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PHX MINERALS INC. (PHX)·Q3 2024 Earnings Summary

Executive Summary

  • Q3 2024 delivered $9.14M total revenue and diluted EPS of $0.03, with net income of $1.10M; revenue was roughly flat year over year but down sequentially due to lower volumes and pricing, while Adjusted EBITDA fell to $4.91M from $6.43M in Q2 .
  • Royalty volumes were the second-highest in company history despite a bearish gas macro; management reaffirmed the $50M borrowing base and maintained quarterly dividend at $0.04 per share, highlighting balance sheet resilience and cash returns .
  • Guidance for the remainder of 2024 was effectively maintained versus Q2’s outlook (production mix/cost metrics), and management reiterated volume growth on a rolling 12‑month basis driven by well conversions and a strong inventory of wells in progress (278 gross; 0.93 net) .
  • Stock-relevant catalysts: stable borrowing base, continued dividend at $0.04, visible well conversion pipeline (SCOOP/Haynesville), and hedging gains; headwinds remain from gas prices and higher transportation/gathering rates in Louisiana Haynesville .

What Went Well and What Went Wrong

What Went Well

  • Second-highest royalty volumes in company history; management emphasized asset quality and resilient profitability in volatile pricing environments (“risk‑mitigated business is built for resilient and sustainable profitability”) .
  • Balance sheet strength: debt reduced to $27.75M, debt-to-adjusted EBITDA (TTM) at 1.36x; borrowing base reaffirmed at $50M .
  • Hedging program delivered $932K realized gains in Q3 and a net $1.09M contribution to revenue; royalty volumes up year over year on new Haynesville and SCOOP wells .

What Went Wrong

  • Sequential production decline: total volumes down 20% and royalty volumes down 23% versus Q2 due to fewer Haynesville wells turned to sales and normal quarter-to-quarter lumpiness .
  • Pricing headwinds: realized natural gas ~$2/Mcf and oil ~$74.83/bbl, with NGL ~$19.60/bbl; macro commentary remained cautious on near-term demand and weather impacts .
  • Higher transportation/gathering/marketing costs (+60% YoY) driven by activity in Louisiana Haynesville, pressuring per‑Mcfe unit costs .

Financial Results

MetricQ1 2024Q2 2024Q3 2024Notes
Total Revenue ($USD)$7,869,418 $9,541,235 $9,137,029 Includes NG, oil, NGL, lease bonus, derivatives
Natural Gas, Oil & NGL Sales ($USD)$7,090,208 $9,826,006 $7,888,516 Before derivatives
Gains (Losses) on Derivatives ($USD)$627,492 ($418,997) $1,089,242 Cash + non‑cash
Net Income ($USD)($183,615) $1,295,771 $1,100,310 GAAP
Diluted EPS ($USD)($0.01) $0.04 $0.03 GAAP
Adjusted EBITDA ($USD)$4,607,034 $6,426,167 $4,905,335 Non‑GAAP
Segment Revenue ($USD)Q1 2024Q2 2024Q3 2024
Royalty Interest Sales$6,176,274 $8,818,964 $6,982,112
Working Interest Sales$913,934 $1,007,042 $906,404
Natural Gas, Oil & NGL Total$7,090,208 $9,826,006 $7,888,516
KPIsQ1 2024Q2 2024Q3 2024
Mcfe Sold2,116,776 2,967,779 2,378,622
Gas Mcf Sold1,700,108 2,464,846 1,898,442
Oil Barrels Sold37,260 51,828 45,698
NGL Barrels Sold32,184 31,994 34,332
Avg NG Price before hedges ($/Mcf)$2.10 $2.05 $2.00
Avg NG Price after hedges ($/Mcf)$3.08 $2.57 $2.54
% NG Sales Hedged62% 38% 48%
Avg Oil Price before hedges ($/bbl)$76.01 $77.38 $74.83
Avg Oil Price after hedges ($/bbl)$76.19 $75.38 $72.95
% Oil Sales Hedged37% 25% 31%
Transportation/Gathering/Marketing ($/Mcfe)$0.40 $0.52 $0.47
DD&A ($/Mcfe)$1.11 $0.76 $1.00

Guidance Changes

MetricPeriodPrevious GuidanceCurrent GuidanceChange
Mineral & Royalty Production (Mmcfe)FY 20248,700–9,100 Maintained (no change signaled) Maintained
Working Interest Production (Mmcfe)FY 20241,000–1,200 Maintained (no change signaled) Maintained
Total Production (Mmcfe)FY 20249,700–10,300 Maintained (no change signaled) Maintained
% Natural GasFY 202479–82% Maintained (no change signaled) Maintained
TGM Cost per McfeFY 2024$0.40–$0.50 Maintained (no change signaled) Maintained
Production Tax (% of pre‑hedge sales)FY 20245.25–6.25% Maintained (no change signaled) Maintained
LOE (absolute, $000s)FY 2024$1,100–$1,300 Maintained (no change signaled) Maintained
Cash G&A (absolute, $000s)FY 2024$9,500–$9,900 Maintained (no change signaled) Maintained
DividendQuarterly$0.03 (Q2 paid) $0.04 declared for Dec. 5, 2024 Raised and maintained

Earnings Call Themes & Trends

TopicPrevious Mentions (Q1 and Q2)Current Period (Q3)Trend
Natural gas macroEmphasized LNG demand; AI/data center power demand as emerging driver Bearish near-term prices; optimistic medium-term on LNG doubling to ~25 Bcf/d by 2028 and AI power demand adding ~7 Bcf/d by 2030 Constructive medium-term
Volume trajectoryQ2 record royalty volumes from Haynesville; “lumpiness” expected Sequential decline anticipated due to fewer high-interest wells; rolling 12-month royalty volumes +10.3% Upward over 12-month horizon
HedgingConsistent use of swaps/collars; cash gains 48% gas, 31% oil hedged; $932K realized hedge gains in Q3 Ongoing risk management
SCOOP/SpringBoard III activityBuilding pipeline; rigs on acreage and nearby Dramatic increase in drilling; ~40 gross wells in progress; liquids-rich benefits Accelerating
M&A pipelineActive evaluations; disciplined underwriting “Growing pipeline of attractive opportunities”; ~$3.0M minerals acquired in Q3 Steady deal flow
Costs (TGM in LA Haynesville)Elevated TGM noted in Q1 TGM +60% YoY; higher LA rates cited Cost pressure persists

Management Commentary

  • “PHX generated our second-highest quarter for royalty volumes in our history, validating the quality of our asset base even amidst continued volatility in commodity pricing.” – Chad L. Stephens, President & CEO .
  • “We remain positive on natural gas prices… seeing sequential increased rig activities on and around our mineral acreage.” – Chad L. Stephens .
  • “Our risk-mitigated business is built for resilient and sustainable profitability even during challenging pricing environments.” – Chad L. Stephens .
  • “Realized hedge gains for the quarter were $932,000… natural gas hedges using both swaps and costless collars.” – Raphael D’Amico, CFO .
  • “Royalty volumes represented 88% of total production… 80% of volumes were natural gas.” – Danielle Mezo, operations .

Q&A Highlights

  • Commodity mix outlook: Despite increased SCOOP activity (more liquids-rich), overall production mix not expected to change dramatically given robust Haynesville IP rates; liquids-rich gas can lift realized NG prices via BTU content .
  • Quarterly trough question: Management avoids quarterly guidance; maintained FY outlook and suggests rolling 12‑month view given operator timing variability .
  • M&A focus: Balanced between Haynesville (more rational seller pricing) and Anadarko (SCOOP/STACK); capital deployed where returns are highest, ~$3M in Q3 .
  • Operator activity into 2025: Watching Chesapeake/Aethon; some smaller operators planning Haynesville turn‑ins during winter, subject to pricing .

Estimates Context

  • Wall Street consensus (S&P Global) for Q3 2024 EPS/revenue was unavailable due to a CIQ mapping issue for PHX; as a result, estimate comparisons cannot be provided at this time. Values would normally be retrieved from S&P Global consensus.

Key Takeaways for Investors

  • PHX’s royalty engine remains resilient: second-highest royalty volumes amid gas price weakness, with rolling 12‑month royalty volumes up 10.3% signaling underlying growth from SCOOP/Haynesville .
  • Balance sheet and liquidity intact: debt reduced to $27.75M; borrowing base reaffirmed at $50M; debt/TTM Adjusted EBITDA 1.36x supports continued capital returns and selective acquisitions .
  • Hedging offsets macro volatility: $932K realized hedge gains in Q3 and significant collars/swaps across NG and oil reduce cash flow variability .
  • Watch costs in LA Haynesville: elevated transportation/gathering/marketing rates pressured unit costs; mix shift toward SCOOP liquids and pricing uplift (rich gas BTU) can mitigate .
  • Dividend at $0.04 per quarter is sustained; signals confidence in cash flow durability and supports income-focused positioning .
  • Near-term trading lens: seasonal winter pricing and potential Haynesville turn‑ins could lift volumes/prices; catalysts include additional rig activity on PHX acreage and further M&A .
  • Medium-term thesis: LNG capacity ramp and AI/data center demand growth underpin a constructive multi‑year gas outlook; PHX’s minerals footprint is positioned to benefit with limited capex requirements .