PHX Minerals Reports Results for the Quarter and Fiscal Year Ended Dec. 31, 2023; Announces Dividend and Provides 2024 Operational Outlook

FORT WORTH, Texas, March 12, 2024 /PRNewswire/ — PHX MINERALS INC., “PHX” or the “Company” (NYSE: PHX), today reported financial and operating results for the quarter and fiscal year ended Dec. 31, 2023.

Summary of Results for the Period Ended Dec. 31, 2023

Net income in the fiscal fourth quarter and full fiscal year 2023 was $2.5 million, or $0.07 per diluted share, and $13.9 million, or $0.39 per diluted share, respectively, compared to net income of $1.9 million, or $0.05 per diluted share, for the quarter ended Sept. 30, 2023, and net income of $17.1 million, or $0.48 per diluted share, for the year ended Dec. 31, 2022.
Adjusted EBITDA(1) in the fiscal fourth quarter and full fiscal year was $4.5 million and $22.7 million, respectively, compared to $6.3 million for the quarter ended Sept. 30, 2023, and $26.7 million for the year ended Dec. 31, 2022.
Royalty production volumes for the fiscal fourth quarter decreased 6% to 1,946 Mmcfe compared to the quarter ended Sept. 30, 2023, and increased 23% to 8,123 Mmcfe for the full fiscal year 2023 compared to the year ended Dec. 31, 2022.
Total production volumes for the fiscal fourth quarter decreased 4% to 2,245 Mmcfe compared to the quarter ended Sept. 30, 2023, and decreased 3% to 9,379 Mmcfe for the full fiscal year 2023 compared to the year ended Dec. 31, 2022.
Net proved royalty interest reserves increased 9% to 57.8 Bcfe at Dec. 31, 2023 from 53.1 Bcfe at Dec. 31, 2022.
Converted 46 gross (0.098 net) and 314 gross (1.03 net) wells to producing status in the fiscal fourth quarter and full fiscal year 2023, compared to 71 gross (0.155 net) during the quarter ended Sept. 30, 2023, and 313 gross (1.15 net) during the year ended Dec. 31, 2022.
Inventory of 168 gross (0.851 net) wells in progress and 95 gross (0.444 net) permits as of Dec. 31, 2023, compared to 185 gross (0.81 net) wells in progress and 93 gross (0.28 net) permits as of Sept. 30, 2023.
Total debt was $32.8 million and the debt to adjusted EBITDA (TTM) (1) ratio was 1.45x as of Dec. 31, 2023.

Subsequent Events

PHX announced a $0.03 per share quarterly dividend, payable on March 29, 2024, to stockholders of record on March 18, 2024.

(1)       This is a non-GAAP measure. Refer to the Non-GAAP Reconciliation section.

Chad L. Stephens, President and CEO, commented, “In 2023, PHX delivered year-over-year royalty volume growth of 23%, expanding 2P royalty reserves by 12%, generating significant operating cash flow and net income. These results enabled us to raise our quarterly dividend by 33% despite another challenging year in the natural gas pricing environment. Our strong balance sheet and strategy of modest leverage enabled us to deliver consistent results despite a historic drop in gas prices and rising interest rates validating our business strategy, which positions us for success in both up and down markets.”

“Looking forward, we are optimistic that reduced drilling activity, announced production curtailments, and the expansion of LNG export facilities should balance the market and improve commodity prices,” continued Mr. Stephens. “During the past year, PHX deployed more than $30 million to acquire almost 2,400 net royalty acres in the Haynesville and SCOOP plays. The acquisition of these high-quality minerals will further drive our royalty volumes, margin expansion and cash flow over the course of the next two to three years. With our strong financial position and a highly focused acquisition strategy we are poised to unlock value for our shareholders as the commodity pricing environment improves.”

Financial Highlights

Three Months
Ended

Three Months
Ended

Twelve Months
Ended

Twelve Months
Ended

Dec. 31, 2023

Dec. 31, 2022

Dec. 31, 2023

Dec. 31, 2022

Royalty Interest Sales

$

7,378,650

$

10,571,704

$

31,593,351

$

47,335,656

Working Interest Sales

$

1,170,133

$

4,316,970

$

4,942,934

$

23,726,485

Natural Gas, Oil and NGL Sales

$

8,548,783

$

14,888,674

$

36,536,285

$

71,062,141

Gains (Losses) on Derivative Contracts

$

3,211,410

$

3,347,002

$

6,859,589

$

(16,322,244)

Lease Bonuses and Rental Income

$

22,780

$

34,482

$

1,068,022

$

423,069

Total Revenue

$

11,782,973

$

18,270,158

$

44,463,896

$

55,162,966

Lease Operating Expense

per Working Interest Mcfe

$

1.07

$

1.66

$

1.27

$

1.21

Transportation, Gathering and Marketing

per Mcfe

$

0.42

$

0.66

$

0.39

$

0.63

Production and Ad Valorem Tax per Mcfe

$

0.20

$

0.30

$

0.20

$

0.34

G&A Expense per Mcfe

$

1.36

$

1.42

$

1.28

$

1.29

Cash G&A Expense per Mcfe (1)

$

1.10

$

1.16

$

1.02

$

1.02

Interest Expense per Mcfe

$

0.32

$

0.29

$

0.25

$

0.17

DD&A per Mcfe

$

1.09

$

0.81

$

0.91

$

0.77

Total Expense per Mcfe

$

3.53

$

3.92

$

3.20

$

3.58

Net Income

$

2,513,444

$

3,346,133

$

13,920,800

$

17,073,156

Adjusted EBITDA (2)

$

4,504,288

$

5,334,016

$

22,652,263

$

26,743,500

Cash Flow from Operations (3)

$

3,361,455

$

10,141,814

$

24,171,139

$

39,035,474

CapEx (4)

$

4,587

$

87,104

$

325,983

$

447,065

CapEx – Mineral Acquisitions

$

4,351,757

$

14,499,014

$

29,735,516

$

46,380,423

Borrowing Base

$

50,000,000

$

50,000,000

Debt

$

32,750,000

$

33,300,000

Debt to Adjusted EBITDA (TTM) (2)

1.45

1.25

(1)      

Cash G&A expense is G&A excluding restricted stock and deferred director’s expense from the adjusted EBITDA table in the non-GAAP Reconciliation section.

(2)      

This is a non-GAAP measure. Refer to the Non-GAAP Reconciliation section.

(3)      

GAAP cash flow from operations.

(4)      

Includes legacy working interest expenditures and fixtures and equipment.

Operating Highlights

Three Months
Ended

Three Months
Ended

Twelve Months
Ended

Twelve Months
Ended

Dec. 31, 2023

Dec. 31, 2022

Dec. 31, 2023

Dec. 31, 2022

Gas Mcf Sold

1,775,577

1,669,320

7,457,084

7,522,763

Average Sales Price per Mcf before the

effects of settled derivative contracts

$

2.53

$

5.66

$

2.61

$

6.19

Average Sales Price per Mcf after the

effects of settled derivative contracts

$

2.76

$

4.02

$

2.96

$

4.20

% of sales subject to hedges

44

%

65

%

46

%

61

%

Oil Barrels Sold

39,768

52,406

182,916

202,867

Average Sales Price per Bbl before the

effects of settled derivative contracts

$

78.66

$

82.52

$

76.76

$

93.06

Average Sales Price per Bbl after the

effects of settled derivative contracts

$

75.37

$

62.03

$

74.21

$

60.98

% of sales subject to hedges

36

%

57

%

42

%

66

%

NGL Barrels Sold

38,422

38,611

137,484

159,475

Average Sales Price per Bbl(1)

$

24.00

$

28.77

$

22.18

$

35.44

Mcfe Sold

2,244,717

2,215,419

9,379,484

9,696,809

Natural gas, oil and NGL sales before the

effects of settled derivative contracts

$

8,548,783

$

14,888,674

$

36,536,285

$

71,062,141

Natural gas, oil and NGL sales after the

effects of settled derivative contracts

$

8,823,534

$

11,067,174

$

38,719,598

$

49,586,709

(1) There were no NGL settled derivative contracts during the 2023 and 2022 periods.

Total Production for the last four quarters was as follows:

Quarter ended

Mcf Sold

Oil Bbls Sold

NGL Bbls Sold

Mcfe Sold

12/31/2023

1,775,577

39,768

38,422

2,244,717

9/30/2023

1,868,012

48,032

32,029

2,348,378

6/30/2023

1,854,485

41,009

33,929

2,304,113

3/31/2023

1,959,010

54,107

33,104

2,482,276

Natural gas volumes were 79% of total production volumes for the quarter ended Dec. 31, 2023.

Royalty Interest Production for the last four quarters was as follows:

Quarter ended

Mcf Sold

Oil Bbls Sold

NGL Bbls Sold

Mcfe Sold

12/31/2023

1,590,301

35,547

23,769

1,946,196

9/30/2023

1,689,396

43,575

20,416

2,073,342

6/30/2023

1,673,346

35,599

20,516

2,010,036

3/31/2023

1,700,974

45,395

20,063

2,093,722

Natural gas volumes were 82% of total royalty production volumes for the quarter ended Dec. 31, 2023.

Working Interest Production for the last four quarters was as follows:

Quarter ended

Mcf Sold

Oil Bbls Sold

NGL Bbls Sold

Mcfe Sold

12/31/2023

185,276

4,221

14,653

298,521

9/30/2023

178,616

4,457

11,613

275,036

6/30/2023

181,139

5,410

13,413

294,077

3/31/2023

258,036

8,712

13,041

388,554

Outlook

PHX is providing an operational outlook for 2024 as follows:

Calendar Year 2022
Actual

Calendar Year 2023
Actual

Calendar Year 2024
Outlook

Mineral & Royalty Production (Mmcfe)

6,613

8,123

8,100 – 8,800

Working Interest Production (Mmcfe)

3,084

1,256

1,000 – 1,200

Total Production (Mmcfe)

9,697

9,379

9,100 – 10,000

Percentage Natural Gas

78 %

80 %

79% – 82%

Transportation, Gathering & Marketing (per Mcfe)

$0.63

$0.39

$0.38 – $0.43

Production Tax (as % of pre-hedge sales volumes)

4.50 %

5.20 %

5.00% – 5.50%

LOE Expenses (on an absolute basis in 000’s)

$3,807

$1,599

$1,100 – $1,300

Cash G&A (on an absolute basis in 000’s)

$9,900

$9,500

$9,700 – $9,900

Quarter Ended Dec. 31, 2023 Results

The Company recorded net income of $2.5 million, or $0.07 per diluted share, for the quarter ended Dec. 31, 2023, as compared to net income of $3.3 million, or $0.09 per diluted share, for the quarter ended Dec. 31, 2022. The change in net income was principally the result of a decrease in natural gas, oil and NGL sales, a decrease in gains on asset sales, and an increase in DD&A, partially offset by decreases in impairment, lease operating expenses, and transportation, gathering and marketing expenses.

Natural gas, oil and NGL revenue decreased $6.3 million, or 43%, for the quarter ended Dec. 31, 2023, compared to the quarter ended Dec. 31, 2022, due to decreases in natural gas, oil and NGL prices of 55%, 5% and 17%, respectively, and a decrease in oil volumes of 24%, partially offset by an increase in natural gas volumes of 6%.

The increase in royalty production volumes during the quarter ended Dec. 31, 2023 to 1,946 Mmcfe from 1,628 Mmcfe during the quarter ended Dec. 31, 2022 resulted from new wells in the Haynesville Shale and SCOOP coming online. The production decrease in working interest volumes during the quarter ended Dec. 31, 2023, as compared to the quarter ended Dec. 31, 2022, resulted from the divestiture of working interest properties in the Arkoma Stack and Eagle Ford Shale plays.

The Company had a net gain on derivative contracts of $3.2 million for the quarter ended Dec. 31, 2023, comprised of a $2.9 million non-cash gain on derivatives and a $0.3 million gain on settled derivatives, as compared to a net gain of $3.3 million for the quarter ended Dec. 31, 2022. The change in net gain on derivative contracts was due to the Company’s settlements of natural gas and oil collars and fixed price swaps and the change in valuation caused by the difference in Dec. 31, 2023 pricing relative to the strike price on open derivative contracts.

The Company recorded no impairment and made immaterial divestitures during the quarter ended Dec. 31, 2023. Lease operating expenses and transportation, gathering and marketing expenses were lower due to the divestiture of working interest properties in the Arkoma Stack and Eagle Ford Shale plays.

Twelve Months Ended Dec. 31, 2023 Results

The Company recorded net income of $13.9 million, or $0.39 per diluted share, for the twelve months ended Dec. 31, 2023, as compared to net income of $17.1 million, or $0.48 per diluted share, for the twelve months ended Dec. 31, 2022. The change in net income was principally the result of a decrease in natural gas, oil and NGL sales and a decrease in gains on asset sales, partially offset by an increase in gains associated with our derivative contracts and decreases in impairment, lease operating expenses, production and ad valorem taxes, and transportation, gathering and marketing expenses.

Natural gas, oil and NGL revenue decreased $34.5 million, or 49%, for the twelve months ended Dec. 31, 2023, compared to the twelve months ended Dec. 31, 2022, due to decreases in natural gas, oil and NGL prices of 58%, 18% and 37%, respectively, and decreases in natural gas, oil and NGL volumes of 1%, 10% and 14%, respectively.

The increase in royalty production volumes during the twelve months ended Dec. 31, 2023 to 8,123 Mmcfe from 6,613 Mmcfe during the twelve months ended Dec. 31, 2022 resulted from new wells in the Haynesville Shale and SCOOP coming online. The production decrease in working interest volumes during the twelve months ended Dec. 31, 2023, as compared to the twelve months ended Dec. 31, 2022, resulted from the divestiture of working interest properties in the Fayetteville Shale, Arkoma Stack, and Eagle Ford Shale plays.

The Company had a net gain on derivative contracts of $6.9 million for the twelve months ended Dec. 31, 2023, comprised of a a $4.3 million non-cash gain on derivatives and a $2.6 million gain on settled derivatives, as compared to a net loss of ($16.3) million for the twelve months ended Dec. 31, 2022. The gain on settled derivative contracts for the twelve months ended Dec. 31, 2023 excludes $0.4 million of cash paid to settle off-market derivative contracts. The total net cash received to settle hedge contracts during the twelve months ended Dec. 31, 2023 was $2.2 million. The change in net gain on derivative contracts was due to the Company’s settlements of natural gas and oil collars and fixed price swaps and the change in valuation caused by the difference in Dec. 31, 2023 pricing relative to the strike price on open derivative contracts.

Lease operating expenses and transportation, gathering and marketing expenses were lower due to the divestiture of working interest properties in the Fayetteville Shale, Arkoma Stack, and Eagle Ford Shale plays. Production and ad valorem taxes decreased due to a 49% decrease in natural gas, oil and NGL sales. 

Operations Update

During the quarter ended Dec. 31, 2023, the Company converted 46 gross (0.098 net) wells to producing status, including 21 gross (0.044 net) wells in the Haynesville and 14 gross (0.024 net) wells in the SCOOP, compared to 60 gross (0.27 net) wells in the quarter ended Dec. 31, 2022.

At Dec. 31, 2023, the Company had a total of 168 gross (0.851 net) wells in progress across its mineral positions and 95 gross (0.444 net) active permitted wells, compared to 185 gross (0.81 net) wells in progress and 93 gross (0.28 net) active permitted wells at Sept. 30, 2023. As of Feb. 12, 2024, 14 rigs were operating on the Company’s acreage and 57 rigs operating within 2.5 miles of its acreage.

Bakken/

Three

Arkoma

SCOOP

STACK

Forks

Stack

Haynesville

Other

Total

As of Dec. 31, 2023:

Gross Wells in Progress on PHX Acreage (1)

57

5

8

2

87

9

168

Net Wells in Progress on PHX Acreage (1)

0.227

0.023

0.043

0.001

0.537

0.020

0.851

Gross Active Permits on PHX Acreage

35

5

–

5

44

6

95

Net Active Permits on PHX Acreage

0.151

0.011

–

0.002

0.246

0.034

0.444

As of Feb. 12, 2024:

Rigs Present on PHX Acreage

6

–

1

–

4

3

14

Rigs Within 2.5 Miles of PHOENIX Acreage

14

9

2

1

23

8

57

(1)

Wells in progress includes drilling wells and drilled but uncompleted wells, or DUCs.

Leasing Activity

During the quarter ended Dec. 31, 2023, the Company leased 108 net mineral acres to third-party exploration and production companies for an average bonus payment of $968 per net mineral acre and an average royalty of 24%.

Acquisition and Divestiture Update

During the quarter ended Dec. 31, 2023, the Company purchased 325 net royalty acres for approximately $4.3 million and had no significant divestitures.

Acquisitions

SCOOP

Haynesville

Other

Total

During Three Months Ended Dec. 31, 2023:

Net Mineral Acres Purchased

96

142

–

238

Net Royalty Acres Purchased

112

213

–

325

Royalty Reserves Update

At Dec. 31, 2023, proved royalty reserves increased 9% to 57.8 Bcfe compared to 53.1 Bcfe at Dec. 31, 2022. Proved developed reserves increased by 5.3 Bcfe and proved undeveloped reserves decreased by 0.7 Bcfe, primarily due to execution of our acquisition strategy and consistent development in the Haynesville and SCOOP plays resulting in conversion of undeveloped reserves to producing.

Proved Royalty Interest

Reserves SEC Pricing

Dec. 31, 2023

Dec. 31, 2022

Proved Developed Reserves:

Mcf of Gas

36,156,363

31,467,785

Barrels of Oil

731,527

628,289

Barrels of NGL

715,683

712,342

Mcfe (1)

44,839,623

39,511,571

Proved Undeveloped Reserves:

Mcf of Gas

11,508,969

12,608,549

Barrels of Oil

134,497

118,168

Barrels of NGL

99,712

48,136

Mcfe (1)

12,914,223

13,606,373

Total Proved Reserves:

Mcf of Gas

47,665,332

44,076,334

Barrels of Oil

866,024

746,457

Barrels of NGL

815,395

760,478

Mcfe (1)

57,753,846

53,117,944

10% Discounted Estimated Future

Net Cash Flows (before income taxes):

Proved Developed

$

73,448,070

$

122,723,015

Proved Undeveloped

23,525,572

56,306,773

Total

$

96,973,642

$

179,029,788

(1) Crude oil and NGL converted to natural gas on a one barrel of crude oil or NGL equals six Mcf of natural gas basis.

Total Reserves Update

At Dec. 31, 2023, proved reserves were 71.2 Bcfe, as calculated by Cawley, Gillespie and Associates, Inc., the Company’s independent consulting petroleum engineering firm. This was an 11% decrease, compared to the 79.7 Bcfe of proved reserves at Dec. 31, 2022. Total proved developed reserves decreased 12% to 58.3 Bcfe, as compared to Dec. 31, 2022 reserve volumes, mainly due to sales of working interest properties in the Arkoma Stack and Eagle Ford Shale.  SEC prices used for the Dec. 31, 2023 report averaged $2.67 per Mcf for natural gas, $76.85 per barrel for oil and $21.98 per barrel for NGL, compared to $6.52 per Mcf for natural gas, $92.74 per barrel for oil and $39.18 per barrel for NGL for the Dec. 31, 2022 report. These prices reflect net prices received at the wellhead.

Proved Reserves SEC Pricing

Dec. 31, 2023

Dec. 31, 2022

Proved Developed Reserves:

Mcf of Gas

44,479,988

48,596,944

Barrels of Oil

937,465

1,253,838

Barrels of NGL

1,362,944

1,660,439

Mcfe (1)

58,282,442

66,082,606

Proved Undeveloped Reserves:

Mcf of Gas

11,508,969

12,608,549

Barrels of Oil

134,497

118,168

Barrels of NGL

99,712

48,136

Mcfe (1)

12,914,223

13,606,373

Total Proved Reserves:

Mcf of Gas

55,988,957

61,205,493

Barrels of Oil

1,071,962

1,372,006

Barrels of NGL

1,462,656

1,708,575

Mcfe (1)

71,196,665

79,688,979

10% Discounted Estimated Future

Net Cash Flows (before income taxes):

Proved Developed

$

86,694,012

$

185,018,066

Proved Undeveloped

23,325,572

56,306,773

Total

$

110,019,584

$

241,324,839

SEC Pricing

Gas/Mcf

$

2.67

$

6.52

Oil/Barrel

$

76.85

$

92.74

NGL/Barrel

$

21.98

$

39.18

Proved Reserves – Projected Future Pricing (2)

10% Discounted Estimated Future

Proved Reserves

Net Cash Flows (before income taxes):

Dec. 31, 2023

Dec. 31, 2022

Proved Developed

$

107,635,503

$

126,605,850

Proved Undeveloped

29,439,523

38,748,236

Total

$

137,075,026

$

165,354,086

(1) Crude oil and NGL converted to natural gas on a one barrel of crude oil or NGL equals six Mcf of natural gas basis.

(2) Projected futures pricing as of Dec. 31, 2023 and Dec. 31, 2022 basis adjusted to Company wellhead price.

Quarterly Conference Call

PHX will host a conference call to discuss the Company’s results for the quarter ended Dec. 31, 2023 at 11 a.m. EDT tomorrow, March 13, 2024. Management’s discussion will be followed by a question-and-answer session with investors.

To participate on the conference call, please dial 877-407-3088 (toll-free domestic) or 201-389-0927. A replay of the call will be available for 14 days after the call. The number to access the replay of the conference call is 877-660-6853 and the PIN for the replay is 13744298.

A live audio webcast of the conference call will be accessible from the “Investors” section of PHX’s website at https://phxmin.com/events. The webcast will be archived for at least 90 days.

FINANCIAL RESULTS

Statements of Income

Three Months Ended
Dec. 31,

Twelve Months
Ended

Twelve Months
Ended

2023

2022

Dec. 31, 2023

Sept. 30, 2022

Revenues:

Natural gas, oil and NGL sales

$

8,548,783

$

14,888,674

$

36,536,285

$

69,860,631

Lease bonuses and rental income

22,780

34,482

1,068,022

467,502

Gains (losses) on derivative contracts

3,211,410

3,347,002

6,859,589

(16,833,078)

11,782,973

18,270,158

44,463,896

53,495,055

Costs and expenses:

Lease operating expenses

319,113

977,165

1,598,944

3,945,706

Transportation, gathering and marketing

945,788

1,455,260

3,674,832

5,890,390

Production and ad valorem taxes

457,058

656,764

1,881,737

3,332,581

Depreciation, depletion and amortization

2,443,154

1,802,114

8,566,185

7,278,118

Provision for impairment

–

6,100,696

38,533

14,565

Interest expense

723,685

637,698

2,362,393

1,164,992

General and administrative

3,050,828

3,137,401

11,970,182

11,500,594

Losses (gains) on asset sales and other

84,443

(824,073)

(4,285,170)

(4,243,163)

Total costs and expenses

8,024,069

13,943,025

25,807,636

28,883,783

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

3,758,904

4,327,133

18,656,260

24,611,272

Provision for income taxes

1,245,460

981,000

4,735,460

4,202,000

Net income

$

2,513,444

$

3,346,133

$

13,920,800

$

20,409,272

Basic earnings per common share

$

0.07

$

0.09

$

0.39

$

0.59

Diluted earnings per common share

$

0.07

$

0.09

$

0.39

$

0.59

Weighted average shares outstanding:

Basic

36,036,270

35,679,740

35,980,309

34,403,498

Diluted

36,083,449

36,489,353

35,980,309

34,560,310

Dividends per share of

common stock paid in period

$

0.0300

$

0.0200

$

0.0975

$

0.0650

Balance Sheets

Dec. 31, 2023

Sept. 30, 2022

Assets

Current assets:

Cash and cash equivalents

$

806,254

$

3,396,809

Natural gas, oil, and NGL sales receivables (net of $0

4,900,126

13,152,274

allowance for uncollectible accounts)

Refundable income taxes

455,931

–

Derivative contracts, net

3,120,607

–

Other

878,659

1,372,847

Total current assets

10,161,577

17,921,930

Properties and equipment at cost, based on

   successful efforts accounting:

Producing natural gas and oil properties

209,082,847

248,978,928

Non-producing natural gas and oil properties

58,820,445

51,779,336

Other

1,360,614

1,085,056

269,263,906

301,843,320

Less accumulated depreciation, depletion and amortization

(114,139,423)

(168,759,385)

Net properties and equipment

155,124,483

133,083,935

Derivative contracts, net

162,980

–

Operating lease right-of-use assets

572,610

739,131

Other, net

486,630

757,116

Total assets

$

166,508,280

$

152,502,112

Liabilities and Stockholders’ Equity

Current liabilities:

Accounts payable

$

562,607

$

647,217

Derivative contracts, net

–

7,873,979

Income taxes payable

–

495,858

Current portion of operating lease liability

233,390

213,355

Accrued liabilities and other

1,215,275

2,032,275

Total current liabilities

2,011,272

11,262,684

Long-term debt

32,750,000

28,300,000

Deferred income taxes, net

6,757,637

1,585,906

Asset retirement obligations

1,062,139

1,901,904

Derivative contracts, net

–

687,212

Operating lease liability, net of current portion

695,818

985,887

Total liabilities

43,276,866

44,723,593

Stockholders’ equity:

Common Stock, $0.01666 par value; 54,000,500 shares authorized and

36,121,723 issued at Dec. 31, 2023; 54,000,500 shares authorized

and 35,776,752 issued at Sep. 30, 2022

601,788

596,041

Capital in excess of par value

41,676,417

44,177,051

Deferred directors’ compensation

1,487,590

1,496,243

Retained earnings

80,022,839

67,117,791

123,788,634

113,387,126

Less treasury stock, at cost; 131,477 shares at Dec. 31,

2023, and 377,232 shares at Sep. 30, 2022

(557,220)

(5,608,607)

Total stockholders’ equity

123,231,414

107,778,519

Total liabilities and stockholders’ equity

$

166,508,280

$

152,502,112

Condensed Statements of Cash Flows

Twelve Months Ended

Three Months Ended

Twelve Months Ended

Dec. 31, 2023

Dec. 31, 2022

Sept. 30, 2022

Operating Activities

Net income

$

13,920,800

$

3,346,133

$

20,409,272

Adjustments to reconcile net income (loss) to net cash provided

  by operating activities:

Depreciation, depletion and amortization

8,566,185

1,802,114

7,278,118

Impairment of producing properties

38,533

6,100,696

14,565

Provision for deferred income taxes

4,303,731

868,000

1,242,000

Gain from leasing fee mineral acreage

(1,067,992)

(34,371)

(466,341)

Proceeds from leasing fee mineral acreage

1,213,913

67,651

688,207

Net (gain) loss on sales of assets

(4,728,758)

(934,207)

(4,423,646)

Directors’ deferred compensation expense

228,017

44,827

191,852

Total (gain) loss on derivative contracts

(6,859,589)

(3,347,002)

16,833,078

Cash receipts (payments) on settled derivative contracts

2,743,475

(810,839)

(2,796,250)

Restricted stock award expense

2,205,910

524,257

2,211,673

Other

136,412

30,157

87,353

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

Natural gas, oil and NGL sales receivables

4,883,870

3,368,278

(6,723,292)

Income taxes receivable

(455,931)

–

2,413,942

Other current assets

(45,869)

(309,051)

250,568

Accounts payable

69,228

(129,304)

(10,305)

Other non-current assets

206,292

63,723

(380,964)

Income taxes payable

(576,427)

80,569

161,808

Accrued liabilities

(610,661)

(589,817)

550,012

Total adjustments

10,250,339

6,795,681

17,122,378

Net cash provided by operating activities

24,171,139

10,141,814

37,531,650

Investing Activities

Capital expenditures

(325,983)

(87,104)

(552,638)

Acquisition of minerals and overriding royalty interests

(29,735,516)

(14,499,014)

(43,525,236)

Net proceeds from sales of assets

9,614,194

1,137,730

13,217,844

Deposits received on held for sale assets

–

815,000

–

Net cash provided (used) by investing activities

(20,447,305)

(12,633,388)

(30,860,030)

Financing Activities

Borrowings under credit facility

19,500,000

10,000,000

21,300,000

Payments of loan principal

(20,050,000)

(5,000,000)

(10,500,000)

Net proceeds from equity issuance

–

–

5,006,538

Cash receipts from (payments on) off-market derivative contracts

(560,162)

(3,010,661)

(19,260,104)

Purchases of treasury stock

(402,704)

(52,460)

(1,855)

Payments of dividends

(3,520,366)

(726,462)

(2,257,901)

Net cash provided (used) by financing activities

(5,033,232)

1,210,417

(5,713,322)

Increase (decrease) in cash and cash equivalents

(1,309,398)

(1,281,157)

958,298

Cash and cash equivalents at beginning of period

2,115,652

3,396,809

2,438,511

Cash and cash equivalents at end of period

$

806,254

$

2,115,652

$

3,396,809

Supplemental Disclosures of Cash Flow Information:

Interest paid (net of capitalized interest)

$

2,405,361

$

581,142

$

997,085

Income taxes paid (net of refunds received)

$

1,464,087

$

32,431

$

384,249

Supplemental Schedule of Noncash Investing and Financing Activities:

Dividends declared and unpaid

$

113,443

$

811,688

$

–

Gross additions to properties and equipment

$

30,761,578

$

14,710,613

$

46,791,346

Value of shares used for acquisitions

–

–

(3,510,001)

Net increase (decrease) in accounts receivable for properties

and equipment additions

(700,079)

(124,495)

796,529

Capital expenditures and acquisitions

$

30,061,499

$

14,586,118

$

44,077,874

Derivative Contracts as of March 7, 2024

Production volume

Contract period

covered per month

Index

Contract price

Natural gas costless collars

January – March 2024

30,000 Mmbtu

NYMEX Henry Hub

$3.25 floor / $5.25 ceiling

January – September 2024

30,000 Mmbtu

NYMEX Henry Hub

$3.00 floor / $3.60 ceiling

January 2024

135,000 Mmbtu

NYMEX Henry Hub

$4.50 floor / $7.90 ceiling

February 2024

125,000 Mmbtu

NYMEX Henry Hub

$4.50 floor / $7.90 ceiling

March 2024

130,000 Mmbtu

NYMEX Henry Hub

$4.50 floor / $7.90 ceiling

April 2024

90,000 Mmbtu

NYMEX Henry Hub

$3.50 floor / $4.70 ceiling

May 2024

95,000 Mmbtu

NYMEX Henry Hub

$3.50 floor / $4.70 ceiling

June 2024

90,000 Mmbtu

NYMEX Henry Hub

$3.50 floor / $4.70 ceiling

January – March 2024

30,000 Mmbtu

NYMEX Henry Hub

$3.00 floor / $6.00 ceiling

October 2024 – June 2025

30,000 Mmbtu

NYMEX Henry Hub

$3.00 floor / $5.00 ceiling

November 2024 – March 2025

90,000 Mmbtu

NYMEX Henry Hub

$3.25 floor / $5.25 ceiling

November – December 2024

35,000 Mmbtu

NYMEX Henry Hub

$3.50 floor / $5.15 ceiling

January – March 2025

30,000 Mmbtu

NYMEX Henry Hub

$3.50 floor / $5.15 ceiling

April 2025 – September 2025

55,000 Mmbtu

NYMEX Henry Hub

$3.00 floor / $3.75 ceiling

November 2025 – March 2026

100,000 Mmbtu

NYMEX Henry Hub

$3.50 floor / $4.85 ceiling

Natural gas fixed price swaps

January – February 2024

135,000 Mmbtu

NYMEX Henry Hub

$3.65

March 2024

127,500 Mmbtu

NYMEX Henry Hub

$3.65

April – June 2024

10,000 Mmbtu

NYMEX Henry Hub

$3.21

April – October 2024

50,000 Mmbtu

NYMEX Henry Hub

$3.17

April – July 2024

127,500 Mmbtu

NYMEX Henry Hub

$3.24

July – October 2024

75,000 Mmbtu

NYMEX Henry Hub

$3.47

July – October 2024

25,000 Mmbtu

NYMEX Henry Hub

$3.47

August – September 2024

120,000 Mmbtu

NYMEX Henry Hub

$3.24

October 2024

105,000 Mmbtu

NYMEX Henry Hub

$3.24

November – December 2024

70,000 Mmbtu

NYMEX Henry Hub

$4.16

January – March 2025

60,000 Mmbtu

NYMEX Henry Hub

$4.16

January – March 2025

50,000 Mmbtu

NYMEX Henry Hub

$3.51

April – October 2025

100,000 Mmbtu

NYMEX Henry Hub

$3.28

Oil costless collars

January 2024

1,850 Bbls

NYMEX WTI

$63.00 floor / $76.00 ceiling

February 2024

1,700 Bbls

NYMEX WTI

$63.00 floor / $76.00 ceiling

March 2024

1,750 Bbls

NYMEX WTI

$63.00 floor / $76.00 ceiling

April 2024

1,700 Bbls

NYMEX WTI

$63.00 floor / $76.00 ceiling

May 2024

1,750 Bbls

NYMEX WTI

$63.00 floor / $76.00 ceiling

June 2024

1,650 Bbls

NYMEX WTI

$63.00 floor / $76.00 ceiling

January – March 2024

1,650 Bbls

NYMEX WTI

$65.00 floor / $76.50 ceiling

April – June 2024

500 Bbls

NYMEX WTI

$65.00 floor / $76.50 ceiling

June – September 2024

500 Bbls

NYMEX WTI

$70.00 floor / $78.10 ceiling

July – October 2024

1,650 Bbls

NYMEX WTI

$65.00 floor / $76.50 ceiling

October – December 2024

500 Bbls

NYMEX WTI

$67.00 floor / $77.00 ceiling

Oil fixed price swaps

January – March 2024

750 Bbls

NYMEX WTI

$71.75

April – October 2024

1,000 Bbls

NYMEX WTI

$66.10

April – June 2024

1,300 Bbls

NYMEX WTI

$70.59

July – October 2024

1,500 Bbls

NYMEX WTI

$69.50

November – December 2024

2,000 Bbls

NYMEX WTI

$69.50

November 2024 – March 2025

1,600 Bbls

NYMEX WTI

$64.80

January – March 2025

500 Bbls

NYMEX WTI

$69.50

January – June 2025

2,000 Bbls

NYMEX WTI

$70.90

April – June 2025

750 Bbls

NYMEX WTI

$69.50

April – June 2025

1,000 Bbls

NYMEX WTI

$68.00

July – September 2025

500 Bbls

NYMEX WTI

$69.50

July – December 2025

1,500 Bbls

NYMEX WTI

$68.90

Non-GAAP Reconciliation

This press release includes certain “non-GAAP financial measures” as defined under the rules and regulations of the U.S. Securities and Exchange Commission, or the SEC, including Regulation G. These non-GAAP financial measures are calculated using GAAP amounts in the Company’s financial statements. These measures, detailed below, are provided in addition to, not as an alternative for, and should be read in conjunction with, the information contained in the Company’s financial statements prepared in accordance with GAAP (including the notes thereto), included in the Company’s SEC filings and posted on its website.

Adjusted EBITDA Reconciliation 

The Company defines “adjusted EBITDA” as earnings before interest, taxes, depreciation and amortization, or EBITDA, excluding non-cash gains (losses) on derivatives and gains (losses) on asset sales and including cash receipts from (payments on) off-market derivatives and restricted stock and deferred directors’ expense. The Company has included a presentation of adjusted EBITDA because it recognizes that certain investors consider this amount to be a useful means of measuring the Company’s ability to meet its debt service obligations and evaluating its financial performance. Adjusted EBITDA has limitations and should not be considered in isolation or as a substitute for net income, operating income, cash flow from operations or other consolidated income or cash flow data prepared in accordance with GAAP. Because not all companies use identical calculations, this presentation of adjusted EBITDA may not be comparable to a similarly titled measure of other companies. The following table provides a reconciliation of net income (loss) to adjusted EBITDA for the quarters indicated:

Three Months
Ended

Three Months
Ended

Twelve Months
Ended

Twelve Months
Ended

Three Months
Ended

Dec. 31, 2023

Dec. 31, 2022

Dec. 31, 2023

Dec. 31, 2022

Sept. 30, 2023

Net Income

$

2,513,444

$

3,346,133

$

13,920,800

$

17,073,156

$

1,895,403

Plus:

Income tax expense

1,245,460

981,000

4,735,460

4,421,000

589,000

Interest expense

723,685

637,698

2,362,393

1,625,971

556,941

DD&A

2,443,154

1,802,114

8,566,185

7,496,472

2,022,709

Impairment expense

–

6,100,696

38,533

6,109,676

36,460

Less:

Non-cash gains (losses)

on derivatives

2,936,659

6,265,041

4,302,531

(584,976)

(940,592)

Gains (losses) on asset sales

57,505

934,207

4,728,759

7,478,781

243,041

Plus:

Cash receipts from (payments on)

off-market derivative contracts(1)

–

(903,461)

(373,745)

(5,738,164)

–

Restricted stock and deferred

director’s expense

572,709

569,084

2,433,927

2,649,194

522,965

Adjusted EBITDA

$

4,504,288

$

5,334,016

$

22,652,263

$

26,743,500

$

6,321,029

(1) The initial receipt of $8.8 million of cash from BP Energy Company, or BP, for entering into the off-market derivative
contracts had no effect on the Company’s statement of operations and was considered cash flow from financing activities.
A portion of subsequent settlements with BP had no effect on the Company’s statement of operations.

Debt to Adjusted EBITDA (TTM) Reconciliation 

“Debt to adjusted EBITDA (TTM)” is defined as the ratio of long-term debt to adjusted EBITDA on a trailing 12-month (TTM) basis. The Company has included a presentation of debt to adjusted EBITDA (TTM) because it recognizes that certain investors consider such ratios to be a useful means of measuring the Company’s ability to meet its debt service obligations and for evaluating its financial performance. The debt to adjusted EBITDA (TTM) ratio has limitations and should not be considered in isolation or as a substitute for net income, operating income, cash flow from operations or other consolidated income or cash flow data prepared in accordance with GAAP. Because not all companies use identical calculations, this presentation of debt to adjusted EBITDA (TTM) may not be comparable to a similarly titled measure of other companies. The following table provides a reconciliation of net income (loss) to adjusted EBITDA on a TTM basis and of the resulting debt to adjusted EBITDA (TTM) ratio:

TTM Ended

TTM Ended

Dec. 31, 2023

Dec. 31, 2022

Net Income

$

13,920,800

$

17,073,156

Plus:

Income tax expense

4,735,460

4,421,000

Interest expense

2,362,393

1,625,971

DD&A

8,566,185

7,496,472

Impairment expense

38,533

6,109,676

Less:

Non-cash gains (losses)

on derivatives

4,302,531

(584,976)

Gains (losses) on asset sales

4,728,759

7,478,781

Plus:

Cash receipts from (payments on)

off-market derivative contracts(1)

(373,745)

(5,738,164)

Restricted stock and deferred

director’s expense

2,433,927

2,649,194

Adjusted EBITDA

$

22,652,263

$

26,743,500

Debt

$

32,750,000

$

33,300,000

Debt to Adjusted EBITDA (TTM)

1.45

1.25

(1) The initial receipt of $8.8 million of cash from BP for entering into the off-market derivative contracts had no effect on the
Company’s statement of operations and was considered cash flow from financing activities. A portion of subsequent settlements
with BP had no effect on the Company’s statement of operations.

PHX Minerals Inc. (NYSE: PHX) Fort Worth-based, PHX Minerals Inc. is a natural gas and oil mineral company with a strategy to proactively grow its mineral position in its core focus areas. PHX owns mineral acreage principally located in Oklahoma, Texas, Louisiana, North Dakota and Arkansas. Additional information on the Company can be found at www.phxmin.com.

Cautionary Statement Regarding Forward-Looking Statements 

This press release includes “forward-looking statements” within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended. Words such as “anticipates,” “plans,” “estimates,” “believes,” “expects,” “intends,” “will,” “should,” “may” and similar expressions may be used to identify forward-looking statements. Forward-looking statements are not statements of historical fact and reflect PHX’s current views about future events. Forward-looking statements may include, but are not limited to, statements relating to: the Company’s operational outlook; the Company’s ability to execute its business strategies; the volatility of realized natural gas and oil prices; the level of production on the Company’s properties; estimates of quantities of natural gas, oil and NGL reserves and their values; general economic or industry conditions; legislation or regulatory requirements; conditions of the securities markets; the Company’s ability to raise capital; changes in accounting principles, policies or guidelines; financial or political instability; acts of war or terrorism; title defects in the properties in which the Company invests; and other economic, competitive, governmental, regulatory or technical factors affecting properties, operations or prices. Although the Company believes expectations reflected in these and other forward-looking statements are reasonable, the Company can give no assurance such expectations will prove to be correct. Such forward-looking statements are subject to a number of assumptions, risks and uncertainties, many of which are beyond the control of the Company. These forward-looking statements involve certain risks and uncertainties that could cause results to differ materially from those expected by the Company’s management. Information concerning these risks and other factors can be found in the Company’s filings with the SEC, including its Annual Reports on Form 10-K and Quarterly Reports on Form 10-Q, available on the Company’s website or the SEC’s website at www.sec.gov.

Investors are cautioned that any such forward-looking statements are not guarantees of future performance and that actual results or developments may differ materially from those projected. The forward-looking statements in this press release are made as of the date hereof, and the Company does not undertake any obligation to update the forward-looking statements as a result of new information, future events or otherwise.

SOURCE PHX MINERALS INC.


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