The Canadian industry's drilling activity continued to be weak in the fourth quarter of 2012 and this created pressures on day rates and increased competition in the market. Despite this overall retraction, horizontal and directional drilling continued to dominate Canadian industry activity and represented approximately 93 percent of total Canadian industry drilling days (2011 - 92 percent). (Source: Daily Oil Bulletin) In the 2012-quarter, PHX Energy focused its marketing efforts on the Montney, Duvernay, and deep basin plays where the Corporation's experience level is rising and there is potential opportunities for expansion. The Corporation also remained active in the Viking, Cardium, Shaunavon, Bakken, and Frobisher areas.
For the year ended December 31, 2012, the Corporation's Canadian revenue was $126.7 million, which is 12 percent lower than the $144.4 million generated in the 2011-year. The number of horizontal and directional operating days realized in the Canadian industry during the 2012-year decreased by 15 percent to 118,066 days as compared to 139,359 days in 2011. (Source: Daily Oil Bulletin) In comparison, the Corporation's Canadian drilling days decreased by 17 percent to 10,567 days in the 2012-year from 12,760 days in 2011. Oil well drilling activity (as measured by operating days) represented approximately 83 percent of PHX Energy's Canadian activity for the year ended December 31, 2012 (2011 - 75 percent) with the remainder of activity primarily related to liquids rich natural gas.
The negative impact of slower industry activity on the Corporation's revenue level in 2012 was partially alleviated by PHX Energy's improved average day rates, which increased by 6 percent from $11,318 in 2011 to $11,991 in 2012. Higher day rates were achieved as a result of greater demand for horizontal gamma jobs and the increased utilization of the Corporation's RWD systems as well as other premium directional drilling technologies.
Reportable segment profit before tax for the three-month period ended December 31, 2012 decreased by 58 percent to $4.1 million from $9.7 million in the 2011-quarter. For the year ended December 31, 2012, reportable segment profit before tax decreased by 40 percent to $16.1 million from $26.8 million in 2011. The decreases in both 2012-periods were primarily due to lower levels of activity and higher infrastructure costs.
Given the challenges in the Canadian market, PHX Energy is committed to implementing and growing initiatives that aim to provide its customers exceptional service and create drilling efficiencies. In late 2012, the Corporation aimed to increase the utilization of its Remote Access Directional Drilling ("RADD") services, which focus on reducing operators' costs by centralizing remote logging services. Additionally, PHX Energy is growing its Insight drilling optimization operations, whereby real-time solutions for improved drilling practices are provided by a team of technical experts. It is expected that both these initiatives will provide a positive impact on Canadian margins in 2013.
United States
(Stated in thousands of dollars)
Three-month periods ended Years ended December 31, December 31, 2012 2011 % Change 2012 2011 % Change--------------------------------------------------------------------------------------------------------------------------------------------------------Revenue 37,824 23,477 61 137,712 93,483 47Reportable segment profit before tax 4,243 268 n.m. 14,360 5,600 156--------------------------------------------------------------------------------------------------------------------------------------------------------
