ACT Energy Technologies Reports 2025 Q1 Interim Results
Canada NewsWire
CALGARY, AB, May 8, 2025
/NOT FOR DISSEMINATION IN THE UNITED STATES OF AMERICA/
CALGARY, AB, May 8, 2025 /CNW/ -
(TSX: ACX) ACT Energy Technologies Ltd (the "Company" or "ACT")'s news release contains "forward-looking statements" within the meaning of applicable Canadian securities laws. For a full disclosure of forward-looking statements and the risks to which they are subject, see the 'Forward-Looking Statements' section in this news release. This news release contains references to Adjusted gross margin, Adjusted gross margin percentage, Adjusted EBITDAS, Adjusted EBITDAS margin percentage, Free cash flow, Working capital and Net capital expenditures. These terms do not have standardized meanings prescribed under International Financial Reporting Standards as issued by the International Accounting Standards Board ("IFRS Accounting Standards") and may not be comparable to similar measures used by other companies. See the 'Non-GAAP Measures' section in this news release for definitions and tabular calculations.
2025 Q1 FINANCIAL RESULTS
-- ACT's first quarter revenues of $135.4 million saw a strong increase
coming out of the winter holiday season, up 6% sequentially, modestly
better than the North American active land rig count sequential increase
of 5% (1). Similarly, Adjusted EBITDAS (2) of $19.7 million in 2025 Q1
posted a 12% sequential increase versus the $17.6 million in 2024 Q4.
-- Owing principally to weakness in the U.S. land rig count year-over-year,
plus much lower levels of lost-in-hole revenues (2) in 2025 Q1, our
consolidated revenues declined 18%, compared to $165.0 million in 2024
Q1. The 31% decline in Adjusted EBITDAS (2) compared to $28.8 million in
2024 Q1, was disproportionately impacted by lower lost-in-hole revenues
(2).
-- Net income of $7.2 million in 2025 Q1, compared to $11.6 million in 2024
Q1 mainly due to lower revenues in 2025 Q1.
-- Cash flow - operating activities of $18.7 million in 2025 Q1, compared to
$15.7 million in 2024 Q1.
-- Free cash flow (2) of $7.9 million in 2025 Q1, compared to Free cash flow
(2) of $6.2 million in 2024 Q1.
-- The Company purchased 742,699 common shares of ACT under its normal
course issuer bid ("NCIB") for a total amount of $4.5 million, at an
average price of $6.09 per common share. Subsequent to March 31, 2025,
the Company purchased 212,900 common shares for a total purchase amount
of $1.0 million, at an average purchase price of $4.84 per common share.
-- Loans and borrowings less cash was $50.3 million as at March 31, 2025,
compared to $50.7 million as at December 31, 2024.
-- The Company strengthened liquidity with $61.3 million of undrawn capacity
on the Company's amended Credit Agreement and a cash balance of $12.9
million (December 31, 2024 - $55.0 million and $12.8 million,
respectively).
2025 Q1 OPERATIONAL RESULTS
-- While we remained one of the most active directional drillers in the
Canadian market during the first quarter, we experienced a modest decline
in operating days of 3% versus 2024 Q1 given slight differences in
activity across the various Canadian resource plays. The ramp up in 2025
Q1 activity was also relatively strong this year, with our job count
rebounding by approximately 23% sequentially versus a 20% increase of the
industry rig count (1).
-- Our U.S. activity saw sequential gains in 2025 Q1 despite a difficult
underlying U.S. land rig market. First quarter operating days were up 7%
sequentially, relative to 2024 Q4. This contrasts with an essentially
flat U.S. land rig count (1). On a year-over-year basis, a 5% contraction
in the U.S. land rig count (1) plus customer consolidation pushed our
U.S. operating days down by 17% in 2025 Q1, compared to 2024 Q1.
-- ACT recognized an unusually low level of lost-in-hole revenues (2), which
led to a decrease in the Canadian and U.S. average revenues per operating
day (3) of 5% and 8%, respectively, in 2025 Q1, compared to 2024 Q1.
Historically, lost-in-hole activity has been achieved at relatively
consistent levels as a percentage of operating revenues.
-- At the end of 2025 Q1, the Company began to see realized gross margin
expansion in its U.S. directional business reducing its third-party
rental costs by utilizing Rime supplied measurement-while-drilling
("MWD") systems. Further strengthening of gross margins is expected as
more MWD systems are deployed. As of May 8, 2025, twenty-four Rime MWD
systems have been deployed with an additional twenty-six MWD systems
expected to be built by the end of 2025 Q2. A substantial majority of the
inventory required to build-out these systems was spent in 2024, with
minimal purchases required in 2025.
(1) As per Baker Hughes and Rig Locator.
(2) As defined in the 'Non-GAAP measures' section
of this news release.
(3) Per 'Supplementary financial measures and other
definitions' section in this news release.
PRESIDENT'S MESSAGE
Comments from President & CEO Tom Connors:
"Our first quarter 2025 results showed solid improvement coming out of the holiday break as operating days in both of our major geographic segments outperformed the rise in underlying industry benchmarks. Our North American operating days improved by over 15% compared to fourth quarter 2024 levels versus a 5% increase in the North American active land rig count (1) .
In Canada, we saw relatively consistent activity levels relative to the robust activity levels associated with the first quarter of 2024. We continue to believe that the regions in which we operate have some of the best economic return levels, which, combined with our extensive experience and leading technology offering, is ideally suited for the growing number and depth of wells drilled in multi-lateral oil plays.
"While we did see a meaningful sequential activity increase in our U.S. segment, our activity was down from the first quarter of 2024. Our U.S. operating days fell by 17% year-over-year due to lower industry drilling levels, especially among exploration and production ("E&P") companies involved in mergers and acquisitions ("M&A"). Overall, the U.S. land rig count declined by 5% year-over-year in 2025 Q1 (1) , whereas the U.S. rig count working for E&P companies involved in M&A is down 19% (source: RBC Research, April 21, 2025). Numerous U.S. transactions saw significantly fewer rigs deployed within six to twelve months after announcement. Despite these impacts, our U.S. segment continues to operate at levels consistent with our historical proportions of the overall industry rig count.
"We started to see margin expansion in the first quarter of 2025 and believe we will see further margin expansion as we continue the deployment of our own MWD systems developed by Rime Downhole Technologies (acquired in 2023). We remain on target to complete the construction of 50 MWD systems by the end of the second quarter of 2025. These new MWD systems will strengthen the durability of our cash flow, replacing rented third-party MWD systems. The deployment of the tools into an operating environment for our customers will happen incrementally throughout 2025 with full utilization rates expected in 2026.
"Our business focus remains consistent, we are committed to delivering ultra-high-performance directional drilling and related down-hole services, leveraging our proprietary technologies and experienced team. This focus will allow us to deliver value to our shareholders through the cycles. To maximize returns, we expect to allocate capital as follows:
-- Expand margins: utilize selective capital investment, primarily rotary
steerable systems ("RSS") and MWD, replacing rental equipment with
optimized in-house solutions.
-- Return of capital: repurchase of shares through the Company's NCIB.
-- Further strengthen our financial position: although debt remains low,
further modest reduction of debt will allow for business resiliency
through the cycles, allowing the Company to be counter-cyclical with
respect to long-term investment decisions.
"By having this diverse approach to capital allocation, we believe we will continue to build out a durable business model, focused on ensuring an effective use of capital.
"Volatile industry conditions are to be expected and anticipated in an oilfield service business. We are fortunate to have people to help navigate this business through uncertain times if and as they arise. We sincerely appreciate their dedication to our business and customers as we continue to build our Company," stated Tom Connors, ACT President and Chief Executive Officer.
(1) Per Baker Hughes and Rig Locator
FINANCIAL HIGHLIGHTS
(unaudited)
Three months ended March 31,
(stated in thousands of Canadian dollars, 2025 2024
except net
income per common share amounts)
Revenues $ 135,357 $ 164,956
Gross margin percentage 22 % 22 %
Adjusted gross margin percentage (1) 28 % 29 %
Adjusted EBITDAS (1) $ 19,699 $ 28,752
Adjusted EBITDAS margin percentage (1) 15 % 17 %
Net income $ 7,248 $ 11,584
Per common share - basic (2) $ 0.21 $ 0.34
Per common share - diluted (2) $ 0.19 $ 0.30
Cash flow - operating activities $ 18,685 $ 15,746
Free cash flow (1) $ 7,875 $ 6,211
Weighted average common shares
outstanding:
Basic (000s) (2) 34,160 34,383
Diluted (000s) (2) 37,867 38,495
Balance (stated in thousands of Canadian dollars) March 31, December 31,
2025 2024
Working capital, excluding current portion of loans
and borrowings (1) $ 70,665 $ 84,417
Total assets $ 485,001 $ 472,881
Loans and borrowings $ 63,200 $ 63,527
Shareholders' equity $ 243,284 $ 241,580
(1) Refer to the 'Non-GAAP Measures' section in this
news release.
(2) Restated to reflect the 7:1 common share consolidation
on July 3, 2024. Refer to the 'Common share consolidation'
section in this news release.
OUTLOOK
Despite ongoing uncertainty in global markets related to proposed U.S. trade policy revisions, the longer-term outlook for North American energy-related activity remains positive. Global demand continues to rise while geopolitical events continue to increase the uncertainty around supply. Our E&P clients have also worked hard since the Covid downturn to improve their balance sheets, which should allow much better insulation around field capital spending levels against a backdrop of commodity price volatility. In Canada, the commissioning of the Trans Mountain oil pipeline expansion in May 2024, followed by the impending start-up of the liquified natural gas ("LNG") Canada project in mid-2025, will provide significant tidewater and global market access for both Canadian crude and natural gas. Both projects should continue to translate to more consistent and slightly improved activity levels for oilfield service providers over time. LNG also represents a significant area of growth for the U.S. market as more than 11 bcf per day of export capacity will be added from 2025 to 2028, supporting incremental growth in drilling activity and less volatility in activity related to the cyclicality of domestic natural gas prices. The potential growth in energy demand related to the evolving market for artificial intelligence ("AI") data centers is a developing trend that could further support natural gas-related drilling activity over the long-term.
Despite the typical pull-back in second quarter activity in Canada owing to wet weather conditions, our recent job count has been in the low-to-high 20 range, which is modestly ahead of last year's April-to-early May run rate. Our Canadian customers have shown a tendency in recent years to level-load their capital programs in 2025 Q2, which includes more pad-based drilling to avoid road bans.
For the remainder of the year, our Canadian activity is expected to be similar to 2024. If uncertainty or increased costs due to trade policy persists, some potential for downside risk exists, but could be offset by improved pricing for Canadian heavy oil production due to narrowing of the discount typically realized by Canadian producers due to pipeline constraints. Trans Mountain pipeline volumes and loadings remain strong, showing the real-time virtue of expanded takeaway capacity. With our industry-leading position in multi-lateral drilling, the compelling economics of multi-lateral wells is expected to support continued solid activity through the summer despite potential headwinds related to weaker commodity prices or other market uncertainties. Similar to the fourth quarter of 2024, we also anticipate that operator discipline will remain a factor in the fourth quarter of 2025 and likely result in some degree of budget exhaustion and reduced activity versus the third quarter of 2025.
In the U.S. we expect to operate in a range of 40 to 50 jobs daily for the remainder of the year as drilling activity remains somewhat constrained due to customer consolidation and concern over commodity price volatility. We do see near term risk in customer activity resulting from the proposed U.S. tariffs and potential negative effect on oil prices. However, improved year-over-year natural gas prices are creating some optimism for an increase in rig activity later this year or into 2026, particularly as new Gulf Coast LNG export facilities come online.
We feel well-positioned to navigate a relatively flat macroeconomic environment in North America and are optimistic about the potential upside related to the deployment of our own technology in the U.S. market, but we remain cautious on the impact of tariffs and are evaluating the potential impact on our business. Given our supply chains are generally resident in each nation and 65% to 70% of our revenues are U.S. based, we expect the impact will be somewhat limited, but there may be certain elements of our supply chain that will increase in cost. While tariffs and their potential impact may persist or prove to be short-term in nature, the underlying risk is the negative impact on the investment climate and overall consumer sentiment.
RESULTS OF OPERATIONS
Financial
Three months ended March 31,
(stated in thousands of Canadian dollars, 2025 2024
except percentages)
Revenues
United States $ 81,616 $ 106,562
Canada 53,741 58,394
Total revenues 135,357 164,956
Cost of sales
Direct costs (97,873) (117,008)
Depreciation and amortization (7,348) (11,635)
Share-based compensation (131) (223)
Cost of sales (105,352) (128,866)
Gross margin $ 30,005 $ 36,090
Gross margin percentage 22 % 22 %
Adjusted gross margin percentage (1) 28 % 29 %
(1) Refer to the 'Non-GAAP Measures' section in this
news release.
Operational
Three months ended March 31, %
(stated in Canadian dollars, except 2025 2024 Change
operating days
and average industry land rig counts)
Operating days (1)
United States 3,040 3,670 (17 %)
Canada 4,254 4,374 (3 %)
7,294 8,044 (9 %)
Industry land rig count (2)
United States 572 602 (5 %)
Canada 205 197 4 %
Average revenues per operating day (1)
United States $ 26,847 $ 29,036 (8 %)
Canada $ 12,633 $ 13,350 (5 %)
$ 18,557 $ 20,507 (10 %)
Net lost-in-hole equipment
reimbursements (3) $ 1,117 $ 10,646 (90 %)
(1) Per 'Supplementary financial measures and other
definitions' section in this news release.
(2) Per Baker Hughes and Rig Locator.
(3) Refer to the 'Non-GAAP Measures' section in this
news release.
Summary
The Company sustained gross margin and Adjusted gross margin percentages (1) despite a 9% decline in the Company's operating days and a significant reduction of lost-in-hole revenues (1) , both contributing significantly to the 18% decline in the Company's revenues relative to the prior period. Typically, declines in operating days and revenues would result in the Company's fixed components of direct costs negatively impacting margin percentages. However, the Company's improved the durability and resiliency of gross margins through replacement of third-party rental equipment with owned equipment, primarily through deployment of Rime MWD systems.
(1) Refer to the 'Non-GAAP Measures' section in this news release.
SEGMENTED INFORMATION
United States
Revenues
U.S. revenues were $81.6 million in 2025 Q1, a decrease of $25.0 million or 24%, compared to $106.6 million in 2024 Q1. The Company experienced a 17% decrease in operating days in 2025 Q1 (2025 - 3,040 days; 2024 - 3,670 days). The Company's activity declines exceeded the 5% decrease in the average U.S. land rig count mainly as a result of consolidation by some of the Company's customers. The average revenues per operating day (2() decreased 8% in 2025 Q1 (2025 - $26,847 per day; 2024 - $29,036 per day). The decrease in average revenues per operating day (2) is mainly due to lower lost-in-hole revenues and lower equipment service intensity on jobs during 2025 Q1, compared to 2024 Q1. In 2025 Q1, the Company experienced an unusually low rate of lost-in-hole activity compared to 2024 Q1 ($12.4 million), which was conversely unusually high. Over longer periods of time, lost-in-hole activity has historically been relatively consistent as a percentage of operating revenues.
Direct costs
U.S. direct costs included in cost of sales were $62.1 million in 2025 Q1, a decrease of $18.6 million or 23%, compared to $80.7 million in 2024 Q1. The decrease is mainly due to lower MWD third-party rental costs, resulting from the Rime MWD build-out and lower labour and repair costs related to lower activity in 2025 Q1. As a percentage of revenues, direct costs were 76% in 2025 Q1 and 2024 Q1. Lower direct costs as a percentage of revenues, as described above, were offset by the effect of minimal lost-in-hole revenues (1) in 2025 Q1 relative to the comparative period.
Canadian
Revenues
Canadian revenues were $53.7 million in 2025 Q1, a decrease of $4.7 million or 8%, compared to $58.4 million in 2024 Q1, with the decline primarily attributable to lower lost-in-hole revenues (1) and a 3% decrease in operating days in 2025 Q1 (2025 - 4,254 days; 2024 - 4,374 days). Despite a modest increase in the Western Canada average land rig count of 4%, ACT had a slight decline in activity during 2025 Q1 primarily attributable to lower activity in oil plays where ACT is more prevalent.
The average revenues per operating day (2) decreased 5% in 2025 Q1 (2025 - $12,633 per day; 2024 - $13,350 per day). The decrease in the average revenues per operating day (2) is mainly attributed to lower lost-in-hole revenues (1) . In 2025 Q1, the Company experienced an unusually low rate of lost-in-hole activity compared to 2024 Q1 ($4.3 million), which was conversely unusually high. Over longer periods of time, lost-in-hole activity has historically been relatively consistent as a percentage of operating revenues.
Direct costs
Canadian direct costs included in cost of sales were $35.7 million in 2025 Q1, a decrease of $0.6 million or 2%, compared to $36.3 million in 2024 Q1. The decrease is mainly due to lower labour and repair costs in 2025 Q1 as a result of lower activity. As a percentage of revenues, direct costs were 66% in 2025 Q1, compared to 62% in 2024 Q1. The effect of minimal lost-in-hole revenues (1) in 2025 Q1 relative to the comparative period is the primary factor in direct costs being higher as a percentage of revenues in the current period.
CONSOLIDATED
Revenues
The Company recognized $135.4 million of revenues in 2025 Q1, a decrease of $29.6 million or 18%, compared to $165.0 million in 2024 Q1. The decrease is due to a 9% decrease in operating days (2025 - 7,294 days; 2024 - 8,044 days), and a 10% decrease in the average revenues per operating day (2) resulting from very low levels of lost-in-hole revenue (1) compared to 2024 Q1.
Direct costs
The Company recognized $97.9 million of direct costs in 2025 Q1, a decrease of $19.1 million or 16%, compared to $117.0 million in 2024 Q1. The decrease is mainly due to lower labour and repair costs related to the decrease in operating days, and lower third-party MWD rental costs mainly related to the Rime MWD build-out.
Direct costs as a percentage of revenues increased to 72% in 2025 Q1, compared to 71% in 2024 Q1, mainly due to the effect of minimal lost-in-hole revenues (1) in 2025 Q1 relative to the comparative period.
Gross margin and adjusted gross margin
The gross margin percentage was 22% in 2025 Q1 and 2024 Q1. The Adjusted gross margin percentage (1) decreased to 28% in 2025 Q1, compared to 29% in 2024 Q1. Despite a 9% decline in the Company's operating days and a significant reduction of lost-in-hole revenues (1) , the gross margin percentage and Adjusted gross margin percentage (1) were relatively consistent. The Company remains focused on reducing third-party MWD rental costs by investing capital to build out its MWD fleet.
Depreciation and amortization expense
Depreciation and amortization expense included in cost of sales decreased to $7.3 million in 2025 Q1, compared to $11.6 million in 2024 Q1. The decrease is mainly due to a change in depreciation methodology affecting the prior period.
(1) Refer to the 'Non-GAAP Measures' section in this news release. (2) Per 'Supplementary financial measures and other definitions' section in this news release.
Selling, general and administrative ("SG&A") expenses
Three months ended March 31,
(stated in thousands of Canadian dollars) 2025 2024
Selling, general and administrative expenses:
Direct costs $ 16,433 $ 16,026
Depreciation and amortization 2,826 2,347
Share-based compensation 541 930
Selling, general and administrative expenses $ 19,800 $ 19,303
The Company recognized direct costs included in SG&A expenses of $16.4 million in 2025 Q1, relatively consistent compared to $16.0 million in 2024 Q1. Direct costs included in SG&A expenses as a percentage of revenues were 12% in 2025 Q1, compared to 10% in 2024 Q1. The increase resulting from lower lost-in-hole revenues (1) and the fixed nature of SG&A expenses being unaffected by activity levels.
Depreciation and amortization included in SG&A expenses were $2.8 million in 2025 Q1, compared to $2.3 million in 2024 Q1. The increase is mainly due to intangible amortization expense related to the rotary steerable system ("RSS") licenses.
Stock-based compensation included in SG&A expenses were $0.5 million in 2025 Q1, compared to $0.9 million in 2024 Q1. The decrease is mainly due to certain stock options being fully vested in 2024.
Research and development ("R&D") costs
Three months ended March 31,
(stated in thousands of Canadian dollars) 2025 2024
Research and development costs $ 1,364 $ 1,203
The Company recognized R&D costs of $1.4 million in 2025 Q1, compared to $1.2 million in 2024 Q1. R&D costs are salaries, benefits, purchased materials and shop supply costs related to new product development and technology.
Write-off of property, plant and equipment
Three months ended March 31,
(stated in thousands of Canadian dollars) 2025 2024
Write-off of property, plant and equipment $ 179 $ 1,635
The Company recognized a write-off of property, plant and equipment of $0.2 million in 2025 Q1, compared to $1.6 million in 2024 Q1. The write-offs related to equipment lost-in-hole and damaged beyond repair. Lost-in-hole equipment and damaged beyond repair reimbursements from customers are based on service agreements held with clients and are recognized as revenues.
Finance costs
Three months ended March 31,
(stated in thousands of Canadian dollars) 2025 2024
Finance costs - loans and borrowings and
exchangeable
promissory notes $ 2,235 $ 2,465
Finance costs - lease liabilities $ 281 $ 205
Finance costs - loans and borrowings and exchangeable promissory notes were $2.2 million in 2025 Q1, a decrease of $0.3 million, compared to $2.5 million in 2024 Q1. The decrease is mainly due to a lower outstanding balance of loans and borrowings in 2025 Q1 compared to 2024 Q1.
In addition, the Company had finance costs - lease liabilities of $0.3 million in 2025 Q1, related to lease liabilities, compared to $0.2 million in 2024 Q1.
Foreign exchange
Three months ended March 31,
(stated in thousands of Canadian dollars) 2025 2024
Foreign exchange (loss) gain $ (250) $ 1,970
Foreign currency translation (loss) gain on
foreign
operations $ (79) $ 1,455
The Company recognized a foreign exchange loss of $0.3 million in 2025 Q1, compared to a foreign exchange gain of $2.0 million in 2024 Q1. The impact of foreign exchange is due to fluctuations of the Canadian dollar relative to the United States dollar ("USD") related to foreign currency transactions and balances recognized in net income.
The Company recognized a foreign currency translation loss on foreign operations of $0.1 million in 2025 Q1, compared to a gain of $1.5 million in 2024 Q1. The Company's foreign operations are denominated in USD and differences due to fluctuations in the foreign currency exchange rates are recorded in other comprehensive income.
Income tax recovery (expense)
Three months ended March 31,
(stated in thousands of Canadian dollars) 2025 2024
Current $ (74) $ (1,453)
Deferred 1,269 (212)
Income tax recovery (expense) $ 1,195 $ (1,665)
The Company recognized an income tax recovery of $1.2 million in 2025 Q1, compared to an income tax expense of $1.7 million in 2024 Q1. Income tax expense is recognized based upon expected annualized rates using the statutory rates of 23% for both Canada and the U.S. adjusted for key items that will effect the Company's actual tax for the period.
During 2025 Q1, the Company realized a loss before income tax in its U.S. segment resulting in an income tax recovery in the current period. In addition, the Company utilized previously unrecognized Canadian tax pools reducing the Canadian tax expense to nil. The remaining amount of unrecognized Canadian and U.S. tax pools as at March 31, 2025 are estimated at $5.5 million and $9.6 million, respectively.
LIQUIDITY AND CAPITAL RESOURCES
Annually, the Company's principal source of liquidity is cash generated from its operations. In addition, the Company has the ability to fund liquidity requirements through its credit facility and the issuance of additional debt and/or equity, if available.
In order to facilitate the management of its liquidity, the Company prepares an annual budget, which is updated, as necessary, depending on varying factors, including changes in capital structure, execution of the Company's business plan and general industry conditions. The annual budget is approved by the Board of Directors and updated forecasts are prepared as the fiscal year progresses with changes reviewed by the Board of Directors.
Cash flow - operating activities was $18.7 million in 2025 Q1, compared to $15.7 million in 2024 Q1. ACT remains focused on reducing its loans and borrowings and generating Free cash flow, as defined in the 'Non-GAAP measures' section of this news release. In addition, the Company will remain opportunistic in executing its NCIB and making strategic and accretive acquisitions.
At March 31, 2025, the Company had working capital, excluding current portion of loans and borrowings of $70.7 million (December 31, 2024 - $84.4 million).
Common share consolidation
On May 9, 2024, the shareholders of the Company approved the consolidation of the issued and outstanding common shares of the Company, on the basis of one post-consolidation common share for a range of five to ten pre-consolidation common shares. On June 10, 2024, the Board of Directors approved a consolidation ratio of one post-consolidation share for seven pre-consolidation common shares (the "Consolidation"). As a result, on July 3, 2024, 243,383,392 common shares issued and outstanding prior to the Consolidation were reduced to 34,769,056 common shares. No fractional common shares were issued in connection with the Consolidation, and all fractional common shares that otherwise would have been issued was rounded to the nearest whole common share. The number of shares and per share amounts in this news release were restated to reflect the Consolidation.
Normal course issuer bid
During the three months ended March 31, 2025, 742,699 (2024 - 353,100) common shares were purchased under the NCIB for a total purchase amount of $4.5 million (2024 - $2.1 million) at an average price of $6.09 (2024 - $5.88) per common share. A portion of the purchase amount reduced share capital by $4.2 million (2024 - $2.0 million) and the residual purchase amount of $0.3 million (2024 - $0.1 million) was recorded to the surplus.
In connection with the NCIB, the Company established an automatic securities purchase plan ("the Plan"). Accordingly, the Company may repurchase its common shares under the Plan on any trading day during the NCIB, including during regulatory restrictions or self-imposed trading blackout periods. The Plan commenced on July 29, 2024 and will terminate on July 28, 2025. As at March 31, 2025, the Company recognized $3.9 million as an accrued liability for the maximum common shares to be purchased under the Plan.
Subsequent to March 31, 2025, the Company purchased 212,900 common shares for a total purchase amount of $1.0 million, at an average purchase price of $4.84 per common share.
Syndicated and revolving credit facilities
On March 21, 2025, the Company entered into a Fifth Amended and Restated Credit Agreement with its existing syndicate of lenders co-lead by ATB Financial and Royal Bank of Canada ("Amended Credit Agreement"). The Amended Credit Agreement provided for the following:
i. A revolving facility with an approximate principal
amount of $124.3 million comprised of: i) $100.0 million
Syndicated Revolving Facility ("CAD Syndicated Revolving
Facility") and ii) $10.0 million revolving facility
provided by ATB Financial ("ATB Revolving Facility"),
and iii) USD $10.0 million (approximately CAD $14.3
million equivalent) provided by HSBC Bank USA, N.A.
("HSBC Revolving Facility"). The revolving facility
replaced the Company's existing facilities (CAD Syndicated
Term Facility of $59.0 million, USD Syndicated Term
Facility of USD $21.0 million, Syndicated Operating
Facility of $35.0 million, Revolving Operating Facility
of $15.0 million and USD Revolving Operating Facility
of $10.0 million). As such, the contractual repayments
of the CAD Syndicated Term Facility and USD Syndicated
Term Facility are no longer required;
ii. A lower amended interest rate updated to the financial
institution's prime rate plus 1.0% to 1.75% or Canadian
Overnight Repo Rate Average rate / Secured Overnight
Financing Rate plus 2.0% to 2.75% (previously prime
rate plus 1.5% to 2.25% or Canadian Overnight Repo
Rate Average rate / Secured Overnight Financing Rate
plus 2.5% to 3.25%);
iii. The maturity date extended from July 11, 2026 to March
21, 2028;
iv. Replaced the financial covenant of Consolidated Fixed
Charge Coverage ratio (previously required to be no
less than 1.25:1) with a Consolidated Interest Coverage
Ratio, which is required to be no less than 3.00:1.
The Consolidated Funded Debt to Consolidated Credit
Agreement EBITDA ratio remained unchanged and shall
not exceed 2.50:1; and
v. The syndicate of lenders remained unchanged with the
exception of Royal Bank of Canada joining ATB Financial
as the syndicate co-lead.
As at March 31, 2025, $61.3 million of the $124.3 million Revolving Facility remained undrawn.
At March 31, 2025, the Company was in compliance with all covenants, including its financial covenants, which were as follows:
-- Consolidated Funded Debt to Consolidated Credit Agreement EBITDA ratio
shall not exceed 2.5:1.0 (calculated - 1.0); and
-- Consolidated Interest Coverage ratio shall not be less than 3.0 :1.0
(calculated - 9.6).
Contractual obligations and contingencies
As at March 31, 2025, the Company's commitment to capital is approximately $7.2 million (December 31, 2024 - $11.9 million), which is expected to be incurred over the next six months.
The Company holds six letters of credit totaling $1.8 million (December 31, 2024 - $1.8 million) related to rent payments, corporate credit cards and a utilities deposit.
The Company is involved in various other legal claims and tax audits associated with the normal course of operations. The Company believes that any liabilities that may arise pertaining to such matters would not have a material impact on its financial position.
In relation to a pre-closing sales tax issue related to the July 14, 2022 acquisition of Altitude, as a result of a preliminary assessment, the Company has recognized a provision of $15.5 million in Trade and other payables. Pursuant to the Equity Purchase Agreement related to the Altitude acquisition, the sellers provided the Company with an indemnity related to pre-closing tax issues, including the sales tax issue noted. Accordingly, the Company has recognized an offsetting indemnity receivable of $15.5 million in Other receivable. This assessment relies on estimates and assumptions and may involve a series of judgements about future events. New information may become available that causes the Company to change its judgement regarding the adequacy of this provision.
The following table outlines the anticipated payments related to contractual commitments subsequent to March 31, 2025:
(stated in thousands Carrying One year 1-2 years 3-5 years Thereafter
of Canadian dollars) amount
Loans and borrowings -
principal $ 63,818 $ 685 $ -- $ 63,133 $ --
Exchangeable
promissory
("EP")notes -
principal 28,752 -- 28,752 -- --
Interest payments on
loans andborrowings
and EP notes 15,635 6,122 5,079 4,434 --
Lease liabilities -
undiscounted 21,839 4,034 3,684 8,779 5,342
Trade and other
payables 116,352 116,352 -- -- --
Total $ 246,396 $ 127,193 $ 37,515 $ 76,346 $ 5,342
Capital structure
As at May 8, 2025, the Company has 33,551,247 common shares, 3,290,598 stock options, 376,203 restricted shares, and EP Notes that are exchangeable into a maximum of 3,510,000 common shares outstanding.
NET CAPITAL EXPENDITURES
The following table details the Company's Net capital expenditures (1) :
Three months ended March 31,
(stated in thousands of Canadian dollars) 2025 2024
MWD and related equipment $ 14,855 $ 7,911
Motors and related equipment 7,985 7,206
Shop and automotive equipment 56 233
Other 653 569
Gross capital expenditures 23,549 15,919
Less: net lost-in-hole equipment
reimbursements (1,117) (10,646)
Net capital expenditures (1) $ 22,432 $ 5,273
(1) Refer to the 'Non-GAAP Measures' section in this
news release.
Equipment additions totaling $23.5 million included $7.6 million of items previously purchased and held in inventory for the Rime MWD system build-out in 2025 Q1.
As at March 31, 2025, property, plant and equipment included $15.8 million (2024 - $7.9 million) of MWD equipment not yet being depreciated as they are currently being manufactured and tested. Depreciation of the assets will commence upon the assets being fully operational.
Given the current market uncertainty, partly as a result of the enacted and proposed U.S. tariffs, the Company's 2025 Net capital expenditure budget will be dynamic and adjusted to reflect management's expectation of future activity levels. Currently, the Company's target Net capital expenditures (1) budget is anticipated to relate to necessary sustaining capital expenditures that will enhance realized gross margin percentage levels, including growing ACT's high-performance mud motors, MWD in both Canada and the U.S., and selective RSS deployments. ACT intends to fund its 2025 capital plan from cash flow - operating activities.
NON-GAAP MEASURES
ACT uses certain performance measures throughout this news release that are not defined under IFRS Accounting Standards or Generally Accepted Accounting Principles ("GAAP"). These non-GAAP measures do not have a standardized meaning and may differ from that of other organizations, and accordingly, may not be comparable. Investors should be cautioned that these measures should not be construed as alternatives to IFRS Accounting Standards measures as an indicator of ACT's performance.
These measures include the Adjusted gross margin, Adjusted gross margin percentage, Adjusted EBITDAS, Adjusted EBITDAS margin percentage, Free cash flow, Working capital and Net capital expenditures. Management believes these measures provide supplemental financial information that is useful in the evaluation of ACT's operations.
These non-GAAP measures are defined as follows:
i) "Adjusted gross margin" - calculated as gross margin
before non-cash costs (write-down of inventory included
in cost of sales, depreciation and amortization and
share-based compensation); is a supplemental measure
of changes in financial performance that are closely
related to the Company's core operating activities,
by excluding certain non-cash costs that might otherwise
distort trends in overall profitability (see tabular
calculation);
ii) "Adjusted gross margin percentage" - calculated as
Adjusted gross margin divided by revenues; is considered
a primary indicator of operating performance (see
tabular calculation);
iii) "Adjusted EBITDAS" - calculated as net income before
finance costs, unrealized foreign exchange gain (loss),
foreign exchange gain (loss) on intercompany balances,
income tax expense, depreciation and amortization,
gain on settlement of lease liabilities, non-recurring
costs, write-down of inventory included in cost of
sales and share-based compensation; provides supplemental
information to net income that is useful in evaluating
the results from our principal business activities
prior to consideration of how our activities are financed,
foreign exchange components and other charges like
depreciation (see tabular calculation);
iv) "Adjusted EBITDAS margin percentage" - calculated
as Adjusted EBITDAS divided by revenues; provides
supplemental information to net income that is useful
in evaluating the results and financing of the Company's
business activities before considering certain charges
as a percentage of revenues (see tabular calculation);
v) "Free cash flow" - calculated as cash flow - operating
activities prior to: i) changes in non-cash working
capital, ii) and income tax (refund) payment less:
i) cash flow - investing activities (updated from
property, plant and equipment ("PP&E") and intangible
asset additions, excluding assets acquired in business
combinations), ii) required repayments on loans and
borrowings, in accordance with the Company's credit
facility agreement, and iii) repayments of lease liabilities,
net of finance costs, offset by proceeds on disposal
of PP&E. This is a useful supplemental measure of
the Company's ability to generate funds from operations
available for future capital expenditures, discretionary
debt repayments, or other strategic initiatives (see
tabular calculation).
Free cash flow was updated from prior periods to deduct
cash flow - investing activities (updated from PP&E
and intangible asset additions, excluding assets acquired
in business combinations) to include changes in non-cash
investing working capital in the calculation to account
for non-cash movements in the period;
vi) "Net capital expenditures" - calculated as the gross
capital expenditures less net lost-in-hole equipment
reimbursements, as defined below - refer to the "Net
capital expenditures" section of this news release
for tabular calculation;
1. "Lost-in-hole revenues" -
represent reimbursements
received from customers and
insurance proceeds related
to directional drilling equipment
that is lost in-hole
or damaged beyond repair.
Management considers lost-in-hole
revenues to be supplemental
information that assists
in understanding fluctuations in
the Company's reported
revenues under IFRS Accounting
Standards. Although
lost-in-hole revenues tend to
remain relatively consistent
over longer periods, they can vary
significantly from
period to period, causing
fluctuations in the Company's
financial results;
2. "Net lost-in-hole equipment
reimbursements" - represent
lost-in-hole revenues, as defined
above, less outflows
associated with vendor payments
for insurance coverage
and third-party rental equipment
replacement, following
equipment loss-in-hole or damage
beyond repair; and
vii) "Working capital" - calculated as current assets less
current liabilities, excluding the current portion
of loans and borrowings. Management uses this measure
as an indication of the Company's financial and cash
liquidity position.
The following tables provide reconciliations from the IFRS Accounting Standards to non-GAAP measures included in this news release.
Adjusted gross margin
Three months ended March 31,
(stated in thousands of Canadian dollars) 2025 2024
Gross margin $ 30,005 $ 36,090
Add non-cash items included in cost of sales:
Write-down of inventory included in cost of
sales -- 7
Depreciation and amortization 7,348 11,635
Share-based compensation 131 223
Adjusted gross margin $ 37,484 $ 47,955
Adjusted gross margin percentage 28 % 29 %
Adjusted EBITDAS
Three months ended March 31,
(stated in thousands of Canadian dollars, 2025 2024
except percentages)
Net income $ 7,248 $ 11,584
Add (deduct):
Income tax (recovery) expense (1,195) 1,665
Depreciation and amortization - cost of sales 7,348 11,635
Depreciation and amortization - selling,
general and
administrative expenses 2,826 2,347
Share-based compensation - cost of sales 131 223
Share-based compensation - selling, general
and administrative
expenses 541 930
Finance costs - loans and borrowings and
exchangeable
promissory notes 2,235 2,465
Finance costs - lease liabilities 281 205
Unrealized foreign exchange loss (gain) 284 (2,309)
Non-recurring expenses, including inventory
write-off -- 7
Adjusted EBITDAS $ 19,699 $ 28,752
Adjusted EBITDAS margin percentage 15 % 17 %
Free cash flow
Three months ended March 31,
(stated in thousands of Canadian dollars) 2025 2024
Cash flow - operating activities $ 18,685 $ 15,746
Add (deduct):
Income tax (refund) payment (55) 160
Changes in non-cash operating working capital 1,091 14,481
Less:
Cash flow - investing activities (10,809) (18,128)
Required repayments on loans and borrowings
(1) -- (5,149)
Repayments of lease liabilities, net of
finance costs (1,037) (899)
Free cash flow $ 7,875 $ 6,211
(1) Required repayments on loans and borrowings in
accordance with the credit facility agreement, which
excludes discretionary debt repayments.
SUPPLEMENTARY FINANCIAL MEASURES AND OTHER DEFINITIONS
i) "Average revenues per operating day" - is a supplemental
operational metric calculated by dividing revenues,
either for a specific geographic segment or on a consolidated
basis as reported under IFRS Accounting Standards,
by the corresponding number of operating days for
that segment or on a consolidated basis. Management
uses revenues per operating day to assess pricing
strength, service intensity, and comparative financial
performance against different periods and across different
geographic markets; and
ii) "Operating days" - are defined as the total number
of calendar days during which directional drilling
services were actively provided to a customer at a
rig site, excluding any days where personnel or equipment
were on location but not engaged in active drilling
operations (such as standby, rig move days, or other
non-operational periods, regardless of whether partial
revenues were recognized).
FORWARD LOOKING STATEMENTS
This news release contains certain forward-looking statements and forward-looking information (collectively referred to herein as "forward-looking statements") within the meaning of applicable Canadian securities laws. All statements other than statements of present or historical fact are forward-looking statements. Forward-looking statements are often, but not always, identified by the use of words such as "anticipate", "achieve", "believe", "plan", "intend", "objective", "continuous", "ongoing", "estimate", "outlook", "expect", "may", "will", "project", "should" or similar words suggesting future outcomes. In particular, this news release contains forward-looking statements relating to, among other things:
-- The 2025 Net capital expenditure budget and financing thereof;
-- At the end of 2025 Q1, the Company began to see realized gross margin
expansion in its U.S. directional business reducing its third-party
rental costs by utilizing Rime supplied measurement-while-drilling
("MWD") systems. Further durability of gross margins is expected as more
MWD systems are deployed. To date, twenty-four Rime MWD systems have been
deployed with an additional twenty-six MWD systems expected to be
deployed by the end of 2025 Q2.
-- We started to see margin expansion in the first quarter of 2025 and
believe we will see further margin expansion as we continue the
deployment of our own MWD systems developed by Rime Downhole Technologies
(acquired in 2023). We remain on target to complete the construction of
50 MWD systems by the end of the second quarter of 2025. These new MWD
systems will strengthen the durability of our cash flow, replacing rented
third-party MWD systems. The deployment of the tools into an operating
environment for our customers will happen incrementally throughout 2025
with full utilization rates expected in 2026
-- The Company remains focused on reducing third-party MWD rental costs by
investing capital to build out its MWD fleet.
-- ACT's business focus remains consistent, we are committed to delivering
ultra-high-performance directional drilling and related down-hole
services, leveraging our proprietary technologies and experienced team.
This focus will allow us to deliver value to our shareholders through the
cycles. To maximize returns, we expect to allocate capital as follows:
-- Expand margins: utilize selective capital investment,
primarily RSS and MWD, replacing rental equipment with optimized
in-house solutions.
-- Return of capital: repurchase of shares through the
Company's NCIB.
-- Further strengthen our financial position: although debt remains
low, further modest reduction of debt will allow for business
resiliency through the cycles allowing the Company to be
counter-cyclical with respect to long-term investment decisions.
-- By having this diverse approach to capital allocation, we believe we will
continue to build out a durable business model, focused on ensuring an
effective use of capital.
-- Given the current market uncertainty, partly as a result of the enacted
and proposed U.S. tariffs, the Company's 2025 Net capital expenditure
budget, will be dynamic and adjusted to reflect management's expectation
of future activity levels.
-- Currently, the Company's target Net capital expenditure budget is
anticipated to relate to necessary sustaining capital expenditures that
will enhance realized gross margin percentage levels, including growing
ACT's high-performance mud motors, MWD in both Canada and the U.S., and
RSS in the U.S. ACT intends to fund its 2025 capital plan from cash flow
- operating activities.
-- The longer-term outlook for North American energy-related activity
remains positive.
-- Global demand continues to rise while geopolitical events continue to
increase the uncertainty around supply.
-- In Canada, the commissioning of the Trans Mountain oil pipeline expansion
in May 2024, followed by the impending start-up of the LNG Canada project
in mid-2025, will provide significant tidewater and global market access
for both Canadian crude and natural gas.
-- Both projects should continue to translate to more consistent and
slightly improved activity levels for oilfield service providers over
time.
-- LNG also represents a significant area of growth for the U.S. market as
more than 11 bcf per day of export capacity will be added from 2025 to
2028, supporting incremental growth in drilling activity and less
volatility in activity related to the cyclicality of domestic natural gas
prices.
-- The potential growth in energy demand related to the evolving market for
AI data centers is also a developing trend that could further support
natural gas-related drilling activity over the long-term.
-- For the remainder of the year, our Canadian activity is expected to be
similar to 2024.
-- If uncertainty or increased costs due to trade policy persists, some
potential for downside risk exists, but could be offset by improved
pricing for Canadian heavy oil production due to narrowing of the
discount typically realized by Canadian producers due to pipeline
constraints.
-- Trans Mountain pipeline volumes and loadings remain strong, showing the
real-time virtue of expanded takeaway capacity.
-- With our industry-leading position in multi-lateral drilling, the
compelling economics of multi-lateral wells is expected to support
continued solid activity through the summer despite potential headwinds
related to weaker commodity prices or other market uncertainties. Similar
to the fourth quarter of 2024, we also anticipate that operator
discipline will remain a factor in the fourth quarter of 2025 and likely
result in some degree of budget exhaustion and reduced activity versus
the third quarter of 2025.
-- In the U.S. we expect to operate in a range of 40 to 50 jobs daily for
the remainder of the year as drilling activity remains somewhat
constrained due to customer consolidation and concern over commodity
price volatility.
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