OKLAHOMA CITY, May 5, 2017 /PRNewswire/ -- PANHANDLE OIL AND GAS INC. (NYSE: PHX) today reported financial and operating results for the Company's fiscal second quarter and six months ended March 31, 2017.

HIGHLIGHTS FOR THE PERIODS ENDED MARCH 31, 2017

  • Recorded fiscal second quarter 2017 net income of $3,470,433, $0.21 per diluted share, as compared to net loss of $7,438,161, $0.44 per diluted share, for the 2016 quarter.
  • Recorded six month 2017 net income of $1,232,041, $0.07 per diluted share, compared to net loss of $10,237,279, $0.61 per diluted share, for the 2016 six months.
  • Generated cash from operating activities of $9,348,565 for the 2017 six-month period, well in excess of $7,721,254 of capital expenditures for drilling and equipping wells.
  • Received lease bonus proceeds of $3.2 million in first six months of fiscal 2017.
  • Reduced debt $0.5 million from Sept. 30, 2016, to $44 million as of March 31, 2017.
  • Produced on average 26.1 Mmcfe/day for $3.78/Mcfe net realized price during the quarter.
  • Proved reserves totaled 140.4 Bcfe at March 31, 2017, a 13% increase from reserves at Sept. 30, 2016.
  • Generated 2017 second-quarter and six-month EBITDA of $5,775,445 and $10,072,948, respectively.

MANAGEMENT COMMENTS

Commenting on the results, Paul F. Blanchard Jr., President and CEO said, "Panhandle experienced a material shift in momentum this quarter. Net income for the quarter of $3.5 million was the highest for the Company since the first quarter of 2015. Our average sales price of oil, gas and NGL also reached the highest level since the first quarter of 2015 at $3.78 per Mcfe and we generated lease bonus revenues of $2.3 million. Compared to 2016 year-end, total mid-year 2017 proved reserves increased 16.4 Bcfe, while proved developed reserves increased 12.5 Bcfe. During the six months ended March 31, 2017, we funded $7.7 million in capital expenditures with cash flow, while reducing debt by $.5 million.

"The first phase of our 2017 capital investment program, four significant southeastern Oklahoma Woodford wells operated by BP, went on sales late in the quarter. Combined, the wells were producing approximately 4,000 Mcf per day net to Panhandle after approximately one month of sales. The first two Eagle Ford wells of our 2017 drilling program began producing in late April at initial rates above our expectations. Additional material production is scheduled to begin in the third and fourth quarters from projects underway in the Eagle Ford, southeastern Oklahoma Woodford and STACK plays.

"The Company's two high-potential Permian projects are advancing with the completion and initial production of two wells in the San Andres in Cochran County, Texas, operated by Element Petroleum, and QEP's current completion activity on the 2-mile lateral Woodford Shale well in Andrews/Winkler County, Texas. Initial results from both San Andres wells are encouraging, as they have begun producing oil in the early stages of completion fluid recovery. If successful, these two Permian projects have the potential to add material production and reserves to the Company.

"We are very excited by all the operational programs underway, and we believe they will provide substantial production and proved developed reserve growth momentum in the second half of 2017."

FISCAL SECOND QUARTER 2017 RESULTS

For the 2017 second quarter, the Company recorded net income of $3,470,433, or $0.21 per diluted share. This compared to a net loss of $7,438,161, or $0.44 per diluted share, for the 2016 second quarter. Net cash provided by operating activities increased 66% to $5,664,914 for the 2017 second quarter, versus $3,416,395 for the 2016 second quarter. Capital expenditures for the 2017 fiscal quarter totaled $5,546,731. In addition, the Company recorded a $10,788 non-cash provision for impairment in the 2017 quarter, as compared to an $8.1 million provision in the 2016 quarter.

Total revenues for the 2017 second quarter were $13,964,288, an 84% increase from $7,592,852 for the 2016 quarter. Oil, NGL and natural gas sales increased $2,754,716 or 45% in the 2017 quarter, compared to the 2016 quarter, as a result of a 72% increase in the average per Mcfe sales price somewhat offset by a 16% decrease in Mcfe production. The average sales price per Mcfe of production during the 2017 second quarter was $3.78, compared to $2.20 for the 2016 second quarter. The 2017 quarter included a $2.7 million gain on derivative contracts, as compared to a $1.0 million gain for the 2016 quarter.

Oil production decreased 27% in the 2017 quarter to 66,547 barrels, versus 90,760 barrels in the 2016 quarter, while gas production decreased 13% to 1,748,909 Mcf for the 2017 quarter, compared to the 2016 quarter. In addition, 33,836 barrels of NGL were sold in the 2017 quarter, as compared to 37,934 barrels in the 2016 quarter.

SIX MONTHS 2017 RESULTS

For the 2017 six months, the Company recorded net income of $1,232,041, or $0.07 per diluted share. This compared to a net loss of $10,237,279, or $0.61 per diluted share, for the 2016 six months. Net cash provided by operating activities decreased 32% year over year to $9,348,565 for the 2017 six months, versus the 2016 six months, but fully funded costs to drill and equip wells. Capital expenditures for the 2017 six months totaled $7,721,254. The Company recorded a $10,788 non-cash provision for impairment in the 2017 six months, as compared to an $11.8 million provision in the 2016 period.

Total revenues for the 2017 six months were $21,000,931, a 10% increase from $19,038,708 for the 2016 six months. Oil, NGL and natural gas sales increased $2,598,646 or 17% in the 2017 six months, compared to the 2016 six months, as a result of a 43% increase in the average per Mcfe sales price somewhat offset by an 18% decrease in Mcfe production. The average sales price per Mcfe of production during the 2017 six months was $3.65, compared to $2.56 for the 2016 six months. The 2017 six months included a $38,650 gain on derivative contracts as compared to a $940,177 gain for the 2016 period.

Oil production decreased 28% in the 2017 six months to 142,183 barrels from 197,122 barrels in the 2016 six months, while gas production decreased 632,460 Mcf, or 15%, compared to the 2016 six months. In addition, 69,487 barrels of NGL were sold in the 2017 six months, which was a 19% decrease compared to 2016 NGL volumes.

RESERVES UPDATE

March 31, 2017, mid-year proved reserves were 140.4 Bcfe, as calculated by the Company's independent consulting petroleum engineering firm, DeGolyer and MacNaughton. This was an increase of 13%, compared to the 124.0 Bcfe of proved reserves at Sept. 30, 2016. SEC prices used for the March 31, 2017, report averaged $2.45 per Mcf for natural gas, $43.10 per barrel for oil and $15.84 per barrel for NGL, compared to $1.97 per Mcf for natural gas, $36.77 per barrel for oil and $12.22 per barrel for NGL at the Sept. 30, 2016, report. The above prices reflect the net prices received at the wellhead. Total proved developed reserves increased 15% to 93.9 Bcfe, as compared to Sept. 30, 2016, reserve volumes.

OPERATIONS UPDATE

Drilling and completion activities continue on five significant projects. Three are in the cores of lower risk resource plays and two are higher risk plays in the Permian Basin.

Southeastern Oklahoma Woodford Shale: Panhandle is participating in eight significant wells operated by BP. The first four wells, each with 25% working interest and 31.25% net revenue interest, began producing in late February and early March. After approximately one month of production, the four wells combined were producing 4,000 Mcf per day net to Panhandle. The remaining four wells, each with 15% working interest and 23.6% net revenue interest, are currently being completed and are expected to begin producing in May. Panhandle currently has an additional 1,411 gross undeveloped locations identified in this play with 3P net reserves of 221 Bcfe.

Eagle Ford: Six wells have been drilled on the leasehold during 2017. Panhandle owns an average 16.6% working interest and 12.4% net revenue interest in these wells. The first two wells began producing in late April and are currently making a combined rate of 300 Boe per day net to Panhandle after ten days on production. The remaining four wells are scheduled to be completed in June with initial production expected from those wells in July. An additional four-well pad, with 8.2% working interest and 6.1% net revenue interest, is scheduled to begin drilling this month. These wells should be on production during our fourth quarter, 2017. Panhandle has 97 additional Eagle Ford infill development locations identified on its acreage with 3P net reserves of 6.2 million Boe.

STACK/Cana Play: The Company is participating with a 17.5% working interest and a 16.25% net revenue interest in six Woodford Shale wells operated by Cimarex Energy. All six wells have been drilled, and completion activity is planned to begin mid-May, with initial production from all six wells scheduled for mid-June. Panhandle currently has an additional 1,135 gross undeveloped locations identified in STACK/SCOOP/Cana with 3P net reserves of 166 Bcfe.

Activity in these three low-risk resource plays is anticipated to result in material increases in daily oil, NGL and natural gas production in our 2017 third and fourth quarters. This activity will also result in a material increase in second half 2017 capital expenditures, when compared to the same period in 2016.

Permian Basin: QEP is currently completing a 2-mile lateral Woodford Shale well on the Company's contiguous 43.6-square-mile mineral holdings in Andrews and Winkler Counties, Texas. Panhandle has leased its 2,440 net mineral acres in the block and is entitled to a proportionately reduced 25% royalty. Panhandle also has the right to participate with up to 10% working interest in each unit as initial unit wells are proposed. With full participation, Panhandle would have a 7% working interest and a 7.5% net revenue interest in these new units within the 43.6-square-mile block.

Also in the Permian Basin, Element Petroleum is evaluating the San Andres formation on and around Panhandle's contiguous 34.5-square-mile gross acreage block in Cochran County, Texas. The Company has leased 4,050 net mineral acres to Element and has a proportionately reduced 25% royalty. Panhandle also has the right to participate with 10% working interest in each unit as initial unit wells are proposed. With full participation, Panhandle would have a 10% working interest and a 12.1% net revenue interest in these new units within the 34.5-square-mile block. Thus far, Element has drilled and cored five pilot wells, completed one salt water disposal well, drilled another salt water disposal well and completed two 1.5-mile lateral wells in the San Andres. The two completed San Andres wells are in early stages of completion fluid recovery, but have already started producing oil. Element has scheduled the drilling and completion of eight additional San Andres wells between now and October 2017.

HEDGING UPDATE

As of May 1, 2017, the Company had protected approximately 5.7 Bcf of its gas production from April 2017 through March 2018 at an average floor price of $3.15 per Mcf and an average ceiling price $3.48 per Mcf. The Company has also protected 201,000 barrels of oil production for the same period with an average floor price of $51.32 and an average ceiling price of $55.79. The oil and gas hedges consist of swaps and costless collars.

FINANCIAL HIGHLIGHTS


Statements of Operations


















Three Months Ended March 31,



Six Months Ended March 31,



2017



2016



2017



2016


Revenues:






Oil, NGL and natural gas sales

$

8,890,902



$

6,136,186



$

17,790,120



$

15,191,474


Lease bonuses and rentals


2,334,203




481,553




3,172,161




2,907,057


Gains (losses) on derivative contracts


2,739,183




975,113




38,650




940,177




13,964,288




7,592,852




21,000,931




19,038,708


Costs and expenses:
















Lease operating expenses


3,105,496




3,187,353




6,154,911




6,753,889


Production taxes


371,553




229,140




739,398




550,981


Depreciation, depletion and amortization


4,105,655




6,045,883




8,939,918




13,003,535


Provision for impairment


10,788




8,115,791




10,788




11,849,064


Loss (gain) on asset sales and other


91,337




34,054




86,998




(204,915)


Interest expense


286,398




342,348




578,767




702,910


General and administrative


1,719,628




1,651,444




3,562,110




3,563,523




9,690,855




19,606,013




20,072,890




36,218,987


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


4,273,433




(12,013,161)




928,041




(17,180,279)


















Provision (benefit) for income taxes


803,000




(4,575,000)




(304,000)




(6,943,000)


















Net income (loss)

$

3,470,433



$

(7,438,161)



$

1,232,041



$

(10,237,279)


















































Basic and diluted earnings (loss) per common share

$

0.21



$

(0.44)



$

0.07



$

(0.61)


















Basic and diluted weighted average shares outstanding:
















Common shares


16,644,755




16,579,116




16,624,229




16,571,488


Unissued, directors' deferred compensation shares


277,167




259,381




277,200




258,206




16,921,922




16,838,497




16,901,429




16,829,694


















Dividends declared per share of common stock and paid in period

$

0.04



$

0.04



$

0.08



$

0.08


















 

Balance Sheets










March 31, 2017



Sept. 30, 2016


Assets

(unaudited)






Current assets:








Cash and cash equivalents

$

551,671



$

471,213


Oil, NGL and natural gas sales receivables (net of allowance for uncollectable accounts)


5,150,560




5,287,229


Refundable income taxes


876,362




83,874


Other


337,712




419,037


Total current assets


6,916,305




6,261,353










Properties and equipment, at cost, based on successful efforts accounting:








Producing oil and natural gas properties


435,198,500




434,469,093


Non-producing oil and natural gas properties


7,497,046




7,574,649


Other


1,071,876




1,069,658




443,767,422




443,113,400


Less accumulated depreciation, depletion and amortization


(251,168,113)




(251,707,749)


Net properties and equipment


192,599,309




191,405,651










Investments


169,473




157,322


Total assets

$

199,685,087



$

197,824,326










Liabilities and Stockholders' Equity








Current liabilities:








Accounts payable

$

5,294,624



$

2,351,623


Derivative contracts, net


43,705




403,612


Accrued liabilities and other


1,521,993




1,718,558


Total current liabilities


6,860,322




4,473,793










Long-term debt


44,000,000




44,500,000


Deferred income taxes


30,600,007




30,676,007


Asset retirement obligations


3,054,646




2,958,048


Derivative contracts, net


-




24,659










Stockholders' equity:








Class A voting common stock, $.0166 par value; 24,000,000 shares authorized, 16,863,004 issued at March 31, 2017, and Sept. 30, 2016


280,938




280,938


Capital in excess of par value


2,431,161




3,191,056


Deferred directors' compensation


3,277,619




3,403,213


Retained earnings


112,373,669




112,482,284




118,363,387




119,357,491


Less treasury stock, at cost; 194,213 shares at March 31, 2017, and 262,708 shares at Sept. 30, 2016


(3,193,275)




(4,165,672)


Total stockholders' equity


115,170,112




115,191,819


Total liabilities and stockholders' equity

$

199,685,087



$

197,824,326


 

Condensed Statements of Cash Flows 










Six months ended March 31,



2017



2016


Operating Activities



Net income (loss)

$

1,232,041



$

(10,237,279)


Adjustments to reconcile net income (loss) to net cash provided by operating activities:








Depreciation, depletion and amortization


8,939,918




13,003,535


Impairment


10,788




11,849,064


Provision for deferred income taxes


(76,000)




(7,405,000)


Gain from leasing of fee mineral acreage


(3,171,490)




(2,906,480)


Proceeds from leasing of fee mineral acreage


3,191,075




3,193,775


Net (gain) loss on sale of assets


87,161




(271,080)


Directors' deferred compensation expense


176,368




168,402


Restricted stock awards


317,633




508,095


Other


(835)




70,289


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








Oil, NGL and natural gas sales receivables


136,669




3,644,841


Fair value of derivative contracts


(384,566)




3,880,013


Refundable production taxes


-




21,983


Other current assets


81,325




(79,829)


Accounts payable


(203,053)




(510,114)


Income taxes receivable


(792,488)




(775,806)


Accrued liabilities


(195,981)




(393,984)


Total adjustments


8,116,524




23,997,704


Net cash provided by operating activities


9,348,565




13,760,425










Investing Activities








Capital expenditures, including dry hole costs


(7,721,254)




(2,554,543)


Investments in partnerships


(17,220)




48,462


Proceeds from sales of assets


718,700




627,547


Net cash provided (used) by investing activities


(7,019,774)




(1,878,534)










Financing Activities








Borrowings under debt agreement


7,038,699




6,078,919


Payments of loan principal


(7,538,699)




(16,578,919)


Purchase of treasury stock


(407,677)




(117,165)


Payments of dividends


(1,340,656)




(1,338,011)


Excess tax benefit on stock-based compensation


-




(44,000)


Net cash provided (used) by financing activities


(2,248,333)




(11,999,176)










Increase (decrease) in cash and cash equivalents


80,458




(117,285)


Cash and cash equivalents at beginning of period


471,213




603,915


Cash and cash equivalents at end of period

$

551,671



$

486,630










Supplemental Schedule of Noncash Investing and Financing Activities








Additions to asset retirement obligations

$

32,236



$

7,160










Gross additions to properties and equipment

$

10,867,308



$

2,483,225










Net (increase) decrease in accounts payable for properties and equipment additions


(3,146,054)




71,318


Capital expenditures and acquisitions, including dry hole costs

$

7,721,254



$

2,554,543


 

Proved Reserves












SEC Pricing



March 31, 2017



Sept. 30, 2016


Proved Developed Reserves:


(unaudited)


Barrels of NGL



1,138,567





1,095,256


Barrels of Oil



1,972,247





1,980,519


Mcf of Gas



75,234,358





62,929,047


Mcfe (1)



93,899,242





81,383,697


Proved Undeveloped Reserves:










Barrels of NGL



1,085,425





527,447


Barrels of Oil



3,565,651





3,445,571


Mcf of Gas



18,573,817





18,796,551


Mcfe (1)



46,480,273





42,634,659


Total Proved Reserves:










Barrels of NGL



2,223,992





1,622,703


Barrels of Oil



5,537,898





5,426,090


Mcf of Gas



93,808,175





81,725,598


Mcfe (1)



140,379,515





124,018,356












10% Discounted Estimated Future










Net Cash Flows (before income taxes):










Proved Developed

$


81,049,074



$


55,586,606


Proved Undeveloped



10,970,478





(7,696,741)


Total

$


92,019,552



$


47,889,865


SEC Pricing










Oil/Barrel

$


43.10



$


36.77


Gas/Mcf

$


2.45



$


1.97


NGL/Barrel

$


15.84



$


12.22












Proved Reserves - NYMEX Futures Pricing (2)












10% Discounted Estimated Future

Proved Reserves


Net Cash Flows (before income taxes):

March 31, 2017



Sept. 30, 2016


Proved Developed

$


93,527,500



$


99,901,435


Proved Undeveloped



23,987,020





26,931,306


Total

$


117,514,520



$


126,832,741













(1) Crude oil and NGL converted to natural gas on a one barrel of crude oil or NGL equals six Mcf of natural gas basis

(2) NYMEX Futures Pricing as of March 31, 2017, and Sept. 30, 2016, basis adjusted to Company wellhead price

                                                                       

OPERATING HIGHLIGHTS


















Second Quarter Ended



Second Quarter Ended



Six Months Ended



Six Months Ended



March 31, 2017



March 31, 2016



March 31, 2017



March 31, 2016


Mcfe Sold


2,351,207




2,786,303




4,868,621




5,929,703


Average Sales Price per Mcfe

$

3.78



$

2.20



$

3.65



$

2.56


Oil Barrels Sold


66,547




90,760




142,183




197,122


Average Sales Price per Barrel

$

47.93



$

27.19



$

46.96



$

33.75


Mcf Sold


1,748,909




2,014,139




3,598,601




4,231,061


Average Sales Price per Mcf

$

2.89



$

1.64



$

2.72



$

1.78


NGL Barrels Sold


33,836




37,934




69,487




85,985


Average Sales Price per Barrel

$

19.17



$

9.85



$

18.90



$

11.49


 


















Quarter ended


Oil Bbls Sold



Mcf Sold



NGL Bbls Sold



Mcfe Sold


3/31/2017



66,547




1,748,909




33,836




2,351,207


12/31/2016



75,636




1,849,692




35,651




2,517,414


9/30/2016



78,398




1,940,749




44,598




2,678,725


6/30/2016



88,732




2,112,567




40,477




2,887,821


3/31/2016



90,760




2,014,139




37,934




2,786,303


The Company's derivative contracts in place for natural gas at March 31, 2017, are outlined in its Form 10-Q for the period ending March 31, 2017.

Panhandle Oil and Gas Inc. (NYSE: PHX) is engaged in the exploration for and production of natural gas and oil. Additional information on the Company can be found at www.panhandleoilandgas.com.

Forward-Looking Statements and Risk Factors This report includes "forward-looking statements" within the meaning of Section 27A of the Securities Act of 1933 and Section 21E of the Securities Exchange Act of 1934. Forward-looking statements include current expectations or forecasts of future events. They may include estimates of oil and gas reserves, expected oil and gas production and future expenses, projections of future oil and gas prices, planned capital expenditures for drilling, leasehold acquisitions and seismic data, statements concerning anticipated cash flow and liquidity and Panhandle's strategy and other plans and objectives for future operations. Although Panhandle believes the expectations reflected in these and other forward-looking statements are reasonable, we can give no assurance they will prove to be correct. They can be affected by inaccurate assumptions or by known or unknown risks and uncertainties. Factors that could cause actual results to differ materially from expected results are described under "Risk Factors" in Part 1, Item 1 of Panhandle's 2016 Form 10-K filed with the Securities and Exchange Commission. These "Risk Factors" include the worldwide economic recession's continuing negative effects on the natural gas business; Panhandle's hedging activities may reduce the realized prices received for natural gas sales; the volatility of oil and gas prices; the Company's ability to compete effectively against strong independent oil and gas companies and majors; the availability of capital on an economic basis to fund reserve replacement costs; Panhandle's ability to replace reserves and sustain production; uncertainties inherent in estimating quantities of oil and gas reserves and projecting future rates of production and the amount and timing of development expenditures; uncertainties in evaluating oil and gas reserves; unsuccessful exploration and development drilling; decreases in the values of our oil and gas properties resulting in write-downs; the negative impact lower oil and gas prices could have on our ability to borrow; drilling and operating risks; and we cannot control activities on our properties as the Company is a non-operator.

Do not place undue reliance on these forward-looking statements, which speak only as of the date of this release, as Panhandle undertakes no obligation to update this information. Panhandle urges you to carefully review and consider the disclosures made in this presentation and Panhandle's filings with the Securities and Exchange Commission that attempt to advise interested parties of the risks and factors that may affect Panhandle's business.

 

SOURCE PANHANDLE OIL AND GAS INC.


Source: PANHANDLE OIL AND GAS INC.