Panhandle Oil and Gas Inc. Reports Third Quarter and Nine Months 2009 Results
OKLAHOMA CITY, Aug. 10 /PRNewswire-FirstCall/ — PANHANDLE OIL AND GAS INC. (NYSE: PHX) today reported financial and operating results for the fiscal third quarter and nine months ended June 30, 2009.
HIGHLIGHTS FOR THE THREE AND NINE MONTH PERIODS ENDED JUNE 30, 2009
- Produced a quarterly record 2.6 Bcfe during the third quarter of 2009, a 34% increase from the corresponding 2008 period.
- Reported record nine month production of 7.5 Bcfe, a 36% increase compared to the corresponding 2008 period.
- Strengthened balance sheet and reduced debt by $2.5 million to $13.3 million from March 31, 2009.
- Cash provided by operating activities increased 20% in the 2009 nine months as compared to the 2008 period.
- Continued to convert Panhandle’s mineral rights ownership interests into producing well interests particularly in the Woodford Shale in Southeast Oklahoma and the Fayetteville Shale in Arkansas.
- Participated in 151 wells with a working interest thus far in 2009 with only three dry holes.
Three Months Results 2009
For the quarter ending June 30, 2009, the Company recorded a net loss of $928,512 or $.11 per share as compared to net income of $6,468,885 or $.76 per share for the 2008 third quarter. Capital expenditures for drilling and equipping wells decreased 55% to $5,238,302, as compared to the corresponding 2008 quarter. Net cash provided by operating activities for the 2009 quarter was $5,705,859 as compared to $9,117,191 for the 2008 quarter. Production for the 2009 third quarter increased 34% to 2,647,474 Mcfe as compared to 1,979,904 Mcfe for the 2008 quarter. Total revenues for the 2009 quarter were $8,779,960 as compared to $18,453,206 for the 2008 quarter. For the 2009 quarter, the average sales price per Mcfe declined to $3.42 as compared to $10.38 for the 2008 period.
The outstanding balance on the Company’s bank line-of-credit at August 3, 2009 was $11.4 million on a borrowing base of $35 million.
Nine Month Results 2009
For the fiscal nine months ended June 30, 2009, the Company recorded a net loss of $2,748,397 or $.33 per share as compared to net income for the 2008 nine months of $12,780,473 or $1.50 per share. Net cash provided by operating activities for the 2009 period increased 20% to $30,617,545 as compared to $25,474,992 for the 2008 nine months. Total revenues for the 2009 nine months were $28,973,677 as compared to $44,904,231 for the 2008 nine months. Capital expenditures for drilling and equipping wells totaled $35,509,890 in the 2009 fiscal period, as compared to $27,757,275 for the 2008 fiscal period. For the 2009 nine months, the average sales price per Mcfe declined to $3.74 as compared to $8.79 for the 2008 period.
The Company has in place certain natural gas fixed swap contracts which cover the remainder of calendar 2009 and all of 2010. Based on current monthly natural gas production levels, approximately 37% of 2009 natural gas production and approximately 45% of anticipated 2010 natural gas production is hedged at weighted average prices of $3.77 per Mcf for 2009 and $5.30 per Mcf for 2010. These prices are net prices tied to specific Oklahoma pipelines, as opposed to NYMEX prices. In the first nine months of fiscal 2009, the Company received total payments of $1,782,400 on its derivative contracts. These contracts continue to reduce the Company’s exposure to short-term fluctuations in the price of natural gas.
Management Comment
Michael C. Coffman, President and CEO stated, “The economic downturn and the resulting downward pressure on natural gas demand, coupled with high natural gas storage levels have combined to dramatically reduce natural gas sales prices as our fiscal year has progressed. Our increase in production through the first nine months of fiscal 2009 has somewhat buffered the effect of the substantial price decline on revenues. However, cash flow from operations has remained strong and through the first nine months 20% above last year’s level, which has allowed us to continue drilling principally from available cash.”
Coffman continued, “We have been pleased with the results of our drilling program this year. Quarterly production increased to a record level of 2.6 Bcfe, which was 34% higher than last year’s third quarter volumes and 11% over production volumes in the second quarter of this year. Panhandle has a large diversified base of mineral acreage ownership which continues to provide us substantial drilling opportunities in three world class shale plays, the Fayetteville Shale in Arkansas and the Woodford Shales in southeast Oklahoma and the Cana Woodford Shale in western Oklahoma. In addition, we continue to see new opportunities in western Oklahoma with horizontal drilling in several formations that are yielding outstanding results. We have more than 3,000 3P drilling locations, just in the plays discussed above, primarily on our perpetually owned fee mineral acreage which will provide Panhandle drilling opportunities for years to come.
“With that being said, in view of current market prices for natural gas, we have slowed our drilling activity as the fiscal year has progressed, which is reflected in third quarter capital expenditures of $5.2 million as compared to $30.3 million in the first six months of fiscal 2009. For the next several months, we will principally commit to drilling projects necessary to protect our unit rights. The result of this reduced drilling program will eventually be lower production rates as we defer drilling until market conditions improve. As we have stated many times, we are well positioned to weather this current industry and economic downturn and are prepared to prosper as the industry, product prices, and economy in general recover. Our ability to drill on our mineral acres gives us a continuing advantage in capital efficiency which we will continue to exploit.”
“We reduced our debt level from $15.8 million at March 31, 2009 to $13.3 million at June 30. We used the $2.5 million proceeds from the sale of a partial interest in the SE Leedey Field in Western Oklahoma to make the debt reduction. This interest, consisting of approximately 350 Mmcfe of proved producing reserves (less than 1% of Panhandle’s total proved producing reserves) and 910 acres of leasehold, was sold for what we consider to be full value. Production from the SE Leedey Field was approximately 1% of our daily production. The gain from this sale will be recorded in the fourth fiscal quarter, as the transfer of the properties was effective July 1, 2009.”
OPERATING HIGHLIGHTS
Third Third Nine Nine
Quarter Quarter Months Months
Ended Ended Ended Ended
June 30, June 30, June 30, June 30,
2009 2008 2009 2008
--------- --------- --------- ---------
MCFE Sold 2,647,474 1,979,904 7,522,897 5,538,866
Average Sales Price per MCFE $3.42 $10.38 $3.74 $8.79
Barrels Sold 34,145 31,907 99,149 101,027
Average Sales Price per Barrel $53.89 $120.92 $48.81 $100.12
MCF Sold 2,442,604 1,788,462 6,928,003 4,932,704
Average Sales Price per MCF $2.96 $9.33 $3.36 $7.82
Quarterly Production Levels
Quarter ended Barrels Sold MCF Sold MCFE
------------- ------------ -------- ----
6/30/09 34,145 2,442,604 2,647,474
3/31/09 34,744 2,171,660 2,380,124
12/31/08 30,260 2,313,739 2,495,299
9/30/08 31,375 1,995,333 2,183,583
6/30/08 31,907 1,788,462 1,979,904
Derivative contracts in place as of June 30, 2009
(prices below reflect the Company's net price from the listed Oklahoma
pipelines)
Production
Volume
covered per Indexed (1)
Contract period month Pipeline Fixed price
--------------- ------------- -------- -----------
March - December, 2009 60,000 mmbtu CEGT $4.01
April - December, 2009 100,000 mmbtu CEGT $3.71
May - December, 2009 70,000 mmbtu CEGT $3.615
July - December, 2009 70,000 mmbtu PEPL $3.745
January - December, 2010 100,000 mmbtu CEGT $5.015
January - December, 2010 50,000 mmbtu CEGT $5.050
January - December, 2010 100,000 mmbtu PEPL $5.57
January - December, 2010 50,000 mmbtu PEPL $5.56
(1) CEGT - Centerpoint Energy Gas Transmission's East pipeline in
Oklahoma
PEPL - Panhandle Eastern Pipeline Company's Texas/Oklahoma mainline
FINANCIAL HIGHLIGHTS
Consolidated Statements of Operations
(unaudited)
Three Months Ended Nine Months Ended
June 30, June 30,
2009 2008 2009 2008
---- ---- ---- ----
Revenues:
Oil and natural gas
sales $9,058,169 $20,551,865 $28,114,989 $48,687,560
Lease bonuses and
rentals 28,777 32,154 182,019 110,464
Gains (losses) on
derivative contracts (470,974) (2,286,789) 212,578 (4,391,316)
Gain on asset sales,
interest and other 114,744 105,963 211,202 190,718
Income of
partnerships 49,244 50,013 252,889 306,805
------ ------ ------- -------
8,779,960 18,453,206 28,973,677 44,904,231
Costs and expenses:
Lease operating
expenses 2,095,933 2,178,732 5,772,401 4,977,151
Production taxes 369,802 675,206 1,117,040 2,431,165
Exploration costs 112,537 35,394 314,845 397,125
Depreciation,
depletion and
amortization 6,844,813 4,671,193 20,882,405 13,376,346
Provision for
impairment 115,892 37,666 2,124,133 385,672
Loss on sale of assets - 203,387 - 203,387
General and
administrative 1,174,315 1,164,743 3,721,070 3,991,566
Interest expense 68,180 - 68,180 44,346
------ --- ------ ------
10,781,472 8,966,321 34,000,074 25,806,758
---------- --------- ---------- ----------
Income (loss) before
provision (benefit)
for income taxes (2,001,512) 9,486,885 (5,026,397) 19,097,473
Provision (benefit)
for income taxes (1,073,000) 3,018,000 (2,278,000) 6,317,000
----------- --------- ----------- ---------
Net income (loss) $(928,512) $6,468,885 $(2,748,397) $12,780,473
========= ========== =========== ===========
Earnings (loss) per
common share (Note 4) $(0.11) $0.76 $(0.33) $1.50
====== ===== ====== =====
Weighted average shares
outstanding:
Common shares 8,300,128 8,423,067 8,300,128 8,428,701
Unissued, vested
directors' shares 97,867 85,909 96,325 84,911
------ ------ ------ ------
8,397,995 8,508,976 8,396,453 8,513,612
========= ========= ========= =========
Dividends declared
per share of common
stock and paid in
period $0.07 $0.07 $0.21 $0.21
===== ===== ===== =====
Consolidated Balance Sheets
(unaudited)
June 30, September 30,
2009 2008
---- ----
Assets
Current assets:
Cash and cash equivalents $605,090 $895,708
Oil and natural gas sales receivables (net) 7,548,471 17,183,128
Short-term derivative contracts - 646,193
Refundable income taxes - 2,162,305
Assets held for sale 893,325 -
Other 708,143 217,691
------- -------
Total current assets 9,755,029 21,105,025
Properties and equipment, at cost, based on
successful efforts accounting:
Producing oil and natural gas properties 195,946,566 175,727,196
Non-producing oil and natural gas properties 10,254,992 11,216,103
Other 546,676 491,321
------- -------
206,748,234 187,434,620
Less accumulated depreciation, depletion and
amortization 106,949,000 87,661,433
----------- ----------
Net properties and equipment 99,799,234 99,773,187
Investments 681,021 736,314
Other 515,247 392,657
------- -------
Total assets $110,750,531 $122,007,183
============ ============
Liabilities and Stockholders' Equity
Current liabilities:
Accounts payable $4,586,336 $15,897,565
Short-term derivative contracts 29,389 -
Prepayment of sales price on assets to be
sold 2,514,343 -
Accrued liabilities 814,277 608,456
------- -------
Total current liabilities 7,944,345 16,506,021
Long-term debt 13,332,504 9,704,100
Deferred income taxes 22,818,750 25,943,750
Asset retirement obligations 1,672,978 1,504,411
Long-term derivative contracts 894,240 -
Stockholders' equity:
Class A voting common stock, $.0166 par value;
24,000,000 shares authorized, 8,431,502
issued at June 30, 2009 and at September
30, 2008 140,524 140,524
Capital in excess of par value 2,090,070 2,090,070
Deferred directors' compensation 1,836,048 1,605,811
Retained earnings 64,745,180 69,236,604
---------- ----------
68,811,822 73,073,009
Less treasury stock, at cost; 131,374 shares
at June 30, 2009 and at September 30, 2008 (4,724,108) (4,724,108)
---------- ----------
Total stockholders' equity 64,087,714 68,348,901
---------- ----------
Total liabilities and stockholders' equity $110,750,531 $122,007,183
============ ============
Condensed Consolidated Statements of Cash Flows
(unaudited)
Nine months ended June 30,
2009 2008
---- ----
Operating Activities
Net income (loss) $(2,748,397) $12,780,473
Adjustments to reconcile net income (loss)
to net cash provided by operating
activities:
(Gain) loss, net, on sale of assets (181,760) 83,986
Income of partnerships (252,889) (306,805)
Exploration costs 314,845 397,125
Depreciation, depletion and amortization 20,882,405 13,376,346
Provision for impairment 2,124,223 385,672
Deferred income taxes (3,125,000) 4,275,000
Distributions received from partnerships 308,182 368,413
Directors' deferred compensation expense 230,237 225,965
Cash provided by changes in assets and
liabilities:
Oil and natural gas sales receivables 9,634,657 (9,359,047)
Derivative contracts 1,569,822 3,613,416
Refundable income taxes 2,162,305 -
Other current assets (490,452) (819,020)
Other non-current assets (122,590) -
Accounts payable 106,136 130,477
Accrued liabilities 39,902 322,991
Income taxes payable 165,919 -
------- ---
Total adjustments 33,365,942 12,694,519
---------- ----------
Net cash provided by operating activities 30,617,545 25,474,992
Investing Activities
Capital expenditures, including dry hole
costs (35,509,890) (27,757,275)
Proceeds from leasing of fee mineral
acreage 202,007 131,449
Proceeds from asset sales 2,514,343 181,120
--------- -------
Net cash used in investing activities (32,793,540) (27,444,706)
Financing Activities
Borrowings under credit facility 43,705,195 40,058,723
Payments on credit facility (40,076,791) (34,701,332)
Purchase of treasury stock - (1,955,761)
Payments of dividends (1,743,027) (1,770,615)
---------- ----------
Net cash provided by financing activities 1,885,377 1,631,015
--------- ---------
Decrease in cash and cash equivalents (290,618) (338,699)
Cash and cash equivalents at beginning of
period 895,708 989,360
------- -------
Cash and cash equivalents at end of period $605,090 $650,661
======== ========
Supplemental Schedule of Noncash Investing and
Financing Activities
Receivable from asset sales $- $658,668
=== ========
Additions to asset retirement obligations $168,567 $-
======== ===
Gross additions to properties and equipment $24,069,809 $29,625,707
Net (increase) decrease in accounts
payable for properties and equipment
additions 11,440,081 (1,868,432)
---------- ----------
Capital expenditures, including dry hole
costs $35,509,890 $27,757,275
=========== ===========
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 2008 Form 10-K filed with the Securities and Exchange Commission. These “Risk Factors” include 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; declines 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; and drilling and operating risks.
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.