PHX Energy Services Q1 '25 Update - $PHX.to

Strong quarter. Cautious outlook due to tariff/trade war.

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

Price: $7.92 CAD

MC: 360 million CAD

EV: 377 million CAD

Yield: 10.1%

1 year performance: -11%

PHX reported last night. Results were ahead of my expectations and the stock is up 5% at time of writing.

*all numbers in CAD unless stated otherwise

Quarter Recap

• Revenue came in at 193.7 million vs 166.1 million last year

  • Up 17 %

  • They are showing strength growth in the Rotary Steerable Systems (RSS) and motor rental revenue streams.

• EBITDA came in at 40.7 million vs 35 million last year

  • up 16%

  • 21% margin

• US operations

  • Strong revenue growth of 19% to 136.1 million

  • Operating days and revenue per day up 9%

• Canadian operations

  • Revenue growth of 11% to the highest quarterly revenue since 2014 at 57.6 million

  • Operating days and revenue per day both up 5%

• They increased their capital budget to 65 million from 55 million

  • The lion’s share of the increase going to RSS fleet and real time RSS communications technology

  • 40 of the 65 million in capital expenditures is marked as “growth”

• No buybacks this quarter same as Q1 2024

• Return of Capital Strategy (ROCS)

  • They plan on returning 70% of what is deemed “excess cash flow”

  • Excess cash flow of 18.2 million means that 12.7 million is to be returned

  • They paid 9.1 million in dividends and had no buybacks

  • So they have 3.6 million extra to return

Valuation

I have them at 2.9x EV/ttm EBITDA. I am not sure what happens to the space if oil stays in the 50s for a long time, so I am hesitant to make too many forward looking predictions in the short term.

Closing Thoughts

Given all the tariff uncertainty I can imagine PHX bunkering down a bit with their buybacks. Although if they can outperform the industry activity like they have, then it makes sense to buy their own shares here.

Oil has come back into the 50s which likely means at best flat capital budgets from PHX’s customers. How long it stays here, I have no idea.

I am comfortable holding PHX in my OFS basket.

Thanks for reading.

Dean

* long PHX.to