facility.
Capital Resources
As of September 30, 2025, the Corporation had CAD $42.4 million drawn on its Canadian credit facilities, nothing drawn on its US operating facility, and a cash balance of $7.9 million. In September 2025, the Corporation increased the borrowing amounts in the syndicated facility from CAD $80 million to CAD $95 million and in the US operating facility from USD $20 million to USD $25 million. The Corporation also extended the maturity date of the syndicated loan agreement to December 12, 2028. With the increased borrowing amounts, the Corporation had CAD $67 million and USD $25 million available from its credit facilities. The credit facilities are secured by substantially all of the Corporation’s assets and mature in December 2028.
As at September 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.
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 expected capital expenditure budget for the 2025-year is $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.
For 2026, the expected preliminary capital expenditure program is $60 million, of which approximately half is anticipated to be spent on growth. The Corporation believes that its current fleet of MWD systems and motors will support its forecasted 2026-activity and the 2026 growth capital expenditures are expected to be mainly focused on further expanding the RSS fleets and Atlas motor rental fleets. The remaining half is anticipated to be spent on maintenance of the fleet of drilling and other equipment and replacement of equipment lost downhole during drilling operations. Of the 2026 expected capital expenditures, approximately half has been committed and anticipated to be delivered within the first quarter of 2026.
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 and 2026, 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, 2025, the Corporation has entered into commitments to purchase drilling and other equipment for $13.9 million (2024 – $12 million); equipment on order is largely expected to be delivered within the first quarter of 2026.
About PHX Energy Services Corp.
PHX Energy is a growth-oriented, public oil and natural gas services company. The Corporation, through its directional drilling subsidiary entities provides horizontal and directional drilling services and technologies to oil and natural gas exploration and development companies principally in Canada and the US. In connection with the services it provides, PHX Energy engineers, develops and manufactures leading-edge technologies. In recent years, PHX Energy has developed various new technologies that have positioned the Corporation as a technology leader in the horizontal and directional drilling services sector.
PHX Energy’s Canadian directional drilling operations are conducted through Phoenix Technology Services LP. The Corporation maintains its corporate head office, research and development, Canadian sales, service and operational centers in Calgary, Alberta. In addition, PHX Energy has a facility in Estevan, Saskatchewan. PHX Energy’s US operations, conducted through the Corporation’s wholly-owned subsidiary, Phoenix Technology Services USA Inc., is headquartered in Houston, Texas. Phoenix USA has sales and service facilities in Houston, Texas; Midland, Texas; Casper, Wyoming; and Oklahoma City, Oklahoma. Internationally, PHX Energy has administrative offices in Luxembourg and the Cayman Islands and 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:
Michael Buker, President and CEO; 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
| (Stated in thousands of dollars, unaudited) | September 30, 2025 | December 31, 2024 | ||||
| ASSETS | ||||||
| Current assets: | ||||||
| Cash | $ | 7,871 | $ | 14,163 | ||
| Trade and other receivables | 139,169 | 133,589 | ||||
| Inventories | 57,176 | 63,135 | ||||
| Prepaid expenses | 2,904 | 2,628 | ||||
| Current tax assets | 8,536 | 502 | ||||
| Total current assets | 215,656 | 214,017 | ||||
| Non-current assets: | ||||||
| Drilling and other long-term assets | 176,401 | 166,081 | ||||
| Right-of-use assets | 22,291 | 24,943 | ||||
| Intangible assets | 17,197 | 14,611 | ||||
| Investments | 2,171 | 2,171 | ||||
| Other long-term assets | 1,143 | 1,463 | ||||
| Deferred tax assets | 151 | – | ||||
| Total non-current assets | 219,354 | 209,269 | ||||
| Total assets | $ | 435,010 | $ | 423,286 | ||
| LIABILITIES AND SHAREHOLDERS’ EQUITY | ||||||
| Current liabilities: | ||||||
| Trade and other payables | $ | 100,397 | $ | 116,668 | ||
| Dividends payable | 9,036 | 9,102 | ||||
| Current lease liabilities | 3,968 | 3,702 | ||||
| Current tax liability | 23 | – | ||||
| Total current liabilities | 113,424 | 129,472 | ||||
| Non-current liabilities: | ||||||
| Lease liabilities | 28,484 | 31,650 | ||||
| Loans and borrowings | 42,406 | 16,827 | ||||
| Deferred tax liabilities | 25,947 | 19,792 | ||||
| Other | 1,579 | 3,340 | ||||
| Total non-current liabilities | 98,416 | 71,609 | ||||
| Equity: | ||||||
| Share capital | 200,810 | 203,841 | ||||
| Contributed surplus | 7,507 | 7,189 | ||||
| Deficit | (18,389 | ) | (28,291 | ) | ||
| Accumulated other comprehensive income (AOCI) | 33,242 | 39,466 | ||||
| Total equity | 223,170 | 222,205 | ||||
| Total liabilities and equity | $ | 435,010 | $ | 423,286 | ||
Condensed Consolidated Interim Statements of Comprehensive Earnings
(Stated in thousands of dollars except earnings per share, unaudited)
| Three-month periods ended September 30, | Nine-month periods ended September 30, |
|||||||||||
| 2025 | 2024 | 2025 | 2024 | |||||||||
| Revenue | $ | 164,333 | $ | 160,634 | $ | 525,707 | $ | 480,987 | ||||
| Direct costs | 146,637 | 131,666 | 443,496 | 387,166 | ||||||||
| Gross profit | 17,696 | 28,968 | 82,211 | 93,821 | ||||||||
| Expenses: | ||||||||||||
| Selling, general and administrative expenses | 12,661 | 15,885 | 48,476 | 50,726 | ||||||||
| Research and development expenses | 1,743 | 1,392 | 5,131 | 4,004 | ||||||||
| Finance expense | 866 | 620 | 2,175 | 1,421 | ||||||||
| Finance expense lease liabilities | 471 | 628 | 1,460 | 1,700 | ||||||||
| Other income | (7,743 | ) | (4,504 | ) | (22,840 | ) | (18,503 | ) | ||||
| 7,998 | 14,021 | 34,402 | 39,348 | |||||||||
| Earnings before income taxes | 9,698 | 14,947 | 47,809 | 54,473 | ||||||||
| Provision for income taxes | ||||||||||||
| Current | (6,226 | ) | 2,672 | 3,940 | 12,724 | |||||||
| Deferred | 7,463 | 2,115 | 6,726 | 1,222 | ||||||||
| 1,237 | 4,787 | 10,666 | 13,946 | |||||||||
| Net earnings | 8,461 | 10,160 | 37,143 | 40,527 | ||||||||
| Other comprehensive income | ||||||||||||
| Foreign currency translation, net of tax | 4,127 | (2,217 | ) | (6,224 | ) | 3,125 | ||||||
| Equity investment loss through AOCI | – | – | – | (830 | ) | |||||||
| Total comprehensive earnings | $ | 12,588 | $ | 7,943 | $ | 30,919 | $ | 42,822 | ||||
| Earnings per share – basic | $ | 0.19 | $ | 0.22 | $ | 0.82 | $ | 0.86 | ||||
| Earnings per share – diluted | $ | 0.16 | $ | 0.22 | $ | 0.78 | $ | 0.86 | ||||
Condensed Consolidated Interim Statements of Cash Flows
(Stated in thousands of dollars, unaudited)
| Three-month periods ended September 30, | Nine-month periods ended September 30, | ||||||||||||||
| 2025 | 2024 | 2025 | 2024 | ||||||||||||
| Cash flows from operating activities: | |||||||||||||||
| Earnings | $ | 8,461 | $ | 10,160 | $ | 37,143 | $ | 40,527 | |||||||
| Adjustments for: | |||||||||||||||
| Depreciation and amortization | 16,346 | 11,516 | 41,528 | 32,977 | |||||||||||
| Depreciation and amortization right-of-use asset | 862 | 1,214 | 2,613 | 2,920 | |||||||||||
| Provision for income taxes | 1,237 | 4,787 | 10,666 | 13,946 | |||||||||||
| Unrealized foreign exchange loss (gain) | (457 | ) | (47 | ) | 3 | 187 | |||||||||
| Net gain on disposition of drilling equipment | (6,668 | ) | (4,340 | ) | (22,180 | ) | (18,627 | ) | |||||||
| Equity-settled share-based payments | 117 | 140 | 357 | 422 | |||||||||||
| Finance expense | 866 | 620 | 2,175 | 1,421 | |||||||||||
| Finance expense lease liabilities | 471 | 628 | 1,460 | 1,700 | |||||||||||
| Provision for inventory obsolescence | 577 | 891 | 2,992 | 1,622 | |||||||||||
| Interest paid on lease liabilities | (471 | ) | (628 | ) | (1,460 | ) | (1,700 | ) | |||||||
| Interest paid | (1,020 | ) | (398 | ) | (1,916 | ) | (886 | ) | |||||||
| Income taxes paid | (1,564 | ) | (1,843 | ) | (12,302 | ) | (2,572 | ) | |||||||
| Change in non-cash working capital | 1,308 | 6,040 | (19,604 | ) | 7,288 | ||||||||||
| Net cash from operating activities | 20,065 | 28,740 | 41,475 | 79,225 | |||||||||||
| Cash flows from investing activities: | |||||||||||||||
| Proceeds on disposition of drilling equipment | 9,127 | 6,973 | 30,932 | 26,683 | |||||||||||
| Acquisition of drilling and other equipment | (16,525 | ) | (11,143 | ) | (62,812 | ) | (67,563 | ) | |||||||
| Acquisition of intangible assets | – | (1,365 | ) | (4,699 | ) | (1,365 | ) | ||||||||
| Change in non-cash working capital | (4,656 | ) | (9,361 | ) | (3,899 | ) | (5,178 | ) | |||||||
| Net cash used in investing activities | (12,054 | ) | (14,896 | ) | (40,478 | ) | (47,423 | ) | |||||||
| Cash flows from financing activities: | |||||||||||||||
| Net proceeds from loans and borrowings | 1,078 | 9,500 | 26,021 | 11,500 | |||||||||||
| Dividends paid to shareholders | (9,092 | ) | (9,437 | ) | (27,306 | ) | (28,388 | ) | |||||||
| Repurchase of shares under the NCIB | (2,339 | ) | (12,612 | ) | (3,250 | ) | (15,756 | ) | |||||||
| Payments of lease liability | (918 | ) | (809 | ) | (2,765 | ) | (2,504 | ) | |||||||
| Proceeds from exercise of options | – | 53 | 180 | 874 | |||||||||||
| Net cash used in financing activities | (11,271 | ) | (13,305 | ) | (7,120 | ) | (34,274 | ) | |||||||
| Net increase (decrease) in cash | (3,260 | ) | 539 | (6,123 | ) | (2,472 | ) | ||||||||
| Cash, beginning of period | 10,696 | 13,798 | 14,163 | 16,433 | |||||||||||
| Effect of movements in exchange rates on cash held | 435 | (134 | ) | (169 | ) | 242 | |||||||||
| Cash, end of period | $ | 7,871 | $ | 14,203 | $ | 7,871 | $ | 14,203 | |||||||
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”, “targets” 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 flexibility the increase to the Corporation’s credit facility is expected to provide, the Corporation’s intent to preserve balance sheet strength and continue to reward shareholders, including through its ROCS program, that anticipated lower net capital expenditures in the remainder of the year and that this will allow for the distributable cash under ROCS to be within the targeted at 70 percent of excess cash flow at year end 2025, PHX Energy’s intentions with respect to the current NCIB, the anticipated industry activity and demand for the Corporation’s services and technologies in North America, the projected capital expenditures budget for 2025 and 2026, and how the budgets will be allocated and funded, the timeline for delivery of equipment on order, and the anticipated continuation of PHX Energy’s quarterly dividend program and the amounts of dividends.
The above are stated under the headings: “Financial Results”, “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.
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.
Readers are cautioned that the foregoing lists of factors are not exhaustive. Additional information on these and other factors that could affect the Corporation’s operations and financial results are included in reports on file with the Canadian Securities Regulatory Authorities and may be accessed through the SEDAR+ website (www.sedarplus.ca) or at the Corporation’s website. The forward-looking statements and information contained in this document are expressly qualified by this cautionary statement. The Corporation does not undertake any obligation to publicly update or revise any forward-looking statements or information, whether as a result of new information, future events or otherwise, except as may be required by applicable securities laws.
Non-GAAP and Other Financial Measures
Non-GAAP Financial Measures and Ratios
a) Adjusted EBITDA
Adjusted EBITDA, defined as earnings before finance expense, finance expense lease liability, income taxes, depreciation and amortization, impairment losses on drilling and other equipment and goodwill and other write-offs, equity-settled share-based payments, severance payouts relating to the Corporation’s restructuring cost, and unrealized foreign exchange gains or losses, does not have a standardized meaning and is not a financial measure that is recognized under GAAP. However, Management believes that adjusted EBITDA provides supplemental information to earnings that is useful in evaluating the results of the Corporation’s principal business activities before considering certain charges, how it was financed and how it was taxed in various countries. Investors should be cautioned, however, that adjusted EBITDA should not be construed as an alternative measure to earnings determined in accordance with GAAP. PHX Energy’s method of calculating adjusted EBITDA may differ from that of other organizations and, accordingly, its adjusted EBITDA may not be comparable to that of other companies.
The following is a reconciliation of earnings to adjusted EBITDA:
(Stated in thousands of dollars)
| Three-month periods ended September 30, | Nine-month periods ended September 30, | ||||||||
| 2025 | 2024 | 2025 | 2024 | ||||||
| Earnings: | 8,461 | 10,160 | 37,143 | 40,527 | |||||
| Add: | |||||||||
| Depreciation and amortization drilling and other equipment | 16,346 | 11,516 | 41,528 | 32,977 | |||||
| Depreciation and amortization right-of-use asset | 862 | 1,214 | 2,613 | 2,920 | |||||
| Provision for income taxes | 1,237 | 4,787 | 10,666 | 13,946 | |||||
| Finance expense | 866 | 620 | 2,175 | 1,421 | |||||
| Finance expense lease liability | 471 | 628 | 1,460 | 1,700 | |||||
| Equity-settled share-based payments | 117 | 140 | 357 | 422 | |||||
| Unrealized foreign exchange loss (gain) | (457 | ) | (47 | ) | 3 | 187 | |||
| Adjusted EBITDA | 27,903 | 29,018 | 95,945 | 94,100 | |||||
b) Adjusted EBITDA Per Share – Diluted
Adjusted EBITDA per share – diluted is calculated using the treasury stock method whereby deemed proceeds on the exercise of the share options are used to reacquire common shares at an average share price. The calculation of adjusted EBITDA per share – dilutive is based on the adjusted EBITDA as reported in the table above divided by the diluted number of shares outstanding.
c) Adjusted EBITDA as a Percentage of Revenue
Adjusted EBITDA as a percentage of revenue is calculated by dividing the adjusted EBITDA as reported in the table above by revenue as stated on the Condensed Consolidated Interim Statements of Comprehensive Earnings.
d) Gross Profit as a Percentage of Revenue Excluding Depreciation & Amortization
Gross profit as a percentage of revenue excluding depreciation & amortization is defined as the Corporation’s gross profit excluding depreciation and amortization divided by revenue and is used to assess operational profitability. This Non-GAAP ratio does not have a standardized meaning and is not a financial measure recognized under GAAP. PHX Energy’s method of calculating gross profit as a percentage of revenue may differ from that of other organizations and, accordingly, it may not be comparable to that of other companies.
The following is a reconciliation of revenue, direct costs, depreciation and amortization and gross profit to gross profit as a percentage of revenue excluding depreciation and amortization:
(Stated in thousands of dollars)
| Three-month periods ended September 30, | Nine-month periods ended September 30, | |||||||
| 2025 | 2024 | 2025 | 2024 | |||||
| Revenue | 164,333 | 160,634 | 525,707 | 480,987 | ||||
| Direct costs | 146,637 | 131,666 | 443,496 | 387,166 | ||||
| Gross profit | 17,696 | 28,968 | 82,211 | 93,821 | ||||
| Depreciation & amortization drilling and other equipment (included in direct costs) | 16,346 | 11,516 | 41,528 | 32,977 | ||||
| Depreciation & amortization right-of-use asset (included in direct costs) | 862 | 1,214 | 2,613 | 2,920 | ||||
| 34,904 | 41,698 | 126,352 | 129,718 | |||||
| Gross profit as a percentage of revenue excluding depreciation & amortization | 21 | % | 26 | % | 24 | % | 27 | % |
e) SG&A Costs Excluding Share-Based Compensation as a Percentage of Revenue
SG&A costs excluding share-based compensation as a percentage of revenue is defined as the Corporation’s SG&A costs excluding share-based compensation divided by revenue and is used to assess the impact of administrative costs excluding the effect of share price volatility. This Non-GAAP ratio does not have a standardized meaning and is not a financial measure recognized under GAAP. PHX Energy’s method of calculating SG&A costs excluding share-based compensation as a percentage of revenue may differ from that of other organizations and, accordingly, it may not be comparable to that of other companies.
The following is a reconciliation of SG&A costs, share-based compensation, and revenue to SG&A costs excluding share-based compensation as a percentage of revenue:
(Stated in thousands of dollars)
| Three-month periods ended September 30, | Nine-month periods ended September 30, | |||||||
| 2025 | 2024 | 2025 | 2024 | |||||
| SG&A Costs | 12,661 | 15,885 | 48,476 | 50,726 | ||||
| Deduct: | ||||||||
| Share-based compensation (included in SG&A) | 889 | 2,611 | 4,978 | 10,006 | ||||
| 11,772 | 13,274 | 43,498 | 40,720 | |||||
| Revenue | 164,333 | 160,634 | 525,707 | 480,987 | ||||
| SG&A costs excluding share-based compensation as a percentage of revenue | 7 | % | 8 | % | 8 | % | 8 | % |
Capital Management Measures
a) Funds from Operations
Funds from operations is defined as cash flows generated from operating activities before changes in non-cash working capital, interest paid, and income taxes paid. This financial measure does not have a standardized meaning and is not a financial measure recognized under GAAP. Management uses funds from operations as an indication of the Corporation’s ability to generate funds from its operations before considering changes in working capital balances and interest and taxes paid. Investors should be cautioned, however, that this financial measure should not be construed as an alternative measure to cash flows from operating activities determined in accordance with GAAP. PHX Energy’s method of calculating funds from operations may differ from that of other organizations and, accordingly, it may not be comparable to that of other companies.
The following is a reconciliation of cash flows from operating activities to funds from operations:
(Stated in thousands of dollars)
| Three-month periods ended September 30, |
Nine-month periods ended September 30, | |||||||
| 2025 | 2024 | 2025 | 2024 | |||||
| Cash flows from operating activities | 20,065 | 28,740 | 41,475 | 79,225 | ||||
| Add (deduct): | ||||||||
| Changes in non-cash working capital | (1,308 | ) | (6,040 | ) | 19,604 | (7,288 | ) | |
| Interest paid | 1,020 | 398 | 1,916 | 886 | ||||
| Income taxes paid | 1,564 | 1,843 | 12,302 | 2,572 | ||||
| Funds from operations | 21,341 | 24,941 | 75,297 | 75,395 | ||||
b) Excess Cash Flow
Excess cash flow is defined as funds from operations (as defined above) less cash payment on leases, growth capital expenditures, and maintenance capital expenditures from downhole equipment losses and asset retirements, and increased by proceeds on disposition of drilling equipment. This financial measure does not have a standardized meaning and is not a financial measure recognized under GAAP. Management uses excess cash flow as an indication of the Corporation’s ability to generate funds from its operations to support operations and grow and maintain the Corporation’s drilling and other equipment. This performance measure is useful to investors for assessing the Corporation’s operating and financial performance, leverage and liquidity. Investors should be cautioned, however, that this financial measure should not be construed as an alternative measure to cash flows from operating activities determined in accordance with GAAP. PHX Energy’s method of calculating excess cash flow may differ from that of other organizations and, accordingly, it may not be comparable to that of other companies.
The following is a reconciliation of cash flows from operating activities to excess cash flow:
(Stated in thousands of dollars)
| Three-month periods ended September 30, | Nine-month periods ended September 30, | ||||||||
| 2025 | 2024 | 2025 | 2024 | ||||||
| Cash flows from operating activities | 20,065 | 28,740 | 41,475 | 79,225 | |||||
| Add (deduct): | |||||||||
| Changes in non-cash working capital | (1,308 | ) | (6,040 | ) | 19,604 | (7,288 | ) | ||
| Interest paid | 1,020 | 398 | 1,916 | 886 | |||||
| Income taxes paid | 1,564 | 1,843 | 12,302 | 2,572 | |||||
| Cash payment on leases | (1,389 | ) | (1,437 | ) | (4,225 | ) | (4,204 | ) | |
| 19,952 | 23,504 | 71,072 | 71,191 | ||||||
| Proceeds on disposition of drilling equipment | 9,127 | 6,973 | 30,932 | 26,683 | |||||
| Maintenance capital expenditures to replace downhole equipment losses and asset retirements | (2,765 | ) | (82 | ) | (20,215 | ) | (7,765 | ) | |
| Net proceeds | 6,362 | 6,891 | 10,717 | 18,918 | |||||
| Growth capital expenditures | (13,760 | ) | (11,061 | ) | (42,597 | ) | (59,798 | ) | |
| Excess cash flow | 12,554 | 19,334 | 39,192 | 30,311 | |||||
c) Working Capital
Working capital is defined as the Corporation’s current assets less its current liabilities and is used to assess the Corporation’s short-term liquidity. This financial measure does not have a standardized meaning and is not a financial measure recognized under GAAP. Management uses working capital to provide insight as to the Corporation’s ability to meet obligations as at the reporting date. PHX Energy’s method of calculating working capital may differ from that of other organizations and, accordingly, it may not be comparable to that of other companies.
The following is a reconciliation of current assets and current liabilities to working capital:
(Stated in thousands of dollars)
| September 30, 2025 |
December 31, 2024 | |||
| Current assets | 215,656 | 214,017 | ||
| Deduct: | ||||
| Current liabilities | (113,424 | ) | (129,472 | ) |
| Working capital | 102,232 | 84,545 | ||
d) Net Debt (Net Cash)
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.
The following is a reconciliation of loans and borrowings and cash to net debt:
(Stated in thousands of dollars)
| September 30, 2025 |
December 31, 2024 | |||
| Loans and borrowings | 42,406 | 16,827 | ||
| Deduct: | ||||
| Cash | (7,871 | ) | (14,163 | ) |
| Net debt (Net cash) | 34,535 | 2,664 | ||
e) Net Capital Expenditures
Net capital expenditures is comprised of total additions to drilling and other long-term assets, as determined in accordance with IFRS, less total proceeds from disposition of drilling equipment, as determined in accordance with IFRS. This financial measure does not have a standardized meaning and is not a financial measure recognized under GAAP. Management uses net capital expenditures to provide insight as to the Corporation’s ability to meet obligations as at the reporting date. PHX Energy’s method of calculating net capital expenditures may differ from that of other organizations and, accordingly, it may not be comparable to that of other companies.
The following is a reconciliation of additions to drilling and other equipment and proceeds from disposition of drilling equipment to net capital expenditures:
(Stated in thousands of dollars)
| Three-month periods ended September 30, |
Nine-month periods ended September 30, | ||||||||
| 2025 | 2024 | 2025 | 2024 | ||||||
| Growth capital expenditures | 13,760 | 11,061 | 42,597 | 59,798 | |||||
| Maintenance capital expenditures from asset retirements | 1,402 | 82 | 15,602 | 6,252 | |||||
| Maintenance capital expenditures to replace downhole equipment losses |
1,363 | – | 4,613 | 1,513 | |||||
| Total capital expenditures | 16,525 | 11,143 | 62,812 | 67,563 | |||||
| Deduct: | |||||||||
| Proceeds on disposition of drilling equipment | (9,127 | ) | (6,973 | ) | (30,932 | ) | (26,683 | ) | |
| Net capital expenditures | 7,398 | 4,170 | 31,880 | 40,880 | |||||
f) Remaining Distributable Balance under ROCS
Remaining distributable balance under ROCS is comprised of 70 percent of excess cash flow as defined above less repurchases of shares under the Normal Course Issuer Bids in effect during the period and less the dividends paid to shareholders during the period. This financial measure does not have a standardized meaning and is not a financial measure recognized under GAAP. Management uses the remaining distributable balance under ROCS to provide insight as to the Corporation’s ROCS strategy as at the reporting date. PHX Energy’s method of calculating remaining distributable balance under ROCS may differ from that of other organizations and, accordingly, it may not be comparable to that of other companies.
The following is a reconciliation of excess cash flow as defined above to remaining distributable balance under ROCS:
(Stated in thousands of dollars)
| Three-month periods ended September 30, | Nine-month periods ended September 30, | ||||||||
| 2025 | 2024 | 2025 | 2024 | ||||||
| Excess cash flow | 12,554 | 19,334 | 39,192 | 30,311 | |||||
| 70% of excess cash flow | 8,788 | 13,534 | 27,434 | 21,218 | |||||
| Deduct: | |||||||||
| Dividends paid to shareholders | (9,092 | ) | (9,437 | ) | (27,306 | ) | (28,388 | ) | |
| Repurchase of shares under the NCIB | (2,339 | ) | (12,612 | ) | (3,250 | ) | (15,756 | ) | |
| Remaining Distributable Balance under ROCS | (2,643 | ) | (8,515 | ) | (3,122 | ) | (22,926 | ) | |
Supplementary Financial Measures
“Average consolidated revenue per day” is comprised of consolidated revenue, as determined in accordance with IFRS, divided by the Corporation’s consolidated number of operating days. Operating days is defined under the “Definitions” section below.
“Average revenue per operating day” is comprised of revenue, as determined in accordance with IFRS, divided by the number of operating days.
“Dividends paid per share” is comprised of dividends paid, as determined in accordance with IFRS, divided by the number of shares outstanding at the dividend record date.
“Dividends declared per share” is comprised of dividends declared, as determined in accordance with IFRS, divided by the number of shares outstanding at the dividend record date.
“Effective tax rate” is comprised of provision for or recovery of income tax, as determined in accordance with IFRS, divided by earnings before income taxes, as determined in accordance with IFRS.
“Funds from operations per share – diluted” is calculated using the treasury stock method whereby deemed proceeds on the exercise of the share options are used to reacquire common shares at an average share price. The calculation of funds from operations per share – diluted is based on the funds from operations as reported in the table above divided by the diluted number of shares outstanding.
Definitions
“Operating days” throughout this document, it is referring to the billable days on which PHX Energy is providing services to the client at the rig site.
“Capital expenditures” equate to the Corporation’s total acquisition of drilling and other equipment as stated on the Condensed Consolidated 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.
