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| Share Name | Share Symbol | Market | Type |
|---|---|---|---|
| Rms Systems Inc. | TSXV:RMS | TSX Venture | Common Stock |
| Price Change | % Change | Share Price | Bid Price | Offer Price | High Price | Low Price | Open Price | Shares Traded | Last Trade | |
|---|---|---|---|---|---|---|---|---|---|---|
| 0.00 | 0.00% | 0 | - |
Hot Features
Premium
Aided by international and US growth, PHX Energy (TSX:PHX) generated an all-time
record level of revenue, operating days, EBITDA and funds from operations in
2012.
For the year ended December 31, 2012, the Corporation generated consolidated
revenue of $301.7 million as compared to $260.1 million in the 2011-year; an
increase of 16 percent. EBITDA increased by 9 percent to $48.8 million in 2012
as compared to $45.0 million in 2011, and the Corporation's funds from
operations were $50.6 million in 2012, which is 14 percent greater than the
$44.2 million achieved in 2011.
In North America, the industry trend toward horizontal and directional drilling
has never been sturdier. Industry horizontal and directional drilling activity
represented approximately 88 percent (as measured by drilling days) and 71
percent (as measured by rigs running per day) of the 2012 total drilling
activity in Canada and the US, respectively. This compared to 87 percent in
Canada and 69 percent in the US for the 2011-year. (Sources: Daily Oil Bulletin
and Baker Hughes)
US operations achieved significant growth in 2012 as a result of an expanded
marketing team, successful penetration in the Permian Basin, South Texas, and
Mid-Continent markets, and the expansion of the motor rental division in
Midland, Texas. US revenue, as a percentage of consolidated revenue, was 46
percent in 2012 as compared to 36 percent in 2011.
International operations were also robust, particularly in Albania and Russia.
In 2012, the international operating segment represented 12 percent of
consolidated revenue as compared to 9 percent in the prior year. PHX Energy
foresees this momentum continuing, and with the addition of resistivity work and
a new client in Albania, intensified marketing efforts in Russia and Colombia,
and a continued focus on delivering exceptional service, international
operations' contribution to consolidated revenue is expected to increase in the
future years.
During 2012, the Corporation successfully expanded the deployment of its various
value added directional drilling technologies, particularly its resistivity
while drilling ("RWD") systems, in most of its operating regions, and this
contributed to higher positive margins. PHX Energy is committed to growing its
RWD offering and expects to add 7 RWD systems by mid-year.
To support strong operational activity levels, a record level of capital
expenditures, $51.5 million, was incurred in 2012. With these capital
expenditures, PHX Energy's down hole performance drilling motor fleet increased
by over 200 motors and job capacity increased to 210 concurrent jobs from 190 in
2011. The greater job capacity resulted from the addition of 9 P-360 positive
pulse measurement while drilling ("MWD") systems, 6 E-360 electromagnetic ("EM")
MWD systems, and 5 RWD systems. As at December 31, 2012, the Corporation's MWD
fleet consisted of 133 P-360 positive pulse MWD systems, 65 E-360 EM MWD
systems, and 12 RWD systems. Of these, 86 MWD systems were deployed in Canada,
94 in the US, 15 in Russia, 6 in Albania, 5 in Colombia, and 4 in Peru.
The Corporation's capital expenditures were financed by cash flow from
operations and borrowings under the Corporation's credit facilities. On
September 6, 2012, the Corporation entered into a new loan agreement with a bank
syndicate. Under the terms of the agreement, the Corporation now has access to
credit facilities aggregating to approximately $130 million for a term of three
years. As at December 31, 2012, the Corporation carried long-term debt of $80
million and working capital of $45.5 million.
The 2013 capital expenditure budget has been approved by the Board of Directors
and is projected to be $30.4 million.
For the year ended December 31, 2012, the Corporation paid dividends of $0.66
per share to its shareholders (2011 - $0.48 per share), or $18.6 million (2011 -
$12.5 million). PHX Energy ended 2012 with a cash dividend payout ratio of 37
percent (cash dividends paid divided by funds from operations).
Financial Highlights
(Stated in thousands of dollars except per share amounts, percentages and shares
outstanding)
Three-month periods ended Years ended
December 31, December 31,
% %
2012 2011 Change 2012 2011 Change
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Operating
Results (unaudited)(unaudited)
Revenue 79,473 73,606 8 301,720 260,063 16
Net earnings 4,537 5,284 (14) 17,707 18,328 (3)
Earnings per
share - diluted 0.16 0.19 (16) 0.63 0.65 (3)
EBITDA (1) 13,575 13,566 - 48,837 45,007 9
EBITDA per share
- diluted (1) 0.48 0.48 - 1.73 1.59 9
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Cash Flow
Cash flows from
operating
activities 13,748 19,376 (29) 33,070 23,224 42
Funds from
operations (1) 13,890 13,182 5 50,621 44,233 14
Funds from
operations per
share - diluted
(1) 0.49 0.47 4 1.79 1.56 15
Dividends paid 5,080 3,165 61 18,595 12,474 49
Dividends per
share (2) 0.18 0.12 50 0.66 0.48 38
Capital
expenditures 5,334 15,012 (64) 51,452 49,280 4
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Financial
Position,
December 31,
Working capital 45,480 44,868 1
Long-term debt 80,000 56,000 43
Shareholders'
equity 115,095 113,868 1
Common shares
outstanding 28,241,371 28,091,062 1
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(1) Refer to non-GAAP measures section.
(2) Dividends made by the Corporation on a per share basis in the period.
Non-GAAP Measures
PHX Energy uses certain performance measures throughout this document that are
not recognizable under Canadian generally accepted accounting principles
("GAAP"). These performance measures include earnings before interest, taxes,
depreciation and amortization ("EBITDA"), EBITDA per share, funds from
operations and funds from operations per share. Management believes that these
measures provide supplemental financial information that is useful in the
evaluation of the Corporation's operations and are commonly used by other oil
and natural gas service companies. Investors should be cautioned, however, that
these measures should not be construed as alternatives to measures determined in
accordance with GAAP as an indicator of PHX Energy's performance. The
Corporation's method of calculating these measures may differ from that of other
organizations, and accordingly, these may not be comparable. Please refer to the
non-GAAP measures section.
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 references to, without limitation, growth in PHX Energy's
international operations and this segment representing a greater percentage of
revenue; the growth of the Corporation's RWD fleet, projected capital
expenditure budget and how this budget will be funded; the ability to reduce
performance drilling motor and MWD repair costs and improve profitability;
improved profitability in South America as a result of integrating the Peruvian
and Colombian management teams; the expected tax rate in Canada; the potential
opportunities for expansion in key plays in Canada; the ability to implement and
grow initiatives, such as RADD and Insight drilling optimization operations
which are believed to have a positive impact on Canadian margins; the expansion
of the motor rental division in the US; future US growth; efficiencies being
created from hiring local personnel in Albania; the opportunity to expand in
Eastern Europe; increased activity in Russia as a result of new work awarded and
invitations to tender having been submitted; anticipated future growth in
Colombia and Peru; synergies and opportunities for growth as a result of the
relationships established with RMS Systems Inc.; and the commencement of
operations for RigManager International Inc. in Russia.
The above references are stated under the headings: "Operating Costs and
Expenses", "Segmented Information", "Cash Requirements for Capital
Expenditures", and "Investments". Furthermore, all information contained within
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; tax laws; 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 Years ended
December 31, December 31,
2012 2011 % Change 2012 2011 % Change
----------------------------------------------------------------------------
----------------------------------------------------------------------------
Revenue 79,473 73,606 8 301,720 260,063 16
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----------------------------------------------------------------------------
Despite continual weak industry activity in Canada, PHX Energy generated
consolidated revenue for the three-month period ended December 31, 2012 of $79.5
million, an 8 percent increase compared to the $73.6 million in the
corresponding 2011-period. This level of quarterly revenue was a record for a
fourth quarter and the third highest in the Corporation's history, with the
all-time record being achieved in the third quarter of 2012 followed by the
revenue achieved in the first quarter of the year. Consolidated operating days
increased by 8 percent to 6,690 days in 2012 from 6,210 days in the 2011-quarter
and were also a fourth quarter record. Average consolidated day rates for the
three-month period ended December 31, 2012, excluding the motor rental division
in Midland, Texas, were $11,671 which is comparable to the day rates of $11,695
realized in the fourth quarter of 2011.
The demand for horizontal and directional drilling services continued to be
strong in Canada and US. In the 2012-quarter, horizontal and directional
drilling activity represented a record 93 percent of total Canadian industry
drilling days (2011 - 92 percent). In the US, horizontal and directional
activity represented approximately 72 percent of the rigs running per day in the
fourth quarter of 2012 compared to 69 percent in the 2011-quarter. (Sources:
Daily Oil Bulletin and Baker Hughes)
International operations also generated record level of revenues for a fourth
quarter. International revenue, as a percentage of total consolidated revenue,
increased to 12 percent in the 2012-quarter compared to 9 percent in the
2011-quarter.
For the year ended December 31, 2012, PHX Energy generated record consolidated
revenue of $301.7 million, a 16 percent increase compared to 2011 revenue of
$260.1 million. This achievement is the result of the Corporation's strategy to
grow its US and international regions. US and international revenue, as a
percentage of total consolidated revenue, grew to 46 and 12 percent,
respectively, for the 2012-year as compared to 36 and 9 percent in 2011.
Consolidated operating days increased by 6 percent to a record 24,930 days
compared to 23,458 in 2011. Average consolidated day rates for the year ended
December 31, 2012, excluding the motor rental division in Midland, Texas,
increased by 8 percent to $11,903 from $11,039 in the corresponding 2011-period.
The 2012 average consolidated day rates are stronger due in part to higher
international activity and greater utilization of the Corporation's RWD
technology.
Operating Costs and Expenses
(Stated in thousands of dollars except percentages)
Three-month periods ended Years ended
December 31, December 31,
2012 2011 % Change 2012 2011 % Change
----------------------------------------------------------------------------
----------------------------------------------------------------------------
Direct costs 62,990 56,253 12 238,168 201,251 18
Depreciation &
amortization
(included in
direct costs) 5,800 4,447 30 21,336 16,171 32
Gross profit as
percentage of
revenue
excluding
depreciation &
amortization 28% 30% 28% 29%
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Direct costs are comprised of field and shop expenses, and include depreciation
and amortization on the Corporation's equipment. Excluding depreciation and
amortization, gross profit as a percentage of revenue was 28 percent for the
three-month period ended December 31, 2012 as compared to 30 percent in the
comparable 2011-period. For the year ended December 31, 2012, gross profit as a
percentage of revenue (excluding depreciation and amortization) was 28 percent
as compared to 29 percent in 2011.
The slight decrease in PHX Energy's margins in the three-month period and year
ended December 31, 2012 is due to the following factors:
-- slower industry activity in Canada,
-- weaker than expected activity for the Corporation in Peru and Colombia,
and
-- increased performance drilling motor and MWD system repair costs in
Canada and US. PHX Energy is currently examining ways to help reduce
these costs.
Several other cost reduction strategies have been started, including the
integration of the Peruvian and Colombian management teams with the aim of
realizing cost savings from better rationalization of manpower and equipment in
South America.
The overall negative impact on margins was partially offset by lower third party
equipment rentals and greater utilization of the Corporation's RWD technology,
which is at a premium. The Corporation's third party equipment rentals for the
fourth quarter of 2012 were $1.9 million, or 2 percent of consolidated revenue,
as compared to $2.8 million, or 4 percent of revenue, in the corresponding
2011-quarter. For the year ended December 31, 2012, third party equipment
rentals were $8.8 million, or 3 percent of consolidated revenue, versus $15.1
million, or 6 percent of revenue, in 2011.
Depreciation and amortization for the three-month period ended December 31, 2012
increased by 30 percent to $5.8 million as compared to $4.4 million in the
2011-quarter. For the year ended December 31, 2012, depreciation and
amortization increased by 32 percent to $21.3 million from $16.2 million in
2011. The increase in both periods is the result of the Corporation's record
level of capital expenditure programs in 2011 and 2012.
(Stated in thousands of dollars except percentages)
Three-month periods ended Years ended
December 31, December 31,
% %
2012 2011 Change 2012 2011 Change
----------------------------------------------------------------------------
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Selling, general
and
administrative
("SG&A") costs 8,456 8,512 (1) 34,467 31,618 9
Share-based
payments
(included in
SG&A costs) 410 483 (15) 2,265 2,971 (24)
SG&A costs
excluding
share-based
payments as a
percentage of
revenue 10% 11% 11% 11%
----------------------------------------------------------------------------
----------------------------------------------------------------------------
SG&A costs for the three-month period ended December 31, 2012 were $8.5 million
which is similar to the costs incurred in the 2011-period. Included in SG&A
costs are share-based payments of $0.4 million in the 2012-quarter as compared
to a $0.5 million in the 2011-quarter. Excluding these costs, SG&A costs
represented 10 percent of consolidated revenue in the 2012 three-month period
compared to 11 percent in the 2011-period.
For the year ended December 31, 2012, SG&A costs increased by 9 percent to $34.5
million as compared to $31.6 million in 2011. Excluding share-based payments of
$2.3 million in the 2012-year and $3.0 million in the 2011-year, SG&A costs as a
percentage of consolidated revenue were 11 percent in both years.
SG&A costs, excluding share-based payments, generally increased in dollar terms
during 2012 due to higher payroll expenses and marketing related costs
associated with stronger US and international activity.
Share-based payments relate to the amortization of the fair values of issued
options of the Corporation using the Black-Scholes model. In the three-month
period and year ended December 31, 2012, share-based payments decreased by 15
percent and 24 percent, respectively, as the Corporation has not made
significant option issuances since December 2011.
(Stated in thousands of dollars)
Three-month periods ended Years ended
December 31, December 31,
% %
2012 2011 Change 2012 2011 Change
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Research and
development
expense 321 503 (36) 1,985 2,124 (7)
----------------------------------------------------------------------------
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Research and development ("R&D") expenditures charged to net earnings during the
three-month periods ended December 31, 2012 and 2011 were $0.3 million and $0.5
million, respectively. In addition, during the same 2012-period, $39,000 (2011 -
$128,000) were capitalized as development costs on certain projects.
For the year ended December 31, 2012, R&D expenditures of $2.1 million were
incurred, of which $151,000 were capitalized as deferred development costs. R&D
expenditures for the year ended December 31, 2011 were $3.2 million, of which
$1.1 million were capitalized.
(Stated in thousands of dollars)
Three-month periods ended Years ended
December 31, December 31,
2012 2011 % Change 2012 2011 % Change
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Finance
expense 1,091 646 69 3,233 2,097 54
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----------------------------------------------------------------------------
Finance expenses relate to interest charges on the Corporation's long-term and
short-term bank facilities. For the three-month period ended December 31, 2012,
finance charges increased to $1.1 million from $0.6 million in the 2011-period.
Finance charges increased to $3.2 million in the 2012-year from $2.1 million in
2011. The increase in the finance expense in both 2012-periods is the result of
additional bank borrowings made to fund PHX Energy's capital expenditure
programs in 2011 and 2012.
(Stated in thousands of dollars)
Three-month periods ended Years ended
December 31, December 31,
% %
2012 2011 Change 2012 2011 Change
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Gains on
disposition of
drilling
equipment 575 1,859 (69) 2,727 5,589 (51)
Foreign exchange
losses (89) (906) (90) (1,267) (1,377) (8)
Provision for
bad debt (108) (173) (38) (15) (447) (97)
Losses from the
change in fair
value of
investment in
equity
securities - - - (490) - n.m.
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Other income 378 780 (52) 955 3,765 (75)
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n.m. - not meaningful
For the three-month period and year ended December 31, 2012, PHX Energy realized
gains on disposition of drilling equipment of $0.6 million (2011 - $1.9 million)
and $2.7 million (2011 - $5.6 million), respectively. The dispositions of
drilling equipment relate primarily to equipment lost in well bores that are
uncontrollable in nature. The gain reported is net of any asset retirements that
are made before the end of the equipment's useful life and self-insured down
hole equipment losses, if any. Gains 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. There were
fewer occurrences of losses in the 2012-periods as compared to the corresponding
2011-periods. In addition, there were more occurrences of scrapped assets in the
2012-year.
Offsetting other income for the three-month period ended December 31, 2012 are
foreign exchange losses of $0.1 million (2011 - $0.9 million) and a bad debt
provision of $0.1 million (2011 - $0.2 million). For the year ended December 31,
2012, other expenses offsetting other income include foreign exchange losses of
$1.3 million (2011 - $1.4 million), bad debt provisions of $15,000 (2011 - $0.4
million), and losses from the change in fair value of investment in equity
securities of $0.5 million (2011 - nil).
For the year ended December 31, 2012, foreign exchange losses resulted mainly
from fluctuations in the LEK-CDN and RUR-CDN exchange rates. Management has
implemented strategies to mitigate this foreign exchange exposure in future
periods.
For the year ended December 31, 2012, losses from the change in fair value of
investment in equity securities relate to the investment in the publicly traded
equity securities of RMS Systems Inc. ("RMS"), which has been designated as
financial assets at fair value through profit or loss before October 22, 2012.
As at October 22, 2012, RMS became an equity-accounted investee of PHX Energy.
(Stated in thousands of dollars)
Three-month periods ended Years ended
December 31, December 31,
2012 2011 2012 2011
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Provision for income
taxes 2,147 3,189 6,561 8,411
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----------------------------------------------------------------------------
The provision for income taxes for the three-month period ended December 31,
2012 was $2.1 million as compared to $3.2 million in the 2011-period. For the
year ended December 31, 2012, the provision for income taxes was $6.6 million as
compared to $8.4 million in 2011. The expected combined Canadian federal and
provincial tax rate for 2012 is 25 percent. The effective tax rates in the
three-month period and year ended December 31, 2012 of 32 percent and 27
percent, respectively, are higher than the expected rate due to the
profitability of US operations where tax rates are higher, non-recognition
deferred tax assets for foreign losses, and non-deductibility of share-based
payments.
(Stated in thousands of dollars except per share amounts and percentages)
Three-month periods ended Years ended
December 31, December 31,
2012 2011 % Change 2012 2011 % Change
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Net earnings 4,537 5,284 (14) 17,707 18,328 (3)
Earnings per
share -
diluted 0.16 0.19 (16) 0.63 0.65 (3)
EBITDA 13,575 13,566 - 48,837 45,007 9
EBITDA per
share -
diluted 0.48 0.48 - 1.73 1.59 9
EBITDA as a
percentage of
revenue 17% 18% 16% 17%
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----------------------------------------------------------------------------
The Corporation's level of net earnings in the three-month period and year ended
December 31, 2012 decreased due to lower margins, higher depreciation expenses
and higher finance expenses. EBITDA for the fourth quarter of 2012 is comparable
to that achieved in the 2011-quarter. For the year ended December 31, 2012,
EBITDA increased by 9 percent due primarily to activity growth in the US and
international regions. EBITDA as a percentage of revenue for the three-month
period ended December 31, 2012 was 17 percent (2011 - 18 percent) and for the
2012-year was 16 percent (2011 - 17 percent).
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 Albania, Peru, Russia and Colombia.
Canada
(Stated in thousands of dollars)
Three-month periods ended Years ended
December 31, December 31,
2012 2011 % Change 2012 2011 % Change
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Revenue 32,344 43,842 (26) 126,712 144,416 (12)
Reportable
segment
profit
before tax 4,096 9,652 (58) 16,079 26,841 (40)
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PHX Energy's Canadian revenue decreased by 26 percent to $32.3 million (2011 -
$43.8 million) and operating days decreased by 24 percent to 2,829 days (2011 -
3,739 days). In comparison, total industry horizontal and directional drilling
activity, as measured by drilling days, was 28 percent lower in the
2012-quarter, 29,264 days, compared to the 2011-quarter's 40,601 days. (Source:
Daily Oil Bulletin) Average day rates decreased by 2 percent to $11,433 in the
2012-quarter from $11,725 in the 2011-quarter.
The Canadian industry's drilling activity continued to be weak in the fourth
quarter of 2012 and this created pressures on day rates and increased
competition in the market. Despite this overall retraction, horizontal and
directional drilling continued to dominate Canadian industry activity and
represented approximately 93 percent of total Canadian industry drilling days
(2011 - 92 percent). (Source: Daily Oil Bulletin) In the 2012-quarter, PHX
Energy focused its marketing efforts on the Montney, Duvernay, and deep basin
plays where the Corporation's experience level is rising and there is potential
opportunities for expansion. The Corporation also remained active in the Viking,
Cardium, Shaunavon, Bakken, and Frobisher areas.
For the year ended December 31, 2012, the Corporation's Canadian revenue was
$126.7 million, which is 12 percent lower than the $144.4 million generated in
the 2011-year. The number of horizontal and directional operating days realized
in the Canadian industry during the 2012-year decreased by 15 percent to 118,066
days as compared to 139,359 days in 2011. (Source: Daily Oil Bulletin) In
comparison, the Corporation's Canadian drilling days decreased by 17 percent to
10,567 days in the 2012-year from 12,760 days in 2011. Oil well drilling
activity (as measured by operating days) represented approximately 83 percent of
PHX Energy's Canadian activity for the year ended December 31, 2012 (2011 - 75
percent) with the remainder of activity primarily related to liquids rich
natural gas.
The negative impact of slower industry activity on the Corporation's revenue
level in 2012 was partially alleviated by PHX Energy's improved average day
rates, which increased by 6 percent from $11,318 in 2011 to $11,991 in 2012.
Higher day rates were achieved as a result of greater demand for horizontal
gamma jobs and the increased utilization of the Corporation's RWD systems as
well as other premium directional drilling technologies.
Reportable segment profit before tax for the three-month period ended December
31, 2012 decreased by 58 percent to $4.1 million from $9.7 million in the
2011-quarter. For the year ended December 31, 2012, reportable segment profit
before tax decreased by 40 percent to $16.1 million from $26.8 million in 2011.
The decreases in both 2012-periods were primarily due to lower levels of
activity and higher infrastructure costs.
Given the challenges in the Canadian market, PHX Energy is committed to
implementing and growing initiatives that aim to provide its customers
exceptional service and create drilling efficiencies. In late 2012, the
Corporation aimed to increase the utilization of its Remote Access Directional
Drilling ("RADD") services, which focus on reducing operators' costs by
centralizing remote logging services. Additionally, PHX Energy is growing its
Insight drilling optimization operations, whereby real-time solutions for
improved drilling practices are provided by a team of technical experts. It is
expected that both these initiatives will provide a positive impact on Canadian
margins in 2013.
United States
(Stated in thousands of dollars)
Three-month periods ended Years ended
December 31, December 31,
2012 2011 % Change 2012 2011 % Change
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Revenue 37,824 23,477 61 137,712 93,483 47
Reportable
segment
profit before
tax 4,243 268 n.m. 14,360 5,600 156
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n.m. - not meaningful
PHX Energy's US operations had a record fourth quarter. For the three-month
period ended December 31, 2012, US revenue of $37.8 million was generated
compared to $23.5 million in the 2011-period; a 61 percent increase. In the
Corporation's history, this level of revenue is second only to record results
achieved in the third quarter of 2012. The Corporation's US operating days in
the fourth quarter increased by 56 percent to 3,152 days from 2,015 days in the
2011-quarter. Average US day rates, excluding the motor rental division in
Midland, Texas, increased by 4 percent to $11,557 in the 2012-quarter compared
to $11,163 in the corresponding 2011-period. This increase is attributable to
the increased utilization of the Corporation's value added technologies, such as
its RWD technology.
In the fourth quarter of 2012, US industry activity, as measured by the average
number of horizontal and directional rigs running on a daily basis, decreased by
6 percent to 1,302 rigs from 1,384 rigs in 2011. (Source: Baker Hughes) Despite
reduced rig utilization levels, the Corporation continued to realize substantial
growth in its US operations. Horizontal oil well drilling represented
approximately 49 percent of Phoenix USA's overall activity, as measured by
drilling days, in the fourth quarter of 2012 as compared to 39 percent in the
2011-quarter.
Phoenix USA achieved a remarkable year-over-year improvement in 2012, generating
a record level of revenue, $137.7 million which is 47 percent higher than the
$93.5 million reported in the 2011-year. Excluding the motor rental division in
Midland, Texas, Phoenix USA achieved a 12 percent increase in its average day
rates, which were $11,508 in 2012 as compared to $10,306 in 2011. The
Corporation's US operating days also increased by 29 percent to 11,534 days in
the 2012-year compared to 8,961 days in 2011-year. In comparison, US industry
activity, as measured by the average number of horizontal and directional rigs
running on a daily basis, increased by 5 percent to 1,367 rigs in 2012 compared
to 1,305 rigs in 2011. (Source: Baker Hughes)
Intensified marketing efforts through the expansion of the marketing team in all
US areas have made a positive impact on activity levels. The Corporation
realized substantial growth from its successful penetration in the Permian
Basin, South Texas, and Mid-Continent markets, and during the year, Phoenix USA
was active in the Wolf Camp, Barnett, Eagleford, Marcellus, Utica, Granite Wash,
Mississippian Lime, Niobrara, and Bakken plays.
With the success achieved by the motor rental division in Midland, Texas,
additional marketing personnel are in place and the motor rental division is
being expanded to the Mid-Continent area of the Gulf Coast region and the Rocky
Mountain region. The Corporation has also realized a greater demand for its RWD
technology and expects to add 3 RWD systems in the US in early 2013. PHX Energy
foresees that these areas will further propel Phoenix USA's growth.
Reportable segment profit before tax for the three-month period ended December
31, 2012 increased to $4.2 million from $0.3 million in the 2011-period. For the
year ended December 31, 2012, reportable segment profit before tax increased to
$14.4 million from $5.6 million in 2011. The increase in profitability and
improved margins in both periods was primarily due to higher activity and
improved day rates.
International
(Stated in thousands of dollars)
Three-month periods ended Years ended
December 31, December 31,
2012 2011 % Change 2012 2011 % Change
----------------------------------------------------------------------------
----------------------------------------------------------------------------
Revenue 9,305 6,287 48 37,296 22,164 68
Reportable
segment
profit before
tax 1,460 917 59 8,778 3,666 139
----------------------------------------------------------------------------
----------------------------------------------------------------------------
For the three-month period ended December 31, 2012, international revenue
increased by 48 percent to $9.3 million from $6.3 million in the 2011-period.
International operating days increased by 56 percent from 456 days in the
2011-quarter to 710 days in the 2012-quarter. The Corporation generated 12
percent of its consolidated revenue from international operations in the fourth
quarter of 2012 compared to 9 percent in 2011.
During the 2012-year, PHX Energy's international operations achieved significant
growth, and generated record annual revenues and operating days. For the year
ended December 31, 2012, revenue increased by 68 percent to $37.3 million as
compared to $22.2 million in 2011. International operating days increased by 63
percent from 1,737 days in 2011 to 2,830 days in 2012.
Phoenix Albania remained the Corporation's most active international area and
continued to operate on 5 consecutive rigs for most of the 2012-quarter.
RigManager International Inc.'s ("RMII") electronic drilling recorder ("EDR")
systems also continued to run on all 5 rigs. Since commencing operations in
2008, Phoenix Albania has successfully drilled in excess of 288 wells in the
region. In the fourth quarter of 2012, RWD services were successfully
implemented in Albania and services were provided for a new client on a
directional well, both of which contributed to increased revenues. The
Corporation is continuing to hire, train, and develop local Albanian staff,
which is expected to create further efficiencies and at the same time, goodwill
by supporting the local economy. Currently, 33 percent of the total number of
employees in the country are Albanian nationals. In 2013, PHX Energy will focus
on exploring expansion opportunities for its Eastern European operations, while
continuing to provide superior services to its current clients. The Corporation
presently has a 6 job capacity in Albania.
In the fourth quarter of 2012, the Corporation continued to realize strong
activity levels in Russia, however, the quarterly results are less than
forecasted due to rig maintenance schedules and unseasonably warm weather in
Siberia that delayed the construction of ice roads. It is anticipated that
further growth will be achieved in 2013 as Phoenix Russia has already been
awarded additional rigs by both an existing client and new clients in Siberia.
In addition, the Corporation has participated in numerous tender invitations for
work to be executed in 2013 and is awaiting the award of these tenders. This is
a strong indication that Phoenix Russia has solidified its presence as a
credible horizontal and directional drilling service provider in this strategic
market.
In Colombia, the Corporation suffered low activity levels during the quarter,
partially due to a key client's inability to meet their license obligations.
Despite low activity levels, PHX Energy remains confident in this market and its
ability to provide fit-for-purpose services throughout the region. PHX Energy's
operations in Colombia currently have a 5 job capacity.
Peruvian industry activity continued to be weak in the fourth quarter of 2012,
however, as a result of the outstanding service quality and cost savings
delivered to a key client, Phoenix Peru has been invited to compete for
additional work in 2013. It is believed that this opportunity will lead to
modest growth in 2013. Phoenix Peru currently has a job capacity of 4 full
service jobs.
In order to streamline operations in the South America, the Peruvian and
Colombian management teams have been integrated into a single management team
that will oversee activities in both locations. This initiative is expected to
create efficiencies by improving asset and personnel utilization, thereby
enhancing overall profitability.
For the three-month period ended December 31, 2012, reportable segment profit
before tax was $1.5 million, an increase of 59 percent compared to the $0.9
million in the corresponding 2011-period. Reportable segment profit before tax
for the year ended December 31, 2012 was $8.8 million as compared to $3.7
million in 2011; a 139 percent increase. Strong activity levels in Albania and
Russia were the main factors in the international segment's improved
profitability.
Investing Activities
Net cash used in investing activities for the year ended December 31, 2012 was
$64.7 million as compared to $35.4 million in 2011. The Corporation made a $3.5
million investment in the joint venture company RMII, a $2.6 million investment
in shares of its joint venture partner RMS, and added a record $51.5 million in
capital equipment in 2012 (2011 - $49.3 million). The 2012 capital expenditures
included:
-- $29.8 million in down hole performance drilling motors;
-- $13.0 million in MWD systems and spare components;
-- $5.1 million in non-magnetic drill collars and jars;
-- $1.0 million in machinery and equipment for global service centres; and
-- $2.6 million in other assets, including vehicles of $0.9 million and
software of $0.8 million.
The capital expenditure program undertaken in the year was financed from a
combination of cash flow from operations, long-term debt and working capital.
The Corporation realized proceeds from the involuntary disposal of drilling
equipment in well bores of $9.0 million in 2012, as compared to $9.4 million in
2011. The change in non-cash working capital balances of $16.2 million (use of
cash) for the year ended December 31, 2012 relates to $6.8 million of net change
in the Corporation's trade payables that are associated with the acquisition of
capital assets and $9.4 million of land and progress billings associated with an
operations center under construction that is currently being held for sale. This
compares to $4.4 million (source of cash) for the year ended December 31, 2011.
Financing Activities
The Corporation reported cash flows from financing activities of $27.6 million
in 2012 as compared to $11.9 million in 2011. In the 2012-year:
-- the Corporation paid dividends of $18.6 million to shareholders, or
$0.66 per share;
-- through its option and DRIP programs the Corporation received cash
proceeds of $1.3 million to acquire 150,309 common shares of the
Corporation; and
-- the Corporation received net proceeds from its operating facility and
syndicated facility of an aggregate of $44.9 million to finance its
capital expenditures program and the construction of the new operations
center.
Capital Resources
On September 6, 2012, the Corporation entered into a new syndicated loan
agreement with its bank. Under the new agreement, the Corporation has access to
a $10 million operating facility. The facility bears interest based primarily on
the Corporation's senior debt to EBITDA ratio, as defined in the agreement. At
the Corporation's option, interest is at the bank's prime rate plus a margin
that ranges from a minimum of 0.75 percent to a maximum of 2 percent, or the
bank's bankers' acceptance rate plus a margin that ranges from a minimum of 1.75
percent to a maximum of 3 percent. As of December 31, 2012, the Corporation had
$5.9 million drawn on this facility.
Under the new syndicated loan agreement, the Corporation also has access to a
$95 million syndicated facility and a US$25 million operating facility in the
US. The facilities bear interest at the same rates disclosed above. The
syndicated facility will permanently reduce to $80 million on September 30,
2013, which coincides with the expected sale and leaseback of the new operations
center. The remaining $80 million syndicated facility and the US operating
facility mature on September 6, 2015. The maturity date can be extended for
another year at the option of the lender. As at December 31, 2012, $95 million
was drawn on the syndicated facility, of which $15 million was classified as
current, and nil was drawn on the US operating facility.
All credit facilities are secured by a general security agreement over all
assets of the Corporation located in Canada and the US. As at December 31, 2012,
the Corporation was in compliance with all of its bank debt covenants.
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
2013 capital budget has been set at $30.4 million subject to quarterly review of
the Board of Directors. 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 2013, 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.
Investments
During the year, PHX Energy invested in shares of and entered a Joint Venture
with RMS, who has developed an EDR technology that offers drilling operators the
ability to remotely view down hole data, monitor drilling progress in real-time
and create meaningful data analysis. There are many synergies between the EDR
services offered by RMS and the Corporation's current service offering that can
be realized. PHX Energy believes that these investments present a positive
opportunity to participate in an attractive segment of the oil and natural gas
industry that has few competitors and will strategically assist the Corporation
in achieving its long-term goals to expand its international and US operating
segments. The Joint Venture couples PHX Energy's marketing expertise and
relationships in the US and internationally with RMS's technical expertise
related to their EDR products and services.
On January 25, 2012, the Corporation invested in publicly traded equity
securities of RMS, which have been designated as financial assets through profit
or loss.
On May 18, 2012, the Corporation entered into a joint venture agreement with
RMS, pursuant to which, the parties have incorporated RigManager International
Inc. ("RMII") which is equally owned by the two parties. Pursuant to the joint
venture, RMS transferred all of its interest in its wholly-owned US subsidiary,
RigManager Inc., to RMII and granted RMII an exclusive perpetual license to
market and distribute RMS' EDR technology worldwide outside Canada. During the
year, RMII continued operations in the US and started operations in Albania and
Mexico. It is expected operations in Russia in will commence in 2013.
On October 22, 2012, the Corporation completed a private placement purchase of
additional RMS shares thereby increasing its interest in RMS to 19.5 percent. As
part of this transaction, a second representative of PHX Energy was appointed to
the Board of Directors of RMS. As at October 22, 2012, RMS became an
equity-accounted investee of PHX Energy.
Outlook
In 2012, PHX Energy navigated through various challenges and through all this is
proud of its people and the accomplishments achieved. Amongst a year of mixed
opportunities and challenges, PHX Energy again executed operationally and
reported record revenue, operating days and EBITDA.
North American industry and commodity price trends in 2012 reinforced the
importance of diversification. While oil prices appeared robust, the
differential that applied due to market constraints vastly widened in Canada and
created a large short fall in producers' cash flow that reduced some drilling
budgets. In addition, the expected recovery of natural gas prices was short
lived and therefore activity levels remained depressed in certain areas due to
unfavorable economics. As a result of these factors, Canadian industry activity
decreased when compared to the prior year and US industry activity was
relatively flat.
Canada relies heavily on US demand for oil and natural gas commodities and it is
this reliance that has led to the current Canadian market conditions. In 2012,
this was apparent in the challenges that resulted from the oil price
differentials and low natural gas prices, one of which was the capital markets
remaining predominately closed for many exploration and production companies
whose budgets depend on the ability to raise capital. In a year with reduced
drilling activity, PHX Energy's Canadian operations performed well and this can
be attributed to the diverse client base that has been established as a result
of proven performance in Western Canada. The Canadian industry in 2013 will
likely continue at the same pace as 2012, and PHX Energy believes it will
maintain a healthy share of activity with its knowledge of drilling operations
in key basins.
Given the forecasted challenges for Canada in 2012 and PHX Energy's strong
penetration in this market, a strategic objective was to strengthen and grow US
operations. The US market, with its large rig count, presented greater
opportunities during the year and PHX Energy established new operating areas to
service the key basins that were emerging. Primarily due to increased activity
in the Gulf Coast region that was driven by a dedicated team of key personnel,
the Corporation delivered on this objective and US operations reported results
that exceed expectations. For 2013, it is anticipated that the US will continue
to be a strong growth area for PHX Energy, as the momentum in the Gulf Coast
region creates further gains in market share, the Rocky Mountain region becomes
more active in the year and with the industry rig count in the Northeast region
beginning to show slight increases in early 2013.
Another key strategy in the past year was to focus resources on the
Corporation's international segments to eliminate losses in areas that were not
profitable and to strive to grow in areas where activity levels were favorable.
By implementing initiatives that were targeted to each area, many of the metrics
set at the start of 2012 were achieved and at year end, international operations
represented 12 percent of consolidated revenue and profitability improved. In
addition, through some of the strategies deployed the structure is now in place
for expansion in the present markets where opportunity exists, and PHX Energy
believes going forward growth in these areas will be realized.
In 2012, PHX Energy also expanded the deployment of value added technologies in
North America and internationally, such as its RWD services. In a year where day
rates were flat for a traditional service package, the additional revenue stream
created by these technologies aided in revenue growth along with the record
number of operating days achieved. A focus going forward will be to continue to
expand the fleet of these tools, as they give PHX Energy a competitive advantage
in many markets and offer clients operational benefits.
PHX Energy foresees the future potential for a game changing shift in the North
American industry related to projects focused on exporting natural gas outside
of North America. In addition, it is anticipated that international operators
will begin to deploy the techniques and technologies that created the shale
revolution in North America. These paradigm shifts will bode well for the
Corporation, however, it is not likely they will take hold in the near term. As
such, in 2013 PHX Energy will continue to leverage its diverse operational
footprint and high service level to continually reward shareholders.
Additionally, PHX Energy will keep a watchful eye on the industry trends and
ensure it is equipped to be at the forefront when the shift begins to take hold.
John Hooks, Chairman of the Board, President and Chief Executive Officer
February 27, 2013
Non-GAAP Measures
1) EBITDA
EBITDA, defined as earnings before interest, taxes, depreciation and
amortization, is not a financial measure that is recognized under GAAP. However,
Management believes that EBITDA provides supplemental information to net
earnings that is useful in evaluating the Corporation's operations before
considering how it was financed or taxed in various countries. Investors should
be cautioned, however, that EBITDA should not be construed as an alternative
measure to net earnings determined in accordance with GAAP. PHX Energy's method
of calculating EBITDA may differ from that of other organizations and,
accordingly, its EBITDA may not be comparable to that of other companies.
The following is a reconciliation of net earnings to EBITDA:
(Stated in thousands of dollars)
Three-month periods ended Years ended
December 31, December 31,
2012 2011 2012 2011
----------------------------------------------------------------------------
----------------------------------------------------------------------------
Net earnings 4,537 5,284 17,707 18,328
Add:
Depreciation and
amortization 5,800 4,447 21,336 16,171
Provision for income taxes 2,147 3,189 6,561 8,411
Finance expense 1,091 646 3,233 2,097
----------------------------------------------------------------------------
EBITDA as reported 13,575 13,566 48,837 45,007
----------------------------------------------------------------------------
----------------------------------------------------------------------------
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 EBITDA per share on
a dilutive basis does not include anti-dilutive options.
2) Funds from Operations
Funds from operations is defined as cash flows generated from operating
activities before changes in non-cash working capital. This is not a 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. 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 Years ended
December 31, December 31,
2012 2011 2012 2011
----------------------------------------------------------------------------
----------------------------------------------------------------------------
Cash flows from operating
activities 13,748 19,376 33,070 23,224
Add (deduct):
Changes in non-cash
working capital (1,285) (6,933) 13,054 18,437
Interest paid 866 687 2,863 1,884
Income taxes paid 561 52 1,634 688
----------------------------------------------------------------------------
Funds from operations 13,890 13,182 50,621 44,233
----------------------------------------------------------------------------
----------------------------------------------------------------------------
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.
About PHX Energy Services Corp.
The Corporation, through its subsidiary entities, provides horizontal and
directional technology and drilling services to oil and natural gas producing
companies in Canada, the US, Albania, Peru, Russia, and Colombia. PHX Energy
develops and manufactures its E-360 electromagnetic ("EM") and P-360 positive
pulse measurement while drilling ("MWD") technologies that are made available
for internal operational use.
PHX Energy's Canadian 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; Traverse City, Michigan; Casper, Wyoming; Denver, Colorado; Fort
Worth, Texas; Midland, Texas; Buckhannon, West Virginia; Pittsburgh,
Pennsylvania; and Oklahoma City, Oklahoma. Internationally, PHX Energy has sales
offices and service facilities in Albania, Peru, Russia, and Colombia, and an
administrative office in Nicosia, Cyprus.
As at December 31, 2012, PHX Energy had approximately 790 full-time employees
and the Corporation utilized over 300 additional field consultants in 2012.
Consolidated Statements of Financial Position
December 31, December 31,
2012 2011
----------------------------------------------------------------------------
----------------------------------------------------------------------------
ASSETS
Current assets:
Cash and cash equivalents $ 4,329,969 $ 8,376,344
Trade and other receivables 67,189,884 63,209,860
Inventories 21,833,051 15,445,543
Prepaid expenses 3,476,559 3,720,607
Assets held for sale 9,436,462 -
----------------------------------------------------------------------------
Total current assets 106,265,925 90,752,354
Non-current assets:
Drilling and other equipment 144,370,109 120,572,230
Goodwill 8,876,351 8,876,351
Equity-accounted investees 5,010,292 -
----------------------------------------------------------------------------
Total non-current assets 158,256,752 129,448,581
----------------------------------------------------------------------------
Total assets $ 264,522,677 $ 220,200,935
----------------------------------------------------------------------------
----------------------------------------------------------------------------
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
Operating facility $ 5,897,711 $ -
Trade and other payables 38,165,118 44,538,854
Dividends payable 1,626,287 1,064,592
Current tax liabilities 97,020 280,981
Loans and borrowings 15,000,000 -
----------------------------------------------------------------------------
Total current liabilities 60,786,136 45,884,427
Non-current liabilities:
Loans and borrowings 80,000,000 56,000,000
Deferred tax liabilities 8,641,858 4,448,999
----------------------------------------------------------------------------
Total non-current liabilities 88,641,858 60,448,999
Equity:
Share capital 99,101,118 97,583,055
Contributed surplus 7,860,658 5,827,955
Retained earnings 9,764,748 11,461,288
Accumulated other comprehensive income (1,631,841) (803,517)
----------------------------------------------------------------------------
Total equity attributable to equity holders
of the Corporation 115,094,683 114,068,781
Non-controlling interests - (201,272)
----------------------------------------------------------------------------
Total equity 115,094,683 113,867,509
----------------------------------------------------------------------------
Total liabilities and equity $ 264,522,677 $ 220,200,935
----------------------------------------------------------------------------
----------------------------------------------------------------------------
Consolidated Statements of Comprehensive Income
Three-month periods ended
December 31, Years ended December 31,
2012 2011 2012 2011
----------------------------------------------------------------------------
----------------------------------------------------------------------------
Revenue $ 79,473,206 $ 73,606,432 $ 301,719,813 $ 260,063,371
Direct costs 62,989,673 56,252,668 238,167,915 201,250,946
----------------------------------------------------------------------------
Gross profit 16,483,533 17,353,764 63,551,898 58,812,425
----------------------------------------------------------------------------
----------------------------------------------------------------------------
Expenses:
Selling, general
and
administrative
expenses 8,456,052 8,512,364 34,466,938 31,618,058
Research and
development
expenses 320,810 502,699 1,985,404 2,123,544
Finance expense 1,090,636 645,694 3,232,978 2,096,702
Other income (378,248) (780,498) (954,849) (3,765,395)
----------------------------------------------------------------------------
9,489,250 8,880,259 38,730,471 32,072,909
Share of loss of
equity-accounted
investees (net of
tax) 310,327 - 552,931 -
----------------------------------------------------------------------------
Earnings before
income taxes 6,683,956 8,473,505 24,268,496 26,739,516
----------------------------------------------------------------------------
----------------------------------------------------------------------------
Provision for
income taxes:
Current 209,368 263,985 1,579,789 1,260,940
Deferred 1,937,809 2,925,249 4,981,679 7,150,330
----------------------------------------------------------------------------
2,147,177 3,189,234 6,561,468 8,411,270
----------------------------------------------------------------------------
Net earnings 4,536,779 5,284,271 17,707,028 18,328,246
----------------------------------------------------------------------------
----------------------------------------------------------------------------
Other comprehensive
income:
Foreign currency
translation 1,587,768 (721,114) (873,637) (93,020)
----------------------------------------------------------------------------
Total comprehensive
income for the
year $ 6,124,547 $ 4,563,157 $ 16,833,391 $ 18,235,226
----------------------------------------------------------------------------
----------------------------------------------------------------------------
Earnings
attributable to:
Equity holders of
the Corporation $ 4,536,779 $ 5,070,388 $ 17,707,028 $ 18,413,357
Non-controlling
interests - 213,883 - (85,111)
----------------------------------------------------------------------------
Net earnings $ 4,536,779 $ 5,284,271 $ 17,707,028 $ 18,328,246
----------------------------------------------------------------------------
----------------------------------------------------------------------------
Comprehensive
income
attributable to:
Equity holders of
the Corporation $ 6,124,547 $ 4,262,697 $ 16,833,391 $ 18,297,167
Non-controlling
interests - 300,460 - (61,941)
----------------------------------------------------------------------------
Total comprehensive
income for the
year $ 6,124,547 $ 4,563,157 $ 16,833,391 $ 18,235,226
----------------------------------------------------------------------------
----------------------------------------------------------------------------
Earnings per share
- basic $ 0.16 $ 0.19 $ 0.63 $ 0.66
Earnings per share
- diluted $ 0.16 $ 0.19 $ 0.63 $ 0.65
----------------------------------------------------------------------------
----------------------------------------------------------------------------
Consolidated Statements of Cash Flows
Three-month periods ended Years ended
December 31, December 31,
2012 2011 2012 2011
----------------------------------------------------------------------------
----------------------------------------------------------------------------
Cash flows from
operating
activities:
Net earnings $ 4,536,779 $ 5,284,271 $ 17,707,028 $ 18,328,246
Adjustments for:
Depreciation and
amortization 5,799,949 4,446,840 21,335,874 16,171,041
Provision for income
taxes 2,147,177 3,189,234 6,561,468 8,411,270
Unrealized foreign
exchange loss 62,396 819,284 1,188,443 1,396,940
Gain on disposition
of drilling
equipment (575,431) (1,859,479) (2,727,295) (5,588,728)
Share-based payments 409,895 483,028 2,264,706 2,970,553
Finance expense 1,090,636 645,694 3,232,978 2,096,702
Provision for bad
debts 108,197 172,756 15,059 446,521
Change in fair value
of investment in
equity securities - - 490,245 -
Share of loss of
equity-accounted
investees 310,327 - 552,931 -
Change in non-cash
working capital 1,284,738 6,933,540 (13,053,739) (18,437,087)
----------------------------------------------------------------------------
Cash generated from
operating
activities 15,174,663 20,115,168 37,567,698 25,795,458
Interest paid (866,164) (687,004) (2,863,421) (1,883,712)
Income taxes paid (560,668) (52,106) (1,633,970) (687,729)
----------------------------------------------------------------------------
Net cash from
operating
activities 13,747,831 19,376,058 33,070,307 23,224,017
----------------------------------------------------------------------------
Cash flows from
investing
activities:
Proceeds on
disposition of
drilling equipment 2,045,771 3,057,671 9,039,942 9,445,520
Acquisition of
drilling and other
equipment (5,334,438) (15,012,314) (51,452,063) (49,279,614)
Investment in
equity-accounted
investees (1,960,000) - (6,053,468) -
Change in non-cash
working capital (4,946,603) (123,078) (16,239,576) 4,426,676
----------------------------------------------------------------------------
Net cash used in
investing
activities (10,195,270) (12,077,721) (64,705,165) (35,407,418)
----------------------------------------------------------------------------
Cash flows from
financing
activities:
Proceeds from
issuance of share
capital 276,006 1,137,840 1,286,060 4,407,921
Dividends paid to
shareholders (5,079,636) (3,165,287) (18,595,288) (12,473,708)
Proceeds on loans
and borrowings 2,000,000 3,500,000 39,000,000 20,000,000
Proceeds on
operating facility (298,747) (5,877,124) 5,897,711 -
----------------------------------------------------------------------------
Net cash from
financing
activities (3,102,377) (4,404,571) 27,588,483 11,934,213
----------------------------------------------------------------------------
Net decrease in cash
and cash
equivalents 450,184 2,893,766 (4,046,375) (249,188)
Cash and cash
equivalents,
beginning of year 3,879,785 5,482,578 8,376,344 8,625,532
----------------------------------------------------------------------------
Cash and cash
equivalents, end of
year $ 4,329,969 $ 8,376,344 $ 4,329,969 $ 8,376,344
----------------------------------------------------------------------------
----------------------------------------------------------------------------
FOR FURTHER INFORMATION PLEASE CONTACT:
PHX Energy Services Corp.
John Hooks
President and CEO
403-543-4466
PHX Energy Services Corp.
Cameron Ritchie
Senior Vice President Finance and CFO
403-543-4466
403-543-4485 (FAX)
PHX Energy Services Corp.
Suite 1400, 250 2nd Street SW
Calgary, Alberta T2P 0C1
www.phxtech.com
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