PHX Minerals Reports Results for the Quarter Ended June 30, 2023; Announces Dividend Payment
FORT WORTH, Texas, Aug. 8, 2023 /PRNewswire/ -- PHX MINERALS INC., "PHX" or the "Company" (NYSE: PHX), today reported financial and operating results for the quarter ended June 30, 2023.
Summary of Results for the Quarter Ended June 30, 2023
- Net loss was ($0.04) million, or $0.00 per share, compared to net income of $9.6 million, or $0.27 per share, for the quarter ended March 31, 2023, and net income of $8.6 million, or $0.25 per share, for the quarter ended June 30, 2022.
- Adjusted pretax net income(1) was $0.6 million, or $0.02 per share, compared to $4.7 million, or $0.13 per share, for the quarter ended March 31, 2023, and $4.3 million, or $0.12 per share, for the quarter ended June 30, 2022.
- Adjusted EBITDA(1) was $4.1 million, compared to $7.7 million for the quarter ended March 31, 2023, and $7.2 million for the quarter ended June 30, 2022.
- Royalty production volumes decreased 4% to 2,010 Mmcfe compared to the quarter ended March 31, 2023, and increased 26% compared to the quarter ended June 30, 2022.
- Total production volumes decreased 7% to 2,304 Mmcfe compared to the quarter ended March 31, 2023, and decreased 5% compared to the quarter ended June 30, 2022.
- Converted 81 gross (0.30 net) wells to producing status, compared to 117 gross (0.46 net) during the quarter ended March 31, 2023 and 96 gross (0.25 net) during the quarter ended June 30, 2022.
- Inventory of 186 gross (0.51 net) wells in progress and 86 gross (0.40 net) permits as of June 30, 2023, compared to 198 gross (0.65 net) wells in progress and 86 gross (0.24 net) permits as of March 31, 2023.
- Total debt was $23.8 million and the debt to adjusted EBITDA (TTM) (1) ratio was 0.93x at June 30, 2023.
- PHX closed on acquisitions totaling 151 net royalty acres located in the SCOOP and the Haynesville plays for approximately $1.8 million.
- PHX announced a $0.0225 per share quarterly dividend, payable on Sept. 8, 2023, to stockholders of record as of Aug. 24, 2023.
(1) This is a non-GAAP measure. Refer to the Non-GAAP Reconciliation section.
Chad L. Stephens, President and CEO, commented, "We continue to experience significant activity on our minerals including wells being put on production, new wells being spud and new permitting, demonstrating the quality of our assets even during a down market with lower natural gas prices. During the quarter, we experienced increased rig activity on our minerals compared to a year ago, expanding our market share of rigs operating within our core regions. The sequential decline in royalty volumes during the quarter is primarily attributable to the timing of wells being placed online. We continually monitor operator activity across our mineral position and are confident that the timing of our wells in progress will support our royalty volume growth allowing us to achieve our royalty volume outlook for calendar 2023, driving revenue growth and increasing cash flow.
"It appears the second quarter likely represented the bottom for natural gas prices and current macro dynamics suggest sequential price improvements in the remainder of the year," said Stephens. "In spite of a dramatic drop in natural gas prices in the second quarter, PHX Minerals remained focused on proactively allocating its free cash flow to fund acquisitions, return capital to shareholders via our fixed dividend and improving our liquidity position. This speaks to the inherent benefits of our business model in mitigating risks and expanding margins to maximize cash flow. The acquisition market dynamics are improving as natural gas prices stabilize. Our strong balance sheet and cash flow provide ample liquidity to deploy judiciously to fund our growth strategy."
Financial Highlights | ||||||||||||||||
Three Months | Three Months | Six Months | Six Months | |||||||||||||
June 30, 2023 | June 30, 2022 | June 30, 2023 | June 30, 2022 | |||||||||||||
Royalty Interest Sales | $ | 6,217,663 | $ | 12,473,415 | $ | 16,341,404 | $ | 21,352,409 | ||||||||
Working Interest Sales | $ | 1,013,501 | $ | 7,088,153 | $ | 2,747,007 | $ | 12,993,024 | ||||||||
Natural Gas, Oil and NGL Sales | $ | 7,231,164 | $ | 19,561,568 | $ | 19,088,411 | $ | 34,345,433 | ||||||||
Gains (Losses) on Derivative Contracts | $ | 183,006 | $ | (2,387,226) | $ | 3,985,826 | $ | (15,370,632) | ||||||||
Lease Bonuses and Rental Income | $ | 111,991 | $ | 209,329 | $ | 425,141 | $ | 371,237 | ||||||||
Total Revenue | $ | 7,526,161 | $ | 17,383,671 | $ | 23,499,378 | $ | 19,346,038 | ||||||||
Lease Operating Expense | ||||||||||||||||
per Working Interest Mcfe | $ | 1.07 | $ | 1.08 | $ | 1.26 | $ | 1.05 | ||||||||
Transportation, Gathering and Marketing | ||||||||||||||||
per Mcfe | $ | 0.39 | $ | 0.59 | $ | 0.43 | $ | 0.60 | ||||||||
Production Tax per Mcfe | $ | 0.20 | $ | 0.38 | $ | 0.22 | $ | 0.33 | ||||||||
G&A Expense per Mcfe | $ | 1.38 | $ | 1.18 | $ | 1.29 | $ | 1.15 | ||||||||
Cash G&A Expense per Mcfe (1) | $ | 1.07 | $ | 0.95 | $ | 1.01 | $ | 0.94 | ||||||||
Interest Expense per Mcfe | $ | 0.23 | $ | 0.12 | $ | 0.23 | $ | 0.11 | ||||||||
DD&A per Mcfe | $ | 0.96 | $ | 0.83 | $ | 0.86 | $ | 0.85 | ||||||||
Total Expense per Mcfe | $ | 3.30 | $ | 3.47 | $ | 3.21 | $ | 3.41 | ||||||||
Net Income (Loss) | $ | (41,291) | $ | 8,589,010 | $ | 9,511,953 | $ | 4,568,555 | ||||||||
Adjusted EBITDA (2) | $ | 4,086,707 | $ | 7,194,102 | $ | 11,826,947 | $ | 13,013,517 | ||||||||
Cash Flow from Operations (3) | $ | 4,915,788 | $ | 8,404,654 | $ | 13,849,265 | $ | 15,700,984 | ||||||||
CapEx (4) | $ | 84,593 | $ | 72,176 | $ | 275,419 | $ | 158,847 | ||||||||
CapEx - Mineral Acquisitions | $ | 1,677,388 | $ | 8,954,133 | $ | 11,914,003 | $ | 18,228,580 | ||||||||
Borrowing Base | $ | 45,000,000 | $ | 50,000,000 | ||||||||||||
Debt | $ | 23,750,000 | $ | 28,300,000 | ||||||||||||
Debt to Adjusted EBITDA (TTM) (2) | 0.93 | 1.31 | ||||||||||||||
(1) | Cash G&A expense is G&A excluding restricted stock and deferred director's expense from the adjusted EBITDA table in the non-GAAP Reconciliation section. |
(2) | This is a non-GAAP measure. Refer to the Non-GAAP Reconciliation section. |
(3) | GAAP cash flow from operations. |
(4) | Includes legacy working interest expenditures and fixtures and equipment. |
Operating Highlights | |||||||||||||||
Three Months Ended | Three Months Ended | Six Months Ended | Six Months Ended | ||||||||||||
June 30, 2023 | June 30, 2022 | June 30, 2023 | June 30, 2022 | ||||||||||||
Gas Mcf Sold | 1,854,485 | 1,897,799 | 3,813,496 | 3,805,829 | |||||||||||
Average Sales Price per Mcf before the | |||||||||||||||
effects of settled derivative contracts | $ | 1.92 | $ | 6.82 | $ | 2.75 | $ | 5.65 | |||||||
Average Sales Price per Mcf after the | |||||||||||||||
effects of settled derivative contracts | $ | 2.49 | $ | 4.32 | $ | 3.18 | $ | 3.80 | |||||||
% of sales subject to hedges | 45 | % | 63 | % | 47 | % | 62 | % | |||||||
Oil Barrels Sold | 41,009 | 48,928 | 95,116 | 100,559 | |||||||||||
Average Sales Price per Bbl before the | |||||||||||||||
effects of settled derivative contracts | $ | 73.87 | $ | 105.23 | $ | 75.09 | $ | 98.06 | |||||||
Average Sales Price per Bbl after the | |||||||||||||||
effects of settled derivative contracts | $ | 73.80 | $ | 60.18 | $ | 71.58 | $ | 62.02 | |||||||
% of sales subject to hedges | 53 | % | 73 | % | 49 | % | 73 | % | |||||||
NGL Barrels Sold | 33,929 | 39,732 | 67,033 | 80,103 | |||||||||||
Average Sales Price per Bbl(1) | $ | 18.93 | $ | 36.76 | $ | 22.02 | $ | 37.41 | |||||||
Mcfe Sold | 2,304,113 | 2,429,760 | 4,786,390 | 4,889,802 | |||||||||||
Natural gas, oil and NGL sales before the | |||||||||||||||
effects of settled derivative contracts | $ | 7,231,164 | $ | 19,561,568 | $ | 19,088,411 | $ | 34,345,433 | |||||||
Natural gas, oil and NGL sales after the | |||||||||||||||
effects of settled derivative contracts | $ | 8,280,104 | $ | 12,607,397 | $ | 20,394,028 | $ | 23,687,014 | |||||||
(1) There were no NGL settled derivative contracts during the 2023 and 2022 quarters. | |||||||||||||||
Total Production for the last four quarters was as follows:
Quarter ended | Mcf Sold | Oil Bbls Sold | NGL Bbls Sold | Mcfe Sold | ||||||||||||
6/30/2023 | 1,854,485 | 41,009 | 33,929 | 2,304,113 | ||||||||||||
3/31/2023 | 1,959,010 | 54,107 | 33,104 | 2,482,276 | ||||||||||||
12/31/2022 | 1,669,320 | 52,406 | 38,611 | 2,215,419 | ||||||||||||
9/30/2022 | 2,047,614 | 49,902 | 40,761 | 2,591,588 | ||||||||||||
Total production volumes attributable to natural gas were 80% for the quarter ended June 30, 2023.
Royalty Interest Production for the last four quarters was as follows:
Quarter ended | Mcf Sold | Oil Bbls Sold | NGL Bbls Sold | Mcfe Sold | ||||||||||||
6/30/2023 | 1,673,346 | 35,599 | 20,516 | 2,010,036 | ||||||||||||
3/31/2023 | 1,700,974 | 45,395 | 20,063 | 2,093,722 | ||||||||||||
12/31/2022 | 1,303,825 | 33,691 | 20,353 | 1,628,089 | ||||||||||||
9/30/2022 | 1,525,363 | 32,202 | 20,488 | 1,841,502 | ||||||||||||
Royalty production volumes attributable to natural gas were 83% for the quarter ended June 30, 2023.
Working Interest Production for the last four quarters was as follows:
Quarter ended | Mcf Sold | Oil Bbls Sold | NGL Bbls Sold | Mcfe Sold | ||||||||||||
6/30/2023 | 181,139 | 5,410 | 13,413 | 294,077 | ||||||||||||
3/31/2023 | 258,036 | 8,712 | 13,041 | 388,554 | ||||||||||||
12/31/2022 | 365,495 | 18,715 | 18,258 | 587,330 | ||||||||||||
9/30/2022 | 522,251 | 17,700 | 20,273 | 750,086 | ||||||||||||
Quarter Ended June 30, 2023, Results
The Company recorded net loss of ($0.04) million, or $0.00 per share, for the quarter ended June 30, 2023, as compared to net income of $8.6 million, or $0.25 per share, for the quarter ended June 30, 2022. The change in net income was principally the result of a decrease in natural gas, oil and NGL sales and a decrease in gains on asset sales, partially offset by an increase in gains associated with our hedge contracts and a decrease in income tax provision.
Natural gas, oil and NGL revenue decreased $12.3 million, or 63%, for the quarter ended June 30, 2023, compared to the quarter ended June 30, 2022, due to decreases in natural gas, oil and NGL prices of 72%, 30% and 49%, respectively, and decreases in natural gas, oil and NGL volumes of 2%, 16% and 15%, respectively.
The production increase in royalty volumes during the quarter ended June 30, 2023, as compared to the quarter ended June 30, 2022, resulted from new wells in the Haynesville Shale coming online.
The Company had a net gain on derivative contracts of $0.2 million for the quarter ended June 30, 2023, compromised of a $1.0 million gain on settled derivatives and a $0.9 million non-cash loss on derivatives, as compared to a net loss of ($2.4) million for the quarter ended June 30, 2022. The change in net gain on derivative contracts was due to the Company's settlements of natural gas and oil collars and fixed price swaps and the change in valuation caused by the difference in June 30, 2023 pricing relative to the strike price on open derivative contracts.
Six Months Ended June 30, 2023, Results
The Company recorded net income of $9.5 million, or $0.26 per share, for the six months ended June 30, 2023, as compared to a net income of $4.6 million, or $0.13 per share, for the six months ended June 30, 2022. The change in net income was principally the result of an increase in gains associated with our hedge contracts and an increase in gains on asset sales, partially offset by a decrease in natural gas, oil and NGL sales and an increase in income tax provision.
Natural gas, oil and NGL revenue decreased $15.3 million, or 44%, for the six months ended June 30, 2023, compared to the six months ended June 30, 2022, due to decreases in natural gas, oil and NGL prices of 51%, 23% and 41%, respectively, and decreases in oil and NGL volumes of 5% and 16%, respectively.
The production increase in royalty volumes during the six months ended June 30, 2023, as compared to the six months ended June 30, 2022, resulted from new wells in the Haynesville Shale coming online.
The Company had a net gain on derivative contracts of $4.0 million for the six months ended June 30, 2023, compromised of a $1.7 million gain on settled derivatives and a $2.3 million non-cash gain on derivatives, as compared to a net loss of ($15.4) million for the six months ended June 30, 2022. Gain on settled derivative contracts for the six months ended June 30, 2023, excludes $0.4 million of cash paid to settle off-market derivative contracts. The total cash received to settle hedge contracts during the six months ended June 30, 2023 was $1.3 million. The change in net gain on derivative contracts was due to the Company's settlements of natural gas and oil collars and fixed price swaps and the change in valuation caused by the difference in June 30, 2023 pricing relative to the strike price on open derivative contracts.
Operations Update
During the quarter ended June 30, 2023, the Company converted 81 gross (0.30 net) wells to producing status, including 26 gross (0.20 net) wells in the Haynesville and 20 gross (0.06 net) wells in the SCOOP, compared to 96 gross (0.25 net) wells in the quarter ended June 30, 2022.
At June 30, 2023, the Company had a total of 186 gross (0.51 net) wells in progress across its mineral positions and 86 gross (0.40 net) active permitted wells, compared to 198 gross (0.65 net) wells in progress and 86 gross (0.24 net) active permitted wells at March 31, 2023. As of July 10, 2023, 15 rigs were operating on the Company's acreage and 61 rigs operating within 2.5 miles of its acreage.
Bakken/ | |||||||||||||||||||||||||||
Three | Arkoma | ||||||||||||||||||||||||||
SCOOP | STACK | Forks | Stack | Haynesville | Other | Total | |||||||||||||||||||||
As of June 30, 2023: | |||||||||||||||||||||||||||
Gross Wells in Progress on PHX Acreage (1) | 68 | 12 | 8 | 5 | 84 | 9 | 186 | ||||||||||||||||||||
Net Wells in Progress on PHX Acreage (1) | 0.174 | 0.025 | 0.001 | 0.001 | 0.284 | 0.028 | 0.513 | ||||||||||||||||||||
Gross Active Permits on PHX Acreage | 30 | 11 | 13 | 5 | 21 | 6 | 86 | ||||||||||||||||||||
Net Active Permits on PHX Acreage | 0.115 | 0.046 | 0.049 | 0.002 | 0.161 | 0.025 | 0.398 | ||||||||||||||||||||
As of July 10, 2023: | |||||||||||||||||||||||||||
Rigs Present on PHX Acreage | 5 | 2 | - | - | 8 | - | 15 | ||||||||||||||||||||
Rigs Within 2.5 Miles of PHX Acreage | 12 | 15 | 3 | 1 | 23 | 7 | 61 | ||||||||||||||||||||
(1) | Wells in progress includes drilling wells and drilled but uncompleted wells, or DUCs. |
Leasing Activity
During the quarter ended June 30, 2023, the Company leased 367 net mineral acres for an average bonus payment of $526 per net mineral acre and an average royalty of 23%.
Acquisition and Divestiture Update
During the quarter ended June 30, 2023, the Company purchased 151 net royalty acres for approximately $1.8 million and had no significant divestitures.
Acquisitions | ||||||||||||||||
SCOOP | Haynesville | Other | Total | |||||||||||||
During Three Months Ended June 30, 2023: | ||||||||||||||||
Net Mineral Acres Purchased | 113 | 5 | - | 118 | ||||||||||||
Net Royalty Acres Purchased | 144 | 7 | - | 151 | ||||||||||||
Outlook
PHX is providing an updated operational outlook for 2023 as follows:
Calendar Year 2022 | Calendar Year 2023 | Calendar Year 2023 | ||||
Mineral & Royalty Production (Mmcfe) | 6,613 | 4,104 | 7,600 - 8,600 | |||
Working Interest Production (Mmcfe) | 3,084 | 683 | 1,200 - 1,400(1) | |||
Total Production (Mmcfe) | 9,697 | 4,787 | 8,800 - 10,000 | |||
Percentage Natural Gas | 78 % | 80 % | 78% - 83% | |||
Transportation, Gathering & Marketing (per Mcfe) | $0.63 | $0.43 | $0.45 - $0.50 | |||
Production Tax (as % of pre-hedge sales volumes) | 4.50 % | 5.50 % | 5.50% - 6.00% | |||
LOE Expenses (on an absolute basis in 000's) | $3,807 | $860 | $1,200 - $1,400 | |||
Cash G&A (per Mcfe) | $1.01 | $1.01 | $1.00 - $1.06 |
(1) | Pro-forma divestitures of Eagle Ford and Arkoma working interest assets, excludes potential future sales of additional working interest assets. |
Quarterly Conference Call
PHX will host a conference call to discuss the Company's results for the quarter ended June 30, 2023, at 11 a.m. EDT tomorrow, Aug. 9, 2023. Management's discussion will be followed by a question-and-answer session with investors.
To participate on the conference call, please dial 877-407-3088 (toll-free domestic) or 201-389-0927. A replay of the call will be available for 14 days after the call. The number to access the replay of the conference call is 877-660-6853 and the PIN for the replay is 13740305.
A live audio webcast of the conference call will be accessible from the "Investors" section of PHX's website at https://phxmin.com/events. The webcast will be archived for at least 90 days.
FINANCIAL RESULTS | |||||||||||||||
Statements of Operations | |||||||||||||||
Three Months Ended June 30, | Six Months Ended June 30, | ||||||||||||||
2023 | 2022 | 2023 | 2022 | ||||||||||||
Revenues: | |||||||||||||||
Natural gas, oil and NGL sales | $ | 7,231,164 | $ | 19,561,568 | $ | 19,088,411 | $ | 34,345,433 | |||||||
Lease bonuses and rental income | 111,991 | 209,329 | 425,141 | 371,237 | |||||||||||
Gains (losses) on derivative contracts | 183,006 | (2,387,226) | 3,985,826 | (15,370,632) | |||||||||||
7,526,161 | 17,383,671 | 23,499,378 | 19,346,038 | ||||||||||||
Costs and expenses: | |||||||||||||||
Lease operating expenses | 314,150 | 900,807 | 859,917 | 1,830,261 | |||||||||||
Transportation, gathering and marketing | 906,373 | 1,430,136 | 2,035,129 | 2,918,654 | |||||||||||
Production taxes | 461,893 | 925,197 | 1,043,326 | 1,622,590 | |||||||||||
Depreciation, depletion and amortization | 2,210,332 | 2,022,832 | 4,100,322 | 4,143,948 | |||||||||||
Provision for impairment | - | 6,277 | 2,073 | 6,277 | |||||||||||
Interest expense | 524,294 | 286,345 | 1,081,767 | 516,557 | |||||||||||
General and administrative | 3,177,103 | 2,877,614 | 6,159,012 | 5,621,878 | |||||||||||
Losses (gains) on asset sales and other | 139,307 | (630,547) | (4,195,121) | (2,891,682) | |||||||||||
Total costs and expenses | 7,733,452 | 7,818,661 | 11,086,425 | 13,768,483 | |||||||||||
Income (loss) before provision (benefit) for income taxes | (207,291) | 9,565,010 | 12,412,953 | 5,577,555 | |||||||||||
Provision (benefit) for income taxes | (166,000) | 976,000 | 2,901,000 | 1,009,000 | |||||||||||
Net income (loss) | $ | (41,291) | $ | 8,589,010 | $ | 9,511,953 | $ | 4,568,555 | |||||||
Basic and diluted earnings (loss) per common share | $ | (0.00) | $ | 0.25 | $ | 0.26 | $ | 0.13 | |||||||
Weighted average shares outstanding: | |||||||||||||||
Basic | 35,965,281 | 34,652,155 | 35,950,615 | 34,473,247 | |||||||||||
Diluted | 35,965,281 | 34,851,214 | 36,034,438 | 34,473,247 | |||||||||||
Dividends per share of | |||||||||||||||
common stock paid in period | $ | 0.0225 | $ | 0.02 | $ | 0.045 | $ | 0.035 | |||||||
Balance Sheets | |||||||
June 30, 2023 | Dec. 31, 2022 | ||||||
Assets | |||||||
Current assets: | |||||||
Cash and cash equivalents | $ | 1,267,627 | $ | 2,115,652 | |||
Natural gas, oil, and NGL sales receivables (net of $0 | 5,839,904 | 9,783,996 | |||||
allowance for uncollectable accounts) | |||||||
Refundable income taxes | 675,268 | - | |||||
Derivative contracts, net | 1,371,377 | - | |||||
Held for sale assets | - | 6,420,051 | |||||
Other | 370,896 | 1,543,956 | |||||
Total current assets | 9,525,072 | 19,863,655 | |||||
Properties and equipment at cost, based on | |||||||
successful efforts accounting: | |||||||
Producing natural gas and oil properties | 189,868,020 | 181,431,139 | |||||
Non-producing natural gas and oil properties | 61,180,555 | 57,781,644 | |||||
Other | 1,347,124 | 1,122,436 | |||||
252,395,699 | 240,335,219 | ||||||
Less accumulated depreciation, depletion and amortization | (110,426,239) | (107,085,212) | |||||
Net properties and equipment | 141,969,460 | 133,250,007 | |||||
Derivative contracts, net | - | 141,345 | |||||
Operating lease right-of-use assets | 640,799 | 706,871 | |||||
Other, net | 596,874 | 695,399 | |||||
Total assets | $ | 152,732,205 | $ | 154,657,277 | |||
Liabilities and Stockholders' Equity | |||||||
Current liabilities: | |||||||
Accounts payable | $ | 270,780 | $ | 504,466 | |||
Derivative contracts, net | - | 1,534,034 | |||||
Income taxes payable | - | 576,427 | |||||
Current portion of operating lease liability | 226,389 | 217,656 | |||||
Held for sale liabilities | - | 889,155 | |||||
Accrued liabilities and other | 1,342,795 | 3,121,522 | |||||
Total current liabilities | 1,839,964 | 6,843,260 | |||||
Long-term debt | 23,750,000 | 33,300,000 | |||||
Deferred income taxes, net | 5,132,906 | 2,453,906 | |||||
Asset retirement obligations | 1,041,177 | 1,027,777 | |||||
Derivative contracts, net | 83,857 | - | |||||
Operating lease liability, net of current portion | 814,169 | 929,208 | |||||
Total liabilities | 32,662,073 | 44,554,151 | |||||
Stockholders' equity: | |||||||
Common Stock, $0.01666 par value; 54,000,500 shares authorized and | |||||||
35,938,900 issued at June 30, 2023; 54,000,500 shares authorized | |||||||
and 35,938,206 issued at Dec. 31, 2022 | 598,742 | 598,731 | |||||
Capital in excess of par value | 43,782,600 | 43,344,916 | |||||
Deferred directors' compensation | 1,368,956 | 1,541,070 | |||||
Retained earnings | 77,555,195 | 68,925,774 | |||||
123,305,493 | 114,410,491 | ||||||
Less treasury stock, at cost; 225,723 shares at June 30, | |||||||
2023, and 300,272 shares at Dec. 31, 2022 | (3,235,361) | (4,307,365) | |||||
Total stockholders' equity | 120,070,132 | 110,103,126 | |||||
Total liabilities and stockholders' equity | $ | 152,732,205 | $ | 154,657,277 | |||
Condensed Statements of Cash Flows | |||||||
Six Months Ended June 30, | |||||||
2023 | 2022 | ||||||
Operating Activities | |||||||
Net income (loss) | $ | 9,511,953 | $ | 4,568,555 | |||
Adjustments to reconcile net income (loss) to net cash provided | |||||||
by operating activities: | |||||||
Depreciation, depletion and amortization | 4,100,322 | 4,143,948 | |||||
Impairment of producing properties | 2,073 | 6,277 | |||||
Provision for deferred income taxes | 2,679,000 | (159,000) | |||||
Gain from leasing fee mineral acreage | (425,141) | (370,131) | |||||
Proceeds from leasing fee mineral acreage | 488,173 | 450,881 | |||||
Net (gain) loss on sales of assets | (4,428,212) | (3,028,394) | |||||
Directors' deferred compensation expense | 109,383 | 79,728 | |||||
Total (gain) loss on derivative contracts | (3,985,826) | 15,370,632 | |||||
Cash receipts (payments) on settled derivative contracts | 1,865,779 | (1,215,245) | |||||
Restricted stock award expense | 1,228,871 | 963,203 | |||||
Other | 70,526 | 18,515 | |||||
Cash provided (used) by changes in assets and liabilities: | |||||||
Natural gas, oil and NGL sales receivables | 3,944,092 | (3,760,490) | |||||
Other current assets | 405,055 | 247,518 | |||||
Accounts payable | (228,305) | (155,410) | |||||
Income taxes receivable | (675,268) | (860,416) | |||||
Other non-current assets | 95,283 | (403,745) | |||||
Income taxes payable | (576,427) | (499,939) | |||||
Accrued liabilities | (332,066) | 304,497 | |||||
Total adjustments | 4,337,312 | 11,132,429 | |||||
Net cash provided by operating activities | 13,849,265 | 15,700,984 | |||||
Investing Activities | |||||||
Capital expenditures | (275,419) | (158,847) | |||||
Acquisition of minerals and overriding royalty interests | (11,914,003) | (18,228,580) | |||||
Net proceeds from sales of assets | 9,223,405 | 3,265,897 | |||||
Net cash provided (used) by investing activities | (2,966,017) | (15,121,530) | |||||
Financing Activities | |||||||
Borrowings under credit facility | 6,000,000 | 10,300,000 | |||||
Payments of loan principal | (15,550,000) | (2,000,000) | |||||
Net proceeds from equity issuance | - | 4,702,619 | |||||
Cash receipts from (payments on) off-market derivative contracts | (560,162) | (9,443,174) | |||||
Purchases of treasury stock | (669) | - | |||||
Payments of dividends | (1,620,442) | (1,208,967) | |||||
Net cash provided (used) by financing activities | (11,731,273) | 2,350,478 | |||||
Increase (decrease) in cash and cash equivalents | (848,025) | 2,929,932 | |||||
Cash and cash equivalents at beginning of period | 2,115,652 | 1,559,350 | |||||
Cash and cash equivalents at end of period | $ | 1,267,627 | $ | 4,489,282 | |||
Supplemental Disclosures of Cash Flow Information: | |||||||
Interest paid (net of capitalized interest) | $ | 1,155,637 | $ | 487,487 | |||
Income taxes paid (net of refunds received) | $ | 1,473,696 | $ | 2,528,356 | |||
Supplemental Schedule of Noncash Investing and Financing Activities: | |||||||
Gross additions to properties and equipment | $ | 12,952,046 | $ | 18,248,046 | |||
Net increase (decrease) in accounts receivable for properties | |||||||
and equipment additions | (762,624) | 139,381 | |||||
Capital expenditures and acquisitions | $ | 12,189,422 | $ | 18,387,427 | |||
Proved Reserves | |||||||
Proved Reserves SEC Pricing | |||||||
June 30, 2023 | Sept. 30, 2022 | ||||||
Proved Developed Reserves: | |||||||
Mcf of Gas | 46,258,075 | 50,304,185 | |||||
Barrels of Oil | 979,110 | 1,275,853 | |||||
Barrels of NGL | 1,456,785 | 1,698,046 | |||||
Mcfe (1) | 60,873,448 | 68,147,579 | |||||
Proved Undeveloped Reserves: | |||||||
Mcf of Gas | 6,484,678 | 11,933,021 | |||||
Barrels of Oil | 90,075 | 106,924 | |||||
Barrels of NGL | 119,268 | 64,637 | |||||
Mcfe (1) | 7,740,736 | 12,962,387 | |||||
Total Proved Reserves: | |||||||
Mcf of Gas | 52,742,753 | 62,237,206 | |||||
Barrels of Oil | 1,069,185 | 1,382,777 | |||||
Barrels of NGL | 1,576,053 | 1,762,683 | |||||
Mcfe (1) | 68,614,184 | 81,109,966 | |||||
10% Discounted Estimated Future | |||||||
Net Cash Flows (before income taxes): | |||||||
Proved Developed | $ | 135,258,962 | $ | 184,948,239 | |||
Proved Undeveloped | 22,990,870 | 52,978,389 | |||||
Total | $ | 158,249,832 | $ | 237,926,628 | |||
SEC Pricing | |||||||
Gas/Mcf | $ | 4.63 | $ | 6.41 | |||
Oil/Barrel | $ | 82.41 | $ | 90.33 | |||
NGL/Barrel | $ | 31.24 | $ | 38.09 | |||
Proved Reserves - Projected Future Pricing (2) | |||||||
10% Discounted Estimated Future | Proved Reserves | ||||||
Net Cash Flows (before income taxes): | June 30, 2023 | Sept. 30, 2022 | |||||
Proved Developed | $ | 102,982,498 | $ | 128,718,584 | |||
Proved Undeveloped | 17,361,221 | 39,770,031 | |||||
Total | $ | 120,343,719 | $ | 168,488,615 | |||
(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) Projected futures pricing as of June 30, 2023, and Sept. 30, 2022 (the Company's fiscal year-end prior to adoption of December 31 as fiscal year-end), basis adjusted to Company wellhead price. | |||||||
Derivative Contracts as of July 20, 2023 | ||||||
Production volume | ||||||
Contract period | covered per month | Index | Contract price | |||
Natural gas costless collars | ||||||
July - December 2023 | 20,000 Mmbtu | NYMEX Henry Hub | $3.00 floor / $4.70 ceiling | |||
July - September 2023 | 75,000 Mmbtu | NYMEX Henry Hub | $3.50 floor / $7.00 ceiling | |||
October - December 2023 | 25,000 Mmbtu | NYMEX Henry Hub | $3.50 floor / $7.00 ceiling | |||
November 2023 - March 2024 | 30,000 Mmbtu | NYMEX Henry Hub | $3.25 floor / $5.25 ceiling | |||
December 2023 - September 2024 | 30,000 Mmbtu | NYMEX Henry Hub | $3.00 floor / $3.60 ceiling | |||
January 2024 | 135,000 Mmbtu | NYMEX Henry Hub | $4.50 floor / $7.90 ceiling | |||
February 2024 | 125,000 Mmbtu | NYMEX Henry Hub | $4.50 floor / $7.90 ceiling | |||
March 2024 | 130,000 Mmbtu | NYMEX Henry Hub | $4.50 floor / $7.90 ceiling | |||
April 2024 | 90,000 Mmbtu | NYMEX Henry Hub | $3.50 floor / $4.70 ceiling | |||
May 2024 | 95,000 Mmbtu | NYMEX Henry Hub | $3.50 floor / $4.70 ceiling | |||
June 2024 | 90,000 Mmbtu | NYMEX Henry Hub | $3.50 floor / $4.70 ceiling | |||
January - March 2024 | 30,000 Mmbtu | NYMEX Henry Hub | $3.00 floor / $6.00 ceiling | |||
October 2024 - June 2025 | 30,000 Mmbtu | NYMEX Henry Hub | $3.00 floor / $5.00 ceiling | |||
November 2024 - March 2025 | 90,000 Mmbtu | NYMEX Henry Hub | $3.25 floor / $5.25 ceiling | |||
Natural gas fixed price swaps | ||||||
July - December 2023 | 100,000 Mmbtu | NYMEX Henry Hub | $3.37 | |||
July - December 2023 | 20,000 Mmbtu | NYMEX Henry Hub | $3.57 | |||
July - October 2023 | 20,000 Mmbtu | NYMEX Henry Hub | $3.58 | |||
July - October 2023 | 50,000 Mmbtu | NYMEX Henry Hub | $2.52 | |||
April - June 2024 | 10,000 Mmbtu | NYMEX Henry Hub | $3.21 | |||
April - October 2024 | 50,000 Mmbtu | NYMEX Henry Hub | $3.17 | |||
July - October 2024 | 75,000 Mmbtu | NYMEX Henry Hub | $3.47 | |||
July - October 2024 | 25,000 Mmbtu | NYMEX Henry Hub | $3.47 | |||
Oil costless collars | ||||||
January 2024 | 1,850 Bbls | NYMEX WTI | $63.00 floor / $76.00 ceiling | |||
February 2024 | 1,700 Bbls | NYMEX WTI | $63.00 floor / $76.00 ceiling | |||
March 2024 | 1,750 Bbls | NYMEX WTI | $63.00 floor / $76.00 ceiling | |||
April 2024 | 1,700 Bbls | NYMEX WTI | $63.00 floor / $76.00 ceiling | |||
May 2024 | 1,750 Bbls | NYMEX WTI | $63.00 floor / $76.00 ceiling | |||
June 2024 | 1,650 Bbls | NYMEX WTI | $63.00 floor / $76.00 ceiling | |||
January - March 2024 | 1,650 Bbls | NYMEX WTI | $65.00 floor / $76.50 ceiling | |||
April - June 2024 | 500 Bbls | NYMEX WTI | $65.00 floor / $76.50 ceiling | |||
July - October 2024 | 1,650 Bbls | NYMEX WTI | $65.00 floor / $76.50 ceiling | |||
Oil fixed price swaps | ||||||
July - December 2023 | 1,500 Bbls | NYMEX WTI | $67.55 | |||
July - December 2023 | 750 Bbls | NYMEX WTI | $70.05 | |||
July - December 2023 | 1,500 Bbls | NYMEX WTI | $80.80 | |||
July - December 2023 | 1,000 Bbls | NYMEX WTI | $80.74 | |||
December 2023 - March 2024 | 750 Bbls | NYMEX WTI | $71.75 | |||
April - October 2024 | 1,000 Bbls | NYMEX WTI | $66.10 | |||
April - June 2024 | 1,300 Bbls | NYMEX WTI | $70.59 | |||
November 2024 - March 2025 | 1,600 Bbls | NYMEX WTI | $64.80 | |||
April - June 2025 | 1,000 Bbls | NYMEX WTI | $68.00 | |||
Non-GAAP Reconciliation
This press release includes certain "non-GAAP financial measures" as defined under the rules and regulations of the U.S. Securities and Exchange Commission, or the SEC, including Regulation G. These non-GAAP financial measures are calculated using GAAP amounts in the Company's financial statements. These measures, detailed below, are provided in addition to, not as an alternative for, and should be read in conjunction with, the information contained in the Company's financial statements prepared in accordance with GAAP (including the notes thereto), included in the Company's SEC filings and posted on its website.
Adjusted EBITDA Reconciliation
The Company defines "adjusted EBITDA" as earnings before interest, taxes, depreciation and amortization, or EBITDA, excluding non-cash gains (losses) on derivatives and gains (losses) on asset sales and including cash receipts from (payments on) off-market derivatives and restricted stock and deferred directors' expense. The Company has included a presentation of adjusted EBITDA because it recognizes that certain investors consider this amount to be a useful means of measuring the Company's ability to meet its debt service obligations and evaluating its financial performance. Adjusted EBITDA has limitations and should not be considered in isolation or as a substitute for net income, operating income, cash flow from operations or other consolidated income or cash flow data prepared in accordance with GAAP. Because not all companies use identical calculations, this presentation of adjusted EBITDA may not be comparable to a similarly titled measure of other companies. The following table provides a reconciliation of net income (loss) to adjusted EBITDA for the quarters indicated:
Three Months | Three Months | Six Months | Six Months | Three Months | |||||||||||||||
June 30, 2023 | June 30, 2022 | June 30, 2023 | June 30, 2022 | March 31, 2023 | |||||||||||||||
Net Income (Loss) | $ | (41,291) | $ | 8,589,010 | $ | 9,511,953 | $ | 4,568,555 | $ | 9,553,244 | |||||||||
Plus: | |||||||||||||||||||
Income tax expense | |||||||||||||||||||
(benefit) | (166,000) | 976,000 | 2,901,000 | 1,009,000 | 3,067,000 | ||||||||||||||
Interest expense | 524,294 | 286,345 | 1,081,767 | 516,557 | 557,473 | ||||||||||||||
DD&A | 2,210,332 | 2,022,832 | 4,100,322 | 4,143,948 | 1,889,990 | ||||||||||||||
Impairment expense | - | 6,277 | 2,073 | 6,277 | 2,073 | ||||||||||||||
Less: | |||||||||||||||||||
Non-cash gains (losses) | |||||||||||||||||||
on derivatives | (865,935) | 3,282,921 | 2,306,464 | (8,489,719) | 3,172,399 | ||||||||||||||
Gains (losses) on asset sales | 10,230 | 693,750 | 4,428,213 | 2,985,965 | 4,417,983 | ||||||||||||||
Plus: | |||||||||||||||||||
Cash receipts from (payments on) | |||||||||||||||||||
off-market derivative contracts(1) | - | (1,284,024) | (373,745) | (3,777,505) | (373,745) | ||||||||||||||
Restricted stock and deferred | |||||||||||||||||||
director's expense | 703,667 | 574,333 | 1,338,254 | 1,042,931 | 634,587 | ||||||||||||||
Adjusted EBITDA | $ | 4,086,707 | $ | 7,194,102 | $ | 11,826,947 | $ | 13,013,517 | $ | 7,740,240 | |||||||||
(1) The initial receipt of $8.8 million of cash from BP Energy Company, or BP, for entering into the off-market derivative contracts had no effect on the Company's statement of operations and was considered cash flow from financing activities. A portion of subsequent settlements with BP had no effect on the Company's statement of operations. | |||||||||||||||||||
Debt to Adjusted EBITDA (TTM) Reconciliation
"Debt to adjusted EBITDA (TTM)" is defined as the ratio of long-term debt to adjusted EBITDA on a trailing 12-month (TTM) basis. The Company has included a presentation of debt to adjusted EBITDA (TTM) because it recognizes that certain investors consider such ratios to be a useful means of measuring the Company's ability to meet its debt service obligations and for evaluating its financial performance. The debt to adjusted EBITDA (TTM) ratio has limitations and should not be considered in isolation or as a substitute for net income, operating income, cash flow from operations or other consolidated income or cash flow data prepared in accordance with GAAP. Because not all companies use identical calculations, this presentation of debt to adjusted EBITDA (TTM) may not be comparable to a similarly titled measure of other companies. The following table provides a reconciliation of net income (loss) to adjusted EBITDA on a TTM basis and of the resulting debt to adjusted EBITDA (TTM) ratio:
TTM Ended | TTM Ended | ||||||
June 30, 2023 | June 30, 2022 | ||||||
Net Income (Loss) | $ | 22,016,554 | $ | 7,486,604 | |||
Plus: | |||||||
Income tax expense (benefit) | 6,313,000 | 2,221,949 | |||||
Interest expense | 2,191,181 | 898,201 | |||||
DD&A | 7,452,846 | 7,297,339 | |||||
Impairment expense | 6,105,472 | 16,482 | |||||
Less: | |||||||
Non-cash gains (losses) | |||||||
on derivatives | 10,211,207 | (815,184) | |||||
Gains (losses) on asset sales | 8,921,031 | 1,112,581 | |||||
Plus: | |||||||
Cash receipts from (payments on) | |||||||
off-market derivative contracts(1) | (2,334,403) | 2,334,403 | |||||
Restricted stock and deferred | |||||||
director's expense | 2,944,517 | 1,691,912 | |||||
Adjusted EBITDA | $ | 25,556,929 | $ | 21,649,493 | |||
Debt | $ | 23,750,000 | $ | 28,300,000 | |||
Debt to Adjusted EBITDA (TTM) | 0.93 | 1.31 | |||||
(1) The initial receipt of $8.8 million of cash from BP for entering into the off-market derivative contracts had no effect on the Company's statement of operations and was considered cash flow from financing activities. A portion of subsequent settlements with BP had no effect on the Company's statement of operations. | |||||||
Adjusted Pretax Net Income (Loss) Reconciliation
"Adjusted pretax net income (loss)" is defined as earnings before taxes and impairment expense, excluding non-cash gains (losses) on derivatives and gains (losses) on asset sales and including cash receipts from (payments on) off-market derivatives. The Company has included a presentation of adjusted pretax net income (loss) because it recognizes that certain investors consider this amount to be a useful means of measuring the Company's ability to meet its debt service obligations and evaluating its financial performance. Adjusted pretax net income (loss) has limitations and should not be considered in isolation or as a substitute for net income, operating income, cash flow from operations or other consolidated income or cash flow data prepared in accordance with GAAP. Because not all companies use identical calculations, this presentation of adjusted pretax net income (loss) may not be comparable to a similarly titled measure of other companies. The following table provides a reconciliation of net income (loss) to adjusted pretax net income (loss) for the periods indicated:
Three Months | Three Months | Six Months | Six Months | Three Months | |||||||||||||||
June 30, 2023 | June 30, 2022 | June 30, 2023 | June 30, 2022 | March 31, 2023 | |||||||||||||||
Net Income (Loss) | $ | (41,291) | $ | 8,589,010 | $ | 9,511,953 | $ | 4,568,555 | $ | 9,553,244 | |||||||||
Plus: | |||||||||||||||||||
Income tax expense (benefit) | (166,000) | 976,000 | 2,901,000 | 1,009,000 | 3,067,000 | ||||||||||||||
Impairment expense | - | 6,277 | 2,073 | 6,277 | 2,073 | ||||||||||||||
Less: | |||||||||||||||||||
Non-cash gains (losses) | |||||||||||||||||||
on derivatives | (865,935) | 3,282,921 | 2,306,464 | (8,489,719) | 3,172,399 | ||||||||||||||
Gains (losses) on asset sales | 10,230 | 693,750 | 4,428,213 | 2,985,965 | 4,417,983 | ||||||||||||||
Plus: | |||||||||||||||||||
Cash receipts from (payments on) | |||||||||||||||||||
off-market derivative contracts(1) | - | (1,284,024) | (373,745) | (3,777,505) | (373,745) | ||||||||||||||
Adjusted Pretax Net Income (Loss) | $ | 648,414 | $ | 4,310,592 | $ | 5,306,604 | $ | 7,310,081 | $ | 4,658,190 | |||||||||
Weighted average shares outstanding | |||||||||||||||||||
Basic | 35,965,281 | 34,652,155 | 35,950,615 | 34,473,247 | 35,935,791 | ||||||||||||||
Diluted | 35,965,281 | 34,851,214 | 36,034,438 | 34,473,247 | 35,935,791 | ||||||||||||||
Adjusted Pretax Net Income (Loss) | |||||||||||||||||||
per basic and diluted share | $ | 0.02 | $ | 0.12 | $ | 0.15 | $ | 0.21 | $ | 0.13 | |||||||||
(1) The initial receipt of $8.8 million of cash from BP for entering into the off-market derivative contracts had no effect on the Company's statement of operations and was considered cash flow from financing activities. A portion of subsequent settlements with BP had no effect on the Company's statement of operations. | |||||||||||||||||||
PHX Minerals Inc. (NYSE: PHX) Fort Worth-based, PHX Minerals Inc. is a natural gas and oil mineral company with a strategy to proactively grow its mineral position in its core focus areas. PHX owns mineral acreage principally located in Oklahoma, Texas, Louisiana, North Dakota and Arkansas. Additional information on the Company can be found at www.phxmin.com.
Cautionary Statement Regarding Forward-Looking Statements
This press release includes "forward-looking statements" within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended. Words such as "anticipates," "plans," "estimates," "believes," "expects," "intends," "will," "should," "may" and similar expressions may be used to identify forward-looking statements. Forward-looking statements are not statements of historical fact and reflect PHX's current views about future events. Forward-looking statements may include, but are not limited to, statements relating to: the Company's operational outlook; the Company's ability to execute its business strategies; the volatility of realized natural gas and oil prices; the level of production on the Company's properties; estimates of quantities of natural gas, oil and NGL reserves and their values; general economic or industry conditions; legislation or regulatory requirements; conditions of the securities markets; the Company's ability to raise capital; changes in accounting principles, policies or guidelines; financial or political instability; acts of war or terrorism; title defects in the properties in which the Company invests; and other economic, competitive, governmental, regulatory or technical factors affecting properties, operations or prices. Although the Company believes expectations reflected in these and other forward-looking statements are reasonable, the Company can give no assurance such expectations will prove to be correct. Such forward-looking statements are subject to a number of assumptions, risks and uncertainties, many of which are beyond the control of the Company. These forward-looking statements involve certain risks and uncertainties that could cause results to differ materially from those expected by the Company's management. Information concerning these risks and other factors can be found in the Company's filings with the SEC, including its Annual Reports on Form 10-K and Quarterly Reports on Form 10-Q, available on the Company's website or the SEC's website at www.sec.gov.
Investors are cautioned that any such forward-looking statements are not guarantees of future performance and that actual results or developments may differ materially from those projected. The forward-looking statements in this press release are made as of the date hereof, and the Company does not undertake any obligation to update the forward-looking statements as a result of new information, future events or otherwise.
SOURCE PHX MINERALS INC.
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