Panhandle Oil and Gas Inc. Reports Second Quarter and Six Months 2019 Results and Mid-Year Reserves Update
OKLAHOMA CITY – PANHANDLE OIL AND GAS INC., the “Company,” (NYSE: PHX), today reported financial and operating results for the second quarter and six months ended March 31, 2019.
Paul F. Blanchard Jr., President and CEO commented, “During the first half of fiscal 2019, we continued to execute our corporate strategy of optimizing our mineral portfolio, maintaining a strong financial position and generating optimal cash flow. This execution included several specific initiatives: 1) selling mineral acreage in New Mexico and purchasing mineral acreage in the STACK play in Oklahoma, both at valuations that were very attractive to Panhandle, 2) repurchasing approximately $4.0 million of our stock at a price we believe represents an attractive long-term value to our shareholders and 3) reducing debt by $6.9 million.”
Mr. Blanchard continued, “Our unique mineral holdings, including large positions of both leased and open minerals in key areas, provide us with several levers to generate significant cash flow moving forward, and to continue to optimize our portfolio. Two special portfolio optimization projects underway for the second half of 2019 include the marketing of additional high-value Permian Basin mineral acreage and a new marketing effort to lease out a multiple-county package of Panhandle mineral acreage in the STACK and SCOOP plays. Much of this STACK and SCOOP acreage was previously held by the Company as unleased to allow for potential working interest participation. Each of these projects have the potential to generate meaningful cash flow for the Company. We are also aggressively pursuing the acquisition of additional mineral acreage with significant undeveloped potential in the Bakken and the STACK and SCOOP plays as part of our strategy. In that regard, we executed an agreement earlier this week to purchase additional Bakken mineral acreage from a private seller for $3.48 million. The details of the transaction are in the acquisition and divestiture section of this release. Finally, our seven new Eagle Ford Shale working interest wells began producing at the end of the second quarter and are performing in line with our pre-drilling expectations. These wells are expected to materially increase Panhandle’s third quarter oil production.”
HIGHLIGHTS FOR THE PERIODS ENDED MARCH 31, 2019
- Net income in the first half of 2019 was $10.8 million or $0.64 per share, as compared to $14.9 million or $0.87 per share in the same period of 2018. Adjusted pre-tax net income(1) increased 117% in the first half of 2019 to $10.0 million or $0.59 per share, as compared to $4.6 million or $0.27 per share in the first half of 2018. Adjusted pre-tax net loss for the 2019 second quarter was $0.1 million.
- Adjusted EBITDA(1) grew 23% in the first half of 2019 to $18.5 million, as compared to $15.0 million in 2018, including a $9.1 million gain on asset sales in the adjusted EBITDA for the 2019 period. Adjusted EBITDA for the 2019 second quarter was $4.0 million.
- The Company repurchased $4.0 million of stock during the first half of 2019 at an average price of $15.89 per share, of which, $2.9 million was purchased in the second quarter.
- Reduced debt from $51.0 million, as of Sept. 30, 2018, to $44.1 million, as of March 31, 2019, which has declined further to $42.0 million as of May 7, 2019.
- Debt to enterprise value and debt to adjusted EBITDA (TTM) were 14.50% and 1.50x, respectively, at March 31, 2019.
- The total return to shareholders in the first half of 2019 was $12.2 million through stock repurchases, dividends and debt reduction. This equates to an effective annualized yield of approximately 9.4% for that period.
- Royalty interest oil, NGL and natural gas sales increased 22.2% to $7.9 million in the first half of 2019 as compared to $6.5 million for the same period last year.
- This is a Non-GAAP measure. Refer to the Non-GAAP Reconciliation section.
OPERATING HIGHLIGHTS
|
|
Second Quarter Ended |
|
|
Second Quarter Ended |
|
|
Six Months Ended |
|
|
Six Months Ended |
|
||||
|
|
March 31, 2019 |
|
|
March 31, 2018 |
|
|
March 31, 2019 |
|
|
March 31, 2018 |
|
||||
|
Mcfe Sold |
|
2,421,525 |
|
|
|
2,942,274 |
|
|
|
5,186,055 |
|
|
|
6,364,087 |
|
|
Average Sales Price per Mcfe |
$ |
3.81 |
|
|
$ |
4.17 |
|
|
$ |
4.13 |
|
|
$ |
3.95 |
|
|
Oil Barrels Sold |
|
74,372 |
|
|
|
82,312 |
|
|
|
157,200 |
|
|
|
173,149 |
|
|
Average Sales Price per Barrel |
$ |
52.84 |
|
|
$ |
63.20 |
|
|
$ |
53.49 |
|
|
$ |
58.28 |
|
|
Gas Mcf Sold |
|
1,688,043 |
|
|
|
2,107,920 |
|
|
|
3,582,033 |
|
|
|
4,550,305 |
|
|
Average Sales Price per Mcf |
$ |
2.65 |
|
|
$ |
2.72 |
|
|
$ |
3.00 |
|
|
$ |
2.60 |
|
|
NGL Barrels Sold |
|
47,875 |
|
|
|
56,747 |
|
|
|
110,137 |
|
|
|
129,148 |
|
|
Average Sales Price per Barrel |
$ |
17.05 |
|
|
$ |
23.60 |
|
|
$ |
20.62 |
|
|
$ |
25.00 |
|
FINANCIAL HIGHLIGHTS
|
|
|
Second Quarter Ended |
|
|
Second Quarter Ended |
|
|
Six Months Ended |
|
|
Six Months Ended |
|
||||
|
|
|
March 31, 2019 |
|
|
March 31, 2018 |
|
|
March 31, 2019 |
|
|
March 31, 2018 |
|
||||
|
Working Interest Sales |
|
$ |
6,070,901 |
|
|
$ |
8,701,919 |
|
|
$ |
13,505,476 |
|
|
$ |
18,668,088 |
|
|
Royalty Interest Sales |
|
$ |
3,150,418 |
|
|
$ |
3,564,117 |
|
|
$ |
7,926,562 |
|
|
$ |
6,485,367 |
|
|
Oil, NGL and Natural Gas Sales |
|
$ |
9,221,319 |
|
|
$ |
12,266,036 |
|
|
$ |
21,432,038 |
|
|
$ |
25,153,455 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Lease Bonuses and Rental Income |
|
$ |
208,746 |
|
|
$ |
499,198 |
|
|
$ |
723,303 |
|
|
$ |
596,157 |
|
|
Total Revenue |
|
$ |
7,636,213 |
|
|
$ |
11,421,258 |
|
|
$ |
33,965,207 |
|
|
$ |
23,911,784 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
LOE per Mcfe |
|
$ |
1.23 |
|
|
$ |
1.09 |
|
|
$ |
1.17 |
|
|
$ |
1.08 |
|
|
Production Tax per Mcfe |
|
$ |
0.19 |
|
|
$ |
0.17 |
|
|
$ |
0.21 |
|
|
$ |
0.16 |
|
|
DD&A per Mcfe |
|
$ |
1.50 |
|
|
$ |
1.44 |
|
|
$ |
1.43 |
|
|
$ |
1.50 |
|
|
G&A Expense per Mcfe |
|
$ |
0.88 |
|
|
$ |
0.60 |
|
|
$ |
0.79 |
|
|
$ |
0.57 |
|
|
Interest Expense per Mcfe |
|
$ |
0.20 |
|
|
$ |
0.15 |
|
|
$ |
0.20 |
|
|
$ |
0.14 |
|
|
Total Expense per Mcfe |
|
$ |
4.00 |
|
|
$ |
3.45 |
|
|
$ |
3.80 |
|
|
$ |
3.45 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net Income |
|
$ |
(1,931,334 |
) |
|
$ |
1,070,176 |
|
|
$ |
10,804,606 |
|
|
$ |
14,855,115 |
|
|
Adj. Pre-Tax Net Income (Loss) (1) |
|
$ |
(86,375 |
) |
|
$ |
2,681,658 |
|
|
$ |
10,014,384 |
|
|
$ |
4,607,633 |
|
|
Adjusted EBITDA (1) |
|
$ |
4,023,385 |
|
|
$ |
7,358,687 |
|
|
$ |
18,477,200 |
|
|
$ |
14,992,065 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash Flow from Operations |
|
$ |
5,051,311 |
|
|
$ |
8,161,399 |
|
|
$ |
9,061,054 |
|
|
$ |
15,359,982 |
|
|
CapEx - Drilling & Equipping |
|
$ |
2,713,744 |
|
|
$ |
1,559,601 |
|
|
$ |
4,159,683 |
|
|
$ |
6,544,481 |
|
|
CapEx - Acquisitions |
|
$ |
1,386,775 |
|
|
$ |
- |
|
|
$ |
1,809,775 |
|
|
$ |
- |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Borrowing Base |
|
|
|
|
|
|
|
|
|
$ |
80,000,000 |
|
|
$ |
80,000,000 |
|
|
Debt |
|
|
|
|
|
|
|
|
|
$ |
44,100,000 |
|
|
$ |
43,500,000 |
|
|
Debt/Adjusted EBITDA (TTM) (1) |
|
|
|
|
|
|
|
|
|
|
1.50 |
|
|
|
1.52 |
|
|
Debt to Enterprise Value (1) |
|
|
|
|
|
|
|
|
|
|
14.50 |
% |
|
|
11.84 |
% |
- This is a Non-GAAP measure. Refer to the Non-GAAP Reconciliation section.
SECOND QUARTER 2019 RESULTS
Total production decreased 18% in the 2019 quarter, as compared to the 2018 quarter. Total production has decreased due to the natural decline of the production base and, to a lesser extent, the result of marginal property divestitures. This was partially offset by the production from new royalty and working interest wells. The oil production decrease is primarily from the Eagle Ford Shale properties, a result of naturally declining production, as well as shut-in time for wells offsetting the newly completed (March 2019) seven-well program during stimulation and flowback. This decrease was somewhat offset by the mineral acquisition of Bakken oil-producing properties in August 2018. The NGL production decrease is attributed to both natural production decline and operators electing to remove less NGLs from the natural gas stream due to lower NGL prices. These decreases in the liquid-rich production from the prior year’s drilling program in the Anadarko Basin Woodford Shale and Eagle Ford Shale were partially offset by new well drilling in the Arkoma Woodford and STACK in Oklahoma. Decreased gas production was due to naturally declining production in the Anadarko Woodford and Arkoma Woodford shales, well workovers in the Arkoma Woodford Shale and, to a lesser extent, marginal property divestitures during 2018. These decreases were partially offset by new drilling in the STACK and Anadarko Woodford.
The total production in the second quarter of 2018 saw significant increases due to our substantial 2017 drilling program in the Arkoma Woodford (8 wells), Anadarko Woodford (6 wells) and Eagle Ford (10 wells) shales, which began production just before or during the quarter. All of these wells had significantly higher than average NRI’s and were producing at high rates during that time. As with virtually all horizontal wells, production from these wells experienced significant declines during their first year. This decline, along with materially lower capital expenditures during fiscal 2018 and the first half of fiscal 2019, accounted for a material portion of the Company’s production decline experienced in the 2019 comparable periods.
Average daily production in the second quarter of 2019 decreased 10% when compared to the first quarter of 2019. A material portion of the decrease was due to the following factors: adjustments to prior quarter receivable balances, operators electing to remove less NGL from the natural gas stream due to lower NGL prices and the sale of producing properties in the first quarter.
Oil, NGL and natural gas revenue decreased 25% in the 2019 quarter as production decreased 18% and product prices decreased relative to the 2018 quarter. The 2019 quarter included a $1.8 million loss on derivative contracts as compared to a $1.3 million loss for the 2018 quarter.
The 16% increase in total cost per MCFE in the 2019 quarter relative to the 2018 quarter was primarily driven by lower production as noted above. In the 2018 quarter there was significant production from lower cost wells (wells that have very high royalty interest in relation to their working interest). These wells had large initial production rates that drove the per Mcfe rate down across most expense categories. As expected, production on these wells has declined in the 2019 quarter from their previous high rates. Interest expense and production taxes were also influenced, respectively, by higher bank interest rates and production tax rate. G&A expense also increased due to non-recurring restricted stock and other compensation expenses tied to retirement clauses and other employee changes.
The Company’s net income (loss) changed from net income of $1.1 million in the 2018 quarter to a net loss of $1.9 million in the 2019 quarter. The majority of the change was due to lower production and decreased prices in the 2019 quarter. Adjusted pre-tax net income (loss) (1) was $0.1 million net loss in the 2019 quarter, as compared to net income of $2.7 million in the 2018 quarter.
- This is a Non-GAAP measure. Refer to the Non-GAAP Reconciliation section.
SIX MONTHS 2019 RESULTS
Total production decreased 19% in the 2019 period, as compared to the 2018 period. This decrease for the 2019 six-month period, was due to factors consistent with those discussed above. Panhandle also elected not to participate with a working interest on 32 wells proposed on its minerals.
Oil, NGL and natural gas revenue decreased 15% in the 2019 period as production decreased 19% and product prices increased relative to the 2018 period. The 2019 period included a $2.7 million gain on derivative contracts as compared to a $1.8 million loss for the 2018 period.
In the 2019 period, the Company sold mineral acreage in Lea and Eddy Counties, N.M., for a gain of $9,096,938. In the 2018 period, the Company sold its working interest in several marginal properties in Oklahoma for a loss of $466,129.
The 10% increase in total cost per MCFE in the 2019 period relative to the 2018 period was primarily driven by lower production as noted above. In the 2018 period there were significant increases in production from lower cost wells (wells that have very high royalty interest in relation to their working interest). These wells had large initial production rates that drove the cost per Mcfe down across most expense categories. As expected, in the 2019 period the production on these wells has declined from their initial high rates. Interest expense and production taxes were also influenced, respectively, by higher bank interest rates and production tax rate increases in Oklahoma during the 2019 period. G&A expense also increased due to non-recurring restricted stock and other compensation expenses.
The Company’s net income decreased $4.1 million in the 2019 period, as compared to the 2018 period. The 2018 period was materially impacted by the Tax Cuts and Jobs Act enacted in December 2017, and the 2019 period was materially impacted by the gain on sale of assets and the mark-to-market gain on Panhandle’s derivatives. Adjusted pre-tax net income (1) was $10.0 million in the 2019 period, as compared to $4.6 million in the 2018 period.
The Company generated excess free cash flow, enabling us to return $5.3 million to shareholders through dividend payments and stock repurchases, while also paying down $6.9 million of debt.
- This is a Non-GAAP measure. Refer to the Non-GAAP Reconciliation section.
OPERATIONS UPDATE
Eagle Ford
Seven Eagle Ford Shale wells began production at the end of the second quarter. The Company’s average working interest in this group of wells is 10.8% (8% net revenue), as the wells are located partially on the Company’s 16% working interest (12% net revenue) acreage and partially on acreage Panhandle does not own. The average initial 30-day production rate from the seven wells was 860 Boe per day (69 Boepd net to Panhandle). This is in line with projected production for these Eagle Ford Shale wells. These wells are expected to materially increase third quarter oil production.
Oklahoma
Drilling activity on the Company’s Oklahoma mineral acreage continues to be strong, with 15 rigs currently active on royalty interest wells. The majority of the activity is in SCOOP and STACK with 13 royalty interest wells drilling.
Permian Basin
Two rigs are currently drilling royalty interest wells on our mineral holdings in the Permian Basin in Texas and New Mexico.
Bakken
One rig is drilling a royalty interest well on our mineral holdings in the Bakken in North Dakota.
Rig Activity
In addition to the 18 rigs currently drilling royalty interest wells on Panhandle acreage, 87 rigs are currently drilling within 2.5 miles of Panhandle acreage, which is an indication of future potential drilling interest on our mineral acreage.
Leasing Activity
The Company leased out 336 mineral acres at approximately $622/acre in the quarter at an average royalty rate of 20.3%.
ACQUISITION AND DIVESTITURE UPDATE
Panhandle acquired 374 mineral acres in the core of the STACK play in western Oklahoma in the first half of 2019 for $1,809,775 or $4,800/acre. This acreage is in an area of current drilling, primarily by Continental Resources, for both the Meramec and Woodford in Blaine and Caddo Counties, Okla.
On May 6, 2019, Panhandle entered into a definitive agreement to acquire 319 net mineral acres in the core of the Bakken/Three Forks play, principally in McKenzie and Dunn Counties, N.D., for $3.48 million. There are 324 Bakken and Three Forks wells with net royalty production of approximately 52 Boe per day and an additional 130 Bakken and Three Forks undeveloped locations on the mineral acreage. Drilling and completion operations are underway on 49 of the undeveloped locations and 5 locations have been permitted. Cash flow for May 2019 is estimated at $52,300. The transaction is expected to close by the end of May 2019 and will be funded utilizing the Company’s bank credit facility.
During the first quarter of 2019, the Company sold 2,016 net mineral acres and producing oil and gas properties located in Lea and Eddy Counties, N.M., to a private buyer for total net consideration of $9,096,938 and recorded a gain on the sale of $9,096,938.
The Company intends to continue optimizing its mineral portfolio through strategic sales and purchases. Panhandle is unique in the industry, in that the net book value of our entire 260,000-acre mineral portfolio is only $71 per acre. This affords the Company the opportunity to generate material net income and EBITDA on lease bonuses and the strategic sale of minerals.
RESERVES UPDATE
March 31, 2019, mid-year proved reserves were 159.5 Bcfe, as calculated by DeGolyer and MacNaughton, the Company’s independent consulting petroleum engineering firm. This was an 8% decrease, compared to the 173.6 Bcfe of proved reserves at Sept. 30, 2018. SEC prices used for the March 31, 2019, report averaged $2.75 per Mcf for natural gas, $61.63 per barrel for oil and $23.46 per barrel for NGL, compared to $2.56 per Mcf for natural gas, $62.86 per barrel for oil and $26.13 per barrel for NGL at the Sept. 30, 2018, report. These prices reflect net prices received at the wellhead. Total proved developed reserves decreased 4% to 105.0 Bcfe, as compared to Sept. 30, 2018, reserve volumes. Total proved undeveloped reserves decreased 9.3 Bcfe principally due to 12 Eagle Ford Shale wells being reclassified from proven undeveloped to probable undeveloped as the wells are no longer scheduled to be drilled within five years of when they were classified as proven undeveloped. To a lesser extent, the change of our Arkoma Basin Woodford proven undeveloped locations from working interest to royalty interest also contributed to the decrease. This change was made to reflect our current intent to lease these minerals and not participate with a working interest when they are drilled.
SECOND QUARTER EARNINGS CALL
Panhandle will host a conference call to discuss second quarter results at 5:00 p.m. E.D.T. on May 9, 2019. Management’s discussion will be followed by a question and answer session with investors. To participate on the conference call, please dial 877-407-9210 (domestic) or 201-689-8049 (international). A replay of the call will be available for 14 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 46460.
FINANCIALS
Statements of Operations
|
|
Three Months Ended March 31, |
|
|
Six Months Ended March 31, |
|
||||||||||
|
|
2019 |
|
|
2018 |
|
|
2019 |
|
|
2018 |
|
||||
|
Revenues: |
(unaudited) |
|
|
(unaudited) |
|
||||||||||
|
Oil, NGL and natural gas sales |
$ |
9,221,319 |
|
|
$ |
12,266,036 |
|
|
$ |
21,432,038 |
|
|
$ |
25,153,455 |
|
|
Lease bonuses and rental income |
|
208,746 |
|
|
|
499,198 |
|
|
|
723,303 |
|
|
|
596,157 |
|
|
Gains (losses) on derivative contracts |
|
(1,793,852 |
) |
|
|
(1,343,976 |
) |
|
|
2,712,928 |
|
|
|
(1,837,828 |
) |
|
Gain on asset sales |
|
- |
|
|
|
- |
|
|
|
9,096,938 |
|
|
|
- |
|
|
|
|
7,636,213 |
|
|
|
11,421,258 |
|
|
|
33,965,207 |
|
|
|
23,911,784 |
|
|
Costs and expenses: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Lease operating expenses |
|
2,988,178 |
|
|
|
3,217,568 |
|
|
|
6,092,748 |
|
|
|
6,844,277 |
|
|
Production taxes |
|
467,308 |
|
|
|
497,823 |
|
|
|
1,076,259 |
|
|
|
986,813 |
|
|
Depreciation, depletion and amortization |
|
3,623,976 |
|
|
|
4,241,078 |
|
|
|
7,437,662 |
|
|
|
9,516,902 |
|
|
Interest expense |
|
485,784 |
|
|
|
435,951 |
|
|
|
1,025,154 |
|
|
|
867,530 |
|
|
General and administrative |
|
2,133,153 |
|
|
|
1,766,190 |
|
|
|
4,071,993 |
|
|
|
3,654,333 |
|
|
Loss on asset sales and other |
|
(852 |
) |
|
|
216,472 |
|
|
|
15,785 |
|
|
|
(79,186 |
) |
|
|
|
9,697,547 |
|
|
|
10,375,082 |
|
|
|
19,719,601 |
|
|
|
21,790,669 |
|
|
Income (loss) before provision (benefit) for income taxes |
|
(2,061,334 |
) |
|
|
1,046,176 |
|
|
|
14,245,606 |
|
|
|
2,121,115 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Provision (benefit) for income taxes |
|
(130,000 |
) |
|
|
(24,000 |
) |
|
|
3,441,000 |
|
|
|
(12,734,000 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income (loss) |
$ |
(1,931,334 |
) |
|
$ |
1,070,176 |
|
|
$ |
10,804,606 |
|
|
$ |
14,855,115 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic and diluted earnings (loss) per common share |
$ |
(0.11 |
) |
|
$ |
0.06 |
|
|
$ |
0.64 |
|
|
$ |
0.87 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic and diluted weighted average shares outstanding: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Common shares |
|
16,679,187 |
|
|
|
16,766,010 |
|
|
|
16,712,493 |
|
|
|
16,725,076 |
|
|
Unissued, directors' deferred compensation shares |
|
183,206 |
|
|
|
205,867 |
|
|
|
217,704 |
|
|
|
267,005 |
|
|
|
|
16,862,393 |
|
|
|
16,971,877 |
|
|
|
16,930,197 |
|
|
|
16,992,081 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Dividends declared per share of |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
common stock and paid in period |
$ |
0.04 |
|
|
$ |
0.04 |
|
|
$ |
0.08 |
|
|
$ |
0.08 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance Sheets
|
|
March 31, 2019 |
|
|
Sept. 30, 2018 |
|
||
|
Assets |
(unaudited) |
|
|
|
|
|
|
|
Current assets: |
|
|
|
|
|
|
|
|
Cash and cash equivalents |
$ |
504,982 |
|
|
$ |
532,502 |
|
|
Oil, NGL and natural gas sales receivables (net of |
|
6,385,694 |
|
|
|
7,101,629 |
|
|
allowance for uncollectable accounts) |
|
|
|
|
|
|
|
|
Refundable income taxes |
|
571,315 |
|
|
|
33,165 |
|
|
Derivative contracts, net |
|
715,223 |
|
|
|
- |
|
|
Other |
|
751,525 |
|
|
|
578,880 |
|
|
Total current assets |
|
8,928,739 |
|
|
|
8,246,176 |
|
|
|
|
|
|
|
|
|
|
|
Properties and equipment, at cost, based on |
|
|
|
|
|
|
|
|
successful efforts accounting: |
|
|
|
|
|
|
|
|
Producing oil and natural gas properties |
|
432,969,755 |
|
|
|
427,448,584 |
|
|
Non-producing oil and natural gas properties |
|
12,521,442 |
|
|
|
12,563,519 |
|
|
Other |
|
1,686,490 |
|
|
|
1,529,770 |
|
|
|
|
447,177,687 |
|
|
|
441,541,873 |
|
|
Less accumulated depreciation, depletion and amortization |
|
(250,606,416 |
) |
|
|
(243,257,472 |
) |
|
Net properties and equipment |
|
196,571,271 |
|
|
|
198,284,401 |
|
|
|
|
|
|
|
|
|
|
|
Investments |
|
197,340 |
|
|
|
219,109 |
|
|
Derivative contracts, net |
|
101,983 |
|
|
|
- |
|
|
Total assets |
$ |
205,799,333 |
|
|
$ |
206,749,686 |
|
|
|
|
|
|
|
|
|
|
|
Liabilities and Stockholders' Equity |
|
|
|
|
|
|
|
|
Current liabilities: |
|
|
|
|
|
|
|
|
Accounts payable |
$ |
487,756 |
|
|
$ |
881,130 |
|
|
Derivative contracts, net |
|
- |
|
|
|
3,064,046 |
|
|
Accrued liabilities and other |
|
1,451,427 |
|
|
|
1,791,950 |
|
|
Total current liabilities |
|
1,939,183 |
|
|
|
5,737,126 |
|
|
|
|
|
|
|
|
|
|
|
Long-term debt |
|
44,100,000 |
|
|
|
51,000,000 |
|
|
Deferred income taxes |
|
22,030,007 |
|
|
|
18,088,007 |
|
|
Asset retirement obligations |
|
2,897,354 |
|
|
|
2,809,378 |
|
|
Derivative contracts, net |
|
- |
|
|
|
349,970 |
|
|
|
|
|
|
|
|
|
|
|
Stockholders' equity: |
|
|
|
|
|
|
|
|
Class A voting common stock, $0.0166 par value; |
|
|
|
|
|
|
|
|
24,000,000 shares authorized, 16,897,306 issued at March 31, |
|
|
|
|
|
|
|
|
2019, and 16,896,881 issued at Sept. 30, 2018 |
|
281,509 |
|
|
|
281,502 |
|
|
Capital in excess of par value |
|
2,830,224 |
|
|
|
2,824,691 |
|
|
Deferred directors' compensation |
|
2,415,569 |
|
|
|
2,950,405 |
|
|
Retained earnings |
|
134,723,381 |
|
|
|
125,266,945 |
|
|
|
|
140,250,683 |
|
|
|
131,323,543 |
|
|
Less treasury stock, at cost; 329,065 shares at March 31, |
|
|
|
|
|
|
|
|
2019, and 145,467 shares at Sept. 30, 2018 |
|
(5,417,894 |
) |
|
|
(2,558,338 |
) |
|
Total stockholders' equity |
|
134,832,789 |
|
|
|
128,765,205 |
|
|
Total liabilities and stockholders' equity |
$ |
205,799,333 |
|
|
$ |
206,749,686 |
|
Condensed Statements of Cash Flows
|
|
Six months ended March 31, |
|
|||||
|
|
2019 |
|
|
2018 |
|
||
|
Operating Activities |
(unaudited) |
|
|||||
|
Net income (loss) |
$ |
10,804,606 |
|
|
$ |
14,855,115 |
|
|
Adjustments to reconcile net income (loss) to net cash provided |
|
|
|
|
|
|
|
|
by operating activities: |
|
|
|
|
|
|
|
|
Depreciation, depletion and amortization |
|
7,437,662 |
|
|
|
9,516,902 |
|
|
Provision for deferred income taxes |
|
3,942,000 |
|
|
|
(12,771,000 |
) |
|
Gain from leasing of fee mineral acreage |
|
(722,912 |
) |
|
|
(595,946 |
) |
|
Proceeds from leasing of fee mineral acreage |
|
737,812 |
|
|
|
610,552 |
|
|
Net (gain) loss on sale of assets |
|
(9,096,938 |
) |
|
|
466,128 |
|
|
Directors' deferred compensation expense |
|
132,280 |
|
|
|
170,826 |
|
|
Fair value of derivative contracts |
|
(4,231,222 |
) |
|
|
2,486,518 |
|
|
Restricted stock awards |
|
446,321 |
|
|
|
347,838 |
|
|
Other |
|
9,326 |
|
|
|
(1,337 |
) |
|
Cash provided (used) by changes in assets and liabilities: |
|
|
|
|
|
|
|
|
Oil, NGL and natural gas sales receivables |
|
715,935 |
|
|
|
1,110,368 |
|
|
Other current assets |
|
(172,645 |
) |
|
|
(87,495 |
) |
|
Accounts payable |
|
(77,977 |
) |
|
|
(73,066 |
) |
|
Income taxes receivable |
|
(538,150 |
) |
|
|
(302,370 |
) |
|
Other non-current assets |
|
17,317 |
|
|
|
(66,364 |
) |
|
Accrued liabilities |
|
(342,361 |
) |
|
|
(306,687 |
) |
|
Total adjustments |
|
(1,743,552 |
) |
|
|
504,867 |
|
|
Net cash provided by operating activities |
|
9,061,054 |
|
|
|
15,359,982 |
|
|
|
|
|
|
|
|
|
|
|
Investing Activities |
|
|
|
|
|
|
|
|
Capital expenditures |
|
(4,159,683 |
) |
|
|
(6,544,481 |
) |
|
Acquisition of minerals and overrides |
|
(1,809,775 |
) |
|
|
- |
|
|
Investments in partnerships |
|
(199 |
) |
|
|
7,493 |
|
|
Proceeds from sales of assets |
|
9,096,938 |
|
|
|
1,129,705 |
|
|
Net cash provided (used) by investing activities |
|
3,127,281 |
|
|
|
(5,407,283 |
) |
|
|
|
|
|
|
|
|
|
|
Financing Activities |
|
|
|
|
|
|
|
|
Borrowings under debt agreement |
|
8,686,270 |
|
|
|
10,596,451 |
|
|
Payments of loan principal |
|
(15,586,270 |
) |
|
|
(19,318,671 |
) |
|
Purchase of treasury stock |
|
(3,967,685 |
) |
|
|
(272,100 |
) |
|
Payments of dividends |
|
(1,348,170 |
) |
|
|
(1,347,608 |
) |
|
Net cash provided (used) by financing activities |
|
(12,215,855 |
) |
|
|
(10,341,928 |
) |
|
|
|
|
|
|
|
|
|
|
Increase (decrease) in cash and cash equivalents |
|
(27,520 |
) |
|
|
(389,229 |
) |
|
Cash and cash equivalents at beginning of period |
|
532,502 |
|
|
|
557,791 |
|
|
Cash and cash equivalents at end of period |
$ |
504,982 |
|
|
$ |
168,562 |
|
|
|
|
|
|
|
|
|
|
|
Supplemental Schedule of Noncash Investing and Financing Activities |
|
|
|
|
|
|
|
|
Additions to asset retirement obligations |
$ |
27,562 |
|
|
$ |
13,871 |
|
|
|
|
|
|
|
|
|
|
|
Gross additions to properties and equipment |
$ |
5,654,060 |
|
|
$ |
5,556,196 |
|
|
Net (increase) decrease in accounts payable for properties |
|
|
|
|
|
|
|
|
and equipment additions |
|
315,398 |
|
|
|
988,285 |
|
|
Capital expenditures and acquisitions |
$ |
5,969,458 |
|
|
$ |
6,544,481 |
|
Proved Reserves
|
|
Proved Reserves SEC Pricing |
|
|||||
|
|
March 31, 2019 |
|
|
Sept. 30, 2018 |
|
||
|
Proved Developed Reserves: |
(unaudited) |
|
|||||
|
Barrels of NGL |
|
2,046,499 |
|
|
|
2,085,706 |
|
|
Barrels of Oil |
|
2,242,621 |
|
|
|
2,334,587 |
|
|
Mcf of Gas |
|
79,229,340 |
|
|
|
83,151,954 |
|
|
Mcfe (1) |
|
104,964,060 |
|
|
|
109,673,712 |
|
|
Proved Undeveloped Reserves: |
|
|
|
|
|
|
|
|
Barrels of NGL |
|
1,240,424 |
|
|
|
848,484 |
|
|
Barrels of Oil |
|
2,775,374 |
|
|
|
3,649,835 |
|
|
Mcf of Gas |
|
30,457,852 |
|
|
|
36,910,082 |
|
|
Mcfe (1) |
|
54,552,640 |
|
|
|
63,899,996 |
|
|
Total Proved Reserves: |
|
|
|
|
|
|
|
|
Barrels of NGL |
|
3,286,923 |
|
|
|
2,934,190 |
|
|
Barrels of Oil |
|
5,017,995 |
|
|
|
5,984,422 |
|
|
Mcf of Gas |
|
109,687,192 |
|
|
|
120,062,036 |
|
|
Mcfe (1) |
|
159,516,700 |
|
|
|
173,573,708 |
|
|
|
|
|
|
|
|
|
|
|
10% Discounted Estimated Future |
|
|
|
|
|
|
|
|
Net Cash Flows (before income taxes): |
|
|
|
|
|
|
|
|
Proved Developed |
$ |
121,564,750 |
|
|
$ |
125,915,804 |
|
|
Proved Undeveloped |
|
64,133,866 |
|
|
|
78,657,354 |
|
|
Total |
$ |
185,698,616 |
|
|
$ |
204,573,158 |
|
|
SEC Pricing |
|
|
|
|
|
|
|
|
Oil/Barrel |
$ |
61.63 |
|
|
$ |
62.86 |
|
|
Gas/Mcf |
$ |
2.75 |
|
|
$ |
2.56 |
|
|
NGL/Barrel |
$ |
23.46 |
|
|
$ |
26.13 |
|
|
|
|
|
|
|
|
|
|
|
Proved Reserves - Projected Future Pricing (2) |
|
||||||
|
|
|
|
|
|
|
|
|
|
10% Discounted Estimated Future |
Proved Reserves |
|
|||||
|
Net Cash Flows (before income taxes): |
March 31, 2019 |
|
|
Sept. 30, 2018 |
|
||
|
Proved Developed |
$ |
130,988,726 |
|
|
$ |
155,728,130 |
|
|
Proved Undeveloped |
|
73,536,614 |
|
|
|
104,462,753 |
|
|
Total |
$ |
204,525,340 |
|
|
$ |
260,190,883 |
|
|
|
|
|
|
|
|
|
|
|
(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, 2019, and Sept. 30, 2018, basis adjusted to Company wellhead price |
|
||||||
Hedge Position as of May 9, 2019
|
Period |
|
Product |
|
Volume Mcf/Bbl |
|
|
Swap Price |
|
|
Collar Average Floor Price |
|
|
Collar Average Ceiling Price |
|
||||
|
2019 |
|
Natural Gas |
|
|
3,400,000 |
|
|
$ |
2.99 |
|
|
|
|
|
|
|
|
|
|
2020 |
|
Natural Gas |
|
|
1,260,000 |
|
|
$ |
2.81 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2019 |
|
Crude Oil |
|
|
58,000 |
|
|
|
|
|
|
$ |
59.31 |
|
|
$ |
69.47 |
|
|
2019 |
|
Crude Oil |
|
|
102,000 |
|
|
$ |
58.12 |
|
|
|
|
|
|
|
|
|
|
2020 |
|
Crude Oil |
|
|
48,000 |
|
|
|
|
|
|
$ |
58.75 |
|
|
$ |
66.79 |
|
|
2020 |
|
Crude Oil |
|
|
72,000 |
|
|
$ |
57.98 |
|
|
|
|
|
|
|
|
|
Non-GAAP Reconciliation
This news release includes certain “non-GAAP financial measures” under the rules of the Securities and Exchange Commission, including Regulation G. These non-GAAP measures are calculated using GAAP amounts in our financial statements.
Adjusted EBITDA Reconciliation
Adjusted EBITDA is defined as net income (loss) plus interest expense, provision for impairment, depreciation, depletion and amortization of properties and equipment, including amortization of other assets, provision (benefit) for income taxes and unrealized (gains) losses on derivative contracts. We recognize that certain investors consider adjusted EBITDA a useful means of measuring our ability to meet our debt service obligations and evaluating our financial performance. Adjusted EBITDA has limitations and should not be considered in isolation or as a substitute for net income, operating income, cash flow from operations or other consolidated income or cash flow data prepared in accordance with GAAP. Because not all companies use identical calculations, this presentation of adjusted EBITDA may not be comparable to a similarly titled measure of other companies. The following table provides a reconciliation of net income (loss) to adjusted EBITDA for the periods indicated.
|
|
Second Quarter Ended |
|
|
Second Quarter Ended |
|
|
Six Months Ended |
|
|
Six Months Ended |
|
||||
|
|
March 31, 2019 |
|
|
March 31, 2018 |
|
|
March 31, 2019 |
|
|
March 31, 2018 |
|
||||
|
Net Income (Loss) |
$ |
(1,931,334 |
) |
|
$ |
1,070,176 |
|
|
$ |
10,804,606 |
|
|
$ |
14,855,115 |
|
|
Plus: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Unrealized (gains) losses on derivatives |
|
1,974,959 |
|
|
|
1,635,482 |
|
|
|
(4,231,222 |
) |
|
|
2,486,518 |
|
|
Income Tax Expense (Benefit) |
|
(130,000 |
) |
|
|
(24,000 |
) |
|
|
3,441,000 |
|
|
|
(12,734,000 |
) |
|
Interest Expense |
|
485,784 |
|
|
|
435,951 |
|
|
|
1,025,154 |
|
|
|
867,530 |
|
|
DD&A |
|
3,623,976 |
|
|
|
4,241,078 |
|
|
|
7,437,662 |
|
|
|
9,516,902 |
|
|
Impairment |
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
Adjusted EBITDA |
$ |
4,023,385 |
|
|
$ |
7,358,687 |
|
|
$ |
18,477,200 |
|
|
$ |
14,992,065 |
|
Adjusted Pre-Tax Net Income (Loss) Reconciliation
Adjusted pre-tax net income (loss) is defined as net income (loss) plus provision (benefit) for income taxes and unrealized (gains) losses on derivative contracts. We recognize that certain investors consider adjusted pre-tax net income (loss) a useful means of evaluating our financial performance. Adjusted pre-tax net income (loss) has limitations and should not be considered in isolation or as a substitute for net income, operating income, cash flow from operations or other consolidated income or cash flow data prepared in accordance with GAAP. Because not all companies use identical calculations, this presentation of adjusted pre-tax net income (loss) may not be comparable to a similarly titled measure of other companies. The following table provides a reconciliation of net income (loss) to adjusted pre-tax net income (loss) for the periods indicated.
|
|
Second Quarter Ended |
|
|
Second Quarter Ended |
|
|
Six Months Ended |
|
|
Six Months Ended |
|
||||
|
|
March 31, 2019 |
|
|
March 31, 2018 |
|
|
March 31, 2019 |
|
|
March 31, 2018 |
|
||||
|
Net Income (Loss) |
$ |
(1,931,334 |
) |
|
$ |
1,070,176 |
|
|
$ |
10,804,606 |
|
|
$ |
14,855,115 |
|
|
Plus: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Unrealized (gains) losses on derivatives |
|
1,974,959 |
|
|
|
1,635,482 |
|
|
|
(4,231,222 |
) |
|
|
2,486,518 |
|
|
Income Tax Expense (Benefit) |
|
(130,000 |
) |
|
|
(24,000 |
) |
|
|
3,441,000 |
|
|
|
(12,734,000 |
) |
|
Interest Expense |
|
485,784 |
|
|
|
435,951 |
|
|
|
1,025,154 |
|
|
|
867,530 |
|
|
DD&A |
|
3,623,976 |
|
|
|
4,241,078 |
|
|
|
7,437,662 |
|
|
|
9,516,902 |
|
|
Impairment |
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
Adjusted EBITDA |
$ |
4,023,385 |
|
|
$ |
7,358,687 |
|
|
$ |
18,477,200 |
|
|
$ |
14,992,065 |
|
Enterprise Value Calculation
|
|
Second Quarter Ended |
|
|
Second Quarter Ended |
|
|
Six Months Ended |
|
|
Six Months Ended |
|
||||
|
|
March 31, 2019 |
|
|
March 31, 2018 |
|
|
March 31, 2019 |
|
|
March 31, 2018 |
|
||||
|
Market Value |
$ |
260,121,384 |
|
|
$ |
323,775,893 |
|
|
$ |
260,121,384 |
|
|
$ |
323,775,893 |
|
|
Debt |
|
44,100,000 |
|
|
|
43,500,000 |
|
|
|
44,100,000 |
|
|
|
43,500,000 |
|
|
Enterprise Value |
$ |
304,221,384 |
|
|
$ |
367,275,893 |
|
|
$ |
304,221,384 |
|
|
$ |
367,275,893 |
|
Panhandle Oil and Gas Inc. (NYSE: PHX) Oklahoma City-based, Panhandle Oil and Gas Inc. is an oil and natural gas mineral and leasehold acreage-focused capital allocator seeking the highest per share returns while maintaining a conservative net leverage ratio to ensure survivability and prosperity in all business and mineral commodity price cycles. The capital allocation tools include: (i) selective participation in working interest wells on its existing holdings in the highest quality, low-risk projects that are projected to exceed our corporate return threshold; (ii) aggressive leasing of its mineral holdings outside of areas of potential working interest participation; (iii) acquisition of mineral acreage, in the cores of resource plays, with substantial undeveloped opportunities that meet or exceed our corporate return threshold; (iv) divestiture of minerals with limited optionality and mineral rights when the amount negotiated exceeds our projected total value; (v) payment of quarterly dividends, with optionality for special dividends when available capital exceeds operational requirements and has no other higher shareholder return option for an extended time period; and (vi) repurchase of common shares when the share price trades at a material discount to the Company's estimated intrinsic value.
Panhandle’s principal properties are located in Oklahoma, Arkansas, Texas, New Mexico and North Dakota. 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 2018 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 oil and 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 our inability to 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.