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Mexco Energy Corp Reports Operating Results (10-Q)
Posted by: gurufocus (IP Logged)
Date: February 12, 2009 10:24PM
Mexco Energy Corp (MXC) filed Quarterly Report for the period ended 2008-12-31. Mexco Energy Corporation is an independent energy company engaged in the exploration for and the acquisition development and production of oil and gas. Mexco Energy Corp has a market cap of $19.5 million; its shares were traded at around $9.23 with a P/E ratio of 11.5 and P/S ratio of 5.02. Mexco Energy Corp had an annual average earning growth of 2.5% over the past 5 years.
Highlight of Business Operations:
For the first nine months of fiscal 2009, cash flow from operations was $2,366,686 compared to $658,241 for the first nine months of fiscal 2008. This increase was primarily due to an increase in cash provided by oil and gas sales. Cash of $2,709,451 was used for additions to property and equipment and $950,000 for net reductions in long term debt. Accordingly, net cash decreased $46,745.
At December 31, 2008, we had working capital of approximately $497,559 compared to working capital of $627,674 at March 31, 2008, a decrease of $130,115. This was mainly as a result of a decrease in accounts receivable oil and gas sales.
We have a revolving credit agreement with Bank of America, N.A. (“Bank”), which provides for a credit facility of $5,000,000, subject to a borrowing base determination. In September 2008, the borrowing base was redetermined and set at $4,900,000 with no monthly commitment reductions. The borrowing base is evaluated annually, on or about September 1. Amounts borrowed under this agreement are collateralized by the common stock of one of the Company s wholly owned subsidiaries and all of the Company s oil and gas properties. Two letters of credit for $50,000 each, in lieu of a plugging bond covering the properties we operate, are outstanding under the facility, one with the Texas Railroad Commission and one with the State of New Mexico. Interest under this agreement is payable monthly. The balance outstanding under this agreement as of December 31, 2008 was $1,650,000 and $1,575,000 as of February 11, 2009.
Oil and gas sales. Revenue from oil and gas sales decreased from $952,211 for the third quarter of fiscal 2008 to $908,253 for the same period of fiscal 2009. This decrease of 5% or $43,958 resulted from a decrease in oil and gas prices and oil production partially offset by an increase in gas production. Revenues from oil and gas royalty interests accounted for approximately 47% of our total revenues for the third quarter of fiscal 2009 compared to 16% for the third quarter of fiscal 2008. Average gas prices decreased from $6.36 per mcf for the third quarter of fiscal 2008 to $4.54 per mcf for the same period of fiscal 2009. Average oil prices also decreased from $86.05 per bbl for the third quarter of fiscal 2008 to $54.55 for the same period of fiscal 2009. Oil and gas production quantities were 4,515 barrels (“bbls”) and 88,630 thousand cubic feet (“mcf”) for the third quarter of fiscal 2008 and 4,190 bbls and 149,778 mcf for the same period of fiscal 2009, a decrease of 7% in oil production and an increase of 69% in gas production.
Oil and gas sales. Revenue from oil and gas sales increased from $2,642,302 for the nine months ended December 31, 2007 to $4,176,050 for the same period of fiscal 2009. This increase of 58%, or $1,533,748, resulted from increases in oil and gas prices and gas production partially offset by a decrease in oil production. Revenues from oil and gas royalty interests accounted for approximately 36% of our total revenues for the nine months ended December 31, 2008 compared to 18% for the same period of fiscal 2008. Average gas prices increased from $6.35 per mcf for the first nine months ended December 31, 2007 to $7.45 per mcf for the same period of fiscal 2009. Average oil prices also increased from $72.09 per bbl for the first nine months of fiscal 2008 to $96.89 for the same period of fiscal 2009. Oil and gas production quantities were 13,348 bbls and 264,435 mcf for the first nine months ended December 31, 2007 and 12,903 bbls and 392,921 mcf for the same period of fiscal 2009, a decrease of 3% in oil production and an increase of 49% in gas production.
Interest Rate Risk. At December 31, 2008 we had an outstanding loan balance of $1,650,000 under our $5.0 million revolving credit agreement, which bears interest at BBA LIBOR daily floating rate, plus 2.50 percentage points. In addition, beginning March 31, 2009, we will pay quarterly, in arrears, an unused commitment fee in an amount equal to ½ of 1 percent (.5%) times the daily average of the unadvanced amount of the commitment. If the interest rate on our bank debt increases or decreases by one percentage point, our annual pretax income would change by $16,500 based on the outstanding balance at December 31, 2008.
Stocks Discussed: MXC,