Panhandle Oil and Gas : Fiscal Third Quarter 2018 and Nine Months Results

FOR IMMEDIATE RELEASE PLEASE CONTACT:

Paul F. Blanchard Jr. 405.948.1560

Website:www.panhandleoilandgas.com

Aug. 6, 2018

PANHANDLE OIL AND GAS INC.

REPORTS FISCAL THIRD QUARTER 2018 AND NINE MONTHS RESULTS

OKLAHOMA CITY-PANHANDLE OIL AND GAS INC. (NYSE: PHX) today reported financial and operating results for theCompany'sfiscal third quarter and nine months ended June 30, 2018.

HIGHLIGHTS FOR THE PERIODS ENDED JUNE 30, 2018

• •Increased total equivalent production 19%, as compared to the nine months ended June 30, 2017.

• •Reported third quarter 2018 net loss of $775,093, $0.05 per diluted share, as compared to a net income of $1,260,758, $0.07 per diluted share, for the 2017 quarter.

• •Generated nine-month 2018 net income of $14,080,022, $0.83 per diluted share, as compared to a net income of $2,492,799, $0.15 per diluted share, for the 2017 nine months.

• •Generated free cash flow of $13,914,805, as cash from operating activities of $21,657,902 for the 2018 nine-month period was well in excess of capital expenditures for drilling and equipping wells of $7,743,097.

• •Decreased lease operating expense (LOE) per Mcfe to $1.08 for the nine-month period, as compared to $1.22 in the prior year'snine-month period.

• •Reduced debt from $52.2 million, as of Sept. 30, 2017, to $40.4 million, as of June 30, 2018, which has declined further to $39.5 million as of July 31, 2018.

• •Generated 2018 third-quarter and nine-month EBITDA(1)of $4,056,312 and $16,561,859, respectively.

(1)

EBITDA is a Non-GAAP measure. Refer to the Non-GAAP Reconciliation section.

MANAGEMENT COMMENTS

Paul F. Blanchard Jr., President and CEO, said, "Production increased 19% as compared to the first nine months of 2017. Oil and natural gas liquids volumes grew from 23% to 30% of total production from the third quarter of 2017 to the current quarter andnow represent 59% of Panhandle's oil and gas revenue.With the diversity of our perpetual mineral and leasehold positions across 10 states in several premier oil, gas and NGL resource plays, Panhandle has the ability to direct capital to only the projects which meet our stringent return requirements. The Company is continuing to deploy a majority of capital invested into low-risk oil drilling projects in the Eagle Ford, STACK and SCOOP. We also recently announced an agreement to purchase leased mineral acreage with 94 producing wells, 20 drilled uncompleted wells and 194 additional locations in the Bakken Shale for $9 million, which is projected to produce 83% oil and NGLs. As a result of these current drilling and acquisition activities along with the industry's current emphasis on drilling for oil, we anticipate continued growth in oil and NGL as a percent of our total production.

"While focusing on capital allocation to drive shareholder returns, we continue to optimize our current operations. Leaseoperating expenses per unit improved by 11.5% relative to the prior year nine months as the result of our strategic divestiture of marginal properties, combined with the addition of new high-quality, low operating cost wells.

"The excess cash flow generated in 2018 has been utilized to pay the Company's regular dividend and to further reduce debt from $52.2 million to $40.4 million at the end of the third quarter, a 23% reduction during the nine-month period. Panhandle had $39.6million available on its bank line as of June 30, 2018. The Company's net debt to enterprise value ratio and net debt to trailing twelve-month EBITDA ratio were 11.1% and 1.7x, respectively."

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5400 N. Grand Blvd., Suite 300Oklahoma City, OK 73112Ph. (405)948-1560Fax (405)948-2038

Panhandle Oil and Gas Inc. Reports Fiscal Third Quarter 2018 and Nine Months Results…continued

OPERATIONS UPDATE

Eagle Ford

Drilling is underway on Panhandle's Eagle Ford leasehold acreage, where the second well on a seven-well pad is currently being drilled. The Company'saverage working interest in this group of wells is 10.7%, as the wells are located partially on our 16% working interest (12% net revenue interest) acreage and partially on acreage Panhandle does not own. The seven wells on this pad will all be drilled before any are completed. Panhandle currently anticipates the seven wells will begin producing simultaneously in the first calendar quarter of 2019. If oil prices remain at their current level, the Company expects the operator will continue to drill on our 16% working interest acreage with a one-rig continuous drilling program. Panhandle has 93 undeveloped infill locations identified on the property. Year-to-date capital expenditures in the Eagle Ford are $4.4 million with another $1.1 million anticipated in the fourth quarter.

Permian Basin

The Company owns a 12.5% royalty interest on leased mineral holdings in a south-central Lea County, N.M., horizontal Wolfcamp well which began producing on June 30, 2018, with a peak 30-day average rate of 1,433 Boe per day (179 Boe per day net to Panhandle, 79% oil). There are three additional Wolfcamp locations and up to eight additional Bone Spring locations to be drilled on this unit, based on current well spacing in the area. The operator has indicated the intent to drill an additional Wolfcamp well on the unit in early calendar 2019.

Panhandle owns approximately 955 largely contiguous mineral acres in northwest Eddy County, N.M., where initial development of the Yeso Lime at a depth of 2,800 feet is underway. The Company has a 3.3% royalty interest in two horizontal Yeso wells on the block, which began producing in December 2017. Production from these wells steadily increased each month to the most recent month of production available, February 2018. In February, the wells were each producing an average of 846 Boe per day (56 Boe per day net to Panhandle for the two wells, 93% oil). Additional development on our acreage is anticipated.

The Company owns a 1.2% royalty interest in a horizontal Woodford oil well that has been drilled, but not yet completed, onPanhandle's2,440 contiguous mineral acreage block in Andrews and Winkler Counties, Texas. Panhandle has elected to take a royalty interest in this higher risk play thus far, but continues to monitor well performance in this area for possible future working interest participation.

There was no additional activity on our 4,050 contiguous mineral acreage block in Cochran County, Texas, where seven horizontal San Andres wells have been drilled, with six wells producing and one not yet completed. The operator has indicated the intent to drill another San Andres well in the fall of 2018. Panhandle has elected to take a royalty interest in this higher risk play thus far, but continues to monitor well performance in this area for possible future working interest participation.

Oklahoma

Activity onthe Company'smineral acreage in the Oklahoma plays continues to be robust. Drilling and completion operations are currently underway on 23 wells, primarily in STACK/Cana/SCOOP. However, this activity has been in units where Panhandle owns royalty interest only or small working interest participation rights, relative to our average ownership and, therefore, does not require a significant capital commitment from the Company at this time. This is in contrast to last year when Panhandle'sparticipation was in units where the Company owned much larger than average working interest participation rights. The year-to-year difference is the result of our exceptionally diverse and varied mineral ownership in the cores of these plays, combined with the specific units the operators select to drill.Panhandle'srights vary from less than 1% in some drilling units up to 50% in others. Year-to-date capital expenditures in STACK/Cana/SCOOP are $1.6 million with another $1.2 million committed in 10 relatively low working interest wells that are currently being drilled and completed. In the southeastern Oklahoma Woodford, year-to-date capital expenditures are $0.7 million with another $1.0 million committed in 9 working interest wells that are scheduled for 2018 drilling.

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Panhandle Oil and Gas Inc. Reports Fiscal Third Quarter 2018 and Nine Months Results…continued

FISCAL THIRD QUARTER 2018 RESULTS

For the 2018 third quarter, the Company recorded a net loss of $775,093, or $0.05 per diluted share. This compares to net income of $1,260,758, or $0.07 per diluted share, for the 2017 third quarter. Net cash provided by operating activities increased 27% to $6,297,921 for the 2018 third quarter, versus $4,972,672 for the 2017 third quarter. Capital expenditures totaled $1,198,616 in the 2018 third quarter, compared to $10,290,467 in the 2017 third quarter.

Total revenues for the 2018 third quarter were $9,557,937, a 23% decrease from $12,437,186 for the 2017 quarter. Oil, NGL and natural gas sales increased $1,204,782 or 12% in the 2018 quarter, compared to the 2017 quarter, as a result of a slight increase in Mcfe production and a 12% increase in the average per Mcfe sales price. The average sales price per Mcfe of production during the 2018 third quarter was $3.78, compared to $3.38 for the 2017 third quarter. Lease bonus income decreased $335,293 from $819,591 in the 2017 quarter to $484,298 in the 2018 quarter. Also, the 2018 quarter included a $2.1 million loss on derivative contracts, as compared to a $1.6 million gain for the 2017 quarter.

Total expenses decreased $67,398 in the 2018 quarter as compared to the 2017 quarter. This decrease was mainly driven by decreases in LOE and G&A, partially offset by increases in interest and loss on sale of assets.

Gas production decreased 8% to 2,082,700 Mcf for the 2018 quarter, compared to the 2017 quarter, while oil production increased 6% to 80,298 barrels versus 75,467 barrels. In addition, 67,142 barrels of NGL were sold in the 2018 quarter, as compared to 39,337 barrels in the 2017 quarter.

NINE MONTHS 2018 RESULTS

For the 2018 nine-month period, the Company recorded net income of $14,080,022, or $0.83 per diluted share. This compares to net income of $2,492,799, or $0.15 per diluted share, for the 2017 nine months. The 2018 nine-month results include a $12,777,000 decrease in income tax as a result of the new tax law (see income tax below). Net cash provided by operating activities increased 51% year over year to $21,657,902 for the 2018 nine months, versus the 2017 nine months. This cash flow fully funded costs to drill and equip wells, as well as significantly reduced our debt. Capital expenditures for the 2018 nine months totaled $7,743,097.

Total revenues for the 2018 nine months were $33,469,721, as compared to $33,438,117 for the 2017 nine months. Oil, NGL and natural gas sales increased $8,568,117, or 31% in the 2018 nine months, compared to the 2017 nine months, as a result of a 19% increase in Mcfe production and a 10% increase in the average per Mcfe sales price. The average sales price per Mcfe of production during the 2018 nine months was $3.90, compared to $3.55 for the 2017 nine months. Lease bonus income decreased $2,911,297 from $3,991,752 in the 2017 nine months to $1,080,455 in the 2018 nine months. The 2018 nine months included a $4.0 million loss on derivative contracts as compared to a $1.7 million gain for the 2017 period.

Total expenses increased $1,650,381 in the 2018 period as compared to the 2017 period. This increase was mainly driven by an increase in LOE, production tax, DD&A and interest expense over the prior year nine months. The increases in LOE, production tax and DD&A were due to increased Mcfe production. Although LOE and DD&A expenses increased over the prior year nine months, the per Mcfe rates of both declined comparatively. Interest expense increased due to higher interest rates.

Oil production increased 16% in the 2018 nine-month period to 253,447 barrels from 217,650 barrels in the 2017 nine months, while gas production increased 769,313 Mcf, or 13%, compared to the 2017 nine months. In addition, 196,290 barrels of NGL were sold in the 2018 nine months, which was an 80% increase compared to 2017 NGL volumes.

INCOME TAX

The provision (benefit) for income tax in the nine-month period includes an adjustment of $12,777,000 (benefit) for net deferred tax liabilities as a result of the Tax Cuts and Jobs Act enacted in December 2017, which reduced corporate income tax rates from35% to 21%. This adjustment represents the Company's reasonable estimate of theeffect of the change in future tax rates on deferred tax items at June 30, 2018. Pre-tax net income was $1,137,022 for the nine-month period of 2018.

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Panhandle Oil and Gas Inc. Reports Fiscal Third Quarter 2018 and Nine Months Results…continued

FINANCIAL HIGHLIGHTS

Statements of Operations

Three Months Ended June 30,2018

Revenues:

Oil, NGL and natural gas sales Lease bonuses and rentals

$

Gains (losses) on derivative contractsCosts and expenses:

Lease operating expenses Production taxes

Depreciation, depletion and amortization Provision for impairment

Loss (gain) on asset sales and other Interest expense

General and administrative

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

(unaudited)

2017

Nine Months Ended June 30,2018

(unaudited)

2017

11,202,680$484,298(2,129,041)9,557,937

3,233,172

485,157

4,619,509-

190,045

420,896

1,593,251

9,997,898$819,5911,619,69712,437,186

3,391,079

390,387

4,714,350-

11,447

306,161

1,796,004

36,356,135$1,080,455(3,966,869)33,469,721

10,077,449

1,471,970

14,136,411-

110,859

1,288,426

5,247,584

27,788,0183,991,7521,658,34733,438,117

9,545,990

1,129,785

13,654,268

10,788

98,445

884,928

5,358,114

10,542,030

10,609,428

32,332,699

30,682,318

(984,093 )

1,827,758

1,137,022

2,755,799

Provision (benefit) for income taxes

Net income (loss)

$

(209,000 )

567,000(12,943,000)

(775,093$

)

1,260,758$

14,080,022

$

263,0002,492,799

Basic and diluted earnings (loss) per common share

$

Basic and diluted weighted average shares outstanding:

Common shares

Unissued, directors' deferred compensation shares

(0.05$

)

0.07$

0.83

$

0.15

16,775,981206,20216,982,183

16,668,814254,89116,923,705

16,742,044205,86716,947,911

16,639,090277,29416,916,384

Dividends declared per share of common stock and paid in period

$

0.04

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$

0.04$

0.12

$

0.12

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Panhandle Oil and Gas Inc. Reports Fiscal Third Quarter 2018 and Nine Months Results…continued

Balance Sheets

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