Third Quarter 2010 Results
HIGHLIGHTS FOR THE PERIODS ENDED JUNE 30, 2010
- Recorded a quarterly net income of $1,511,300 as compared to a third quarter 2009 net loss of $928,512
- Recorded a nine-month net income of $8,383,244 as compared to a 2009 nine-month net loss of $2,748,397
- Generated cash from operating activities of $20,235,140 for the nine-month period, substantially in excess of $8,189,105 in capital expenditures
- Increased sequential quarterly production by 7% to 2,236,236 Mcfe as compared to 2,090,154 Mcfe for the second quarter ended March 31, 2010
- Paid off outstanding balance at June 30, 2010 under the Company’s $50 million credit facility.
FISCAL THIRD QUARTER 2010 RESULTS
For the quarter ending June 30, 2010, the Company recorded a net income of $1,511,300, $.18 per share, as compared to a net loss of $928,512, $.11 per share, for the 2009 third quarter. Total revenues for the 2010 quarter increased 21% over the 2009 quarter to $10,461,870. Cash provided by operating activities totaled $8,656,728, while capital expenditures totaled $3,079,595. Production for the third quarter 2010 was 2,236,236 Mcfe as compared to 2,647,474 Mcfe for the 2009 quarter (a Company record), but was 7% higher than 2010 second quarter production of 2,090,154 Mcfe. The average per Mcfe sales price increased 26% for the 2010 third quarter to $4.32, as compared to $3.42 for the 2009 quarter. The Company recorded approximately $1,100,000 in the 2010 third quarter and payment was received in July 2010 related to the favorable settlement of a lawsuit related to one well in western Oklahoma.
NINE MONTHS 2010 RESULTS
For the nine months ended June 30, 2010, the Company recorded a net income of $8,383,244, $1.00 per share, as compared to a net loss of $2,748,397, $.33 per share, for the 2009 nine months. Total revenues for the 2010 nine months were $39,640,106, a 38% increase over the 2009 nine months. Cash provided by operating activities totaled $20,235,140, which funded capital expenditures of $8,189,105 and enabled the Company to pay off its line of credit balance. Production for the 2010 nine months totaled 6,604,523 Mcfe as compared to 7,522,897 Mcfe for the 2009 nine months. The average per Mcfe sales price increased 33% for the 2010 nine months to $4.99 as compared to $3.74 for the 2009 nine months. The Company further recognized a pre-tax gain (realized and unrealized) on derivative contracts in the 2010 nine months of $5,410,714, compared to a $212,578 gain for the 2009 period.
MANAGEMENT COMMENTS
We are encouraged that our third quarter 2010 production increased 7% over second quarter production levels in spite of reduced capital expenditures as compared to last year’s levels. Although our capex was 77% lower through nine months of 2010 as compared to 2009 levels, Panhandle’s nine month production is only 12% lower than last year, bearing in mind 2009 was a record production year for the Company. We think this highlights the strength and quality of Panhandle’s asset base in several of the premier resource plays in North America. Once we complete our technical evaluation of each project, we have the advantage of being able to selectively participate with a working interest only in those quality drilling projects on our acreage that will add value for our shareholders. Those projects in which we decide not to invest capital following our review of the project’s technical merit will still generate a return in the form of a royalty interest when production is established.
Panhandle will benefit from the current industry focus on drilling liquids-rich areas and oil properties, because a substantial portion of this drilling is on our perpetually-owned fee mineral acreage located in developing areas such as the Granite Wash and Cana Woodford. Because we already own the mineral rights, we will not be forced to purchase additional leasehold positions at higher market rates in order to participate in these drilling opportunities, and we are not forced to drill to hold acreage as many of the operators in these plays must.
During the quarter, Panhandle participated with a 5.8% Net Revenue Interest (NRI) in two wells in the Southeastern Oklahoma Woodford Shale, which produced at the combined rate of 6,600 Mcf per day during their first month of sales. In the Fayetteville Shale, Panhandle participated with a 6.0% NRI in a well which produced 5,500 Mcf per day during its first month of sales. The Company also participated with a 3.1% NRI in a well in the Anadarko “Cana” Woodford Shale which produced an initial rate of 5,400 Mcfd and we participated with a 1.3% NRI in an Anadarko Basin Horizontal Granite Wash well which yielded initial sales of 11,600 Mcf per day and 600 Bo per day. On July 20, 2010, we had nine working interest wells drilling or completing in our three major shale plays, and there were another 34 working interest wells in which we have approved to participate with a working interest which are not yet drilling.
Our cash flow from operations has allowed us to completely pay off our bank debt, fund capex, and build a cash balance despite low natural gas prices and we expect to continue to fund drilling from available cash flow. Panhandle continues to outperform many larger companies in these difficult market conditions. We have the balance sheet strength, a strong asset base, and financial flexibility to efficiently develop our mineral acreage assets, generate our own projects, or pursue appropriate accretive acquisitions should those opportunities present themselves.
Michael C. Coffman
President, CEO
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Paul F. Blanchard
Sr. Vice President, COO |
View Third quarter 2010 Financial Report