Panhandle Oil and Gas Inc. Reports Third Quarter and Nine Months 2011 Results

OKLAHOMA CITY, Aug. 8, 2011 /PRNewswire/ -- PANHANDLE OIL AND GAS INC. (NYSE: PHX) today reported financial and operating results for the Company's fiscal third quarter and nine months ended June 30, 2011.  

HIGHLIGHTS FOR THE PERIODS ENDED JUNE 30, 2011

• Recorded a quarterly net income of $2,650,429
• Recorded a nine-month net income of $5,849,531
• Generated cash from operating activities of $20,841,594 for the nine-month period, well in excess of nine-month capital expenditures of  $17,358,890
• Reported third-quarter and nine-month production of 2,129,160 Mcfe and 6,489,389 Mcfe, respectively  
• Increased capital expenditures for the 2011 nine-month period 112% to $17,358,890 as compared to the 2010 nine-month period of $8,189,105
• Maintained $0 balance on credit facility at June 30, 2011

FISCAL THIRD-QUARTER 2011 RESULTS

For the quarter ending June 30, 2011, the Company recorded a net income of $2,650,429 ($.32 per share) as compared to a net income of $1,511,300 ($.18 per share) for the 2010 third quarter.  Total revenues for the 2011 quarter increased 12% to $11,688,417 as compared to the 2010 quarter.  Cash provided by operating activities totaled $7,260,259, which exceeded capital expenditures of $6,292,965.  Production for the 2011 quarter decreased 5% to 2,129,160 Mcfe as compared to 2,236,236 Mcfe for the 2010 quarter.  The average per Mcfe sales price increased 22% for the 2011 quarter to $5.26, as compared to $4.32 for the 2010 quarter. The Company recorded a pre-tax gain (realized and unrealized) on derivative contracts in the 2011 quarter of $344,856 compared to a loss of $218,935 for the 2010 quarter.  

NINE MONTHS 2011 RESULTS

For the nine months ended June 30, 2011, the Company recorded a net income of $5,849,531 ($.70 per share) as compared to a net income of $8,383,244 ($1.00 per share) for the 2010 nine months.  Total revenues for the 2011 nine months decreased 18% to $32,567,424 as compared to the 2010 nine months.  Cash provided by operating activities totaled $20,841,594, a 3% increase, which exceeded capital expenditures of $17,358,890.  Production for the 2011 nine months totaled 6,489,389 Mcfe as compared to 6,604,523 Mcfe for the 2010 nine months.  The average per Mcfe sales price decreased 2% for the 2011 nine months to $4.90 as compared to $4.99 for the 2010 nine months.  The pre-tax gain (realized and unrealized) on derivative contracts in the 2011 nine months was $332,183, compared to a $5,410,714 gain for the 2010 period.  The decrease in 2011 derivative contracts gain as compared to the 2010 nine-months gain was the primary factor for the decrease in 2011 nine-month revenues and net income.

MANAGEMENT COMMENTS

Michael C. Coffman, President and CEO said, "Panhandle continues to demonstrate that our low cost structure and our core strategy of drilling on our owned mineral acreage allows us to be profitable even during this low natural gas price environment.  Our oil and gas sales revenue is currently generated approximately 74% from natural gas sales, 21% from oil sales and 5% from natural gas liquids sales.  We are focusing our drilling capital on oil and natural gas liquids-rich projects and as industry wide drilling continues to shift to these projects, our revenue from these projects will increase and add to our profitability."

Coffman continued:  "Our cash flow remains strong and was in excess of capital expenditures through the nine months of 2011, which allows Panhandle to remain debt-free.  We expect capital expenditures for drilling expenditures to continue to increase in the coming quarters.  Further, our strong balance sheet and cash flow provide the Company with sufficient capital to invest in additional opportunities to increase shareholder value.  As a result we are allocating capital to add to our mineral acreage ownership through strategic purchases of additional fee mineral acreage including acreage in established shale gas plays."

OPERATIONS UPDATE

Paul Blanchard, Senior Vice President and COO said, "We continue to receive increasing numbers of drilling proposals in the oil and liquids-rich plays of Western Oklahoma, which reflects the ongoing acceleration of drilling activity on our mineral acreage.  We are on track to more than double our drilling capital expenditures for fiscal 2011 as compared to 2010.  The 2% decline in production thus far in 2011 is attributable to the dramatic drop in capital expenditures in late 2009 and 2010.  We believe this highlights the strength of our mineral acreage in that the dramatic decrease in capital expenditures and drilling activity in 2009 and 2010 is reflected in a relatively modest 2% production decrease.  Our increasing capital expenditure level in 2011 will translate in production increasing as these new wells are drilled and new production comes on line."

Blanchard continued:  "In addition to capital expenditures for drilling and equipping wells, we have begun an acquisition program to purchase additional mineral acreage in our major activity areas of the Fayetteville Shale, the Southeastern Oklahoma Woodford Shale and in Western Oklahoma, including the Cana Woodford Shale and the horizontal Granite Wash plays.  This is a carefully considered strategy in which we are pursuing additional mineral acreage principally in gas plays to position the Company for what we believe will be improving gas market conditions in the coming years.  We expect to ramp up our mineral rights acquisition effort for the remainder of this year and to continue this acquisition program through fiscal 2012."

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.  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.