CDN NEWS | 
US NEWS 
FOR: PHX ENERGY SERVICES CORP.
TSX SYMBOL: PHX
Date issue: August 03, 2017
Time in: 7:10 PM e
Attention:
CALGARY, ALBERTA--(Marketwired - Aug. 3, 2017) -
Financial Results
For the three-month period ended June 30, 2017, PHX Energy (TSX:PHX) generated consolidated revenue of $53.8 million, more than double the $26.4 million generated in the respective 2016-period. The increased revenue primarily resulted from greater activity levels across all of the Corporation's operating segments, as consolidated operating days in the second quarter of 2017 grew by 94 percent to 4,749 days from 2,452 days in the 2016-quarter.
In the second quarter of 2017, adjusted EBITDA (see "Non-GAAP Measures") rose to $0.6 million, an improvement over the negative $2.0 million realized in the 2016-quarter. The Corporation reduced its quarterly net loss by 22 percent in 2017 to $10.4 million from $13.4 million in the comparable 2016-quarter. Included in these results is Stream Services' ("Stream") adjusted EBITDA of negative $0.6 million (2016 - negative $0.7 million) and net losses of $0.9 million (2016 - $1.3 million).
As at June 30, 2017, PHX Energy had long-term debt of $5.0 million and working capital (see "Non-GAAP Measures") of $44.7 million.
Capital Spending
During the second quarter of 2017, the Corporation incurred $6.7 million in capital expenditures (2016 - $2.0 million), which were primarily used to expand the fleet of Velocity Real-Time Systems ("Velocity") and electronic drilling recorder ("EDR") equipment.
As at June 30, 2017, the Corporation had $14.4 million of outstanding capital commitments to purchase drilling and other equipment. These commitments include $9.5 million for Velocity systems, $3.0 million for performance drilling motors, $1.2 million for resistivity while drilling ("RWD") systems, $0.5 million for EDR equipment and $0.2 million for machinery and equipment. The Corporation expects the equipment to be delivered throughout the remainder of 2017.
PHX Energy's anticipated capital expenditure budget for 2017 remains at $25.0 million.
Normal Course Issuer Bid
The TSX approved PHX Energy's Normal Course Issuer Bid ("NCIB") to purchase for cancellation, from time-to-time, up to a maximum of 2,929,494 common shares of the Corporation. Purchases of common shares will be made on the open market through the facilities of the TSX and through alternative trading systems. The price which PHX Energy will pay for any common shares purchased will be at the prevailing market price on the TSX or alternate trading systems at the time of such purchase. The NCIB commenced on June 26, 2017 and will terminate on June 25, 2018 or such earlier time as the NCIB is completed or terminated at the option of the Corporation. No share purchases, pursuant to the NCIB, were made by the Corporation during the period from June 26, 2017 to June 30, 2017.
Equity Financing
On February 2, 2017, PHX Energy closed a bought deal financing for aggregate proceeds of $28.8 million. An aggregate of 7,187,500 common shares of the Corporation were issued at a price of $4.00 per common share. Concurrent with the closing of the public offering, certain directors, officers, employees and consultants of PHX Energy purchased a total of 500,000 common shares at a price of $4.00 per share on a private placement basis. The gross proceeds from the public offering and concurrent private placement totaled to approximately $30.8 million.
The proceeds from the equity financing were primarily used to reduce the outstanding loans and borrowings under the Corporation's credit facility.
(Stated in thousands of dollars except per share amounts, percentages and shares outstanding)
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Three-month periods ended June 30, 2017 2016 % Change ---------------------------------------------------------------------------- ---------------------------------------------------------------------------- Operating Results (unaudited) (unaudited) Revenue 53,822 26,359 104 Net loss (10,412) (13,360) (22) Loss per share - diluted (0.18) (0.32) (44) Adjusted EBITDA (1) 553 (2,018) n.m. Adjusted EBITDA per share - diluted (1) 0.01 (0.05) n.m. Adjusted EBITDA as a percentage of revenue (1) 1% (8%) ---------------------------------------------------------------------------- Cash Flow Cash flows from operating activities 13,671 4,075 n.m. Funds from (used in) operations (1) 113 (3,192) n.m. Funds from (used in) operations per share - diluted(1) - (0.08) n.m. Dividends paid - - - Dividends per share (2) - - - Capital expenditures 6,698 2,035 n.m. --------------------------------------------------------------------------------------------------------------------------------------------------------
Financial Position (unaudited)
Working capital
Long-term debt
Shareholders' equity
Common shares outstanding
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---------------------------------------------------------------------------- Financial Position (unaudited) Jun 30, '17 Dec 31, '16 Working capital 44,671 44,230 1 Long-term debt 5,000 29,014 (83) Shareholders' equity 189,641 178,387 6 Common shares outstanding 58,589,887 50,810,721 15 ---------------------------------------------------------------------------- ----------------------------------------------------------------------------
n.m. not meaningful
(1) Refer to non-GAAP measures section that follows the outlook section.
(2) Dividends paid by the Corporation on a per share basis in the period.
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Non-GAAP Measures
PHX Energy uses certain performance measures throughout this press release that are not recognizable under Canadian generally accepted accounting principles ("GAAP"). These performance measures include adjusted earnings before interest, taxes, depreciation and amortization ("EBITDA"), adjusted EBITDA per share, funds from operations, funds from operations per share, debt to covenant EBITDA ratio and working capital. Management believes that these measures provide supplemental financial information that is useful in the evaluation of the Corporation's operations and are commonly used by other oil and natural gas service companies. Investors should be cautioned, however, that these measures should not be construed as alternatives to measures determined in accordance with GAAP as an indicator of PHX Energy's performance. The Corporation's method of calculating these measures may differ from that of other organizations, and accordingly, these may not be comparable. Please refer to the non-GAAP measures section following the Outlook section for applicable definitions and reconciliations.
Cautionary Statement Regarding Forward-Looking Information and Statements
This document contains certain forward-looking information and statements within the meaning of applicable securities laws. The use of "expect", "anticipate", "continue", "estimate", "objective", "ongoing", "may", "will", "project", "could", "should", "can", "believe", "plans", "intends", "strategy" and similar expressions are intended to identify forward-looking information or statements.
The forward-looking information and statements included in this document are not guarantees of future performance and should not be unduly relied upon. These statements and information involve known and unknown risks, uncertainties and other factors that may cause actual results or events to differ materially from those anticipated in such forward-looking statements and information. The Corporation believes the expectations reflected in such forward-looking statements and information are reasonable, but no assurance can be given that these expectations will prove to be correct. Such forward-looking statements and information included in this document should not be unduly relied upon. These forward-looking statements and information speak only as of the date of this document.
In particular, forward-looking information and statements contained in this document include, without limitation, the delivery of capital expenditure items, the projected capital expenditures budget and how this budget will be funded, and how R&D projects will enhance and expand PHX Energy's services.
The above are stated under the headings: "Capital Spending", "Operating Cost and Expenses", and "Capital Resources". Furthermore all statements in the Outlook section of this document contains 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, among other things: the Corporation will continue to conduct its operations in a manner consistent with past operations; the general continuance of current industry conditions; anticipated financial performance, business prospects, impact of competition, strategies, the general stability of the economic and political environment in which the Corporation operates; exchange and interest rates; the continuance of existing (and in certain circumstances, the implementation of proposed) tax, royalty and regulatory regimes; the sufficiency of budgeted capital expenditures in carrying out planned activities; the availability and cost of labour and services and the adequacy of cash flow; debt and ability to obtain financing on acceptable terms to fund its planned expenditures, which are subject to change based on commodity prices; market conditions and future oil and natural gas prices; and potential timing delays. Although Management considers these material factors, expectations and assumptions to be reasonable based on information currently available to it, no assurance can be given that they will prove to be correct.
Readers are cautioned that the foregoing lists of factors are not exhaustive. Additional information on these and other factors that could affect the Corporation's operations and financial results are included in reports on file with the Canadian Securities Regulatory Authorities and may be accessed through the SEDAR website (www.sedar.com) or at the Corporation's website. The forward-looking statements and information contained in this document are expressly qualified by this cautionary statement. The Corporation does not undertake any obligation to publicly update or revise any forward-looking statements or information, whether as a result of new information, future events or otherwise, except as may be required by applicable securities laws.
Revenue
(Stated in thousands of dollars)
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Three-month periods ended June 30, Six-month periods ended June 30, 2017 2016 % Change 2017 2016 % Change ---------------------------------------------------------------------------- ---------------------------------------------------------------------------- Revenue 53,822 26,359 104 114,944 66,808 72 ---------------------------------------------------------------------------- ----------------------------------------------------------------------------/T/
During the three-month period ended June 30, 2017, the Corporation generated consolidated revenue of $53.8 million, more than double the $26.4 million recognized in the 2016-period. The increase in the consolidated quarterly revenue in 2017 was driven by higher levels of drilling activity that resulted from improved commodity prices when compared to the 2016-period. Consolidated operating days in the second quarter of 2017 rose by 94 percent to 4,749 days as compared to 2,452 days in the 2016-quarter. The average consolidated day rate in the 2017-quarter, excluding the motor rental division in the US and the Stream division, was $11,029, a 5 percent improvement over the $10,549 realized in the comparable 2016-quarter. US and international revenue as a percentage of total consolidated revenue were 65 and 10 percent, respectively, for the 2017-quarter as compared to 66 and 12 percent in 2016.
During the 2017-quarter, there were twice as many rigs operating per day in both Canada and the US as the industry recovered from the historical lows experienced in 2016. In Canada, horizontal drilling continued to dominate all activity at 96 percent of industry drilling days in the second quarter of 2017 (2016 - 92 percent), and in the US the average number of horizontal rigs running per day represented 84 percent of the rig count in the 2017-quarter (2016 - 77 percent) (Sources: Daily Oil Bulletin and Baker Hughes).
Consolidated revenue for the six-month period ended June 30, 2017 increased by 72 percent to $114.9 million from $66.8 million in the comparable 2016-period. The Corporation achieved 11,432 consolidated operating days in the six-month period ended June 30, 2017, which is 75 percent higher than the 6,521 days reported in 2016.
Operating Costs and Expenses
(Stated in thousands of dollars except percentages)
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Three-month periods ended Six-month periods ended June 30, June 30, 2017 2016 % Change 2017 2016 % Change ---------------------------------------------------------------------------- ---------------------------------------------------------------------------- Direct costs 56,776 36,253 57 117,581 82,264 43 Gross loss as a percentage of revenue (5%) (38%) (2%) (23%) Depreciation & amortization (included in direct costs) 10,514 13,013 (19) 21,445 27,015 (21) Gross profit as percentage of revenue excluding depreciation & amortization 14% 12% 16% 17% ---------------------------------------------------------------------------- ----------------------------------------------------------------------------/T/
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