Panhandle Oil and Gas Inc. Announces Sept. 30, 2013, Reserves and Operations Update

OKLAHOMA CITY, Nov. 5, 2013 /PRNewswire/ -- PANHANDLE OIL AND GAS INC. (NYSE: PHX), "the Company," a non-operating independent oil and natural gas company with reserves and production primarily in the Mid-Continent region, today announced estimated total proved reserve volumes for the Company's fiscal year ended Sept. 30, 2013. Additional information on the Company can be found at www.panhandleoilandgas.com.

2013 Reserve Highlights

  • Total proved reserves increase 22% to 151.8 Bcfe at Sept. 30, 2013
  • Proved oil reserves grow 53% and NGL reserves grow 105%
  • Proved reserves continue to grow at a compound annual growth rate of 24% since 2006 strategy change

Total Proved Reserves Increase 22%

Panhandle's estimated total proved reserves at Sept. 30, 2013, increased 22% to 151.8 Bcfe from 124.7 Bcfe reported for Sept. 30, 2012, based on SEC mandated pricing. The Sept. 30, 2013, wellhead prices of $3.33 per Mcf of natural gas, $89.06 per barrel of oil and $27.28 per barrel of natural gas liquids (NGL) compare to Sept. 30, 2012, prices of $2.51 per Mcf of natural gas, $89.41 per barrel of oil and $35.70 per barrel of NGL. Panhandle's total estimated proved reserves are approximately 87% natural gas, 7% oil and 6% NGL. The Sept. 30, 2013 and 2012, proved reserves were calculated by the independent petroleum engineering consulting firm DeGolyer and MacNaughton.

Panhandle's increased drilling activity over the last 24 months in several plays in Western Oklahoma and the Texas Panhandle has resulted in significant increases in oil, NGL and natural gas production along with the addition of material new reserves for the Company. During fiscal 2013 the Company's oil reserves increased 53%, NGL reserves increased 105% and natural gas reserves increased 17%.

At Sept. 30, 2013, approximately 61% of total proved reserves, or 93.1 Bcfe, are categorized as proved developed reserves as compared to 73.8 Bcfe at Sept. 30, 2012. Thirty-nine percent, or 58.7 Bcfe of total proved reserves, are categorized as proved undeveloped (PUD) at Sept. 30, 2013, as compared to 41%, or 50.9 Bcfe, of PUD reserves at Sept. 30, 2012.

Since operating strategy changes in fiscal 2006, Panhandle's total proved reserves have grown 343% from 34.3 Bcfe to 151.8 Bcfe, a compound annual growth rate of 24%. This increase in reserves was accomplished principally from internally generated cash flow as debt increased by only $5 million during the period, ending at $8.3 million on Sept. 30, 2013, and the Company still has never issued shares in a secondary offering.

Management Comments

Michael C. Coffman, Panhandle's President and CEO said: "Fiscal 2013 increases of 22% in total proved reserves, 53% in proved oil reserves and 105% in proved NGL reserves were accomplished through utilization of operating cash flow to fund drilling operations on existing mineral acreage and leasehold. Panhandle's ongoing commitment to its core operating strategy of taking working interests in economically viable wells drilled on owned mineral acreage continues to maximize the value of our assets, thus increasing shareholder value.

We are continuing our drilling focus in fiscal 2014 on oil and NGL rich plays. As we are in an enviable financial position, with debt currently standing at less than $4 million, we will continue to deploy the capital necessary to take full advantage of all drilling opportunities that are expected to generate acceptable rates-of-return for the Company."

Paul F. Blanchard, Panhandle's Sr. Vice-President and COO added: "Horizontal drilling and advances in completion technology have led to a renaissance of oil drilling in the Anadarko and Ardmore Basins of Oklahoma and the Texas Panhandle. This activity has resulted in several new oil plays on Panhandle's mineral acreage.

The oil and NGL production and reserve growth experienced by Panhandle in 2013 is primarily the result of horizontal drilling in four plays in western Oklahoma and the Texas Panhandle, as well as in the southern Oklahoma Woodford Shale plays. These plays hold significant quantities of oil, NGL and natural gas reserves and have substantial development drilling opportunities remaining. The areas of focus for Panhandle are a Cleveland oil play in northern Hemphill County, Texas, two Marmaton/Cleveland oil plays in Ellis and Roger Mills County, Okla., the Hogshooter/Granite Wash oil play in Beckham County, Okla. and the Woodford Shale oil plays in the southern Anadarko and Ardmore Basins of southern Oklahoma. To a lesser extent, Panhandle is active in oil drilling in focused areas of the Permian Basin, the North Dakota Bakken and the Northern Oklahoma Mississippian/Woodford. Natural gas production growth in 2013 was primarily driven by development drilling in the prolific core of the Arkansas Fayetteville Shale where good well performance combined with relatively low well costs result in reasonable returns at current NYMEX strip pricing.

Once again, Panhandle is generating superior economics and profitability in these plays by taking a working interest in wells drilled on our perpetual mineral acreage. We have no current acreage costs in these plays and our mineral acreage ownership also generates a non-cost-bearing royalty revenue stream in addition to our working interest revenues. In 2013, Panhandle continued to build a diverse opportunity set across multiple states and basins for future oil, NGL and natural gas production and reserve growth while maintaining our focus of creating shareholder value."

Proved Reserves – SEC Flat Pricing



Proved Reserves SEC Pricing





Sept. 30, 2013


Sept. 30, 2012


% Change

Proved Developed Reserves:







Barrels of NGL

764,321


494,160


55%


Barrels of Oil

1,037,721


849,548


22%


Mcf of Gas

82,298,833


65,733,119


25%


Mcfe (1)

93,111,085


73,795,367


26%

Proved Undeveloped Reserves:







Barrels of NGL

851,805


294,582


189%


Barrels of Oil

605,582


222,771


172%


Mcf of Gas

49,990,334


47,780,937


5%


Mcfe (1)

58,734,656


50,885,055


15%

Total Proved Reserves:







Barrels of NGL

1,616,126


788,742


105%


Barrels of Oil

1,643,303


1,072,319


53%


Mcf of Gas

132,289,167


113,514,056


17%


Mcfe (1)

151,845,741


124,680,422


22%








10% Discounted Estimated Future






Net Cash Flows (before income taxes):







Proved Developed

$125,186,445


$87,587,058




Proved Undeveloped

51,276,694


27,151,132




Total

$176,463,139


$114,738,190



SEC Pricing







Oil/Barrel

$89.06


$89.41




Gas/Mcf

$3.33


$2.51




NGL/Barrel

$27.28


$35.70



(1)

 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.

Probable and Possible Reserves

DeGolyer and MacNaughton also prepared estimates of the Company's probable and possible undeveloped reserves utilizing NYMEX futures pricing.

Estimated Net Probable and Possible Reserves

NYMEX Futures Pricing (2)



Sept. 30, 2013

Probable Reserves:



Barrels of NGL

1,389,560


Barrels of Oil

226,516


Mcf of Gas

177,830,667


Mcfe (1)

187,527,123

10% Discounted Estimated Future


Net Cash Flows (before income taxes)

$60,953,455




Possible Reserves:



Barrels of NGL

1,927,146


Barrels of Oil

747,018


Mcf of Gas

169,491,034


Mcfe (1)

185,536,018

10% Discounted Estimated Future


Net Cash Flows (before income taxes)

$64,120,945

 

Proved Reserves – NYMEX Futures Pricing (2)

10% Discounted Estimated Future


Proved Reserves

Net Cash Flows (before income taxes)


Sept. 30, 2013

Proved Developed


$144,432,557

Proved Undeveloped


63,586,718

Total


$208,019,275

(1)

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.

(2)

Nymex Futures Pricing as of Sept. 30, 2013, basis adjusted to Company wellhead price

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

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 2012 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.



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http://www.panhandleoilandgas.com

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