Panhandle Oil And Gas Inc. Reports Second Quarter And Six Months 2012 Results And Mid-Year Reserve Update

OKLAHOMA CITY, May 7, 2012 /PRNewswire/ -- PANHANDLE OIL AND GAS INC. (NYSE: PHX) today reported financial and operating results for the Company's fiscal second quarter and six months ended March 31, 2012. 

HIGHLIGHTS FOR THE PERIODS ENDED MARCH 31, 2012

• Recorded a six-month 2012 net income of $4,088,076 as compared to $3,199,102 for the 2011 six months
• Generated cash from operating activities of $15,061,760 for the 2012 six-month period, well in excess of $12,074,991 of capital expenditures for drilling and equipping wells
• Reported 2012 second quarter and six-month production of 2,654,485 Mcfe and 5,214,009 Mcfe, respectively, which were increases of 23% and 20%, respectively, as compared to the same periods of fiscal 2011
• Continued to significantly increase oil and natural gas liquids (NGL) production
• Increased proved reserves 19% to 132.9 Bcfe at March 31, 2012, as compared to 111.7 Bcfe at Sept. 30, 2011
• Reduced debt to $8 million as of May 4, 2012

FISCAL SECOND QUARTER 2012 RESULTS

For the quarter ending March 31, 2012, the Company recorded a net income of $675,966, $.08 per share, as compared to a net income of $1,772,253, $.21 per share, for the 2011 second quarter.  Total revenues for the 2012 quarter decreased to $10,436,910, or 5%, as compared to the 2011 quarter.  Cash provided by operating activities totaled $7,316,108, while capital expenditures for drilling and equipping wells amounted to $5,730,985.  Production for the 2012 quarter increased 23% to 2,654,485 Mcfe, as compared to 2,152,011 Mcfe for the 2011 quarter.  The major factor causing the decline in revenues and net income for the 2012 quarter was the average per Mcfe sales price decrease of 29% to $3.60, as compared to $5.07 for the 2011 quarter. The Company continued to increase its oil and natural gas liquids production, which now accounts for 13% of Mcfe production, and expects to continue this trend during the remainder of fiscal 2012.

SIX MONTHS 2012 RESULTS

For the six months ended March 31, 2012, the Company recorded a net income of $4,088,076, $.49 per share, as compared to a net income of $3,199,102, $.38 per share, for the 2011 six months.  Total revenues for the 2012 six months increased to $23,841,243, or 14%, as compared to the 2011 six months.  For the 2012 six months, cash provided by operating activities totaled $15,061,760, which more than funded drilling capital expenditures of $12,074,991.  Production for the 2012 six months totaled 5,214,009 Mcfe as compared to 4,360,229 Mcfe for the 2011 six months.  The average per Mcfe sales price decreased 14% for the 2012 six months to $4.09 as compared to $4.73 for the 2011 six months.  The 2012 six-month revenue increase was principally the result of lease bonuses and rentals of $1,921,918 received in the 2012 six months, as compared to $141,855 in the 2011 six months.  $1,714,000 of lease bonus was one transaction in which the Company leased 2,431 net acres of its mineral acres in the Mississippian play in northern Oklahoma.  The Company also retained a 3/16 non-cost-bearing royalty in any production established on these acres, while retaining ownership of its mineral acres.

RESERVES UPDATE

March 31, 2012, mid-year proved reserves were 132.9 Bcfe, as calculated by the Company's consulting petroleum engineering firm, DeGolyer and MacNaughton.  This was an increase of 19%, compared to the 111.7 Bcfe of proved reserves at Sept. 30, 2011.  SEC prices used for the March 31, 2012, report averaged $3.38 per Mcf for natural gas, $92.96 per barrel for oil and $41.06 per barrel for NGL, as compared to $3.81 per Mcf for natural gas, $90.28 per barrel for oil and $38.91 per barrel for NGL for the Sept. 30, 2011, report.  Total proved developed reserves increased 17.3% to 78.7 Bcfe and proved undeveloped reserves increased 21.6% to 54.2 Bcfe, as compared to Sept. 30, 2011, reserve volumes.

MANAGEMENT COMMENTS

Michael C. Coffman, President and CEO said, "Our cash flow and earnings remain strong in fiscal 2012.  Cash flow from operations increased 11% and net income increased 28% for the six months ended March 31, 2012, as compared to the first half of last year.  We are pleased to be able to continue to fund our drilling capital expenditures from cash flow.  Our drilling and acquisition efforts combined to increase our Mcfe production volumes 20% in the 2012 six-month period as compared to the 2011 period.  During this same period, oil production increased 34% in 2012 and NGL barrels sold totaled 42,496, combining to represent 38% of our oil, natural gas and NGL sales revenues and 13% of our Mcfe production volumes."

Coffman continued: "We continue to be able to invest a significant portion of our drilling dollars in oily and NGL rich plays in western Oklahoma that are expected to yield excellent rates of return and should maintain our upward momentum in production of oil and NGL through the remainder of fiscal 2012.  Our continuing focus on our core strategies and maintaining a strong financial position allow Panhandle to generate net income, production increases and reserve growth during this challenging natural gas price environment."

OPERATIONS UPDATE

Paul Blanchard, Senior Vice President and COO said, "A key development was the Company's ability to close agreements to lease our mineral acreage in plays that we felt were not particularly attractive for us as a non-operator working interest participant.  We have now signed agreements which combined netted $6.7 million in lease bonus receipts, through the end of April 2012, and importantly also give Panhandle a 3/16 non-cost-bearing royalty interest in any production from wells drilled on these leased rights.  We are confident that these lease agreements add significant value to our shareholders.  The proceeds from these agreements have allowed us to reduce our debt to $8 million on May 4, 2012, leaving the Company in a very strong position to continue to take advantage of ongoing drilling opportunities or other opportunities that may become available.  We will continue to seek out those opportunities that increase shareholder value over time."

(1)  The Company reported NGL reserves for the first time in its 2011 year-end reserve report. Increased drilling activity over the last 12-18 months in several western Oklahoma plays, which produce significant NGL, have resulted in meaningful NGL production and reserves for the Company, necessitating inclusion in the reserve calculation and inclusion of NGL production volumes with first quarter 2012 results.

The Company's derivative contracts in place for natural gas at March 31, 2012, are outlined in its Form 10-Q for the period ending March 31, 2012.

Panhandle Oil and Gas Inc. (NYSE: PHX) is engaged in the exploration for and production of natural gas and oil.  Additional information on the Company can be found at www.panhandleoilandgas.com.

Forward-Looking Statements and Risk Factors – This report includes "forward-looking statements" within the meaning of Section 27A of the Securities Act of 1933 and Section 21E of the Securities Exchange Act of 1934.  Forward-looking statements include current expectations or forecasts of future events.  They may include estimates of oil and gas reserves, expected oil and gas production and future expenses, projections of future oil and gas prices, planned capital expenditures for drilling, leasehold acquisitions and seismic data, statements concerning anticipated cash flow and liquidity and Panhandle's strategy and other plans and objectives for future operations.  Although Panhandle believes the expectations reflected in these and other forward-looking statements are reasonable, we can give no assurance they will prove to be correct.  They can be affected by inaccurate assumptions or by known or unknown risks and uncertainties.  Factors that could cause actual results to differ materially from expected results are described under "Risk Factors" in Part 1, Item 1 of Panhandle's 2011 Form 10-K filed with the Securities and Exchange Commission.  These "Risk Factors" include the worldwide economic recession's continuing negative effects on the natural gas business; our hedging activities may reduce the realized prices received for natural gas sales; the volatility of oil and gas prices; Panhandle's ability to compete effectively against strong independent oil and gas companies and majors; the availability of capital on an economic basis to fund reserve replacement costs; Panhandle's ability to replace reserves and sustain production; uncertainties inherent in estimating quantities of oil and gas reserves and projecting future rates of production and the amount and timing of development expenditures; uncertainties in evaluating oil and gas reserves; unsuccessful exploration and development drilling; decreases in the values of our oil and gas properties resulting in write-downs; the negative impact lower oil and gas prices could have on our ability to borrow; drilling and operating risks; and we cannot control activities on our properties as the Company is a non-operator.

Do not place undue reliance on these forward-looking statements, which speak only as of the date of this release.   Panhandle undertakes no obligation to update this information.  Panhandle urges you to carefully review and consider the disclosures made in this presentation and Panhandle's filings with the Securities and Exchange Commission that attempt to advise interested parties of the risks and factors that may affect Panhandle's business.

SOURCE PANHANDLE OIL AND GAS INC.