Core Insights - PHX Energy reported consolidated revenue of $167.7 million for Q2 2025, a 9% increase from $154.2 million in Q2 2024, marking the highest second-quarter revenue on record [3][6][24] - Adjusted EBITDA for Q2 2025 was $27.4 million, representing 16% of consolidated revenue, down from $30 million (19% of revenue) in Q2 2024 [3][9][32] - Earnings for Q2 2025 were $8.5 million ($0.17 per share), a decrease of 34% from $12.9 million ($0.26 per share) in Q2 2024 [4][9][42] Financial Highlights - Revenue from directional drilling services increased by 8% to $153.9 million in Q2 2025, while motor rental revenue rose by 28% to $12.8 million [24][27] - The Canadian division reported revenue of $39.6 million, a 4% increase from $38.2 million in Q2 2024, despite a 6% decline in Canadian industry drilling days [8][25] - Excess cash flow for Q2 2025 was $9.3 million, a significant increase of 163% from $3.5 million in Q2 2024 [4][12] Operational Performance - The US division's revenue grew by 10% to $128.1 million in Q2 2025, despite a 5% decline in the average number of active rigs in the US [7][46] - The average revenue per day for directional drilling services improved by 7% to $22,476 in Q2 2025, driven by higher RSS activity [26][27] - The Canadian division's average revenue per day increased by 16% to $16,409, supported by the expansion of RSS activity [8][26] Cost and Expenses - Direct costs increased by 13% to $143.4 million in Q2 2025, primarily due to higher equipment repair expenses and increased costs from tariffs [30][31] - SG&A costs rose by 21% to $16.7 million in Q2 2025, mainly due to rising personnel-related costs [33][34] - Depreciation and amortization expenses on drilling and other equipment increased by 13% to $12.6 million in Q2 2025 [31][42] Shareholder Returns - The company declared a dividend of $0.20 per share, totaling $9.1 million, paid on July 15, 2025 [11][12] - The corporation repurchased and cancelled 100,000 common shares for $0.9 million under the Normal Course Issuer Bid (NCIB) [15][16] - Since 2017, 28% of outstanding shares have been purchased and cancelled as part of the Return of Capital Strategy (ROCS) [5][12] Outlook - The company anticipates continued strong activity and revenue in the second half of 2025, focusing on its premium Rotary Steerable Systems (RSS) offerings [5][6] - Despite a softer market expected through 2025, there are opportunities for growth in natural gas-focused drilling rigs due to increasing LNG exports [5][6] - The company plans to apply for the renewal of its NCIB to continue rewarding shareholders [16][12]

Core Points - John M. Hooks has disposed of 269,900 common shares of PHX Energy Services Corp, representing 0.6% of the outstanding shares [1][2] - Following the sale, Mr. Hooks' ownership decreased from approximately 10.2% to 9.6%, now holding 4,362,176 common shares [2] - The total value of the disposed shares was $2,164,598, averaging $8.02 per share, and the sale was conducted for personal financial reasons [2] Company Information - Prior to the disposition, Mr. Hooks owned or controlled 4,632,076 common shares of PHX Energy Services Corp [2] - The disposition was executed through the Toronto Stock Exchange [1] - Mr. Hooks may adjust his shareholdings in PHX in the future based on market conditions [2]

[Agreement Overview](index=1&type=section&id=AGREEMENT%20AND%20PLAN%20OF%20MERGER) This agreement outlines the terms for WhiteHawk Acquisition's acquisition of PHX Minerals via a tender offer and merger [Parties and Transaction](index=1&type=section&id=Parties%20and%20Transaction) WhiteHawk Acquisition will acquire PHX Minerals for $4.35 per share through a two-step tender offer and merger process Key Transaction Terms | Term | Details | | :--- | :--- | | **Acquirer** | WhiteHawk Acquisition, Inc. ("Parent") | | **Target** | PHX Minerals Inc. ("Company") | | **Offer Price** | $4.35 per Company Common Share in cash | | **Transaction Structure** | Cash tender offer followed by a merger under DGCL Section 251(h) | - The Company's Board of Directors has **unanimously determined** the agreement and transactions are advisable and fair, and recommends that stockholders tender their shares in the offer[11](index=11&type=chunk) - Concurrently with the agreement, certain specified stockholders have entered into **Tender and Support Agreements**, committing to tender their shares[12](index=12&type=chunk) - Parent has secured financing through **Equity Commitment Letters** and a **Limited Guarantee** to ensure funds are available for the transaction[12](index=12&type=chunk) [The Offer](index=7&type=section&id=ARTICLE%201%20THE%20OFFER) This article details the terms of the tender offer, including conditions, timing, and required actions by both parties [The Offer](index=7&type=section&id=1.1%20The%20Offer) Merger Sub will commence a cash tender offer for all Company shares, contingent upon a majority of shares being tendered Offer Details | Parameter | Value | | :--- | :--- | | **Offer Price** | $4.35 per share, in cash | | **Shares Sought** | Any and all outstanding Company Common Shares | | **Initial Expiration** | 12:00 midnight, NYC time, on the 20th Business Day after commencement | - The offer is subject to the **"Minimum Condition"**, requiring a number of shares representing at least a majority of all outstanding shares be validly tendered[15](index=15&type=chunk) - Merger Sub is required to extend the offer for up to **three consecutive 10-business-day periods** if the Minimum Condition is the sole unsatisfied condition[21](index=21&type=chunk) - Parent and Merger Sub must file a Tender Offer Statement on **Schedule TO** with the SEC on the day the offer commences[28](index=28&type=chunk)[31](index=31&type=chunk) [Company Actions](index=12&type=section&id=1.2%20Company%20Actions) The Company must file a Schedule 14D-9 with its board recommendation and provide stockholder lists to facilitate the offer - The Company must file a **Schedule 14D-9** with the SEC concurrently with the Schedule TO, which will contain the Company Board's recommendation to stockholders[33](index=33&type=chunk) - The Company is required to provide Parent and Merger Sub with access to its **stockholder list** and other information to help communicate the offer[35](index=35&type=chunk) - Parent and Merger Sub must hold the stockholder information in confidence and use it **only in connection with the offer and merger**[35](index=35&type=chunk) [The Merger](index=13&type=section&id=ARTICLE%202%20THE%20MERGER) This article describes the mechanics of the merger, which will follow the successful completion of the tender offer [The Merger](index=13&type=section&id=2.1%20The%20Merger) Following the tender offer, Merger Sub will merge into the Company, which will become a wholly-owned subsidiary of Parent - Following the tender offer, Merger Sub will merge into the Company, which will survive as a **wholly-owned subsidiary** of Parent[37](index=37&type=chunk) - The merger will be governed by **Section 251(h) of the DGCL**, eliminating the need for a vote by the Company's stockholders[37](index=37&type=chunk) - At the effective time of the merger, the Company's certificate of incorporation and bylaws will be **amended and restated**[38](index=38&type=chunk) [Closing and Effective Time of the Merger](index=14&type=section&id=2.2%20Closing%20and%20Effective%20Time%20of%20the%20Merger) The merger closing will occur on the same day as the tender offer acceptance and becomes effective upon filing a Certificate of Merger - The merger closing will occur on the **same business day** as the Acceptance Time of the tender offer, subject to the satisfaction of all conditions[40](index=40&type=chunk) - The merger becomes effective at the time the **Certificate of Merger** is filed with the Delaware Secretary of State[40](index=40&type=chunk) [Governance Matters](index=15&type=section&id=2.3%20Governance%20Matters) The directors of Merger Sub will become the directors of the surviving corporation immediately following the merger - At the Effective Time, the directors of Merger Sub will become the directors of the **Surviving Corporation**[42](index=42&type=chunk) [Conversion of Securities in the Merger](index=15&type=section&id=ARTICLE%203%20CONVERSION%20OF%20SECURITIES%20IN%20THE%20MERGER) This article details the conversion of Company shares and equity awards into cash consideration following the merger [Conversion of Securities](index=15&type=section&id=3.1%20Conversion%20of%20Securities) Each remaining Company share will be converted into the right to receive the cash merger consideration, with certain exceptions - Each outstanding Company Common Share will be converted into the right to receive the **Merger Consideration**, which is equal to the Offer Price[44](index=44&type=chunk) - Shares owned by the Company, Parent, or Merger Sub ("Cancelled Shares") will be **cancelled and retired** with no consideration paid[46](index=46&type=chunk) [Payment for Securities; Surrender of Certificates](index=16&type=section&id=3.2%20Payment%20for%20Securities;%20Surrender%20of%20Certificates) Parent will appoint a Paying Agent to manage the exchange of stock certificates and book-entry shares for cash payments - Parent will appoint a **Paying Agent** and deposit the aggregate Merger Consideration into an Exchange Fund for the benefit of stockholders[49](index=49&type=chunk) - Holders of physical stock certificates must surrender them with a duly executed **Letter of Transmittal** to receive payment[50](index=50&type=chunk) - Holders of **book-entry shares** will receive payment automatically through DTC's customary procedures[51](index=51&type=chunk) - Any portion of the Exchange Fund unclaimed after **12 months** will be returned to the Surviving Corporation[53](index=53&type=chunk) [Dissenting Shares](index=19&type=section&id=3.3%20Dissenting%20Shares) Stockholders who properly exercise appraisal rights under Delaware law will be entitled to the fair value of their shares - Stockholders who properly demand appraisal rights under **Section 262 of the DGCL** will not receive the Merger Consideration[56](index=56&type=chunk) - If a holder fails to perfect or withdraws their appraisal rights, their shares will be converted into the right to receive the **Merger Consideration**[56](index=56&type=chunk) - The Company must promptly notify Parent of any appraisal demands and may not settle any such demands without **Parent's written consent**[56](index=56&type=chunk) [Treatment of Company Equity Awards](index=20&type=section&id=3.4%20Treatment%20of%20Company%20Equity%20Awards) Outstanding Company equity awards will be converted into cash payments, with specific vesting treatments for different award types - Company **Time-Based Restricted Shares** will be converted into Restricted Cash Awards, vesting on the earlier of their original date or 90 days post-closing[58](index=58&type=chunk) - Company **Performance-Based Restricted Shares** will vest in full, assuming maximum performance, and be cancelled in exchange for a cash payment[59](index=59&type=chunk) - Company **DCP Units** will be cancelled and converted into the right to receive a cash payment equal to the Merger Consideration[61](index=61&type=chunk) [Withholding Rights](index=21&type=section&id=3.5%20Withholding%20Rights) The paying parties are entitled to deduct and withhold any amounts required by applicable tax law from payments - The paying parties are entitled to **deduct and withhold** from any payments the amounts required by any applicable tax law[63](index=63&type=chunk) [Further Actions](index=22&type=section&id=3.6%20Further%20Actions) Post-merger, the new leadership will execute all necessary actions to formally vest all assets in the Surviving Corporation - Post-merger, the leadership of Parent and the Surviving Corporation will execute all necessary documents to confirm the **transfer of all rights and assets**[65](index=65&type=chunk) [Representations and Warranties of the Company](index=22&type=section&id=ARTICLE%204%20REPRESENTATIONS%20AND%20WARRANTIES%20OF%20THE%20COMPANY) This article contains the Company's formal statements regarding its corporate, financial, operational, and legal status [Corporate and Financial Matters](index=22&type=section&id=4.1-4.10%20Corporate%20and%20Financial%20Matters) The Company represents its valid incorporation, capitalization, board approval, and sound financial condition as of May 2025 Company Capitalization (as of May 6, 2025) | Security Type | Authorized | Issued and Outstanding | | :--- | :--- | :--- | | **Common Shares** | 75,000,000 | 37,922,368 | | **Preferred Shares** | 10,000 | 0 | - As of the Capitalization Date, there were **1,400,358 Company Restricted Shares** and **299,255 Company DCP Units** outstanding[74](index=74&type=chunk) - The Company Board has **unanimously approved** the merger and resolved that it be governed by Section 251(h) of the DGCL[78](index=78&type=chunk) - Since December 31, 2024, there has not been any event that has had a **Company Material Adverse Effect**[92](index=92&type=chunk) [Operational and Legal Matters](index=29&type=section&id=4.11-4.19%20Operational%20and%20Legal%20Matters) The Company provides representations on its employee benefits, labor relations, material contracts, and legal compliance - The Company represents that the merger will not trigger severance or result in **"excess parachute payments"** under Section 280G of the Code[99](index=99&type=chunk) - The Company is not a party to any **collective bargaining agreements**, and there are no pending union representation demands[104](index=104&type=chunk) - There are no pending or threatened proceedings that would have a **Company Material Adverse Effect**[113](index=113&type=chunk) - The Company and its subsidiaries are in compliance with applicable **Environmental Laws**, except where non-compliance would not be material[115](index=115&type=chunk) [Transaction-Related Matters](index=39&type=section&id=4.20-4.26%20Transaction-Related%20Matters) The Company confirms it has received a fairness opinion and that no state anti-takeover statutes apply to the merger - The Company Board received an opinion from **RBC Capital Markets, LLC**, stating that the consideration is fair from a financial point of view[142](index=142&type=chunk) - The Company represents that the information it provides for the **Schedule 14D-9** will be accurate and comply with applicable laws[143](index=143&type=chunk) - No state **anti-takeover statutes**, such as Section 203 of the DGCL, are applicable to the merger or the other transactions[148](index=148&type=chunk) [Representations and Warranties of Parent and Merger Sub](index=41&type=section&id=ARTICLE%205%20REPRESENTATIONS%20AND%20WARRANTIES%20OF%20PARENT%20AND%20MERGER%20SUB) This article contains formal statements from Parent and Merger Sub regarding their corporate status and financing capabilities [Parent and Merger Sub Representations](index=42&type=section&id=5.1-5.13%20Parent%20and%20Merger%20Sub%20Representations) Parent and Merger Sub confirm their authority and represent that they have secured sufficient financing for the transaction - Merger Sub was formed **solely for the purpose of the merger** and has not engaged in any other business activities[167](index=167&type=chunk) - Parent and Merger Sub represent that the Surviving Corporation will be **solvent** immediately after the consummation of the transaction[168](index=168&type=chunk) - Parent has provided true and complete copies of the **Equity and Debt Commitment Letters**, which represent sufficient funds for the transaction[171](index=171&type=chunk) - Parent and Merger Sub acknowledge that their obligation to consummate the transaction is **not contingent upon obtaining financing**[176](index=176&type=chunk) [Covenants](index=48&type=section&id=ARTICLE%206%20COVENANTS) This article outlines the binding agreements and obligations of each party between the signing and closing of the transaction [Conduct of Business Pending Closing](index=48&type=section&id=6.1%20Conduct%20of%20Business%20by%20the%20Company%20and%20Parent%20Pending%20the%20Closing) The Company agrees to operate in the ordinary course of business and is restricted from certain actions without Parent's consent - The Company must conduct its operations in the **ordinary course of business** consistent with past practice until the closing[181](index=181&type=chunk) - The Company is prohibited from actions like issuing new equity, making acquisitions over **$100,000**, or paying dividends other than its regular quarterly dividend[182](index=182&type=chunk)[183](index=183&type=chunk) [No Solicitation by the Company](index=53&type=section&id=6.3%20No%20Solicitation%20by%20the%20Company) The Company is prohibited from soliciting alternative acquisition proposals but retains a "fiduciary out" for superior offers - The Company is prohibited from initiating, soliciting, or knowingly encouraging any alternative **"Company Acquisition Proposal"**[190](index=190&type=chunk) - The Company Board may engage with an unsolicited proposal if it could lead to a **"Superior Company Proposal"** and is required by its fiduciary duties[191](index=191&type=chunk) - Before changing its recommendation, the Company must provide Parent a **five-business-day notice period** to negotiate and improve its offer[195](index=195&type=chunk) [Employee Benefit Matters](index=60&type=section&id=6.7%20Employee%20Benefit%20Matters) Parent commits to providing continuing employees with comparable compensation and benefits through the end of 2025 - Through December 31, 2025, Parent will provide continuing employees with **substantially comparable compensation and benefits**[209](index=209&type=chunk) - The merger is acknowledged as a **"Change in Control,"** which may trigger certain provisions in existing employee benefit plans[210](index=210&type=chunk) - Continuing employees will receive **credit for their years of service** with the Company for vesting and eligibility purposes in Parent's benefit plans[212](index=212&type=chunk) [Indemnification of Directors and Officers](index=62&type=section&id=6.8%20Indemnification%20of%20Directors%20and%20Officers) Parent agrees to honor all indemnification obligations and maintain D&O insurance for the Company's directors and officers for six years - For **six years post-merger**, the Surviving Corporation will indemnify all past and present directors and officers to the fullest extent permitted by law[217](index=217&type=chunk) - The Surviving Corporation will maintain **D&O insurance coverage** for six years that is substantially equivalent to existing policies[220](index=220&type=chunk) [Financing Covenants](index=65&type=section&id=6.15-6.16%20Financing%20Covenants) Parent must use its best efforts to obtain its committed financing, while the Company agrees to provide reasonable cooperation - The Company must provide **reasonable best efforts cooperation** to Parent in connection with the arrangement of the Debt Financing[231](index=231&type=chunk) - Parent and Merger Sub must use **reasonable best efforts** to arrange, obtain, and consummate the Equity and Debt Financing[233](index=233&type=chunk)[238](index=238&type=chunk) - Parent is prohibited from amending financing letters if such changes would **delay or prevent the closing** or reduce the total financing amount[233](index=233&type=chunk)[238](index=238&type=chunk) - If debt financing becomes unavailable, Parent must use reasonable best efforts to obtain **Alternative Financing** on comparable terms[238](index=238&type=chunk) [Conditions to Consummation of the Merger](index=70&type=section&id=ARTICLE%207%20CONDITIONS%20TO%20CONSUMMATION%20OF%20THE%20MERGER) This article specifies the conditions that must be met for the merger to proceed after the tender offer is completed [Conditions to the Merger](index=71&type=section&id=7.1-7.2%20Conditions%20to%20the%20Merger) The merger is conditioned upon the successful completion of the tender offer and the absence of any legal prohibitions - A key condition to the merger is that Merger Sub must have **irrevocably accepted for payment** all Company shares validly tendered in the Offer[241](index=241&type=chunk) - The merger cannot proceed if any governmental entity has enacted a law or issued an order that **makes the merger illegal**[242](index=242&type=chunk) [Termination, Amendment and Waiver](index=71&type=section&id=ARTICLE%208%20TERMINATION,%20AMENDMENT%20AND%20WAIVER) This article details the conditions under which the agreement can be terminated and the financial consequences of doing so [Termination](index=71&type=section&id=8.1%20Termination) The agreement can be terminated under specific circumstances, including by a set date or if one party breaches its terms - The agreement can be terminated by either party if the tender offer is not consummated by the **Outside Date of November 10, 2025**[244](index=244&type=chunk) - Parent may terminate if the Company Board effects a **Company Change of Board Recommendation**[244](index=244&type=chunk) - The Company may terminate to enter into an agreement for a **Superior Company Proposal**, provided it pays the Company Termination Fee[245](index=245&type=chunk) - The Company may terminate if Merger Sub **fails to consummate the offer** after all conditions have been satisfied[245](index=245&type=chunk) [Termination Fees and Expenses](index=73&type=section&id=8.3%20Fees%20and%20Expenses) A reciprocal termination fee of $6.8 million is payable by either the Company or Parent under specific termination scenarios Termination Fees | Fee | Amount | Payable By | Payable To | Triggering Conditions | | :--- | :--- | :--- | :--- | :--- | | **Company Termination Fee** | $6,800,000 | Company | Parent | Termination by Parent due to a change in board recommendation, or by the Company to accept a superior proposal. | | **Parent Termination Fee** | $6,800,000 | Parent | Company | Termination by the Company because Merger Sub fails to consummate the offer when all conditions are satisfied. | - The termination fees are not a penalty but are considered **liquidated damages**, representing the sole and exclusive remedy for specified termination events[252](index=252&type=chunk)[253](index=253&type=chunk) [General Provisions](index=75&type=section&id=ARTICLE%209%20GENERAL%20PROVISIONS) This article contains standard legal clauses governing the interpretation and enforcement of the merger agreement [Boilerplate and Legal Clauses](index=75&type=section&id=9.1-9.17%20Boilerplate%20and%20Legal%20Clauses) The agreement is governed by Delaware law, allows for specific performance, and limits liability to the signatory parties - Representations, warranties, and covenants generally **do not survive the Effective Time**, except for those that contemplate performance after closing[258](index=258&type=chunk) - The agreement is governed by the laws of the **State of Delaware**, and any legal proceedings must be brought exclusively in Delaware courts[346](index=346&type=chunk)[347](index=347&type=chunk) - The parties are entitled to seek **specific performance** and injunctions to prevent breaches of the agreement[353](index=353&type=chunk) - The Company has the right to seek specific performance to compel Parent to close, but only if the **debt financing has been funded**[354](index=354&type=chunk)[355](index=355&type=chunk) - The **non-recourse clause** limits liability to the contracting parties, protecting their respective directors, officers, and affiliates from claims[356](index=356&type=chunk) [Annex A – Conditions to the Offer](index=98&type=section&id=Annex%20A%20%E2%80%93%20Conditions%20to%20the%20Offer) This annex lists the specific conditions that must be met for Merger Sub to be obligated to purchase the tendered shares [Conditions to the Offer](index=98&type=section&id=Conditions%20to%20the%20Offer) The offer is primarily conditioned on a majority of shares being tendered and the absence of a Material Adverse Effect - The primary condition is the **Minimum Condition**, requiring a majority of shares to be tendered[362](index=362&type=chunk) - Other key conditions include no legal injunctions, the accuracy of Company representations, and that **no Company Material Adverse Effect** shall have occurred[362](index=362&type=chunk)[363](index=363&type=chunk) - These conditions are for the sole benefit of Parent and Merger Sub and **may be waived by them**, with certain exceptions[364](index=364&type=chunk) [Exhibit A – Form Tender and Support Agreement](index=100&type=section&id=Exhibit%20A%20%E2%80%93%20Form%20Tender%20and%20Support%20Agreement) This exhibit provides the form of agreement signed by key stockholders committing their support for the transaction [Tender and Support Agreement Overview](index=101&type=section&id=Tender%20and%20Support%20Agreement%20Overview) Certain stockholders agree to tender their shares, vote against competing proposals, and grant Parent an irrevocable proxy - Stockholders party to this agreement commit to **promptly tender all their shares** into the Offer and not withdraw them[373](index=373&type=chunk)[374](index=374&type=chunk) - Stockholders agree to **vote against any competing Company Acquisition Proposal** and any other action that would interfere with the merger[379](index=379&type=chunk) - Stockholders grant Parent an **irrevocable proxy** to vote their shares in accordance with the agreement's terms[381](index=381&type=chunk) - Stockholders are **prohibited from selling or transferring** their shares during the agreement period, with limited exceptions[394](index=394&type=chunk)[396](index=396&type=chunk) [Exhibit B – Form of Amended and Restated Certificate of Incorporation](index=114&type=section&id=Exhibit%20B%20%E2%80%93%20Form%20of%20Amended%20and%20Restated%20Certificate%20of%20Incorporation) This exhibit presents the new certificate of incorporation that will govern the Surviving Corporation after the merger [Amended and Restated Certificate of Incorporation](index=115&type=section&id=Amended%20and%20Restated%20Certificate%20of%20Incorporation) The new certificate authorizes 150 shares of common stock, provides director indemnification, and opts out of Section 203 - The authorized capital stock of the Surviving Corporation will be **150 shares of Common Stock** with a par value of $0.01[433](index=433&type=chunk) - The certificate includes provisions to **eliminate the personal liability of directors** for monetary damages for breaches of fiduciary duty[435](index=435&type=chunk) - The corporation expressly elects **not to be governed by Section 203 of the DGCL**, a common anti-takeover provision[437](index=437&type=chunk)

[Part I Financial Information](index=5&type=section&id=Part%20I%20Financial%20Information) The company's financial position as of March 31, 2025, shows a slight decrease in total assets and a reduction in total liabilities, primarily due to debt repayment, while net income significantly improved in Q1 2025 driven by higher sales and asset gains [Item 1 Condensed Financial Statements](index=5&type=section&id=Item%201%20Condensed%20Financial%20Statements) The company reported total assets of **$161.1 million** as of March 31, 2025, a slight decrease from **$163.9 million** at year-end 2024, primarily due to a reduction in net properties and equipment. Total liabilities decreased to **$35.5 million** from **$42.0 million**, largely driven by a **$9.75 million** reduction in long-term debt. For the first quarter of 2025, the company achieved a net income of **$4.4 million**, a significant turnaround from a net **loss** of **$0.2 million** in the same period of 2024, boosted by higher natural gas, oil, and NGL sales and a significant **gain** on asset sales. Cash flow from operations was **$4.3 million** [Condensed Balance Sheets](index=5&type=page&id=Condensed%20Balance%20Sheets) Condensed Balance Sheet Summary | Metric | March 31, 2025 (unaudited) | December 31, 2024 | | :--- | :--- | :--- | | **Total Assets** | **$161,085,432** | **$163,915,766** | | Net properties and equipment | $150,267,820 | $153,376,249 | | **Total Liabilities** | **$35,539,132** | **$41,965,913** | | Long-term debt | $19,750,000 | $29,500,000 | | **Total Stockholders' Equity** | **$125,546,300** | **$121,949,853** | [Condensed Statements of Income](index=6&type=page&id=Condensed%20Statements%20of%20Income) Condensed Statement of Income Summary (Three Months Ended March 31) | Metric | 2025 (unaudited) | 2024 | | :--- | :--- | :--- | | Natural gas, oil and NGL sales | $10,433,287 | $7,090,208 | | Total Revenues | $7,598,312 | $7,869,418 | | Gains (losses) on derivative contracts | ($3,163,178) | $627,492 | | Gains on asset sales and other | $6,519,747 | ($24,212) | | **Net Income (Loss)** | **$4,383,882** | **($183,615)** | | **Diluted EPS** | **$0.12** | **($0.01)** | [Condensed Statements of Cash Flows](index=8&type=page&id=Condensed%20Statements%20of%20Cash%20Flows) Condensed Statement of Cash Flows Summary (Three Months Ended March 31) | Metric | 2025 (unaudited) | 2024 | | :--- | :--- | :--- | | **Net cash provided by operating activities** | **$4,276,440** | **$5,246,651** | | Net cash provided by (used in) investing activities | $7,228,471 | ($1,347,188) | | Net cash provided by (used in) financing activities | ($11,210,880) | ($3,079,968) | | **Increase (decrease) in cash and cash equivalents** | **$294,031** | **$819,495** | [Notes to Condensed Financial Statements](index=9&type=page&id=Notes%20to%20Condensed%20Financial%20Statements) Key notes include details on revenue recognition, where natural gas, oil, and NGL sales **increased significantly**. The company's long-term debt consists of a **$100 million** credit facility with **$19.75 million** outstanding. The company actively uses derivative contracts to hedge commodity prices, resulting in a **net liability** of **$3.7 million**. A significant subsequent event was the agreement to be acquired in an all-cash transaction at **$4.35 per share** Disaggregation of Revenues (Three Months Ended March 31, 2025) | Revenue Source | Royalty Interest | Working Interest | Total | | :--- | :--- | :--- | :--- | | Natural gas revenue | $6,038,625 | $611,235 | $6,649,860 | | Oil revenue | $2,711,565 | $275,141 | $2,986,706 | | NGL revenue | $538,234 | $258,487 | $796,721 | | **Total Sales** | **$9,288,424** | **$1,144,863** | **$10,433,287** | - The company has a **$100 million** credit facility with a borrowing base of **$50 million**, maturing in September 2028. As of March 31, 2025, **$19.75 million** was **outstanding**, with **$30.25 million** **available for borrowing**. The company was in **compliance with all covenants**[48](index=48&type=chunk)[51](index=51&type=chunk) Property Divestitures (Q1 2025) | Quarter Ended | Net mineral acres | Sale Price | Gain/(Loss) | Location | | :--- | :--- | :--- | :--- | :--- | | March 31, 2025 | **165,326 acres** | **$7.9 million** | **$6.7 million** | OK, AR, CO, FL, IN, KS, MT, ND, NM, SD, TX | - The company uses commodity price derivative agreements (swaps and collars) to hedge exposure to price fluctuations. As of March 31, 2025, the fair value of these contracts was a **net liability** of **$3.7 million**[63](index=63&type=chunk)[69](index=69&type=chunk) - On May 8, 2025, the company entered into a definitive agreement to be acquired in an all-cash transaction valued at **$4.35 per share**[82](index=82&type=chunk) [Item 2 Management's Discussion and Analysis of Financial Condition and Results of Operations](index=23&type=section&id=Item%202%20Management's%20Discussion%20and%20Analysis%20of%20Financial%20Condition%20and%20Results%20of%20Operations) The company's net income surged to **$4.4 million** in Q1 2025 from a net **loss** of **$0.2 million** in Q1 2024. This improvement was driven by a **47% increase** in natural gas, oil, and NGL sales, fueled by higher natural gas prices and **increased production volumes**, and a **$6.7 million gain** from asset divestitures. These **gains** were partially offset by a **$3.2 million loss** on derivative contracts. The company's strategy remains focused on **growth through mineral acquisitions in core areas**, particularly in the SCOOP and Haynesville plays, while **ceased taking new working interest positions**. Liquidity remains strong with **$30.3 million** **available** under its credit facility [Business Overview](index=23&type=page&id=Business%20Overview) - PHX's **principal business is managing and acquiring perpetual natural gas and oil mineral interests** in US resource plays[84](index=84&type=chunk) - The current business strategy is **growth through mineral acquisitions in core areas** (SCOOP and Haynesville Shale) and development of its mineral acreage inventory. The company has **ceased taking new working interest positions**[85](index=85&type=chunk) [Results of Operations](index=23&type=page&id=Results%20of%20Operations) For Q1 2025, net income was **$4.4 million** compared to a net **loss** of **$0.2 million** in Q1 2024. The positive swing was primarily due to a **47% increase** in commodity sales to **$10.4 million**, driven by an **83% rise** in natural gas prices and a **14% increase** in oil volumes. A significant **gain** on asset sales of **$6.5 million** also contributed. This was partially offset by a **$3.2 million loss** on derivative contracts, compared to a **$0.6 million gain** in the prior year, and a **12% increase** in G&A expenses Production and Average Sales Prices (Q1 2025 vs Q1 2024) | Metric | Q1 2025 | Q1 2024 | | :--- | :--- | :--- | | Natural Gas Sold (MCF) | **1,729,256 MCF** | **1,700,108 MCF** | | Avg. Gas Price ($/MCF) | **$3.85/MCF** | **$2.10/MCF** | | Oil Sold (Bbls) | **42,355 Bbls** | **37,260 Bbls** | | Avg. Oil Price ($/Bbl) | **$70.52/Bbl** | **$76.01/Bbl** | | NGL Sold (Bbls) | **29,316 Bbls** | **32,184 Bbls** | | Avg. NGL Price ($/Bbl) | **$27.18/Bbl** | **$21.51/Bbl** | | **Total Sales** | **$10,433,287** | **$7,090,208** | - Royalty interest production volumes **increased** in Q1 2025 compared to Q1 2024, primarily due to **new wells coming online** in the Haynesville Shale and SCOOP plays[89](index=89&type=chunk) - **Gains (losses) on derivative contracts** swung from a **$627,492 gain** in Q1 2024 to a **$3,163,178 loss** in Q1 2025, driven by settlements and changes in the fair value of open contracts[92](index=92&type=chunk) - General and Administrative (G&A) costs **increased by 12%** to **$3.8 million**, primarily due to **higher professional fees** associated with the company's strategic alternatives process[101](index=101&type=chunk) [Liquidity and Capital Resources](index=28&type=page&id=Liquidity%20and%20Capital%20Resources) As of March 31, 2025, the company had **positive working capital** of **$7.6 million** and **cash** of **$2.5 million**. Net cash from operations was **$4.3 million**. Investing activities provided **$7.2 million**, mainly from asset sales, while financing activities used **$11.2 million** for debt repayment and dividends. The company reduced its debt by **$9.75 million**, leaving a balance of **$19.75 million** and **$30.3 million** **available** on its credit facility. Management expects future operations, acquisitions, and dividends to be funded by cash flow, **cash on hand**, and **credit facility borrowings** Cash Flow Summary (Three Months Ended March 31) | Activity | 2025 | 2024 | Change | | :--- | :--- | :--- | :--- | | Operating activities | $4,276,440 | $5,246,651 | ($970,211) | | Investing activities | $7,228,471 | ($1,347,188) | $8,575,659 | | Financing activities | ($11,210,880) | ($3,079,968) | ($8,130,912) | - The **decrease in operating cash flow** was primarily due to a **$1.9 million decrease** in net settlements from derivative contracts[105](index=105&type=chunk) - The **increase in investing cash flow** was driven by **$7.8 million higher** net proceeds from asset sales in Q1 2025[106](index=106&type=chunk) - As of March 31, 2025, the company had **$19.75 million** in **outstanding** borrowings and **$30.3 million** **available** under its Credit Facility, and was in **compliance with all covenants**[114](index=114&type=chunk)[115](index=115&type=chunk) [Item 3 Quantitative and Qualitative Disclosures about Market Risk](index=32&type=section&id=Item%203%20Quantitative%20and%20Qualitative%20Disclosures%20about%20Market%20Risk) The company is exposed to commodity price risk and interest rate risk. Based on 2024 volumes, a **$0.10 per MCF change** in natural gas prices would impact operating revenue by approximately **$797,000**, and a **$1.00 per barrel change** in oil prices would impact revenue by about **$178,000**. A **1% increase** in interest rates on its **outstanding debt** of **$19.75 million** would **increase** quarterly interest expense by approximately **$49,000** - The company is **significantly impacted by volatile natural gas and oil prices**. Excluding hedges, a **$0.10/MCF change** in gas price affects annual revenue by **~$797k**, and a **$1.00/Bbl change** in oil price affects annual revenue by **~$178k**, based on FY2024 volumes[120](index=120&type=chunk) - The company is **exposed to interest rate risk** on its credit facility. A **1% increase** in interest rates would have **increased** interest expense by **$49,375** for the three months ended March 31, 2025, based on the **outstanding debt** of **$19.75 million**[121](index=121&type=chunk) [Item 4 Controls and Procedures](index=32&type=section&id=Item%204%20Controls%20and%20Procedures) Management, including the CEO and CFO, evaluated the company's **disclosure controls and procedures** and concluded they were **effective** as of the end of the quarter (March 31, 2025). There were **no material changes** in the company's internal control over financial reporting during the quarter - The CEO and CFO concluded that the company's **disclosure controls and procedures were effective** as of March 31, 2025[122](index=122&type=chunk) - There were **no changes in internal control over financial reporting** during the quarter ended March 31, 2025, that have materially affected, or are reasonably likely to materially affect, internal controls[124](index=124&type=chunk) [Part II Other Information](index=34&type=section&id=Part%20II%20Other%20Information) This section covers legal proceedings, risk factors, equity sales, and exhibits, providing additional context to the company's operations and governance [Item 1 Legal Proceedings](index=34&type=section&id=Item%201%20Legal%20Proceedings) The company is **not a party to any pending legal proceedings** that it believes would have a **material adverse effect** on its financial condition, operating results, or cash flow - The company states it is **not a party to any pending legal proceedings** that would be expected to have a **material adverse effect** on its financial condition or results[125](index=125&type=chunk) [Item 1A Risk Factors](index=34&type=section&id=Item%201A%20Risk%20Factors) There have been **no material changes** to the risk factors previously disclosed in the company's Annual Report on Form 10-K for the fiscal year ended December 31, 2024 - **No material changes** have been made to the risk factors disclosed in the Annual Report on Form 10-K for the fiscal year ended December 31, 2024[126](index=126&type=chunk) [Item 2 Unregistered Sales of Equity Securities and Use of Proceeds](index=34&type=section&id=Item%202%20Unregistered%20Sales%20of%20Equity%20Securities%20and%20Use%20of%20Proceeds) The company has an evergreen stock repurchase program authorizing the repurchase of up to **$1.5 million** of its common stock. **No repurchases** were made under this program during the quarter ended March 31, 2025 - The company made **no repurchases** of its Common Stock under its Repurchase Program during the quarter ended March 31, 2025[127](index=127&type=chunk) [Item 6 Exhibits](index=34&type=section&id=Item%206%20Exhibits) This section lists the exhibits filed with the Form 10-Q, including corporate governance documents, merger agreements, and **certifications by the CEO and CFO** required by the Sarbanes-Oxley Act - This section provides a list of all exhibits filed with the report, including **certifications by the CEO and CFO** under Sections 302 and 906 of the Sarbanes-Oxley Act[129](index=129&type=chunk)[130](index=130&type=chunk)

Financial Performance - The company reported a net income of $4.4 million, or $0.12 per diluted share, for the quarter ended March 31, 2025, compared to a net loss of $(0.2) million, or $(0.01) per diluted share, for the same quarter in 2024 [6][14] - Adjusted EBITDA was $6.2 million, an increase from $4.6 million for the quarter ended March 31, 2024 [6][30] - Total revenue for the quarter was $7.6 million, a decrease from $7.9 million in the same quarter of the previous year [5][25] Sales and Production - Natural gas, oil, and NGL sales increased by $3.3 million, or 47%, compared to the same quarter in 2024, driven by a rise in natural gas prices by 83% and NGL prices by 26% [15][25] - Total production volumes decreased by 9% to 2,159 Mmcfe compared to the previous quarter but increased by 2% compared to the same quarter in 2024 [6][10] - Royalty production volumes decreased by 9% to 1,910 Mmcfe compared to the previous quarter but increased by 3% year-over-year [6][11] Operational Highlights - The company converted 65 gross (0.113 net) wells to producing status during the quarter, compared to 85 gross (0.32 net) wells in the same quarter of 2024 [18][19] - As of March 31, 2025, there were 247 gross (1.017 net) wells in progress and permits, an increase from 225 gross (0.91 net) wells at the end of the previous quarter [19][20] - The company had 18 rigs operating on its acreage as of March 31, 2025 [19][20] Debt and Dividends - Total debt was reduced to $19.8 million, down from $29.5 million at the end of the previous quarter, resulting in a debt-to-adjusted EBITDA ratio of 0.86x [6][31] - The company announced a quarterly dividend of $0.04 per share, payable on June 4, 2025 [6][14] Strategic Developments - The company completed a divestiture of non-producing minerals in January 2025, which contributed to the reduction of debt [4][6] - PHX Minerals entered into a definitive agreement with WhiteHawk Income Corporation for an all-cash acquisition valued at $4.35 per share, totaling approximately $187 million [6][24]

Group 1 - PHX Energy Services Corp. announced the election results of its directors at the annual meeting held on May 7, 2025, with seven nominees elected to serve until the next annual meeting [1] - The voting results for each nominee showed high approval rates, with Michael L. Buker receiving 98.44% votes in favor, and Lawrence M. Hibbard receiving the lowest at 85.70% [1] - The company is focused on growth and provides horizontal and directional drilling services primarily in Canada and the US, positioning itself as a technology leader in the sector [2] Group 2 - PHX Energy is publicly traded on the Toronto Stock Exchange under the symbol "PHX" [3] - The company has developed various new technologies in recent years, enhancing its competitive edge in the oil and natural gas services industry [2]

Core Viewpoint - PHX Energy achieved record quarterly revenue and strong profitability in Q1 2025, driven by growth in high-margin services and effective capital management [3][10][11]. Financial Highlights - Consolidated revenue reached $193.7 million, a 17% increase from $166.1 million in Q1 2024 [2][3]. - Earnings rose to $20.2 million, or $0.44 per share, up 15% from $17.5 million, or $0.37 per share, in the same period last year [2][4]. - Adjusted EBITDA was $40.7 million, a 16% increase from $35 million in Q1 2024, representing 21% of consolidated revenue [2][4][10]. Operational Performance - The US division generated record revenue of $136.1 million, a 19% increase from $114.2 million in Q1 2024 [12][48]. - The Canadian division reported revenue of $57.6 million, an 11% increase from $52 million in the same quarter last year, marking the highest level since 2014 [13][56]. - The Corporation generated excess cash flow of $18.2 million after net capital expenditures of $13.8 million [3][4]. Capital Expenditures - The capital expenditure budget for 2025 was increased to $65 million, focusing on expanding the Rotary Steerable Systems (RSS) fleet and Real Time RSS Communications technology [24][7]. - In Q1 2025, capital expenditures totaled $24.7 million, with $15.6 million allocated for growth and $7.8 million for maintenance [21][61]. Shareholder Returns - A dividend of $0.20 per share was declared, totaling $9.1 million, which is 4% lower than the previous year due to share repurchases [15][16]. - The Return of Capital Strategy (ROCS) aims to utilize up to 70% of annual excess cash flow for shareholder returns, with $3.6 million remaining distributable under ROCS for Q1 2025 [16][17]. Market Outlook - The company anticipates continued strong demand for RSS despite potential industry disruptions from global economic conditions and fluctuating oil prices [5][6]. - The strategic focus remains on advancing technology and maintaining a strong balance sheet to navigate market uncertainties [7][8].

Company Announcement - PHX Minerals Inc. will release its financial results for the quarter ended March 31, 2025, after market close on May 8, 2025 [1] - A conference call to discuss the results is scheduled for 11 a.m. ET on May 9, 2025, with access available via phone and a live audio webcast [2] Company Overview - PHX Minerals is a natural gas and oil mineral company focused on growing its mineral position in key areas, primarily in Oklahoma, Texas, Louisiana, North Dakota, and Arkansas [3]

Financial Performance & Valuation - As of December 31, 2024, the company's market capitalization was $151.7 million[9], and its enterprise value was $179 million[9] - The company's liquidity as of December 31, 2024, was $27.1 million[9] - The company's dividend yield was 4%[9], based on an annualized dividend of $0.16 per share[12] - The company's leverage ratio was 1.38x[9], calculated as total debt divided by TTM Adjusted EBITDA[12] - The company's LTM Adjusted EBITDA was $21.3 million[9], with a discretionary cash flow yield of approximately 12%[9] and an LTM ROCE of approximately 8%[9] Asset Base & Strategy - Approximately 70% of the company's 3P reserves are natural gas[9] - The company holds 89,135 net leased royalty acres with an average royalty rate of approximately 16%[9] - The company has completed approximately $139 million in mineral acquisitions[15] - Royalty production volumes are up approximately 278%[15], and 2P royalty reserves are up approximately 130%[15] Debt & Liquidity - Since December 31, 2024, the company has paid down $9.8 million of debt, bringing the debt balance to $19.8 million as of March 5, 2025[12]

Financial Data and Key Metrics Changes - Total production volumes increased approximately 5% year over year, with royalty volume up 8% for the year [3][9] - EBITDA was down slightly year over year, supported by a traditional hedging program [4] - Natural gas, oil, and NGL sales revenues increased 13% to $8.9 million for the quarter, but decreased 8% to $33.7 million for the full year compared to 2023 [17] - Adjusted EBITDA for the quarter was $5.4 million, up from $4.9 million in the previous quarter, while for the full year it was $21.3 million compared to $22.7 million in 2023 [23] Business Line Data and Key Metrics Changes - Royalty production increased 8% to 8,760 million CFE, with quarterly royalty production remaining flat from the previous quarter [10][11] - Oil represented 11% of production volumes, while NGL represented 9% [11] - Total proved reserves decreased 11% to 63.7 BCFE, with improved royalty reserves decreasing 9% to 52.5 BCFE [12] Market Data and Key Metrics Changes - Realized natural gas prices for Q4 2024 averaged $2.64 per Mcf, compared to $2.00 in Q3 2024 [18] - Realized oil prices averaged $69.82, down 7% from the previous quarter, while NGLs averaged $23.01, up 17% [18] - For the full year 2024, natural gas prices averaged $2.19 compared to $2.61 in 2023, and oil averaged $74.59 compared to $76.76 in 2023 [18] Company Strategy and Development Direction - The company is committed to maintaining a strong conservative balance sheet and has applied proceeds from the sale of non-core minerals to reduce debt [6][7] - The company is evaluating strategic alternatives to unlock value, with a focus on high-quality assets and improving financial position [7][28] Management's Comments on Operating Environment and Future Outlook - Management acknowledged the challenges posed by lower rig counts and reduced industry capex budgets, but expressed optimism about improving natural gas fundamentals [2][3] - The company remains optimistic about prospects for 2025, citing a solid foundation of high-quality assets and a commitment to exploring strategic opportunities [28] Other Important Information - The company sold non-producing minerals for $8 million, which were old legacy assets with no production cash flow [6] - Total debt as of December 31, 2024, was $29.5 million, with a trailing debt to twelve-month adjusted EBITDA of 1.38 times [25] Q&A Session Summary Question: Insights on the strategic alternatives review process - Management stated that they do not comment on ongoing processes [35] Question: Approach to M&A and ground game leasing during the review - Management confirmed that the business continues to operate as usual, with no changes to their approach [37] Question: Production guidance for 2025 - Management indicated that while they are not providing guidance, trends from the past two years suggest a continuation of current production levels [39]