UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
☑ | Quarterly Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 |
For the period ended June 30, 2018
☐ | Transition Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 |
For the transition period from to
Commission File Number 001-31759
PANHANDLE OIL AND GAS INC.
(Exact name of registrant as specified in its charter)
OKLAHOMA | 73-1055775 |
(State or other jurisdiction of incorporation or organization) | (I.R.S. Employer Identification No.) |
Grand Centre, Suite 300, 5400 N Grand Blvd., Oklahoma City, Oklahoma 73112
(Address of principal executive offices)
Registrant's telephone number including area code (405) 948-1560
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes ☑ No ☐
Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files). Yes ☑ No ☐
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, smaller reporting company, or an emerging growth company. See definitions of "large accelerated filer," "accelerated filer," "smaller reporting company," and "emerging growth company" in Rule 12b-2 of the Exchange Act. (Check one):
Large accelerated filer | ☐ | Accelerated filer | ☑ | Non-accelerated filer | ☐ | Smaller reporting company | ☐ |
Emerging growth company ☐
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ☐ No ☑
Outstanding shares of Class A Common stock (voting) at August 6, 2018: 16,778,509
INDEX
Part I |
| Financial Information | Page | ||
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| Item 1 |
| Condensed Financial Statements | 1 |
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| Condensed Balance Sheets – June 30, 2018, and September 30, 2017 | 1 |
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| Condensed Statements of Operations – Three and nine months ended June 30, 2018 and 2017 | 2 |
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| Statements of Stockholders' Equity – Nine months ended June 30, 2018 and 2017 | 3 |
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| Condensed Statements of Cash Flows – Nine months ended June 30, 2018 and 2017 | 4 |
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| Notes to Condensed Financial Statements | 5 |
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| Item 2 |
| Management's discussion and analysis of financial condition and results of operations | 12 |
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| Item 3 |
| Quantitative and qualitative disclosures about market risk | 18 |
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| Item 4 |
| Controls and procedures | 19 |
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Part II |
| Other Information |
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| Item 2 |
| Unregistered Sales of Equity Securities and Use of Proceeds | 19 |
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| Item 6 |
| Exhibits and reports on Form 8-K | 19 |
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| Signatures | 20 | ||
The following defined terms are used in this report:
"Bbl" barrel.
"Board" board of directors.
"BTU" British Thermal Units.
"Company" Panhandle Oil and Gas Inc.
"completion" the process of treating a drilled well followed by the installation of permanent equipment for the production of crude oil and/or natural gas.
"DD&A" depreciation, depletion and amortization.
"dry hole" exploratory or development well that does not produce crude oil and/or natural gas in economic quantities.
"EBITDA" earnings before interest, taxes, depreciation and amortization (including impairment). This is a Non-GAAP measure.
"ESOP" the Panhandle Oil and Gas Inc. Employee Stock Ownership and 401(k) Plan, a tax qualified, defined contribution plan.
"exploratory well" a well drilled to find a new field or to find a new reservoir in a field previously found to be productive of crude oil or natural gas in another reservoir.
"FASB" the Financial Accounting Standards Board.
"field" an area consisting of a single reservoir or multiple reservoirs all grouped on, or related to, the same individual geological structural feature or stratigraphic condition. The field name refers to the surface area, although it may refer to both the surface and the underground productive formations.
"G&A" general and administrative costs.
"gross acres" the total acres in which an interest is owned.
"held by production" or "HBP" an oil and gas lease continued into effect into its secondary term for so long as a producing oil and/or gas well is located on any portion of the leased premises or lands pooled therewith.
"horizontal drilling" a drilling technique used in certain formations where a well is drilled vertically to a certain depth and then drilled horizontally within a specified interval.
"IDC" intangible drilling costs.
"Independent Consulting Petroleum Engineer(s)" or "Independent Consulting Petroleum Engineering Firm" DeGolyer and MacNaughton of Dallas, Texas.
"LOE" lease operating expense.
"Mcf" thousand cubic feet.
"Mcfe" natural gas stated on an Mcf basis and crude oil and natural gas liquids converted to a thousand cubic feet of natural gas equivalent by using the ratio of one Bbl of crude oil or natural gas liquids to six Mcf of natural gas.
"Mmbtu" million BTU.
"minerals" , "mineral acres" or "mineral interests" fee mineral acreage owned in perpetuity by the Company.
"net acres" the sum of the fractional interests owned in gross acres.
"NGL" natural gas liquids.
"NYMEX" New York Mercantile Exchange.
"Panhandle" Panhandle Oil and Gas Inc.
"play" term applied to identified areas with potential oil and/or natural gas reserves.
"proved reserves" the quantities of crude oil and natural gas, which, by analysis of geoscience and engineering data, can be estimated with reasonable certainty to be economically producible from a given date forward, from known reservoirs and under existing economic conditions, operating methods, and government regulations prior to the time at which contracts providing the right to operate expire, unless evidence indicates renewal is reasonably certain.
"royalty interest" well interests in which the Company does not pay a share of the costs to drill, complete and operate a well, but receives a smaller proportionate share (as compared to a working interest) of production.
"SEC" the United States Securities and Exchange Commission.
"undeveloped acreage" acreage on which wells have not been drilled or completed to a point that would permit the production of commercial quantities of crude oil and/or natural gas.
"working interest" well interests in which the Company pays a share of the costs to drill, complete and operate a well and receives a proportionate share of production.
"WTI" West Texas Intermediate.
Fiscal year references
All references to years in this report, unless otherwise noted, refer to the Company's fiscal year end of September 30. For example, references to 2018 mean the fiscal year ended September 30, 2018.
Fiscal quarter references
All references to quarters in this report, unless otherwise noted, refer to the Company's fiscal quarter based on a fiscal year end of September 30. For example, references to first quarter mean the quarter of October 1 through December 31.
References to oil and natural gas properties
References to oil and natural gas properties inherently include natural gas liquids associated with such properties.
PART 1. FINANCIAL INFORMATION
PANHANDLE OIL AND GAS INC.
CONDENSED BALANCE SHEETS
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| June 30, 2018 |
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| September 30, 2017 |
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Assets |
| (unaudited) |
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Current assets: |
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Cash and cash equivalents |
| $ | 477,013 |
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| $ | 557,791 |
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Oil, NGL and natural gas sales receivables (net of allowance for uncollectable accounts) |
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| 6,489,489 |
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| 7,585,485 |
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Refundable income taxes |
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| 209,970 |
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| 489,945 |
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Assets held for sale |
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| - |
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| 557,750 |
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Derivative contracts, net |
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| - |
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| 544,924 |
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Other |
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| 176,356 |
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| 253,480 |
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Total current assets |
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| 7,352,828 |
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| 9,989,375 |
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Properties and equipment at cost, based on successful efforts accounting: |
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Producing oil and natural gas properties |
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| 418,338,755 |
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| 434,571,516 |
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Non-producing oil and natural gas properties |
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| 8,170,286 |
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| 7,428,927 |
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Other |
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| 1,515,076 |
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| 1,067,894 |
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| 428,024,117 |
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| 443,068,337 |
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Less accumulated depreciation, depletion and amortization |
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| (239,052,685 | ) |
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| (246,483,979 | ) |
Net properties and equipment |
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| 188,971,432 |
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| 196,584,358 |
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Investments |
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| 212,068 |
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| 170,486 |
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Total assets |
| $ | 196,536,328 |
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| $ | 206,744,219 |
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Liabilities and Stockholders' Equity |
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Current liabilities: |
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Accounts payable |
| $ | 1,163,424 |
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| $ | 1,847,230 |
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Derivative contracts, net |
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| 3,014,511 |
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| - |
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Accrued liabilities and other |
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| 1,554,645 |
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| 1,690,789 |
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Total current liabilities |
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| 5,732,580 |
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| 3,538,019 |
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Long-term debt |
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| 40,400,000 |
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| 52,222,000 |
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Deferred income taxes, net |
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| 18,104,007 |
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| 31,051,007 |
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Asset retirement obligations |
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| 2,776,058 |
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| 3,196,889 |
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Derivative contracts, net |
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| 288,969 |
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| 28,765 |
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Stockholders' equity: |
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Class A voting common stock, $.0166 par value; 24,000,000 shares authorized, 16,896,455 issued at June 30, 2018, and 16,863,004 issued at September 30, 2017 |
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| 281,495 |
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| 280,938 |
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Capital in excess of par value |
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| 2,690,834 |
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| 2,726,444 |
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Deferred directors' compensation |
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| 2,882,263 |
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| 3,459,909 |
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Retained earnings |
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| 125,386,738 |
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| 113,330,216 |
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| 131,241,330 |
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| 119,797,507 |
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Less treasury stock, at cost; 117,946 shares at June 30, 2018, and 184,988 shares at September 30, 2017 |
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| (2,006,616 | ) |
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| (3,089,968 | ) |
Total stockholders' equity |
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| 129,234,714 |
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| 116,707,539 |
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Total liabilities and stockholders' equity |
| $ | 196,536,328 |
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| $ | 206,744,219 |
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(See accompanying notes)
(1