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 December 10, 2015 - 4:10 PM EST
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Panhandle Oil And Gas Inc. Reports Fiscal 2015 Financial Results

Records Fiscal 2015 Net Income of $9,321,341 ($0.56 per share)

OKLAHOMA CITY, Dec. 10, 2015 /PRNewswire/ -- PANHANDLE OIL AND GAS INC., the "Company," (NYSE:PHX) today reported financial and operating results for the fiscal year ended Sept. 30, 2015, and for the fiscal fourth quarter, as well as provided an update on its bank line-of-credit borrowing base.

HIGHLIGHTS FOR THE YEAR ENDED SEPT. 30, 2015

  • Recorded fiscal year 2015 net income of $9,321,341, 0.56 per share, compared to a net income of $25,001,462, 1.49 per share, for fiscal 2014.
  • Posted total fiscal 2015 production of 13.7 billion cubic feet equivalent (Bcfe).
  • Increased fiscal year 2015 oil production 31% over 2014 volumes.
  • Generated cash from operating activities of $45.6 million for the year, well in excess of capital expenditures of $30.8 million.
  • Reduced debt $13 million during fiscal 2015.

Fiscal Year 2015 Results

For fiscal 2015, the Company recorded net income of $9,321,341, or $0.56 per share. This compared to net income of $25,001,462, or $1.49 per share, for fiscal 2014. Net cash provided by operating activities decreased 13% to $45.6 million for 2015 versus 2014, well in excess of capital expenditures in fiscal 2015, which totaled $30.8 million.

Total revenues for 2015 were $70,882,093, a decrease of 16% from $84,411,224 for 2014. Oil, NGL and natural gas sales revenues decreased $28,312,614 or 34% in 2015, as compared to 2014. This revenue decrease was a result of decreased oil, NGL and natural gas prices of 43%, 44% and 33%, respectively, and a 10% decrease in natural gas production, partially offset by increased oil and NGL production volumes of 31% and 2%, respectively. Overall results were a 3% decrease in Mcfe production volumes and a 32% decrease in the average sales price per Mcfe to $3.97, as compared to $5.88 in 2014.

Gains on derivative contracts in 2015 totaled $13.8 million in 2015 as compared to $.2 million in 2014.  The majority of these gains were for oil contracts put in place in fiscal 2014 to protect prices received for production from the Eagle Ford Shale properties.

Oil production increased 31% in 2015 to 453,125 barrels from 346,387 barrels in 2014; while gas production decreased 10% to 9,745,223 Mcf. Production from the Eagle Ford was principally responsible for the increased oil volumes. In addition, 210,960 barrels of NGL were produced in fiscal 2015, which was a 2% increase versus 2014. The decline in natural gas production was principally a result of natural decline in production from the Company's Fayetteville Shale properties and significantly reduced natural gas drilling and completion activity Company wide.

Total costs and expenses increased $9.1 million or 19% in 2015 as compared to 2014. $3.6 million of the expense increase was in lease operating expenses, as we add additional wells to our producing inventory each year. For the last several years, the majority of wells added have been oil and NGL rich wells, particularly the Eagle Ford wells, which have higher operating costs than dry gas wells. DD&A per Mcfe of production for 2015 was $1.74, as compared to $1.55 in 2014, which resulted in an increase of $2.5 million in DD&A expense in 2015. Offsetting this was a decrease of $.6 million due to a 3% decrease in oil, NGL and natural gas production volumes collectively in 2015, compared to 2014. The rate increase was principally due to lower projected remaining reserve volumes brought about by lower product prices shortening the economic lives of many wells. A further impact of lower product prices in 2015, as compared to 2014, was an increase of $3.9 million in the provision for impairment to $5.0 million.  A significant number of smaller fields, primarily in Oklahoma, Kansas and Texas were responsible for the 2015 impairment charges.

Fiscal Fourth Quarter 2015 Results

For the 2015 fourth quarter, the Company recorded a net loss of $887,681, or $0.05 per share. This compared to net income of $9,297,986, or $0.55 per share, for the 2014 fourth quarter. Net cash provided by operating activities decreased 49% to $8,223,212 for the 2015 fourth quarter versus the 2014 fourth quarter. Fourth quarter 2015 cash from operating activities again exceeded costs to drill and equip wells of $7,187,276.

Total revenues for the 2015 fourth quarter were $13,455,001, a decrease of 52% from $27,887,445 for the 2014 quarter. Oil, NGL and gas sales revenue decreased $12,597,524, or 53% in the 2015 quarter, as compared to the 2014 quarter. This revenue decrease was a result of decreased oil, NGL and natural gas volumes of 11%, 15% and 16%, respectively, and decreased oil, NGL and natural gas prices of 52%, 54% and 37%, respectively. Average sales price per Mcfe of production during the 2015 fourth quarter was $3.46, a 45% decrease from $6.27 in the 2014 fourth quarter. Oil production decreased in the 2015 quarter to 112,237 barrels, versus 126,256 barrels in the 2014 quarter, while gas production decreased 16% to 2,261,236 Mcf, and NGL production decreased 15% to 47,738 barrels. Natural decline and significantly reduced capital expenditures to drill and complete new wells combined to reduce production volumes. Costs and expenses were flat quarter to quarter. Additionally, gains on derivative contracts were $2.1 million in the 2015 quarter compared to $3.8 million in the 2014 quarter.

Bank Line-of-Credit Update

On December 10, 2015, Panhandle's bank line-of-credit borrowing base was set at $100 million. This compares to a current outstanding balance of $59.5 million. Availability under the line of $40.5 million is well in excess of projected needs. Based on currently expected product prices, the Company anticipates funding normal operations in 2016 from internally generated cash flow.

Management Comments

Michael C. Coffman, President and CEO, said, "It goes without saying that fiscal 2015 was an extremely difficult year in the energy industry. Both oil and natural gas prices were significantly reduced from 2014 average levels, and capital expenditure levels to drill wells were materially constrained as well. As has been Panhandle's philosophy for many years, we chose the conservative path, spending only cash flow and reducing debt $13 million during the year. 

"We have positioned Panhandle not only to survive this current down price cycle, but to be in a position to take advantage of opportunities that may be available should this downturn continue for an extended time. As always, we will continue to follow our proven conservative operating strategies and, coupled with patience, believe our long-term outlook is bright."

Paul Blanchard, Senior Vice President and COO, said, "Panhandle continues to maintain a consistent investment philosophy driven by a risked rate-of-return analysis of each investment opportunity. We only invest in projects that are anticipated to earn meaningful returns. For the last several years this approach led to the Company to elect to invest in 65% to 70% of well proposals received. During 2015, the Company elected to participate in only 40% of proposals received. The decline in our capital investing led to modestly lower production in 2015, as compared to 2014.

"We believe this approach will serve our shareholders well over the long term as we choose not to invest in projects that are anticipated to provide no meaningful returns at today's NYMEX futures pricing. Instead, we will preserve that capital to have it available to invest in high-quality assets that may become available at an opportune point in this downturn."

FINANCIAL HIGHLIGHTS

 

Statements of Operations




Three Months Ended Sept. 30,


Year Ended Sept. 30,



2015


2014


2015


2014

Revenues:













Oil, NGL and natural gas sales


$

11,133,075


$

23,730,599


$

54,533,914


$

82,846,528

Lease bonuses and rentals



64,652



69,906



2,010,395



423,328

Gains (losses) on derivative contracts



2,115,551



3,758,509



13,822,506



247,414

Income from partnerships



141,723



328,431



515,278



893,954




13,455,001



27,887,445



70,882,093



84,411,224

Costs and expenses:













Lease operating expenses



4,238,428



3,982,645



17,472,408



13,912,792

Production taxes



318,085



822,580



1,702,302



2,694,118

Exploration costs



36



15,877



48,404



86,017

Depreciation, depletion and amortization



6,141,070



6,334,272



23,821,139



21,896,902

Provision for impairment



1,476,431



665,933



5,009,191



1,096,076

Loss (gain) on asset sales and other



(371,408)



(22,709)



(398,994)



8,378

Interest expense



355,427



421,599



1,550,483



462,296

General and administrative



1,965,114



2,083,262



7,339,320



7,433,183

Bad debt expense (recovery)



180,499



-



180,499



-




14,303,682



14,303,459



56,724,752



47,589,762

Income (loss) before provision (benefit) for income taxes



 

(848,681)



 

13,583,986



 

14,157,341



 

36,821,462

Provision (benefit) for income taxes



39,000



4,286,000



4,836,000



11,820,000














Net income (loss)


$

(887,681)


$

9,297,986


$

9,321,341


$

25,001,462








































Basic and diluted earnings per common share:













Net income (loss)


$

(0.05)


$

0.55


$

0.56


$

1.49



























Weighted average shares outstanding:













Common shares



16,546,528



16,474,040



16,522,462



16,472,144

Unissued, vested directors' shares



251,005



258,905



246,442



255,039




16,797,533



16,732,945



16,768,904



16,727,183














Dividends declared per share of common stock and paid in period


 

$

 

0.04


 

$

 

0.04


 

$

 

0.16


 

$

 

0.16

 

Balance Sheets




Sept. 30, 2015


Sept. 30, 2014

Assets







Current Assets:







Cash and cash equivalents


$

603,915


$

509,755

Oil, NGL and natural gas sales receivables, net of allowance for uncollectable accounts



7,895,591



16,227,469

Refundable income taxes



345,897



-

Refundable production taxes



476,001



625,996

Derivative contracts, net



4,210,764



1,650,563

Other



252,016



354,828

Total current assets



13,784,184



19,368,611








Properties and equipment at cost, based on successful efforts accounting:







Producing oil and natural gas properties



441,141,337



418,237,512

Non-producing oil and natural gas properties



8,293,997



10,260,717

Furniture and fixtures



1,393,559



1,317,725




450,828,893



429,815,954

Less accumulated depreciation, depletion and amortization



(228,036,803)



(204,731,661)

Net properties and equipment



222,792,090



225,084,293








Investments



2,248,999



1,936,421

Derivative contracts, net



-



251,279

Total assets


$

238,825,273


$

246,640,604








Liabilities and Stockholders' Equity







Current Liabilities:







Accounts payable


$

2,028,746


$

7,034,773

Deferred income taxes



1,517,100



600,100

Income taxes payable



-



523,843

Accrued liabilities and other



1,330,901



1,290,858

Total current liabilities



4,876,747



9,449,574








Long-term debt



65,000,000



78,000,000

Deferred income taxes



39,118,907



37,363,907

Asset retirement obligations



2,824,944



2,638,470








Stockholders' equity:







Class A voting common stock, $.0166 par value; 24,000,000 shares authorized, 16,863,004 issued at Sept. 30, 2015 and 2014



280,938



280,938

Capital in excess of par value



2,993,119



2,861,343

Deferred directors' compensation



3,084,289



3,110,351

Retained earnings



125,446,473



118,794,188




131,804,819



125,046,820

Treasury stock, at cost; 302,623 shares at Sept. 30, 2015, and 372,364 shares at Sept. 30, 2014



(4,800,144)



(5,858,167)

Total stockholders' equity



127,004,675



119,188,653

Total liabilities and stockholders' equity


$

238,825,273


$

246,640,604

 

Condensed Statements of Cash Flows




Year ended Sept. 30,



2015


2014

Operating Activities







Net income (loss)


$

9,321,341


$

25,001,462

Adjustments to reconcile net income (loss) to net cash provided by operating activities:







Depreciation, depletion and amortization



23,821,139



21,896,902

Impairment



5,009,191



1,096,076

Provision for deferred income taxes



2,672,000



6,610,000

Exploration costs



48,404



86,017

Gain from leasing of fee mineral acreage



(2,007,993)



(422,818)

Net (gain) loss on sales of assets



-



149,062

Income from partnerships



(515,278)



(893,954)

Distributions received from partnerships



736,280



1,129,324

Common stock contributed to ESOP



185,113



341,125

Common stock (unissued) to Directors' Deferred Compensation Plan



302,353



353,825

Restricted stock awards



895,127



659,320

Bad debt expense (recovery)



180,499



-

Cash provided (used) by changes in assets and liabilities:







Oil, NGL and natural gas sales receivables



8,151,379



(2,506,708)

Fair value of derivative contracts



(2,308,922)



(1,476,644)

Refundable income taxes



(345,897)



-

Refundable production taxes



149,995



576,537

Other current assets



102,812



(224,830)

Accounts payable



(343,186)



252,860

Income taxes payable



(523,843)



(284,149)

Accrued liabilities



40,500



279,195

Total adjustments



36,249,673



27,621,140

Net cash provided by operating activities



45,571,014



52,622,602








Investing Activities







Capital expenditures, including dry hole costs



(30,800,625)



(38,612,788)

Acquisition of working interest properties



(308,180)



(83,253,952)

Acquisition of minerals and overrides



-



(56,250)

Proceeds from leasing of fee mineral acreage



2,053,900



477,144

Investments in partnerships



(533,580)



(597,149)

Proceeds from sales of assets



-



92,000

Net cash used in investing activities



(29,588,485)



(121,950,995)








Financing Activities







Borrowings under debt agreement



25,833,116



99,846,333

Payments of loan principal



(38,833,116)



(30,108,589)

Purchases of treasury stock



(242,313)



(122,044)

Payments of dividends



(2,669,056)



(2,661,723)

Excess tax benefit on stock-based compensation



23,000



17,000

Net cash provided by (used in) financing activities



(15,888,369)



66,970,977

Increase (decrease) in cash and cash equivalents



94,160



(2,357,416)

Cash and cash equivalents at beginning of year



509,755



2,867,171

Cash and cash equivalents at end of year


$

603,915


$

509,755







Year ended Sept. 30,



2015


2014

Supplemental Disclosures of Cash Flow Information














Interest paid, net of capitalized interest


$

1,558,885


$

380,451

Income taxes paid, net of refunds received


$

3,009,939


$

5,477,147








Supplemental schedule of noncash investing and financing activities:







Additions and revisions, net, to asset retirement obligations


$

70,529


$

225,453








Gross additions to properties and equipment


$

26,183,115


$

120,284,639

Net (increase) decrease in accounts payable for properties and equipment additions



4,925,690



1,638,351

Capital expenditures, including dry hole costs


$

31,108,805


$

121,922,990

 

 

OPERATING HIGHLIGHTS



Fourth Quarter Ended


Fourth Quarter Ended


Year Ended


Year Ended


Sept. 30, 2015


Sept. 30, 2014


Sept. 30, 2015


Sept. 30, 2014

MCFE Sold

3,221,086


3,783,123


13,729,733


14,098,009

Average Sales Price per MCFE

$3.46


$6.27


$3.97


$5.88

Barrels of Oil Sold

112,237


126,256


453,125


346,387

Average Sales Price per Barrel

$44.18


$91.83


$53.12


$93.68

MCF of Natural Gas Sold

2,261,236


2,690,493


9,745,223


10,773,559

Average Sales Price per MCF

$2.43


$3.88


$2.73


$4.05

Barrels of NGL Sold

47,738


55,849


210,960


207,688

Average Sales Price per Barrel

$14.10


$30.48


$18.25


$32.31

 

Quarterly Production Levels


Quarter ended


Oil Bbls Sold


MCF Sold


NGL Bbls Sold


MCFE Sold

9/30/15


112,237


2,261,236


47,738


3,221,086

6/30/15


109,738


2,407,049


41,737


3,315,899

3/31/15


114,567


2,475,777


48,681


3,455,265

12/31/14


116,583


2,601,161


72,804


3,737,483

9/30/14


126,256


2,690,493


55,849


3,783,123

6/30/14


70,479


2,508,346


63,029


3,309,394

3/31/14


66,239


2,788,768


51,670


3,496,222

12/31/13


83,413


2,785,952


37,140


3,509,270

 

Derivative contracts in place as of December 1, 2015

(prices below reflect the Company's net price from the listed pipelines)




Production volume


Indexed



Contract period


covered per month


pipeline


Fixed price

Natural gas costless collars







January - December 2015


100,000 Mmbtu


NYMEX Henry Hub


$3.50 floor / $4.10 ceiling

January - December 2015


70,000 Mmbtu


NYMEX Henry Hub


$3.25 floor / $4.00 ceiling

December 2015 - May 2016


80,000 Mmbtu


NYMEX Henry Hub


$2.50 floor / $3.10 ceiling








Natural gas fixed price swaps







January - September 2016


80,000 Mmbtu


NYMEX Henry Hub


$2.43








Oil costless collars







July - December 2015


10,000 Bbls


NYMEX WTI


$80.00 floor / $86.50 ceiling








Oil fixed price swaps







April - December 2015


5,000 Bbls


NYMEX WTI


$94.56

July - December 2015


7,000 Bbls


NYMEX WTI


$93.91








 

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 2015 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; Panhandle's 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; unsuccessful exploration and development drilling; decreases in the values of Panhandle's oil and gas properties resulting in write-downs; the negative impact lower oil and gas prices could have on the Company's ability to borrow; drilling and operating risks; and Panhandle cannot control activities on its 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. 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.

 

To view the original version on PR Newswire, visit:http://www.prnewswire.com/news-releases/panhandle-oil-and-gas-inc-reports-fiscal-2015-financial-results-300191455.html

SOURCE PANHANDLE OIL AND GAS INC.


Source: PR Newswire (December 10, 2015 - 4:10 PM EST)

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