Mexco Energy Corporation Reports Profitable Second Quarter

Nov 16, 2010, 17:03 ET from Mexco Energy Corporation

MIDLAND, Texas, Nov. 16, 2010 /PRNewswire-FirstCall/ -- Mexco Energy Corporation (Amex: MXC) today reported net income of $70,040 for the quarter ending September 30, 2010, the Company's second quarter of fiscal 2011, compared to a net income of $158,350 for the same quarter of fiscal 2010.  

Operating revenues in the second quarter of fiscal 2011 were $788,639, an increase of $42,345 or 6% from $746,294 for the first quarter of fiscal 2010.

The average sales price for the quarter ending September 30, 2010 was $5.49 per Mcfe compared to $4.24 per Mcfe for the quarter ending September 30, 2009, an increase of 29%.  Oil production increased 2% and gas production decreased 22% during the second quarter of fiscal 2011 as compared to the second quarter of fiscal 2010.  This decrease in gas production is attributable to natural decline and certain production shut-in for repairs and maintenance.  

During the quarter ended September 30, 2010, the Company made two significant acquisitions including overriding royalty interests averaging .28% in 5,120 gross acres covering eight sections in the Haynesville trend area of DeSoto Parish, Louisiana, for an approximate purchase price of $1.65 million.  This acreage currently contains five (5) horizontal wells producing from the Haynesville Shale formation and an additional 59 potential drill sites.  Most of the wells will be operated by Petrohawk Operating Company with the balance operated by Chesapeake Energy.  Other wells drilled in the Haynesville area show the presence of at least two (2) other potential producing zones, the Bossier and Cotton Valley, which are held by production and available for development as conditions warrant.  Any development of these royalties will be free to Mexco of expenses for drilling and operations.  The Haynesville area has been estimated to become the largest gas resource in the United States and the fourth largest in the world subject to realization of technical estimates, according to World Oil in its June 2010 edition.  World Oil recognizes DeSoto Parish as one of the top six (6) parishes of Louisiana where the most productive Haynesville wells are located.  

Also during the second quarter of fiscal 2011, the Company acquired all of the outstanding stock of a Texas corporation which owns royalties producing primarily natural gas for a purchase price of $478,000.  These royalties consist of over 200 properties covering 60 counties and parishes in Oklahoma, Texas, Louisiana, New Mexico, Mississippi and Alabama.  

For the six months ended September 30, 2010, the Company reported net income of $75,816, compared to $90,347 for the same period of fiscal 2010.  Operating revenues increased 16% to $1,625,032 for the six months ended September 30, 2010 from $1,404,471 for the same period of fiscal 2010.  

Mexco Energy Corporation owns oil and gas properties in twelve states, with the majority of its activity centered in West Texas.  The Company plans to continue to focus its efforts to increase oil and natural gas reserves through exploration and development as well as acquisition of royalties with significant development potential.

Mexco Energy Corporation and Subsidiaries

CONSOLIDATED BALANCE SHEETS

September 30,

March 31,

2010

2010

(Unaudited)

ASSETS

Current assets

Cash and cash equivalents

$      142,760

$      160,439

Accounts receivable:

Oil and gas sales

402,436

538,444

Trade

31,855

63,455

Related parties

-

55

Prepaid costs and expenses

111,471

17,161

Total current assets

688,522

779,554

Property and equipment, at cost

Oil and gas properties, using the full cost method

29,604,335

27,353,016

Other

78,520

76,161

29,682,855

27,429,177

Less accumulated depreciation, depletion and amortization

14,698,342

14,179,156

Property and equipment, net

14,984,513

13,250,021

$ 15,673,035

$ 14,029,575

LIABILITIES AND STOCKHOLDERS' EQUITY

Current liabilities

Accounts payable and accrued expenses

$      266,875

$      301,160

Long-term debt

2,150,000

700,000

Asset retirement obligation

511,343

486,305

Deferred income tax liabilities

802,597

902,757

Commitments and contingencies

Stockholders' equity

Preferred stock - $1.00 par value;

10,000,000 shares authorized; none outstanding

-

-

Common stock - $0.50 par value; 40,000,000 shares authorized;

2,006,366 and 2,003,866 shares issued;

1,949,199 and 1,919,866 shares outstanding as of

September 30, 2010 and March 31, 2010, respectively

1,003,183

1,001,933

Additional paid-in capital

5,997,423

5,907,899

Retained earnings

5,231,954

5,156,138

Treasury stock, at cost (57,167 and 84,000 shares as of

September 30, 2010 and March 31, 2010, respectively)

(290,340)

(426,617)

Total stockholders' equity

11,942,220

11,639,353

$ 15,673,035

$ 14,029,575

Mexco Energy Corporation and Subsidiaries

CONSOLIDATED STATEMENTS OF OPERATIONS

(Unaudited)

Three Months Ended

Six Months Ended

September 30

September 30

2010

2009

2010

2009

Operating revenue:

Oil and gas

$  783,990

$  737,944

$1,616,000

$1,391,754

Other

4,649

8,350

9,032

12,717

Total operating revenues

788,639

746,294

1,625,032

1,404,471

Operating expenses:

Production

253,138

269,251

621,365

510,224

Accretion of asset retirement obligation

8,544

7,879

16,974

15,607

Depreciation, depletion, and amortization

267,691

275,072

519,186

538,534

General and administrative

199,544

198,229

447,683

430,414

Total operating expenses

728,917

750,431

1,605,208

1,494,779

Operating profit (loss)

59,722

(4,137)

19,824

(90,308)

Other income (expenses):

Interest income

22

61

26

227

Interest expense

(6,857)

(8,737)

(10,196)

(18,361)

Net other expense

(6,835)

(8,676)

(10,170)

(18,134)

Earnings (loss) before provision for income taxes

52,887

(12,813)

9,654

(108,442)

Income tax expense (benefit):

Current

33,998

-

33,998

-

Deferred

(51,151)

(171,163)

(100,160)

(198,789)

(17,153)

(171,163)

(66,162)

(198,789)

Net income

$    70,040

$  158,350

$     75,816

$     90,347

Earnings per common share:

Basic

$        0.04

$        0.08

$         0.04

$         0.05

Diluted

$        0.04

$        0.08

$         0.04

$         0.05

Weighted average common shares outstanding:

Basic

1,935,199

1,883,248

1,928,711

1,880,944

Diluted

1,945,893

1,942,514

1,946,420

1,945,702

In accordance with the Safe Harbor provisions of the Private Securities Litigation Reform Act of 1995, Mexco Energy Corporation cautions that statements in this press release which are forward-looking and which provide other than historical information involve risks and uncertainties that may impact the Company's actual results of operations. These risks include, but are not limited to, production variance from expectations, volatility of oil and gas prices, the need to develop and replace reserves, exploration risks, uncertainties about estimates of reserves, competition, government regulation, and mechanical and other inherit risks associated with oil and gas production.  A discussion of these and other factors, including risks and uncertainties, is set forth in the Company's Form 10-K for the fiscal year ended March 31, 2010.  Mexco Energy Corporation disclaims any intention or obligation to revise any forward-looking statements.

For additional information, please contact:  Nicholas C. Taylor, President and Chief Executive Officer or Tammy L. McComic, Executive Vice President and Chief Financial Officer, both of Mexco Energy Corporation, (432) 682-1119.

SOURCE Mexco Energy Corporation