Panhandle Oil And Gas Inc. Reports Fiscal 2015 Financial Results

Records Fiscal 2015 Net Income of $9,321,341 ($0.56 per share)

Dec 10, 2015, 16:10 ET from PANHANDLE OIL AND GAS INC.

OKLAHOMA CITY, Dec. 10, 2015 /PRNewswire/ -- PANHANDLE OIL AND GAS INC., the "Company," (NYSE: PHX) today reported financial and operating results for the fiscal year ended Sept. 30, 2015, and for the fiscal fourth quarter, as well as provided an update on its bank line-of-credit borrowing base.

HIGHLIGHTS FOR THE YEAR ENDED SEPT. 30, 2015

  • Recorded fiscal year 2015 net income of $9,321,341, 0.56 per share, compared to a net income of $25,001,462, 1.49 per share, for fiscal 2014.
  • Posted total fiscal 2015 production of 13.7 billion cubic feet equivalent (Bcfe).
  • Increased fiscal year 2015 oil production 31% over 2014 volumes.
  • Generated cash from operating activities of $45.6 million for the year, well in excess of capital expenditures of $30.8 million.
  • Reduced debt $13 million during fiscal 2015.

Fiscal Year 2015 Results

For fiscal 2015, the Company recorded net income of $9,321,341, or $0.56 per share. This compared to net income of $25,001,462, or $1.49 per share, for fiscal 2014. Net cash provided by operating activities decreased 13% to $45.6 million for 2015 versus 2014, well in excess of capital expenditures in fiscal 2015, which totaled $30.8 million.

Total revenues for 2015 were $70,882,093, a decrease of 16% from $84,411,224 for 2014. Oil, NGL and natural gas sales revenues decreased $28,312,614 or 34% in 2015, as compared to 2014. This revenue decrease was a result of decreased oil, NGL and natural gas prices of 43%, 44% and 33%, respectively, and a 10% decrease in natural gas production, partially offset by increased oil and NGL production volumes of 31% and 2%, respectively. Overall results were a 3% decrease in Mcfe production volumes and a 32% decrease in the average sales price per Mcfe to $3.97, as compared to $5.88 in 2014.

Gains on derivative contracts in 2015 totaled $13.8 million in 2015 as compared to $.2 million in 2014.  The majority of these gains were for oil contracts put in place in fiscal 2014 to protect prices received for production from the Eagle Ford Shale properties.

Oil production increased 31% in 2015 to 453,125 barrels from 346,387 barrels in 2014; while gas production decreased 10% to 9,745,223 Mcf. Production from the Eagle Ford was principally responsible for the increased oil volumes. In addition, 210,960 barrels of NGL were produced in fiscal 2015, which was a 2% increase versus 2014. The decline in natural gas production was principally a result of natural decline in production from the Company's Fayetteville Shale properties and significantly reduced natural gas drilling and completion activity Company wide.

Total costs and expenses increased $9.1 million or 19% in 2015 as compared to 2014. $3.6 million of the expense increase was in lease operating expenses, as we add additional wells to our producing inventory each year. For the last several years, the majority of wells added have been oil and NGL rich wells, particularly the Eagle Ford wells, which have higher operating costs than dry gas wells. DD&A per Mcfe of production for 2015 was $1.74, as compared to $1.55 in 2014, which resulted in an increase of $2.5 million in DD&A expense in 2015. Offsetting this was a decrease of $.6 million due to a 3% decrease in oil, NGL and natural gas production volumes collectively in 2015, compared to 2014. The rate increase was principally due to lower projected remaining reserve volumes brought about by lower product prices shortening the economic lives of many wells. A further impact of lower product prices in 2015, as compared to 2014, was an increase of $3.9 million in the provision for impairment to $5.0 million.  A significant number of smaller fields, primarily in Oklahoma, Kansas and Texas were responsible for the 2015 impairment charges.

Fiscal Fourth Quarter 2015 Results

For the 2015 fourth quarter, the Company recorded a net loss of $887,681, or $0.05 per share. This compared to net income of $9,297,986, or $0.55 per share, for the 2014 fourth quarter. Net cash provided by operating activities decreased 49% to $8,223,212 for the 2015 fourth quarter versus the 2014 fourth quarter. Fourth quarter 2015 cash from operating activities again exceeded costs to drill and equip wells of $7,187,276.

Total revenues for the 2015 fourth quarter were $13,455,001, a decrease of 52% from $27,887,445 for the 2014 quarter. Oil, NGL and gas sales revenue decreased $12,597,524, or 53% in the 2015 quarter, as compared to the 2014 quarter. This revenue decrease was a result of decreased oil, NGL and natural gas volumes of 11%, 15% and 16%, respectively, and decreased oil, NGL and natural gas prices of 52%, 54% and 37%, respectively. Average sales price per Mcfe of production during the 2015 fourth quarter was $3.46, a 45% decrease from $6.27 in the 2014 fourth quarter. Oil production decreased in the 2015 quarter to 112,237 barrels, versus 126,256 barrels in the 2014 quarter, while gas production decreased 16% to 2,261,236 Mcf, and NGL production decreased 15% to 47,738 barrels. Natural decline and significantly reduced capital expenditures to drill and complete new wells combined to reduce production volumes. Costs and expenses were flat quarter to quarter. Additionally, gains on derivative contracts were $2.1 million in the 2015 quarter compared to $3.8 million in the 2014 quarter.

Bank Line-of-Credit Update

On December 10, 2015, Panhandle's bank line-of-credit borrowing base was set at $100 million. This compares to a current outstanding balance of $59.5 million. Availability under the line of $40.5 million is well in excess of projected needs. Based on currently expected product prices, the Company anticipates funding normal operations in 2016 from internally generated cash flow.

Management Comments

Michael C. Coffman, President and CEO, said, "It goes without saying that fiscal 2015 was an extremely difficult year in the energy industry. Both oil and natural gas prices were significantly reduced from 2014 average levels, and capital expenditure levels to drill wells were materially constrained as well. As has been Panhandle's philosophy for many years, we chose the conservative path, spending only cash flow and reducing debt $13 million during the year. 

"We have positioned Panhandle not only to survive this current down price cycle, but to be in a position to take advantage of opportunities that may be available should this downturn continue for an extended time. As always, we will continue to follow our proven conservative operating strategies and, coupled with patience, believe our long-term outlook is bright."

Paul Blanchard, Senior Vice President and COO, said, "Panhandle continues to maintain a consistent investment philosophy driven by a risked rate-of-return analysis of each investment opportunity. We only invest in projects that are anticipated to earn meaningful returns. For the last several years this approach led to the Company to elect to invest in 65% to 70% of well proposals received. During 2015, the Company elected to participate in only 40% of proposals received. The decline in our capital investing led to modestly lower production in 2015, as compared to 2014.

"We believe this approach will serve our shareholders well over the long term as we choose not to invest in projects that are anticipated to provide no meaningful returns at today's NYMEX futures pricing. Instead, we will preserve that capital to have it available to invest in high-quality assets that may become available at an opportune point in this downturn."

FINANCIAL HIGHLIGHTS

 

Statements of Operations

Three Months Ended Sept. 30,

Year Ended Sept. 30,

2015

2014

2015

2014

Revenues:

Oil, NGL and natural gas sales

$

11,133,075

$

23,730,599

$

54,533,914

$

82,846,528

Lease bonuses and rentals

64,652

69,906

2,010,395

423,328

Gains (losses) on derivative contracts

2,115,551

3,758,509

13,822,506

247,414

Income from partnerships

141,723

328,431

515,278

893,954

13,455,001

27,887,445

70,882,093

84,411,224

Costs and expenses:

Lease operating expenses

4,238,428

3,982,645

17,472,408

13,912,792

Production taxes

318,085

822,580

1,702,302

2,694,118

Exploration costs

36

15,877

48,404

86,017

Depreciation, depletion and amortization

6,141,070

6,334,272

23,821,139

21,896,902

Provision for impairment

1,476,431

665,933

5,009,191

1,096,076

Loss (gain) on asset sales and other

(371,408)

(22,709)

(398,994)

8,378

Interest expense

355,427

421,599

1,550,483

462,296

General and administrative

1,965,114

2,083,262

7,339,320

7,433,183

Bad debt expense (recovery)

180,499

-

180,499

-

14,303,682

14,303,459

56,724,752

47,589,762

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

 

(848,681)

 

13,583,986

 

14,157,341

 

36,821,462

Provision (benefit) for income taxes

39,000

4,286,000

4,836,000

11,820,000

Net income (loss)

$

(887,681)

$

9,297,986

$

9,321,341

$

25,001,462

Basic and diluted earnings per common share:

Net income (loss)

$

(0.05)

$

0.55

$

0.56

$

1.49

Weighted average shares outstanding:

Common shares

16,546,528

16,474,040

16,522,462

16,472,144

Unissued, vested directors' shares

251,005

258,905

246,442

255,039

16,797,533

16,732,945

16,768,904

16,727,183

Dividends declared per share of common stock and paid in period

 

$

 

0.04

 

$

 

0.04

 

$

 

0.16

 

$

 

0.16

 

Balance Sheets

Sept. 30, 2015

Sept. 30, 2014

Assets

Current Assets:

Cash and cash equivalents

$

603,915

$

509,755

Oil, NGL and natural gas sales receivables, net of allowance for uncollectable accounts

7,895,591

16,227,469

Refundable income taxes

345,897

-

Refundable production taxes

476,001

625,996

Derivative contracts, net

4,210,764

1,650,563

Other

252,016

354,828

Total current assets

13,784,184

19,368,611

Properties and equipment at cost, based on successful efforts accounting:

Producing oil and natural gas properties

441,141,337

418,237,512

Non-producing oil and natural gas properties

8,293,997

10,260,717

Furniture and fixtures

1,393,559

1,317,725

450,828,893

429,815,954

Less accumulated depreciation, depletion and amortization

(228,036,803)

(204,731,661)

Net properties and equipment

222,792,090

225,084,293

Investments

2,248,999

1,936,421

Derivative contracts, net

-

251,279

Total assets

$

238,825,273

$

246,640,604

Liabilities and Stockholders' Equity

Current Liabilities:

Accounts payable

$

2,028,746

$

7,034,773

Deferred income taxes

1,517,100

600,100

Income taxes payable

-

523,843

Accrued liabilities and other

1,330,901

1,290,858

Total current liabilities

4,876,747

9,449,574

Long-term debt

65,000,000

78,000,000

Deferred income taxes

39,118,907

37,363,907

Asset retirement obligations

2,824,944

2,638,470

Stockholders' equity:

Class A voting common stock, $.0166 par value; 24,000,000 shares authorized, 16,863,004 issued at Sept. 30, 2015 and 2014

280,938

280,938

Capital in excess of par value

2,993,119

2,861,343

Deferred directors' compensation

3,084,289

3,110,351

Retained earnings

125,446,473

118,794,188

131,804,819

125,046,820

Treasury stock, at cost; 302,623 shares at Sept. 30, 2015, and 372,364 shares at Sept. 30, 2014

(4,800,144)

(5,858,167)

Total stockholders' equity

127,004,675

119,188,653

Total liabilities and stockholders' equity

$

238,825,273

$

246,640,604

 

Condensed Statements of Cash Flows

Year ended Sept. 30,

2015

2014

Operating Activities

Net income (loss)

$

9,321,341

$

25,001,462

Adjustments to reconcile net income (loss) to net cash provided by operating activities:

Depreciation, depletion and amortization

23,821,139

21,896,902

Impairment

5,009,191

1,096,076

Provision for deferred income taxes

2,672,000

6,610,000

Exploration costs

48,404

86,017

Gain from leasing of fee mineral acreage

(2,007,993)

(422,818)

Net (gain) loss on sales of assets

-

149,062

Income from partnerships

(515,278)

(893,954)

Distributions received from partnerships

736,280

1,129,324

Common stock contributed to ESOP

185,113

341,125

Common stock (unissued) to Directors' Deferred Compensation Plan

302,353

353,825

Restricted stock awards

895,127

659,320

Bad debt expense (recovery)

180,499

-

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

Oil, NGL and natural gas sales receivables

8,151,379

(2,506,708)

Fair value of derivative contracts

(2,308,922)

(1,476,644)

Refundable income taxes

(345,897)

-

Refundable production taxes

149,995

576,537

Other current assets

102,812

(224,830)

Accounts payable

(343,186)

252,860

Income taxes payable

(523,843)

(284,149)

Accrued liabilities

40,500

279,195

Total adjustments

36,249,673

27,621,140

Net cash provided by operating activities

45,571,014

52,622,602

Investing Activities

Capital expenditures, including dry hole costs

(30,800,625)

(38,612,788)

Acquisition of working interest properties

(308,180)

(83,253,952)

Acquisition of minerals and overrides

-

(56,250)

Proceeds from leasing of fee mineral acreage

2,053,900

477,144

Investments in partnerships

(533,580)

(597,149)

Proceeds from sales of assets

-

92,000

Net cash used in investing activities

(29,588,485)

(121,950,995)

Financing Activities

Borrowings under debt agreement

25,833,116

99,846,333

Payments of loan principal

(38,833,116)

(30,108,589)

Purchases of treasury stock

(242,313)

(122,044)

Payments of dividends

(2,669,056)

(2,661,723)

Excess tax benefit on stock-based compensation

23,000

17,000

Net cash provided by (used in) financing activities

(15,888,369)

66,970,977

Increase (decrease) in cash and cash equivalents

94,160

(2,357,416)

Cash and cash equivalents at beginning of year

509,755

2,867,171

Cash and cash equivalents at end of year

$

603,915

$

509,755

Year ended Sept. 30,

2015

2014

Supplemental Disclosures of Cash Flow Information

Interest paid, net of capitalized interest

$

1,558,885

$

380,451

Income taxes paid, net of refunds received

$

3,009,939

$

5,477,147

Supplemental schedule of noncash investing and financing activities:

Additions and revisions, net, to asset retirement obligations

$

70,529

$

225,453

Gross additions to properties and equipment

$

26,183,115

$

120,284,639

Net (increase) decrease in accounts payable for properties and equipment additions

4,925,690

1,638,351

Capital expenditures, including dry hole costs

$

31,108,805

$

121,922,990

 

 

OPERATING HIGHLIGHTS

Fourth Quarter Ended

Fourth Quarter Ended

Year Ended

Year Ended

Sept. 30, 2015

Sept. 30, 2014

Sept. 30, 2015

Sept. 30, 2014

MCFE Sold

3,221,086

3,783,123

13,729,733

14,098,009

Average Sales Price per MCFE

$3.46

$6.27

$3.97

$5.88

Barrels of Oil Sold

112,237

126,256

453,125

346,387

Average Sales Price per Barrel

$44.18

$91.83

$53.12

$93.68

MCF of Natural Gas Sold

2,261,236

2,690,493

9,745,223

10,773,559

Average Sales Price per MCF

$2.43

$3.88

$2.73

$4.05

Barrels of NGL Sold

47,738

55,849

210,960

207,688

Average Sales Price per Barrel

$14.10

$30.48

$18.25

$32.31

 

Quarterly Production Levels

Quarter ended

Oil Bbls Sold

MCF Sold

NGL Bbls Sold

MCFE Sold

9/30/15

112,237

2,261,236

47,738

3,221,086

6/30/15

109,738

2,407,049

41,737

3,315,899

3/31/15

114,567

2,475,777

48,681

3,455,265

12/31/14

116,583

2,601,161

72,804

3,737,483

9/30/14

126,256

2,690,493

55,849

3,783,123

6/30/14

70,479

2,508,346

63,029

3,309,394

3/31/14

66,239

2,788,768

51,670

3,496,222

12/31/13

83,413

2,785,952

37,140

3,509,270

 

Derivative contracts in place as of December 1, 2015

(prices below reflect the Company's net price from the listed pipelines)

Production volume

Indexed

Contract period

covered per month

pipeline

Fixed price

Natural gas costless collars

January - December 2015

100,000 Mmbtu

NYMEX Henry Hub

$3.50 floor / $4.10 ceiling

January - December 2015

70,000 Mmbtu

NYMEX Henry Hub

$3.25 floor / $4.00 ceiling

December 2015 - May 2016

80,000 Mmbtu

NYMEX Henry Hub

$2.50 floor / $3.10 ceiling

Natural gas fixed price swaps

January - September 2016

80,000 Mmbtu

NYMEX Henry Hub

$2.43

Oil costless collars

July - December 2015

10,000 Bbls

NYMEX WTI

$80.00 floor / $86.50 ceiling

Oil fixed price swaps

April - December 2015

5,000 Bbls

NYMEX WTI

$94.56

July - December 2015

7,000 Bbls

NYMEX WTI

$93.91

 

Panhandle Oil and Gas Inc. (NYSE: PHX) is engaged in the exploration for and production of natural gas and oil. 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 2015 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 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 Panhandle's oil and gas properties resulting in write-downs; the negative impact lower oil and gas prices could have on the Company's ability to borrow; drilling and operating risks; and Panhandle cannot control activities on its 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