0000315131false00003151312023-11-082023-11-08
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 8-K
CURRENT REPORT
Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934
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Date of Report (Date of earliest event reported): November 08, 2023 |
PHX MINERALS INC.
(Exact name of Registrant as Specified in Its Charter)
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Delaware |
001-31759 |
73-1055775 |
(State or Other Jurisdiction
of Incorporation) |
(Commission File Number) |
(IRS Employer
Identification No.) |
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1320 South University Drive Suite 720 |
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Fort Worth, Texas |
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76107 |
(Address of Principal Executive Offices) |
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(Zip Code) |
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Registrant’s Telephone Number, Including Area Code: (405) 948-1560 |
(Former Name or Former Address, if Changed Since Last Report)
Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions:
☐Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)
☐Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)
☐Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))
☐Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c))
Securities registered pursuant to Section 12(b) of the Act:
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Title of each class
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Trading
Symbol(s) |
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Name of each exchange on which registered
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Common Stock, $0.01666 par value |
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PHX |
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New York Stock Exchange |
Indicate by check mark whether the registrant is an emerging growth company as defined in Rule 405 of the Securities Act of 1933 (§ 230.405 of this chapter) or Rule 12b-2 of the Securities Exchange Act of 1934 (§ 240.12b-2 of this chapter).
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. ☐
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Item 2.02 |
Results of Operations and Financial Condition. |
On November 8, 2023, PHX Minerals Inc. (the “Company”) issued a press release providing information regarding the Company’s quarter ended September 30, 2023 financial and operating results. The press release is furnished as Exhibit 99.1 to this Current Report on Form 8-K and is incorporated by reference herein.
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Item 7.01 |
Regulation FD Disclosure. |
The information set forth under Item 2.02 of this Current Report on Form 8-K is hereby incorporated in this Item 7.01 by reference.
On November 8, 2023, the Company posted an updated investor presentation to its website. A copy of the presentation is furnished as Exhibit 99.2 to this Current Report on Form 8-K.
The information in Item 2.02 and Item 7.01 of this Current Report on Form 8-K, including the attached Exhibit 99.1 and 99.2, is being furnished pursuant to Item 2.02 and Item 7.01 and shall not be deemed to be “filed” for purposes of Section 18 of the Securities Exchange Act of 1934, as amended (the “Exchange Act”), or otherwise subject to the liabilities of that section, and shall not be deemed to be incorporated by reference into any of the Company’s filings under the Securities Act of 1933, as amended, or the Exchange Act, whether made before or after the date hereof and regardless of any general incorporation language in such filings, except to the extent expressly set forth by specific reference in such a filing.
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Item 9.01 |
Financial Statements and Exhibits |
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.
PHX MINERALS INC.
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By: |
/s/ Chad L. Stephens |
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Chad L. Stephens |
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Chief Executive Officer |
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DATE: |
November 8, 2023 |
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Exhibit 99.1
FOR IMMEDIATE RELEASE
PHX Minerals Reports Results for the Quarter Ended Sept. 30, 2023; Increases Fixed Quarterly Dividend 33% and Expands Borrowing Base
FORT WORTH, Texas, Nov. 8, 2023 – PHX MINERALS INC., “PHX” or the “Company” (NYSE: PHX), today reported financial and operating results for the quarter ended Sept. 30, 2023.
Summary of Results for the Quarter Ended Sept. 30, 2023
•Net income was $1.9 million, or $0.05 per diluted share, compared to net loss of ($0.04) million, or $0.00 per diluted share, for the quarter ended June 30, 2023, and net income of $9.2 million, or $0.25 per diluted share, for the quarter ended Sept. 30, 2022.
•Adjusted pretax net income(1) was $3.2 million, or $0.09 per diluted share, compared to $0.6 million, or $0.02 per diluted share, for the quarter ended June 30, 2023, and $5.3 million, or $0.15 per diluted share, for the quarter ended Sept. 30, 2022.
•Adjusted EBITDA(1) was $6.3 million, compared to $4.1 million for the quarter ended June 30, 2023, and $8.4 million for the quarter ended Sept. 30, 2022.
•Royalty production volumes increased 3% to 2,073 Mmcfe compared to the quarter ended June 30, 2023, and increased 13% compared to the quarter ended Sept. 30, 2022.
•Total production volumes increased 2% to 2,348 Mmcfe compared to the quarter ended June 30, 2023, and decreased 9% compared to the quarter ended Sept. 30, 2022.
•Converted 71 gross (0.155 net) wells to producing status, compared to 81 gross (0.30 net) during the quarter ended June 30, 2023 and 49 gross (0.22 net) during the quarter ended Sept. 30, 2022.
•Inventory of 185 gross (0.81 net) wells in progress and 93 gross (0.28 net) permits as of Sept. 30, 2023, compared to 186 gross (0.51 net) wells in progress and 86 gross (0.40 net) permits as of June 30, 2023.
•Total debt was $30.8 million and the debt to adjusted EBITDA (TTM) (1) ratio was 1.31x at Sept. 30, 2023.
Subsequent Events
•PHX announced a 33% increase in its fixed quarterly dividend to $0.03 per share, payable on Dec. 7, 2023, to stockholders of record on Nov. 23, 2023.
•PHX entered into the fifth amendment to its credit agreement on Nov. 6, 2023 pursuant to which, among other changes, the borrowing base under PHX’s credit facility is increased from $45.0 million to $50.0 million in connection with its regularly scheduled semi-annual redetermination.
(1)This is a non-GAAP measure. Refer to the Non-GAAP Reconciliation section.
Chad L. Stephens, President and CEO, commented, “We are pleased with this quarter’s financial results as they highlight the company’s progress. There continues to be robust drilling activity on our minerals reflecting the high-quality nature of our assets. Royalty volume growth remains on trend to increase approximately 20% year over year. Royalty volumes now represent over 90% of cash flow as the nonop working interest portion of our business has steadily become less material to our financial performance. We continue to see active deal flow, having completed roughly $13 million of mineral acquisitions during the quarter and in excess of $40 million over the trailing 12-month period.”
“The Board of Directors approved an increase in our quarterly dividend from $0.0225 to $0.03, a 33% increase, which reflects their belief in the continued sustainability of our business model. Additionally, our bank group increased our borrowing base from $45.0 million to $50.0 million, which also reflects on the high quality of our asset base and our ability to execute on our strategy.”
– 1 –
PHX Minerals Inc.
Reports Quarter ended Sept. 30, 2023 Results …cont.
Financial Highlights
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Three Months Ended |
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Three Months Ended |
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Nine Months Ended |
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Nine Months Ended |
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Sept. 30, 2023 |
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Sept. 30, 2022 |
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Sept. 30, 2023 |
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Sept. 30, 2022 |
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Royalty Interest Sales |
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$ |
7,873,297 |
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$ |
15,411,544 |
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$ |
24,214,701 |
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$ |
36,763,953 |
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Working Interest Sales |
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$ |
1,025,794 |
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$ |
6,416,490 |
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$ |
3,772,801 |
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$ |
19,409,514 |
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Natural Gas, Oil and NGL Sales |
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$ |
8,899,091 |
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$ |
21,828,034 |
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$ |
27,987,502 |
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$ |
56,173,467 |
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Gains (Losses) on Derivative Contracts |
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$ |
(337,647 |
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$ |
(4,298,614 |
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$ |
3,648,179 |
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$ |
(19,669,246 |
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Lease Bonuses and Rental Income |
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$ |
620,101 |
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$ |
17,350 |
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$ |
1,045,242 |
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$ |
388,587 |
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Total Revenue |
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$ |
9,181,545 |
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$ |
17,546,770 |
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$ |
32,680,923 |
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$ |
36,892,808 |
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Lease Operating Expense |
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per Working Interest Mcfe |
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$ |
1.50 |
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$ |
1.28 |
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$ |
1.33 |
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$ |
1.12 |
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Transportation, Gathering and Marketing |
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per Mcfe |
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$ |
0.30 |
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$ |
0.68 |
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$ |
0.38 |
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$ |
0.63 |
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Production Tax per Mcfe |
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$ |
0.17 |
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$ |
0.36 |
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$ |
0.20 |
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$ |
0.34 |
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G&A Expense per Mcfe |
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$ |
1.18 |
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$ |
1.46 |
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$ |
1.25 |
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$ |
1.26 |
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Cash G&A Expense per Mcfe (1) |
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$ |
0.95 |
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$ |
1.06 |
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$ |
0.99 |
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$ |
0.98 |
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Interest Expense per Mcfe |
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$ |
0.24 |
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$ |
0.18 |
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$ |
0.23 |
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$ |
0.13 |
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DD&A per Mcfe |
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$ |
0.86 |
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$ |
0.60 |
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$ |
0.86 |
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$ |
0.76 |
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Total Expense per Mcfe |
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$ |
2.93 |
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$ |
3.65 |
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$ |
3.10 |
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$ |
3.49 |
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Net Income (Loss) |
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$ |
1,895,403 |
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$ |
9,158,468 |
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$ |
11,407,356 |
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$ |
13,727,023 |
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Adjusted EBITDA (2) |
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$ |
6,321,029 |
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$ |
8,395,965 |
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$ |
18,147,976 |
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$ |
21,409,483 |
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Cash Flow from Operations (3) |
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$ |
6,960,419 |
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$ |
13,192,676 |
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$ |
20,809,684 |
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$ |
28,893,660 |
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CapEx (4) |
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$ |
45,977 |
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$ |
201,114 |
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$ |
321,396 |
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$ |
359,961 |
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CapEx - Mineral Acquisitions |
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$ |
13,469,756 |
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$ |
13,652,829 |
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$ |
25,383,759 |
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$ |
31,881,409 |
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Borrowing Base |
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$ |
45,000,000 |
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$ |
50,000,000 |
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Debt |
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$ |
30,750,000 |
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$ |
28,300,000 |
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Debt to Adjusted EBITDA (TTM) (2) |
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1.31 |
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1.10 |
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(1)Cash G&A expense is G&A excluding restricted stock and deferred director’s expense from the adjusted EBITDA table in the non-GAAP Reconciliation section.
(2)This is a non-GAAP measure. Refer to the Non-GAAP Reconciliation section.
(3)GAAP cash flow from operations.
(4)Includes legacy working interest expenditures and fixtures and equipment.
*****MORE*****
– 2 –
PHX Minerals Inc.
Reports Quarter ended Sept. 30, 2023 Results …cont.
Operating Highlights
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Three Months Ended |
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Three Months Ended |
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Nine Months Ended |
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Nine Months Ended |
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Sept. 30, 2023 |
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Sept. 30, 2022 |
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Sept. 30, 2023 |
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Sept. 30, 2022 |
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Gas Mcf Sold |
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1,868,012 |
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2,047,614 |
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5,681,508 |
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5,853,443 |
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Average Sales Price per Mcf before the |
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effects of settled derivative contracts |
$ |
2.40 |
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$ |
7.61 |
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$ |
2.63 |
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$ |
6.33 |
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Average Sales Price per Mcf after the |
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effects of settled derivative contracts |
$ |
2.72 |
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$ |
5.08 |
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$ |
3.03 |
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$ |
4.25 |
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% of sales subject to hedges |
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46 |
% |
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58 |
% |
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46 |
% |
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60 |
% |
Oil Barrels Sold |
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48,032 |
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49,902 |
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143,148 |
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150,461 |
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Average Sales Price per Bbl before the |
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effects of settled derivative contracts |
$ |
78.48 |
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$ |
94.07 |
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$ |
76.23 |
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$ |
96.73 |
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Average Sales Price per Bbl after the |
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effects of settled derivative contracts |
$ |
78.44 |
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$ |
57.80 |
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$ |
73.88 |
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$ |
60.62 |
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% of sales subject to hedges |
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35 |
% |
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62 |
% |
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44 |
% |
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69 |
% |
NGL Barrels Sold |
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32,029 |
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40,761 |
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99,063 |
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120,864 |
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Average Sales Price per Bbl(1) |
$ |
20.35 |
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$ |
37.89 |
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$ |
21.48 |
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$ |
37.57 |
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Mcfe Sold |
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2,348,378 |
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2,591,588 |
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7,134,770 |
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7,481,390 |
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Natural gas, oil and NGL sales before the |
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effects of settled derivative contracts |
$ |
8,899,091 |
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$ |
21,828,034 |
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$ |
27,987,502 |
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$ |
56,173,467 |
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Natural gas, oil and NGL sales after the |
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effects of settled derivative contracts |
$ |
9,502,036 |
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$ |
14,832,521 |
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$ |
29,896,064 |
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$ |
38,519,536 |
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(1) There were no NGL settled derivative contracts during the 2023 and 2022 quarters. |
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Total Production for the last four quarters was as follows:
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Quarter ended |
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Mcf Sold |
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Oil Bbls Sold |
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NGL Bbls Sold |
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Mcfe Sold |
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9/30/2023 |
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1,868,012 |
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48,032 |
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32,029 |
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2,348,378 |
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6/30/2023 |
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1,854,485 |
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41,009 |
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33,929 |
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2,304,113 |
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3/31/2023 |
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1,959,010 |
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54,107 |
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33,104 |
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2,482,276 |
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12/31/2022 |
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1,669,320 |
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52,406 |
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38,611 |
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2,215,419 |
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Total production volumes attributable to natural gas were 80% for the quarter ended Sept. 30, 2023.
Royalty Interest Production for the last four quarters was as follows:
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Quarter ended |
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Mcf Sold |
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Oil Bbls Sold |
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NGL Bbls Sold |
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Mcfe Sold |
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9/30/2023 |
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1,689,396 |
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43,575 |
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20,416 |
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2,073,342 |
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6/30/2023 |
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1,673,346 |
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35,599 |
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20,516 |
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2,010,036 |
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3/31/2023 |
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1,700,974 |
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45,395 |
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20,063 |
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2,093,722 |
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12/31/2022 |
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1,303,825 |
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33,691 |
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20,353 |
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1,628,089 |
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Royalty production volumes attributable to natural gas were 81% for the quarter ended Sept. 30, 2023.
*****MORE*****
– 3 –
PHX Minerals Inc.
Reports Quarter ended Sept. 30, 2023 Results …cont.
Working Interest Production for the last four quarters was as follows:
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Quarter ended |
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Mcf Sold |
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Oil Bbls Sold |
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NGL Bbls Sold |
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Mcfe Sold |
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9/30/2023 |
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178,616 |
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4,457 |
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11,613 |
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275,036 |
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6/30/2023 |
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181,139 |
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5,410 |
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13,413 |
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294,077 |
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3/31/2023 |
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258,036 |
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8,712 |
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13,041 |
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388,554 |
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12/31/2022 |
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365,495 |
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18,715 |
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18,258 |
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587,330 |
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Quarter Ended Sept. 30, 2023 Results
The Company recorded net income of $1.9 million, or $0.05 per diluted share, for the quarter ended Sept. 30, 2023, as compared to net income of $9.2 million, or $0.25 per diluted share, for the quarter ended Sept. 30, 2022. The change in net income was principally the result of a decrease in natural gas, oil and NGL sales and a decrease in gains on asset sales, partially offset by a decrease in losses associated with our derivative contracts and a decrease in income tax provision.
Natural gas, oil and NGL revenue decreased $12.9 million, or 59%, for the quarter ended Sept. 30, 2023, compared to the quarter ended Sept. 30, 2022, due to decreases in natural gas, oil and NGL prices of 68%, 17% and 46%, respectively, and decreases in natural gas, oil and NGL volumes of 9%, 4% and 21%, respectively.
The increase in royalty production volumes during the quarter ended Sept. 30, 2023, as compared to the quarter ended Sept. 30, 2022, resulted from new wells in the Haynesville Shale and SCOOP coming online. The production decrease in working interest volumes during the quarter ended Sept. 30, 2023, as compared to the quarter ended Sept. 30, 2022, resulted from the divestiture of working interest properties.
The Company had a net loss on derivative contracts of ($0.3) million for the quarter ended Sept. 30, 2023, comprised of a $0.6 million gain on settled derivatives and a ($0.9) million non-cash loss on derivatives, as compared to a net loss of ($4.3) million for the quarter ended Sept. 30, 2022. The change in net loss on derivative contracts was due to the Company’s settlements of natural gas and oil collars and fixed price swaps and the change in valuation caused by the difference in Sept. 30, 2023 pricing relative to the strike price on open derivative contracts.
Nine Months Ended Sept. 30, 2023 Results
The Company recorded net income of $11.4 million, or $0.31 per diluted share, for the nine months ended Sept. 30, 2023, as compared to net income of $13.7 million, or $0.39 per diluted share, for the nine months ended Sept. 30, 2022. The change in net income was principally the result of a decrease in natural gas, oil and NGL sales and a decrease in gains on asset sales, partially offset by an increase in gains associated with our derivative contracts and decreases in lease operating expenses and transportation, gathering and marketing expenses.
Natural gas, oil and NGL revenue decreased $28.2 million, or 50%, for the nine months ended Sept. 30, 2023, compared to the nine months ended Sept. 30, 2022, due to decreases in natural gas, oil and NGL prices of 58%, 21% and 43%, respectively, and decreases in natural gas, oil and NGL volumes of 3%, 5% and 18%, respectively.
The increase in royalty production volumes during the nine months ended Sept. 30, 2023, as compared to the nine months ended Sept. 30, 2022, resulted from new wells in the Haynesville Shale and SCOOP coming online. The production decrease in working interest volumes during the nine months ended Sept. 30, 2023, as compared to the nine months ended Sept. 30, 2022, resulted from the divestiture of working interest properties.
The Company had a net gain on derivative contracts of $3.6 million for the nine months ended Sept. 30, 2023, comprised of a $2.3 million gain on settled derivatives and a $1.4 million non-cash gain on derivatives, as compared to a net loss of ($19.7) million for the nine months ended Sept. 30, 2022. The gain on settled derivative contracts for the nine months ended Sept. 30, 2023 excludes $0.4 million of cash paid to settle off-market derivative contracts. The total cash received to settle hedge contracts during the nine months ended Sept. 30, 2023 was $1.9 million. The change in net gain on derivative contracts was due to the Company’s settlements of natural gas and oil collars and fixed price swaps and the change in valuation caused by the difference in September 30, 2023 pricing relative to the strike price on open derivative contracts.
*****MORE*****
– 4 –
PHX Minerals Inc.
Reports Quarter ended Sept. 30, 2023 Results …cont.
Operations Update
During the quarter ended Sept. 30, 2023, the Company converted 71 gross (0.155 net) wells to producing status, including 22 gross (0.08 net) wells in the Haynesville and 32 gross (0.07 net) wells in the SCOOP, compared to 49 gross (0.22 net) wells in the quarter ended Sept. 30, 2022.
At Sept. 30, 2023, the Company had a total of 185 gross (0.81 net) wells in progress across its mineral positions and 93 gross (0.28 net) active permitted wells, compared to 186 gross (0.51 net) wells in progress and 86 gross (0.40 net) active permitted wells at June 30, 2023. As of October 9, 2023, 14 rigs were operating on the Company’s acreage and 56 rigs operating within 2.5 miles of its acreage.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Bakken/ |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three |
|
|
Arkoma |
|
|
|
|
|
|
|
|
|
|
|
SCOOP |
|
|
STACK |
|
|
Forks |
|
|
Stack |
|
|
Haynesville |
|
|
Other |
|
|
Total |
|
As of Sept. 30, 2023: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Gross Wells in Progress on PHX Acreage (1) |
|
52 |
|
|
|
13 |
|
|
|
8 |
|
|
|
4 |
|
|
|
97 |
|
|
|
11 |
|
|
|
185 |
|
Net Wells in Progress on PHX Acreage (1) |
|
0.159 |
|
|
|
0.034 |
|
|
|
0.043 |
|
|
|
0.003 |
|
|
|
0.538 |
|
|
|
0.031 |
|
|
|
0.808 |
|
Gross Active Permits on PHX Acreage |
|
43 |
|
|
|
7 |
|
|
|
5 |
|
|
|
5 |
|
|
|
28 |
|
|
|
5 |
|
|
|
93 |
|
Net Active Permits on PHX Acreage |
|
0.128 |
|
|
|
0.031 |
|
|
|
0.006 |
|
|
|
0.002 |
|
|
|
0.095 |
|
|
|
0.021 |
|
|
|
0.283 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
As of Oct. 9, 2023: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Rigs Present on PHX Acreage |
|
6 |
|
|
|
- |
|
|
|
1 |
|
|
|
- |
|
|
|
5 |
|
|
|
2 |
|
|
|
14 |
|
Rigs Within 2.5 Miles of PHX Acreage |
|
11 |
|
|
|
13 |
|
|
|
5 |
|
|
|
- |
|
|
|
19 |
|
|
|
8 |
|
|
|
56 |
|
(1) Wells in progress includes drilling wells and drilled but uncompleted wells, or DUCs.
Leasing Activity
During the quarter ended Sept. 30, 2023, the Company leased 357 net mineral acres to third-party exploration and production companies for an average bonus payment of $2,075 per net mineral acre and an average royalty of 24%.
Acquisition and Divestiture Update
During the quarter ended Sept. 30, 2023, the Company purchased 974 net royalty acres for approximately $13.4 million and had no significant divestitures.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Acquisitions |
|
|
|
SCOOP |
|
|
Haynesville |
|
|
Other |
|
|
Total |
|
During Three Months Ended Sept. 30, 2023: |
|
|
|
|
|
|
|
|
|
|
|
|
Net Mineral Acres Purchased |
|
|
102 |
|
|
|
459 |
|
|
|
- |
|
|
|
561 |
|
Net Royalty Acres Purchased |
|
|
159 |
|
|
|
815 |
|
|
- |
|
|
|
974 |
|
*****MORE*****
– 5 –
PHX Minerals Inc.
Reports Quarter ended Sept. 30, 2023 Results …cont.
Outlook
PHX is providing an updated operational outlook for 2023 as follows:
|
|
|
|
|
|
|
|
|
Calendar Year 2022 Actual |
|
Calendar Year 2023 YTD Actual |
|
Calendar Year 2023 Outlook |
Mineral & Royalty Production (Mmcfe) |
|
6,613 |
|
6,177 |
|
8,000 - 8,400 |
Working Interest Production (Mmcfe) |
|
3,084 |
|
958 |
|
1,200 - 1,400(1) |
Total Production (Mmcfe) |
|
9,697 |
|
7,135 |
|
9,200 - 9,800 |
Percentage Natural Gas |
|
78% |
|
80% |
|
79% - 81% |
|
|
|
|
|
|
|
Transportation, Gathering & Marketing (per Mcfe) |
|
$0.63 |
|
$0.38 |
|
$0.37 - $0.42 |
Production Tax (as % of pre-hedge sales volumes) |
|
4.50% |
|
5.10% |
|
5.00% - 5.50% |
LOE Expenses (on an absolute basis in 000’s) |
|
$3,807 |
|
$1,274 |
|
$1,500 - $1,700 |
Cash G&A (per Mcfe) |
|
$1.01 |
|
$0.99 |
|
$0.99 - $1.02 |
(1) Pro-forma divestitures of Eagle Ford and Arkoma working interest assets, excludes potential future sales of additional working interest assets.
Quarterly Conference Call
PHX will host a conference call to discuss the Company’s results for the quarter ended Sept. 30, 2023, at 11 a.m. EST tomorrow, Nov. 9, 2023. Management’s discussion will be followed by a question-and-answer session with investors.
To participate on the conference call, please dial 877-407-3088 (toll-free domestic) or 201-389-0927. A replay of the call will be available for 14 days after the call. The number to access the replay of the conference call is 877-660-6853 and the PIN for the replay is 13742254.
A live audio webcast of the conference call will be accessible from the “Investors” section of PHX’s website at https://phxmin.com/events. The webcast will be archived for at least 90 days.
*****MORE*****
– 6 –
PHX Minerals Inc.
Reports Quarter ended Sept. 30, 2023 Results …cont.
FINANCIAL RESULTS
Statements of Operations
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended Sept. 30, |
|
|
Nine Months Ended Sept. 30, |
|
|
2023 |
|
|
2022 |
|
|
2023 |
|
|
2022 |
|
Revenues: |
|
|
|
|
|
Natural gas, oil and NGL sales |
$ |
8,899,091 |
|
|
$ |
21,828,034 |
|
|
$ |
27,987,502 |
|
|
$ |
56,173,467 |
|
Lease bonuses and rental income |
|
620,101 |
|
|
|
17,350 |
|
|
|
1,045,242 |
|
|
|
388,587 |
|
Gains (losses) on derivative contracts |
|
(337,647 |
) |
|
|
(4,298,614 |
) |
|
|
3,648,179 |
|
|
|
(19,669,246 |
) |
|
|
9,181,545 |
|
|
|
17,546,770 |
|
|
|
32,680,923 |
|
|
|
36,892,808 |
|
Costs and expenses: |
|
|
|
|
|
|
|
|
|
|
|
Lease operating expenses |
|
413,643 |
|
|
|
961,148 |
|
|
|
1,273,560 |
|
|
|
2,791,409 |
|
Transportation, gathering and marketing |
|
693,915 |
|
|
|
1,758,132 |
|
|
|
2,729,044 |
|
|
|
4,676,786 |
|
Production taxes |
|
387,624 |
|
|
|
929,330 |
|
|
|
1,430,950 |
|
|
|
2,551,920 |
|
Depreciation, depletion and amortization |
|
2,022,709 |
|
|
|
1,550,410 |
|
|
|
6,123,031 |
|
|
|
5,694,358 |
|
Provision for impairment |
|
36,460 |
|
|
|
2,703 |
|
|
|
38,533 |
|
|
|
8,980 |
|
Interest expense |
|
556,941 |
|
|
|
471,716 |
|
|
|
1,638,708 |
|
|
|
988,273 |
|
General and administrative |
|
2,760,342 |
|
|
|
3,783,159 |
|
|
|
8,919,354 |
|
|
|
9,405,037 |
|
Losses (gains) on asset sales and other |
|
(174,492 |
) |
|
|
(3,499,296 |
) |
|
|
(4,369,613 |
) |
|
|
(6,390,978 |
) |
Total costs and expenses |
|
6,697,142 |
|
|
|
5,957,302 |
|
|
|
17,783,567 |
|
|
|
19,725,785 |
|
Income (loss) before provision (benefit) for income taxes |
|
2,484,403 |
|
|
|
11,589,468 |
|
|
|
14,897,356 |
|
|
|
17,167,023 |
|
|
|
|
|
|
|
|
|
|
|
|
|
Provision (benefit) for income taxes |
|
589,000 |
|
|
|
2,431,000 |
|
|
|
3,490,000 |
|
|
|
3,440,000 |
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income (loss) |
$ |
1,895,403 |
|
|
$ |
9,158,468 |
|
|
$ |
11,407,356 |
|
|
$ |
13,727,023 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic earnings (loss) per common share |
$ |
0.05 |
|
|
$ |
0.26 |
|
|
$ |
0.32 |
|
|
$ |
0.39 |
|
|
|
|
|
|
|
|
|
|
|
|
|
Diluted earnings (loss) per common share |
$ |
0.05 |
|
|
$ |
0.25 |
|
|
$ |
0.31 |
|
|
$ |
0.39 |
|
|
|
|
|
|
|
|
|
|
|
|
|
Weighted average shares outstanding: |
|
|
|
|
|
|
|
|
|
|
|
Basic |
|
35,983,116 |
|
|
|
35,573,813 |
|
|
|
35,961,570 |
|
|
|
34,833,427 |
|
Diluted |
|
36,656,272 |
|
|
|
35,916,878 |
|
|
|
36,670,494 |
|
|
|
35,204,241 |
|
|
|
|
|
|
|
|
|
|
|
|
|
Dividends per share of |
|
|
|
|
|
|
|
|
|
|
|
common stock paid in period |
$ |
0.0225 |
|
|
$ |
0.02 |
|
|
$ |
0.0675 |
|
|
$ |
0.055 |
|
|
|
|
|
|
|
|
|
|
|
|
|
*****MORE*****
– 7 –
PHX Minerals Inc.
Reports Quarter ended Sept. 30, 2023 Results …cont.
Balance Sheets
|
|
|
|
|
|
|
|
|
Sept. 30, 2023 |
|
|
Dec. 31, 2022 |
|
Assets |
|
|
|
|
|
Current assets: |
|
|
|
|
|
Cash and cash equivalents |
$ |
1,235,193 |
|
|
$ |
2,115,652 |
|
Natural gas, oil, and NGL sales receivables (net of $0 |
|
5,414,075 |
|
|
|
9,783,996 |
|
allowance for uncollectable accounts) |
|
|
|
|
|
Refundable income taxes |
|
712,475 |
|
|
|
- |
|
Derivative contracts, net |
|
577,381 |
|
|
|
- |
|
Held for sale assets |
|
- |
|
|
|
6,420,051 |
|
Other |
|
438,524 |
|
|
|
1,543,956 |
|
Total current assets |
|
8,377,648 |
|
|
|
19,863,655 |
|
|
|
|
|
|
|
Properties and equipment at cost, based on |
|
|
|
|
|
successful efforts accounting: |
|
|
|
|
|
Producing natural gas and oil properties |
|
202,915,457 |
|
|
|
181,431,139 |
|
Non-producing natural gas and oil properties |
|
61,096,631 |
|
|
|
57,781,644 |
|
Other |
|
1,353,686 |
|
|
|
1,122,436 |
|
|
|
265,365,774 |
|
|
|
240,335,219 |
|
Less accumulated depreciation, depletion and amortization |
|
(112,095,510 |
) |
|
|
(107,085,212 |
) |
Net properties and equipment |
|
153,270,264 |
|
|
|
133,250,007 |
|
|
|
|
|
|
|
Derivative contracts, net |
|
- |
|
|
|
141,345 |
|
Operating lease right-of-use assets |
|
606,978 |
|
|
|
706,871 |
|
Other, net |
|
540,402 |
|
|
|
695,399 |
|
Total assets |
$ |
162,795,292 |
|
|
$ |
154,657,277 |
|
|
|
|
|
|
|
Liabilities and Stockholders' Equity |
|
|
|
|
|
Current liabilities: |
|
|
|
|
|
Accounts payable |
$ |
387,460 |
|
|
$ |
504,466 |
|
Derivative contracts, net |
|
- |
|
|
|
1,534,034 |
|
Income taxes payable |
|
- |
|
|
|
576,427 |
|
Current portion of operating lease liability |
|
230,347 |
|
|
|
217,656 |
|
Held for sale liabilities |
|
- |
|
|
|
889,155 |
|
Accrued liabilities and other |
|
2,024,369 |
|
|
|
3,121,522 |
|
Total current liabilities |
|
2,642,176 |
|
|
|
6,843,260 |
|
|
|
|
|
|
|
Long-term debt |
|
30,750,000 |
|
|
|
33,300,000 |
|
Deferred income taxes, net |
|
5,709,906 |
|
|
|
2,453,906 |
|
Asset retirement obligations |
|
1,051,224 |
|
|
|
1,027,777 |
|
Derivative contracts, net |
|
230,453 |
|
|
|
- |
|
Operating lease liability, net of current portion |
|
755,541 |
|
|
|
929,208 |
|
Total liabilities |
|
41,139,300 |
|
|
|
44,554,151 |
|
|
|
|
|
|
|
Stockholders' equity: |
|
|
|
|
|
Common Stock, $0.01666 par value; 54,000,500 shares authorized and |
|
|
|
|
|
35,938,900 issued at Sept. 30, 2023; 54,000,500 shares authorized |
|
|
|
|
|
and 35,938,206 issued at Dec. 31, 2022 |
|
598,742 |
|
|
|
598,731 |
|
Capital in excess of par value |
|
44,249,366 |
|
|
|
43,344,916 |
|
Deferred directors' compensation |
|
1,425,155 |
|
|
|
1,541,070 |
|
Retained earnings |
|
78,618,090 |
|
|
|
68,925,774 |
|
|
|
124,891,353 |
|
|
|
114,410,491 |
|
Less treasury stock, at cost; 225,723 shares at Sept. 30, |
|
|
|
|
|
2023, and 300,272 shares at Dec. 31, 2022 |
|
(3,235,361 |
) |
|
|
(4,307,365 |
) |
Total stockholders' equity |
|
121,655,992 |
|
|
|
110,103,126 |
|
Total liabilities and stockholders' equity |
$ |
162,795,292 |
|
|
$ |
154,657,277 |
|
*****MORE*****
– 8 –
PHX Minerals Inc.
Reports Quarter ended Sept. 30, 2023 Results …cont.
Condensed Statements of Cash Flows
|
|
|
|
|
|
|
|
|
Nine Months Ended Sept. 30, |
|
|
2023 |
|
|
2022 |
|
Operating Activities |
|
|
Net income (loss) |
$ |
11,407,356 |
|
|
$ |
13,727,023 |
|
Adjustments to reconcile net income (loss) to net cash provided |
|
|
|
|
|
by operating activities: |
|
|
|
|
|
Depreciation, depletion and amortization |
|
6,123,031 |
|
|
|
5,694,358 |
|
Impairment of producing properties |
|
38,533 |
|
|
|
8,980 |
|
Provision for deferred income taxes |
|
3,256,000 |
|
|
|
876,000 |
|
Gain from leasing fee mineral acreage |
|
(1,045,242 |
) |
|
|
(387,419 |
) |
Proceeds from leasing fee mineral acreage |
|
1,108,909 |
|
|
|
593,168 |
|
Net (gain) loss on sales of assets |
|
(4,671,253 |
) |
|
|
(6,587,005 |
) |
Directors' deferred compensation expense |
|
165,582 |
|
|
|
124,281 |
|
Total (gain) loss on derivative contracts |
|
(3,648,179 |
) |
|
|
19,669,246 |
|
Cash receipts (payments) on settled derivative contracts |
|
2,468,724 |
|
|
|
(2,796,250 |
) |
Restricted stock award expense |
|
1,695,637 |
|
|
|
1,955,829 |
|
Other |
|
105,604 |
|
|
|
50,215 |
|
Cash provided (used) by changes in assets and liabilities: |
|
|
|
|
|
Natural gas, oil and NGL sales receivables |
|
4,369,921 |
|
|
|
(5,132,207 |
) |
Other current assets |
|
408,533 |
|
|
|
576,348 |
|
Accounts payable |
|
(107,796 |
) |
|
|
85,344 |
|
Income taxes receivable |
|
(712,475 |
) |
|
|
- |
|
Other non-current assets |
|
150,515 |
|
|
|
(391,217 |
) |
Income taxes payable |
|
(576,427 |
) |
|
|
(4,081 |
) |
Accrued liabilities |
|
272,711 |
|
|
|
831,047 |
|
Total adjustments |
|
9,402,328 |
|
|
|
15,166,637 |
|
Net cash provided by operating activities |
|
20,809,684 |
|
|
|
28,893,660 |
|
|
|
|
|
|
|
Investing Activities |
|
|
|
|
|
Capital expenditures |
|
(321,396 |
) |
|
|
(359,961 |
) |
Acquisition of minerals and overriding royalty interests |
|
(25,383,759 |
) |
|
|
(31,881,409 |
) |
Net proceeds from sales of assets |
|
9,556,666 |
|
|
|
8,631,352 |
|
Net cash provided (used) by investing activities |
|
(16,148,489 |
) |
|
|
(23,610,018 |
) |
|
|
|
|
|
|
Financing Activities |
|
|
|
|
|
Borrowings under credit facility |
|
16,000,000 |
|
|
|
17,300,000 |
|
Payments of loan principal |
|
(18,550,000 |
) |
|
|
(9,000,000 |
) |
Net proceeds from equity issuance |
|
- |
|
|
|
5,039,045 |
|
Cash receipts from (payments on) off-market derivative contracts |
|
(560,162 |
) |
|
|
(14,857,682 |
) |
Purchases of treasury stock |
|
(669 |
) |
|
|
(1,855 |
) |
Payments of dividends |
|
(2,430,823 |
) |
|
|
(1,925,691 |
) |
Net cash provided (used) by financing activities |
|
(5,541,654 |
) |
|
|
(3,446,183 |
) |
|
|
|
|
|
|
Increase (decrease) in cash and cash equivalents |
|
(880,459 |
) |
|
|
1,837,459 |
|
Cash and cash equivalents at beginning of period |
|
2,115,652 |
|
|
|
1,559,350 |
|
Cash and cash equivalents at end of period |
$ |
1,235,193 |
|
|
$ |
3,396,809 |
|
|
|
|
|
|
|
Supplemental Disclosures of Cash Flow Information: |
|
|
|
|
|
|
|
|
|
|
|
Interest paid (net of capitalized interest) |
$ |
1,652,872 |
|
|
$ |
888,720 |
|
Income taxes paid (net of refunds received) |
$ |
1,522,904 |
|
|
$ |
2,568,081 |
|
|
|
|
|
|
|
Supplemental Schedule of Noncash Investing and Financing Activities: |
|
|
|
|
|
|
|
|
|
|
|
Dividends declared and unpaid |
$ |
94,587 |
|
|
$ |
- |
|
|
|
|
|
|
|
Gross additions to properties and equipment |
$ |
26,392,844 |
|
|
$ |
31,607,517 |
|
Net increase (decrease) in accounts receivable for properties |
|
|
|
|
|
and equipment additions |
|
(687,689 |
) |
|
|
633,853 |
|
Capital expenditures and acquisitions |
$ |
25,705,155 |
|
|
$ |
32,241,370 |
|
*****MORE*****
– 9 –
PHX Minerals Inc.
Reports Quarter ended Sept. 30, 2023 Results …cont.
Derivative Contracts as of October 31, 2023
|
|
|
|
|
|
|
|
|
Production volume |
|
|
|
|
Contract period |
|
covered per month |
|
Index |
|
Contract price |
Natural gas costless collars |
|
|
|
|
|
|
October - December 2023 |
|
20,000 Mmbtu |
|
NYMEX Henry Hub |
|
$3.00 floor / $4.70 ceiling |
October - December 2023 |
|
25,000 Mmbtu |
|
NYMEX Henry Hub |
|
$3.50 floor / $7.00 ceiling |
November 2023 - March 2024 |
|
30,000 Mmbtu |
|
NYMEX Henry Hub |
|
$3.25 floor / $5.25 ceiling |
December 2023 - September 2024 |
|
30,000 Mmbtu |
|
NYMEX Henry Hub |
|
$3.00 floor / $3.60 ceiling |
January 2024 |
|
135,000 Mmbtu |
|
NYMEX Henry Hub |
|
$4.50 floor / $7.90 ceiling |
February 2024 |
|
125,000 Mmbtu |
|
NYMEX Henry Hub |
|
$4.50 floor / $7.90 ceiling |
March 2024 |
|
130,000 Mmbtu |
|
NYMEX Henry Hub |
|
$4.50 floor / $7.90 ceiling |
April 2024 |
|
90,000 Mmbtu |
|
NYMEX Henry Hub |
|
$3.50 floor / $4.70 ceiling |
May 2024 |
|
95,000 Mmbtu |
|
NYMEX Henry Hub |
|
$3.50 floor / $4.70 ceiling |
June 2024 |
|
90,000 Mmbtu |
|
NYMEX Henry Hub |
|
$3.50 floor / $4.70 ceiling |
January - March 2024 |
|
30,000 Mmbtu |
|
NYMEX Henry Hub |
|
$3.00 floor / $6.00 ceiling |
October 2024 - June 2025 |
|
30,000 Mmbtu |
|
NYMEX Henry Hub |
|
$3.00 floor / $5.00 ceiling |
November 2024 - March 2025 |
|
90,000 Mmbtu |
|
NYMEX Henry Hub |
|
$3.25 floor / $5.25 ceiling |
November - December 2024 |
|
35,000 Mmbtu |
|
NYMEX Henry Hub |
|
$3.50 floor / $5.15 ceiling |
January - March 2025 |
|
30,000 Mmbtu |
|
NYMEX Henry Hub |
|
$3.50 floor / $5.15 ceiling |
Natural gas fixed price swaps |
|
|
|
|
|
|
October - December 2023 |
|
100,000 Mmbtu |
|
NYMEX Henry Hub |
|
$3.37 |
October - December 2023 |
|
20,000 Mmbtu |
|
NYMEX Henry Hub |
|
$3.57 |
December 2023 - February 2024 |
|
135,000 Mmbtu |
|
NYMEX Henry Hub |
|
$3.65 |
October 2023 |
|
20,000 Mmbtu |
|
NYMEX Henry Hub |
|
$3.58 |
October 2023 |
|
50,000 Mmbtu |
|
NYMEX Henry Hub |
|
$2.52 |
March 2024 |
|
127,500 Mmbtu |
|
NYMEX Henry Hub |
|
$3.65 |
April - June 2024 |
|
10,000 Mmbtu |
|
NYMEX Henry Hub |
|
$3.21 |
April - October 2024 |
|
50,000 Mmbtu |
|
NYMEX Henry Hub |
|
$3.17 |
April - July 2024 |
|
127,500 Mmbtu |
|
NYMEX Henry Hub |
|
$3.24 |
July - October 2024 |
|
75,000 Mmbtu |
|
NYMEX Henry Hub |
|
$3.47 |
July - October 2024 |
|
25,000 Mmbtu |
|
NYMEX Henry Hub |
|
$3.47 |
August - September 2024 |
|
120,000 Mmbtu |
|
NYMEX Henry Hub |
|
$3.24 |
October 2024 |
|
105,000 Mmbtu |
|
NYMEX Henry Hub |
|
$3.24 |
November - December 2024 |
|
70,000 Mmbtu |
|
NYMEX Henry Hub |
|
$4.16 |
January - March 2025 |
|
60,000 Mmbtu |
|
NYMEX Henry Hub |
|
$4.16 |
Oil costless collars |
|
|
|
|
|
|
January 2024 |
|
1,850 Bbls |
|
NYMEX WTI |
|
$63.00 floor / $76.00 ceiling |
February 2024 |
|
1,700 Bbls |
|
NYMEX WTI |
|
$63.00 floor / $76.00 ceiling |
March 2024 |
|
1,750 Bbls |
|
NYMEX WTI |
|
$63.00 floor / $76.00 ceiling |
April 2024 |
|
1,700 Bbls |
|
NYMEX WTI |
|
$63.00 floor / $76.00 ceiling |
May 2024 |
|
1,750 Bbls |
|
NYMEX WTI |
|
$63.00 floor / $76.00 ceiling |
June 2024 |
|
1,650 Bbls |
|
NYMEX WTI |
|
$63.00 floor / $76.00 ceiling |
January - March 2024 |
|
1,650 Bbls |
|
NYMEX WTI |
|
$65.00 floor / $76.50 ceiling |
April - June 2024 |
|
500 Bbls |
|
NYMEX WTI |
|
$65.00 floor / $76.50 ceiling |
July - October 2024 |
|
1,650 Bbls |
|
NYMEX WTI |
|
$65.00 floor / $76.50 ceiling |
Oil fixed price swaps |
|
|
|
|
|
|
October - December 2023 |
|
1,500 Bbls |
|
NYMEX WTI |
|
$67.55 |
October - December 2023 |
|
750 Bbls |
|
NYMEX WTI |
|
$70.05 |
October - December 2023 |
|
1,500 Bbls |
|
NYMEX WTI |
|
$80.80 |
October - December 2023 |
|
1,000 Bbls |
|
NYMEX WTI |
|
$80.74 |
December 2023 - March 2024 |
|
750 Bbls |
|
NYMEX WTI |
|
$71.75 |
April - October 2024 |
|
1,000 Bbls |
|
NYMEX WTI |
|
$66.10 |
April - June 2024 |
|
1,300 Bbls |
|
NYMEX WTI |
|
$70.59 |
November 2024 - March 2025 |
|
1,600 Bbls |
|
NYMEX WTI |
|
$64.80 |
April - June 2025 |
|
1,000 Bbls |
|
NYMEX WTI |
|
$68.00 |
*****MORE*****
– 10 –
PHX Minerals Inc.
Reports Quarter ended Sept. 30, 2023 Results …cont.
Non-GAAP Reconciliation
This press release includes certain “non-GAAP financial measures” as defined under the rules and regulations of the U.S. Securities and Exchange Commission, or the SEC, including Regulation G. These non-GAAP financial measures are calculated using GAAP amounts in the Company’s financial statements. These measures, detailed below, are provided in addition to, not as an alternative for, and should be read in conjunction with, the information contained in the Company’s financial statements prepared in accordance with GAAP (including the notes thereto), included in the Company’s SEC filings and posted on its website.
Adjusted EBITDA Reconciliation
The Company defines “adjusted EBITDA” as earnings before interest, taxes, depreciation and amortization, or EBITDA, excluding non-cash gains (losses) on derivatives and gains (losses) on asset sales and including cash receipts from (payments on) off-market derivatives and restricted stock and deferred directors’ expense. The Company has included a presentation of adjusted EBITDA because it recognizes that certain investors consider this amount to be a useful means of measuring the Company’s ability to meet its debt service obligations and evaluating its financial performance. Adjusted EBITDA has limitations and should not be considered in isolation or as a substitute for net income, operating income, cash flow from operations or other consolidated income or cash flow data prepared in accordance with GAAP. Because not all companies use identical calculations, this presentation of adjusted EBITDA may not be comparable to a similarly titled measure of other companies. The following table provides a reconciliation of net income (loss) to adjusted EBITDA for the quarters indicated:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended |
|
|
Three Months Ended |
|
|
Nine Months Ended |
|
|
Nine Months Ended |
|
|
Three Months Ended |
|
|
Sept. 30, 2023 |
|
|
Sept. 30, 2022 |
|
|
Sept. 30, 2023 |
|
|
Sept. 30, 2022 |
|
|
June 30, 2023 |
|
Net Income (Loss) |
$ |
1,895,403 |
|
|
$ |
9,158,468 |
|
|
$ |
11,407,356 |
|
|
$ |
13,727,023 |
|
|
$ |
(41,291 |
) |
Plus: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income tax expense |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(benefit) |
|
589,000 |
|
|
|
2,431,000 |
|
|
|
3,490,000 |
|
|
|
3,440,000 |
|
|
|
(166,000 |
) |
Interest expense |
|
556,941 |
|
|
|
471,716 |
|
|
|
1,638,708 |
|
|
|
988,273 |
|
|
|
524,294 |
|
DD&A |
|
2,022,709 |
|
|
|
1,550,410 |
|
|
|
6,123,031 |
|
|
|
5,694,358 |
|
|
|
2,210,332 |
|
Impairment expense |
|
36,460 |
|
|
|
2,703 |
|
|
|
38,533 |
|
|
|
8,980 |
|
|
|
- |
|
Less: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Non-cash gains (losses) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
on derivatives |
|
(940,592 |
) |
|
|
1,639,703 |
|
|
|
1,365,872 |
|
|
|
(6,850,017 |
) |
|
|
(865,935 |
) |
Gains (losses) on asset sales |
|
243,041 |
|
|
|
3,558,611 |
|
|
|
4,671,254 |
|
|
|
6,544,575 |
|
|
|
10,230 |
|
Plus: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash receipts from (payments on) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
off-market derivative contracts(1) |
|
- |
|
|
|
(1,057,197 |
) |
|
|
(373,745 |
) |
|
|
(4,834,703 |
) |
|
|
- |
|
Restricted stock and deferred |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
director's expense |
|
522,965 |
|
|
|
1,037,179 |
|
|
|
1,861,219 |
|
|
|
2,080,110 |
|
|
|
703,667 |
|
Adjusted EBITDA |
$ |
6,321,029 |
|
|
$ |
8,395,965 |
|
|
$ |
18,147,976 |
|
|
$ |
21,409,483 |
|
|
$ |
4,086,707 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(1) The initial receipt of $8.8 million of cash from BP Energy Company, or BP, for entering into the off-market derivative contracts had no effect on the Company’s statement of operations and was considered cash flow from financing activities. A portion of subsequent settlements with BP had no effect on the Company’s statement of operations. |
|
Debt to Adjusted EBITDA (TTM) Reconciliation
“Debt to adjusted EBITDA (TTM)” is defined as the ratio of long-term debt to adjusted EBITDA on a trailing 12-month (TTM) basis. The Company has included a presentation of debt to adjusted EBITDA (TTM) because it recognizes that certain investors consider such ratios to be a useful means of measuring the Company’s ability to meet its debt service obligations and for evaluating its financial performance. The debt to adjusted EBITDA (TTM) ratio has limitations and should not be considered in isolation or as a substitute for net income, operating income, cash flow from operations or other consolidated income or cash flow data prepared in accordance with GAAP. Because not all companies use identical calculations, this presentation of debt to adjusted EBITDA (TTM) may not be
*****MORE*****
– 11 –
PHX Minerals Inc.
Reports Quarter ended Sept. 30, 2023 Results …cont.
comparable to a similarly titled measure of other companies. The following table provides a reconciliation of net income (loss) to adjusted EBITDA on a TTM basis and of the resulting debt to adjusted EBITDA (TTM) ratio:
|
|
|
|
|
|
|
|
|
TTM Ended |
|
|
TTM Ended |
|
|
Sept. 30, 2023 |
|
|
Sept. 30, 2022 |
|
Net Income (Loss) |
$ |
14,753,489 |
|
|
$ |
20,409,272 |
|
Plus: |
|
|
|
|
|
Income tax expense (benefit) |
|
4,471,000 |
|
|
|
4,202,000 |
|
Interest expense |
|
2,276,406 |
|
|
|
1,164,992 |
|
DD&A |
|
7,925,145 |
|
|
|
7,278,118 |
|
Impairment expense |
|
6,139,229 |
|
|
|
14,565 |
|
Less: |
|
|
|
|
|
Non-cash gains (losses) |
|
|
|
|
|
on derivatives |
|
7,630,914 |
|
|
|
(2,299,518 |
) |
Gains (losses) on asset sales |
|
5,605,461 |
|
|
|
4,423,648 |
|
Plus: |
|
|
|
|
|
Cash receipts from (payments on) |
|
|
|
|
|
off-market derivative contracts(1) |
|
(1,277,206 |
) |
|
|
(7,522,794 |
) |
Restricted stock and deferred |
|
|
|
|
|
director's expense |
|
2,430,303 |
|
|
|
2,403,525 |
|
Adjusted EBITDA |
$ |
23,481,991 |
|
|
$ |
25,825,548 |
|
|
|
|
|
|
|
Debt |
$ |
30,750,000 |
|
|
$ |
28,300,000 |
|
Debt to Adjusted EBITDA (TTM) |
|
1.31 |
|
|
|
1.10 |
|
|
|
|
|
|
|
(1) The initial receipt of $8.8 million of cash from BP for entering into the off-market derivative contracts had no effect on the Company’s statement of operations and was considered cash flow from financing activities. A portion of subsequent settlements with BP had no effect on the Company’s statement of operations. |
|
Adjusted Pretax Net Income (Loss) Reconciliation
“Adjusted pretax net income (loss)” is defined as earnings before taxes and impairment expense, excluding non-cash gains (losses) on derivatives and gains (losses) on asset sales and including cash receipts from (payments on) off-market derivatives. The Company has included a presentation of adjusted pretax net income (loss) because it recognizes that certain investors consider this amount to be a useful means of measuring the Company’s ability to meet its debt service obligations and evaluating its financial performance. Adjusted pretax net income (loss) has limitations and should not be considered in isolation or as a substitute for net income, operating income, cash flow from operations or other consolidated income or cash flow data prepared in accordance with GAAP. Because not all companies use identical calculations, this presentation of adjusted pretax net income (loss) may not be comparable to a similarly titled measure of other companies. The following table provides a reconciliation of net income (loss) to adjusted pretax net income (loss) for the periods indicated:
*****MORE*****
– 12 –
PHX Minerals Inc.
Reports Quarter ended Sept. 30, 2023 Results …cont.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended |
|
|
Three Months Ended |
|
|
Nine Months Ended |
|
|
Nine Months Ended |
|
|
Three Months Ended |
|
|
Sept. 30, 2023 |
|
|
Sept. 30, 2022 |
|
|
Sept. 30, 2023 |
|
|
Sept. 30, 2022 |
|
|
June 30, 2023 |
|
Net Income (Loss) |
$ |
1,895,403 |
|
|
$ |
9,158,468 |
|
|
$ |
11,407,356 |
|
|
$ |
13,727,023 |
|
|
$ |
(41,291 |
) |
Plus: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income tax expense (benefit) |
|
589,000 |
|
|
|
2,431,000 |
|
|
|
3,490,000 |
|
|
|
3,440,000 |
|
|
|
(166,000 |
) |
Impairment expense |
|
36,460 |
|
|
|
2,703 |
|
|
|
38,533 |
|
|
|
8,980 |
|
|
|
- |
|
Less: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Non-cash gains (losses) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
on derivatives |
|
(940,592 |
) |
|
|
1,639,703 |
|
|
|
1,365,872 |
|
|
|
(6,850,017 |
) |
|
|
(865,935 |
) |
Gains (losses) on asset sales |
|
243,041 |
|
|
|
3,558,611 |
|
|
|
4,671,254 |
|
|
|
6,544,575 |
|
|
|
10,230 |
|
Plus: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash receipts from (payments on) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
off-market derivative contracts(1) |
|
- |
|
|
|
(1,057,197 |
) |
|
|
(373,745 |
) |
|
|
(4,834,703 |
) |
|
|
- |
|
Adjusted Pretax Net Income (Loss) |
$ |
3,218,414 |
|
|
$ |
5,336,660 |
|
|
$ |
8,525,018 |
|
|
$ |
12,646,742 |
|
|
$ |
648,414 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Weighted average shares outstanding |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic |
|
35,983,116 |
|
|
|
35,573,813 |
|
|
|
35,961,570 |
|
|
|
34,833,427 |
|
|
|
35,965,281 |
|
Diluted |
|
36,656,272 |
|
|
|
35,916,878 |
|
|
|
36,670,494 |
|
|
|
35,204,241 |
|
|
|
35,965,281 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Adjusted Pretax Net Income (Loss) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
per basic share |
$ |
0.09 |
|
|
$ |
0.15 |
|
|
$ |
0.24 |
|
|
$ |
0.36 |
|
|
$ |
0.02 |
|
Adjusted Pretax Net Income (Loss) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
per diluted share |
$ |
0.09 |
|
|
$ |
0.15 |
|
|
$ |
0.23 |
|
|
$ |
0.36 |
|
|
$ |
0.02 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(1) The initial receipt of $8.8 million of cash from BP for entering into the off-market derivative contracts had no effect on the Company’s statement of operations and was considered cash flow from financing activities. A portion of subsequent settlements with BP had no effect on the Company’s statement of operations. |
|
PHX Minerals Inc. (NYSE: PHX) Fort Worth-based, PHX Minerals Inc. is a natural gas and oil mineral company with a strategy to proactively grow its mineral position in its core focus areas. PHX owns mineral acreage principally located in Oklahoma, Texas, Louisiana, North Dakota and Arkansas. Additional information on the Company can be found at www.phxmin.com.
*****MORE*****
– 13 –
PHX Minerals Inc.
Reports Quarter ended Sept. 30, 2023 Results …cont.
Cautionary Statement Regarding Forward-Looking Statements
This press release includes “forward-looking statements” within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended. Words such as “anticipates,” “plans,” “estimates,” “believes,” “expects,” “intends,” “will,” “should,” “may” and similar expressions may be used to identify forward-looking statements. Forward-looking statements are not statements of historical fact and reflect PHX’s current views about future events. Forward-looking statements may include, but are not limited to, statements relating to: the Company’s operational outlook; the Company’s ability to execute its business strategies; the volatility of realized natural gas and oil prices; the level of production on the Company’s properties; estimates of quantities of natural gas, oil and NGL reserves and their values; general economic or industry conditions; legislation or regulatory requirements; conditions of the securities markets; the Company’s ability to raise capital; changes in accounting principles, policies or guidelines; financial or political instability; acts of war or terrorism; title defects in the properties in which the Company invests; and other economic, competitive, governmental, regulatory or technical factors affecting properties, operations or prices. Although the Company believes expectations reflected in these and other forward-looking statements are reasonable, the Company can give no assurance such expectations will prove to be correct. Such forward-looking statements are subject to a number of assumptions, risks and uncertainties, many of which are beyond the control of the Company. These forward-looking statements involve certain risks and uncertainties that could cause results to differ materially from those expected by the Company’s management. Information concerning these risks and other factors can be found in the Company’s filings with the SEC, including its Annual Reports on Form 10-K and Quarterly Reports on Form 10-Q, available on the Company’s website or the SEC’s website at www.sec.gov.
Investors are cautioned that any such forward-looking statements are not guarantees of future performance and that actual results or developments may differ materially from those projected. The forward-looking statements in this press release are made as of the date hereof, and the Company does not undertake any obligation to update the forward-looking statements as a result of new information, future events or otherwise.
Investor Contact:
Rob Fink / Stephen Lee
FNK IR
646.809.4048
PHX@fnkir.com
Corporate Contact:
405.948.1560
inquiry@phxmin.com
*****END*****
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Investor Presentation November 2023 NYSE: PHX Exhibit 99.2
This presentation does not constitute an offer to sell, a solicitation of an offer to buy, or a recommendation to purchase any security of PHX Minerals Inc. (“PHX” or the “Company”). No offering of securities shall be made except by means of a prospectus meeting the requirements of Section 10 of the Securities Act of 1933, as amended, or an exemption therefrom. Cautionary Statement Regarding Forward-Looking Statements This presentation 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. All statements, other than statements of historical fact, included in this presentation that address activities, events or developments that the company expects, believes or anticipates will or may occur in the future are forward looking statements. The words “anticipates”, “plans”, “estimates”, “believes”, “expects”, “intends”, “will”, “should”, “may” and similar expressions may be used to identify forward-looking statements. Forward-looking statements may include, but are not limited to, statements relating to: our ability to execute our business strategies; the volatility of realized natural gas and oil prices; the level of production on our properties; estimates of quantities of natural gas, oil and NGL reserves and their values; general economic or industry conditions; legislation or regulatory requirements; conditions of the securities markets; our ability to raise capital; changes in accounting principles, policies or guidelines; financial or political instability; acts of war or terrorism; title defects in the properties in which we invest; and other economic, competitive, governmental, regulatory or technical factors affecting our properties, operations or prices. Although the Company believes the expectations reflected in these and other forward-looking statements are reasonable, the Company can give no assurance such statements will prove to be correct. Such forward-looking statements are subject to a number of assumptions, risks and uncertainties, many of which are beyond the control of the Company. These forward-looking statements involve certain risks and uncertainties that could cause the results to differ materially from those expected by the Company’s management. Information concerning these risks and other factors can be found in the Company’s filings with the Securities and Exchange Commission, including its Annual Report on Form 10-K and Quarterly Reports on Form 10-Q, available on the Company's website or the SEC’s website at www.sec.gov. Readers are cautioned that any such statements are not guarantees of future performance and that actual results or developments may differ materially from those projected in the forward-looking statements. The forward-looking statements in this presentation are made as of the date hereof, and the Company does not undertake any obligation to update the forward-looking statements as a result of new information, future events or otherwise. Use of Non-GAAP Financial Information This presentation includes certain non-GAAP financial measures. Adjusted EBITDA is a supplemental non-GAAP measure that is used by management and external users of our financial statements, such as industry analysts, investors, lenders and rating agencies. PHX defines “Adjusted EBITDA” as earnings before interest, taxes, depreciation and amortization, or EBITDA, excluding unrealized gains (losses) on derivatives and gains (losses) on asset sales and including cash receipts from (payments on) off-market derivatives and restricted stock and deferred directors’ expense. PHX references Adjusted EBITDA in this presentation because it recognizes that certain investors consider Adjusted EBITDA a useful means of measuring our ability to meet our debt service obligations and evaluating our financial performance. Adjusted EBITDA has limitations and should not be considered in isolation or as a substitute for net income, operating income, cash flow from operations or other consolidated income or cash flow data prepared in accordance with GAAP. Because not all companies use identical calculations, the Company’s calculations of Adjusted EBITDA may not be comparable to similarly titled measures of other companies. Oil and Gas Reserves The SEC generally permits oil and gas companies, in filings made with the SEC, to disclose proved reserves, which are reserve estimates that geological and engineering data demonstrate with reasonable certainty to be recoverable in future years from known reservoirs under existing economic and operating conditions, and certain probable and possible reserves that meet the SEC’s definitions for such terms. The Company discloses only estimated proved reserves in its filings with the SEC. The Company’s estimated proved reserves as of June 30, 2023, referenced in this presentation were prepared by Cawley, Gillespie and Associates, Inc, an independent engineering firm, and comply with definitions promulgated by the SEC. Additional information on the Company’s estimated proved reserves is contained in the Company’s filings with the SEC. Cautionary Statement Regarding Forward-Looking Statements
Overview PHX is a growth oriented mineral rights company focused on natural gas 3 In January of 2020, PHX Minerals began a dramatic company transformation: New management / technical team with deep industry experience New minerals only corporate strategy focused on growth Acquire minerals ahead of the drill bit under active operators in the highest quality rock New company name from the former Panhandle Oil & Gas to better align with strategy Former Company reserve footprint was scattered and consisted of both mature legacy non-operated working interest and royalty interest Historically, no catalyst to provide predictable / sustainable volume or reserve growth Since 2020, have high graded assets by divesting virtually all of the material non-operated working interest assets and redeploying proceeds and free cash flow into mineral acquisition strategy Predictable line of sight development provides growth catalyst Deep inventory of drillable locations increases annual production volumes and cash flows Today, PHX is approximately 88% royalty by production volumes and 80% by proved reserves Transformation complete with sustainable model and balance sheet going forward
Source: Company information and Enverus 1 Based on $3.55 per share as of 10/20/2023 and 37 million shares outstanding on a fully diluted basis as of 09/30/2023 2 Market Cap plus debt of $30.8 million minus cash on hand of $1.2 million as of 09/30/2023 3 Calculated as working capital (current assets less current liabilities excluding current derivatives) plus availability on the borrowing base; On a pro forma basis, Q3 2023 includes a $50 million borrowing base, which was recently increased from $45 million as part of the last redetermination that was finalized on November 6th, 2023. See Non-GAAP reconciliation in Appendix 4 Based on $0.12 annualized Dividend per share 5 Total Debt / TTM Adjusted EBITDA; See Non-GAAP Reconciliation in Appendix 6 See Non-GAAP reconciliation in Appendix 7 At mid-point of production outlook (see page 12) 8 As of 9/30/2023; PHX also owns 166,232 unleased net royalty acres normalized to a 1/8th royalty 9 3P Reserves per 6/30/2023 CGA Mid Year Report proforma proforma acquisitions, divestitures and activity as of 9/30/2023 at 9/30/2023 SEC price deck of $77.70 per bbl of oil, $29.46 per bbl of NGL, $3.26 per mcf of gas (proved volume weighted average price) Company Snapshot Key Statistics Market Cap1 $131.4 Enterprise Value2 $160.9 Liquidity3 $24.4 Dividend Yield4 3.38% Leverage5 1.31x Cal. 2022 Adjusted EBITDA6 $26.7 YTD 2023 Adjusted EBITDA6 $18.1 Cal. 2022 Discretionary Cash Flow Yield6 ~25% Cal. 2022 ROCE6 ~15% Percent of 3P Reserves – Natural Gas9 ~76% Net Leased Royalty Acres8 92,948 Sustainable Royalty Production Growth Through Conversion of Existing Mineral Location Inventory (see pages 16 and 17) MMCFE Outlook7 4 $ in millions CAGR: ~20.8%
Strategy Execution Goals Set in early 2020 Achievements Through Sept. 30, 2023 High Grade Asset Base Grow royalty production (higher margin/lower cost) Improve line of sight development opportunities Exit working interest assets (higher cost/lower margin) Divest unleased non-producing minerals lacking scale and line of sight development Total royalty volume growth since 2020: 150%1 Mineral acquisitions completed: ~$127 million Built a 10+ year inventory of line of sight development locations Working interest wellbores sold: 1,382 Unleased non-producing mineral acres sold: ~25,400 Build a strong and sustainable balance sheet Reduced leverage: ~2.5x to ~1.3x (Debt / TTM Adjusted EBITDA2) Improved commercial bank lending terms and relationships Enhanced liquidity profile as a result of superior asset performance and more predictable development timing Become a consolidator in the mineral space Implement growth strategy that is balanced with appropriate debt management and dividend payout ratio Allocate capital to generate the best possible returns to shareholders Mineral acquisition transactions completed: 71 Focus on smaller acquisition in targeted areas: ~$1.8 million average (generates higher returns with less competition) Generate return on capital employed (ROCE) Generated ~15% ROCE2 in 2022 up from ~0% in 2019 and 2020 Return profile under royalty only strategy driven by new volumes associated with well conversions from acquisitions 1 Based on fiscal 2020 royalty volumes of 3.3 Bcfe and the midpoint of the 2023 royalty volume outlook 2 See Non-GAAP reconciliation in Appendix Improve balance sheet designed to withstand commodity price volatility
Improving Margins Driving Earnings & ROCE 6 The two key metrics used by PHX to measure the success of our royalties-only strategy and royalties acquisition program are: Return on Capital Employed (ROCE)1 NAV per share measure (the PV-10 value of our proved and probable reserves) Balance sheet management and ample liquidity underpin our strategy in order to thrive across the various pricing cycles of the energy sector 1 Defined as EBIT excluding non-cash gain/loss on derivatives, non-cash impairments, non-cash G&A, cash receipts from/payments on off-market derivatives and gain(losses) on asset sales divided by average debt and equity during the quarter 2 See Non-GAAP reconciliation in Appendix Royalties Only Strategy Non-operated Working interest Strategy 2
Per Share NAV Continues to Grow 7 Significant improvement in NAV both on an absolute and per share basis (published in every corporate presentation since early 2021) since royalty-only strategy effort began under new management team High grading assets with mineral acquisition program, despite divesting of non-operated working interest, has grown PV10 value and increased NAV per share since change in strategy Below reserve value independently verified by DeGolyer & MacNaughton (2021) and Cawley, Gillespie and Associates, Inc (2022-2023) Current asset base has lower risk and higher growth profile than the PHX pre-2020 legacy asset base Total 2P Reserve Value @ PV-10 ($ millions) NAV per Share Net of Debt Next Twelve-Month NYMEX strip for oil and natural gas as of date reserves analysis was compiled
Royalty Cash Flow Driving Shareholder Value Royalty Production and Realized Natural Gas Price Adjusted EBITDA1 Adjusted Pre-Tax NI2 Return on Capital Employed3 $ in millions $ in millions Source: Company filings ; All quarters are in Calendar Year 1 Calculated as net income excluding non-cash gain/loss on derivatives, income tax expense, interest expense, DD&A, non-cash impairments, non-cash G&A, gain(losses) on asset sales and cash receipts from/payments on off-market derivatives; See Non-GAAP reconciliation in Appendix 2 Pre-tax net income adjusted to exclude unrealized gain on derivatives, non-cash impairments, cash receipts from/payments on off-market derivatives and gains(losses) on asset sales; See Non-GAAP reconciliation in Appendix 3 Annualized EBIT excluding non-cash gain/loss on derivatives, non-cash impairments, non-cash G&A, cash receipts from/payments on off-market derivatives and gain(losses) on asset sales divided by average debt and equity during the quarter; See Non-GAAP reconciliation in Appendix
Stable Balance Sheet & Ample Liquidity Net Debt 1 Percentage Drawn on Credit Facility Advance Rate4 Debt / Adjusted EBITDA2 (TTM) Liquidity3,4 $ in millions $ in millions Source: Company filings ; All quarters are in Calendar Year 1 Total debt less cash 2 Total Debt / Adjusted EBITDA; See Non-GAAP reconciliation in Appendix 3 Calculated as working capital (current assets less current liabilities excluding current derivatives) plus availability on the borrowing base; See Non-GAAP reconciliation in Appendix 4 On a pro forma basis, Q3 2023 includes a $50 million borrowing base, which was recently increased from $45 million as part of the last redetermination that was finalized on November 6th, 2023
Strong Per Unit Metrics Driven by Royalty Only Strategy 1 Includes proceeds from and payments on off-market derivative settlements 2 There were no NGL settled derivative contracts 3 See Non-GAAP reconciliation of adjusted EBITDA and discretionary cash flow in Appendix 4 See next slide for cash expenses
Strong Margins Driven by Royalty Only Strategy 1 Includes proceeds from and payments on off-market derivative settlements; there were no NGL settled derivative contracts 2 See Non-GAAP reconciliation in Appendix
PHX Operational Outlook 1 Pro-forma divestures of Eagleford and Arkoma working interest assets, excludes potential future sales of additional working interest assets 2 See Non-GAAP reconciliation in Appendix Cal. Year 2022 Actual Cal. 2023 YTD Actual Cal. Year 2023 Outlook Mineral & Royalty Production (Mmcfe) 6,613 6,177 8,000 – 8,400 Working Interest Production (Mmcfe) 3,084 958 1,200 – 1,4001 Total Production (Mmcfe) 9,697 7,135 9,200 – 9,800 Percentage Natural Gas 78% 80% 79% - 81% Transportation, Gathering & Marketing (per mcfe) $0.63 $0.38 $0.37 - $0.42 Production Tax (as % of pre-hedge sales) 4.50% 5.10% 5.00% - 5.50% LOE Expenses (on an absolute basis in 000’s) $3,807 $1,274 $1,500 - $1,700 Cash G&A (per mcfe)2 $1.01 $0.99 $0.99 - $1.02 Calendar 2023 production derived from wells already on production and wells currently being drilled/completed by operators Royalty volume growth driven by mineral acquisitions of high-quality undrilled location inventory in the core of our focus areas under active operators
Focused in SCOOP and Haynesville Key Operators of PHX Minerals
Royalty Reserve Growth Sustainable royalty reserve and production growth through conversion of existing mineral location inventory Royalty Reserves Royalty Production MMCFE CAGR: ~51% MMCFE CAGR: ~41%
Yearly Conversions To Producing Wells Strong drilling activity on our mineral assets provides sustainable annual royalty production growth Gross Conversions Net Conversions 1 As of 09/30/2023 1 1
Quarterly Near-Term Drilling Inventory Continuous conversion of undrilled location inventory will drive future royalty volume growth Gross Inventory Net Inventory
Royalty Interest Inventory by Basin Sub-region Gross PDP Wells1 Net PDP Wells1 Undeveloped Locations1 Sub-region PDP Wells Average NRI1 Gross Wells In Progress2 Net Wells in Progress3 Gross Permits Net Permits3 Gross Technical PUDs4 Net Technical PUDs3,4,5 Gross PROB Net PROB3,5 Gross POSS Net POSS3,5 SCOOP 1,063 4.495 52 0.159 43 0.128 198 0.684 800 2.346 353 1.251 Haynesville 536 3.143 97 0.538 28 0.095 230 0.788 143 0.525 4 0.003 STACK 398 1.743 13 0.034 7 0.031 71 0.391 172 1.056 60 0.576 Bakken 619 1.786 8 0.043 5 0.006 65 0.243 137 0.829 9 0.146 Arkoma Stack 529 4.757 4 0.003 5 0.002 2 0.003 97 1.745 83 0.924 Fayetteville 1,073 6.454 0 0 0 0 0 0 0 0 0 0 Other 2,020 16.728 11 0.031 5 0.021 0 0 0 0 0 0 Total 6,238 39.106 185 0.808 93 0.283 566 2.109 1,349 6.501 509 2.900 Gross Undeveloped Locations 2,702 2,702 Note: 1 As of 09/30/2023 2 Wells in Progress includes wells currently being drilled and wells waiting on completion 3 Net interest on wells are internal estimates and subject to confirmation from operator 4 Technical PUDs, reviewed and approved by Cawley, Gillespie and Associates, Inc., share all technical merits of PUDs but development timing is uncertain. PHX Technical PUDs are most likely PUDs in their respective operator’s reserve report. 5 Technical PUDs, PROB, and POSS net wells assume 10,000 ft. laterals 7 At this time, well counts do not account for all future reserves, such as the Bossier in the Haynesville, or reserves associated with 150,000 unleased mineral acres 2 Continuous conversion of undrilled location inventory will drive future royalty volume growth
Reserves Value Summary SEC Pricing1 Strip Pricing2 $100/$6.00 Flat Pricing3 $326 $315 $525 1 3P Reserves per CGA Mid Year Report proforma acquisitions, divestitures and activity as of 9/30/2023 at 9/30/2023 SEC price deck of $77.70 per bbl of oil, $29.46 per bbl of NGL, $3.26 per mcf of gas (proved volume weighted average price) 2 3P Reserves per per CGA Mid Year Report proforma acquisitions, divestitures and activity as of 9/30/2023 at 10/16/2023 STRIP price of WTI/HH 2023: $85.96/$3.29, 2024: $80.18/$3.55, 2025: $75.04/$4.06, 2026: $71.42/$4.06, 2027: $68.60/$3.99, 2028: $66.18/$3.89, 2029: $63.96/$3.88, 2030: $61.82/$3.78, 2031: $59.99/$3.73, 2032: $58.58/$3.70, 2033: $57.13/$3.81, 2034: $56.47/$3.91, 2035+: $56.47/$4.10. 3 3P Reserves per CGA Mid Year Report proforma acquisitions, divestitures and activity as of 9/30/2023 at flat price deck of $100.00 WTI /$6.00 HH 4 Technical PUDs, reviewed and approved by Cawley, Gillespie and Associates, Inc., share all technical merits of PUDs but development timing is uncertain. PHX Technical PUDs may be PUDs in their respective operator’s reserve report. 5 Scheduled out approximately 10 years for PROB and 15 years for POSS. 6 PV-10 less net debt of $29.5 MM as of 9/30/2023 divided by total shares outstanding as of 9/30/2023 7 At this time, does not account for all future reserves, such as the Bossier in the Haynesville, or reserves associated with 150,000 unleased mineral acres Reserve Category PV-10 Value ($mm) SEC1 Strip2 $100 / $6.003 PDP $98.1 $96.4 $167.9 Drilling or Waiting on Completion $20.2 $21.0 $35.9 Permits $6.9 $7.1 $11.3 Total Proved Reserves $125.2 $124.4 $215.1 Technical PUDs4 $51.2 $51.6 $83.6 PROB5 $116.6 $110.5 $177.7 POSS5 $33.0 $28.8 $48.4 Total 3P Reserves $326.1 $315.3 $524.8 Proved PV-10 Per Share6 $2.59 $2.57 $5.02 2P PV-10 Per Share6 $7.12 $6.95 $12.08 3P PV-10 Per Share6 $8.01 $7.73 $13.39
Robust Acquisition Process 19 PHX believes that being the aggregator of choice in our core areas is a key component of our strategy Royalties, just like any other hydrocarbon asset class, are naturally depleting assets and reinvestment is required to maintain and grow cash flows over time We target minerals in our core areas (SCOOP and Haynesville) with full analysis of geology and established type curves in order to minimize execution risk Typical profile of acquisitions includes an already producing component as well as royalties that are either in the process of being developed (WIPs) or will be developed over time (locations) by reputable and creditworthy operators to minimize timing risk Focused on active operators in order to minimize development timing risk Our acquisition program targets returns well in excess of our cost of capital (see ROCE) to drive increasing shareholder value IRR Payback MOIC Commodity Pricing Geology Type Curves Title Review Takeaway Capacity Basin Differentials Development Timing Inputs Requirements PHX’s A&D Methodology
Acquisition Summary Acquisitions by Basin by Year Focused on highest quality rock in the SCOOP and Haynesville plays Targeting a mix of production, near term development opportunities via wells in progress and additional upside potential under high quality operators $32.0M in acquisitions in SCOOP and $85.6M in Haynesville since Q1 of 2020 Positioned For Growth Through Acquisitions Total domestic US mineral market estimated at ~$0.5 - 1 trillion(2) Highly fragmented Predominantly owned by private individuals PHX well positioned to be one of the premier consolidators in our core areas Focus on smaller deals increases opportunity set and potential returns Market Opportunity Midpoint (1) : 97% 1 As of 09/30/2023 2 Midpoint of market size estimate range. Based on production data from EIA and spot price as of 03/31/2021. Assumes 20% of royalties are on Federal lands and there is an average royalty burden of 18.75%. Assumes a 10x multiple on cash flows to derive total market size. Excludes NGL value and overriding royalty interests 3 Enterprise values of PHX, DMCP, KRP, BSM, STR and VNOM as of 03/31/2023 1
Acquisition History All acreage currently owned in the Haynesville and predominately all acreage currently owned in Springboard III area of interest was acquired under current management team’s guidance Source: Company information and Enverus; Map of active rigs as of 10/09/2023 1 As of 09/30/2023 1 1
North Haynesville Update PHX New High NRI Units SOUTHWESTERN | GEP / LEE DSU | 5 WELL AVG 1st Prod 8/2022 (11mo) PHX NRI 2.296%5 AVG IP 31.2 MMCF/d AVG CUM 7.8 BCF AVG LL 8,448’ AVG CUM/FT 923 MMCF/FT CHESAPEAKE | GRAF 26&23-16-14HC | 3 WELL AVG 1st Prod 4/2023 (3mo) PHX NRI 0.543% AVG IP24 31.9 MMCF/d AVG CUM 2.43 BCF AVG LL 10,001’ AVG CUM/FT 223 MMCF/FT CHESAPEAKE | MMRTNEZ 20&17 HC | 3 WELL AVG 1st Prod 5/2023 (3mo) PHX NRI 0.650% AVG IP24 27.9 MMCF/d AVG CUM 2.0 BCF AVG LL 9,749’ AVG CUM/FT 202 MMCF/FT CHESAPEAKE | MAYO 13&12-16-14 HC 001-ALT 1st Prod 8/2022 (8mo) PHX NRI 0.886% IP24 34.4 MMCF/d CUM 6.726 BCF LL 9,859’ CUM/FT 682 MMCF/FT Source: Company info and Enverus 1 As of 09/30/2023 2 Wells in Progress includes wells currently being drilled and wells waiting on completion 3 Active natural gas and oil horizontal permits filed 4 Data from Enverus as of 10/09/2023 5 NRIs are internal estimates and are subject to confirmation from operator Operators are drilling 3-5 wells per unit, and a positive indication of near term volumes and cashflows Since 2019, core development areas have been extended as new completion designs have lowered breakevens Key Operators: Aethon, Trinity, Chesapeake, Silverhill, Blue Dome and Paloma PHX North Haynesville Ownership1: 6,646 NRA (total PHX Haynesville ownership 8,120 NRA) Gross Wells In Progress2: 66 Gross Active Permits3: 25 Gross Active Rigs4: 21 1 2 3 4 1 2 3 4
Springboard III Update Highest resource in-place per DSU in the midcontinent, co-developing the Mississippian Sycamore & Woodford Shale Operators starting to infill existing DSUs; Early results suggest very little to no Parent-Child degradation PHX Springboard III Ownership1: 3,708 NRA Gross Wells In Progress2: 15 Gross Active Permits3: 10 Gross Active Rigs4: 4 Recent Well Results Source: Company info and Enverus 1 As of 09/30/2023 2 Wells in Progress includes wells currently being drilled and wells waiting on completion 3 Active natural gas and oil horizontal permits filed 4 Data from Enverus as of 10/09/2023 CONTINENTAL | COURBET SYCAMORE DSU | 6 WELL AVG 1st Prod 4/2023 (4mo) PHX NRI 0.384% LL 8,169’ Avg 90 Day Cum 114 MBOE6 NRM PROP 3,020 #/FT Avg Cum Prod 197 MBOE6 CONTINENTAL | LEON 2 & 3-26-23-14XHM | SYCAMORE | 2 WELL AVG 1st Prod 9/2022 (11mo) PHX NRI 0.886% LL 10,295’ Avg 90 Day Cum 121 MBOE6 NRM PROP 2’507 #/FT Cum Prod 379 MBOE6 CONTINENTAL | COURBET WOODFORD DSU | 9 WELL AVG 1st Prod 4/2023 (4mo) PHX NRI 0.363% LL 11,378’ Avg 90 Day Cum 110 MBOE6 NRM PROP 2,513 #/FT Avg Cum Prod 177 MBOE6 CAMINO | RINGER RANCH 2 & 3 -20-17XHM | SYCAMORE | 2 WELL AVG 1st Prod 4/2023 (4mo) PHX NRI 1.246% LL 10,226’ Avg 90 Day Cum 129 MBOE6 NRM PROP 2,508 #/FT Avg Cum Prod 182.4 MBOE6 1 2 3 4 1 2 3 4
STACK MERGE SCOOP MERAMEC OSAGE/SYCAMORE WOODFORD SHALE STACK | MERGE | SCOOP The SCOOP is the premiere play in Oklahoma with the highest resource in-place and most horizontal objectives The transition between the SCOOP and STACK is the MERGE where the thickness prevents stacked development The primary target in the STACK is the Meramec All 3 regions are sourced by the Woodford and feature >1,350 btu gas and minimal produced water 1 PHX internally plans all undrilled inventory on a section-by-section basis, the above is a representation of the regional estimate of wells per section, however locally some areas will differ MERGE SCOOP STACK A A’ WOODFORD SHALE OSAGE MERAMEC WOODFORD SHALE SYCAMORE MERAMEC STACK MERGE SCOOP A A’ BOOKED LOCATION UNBOOKED LOCATION
Company Leadership Management Team Title Years with Company Experience Chad Stephens President, CEO and Board Director 5 CEO for PHX since 2019 SVP –Corporate Development of Range Resources for 30 years until retiring in 2018 B.A. in Finance and Land Management from University of Texas Ralph D’Amico Senior Vice President, CFO 4 CFO for PHX since 2020 20 years of investment banking experience Bachelor’s in Finance from University of Maryland; MBA from George Washington University Chad True V.P. of Accounting 3 >14 years of accounting experience Audit and accounting positions with Grant Thornton LP, Tiptop Oil & Gas and Wexford Capital LP B.S. and Masters in Accounting from Oklahoma State University Danielle Mezo V.P. of Engineering 3 >13 years reservoir engineer experience Reservoir engineer, acquisitions, and corporate planning positions at SandRidge Energy B.S. in Petroleum Engineering from University of Oklahoma and licensed Professional Engineer Carl Vandervoort V.P. of Geology 3 >16 years experience, recently managed a buy-side consulting company for private equity groups and portfolio companies Exploration Manager for Zenergy, Inc., an Apollo Management portfolio company B.S. in Chemistry from University of Texas; M.S. in Geophysics at University of Oklahoma Kenna Clapp V.P. of Land 3 >13 years of land experience Various land positions with Chesapeake Energy in Haynesville, Eagleford, Mid-Continent and Barnett shales B.S. in Accounting and Finance from Oklahoma State University; JD from Oklahoma City University Board of Directors Title Years with Company Experience Mark T. Behrman Chairman 5 CEO of LSB Industries, Inc. since 2018 Managing Director and Head of Investment Banking of the Industrial and Energy Practices of Sterne Agee from 2007 to 2014 MBA in Finance from Hofstra University and B.S. in Accounting, Minor in Finance from Binghamton University Glen A. Brown Director 2 SVP – Exploration for Continental Resources from 2015 through 2017 Exploration manager for EOG Resources Midcontinent from 1991 through 2003 Bachelor’s in Geology from State University of New York; Master’s in Geology from New Mexico State University in Las Cruces Lee M. Canaan Director 7 Founder and portfolio manager of Braeburn Capital Partners, LLC Board member for EQT Corporation and Aethon Energy, LLC Bachelor’s in Geological Sciences from USC, Master’s in Geophysics from UT-Austin, and MBA in Finance from Wharton Peter B. Delaney Director 4 Principal with Tequesta Capital Partners since 2016 Chairman and CEO of OGE Energy Corporation from 2007 through 2015 Steven L. Packebush Director 1 Founder and partner in Elevar Partners, LLC President of Koch Ag & Energy Solutions upon his retirement in 2018 after 30 years with the company Bachelor’s in agricultural economics from Kansas State John H. Pinkerton Director 2 CEO of Range Resources Corporation from 1992 through 2012 Executive Chairman and Chairman of Board of Directors for Encino Energy from 2017 through 2022 B.A. in Business Administration from Texas Christian University; Master’s from the University of Texas at Arlington
Analyst Coverage Firm Analyst Contact Stifel Nicolaus Derrick Whitfield whitfieldd@stifel.com Johnson Rice Charles Meade cmeade@jrco.com Northland Securities Donovan Schafer dschafer@northlandcapitalmarkets.com Alliance Global Partners Jeff Grampp jgrampp@allianceg.com Seaport Global Securities Nicholas Pope npope@seaportrp.com
Appendix
Current Hedge Position Mix of collars and swaps designed to provide upside exposure while protecting downside risk Note: Volumes hedged as of 10/20/2023; Gas hedge prices are in $/Mcf and Oil hedge prices are in $/bbl
Natural Gas – Continued Demand Growth Natural Gas Electrical Generation1 Monthly Electrical Generation by Fuel Type1 Natural Gas Consumption1 1 EIA US natural gas pipeline exports to Mexico set a monthly all-time high in June 2023 at 6.8 Bcf/d 20 additional gas fired power plants with total capacity of 7.7 GW expected to come online in 2024 – 2025 California Public Utilities Commission recently voted to increase working natural gas storage at Alyso Canyon Natural gas share of electrical generation in Florida was 75% in 2022 compared to 31% in 2002
Natural Gas – Surging LNG Demand Forecasted U.S. Export Annual Volume Growth1 Large Scale Approved Liquefaction Facilities 1 Current LNG export capacity is fully committed Additional capacity of 6.1 Bcf/d is currently under construction and is expected to come online by 2025 Golden Pass trains 1 & 2 expected online in 2024 and train 3 in early 2025 Plaquemines trains 1 – 18 expected online in 2H 2024 and trains 19 – 36 in 2025 US exported more LNG (11.6 Bcf/d) than any other country in first half of 2023 1 EIA
Scoop Haynesville Bakken Stack Arkoma Fayetteville Other Total Production Mix Net Production (MMcfe/d)1,2 3.95 12.26 1.25 3.32 1.19 1.03 2.52 25.53 Leased Net Royalty Acres1 9,289 8,120 3,996 6,836 9,932 8,395 46,380 92,9486 Permits on File1 43 28 5 7 5 - 5 93 Rigs Running on PHX Acreage3 6 5 1 - - - 2 14 Rigs Running Within 2.5 miles of PHX Acreage3 11 19 5 13 - - 8 56 Top Operators 1 As of Quarter ended 09/30/2023 2 Includes both royalty and working interest production 3 Provided by Enverus as of 10/09/2023 4 As of 09/30/2023, as determined by wells currently being drilled, wells waiting on completion, and permits 5 As of 09/30/2023, as determined by wells on production 6 PHX also owns 166,232 unleased net royalty acres normalized to a 1/8th royalty Portfolio Overview by Basin 4 4 4 4 4 5 4 4 29%
Definition of a Mineral Interest Illustrative Mineral Revenue Generation Unleased Minerals 100% owned by PHX PHX Issues a Lease PHX receives an upfront cash bonus payment and customarily a 20-25% royalty on production revenues In return, PHX delivers the right to explore and develop with the operator bearing 100% of costs for a specified lease term Leased Minerals Revenue Share PHX: 20-25% Operator: 75-80% Cost Share PHX: 0% Operator: 100% Lease Termination Upon termination of a lease, all future development rights revert to PHX to explore or lease again Process starts again from step 1 Minerals Perpetual real-property interests that grant hydrocarbon ownership under a tract of land Surface and mineral ownership have been negotiated in most cases over the decades Surface owners cannot legally prevent the development of minerals under most circumstances Represent the right to drill, and produce hydrocarbon or lease that right to third parties for an upfront payment and a negotiated percentage of production revenues ORRIs Overriding royalty interests Royalty interests that burden the working interests of a lease Right to receive a fixed, cost-free percentage of production revenue (term limited to life of leasehold estate) 1 2 3 4
Royalty Interests Versus Working Interests PHX believes that royalty assets provide a higher risk adjusted return compared to working interest assets Illustrative Margin Comparison Working Interest Mcfe Revenue $3.00 Less: Royalty Burden ($0.60)(1) Less: LOE ($1.00) Less: Taxes ($0.15) Less: Transportation ($0.25) Cash Margin ($) $1.00 Cash Margin (%) 33.0% Royalty Mcfe Revenue $3.00 Less: LOE - Less: Taxes ($0.15) Less: Transportation ($0.20)(2) Cash Margin ($) $2.65 Cash Margin (%) 88.0% Non-operated Working interest ownership bears one hundred percent of the development and production costs associated with a hydrocarbon well. Non-operated Working interest owners receive their share of the revenue after the royalty interest owners are paid. A mineral interest is real property that entitles the owner to all the rights associated with hydrocarbons below the surface in perpetuity. A royalty interest is created from a mineral interest and entitles the owner to receive a certain percentage of the gross revenue generated from the sales of the hydrocarbons without incurring development and operating costs. Royalty owner’s volumes come from working interest royalty burden 1 Assumes a 1/5 lease royalty burden 2 A portion of leases are cost free with all transportation costs paid by the operator
Royalty Interests Have Less Risk Than Working Interests 34 Both royalties and non-operated working interest asset classes have the same exposure to pricing cycles, however, Royalty assets have fewer risks when compared to other hydrocarbon asset classes The biggest risk associated with royalties is the lack of control over development timing Non-operated working interest assets have similar timing uncertainty as royalty owners Non-operated working interest assumes all cost to operate the well Royalty owners are not subject to lease operating expenses, SG&A overhead or workover expenses Increasing Risk Capex Exposure Operating Cost Exposure Environmental Liability Timing Risk Operator Bankruptcy Risk E&P (Non op Working Interest) E&P (Operated Working Interest) Royalties
Royalty Interests Trade At Higher Multiples Than Working Interests 35 Investors value working interest and royalty companies differently in the public markets Royalty companies trade at a premium to working interest companies primarily due to lower risk and lower capital intensity of the business Over time, PHX believes it should see an increase of its Enterprise Value / EBITDA ratio (adjusted for size) as the market recognizes the success of the royalties-only strategy Source: Stifel Nicolaus research note published on 10/27/2023
Minerals are Real Property Mineral and royalty interests are generally considered by law to be real property interests and are thus afforded additional protections under bankruptcy law Working Interest owner entitled to ~75-85% of production revenue based on royalty rate and bears 100% of development cost and lease operating expense Senior Debt Senior Secured Debt Equity Subordinated Debt Mineral Interest owner entitled to ~15-25% of production revenue based on royalty rate
Reconciliation of Non-GAAP Financial Measures Source: Company Filings
Reconciliation of Non-GAAP Financial Measures Source: Company filings 1 On a pro forma basis, Q3 2023 includes a $50 million borrowing base, which was recently increased from $45 million as part of the last redetermination that was finalized on November 6th, 2023
Reconciliation of Non-GAAP Financial Measures Source: Company Filings
Reconciliation of Non-GAAP Financial Measures
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