Panhandle Oil and Gas Inc. : Reports Second Quarter And Six Months 2012 Results And Mid-Year Reserve Update
05/07/2012| 07:05am US/Eastern
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OKLAHOMA CITY, May 7, 2012 /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, 2012.
HIGHLIGHTS FOR THE PERIODS ENDED MARCH 31, 2012
-- Recorded a six-month 2012 net income of $4,088,076 as compared to
$3,199,102 for the 2011 six months
-- Generated cash from operating activities of $15,061,760 for the 2012
six-month period, well in excess of $12,074,991 of capital expenditures
for drilling and equipping wells
-- Reported 2012 second quarter and six-month production of 2,654,485 Mcfe
and 5,214,009 Mcfe, respectively, which were increases of 23% and 20%,
respectively, as compared to the same periods of fiscal 2011
-- Continued to significantly increase oil and natural gas liquids (NGL)
production
-- Increased proved reserves 19% to 132.9 Bcfe at March 31, 2012, as
compared to 111.7 Bcfe at Sept. 30, 2011
-- Reduced debt to $8 million as of May 4, 2012
FISCAL SECOND QUARTER 2012 RESULTS
For the quarter ending March 31, 2012, the Company recorded a net income of $675,966, $.08 per share, as compared to a net income of $1,772,253, $.21 per share, for the 2011 second quarter. Total revenues for the 2012 quarter decreased to $10,436,910, or 5%, as compared to the 2011 quarter. Cash provided by operating activities totaled $7,316,108, while capital expenditures for drilling and equipping wells amounted to $5,730,985. Production for the 2012 quarter increased 23% to 2,654,485 Mcfe, as compared to 2,152,011 Mcfe for the 2011 quarter. The major factor causing the decline in revenues and net income for the 2012 quarter was the average per Mcfe sales price decrease of 29% to $3.60, as compared to $5.07 for the 2011 quarter. The Company continued to increase its oil and natural gas liquids production, which now accounts for 13% of Mcfe production, and expects to continue this trend during the remainder of fiscal 2012.
SIX MONTHS 2012 RESULTS
For the six months ended March 31, 2012, the Company recorded a net income of $4,088,076, $.49 per share, as compared to a net income of $3,199,102, $.38 per share, for the 2011 six months. Total revenues for the 2012 six months increased to $23,841,243, or 14%, as compared to the 2011 six months. For the 2012 six months, cash provided by operating activities totaled $15,061,760, which more than funded drilling capital expenditures of $12,074,991. Production for the 2012 six months totaled 5,214,009 Mcfe as compared to 4,360,229 Mcfe for the 2011 six months. The average per Mcfe sales price decreased 14% for the 2012 six months to $4.09 as compared to $4.73 for the 2011 six months. The 2012 six-month revenue increase was principally the result of lease bonuses and rentals of $1,921,918 received in the 2012 six months, as compared to $141,855 in the 2011 six months. $1,714,000 of lease bonus was one transaction in which the Company leased 2,431 net acres of its mineral acres in the Mississippian play in northern Oklahoma. The Company also retained a 3/16( )non-cost-bearing royalty in any production established on these acres, while retaining ownership of its mineral acres.
RESERVES UPDATE
March 31, 2012, mid-year proved reserves were 132.9 Bcfe, as calculated by the Company's consulting petroleum engineering firm, DeGolyer and MacNaughton. This was an increase of 19%, compared to the 111.7 Bcfe of proved reserves at Sept. 30, 2011. SEC prices used for the March 31, 2012, report averaged $3.38 per Mcf for natural gas, $92.96 per barrel for oil and $41.06 per barrel for NGL, as compared to $3.81 per Mcf for natural gas, $90.28 per barrel for oil and $38.91 per barrel for NGL for the Sept. 30, 2011, report. Total proved developed reserves increased 17.3% to 78.7 Bcfe and proved undeveloped reserves increased 21.6% to 54.2 Bcfe, as compared to Sept. 30, 2011, reserve volumes.
MANAGEMENT COMMENTS
Michael C. Coffman, President and CEO said, "Our cash flow and earnings remain strong in fiscal 2012. Cash flow from operations increased 11% and net income increased 28% for the six months ended March 31, 2012, as compared to the first half of last year. We are pleased to be able to continue to fund our drilling capital expenditures from cash flow. Our drilling and acquisition efforts combined to increase our Mcfe production volumes 20% in the 2012 six-month period as compared to the 2011 period. During this same period, oil production increased 34% in 2012 and NGL barrels sold totaled 42,496, combining to represent 38% of our oil, natural gas and NGL sales revenues and 13% of our Mcfe production volumes."
Coffman continued: "We continue to be able to invest a significant portion of our drilling dollars in oily and NGL rich plays in western Oklahoma that are expected to yield excellent rates of return and should maintain our upward momentum in production of oil and NGL through the remainder of fiscal 2012. Our continuing focus on our core strategies and maintaining a strong financial position allow Panhandle to generate net income, production increases and reserve growth during this challenging natural gas price environment."
OPERATIONS UPDATE
Paul Blanchard, Senior Vice President and COO said, "A key development was the Company's ability to close agreements to lease our mineral acreage in plays that we felt were not particularly attractive for us as a non-operator working interest participant. We have now signed agreements which combined netted $6.7 million in lease bonus receipts, through the end of April 2012, and importantly also give Panhandle a 3/16 non-cost-bearing royalty interest in any production from wells drilled on these leased rights. We are confident that these lease agreements add significant value to our shareholders. The proceeds from these agreements have allowed us to reduce our debt to $8 million on May 4, 2012, leaving the Company in a very strong position to continue to take advantage of ongoing drilling opportunities or other opportunities that may become available. We will continue to seek out those opportunities that increase shareholder value over time."
OPERATING HIGHLIGHTS
---
Second Quarter Second Quarter Six Months Six Months
Ended Ended Ended Ended
March 31, 2012 March 31, 2011 March 31, 2012 March 31, 2011
-------------- -------------- -------------- --------------
Mcfe Sold 2,654,485 2,152,011 5,214,009 4,360,229
Average
Sales
Price
per Mcfe $3.60 $5.07 $4.09 $4.73
Oil
Barrels
Sold 30,614 26,376 68,654 51,341
Average
Sales
Price
per
Barrel $97.55 $88.20 $93.03 $84.10
Mcf Sold 2,303,797 1,993,755 4,547,109 4,052,183
Average
Sales
Price
per Mcf $2.39 $4.30 $2.91 $4.03
NGL
Barrels
Sold (1) 27,834 42,496
Average
Sales
Price
per
Barrel $38.92 $39.31
Quarterly Production Levels
---
Quarter
ended Oil Bbls Sold Mcf Sold NGL Bbls Sold (1) Mcfe Sold
------- ------------- -------- ---------------- ---------
3/31/12 30,614 2,303,797 27,834 2,654,485
12/31/11 38,040 2,243,312 14,662 2,559,524
9/30/11 27,418 2,268,606 2,433,114
6/30/11 25,382 1,976,868 2,129,160
3/31/11 26,376 1,993,755 2,152,011
(1) The Company reported NGL reserves for the first time in its 2011 year-end reserve report. Increased drilling activity over the last 12-18 months in several western Oklahoma plays, which produce significant NGL, have resulted in meaningful NGL production and reserves for the Company, necessitating inclusion in the reserve calculation and inclusion of NGL production volumes with first quarter 2012 results.
The Company's derivative contracts in place for natural gas at March 31, 2012, are outlined in its Form 10-Q for the period ending March 31, 2012.
Proved Reserves
---
SEC Pricing
-----------
March 31, 2012 Sept. 30, 2011
-------------- --------------
Net Proved Developed Reserves:
------------------------------
Barrels of Oil 820,395 759,989
Mcf of Gas 71,003,515 60,193,878
Barrels of NGL 455,209 386,774
Mcfe * 78,657,139 67,074,456
Net Proved Undeveloped Reserves:
--------------------------------
Barrels of Oil 70,713 83,749
Mcf of Gas 52,170,073 41,644,106
Barrels of NGL 272,029 404,874
Mcfe * 54,226,525 44,575,844
Net Total Proved Reserves:
--------------------------
Barrels of Oil 891,108 843,738
Mcf of Gas 123,173,588 101,837,984
Barrels of NGL 727,238 791,648
Mcfe * 132,883,664 111,650,300
10% Discounted Estimated Future
Net Cash Flows (before federal
income taxes)
Proved Developed $116,558,108 $106,464,138
Proved Undeveloped 26,954,407 29,977,891
Total $143,512,515 $136,442,029
============ ============
Pricing
Oil/Barrel (constant) $92.96 $90.28
Gas/Mcf (constant) $3.38 $3.81
NGL/Barrel (constant) $41.06 $38.91
*Crude oil and NGL converted to natural gas on a one barrel of crude oil or NGL equals six Mcf of
natural gas basis
FINANCIAL HIGHLIGHTS
Statements of Operations
---
Three Months Ended March
31, Six Months Ended March 31,
2012 2011 2012 2011
---- ---- ---- ----
Revenues: (unaudited) (unaudited)
Oil and
natural gas
(and
associated
natural gas liquids) sales $9,565,898 $10,907,935 $21,310,175 $20,639,509
Lease bonuses
and rentals 166,727 28,490 1,921,918 141,855
Gains
(losses) on
derivative
contracts 590,912 8,766 368,833 (12,673)
Income from
partnerships 113,373 32,268 240,317 110,316
------------
10,436,910 10,977,459 23,841,243 20,879,007
Costs and expenses:
Lease
operating
expenses 2,051,487 2,081,579 4,316,399 4,279,449
Production
taxes 343,852 422,428 782,351 767,072
Exploration
costs 41,688 290,353 355,058 577,457
Depreciation,
depletion and
amortization 4,940,961 3,631,385 9,083,374 7,066,196
Provision for
impairment 217,262 828,019 580,809 828,019
Loss (gain)
on asset
sales,
interest and
other 29,537 (13,499) (47,504) (19,226)
General and
administrative 1,606,157 1,465,941 3,303,680 3,105,938
9,230,944 8,706,206 18,374,167 16,604,905
--------- --------- ---------- ----------
Income before provision for income taxes 1,205,966 2,271,253 5,467,076 4,274,102
Provision for income taxes 530,000 499,000 1,379,000 1,075,000
------- ------- --------- ---------
Net income $675,966 $1,772,253 $4,088,076 $3,199,102
======== ========== ========== ==========
Basic and diluted earnings per common
share $0.08 $0.21 $0.49 $0.38
===== ===== ===== =====
Basic and diluted weighted average shares outstanding:
Common shares 8,249,954 8,281,059 8,253,079 8,291,549
Unissued,
directors'
deferred
compensation
shares 133,851 119,943 133,387 119,652
8,383,805 8,401,002 8,386,466 8,411,201
========= ========= ========= =========
Dividends declared per share of
common stock
and paid in
period $0.07 $0.07 $0.14 $0.14
=============
Balance Sheets
---
March 31, 2012 Sept. 30, 2011
-------------- --------------
Assets (unaudited)
Current assets:
Cash and cash
equivalents $1,119,676 $3,506,999
Oil and natural
gas sales
receivables 6,950,126 8,811,404
Deferred income
taxes 26,900 -
Refundable
income taxes - 354,246
Refundable
production
taxes 479,621 223,672
Derivative
contracts 309,658 269,329
Other 195,792 95,408
-----
Total current assets 9,081,773 13,261,058
Properties and equipment, at cost, based on
successful efforts accounting:
Producing oil
and natural gas
properties 260,460,706 230,554,198
Non-producing
oil and natural
gas properties 9,889,633 11,100,350
Furniture and
fixtures 655,201 628,929
--------------
271,005,540 242,283,477
Less accumulated
depreciation,
depletion and
amortization (155,307,113) (146,147,514)
--------------
Net properties and equipment 115,698,427 96,135,963
Investments 823,028 667,504
Refundable production taxes 1,031,146 1,359,668
--------- ---------
Total assets $126,634,374 $111,424,193
============ ============
Liabilities and Stockholders' Equity
Current liabilities:
Accounts payable $3,399,998 $4,899,593
Deferred income
taxes - 7,100
Income taxes
payable 283,863 -
Accrued
liabilities and
other 1,024,793 1,040,269
--------------
Total current liabilities 4,708,654 5,946,962
Long-term debt 13,809,501 -
Deferred income taxes 25,170,393 24,777,650
Asset retirement obligations 1,934,291 1,843,875
Derivative contracts - 53,389
Stockholders' equity:
Class A voting
common stock,
$.0166 par
value;
24,000,000 shares authorized,
8,431,502 issued at 140,524 140,524
March 31, 2012, and September
30, 2011
Capital in
excess of par
value 1,844,004 1,924,507
Deferred
directors'
compensation 2,475,538 2,665,583
Retained
earnings 82,698,964 79,771,563
---------
87,159,030 84,502,177
Less treasury
stock, at cost;
191,970 shares
at March 31,
2012, and 175,331 shares at
September 30, 2011 (6,147,495) (5,699,860)
---------- ----------
Total stockholders' equity 81,011,535 78,802,317
---------- ----------
Total liabilities and stockholders' equity $126,634,374 $111,424,193
============ ============
Condensed Statements of Cash Flows
---
Six months ended March 31,
2012 2011
---- ----
Operating Activities (unaudited)
Net income $4,088,076 $3,199,102
Adjustments to
reconcile net
income to net
cash provided
by operating
activities:
Depreciation, depletion and
amortization 9,083,374 7,066,196
Impairment 580,809 828,019
Provision for deferred income
taxes 358,743 467,000
Exploration costs 355,058 577,457
Net (gain) loss on sale of assets (2,042,337) (139,955)
Income from partnerships (240,317) (110,316)
Distributions received from
partnerships 290,861 175,813
Directors' deferred compensation
expense 216,724 235,950
Restricted stock awards 148,793 58,846
Cash provided by
changes in
assets and
liabilities:
Oil and natural gas sales
receivables 1,861,278 965,987
Fair value of derivative contracts (93,718) 1,498,523
Refundable production taxes 72,573 57,958
Other current assets (48,078) 261,954
Accounts payable 100,827 325,408
Income taxes receivable 354,246 (758,332)
Other non-current assets 308 -
Income taxes payable 283,863 (922,136)
Accrued liabilities (309,323) (206,139)
-------- --------
Total adjustments 10,973,684 10,382,233
-------------
Net cash provided
by operating
activities 15,061,760 13,581,335
Investing Activities
Capital expenditures, including
dry hole costs (12,074,991) (11,065,925)
Acquisition of working interest
properties (17,399,052) -
Acquisition of minerals and
overrides (1,443,893) -
Proceeds from leasing of fee
mineral acreage 1,978,410 155,908
Investments in partnerships (206,376) 46,809
Proceeds from sales of assets 131,693 938
Excess tax benefit on stock-based
compensation 75,257 -
------ ---
Net cash used in
investing
activities (28,938,952) (10,862,270)
Financing Activities
Borrowings under debt agreement 32,458,470 -
Payments of loan principal (18,648,969) -
Purchase of treasury stock (1,158,957) (1,264,965)
Payments of dividends (1,160,675) (1,163,329)
---------- ----------
Net cash provided
by (used in)
financing
activities 11,489,869 (2,428,294)
-------------
Increase
(decrease) in
cash and cash
equivalents (2,387,323) 290,771
Cash and cash
equivalents at
beginning of
period 3,506,999 5,597,258
-------------
Cash and cash
equivalents at
end of period $1,119,676 $5,888,029
==============
Supplemental Schedule of Noncash Investing and
Financing Activities
Additions to
asset retirement
obligations $35,816 $13,380
=================
Gross additions
to properties
and equipment $29,559,055 $9,704,758
Net (increase)
decrease in
accounts payable
for properties
and equipment additions 1,358,881 1,361,167
--------- ---------
Capital
expenditures and
acquisitions,
including dry
hole costs $30,917,936 $11,065,925
=================
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 2011 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; our hedging activities may reduce the realized prices received for natural gas sales; the volatility of oil and gas prices; Panhandle'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. 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.
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