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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

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

$

333

 

 

$

546

 

Average Royalty per Net Mineral Acre

 

24%

 

 

20%

 

 

 

-

 

 

-

 

 

 

-

 

 

 

-

 

 

20%

 

 

22%

 

ACQUISITION AND DIVESTITURE UPDATE

During the first quarter of fiscal year 2022 through Jan. 31, 2022, the Company purchased 2,151 net royalty acres for $13,788,632 and 1,519,481 shares of PHX common stock and sold 7,201 of predominantly undeveloped and unleased net mineral acres for $2,088,856.

 

 

 

 

 

 

 

 

 

 

Bakken/

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Three

 

 

Arkoma

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

SCOOP

 

 

STACK

 

 

Forks

 

 

Stack

 

 

Fayetteville

 

 

Haynesville

 

 

Other

 

 

Total

 

For the period ended 1/31/22:(1)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Net Mineral Acres Purchased

 

 

451

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

966

 

 

 

-

 

 

 

1,417

 

Net Royalty Acres Purchased

 

 

558

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

1,593

 

 

 

-

 

 

 

2,151

 

Price per Net Royalty Acre

 

$

7,031

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

$

9,129

 

 

 

-

 

 

$

8,585

 

Net Mineral Acres Sold

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

7,201

 

 

 

7,201

 

Net Royalty Acres Sold

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

7,701

 

 

 

7,701

 

Price per Net Royalty Acre

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

$

271

 

 

$

271

 

  1. First quarter 2022 through Jan. 31 2022.

During the first quarter of fiscal year 2022, the Company sold 708 gross working interest wells (17.27 net wells).

For the Period Ended

 

Proceeds ($)

 

 

P&A Liability

(Net Value $)

 

 

Gross Wells

 

 

Net Wells

 

Dec. 31, 2021

 

$

4,625,000

 

 

$

691,225

 

 

 

708

 

 

 

17.27

 

                                 

 

FIRST QUARTER EARNINGS CALL

PHX will host a conference call to discuss first quarter results at 11:00 a.m. EST on Feb. 15, 2022. Management’s discussion will be followed by a question and answer session with investors. To participate on the conference call, please dial 877-407-3088 (domestic) or 201-389-0927 (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 877-660-6853 and the PIN for the replay is 13726336.

FINANCIAL RESULTS

Statements of Operations

 

Three Months Ended Dec. 31,

 

 

2021

 

 

2020

 

Revenues:

 

 

Natural gas, oil and NGL sales

$

13,687,164

 

 

$

6,424,979

 

Lease bonuses and rental income

 

78,915

 

 

 

1,433

 

Gains (losses) on derivative contracts

 

2,836,168

 

 

 

(254,036

)

 

 

16,602,247

 

 

 

6,172,376

 

Costs and expenses:

 

 

 

 

 

 

 

Lease operating expenses

 

1,256,011

 

 

 

1,004,412

 

Transportation, gathering and marketing

 

1,213,604

 

 

 

1,280,965

 

Production taxes

 

678,947

 

 

 

276,026

 

Depreciation, depletion and amortization

 

1,583,760

 

 

 

2,260,649

 

Provision for impairment

 

5,585

 

 

 

-

 

Interest expense

 

176,719

 

 

 

301,898

 

General and administrative

 

2,095,557

 

 

 

1,731,097

 

Losses (gains) on asset sales and other

 

2,147,815

 

 

 

(16,951

)

Total costs and expenses

 

9,157,998

 

 

 

6,838,096

 

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

 

7,444,249

 

 

 

(665,720

)

 

 

 

 

 

 

 

 

Provision (benefit) for income taxes

 

762,000

 

 

 

(69,000

)

 

 

 

 

 

 

 

 

Net income (loss)

$

6,682,249

 

 

$

(596,720

)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Basic and diluted earnings (loss) per common share

$

0.20

 

 

$

(0.03

)

 

 

 

 

 

 

 

 

Basic and diluted weighted average shares outstanding:

 

 

 

 

 

 

 

Common shares

 

32,895,631

 

 

 

22,378,146

 

Unissued, directors' deferred compensation shares

 

232,091

 

 

 

178,090

 

 

 

33,127,722

 

 

 

22,556,236

 

 

 

 

 

 

 

 

 

Dividends declared per share of

 

 

 

 

 

 

 

common stock and paid in period

$

0.01

 

 

$

0.01

 

 

 

 

 

 

 

 

 

Dividends declared per share of

 

 

 

 

 

 

 

common stock and to be paid in quarter ended March 31

$

0.015

 

 

$

0.01

 

 

 

 

 

 

 

 

 

 

Balance Sheets

 

Dec. 31, 2021

 

 

Sept. 30, 2021

 

Assets

 

 

 

 

 

 

 

Current assets:

 

 

 

 

 

 

 

Cash and cash equivalents

$

1,559,350

 

 

$

2,438,511

 

Natural gas, oil, and NGL sales receivables (net of $0

 

8,020,067

 

 

 

6,428,982

 

allowance for uncollectable accounts)

 

 

 

 

 

 

 

Refundable income taxes

 

-

 

 

 

2,413,942

 

Other

 

1,333,279

 

 

 

942,082

 

Total current assets

 

10,912,696

 

 

 

12,223,517

 

 

 

 

 

 

 

 

 

Properties and equipment at cost, based on

 

 

 

 

 

 

 

   successful efforts accounting:

 

 

 

 

 

 

 

Producing natural gas and oil properties

 

249,861,777

 

 

 

319,984,874

 

Non-producing natural gas and oil properties

 

54,960,073

 

 

 

40,466,098

 

Other

 

883,310

 

 

 

794,179

 

 

 

305,705,160

 

 

 

361,245,151

 

Less accumulated depreciation, depletion and amortization

 

(195,971,382

)

 

 

(257,643,661

)

Net properties and equipment

 

109,733,778

 

 

 

103,601,490

 

 

 

 

 

 

 

 

 

Operating lease right-of-use assets

 

585,888

 

 

 

607,414

 

Other, net

 

570,072

 

 

 

578,593

 

Total assets

$

121,802,434

 

 

$

117,011,014

 

 

 

 

 

 

 

 

 

Liabilities and Stockholders' Equity

 

 

 

 

 

 

 

Current liabilities:

 

 

 

 

 

 

 

Accounts payable

$

612,387

 

 

$

772,717

 

Derivative contracts, net

 

6,413,308

 

 

 

12,087,988

 

Income taxes payable

 

499,939

 

 

 

334,050

 

Current portion of operating lease liability

 

133,614

 

 

 

132,287

 

Accrued liabilities and other

 

2,047,437

 

 

 

1,809,337

 

Total current liabilities

 

9,706,685

 

 

 

15,136,379

 

 

 

 

 

 

 

 

 

Long-term debt

 

20,000,000

 

 

 

17,500,000

 

Deferred income taxes, net

 

709,906

 

 

 

343,906

 

Asset retirement obligations

 

2,157,289

 

 

 

2,836,172

 

Derivative contracts, net

 

132,569

 

 

 

1,696,479

 

Operating lease liability, net of current portion

 

755,433

 

 

 

789,339

 

 

 

 

 

 

 

 

 

Total liabilities

 

33,461,882

 

 

 

38,302,275

 

 

 

 

 

 

 

 

 

Stockholders' equity:

 

 

 

 

 

 

 

Class A voting common stock, $0.01666 par value; 54,000,500

 

 

 

 

 

 

 

shares authorized and 34,405,287 issued at Dec. 31, 2021;

 

 

 

 

 

 

 

36,000,500 shares authorized and 32,770,433 issued at Sept. 30, 2021

 

573,192

 

 

 

545,956

 

Capital in excess of par value

 

36,741,266

 

 

 

33,213,645

 

Deferred directors' compensation

 

1,835,721

 

 

 

1,768,151

 

Retained earnings

 

54,798,980

 

 

 

48,966,420

 

 

 

93,949,159

 

 

 

84,494,172

 

Less treasury stock, at cost; 377,232 shares at Dec. 31,

 

 

 

 

 

 

 

2021, and 388,545 shares at Sept. 30, 2021

 

(5,608,607

)

 

 

(5,785,433

)

Total stockholders' equity

 

88,340,552

 

 

 

78,708,739

 

Total liabilities and stockholders' equity

$

121,802,434

 

 

$

117,011,014

 

 

Condensed Statements of Cash Flows

 

Three Months Ended Dec. 31,

 

 

2021

 

 

2020

 

Operating Activities

 

 

Net income (loss)

$

6,682,249

 

 

$

(596,720

)

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

 

 

 

 

 

 

 

  by operating activities:

 

 

 

 

 

 

 

Depreciation, depletion and amortization

 

1,583,760

 

 

 

2,260,649

 

Impairment of producing properties

 

5,585

 

 

 

-

 

Provision for deferred income taxes

 

366,000

 

 

 

(69,000

)

Gain from leasing fee mineral acreage

 

(78,922

)

 

 

(232

)

Proceeds from leasing fee mineral acreage

 

95,039

 

 

 

232

 

Net (gain) loss on sales of assets

 

2,163,359

 

 

 

(30,862

)

Directors' deferred compensation expense

 

67,570

 

 

 

44,527

 

Total (gain) loss on derivative contracts

 

(2,836,168

)

 

 

254,036

 

Cash receipts (payments) on settled derivative contracts

 

-

 

 

 

613,314

 

Restricted stock awards

 

255,844

 

 

 

122,978

 

Other

 

37,138

 

 

 

14,387

 

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

 

 

 

 

 

 

 

Natural gas, oil and NGL sales receivables

 

(1,591,085

)

 

 

(813,167

)

Other current assets

 

(325,780

)

 

 

(676,620

)

Accounts payable

 

(95,649

)

 

 

(398,556

)

Income taxes receivable

 

2,413,942

 

 

 

(12,545

)

Other non-current assets

 

10,253

 

 

 

30,958

 

Income taxes payable

 

165,889

 

 

 

-

 

Accrued liabilities

 

(281,034

)

 

 

(271,998

)

Total adjustments

 

1,955,741

 

 

 

1,068,101

 

Net cash provided by operating activities

 

8,637,990

 

 

 

471,381

 

 

 

 

 

 

 

 

 

Investing Activities

 

 

 

 

 

 

 

Capital expenditures

 

(192,677

)

 

 

(128,083

)

Acquisition of minerals and overriding royalty interests

 

(11,643,827

)

 

 

(7,869,746

)

Net proceeds from sales of assets

 

4,586,492

 

 

 

-

 

Net cash provided (used) by investing activities

 

(7,250,012

)

 

 

(7,997,829

)

 

 

 

 

 

 

 

 

Financing Activities

 

 

 

 

 

 

 

Borrowings under credit facility

 

4,000,000

 

 

 

-

 

Payments of loan principal

 

(1,500,000

)

 

 

(1,750,000

)

Net proceeds from equity issuance

 

(32,507

)

 

 

(24,242

)

Cash receipts from (payments on) off-market derivative contracts

 

(4,402,422

)

 

 

-

 

Payments of dividends

 

(332,210

)

 

 

(225,887

)

Net cash provided (used) by financing activities

 

(2,267,139

)

 

 

(2,000,129

)

 

 

 

 

 

 

 

 

Increase (decrease) in cash and cash equivalents

 

(879,161

)

 

 

(9,526,577

)

Cash and cash equivalents at beginning of period

 

2,438,511

 

 

 

10,690,395

 

Cash and cash equivalents at end of period

$

1,559,350

 

 

$

1,163,818

 

 

 

 

 

 

 

 

 

Supplemental Schedule of Noncash Investing and Financing Activities

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Dividends declared and unpaid

$

517,479

 

 

$

229,049

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Gross additions to properties and equipment

$

15,183,829

 

 

$

7,986,350

 

Equity offering used for acquisitions

 

(3,510,001

)

 

 

(250,000

)

Net (increase) decrease in accounts payable for properties

 

 

 

 

 

 

 

and equipment additions

 

162,676

 

 

 

261,479

 

Capital expenditures and acquisitions

$

11,836,504

 

 

$

7,997,829

 

 

Derivative Contracts as of Jan. 31, 2022

 

 

 

 

 

 

 

 

 

 

 

 

Collar Average

 

 

Collar Average

 

Fiscal Period

 

Product

 

Volume Mcf/Bbl

 

 

Swap Price

 

 

Floor Price

 

 

Ceiling Price

 

Remaining 2022

 

Natural Gas

 

 

610,000

 

 

 

 

 

 

$

3.50

 

 

$

4.19

 

Remaining 2022

 

Natural Gas

 

 

2,818,000

 

 

$

2.94

 

 

 

 

 

 

 

 

 

2023

 

Natural Gas

 

 

500,000

 

 

 

 

 

 

$

3.32

 

 

$

4.54

 

2023

 

Natural Gas

 

 

1,980,000

 

 

$

3.22

 

 

 

 

 

 

 

 

 

2024

 

Natural Gas

 

 

60,000

 

 

 

 

 

 

$

3.00

 

 

$

4.70

 

2024

 

Natural Gas

 

 

360,000

 

 

$

3.40

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Remaining 2022

 

Crude Oil

 

 

113,000

 

 

$

44.25

 

 

 

 

 

 

 

 

 

2023

 

Crude Oil

 

 

50,390

 

 

$

55.20

 

 

 

 

 

 

 

 

 

2024

 

Crude Oil

 

 

6,890

 

 

$

68.42

 

 

 

 

 

 

 

 

 

 

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. These measures, detailed below, are provided in addition to, not as an alternative for, and should be read in conjunction with, the information contained in our financial statements prepared in accordance with GAAP (including the notes), included in our SEC filings and posted on our website.

Adjusted EBITDA Reconciliation

EBITDA excluding unrealized gains (losses) on derivatives and gains (losses) on asset sales and including cash receipts from (payments on) off-market derivatives and restricted stock and deferred directors’ expense is defined as adjusted EBITDA. We have included a presentation of adjusted EBITDA because we recognize that certain investors consider this amount 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 presentation of net income (loss) to adjusted EBITDA for the periods indicated:

 

First Quarter Ended

 

 

First Quarter Ended

 

 

Fourth Quarter Ended

 

 

Dec. 31, 2021

 

 

Dec. 31, 2020

 

 

Sept. 30, 2021

 

Net Income (Loss)

$

6,682,249

 

 

$

(596,720

)

 

$

(3,764,200

)

Plus:

 

 

 

 

 

 

 

 

 

 

 

    Income tax expense

 

 

 

 

 

 

 

 

 

 

 

 (benefit)

 

762,000

 

 

 

(69,000

)

 

 

450,949

 

    Interest expense

 

176,719

 

 

 

301,898

 

 

 

204,925

 

    DD&A

 

1,583,760

 

 

 

2,260,649

 

 

 

1,569,631

 

Impairment

 

5,585

 

 

 

-

 

 

 

4,620

 

Less:

 

 

 

 

 

 

 

 

 

 

 

    Unrealized gains (losses)

 

 

 

 

 

 

 

 

 

 

 

    on derivatives

 

4,550,459

 

 

 

(867,350

)

 

 

3,124,035

 

Gains (losses) on asset sales

 

(2,120,927

)

 

 

16,476

 

 

 

247,543

 

Plus:

 

 

 

 

 

 

 

 

 

 

 

Cash receipts from (payments on)

 

 

 

 

 

 

 

 

 

 

 

 off-market derivative contracts(1)

 

(2,688,091

)

 

 

-

 

 

 

8,800,000

 

Restricted stock and deferred

 

 

 

 

 

 

 

 

 

 

 

director's expense

 

323,415

 

 

 

167,505

 

 

 

325,567

 

Adjusted EBITDA

$

4,416,105

 

 

$

2,915,206

 

 

$

4,219,914

 

 

 

 

 

 

 

 

 

 

 

 

 

(1) The initial receipt of $8.8 million of cash from BP for entering into the off-market derivative contracts had no effect on the statement of operations and was considered cash flow from financing activities. A portion of subsequent settlements with BP have no effect on the statement of operations.

 

 

Debt/Adjusted EBITDA (TTM) Reconciliation

Debt/adjusted EBITDA (TTM) is defined as the ratio of long-term debt to adjusted EBITDA on a trailing 12-month (TTM) basis. We have included a presentation of debt/adjusted EBITDA (TTM) because we recognize that certain investors consider such ratios a useful means of measuring our ability to meet our debt service obligations and evaluating our financial performance. The debt/adjusted EBITDA (TTM) ratio 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 debt/adjusted EBITDA (TTM) may not be comparable to a similarly titled measure of other companies. The following table provides a presentation of net income (loss) to adjusted EBITDA on a TTM basis, and of the resulting debt/adjusted EBITDA (TTM) ratio:

 

TTM Ended

 

 

TTM Ended

 

 

Dec. 31, 2021

 

 

Dec. 31, 2020

 

Net Income (Loss)

$

1,061,732

 

 

$

(26,440,871

)

Plus:

 

 

 

 

 

 

 

    Income tax expense (benefit)

 

179,949

 

 

 

(8,612,000

)

    Interest expense

 

869,948

 

 

 

1,218,021

 

    DD&A

 

7,068,915

 

 

 

10,618,731

 

    Impairment

 

56,060

 

 

 

29,904,528

 

Less:

 

 

 

 

 

 

 

    Unrealized gains (losses)

 

 

 

 

 

 

 

    on derivatives

 

1,141,029

 

 

 

(2,349,474

)

Gains (losses) on asset sales

 

(1,824,556

)

 

 

716,910

 

Plus:

 

 

 

 

 

 

 

Cash receipts from (payments on)

 

 

 

 

 

 

 

 off-market derivative contracts(1)

 

6,111,909

 

 

 

-

 

Restricted stock and deferred

 

 

 

 

 

 

 

director's expense

 

1,191,576

 

 

 

902,248

 

Adjusted EBITDA

$

17,223,616

 

 

$

9,223,221

 

 

 

 

 

 

 

 

 

Debt

$

20,000,000

 

 

$

27,000,000

 

Debt/Adjusted EBITDA

 

1.16

 

 

 

2.93

 

 

 

 

 

 

 

 

 

(1) The initial receipt of $8.8 million of cash from BP for entering into the off-market derivative contracts had no effect on the statement of operations and was considered cash flow from financing activities. A portion of subsequent settlements with BP have no effect on the statement of operations.

 

 

PHX Minerals Inc. (NYSE: PHX) Oklahoma City-based, PHX Minerals Inc. is a natural gas and oil mineral company with a strategy to proactively grow its mineral position in its core areas of focus. PHX owns approximately 251,000 net mineral acres principally located in Oklahoma, Texas, Louisiana, North Dakota, and Arkansas. Additional information on PHX can be found at www.phxmin.com.

Cautionary Statement Regarding Forward-Looking Statements

This press release 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. Words such as “anticipates,” “plans,” “estimates,” “believes,” “expects,” “intends,” “will,” “should,” “may” and similar expressions may be used to identify forward-looking statements. Forward-looking statements are not statements of historical fact and reflect PHX’s current views about future events. Forward-looking statements may include, but are not limited to, statements relating to: the Company’s ability to execute its business strategies; the volatility of realized natural gas and oil prices; the level of production on the Company’s properties; estimates of quantities of natural gas, oil and NGL reserves and their values; general economic or industry conditions; legislation or regulatory requirements; conditions of the securities markets; the Company’s ability to raise capital; changes in accounting principles, policies or guidelines; financial or political instability; acts of war or terrorism; title defects in the properties in which the Company invests; and other economic, competitive, governmental, regulatory or technical factors affecting properties, operations or prices. Although the Company believes expectations reflected in these and other forward-looking statements are reasonable, we can give no assurance they will prove to be correct. Such forward-looking statements are subject to a number of assumptions, risks and uncertainties, many of which are beyond the control of the Company. These forward-looking statements involve certain risks and uncertainties that could cause the results to differ materially from those expected by the Company’s management. Information concerning these risks and other factors can be found in the Company’s filings with the Securities and Exchange Commission, including its Annual Reports on Form 10-K and Quarterly Reports on Form 10-Q, available on the Company’s website or the SEC’s website at www.sec.gov.

Investors are cautioned that any such statements are not guarantees of future performance and that actual results or developments may differ materially from those projected in forward-looking statements. The forward-looking statements in this press release are made as of the date hereof, and the Company does not undertake any obligation to update the forward-looking statements as a result of new information, future events or otherwise.