Transcript View Presentation Slides - Panhandle Oil and Gas Inc.

PHX
LISTED
NYSE®
Forward-Looking Statements and Risk Factors – This presentation 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 or mineral acreage acquisitions, 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 2012 Form 10-K filed with the
Securities and Exchange Commission. These “Risk Factors” include the volatility of oil and gas prices; Panhandle’s
ability to compete effectively against larger independent oil and gas companies; 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; the
amount and timing of development expenditures; unsuccessful exploration and development drilling; declines 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; current economic conditions worldwide; future legislative or regulating changes; shortages of
oilfield equipment, services and qualified personnel; and drilling and operating risks. As Panhandle does not operate
any of the properties in which it has an interest, we have very limited ability to exercise any influence over operations
of these properties, associated costs or the timing of drilling on its properties.
Do not place undue reliance on these forward-looking statements, which speak only as of the date of this release, and
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.
Annual Shareholders Meeting, March 7, 2013
2
Financial Highlights - Fiscal 2012
Year Ended
September 30,
2012
2011
Revenue
Net income
Earnings per share
$48,532,317
$7,370,996
$.88
$44,976,651
$8,493,912
$1.01
Net cash provided by operating
activities (not including lease bonus
received of $7.3 mm)
$25,371,196
$29,283,929
Capital expenditures - Drilling
- Acquisitions
$25,147,306
20,144,121
$22,739,908
4,805,440
Mcfe produced
Average Mcfe sales price
Long-term debt
10,583,440
$3.86
$14,874,985
8,922,503
$4.87
$0
Annual Shareholders Meeting, March 7, 2013
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Financial Highlights - Fiscal 2012
Condensed Balance Sheet
Current assets
Property and equipment
Less accumulated DD&A
Net property and equipment
Other
Total assets
Current liabilities
Long-term debt
Deferred income taxes
Asset retirement obligation
Shareholders equity:
Stock and paid in capital
Retained earnings
Deferred directors’ compensation
Treasury stock
Total liabilities and equity
September 30, 2012
$11,622,845
286,816,134
(165,199,079)
121,617,055
1,946,830
$135,186,730
$7,627,742
14,874,985
26,708,907
2,122,950
2,160,753
84,821,395
2,676,160
(5,806,162)
$135,186,730
Annual Shareholders Meeting, March 7, 2013
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Financial Highlights - First Quarter 2013
Three Months Ended
December 31,
2012
2011
$14,180,435
$13,404,333
$2,148,298
$3,412,110
$.26
$.41
Net cash provided by operating activities
$7,158,243
$7,745,652
Capital expenditures - Drilling
- Acquisitions
$6,864,399
$330,000
$6,344,006
$18,783,949
$14,454,757
$14,522,371
3,008,365
2,559,524
$4.24
$4.59
Revenue
Net income
Earnings per share
Long-term debt
Mcfe sold
Average Mcfe sales price
Annual Shareholders Meeting, March 7, 2013
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PHX Stock Price History
40
35
30
25
20
15
10
5
0
Ten-Year Share Price Growth
Annual Shareholders Meeting, March 7, 2013
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Operating Highlights

Development of western Oklahoma/Texas Panhandle oil and natural
gas liquids rich horizontal Granite Wash, Hogshooter, Cleveland,
Marmaton and Tonkawa

Focused development of our high quality asset base in three of
the nation’s premier resource plays




Arkansas Fayetteville Shale
Anadarko Basin ‘Cana’ Woodford Shale
Southeastern Oklahoma Woodford Shale
Southern Oklahoma Woodford Shale Oil Play

~ 3,700 net mineral acres available for participation
Annual Shareholders Meeting, March 7, 2013
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Quarterly Production (Oil & NGL*)
Barrels
OIL
NGL
60,000
50,000
40,000
30,000
20,000
10,000
2
2
01
.2
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9.
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6.
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3.
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1
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* The Company began accounting for NGL production as a separate product from gas in FY 2012
Annual Shareholders Meeting, March 7, 2013
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Quarterly Production
MCFE
GAS
Equivalent Oil + NGL
4,000,000
3,500,000
3,000,000
2,500,000
2,000,000
1,500,000
1,000,000
500,000
0
Annual Shareholders Meeting, March 7, 2013
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Reserve Statistics – 2012
Exceptional Reserve Growth
• Proved reserves at year-end 2012


Fiscal year-end 2012 proved reserves increased to 124.7 Bcfe
An 11.7% increase over 2011
• Record 3P (proved, probable and possible) reserves at year-end 2012


Fiscal year-end 2012 3P reserves increased to 442.1 Bcfe
A 7.4% increase over 2011
• Year-end 2012 inventory of undeveloped locations

4,180 undeveloped locations
• Proved, probable and possible reserve appraisal performed by DeGolyer
and MacNaughton
Annual Shareholders Meeting, March 7, 2013
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Proved Reserve Growth
Proved Developed Reserves
Proved Undeveloped Reserves
140.0
Proved Reserves (Bcfe)
120.0
50.9
100.0
41.2
80.0
60.0
44.6
9.2
12.8
6.4
40.0
3.6
20.0
5.6
27.7
28.7
2005
2006
35.5
41.3
50.3
62.5
67.1
2010
2011
73.8
0.0
2007
2008
2009
2012
Annual Shareholders Meeting, March 7, 2013
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Probable & Possible Undeveloped Reserve Growth
Probable
Possible
Proved/Possible Reserves, (Bcfe)
400.0
350.0
300.0
250.0
160.9
174.8
200.0
200.1
147.9
150.0
75.0
100.0
50.0
86.1
87.4
87.1
2008
2009
2010
125.1
156.5
0.0
2011
2012
Annual Shareholders Meeting, March 7, 2013
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Year-End 2012 Reserves and First Quarter 2013 Production and Revenue by Product
Gas
100
9%
5%
4%
Oil
NGL
9%
15%
6%
38%
80
31%
7%
60
91%
40
85%
62%
20
0
Year-End
2012 SEC
PDP Reserves
First Quarter 2013
Production
First Quarter 2013
Revenue
Annual Shareholders Meeting, March 7, 2013
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Acquisition Strategy and Activity
Acquisition Strategy
●
Focus on acquiring both HBP leasehold and un-leased and leased mineral acreage
properties in economically depressed dry gas resource plays as well as appropriately
priced oil/liquids rich properties
●
Majority of purchases to date have been in the Fayetteville Shale
●
Potential to expand into other dry gas plays and oil/liquids rich plays
●
The goal is to add extremely low risk and long lived proved, probable and possible
reserves which will generate exceptionally attractive long term returns
●
This is accomplished by acquiring dry gas reserves below industry replacement cost
in the cores of the nation’s lowest cost gas resource plays or acquiring appropriately
priced oil/liquids rich properties
Annual Shareholders Meeting, March 7, 2013
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Leasing Strategy and Activity
Leasing Strategy (Leasing of PHX mineral holdings to active operators)
Lease Company minerals in situations where it is clear that the value generated by the lease
bonus and royalty will exceed the potential value of participation with a working interest in wells
drilled on mineral acreage
●
●
Example: Northern Oklahoma Mississippian Play leased for ~$1.7MM bonus with 3 years primary
term, while retaining 3/16ths royalty (proportionately reduced) in each well drilled
on PHX minerals
 Mississippian reserves are extremely variable and difficult to predict
 PHX minerals were not generally located near viable Mississippian vertical show wells or
economic Mississippian horizontal wells
 Water transportation and disposal expenses make most wells uneconomic for non-operating
owners as they do not share ownership with the operators in the profit center disposal systems
and are captive to very high disposal fees
 Produced water is saturated with salt and therefore difficult and expensive to lift from the
producing wells leading to higher operating expenses and potential for environmental liability
 Leasing eliminates the risk of investing capital in uneconomic projects due to low reserves,
mechanical failures, low product price or high operating expense
●
Will consider leasing in other plays where leasing valuations are compelling
Annual Shareholders Meeting, March 7, 2013
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Southeastern Oklahoma Woodford Shale

Diverse mineral ownership across the play

Interest (WI or RI) in 17% of all producing wells in the play

PHX wells primarily operated by Newfield, Devon, BP and PetroQuest

Current production 5.3 Mmcfe per day

Reserves
 Year-End 2012 Proved – 37.6 Bcfe (30.1% of total)
 Probable – 90.4 Bcfe (57.8% of total)
 Possible – 72.4 Bcfe (45.0% of total)

Mineral ownership generates superior returns
Annual Shareholders Meeting, March 7, 2013
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Southeastern Oklahoma Woodford Shale
Current Development Area

6,518 net PHX acres

163 PHX producing working
interest wells w/6.1% average
NRI

60 PHX producing royalty
interest wells

4.4% average NRI in 897
undeveloped WI locations

359 additional undeveloped
RI locations
Blue outline is
Current
Development Area
Annual Shareholders Meeting, March 7, 2013
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Arkansas Fayetteville Shale

Diverse mineral and leasehold ownership across the play

Interest (WI or RI) in 22% of all producing wells in the play

PHX wells primarily operated by Southwestern Energy

Current production 14.1 Mmcfe per day

Reserves
 Year-End 2012 Proved – 48.2 Bcfe (38.6% of total)
 Probable – 29.8 Bcfe (19.1% of total)
 Possible – 46.0 Bcfe (28.6% of total)

Mineral ownership generates superior returns
Annual Shareholders Meeting, March 7, 2013 18
Arkansas Fayetteville Shale
Current Development Area
Current Development Area

10,473 net PHX acres


459 PHX producing working interest wells
w/3.0% average NRI
4.8% average NRI in 800 undeveloped WI
locations

1,205 additional undeveloped RI locations

543 PHX producing royalty interest wells
Annual Shareholders Meeting, March 7, 2013 19
Anadarko Basin ‘Cana’ Woodford Shale

Diverse mineral ownership across initial play
and expansion areas

Interest (WI or RI) in 12% of all producing wells in the play

PHX wells primarily operated by Devon and Cimarex

Current production 2.1 Mmcfe per day

Reserves
 Year-End 2012 Proved – 9.4 Bcfe (7.5% of total)
 Probable – 34.6 Bcfe (22.1% of total)
 Possible – 34.5 Bcfe (21.4% of total)
●
Mineral ownership generates superior returns
Annual Shareholders Meeting, March 7, 2013
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Anadarko Basin Woodford Shale
Reserve
Assessment Area

3,545 net PHX acres

57 PHX producing working interest
wells w/3.0% average NRI

7 PHX producing royalty interest
wells

3.8% average NRI in 437
undeveloped WI locations

330 additional RI locations
Blue outline is 3P
Reserve Assessment
Area
Red outline is Core
Development Area
Yellow outline is
Potential Play
Extent
Annual Shareholders Meeting, March 7, 2013
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Western Oklahoma and Texas Panhandle Net Acreage


The currently active oil and
liquids plays within the outlined
area include the Granite Wash,
Hogshooter, Cleveland and
Marmaton
~ 17,100 net mineral acres
available for PHX participation

~ 320 net leasehold acres
available for PHX participation

~ 8,400 net mineral acres leased
in the past with PHX retained
royalty

2,743 acres leased from surface
to base of Virgilian (Tonkawa
Equivalent)
Annual Shareholders Meeting, March 7, 2013
22
PHX Drilling Activity in Western Oklahoma and the Texas Panhandle
2012 Wells
2013 Wells
Annual Shareholders Meeting, March 7, 2013
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PHX
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