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PHX Minerals Fiscal First Quarter 2021 Results

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   |    Wednesday,February 10,2021

PHX Minerals Inc. reported financial and operating results for the first quarter ended Dec. 31, 2020.


  • Production volumes for the first fiscal quarter of 2021 were 2,074 Mmcfe, up from 2,038 Mmcfe in the fourth fiscal quarter of 2020 and down from 2,278 Mmcfe in the first fiscal quarter of 2020.
  • Net loss in the first fiscal quarter of 2021 was $0.6 million, or $0.03 per share, as compared to net income of $1.9 million, or $0.11 per share, in the first fiscal quarter of 2020.
  • Adjusted EBITDA excluding gain on asset sales(1) for the first quarter of 2021 was $2.7 million, up from $2.0 million in the fourth fiscal quarter of 2020 and down from $3.9 million in the first fiscal quarter of 2020.
  • Reduced total debt 6% from $28.8 million, as of Sept. 30, 2020, to $27.0 million, as of Dec. 31, 2020. Total debt was further reduced to $26.0 million as of Feb. 1, 2021.
  • On Oct. 8, 2020, the Company closed on the previously announced purchase of 297 net royalty acres in Grady County, Okla., and 237 net mineral acres (398 net royalty acres) in Harrison, Panola and Nacogdoches Counties, Texas, for consideration of $5.5 million and 153,375 shares of PHX common stock.
  • On Nov. 12, 2020, and Dec. 17, 2020, the Company completed two additional acquisitions totaling 223 net mineral acres (326 net royalty acres) in San Augustine, Texas targeting the Haynesville play for a total of $1.75 million.
  • Debt to adjusted EBITDA (TTM) (1) ratio was 2.99x at Dec. 31, 2020.
  • Approved payment of a one cent per share dividend payable on March 5, 2021, to stockholders of record on Feb. 19, 2021.

Chad L. Stephens, President and CEO, commented, "Our first quarter of 2021 was much improved over the fourth quarter of 2020 with adjusted EBITDA excluding gain on asset sales(1) increasing by 37% and debt decreasing by 6%, or $1.8 million. Since the end of our first quarter, we have further reduced our debt by an additional $1.0 million, from $27.0 million to $26.0 million. Our results reflect a very strong quarter for PHX and an improving energy sector. I am very pleased with the high level at which our team is performing. During the quarter, we closed on $7.3 million of previously announced producing mineral acquisitions using proceeds from our equity offering completed in September 2020. This exhibits our stated strategy of acquiring producing minerals in the core of our focus areas with line-of-sight development opportunities. We are excited about additional opportunities we are seeing that we believe could further drive an increase in shareholder value, and we look forward to keeping you updated on our continued progress."

Ops Update

During the quarter ended Dec. 31, 2020, we converted seven gross and 0.02 net wells in progress to producing wells. Our inventory of wells in progress increased to 120 gross wells and 0.62 net wells.

Q1 2021 Results

The Company recorded a first quarter 2021 net loss of $596,720, or $0.03 per share, as compared to net income of $1,892,114, or $0.11 per share, in the first quarter 2020. The decrease was principally the result of decreased natural gas, oil and NGL sales, decreased gain on asset sales and decreased lease bonuses and rental income, partially offset by a decrease in general and administrative expenses (G&A), lease operating expenses (LOE), transportation, gathering and marketing expenses, production taxes, depreciation, depletion and amortization (DD&A) and changes in tax provision (benefit).

Natural gas, oil and NGL revenue decreased $1,168,859, or 15%, for the first quarter 2021 compared to the corresponding 2020 quarter due to decreases in oil and NGL prices of 24% and 3%, respectively, and decreases in natural gas and oil volumes of 10% and 11%, respectively.

The decrease in oil production was primarily due to postponement of workovers due to prevailing economic conditions, as well as naturally declining production in high interest wells in the Eagle Ford play. This decrease was partially offset by new wells brought online in the SCOOP and STACK plays. The increase in NGL production was primarily attributable to increased production on high interest wells in liquid-rich gas areas of the STACK play. Natural gas volumes decreased as a result of naturally declining production in the Fayetteville Shale, Arkoma Stack and STACK plays, as well as production downtime in high-interest wells and curtailments in response to market conditions in the Arkoma Stack and STACK plays.

The Company had a net loss on derivative contracts of $254,036 in the 2021 quarter as compared to a net loss of $817,894 in the 2020 quarter. The net loss on derivative contracts in both periods was principally due to the natural gas and oil collars and fixed price swaps being less beneficial in relation to their respective contracted volumes and prices at the beginning of the periods.

The 11% decrease in total cost per Mcfe in the 2021 quarter relative to the 2020 quarter was primarily driven by a decrease in DD&A. DD&A decreased $695,052, or 24%, in the 2021 quarter to $1.09 per Mcfe as compared to $1.30 per Mcfe in the 2020 quarter. $265,399 of the decrease was a result of production decreasing 9% in the 2021 quarter. Also, DD&A decreased $429,653 as a result of a $0.21 decrease in the DD&A rate per Mcfe. The rate decrease was mainly due to impairments taken at the end of both fiscal 2019 and the 2020 second quarter, which lowered the basis of the assets. The rate decrease was partially offset by lower natural gas, oil and NGL prices utilized in the reserve calculations during the 2021 quarter, as compared to prices used for the 2020 quarter, shortening the economic life of wells.

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