PHX Energy Services (TSE:PHX) President and CEO Mike Buker outlined the company’s directional drilling business, its growing use of rotary steerable technology and its capital-return approach during a presentation at Planet MicroCap Toronto.
Buker said Calgary-based PHX is not a drilling-rig contractor. Instead, the company works alongside rig operators and oil-and-gas producers to steer wells from vertical to horizontal sections, allowing customers to increase their exposure to target formations such as the Montney, Duvernay and Spraberry.
The company provides downhole measurement-while-drilling equipment, steering tools and personnel who monitor equipment and guide the well path at the drilling location. PHX has operated for 31 years and generates roughly 75% of its revenue in the United States, according to Buker.
U.S. Operations and Market Position
Buker identified the Permian Basin in West Texas and eastern New Mexico as a major market because of its concentration of drilling activity and customers’ focus on operational performance. He said there are roughly 275 active drilling rigs in the Permian, compared with approximately 210 active rigs across Canada.
PHX’s largest customers currently include Exxon, Oxy and Shell, Buker said. In 2025, the company drilled nearly 13 million meters across its operations, which typically include 40 to 50 active jobs per day in Canada and 50 to 60 in the U.S. The company also has a small Middle East operation run with a partner.
Across North America, Buker estimated there are 35 to 36 directional drilling competitors, though only six or seven compete in the top tier of the market. He said providers serving major oil-and-gas companies must offer proprietary technology, strong equipment reliability, operational efficiency and the ability to meet customer audit requirements.
PHX holds approximately 10% to 11% of the U.S. directional drilling market, serving about 60 of an estimated 600 active U.S. rigs, Buker said. In Canada, he said the company holds about a 22% market share. Overall, it operates between 100 and 110 active full-service jobs on a typical day.
Rotary Steerable Technology as Growth Driver
Buker highlighted rotary steerable tools as a key growth opportunity. Unlike traditional bent-motor systems, rotary steerable tools continuously rotate while pads apply pressure to direct the drill bit. He said the technology can improve drilling speed and efficiency.
PHX is the second-largest provider of rotary steerable technology in North America behind Schlumberger, according to Buker. He said a conventional directional drilling job may carry a day rate of about C$15,000, while adding a rotary steerable tool can raise the rate to roughly C$35,000 to C$40,000 per day.
Customers accept the higher rate because faster drilling can reduce rig time, Buker said. He estimated that rigs cost approximately C$120,000 per day and said rotary steerable technology can, as a general rule, double drilling speeds. He cited examples in which a 3,000-meter Montney well’s drilling time fell from about 25 days to 12 days, while some Delaware Basin wells that previously took 40 days can now be drilled in 20 days or less.
About 20% of North America’s roughly 800 active rigs currently use rotary steerable technology, Buker said. He expects penetration could rise to 30% to 40% over the next several years. PHX has roughly 70 Schlumberger Orbit tools and about 60 Halliburton iCruise tools in its fleet, he said, with PHX holding perpetual licenses to buy additional equipment under its agreements.
Market Outlook and Capital Allocation
Buker said higher WTI oil prices related to conflict in the Middle East have left U.S. customers “quite flush with cash” as they move through budgeting cycles. He said he expects an increase in activity in the Permian as customers enter 2027 planning. He projected the U.S. rig count could rise from about 600 currently to 650 by this time in 2027.
In Canada, Buker said pipeline discussions, LNG activity and anticipated growth in oil exports could support additional oil and natural-gas drilling. He said Canada’s active rig count could rise gradually to about 300 within five years, compared with about 220 at the time of the presentation.
PHX plans to release its third-quarter results the following week, Buker said. The company has recorded four years of record revenue despite a 30% contraction in its total addressable market, which he attributed largely to expanding rotary steerable operations.
On capital allocation, Buker said PHX targets returning 70% of excess cash to shareholders after funding technology investment and maintaining low debt. The company has repurchased about 28% of its outstanding shares since 2017 and reinstated its dividend in 2020. Its quarterly dividend has since risen five times to C$0.20 per share, or C$0.80 annually.
Buker said the company spent about C$80 million on capital expenditures during the year and views continued investment in technology as necessary to remain competitive. He added that PHX has not made an acquisition in 15 years and would be cautious about pursuing mergers and acquisitions, citing the difficulty of integrating competitors’ equipment and the company’s past experience with deals.
About PHX Energy Services (TSE:PHX)
PHX Energy is a growth oriented, public oil and natural gas services company. The Corporation, through its directional drilling subsidiary entities provides horizontal and directional drilling services to oil and natural gas exploration and development companies principally in Canada and the US. In connection with the services it provides, PHX Energy engineers, develops and manufactures leading-edge technologies. In recent years, PHX Energy has developed various new technologies that have positioned the Corporation as a technology leader in the horizontal and directional drilling services sector in North America.
