Panhandle Oil and Gas Inc. Reports Fiscal First Quarter 2011 Results

OKLAHOMA CITY, Feb. 8, 2011 /PRNewswire/ -- PANHANDLE OIL AND GAS INC. (NYSE: PHX) today reported financial and operating results for the fiscal 2011 first quarter ended December 31, 2010.  

FIRST QUARTER 2011 HIGHLIGHTS

• Recorded net income of $1,426,849 as compared to first quarter 2010 net income of $1,708,378
• Generated cash flow from operations of $8,579,664, an increase of 78% as compared to the 2010 quarter
• Reported first quarter production of 2,208,218 Mcfe
• Maintained $0 balance outstanding on credit facility
• Increased capital expenditures to $6,570,808 for the quarter, an increase of 147% over the 2010 quarter

For the quarter, the Company recorded net income of $1,426,849, or $.17 per share, as compared to a net income of $1,708,378, or $.20 per share, for the 2010 first quarter.  Net cash provided by operating activities increased 78% to $8,579,664 for the 2011 first quarter as compared to the 2010 first quarter.  Capital expenditures for drilling and equipping wells and leasehold acquisitions increased 147% from the 2010 first quarter to $6,570,808.  Production for the first quarter of 2011 was 2,208,218 Mcfe.  This was a 4.5% decrease in sequential quarterly production and a 3% decrease from the 2010 first quarter.  The average sales price per Mcfe of production during the 2011 first quarter was $4.41 as compared to $4.75 for the 2010 first quarter.  

Total revenues for the 2011 quarter decreased 19.6% to $9,901,548, as compared to $12,321,352 for the 2010 quarter.  The decrease in revenues resulted from a slight decrease in production and in the price realized per Mcfe of production, and a loss from derivative contracts in the 2011 quarter of $21,439 as compared to a gain of $1,403,340 in the 2010 first quarter from derivative contracts.    

MANAGEMENT COMMENTS

Michael C. Coffman, President and CEO, said, "Cash flow remained strong allowing us to fully fund our increasing capital expenditures, pay our operating costs and overhead, make dividend payments, repurchase shares and still increase our cash position.  Although net income was down $281,529 for the first fiscal quarter of 2011 as compared to the 2010 first quarter, we are pleased with the Company's progress so far in fiscal 2011.  

"Capital expenditures increased 147% in the 2011 quarter, with a significant part of the increased drilling dollars going to oil and natural gas liquids-rich plays in Western Oklahoma.  We expect this trend of increasing drilling opportunities in these plays to continue throughout 2011.  Panhandle's perpetual mineral acreage ownership in Western Oklahoma continues to allow the Company to benefit from this significant industry shift to oil and natural gas liquids-rich plays.  We remain in an attractive financial position with significant capital available to take full advantage of these new drilling opportunities; as always we will maintain our sharp focus on investments that will generate shareholder value over time."

Paul Blanchard, Senior Vice President and COO, said, "The reduction in our drilling activity in 2010, as operators shifted emphasis away from dry gas drilling, has resulted in moderately lower production levels thus far in fiscal 2011.  However, as operators continue to shift drilling activity to oil and natural gas liquids-rich plays, particularly in Western Oklahoma, we anticipate production levels will increase.  Drilling and completing these horizontal wells takes time, thus we expect additions to production beginning in the latter half of 2011 and into 2012.

"Panhandle owns approximately 41,000 net mineral acres in Western Oklahoma that present us with drilling opportunities for several years.  These opportunities will allow us to capitalize on the current superior rates of return these areas generate.  We continue to emphasize for investors the competitive advantage Panhandle enjoys because we do not need to expend resources to acquire additional acreage in order to grow our drilling opportunities in these new plays."

The Company's derivative contracts in place for natural gas at December 31, 2010 are outlined in its Form 10-Q for the period ending December 31, 2010.

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 2010 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; uncertainties in evaluating oil and gas reserves; 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, and 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.