Q1 2021 PHX Minerals Inc Earnings Call

Sure, please hold the line and we'll be right back with you.

Am I good day everyone and welcome to PHX minerals first fiscal quarter 2021 earnings conference call today's conference is being recorded. I would not like to turn the call over to Ralph D'Amico. Thx's vice president's Chief Financial Officer, please go ahead. Thank you for joining us today to discuss our 2021 fiscal first-quarter results with me on the call today for prepared remarks or a Cat Stevens president and chief executive officer and Freda web vice president of mineral operations after prepared remarks. We will open up the call to a Q&A set.

Earnings press release that was issued earlier today is also posted on the investor relations website before I turned to call over to Chad. I'd like to remind everyone life during today's call including the Q&A session. We may make forward-looking statements regarding expected expected Revenue earnings future plans opportunities and their expectations of the company these estimates and plans in other forward-looking statements involve known and unknown risks and uncertainties that may cause actual results to be materially different from those expressed or implied on the call. These risks are detailed in our most recent annual report on form 10-K as such may be amended or supplemented by subsequent quarterly reports on form 10-q or other reports filed with the Securities and Exchange Commission, the statements made during this conference call log.

based upon information

No to PHX as of the date and time of this call PHX assumes no obligation to update the information presented on today's call with that. I'd like to turn the call over to Chad Stevens, thx's chief executive officer. Thanks Ralph. And thanks everyone on the line for participating in PHX. Twenty Twenty-One wage fiscal quarter conference call. We sincerely appreciate your time and your continued interest in the company. I was very pleased with our performance during our first fiscal quarter of 2551 adjusted ebitda, excluding gains on sale was up by 37% relative to the prior quarter ended 920 due to a combination of higher sales volumes and higher realized commodity prices particularly natural gas as the energy markets recover from the impact of coping

Well, some Freedom will provide more detail on that later on the call. We also continue to focus on reducing our debt in order to deliver the company and increase our financial flexibility as we paid down 1.75 million of debt during the quarter and an additional 1 million since the quarter-end to bring our total debt outstanding as of February one thousand to twenty-six million as we stated in our last earnings call when using nymex strip pricing we estimate we would be able to repay our debt through operating free cash flow hedge just over three years.

as previously announced we closed on the mineral Acquisitions in Grady County Oklahoma InterContinental springboard one asset and in Harrison Panola and a backup counties Texas focusing on the Haynesville for a total of 5.5 million we also closed on two additional mineral Acquisitions in San Augustine County Texas Painesville where A Thon owns the drilling lights and operates for a combined 1.75 million bringing our total mineral Acquisitions closed during the quarter to seven point two five million the mineral assets acquired include existing production wells in the process of being brought to production and additional drilling locations the exact positions were funded with proceeds from a September 2020 Equity offering as we move further into calendar year 2021 we continue to see improving commodity prices

And rig activity which are leading to a steady increase in Mineral acquisition opportunities as I stated on our last earnings call. We will continue to focus on growing shareholder value off by being a proactive consolidator in the mineral space. I believe the work we've completed over the last year to streamline. Our operations reduced GNA reduce our overall debt off profile and reposition. Our minerals portfolio has strategically positioned us to succeed going forward.

Lastly I would like to.

Announce that our long-standing vice-president of mineral operations free to web will be retiring effective. April 1st. Frida has managed all aspects of the companies Reservoir Engineers land acquisition and divestiture evaluations during her 9 and 1/2 years at the company the board of directors Senior Management and employees at PHX thankful for her dedication and hard work on behalf of the shareholders in wish her all the best with Frida's retirement. We are fortunate to have two highly qualified individuals assume her duties or responsibilities. Danielle mezzo has become a new director of engineering while Kenta clap has become a new director of land both Daniel and Kenna have extensive industry experience wage, and we are lucky to have them join the PHX team at this point. I'd like to turn the call over to Frida to provide quick operational overview and enter out to discuss the financials.

Thank you, Chad and hello to everyone on the line. Thank you for joining our call today is Chad just mentioned commodity prices have had a nice rebound since the lows of last month. This is help certain place including scoop and stack exceed their economic threshold, which is allowing operators to allocate development Capital to these plays in Oklahoma. The rig count is still down 50% compared to this time last year, but we have seen a recent upward Trend with three rigs added over. The last month is showing over a hundred percent increase in September 2020.

During the quarter ended December 31st. We have seven gross .02 net Wells convert from Wells in progress to producing compares to 76 gross 1/8 net Wells during the quarter ended September Thirty. The majority of the wells brought online our end scoop regen dead end of the quarter. We had an additional 120 gross 62 net wells in progress up from 115 gross point five one net reported at our prior earnings call the majority of the wells and progress are in scoop stack and Haynesville regions.

Also, as of the quarter end, we had three Rick's present on PHX acreage and thirty within 2.5 Mi compared to four rigs on our acreage and thirty-two. He's within two point five miles reported last call.

Even though rig activity in and around PHX is slightly down on a quarter-over-quarter basis. We have seen an increase in our inventory of wells in progress, which is encouraging four volumes and the upcoming quarters before I turn the call to Ralph. I'd like to say that I've enjoyed the oil and gas industry over 40 years starting in nineteen. Seventy-Six was City service oil and gas as a summer intern field roustabout. It has been a long exciting often very challenging career. It's been filled with wonderful people an exceptional learning opportunities. I greatly appreciate the opportunity at PHX to serve as vice president of mineral operations and work with some of the finest most professional people. I've met with that. I'll turn the call to Ralph's or review the financials.

Thanks Rita for the first quarter.

Ended December 31st 2020 total revenues were 6.2 million up 41% from the fourth fiscal quarter of 2020. The quarter-over-quarter change were caused by the following natural gas oil and NGL revenues increased to six point four million or 28% on a sequential quarter basis with total hydrocarbon production increased 2% as curtailed volumes continue being brought back online and you weren't put on production particularly in the scoop and the stack rejects note that while working interest volumes increased by 5% royalty volumes decreased by 4% The decrease in royalty volume is primarily due to the applications made during the quarter not being fully incorporated into our results. We are diligently working to integrate the producing Wells from the Acquisitions. We just completed wage.

Tire average prices received for natural gas oil and NGL and a quarter also had a large impact on sales on an average mcfc basis prices increased by 56% from $2.47 to $3.10 this quarter.

Also, we had a $254,000 loss in our derivative contracts in the first fiscal quarter compared to a 1.5 million loss in the pre-order note that on a cash basis. We realize the gain of 613000 this quarter compared to a gain of $880,000 in the prior quarter of bonus and Rental revenues are down on a quarter-over-quarter basis to $1,400 while we are disappointed with leasing activity on our open minerals. We continue to actively look for opportunities to lease these minerals to operators. It may be some time before leasing returns to normal its operators focus on drilling Acres. They already have underway.

Total expenses were flat on a quarter-over-quarter basis at approximately 6.9 million the company's l o e increased approximately $35,000 or 4% off in the current quarter as compared to the prior quarter. This is primarily due to higher working interest volumes on a per mcf fee basis remained flat at $0.48 a month Transportation Gathering and marketing increased 15% and production taxes increased 47% on a quarter-over-quarter basis as a result of higher production and real-life prices.

GNA remained flat on a quarter-over-quarter basis at approximately 1.7 million. It is important to note that our first fiscal quarter includes higher G&A expenses compared to other quarters as we work on various year-end items and prepare for our annual meeting. We continue to expect that fiscal 21 GNA will be lower than 20 GNA as we benefit from for four quarters of the cost control measures. We have implemented adjusted ebitda excluding games on sales.

Was 2.8.

Billion in the first fiscal quarter of 2021 compared to two million into fourth quarter of 2020. We have continued to deploy an active commodity hedging program utilizing both Black Ops and Costless collars, which extend out through the end of calendar 2022. You can see a detailed up-to-date schedule in both the press release and the 10-q.

Finally, let me also touch on debt. We had total debt of $27 million as of December 31st. That's a 6% reduction from the prior quarter page. And also it's important to note that none of the debt was classified as short-term debt on their balance sheet. As of February 1st debt has further been reduced to twenty six million also has February 1st. We had one point 1 million in cash on the balance sheet after giving effect to Acquisitions that closed during the quarter our debts trailing-twelve-month ebitda wage increase to 2.99 times from 2.14 times on September 30th, 2020. This increase occurred due to the last quarter rolling down the calculation going forward. We will continue to focus on reducing debt as part of our strategy and expect that these leverage metrics will decrease in the coming quarters as dead is dead.

And normalizes to a post covet environment with that. I'd like to turn the call over to Chad for some final remarks.

Thanks Ralph. We have done a good job of implementing a purposeful repositioning of the company in this rather disruptive Market to take advantage of the modest recovery in the county sector. We are excited about the opportunities before us to drive shareholder value and will strive everyday to build shareholder confidence. We look forward to keeping a prize of our progress with this concludes. Our prepared remarks portion of the call Operator. Let's open up the Q4 questions, certainly ladies and gentlemen, the floor is now open for questions. If you have any questions or comments, please press star one on your phone at this time. We asked about posing your question you please pick up your handset listening on speakerphone to provide Optimum sound quality. Please hold while we pull for questions.

And the first question is coming from Derek Whitfield Derek Carolina's live. Please answer your foot and pulls your question.

Good afternoon, Derek with with Stephen and congrats on your retirement Freedom will learned. Thank you.

Regarding the acquisition that we're closed during the quarter. Could you comment on how activities progressing across those assets and how production would look on a fully Consolidated basis at present home?

Yeah. Hey Derek. It's Ralph production were very excited about the production coming from those assets. We think based on the data that we're seeing on the wells that are online are doing well. They're exceeding in many cases exceeding our projections. I think this is the booking the volumes just a matter of doing your diligence and making sure that what we book is correct and and that usually takes a couple of months for us to do that.

make sure

Correct. I think if you we estimate that if you actually included all the volumes from the Acquisitions that we think we are where we know we're receiving the royalty volume down instead of being down 4% probably would have been up in the magnitude of the low to mid-single digits.

Really Derek to this is Chad and that once you closed on these Acquisitions, you have to get the transfer documents the assignments the mineral Deeds to the operator. And typically the service takes their land Department can take anywhere from four to six weeks to to incorporate the changes into their records division orders getting their paid exchanged and you try to push as hard as you can but obviously everybody's cut back on staff and it it takes a little while to get to get the the interest changed over to to a new pay status.

Understood great color guys appreciate that and as a housekeeping oriented follow-up, we notice rather sizable income tax refund and the current asset on your balance sheet. Could you speak to the nature of the tax refund and expected timing?

Sure, so we filed for a tax refund in June of last year. And that was a AMT acceleration from the fact that old one point four million dollars in terms of timing that that's unfortunately that's up to the government. We they know we know they have the return package and we're expecting that to come in at some point. Also related to the to the cares act. We had we have a two point two million dollar tax receiving a call from a with the carry back that's allowed from 2024 net operating losses. So we think that at some point there should be three point six million dollars of tax refunds coming in from the federal government in terms of timing that's a little bit of an unknown, but but wage

That's that's the best estimate I can give you.

It's very helpful guys and supportive of your debt reduction objectives as well. Thanks for your time. Thanks.

Thank you. Once again, ladies and gentlemen the floor remains open for questions. If you do have a question, please press star one on your phone at this time.

And they were no other questions in at this time.

Okay operator. Thank you. We appreciate everybody being on the call, and we look forward to our next quarterly call. Have a good day. Thank you. Thank you. Ladies and gentlemen, this does conclude today's conference call. You may disconnect your phone lines at this time, and have a wonderful day. Thank you for your participation.