Panhandle Oil and Gas Inc.

Transcription

1 PHX LISTED NYSE

2 Panhandle Oil and Gas Inc. FORWARD-LOOKING STATEMENTS AND RISK FACTORS This presentation contains projections and other forward-looking statements within the meaning of Section 27A of the U.S. Securities Act of 1933 and Section 21E of the U.S. Securities Exchange Act of These projections and statements reflect the Company s current views with respect to future events and financial performance. No assurances can be given, however, that these events will occur or that these projections will be achieved, and actual results could differ materially from those projected as a result of certain factors. A discussion of these factors is included in the Company's periodic reports filed with the U.S. Securities and Exchange Commission. 2

3 Panhandle Oil and Gas Inc. Overview COMPANY DESCRIPTION Engaged in oil and gas exploration and production Founded in 1926 as a Cooperative Royalty Association Went public in 1979 as a C-corporation Market Cap - $370 million (as of 1/13/17) Current Dividend Yield is 0.72% Dividend paid for over 50 consecutive years 16.8 million shares outstanding, average trading volume ~36,000 shares per day No secondary offerings in Company history 3

4 Panhandle Oil and Gas Inc. Overview COMPANY OPERATIONS The Company owns interest in 6,200 gross producing wells 2,200 wells working interest; the majority also have royalty interest associated with our mineral acreage ownership 4,000 wells with royalty interest only Revenues 75% from working interest 25% from royalty interest Production mix: 34% Oil and NGL 66% natural gas 4

5 Panhandle Oil and Gas Inc. Overview COMPANY RESERVES Year-end 2016 proven reserves 124 Bcfe, 81.4 Bcfe (67%) proven developed 4,800+ gross 3-P (proven, probable and possible) undeveloped locations, primarily in cores of resource plays amounting to 589 Bcfe of net undeveloped reserves downturn: impairment charge only 8% of our 2014 book value and 5% of our current market capitalization, is a reflection of the quality of our assets 5

6 Panhandle Oil and Gas Inc. Overview COMPANY STRATEGY Our investment philosophy is based on generating reasonable returns for our shareholders in relatively low risk investments Participate with a working interest in wells that we believe will earn reasonable risk-weighted rates of return Otherwise, lease our minerals at the best available up-front cash bonus and royalty percentage 6

7 Panhandle Oil and Gas Inc. Overview MINERAL AND LEASEHOLD ASSETS The Company s foundation is 255,000 net acres of perpetually-owned mineral rights 56,500 net mineral acres are producing 13,300 net mineral acres are leased 185,200 net mineral acres are open Estimated market value of our undeveloped minerals (leased and open) ~$120 million Mineral acreage lease bonus proceeds $8.0 million in FY 2016 $1.9 million YTD in FY 2017 Also own 19,400 net acres of leasehold held by production 7

8 Net Acres (Thousands) Panhandle Oil and Gas Inc. Overview MINERAL AND LEASEHOLD ASSETS Significant Mineral Acreage Holdings OK NM TX ND AR Leasehold 8

9 Panhandle Oil and Gas Inc. Overview MINERAL AND LEASEHOLD ASSETS Material mineral and/or leasehold positions in several top resource plays including: STACK/CANA/SCOOP, southeastern Oklahoma (Arkoma) Woodford Shale Eagle Ford Shale Fayetteville Shale Potential high impact projects are located in the Permian Basin Cochran County Texas San Andres project operated by Element Petroleum Andrews & Winkler Counties Texas Woodford Shale project operated by QEP Resources 9

10 STACK, CANA and SCOOP Plays Devon, Continental, Newfield, Marathon Stack Meramec/ Woodford Devon, Cimarex, Continental Cana Woodford Continental, Newfield, Marathon, XTO SCOOP Woodford/Springer PHX Mineral Holdings 10

11 STACK, CANA and SCOOP Plays PHX Operations Diverse mineral and leasehold ownership across several plays PHX wells primarily operated by Devon, Cimarex, Continental, Newfield and XTO Current production 3.9 Mmcfe per day YE 2016 Reserves Proved 16.8 Bcfe (13.5% of total) Probable Bcfe (36% of total) Possible 62.8 Bcfe (29% of total) 1,367 undeveloped locations identified Current Operations Elected to participate in six Cimarex operated STACK/CANA Woodford wells 17.5% working interest and 16.25% NRI The first two wells started drilling in mid-december 2016 All six wells will be drilled before completion operations begin Production from the six wells is anticipated to begin in the second quarter of

12 Southeastern Oklahoma Woodford Shale PHX Mineral Holdings Newfield, BP, XTO Play Outline 12

13 Southeastern Oklahoma Woodford Shale PHX Operations Diverse mineral and leasehold ownership across the play PHX wells primarily operated by Newfield, BP and XTO Current production 3.1 Mmcfe per day YE 2016 Reserves Proved 25.8 Bcfe (21% of total) Probable Bcfe (42% of total) Possible 81.4 Bcfe (38% of total) 1,419 undeveloped locations identified Current Operations We have elected to participate in eight wells Average 20% WI and 27.4% NRI, operated by BP Five wells have been drilled and two wells are drilling The first four wells are being completed and expected to begin producing first quarter of 2017 The remaining 4 wells are projected to begin producing early second quarter of

14 Eagle Ford Locator Map PHX 14

15 PHX Eagle Ford Shale Leasehold Acreage and Active Wells PHX Leasehold Acreage 15

16 Eagle Ford Shale PHX Operations Current net production 349 Boe per day from 71 producing wells YE 2016 Reserves Proved 32.6 Bcfe (26.3% of total reserves) 4,255 Mbo (79% Crude Oil) 615 MbNGL (11% NGL) 3.3 Bcf (10% Natural Gas) 106 additional undeveloped Eagle Ford locations Current Operations One DUC well was completed in July, 2016 Well was fracture stimulated with enhanced techniques including the use of significantly more sand and improved diversion Produced an average of 1,010 Boe per day (90% oil) for the first 30 days of production, 849 Boe per day for the first 60 days and 769 Boe per day for the first 90 days* Six month cumulative production to date is ~110,000 Boe Operator has commenced a ten well drilling program on our acreage The first two wells are projected to begin producing in April 2017 The next four wells are expected to begin producing in the third quarter 2017 Remaining four wells should be on sales in the fourth quarter * rates adjusted for downtime 16

17 Permian Basin Andrews & Winkler Counties Woodford Shale Project 17

18 Permian Basin Andrews & Winkler Counties Woodford Shale Project Panhandle leased out ~2,440 contiguous net mineral acres on the Central Basin Uplift in Andrews and Winkler Counties, Texas The lease covers a 43.6 square mile area Generated $1.2 million in lease bonus revenues to PHX Terms to Company Panhandle will receive 25% of all production proportionately reduced, in the form of royalty payments from the leased property Panhandle has the right to buy back the lease in each unit as initial unit wells are proposed, up to a maximum working interest of 10% With full participation (assuming 640 acre units), Panhandle would have a 7% working interest and a 7.5% net revenue interest in all the wells drilled on the 43.6 square mile block Current Operations The first well has been drilled and completed; started producing in March, 2016 and has cumulative production of ~26,100 Bo + 27,850 Mcf from the Woodford Shale The operator is drilling a second 2 mile lateral Woodford Shale well on the block 18

19 Permian Basin Cochran Co. San Andres Project 19

20 Permian Basin Cochran Co. San Andres Project Panhandle leased out 4,050 contiguous net mineral acres to Element Petroleum on the northwest shelf of the Midland Basin in Cochran Co. Texas The lease covers a 34.5 square mile area The operator intends to drill 1.5 mile horizontal San Andres wells at ~5,000 TVD The Company generated $2.1 million in lease bonus Terms to Company Panhandle will receive 25% of all production proportionately reduced, in the form of royalty payments from the leased property Panhandle has the right to buy back the lease in each unit as initial unit wells are proposed up to a maximum working interest of 10% With full participation Panhandle would have a 10% working interest and a 12.1% net revenue interest in all wells drilled on the 34.5 square mile area Current Operations The operator, Element, has commenced evaluating the acreage with 9 San Andres test wells Four vertical pilot hole wells have been drilled and cored and a fifth is drilling Element has also drilled one SWD well and two more are planned Lateral drilling and completion in the pilot wells is planned to begin in the first quarter of

21 Panhandle Oil and Gas Inc. Risk Management OPERATIONAL RISK Mineral ownership is perpetual, no drilling required to hold land assets Operators are generally large independents who are major resource play developers PHX leverages the operators experience, knowledge and resources We chose which wells to participate in with a working interest We do not pay for geoscience (geologic and geophysical), engineering and land costs We pay drilling, completion and operating costs only for wells in which we participate with a working interest BALANCE SHEET Total debt $44.5 million as of 9/30/16 (2.24 x TTM EBITDA) Borrowing base $80 million (December 2016 redetermination) 21

22 Panhandle Oil and Gas Inc. Risk Management CURRENT HEDGE POSITION Period Product Volume Mcf/Bbl Swap Price Collar Average Floor Price Collar Average Ceiling Price 2017 Natural Gas 3,740,000 $2.87 $ Natural Gas 2,135,000 $ Natural Gas 750,000 $3.44 $ Natural Gas 375,000 $ Crude Oil 183,000 $49.18 $ Crude Oil 69,000 $

23 THE MINERAL ACREAGE ADVANTAGE Economic Impact of Working Interest Participation on Mineral Acres Example: STACK/CANA Woodford Shale Well 1.6 Finding Cost, $/Mcfe Rate of Return, % (BTAX) 50 ASSUMPTIONS: W.I. NRI PHX ownership 5% 5% Typical ownership 5% 3.75% Reserves 8,110 Mmcf Mbngl + 79 Mbo $ % Lower 83% Higher 24% 44% Gross well cost - $6,800,000 Wellhead prices 12/12/16 NYMEX Strip, adjusted for basis RESULTS: MINERAL VS LEASEHOLD OWNERSHIP $ % LOWER FINDING COST 83% HIGHER RATE OF RETURN This advantage applies to all plays in which Panhandle drills on owned mineral acres 0 Typical W.I. Owner PHX Typical W.I. Owner PHX 0 23

24 Financial Highlights 2016 Fiscal Year September 30 th Fiscal Year End Oil, NGL and natural gas sales $31,411,353 $54,533,914 Lease bonus $7,735,785 $2,010,395 Total revenue $39,063,183 $70,882,093 Net income (loss) ($10,286,884) $9,321,341 Earnings per share ($0.61) $0.56 TTM EBITDA $19,835,571 $44,538,154 Net cash provided by operating activities $14,589,717 $45,571,014 Capital expenditures - drilling $3,986,235 $30,800,625 Long-term debt $44,500,000 $65,000,000 Mcfe sold 11,496,249 13,729,733 Average Mcfe sales price $2.73 $

25 Financial Highlights 2016 Fiscal Year End CONDENSED BALANCE SHEET SEPTEMBER 30, 2016 Current assets $6,572,253 Net property and equipment 191,405,651 Other 157,322 Total assets $198,135,226 Current liabilities $4,498,452 Long-term debt 44,500,000 Deferred income taxes 30,986,907 Asset retirement obligation, other 2,958,048 Shareholders equity 115,191,819 Total liabilities and equity $198,135,226 25

26 PHX Stock Price History Net of Dividends

27 Mcfe/Share 3P Undeveloped Reserves Per Debt Adjusted Share 40.0 Reserves per Share Debt Adjusted Shares are Based on Fiscal Year-End Debt and Stock Price All Years Share Count-Adjusted for Stock Splits 27

28 Long Term Growth Strategy PANHANDLE S PRIMARY GOAL IS THE CREATION OF SHAREHOLDER VALUE OVER THE LONG TERM Wisely invest in wells drilled on our mineral and leasehold acreage Acquire additional assets that are accretive to share value Maximize royalty and lease bonus values when not participating in drilling on our mineral holdings Place hedges to protect from commodity price downside Maintain a conservative balance sheet to be prepared for volatility in oil and gas pricing and to also take advantage of the Company's quality investment opportunities 28

29 Appendix Slides APPENDIX

30 Arkansas Fayetteville Shale Diverse mineral and/or leasehold ownership across the play PHX wells primarily operated by Southwestern Energy Current production 8.0 Mmcfe per day YE 2016 Reserves Proved 25.5 Bcfe (21% of total) Probable 57.7 Bcfe (17% of total) Possible 66.3 Bcfe (31% of total) 1,792 undeveloped locations identified Southwestern has one rig drilling in the play 30

31 Arkansas Fayetteville Shale 31

32 Quarterly Production MCFE 4,500,000 GAS Equivalent Oil + NGL 4,000,000 3,500,000 3,000,000 2,500,000 2,000,000 1,500,000 1,000, ,

33 Royalty Production and Revenue History $50 $45 $40 $35 $30 Royalty Volume Bcfe Royalty Revenue $Million PHX has over approximately 4,800 identified undeveloped locations and 199,000 mineral acres not currently producing available to feed continued royalty production growth $ $20 $15 $10 $ $

34 Year-End 2016 Reserves and 2016 Fiscal Year Production and Revenue by Product 120 Gas NGL Oil % 26% 8% 28% 19% 9% 50% 43% 60 7% 40 66% 72% 20 50% 0 Year-End 2016 SEC Proved Reserves Fiscal Year 2016 Production Fiscal Year 2016 Revenue 34