ACT Energy Technologies Ltd. press release
ACT Energy Technologies Reports 2025 Q1 Interim Results
TSX - Toronto Stock Exchange · Canada
Canada NewsWire
/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, except net income per common share amounts) | | 2025 | | 2024 | | | | | | | | 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, 2025 | December 31, 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, except percentages) | 2025 | 2024 | | | | | | 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 operating days and average industry land rig counts) | 2025 | 2024 | Change | | | | | | | 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.