PHX Minerals (PHX)2024-11-09 18:02Financial Data and Key Metrics Changes - For Q3 2024, natural gas, oil, and NGL sales revenues decreased by 20% to $7.9 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 $2.05 in Q2 2024, while realized oil prices averaged $74.83, down 3% from Q2 2024, and NGL prices averaged $19.60 a barrel, down 18% from Q2 2024 [21] - Adjusted EBITDA decreased to $4.9 million in Q3 2024 from $6.4 million in Q2 2024, with net income for the quarter at $1.1 million or $0.03 per share compared to $1.3 million or $0.04 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 $3 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]