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UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D. C. 20549

 

FORM 10-Q

 

☒ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

 

For the quarterly period ended December 31, 2023

 

OR

 

☐ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

 

For the transition period from         to

 

Commission File No. 1-31785

 

MEXCO ENERGY CORPORATION

(Exact name of registrant as specified in its charter)

 

Colorado   84-0627918
(State or other jurisdiction of
incorporation or organization)		   (IRS Employer
Identification Number)

 

415 West Wall Street, Suite 475
Midland, Texas		   79701
(Address of principal executive offices)   (Zip code)

 

(432) 682-1119

(Registrant’s telephone number, including area code)

 

Securities registered pursuant to Section 12(b) of the Act:

 

Title of each class   Trading Symbol(s)   Name of each exchange on which registered
Common Stock, par value $0.50 per share   MXC   NYSE American

 

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months and (2) has been subject to such filing requirements for the past 90 days. YES ☒ NO ☐

 

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§ 229.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files). Yes ☒ No ☐

 

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company as defined in Rule 12b-2 of the Exchange Act.

 

  Large Accelerated Filer ☐   Accelerated Filer ☐
  Non-Accelerated Filer ☐   Smaller reporting company ☒
  Emerging growth company ☐  

 

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐

 

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). YES ☐ NO ☒

 

The number of shares outstanding of the registrant’s common stock, par value $.50 per share, as of February 8, 2024 was 2,097,838.

 

 

 

 

 

 

MEXCO ENERGY CORPORATION AND SUBSIDIARIES

 

Table of Contents

 

  Page
PART I. FINANCIAL INFORMATION  
 
  Item 1.

Financial Statements

 3
       
    Consolidated Balance Sheets as of December 31, 2023 (Unaudited) and March 31, 20233
       
    Consolidated Statements of Operations (Unaudited) for the three months and nine months ended December 31, 2023 and December 31, 2022 4
       
   

Consolidated Statements of Changes in Stockholders’ Equity (Unaudited) for the three and nine months ended December 31, 2023 and December 31, 2022

 5
       
    Consolidated Statements of Cash Flows (Unaudited) for the nine months ended December 31, 2023 and December 31, 2022 6
       
    Notes to Consolidated Financial Statements (Unaudited) 7
       
  Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations 13
       
  Item 3. Quantitative and Qualitative Disclosures About Market Risk 17
       
  Item 4. Controls and Procedures 17
   
PART II. OTHER INFORMATION  
   
  Item 1. Legal Proceedings 18
       
  Item 1A. Risk Factors 18
       
  Item 2. Unregistered Sales of Equity Securities and Use of Proceeds 18
       
  Item 6. Exhibits 18
       
SIGNATURES 19
       
CERTIFICATIONS  

 

 2 

 

 

PART I – FINANCIAL INFORMATION

 

Item 1. Financial Statements

 

Mexco Energy Corporation and Subsidiaries

CONSOLIDATED BALANCE SHEETS

 

   December 31,   March 31, 
   2023   2023 
   (Unaudited)     
ASSETS        
Current assets          
Cash and cash equivalents  $3,578,938   $2,235,771 
Accounts receivable:          
Oil and natural gas sales   911,255    1,366,784 
Trade   8,427    7,031 
Prepaid costs and expenses   20,479    56,502 
Prepaid drilling   33,052    67,951 
Total current assets   4,552,151    3,734,039 
Property and equipment, at cost          
Oil and gas properties, using the full cost method   46,553,548    45,391,634 
Other   121,926    121,926 
Accumulated depreciation, depletion and amortization   (33,483,798)   (32,215,095)
Property and equipment, net   13,191,676    13,298,465 
Investments – cost basis   900,000    700,000 
Operating lease, right-of-use asset   33,553    75,629 
Other noncurrent assets   9,672    12,156 
Total assets  $18,687,052   $17,820,289 
           
LIABILITIES AND STOCKHOLDERS’ EQUITY          
Current liabilities          
Accounts payable and accrued expenses  $221,422   $201,897 
Operating lease liability, current   33,553    56,366 
Total current liabilities   254,975    258,263 
Long-term liabilities          
Operating lease liability, long-term   -    19,263 
Asset retirement obligations   692,185    710,276 
Deferred income tax liabilities   319,848    - 
Total long-term liabilities   1,012,033    729,539 
Total liabilities   1,267,008    987,802 
           
Commitments and contingencies   -     -  
           
Stockholders’ equity          
Preferred stock - $1.00 par value; 10,000,000 shares authorized; none outstanding   -    - 
Common stock - $0.50 par value; 40,000,000 shares authorized; 2,221,916 and 2,221,416 shares issued; 2,099,339 and 2,136,000 shares outstanding as of December 31, 2023 and March 31, 2023, respectively   1,110,958    1,110,708 
Additional paid-in capital   8,496,527    8,321,145 
Retained earnings   8,858,186    7,991,129 
Treasury stock, at cost (122,577 and 85,416 shares, respectively)   (1,045,627)   (590,495)
Total stockholders’ equity   17,420,044    16,832,487 
Total liabilities and stockholders’ equity  $18,687,052   $17,820,289 

 

The accompanying notes are an integral part of the consolidated financial statements.

 

 3 

 

 

Mexco Energy Corporation and Subsidiaries

CONSOLIDATED STATEMENTS OF OPERATIONS

(Unaudited)

 

   2023   2022   2023   2022 
   Three Months Ended   Nine Months Ended 
   December 31   December 31 
   2023   2022   2023   2022 
Operating revenue:                    
Oil sales  $1,387,008   $1,750,539   $3,916,492   $4,707,735 
Natural gas sales   223,587    735,478    789,903    2,476,290 
Other   45,848    95,193    105,077    171,950 
Total operating revenues   1,656,443    2,581,210    4,811,472    7,355,975 
                     
Operating expenses:                    
Production   401,035    478,670    1,143,116    1,308,143 
Accretion of asset retirement obligation   7,225    7,553    22,121    22,902 
Depreciation, depletion, and amortization   400,337    496,509    1,268,703    1,268,016 
General and administrative   335,152    288,536    981,664    876,735 
Total operating expenses   1,143,749    1,271,268    3,415,604    3,475,796 
                     
Operating income   512,694    1,309,942    1,395,868    3,880,179 
                     
Other income (expenses):                    
Interest income   36,936    59    86,995    152 
Interest expense   (1,075)   (3,230)   (3,235)   (9,922)
Net other income (expense)   35,861    (3,171)   83,760    (9,770)
                     
Income before provision for income taxes   548,555    1,306,771    1,479,628    3,870,409 
                     
Income tax expense:                    
Current   32,959    61,986    79,123    115,236 
Deferred   169,986    -    319,848    - 
Total income tax expense   202,945    61,986    398,971    115,236 
                     
Net income  $345,610   $1,244,785   $1,080,657   $3,755,173 
                     
Income per common share:                    
Basic:  $0.16   $0.58   $0.51   $1.75 
Diluted:  $0.16   $0.56   $0.50   $1.70 
                     
Weighted average common shares outstanding:                    
Basic:   2,103,503    2,147,750    2,120,611    2,148,859 
Diluted:   2,151,783    2,205,706    2,169,708    2,213,652 

 

The accompanying notes are an integral part of the consolidated financial statements.

 

 4 

 

 

Mexco Energy Corporation and Subsidiaries

CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS’ EQUITY

(Unaudited)

 

   Common
Stock Par
Value		   Additional
Paid-In
Capital		   Retained
Earnings		   Treasury
Stock		   Total
Stockholders’
Equity		 
Balance at April 1, 2023  $1,110,708   $8,321,145   $7,991,129   $(590,495)  $16,832,487 
Net income   -    -    465,614    -    465,614 
Dividends paid   -    -    (213,600)   -    (213,600)
Issuance of stock through options exercised   250    2,712    -    -    2,962 
Stock based compensation   -    54,975    -    -    54,975 
Balance at June 30, 2023  $1,110,958   $8,378,832   $8,243,143   $(590,495)  $17,142,438 
Net income   -    -    269,433    -    269,433 
Purchase of stock   -    -    -    (325,256)   (325,256)
Stock based compensation   -    58,848    -    -    58,848 
Balance at September 30, 2023  $1,110,958   $8,437,680   $8,512,576   $(915,751)  $17,145,463 
Net income   -    -    345,610    -    345,610 
Stock based compensation   -    58,847    -    -    58,847 
Purchase of stock   -    -    -    (129,876)   (129,876)
Balance at December 31, 2023  $1,110,958   $8,496,527   $8,858,186   $(1,045,627)  $17,420,044 

 

    Common Stock Par Value    Additional Paid-In Capital    Retained
Earnings		    Treasury
Stock		    

Total

Stockholders’
Equity

 
Balance at April 1, 2022  $1,108,208   $8,133,982   $3,328,427   $(346,001)  $12,224,616 
Net income   -    -    1,298,672    -    1,298,672 
Stock based compensation   -    25,571    -    -    25,571 
Balance at June 30, 2022  $1,108,208   $8,159,553   $4,627,099   $(346,001)  $13,548,859 
Net income   -    -    1,211,716    -    1,211,716 
Profit from purchase of stock by insider   -    30,179    -    -    30,179 
Stock based compensation   -    34,431    -    -    34,431 
Balance at September 30, 2022  $1,108,208   $8,224,163   $5,838,815   $(346,001)  $14,825,185 
Net income   -    -    1,244,785    -    1,244,785 
Issuance of stock through options exercised   2,500    14,200    -    -    16,700 
Stock based compensation   -    41,460    -    -    41,460 
Purchase of stock   -    -    -    (168,260)   (168,260)
Balance at December 31, 2022  $1,110,708   $8,279,823   $7,083,600   $(514,261)  $15,959,870 
                          
SHARE ACTIVITY                         
Common stock shares, issued:                         
Balance at April 1, 2023        2,221,416                
Issued        500                
Balance at Dec. 31, 2023        2,221,916                
Common stock shares, held in treasury:                         
Balance at April 1, 2023        (85,416)               
Acquisitions        (37,161)               
Balance at Dec. 31, 2023        (122,577)               
                         
Common stock shares, outstanding at December 31, 2023        2,099,339                

 

The accompanying notes are an integral part of the consolidated financial statements.

 

 5 

 

 

Mexco Energy Corporation and Subsidiaries

CONSOLIDATED STATEMENTS OF CASH FLOWS

For the Nine Months Ended December 31,

(Unaudited)

 

   2023   2022 
Cash flows from operating activities:          
Net income  $1,080,657   $3,755,173 
Adjustments to reconcile net income to net cash provided by operating activities:          
Deferred income tax expense   319,848    - 
Stock-based compensation   172,670    101,462 
Depreciation, depletion and amortization   1,268,703    1,268,016 
Accretion of asset retirement obligations   22,121    22,902 
Amortization of debt issuance costs   3,235    9,394 
Changes in operating assets and liabilities:          
Decrease (increase) in accounts receivable   454,133    (738,558)
Decrease in right-of-use asset   42,076    40,529 
Decrease in prepaid expenses   36,023    31,249 
Increase (decrease) in accounts payable and accrued expenses   32,042    (81,236)
Settlement of asset retirement obligations   (14,715)   (17,482)
Decrease in operating lease liability   (42,076)   (40,529)
Net cash provided by operating activities   3,374,717    4,350,920 
           
Cash flows from investing activities:          
Additions to oil and gas properties   (1,471,543)   (4,760,880)
Additions to other property and equipment   -    (1,718)
Drilling refunds   -    18,329 
Investment in limited liability companies at cost   (200,000)   (225,000)
Proceeds from sale of oil and gas properties and equipment   306,513    - 
Net cash used in investing activities   (1,365,030)   (4,969,269)
           
Cash flows from financing activities:          
Proceeds from exercise of stock options   2,962    16,700 
Profits from purchase of stock by insider   -    30,179 
Debt issuance costs   (750)   - 
Proceeds from long-term debt   -    675,000 
Reduction of long-term debt   -    (675,000)
Dividends paid   (213,600)   - 
Acquisition of treasury stock   (455,132)   (168,260)
Net cash used in financing activities   (666,520)   (121,381)
           
Net increase (decrease) in cash and cash equivalents   1,343,167    (739,730)
           
Cash and cash equivalents at beginning of period   2,235,771    1,370,766 
           
Cash and cash equivalents at end of period  $3,578,938   $631,036 
           
Non-cash investing and financing activities:          
Asset retirement obligations  $2,838   $21,554 

 

The accompanying notes are an integral part of the consolidated financial statements.

 

 6 

 

 

Mexco Energy Corporation and Subsidiaries

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

 

1. Nature of Operations

 

Mexco Energy Corporation (a Colorado corporation) and its wholly owned subsidiaries, Forman Energy Corporation (a New York corporation), Southwest Texas Disposal Corporation (a Texas corporation) and TBO Oil & Gas, LLC (a Texas limited liability company) (collectively, the “Company”) are engaged in the acquisition, exploration, development and production of crude oil, natural gas, condensate and natural gas liquids (“NGLs”). Most of the Company’s oil and gas interests are centered in West Texas and Southeastern New Mexico; however, the Company owns producing properties and undeveloped acreage in fourteen states. All of the Company’s oil and gas interests are operated by others.

 

2. Basis of Presentation and Significant Accounting Policies

 

Principles of Consolidation. The consolidated financial statements include the accounts of Mexco Energy Corporation and its wholly owned subsidiaries. All significant intercompany balances and transactions associated with the consolidated operations have been eliminated.

 

Estimates and Assumptions. In preparing financial statements in conformity with accounting principles generally accepted in the United States of America (“GAAP”), management is required to make informed judgments, estimates and assumptions that affect the reported amounts of assets and liabilities as of the date of the financial statements and affect the reported amounts of revenues and expenses during the reporting period. In addition, significant estimates are used in determining proved oil and gas reserves. Although management believes its estimates and assumptions are reasonable, actual results may differ materially from those estimates. The estimate of the Company’s oil and natural gas reserves, which is used to compute depreciation, depletion, amortization and impairment of oil and gas properties, is the most significant of the estimates and assumptions that affect these reported results.

 

Interim Financial Statements. In the opinion of management, the accompanying unaudited consolidated financial statements contain all adjustments (consisting only of normal recurring accruals) necessary to present fairly the financial position of the Company as of December 31, 2023, and the results of its operations and cash flows for the interim periods ended December 31, 2023 and 2022. The consolidated financial statements as of December 31, 2023 and for the three and nine month periods ended December 31, 2023 and 2022 are unaudited. The consolidated balance sheet as of March 31, 2023 was derived from the audited balance sheet filed in the Company’s 2023 annual report on Form 10-K filed with the Securities and Exchange Commission (“SEC”). The results of operations for the periods presented are not necessarily indicative of the results to be expected for a full year. The accounting policies followed by the Company are set forth in more detail in Note 2 of the “Notes to Consolidated Financial Statements” in the Form 10-K. Certain information and footnote disclosures normally included in financial statements prepared in accordance with accounting principles generally accepted in the United States of America have been condensed or omitted in this Form 10-Q pursuant to the rules and regulations of the SEC. However, the disclosures herein are adequate to make the information presented not misleading. It is suggested that these financial statements be read in conjunction with the financial statements and notes thereto included in the Form 10-K.

 

Investments. The Company accounts for investments of less than 3% of any limited liability companies at cost. The Company has no control of the limited liability companies. The cost of the investment is recorded as an asset on the consolidated balance sheets and when income from the investment is received, it is immediately recognized on the consolidated statements of operations.

 

Reclassifications. Certain amounts in prior periods’ consolidated financial statements have been reclassified to conform with the current period’s presentation. These reclassifications had no effect on previously reported results of operations, retained earnings or net cash flows.

 

3. Asset Retirement Obligations

 

The Company’s asset retirement obligations (“ARO”) relate to the plugging of wells, the removal of facilities and equipment, and site restoration on oil and gas properties. The fair value of a liability for an ARO is recorded in the period in which it is incurred, discounted to its present value using the credit adjusted risk-free interest rate, and a corresponding amount capitalized by increasing the carrying amount of the related long-lived asset. The liability is accreted each period until the liability is settled or the well is sold, at which time the liability is removed. The related asset retirement cost is capitalized as part of the carrying amount of our oil and natural gas properties. The ARO is included in the consolidated balance sheets with the current portion being included in the accounts payable and other accrued expenses.

 

 7 

 

 

The following table provides a rollforward of the AROs for the first nine months of fiscal 2024:

 

Carrying amount of asset retirement obligations as of April 1, 2023  $730,276 
Liabilities incurred   2,838 
Liabilities settled   (43,050)
Accretion expense   22,121 
Carrying amount of asset retirement obligations as of December 31, 2023   712,185 
Less: Current portion   20,000 
Non-Current asset retirement obligation  $692,185 

 

4. Stock-based Compensation

 

The Company recognized stock-based compensation expense of $58,847 and $41,460 in general and administrative expense in the Consolidated Statements of Operations for the three months ended December 31, 2023 and 2022, respectively. Stock-based compensation expense recognized for the nine months ended December 31, 2023 and 2022 was $172,670 and $101,462, respectively. The total cost related to non-vested awards not yet recognized at December 31, 2023 totals $559,490 which is expected to be recognized over a weighted average of 2.39 years.

 

During the nine months ended December 31, 2023, the Compensation Committee of the Board of Directors approved and the Company granted 32,000 stock options exercisable at $12.68 per share with an estimated fair value of $279,360. During the nine months ended December 31, 2022, the Compensation Committee of the Board of Directors approved and the Company granted 31,000 stock options exercisable at $18.05 per share with an estimated fair value of $385,640. These options are exercisable at a price not less than the fair market value of the stock at the date of grant, have an exercise period of ten years and generally vest over four years.

 

Included in the following table is a summary of the grant-date fair value of stock options granted and the related assumptions used in the Binomial models for stock options granted during the nine months ended December 31, 2023 and 2022. All such amounts represent the weighted average amounts.

 

   Nine Months Ended 
   December 31 
   2023   2022 
Grant-date fair value  $8.73   $12.44 
Volatility factor   56.5%   57.3%
Dividend yield   -    - 
Risk-free interest rate   3.44%   3.15%
Expected term (in years)   6.25    6.25 

 

The following table is a summary of activity of stock options for the nine months ended December 31, 2023:

 

   Number of
Shares		   Weighted
Average
Exercise
Price		   Weighted Average
Remaining
Contract Life in Years		   Intrinsic Value 
Outstanding at April 1, 2023   139,250   $8.36    7.04   $419,853 
Granted   32,000    12.68           
Exercised   (500)   5.93           
Forfeited or Expired   -    -           
Outstanding at December 31, 2023   170,750   $9.18    6.85   $- 
                     
Vested at December 31, 2023   90,500   $6.42    5.47   $245,128 
Exercisable at December 31, 2023   90,500   $6.42    5.47   $245,128 

 

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During the nine months ended December 31, 2023, stock options covering 500 shares were exercised with a total intrinsic value of $2,416. The Company received proceeds of $2,962 from these exercises. During the nine months ended December 31, 2022, stock options covering 5,000 shares were exercised with a total intrinsic value of $47,575. The Company received proceeds of $16,700 from these exercises.

 

There were no stock options forfeited or expired during the nine months ended December 31, 2023 and 2022. No forfeiture rate is assumed for stock options granted to directors or employees due to the forfeiture rate history of these types of awards.

 

Outstanding options at December 31, 2023 expire between August 2024 and April 2033 and have exercise prices ranging from $3.34 to $18.05.

 

5. Long Term Debt

 

On December 28, 2018, the Company entered into a loan agreement (the “Agreement”) with West Texas National Bank (“WTNB”), which originally provided for a credit facility of $1,000,000 with a maturity date of December 28, 2021. The Agreement has no monthly commitment reduction and a borrowing base to be evaluated annually.

 

On February 28, 2020, the Agreement was amended to increase the credit facility to $2,500,000, extend the maturity date to March 28, 2023 and increase the borrowing base to $1,500,000. On March 28, 2023, the Agreement was amended to extend the maturity date to March 28, 2026.

 

Under the Agreement, interest on the facility accrues at a rate equal to the prime rate as quoted in the Wall Street Journal plus one-half of one percent (0.5%) floating daily. Interest on the outstanding amount under the Agreement is payable monthly. In addition, the Company will pay an unused commitment fee in an amount equal to one-half of one percent (0.5%) times the daily average of the unadvanced amount of the commitment. The unused commitment fee is payable quarterly in arrears on the last day of each calendar quarter. As of December 31, 2023, there was $1,500,000 available for borrowing by the Company on the facility.

 

No principal payments are anticipated to be required through the maturity date of the credit facility, March 28, 2026. Upon closing the second amendment to the Agreement, the Company paid a loan origination fee of $9,000 plus legal and recording expenses totaling $12,950, which were deferred over the life of the credit facility.

 

Amounts borrowed under the Agreement are collateralized by the common stock of the Company’s wholly owned subsidiaries and substantially all of the Company’s oil and gas properties.

 

The Agreement contains customary covenants for credit facilities of this type including limitations on change in control, disposition of assets, mergers and reorganizations. The Company is also obligated to meet certain financial covenants under the Agreement and requires senior debt to earnings before interest, taxes, depreciation and amortization (“EBITDA”) ratios (Senior Debt/EBITDA) less than or equal to 4.00 to 1.00 measured with respect to the four trailing quarters and minimum interest coverage ratios (EBITDA/Interest Expense) of 2.00 to 1.00 for each quarter.

 

In addition, this Agreement prohibits the Company from paying cash dividends on its common stock without written permission of WTNB. The Company obtained written permission from WTNB prior to declaring the special dividend on April 10, 2023 as discussed in Note 10. The Agreement does not permit the Company to enter into hedge agreements covering crude oil and natural gas prices without prior WTNB approval.

 

There was no balance outstanding on the line of credit as of December 31, 2023.

 

6. Leases

 

The Company leases approximately 4,160 rentable square feet of office space from an unaffiliated third party for our corporate office located in Midland, Texas. This includes 1,112 square feet of office space shared with and paid by our principal shareholder. The lease does not include an option to renew and is a 36-month lease that was to expire in May 2021. In June 2020, in exchange for a reduction in rent for the months of June and July 2020, the Company agreed to a 2-month extension to its current lease agreement at the regular monthly rate extending its current lease expiration date to July 2021. In June 2021, the Company agreed to extend its current lease at a flat (unescalated) rate for 36 months. The amended lease now expires on July 31, 2024.

 

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The Company determines an arrangement is a lease at inception. Operating leases are recorded in operating lease right-of-use asset, operating lease liability, current, and operating lease liability, long-term on the consolidated balance sheets.

 

Operating lease right-of-use assets represent the Company’s right to use an underlying asset for the lease term and lease liabilities represent its obligation to make lease payments arising from the lease. Operating lease assets and liabilities are recognized at the commencement date based on the present value of lease payments over the lease term. As the Company’s lease does not provide an implicit rate, the Company uses the incremental borrowing rate based on the information available at commencement date in determining the present value of lease payments. The incremental borrowing rate used at adoption was 3.75%. Significant judgement is required when determining the incremental borrowing rate. Rent expense for lease payments is recognized on a straight-line basis over the lease term.

 

The balance sheets classification of lease assets and liabilities was as follows:

 

   December 31, 2023 
Assets    
Operating lease right-of-use asset, beginning balance  $75,629 
Current period amortization   (42,076)
Total operating lease right-of-use asset  $33,553 
      
Liabilities     
Operating lease liability, current  $33,553 
Operating lease liability, long term   - 
Total lease liabilities  $33,553 

 

Future minimum lease payments as of December 31, 2023 under non-cancellable operating leases are as follows:

 

   Lease Obligation 
Fiscal Year Ended March 31, 2024   14,560 
Fiscal Year Ended March 31, 2025   19,413 
Total lease payments  $33,973 
Less: imputed interest   (420)
Operating lease liability   33,553 
Less: operating lease liability, current   (33,553)
Operating lease liability, long term  $- 

 

Net cash paid for our operating lease for the nine months ended December 31, 2023 and 2022 was $32,001. Rent expense, less sublease income of $11,679 is included in general and administrative expenses.

 

7. Income Taxes

 

On August 16, 2022, President Biden signed into law the Inflation Reduction Act of 2022 (“IRA 2022”). The IRA 2022, among other tax provisions, imposes a 15% corporate alternative minimum tax on corporations with book financial statement income in excess of $1.0 billion, effective for tax years beginning after December 31, 2022. The IRA 2022 also establishes a 1% excise tax on stock repurchases made by publicly traded U.S. corporations, effective for stock repurchases in excess of an annual limit of $1.0 million after December 31, 2022. The IRA 2022 did not impact the Company’s current year tax provision or the Company’s financial statements.

 

The income tax provision consists of the following for the nine months ended December 31, 2023 and 2022:

 

   2023   2022 
   Nine Months Ended 
   December 31 
   2023   2022 
Current income tax expense:          
Federal  $-   $- 
State   79,123    115,236 
Total current income tax expense   79,123    115,236 
Deferred income tax expense:          
Federal   319,848    - 
State   -    - 
Total deferred income tax expense   319,848    - 
Total income tax expense:  $398,971   $115,236 

 

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Federal income tax for the nine months ended December 31, 2023 was $319,848. There was no federal income tax expense for the nine months ended December 31, 2022 because the Company was in a net deferred tax asset position.

 

A reconciliation of the provision for income taxes to income taxes computed using the federal statutory rate for the nine months ended December 31 follows:

 

   2023   2022 
Tax expense at federal statutory rate (1)  $294,106   $788,586 
Statutory depletion carryforward   (5,694)   (257,509)
Change in valuation allowance   (3,578)   (550,947)
Permanent differences   35,014    19,812 
State income expense   79,123    115,236 
Other   -    58 
Total income tax  $398,971   $115,236 
Effective income tax rate   27%   3%

 

(1) The federal statutory rate was 21% for nine months ended December 31, 2023 and 2022.

 

8. Related Party Transactions

 

Related party transactions for the Company primarily relate to shared office expenditures in addition to administrative and operating expenses paid on behalf of the principal stockholder. The total billed to and reimbursed by the stockholder for the three months ended December 31, 2023 and 2022 was $3,625 and $11,598, respectively. The total billed to and reimbursed by the stockholder for the nine months ended December 31, 2023 and 2022 was $21,619 and $35,333, respectively. The principal stockholder pays for his share of the lease amount for the shared office space directly to the lessor. Amounts paid by the principal stockholder directly to the lessor for the three months ending December 31, 2023 and 2022 were $3,893. Amounts paid by the principal stockholder directly to the lessor for the nine months ending December 31, 2023 and 2022 were $11,679.

 

9. Income Per Common Share

 

The following is a reconciliation of the number of shares used in the calculation of basic and diluted net income per share for the three and nine month periods ended December 31, 2023 and 2022:

 

   2023   2022   2023   2022 
   Three Months Ended   Nine Months Ended 
   December 31   December 31 
   2023   2022   2023   2022 
Net income  $345,610   $1,244,785   $1,080,657   $3,755,173 
                     
Shares outstanding:                    
Weighted avg. shares outstanding – basic   2,103,503    2,147,750    2,120,611    2,148,859 
Effect of assumed exercise of dilutive stock options   48,280    57,956    49,097    64,793 
Weighted avg. shares outstanding – dilutive   2,151,783    2,205,706    2,169,708    2,213,652 
                     
Income per common share:                    
Basic  $0.16   $0.58   $0.51   $1.75 
Diluted  $0.16   $0.56   $0.50   $1.70 

 

For the three and nine months ended December 31, 2023, 63,000 shares relating to stock options were excluded from the computation of diluted net income because their inclusion would be anti-dilutive. Anti-dilutive stock options have a weighted average exercise price of $15.32 at December 31, 2023. For the three and nine months ended December 31, 2022, 31,000 shares relating to stock options were excluded from the computation of diluted net income because their inclusion would be anti-dilutive. Anti-dilutive stock options have a weighted average exercise price of $18.05 at December 31, 2022.

 

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10. Stockholders’ Equity

 

In March 2023, the Board of Directors authorized the use of up to $1,000,000 to repurchase shares of the Company’s common stock, par value $0.50, for the treasury account. This program does not have an expiration date and may be modified, suspended or terminated at any time by the Board. Under the repurchase program, shares of common stock may be purchased from time to time through open market purchases or other transactions. The amount and timing of repurchases will be subject to the availability of stock, prevailing market conditions, the trading price of the stock, our financial performance and other conditions. Repurchases may also be made from time-to-time in connection with the settlement of our share-based compensation awards. Repurchases will be funded from cash flow.

 

On August 16, 2022, President Biden signed into law the Inflation Reduction Act of 2022 (“IRA 2022”). The IRA 2022, among other tax provisions, establishes a 1% excise tax on stock repurchases made by publicly traded U.S. corporations, effective for stock repurchases in excess of an annual limit of $1,000,000 after December 31, 2022.

 

During the nine months ended December 31, 2023, the Company repurchased 37,161 shares for the treasury at an aggregate cost of $455,133. During the nine months ended December 31, 2022, the Company repurchased 12,416 shares for the treasury at an aggregate cost of $168,260. Subsequently, in January 2024, the Company repurchased 1,501 shares for the treasury at an aggregate cost of $15,018.

 

On April 10, 2023, the Board of Directors declared a special dividend of $0.10 per common share. The Company paid the special dividend of $213,600 on May 15, 2023 to the stockholders of record at the close of business on May 1, 2023. The Company can provide no assurance that dividends will be declared in the future or as to the amount of any future dividend.

 

Dividends declared by the Board and stock repurchased during the period are presented in the Company’s consolidated statements of changes in stockholders’ equity as dividends paid and purchases of treasury stock, respectively. Dividends paid and stock repurchased during the period are presented as cash used in financing activities in the Company’s consolidated statements of cash flows. Stock repurchases are included as treasury stock in the consolidated balance sheets.

 

11. Subsequent Events

 

In February 2024, Mexco expended approximately $244,000 to participate in the drilling of six horizontal wells in the Bone Spring Sand formation of the Delaware Basin in Lea County, New Mexico.

 

The Company completed a review and analysis of all events that occurred after the consolidated balance sheet date to determine if any such events must be reported and has determined that there are no other subsequent events to be disclosed.

 

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Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations

 

Unless the context otherwise requires, references to the “Company”, “Mexco”, “we”, “us” or “our” mean Mexco Energy Corporation and its consolidated subsidiaries.

 

Cautionary Statements Regarding Forward-Looking Statements. Management’s Discussion and Analysis of Financial Condition and Results of Operations (“MD&A”) contains forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended (the “Securities Act”), and Section 21E of the Securities Exchange Act of 1934, as amended (the “Exchange Act”). Forward-looking statements include statements regarding our plans, beliefs or current expectations and may be signified by the words “could”, “should”, “expect”, “project”, “estimate”, “believe”, “anticipate”, “intend”, “budget”, “plan”, “forecast”, “predict” and other similar expressions. Forward-looking statements appear throughout this Form 10-Q with respect to, among other things: profitability; planned capital expenditures; estimates of oil and gas production; future project dates; estimates of future oil and gas prices; estimates of oil and gas reserves; our future financial condition or results of operations; and our business strategy and other plans and objectives for future operations. Forward-looking statements involve known and unknown risks and uncertainties that could cause actual results to differ materially from those contained in any forward-looking statement.

 

While we have made assumptions that we believe are reasonable, the assumptions that support our forward-looking statements are based upon information that is currently available and is subject to change. All forward-looking statements in the Form 10-Q are qualified in their entirety by the cautionary statement contained in this section. We do not undertake to update, revise or correct any of the forward-looking information. It is suggested that these financial statements be read in conjunction with the financial statements and notes thereto included in the Form 10-K.

 

Liquidity and Capital Resources. Historically, we have funded our operations, acquisitions, exploration and development expenditures from cash generated by operating activities, bank borrowings, sales of non-core properties and issuance of common stock. Our primary financial resource is our base of oil and gas reserves. We have pledged our producing oil and gas properties to secure our credit facility. We do not have any delivery commitments to provide a fixed and determinable quantity of its oil and gas under any existing contract or agreement.

 

Our long-term strategy is on increasing profit margins while concentrating on obtaining reserves with low cost operations by acquiring and developing oil and gas properties with potential for long-lived production. We focus our efforts on the acquisition of royalties and working interests in non-operated properties in areas with significant development potential.

 

At December 31, 2023, we had working capital of $4,297,176 compared to working capital of $3,475,776 at March 31, 2023, an increase of $821,400 for the reasons set forth below.

 

Cash Flows

 

Changes in the net funds provided by or (used in) each of our operating, investing and financing activities are set forth in the table below:

 

   For the Nine Months Ended
December 31,		     
   2023   2022   Change 
Net cash provided by operating activities   3,374,717    4,350,920    (976,203)
Net cash used in investing activities   (1,365,030)   (4,969,269)   (3,604,239)
Net cash used in financing activities   (666,520)   (121,381)   545,139 

 

Cash Flow Provided by Operating Activities. Cash flow from operating activities is primarily derived from the production of our crude oil and natural gas reserves and changes in the balances of non-cash accounts, receivables, payables or other non-energy property asset account balances. Cash flow provided by our operating activities for the nine months ended December 31, 2023 was $3,374,717 in comparison to $4,350,920 for the nine months ended December 31, 2022. This decrease of $976,203 in our cash flow operating activities consisted of an increase in our non-cash expenses of $384,803; a decrease in our accounts receivable of $1,192,691; an increase of $113,278 of our accounts payable and accrued expenses; and, a decrease in our net income for the current nine months of $2,674,516. Variations in cash flow from operating activities may impact our level of exploration and development expenditures.

 

Our expenditures in operating activities consist primarily of drilling expenses, production expenses and engineering services. Our expenses also consist of employee compensation, accounting, insurance and other general and administrative expenses that we have incurred in order to address normal and necessary business activities of a public company in the crude oil and natural gas production industry.

 

Cash Flow Used in Investing Activities. Cash flow from investing activities is derived from changes in oil and gas property balances. For the nine months ended December 31, 2023, we had net cash of $1,365,030 used for additions to oil and gas properties compared to $4,969,269 for the nine months ended December 31, 2022.

 

Cash Flow Provided by Financing Activities. Cash flow from financing activities is derived from our changes in long-term debt and in equity account balances. Cash flow used in our financing activities was $666,520 for the nine months ended December 31, 2023 compared to cash flow used in our financing activities of $121,381 for the nine months ended December 31, 2022. During the nine months ended December 31, 2023, we expended $213,600 to pay the special dividend and $455,132 to purchase 37,161 shares of our stock for the treasury account.

 

Accordingly, net cash increased $1,343,167, leaving cash and cash equivalents on hand of $3,578,938 as of December 31, 2023.

 

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Oil and Natural Gas Property Development.

 

New Participations in Fiscal 2024. The Company currently plans to participate in the drilling and completion of 48 horizontal wells and 1 vertical well at an estimated aggregate cost of approximately $2,200,000 for the fiscal year ending March 31, 2024. Forty-five of these horizontal wells are in the Delaware Basin located in the western portion of the Permian Basin in Lea and Eddy Counties, New Mexico. The remaining 3 horizontal wells are in the Bakken formation in McKenzie County, north Dakota and the vertical well is in Irion County, Texax.

 

During the first nine months of fiscal 2024, Mexco expended approximately $264,000 to participate in the drilling of four horizontal wells in the Wolfcamp Sand formation of the Delaware Basin in Lea County, New Mexico. Mexco’s working interest in these wells is .52%. Two of these wells began producing in November 2023 with initial average production rates of 1,066 barrels of oil, 4,393 barrels of water and 2,483,000 cubic feet of gas per day, or 1,480 barrels of oil equivalent (“BOE”) per day.

 

During the first nine months of fiscal 2024, Mexco expended approximately $152,000 to participate in the drilling of two horizontal wells in the Penn Shale formation of the Delaware Basin in Lea County, New Mexico. Mexco’s working interest in these wells is .4%. These wells began producing in November 2023 with initial average production rates of 837 barrels of oil, 1,794 barrels of water and 659,000 cubic feet of gas per day, or 947 BOE per day.

 

During the first nine months of fiscal 2024, Mexco expended approximately $105,000 to participate in the drilling and completion of two horizontal wells in the Penn Shale formation of the Delaware Basin in Lea County, New Mexico. Mexco’s working interest in these wells is approximately ..285%. These wells began producing in September 2023 with initial average production rates of 582 barrels of oil, 1,488 barrels of water and 791,000 cubic feet of gas per day, or 714 BOE per day.

 

In July 2023, Mexco expended approximately $787,000 to participate in the drilling of five horizontal wells in the Bone Spring Sand formation of the Delaware Basin in Lea County, New Mexico. Mexco’s working interest in these wells is approximately 2.2%.

 

In July 2023, Mexco expended approximately $36,000 to participate in the drilling and completion of two horizontal wells in the Bone Spring Sand formation of the Delaware Basin in Lea County, New Mexico. Mexco’s working interest in these wells is approximately .1%. One of these wells began producing in September 2023 with initial average production rates of 747 barrels of oil, 1,933 barrels of water and 433,000 cubic feet of gas per day, or 819 BOE per day.

 

In November 2023, Mexco expended approximately $32,000 to participate in the drilling and completion of one horizontal well in the Penn Shale formation of the Delaware Basin in Lea County, New Mexico. Mexco’s working interest in this well is .16%.

 

In October 2022, the Company made an approximately 2% equity investment commitment in a limited liability company amounting to $2,000,000 of which $600,000 has been funded as of December 31, 2023. Subsequently, in February 2024, the Company funded another $200,000 toward this investment. The limited liability company is capitalized at approximately $100 million to purchase mineral interests in the Utica and Marcellus areas in the state of Ohio. To date, this LLC has returned $58,022 or 7% of the total investment.

 

In April 2019, the Company invested over a period of four years $300,000 for a less than 1% investment commitment in a limited liability company to purchase mineral interests in the Utica and Marcellus areas of Ohio. To date, this LLC has returned $263,756 or 88% of the total investment.

 

Completion of Wells Drilled in Fiscal 2023. The Company expended approximately $450,000 in the completion of 21 horizontal wells in which the Company participated in fiscal 2023.

 

The Company expended approximately $427,000 for the completion costs of eight horizontal wells in the Wolfcamp Sand formation of the Delaware Basin in Lea County, New Mexico that the Company participated in drilling during fiscal 2023. Mexco’s working interest in these wells is .52%. These wells began producing in October 2023 with initial average production rates of 825 barrels of oil, 3,540 barrels of water and 2,150,000 cubic feet of gas per day, or, 1,183 BOE per day.

 

Three horizontal wells in the Bone Spring formation of the Delaware Basin in Eddy County, New Mexico in which the Company participated during fiscal 2023 were completed in May 2023 with initial average production rates of 437 barrels of oil, 983 barrels of water and 603,000 cubic feet of gas per day, or, 538 barrels of oil equivalent per day. Mexco’s working interest in these wells is .05%.

 

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In October 2023, six of seven horizontal wells in the Bone Spring Sand formation of the Delaware Basin in Lea County, New Mexico in which the Company participated during fiscal 2023 were completed with initial average production rates of 1,991 barrels of oil, 2,134 barrels of water and 2,414,000 cubic feet of gas per day, or, 2,393 barrels of oil equivalent per day. Mexco’s working interest in these wells is .033%.

 

Acquisitions. In December 2023, the Company acquired royalty (mineral) interests in 8 wells operated by Occidental Petroleum Corporation and located in Reeves County, Texas for a purchase price of $364,000 which is effective November 1, 2023. Subsequently, in January 2024, the Company acquired an additional interest in these same wells for a purchase price of $91,000, effective December 1, 2023.

 

In November 2023, the Company acquired small royalty (mineral) interests in 13 wells operated by Diamondback Energy, Inc. and located in Midland County, Texas for a purchase price of $45,300 which is effective November 1, 2023.

 

In November 2023, the Company acquired small producing and non-producing royalty (mineral) interests in 1,280 gross acres in Crane, Ector, Midland and Upton Counties, Texas for a purchase price of $60,500 which is October 1, 2023.

 

In June 2023, the Company acquired small royalty (mineral) interests in 6 wells operated by Highpeak Energy and located in Howard County, Texas for a purchase price of $20,000 which is effective July 1, 2023.

 

Sales of Properties. During the first quarter of fiscal 2024, the Company received approximately $280,000 in cash from a sale of joint venture leasehold acreage and marginal producing working interest wells in Reagan County, Texas, marginal producing working interest wells in Pecos County, Texas and interest in surface acreage in Palo Pinto County, Texas.

 

In December 2023, the Company made on a 3-year Term Assignment of 98% of the Company’s leasehold interest in certain deep rights of 200 acres in Loving and Ward Counties, Texas. The Company received $5,000 per net leasehold acre in the total amount of approximately $980,000. The Company retained the remaining 2% leasehold interest as a participating interest in the full unit at approximately .625% working interest. The Company also retained an overriding royalty interest of 5% proportionately reduced.

 

Also in December 2023, the Company made on a 3-year Term Assignment of the Company’s leasehold interest in 12.96 net mineral acres located in Lea County, New Mexico. The Company received $2,500 per net leasehold acre in the total amount of $32,400. The Company retained an overriding royalty interest equal to the positive difference between 25% and any existing burdens of record as of the effective date.

 

We are participating in other projects and are reviewing projects in which we may participate. The cost of such projects would be funded, to the extent possible, from existing cash balances and cash flow from operations. The remainder may be funded through borrowings on the credit facility and, if appropriate, sales of non-core properties.

 

Crude oil and natural gas generally remained volatile during the last year. The volatility of the energy markets makes it extremely difficult to predict future oil and natural gas price movements with any certainty. For example, in the last twelve months, the NYMEX West Texas Intermediate (“WTI”) posted price for crude oil has ranged from a low of $62.72 per bbl in March 2023 to a high of $89.66 per bbl in September 2023. The Henry Hub Spot Market Price (“Henry Hub”) posted price for natural gas has ranged from a low of $1.74 per MMBtu in June 2023 to a high of $3.78 per MMBtu in January 2023.

 

On December 31, 2023, the WTI posted price for crude oil was $67.63 and the Henry Hub posted price for natural gas was $2.58. See Results of Operations below for realized price.

 

Contractual Obligations. We have no off-balance sheet debt or unrecorded obligations and have not guaranteed the debt of any other party. The following table summarizes our future payments we are obligated to make based on agreements in place as of December 31, 2023:

 

 Payments due in: 
   Total   less than 1 year   1 - 3 years   over 3 years 
Contractual obligations:                    
Leases (1)  $33,973   $33,973   $-   $- 

 

(1) The lease amount represents the monthly rent amount for our principal office space in Midland, Texas under a 38-month lease agreement effective May 15, 2018 and extended another 36 months to July 31, 2024. Of this total obligation for the remainder of the lease, our majority shareholder will pay $9,084 less than 1 year for his portion of the shared office space.

 

 15 

 

 

Results of Operations – Three Months Ended December 31, 2023 and 2022. For the quarter ended December 31, 2023, there was net income of $345,610 compared to $1,244,785 for the quarter ended December 31, 2022 as a result of a decrease in operating revenues due to a decrease in oil and gas prices and production partially offset by a decrease in operating expenses that is further explained below.

 

Oil and gas sales. Revenue from oil and gas sales was $1,610,595 for the third quarter of fiscal 2024, a 35% decrease from $2,486,017 for the same period of fiscal 2023. This resulted from a decrease in oil and natural gas production volumes and a decrease in oil and natural gas prices.

 

   2023   2022   % Difference 
Oil:               
Revenue  $1,387,008   $1,750,539    (20.8%)
Volume (bbls)   17,636    21,308    (17.2%)
Average Price (per bbl)  $78.65   $82.15    (4.3%)
                
Gas:               
Revenue  $223,587   $735,478    (69.6%)
Volume (mcf)   122,794    145,980    (15.9%)
Average Price (per mcf)  $1.82   $5.04    (63.9%)

 

Production and exploration. Production costs were $401,035 for the third quarter of fiscal 2024, a 16% decrease from $478,670 for the same period of fiscal 2023. This is primarily the result of a decrease in production taxes and marketing charges as a result of the decrease in oil and gas revenues.

 

Depreciation, depletion and amortization. Depreciation, depletion and amortization expense was $400,337 for the third quarter of fiscal 2024, a 19% decrease from $496,509 for the same period of fiscal 2023, primarily due to a decrease in production and full cost pool amortization base.

 

General and administrative expenses. General and administrative expenses were $335,153 for the third quarter of fiscal 2024, a 16% increase from $288,536 for the same period of fiscal 2023. This was primarily due to an increase in accounting fees and employee stock option compensation.

 

Income taxes. Federal income tax for the three months ended December 31, 2023 was $169,986. There was no federal income tax expense for the three months ended December 31, 2022 because the Company was in a net deferred tax asset position. State income tax was $32,959 for the three months ended December 31, 2023, a 47% decrease from $61,986 for the three months ended December 31, 2022 due to the decrease in oil and natural gas sales in the State of New Mexico. The effective tax rate for state and federal taxes combined for the three months ended December 31, 2023 and 2022 was 37% and 5%, respectively. The increase in the effective federal tax rate is the result of the reconciliation to the federal tax return.

 

Results of Operations – Nine Months Ended December 31, 2023 and 2022. For the nine months ended December 31, 2023, there was a net income of $1,080,657 compared to net income of $3,755,173 for the nine months ended December 31, 2022. This was a result of a decrease in operating revenues due to a decrease in oil and gas prices and a decrease in gas production partially offset by an increase in oil production and a decrease in operating expenses that is further explained below.

 

Oil and gas sales. Revenue from oil and gas sales was $4,706,395 for the nine months ended December 31, 2023, a 35% decrease from $7,184,025 for the same period of fiscal 2023. This resulted from a decrease in oil and natural gas prices and a decrease in natural gas production partially offset by an increase in oil production.

 

   2023   2022   % Difference 
Oil:               
Revenue  $3,916,792   $4,707,735    (16.8%)
Volume (bbls)   50,826    50,052    1.5%
Average Price (per bbl)  $77.06   $94.06    (18.1%)
                
Gas:               
Revenue  $789,903   $2,476,290    (68.1%)
Volume (mcf)   372,459    394,293    (5.5%)
Average Price (per mcf)  $2.12   $6.28    (66.2%)

 

 16 

 

 

Production and exploration. Production costs were $1,143,116 for the nine months ended December 31, 2023, a 13% decrease from $1,308,143 for the nine months ended December 31, 2022. This decrease is primarily the result of a decrease in production taxes and marketing charges as a result of the decrease in oil and gas revenues.

 

Depreciation, depletion and amortization. Depreciation, depletion and amortization expense was $1,268,703 for the nine months ended December 31, 2023, a .1% increase from $1,268,016 for the nine months ended December 31, 2022, due to a decrease in oil and gas reserves and an increase in oil production partially offset by a decrease in gas production and the full cost amortization base.

 

General and administrative expenses. General and administrative expenses were $981,665 for the nine months ended December 31, 2023, a 12% increase from $876,735 for the nine months ended December 31, 2022. This was primarily due to an increase in employee stock option compensation, accounting fees and engineering services partially offset by a decrease in legal fees.

 

Income taxes. Federal income tax for the nine months ended December 31, 2023 was $319,848. There was no federal income tax expense for the nine months ended December 31, 2022 because the Company was in a net deferred tax asset position. State income tax was $79,123 for the nine months ended December 31, 2023, a 31% decrease from $115,236 for the nine months ended December 31, 2022 due to the decrease in oil and natural gas sales in the State of New Mexico. The effective tax rate for state and federal taxes combined for the nine months ended December 31, 2023 and 2022 was 27% and 3%, respectively. The increase in the effective federal tax rate is the result of the reconciliation to the federal tax return.

 

Item 3. Quantitative and Qualitative Disclosures About Market Risk

 

The primary sources of market risk for us include fluctuations in commodity prices and interest rates. All of our financial instruments are for purposes other than trading.

 

Credit Risk. Credit risk is the risk of loss as a result of nonperformance by other parties of their contractual obligations. Our primary credit risk is related to oil and gas production sold to various purchasers and the receivables are generally not collateralized. At December 31, 2023, our largest credit risk associated with any single purchaser was $565,161 or 62% of our total oil and gas receivables. We have not experienced any significant credit losses.

 

Energy Price Risk. Our most significant market risk is the pricing applicable to our crude oil and natural gas production. Our financial condition, results of operations, and capital resources are highly dependent upon the prevailing market prices of, and demand for, oil and natural gas. Prices for oil and natural gas production has been volatile and unpredictable for several years, and we expect this volatility to continue in the future.

 

Factors that can cause price fluctuations include the level of global demand for petroleum products, foreign and domestic supply of oil and gas, the establishment of and compliance with production quotas by oil-exporting countries, weather conditions, the price and availability of alternative fuels and overall political and economic conditions in oil producing and consuming countries.

 

For example, in the last twelve months, the NYMEX West Texas Intermediate (“WTI”) posted price for crude oil has ranged from a low of $62.72 per bbl in March 2023 to a high of $89.66 per bbl in September 2023. The Henry Hub Spot Market Price (“Henry Hub”) posted price for natural gas has ranged from a low of $1.74 per MMBtu in June 2023 to a high of $3.78 per MMBtu in January 2023. On December 31, 2023, the WTI posted price for crude oil was $67.63 and the Henry Hub posted price for natural gas was $2.58. See Results of Operations above for the Company’s realized prices during the three and nine months. Subsequently, on January 30, 2024, the WTI posted price for crude oil was $73.80 and the Henry Hub posted price for natural gas was $2.26.

 

Declines in oil and natural gas prices will materially adversely affect our financial condition, liquidity, ability to obtain financing and operating results. Changes in oil and gas prices impact both estimated future net revenue and the estimated quantity of proved reserves. Any reduction in reserves, including reductions due to price fluctuations, can reduce the borrowing base under our credit facility and adversely affect the amount of cash flow available for capital expenditures and our ability to obtain additional capital for our acquisition, exploration and development activities. In addition, a noncash write-down of our oil and gas properties could be required under full cost accounting rules if prices declined significantly, even if it is only for a short period of time. Lower prices may also reduce the amount of crude oil and natural gas that can be produced economically. Thus, we may experience material increases or decreases in reserve quantities solely as a result of price changes and not as a result of drilling or well performance.

 

Similarly, any improvements in oil and gas prices can have a favorable impact on our financial condition, results of operations and capital resources. If the average oil price had increased or decreased by ten dollars per barrel for the first nine months of fiscal 2024, our operating revenues would have increased or decreased $508,260. If the average gas price had increased or decreased by one dollar per mcf for the first nine months of fiscal 2024, our operating revenues would have increased or decreased $372,459.

 

Item 4. Controls and Procedures

 

Evaluation of Disclosure Controls and Procedures. We maintain disclosure controls and procedures to ensure that the information we must disclose in our filings with the SEC is recorded, processed, summarized and reported on a timely basis. At the end of the period covered by this report, our principal executive officer and principal financial officer reviewed and evaluated the effectiveness of our disclosure controls and procedures, as defined in Exchange Act Rules 13a-15(e). Based on such evaluation, such officers concluded that, as of December 31, 2023, our disclosure controls and procedures were effective.

 

Changes in Internal Control over Financial Reporting. No changes in our internal control over financial reporting occurred during the nine months ended December 31, 2023 that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

 

 17 

 

 

PART II – OTHER INFORMATION

 

Item 1. Legal Proceedings

 

We may, from time to time, be involved in litigation and claims arising out of our operations in the normal course of business. We are not aware of any legal or governmental proceedings against us, or contemplated to be brought against us, under various environmental protection statutes or other regulations to which we are subject.

 

Item 1A.Risk Factors

 

There have been no material changes to the information previously disclosed in Item 1A. “Risk Factors” in our 2023 Annual Report on Form 10-K.

 

Item 2. Unregistered Sales of Equity Securities and Use of Proceeds

 

c. Issuer Purchases of Equity Securities

 

In March 2023, our board of directors authorized the use of up to $1,000,000 to repurchase shares of our common stock for the treasury account. This program does not have an expiration date and may be modified, suspended or terminated at any time by the board of directors. The following table provides information related to repurchases of our common stock for the treasury account during the nine months ended December 31, 2023:

 

   Total Number of Shares Purchased   Average Price Paid per Share   Total Number of Shares Purchased as Part of Publicly Announced Program   Approximate Dollar Value of Shares that May Yet be Purchased Under the Program (1) 
April 1-30, 2023   -    -    -   $1,000,000 
May 1-31, 2023   -    -    -   $1,000,000 
June 1-30, 2023   -    -    -   $1,000,000 
July 1-31, 2023   9,500   $12.28    9,500   $883,293 
August 1-31, 2023   9,500   $12.69    9,500   $762,743 
September 1-30, 2023   7,000   $12.57    7,000   $674,744 
October 1-31, 2023   6,000   $12.58    6,000   $599,267 
November 1-30, 2023   1,839   $11.49    1,839   $578,141 
December 1-31, 2023   3,322   $10.02    3,322   $544,868 

 

(1) The program authorizing the use of up to $1,000,000 to repurchase shares of our common stock for the treasury account was approved by the board of directors on March 27, 2023 and does not have an expiration date. As of December 31, 2023, 37,161 shares of Mexco’s common stock have been purchased for a total of $455,132.

 

Item 6. Exhibits

 

31.1   Certification of the Chief Executive Officer of Mexco Energy Corporation
31.2   Certification of the Chief Financial Officer of Mexco Energy Corporation
32.1   Certification of the Chief Executive Officer and Chief Financial Officer of Mexco Energy Corporation pursuant to 18 U.S.C. §1350
101.INS   Inline XBRL Instance Document
101.SCH   Inline XBRL Taxonomy Extension Schema Document
101.CAL   Inline XBRL Taxonomy Extenstion Calculation Linkbase Document
101.DEF   Inline XBRL Taxonomy Extension Definition Linkbase Document
101.LAB   Inline XBRL Taxonomy Extension Label Linkbase Document
101.PRE   Inline XBRL Taxonomy Extension Presentation Linkbase Document
104   Cover Page Interactive Data File (embedded within the Inline XBRL and contained in Exhibit 101)

 

 18 

 

 

SIGNATURES

 

Pursuant to the requirements of the Securities and Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.

 

  MEXCO ENERGY CORPORATION
  (Registrant)
   
Dated: February 9, 2024 /s/ Nicholas C. Taylor
  Nicholas C. Taylor
  Chairman of the Board and Chief Executive Officer
   
Dated: February 9, 2024 /s/ Tamala L. McComic
  Tamala L. McComic
  President, Chief Financial Officer, Treasurer and Assistant Secretary

 

 19 

 

Exhibit 31.1

 

CHIEF EXECUTIVE OFFICER CERTIFICATION

 

CERTIFICATION

 

I, Nicholas C. Taylor, certify that:

 

1. I have reviewed this quarterly report on Form 10-Q of Mexco Energy Corporation;
   
2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;
   
3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;
   
4. The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f) for the registrant and have:

 

  a) designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;
     
  b) designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;
     
  c) evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and
     
  d) disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and

 

5. The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):

 

  a) all significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and
     
  b) any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

 

Date: February 9, 2024 /s/ Nicholas C. Taylor
  Nicholas C. Taylor
  Chairman of the Board and Chief Executive Officer

 

 

 

 

Exhibit 31.2

 

CHIEF FINANCIAL OFFICER CERTIFICATION

 


CERTIFICATION

 

I, Tamala L. McComic, certify that:

 

1. I have reviewed this quarterly report on Form 10-Q of Mexco Energy Corporation;
   
2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;
   
3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;
   
4. The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f) for the registrant and have:

 

  a) designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;
     
  b) designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;
     
  c) evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and
     
  d) disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and

 

5. The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):

 

  a) all significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and
     
  b) any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

 

Date: February 9, 2024 /s/ Tamala L. McComic
  Tamala L. McComic
  President and Chief Financial Officer

 

 

 

 

Exhibit 32.1

 

CERTIFICATION OF

CHIEF EXECUTIVE OFFICER AND CHIEF FINANCIAL OFFICER

OF MEXCO ENERGY CORPORATION

PURSUANT TO 18 U.S.C. §1350

 

In connection with the Quarterly Report of Mexco Energy Corporation on Form 10-Q for the quarterly period ended December 31, 2023, as filed with the Securities and Exchange Commission on February 9, 2024 (the “Report”), the undersigned, in the capacities and on the dates indicated below, each hereby certify pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that, to the best of their knowledge:

 

  1. The Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934, as amended; and
     
  2. The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of Mexco Energy Corporation as of the dates and for periods presented as required by such Report.

 

Date: February 9, 2024 /s/ Nicholas C. Taylor
  Nicholas C. Taylor
  Chairman of the Board and Chief Executive Officer
   
Date: February 9, 2024 /s/ Tamala L. McComic
  Tamala L. McComic
  President and Chief Financial Officer

 

 

 

v3.24.0.1
Cover - shares
 9 Months Ended
Dec. 31, 2023
Feb. 08, 2024
Cover [Abstract]    
Document Type 10-Q  
Amendment Flag false  
Document Quarterly Report true  
Document Transition Report false  
Document Period End Date Dec. 31, 2023  
Document Fiscal Period Focus Q3  
Document Fiscal Year Focus 2024  
Current Fiscal Year End Date --03-31  
Entity File Number 1-31785  
Entity Registrant Name MEXCO ENERGY CORPORATION  
Entity Central Index Key 0000066418  
Entity Tax Identification Number 84-0627918  
Entity Incorporation, State or Country Code CO  
Entity Address, Address Line One 415 West Wall Street  
Entity Address, Address Line Two Suite 475  
Entity Address, City or Town Midland  
Entity Address, State or Province TX  
Entity Address, Postal Zip Code 79701  
City Area Code (432)  
Local Phone Number 682-1119  
Title of 12(b) Security Common Stock, par value $0.50 per share  
Trading Symbol MXC  
Security Exchange Name NYSE  
Entity Current Reporting Status Yes  
Entity Interactive Data Current Yes  
Entity Filer Category Non-accelerated Filer  
Entity Small Business true  
Entity Emerging Growth Company false  
Entity Shell Company false  
Entity Common Stock, Shares Outstanding   2,097,838
v3.24.0.1
Consolidated Balance Sheets - USD ($)
Dec. 31, 2023
Mar. 31, 2023
Current assets    
Cash and cash equivalents $ 3,578,938 $ 2,235,771
Accounts receivable:    
Oil and natural gas sales 911,255 1,366,784
Trade 8,427 7,031
Prepaid costs and expenses 20,479 56,502
Prepaid drilling 33,052 67,951
Total current assets 4,552,151 3,734,039
Property and equipment, at cost    
Oil and gas properties, using the full cost method 46,553,548 45,391,634
Other 121,926 121,926
Accumulated depreciation, depletion and amortization (33,483,798) (32,215,095)
Property and equipment, net 13,191,676 13,298,465
Investments – cost basis 900,000 700,000
Operating lease, right-of-use asset 33,553 75,629
Other noncurrent assets 9,672 12,156
Total assets 18,687,052 17,820,289
Current liabilities    
Accounts payable and accrued expenses 221,422 201,897
Operating lease liability, current 33,553 56,366
Total current liabilities 254,975 258,263
Long-term liabilities    
Operating lease liability, long-term 19,263
Asset retirement obligations 692,185 710,276
Deferred income tax liabilities 319,848
Total long-term liabilities 1,012,033 729,539
Total liabilities 1,267,008 987,802
Commitments and contingencies
Stockholders’ equity    
Preferred stock - $1.00 par value; 10,000,000 shares authorized; none outstanding
Common stock - $0.50 par value; 40,000,000 shares authorized; 2,221,916 and 2,221,416 shares issued; 2,099,339 and 2,136,000 shares outstanding as of December 31, 2023 and March 31, 2023, respectively 1,110,958 1,110,708
Additional paid-in capital 8,496,527 8,321,145
Retained earnings 8,858,186 7,991,129
Treasury stock, at cost (122,577 and 85,416 shares, respectively) (1,045,627) (590,495)
Total stockholders’ equity 17,420,044 16,832,487
Total liabilities and stockholders’ equity $ 18,687,052 $ 17,820,289
v3.24.0.1
Consolidated Balance Sheets (Parenthetical) - $ / shares
Dec. 31, 2023
Mar. 31, 2023
Statement of Financial Position [Abstract]    
Preferred stock, par value $ 1.00 $ 1.00
Preferred stock, shares authorized 10,000,000 10,000,000
Preferred stock, shares outstanding 0 0
Common stock, par value $ 0.50 $ 0.50
Common stock, shares authorized 40,000,000 40,000,000
Common stock, shares issued 2,221,916 2,221,416
Common stock, shares outstanding 2,099,339 2,136,000
Treasury stock, shares 122,577 85,416
v3.24.0.1
Consolidated Statements of Operations (Unaudited) - USD ($)
 3 Months Ended 9 Months Ended
Dec. 31, 2023
Dec. 31, 2022
Dec. 31, 2023
Dec. 31, 2022
Operating revenue:        
Total operating revenues $ 1,656,443 $ 2,581,210 $ 4,811,472 $ 7,355,975
Operating expenses:        
Production 401,035 478,670 1,143,116 1,308,143
Accretion of asset retirement obligation 7,225 7,553 22,121 22,902
Depreciation, depletion, and amortization 400,337 496,509 1,268,703 1,268,016
General and administrative 335,152 288,536 981,664 876,735
Total operating expenses 1,143,749 1,271,268 3,415,604 3,475,796
Operating income 512,694 1,309,942 1,395,868 3,880,179
Other income (expenses):        
Interest income 36,936 59 86,995 152
Interest expense (1,075) (3,230) (3,235) (9,922)
Net other income (expense) 35,861 (3,171) 83,760 (9,770)
Income before provision for income taxes 548,555 1,306,771 1,479,628 3,870,409
Income tax expense:        
Current 32,959 61,986 79,123 115,236
Deferred 169,986 319,848
Total income tax expense 202,945 61,986 398,971 115,236
Net income $ 345,610 $ 1,244,785 $ 1,080,657 $ 3,755,173
Income per common share:        
Basic: $ 0.16 $ 0.58 $ 0.51 $ 1.75
Diluted: $ 0.16 $ 0.56 $ 0.50 $ 1.70
Weighted average common shares outstanding:        
Basic: 2,103,503 2,147,750 2,120,611 2,148,859
Diluted: 2,151,783 2,205,706 2,169,708 2,213,652
Oil Sales [Member]        
Operating revenue:        
Total operating revenues $ 1,387,008 $ 1,750,539 $ 3,916,492 $ 4,707,735
Natural Gas Sales [Member]        
Operating revenue:        
Total operating revenues 223,587 735,478 789,903 2,476,290
Other [Member]        
Operating revenue:        
Total operating revenues $ 45,848 $ 95,193 $ 105,077 $ 171,950
v3.24.0.1
Consolidated Statements of Changes in Stockholders' Equity (Unaudited) - USD ($)
Common Stock [Member]
Additional Paid-in Capital [Member]
Retained Earnings [Member]
Treasury Stock, Common [Member]
Total
Balance at Mar. 31, 2022 $ 1,108,208 $ 8,133,982 $ 3,328,427 $ (346,001) $ 12,224,616
Net income 1,298,672 1,298,672
Stock based compensation 25,571 25,571
Balance at Jun. 30, 2022 1,108,208 8,159,553 4,627,099 (346,001) 13,548,859
Balance at Mar. 31, 2022 1,108,208 8,133,982 3,328,427 (346,001) 12,224,616
Net income         3,755,173
Purchase of stock         (168,260)
Balance at Dec. 31, 2022 1,110,708 8,279,823 7,083,600 (514,261) 15,959,870
Balance at Jun. 30, 2022 1,108,208 8,159,553 4,627,099 (346,001) 13,548,859
Net income 1,211,716 1,211,716
Stock based compensation 34,431 34,431
Profit from purchase of stock by insider 30,179 30,179
Balance at Sep. 30, 2022 1,108,208 8,224,163 5,838,815 (346,001) 14,825,185
Net income 1,244,785 1,244,785
Issuance of stock through options exercised 2,500 14,200 16,700
Stock based compensation 41,460 41,460
Purchase of stock (168,260) (168,260)
Balance at Dec. 31, 2022 1,110,708 8,279,823 7,083,600 (514,261) $ 15,959,870
Common stock, shares outstanding         2,136,000
Balance at Mar. 31, 2023 $ 1,110,708 8,321,145 7,991,129 $ (590,495) $ 16,832,487
Balance, shares at Mar. 31, 2023 2,221,416       2,221,416
Treasury stock, shares at Mar. 31, 2023       (85,416) 85,416
Net income 465,614 $ 465,614
Dividends paid (213,600) (213,600)
Issuance of stock through options exercised 250 2,712 2,962
Stock based compensation 54,975 54,975
Balance at Jun. 30, 2023 1,110,958 8,378,832 8,243,143 (590,495) 17,142,438
Balance at Mar. 31, 2023 $ 1,110,708 8,321,145 7,991,129 $ (590,495) $ 16,832,487
Balance, shares at Mar. 31, 2023 2,221,416       2,221,416
Treasury stock, shares at Mar. 31, 2023       (85,416) 85,416
Net income         $ 1,080,657
Purchase of stock         (455,133)
Issuance of stock, shares 500        
Acquisitions, shares       (37,161)  
Balance at Dec. 31, 2023 $ 1,110,958 8,496,527 8,858,186 $ (1,045,627) $ 17,420,044
Balance, shares at Dec. 31, 2023 2,221,916       2,221,916
Treasury stock, shares at Dec. 31, 2023       (122,577) 122,577
Balance at Jun. 30, 2023 $ 1,110,958 8,378,832 8,243,143 $ (590,495) $ 17,142,438
Net income 269,433 269,433
Stock based compensation 58,848 58,848
Purchase of stock (325,256) (325,256)
Balance at Sep. 30, 2023 1,110,958 8,437,680 8,512,576 (915,751) 17,145,463
Net income 345,610 345,610
Stock based compensation 58,847 58,847
Purchase of stock (129,876) (129,876)
Balance at Dec. 31, 2023 $ 1,110,958 $ 8,496,527 $ 8,858,186 $ (1,045,627) $ 17,420,044
Balance, shares at Dec. 31, 2023 2,221,916       2,221,916
Treasury stock, shares at Dec. 31, 2023       (122,577) 122,577
Common stock, shares outstanding 2,099,339       2,099,339
v3.24.0.1
Consolidated Statements of Cash Flows (Unaudited) - USD ($)
 9 Months Ended
Dec. 31, 2023
Dec. 31, 2022
Cash flows from operating activities:    
Net income $ 1,080,657 $ 3,755,173
Adjustments to reconcile net income to net cash provided by operating activities:    
Deferred income tax expense 319,848
Stock-based compensation 172,670 101,462
Depreciation, depletion and amortization 1,268,703 1,268,016
Accretion of asset retirement obligations 22,121 22,902
Amortization of debt issuance costs 3,235 9,394
Changes in operating assets and liabilities:    
Decrease (increase) in accounts receivable 454,133 (738,558)
Decrease in right-of-use asset 42,076 40,529
Decrease in prepaid expenses 36,023 31,249
Increase (decrease) in accounts payable and accrued expenses 32,042 (81,236)
Settlement of asset retirement obligations (14,715) (17,482)
Decrease in operating lease liability (42,076) (40,529)
Net cash provided by operating activities 3,374,717 4,350,920
Cash flows from investing activities:    
Additions to oil and gas properties (1,471,543) (4,760,880)
Additions to other property and equipment (1,718)
Drilling refunds 18,329
Investment in limited liability companies at cost (200,000) (225,000)
Proceeds from sale of oil and gas properties and equipment 306,513
Net cash used in investing activities (1,365,030) (4,969,269)
Cash flows from financing activities:    
Proceeds from exercise of stock options 2,962 16,700
Profits from purchase of stock by insider 30,179
Debt issuance costs (750)
Proceeds from long-term debt 675,000
Reduction of long-term debt (675,000)
Dividends paid (213,600)
Acquisition of treasury stock (455,132) (168,260)
Net cash used in financing activities (666,520) (121,381)
Net increase (decrease) in cash and cash equivalents 1,343,167 (739,730)
Cash and cash equivalents at beginning of period 2,235,771 1,370,766
Cash and cash equivalents at end of period 3,578,938 631,036
Non-cash investing and financing activities:    
Asset retirement obligations $ 2,838 $ 21,554
v3.24.0.1
Nature of Operations
 9 Months Ended
Dec. 31, 2023
Organization, Consolidation and Presentation of Financial Statements [Abstract]  
Nature of Operations

1. Nature of Operations

 

Mexco Energy Corporation (a Colorado corporation) and its wholly owned subsidiaries, Forman Energy Corporation (a New York corporation), Southwest Texas Disposal Corporation (a Texas corporation) and TBO Oil & Gas, LLC (a Texas limited liability company) (collectively, the “Company”) are engaged in the acquisition, exploration, development and production of crude oil, natural gas, condensate and natural gas liquids (“NGLs”). Most of the Company’s oil and gas interests are centered in West Texas and Southeastern New Mexico; however, the Company owns producing properties and undeveloped acreage in fourteen states. All of the Company’s oil and gas interests are operated by others.

 
v3.24.0.1
Basis of Presentation and Significant Accounting Policies
 9 Months Ended
Dec. 31, 2023
Accounting Policies [Abstract]  
Basis of Presentation and Significant Accounting Policies

2. Basis of Presentation and Significant Accounting Policies

 

Principles of Consolidation. The consolidated financial statements include the accounts of Mexco Energy Corporation and its wholly owned subsidiaries. All significant intercompany balances and transactions associated with the consolidated operations have been eliminated.

 

Estimates and Assumptions. In preparing financial statements in conformity with accounting principles generally accepted in the United States of America (“GAAP”), management is required to make informed judgments, estimates and assumptions that affect the reported amounts of assets and liabilities as of the date of the financial statements and affect the reported amounts of revenues and expenses during the reporting period. In addition, significant estimates are used in determining proved oil and gas reserves. Although management believes its estimates and assumptions are reasonable, actual results may differ materially from those estimates. The estimate of the Company’s oil and natural gas reserves, which is used to compute depreciation, depletion, amortization and impairment of oil and gas properties, is the most significant of the estimates and assumptions that affect these reported results.

 

Interim Financial Statements. In the opinion of management, the accompanying unaudited consolidated financial statements contain all adjustments (consisting only of normal recurring accruals) necessary to present fairly the financial position of the Company as of December 31, 2023, and the results of its operations and cash flows for the interim periods ended December 31, 2023 and 2022. The consolidated financial statements as of December 31, 2023 and for the three and nine month periods ended December 31, 2023 and 2022 are unaudited. The consolidated balance sheet as of March 31, 2023 was derived from the audited balance sheet filed in the Company’s 2023 annual report on Form 10-K filed with the Securities and Exchange Commission (“SEC”). The results of operations for the periods presented are not necessarily indicative of the results to be expected for a full year. The accounting policies followed by the Company are set forth in more detail in Note 2 of the “Notes to Consolidated Financial Statements” in the Form 10-K. Certain information and footnote disclosures normally included in financial statements prepared in accordance with accounting principles generally accepted in the United States of America have been condensed or omitted in this Form 10-Q pursuant to the rules and regulations of the SEC. However, the disclosures herein are adequate to make the information presented not misleading. It is suggested that these financial statements be read in conjunction with the financial statements and notes thereto included in the Form 10-K.

 

Investments. The Company accounts for investments of less than 3% of any limited liability companies at cost. The Company has no control of the limited liability companies. The cost of the investment is recorded as an asset on the consolidated balance sheets and when income from the investment is received, it is immediately recognized on the consolidated statements of operations.

 

Reclassifications. Certain amounts in prior periods’ consolidated financial statements have been reclassified to conform with the current period’s presentation. These reclassifications had no effect on previously reported results of operations, retained earnings or net cash flows.

 
v3.24.0.1
Asset Retirement Obligations
 9 Months Ended
Dec. 31, 2023
Asset Retirement Obligation Disclosure [Abstract]  
Asset Retirement Obligations

3. Asset Retirement Obligations

 

The Company’s asset retirement obligations (“ARO”) relate to the plugging of wells, the removal of facilities and equipment, and site restoration on oil and gas properties. The fair value of a liability for an ARO is recorded in the period in which it is incurred, discounted to its present value using the credit adjusted risk-free interest rate, and a corresponding amount capitalized by increasing the carrying amount of the related long-lived asset. The liability is accreted each period until the liability is settled or the well is sold, at which time the liability is removed. The related asset retirement cost is capitalized as part of the carrying amount of our oil and natural gas properties. The ARO is included in the consolidated balance sheets with the current portion being included in the accounts payable and other accrued expenses.

 

 

The following table provides a rollforward of the AROs for the first nine months of fiscal 2024:

 

Carrying amount of asset retirement obligations as of April 1, 2023  $730,276 
Liabilities incurred   2,838 
Liabilities settled   (43,050)
Accretion expense   22,121 
Carrying amount of asset retirement obligations as of December 31, 2023   712,185 
Less: Current portion   20,000 
Non-Current asset retirement obligation  $692,185 

 
v3.24.0.1
Stock-based Compensation
 9 Months Ended
Dec. 31, 2023
Share-Based Payment Arrangement [Abstract]  
Stock-based Compensation

4. Stock-based Compensation

 

The Company recognized stock-based compensation expense of $58,847 and $41,460 in general and administrative expense in the Consolidated Statements of Operations for the three months ended December 31, 2023 and 2022, respectively. Stock-based compensation expense recognized for the nine months ended December 31, 2023 and 2022 was $172,670 and $101,462, respectively. The total cost related to non-vested awards not yet recognized at December 31, 2023 totals $559,490 which is expected to be recognized over a weighted average of 2.39 years.

 

During the nine months ended December 31, 2023, the Compensation Committee of the Board of Directors approved and the Company granted 32,000 stock options exercisable at $12.68 per share with an estimated fair value of $279,360. During the nine months ended December 31, 2022, the Compensation Committee of the Board of Directors approved and the Company granted 31,000 stock options exercisable at $18.05 per share with an estimated fair value of $385,640. These options are exercisable at a price not less than the fair market value of the stock at the date of grant, have an exercise period of ten years and generally vest over four years.

 

Included in the following table is a summary of the grant-date fair value of stock options granted and the related assumptions used in the Binomial models for stock options granted during the nine months ended December 31, 2023 and 2022. All such amounts represent the weighted average amounts.

 

   Nine Months Ended 
   December 31 
   2023   2022 
Grant-date fair value  $8.73   $12.44 
Volatility factor   56.5%   57.3%
Dividend yield   -    - 
Risk-free interest rate   3.44%   3.15%
Expected term (in years)   6.25    6.25 

 

The following table is a summary of activity of stock options for the nine months ended December 31, 2023:

 

   Number of
Shares		   Weighted
Average
Exercise
Price		   Weighted Average
Remaining
Contract Life in Years		   Intrinsic Value 
Outstanding at April 1, 2023   139,250   $8.36    7.04   $419,853 
Granted   32,000    12.68           
Exercised   (500)   5.93           
Forfeited or Expired   -    -           
Outstanding at December 31, 2023   170,750   $9.18    6.85   $- 
                     
Vested at December 31, 2023   90,500   $6.42    5.47   $245,128 
Exercisable at December 31, 2023   90,500   $6.42    5.47   $245,128 

 

 

During the nine months ended December 31, 2023, stock options covering 500 shares were exercised with a total intrinsic value of $2,416. The Company received proceeds of $2,962 from these exercises. During the nine months ended December 31, 2022, stock options covering 5,000 shares were exercised with a total intrinsic value of $47,575. The Company received proceeds of $16,700 from these exercises.

 

There were no stock options forfeited or expired during the nine months ended December 31, 2023 and 2022. No forfeiture rate is assumed for stock options granted to directors or employees due to the forfeiture rate history of these types of awards.

 

Outstanding options at December 31, 2023 expire between August 2024 and April 2033 and have exercise prices ranging from $3.34 to $18.05.

 
v3.24.0.1
Long Term Debt
 9 Months Ended
Dec. 31, 2023
Debt Disclosure [Abstract]  
Long Term Debt

5. Long Term Debt

 

On December 28, 2018, the Company entered into a loan agreement (the “Agreement”) with West Texas National Bank (“WTNB”), which originally provided for a credit facility of $1,000,000 with a maturity date of December 28, 2021. The Agreement has no monthly commitment reduction and a borrowing base to be evaluated annually.

 

On February 28, 2020, the Agreement was amended to increase the credit facility to $2,500,000, extend the maturity date to March 28, 2023 and increase the borrowing base to $1,500,000. On March 28, 2023, the Agreement was amended to extend the maturity date to March 28, 2026.

 

Under the Agreement, interest on the facility accrues at a rate equal to the prime rate as quoted in the Wall Street Journal plus one-half of one percent (0.5%) floating daily. Interest on the outstanding amount under the Agreement is payable monthly. In addition, the Company will pay an unused commitment fee in an amount equal to one-half of one percent (0.5%) times the daily average of the unadvanced amount of the commitment. The unused commitment fee is payable quarterly in arrears on the last day of each calendar quarter. As of December 31, 2023, there was $1,500,000 available for borrowing by the Company on the facility.

 

No principal payments are anticipated to be required through the maturity date of the credit facility, March 28, 2026. Upon closing the second amendment to the Agreement, the Company paid a loan origination fee of $9,000 plus legal and recording expenses totaling $12,950, which were deferred over the life of the credit facility.

 

Amounts borrowed under the Agreement are collateralized by the common stock of the Company’s wholly owned subsidiaries and substantially all of the Company’s oil and gas properties.

 

The Agreement contains customary covenants for credit facilities of this type including limitations on change in control, disposition of assets, mergers and reorganizations. The Company is also obligated to meet certain financial covenants under the Agreement and requires senior debt to earnings before interest, taxes, depreciation and amortization (“EBITDA”) ratios (Senior Debt/EBITDA) less than or equal to 4.00 to 1.00 measured with respect to the four trailing quarters and minimum interest coverage ratios (EBITDA/Interest Expense) of 2.00 to 1.00 for each quarter.

 

In addition, this Agreement prohibits the Company from paying cash dividends on its common stock without written permission of WTNB. The Company obtained written permission from WTNB prior to declaring the special dividend on April 10, 2023 as discussed in Note 10. The Agreement does not permit the Company to enter into hedge agreements covering crude oil and natural gas prices without prior WTNB approval.

 

There was no balance outstanding on the line of credit as of December 31, 2023.

 
v3.24.0.1
Leases
 9 Months Ended
Dec. 31, 2023
Leases  
Leases

6. Leases

 

The Company leases approximately 4,160 rentable square feet of office space from an unaffiliated third party for our corporate office located in Midland, Texas. This includes 1,112 square feet of office space shared with and paid by our principal shareholder. The lease does not include an option to renew and is a 36-month lease that was to expire in May 2021. In June 2020, in exchange for a reduction in rent for the months of June and July 2020, the Company agreed to a 2-month extension to its current lease agreement at the regular monthly rate extending its current lease expiration date to July 2021. In June 2021, the Company agreed to extend its current lease at a flat (unescalated) rate for 36 months. The amended lease now expires on July 31, 2024.

 

 

The Company determines an arrangement is a lease at inception. Operating leases are recorded in operating lease right-of-use asset, operating lease liability, current, and operating lease liability, long-term on the consolidated balance sheets.

 

Operating lease right-of-use assets represent the Company’s right to use an underlying asset for the lease term and lease liabilities represent its obligation to make lease payments arising from the lease. Operating lease assets and liabilities are recognized at the commencement date based on the present value of lease payments over the lease term. As the Company’s lease does not provide an implicit rate, the Company uses the incremental borrowing rate based on the information available at commencement date in determining the present value of lease payments. The incremental borrowing rate used at adoption was 3.75%. Significant judgement is required when determining the incremental borrowing rate. Rent expense for lease payments is recognized on a straight-line basis over the lease term.

 

The balance sheets classification of lease assets and liabilities was as follows:

 

   December 31, 2023 
Assets    
Operating lease right-of-use asset, beginning balance  $75,629 
Current period amortization   (42,076)
Total operating lease right-of-use asset  $33,553 
      
Liabilities     
Operating lease liability, current  $33,553 
Operating lease liability, long term   - 
Total lease liabilities  $33,553 

 

Future minimum lease payments as of December 31, 2023 under non-cancellable operating leases are as follows:

 

   Lease Obligation 
Fiscal Year Ended March 31, 2024   14,560 
Fiscal Year Ended March 31, 2025   19,413 
Total lease payments  $33,973 
Less: imputed interest   (420)
Operating lease liability   33,553 
Less: operating lease liability, current   (33,553)
Operating lease liability, long term  $- 

 

Net cash paid for our operating lease for the nine months ended December 31, 2023 and 2022 was $32,001. Rent expense, less sublease income of $11,679 is included in general and administrative expenses.

 
v3.24.0.1
Income Taxes
 9 Months Ended
Dec. 31, 2023
Income Tax Disclosure [Abstract]  
Income Taxes

7. Income Taxes

 

On August 16, 2022, President Biden signed into law the Inflation Reduction Act of 2022 (“IRA 2022”). The IRA 2022, among other tax provisions, imposes a 15% corporate alternative minimum tax on corporations with book financial statement income in excess of $1.0 billion, effective for tax years beginning after December 31, 2022. The IRA 2022 also establishes a 1% excise tax on stock repurchases made by publicly traded U.S. corporations, effective for stock repurchases in excess of an annual limit of $1.0 million after December 31, 2022. The IRA 2022 did not impact the Company’s current year tax provision or the Company’s financial statements.

 

The income tax provision consists of the following for the nine months ended December 31, 2023 and 2022:

 

   2023   2022 
   Nine Months Ended 
   December 31 
   2023   2022 
Current income tax expense:          
Federal  $-   $- 
State   79,123    115,236 
Total current income tax expense   79,123    115,236 
Deferred income tax expense:          
Federal   319,848    - 
State   -    - 
Total deferred income tax expense   319,848    - 
Total income tax expense:  $398,971   $115,236 

 

 

Federal income tax for the nine months ended December 31, 2023 was $319,848. There was no federal income tax expense for the nine months ended December 31, 2022 because the Company was in a net deferred tax asset position.

 

A reconciliation of the provision for income taxes to income taxes computed using the federal statutory rate for the nine months ended December 31 follows:

 

   2023   2022 
Tax expense at federal statutory rate (1)  $294,106   $788,586 
Statutory depletion carryforward   (5,694)   (257,509)
Change in valuation allowance   (3,578)   (550,947)
Permanent differences   35,014    19,812 
State income expense   79,123    115,236 
Other   -    58 
Total income tax  $398,971   $115,236 
Effective income tax rate   27%   3%

 

(1) The federal statutory rate was 21% for nine months ended December 31, 2023 and 2022.

 
v3.24.0.1
Related Party Transactions
 9 Months Ended
Dec. 31, 2023
Related Party Transactions [Abstract]  
Related Party Transactions

8. Related Party Transactions

 

Related party transactions for the Company primarily relate to shared office expenditures in addition to administrative and operating expenses paid on behalf of the principal stockholder. The total billed to and reimbursed by the stockholder for the three months ended December 31, 2023 and 2022 was $3,625 and $11,598, respectively. The total billed to and reimbursed by the stockholder for the nine months ended December 31, 2023 and 2022 was $21,619 and $35,333, respectively. The principal stockholder pays for his share of the lease amount for the shared office space directly to the lessor. Amounts paid by the principal stockholder directly to the lessor for the three months ending December 31, 2023 and 2022 were $3,893. Amounts paid by the principal stockholder directly to the lessor for the nine months ending December 31, 2023 and 2022 were $11,679.

 
v3.24.0.1
Income Per Common Share
 9 Months Ended
Dec. 31, 2023
Income per common share:  
Income Per Common Share

9. Income Per Common Share

 

The following is a reconciliation of the number of shares used in the calculation of basic and diluted net income per share for the three and nine month periods ended December 31, 2023 and 2022:

 

   2023   2022   2023   2022 
   Three Months Ended   Nine Months Ended 
   December 31   December 31 
   2023   2022   2023   2022 
Net income  $345,610   $1,244,785   $1,080,657   $3,755,173 
                     
Shares outstanding:                    
Weighted avg. shares outstanding – basic   2,103,503    2,147,750    2,120,611    2,148,859 
Effect of assumed exercise of dilutive stock options   48,280    57,956    49,097    64,793 
Weighted avg. shares outstanding – dilutive   2,151,783    2,205,706    2,169,708    2,213,652 
                     
Income per common share:                    
Basic  $0.16   $0.58   $0.51   $1.75 
Diluted  $0.16   $0.56   $0.50   $1.70 

 

For the three and nine months ended December 31, 2023, 63,000 shares relating to stock options were excluded from the computation of diluted net income because their inclusion would be anti-dilutive. Anti-dilutive stock options have a weighted average exercise price of $15.32 at December 31, 2023. For the three and nine months ended December 31, 2022, 31,000 shares relating to stock options were excluded from the computation of diluted net income because their inclusion would be anti-dilutive. Anti-dilutive stock options have a weighted average exercise price of $18.05 at December 31, 2022.

 

 
v3.24.0.1
Stockholders’ Equity
 9 Months Ended
Dec. 31, 2023
Equity [Abstract]  
Stockholders’ Equity

10. Stockholders’ Equity

 

In March 2023, the Board of Directors authorized the use of up to $1,000,000 to repurchase shares of the Company’s common stock, par value $0.50, for the treasury account. This program does not have an expiration date and may be modified, suspended or terminated at any time by the Board. Under the repurchase program, shares of common stock may be purchased from time to time through open market purchases or other transactions. The amount and timing of repurchases will be subject to the availability of stock, prevailing market conditions, the trading price of the stock, our financial performance and other conditions. Repurchases may also be made from time-to-time in connection with the settlement of our share-based compensation awards. Repurchases will be funded from cash flow.

 

On August 16, 2022, President Biden signed into law the Inflation Reduction Act of 2022 (“IRA 2022”). The IRA 2022, among other tax provisions, establishes a 1% excise tax on stock repurchases made by publicly traded U.S. corporations, effective for stock repurchases in excess of an annual limit of $1,000,000 after December 31, 2022.

 

During the nine months ended December 31, 2023, the Company repurchased 37,161 shares for the treasury at an aggregate cost of $455,133. During the nine months ended December 31, 2022, the Company repurchased 12,416 shares for the treasury at an aggregate cost of $168,260. Subsequently, in January 2024, the Company repurchased 1,501 shares for the treasury at an aggregate cost of $15,018.

 

On April 10, 2023, the Board of Directors declared a special dividend of $0.10 per common share. The Company paid the special dividend of $213,600 on May 15, 2023 to the stockholders of record at the close of business on May 1, 2023. The Company can provide no assurance that dividends will be declared in the future or as to the amount of any future dividend.

 

Dividends declared by the Board and stock repurchased during the period are presented in the Company’s consolidated statements of changes in stockholders’ equity as dividends paid and purchases of treasury stock, respectively. Dividends paid and stock repurchased during the period are presented as cash used in financing activities in the Company’s consolidated statements of cash flows. Stock repurchases are included as treasury stock in the consolidated balance sheets.

 
v3.24.0.1
Subsequent Events
 9 Months Ended
Dec. 31, 2023
Subsequent Events [Abstract]  
Subsequent Events

11. Subsequent Events

 

In February 2024, Mexco expended approximately $244,000 to participate in the drilling of six horizontal wells in the Bone Spring Sand formation of the Delaware Basin in Lea County, New Mexico.

 

The Company completed a review and analysis of all events that occurred after the consolidated balance sheet date to determine if any such events must be reported and has determined that there are no other subsequent events to be disclosed.
v3.24.0.1
Basis of Presentation and Significant Accounting Policies (Policies)
 9 Months Ended
Dec. 31, 2023
Accounting Policies [Abstract]  
Principles of Consolidation

Principles of Consolidation. The consolidated financial statements include the accounts of Mexco Energy Corporation and its wholly owned subsidiaries. All significant intercompany balances and transactions associated with the consolidated operations have been eliminated.

 
Estimates and Assumptions

Estimates and Assumptions. In preparing financial statements in conformity with accounting principles generally accepted in the United States of America (“GAAP”), management is required to make informed judgments, estimates and assumptions that affect the reported amounts of assets and liabilities as of the date of the financial statements and affect the reported amounts of revenues and expenses during the reporting period. In addition, significant estimates are used in determining proved oil and gas reserves. Although management believes its estimates and assumptions are reasonable, actual results may differ materially from those estimates. The estimate of the Company’s oil and natural gas reserves, which is used to compute depreciation, depletion, amortization and impairment of oil and gas properties, is the most significant of the estimates and assumptions that affect these reported results.

 
Interim Financial Statements

Interim Financial Statements. In the opinion of management, the accompanying unaudited consolidated financial statements contain all adjustments (consisting only of normal recurring accruals) necessary to present fairly the financial position of the Company as of December 31, 2023, and the results of its operations and cash flows for the interim periods ended December 31, 2023 and 2022. The consolidated financial statements as of December 31, 2023 and for the three and nine month periods ended December 31, 2023 and 2022 are unaudited. The consolidated balance sheet as of March 31, 2023 was derived from the audited balance sheet filed in the Company’s 2023 annual report on Form 10-K filed with the Securities and Exchange Commission (“SEC”). The results of operations for the periods presented are not necessarily indicative of the results to be expected for a full year. The accounting policies followed by the Company are set forth in more detail in Note 2 of the “Notes to Consolidated Financial Statements” in the Form 10-K. Certain information and footnote disclosures normally included in financial statements prepared in accordance with accounting principles generally accepted in the United States of America have been condensed or omitted in this Form 10-Q pursuant to the rules and regulations of the SEC. However, the disclosures herein are adequate to make the information presented not misleading. It is suggested that these financial statements be read in conjunction with the financial statements and notes thereto included in the Form 10-K.

 
Investments

Investments. The Company accounts for investments of less than 3% of any limited liability companies at cost. The Company has no control of the limited liability companies. The cost of the investment is recorded as an asset on the consolidated balance sheets and when income from the investment is received, it is immediately recognized on the consolidated statements of operations.

 
Reclassifications

Reclassifications. Certain amounts in prior periods’ consolidated financial statements have been reclassified to conform with the current period’s presentation. These reclassifications had no effect on previously reported results of operations, retained earnings or net cash flows.
v3.24.0.1
Asset Retirement Obligations (Tables)
 9 Months Ended
Dec. 31, 2023
Asset Retirement Obligation Disclosure [Abstract]  
Schedule of Rollforward of Asset Retirement Obligations

The following table provides a rollforward of the AROs for the first nine months of fiscal 2024:

 

Carrying amount of asset retirement obligations as of April 1, 2023  $730,276 
Liabilities incurred   2,838 
Liabilities settled   (43,050)
Accretion expense   22,121 
Carrying amount of asset retirement obligations as of December 31, 2023   712,185 
Less: Current portion   20,000 
Non-Current asset retirement obligation  $692,185 
v3.24.0.1
Stock-based Compensation (Tables)
 9 Months Ended
Dec. 31, 2023
Share-Based Payment Arrangement [Abstract]  
Schedule of Grant-date Fair Value of Stock Options Granted and Assumptions Used Binominal Models

Included in the following table is a summary of the grant-date fair value of stock options granted and the related assumptions used in the Binomial models for stock options granted during the nine months ended December 31, 2023 and 2022. All such amounts represent the weighted average amounts.

 

   Nine Months Ended 
   December 31 
   2023   2022 
Grant-date fair value  $8.73   $12.44 
Volatility factor   56.5%   57.3%
Dividend yield   -    - 
Risk-free interest rate   3.44%   3.15%
Expected term (in years)   6.25    6.25 
Summary of Activity of Stock Options

The following table is a summary of activity of stock options for the nine months ended December 31, 2023:

 

   Number of
Shares		   Weighted
Average
Exercise
Price		   Weighted Average
Remaining
Contract Life in Years		   Intrinsic Value 
Outstanding at April 1, 2023   139,250   $8.36    7.04   $419,853 
Granted   32,000    12.68           
Exercised   (500)   5.93           
Forfeited or Expired   -    -           
Outstanding at December 31, 2023   170,750   $9.18    6.85   $- 
                     
Vested at December 31, 2023   90,500   $6.42    5.47   $245,128 
Exercisable at December 31, 2023   90,500   $6.42    5.47   $245,128 
v3.24.0.1
Leases (Tables)
 9 Months Ended
Dec. 31, 2023
Leases  
Schedule of Operating Lease Assets and Liabilities

The balance sheets classification of lease assets and liabilities was as follows:

 

   December 31, 2023 
Assets    
Operating lease right-of-use asset, beginning balance  $75,629 
Current period amortization   (42,076)
Total operating lease right-of-use asset  $33,553 
      
Liabilities     
Operating lease liability, current  $33,553 
Operating lease liability, long term   - 
Total lease liabilities  $33,553 
Schedule of Future Minimum Lease Payments

Future minimum lease payments as of December 31, 2023 under non-cancellable operating leases are as follows:

 

   Lease Obligation 
Fiscal Year Ended March 31, 2024   14,560 
Fiscal Year Ended March 31, 2025   19,413 
Total lease payments  $33,973 
Less: imputed interest   (420)
Operating lease liability   33,553 
Less: operating lease liability, current   (33,553)
Operating lease liability, long term  $- 
v3.24.0.1
Income Taxes (Tables)
 9 Months Ended
Dec. 31, 2023
Income Tax Disclosure [Abstract]  
Schedule of Income Tax Provision

The income tax provision consists of the following for the nine months ended December 31, 2023 and 2022:

 

   2023   2022 
   Nine Months Ended 
   December 31 
   2023   2022 
Current income tax expense:          
Federal  $-   $- 
State   79,123    115,236 
Total current income tax expense   79,123    115,236 
Deferred income tax expense:          
Federal   319,848    - 
State   -    - 
Total deferred income tax expense   319,848    - 
Total income tax expense:  $398,971   $115,236 
Schedule of Reconciliation of Provision for Income Taxes

A reconciliation of the provision for income taxes to income taxes computed using the federal statutory rate for the nine months ended December 31 follows:

 

   2023   2022 
Tax expense at federal statutory rate (1)  $294,106   $788,586 
Statutory depletion carryforward   (5,694)   (257,509)
Change in valuation allowance   (3,578)   (550,947)
Permanent differences   35,014    19,812 
State income expense   79,123    115,236 
Other   -    58 
Total income tax  $398,971   $115,236 
Effective income tax rate   27%   3%

 

(1) The federal statutory rate was 21% for nine months ended December 31, 2023 and 2022.
v3.24.0.1
Income Per Common Share (Tables)
 9 Months Ended
Dec. 31, 2023
Income per common share:  
Schedule of Reconciliation of Basic and Diluted Net Income (loss) Per Share

The following is a reconciliation of the number of shares used in the calculation of basic and diluted net income per share for the three and nine month periods ended December 31, 2023 and 2022:

 

   2023   2022   2023   2022 
   Three Months Ended   Nine Months Ended 
   December 31   December 31 
   2023   2022   2023   2022 
Net income  $345,610   $1,244,785   $1,080,657   $3,755,173 
                     
Shares outstanding:                    
Weighted avg. shares outstanding – basic   2,103,503    2,147,750    2,120,611    2,148,859 
Effect of assumed exercise of dilutive stock options   48,280    57,956    49,097    64,793 
Weighted avg. shares outstanding – dilutive   2,151,783    2,205,706    2,169,708    2,213,652 
                     
Income per common share:                    
Basic  $0.16   $0.58   $0.51   $1.75 
Diluted  $0.16   $0.56   $0.50   $1.70 
v3.24.0.1
Basis of Presentation and Significant Accounting Policies (Details Narrative)
 9 Months Ended
Dec. 31, 2023
Accounting Policies [Abstract]  
Cost method investments, percentage description The Company accounts for investments of less than 3% of any limited liability companies at cost
v3.24.0.1
Schedule of Rollforward of Asset Retirement Obligations (Details) - USD ($)
 3 Months Ended 9 Months Ended
Dec. 31, 2023
Dec. 31, 2022
Dec. 31, 2023
Dec. 31, 2022
Mar. 31, 2023
Asset Retirement Obligation Disclosure [Abstract]          
Asset Retirement Obligation, Beginning Balance     $ 730,276    
Asset Retirement Obligation, Liabilities Incurred     2,838    
Asset Retirement Obligation, Liabilities Settled     (43,050)    
Asset Retirement Obligation, Accretion Expense $ 7,225 $ 7,553 22,121 $ 22,902  
Asset Retirement Obligation, Ending Balance 712,185   712,185    
Asset Retirement Obligation, Current 20,000   20,000    
Asset Retirement Obligations, Noncurrent $ 692,185   $ 692,185   $ 710,276
v3.24.0.1
Schedule of Grant-date Fair Value of Stock Options Granted and Assumptions Used Binominal Models (Details) - $ / shares
 9 Months Ended
Dec. 31, 2023
Dec. 31, 2022
Share-Based Payment Arrangement [Abstract]    
Grant-date fair value $ 8.73 $ 12.44
Volatility factor 56.50% 57.30%
Dividend yield
Risk-free interest rate 3.44% 3.15%
Expected term (in years) 6 years 3 months 6 years 3 months
v3.24.0.1
Summary of Activity of Stock Options (Details) - USD ($)
 9 Months Ended 12 Months Ended
Dec. 31, 2023
Dec. 31, 2022
Mar. 31, 2023
Share-Based Compensation Arrangement by Share-Based Payment Award [Line Items]      
Number of Shares, Exercised (500) (5,000)  
Number of Shares, Forfeited or Expired 0 0  
Share-Based Payment Arrangement, Option [Member]      
Share-Based Compensation Arrangement by Share-Based Payment Award [Line Items]      
Number of Shares, Beginning Balance 139,250    
Weighted Average Exercise Price Per Share, Beginning Balance $ 8.36    
Weighted Average Remaining Contract Life in Years, Ending Balance 6 years 10 months 6 days   7 years 14 days
Intrinsic Value, Beginning Balance $ 419,853    
Number of Shares, Granted 32,000    
Weighted Average Exercise Price Per Share, Granted $ 12.68    
Number of Shares, Exercised (500)    
Weighted Average Exercise Price Per Share, Exercised $ 5.93    
Number of Shares, Forfeited or Expired    
Weighted Average Exercise Price Per Share, Forfeited or Expired    
Number of Shares, Ending Balance 170,750   139,250
Weighted Average Exercise Price Per Share, Ending Balance $ 9.18   $ 8.36
Intrinsic Value, Ending Balance   $ 419,853
Number of Shares, Vested 90,500    
Weighted Average Exercise Price Per Share, Vested $ 6.42    
Weighted Aggregate Average Remaining Contract Life in Years, Vested 5 years 5 months 19 days    
Intrinsic Value, Vested $ 245,128    
Number of Shares, Exercisable 90,500    
Weighted Average Exercise Price Per Share, Exercisable $ 6.42    
Weighted Aggregate Average Remaining Contract Life in Years, Exercisable 5 years 5 months 19 days    
Intrinsic Value, Exercisable $ 245,128    
v3.24.0.1
Stock-based Compensation (Details Narrative) - USD ($)
 3 Months Ended 9 Months Ended
Dec. 31, 2023
Dec. 31, 2022
Dec. 31, 2023
Dec. 31, 2022
Share-Based Payment Arrangement, Expensed and Capitalized, Amount [Line Items]        
Stock based compensation expenses     $ 172,670 $ 101,462
Total cost related to non-vested awards $ 559,490   $ 559,490  
Non-vested awards, weighted average period of recognition     2 years 4 months 20 days  
Stock option shares exercised     500 5,000
Stock options intrinsic value exercised     $ 2,416 $ 47,575
Proceeds from exercise of stock options     $ 2,962 $ 16,700
Number of shares, forfeited or expired     0 0
Outstanding options exercise price, lower range     $ 3.34  
Outstanding options exercise price, upper range     $ 18.05  
Minimum [Member]        
Share-Based Payment Arrangement, Expensed and Capitalized, Amount [Line Items]        
Outstanding options expiration month and year     2024-08  
Maximum [Member]        
Share-Based Payment Arrangement, Expensed and Capitalized, Amount [Line Items]        
Outstanding options expiration month and year     2033-04  
Board of Directors [Member]        
Share-Based Payment Arrangement, Expensed and Capitalized, Amount [Line Items]        
Number of Shares, granted     32,000 31,000
Exercisable price per share     $ 12.68 $ 18.05
Fair value of stock option exercisable     $ 279,360 $ 385,640
Weighted average remaining contractual term exercise period     10 years  
Award vesting period     4 years  
General and Administrative Expense [Member]        
Share-Based Payment Arrangement, Expensed and Capitalized, Amount [Line Items]        
Stock based compensation expense $ 58,847 $ 41,460    
v3.24.0.1
Long Term Debt (Details Narrative) - USD ($)
 9 Months Ended
Feb. 28, 2020
Dec. 28, 2018
Dec. 31, 2023
Collaborative Arrangement and Arrangement Other than Collaborative [Line Items]      
Line of credit     $ 0
Loan Agreement [Member]      
Collaborative Arrangement and Arrangement Other than Collaborative [Line Items]      
Debt instrument covenant description     The Agreement contains customary covenants for credit facilities of this type including limitations on change in control, disposition of assets, mergers and reorganizations. The Company is also obligated to meet certain financial covenants under the Agreement and requires senior debt to earnings before interest, taxes, depreciation and amortization (“EBITDA”) ratios (Senior Debt/EBITDA) less than or equal to 4.00 to 1.00 measured with respect to the four trailing quarters and minimum interest coverage ratios (EBITDA/Interest Expense) of 2.00 to 1.00 for each quarter
Loan Agreement [Member] | West Texas National Bank [Member]      
Collaborative Arrangement and Arrangement Other than Collaborative [Line Items]      
Credit facility $ 2,500,000 $ 1,000,000  
Line of credit facility, maturity date Mar. 28, 2026 Dec. 28, 2021  
Line of credit, increase in borrowing base amount $ 1,500,000    
Debt instrument rate 0.50%    
Commitment fee description the Company will pay an unused commitment fee in an amount equal to one-half of one percent (0.5%) times the daily average of the unadvanced amount of the commitment.    
Line of credit available for borrowing     $ 1,500,000
Loan origination fee $ 9,000    
Legal fees $ 12,950    
v3.24.0.1
Schedule of Operating Lease Assets and Liabilities (Details) - USD ($)
Dec. 31, 2023
Mar. 31, 2023
Leases    
Operating lease right-of-use asset, beginning balance $ 75,629  
Current period amortization (42,076)  
Total operating lease right-of-use asset 33,553 $ 75,629
Operating lease liability, current 33,553 56,366
Operating lease liability, long term $ 19,263
Total lease liabilities $ 33,553  
v3.24.0.1
Schedule of Future Minimum Lease Payments (Details) - USD ($)
Dec. 31, 2023
Mar. 31, 2023
Leases    
Fiscal Year Ended March 31, 2024 $ 14,560  
Fiscal Year Ended March 31, 2025 19,413  
Total lease payments 33,973  
Less: imputed interest (420)  
Operating lease liability 33,553  
Less: operating lease liability, current (33,553) $ (56,366)
Operating lease liability, long term $ 19,263
v3.24.0.1
Leases (Details Narrative)
 1 Months Ended 9 Months Ended
Jun. 30, 2021
Dec. 31, 2023
USD ($)
ft²
Dec. 31, 2022
USD ($)
Deferred Compensation Arrangement with Individual, Excluding Share-Based Payments and Postretirement Benefits [Line Items]      
Area of lease | ft²   4,160  
Lease term   36 months  
Lease term extension, description the Company agreed to extend its current lease at a flat (unescalated) rate for 36 months In June 2020, in exchange for a reduction in rent for the months of June and July 2020, the Company agreed to a 2-month extension to its current lease agreement at the regular monthly rate extending its current lease expiration date to July 2021  
Lease expiration date Jul. 31, 2024    
Incremental borrowing rate   3.75%  
Net cash paid for operating lease | $   $ 32,001 $ 32,001
Sublease income | $   $ 11,679  
Shareholder [Member]      
Deferred Compensation Arrangement with Individual, Excluding Share-Based Payments and Postretirement Benefits [Line Items]      
Area of lease | ft²   1,112  
v3.24.0.1
Schedule of Income Tax Provision (Details) - USD ($)
 3 Months Ended 9 Months Ended
Dec. 31, 2023
Dec. 31, 2022
Dec. 31, 2023
Dec. 31, 2022
Income Tax Disclosure [Abstract]        
Federal    
State     79,123 115,236
Total current income tax expense $ 32,959 $ 61,986 79,123 115,236
Federal     319,848
State    
Total deferred income tax expense 169,986 319,848
Total income tax expense $ 202,945 $ 61,986 $ 398,971 $ 115,236
v3.24.0.1
Schedule of Reconciliation of Provision for Income Taxes (Details) - USD ($)
 3 Months Ended 9 Months Ended
Dec. 31, 2023
Dec. 31, 2022
Dec. 31, 2023
Dec. 31, 2022
Income Tax Disclosure [Abstract]        
Tax expense at federal statutory rate () [1]     $ 294,106 $ 788,586
Statutory depletion carryforward     (5,694) (257,509)
Change in valuation allowance     (3,578) (550,947)
Permanent differences     35,014 19,812
State income expense     79,123 115,236
Other     58
Total income tax expense $ 202,945 $ 61,986 $ 398,971 $ 115,236
Effective income tax rate     27.00% 3.00%
[1] The federal statutory rate was 21% for nine months ended December 31, 2023 and 2022.
v3.24.0.1
Income Taxes - Schedule of Reconciliation of Provision for Income Taxes (Details) (Parenthetical)
 9 Months Ended
Dec. 31, 2023
Dec. 31, 2022
Income Tax Disclosure [Abstract]    
Federal income tax rate 21.00% 21.00%
v3.24.0.1
Income Taxes (Details Narrative) - USD ($)
 3 Months Ended 9 Months Ended
Aug. 16, 2022
Dec. 31, 2023
Dec. 31, 2022
Dec. 31, 2023
Dec. 31, 2022
Income Tax Disclosure [Abstract]          
Income tax examination, description The IRA 2022, among other tax provisions, imposes a 15% corporate alternative minimum tax on corporations with book financial statement income in excess of $1.0 billion, effective for tax years beginning after December 31, 2022. The IRA 2022 also establishes a 1% excise tax on stock repurchases made by publicly traded U.S. corporations, effective for stock repurchases in excess of an annual limit of $1.0 million after December 31, 2022        
Fedral income tax   $ 169,986 $ 319,848
v3.24.0.1
Related Party Transactions (Details Narrative) - USD ($)
 3 Months Ended 9 Months Ended
Dec. 31, 2023
Dec. 31, 2022
Dec. 31, 2023
Dec. 31, 2022
Related Party Transaction [Line Items]        
Due to related party $ 3,893 $ 3,893 $ 11,679 $ 11,679
Related Party [Member]        
Related Party Transaction [Line Items]        
Reimbursement expenses $ 3,625 $ 11,598 $ 21,619 $ 35,333
v3.24.0.1
Schedule of Reconciliation of Basic and Diluted Net Income (loss) Per Share (Details) - USD ($)
 3 Months Ended 9 Months Ended
Dec. 31, 2023
Sep. 30, 2023
Jun. 30, 2023
Dec. 31, 2022
Sep. 30, 2022
Jun. 30, 2022
Dec. 31, 2023
Dec. 31, 2022
Income per common share:                
Net income $ 345,610 $ 269,433 $ 465,614 $ 1,244,785 $ 1,211,716 $ 1,298,672 $ 1,080,657 $ 3,755,173
Weighted avg. shares outstanding – basic 2,103,503     2,147,750     2,120,611 2,148,859
Effect of assumed exercise of dilutive stock options $ 48,280     $ 57,956     $ 49,097 $ 64,793
Weighted avg. shares outstanding – dilutive 2,151,783     2,205,706     2,169,708 2,213,652
Basic $ 0.16     $ 0.58     $ 0.51 $ 1.75
Diluted $ 0.16     $ 0.56     $ 0.50 $ 1.70
v3.24.0.1
Income Per Common Share (Details Narrative) - $ / shares
 3 Months Ended 9 Months Ended
Dec. 31, 2023
Dec. 31, 2022
Dec. 31, 2023
Dec. 31, 2022
Income per common share:        
Antidilutive securities excluded from computation of earnings per share 63,000 31,000 63,000 31,000
Anti-dilutive stock options have a weighted average exercise price     $ 15.32 $ 18.05
v3.24.0.1
Stockholders’ Equity (Details Narrative) - USD ($)
 1 Months Ended 3 Months Ended 9 Months Ended
Apr. 10, 2023
Jan. 31, 2024
Dec. 31, 2023
Sep. 30, 2023
Jun. 30, 2023
Dec. 31, 2022
Dec. 31, 2023
Dec. 31, 2022
Mar. 31, 2023
Aug. 16, 2022
Stock authorized repurchased shares for treasury           $ 1,000,000   $ 1,000,000    
Common stock, par value     $ 0.50       $ 0.50   $ 0.50  
Excise tax percentage                   1.00%
Stock repurchased during the period, shares             37,161 12,416    
Stock repurchased during the period, value     $ 129,876 $ 325,256   $ 168,260 $ 455,133 $ 168,260    
Dividend $ 213,600       $ 213,600          
Subsequent Event [Member]                    
Stock repurchased during the period, shares   1,501                
Stock repurchased during the period, value   $ 15,018                
Board of Directors [Member]                    
Common stock, par value $ 0.10               $ 0.50  
Maximum [Member] | Board of Directors [Member]                    
Stock authorized repurchased shares for treasury                 $ 1,000,000  
v3.24.0.1
Subsequent Events (Details Narrative)
Feb. 28, 2024
USD ($)
Subsequent Event [Member]  
Subsequent Event [Line Items]  
Drilling expense $ 244,000
Mexco Energy (AMEX:MXC)
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