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PHX Minerals (PHX) - 2024 Q3 - Earnings Call Transcript
PHXPHX Minerals (PHX)2024-11-09 18:02
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Financial Data and Key Metrics Changes - For Q3 2024, natural gas, oil, and NGL sales revenues decreased by 20% to 7.9millioncomparedtothepriorquarter,primarilyduetoadecreaseinproductionvolumesofabout207.9 million compared to the prior quarter, primarily due to a decrease in production volumes of about 20% [21] - Realized natural gas prices averaged 2 per Mcf, down from 2.05inQ22024,whilerealizedoilpricesaveraged2.05 in Q2 2024, while realized oil prices averaged 74.83, down 3% from Q2 2024, and NGL prices averaged 19.60abarrel,down1819.60 a barrel, down 18% from Q2 2024 [21] - Adjusted EBITDA decreased to 4.9 million in Q3 2024 from 6.4millioninQ22024,withnetincomeforthequarterat6.4 million in Q2 2024, with net income for the quarter at 1.1 million or 0.03persharecomparedto0.03 per share compared to 1.3 million or 0.04pershareinthepriorquarter[24]BusinessLineDataandKeyMetricsChanges−Totalcorporateproductiondecreasedby200.04 per share in the prior quarter [24] Business Line Data and Key Metrics Changes - Total corporate production decreased by 20% from the previous quarter to 2,379 Mcfe, with royalty production decreasing by 23% to 2,098 Mcfe, marking the second highest quarterly royalty production record for the company [15] - Royalty volumes represented 88% of total production during Q3 2024, with 80% of production volumes being natural gas, 11% oil, and 9% NGL [18] - The company converted 46 gross or 0.18 net wells in progress to producing wells during Q3 2024, compared to 55 gross or 0.4 net in the prior quarter [18] Market Data and Key Metrics Changes - The natural gas supply-demand macro remained bearish during the quarter, with a disappointing weather pattern leading to a reduction of about 150 to 200 Bcf of total natural gas demand since the end of September [7] - Year-to-date storage injection is at the low end of the five-year average, reducing the natural gas inventory surplus from a high of almost 700 Bcf in March to approximately 325 Bcf currently [8] - The company anticipates that U.S. LNG export volumes will double to almost 25 Bcf per day by 2028, driven by new LNG export facilities [8] Company Strategy and Development Direction - The company is focused on maintaining a conservative leverage approach and proactive hedging programs to support financial strength [13] - The company has reaffirmed its borrowing base under the existing bank credit facility at 50 million, reflecting the quality of its asset base [14] - The company is committed to a disciplined acquisition program, deploying about 3milliononaccretivemineralacquisitionsduringQ32024whilemaintainingastronginventoryofhigh−qualitydrillinglocations[26]Management′sCommentsonOperatingEnvironmentandFutureOutlook−ManagementexpressedoptimismregardingtheoutlookfornaturalgaspricesduetoexpectedincreasesinLNGexportvolumesandpowerdemanddrivenbyAIanddatacenters[9][10]−Thecompanynotedthatthecurrentnaturalgasforwardstrippricedoesnotreflectthebullishmacrodynamicsexpectedtoliftpricesoverthenext12to24months[10]−Managementhighlightedtheimportanceofmonitoringrigactivitiesandoperatorplans,indicatingapotentialuptickinactivityin2025[46][47]OtherImportantInformation−Thecompanyreduceditsdebtby3 million on accretive mineral acquisitions during Q3 2024 while maintaining a strong inventory of high-quality drilling locations [26] Management's Comments on Operating Environment and Future Outlook - Management expressed optimism regarding the outlook for natural gas prices due to expected increases in LNG export volumes and power demand driven by AI and data centers [9][10] - The company noted that the current natural gas forward strip price does not reflect the bullish macro dynamics expected to lift prices over the next 12 to 24 months [10] - Management highlighted the importance of monitoring rig activities and operator plans, indicating a potential uptick in activity in 2025 [46][47] Other Important Information - The company reduced its debt by 5 million or approximately 15% since year-end 2023, emphasizing its financial strength [29] - The board approved a quarterly dividend of $0.04 per share, reflecting confidence in the company's ability to grow its asset base [30] Q&A Session Summary Question: Insights on the commodity mix development in SCOOP - Management indicated that while there is significant activity in Haynesville, they do not expect a dramatic change in the overall production mix over the next year or two [34] Question: Conviction on Q3 being a trough level for production - Management stated that while they believe there is more upside than downside in the macro dynamics, they avoid providing specific quarterly guidance and focus on rolling 12-month evaluations [37] Question: M&A opportunities and activity in Haynesville - Management confirmed a steady deal flow in both Haynesville and SCOOP/STACK fairway, with an increase in activity on the Texas side of Haynesville [40] Question: Early indications of activity uptick in 2025 - Management noted that while they monitor operator activities, it is difficult to predict future production levels, but they are not concerned about volume trends based on current rig activity [46]