PHX Energy Solutions Q4 24 Update - $PHX.to

Quick update after Q4 2024

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

Price: $9.05

MC: 415 million CAD

EV: 422 million CAD

Yield: 8.8%

1 year performance: -3% not including dividends

PHX reported Tuesday last week. Results were ahead of my expectations and the stock was up 5% initially and has settled the week up 1.9%.

*all numbers in CAD unless stated otherwise

Quarter Recap

• Revenue came in at 178.7 million.

  • This compares to 165.3 in Q4 2023.

• Full year revenue came in at 659.7 million. This compares to 656.3 million in 2023.

• Canadian revenue came in at 46.3 million vs 42.4 million last year.

• US revenue came in at 132.3 million vs 122.1 million last year.

• EBITDA came in at 29.6 million for Q4 vs 35.4 million last year.

• 2024 EBITDA was 123.7 or 19% of revenue.

  • This compares to 150.7 in 2023.

  • From the news release": “profitability declined mainly due to generally higher equipment repair expenses, weaker activity in the Corporation’s high margin RSS and motor rental revenue streams in the US, and lower net gain on disposition of drilling equipment realized in the 2024-quarter.”

• Capital budget of 50 million net of sales for 2025 originally. Now at 55 million.

  • 2 million carryover from 2024.

  • 3 million additional.

  • They spent 83.3 million in 2024, 46.5 net of equipment sales.

• Outlook

  • The first two months of 2025 have been strong in the US.

  • So far in Q1, Canada activity has been higher than 2024.

• The company’s CEO (John Hooks) has now transitioned to the Executive Board Chair and Michael Buker has been appointed as CEO.

  • This is part of a multi-year succession plan.

• They feel they will catch up to the ROCS target in 2025.

Update on the ROCS (return of capital strategy):

On capital spending:

Valuation

I have PHX trading at 3.4x EV/EBITDA on a trailing basis. I’m not expecting too much out of 2025 at the time of writing.

Closing Thoughts

PHX is chugging along. I was hoping for some better profitability this year, but still they are doing well. Given that they are nearly 25 million behind the targeted ROCS target (meaning they have returned 25 million more than the target), I don’t see the dividend being raised in the immediate term. I do think they will continue with the repurchase of shares.

I like PHX in the basket of OFS cos. I think the focus on returning capital brings some welcome balance to the basket.

I continue to hold my shares and may buy on weakness.

Thanks for reading.

Dean

* long PHX.to