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Horizontal and directional drilling continued to represent the majority of rigs running on a daily basis during the third quarter of 2025. During the 2025-quarter, Phoenix USA was active in the Permian, Eagleford, Scoop/Stack, Uinta, Fayetteville, and Marcellus basins. Additionally, Phoenix USA was involved with gas storage projects in Louisiana and Texas.

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For the three-month period ended September 30, 2025, the US division’s average revenue per day⁽³⁾ for directional drilling services decreased by 6 percent to $25,327 (2024 – $26,876). Omitting the impact of foreign exchange, the average revenue per day for directional drilling services also decreased by 6 percent in the 2025-quarter. This decrease was mainly due to the decline in the proportion of RSS operating days as a percentage of total days, as well as the pricing pressures that resulted from weaker industry conditions. For the nine-month period ended September 30, 2025, the US division’s average revenue per day was relatively flat at $25,989 as compared to $25,667 in the corresponding 2024-period. Omitting the impact of foreign exchange, the average revenue per day for directional drilling services marginally decreased by 1 percent.

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For the three and nine-month periods ended September 30, 2025, US motor rental revenue increased by 16 and 26 percent, respectively, to $11.4 million and $34.4 million (2024 – $9.8 million and $27.3 million). Throughout the first three quarters of 2025, with added resources dedicated to this line of business, the Corporation’s US motor rental division was successful in further penetrating the motor rental market and continued to grow its client base.

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In the three and nine-month periods of 2025, PHX Energy’s US operations generated $0.3 million and $3.9 million of revenue from the sale of motors and parts compared to $2 million and $5.9 million in the corresponding 2024-periods. Due to the sporadic and cyclical nature of the customers’ ordering frequency, it is expected that revenue from this line of business will fluctuate between periods.

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For the three and nine-month periods ended September 30, 2025, the US segment’s reportable segment income before tax decreased by 35 percent to $11.3 million and by 11 percent to $54.4 million, respectively (2024 – $17.3 million and $60.9 million, respectively). In both 2025 three and nine-month periods, the gains in revenue, mainly driven by increased operating days, were offset by higher direct costs that mainly resulted from rising costs of equipment parts and repair services. Additionally, lower gross profit margin in the 2025-quarter was partly attributable to the decline in the US division’s high-margin revenue streams, particularly RSS activity and motor equipment and parts sales. Higher other income generated from downhole equipment losses did somewhat lessen the decrease in gross profit margins in both 2025-periods.

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Canada

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(Stated in thousands of dollars)

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For the three and nine-month periods ended September 30, 2025, PHX Energy’s Canadian operations generated revenue of $44.1 million and $141.3 million, respectively, an increase of 1 and 6 percent as compared to $43.7 million and $133.9 million in the corresponding 2024-periods.

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In the 2025 three-month period, PHX Energy’s Canadian operating days decreased by 5 percent to 3,128 days from 3,302 days in the same 2024-quarter and its RSS operating days accounted for 4 percent of its activity in the 2025-period (2024 – 3 percent). In comparison, industry horizontal and directional drilling activity, as measured by drilling days, declined by 12 percent to 15,270 in the third quarter of 2025 from 17,398 in the 2024-quarter. During the 2025-quarter, the Corporation was active in the Duvernay, Montney, Glauconite, Frobisher, Cardium, Viking, Bakken, Torquay, Colony, Ellerslie, Charlie Lake, Cummings, Sparky, and Scallion basins.

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In the 2025 nine-month period, PHX Energy’s Canadian segment’s operating days⁽³⁾ decreased slightly by 3 percent to 9,541 days from 9,842 days in the same 2024-period and its RSS operating days accounted for 7 percent of its activity in the 2025-period (2024 – 4 percent). In comparison, industry horizontal and directional drilling activity, as measured by drilling days, decreased by 6 percent to 43,535 in the first three quarters of 2025 from 46,261 in the same 2024-period.

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The Canadian division’s average revenue per day⁽³⁾ for directional drilling services increased by 6 and 8 percent in the three and nine-month periods ended September 30, 2025, to $13,932 and $14,590, respectively, as compared to $13,091 and $13,488 in the corresponding 2024-periods. The improvements were largely driven by the higher client demand for the Corporation’s premium technologies, including RSS.

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For the three and nine-month periods ended September 30, 2025, the Canadian segment’s reportable segment income before tax decreased by 30 percent to $3.2 million and by 3 percent to $15.5 million, respectively (2024 – $4.6 million and $16 million, respectively). In both 2025-periods, the decline in profitability was mainly attributable to higher direct costs and fewer instances of downhole equipment losses that resulted in lower other income.

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Investing Activities

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Net cash used in investing activities for the three-month period ended September 30, 2025 was $12.1 million as compared to $14.9 million in the corresponding 2024-period. During the third quarter of 2025, the Corporation spent $13.8 million (2024 – $11.1 million) to grow the Corporation’s fleet of drilling equipment, $1.4 million (2024 – $0.1 million) was used to maintain capacity in the Corporation’s fleet of drilling and other equipment, and $1.4 million (2024 – nil) was spent to replace equipment lost downhole during drilling operations. With proceeds on disposition of drilling and other equipment of $9.1 million (2024 – $7 million), the Corporation’s net capital expenditures for the 2025-period were $7.4 million (2024 – $4.2 million).

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The 2025-quarter capital expenditures comprised of:

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The capital expenditure program undertaken in the year was primarily financed from proceeds on disposition of drilling equipment, cash flows from operating activities, and the Corporation’s credit facilities when required.

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The change in non-cash working capital balances of $4.7 million (use of cash) for the three-month period ended September 30, 2025, relates to the net change in the Corporation’s trade payables that are associated with the acquisition of capital assets (2024 – $9.4 million).

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Financing Activities

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For the three-month period ended September 30, 2025, net cash used in financing activities was $11.3 million as compared to $13.3 million in the same 2024-period. In the 2025-quarter:

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Capital Resources

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As of September 30, 2025, the Corporation had CAD $42.4 million drawn on its Canadian credit facilities, nothing drawn on its US operating facility, and a cash balance of $7.9 million. In September 2025, the Corporation increased the borrowing amounts in the syndicated facility from CAD $80 million to CAD $95 million and in the US operating facility from USD $20 million to USD $25 million. The Corporation also extended the maturity date of the syndicated loan agreement to December 12, 2028. With the increased borrowing amounts, the Corporation had CAD $67 million and USD $25 million available from its credit facilities. The credit facilities are secured by substantially all of the Corporation’s assets and mature in December 2028.

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As at September 30, 2025, the Corporation was in compliance with all its financial covenants. Under the syndicated credit agreement, in any given period, the Corporation’s distributions (as defined therein) cannot exceed its maximum aggregate amount of distributions limit as defined in the Corporation’s syndicated credit agreement. Distributions include, without limitation, dividends declared and paid, cash used for common shares purchased by the independent trustee in the open market and held in trust for potential settlement of outstanding retention awards, as well as cash used for common shares repurchased and cancelled under the NCIB.

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Cash Requirements for Capital Expenditures

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Historically, the Corporation has financed its capital expenditures and acquisitions through cash flows from operating activities, proceeds on disposition of drilling equipment, debt and equity. The expected capital expenditure budget for the 2025-year is $65 million. Of the total expenditures, $47 million is anticipated to be spent on growth and the remainder is anticipated to be spent to maintain capacity in the fleet of drilling and other equipment and replace equipment lost downhole during drilling operations. The amount expected to be allocated towards replacing equipment lost downhole could increase, should more downhole equipment losses occur throughout the year.

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For 2026, the expected preliminary capital expenditure program is $60 million, of which approximately half is anticipated to be spent on growth. The Corporation believes that its current fleet of MWD systems and motors will support its forecasted 2026-activity and the 2026 growth capital expenditures are expected to be mainly focused on further expanding the RSS fleets and Atlas motor rental fleets. The remaining half is anticipated to be spent on maintenance of the fleet of drilling and other equipment and replacement of equipment lost downhole during drilling operations. Of the 2026 expected capital expenditures, approximately half has been committed and anticipated to be delivered within the first quarter of 2026.

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These planned expenditures are expected to be financed from cash flow from operating activities, proceeds on disposition of drilling equipment, cash and cash equivalents, and the Corporation’s credit facilities, if necessary. However, if a sustained period of market uncertainty, threat of trade wars, and financial market volatility persists in 2025 and 2026, the Corporation’s activity levels, cash flows and access to credit may be negatively impacted, and the expenditure level would be reduced accordingly where possible. Conversely, if future growth opportunities present themselves, the Corporation would look at expanding this planned capital expenditure amount.

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As at September 30, 2025, the Corporation has entered into commitments to purchase drilling and other equipment for $13.9 million (2024 – $12 million); equipment on order is largely expected to be delivered within the first quarter of 2026.

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About PHX Energy Services Corp.
PHX Energy is a growth-oriented, public oil and natural gas services company. The Corporation, through its directional drilling subsidiary entities provides horizontal and directional drilling services and technologies to oil and natural gas exploration and development companies principally in Canada and the US. In connection with the services it provides, PHX Energy engineers, develops and manufactures leading-edge technologies. In recent years, PHX Energy has developed various new technologies that have positioned the Corporation as a technology leader in the horizontal and directional drilling services sector.

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PHX Energy’s Canadian directional drilling operations are conducted through Phoenix Technology Services LP. The Corporation maintains its corporate head office, research and development, Canadian sales, service and operational centers in Calgary, Alberta. In addition, PHX Energy has a facility in Estevan, Saskatchewan. PHX Energy’s US operations, conducted through the Corporation’s wholly-owned subsidiary, Phoenix Technology Services USA Inc., is headquartered in Houston, Texas. Phoenix USA has sales and service facilities in Houston, Texas; Midland, Texas; Casper, Wyoming; and Oklahoma City, Oklahoma. Internationally, PHX Energy has administrative offices in Luxembourg and the Cayman Islands and also supplies technology to the Middle East regions.

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The common shares of PHX Energy trade on the Toronto Stock Exchange under the symbol PHX.

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For further information please contact:
Michael Buker, President and CEO; or Cameron Ritchie, Senior Vice President Finance and CFO

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PHX Energy Services Corp.
Suite 1600, 215 9th Avenue SW, Calgary Alberta T2P 1K3
Tel: 403-543-4466 Fax: 403-543-4485 www.phxtech.com

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Condensed Consolidated Interim Statements of Financial Position

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Condensed Consolidated Interim Statements of Comprehensive Earnings
(Stated in thousands of dollars except earnings per share, unaudited)

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Condensed Consolidated Interim Statements of Cash Flows
(Stated in thousands of dollars, unaudited)

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Cautionary Statement Regarding Forward-Looking Information and Statements

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This document contains certain forward-looking information and statements within the meaning of applicable securities laws. The use of “expect”, “anticipate”, “continue”, “estimate”, “objective”, “ongoing”, “may”, “will”, “project”, “could”, “should”, “can”, “believe”, “plans”, “intends”, “strategy”, “targets” and similar expressions are intended to identify forward-looking information or statements.

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The forward-looking information and statements included in this document are not guarantees of future performance and should not be unduly relied upon. These statements and information involve known and unknown risks, uncertainties and other factors that may cause actual results or events to differ materially from those anticipated in such forward-looking statements and information. The Corporation believes the expectations reflected in such forward-looking statements and information are reasonable, but no assurance can be given that these expectations will prove to be correct. Such forward-looking statements and information included in this document should not be unduly relied upon. These forward-looking statements and information speak only as of the date of this document.

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In particular, forward-looking information and statements contained in this document include without limitation, the anticipated flexibility the increase to the Corporation’s credit facility is expected to provide, the Corporation’s intent to preserve balance sheet strength and continue to reward shareholders, including through its ROCS program, that anticipated lower net capital expenditures in the remainder of the year and that this will allow for the distributable cash under ROCS to be within the targeted at 70 percent of excess cash flow at year end 2025, PHX Energy’s intentions with respect to the current NCIB, the anticipated industry activity and demand for the Corporation’s services and technologies in North America, the projected capital expenditures budget for 2025 and 2026, and how the budgets will be allocated and funded, the timeline for delivery of equipment on order, and the anticipated continuation of PHX Energy’s quarterly dividend program and the amounts of dividends.

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The above are stated under the headings: “Financial Results”, “Overall Performance”, “Dividends and ROCS”, “Capital Spending”, and “Capital Resources”. In addition, all information contained under the heading “Outlook” of this document may contain forward-looking statements.

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In addition to other material factors, expectations and assumptions which may be identified in this document and other continuous disclosure documents of the Corporation referenced herein, assumptions have been made in respect of such forward-looking statements and information regarding, without limitation, that: the Corporation will continue to conduct its operations in a manner consistent with past operations; the general continuance of current industry conditions and the accuracy of the Corporation’s market outlook expectations for 2025 and in the future; that future business, regulatory and industry conditions will be within the parameters expected by the Corporation; that there will be no significant adverse tariff events including intentional tariff wars that could have a significant impact on the markets in which the Corporation operates; anticipated financial performance, business prospects, impact of competition, strategies, the general stability of the economic and political environment in which the Corporation operates; the potential impact of trade wars, pandemics, the Russian-Ukrainian war, Middle-East conflict and other world events on the global economy, specifically trade, manufacturing, supply chain, inflation and energy consumption, among other things and the resulting impact on the Corporation’s operations and future results which remain uncertain; exchange and interest rates, and inflationary pressures including the potential for further interest rate hikes by global central banks and the impact on financing charges and foreign exchange and the anticipated global economic response to concerted interest rate hikes; the continuance of existing (and in certain circumstances, the implementation of proposed) tax, royalty and regulatory regimes; the sufficiency of budgeted capital expenditures in carrying out planned activities; the availability and cost of labour and services and the adequacy of cash flow; debt and ability to obtain financing on acceptable terms to fund its planned expenditures, which are subject to change based on commodity prices; market conditions and future oil and natural gas prices; and potential timing delays. Although management considers these material factors, expectations, and assumptions to be reasonable based on information currently available to it, no assurance can be given that they will prove to be correct.

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Readers are cautioned that the foregoing lists of factors are not exhaustive. Additional information on these and other factors that could affect the Corporation’s operations and financial results are included in reports on file with the Canadian Securities Regulatory Authorities and may be accessed through the SEDAR+ website (www.sedarplus.ca) or at the Corporation’s website. The forward-looking statements and information contained in this document are expressly qualified by this cautionary statement. The Corporation does not undertake any obligation to publicly update or revise any forward-looking statements or information, whether as a result of new information, future events or otherwise, except as may be required by applicable securities laws.

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Non-GAAP and Other Financial Measures

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Non-GAAP Financial Measures and Ratios

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a)   Adjusted EBITDA

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Adjusted EBITDA, defined as earnings before finance expense, finance expense lease liability, income taxes, depreciation and amortization, impairment losses on drilling and other equipment and goodwill and other write-offs, equity-settled share-based payments, severance payouts relating to the Corporation’s restructuring cost, and unrealized foreign exchange gains or losses, does not have a standardized meaning and is not a financial measure that is recognized under GAAP. However, Management believes that adjusted EBITDA provides supplemental information to earnings that is useful in evaluating the results of the Corporation’s principal business activities before considering certain charges, how it was financed and how it was taxed in various countries. Investors should be cautioned, however, that adjusted EBITDA should not be construed as an alternative measure to earnings determined in accordance with GAAP. PHX Energy’s method of calculating adjusted EBITDA may differ from that of other organizations and, accordingly, its adjusted EBITDA may not be comparable to that of other companies.

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The following is a reconciliation of earnings to adjusted EBITDA:

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(Stated in thousands of dollars)        

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b)   Adjusted EBITDA Per Share – Diluted

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Adjusted EBITDA per share – diluted is calculated using the treasury stock method whereby deemed proceeds on the exercise of the share options are used to reacquire common shares at an average share price. The calculation of adjusted EBITDA per share – dilutive is based on the adjusted EBITDA as reported in the table above divided by the diluted number of shares outstanding.

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c)   Adjusted EBITDA as a Percentage of Revenue

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Adjusted EBITDA as a percentage of revenue is calculated by dividing the adjusted EBITDA as reported in the table above by revenue as stated on the Condensed Consolidated Interim Statements of Comprehensive Earnings.

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d)   Gross Profit as a Percentage of Revenue Excluding Depreciation & Amortization

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Gross profit as a percentage of revenue excluding depreciation & amortization is defined as the Corporation’s gross profit excluding depreciation and amortization divided by revenue and is used to assess operational profitability. This Non-GAAP ratio does not have a standardized meaning and is not a financial measure recognized under GAAP. PHX Energy’s method of calculating gross profit as a percentage of revenue may differ from that of other organizations and, accordingly, it may not be comparable to that of other companies.

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The following is a reconciliation of revenue, direct costs, depreciation and amortization and gross profit to gross profit as a percentage of revenue excluding depreciation and amortization:

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(Stated in thousands of dollars)

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e)   SG&A Costs Excluding Share-Based Compensation as a Percentage of Revenue

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SG&A costs excluding share-based compensation as a percentage of revenue is defined as the Corporation’s SG&A costs excluding share-based compensation divided by revenue and is used to assess the impact of administrative costs excluding the effect of share price volatility. This Non-GAAP ratio does not have a standardized meaning and is not a financial measure recognized under GAAP. PHX Energy’s method of calculating SG&A costs excluding share-based compensation as a percentage of revenue may differ from that of other organizations and, accordingly, it may not be comparable to that of other companies.

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The following is a reconciliation of SG&A costs, share-based compensation, and revenue to SG&A costs excluding share-based compensation as a percentage of revenue:

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(Stated in thousands of dollars)

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Capital Management Measures

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a)   Funds from Operations

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Funds from operations is defined as cash flows generated from operating activities before changes in non-cash working capital, interest paid, and income taxes paid. This financial measure does not have a standardized meaning and is not a financial measure recognized under GAAP. Management uses funds from operations as an indication of the Corporation’s ability to generate funds from its operations before considering changes in working capital balances and interest and taxes paid. Investors should be cautioned, however, that this financial measure should not be construed as an alternative measure to cash flows from operating activities determined in accordance with GAAP. PHX Energy’s method of calculating funds from operations may differ from that of other organizations and, accordingly, it may not be comparable to that of other companies.

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The following is a reconciliation of cash flows from operating activities to funds from operations:

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(Stated in thousands of dollars)

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b)   Excess Cash Flow

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Excess cash flow is defined as funds from operations (as defined above) less cash payment on leases, growth capital expenditures, and maintenance capital expenditures from downhole equipment losses and asset retirements, and increased by proceeds on disposition of drilling equipment. This financial measure does not have a standardized meaning and is not a financial measure recognized under GAAP. Management uses excess cash flow as an indication of the Corporation’s ability to generate funds from its operations to support operations and grow and maintain the Corporation’s drilling and other equipment. This performance measure is useful to investors for assessing the Corporation’s operating and financial performance, leverage and liquidity. Investors should be cautioned, however, that this financial measure should not be construed as an alternative measure to cash flows from operating activities determined in accordance with GAAP. PHX Energy’s method of calculating excess cash flow may differ from that of other organizations and, accordingly, it may not be comparable to that of other companies.

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The following is a reconciliation of cash flows from operating activities to excess cash flow:

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(Stated in thousands of dollars)

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Three-month periods ended September 30,

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