PHX Minerals Inc. Price & Performance (PHX)

The statements made during this call are based upon information known to PHHX as of today, March 13, 2025, and the company does not intend to update these forward looking statements whether as a result of new information, future events or otherwise, unless required by law. With that, I'd like to turn the call over to Chad Stevens, PHX' Chief Executive Officer. Chad? Thanks, Steven, and thanks to all of you on this call for participating in PHX's December 3124, quarter end and annual earnings conference call. We appreciate your interest in the company. Bear with me. [indiscernible] Computer just went down. Thank you. Our results in calendar 2024 were largely in macro fundamentals As we eliminated throughout this past year, the macro headwinds created difficult industry conditions with lower rig counts and reduced industry CapEx budgets. The general uncertainty in the U. S. Election cycle and the Fed's decision to maintain current interest rates added to these headwinds. But PHX delivered commendable financial results this year even considering this unfavorable environment. Despite slower industry activity, our total production volumes were up approximately 5% year over year with royalty volume up 8% for the year. EBITDA was down slightly. Year over year and was supported by our traditional hedging program.

Over the last several quarters, and as we weathered, the low natural gas prices, we opined on an imminent improvement in the natural gas macro story. Our forecast then for improving fundamentals is resonating now with a gas strip well over $4 This will improve our financials and should translate into increased industry activity on our strategically located mineral assets.

I also highlight that our total well conversions to production remained at historical levels in 2024, and our well activity remains high, which will drive future well conversions in 2025 and beyond. All of this speaks to the high quality of our assets and resulted in a 33% increase in our dividend announced in the third quarter of twenty twenty four. As disclosed in our subsequent events section, we sold non producing minerals for $8,000,000 at the January 2025. These minerals were old legacy assets cash flow or reserves associated with them. They were located in areas with little to no industry activity and thus business. We have always maintained a strong conservative balance sheet. Began evaluating strategic alternatives in December and that process is progressed as planned. We are committed to keeping shareholders informed and will provide an update on the outcomes once the process is complete. At this point, I'd like to turn the call over to Danielle to provide a quick operational overview and then to Ralph to discuss the financials.

Thanks, Chad, and good morning to everyone participating on the call. For our year ended 12/31/2024, total corporate production increased 5% to nine thousand hundred and forty one NMCFE from the year ended 12/31/2023, and for the quarter remained flat. At 23798% to 8,760 millimeters CFE at 2,096 MMMCFE. So there can be some volatility both up and down on a quarter to quarter basis and volumes associated with our business model are better evaluated on a rolling twelve month basis. Royalty volumes represented 88% total production during our 12/31/2024 quarter. 80% of our quarter's production volumes were natural gas, which aligns with our long term position that now natural gas is a key transition fuel for a sustainable energy future. Oil represented 11% of production volumes and NGL represented 09/3139, our total proved reserves decreased 11% to 63.7 Bcfe, the PV-ten of $79,600,000 at SEC pricing. Improved royalty reserves decreased 9% to 52.5 Bcfe with a PV-ten of $71,900,000 at SEC pricing. These reserve decreases were primarily attributable to the large year over year drop in gas prices Given where natural gas prices currently are, these reserves could be recouped in the coming year.

In addition to our proved reserves, we have a robust inventory of over 2,400 undrilled probable locations that fuel our population of PHX and permits and drives our year over year royalty volume growth. During fourth quarter twenty twenty four, third party operators active on our mineral acreage converted 71 growth or 0.22 net wells in progress or WIP to producing wells compared to 46 or 0.1 net in the prior sequential quarter. We are pleased with our well conversion rates, particularly given the challenging natural gas macro environment which includes some operators deferring bringing completed wells online until there is an At the same time, our inventory of wells in progress on our minerals, which include [indiscernible] well-being drilled and PHX files, remains strong two twenty five gross or 0.91 net wells compared to two seventy eight gross or 0.93 net at the end of September thirty, twenty twenty four quarter. The continued track record of well conversions and replenishment of the inventory of well in progress or WIPs reflects the high quality portfolio of assets we have assembled to provide steady sustainable future growth.

In addition to our WIPs, we regularly monitor third party operator rig activities in our focus areas and observe 16 rigs present on PHX Minerals acreage as of 02/03/2025. Additionally, we had 62 rigs active within 2.5 miles of PHX ownership.

In summary, we continue to see steady development on both our legacy and recently acquired mineral assets, which should lead to annually increasing royalty volume.

Now I will turn the call back to Ralph to discuss financials.

Thanks Danielle and thanks to everyone for being on the call today.

For the quarter ended 12/31/2024, we natural gas, oil and NGL sales revenues increased 13% to $8,900,000 and decreased 8% to $33,700,000 respectively compared to $7,900,000 in the prior sequential quarter and $36,500,000 for the full year 2023. During our fourth quarter, volumes remained relatively flat as Danielle mentioned, and realized prices increased 13% compared to the prior sequential quarter.

For the full year 2024, volumes increased 5%, realized prices decreased 12% compared to 2023. Recall also that we sold two working interest packages with closing dates in the first quarter of twenty twenty three. So 2024 did not have any production associated with these assets, while 2023 included approximately one full month Realized natural gas prices for the fourth quarter of twenty four averaged PHX per Mcf PHX to $2 even in the third quarter of 'twenty four. Realized oil prices averaged 69.82 down 7% from the third quarter of 'twenty $4 and NGLs averaged $23.01 up 17% compared to the third quarter. For the full year 2024, natural gas prices averaged $2.19 compared to $2.61 in 2023 and oil averaged 74.59 PHX to 76.76 in 2023, while NGLs averaged 2,195 PHX to 22.18 in 2023. Realized hedge gains for the fourth quarter were $511,000 and were $4,300,000 for the full year 2024. Our current hedge position is available in our most recently filed 10 ks. Total transportation expenses decreased 9% on a sequential quarter basis to approximately $1,000,000 primarily due volumes in areas with lower lower transportation costs representing a larger percentage of the overall volumes. For the full year, transportation expenses increased 18% to PHX PHX primarily due to some high interest wells in the Haynesville coming online where leases were cost bearing.

In 2024. Production taxes decreased 33% on a sequential quarter basis to 284,000 primarily due to lower production volumes in areas that had states that had lower production tax rates. For the full year 2024, taxes decreased 15% to 1,700,000.0 compared to 2023, primarily due to lower realized price offset by slightly higher volumes. LOE associated with our legacy non operated working interest wells increased 4% on a sequential quarter basis to 307,000 For the full year, LOE decreased 23% to $1,200,000 And recall that as I mentioned earlier, the comparable period in 2023 also had PHX one full month of LOE expenses with the assets that were divested.

Cash G and A increased to 2,340,000.00 in the fourth quarter compared to the prior sequential quarter, primarily due to normal year end professional service expenses. For the full year, cash G and A decreased 4% to $9,200,000 compared to 2023, primarily due to our internal ongoing internal cost control effort. Adjusted EBITDA for the quarter was up to 5,400,000.0 compared to $4,900,000 in the third quarter. For the full year, adjusted EBITDA was $21,300,000 compared to $22,700,000 in 2023. As Chad mentioned, primarily due to lower realized prices offset by slightly higher volumes. Net income for the quarter was $109,000 or PHX per share PHX to $1,100,000 or $0.03 per share in the prior sequential quarter. Note that the first quarter natural gas prices towards increased towards the end of the quarter. Causing a negative non cash mark to market adjustment of one point Absent this non cash expense, we would have generated higher positive net income. Total debt as of December 3124, was $29,500,000 and our trailing debt to twelve month adjusted EBITDA was 1.38 times. As Chad mentioned, subsequent to the quarter, we reduced our debt to PHX through a combination of operating cash flow and the sale the proceeds from the sale of the non producing unleashed open mineral acres.

Bringing our pro form a leverage to under one times. With that, I'll turn the call over to Chad for some final remarks.

Thanks, Ralph.

As we reflect on 2024, 2024, I'm proud of our resilience. And performance amid a challenging macro environment. Despite industry headwinds, PHX demonstrated growth maintained asset quality and successfully enhanced shareholder returns. Looking ahead to 2025, we remain optimistic about our prospects. With a solid foundation of high quality assets, and improving financial position. And a commitment to exploring strategic opportunities that can unlock value we are well positioned for continued growth and value creation for our shareholders in the year ahead. As always, thank both our employees and Board of Directors for their dedication and hard work. This concludes the prepared remarks portion of the call. Operator, please open up the queue for questions.

Certainly. We'll now be conducting a question and answer session.

Our first question is coming from Derek Whitfield from Texas Capital. Your line is now live.

Good morning, Allen. Thanks for taking my questions.

Hi, Derek. With the understanding that the strategic alternatives review is ongoing, are there any highlights or insights that you can share with us on what you wanted to do process today Derek, I think our policy really is not to comment on an ongoing process in any sort of way. Completely fair. Maybe speak about it from this PHX, if you could. So while this effort is underway, how should we think about your approach to M and A and ground game leasing? [indiscernible] Yes. We continue to operate the business as is. Right, as we always have. So there really is no change to how we approach the business.

Great. And then maybe on 2025, with the understanding that you're not providing production guidance or guidance today, does your line of sight wells support flattish production?

I think you can see what's happened with our conversions and production over the last two years and a significantly lower natural gas price environment. So you can extrapolate from the last two years with what's happened, right, that you could see a trend continuing to 2025. But I'll leave it at that as again, we're not providing guidance while we're going through this process.

Understood and appreciate. Thanks for your time. Thanks, Derek.

We've reached the end of our question and answer session. I'd like to turn the floor back over for any further or closing comments. Thank you, operator. Again, I'd like to thank our employees and shareholders for their continued PHX. I'd also like to note that Ralph and I will continue to expand our investor marketing activities over the coming weeks and months. If you'd be interested in meeting with us please don't hesitate to reach out to myself Ralph or the folks at ThinkIR. We look forward to hosting our next call in May 2025 to discuss our first quarter twenty twenty five results. Thank you.

Thank you. That does conclude today's teleconference and webcast. You may disconnect your line at this time and have a wonderful day. We thank you for your participation today.