Mexco Energy (MXC) - 2021 Q2 - Quarterly Report

PART I. FINANCIAL INFORMATION Financial Statements Mexco Energy Corporation reported a net loss of $341,640 for the six months ended September 30, 2020, with total assets increasing to $10.21 million and liabilities growing to $2.15 million Consolidated Balance Sheets Total assets increased to $10.21 million, liabilities rose to $2.15 million due to debt and a PPP loan, and stockholders' equity decreased to $8.06 million Consolidated Balance Sheet Highlights (Unaudited) | Account | Sep 30, 2020 ($) | Mar 31, 2020 ($) | | :--- | :--- | :--- | | Total Current Assets | $407,943 | $369,266 | | Property and equipment, net | $9,573,669 | $9,472,913 | | Total Assets | $10,209,769 | $10,070,509 | | Total Current Liabilities | $167,200 | $182,481 | | Long-term debt | $1,143,686 | $757,423 | | PPP loan payable | $68,574 | $- | | Total Liabilities | $2,149,664 | $1,706,147 | | Total Stockholders' Equity | $8,060,105 | $8,364,362 | Consolidated Statements of Operations The company reported a net loss of $41,970 for Q2 2020, while the six-month net loss widened to $341,640 due to decreased operating revenues Quarterly and Six-Month Operating Results (Unaudited) | Metric | Q2 2020 ($) | Q2 2019 ($) | Six Months 2020 ($) | Six Months 2019 ($) | | :--- | :--- | :--- | :--- | :--- | | Total Operating Revenues | $636,042 | $625,884 | $1,006,498 | $1,325,475 | | Operating Loss | $(16,806) | $(74,771) | $(298,186) | $(122,621) | | Net Loss | $(41,970) | $(82,787) | $(341,640) | $(136,973) | | Loss Per Share (Basic) | $(0.02) | $(0.04) | $(0.17) | $(0.07) | Consolidated Statements of Changes in Stockholders' Equity Stockholders' equity decreased from $8.36 million to $8.06 million, primarily due to a net loss, partially offset by stock-based compensation and option exercises Changes in Stockholders' Equity (Six Months Ended Sep 30, 2020) | Description | Amount ($) | | :--- | :--- | | Balance at April 1, 2020 | $8,364,362 | | Net loss | $(341,640) | | Issuance of stock through options exercised | $9,435 | | Stock based compensation | $27,948 | | Balance at September 30, 2020 | $8,060,105 | Consolidated Statements of Cash Flows Net cash from operations decreased to $164,237, investing activities used $593,949, and financing provided $458,009, resulting in a net cash increase of $28,297 Cash Flow Summary (Six Months Ended Sep 30) | Cash Flow Activity | 2020 ($) | 2019 ($) | | :--- | :--- | :--- | | Net cash provided by operating activities | $164,237 | $342,938 | | Net cash used in investing activities | $(593,949) | $(915,691) | | Net cash provided by financing activities | $458,009 | $515,000 | | Net increase (decrease) in cash | $28,297 | $(57,753) | | Cash at end of period | $62,678 | $70,499 | Notes to Consolidated Financial Statements Notes detail oil and gas operations, COVID-19 impact on energy prices, and key accounting policies including debt, leases, and derivatives - The company explores, develops, and produces oil and natural gas primarily in West Texas and Southeastern New Mexico, with all interests operated by others[17] - The COVID-19 pandemic has significantly reduced oil and natural gas demand, adversely impacting the company's operations and financial performance[18] - The credit facility with West Texas National Bank was increased to $2.5 million and extended to March 28, 2023, with an outstanding balance of $1.175 million as of September 30, 2020[31][37] - The company incurred a realized loss of $19,200 from crude oil put option contracts that expired in July and August 2020[58][59] Management's Discussion and Analysis of Financial Condition and Results of Operations Management discusses a 52% decrease in cash flow from operations, a widened net loss of $341,640, and plans for drilling 20 horizontal wells Liquidity and Capital Resources Liquidity is funded by operations, borrowings, and asset sales; cash flow from operations decreased by 52% to $164,237 due to lower oil prices - Cash flow from operations for the first six months of fiscal 2021 decreased by 52% to $164,237, primarily due to lower crude oil and natural gas prices[80] - The company plans to participate in drilling 20 horizontal wells at an estimated cost of approximately $1.2 million for fiscal year 2021[82] - The company received a Paycheck Protection Program (PPP) loan of approximately $68,600 in May 2020 to maintain payroll and cover overhead[91] Results of Operations – Three Months Ended September 30, 2020 Net loss for Q2 fiscal 2021 improved to $41,970 due to increased oil and gas sales volumes offsetting lower oil prices, and a 25% decrease in G&A expenses Q2 2021 vs Q2 2020 Oil and Gas Sales | Metric | Q2 2021 | Q2 2020 | % Change | | :--- | :--- | :--- | :--- | | Oil Revenue ($) | $504,957 | $531,086 | (4.9)% | | Oil Volume (barrels) | 13,143 | 10,094 | 30.2% | | Avg. Oil Price ($/barrel) | $38.42 | $52.61 | (27.0)% | | Gas Revenue ($) | $125,007 | $94,664 | 32.1% | | Gas Volume (Mcf) | 88,890 | 72,686 | 22.3% | | Avg. Gas Price ($/Mcf) | $1.41 | $1.30 | 8.5% | - General and administrative expenses decreased by 25% to $192,360, driven by lower salaries, legal fees, and insurance[99] Results of Operations – Six Months Ended September 30, 2020 The six-month net loss widened to $341,640 due to a 25% decrease in oil and gas sales revenue, primarily from a 41% drop in average oil prices Six Months 2021 vs 2020 Oil and Gas Sales | Metric | Six Months 2021 | Six Months 2020 | % Change | | :--- | :--- | :--- | :--- | | Oil Revenue ($) | $787,327 | $1,119,522 | (29.7)% | | Oil Volume (barrels) | 24,677 | 20,703 | 19.2% | | Avg. Oil Price ($/barrel) | $31.91 | $54.08 | (41.0)% | | Gas Revenue ($) | $206,816 | $197,922 | 4.5% | | Gas Volume (Mcf) | 168,406 | 144,533 | 16.5% | | Avg. Gas Price ($/Mcf) | $1.23 | $1.37 | (10.2)% | - Production costs decreased by 13% due to lower production taxes and operator cost-cutting measures amid depressed commodity prices[103] Quantitative and Qualitative Disclosures About Market Risk The company faces significant market risks from commodity price volatility and interest rate changes, with a concentrated credit risk from a single purchaser - Energy price risk is significant; a $10 per barrel change in oil price would alter pretax income by $246,770 for the first six months of fiscal 2021[111][115] - A $1 per Mcf change in average gas price would alter pretax income by $168,406 for the first six months of fiscal 2021[115] - As of September 30, 2020, credit risk is concentrated, with one purchaser accounting for $212,549, or 66%, of total oil and gas receivables[110] Controls and Procedures Disclosure controls and procedures were effective as of September 30, 2020, with no material changes to internal control over financial reporting - Disclosure controls and procedures were effective as of September 30, 2020, as concluded by principal executive and financial officers[116] - No material changes in internal control over financial reporting occurred during the six months ended September 30, 2020[117] PART II. OTHER INFORMATION Legal Proceedings The company is not currently involved in any material legal or governmental proceedings - The company is not currently involved in any material litigation or claims arising from its operations[119] Risk Factors No material changes have occurred to the risk factors previously disclosed in the company's 2020 Annual Report on Form 10-K - No material changes have occurred to the risk factors disclosed in the Form 10-K for the fiscal year 2020[120] Exhibits The report includes required certifications from the Chief Executive Officer and Chief Financial Officer - The exhibits filed with this report include CEO and CFO certifications pursuant to securities laws (31.1, 31.2, 32.1)[121]