Full Year 2024 PHX Minerals Inc Earnings Call
Speaker Change: Greetings and welcome to the PHX Menorals Inc. 4th quarter in year-end 2024 Earnings Call. At this time, all participants will be listening only mode. If anyone should require operator assistance, please press star zero on your telephone keypad.
Speaker Change: A question and answer session will follow the formal presentation. He may be placing the question at any time by pressing star 100 telephone keypad.
as a reminder this conference is being recorded.
Speaker Change: It's time I pleasure to chuckle over to your host, Stephen Lee, Invest relations. Please go ahead. Thank you operator and thank you for everyone for joining us today to discuss PHX Minerals December 31, 2024, QALE and Annual Results.
Speaker Change: On the call today are Chad Stephens, President and Chief Executive Officer, Ralph Demiko, Executive Vice President and Chief Financial Officer, and Danielle Mezo, Vice President of Engineering.
Speaker Change: The earning press released that was issued yesterday after the close. It's also posted on the PHIC Investory Relations website.
Speaker Change: These estimates and other full-looking statements involve known and unknown risks and uncertainties that we cause actual results in materially different from those expressed or implied on the call.
Speaker Change: These risks are detailed in pediatric minerals, most recent annual report on form 10K, as such may be amended or supplemented by subsequent coral reports on form 10K or other reports filed with the Security and Exchange Commission.
Speaker Change: The statements made during this call are based upon information known to PHAs of today, March 13, 2025, and the company does not intend to update these four-looking statements, whether as a result of new information, future events or otherwise unless required by law.
Speaker Change: With that, I'll turn the call over to Chad Stephens, PHX Chief Executive Officer Chad
Chad Stephens: Thanks, Stephen, and thanks to all of you on this call for participating in PHX's December 31st, 2024, quarter-end annual earnings We appreciate your interest in the company.
Thank you.
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Bear With Me David
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Thank you.
Speaker Change: Our results in calendar 2024 were largely influenced by natural gas macro fundamentals.
Chad Stephens: As we eliminated throughout this past year, the macro headwinds created difficult industry conditions with lower and rig counts and reduced industry capex budgets.
Chad Stephens: The general uncertainty in the U.S. election cycle and the Fed's decision to maintain current interest rates added that these headwinds, but PHX delivered commendable financial results this year, even considering this unfavorable environment.
Chad Stephens: Despite slower industry activity, our total production volumes were approximately 5% year-over-year with royalty volume up 8% for the year. Ibadal was down slightly, year-over-year and was supported by our traditional hedging program.
Chad Stephens: Over the last several quarters, and as we weathered the low natural gas prices, we apine on an imminent improvement in the natural gas macro story. Our forecast then for improving fundamentals is resonating now with a gas trip well over $4.
Chad Stephens: This will improve our financials and should translate into increased industry activity on our strategically deeply located mineral assets.
Chad Stephens: I also highlight that our total well-convergence to production remained at historical levels in 2024 and our well-activity remains high which will drive future well-convergence in 2025 and beyond.
Chad Stephens: All this speaks to the high quality of our assets and resulted in a 33% increase in our dividend announced in the third quarter of 2024.
Chad Stephens: As the slow is in our subsequent event section, we sold non-producing minerals for $8 million at the end of January 2025.
Chad Stephens: These minerals were old legacy assets that had no production, cash flow or reserves associated with them. They were located in areas with little to no industry activity, and thus had no strategic value to the company's core business.
Chad Stephens: We have always maintained a strong conservative balance sheet. Upon the sale of our non-core minerals, closing in January 25, we applied the sale proceeds to reducing debt. Ralph will discuss more about leverage in a moment.
Chad Stephens: As previously disclosed, we formally began evaluating strategic alternatives in December and that process is progressed as planned. We are committed to keeping shareholders informed and will provide an update on the outcomes once the process is complete.
Speaker Change: At this point, I'd like to turn the call over to Danielle to provide a quick operational overview and then to route to discuss the financials.
Danielle Mezo: Thanks, Chad, and good morning to everyone participating on the call.
Speaker Change: For a year ended December 31st, 2024, total corporate production increased 5% to 9,841 NNCFE from the year ended December 31st, 2023.
Speaker Change: And for the quarter, remain flat at 2379 NNCFE from the prior sequential quarter
Speaker Change: Annual royalty production for 2024 increased 8% to 8,760 MMCFE and quarterly royalty production remained flat from the September 30, 2024 quarter at 2,096 MMCFE.
Speaker Change: It is important to note that as a mineral holder, we do not control timing on well development, so there can be some volatility both up and down on a quarter to quarter basis and volumes associated with our business model are better evaluated on a rolling 12 month basis.
Speaker Change: Royalty Volumes represented 88% of total production during our December 31, 2024 quarter. 80% of our quarters production volumes were natural gas, which aligns with our long-term position that natural gas is the future transition fuel for sustainable energy future.
Oil represented 11% of production volumes, and NGL represented 9%.
At December 31st
Speaker Change: Our Total Proof Reserves decreased 11% to 63.7 BCFE with the PV10 of 79.6 million at SEC Pricing and Proof Royalty Reserves decreased 9% to 52.5 BCFE with a PV10 of 71.9 million at SEC Pricing.
Speaker Change: These reserve decreases were primarily attributable to the large year-over-year drop in gas prices.
Speaker Change: Given where natural gas prices currently are, these reserves could be recouped in the coming year. In addition to our proved reserves, we have a robust inventory of over 2,400 undrild probable locations that fuel our population of whips and permits and drives our year-over-year royalty volume growth.
Speaker Change: During 4th quarter, 2024, third-party operators active on-arm mineral acreage converted 71 gross or 0.22 net wells in progress or whips to producing wells compared to 46 or 0.1 net in the prior sequential quarter.
Speaker Change: We are pleased with our well-conversion rates, particularly given the challenging natural gas macro environment, which includes some operators deferring bringing complete wealth online until there is an improvement in gas prices.
Speaker Change: At the same time, our inventory of weld and progress on our minerals, which is a duct, well-being drilled, and permits filed, remains strong with 225 gross or .91 net weld compared to 278 gross or .93 net at the end of September 30th, 2024 quarter.
Speaker Change: In addition to our whips, we regularly monitor third-party operator rig activities in our focus areas and observe 16 rigs present on Ph.J. Minerals acreage as of February 3rd 2025. Additionally, we have 62 rigs active within 2.5 miles of Ph.J.
Speaker Change: In summary, we continue to see steady development on 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 financial.
Ralph D'Amico: Thanks Danielle, and thanks to everyone for being on the call today. For the quarter ended December 31, 2024, Natural Gas, Oil and NGL sales revenues increased 13% to 8.9 million and decreased 8%
Ralph D'Amico: to 33.7 million respectively compared to 7.9 million in the prior sequential quarter and 36.5 million for the four year 2023.
Ralph D'Amico: During our fourth quarter, volumes remained relatively flat, as Danielle mentioned, and realized prices increased 13% compared to the prior sequential quarter.
Ralph D'Amico: Recall also that we sold two working interest packages with closing dates in the first quarter of 2023. So 2024 did not have any production associated with these assets while 2023 included approximately one full month for both sets of assets.
Ralph D'Amico: Realized natural gas prices for the fourth quarter of 24, averaged 2.64
Ralph D'Amico: $2.64 per MCF compared to $2, even in the third quarter of 24. Realized oil prices averaged $69.82.
Ralph D'Amico: Down 7% from the third quarter of 24, NGL's average $23.1 penny, up 17% compared to the third quarter.
Ralph D'Amico: in oil averaged $74.59 compared to $76.76 in $23, while NGL's averaged $21.95 compared to $22.18 in $20.23.
Ralph D'Amico: Realized hedge gains for the fourth quarter were $511,000 and were $4.3 million for the full year 2024. Our current hedge position is available in our most recently filed 10K.
Ralph D'Amico: Total transportation expenses decrease 9% on a sequential quarter basis to approximately 1 million, primarily due...
to volumes.
in areas with lower- Um.
Ralph D'Amico: Lower transportation costs representing a larger percentage of the overall volumes.
Ralph D'Amico: For the four year transportation expenses increased 18% to 4.5 million primarily due to some high interest wells in the Hainesville coming online where leases were cost bearing. [inaudible]
Ralph D'Amico: in 2024. Production taxes decreased 33% on a sequential quarter basis to 284,000. Primarily do
Ralph D'Amico: to lower production volumes in areas that had in states that had lower production tax rates.
Ralph D'Amico: for the full year 2024 taxes decreased 15% to a 1.7 million.
Ralph D'Amico: compared to 2023. Primarily due to lower realized prices offset by slightly higher volumes. LOE associated with our legacy non-operated working interest wells increased 4% on a sequential quarter basis to 307000.
Ralph D'Amico: For the full year, L.O.E. decreased 23% to 1.2 million and recalled that as I mentioned earlier, the comparable period in 2023 also had approximately one full month of L.O.E. expenses with the assets that were divested.
Ralph D'Amico: Cash GNA increased to 2.34 million in the fourth quarter compared to the prior sequential quarter, primarily due to normal year end professional service expenses.
Ralph D'Amico: For the full year, cash GNA decreased 4% to 9.2 million compared to 2023, primarily due to our internal ongoing internal cost control effort.
Ralph D'Amico: Adjusted the bidot for the quarter was up to 5.4 million compared to 4.9 million in the third quarter
Ralph D'Amico: For the full year, Adjusted EBITDA was 21.3 million compared to 22.7 in 2023, as Chad mentioned primarily due to lower realized prices offset by slightly higher volumes.
Ralph D'Amico: Net income for the quarter was $109,000 or zero cents per share compared to 1.1 million.
Ralph D'Amico: or three cents per share in the prior sequential quarter. Note that the first quarter, natural gas prices towards increased towards the end of the quarter causing a negative non-cash mark to market adjustment of 1.5 million to her hedge book.
Absent is non-cash expense, we would have generated.
Higher, Positive Net Income .
Ralph D'Amico: Total debt, as of December 31, 24, was 29.5 million, and our trailing debt to 12-month of justice that he bit that was 1.38 times.
Chad Stephens: As Chad mentioned, subsequent to the quarter, we reduced our debt to 19.8 million through a combination of operating cash flow and the sale, the proceeds from the sale of the and not producing unleased open mineral acres.
Ralph D'Amico: bringing our pro forma leverage to under one times. With that, I'll turn the call over to Chad for some final remarks.
Chad Stephens: Thanks Ralph. As we reflect on 24 or 2024, I am proud of our resilience and performance amid a challenging macro-environment. Despite industry headwinds, PHX demonstrated growth, maintained asset quality and successfully enhanced shareholder returners.
Looking ahead to 2025, we remain optimistic about our prospects.
Chad Stephens: with a solid foundation of high quality assets, an improving financial position, and a commitment to exploring strategic opportunities that can unlock value, we are well positioned for continued growth and value creation for our shareholders in the year ahead.
Chad Stephens: As always, I thank both our employees and Board of Directors for the dedication and hard work This concludes the prepared remarks portion of the call operator, please open up the key for questions
Speaker Change: Certainly, when I'll be conducting a question and answer session, if you'd like to be placing the question Q, please press star 1 under telephone keypad. A confirmation tone will indicate your line is in the question Q. Once again, that star 1 to be placed in the question Q. The question Q. Once again, that star 1
Speaker Change: Our first question is coming from Derrick Whitfield from Texas Capital. Your line is now live.
Thank you. Bye.
Good morning all and thanks for taking my questions.
Hi, Barry.
Speaker Change: With the understanding that the Strategic Alternance Review is ongoing, are there any highlights or insights that you can share with us on what you learned in the process today?
[inaudible]
Speaker Change: Derrick, I think our policy really is not to comment on an ongoing process in any sort of way.
Speaker Change: Completely fair. Maybe speak about it from this perspective if you could. So while this effort is under a way, how should we think about your approach to M&A and ground game leasing?
Speaker Change: Well, we continue to operate the business as is, as we always have, so there really is no change to how we approach the business.
Speaker Change: Great, and then maybe on 2025, with the understanding that you're not providing production guidance or guidance today, does your wine aside well support flatage production?
I think you can see what's happened with our-
Speaker Change: Conversions and production over the last two years in a significantly lower natural gas price environment so you can extrapolate from
Speaker Change: The last two years with what's happening, what's happened, right? You could see a trend continuing to 2025, but I'll leave it at that as again, we're not providing guidance while we're going through this process.
Understood and appreciate it. Thanks for your time.
Thanks, Derek.
Speaker Change: Thank you. We reached out to our question and answer session. I'd like to turn the floor back over for a new further closing comments.
Speaker Change: 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. If you'd be interested in meeting with us, please don't hesitate to reach out to myself. Ralph are the folks that think I are. We look forward to hosting our next call in May 2025 to discuss our first quarter 25 results. Thank you. Thank you.
Speaker Change: Thank you, that does conclude today's teleconferencing webcast. You may disconnect your line at this time and have a wonderful day. We thank you for your participation today.