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