PHX MINERALS REPORTS FISCAL FOURTH QUARTER 2022 AND FISCAL YEAR 2022 RESULTS AND ANNOUNCES INCREASE IN DIVIDEND PAYMENT
FORT WORTH, Texas, Dec. 13, 2022 /PRNewswire/ -- PHX MINERALS INC., "PHX" or the "Company" (NYSE:PHX), today reported financial and operating results for the fiscal fourth quarter and fiscal year ended Sept. 30, 2022.
SUMMARY OF RESULTS FOR THE PERIOD ENDED SEPT. 30, 2022
- Net income in the fiscal fourth quarter of 2022 and full fiscal year 2022 was $9.2 million, or $0.26 per share, and $20.4 million, or $0.59 per share, respectively, compared to net income of $8.6 million, or $0.25 per share, in the fiscal third quarter of 2022 and net loss of $(6.2) million, or $(0.24) per share, for fiscal year 2021.
- Adjusted EBITDA(1) in the fiscal fourth quarter of 2022 and full fiscal year 2022 was $8.4 million and $25.8 million, respectively, compared to $7.2 million in the fiscal third quarter of 2022 and $15.7 million for fiscal year 2021.
- Royalty production volumes for the fiscal fourth quarter of 2022 increased 15% to a record 1,842 Mmcfe, and total production volumes for the fiscal fourth quarter of 2022 increased 7% to 2,592 Mmcfe, compared to the fiscal third quarter of 2022.
- Royalty production volumes for fiscal year 2022 increased 49% to 6,209 Mmcfe, and total production volumes for fiscal year 2022 increased 6% to 9,609 Mmcfe, compared to fiscal year 2021.
- 172 gross (0.85 net) wells in progress as of Sept. 30, 2022, compared to 155 gross (0.79 net) as of June 30, 2022.
- Net total proved royalty interest reserves increased 45% to 52.8 Bcfe at Sept. 30, 2022, from 36.4 Bcfe at Sept. 30, 2021.
- Total debt was $28.3 million and the debt to adjusted EBITDA (TTM) (1) ratio was 1.10x at Sept. 30, 2022.
- During the fiscal fourth quarter of 2022, PHX closed on acquisitions totaling 923 net royalty acres located in the SCOOP and the Haynesville plays for approximately $13.5 million, bringing the total acquisitions in fiscal year 2022 to 4,570 net royalty acres for approximately $48.0 million.
SUBSEQUENT EVENTS
- PHX announced a 12.5% increase in its fixed quarterly dividend to $0.0225 per share, payable on March 3, 2023, to stockholders of record on Feb. 17, 2023.
- On Dec. 7, 2022, PHX had its borrowing base reaffirmed at $50 million and added an additional bank to the lending group.
- Since Sept. 30, 2022, PHX has closed on additional acquisitions of 930 net royalty acres located in the SCOOP and Haynesville plays for approximately $10.3 million.
- On Dec. 9, 2022, PHX's Board approved a change in fiscal year from the twelve months beginning Oct. 1st and ending Sept. 30th to the twelve months beginning Jan. 1st and ending Dec. 31st. PHX's fiscal year 2023 will begin Jan. 1, 2023, and end Dec. 31, 2023.
- On Dec. 12, 2022, PHX voluntarily terminated its At-The-Market Equity Offering Sales Agreement, dated Aug. 25, 2021.
(1) | This is a non-GAAP measure. Refer to the Non-GAAP Reconciliation section. |
Chad L. Stephens, President and CEO, commented, "In fiscal 2022, we made significant progress in the strategic transition that we began in late 2019. This strategy, to exit legacy assets and transition to a low fixed-cost royalty production model, is coming into sharp focus as demonstrated by the significant improvements in our financial results. We are executing according to our stated plan, growing our royalty reserves, high grading our asset base and generating meaningful profitability and cash flow. In response, both royalty production and royalty reserves reached all-time high levels in the fourth fiscal quarter. Looking ahead, 2023 should prove to be the final year of this transformative transition as we plan to divest a material portion of our remaining legacy non-operated working interest assets. Following these planned divestitures, royalty volumes will represent greater than 90% of total corporate volumes, leaving working interest volumes virtually immaterial."
"Our strategy to allocate capital to existing and near-term potential royalty production acquisitions is working, delivering returns ahead of our expectations," continued Mr. Stephens. "Importantly, our pipeline for acquisitions in our targeted regions remains robust. Also, supply and demand for natural gas remains favorable, which supports strong commodity pricing and gives us the environment to continue to improve profitability and cashflow. Our plan remains steadfast: to utilize the majority of our free cash flow to acquire additional mineral and royalty assets in our core focus areas with the expectation that these acquisitions will quickly convert to additional royalty production volumes. Simultaneously, as we work to continue to scale and expand profitability, we should be positioned to continue to increase our cash dividend which has risen 125% over the last 6 quarters."
FINANCIAL HIGHLIGHTS | ||||||||||||||||
Fourth Quarter Ended | Fourth Quarter Ended | Year Ended | Year Ended | |||||||||||||
Sept. 30, 2022 | Sept. 30, 2021 | Sept. 30, 2022 | Sept. 30, 2021 | |||||||||||||
Royalty Interest Sales | $ | 15,411,544 | $ | 6,007,389 | $ | 44,484,472 | $ | 18,432,035 | ||||||||
Working Interest Sales | $ | 6,416,490 | $ | 6,071,031 | $ | 25,376,159 | $ | 19,317,009 | ||||||||
Natural Gas, Oil and NGL Sales | $ | 21,828,034 | $ | 12,078,420 | $ | 69,860,631 | $ | 37,749,044 | ||||||||
Gains (Losses) on Derivative Contracts | $ | (4,298,614) | $ | (8,112,827) | $ | (16,833,078) | $ | (16,202,489) | ||||||||
Lease Bonuses and Rental Income | $ | 17,350 | $ | 105,974 | $ | 467,502 | $ | 425,113 | ||||||||
Total Revenue | $ | 17,546,770 | $ | 4,071,567 | $ | 53,495,055 | $ | 21,971,668 | ||||||||
Lease Operating Expense | ||||||||||||||||
per Working Interest Mcfe | $ | 1.28 | $ | 0.93 | $ | 1.19 | $ | 0.86 | ||||||||
Transportation, Gathering and Marketing | ||||||||||||||||
per Mcfe | $ | 0.68 | $ | 0.74 | $ | 0.61 | $ | 0.64 | ||||||||
Production Tax per Mcfe | $ | 0.36 | $ | 0.28 | $ | 0.34 | $ | 0.21 | ||||||||
Cash G&A Expense per Mcfe (1) | $ | 1.06 | $ | 0.82 | $ | 0.95 | $ | 0.79 | ||||||||
G&A Expense per Mcfe | $ | 1.46 | $ | 0.97 | $ | 1.20 | $ | 0.90 | ||||||||
Interest Expense per Mcfe | $ | 0.18 | $ | 0.09 | $ | 0.12 | $ | 0.11 | ||||||||
DD&A per Mcfe | $ | 0.60 | $ | 0.71 | $ | 0.76 | $ | 0.85 | ||||||||
Total Expense per Mcfe | $ | 3.65 | $ | 3.30 | $ | 3.45 | $ | 3.18 | ||||||||
Net Income (Loss) | $ | 9,158,468 | $ | (3,764,200) | $ | 20,409,272 | $ | (6,217,237) | ||||||||
Adjusted EBITDA (2) | $ | 8,395,965 | $ | 4,219,914 | $ | 25,825,548 | $ | 15,726,260 | ||||||||
Cash Flow from Operations | $ | 13,192,676 | $ | (6,298,246) | $ | 37,531,650 | $ | 3,942,087 | ||||||||
CapEx | $ | 201,114 | $ | 36,413 | $ | 552,638 | $ | 733,172 | ||||||||
CapEx - Mineral Acquisitions | $ | 13,652,829 | $ | 1,287,082 | $ | 43,525,236 | $ | 20,624,347 | ||||||||
Borrowing Base | $ | 50,000,000 | $ | 27,500,000 | ||||||||||||
Debt | $ | 28,300,000 | $ | 17,500,000 | ||||||||||||
Debt to Adjusted EBITDA (TTM) (2) | 1.10 | 1.11 | ||||||||||||||
(1) | Cash G&A expense is G&A excluding restricted stock and deferred director's expense from the adjusted EBITDA table on page 13. |
(2) | 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, 2022 | Sept. 30, 2021 | Sept. 30, 2022 | Sept. 30, 2021 | ||||||||||||
Gas Mcf Sold | 2,047,614 | 1,609,101 | 7,427,708 | 6,699,720 | |||||||||||
Average Sales Price per Mcf before the | |||||||||||||||
effects of settled derivative contracts | $ | 7.61 | $ | 4.27 | $ | 6.16 | $ | 3.13 | |||||||
Average Sales Price per Mcf after the | |||||||||||||||
effects of settled derivative contracts | $ | 5.08 | $ | 3.54 | $ | 4.09 | $ | 2.95 | |||||||
% of sales subject to hedges | 58 | % | 72 | % | 62 | % | 62 | % | |||||||
Oil Barrels Sold | 49,902 | 54,043 | 198,535 | 224,479 | |||||||||||
Average Sales Price per Bbl before the | |||||||||||||||
effects of settled derivative contracts | $ | 94.07 | $ | 68.02 | $ | 91.32 | $ | 56.58 | |||||||
Average Sales Price per Bbl after the | |||||||||||||||
effects of settled derivative contracts | $ | 57.80 | $ | 45.09 | $ | 57.67 | $ | 48.17 | |||||||
% of sales subject to hedges | 62 | % | 77 | % | 72 | % | 75 | % | |||||||
NGL Barrels Sold | 40,761 | 46,369 | 165,120 | 171,488 | |||||||||||
Average Sales Price per Bbl(1) | $ | 37.89 | $ | 32.91 | $ | 36.11 | $ | 23.80 | |||||||
Mcfe Sold | 2,591,588 | 2,211,570 | 9,609,638 | 9,075,519 | |||||||||||
Natural gas, oil and NGL sales before the | |||||||||||||||
effects of settled derivative contracts | $ | 21,828,034 | $ | 12,078,420 | $ | 69,860,631 | $ | 37,749,044 | |||||||
Natural gas, oil and NGL sales after the | |||||||||||||||
effects of settled derivative contracts | $ | 14,832,521 | $ | 9,652,336 | $ | 47,804,278 | $ | 34,634,153 | |||||||
(1) There were no NGL settled derivative contracts during the 2022 and 2021 periods. | |||||||||||||||
Total Production for the last four quarters was as follows:
Quarter ended | Mcf Sold | Oil Bbls Sold | NGL Bbls Sold | Mcfe Sold | ||||||||||||
9/30/2022 | 2,047,614 | 49,902 | 40,761 | 2,591,588 | ||||||||||||
6/30/2022 | 1,897,799 | 48,928 | 39,732 | 2,429,760 | ||||||||||||
3/31/2022 | 1,908,030 | 51,631 | 40,371 | 2,460,042 | ||||||||||||
12/31/2021 | 1,574,265 | 48,074 | 44,256 | 2,128,248 | ||||||||||||
Total production volumes attributable to natural gas were 79% and 78%, respectively, for the fiscal fourth quarter of 2022 and fiscal year 2022.
Royalty Interest Production for the last four quarters was as follows:
Quarter ended | Mcf Sold | Oil Bbls Sold | NGL Bbls Sold | Mcfe Sold | ||||||||||||
9/30/2022 | 1,525,363 | 32,202 | 20,488 | 1,841,502 | ||||||||||||
6/30/2022 | 1,283,737 | 32,562 | 19,369 | 1,595,323 | ||||||||||||
3/31/2022 | 1,261,949 | 28,758 | 18,852 | 1,547,609 | ||||||||||||
12/31/2021 | 949,523 | 25,996 | 19,953 | 1,225,220 | ||||||||||||
Royalty production volumes attributable to natural gas were 83% and 81%, respectively, for the fiscal fourth quarter and fiscal year of 2022.
Working Interest Production for the last four quarters was as follows:
Quarter ended | Mcf Sold | Oil Bbls Sold | NGL Bbls Sold | Mcfe Sold | ||||||||||||
9/30/2022 | 522,251 | 17,700 | 20,273 | 750,086 | ||||||||||||
6/30/2022 | 614,062 | 16,366 | 20,363 | 834,437 | ||||||||||||
3/31/2022 | 646,081 | 22,873 | 21,519 | 912,433 | ||||||||||||
12/31/2021 | 624,742 | 22,078 | 24,303 | 903,028 | ||||||||||||
FISCAL FOURTH QUARTER ENDED SEPT. 30, 2022, RESULTS
The Company recorded fiscal fourth quarter 2022 net income of $9,158,468, or $0.26 per share, as compared to a net loss of ($3,764,200), or ($0.12) per share, in the fiscal fourth quarter 2021. The change in net income was principally the result of increased natural gas, oil and NGL sales, decreased losses associated with our hedge contracts and increased gains on asset sales, partially offset by an increase in general and administrative costs, or G&A, and income tax expense.
Natural gas, oil and NGL revenue increased $9,749,614, or 81%, for the fiscal fourth quarter 2022, compared to the corresponding fiscal 2021 quarter, due to increases in natural gas, oil and NGL prices of 78%, 38% and 15%, respectively, and an increase in natural gas volumes of 27%, partially offset by a decrease in oil and NGL volumes of 8% and 12%, respectively.
The production increase in royalty volumes during the fiscal quarter ended Sept. 30, 2022, as compared to the fiscal quarter ended Sept. 30, 2021, was primarily due to acquisitions and new drilling in the Haynesville and SCOOP plays. The decrease in working interest volumes resulted from the divestiture of low-value legacy working interests in Oklahoma and the Fayetteville Shale in Arkansas, naturally declining production in high-interest wells in the Arkoma Stack and STACK plays, and shut-in legacy wells in the Eagle Ford play while the operator completes new offset wells.
The Company had a net loss on derivative contracts of ($4,298,614) in the fiscal fourth quarter 2022, as compared to a net loss of ($8,112,827) in the fiscal fourth quarter 2021, of which ($5,938,317) is a loss on settled derivatives and $1,639,703 is a non-cash gain on derivatives with respect to the fiscal fourth quarter 2022. Loss on settled derivative contracts for the fiscal fourth quarter 2022 excludes $1,057,197 of cash paid to settle off-market derivative contracts. The change in net loss on derivative contracts was due to the Company's settlements of natural gas and oil collars and fixed price swaps and the change in valuation caused by the difference in Sept. 30, 2022, pricing relative to the strike price on open derivative contracts.
The 11% increase in total cost per Mcfe in the fiscal fourth quarter 2022, relative to the fiscal fourth quarter 2021, was primarily driven by an increase in G&A and production taxes. G&A increased $1,640,954, or 77%, in the fiscal fourth quarter 2022, compared to the corresponding fiscal 2021 quarter due to increased legal and accounting expenses associated with higher transaction activity and restricted stock expense. Production taxes increased $307,064, or 49%, due to an increase in natural gas, oil and NGL revenue, but decreased as a percent of natural gas, oil and NGL revenue in the fiscal fourth quarter 2022, compared to the corresponding fiscal 2021 quarter, from 5.2% to 4.3%.
Income tax expense increased in the fiscal fourth quarter 2022 due to net income of $9,158,468, compared to the ($3,764,200) net loss recorded in the fiscal fourth quarter 2021.
FISCAL YEAR 2022 RESULTS
The Company recorded net income of $20,409,272, or $0.59 per share, in the fiscal year ended Sept. 30, 2022 ("fiscal year 2022"), as compared to a net loss of $(6,217,237), or $(0.24) per share, in the fiscal year ended Sept. 30, 2021 ("fiscal year 2021"). The change in net income was principally the result of increased natural gas, oil and NGL sales and gains on asset sales, and decreased depreciation, depletion and amortization, or DD&A, partially offset by an increase in income tax expense, losses on derivative contracts, production taxes, and G&A.
Natural gas, oil and NGL sales increased $32,111,587, or 85%, for fiscal year 2022, compared to fiscal year 2021, due to increases in natural gas, oil and NGL prices of 97%, 61% and 52%, respectively, and an increase in natural gas volumes of 11%, partially offset by a decrease in oil and NGL volumes of 12% and 4%, respectively.
The increase in natural gas production was primarily due to acquisitions and new drilling in the Haynesville play, and slightly offset by divestiture of working interest assets in the Fayetteville Shale and naturally declining production in the Arkoma STACK. The decrease in oil production was a result of naturally declining production in high interest wells in the Eagle Ford and Bakken plays, wells shut in for workovers in the Eagle Ford, our strategy of no longer participating with working interest in new drilling in the Eagle Ford and the natural decline of wells brought online in fiscal year 2021 in the STACK play. These decreases were partially offset by new drilling and acquisitions in the SCOOP. The decrease in NGL production is primarily attributable to the natural decline in high interest, liquids rich wells in the STACK. This was partially offset by new wells in the SCOOP.
The Company had a net loss on derivative contracts of ($16,833,078) in fiscal year 2022, as compared to a net loss of ($16,202,489) in fiscal year 2021, of which ($14,533,560) is a loss on settled derivatives and ($2,299,518) is a non-cash loss on derivatives with respect to fiscal year 2022. Loss on settled derivative contracts for fiscal year 2022 excludes $7,522,794 of cash paid to settle off-market derivative contracts. The change in net loss on derivative contracts was due to the Company's settlements of natural gas and oil collars and fixed price swaps and the change in valuation caused by the difference in Sept. 30, 2022, pricing relative to the strike price on open derivative contracts.
The 8% increase in total cost per Mcfe in fiscal year 2022, relative to fiscal year 2021, was primarily driven by an increase in G&A and production taxes, partially offset by a decrease in DD&A. G&A increased $3,292,712, or 40%, in fiscal year 2022 compared to the fiscal year 2021 due to legal and accounting expenses associated with reincorporating in the state of Delaware and increased transaction activity, increased wage inflation and increased restricted stock expense. Production taxes increased $1,292,563, or 67%, due to increase in natural gas, oil and NGL revenue, but decreased as a percentage of natural gas, oil and NGL revenue in fiscal year 2022, compared to the fiscal year 2021 from 5.1% to 4.6%. DD&A decreased $467,686, or 6%, in fiscal year 2022 to $0.76 per Mcfe, as compared to $0.85 per Mcfe in fiscal year 2021. Of the DD&A decrease, $921,685 was a result of a $0.09 decrease in the DD&A rate per Mcfe, partially offset by an increase of $453,999 resulting from production increasing 6% in fiscal year 2022, compared to fiscal year 2021. The DD&A rate per Mcfe decrease was due to working interest divestitures, partially offset by royalty interest acquisitions during fiscal year 2022.
Income tax expense increased in fiscal year 2022 due to net income of $20,409,272, compared to the $(6,217,237) net loss in fiscal year 2021.
OPERATIONS UPDATE
During the fiscal fourth quarter of 2022, the Company converted 49 gross (0.22 net) wells to producing status, including 18 gross (0.057 net) in the SCOOP and 8 gross (0.057 net) in the Haynesville, compared to 96 gross (0.25 net) wells, including 39 gross (0.19 net) in the SCOOP and 12 gross (0.03 net) in the Haynesville, during the fiscal third quarter of 2022.
During fiscal year 2022, the Company converted 318 gross (1.07 net) wells to producing status, including 108 gross (0.22 net) in the SCOOP and 84 gross (0.57 net) in the Haynesville, compared to 147 gross (0.56 net) wells in fiscal year 2021.
At Sept. 30, 2022, the Company had a total of 172 gross (0.85 net) wells in progress across its mineral positions and 64 gross (0.21 net) active permitted wells, compared to 155 gross (0.79 net) wells in progress and 65 gross (0.21 net) active permitted wells at June 30, 2022. As of Nov. 28, 2022, 26 rigs were operating on the Company's acreage with 99 rigs operating within 2.5 miles of its acreage, compared to 25 rigs operating on the Company's acreage with 96 rigs operating within 2.5 miles of its acreage as of June 30, 2022.
Bakken/ | |||||||||||||||||||||||||||||||
Three | Arkoma | ||||||||||||||||||||||||||||||
SCOOP | STACK | Forks | Stack | Fayetteville | Haynesville | Other | Total | ||||||||||||||||||||||||
As of Sept. 30, 2022: | |||||||||||||||||||||||||||||||
Gross Wells in Progress on PHX Acreage | 42 | 27 | 10 | 5 | - | 80 | 8 | 172 | |||||||||||||||||||||||
Net Wells in Progress on PHX Acreage | 0.15 | 0.05 | 0.07 | 0.003 | - | 0.56 | 0.02 | 0.85 | |||||||||||||||||||||||
Gross Active Permits on PHX Acreage | 22 | 6 | 7 | - | - | 23 | 6 | 64 | |||||||||||||||||||||||
As of Nov. 28, 2022: | |||||||||||||||||||||||||||||||
Rigs Present on PHX Acreage | 11 | 3 | 1 | 2 | - | 9 | - | 26 | |||||||||||||||||||||||
Rigs Within 2.5 Miles of PHX Acreage | 25 | 18 | 4 | 2 | - | 39 | 11 | 99 | |||||||||||||||||||||||
Leasing Activity
During the fiscal fourth quarter of 2022, the Company leased 266 net mineral acres for an average bonus payment of $450 per net mineral acre and an average royalty of 22%.
ACQUISITION AND DIVESTITURE UPDATE
During the fiscal fourth quarter of 2022, the Company purchased 923 net royalty acres for approximately $13.5 million and sold 112 net mineral acres, which were outside our core focus areas and predominantly undeveloped and unleased, for approximately $0.1 million. The Company also sold 243 gross non-operated working interest wellbores for approximately $5.3 million.
Fiscal Fourth Quarter 2022 Acquisitions | ||||||||||||||||
SCOOP | Haynesville | Other | Total | |||||||||||||
Net Mineral Acres Purchased | 114 | 450 | - | 564 | ||||||||||||
Net Royalty Acres Purchased | 157 | 766 | - | 923 | ||||||||||||
During fiscal year 2022, the Company purchased 4,570 net royalty acres for approximately $48.0 million and sold 9,707 net mineral acres, which were outside our core focus areas and predominantly undeveloped and unleased, for approximately $2.7 million. The Company also sold 1,001 gross non-operated working interest wellbores for approximately $10.5 million.
Fiscal Year 2022 Acquisitions | ||||||||||||||||
SCOOP | Haynesville | Other | Total | |||||||||||||
Net Mineral Acres Purchased | 823 | 2,204 | - | 3,027 | ||||||||||||
Net Royalty Acres Purchased | 989 | 3,581 | - | 4,570 | ||||||||||||
ROYALTY RESERVES UPDATE
At Sept. 30, 2022, proved royalty reserves increased 45% to 52.8 Bcfe compared to 36.4 Bcfe at Sept. 30, 2021. Proved developed reserves increased by 8.7 Bcfe and proved undeveloped reserves increased by 7.7 Bcfe, primarily due to execution of our acquisition strategy and increased activity in the Haynesville and SCOOP plays.
Proved Royalty Interest | |||||||
Reserves SEC Pricing | |||||||
Sept. 30, 2022 | Sept. 30, 2021 | ||||||
Proved Developed Reserves: | |||||||
Mcf of Gas | 32,055,133 | 23,978,345 | |||||
Barrels of Oil | 607,727 | 667,457 | |||||
Barrels of NGL | 685,166 | 527,142 | |||||
Mcfe (1) | 39,812,491 | 31,145,939 | |||||
Proved Undeveloped Reserves: | |||||||
Mcf of Gas | 11,933,021 | 4,664,782 | |||||
Barrels of Oil | 106,924 | 64,979 | |||||
Barrels of NGL | 64,637 | 34,762 | |||||
Mcfe (1) | 12,962,387 | 5,263,228 | |||||
Total Proved Reserves: | |||||||
Mcf of Gas | 43,988,154 | 28,643,127 | |||||
Barrels of Oil | 714,651 | 732,436 | |||||
Barrels of NGL | 749,803 | 561,904 | |||||
Mcfe (1) | 52,774,878 | 36,409,167 | |||||
10% Discounted Estimated Future | |||||||
Net Cash Flows (before income taxes): | |||||||
Proved Developed | $ | 119,710,945 | $ | 45,948,690 | |||
Proved Undeveloped | 52,978,389 | 9,731,035 | |||||
Total | $ | 172,689,334 | $ | 55,679,725 | |||
(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. | |||||||
TOTAL RESERVES UPDATE
At Sept. 30, 2022, proved reserves were 81.1 Bcfe, as calculated by Cawley, Gillespie and Associates, Inc., the Company's independent consulting petroleum engineering firm. This was a 2% decrease, compared to the 83.0 Bcfe of proved reserves at Sept. 30, 2021. Total proved developed reserves decreased 12% to 68.1 Bcfe, as compared to Sept. 30, 2021, reserve volumes, mainly due to sales of working interest properties in the Fayetteville Shale, Arkoma Stack and Western Anadarko Basin. SEC prices used for the Sept. 30, 2022, report averaged $6.41 per Mcf for natural gas, $90.33 per barrel for oil and $38.09 per barrel for NGL, compared to $2.79 per Mcf for natural gas, $56.51 per barrel for oil and $20.58 per barrel for NGL for the Sept. 30, 2021, report. These prices reflect net prices received at the wellhead.
Proved Reserves SEC Pricing | |||||||
Sept. 30, 2022 | Sept. 30, 2021 | ||||||
Proved Developed Reserves: | |||||||
Mcf of Gas | 50,304,185 | 60,287,881 | |||||
Barrels of Oil | 1,275,853 | 1,439,860 | |||||
Barrels of NGL | 1,698,046 | 1,467,092 | |||||
Mcfe (1) | 68,147,579 | 77,729,593 | |||||
Proved Undeveloped Reserves: | |||||||
Mcf of Gas | 11,933,021 | 4,664,787 | |||||
Barrels of Oil | 106,924 | 64,980 | |||||
Barrels of NGL | 64,637 | 34,761 | |||||
Mcfe (1) | 12,962,387 | 5,263,233 | |||||
Total Proved Reserves: | |||||||
Mcf of Gas | 62,237,206 | 64,952,668 | |||||
Barrels of Oil | 1,382,777 | 1,504,840 | |||||
Barrels of NGL | 1,762,683 | 1,501,853 | |||||
Mcfe (1) | 81,109,966 | 82,992,826 | |||||
10% Discounted Estimated Future | |||||||
Net Cash Flows (before income taxes): | |||||||
Proved Developed | $ | 184,948,239 | $ | 86,793,303 | |||
Proved Undeveloped | 52,978,389 | 9,731,036 | |||||
Total | $ | 237,926,628 | $ | 96,524,339 | |||
SEC Pricing | |||||||
Gas/Mcf | $ | 6.41 | $ | 2.79 | |||
Oil/Barrel | $ | 90.33 | $ | 56.51 | |||
NGL/Barrel | $ | 38.09 | $ | 20.58 | |||
Proved Reserves - Projected Future Pricing (2) | |||||||
10% Discounted Estimated Future | Proved Reserves | ||||||
Net Cash Flows (before income taxes): | Sept. 30, 2022 | Sept. 30, 2021 | |||||
Proved Developed | $ | 128,718,584 | $ | 111,007,369 | |||
Proved Undeveloped | 39,770,031 | 11,989,928 | |||||
Total | $ | 168,488,615 | $ | 122,997,297 | |||
(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, 2022, and Sept. 30, 2021, basis adjusted to Company wellhead price. | |||||||
FOURTH QUARTER EARNINGS CALL
PHX will host a conference call to discuss the Company's fiscal fourth quarter 2022 results at 11:00 a.m. EST tomorrow, Dec. 14, 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 13734289. A webcast will be available at https://event.choruscall.com/mediaframe/webcast.html?webcastid=pL7VYYvq.
FINANCIAL RESULTS | |||||||||||||||
Statements of Operations | |||||||||||||||
Three Months Ended Sept. 30, | Year Ended Sept. 30, | ||||||||||||||
2022 | 2021 | 2022 | 2021 | ||||||||||||
Revenues: | |||||||||||||||
Natural gas, oil and NGL sales | $ | 21,828,034 | $ | 12,078,420 | $ | 69,860,631 | $ | 37,749,044 | |||||||
Lease bonuses and rental income | 17,350 | 105,974 | 467,502 | 425,113 | |||||||||||
Gains (losses) on derivative contracts | (4,298,614) | (8,112,827) | (16,833,078) | (16,202,489) | |||||||||||
17,546,770 | 4,071,567 | 53,495,055 | 21,971,668 | ||||||||||||
Costs and expenses: | |||||||||||||||
Lease operating expenses | 961,148 | 1,130,916 | 4,047,420 | 4,230,968 | |||||||||||
Transportation, gathering and marketing | 1,758,132 | 1,628,634 | 5,890,390 | 5,767,287 | |||||||||||
Production taxes | 929,330 | 622,266 | 3,230,867 | 1,938,304 | |||||||||||
Depreciation, depletion and amortization | 1,550,410 | 1,569,631 | 7,278,118 | 7,745,804 | |||||||||||
Provision for impairment | 2,703 | 4,620 | 14,565 | 50,475 | |||||||||||
Interest expense | 471,716 | 204,925 | 1,164,992 | 995,127 | |||||||||||
General and administrative | 3,783,159 | 2,142,205 | 11,500,594 | 8,207,882 | |||||||||||
Loss on debt extinguishment | - | 260,236 | - | 260,236 | |||||||||||
Losses (gains) on asset sales and other | (3,499,296) | (178,615) | (4,243,163) | (356,127) | |||||||||||
Total costs and expenses | 5,957,302 | 7,384,818 | 28,883,783 | 28,839,956 | |||||||||||
Income (loss) before provision (benefit) for income taxes | 11,589,468 | (3,313,251) | 24,611,272 | (6,868,288) | |||||||||||
Provision (benefit) for income taxes | 2,431,000 | 450,949 | 4,202,000 | (651,051) | |||||||||||
Net income (loss) | $ | 9,158,468 | $ | (3,764,200) | $ | 20,409,272 | $ | (6,217,237) | |||||||
Basic and diluted earnings (loss) per common share | $ | 0.26 | $ | (0.12) | $ | 0.59 | $ | (0.24) | |||||||
Weighted average shares outstanding: | |||||||||||||||
Basic | 35,573,813 | 30,207,492 | 34,403,498 | 25,925,536 | |||||||||||
Diluted | 35,916,878 | 30,207,492 | 34,560,310 | 25,925,536 | |||||||||||
Dividends per share of | |||||||||||||||
common stock paid in period | $ | 0.02 | $ | 0.01 | $ | 0.065 | $ | 0.04 | |||||||
Balance Sheets | |||||||
Sept. 30, 2022 | Sept. 30, 2021 | ||||||
Assets | |||||||
Current assets: | |||||||
Cash and cash equivalents | $ | 3,396,809 | $ | 2,438,511 | |||
Natural gas, oil, and NGL sales receivables (net of $0 | 13,152,274 | 6,428,982 | |||||
allowance for uncollectable accounts) | |||||||
Refundable income taxes | - | 2,413,942 | |||||
Other | 1,372,847 | 942,082 | |||||
Total current assets | 17,921,930 | 12,223,517 | |||||
Properties and equipment at cost, based on | |||||||
successful efforts accounting: | |||||||
Producing natural gas and oil properties | 248,978,928 | 319,984,874 | |||||
Non-producing natural gas and oil properties | 51,779,336 | 40,466,098 | |||||
Other | 1,085,056 | 794,179 | |||||
301,843,320 | 361,245,151 | ||||||
Less accumulated depreciation, depletion and amortization | (168,759,385) | (257,643,661) | |||||
Net properties and equipment | 133,083,935 | 103,601,490 | |||||
Operating lease right-of-use assets | 739,131 | 607,414 | |||||
Other, net | 757,116 | 578,593 | |||||
Total assets | $ | 152,502,112 | $ | 117,011,014 | |||
Liabilities and Stockholders' Equity | |||||||
Current liabilities: | |||||||
Accounts payable | $ | 647,217 | $ | 772,717 | |||
Derivative contracts, net | 7,873,979 | 12,087,988 | |||||
Income taxes payable | 495,858 | 334,050 | |||||
Current portion of operating lease liability | 213,355 | 132,287 | |||||
Accrued liabilities and other | 2,032,275 | 1,809,337 | |||||
Total current liabilities | 11,262,684 | 15,136,379 | |||||
Long-term debt | 28,300,000 | 17,500,000 | |||||
Deferred income taxes, net | 1,585,906 | 343,906 | |||||
Asset retirement obligations | 1,901,904 | 2,836,172 | |||||
Derivative contracts, net | 687,212 | 1,696,479 | |||||
Operating lease liability, net of current portion | 985,887 | 789,339 | |||||
Total liabilities | 44,723,593 | 38,302,275 | |||||
Stockholders' equity: | |||||||
Voting common stock, par value $0.01666 per share: 54,000,500 shares | |||||||
authorized and 35,776,752 shares issued and outstanding at Sept. 30, 2022, | |||||||
36,000,500 shares authorized and 32,770,433 shares issued and | 596,041 | 545,956 | |||||
outstanding at Sept. 30, 2021 | |||||||
Capital in excess of par value | 44,177,051 | 33,213,645 | |||||
Deferred directors' compensation | 1,496,243 | 1,768,151 | |||||
Retained earnings | 67,117,791 | 48,966,420 | |||||
113,387,126 | 84,494,172 | ||||||
Less treasury stock, at cost; 377,232 shares at Sept. 30, | |||||||
2022, and 388,545 shares at Sept. 30, 2021 | (5,608,607) | (5,785,433) | |||||
Total stockholders' equity | 107,778,519 | 78,708,739 | |||||
Total liabilities and stockholders' equity | $ | 152,502,112 | $ | 117,011,014 | |||
Condensed Statements of Cash Flows | |||||||
Year Ended Sept. 30, | |||||||
2022 | 2021 | ||||||
Operating Activities | |||||||
Net income (loss) | $ | 20,409,272 | $ | (6,217,237) | |||
Adjustments to reconcile net income (loss) to net cash provided | |||||||
by operating activities: | |||||||
Depreciation, depletion and amortization | 7,278,118 | 7,745,804 | |||||
Impairment of producing properties | 14,565 | 50,475 | |||||
Provision for deferred income taxes | 1,242,000 | (985,101) | |||||
Gain from leasing fee mineral acreage | (466,341) | (421,915) | |||||
Proceeds from leasing fee mineral acreage | 688,207 | 441,653 | |||||
Net (gain) loss on sales of assets | (4,423,646) | (309,348) | |||||
Directors' deferred compensation expense | 191,852 | 234,466 | |||||
Total (gain) loss on derivative contracts | 16,833,078 | 16,202,489 | |||||
Cash receipts (payments) on settled derivative contracts | (2,796,250) | (11,925,669) | |||||
Restricted stock awards | 2,211,673 | 801,200 | |||||
Loss on debt extinguishment | - | 260,236 | |||||
Other | 87,353 | (11,099) | |||||
Cash provided (used) by changes in assets and liabilities: | |||||||
Natural gas, oil and NGL sales receivables | (6,723,292) | (3,485,762) | |||||
Refundable (payable) income taxes | 2,413,942 | 1,391,285 | |||||
Other current assets | 250,568 | (436,401) | |||||
Accounts payable | (10,305) | (151,875) | |||||
Other non-current assets | (380,964) | (86,282) | |||||
Income taxes payable | 161,808 | - | |||||
Accrued liabilities | 550,012 | 845,168 | |||||
Total adjustments | 17,122,378 | 10,159,324 | |||||
Net cash provided by operating activities | 37,531,650 | 3,942,087 | |||||
Investing Activities | |||||||
Capital expenditures | (552,638) | (733,172) | |||||
Acquisition of minerals and overriding royalty interests | (43,525,236) | (20,624,347) | |||||
Net proceeds from sales of assets | 13,217,844 | 988,600 | |||||
Net cash provided (used) by investing activities | (30,860,030) | (20,368,919) | |||||
Financing Activities | |||||||
Borrowings under credit facility | 21,300,000 | 26,300,000 | |||||
Payments of loan principal | (10,500,000) | (37,550,000) | |||||
Net proceeds from equity issuance | 5,006,538 | 11,688,137 | |||||
Cash receipts from (payments on) off-market derivative contracts | (19,260,104) | 8,800,000 | |||||
Purchases of treasury stock | (1,855) | (2,741) | |||||
Payments of dividends | (2,257,901) | (1,060,448) | |||||
Net cash provided (used) by financing activities | (5,713,322) | 8,174,948 | |||||
Increase (decrease) in cash and cash equivalents | 958,298 | (8,251,884) | |||||
Cash and cash equivalents at beginning of year | 2,438,511 | 10,690,395 | |||||
Cash and cash equivalents at end of year | $ | 3,396,809 | $ | 2,438,511 | |||
Supplemental Disclosures of Cash Flow Information | |||||||
Interest paid (net of capitalized interest) | $ | 997,085 | $ | 1,021,142 | |||
Income taxes paid (net of refunds received) | $ | 384,249 | $ | (1,391,225) | |||
Gross additions to properties and equipment | $ | 46,791,346 | $ | 31,485,015 | |||
Value of shares used for acquisitions | (3,510,001) | (10,272,288) | |||||
Net (increase) decrease in accounts payable for properties | |||||||
and equipment additions | 796,529 | 144,792 | |||||
Capital expenditures and acquisitions | $ | 44,077,874 | $ | 21,357,519 | |||
Derivative Contracts as of Sept. 30, 2022 | ||||||||||||||||||
Collar Average | Collar Average | |||||||||||||||||
Fiscal Period | Product | Volume Mcf/Bbl | Swap Price | Floor Price | Ceiling Price | |||||||||||||
2023 | Natural Gas | 1,415,000 | $ | 4.13 | $ | 7.69 | ||||||||||||
2023 | Natural Gas | 2,100,000 | $ | 3.24 | ||||||||||||||
2024 | Natural Gas | 135,000 | $ | 3.28 | $ | 5.98 | ||||||||||||
2024 | Natural Gas | 380,000 | $ | 3.41 | ||||||||||||||
2023 | Crude Oil | 15,000 | $ | 75.00 | $ | 96.00 | ||||||||||||
2023 | Crude Oil | 72,750 | $ | 63.65 | ||||||||||||||
2024 | Crude Oil | 14,250 | $ | 74.91 | ||||||||||||||
Non-GAAP Reconciliation
This press release includes certain "non-GAAP financial measures" as defined under the rules and regulations of the U.S. Securities and Exchange Commission, or the SEC, including Regulation G. These non-GAAP financial measures are calculated using GAAP amounts in the Company's 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 the Company's financial statements prepared in accordance with GAAP (including the notes thereto), included in the Company's SEC filings and posted on its website.
Adjusted EBITDA Reconciliation
We define "adjusted EBITDA" as earnings before interest, taxes, depreciation and amortization, or EBITDA, excluding non-cash 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. We have included a presentation of adjusted EBITDA because we recognize that certain investors consider this amount to be 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:
Fourth Quarter | Fourth Quarter | Year Ended | Year Ended | Third Quarter | |||||||||||||||
Sept. 30, 2022 | Sept. 30, 2021 | Sept. 30, 2022 | Sept. 30, 2021 | June 30, 2022 | |||||||||||||||
Net Income (Loss) | $ | 9,158,468 | $ | (3,764,200) | $ | 20,409,272 | $ | (6,217,237) | $ | 8,589,010 | |||||||||
Plus: | |||||||||||||||||||
Income tax expense | |||||||||||||||||||
(benefit) | 2,431,000 | 450,949 | 4,202,000 | (651,051) | 976,000 | ||||||||||||||
Interest expense | 471,716 | 204,925 | 1,164,992 | 995,127 | 286,345 | ||||||||||||||
DD&A | 1,550,410 | 1,569,631 | 7,278,118 | 7,745,804 | 2,022,832 | ||||||||||||||
Impairment | 2,703 | 4,620 | 14,565 | 50,475 | 6,277 | ||||||||||||||
Less: | |||||||||||||||||||
Non-cash gains (losses) | |||||||||||||||||||
on derivatives | 1,639,703 | 3,124,035 | (2,299,518) | (4,276,820) | 3,282,921 | ||||||||||||||
Gains (losses) on asset sales | 3,558,611 | 247,543 | 4,423,648 | 309,344 | 693,750 | ||||||||||||||
Plus: | |||||||||||||||||||
Cash receipts from (payments on) | |||||||||||||||||||
off-market derivative contracts(1) | (1,057,197) | 8,800,000 | (7,522,794) | 8,800,000 | (1,284,024) | ||||||||||||||
Restricted stock and deferred | |||||||||||||||||||
director's expense | 1,037,179 | 325,567 | 2,403,525 | 1,035,666 | 574,333 | ||||||||||||||
Adjusted EBITDA | $ | 8,395,965 | $ | 4,219,914 | $ | 25,825,548 | $ | 15,726,260 | $ | 7,194,102 | |||||||||
(1) The initial receipt of $8.8 million of cash from BP Energy Company, or BP, for entering into the off-market derivative contracts had no effect on the Company's statement of operations and was considered cash flow from financing activities. A portion of subsequent settlements with BP had no effect on the Company's statement of operations. | |||||||||||||||||||
Debt to Adjusted EBITDA (TTM) Reconciliation
"Debt to 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 to adjusted EBITDA (TTM) because we recognize that certain investors consider such ratios to be a useful means of measuring our ability to meet our debt service obligations and for evaluating our financial performance. The debt to 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 to adjusted EBITDA (TTM) 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 on a TTM basis and of the resulting debt to adjusted EBITDA (TTM) ratio:
TTM Ended | TTM Ended | ||||||
Sept. 30, 2022 | Sept. 30, 2021 | ||||||
Net Income (Loss) | $ | 20,409,272 | $ | (6,217,237) | |||
Plus: | |||||||
Income tax expense (benefit) | 4,202,000 | (651,051) | |||||
Interest expense | 1,164,992 | 995,127 | |||||
DD&A | 7,278,118 | 7,745,804 | |||||
Impairment | 14,565 | 50,475 | |||||
Less: | |||||||
Non-cash gains (losses) | |||||||
on derivatives | (2,299,518) | (4,276,820) | |||||
Gains (losses) on asset sales | 4,423,648 | 309,344 | |||||
Plus: | |||||||
Cash receipts from (payments on) | |||||||
off-market derivative contracts(1) | (7,522,794) | 8,800,000 | |||||
Restricted stock and deferred | |||||||
director's expense | 2,403,525 | 1,035,666 | |||||
Adjusted EBITDA | $ | 25,825,548 | $ | 15,726,260 | |||
Debt | $ | 28,300,000 | $ | 17,500,000 | |||
Debt to Adjusted EBITDA (TTM) | 1.10 | 1.11 | |||||
(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 Company's statement of operations and was considered cash flow from financing activities. A portion of subsequent settlements with BP has no effect on the Company's statement of operations. | |||||||
Pretax Net Income (Loss) Excluding Non-cash Derivative Gains (Losses) Reconciliation
"Pretax net income (loss) excluding non-cash derivative gains (losses)" is defined as earnings before taxes, excluding non-cash gains (losses) on derivatives. We have included a presentation of pretax net income (loss) excluding non-cash derivative gains (losses) because we recognize that certain investors consider this amount to be a useful means of measuring our ability to meet our debt service obligations and evaluating our financial performance. Pretax net income (loss) excluding non-cash derivative gains (losses) 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 pretax net income (loss) excluding non-cash derivative gains (losses) may not be comparable to a similarly titled measure of other companies. The following table provides a reconciliation of net income (loss) to pretax net income (loss) excluding non-cash derivative gains (losses) for the periods indicated:
Fourth Quarter Ended | Fourth Quarter Ended | ||||||
Sept. 30, 2022 | Sept. 30, 2021 | ||||||
Net Income (Loss) | $ | 9,158,468 | $ | (3,764,200) | |||
Plus: | |||||||
Income tax expense (benefit) | 2,431,000 | 450,949 | |||||
Less: | |||||||
Non-cash gains (losses) | |||||||
on derivatives | 1,639,703 | 3,124,035 | |||||
Pretax Net Income (Loss) excluding | |||||||
Non-cash Derivative Gains (Losses) | $ | 9,949,765 | $ | (6,437,286) | |||
Weighted average shares outstanding | |||||||
Basic | 35,573,813 | 30,207,492 | |||||
Diluted | 35,916,878 | 30,207,492 | |||||
Pretax Net Income (Loss) excluding Non-cash | |||||||
Derivative Gains (Losses) per basic and diluted share | $ | 0.28 | $ | (0.21) | |||
PHX Minerals Inc. (NYSE:PHX) Fort Worth-based, PHX Minerals Inc. is a natural gas and oil focused mineral company with a strategy to proactively grow its mineral position in its core focus areas. PHX owns mineral acreage principally located in Oklahoma, Texas, Louisiana, North Dakota and Arkansas. Additional information on the Company 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, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended. 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, the Company can give no assurance such expectations 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 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 SEC, 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.
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