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Panhandle Oil And Gas Inc. Announces Sept. 30, 2012, Reserves and an Operations Update

OKLAHOMA CITY, Nov. 7, 2012 /PRNewswire/ -- PANHANDLE OIL AND GAS INC. (NYSE-PHX-News, "the Company"), a growing non-operating independent oil and natural gas company with reserves and production primarily in the Arkansas Fayetteville Shale, the Southeastern Oklahoma Woodford Shale, the Anadarko Basin (Cana) Woodford Shale and several Western Oklahoma liquid-rich plays, including the Granite Wash, today announced estimated total proved reserve volumes for the Company's fiscal year ended Sept. 30, 2012. Additional information on the Company can be found at www.panhandleoilandgas.com.

Total Proved Reserves Increase 12%

Panhandle's estimated total proved reserves at Sept. 30, 2012, increased 12% to 124.7 Bcfe from 111.7 Bcfe reported for Sept. 30, 2011, based on SEC mandated pricing. The Sept. 30, 2012, wellhead prices of $2.51 per Mcf of natural gas, $89.41 per barrel of oil and $35.70 per barrel of natural gas liquids (NGL) compare to Sept. 30, 2011, prices of $3.81 per Mcf of natural gas, $90.28 per barrel of oil and $38.91 per barrel of NGL in the 2011 report. Panhandle's increased drilling activity over the last 24 months in several plays in Western Oklahoma and the Texas Panhandle which produce significant oil and NGL, have resulted in meaningful increases in oil and NGL production and the discovery of new reserves for the Company. The increased NGL production necessitated inclusion, for the first time, of the NGL volumes in the reserve calculations for fiscal year end 2011. Panhandle's total estimated proved reserves are approximately 91% natural gas, 5% oil and 4% NGL. The Sept. 30, 2012 and 2011, proved reserves were calculated by the independent petroleum engineering consulting firm DeGolyer and MacNaughton.

At Sept. 30, 2012, approximately 59% of total proved reserves, or 73.8 Bcfe, are categorized as proved developed reserves as compared to 67.1 Bcfe at Sept. 30, 2011. Forty-one percent, or 50.1 Bcfe of total proved reserves, are categorized as proved undeveloped (PUD) at Sept. 30, 2012, as compared to 44.6 Bcfe of total PUD reserves at Sept. 30, 2011. As a result of several years of drilling activity in the Company's shale plays, Panhandle's PUD reserves reflect a substantial number of drilling locations resulting from the continuing delineation of these plays. In addition, the continuing increased lateral length and other advances in well completion technology have increased reserves per well in these plays, especially in the core of the plays where most of the current drilling is taking place.

Since operating strategy changes in fiscal 2006, Panhandle's total proved reserves have grown 264% from 34.3 Bcfe to 124.7 Bcfe, at a compound annual growth rate of 24%. This year's growth in proved reserves benefited from the acquisitions made in the Arkansas Fayetteville Shale and another year of active drilling on the Company's mineral and leasehold acreage. However, significant downward revisions in natural gas reserves, resulting from the lower SEC mandated natural gas price utilized in the Sept. 30, 2012, reserve report, offset some of these gains in reserve volumes.



Proved Reserves



SEC Pricing



Sept. 30, 2012


Sept. 30, 2011

Proved Developed Reserves:





Barrels of NGL (1) (2)

494,160


386,774


Barrels of Oil

849,548


759,989


Mcf of Gas

65,733,119


60,193,878


Mcfe (2)

73,795,367


67,074,456

Proved Undeveloped Reserves:





Barrels of NGL (1) (2)

294,582


404,874


Barrels of Oil

222,771


83,749


Mcf of Gas

47,780,937


41,644,106


Mcfe (2)

50,885,055


44,575,844

Total Proved Reserves:





Barrels of NGL (1) (2)

788,742


791,648


Barrels of Oil

1,072,319


843,738


Mcf of Gas

113,514,056


101,837,984


Mcfe (2)

124,680,422


111,650,300






10% Discounted Estimated Future




Net Cash Flows (before income taxes):





Proved Developed

$87,587,058


$106,464,138


Proved Undeveloped

27,151,132


29,977,891


Total

$114,738,190


$136,442,029

SEC Pricing





Oil/Barrel

$89.41


$90.28


Gas/Mcf

$2.51


$3.81


NGL/Barrel

$35.70


$38.91

(1)

2011 was the first year the Company had sufficient volumes of NGL to warrant reserve volumes disclosure. These NGL are associated with a rapid increase in drilling activity in western Oklahoma, which includes many plays producing significant volumes of NGL.

(2)

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.

Mcf:

thousand cubic feet of natural gas

Bcfe:

billion cubic feet of natural gas equivalent

Mcfe:

thousand cubic feet of natural gas equivalent

NGL:

natural gas liquids

Probable and Possible Reserves

DeGolyer and MacNaughton prepared estimates of the Company's probable and possible undeveloped reserves for certain interests owned in the two Woodford Shale plays in Oklahoma, the Fayetteville Shale in Arkansas and the Granite Wash play in Western Oklahoma as follows:



Estimated Net Probable and Possible Reserves



NYMEX Strip Pricing (3)



Sept. 30, 2012


Sept. 30, 2011

Probable Reserves:





Barrels of NGL

1,012,797


416,435


Barrels of Oil

127,090


124,409


Mcf of Gas

149,600,687


121,843,848


Mcfe

156,440,009


125,088,912

Possible Reserves:





Barrels of NGL

893,328


865,681


Barrels of Oil

379,225


430,055


Mcf of Gas

153,297,445


166,988,730


Mcfe

160,932,763


174,763,143

(3)

Nymex Strip Pricing as of Sept. 30, 2012, basis adjusted

Management Comments

Michael C. Coffman, Panhandle's President and CEO said: "Fiscal 2012 increases in reserves are principally the result of the purchase of Fayetteville Shale assets which included interests in 193 producing wells and 1,531 net acres of leasehold and Panhandle's continuing commitment to its operating strategy of taking working interests in wells drilled on our mineral acreage to maximize the value of the underlying hydrocarbon assets for our shareholders. This strategy continues to add to and build on the Company's reserve base year over year. We expect to continue to expand our reserve base and increase production volumes in fiscal 2013 by drilling on our existing minerals and leasehold. Mineral acreage or producing property acquisitions would further add to this growth. We currently project our 2013 capital expenditure level for drilling and completions to be marginally higher than 2012 and equally split between oily and natural gas liquids projects in Western Oklahoma and the Texas Panhandle and projects in the prolific core of the Fayetteville Shale in Arkansas. Our experienced management team will continue to deploy capital in projects with proven and efficient operators in plays that are expected to maximize rates-of-return to Panhandle. We will also continue to search for acquisitions that will be additive to the Company's per share value."

Paul F. Blanchard, Panhandle's Sr. Vice-President and COO added: "Panhandle's ownership of approximately 255,000 broadly diversified fee mineral acres continues to provide an excellent foundation for sustained high quality proved and 3P (proved, probable and possible) reserve growth, which reached a record high of 442.1 Bcfe. In addition to the proved and 3P reserve growth, the quality of these reserves has been substantially enhanced again for year-end 2012 with the percentage of proved and probable reserves increasing significantly to 64% of total 3P reserves versus 58% of total 3P reserves for year-end 2011. Based on current and anticipated drilling activity, the Company expects that the growth of proved and 3P reserves with an overall enhancement of 3P reserve quality will continue.

During fiscal 2012, the Company continued participating in high-quality, low-cost dry gas drilling by allocating approximately 47% of the year's approved capital to that component, principally in the core of the Fayetteville Shale.  The remaining 53% of fiscal 2012 approved capital expenditures were allocated predominately to oil and natural gas liquids rich horizontal drilling in the Granite Wash, Cleveland, Marmaton and Tonkawa plays in Western Oklahoma and the Texas Panhandle, as well as activity in the Spraberry and Yeso in West Texas and New Mexico. This focus on oil drilling by the Company in 2012 led to an increase in proved oil reserves of approximately 229,000 Bbls or a 27.1% increase for year end 2012 as compared to year end 2011."

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 2011 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; our hedging activities may reduce the realized prices received for natural gas sales; the volatility of oil and gas prices; Panhandle'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; 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 we cannot 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.  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.

SOURCE Panhandle Oil and Gas Inc.



RELATED LINKS
http://www.panhandleoilandgas.com

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