Panhandle Oil and Gas Inc. Reports Fourth Quarter and Fiscal 2014 Financial Results

OKLAHOMA CITY – Dec. 10, 2014 – PANHANDLE OIL AND GAS INC., the “Company,” (NYSE:PHX) today reported financial and operating results for the fiscal fourth quarter and twelve months ended Sept. 30, 2014.

HIGHLIGHTS FOR THE YEAR ENDED SEPT. 30, 2014

  • Recorded 12-month net income of $25,001,462, or $1.49 per share, the largest in Company history, compared to a net income of $13,960,049, or $0.84 per share, for fiscal 2013.
  • Increased fiscal 2014 production by 9% over fiscal 2013 to 14.1 billion cubic feet equivalent (Bcfe), the largest in Company history.
  • Increased fiscal year 2014 oil production 48% over 2013 volumes.
  • Generated cash from operating activities of $52.6 million for the year, well in excess of drilling capital expenditures of $38.6 million.
  • Increased oil, NGL and natural gas sales revenues 37% in fiscal 2014 as compared to fiscal 2013.
  • Reduced debt $7.9 million during the fourth quarter of 2014.
     

Fiscal Year 2014 Results

For fiscal 2014, the Company recorded net income of $25,001,462, or $1.49 per share. This compared to net income of $13,960,049, or $0.84 per share, for fiscal 2013. Net cash provided by operating activities increased 41% to $52.6 million for fiscal 2014 versus 2013. Capital expenditures for drilling and equipping wells in fiscal 2014 totaled $38.6 million, of which $8 million was expended for drilling and equipping wells on the Eagle Ford acquisition properties with the remaining $30.6 million expended for drilling on legacy properties.

Total revenues for 2014 were $84,411,224, an increase of 34% from $62,889,120 for 2013. Oil, NGL and natural gas sales revenues increased $22,240,650 or 37% in 2014 as compared to 2013. This revenue increase was a result of increased oil and NGL production volumes of 48% and 86%, respectively, and increased oil, NGL and natural gas prices of 2%, 17% and 22%, respectively. Overall results were a 9% increase in Mcfe production volumes and a 26% increase in the average per Mcfe sales price. The average sales price per Mcfe of production during 2014 was $5.88 compared to $4.68 in 2013.

Oil production increased 48% in 2014 to 346,387 barrels from 234,084 barrels in 2013, while gas production was basically flat. Drilling expenditures over the prior 24-36 months targeting oil and NGL rich plays, principally in western Oklahoma and the Texas Panhandle, along with the producing wells acquired in the Eagle Ford, are responsible for the increased oil volumes. In addition, 207,688 barrels of NGL were produced in fiscal 2014, which was an 86% increase versus 2013.

Total costs and expenses increased $5.4 million or 13% in fiscal 2014 as compared to 2013. $2 million of the expense increase was in lease operating expenses, which continue to increase as we add additional wells to our producing list each year. The majority of these wells for the last several years have been oil and NGL rich wells, which have higher operating costs than dry gas wells. Production taxes increased $.9 million, which is a function of the higher oil, NGL and natural gas sales revenues recorded in fiscal 2014 compared to 2013. DD&A per Mcfe of production for 2014 was $1.55 as compared to $1.69 in 2013, which resulted in slightly lower DD&A expense in 2014, even with increased production of 9%. In fiscal 2013, the Company recorded a $.9 million gain on asset sales and other, the majority of which was the result of a payment received settling a class action lawsuit. There was no such gain recorded in 2014.

Fiscal Fourth Quarter 2014 Results

For the 2014 fourth quarter, the Company recorded net income of $9,297,986, or $0.55 per share. This compared to net income of $5,719,096, or $0.34 per share, for the 2013 fourth quarter. Net cash provided by operating activities increased 23% to $16,184,066 for the 2014 fourth quarter versus the 2013 fourth quarter, which substantially exceeded 2014 fourth quarter costs to drill and equip wells of $11,918,937.

Total revenues for the 2014 fourth quarter were $27,887,445, an increase of 52% from $18,396,254 for the 2013 quarter. Oil, NGL and gas sales revenue increased $5,811,657, or 32% in the 2014 quarter as compared to the 2013 quarter. This revenue increase was a result of increased oil and NGL volumes of 59% and 84%, respectively, and increased natural gas prices of 21%, offset somewhat by a 9% decrease in the average oil sales price to $91.83 per barrel. The above changes combined to increase the average sales price per Mcfe of production during the 2014 fourth quarter to $6.27, a 22% increase from $5.15 for the 2013 fourth quarter. Oil production increased in the 2014 quarter to 126,256 barrels, versus 79,387 barrels in the 2013 quarter, while gas production decreased 5% to 2,690,493 Mcf, and NGL production increased 84% to 55,849 barrels. Again, drilling expenditures over the prior 24-36 months targeting oil and NGL rich plays and the producing wells acquired in the Eagle Ford are responsible for the oil and NGL volume increases.

Management Comments

Michael C. Coffman, President and CEO, said, “2014 was an exceptional year for Panhandle. Net income, production and reserves were at record setting levels. We also were able to close on the largest acquisition in Company history at the end of the fiscal third quarter. Our fourth quarter, with the full effect of the Eagle Ford production for the entire quarter, resulted in the largest quarterly net income in the Company’s history.

“Obviously, product prices have dropped significantly since the end of the fiscal year, which, should they continue at the current level throughout fiscal 2015, will affect the Company’s 2015 earnings and reduce our capital expenditure level. We have oil hedging in place through 2015 representing approximately 80% of our upper-end expectation of production from our Eagle Ford properties or approximately 50% of our total oil production. We also have hedging in place for a significant portion of our 2015 natural gas production. These hedges and expected cash flows from operations should provide the Company a relatively stable cash flow base for 2015.

“At the current time, it is difficult for us, as a non-operator, to be able to make a reasonable estimation of 2015 capital expenditures. However, with our good financial position and cash flows, we will deploy capital where necessary to take advantage of those drilling opportunities, which we anticipate will generate acceptable rates of return and grow value for our shareholders. As usual, our drilling capital expenditures for 2015 are expected to be funded from cash flow provided by operations and excess cash flow will be used to further reduce our bank debt.”

Paul Blanchard, Senior Vice President and COO, said, “Panhandle’s conservative financial and operating strategies, which have been in place for years, position the Company to operate in this less than favorable oil market. The Company’s low cost structure, hedging strategy, clean balance sheet, geographic diversity, product mix and focus on generating returns on capital invested will all contribute to our ability to successfully manage through this difficult commodity price cycle. While the duration of this period of low oil prices will impact the trajectory of production and reserve growth, we are confident the Company is well positioned to deliver long-term growth of shareholder value.

FINANCIAL HIGHLIGHTS

Statements of Operations

 

 

Three Months Ended Sept. 30,

 

Year Ended Sept. 30,

 

 

2014

 

2013

 

2014

 

2013

Revenues:

 

 

 

 

 

 

 

 

 

 

 

 

Oil, NGL and natural gas sales

 

$

 23,730,600 

 

$

 17,918,943 

 

$

 82,846,528 

 

$

 60,605,878 

Lease bonuses and rentals

 

 

 69,906 

 

 

 399,367 

 

 

 423,328 

 

 

 938,846 

Gains (losses) on derivative contracts

 

 

 3,758,509 

 

 

 (185,142)

 

 

 247,414 

 

 

 611,024 

Income from partnerships

 

 

 328,431 

 

 

 263,086 

 

 

 893,954 

 

 

 733,372 

 

 

 

 27,887,445 

 

 

 18,396,254 

 

 

 84,411,224 

 

 

 62,889,120 

Costs and expenses:

 

 

 

 

 

 

 

 

 

 

 

 

Lease operating expenses

 

 

 3,982,645 

 

 

 2,820,790 

 

 

 13,912,792 

 

 

 11,861,403 

Production taxes

 

 

 822,580 

 

 

 657,499 

 

 

 2,694,118 

 

 

 1,834,840 

Exploration costs

 

 

 15,877 

 

 

 (51,032)

 

 

 86,017 

 

 

 9,795 

Depreciation, depletion and amortization

 

 

 6,334,272 

 

 

 4,855,581 

 

 

 21,896,902 

 

 

 21,945,768 

Provision for impairment

 

 

 665,933 

 

 

 304,829 

 

 

 1,096,076 

 

 

 530,670 

Loss (gain) on asset sales and other

 

 

 (22,709)

 

 

 (679,572)

 

 

 8,378 

 

 

 (942,959)

Interest expense

 

 

 421,599 

 

 

 33,092 

 

 

 462,296 

 

 

 157,558 

General and administrative

 

 

 2,083,262 

 

 

 1,674,971 

 

 

 7,433,183 

 

 

 6,801,996 

 

 

 

 14,303,459 

 

 

 9,616,158 

 

 

 47,589,762 

 

 

 42,199,071 

Income before provision

 

 

 

 

 

 

 

 

 

 

 

 

for income taxes

 

 

 13,583,986 

 

 

 8,780,096 

 

 

 36,821,462 

 

 

 20,690,049 

Provision for income taxes

 

 

 4,286,000 

 

 

 3,061,000 

 

 

 11,820,000 

 

 

 6,730,000 

 

 

 

 

 

 

 

 

 

 

 

 

 

Net income

 

$

 9,297,986 

 

$

 5,719,096 

 

$

 25,001,462 

 

$

 13,960,049 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Basic and diluted earnings per common share:

 

 

 

 

 

 

 

 

 

 

 

 

Net income

 

$

 0.55 

 

$

 0.34 

 

$

 1.49 

 

$

 0.84 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Weighted average shares outstanding:

 

 

 

 

 

 

 

 

 

 

 

 

Common shares

 

 

 16,474,040 

 

 

 16,440,932 

 

 

 16,472,144 

 

 

 16,481,584 

Unissued, vested directors' shares

 

 

 258,905 

 

 

 240,152 

 

 

 255,039 

 

 

 232,224 

 

 

 

 16,732,945 

 

 

 16,681,084 

 

 

 16,727,183 

 

 

 16,713,808 

 

 

 

 

 

 

 

 

 

 

 

 

 

Dividends declared per share of

 

 

 

 

 

 

 

 

 

 

 

 

common stock and paid in period

 

$

 0.04 

 

$

 0.035 

 

$

 0.16 

 

$

 0.14 

Balance Sheets

 

 

Sept. 30, 2014

 

Sept. 30, 2013

Assets

 

 

 

 

 

 

Current Assets:

 

 

 

 

 

 

Cash and cash equivalents

 

$

 509,755 

 

$

 2,867,171 

Oil, NGL and natural gas sales receivables

 

 

 16,227,469 

 

 

 13,720,761 

Refundable production taxes

 

 

 625,996 

 

 

 662,051 

Derivative contracts

 

 

 1,650,563 

 

 

 425,198 

Other

 

 

 354,828 

 

 

 129,998 

Total current assets

 

 

 19,368,611 

 

 

 17,805,179 

 

 

 

 

 

 

 

Properties and equipment at cost, based on successful

 

 

 

 

 

 

efforts accounting:

 

 

 

 

 

 

Producing oil and natural gas properties

 

 

 418,237,512 

 

 

 304,889,145 

Non-producing oil and natural gas properties

 

 

 10,260,717 

 

 

 8,932,905 

Furniture and fixtures

 

 

 1,317,725 

 

 

 737,368 

 

 

 

 429,815,954 

 

 

 314,559,418 

Less accumulated depreciation, depletion and

 

 

 

 

 

 

amortization

 

 

 (204,731,661)

 

 

 (186,641,291)

Net properties and equipment

 

 

 225,084,293 

 

 

 127,918,127 

 

 

 

 

 

 

 

Investments

 

 

 1,936,421 

 

 

 1,574,642 

Derivative contracts

 

 

 251,279 

 

 

 -

Refundable production taxes

 

 

 -

 

 

 540,482 

Total assets

 

$

 246,640,604 

 

$

 147,838,430 

 

 

 

 

 

 

 

Liabilities and Stockholders' Equity

 

 

 

 

 

 

Current Liabilities:

 

 

 

 

 

 

Accounts payable

 

$

 7,034,773 

 

$

 8,409,634 

Deferred income taxes

 

 

 600,100 

 

 

 127,100 

Income taxes payable

 

 

 523,843 

 

 

 751,992 

Accrued liabilities and other

 

 

 1,290,858 

 

 

 1,011,865 

Total current liabilities

 

 

 9,449,574 

 

 

 10,300,591 

 

 

 

 

 

 

 

Long-term debt

 

 

 78,000,000 

 

 

 8,262,256 

Deferred income taxes

 

 

 37,363,907 

 

 

 31,226,907 

Asset retirement obligations

 

 

 2,638,470 

 

 

 2,393,190 

 

 

 

 

 

 

 

Stockholders' equity:

 

 

 

 

 

 

Class A voting common stock, $.0166 par value; 24,000,000 shares

 

 

 

 

 

 

authorized, 16,863,004 issued at Sept. 30, 2014 and 2013

 

 

 280,938 

 

 

 140,524 

Capital in excess of par value

 

 

 2,861,343 

 

 

 2,587,838 

Deferred directors' compensation

 

 

 3,110,351 

 

 

 2,756,526 

Retained earnings

 

 

 118,794,188 

 

 

 96,454,449 

 

 

 

 125,046,820 

 

 

 101,939,337 

Treasury stock, at cost; 372,364 shares at Sept. 30, 2014,

 

 

 

 

 

 

and 400,496 shares at Sept. 30, 2013

 

 

 (5,858,167)

 

 

 (6,283,851)

Total stockholders' equity

 

 

 119,188,653 

 

 

 95,655,486 

Total liabilities and stockholders' equity

 

$

 246,640,604 

 

$

 147,838,430 

Condensed Statements of Cash Flows

 

 

 

Year ended Sept. 30,

 

 

2014

 

2013

Operating Activities

 

 

 

 

 

 

Net income (loss)

 

$

 25,001,462 

 

$

 13,960,049 

Adjustments to reconcile net income (loss) to net

 

 

 

 

 

 

cash provided by operating activities:

 

 

 

 

 

 

Depreciation, depletion and amortization

 

 

 21,896,902 

 

 

 21,945,768 

Impairment

 

 

 1,096,076 

 

 

 530,670 

Provision for deferred income taxes

 

 

 6,610,000 

 

 

 4,767,000 

Exploration costs

 

 

 86,017 

 

 

 9,795 

Gain from leasing of fee mineral acreage

 

 

 (422,818)

 

 

 (936,701)

Net (gain) loss on sales of assets

 

 

 149,062 

 

 

 (208,750)

Income from partnerships

 

 

 (893,954)

 

 

 (733,372)

Distributions received from partnerships

 

 

 1,129,324 

 

 

 917,718 

Common stock contributed to ESOP

 

 

 341,125 

 

 

 308,450 

Common stock (unissued) to Directors'

 

 

 

 

 

 

Deferred Compensation Plan

 

 

 353,825 

 

 

 377,520 

Restricted stock awards

 

 

 659,320 

 

 

 683,968 

Cash provided (used) by changes in assets

 

 

 

 

 

 

and liabilities:

 

 

 

 

 

 

Oil, NGL and natural gas sales receivables

 

 

 (2,506,708)

 

 

 (5,370,896)

Fair value of derivative contracts

 

 

 (1,476,644)

 

 

 (597,469)

Refundable income taxes

 

 

 -

 

 

 325,715 

Refundable production taxes

 

 

 576,537 

 

 

 294,881 

Other current assets

 

 

 (224,830)

 

 

 73,508 

Accounts payable

 

 

 252,860 

 

 

 298,191 

Income taxes payable

 

 

 (284,149)

 

 

 751,992 

Accrued liabilities

 

 

 279,195 

 

 

 4,072 

Total adjustments

 

 

 27,621,140 

 

 

 23,442,060 

Net cash provided by operating activities

 

 

 52,622,602 

 

 

 37,402,109 

 

 

 

 

 

 

 

Investing Activities

 

 

 

 

 

 

Capital expenditures, including dry hole costs

 

 

 (38,612,788)

 

 

 (26,765,785)

Acquisition of working interest properties

 

 

 (83,253,952)

 

 

 -

Acquisition of minerals and overrides

 

 

 (56,250)

 

 

 (783,750)

Proceeds from leasing of fee mineral acreage

 

 

 477,144 

 

 

 1,023,368 

Investments in partnerships

 

 

 (597,149)

 

 

 (724,118)

Proceeds from sales of assets

 

 

 92,000 

 

 

 870,610 

Net cash used in investing activities

 

 

 (121,950,995)

 

 

 (26,379,675)

 

 

 

 

 

 

 

Financing Activities

 

 

 

 

 

 

Borrowings under debt agreement

 

 

 99,846,333 

 

 

 11,569,652 

Payments of loan principal

 

 

 (30,108,589)

 

 

 (18,182,381)

Purchases of treasury stock

 

 

 (122,044)

 

 

 (1,214,638)

Payments of dividends

 

 

 (2,661,723)

 

 

 (2,326,995)

Excess tax benefit on stock-based compensation

 

 

 17,000 

 

 

 15,000 

Net cash provided by (used in) financing activities

 

 

 66,970,977 

 

 

 (10,139,362)

Increase (decrease) in cash and cash equivalents

 

 

 (2,357,416)

 

 

 883,072 

Cash and cash equivalents at beginning of year

 

 

 2,867,171 

 

 

 1,984,099 

Cash and cash equivalents at end of year

 

$

 509,755 

 

$

 2,867,171 

 

 

 

 

Year ended Sept. 30,

 

 

2014

 

2013

Supplemental Disclosures of Cash Flow

 

 

 

 

 

 

Information

 

 

 

 

 

 

 

 

 

 

 

 

 

Interest paid (net of capitalized interest)

 

$

 380,451 

 

$

 157,558 

Income taxes paid, net of refunds received

 

$

 5,477,147 

 

$

 870,295 

 

 

 

 

 

 

 

Supplemental schedule of noncash

 

 

 

 

 

 

investing and financing activities:

 

 

 

 

 

 

Additions and revisions, net, to asset

 

 

 

 

 

 

retirement obligations

 

$

 225,453 

 

$

 161,065 

 

 

 

 

 

 

 

Gross additions to properties and equipment

 

$

 120,284,639 

 

$

 29,261,285 

Net (increase) decrease in accounts payable for

 

 

 

 

 

 

properties and equipment additions

 

 

 1,638,351 

 

 

 (1,711,750)

Capital expenditures, including dry hole costs

 

$

 121,922,990 

 

$

 27,549,535 

OPERATING HIGHLIGHTS

 

Fourth Quarter Ended

 

Fourth Quarter Ended

 

Year Ended

 

Year Ended

 

Sept. 30, 2014

 

Sept. 30, 2013

 

Sept. 30, 2014

 

Sept. 30, 2013

MCFE Sold

3,783,123

 

3,478,639

 

14,098,009

 

12,962,215

Average Sales Price per MCFE

$6.27

 

$5.15

 

$5.88

 

$4.68

Barrels of Oil Sold

126,256

 

79,387

 

346,387

 

234,084

Average Sales Price per Barrel

$91.83

 

$100.98

 

$93.68

 

$91.56

MCF of Natural Gas Sold

2,690,493

 

2,820,079

 

10,773,559

 

10,886,329

Average Sales Price per MCF

$3.88

 

$3.20

 

$4.05

 

$3.31

Barrels of NGL Sold

55,849

 

30,373

 

207,688

 

111,897

Average Sales Price per Barrel

$30.48

 

$28.89

 

$32.31

 

$27.67

Quarterly Production Levels

Quarter ended

 

Oil Bbls Sold

 

MCF Sold

 

NGL Bbls Sold

 

MCFE Sold

9/30/14

 

126,256

 

2,690,493

 

55,849

 

3,783,123

6/30/14

 

70,479

 

2,508,346

 

63,029

 

3,309,394

3/31/14

 

66,239

 

2,788,768

 

51,670

 

3,496,222

12/31/13

 

83,413

 

2,785,952

 

37,140

 

3,509,270

9/30/13

 

79,387

 

2,820,079

 

30,373

 

3,478,639

6/30/13

 

55,474

 

2,742,996

 

25,660

 

3,229,800

3/31/13

 

52,567

 

2,778,869

 

25,190

 

3,245,411

12/31/12

 

46,656

 

2,544,385

 

30,674

 

3,008,365

Derivative contracts in place as of December 1, 2014)
(prices below reflect the Company’s net price from the listed pipelines)

 

 

Production volume

 

Indexed

 

 

Contract period

 

covered per month

 

pipeline

 

Fixed price

Natural gas costless collars

 

 

 

 

 

 

July - December 2014

 

140,000 Mmbtu

 

NYMEX Henry Hub

 

$3.75 floor / $4.50 ceiling

November 2014 - April 2015

 

100,000 Mmbtu

 

NYMEX Henry Hub

 

$3.75 floor / $4.25 ceiling

January - March 2015

 

100,000 Mmbtu

 

NYMEX Henry Hub

 

$4.00 floor / $5.00 ceiling

January - March 2015

 

30,000 Mmbtu

 

NYMEX Henry Hub

 

$4.00 floor / $4.60 ceiling

January - December 2015

 

100,000 Mmbtu

 

NYMEX Henry Hub

 

$3.50 floor / $4.10 ceiling

January - December 2015

 

70,000 Mmbtu

 

NYMEX Henry Hub

 

$3.25 floor / $4.00 ceiling

April - September 2015

 

70,000 Mmbtu

 

NYMEX Henry Hub

 

$3.50 floor / $4.05 ceiling

April - October 2015

 

50,000 Mmbtu

 

NYMEX Henry Hub

 

$3.50 floor / $4.00 ceiling

May - October 2015

 

70,000 Mmbtu

 

NYMEX Henry Hub

 

$3.50 floor / $3.95 ceiling

 

 

 

 

 

 

 

Natural gas fixed price swaps

 

 

 

 

 

 

July - December 2014

 

140,000 Mmbtu

 

NYMEX Henry Hub

 

$4.11

October - December 2014

 

40,000 Mmbtu

 

NYMEX Henry Hub

 

$4.61

 

 

 

 

 

 

 

Oil costless collars

 

 

 

 

 

 

January - December 2014

 

4,000 Bbls

 

NYMEX WTI

 

$85.00 floor / $100.00 ceiling

July - December 2014

 

5,000 Bbls

 

NYMEX WTI

 

$90.00 floor / $97.00 ceiling

July - December 2015

 

10,000 Bbls

 

NYMEX WTI

 

$80.00 floor / $86.50 ceiling

 

 

 

 

 

 

 

Oil fixed price swaps

 

 

 

 

 

 

January - December 2014

 

3,000 Bbls

 

NYMEX WTI

 

$94.50

June - December 2014

 

4,000 Bbls

 

NYMEX WTI

 

$99.40

July - December 2014

 

4,000 Bbls

 

NYMEX WTI

 

$95.25

July - December 2014

 

5,000 Bbls

 

NYMEX WTI

 

$94.20

January - March 2015

 

6,000 Bbls

 

NYMEX WTI

 

$92.85

January - June 2015

 

7,000 Bbls

 

NYMEX WTI

 

$96.80

January - June 2015

 

5,000 Bbls

 

NYMEX WTI

 

$97.40

January - June 2015

 

4,000 Bbls

 

NYMEX WTI

 

$97.25

April - December 2015

 

5,000 Bbls

 

NYMEX WTI

 

$94.56

July - December 2015

 

7,000 Bbls

 

NYMEX WTI

 

$93.91

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 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; unsuccessful exploration and development drilling; decreases in the values of our oil and gas properties resulting in write-downs; the negative impact lower oil and gas prices could have on our ability to borrow; drilling and operating risks; and we cannot control activities on our properties as the Company is a non-operator.

Do not place undue reliance on these forward-looking statements, which speak only as of the date of this release. Panhandle undertakes no obligation to update this information. Panhandle urges you to carefully review and consider the disclosures made in this presentation and Panhandle’s filings with the Securities and Exchange Commission that attempt to advise interested parties of the risks and factors that may affect Panhandle’s business.