First Quarter Highlights
For the three-month period ended March 31, 2026, PHX Energy generated consolidated revenue of $183.9 million, which is 5 percent lower than the $193.7 million generated in the first quarter of 2025, virtually the same level as the consolidated revenue generated in the fourth quarter of 2025, and the second highest level of first quarter revenue in the Corporation's history. Rotary Steerable Systems ("RSS") activity in the 2026-quarter was a record and represented 18 percent of the Corporation's consolidated activity (2025, 15 percent). However, both the US and Canadian industry's drilling activity contracted causing PHX Energy's consolidated operating days to decline by 7 percent quarter-over-quarter. Consolidated revenue in the 2026-quarter included $12.2 million of motor rental revenue and $0.4 million of revenue generated from the sale of motor equipment and parts (2025 - $11.7 million and $2.6 million, respectively).
Adjusted EBITDA excluding cash-settled share-based compensation expense(1) for the three-month period ended March 31, 2026 was $39.5 million, 22 percent of consolidated revenue(1), as compared to $43.3 million, 22 percent of consolidated revenue, in the same 2025-quarter. In the first quarter of 2026, the Corporation incurred higher cash-settled share-based compensation expense of $9.6 million (2025 - $2.7 million) that primarily resulted from the increase in PHX Energy's share price from $7.50 at December 31, 2025 to $13.21 at March 31, 2026 (2025, decreased from $9.32 at December 31, 2024 to $8.86 at March 31, 2025). Adjusted EBITDA(1) including cash-settled share-based compensation expense was $30 million, 16 percent of consolidated revenue(1), compared to $40.7 million, 21 percent of consolidated revenue, in the same 2025-quarter.
Earnings in the 2026 three-month period were $8.9 million, $0.20 per share, as compared to $20.2 million, $0.44 per share, in the same 2025-period. Earnings in the 2026-period included depreciation and amortization expenses on drilling and other equipment of $16.9 million (pre-tax) which is a 35 percent increase when compared to the $12.6 million (pre-tax) in the corresponding 2025-quarter. This increase is the result of ongoing fixed asset additions as well as $2.8 million in additional depreciation recognized in the 2026-quarter relating to a change in the estimated useful life of certain primary components of motors that was effective in the third quarter of 2025.
In the 2026-quarter, PHX Energy's US division's revenue was $125.8 million, 8 percent lower than the $136.1 million generated in the first quarter of 2025. The US division saw a 6 percent decline in its operating days, and in comparison, the average number of active horizontal and directional rigs per day in the US industry declined by 7 percent quarter-over-quarter. Despite these declines, the US division achieved record RSS activity in the first quarter of 2026 with RSS representing 26 percent of the division's operating days (2025 - 22 percent). US division revenue in the 2026-quarter represented 68 percent of consolidated revenue (2025 - 70 percent).
PHX Energy's Canadian division reported $58.1 million of quarterly revenue, marginally higher compared to $57.6 million in the 2025-quarter. The segment's RSS activity continued to be strong, representing 10 percent of its operating days (2025, 6 percent) which helped the division maintain the same level of revenue despite weaker industry activity levels quarter-over-quarter. The Canadian division's operating days decreased by 8 percent but record owned RSS activity was achieved in the 2026-quarter which resulted from the division's continued expansion of its RSS fleet.
The Corporation's net capital expenditures(2), which account for proceeds on disposition of drilling and other equipment, were $16.2 million for the 2026-period. For the three-month period ended March 31, 2026, PHX Energy spent $28.5 million in capital expenditures and proceeds on disposition of drilling and other equipment were $12.3 million. Proceeds on disposition of drilling and other equipment mainly result from instances of downhole equipment losses where operators compensate the Corporation for the replacement cost of the lost drilling equipment and therefore fund the related capital expenditure rather than the expenditure being solely funded by the Corporation's cash flows from operating activities, and its credit facilities when required.
For the three-month period ended March 31, 2026, the Corporation generated excess cash flow(2) of $3 million, after deducting net capital expenditures(2) of $16.2 million (2025 - $18.2 million and $13.8 million, respectively).
On February 24, 2026, the Corporation declared a special dividend of $0.20 per share or $9.1 million, payable on April 1, 2026, to shareholders of record on March 16, 2026. On March 13, 2026, the Corporation declared a regular quarterly dividend of $0.20 per share or $9.1 million, payable on April 15, 2026, to shareholders of record on March 31, 2026.
As of March 31, 2026, the Corporation had CAD $56.8 million drawn on its Canadian credit facilities, USD $4 million drawn on its US operating facility, and a cash balance of $19 million, resulting in net debt(2) of $43.4 million (December 31, 2025 - $6.4 million). The proceeds from loans and borrowings were primarily used to fund capital acquisitions, dividends, share-based payments, and working capital. The Corporation had CAD $52.7 million and USD $21 million available to be drawn from its credit facilities as at the end of the 2026-quarter.
As at March 31, 2026, the Corporation had a working capital(2) of $122 million.
Financial Highlights (Stated in thousands of dollars except per share amounts, percentages and shares outstanding)
Three-month periods ended March 31,
2026
2025
% Change
Operating Results
Revenue
183,885
193,704
(5
)
Earnings
8,936
20,159
(56
)
Earnings per share, diluted
0.20
0.44
(55
)
Adjusted EBITDA(1)
29,957
40,687
(26
)
Adjusted EBITDA per share, diluted(1)
0.66
0.89
(26
)
Adjusted EBITDA as a percentage of revenue(1)
16
%
21
%
Adjusted EBITDA excluding share-based compensation(1)
39,542
43,347
(9
)
Adjusted EBITDA excluding share-based compensation per share, diluted(1)
0.87
0.95
(8
)
Adjusted EBITDA excluding share-based compensation as a percentage of revenue(1)
22
%
22
%
Cash Flow
Cash flows from (used in) operating activities
(532
)
10,919
(105
)
Funds from operations(2)
20,648
33,362
(38
)
Funds from operations per share, diluted(3)
0.46
0.73
(37
)
Dividends paid per share(3)
0.40
0.20
100
Dividends paid
18,148
9,102
99
Capital expenditures
28,506
24,692
15
Excess cash flow(2)
2,996
18,163
(84
)
Financial Position
Mar 31 '26
Dec 31 ‘25
Working capital(2)
122,026
110,910
10
Net debt(2)
43,398
6,382
n.m.
Shareholders' equity
223,721
229,043
(2
)
Common shares outstanding
45,502,406
45,367,773
-
n.m., not meaningful
Outlook Our operational and financial performance has remained resilient despite a weaker industry backdrop and ongoing inflationary pressures. This is the result of the strength and composition of our premium technology fleet, combined with best-in-class technical support. Increased RSS deployment in both Canada and the US, along with sustained strong market share, has supported favourable first quarter results, and we expect this momentum to continue in the coming quarters.
We remain committed to differentiating ourselves as a value-driven investment and returning capital to shareholders through our ROCS framework while investing in growth. A special dividend was declared in the first quarter along with our regular quarterly dividend, and our capital spending program is more heavily weighted toward the first half of the year. Although we exceeded the 70 percent target of excess cash flow, we anticipate returning to a balanced ROCS position in the second half of the year, while rewarding shareholders with our quarterly dividends and leveraging other mechanism when opportunistic.
The volatility in the energy sector is persisting, driven in part by ongoing geopolitical tensions in the Middle East. Although commodity prices have strengthened, this has not yet translated into higher North American rig counts. Until a sustained increase in drilling activity materializes, we do not expect a significant impact on our overall activity levels. That said, we remain optimistic about our performance and growth within the current industry environment.
In the second quarter, we continue to see a greater portion of activity represented by RSS services, and the strength of our performance and diverse RSS fleet are key contributors to our growth. The successful testing of enhancements to our Real-Time RSS Communications technologies and the expansion of our RSS fleet, including 7⅞" RSS tools in the US, further differentiate our RSS offering. Additionally, growth in the Atlas motor rental business is expected, and this will also contribute positively to margin stability.
Inflationary pressures continue to impact operating costs, and we anticipate that the current higher cost environment will persist in the near term. We will focus on internal efficiency and allocate capital towards high margin technologies to help offset cost pressures. The Board has approved a $5 million increase to the 2026 capital expenditure budget to $65 million, which will be dedicated to premium technologies. Net capital expenditures are expected to be lower after accounting for equipment replacements.
Strategic priorities for 2026 continue to be:
Create Shareholder Value
Technology Leadership
Deliver Operational Efficiencies
Diversification of Regional and Client Exposure
Protecting Margins in a Volatile Environment
Our capital allocation approach continues to balance disciplined investment in strategic growth with maintaining a strong balance sheet, while returning capital to shareholders through dividends, share buybacks, and special distributions under our ROCS framework.
Michael Buker, President & CEO May 5, 2026
Overall Performance
Due to softer industry drilling activity in North America quarter-over-quarter, for the three-month period ended March 31, 2026, PHX Energy generated consolidated revenue of $183.9 million which is 5 percent lower than the $193.7 million generated in the same period of 2025.
In the first quarter of 2026, the Corporation's US division's revenue decreased by 8 percent to $125.8 million compared to $136.1 million in the same 2025-quarter. PHX Energy's US operating days saw a decrease of 6 percent to 4,286 days in the 2026 three-month period from 4,549 in the same 2025-period while the US industry's rig count declined by 7 percent quarter-over-quarter. For the three-month period ended March 31, 2026, the US division achieved record RSS activity which represented 26 percent of the division's operating days, up from 22 percent in the same 2025-period. The US division's average revenue per day(3) for directional drilling services, in both local and reporting currency, was mostly flat quarter-over-quarter. In the 2026 three-month period, the Corporation's US motor rental division's revenue grew by 5 percent to $11.5 million from $11 million in the same 2025-period and the US division generated $0.4 million of revenue from motor equipment and parts sold (2025 - $2.6 million). Revenue from the Corporation's US division in the quarter represented 68 percent of consolidated revenue (2025 - 70 percent).
For the three-month period ended March 31, 2026, the Corporation's Canadian segment generated revenue of $58.1 million, a slight increase compared to $57.6 million in the same 2025-period. The Canadian division recorded 3,722 operating days in the 2026-quarter, an 8 percent decrease from the 4,052 operating days realized in the comparable 2025-quarter. In comparison, the Canadian industry drilling activity decreased by 5 percent quarter-over-quarter. In the first quarter of 2026, RSS activity represented 10 percent of the Canadian segment's operating days, up from 6 percent in the same 2025-quarter. Average revenue per day(3) for directional drilling services realized by the Canadian division improved by 10 percent to $15,425 in the 2026-quarter, as compared to $14,037 in the corresponding 2025-quarter. The improvement was largely driven by the Canadian division's clients' higher utilization of the Corporation's premium technologies, particularly RSS. PHX Energy's Canadian motor rental division generated $0.7 million of revenue in the 2026-period (2025 - $0.7 million).
In the 2026 three-month period, earnings were $8.9 million (2025 - $20.2 million), adjusted EBITDA(1) was $30 million (2025 - $40.7 million), and adjusted EBITDA as a percentage of consolidated revenue(1) was 16 percent (2025, 21 percent). Earnings in the 2026-period included depreciation and amortization expenses on drilling and other equipment of $16.9 million (pre-tax) which increased by 35 percent as compared to $12.6 million (pre-tax) in the corresponding 2025-quarter. This increase is the result of ongoing fixed asset additions as well as $2.8 million in additional depreciation relating to a change in the estimated useful life of certain primary components of motors. Also included in earnings and adjusted EBITDA in the 2026-quarter is cash-settled share-based compensation expense of $9.6 million (pre-tax) which increased from $2.7 million (pre-tax) in the same 2025-quarter mainly as a result of the increase in PHX Energy's share price in the period. Omitting this impact, adjusted EBITDA excluding cash-settled share-based compensation expense(1) in the 2026-period was $39.5 million, 22 percent of consolidated revenue, as compared to $43.3 million, 22 percent of consolidated revenue, in the same 2025-period.
As at March 31, 2026, the Corporation had working capital(2) of $122 million and net debt(2) of $43.4 million. The Corporation has CAD $52.7 million and USD $21 million available to be drawn from its credit facilities at the end of the 2026-quarter.
Dividends and ROCSOn February 24, 2026, the Corporation declared a special dividend of $0.20 per share payable to shareholders of record on March 16, 2026. An aggregate of $9.1 million was paid to shareholders on April 1, 2026.
On March 13, 2026, the Corporation declared a regular quarterly dividend of $0.20 per share payable to shareholders of record on March 31, 2026. An aggregate of $9.1 million was paid to shareholders on April 15, 2026.
(Stated in thousands of dollars)
Three-month periods ended March 31,
2026
2025
Excess cash flow(2)
2,996
18,163
Targeted 70% of excess cash flow under ROCS
2,097
12,714
Add:
Remaining balance under ROCS target carried forward from the previous year
8,691
-
10,788
12,714
Deduct:
Dividends paid to shareholders
(18,148
)
(9,102
)
Repurchase of shares under the NCIB
-
-
Remaining balance under ROCS target(2)
(7,360
)
3,612
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 three-month period ended March 31, 2026, excess cash flow decreased primarily due to lower cash flows from operating activities and higher capital expenditures. The Corporation continued to prioritize shareholder returns while protecting its financial position. At the end of 2025, PHX Energy had $8.7 million of remaining balance under ROCS target(2) which was carried forward into 2026 for distribution. During the 2026-quarter, the Corporation declared a special dividend in conjunction with the release of the 2025 fiscal year results and maintained its current level of regular quarterly dividends, paying a total of $18.1 million in dividends to shareholders. These distributions exceeded the 70 percent target in the 2026-quarter and the amount carried forward from the previous year. However, net capital expenditures(2) to be spent in the second half of the year are anticipated to be lower than the first half and PHX Energy believes this will allow for the remaining balance under ROCS target to be at a balanced position by the end of the 2026-year.
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 are to be made on the open market through the facilities of the TSX and through alternative trading systems. The price which PHX Energy is to pay for any common shares purchased is to be at the prevailing market price on the TSX or alternate trading systems at the time of such purchase.
Pursuant to the current NCIB, no common shares were purchased by the Corporation and cancelled in the three-month period ended March 31, 2026 (2025, no common shares cancelled). The full amount of the current NCIB remains available for repurchase and cancellation.
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 three-month period ended March 31, 2026, the Corporation spent $28.5 million in capital expenditures, of which $15.6 million was spent on growing the Corporation's fleet of drilling equipment, $9.5 million was spent to replace retired assets, and $3.4 million was spent to replace equipment lost downhole during drilling operations. With proceeds on disposition of drilling and other equipment of $12.3 million, the Corporation's net capital expenditures(2) for the 2026-period were $16.2 million. Proceeds on disposition of drilling equipment mainly result from instances of downhole equipment losses where operators compensate the Corporation for the replacement cost of the lost drilling equipment and therefore fund the related capital expenditure rather than the expenditure being solely funded by the Corporation's cash flows from operating activities, and its credit facilities when required.
Capital expenditures in the 2026-quarter were primarily directed towards Atlas High Performance motors ("Atlas"), RSS, both PowerDrive Orbit and iCruise and the Corporation's proprietary Real-Time RSS Communications technologies, and Velocity Real-Time systems ("Velocity").
(Stated in thousands of dollars)
Three-month periods ended March 31,
2026
2025
Growth capital expenditures
15,580
15,605
Maintenance capital expenditures from asset retirements
9,555
7,837
Maintenance capital expenditures to replace downhole equipment losses
3,371
1,250
Total capital expenditures
28,506
24,692
Deduct:
Proceeds on disposition of drilling equipment
(12,285
)
(10,919
)
Net capital expenditures(2)
16,221
13,773
As at March 31, 2026, the Corporation had capital commitments to purchase drilling and other equipment for $32.4 million, $20.4 million of which is growth capital allocated as follows: $11.2 million for RSS systems, $5.3 million for Velocity and other guidance systems, $2.2 million for performance drilling motors, and $1.7 million for other equipment. Equipment on order is largely expected to be delivered before the end of the second quarter of 2026.
In May 2026, the Board approved an increase to the 2026 capital expenditure budget from $60 million to $65 million, of which approximately 60 percent is now anticipated to be spent on growth. 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 increase in the 2026 capital expenditure budget largely relates to growing the Corporation's RSS fleet, including its proprietary Real-Time RSS Communications technologies.
The Corporation currently possesses approximately 962 Atlas motors, comprised of various configurations including its 5.25", 5.76", 6.63", 7.12", 7.25", 8.12", 9.00", and 12.00" and 127 Velocity systems. The Corporation also possesses the largest independent RSS fleet in North America with 110 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 MeasuresThroughout 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 and 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 include, but are not limited to, adjusted EBITDA, adjusted EBITDA per share - diluted, adjusted EBITDA as a percentage of revenue, adjusted EBITDA excluding cash-settled share-based compensation expense, adjusted EBITDA excluding cash-settled share-based compensation expense per share - diluted, adjusted EBITDA excluding cash-settled share-based compensation expense 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 capital expenditures, remaining balance under ROCS target, average consolidated revenue per day, average revenue per operating day, dividends paid per share, dividends declared per share, 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 the Press Release should be read in conjunction with the section entitled "Non-GAAP and Other Financial Measures" at the end of this Press Release hereof 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 March 31,
2026
2025
% Change
Directional drilling services
171,304
179,360
(4
)
Motor rental
12,183
11,706
4
Sale of motor equipment and parts
398
2,638
(85
)
Total revenue
183,885
193,704
(5
)
For the three-month period ended March 31, 2026, PHX Energy generated consolidated revenue of $183.9 million, which is 5 percent lower than the $193.7 million generated in the first quarter of 2025, virtually the same level as the consolidated revenue generated in the fourth quarter of 2025, and the second highest level of first quarter revenue in the Corporation's history. This level of quarterly revenue was achieved despite continued softer industry conditions in the first quarter of 2026 with both the US and Canadian industry's drilling activity weakening compared to the first quarter of 2025. PHX Energy's strong RSS activity was a key contributor to these results, and it grew to 18 percent of the Corporation's consolidated activity in the 2026-quarter from 15 percent in 2025.
In the 2026 three-month period, the average number of horizontal and directional rigs operating per day in the US was 519, which is 7 percent lower compared to the same quarter in 2025 and flat as compared to the daily average of 516 in the fourth quarter of 2025. In Canada, industry horizontal and directional drilling activity (as measured by drilling days) was 16,558 days in the 2026-quarter, a 5 percent decrease from 17,501 days in the same 2025-quarter. In comparison, the Corporation's consolidated operating days declined by 7 percent to 8,008 days in the 2026-quarter as compared to 8,600 days in the 2025-quarter.
In the three-month period of 2026, average consolidated revenue per day for directional drilling services improved by 3 percent to $21,392 from $20,856 in the same 2025-period. The improvement was largely driven by customers' increased utilization of PHX Energy's premium technologies, particularly RSS and Real-Time RSS Communications technologies.
In the first quarter of 2026, revenue generated by PHX Energy's Atlas motor rental division increased by 4 percent to $12.2 million from $11.7 million in the first quarter of 2025. The Corporation's US motor rental division continues to see growth through the expansion of its client base with increased marketing efforts and continued investment in resources to support the division and sustain its growth.
For the three-month period ended March 31, 2026, revenue generated from the sale of motor equipment and parts decreased to $0.4 million from $2.6 million in the same 2025-period. Due to the intermittent and cyclical nature of the customers' ordering frequency and changes in customers' equipment fleet and demand, 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 March 31,
2026
2025
% Change
Direct costs
153,518
153,415
-
Depreciation & amortization drilling and other equipment (included in direct costs)
16,949
12,569
35
Depreciation & amortization right-of-use asset (included in direct costs)
836
888
(6
)
Gross profit as a percentage of revenue excluding depreciation & amortization(1)
26
%
28
%
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 March 31, 2026, direct costs were flat at $153.5 million as compared to $153.4 million in the same 2025-period.
In the 2026 three-month period, the Corporation's depreciation and amortization on drilling and other equipment increased by 35 percent, mainly as result of ongoing fixed asset additions as well as $2.8 million in additional depreciation recorded in the 2026-quarter relating to a change in the estimated useful life of certain primary components of motors that was effective in the third quarter of 2025.
Gross profit as a percentage of revenue excluding depreciation and amortization(1) was 26 percent in the 2026-quarter, a decrease compared to 28 percent in the first quarter of 2025. In the 2026 three-month period, despite the decline in consolidated activity and revenue, direct costs did not decline to the same extent due to overall greater equipment repair costs and increased equipment rental expenses. Consistent with the increases in costs seen in the second half of 2025, the costs of equipment parts and services have increased overall and were impacted by several factors, including inflation and other tariff-related increases caused by the prolonged disruption to global trade. Servicing and equipment rental costs also increased mainly due to higher RSS activity and the Corporation's need to utilize rentals to meet the volume of client demand in some cases. Additionally, lower profitability was also attributable to the decrease in parts sales, which is a high-margin revenue stream for the Corporation.
(Stated in thousands of dollars except percentages)
Three-month periods ended March 31,
2026
2025
% Change
Selling, general and administrative ("SG&A") costs
26,134
19,130
37
Cash-settled share-based compensation (included in SG&A costs)
9,585
2,660
n.m.
Equity-settled share-based compensation (included in SG&A costs)
98
89
10
SG&A costs excluding share-based compensation as a percentage of revenue(1)
9
%
8
%
n.m., not meaningful
For the three-month period ended March 31, 2026, SG&A costs were $26.1 million, a 37 percent increase as compared to $19.1 million in the corresponding 2025-period. Higher SG&A costs in the 2026-period were primarily due to increases in cash-settled share-based compensation expense that was largely driven by the PHX Energy‘s higher share price.
Cash-settled share-based compensation relates to the Corporation's retention awards and is measured at fair value. For the three-month period ended March 31, 2026, the related compensation expense recognized by PHX Energy was $9.6 million as compared to $2.7 million in the same 2025-period. Changes in cash-settled share-based compensation expense in the 2026-period were mainly driven by increases in the Corporation's share price, payout multipliers, and the number of awards granted in the period. In the 2026 three-month period, the Corporation's share price increased from $7.50 at December 31, 2025 to $13.21 at March 31, 2026 (2025, decreased from $9.32 at December 31, 2024 to $8.86 at March 31, 2025). There were 1,236,825 retention awards outstanding as at March 31, 2026 (2025, 1,326,596). SG&A costs excluding share-based compensation as a percentage of revenue(1) were generally flat period-over-period at 9 percent in the three-month period ended March 31, 2026 (2025, 8 percent).
(Stated in thousands of dollars)
Three-month periods ended March 31,
2026
2025
% Change
Research and development expense
1,883
1,780
6
For the three-month period ended March 31, 2026, PHX Energy spent $1.9 million on research and development ("R&D") expenditures, an increase of 6 percent as compared to $1.8 million spent in the corresponding 2025-period. Higher R&D expenditures in the 2026-period are mainly attributable to increased personnel related costs and prototype and equipment parts expenses incurred to support key R&D projects during the period, including advancing the maturity of PHX Energy's Real-Time RSS Communications fleet while further expanding RSS capabilities. Since 2020, the Corporation has increased its investments in R&D, dedicating further resources to continue to secure its position as a technology leader in the sector.
(Stated in thousands of dollars)
Three-month periods ended March 31,
2026
2025
% Change
Finance expense
718
606
18
Finance expense lease liabilities
443
506
(12
)
Finance expenses mainly relate to interest charges on the Corporation's credit facilities. For the three-month period ended March 31, 2026, finance expense increased to $0.7 million from $0.6 million in the same 2025-period. The increase in finance expenses in the 2026-period was primarily due to higher drawings on the credit facilities in the period that were primarily used to fund capital acquisitions, dividends, and share-based payments.
Finance expense lease liabilities relate to interest expense incurred on lease liabilities. For the three-month period ended March 31, 2026, finance expense lease liabilities declined to $0.4 million from $0.5 million in the same 2025-period due to leases that expired between April 1, 2025 and March 31, 2026.
(Stated in thousands of dollars)
Three-month periods ended March 31,
2026
2025
Net gain on disposition of drilling equipment
9,359
7,861
Foreign exchange gains (losses)
159
(216
)
Miscellaneous other income
179
-
Recovery of bad debt
117
-
Other income
9,814
7,645
For the three-month period ended March 31, 2026, the Corporation recognized other income of $9.8 million, an increase compared to $7.6 million in the same 2025-period. Other income is mainly comprised of net gain on disposition of drilling equipment which mainly arises from instances of downhole equipment losses where operators compensate for the replacement cost of the lost drilling equipment and the gain is calculated as the excess of those proceeds over the carrying amount of the drilling equipment lost. 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 2026-period, more instances of high dollar valued downhole equipment losses occurred as compared to the corresponding 2025-period, resulting in higher levels of net gain on disposition of drilling equipment recognized.
Foreign exchange gains of $0.2 million in the three-month period of 2026 (2025, $0.2 million loss), were primarily due to the revaluation and settlement of CAD-denominated intercompany payables in the US.
In the 2026 three-month period, the miscellaneous other income of $0.2 million pertains to sundry and occasional transactions, such as proceeds from the sale of scrapped metal and machining services for a third party.
In the first quarter of 2026, PHX Energy recovered $0.1 million of bad debt which related to a client in the US.
(Stated in thousands of dollars except percentages)
Three-month periods ended March 31,
2026
2025
Provision for income taxes
2,067
5,753
