PHX Minerals has reported financial and operating results for the quarter ended June 30, 2023.

Summary of Results for the Quarter Ended June 30, 2023

• Net loss was ($0.04) million, or $0.00 per share, compared to net income of $9.6 million, or $0.27 per share, for the quarter ended March 31, 2023, and net income of $8.6 million, or $0.25 per share, for the quarter ended June 30, 2022.
• Adjusted pretax net income(1) was $0.6 million, or $0.02 per share, compared to $4.7 million, or $0.13 per share, for the quarter ended March 31, 2023, and $4.3 million, or $0.12 per share, for the quarter ended June 30, 2022.
• Adjusted EBITDA(1) was $4.1 million, compared to $7.7 million for the quarter ended March 31, 2023, and $7.2 million for the quarter ended June 30, 2022.
• Royalty production volumes decreased 4% to 2,010 Mmcfe compared to the quarter ended March 31, 2023, and increased 26% compared to the quarter ended June 30, 2022.
• Total production volumes decreased 7% to 2,304 Mmcfe compared to the quarter ended March 31, 2023, and decreased 5% compared to the quarter ended June 30, 2022.
• Converted 81 gross (0.30 net) wells to producing status, compared to 117 gross (0.46 net) during the quarter ended March 31, 2023 and 96 gross (0.25 net) during the quarter ended June 30, 2022.
• Inventory of 186 gross (0.51 net) wells in progress and 86 gross (0.40 net) permits as of June 30, 2023, compared to 198 gross (0.65 net) wells in progress and 86 gross (0.24 net) permits as of March 31, 2023.
• Total debt was $23.8 million and the debt to adjusted EBITDA (TTM) (1) ratio was 0.93x at June 30, 2023.
• PHX closed on acquisitions totaling 151 net royalty acres located in the SCOOP and the Haynesville plays for approximately $1.8 million.
• PHX announced a $0.0225 per share quarterly dividend, payable on Sept. 8, 2023, to stockholders of record as of Aug. 24, 2023.

(1) Non-GAAP measure 

Chad L. Stephens, President and CEO, commented, 
"We continue to experience significant activity on our minerals including wells being put on production, new wells being spud and new permitting, demonstrating the quality of our assets even during a down market with lower natural gas prices. During the quarter, we experienced increased rig activity on our minerals compared to a year ago, expanding our market share of rigs operating within our core regions. The sequential decline in royalty volumes during the quarter is primarily attributable to the timing of wells being placed online. We continually monitor operator activity across our mineral position and are confident that the timing of our wells in progress will support our royalty volume growth allowing us to achieve our royalty volume outlook for calendar 2023, driving revenue growth and increasing cash flow.

"It appears the second quarter likely represented the bottom for natural gas prices and current macro dynamics suggest sequential price improvements in the remainder of the year," said Stephens. "In spite of a dramatic drop in natural gas prices in the second quarter, PHX Minerals remained focused on proactively allocating its free cash flow to fund acquisitions, return capital to shareholders via our fixed dividend and improving our liquidity position. This speaks to the inherent benefits of our business model in mitigating risks and expanding margins to maximize cash flow. The acquisition market dynamics are improving as natural gas prices stabilize. Our strong balance sheet and cash flow provide ample liquidity to deploy judiciously to fund our growth strategy."

Quarter Ended June 30, 2023, Results

The Company recorded net loss of ($0.04) million, or $0.00 per share, for the quarter ended June 30, 2023, as compared to net income of $8.6 million, or $0.25 per share, for the quarter ended June 30, 2022. The change in net income was principally the result of a decrease in natural gas, oil and NGL sales and a decrease in gains on asset sales, partially offset by an increase in gains associated with our hedge contracts and a decrease in income tax provision.

Natural gas, oil and NGL revenue decreased $12.3 million, or 63%, for the quarter ended June 30, 2023, compared to the quarter ended June 30, 2022, due to decreases in natural gas, oil and NGL prices of 72%, 30% and 49%, respectively, and decreases in natural gas, oil and NGL volumes of 2%, 16% and 15%, respectively.

The production increase in royalty volumes during the quarter ended June 30, 2023, as compared to the quarter ended June 30, 2022, resulted from new wells in the Haynesville Shale coming online.

The Company had a net gain on derivative contracts of $0.2 million for the quarter ended June 30, 2023, compromised of a $1.0 million gain on settled derivatives and a $0.9 million non-cash loss on derivatives, as compared to a net loss of ($2.4) million for the quarter ended June 30, 2022. The change in net gain on derivative contracts was due to the Company's settlements of natural gas and oil collars and fixed price swaps and the change in valuation caused by the difference in June 30, 2023 pricing relative to the strike price on open derivative contracts.

Six Months Ended June 30, 2023, Results

The Company recorded net income of $9.5 million, or $0.26 per share, for the six months ended June 30, 2023, as compared to a net income of $4.6 million, or $0.13 per share, for the six months ended June 30, 2022. The change in net income was principally the result of an increase in gains associated with our hedge contracts and an increase in gains on asset sales, partially offset by a decrease in natural gas, oil and NGL sales and an increase in income tax provision.

Natural gas, oil and NGL revenue decreased $15.3 million, or 44%, for the six months ended June 30, 2023, compared to the six months ended June 30, 2022, due to decreases in natural gas, oil and NGL prices of 51%, 23% and 41%, respectively, and decreases in oil and NGL volumes of 5% and 16%, respectively.

The production increase in royalty volumes during the six months ended June 30, 2023, as compared to the six months ended June 30, 2022, resulted from new wells in the Haynesville Shale coming online.

The Company had a net gain on derivative contracts of $4.0 million for the six months ended June 30, 2023, compromised of a $1.7 million gain on settled derivatives and a $2.3 million non-cash gain on derivatives, as compared to a net loss of ($15.4) million for the six months ended June 30, 2022. Gain on settled derivative contracts for the six months ended June 30, 2023, excludes $0.4 million of cash paid to settle off-market derivative contracts. The total cash received to settle hedge contracts during the six months ended June 30, 2023 was $1.3 million. The change in net gain on derivative contracts was due to the Company's settlements of natural gas and oil collars and fixed price swaps and the change in valuation caused by the difference in June 30, 2023 pricing relative to the strike price on open derivative contracts.

Operations Update

During the quarter ended June 30, 2023, the Company converted 81 gross (0.30 net) wells to producing status, including 26 gross (0.20 net) wells in the Haynesville and 20 gross (0.06 net) wells in the SCOOP, compared to 96 gross (0.25 net) wells in the quarter ended June 30, 2022.

At June 30, 2023, the Company had a total of 186 gross (0.51 net) wells in progress across its mineral positions and 86 gross (0.40 net) active permitted wells, compared to 198 gross (0.65 net) wells in progress and 86 gross (0.24 net) active permitted wells at March 31, 2023. As of July 10, 2023, 15 rigs were operating on the Company's acreage and 61 rigs operating within 2.5 miles of its acreage.

KeyFacts Energy Industry Directory: PHX Minerals