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Mexco Energy Corp Reports Operating Results (10-Q)
Posted by: gurufocus (IP Logged)
Date: November 13, 2009 12:11PM
Mexco Energy Corp (MXC) filed Quarterly Report for the period ended 2009-09-30. 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 million; its shares were traded at around $10.11 with a P/E ratio of 36.1 and P/S ratio of 3.8. Mexco Energy Corp had an annual average earning growth of 2.5% over the past 5 years.
Highlight of Business Operations:
For the first six months of fiscal 2010, cash flow from operations was $451,861. Cash of $451,485 was used for additions to oil and gas properties and $125,000 for net reduction in long term debt. Accordingly, net cash increased $5,474.
At September 30, 2009, we had working capital of approximately $372,809 compared to working capital of $221,989 at March 31, 2009, an increase of $150,820. This was mainly as a result of an increase in accounts receivable and a decrease in accounts payable and accrued expenses.
Crude oil and natural gas prices have fluctuated significantly in recent years. During the second quarter of fiscal 2009, oil and gas prices began trending downward, while drilling, completion and operating costs remained high. The effect of declining product prices on our business is significant. Lower product prices reduce our cash flow from operations and diminish the present value of our oil and gas reserves. Lower product prices also offer us less incentive to assume the drilling risks that are inherent in our business. The volatility of the energy markets make it extremely difficult to predict future oil and natural gas price movements with any certainty. For example, the West Texas Intermediate (“WTI”) posted price for crude oil has ranged from a low of $30.28 per bbl in December 2008 to a high of $145.31 per bbl in July 2008. The Henry Hub Spot Market Price (“Henry Hub”) for natural gas has ranged from a low of $1.84 per MMBtu in September 2009 to a high of $13.31 per MMBtu in July 2008. On September 30, 2009 the WTI posted price for crude oil was $70.46 per bbl and the Henry Hub spot price for natural gas was $3.24 per MMBtu. Management is of the opinion that cash flow from operations and funds available from financing will be sufficient to provide adequate liquidity for the next fiscal year.
Oil and gas sales. Revenue from oil and gas sales was $737,944 for the second quarter of fiscal 2010, a 54% decrease from $1,595,209 for the same period of fiscal 2009. This resulted from a decrease in oil and gas prices and oil production offset partially by an increase in gas production. Average gas prices were $3.08 per thousand cubic feet (“mcf”) for the second quarter of fiscal 2010, a decrease from $8.78 per mcf for the same period of fiscal 2009. Average oil prices were $64.40 per barrel (“bbl”) for the second quarter of fiscal 2010, a decrease from $116.07 per bbl for the period of fiscal 2009. Oil and gas production quantities were 4,379 bbls and 147,853 mcf for the second quarter of fiscal 2010 and 4,606 bbls and 120,856 mcf for the second quarter of fiscal 2009, an increase of 22% in gas production and a decrease of 5% in oil production.
Oil and gas sales. Revenue from oil and gas sales was $1,391,754 for the six months ended September 30, 2009, a 57% decrease from $3,267,797 for the same period of fiscal 2009. This resulted from a decrease in oil and gas prices partially offset by an increase in gas production. Average gas prices were $3.06 per mcf for the first six months of fiscal 2010, a decrease from $9.24 per mcf for the first six months of fiscal 2009. Average oil prices were $59.12 per bbl for the first six months of fiscal 2010, a decrease from $117.25 per bbl for the first six months of fiscal 2009. Oil and gas production quantities were 8,710 bbls and 286,271 mcf for the first six months of fiscal 2010 and 8,713 bbls and 243,143 mcf for the first six months of fiscal 2009, an increase of 18% in gas production and no change in oil production.
Interest Rate Risk. At September 30, 2009, we had an outstanding loan balance of $1,275,000 under our $5.0 million revolving credit agreement, which bears interest at an annual rate equal to the BBA LIBOR daily floating rate, plus 2.50 percentage points. If the interest rate on our bank debt increases or decreases by one percentage point our annual pretax income would change by $12,750 based on the outstanding balance at September 30, 2009.
Stocks Discussed: MXC,