Q1 2020 Earnings Call
Good day, everyone and welcome to Panhandle oil and gas Inc. first quarter 2020 earnings Conference call. Today's conference is being recorded I would now like to turn the conference call over to Ralph Let me go Panhandle, Vice President Investor Relations. Please go ahead.
Thank you for joining us today to discuss or 2021st quarter results with me on the call todays prepared remarks, or Chad Stephens, Chief Executive Officer, Rob When steel Chief Financial Officer and myself. After the prepared remarks, we will walk open up the coal for Q1 eight section during the Q.
In a session where you will also be joint break free to web who is the VP of operations. Please note that were also webcast need to school on our Investor Relations website Panhandle when gas dotcom. The earnings press release that was issued earlier today is also posted on the Investor Relations website.
Before I turn the call over to Chad I'd like to remind everyone that during today's call, including the key Rene session. We may make forward looking statements regarding expected revenue earnings future plans opportunities in other expectations of the company. These estimates implants in other forward looking statements involve new.
And unknown risks and uncertainties the may cause actual results could differ materially from those expressed or implied on the call.
The risks are detailed in our most recent annual report on form 10-K search maybe amended or supplemented by subsequent quarterly reports on form 10-Q, four other reports filed with the Securities and Exchange Commission. The statements made during this conference call are based upon information known to Panhandle as if the date in time.
This call Panhandle assumes no obligation to update the information presented in today's call with that I'd like to turn the call over to Chad Stephens Panhandle's Chief Executive Officer.
Thanks, Ralph and thanks to everyone on the line for participating and can handle 2020 fiscal first quarter conference call. We sincerely appreciate your time and your continued interest in the company.
First quarter, a 2020 reflected increasing momentum despite continued commodity price headwinds in executing the strategy, we originally announced in 2019.
As previously discussed we're moving away from working interest participation to implement a disciplined focus on proactively going a minimal loyalty holdings in areas with good rock quality clear line of sight development under well established operators on an in a very accretive basis.
Her time, we are confident this strategy should provide meaningful free cash flow that we can return to our shareholders.
In the first quarter, we closed on our previously announced acquisition of 700 net mineral acres in the core of the stack under acreage largely operated by Devon Attentive and mail. So we're currently actively evaluating other interesting opportunities mainly in the stacks good and Buck.
[noise], Rob will provide detailed color around the first quarter results in a moment.
Interestingly quarter over quarter, we saw a decline in operating cash flow of approximately 1.3 million or 42%, but this decline is all due to a material swing and derivative contracts, we booked a 1.1 million derivative gain in fourth quarter 20 night team.
And an 800000 dollar loss in first quarter 21.9 million negative variance otherwise our operating cash flow would have been virtually flat.
I would also emphasize that our capital expenditures for the quarter have dropped to an insignificant amount just over $100000.
We are seeing the natural decline in our working interest PDP volumes continue as we abstain from participating with working interest in new wells.
As we transition to the mineral only strategy, we should be able to mitigate this decline through the organic development of our minerals and by acquiring minerals. Then include existing production and line of sight development similar to the stack deal we announced in December.
This acquisition only contributed 14 days of production for the first quarter 20 numbers beginning in the second quarter, we will realize the full impact to our financials.
We have an active mineral package deal flow and are optimistic at our chances of closing more acquisitions in the future. We look forward to keeping you updated without progress at this point I would like to turn the call over to Ralph to provide quick operational overview.
Thanks, Chad.
Handle continues to see strong activity on its mineral position during the quarter ended December 31st we had 97 gross 0.32 net wells converted from wells in progress to producing wells. The majority of this activity continues to be focused in the scoop stack and Bakken regions.
At the ended the quarter, we had 125 gross 0.49 net wells in progress, which is basically a one to one replacement ratio of the prior quarters well in progress there were placed on production.
This shows the resiliency inorganic growth potential of the Panhandle asset base also as the at the <unk> as of the quarter end, we had nine rigs presidency on PHX acreage and 55 within two and a half miles again predominantly focused on scoop stack and Bakken.
We continue to actively lease or open minerals, including minerals that had been previously held for a working interest participation. During the first fiscal quarter. We leased 754 net acres for about 528000, which works out to an average bonus or $668 per acre.
In a royalty up 21% on the acquisition and divestiture front, we closed on the sale with 530 predominantly undeveloped mineral acres in northwest Eddy County, New Mexico at an average price or $4800 breaker.
We also closed on the purchase of 700 net mineral acres.
In the core of the stack is Chad previously mentioned these two deals bookend or philosophy of treating or minerals like a portfolio and high grading our assets to maximize cash flow and reduce risk or deal pipeline continues to be strong and we're currently evaluating several opportunities with that I'll turn the call over time.
Rob will provide a review of the financials.
Thanks, Ralph first I want to thank everyone for being on our call today.
I will share with you some more details regarding our financial results for the first quarter ended 12, 31, 2019, and then turn the call back over to chat to make some final comment.
For our first quarter ended December 31, 2019, our total revenues were 10.6 million, which is a 33% decrease from the 15.7 million in the fourth quarter of 2019. This change was caused by the filing won the company sold minerals in the fourth quarter of 19 for gain on sale five point.
9 million and the company sold mineral assets in the first quarter 20 or gain on sale of 3.3 million a decrease of 2.6 million in revenue.
Do as Chad mentioned earlier.
We had a 1.1 million dollar gain on our derivative contracts in the fourth quarter 2019, and that turned to a loss of <unk> point 8 million in the first quarter $21.9 million decrease in revenue.
Three oil NGL and natural gas revenues decreased 46 million or 7.3% during the first quarter 20 compared to the fourth quarter of 19 future production decreases from all our products in the Eagle Ford and Arkoma.
And that was partially offset by higher natural gas and NGL prices in the first quarter of 20.
Our total expenses excluding impairment previously discussed in our 2019 10-K decreased 4.9 million or 37% in the first quarter up 20, when compared to the fourth quarter of 90.
The majority of the decrease was due to the reduction in DDNA 3.4 million or 54%.
The company's DDNA rate in the first quarter Corning was $1.30 cents per mcf, the as compared to $2.50 brands you happy in the fourth quarter of 2019.
The company's Elouise decreased 682000 or 21% in the first quarter 20, as compared to the fourth quarter 19.
This was primarily due to lower expenses in the Eagle Ford as well as lower Workover expenses overall and lower production.
DNA decreased approximately 461000 or 17% in the first quarter, pointing as compared to the fourth quarter of 19 that was mainly due to the onetime severance pay the former CEO in the fourth quarter Nike.
Partially offset by higher legal and technical consulting expenses in the first quarter one.
Our adjusted EBITDA was 7.2 million in the first quarter of 20 as compared to 10.1 million in the fourth quarter of 19 adjusted pretax net income was 3.9 million or 23 cents per share in the first quarter 20, as compared to 2.7 million or 16 cents per share in the fourth quarter of 90.
Both the adjusted pretax net income and adjusted EBITDA includes gain on sale of assets.
We continue to deploy an active commodity hedging program, which extends out into early calendar 2021.
Currently we have 156000 barrels of oil hedged at a price of approximately $59 per barrel for calendar 2020.
We also have 1.4 Bcf of natural gas hedge at a price of approximately $2.75 per Mcf per calendar 2020.
We've been able to lock in favor of returns for our shareholders through this hedging program and we plan to continue.
With that I'd like to turn the call over to Jeff for some final remarks.
Thank you, Rob I would like to reiterate how excited I am about the new strategic direction, we have set for the company and look forward to keeping you apprised of our progress in the coming quarters. This concludes the prepared remarks portion of the call operator, let's please open up acute for questions.
Thanks.
Our now.
Good question.
On your telephone.
Yeah.
To provide the best.
Again, ladies and gentlemen.
Question or comment.
On your telephone.
Just a moment to give everyone a chance to Q.
From Richard Howard.
Point.
Please go ahead.
Oh good afternoon.
That's that's been questions.
First of all or have we continued to see the ability to make sales in the Permian.
Are you, referring slowed down so maybe county, the economy was the easy County sale. The last one on and or there's still opportunities is to sell or has that slowed way down.
Hey, Richards Ralph no. The last one that we did was the Eddy County shale that's the last one disclosed.
We continue to have discussions and think about opportunities, but right. Now there is there's nothing that's on the on the front burner.
Okay, and if we have if we have purchases will we typically use.
The money from.
Those sales and a in the extreme I mean other tax free exchanges or are we going to Oh, we're going to depend incentive cash that's generated by our activities.
Yeah. Richard this is Chad so it to fund our purchases if we were able to sell more minerals. We would do similar like kind exchange 10, 31 structured <unk> type deals for tax deferred advantage.
But to the extent, we do not show minerals, we would source of funds to to acquire minerals from cash on hand debt and potentially equity.
That's it.
Do you foresee.
Not making sure <unk> with <unk>.
Right.
No. We don't think at this point that that's the best choose the best allocation of our capital going forward. So you probably will not see for the foreseeable future an active share repurchase.
Okay.
Oh My second question a lot.
Got it extended the first one that my second question.
Oh.
Could you give us some feel for how much of that relates to.
Royalty.
Action and how much relates to our working interest production.
There is about one or two thirds <unk>.
The first party first part of your question you broke up can you quickly repeat I'm sorry for.
Sure.
The 70 million that we haven't the borrowing base.
Thank burlington's.
Is it should I look at that as <unk>.
Two thirds.
Working in <unk> and one third <unk>.
That's that's the approximate relation.
Our.
Sales right now.
Well it is as a laid out in the most recent she the borrowing base has been reduced to 45 million.
Oh, okay.
Got it.
And that's well it was reduced because if you'll recall at the end of year, we announced.
The impairment because we eliminated all of the PV drilling locations on the Eagle Ford, which triggered the impairment.
But we also eliminate 80 85 million a future capex associated with those P.D. So it reduce the borrowing base. So at this point out barring base is virtually associated with the PDP Frida. If you have a sense of how much is associated <unk> from a reserve standpoint.
There is associated with working interest you might be able to.
Answer that question.
Yeah, I think is probably in line was with our production.
So Ah two thirds working interest one third a royalty.
Thank you very much.
Thank you.
Ladies and gentlemen.
Ask a question.
One.
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And I apologize, ladies and gentlemen.
Hi.
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Oh for any closing comment.
Thank you Christie thanks, everybody for joining us we look forward to updating you guys at the end of the next quarter. Thanks again for participating on your interest in Panhandle.
I'm not.
Today's teleconference. Thank you for your participation you may now disconnect your lines.
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