PHX Minerals Inc., First Quarter 2023 Results

Quarter Ended March 31, 2023, Results

The Company recorded net income of $9.6 million, or $0.27 per share, for the quarter ended March 31, 2023, as compared to a net loss of ($4.0) million, or ($0.12) per share, for the quarter ended March 31, 2022. The change in net income was principally the result of increased gains associated with our hedge contracts and increased gains on asset sales, partially offset by decreased natural gas, oil and NGL sales and increased income tax provision.

Natural gas, oil and NGL revenue decreased $2.9 million, or 20%, for the quarter ended March 31, 2023, compared to the quarter ended March 31, 2022, due to decreases in natural gas, oil and NGL prices of 21%, 17% and 34%, respectively, and a decrease in NGL volumes of 18%, partially offset by an increase in natural gas and oil volumes of 3% and 5%, respectively.

The production increase in royalty volumes during the quarter ended March 31, 2023, as compared to the quarter ended March 31, 2022, resulted from new wells in the Haynesville Shale and Bakken plays coming online. The decrease in working interest volumes resulted from the divestiture of low-value legacy working interests in the Eagle Ford Shale in Texas and the Arkoma Stack in Oklahoma, and naturally declining production in high-interest wells in the STACK.

The Company had a net gain on derivative contracts of $3.8 million in the quarter ended March 31, 2023, of which $0.6 million is a gain on settled derivatives and $3.2 million is a non-cash gain on derivatives, as compared to a net loss of ($13.0) million in the quarter ended March 31, 2022. Gain on settled derivative contracts for the quarter ended March 31, 2023, excludes $0.4 million of cash paid to settle off-market derivative contracts. The total cash received to settle hedge contracts during the quarter ended March 31, 2023 was $0.3 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 March 31, 2023 pricing relative to the strike price on open derivative contracts.

The Company closed on the previously announced divestitures of non-operated working interest in the Arkoma Stack and Eagle Ford plays, which resulted in a net gain on sale of $4.2 million recognized in the quarter ended March 31, 2023.

The 8% decrease in total cost per Mcfe in the quarter ended March 31, 2023, relative to the quarter ended March 31, 2022, was primarily driven by a decrease in lease operating expense and transportation, gathering and marketing expense.

Operations Update

During the quarter ended March 31, 2023, the Company converted 117 gross (0.46 net) wells to producing status, including 45 gross (0.34 net) wells in the Haynesville, 20 gross (0.03 net) wells in the SCOOP and 4 gross (0.01 net) in the Bakken, compared to 108 gross (0.48 net) wells in the quarter ended March 31, 2022.

At March 31, 2023, the Company had a total of 198 gross (0.65 net) wells in progress across its mineral positions and 86 gross (0.24 net) active permitted wells, compared to 203 gross (0.83 net) wells in progress and 76 gross (0.22 net) active permitted wells at Dec. 31, 2022. As of April 10, 2023, 26 rigs were operating on the Company's acreage with 95 rigs operating within 2.5 miles of its acreage.

Leasing Activity

During the quarter ended March 31, 2023, the Company leased 512 net mineral acres for an average bonus payment of $978 per net mineral acre and an average royalty of 24%.

Acquisition and Divestiture Update

During the quarter ended March 31, 2023, the Company purchased 913 net royalty acres for approximately $10.8 million and sold 757 net mineral acres, which were outside the Company's core focus areas and predominantly undeveloped and unleased, for approximately $0.3 million. The Company also sold 268 gross non-operated working interest wellbores for approximately $10.7 million.