PHX Minerals Inc Q4 2023 Earnings Call

Operator: Good morning, and thank you for attending today's PHX Minerals December 31, 2023 Year-End Earnings Conference. At this time, all lines will be muted during the presentation of the call, with an opportunity for a Q&A session. As a reminder, this call is being recorded. I would now like to turn the call over to Stephen Lee with FNK-IR. Thank you.

Good morning, and thank you for attending today's P. H X minerals December 31st 2023 year ended earnings conference call.

At this time all lines will be muted during the presentation of the call with an opportunity for Q&A session at the end.

As a reminder, this call is being recorded I would now like to turn the call over to Stephen Lee with F. N K I R. Thank you. Please go ahead.

Thank you and good morning, Thank you for joining us today to discuss PHX minerals December 31st 2023 annual results joining us on the call today are Chuck Stevens, President and Chief Executive Officer, Ralph The Niko Senior Vice President and Chief Financial Officer, and Daniela Meso, Vice President of engineering.

Stephen Lee: Thank you for joining us today to discuss PHX Minerals' December 31, 2023 annual results. Joining us on the call today are Chad Stephens, President and Chief Executive Officer, Ralph D'Amico, Senior Vice President and Chief Financial Officer, and Danielle Mezo, Vice President of Engineering. The earnings press release that was issued yesterday after the close is also posted on PHX 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&A session, management may make forward-looking statements regarding expected revenue, earnings, future plans, opportunities, and other expectations of the company. These estimates and other foregoing 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.

The earnings press release that was issued yesterday after the close it's also posted on PHX 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&A session management may make forward looking statements regarding expected revenue earnings Swisher plans opportunities and other.

The expectation of the company. These estimates and 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.

Stephen Lee: These risks are detailed in PHS Minerals' most recent annual report on Form 10-K, as it 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 call are based upon information known to PHX as of today, March 13, 2024, and the company does not intend to update these forelooking statements, whether as a result of new information, future events, or otherwise, unless required by law. With that said, I would like to turn the call over to Chad Stephens, PHX's Chief Executive Officer. Chad?

These risks are detailed in Piedras minerals. Most recent annual report on Form 10-K, as such maybe 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 call are based upon information known to PHH as of today March 13, 2024, and the company does not intend to update these forward looking statements whether as a result of new information future events or otherwise unless required by law.

With that I'd like to turn the call over to Chad Stephens ph.

Officer Chet.

Chad L. Stephens: Thanks, Stephen. And thanks to all of you on this call for participating in PHX's December 31, 2023 Fiscal Year End Earnings Conference Call. We appreciate your interest in the company. I am pleased to report another strong year for PHX.

Thanks, Steven and thanks to all of you on this call for participating in PHX is December 31st 2023 fiscal year end earnings Conference call. We appreciate your interest in the company.

I am pleased to report another strong year for PHX, we delivered a 23% increase in royalty volumes.

Chad L. Stephens: We delivered a 23% increase in royalty volumes, expanded our 2P royalty reserves by 12%, and generated significant operating cash flow as well as net income. This performance enabled us to increase our quarterly dividend by 33%, reflecting our confidence in our business strategy and ability to continue to generate consistent cash flow. I'm especially pleased with these accomplishments despite another challenging year in the natural gas market. This demonstrates the value of our risk-mitigated business model as we can deliver strong profitability even during a period of challenging prices. During the past year, PHX deployed more than $30 million to acquire nearly 2,400 net royalty acres in the Haynesville and Scoot Plays.

Expanded our two P royalty reserves of about 12% and generated significant operating cash flow as well as net income.

This performance enabled us to increase our quarterly dividend by 33%, reflecting our confidence in our business strategy and ability to continue to generate consistent cash flows.

I'm, especially pleased to visa accomplishments, despite another challenging year in the natural gas market.

This demonstrates the value of our risk mitigated business model as we can deliver strong profitability, even during a period of challenging pricing.

During the past year PHX deployed more than 30 million to acquire nearly 2400 net royalty acres.

In the Haynesville and Scoop plays.

Chad L. Stephens: 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. We continue to maintain modest leverage, backed by a strong balance sheet, and our M&A activity is built on proven processes, focused on high-quality minerals that can convert to production quickly. 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. In the fourth quarter, PHS continued to experience robust activity on our mineral acreage, which Danielle will discuss in more detail in a moment. We are encouraged by the quarter's well-in-progress inventory, which stands at an all-time high for the company, including ducks, whips, and permits. The number of rigs present on PHX and its surrounding acreage remain strong.

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.

We continue to maintain modest leverage backed by a strong balance sheet and our M&A activity is built on proven processes focused on high quality minerals that can convert to production quickly.

With our strong financial position and are highly focused acquisition strategy, we are poised to unlock value for our shareholders as the commodity pricing environment improves.

In the fourth quarter Phs continue to experience robust activity.

Our mineral acreage, which Daniel will discuss in more detail in a moment.

We are encouraged by the quarters well in progress inventory, which stands at an all time high for the company, including Ducks whips and permits the number of rigs present on PHX and its surrounding acreage remains strong.

Chad L. Stephens: This provides good visibility for our production growth in the coming quarters. I direct you to our latest IR slide deck posted last night that explains in detail the pace of operator development on our minerals and our inventory of undrilled locations. It is this inventory that fuels the development that drives our year-over-year royalty volume growth. As natural gas prices touched a four-year low last month, we began to see natural gas-focused E&Ps begin reducing budgets and deferring well completions into the future, awaiting better prices. The latest being EQT, which announced two weeks ago that they are curtailing one BCF a day of production, at least through March. And CNX yesterday announced that they are deferring completion of a number of wells and curtailing their current production until natural gas prices improve, despite slower industry-wide development activities.

This provides good visibility for our production growth in the coming quarters.

I direct you to our latest IR slide deck posted last night that explains in detail the pace of operator development on our minerals and our inventory of and drill locations.

It is this inventory that fuels the development that drives our year over year royalty volume growth.

As natural gas prices touched a four year low last month, we began to see natural gas focused e&ps begin reducing budgets and deferring well completions into the future awaiting better prices.

The latest being EQT, which announced two weeks ago. They are curtailing one Bcf a day of production at least through March and C. N X yesterday announced they are deferring completion of a number of wells and curtailing their current production until natural gas prices improve.

Despite slower industry wide development activities.

Chad L. Stephens: We are expecting a 4% increase in royalty volume and 2% increase in total corporate volumes in 2024, speaking to the quality of our assets; please reference our press release and corporate presentation for our full 2024 guidance. With reduced drilling and production activities just discussed, and the expected increases in demand from new LNG export facilities coming online in 2024 and 2025, we believe this will balance the market and improve commodity prices as we move forward. At this point, I'd like to turn the call over to Danielle to provide a quick operational overview and then to Ralph to discuss the finances. Thanks, Chad.

We are expecting a 4% increase in royalty volume and 2% increase in total corporate volumes in 'twenty 'twenty four speaking to the quality of our assets. Please reference our press release and corporate presentation for our full 2020 for guidance.

With reduced drilling and production activities just discussed and.

And the expected increases in demand from new LNG export facilities coming online in 'twenty four 'twenty five we believe this will balance the market and improved commodity prices as we move forward.

At this point I'd like to turn the call over to Danielle to provide a quick operational overview and then they're out to discuss the financials.

Chad and good morning to everyone participating on the call for our year ended December 31, 2023 total corporate production decreased 3% from the year ended December 31, 2022 and for the quarter ended December 31, 2023 increased 4% from the December 31, 2022 quarter recall that calc.

Danielle D. Mezo: And good morning to everyone participating on the call. For the year-ended December 31, 2023, total corporate production decreased 3% from the year-ended December 31, 2022. And for the quarter-ended December 31, 2023, increased 4% from the December 31, 2022 quarter. Recall that calendar 2022 includes 100% of the working interest volumes in the Arcoma and Eagleford, which we sold in January of 2023. Performer for the divestiture, we would have seen an increase in total corporate volumes on an annual basis. As we move forward, it will be easier to compare period-over-period volumes, as we are effectively done with our Working Interest Investigation. Working interest volumes now represent only 10% of total corporate volume.

<unk> 2022 include 100% of the working interest volumes in the Arkoma and Eagle Ford, which we sold in January of 2023.

The format for the divestiture, we would see an increase in total corporate volumes on an annual basis as we move forward it will be easier to compare period over period volumes as we are effectively done with our working interest divestitures.

Working interest volumes now represent only 10% of total corporate body.

Danielle D. Mezo: This will become an even smaller percentage as working interest production continues to decline and royalty volumes continue to grow. Seventy-nine percent of our last quarter's production volumes were natural gas, which aligns with our long-term position that natural gas is the key transition fuel for a sustainable energy future. Oil represented 11% of production volumes, and NGL represented 10%.

This will become an even smaller percentage that's working interest production can you continues to decline and royalty volume continues to grow.

79% of our last quarter's production volumes, where natural gas, which aligns with our long term position that natural gas is the key transition fuel for a sustainable energy future oil represented 11% of production volumes and NGL represented 10% annual royalty production for 2023 increased 23% to 8123, and then C. S.

Danielle D. Mezo: Annual royalty production for 2023 increased 23% to 8,123 MMCFE, and quarterly royalty production increased 19% from the year-ago quarter to 1,946 MMCFE, respectively. Volume growth over the last 12 months is a result of the successful execution of our mineral acquisition program. It is important to note that, as a mineral holder, we do not control the timing of well development, so there can be some volatility on a quarter-to-quarter basis, and volumes associated with our business model are better evaluated on a rolling 12-month basis. Production volumes associated with our non-op working interest decreased 59% for the year due to the sale of our Arcoma and Eagleford assets and decreased 49% compared to the year-ago quarter for the same reason.

And quarterly royalty production increased 19% from the year ago quarter to 1946, respectively. The volume growth over the last 12 months as a result of the successful execution of our mineral acquisition program. It is important to note that as a mineral holder, we do not control timing on well development. So there can be some.

Volatility volatility on a quarter to quarter basis and volumes associated with our business model, our better evaluate it on a rolling 12 month basis.

Production volumes associated with our non op working interest decreased 59% for the year due to the sale of our Arkoma and Eagle Ford assets and decreased 49% compared to the year ago quarter for the same reason note that we are not participating in new working interest wells. So our non op working interest volumes will continue to decrease due to its natural decline rate.

Danielle D. Mezo: Note that we are not participating in new working interest wells, so our non-op working interest volumes will continue to decrease due to their natural decline rate relative to our total volumes and become less relevant to the business. Royalty volumes represented 87% of total production during our December 31, 2023 quarter and 87% for the full 2023 calendar year. As recently as calendar year 2021, royalty volumes were only 45% of our total. As we have grown our royalty volumes and divested of our non-op working interest, the quality of our asset base is enhanced with improving margins, which Ralph will talk about shortly. We have regraded our asset base, which provides a much stronger collateral base with which to support our bank credit facility.

Relative to our total volume and become less relevant to the business.

Royalty volumes represented 87% of total production during our December 31, 2023 quarter and 87% for the full 2023 calendar year as recently at calendar year 2021 royalty volumes were only 45% of our total volume.

As we have grown our royalty volumes and divested of our non op working interest the quality of our asset base is enhanced with improving margins, which Ralph will talk about shortly we have high graded our asset base, which provides a much stronger collateral base with which to support our bank credit facility.

Danielle D. Mezo: Our total approved reserves decreased 11% to 71.2 BCFE with a PV10 of $110 million at SEC pricing, primarily as a result of the sales of our legacy non-operated working interest assets. We continue to execute our corporate strategy to exit this portion of our business, which we have consistently messaged since 2012. As we have divested of these non-op working interest assets, we have redeployed the proceeds into our mineral acquisition program, which has contributed to our improved margins and inventory of undeveloped drilling locations. As of December 31st, 2023, our approved royalty reserves increased 9% to 57.8 BCFE with a PV10 of $97 million at SEC pricing. And our undrilled development inventory, mentioned earlier by Chad, and which we categorize as probable reserves, increased 13% to 99.6 BCFE with a PV10 of $157.9 million. These undrilled probable reserves are undeveloped locations that have been identified by rigorous geologic and engineering analysis and offsets existing producing wells.

Our total proved reserves decreased 11% to 71.2 P. C. S E with a PV 10 of $110 million at SEC pricing, primarily as a result of the sale of our legacy non operated working interest assets. We continue to execute our corporate strategy to exit this portion of our business, which we have consistently messaged.

2020, as we have divested of non op working interest assets, we have redeployed the proceeds into our mineral acquisition program, which has contributed to our improved margins and inventory of undeveloped drilling locations.

At December 31st 2023, our proved royalty reserves increased 9% to 57 eight D. C. S E with a PV 10 of $97 million at SEC pricing and our Undrawn development inventory mentioned earlier by Chad and which we categorize as probable reserves increased 13% to $99.

D C. S E with a PV 10 of 157 9 million. These undrawn probable reserves are undeveloped locations that have been identified by rigorous geologic and engineering analysis and offset existing producing wells. The only uncertainty is regarding the timing of development by the operator given that our minerals are located in.

Danielle D. Mezo: The only uncertainty is regarding the timing of development by the operator. Given that our minerals are located in the core of our focus areas with top-tier rock quality under reputable and highly active operators, we are confident these undeveloped locations will ultimately be converted to production, resulting in increasing royalty volumes and robust reserves. During the quarter ended December 31st, 2023, third-party operators active on our mineral acreage converted 46 gross or.098 net wells in progress or WIPs to producing wells. For the full 2023 calendar year, third-party operators active on our mineral acreage converted 314 gross or 1.034 net WIPs to producing wells compared to 313 gross or 1.15 net in calendar 2022. The majority of the new wells brought online are located in Hainesville.

The core of our focus areas with top tier rock quality under reputable and highly active operators. We are confident these undeveloped locations will ultimately be converted to producing results.

Resulting in increasing royalty volumes and robust reserve replacement.

During the quarter ended December 31, 2023 third party operators active on our mineral acreage converted 46th growth 1.098, net wells in progress or went to producing wells for the fall 2023 calendar year third party operators active on our mineral acreage converted 314 gross or 1.0.

Three four net with its producing well compared to 313 gross or 1.15 net in calendar 2022. The majority of the new wells brought online are located in the Haynesville and the scale. We are very pleased with our well conversion rates, particularly given the challenging nature.

Ralph D'Amico: We are very pleased with our well conversion rates, particularly given the challenging natural gas macroenvironment, which includes some operators deferring bringing completed wells online until there is an improvement in natural gas prices. At the same time, our inventory of wells in progress on our minerals, which includes ducts, wells being drilled, and permits filed, increased on a net basis to 263 gross or 1.295 net wells compared to 278 gross or 1.09 net wells reported as of September 30th. The continued track record of well conversions and replenishment of the Inventory of Wells in Progress, or WIPs, shows the repeatability of our business strategy. In addition to our WIPs, we regularly monitor third-party operator rig activities in our focus areas and observed 14 rigs present on THX Minerals Acreage as of February 12, 2020. Additionally, we had 57 rigs active within 2.5 miles of PHX. In summary, we continue to see steady development in both our legacy and recently acquired mineral assets, which should lead to increasing royalty volumes. Now, I will turn the call back to Ralph.

Given the challenging natural gas macro environment, which includes some operators deferring, bringing completed wells online until there is an improvement in natural gas prices.

At the same time, our inventory of wells in progress on our minerals, which includes duct wells being drilled and permits filed increased on a net basis to 263 gross or one point to 95 net wells compared to the 278 gross or 1.09 net wells reported as of September 30th 2023.

Continued track record of well conversions and replenishment of the inventory of wells in progress or wet shows the repeatability of our business strategy. In addition to our web we regularly monitor third party operator rig activities in our focus areas and observed 14 rigs present on THX mineral acreage as of February 12, 2024.

Additionally, we had 57 rates active within 2.5 miles of PHX ownership.

In summary, we continue to see steady development in both our legacy and recently acquired mineral assets, which should lead to annually increasing royalty volumes now I will turn the call back to Ralph to discuss financials.

Thanks, Danielle and thank you to everyone for being on the call today as a reminder, we changed our fiscal year in December of 2022 from a 12 month year ended September 30th to a December 31st fiscal year. The 10-K filed yesterday reflects the new December 31st year end for our <unk>.

Ralph D'Amico: Thanks, Danielle. And thank you to everyone for being on the call today. As a reminder, we changed our fiscal year in December of 2022 from a 12 month year ending September 30th to a December 31st fiscal year. The 10k filed yesterday reflects the new December 31st year end.

Fourth quarter ended December 31, 2023, natural gas oil and NGL sales volumes decreased 4% to $8 5 million compared to the prior sequential quarter due primarily to a slight decrease in production volumes of 4%, partially offset by a modest 1% increase in realized.

Ralph D'Amico: For our fourth quarter ended December 31, 2023, natural gas, oil, and NGL sales volumes decreased 4% to $8.5 million compared to the prior sequential quarter, due primarily to a slight decrease in production volumes of 4%, partially offset by a modest 1% increase in realized prices. For the full year 2023 calendar year, natural gas, oil, and NGL sales revenues decreased 49% to $36.5 million. Breaking down this number further, royalty production volumes actually increased 23%, offset by a 59% decrease in working interest production volumes compared to calendar 2022, primarily due to the sale of the Eagleford and Arcoma properties, which we closed in January of 2023. Additionally, realized commodity prices decreased 47% on an MCFE basis, to $3.90 in 2023 compared to $7.33 in calendar 22. Realized natural gas prices averaged for the quarter ending December 31, 2023 were $2.53 per MCFE. For the full 2023 calendar year, realized natural gas prices were $2.61 per MCFE. Realized oil prices averaged $78.66 and $76.76 per barrel for the quarter and full year, respectively. NGLs averaged $24.00 and $22.18 per barrel for the quarter and full year, respectively.

Prices for the full year 2023 calendar year natural gas oil and NGL sales revenues decreased 49% to $36 5 million breaking down. This number further royalty production volumes actually increased 23% offset by a 59% decrease.

In working interest production volumes compared to calendar 2022, primarily due to the sale of the Eagle Ford and Arkoma properties, which we closed in January of 2023. Additionally, realized commodity prices decreased 47% on an M C a fee basis.

Two or $3.90 in 2023 compared to $7.33 in calendar 'twenty, two realized natural gas prices average.

For the quarter ended 20, <unk> December 31, 2023 were $2 53 per M. C. A fee for the full 2023 calendar year realized natural gas prices were $2.61 per M. C. F E realized oil prices averaged $78.66 in 76.

And 76 cents per barrel for the quarter and full year respectively.

<unk> averaged $24 and $22 18 per barrel for the quarter and full year, respectively realized hedge gains for the quarter were 275.

That was $1 and $2 6 million for <unk> for the quarter and full year, respectively for the quarter and full calendar year, respectively, approximately 44% and 46% of our natural gas, 36% and 42% of our oil and none of our NGL <unk>.

Ralph D'Amico: Realized hedge gains for the quarter were $275.99 thousand dollars and 2.6 million for the quarter and full calendar year, respectively. For the quarter and full calendar year, respectively, approximately 44 percent and 46 percent of our natural gas, 36 percent and 42 percent of our oil, and none of our NGL production volumes were hedged at average prices of $3.35 and $3.53 per mcf and $74.91 and $70.96 per barrel. Approximately 50% of our anticipated full-year 24 natural gas production at the midpoint of our guidance has downside protection at approximately $3.45 per MCF. On the oil side, approximately a third of our anticipated production at the midpoint of our guidance has downside protection at approximately $65.15 per barrel. We structure our natural gas hedges using both swaps and costless collars, which means we also have upside exposure on certain volumes in the $45 range.

<unk> volumes were hedged at average prices of $3 35, and $3 53 per Mcf and 70, 491, and 17 96 per barrel.

Approximately 50% of our anticipated full year 'twenty for natural gas production at the midpoint of our guidance has downside protection at approximately $3.45 per Mcf on the oil side approximately a third of our anticipated production at the midpoint of our guidance is downside protection.

<unk> at approximately $65 15 per barrel restructure and natural gas hedges using both swaps and Costless collars, which means we also have upside exposure on certain volumes to the $45 range. Our current hedge position is available in our recently filed 10-K.

Total transportation gathering and marketing increased 36% on a sequential quarter basis to 946000, primarily due to a large percentage of new volumes coming from cost bearing leases compared to the prior quarter when a higher percentage of the new volumes came from cost free leases.

For the Calvert for the full calendar year. These transportation expenses decreased 40% to $3 7 million, primarily due to the sales of our higher cost working interest assets in the Eagle Ford N D Arkoma.

Ralph D'Amico: Our current hedge position is available in our recently filed $10K. Total transportation, gathering, and marketing increased 36% on a sequential quarter basis to $946,000, primarily due to a large percentage of new volumes coming from cost-bearing leases compared to the prior quarter when a higher percentage of the new volumes came from cost-free leases. For the full calendar year, these transportation expenses decreased 40% to $3.7 million, primarily due to the sales of our higher cost working interest assets into Eagleford and DeArcoma. Production and ad valorem taxes increased 4% on a sequential quarter basis to approximately $457,000 due to higher production in Louisiana, which applies its tax rate to production volumes and not revenues.

Production and AD valorem taxes increased 4% on a sequential quarter basis to approximately 457000 due to higher production in Louisiana, which applies its tax rate to production volumes and not revenues for the full calendar year production and AD valorem taxes decreased 42 <unk>.

Or sent to one 9 million again, primarily due to sales of the higher cost working interest assets in the Eagle Ford and Arkoma.

Louis associated with their legacy non operated working interest wells decreased 12% on a sequential quarter basis to $319000 for the full calendar year L. O E decreased 57% to $1 6 million again.

Ralph D'Amico: For the full calendar year, production and ad valorem taxes decreased 42% to $1.9 million, again primarily due to the sales of the higher cost working interest assets in the Eagleford and Arcoma. LOE associated with our legacy non-operated working interest wells decreased 12% on a sequential quarter basis to $319,000. For the full calendar year, LOE decreased 57% to $1.6 million, again due to the sales of those higher-cost working interest assets. Cast G&A was up 11% to $2.5 million compared to the prior sequential quarter, primarily due to normal year-end professional fees.

Due to the sales of those higher cost working interest assets cash G&A was up 11% to $2 5 million compared to the prior sequential quarter, primarily due to normal year end professional fees for the full calendar year cash G&A decreased 4% to $9 5 million.

Primarily due to higher efficiencies associated with our cost control efforts.

Adjusted EBITDA was $4 5 million in the quarter ended December 31, 23, as compared to $6 3 million in September 30th 2023 quarter for the full 2023 calendar year, adjusted EBITDA was $22 7 million compared to two.

Ralph D'Amico: For the full calendar year, Cast G&A decreased 4% to $9.5 million, primarily due to higher efficiencies associated with our cost control efforts. Adjusted EBITDA was $4.5 million in the quarter ended December 31, 2023, as compared to $6.3 million in the September 30, 2023 quarter. For the full 2023 calendar year, Adjusted EBITDA was $22.7 million compared to $26.7 million in calendar 22. The 15% decrease in annual EBITDA is despite an actual 47% decrease in realized commodity prices and the sale of the two working interest assets in January of 2023. Net income for the quarter was $2.5 million, or $0.07 per diluted share, compared to net income of $1.9 million, or $0.05 per diluted share, for the prior sequential quarter.

$26 7 million in calendar 'twenty two.

The 15% decrease in annual EBITDA is despite an actual 47% decrease in realized commodity prices and the sale of the two working interest assets in January of 'twenty three.

Net income for the quarter was $2 5 million or seven cents per diluted share compared to net income of $1 9 million or five cents per diluted share for the prior sequential quarter for the full calendar year 2023, net income was $13 9 million or 39 cents per diluted share.

Compared to net income of $17 1 million or 48 cents per diluted share and we had total debt of $32 $75 million as of December 31, 2023, compared to $33 3 million as of December 31, 22, our debt to trailing adjusted EBITDA was <unk>.

1.51, 45 as of December 31, 23.

Since implementing our new minerals only strategy in 2020, we have high graded our asset and improve their cash margins, while reducing the leverage metrics of the company are now high quality undeveloped location inventory will serve as a catalyst to grow reserves and royalties in the future our strategy to manage leverage is.

Ralph D'Amico: For the full calendar year 2023, net income was $13.9 million, or $0.39 per diluted share, compared to net income of $17.1 million, or $0.48 per diluted share. We had total debt of $32.75 million as of December 31st, 2023 compared to $33.3 million as of December 31st, 2022. Our debt to trailing adjusted EBITDA was $1.45 as of December 31st, 2023. Since implementing our new minerals-only strategy in 2020, we have high-graded our assets and improved our cash margins while reducing the leverage metrics of the company. Our now high-quality undeveloped location inventory will serve as the catalyst to grow reserves and royalties in the future. Our strategy to manage leverage is influenced by our view of the macroeconomic climate and the opportunities set before us, with projected leverage in the most draconian economic environment never to be above 2.0 times. Our hedge position, as discussed above, helps protect our strong balance sheet while providing upside exposure. We manage the risk based on a mid-price cycle, assuming a low price range for natural gas of $1.75 to $2.50 and a high price range of $4.50 to $5. With that, I'll turn the call over to Chad for some final remarks. Thank you, Ralph.

Influenced by by our view of the macroeconomic climate and the opportunity set before us with projected leverage in the most draconian economic environment never to be above 2.0 times, our hedge position as discussed above helps protect our strong balance sheet, while providing upside exposure.

We manage the risk based on a mid price cycle, assuming a low price range for natural gas of $1 75 to $2 50, and a high price range of $4 50 to $5 with that I'll turn the call over to Chad for some final remarks.

Thank you Ralph.

As I commented in my opening remarks, we are very pleased with our achievements during 2023, despite the challenging macro environment.

The dramatic collapse in natural gas prices has had a material impact on natural gas focus e&ps development activities, especially in the Haynesville and Marcellus.

As a mineral operator, we will also be impacted by this however, our business strategy is to acquire minerals in the core of our focus area with near term development potential.

This can be seen by our expected royalty volume growth in 2024, despite the various headwinds.

Chad L. Stephens: As I commented in my opening remarks, we are very pleased with our achievements during 2023, despite the challenging macro environment. The dramatic collapse in natural gas prices has had a material impact on natural gas-focused E&P's development activity, especially in Haynesville and Marcello. As a mineral operator, we will also be impacted by, However, our business strategy is to acquire minerals in the core of our focus area with near-term development potential. This can be seen by our expected royalty volume growth in 2024, despite the various headlines. Put another way, we are structured to generate solid and consistent cash flows, even during challenging times, due to our focused risk-mitigated approach.

Put another way, we are structured to generate solid and consistent consistent cash flows even during challenging times due to our focused risk mitigated approach with.

With a strong and conservative balance sheet, we will continue to be proactive in our mineral acquisition further enhancing shareholder value in the future.

To recap our progress and achievements, we have built a portfolio of new high quality assets with improved cash margins over the last four years.

A mineral interest and a deep inventory of undeveloped drilling locations that has and will continue to drive increasing royalty volumes and cash flow.

Daniel talked earlier about PV 10 value of our proved and probable reserves.

Chad L. Stephens: With a strong and conservative balance sheet, we will continue to be proactive in our mineral acquisition, further enhancing shareholder value in the future. To recap our progress and achievements, we have built a portfolio of new, high-quality assets with improved cash margins over the last four years, and a mineral interest in a deep inventory of undeveloped drilling locations that has and will continue to drive increasing royalty volumes in cash flow. Danielle talked earlier about the PB10 value of our Proved and Probable Reserve. In this regard, I direct you to slide seven of our newly posted IR presentation, which shows a total 2P PD-10 reserve value at current NAMEC strip prices of close to $300 million. If natural gas prices return to a more normal mid-price cycle, that PV-10 value would be dramatically higher.

In this regard I direct you to slide seven of our newly posted IR presentation that reflect a total two P. PV 10 reserve value at current Nymex strip prices of close to $300 million.

If natural gas prices return to a more normal mid price cycle.

That PV 10 value would be dramatically higher.

We also show in the appendix of our IR presentation, the timing of new LNG export capacity from the Gulf Coast.

Once in service this will help bring natural gas prices into that mid price that possibly upper range and increase our royalty production volumes and cash flow.

Since 2020 and to date, we have spent 130 million acquiring our current mineral position in the scoop and Haynesville.

Phx's current enterprise value is roughly a $145 million with this reserve value I mentioned earlier of at least $300 million.

Chad L. Stephens: We also show in the appendix of our IR presentation the timing of new LNG export capacity from the Gulf Coast. Once in service, this will help bring natural gas prices into that mid-price to possibly upper range and increase our royalty production volumes and cash flow. Since 2020 and to date, we have spent $130 million acquiring our current mineral position in The Scoop in Haynesville. PHX's current enterprise value is roughly $145 million, with a reserve value I mentioned earlier of at least $300 million.

We recognize the disconnect between these facts and our current stock price.

We continually work every day searching for the best way to reward our shareholders and closed this conundrum by increasing shareholder value.

The company continues to make notable progress only through the hard work of our dedicated employees and the keen wisdom provided by our board. So in closing I. Thank them for their efforts, we look forward to keeping you updated.

This concludes the prepared remarks portion of the call operator, please open up the queue for questions.

Thank you ladies and gentlemen, the floor is now open for questions. If he would like to ask a question. Please press star one on your telephone keypad at this time.

Chad L. Stephens: We recognize the disconnect between these facts and our current stock price. We continually work every day searching for the best way to reward our shareholders and close this conundrum by increasing shareholder value. The company continues to make notable progress only through the hard work of our dedicated employees and the keen wisdom provided by our board.

Total indicate your line is another question queue. You May press star two if he would like to remove your question from the queue for participants using speaker equipment. It may be.

Sorry to pick up the handset before pressing the star keys.

Again, Thats Star one to register a question at this time.

Today's first question is coming from Nathan Pendleton of Stifel. Please go ahead.

Good morning.

Can you provide some color on what you're seeing on the ground regarding wells being turned to production in the Haynesville and how have you incorporated that into your 2020 for guidance.

Hey, Nate it's Ralph.

Operator: So, in closing, I thank them for their efforts. We look forward to keeping you updated. This concludes the prepared remarks portion of the call. Operator, please open up the queue for questions. Thank you. Ladies and gentlemen, the floor is now open to questions. If you would like to ask a question, please press star 1 on your telephone keypad at this time. A confirmation tone will indicate your line. You may press star 2 if you would like to remove your question from the... For participants using speaker equipment, it may be necessary to pick up the handset before pressing the button.

Yeah, I mean, you know.

Obviously, everybody has seen the announcements from Chesapeake and some others about.

Slowing down the pace of development right.

We continue to see activity, where in some cases, they will permit a well where they will bring a rig on location set casing and get the surface ready and then sort of move that well off.

Location and move it to someplace else right. So to us that really indicates that you know again, they're taking a temporary pause right, but you know they have every intention of at some point you know when a better price environment of circling back and you know and and finished drilling and completing those wells and putting them on sales.

Operator: And again, that's star number one to register a question at the... Today's first question is coming from Nate Pendleton of Stiefel. Please go ahead. Good morning.

Ralph D'Amico: Can you provide some color on what you're seeing on the ground regarding wells being turned to production in Hainesville? And how have you incorporated that into your 2024 guidance? Hey Ned, it's Ralph.

And we've also seen a.

A few wells, where the well is actually been completed you can see the report on our on the Louisiana State website.

Ralph D'Amico: Yeah, I mean, obviously, everybody's seen the announcements from, you know, Chesapeake and some others about slowing down the pace of development, right? But we continue to see activity where, in some cases, they'll permit a well where they will bring a rig to the location, set casing and get the surface ready, and then sort of move that well off the location and move it to someplace else, right? So, to us, that really indicates that, you know, again, they're taking a temporary pause, right? But, you know, they have every intention of, at some point, you know, in a better price environment, circling back and finishing drilling and completing those wells and putting them on sale. We've also seen a few wells where the well has actually been completed. You can see the report on the Louisiana State website.

It's just a matter of the operator, not wanting to turn the well on and get all of that flush production sold at current prices right. So.

You know what.

We think as you know prices sort of get back approaching $3 right and if you followed the curve that's probably.

Towards the second half of this year are those volumes will start coming back online and so our our guidance and sort of what we anticipate is incorporates all of that right. So youre still seeing a pretty strong conversion number is just it's just more geared towards the second half of the year than it is to the first.

Half of the year.

Got it I appreciate the detail Ralph and can you share any updated thoughts on future prices.

Specifically for natural gas given that it seems you've added hedges during the quarter for 2025 and 2026.

Yes, I mean, you know obviously, we continue to be optimistic on gas prices I mean in the long term.

Ralph D'Amico: It's just a matter of the operator not wanting to turn the well on and get all that flush production, you know, sold at current prices, right? So, you know, we think as prices sort of get back to approaching $3, and if you follow the curve, that's probably, towards the second half of this year, those volumes will start coming back online. And so our guidance and sort of what we anticipate incorporates all of that, right? So you're still seeing pretty strong conversion numbers; it's just more geared towards the second half of the year than it is for the first half of the year. I got it.

Is the key is the key fuel for for energy transition and certainly these LNG projects that.

Despite what the yet the government announced in terms of Shlomi.

Slowing down permitting.

That slowdown in permitting it doesn't affect any of these projects that are coming online in the next 18 months plus right. So we think those volumes are going to come online and where those projects will come online and theyre going to need new volumes, having said that you know when you look at the forward curve.

Ralph D'Amico: I appreciate the detail, Ralph. And can you share any updated thoughts on future prices specifically for natural gas, given that it seems you've added hedges during the quarter for 2025 and 2026? Yeah, I mean, obviously, we continue to be optimistic about gas prices. I mean, in the long term, you know, it is the key fuel for the energy transition.

And you see $3 $54 odd during winter right.

Our view is.

We want to lock in some of those prices right nobody has a crystal ball.

And.

You know and so if we locked down a good percentage of our volumes at that price.

Ralph D'Amico: And certainly these LMG projects that, you know, despite what the government announced in terms of slowing down permitting. That slowdown in permitting doesn't affect any of these projects that are coming online in the next 18 months plus, right? So we think those volumes are going to come online, or those projects will come online, and they're going to need new volumes. Having said that, when you look at the forward curve and you see $3.50, $4.00 during winter, our view is we want to lock in some of those prices, right? Nobody has a crystal ball, you know, and so if we lock down a good percentage of our volumes at that price, we think those are reasonable prices. And if prices go above that, you know, it means that development is going to be accelerated on our other production, on our other locations, which are not hedged at this point since they're not producing, right? So to us, it's a nice balance of locking in attractive pricing and still getting, you know, still having a lot of exposure to higher prices if they go above $4. And Nate, this is Chad, so just a couple of data points for you. In December...

Those are reasonable prices and if prices go above that you know it means that development is going to be accelerated on our other production on our other locations, which are not hedged at this point since theyre not producing right. So to us. It's a it's a nice balance of locking in attractive pricing.

And still getting you know still having a lot of exposure to two higher prices if if they go above $4.

Nate. This is this is Chad so just a couple of data points for you in December.

Gross U S domestic natural gas production hit an all time high of 105 Bcf a day today.

Today with the curtailments that I discussed in my in my comments, that's right now about 100 Bcf a day gross and going down given all of the announced curtailments cutbacks.

Let lack of activity Capex cuts, so that's going down and then with LNG.

All of the known.

Projects that are in construction as we speak and targeted to be in service towards the end of 'twenty, four but but much more materially in the first and second quarter of 2025, that's nine Bcf per day of additional LNG export capacity on top of the 13 Bcf a day that's <unk>.

Chad L. Stephens: Gross U.S. domestic natural gas production hit an all-time high of 105 BCF a day. Today, with the curtailments that I discussed in my comments, that's right now about a hundred BCF a day gross and going down, given all the announced curtailments, cutbacks, lack of activity, and CapEx cuts. So that's going down. And then with LNG, all of the known projects that are in construction as we speak and targeted to be in service toward the end of 2024, but much more materially in the first and second quarters of 2025, that's 9 BCF per day of additional LNG export capacity on top of the 13 BCF per day that's existing.

<unk>. So we're gonna have over 20 approaching 2022 Bcf a day of LNG export capacity by mid.

2025, which we feel like will more than balance.

The market at a at a gross production of 100, plus or minus a little bit of 100 Bcf a day and should should lift prices into what we talked about referenced kind of a mid mid price cycle for $4 50, maybe possibly five $5 Mcf Nymex. So we're optimistic that that.

Chad L. Stephens: So we're going to have over 20 approaching 2022 BCF a day of LNG export capacity by mid 2024. 2025, which we feel like will more than balance the market at a gross production of 100, plus or minus a little bit, 100 B.C.F. a day and should lift prices into what we talked about referenced, kind of a mid-price cycle for 450, maybe, possibly $5.00 M.C.

Mid 25, the market is going to be balanced.

Got it thanks for taking my questions.

Thank you. The next question is coming from Charles Meade of Johnson Rice. Please go ahead.

Good morning, Chad said to you and your whole team there.

I appreciate some of the your recitation of some of the with.

But the public operators have done a CNA excellence recently, but also E C T.

Speak and I suppose this is a little bit alone lines up the previous question can you give us insight into.

Chad L. Stephens: So we're optimistic that by mid-25 the market's going to be balanced. Got it. Thanks for taking my questions. Thank you. The next question is coming from Charles Meade of Johnson Rice. Please go ahead.

Either what you are into what the private operators in the Haynesville are doing either either from from what you can kind of observed through regulatory filings or perhaps if you've had any communication from from those operators.

Chad L. Stephens: Good morning, Chad, to you and your whole team there. I appreciate some of your recitation of some of what the public operators have done, CNX, most recently, but also EQT and Chesapeake. I suppose this is a little bit along the lines of the previous question. Can you give us insight into either what you or what the private operators in Haynesville are doing, either from what you can kind of observe through regulatory filings or perhaps if you've had any communication from those operators? Yeah, we have a lot of Minerals underneath Aethon, which is a private equity-backed company based in Dallas, and they were really the ones that, back in 2018, 2017, and 18, really unlocked the technology to make Haynesville what it is today. And they've really slowed down their role, so to speak.

Yeah, we we have a lot of.

Minerals underneath Aegon, <unk>, which is a private pay.

But equity backed company based in Dallas, and they were really the one that back in 2018 2017, and they can really unlocked.

The technology to make the haynesville, but what it is today and they really slowed slowed their roles so to speak I'm not sure the number of rigs they dropped but they they really they really cut back their completions.

Curtailing their production just like the public operators. So we're seeing a similar behavior on the private equity just based on Athens, what they're doing and what we see they're doing.

Got it that's helpful. And then that's a little a little more difficult part of the market for us to observe.

Chad L. Stephens: I'm not sure the number of rigs they've dropped, but they've really cut back on completions, curtailing their production, just like the public operators. So we're seeing a similar behavior on the private equity side, just based on ATHONs, what they're doing, and what we see they're doing.

And then going back to your prepared comments, but youre still going to grow royalty volumes and we know that.

The Haynesville, it's it's been flat to down and so the other pieces of it.

Chad L. Stephens: That's helpful. And that's a little more difficult part of the market for us to observe. And then going back to some of your prepared comments about that you're still going to grow royalty volumes. You know, we know that Haynesville is flat down.

It implies there where I think it implies that that youre still seeing a lot of activity on your scoop and stack assets. So I wonder if you could talk about that side of the.

You know that side of the asset portfolio are what youre seeing with trends.

Chad L. Stephens: So the other piece implies, or I think it implies, that you're still seeing a lot of activity on your scoop and stack assets. So I wonder if you could talk about that side of the asset portfolio, what you're seeing with trends on operators there, whether you're more in the north, more in the south, what kind of targets and anyone in particular who's really ramping activity. Yeah, and Charles, to speak to that specifically, I do want to comment on the interesting dynamic in Hainesville year over year, from this time last year in March. When you think about it, January, February, March of 2023, gas prices fell off a cliff. And it was really beginning in March that the rig activity really collapsed.

Operators, there, whether you're more more in the north more in the south what kind of targets and anyone in particular, who's who's really ramping activity.

Yeah and the <unk>.

Charles to just speak to that specifically I do want to comment it's an interesting dynamic in the haynesville over the year over year from this time last year in March when you think about it January February March of 2023.

Gas prices fell off a cliff.

And it was really beginning in March that the rig activity really collapsed, but if you look at rig counts in the Haynesville. This time last year. It was over 30 in excess of 30 <unk>.

Chad L. Stephens: But if you look at rig counts in the Haynesville this time last year, there were over 30, in excess of 30, proximal to our area, we follow rigs in and around our area, and there were in excess of 30 rigs within a couple of miles of our minerals and our activity. And today that's dropped by about a third, to around a little over 20 rigs in and around our place. Then you look at the rigs on our minerals, and it's relatively flat year over year, so our actual percent market share, as we call it, has actually gone up because the gross recount has gone down, but the rig activity on our minerals has gone up, and that just speaks to the quality.

Proximal to our we follow rigs in and around our area and it was.

Success of 30 rigs within a couple of miles of our minerals our activity and today that's dropped by about a third.

Around little over 20 rigs in and around our place then you look at the rigs on our minerals and it's relatively flat year over year. So our excellent percent market share as we call. It has actually gone up.

Because the gross rig counts gone down but.

Rig activity on our minerals has gone up and that just speaks to the quality. So that's one reason we we will have we will report a modest year over year increase in.

Chad L. Stephens: So that's one reason we will have, we will report a modest year-over-year increase in our natural gas royalty volumes because of that. Also, there are two areas of the scoop that we focus on. One of the more active operators is Continental. They're constantly, they're very efficient in the way they file permits, and within a few weeks of filing a permit, they get a rig on and start drilling a well. They're very efficient in that way, and we should follow them.

In our natural gas royalty volumes because of that that also in the there's two areas of the scoop that we focus on one of the more active operators as continental.

They're they're constantly they are very efficient in the way they filed permits and within a few weeks of filing a permit they get a rig on and start drilling a well every efficient that way and we follow them. So they've continued to run a couple of rigs in the scoop areas that we're focused on.

Chad L. Stephens: So they've continued to run a couple of rigs in the scoop areas that we're focused on. So we're, again, because they're so consistent and efficient in their execution, implementation, and execution, we're confident that with their behavior with the rig count in and around our minerals, that's helping drive the year-over-year royalty volume growth at least, a modest single-digit for this year given where natural gas prices are Got it. That's helpful. There is a lot of detail.

So we're again, because they're so consistent and efficient in their execution implementation execution, we're confident that with their bill.

Paviour with these the rig count in and around our minerals that that's helping drive the year over year royalty volume growth at least.

A modest single digit.

For this year, given where natural gas prices are.

Got it that's helpful I didn't detail appreciate it.

Ralph D'Amico: I appreciate it. And the one other thing, you know, one quick thing, Charles. I mean, it's interesting in the mid-con, right? I mean, aside from all the private guys like Continental 89, Citizen, Charter Oaks, Newborn, all those guys who are currently drilling on us, there's a number of public guys who are also drilling on us today. They don't like to advertise it because they also have assets in the Permian, and they prefer to talk about their Permian assets. But, you know, the way we look at it is, the wells they're drilling for our minerals in Oklahoma have to compete on a cost, on a return standpoint to the Permian, otherwise, they wouldn't be drilling for it. So they may not talk about it, but they sure are spending money drilling those wells, and we benefit from that. And I think that's something that's generally overlooked just because, you know, they choose not to talk about the scoop and the stack in other areas of Oklahoma. But that's a factor that does happen, we pay attention to, and it is beneficial to us. Thank you, Ralph.

And then one other thing you know one quick thing Charles I mean, it's interesting on the in the mid Con right I mean aside from all the private guys like Continental 89 citizen charter Oaks newborn all those guys who are currently drilling on us. There's a number of public guys. We're also drilling on us today, they don't like to advertise it because they also have assets in the Permian that they prefer to talk.

Their Permian assets.

But you know the way we look at it is.

Yeah.

The wells you're drilling on our minerals in Oklahoma have to compete on a cost on a return standpoint to the Permian otherwise it wouldnt be drilling it. So they may not talk about it but they sure are spending money and drilling those wells and we benefit from that.

And I think that's something that's generally overlooked just because you know they choose not to talk about the scoop and the stack and other areas of Oklahoma, but that's a factor that that that that does happen, we pay attention to and it is beneficial to us.

Thank you Ralph.

Thank you. The next question is coming from Jeff Gramm of Alliance Global Partners. Please go ahead.

It's not a capital allocation question for you. So we look into 'twenty for a given your hedge book as well as the high margin royalty model it.

Ralph D'Amico: Thank you. The next question is coming from Jeff Grampp of Alliance Global Partners. Please go ahead.

It seems like you guys will still have a decent chunk of some discretionary free cash flow post dividend.

Ralph D'Amico: I had a capital allocation question for you. As we look into 24, given your hedge book, as well as the high margin royalty model, it seems like you guys will still have, you know, a decent chunk of some discretionary free cash flow post-dividend. What's the appetite for acquisitions in this market, and how would you kind of compare, contrast, or balance, you know, presumably some lower pricing along with, you know, making sure you're not going over your skis from a liquidity and leverage standpoint? That's a good question, Jeff.

What's the appetite for acquisitions in this market and how would you kind of compare contrast or balance.

You know, presumably some lower pricing along with making sure you're not going over your skis from a liquidity and leverage standpoint.

That's a good question, Jeff Yeah look I mean, I think you can look at you can look at last spring as sort of a you.

You know sort of.

As an example, what we did last spring natural gas prices also dropped right and there was a big bid ask spread between what sellers of minerals, we're looking for and what you know.

Ralph D'Amico: Yeah, look, I mean, you can look at last spring as sort of a, you know, sort of an example of what we did. You know, last spring, natural gas prices also dropped, right? And there was a big bid-ask spread between what sellers of minerals were looking for and what we were willing to pay for them. You know, and so I think if you look at this year, it's probably going to be something fairly similar. We've always been very disciplined, and we don't change our underwriting economics or metrics or the way that we look at acquisitions, regardless of the commodity price environment. Um, you know, and so if prices, what sellers are willing to sell minerals for, if it comes down, right, then great, we can execute on that. If it doesn't come down, you know, what we generally do is what we did last year, right?

We are willing to pay for them.

And so I think if you look at this year, it's probably going to be something fairly similar we've always been very disciplined and we don't change our underwriting economics or metrics or the way that we we look at acquisitions, regardless of the commodity price environment.

And so if prices if if what sellers are willing to sell minerals for if it comes down.

Then great we can execute on that if it doesn't come down you know what we generally do is what we did last year right. We continue to sort of build liquidity and wait for you know for prices to come our way. The good news is as Chad mentioned, we have an inventory of over 2000 gross locations that are.

Or are you know very high quality right. So.

You know that allows us to still grow our reserve volumes or in an hour royalty production volumes right without having to rely on you know on acquisitions.

Ralph D'Amico: We continue to sort of build liquidity and wait for prices to come our way. The good news is, as Chad mentioned, we have an inventory of over 2,000 gross locations that are, you know, very high quality, right? So, you know, that allows us to still grow our reserve volumes and our royalty production volumes, right, without having to rely on, you know, acquisitions in the near term, right? So I would say that's the plan. We're going to be patient, and if the pricing makes sense, we can acquire the minerals. And if they don't, we'll build liquidity, pay down debt, and eventually, the market will reach equilibrium again, just like it did last year. Okay, I appreciate those details.

In the near term right. So I would say that's the plan, but we're gonna be patient and if pricing makes sense, we can acquire minerals and if they don't.

We'll build liquidity pay down debt and eventually the market will reach equilibrium again, just like you did last year.

Okay I appreciate those details for my follow up on.

On the new slide deck it looks like.

In your slide are calling out the Texas side of the Haynesville and some recent results there.

Just wondering if you guys now consider that core and maybe that's maybe that's not new you guys. Just wanted to to shine a little bit more of a light on it but is that an area that you guys are spending more time on than say 12 to 24 months ago.

Ralph D'Amico: For my follow-up, on the new slide deck, it looked like there might be a new slide calling out the Texas side of Haynesville and some recent results there. Just wondering if you guys now consider that core, and maybe that's not new, you guys just wanted to shine a little bit more light on it, but is that an area that you guys are spending more time on than, say, 12, 24 months ago? Now, we've always spent time in that area, right?

Yeah. We've always spent time in that area right I think the purpose of this slide was to kind of show that you know, particularly with the announcement that etan was dropping rigs and under that a M. I that they had with with Blackstone right, where we want it to be able to do with the slightest differentiate the area of the a 10.

Ralph D'Amico: I think the purpose of this slide was to kind of show that, you know, particularly with the announcement that Athon was dropping rigs under that AMI that they had with Blackstone, right? What we wanted to be able to do with this slide was differentiate the area of the Texas side of Hainesville in which we own minerals from what, you know, what that AMI area was, right? And what you can see here is that it continues where we are.

Aside of the Haynesville in which we own minerals to what you know what that Ami area was right in what you can see on here is that it continues where we are it continues to be actively developed including you know our current development by Athos, regardless of pricing in this area. So we are.

Chad L. Stephens: It continues to be actively developed, including, you know, current development by Athon, regardless of pricing in this area. So, we were just trying to differentiate it versus what we're doing versus what's out there in the marketplace today. And to be clear, Jeff, the Athon Blackstone AMI is along the river there between Angelina and Nacogdoches County, where you see a few horizontal wells down there versus where our green minerals are up in St. Augustine and a little bit of eastern Nacogdoches where a lot of the rig activity has remained. I appreciate those details, guys. Thanks for your time.

Just trying to differentiate it versus what we're doing versus what's out there in the out in the marketplace today.

And to be clear Jeff.

Based on Blackstone a M. I is along the river there between Angelina and Nacogdoches County, where you see a few horizontal wells down there versus where our green minerals are up in San Augustine and a little bit of eastern Nacogdoches, where a lot of the rig activity has remained.

Great I appreciate those details guys. Thanks for the time.

Okay.

Thank you. The next question is coming from Jonathan Schaffer of Northland Capital markets. Please go ahead.

Hey, guys. Thanks for taking the questions first one to ask about 2024 guidance. So.

Ralph D'Amico: Thank you. The next question is coming from Donovan Schafer of, Please go ahead. Hey guys, thanks for taking the questions. I first want to ask about 2024 guidance. So in the last few calls, you've talked about how, you know, now that you've mostly completed the conversion of royalty-only from working interest now to, you know, the overwhelming majority being royalty-only interest, and that, you know, now that that conversion has been basically done, you would be in this, like, a return to growth mode, growing the royalty-only production at a double-digit rate. And I think even in some cases, Obviously, the guidance at the midpoint is 4% year-over-year growth for royalties and 80% at the high end of that range. And that's, of course, you know, below, I mean, that's not double-digit and, of course, below 20%.

Last few calls you've talked about how now that you've mostly completed the conversion of royalty only from from working interest now too.

Yeah.

Overwhelming majority being royalty only interests.

Now that that conversion has been basically done and you'd be in this like a return to growth mode.

Growing the royalty you only production at a double digit rate and I think even in some cases you alluded to.

<unk> the historical growth rate, which has been closer to 20% for the royalties obviously the guidance at the midpoint is 4% year over year growth for royalties and 8% at the high end of that range.

And Thats of course, you don't below I mean, that's not double digit in course below 20%.

A lot of things are happening certainly in the macro environment, we've already talked about a lot of that but.

I'm just curious if you could.

Chad L. Stephens: A lot of things are happening, certainly in the macro environment. We've already talked about a lot of that. But I'm just curious if you could talk through if the earlier views and perspectives sort of still hold and if it's really just been a matter of change and development activity or the pace. Maybe another way to put it would be, if we hadn't seen such a dramatic decline in natural gas prices, you know, in the second half of January, would you? Do you think the guidance would more likely have been somewhere?

Talk.

You can talk through if the earlier views and perspective sort of still hold and if it's really just.

In a matter of change in development activity or the pace and maybe another way to put the put it would be.

You know if we hadn't seen such a dramatic decline in natural gas prices you know in the second half of January would you.

Do you think.

The guidance more likely have been somewhere you would do you think it would have hit that double digit growth rate at the midpoint.

Or.

Something closer to 20% I'm, just trying to reconcile the past comments with current situation and if the past comments still hold.

Chad L. Stephens: Do you think it would have hit that double-digit growth rate at a midpoint, or, you know, something closer to 20%? I'm just trying to reconcile the past comments with the current situation, and if the past comments still hold..., but for a more normal environment. Hey Donovan, this is Chad. I'll answer first and then let the others maybe follow on.

But.

For a more normal environment.

Yeah, Hey, good morning.

Yes. This is Chad I'll I'll answer first and then let let the others maybe follow on so again to be clear we've consistently messaged this that.

Chad L. Stephens: So again, to be clear, we've consistently messaged this that there are two different dynamics at play when we talk about volumes. One is corporate volumes. Corporate volumes have two components: non-op working interest and Royal.

There's two different dynamics at play when we talk about volumes one is corporate volumes.

Corporate volumes have two components.

Non op working interest and royalty.

Chad L. Stephens: And we've constantly messaged and focused on our royalties, only volume growth, because we weren't doing anything with the non-op working interest. We were divesting of the non-op working interest, redeploying proceeds using our cash flow, and buying royalties, mineral interests, and royalties in these two areas. So when you look at our investor relations slide deck, we highlight organic royalty production growth. We talk about it in our quarterly 10-Qs and year-in, year-over-year. It's all about royalty because we're not doing anything, investing any capital, or allocating any capital to the non-op working interest.

We've constantly messaged and focused on our royalty.

Only volume growth because we werent, we werent doing anything on non op working interest we were divesting of non op working interest redeploying proceeds using our cash flow and buying royalty mineral interest and royalty in these two areas. So when you look at our Investor Relations slide deck, we highlight organic royalty production.

<unk> growth.

We've talked about it in our quarterly 10, Qs and your year end year over year, it's all about royalty because we're not we're not doing anything investing any capital allocating any capital to non op working interest. So that's why we've continued to highlight and feel good about double digit royalty volume growth what.

Chad L. Stephens: So that's why we've continued to highlight and feel good about double-digit royalty volume growth whatever period you're comparing. Now, to what you just talked about and what we've been discussing, with natural gas prices and cash prices today below $1.50, I think it strips $1.65 or something, but cash prices, what buyers are actually negotiating for and buying on a daily basis, are below $1.50. So it's bad out there

Ever period, you're comparing.

Now to what you just talked about and what we've been discussing with natural gas prices and cash prices today are below above 50, I think strips above 65 or something that cash prices what buyers are actually.

Negotiating for buying on a day daily basis is below about 50. So it it's it's bad out there and so the E&ps Chesapeake.

Chad L. Stephens: And so the EMPs, Chesapeake, EQT, everybody's cutting back CAPEX, cutting back RIGS, curtailing production, and so we have taken that into account, knowing what we know, and we've taken that into account for our 2024 guidance and pulled way back on that double-digit growth to that modest single-digit growth based on what we know is going on in the Haynesville and with our operators in So we feel pretty good about that little single-digit 4% we're talking about. If we hit the high end of that, great, but we feel really good about that midpoint. Ralph, I don't know if you want to add to that or not, but yeah, I mean, you know, I mean, we don't operate in a vacuum, right, Donovan, right? So if operators are, if you look at what the gas guys are saying, flat to down year over year, mostly down year over year, right? I mean, we're certainly not immune to it.

Qt everybody's cut back Capex cutting back rigs curtailing production and so we have taken that into account knowing what we know we've taken that into account for our 2020 for guidance and pull way back on that double digit growth to have that modest single single digit growth based on.

What we know is going on in the Haynesville our operators in the Haynesville and the operators in the Scoop stack. So we feel pretty good about that little single digit 4%, what we're talking about if.

If we hit the high end of that great, but we feel really good about that midpoint, Ralph I know, if you want to add to that or yeah. I mean, I you know I mean, we don't operate in a in a vacuum right Donovan right. So if operators are if you look at what the gas guys are saying flat to down year over year, mostly down year over year right.

I mean, we're.

We're certainly not immune to it and in a $3 pricing environment right.

You know whenever that comes back or if we were here today I think the historical growth rate based on the pace of development and the number of rigs that those operators would be running yes. We would go back to what we've averaged over the last.

Ralph D'Amico: In a $3 pricing environment, right? You know, whenever that comes back, or if we were here today, I think the historical growth rate based on the pace of development and the number of rigs that those operators would be running, yes, we would go back to what we've averaged over the last three years, right? But that is, you know, dependent on what the operators do, which is dependent upon what, you know, natural gas prices do. So, to answer your questions, yes, if you had a $3 price and operators were drilling at a similar rate, yes, our growth would return to what we've historically been able to achieve over the last three years. Not only royalty volume growth would move back up into that double-digit range, which would then drive higher cash flow, cash flow per share, and that PV10 reserve value that I mentioned as well. Yeah, yeah, no, there's kind of like a stacked layer of variables that would drive upsides.

Over the last three years right, but that is you know.

Dependent on what the operators do which is dependent upon what you know natural gas prices do so you know to answer your questions. Yes, if you have $3 price and operators are drilling at a similar rate, yes, our growth would return to what we have historically.

<unk> been able to achieve over the last three years.

Not only not only royalty volume growth.

<unk> moved back up into that double digit range, which would then drive higher cash flow cash flow per share and that PV 10 reserve value.

Mentioned as well.

Yes, yes.

Kind of like a there's sort of a stacked layers of of variables that would drive upside so.

Chad L. Stephens: That's great. And then, as a follow-up, I want to ask you something, I think I asked you on the last call about this, but kind of just looking for an update here. The issue of associated gas coming out of the Permian or, you know, potentially other basins where, you know, in the current natural gas price environment, the gas-focused drillers are not, you know, they have an incentive to slow down, but oil prices are still at a healthy level, you know, kind of bouncing around or kind of close to $80-ish a barrel. So more oil-focused production continues, and that's going You know, I know there's a pipeline that's going to bring more of the Permian gas to markets where you sell your gas.

That's great.

And then as a follow up I wanted to ask I think I asked on the last call about this but kind of just looking for an update here.

The issue of associated gas coming out of the Permian or potentially other basins, where you know in the current natural gas price environment.

The gas focus drillers or not.

They have an incentive to slow down what oil prices are still at a healthy level, you know kind of bouncing around or kind of close to $80. A barrel. So more oil focused production continues and that's gonna associated gas you know I know, there's the pipeline that's going to bring more of the Permian gas to markets, where you sell your gas.

Yes.

Chad L. Stephens: And there's, you know, that should line up with LNG capacity coming online, but just curious if we can get any update there, you know, between the last four months or so since the last call. So, again, when you look at the U.S. natural gas market and the supply and demand dynamics, there are kind of really three main areas that are driving the overall growth in natural gas supply. One, Marcellus... pretty much right now as we speak, cap.

And there's you know that should lineup with LNG capacity coming online, but just curious if we can get any update there between the last four months or so since the last call.

So when you again when you look at kind of a U S natural gas market and the supply and demand dynamics.

Kind of really three main areas that are driving.

The overall growth in natural gas supply one Marcellus.

Is pretty much right now as we speak capped theres no more capacity coming out of the basin. All the pipelines are full so as those operators announced their capex budgets year over year everything all their production announced production is relatively flat and as EQT has indicated they're going to actually be.

Chad L. Stephens: There's no more capacity coming out of the basin. All the pipelines are full. So as those operators announce their CapEx budgets year over year, all their production, announced production is relatively flat, and as EQT has indicated, they're going to actually be curtailing. But overall, there's no new material volumes coming out of the Marcellus to feed the increase in demand from LNG. Then you've got the Haynesville, which has huge growth year over year and can grow at a pretty fast clip with those big wells that are being drilled throughout the overall Haynesville basin. And then, recently, as you alluded to, in the Permian Associated Gas, Kinder Morgan has a new project there.

Tailing, but overall, there's no new material.

Volumes coming out of the Marcellus to feed.

The increase in demand for LNG, then you've got the Haynesville, which is huge growth year over year and can grow at a pretty fast clip with those big wells that are being drilled throughout the the overall Haynesville basin and then recently announced as you alluded to in the Permian associated gas Kinder Morgan.

He has a new project there, it's actually being built as we speak and is gonna add half a bcf a day of of supply of associated gas other than that most of the other all the other.

Chad L. Stephens: It's actually being built as we speak and is going to add half a BCF a day of supply of associated gas. Other than that, most of the other or all the other pipelines coming out of the Permian Basin are pretty much full. So you're only having half a BCF a day of incremental increase to be in service by the end of the year or early first quarter of 2025 with all this new demand, LNG demand coming. So that's again why I feel confident that the market will be balanced, first quarter to mid 2025 and will pull prices up and support prices over the next 24 to 36 months. Okay, great. That's helpful. And if I can just squeeze one last question in, I want to ask about, you know, I believe it was in the Inflation Reduction Act, but there's the proposal for, you know, a fee on methane.

Pipelines coming out of the Permian basin are pretty much full so you are only having a half a bcf a day of incremental increase to be in service by end of the year or early first quarter of 2025 with this all of this new demand.

LNG demand coming so that's again why I feel confident that overall.

The market will be balanced.

First quarter to mid 2025 and pull.

Pulp prices up and support support prices over the next.

24 to 36 months.

Okay, Great. That's helpful and if I can just squeeze one last question and I wanted to ask about.

Yeah, I believe I believe it was in the inflation reduction act, but there's the proposal of a fee on methane.

Chad L. Stephens: I kind of forget where we are in the rulemaking process or if final numbers have been established there or not, but I'm curious if you guys have done any analysis there, if it's something you've been following closely at all as to whether, if there is a fee, is it at the state level where it'd have to be worked out of whether that's something that could be borne by the royalty interest owners or if it's kind of a settled, you know, it's already settled that that would all be, you know, working interests and no royalty interests and if you think there could be an impact on just the overall economics of natural gas with a methane fee in place. Any color there.

I kind of forget where we are in like the rulemaking process or.

Its final numbers had been established there or not but im curious if you guys have done any analysis. There if it's something you've been following closely at all as to whether you know if there is a fee.

Is it at the state level, where it has to be worked out of whether thats something that could be borne by the royalty interest owners or if it's kind of a settled.

It's already settled that that would all be.

You know working interest and a royalty interest and if you think there could be an impact on just the overall economics of natural gas.

With a with a methane in place.

Any color there would be helpful.

Chad L. Stephens: So, the two subjects that I try to follow, at least generally, though it's pretty complicated, are one, a carbon tax, so to speak. And there is a carbon market out there for companies who want to try to be carbon neutral that are high emitters. So they're buying carbon credits in the carbon tax market to try to balance their emissions, But we're not an emitter, so we don't worry about that, so to speak, as a mineral owner. The methane fee is still in legislative debate, so it's hard to understand who would pay it, how it would work, and whether the mineral owner would be burdened by it. It depends upon how the oil and gas lease reads and what sort of fees that the operator can pass through to the mineral owner through a deduction on the royalty rates that they're paying.

So.

The two the two subjects that I tried to follow at least generally so it's pretty complicated or want a carbon tax.

To speak.

And there is a carbon market out there for companies, who want to try to be neutral that are high emitters, so they're buying they're.

They are buying carbon credits in the carbon tax market to try to balance their emissions.

But we were not in a matter. So we don't we don't worry about that so to speak as a mineral owner the methane fee is that still in a legislative discussion. So it's hard to understand who would pay it how it would work with the mineral owner be burdened by it depends upon how the oil and gas lease rates and what sort of.

Fees that the operator can pass through to the mineral owner through a deduction on the royalty rates that they're paying so it's it's so early in the game there I, it's hard to really determine what the impact would be for a royalty on it.

Chad L. Stephens: It's so early in the game there that it's hard to really determine what the impact would be for royalties. Okay. Okay. That's helpful.

Donovan Due Schafer: All right. Thank you, guys. I'll take the rest of my questions offline.

Okay. Okay. That's helpful. All right. Thank you guys I'll take the rest of my questions offline.

Danielle D. Mezo: Thanks. Thank you. At this time, I'd like to turn the floor back over to you for closing.

Thanks.

At this time I would like to turn the floor back over to Mr. Stevens for closing comments.

Danielle D. Mezo: Thank you, operator. Again, I'd like to thank our employees and shareholders for their continued support. I'd also like to note that Ralph and I will continue to expand our investor marketing activities over the coming weeks and months. Specifically, we will be participating in the KeyBank Virtual Minerals Conference on March 26th, the Alliance Global Virtual Energy Conference on April 10th, and the Steeple Cross-Sector Insights Conference that will be hosted in Boston on June 4th and 5th. If you'd be interested in meeting at one of these events at any time, please don't hesitate to reach out to myself, Ralph, or the folks at Fink IR. We look forward to hosting our next call in early May to discuss our first quarter 2024 results. Ladies and gentlemen, thank you for tuning in. I'm Danielle Grampp. Have a great day. You may disconnect your lines or log off the webcast at this time and enjoy the rest of your day at www.panhandleoil.com.

Thank you operator, again I'd like to thank our employees and shareholders for their continued support I would also like to note that Ralph and I will continue to expand our investor marketing activities over the coming weeks and months.

Specifically, we will be participating in the Keybanc virtual minerals conference on March 26, The Alliance Global Virtual Energy Conference on April 10.

And the Stifel Cross sector insights conference that will be hosted in Boston on June 4th and fifth.

If you'd be interested in meeting at one of these events at any time, please don't hesitate to reach out to myself, Ralph or the folks at fake I R. We look forward to hosting our next call in early may to discuss our first quarter 2024 results. Thank you.

Ladies and gentlemen. This concludes today's event you may disconnect. Your lines have log off the webcast at this time I didn't join the rest of your day.

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Okay.

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