Panhandle Oil and Gas Inc. Reports Second Quarter and Six Months 2020 Results, Announces Dividend Payment and Mid-Year Reserves Update

OKLAHOMA CITY, May 7, 2020 – PANHANDLE OIL AND GAS INC., “Panhandle” or the “Company,” (NYSE: PHX), today reported financial and operating results for the second quarter ended March 31, 2020.

Chad L. Stephens, President and CEO, commented, “Panhandle joins the chorus in thanking our remarkable health care workers, hospital staff and front-line responders in essential jobs that are helping the world through this unprecedented time. Risking their health to save ours is immensely appreciated. I am happy to report that our royalty interest production volumes have increased by 41% as compared to the prior quarter. This is due to the effect of a full quarter of our STACK mineral acquisition that closed last December and additional well activity on our Bakken and SCOOP minerals. The increase more than offset our decrease in working interest production volumes during the same period to generate an overall company production volume growth for the quarter of 10% as compared to the prior quarter. These results allowed us to reduce our debt by another $3.0 million (roughly 8%) since our last quarter. The royalty interest volume growth was not enough to mitigate a continued drop in commodity prices which caused our quarter over quarter adjusted EBITDA and operating cash flow to decline. The economic downturn associated with COVID-19 caused commodity prices to decline further and reduced new drilling activity across the energy patch, including on our minerals. Despite these challenging times, we will maintain our long-term focus on NAV-accretive growth through the acquisition of producing minerals and royalty interests. We recognize that the near-term uncertainty and market volatility make it difficult to transact. As such, in the short term we will focus on the important issues we can control, such as the safety and health of our employees, lowering our G&A costs, reducing our debt, and continually improving our internal systems and processes, in order to be more efficient and effective in pursuing our long term goals when the economy opens up again. As part of our debt reduction effort, the Board voted at the recent May meeting to reduce our quarterly dividend to $0.01. This will allow the Company to apply an additional $2.0 million toward debt reduction and help in maintaining adequate liquidity to operate our business. I remain confident that, by applying these prudent steps of judicious capital allocation and cash management, Panhandle will successfully navigate through the current market uncertainties and emerge as a leaner more efficient company.

SUMMARY OF RESULTS FOR THE PERIODS ENDED MARCH 31, 2020, AND SUBSEQUENT EVENTS

  • Royalty interest volumes sold increased in the second quarter of 2020 to 1.11 Bcfe from 0.79 Bcfe in the first quarter of 2020 primarily due to having a full quarter of production related to the STACK acquisition completed in December 2019 and additional mineral interest wells coming online.
  • As a result of lower commodity prices, we recorded a non-cash impairment of $29.5 million in the second quarter of 2020.
  • Net loss in the first half of fiscal 2020 was $18.1 million or $1.09 per share (net income of $11.5 million or $0.69 per share excluding the non-cash impairment associated primarily with our assets in the Fayetteville and Eagle Ford shales), as compared to net income of $10.8 million or $0.64 per share in the fiscal 2019 period.
  • Net loss in the second quarter of 2020 was $20.0 million or $1.21 per share (net income of $9.6 million or $0.58 per share excluding the non-cash impairment), as compared to net loss of $1.9 million or $0.11 per share in the same period of 2019.
  • Adjusted EBITDA(1) in the first half of fiscal 2020 was $10.3 million, as compared to $18.5 million in the fiscal 2019 period, including $3.3 million and $9.1 million gains on asset sales in the adjusted EBITDA for the 2020 and 2019 periods, respectively.
  • Adjusted EBITDA(1) for the second quarter of 2020 was $3.1 million, as compared to $4.0 million in the same period in 2019.
  • Reduced debt from $35.4 million, as of Sept. 30, 2019, to $32.0 million, as of March 31, 2020. Net debt has been further reduced to approximately $29.3 million as of May 1, 2020.
  • Debt to adjusted EBITDA (TTM) ratio was 1.12x at March 31, 2020.
  • Subsequent to March 31, 2020, the Company implemented a G&A reduction plan which we expect, when fully implemented, to reduce G&A by between $1 to $2 million annually.
  • At its meeting on May 5, 2020, the Company’s Board of Directors approved a payment of a one cent per share quarterly dividend. The dividend will be payable on June 5, 2020, to stockholders of record on May 21, 2020. 
  1. This is a non-GAAP measure. Refer to the Non-GAAP Reconciliation section.

OPERATING HIGHLIGHTS
 

 

Second Quarter Ended

 

 

Second Quarter Ended

 

 

Six Months Ended

 

 

Six Months Ended

 

 

March 31, 2020

 

 

March 31, 2019

 

 

March 31, 2020

 

 

March 31, 2019

 

Mcfe Sold

 

2,511,654

 

 

 

2,421,525

 

 

 

4,790,141

 

 

 

5,186,055

 

Average Sales Price per Mcfe

$

3.18

 

 

$

3.81

 

 

$

3.25

 

 

$

4.13

 

Oil Barrels Sold

 

103,215

 

 

 

74,372

 

 

 

169,095

 

 

 

157,200

 

Average Sales Price per Barrel

$

46.19

 

 

$

52.84

 

 

$

48.69

 

 

$

53.49

 

Gas Mcf Sold

 

1,607,442

 

 

 

1,688,043

 

 

 

3,255,269

 

 

 

3,582,033

 

Average Sales Price per Mcf

$

1.67

 

 

$

2.65

 

 

$

1.91

 

 

$

3.00

 

NGL Barrels Sold

 

47,487

 

 

 

47,875

 

 

 

86,717

 

 

 

110,137

 

Average Sales Price per Barrel

$

11.05

 

 

$

17.05

 

 

$

13.14

 

 

$

20.62

 

FINANCIAL HIGHLIGHTS

 

 

Second Quarter Ended

 

 

Second Quarter Ended

 

 

Six Months Ended

 

 

Six Months Ended

 

 

 

March 31, 2020

 

 

March 31, 2019

 

 

March 31, 2020

 

 

March 31, 2019

 

    Working Interest Sales

 

$

3,415,049

 

 

$

6,070,901

 

 

$

8,099,785

 

 

$

13,505,476

 

    Royalty Interest Sales

 

$

4,567,856

 

 

$

3,150,418

 

 

$

7,476,958

 

 

$

7,926,562

 

Oil, NGL and Natural Gas Sales

 

$

7,982,905

 

 

$

9,221,319

 

 

$

15,576,743

 

 

$

21,432,038

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Lease Bonuses and Rental Income

 

$

22,092

 

 

$

208,746

 

 

$

549,791

 

 

$

723,303

 

Total Revenue

 

$

12,076,574

 

 

$

7,636,213

 

 

$

22,653,105

 

 

$

33,965,207

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

LOE per Mcfe

 

$

0.61

 

 

$

0.62

 

 

$

0.57

 

 

$

0.58

 

Transportation, Gathering and Marketing per Mcfe

 

$

0.55

 

 

$

0.61

 

 

$

0.58

 

 

$

0.59

 

Production Tax per Mcfe

 

$

0.16

 

 

$

0.19

 

 

$

0.15

 

 

$

0.21

 

G&A Expense per Mcfe

 

$

0.87

 

 

$

0.88

 

 

$

0.92

 

 

$

0.79

 

Interest Expense per Mcfe

 

$

0.14

 

 

$

0.20

 

 

$

0.15

 

 

$

0.20

 

DD&A per Mcfe

 

$

1.34

 

 

$

1.50

 

 

$

1.32

 

 

$

1.43

 

Total Expense per Mcfe

 

$

3.67

 

 

$

4.00

 

 

$

3.69

 

 

$

3.80

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Impairment

 

$

29,545,702

 

 

$

-

 

 

$

29,545,702

 

 

$

-

 

Net Income (Loss)

 

$

(19,973,170

)

 

$

(1,931,334

)

 

$

(18,081,056

)

 

$

10,804,606

 

Adj. Pre-Tax Net Income (Loss) (1)

 

$

(633,906

)

 

$

(86,375

)

 

$

3,231,875

 

 

$

10,014,384

 

Adjusted EBITDA (1)

 

$

3,086,185

 

 

$

4,023,385

 

 

$

10,278,332

 

 

$

18,477,200

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Cash Flow from Operations

 

$

4,009,901

 

 

$

5,051,311

 

 

$

6,108,342

 

 

$

9,061,054

 

CapEx - Drilling & Completing

 

$

34,490

 

 

$

2,713,744

 

 

$

139,755

 

 

$

4,159,683

 

CapEx - Mineral Acquisitions

 

$

81,422

 

 

$

1,386,775

 

 

$

10,254,016

 

 

$

1,809,775

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Borrowing Base

 

 

 

 

 

 

 

 

 

$

45,000,000

 

 

$

80,000,000

 

Debt

 

 

 

 

 

 

 

 

 

$

32,000,000

 

 

$

44,100,000

 

Debt/Adjusted EBITDA (TTM) (1)

 

 

 

 

 

 

 

 

 

 

1.12

 

 

 

1.50

 

  1. This is a non-GAAP measure. Refer to the Non-GAAP Reconciliation section.

SECOND QUARTER 2020 RESULTS

Oil, NGL and natural gas revenue decreased 13% in the 2020 quarter as production increased 4% and product prices decreased 17% relative to the 2019 quarter. The 2020 quarter revenue included a $4.1 million gain on derivative contracts as compared to a $1.8 million loss for the 2019 quarter.

Total production increased 4% in the 2020 quarter, as compared to the 2019 quarter. Total production increased due to including a full quarter of results associated with the STACK acquisition, which closed in December 2019, and additional royalty oil wells coming online primarily in the Bakken. This increase was partially offset by the natural decline of the production base. The oil production increase of 39% is attributable to producing property royalty acquisitions in the Bakken in North Dakota and Anadarko STACK in Oklahoma, as well as new well drilling on legacy Panhandle mineral acreage in the SCOOP and STACK in Oklahoma. The natural gas production decrease of 5%is the result of naturally declining production in the STACK, Arkoma Stack and Fayetteville Shale, partially offset by royalty acquisition volumes in the STACK and Bakken and volumes identified in new royalty wells in the SCOOP and Bakken. The NGL production remained relatively flat as naturally declining production in liquid-rich gas areas of the Anadarko Basin and Arkoma Stack are offset by additional production related to royalty acquisition volumes in the STACK and Bakken, new royalty wells in the SCOOP and Bakken, and operators removing more NGL from the natural gas stream.

The 8% decrease in total cost per Mcfe in the 2020 quarter relative to the 2019 quarter was primarily driven by higher royalty volumes and an increased proportion of oil compared to NGL and natural gas.

The DD&A rate decrease was mainly due to the impairment taken on the Eagle Ford at the end of fiscal 2019, which lowered the basis of the assets. This rate decrease was partially offset by lower oil, NGL and natural gas prices utilized in the reserve calculations during the 2020 quarter, as compared to the 2019 quarter, shortening the economic life of wells.  This resulted in lower projected remaining reserves on a significant number of wells causing increased units of production DD&A.

The interest expense decrease was mainly attributable to lower average outstanding debt balance during the 2020 quarter as compared to the 2019 quarter.

The decrease in production tax rate was primarily due to lower product prices during the 2020 quarter.  

The Company’s net income decreased from net loss of $1.9 million in the 2019 quarter to net loss of $20.0 million in the 2020 quarter. The majority of the decrease was due to a non-cash impairment associated primarily with the Fayetteville and the Eagle Ford shales.

SIX MONTHS 2020 RESULTS

Oil, NGL and natural gas revenue decreased 27% in the 2020 period as production decreased 8% and product prices decreased 21% relative to the 2019 period. The 2020 period revenue included a $3.3 million gain on derivative contracts as compared to a $2.7 million gain for the 2019 period.

Total production decreased 8% in the 2020 period, as compared to the 2019 period. This decrease for the 2020 six-month period, was the result of Panhandle electing not to participate with a working interest on 16 wells proposed on its mineral and leasehold acreage, partially offset by the factors discussed above.

The 3% decrease in total cost per MCFE in the 2020 period relative to the 2019 period was primarily driven by lower production as noted above. Interest expense and production taxes were also influenced by lower debt balances outstanding and lower production tax associated with lower commodity prices, respectively.

The Company’s net income decreased from net income of $10.8 million in the 2019 period to net loss of $18.1 million in the 2020 period. The majority of the decrease was due to a non-cash impairment associated primarily with the Fayetteville and the Eagle Ford shales.

OPERATIONS UPDATE

During the quarter ended March 31, 2020, we converted 25 gross/0.06 net wells in progress to producing wells. Our inventory of wells in progress decreased to 118 gross wells but increased on a net well basis to 0.50 wells, as new drilling occurred on acreage where we have a higher ownership stake. Permits outstanding increased as new permits were filed, but this increase was offset by fewer permits being converted to wells in progress.

 

 

 

 

 

 

 

Bakken/

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

SCOOP/

 

 

Three

 

 

Arkoma

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

STACK

 

 

Forks

 

 

Stack

 

 

Permian

 

 

Fayetteville

 

 

Other

 

 

Total

 

Gross Wells in Progress on PHX Acreage:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

As of 12/31/19

 

 

79

 

 

 

2

 

 

 

11

 

 

 

5

 

 

 

-

 

 

 

28

 

 

 

125

 

Net Change

 

 

12

 

 

 

-

 

 

 

-7

 

 

 

-

 

 

 

-

 

 

 

-12

 

 

 

-7

 

As of 3/31/20

 

 

91

 

 

 

2

 

 

 

4

 

 

 

5

 

 

 

-

 

 

 

16

 

 

 

118

 

Net Wells in Progress on PHX Acreage:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

As of 12/31/19

 

 

0.19

 

 

 

-

 

 

 

0.02

 

 

 

0.15

 

 

 

-

 

 

 

0.13

 

 

 

0.49

 

Net Change

 

 

0.08

 

 

 

-

 

 

 

-0.01

 

 

 

-

 

 

 

-

 

 

 

-0.06

 

 

 

0.01

 

As of 3/31/20

 

 

0.27

 

 

 

-

 

 

 

0.01

 

 

 

0.15

 

 

 

-

 

 

 

0.07

 

 

 

0.50

 

Gross Active Permits on PHX Acreage:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

As of 12/31/19

 

 

35

 

 

 

13

 

 

 

6

 

 

 

-

 

 

 

-

 

 

 

11

 

 

 

65

 

Net Change

 

 

4

 

 

 

-

 

 

 

4

 

 

 

-

 

 

 

-

 

 

 

9

 

 

 

17

 

As of 3/31/20

 

 

39

 

 

 

13

 

 

 

10

 

 

 

-

 

 

 

-

 

 

 

20

 

 

 

82

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

As of 3/31/20:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Rigs Present on PHX Acreage

 

 

8

 

 

 

-

 

 

 

-

 

 

 

1

 

 

 

-

 

 

 

1

 

 

 

10

 

Rigs Within 2.5 Miles of PHX Acreage

 

 

27

 

 

 

6

 

 

 

-

 

 

 

2

 

 

 

-

 

 

 

6

 

 

 

41

 

Leasing Activity

During the second quarter of fiscal 2020, Panhandle leased 36 net mineral acres for an average bonus payment of $603 per net mineral acre and an average royalty of 22%.
 

 

 

 

 

 

 

Bakken/

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

SCOOP/

 

 

Three

 

 

Arkoma

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

STACK

 

 

Forks

 

 

Stack

 

 

Permian

 

 

Fayetteville

 

 

Other

 

 

Total

 

During Three Months Ended 3/31/20:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Net Mineral Acres Leased

 

 

10

 

 

 

-

 

 

 

-

 

 

 

23

 

 

 

-

 

 

 

3

 

 

 

36

 

Average Bonus per Net Mineral Acre

 

$

1,000

 

 

 

-

 

 

$

50

 

 

$

500

 

 

 

-

 

 

$

158

 

 

$

603

 

Average Royalty per Net Mineral Acre

 

25%

 

 

 

-

 

 

20%

 

 

25%

 

 

 

-

 

 

19%

 

 

22%

 

ACQUISITION AND DIVESTITURE UPDATE

During the second quarter of fiscal 2020, Panhandle did not purchase any net mineral acres or sell any net mineral acres.

RESERVES UPDATE

As of March 31, 2020, mid-year proved reserves were 74.6 Bcfe, as calculated by DeGolyer and MacNaughton, the Company’s independent consulting petroleum engineering firm. This was a 30% decrease, compared to the 106.4 Bcfe of proved reserves at Sept. 30, 2019, and is primarily attributable to revisions associated with lower natural gas prices. SEC prices used for the March 31, 2020, report averaged $1.90 per Mcf for natural gas, $53.10 per barrel for oil and $15.31 per barrel for NGL, compared to $2.48 per Mcf for natural gas, $54.40 per barrel for oil and $19.30 per barrel for NGL at the Sept. 30, 2019, report. These prices reflect net prices received at the wellhead. Total proved developed reserves decreased 19% to 72.8 Bcfe, as compared to Sept. 30, 2019, reserve volumes. Total proved undeveloped reserves decreased 15.3 Bcfe principally due to reclassifying locations from proven undeveloped to probable undeveloped related to significant reduction in drilling activity in the STACK, SCOOP, Arkoma Stack and Bakken. As per reserve reporting rules, wells that are no longer scheduled to be drilled within five years must be reclassified from proven undeveloped to probable undeveloped.

SECOND QUARTER EARNINGS CALL

Panhandle will host a conference call to discuss second quarter results at 5:00 p.m. EDT on May 7, 2020. Management’s discussion will be followed by a question and answer session with investors. To participate on the conference call, please dial 844-602-0380 (domestic) or 862-298-0970 (international). A replay of the call will be available for 14 days after the call. The number to access the replay of the conference call is 877-481-4010 and the PIN for the replay is 34278.

FINANCIALS

Statements of Operations

 

 

Three Months Ended March 31,

 

 

Six Months Ended March 31,

 

 

2020

 

 

2019

 

 

2020

 

 

2019

 

Revenues:

 (unaudited)

 

 

 (unaudited)

 

Oil, NGL and natural gas sales

$

7,982,905

 

 

$

9,221,319

 

 

$

15,576,743

 

 

$

21,432,038

 

Lease bonuses and rental income

 

22,092

 

 

 

208,746

 

 

 

549,791

 

 

 

723,303

 

Gains (losses) on derivative contracts

 

4,071,577

 

 

 

(1,793,852

)

 

 

3,253,683

 

 

 

2,712,928

 

Gain on asset sales

 

-

 

 

 

-

 

 

 

3,272,888

 

 

 

9,096,938

 

 

 

12,076,574

 

 

 

7,636,213

 

 

 

22,653,105

 

 

 

33,965,207

 

Costs and expenses:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Lease operating expenses

 

1,542,199

 

 

 

1,505,507

 

 

 

2,723,870

 

 

 

3,020,061

 

Transportation, gathering and marketing

 

1,386,297

 

 

 

1,482,671

 

 

 

2,769,298

 

 

 

3,072,687

 

Production taxes

 

404,728

 

 

 

467,308

 

 

 

732,009

 

 

 

1,076,259

 

Depreciation, depletion and amortization

 

3,373,518

 

 

 

3,623,976

 

 

 

6,329,219

 

 

 

7,437,662

 

Provision for impairment

 

29,545,702

 

 

 

-

 

 

 

29,545,702

 

 

 

-

 

Interest expense

 

346,573

 

 

 

485,784

 

 

 

717,238

 

 

 

1,025,154

 

General and administrative

 

2,174,661

 

 

 

2,133,153

 

 

 

4,397,689

 

 

 

4,071,993

 

Loss on asset sales and other expense (income)

 

40,066

 

 

 

(852

)

 

 

29,136

 

 

 

15,785

 

 

 

38,813,744

 

 

 

9,697,547

 

 

 

47,244,161

 

 

 

19,719,601

 

Income (loss) before provision (benefit) for income taxes

 

(26,737,170

)

 

 

(2,061,334

)

 

 

(24,591,056

)

 

 

14,245,606

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Provision (benefit) for income taxes

 

(6,764,000

)

 

 

(130,000

)

 

 

(6,510,000

)

 

 

3,441,000

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Net income (loss)

$

(19,973,170

)

 

$

(1,931,334

)

 

$

(18,081,056

)

 

$

10,804,606

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Basic and diluted earnings (loss) per common share

$

(1.21

)

 

$

(0.11

)

 

$

(1.09

)

 

$

0.64

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Basic and diluted weighted average shares outstanding:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Common shares

 

16,384,687

 

 

 

16,679,187

 

 

 

16,362,057

 

 

 

16,712,493

 

Unissued, directors' deferred compensation shares

 

139,390

 

 

 

183,206

 

 

 

186,443

 

 

 

217,704

 

 

 

16,524,077

 

 

 

16,862,393

 

 

 

16,548,500

 

 

 

16,930,197

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Dividends declared per share of

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

common stock and paid in period

$

0.04

 

 

$

0.04

 

 

$

0.08

 

 

$

0.08

 

Balance Sheets

 

 

March 31, 2020

 

 

Sept. 30, 2019

 

Assets

 

(unaudited)

 

 

 

 

 

Current assets:

 

 

 

 

 

 

 

Cash and cash equivalents

$

498,777

 

 

$

6,160,691

 

Oil, NGL and natural gas sales receivables (net of

 

3,913,347

 

 

 

4,377,646

 

allowance for uncollectable accounts)

 

 

 

 

 

 

 

Refundable income taxes

 

3,401,870

 

 

 

1,505,442

 

Derivative contracts, net

 

4,216,915

 

 

 

2,256,639

 

Other

 

601,412

 

 

 

177,037

 

Total current assets

 

12,632,321

 

 

 

14,477,455

 

 

 

 

 

 

 

 

 

Properties and equipment, at cost, based on

 

 

 

 

 

 

 

   successful efforts accounting:

 

 

 

 

 

 

 

Producing oil and natural gas properties

 

326,766,558

 

 

 

354,718,398

 

Non-producing oil and natural gas properties

 

19,030,785

 

 

 

14,599,023

 

Other

 

1,782,063

 

 

 

1,722,080

 

 

 

347,579,406

 

 

 

371,039,501

 

Less accumulated depreciation, depletion and amortization

 

(261,599,529

)

 

 

(259,314,590

)

Net properties and equipment

 

85,979,877

 

 

 

111,724,911

 

 

 

 

 

 

 

 

 

Investments

 

151,752

 

 

 

205,076

 

Derivative contracts, net

 

-

 

 

 

237,505

 

Total assets

$

98,763,950

 

 

$

126,644,947

 

 

 

 

 

 

 

 

 

Liabilities and Stockholders' Equity

 

 

 

 

 

 

 

Current liabilities:

 

 

 

 

 

 

 

Accounts payable

$

810,095

 

 

$

665,160

 

Accrued liabilities and other

 

1,246,544

 

 

 

2,433,466

 

Total current liabilities

 

2,056,639

 

 

 

3,098,626

 

 

 

 

 

 

 

 

 

Long-term debt

 

32,000,000

 

 

 

35,425,000

 

Deferred income taxes

 

1,312,007

 

 

 

5,976,007

 

Asset retirement obligations

 

2,862,523

 

 

 

2,835,781

 

 

 

 

 

 

 

 

 

Stockholders' equity:

 

 

 

 

 

 

 

Class A voting common stock, $0.01666 par value; 24,000,500

 

 

 

 

 

 

 

shares authorized; 16,897,306 issued at March 31, 2020, and

 

 

 

 

 

 

 

Class A voting common stock, $0.01666 par value; 24,000,000

 

 

 

 

 

 

 

shares authorized; 16,897,306 issued at Sept. 30, 2019

 

281,509

 

 

 

281,509

 

Capital in excess of par value

 

3,264,383

 

 

 

2,967,984

 

Deferred directors' compensation

 

2,092,426

 

 

 

2,555,781

 

Retained earnings

 

62,447,346

 

 

 

81,848,301

 

 

 

68,085,664

 

 

 

87,653,575

 

Less treasury stock, at cost; 505,252 shares at March 31,

 

 

 

 

 

 

 

2020, and 558,051 shares at Sept. 30, 2019

 

(7,552,883

)

 

 

(8,344,042

)

Total stockholders' equity

 

60,532,781

 

 

 

79,309,533

 

Total liabilities and stockholders' equity

$

98,763,950

 

 

$

126,644,947

 

Condensed Statements of Cash Flows

 

Six months ended March 31,

 

 

2020

 

 

2019

 

Operating Activities

(unaudited)

 

Net income (loss)

$

(18,081,056

)

 

$

10,804,606

 

Adjustments to reconcile net income (loss) to net cash provided

 

 

 

 

 

 

 

  by operating activities:

 

 

 

 

 

 

 

Depreciation, depletion and amortization

 

6,329,219

 

 

 

7,437,662

 

Impairment of producing properties

 

29,545,702

 

 

 

-

 

Provision for deferred income taxes

 

(4,664,000

)

 

 

3,942,000

 

Gain from leasing of fee mineral acreage

 

(544,979

)

 

 

(722,912

)

Proceeds from leasing of fee mineral acreage

 

559,462

 

 

 

737,812

 

Net (gain) loss on sale of assets

 

(3,265,449

)

 

 

(9,096,938

)

Directors' deferred compensation expense

 

140,130

 

 

 

132,280

 

Fair value of derivative contracts

 

(1,722,771

)

 

 

(4,231,222

)

Restricted stock awards

 

491,616

 

 

 

446,321

 

Other

 

7,225

 

 

 

9,326

 

Cash provided (used) by changes in assets and liabilities:

 

 

 

 

 

 

 

Oil, NGL and natural gas sales receivables

 

464,299

 

 

 

715,935

 

Other current assets

 

(232,349

)

 

 

(172,645

)

Accounts payable

 

117,561

 

 

 

(77,977

)

Income taxes receivable

 

(1,896,428

)

 

 

(538,150

)

Other non-current assets

 

50,010

 

 

 

17,317

 

Accrued liabilities

 

(1,189,850

)

 

 

(342,361

)

Total adjustments

 

24,189,398

 

 

 

(1,743,552

)

Net cash provided by operating activities

 

6,108,342

 

 

 

9,061,054

 

 

 

 

 

 

 

 

 

Investing Activities

 

 

 

 

 

 

 

Capital expenditures

 

(139,755

)

 

 

(4,159,683

)

Acquisition of minerals and overrides

 

(10,254,016

)

 

 

(1,809,775

)

Investments in partnerships

 

-

 

 

 

(199

)

Proceeds from sales of assets

 

3,376,049

 

 

 

9,096,938

 

Net cash provided (used) by investing activities

 

(7,017,722

)

 

 

3,127,281

 

 

 

 

 

 

 

 

 

Financing Activities

 

 

 

 

 

 

 

Borrowings under Credit Facility

 

5,561,725

 

 

 

8,686,270

 

Payments of loan principal

 

(8,986,725

)

 

 

(15,586,270

)

Purchase of treasury stock

 

(7,635

)

 

 

(3,967,685

)

Payments of dividends

 

(1,319,899

)

 

 

(1,348,170

)

Net cash provided (used) by financing activities

 

(4,752,534

)

 

 

(12,215,855

)

 

 

 

 

 

 

 

 

Increase (decrease) in cash and cash equivalents

 

(5,661,914

)

 

 

(27,520

)

Cash and cash equivalents at beginning of period

 

6,160,691

 

 

 

532,502

 

Cash and cash equivalents at end of period

$

498,777

 

 

$

504,982

 

 

 

 

 

 

 

 

 

Supplemental Schedule of Noncash Investing and Financing Activities

 

 

 

 

 

 

 

Additions and revisions, net, to asset retirement obligations

$

4

 

 

$

27,562

 

 

 

 

 

 

 

 

 

Gross additions to properties and equipment

$

10,229,121

 

 

$

5,654,060

 

Net (increase) decrease in accounts payable for properties

 

 

 

 

 

 

 

and equipment additions

 

164,650

 

 

 

315,398

 

Capital expenditures and acquisitions

$

10,393,771

 

 

$

5,969,458

 

Proved Reserves
 

 

Proved Reserves SEC Pricing

 

 

March 31, 2020

 

 

Sept. 30, 2019

 

Proved Developed Reserves:

 

 

Barrels of NGL

 

1,508,483

 

 

 

1,747,242

 

Barrels of Oil

 

1,610,078

 

 

 

1,863,096

 

Mcf of Gas

 

54,120,398

 

 

 

67,713,193

 

Mcfe (1)

 

72,831,764

 

 

 

89,375,221

 

Proved Undeveloped Reserves:

 

 

 

 

 

 

 

Barrels of NGL

 

32,125

 

 

 

226,038

 

Barrels of Oil

 

104,249

 

 

 

516,994

 

Mcf of Gas

 

918,319

 

 

 

12,560,713

 

Mcfe (1)

 

1,736,563

 

 

 

17,018,905

 

Total Proved Reserves:

 

 

 

 

 

 

 

Barrels of NGL

 

1,540,608

 

 

 

1,973,280

 

Barrels of Oil

 

1,714,327

 

 

 

2,380,090

 

Mcf of Gas

 

55,038,717

 

 

 

80,273,906

 

Mcfe (1)

 

74,568,327

 

 

 

106,394,126

 

 

 

 

 

 

 

 

 

10% Discounted Estimated Future

 

 

 

 

 

 

 

Net Cash Flows (before income taxes):

 

 

 

 

 

 

 

Proved Developed

$

58,631,849

 

 

$

86,814,212

 

Proved Undeveloped

 

4,080,453

 

 

 

23,581,427

 

Total

$

62,712,302

 

 

$

110,395,639

 

SEC Pricing

 

 

 

 

 

 

 

Oil/Barrel

$

53.10

 

 

$

54.40

 

Gas/Mcf

$

1.90

 

 

$

2.48

 

NGL/Barrel

$

15.31

 

 

$

19.30

 

 

 

 

 

 

 

 

 

Proved Reserves - Projected Future Pricing (2)

 

 

 

 

 

 

 

 

 

10% Discounted Estimated Future

Proved Reserves

 

Net Cash Flows (before income taxes):

March 31, 2020

 

 

Sept. 30, 2019

 

Proved Developed

$

55,461,699

 

 

$

99,204,697

 

Proved Undeveloped

 

3,371,650

 

 

 

27,518,415

 

Total

$

58,833,349

 

 

$

126,723,112

 

 

 

 

 

 

 

 

 

(1) Crude oil and NGL converted to natural gas on a one barrel of crude oil or NGL equals six Mcf of natural gas basis

 

(2) Projected futures pricing as of March 31, 2020, and Sept. 30, 2019, basis adjusted to Company wellhead price

 

 

Hedge Position as of May 1, 2020

Period

 

Product

 

Volume Mcf/Bbl

 

 

Swap Price

 

 

Collar Average Floor Price

 

 

Collar Average Ceiling Price

 

2020

 

Natural Gas

 

 

240,000

 

 

 

 

 

 

$

2.28

 

 

$

2.89

 

2020

 

Natural Gas

 

 

720,000

 

 

$

2.72

 

 

 

 

 

 

 

 

 

2021

 

Natural Gas

 

 

1,080,000

 

 

 

 

 

 

$

2.30

 

 

$

2.99

 

2021

 

Natural Gas

 

 

600,000

 

 

$

2.73

 

 

 

 

 

 

 

 

 

2022

 

Natural Gas

 

 

100,000

 

 

$

2.73

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

2020

 

Crude Oil

 

 

30,000

 

 

 

 

 

 

$

58.00

 

 

$

65.83

 

2020

 

Crude Oil

 

 

84,000

 

 

$

58.01

 

 

 

 

 

 

 

 

 

2021

 

Crude Oil

 

 

96,000

 

 

$

37.00

 

 

 

 

 

 

 

 

 

Non-GAAP Reconciliation

This news release includes certain “non-GAAP financial measures” under the rules of the Securities and Exchange Commission, including Regulation G. These non-GAAP measures are calculated using GAAP amounts in our financial statements.

Adjusted EBITDA Reconciliation

Adjusted EBITDA is defined as net income (loss) plus interest expense, provision for impairment, depreciation, depletion and amortization of properties and equipment, including amortization of other assets, provision (benefit) for income taxes and unrealized (gains) losses on derivative contracts. We have included a presentation of adjusted EBITDA because we recognize that certain investors consider adjusted EBITDA a useful means of measuring our ability to meet our debt service obligations and evaluating our financial performance. Adjusted EBITDA has limitations and should not be considered in isolation or as a substitute for net income, operating income, cash flow from operations or other consolidated income or cash flow data prepared in accordance with GAAP. Because not all companies use identical calculations, this presentation of adjusted EBITDA may not be comparable to a similarly titled measure of other companies. The following table provides a reconciliation of net income (loss) to adjusted EBITDA for the periods indicated.

 

Second Quarter Ended

 

 

Second Quarter Ended

 

 

Six Months Ended

 

 

Six Months Ended

 

 

March 31, 2020

 

 

March 31, 2019

 

 

March 31, 2020

 

 

March 31, 2019

 

Net Income (Loss)

$

(19,973,170

)

 

$

(1,931,334

)

 

$

(18,081,056

)

 

$

10,804,606

 

Plus:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

    Unrealized (gains) losses on derivatives

 

(3,442,438

)

 

 

1,974,959

 

 

 

(1,722,771

)

 

 

(4,231,222

)

    Income Tax Expense (Benefit)

 

(6,764,000

)

 

 

(130,000

)

 

 

(6,510,000

)

 

 

3,441,000

 

    Interest Expense

 

346,573

 

 

 

485,784

 

 

 

717,238

 

 

 

1,025,154

 

    DD&A

 

3,373,518

 

 

 

3,623,976

 

 

 

6,329,219

 

 

 

7,437,662

 

    Impairment

 

29,545,702

 

 

 

-

 

 

 

29,545,702

 

 

 

-

 

Adjusted EBITDA

$

3,086,185

 

 

$

4,023,385

 

 

$

10,278,332

 

 

$

18,477,200

 

Adjusted Pre-Tax Net Income (Loss) Reconciliation

Adjusted pre-tax net income (loss) is defined as net income (loss) plus provision for impairment, provision (benefit) for income taxes and unrealized (gains) losses on derivative contracts. We have included a presentation of adjusted pre-tax net income (loss) because we recognize that certain investors consider adjusted pre-tax net income (loss) a useful means of evaluating our financial performance. Adjusted pre-tax net income (loss) has limitations and should not be considered in isolation or as a substitute for net income, operating income, cash flow from operations or other consolidated income or cash flow data prepared in accordance with GAAP. Because not all companies use identical calculations, this presentation of adjusted pre-tax net income (loss) may not be comparable to a similarly titled measure of other companies. The following table provides a reconciliation of net income (loss) to adjusted pre-tax net income (loss) for the periods indicated.

 

Second Quarter Ended

 

 

Second Quarter Ended

 

 

Six Months Ended

 

 

Six Months Ended

 

 

March 31, 2020

 

 

March 31, 2019

 

 

March 31, 2020

 

 

March 31, 2019

 

Net Income (Loss)

$

(19,973,170

)

 

$

(1,931,334

)

 

$

(18,081,056

)

 

$

10,804,606

 

Plus:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Impairment

 

29,545,702

 

 

 

-

 

 

 

29,545,702

 

 

 

-

 

Unrealized (gains) losses on derivatives

 

(3,442,438

)

 

 

1,974,959

 

 

 

(1,722,771

)

 

 

(4,231,222

)

   Income Tax Expense (Benefit)

 

(6,764,000

)

 

 

(130,000

)

 

 

(6,510,000

)

 

 

3,441,000

 

Adjusted Pre-Tax Net Income (Loss)

$

(633,906

)

 

$

(86,375

)

 

$

3,231,875

 

 

$

10,014,384

 

Panhandle Oil and Gas Inc. (NYSE: PHX) Oklahoma City-based, Panhandle Oil and Gas Inc. is an oil and natural gas mineral company with a strategy to proactively pursue the acquisition of additional minerals in our core areas of focus. Panhandle owns approximately 258,000 net mineral acres principally located in Oklahoma, North Dakota, Texas, New Mexico and Arkansas. Approximately 71% of this mineral count is unleased and undeveloped. Additional information on the Company can be found at www.panhandleoilandgas.com.

Cautionary Statement Regarding Forward-Looking Statements

 This press release 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. Words such as “anticipates,” “plans,” “estimates,” “believes,” “expects,” “intends,” “will,” “should,” “may” and similar expressions may be used to identify forward-looking statements. Forward-looking statements are not statements of historical fact and reflect Panhandle’s current views about future events. Forward-looking statements may include, but are not limited to, statements relating to: our future financial and operating results; our ability to execute our business strategies; estimations and the respective values of oil, NGL and natural gas reserves; the level of production on our properties and the future expenses associated therewith; projections and volatility of future realized oil and natural gas prices; planned capital expenditures associated with our mineral, leasehold and non-operated working interests; statements concerning anticipated cash flow and liquidity; and our 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. Such forward-looking statements are subject to a number of assumptions, risks and uncertainties, many of which are beyond the control of the Company. These forward-looking statements involve certain risks and uncertainties that could cause the results to differ materially from those expected by the Company’s management. Information concerning these risks and other factors can be found in the Company’s filings with the Securities and Exchange Commission, including its Annual Reports on Form 10-K and Quarterly Reports on Form 10-Q, available on the Company's website or the SEC’s website at www.sec.gov.

 Investors are cautioned that any such statements are not guarantees of future performance and that actual results or developments may differ materially from those projected in forward-looking statements. The forward-looking statements in this press release are made as of the date hereof, and the Company does not undertake any obligation to update the forward-looking statements as a result of new information, future events or otherwise.