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PANHANDLE OIL AND GAS INC
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PANHANDLE OIL AND GAS INC. Reports Fiscal 2013 First Quarter Results

2013-02-07 06:00 ET - News Release

Records Net Income of $2,148,298 ($.26 per share) and an 18% Production Increase

OKLAHOMA CITY, Feb. 7, 2013 /PRNewswire/ -- PANHANDLE OIL AND GAS INC. (NYSE-PHX) today reported financial and operating results for the 2013 fiscal first quarter ending Dec. 31, 2012.

FIRST QUARTER 2013 HIGHLIGHTS

  • Recorded first quarter 2013 net income of $2,148,298, $.26 per share, compared to net income of $3,412,110, $.41 per share, for the 2012 first quarter.
  • Recorded highest quarterly Mcfe production in Company history of 3,008,365 Mcfe, compared to 2,559,524 Mcfe for the 2012 first quarter.
  • Increased quarterly oil production by 23% to 46,656 barrels (a Company record), compared to 38,040 barrels for the 2012 first quarter.
  • Fully funded capital expenditures of $6.9 million for drilling and equipping wells for the 2013 first quarter with cash generated by operating activities of $7.2 million during the quarter.
  • Continued to receive a large number of oily and natural gas liquids (NGL) rich well proposals on mineral acreage, with drilling commitments ahead of fiscal 2012 thus far.

For the 2013 first quarter, the Company recorded net income of $2,148,298, or $.26 per share, as compared to net income of $3,412,110, or $.41 per share, for the 2012 first quarter.  Net cash provided by operating activities decreased 8% to $7,158,243 for the 2013 first quarter, as compared to the 2012 first quarter.  Cash flow from operations fully funded costs to drill and equip wells for the quarter.  Capital expenditures for the 2013 quarter totaled $7,194,399, which included $6,864,399 for drilling and equipping wells.  Capital expenditures thus far in fiscal 2013 are 65% directed toward oily and NGL rich plays, principally in Western and South Central Oklahoma and the Texas Panhandle. 

Total revenues for the 2013 quarter were $14,180,435, as compared to $13,404,333 for the 2012 quarter.  The 2012 quarter included lease bonuses and rentals of $1,755,191, as compared to $374,392 in the 2013 quarter.  Oil and gas sales increased $1,014,677 or 9% in the 2013 quarter, as compared to the 2012 quarter, as a result of an 18% increase in Mcfe production somewhat offset by an 8% decrease in the average per Mcfe sales price.  The average sales price per Mcfe of production during the 2013 first quarter was $4.24, as compared to $4.59 for the 2012 first quarter.

Oil production increased 23% in the 2013 quarter to 46,656 barrels, as compared to 38,040 barrels in the 2012 quarter, and gas production increased 301,073 Mcf, or 13%, as compared to the 2012 quarter.  Gas production volumes attributable to the Fayetteville property acquisition (which closed in late October 2011) and subsequent drilling on those properties are primarily responsible for the gas production increase this quarter.  In addition, 30,674 barrels of NGL were sold in the quarter.    

MANAGEMENT COMMENTS

Michael C. Coffman, President and CEO said, "We are pleased with the first quarter results, both from a financial and operational standpoint.  Our increasing focus on oily and NGL rich drilling projects over the last two year period has resulted in a trend of increasing production volumes of both oil and NGL.  At today's price differentials for oil versus dry natural gas, this adds significantly to our revenue stream.  Indications are capital expenditures for drilling in fiscal 2013 will continue to be very heavily weighted to these type projects.

"As we are still principally a natural gas company, the current market price for natural gas could make 2013 a somewhat challenging year for Panhandle, but our strong financial position, mineral acreage ownership in numerous oily plays, especially in Western Oklahoma, and our capital efficient strategies will allow us to continue to invest capital in projects with favorable rates of return, which will further enhance Panhandle's share value over the long term."

Paul Blanchard, Senior Vice President and COO said, "The oil and NGL rich plays continue to be aggressively developed by several large independent operators in Western Oklahoma and the Texas Panhandle.  We own 25,000 net mineral acres in the counties with focused activity in the Granite Wash, Hogshooter, Cleveland, Marmaton and Tonkawa.  Of the 25,000 acres, 17,100 acres are available for working interest participation, and that acreage is where a majority of the Company's drilling capital is currently being invested.  We retain a non-cost bearing royalty on the remainder of the mineral acres, which were predominately leased prior to our 2006 strategy change.  The activity in this area was the primary driver for the Company's record oil production this quarter.  As operators transition from reservoir delineation to infill development in these plays, we anticipate sustained activity and continued growth in oil and NGL production and reserves.  The Company's record gas production this quarter was primarily the result of the acquisition of and the continued development taking place in the prolific Fayetteville Shale core on the Company's fee mineral acreage and leasehold.  We anticipate continual drilling activity in this play due to the extremely low finding and development cost.  At the current pace we still have several years of Fayetteville core development, and we expect additional gas production growth as this asset is fully developed."

PRODUCTION






First Quarter Ended


First Quarter Ended


Dec. 31, 2012


Dec. 31, 2011

Mcfe Sold

3,008,365


2,559,524

Average Sales Price per Mcfe

$4.24


$4.59

Oil Barrels Sold

46,656


38,040

Average Sales Price per Barrel

$83.86


$89.39

Mcf Sold

2,544,385


2,243,312

Average Sales Price per Mcf

$3.11


$3.46

NGL Barrels Sold

30,674


14,662

Average Sales Price per Barrel

$30.31


$40.05

Quarter ended


Oil Bbls Sold


Mcf Sold


NGL Bbls Sold


Mcfe Sold

12/31/2012


46,656


2,544,385


30,674


3,008,365

9/30/2012


45,552


2,251,540


32,538


2,720,080

6/30/2012


38,937


2,273,649


23,680


2,649,351

3/31/2012


30,614


2,303,797


27,834


2,654,485

12/31/2011


38,040


2,243,312


14,662


2,559,524

The Company's derivative contracts in place for natural gas at Dec. 31, 2012, are outlined in its Form 10-Q for the period ending Dec. 31, 2012.

 

FINANCIAL HIGHLIGHTS


Statements of Operations








Three Months Ended Dec. 31,




2012


2011

Revenues:


 (unaudited) 



Oil, NGL and natural gas sales

$   12,758,954


$   11,744,277


Lease bonuses and rentals

374,392


1,755,191


Gains (losses) on derivative contracts

892,693


(222,079)


Income from partnerships

154,396


126,944




14,180,435


13,404,333

Costs and expenses:





Lease operating expenses

3,296,562


2,264,912


Production taxes

303,553


438,499


Exploration costs

19,767


313,370


Depreciation, depletion and amortization

5,639,020


4,142,413


Provision for impairment

154,965


363,547


Loss (gain) on asset sales, interest and other

43,186


(77,041)


General and administrative

1,898,084


1,697,523




11,355,137


9,143,223

Income before provision for income taxes

2,825,298


4,261,110







Provision for income taxes

677,000


849,000







Net income

$     2,148,298


$     3,412,110































Basic and diluted earnings per common share

$              0.26


$              0.41







Basic and diluted weighted average shares outstanding:





Common shares

8,250,109


8,256,171


Unissued, directors' deferred compensation shares

122,285


130,654




8,372,394


8,386,825



Balance Sheets










Dec. 31, 2012


Sept. 30, 2012

Assets


(unaudited)



Current assets:





Cash and cash equivalents

$           986,363


$        1,984,099


Oil, NGL and natural gas sales receivables

8,234,220


8,349,865


Deferred income taxes

95,900


121,900


Refundable income taxes

5,980


325,715


Refundable production taxes

548,576


585,454


Derivative contracts

764,643


-


Other

155,978


255,812

Total current assets

10,791,660


11,622,845







Properties and equipment, at cost, based on




   successful efforts accounting:





Producing oil and natural gas properties

281,200,946


275,997,569


Non-producing oil and natural gas properties

9,962,008


10,150,561


Furniture and fixtures

703,457


668,004




291,866,411


286,816,134


Less accumulated depreciation, depletion and amortization

(170,783,831)


(165,199,079)

Net properties and equipment

121,082,580


121,617,055







Investments

1,238,638


1,034,870

Refundable production taxes

736,004


911,960

Total assets

$    133,848,882


$    135,186,730







Liabilities and Stockholders' Equity




Current liabilities:





Accounts payable

$        4,057,404


$        6,447,692


Derivative contracts

-


172,271


Accrued liabilities and other

1,014,007


1,007,779

Total current liabilities

5,071,411


7,627,742







Long-term debt

14,454,757


14,874,985

Deferred income taxes

27,020,907


26,708,907

Asset retirement obligations

2,195,383


2,122,950







Stockholders' equity:





Class A voting common stock, $.0166 par value;






24,000,000 shares authorized, 8,431,502 issued at Dec. 31, 2012, and Sept. 30, 2012

140,524


140,524


Capital in excess of par value

2,195,559


2,020,229


Deferred directors' compensation

2,493,184


2,676,160


Retained earnings

85,805,264


84,821,395




90,634,531


89,658,308


Less treasury stock, at cost; 173,147 shares at Dec. 31,






2012, and 181,310 shares at Sept. 30, 2012

(5,528,107)


(5,806,162)

Total stockholders' equity

85,106,424


83,852,146

Total liabilities and stockholders' equity

$    133,848,882


$    135,186,730



Condensed Statements of Cash Flows





Three months ended Dec. 31,




2012


2011

Operating Activities


(unaudited)



Net income

$  2,148,298


$    3,412,110


Adjustments to reconcile net income to net cash provided





  by operating activities:






Depreciation, depletion and amortization

5,639,020


4,142,413



Impairment

154,965


363,547



Provision for deferred income taxes

338,000


231,000



Exploration costs

19,767


313,370



Gain from leasing of fee mineral acreage

(373,440)


(1,754,982)



Net (gain) loss on sale of assets

-


(116,879)



Income from partnerships

(154,396)


(126,944)



Distributions received from partnerships

194,147


150,404



Directors' deferred compensation expense

114,164


119,876



Restricted stock awards

257,877


57,729


Cash provided by changes in assets and liabilities:






Oil and natural gas sales receivables

115,645


338,124



Fair value of derivative contracts

(936,914)


536,014



Refundable production taxes

212,834


65,919



Other current assets

47,528


(40,662)



Accounts payable

(361,777)


(95,148)



Income taxes receivable

319,735


354,246



Other non-current assets

-


308



Income taxes payable

-


264,786



Accrued liabilities

(577,210)


(469,579)


Total adjustments

5,009,945


4,333,542


Net cash provided by operating activities

7,158,243


7,745,652







Investing Activities






Capital expenditures, including dry hole costs

(6,864,399)


(6,344,006)



Acquisition of working interest properties

-


(17,399,052)



Acquisition of minerals and overrides

(330,000)


(1,384,897)



Proceeds from leasing of fee mineral acreage

384,790


1,802,892



Investments in partnerships

(243,519)


(63,242)



Proceeds from sales of assets

-


128,925



Excess tax benefit on stock-based compensation

15,000


-


Net cash used in investing activities

(7,038,128)


(23,259,380)







Financing Activities






Borrowings under debt agreement

4,171,662


25,726,136



Payments of loan principal

(4,591,890)


(11,203,765)



Purchase of treasury stock

(116,632)


-



Payments of dividends

(580,991)


(579,756)


Net cash provided by (used in) financing activities

(1,117,851)


13,942,615








Increase (decrease) in cash and cash equivalents

(997,736)


(1,571,113)


Cash and cash equivalents at beginning of period

1,984,099


3,506,999


Cash and cash equivalents at end of period

$     986,363


$      1,935,886







Supplemental Schedule of Noncash Investing and Financing Activities




Dividends declared and unpaid

$     583,438


$         581,319


Additions to asset retirement obligations

$       42,156


$           16,246








Gross additions to properties and equipment

$  5,218,194


$    23,483,505


Net (increase) decrease in accounts payable for properties






and equipment additions

1,976,205


1,644,450


Capital expenditures and acquisitions, including dry hole costs

$   7,194,399


$    25,127,955

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

Forward-Looking Statements and Risk Factors This report includes "forward-looking statements" within the meaning of Section 27A of the Securities Act of 1933 and Section 21E of the Securities Exchange Act of 1934.  Forward-looking statements include current expectations or forecasts of future events.  They may include estimates of oil and gas reserves, expected oil and gas production and future expenses, projections of future oil and gas prices, planned capital expenditures for drilling, leasehold acquisitions and seismic data, statements concerning anticipated cash flow and liquidity and Panhandle's strategy and other plans and objectives for future operations.  Although Panhandle believes the expectations reflected in these and other forward-looking statements are reasonable, we can give no assurance they will prove to be correct.  They can be affected by inaccurate assumptions or by known or unknown risks and uncertainties.  Factors that could cause actual results to differ materially from expected results are described under "Risk Factors" in Part 1, Item 1 of Panhandle's 2012 Form 10-K filed with the Securities and Exchange Commission.  These "Risk Factors" include the worldwide economic recession's continuing negative effects on the natural gas business; our hedging activities may reduce the realized prices received for natural gas sales; the volatility of oil and gas prices; Panhandle's ability to compete effectively against strong independent oil and gas companies and majors; the availability of capital on an economic basis to fund reserve replacement costs; Panhandle's ability to replace reserves and sustain production; uncertainties inherent in estimating quantities of oil and gas reserves and projecting future rates of production and the amount and timing of development expenditures; uncertainties in evaluating oil and gas reserves; unsuccessful exploration and development drilling; decreases in the values of our oil and gas properties resulting in write-downs; the negative impact lower oil and gas prices could have on our ability to borrow; drilling and operating risks; and we cannot control activities on our properties as the Company is a non-operator.

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

 

SOURCE PANHANDLE OIL AND GAS INC.

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