Panhandle Oil and Gas Inc. Announces Fiscal Year End 2018 Reserves Update

OKLAHOMA CITY – PANHANDLE OIL AND GAS INC. (NYSE: PHX), “the Company,” today announced estimated total proved reserve volumes for the Company’s fiscal year ended Sept. 30, 2018.

Proved Reserves

Panhandle’s estimated total proved reserves at Sept. 30, 2018, increased 3% to 173.6 Bcfe from 168.6 Bcfe reported for Sept. 30, 2017, based on SEC mandated pricing. SEC prices at the wellhead at Sept. 30, 2018, were $2.56 per Mcf of natural gas, $62.86 per barrel of oil and $26.13 per barrel of NGL as compared to Sept. 30, 2017, SEC wellhead prices of $2.81 per Mcf of natural gas, $46.31 per barrel of oil and $17.55 per barrel of NGL. Panhandle’s total estimated proved reserves at Sept. 30, 2018 are approximately 69% natural gas, 21% oil and 10% NGL. Sept. 30, 2018 and 2017, proved reserves were calculated by DeGolyer and MacNaughton, an independent petroleum engineering consulting firm.

At Sept. 30, 2018, approximately 63% of total proved reserves, or 109.7 Bcfe, are categorized as proved developed as compared to 66%, or 111.7 Bcfe, at Sept. 30, 2017. Proved undeveloped reserves, or PUD, comprised 37% of total proved reserves, or 63.9 Bcfe, at Sept. 30, 2018, as compared to 34%, or 56.9 Bcfe, at Sept. 30, 2017.

Management Comments

Paul F. Blanchard, Panhandle’s President and CEO, commented: “While our year-end 2018 proved reserves only increased 3% as compared to year-end 2017, there were material changes in our underlying business. Year-end 2018 proved oil and NGL reserves grew by one million barrels or 13%, while natural gas reserves declined by 1.1 Bcf. This strong relative growth in oil and NGLs along with a higher SEC oil price in 2018 resulted in the estimated future net cash flows at a 10% discount rate and SEC pricing, growing 62% to $204.6 million from $126.0 million in 2017.

“We strategically made a concerted effort to grow oil and NGLs in 2018, as this was the focus of both our drilling and acquisition efforts, while our divestiture effort focused on eliminating marginal natural gas properties. Growing our oil and NGL reserves along with production will continue to be our focus in 2019. In fact, this growth should accelerate in 2019, with both the higher-return continuous one-rig Eagle Ford drilling program that we anticipate and continued development of our mineral acreage in the STACK, SCOOP, Midland Basin and the Bakken.”

Definition of Press Release Terms:

Mcf: thousand cubic feet of natural gas
Bcfe: billion cubic feet of natural gas equivalent
Mcfe: thousand cubic feet of natural gas equivalent (Crude oil and NGL are converted to a thousand cubic feet of natural gas equivalent by using the ratio of one barrel to six Mcf of natural gas.)
NGL: natural gas liquids

 

Proved Reserves – SEC Flat Pricing

 

Proved Reserves SEC Pricing

 

 

Sept. 30, 2018

 

 

Sept. 30, 2017

 

Proved Developed Reserves:

 

 

 

 

 

 

 

Barrels of NGL

 

2,085,706

 

 

 

1,768,425

 

Barrels of Oil

 

2,334,587

 

 

 

2,201,528

 

Mcf of Gas

 

83,151,954

 

 

 

87,861,043

 

Mcfe

 

109,673,712

 

 

 

111,680,761

 

Proved Undeveloped Reserves:

 

 

 

 

 

 

 

Barrels of NGL

 

848,484

 

 

 

616,274

 

Barrels of Oil

 

3,649,835

 

 

 

3,308,139

 

Mcf of Gas

 

36,910,082

 

 

 

33,334,077

 

Mcfe

 

63,899,996

 

 

 

56,880,555

 

Total Proved Reserves:

 

 

 

 

 

 

 

Barrels of NGL

 

2,934,190

 

 

 

2,384,699

 

Barrels of Oil

 

5,984,422

 

 

 

5,509,667

 

Mcf of Gas

 

120,062,036

 

 

 

121,195,120

 

Mcfe

 

173,573,708

 

 

 

168,561,316

 

 

 

 

 

 

 

 

 

10% Discounted Estimated Future

 

 

 

 

 

 

 

Net Cash Flows (before income taxes):

 

 

 

 

 

 

 

Proved Developed

$

125,915,804

 

 

$

112,276,166

 

Proved Undeveloped

 

78,657,354

 

 

 

13,746,585

 

Total

$

204,573,158

 

 

$

126,022,751

 

SEC Pricing

 

 

 

 

 

 

 

Oil/Barrel

$

62.86

 

 

$

46.31

 

Gas/Mcf

$

2.56

 

 

$

2.81

 

NGL/Barrel

$

26.13

 

 

$

17.55

 

TABLE 1

Proved Reserves – Projected Future Pricing (1)

10% Discounted Estimated Future

 

Proved Reserves

 

Net Cash Flows (before income taxes)

 

Sept. 30, 2018

 

Proved Developed

 

$

155,728,130

 

Proved Undeveloped

 

 

104,462,753

 

Total

 

$

260,190,883

 

 

  1. Projected future pricing as of Sept. 30, 2018, basis adjusted to Company wellhead price

 

TABLE 2

Probable and Possible Reserves

DeGolyer and MacNaughton prepared estimates of the Company’s probable and possible undeveloped reserves utilizing projected future pricing, basis adjusted to Company wellhead price.

Estimated Net Probable and Possible Reserves

 

Projected Futures Pricing (1)

 

 

Sept. 30, 2018

 

Probable Reserves:

 

 

 

Barrels of NGL

 

3,122,142

 

Barrels of Oil

 

2,522,716

 

Mcf of Gas

 

208,377,033

 

Mcfe (1)

 

242,246,181

 

10% Discounted Estimated Future

 

 

 

Net Cash Flows (before income taxes)

$

133,300,542

 

 

 

 

 

Possible Reserves:

 

 

 

Barrels of NGL

 

2,311,678

 

Barrels of Oil

 

668,603

 

Mcf of Gas

 

202,716,483

 

Mcfe (1)

 

220,598,169

 

10% Discounted Estimated Future

 

 

 

Net Cash Flows (before income taxes)

$

60,815,476

 

  1. Projected Future Pricing as of Sept. 30, 2018, basis adjusted to Company wellhead price

 

Panhandle Oil and Gas Inc. (NYSE: PHX) Oklahoma City-based, Panhandle Oil and Gas Inc. is an oil and natural gas mineral and leasehold acreage-focused capital allocator seeking the highest per share returns while maintaining a conservative net leverage ratio to ensure survivability and prosperity in all business and mineral commodity price cycles. The capital allocation tools include: (i) selective participation in working interest wells on its existing holdings in the highest quality, low-risk projects that are projected to exceed corporate return thresholds; (ii) aggressive leasing of its mineral holdings outside of areas of potential working interest participation; (iii) acquisition of undervalued mineral rights in established resource plays; (iv) divestiture of limited optionality and overvalued mineral rights; (v) payment of quarterly dividends, with optionality for special dividends when available capital exceeds operational requirements and has no other higher shareholder return option for an extended time period; and (vi) repurchase of common shares when the share price trades at a material discount to the company's estimated intrinsic value.

Panhandle’s principal properties are located in Oklahoma, Arkansas, Texas, New Mexico and North Dakota. Additional information on the Company can be found at www.panhandleoilandgas.com.

 

Forward-Looking Statements and Risk Factors This report includes “forward-looking statements” within the meaning of Section 27A of the Securities Act of 1933 and Section 21E of the Securities Exchange Act of 1934. Forward-looking statements include current expectations or forecasts of future events. They may include estimates of oil and gas reserves, expected oil and gas production and future expenses, projections of future oil and gas prices, planned capital expenditures for drilling, leasehold acquisitions and seismic data, statements concerning anticipated cash flow and liquidity, and Panhandle’s strategy and other plans and objectives for future operations. Although Panhandle believes the expectations reflected in these and other forward-looking statements are reasonable, we can give no assurance they will prove to be correct. They can be affected by inaccurate assumptions or by known or unknown risks and uncertainties. Factors that could cause actual results to differ materially from expected results are described under “Risk Factors” in Part 1, Item 1 of Panhandle’s 2017 Form 10-K filed with the Securities and Exchange Commission. These “Risk Factors” include the worldwide economic recession’s continuing negative effects on the natural gas business; Panhandle’s hedging activities may reduce the realized prices received for oil and natural gas sales; the volatility of oil and gas prices; the Company’s ability to compete effectively against strong independent oil and gas companies and majors; the availability of capital on an economic basis to fund reserve replacement costs; Panhandle’s ability to replace reserves and sustain production; uncertainties inherent in estimating quantities of oil and gas reserves and projecting future rates of production and the amount and timing of development expenditures; uncertainties in evaluating oil and gas reserves; unsuccessful exploration and development drilling; decreases in the values of our oil and gas properties resulting in write-downs; the negative impact lower oil and gas prices could have on our ability to borrow; drilling and operating risks; and our inability to control activities on our properties as the Company is a non-operator.

Do not place undue reliance on these forward-looking statements, which speak only as of the date of this release, as Panhandle undertakes no obligation to update this information. Panhandle urges you to carefully review and consider the disclosures made in this presentation and Panhandle’s filings with the Securities and Exchange Commission that attempt to advise interested parties of the risks and factors that may affect Panhandle’s business.

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