PHX Energy is pleased to announce that its Board of Directors has declared a special cash dividend of $0.20 per common share, designated as an "eligible dividend" within the meaning of subsection 89(1) of the Income Tax Act (Canada), payable on April 1, 2026 to shareholders of record at the close of business on March 16, 2026. This special dividend reflects the Corporation's track record of rewarding shareholders as intended under its Return of Capital Strategy ("ROCS") while continuing to invest in operational growth. The Corporation believes it has effectively utilized both its quarterly dividend program and NCIB over the past 5 years to create shareholder rewards. With 2025 being the fourth consecutive year of record revenue while maintaining balance sheet strength and given that the Corporation ended the year below our ROCS target of returning up to 70 percent of excess cash flow(2), our Board determined to further reward shareholders with this special dividend in addition to the regular quarterly dividend.
Fourth Quarter Highlights
For the three-month period ended December 31, 2025, PHX Energy generated consolidated revenue of $183.9 million, the highest level of fourth quarter revenue on record and 3 percent higher than the $178.7 million generated in the fourth quarter of 2024. The strong revenue achieved in the 2025-quarter is partly attributable to the increase in quarterly Rotary Steerable Systems ("RSS") activity which represented 18 percent of the Corporation's consolidated activity in the 2025-quarter (2024-quarter - 15 percent). Consolidated revenue in the 2025-quarter included $11.8 million of motor rental revenue and $0.4 million of revenue generated from the sale of motor equipment and parts (2024 - $10 million and $5.3 million, respectively).
In the fourth quarter of 2025, adjusted EBITDA(1) was $36.9 million, 20 percent of consolidated revenue(1) as compared to $29.6 million, 17 percent of consolidated revenue, in the same 2024-quarter. Adjusted EBITDA in the 2025-quarter included $0.1 million of cash-settled share-based compensation expense (2024 - $2.2 million) and $8.2 million of net gain on disposition of drilling equipment (2024 - $6 million).
Earnings in the 2025 three-month period were $17.6 million, $0.35 per share - diluted, as compared to $14.1 million, $0.30 per share - diluted, in the same 2024-period. Earnings in the 2025-period included a provision for income tax of $0.2 million compared to $1.7 million in the same 2024-period. Additionally, the 2025-quarter's earnings included depreciation and amortization expenses on drilling and other equipment of $16.8 million (pre-tax) which is a 42 percent increase when compared to the $11.8 million (pre-tax) in the corresponding 2024-quarter. This increase is the result of ongoing fixed asset additions as well as $3 million in additional depreciation relating to a change in the estimated useful life of certain primary components of motors.
PHX Energy's US division's revenue in the fourth quarter of 2025 was $131.8 million, mostly flat against the $132.3 million generated in the fourth quarter of 2024. In comparison, the average number of active horizontal and directional rigs per day in the US industry declined by 7 percent quarter-over-quarter. US division revenue in the 2025-quarter represented 72 percent of consolidated revenue (2024, 74 percent).
PHX Energy's Canadian division reported $52.1 million of quarterly revenue, 12 percent higher compared to $46.3 million in the 2024-quarter. The fourth quarter was the division's most active in terms of RSS and this contributed to the revenue growth as the division has continued to expand its RSS presence in this market since establishing its own fleet at the beginning of the year. In comparison, in the 2025 three-month period, Canadian industry drilling days declined by 10 percent compared to the same 2024-period.
For the three-month period ended December 31, 2025, the Corporation generated excess cash flow(2) of $29.8 million, after the impact of net capital expenditures(2) of $1.9 million (2024 - $17.3 million and $5.7 million, respectively).
On December 15, 2025, the Corporation declared a dividend of $0.20 per share(3) or $9.1 million, paid on January 15, 2026 to shareholders of record on December 31, 2025.
Year End Highlights
For the fourth consecutive year, the Corporation generated the highest level of annual consolidated revenue in its history. For the year ended December 31, 2025, PHX Energy generated consolidated revenue of $709.6 million which is 8 percent higher than the $659.7 million generated in 2024. Consolidated revenue in the 2025-year included $48.3 million of motor rental revenue (2024 - $38.4 million) and $4.3 million of revenue generated from the sale of motor equipment and parts (2024 - $11.2 million). RSS activity in the 2025-year was also a record, with strong US activity and the addition of the Canadian division's owned fleet, RSS operating days increased 23 percent year-over-year. RSS operating days represented 16 percent of the Corporation's consolidated activity in the 2025-year (2024 - 14 percent).
In the 2025 twelve-month period, adjusted EBITDA(1) was $132.8 million, 19 percent of consolidated revenue(1), as compared to $123.7 million, 19 percent of consolidated revenue in the same 2024-period. This annual adjusted EBITDA result is the second highest in the Corporation's history, with the record being achieved in 2023. Included in the 2025-year's adjusted EBITDA is a net gain on disposition of drilling equipment of $30.4 million (2024 - $24.6 million) and cash-settled share-based compensation expense of $4.7 million (2024 - $11.8 million).
In the 2025-year, earnings were $54.7 million, $1.13 per share, diluted, as compared to $54.6 million, $1.16 per share, diluted, in 2024. For the year-ended December 31, 2025, PHX Energy recorded a tax provision of $10.8 million, a decrease compared to $15.7 million in 2024. Additionally, depreciation and amortization expenses in the 2025 twelve-month period increased by 30 percent to $58.3 million (pre-tax) from $44.8 million (pre-tax) in 2024. This increase is the result of ongoing fixed asset additions as well as $6 million in additional depreciation for the 2025-year relating to a change in the estimated useful life of certain primary components of motors.
The Corporation's US division generated record annual revenue, which was supported by the highest RSS activity for any given year and increased motor rental revenue. US revenue in 2025 increased by 8 percent to $516.2 million from $479.5 million in 2024 and represented 73 percent of consolidated revenue (2024 - 73 percent). In comparison, the US rig count declined by 6 percent year-over-year.
PHX Energy's Canadian division generated record annual revenue of $193.4 million, an increase of 7 percent compared to $180.2 million generated by the division in 2024. In comparison, the Canadian industry horizontal and directional drilling activity (as measured by drilling days) decreased by 7 percent year-over-year.
For the year ended December 31, 2025, PHX Energy generated excess cash flow(2) of $69 million, after deducting net capital expenditures(2) of $30 million. As at December 31, 2025, the Corporation had a remaining balance of $8.7 million under the Return of Capital Strategy ("ROCS") target(2).
In the 2025 twelve-month period, through its Normal Course Issuer Bid ("NCIB"), the Corporation purchased and cancelled 379,000 common shares for $3.3 million. Since the second quarter of 2017 to December 31, 2025, a total of 16.6 million common shares have been purchased and cancelled under PHX Energy's NCIB's. This represents 28 percent of common shares outstanding as of June 30, 2017.
PHX Energy paid $36.3 million in dividends in the 2025-year which is 3 percent lower than the dividend amount paid in 2024 due to NCIB repurchases and cancellation of shares throughout 2025 and is equivalent to 53 percent of excess cash flows(3) for the year (2024, 79 percent). In both years, dividends of $0.80 per share(3) were paid to shareholders. Since the reinstatement of the quarterly dividend program in December 2020, a total of $134.6 million of dividends, approximately $2.83 per share(3), have been paid to shareholders to date.
As at December 31, 2025, the Corporation had working capital(2) of $110.9 million and net debt(2) of $6.4 million.
Financial Highlights
(Stated in thousands of dollars except per share amounts, percentages and shares outstanding)
Three-month periods ended December 31,
Years ended December 31,
2025
2024
% Change
2025
2024
% Change
Operating Results
Revenue
183,892
178,676
3
709,598
659,663
8
Earnings
17,569
14,098
25
54,710
54,622
-
Earnings per share, diluted
0.35
0.30
17
1.13
1.16
(3
)
Adjusted EBITDA(1)
36,869
29,638
24
132,812
123,734
7
Adjusted EBITDA per share, diluted(1)
0.80
0.63
27
2.88
2.63
10
Adjusted EBITDA as a percentage of revenue(1)
20
%
17
%
19
%
19
%
Cash Flow
Cash flows from operating activities
31,681
17,676
79
73,156
96,898
(25
)
Funds from operations(2)
29,309
24,305
21
104,603
99,695
5
Funds from operations per share, diluted(3)
0.64
0.51
25
2.27
2.12
7
Dividends paid per share(3)
0.20
0.20
-
0.80
0.80
-
Dividends paid
9,036
9,183
(2
)
36,342
37,570
(3
)
Capital expenditures
9,481
15,714
(40
)
72,293
83,277
(13
)
Excess cash flow(2)
29,786
17,263
73
68,975
47,569
45
Financial Position, December 31,
Working capital(2)
110,910
84,545
31
Net debt (Net cash)(2)
6,382
2,664
140
Shareholders' equity
229,043
222,205
3
Common shares outstanding
45,367,773
45,506,773
-
Outlook We are proud of our 2025 operational and financial performance despite a weaker industry backdrop and a volatile cost environment. The strength and composition of our premium technology fleet, combined with best-in-class technical support, allowed us to navigate lower rig counts effectively. The first quarter of 2026 has built on the momentum established in the fourth quarter of 2025, marked by increased RSS deployment in both Canada and the US and a sustained strong market share.
Strategic Priorities for 2026
Create Shareholder Value - Continue our proven track record of leveraging our operational excellence to create meaningful shareholder returns through our ROCS.
The Board has declared a special cash dividend of $0.20 per common share, payable on April 1, 2026 to shareholders of record at the close of business on March 16, 2026. We believe now is an opportunistic time to reward shareholders and this special dividend reflects our strong operational results and solid balance sheet performance over the past 5 years, our commitment to rewarding shareholders while investing in growth, and our confidence in our 2026 outlook. Additionally, it reinforces how the mechanism of ROCS provides an attractive opportunity to enhance the value to our shareholders when the prevailing market price does not reflect the underlying value of our common shares.
By establishing a capital allocation strategy that includes a target of returning up to 70 percent of excess cash flow(2) to shareholders we differentiate ourselves as an oilfield services investment. Since 2020 we have paid $134.6 million of dividends to shareholders and repurchased 28 percent of common shares outstanding as of June 30, 2017. Going into 2026, we intend to sustain this unique position through the mechanisms of ROCS including our base dividend program, NCIB and other mechanisms, such as this special dividend, if opportunistic.
Technology Leadership - We will continue investing in advanced technologies to ensure our fleet evolves alongside increasingly complex drilling programs.
RSS and Real-Time RSS Communications technologies remain key differentiators as operators intensify their focus on drilling efficiency. In 2026, one of our core engineering priorities will be advancing the maturity of our Real-Time Communications fleet while further expanding RSS capabilities.
In late 2025, we added a 7⅞" RSS tool to our fleet in the US to meet evolving client demand. This investment positions us favorably, as currently we are among a limited number of providers offering this emerging tool size.
A focus on downhole data capabilities is regaining prominence, with customers demanding broader data sets and faster transmission speeds. With our engineering group continually developing commercial technologies, enhancements to Velocity's unified telemetry have doubled the rate at which real-time downhole data is transmitted to the surface. It is this continued investment in evolving our technology that maintains our competitive advantage.
Deliver Operational Efficiencies - Operators continue to seek greater operational efficiency, which includes longer horizontal ("lateral") sections many of which reach up to 4 miles in length.
Our integrated technology suite is critical to executing longer and more complex well profiles, including U-turn and J-wells. The capital and technical barriers to deploying a full RSS-enabled fleet limit top-tier competition. Our strategic initiatives over the last decade have propelled us into this top tier and this has benefited us in establishing the strong relationships we have with major operators who represent a large portion of the rig count. As lower rig counts persist, we believe our continued focus on high performance technologies and services will continue to provide market share gains.
Diversification of Regional and Client Exposure - We will continue strengthening our regional footprint and broadening our customer base.
Our targeted focus in core basins—particularly the Permian and Montney/Duvernay- has driven sustained, record-level performance in both Canada and the US. While these basins remain a priority given their high rig concentration, we also recognize growth opportunities in select basins, such as the Haynesville, Marcellus and Clearwater, and are allocating resources to thoughtfully expand our presence in these markets.
Ongoing E&P consolidation has reduced the number of operators while increasing their scale. We are proud to support most of these leading producers and remain well positioned to grow alongside them while we look to expand our client base to reduce risks associated with one customer representing a significant portion of activity.
Protecting Margins in a Volatile Environment
Uncertainty related to global trade dynamics and the broader geopolitical landscape continues to create cost and supply chain pressures. As we navigate tariffs, inflation, and ongoing market volatility, we are proactively preserving margins through strategic sourcing initiatives, disciplined supplier negotiations, and continued cost control.
We expect elements of this higher-cost environment to persist into 2026 and remain focused on improving profitability. While commodity price volatility has introduced some pricing pressure, we are committed to protecting returns by emphasizing technology differentiation, service quality, and value-based customer partnerships.
Allocating capital expenditures to high-margin business lines will help mitigate ongoing cost pressures. Our Atlas motor rentals in the US and Canada grew in 2025, and we are continuing to invest resources to sustain this momentum. Expanding RSS activity in Canada, leveraging the increased capacity in our fleet, will also remain a key focus in 2026 as more operators adopt this technology.
Our capital allocation strategy remains focused on funding strategic capital expenditures that will enable our technology and market share leadership, sustaining a balance sheet with relatively low debt levels, and rewarding shareholders through ROCS with the continued optionality of including the base dividend program, potential share buy backs, and potential special dividends.
Michael Buker, President & CEO February 24, 2026Overall Performance
In the final quarter of 2025, weaker industry environment persisted with both the US and Canadian industries' activity softening compared to the same quarter in 2024. Despite this, both the US and Canadian divisions outperformed industry activity trends and as a result, PHX Energy generated consolidated revenue of $183.9 million, its highest level of fourth quarter revenue on record and a 3 percent increase from the $178.7 million reported in the 2024-quarter.
For the three-month period ended December 31, 2025, the Corporation's US division's revenue was mostly flat at $131.8 million compared to $132.3 million in the same 2024-period. PHX Energy's US operating days saw a modest increase of 2 percent to 4,525 days in the 2025 three-month period from 4,438 in the same 2024-period while the US industry's rig count declined by 7 percent quarter-over-quarter. For the three-month period ended December 31, 2025, RSS activity represented 22 percent of the division's operating days, the same level as in the 2024-period. The US division's average revenue per day(3) for directional drilling services, in both local and reporting currency, was flat against the same 2024 three-month period. The Corporation's US motor rental activity also showed resilience to the slower market environment and US motor rental revenue increased to $11.4 million from $9.2 million in the same period in 2024. In the 2025-quarter, the US division generated $0.4 million of revenue from motor equipment and parts sold (2024-quarter - $5.3 million). Revenue from the Corporation's US division in the fourth quarter of 2025 represented 72 percent of consolidated revenue (2024, 74 percent).
Canadian division revenue in the 2025 three-month period grew to $52.1 million, a 12 percent increase from $46.3 million in the same 2024-period. The Canadian segment recorded 3,302 operating days in the 2025-quarter, a 2 percent decrease from the 3,369 operating days realized in the comparable 2024-quarter, but a smaller decrease compared to the 10 percent decline in Canadian industry horizontal and directional drilling days quarter-over-quarter. In the last quarter of 2025, RSS activity increased to 12 percent of the Canadian segment's operating days from 5 percent in the same 2024-quarter. As a result, average revenue per day(3) realized by the Canadian division increased by 16 percent to $15,640 in the 2025-quarter, as compared to $13,538 in the corresponding 2024-quarter. The Corporation's Canadian motor rental division generated $0.5 million of revenue in the 2025-period (2024 - $0.8 million).
In the 2025-quarter, earnings were $17.6 million (2024 - $14.1 million), adjusted EBITDA(1) was $36.9 million (2024 - $29.6 million), and adjusted EBITDA as a percentage of consolidated revenue(1) was 20 percent (2024, 17 percent). For the three-month period ended December 31, 2025, the Corporation recorded a tax provision of $0.2 million, a decrease compared to $1.7 million in the 2024-period. In addition, earnings in the 2025-period included depreciation and amortization expenses on drilling and other equipment of $16.8 million (pre-tax) which increased by 42 percent as compared to $11.8 million (pre-tax) in the corresponding 2024-period.This increase is the result of fixed asset additions throughout 2025 as well as $3 million in additional depreciation relating to a change in the estimated useful life of certain primary components of motors. Included in the 2025 three-month period adjusted EBITDA is cash-settled share-based compensation expense of $0.1 million (2024 - $2.2 million) and net gain on disposition of drilling equipment of $8.2 million (2024 - $6 million).
For the year ended December 31, 2025, for the fourth consecutive year the Corporation achieved the highest annual revenue in its history, $709.6 million, an increase of 8 percent compared to $659.7 million in 2024. Record RSS activity and strong motor rental activities were key contributing factors to this achievement. Particularly, in the twelve-month period of 2025, RSS activity represented 16 percent of PHX Energy's consolidated operating days, an increase compared to 14 percent in 2024, and consolidated motor rental revenue increased to $48.3 million from $38.4 million in 2024.
Earnings for the 2025-year were $54.7 million (2024 - $54.6 million) and adjusted EBITDA(1) was $132.8 million, 19 percent of consolidated revenue(1) (2024 - $123.7 million, 19 percent of consolidated revenue). In the 2025-year, the Corporation recorded a tax provision of $10.8 million, a decrease compared to $15.7 million in 2024. Additionally, depreciation and amortization expenses increased by 30 percent to $58.3 million (pre-tax) from $44.8 million (pre-tax) in 2024. This increase is the result of ongoing fixed asset additions as well as $6 million in additional depreciation for the 2025-year relating to a change in the estimated useful life of certain primary components of motors. Included in the 2025 twelve-month period's adjusted EBITDA is $30.4 million of net gain on disposition of drilling equipment (2024 - $24.6 million) and cash-settled share-based compensation expense of $4.7 million (2024 - $11.8 million).
As at December 31, 2025, the Corporation had working capital(2) of $110.9 million and net debt(2) of $6.4 million. The Corporation also has CAD $74 million and USD $25 million available to be drawn from its credit facilities at the end of the 2025-year.
Dividends and ROCSOn December 15, 2025, the Corporation declared a dividend of $0.20 per share(3) payable to shareholders of record on December 31, 2025. An aggregate of $9.1 million was paid on January 15, 2026.
The Corporation remains committed to enhancing shareholder returns through its Return of Capital Strategy ("ROCS") which targets up to 70 percent of annual excess cash flow(2) to be used for shareholder returns and includes multiple options including the dividend program and the NCIB. For the year ended December 31, 2025, excess cash flow increased primarily due to lower capital expenditures and higher proceeds on disposition of drilling equipment. The Corporation continued to prioritize shareholder returns while protecting its financial position, and in the 2025-year, maintained its current level of dividends, paying $36.3 million in dividends to shareholders, and repurchased and cancelled 379,000 common shares for $3.3 million under the Corporation's NCIB. For the year-ended December 31, 2025, the remaining balance under ROCS target(2) was $8.7 million.
(Stated in thousands of dollars)
Three-month periods ended December 31,
Years ended December 31,
2025
2024
2025
2024
Excess cash flow
29,786
17,263
68,975
47,569
Targeted 70% of excess cash flow under ROCS
20,850
12,084
48,283
33,298
Deduct:
Dividends paid to shareholders
(9,036
)
(9,183
)
(36,342
)
(37,570
)
Repurchase of shares under the NCIB
-
(4,859
)
(3,250
)
(20,614
)
Remaining balance under ROCS target
11,814
(1,958
)
8,691
(24,886
)
As part of PHX Energy's commitment rewarding shareholders through ROCS, the Board has declared a special cash dividend of $0.20 per common share, payable on April 1, 2026 to shareholders of record at the close of business on March 16, 2026. This special dividend reflects the Corporation's track record of rewarding shareholders as it had intended when the ROCS program was established while continuing to invest in operational growth. Given that the Corporation ended the year below our ROCS target of returning up to 70 percent of excess cash flow(2) our Board determined to further reward shareholders with this special dividend in addition to the regular quarterly dividend.
Normal Course Issuer Bid ("NCIB")During the third quarter of 2025, the TSX approved the renewal of PHX Energy's NCIB to purchase for cancellation, from time-to-time, up to a maximum of 4,035,757 common shares, representing 10 percent of the Corporation's public float of Common Shares as at August 5, 2025. The NCIB commenced on August 18, 2025 and will terminate on August 17, 2026. Purchases of common shares may be made on the open market through the facilities of the TSX and through alternative trading systems. The price which PHX Energy is to pay for any common shares purchased is to be at the prevailing market price on the TSX or alternate trading systems at the time of such purchase.
Pursuant to the previous NCIB, 379,000 common shares were purchased by the Corporation and cancelled for $3.3 million in the year ended December 31, 2025 (2024, 2,141,232 common shares were purchased and cancelled for $20.6 million). No common shares have been purchased to date under the current NCIB.
It is the Corporation's intention to continue the current strategy of leveraging the NCIB at opportunistic times as a tool to further reward shareholders under ROCS especially during times of market industry weaknesses.
Capital SpendingFor the year ended December 31, 2025, the Corporation spent $72.3 million in capital expenditures, of which $49 million was spent on growing the Corporation's fleet of drilling equipment, $16.6 million was spent to replace retired assets, and $6.7 million was spent to replace equipment lost downhole during drilling operations. With proceeds on disposition of drilling and other equipment of $42.3 million, the Corporation's net capital expenditures(2) for the 2025-year were $30 million. Capital expenditures in the 2025-year were primarily directed towards RSS, both PowerDrive Orbit and iCruise and the Corporation's proprietary Real-Time RSS Communications technologies, Velocity Real-Time systems ("Velocity"), and Atlas High Performance motors ("Atlas"). PHX Energy funded capital spending primarily using proceeds on disposition of drilling equipment, cash flows from operating activities, and its credit facilities when required.
(Stated in thousands of dollars)
Three-month periods ended December 31,
Years ended December 31,
2025
2024
2025
2024
Growth capital expenditures
6,362
13,580
48,959
73,378
Maintenance capital expenditures from asset retirements
1,032
-
16,634
5,289
Maintenance capital expenditures to replace downhole equipment losses
2,087
2,134
6,700
4,610
Total capital expenditures
9,481
15,714
72,293
83,277
Deduct:
Proceeds on disposition of drilling equipment
(11,354
)
(10,057
)
(42,286
)
(36,741
)
Net capital expenditures(2)
(1,873
)
5,657
30,007
46,536
As at December 31, 2025, the Corporation had capital commitments to purchase drilling and other equipment for $41.4 million, $18.1 million of which is growth capital allocated as follows: $7.8 million for RSS systems, $7.6 million for performance drilling motors, $2.6 million for Velocity systems, and $0.1 million for other equipment. Equipment on order as at December 31, 2025 is expected to be delivered within the first half of 2026.
The Board approved a preliminary 2026 capital expenditure program of $60 million, of which approximately 40 percent is anticipated to be spent on growth. The growth portion is expected to be directed toward continuing to expand PHX Energy's high margin technologies, including RSS and supporting greater activity in the Atlas motor rental division. The remainder is anticipated to be spent on maintenance of the fleet of drilling and other equipment and replacement of equipment lost downhole during drilling operations.
The Corporation currently possesses approximately 915 Atlas motors, comprised of various configurations including its 5.25", 5.76", 6.63", 7.12", 7.25", 8.12", and 9.00" Atlas motors, and 127 Velocity systems. The Corporation also possesses the largest independent RSS fleet in North America with 113 RSS tools. The size and diversity of PHX Energy's RSS fleet creates unique competitive advantages in that it is comprised of both the PowerDrive Orbit and iCruise systems, includes its proprietary Real-Time RSS Communications technology for both systems and is one of the only fleets today to have a 7 ⅞ RSS tool along with the traditional RSS tool sizes.
Non-GAAP and Other Financial Measures
Throughout this Press Release, PHX Energy uses certain measures to analyze financial performance, financial position, and cash flow. These Non-GAAP and Other Specified Financial Measures do not have standardized meanings prescribed under Canadian generally accepted accounting principles ("GAAP") and include Non-GAAP Financial Measures, Non-GAAP Ratios, Capital Management Measures and Supplementary Financial Measures (collectively referred to as "Non-GAAP and Other Financial Measures"). These Non-GAAP and Other Specified Financial Measures used by PHX Energy include adjusted EBITDA, adjusted EBITDA per share - diluted, adjusted EBITDA as a percentage of revenue, gross profit as a percentage of revenue excluding depreciation and amortization, selling, general and administrative ("SG&A") costs excluding share-based compensation as a percentage of revenue, funds from operations, excess cash flow, working capital, net debt (net cash), net capital expenditures, remaining balance under ROCS target, average consolidated revenue per day, average revenue per day, dividends paid per share, dividends declared per share, dividends paid as a percentage of excess cash flows, effective tax rate, and funds from operations per share - diluted. Management believes that these measures provide supplemental financial information that is useful in the evaluation of the Corporation's operations and may be 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.
Readers are cautioned that this Press Release should be read in conjunction with the section entitled "Non-GAAP and Other Financial Measures" at the end of this Press Release of for applicable definitions, rationale for use, method of calculation and reconciliations where applicable as well as the section entitled "Cautionary Statement Regarding Forward-Looking Information and Statements". Footnotes throughout this document reference:(1) Non-GAAP financial measure or ratio 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 and Other Financial Measures section of this Press Release. (2) Capital management 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 and Other Financial Measures section of this Press Release. (3) Supplementary financial 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 and Other Financial Measures section of this Press Release.
Revenue
The Corporation generates revenue primarily through the provision of directional drilling services which includes providing equipment, personnel, and operational support for drilling a well. Additionally, the Corporation generates revenue through the rental and sale of drilling motors and associated parts, particularly Atlas.
(Stated in thousands of dollars)
Three-month periods ended December 31,
Years ended December 31,
2025
2024
% Change
2025
2024
% Change
Directional drilling services
171,644
163,392
5
657,014
609,994
8
Motor rental
11,838
9,966
19
48,271
38,436
26
Sale of motor equipment and parts
410
5,318
(92
)
4,313
11,233
(62
)
Total revenue
183,892
178,676
3
709,598
659,663
8
In 2025, PHX Energy achieved its highest level of fourth quarter and annual revenue in its history. Consolidated revenue in the last quarter of 2025 increased by 3 percent to $183.9 million compared to $178.7 million in the corresponding 2024-quarter and annual consolidated revenue increased by 8 percent to $709.6 million compared to $659.7 million in 2024.
In the final quarter of 2025, softer industry conditions persisted and both the US and Canadian industry rig counts were lower compared to the same quarter in 2024. The average number of horizontal and directional rigs operating per day in the US declined by 7 percent to 516 in the 2025 three-month period from 555 in the corresponding 2024-period. In Canada, industry horizontal and directional drilling activity (as measured by drilling days) was 14,881 days in the 2025-quarter, a 10 percent decrease from 16,498 days in the same 2024-quarter. In comparison, the Corporation's consolidated operating days increased marginally to 7,826 days in the 2025-quarter from 7,807 days in the 2024-quarter.
For the year-ended December 31, 2025, PHX Energy recorded 30,687 consolidated operating days which is 3 percent more than the 29,877 days in the 2024-year. The US rig count and the Canadian industry horizontal and directional drilling activity (as measured by drilling days) declined by 6 percent and 7 percent, respectively, year-over-year.
Average consolidated revenue per day(3) for directional drilling services improved by 5 percent in both 2025-periods to $21,932 in the 2025-quarter (2024, $20,930) and to $21,410 in the 2025-year (2024, $20,418). These improvements were largely driven by customers' increased utilization of PHX Energy's premium technologies particularly RSS and Real-Time RSS Communications technologies. RSS activity was strong and represented 18 percent of the Corporation's consolidated activity in the 2025-quarter (2024, 15 percent) and 16 percent in the 2025-year (2024, 14 percent).
In the 2025 three and twelve-month periods, revenue generated by PHX Energy's Atlas motor rental division increased by 19 percent to $11.8 million (2024 - $10 million) and 26 percent to $48.3 million (2024 - $38.4 million), respectively. Throughout the year, the Corporation's US motor rental division successfully grew its client base through increased marketing efforts and additional resources dedicated to support the division.
For the three-month period and year ended December 31, 2025, revenue of $0.4 million and $4.3 million, respectively, were generated from the sale of motor equipment and parts (2024, $5.3 million and $11.2 million). Due to the intermittent and cyclical nature of the customers' ordering frequency, it is expected that revenue from this line of business will fluctuate between periods.
Operating Costs and Expenses
(Stated in thousands of dollars except percentages)
Three-month periods ended December 31,
Years ended December 31,
2025
2024
% Change
2025
2024
% Change
Direct costs
155,137
148,003
5
598,634
535,169
12
Depreciation & amortization drilling and other equipment (included in direct costs)
16,793
11,846
42
58,321
44,822
30
Depreciation & amortization right-of-use asset (included in direct costs)
843
867
(3
)
3,456
3,787
(9
)
Gross profit as a percentage of revenue excluding depreciation & amortization(1)
25
%
24
%
24
%
26
%
Direct costs are comprised of field and shop expenses, costs of motors and parts sold, and include depreciation and amortization of the Corporation's equipment and right-of-use assets. For the three-month period ended December 31, 2025, direct costs increased by 5 percent to $155.1 million from $148 million in the same 2024-period. For the year-ended December 31, 2025, direct costs increased by 12 percent to $598.6 million from $535.2 million in 2024.
For the three and twelve-month periods of 2025, the Corporation's depreciation and amortization on drilling and other equipment increased by 42 percent and 30 percent, respectively, mainly as a result of the additions to fixed assets throughout 2025 and a change in the estimated useful lives of certain major components of motors that was effective September 1, 2025 which resulted in $3 million of additional depreciation recorded in the 2025-quarter and $6 million in the year. Apart from higher depreciation and amortization expenses on drilling and other equipment, higher direct costs in both 2025-periods primarily resulted from greater costs of equipment parts and services which were impacted by several factors including inflation, tariffs implemented late in the first quarter of 2025, and servicing and rental costs related to higher RSS activity.
For the three-month period ended December 31, 2025, gross profit as a percentage of revenue excluding depreciation and amortization(1) increased to 25 percent from 24 percent in the same 2024-period. Included in direct costs in the 2024-period was a $2.2 million write-down of inventory to its net realizable value. For the year ended December 31, 2025, gross profit as a percentage of revenue excluding depreciation and amortization(1) declined to 24 percent from 26 percent in 2024. The decrease in profitability was mainly due to rising equipment servicing costs and lower revenue from the sale of motor equipment and parts.
(Stated in thousands of dollars except percentages)
Three-month periods ended December 31,
Years ended December 31,
2025
2024
% Change
2025
2024
% Change
Selling, general and administrative ("SG&A") costs
15,984
17,567
(9
)
64,460
68,294
(6
)
Cash-settled share-based compensation (included in SG&A costs)
111
2,190
(95
)
4,732
11,774
(60
)
Equity-settled share-based compensation (included in SG&A costs)
48
59
(19
)
405
480
(16
)
SG&A costs excluding share-based compensation as a percentage of revenue(1)
9
%
9
%
8
%
8
%
For the three-month period and year ended December 31, 2025, SG&A costs decreased to $16 million and $64.5 million, respectively, from $17.6 million and $68.3 million in the corresponding 2024-periods. In both 2025-periods, the decrease in SG&A costs was mainly due to lower cash-settled share-based compensation expense.
Cash-settled share-based compensation relates to the Corporation's retention awards and is measured at fair value. For the three-month period and year ended December 31, 2025, the related compensation expense recognized by PHX Energy was $0.1 million (2024 - $2.2 million) and $4.7 million (2024 - $11.8 million), respectively. Changes in cash-settled share-based compensation expense in the 2025-periods were mainly driven by fluctuations in the Corporation's share price, estimated payout multipliers, and the number of awards granted in the period. There were 1,546,632 retention awards outstanding as at December 31, 2025 (2024, 1,599,094). SG&A costs excluding share-based compensation as a percentage of revenue(1) were flat period-over-period at 9 percent and 8 percent in the three and twelve-month periods ended December 31, 2025, respectively (2024, 9 percent and 8 percent, respectively).
(Stated in thousands of dollars)
Three-month periods ended December 31,
Years ended December 31,
2025
2024
% Change
2025
2024
% Change
Research and development expense
1,685
1,333
26
6,816
5,337
28
For the three-month period and year ended December 31, 2025, PHX Energy spent $1.7 million and $6.8 million on research and development ("R&D") expenditures, an increase of 26 and 28 percent as compared to $1.3 million and $5.3 million spent in the corresponding 2024-periods. Greater R&D expenditures in the 2025-periods were largely driven by rising personnel related costs and increased prototype and equipment repair parts incurred to support key R&D initiatives.
(Stated in thousands of dollars)
Three-month periods ended December 31,
Years ended December 31,
2025
2024
% Change
2025
2024
% Change
Finance expense
747
527
42
2,921
1,948
50
Finance expense lease liabilities
460
512
(10
)
1,921
2,213
(13
)
Finance expenses mainly relate to interest charges on the Corporation's credit facilities. For the three-month period and year ended December 31, 2025, finance expense increased to $0.7 million and $2.9 million, respectively (2024 - $0.5 million and $1.9 million). The increase in finance expenses in both 2025-periods was primarily due to higher drawings on the credit facilities in the periods.
Finance expense lease liabilities relate to interest expense incurred on lease liabilities. For the three and twelve-month periods ended December 31, 2025, finance expense lease liabilities decreased to $0.5 million and $1.9 million, respectively (2024 - $0.5 million and $2.2 million), due to leases that expired in 2025.
(Stated in thousands of dollars)
Three-month periods ended December 31,
Years ended December 31,
2025
2024
2025
2024
Net gain on disposition of drilling equipment
8,203
6,021
30,383
24,648
Foreign exchange losses
(247
)
(946
)
(205
)
(1,070
)
Provision for bad debts
(198
)
-
(198
)
-
Miscellaneous other income
89
-
707
-
Other income
7,847
5,075
30,687
23,578
For the three-month period and year ended December 31, 2025, the Corporation recognized other income of $7.8 million and $30.7 million, respectively (2024 - $5.1 million and $23.6 million, respectively). In both periods, other income was mainly comprised of net gain on disposition of drilling equipment. 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. In the 2025-quarter and year, more instances of high dollar valued downhole equipment losses occurred as compared to the corresponding 2024-periods resulting in higher levels of net gain on disposition of drilling equipment recognized.
Foreign exchange losses of $0.3 million and $0.2 million in the three and twelve-month periods of 2025 (2024, $0.9 million and $1.1 million), were primarily due to the revaluation and settlement of CAD-denominated intercompany payables in the US.
In the final quarter of 2025, PHX Energy provisioned $0.2 million for bad debts which relates to one client in the US and one client in Canada.
In the 2025 three and twelve-month periods, the miscellaneous other income of $0.1 million and $0.7 million, respectively, pertain to sundry and occasional transactions such as proceeds from the sale of scrapped metal and machining services for a third party.
(Stated in thousands of dollars except percentages)
Three-month periods ended December 31,
Years ended December 31,
2025
2024
2025
2024
Provision for (Recovery of) income taxes
157
1,711
10,823
15,658
Effective tax rates (3)
1
%
11
%
17
%
22
%
For the three-month period and year ended December 31, 2025, the Corporation reported a provision for income tax of $0.2 million (2024 - $1.7 million), and $10.8 million (2024 - $15.7 million), respectively. PHX Energy's effective tax rate(3) of 1 percent in the 2025-quarter and 17 percent in the 2025-year are lower than the combined US federal and state corporate income tax rate of 22.5 percent and the combined Canadian federal and provincial corporate income tax rate of 23 percent. In the 2025-periods, lower provision for income taxes are primarily attributable to the recognition and utilization of previously unrecognized deferred tax assets in the Luxembourg jurisdiction and recovery of income taxes relating to prior periods.
(Stated in thousands of dollars except per share amounts and percentages)
Three-month periods ended December 31,
Years ended December 31,
2025
2024
% Change
2025
2024
% Change
Operating Results
Earnings
17,569
14,098
25
54,710
54,622
-
Earnings per share, diluted
