Panhandle Oil And Gas Inc. Reports Fiscal Second Quarter, Six Months 2014 Results And Mid-Year Reserve Update Company Increases Second Quarter Net Income 453% and Mcfe Production 8%

OKLAHOMA CITY, May 8, 2014 /PRNewswire/ -- PANHANDLE OIL AND GAS INC. (NYSE: PHX) today reported financial and operating results for the Company's fiscal second quarter and six months ended March 31, 2014.

HIGHLIGHTS FOR THE PERIODS ENDED MARCH 31, 2014

  • Recorded fiscal second quarter 2014 net income of $5,654,573, $0.68 per diluted share, as compared to $1,022,487, $0.12 per diluted share, for the 2013 quarter.
  • Recorded six month 2014 net income of $10,580,891, $1.27 per diluted share, compared to net income of $3,170,785, $0.38 per diluted share, for the 2013 six months.
  • Generated cash from operating activities of $21,733,352 for the 2014 six-month period, well in excess of $17,606,988 of capital expenditures for drilling and equipping wells.
  • Reported 2014 second-quarter and six-month production of 3,496,222 Mcfe and 7,005,492 Mcfe, respectively, which were increases of 8% and 12%, respectively, over the same periods of fiscal 2013.
  • Continued to record increased oil production, 26% and 51% for the quarter and six months, respectively, as compared to the same 2013 periods.
  • Continued to record increased natural gas liquids (NGL) production, 105% and 59% for the quarter and six months, respectively, as compared to the same 2013 periods.
  • Increased proved reserves 4.7% to 159.0 Bcfe at March 31, 2014, from 151.8 Bcfe at Sept. 30, 2013.

FISCAL SECOND QUARTER 2014 RESULTS

For the 2014 fiscal second quarter, the Company recorded net income of $5,654,573, or $0.68 per diluted share.  This compared to net income of $1,022,487, or $0.12 per diluted share, for the 2013 second quarter.  Net cash provided by operating activities increased 19% to $9,847,005 for the 2014 second quarter versus the 2013 fiscal second quarter.  Capital expenditures for the 2014 fiscal quarter totaled $7,714,726 and continue to be principally directed toward oil and NGL rich plays in western and south central Oklahoma and the Texas Panhandle.  The 2014 quarter included a $1.6 million loss on derivative contracts as compared to a $1.8 million loss for the 2013 period.  The Company principally uses derivative contracts of less than one year duration to provide protection against significant declines in cash flows from fluctuations in the price of natural gas and, to a lesser extent, oil.  The Company typically will hedge around 50% - 60% of its expected production volumes.

Total revenues for the 2014 second quarter were $19,752,045, a 57% increase from $12,581,986 for the 2013 quarter.  Oil, NGL and natural gas sales increased $7,007,457 or 50% in the 2014 quarter, compared to the 2013 quarter, as a result of an 8% increase in Mcfe production and a 39% increase in the average per Mcfe sales price.  The average sales price per Mcfe of production during the 2014 second quarter was $6.04, compared to $4.34 for the 2013 second quarter.  Increases in the sales price of natural gas and higher sales volumes of high-value oil and NGL combined to improve the sales price per Mcfe.

Oil production increased 26% in the 2014 quarter to 66,239 barrels versus 52,567 barrels in the 2013 quarter, while gas production of 2,788,768 Mcf for the 2014 quarter was basically flat compared to the 2013 quarter.  In addition, 51,670 barrels of NGL were sold in the 2014 quarter as compared to 25,190 barrels in the 2013 quarter.

SIX MONTHS 2014 RESULTS

For the 2014 six months, the Company recorded net income of $10,580,891, or $1.27 per diluted share.  This compared to net income of $3,170,785, or $0.38 per diluted share, for the 2013 six months.  Net cash provided by operating activities increased 41% year over year to $21,733,352 for the 2014 six months versus the 2013 six months.  Again, cash flow from operations fully funded costs to drill and equip wells for the six months.  Capital expenditures for the 2014 six months totaled $19,213,443, which included $17,606,988 for drilling and equipping wells and acquisitions of $1,606,455.  The 2014 six months included a $2.1 million loss on derivative contracts as compared to a $0.9 million loss for the 2013 period.

Total revenues for the 2014 six months were $38,148,801, a 43% increase from $26,762,421 for the 2013 six months.  Oil, NGL and natural gas sales increased $12,721,585 or 47% in the 2014 six months, compared to the 2013 six months, as a result of a 12% increase in Mcfe production and a 32% increase in the average per Mcfe sales price.  The average sales price per Mcfe of production during the 2014 six months was $5.65, compared to $4.29 for the 2013 six months.

Oil production increased 51% in the 2014 six months to 149,652 barrels from 99,223 barrels in the 2013 six months while gas production increased 251,466 Mcf, or 5%, compared to the 2014 six months.  In addition, 88,810 barrels of NGL were sold in the 2014 six months which was a 59% increase compared to 2013 NGL volumes.  Drilling expenditures over the last 18 months targeting the oil and NGL rich plays are responsible for the increased oil and NGL volumes.

RESERVES UPDATE

March 31, 2014, mid-year proved reserves were 159.0 Bcfe, as calculated by the Company's consulting petroleum engineering firm, DeGolyer and MacNaughton.  This was an increase of 4.7%, compared to the 151.8 Bcfe of proved reserves at Sept. 30, 2013.  SEC prices used for the March 31, 2014, report averaged $3.72 per Mcf for natural gas, $94.95 per barrel for oil and $27.99 per barrel for NGL compared to $3.33 per Mcf for natural gas, $89.06 per barrel for oil and $27.28 per barrel for NGL for the Sept. 30, 2013, report.  The above prices reflect net at the wellhead prices.  Total proved developed reserves increased 7.4% to 100.0 Bcfe as compared to Sept. 30, 2013, reserve volumes.

MANAGEMENT COMMENTS

Michael C. Coffman, President and CEO, said: "2014 continues to be an excellent financial and operational year.  The winter of 2013-2014 was a game changer for 2014 natural gas prices.  For our second quarter ended March 31, 2014, the average natural gas sales price was $4.74 as compared to $3.19 for the 2013 second quarter.  The gas price increases and our increased oil and NGL sales volumes resulted in a net income for the quarter of $5,654,573 and a six-month net income of $10,580,891."

Coffman continued: "Current expectations are that natural gas prices will continue to be elevated this summer as storage levels are extremely low and will need to be refilled prior to the winter heating season.  These expected prices should continue to have a positive impact on our earnings for 2014.  The Company remains in a very strong financial position that allows us to be ready to take advantage of drilling or acquisition opportunities that will add to our asset base and are expected to deliver additional value for our shareholders."

OPERATIONS UPDATE

Paul Blanchard, Senior Vice President and COO, said: "During the last few years of relatively low natural gas prices, Panhandle pursued a contrarian strategy of growing its natural gas production through producing property acquisitions and participation in low cost drilling in the core of the Fayetteville Shale. At the same time, we have grown profitable oil and NGL production through selected drilling participation in high-quality oil and NGL rich projects on Company owned mineral holdings principally in western and south central Oklahoma and the Texas Panhandle. Through this growth period, the Company's cost structure per Mcfe of production decreased materially and all capital investments were entirely funded through internally generated cash flow. With the rebound in natural gas prices experienced this quarter, we are enjoying the benefits of these efforts in the form of much higher cash flow and net income."

 

FINANCIAL HIGHLIGHTS

Statements of Operations


























Three Months Ended March 31,


Six Months Ended March 31,


2014


2013


2014


2013

Revenues:

(unaudited)


(unaudited)

Oil, NGL and natural gas sales

$

21,108,301


$

14,100,844


$

39,581,383


$

26,859,798

Lease bonuses and rentals


19,717



140,941



215,946



515,333

Gains (losses) on derivative contracts


(1,587,029)



(1,811,359)



(2,083,930)



(918,666)

Income from partnerships


211,056



151,560



435,402



305,956



19,752,045



12,581,986



38,148,801



26,762,421

Costs and expenses:












Lease operating expenses


3,653,000



2,638,342



6,968,397



5,934,904

Production taxes


706,033



412,886



1,277,597



716,439

Exploration costs


24,429



15,412



63,184



35,179

Depreciation, depletion and amortization


4,939,834



6,258,623



10,247,853



11,897,643

Provision for impairment


227,152



63,476



430,143



218,441

Loss (gain) on asset sales, interest and other


104,644



(211,896)



27,189



(168,710)

General and administrative


1,651,380



1,643,656



3,524,547



3,541,740



11,306,472



10,820,499



22,538,910



22,175,636

Income before provision for income taxes


8,445,573



1,761,487



15,609,891



4,586,785













Provision for income taxes


2,791,000



739,000



5,029,000



1,416,000













Net income

$

5,654,573


$

1,022,487


$

10,580,891


$

3,170,785





























































Basic and diluted earnings per common share

$

0.68


$

0.12


$

1.27


$

0.38













Basic and diluted weighted average shares outstanding:












Common shares


8,236,672



8,254,226



8,234,261



8,252,145

Unissued, directors' deferred compensation shares


126,051



113,258



125,712



113,045



8,362,723



8,367,484



8,359,973



8,365,190













Dividends declared per share of












common stock and paid in period

$

0.08


$

0.07


$

0.16


$

0.14

 

Balance Sheets














March 31, 2014


Sept. 30, 2013

Assets

(unaudited)




Current assets:






Cash and cash equivalents

$

1,816,400


$

2,867,171

Oil, NGL and natural gas sales receivables


17,105,718



13,720,761

Refundable production taxes


666,180



662,051

Derivative contracts


-



425,198

Other


185,725



129,998

Total current assets


19,774,023



17,805,179







Properties and equipment, at cost, based on






   successful efforts accounting:






Producing oil and natural gas properties


317,646,446



304,889,145

Non-producing oil and natural gas properties


9,151,030



8,932,905

Furniture and fixtures


743,493



737,368



327,540,969



314,559,418

Less accumulated depreciation, depletion and amortization


(193,194,710)



(186,641,291)

Net properties and equipment


134,346,259



127,918,127







Investments


1,664,914



1,574,642

Refundable production taxes


272,305



540,482

Total assets

$

156,057,501


$

147,838,430







Liabilities and Stockholders' Equity






Current liabilities:






Accounts payable

$

6,532,367


$

8,409,634

Derivative contracts


1,292,329



-

Deferred income taxes


43,100



127,100

Income taxes payable


865,882



751,992

Accrued liabilities and other


768,795



1,011,865

Total current liabilities


9,502,473



10,300,591







Long-term debt


6,000,000



8,262,256

Deferred income taxes


32,763,907



31,226,907

Asset retirement obligations


2,539,172



2,393,190







Stockholders' equity:






Class A voting common stock, $.0166 par value; 24,000,000 shares authorized, 8,431,502 issued at March 31, 2014, and Sept. 30, 2013


 

140,524



 

140,524

Capital in excess of par value


2,590,501



2,587,838

Deferred directors' compensation


2,946,032



2,756,526

Retained earnings


105,705,125



96,454,449



111,382,182



101,939,337

Less treasury stock, at cost; 194,830 shares at March 31,






2014, and 200,248 shares at Sept. 30, 2013


(6,130,233)



(6,283,851)

Total stockholders' equity


105,251,949



95,655,486

Total liabilities and stockholders' equity

$

156,057,501


$

147,838,430

 

Condensed Statements of Cash Flows














Six months ended March 31,


2014


2013

Operating Activities

(unaudited)

Net income

$

10,580,891


$

3,170,785

Adjustments to reconcile net income to net cash provided






  by operating activities:






Depreciation, depletion and amortization


10,247,853



11,897,643

Impairment


430,143



218,441

Provision for deferred income taxes


1,453,000



957,000

Exploration costs


63,184



35,179

Gain from leasing of fee mineral acreage


(215,704)



(514,326)

Net (gain) loss on sale of assets


152,766



(208,750)

Income from partnerships


(435,402)



(305,956)

Distributions received from partnerships


547,028



389,962

Directors' deferred compensation expense


189,506



201,211

Restricted stock awards


262,174



399,907

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






Oil, NGL and natural gas sales receivables


(3,384,957)



(2,170,548)

Fair value of derivative contracts


1,717,527



1,087,443

Refundable production taxes


264,048



237,683

Other current assets


(55,727)



37,971

Accounts payable


46,051



426,487

Income taxes receivable


-



(117,886)

Income taxes payable


113,890



-

Accrued liabilities


(242,919)



(307,427)

Total adjustments


11,152,461



12,264,034

Net cash provided by operating activities


21,733,352



15,434,819







Investing Activities






Capital expenditures, including dry hole costs


(17,606,988)



(12,719,947)

Acquisition of working interest properties


(1,550,205)



-

Acquisition of minerals and overrides


(56,250)



(330,000)

Proceeds from leasing of fee mineral acreage


237,733



527,570

Investments in partnerships


(201,898)



(418,891)

Proceeds from sales of assets


92,000



870,610

Net cash used in investing activities


(19,085,608)



(12,070,658)







Financing Activities






Borrowings under debt agreement


8,312,545



4,181,199

Payments of loan principal


(10,574,801)



(5,556,184)

Purchase of treasury stock


(122,044)



(507,345)

Payments of dividends


(1,330,215)



(1,164,178)

Excess tax benefit on stock-based compensation


16,000



15,000

Net cash provided by (used in) financing activities


(3,698,515)



(3,031,508)







Increase (decrease) in cash and cash equivalents


(1,050,771)



332,653

Cash and cash equivalents at beginning of period


2,867,171



1,984,099

Cash and cash equivalents at end of period

$

1,816,400


$

2,316,752







Supplemental Schedule of Noncash Investing and Financing Activities






Additions to asset retirement obligations

$

84,786


$

78,706







Gross additions to properties and equipment

$

17,290,125


$

13,310,629

Net (increase) decrease in accounts payable for properties






and equipment additions


1,923,318



(260,682)

Capital expenditures and acquisitions, including dry hole costs

$

19,213,443


$

13,049,947

 


Proved Reserves














SEC Pricing


March 31, 2014


Sept. 30, 2013

Proved Developed Reserves:


(unaudited)

Barrels of NGL


1,123,310



764,321

Barrels of Oil


1,224,392



1,037,721

Mcf of Gas


85,925,225



82,298,833

Mcfe (1)


100,011,437



93,111,085

Proved Undeveloped Reserves:






Barrels of NGL


930,058



851,805

Barrels of Oil


435,070



605,582

Mcf of Gas


50,778,306



49,990,334

Mcfe (1)


58,969,074



58,734,656

Total Proved Reserves:






Barrels of NGL


2,053,368



1,616,126

Barrels of Oil


1,659,462



1,643,303

Mcf of Gas


136,703,531



132,289,167

Mcfe (1)


158,980,511



151,845,741







10% Discounted Estimated Future






Net Cash Flows (before income taxes):






Proved Developed

$

155,038,658


$

125,186,445

Proved Undeveloped


52,447,249



51,276,694

Total

$

207,485,907


$

176,463,139

SEC Pricing






Oil/Barrel

$

94.95


$

89.06

Gas/Mcf

$

3.72


$

3.33

NGL/Barrel

$

27.99


$

27.28







Proved Reserves - NYMEX Futures Pricing (2)







10% Discounted Estimated Future

Proved Reserves

Net Cash Flows (before income taxes):

March 31, 2014


Sept. 30, 2013

Proved Developed

$

153,999,890


$

144,432,557

Proved Undeveloped


53,600,280



63,586,718

Total

$

207,600,170


$

208,019,275







(1)

Crude oil and NGL converted to natural gas on a one barrel of crude oil or NGL equals six Mcf of natural gas basis

(2)

NYMEX Futures Pricing as of March 31, 2014, basis adjusted to Company wellhead price

 

OPERATING HIGHLIGHTS


























Second Quarter Ended


Second Quarter Ended


Six Months Ended


Six Months Ended


March 31, 2014


March 31, 2013


March 31, 2014


March 31, 2013

Mcfe Sold


3,496,222



3,245,411



7,005,492



6,253,776

Average Sales Price per Mcfe

$

6.04


$

4.34


$

5.65


$

4.29

Oil Barrels Sold


66,239



52,567



149,652



99,223

Average Sales Price per Barrel

$

92.74


$

87.90


$

93.26


$

86.00

Mcf Sold


2,788,768



2,778,869



5,574,720



5,323,254

Average Sales Price per Mcf

$

4.74


$

3.19


$

4.08


$

3.15

NGL Barrels Sold


51,670



25,190



88,810



55,864

Average Sales Price per Barrel

$

33.53


$

24.91


$

32.62


$

27.87



















Quarter ended


Oil Bbls Sold


Mcf Sold


NGL Bbls Sold


Mcfe Sold

3/31/2014


66,239


2,788,768


51,670


3,496,222

12/31/2013


83,413


2,785,952


37,140


3,509,270

9/30/2013


79,387


2,820,079


30,373


3,478,639

6/30/2013


55,474


2,742,996


25,660


3,229,800

3/31/2013


52,567


2,778,869


25,190


3,245,411

The Company's derivative contracts in place for natural gas at March 31, 2014, are outlined in its Form 10-Q for the period ending March 31, 2014.

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 2013 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.



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