Exploration & Production | Quarterly / Earnings Reports | Second Quarter (2Q) Update | Deals - Acquisition, Mergers, Divestitures

Panhandle Highlights Eagle Ford Additions in 2Q

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   |    Thursday,August 07,2014

Panhandle Oil and Gas Inc. has reported financial and operating results for the Company's fiscal third quarter and nine months ended June 30, 2014.

Highlights:br />

• Recorded nine month 2014 net income of $15,703,476, $1.88 per diluted share, compared to net income of $8,240,953, $0.99 per diluted share, for the 2013 nine months.
• Recorded fiscal third quarter 2014 net income of $5,122,585, $0.61 per diluted share, as compared to $5,070,168, $0.61 per diluted share, for the 2013 quarter.
• Generated cash from operating activities of $36,438,536 for the 2014 nine-month period, well in excess of $26,693,851 of capital expenditures for drilling and equipping wells.
• Reported 2014 third-quarter and nine-month production of 3,309,394 Mcfe and 10,314,886 Mcfe, respectively, which were increases of 2% and 9%, respectively, over the same periods of fiscal 2013.
• Continued to record increased oil production, 27% and 42% for the 2014 quarter and nine months, respectively, as compared to the same 2013 periods.
• Continued to record increased natural gas liquids (NGL) production, 146% and 86% for the 2014 quarter and nine months, respectively, as compared to the same 2013 periods.
• Closed largest acquisition in Company history on June 17, 2014.

Michael C. Coffman, President and CEO, said: "The 2014 third quarter was again an excellent financial, as well as operational, quarter.  Our continued focus on increasing production of oil and NGLs and the increase of average natural gas prices in fiscal 2014 have combined to increase Panhandle's average per Mcfe sales price 27%, to $5.73, for the 2014 nine month period.

"The Eagle Ford acquisition was closed on June 17, thus only 14 days of production from these wells is included in third-quarter production numbers.  The fourth quarter of fiscal 2014 will include a full quarter of production from these assets, which will materially increase oil production and profitability for the fourth quarter.  And, with over 100 locations remaining to drill on the Eagle Ford acreage, these assets will continue to provide meaningful oil production for Panhandle for many years."

Operations Update

Paul Blanchard, Senior Vice President and COO, said: "Our recently acquired Eagle Ford properties produced 845 Boe per day, net, in June 2014. The production was 83% oil, 9% NGL and 8% natural gas. Development activity is ongoing as planned on the property with one well drilling, one well waiting on completion and four wells currently being completed.

"The consecutive quarter decline in natural gas production was largely attributable to wells placed on production in late 2013 and early 2014 experiencing the typical steep initial decline rates combined with a slowdown in gas wells being placed on production during the two recent quarters. Based on well proposals received and current drilling and completion activity, we anticipate new gas well production will accelerate to higher levels in coming quarters, which should result in an overall increase in natural gas production."

Fiscal Third Quarter Results

For the 2014 third quarter, the Company recorded net income of $5,122,585, or $0.61 per diluted share.  This compared to net income of $5,070,168, or $0.61 per diluted share, for the 2013 third quarter.  Net cash provided by operating activities increased 68% to $14,705,184 for the 2014 third quarter, versus the 2013 third quarter.  Capital expenditures for drilling and completing wells for the 2014 fiscal quarter totaled $9,086,863 and continue to be principally directed toward oil and NGL rich plays in western and south central Oklahoma, the Texas Panhandle, and, subsequent to the acquisition, in the Eagle Ford Shale.  The 2014 quarter included a $1.4 million loss on derivative contracts as compared to a $1.7 million gain for the 2013 period.  The Company principally uses derivative contracts of less than one year duration to provide protection against significant declines in cash flows from fluctuations in the price of natural gas and, to a lesser extent, oil and will typically hedge around 50% of its expected production volumes.

Total revenues for the 2014 third quarter were $18,374,977, a 4% increase from $17,730,445 for the 2013 quarter.  Oil, NGL and natural gas sales increased $3,707,408 or 23% in the 2014 quarter, compared to the 2013 quarter, as a result of a 2% increase in Mcfe production and a 20% increase in the average per Mcfe sales price.  The average sales price per Mcfe of production during the 2014 third quarter was $5.90, compared to $4.90 for the 2013 third quarter.  Increases in the sales price of natural gas and higher sales volumes of high-value oil and NGL combined to improve the average sales price per Mcfe.

Oil production increased 27% in the 2014 quarter to 70,479 barrels versus 55,474 barrels in the 2013 quarter, while gas production of 2,508,346 Mcf for the 2014 quarter decreased 9% compared to the 2013 quarter.  In addition, 63,029 barrels of NGL were sold in the 2014 quarter as compared to 25,660 barrels in the 2013 quarter, an increase of 146%.

Nine Month 2014 Results

For the 2014 nine months, the Company recorded net income of $15,703,476, or $1.88 per diluted share.  This compared to net income of $8,240,953, or $0.99 per diluted share, for the 2013 nine months.  Net cash provided by operating activities increased 51% year over year to $36,438,536 for the 2014 nine months versus the 2013 nine months.  Again, cash flow from operations fully funded costs to drill and equip wells for the nine months.  Capital expenditures for the 2014 nine months totaled $113,509,546, which included $26,693,851 for drilling and equipping wells and acquisitions of$86,815,695.  The 2014 nine months included a $3.5 million loss on derivative contracts as compared to a $0.8 milliongain for the 2013 period.

Total revenues for the 2014 nine months were $56,523,778, a 27% increase from $44,492,866 for the 2013 nine months.  Oil, NGL and natural gas sales increased $16,428,993 or 38% in the 2014 nine months, compared to the 2013 nine months, as a result of a 9% increase in Mcfe production and a 27% increase in the average per Mcfe sales price.  The average sales price per Mcfe of production during the 2014 nine months was $5.73, compared to $4.50 for the 2013 nine months.

Oil production increased 42% in the 2014 nine months to 220,131 barrels from 154,697 barrels in the 2013 nine months while gas production increased 16,816 Mcf compared to the 2014 nine months.  In addition, 151,839 barrels of NGL were sold in the 2014 nine months which was an 86% increase compared to 2013 NGL volumes.  Drilling expenditures over the last 18 months targeting the oil and NGL rich plays are responsible for the increased oil and NGL volumes.