Mexco Energy (MXC) - 2024 Q2 - Quarterly Report

PART I. FINANCIAL INFORMATION Financial Statements Mexco Energy reported a significant decrease in net income and cash from operations, primarily due to lower commodity prices, despite a slight increase in total assets Consolidated Balance Sheet Highlights (Unaudited) | Account | September 30, 2023 ($) | March 31, 2023 ($) | | :--- | :--- | :--- | | Total Current Assets | $3,471,638 | $3,734,039 | | Property and equipment, net | $13,789,241 | $13,298,465 | | Total Assets | $18,219,335 | $17,820,289 | | Total Current Liabilities | $226,458 | $258,263 | | Total Liabilities | $1,073,872 | $987,802 | | Total Stockholders' Equity | $17,145,463 | $16,832,487 | Consolidated Statements of Operations Highlights (Unaudited) | Metric | Three Months Ended Sep 30, 2023 ($) | Three Months Ended Sep 30, 2022 ($) | Six Months Ended Sep 30, 2023 ($) | Six Months Ended Sep 30, 2022 ($) | | :--- | :--- | :--- | :--- | :--- | | Total Operating Revenues | $1,406,610 | $2,324,792 | $3,155,029 | $4,774,765 | | Operating Income | $318,673 | $1,240,182 | $883,174 | $2,570,237 | | Net Income | $269,433 | $1,211,716 | $735,047 | $2,510,388 | | Diluted EPS | $0.12 | $0.55 | $0.34 | $1.13 | Consolidated Statements of Cash Flows Highlights (Unaudited) | Cash Flow Activity | Six Months Ended Sep 30, 2023 ($) | Six Months Ended Sep 30, 2022 ($) | | :--- | :--- | :--- | | Net cash provided by operating activities | $2,430,364 | $3,418,087 | | Net cash used in investing activities | ($1,544,299) | ($4,253,453) | | Net cash (used in) provided by financing activities | ($536,644) | $30,179 | | Net increase (decrease) in cash | $349,421 | ($805,187) | | Cash and cash equivalents at end of period | $2,585,192 | $565,579 | - In June 2023, the Board authorized a $1 million stock repurchase program, with 26,000 shares repurchased for $325,256 during the six months ended September 30, 2023[49][51] - On April 10, 2023, the Board declared a special dividend of $0.10 per share, totaling $213,600, which was paid on May 15, 2023[52] - Subsequent to the quarter end, in October 2023, the company signed a Letter of Intent for a 3-year term assignment of deep rights in Loving and Ward Counties, Texas, expecting to receive approximately $980,000[54] Management's Discussion and Analysis of Financial Condition and Results of Operations Lower oil and gas prices significantly impacted financial performance, leading to sharp revenue and net income declines, while the company continued drilling projects and shareholder returns Liquidity and Capital Resources Working capital decreased, and operating cash flow declined due to lower net income, with financing activities used for dividends and share repurchases Changes in Cash Flows (Six Months Ended September 30) | Activity | 2023 ($) | 2022 ($) | Change ($) | | :--- | :--- | :--- | :--- | | Net cash provided by operating activities | $2,430,364 | $3,418,087 | ($987,723) | | Net cash used in investing activities | ($1,544,299) | ($4,253,453) | ($2,709,154) | | Net cash (used in) provided by financing activities | ($536,644) | $30,179 | $566,823 | - Working capital was $3,245,180 at September 30, 2023, a decrease of $230,596 from March 31, 2023[62] - Cash used in financing activities for the six months ended September 30, 2023, was $536,644, which included $213,600 for a special dividend and $325,256 for stock repurchases[67] Oil and Natural Gas Property Development The company actively participated in new drilling and completion projects in the Delaware Basin, planning new wells and selling non-core assets - The company plans to participate in drilling and completing 40 horizontal wells in the Delaware Basin during fiscal year 2024 at an estimated cost of $1.7 million[69] - In the first six months of fiscal 2024, the company participated in drilling multiple horizontal wells in the Delaware Basin, with expenditures including $787,000 for five wells in the Bone Spring Sand formation and $133,000 for four wells in the Wolfcamp Sand formation[70][73] - The company expended approximately $450,000 to complete 21 horizontal wells in which it had participated during fiscal 2023[76] - During the first quarter of fiscal 2024, the company sold joint venture leasehold acreage and marginal producing wells for approximately $280,000 in cash[81] Results of Operations Operating results significantly declined due to sharp decreases in realized oil and natural gas prices, leading to substantial drops in revenue and net income Oil and Gas Sales Comparison (Three Months Ended Sep 30) | Metric | 2023 ($) | 2022 ($) | % Difference | | :--- | :--- | :--- | :--- | | Oil Revenue | $1,099,806 | $1,397,875 | (21.3%) | | Average Oil Price (per bbl) | $80.51 | $96.27 | (16.4%) | | Gas Revenue | $280,904 | $884,020 | (68.2%) | | Average Gas Price (per mcf) | $2.60 | $7.45 | (65.1%) | - For the quarter ended Sep 30, 2023, net income was $269,433, a significant decrease from $1,211,716 in the prior-year quarter, driven by lower commodity prices and production[85] Oil and Gas Sales Comparison (Six Months Ended Sep 30) | Metric | 2023 ($) | 2022 ($) | % Difference | | :--- | :--- | :--- | :--- | | Oil Revenue | $2,529,484 | $2,957,196 | (14.5%) | | Average Oil Price (per bbl) | $76.21 | $102.88 | (25.9%) | | Gas Revenue | $566,316 | $1,740,812 | (67.5%) | | Average Gas Price (per mcf) | $2.27 | $7.01 | (67.6%) | - For the six months ended Sep 30, 2023, net income was $735,047 compared to $2,510,388 in the prior-year period, due to a 34% decrease in oil and gas sales revenue[92][93] Quantitative and Qualitative Disclosures About Market Risk The company faces significant market risks from volatile crude oil and natural gas prices, directly impacting revenues, and also has concentrated credit risk with a single large purchaser - The company's most significant market risk is the price of crude oil and natural gas, with WTI crude prices ranging from $62.72 to $89.66 per barrel and Henry Hub gas prices from $1.74 to $7.20 per MMBtu in the last twelve months[100][102] - A sensitivity analysis for the first six months of fiscal 2024 indicates that a $10 per barrel change in oil prices would alter operating revenues by $331,890, and a $1 per mcf change in gas prices would alter revenues by $249,665[104] - The company faces credit risk, with its largest single purchaser representing $443,055, or 55% of total oil and gas receivables at September 30, 2023[99] Controls and Procedures Disclosure controls and procedures were effective as of September 30, 2023, with no material changes to internal control over financial reporting during the quarter - The principal executive officer and principal financial officer concluded that as of September 30, 2023, the company's disclosure controls and procedures were effective[106] - No changes in internal control over financial reporting occurred during the six months ended September 30, 2023, that have materially affected, or are reasonably likely to materially affect, internal controls[107] PART II. OTHER INFORMATION Legal Proceedings The company is not aware of any material legal or governmental proceedings currently against it or contemplated - The company is not aware of any legal or governmental proceedings against it, or contemplated to be brought against it, under various environmental protection statutes or other regulations[108] Risk Factors No material changes have occurred to the risk factors previously disclosed in the company's 2023 Annual Report on Form 10-K - There have been no material changes to the information previously disclosed in Item 1A. "Risk Factors" in the company's 2023 Annual Report on Form 10-K[109] Exhibits The report includes required CEO and CFO certifications along with Inline XBRL financial data files - Exhibits filed with this report include CEO and CFO certifications (31.1, 31.2, 32.1) and various Inline XBRL documents for interactive data[111]