FOR IMMEDIATE RELEASE PLEASE CONTACT: Michael C. Coffman Website: Dec. 11, 2012

Transcription

1 FOR IMMEDIATE RELEASE PLEASE CONTACT: Michael C. Coffman Website: Dec. 11, 2012 PANHANDLE OIL AND GAS INC. REPORTS FOURTH QUARTER AND FISCAL 2012 RESULTS Records Net Income Of $7,370,996 ($.88 per share) And A 19% Production Increase For Fiscal Year 2012 OKLAHOMA CITY PANHANDLE OIL AND GAS INC., the Company. (NYSE-PHX) today reported financial and operating results for the fiscal fourth quarter and twelve months ended Sept. 30, HIGHLIGHTS FOR THE YEAR ENDED SEPT. 30, 2012 Recorded 12-month net income of $7,370,996, $.88 per share, compared to a net income of $8,493,912, $1.01 per share, for fiscal Increased fiscal year 2012 production by 19% over fiscal year 2011 to 10.6 billion cubic feet equivalent (Bcfe), the largest in Company history. Increased fiscal year 2012 oil production 47% over fiscal year 2011 volumes. Generated cash from operating activities of $25.4 million for the year, which fully funded drilling capital expenditures of $25.1 million. Leased the Company s mineral rights in certain Western and Northern Oklahoma plays for $6.5 million in up front lease bonus payments and royalty in future production. The Western Oklahoma lease was the most valuable leasing deal in Company history. Acquired approximately $20.1 million of producing properties and mineral acreage during fiscal 2012, principally in the core of the Fayetteville Shale in Arkansas. Fiscal Fourth Quarter 2012 Results The Company recorded net income of $182,621, or $.02 per share, as compared to net income of $2,644,381, or $.31 per share, for the 2011 fourth quarter. Total revenues for the 2012 quarter were $11,041,382 as compared to $12,409,227 for the 2011 quarter. For the 2012 quarter, net income was negatively affected by an average realized sales price reduction to $4.07 per Mcfe as compared to $4.78 per Mcfe for the 2011 period, and by higher depreciation, depletion and amortization costs (DD&A). The DD&A cost increase resulted from higher production volumes in the 2012 quarter, higher finding costs per Mcfe in the oil and liquids-rich plays and negative price revisions in the 2012 year-end reserve report reducing ultimate reserves, thus increasing the DD&A rate on a significant number of wells. Net cash provided by operating activities for the 2012 quarter decreased to $4,383,916 compared to $8,592,240 for the 2011 quarter, principally as a result of the lower net income and increased oil and gas sales receivable in the 2012 quarter. Capital expenditures in the 2012 quarter decreased 9% to $9,240,390, as compared to $10,186,458 in the corresponding 2011 quarter. This decrease is a result of the Company purchasing approximately $4.5 million of mineral acreage during the 2011 fourth quarter and only minimal purchases being made in the 2012 fourth quarter. Capital expenditures for drilling actually increased $3.4 million in the fourth quarter of fiscal 2012, as compared to the 2011 quarter, which reflects a continuing upswing in activity in the liquids-rich and oily plays in Western Oklahoma and continuing development of the core of the Fayetteville Shale in Arkansas. For the fourth fiscal quarter ended Sept. 30, 2012, production increased 12% to 2,720,080 Mcfe as compared to 2,433,114 Mcfe for the 2011 fourth quarter. This increase is reflective of a continually active drilling program during the year and the acquisition of producing properties in the Fayetteville Shale made in early fiscal Fiscal Year 2012 Results The Company recorded a net income of $7,370,996, or $.88 per share, as compared to net income for fiscal 2011 of $8,493,912, or $1.01 per share. Total revenues for 2012 increased to $48,532,317 as compared to $44,976,651 for The increase in revenues for 2012 was the result of the Company receiving lease bonus revenues of $7.2 million in 2012 as compared to $400,000 in For fiscal 2012, the average realized sales price was $3.86 per Mcfe as compared to $4.87 per Mcfe for Although Mcfe production

2 volumes increased 19% to 10,583,440 Mcfe in fiscal 2012, the average Mcfe sales price reduction of $1.01 materially reduced 2012 revenues and ultimately net income. The lease bonuses overcame part of the revenue reduction from decreased product sales prices. Increased costs of $4.6 million, principally DD&A costs, in 2012 further contributed to the decline in net income. Increased DD&A costs resulted from a 19% increase in production volumes in 2012, higher finding costs per Mcfe in the oil and liquids-rich plays and negative price revisions reducing ultimate reserves, thus increasing the DD&A rate, on a significant number of wells in the 2012 yearend reserve report. Net cash provided by operating activities for 2012 was $25,371,196 as compared to $29,283,929 for The $7.3 million of lease bonuses received is shown on the Company s Statement of Cash Flows as a receipt in the Investing Activities section rather than being included in Cash Provided by Operating Activities. Capital expenditures for drilling and equipping wells and the acquisition of producing properties and mineral acreage totaled $45,291,427 in 2012 as compared to $27,545,348 for Capital expenditures for drilling and equipping wells in 2012 increased $2.4 million with the remaining capital expenditure increase being in property acquisitions. In a press release dated Nov. 7, 2012, Panhandle announced that total proved reserves increased 12% to Bcfe for fiscal 2012 as compared to fiscal Proved developed reserves of 73.8 Bcfe at year-end 2012 were the largest in Company history. The continued growth in proved developed reserves was the result of the purchase of Fayetteville Shale assets and Panhandle s continuing commitment to its strategy of taking working interests in wells drilled on the Company s owned mineral acreage. Currently total proved reserves are approximately 91% natural gas, 5% oil and 4% NGL. Over the last 24 months, industry drilling activity has continued to become more focused on oily and liquids-rich plays. The Company has in excess of 40,000 net acres of minerals in Western Oklahoma and the Texas Panhandle, which contain several of the plays. New production and reserves from these plays will continue to expand the Company s oil and NGL reserves and production over the coming year. Panhandle s oil and gas sales revenues are currently 58% from natural gas sales and 42% from oil and NGL sales. Management Comments Michael C. Coffman, President and CEO, said, Fiscal 2012 was another challenging year with natural gas prices being depressed most of the year. However, Panhandle once again proved the worth of its operational strategies and its mineral acreage asset base returning both a strong financial year with solid earnings as well as delivering very positive operational metrics. The Company recorded the largest lease bonus revenue in the Company s history, closed on the second largest acquisition in the Company s history and grew production of oil and total MCFE s to record levels, all in fiscal We further ended the year with an increase in proved reserves of 12% over year-end 2011 proved reserves and with a large number of wells approved, drilling or completing we are in a position to continue our operational momentum into 2013 and beyond. The combination of our very strong financial position, our operational momentum and an expected continuing recovery of natural gas prices points to 2013 results adding substantial value for the Company. Paul F. Blanchard, Panhandle s Senior Vice-President and COO, added, In fiscal 2012 Panhandle accelerated the transition it began in fiscal 2011 toward growth in oil and NGL production and proved reserves. The Company s 2012 oil production reached a record high of 153,000 barrels of oil which was a 47% increase over 2011, and total Company oil and NGL production exceeded 250,000 barrels in The Company s 2012 proven oil reserves increased 27% over 2011 to 1,072,000 barrels, while total proven oil and NGL reserves reached 1,861,000 barrels. The persistent value disparity between relatively low natural gas prices compared to high oil prices has led to a dramatic drop in natural gas well drilling and a material increase in oil well drilling throughout the United States. In recognition of this oil drilling investment opportunity, Panhandle allocated approximately 53% of its approved drilling capital expenditures to oil and liquids-rich projects in The majority of this investment was on the Company s mineral holdings in Western Oklahoma and the Texas Panhandle; however, the Company also participated in oil drilling on its mineral holdings in the Permian Basin of West Texas and New Mexico as well as the developing Southern Oklahoma Woodford Shale oil plays. Through this transition we have maintained our core principle of maximizing long-term shareholder value through optimized development of our extensive and diverse mineral acreage holdings.

3 FINANCIAL HIGLIGHTS Statements of Operations Three Months Ended Sept. 30, Year Ended Sept. 30, Revenues: Oil, NGL and natural gas sales $ 11,069,550 $ 11,639,139 $ 40,818,434 $ 43,469,130 Lease bonuses and rentals 216, ,417 7,152, ,757 Gains (losses) on derivative contracts (376,175) 402,116 73, ,299 Income from partnerships 131, , , ,465 11,041,382 12,409,227 48,532,317 44,976,651 Costs and expenses: Lease operating expenses 2,571,028 1,950,124 9,141,970 8,441,754 Production taxes 377, ,258 1,449,537 1,456,755 Exploration costs 595,519 30, ,718 1,025,542 Depreciation, depletion and amortization 5,380,502 3,929,532 19,061,239 14,712,188 Provision for impairment 39, , ,508 1,728,162 Loss (gain) on asset sales, interest and other (6,353) (4,820) 39,493 (68,325) General and administrative 1,586,737 1,465,506 6,388,856 5,994,663 10,544,761 8,688,846 37,887,321 33,290,739 Income before provision for income taxes 496,621 3,720,381 10,644,996 11,685,912 Provision for income taxes 314,000 1,076,000 3,274,000 3,192,000 Net income $ 182,621 $ 2,644,381 $ 7,370,996 $ 8,493,912 Basic and diluted earnings per common share: Net income $ 0.02 $ 0.31 $ 0.88 $ 1.01 Weighted average shares outstanding: Common shares 8,239,648 8,245,577 8,246,335 8,271,162 Unissued, vested directors' shares 119, , , ,728 8,358,734 8,372,473 8,360,931 8,393,890 Dividends declared per share of common stock and paid in period $ 0.07 $ 0.07 $ 0.28 $ 0.28

4 Balance Sheets Sept. 30, 2012 Sept. 30, 2011 Assets Current Assets: Cash and cash equivalents $ 1,984,099 $ 3,506,999 Oil, NGL and natural gas sales receivables 8,349,865 8,811,404 Refundable income taxes 325, ,246 Refundable production taxes 585, ,672 Deferred income taxes 121,900 - Derivative contracts - 269,329 Other 255,812 95,408 Total current assets 11,622,845 13,261,058 Properties and equipment at cost, based on successful efforts accounting: Producing oil and natural gas properties 275,997, ,554,198 Non-producing oil and natural gas properties 10,150,561 11,100,350 Furniture and fixtures 668, , ,816, ,283,477 Less accumulated depreciation, depletion and amortization 165,199, ,147,514 Net properties and equipment 121,617,055 96,135,963 Investments 1,034, ,504 Refundable production taxes 911,960 1,359,668 Total assets $ 135,186,730 $ 111,424,193 Liabilities and S tockholders' Equity Current Liabilities: Accounts payable $ 6,447,692 $ 4,899,593 Derivative contracts 172,271 - Deferred income taxes - 7,100 Accrued liabilities and other 1,007,779 1,040,269 Total current liabilities 7,627,742 5,946,962 Long-term debt 14,874,985 - Deferred income taxes 26,708,907 24,777,650 Asset retirement obligations 2,122,950 1,843,875 Derivative contracts - 53,389 Stockholders' equity: Class A voting common stock, $.0166 par value; 24,000,000 shares authorized, 8,431,502 issued at Sept. 30, 2012 and , ,524 Capital in excess of par value 2,020,229 1,924,507 Deferred directors' compensation 2,676,160 2,665,583 Retained earnings 84,821,395 79,771,563 89,658,308 84,502,177 Treasury stock, at cost; 181,310 shares at Sept. 30, 2012, and 175,331 shares at Sept. 30, 2011 (5,806,162) (5,699,860) Total stockholders' equity 83,852,146 78,802,317 Total liabilities and stockholders' equity $ 135,186,730 $ 111,424,193

5 Condensed Statements of Cash Flows Year ended S ept. 30, Operating Activities Net income (loss) $ 7,370,996 $ 8,493,912 Adjustments to reconcile net income (loss) to net cash provided by operating activities: Depreciation, depletion and amortization 19,061,239 14,712,188 Impairment 826,508 1,728,162 Provision for deferred income taxes 1,802,257 1,878,000 Exploration costs 979,718 1,025,542 Gain from leasing of fee mineral acreage (7,146,299) (352,642) Net (gain) loss on sales of assets (122,504) 2,112 Income from partnerships (487,070) (420,465) Distributions received from partnerships 601, ,382 Other - - Common stock contributed to ESOP 326, ,843 Common stock (unissued) to Directors' Deferred Compensation Plan 417, ,456 Restricted stock awards 330, ,482 Cash provided (used) by changes in assets and liabilities: Oil, NGL and natural gas sales receivables 461, ,598 Fair value of dervative contracts 388,211 1,404,386 Refundable income taxes 28,531 (354,246) Refundable production taxes 85,926 (124,621) Other current assets (108,098) 317,370 Accounts payable 585,912 72,119 Other non-current assets Income taxes payable - (922,136) Accrued liabilities (32,490) 119,487 Total adjustments 18,000,200 20,790,017 Net cash provided by operating activities 25,371,196 29,283,929 Investing Activities Capital expenditures, including dry hole costs (25,147,306) (22,739,908) Acquistion of working interest properties (17,399,052) (185,125) Acquistion of minerals and overrides (2,745,069) (4,620,315) Proceeds from leasing of fee mineral acreage 7,265, ,807 Investments in partnerships (481,904) (46,213) Proceeds from sales of assets 134, Excess tax benefit on stock-based compensation 83,742 - Net cash used in investing activities (38,288,960) (27,200,816) Financing Activities Borrowings under debt agreement 43,475,443 - Payments of loan principal (28,600,458) - Purchases of treasury stock (1,158,957) (1,851,290) Payments of dividends (2,321,164) (2,322,082) Net cash provided by (used in) financing activities 11,394,864 (4,173,372) Increase (decrease) in cash and cash equivalents (1,522,900) (2,090,259) Cash and cash equivalents at beginning of year 3,506,999 5,597,258 Cash and cash equivalents at end of year $ 1,984,099 $ 3,506,999

6 Condensed Statements of Cash Flows (continued) S upplemental Disclosures of Cash Flow Information Year ended S ept. 30, Interest paid (net of capitalized interest) $ 127,970 $ - Income taxes paid, net of refunds received $ 1,356,706 $ 2,584,172 S upplemental schedule of noncash investing and financing activities: Additions and revisions, net, to asset retirement obligations $ 279,075 $ 113,506 Gross additions to properties and equipment $ 46,201,308 $ 27,310,016 Net (increase) decrease in accounts payable for properties and equipment additions (909,881) 235,332 Capital expenditures, including dry hole costs $ 45,291,427 $ 27,545,348 OPERATING HIGHLIGHTS Fourth Quarter Ended Fourth Quarter Ended Year Ended Year Ended Sept. 30, 2012 Sept. 30, 2011 Sept. 30, 2012 Sept. 30, 2011 M CFE Sold 2,720,080 2,433,114 10,583,440 8,922,503 Average Sales Price per MCFE $4.07 $4.78 $3.86 $4.87 Barrels of Oil Sold 45,552 27, , ,141 Average Sales Price per Barrel $87.24 $87.71 $90.13 $88.00 M CF of Natural Gas Sold 2,251,540 2,268,606 9,072,298 8,297,657 Average Sales Price per MCF $2.68 $4.07 $2.62 $4.13 Barrels of NGL Sold (1) 32,538 98,714 Average Sales Price per Barrel $32.52 $33.23 Quarterly Production Levels Quarter ended Oil Bbls Sold MCF Sold NGL Bbls Sold (1) MCFE Sold 9/30/12 45,552 2,251,540 32,538 2,720,080 6/30/12 38,937 2,273,649 23,680 2,649,351 3/31/12 30,614 2,303,797 27,834 2,654,485 12/31/11 38,040 2,243,312 14,662 2,559,524 9/30/11 27,418 2,268,606 2,433,114 6/30/11 25,382 1,976,868 2,129,160 3/31/11 26,376 1,993,755 2,152,011 12/31/10 24,965 2,058,428 2,208,218 (1) The Company reported NGL reserves for the first time in its 2011 year-end reserve report. Increased drilling activity over the last two years in several Western Oklahoma and Texas Panhandle plays which produce significant NGL has resulted in meaningful NGL reserves and production for the Company. These reserve and production increases necessitated inclusion of NGL in the 2011 year-end reserve calculation and 2012 production volumes. In quarters prior to 2012, all NGL sales revenues were included with natural gas sales revenues.

7 Derivative contracts in place as of Sept. 30, 2012 (prices below reflect the Company s net price from the listed Oklahoma pipelines) Production volume Indexed (1) Contract period covered per month pipeline Fixed price Natural gas basis protection swaps January - December ,000 M mbtu CEGT NYM EX -$.29 January - December ,000 M mbtu CEGT NYM EX -$.30 January - December ,000 M mbtu PEPL NYM EX -$.29 January - December ,000 M mbtu PEPL NYM EX -$.30 Natural gas costless collars March - October ,000 Mmbtu NYMEX Henry Hub $2.50 floor/$3.25 ceiling April - October ,000 Mmbtu NYMEX Henry Hub $2.50 floor/$3.10 ceiling April - October ,000 Mmbtu NYMEX Henry Hub $2.50 floor/$3.20 ceiling April - October ,000 Mmbtu NYMEX Henry Hub $2.50 floor/$3.20 ceiling April - October ,000 Mmbtu NYMEX Henry Hub $2.50 floor/$3.45 ceiling April - October ,000 Mmbtu NYMEX Henry Hub $2.50 floor/$3.30 ceiling August - October ,000 Mmbtu NYMEX Henry Hub $2.50 floor/$3.30 ceiling November January ,000 Mmbtu NYMEX Henry Hub $3.00 floor/$3.70 ceiling November January ,000 Mmbtu NYMEX Henry Hub $3.00 floor/$3.70 ceiling November January ,000 Mmbtu NYMEX Henry Hub $3.00 floor/$3.65 ceiling Oil costless collars January - December ,000 Bbls NYMEX WTI $90 floor/$105 ceiling February - December ,000 Bbls NYMEX WTI $90 floor/$110 ceiling May - December ,000 Bbls NYMEX WTI $90 floor/$114 ceiling (1) CEGT - Centerpoint Energy Gas Transmission's East pipeline in Oklahoma PEPL - Panhandle Eastern Pipeline Company's Texas/Oklahoma mainline Panhandle Oil and Gas Inc. (NYSE-PHX) is engaged in the exploration for and production of natural gas and oil. Additional information on the Company can be found at Forward-Looking Statements and Risk Factors This report includes forward-looking statements within the meaning of Section 27A of the Securities Act of 1933 and Section 21E of the Securities Exchange Act of Forward-looking statements include current expectations or forecasts of future events. They may include estimates of oil and gas reserves, expected oil and gas production and future expenses, projections of future oil and gas prices, planned capital expenditures for drilling, leasehold acquisitions and seismic data, statements concerning anticipated cash flow and liquidity and Panhandle s strategy and other plans and objectives for future operations. Although Panhandle believes the expectations reflected in these and other forward-looking statements are reasonable, we can give no assurance they will prove to be correct. They can be affected by inaccurate assumptions or by known or unknown risks and uncertainties. Factors that could cause actual results to differ materially from expected results are described under Risk Factors in Part 1, Item 1 of Panhandle s 2012 Form 10-K filed with the Securities and Exchange Commission. These Risk Factors include the worldwide economic recession s continuing negative effects on the natural gas business; our hedging activities may reduce the realized prices received for natural gas sales; the volatility of oil and gas prices; Panhandle s ability to compete effectively against strong independent oil and gas companies and majors; the availability of capital on an economic basis to fund reserve replacement costs; Panhandle s ability to replace reserves and sustain production; uncertainties inherent in estimating quantities of oil and gas reserves and projecting future rates of production and the amount and timing of development expenditures; unsuccessful exploration and development drilling; decreases in the values of our oil and gas properties resulting in write-downs; the negative impact lower oil and gas prices could have on our ability to borrow; drilling and operating risks; and we cannot control activities on our properties as the Company is a non-operator. Do not place undue reliance on these forward-looking statements, which speak only as of the date of this release. Panhandle undertakes no obligation to update this information. Panhandle urges you to carefully review and consider the disclosures made in this presentation and Panhandle s filings with the Securities and Exchange Commission that attempt to advise interested parties of the risks and factors that may affect Panhandle s business. *****END***** 7