Panhandle Oil and Gas Inc. (ticker: PHX) reported financial and operating results for the company’s fiscal first quarter ended December 31, 2017. For the 2018 first quarter, the company recorded net income of $13,784,939, or $0.81 per diluted share. This compared to a net loss of $2,238,392, or ($0.13) per diluted share, for the 2017 first quarter.
The 2018 first quarter results include a $12,652,000 decrease in income tax as a result of the new U.S. tax law. Net cash provided by operating activities increased 95% to $7,198,584 for the 2018 first quarter, versus $3,683,651 for the 2017 first quarter.
Capital expenditures totaled $4,984,880 in the 2018 first quarter, compared to $2,174,523 in the 2017 quarter.
CEO Paul F. Blanchard Jr. provides a broad company update
President and CEO Paul F. Blanchard Jr. said, “First quarter 2018 production increased 4% over the previous quarter to 37.2 Mmcfe per day, a 36% increase as compared to the 2017 quarter. The price we received for our production on a per Mcfe basis improved 6%, while our LOE per Mcfe decreased 12%, as compared to the 2017 quarter.
“The growth in production and reduction in LOE per Mcfe were largely the result of our capital investment campaign in 2017 and the first quarter of 2018. For the 2017 drilling program, the company calculated a finding cost of approximately $0.97 per Mcfe based on a 6:1 conversion factor and a finding cost of approximately $0.84/Mcfe based on a 2017 average product price equivalence conversion.
“First quarter 2018 capital investments totaled approximately $5.0 million and were primarily directed toward the three low-risk resource plays that were the focus of the 2017 program: the Eagle Ford Shale, the southeastern Oklahoma Woodford Shale and the STACK/Cana Woodford Shale. Disposition of marginal wells with high LOE also contributed to the reduction in LOE, while having minimal impact on our cash flow.
“A total of 13 wells are currently being drilled on our mineral holdings in Oklahoma. We have a royalty interest in 10 of those wells, a working interest in one and have not yet elected on the remaining two. Seven of the wells are in the STACK/Cana area, five are in the SCOOP area and one is in the southeastern Oklahoma Woodford.
“There is currently no drilling underway in our two Permian projects. The operator of the Andrews and Winkler Counties, Texas, acreage has drilled a Barnett Shale well that is in the process of being completed, and the operator of our Cochran County, Texas, acreage has six wells producing a total of 473 Boe per day gross (22 Boe net to Panhandle) with one well drilled, but not yet completed.
“We have approved the drilling of 19 gross wells and the re-fracturing of one of our Eagle Ford wells, none of which have yet started. These projects are estimated to be a net investment of $1.7 million. We are currently evaluating an additional 23 well proposals on our holdings. These wells have a total projected net cost of $1.3 million.
“Leasing activity was slow in the first quarter, generating approximately $100,000 of lease bonus revenue. However, the company received an additional $430,000 in lease bonus revenue in January 2018. This actively managed leasing program will continue to be a part of optimizing the value of our assets and pulling that value forward. In addition, the company will consider selling mineral holdings if we believe it is in the best long-term interest of our shareholders. For example, late in the fourth quarter of 2017, we received an attractive negotiated offer for the sale of a relatively small number of largely undeveloped mineral acres with closing set for early 2018. The buyer was unable to close, and Panhandle retained the $462,500 deposit. Although the sale did not close, we believe it further represents the flexibility we have in our quest to maximize long-term shareholder value.
“We are beginning to see the tangible results from the marginal property divestiture program we instituted in 2017. Thus far, we have sold 230 gross marginal wells that accounted for approximately 5.3% of the company’s LOE, but only approximately 0.7% of our cash flow from producing properties.
“We are planning to market an additional 232 gross marginal wells. If these wells are sold, the company will have sold 462 gross working interest wells or 21% of our total gross working interest well count. If the full 462 gross working interest wells are sold the company’s LOE would decrease by approximately 9.6%, while our cash flow from producing properties would only decrease approximately 1.8% based on prior year activity,” Blanchard Jr. said.
EnerCom Dallas conference presenter
Panhandle Oil and Gas Inc. will be presenting at the EnerCom Dallas investment conference, Feb. 21-22 at the Tower Club in downtown Dallas. Institutional investors, portfolio managers, financial analysts, CIOs and other investment community professionals who invest in the energy space should register now.
