MEXCO ENERGY CORP - 10-Q Summary (Q2 2025)
Business Context and Reporting Period
This filing is a Quarterly Report (Form 10-Q) for Mexco Energy Corporation for the period ended September 30, 2024 (Fiscal Q2 2025). Mexco is a smaller reporting company engaged in the acquisition, exploration, development, and production of crude oil, natural gas, condensate, and NGLs. Operations are primarily centered in West Texas and Southeastern New Mexico, with interests in 14 states. All properties are non-operated.
Key Financial Metrics
| Metric | Three Months Ended Sept 30, 2024 | Six Months Ended Sept 30, 2024 |
|---|---|---|
| Total Operating Revenues | $1,749,227 | $3,477,062 |
| Net Income | $317,198 | $608,237 |
| Diluted EPS | $0.15 | $0.29 |
| Operating Cash Flow (6mo) | $2,006,405 | |
| Cash and Equivalents (Sept 30, 2024) | $1,578,357 | |
| Total Debt Outstanding | $0 (Credit facility available: $1.5M) | |
| Working Capital | $1,974,033 |
Material Changes vs. Prior Period
- Revenue Growth: Total operating revenues increased 24% quarter-over-quarter (QoQ) to $1.75M and 10% year-over-year (YoY) for the six-month period to $3.48M. This was driven by a 49% increase in oil production volume (20,325 bbls vs. 13,661 bbls QoQ), partially offset by a 7% decrease in average oil prices ($74.86 vs. $80.51).
- Gas Revenue Decline: Natural gas revenue dropped 38% QoQ to $174,235 due to a 50% decrease in average gas prices ($1.30 vs. $2.60), despite a 24% increase in volume. Pipeline constraints in the Permian Basin contributed to lower realized prices.
- Expense Increases: Depreciation, depletion, and amortization (DD&A) rose 53% QoQ to $584,288 due to a higher full cost pool and increased production. General and administrative expenses increased 9% QoQ to $334,525.
- Net Income: Net income increased 18% QoQ to $317,198 but decreased 17% YoY for the six-month period ($608,237 vs. $735,047).
- Capital Allocation: The company repurchased 57,766 shares of treasury stock for $703,216 during the six-month period and paid a special dividend of $209,000.
Outlook, Risks, and Unusual Items
- Capital Expenditures: Management plans to participate in drilling 30 horizontal wells for the fiscal year ending March 31, 2025, at an estimated cost of $2.0M. Recent subsequent events include $260,000 in royalty acquisitions in October 2024 and $450,000 in November 2024.
- Liquidity: The company maintains a $2.5M credit facility with West Texas National Bank, with $1.5M currently available. No principal payments are due until maturity in March 2026. The facility requires a Senior Debt/EBITDA ratio of ≤ 4.0 and prohibits dividends without bank permission (permission was obtained for the recent dividend).
- Market Risks: The company is highly exposed to commodity price volatility. WTI crude ranged from $61.73 to $86.77 in the last 12 months. A $10/bbl change in oil price would impact six-month operating revenues by approximately $392,340.
- Subsequent Events: In October and November 2024, the company acquired royalty interests in multiple wells in New Mexico, Louisiana, Texas, and the Dakotas for a total of approximately $554,000.
Investor Verification Checklist
- Verify the impact of Permian Basin pipeline constraints on future natural gas realizations and potential negative pricing events.
- Confirm the status of the $2.0M planned capital expenditure program for 30 horizontal wells and funding sources (cash flow vs. credit facility).
- Review the credit facility covenants (Senior Debt/EBITDA ≤ 4.0) to ensure continued compliance given the recent increase in DDA expenses.
- Assess the integration and production ramp-up of the $554,000 in royalty acquisitions closed in October and November 2024.
- Monitor the company's cash burn rate relative to its $1.58M cash balance, considering ongoing stock repurchases and dividend policies.