Financial Results
In the third quarter of 2020, despite the ongoing challenges presented by the COVID-19 pandemic, the Corporation continued to achieve positive adjusted EBITDA. For the three-month period ended
For the three-month period ended
During the third quarter of 2020, the Corporation’s US activity continued to be impacted by the industry downturn that led the rig count to all-time lows. Despite the weak environment, the Corporation was resilient to this and experienced a smaller decline relative to the overall US market evidencing the positive reputation and capabilities of PHX Energy’s high performance technology fleet. The US rig count fell 72 percent from 920 average rigs running per day in the third quarter of 2019 to 254 rigs in the 2020-quarter (Source:
The ongoing challenges and uncertainty in the Canadian industry persisted in the third quarter with activity levels falling to multi-decade lows. The rig count dropped 64 percent quarter-over-quarter with an average of 47 active rigs operating per day in the third quarter of 2020 (2019 - 132) (Source:
The Corporation continued to maintain a strong balance sheet position, and as at
Responding to COVID-19
On
COVID-19 has had a significant impact on the global economy and has resulted in a substantial weakening of global oil prices and global oil demand. The Corporation continued to experience reduced drilling activity in the third quarter of 2020 due to the prevailing economic and industry conditions driven by COVID-19. There are many variables and uncertainties regarding COVID-19, including the duration and magnitude of the disruption in the oil and natural gas industry. As such, it is not possible to precisely estimate the impact of the COVID-19 pandemic on the Corporation’s financial condition and operations. Management has been proactive in mitigating these risks, aligning costs with projected revenues and protecting profit margins. Management restructured its business costs, primarily during the second quarter, in line with decreasing drilling activity in
The Corporation has remained diligent in protecting its balance sheet and retains financial flexibility with significant liquidity on its credit facilities and no bank loans and borrowings outstanding at the end of the 2020-quarter. As at
Capital Spending
For the three-month period ended
As at
In 2020, the Corporation expects to spend
Capital expenditures since 2015 have primarily been dedicated toward expanding and growing the capacity of the high performance fleets. In addition to the Corporation’s fleet of conventional measurement while drilling (“MWD”) systems and drilling motors, the Corporation possesses 350 Atlas motors, comprised of various configurations including its 7.25", 5.13", 5.76”, 8” and 9" Atlas motors, 77 Velocity systems, and 18 PowerDrive Orbit RSS, the largest independent fleet in
Normal Course Issuer Bid
During the third quarter of 2020, the
Pursuant to the current NCIB, in the three-month period ended
Financial Highlights
(Stated in thousands of dollars except per share amounts, percentages and shares outstanding)
Three-month periods ended | Nine-month periods ended | |||||||||||||
2020 | 2019 | % Change | 2020 | 2019 | % Change | |||||||||
Operating Results | (unaudited) | (unaudited) | (unaudited) | (unaudited) | ||||||||||
Revenue | 39,776 | 93,099 | (57 | ) | 189,564 | 268,204 | (29 | ) | ||||||
Net income (loss) | (1,505 | ) | 2,594 | n.m. | (9,725 | ) | (494 | ) | n.m. | |||||
Earnings (loss) per share – diluted | (0.03 | ) | 0.05 | n.m. | (0.18 | ) | (0.01 | ) | n.m. | |||||
Adjusted EBITDA (1) | 7,469 | 15,536 | (52 | ) | 31,462 | 37,961 | (17 | ) | ||||||
Adjusted EBITDA per share – diluted (1) | 0.14 | 0.27 | (48 | ) | 0.59 | 0.66 | (11 | ) | ||||||
Adjusted EBITDA as a percentage of revenue (1) | 19 | % | 17 | % | 17 | % | 14 | % | ||||||
Cash Flow | ||||||||||||||
Cash flows from operating activities | 9,400 | 9,721 | (3 | ) | 57,781 | 40,665 | 42 | |||||||
Funds from operations (1) | 5,481 | 14,669 | (63 | ) | 29,429 | 34,554 | (15 | ) | ||||||
Funds from operations per share – diluted (1) | 0.10 | 0.26 | (62 | ) | 0.55 | 0.60 | (8 | ) | ||||||
Capital expenditures | 1,816 | 8,444 | (78 | ) | 22,245 | 28,840 | (23 | ) | ||||||
Free cash flow (1) | 2,544 | 11,569 | (78 | ) | 19,883 | 22,326 | (11 | ) | ||||||
Financial Position (unaudited) | ||||||||||||||
Working capital | 56,416 | 68,393 | (18 | ) | ||||||||||
Net debt (1) (2) | (18,889 | ) | 14,710 | n.m. | ||||||||||
Shareholders’ equity | 135,497 | 148,944 | (9 | ) | ||||||||||
Common shares outstanding | 50,980,820 | 53,246,420 | (4 | ) |
n.m. – not meaningful
(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 press release.
(2) As at
Non-GAAP Measures
PHX Energy uses throughout this press release 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, free cash flow, net debt and working capital. Management believes that these measures provide supplemental financial information that is useful in the evaluation of the Corporation’s operations and are commonly used by other oil and natural gas service companies. Investors should be cautioned, however, that these measures should not be construed as alternatives to measures determined in accordance with GAAP as an indicator of PHX Energy’s performance. The Corporation’s method of calculating these measures may differ from that of other organizations, and accordingly, such measures may not be comparable. Please refer to the “Non-GAAP Measures” section following the Outlook section of this press release for applicable definitions 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, the projected capital expenditures budget for the 2020-year and how this budget will be allocated and funded, and the anticipated impact of COVID-19 on the Corporation’s operations, results and the Corporation’s planned responses thereto.
The above are stated under the headings: “Capital Spending”, “Responding to COVID-19” and “Cash Requirements for Capital Expenditures”. In addition, all information contained under the headings “Responding to COVID-19” and “Outlook” in this document contains forward-looking statements.
In addition to other material factors, expectations and assumptions which may be identified in this press release and other continuous disclosure documents of the Corporation referenced herein, assumptions have been made in respect of such forward-looking statements and information regarding, among other things: the Corporation will continue to conduct its operations in a manner consistent with past operations; the general continuance of current industry conditions; anticipated financial performance, business prospects, impact of competition, strategies, the general stability of the economic and political environment in which the Corporation operates; the continuing impact of COVID-19 on the global economy, specifically trade, manufacturing, supply chain and energy consumption, among other things and the resulting impact on the Corporation’s operations and future results which remain uncertain; exchange and interest rates; the continuance of existing (and in certain circumstances, the implementation of proposed) tax, royalty and regulatory regimes; the sufficiency of budgeted capital expenditures in carrying out planned activities; the availability and cost of labour and services and the adequacy of cash flow; debt and ability to obtain and maintain financing on acceptable terms to fund its ongoing operations and 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 press release 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 | Nine-month periods ended | ||||||||
2020 | 2019 | % Change | 2020 | 2019 | % Change | |||||
Revenue | 39,776 | 93,099 | (57 | ) | 189,564 | 268,204 | (29 | ) |
Industry activity across all of the Corporation’s operating segments remained weak as depressed oil prices and the impact of COVID-19 carried through the third quarter of 2020. For the three-month period ended
During the third quarter of 2020, Western Texas Intermediate (“WTI”) spot crude oil price and Western Canadian Select (“WCS”) oil prices were 27 percent lower than in the 2019-quarter. WTI averaged USD
For the nine-month period ended
Operating Costs and Expenses
(Stated in thousands of dollars except percentages)
Three-month periods ended | Nine-month periods ended | |||||||||||||
2020 | 2019 | % Change | 2020 | 2019 | % Change | |||||||||
Direct costs | 35,607 | 77,090 | (54 | ) | 163,837 | 228,141 | (28 | ) | ||||||
Gross profit as a percentage of revenue | 10 | % | 17 | % | 14 | % | 15 | % | ||||||
Depreciation & amortization drilling and other equipment (included in direct costs) | 6,977 | 9,894 | (29 | ) | 22,794 | 30,178 | (24 | ) | ||||||
Depreciation & amortization right-of-use asset (included in direct costs) | 861 | 896 | (4 | ) | 2,723 | 2,641 | 3 | |||||||
Gross profit as percentage of revenue excluding depreciation & amortization | 30 | % | 29 | % | 27 | % | 27 | % |
Direct costs are comprised of field and shop expenses and include depreciation and amortization on the Corporation’s equipment and right-of-use assets. For the three and nine-month periods ended
For the three and nine-month periods ended
For the three and nine-month periods ended
(Stated in thousands of dollars except percentages)
Three-month periods ended | Nine-month periods ended | ||||||||||||
2020 | 2019 | % Change | 2020 | 2019 | % Change | ||||||||
SG&A costs | 6,204 | 10,616 | (42 | ) | 20,537 | 35,212 | (42 | ) | |||||
Cash-settled share-based payments (included in SG&A costs) | 888 | 1,078 | (18 | ) | (1,149 | ) | 5,108 | (122 | ) | ||||
Equity-settled share-based payments (included in SG&A costs) | 66 | 160 | (59 | ) | 214 | 559 | (62 | ) | |||||
SG&A costs excluding equity and cash-settled share-based payments and provision for onerous contracts as a percentage of revenue | 13 | % | 10 | % | 11 | % | 11 | % |
For the three and nine-month periods ended
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
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
(Stated in thousands of dollars)
| Three-month periods ended | Nine-month periods ended | ||||||||
2020 | 2019 | % Change | 2020 | 2019 | % Change | |||||
Research & development expense | 216 | 1,193 | (82 | ) | 1,796 | 2,973 | (40 | ) |
Research and development (“R&D”) expenditures for the three and nine-month periods ended
(Stated in thousands of dollars)
| Three-month periods ended | Nine-month periods ended | ||||||||
2020 | 2019 | % Change | 2020 | 2019 | % Change | |||||
Finance expense | 133 | 306 | (57 | ) | 661 | 1,090 | (39 | ) | ||
Finance expense lease liability | 573 | 622 | (8 | ) | 1,799 | 1,897 | (5 | ) |
Finance expenses relate to interest charges on the Corporation’s long-term and short-term bank facilities. For the three and nine-month periods ended
Finance expense lease liability relates to interest expenses incurred on lease liabilities. For the three and nine-month periods ended
(Stated in thousands of dollars)
Three-month periods ended | Nine-month periods ended | |||||||||
2020 | 2019 | 2020 | 2019 | |||||||
Net gain on disposition of drilling equipment | (136 | ) | (514 | ) | (2,545 | ) | (3,390 | ) | ||
Foreign exchange losses (gains) | 226 | 44 | (3 | ) | 557 | |||||
Provision for (Recovery of) bad debts | (1,608 | ) | 62 | 2,344 | 388 | |||||
Other income | (1,518 | ) | (408 | ) | (204 | ) | (2,445 | ) |
Net gain on disposition of drilling equipment is comprised of gains on disposition of drilling equipment that typically result from insurance programs undertaken whereby proceeds for the lost equipment are at current replacement values, which are higher than the respective equipment’s book value. The recognized gain is net of losses, which typically result from asset retirements that were made before the end of the equipment’s useful life and self-insured downhole equipment losses. For the three and nine-month periods ended
In both 2020-periods, the Corporation had fewer occurrences of downhole equipment losses resulting in lower net gain on disposition of drilling equipment.
Foreign exchange gains and losses relate to unrealized and realized exchange fluctuations in the period. For the three and nine-month periods ended
For the nine-month period ended
(Stated in thousands of dollars)
| Three-month periods ended | Nine-month periods ended | ||||||
2020 | 2019 | % Change | 2020 | 2019 | % Change | |||
Impairment loss | - | - | n.m. | 10,730 | - | n.m. |
n.m. – not meaningful
For the nine-month period ended
(Stated in thousands of dollars, except percentages)
| Three-month periods ended | Nine-month periods ended | ||||
2020 | 2019 | 2020 | 2019 | |||
Provision for (Recovery of) income taxes | 66 | 1,086 | 133 | 1,830 | ||
Effective tax rates | n.m. | n.m. | n.m. | n.m. |
n.m. – not meaningful
Provisions for income taxes for the three and nine-month periods ended
Segmented Information
The Corporation reports three operating segments on a geographical basis throughout the Canadian provinces of
(Stated in thousands of dollars)
Three-month periods ended | Nine-month periods ended | ||||||||||||
2020 | 2019 | % Change | 2020 | 2019 | % Change | ||||||||
Revenue | 7,044 | 19,123 | (63 | ) | 36,210 | 54,651 | (34 | ) | |||||
Reportable segment profit (loss) before tax | (328 | ) | (77 | ) | n.m. | 95 | (4,328 | ) | n.m. |
n.m. – not meaningful
For the three and nine-month periods ended
During the third quarter of 2020, the Corporation remained active in the
Despite the decline in revenue in the 2020-periods, reportable segment loss in the third quarter of 2020 was minimized to
(Stated in thousands of dollars)
Three-month periods ended | Nine-month periods ended | ||||||||||
2020 | 2019 | % Change | 2020 | 2019 | % Change | ||||||
Revenue | 30,337 | 68,265 | (56 | ) | 143,074 | 198,399 | (28 | ) | |||
Reportable segment income before tax | 678 | 6,623 | (90 | ) | 9,835 | 15,746 | (38 | ) |
PHX Energy’s US operations continued to gain market share and remain profitable in a quarter when the industry hit its lowest activity level in history. In the third quarter of 2020, revenue from PHX Energy’s US operations decreased by 56 percent to
For the three-month period ended
For the nine-month period ended
For the nine-month period ended
International
(Stated in thousands of dollars)
Three-month periods ended | Nine-month periods ended | |||||||||||
2020 | 2019 | % Change | 2020 | 2019 | % Change | |||||||
Revenue | 2,395 | 5,711 | (58 | ) | 10,280 | 15,154 | (32 | ) | ||||
Reportable segment income (loss) before tax | (1,464 | ) | 304 | n.m. | (1,447 | ) | 369 | n.m. |
n.m. – not meaningful
For the three-month period ended
For the three-month period ended
For the three and nine-month periods ended
Investing Activities
Net cash used in investing activities for the three-month period ended
$1.7 million in MWD systems and spare components; and$0.1 million in downhole performance drilling motors.
The capital expenditure program undertaken in the period was financed generally from cash flow from operating activities. Of the total capital expenditures in the 2020-quarter
The change in non-cash working capital balance of
Financing Activities
The Corporation reported cash flows used in financing activities of
- repurchased 2,270,600 common shares for
$3.2 million under the NCIB; and - made payments of
$0.7 million towards lease liability.
Capital Resources
As of
As at
Cash Requirements for Capital Expenditures
Historically, the Corporation has financed its capital expenditures and acquisitions through cash flows from operating activities, debt and equity. The 2020 capital expenditures are expected to be
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 2020, 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.
As at
Outlook
During the third quarter, we achieved positive adjusted EBITDA, gained market share and maintained a cash positive position with zero bank debt despite the global COVID-19 pandemic and muted demand for energy continuing to impact our financial results. We remained diligently focused on cost management strategies and operational excellence which allowed us to produce these achievements in an extremely challenging environment.
With the prolonged duration of this pandemic, safety remains at the forefront of our activities. As new waves of COVID-19 develop, we continue to monitor the situation and the safety and health guidelines set out by government and health officials, adapting our operations and protocols as needed.
While the rig counts in
We continue to focus on our strategic initiatives that are positioning us to outlast and survive this downturn and to grow when a meaningful market recovery occurs. Our priorities remain focused on building our balance sheet strength, maintaining positive adjusted EBITDA and cash flows despite declining revenue and activity and protecting our position as a technology leader. We continue to monitor, evaluate and adjust our business costs in line with drilling activity in
In the fourth quarter rig counts are slightly increasing, and our activity levels are also seeing a slight uptick from the third quarter as we have gained additional work from both existing and new clients. We are hopeful this trend will continue into 2021, given the recent strength in natural gas prices. That said, this is a very volatile time surrounded with uncertainty and conditions can change rapidly. Although we are in an enviable position both operationally and financially, any recovery will be gradual, and challenges, such as pricing pressure, will remain especially if the competitive landscape in our sector does not change.
We believe we are positioned to grow and protect our place both as an operational and financial leader in our sector as we all navigate the road ahead.
Non-GAAP Measures
Adjusted EBITDA
Adjusted EBITDA, defined as earnings before finance expense, finance expense lease liability, income taxes, depreciation and amortization, impairment losses on drilling and other equipment and goodwill, equity 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 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. Starting in the first quarter of 2020, due to the impact of COVID-19 and the downturn in the oil and natural gas industry, the Corporation included impairment expenses and severance costs, which were not present in the relative 2019-quarter. Severance costs related to restructuring were not present, and therefore were not included in the 2019 Annual Report. 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 | Nine-month periods ended | |||||||||
2020 | 2019 | 2020 | 2019 | |||||||
Net income (loss) | (1,505 | ) | 2,594 | (9,725 | ) | (494 | ) | |||
Add (deduct): | ||||||||||
Depreciation and amortization drilling and other equipment | 6,977 | 9,894 | 22,794 | 30,178 | ||||||
Depreciation and amortization right-of-use asset | 861 | 896 | 2,723 | 2,642 | ||||||
Impairment loss | - | - | 10,730 | - | ||||||
Severance expense | 102 | - | 2,033 | - | ||||||
Provision for income taxes | 66 | 1,086 | 133 | 1,830 | ||||||
Finance expense | 133 | 306 | 661 | 1,090 | ||||||
Finance expense lease liability | 573 | 622 | 1,799 | 1,897 | ||||||
Equity-settled share-based payments | 66 | 160 | 214 | 559 | ||||||
Unrealized foreign exchange (gain) loss | 196 | (22 | ) | 100 | 259 | |||||
Adjusted EBITDA as reported | 7,469 | 15,536 | 31,462 | 37,961 |
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 | Nine-month periods ended | ||||||||
2020 | 2019 | 2020 | 2019 | ||||||
Cash flows from operating activities | 9,400 | 9,721 | 57,781 | 40,665 | |||||
Add (deduct): | |||||||||
Changes in non-cash working capital | (3,989 | ) | 4,699 | (28,277 | ) | (6,756 | ) | ||
Interest paid | 47 | 172 | 335 | 668 | |||||
Income taxes paid (received) | 23 | 77 | (410 | ) | (23 | ) | |||
Funds from operations | 5,481 | 14,669 | 29,429 | 34,554 |
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.
Free Cash Flow
Free cash flow is defined as funds from operations (as defined above) less maintenance capital expenditures and cash payment on leases. This non-GAAP measure does not have a standardized meaning and is not a financial measure recognized under GAAP. Management uses free cash flow as an indication of the Corporation’s ability to generate funds from its operations to support operations and maintain the Corporation’s drilling and other equipment. This performance measure is useful to investors for assessing the Corporation’s operating and financial performance, leverage and liquidity. Investors should be cautioned, however, that this financial measure should not be construed as an alternative measure to cash flows from operating activities determined in accordance with GAAP. PHX Energy’s method of calculating free cash flow may differ from that of other organizations and, accordingly, it may not be comparable to that of other companies.
The following is a reconciliation of funds from operations to free cash flow:
(Stated in thousands of dollars)
Three-month periods ended | Nine-month periods ended | |||||||||
2020 | 2019 | 2020 | 2019 | |||||||
Funds from operations (1) | 5,481 | 14,669 | 29,429 | 34,554 | ||||||
Deduct: | ||||||||||
Maintenance capital expenditures | (1,691 | ) | (1,658 | ) | (5,478 | ) | (7,956 | ) | ||
Cash payment on leases | (1,246 | ) | (1,442 | ) | (4,068 | ) | (4,272 | ) | ||
Free cash flow | 2,544 | 11,569 | 19,883 | 22,326 |
(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 press release.
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 drilling and other equipment and goodwill, unrealized foreign exchange gains or losses, 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 syndicate 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
The Corporation, through its directional drilling subsidiary entities, provides horizontal and directional drilling technology and services to oil and natural gas producing companies in
PHX Energy’s Canadian directional drilling operations are conducted through
In the first quarter of 2020, the Corporation closed substantially all of its operations in its Stream Services (“Stream”) division which marketed electronic drilling recorder (“EDR”) technology and services.
The common shares of PHX Energy trade on the
For further information please contact:
Suite 1400,
Tel: 403-543-4466 Fax: 403-543-4485 www.phxtech.com
Consolidated Statements of Financial Position
(unaudited)
ASSETS | ||||||||
Current assets: | ||||||||
Cash and cash equivalents | $ | 18,889,321 | $ | 10,582,296 | ||||
Trade and other receivables | 30,231,680 | 93,641,885 | ||||||
Inventories | 31,089,870 | 30,826,700 | ||||||
Prepaid expenses | 2,119,286 | 2,569,046 | ||||||
Current tax assets | 449,254 | - | ||||||
Total current assets | 82,779,411 | 137,619,927 | ||||||
Non-current assets: | ||||||||
Drilling and other equipment | 76,545,462 | 78,416,229 | ||||||
Right-of-use asset | 29,912,917 | 32,825,964 | ||||||
Intangible assets | 16,906,645 | 18,901,559 | ||||||
- | 8,876,351 | |||||||
Deferred tax assets | 670,800 | 613,355 | ||||||
Total non-current assets | 124,035,824 | 139,633,458 | ||||||
Total assets | $ | 206,815,235 | $ | 277,253,385 | ||||
LIABILITIES AND SHAREHOLDERS' EQUITY | ||||||||
Current liabilities: | ||||||||
Operating facility | $ | - | $ | 11,395,835 | ||||
Lease liability | 3,316,277 | 2,765,633 | ||||||
Trade and other payables | 23,046,780 | 54,892,277 | ||||||
Current tax liability | - | 172,766 | ||||||
Total current liabilities | 26,363,057 | 69,226,511 | ||||||
Non-current liabilities: | ||||||||
Lease liability | 36,821,093 | 39,753,860 | ||||||
Loans and borrowings | - | 13,896,400 | ||||||
Deferred tax liability | 8,134,294 | 5,432,527 | ||||||
Total non-current liabilities | 44,955,387 | 59,082,787 | ||||||
Equity: | ||||||||
Share capital | 248,027,502 | 251,815,183 | ||||||
Contributed surplus | 10,153,802 | 10,854,650 | ||||||
Retained earnings | (137,627,915 | ) | (127,902,593 | ) | ||||
Accumulated other comprehensive income | 14,943,402 | 14,176,847 | ||||||
Total equity | 135,496,791 | 148,944,087 | ||||||
Total liabilities and equity | $ | 206,815,235 | $ | 277,253,385 | ||||
Consolidated Statements of Comprehensive Loss
(unaudited)
Three-month periods ended | Nine-month periods ended | |||||||||||||
2020 | 2019 | 2020 | 2019 | |||||||||||
Revenue | $ | 39,775,807 | $ | 93,099,227 | $ | 189,564,243 | $ | 268,203,575 | ||||||
Direct costs | 35,606,558 | 77,089,805 | 163,837,043 | 228,140,741 | ||||||||||
Gross profit | 4,169,249 | 16,009,422 | 25,727,200 | 40,062,834 | ||||||||||
Expenses: | ||||||||||||||
Selling, general and administrative expenses | 6,203,506 | 10,615,982 | 20,537,315 | 35,212,139 | ||||||||||
Research and development expenses | 216,019 | 1,193,183 | 1,795,964 | 2,972,786 | ||||||||||
Finance expense | 132,827 | 306,097 | 661,426 | 1,089,722 | ||||||||||
Finance expense lease liability | 573,301 | 622,196 | 1,799,316 | 1,896,879 | ||||||||||
Other income | (1,517,516 | ) | (407,597 | ) | (204,350 | ) | (2,445,385 | ) | ||||||
Impairment loss | - | - | 10,729,587 | - | ||||||||||
5,608,137 | 12,329,861 | 35,319,258 | 38,726,141 | |||||||||||
Earnings (loss) before income taxes | (1,438,888 | ) | 3,679,561 | (9,592,058 | ) | 1,336,693 | ||||||||
Provision for (Recovery of) income taxes | ||||||||||||||
Current | 4,786 | 121,492 | (741,788 | ) | 590,276 | |||||||||
Deferred | 61,503 | 964,563 | 875,052 | 1,239,976 | ||||||||||
66,289 | 1,086,055 | 133,264 | 1,830,252 | |||||||||||
Net earnings (loss) | (1,505,177 | ) | 2,593,506 | (9,725,322 | ) | (493,559 | ) | |||||||
Other comprehensive income (loss) | ||||||||||||||
Foreign currency translation | (3,889,876 | ) | 1,001,351 | 766,555 | (1,660,718 | ) | ||||||||
Total comprehensive income (loss) for the period | $ | (5,395,053 | ) | $ | 3,594,857 | $ | (8,958,767 | ) | $ | (2,154,277 | ) | |||
Loss per share – basic | $ | (0.03 | ) | $ | 0.05 | $ | (0.18 | ) | $ | (0.01 | ) | |||
Loss per share – diluted | $ | (0.03 | ) | $ | 0.05 | $ | (0.18 | ) | $ | (0.01 | ) | |||
Consolidated Statements of Cash Flows
(unaudited)
Three-month periods ended | Nine-month periods ended | ||||||||||||
2020 | 2019 | 2020 | 2019 | ||||||||||
Cash flows from operating activities: | |||||||||||||
Net earnings (loss) | $ | (1,505,177 | ) | $ | 2,593,506 | $ | (9,725,322 | ) | $ | (493,559 | ) | ||
Adjustments for: | |||||||||||||
Depreciation and amortization | 6,977,324 | 9,893,523 | 22,794,025 | 30,178,287 | |||||||||
Depreciation and amortization right-of-use asset | 860,942 | 895,878 | 2,723,376 | 2,641,400 | |||||||||
Impairment loss | - | - | 10,729,587 | - | |||||||||
Provision for income taxes | 66,289 | 1,086,055 | 133,264 | 1,830,252 | |||||||||
Unrealized foreign exchange loss (gain) | 196,489 | (21,904 | ) | 100,158 | 259,105 | ||||||||
Gain on disposition of drilling equipment | (136,060 | ) | (513,628 | ) | (2,544,631 | ) | (3,390,124 | ) | |||||
Equity-settled share-based payments | 65,888 | 160,260 | 214,009 | 559,317 | |||||||||
Finance expense | 132,827 | 306,097 | 661,426 | 1,089,722 | |||||||||
Provision for (Recovery of) bad debts | (1,608,021 | ) | 61,590 | 2,343,733 | 387,728 | ||||||||
Provision for inventory obsolescence | 431,190 | 207,958 | 2,000,430 | 1,491,260 | |||||||||
Interest paid | (47,314 | ) | (172,424 | ) | (335,375 | ) | (667,712 | ) | |||||
Income taxes received (paid) | (23,362 | ) | (77,482 | ) | 409,602 | 23,389 | |||||||
Change in non-cash working capital | 3,988,970 | (4,698,171 | ) | 28,276,583 | 6,755,880 | ||||||||
Net cash from operating activities | 9,399,985 | 9,721,258 | 57,780,865 | 40,664,945 | |||||||||
Cash flows from investing activities: | |||||||||||||
Proceeds on disposition of drilling equipment | 837,528 | 5,779,886 | 5,472,487 | 11,823,951 | |||||||||
Acquisition of drilling and other equipment | (1,815,513 | ) | (8,443,739 | ) | (22,245,353 | ) | (28,840,422 | ) | |||||
Acquisition of intangible assets | - | (66,180 | ) | - | (66,180 | ) | |||||||
Change in non-cash working capital | (295,943 | ) | (1,631,833 | ) | (373,126 | ) | (5,345,034 | ) | |||||
Net cash used in investing activities | (1,273,928 | ) | (4,361,866 | ) | (17,145,992 | ) | (22,427,685 | ) | |||||
Cash flows from financing activities: | |||||||||||||
Proceeds from (repayment of) loans and borrowings | - | (1,308,700 | ) | (13,960,400 | ) | 3,179,000 | |||||||
Proceeds from (repayment of) operating facility | - | 9,827 | (11,395,835 | ) | (6,780,490 | ) | |||||||
Payments of lease liability | (672,480 | ) | (819,493 | ) | (2,269,075 | ) | (2,374,837 | ) | |||||
Surrender value cash payment | - | - | (1,518,042 | ) | - | ||||||||
Repurchase of shares under the NCIB | (3,192,246 | ) | (3,978,754 | ) | (3,192,246 | ) | (9,324,191 | ) | |||||
Proceeds from issuance of share capital | - | - | 7,750 | 87,750 | |||||||||
Net cash used in financing activities | (3,864,726 | ) | (6,097,120 | ) | (32,327,848 | ) | (15,212,768 | ) | |||||
Net increase (decrease) in cash and cash equivalents | 4,261,331 | (737,728 | ) | 8,307,025 | 3,024,492 | ||||||||
Cash and cash equivalents, beginning of period | 14,627,990 | 7,405,638 | 10,582,296 | 3,643,418 | |||||||||
Cash and cash equivalents, end of period | $ | 18,889,321 | $ | 6,667,910 | $ | 18,889,321 | $ | 6,667,910 |
Source:
2020 GlobeNewswire, Inc., source