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Panhandle Oil And Gas Inc. reports fourth quarter and fiscal 2012 results

Wednesday, Dec 12, 2012

OKLAHOMA CITY, Dec. 11, 2012 /PRNewswire/ -- PANHANDLE OIL AND GAS INC., the "Company," (NYSE-PHX) today reported financial and operating results for the fiscal fourth quarter and twelve months ended Sept. 30, 2012.

HIGHLIGHTS FOR THE YEAR ENDED SEPT. 30, 2012

Recorded 12-month net income of $7,370,996, $.88 per share, compared to a net income of $8,493,912, $1.01 per share, for fiscal 2011.

Increased fiscal year 2012 production by 19% over fiscal year 2011 to 10.6 billion cubic feet equivalent (Bcfe), the largest in Company history.

  • Increased fiscal year 2012 oil production 47% over fiscal year 2011 volumes.

    Generated cash from operating activities of $25.4 million for the year, which fully funded drilling capital expenditures of $25.1 million.
  • Leased the Company's mineral rights in certain Western and Northern Oklahoma plays for $6.5 million in up front lease bonus payments and royalty in future production.  The Western Oklahoma lease was the most valuable leasing deal in Company history.

    Acquired approximately $20.1 million of producing properties and mineral acreage during fiscal 2012, principally in the core of the Fayetteville Shale in Arkansas.

    Fiscal Fourth Quarter 2012 Results

    The Company recorded net income of $182,621, or $.02 per share, as compared to net income of $2,644,381, or $.31 per share, for the 2011 fourth quarter.  Total revenues for the 2012 quarter were $11,041,382 as compared to $12,409,227 for the 2011 quarter.  For the 2012 quarter, net income was negatively affected by an average realized sales price reduction to $4.07 per Mcfe as compared to $4.78 per Mcfe for the 2011 period, and by higher depreciation, depletion and amortization costs (DD&A).  The DD&A cost increase resulted from higher production volumes in the 2012 quarter, higher finding costs per Mcfe in the oil and liquids-rich plays and negative price revisions in the 2012 year-end reserve report reducing ultimate reserves, thus increasing the DD&A rate on a significant number of wells.  Net cash provided by operating activities for the 2012 quarter decreased to $4,383,916 compared to $8,592,240 for the 2011 quarter, principally as a result of the lower net income and increased oil and gas sales receivable in the 2012 quarter.

    Capital expenditures in the 2012 quarter decreased 9% to $9,240,390, as compared to $10,186,458 in the corresponding 2011 quarter.  This decrease is a result of the Company purchasing approximately $4.5 million of mineral acreage during the 2011 fourth quarter and only minimal purchases being made in the 2012 fourth quarter.  Capital expenditures for drilling actually increased $3.4 million in the fourth quarter of fiscal 2012, as compared to the 2011 quarter, which reflects a continuing upswing in activity in the liquids-rich and oily plays in Western Oklahoma and continuing development of the core of the Fayetteville Shale in Arkansas.

    For the fourth fiscal quarter ended Sept. 30, 2012, production increased 12% to 2,720,080 Mcfe as compared to 2,433,114 Mcfe for the 2011 fourth quarter.  This increase is reflective of a continually active drilling program during the year and the acquisition of producing properties in the Fayetteville Shale made in early fiscal 2012.

    Fiscal Year 2012 Results

    The Company recorded a net income of $7,370,996, or $.88 per share, as compared to net income for fiscal 2011 of $8,493,912, or $1.01 per share.  Total revenues for 2012 increased to $48,532,317 as compared to $44,976,651 for 2011.  The increase in revenues for 2012 was the result of the Company receiving lease bonus revenues of $7.2 million in 2012 as compared to $400,000 in 2011.  For fiscal 2012, the average realized sales price was $3.86 per Mcfe as compared to $4.87 per Mcfe for 2011.  Although Mcfe production volumes increased 19% to 10,583,440 Mcfe in fiscal 2012, the average Mcfe sales price reduction of $1.01 materially reduced 2012 revenues and ultimately net income.

    The lease bonuses overcame part of the revenue reduction from decreased product sales prices.  Increased costs of $4.6 million, principally DD&A costs, in 2012 further contributed to the decline in net income.  Increased DD&A costs resulted from a 19% increase in production volumes in 2012, higher finding costs per Mcfe in the oil and liquids-rich plays and negative price revisions reducing ultimate reserves, thus increasing the DD&A rate, on a significant number of wells in the 2012 year-end reserve report.  Net cash provided by operating activities for 2012 was $25,371,196 as compared to $29,283,929 for 2011.  The $7.3 million of lease bonuses received is shown on the Company's Statement of Cash Flows as a receipt in the Investing Activities section rather than being included in Cash Provided by Operating Activities.

    Capital expenditures for drilling and equipping wells and the acquisition of producing properties and mineral acreage totaled $45,291,427 in 2012 as compared to $27,545,348 for 2011.  Capital expenditures for drilling and equipping wells in 2012 increased $2.4 million with the remaining capital expenditure increase being in property acquisitions.

    In a press release dated Nov. 7, 2012, Panhandle announced that total proved reserves increased 12% to 124.7 Bcfe for fiscal 2012 as compared to fiscal 2011.  Proved developed reserves of 73.8 Bcfe at year-end 2012 were the largest in Company history.  The continued growth in proved developed reserves was the result of the purchase of Fayetteville Shale assets and Panhandle's continuing commitment to its strategy of taking working interests in wells drilled on the Company's owned mineral acreage.  Currently total proved reserves are approximately 91% natural gas, 5% oil and 4% NGL.

    Over the last 24 months, industry drilling activity has continued to become more focused on oily and liquids-rich plays.  The Company has in excess of 40,000 net acres of minerals in Western Oklahoma and the Texas Panhandle, which contain several of the plays.  New production and reserves from these plays will continue to expand the Company's oil and NGL reserves and production over the coming year.  Panhandle's oil and gas sales revenues are currently 58% from natural gas sales and 42% from oil and NGL sales.

    Management Comments

    Michael C. Coffman, President and CEO, said, "Fiscal 2012 was another challenging year with natural gas prices being depressed most of the year.  However, Panhandle once again proved the worth of its operational strategies and its mineral acreage asset base returning both a strong financial year with solid earnings as well as delivering very positive operational metrics.

    "The Company recorded the largest lease bonus revenue in the Company's history, closed on the second largest acquisition in the Company's history and grew production of oil and total MCFE's to record levels, all in fiscal 2012.  We further ended the year with an increase in proved reserves of 12% over year-end 2011 proved reserves and with a large number of wells approved, drilling or completing we are in a position to continue our operational momentum into 2013 and beyond.  The combination of our very strong financial position, our operational momentum and an expected continuing recovery of natural gas prices points to 2013 results adding substantial value for the Company."

    Paul F. Blanchard, Panhandle's Senior Vice-President and COO, added, "In fiscal 2012 Panhandle accelerated the transition it began in fiscal 2011 toward growth in oil and NGL production and proved reserves.  The Company's 2012 oil production reached a record high of 153,000 barrels of oil which was a 47% increase over 2011, and total Company oil and NGL production exceeded 250,000 barrels in 2012.  The Company's 2012 proven oil reserves increased 27% over 2011 to 1,072,000 barrels, while total proven oil and NGL reserves reached 1,861,000 barrels.  The persistent value disparity between relatively low natural gas prices compared to high oil prices has led to a dramatic drop in natural gas well drilling and a material increase in oil well drilling throughout the United States.  In recognition of this oil drilling investment opportunity, Panhandle allocated approximately 53% of its approved drilling capital expenditures to oil and liquids-rich projects in 2012.  The majority of this investment was on the Company's mineral holdings in Western Oklahoma and the Texas Panhandle; however, the Company also participated in oil drilling on its mineral holdings in the Permian Basin of West Texas and New Mexico as well as the developing Southern Oklahoma Woodford Shale oil plays.

    "Through this transition we have maintained our core principle of maximizing long-term shareholder value through optimized development of our extensive and diverse mineral acreage holdings."

    SOURCE PANHANDLE OIL AND GAS INC.

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