Q3 2020 Panhandle Oil and Gas Inc Earnings Call

Please standby we're about to be get good day, everyone and welcome to Panhandle oil and gas Inc. third quarter Twentytwenty earnings Conference call. Today's conference is being recorded I would now like to turn the call over to Ralph Demicco, Panhandle's, Vice President and Chief Financial Officer. Please go ahead.

Thank you for joining us today to discuss our 2023rd quarter results with me on the call. Their remarks are Chad Stephens, President and Chief Executive Officer in freedom wet vice-president mineral operations. After their prepared remarks, we will open the call what Fourq Una Sasha.

The earnings press release that was issued earlier today is also posted on our Investor Relations website before I turn the call over to Chad I'd like to remind everyone that during today's call, including the Q what age session. We may make forward looking statements regarding expected revenue Bernice feature plants opportunity.

Ladies and other expectations that the company.

That's gonna <unk> plans and other forward looking statements involve both known and unknown risks and uncertainties that may cause actual results to be materially different from those expressed the required on the call.

These risks are detailed in our most recent annual report on form 10-K, and such maybe amended or supplemented by subsequent quarterly reports on form 10-Q.

The reports filed with the Securities and Exchange Commission.

Statements made during this conference call, where based upon information known to Panhandle as if the date in time of the call and Andrew 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 Sandoz, Chief Executive Officer.

Thanks, Ralph and thanks to everyone on the line for participating in Panhandle 2020 fiscal third quarter Conference call. We sincerely appreciate your time and your continued interest in the company.

The third quarter 2020 was very challenging for Panhandle, as we dealt with the effects of cobot 19, and the associated downturns in the economy and commodity prices.

Our royalty volumes decreased about 60% quarter over quarter, and our total volumes, including working interest decreased a total of 20%.

Activity on our minerals continues to experience a slowdown as operators contend with the current state of the economy.

Despite the current macro environment, we continue to manage costs generate free cash flow and reduce debt during the third quarter.

Over the past few weeks I've been encouraged by the signs of an uptick in activity in the sector.

This includes curtailed production being brought back online increased permitting in core areas and deal flow picking up in general.

I remain confident that opinion will successfully navigate this market downturn, taking proactive steps a pretty prudent capital allocation that reflect market conditions and remain committed to our long term strategy. Although it may be accretive growth via acquisitions at this point I would like to turn the call.

I would have freedom to provide quit operational overview, and then turn out to discuss the financials.

Thank you Chad and Hello to everyone on the line.

During the quarter ended June Thirtyth, we had 48 gross 0.22 net wells convert from wells in progress to producing wells as compared to 25 gross 0.06 net wells during the quarter ended March 31st.

At the end of the quarter, we had an additional 85 gross 0.44 net wells and progress.

Yeah, I'm from 118 gross 0.5 CNET from the prior quarter.

Also as the quarter ended we had no rigs president on Panhandle acreage and 15 within 2.5 miles compared to 10 rigs our acreage and 41 within 2.5 miles at March 31.

Since the end of the quarter, we've seen two rigs move onto our acreage position one in the scoop and one in the basket.

Clearly we are still in the middle of the slowdown in the sector as the economy deals with co that night team and the lower commodity prices. We are encouraged by what we've seen in the last few weeks as Chad mentioned.

Leasing on her open minerals with flat during the quarter as operators continue to recalibrate their capital program.

During the third fiscal quarter 2020, we leased 120 net acres for about $23000 as compared to 36 net acres by 22000, the fire corridor.

Subsequent to June Thirtyth, we closed on the sale of 5925 open Nonproducing acres and northwest Oklahoma for $794000.

With that I'd like to turn the call over to Ralph who will provide a review of financial.

Thanks Freedom first I'd like to thank everybody for being on our call today.

Third quarter ended June Thirtyth 2020, sort of revenues were 2.7 million, which is a 76% decrease from the hundred 13 million into second quarter of 20 Twond. The change was caused by default.

One oil.

NGL and natural gas revenues decreased 3.7 million were 51% during the third quarter of 21 compared to the second quarter 2020.

Total production decreased by about 20% as a result of fewer new wells being brought online in the third quarter relative to the second quarter.

It's important to remember denim royalty wells, we received first shame minimum you wells generally three six months. After after production has soared in that first check includes all monies owed from the first day of production through the bases to check is written in essence, the second quarter included a true up.

First money wells of about 30000 barrels of oil, which <unk> third quarter did not have given to slow down in the economy to a lesser degree. We were also affected by curtailments on existing production breaking out volumes between royalty and working interest the decrease was 16% and.

22% respectively.

Lower average prices received for oil natural gas and NGL into quarter.

39% on an Mcf fee basis also had a large impact on sales.

We had 8.8 million dollar loss on our derivatives contracts in the third quarter can pair to a 4.1 million gain the prior quarter note that we realize that gain of 1.7 million compared to point sixmillion to prior quarter on a cash basis. This really reflects that.

Positive impact of our hedge book during this downturn.

Reasonableness revenue were generally flat on a quarter over quarter basis as operators continue your resetting their capital budgets as a result of current market conditions for total expenses, excluding impairment the decreased 2.4 million or about 25% into third quarter of 2020 compared to the second call.

Order.

The company's out what we decreased approximately 400000 were 26% in the third quarter as compared to the second quarter.

This is partially due to higher one time, yes balance sheet balancing charges in the second quarter and Panhandle proactively selling on economic working interest wells on a currency a fee basis elouise decreased about 8% to 60 cents per Mcf fee transportation gathering and more.

Operating expenses were also lower on an absolute dollar basis and per Mcf fee basis about 30% and 12% respectively.

Generally as a result of lower sales. The same can be said about production taxes, which decreased 64% on a quarter over quarter basis, a g. a decrease about $266000 were 12% into third quarter compared to the second quarter of 2020 as a result of.

Our cost control measures.

Adjusted EBITDA was 1.2 million in the third quarter of 2020 as compared to 2.4 million into second quarter. We have continued to deploy an active commodity hedging program, which extends out into calendar 2022 generally we have lost in costless collars on natural gas between two.

Allergan, 30 cents and $3.02 and on oil between $36.69 and $52.55.

You can see enough to be schedule into both the press release and the 10-Q that were filed today.

Let me also touch on debt, we had net debt of 28 million as of June Thirtyth and as and as of August 11.

That has further been reduced to 26.9 million. This reduction is net of the proceeds from the sale of open minerals that freedom mentioned lastly on the second quarter restatement. We believed that we have remediated the issues that caused the error in revenue accrual and we do not expected this would be an issue again.

With that I will turn to call over to chat for some final remarks. Thank.

Thank you Ralph I would like to emphasize how committed we are taking proactive and prudent actions given the current difficult market conditions, focusing on the balance sheet that includes hedging reducing DNA, reducing the dividend as we discussed in the second quarter and allocating all free cash flow to reduce.

The net debt.

These prudent allocations of capital and cash management processes will assist in maneuvering panhandle through this downturn.

We will also keep an eye on the landscape for growth opportunities 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 the queue for questions.

Thank you Sir the floor is now open for questions. If you would like ask a question. Please press Star then one on your telephone keypad at any time to join the queue.

If you're using a speakerphone please pick up the handset.

Does that sound quality again, ladies and gentlemen, if you have a question or comment. Please press star one on your telephone keypad.

I will probably just a moment to give everyone a chance testing.

And I'm showing no questions from the phone lines. So I'll turn it back over to management for any closing remarks.

Oh, yes.

Thanks, everybody for joining US is there on your questions. We look forward to keeping you updated on the next quarterly call, which would be our.

Fiscal yearend 2020 call.

Thanks, everybody.

And that does conclude today's what I. Thank you for attending you may disconnect. Your lines at this time and have a great. Thanks.

Oh.

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