MEXCO ENERGY CORP - 10-Q Summary
Business Context and Reporting Period
This is a Quarterly Report (Form 10-Q) for MEXCO Energy Corporation for the period ended September 30, 1996. The company is engaged in the acquisition, development, and production of oil and gas properties, primarily in Texas. The financial statements are unaudited.
Key Financial Metrics
| Metric | 3 Months Ended Sep 30, 1996 | 6 Months Ended Sep 30, 1996 |
|---|---|---|
| Total Revenues | $260,651 | $458,061 |
| Net Income | $129,765 | $199,565 |
| Net Income Per Share | $0.09 | $0.14 |
| Net Cash from Operations | N/A | $421,528 |
| Cash and Equivalents (Sep 30, 1996) | $280,134 | |
| Total Assets | $2,911,708 | |
| Total Liabilities | $166,998 | |
| Working Capital | $314,317 (Current Assets $428,517 - Current Liab $114,200) |
Material Changes vs. Prior Period
- Revenue Growth: Total revenues increased 90% ($157,807) for the quarter and 73% ($253,097) for the six months compared to the prior year periods. This was driven by higher oil and gas prices and increased production volumes.
- Price Increases: Average oil prices rose to $21.32/barrel (Q2 1996) from $15.82 (Q2 1995). Average gas prices rose to $2.17/MCF (Q2 1996) from $1.38 (Q2 1995).
- Profitability: Net income surged to $129,765 for the quarter from $21,053 in the prior year quarter. For the six-month period, net income was $199,565 compared to $66,498.
- Expenses: Depreciation, depletion, and amortization (DD&A) increased 38% due to new property acquisitions and higher production. General and administrative costs remained relatively flat for the quarter but increased 21% for the six-month period.
- Acquisitions: In June and July 1996, the company acquired additional working interests in the Lazy JL Field in Garza County, Texas, totaling approximately 1,520 acres.
Outlook, Risks, and Management Commentary
- Drilling Activity: The company participated in drilling two wells during the six-month period. One well in the Viejos Field was successfully completed after the reporting period.
- Liquidity and Debt: In August 1996, the company secured a $500,000 revolving line of credit collateralized by a deed of trust on its properties. As of September 30, 1996, no borrowings had been made under this facility. The loan is payable in full by April 15, 1997.
- Cash Flow: Net cash provided by operating activities for the six months was $421,528, significantly higher than the $147,953 in the prior year. Capital expenditures were $313,506.
- Risks: Management notes that results for the interim periods are not necessarily indicative of full-year results. The company states it cannot specifically identify the effects of inflation on operations.
Investor Verification Checklist
- Verify the impact of the new $500,000 line of credit on future leverage ratios and interest expense.
- Confirm the production volumes and well performance from the newly acquired Lazy JL Field properties.
- Monitor the status of the drilling project in the Viejos Field completed post-period end.
- Assess the sustainability of current oil and gas prices ($21.32/bbl and $2.17/MCF) which drove the significant revenue increase.
- Review the company's capital expenditure plan to ensure operating cash flow remains sufficient to fund development without immediate recourse to the credit line.