Panhandle Oil and Gas Inc. Reports Fiscal Third Quarter and Nine Months 2015 Results and Operations Update

OKLAHOMA CITY – Aug. 6, 2015 – 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, 2015.


  • Recorded nine-month 2015 net income of $10,209,022, $0.61 per diluted share, compared to net income of $15,703,476, $0.94 per diluted share, for the 2014 nine months.
  • Recorded fiscal third quarter 2015 net loss of $728,946, $0.04 per diluted share, as compared to net income $5,122,585, $0.31 per diluted share, for the 2014 quarter.
  • Generated cash from operating activities of $37,347,802 for the 2015 nine-month period, well in excess of $23,613,349 of capital expenditures for drilling and equipping wells.
  • Reported 2015 third-quarter and nine-month production of 3,315,899 Mcfe and 10,508,647 Mcfe, respectively, which were flat and a 2% increase, respectively, over the same periods of fiscal 2014.
  • Reduced debt $12.5 million from Sept. 30, 2014, to $65.5 million.


For the 2015 third quarter, the Company recorded net loss of $728,946, or $0.04 per diluted share.  This compared to net income of $5,122,585, or $0.31 per diluted share, for the 2014 third quarter.  Net cash provided by operating activities decreased 35% to $9,693,886 for the 2015 third quarter, versus the 2014 third quarter.  Capital expenditures for drilling and completing wells for the quarter totaled $3,815,353 and continue to be principally directed to drilling of wells in south central Oklahoma and the completion of wells drilled in 2014 in the Bakken.  The 2015 quarter and the 2014 quarter both included losses on derivative contracts of $1.4 million.  Actual cash receipts from derivative contracts in the 2015 quarter were $3.6 million with the change in the fair market value for derivatives during the 2015 quarter being $(5.0) million (pre-tax).  The Company principally uses derivative contracts of less than one year duration to provide protection against significant declines in cash flows from fluctuations in the price of natural gas and to a lesser extent oil.  The Company has typically hedged around 50% of its expected production volumes.

Total revenues for the 2015 third quarter were $11,748,888, a 36% decrease from $18,374,977 for the 2014 quarter.  Oil, NGL and natural gas sales decreased $8,090,955 or 41% in the 2015 quarter, compared to the 2014 quarter, resulting from flat production volumes and a 42% decrease in the average per Mcfe sales price.  The average sales price per Mcfe of production during the 2015 third quarter was $3.45, compared to $5.90 for the 2014 third quarter.  The sales prices of natural gas and oil both declined 48% while NGL declined 57% as compared to the 2014 quarter.

The Company closed on several leases of our mineral acreage in the quarter, which generated $1.7 million of lease bonus revenue.  The largest of these leases was in West Texas and generated $1.2 million of lease bonus.

Oil production increased 56% in the 2015 quarter to 109,738 barrels, versus 70,479 barrels in the 2014 quarter while gas production of 2,407,049 Mcf for the 2015 quarter decreased 4% compared to the 2014 quarter.  In addition, 41,737 barrels of NGL were sold in the 2015 quarter as compared to 63,029 barrels in the 2014 quarter, a decrease of 34%.


For the 2015 nine months, the Company recorded net income of $10,209,022, or $0.61 per diluted share.  This compared to net income of $15,703,476, or $0.94 per diluted share, for the 2014 nine months.  Net cash provided by operating activities increased 2% year over year to $37,347,802 for the 2015 nine months, versus the 2014 nine months.  Once again, cash flow from operations fully funded costs to drill and equip wells for the nine months.  Capital expenditures for the 2015 nine months totaled $23,921,529, which included $23,613,349 for drilling and equipping wells and acquisitions of $308,180.  The 2015 nine months included an $11.7 million gain on derivative contracts as compared to a $3.5 million loss for the 2014 period.

Total revenues for the 2015 nine months were $57,427,092, a 2% increase from $56,523,778 for the 2014 nine months.  However, oil, NGL and natural gas sales decreased $15,715,089 to $43,400,839, or 27% in the 2015 nine months, compared to the 2014 nine months, as the net result of a 2% increase in Mcfe production and a 28% decrease in the average per Mcfe sales price.  The average sales price per Mcfe of production during the 2015 nine months was $4.13, compared to $5.73 for the 2014 nine months.

Oil production increased 55% in the 2015 nine months to 340,888 barrels from 220,131 barrels in the 2014 nine months while gas production decreased 599,079 Mcf compared to the 2014 nine months.  In addition, 163,222 barrels of NGL were sold in the 2015 nine months, which was a 7% increase compared to 2014 NGL volumes.  The Eagle Ford acquisition made in June 2014 continues to be the basis for 2015 increased oil production; while normal decline in production and significantly decreased dry natural gas drilling are responsible for the gas production decline.


Michael C. Coffman, President and CEO, said:Difficult times due to low product prices continue to depress our industry.  Panhandle has been through several of these cycles during its almost 90-year history and will undoubtedly see more in the future.  We have always strived to maintain a conservative management philosophy and a simple financial structure which has served Panhandle well, especially during the lean times.”

Coffman continued: “We will continue to focus on the longer-term outlook and are in the enviable position of being able to deploy drilling capital only when and where we can expect to earn a reasonable rate of return, as we have no need to drill to hold acreage.  The Company continues to maintain the flexibility to be opportunistic in acquiring assets that would be accretive to shareholder value.  Further, our geographic and play diversity and product mix position the Company to manage its way through this difficult price cycle.  We will continue to reduce our debt with available excess cash flow.


Paul Blanchard, Senior Vice President and COO, said: “The Company entered into a land lease agreement in the Permian Basin in Andrews and Winkler Counties, Texas, during the third quarter. We leased out approximately 2,400 net mineral acres in 40+ sections (square miles) that have multiple well stacked pay potential in the Wolfcamp, Strawn, Atoka, Barnett and Woodford. The lease generated $1.2 million in cash bonus for Panhandle during the quarter, and the Company will receive a 25% royalty from the leased property. Additionally, Panhandle has the right to buy back the lease and participate with its original interest, up to a maximum 10% working interest, in each unit when the initial well in a unit is proposed. This deal structure secures the significant lease bonus and an attractive royalty for Panhandle while maintaining the option to participate with a material working interest should the project meet our investment standards.

“Panhandle continues to maintain its long-term investment philosophy during this commodity price downturn. We are receiving a reduced volume of well proposals, and many of those proposals do not meet our criteria to participate.  Therefore our drilling and completion capital expenditures are relatively low. If this low commodity price environment persists through 2016, the Company projects that a reduced level of capital expenditures will result in a small decrease in next year’s production relative to 2015.

“Recent investments included the completion of five high-rate Bakken oil wells on Panhandle’s mineral acreage in the Fort Berthold area of North Dakota.  These wells were drilled in 2014 but completion was deferred until May of 2015. Panhandle owns a 6.25% working and net revenue interest in all five wells which began producing in late May. Additional notable investments during the quarter included drilling and completion activity on our mineral holdings in the SCOOP Woodford play in the Anadarko and Marietta Basins in south central Oklahoma and the Springer play in the Anadarko Basin in south central Oklahoma. This drilling activity in the core of SCOOP is projected to generate favorable rates of return at recent NYMEX futures pricing.

“Five of our six Eagle Ford wells drilled in 2014 are scheduled to be completed beginning in August 2015, with production anticipated to begin in early October 2015. Panhandle owns a 16% working interest and approximately 12% net revenue interest in these wells.  The operator of our Eagle Ford properties has completed installation of water disposal lines which connect the wells in the field to a nearby commercial disposal well, thereby significantly reducing water disposal and road repair costs associated with previous water-trucking. An electrical substation has also been constructed proximal to the field, and the operator is in the process of connecting the wells in the field to this system. This will eliminate the use of diesel generators in the field and result in a material reduction in lease operating expense associated with generator rental, diesel fuel, trucking cost and road repairs. The recently installed disposal system and electrical substation work complements the oil and natural gas pipelines infrastructure already in place in the field and allows the operator to optimize field level operating expenses.  This augments the value of the properties’ oil and natural gas production.”


Statements of Operations


Three Months Ended June 30,


Nine Months Ended June 30,













Oil, NGL and natural gas sales












Lease bonuses and rentals












Gains (losses) on derivative contracts












Income from partnerships
























Costs and expenses:












Lease operating expenses












Production taxes












Exploration costs












Depreciation, depletion and amortization












Provision for impairment












Loss (gain) on asset sales and other












Interest expense












General and administrative
























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
























Provision (benefit) for income taxes
























Net income (loss)
















































Basic and diluted earnings (loss) per common share
























Basic and diluted weighted average shares outstanding:












Common shares












Unissued, directors' deferred compensation shares




































Dividends declared per share of












common stock and paid in period












Balance Sheets


June 30, 2015


Sept. 30, 2014






Current assets:






Cash and cash equivalents






Oil, NGL and natural gas sales receivables






Refundable production taxes






Derivative contracts, net












Total current assets












Properties and equipment, at cost, based on






   successful efforts accounting:






Producing oil and natural gas properties






Non-producing oil and natural gas properties


















Less accumulated depreciation, depletion and amortization






Net properties and equipment


















Derivative contracts, net






Total assets












Liabilities and Stockholders' Equity






Current liabilities:






Accounts payable






Deferred income taxes






Income taxes payable






Accrued liabilities and other






Total current liabilities












Long-term debt






Deferred income taxes






Asset retirement obligations












Stockholders' equity:






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






24,000,000 shares authorized, 16,863,004 issued at June 30,






2015, and Sept. 30, 2014






Capital in excess of par value






Deferred directors' compensation






Retained earnings












Less treasury stock, at cost; 316,628 shares at June 30,






2015, and 372,364 shares at Sept. 30, 2014






Total stockholders' equity






Total liabilities and stockholders' equity






Condensed Statements of Cash Flows


Nine months ended June 30,





Operating Activities


Net income (loss)






Adjustments to reconcile net income to net cash provided






  by operating activities:






Depreciation, depletion and amortization












Provision for deferred income taxes






Exploration costs






Gain from leasing of fee mineral acreage






Net (gain) loss on sale of assets






Income from partnerships






Distributions received from partnerships






Directors' deferred compensation expense






Restricted stock awards






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






Oil, NGL and natural gas sales receivables






Fair value of derivative contracts






Refundable production taxes






Other current assets






Accounts payable






Income taxes receivable






Income taxes payable






Accrued liabilities






Total adjustments






Net cash provided by operating activities












Investing Activities






Capital expenditures, including dry hole costs






Acquisition of working interest properties






Acquisition of minerals and overrides






Proceeds from leasing of fee mineral acreage






Investments in partnerships






Proceeds from sales of assets






Net cash used in investing activities












Financing Activities






Borrowings under debt agreement






Payments of loan principal






Purchase of treasury stock






Payments of dividends






Excess tax benefit on stock-based compensation






Net cash provided by (used in) financing activities












Increase (decrease) in cash and cash equivalents






Cash and cash equivalents at beginning of period






Cash and cash equivalents at end of period












Supplemental Schedule of Noncash Investing and Financing Activities






Additions to asset retirement obligations












Gross additions to properties and equipment






Net (increase) decrease in accounts payable for properties






and equipment additions






Capital expenditures and acquisitions, including dry hole costs
































Third Quarter Ended


Third Quarter Ended


Nine Months Ended


Nine Months Ended


June 30, 2015


June 30, 2014


June 30, 2015


June 30, 2014

Mcfe Sold












Average Sales Price per Mcfe












Oil Barrels Sold












Average Sales Price per Barrel












Mcf Sold












Average Sales Price per Mcf












NGL Barrels Sold












Average Sales Price per Barrel













Quarter ended


Oil Bbls Sold


Mcf Sold


NGL Bbls Sold


Mcfe Sold














































The Company’s derivative contracts in place for natural gas at June 30, 2015, are outlined in its Form 10-Q for the period ending June 30, 2015.

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

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 2014 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, 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.