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PHX Minerals Inc. Reports First Quarter 2022 Results

PHX Minerals Inc. Reports First Quarter 2022 Results

OKLAHOMA CITY, Feb. 14, 2022 – PHX MINERALS INC., “PHX” or the “Company” (NYSE: PHX), today reported financial and operating results for the first quarter ended Dec. 31, 2021.

SUMMARY OF RESULTS FOR THE PERIOD ENDED DEC. 31, 2021, AND SUBSEQUENT EVENTS

  • Royalty production volumes for the first fiscal quarter of 2022 increased 23% to 1,225 Mmcfe from 998 Mmcfe in the fourth fiscal quarter of 2021 and total production volumes for the first fiscal quarter of 2022 decreased 4% to 2,128 Mmcfe from  2,212 Mmcfe in the fourth fiscal quarter of 2021.
  • Net income in the first fiscal quarter of 2022 was $6.7 million, or $0.20 per share, as compared to net loss of ($0.6) million, or ($0.03) per share, in the first fiscal quarter of 2021 and net loss of ($3.8) million, or ($0.14) per share, in the fourth fiscal quarter of 2021.
  • Adjusted EBITDA(1) for the first quarter of 2022 increased to $4.4 million from $2.9 million in the first fiscal quarter of 2021 and increased from $4.2 million  in the fourth fiscal quarter of 2021.
  • Total debt was increased to $20.0 million as of Dec. 31, 2021, in order to fund an acquisition of developed minerals targeting the Haynesville, a 14% increase from $17.5 million as of Sept. 30, 2021. The borrowing base increased to $32.0 million as of Dec. 31, 2021, a 16% increase from $27.5 million as of Sept. 30, 2021.
  • Total debt to adjusted EBITDA (TTM) (1) ratio was 1.16x at Dec. 31, 2021.
  • For the first quarter of fiscal year 2022 through Jan. 31, 2022, closed on the acquisition of 2,151 net royalty acres in the SCOOP play of Oklahoma and the Haynesville play of East Texas and Louisiana for approximately $13.8 million in cash and 1.5 million shares of PHX common stock.
  1. This is a non-GAAP measure. Refer to the Non-GAAP Reconciliation section.

Chad L. Stephens, President and CEO, commented, “As we move into PHX’s fiscal year 2022, you will note our first quarter 2022 results clearly demonstrate the traction we continue to gain from our mineral acquisition strategy, with royalty volumes increasing and working interest volumes declining. This is a direct result of our previously announced mineral acquisitions and the sale of legacy working interest properties, on which we closed last October and November. This is a methodical process that involves divesting mature non-operated working interest properties and redeploying the cash proceeds into acquiring minerals in our core basins, the SCOOP and Haynesville, with high rock quality attributes and active drilling under reputable and credit worthy operators.  These mineral acquisitions provide immediate royalty volumes and cash flow along with an inventory of drilling locations that, as these locations are developed in the near future, will contribute additional growing royalty volumes and cash flow. I would also like to point out that the non-producing locations we have purchased over the last two years are being converted to producing wells at a faster pace than we expected during our underwriting process, which validates our strategy.

                “This buy and sell high grading process generates a dynamic of declining working interest volumes, with no capital allocated to the working interest assets to increase production and slowly divesting of lower valued mature working interest properties, while materially growing our royalty volumes through the acquisition process. This dynamic is dramatically highlighted when you consider year-over-year royalty volumes have grown by over 60% and non-operated working interest volumes have declined year-over-year by 33%. We project that royalty volumes will represent more than 75% of overall corporate volumes by the end of fiscal year 2024 as our inventory of undrilled locations are developed. This will drive better margins, decrease lease operating expense, grow cash flow and generate an attractive return on capital employed.

                “You see this materializing in the first quarter 2022 with impressive reported net income and earnings per share. You will see our financial results only improve from here as our low value hedges roll off and royalty volumes continue to increase in the coming quarters.

                “We have a great partner in Independent Bank, who understands our strategy and has demonstrated their willingness to grow with us, a strong balance sheet and more than ample deal flow in which to allocate our free cash flow. We are confident that the almost $50.0 million of mineral acquisitions we have closed over the last two years will continue to bear fruit in the coming quarters, which will help achieve our ultimate goal of building shareholder value.”

OPERATING HIGHLIGHTS

 

First Quarter Ended

 

 

First Quarter Ended

 

 

Dec. 31, 2021

 

 

Dec. 31, 2020

 

Mcfe Sold

 

2,128,248

 

 

 

2,074,334

 

Average Sales Price per Mcfe

$

6.43

 

 

$

3.10

 

Gas Mcf Sold

 

1,574,265

 

 

 

1,475,456

 

Average Sales Price per Mcf

$

5.52

 

 

$

2.34

 

Oil Barrels Sold

 

48,074

 

 

 

58,675

 

Average Sales Price per Barrel

$

74.39

 

 

$

39.90

 

NGL Barrels Sold

 

44,256

 

 

 

41,138

 

Average Sales Price per Barrel

$

32.11

 

 

$

15.20

 

 

Total Production for the last five quarters was as follows:

Quarter ended

 

Mcf Sold

 

 

Oil Bbls Sold

 

 

NGL Bbls Sold

 

 

Mcfe Sold

 

12/31/2021

 

 

1,574,265

 

 

 

48,074

 

 

 

44,256

 

 

 

2,128,248

 

9/30/2021

 

 

1,609,101

 

 

 

54,043

 

 

 

46,369

 

 

 

2,211,570

 

6/30/2021

 

 

1,879,343

 

 

 

55,492

 

 

 

46,753

 

 

 

2,492,813

 

3/31/2021

 

 

1,735,820

 

 

 

56,269

 

 

 

37,228

 

 

 

2,296,802

 

12/31/2020

 

 

1,475,456

 

 

 

58,675

 

 

 

41,138

 

 

 

2,074,334

 

 

Royalty Interest Production for the last five quarters was as follows:

Quarter ended

 

Mcf Sold

 

 

Oil Bbls Sold

 

 

NGL Bbls Sold

 

 

Mcfe Sold

 

12/31/2021

 

 

949,523

 

 

 

25,996

 

 

 

19,953

 

 

 

1,225,220

 

9/30/2021

 

 

705,397

 

 

 

29,442

 

 

 

19,364

 

 

 

998,230

 

6/30/2021

 

 

908,471

 

 

 

31,095

 

 

 

18,255

 

 

 

1,204,571

 

3/31/2021

 

 

924,969

 

 

 

31,768

 

 

 

19,088

 

 

 

1,230,105

 

12/31/2020

 

 

487,925

 

 

 

27,840

 

 

 

14,948

 

 

 

744,653

 

 

Working Interest Production for the last five quarters was as follows:

Quarter ended

 

Mcf Sold

 

 

Oil Bbls Sold

 

 

NGL Bbls Sold

 

 

Mcfe Sold

 

12/31/2021

 

 

624,742

 

 

 

22,078

 

 

 

24,303

 

 

 

903,028

 

9/30/2021

 

 

903,704

 

 

 

24,601

 

 

 

27,005

 

 

 

1,213,340

 

6/30/2021

 

 

970,872

 

 

 

24,397

 

 

 

28,498

 

 

 

1,288,242

 

3/31/2021

 

 

810,851

 

 

 

24,501

 

 

 

18,140

 

 

 

1,066,697

 

12/31/2020

 

 

987,531

 

 

 

30,835

 

 

 

26,190

 

 

 

1,329,681

 

 

FINANCIAL HIGHLIGHTS

 

 

First Quarter Ended

 

 

First Quarter Ended

 

 

 

Dec. 31, 2021

 

 

Dec. 31, 2020

 

    Working Interest Sales

 

$

5,966,645

 

 

$

3,907,524

 

    Royalty Interest Sales

 

$

7,720,519

 

 

$

2,517,455

 

Natural Gas, Oil and NGL Sales

 

$

13,687,164

 

 

$

6,424,979

 

 

 

 

 

 

 

 

 

 

Lease Bonuses and Rental Income

 

$

78,915

 

 

$

1,433

 

Total Revenue

 

$

16,602,247

 

 

$

6,172,376

 

 

 

 

 

 

 

 

 

 

LOE per Mcfe

 

$

0.59

 

 

$

0.48

 

Transportation, Gathering and Marketing per Mcfe

 

$

0.57

 

 

$

0.62

 

Production Tax per Mcfe

 

$

0.32

 

 

$

0.13

 

G&A Expense per Mcfe

 

$

0.98

 

 

$

0.83

 

Interest Expense per Mcfe

 

$

0.08

 

 

$

0.15

 

DD&A per Mcfe

 

$

0.74

 

 

$

1.09

 

Total Expense per Mcfe

 

$

3.28

 

 

$

3.30

 

 

 

 

 

 

 

 

 

 

Net Income (Loss)

 

$

6,682,249

 

 

$

(596,720

)

Adjusted EBITDA (1)

 

$

4,416,105

 

 

$

2,915,206

 

 

 

 

 

 

 

 

 

 

Cash Flow from Operations

 

$

8,637,990

 

 

$

471,381

 

CapEx - Drilling & Completing

 

$

192,677

 

 

$

128,083

 

CapEx - Mineral Acquisitions

 

$

11,643,827

 

 

$

7,869,746

 

 

 

 

 

 

 

 

 

 

Borrowing Base

 

$

32,000,000

 

 

$

30,000,000

 

Debt

 

$

20,000,000

 

 

$

27,000,000

 

Debt/Adjusted EBITDA (TTM) (1)

 

 

1.16

 

 

 

2.93

 

 

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

FIRST QUARTER 2022 RESULTS

The Company recorded first quarter 2022 net income of $6,682,249, or $0.20 per share, as compared to a net loss of ($596,720), or ($0.03) per share, in the first quarter 2021. The change in net income was principally the result of increased natural gas, oil and NGL sales and an increase in non-cash gain on derivative contracts, partially offset by a loss on asset sales.

Natural gas, oil and NGL revenue increased $7,262,185, or 113%, for the first quarter 2022, compared to the corresponding 2021 quarter due to increases in natural gas, oil and NGL prices of 136%86% and 111%, respectively, and an increase in natural gas and NGL volumes of 7% and 8%, respectively, partially offset by a decrease in oil volumes of 18%.

The royalty production volumes increase during the three months ended Dec. 31, 2021, as compared to the three months ended Dec. 31, 2020, resulted from acquisition wells in the Haynesville Shale and SCOOP plays coming online.  The decrease in working interest volumes resulted from naturally declining production in high-interest wells in the Eagle Ford Shale and divestiture of low-value legacy working interest in Oklahoma.

The Company had a net gain on derivative contracts of $2,836,168 in the first fiscal 2022 quarter, as compared to a net loss of ($254,036) in the first fiscal 2021 quarter. Net gain on derivative contracts excludes $2,688,091 of cash paid to settle off-market derivative contracts. The change in net gain on derivative contracts was principally due to the natural gas and oil collars and fixed price swaps being more beneficial in the quarter ended Dec. 31, 2021, in relation to their respective contracted volumes and prices.

The 1% decrease in total cost per Mcfe in the first fiscal 2022 quarter, relative to the first fiscal 2021 quarter, was primarily driven by a decrease in DD&A. DD&A decreased $676,889, or 30%, in the first fiscal 2022 quarter to $0.74 per Mcfe, as compared to $1.09 per Mcfe in the first fiscal 2021 quarter. Of the DD&A decrease, $735,649 was a result of a $0.35 decrease in the DD&A rate per Mcfe, partially offset by an increase of $58,760 resulting from production increasing 3% in the first fiscal 2022 quarter. The rate decrease was mainly due to an increase in reserves during the first fiscal 2022 quarter, as compared to the first fiscal 2021 quarter.

OPERATIONS UPDATE

During the first fiscal quarter of 2022, the Company converted 68 gross (0.19 net) wells to producing status and had 54 gross (0.25 net) wells in progress added across its mineral position.

At Jan. 31, 2022, the Company had a total of 65 gross wells (0.42 net wells) in progress across its mineral positions and 18 gross active permitted wells. As of Jan. 31, 2022, there were 20 rigs operating on the Company’s acreage and 92 rigs operating within 2.5 miles of its acreage.

 

 

 

 

 

 

 

 

 

 

Bakken/

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Three

 

 

Arkoma

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

SCOOP

 

 

STACK

 

 

Forks

 

 

Stack

 

 

Fayetteville

 

 

Haynesville

 

 

Other

 

 

Total

 

As of 1/31/22:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Gross Wells in Progress on PHX Acreage

 

 

30

 

 

 

7

 

 

 

1

 

 

 

3

 

 

 

-

 

 

 

23

 

 

 

1

 

 

 

65

 

Net Wells in Progress on PHX Acreage

 

 

0.02

 

 

 

0.04

 

 

 

0.00

 

 

 

0.03

 

 

 

-

 

 

 

0.33

 

 

 

-

 

 

 

0.42

 

Gross Active Permits on PHX Acreage:

 

 

10

 

 

 

3

 

 

 

2

 

 

 

2

 

 

 

-

 

 

 

-

 

 

 

1

 

 

 

18

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

As of 1/31/22:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Rigs Present on PHX Acreage

 

 

9

 

 

 

4

 

 

 

-

 

 

 

1

 

 

 

-

 

 

 

4

 

 

 

2

 

 

 

20

 

Rigs Within 2.5 Miles of PHX Acreage

 

 

20

 

 

 

20

 

 

 

11

 

 

 

1

 

 

 

-

 

 

 

27

 

 

 

13

 

 

 

92

 

 

Leasing Activity

During the first quarter of fiscal 2022, the Company leased 175 net mineral acres for an average bonus payment of $546 and an average royalty of 22%.

 

 

 

 

 

 

 

 

 

 

Bakken/

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Three

 

 

Arkoma

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

SCOOP

 

 

STACK

 

 

Forks

 

 

Stack

 

 

Fayetteville

 

 

Haynesville

 

 

Other

 

 

Total

 

During Three Months Ended 12/31/21:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Net Mineral Acres Leased

 

 

80

 

 

 

1

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

94

 

 

 

175

 

Average Bonus per Net Mineral Acre

 

$

1,046

 

 

$

2,500

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

$