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Panhandle Royalty Company Declares Quarterly Dividend and Announces Record Year-End Oil & Gas Reserve Valuation and Record Fiscal 2006 Drilling Budget

Posted on: Wednesday, 26 October 2005, 15:01 CDT

OKLAHOMA CITY, Oct. 26 /PRNewswire-FirstCall/ -- PANHANDLE ROYALTY COMPANY completed another record fiscal year on September 30th. There were record setting increases in future cash flow from proven oil and gas reserves. Based upon future net production excluding any income taxes, but after deduction of estimated future operating cost and severance tax, the undiscounted future cumulative cash flow is $296,860,784. This is a 100% increase from fiscal 2004. The value discounted at 10% is $190,396,012, an increase of 96% from last year. These values were determined by using the September 30th price, unescalated, of $11.54 per mcf for gas and $64.18 per barrel for oil. These amounts do not include CO2 reserves of 1,515,529 mcf valued at $653,616 undiscounted. The gas and oil prices utilized to determine the cash flow were increases of 102% for gas and 44% for oil from fiscal 2004.

Net production during fiscal 2005 was 4,011,226 mcf and 101,581 barrels, or in gas equivalent 4,620,712 mcfe where oil is converted to gas at its BTU equivalent of 6,000 cubic feet per barrel. This was an increase of 3.8% in gas and 1.5% in mcfe production over fiscal 2004. Reserve additions from new wells completed during fiscal 2005 were 92,117 barrels and 6,733,000 mcf or 7,285,702 mcfe, replacing 158% of production on a mcfe basis. Downward revisions in older reserves caused an overall decrease in total reserves of 1.2% to 31,252,278 mcfe when adjusted for divestitures. Most of the decrease in total reserves is attributed to oil. Panhandle participated in few new oil wells. These reserve volumes do not include 1,515,278 mcf of CO2 reserves held by the Company in Colorado's McElmo Dome field.

During fiscal 2005 PHX participated with a working interest in 142 wells which were drilling, testing or completed. There were 107 producers, 6 dry holes and 27 working interest wells testing or drilling at fiscal year-end. A total of 98 or 91.6% of the completions were gas producers. Individual well working interests ranged from 0.2% to 43%. None were operated by PHX. Additionally, the Company had a royalty interest in 201 wells which were drilling, testing or completed during the fiscal year. There were 143 of these completed as producers and 14 dry holes. Combined success rate for working and royalty interest wells was 92.6% compared to 91% in fiscal 2004. There were a total of 31 more producing completions and 1 less dry hole completion (both working interest and royalty interest) than in fiscal 2004.

The completed wells were primarily located in Oklahoma (243 wells), Texas (25 wells), New Mexico (1 well) and Arkansas (2 wells). Most working interest wells were concentrated in the deeper portion of western Oklahoma's Anadarko Basin. Panhandle owns tens of thousands of acres of minerals and a few thousand leasehold acres in this basin. The most concentrated area of completions (88 wells or 33% of all completions) was in Beckham, Custer, Dewey and Roger Mills Counties of Oklahoma, where a localized "boom" is occurring with wells searching primarily for gas in Pennsylvanian age Cleveland, Skinner, Red Fork, Atoka and Morrow reservoirs from 9,500' to 18,500' depth; and for deeper Springer and Hunton reservoirs between 18,000 to 23,000 depth. PHX participated in several scattered shallower wells in the northern portion of the Anadarko Basin, the Ardmore Basin of southern Oklahoma and the Arkoma Basin of Oklahoma.

During fiscal 2005, Panhandle divested its small working interests in 13 waterfloods and one gas unit (Gallegos Canyon field, NW New Mexico). The Company also sold its small working interest in 4 other minor oil fields that did not fit Company growth parameters. Any fee mineral holdings in these divested properties were retained.

* FISCAL 2005 DRILLING BUDGET

The Panhandle board of directors approved the largest drilling budget in Company history for fiscal 2006. The budget of $15,621,000 is a 28% increase over fiscal 2005's drilling budget of $12,215,000. An additional $1,750,000 was budgeted for acquiring new leases and workover expenses on existing wells. The increases will be funded from cash flow. A portion of the increase is to offset inflationary increases in individual well costs. The majority will be used to participate with PHX's full mineral interest and additional leasehold interest in wells where economics meet Company risk parameters. Principal areas of activity are again expected to be the western Oklahoma Anadarko Basin areas where PHX was active in fiscal 2005; the Ouachita Mountain Overthrust area of southeastern Oklahoma and selective prospect areas in southern Oklahoma's Ardmore Basin, the Texas Panhandle, east Texas and southeast New Mexico.

* H W Peace II, Company President and CEO Stated:

"Panhandle's expenditures for drilling, leasing and workovers in fiscal 2005, slightly exceeded the budget. This was more than offset by increased revenues as oil and gas prices considerably exceeded projections one year ago along with the overall increase in production. The increase in cash flow not only funded all drilling activities, it also allowed us to completely pay off our line-of-credit debt and reduce the amortizing 4.56% interest term debt to $5,000,000 on October 1, 2005, while retaining substantial cash for unexpected opportunities. All indicators for fiscal 2006 oil and gas prices are that they will considerably exceed our average received price for fiscal 2005. There may be more opportunities to participate in wells during fiscal 2006 than are now known. The excess cash flow will be used for those opportunities and possible acquisitions should that opportunity occur. As a non-operator, we must rely upon operators to propose and drill wells on our minerals and leasehold. We anticipate increasing our average working interest in wells completed in fiscal to 2006 to over 6% compared to less than 5% in fiscal 2004 completions. This increased interest should allow us to further increase production and reserves in 2006 and later years as expressed in our growth objectives last year where by 2008/2009 we will have an average 8% to 10% working interest participating in new wells. As a non-operator the only wells we place in the proven undeveloped category are those where we have a definite indication from the operator a well will be drilled. Audited financials for the Company will be released in early December."

* QUARTERLY DIVIDEND

The Board of Directors, at its October meeting declared the regular 5 cent per share quarterly dividend. The dividend is payable on December 12, 2005, to shareholders of record on November 11, 2005.

* Forward-Looking Statements and Risk Factors for fiscal 2006 and later periods are made in this document. Such statements represent estimates by management based on the Company's historical operating trends, its proved oil and gas reserves and other information currently available to management. The Company cautions that the forward-looking statements provided herein are subject to all the risks and uncertainties incident to the acquisition of, exploration for, development of and marketing of production from oil & gas reserves. These risks include, but are not limited to, oil and natural gas price risk, environmental risk, drilling risk, reserve quantity risk and operations and production risk. For all the above reasons, actual results may vary materially from the forward-looking statements and there is no assurance that the assumptions used are necessarily the most likely to occur.

* Panhandle Royalty Company is a publicly held diversified mineral holding company engaged in the acquisition, ownership, management and development of its fee minerals and leasehold. It actively participates in the exploration, drilling, production and acquisition of hydrocarbons on internally and externally generated prospects. Its stock is traded on the American Stock Exchange under the symbol PHX. The Company's office is located in Oklahoma City while its mineral holdings, leasehold and production are situated in Oklahoma, New Mexico, Texas and 19 other states.

Panhandle Royalty Company

CONTACT: H W Peace II of Panhandle Royalty Company, +1-405-948-1560

Source: PRNewswire-FirstCall

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