MEXCO ENERGY CORP - 10-Q Summary
Business Context and Reporting Period
Company: Mexco Energy Corporation (MXC)
Filing Type: Form 10-Q (Quarterly Report)
Period Ended: June 30, 2026
Business Overview: Mexco is 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. The company utilizes the full cost method of accounting for oil and gas properties.
Key Financial Metrics
| Metric | Q2 2026 | Q2 2025 |
|---|---|---|
| Total Operating Revenues | $1,983,169 | $1,756,940 |
| Net Income | $501,065 | $241,951 |
| Diluted EPS | $0.24 | $0.12 |
| Operating Cash Flow | $1,451,247 | $1,363,277 |
| Cash and Equivalents (End of Period) | $1,292,873 | $2,546,722 |
| Total Assets | $22,198,045 | $21,692,463 |
| Total Liabilities | $1,874,881 | $1,705,644 |
| Debt Outstanding | $0 | $0 |
| Available Credit Facility | $1,500,000 | $1,500,000 |
Material Changes vs. Prior Period
- Revenue Growth: Total operating revenues increased 13% to $1.98 million, driven by a 29.7% increase in oil sales revenue. This was achieved despite a 14.6% decrease in oil production volumes, as the average realized oil price surged 51.9% to $96.33 per barrel.
- Gas Revenue Decline: Natural gas sales revenue dropped 53.5% to $166,975 due to a 49.1% decrease in average gas prices ($1.07 vs. $2.11 per mcf) and an 8.5% volume decline.
- Profitability: Net income more than doubled to $501,065 (from $241,951), aided by higher oil revenues and a 10% reduction in depreciation, depletion, and amortization (DD&A) expenses.
- Investment Income: Income from investments in LLCs increased 101% to $115,254.
- Cash Position: Cash and cash equivalents decreased by $1.48 million, primarily due to significant capital expenditures ($2.73 million) for property additions and acquisitions, partially offset by strong operating cash flow.
Guidance, Outlook, and Risks
- Capital Expenditures: The company plans to participate in the drilling of 53 horizontal wells in fiscal 2027 at an estimated cost of $1.3 million. Recent activity includes $70,000 spent in July 2026 on three wells in the Delaware Basin.
- Acquisitions: Mexco acquired royalty interests in 144 wells in April 2026 ($1.03 million) and 256 wells in June 2026 ($1.07 million), funded by existing cash resources.
- Dividends: A regular annual dividend of $0.10 per share was declared and paid in June 2026. Future dividends are not assured and require bank approval.
- Market Risks: The company faces significant exposure to commodity price volatility. WTI crude prices ranged from $51.25 to $108.93 in the last 12 months. A $10 decrease in oil prices would reduce quarterly oil sales by approximately $188,000.
- Debt Covenants: The company maintains a $1.5 million credit facility with West Texas National Bank, maturing March 2029. It currently has no outstanding borrowings but must maintain specific EBITDA ratios and obtain bank permission for dividends.
Investor Verification Checklist
- Production Volumes: Verify the sustainability of oil production given the 14.6% volume decline despite revenue growth.
- Capital Allocation: Assess the impact of the $2.73 million in capital expenditures on future liquidity and the ability to fund the planned $1.3 million drilling program.
- Commodity Exposure: Monitor realized oil and gas prices against NYMEX benchmarks, noting the significant spread and volatility in the Permian Basin.
- Acquisition Integration: Confirm the production contribution and cost basis of the 400+ new royalty interests acquired in Q2 2026.
- Dividend Sustainability: Review the company's cash flow coverage of the $0.10 quarterly dividend in the context of increased capital spending.