Mr. John Hooks reports

PHX ENERGY ANNOUNCES RECORD FIRST QUARTER FINANCIAL RESULTS

PHX Energy Services Corp. has released its first quarter financial results.

First quarter highlights:

• In the 2023 quarter, consolidated revenue was $166-million, the highest level of quarterly revenue on record and an increase of 52 per cent from the first quarter of 2022.
• Adjusted EBITDA (earnings before interest, taxes, depreciation and amortization) from continuing operations increased to an all-time quarterly record of $37-million, which represented 22 per cent of consolidated revenue, also the highest quarterly record. Included in the 2023 quarter's adjusted EBITDA is $1.4-million in cash-settled share-based compensation expense. Excluding cash-settled share-based compensation expense, adjusted EBITDA from continuing operations in the first quarter of 2023 was $38.4-million, 23 per cent of consolidated revenue.
• For the three-month period ended March 31, 2023, PHX Energy's earnings from continuing operations increased to $22.4-million, the highest level of quarterly earnings in the corporation's history.
• PHX Energy's U.S. division's revenue of $125.7-million is virtually the same as the record quarterly revenue generated in the fourth quarter of 2022. Excluding the impact of foreign exchange, the 2023 first quarter was an all-time quarterly record revenue for PHX Energy's U.S. operations. U.S. revenue represented 76 per cent of consolidated revenue.
• PHX Energy's Canadian division reported its highest level of quarterly revenue since the fourth quarter of 2014.
• The U.S. dollar remained strong and continued to have a favourable impact on the 2023 quarter's financial results. In the 2023 three-month period, the average U.S.-dollar-to-Canadian-dollar foreign exchange rate was 1.35 compared with 1.27 in the 2022 period.
• The corporation generated excess cash flow of $19.2-million in the 2023 three-month period.
• In the 2023 quarter, PHX Energy paid $7.6-million in dividends, which is triple the dividend amount paid in the same 2022 quarter. On March 15, 2023, the corporation declared a dividend of 15 cents per share or $7.7-million, paid on April 17, 2023, to shareholders of record on March 31, 2023.
• The corporation continues to maintain a strong financial position with working capital of $105.7-million and net debt of $14.3-million with credit facility capacity in excess of $50-million as at March 31, 2023.

Outlook

In the first quarter of 2023, the company has continued to produce record quarterly financial results in revenue, adjusted EBITDA and net earnings. Although currently there is some uncertainty in the market, we remain cautiously optimistic that the company's operational strength will continue to produce strong financial results:

• As anticipated, the North American rig count in the first quarter was relatively flat compared with the fourth quarter. With the recent weakening of commodity prices, the U.S. rig count is currently down 3 per cent from the start of this year, and in Canada, due to the typical slower spring breakup period, the rig count has decreased 44 per cent.
• With this weakening, it has experienced a similar reduction in activity in the United States and expects these slightly lower-than-forecasted activity levels to persist for a few months as the rig count stabilizes. This has been partially offset by the demand for its premium technology remaining strong and in particular its RSS offering, which generates higher day rates. Despite these industry pressures thus far in 2023, activity levels are strong for its U.S. operations on a historical basis, and the company foresees maintaining its market share.
• In Canada, the strong activity from the first quarter is continuing with a more active spring breakup period for its operations, partially due to its client mix and drilling areas being less impacted by the spring thaw.
• It believes that activity levels will rebound in the latter part of the year, and its capital expenditures will provide the required capacity to keep pace with this. Despite the slowdown, its Atlas motors remain in high demand, and with new opportunities to market these motors, they make up a large portion of the capital expenditures budget.
• It has recently entered into an Atlas sales agreement with a client and is actively trying to expand this portion of its business and customer base. It believes that creating an Atlas sales division will allow it to further penetrate the North American market and possibly other international markets. This business line is complementary to its full-service directional offering and opens a portion of the market that may not be available on a full-service basis. It anticipates the additional revenue and associated margins will bolster its already strong financial position.
• It is committed to providing shareholders an attractive total return, and believes it has sustainable dividend program, which it intends to supplement through its return to capital strategy (ROCS), which will potentially allow it to return up to 70 per cent of excess cash flow to shareholders. It will remain disciplined with its cost and capital management to ensure it preserves its balance sheet strength and remains positioned as a leader within the energy service sector.

It remains cautiously optimistic for the rest of the 2023 year, and with its exceptional team of people, it will execute on its strategic and operational objectives to continue to outperform in its sector. Even with the softening industry environment, its industry-leading technology and superior customer services provide it with competitive advantages it can continue to leverage.

About PHX Energy Services Corp.

PHX Energy is a growth-oriented, public oil and natural gas service company. The corporation, through its directional drilling subsidiary entities, provides horizontal and directional drilling services to oil and natural gas exploration and development companies principally in Canada and the United States. In connection with the services it provides, PHX Energy engineers, develops and manufactures leading-edge technologies. In recent years, PHX Energy has developed various new technologies that have positioned the corporation as a technology leader in the horizontal and directional drilling services sector.

PHX Energy's Canadian directional drilling operations are conducted through Phoenix Technology Services LP. The corporation maintains its corporate head office, research and development, Canadian sales, service, and operational centres in Calgary, Alta. In addition, PHX Energy has a facility in Estevan, Sask. PHX Energy's U.S. operations, conducted through the corporation's wholly owned subsidiary, Phoenix Technology Services USA Inc., is headquartered in Houston, Tex. Phoenix USA has sales and service facilities in Houston, Tex.; Midland, Tex.; Casper, Wyo.; and Oklahoma City, Okla. Internationally, PHX Energy has sales offices and service facilities in Albania, and administrative offices in Nicosia, Cyprus, and Luxembourg City, Luxembourg. The corporation also supplies technology to the Middle East regions through an arrangement with National Energy Services Reunited Corp.

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

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