PHX MINERALS INC. REPORTS THIRD FISCAL QUARTER 2022 RESULTS AND ANNOUNCES DIVIDEND PAYMENT

FORT WORTH, Texas, Aug. 8, 2022 – PHX MINERALS INC., “PHX” or the “Company” (NYSE: PHX), today reported financial and operating results for the third fiscal quarter ended June 30, 2022.

SUMMARY OF RESULTS FOR THE QUARTER ENDED JUNE 30, 2022, AND SUBSEQUENT EVENTS

• Net income in the third fiscal quarter of 2022 was $8.6 million, or $0.25 per share, compared to net loss of ($4.0) million, or ($0.12) per share, in the second fiscal quarter of 2022.
• Adjusted EBITDA⁽¹⁾ of $7.2 million for the third fiscal quarter of 2022 increased from $5.8 million in the second fiscal quarter of 2022.
• Royalty production volumes for the third fiscal quarter of 2022 increased 3% to 1,595 Mmcfe, and total production volumes for the third fiscal quarter of 2022 decreased 1% to 2,430 Mmcfe, compared to the second fiscal quarter of 2022.
• 80% of royalty production volumes and 78% of total production volumes in the third fiscal quarter of 2022 were attributable to natural gas.
• 96 gross (0.25 net) wells converted to PDP, including 39 gross (0.19 net) in the SCOOP and 12 gross (0.03 net) in the Haynesville, during the third fiscal quarter of 2022, compared to 108 gross (0.48 net) in the second fiscal quarter of 2022.
• 155 gross (0.79 net) wells in progress as of June 30, 2022, compared to 134 gross (0.60 net) as of March 31, 2022.
• Total debt was $28.3 million and the debt to adjusted EBITDA (TTM) ⁽¹⁾ ratio was 1.31x at June 30, 2022.
• During the third fiscal quarter of 2022, PHX closed on acquisitions totaling 938 net royalty acres located in the SCOOP play of Oklahoma and the Haynesville play of East Texas and Louisiana for approximately $9.1 million.
• Since June 30, 2022, PHX has closed on additional acquisitions of 544 net royalty acres located in the SCOOP play of Oklahoma and the Haynesville play of Louisiana for approximately $8.2 million.
• PHX has entered into a PSA to divest the remainder of its non-operated working interest position in the Fayetteville Shale of Arkansas for approximately $6 million subject to customary closing adjustments.
• PHX announced a $0.02 per share quarterly dividend, payable on Sept. 9, 2022, to stockholders of record on Aug. 25, 2022.

1. This is a non-GAAP measure. Refer to the Non-GAAP Reconciliation section.

Chad L. Stephens, President and CEO, commented, “I am pleased to report another outstanding quarter of financial results including adjusted EBITDA of $7.2 million, a 22% increase over the prior sequential quarter. I would like to thank all of the PHX employees for their hard work that helped the company achieve these excellent third quarter 2022 results.

Consistent with our first and second quarter of 2022 results, we reported an increase in royalty volumes and a further decrease in working interest volumes. This is in line with our corporate strategy. We continue to allocate 100% of our capital to acquiring minerals in the core of the Haynesville in Louisiana and the SCOOP in Southern Oklahoma in high rock quality areas under well capitalized active operators, assuring us of near-term line of sight development. We are keenly focused on executing a successful acquisition strategy and expect our royalty volumes will continue to increase on an annual basis.

In our third fiscal quarter ended June 30, 2022, and including through Aug. 4^th, we have closed on a total of $18.0 million in additional minerals located primarily in the Haynesville with line-of-sight development, which should continue to drive our growing royalty volumes. This brings our fiscal 2022 acquisition program to approximately $42 million. There continues to be a strong set of acquisition opportunities in front of us.

Lastly, I’d like to announce that during our third fiscal quarter we opened our new corporate headquarters in Fort Worth, Texas. This move places our senior management team at the epicenter of the mineral space. We will retain our offices in Oklahoma City where our accounting and technical staff are located and do not anticipate any disruption to the business. We are excited about having new offices in Fort Worth and believe it will better position us to execute the Company’s growth strategy of building shareholder value through the acquisition and ownership of high-quality mineral interest in our core areas.”

OPERATING HIGHLIGHTS

Total Production for the last four quarters was as follows:

Royalty Interest Production for the last four quarters was as follows:

Working Interest Production for the last four quarters was as follows:

FINANCIAL HIGHLIGHTS

1. G&A excluding restricted stock and deferred director’s expense.
2. This is a non-GAAP measure. Refer to the Non-GAAP Reconciliation section.

THIRD FISCAL QUARTER ENDED JUNE 30, 2022, RESULTS

The Company recorded third fiscal quarter 2022 net income of $8,589,010, or $0.25 per share, as compared to a net loss of ($1,356,594), or ($0.05) per share, in the third fiscal quarter 2021. The change in net income was principally the result of increased natural gas, oil and NGL sales, decreased losses associated with our hedge contracts and increased gains on asset sales, partially offset by an increase in general and administrative costs, or G&A, and income tax expense.

Natural gas, oil and NGL revenue increased $8,661,748, or 79%, for the third quarter 2022, compared to the corresponding 2021 quarter due to increases in natural gas, oil and NGL prices of 105%, 65% and 56%, respectively, and an increase in natural gas volumes of 1%, partially offset by a decrease in oil and NGL volumes of 12% and 15%, respectively.

The production increase in royalty volumes during the three months ended June 30, 2022, as compared to the three months ended June 30, 2021, resulted from new wells associated with 2021 and 2022 acquisitions in the Haynesville Shale and SCOOP plays coming online. The decrease in working interest volumes resulted from the divestiture of low-value legacy working interests in Oklahoma and the Fayetteville Shale in Arkansas, naturally declining production in high-interest wells in the Arkoma Stack and STACK plays, and legacy wells shut in in the Eagle Ford play while the operator completes new offset wells.

The Company had a net loss on derivative contracts of ($2,387,226) in the third fiscal 2022 quarter, as compared to a net loss of ($5,487,483) in the third fiscal 2021 quarter, of which ($5,670,147) is a realized loss and $3,282,921 is an unrealized gain with respect to the third fiscal 2022 quarter. Realized net loss on derivative contracts for the third fiscal 2022 quarter excludes $1,284,024 of cash paid to settle off-market derivative contracts. The change in net loss 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, 2022, pricing relative to the strike price on open derivative contracts.

The 10% increase in total cost per Mcfe in the third fiscal 2022 quarter, relative to the third fiscal 2021 quarter, was primarily driven by an increase in G&A and production taxes. G&A increased $602,510, or 26%, in the third fiscal 2022 quarter, compared to the corresponding 2021 quarter due to legal expenses associated with reincorporating in the state of Delaware, increased transaction activity and restricted stock expense. Production taxes increased $328,339, or 55%, due to increase in natural gas, oil and NGL revenue, but decreased as a percent of natural gas, oil and NGL revenue in the third fiscal 2022 quarter, compared to the corresponding 2021 quarter from 5.5% to 4.7%.

NINE MONTHS ENDED JUNE 30, 2022, RESULTS

The Company recorded net income of $11,250,804, or $0.33 per share, in the fiscal nine-month period ended June 30, 2022 (the “fiscal nine-month 2022 period”), as compared to a net loss of ($2,453,037), or ($0.10) per share, in the corresponding 2021 period. The change in net income was principally the result of increased natural gas, oil and NGL sales, gains on asset sales and lease bonuses and rental income, and decreased DD&A, partially offset by an increase in losses on derivative contracts, production taxes, G&A and income tax expense.

Natural gas, oil and NGL sales increased $22,361,973, or 87%, for the fiscal nine-month 2022 period, compared to the corresponding 2021 period, due to increases in natural gas, oil and NGL prices of 103%, 71% and 74%, respectively, and an increase in natural gas volumes of 6%, partially offset by a decrease in oil and NGL volumes of 13% and 1%, respectively.

Natural gas volumes increased during the nine months ended June 30, 2022, as compared to the nine months ended June 30, 2021, primarily as a result of new wells associated with recent acquisitions in the Haynesville Shale and SCOOP plays coming online. These gas volumes were partially offset by naturally declining production in high-interest wells in the Arkoma Stack and divestitures in the Fayetteville. NGL production decreased slightly as a result of naturally declining production from liquids-rich gas wells in the STACK. The decrease in oil production was a result of naturally declining production in working interest wells and the Company’s strategy of no longer participating with working interests in new drilling in the Eagle Ford play and reduced drilling activity of royalty wells in the Bakken play, as well as naturally declining production in high-interest wells brought online in the STACK during fiscal year 2021. Oil production decreases were partially offset by new wells in the SCOOP.

The Company had a net loss on derivative contracts of ($12,534,464) in the fiscal nine-month 2022 period, as compared to a net loss of ($8,089,662) in the corresponding 2021 period, of which ($8,595,246) is a realized loss and ($3,939,218) is an unrealized loss with respect to the fiscal nine-month 2022 period. Realized net loss on derivative contracts for the fiscal nine-month 2022 period excludes $6,465,597 of cash paid to settle off-market derivative contracts. The change in net loss 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, 2022, pricing relative to the strike price on open derivative contracts.

The 8% increase in total cost per Mcfe in the fiscal nine-month 2022 period, relative to the corresponding 2021 period, was primarily driven by an increase in G&A and production taxes, partially offset by a decrease in DD&A. G&A increased $1,651,758, or 27%, in the fiscal nine-month 2022 period, compared to the corresponding 2021 period due to legal expenses associated with reincorporating in the state of Delaware, increased transaction activity and restricted stock expense. Production taxes increased $958,499, or 75%, due to increase in natural gas, oil and NGL revenue, but decreased as a percent of natural gas, oil and NGL revenue in the nine-month 2022 period, compared to the corresponding 2021 period from 5.1% to 4.8%. DD&A decreased $448,465, or 7%, in the fiscal nine-month 2022 period to $0.82 per Mcfe, as compared to $0.90 per Mcfe in the corresponding 2021 period. Of the DD&A decrease, $587,155 was a result of an $0.08 decrease in the DD&A rate per Mcfe, partially offset by an increase of $138,690 resulting from production increasing 2% in the fiscal nine-month 2022 period, compared to the corresponding 2021 period. The DD&A rate per Mcfe decrease was mainly due to an increase in reserves during the fiscal nine-month 2022 period, as compared to the corresponding 2021 period.

OPERATIONS UPDATE

During the third fiscal quarter of 2022, the Company converted 96 gross (0.25 net) wells to producing status, including 39 gross (0.19 net) in the SCOOP and 12 gross (0.03 net) in the Haynesville, compared to 108 gross (0.48 net) wells, including 35 gross (0.04 net) in the SCOOP and 31 gross (0.33 net) in the Haynesville, during the second fiscal quarter of 2022.

At June 30, 2022, the Company had a total of 155 gross (0.79 net) wells in progress across its mineral positions and 65 gross (0.21 net) active permitted wells, compared to 134 gross (0.60 net) wells in progress and 52 gross (0.23 net) active permitted wells at March 31, 2022. As of June 30, 2022, 25 rigs were operating on the Company’s acreage with 96 rigs operating within 2.5 miles of its acreage, compared to 18 rigs operating on the Company’s acreage with 86 rigs operating within 2.5 miles of its acreage as of March 31, 2022.