PHX Minerals (PHX) Q3 2024 earnings summary

Executive summary

• Net income for Q3 2024 was $1.1 million ($0.03 per share), down from $1.3 million in Q2 2024 and $1.9 million in Q3 2023, mainly due to lower commodity sales, lease bonuses, and higher expenses, partially offset by higher derivative gains.

• Achieved the second highest quarterly royalty volumes in company history despite a 20% sequential decline, attributed to fewer new wells online and prior quarter's high-impact wells in Haynesville.

• Transitioned to a royalty-only strategy, growing royalty production volumes by ~278% and 2P royalty reserves by ~151% since early 2020, and completed ~$137 million in mineral acquisitions.

• Maintained a strong financial position by reducing debt by $5 million year-to-date, acquiring $6.5 million in minerals, and reaffirming a $50 million borrowing base.

• Continued focus on disciplined capital allocation, proactive hedging, and returning capital to shareholders through a $0.04 per share quarterly dividend, recently increased by 33%.

Financial highlights

• Q3 2024 sales revenues decreased 20% sequentially to $7.9 million, primarily due to a 20% drop in production volumes; total revenue for Q3 2024 was $9.1 million, flat year-over-year.

• Adjusted EBITDA was $4.9 million, down from $6.4 million in Q2 2024 and $6.3 million in Q3 2023; net income was $1.1 million ($0.03/share).

• Cash and cash equivalents were $2.6 million at September 30, 2024, with $22.3 million available under the credit facility.

• Debt at quarter-end was $27.75 million, with a debt-to-trailing 12-month Adjusted EBITDA ratio of 1.36x.

• Lease bonuses and rental income fell 74% in Q3, reflecting decreased leasing activity.

Outlook and guidance

• Management expects to fund overhead, acquisitions, and dividends from operating cash flow, cash on hand, and credit facility borrowings.

• No significant capital expenditures for new wells are planned, as the company has ceased participating in new working interest wells.

• Optimistic on natural gas price recovery as U.S. LNG export capacity is expected to double by 2028, and power demand from AI/data centers could add 7 BCF/day by 2030.

• 2024 total production outlook: 9,700–10,300 MMcfe, with 79–82% natural gas mix.

• Cash flow expected to pay down debt fully in less than 18 months, assuming no further acquisitions.