Yearly Production Increases 28% to 9.9 Bcfe

OKLAHOMA CITY, Dec. 9 /PRNewswire-FirstCall/ -- PANHANDLE OIL AND GAS INC., the "Company", (NYSE: PHX) today reported financial and operating results for the fiscal fourth quarter and twelve months ended September 30, 2009.

HIGHLIGHTS FOR THE THREE AND TWELVE MONTH PERIODS ENDED SEPTEMBER 30, 2009

• Record twelve month production of 9.9 Bcfe, a 28% increase compared to fiscal 2008.
• Produced 2.4 Bcfe during the fourth quarter of 2009, an 8% increase from the corresponding 2008 period.
• Maintained strong balance sheet with debt of $10.4 million at September 30, 2009.
• Cash provided by operating activities remained strong at $37.7 million for the year.
• Continued to convert Panhandle's mineral rights ownership interests into producing working interest wells particularly in the Woodford Shale, the Fayetteville Shale and the newly emerging Anadarko (Cana)Woodford Shale.
• Generated a 97% success rate in 168 wells drilled with a working interest in 2009.

Fiscal Fourth Quarter 2009 Results

For the fourth fiscal quarter ended September 30, 2009, production increased 8% to 2,356,051 Mcfe as compared to 2,183,583 Mcfe for the 2008 quarter. The Company recorded a net income of $343,376 or $.04 per share as compared to net income of $8,775,296 or $1.04 per share for the 2008 fourth quarter. Capital expenditures for drilling and equipping wells decreased 63% to $4,080,626, as compared to the corresponding 2008 quarter reflecting an overall industry reduction in drilling activity. Net cash provided by operating activities for the 2009 quarter was $6,708,784 as compared to $14,449,727 for the 2008 quarter. Total revenues for the 2009 quarter were $10,983,290 as compared to $24,214,890 for the 2008 quarter. For the 2009 quarter, the average realized sales price was $3.95 per Mcfe as compared to $9.31 per Mcfe for the 2008 period.

On December 8, 2009, Panhandle's banks reaffirmed the Company's $35 million borrowing base and extended the maturity date of the credit facility to October 31, 2012. The outstanding balance on the Company's bank line-of-credit at December 7, 2009 was $7.1 million.

Fiscal Year 2009 Results

For the fiscal year ended September 30, 2009, the Company reported a production increase of 28% to 9.9 Bcfe as compared to 7.7 Bcfe for fiscal 2008. The Company recorded a net loss of $2,405,021 or $.29 per share as compared to net income for fiscal 2008 of $21,555,769 or $2.54 per share. Net cash provided by operating activities for 2009 was $37,650,864 as compared to $39,924,719 for 2008. Total revenues for 2009 were $39,956,967 as compared to $69,119,121 for 2008. Capital expenditures for drilling and equipping wells totaled $39,915,051 in 2009, as compared to $38,747,749 for 2008. For fiscal 2009, the average realized sales price was $3.79 per Mcfe as compared to $8.94 per Mcfe for 2008.

Increases in production for both the three-month and twelve-month periods are principally the result of the Company's drilling efforts in the Woodford Shale in Southeast Oklahoma and the Fayetteville Shale in Arkansas. As of September 30, 2009, Panhandle had 116 producing working interest wells and 29 producing royalty interest wells in the Woodford as well as 74 producing working interest wells and 203 producing royalty interest wells in the Fayetteville. In addition, there were a total of 36 wells in these areas in various operational stages ranging from permitted and approved for drilling to completing and testing.

In a press release dated November 9, 2009, Panhandle announced a 10% increase to proved reserves for fiscal 2009. Total proved reserves increased to 59.6 Bcfe at September 30, 2009. In addition, the Company delivered a finding cost of $1.81 per Mcfe for 2009 and an average finding cost of $2.22 per Mcfe over the last three years.

For 2010, Panhandle intends to continue drilling in our Woodford and Fayetteville projects, and the Company anticipates increasing drilling activity in the newly developing Anadarko (Cana) Woodford in Western Oklahoma. Panhandle currently has six producing working interest wells and two producing royalty interest wells in the Cana play with an additional four wells in various stages. The Company's 1,365 mineral acres in the current core area of this play may generate up to 330 drilling locations at 80 acre spacing.

Based on current monthly natural gas production levels, approximately 41% of the Company's fiscal 2010 first quarter natural gas production and approximately 49% of anticipated second, third and fourth fiscal quarter 2010 natural gas production is hedged at weighted average prices of $3.76 per Mcf for the 2010 first quarter and $5.30 per Mcf for the 2010 remaining quarters. These prices are net prices tied to specific Oklahoma pipelines, as opposed to NYMEX prices. In fiscal 2009, the Company received net cash payments of $2,497,800 on its derivative contracts. These contracts continue to mitigate the Company's exposure to short-term fluctuations in the price of natural gas.

Management Comment

Michael C. Coffman, President and CEO said, "Fiscal 2009 was an extremely challenging year from an economic standpoint, but we have been able to adjust to the challenges and to manage the Company to maintain flexibility to capitalize on sustained market improvements when they materialize. The economic downturn coupled with high natural gas storage levels combined to place downward pressure on natural gas prices throughout the year. As a result, our total revenue decreased 42% and the Company recorded a net loss for the year. Despite the challenges, the Company delivered a 28% production increase, setting a Company record of 9.9 Bcfe; this is a testament to the strength of our asset base and the quality of our employees. Cash flow from operations remained strong at $37.7 million. Capital expenditures were funded principally from cash flow, minimizing our bank line-of-credit increase to less than a net $1 million for the year."

"While capital expenditure for the first six months of 2009 totaled $30,271,588, in the second six months we reduced our capex 68% to $9,643,463. The reduction was a result of fewer proposed wells in our core areas and reduced overall industry drilling activity in response to challenging gas market conditions. We were deliberately very judicious in selecting wells in which we participated with a working interest, focusing on participating in specific wells in which we were protecting our unit drilling rights."

Coffman concluded: "While today's market conditions are challenging, our strong balance sheet, world class operations in the Fayetteville and Woodford Shales and our ability to leverage our mineral rights ownership provide us with strong upside potential in 2010. Our current debt level of $7.1 million is both manageable and flexible. Our strong balance sheet allows us to remain opportunistic in terms of either an acquisition or increasing our drilling activity as opportunities and market conditions warrant. And our 2010 hedging program should provide the Company with sufficient cash flow to drill additional wells on our mineral acreage. All of these factors are consistent with our ongoing corporate strategy and the momentum we have established over the last few years exploiting the capital efficiency advantage gained by drilling on Panhandle's mineral acres and developing positions in low-risk, high-reward plays and maintaining our commitment to our shareholders."

                              OPERATING HIGHLIGHTS
          --------------------------------------------------------------
          Fourth Quarter   Fourth Quarter  Fiscal Year      Fiscal Year
              Ended           Ended           Ended            Ended
           September 30,   September 30,   September 30,   September 30,
               2009            2008            2009            2008
          --------------   --------------  -------------   -------------
MCFE
 Sold        2,356,051       2,183,583        9,878,948      7,722,450
Average
 Sales
 Price
 per
 MCFE            $3.95           $9.31            $3.79          $8.94
Barrels
 Sold           29,011          31,375          128,160        132,402
Average
 Sales
 Price
 per
 Barrel         $61.97         $116.12           $51.79        $103.91
MCF
 Sold        2,181,985       1,995,333        9,109,988      6,928,038
Average
 Sales
 Price
 per
 MCF            $3.44            $8.37            $3.38          $7.98

                   Quarterly Production Levels
                   ---------------------------
Quarter ended     Barrels Sold      MCF Sold           MCFE
-------------     ------------      ---------        ---------
  9/30/09             29,011        2,181,985        2,356,051
  6/30/09             34,145        2,442,604        2,647,474
  3/31/09             34,744        2,171,660        2,380,124
  12/31/08            30,260        2,313,739        2,495,299
  9/30/08             31,375        1,995,333        2,183,583

       Derivative contracts in place as of September 30, 2009
    (prices below reflect the Company's net price from the listed
                         Oklahoma pipelines)

                           Production volume     Indexed (1)
    Contract period        covered per month      Pipeline    Fixed price
    ---------------        -----------------      --------    -----------

March - December, 2009        60,000 mmbtu          CEGT        $4.01

April - December, 2009       100,000 mmbtu          CEGT        $3.71

 May - December, 2009         70,000 mmbtu          CEGT       $3.615

 July - December, 2009        70,000 mmbtu          PEPL       $3.745

January -December, 2010      100,000 mmbtu          CEGT       $5.015

January -December, 2010       50,000 mmbtu          CEGT       $5.050

January -December, 2010      100,000 mmbtu          PEPL        $5.57

January -December, 2010       50,000 mmbtu          PEPL        $5.56

(1)  CEGT -Centerpoint Energy Gas Transmission's East pipeline in
           Oklahoma
     PEPL -Panhandle Eastern Pipeline Company's Texas/Oklahoma mainline

                                  FINANCIAL HIGLIGHTS
                     --------------------------------------------------
                         Consolidated Statements of Operations
                     --------------------------------------------------
                       Three Months Ended        Twelve Months Ended
                          September 30,              September 30,
                        2009         2008         2009          2008
                     ----------  -----------  -----------   -----------
Revenues:
  Oil and natural
   gas sales         $9,306,699  $20,339,225  $37,421,688   $69,026,785
  Lease bonuses and
   rentals                6,887       57,095      188,906       167,559
  Gains (losses) on
   derivative
   contracts           (874,406)   3,450,493     (661,828)     (940,823)
  Gain on asset
   sales, interest
   and other          2,473,151       42,991    2,684,353       233,709
  Income of
   partnerships          70,959      325,086      323,848       631,891
                     ----------   ----------   ----------    ----------
                     10,983,290   24,214,890   39,956,967    69,119,121
Costs and
 expenses:
  Lease operating
   expenses           1,923,625    1,652,019    7,696,026     6,629,170
  Production taxes       84,169      995,427    1,201,209     3,426,592
  Exploration costs     396,737       58,818      711,582       455,943
  Depreciation,
   depletion and
   amortization       7,286,528    6,408,314   28,168,933    19,784,660
  Provision for
   impairment           340,387      140,708    2,464,520       526,380
  Loss on sale of
   assets                     -          802            -       204,189
  General and
   administrative     1,144,974    1,014,946    4,866,044     5,006,512
  Bad debt expense
   (recovery)          (185,272)     591,258     (185,272)      591,258
  Interest expense      (61,234)           -        6,946        44,346
                     ----------   ----------   ----------    ----------
                     10,929,914   10,862,292   44,929,988    36,669,050
                     ----------   ----------   ----------    ----------
Income (loss)
 before provision
 (benefit) for
 income taxes            53,376   13,352,598   (4,973,021)   32,450,071

Provision
 (benefit) for
 income taxes          (290,000)   4,577,302   (2,568,000)   10,894,302
                     ----------   ----------   ----------    ----------

Net income (loss)      $343,376   $8,775,296  $(2,405,021)  $21,555,769
                     ==========   ==========   ==========    ==========


Earnings (loss)
 per common share         $0.04        $1.04       $(0.29)        $2.54
                     ==========   ==========   ==========    ==========


Weighted average
 shares outstanding:
  Common shares       8,300,253    8,341,867    8,300,160     8,406,874
  Unissued, vested
   directors' shares     99,242       86,853       97,177        85,504
                     ----------   ----------   ----------    ----------
                      8,399,495    8,428,720    8,397,337     8,492,378
                     ==========   ==========   ==========    ==========

Dividends declared
 per share of
 common stock and
 paid in period           $0.07        $0.07        $0.28         $0.28
                     ==========   ==========   ==========    ==========

                        Consolidated Balance Sheets
                        ---------------------------

                                          September 30,   September 30,
                                              2009            2008
                                          -------------   -------------
Assets
Current assets:
  Cash and cash equivalents                  $639,908        $895,708
  Oil and natural gas sales
   receivables (net)                        7,747,557      17,183,128
  Deferred income taxes                     1,934,900               -
  Refundable income taxes                           -       2,162,305
  Refundable production taxes                 616,668          78,882
  Short-term derivative contracts                   -         646,193
  Other                                        68,817         143,272
                                         ------------    ------------
Total current assets                       11,007,850      21,109,488

Properties and equipment, at cost,
 based on successful efforts accounting:
  Producing oil and natural gas
   properties                             198,076,244     175,727,196
  Non-producing oil and natural gas
   properties                              10,332,537      11,216,103
  Other                                       578,460         491,321
                                         ------------    ------------
                                          208,987,241     187,434,620
  Less accumulated depreciation,
   depletion and amortization             112,900,027      87,661,433
                                         ------------    ------------
Net properties and equipment               96,087,214      99,773,187

Investments                                   682,391         736,314
Refundable production taxes and
 other                                        772,177         388,194
                                         ------------    ------------
Total assets                             $108,549,632    $122,007,183
                                         ============    ============

Liabilities and Stockholders' Equity
Current liabilities:
  Accounts payable                         $4,810,687     $15,897,565
  Short-term derivative contracts           1,726,901               -
  Accrued liabilities                       1,033,570         608,456
                                         ------------    ------------
Total current liabilities                   7,571,158      16,506,021

Long-term debt                             10,384,722       9,704,100
Deferred income taxes                      24,064,650      25,943,750
Asset retirement obligations                1,620,225       1,504,411
Long-term derivative contracts                786,534               -

Stockholders' equity:
  Class A voting common stock, $.0166
   par value; 24,000,000 shares authorized,
   8,431,502 issued at September 30,
   2009 and September 30, 2008                140,524         140,524
  Capital in excess of par value            1,922,053       2,090,070
  Deferred directors' compensation          1,862,499       1,605,811
  Retained earnings                        64,507,547      69,236,604
                                         ------------    ------------
                                           68,432,623      73,073,009
  Less treasury stock, at cost;
   119,866 shares at September 30,
   2009 and 131,374 shares at
   September 30, 2008                      (4,310,280)     (4,724,108)
                                         ------------    ------------
Total stockholders' equity                 64,122,343      68,348,901
                                         ------------    ------------
Total liabilities and stockholders'
 equity                                  $108,549,632    $122,007,183
                                         ============    ============

              Condensed Consolidated Statements of Cash Flows
              -----------------------------------------------

                                     Year ended September 30,
                                  2009         2008         2007
                               ----------   ----------   ----------
Operating Activities

Net income (loss)             $(2,405,021) $21,555,769   $6,343,464
Adjustments to
 reconcile net income
 (loss) to net
 cash provided by
 operating activities:
  Depreciation,
   depletion,
   amortization,
   and impairment              30,633,453   20,311,040   19,053,457
  Deferred income taxes
   (net)                       (3,814,000)   9,116,000    1,329,000
  Exploration costs               711,582      455,943    1,050,069
  Net (gain) loss on
   sales of assets             (2,654,759)      20,632       22,856
  Income from
   partnerships                  (323,848)    (631,891)    (383,391)
  Distributions received
   from partnerships              373,063      585,588      465,535
  Other                             4,708            -      (45,954)
  Common stock
   contributed to ESOP            245,811      218,733      221,633
  Common stock
   (unissued) to
   Directors'
   Deferred Compensation
   Plan                           256,688      247,033      156,209
  Bad debt expense
   (recovery)                    (185,272)     591,258            -
  Cash provided (used)
   by changes in assets
   and liabilities:
    Oil and natural gas
     sales receivables          9,620,843   (9,671,136)  (1,631,627)
    Fair value of
     dervative contracts        3,159,628     (539,277)    (106,916)
    Refundable income
     taxes                      2,162,305   (2,162,305)   1,772,987
    Refundable production
     taxes                       (537,786)     (78,882)           -
    Other current assets           74,455      (25,927)       3,767
    Other non-current
     assets                      (383,983)    (388,194)    (140,901)
    Accounts payable              287,883       59,921     (118,012)
    Income taxes payable          338,511     (211,155)     211,155
    Accrued liabilities            86,603      471,569      (96,831)
                               ----------   ----------   ----------
Total adjustments              40,055,885   18,368,950   21,763,036
                               ----------   ----------   ----------
Net cash provided by
 operating activities          37,650,864   39,924,719   28,106,500

Investing Activities
Capital expenditures,
 including dry hole
 costs                        (39,915,051) (38,747,749) (27,785,431)
Proceeds from leasing
 of fee mineral
 acreage                          209,930      200,356      188,417
Proceeds from sales of
 assets                         3,441,871      840,398      656,335
                               ----------   ----------   ----------
Net cash used in
 investing activities         (36,263,250) (37,706,995) (26,940,679)

       Condensed Consolidated Statements of Cash Flows (continued)
       -----------------------------------------------------------

                                        Year ended September 30,
                                     2009         2008         2007
                                  ----------   ----------   ----------
Financing Activities

Borrowings under debt
 agreement                       $49,027,225  $47,281,411  $18,046,213
Payments of loan principal       (48,346,603) (42,238,782) (16,551,395)
Purchases of treasury stock                -   (4,998,842)           -
Payments of dividends             (2,324,036)  (2,355,163)  (2,105,632)
                                  ----------   ----------   ----------
Net cash used in financing
 activities                       (1,643,414)  (2,311,376)    (610,814)
                                  ----------   ----------   ----------
Increase (decrease) in cash
 and cash equivalents               (255,800)     (93,652)     555,007
Cash and cash equivalents at
 beginning of year                   895,708      989,360      434,353
                                  ----------   ----------   ----------
Cash and cash equivalents at
 end of year                        $639,908     $895,708     $989,360
                                  ==========   ==========   ==========


Supplemental Disclosures of
 Cash Flow Information

Interest paid (net of
 capitalized interest)                    $-      $23,212     $140,350
Income taxes paid, net of
 refunds received                $(1,261,808)  $4,145,122    $(952,221)

Supplemental schedule of
 noncash investing and
 financing activities:
  Additions and revisions, net,
   to asset retirement
   obligations                       $95,076     $151,998    $(213,759)

  Gross additions to properties
   and equipment                 $28,540,290  $52,812,138  $28,112,522
  Net (increase) decrease in
   accounts payable for
   properties and equipment
   additions                      11,374,761  (14,064,389)    (327,091)
                                  ----------   ----------   ----------
  Capital expenditures,
   including dry hole costs      $39,915,051  $38,747,749  $27,785,431

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 2009 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; declines 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.

Back to top

RELATED LINKS
http://www.panhandleoilandgas.com