Panhandle Oil and Gas Inc. Reports Fiscal Second Quarter and Six Months 2016 Results, Mid-Year Reserve Update and Operations Update

OKLAHOMA CITY – May 9, 2016 – PANHANDLE OIL AND GAS INC. (NYSE: PHX) today reported financial and operating results for the Company’s fiscal second quarter and six months ended March 31, 2016.

SIGNIFCANT ITEMS FOR THE PERIODS ENDED MARCH 31, 2016

  • Recorded fiscal second quarter 2016 net loss of $7,438,161, $0.44 per diluted share, as compared to net income of $704,207, $0.04 per diluted share, for the 2015 quarter.
  • Recorded six month 2016 net loss of $10,237,279, $0.61 per diluted share, compared to net income of $10,937,968, $0.65 per diluted share, for the 2015 six months.
  • Incurred 2016 six-month non-cash impairment provision of $11,849,064.
  • Generated cash from operating activities of $10,566,650 for the 2016 six-month period, well in excess of $2,554,543 of capital expenditures for drilling and equipping wells.
  • Received lease bonus proceeds of $3.2 million in first six months of fiscal 2016 (as of May 9, 2016, lease bonus received has totaled approximately $5.9 million).
  • Reported 2016 second-quarter and six-month production of 2,786,303 Mcfe and 5,929,703 Mcfe, respectively.
  • Reduced debt $10.5 million from Sept. 30, 2015, to $54.5 million through March 31, 2016 (as of May 9, 2016, balance is $51 million).
  • Proved reserves totaled 144.9 Bcfe at March 31, 2016.

FISCAL SECOND QUARTER 2016 RESULTS

For the 2016 second quarter, the Company recorded net loss of $7,438,161, or $0.44 per diluted share. This compared to net income of $704,207, or $0.04 per diluted share, for the 2015 second quarter. Net cash provided by operating activities decreased 77% to $2,916,432 for the 2016 second quarter, versus the 2015 second quarter. Capital expenditures for the 2016 fiscal quarter totaled $1,268,429 and continue to be principally directed toward oil and NGL rich plays in south central Oklahoma including the SCOOP and STACK plays. In addition, the Company recorded an $8.1 million non-cash provision for impairment in the 2016 quarter, as compared to a $1.2 million provision in the 2015 quarter.

Total revenues for the 2016 second quarter were $7,587,091, a 48% decrease from $14,679,034 for the 2015 quarter. Oil, NGL and natural gas sales decreased $6,301,363 or 51% in the 2016 quarter, compared to the 2015 quarter, as a result of a 19% decrease in Mcfe production and a 39% decrease in the average per Mcfe sales price. The average sales price per Mcfe of production during the 2016 second quarter was $2.20, compared to $3.60 for the 2015 second quarter. The 2016 quarter included a $1 million gain on derivative contracts, as compared to a $1.9 million gain for the 2015 quarter. The Company will typically hedge 40-60% of its expected production volumes of oil and gas for a duration of up to one year.

Oil production decreased 21% in the 2016 quarter to 90,760 barrels, versus 114,567 barrels in the 2015 quarter, while gas production decreased 19% to 2,014,139 Mcf for the 2016 quarter, compared to the 2015 quarter. In addition, 37,934 barrels of NGL were sold in the 2016 quarter, as compared to 48,681 barrels in the 2015 quarter.

SIX MONTHS 2016 RESULTS

For the 2016 six months, the Company recorded a net loss of $10,237,279, or $0.61 per diluted share. This compared to a net income of $10,937,968, or $0.65 per diluted share, for the 2015 six months. Net cash provided by operating activities decreased 62% year over year to $10,566,650 for the 2016 six months, versus the 2015 six months. Again, cash flow from operations fully funded costs to drill and equip wells for the six months. Capital expenditures for the 2016 six months totaled $2,554,543. The Company recorded an $11.8 million non-cash provision for impairment in the 2016 six months, as compared to a $3.4 million provision in the 2015 period.

Total revenues for the 2016 six months were $19,049,216, a 58% decrease from $45,678,204 for the 2015 six months. Oil, NGL and natural gas sales decreased $16,765,775 or 52% in the 2016 six months, compared to the 2015 six months, as a result of an 18% decrease in Mcfe production and a 42% decrease in the average per Mcfe sales price. The average sales price per Mcfe of production during the 2016 six months was $2.56, compared to $4.44 for the 2015 six months. The 2016 six months included a $.9 million gain on derivative contracts as compared to a $13.2 million gain for the 2015 period.

Oil production decreased 15% in the 2016 six months to 197,122 barrels from 231,150 barrels in the 2015 six months, while gas production decreased 845,877 Mcf, or 17%, compared to the 2015 six months. In addition, 85,985 barrels of NGL were sold in the 2016 six months, which was a 29% decrease compared to 2015 NGL volumes.

RESERVES UPDATE

March 31, 2016, mid-year proved reserves were 144.9 Bcfe, as calculated by the Company’s consulting petroleum engineering firm, DeGolyer and MacNaughton. This was a decrease of 19.5%, compared to the 180.0 Bcfe of proved reserves at Sept. 30, 2015. SEC prices used for the March 31, 2016, report averaged $2.14 per Mcf for natural gas, $40.07 per barrel for oil and $13.24 per barrel for NGL, compared to $2.84 per Mcf for natural gas, $55.27 per barrel for oil and $19.10 per barrel for NGL at the Sept. 30, 2015, report. The above prices reflect net at the wellhead prices. Total proved developed reserves decreased 15.9% to 90.9 Bcfe, as compared to Sept. 30, 2015, reserve volumes.

Paul Blanchard, Senior Vice President and COO, said: “The Company’s 2016 mid-year reserves were down approximately 35 Bcfe as a result of the dramatically lower product prices experienced in the last six months. This fall in product prices produced a decrease in proved developed reserves of 12.6 Bcfe due to wells reaching their projected economic limits much earlier than projected using Sept. 30, 2015, prices. PUD reserves declined 17.7 Bcfe as many future drilling locations became uneconomic at this quarter’s SEC mandated product prices. In addition, due to extremely low commodity prices, the Company produced 4.5 Bcfe more than was added through new drilling and completion activity during the six-month period.

The reserves associated with the product pricing revisions are still in place and will be brought back into the Company’s reserve report when prices recover to a level seen in the 2015 year-end report. All of Panhandle’s proved, probable and possible locations are either on Company owned perpetual minerals or held-by-production leasehold, and therefore, there is no potential for locations being lost through the expiration of leases at the end of their primary terms.

MANAGEMENT COMMENTS

Michael C. Coffman, President and CEO, said:2016 continues to shape up as one of, if not the most difficult years the energy industry has ever seen. Panhandle is experiencing many of the issues other companies have faced.

“The low oil, natural gas and natural gas liquids prices have dramatically reduced our revenues and resulting cash flows. In addition, non-cash impairment charges resulting from the low commodity prices have resulted in large losses for the Company. These impairment charges reduce the carrying value of producing properties on the Company’s books to a point-in-time (March 31, 2016) estimated market valuation.”

Coffman continued: “Thus far in fiscal 2016, we have incurred $11.8 million, pre-tax, of impairment charges. These charges are excluded in financial covenant calculations of our loan agreement. The borrowing base under our loan agreement will be reset in June 2016, and we expect the borrowing base to be reduced from the current $100 million. We expect it to be set at a level that provides ample liquidity for the Company to continue to employ its normal operating strategies.

OPERATIONS UPDATE

Panhandle continues to actively lease out selected mineral holdings during this commodity price downturn. The strategy behind this activity is to lease out minerals in cases where we believe the present value of the lease bonus plus the royalty will ultimately exceed the risked present value of participating with a working interest in wells drilled on these mineral holdings.

Thus far in the current fiscal year (Oct. 1, 2015 – May 9, 2016) leases have totaled 6,327 net mineral acres and included approximately $5.9 million of lease bonus receipts (ranging from $100 per acre to $4,300 per acre). The leased mineral acreage covers the following areas in Oklahoma and Texas: 

  1. 4,057 acres in the Permian Basin in Cochran County, Texas. We maintain the right to buy back up to a 10% working interest on a unit-by-unit basis. This lease has a three-year primary term with the right to renew with an additional lease bonus.
     
  2. 685 acres in the STACK play in Canadian, Blaine, Custer and Dewey Counties, Oklahoma. The majority of these leases have a four-year primary term. No Cana Core acreage was leased; Panhandle therefore maintains all of its pre-existing rights to participate with a working interest in that play.
     
  3. 1,226 acres in northwest Dewey and southern Woodward Counties, Oklahoma. This is viewed by some as a potential STACK expansion area.

The primarily targeted formations in each of these areas are predominately either limestone or sandstone. By their nature, these reservoirs can be very complex and tend to produce much more variable results than consistent shale resource plays such as the Cana and SCOOP Woodford cores. Generally, there are significant variations over short distances in the reservoir properties in many limestone and sandstone reservoirs leading to potentially wide variations in well-to-well productivity. In fact, the primary target in the STACK and STACK expansion play is the Meramec formation, which is a sub-member of the Mississippian Limestone and has a several-decade long history of producing highly variable wells across northern, central and western Oklahoma. Any mineral acres not drilled within the primary term of the leases will once again become unleased minerals on Panhandle’s books.

In all but the Cochran County lease, by leasing we relinquished the right to participate in these units as a working interest owner during the term of the lease; however, we will retain the royalty interest and the perpetual minerals. Royalty interests are considerably more valuable than an equivalent working interest because they do not bear capital investments or operating expenses.

In essence, these transactions eliminate the risk of investing capital in plays and extensions of plays that have materially more risk than drilling in the cores of shale resource plays, while at the same time preserving risked value through lease bonus payments and potential future royalty income streams.

We are also in late stage negotiations to lease out additional mineral rights, which if completed would result in additional meaningful lease bonuses to the Company.

Lease operating expenses were reduced by 10% when comparing the first six months of 2016 to 2015. This decrease was principally due to field optimization work on our Eagle Ford properties.

FINANCIAL HIGHLIGHTS

Statements of Operations

 

Three Months Ended March 31,

 

Six Months Ended March 31,

 

2016

 

2015

 

2016

 

2015

Revenues:

(unaudited)

 

(unaudited)

Oil, NGL and natural gas sales

$

 6,136,186 

 

$

 12,437,549 

 

$

 15,191,474 

 

$

 31,957,249 

Lease bonuses and rentals

 

 481,553 

 

 

 253,050 

 

 

 2,907,057 

 

 

 282,341 

Gains (losses) on derivative contracts

 

 975,113 

 

 

 1,900,162 

 

 

 940,177 

 

 

 13,150,427 

Income (loss) from partnerships

 

 (5,761)

 

 

 88,273 

 

 

 10,508 

 

 

 288,187 

 

 

 7,587,091 

 

 

 14,679,034 

 

 

 19,049,216 

 

 

 45,678,204 

Costs and expenses:

 

 

 

 

 

 

 

 

 

 

 

Lease operating expenses

 

 3,187,353 

 

 

 4,376,996 

 

 

 6,753,889 

 

 

 9,162,346 

Production taxes

 

 229,140 

 

 

 399,157 

 

 

 550,981 

 

 

 1,021,669 

Exploration costs

 

 1,159 

 

 

 3,105 

 

 

 28,949 

 

 

 28,457 

Depreciation, depletion and amortization

 

 6,045,883 

 

 

 5,811,590 

 

 

 13,003,535 

 

 

 11,950,609 

Provision for impairment

 

 8,115,791 

 

 

 1,208,645 

 

 

 11,849,064 

 

 

 3,400,642 

Loss (gain) on asset sales and other

 

 27,134 

 

 

 (7,145)

 

 

 (242,572)

 

 

 (9,127)

Interest expense

 

 342,348 

 

 

 409,276 

 

 

 702,910 

 

 

 812,009 

General and administrative

 

 1,651,444 

 

 

 1,850,203 

 

 

 3,563,523 

 

 

 3,808,631 

Bad debt expense (recovery)

 

 -

 

 

 -

 

 

 19,216 

 

 

 -

 

 

 19,600,252 

 

 

 14,051,827 

 

 

 36,229,495 

 

 

 30,175,236 

Income (loss) before provision (benefit) for income taxes

 

 (12,013,161)

 

 

 627,207 

 

 

 (17,180,279)

 

 

 15,502,968 

 

 

 

 

 

 

 

 

 

 

 

 

Provision (benefit) for income taxes

 

 (4,575,000)

 

 

 (77,000)

 

 

 (6,943,000)

 

 

 4,565,000 

 

 

 

 

 

 

 

 

 

 

 

 

Net income (loss)

$

 (7,438,161)

 

$

 704,207 

 

$

 (10,237,279)

 

$

 10,937,968 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Basic and diluted earnings (loss) per common share

$

 (0.44)

 

$

 0.04 

 

$

 (0.61)

 

$

 0.65 

 

 

 

 

 

 

 

 

 

 

 

 

Basic and diluted weighted average shares outstanding:

 

 

 

 

 

 

 

 

 

 

 

Common shares

 

 16,579,116 

 

 

 16,514,435 

 

 

 16,571,488 

 

 

 16,504,512 

Unissued, directors' deferred compensation shares

 

 259,381 

 

 

 266,066 

 

 

 258,206 

 

 

 265,503 

 

 

 16,838,497 

 

 

 16,780,501 

 

 

 16,829,694 

 

 

 16,770,015 

 

 

 

 

 

 

 

 

 

 

 

 

Dividends declared per share of

 

 

 

 

 

 

 

 

 

 

 

common stock and paid in period

$

 0.04 

 

$

 0.04 

 

$

 0.08 

 

$

 0.08 

 

 

 

 

 

 

 

 

 

 

 

 

Balance Sheets

 

March 31, 2016

 

Sept. 30, 2015

Assets

(unaudited)

 

 

 

Current assets:

 

 

 

 

 

Cash and cash equivalents

$

 486,630 

 

$

 603,915 

Oil, NGL and natural gas sales receivables (net of

 

 4,231,534 

 

 

 7,895,591 

allowance for uncollectable accounts)

 

 

 

 

 

Refundable income taxes

 

 1,121,703 

 

 

 345,897 

Refundable production taxes

 

 454,018 

 

 

 476,001 

Derivative contracts, net

 

 330,751 

 

 

 4,210,764 

Other

 

 331,845 

 

 

 252,016 

Total current assets

 

 6,956,481 

 

 

 13,784,184 

 

 

 

 

 

 

Properties and equipment, at cost, based on

 

 

 

 

 

   successful efforts accounting:

 

 

 

 

 

Producing oil and natural gas properties

 

 433,557,440 

 

 

 441,141,337 

Non-producing oil and natural gas properties

 

 7,643,408 

 

 

 8,293,997 

Other

 

 1,060,392 

 

 

 1,393,559 

 

 

 442,261,240 

 

 

 450,828,893 

Less accumulated depreciation, depletion and amortization

 

 (240,429,941)

 

 

 (228,036,803)

Net properties and equipment

 

 201,831,299 

 

 

 222,792,090 

 

 

 

 

 

 

Investments

 

 167,663 

 

 

 2,248,999 

Total assets

$

 208,955,443 

 

$

 238,825,273 

 

 

 

 

 

 

Liabilities and Stockholders' Equity

 

 

 

 

 

Current liabilities:

 

 

 

 

 

Accounts payable

$

 1,447,314 

 

$

 2,028,746 

Deferred income taxes

 

 312,100 

 

 

 1,517,100 

Accrued liabilities and other

 

 936,629 

 

 

 1,330,901 

Total current liabilities

 

 2,696,043 

 

 

 4,876,747 

 

 

 

 

 

 

Long-term debt

 

 54,500,000 

 

 

 65,000,000 

Deferred income taxes

 

 32,918,907 

 

 

 39,118,907 

Asset retirement obligations

 

 2,895,488 

 

 

 2,824,944 

 

 

 

 

 

 

Stockholders' equity:

 

 

 

 

 

Class A voting common stock, $.0166 par value;

 

 

 

 

 

24,000,000 shares authorized, 16,863,004 issued at March 31,

 

 

 

 

 

2016, and Sept. 30, 2015

 

 280,938 

 

 

 280,938 

Capital in excess of par value

 

 3,000,554 

 

 

 2,993,119 

Deferred directors' compensation

 

 3,242,150 

 

 

 3,084,289 

Retained earnings

 

 113,871,183 

 

 

 125,446,473 

 

 

 120,394,825 

 

 

 131,804,819 

Less treasury stock, at cost; 280,624 shares at March 31,

 

 

 

 

 

2016, and 302,623 shares at Sept. 30, 2015

 

 (4,449,820)

 

 

 (4,800,144)

Total stockholders' equity

 

 115,945,005 

 

 

 127,004,675 

Total liabilities and stockholders' equity

$

 208,955,443 

 

$

 238,825,273 

Condensed Statements of Cash Flows

 

Six months ended March 31,

 

2016

 

2015

Operating Activities

(unaudited)

Net income (loss)

$

 (10,237,279)

 

$

 10,937,968 

Adjustments to reconcile net income (loss) to net cash provided

 

 

 

 

 

  by operating activities:

 

 

 

 

 

Depreciation, depletion and amortization

 

 13,003,535 

 

 

 11,950,609 

Impairment

 

 11,849,064 

 

 

 3,400,642 

Provision for deferred income taxes

 

 (7,405,000)

 

 

 2,698,000 

Exploration costs

 

 28,949 

 

 

 28,457 

Gain from leasing of fee mineral acreage

 

 (2,906,480)

 

 

 (281,124)

Net (gain) loss on sale of assets

 

 (271,080)

 

 

 -

Income from partnerships

 

 (10,508)

 

 

 (288,187)

Distributions received from partnerships

 

 32,632 

 

 

 395,852 

Directors' deferred compensation expense

 

 168,402 

 

 

 169,464 

Restricted stock awards

 

 508,095 

 

 

 531,243 

Bad debt expense (recovery)

 

 19,216 

 

 

 -

Cash provided (used) by changes in assets and liabilities:

 

 

 

 

 

Oil, NGL and natural gas sales receivables

 

 3,644,841 

 

 

 6,588,410 

Fair value of derivative contracts

 

 3,880,013 

 

 

 (8,588,328)

Refundable production taxes

 

 21,983 

 

 

 26,625 

Other current assets

 

 (79,829)

 

 

 26,579 

Accounts payable

 

 (510,114)

 

 

 (41,635)

Income taxes receivable

 

 (775,806)

 

 

 -

Income taxes payable

 

 -

 

 

 503,394 

Accrued liabilities

 

 (393,984)

 

 

 (404,053)

Total adjustments

 

 20,803,929 

 

 

 16,715,948 

Net cash provided by operating activities

 

 10,566,650 

 

 

 27,653,916 

 

 

 

 

 

 

Investing Activities

 

 

 

 

 

Capital expenditures, including dry hole costs

 

 (2,554,543)

 

 

 (19,797,996)

Acquisition of working interest properties

 

 -

 

 

 (308,180)

Proceeds from leasing of fee mineral acreage

 

 3,193,775 

 

 

 286,844 

Investments in partnerships

 

 48,462 

 

 

 (208,312)

Proceeds from sales of assets

 

 627,547 

 

 

 -

Net cash provided (used) by investing activities

 

 1,315,241 

 

 

 (20,027,644)

 

 

 

 

 

 

Financing Activities

 

 

 

 

 

Borrowings under debt agreement

 

 6,078,919 

 

 

 18,894,612 

Payments of loan principal

 

 (16,578,919)

 

 

 (24,971,023)

Purchase of treasury stock

 

 (117,165)

 

 

 (120,611)

Payments of dividends

 

 (1,338,011)

 

 

 (1,333,023)

Excess tax benefit on stock-based compensation

 

 (44,000)

 

 

 (19,000)

Net cash provided (used) by financing activities

 

 (11,999,176)

 

 

 (7,549,045)

 

 

 

 

 

 

Increase (decrease) in cash and cash equivalents

 

 (117,285)

 

 

 77,227 

Cash and cash equivalents at beginning of period

 

 603,915 

 

 

 509,755 

Cash and cash equivalents at end of period

$

 486,630 

 

$

 586,982 

 

 

 

 

 

 

Supplemental Schedule of Noncash Investing and Financing Activities

 

 

 

 

 

Additions to asset retirement obligations

$

 7,160 

 

$

 32,728 

 

 

 

 

 

 

Gross additions to properties and equipment

$

 2,483,225 

 

$

 18,207,598 

Net (increase) decrease in accounts payable for properties

 

 

 

 

 

and equipment additions

 

 71,318 

 

 

 1,898,578 

Capital expenditures and acquisitions, including dry hole costs

$

 2,554,543 

 

$

 20,106,176 

Proved Reserves

 

SEC Pricing

 

March 31, 2016

 

Sept. 30, 2015

Proved Developed Reserves:

 

(unaudited)

Barrels of NGL

 

 1,236,528

 

 

 1,466,834

Barrels of Oil

 

 2,284,144

 

 

 2,725,077

Mcf of Gas

 

 69,798,702

 

 

 82,899,159

Mcfe (1)

 

 90,922,734

 

 

 108,050,625

Proved Undeveloped Reserves:

 

 

 

 

 

Barrels of NGL

 

 1,179,666

 

 

 1,453,766

Barrels of Oil

 

 3,555,534

 

 

 4,313,353

Mcf of Gas

 

 25,587,282

 

 

 37,314,885

Mcfe (1)

 

 53,998,482

 

 

 71,917,599

Total Proved Reserves:

 

 

 

 

 

Barrels of NGL

 

 2,416,194

 

 

 2,920,600

Barrels of Oil

 

 5,839,678

 

 

 7,038,430

Mcf of Gas

 

 95,385,984

 

 

 120,214,044

Mcfe (1)

 

 144,921,216

 

 

 179,968,224

 

 

 

 

 

 

10% Discounted Estimated Future

 

 

 

 

 

Net Cash Flows (before income taxes):

 

 

 

 

 

Proved Developed

$

 71,263,666

 

$

 126,295,752

Proved Undeveloped

 

 (5,746,678)

 

 

 17,948,482

Total

$

 65,516,988

 

$

 144,244,234

SEC Pricing

 

 

 

 

 

Oil/Barrel

$

 40.07

 

$

 55.27

Gas/Mcf

$

 2.14

 

$

 2.84

NGL/Barrel

$

 13.24

 

$

 19.10

 

 

 

 

 

 

Proved Reserves - NYMEX Futures Pricing (2)

 

 

 

 

 

 

10% Discounted Estimated Future

Proved Reserves

Net Cash Flows (before income taxes):

March 31, 2016

 

Sept. 30, 2015

Proved Developed

$

 93,576,643

 

$

 123,465,294

Proved Undeveloped

 

 10,141,258

 

 

 20,797,565

Total

$

 103,717,901

 

$

 144,262,859

 

 

 

 

 

 

(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) NYMEX Futures Pricing as of March 31, 2016, and Sept. 30, 2015, basis adjusted to Company wellhead price

OPERATING HIGHLIGHTS

 

Second Quarter Ended

 

Second Quarter Ended

 

Six Months Ended

 

Six Months Ended

 

March 31, 2016

 

March 31, 2015

 

March 31, 2016

 

March 31, 2015

Mcfe Sold

 

2,786,303

 

 

3,455,265

 

 

5,929,703

 

 

7,192,748

Average Sales Price per Mcfe

$

2.20

 

$

3.60

 

$

2.56

 

$

4.44

Oil Barrels Sold

 

90,760

 

 

114,567

 

 

197,122

 

 

231,150

Average Sales Price per Barrel

$

27.19

 

$

45.67

 

$

33.75

 

$

58.38

Mcf Sold

 

2,014,139

 

 

2,475,777

 

 

4,231,061

 

 

5,076,938

Average Sales Price per Mcf

$

1.64

 

$

2.64

 

$

1.78

 

$

3.13

NGL Barrels Sold

 

37,934

 

 

48,681

 

 

85,985

 

 

121,485

Average Sales Price per Barrel

$

9.85

 

$

13.82

 

$

11.49

 

$

21.23

 

Quarter ended

 

Oil Bbls Sold

 

Mcf Sold

 

NGL Bbls Sold

 

Mcfe Sold

3/31/2016

 

90,760

 

2,014,139

 

37,934

 

2,786,303

12/31/2015

 

106,362

 

2,216,922

 

48,051

 

3,143,400

9/30/2015

 

112,237

 

2,261,236

 

47,738

 

3,221,086

6/30/2015

 

109,738

 

2,407,049

 

41,737

 

3,315,899

3/31/2015

 

114,567

 

2,475,777

 

48,681

 

3,455,265

The Company’s derivative contracts in place for natural gas at March 31, 2016, are outlined in its Form 10-Q for the period ending March 31, 2016.

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 2015 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; Panhandle’s hedging activities may reduce the realized prices received for natural gas sales; the volatility of oil and gas prices; the Company’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, as 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.