PHX Minerals Inc. Reports Fourth Quarter And Fiscal 2020 Results And Announces Dividend Payment

OKLAHOMA CITY, Dec. 10, 2020 – PHX MINERALS INC., “PHX” or the “Company,” (NYSE: PHX), today reported financial and operating results for the fourth quarter and fiscal year ended Sept. 30, 2020.

Chad L. Stephens, President and CEO, commented, “In many respects, the COVID-19 pandemic impacted the energy industry harder than any other major sector of the U.S. economy in 2020. While natural gas and oil prices have rebounded recently, 2020 saw some of the largest price declines in decades causing producers to quickly shut-in production, slash capital investments and significantly reduce overhead including workforce reductions.

“Despite the impact of the pandemic, we have made significant progress throughout this year on the strategy we laid out in January to focus solely on minerals, high grade the asset base and maintain a flexible balance sheet. We are pleased to see our sequential quarter financial performance improve materially. For the full fiscal year, we have paid down our debt through operating cash flow by $6.7 million, or roughly 20%; controlled cash expenses, which are down approximately $4 million, or 19%; reaffirmed our bank borrowing base; closed on an acquisition for total consideration of $9.3 million and executed a common equity offering of 5.75 million shares to fund additional acquisitions. Since the Sept. 30, 2020, fiscal year end, we have also closed on or entered into a purchase and sales agreement to acquire additional minerals in the SCOOP and Haynesville plays for total cash consideration of $7.3 million. Additionally, we changed our name and logo to better align ourselves with our core strategy. When looking toward the horizon, we estimate we will have completely eliminated our debt within four years, using operating cash flows at current strip prices. The hedges we have in place protect operating cash flows and allow us to weather the volatility in the market. As we pay down debt, our financial position will get stronger and allow us to allocate more capital to our core growth strategy of making value accretive mineral acquisitions. We also believe that the current sector dislocation will provide us with additional opportunities to use our public company platform to be an active minerals consolidator over the next few years.”

HIGHLIGHTS FOR THE PERIODS ENDED SEPT. 30, 2020 AND SUBSEQUENT EVENTS

  • Production volumes for the fourth fiscal quarter of 2020 were 2,038 Mmcfe, up from 1,904 Mmcfe in the third fiscal quarter of 2020 and down from 2,555 Mmcfe in the fourth fiscal quarter of 2019.
  • Production volumes for the full fiscal year 2020 were 8,593 Mmcfe, down from 10,359 Mmcfe in the full fiscal year 2019.
  • Recorded a net loss in fiscal 2020 of $24.0 million or $1.41 per share, as compared to net loss of $40.7 million or $2.43 per share in fiscal 2019. Net loss in both years was primarily due to non-cash impairments. Adjusted pre-tax net income(1) in fiscal 2020 was $0.9 million or $0.05 per share, as compared to $16.7 million or $1.00 per share in fiscal 2019.
  • Adjusted EBITDA(1) for the fourth fiscal quarter of 2020 was $2.7 million, up from $1.2 million in the third fiscal quarter of 2020 and down from $9.5 million in the fourth fiscal quarter of 2019. This includes gain on sale of assets in the 2020 and 2019 fiscal fourth quarters of $0.7 million and $5.9 million, respectively.
  • Adjusted EBITDA(1) for the full fiscal year 2020 was $13.5 million, down from $36.9 million in the full fiscal year 2019. This includes gain on sale of assets in 2020 and 2019 of $4.0 million and $19.0 million, respectively.
  • Reduced debt 19% from $35.4 million as of Sept. 30, 2019, to $28.8 million, as of Sept. 30, 2020. Debt has been further reduced to $27.3 million as of Dec. 1, 2020.
  • Debt to adjusted EBITDA (TTM) ratio was 2.14x at Sept. 30, 2020.
  • On Oct. 8, 2020, the Company closed on the purchase of 297 net royalty acres in Grady County, Okla., and 257 net mineral acres and 12 net royalty acres in Harrison, Panola and Nacogdoches Counties, Texas, for a purchase price of $5.5 million and 153,375 shares of PHX common stock.
  • On Nov. 12, 2020, the Company closed on the purchase of 134 net mineral acres in San Augustine County, Texas, for a purchase price of $750,000.
  • On Dec. 4, 2020, the Company signed a purchase and sale agreement to purchase an additional 87 net mineral acres in San Augustine County, Texas, for a purchase price of $1 million, subject to customary closing adjustments. The Company expects this acquisition to close in the first fiscal quarter of 2021.
  • On Dec. 4, 2020, the Company entered into an Eighth Amendment to the Credit Facility, which reaffirmed the Company’s borrowing base.
  • Approved a payment of a one cent per share dividend payable on March 5, 2021, to stockholders of record on Feb. 19, 2021.
  1. This is a non-GAAP measure. Refer to the Non-GAAP Reconciliation section.

OPERATING HIGHLIGHTS

 

Fourth Quarter Ended

 

 

Fourth Quarter Ended

 

 

Year Ended

 

 

Year Ended

 

 

Sept. 30, 2020

 

 

Sept. 30, 2019

 

 

Sept. 30, 2020

 

 

Sept. 30, 2019

 

Mcfe Sold

 

2,037,779

 

 

 

2,555,085

 

 

 

8,593,153

 

 

 

10,359,509

 

Average Sales Price per Mcfe

$

2.47

 

 

$

3.21

 

 

$

2.72

 

 

$

3.80

 

Gas Mcf Sold

 

1,423,602

 

 

 

1,786,167

 

 

 

5,962,705

 

 

 

7,086,761

 

Average Sales Price per Mcf

$

1.68

 

 

$

1.90

 

 

$

1.72

 

 

$

2.48

 

Oil Barrels Sold

 

55,626

 

 

 

75,934

 

 

 

269,785

 

 

 

329,199

 

Average Sales Price per Barrel

$

37.80

 

 

$

55.28

 

 

$

41.47

 

 

$

55.07

 

NGL Barrels Sold

 

46,737

 

 

 

52,219

 

 

 

168,623

 

 

 

216,259

 

Average Sales Price per Barrel

$

11.84

 

 

$

11.50

 

 

$

11.42

 

 

$

17.10

 

FINANCIAL HIGHLIGHTS

 

 

Fourth Quarter Ended

 

 

Fourth Quarter Ended

 

 

Year Ended

 

 

Year Ended

 

 

 

Sept. 30, 2020

 

 

Sept. 30, 2019

 

 

Sept. 30, 2020

 

 

Sept. 30, 2019

 

    Working Interest Sales

 

$

2,937,807

 

 

$

5,253,699

 

 

$

12,914,080

 

 

$

25,418,411

 

    Royalty Interest Sales

 

$

2,103,179

 

 

$

2,941,962

 

 

$

10,455,923

 

 

$

13,991,625

 

Natural Gas, Oil and NGL Sales

 

$

5,040,986

 

 

$

8,195,661

 

 

$

23,370,003

 

 

$

39,410,036

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Lease Bonuses and Rental Income

 

$

118,174

 

 

$

594,700

 

 

$

690,961

 

 

$

1,547,078

 

Total Revenue

 

$

4,372,618

 

 

$

15,728,084

 

 

$

28,965,819

 

 

$

66,035,685

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

LOE per Mcfe

 

$

0.48

 

 

$

0.69

 

 

$

0.56

 

 

$

0.62

 

Transportation, Gathering and Marketing per Mcfe

 

$

0.55

 

 

$

0.58

 

 

$

0.56

 

 

$

0.59

 

Production Tax per Mcfe

 

$

0.09

 

 

$

0.13

 

 

$

0.12

 

 

$

0.18

 

G&A Expense per Mcfe

 

$

0.84

 

 

$

1.05

 

 

$

0.93

 

 

$

0.83

 

Interest Expense per Mcfe

 

$

0.16

 

 

$

0.17

 

 

$

0.15

 

 

$

0.19

 

DD&A per Mcfe

 

$

1.24

 

 

$

2.50

 

 

$

1.32

 

 

$

1.76

 

Total Expense per Mcfe

 

$

3.36

 

 

$

5.12

 

 

$

3.64

 

 

$

4.17

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Impairment

 

$

-

 

 

$

76,824,337

 

 

$

29,904,528

 

 

$

76,824,337

 

Net Income

 

$

(1,834,122

)

 

$

(56,153,780

)

 

$

(23,952,037

)

 

$

(40,744,938

)

Adj. Pre-Tax Net Income (Loss) (1)

 

$

(125,024

)

 

$

2,650,922

 

 

$

865,282

 

 

$

16,690,239

 

Adjusted EBITDA (1)

 

$

2,723,331

 

 

$

9,470,758

 

 

$

13,465,853

 

 

$

36,882,611

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Cash Flow from Operations

 

$

1,280,555

 

 

$

6,672,733

 

 

$

11,106,295

 

 

$

21,005,684

 

CapEx - Drilling & Completing

 

$

206,968

 

 

$

176,367

 

 

$

403,136

 

 

$

3,526,007

 

CapEx - Mineral Acquisitions

 

$

15,766

 

 

$

542,403

 

 

$

10,288,250

 

 

$

5,662,869

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Borrowing Base

 

 

 

 

 

 

 

 

 

$

31,000,000

 

 

$

70,000,000

 

Debt

 

 

 

 

 

 

 

 

 

$

28,750,000

 

 

$

35,425,000

 

Debt/Adjusted EBITDA (TTM) (1)

 

 

 

 

 

 

 

 

 

 

2.14

 

 

 

0.96

 

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

FOURTH QUARTER 2020 RESULTS

Natural gas, oil and NGL revenue decreased 38% in the 2020 quarter as production decreased 20% and product prices decreased 23%, relative to the 2019 quarter. The 2020 quarter included a $1.5 million loss on derivative contracts as compared to a $1.1 million gain for the 2019 quarter.

Total production decreased 20% in the 2020 quarter, as compared to the 2019 quarter. Total production decreased due to naturally declining production in the Eagle Ford, Arkoma Stack, STACK and, to a lesser extent, the Fayetteville, production downtime in high interest wells in the Arkoma Stack, postponement of workovers due to prevailing economic conditions in high interest wells in the Eagle Ford, and asset sales in 2019 and 2020 in the Permian Basin in Texas and New Mexico.  These decreases were slightly offset by a ten-well drilling program in the Bakken that came online in November 2019 and mineral acquisitions of Bakken and STACK producing properties in late 2019.

In the fourth quarter of 2020, the Company sold open and non-producing net mineral acres in northwest Oklahoma for a gain of $717,640. In the fourth quarter of 2019, the Company sold working interests in Martin County, Texas, and mineral acreage in Reagan, Upton, Loving, Martin, Ward and Reeves Counties, Texas, for a gain of $5,858,701.

The 34% decrease in total cost per Mcfe in the 2020 quarter, relative to the 2019 quarter, was primarily driven by a decrease in DD&A. DD&A decreased $3,855,882, or 60%, in the 2020 quarter to $1.24 per Mcfe, as compared to $2.50 per Mcfe in the 2019 quarter. Of the decrease, $1,293,263 was a result of production decreasing 20% in the 2020 quarter. Also, DD&A decreased $2,562,619 as a result of a $1.26 decrease in the DD&A rate per Mcfe (due to impairments taken at the end of fiscal 2019 and the 2020 second quarter), which lowered the basis of the assets. The rate decrease was partially offset by lower natural gas, oil and NGL prices utilized in the reserve calculations during the 2020 quarter, as compared to the 2019 quarter, shortening the economic life of wells.

No impairment charge was recorded during the 2020 quarter. In the fourth quarter of 2019, impairment was $76,824,337, of which $76,560,376 was recorded on the Eagle Ford assets. The remaining $263,961 of impairment was taken on various other assets. The impairment on the Eagle Ford assets was triggered by the Company making the strategic decision to cease participating with a working interest on its mineral and leasehold acreage going forward and, therefore, removing all working interest PUDs from the reserve reports. The removal of the PUDs caused the Eagle Ford assets to fail the step one test for impairment, as its undiscounted cash flows were not high enough to cover the book basis of the assets. These assets were written down to their fair market value as required by GAAP.

The Company’s net income (loss) changed from net loss of $56.2 million in the 2019 quarter to a net loss of $1.8 million in the 2020 quarter. The change was primarily due to the non-cash impairment (as noted above) in 2019, as well as lower expenses in 2020, partially offset by lower gain on asset sales and loss on derivative contracts in 2020. Adjusted pretax net income(1) was $2.7 million in the 2019 quarter, as compared to $0.1 million adjusted pretax net loss(1) in the 2020 quarter.

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

FISCAL YEAR 2020 RESULTS

Natural gas, oil and NGL revenue decreased 41% in 2020 as production decreased 17% and product prices decreased 28%, relative to 2019. Fiscal 2020 total revenues included a $4.0 million gain on asset sales and also included a $0.9 million gain on derivative contracts, as compared to a $19.0 million gain on asset sales and $6.1 million gain on derivative contracts for 2019.

Total production decreased 17% in 2020, as compared to 2019. This decrease for 2020 was due to factors consistent with those discussed above. The Company also elected not to participate with a working interest in any wells proposed on its mineral acreage during 2020 or 2019.

In 2020, the Company sold 530 net mineral acres in Eddy County, N.M., for a gain on sales of $3.3 million. The Company also sold 5,925 open and non-producing net mineral acres in northwest Oklahoma for a net gain on sales of $0.7 million. In 2019, the Company sold 975 net mineral and royalty acres for a net gain on sales of $18.7 million.

The 13% decrease in total cost per Mcfe in 2020, relative to 2019, was primarily driven by a decrease in DD&A as noted above.

The Company’s net loss changed from net loss of $40.7 million in 2019 to a net loss of $24.0 million in 2020. The majority of the loss in 2019 and 2020 was due to the non-cash impairments. In 2020, net loss was also driven by lower natural gas, oil and NGL sales due to lower commodity prices and decreased production.

During the year, the Company paid down $6.7 million of debt under the Company’s credit facility.

OPERATIONS UPDATE

At Nov. 20, 2020, the Company had a total of 115 gross wells (0.51 net wells) in progress across its mineral positions and 107 gross active permitted wells. As of Nov. 20, 2020, there were four rigs operating on the Company’s acreage and 32 rigs operating within 2.5 miles of its acreage.

 

 

 

 

 

 

 

 

 

 

Bakken/

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Three

 

 

Arkoma

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

SCOOP

 

 

STACK

 

 

Forks

 

 

Stack

 

 

Permian

 

 

Fayetteville

 

 

Haynesville

 

 

Other

 

 

Total

 

As of 11/20/20:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Gross Wells in Progress on PHX Acreage

 

 

46

 

 

 

31

 

 

 

5

 

 

 

1

 

 

 

4

 

 

 

-

 

 

 

21

 

 

 

7

 

 

 

115

 

Net Wells in Progress on PHX Acreage

 

 

0.09

 

 

 

0.16

 

 

 

-

 

 

 

-

 

 

 

0.14

 

 

 

-

 

 

 

0.05

 

 

 

0.07

 

 

 

0.51

 

Gross Active Permits on PHX Acreage

 

 

31

 

 

 

22

 

 

 

25

 

 

 

10

 

 

 

-

 

 

 

-

 

 

 

1

 

 

 

18

 

 

 

107

 

As of 11/20/20:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Rigs Present on PHX Acreage

 

 

4

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

4

 

Rigs Within 2.5 Miles of PHX Acreage

 

 

10

 

 

 

2

 

 

 

4

 

 

 

-

 

 

 

4

 

 

 

-

 

 

 

7

 

 

 

5

 

 

 

32

 

Leasing Activity

During the fourth quarter of fiscal 2020, the Company leased 205 net mineral acres for an average bonus payment of $583 and an average royalty of 23%.

 

 

 

 

 

 

 

 

 

 

Bakken/

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Three

 

 

Arkoma

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

SCOOP

 

 

STACK

 

 

Forks

 

 

Stack

 

 

Permian

 

 

Fayetteville

 

 

Haynesville

 

 

Other

 

 

Total

During Three Months Ended 9/30/20:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Net Mineral Acres Leased

 

 

52

 

 

 

14

 

 

 

-

 

 

 

-

 

 

 

139

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

205

Average Bonus per Net Mineral Acre

 

$

125

 

 

$

2,500

 

 

 

-

 

 

 

-

 

 

$

1,063

 

 

 

-

 

 

 

-

 

 

 

-

 

 

$

583

Average Royalty per Net Mineral Acre

 

23%

 

 

13%

 

 

 

-

 

 

-

 

 

25%

 

 

 

-

 

 

 

-

 

 

-

 

 

23%

ACQUISITION AND DIVESTITURE UPDATE

During the fourth quarter of fiscal 2020, the Company sold 5,925 predominantly open and non-producing net mineral acres at an average price of $134 per acre and did not purchase any net mineral acres.

 

 

 

 

 

 

 

 

 

 

Bakken/

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Three

 

 

Arkoma

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

SCOOP

 

 

STACK

 

 

Forks

 

 

Stack

 

 

Permian

 

 

Fayetteville

 

 

Haynesville

 

 

Other

 

 

Total

During Three Months Ended 9/30/20:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Net Mineral Acres Purchased

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

Price per Net Mineral Acre

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

Net Mineral/Royalty Acres Sold

 

 

-

 

 

 

363

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

5,562

 

 

 

5,925

Price per Net Mineral/Royalty Acre

 

 

-

 

 

$

134

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

$

134

 

 

$

134

RESERVES UPDATE

At Sept. 30, 2020, proved reserves were 57.7 Bcfe, as calculated by DeGolyer and MacNaughton, the Company’s independent consulting petroleum engineering firm. This was a 46% decrease, compared to the 106.4 Bcfe of proved reserves at Sept. 30, 2019. Total proved developed reserves decreased 39% to 54.6 Bcfe, as compared to Sept. 30, 2019, reserve volumes, mainly due to 2020 production and pricing and performance revisions. The pricing revisions were due to wells reaching their economic limits earlier than projected in 2019. The performance revisions were principally due to lower performance of the Company’s high-interest Woodford natural gas wells in the STACK and Arkoma Stack in Oklahoma and, to a lesser extent, lower performance of the Eagle Ford Shale oil properties in southern Texas. Total proved undeveloped reserves decreased 14.0 Bcfe principally due to the impact of COVID-19 and reduced pricing leading to an unprecedented decrease in operator activity in 2020 and a decision to remove PUD locations not permitted, in progress, or drilled and uncompleted (DUC). SEC prices used for the Sept. 30, 2020, report averaged $1.62 per Mcf for natural gas, $40.18 per barrel for oil and $9.95 per barrel for NGL, compared to $2.48 per Mcf for natural gas, $54.40 per barrel for oil and $19.30 per barrel for NGL for the Sept. 30, 2019, report. These prices reflect net prices received at the wellhead.

BORROWING BASE

On Dec. 4, 2020, the Company entered into an Eighth Amendment to the Credit Facility. The borrowing base after Quarterly Reduction Commitments was reaffirmed at $30.0 million. This amendment favorably reduced the Quarterly Commitment Reductions from $1,000,000 to $600,000. Additionally, the consolidated cash balance in the anti-cash hoarding provision was reduced from $2,000,000 to $1,000,000 and the debt to EBITDA ratio was reduced from 4.0:1.00 to 3.50:1.00.

FOURTH QUARTER EARNINGS CALL

PHX will host a conference call to discuss fourth quarter results at 5:00 p.m. EST on Dec. 10, 2020. Management’s discussion will be followed by a question and answer session with investors. To participate on the conference call, please dial 844-369-8770 (domestic) or 862-298-0840 (international). A replay of the call will be available for seven days after the call. The number to access the replay of the conference call is 877-481-4010 and the PIN for the replay is 38618.

FINANCIALS

Statements of Operations

 

Three Months Ended Sept. 30,

 

 

Year Ended Sept. 30,

 

 

2020

 

 

2019

 

 

2020

 

 

2019

 

Revenues:

 

 

 

 

 

Natural gas, oil and NGL sales

$

5,040,986

 

 

$

8,195,661

 

 

$

23,370,003

 

 

$

39,410,036

 

Lease bonuses and rental income

 

118,174

 

 

 

594,700

 

 

 

690,961

 

 

 

1,547,078

 

Gains (losses) on derivative contracts

 

(1,507,982

)

 

 

1,079,022

 

 

 

907,419

 

 

 

6,105,145

 

Gain on asset sales

 

721,440

 

 

 

5,858,701

 

 

 

3,997,436

 

 

 

18,973,426

 

 

 

4,372,618

 

 

 

15,728,084

 

 

 

28,965,819

 

 

 

66,035,685

 

Costs and expenses:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Lease operating expenses

 

969,723

 

 

 

1,758,772

 

 

 

4,841,541

 

 

 

6,398,522

 

Transportation, gathering and marketing

 

1,116,587

 

 

 

1,487,945

 

 

 

4,812,869

 

 

 

6,089,903

 

Production taxes

 

187,628

 

 

 

337,598

 

 

 

1,022,912

 

 

 

1,902,636

 

Depreciation, depletion and amortization

 

2,519,996

 

 

 

6,375,878

 

 

 

11,313,783

 

 

 

18,196,583

 

Provision for impairment

 

-

 

 

 

76,824,337

 

 

 

29,904,528

 

 

 

76,824,337

 

Interest expense

 

328,359

 

 

 

443,958

 

 

 

1,286,788

 

 

 

1,995,789

 

General and administrative

 

1,718,422

 

 

 

2,683,811

 

 

 

8,024,901

 

 

 

8,565,243

 

Loss on asset sales and other expense (income)

 

44,085

 

 

 

206,565

 

 

 

(466

)

 

 

288,610

 

 

 

6,884,800

 

 

 

90,118,864

 

 

 

61,206,856

 

 

 

120,261,623

 

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

 

(2,512,182

)

 

 

(74,390,780

)

 

 

(32,241,037

)

 

 

(54,225,938

)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Provision (benefit) for income taxes

 

(678,060

)

 

 

(18,237,000

)

 

 

(8,289,000

)

 

 

(13,481,000

)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Net income (loss)

$

(1,834,122

)

 

$

(56,153,780

)

 

$

(23,952,037

)

 

$

(40,744,938

)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Basic and diluted earnings (loss) per common share

$

(0.07

)

 

$

(3.35

)

 

$

(1.41

)

 

$

(2.43

)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Basic and diluted weighted average shares outstanding:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Common shares

 

18,289,502

 

 

 

16,362,493

 

 

 

16,856,792

 

 

 

16,575,160

 

Unissued, directors' deferred compensation shares

 

147,341

 

 

 

175,463

 

 

 

154,142

 

 

 

168,586

 

 

 

18,436,843

 

 

 

16,537,956

 

 

 

17,010,934

 

 

 

16,743,746

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Dividends declared per share of

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

common stock and paid in period

$

0.01

 

 

$

0.04

 

 

$

0.10

 

 

$

0.16

 

Balance Sheets

 

Sept. 30, 2020

 

 

Sept. 30, 2019

 

Assets

 

 

 

 

 

 

 

Current assets:

 

 

 

 

 

 

 

Cash and cash equivalents

$

10,690,395

 

 

$

6,160,691

 

Natural gas, oil and NGL sales receivables (net of

 

2,943,220

 

 

 

4,377,646

 

allowance for uncollectable accounts)

 

 

 

 

 

 

 

Refundable income taxes

 

3,805,227

 

 

 

1,505,442

 

Derivative contracts, net

 

-

 

 

 

2,256,639

 

Other

 

351,088

 

 

 

177,037

 

Total current assets

 

17,789,930

 

 

 

14,477,455

 

 

 

 

 

 

 

 

 

Properties and equipment, at cost, based on

 

 

 

 

 

 

 

   successful efforts accounting:

 

 

 

 

 

 

 

Producing natural gas and oil properties

 

324,886,491

 

 

 

354,718,398

 

Non-producing natural gas and oil properties

 

18,993,814

 

 

 

14,599,023

 

Other

 

582,444

 

 

 

717,121

 

 

 

344,462,749

 

 

 

370,034,542

 

Less accumulated depreciation, depletion and amortization

 

(263,590,801

)

 

 

(258,607,521

)

Net properties and equipment

 

80,871,948

 

 

 

111,427,021

 

 

 

 

 

 

 

 

 

Investments

 

79,308

 

 

 

205,076

 

Derivative contracts, net

 

-

 

 

 

237,505

 

Operating lease right-of-use assets

 

690,316

 

 

 

-

 

Other, net

 

590,333

 

 

 

297,890

 

Total assets

$

100,021,835

 

 

$

126,644,947

 

 

 

 

 

 

 

 

 

Liabilities and Stockholders' Equity

 

 

 

 

 

 

 

Current liabilities:

 

 

 

 

 

 

 

Accounts payable

$

997,637

 

 

$

665,160

 

Derivative contracts, net

 

281,942

 

 

 

-

 

Current portion of operating lease liability

 

127,108

 

 

 

-

 

Accrued liabilities and other

 

1,297,363

 

 

 

2,433,466

 

Short-term debt

 

1,750,000

 

 

 

-

 

Total current liabilities

 

4,454,050

 

 

 

3,098,626

 

 

 

 

 

 

 

 

 

Long-term debt

 

27,000,000

 

 

 

35,425,000

 

Deferred income taxes

 

1,329,007

 

 

 

5,976,007

 

Asset retirement obligations

 

2,897,522

 

 

 

2,835,781

 

Derivative contracts, net

 

425,705

 

 

 

-

 

Operating lease liability, net of current portion

 

921,625

 

 

 

-

 

 

 

 

 

 

 

 

 

Stockholders' equity:

 

 

 

 

 

 

 

Class A voting common stock, $0.01666 par value; 24,000,500 shares authorized;

 

 

 

 

 

 

 

 22,647,306 issued at Sept. 30, 2020, and Class A voting common stock, $0.01666 par

 

 

 

 

 

 

 

value; 24,000,000 shares authorized; 16,897,306 issued at Sept. 30, 2019

 

377,304

 

 

 

281,509

 

Capital in excess of par value

 

10,649,611

 

 

 

2,967,984

 

Deferred directors' compensation

 

1,874,007

 

 

 

2,555,781

 

Retained earnings

 

56,244,100

 

 

 

81,848,301

 

 

 

69,145,022

 

 

 

87,653,575

 

Less treasury stock, at cost; 411,487 shares at Sept. 30, 2020; 558,051 shares

 

 

 

 

 

 

 

at Sept. 30, 2019

 

(6,151,096

)

 

 

(8,344,042

)

Total stockholders' equity

 

62,993,926

 

 

 

79,309,533

 

Total liabilities and stockholders' equity

$

100,021,835

 

 

$

126,644,947

 

Condensed Statements of Cash Flows

 

Year ended Sept. 30,

 

2020

 

 

2019

Operating Activities

 

Net income (loss)

$

(23,952,037

)

 

$

(40,744,938

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

 

 

 

 

 

 

  by operating activities:

 

 

 

 

 

 

Depreciation, depletion and amortization

 

11,313,783

 

 

 

18,196,583

Impairment

 

29,904,528

 

 

 

76,824,337

Provision for deferred income taxes

 

(4,647,000

)

 

 

(12,112,000

Gain from leasing of fee mineral acreage

 

(685,927

)

 

 

(1,546,298

Proceeds from leasing of fee mineral acreage

 

701,948

 

 

 

1,565,649

Net (gain) loss on sale of assets

 

(3,973,321

)

 

 

(18,730,197

ESOP contribution expense

 

103,104

 

 

 

372,274

Directors' deferred compensation expense

 

228,408

 

 

 

272,491

Total (gain) loss on derivative contracts

 

(907,419

)

 

 

(6,105,145

Cash receipts (payments) on settled derivative contracts

 

4,109,210

 

 

 

196,985

Restricted stock awards

 

743,897

 

 

 

771,797

Other

 

(2,611

)

 

 

19,085

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

 

 

 

 

 

 

Natural gas, oil and NGL sales receivables

 

1,434,426

 

 

 

2,723,983

Refundable income taxes

 

(2,299,785

)

 

 

(1,472,277

Other current assets

 

(89,931

)

 

 

21,116

Accounts payable

 

1,308,731

 

 

 

105,217

Other non-current assets

 

(1,044,680

)

 

 

7,166

Accrued liabilities

 

(1,139,029

)

 

 

639,856

Total adjustments

 

35,058,332

 

 

 

61,750,622

Net cash provided by operating activities

 

11,106,295

 

 

 

21,005,684

 

 

 

 

 

 

 

Investing Activities

 

 

 

 

 

 

Capital expenditures

 

(403,136

)

 

 

(3,526,007

Acquisition of minerals and overrides

 

(10,288,250

)

 

 

(5,662,869

Investments in partnerships

 

-

 

 

 

(1,648

Proceeds from sales of assets

 

4,228,868

 

 

 

19,515,735

Net cash provided (used) by investing activities

 

(6,462,518

)

 

 

10,325,211

 

 

 

 

 

 

 

Financing Activities

 

 

 

 

 

 

Borrowings under debt agreement

 

6,061,725

 

 

 

16,642,481

Payments of loan principal

 

(12,736,725

)

 

 

(32,217,481

Net proceeds from equity issuance

 

8,220,726

 

 

 

-

Purchase of treasury stock

 

(7,635

)

 

 

(7,454,000

Payments of dividends

 

(1,652,164

)

 

 

(2,673,706

Net cash used in financing activities

 

(114,073

)

 

 

(25,702,706

 

 

 

 

 

 

 

Increase (decrease) in cash and cash equivalents

 

4,529,704

 

 

 

5,628,189

Cash and cash equivalents at beginning of year

 

6,160,691

 

 

 

532,502

Cash and cash equivalents at end of year

$

10,690,395

 

 

$

6,160,691

 

 

 

 

 

 

 

Supplemental Disclosure of Cash Flow Information

 

 

 

 

 

 

Interest paid (net of capitalized interest)

$

1,306,967

 

 

$

2,031,762

Income taxes paid (net of refunds received)

$

(1,342,275

)

 

$

103,279

 

 

 

 

 

 

 

Supplemental Schedule of Noncash Investing and Financing Activities

 

 

 

 

 

 

Additions and revisions, net, to asset retirement obligations

$

4

 

 

$

27,782

 

 

 

 

 

 

 

Gross additions to properties and equipment

$

10,701,284

 

 

$

9,248,415

Net (increase) decrease in accounts payable for properties

 

 

 

 

 

 

and equipment additions

 

(9,898

)

 

 

(59,539

Capital expenditures and acquisitions

$

10,691,386

 

 

$

9,188,876

Proved Reserves

 

Proved Reserves SEC Pricing

 

 

Sept. 30, 2020

 

 

Sept. 30, 2019

 

Proved Developed Reserves:

 

 

Mcf of Gas

 

40,924,083

 

 

 

67,713,193

 

Barrels of Oil

 

1,148,989

 

 

 

1,863,096

 

Barrels of NGL

 

1,135,864

 

 

 

1,747,242

 

Mcfe (1)

 

54,633,201

 

 

 

89,375,221

 

Proved Undeveloped Reserves:

 

 

 

 

 

 

 

Mcf of Gas

 

1,448,690

 

 

 

12,560,713

 

Barrels of Oil

 

184,668

 

 

 

516,994

 

Barrels of NGL

 

83,993

 

 

 

226,038

 

Mcfe (1)

 

3,060,656

 

 

 

17,018,905

 

Total Proved Reserves:

 

 

 

 

 

 

 

Mcf of Gas

 

42,372,773

 

 

 

80,273,906

 

Barrels of Oil

 

1,333,657

 

 

 

2,380,090

 

Barrels of NGL

 

1,219,857

 

 

 

1,973,280

 

Mcfe (1)

 

57,693,857

 

 

 

106,394,126

 

 

 

 

 

 

 

 

 

10% Discounted Estimated Future

 

 

 

 

 

 

 

Net Cash Flows (before income taxes):

 

 

 

 

 

 

 

Proved Developed

$

33,270,804

 

 

$

86,814,212

 

Proved Undeveloped

 

5,659,479

 

 

 

23,581,427

 

Total

$

38,930,283

 

 

$

110,395,639

 

SEC Pricing

 

 

 

 

 

 

 

Gas/Mcf

$

1.62

 

 

$

2.48

 

Oil/Barrel

$

40.18

 

 

$

54.40

 

NGL/Barrel

$

9.95

 

 

$

19.30

 

 

 

 

 

 

 

 

 

Proved Reserves - Projected Future Pricing (2)

 

 

 

 

 

 

 

 

 

10% Discounted Estimated Future

Proved Reserves

 

Net Cash Flows (before income taxes):

Sept. 30, 2020

 

 

Sept. 30, 2019

 

Proved Developed

$

63,648,347

 

 

$

99,204,697

 

Proved Undeveloped

 

7,197,350

 

 

 

27,518,415

 

Total

$

70,845,697

 

 

$

126,723,112

 

 

 

 

 

 

 

 

 

(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 Sept. 30, 2020, and Sept. 30, 2019, basis adjusted to Company wellhead price

 

Hedge Position as of Dec. 1, 2020

Period

 

Product

 

Volume Mcf/Bbl

 

 

Swap Price

 

 

Collar Average Floor Price

 

 

Collar Average Ceiling Price

 

2020

 

Natural Gas

 

 

226,000

 

 

 

 

 

 

$

2.30

 

 

$

3.00

 

2020

 

Natural Gas

 

 

118,000

 

 

$

2.70

 

 

 

 

 

 

 

 

 

2021

 

Natural Gas

 

 

2,924,500

 

 

 

 

 

 

$

2.33

 

 

$

3.03

 

2021

 

Natural Gas

 

 

1,014,500

 

 

$

2.69

 

 

 

 

 

 

 

 

 

2022

 

Natural Gas

 

 

1,402,500

 

 

 

 

 

 

$

2.47

 

 

$

3.14

 

2022

 

Natural Gas

 

 

125,500

 

 

$

2.70

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

2020

 

Crude Oil

 

 

7,500

 

 

 

 

 

 

$

46.47

 

 

$

53.81

 

2020

 

Crude Oil

 

 

20,000

 

 

$

58.02

 

 

 

 

 

 

 

 

 

2021

 

Crude Oil

 

 

51,000

 

 

 

 

 

 

$

36.74

 

 

$

44.79

 

2021

 

Crude Oil

 

 

96,000

 

 

$

37.00

 

 

 

 

 

 

 

 

 

2022

 

Crude Oil

 

 

23,500

 

 

 

 

 

 

$

36.89

 

 

$

45.73

 

2022

 

Crude Oil

 

 

49,000

 

 

$

41.10

 

 

 

 

 

 

 

 

 

Non-GAAP Reconciliation

This news release includes certain