PHX Minerals Reports Results for the Quarter and Fiscal Year Ended Dec. 31, 2023; Announces Dividend and Provides 2024 Operational Outlook

Rhea-AI Summary

PHX Minerals Inc. reported strong financial results for the quarter and fiscal year ended Dec. 31, 2023, with net income of $2.5 million and $13.9 million, respectively. Adjusted EBITDA was $4.5 million and $22.7 million for the same periods. Royalty production volumes increased by 23% for the full fiscal year, while total production volumes decreased by 3%. The company raised its quarterly dividend by 33% despite challenges in the natural gas pricing environment.

Positive

• Strong financial performance with net income of $13.9 million for the fiscal year 2023.
• Adjusted EBITDA of $22.7 million for the full fiscal year.
• 23% increase in royalty production volumes for the fiscal year 2023.
• Total production volumes decreased by 3% for the full fiscal year.
• Quarterly dividend increased by 33% despite challenges in natural gas pricing.

Negative

• Decrease in total production volumes by 3% for the full fiscal year.
• Net income of $2.5 million for the fiscal fourth quarter.
• Adjusted EBITDA of $4.5 million for the fiscal fourth quarter.

Insights

Financial Analyst

PHX Minerals Inc. reported a year-over-year increase in net income for the fiscal fourth quarter, while experiencing a decrease for the full fiscal year. The company's successful expansion in royalty volumes by 23% and reserve growth of 9% indicates a strategic focus on high-quality mineral acquisitions, particularly in the Haynesville and SCOOP plays. The increase in net proved royalty interest reserves is a positive indicator of the company's asset quality and future production potential.

The company's declaration of a higher quarterly dividend despite a challenging natural gas pricing environment showcases a strong balance sheet and a strategy of modest leverage. This financial prudence is crucial in an industry characterized by price volatility. The debt to adjusted EBITDA ratio of 1.45x is within a reasonable range, suggesting that the company maintains a manageable level of debt relative to its earnings.

However, the decrease in total revenue and natural gas, oil and NGL sales raises concerns about the impact of commodity price fluctuations on the company's top-line growth. The reduction in working interest sales also reflects a strategic shift away from direct operational involvement towards a royalty-based income model which may reduce exposure to operational risks and capital expenditure requirements.

Market Research Analyst

The reported decrease in natural gas, oil and NGL prices, coupled with a decrease in oil volumes sold, indicates broader market challenges that could affect investor sentiment towards the energy sector. The company's hedging strategy, which resulted in a net gain on derivative contracts, demonstrates an effective risk management approach that can protect against price volatility. The hedging percentages suggest a balanced approach, shielding a portion of the revenue from price swings while still allowing for upside potential.

PHX Minerals' focus on acquiring high-quality minerals aligns with industry trends emphasizing the importance of asset quality over quantity. The strategic shift towards royalty interests, as opposed to working interests, may attract investors seeking lower risk profiles. The company's operational outlook for 2024, with projected stable mineral and royalty production, provides a clear expectation for investors and could be seen as a stabilizing factor for the stock.

Energy Sector Analyst

The increase in royalty production volumes and the conversion of wells to producing status reflect PHX Minerals' operational efficiency and effective capital deployment. The company's optimism about the balance of the market and improvement in commodity prices due to reduced drilling activity and the expansion of LNG export facilities is shared by other industry players who anticipate a tightening of supply-demand dynamics.

The company's investment of over $30 million in mineral acquisitions and the subsequent increase in royalty interest reserves underscore a strategic growth focus. This is particularly relevant in the context of the energy transition where natural gas plays a critical role as a bridge fuel. PHX Minerals' positioning in plays like the Haynesville Shale, which is known for its high-quality assets and proximity to growing LNG export markets, could provide a competitive advantage as global energy dynamics evolve.

FORT WORTH, Texas, March 12, 2024 /PRNewswire/ -- PHX MINERALS INC., "PHX" or the "Company" (NYSE: PHX), today reported financial and operating results for the quarter and fiscal year ended Dec. 31, 2023.

Summary of Results for the Period Ended Dec. 31, 2023

• Net income in the fiscal fourth quarter and full fiscal year 2023 was $2.5 million, or $0.07 per diluted share, and $13.9 million, or $0.39 per diluted share, respectively, compared to net income of $1.9 million, or $0.05 per diluted share, for the quarter ended Sept. 30, 2023, and net income of $17.1 million, or $0.48 per diluted share, for the year ended Dec. 31, 2022.
• Adjusted EBITDA⁽¹⁾ in the fiscal fourth quarter and full fiscal year was $4.5 million and $22.7 million, respectively, compared to $6.3 million for the quarter ended Sept. 30, 2023, and $26.7 million for the year ended Dec. 31, 2022.
• Royalty production volumes for the fiscal fourth quarter decreased 6% to 1,946 Mmcfe compared to the quarter ended Sept. 30, 2023, and increased 23% to 8,123 Mmcfe for the full fiscal year 2023 compared to the year ended Dec. 31, 2022.
• Total production volumes for the fiscal fourth quarter decreased 4% to 2,245 Mmcfe compared to the quarter ended Sept. 30, 2023, and decreased 3% to 9,379 Mmcfe for the full fiscal year 2023 compared to the year ended Dec. 31, 2022.
• Net proved royalty interest reserves increased 9% to 57.8 Bcfe at Dec. 31, 2023 from 53.1 Bcfe at Dec. 31, 2022.
• Converted 46 gross (0.098 net) and 314 gross (1.03 net) wells to producing status in the fiscal fourth quarter and full fiscal year 2023, compared to 71 gross (0.155 net) during the quarter ended Sept. 30, 2023, and 313 gross (1.15 net) during the year ended Dec. 31, 2022.
• Inventory of 168 gross (0.851 net) wells in progress and 95 gross (0.444 net) permits as of Dec. 31, 2023, compared to 185 gross (0.81 net) wells in progress and 93 gross (0.28 net) permits as of Sept. 30, 2023.
• Total debt was $32.8 million and the debt to adjusted EBITDA (TTM) ⁽¹⁾ ratio was 1.45x as of Dec. 31, 2023.

Subsequent Events

• PHX announced a $0.03 per share quarterly dividend, payable on March 29, 2024, to stockholders of record on March 18, 2024.

(1)       This is a non-GAAP measure. Refer to the Non-GAAP Reconciliation section.

Chad L. Stephens, President and CEO, commented, "In 2023, PHX delivered year-over-year royalty volume growth of 23%, expanding 2P royalty reserves by 12%, generating significant operating cash flow and net income. These results enabled us to raise our quarterly dividend by 33% despite another challenging year in the natural gas pricing environment. Our strong balance sheet and strategy of modest leverage enabled us to deliver consistent results despite a historic drop in gas prices and rising interest rates validating our business strategy, which positions us for success in both up and down markets."

"Looking forward, we are optimistic that reduced drilling activity, announced production curtailments, and the expansion of LNG export facilities should balance the market and improve commodity prices," continued Mr. Stephens. "During the past year, PHX deployed more than $30 million to acquire almost 2,400 net royalty acres in the Haynesville and SCOOP plays. The acquisition of these high-quality minerals will further drive our royalty volumes, margin expansion and cash flow over the course of the next two to three years. With our strong financial position and a highly focused acquisition strategy we are poised to unlock value for our shareholders as the commodity pricing environment improves."

Financial Highlights
		Three Months Ended				Three Months Ended				Twelve Months Ended				Twelve Months Ended
		Dec. 31, 2023				Dec. 31, 2022				Dec. 31, 2023				Dec. 31, 2022
Royalty Interest Sales		$	7,378,650			$	10,571,704			$	31,593,351			$	47,335,656
Working Interest Sales		$	1,170,133			$	4,316,970			$	4,942,934			$	23,726,485
Natural Gas, Oil and NGL Sales		$	8,548,783			$	14,888,674			$	36,536,285			$	71,062,141
Gains (Losses) on Derivative Contracts		$	3,211,410			$	3,347,002			$	6,859,589			$	(16,322,244)
Lease Bonuses and Rental Income		$	22,780			$	34,482			$	1,068,022			$	423,069
Total Revenue		$	11,782,973			$	18,270,158			$	44,463,896			$	55,162,966
Lease Operating Expense
per Working Interest Mcfe		$	1.07			$	1.66			$	1.27			$	1.21
Transportation, Gathering and Marketing
per Mcfe		$	0.42			$	0.66			$	0.39			$	0.63
Production and Ad Valorem Tax per Mcfe		$	0.20			$	0.30			$	0.20			$	0.34
G&A Expense per Mcfe		$	1.36			$	1.42			$	1.28			$	1.29
Cash G&A Expense per Mcfe (1)		$	1.10			$	1.16			$	1.02			$	1.02
Interest Expense per Mcfe		$	0.32			$	0.29			$	0.25			$	0.17
DD&A per Mcfe		$	1.09			$	0.81			$	0.91			$	0.77
Total Expense per Mcfe		$	3.53			$	3.92			$	3.20			$	3.58
Net Income		$	2,513,444			$	3,346,133			$	13,920,800			$	17,073,156
Adjusted EBITDA (2)		$	4,504,288			$	5,334,016			$	22,652,263			$	26,743,500
Cash Flow from Operations (3)		$	3,361,455			$	10,141,814			$	24,171,139			$	39,035,474
CapEx (4)		$	4,587			$	87,104			$	325,983			$	447,065
CapEx - Mineral Acquisitions		$	4,351,757			$	14,499,014			$	29,735,516			$	46,380,423
Borrowing Base										$	50,000,000			$	50,000,000
Debt										$	32,750,000			$	33,300,000
Debt to Adjusted EBITDA (TTM) (2)											1.45				1.25

(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.

 

Operating Highlights
	Three Months Ended				Three Months Ended				Twelve Months Ended				Twelve Months Ended
	Dec. 31, 2023				Dec. 31, 2022				Dec. 31, 2023				Dec. 31, 2022
Gas Mcf Sold		1,775,577				1,669,320				7,457,084				7,522,763
Average Sales Price per Mcf before the
effects of settled derivative contracts	$	2.53			$	5.66			$	2.61			$	6.19
Average Sales Price per Mcf after the
effects of settled derivative contracts	$	2.76			$	4.02			$	2.96			$	4.20
% of sales subject to hedges		44	%			65	%			46	%			61	%
Oil Barrels Sold		39,768				52,406				182,916				202,867
Average Sales Price per Bbl before the
effects of settled derivative contracts	$	78.66			$	82.52			$	76.76			$	93.06
Average Sales Price per Bbl after the
effects of settled derivative contracts	$	75.37			$	62.03			$	74.21			$	60.98
% of sales subject to hedges		36	%			57	%			42	%			66	%
NGL Barrels Sold		38,422				38,611				137,484				159,475
Average Sales Price per Bbl(1)	$	24.00			$	28.77			$	22.18			$	35.44
Mcfe Sold		2,244,717				2,215,419				9,379,484				9,696,809
Natural gas, oil and NGL sales before the
effects of settled derivative contracts	$	8,548,783			$	14,888,674			$	36,536,285			$	71,062,141
Natural gas, oil and NGL sales after the
effects of settled derivative contracts	$	8,823,534			$	11,067,174			$	38,719,598			$	49,586,709
(1) There were no NGL settled derivative contracts during the 2023 and 2022 periods.

Total Production for the last four quarters was as follows:

Quarter ended		Mcf Sold				Oil Bbls Sold				NGL Bbls Sold				Mcfe Sold
12/31/2023			1,775,577				39,768				38,422				2,244,717
9/30/2023			1,868,012				48,032				32,029				2,348,378
6/30/2023			1,854,485				41,009				33,929				2,304,113
3/31/2023			1,959,010				54,107				33,104				2,482,276

Natural gas volumes were 79% of total production volumes for the quarter ended Dec. 31, 2023.

Royalty Interest Production for the last four quarters was as follows:

Quarter ended		Mcf Sold				Oil Bbls Sold				NGL Bbls Sold				Mcfe Sold
12/31/2023			1,590,301				35,547				23,769				1,946,196
9/30/2023			1,689,396				43,575				20,416				2,073,342
6/30/2023			1,673,346				35,599				20,516				2,010,036
3/31/2023			1,700,974				45,395				20,063				2,093,722

Natural gas volumes were 82% of total royalty production volumes for the quarter ended Dec. 31, 2023.

Working Interest Production for the last four quarters was as follows:

Quarter ended		Mcf Sold				Oil Bbls Sold				NGL Bbls Sold				Mcfe Sold
12/31/2023			185,276				4,221				14,653				298,521
9/30/2023			178,616				4,457				11,613				275,036
6/30/2023			181,139				5,410				13,413				294,077
3/31/2023			258,036				8,712				13,041				388,554

 

Outlook
PHX is providing an operational outlook for 2024 as follows:
		Calendar Year 2022 Actual		Calendar Year 2023 Actual		Calendar Year 2024 Outlook
Mineral & Royalty Production (Mmcfe)		6,613		8,123		8,100 - 8,800
Working Interest Production (Mmcfe)		3,084		1,256		1,000 - 1,200
Total Production (Mmcfe)		9,697		9,379		9,100 - 10,000
Percentage Natural Gas		78 %		80 %		79% - 82%
Transportation, Gathering & Marketing (per Mcfe)		$0.63		$0.39		$0.38 - $0.43
Production Tax (as % of pre-hedge sales volumes)		4.50 %		5.20 %		5.00% - 5.50%
LOE Expenses (on an absolute basis in 000's)		$3,807		$1,599		$1,100 - $1,300
Cash G&A (on an absolute basis in 000's)		$9,900		$9,500		$9,700 - $9,900

Quarter Ended Dec. 31, 2023 Results

The Company recorded net income of $2.5 million, or $0.07 per diluted share, for the quarter ended Dec. 31, 2023, as compared to net income of $3.3 million, or $0.09 per diluted share, for the quarter ended Dec. 31, 2022. The change in net income was principally the result of a decrease in natural gas, oil and NGL sales, a decrease in gains on asset sales, and an increase in DD&A, partially offset by decreases in impairment, lease operating expenses, and transportation, gathering and marketing expenses.

Natural gas, oil and NGL revenue decreased $6.3 million, or 43%, for the quarter ended Dec. 31, 2023, compared to the quarter ended Dec. 31, 2022, due to decreases in natural gas, oil and NGL prices of 55%, 5% and 17%, respectively, and a decrease in oil volumes of 24%, partially offset by an increase in natural gas volumes of 6%.

The increase in royalty production volumes during the quarter ended Dec. 31, 2023 to 1,946 Mmcfe from 1,628 Mmcfe during the quarter ended Dec. 31, 2022 resulted from new wells in the Haynesville Shale and SCOOP coming online. The production decrease in working interest volumes during the quarter ended Dec. 31, 2023, as compared to the quarter ended Dec. 31, 2022, resulted from the divestiture of working interest properties in the Arkoma Stack and Eagle Ford Shale plays.

The Company had a net gain on derivative contracts of $3.2 million for the quarter ended Dec. 31, 2023, comprised of a $2.9 million non-cash gain on derivatives and a $0.3 million gain on settled derivatives, as compared to a net gain of $3.3 million for the quarter ended Dec. 31, 2022. 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 Dec. 31, 2023 pricing relative to the strike price on open derivative contracts.

The Company recorded no impairment and made immaterial divestitures during the quarter ended Dec. 31, 2023. Lease operating expenses and transportation, gathering and marketing expenses were lower due to the divestiture of working interest properties in the Arkoma Stack and Eagle Ford Shale plays.

Twelve Months Ended Dec. 31, 2023 Results

The Company recorded net income of $13.9 million, or $0.39 per diluted share, for the twelve months ended Dec. 31, 2023, as compared to net income of $17.1 million, or $0.48 per diluted share, for the twelve months ended Dec. 31, 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 impairment, lease operating expenses, production and ad valorem taxes, and transportation, gathering and marketing expenses.

Natural gas, oil and NGL revenue decreased $34.5 million, or 49%, for the twelve months ended Dec. 31, 2023, compared to the twelve months ended Dec. 31, 2022, due to decreases in natural gas, oil and NGL prices of 58%, 18% and 37%, respectively, and decreases in natural gas, oil and NGL volumes of 1%, 10% and 14%, respectively.

The increase in royalty production volumes during the twelve months ended Dec. 31, 2023 to 8,123 Mmcfe from 6,613 Mmcfe during the twelve months ended Dec. 31, 2022 resulted from new wells in the Haynesville Shale and SCOOP coming online. The production decrease in working interest volumes during the twelve months ended Dec. 31, 2023, as compared to the twelve months ended Dec. 31, 2022, resulted from the divestiture of working interest properties in the Fayetteville Shale, Arkoma Stack, and Eagle Ford Shale plays.

The Company had a net gain on derivative contracts of $6.9 million for the twelve months ended Dec. 31, 2023, comprised of a a $4.3 million non-cash gain on derivatives and a $2.6 million gain on settled derivatives, as compared to a net loss of ($16.3) million for the twelve months ended Dec. 31, 2022. The gain on settled derivative contracts for the twelve months ended Dec. 31, 2023 excludes $0.4 million of cash paid to settle off-market derivative contracts. The total net cash received to settle hedge contracts during the twelve months ended Dec. 31, 2023 was $2.2 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 Dec. 31, 2023 pricing relative to the strike price on open derivative contracts.

Lease operating expenses and transportation, gathering and marketing expenses were lower due to the divestiture of working interest properties in the Fayetteville Shale, Arkoma Stack, and Eagle Ford Shale plays. Production and ad valorem taxes decreased due to a 49% decrease in natural gas, oil and NGL sales. 

Operations Update

During the quarter ended Dec. 31, 2023, the Company converted 46 gross (0.098 net) wells to producing status, including 21 gross (0.044 net) wells in the Haynesville and 14 gross (0.024 net) wells in the SCOOP, compared to 60 gross (0.27 net) wells in the quarter ended Dec. 31, 2022.

At Dec. 31, 2023, the Company had a total of 168 gross (0.851 net) wells in progress across its mineral positions and 95 gross (0.444 net) active permitted wells, compared to 185 gross (0.81 net) wells in progress and 93 gross (0.28 net) active permitted wells at Sept. 30, 2023. As of Feb. 12, 2024, 14 rigs were operating on the Company's acreage and 57 rigs operating within 2.5 miles of its acreage.

									Bakken/
									Three				Arkoma
	SCOOP				STACK				Forks				Stack				Haynesville				Other				Total
As of Dec. 31, 2023:
Gross Wells in Progress on PHX Acreage (1)		57				5				8				2				87				9				168
Net Wells in Progress on PHX Acreage (1)		0.227				0.023				0.043				0.001				0.537				0.020				0.851
Gross Active Permits on PHX Acreage		35				5			-					5				44				6				95
Net Active Permits on PHX Acreage		0.151				0.011			-					0.002				0.246				0.034				0.444
As of Feb. 12, 2024:
Rigs Present on PHX Acreage		6				-				1				-				4				3				14
Rigs Within 2.5 Miles of PHX Acreage		14				9				2				1				23				8				57

(1)	Wells in progress includes drilling wells and drilled but uncompleted wells, or DUCs.

Leasing Activity

During the quarter ended Dec. 31, 2023, the Company leased 108 net mineral acres to third-party exploration and production companies for an average bonus payment of $968 per net mineral acre and an average royalty of 24%.

Acquisition and Divestiture Update

During the quarter ended Dec. 31, 2023, the Company purchased 325 net royalty acres for approximately $4.3 million and had no significant divestitures.

		Acquisitions
		SCOOP				Haynesville				Other		Total
During Three Months Ended Dec. 31, 2023:
Net Mineral Acres Purchased			96				142			-			238
Net Royalty Acres Purchased			112				213			-			325

Royalty Reserves Update

At Dec. 31, 2023, proved royalty reserves increased 9% to 57.8 Bcfe compared to 53.1 Bcfe at Dec. 31, 2022. Proved developed reserves increased by 5.3 Bcfe and proved undeveloped reserves decreased by 0.7 Bcfe, primarily due to execution of our acquisition strategy and consistent development in the Haynesville and SCOOP plays resulting in conversion of undeveloped reserves to producing.

	Proved Royalty Interest
	Reserves SEC Pricing
	Dec. 31, 2023				Dec. 31, 2022
Proved Developed Reserves:
Mcf of Gas		36,156,363				31,467,785
Barrels of Oil		731,527				628,289
Barrels of NGL		715,683				712,342
Mcfe (1)		44,839,623				39,511,571
Proved Undeveloped Reserves:
Mcf of Gas		11,508,969				12,608,549
Barrels of Oil		134,497				118,168
Barrels of NGL		99,712				48,136
Mcfe (1)		12,914,223				13,606,373
Total Proved Reserves:
Mcf of Gas		47,665,332				44,076,334
Barrels of Oil		866,024				746,457
Barrels of NGL		815,395				760,478
Mcfe (1)		57,753,846				53,117,944
10% Discounted Estimated Future
Net Cash Flows (before income taxes):
Proved Developed	$	73,448,070			$	122,723,015
Proved Undeveloped		23,525,572				56,306,773
Total	$	96,973,642			$	179,029,788
(1) Crude oil and NGL converted to natural gas on a one barrel of crude oil or NGL equals six Mcf of natural gas basis.

Total Reserves Update

At Dec. 31, 2023, proved reserves were 71.2 Bcfe, as calculated by Cawley, Gillespie and Associates, Inc., the Company's independent consulting petroleum engineering firm. This was an 11% decrease, compared to the 79.7 Bcfe of proved reserves at Dec. 31, 2022. Total proved developed reserves decreased 12% to 58.3 Bcfe, as compared to Dec. 31, 2022 reserve volumes, mainly due to sales of working interest properties in the Arkoma Stack and Eagle Ford Shale.  SEC prices used for the Dec. 31, 2023 report averaged $2.67 per Mcf for natural gas, $76.85 per barrel for oil and $21.98 per barrel for NGL, compared to $6.52 per Mcf for natural gas, $92.74 per barrel for oil and $39.18 per barrel for NGL for the Dec. 31, 2022 report. These prices reflect net prices received at the wellhead.

	Proved Reserves SEC Pricing
	Dec. 31, 2023				Dec. 31, 2022
Proved Developed Reserves:
Mcf of Gas		44,479,988				48,596,944
Barrels of Oil		937,465				1,253,838
Barrels of NGL		1,362,944				1,660,439
Mcfe (1)		58,282,442				66,082,606
Proved Undeveloped Reserves:
Mcf of Gas		11,508,969				12,608,549
Barrels of Oil		134,497				118,168
Barrels of NGL		99,712				48,136
Mcfe (1)		12,914,223				13,606,373
Total Proved Reserves:
Mcf of Gas		55,988,957				61,205,493
Barrels of Oil		1,071,962				1,372,006
Barrels of NGL		1,462,656				1,708,575
Mcfe (1)		71,196,665				79,688,979
10% Discounted Estimated Future
Net Cash Flows (before income taxes):
Proved Developed	$	86,694,012			$	185,018,066
Proved Undeveloped		23,325,572				56,306,773
Total	$	110,019,584			$	241,324,839
SEC Pricing
Gas/Mcf	$	2.67			$	6.52
Oil/Barrel	$	76.85			$	92.74
NGL/Barrel	$	21.98			$	39.18
Proved Reserves - Projected Future Pricing (2)
10% Discounted Estimated Future	Proved Reserves
Net Cash Flows (before income taxes):	Dec. 31, 2023				Dec. 31, 2022
Proved Developed	$	107,635,503			$	126,605,850
Proved Undeveloped		29,439,523				38,748,236
Total	$	137,075,026			$	165,354,086
(1) Crude oil and NGL converted to natural gas on a one barrel of crude oil or NGL equals six Mcf of natural gas basis.
(2) Projected futures pricing as of Dec. 31, 2023 and Dec. 31, 2022 basis adjusted to Company wellhead price.

Quarterly Conference Call

PHX will host a conference call to discuss the Company's results for the quarter ended Dec. 31, 2023 at 11 a.m. EDT tomorrow, March 13, 2024. 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 13744298.

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.

FINANCIAL RESULTS
Statements of Income
	Three Months Ended Dec. 31,								Twelve Months Ended				Twelve Months Ended
	2023				2022				Dec. 31, 2023				Sept. 30, 2022
Revenues:
Natural gas, oil and NGL sales	$	8,548,783			$	14,888,674			$	36,536,285			$	69,860,631
Lease bonuses and rental income		22,780				34,482				1,068,022				467,502
Gains (losses) on derivative contracts		3,211,410				3,347,002				6,859,589				(16,833,078)
		11,782,973				18,270,158				44,463,896				53,495,055
Costs and expenses:
Lease operating expenses		319,113				977,165				1,598,944				3,945,706
Transportation, gathering and marketing		945,788				1,455,260				3,674,832				5,890,390
Production and ad valorem taxes		457,058				656,764				1,881,737				3,332,581
Depreciation, depletion and amortization		2,443,154				1,802,114				8,566,185				7,278,118
Provision for impairment		-				6,100,696				38,533				14,565
Interest expense		723,685				637,698				2,362,393				1,164,992
General and administrative		3,050,828				3,137,401				11,970,182				11,500,594
Losses (gains) on asset sales and other		84,443				(824,073)				(4,285,170)				(4,243,163)
Total costs and expenses		8,024,069				13,943,025				25,807,636				28,883,783
Income (loss) before provision (benefit) for income taxes		3,758,904				4,327,133				18,656,260				24,611,272
Provision for income taxes		1,245,460				981,000				4,735,460				4,202,000
Net income	$	2,513,444			$	3,346,133			$	13,920,800			$	20,409,272
Basic earnings per common share	$	0.07			$	0.09			$	0.39			$	0.59
Diluted earnings per common share	$	0.07			$	0.09			$	0.39			$	0.59
Weighted average shares outstanding:
Basic		36,036,270				35,679,740				35,980,309				34,403,498
Diluted		36,083,449				36,489,353				35,980,309				34,560,310
Dividends per share of
common stock paid in period	$	0.0300			$	0.0200			$	0.0975			$	0.0650

 

Balance Sheets
	Dec. 31, 2023				Sept. 30, 2022
Assets
Current assets:
Cash and cash equivalents	$	806,254			$	3,396,809
Natural gas, oil, and NGL sales receivables (net of $0		4,900,126				13,152,274
allowance for uncollectable accounts)
Refundable income taxes		455,931				-
Derivative contracts, net		3,120,607				-
Other		878,659				1,372,847
Total current assets		10,161,577				17,921,930
Properties and equipment at cost, based on
successful efforts accounting:
Producing natural gas and oil properties		209,082,847				248,978,928
Non-producing natural gas and oil properties		58,820,445				51,779,336
Other		1,360,614				1,085,056
		269,263,906				301,843,320
Less accumulated depreciation, depletion and amortization		(114,139,423)				(168,759,385)
Net properties and equipment		155,124,483				133,083,935
Derivative contracts, net		162,980				-
Operating lease right-of-use assets		572,610				739,131
Other, net		486,630				757,116
Total assets	$	166,508,280			$	152,502,112
Liabilities and Stockholders' Equity
Current liabilities:
Accounts payable	$	562,607			$	647,217
Derivative contracts, net		-				7,873,979
Income taxes payable		-				495,858
Current portion of operating lease liability		233,390				213,355
Accrued liabilities and other		1,215,275				2,032,275
Total current liabilities		2,011,272				11,262,684
Long-term debt		32,750,000				28,300,000
Deferred income taxes, net		6,757,637				1,585,906
Asset retirement obligations		1,062,139				1,901,904
Derivative contracts, net		-				687,212
Operating lease liability, net of current portion		695,818				985,887
Total liabilities		43,276,866				44,723,593
Stockholders' equity:
Common Stock, $0.01666 par value; 54,000,500 shares authorized and
36,121,723 issued at Dec. 31, 2023; 54,000,500 shares authorized
and 35,776,752 issued at Sep. 30, 2022		601,788				596,041
Capital in excess of par value		41,676,417				44,177,051
Deferred directors' compensation		1,487,590				1,496,243
Retained earnings		80,022,839				67,117,791
		123,788,634				113,387,126
Less treasury stock, at cost; 131,477 shares at Dec. 31,
2023, and 377,232 shares at Sep. 30, 2022		(557,220)				(5,608,607)
Total stockholders' equity		123,231,414				107,778,519
Total liabilities and stockholders' equity	$	166,508,280			$	152,502,112

 

Condensed Statements of Cash Flows
	Twelve Months Ended				Three Months Ended				Twelve Months Ended
	Dec. 31, 2023				Dec. 31, 2022				Sept. 30, 2022
Operating Activities
Net income	$	13,920,800			$	3,346,133			$	20,409,272
Adjustments to reconcile net income (loss) to net cash provided
by operating activities:
Depreciation, depletion and amortization		8,566,185				1,802,114				7,278,118
Impairment of producing properties		38,533				6,100,696				14,565
Provision for deferred income taxes		4,303,731				868,000				1,242,000
Gain from leasing fee mineral acreage		(1,067,992)				(34,371)				(466,341)
Proceeds from leasing fee mineral acreage		1,213,913				67,651				688,207
Net (gain) loss on sales of assets		(4,728,758)				(934,207)				(4,423,646)
Directors' deferred compensation expense		228,017				44,827				191,852
Total (gain) loss on derivative contracts		(6,859,589)				(3,347,002)				16,833,078
Cash receipts (payments) on settled derivative contracts		2,743,475				(810,839)				(2,796,250)
Restricted stock award expense		2,205,910				524,257				2,211,673
Other		136,412				30,157				87,353
Cash provided (used) by changes in assets and liabilities:
Natural gas, oil and NGL sales receivables		4,883,870				3,368,278				(6,723,292)
Income taxes receivable		(455,931)				-				2,413,942
Other current assets		(45,869)				(309,051)				250,568
Accounts payable		69,228				(129,304)				(10,305)
Other non-current assets		206,292				63,723				(380,964)
Income taxes payable		(576,427)				80,569				161,808
Accrued liabilities		(610,661)				(589,817)				550,012
Total adjustments		10,250,339				6,795,681				17,122,378
Net cash provided by operating activities		24,171,139				10,141,814				37,531,650
Investing Activities
Capital expenditures		(325,983)				(87,104)				(552,638)
Acquisition of minerals and overriding royalty interests		(29,735,516)				(14,499,014)				(43,525,236)
Net proceeds from sales of assets		9,614,194				1,137,730				13,217,844
Deposits received on held for sale assets		-				815,000				-
Net cash provided (used) by investing activities		(20,447,305)				(12,633,388)				(30,860,030)
Financing Activities
Borrowings under credit facility		19,500,000				10,000,000				21,300,000
Payments of loan principal		(20,050,000)				(5,000,000)				(10,500,000)
Net proceeds from equity issuance		-				-				5,006,538
Cash receipts from (payments on) off-market derivative contracts		(560,162)				(3,010,661)				(19,260,104)
Purchases of treasury stock		(402,704)				(52,460)				(1,855)
Payments of dividends		(3,520,366)				(726,462)				(2,257,901)
Net cash provided (used) by financing activities		(5,033,232)				1,210,417				(5,713,322)
Increase (decrease) in cash and cash equivalents		(1,309,398)				(1,281,157)				958,298
Cash and cash equivalents at beginning of period		2,115,652				3,396,809				2,438,511
Cash and cash equivalents at end of period	$	806,254			$	2,115,652			$	3,396,809
Supplemental Disclosures of Cash Flow Information:
Interest paid (net of capitalized interest)	$	2,405,361			$	581,142			$	997,085
Income taxes paid (net of refunds received)	$	1,464,087			$	32,431			$	384,249
Supplemental Schedule of Noncash Investing and Financing Activities:
Dividends declared and unpaid	$	113,443			$	811,688			$	-
Gross additions to properties and equipment	$	30,761,578			$	14,710,613			$	46,791,346
Value of shares used for acquisitions		-				-				(3,510,001)
Net increase (decrease) in accounts receivable for properties
and equipment additions		(700,079)				(124,495)				796,529
Capital expenditures and acquisitions	$	30,061,499			$	14,586,118			$	44,077,874

 

Derivative Contracts as of March 7, 2024
		Production volume
Contract period		covered per month		Index		Contract price
Natural gas costless collars
January - March 2024		30,000 Mmbtu		NYMEX Henry Hub		$3.25 floor / $5.25 ceiling
January - 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
April 2025 - September 2025		55,000 Mmbtu		NYMEX Henry Hub		$3.00 floor / $3.75 ceiling
November 2025 - March 2026		100,000 Mmbtu		NYMEX Henry Hub		$3.50 floor / $4.85 ceiling
Natural gas fixed price swaps
Janurary - February 2024		135,000 Mmbtu		NYMEX Henry Hub		$3.65
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
January - March 2025		50,000 Mmbtu		NYMEX Henry Hub		$3.51
April - October 2025		100,000 Mmbtu		NYMEX Henry Hub		$3.28
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
June - September 2024		500 Bbls		NYMEX WTI		$70.00 floor / $78.10 ceiling
July - October 2024		1,650 Bbls		NYMEX WTI		$65.00 floor / $76.50 ceiling
October - December 2024		500 Bbls		NYMEX WTI		$67.00 floor / $77.00 ceiling
Oil fixed price swaps
January - 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
July - October 2024		1,500 Bbls		NYMEX WTI		$69.50
November - December 2024		2,000 Bbls		NYMEX WTI		$69.50
November 2024 - March 2025		1,600 Bbls		NYMEX WTI		$64.80
January - March 2025		500 Bbls		NYMEX WTI		$69.50
January - June 2025		2,000 Bbls		NYMEX WTI		$70.90
April - June 2025		750 Bbls		NYMEX WTI		$69.50
April - June 2025		1,000 Bbls		NYMEX WTI		$68.00
July - September 2025		500 Bbls		NYMEX WTI		$69.50
July - December 2025		1,500 Bbls		NYMEX WTI		$68.90

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				Twelve Months Ended				Twelve Months Ended				Three Months Ended
	Dec. 31, 2023				Dec. 31, 2022				Dec. 31, 2023				Dec. 31, 2022				Sept. 30, 2023
Net Income	$	2,513,444			$	3,346,133			$	13,920,800			$	17,073,156			$	1,895,403
Plus:
Income tax expense		1,245,460				981,000				4,735,460				4,421,000				589,000
Interest expense		723,685				637,698				2,362,393				1,625,971				556,941
DD&A		2,443,154				1,802,114				8,566,185				7,496,472				2,022,709
Impairment expense		-				6,100,696				38,533				6,109,676				36,460
Less:
Non-cash gains (losses)
on derivatives		2,936,659				6,265,041				4,302,531				(584,976)				(940,592)
Gains (losses) on asset sales		57,505				934,207				4,728,759				7,478,781				243,041
Plus:
Cash receipts from (payments on)
off-market derivative contracts(1)		-				(903,461)				(373,745)				(5,738,164)				-
Restricted stock and deferred
director's expense		572,709				569,084				2,433,927				2,649,194				522,965
Adjusted EBITDA	$	4,504,288			$	5,334,016			$	22,652,263			$	26,743,500			$	6,321,029
(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 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
	Dec. 31, 2023				Dec. 31, 2022
Net Income	$	13,920,800			$	17,073,156
Plus:
Income tax expense		4,735,460				4,421,000
Interest expense		2,362,393				1,625,971
DD&A		8,566,185				7,496,472
Impairment expense		38,533				6,109,676
Less:
Non-cash gains (losses)
on derivatives		4,302,531				(584,976)
Gains (losses) on asset sales		4,728,759				7,478,781
Plus:
Cash receipts from (payments on)
off-market derivative contracts(1)		(373,745)				(5,738,164)
Restricted stock and deferred
director's expense		2,433,927				2,649,194
Adjusted EBITDA	$	22,652,263			$	26,743,500
Debt	$	32,750,000			$	33,300,000
Debt to Adjusted EBITDA (TTM)		1.45				1.25
(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.

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.

 

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SOURCE PHX MINERALS INC.

FAQ

What was PHX Minerals Inc.'s net income for the fiscal year 2023?

PHX Minerals Inc. reported a net income of $13.9 million for the fiscal year 2023.

How did the adjusted EBITDA perform for the full fiscal year?

The adjusted EBITDA for PHX Minerals Inc. was $22.7 million for the full fiscal year.

What was the percentage change in royalty production volumes for the fiscal year 2023?

There was a 23% increase in royalty production volumes for the fiscal year 2023.

What happened to total production volumes for the full fiscal year?

Total production volumes decreased by 3% for the full fiscal year.

How did the quarterly dividend change despite challenges in the natural gas pricing environment?

PHX Minerals Inc. raised its quarterly dividend by 33% despite challenges in the natural gas pricing environment.