Mexco Energy (MXC) - 2022 Q3 - Quarterly Report

PART I. FINANCIAL INFORMATION Financial Statements Financial statements reflect significant improvement in financial health, with increased assets and equity, and a turnaround to net income driven by higher oil and gas revenues Consolidated Balance Sheets Balance sheets show total assets increased to $12.07 million and liabilities decreased to $1.04 million, boosting equity to $11.04 million Consolidated Balance Sheet Highlights (Unaudited) | Account | Dec 31, 2021 | Mar 31, 2021 | | :--- | :--- | :--- | | Assets | | | | Cash and cash equivalents | $880,190 | $57,813 | | Total current assets | $1,652,037 | $757,494 | | Property and equipment, net | $10,012,520 | $9,768,943 | | Total assets | $12,073,396 | $10,830,687 | | Liabilities & Equity | | | | Total current liabilities | $208,359 | $138,534 | | Long-term debt | $0 | $1,154,949 | | Total liabilities | $1,035,210 | $2,007,280 | | Total stockholders' equity | $11,038,186 | $8,823,407 | Consolidated Statements of Operations Statements of operations show a significant turnaround to $1.86 million net income for nine months, driven by doubled operating revenues Operating Results (Unaudited) | Metric | Three Months Ended Dec 31, 2021 | Three Months Ended Dec 31, 2020 | Nine Months Ended Dec 31, 2021 | Nine Months Ended Dec 31, 2020 | | :--- | :--- | :--- | :--- | :--- | | Total operating revenues | $1,595,344 | $699,894 | $4,413,023 | $1,706,392 | | Operating income (loss) | $756,379 | $26,073 | $1,880,391 | ($272,113) | | Net income (loss) | $753,302 | $80,497 | $1,857,136 | ($261,143) | | Basic EPS | $0.36 | $0.04 | $0.89 | ($0.13) | | Diluted EPS | $0.35 | $0.04 | $0.87 | ($0.13) | Consolidated Statements of Cash Flows Cash flows show operating activities provided $2.73 million, leading to an $822k increase in cash and equivalents by period end Cash Flow Summary (Unaudited) | Cash Flow Activity | Nine Months Ended Dec 31, 2021 | Nine Months Ended Dec 31, 2020 | | :--- | :--- | :--- | | Net cash provided by operating activities | $2,728,586 | $372,863 | | Net cash used in investing activities | ($1,021,849) | ($818,597) | | Net cash (used in) provided by financing activities | ($884,360) | $452,369 | | Net increase in cash and cash equivalents | $822,377 | $6,635 | | Cash and cash equivalents at end of period | $880,190 | $41,016 | Notes to Consolidated Financial Statements Notes detail oil and gas operations, accounting policies, zero long-term debt, no derivatives, and recent mineral interest acquisitions - The company's oil and gas interests are centered in West Texas and Southeastern New Mexico, with all interests operated by other parties[17] - As of December 31, 2021, the company had no derivative contracts. It previously used crude oil put options which expired in 2020[24] - The company had no balance outstanding on its line of credit as of December 31, 2021, having made net repayments of $1,180,000 during the first nine months of the fiscal year[41] - In January 2022, the company invested an additional $25,000 in a limited liability company focused on mineral interests in Ohio. In February 2022, it agreed to purchase overriding royalty interests in Texas for $567,000[53][54] Management's Discussion and Analysis of Financial Condition and Results of Operations Management discusses significant financial improvement from higher oil/gas prices and production, debt repayment, and future drilling plans Liquidity and Capital Resources Liquidity improved with working capital at $1.44 million and operating cash flow at $2.73 million, supporting debt repayment Cash Flow Changes (Nine Months Ended Dec 31) | Activity | 2021 | 2020 | % Difference | | :--- | :--- | :--- | :--- | | Net cash provided by operating activities | $2,728,586 | $372,863 | 632% | | Net cash used in investing activities | ($1,021,849) | ($818,597) | 25% | | Net cash (used in) provided by financing activities | ($884,360) | $452,369 | (295)% | - Working capital increased by $824,718 to $1,443,678 at December 31, 2021, compared to March 31, 2021[62] Oil and Natural Gas Property Development The company plans to participate in 43 horizontal wells in the Delaware Basin for $1.2 million in fiscal 2022 - The company plans to participate in 43 horizontal wells in the Delaware Basin during fiscal 2022 at an estimated cost of approximately $1,200,000[68] - The company participated in multiple drilling and completion projects in the Delaware Basin, including wells in the Wolfcamp, Bone Spring, and Lower Wolfcamp Shale formations[69][72][75] Results of Operations Operating results show a dramatic improvement with 159% revenue growth to $4.37 million and $1.86 million net income Q3 FY2022 vs Q3 FY2021 Sales Performance | Metric | 2021 | 2020 | % Difference | | :--- | :--- | :--- | :--- | | Oil | | | | | Revenue | $1,073,078 | $520,261 | 106.3% | | Volume (bbls) | 14,142 | 13,004 | 8.8% | | Average Price (per bbl) | $75.88 | $40.01 | 89.7% | | Gas | | | | | Revenue | $500,906 | $171,982 | 191.3% | | Volume (mcf) | 91,534 | 82,688 | 10.7% | | Average Price (per mcf) | $5.47 | $2.08 | 163.0% | Nine Months Ended Dec 31 Sales Performance | Metric | 2021 | 2020 | % Difference | | :--- | :--- | :--- | :--- | | Oil | | | | | Revenue | $3,193,315 | $1,307,588 | 144.2% | | Volume (bbls) | 45,857 | 37,681 | 21.7% | | Average Price (per bbl) | $69.64 | $34.70 | 100.7% | | Gas | | | | | Revenue | $1,177,405 | $378,798 | 210.8% | | Volume (mcf) | 274,204 | 251,094 | 9.2% | | Average Price (per mcf) | $4.29 | $1.51 | 184.1% | - General and administrative expenses for the nine months increased 25% to $794,961 from $634,526, primarily due to higher bonuses, director's fees, and stock option compensation expense[95] Quantitative and Qualitative Disclosures About Market Risk Primary market risks include commodity price volatility, with a $10/bbl oil price change impacting pretax income by $458k - The most significant market risk is energy price volatility. WTI crude prices ranged from $43.60 to $80.63 per barrel in the last twelve months[100][101] - A $10/bbl change in oil price would alter nine-month pretax income by $458,570[102] - A $1/mcf change in gas price would alter nine-month pretax income by $274,204[102] - The company has significant credit risk concentration, with one purchaser representing 71% ($530,696) of total oil and gas receivables as of December 31, 2021[99] Controls and Procedures Disclosure controls and procedures were effective as of December 31, 2021, with no material changes to internal controls - Management concluded that as of December 31, 2021, the company's disclosure controls and procedures were effective[103] - No material changes to internal control over financial reporting occurred during the nine months ended December 31, 2021[104] PART II. OTHER INFORMATION Legal Proceedings The company is not aware of any material legal or governmental proceedings against its operations or financial condition - The company is not aware of any material legal or governmental proceedings against it[106] Risk Factors No material changes to risk factors previously disclosed in the 2021 Annual Report on Form 10-K - No material changes have been made to the risk factors disclosed in the 2021 Annual Report on Form 10-K[107] Exhibits Exhibits include CEO and CFO certifications and Inline XBRL data files as required by regulations - Exhibits filed include CEO and CFO certifications (31.1, 31.2, 32.1) and Inline XBRL documents[108]