Release Date: November 07, 2024
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
Positive Points
- PHX Minerals Inc (PHX, Financial) reported its second highest royalty volumes in company history, indicating strong operational performance despite challenging market conditions.
- The company has reduced its debt by $5 million year-to-date, reflecting a 15% decrease, which underscores its commitment to financial discipline.
- PHX Minerals Inc (PHX) has maintained a strong inventory of wells in progress, with 278 gross wells, highlighting the quality and potential of its mineral assets.
- The company has reaffirmed its borrowing base at $50 million, demonstrating confidence in its asset base and financial stability.
- PHX Minerals Inc (PHX) continues to focus on returning capital to shareholders, as evidenced by the approval of a $0.04 per share quarterly dividend, reflecting a 33% increase from the previous annual dividend.
Negative Points
- Realized natural gas prices were down, impacting cash flows and overall industry activity, due to a bearish natural gas supply-demand macro environment.
- Total corporate production decreased by 20% from the previous quarter, primarily due to fewer new wells being brought online in the Haynesville.
- Sales revenues decreased by 20% to $7.9 million compared to the prior sequential quarter, driven by lower production volumes.
- The company faces volatility in production volumes due to its lack of control over the timing of well development as a mineral holder.
- Adjusted EBITDA decreased to $4.9 million in Q3 2024 from $6.4 million in Q2 2024, reflecting the impact of lower volumes and prices.
Q & A Highlights
Q: How should we expect the commodity mix for PHX Minerals to develop over the next couple of quarters given the development in the SCOOP area?
A: Ralph D'Amico, CFO, explained that despite increased activity in the SCOOP, the overall production mix is not expected to change dramatically due to robust initial production rates from Haynesville wells. Chad Stephens, CEO, added that some operators pay for NGLs as part of rich gas, which improves pricing but keeps NGL volumes down.
Q: Do you have the conviction to call Q3 a trough level for production?
A: Ralph D'Amico, CFO, noted that while they did not change guidance, predicting quarterly production is challenging due to external factors like gas prices. He emphasized evaluating production on a rolling 12-month basis for a clearer growth picture.
Q: Is the uptick in Haynesville acquisitions an indication of where attractive M&A opportunities are?
A: Chad Stephens, CEO, stated that while there is steady deal flow in Haynesville, PHX is also focusing on opportunities in the SCOOP/STACK fairway in Oklahoma. Ralph D'Amico, CFO, added that capital is deployed where the highest potential return is seen, regardless of location.
Q: Are there any early indications of an uptick in activity in 2025 from operators in the Haynesville?
A: Chad Stephens, CEO, mentioned that while they monitor public records and statements, it's difficult to predict operator actions. However, they are comfortable with current rig activity levels on and around their minerals. Ralph D'Amico, CFO, noted that some smaller operators plan to turn on wells in December, anticipating higher winter pricing.
Q: Can you provide more insight into the natural gas macro environment and its impact on PHX?
A: Chad Stephens, CEO, highlighted bullish macro dynamics for natural gas, driven by LNG export growth and increased power demand. He expressed optimism about PHX's future financial performance, supported by well activity and macro trends.
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
