FORT WORTH, Texas


,


Aug. 8, 2022


/PRNewswire/ — PHX MINERALS INC., “PHX” or the “Company” (NYSE: PHX), today reported financial and operating results for the third fiscal quarter ended

June 30, 2022

.

SUMMARY OF RESULTS FOR THE QUARTER ENDED

JUNE 30, 2022

, AND SUBSEQUENT EVENTS

• Net income in the third fiscal quarter of 2022 was
  
  $8.6 million
  
  , or
  
  $0.25
  
  per share, compared to net loss of
  
  ($4.0) million
  
  , or
  
  ($0.12)
  
  per share, in the second fiscal quarter of 2022.
• Adjusted EBITDA
  
  ⁽¹⁾
  
  of
  
  $7.2 million
  
  for the third fiscal quarter of 2022 increased from
  
  $5.8 million
  
  in the second fiscal quarter of 2022.
• Royalty production volumes for the third fiscal quarter of 2022 increased 3% to 1,595 Mmcfe, and total production volumes for the third fiscal quarter of 2022 decreased 1% to 2,430 Mmcfe, compared to the second fiscal quarter of 2022.
• 80% of royalty production volumes and 78% of total production volumes in the third fiscal quarter of 2022 were attributable to natural gas.
• 96 gross (0.25 net) wells converted to PDP, including 39 gross (0.19 net) in the SCOOP and 12 gross (0.03 net) in the
  
  Haynesville
  
  , during the third fiscal quarter of 2022, compared to 108 gross (0.48 net) in the second fiscal quarter of 2022.
• 155 gross (0.79 net) wells in progress as of
  
  June 30, 2022
  
  , compared to 134 gross (0.60 net) as of
  
  March 31, 2022
  
  .
• Total debt was
  
  $28.3 million
  
  and the debt to adjusted EBITDA (TTM)
  
  ⁽¹⁾
  
  ratio was 1.31x at
  
  June 30, 2022
  
  .
• During the third fiscal quarter of 2022, PHX closed on acquisitions totaling 938 net royalty acres located in the SCOOP play of
  
  Oklahoma
  
  and the
  
  Haynesville
  
  play of
  
  East Texas
  
  and
  
  Louisiana
  
  for approximately
  
  $9.1 million
  
  .
• Since
  
  June 30, 2022
  
  , PHX has closed on additional acquisitions of 544 net royalty acres located in the SCOOP play of
  
  Oklahoma
  
  and the
  
  Haynesville
  
  play of
  
  Louisiana
  
  for approximately
  
  $8.2 million
  
  .
• PHX has entered into a PSA to divest the remainder of its non-operated working interest position in the Fayetteville Shale of
  
  Arkansas
  
  for approximately
  
  $6 million
  
  subject to customary closing adjustments.
• PHX announced a
  
  $0.02
  
  per share quarterly dividend, payable on
  
  Sept. 9, 2022
  
  , to stockholders of record on
  
  Aug. 25, 2022
  
  .

Chad L. Stephens

, President and CEO, commented, “I am pleased to report another outstanding quarter of financial results including adjusted EBITDA of

$7.2 million

, a 22% increase over the prior sequential quarter. I would like to thank all of the PHX employees for their hard work that helped the company achieve these excellent third quarter 2022 results.

Consistent with our first and second quarter of 2022 results, we reported an increase in royalty volumes and a further decrease in working interest volumes. This is in line with our corporate strategy. We continue to allocate 100% of our capital to acquiring minerals in the core of the

Haynesville

in

Louisiana

and the SCOOP in

Southern Oklahoma

in high rock quality areas under well capitalized active operators, assuring us of near-term line of sight development. We are keenly focused on executing a successful acquisition strategy and expect our royalty volumes will continue to increase on an annual basis.

In our third fiscal quarter ended

June 30, 2022

, and including through

Aug. 4


^th

, we have closed on a total of

$18.0 million

in additional minerals located primarily in the

Haynesville

with line-of-sight development, which should continue to drive our growing royalty volumes. This brings our fiscal 2022 acquisition program to approximately

$42 million

. There continues to be a strong set of acquisition opportunities in front of us.

Lastly, I’d like to announce that during our third fiscal quarter we opened our new corporate headquarters in

Fort Worth, Texas

. This move places our senior management team at the epicenter of the mineral space. We will retain our offices in

Oklahoma City

where our accounting and technical staff are located and do not anticipate any disruption to the business. We are excited about having new offices in

Fort Worth

and believe it will better position us to execute the Company’s growth strategy of building shareholder value through the acquisition and ownership of high-quality mineral interest in our core areas.”

Total Production for the last four quarters was as follows:

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

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

THIRD FISCAL QUARTER ENDED

JUNE 30, 2022

, RESULTS

The Company recorded third fiscal quarter 2022 net income of

$8,589,010

, or

$0.25

per share, as compared to a net loss of

($1,356,594)

, or

($0.05)

per share, in the third fiscal quarter 2021. The change in net income was principally the result of increased natural gas, oil and NGL sales, decreased losses associated with our hedge contracts and increased gains on asset sales, partially offset by an increase in general and administrative costs, or G&A, and income tax expense.

Natural gas, oil and NGL revenue increased

$8,661,748

, or 79%, for the third quarter 2022, compared to the corresponding 2021 quarter due to increases in natural gas, oil and NGL prices of 105%, 65% and 56%, respectively, and an increase in natural gas volumes of 1%, partially offset by a decrease in oil and NGL volumes of 12% and 15%, respectively.

The production increase in royalty volumes during the three months ended

June 30, 2022

, as compared to the three months ended

June 30, 2021

, resulted from new wells associated with 2021 and 2022 acquisitions in the Haynesville Shale and SCOOP plays coming online. The decrease in working interest volumes resulted from the divestiture of low-value legacy working interests in

Oklahoma

and the Fayetteville Shale in

Arkansas

, naturally declining production in high-interest wells in the Arkoma Stack and STACK plays, and legacy wells shut in in the Eagle Ford play while the operator completes new offset wells.

The Company had a net loss on derivative contracts of

($2,387,226)

in the third fiscal 2022 quarter, as compared to a net loss of

($5,487,483)

in the third fiscal 2021 quarter, of which

($5,670,147)

is a realized loss and

$3,282,921

is an unrealized gain with respect to the third fiscal 2022 quarter. Realized net loss on derivative contracts for the third fiscal 2022 quarter excludes

$1,284,024

of cash paid to settle off-market derivative contracts. The change in net loss 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

June 30, 2022

, pricing relative to the strike price on open derivative contracts.

The 10% increase in total cost per Mcfe in the third fiscal 2022 quarter, relative to the third fiscal 2021 quarter, was primarily driven by an increase in G&A and production taxes. G&A increased

$602,510

, or 26%, in the third fiscal 2022 quarter, compared to the corresponding 2021 quarter due to legal expenses associated with reincorporating in the state of

Delaware

, increased transaction activity and restricted stock expense. Production taxes increased

$328,339

, or 55%, due to increase in natural gas, oil and NGL revenue, but decreased as a percent of natural gas, oil and NGL revenue in the third fiscal 2022 quarter, compared to the corresponding 2021 quarter from 5.5% to 4.7%.

NINE MONTHS ENDED

JUNE 30, 2022

, RESULTS

The Company recorded net income of

$11,250,804

, or

$0.33

per share, in the fiscal nine-month period ended

June 30, 2022

(the “fiscal nine-month 2022 period”), as compared to a net loss of

($2,453,037)

, or

($0.10)

per share, in the corresponding 2021 period. The change in net income was principally the result of increased natural gas, oil and NGL sales, gains on asset sales and lease bonuses and rental income, and decreased DD&A, partially offset by an increase in losses on derivative contracts, production taxes, G&A and income tax expense.

Natural gas, oil and NGL sales increased

$22,361,973

, or 87%, for the fiscal nine-month 2022 period, compared to the corresponding 2021 period, due to increases in natural gas, oil and NGL prices of 103%, 71% and 74%, respectively, and an increase in natural gas volumes of 6%, partially offset by a decrease in oil and NGL volumes of 13% and 1%, respectively.

Natural gas volumes increased during the nine months ended

June 30, 2022

, as compared to the nine months ended

June 30, 2021

, primarily as a result of new wells associated with recent acquisitions in the Haynesville Shale and SCOOP plays coming online. These gas volumes were partially offset by naturally declining production in high-interest wells in the Arkoma Stack and divestitures in the

Fayetteville

. NGL production decreased slightly as a result of naturally declining production from liquids-rich gas wells in the STACK. The decrease in oil production was a result of naturally declining production in working interest wells and the Company’s strategy of no longer participating with working interests in new drilling in the Eagle Ford play and reduced drilling activity of royalty wells in the Bakken play, as well as naturally declining production in high-interest wells brought online in the STACK during fiscal year 2021. Oil production decreases were partially offset by new wells in the SCOOP.

The Company had a net loss on derivative contracts of

($12,534,464)

in the fiscal nine-month 2022 period, as compared to a net loss of

($8,089,662)

in the corresponding 2021 period, of which

($8,595,246)

is a realized loss and

($3,939,218)

is an unrealized loss with respect to the fiscal nine-month 2022 period. Realized net loss on derivative contracts for the fiscal nine-month 2022 period excludes

$6,465,597

of cash paid to settle off-market derivative contracts. The change in net loss 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

June 30, 2022

, pricing relative to the strike price on open derivative contracts.

The 8% increase in total cost per Mcfe in the fiscal nine-month 2022 period, relative to the corresponding 2021 period, was primarily driven by an increase in G&A and production taxes, partially offset by a decrease in DD&A. G&A increased

$1,651,758

, or 27%, in the fiscal nine-month 2022 period, compared to the corresponding 2021 period due to legal expenses associated with reincorporating in the state of

Delaware

, increased transaction activity and restricted stock expense. Production taxes increased

$958,499

, or 75%, due to increase in natural gas, oil and NGL revenue, but decreased as a percent of natural gas, oil and NGL revenue in the nine-month 2022 period, compared to the corresponding 2021 period from 5.1% to 4.8%. DD&A decreased

$448,465

, or 7%, in the fiscal nine-month 2022 period to

$0.82

per Mcfe, as compared to

$0.90

per Mcfe in the corresponding 2021 period. Of the DD&A decrease,

$587,155

was a result of an

$0.08

decrease in the DD&A rate per Mcfe, partially offset by an increase of

$138,690

resulting from production increasing 2% in the fiscal nine-month 2022 period, compared to the corresponding 2021 period. The DD&A rate per Mcfe decrease was mainly due to an increase in reserves during the fiscal nine-month 2022 period, as compared to the corresponding 2021 period.

OPERATIONS UPDATE

During the third fiscal quarter of 2022, the Company converted 96 gross (0.25 net) wells to producing status, including 39 gross (0.19 net) in the SCOOP and 12 gross (0.03 net) in the

Haynesville

, compared to 108 gross (0.48 net) wells, including 35 gross (0.04 net) in the SCOOP and 31 gross (0.33 net) in the

Haynesville

, during the second fiscal quarter of 2022.

At

June 30, 2022

, the Company had a total of 155 gross (0.79 net) wells in progress across its mineral positions and 65 gross (0.21 net) active permitted wells, compared to 134 gross (0.60 net) wells in progress and 52 gross (0.23 net) active permitted wells at

March 31, 2022

. As of

June 30, 2022

, 25 rigs were operating on the Company’s acreage with 96 rigs operating within 2.5 miles of its acreage, compared to 18 rigs operating on the Company’s acreage with 86 rigs operating within 2.5 miles of its acreage as of

March 31, 2022

.

Leasing Activity

During the third quarter of fiscal 2022, the Company leased 395 net mineral acres for an average bonus payment of

$512

per net mineral acre and an average royalty of 22%.

ACQUISITION AND DIVESTITURE UPDATE

During the third quarter of fiscal year 2022, the Company purchased 938 net royalty acres for approximately

$9.1 million

and sold 2,387 net mineral acres, which were outside our core focus areas and predominantly undeveloped and unleased, for approximately

$0.5 million

.

THIRD QUARTER EARNINGS CALL

PHX will host a conference call to discuss the Company’s third fiscal quarter results at

11:00 a.m. EDT tomorrow


Aug. 9, 2022

. 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 (domestic) or 201-389-0927 (international). 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 13731836.

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

We define “adjusted EBITDA” as earnings before interest, taxes, depreciation and amortization, or EBITDA, excluding unrealized 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. We have included a presentation of adjusted EBITDA because we recognize that certain investors consider this amount to be a useful means of measuring our ability to meet our debt service obligations and evaluating our 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 presentation of net income (loss) to adjusted EBITDA for the periods indicated:

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. We have included a presentation of debt to adjusted EBITDA (TTM) because we recognize that certain investors consider such ratios to be useful means of measuring our ability to meet our debt service obligations and for evaluating our 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 presentation of net income (loss) to adjusted EBITDA on a TTM basis and of the resulting debt to adjusted EBITDA (TTM) ratio:

Pretax Net Income (Loss)


Excluding Non-cash Derivative Gains (Losses) Reconciliation

“Pretax net income (loss) excluding non-cash derivative gains (losses)” is defined as earnings before taxes, excluding unrealized gains (losses) on derivatives. We have included a presentation of pretax net income (loss) excluding non-cash derivative gains (losses) because we recognize that certain investors consider this amount to be a useful means of measuring our ability to meet our debt service obligations and evaluating our financial performance. Pretax net income (loss) excluding non-cash derivative gains (losses) 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 pretax net income (loss) excluding non-cash derivative gains (losses) may not be comparable to a similarly titled measure of other companies. The following table provides a presentation of net income (loss) to pretax net income (loss) excluding non-cash derivative gains (losses) for the periods indicated:

PHX Minerals Inc. (NYSE: PHX)



Fort Worth, Texas

, based, PHX Minerals Inc. is a natural gas and oil mineral company with a strategy to proactively grow its mineral position in its core areas of focus. PHX owns approximately 75,000 leased mineral acres principally located in

Oklahoma

,

Texas

,

Louisiana

,

North Dakota

, and

Arkansas

. Additional information on PHX 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 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 the 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 statements are not guarantees of future performance and that actual results or developments may differ materially from those projected in forward-looking statements. 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.

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