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Mexco Energy Corp Reports Operating Results (10-Q)
Posted by: gurufocus (IP Logged)
Date: February 10, 2010 06:15PM
Mexco Energy Corp (MXC) filed Quarterly Report for the period ended 2009-12-31. Mexco Energy Corp has a market cap of $15.7 million; its shares were traded at around $8.29 with a P/E ratio of 82.9 and P/S ratio of 3.2. 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 2010, cash flow from operations was $766,057. Cash of $621,870 was used for additions to oil and gas properties and $410,000 for net reductions in long term debt. Accordingly, net cash decreased $55,730.
At December 31, 2009, we had working capital of approximately $377,348 compared to working capital of $221,989 at March 31, 2009, an increase of $155,359. This was mainly as a result of 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 makes it extremely difficult to predict future oil and natural gas price movements with any certainty. For example in the last twelve months, the West Texas Intermediate (“WTI”) posted price for crude oil has ranged from a low of $33.98 per bbl in February 2009 to a high of $81.03 per bbl in October 2009. 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 $6.10 per MMBtu in January 2009. On December 31, 2009 the WTI posted price for crude oil was $79.39 per bbl and the Henry Hub spot price for natural gas was $5.82 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 $857,035 for the third quarter of fiscal 2010, a 6% decrease from $908,253 for the same period of fiscal 2009. This resulted from a decrease in gas prices and production partially offset by an increase in oil price and production. Average gas prices were $3.92 per thousand cubic feet (“mcf”) for the third quarter of fiscal 2010, a decrease from $4.54 per mcf for the same period of fiscal 2009. Average oil prices were $71.76 per barrel (“bbl”) for the third quarter of fiscal 2010, an increase from $54.55 per bbl for the same period of fiscal 2009. Oil and gas production quantities were 4,519 bbls and 136,073 mcf for the third quarter of fiscal 2010 and 4,190 bbls and 149,778 mcf for the same period of fiscal 2009, an increase of 8% in oil production and a decrease of 9% in gas production.
Oil and gas sales. Revenue from oil and gas sales was $2,248,789 for the nine months ended December 31, 2009, a 46% decrease from $4,176,050 for the same period of fiscal 2009. This resulted from a decrease in oil and gas prices partially offset by an increase in oil and gas production. Average gas prices were $3.34 per mcf for the nine months ended December 31, 2009, a decrease from $7.45 per mcf for the same period of fiscal 2009. Average oil prices were $63.44 per bbl for the first nine months of fiscal 2010, a decrease from $96.89 per bbl for the same period of fiscal 2009. Oil and gas production quantities were 13,229 bbls and 422,343 mcf for the nine months ended December 31, 2009 and 12,903 bbls and 392,921 mcf for the nine months ended December 31, 2008, an increase of 7% in gas production and 3% in oil production.
Interest Rate Risk. At December 31, 2009, we had an outstanding loan balance of $990,000 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 $9,900 based on the outstanding balance at December 31, 2009.
Stocks Discussed: MXC,