OKLAHOMA CITY, Feb. 8, 2018 /PRNewswire/ -- PANHANDLE OIL
AND GAS INC. (NYSE: PHX) today reported financial and operating
results for the Company's fiscal first quarter ended Dec. 31, 2017.
HIGHLIGHTS FOR THE PERIOD ENDED DEC. 31,
2017
- Increased total equivalent production 36%, as compared to the
quarter ended Dec. 31, 2016.
- Generated first quarter 2018 net income of $13,784,939, $0.81
per diluted share, as compared to a net loss of $2,238,392, $0.13
per diluted share, for the 2017 quarter.
- Generated cash from operating activities of $7,198,583, which exceeded capital expenditures
of $4,984,880.
- Decreased lease operating expense (LOE) per Mcfe to
$1.06, as compared to $1.21 in the prior year quarter.
- Reduced debt to $50.4 million, as
of Dec. 31, 2017, which has continued
to decline to $48.0 million as of
Jan. 31, 2018.
- Generated EBITDA (1) of $6,782,342 in the first quarter of 2018, as
compared to $1,781,240 in the 2017
first quarter.
(1) This is a Non-GAAP measure. Refer to the Non-GAAP
Reconciliation section.
MANAGEMENT COMMENTS
Paul F. Blanchard Jr., President
and CEO, said, "Panhandle has unique assets in its 255,000 net
acres of perpetual mineral holdings, of which 198,000 net mineral
acres are currently not producing. With these assets we have unique
flexibility, in that we can evaluate and decide which of the
following options we believe will create the most long-term
shareholder value: 1) participate with a proportionate working
interest in wells drilled on our holdings, 2) lease our mineral
acreage and receive an upfront cash bonus plus royalty income from
the production generated or 3) sell the mineral holdings
outright.
"These unique assets and our unique flexibility distinguish
Panhandle from other public oil and gas companies, including other
mineral-based companies, and provide Panhandle's management team
with unique opportunities to create long-term shareholder value.
Our large unleased mineral holdings and our willingness to deploy
capital in the drilling of low-risk, high-return wells drilled on
these holdings provide this advantage. When we deploy capital in
drilling, we receive royalty revenue as the mineral owner, in
addition to the working interest a typical operator receives.
Additionally, when we elect not to invest capital in drilling, we
lease our mineral rights and receive an upfront cash lease bonus
and royalty revenue from ensuing production. Both options provide
an economic advantage over typical operators, who do not own
mineral rights. In general, mineral-based companies do not invest
in drilling on their mineral holdings and instead distribute their
cash flow to their owners. As a result, they miss the opportunity
for low-risk, high-return investments in working interests, which
we believe maximizes the value of the mineral holdings.
"First quarter 2018 production increased 4% over the previous
quarter to 37.2 Mmcfe per day, a 36% increase as compared to the
2017 quarter. The price we received for our production on a per
Mcfe basis improved 6%, while our LOE per Mcfe decreased 12%, as
compared to the 2017 quarter.
"The growth in production and reduction in LOE per Mcfe were
largely the result of our capital investment campaign in 2017 and
the first quarter of 2018. For the 2017 drilling program, the
Company calculated a finding cost of approximately $0.97 per Mcfe based on a 6:1 conversion factor
and a finding cost of approximately $0.84/Mcfe based on a 2017 average product price
equivalence conversion. First quarter 2018 capital investments
totaled approximately $5.0 million
and were primarily directed toward the three low-risk resource
plays that were the focus of the 2017 program: the Eagle Ford
Shale, the southeastern Oklahoma Woodford Shale and the STACK/Cana
Woodford Shale. Disposition of marginal wells with high LOE also
contributed to the reduction in LOE, while having minimal impact on
our cash flow.
"A total of 13 wells are currently being drilled on our mineral
holdings in Oklahoma. We have a
royalty interest in 10 of those wells, a working interest in one
and have not yet elected on the remaining two. Seven of the wells
are in the STACK/Cana area, five are in the SCOOP area and one is
in the southeastern Oklahoma Woodford. There is currently no
drilling underway in our two Permian projects. The operator of the
Andrews and Winkler Counties, Texas, acreage has drilled a Barnett Shale
well that is in the process of being completed, and the operator of
our Cochran County, Texas, acreage
has six wells producing a total of 473 Boe per day gross (22 Boe
net to Panhandle) with one well drilled, but not yet completed.
"We have approved the drilling of 19 gross wells and the
re-fracturing of one of our Eagle Ford wells, none of which have
yet started. These projects are estimated to be a net investment of
$1.7 million. We are currently
evaluating an additional 23 well proposals on our holdings. These
wells have a total projected net cost of $1.3 million.
"Leasing activity was slow in the first quarter, generating
approximately $100,000 of lease bonus
revenue. However, the Company received an additional $430,000 in lease bonus revenue in January 2018. This actively managed leasing
program will continue to be a part of optimizing the value of our
assets and pulling that value forward. In addition, the Company
will consider selling mineral holdings if we believe it is in the
best long-term interest of our shareholders. For example, late in
the fourth quarter of 2017, we received an attractive negotiated
offer for the sale of a relatively small number of largely
undeveloped mineral acres with closing set for early 2018. The
buyer was unable to close, and Panhandle retained the $462,500 deposit. Although the sale did not
close, we believe it further represents the flexibility we have in
our quest to maximize long-term shareholder value.
"We are beginning to see the tangible results from the marginal
property divestiture program we instituted in 2017. Thus far, we
have sold 230 gross marginal wells that accounted for approximately
5.3% of the Company's LOE, but only approximately 0.7% of our cash
flow from producing properties. We are planning to market an
additional 232 gross marginal wells. If these wells are sold, the
Company will have sold 462 gross working interest wells or 21% of
our total gross working interest well count. If the full 462 gross
working interest wells are sold the Company's LOE would decrease by
approximately 9.6%, while our cash flow from producing properties
would only decrease approximately 1.8% based on prior year
activity."
FISCAL FIRST QUARTER 2018 RESULTS
For the 2018 first quarter, the Company recorded net income of
$13,784,939, or $0.81 per diluted share. This compared to a net
loss of $2,238,392, or $0.13 per diluted share, for the 2017 first
quarter. The 2018 first quarter results include a $12,652,000 decrease in income tax as a result of
new tax law (see income tax below). Net cash provided by operating
activities increased 95% to $7,198,584 for the 2018 first quarter, versus
$3,683,651 for the 2017 first
quarter. Capital expenditures totaled $4,984,880 in the 2018 first quarter, compared to
$2,174,523 in the 2017 quarter.
Total revenues for the 2018 first quarter were $12,490,526, a 78% increase from $7,036,643 for the 2017 quarter. Oil, NGL and
natural gas sales increased $3,988,201 or 45% in the 2018 quarter, compared
to the 2017 quarter, as a result of a 36% increase in Mcfe
production and a 6% increase in the average per Mcfe sales price.
The average sales price per Mcfe of production during the 2018
first quarter was $3.77, compared to
$3.54 for the 2017 first quarter.
Also, the 2018 quarter included a $0.5
million loss on derivative contracts, as compared to a
$2.7 million loss for the 2017
quarter.
Gas production increased 32% to 2,442,384 Mcf for the 2018
quarter, compared to the 2017 quarter, while oil production
increased 20% to 90,837 barrels versus 75,636 barrels. In addition,
72,401 barrels of NGL were sold in the 2018 quarter, as compared to
35,651 barrels in the 2017 quarter.
Total expenses increased $1,033,552 in the 2018 quarter as compared to the
2017 quarter. This increase was mainly driven by an increase in LOE
and DD&A of $1,018,855 over the
prior year quarter due to increased Mcfe production. Although LOE
and DD&A expenses increased over the prior year quarter, their
per Mcfe rates both declined comparatively.
INCOME TAX
The provision (benefit) for income tax in this quarter includes
an adjustment of $12,652,000
(benefit) for net deferred tax liabilities whose rates were
adjusted from 35% to 21% as a result of the Tax Cuts and Jobs Act
enacted in December 2017. This
adjustment represents the Company's reasonable estimate of the
change in future tax rates on deferred tax balances at Dec. 31, 2017. Pre-tax net income was
$1,074,939 for the first quarter of
2018.
FINANCIAL HIGHLIGHTS
Statements of
Operations
|
|
|
Three Months Ended
Dec. 31,
|
|
2017
|
|
2016
|
Revenues:
|
(unaudited)
|
Oil, NGL and natural
gas sales
|
$
|
12,887,419
|
|
$
|
8,899,218
|
Lease bonuses and
rentals
|
|
96,959
|
|
|
837,958
|
Gains (losses) on
derivative contracts
|
|
(493,852)
|
|
|
(2,700,533)
|
|
|
12,490,526
|
|
|
7,036,643
|
Costs and
expenses:
|
|
|
|
|
|
Lease operating
expenses
|
|
3,626,709
|
|
|
3,049,415
|
Production
taxes
|
|
488,990
|
|
|
367,845
|
Depreciation,
depletion and amortization
|
|
5,275,824
|
|
|
4,834,263
|
Loss (gain) on asset
sales and other
|
|
(295,658)
|
|
|
(4,339)
|
Interest
expense
|
|
431,579
|
|
|
292,369
|
General and
administrative
|
|
1,888,143
|
|
|
1,842,482
|
|
|
11,415,587
|
|
|
10,382,035
|
Income (loss) before
provision (benefit) for income taxes
|
|
1,074,939
|
|
|
(3,345,392)
|
|
|
|
|
|
|
Provision (benefit)
for income taxes
|
|
(12,710,000)
|
|
|
(1,107,000)
|
|
|
|
|
|
|
Net income
(loss)
|
$
|
13,784,939
|
|
$
|
(2,238,392)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic and diluted
earnings (loss) per common share
|
$
|
0.81
|
|
$
|
(0.13)
|
|
|
|
|
|
|
Basic and diluted
weighted average shares outstanding:
|
|
|
|
|
|
Common
shares
|
|
16,685,032
|
|
|
16,604,149
|
Unissued, directors'
deferred compensation shares
|
|
263,255
|
|
|
274,035
|
|
|
16,948,287
|
|
|
16,878,184
|
|
|
|
|
|
|
Dividends declared
per share of common stock and paid
in period
|
$
|
0.04
|
|
$
|
0.04
|
|
|
|
|
|
|
Dividends declared
per share of common stock and to
be paid in quarter ended March 31
|
|
0.04
|
|
|
0.04
|
Balance
Sheets
|
|
|
Dec. 31,
2017
|
|
Sept. 30,
2017
|
Assets
|
(unaudited)
|
|
|
|
Current
assets:
|
|
|
|
|
|
Cash and cash
equivalents
|
$
|
568,427
|
|
$
|
557,791
|
Oil, NGL and natural
gas sales receivables (net of allowance for uncollectable accounts)
|
|
7,355,784
|
|
|
7,585,485
|
Refundable income
taxes
|
|
465,371
|
|
|
489,945
|
Assets held for
sale
|
|
-
|
|
|
557,750
|
Derivative contracts,
net
|
|
-
|
|
|
544,924
|
Other
|
|
312,733
|
|
|
253,480
|
Total current
assets
|
|
8,702,315
|
|
|
9,989,375
|
|
|
|
|
|
|
Properties and
equipment, at cost, based on successful efforts accounting:
|
|
|
|
|
|
Producing oil and
natural gas properties
|
|
435,482,235
|
|
|
434,571,516
|
Non-producing oil and
natural gas properties
|
|
7,424,270
|
|
|
7,428,927
|
Other
|
|
1,497,079
|
|
|
1,067,894
|
|
|
444,403,584
|
|
|
443,068,337
|
Less accumulated
depreciation, depletion and amortization
|
|
(249,047,342)
|
|
|
(246,483,979)
|
Net properties and
equipment
|
|
195,356,242
|
|
|
196,584,358
|
|
|
|
|
|
|
Investments
|
|
242,083
|
|
|
170,486
|
Total
assets
|
$
|
204,300,640
|
|
$
|
206,744,219
|
|
|
|
|
|
|
Liabilities and
Stockholders' Equity
|
|
|
|
|
|
Current
liabilities:
|
|
|
|
|
|
Accounts
payable
|
$
|
1,063,042
|
|
$
|
1,847,230
|
Derivative contracts,
net
|
|
334,877
|
|
|
-
|
Accrued liabilities
and other
|
|
1,783,169
|
|
|
1,690,789
|
Total current
liabilities
|
|
3,181,088
|
|
|
3,538,019
|
|
|
|
|
|
|
Long-term
debt
|
|
50,400,000
|
|
|
52,222,000
|
Deferred income
taxes
|
|
18,313,007
|
|
|
31,051,007
|
Asset retirement
obligations
|
|
3,223,872
|
|
|
3,196,889
|
Derivative contracts,
net
|
|
-
|
|
|
28,765
|
|
|
|
|
|
|
Stockholders'
equity:
|
|
|
|
|
|
Class A voting common
stock, $.0166 par value; 24,000,000 shares authorized, 16,863,004 issued at
Dec. 31, 2017, and Sept. 30,
2017
|
|
280,938
|
|
|
280,938
|
Capital in excess of
par value
|
|
2,186,538
|
|
|
2,726,444
|
Deferred directors'
compensation
|
|
3,568,293
|
|
|
3,459,909
|
Retained
earnings
|
|
125,767,547
|
|
|
113,330,216
|
|
|
131,803,316
|
|
|
119,797,507
|
Less treasury stock,
at cost; 154,044 shares at Dec. 31, 2017, and 184,988 shares at Sept. 30, 2017
|
|
(2,620,643)
|
|
|
(3,089,968)
|
Total stockholders'
equity
|
|
129,182,673
|
|
|
116,707,539
|
Total liabilities and
stockholders' equity
|
$
|
204,300,640
|
|
$
|
206,744,219
|
Condensed Statements
of Cash Flows
|
|
|
Three months ended
Dec. 31,
|
|
2017
|
|
2016
|
Operating
Activities
|
(unaudited)
|
Net income
(loss)
|
$
|
13,784,939
|
|
$
|
(2,238,392)
|
Adjustments to
reconcile net income (loss) to net cash provided
by operating activities:
|
|
|
|
|
|
Depreciation,
depletion and amortization
|
|
5,275,824
|
|
|
4,834,263
|
Provision for deferred
income taxes
|
|
(12,738,000)
|
|
|
(1,107,000)
|
Gain from leasing of
fee mineral acreage
|
|
(96,843)
|
|
|
(837,732)
|
Proceeds from leasing
of fee mineral acreage
|
|
98,692
|
|
|
847,578
|
Net (gain) loss on
sale of assets
|
|
272,236
|
|
|
-
|
Directors' deferred
compensation expense
|
|
108,384
|
|
|
105,818
|
Restricted stock
awards
|
|
194,050
|
|
|
180,412
|
Other
|
|
(3,237)
|
|
|
298
|
Cash provided (used)
by changes in assets and liabilities:
|
|
|
|
|
|
Oil, NGL and natural
gas sales receivables
|
|
229,701
|
|
|
(239,558)
|
Fair value of
derivative contracts
|
|
851,036
|
|
|
2,516,263
|
Other current
assets
|
|
(59,253)
|
|
|
145,640
|
Accounts
payable
|
|
(86,404)
|
|
|
(90,474)
|
Income taxes
receivable
|
|
24,574
|
|
|
(14,166)
|
Other non-current
assets
|
|
(79,552)
|
|
|
-
|
Accrued
liabilities
|
|
(577,564)
|
|
|
(419,299)
|
Total
adjustments
|
|
(6,586,356)
|
|
|
5,922,043
|
Net cash provided by
operating activities
|
|
7,198,583
|
|
|
3,683,651
|
|
|
|
|
|
|
Investing
Activities
|
|
|
|
|
|
Capital
expenditures
|
|
(4,984,880)
|
|
|
(2,174,523)
|
Investments in
partnerships
|
|
5,393
|
|
|
(17,571)
|
Proceeds from sales of
assets
|
|
557,750
|
|
|
-
|
Net cash provided
(used) by investing activities
|
|
(4,421,737)
|
|
|
(2,192,094)
|
|
|
|
|
|
|
Financing
Activities
|
|
|
|
|
|
Borrowings under debt
agreement
|
|
8,272,575
|
|
|
4,436,304
|
Payments of loan
principal
|
|
(10,094,795)
|
|
|
(4,836,304)
|
Purchase of treasury
stock
|
|
(272,100)
|
|
|
(407,677)
|
Payments of
dividends
|
|
(671,890)
|
|
|
(670,104)
|
Net cash provided
(used) by financing activities
|
|
(2,766,210)
|
|
|
(1,477,781)
|
|
|
|
|
|
|
Increase (decrease) in
cash and cash equivalents
|
|
10,636
|
|
|
13,776
|
Cash and cash
equivalents at beginning of period
|
|
557,791
|
|
|
471,213
|
Cash and cash
equivalents at end of period
|
$
|
568,427
|
|
$
|
484,989
|
|
|
|
|
|
|
Supplemental
Schedule of Noncash Investing and Financing
Activities
|
|
|
|
|
|
Dividends declared and
unpaid
|
$
|
675,718
|
|
$
|
670,255
|
Additions to asset
retirement obligations
|
$
|
12,026
|
|
$
|
594
|
|
|
|
|
|
|
Gross additions to
properties and equipment
|
$
|
4,287,096
|
|
$
|
3,370,574
|
Net (increase)
decrease in accounts payable for properties and equipment additions
|
|
697,784
|
|
|
(1,196,051)
|
Capital expenditures
and acquisitions
|
$
|
4,984,880
|
|
$
|
2,174,523
|
OPERATING
HIGHLIGHTS
|
|
|
First Quarter
Ended
|
|
First
Quarter Ended
|
|
Dec. 31,
2017
|
|
Dec. 31,
2016
|
Mcfe Sold
|
|
3,421,812
|
|
|
2,517,414
|
Average Sales Price
per Mcfe
|
$
|
3.77
|
|
$
|
3.54
|
Oil Barrels
Sold
|
|
90,837
|
|
|
75,636
|
Average Sales Price
per Barrel
|
$
|
53.83
|
|
$
|
46.09
|
Mcf Sold
|
|
2,442,384
|
|
|
1,849,692
|
Average Sales Price
per Mcf
|
$
|
2.50
|
|
$
|
2.57
|
NGL Barrels
Sold
|
|
72,401
|
|
|
35,651
|
Average Sales Price
per Barrel
|
$
|
26.10
|
|
$
|
18.65
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Quarter
ended
|
|
Oil Bbls
Sold
|
|
Mcf Sold
|
|
NGL Bbls
Sold
|
|
Mcfe Sold
|
12/31/2017
|
|
|
90,837
|
|
|
2,442,384
|
|
|
72,401
|
|
|
3,421,812
|
9/30/2017
|
|
|
93,027
|
|
|
2,330,838
|
|
|
65,034
|
|
|
3,279,204
|
6/30/2017
|
|
|
75,467
|
|
|
2,265,091
|
|
|
39,337
|
|
|
2,953,915
|
3/31/2017
|
|
|
66,547
|
|
|
1,748,909
|
|
|
33,836
|
|
|
2,351,207
|
12/31/2016
|
|
|
75,636
|
|
|
1,849,692
|
|
|
35,651
|
|
|
2,517,414
|
The Company's derivative contracts in place for natural gas at
Dec. 31, 2017, are outlined in its
Form 10-Q for the period ending Dec. 31,
2017.
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.
EBITDA Reconciliation
EBITDA is defined as net income (loss) plus interest expense,
provision for impairment, depreciation, depletion and amortization
of properties and equipment (which includes amortization of other
assets), and provision (benefit) for income taxes. We believe that
certain investors consider EBITDA a useful means of measuring our
ability to meet our debt service obligations and evaluating our
financial performance. 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
EBITDA may not be comparable to a similarly titled measure of other
companies. The following table provides a reconciliation of net
income (loss) to EBITDA for the periods indicated.
|
First Quarter
Ended
|
|
First Quarter
Ended
|
|
Dec. 31,
2017
|
|
Dec. 31,
2016
|
Net Income
(Loss)
|
$
|
13,784,939
|
|
$
|
(2,238,392)
|
Plus:
|
|
|
|
|
|
Income Tax Expense (Benefit)
|
|
(12,710,000)
|
|
|
(1,107,000)
|
Interest Expense
|
|
431,579
|
|
|
292,369
|
DD&A
|
|
5,275,824
|
|
|
4,834,263
|
EBITDA
|
$
|
6,782,342
|
|
$
|
1,781,240
|
Panhandle Oil and Gas Inc. (NYSE:
PHX) is engaged in the exploration for and
production of natural gas and oil. Additional information on the
Company can be found at www.panhandleoilandgas.com.
Forward-Looking Statements and Risk Factors
– This report includes "forward-looking statements" within
the meaning of Section 27A of the Securities Act of 1933 and
Section 21E of the Securities Exchange Act of 1934. Forward-looking
statements include current expectations or forecasts of future
events. They may include estimates of oil and gas reserves,
expected oil and gas production and future expenses, projections of
future oil and gas prices, planned capital expenditures for
drilling, leasehold acquisitions and seismic data, statements
concerning anticipated cash flow and liquidity, and Panhandle's
strategy and other plans and objectives for future operations.
Although Panhandle believes the expectations reflected in these and
other forward-looking statements are reasonable, we can give no
assurance they will prove to be correct. They can be affected by
inaccurate assumptions or by known or unknown risks and
uncertainties. Factors that could cause actual results to differ
materially from expected results are described under "Risk Factors"
in Part 1, Item 1 of Panhandle's 2017 Form 10-K filed with the
Securities and Exchange Commission. These "Risk Factors" include
the worldwide economic recession's continuing negative effects on
the natural gas business; Panhandle's hedging activities may reduce
the realized prices received for natural gas sales; the volatility
of oil and gas prices; the Company's ability to compete effectively
against strong independent oil and gas companies and majors; the
availability of capital on an economic basis to fund reserve
replacement costs; Panhandle's ability to replace reserves and
sustain production; uncertainties inherent in estimating quantities
of oil and gas reserves and projecting future rates of production
and the amount and timing of development expenditures;
uncertainties in evaluating oil and gas reserves; unsuccessful
exploration and development drilling; decreases in the values of
our oil and gas properties resulting in write-downs; the negative
impact lower oil and gas prices could have on our ability to
borrow; drilling and operating risks; and our inability to control
activities on our properties as the Company is a non-operator.
Do not place undue reliance on these forward-looking statements,
which speak only as of the date of this release, as Panhandle
undertakes no obligation to update this information. Panhandle
urges you to carefully review and consider the disclosures made in
this presentation and Panhandle's filings with the Securities and
Exchange Commission that attempt to advise interested parties of
the risks and factors that may affect Panhandle's business.
View original
content:http://www.prnewswire.com/news-releases/panhandle-oil-and-gas-inc-reports-fiscal-first-quarter-2018-results-300596188.html
SOURCE PANHANDLE OIL AND GAS INC.