Panhandle Oil and Gas Inc. Reports Fourth Quarter and Fiscal 2010 Results

OKLAHOMA CITY, Dec. 8, 2010 /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, 2010.  

HIGHLIGHTS FOR THE THREE AND TWELVE MONTH PERIODS ENDED SEPTEMBER 30, 2010

• Recorded 12-month net income of $11,419,690 compared to a net loss of $2,405,021 for fiscal 2009.
• Increased fourth quarter 2010 production by 3% over the third quarter 2010 to 2.3 billion cubic feet equivalent (Bcfe).
• Ended year with zero dollars drawn on the credit facility.
• Cash generated by operating activities was $27.8 million for the year.
• Continued to convert Panhandle's mineral rights ownership interests into producing working interest wells in the Fayetteville Shale, Anadarko Basin (Cana) Woodford Shale and several other western Oklahoma oil and natural gas liquids-rich plays, including the Granite Wash play.
• On December 6, 2010, increased credit facility to $80 million from $50 million and extended maturity to November 30, 2014.

Fiscal Fourth Quarter 2010 Results

The Company recorded net income of $3,036,446, or $.36 per share, as compared to net income of $343,376, or $.04 per share, for the 2009 fourth quarter.  Capital expenditures for drilling and equipping wells decreased 24% to $3,119,401, as compared to the corresponding 2009 quarter, reflecting an overall industry reduction in drilling activity in dry gas plays.  Net cash provided by operating activities for the 2010 quarter rose 12.8% to $7,567,057 as compared to $6,708,784 for the 2009 quarter.  Total revenues for the 2010 quarter rose 44.5% to $12,298,310 as compared to $8,510,139 for the 2009 quarter.  For the 2010 quarter, the average realized sales price was $4.80 per Mcfe as compared to $3.95 per Mcfe for the 2009 period.  

For the fourth fiscal quarter ended September 30, 2010, production increased to 2,312,093 Mcfe as compared to 2,236,236 Mcfe for the 2010 third quarter and 2,090,154 Mcfe for the 2010 second quarter.  Quarterly production was 2% lower compared to the 2009 fourth quarter.  

Fiscal Year 2010 Results

The Company recorded a net income of $11,419,690, or $1.36 per share, as compared to net loss for fiscal 2009 of $2,405,021, or $.29 per share.  Net cash provided by operating activities for 2010 was $27,806,475 as compared to $37,710,606 for 2009.  Total revenues for 2010 rose 39.3% to $51,938,416 as compared to $37,272,614 for 2009.  Capital expenditures for drilling and equipping wells totaled $11,308,506 in 2010, as compared to $39,915,051 for 2009.  For fiscal 2010, the average realized sales price was $4.94 per Mcfe as compared to $3.79 per Mcfe for 2009.

For the fiscal year ended September 30, 2010, the Company reported a production decrease of 10% to 8.9 Bcfe as compared to 9.9 Bcfe for fiscal 2009.  The production decrease reflects lower drilling activity across Panhandle's acreage positions because of lower natural gas prices and the associated 72% reduction in capital expenditures in fiscal 2010 versus 2009.  

In a press release dated November 8, 2010, Panhandle announced a 74% increase in proved reserves for fiscal 2010.  Total proved reserves increased to 103.7 Bcfe at September 30, 2010.  Since 2005 the Company's total proved reserves have grown 232% from 31.3 Bcfe to 103.7 Bcfe, at a compound annual growth rate of 27.2%.  This growth is principally the result of reserves added from development of two Oklahoma Woodford Shale plays and the Arkansas Fayetteville Shale.  

At September 30, 2010, Panhandle had 12 producing working interest wells and 4 producing royalty interest wells in the Cana play with an additional 9 wells in process.  The Company owns 3,545 net mineral acres in the core area of this play yielding a 2.8% average net revenue interest in 1,063 gross proven, probable and possible undeveloped drilling locations based on 80 acre well spacing.  The Company anticipates drilling activity will increase in this play as development of this natural gas liquids-rich play expands during 2011.

At September 30, 2010, Panhandle had 99 producing working interest wells and 281 producing royalty interest wells in the Fayetteville Shale with an additional 24 wells in process.  The Company owns 7,308 net mineral acres in the core area of this play yielding a 2.2% average net revenue interest in 1,735 gross proven, probable and possible undeveloped drilling locations based on 80 acre well spacing.  Because of the very low finding costs associated with Fayetteville Shale development, the Company expects drilling activity to continue in this play in 2011 despite the low natural gas pricing environment.

At September 30, 2010, Panhandle had 137 producing working interest wells and 48 producing royalty interest wells in the Southeast Oklahoma Woodford Shale play with an additional 26 wells in process.  The Company owns 6,310 net mineral acres in the core area of this play yielding a 3.6% average net revenue interest in 1,214 gross proven, probable and possible undeveloped drilling locations based on 80 acre well spacing.  The Company does not anticipate an acceleration of drilling activity in this play during 2011.

Management Comment

Michael C. Coffman, President and CEO said, "Fiscal 2010 was another challenging year both from an economic and operational standpoint.  Despite the dual challenges of the economic downturn and continuing downward pressure on natural gas prices, Panhandle delivered the second highest annual revenue and net income in the Company's history.  The strength of our assets is reflected in the 74% increase in our proved reserves, and we end this fiscal year with zero debt.  These results prove that our commitment to increased drilling on our mineral acreage continues to maximize value for our shareholders."

Paul F. Blanchard, Panhandle's Senior Vice-President and COO added, "We have been pleased with the industry's continuing development of oil and natural gas liquids-rich plays in Western Oklahoma, where Panhandle owns a significant amount of its 254,000 net fee mineral acres.  These plays allow us to capitalize on current market prices and superior rates of return in these plays, versus the dry gas plays such as the Southeast Oklahoma Woodford.  The development of oil and natural gas liquids-rich plays again highlights the advantage Panhandle offers investors through perpetual mineral acreage ownership.  We have been able to shift investment dollars rapidly to more oil and natural gas liquids-rich drilling opportunities without having to expend any capital for additional leasehold acreage."

Blanchard continued: "We expect to deploy substantially more drilling capital in fiscal 2011, particularly in several of the oil and natural gas liquids-rich plays in Western Oklahoma, including horizontal drilling in the Granite Wash, Cleveland, Tonkawa and Marmaton plays, as well as the Anadarko Basin (Cana) Woodford.  Given our strong cash flows and untapped line of credit, we are financially positioned to accelerate our participation in drilling activity in these areas next year."

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; 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.