PHX Energy Quick Update - $PHX.to

Quick update after Q1 2024

*Disclosure: I own shares in PHX. I am not a professional. Please do your own due diligence.

Price: $8.75 CAD

MC: 415 million CAD

EV: 413 million CAD

Yield: 9.1%

1 year performance: +32% (excluding dividends)

PHX reported after the close Tuesday. They don’t hold conference calls so all information is pulled from the financials. Results were in line with my expectations and the stock ended the day down 2%.

Quarter Recap

• Revenue was essentially flat.

  • US revenue was 114.2 million vs 125.7 million last year.

  • Canadian revenue was 52 million vs 40.4 million last year.

    • This was the highest revenue since Q4 2024.

• EBITDA was 35 million vs 37 million last year

  • Margins ticked down from 22% to 21%.

As a reminder PHX has a ROCS (return of capital strategy) were they target to return 70% of excess free cash flow to shareholders.

They purchased a large amount of the budgeted capex this quarter, so resulting FCF was hit. Due to this they have spent above the 70% target of excess FCF.

For Q1 they overspent by 4.3 million. They have a budget of 75 million in capex this year. This is before disposal of assets, so this isn’t the “net capex” number. They spent nearly 30 million of the 75 million this quarter alone, leaving 45 million left for the remaining 3 quarters. The remaining is about 15 million per quarter and it should result higher FCF. So moving forward they should easily get back into the positive by end of the year. The mentioned this in the new release.

Valuation

I have them trading a bit under 3x EV/EBITDA which is cheap especially if they maintain that level of profitability. This is not uncommon for the rest of the OFS companies I follow.

Closing Thoughts

PHX is humming along. I was not expecting as much capex, but over the medium term it washes out. I am looking for increased share purchases from them moving forward. There is a delay from share repurchase transaction date to when it was reported so they may already be doing so. Since quarter end there have only been a handful of days with more than 100k shares traded, but many days have well over 50k shares traded. Early in April there was over 200k shares traded in one day. There should be enough liquidity for them to capitalize on a repurchase.

I am noting the insider selling. Insider ownership is still high here and the amounts have been fairly small, so I’m not worried at this point.

Continuing to hold in my basket of OFS cos.

Thanks for reading.

Dean

* long PHX.to