PHX Energy Announces Its Operating and Financial Results for the Third Quarter of 2019

CALGARY, Alberta, Oct. 30, 2019 (GLOBE NEWSWIRE)

Financial Results

For the three-month period ended September 30, 2019, PHX Energy achieved adjusted EBITDA of $15.5 million, which is the highest quarterly result since the third quarter of 2014. Consolidated revenue for the third quarter was $93.1 million and was the highest since the first quarter of 2015.  Strong growth continued in the US division and this was the primary driver behind the 11 percent increase to adjusted EBITDA and 9 percent increase in consolidated revenue as compared to the third quarter of 2018. In the 2019-quarter there were more premiums and surcharges generated by PHX Energy’s high performance technologies in the US and Canada and this aided the improvement in profitability. Average consolidated revenue per day, excluding the motor rental division in the US and Stream division, for the three-month period ended September 30, 2019 was $13,434, a 14 percent increase as compared to the 2018-quarter’s average of $11,803.

The Corporation’s US activity improved by 10 percent in the 2019-quarter, growing to 3,850 operating days in comparison to 3,506 days in the 2018-quarter. The US segment’s revenue for the 2019-quarter increased 26 percent to $68.3 million from $54.1 million in the 2018-quarter. The higher level of activity and revenue in the US is mainly attributable to the greater capacity of the Corporation’s high performance technology fleets in the US, specifically Velocity Real Time Systems (“Velocity”), PowerDrive Orbit Rotary Steerable Systems (“RSS”), and Atlas High Performance (“Atlas”) Motors. In contrast to the US division’s results, the US rig count declined 12 percent from 1,051 average rigs running per day in the third quarter of 2018 to 920 rigs in the 2019-quarter (Source: Baker Hughes). Given the weakening industry environment, the Corporation’s positive momentum in the US is a testament to its operational performance and the opportunities the US market presents.

The ongoing challenges and uncertainty in the Canadian industry persisted in the third quarter and, as was the case in the first two quarters of 2019, activity levels declined as compared to the prior year.  The rig count dropped 37 percent quarter-over-quarter with an average of 130 active rigs operating per day in the third quarter of 2019 (2018 – 207 rigs) (Source: Baker Hughes). Due to lower activity in the Canadian industry, for the three-month period ended September 30, 2019 the Canadian segment’s revenue declined by 25 percent to $19.1 million relative to $25.6 million in the same 2018-period.

As at September 30, 2019, the Corporation had loans and borrowings of $15 million as well as operating facility borrowings of $6.6 million. These debt items less cash and cash equivalents of $6.7 million resulted in net debt of $14.9 million (December 31, 2018 – $21.5 million). As at September 30, 2019, the Corporation’s working capital was $62.2 million.

Capital Spending

The Corporation spent $28.8 million in capital expenditures in the nine-month period ended September 30, 2019, of which $20.8 million was spent on growing the Corporation’s fleet of drilling equipment and the remaining $8 million was spent on maintenance of the current fleet of drilling and other equipment. Capital expenditures in the first nine-months of the 2019-year were mainly directed towards Atlas Motors and Velocity Systems and were 82 percent higher than the $15.8 million spent in the corresponding 2018-period. The Corporation funded its 2019 capital spending through net cash flows from operations and its working capital and debt facilities.

As at September 30, 2019, the Corporation had $14.7 million of outstanding capital commitments, of which $4.2 million is expected to be delivered in 2019 and $10.5 million is expected to be delivered in the first half of 2020. Capital commitments are primarily comprised of $10.3 million for performance drilling motors, $2.9 million for measurement while drilling (“MWD”) systems, and $1.5 million for other machinery and equipment.

On April 8, 2019, the Corporation announced an increase to its capital expenditure program from $15 million to $25 million. In the second quarter of 2019, PHX Energy’s Board of Directors (the “Board”) approved an increase to the 2019 capital expenditure program that resulted in the budget being set at $30 million as compared to the $25 million previously announced. On September 6, 2019, the Corporation announced another increase to its capital expenditure program from $30 million to $35 million.

In the 2019-year, the Corporation expects to spend $24.5 million growing the Corporation’s fleet of drilling equipment and $10.5 million maintaining the current fleet of drilling and other equipment. The Corporation anticipates that capital expenditures for the 2019-year will be allocated as follows: $16 million towards performance drilling motors primarily relating to Atlas Motors, $15 million on MWD systems, primarily relating to Velocity, and $4 million relating to RSS, and other machinery and equipment.

PHX Energy announces that its Board has approved a preliminary 2020 capital expenditures program of $20 million (the “2020 Program”). The 2020 Program is anticipated to principally be allocated toward expanding the Corporation’s High Performance fleets.

Normal Course Issuer Bid

In the third quarter of 2019, the Toronto Stock Exchange (“TSX”) approved the renewal of PHX Energy’s normal course issuer bid (the “NCIB“) to purchase for cancellation, from time-to-time, up to a maximum of 3,280,889 common shares, representing 10 percent of the Corporation’s public float of Common Shares as at July 31, 2019.  The NCIB commenced on August 9, 2019 and will terminate on August 8, 2020. 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 current NCIB, in the 2019-quarter, 801,600 common shares were purchased by the Corporation and cancelled.

The Corporation’s previous NCIB commenced on August 8, 2018 and terminated on August 7, 2019. Pursuant to the previous NCIB, 357,500 common shares were purchased by the Corporation in the second half of 2018 and cancelled, and in 2019, the Corporation purchased and cancelled 2,237,800 common shares. In total, pursuant to the previous NCIB 2,595,300 common shares have been purchased and cancelled by the Corporation.

PHX Energy continues to use the NCIB as an additional tool to enhance total long-term shareholder returns in conjunction with management’s disciplined capital allocation strategy. In 2019, the Corporation has purchased and cancelled 5 percent of its total shares outstanding as at December 31, 2018.

(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,
		2019	2018	% Change	2019	2018	% Change
Operating Results		(unaudited)	(unaudited)		(unaudited)	(unaudited)
Revenue		93,099	85,033	9	268,204	224,800	19
Net income (loss)		2,594	3,743	(31)	(494)	(591)	(16)
Earnings (loss) per share – diluted		0.05	0.06	(17)	(0.01)	(0.01)	–
Adjusted EBITDA (1)		15,536	13,934	11	37,961	30,715	24
Adjusted EBITDA per share – diluted (1)		0.27	0.24	13	0.66	0.52	27
Adjusted EBITDA as a percentage of revenue (1)		17%	16%		14%	14%
Cash Flow
Cash flows from operating activities		9,721	6,027	63	40,665	15,871	157
Funds from operations (1)		14,669	11,461	28	34,554	24,376	42
Funds from operations per share – diluted(1)		0.26	0.19	37	0.60	0.42	43
Capital expenditures		8,444	8,067	5	28,840	15,831	82
Financial Position (unaudited)					Sept 30, ‘19	Dec 31, ‘18
Working capital (1)					62,207	60,316	3
Net debt (1)					14,900	21,526	(31)
Shareholders’ equity					149,592	168,414	(11)
Common shares outstanding					54,969,320	57,963,720	(5)
(1) Non-GAAP measure that does not have any standardized meaning under IFRS and therefore may not be comparable to similar measures presented by other entities. Refer to non-GAAP measures section that follows the Outlook section of this document.

Non-GAAP Measures

PHX Energy uses throughout this document certain measures to analyze operational and financial performance that do not have standardized meanings prescribed under Canadian generally accepted accounting principles (“GAAP”). These non-GAAP measures include adjusted EBITDA, adjusted EBITDA per share, debt to covenant EBITDA, funds from operations, funds from operations per share, working capital and net debt. Management believes that these measures provide supplemental financial information that is useful in the evaluation of the Corporation’s operations and are commonly used by other oil and natural gas service companies. Investors should be cautioned, however, that these measures should not be construed as alternatives to measures determined in accordance with GAAP as an indicator of PHX Energy’s performance. The Corporation’s method of calculating these measures may differ from that of other organizations, and accordingly, such measures may not be comparable. Please refer to the “Non-GAAP Measures” section following the Outlook section of this document 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 timeline for delivery of equipment on order, and the projected capital expenditures budgets for the 2019 and 2020-year and how these budgets will be allocated and funded.

The above are stated under the headings: “Capital Spending”, and “Cash Requirements for Capital Expenditures”. 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)

	Three-month periods ended September 30,				Nine-month periods ended September 30,
		2019	2018	% Change		2019	2018	% Change
Revenue		93,099	85,033	9		268,204	224,800	19

For the three-month period ended September 30, 2019, PHX Energy recorded the highest level of consolidated quarterly revenue since the first quarter of 2015. The Corporation increased consolidated revenue by 9 percent to $93.1 million in the 2019-quarter compared to $85 million in the 2018-quarter. This was partly driven by improved activity in PHX Energy’s US division, despite declining rig counts in the US industry. In addition, higher revenue per day was realized in both the US and Canadian divisions. For the three-month period ended September 30, 2019, the average consolidated revenue per day, excluding the motor rental division in the US and the Stream division, was $13,434 in comparison to $11,803 in the same 2018-quarter, a 14 percent increase. Higher revenue per day was mainly due to the greater capacity of PHX Energy’s high performance technologies and the resulting increase to the premiums and surcharges generated in the 2019-quarter. For the three-month period ended September 30, 2019, consolidated operating days decreased by 5 percent to 6,629 days from 7,008 days in the corresponding 2018-quarter. The lower operating days are primarily due to large declines in activity in the Corporation’s Canadian segment that were offset by improved activity in the US segment. US and international revenue were 73 percent and 6 percent, respectively, of total consolidated revenue for the 2019-quarter relative to 64 and 6 percent, respectively, for the 2018-quarter.

During the third quarter, the volatility in commodity prices continued and the declines experienced impacted industry activity levels. Western Texas Intermediate (“WTI”) spot crude oil price was 19 percent lower than in the 2018-quarter averaging USD $56/bbl (2018-quarter – USD $69/bbl) and the Western Canadian Select (“WCS”) oil prices showed a 6 percent decrease averaging USD $44/bbl (2018-quarter – USD $47/bbl). Despite declines in both the Canadian and US rig counts the two industry environments continued to be in stark contrast, with the US operating an average of 920 rigs per day in the third quarter, a 12 percent decline quarter-over-quarter, and Canada operating an average of 130 rigs per day, a 37 percent decline quarter-over-quarter.  Throughout North America the vast majority of wells continued to be horizontal and directional in the third quarter, representing 95 percent of all wells drilled in Canada and 94 percent of the average number of rigs operating per day in the US (Sources: Daily Oil Bulletin and Baker Hughes).

For the nine-month period ended September 30, 2019, the Corporation increased consolidated revenue by 19 percent to $268.2 million as compared to the $224.8 million reported in the same 2018-period. Consolidated operating days were flat in the 2019-period at 19,221 days for both 2019 and 2018-periods. The average consolidated revenue per day, excluding the motor rental division in the US and the Stream division, for the 2019 nine-month period was $13,290, an increase of 16 percent compared to the average of  $11,414 in the 2018-period. Improvements in revenue for the nine-month period ended September 30, 2019 were primarily attributable to the greater capacity of high performance technologies and higher activity levels in the US division. US and international revenue were 74 percent and 6 percent, respectively, of total consolidated revenue for the 2019 nine-month period relative to 64 and 7 percent, respectively, for the 2018-period.

Operating Costs and Expenses

(Stated in thousands of dollars except percentages)

	Three-month periods ended September 30,						Nine-month periods ended September 30,
		2019		2018		% Change		2019		2018		% Change
Direct costs		77,090		69,478		11		228,141		197,796		15
Gross profit as a percentage of revenue		17%		18%				15%		12%
Depreciation & amortization drilling and other equipment (included in direct costs)		9,894		9,505		4		30,178		29,613		2
Depreciation & amortization right-of-use asset (included in direct costs)		896		–		n.m.		2,641		–		n.m.
Gross profit as percentage of revenue excluding depreciation & amortization		29%		29%				27%		25%
n.m. – not meaningful

Direct costs are comprised of field and shop expenses, and include depreciation and amortization on the Corporation’s equipment and right-of-use assets. Depreciation on right-of-use assets relates to the impact of adopting IFRS 16 Leases as at January 1, 2019, which required capitalizing the Corporation’s office, shop and vehicle leases.

For the three and nine-month periods ended September 30, 2019, direct costs rose 11 percent and 15 percent, respectively. In both 2019-periods, primarily due to increased activity levels in the US segment, the Corporation incurred greater overall labour costs, volume of equipment repair expenses, and equipment rentals.

For the three-month period ended September 30, 2019, gross profit as a percent of revenue, excluding depreciation and amortization, was 29 percent, which was the same percentage as in the 2018-quarter. For the nine-month period ended September 30, 2019, gross profit as a percent of revenue, excluding depreciation and amortization, was 27 percent in comparison to 25 percent in the 2018-period. Improved profitability thus far in 2019 is primarily due to increased activity and revenue per day in the US segment.

(Stated in thousands of dollars except percentages)

	Three-month periods ended September 30,				Nine-month periods ended September 30,
		2019	2018	% Change	2019	2018	% Change
Selling, general & administrative (“SG&A”) costs		10,616	12,983	(18)	35,212	30,765	14
Cash-settled share-based payments (included in SG&A costs)		1,078	2,925	(63)	5,108	4,076	25
Equity-settled share-based payments (included in SG&A costs)		160	342	(53)	559	1,201	(53)
Onerous contracts lease payment (included in SG&A costs)		–	(122)	n.m.	–	(270)	n.m.
SG&A costs excluding equity and cash-settled share-based payments and provision for onerous contracts as a percentage of revenue		10%	12%		11%	11%
n.m. – not meaningful

For the three-month period ended September 30, 2019, SG&A costs decreased by 18 percent to $10.6 million from $13 million in the 2018-quarter primarily due to lower cash-settled share-based payments in the 2019-quarter.  For the nine-month period ended September 30, 2019, SG&A costs increased by 14 percent primarily due to higher cash-settled share-based payments as well as higher personnel costs in the 2019-period as compared to 2018-period.

Cash-settled share-based payments relate to the Corporation’s Retention Award Plan and are measured at fair value. For the three-month period ended September 30, 2019, cash-settled share-based payments decreased 63 percent to $1.1 million from $2.9 million in the 2018-quarter. For the nine-month period ended September 30, 2019, cash-settled share-based payments increased 25 percent to $5.1 million from $4.1 million in the same 2018-period. Changes in cash-settled share-based payments in the respective periods can be mainly attributed to fluctuations in the Corporation’s share price period-over-period.

Equity-settled share-based payments relate to the amortization of the fair values of issued options by the Corporation using the Black-Scholes model. For the three and nine-month periods ended September 30, 2019, equity-settled share-based payments were 53 percent lower in both periods due to previously granted options that fully vested in the 2018 and 2019-years.

Due to adoption of IFRS 16 Leases as of January 1, 2019, onerous contracts lease payments are no longer recorded.

(Stated in thousands of dollars)

	Three-month periods ended September 30,				Nine-month periods ended September 30,
		2019	2018	% Change		2019	2018	% Change
Research & development expense		1,193	837	43		2,973	2,506	19

Research and development (“R&D”) expenditures for the three and nine-month periods ended September 30, 2019 were $1.2 million and $3 million, respectively, as compared to $0.8 million and $2.5 million in the same 2018-periods. PHX Energy continues to focus on R&D efforts aimed at developing new technologies, improving reliability of equipment, and decreasing costs to operations. In both 2019-periods, the increase in R&D expenditures mainly related to prototype expenses to further enhance Velocity’s operational performance.

(Stated in thousands of dollars)

	Three-month periods ended September 30,				Nine-month periods ended September 30,
		2019	2018	% Change		2019	2018	% Change
Finance expense		306	264	16		1,090	929	17
Finance expense lease liability		622	–	n.m.		1,897	–	n.m.
n.m. – not meaningful

Finance expenses relate to interest charges on the Corporation’s long-term and short-term bank facilities. For the three and nine-month periods ending September 30, 2019 the Corporation’s finance expense grew to $0.3 million and $1.1 million, respectively, an increase of 16 percent and 17 percent, respectively. Higher finance expenses are primarily due to higher average long-term borrowings as a result of increased capital expenditures in the respective 2019-periods compared to the same 2018-periods.

Finance expense lease liability relates to interest expenses incurred on lease liabilities, as a result of the adoption of IFRS 16 Leases in 2019.

(Stated in thousands of dollars)

	Three-month periods ended September 30,						Nine-month periods ended September 30,
			2019		2018		2019	2018
Net gain on disposition of drilling equipment			(514)		(2,358)		(3,390)	(6,209)
Foreign exchange losses (gains)			44		(86)		557	(304)
Provision for (Recovery of) bad debts			62		(8)		388	(15)
Other income			(408)		(2,452)		(2,445)	(6,528)

Net gain on disposition of drilling equipment typically result from insurance programs undertaken whereby proceeds for the lost equipment are at current replacement values, which are higher than the respective equipment’s book value. The recognized gain is net of losses, which typically result from asset retirements that were made before the end of the equipment’s useful life and self-insured downhole equipment losses. For the three and nine-month periods ended September 30, 2019, the Corporation realized a $0.5 million and $3.4 million gain on dispositions, respectively, compared to $2.4 million and $6.2 million gain on dispositions in the corresponding 2018-periods. For both 2019-periods, there were fewer instances of high value downhole equipment losses and more occurrences of asset retirements relative to the 2018-periods.

Foreign exchange losses (gains) relate to unrealized and realized exchange losses in the period. For the three and nine-month periods ended September 30, 2019, the Corporation recognized $44 thousand and $0.6 million in losses, respectively, relative to $0.1 million and $0.3 million gains in the corresponding 2018-periods. Losses in the 2019-periods were mainly due to settlement of US-denominated intercompany payables in the International segment.

Provision for bad debts for the three and nine-month periods ended September 30, 2019 primarily relate to bad debt provisions for a few customers in the US division.

(Stated in thousands of dollars, except percentages)

	Three-month periods ended September 30,			Nine-month periods ended September 30,
		2019	2018		2019	2018
Provision for (Recovery of) income taxes		1,086	180		1,830	(77)
Effective tax rates		30%	5%		n.m.	11%
n.m. – not meaningful

Provision for income taxes for the three and nine-month periods ended September 30, 2019, were $1.1 million and $1.8 million, respectively, as compared to $0.2 million and a recovery of income taxes of $0.1 million in the respective 2018-periods. Deferred taxes in the 2019-periods was impacted by unrecognized deferred tax assets with respect to deductible temporary differences in the Canadian jurisdictions, which were recognized in the corresponding 2018-periods.

Segmented Information

The Corporation reports three operating segments on a geographical basis throughout the Canadian provinces of Alberta, Saskatchewan, British Columbia, and Manitoba; throughout the Gulf Coast, Northeast and Rocky Mountain regions of the US; and internationally, in Russia and Albania.

Canada

(Stated in thousands of dollars)

	Three-month periods ended September 30,				Nine-month periods ended September 30,
		2019	2018	% Change		2019	2018	% Change
Revenue		19,123	25,646	(25)		54,651	66,307	(18)
Reportable segment profit (loss) before tax		1,571	1,831	(14)		616	(1,469)	n.m.
n.m. – not meaningful

The Canadian industry continued to experience challenges in 2019, despite these obstacles PHX Energy remained focused on maintaining market share, controlling costs and improving profitability. For the three and nine-month periods ended September 30, 2019, PHX Energy’s Canadian revenue was $19.1 million and $54.7 million, respectively, in comparison to revenue of $25.6 million and $66.3 million in the corresponding 2018-periods, a decrease of 25 percent and 18 percent, respectively. Lower revenue in PHX Energy’s Canada segment was due to declining drilling activity, however, this was partially offset by slightly higher revenue per day.  For the three and nine-month periods ended September 30, 2019, average revenue per day was $8,648 and $8,644, respectively, compared to $8,408 and $8,227 in the corresponding 2018-quarter.

For the three-month period ended September 30, 2019, the Corporation’s Canadian operating days declined 30 percent to 2,056 days, compared to 2,923 days in the relative 2018-quarter. The decline in the Canadian segment’s activity was slightly less than the decline in industry activity. The industry’s horizontal and directional drilling activity contracted 34 percent as measured by drilling days shrinking from 18,462 days in the 2018-quarter to 12,201 days in the 2019-quarter (Source: Daily Oil Bulletin).

During the third quarter of 2019, oil drilling, as measured by drilling days, represented approximately 49 percent of PHX Energy’s Canadian activity and the Corporation remained active in the Montney, Wilrich, Charlie Lake, Duvernay, Cardium, and Notekiwin areas.

For the nine-month period ended September 30, 2019, operating days declined 23 percent to 5,890 days, compared to 7,694 days in the same 2018-period. The Canadian industry activity declined 32 percent to 33,973 horizontal and directional drilling days reported in the nine-month period of 2019 as compared to 50,145 horizontal and directional drilling days in 2018 (Sources: Daily Oil Bulletin).

Despite the lower revenue and activity levels that have resulted from the challenges faced in the Canadian industry, the Corporation’s Canadian segment generated reportable segment profit before tax of $1.6 million and $0.6 million for the three and nine-month periods ended September 30, 2019, respectively.  The Canadian operations were able to maintain profitability as a result of generating higher average revenue per day and lower overall costs in the 2019-periods relative to the same 2018-periods.

Stream Services

Included in the Canadian segment’s revenue is the Stream division, which generated $1.3 million and $3.7 million of revenue in the three and nine-month periods ending September 30, 2019, respectively, as compared to $1.1 million and $3 million of revenue in the corresponding 2018-periods. Stream continued to increase activity in 2019, resulting in higher operating days for both 2019-periods. For the three and nine-month periods ended September 30, 2019, Stream’s operating days increased to 2,043 days and 6,612 days, respectively, from 1,613 days and 4,354 in the comparable 2018-periods. The increase in operating days in the 2019-periods is slightly offset by lower average revenue per day as compared to the 2018-periods as Stream provided a higher share of lower rate services in 2019 in alternative markets. In the third quarter of 2019 the average revenue per day was $658 as compared to $662 in the 2018-quarter and in the 2019 nine-month period average revenue per day was $566 as compared to $690 in the same 2018-period.

As a result of higher operating days and disciplined cost management, reportable segment losses before tax decreased to $0.3 million and $1 million for the three and nine-month periods ended September 30, 2019, respectively, as compared to $1 million and $3.2 million in the 2018-periods, respectively.

United States

(Stated in thousands of dollars)

	Three-month periods ended September 30,						Nine-month periods ended September 30,
		2019	2018	% Change			2019	2018	% Change
Revenue		68,265	54,129	26			198,399	143,842	38
Reportable segment income before tax		4,975	3,219	55			10,802	2,937	268

Thus far in 2019, the Corporation’s US operations have experienced a rising demand for its high performance technologies, which have increased in capacity during the year. This combined with targeted marketing efforts and the superior operational performance of personnel and equipment has led PHX Energy’s US division to once again outperform the industry.

For the three-month period ended September 30, 2019, US revenue was $68.3 million, a 26 percent increase compared to the $54.1 million in the corresponding 2018-quarter. The 2019 third quarter revenue was the highest quarterly revenue since the fourth quarter of 2014.  Average revenue per day, excluding the Corporation’s motor rental division, increased by 13 percent in the 2019-quarter to CAD $17,032 as compared to CAD $15,083 in the 2018-quarter. The higher average revenue per day relates to premiums and surcharges for the Corporation’s high performance technologies, particularly those resulting from increased RSS activity. The US segment’s operating days increased by 10 percent in the 2019-quarter to 3,850 days as compared to 3,506 days in the 2018-quarter. Reportable segment income was $5 million in the 2019-quarter, up 55 percent when compared to the $3.2 million in the 2018-quarter.

In contrast to the Corporation’s US segments results, the US industry rig count decreased by 12 percent quarter-over-quarter. There were an average of 868 active horizontal and directional rigs per day in the third quarter of 2019 compared to an average of 988 active horizontal and directional rigs per day in the 2018-quarter (Source: Baker Hughes).  Horizontal and directional rigs represented 94 percent of the average number of US rigs running per day (2018 – 94 percent). The Permian basin continued to be the dominate play in the US industry, representing 47 percent of the average operating rigs per day in the 2019-quarter (2018 quarter – 46 percent); although, the Permian did see a 10 percent decline in activity that was in line with the overall rate of decline in the US rig count. (Source: Baker Hughes).  During the three-month period ended September 30, 2019, the Permian basin represented approximately 78 percent of the wells drilled by the Corporation and nearly all of PHX Energy’s US activity was oil well drilling. In addition to the Permian basin, Phoenix USA continued to be active in the  Eagle Ford, Granite Wash, SCOOP/STACK, Marcellus, Bakken Utica and Niobrara basins.

For the nine-month period ended September 30, 2019, US revenue rose to $198.4 million, a 38 percent increase, compared to $143.8 million recognized in the 2018-period. Operating days for the nine-month period ended September 30, 2019, increased 18 percent to 11,502 days as compared to 9,741 days in the same 2018-period. PHX Energy’s activity again outpaced the industry’s horizontal and directional rig count, which showed a slight decline, 3 percent. In the nine-month period there were an average of 930 horizontal and directional rigs running on a daily basis as compared to 958 rigs in the comparable 2018-period (Source: Baker Hughes).  Permian basin activity represented 78 percent of Phoenix USA’s activity in the first nine months of 2019.

For the nine-month period ended September 30, 2019, revenue per day, excluding the Corporation’s motor rental division, increased 13 percent to CAD $16,465, relative to CAD $14,520 in the corresponding 2018-period. For the nine-month period ended September 30, 2019, a reportable segment income of $10.8 million was realized as compared to $2.9 million in the same 2018-period. Higher profitability in the period is mainly attributable to higher revenue per day and operating days in the period.

International

(Stated in thousands of dollars)

	Three-month periods ended September 30,				Nine-month periods ended September 30,
		2019	2018	% Change	2019	2018	% Change
Revenue		5,711	5,258	9	15,154	14,651	3
Reportable segment income before tax		304	1,221	(75)	369	831	(56)

For the three and nine-month periods ended September 30, 2019, the international segment’s revenue was $5.7 million and $15.2 million, respectively, as compared to $5.3 million and $14.7 million in the corresponding 2018-period. The improvement in revenue in both periods was primarily due to higher operating days in Albania.

For the three-month period ended September 30, 2019, PHX Energy’s Russia division’s revenue was $3.5 million, 7 percent lower compared to the $3.7 million in the 2018-quarter. PHX Energy’s Russia division realized higher operating days in 2019-quarter, generating 455 days compared to 406 days in the 2018-quarter. However, this increased activity was offset by a higher share of lower priced services and a general decline in market day rates.

For the three-month period ended September 30, 2019, PHX Energy’s Albania division recognized revenue of $2.3 million as compared to $1.5 million in the same 2018-quarter. The Albania division operated on three rigs in the third quarter of 2019 compared to two rigs in the 2018-quarter. Operating days increased 55 percent to 269 days in the 2019-quarter relative to 173 days in the corresponding 2018-quarter.

The international segment recognized reportable segment income for the three and nine-month periods ended September 30, 2019 of $0.3 million (2018 – $1.2 million) and $0.4 million (2018 – $0.8 million), respectively. The lower margins were primarily due to lower activity in Russia for some key clients and the general decline in market day rates.

Investing Activities

For the three-month period ended September 30, 2019, PHX Energy used $4.5 million of net cash in investing activities as compared to $2.4 million of net cash from investing activities in the 2018-quarter. During the 2019-quarter, the Corporation received proceeds of $5.8 million primarily from the involuntary disposal of drilling equipment in well bores, relative to $3.2 million received in 2018. PHX Energy spent $8.4 million on capital expenditures of drilling and other equipment in the 2019-quarter compared to $8.1 million in the 2018-quarter. 2019-quarter expenditures were comprised of:

• $4.9 million in MWD systems and spare components;
• $2.4 million in downhole performance drilling motors, and
• $1.1 million in RSS, machinery and equipment and other assets.

The capital expenditure program undertaken in the period was financed generally from cash flow from operating activities. Of the total capital expenditures in the 2019-quarter $6.8 million was used to grow the Corporation’s fleet of drilling equipment and the remaining $1.6 million was used to maintain the current fleet of drilling and other equipment.

The change in non-cash working capital balance of $1.6 million (use of cash) for the three-month period ended September 30, 2019, relates to the net change in the Corporation’s trade payables that are associated with the acquisition of capital assets. This compares to a $2.5 million (source of cash) for the three-month period ended September 30, 2018.

Financing Activities

The Corporation reported cash flows used in financing activities of $6.1 million in the three-month period ended September 30, 2019 as compared to $6.2 million in the 2018-quarter. In the 2019-quarter, the Corporation:

• repurchased 1,414,400 shares for $4 million under the NCIB,
• made net repayments of $1.3 million to its syndicated facilities; and
• made payment of $0.8 million towards it lease liability in line with the newly adopted IFRS 16 Leases standard.

Capital Resources

As of September 30, 2019, the Corporation had $15 million drawn on its syndicated facility, $6.6 million drawn on its operating facility, and a cash balance of $6.7 million. As at September 30, 2019, the Corporation had approximately CAD $43.4 million and USD $15 million available to be drawn from its credit facilities. The credit facilities are secured by substantially all of the Corporation’s assets.

As at September 30, 2019, the Corporation was in compliance with all its financial covenants. On July 29, 2019, the Corporation extended the maturity date of the syndicated loan agreement to December 11, 2022. The Corporation also increased the borrowing amounts in the syndicated facility from CAD $48 million to CAD $50 million and in the US operating facility from USD $5 million to USD $15 million.

Cash Requirements for Capital Expenditures

Historically, the Corporation has financed its capital expenditures and acquisitions through cash flows from operating activities, debt and equity. In the third quarter of 2019, the Board approved an increase to PHX Energy’s 2019 capital expenditure program from $30 million to $35 million. The increase to the capital expenditure program was primarily dedicated to purchasing long lead items required to further expand the Atlas Motor and Velocity fleets for activity in 2020.

These planned expenditures are expected to be financed from a combination of one or more of the following: cash flow from operations, the Corporation’s unused credit facilities or equity, if necessary. However, if a sustained period of market uncertainty and financial market volatility persists in 2019, the Corporation’s activity levels, cash flows and access to credit may be negatively impacted, and the expenditure level would be reduced accordingly. Conversely, if future growth opportunities present themselves, the Corporation would look at expanding this planned capital expenditure amount.

Outlook

Profitability continued to strengthen in the third quarter, building upon the improvements that began earlier in 2018. In the quarter, the Corporation achieved the highest quarterly adjusted EBIDTA since the third quarter of 2014 and the highest consolidated quarterly revenue since the first quarter of 2015. These ongoing achievements were made despite Canadian and US industry activity declining and are a result of the Corporation’s strategic focus on the US market and the initiative to build a fleet of differentiating high performance technologies that deliver higher margins.

The Corporation’s US segment continues to be the engine driving the improved financial performance, despite a weakening in the industry. In the third quarter, revenue achieved in the US was the highest quarterly revenue since the fourth quarter 2014. Despite the lower rig counts, the US remains the most significant area of growth for the Corporation. Even with the gains achieved over the past year there is still potential for PHX Energy to capture more market share. Operators in this market are strongly focused on drilling performance and are insisting on specific high performance technologies as they continue to push for faster and more efficient drilling. This trend of high grading drilling technologies is strengthening and PHX Energy is well positioned to capitalize on this demand. PHX Energy will continue to expand its Velocity, Atlas Motor and PowerDrive Orbit RSS fleets, increasing capacity to fuel further growth. As PHX Energy continues to execute on its US growth and technology development strategies, the Corporation is optimistic that US operations will continue to outpace the US industry.

The third quarter in Canada was consistent with the first half of the year, with declining rig counts persisting. The issues related to market access, public perception of the energy sector and political agendas are haunting the energy sector and it appears there will be no change to this environment in the near term. Despite these challenging times, the Corporation is focused on maintaining a viable business in Canada and has adapted its operations to this new norm. As in the US market, the Canadian segment is utilizing the performance and financial advantages created by its fleet of high performance technologies.  Additionally the Corporation is leveraging its infrastructure and expertise in Canada to support the growth in the US. Although PHX Energy does not anticipate an uptick in activity which typically comes with the winter drilling season in the fourth and first quarters, it believes that it can maintain the level of performance achieved in the third quarter with its strong marketing relationships, industry leading operations, premium technologies, and strategies to support its continued growth in the US.

In the third quarter, PHX Energy’s international operations increased activity quarter-over-quarter and Albanian operations generated increased revenue as it remained active on three rigs in the country. In Russia however, revenue slightly declined as a result of a larger portion of lower priced services being provided and overall pricing pressure in the industry.  PHX Energy believes that there are opportunities for growth in Russia and is implementing operational and marketing strategies to capitalize on these in future quarters.

Technology Update

High performance technologies have proven the significant positive impact they can have on Operator’s drilling operations and this has led Operator’s to become more specific and targeted with their requirements. With the lower rig counts competition has intensified, and Operators can demand a directional provider deploy specific technologies in order to be awarded the work. This boasts well for PHX Energy and its high performance fleet, and the Corporation must remain at the forefront of technology development.

The impact the current high performance technologies have made on profitability, market share and performance is one of the most significant in the Corporation’s history. This is the result of an unwavering commitment over the past number of years to differentiate PHX Energy as a leading provider of downhole technologies. Today, the Corporation is laser focused on this objective, allocating its capital expenditure program to increase its capacity while continuing its engineering and development efforts towards improved technologies.  PHX Energy is steadfast on protecting its position in the market as a top tier technology leader.

The Corporation has built its financial position to be one of the more favorable in the sector, with a strong balance sheet and relatively low debt levels. PHX Energy is committed to a conservative approach to its financial management and further strengthening this position. In an environment where it is increasingly difficult to reward shareholders through valuations, PHX Energy is in a unique position to utilize strategies, such as the NCIB, to help create shareholder value.

Michael Buker, President
October 30, 2019

Non-GAAP Measures

Adjusted EBITDA

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

The following is a reconciliation of net earnings to adjusted EBITDA:

(Stated in thousands of dollars)

	Three-month periods ended September 30,			Nine-month periods ended September 30,
		2019	2018	2019	2018
Net income (loss)		2,594	3,743	(494)	(591)
Add (deduct):
Depreciation and amortization drilling and other equipment		9,894	9,505	30,178	29,613
Depreciation and amortization right-of-use asset(1)		896	–	2,642	–
Provision for (Recovery of) income taxes		1,086	180	1,830	(77)
Finance expense		306	264	1,090	929
Finance expense lease liability(1)		622	–	1,897	–
Equity-settled share-based payments		160	342	559	1,201
Unrealized foreign exchange (gain) loss		(22)	(100)	259	(360)
Adjusted EBITDA as reported		15,536	13,934	37,961	30,715
(1) Cash payment on leases included in IFRS 16 for the three and nine-month periods ended September 30, 2019 was $1.4 million and $4.3 million, respectively. These were recorded as rental expenses in direct costs and SG&A in the 2018-periods.

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 on a dilutive basis does not include anti-dilutive options.

Funds from Operations

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

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

(Stated in thousands of dollars)

	Three-month periods ended September 30,				Nine-month periods ended September 30,
		2019	2018		2019	2018
Cash flows from operating activities		9,721	6,027		40,665	15,871
Add (deduct):
Changes in non-cash working capital		4,699	4,808		(6,756)	7,935
Interest paid		172	94		668	442
Income taxes paid (received)		77	532		(23)	128
Funds from (used in) operations		14,669	11,461		34,554	24,376

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 on a dilutive basis does not include anti-dilutive options.

Debt to Covenant EBITDA Ratio

Debt is represented by loans and borrowings. Covenant EBITDA, for purposes of the calculation of this covenant ratio, is represented by net earnings for a rolling four quarter period, adjusted for finance expense and finance expense lease liability, provision for income taxes, depreciation and amortization, equity-settled share-based payments, impairment losses on goodwill and intangible assets, onerous contracts, and IFRS 16 adjustment to restate cash payments to expense, subject to the restrictions provided in the amended credit agreement.

Working Capital

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

Net Debt

Net debt is defined as the Corporation’s loans and borrowings and operating facility borrowings less cash and cash equivalents. This non-GAAP measure does not have a standardized meaning and is not a financial measure recognized under GAAP. Management uses 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.

About PHX Energy Services Corp.

The Corporation, through its directional drilling subsidiary entities, provides horizontal and directional drilling technology and services to oil and natural gas producing companies in Canada, the US, Russia and Albania. PHX Energy also provides electronic drilling recorder (“EDR”) technology and services.

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 centres in Calgary, Alberta. In addition, PHX Energy has a facility in Estevan, Saskatchewan. PHX Energy’s US operations, conducted through the Corporation’s wholly-owned subsidiary, Phoenix Technology Services USA Inc. (“Phoenix USA”), is headquartered in Houston, Texas. Phoenix USA has sales and service facilities in Houston, Texas; Denver, Colorado; Casper, Wyoming; Midland, Texas; Bellaire, Ohio; and Oklahoma City, Oklahoma. Internationally, PHX Energy has sales offices and service facilities in Albania and Russia, and administrative offices in Nicosia, Cyprus; Dublin, Ireland; and Luxembourg City, Luxembourg.

PHX Energy markets its EDR technology and services in Canada through its division, Stream Services (“Stream”), which has an office and operations center in Calgary, Alberta. EDR technology is marketed worldwide, outside Canada, through Stream’s wholly-owned subsidiary Stream Services International Inc.

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

For further information please contact:
John Hooks, CEO; Michael Buker, President; or Cameron Ritchie, Senior Vice President Finance and CFO

PHX Energy Services Corp.
Suite 1400, 250 2nd Street SW
Calgary, Alberta T2P 0C1
Tel:  403-543-4466    Fax: 403-543-4485     www.phxtech.com

Consolidated Statements of Financial Position

(unaudited)

			September 30, 2019			December 31, 2018
ASSETS
Current assets:
	Cash and cash equivalents		$	6,667,910			$	3,643,418
	Trade and other receivables			90,827,920				103,987,716
	Inventories			30,529,040				27,558,003
	Prepaid expenses			3,294,154				2,428,221
	Current tax assets			55,941				625,964
	Total current assets			131,374,965				138,243,322
Non-current assets:
	Drilling and other equipment			85,031,445				94,164,880
	Right-of-use asset			31,602,910				–
	Intangible assets			20,138,047				22,301,680
	Goodwill			8,876,351				8,876,351
	Deferred tax assets			568,299				594,049
	Total non-current assets			146,217,052				125,936,960
Total assets			$	277,592,017			$	264,180,282
LIABILITIES AND SHAREHOLDERS’ EQUITY
Current liabilities:
	Lease liability		$	2,823,969			$	–
	Operating facility			6,568,072				13,348,562
	Trade and other payables			59,775,517				64,578,428
	Total current liabilities			69,167,558				77,926,990
Non-current liabilities:
	Lease liability			40,839,263				–
	Loans and borrowings			15,000,000				11,821,000
	Deferred tax liability			2,993,562				2,886,606
	Provision for onerous contracts			–				1,832,000
	Deferred income			–				1,300,007
	Total non-current liabilities			58,832,825				17,839,613
Equity:
	Share capital			256,566,776				265,760,391
	Contributed surplus			11,148,473				10,631,982
	Retained earnings			(133,869,411	)			(125,385,208	)
	Accumulated other comprehensive income			15,745,796				17,406,514
	Total equity			149,591,634				168,413,679
Total liabilities and equity			$	277,592,017			$	264,180,282

Consolidated Statements of Comprehensive Income/Loss

(unaudited)

		Three-month periods ended September 30,							Nine-month periods ended September 30,
				2019			2018				2019			2018
Revenue			$	93,099,227		$	85,032,830			$	268,203,575		$	224,800,407
Direct costs				77,089,805			69,477,782				228,140,741			197,795,786
Gross profit				16,009,422			15,555,048				40,062,834			27,004,621
Expenses:
Selling, general and administrative expenses				10,615,982			12,983,042				35,212,139			30,765,451
Research and development expenses				1,193,183			836,752				2,972,786			2,506,363
Finance expense				306,097			264,046				1,089,722			929,017
Finance expense lease liability				622,196			–				1,896,879			–
Other income				(407,597	)		(2,452,247	)			(2,445,385	)		(6,528,264	)
				12,329,861			11,631,593				38,726,141			27,672,567
Earnings (loss) before income taxes				3,679,561			3,923,455				1,336,693			(667,946	)
Provision for (Recovery of) income taxes
Current				121,492			1,388,630				590,276			3,315,087
Deferred				964,563			(1,208,674	)			1,239,976			(3,391,862	)
				1,086,055			179,956				1,830,252			(76,775	)
Net earnings (loss)				2,593,506			3,743,499				(493,559	)		(591,171	)
Other comprehensive income (loss)
	Foreign currency translation			1,001,351			(2,541,426	)			(1,660,718	)		753,944
Total comprehensive income (loss) for the period			$	3,594,857		$	1,202,073			$	(2,154,277	)	$	162,773
Earnings (loss) per share – basic			$	0.05		$	0.06			$	(0.01	)	$	(0.01	)
Earnings (loss) per share – diluted			$	0.05		$	0.06			$	(0.01	)	$	(0.01	)

 

Consolidated Statements of Cash Flows

(unaudited)

	Three-month periods ended September 30,							Nine-month periods ended September 30,
		2019			2018				2019			2018
Cash flows from operating activities:
Net income (loss)	$	2,593,506		$	3,743,499			$	(493,559	)	$	(591,171	)
Adjustments for:
Depreciation and amortization		9,893,523			9,505,407				30,178,287			29,612,677
Depreciation and amortization right-of-use asset		895,878			–				2,641,400			–
Provision for (Recovery of) income taxes		1,086,055			179,956				1,830,252			(76,775	)
Unrealized foreign exchange loss (gain)		(21,904	)		(101,286	)			259,105			(359,717	)
Gain on disposition of drilling equipment		(513,628	)		(2,358,209	)			(3,390,124	)		(6,209,463	)
Equity-settled share-based payments		160,260			341,860				559,317			1,200,656
Finance expense		306,097			264,046				1,089,722			929,017
Provision for (Recovery of) bad debts		61,590			(7,553	)			387,728			(15,441	)
Provision for inventory obsolescence		207,958			49,049				1,491,260			256,157
Provision for onerous contracts		–			(122,000	)			–			(270,000	)
Amortization of deferred income		–			(33,333	)			–			(99,999	)
Interest paid		(172,424	)		(93,951	)			(667,712	)		(441,842	)
Income taxes received (paid)		(77,482	)		(532,119	)			23,389			(127,996	)
Change in non-cash working capital		(4,698,171	)		(4,808,355	)			6,755,880			(7,934,636	)
Net cash from operating activities		9,721,258			6,027,011				40,664,945			15,871,467
Cash flows from investing activities:
Proceeds on disposition of drilling equipment		5,779,886			3,197,615				11,823,951			11,165,720
Acquisition of drilling and other equipment		(8,443,739	)		(8,066,652	)			(28,840,422	)		(15,831,277	)
Acquisition of intangible assets		(66,180	)		(26,135	)			(66,180	)		(32,733	)
Change in non-cash working capital		(1,631,833	)		2,459,181				(5,345,034	)		1,259,571
Net cash used in investing activities		(4,361,866	)		(2,435,991	)			(22,427,685	)		(3,438,719	)
Cash flows from financing activities:
Repurchase of shares under the NCIB		(3,978,754	)		(797,258	)			(9,324,191	)		(1,034,758	)
Proceeds from (Repayment of) operating facility		9,827			(1,500,675	)			(6,780,490	)		(872,510	)
Payments of Lease Liability		(819,493	)		–				(2,374,837	)		–
Proceeds from (Repayment of) loans and borrowings		(1,308,700	)		(4,000,000	)			3,179,000			(9,000,000	)
Proceeds from issuance of share capital		–			76,916				87,750			76,916
Net cash used in financing activities		(6,097,120	)		(6,221,017	)			(15,212,768	)		(10,830,352	)
Net increase (decrease) in cash and cash equivalents		(737,728	)		(2,629,997	)			3,024,492			1,602,396
Cash and cash equivalents, beginning of period		7,405,638			8,354,932				3,643,418			4,122,539
Cash and cash equivalents, end of period	$	6,667,910		$	5,724,935			$	6,667,910		$	5,724,935