UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-K

(Mark One)

For the fiscal year ended SEPTEMBER 30, 2020

OR

Commission File Number 001-31759

ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

FOR THE FISCAL YEAR ENDED SEPTEMBER 30, 2017

Commission File Number:     001-31759

PANHANDLE OIL AND GASPHX MINERALS INC.

(Exact name of registrantRegistrant as specified in its charter)Charter)

Registrant’s telephone number, including area code: (405) 948-1560

Securities registered pursuant to Section 12(b) of the Act:

Securities registered pursuant to Section 12(g) of the Act: None

Indicate by check mark if the registrantRegistrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Exchange Act of 1934.           Act. Yes X ☐No☒

Indicate by check mark if the registrantRegistrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Securities Exchange Act of 1934.           Act.  Yes X ☐No

(Facing Sheet Continued)☒

Indicate by check mark whether the registrantRegistrant: (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrantRegistrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.   X Yes☒No☐

Indicate by check mark whether the registrantRegistrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period)period that the registrantRegistrant was required to submit and post such files.      X   files).  Yes ☒ No

Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K (§229.405 of this chapter) is not contained herein, and will not be contained, to the best of the registrant’s knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K.      X    ☐

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, or a non-accelerated filer.filer, smaller reporting company, or an emerging growth company. See definitionthe definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and large accelerated filer”“emerging growth company” in Rule 12b-2 of the Securities Exchange Act of 1934. (Check one):Act.

Emerging growth company       

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act.    Yes     No

☐

Indicate by check mark whether the registrantRegistrant has filed a report on and attestation to its management’s assessment of the effectiveness of its internal control over financial reporting under Section 404(b) of the Sarbanes-Oxley Act (15 U.S.C. 7262(b)) by the registered public accounting firm that prepared or issued its audit report.  ☒

Indicate by check mark whether the Registrant is a shell company (as defined in Rule 12b-2 of the Securities Exchange Act of 1934)Act).  Yes      X   Noyes☐no☒

The aggregate market value of the voting stock held by non-affiliates of the registrant, computed by using the $19.20$3.69 per share closing price of registrant's Class A Common Stock, as reported by the New York Stock Exchange at March 31, 2017,2020, was $297,276,077. As$56,675,049.

The number of December 1, 2017, 16,678,016 shares of Registrant’s Class A Common Stock were outstanding. Asoutstanding as of December 1, 2017, there were no shares of Class B Common Stock outstanding.

Documents Incorporated By Reference

The information required by Part III of this Report, to the extent not set forth herein, is incorporated by reference from the registrant’s Definitive Proxy Statement relating to the annual meeting of stockholders to be held on March 7, 2018. The definitive proxy statement will be filed with the Securities and Exchange Commission within 120 days after the end of the fiscal year to which this Report relates.3, 2020, was 22,389,194.

DOCUMENTS INCORPORATED BY REFERENCE

Portions of the definitive Proxy Statement of PHX Minerals Inc. (to be filed no later than 120 days after September 30, 2020) relating to the Annual Meeting of Stockholders to be held on March 2, 2021, are incorporated into Part III of this Form 10-K.

T A B L E   O F   C O N T E N T S

DEFINITIONSSpecial Note Regarding Forward Looking Statements

This report includes “forward-looking statements” within the meaning of Section 27A of the Securities Act of 1933 (the “Securities Act”), as amended, and Section 21E of the Securities Exchange Act of 1934, as amended (the “Exchange Act”). These statements involve known and unknown risks, uncertainties and other factors that may cause our actual results, performance or achievements to be materially different from any future results, performance or achievements expressed or implied by the forward-looking statements. In some cases, you can identify forward-looking statements in this Form 10-K by words such as “anticipate,” “project,” “intend,” “estimate,” “expect,” “believe,” “predict,” “budget,” “projection,” “goal,” “plan,” “forecast,” “target” or similar expressions.

All statements, other than statements of historical facts, included in this report that address activities, events or developments that we expect or anticipate will or may occur in the future are forward-looking statements. Forward-looking statements may include, but are not limited to statements relating to: our ability to execute our business strategies; the volatility of realized natural gas and oil prices; the level of production on our properties; estimates of quantities of natural gas, oil and NGL reserves and their values; general economic or industry conditions; legislation or regulatory requirements; conditions of the securities markets; our ability to raise capital; changes in accounting principles, policies or guidelines; financial or political instability; acts of war or terrorism; title defects in the properties in which we invest; and other economic, competitive, governmental, regulatory or technical factors affecting our properties, operations or prices.

We caution you that the forward-looking statements contained in this Form 10-K are subject to risks and uncertainties, many of which are beyond our control, incident to the exploration for and development, production and sale of natural gas and oil. These risks include, but are not limited to, the risks described in Item 1A of this Annual Report on Form 10-K for the year ended September 30, 2020 (the “2020 Annual Report on Form 10-K” or this “Annual Report”), and all quarterly reports on Form 10-Q filed subsequently thereto.

Should one or more of the risks or uncertainties described above or elsewhere in our 2020 Annual Report on Form 10-K occur, or should underlying assumptions prove incorrect, our actual results and plans could differ materially from those expressed in any forward-looking statements. Any forward-looking statement speaks only as of the date of which such statement is made, and the Company undertakes no obligation to correct or update any forward-looking statement, whether as a result of new information, future events or otherwise, except as required by applicable law.

Except as required by applicable law, all forward-looking statements attributable to us are expressly qualified in their entirety by this cautionary statement. This cautionary statement should also be considered in connection with any subsequent written or oral forward-looking statements that we or persons acting on our behalf may issue.

Glossary of Certain Terms

The following is a glossary of certain accounting, natural gas and oil industry and other defined terms are used in this report:Annual Report:

As used herein, the “Company,” “PHX,” “we,” “us” and crude oil and natural gas liquids converted“our” refer to a billion cubic feet of natural gas equivalent by using the ratio of one million Bbl of crude oil or natural gas liquids to six Bcf of natural gas.

Board – board of directors.

BTU – British Thermal Units.

CEO – Chief Executive Officer.

CFO – Chief Financial Officer.

Company –PHX Minerals Inc., formerly known as Panhandle Oil and Gas Inc.

completion –, and its predecessors and subsidiaries unless the process of treating a drilled well followed by the installation of permanent equipment for the production of crude oil and/or natural gas.

conventional – an area believed to be capable of producing crude oil and natural gas occurring in discrete accumulations in structural and stratigraphic traps.

DD&A – depreciation, depletion and amortization.

developed acreage – the number of acres allocated or assignable to productive wells or wells capable of production.

development well – a well drilled within the proved area of a crude oil or natural gas reservoir to the depth of a stratigraphic horizon known to be productive.

dry gas – natural gas that remains in a gaseous state in the reservoir and does not produce large quantities of liquid hydrocarbons when brought to the surface. Also may refer to gas that has been processed or treated to remove a majority of natural gas liquids.

dry hole – exploratory or development well that does not produce crude oil and/or natural gas in economically producible quantities.

ESOP – the Panhandle Oil and Gas Inc. Employee Stock Ownership and 401(k) Plan, a tax qualified, defined contribution plan.

exploratory well – a well drilled to find a new field or to find a new reservoir in a field previously found to be productive of crude oil or natural gas in another reservoir.

FASB – the Financial Accounting Standards Board.

field – an area consisting of a single reservoir or multiple reservoirs all grouped on, or related to, the same individual geological structural feature or stratigraphic condition. The field name refers to the surface area, although it may refer to both the surface and the underground productive formations.

formation – a layer of rock, which has distinct characteristics that differ from nearby rock.

G&A – general and administrative expenses.

gross acres or gross wells – the total acres or wells in which a working interest is owned.

held by production or HBP – refers to an oil and gas lease continued into effect into its secondary term for so long as a producing oil and/or gas well is located on any portion of the leased premises or lands pooled therewith.

horizontal drilling – a drilling technique used in certain formations where a well is drilled vertically to a certain depth and then drilled horizontally within a specified interval.

hydraulic fracturing – a process involving the high pressure injection of water, sand and additives into rock formations to stimulate crude oil and natural gas production.

Independent Consulting Petroleum Engineer(s) or Independent Consulting Petroleum Engineering Firm –DeGolyer and MacNaughton of Dallas, Texas.

LOE – lease operating expense.

Mcf – thousand cubic feet.

Mcfd – thousand cubic feet per day.

Mcfe – natural gas stated on an Mcf basis and crude oil and natural gas liquids converted to a thousand cubic feet of natural gas equivalent by using the ratio of one Bbl of crude oil or natural gas liquids to six Mcf of natural gas.

Mmbtu – million BTU.

Mmcf – million cubic feet.

Mmcfe – natural gas stated on an Mmcf basis and crude oil and natural gas liquids converted to a million cubic feet of natural gas equivalent by using the ratio of one thousand Bbl of crude oil or natural gas liquids to six Mmcf of natural gas.

minerals, mineral acres or mineral interests – fee mineral acreage owned in perpetuity by the Company.

net acres or net wells – the sum of the fractional working interests owned in gross acres or gross wells.

NGL – natural gas liquids.

NYMEX – New York Mercantile Exchange.

OPEC – Organization of Petroleum Exporting Countries.

Panhandle – Panhandle Oil and Gas Inc.

PDP – proved developed producing.

play – term applied to identified areas with potential oil, NGL and/or natural gas reserves.

production or produced – volumes of oil, NGL and natural gas that have been both produced and sold.

proved reserves – the quantities of crude oil and natural gas, which, by analysis of geoscience and engineering data, can be estimated with reasonable certainty to be economically producible from a given date forward, from known reservoirs and under existing economic conditions, operating methods, and government regulations prior to the time at which contracts providing the right to operate expire, unless evidence indicates renewal is reasonably certain.

proved developed reserves – reserves expected to be recovered through existing wells with existing equipment and operating methods.

proved undeveloped reserves or PUD – proved reserves expected to be recovered from new wells on undrilled acreage or from existing wells where a relatively major expenditure is required for recompletion.

PV-10 – estimated pre-tax present value of future net revenues discounted at 10% using SEC rules.

royalty interest – well interests in which the Company does not pay a share of the costs to drill, complete and operate a well, but receives a smaller proportionate share (as compared to a working interest) of production.

SEC – the United States Securities and Exchange Commission.

unconventional – an area believed to be capable of producing crude oil and natural gas occurring in accumulations that are regionally extensive, but may lack readily apparent traps, seals and discrete hydrocarbon water boundaries that typically define conventional reservoirs. These areas tend to have low permeability and may be closely associated with

source rock, as is the case with oil and gas shale, tight oil and gas sands, and coalbed methane, and generally require horizontal drilling, fracture stimulation treatments or other special recovery processes in order to achieve economic production.

undeveloped acreage – acreage on which wells have not been drilled or completed to a point that would permit the production of commercial quantities of crude oil and/or natural gas.

working interest – well interests in which the Company pays a share of the costs to drill, complete and operate a well and receives a proportionate share of production.context requires otherwise.

Fiscal year references

All references to years in this report, unless otherwise noted, refer to the Company’s fiscal year end of September 30. For example, references to 20172020 mean the fiscal year ended September 30, 2017.2020.

References to oilnatural gas and natural gasoil properties

References to oilnatural gas and natural gasoil properties inherently include NGL associated with such properties.

PART I

GENERALOverview

Panhandle Oil and GasPHX Minerals Inc. was founded in Range, Texas County, Oklahoma, in 1926, as Panhandle Cooperative Royalty Company. The Company operated as a cooperative until 1979, when it merged into Panhandle Royalty Company and its shares became publicly traded. On April 2, 2007, the Company’s name was changed to Panhandle Oil and Gas Inc., and on October 8, 2020, the Company’s name was changed to PHX Minerals Inc.

While operatingPHX Minerals Inc. is an Oklahoma City-based company focused on perpetual natural gas and oil mineral ownership in resource plays in the United States. Prior to a strategy change in 2019, the Company participated with a working interest on some of its mineral and leasehold acreage and as a cooperative,result, the Company distributed moststill has legacy interests in leasehold acreage and non-operated interests in natural gas and oil properties.

Strategic Focus on Mineral Ownership

During fiscal 2019, the Company made the strategic decision to focus on perpetual natural gas and oil mineral ownership and growth through the acquisitions of producing minerals in its core areas of focus and the development of its net income to shareholders as cash dividends. Upon conversion to a public company in 1979, although still paying dividends,significant mineral acreage inventory. In accordance with this new strategy, the Company began to retain a substantial part ofceased taking any working interest positions on its cash flow tomineral and leasehold acreage going forward. During fiscal 2020, the Company did not participate with a working interest in the drilling of wellsany new wells. The Company believes that its strategy to focus on mineral ownership is the best path to giving its mineral acreage and to purchase additional mineral acreage. Several acquisitionsstockholders the greatest risk-weighted returns on their investments going forward.

A “mineral fee” is an interest in real property in which the owner owns all of additional mineral and leasehold acreage and small companies were made from 1980the rights to the present time.minerals under the surface forever, as compared to a mineral lease in which the lessee’s rights end at the expiration of the lease term or after there is no longer production on the lease. Generally, the mineral interest owner of a mineral fee interest reserves a non-cost bearing royalty interest upon the lease of such gas, oil, and other minerals to a gas and oil exploration and development company. Such companies will lease such mineral interest from the fee mineral owner for a term with the expectation of producing natural gas and oil, thereby generating free cash flow from bonuses and royalties to the mineral interest owner.

TheAs referenced above, the Company’s leasehold interests are non-operated working interests on the lease of the minerals from the mineral fee owner. These non-operated working interests require the Company is involvedto contribute its proportionate share of the costs incurred by the operator in the acquisition, management and development of non-operated oilsuch minerals. As discussed above and natural gas properties, including wells located onfurther below, the Company no longer expects to participate with such working interests going forward. The Company’s mineral and leasehold acreage. Panhandle’s mineral and leasehold properties are located primarily in Arkansas, New Mexico,Oklahoma, Texas, North Dakota, OklahomaArkansas and Texas.New Mexico. The majority of the Company’s oil, NGL and natural gas, oil and NGL production is from wells located in Arkansas, Oklahoma, Texas, North Dakota and Texas.Arkansas.

In March 2007, the Company increased its authorized Class A Common Stock from 12 million shares to 24 million shares. On October 8, 2014, the Company split its Class A Common Stock onAlthough a 2-for-1 basis.

The Company’s office is located at Grand Centre, Suite 300, 5400 N. Grand Blvd., Oklahoma City, OK 73112; telephone – (405) 948-1560; facsimile – (405) 948-2038. The Company’s website is www.panhandleoilandgas.com.

The Company files periodic reports with the SEC on Forms 10-Q and 10-K. These forms,significant amount of the Company’s annual report to shareholders and current press releases are available free of charge on our website as soon as reasonably practicable after they are filed with the SEC or made available to the public. Also, the Company posts copies of its various corporate governance documents on the website. From time to time, the Company posts other important disclosures to investors in the “Press Release” or “Upcoming Events” section of the website, as allowed by SEC rules.

Materials filed with the SEC may be read and copied at the SEC’s Public Reference Room at 100 F Street, N.E., Washington, D.C. 20549. Information on the operation of the Public Reference Room may be obtained by calling the SEC at 1-800-SEC-0330. The SEC also maintains an Internet website at www.sec.gov that contains reports, proxy and information statements, and other information regarding the Company that has been filed electronically with the SEC, including this Form 10-K.

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BUSINESS STRATEGY

Most of Panhandle’s revenues areis currently derived from the production and sale of oil, NGL and natural gas, (see Item 8 - “Financial Statements and Supplementary Data”). The Company’s oil and NGL on its working interests, a growing portion of its revenues is derived from royalties granted from the production and sale of natural gas, properties, including itsoil and NGL. These royalties are tied to ownership of mineral acreage, leasehold acreageand this ownership is perpetual, unless sold by the Company. Royalties are due and payable to the Company whenever natural gas, oil or NGL is produced and sold from wells located on the Company’s mineral acreage.

As of September 30, 2020, the Company owned approximately 252,443 perpetual mineral acres, as detailed in the table below:

Approximately 71% of the Company’s net mineral position is currently unleased, providing the opportunity to generate additional cash flow from bonus payments and royalties without spending additional capital. The Company also owns leases on 17,091 net acres primarily in Oklahoma and working andinterests, royalty interests or both, in 6,510 producing natural gas and oil wells are located primarilyand 125 wells in Arkansas, New Mexico, North Dakota, Oklahoma and Texas (see Item 2 – “Properties”). the process of being drilled or completed.

Exploration and development of the Company’s oilnatural gas and natural gasoil properties are conducted in association with oil andby natural gas and oil exploration and production companies, primarily larger independent operating companies. The Company does not operate any of its oil and natural gas properties, butand oil properties. While the Company previously has been an active working interest participant for many years in wells drilled on its mineral and leasehold acreage, the Company’s current focus is on growth through mineral acresacquisitions and leasehold. through development of its significant mineral acreage inventory in its core areas of focus.

We intend to maximize value to our stockholders through the acquisition of mineral acreage in the core areas of resource plays with substantial undeveloped opportunities; divestiture of non-core minerals with limited optionality when the amount negotiated exceeds our projected total value; and aggressive leasing of our mineral holdings.

Our Business Strategy

Our principal business objective is to maximize value to our stockholders. At the end of 2019, we made the strategic decision to cease taking any working interest positions on our mineral and leasehold acreage going forward. Our focus is on growth through mineral acquisitions and through development of our significant mineral acreage inventory in our core areas. We believe this is the best path to giving our stockholders the greatest risk-weighted returns on their investment. We intend to accomplish this objective by executing the following corporate strategies:

Our Business Strengths

We believe the following attributes position the Company to achieve our objectives:

Principal Products and Markets

The majority of the Company’s drilling participations areCompany derives revenue through its bonus and royalty payments and from working interests on properties located in unconventional plays in Arkansas, Oklahomaits mineral and Texas.

PRINCIPAL PRODUCTS AND MARKETS

leasehold acreage. The Company’s principal products from the production associated with its royalty and non-operated interests, in order of revenue generated, are crude oil, natural gas crude oil and NGL. These products are generally sold by well operators to various purchasers, including pipeline and marketing companies, which service the areas where the Company’s producing wells are located. Since the Company does not operate any of the wells in which it owns an interest, it relies on the operating expertise of numerous companies that operate wells in which the Company owns interests. This includes expertise in the drilling and completion of new wells, producing well operations and, in most cases, the marketing or purchasing of production from the wells. Oil,Natural gas, oil and NGL and natural gas sales are principally handled by the well operator. Payment for oil, NGL and natural gas, oil and NGL sold is received by the Company from the well operator or the contracted purchaser.

Prices of oil, NGL and natural gas, oil and NGL are dependent on numerous factors beyond the Company’s control, of the Company, including supply and demand, competition, weather, international events and geo-political circumstances, actions taken by OPEC and economic, political and regulatory developments. Since demand for natural gas is subject to weather conditions, prices received for the Company’s natural gas production aremay be subject to seasonal variations.

The Company enters into price risk management financial instruments (derivatives) to reduce the Company’s exposure to short-term fluctuations in the price of natural gas and oil and natural gas.protect its return on investments. The derivative contracts apply only to a portion of the Company’s oil and natural gas and oil production, and provide only partial price protection against declines in oil and natural gas prices. These derivative contracts expose the Company to risk of financial lossand oil prices and may limit the benefit of future increases in oilnatural gas and natural gasoil prices. Please read Item 7A – “Quantitative and Qualitative Disclosures about Market Risk” and Note 112 to the financial statements included in Item 8 – “Financial Statements and Supplementary Data” for additional information regarding the derivative contracts.contracts entered into by the Company.

COMPETITIVE BUSINESS CONDITIONSCompetitive Business Conditions

The oil and natural gas industry is highly competitive, particularly in the search for new oil, NGLfee mineral interests and natural gas, oil and NGL reserves. Many factors affect Panhandle’s competitive position and the market for its products, which are beyond its control.control affect the Company’s competitive position. Some of these factors include: the quantity

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and price of foreign oil imports; domestic supply and deliverability of natural gas, oil NGL and natural gas;NGL; changes in prices received for oil, NGL and natural gas, oil and NGL production; business and consumer demand for refined natural gas, oil products NGL and natural gas;NGL; and the effects of federal, state and local regulation of the exploration for, production of and sales of oil, NGL and natural gas, oil and NGL (see Item 1A – “Risk Factors”). Changes in any of these factors canMany companies have a dramatic influence on the price Panhandle receivessubstantially greater resources than we have, and such companies may have more resources to evaluate, bid for its oil, NGL and natural gas production.purchase more mineral fee, royalty and similar interests than our financial or human resources permit.

The Company does not operate any of the wells in which it has an interest; rather, it relies on companies with greater resources, staff, equipment, research and experience for operation of wells in both the drilling and production phases. The Company’s business strategy is to use its strongstable and flexible financial base and its mineral and leasehold acreage ownership,position, coupled with its own geologic and economic evaluations, either to elect to participate in drilling operations with these companies oracquire new mineral acreage and to lease or farmout its mineral orand leasehold acreage while retaining a royalty interest. Thisownership. We believe this strategy allows the Company to compete effectively in expensive and complex drilling operations it could not undertake on its own with limited capital and staffing.

SOURCES AND AVAILABILITY OF RAW MATERIALS

The existence of economically recoverable oil, NGL and natural gas reserves in commercial quantities is cruciala competitive mineral market; however, our ability to the ultimate realization of value from the Company’s mineral and leasehold acreage. These mineral and leasehold properties are essentially the raw materials to our business. The production and sale of oil, NGL and natural gas from the Company’s properties are essential to provide the cash flow necessary to sustain the ongoing viability of the Company. When it is evaluated to be beneficial to share value, the Company purchases oil and natural gas mineral and leasehold acreage to assure the continued availability of acreage with which to participate in exploration and development drilling operations and, subsequently, to produce and sell oil, NGL and natural gas. This participation in exploration, development and production activities and purchase of additional acreage is necessary to continue to supply the Company with the raw materials with which to generate additional cash flow. Mineral and leasehold acreage purchases are made from many owners. The Company does not rely on any particular companies or persons for the purchases ofacquire additional mineral fee, royalty and

similar interests in the future will depend upon our ability to evaluate and leasehold acreage.select suitable properties and to consummate transactions in a highly competitive environment.

MAJOR CUSTOMERSMajor Customers

The Company’s oil, NGL and natural gas, oil and NGL production is sold, in most cases, through itsour lessees or well operators to manynumerous different purchasers. During 2017, sales through two separate well operators accounted for approximately 18% and 13%

Regulation of the Company’s totalOil and Natural Gas Industry

General

As the owner of mineral fee interests and non-operating working interests, we do not have any employees or contractors in the field, and we are not directly subject to many of the regulations of the oil NGL and gas industry. The following disclosure describes regulations and environmental matters more directly associated with operators of natural gas sales. During 2016, sales through two separate well operators accounted for approximately 23% and 12% ofoil properties, including our current operators. Since the Company’s total oil, NGL and natural gas sales. During 2015, sales through two separate well operators accounted for approximately 23% and 14% of the Company’s total oil, NGL and natural gas sales. Generally, if one purchaser declines to continue purchasing the Company’s production, several other purchasers can be located. Pricing is generally consistent from purchaser to purchaser.

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PATENTS, TRADEMARKS, LICENSES, FRANCHISES AND ROYALTY AGREEMENTS

The Company does not ownoperate any patents, trademarks, licenses or franchises. Royalty agreementswells in which it owns an interest, actual compliance with many laws and regulations is controlled by the well operators, with the Company being responsible only for its proportionate share of the costs, if any, involved on wells producingin which it owns a working interest.

Natural gas and oil NGLoperations are subject to various types of legislation, regulation and natural gas generate a portion ofother legal requirements enacted by governmental authorities. Legislation and regulation affecting the Company’s revenues. These royalties are tied to ownership of mineral acreage, and this ownership is perpetual, unless sold by the Company. Royalties are due and payable to the Company whenever oil, NGL or natural gas is produced and sold from wells located on the Company’s mineral acreage.

REGULATION

All of the Company’s well interests and non-producing properties are located onshore in the contiguous United States. The Company’sentire oil and natural gas propertiesindustry is continuously being reviewed for potential revision. Some of these requirements carry substantial penalties for failure to comply.

Although we are generally not directly subject to various taxes,many of the rules, regulations and limitations impacting the natural gas and oil exploration and production industry as whole, the operators who operate on our properties may be impacted by such as grossrules and regulations and we may be responsible for our proportionate share of costs for wells on which we own a working interest. While this may provide the Company with some insulation from compliance costs applicable to our operator-lessees, we may still be indirectly impacted by operator regulations because our revenue stream depends on operators and the production taxesof natural gas, oil and in some cases, ad valorem taxes.NGL.

StatesRegulation of Drilling and Production

The production of natural gas and oil is subject to regulation under federal, state and local statutes, rules, orders and regulations. These statutes and regulations require that operators obtain permits for drilling operations and drilling bonds, andas well as require reports concerning operationsoperations. Additionally, states where we own mineral and impose otherleasehold interests have enacted regulations relating to the exploration for and production of oil, NGL and natural gas. These states also have regulations addressinggoverning conservation matters, including provisions for the unitization or pooling of oil and natural gas and oil properties, the establishment of maximum allowable rates of production from natural gas and oil wells, the regulation of well spacing and plugging and abandonment of wells. TheseThe effect of these regulations varyis to limit the amount of natural gas and oil that can be produced from wells and to limit the number of wells or the locations which can be drilled. Additionally, some states where we hold mineral or leasehold interests may impose a production or severance tax with respect to the production and sale of natural gas, oil and NGL within its jurisdiction.

Regulation of Transportation of Oil

The sale and transportation of our crude oil is generally undertaken by the operators (or by third parties at the direction of the operators) of our properties. Sales of crude oil, condensate and NGL are not currently regulated and are made at negotiated prices; however, Congress could reenact price controls in the future.

Sales of crude oil are affected by the availability, terms and cost of transportation. The transportation of oil in common carrier pipelines is also subject to rate regulation. The Federal Energy Regulatory Commission (the “FERC”) regulates interstate oil pipeline transportation rates under the Interstate Commerce Act. Intrastate oil pipeline transportation rates are subject to regulation by state regulatory commissions. The basis for intrastate oil pipeline regulation, and the degree of regulatory oversight and scrutiny given to intrastate oil pipeline rates, varies from state to state. As previously discussed,Interstate and intrastate common carrier oil pipelines must provide service on a non-discriminatory basis. Under this open access standard, common carriers must offer service to all shippers requesting service on the Company must rely on its well operators to comply with governmental regulations.

ENVIRONMENTAL MATTERS

Assame terms and under the Companysame rates. When oil pipelines operate at full capacity, access is directly involvedgoverned by pro-rationing provisions set forth in the extractionpipelines’ published tariffs.

Regulation of Transportation and useSale of Natural Gas

The sale and transportation of our natural gas is generally undertaken by the operators (or by third parties at the direction of the operators) of our properties. Historically, the transportation and sale for resale of natural resources, itgas in interstate commerce has been regulated pursuant to the Natural Gas Act of 1938, the Natural Gas Policy Act of 1978 and regulations issued under those Acts by the FERC. In the past, the federal government regulated the prices at which natural gas could be sold. While sales by producers of natural gas can currently be made at uncontrolled market prices, Congress could reenact price controls in the future.

The FERC has endeavored to make natural gas transportation more accessible to natural gas buyers and sellers on an open and non-discriminatory basis. The FERC has stated that open access policies are necessary to improve the competitive structure of the interstate natural gas pipeline industry and to create a regulatory framework that will put natural gas sellers into more direct contractual relations with natural gas buyers by, among other things, unbundling the sale of natural gas from the sale of transportation and storage services. Although the FERC’s orders do not directly regulate natural gas producers, they are intended to foster increased competition within all phases of the natural gas industry.

Intrastate natural gas transportation is subject to variousregulation by state regulatory agencies. The basis for intrastate regulation of natural gas transportation and the degree of regulatory oversight and scrutiny given to intrastate natural gas pipeline rates and services varies from state to state.

Environmental Compliance and Risks

Our operators and properties are impacted by extensive and changing federal, state and local laws and regulations regardingrelating to environmental protection, including the generation, storage, handling, emission, transportation and ecological matters. Compliance with thesedischarge of materials into the environment and relating to safety and health.

Natural gas and oil exploration, development and production operations are subject to stringent federal, state and local laws and regulations governing the discharge of materials into the environment or otherwise relating to environmental protection. Historically, most of the environmental regulation of gas and oil production has been left to state regulatory boards or agencies in those jurisdictions where there is significant natural gas and oil production, with limited direct regulation by such federal agencies as the Environmental Protection Agency. However, there are various regulations issued by the Environmental Protection Agency (“EPA”) and other governmental agencies that would govern significant spills, blow-outs or uncontrolled emissions.

Many states, including states where we own properties, have enacted natural gas and oil regulations that apply to the drilling, completion and operations of wells and the disposal of waste oil and salt water. The operators of our properties are subject to such regulations. There are also procedures incident to the plugging and abandonment of dry holes or other non-operational wells, all as governed by the applicable governing state agency.

At the federal level, among the more significant laws and regulations that may necessitate significant capital outlays.affect our business and the oil and natural gas industry are: The Company does not believeComprehensive Environmental Response, Compensation and Liability Act of 1980, also known as “CERCLA” or “Superfund; the existenceOil Pollution Act of these environmental laws,1990; the Resource Conservation and Recovery Act, also known as currently written and interpreted, will materially hinder or adversely affect“RCRA”; the Company’s business operations; however, there can be no assurances made regarding future events, changes in laws,Clean Air Act; Federal Water Pollution Control Act of 1972, or the interpretationClean Water Act; and the Safe Drinking Water Act of laws governing our industry. For example, current discussions regarding future governance of hydraulic fracturing could have a material impact on the Company. Several states and local municipalities have adopted or are considering adopting regulations that could impose more stringent requirements on hydraulic fracturing operations or otherwise seek to ban fracturing activities altogether. The Oklahoma Corporation Commission has ordered the shut-in of some saltwater disposal wells and reductions of injected volumes in others in northern Oklahoma where these wells are proximal to seismic activity. The Company is currently experiencing insignificant impact and anticipates insignificant future impact from these shut-ins and injection volume reductions due to our minimal working interest ownership in this area. 1974.

Since the Company does not operate any wells in which it owns an interest, actual compliance with environmental laws is controlled by the well operators, with Panhandlethe Company being responsible for its proportionate share of the costs involved.involved on wells in which we own a working interest. As such, the Company has no knowledge of any instances of non-compliance with existing laws and regulations. Absent an extraordinary event, any noncompliance is not likely to have a material adverse effect on the financial condition of the Company. The Company maintains insurance coverage at levels which are customary in the industry, but is not fully insured against all environmental risks.

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Taxes

EMPLOYEESThe Company’s natural gas and oil properties are subject to various taxes, such as gross production taxes and, in some cases, ad valorem taxes. The Company pays ad valorem taxes on minerals owned in ten states.

Employees

At September 30, 2017, Panhandle2020, the Company employed 2117 people, with fourincluding executive officers.

Executive Officers

Chad L. Stephens has served as President, Chief Executive Officer and Director since January 2020.  Mr. Stephens served as Interim CEO from October 2019 to December 2019, and he has served as a Director since September 2017.  Prior to joining the Company, Mr. Stephens held several positions at Range Resources Corporation starting in 1990, and from 2002 through his retirement in 2018, he served as Senior Vice President – Corporate Development.

Ralph D’Amico has served as Chief Financial Officer and Corporate Secretary since March 2020 and as Vice President – Business Development since January 2019.  Prior to joining the Company, Mr. D’Amico served as Managing Director at Seaport Global and held various positions at Stifel Nicolaus, Jefferies, Friedman Billings Ramsey and Salomon Smith Barney.

Freda R. Webb has served as Vice President, Mineral Operations since January 2017.  Ms. Webb served the Company as a reservoir engineering consultant from 2011 to 2015. In 2015 she was appointed to the Reservoir Engineering Manager position.  Prior to joining the Company, Ms. Webb held various reservoir engineering, acquisitions, corporate planning and management positions for Cities Services, Occidental Petroleum and Southwestern Energy.  

Corporate Office

The Company’s office is located at Valliance Bank Tower, Suite 1100, 1601 NW Expressway, Oklahoma City, OK 73118. Our telephone number is (405) 948-1560 and facsimile number is (405) 948-1063. The Company’s website is www.phxmin.com.

Available Information

We make available free of charge on our website (www.phxmin.com) our Annual Report on Form 10-K, Quarterly Reports on Form 10-Q, Current Reports on Form 8-K, and other filings pursuant to Section 13(a) or 15(d) of the employees servingSecurities Exchange Act, and amendments to such filings, as soon as reasonably practicable after each are electronically filed with, or furnished to, the SEC.

We also make available within the “Corporate Governance” section under the “Investors” section of our website our Code of Ethics & Business Practices, Code of Ethics for Senior Financial Officers, Corporate Governance Guidelines, Lead Independent Director Charter and Audit Committee, Corporate Governance and Nominating Committee and Compensation Committee Charters, which have been approved by our Board of Directors. We will make timely disclosure on our website of any change to, or waiver from, the Code of Ethics & Business Practices and Code of Ethics for Senior Financial Officers for our principal executive and senior financial officers. The PresidentCopies of our Code of Ethics & Business Practices and CEO is also a directorCode of the Company.Ethics for Senior Financial Officers are available free of charge by writing us at: PHX Minerals Inc., Attn: Chad True, 1601 NW Expressway, Suite 1100, Oklahoma City, OK 73118.

In addition to the other information included in this Form 10-K, the following risk factors should be considered in evaluating the Company’s business and future prospects. If any of the following risk factors should occur, the Company’s financial condition could be materially impacted, and the holders of our securities could lose part or all of their investment in Panhandle.the Company. As the owner of mineral fee interests and non-operating working interests, we do not operate any natural gas and oil properties, and we do not have any employees or contractors in the field. As such, the risks associated with natural gas and oil operations only affect us indirectly and typically through our non-operating working interests as we proportionately share in the costs of operating such wells. The risk factors described below are not exhaustive, and investors are encouraged to perform their own investigation with respect to the Company and its business. Investors should also read the other information in this Form 10-K, including the financial statements and related notes.

UncertaintyRisks Related to our Business

The volatility of economic conditions, worldwide and in the United States, may have a significant negative effect on operating results, liquidity and financial condition.

Effects of change in domestic and international economic conditions could include: (1) an imbalance in supply and demand for oil, NGL and natural gas resulting in decreasedand oil NGL and natural gas reservesprices due to curtailed drilling activity; (2) a decline in oil, NGLfactors beyond our control greatly affects our financial condition, results of operations and natural gas prices; (3) risk of insolvency of well operators and oil, NGL and natural gas purchasers; (4) limited availability of certain insurance coverage; (5) limited access to derivative instruments; and (6) limited credit availability. A decline in reserves would lead to a decline in production, and either a production decline, or a decrease in oil, NGL and natural gas prices, would have a negative impact on the Company’s cash flow, profitability and value.

Oil, NGL and natural gas prices are volatile. Volatility in these prices can adversely affect operating results and the price of the Company’s common stock. This volatility also makes valuation of oil and natural gas producing properties difficult and can disrupt markets.available for distribution.

The supply of and demand for oil, NGL and natural gas, oil and NGL impact the prices we realize on the sale of these commodities and, in turn, materially affect the Company’s financial results. Oil,Natural gas, oil and NGL and natural gas prices have historically been, and will likely continue to be, volatile. The prices for oil, NGL and natural gas, oil and NGL are subject to wide fluctuation in response to a number of factors beyond our control, including:

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Our revenues, operating results, cash available for distribution and the carrying value of our natural gas and oil properties depend significantly upon the prevailing prices for natural gas and oil. Historically, natural gas and oil prices have been volatile and are subject to fluctuations in response to changes in supply and demand, market uncertainty and a variety of additional factors that are beyond our control, including:

These factors and the volatility of the energy markets make it extremely difficult to predict future natural gas and oil price movements with any certainty. If the prices of natural gas produced

Price volatility makes it difficult to budget and project the return on investment in exploration and development projects and to estimate with precision the value of producing properties that are owned or acquired by the Company. In addition, volatile prices often disrupt the market for oil and natural gas properties, as buyers and sellers have more difficulty agreeing on the purchase price of properties. Revenues, results of operations, reserves and capital availability may fluctuate significantly as a result of variations in oil, NGL and natural gas prices and production performance.

Lower oil, NGL and natural gas prices may also trigger significant impairment write-downs onresult in a portionreduction in the borrowing base under our credit agreement, which may be determined at the discretion of the Company’s properties which negatively affect the Company’s results of operations. In addition, the credit available under its credit facility is affected by product prices.our lenders.

Low oil, NGL and natural gas, oil and NGL prices for a prolonged period of time would have a material adverse effect on the Company.

The volatility of the energy markets makes it extremely difficult to predict future natural gas, oil and NGL price movements with any certainty. Natural gas, oil and NGL prices continued to fluctuate in fiscal year 2020 and have fluctuated significantly over the past several months as a result of the ongoing COVID-19 pandemic. The Company’s financial position, results of operations, access to capital and the quantities of oil, NGL and natural gas, oil and NGL that may be economically produced would be negatively impacted if oil, NGL and natural gas, oil and NGL prices arewere low for an extended period of time. The ways in which low prices could have a material negative effect include:

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ultimate impact of this pandemic is highly uncertain and subject to change. The Company cannot control activities on its properties.

The Company does not operate anyextent of the properties in which it has an interestimpact of COVID-19 on our operational and has very limited abilityfinancial performance will depend on future developments, including the duration and spread of the pandemic, its severity, actions to exercise influence overcontain the third-party operators of these properties. Our dependence ondisease or mitigate its impact and the third-party operators of our properties, and on the cooperation of other working interest owners in these properties, could negatively affect the following:

Dependency on each operator’s judgment, expertise and financial resourcescertainty at this time. Sustained low oil prices due to COVID-19 could result in unexpected future costs, lost revenues and/or capital restrictions, to the extent they would cumulativelyevents discussed in the immediately preceding risk factor, which could have a material adverse effect on our business and financial results. We are unable to predict the ultimate adverse impact of COVID-19 on our business, which will depend on numerous evolving factors and future developments, including the pandemic’s ongoing effect on the demand for oil and natural gas and the response of the overall economy and the financial markets after governmental restrictions are eased or after an effective treatment becomes available.

Lower natural gas, oil and NGL prices or negative adjustments to natural gas, oil and NGL reserves may result in significant impairment charges.

The Company has elected to utilize the successful efforts method of accounting for its natural gas and oil exploration and development activities. Exploration expenses, including geological and geophysical costs, rentals and exploratory dry holes, are charged against income as incurred. Costs of successful wells and related production equipment and development dry holes are capitalized and amortized by property using the unit-of-production method (the ratio of natural gas, oil and NGL volumes produced to total proved or proved developed reserves) as natural gas, oil and NGL are produced.

All long-lived assets, principally the Company’s financial positionnatural gas and oil properties, are monitored for potential impairment when circumstances indicate that the carrying value of the asset on our books may be greater than its future net cash flows. The need to test a property for impairment may result from declines in natural gas, oil and NGL sales prices or unfavorable adjustments to natural gas, oil and NGL reserves. The decision to not participate in future development on our leasehold acreage can trigger a test for impairment. Also, once assets are classified as held for sale, they are reviewed for impairment. Because of the uncertainty inherent in these factors, the Company cannot predict when or if future impairment charges will be recorded. If an impairment charge is recognized, cash flow from operating activities is not impacted, but net income and, consequently, stockholders’ equity are reduced. In periods when impairment charges are incurred, it could have a material adverse effect on our results of operations. See Note 11 to the financial statements included in Item 8 – “Financial Statements and Supplemental Data” for further discussion on impairment under the heading “Impairment.”

Our future success depends on finding, developing or acquiring additional reserves, and failure to find or acquire additional reserves will cause reserves and production to decline materially from their current levels.

The rate of production from natural gas and oil properties generally declines as reserves are depleted. The Company’s proved reserves will decline materially as reserves are produced except to the extent that the Company acquires additional properties containing proved reserves, conducts additional successful exploration and development drilling, successfully applies new technologies or identifies additional behind-pipe zones (different productive zones within existing producing well bores) or secondary recovery reserves.

Drilling for natural gas and oil invariably involves unprofitable efforts, not only from dry wells, but also from wells that are productive but do not produce sufficient reserves to return a profit after deducting drilling, completion, operating and other costs. In addition, wells that are profitable may not achieve a targeted rate of return. The Company relies on third-party operators’ interpretation of seismic data and other advanced technologies in identifying prospects and in conducting exploration and development activities. Nevertheless, prior to drilling a well, the seismic data and other technologies used do not allow operators to know conclusively whether natural gas, oil or NGL is present in commercial quantities.

Cost factors can adversely affect the economics of any project, and the eventual cost of drilling, completing and operating a well is controlled by well operators and existing market conditions. Further, drilling operations may be curtailed, delayed or canceled as a result of numerous factors, including:

Competition for acquisitions may increase the cost of, or cause us to refrain from, completing acquisitions. Our ability to complete acquisitions is dependent upon, among other things, our ability to obtain debt and equity financing and, in some cases, regulatory approvals. Further, these acquisitions may be in geographic regions in which we do not currently hold properties, which could result in unforeseen operating difficulties. In addition, if we enter into new geographic markets, we may be subject to additional and unfamiliar legal and regulatory requirements. Compliance with regulatory requirements may impose substantial additional obligations on us and our management, cause us to expend additional time and resources in compliance activities and increase our exposure to penalties or fines for non-compliance with such additional legal requirements. Further, the success of any completed acquisition will depend on our ability to effectively integrate the acquired business into our existing operations. The process of integrating acquired businesses may involve unforeseen difficulties and may require a disproportionate amount of our managerial and financial resources. In addition, possible future acquisitions may be larger and for purchase prices significantly higher than those paid for earlier acquisitions.

No assurance can be given that we will be able to identify suitable acquisition opportunities, negotiate acceptable terms, obtain financing for acquisitions on acceptable terms or successfully acquire identified targets. Our failure to achieve consolidation savings, to integrate the acquired businesses and assets into our existing operations successfully or to minimize any unforeseen operational difficulties could have a material adverse effect on our financial condition, results of operations and cash available for distribution. The inability to effectively manage the integration of acquisitions could reduce our focus on subsequent acquisitions and current operations, which, in turn, could negatively impact our growth, results of operations and cash available for distribution.

Any acquisitions of additional mineral and royalty interests that we complete will be subject to substantial risks.

Any acquisition involves potential risks, including, among other things:

Our estimated proved reserves are based on many assumptions that may prove to be inaccurate. Any inaccuracies in these reserve estimates or underlying assumptions may materially affect the quantities and present value of our reserves.

It is not possible to measure underground accumulations of natural gas, oil and NGL with precision. Natural gas, oil and NGL reserve engineering requires subjective estimates of underground accumulations of natural gas, oil and NGL using assumptions concerning future prices of these commodities, future production levels and operating and development costs. In estimating our reserves, we and our Independent Consulting Petroleum Engineering Firm (DeGolyer and MacNaughton of Dallas, Texas) mustmake various assumptions with respect to many matters that may prove to be incorrect, including:

If any of these assumptions prove to be incorrect, our estimates of reserves, the classifications of reserves based on risk of recovery and our estimates of the future net cash flows from our reserves could change significantly.

The Company’s standardized measure of oil and natural gas reserves is calculated using the 12-month average price calculated as the unweighted arithmetic average of the first-day-of-the-month individual product prices for each month within the 12-month period prior to September 30. These prices and the operating costs in effect as of the date of estimation are held flat over the life of the properties. Production and income tax expenses are deducted from this calculation of future estimated development, with the result discounted at 10% per annum to reflect the timing of future net revenue in accordance with the rules and regulations of the SEC. Over time, we may make material changes to reserve estimates to take into account changes in our assumptions and the results of actual development and production.

The reserve estimates made for fields that do not have a lengthy production history are less reliable than estimates for fields with lengthy records. A lack of production history may contribute to inaccuracy in our estimates of proved reserves, future production rates and the timing of development expenditures. Further, our lack of knowledge of all individual well information known to the well operators such as incomplete well stimulation efforts, restricted production rates for various reasons and up-to-date well production data, etc. may cause differences in our reserve estimates.

Because PUD reserves, under SEC reporting rules, may only be recorded if the wells they relate to are scheduled to be drilled within five years of the date of recording, the removal of PUD reserves that are not developed within this five-year period may be required. Removals of this nature may significantly reduce the quantity and present value of the Company’s natural gas, oil and NGL reserves. Please read Item 2 – “Properties – Proved Reserves” and Note 16 to the financial statements included in Item 8 – “Financial Statements and Supplementary Data.”

Since forward-looking prices and costs are not used to estimate discounted future net cash flows from our estimated proved reserves, the standardized measure of our estimated proved reserves is not necessarily the same as the current market value of our estimated proved natural gas, oil and NGL reserves.

The timing of the development and production on our properties will affect the timing of actual future net cash flows from proved reserves, and thus their actual present value. In addition, the 10% discount factor used when calculating discounted future net cash flows, in compliance with the FASB statement on oil and natural gas producing activities disclosures, may not be the most appropriate discount factor based on interest rates in effect from time to time and risks associated with the Company, or the oil and natural gas industry in general.

Debt level and interest rates may adversely affect our business.

The Company has a credit facility with a group of banks headed by Bank of Oklahoma (BOK), which consists of a revolving loan of $200,000,000. As of September 30, 2020, the Company had a balance of $28,750,000 drawn on the facility. On December 4, 2020, the facility’s borrowing base after Quarterly Commitment Reductions was reaffirmed at $30,000,000, which is secured by all of the Company’s producing gas and oil properties and contains certain restrictive covenants.

Should the Company incur additional indebtedness under its credit facility to fund capital projects or for other reasons, there is risk of it adversely affecting our business operations as follows:

The borrowing base of our corporate revolving bank credit facility is subject to periodic redetermination and is based in part on natural gas, oil and NGL prices. A lowering of our borrowing base because of lower natural gas, oil or NGL prices, or for other reasons, could require us to repay indebtedness in excess of the newly established borrowing base, or we might need to further secure the debt with additional collateral. Our ability to meet any debt obligations depends on our future performance. General business, economic, financial and product pricing conditions, along with other factors, affect our future performance, and many of these factors are beyond our control. In addition, our failure to comply with the restrictive covenants relating to our credit facility could result in a default, which might adversely affect our business, financial condition, results of operations and cash flows.

We may incur losses as a result of title defects in the properties we own.

Consistent with industry practice, we do not have current abstracts or title opinions on all of our mineral acreage and, therefore, cannot be certain that we have unencumbered title to all of these properties. Our failure to cure any title defects that may exist may adversely impact our ability in the future to increase production and reserves. There is no assurance that we will not suffer a monetary loss from title defects or title failure. Additionally, undeveloped acreage has greater risk of title defects than developed acreage. If there are any title defects or defects in assignment of leasehold rights in properties in which we hold an interest, we may suffer a financial loss.

Competition in the oil and natural gas industry is intense, and most of our competitors have greater financial and other resources than we do.

We compete in the highly competitive areas of natural gas and oil acquisition, development, exploration and production. We face intense competition from both major and independent oil and natural gas companies to acquire desirable producing properties, new properties for future exploration and human resource expertise necessary to effectively develop properties. We also face similar competition in obtaining sufficient capital to maintain or grow production.

We may be subject to information technology system failures, network disruptions, cyber-attacks or other breaches in data security.

The oil and natural gas industry in general has become increasingly dependent upon digital technologies to conduct day-to-day operations, including certain exploration, development and production activities. We use digital technology to estimate quantities

of natural gas, oil and NGL reserves, process and record financial data and communicate with our employees and third parties. Power, telecommunication or other system failures due to hardware or software malfunctions, computer viruses, vandalism, terrorism, natural disasters, fire, human error or by other means could significantly affect the Company’s ability to conduct its business. Though we have implemented complex network security measures, stringent internal controls and maintain offsite backup of all crucial electronic data, there cannot be absolute assurance that a form of system failure or data security breach will not have a material adverse effect on our financial condition and operations results. For instance, unauthorized access to our reserves information or other proprietary or commercially sensitive information could lead to data corruption, communication interruption or other disruptions in our operations or planned business transactions, any of which could have a material adverse impact on our results of operations. Further, as cyber-attacks continue to evolve, we may be required to expend significant additional resources to continue to modify or enhance our protective measures or to investigate and remediate any vulnerability to cyber-attacks.

The Company’s derivative activities may reduce the cash flow received for oilnatural gas and natural gasoil sales.

In order to manage exposure to price volatility on our oil and natural gas and oil production, we currently, and may in the future, enter into oilnatural gas and natural gasoil derivative contracts for a portion of our expected production. OilNatural gas and natural gasoil price derivatives may limit the cash flow we actually realize and therefore reduce the Company’s ability to fund future projects. None of our oilnatural gas and natural gasoil price derivative contracts are designated as hedges for accounting purposes; therefore, all changes in fair value of derivative contracts are reflected in earnings. Accordingly, these fair values may vary significantly from period to period, materially affecting reported earnings. In addition, this type of derivative contract can limit the benefit we would receive from increases in the prices for natural gas and oil. The fair value of our oilnatural gas and natural gasoil derivative instruments outstanding as of September 30, 2017,2020, was a net assetliability of $516,159.$707,647.

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There is risk associated with our derivative contracts that involves the possibility that counterparties may be unable to satisfy contractual obligations to us. If any counterparty to our derivative instruments were to default or seek bankruptcy protection, it could subject a larger percentage of our future oilnatural gas and natural gasoil production to commodity price changes and could have a negative effect on our ability to fund future projects.acquisitions.

Please read Item 7A – “Quantitative and Qualitative Disclosures about Market Risk” and Note 1 and 12 to the financial statements included in Item 8 – “Financial Statements and Supplementary Data” for additional information regarding derivative contracts.

Future legislative or regulatory changes, including those resulting from the United States election in 2020, may result in increased costs and decreased revenues, cash flows and liquidity.

Companies that operate wells in which the Company owns a working interest are subject to extensive federal, state and local regulation. The Company, as a working interest owner, is therefore indirectly subject to these same regulations. New or changed laws and regulations such as those described below could have a material adverse effect on our business. In particular, changes in law or regulation related to hydraulic fracturing or greenhouse gases could potentially increase capital, compliance and operating costs significantly, as well as halt or delay the further development of oil and gas reserves on the Company’s properties.

Federal Income Taxation

We are subject to U.S. federal income tax, as well as income or capital-based taxes in various states, and our operating cash flow is sensitive to the amount of income taxes we must pay. Income taxes are assessed on our revenue after consideration of all allowable deductions and credits. Changes in the types of earnings that are subject to income tax, the types of costs that are considered allowable deductions or the rates assessed on our taxable earnings would all impact our income taxes and resulting operating cash flow.

Congress passed legislation in December 2017, commonly referred to as the Tax Cuts and Jobs Act (the “Tax Reform Legislation”), that significantly affects U.S. tax law. The Tax Reform Legislation contains a number of changes to the manner in which the U.S. imposes income tax on multinational corporations. Although some changes should be positive, such as a permanent reduction to the corporate income tax rate, the repeal of the corporate alternative minimum tax, a temporary increase in the amount of bonus depreciation available for qualified property placed into service between September 27, 2017, and December 31, 2022, and other changes may negatively affect the Company. These provisions include, for example, significant additional limitations on the deductibility of interest expense and net operating losses and the repeal of the domestic production activity deduction. In addition, compliance with the Tax Reform Legislation and ensuing regulations will require complex computations and accumulation of information not previously required or regularly produced.

Further revisions to U.S. tax law, such as a reversal of the corporate income tax rate reduction, the repeal of the percentage depletion allowance, the repeal of expensing for intangible drilling costs or the repeal of enhanced bonus depreciation, could have a materially adverse effect on our business. Moreover, the U.S. Department of Treasury has broad authority to issue regulations and interpretative guidance that may significantly impact how we apply U.S. tax law, with a corresponding impact on the results of our operations for the periods affected.

Oklahoma Taxation

Oklahoma imposes a gross production tax, or severance tax, on the value of natural gas, oil and NGL produced within the state. Under recent changes to Oklahoma law, the gross production tax rate on the first three years of a horizontal well’s production was increased from 2.2% to 5.2%, effective July 1, 2018. This increase in tax will likely decrease the profitability of newer horizontal wells producing natural gas, oil and NGL in Oklahoma, including wells in which the Company owns an interest.

Hydraulic Fracturing and Water Disposal

The vast majority of natural gas and oil wells drilled in recent years have been, and future wells are expected to be, hydraulically fractured as a part of the process of completing the wells and putting them on production. This is true of the wells drilled in which the Company owns an interest. Hydraulic fracturing is a process that involves pumping water, sand and additives at high pressure into rock formations to stimulate natural gas and oil production. In developing plays where hydraulic fracturing, which requires large volumes of water, is necessary for successful development, the demand for water may exceed the supply. A lack of readily available water or a significant increase in the cost of water could cause delays or increased completion costs.

In addition to water, hydraulic fracturing fluid contains chemical additives designed to optimize production. Well operators are being required in certain states to disclose the components of these additives. Additional states and the federal government may follow with similar requirements or may restrict the use of certain additives. This could result in more costly or less effective development of wells.

Once a well has been hydraulically fractured, the fluid produced from the fractured wells must be either treated for reuse or disposed of by injecting the fluid into disposal wells. Injection well disposal processes have been, and continue to be, studied to determine the extent of correlation between injection well disposal and the occurrence of earthquakes. Certain studies have concluded there is a correlation, and this has resulted in the cessation of or the reduction of injection rates in certain water disposal wells, especially in northern Oklahoma.

Efforts to regulate hydraulic fracturing and fluid disposal continue at the local, state and federal level. New regulations are being considered, including limiting water withdrawals and usage, limiting water disposition, restricting which additives may be used, implementing statewide hydraulic fracturing moratoriums and temporary or permanent bans in certain environmentally sensitive areas. Public sentiment against hydraulic fracturing and fluid disposal and shale production could result in more stringent permitting and compliance requirements. In addition, critical declarations made by one or more candidates seeking the office of the President of the United States in 2020 include proposals to ban hydraulic fracturing of oil and gas wells and to ban new leases for production of minerals on federal properties. Consequences of these actions could potentially increase capital, compliance and operating costs significantly, as well as delay or halt the further development of gas and oil reserves on the Company’s properties.

Any of the above factors could have a material adverse effect on our financial position, results of operations or cash flows.

Climate Change

Certain studies have suggested that emission of certain gases, commonly referred to as “greenhouse gases,” may be impacting the earth's climate. Methane, the primary component of natural gas, and carbon dioxide, a byproduct of burning natural gas and oil, are examples of greenhouse gases. Various state governments and regional organizations are considering enacting new legislation and promulgating new regulations governing or restricting the emission of greenhouse gases from stationary sources such as gas and oil production equipment and operations.

Legislation to regulate greenhouse gas emissions has periodically been introduced in the U.S. Congress, and such legislation may be proposed in the future. In addition, in December 2015, the United States joined the international

community at the 21st Conference of the Parties of the United Nations Framework Convention on Climate Change in Paris, France, in preparing an agreement which set greenhouse gas emission reduction goals every five years beginning in 2020. This “Paris Agreement” was signed by the United States in April 2016 and entered into force in November 2016. To help achieve these reductions, federal agencies addressed climate change through a variety of administrative actions. The U.S. Environmental Protection Agency (the “EPA”) issued greenhousegas monitoring and reporting regulations that cover natural gas and oil facilities, among other industries. However, on June 1, 2017, the President of the United States announced that the United States planned to withdraw from the Paris Agreement and to seek negotiations to either reenter the Paris Agreement on different terms or establish a new framework agreement. The Paris Agreement provides for a four-year exit process beginning when it took effect in November 2016, which resulted in an exit in November 2020. The United States’ adherence to the exit process is uncertain and/or the terms on which the United States may reenter the Paris Agreement, or a separately negotiated agreement are unclear at this time. Critical declarations made by one or more candidates seeking the office of the President of the United States in 2020 include a proposal to reverse the United States’ withdrawal from the Paris Agreement.

The direction of future U.S. climate change regulation is difficult to predict given the current uncertainties surrounding the policies of the Trump Administration and the outcome of the United Stated election in 2020. The EPA may or may not continue developing regulations to reduce greenhouse gas emissions from the oil and natural gas industry. Even if federal efforts in this area slow, states may continue pursuing climate regulations. Any laws or regulations that may be adopted to restrict or reduce emissions of greenhouse gases could require our operators to incur additional operating costs, such as costs to purchase and operate emissions controls, to obtain emission allowances or to pay emission taxes and reduce demand.

Seismic Activity

Earthquakes in northern and central Oklahoma and elsewhere have prompted concerns about seismic activity and possible relationships with the energy industry. Legislative and regulatory initiatives intended to address these concerns may result in additional levels of regulation that could lead to operational delays, increase operating and compliance costs or otherwise adversely affect operations.

The adoption of derivatives legislation by the U.S. Congress could have an adverse effect on us and our ability to hedge risks associated with our business.

The Dodd-Frank Act requires the CommoditiesCFTC (the United States Commodity Futures Trading Commission (the “CFTC”)Commission) and the SEC to promulgate rules and regulations establishing federal oversight and regulation of the over-the-counter derivatives market and entities that participate in that market including swap clearing and trade execution requirements. New or modified rules, regulations or requirements may increase the cost and availability to the counterparties of our hedging and swap positions which they can make available to us, as applicable, and may further require the counterparties to our derivative instruments to spin off some of their derivative activities to separate entities which may not be as creditworthy as the current counterparties. Any changes in the regulations of swaps may result in certain market participants deciding to curtail or cease their derivative activities.

While many rules and regulations have been promulgated and are already in effect, other rules and regulations remain to be finalized or effectuated and, therefore, the impact of those rules and regulations on us is uncertain at this time. The Dodd-Frank Act, and the rules promulgated thereunder, could (i) significantly increase the cost, or decrease the liquidity, of energy-related derivatives that we use to hedge against commodity price fluctuations (including through requirements to post collateral), (ii) materially alter the terms of derivative contracts, (iii) reduce the availability of derivatives to protect against risks we encounter and (iv) increase our exposure to less creditworthy counterparties.

Lower oil, NGL and natural gas prices or negative adjustmentsRisks Related to oil, NGL and natural gas reserves may result in significant impairment charges.our Third-Party Operators

The Company has elected to utilize the successful efforts method of accounting forcannot control activities on its oil and natural gas exploration and development activities. Exploration expenses, including geological and geophysical costs, rentals and exploratory dry holes, are charged against income as incurred. Costs of successful wells and related production equipment and development dry holes are capitalized and amortized by property using the unit-of-production method (the ratio of oil, NGL and natural gas volumes produced to total proved or proved developed reserves) as oil, NGL and natural gas are produced.properties.

All long-lived assets, principally the Company’s oil and natural gas properties, are monitored for potential impairment when circumstances indicate that the carrying valueThe Company does not operate any of the assetproperties in which it has an interest and has very limited ability to exercise influence over the third-party operators of these properties. Our dependence on the third-party operators of our books may be greater than its future net cash flows. The need to test a property for

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impairment may result from declines in oil, NGLproperties, and natural gas sales prices or unfavorable adjustments to oil, NGL and natural gas reserves. Also, once assets are classified as held for sale, they are reviewed for impairment. Becauseon the cooperation of the uncertainty inherentother working interest owners in these factors,properties, could negatively affect the Company cannot predict when following:

Dependency on each operator’s judgment, expertise and financial resources could result in unexpected future costs, lost revenues and/or if future impairment charges will be recorded. If an impairment charge is recognized, cash flow from operating activities is not impacted, but net income and, consequently, shareholders’ equity are reduced. In periods when impairment charges are incurred, it couldcapital restrictions, to the extent they would cumulatively have a material adverse effect on ourthe Company’s financial position and results of operations. See Note 1 to the financial statements included in Item 8 – “Financial Statements and Supplemental Data” for further discussion on impairment under the heading “Depreciation, Depletion, Amortization and Impairment.”

Our estimated proved reserves are based on many assumptions that may prove to be inaccurate. Any inaccuracies in these reserve estimates or underlying assumptions may materially affect the quantities and present value of our reserves.

It is not possible to measure underground accumulations of oil, NGL and The natural gas with precision. Oil, NGL and natural gas reserve engineering requires subjective estimates of underground accumulations of oilNGL and natural gas using assumptions concerning future prices of these commodities, future production levels, and operating and development costs. In estimating our reserves, we and our Independent Consulting Petroleum Engineering Firm must make various assumptions with respect to many matters that may prove to be incorrect, including:

If any of these assumptions prove to be incorrect, our estimates of reserves, the classifications of reserves based on risk of recovery and our estimates of the future net cash flows from our reserves could change significantly.

Our standardized measure of oil and natural gas reserves is calculated using the 12-month average price calculated as the unweighted arithmetic average of the first-day-of-the-month individual product prices for each month within the 12-month period prior to September 30. These prices and the operating costs in effect as of the date of estimation are held flat over the life of the properties. From this calculation of future estimated development, production and

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income tax expenses are deducted with the result discounted at 10% per annum to reflect the timing of future net revenue in accordance with the rules and regulations of the SEC. Over time, we may make material changes to reserve estimates to take into account changes in our assumptions and the results of actual development and production.

The reserve estimates made for fields that do not have a lengthy production history are less reliable than estimates for fields with lengthy production histories. A lack of production history may contribute to inaccuracy in our estimates of proved reserves, future production rates and the timing of development expenditures. Further, our lack of knowledge of all individual well information known to the well operators such as incomplete well stimulation efforts, restricted production rates for various reasons and up-to-date well production data, etc. may cause differences in our reserve estimates.

Because PUD reserves, under SEC reporting rules, may only be recorded if the wells they relate to are scheduled to be drilled within five years of the date of recording, the removal of PUD reserves that are not developed within this five-year period may be required. Removals of this nature may significantly reduce the quantity and present value of the Company’s oil, NGL and natural gas reserves. Please read Item 2 – “Properties – Proved Reserves” and Note 11 to the financial statements included in Item 8 – “Financial Statements and Supplementary Data.”

Because forward-looking prices and costs are not used to estimate discounted future net cash flows from our estimated proved reserves, the standardized measure of our estimated proved reserves is not necessarily the same as the current market value of our estimated proved oil, NGL and natural gas reserves.

The timing of both our production and our incurrence of expenses in connection with the development and production of our properties will affect the timing of actual future net cash flows from proved reserves, and thus their actual present value. In addition, the 10% discount factor used when calculating discounted future net cash flows, in compliance with the FASB statement on oil and natural gas producing activities disclosures, may not be the most appropriate discount factor based on interest rates in effect from time to time and risks associated with the Company, or the oil and natural gas industry in general.

Failure to find or acquire additional reserves will cause reserves and production to decline materially from their current levels.

The rate of production from oil and natural gas properties generally declines as reserves are depleted. The Company’s proved reserves will decline materially as reserves are produced except to the extent that the Company acquires additional properties containing proved reserves, conducts additional successful exploration and development drilling, successfully applies new technologies or identifies additional behind-pipe zones (different productive zones within existing producing well bores) or secondary recovery reserves.

Drilling for oil and natural gas invariably involves unprofitable efforts, not only from dry wells, but also from wells that are productive but do not produce sufficient reserves to return a profit after deducting drilling, completion, operating and other costs. In addition, wells that are profitable may not achieve a targeted rate of return. The Company relies on third-party

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operators’ interpretation of seismic data and other advanced technologies in identifying prospects and in conducting exploration and development activities. Nevertheless, prior to drilling a well, the seismic data and other technologies used do not allow operators to know conclusively whether oil, NGL or natural gas is present in commercial quantities.

Cost factors can adversely affect the economics of any project, and ultimately the cost of drilling, completing and operating a well is controlled by well operators and existing market conditions. Further, drilling operations may be curtailed, delayed or canceled as a result of numerous factors, including:

Oil and natural gas drilling and producing operations of our third-party operators involve various risks.

The Company isBecause we do not operate our properties, our business relies heavily upon our third-party operators and their operational effectiveness. Through our third-party operators, we are subject to all the risks normally incident to the operation and development of oil and natural gas and oil properties, including:

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As a non-operator, we are also dependent on third-party operators and the contractors they hire for operational safety, environmental safety and compliance with regulations of governmental authorities.

The Company maintains insurance against many potential losses or liabilities arising from well operations in accordance with customary industry practices and in amounts believed by management to be prudent. However, this insurance does not protect the Company against all risks. For example, the Company does not maintain insurance for business interruption, acts of war or terrorism. Additionally, pollution and environmental risks generally are not fully insurable. These risks could give rise to significant uninsured costs that couldmight have a material adverse effect on the Company’s business condition and financial results.

Debt levelWe may experience delays in the payment of royalties and interest ratesbe unable to replace operators that do not make required royalty payments, and we may not be able to terminate our leases with defaulting lessees if any of the operators on those leases declare bankruptcy.

A failure on the part of the operators to make royalty payments gives us the right to terminate the lease, repossess the property and enforce payment obligations under the lease. If we repossessed any of our properties, we would seek a replacement operator. However, we might not be able to find a replacement operator and, if we did, we might not be able to enter into a new lease

on favorable terms within a reasonable period of time. In addition, the outgoing operator could be subject to a proceeding under title 11 of the United States Code (the “Bankruptcy Code”), in which case our right to enforce or terminate the lease for any defaults, including non-payment, may be substantially delayed or otherwise impaired. In general, in a proceeding under the Bankruptcy Code, the bankrupt operator would have a substantial period of time to decide whether to ultimately reject or assume the lease, which could prevent the execution of a new lease or the assignment of the existing lease to another operator. In the event that the operator rejected the lease, our ability to collect amounts owed would be substantially delayed, and our ultimate recovery may be only a fraction of the amount owed or nothing. In addition, if we are able to enter into a new lease with a new operator, the replacement operator may not achieve the same levels of production or sell natural gas or oil at the same price as the operator it replaced.

Shortages of oilfield equipment, services, qualified personnel and resulting cost increases could adversely affect results of operations.

The demand for qualified and experienced field personnel, geologists, geophysicists, engineers and other professionals in the oil and natural gas industry can fluctuate significantly, often in correlation with natural gas, oil and NGL prices, resulting in periodic shortages. When demand for rigs and equipment increases due to an increase in the number of wells being drilled, there have been shortages of drilling rigs, hydraulic fracturing equipment and personnel and other oilfield equipment. Higher natural gas, oil and NGL prices generally stimulate increased demand for, and result in increased prices of, drilling rigs, crews and associated supplies, equipment and services. These shortages or price increases could negatively affect the ability to drill wells and conduct ordinary operations by the operators of the Company’s wells, resulting in an adverse effect on the Company’s financial condition, cash flow and operating results.

The marketability of natural gas and oil production is dependent upon transportation, pipelines and refining facilities, which neither we nor many of our operators’ control. Any limitation in the availability of those facilities could interfere with our or our operators’ ability to market our or our operators’ production and could harm our business.

The Company has a credit facility with a groupmarketability of banks headed by Bank of Oklahoma (BOK), which consists of a revolving loan of $200,000,000. As of September 30, 2017, the Company had a balance of $52,222,000 drawnour or our operators’ production depends in part on the facility.availability, proximity and capacity of pipelines, tanker trucks and other transportation methods and processing and refining facilities owned by third parties. The facility has a current borrowing baseamount of $80,000,000, which is secured by certain of the Company’s propertiesoil that can be produced and contains certain restrictive covenants.

Should the Company incur additional indebtedness under its credit facility to fund capital projects or for other reasons, there is risk of it adversely affecting our business operations as follows:

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The borrowing base of our corporate revolving bank credit facilitysold is subject to periodic redeterminationcurtailment in certain circumstances, such as pipeline interruptions due to scheduled and is based in partunscheduled maintenance, excessive pressure, physical damage or lack of available capacity on oil, NGLthese systems, tanker truck availability and extreme weather conditions. Also, the shipment of our or our operators’ natural gas prices. A lowering of our borrowing base because of lowerand oil NGLon third-party pipelines may be curtailed or natural gas prices, or for other reasons, could require us to repay indebtedness in excessdelayed if it does not meet the quality specifications of the newly established borrowing base,pipeline owners. The curtailments arising from these and similar circumstances may last from a few days to several months. In many cases, we or we might needour operators are provided only with limited, if any, notice as to further secure the debt with additional collateral. Ourwhen these circumstances will arise and their duration. Any significant curtailment in gathering system or transportation, processing or refining-facility capacity could reduce our or our operators’ ability to meet any debt obligations dependsmarket oil production and have a material adverse effect on our future performance. General business,financial condition, results of operations and cash distributions to stockholders. Our or our operators’ access to transportation options and the prices we or our operators receive can also be affected by federal and state regulation—including regulation of oil production, transportation and pipeline safety—as well by general economic financialconditions and product pricing conditions, along with other factors, affect our future performance,changes in supply and many of these factors are beyond our control.demand. In addition, the third parties on whom we or our failureoperators rely for transportation services are subject to comply with the restrictive covenants relating to our credit facility could result in a default, whichcomplex federal, state, tribal and local laws that could adversely affect the cost, manner or feasibility of conducting our business.

Risks Related to the Oil and Gas Industry

Concerns over general economic, business or industry conditions may have a material adverse effect on our results of operations, financial condition and cash available for distribution.

Concerns over global economic conditions, energy costs, geopolitical issues, inflation, the availability and cost of credit in the European, Asian and the U.S. markets contribute to economic uncertainty and diminished expectations for the global economy. These factors, combined with volatile prices of natural gas, oil and NGL, volatility in consumer confidence and job markets, may result in an economic slowdown or recession. In addition, continued hostilities in the Middle East and the occurrence or threat of terrorist attacks in the United States or other countries could adversely affect the economies of the United States and other countries. Concerns about global economic growth have had a significant adverse impact on global financial markets and commodity prices. If the economic climate in the United States or abroad deteriorates, worldwide demand for petroleum products could diminish, which could impact the price at which natural gas, oil and NGL from our properties are sold, affect the ability of vendors, suppliers and customers associated with our properties to continue operations and ultimately adversely impact our results of operations, financial condition and cash available for distribution.

Conservation measures and technological advances could reduce demand for natural gas and oil.

Fuel conservation measures, alternative fuel requirements, increasing consumer demand for alternatives to natural gas and oil, technological advances in fuel economy and energy generation devices could reduce demand for natural gas and oil. The impact of the changing demand for natural gas and oil services and products may have a material adverse effect on our business, financial condition, results of operations and cash flows.available for distribution.

Risks Related to an Investment in our Common Stock

The issuance of additional shares of our common stock could cause the market price of our common stock to decline and may result in dilution to our existing shareholders.stockholders.

The Company has filed a shelf registration statement which was declared effective on November 15, 2017,October 19, 2020, that allowswill allow us to issue up to $75 million in securities including common stock, preferred stock, debt, warrants and units. The shelf registration statement is intended to provide the Company with increased financial flexibility and more efficient access to the capital markets. We expect the SEC to declare the shelf registration to be effective after we file an amended shelf registration and issue the September 30, 2020, financials.

We cannot predict the effect, if any, that market sales of these securities or the availability of the securities will have on the prevailing market price of our common stock prevailing from time to time. Substantial sales of shares of our common stock or other securities in the public market, or the perception that those sales could occur, may cause the market price of our common stock to decline. Such a decrease in our share price could in turn impair our ability to raise capital through the sale of additional equity securities. In addition, any such decline may make it more difficult for youstockholders to sell shares of our common stock at prices youthey deem acceptable.

We are currently authorized to issue an aggregate of 24,000,00024,000,500 shares of common stock of which 16,678,01622,389,194 shares were issued and outstanding on December 1, 2017.3, 2020. Future issuances of our common stock, or other securities convertible into our common stock, may result in significant dilution to our existing shareholders.stockholders. Significant dilution would reduce the proportionate ownership and voting power held by our existing shareholders.stockholders.

Future legislativeWe may reduce or regulatory changes may resultsuspend our dividend in increased costs and decreased revenues, cash flows and liquidity.the future.

Companies that operate wells in which Panhandle ownsWe have paid a working interest are subject to extensive federal, state and local regulation. Panhandle, as a working interest owner, is therefore indirectly subject to these same regulations. New or changed laws and regulations such as those described below could have a material adverse effect on our business.

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Federal Income Taxation

The United States House of Representatives and the Senate have each passed their own version of tax reform (the “Tax Bill”) which is a proposed overhaul of the Internal Revenue Code of 1986 and could alter tax ratesquarterly dividend for individuals and businesses and could eliminate several tax deductions, including several deductions utilized by the Company. The house and the senate bills still have to be reconciledmany years. Our most recent quarterly dividend was $0.01 per share, and we do not know ifhave paid a quarterly dividend of $0.01 per share or $0.04 per share for the Tax Bill will be adoptedpast two years. In the future our Board may, without advance notice, determine to reduce or suspend our dividend in whole, in part or not at all. As a result, the impact of the Tax Bill on us is uncertain at this time.

Proposalsorder to repeal the expensing of intangible drilling costs, repeal the percentage depletion allowancemaintain our financial flexibility and increase the amortization period of geological and geophysical expenses, if enacted, would increase and accelerate the Company’s payment of federal income taxes. As a result, these changes would decrease the Company’s cash flows available for developing its oil and natural gas properties.

Hydraulic Fracturing and Water Disposal

The vast majority of oil and natural gas wells drilled in recent years have been, and future wells are expected to be, hydraulically fractured as a part of the process of completing the wells and putting them on production. This is true of the wells drilled in whichbest position the Company owns an interest. Hydraulic fracturing is a process that involves pumping water, sand and additives at high pressure into rock formations to stimulate oil and natural gas production. In developing plays where hydraulic fracturing, which requires large volumes of water, is necessary for successful development, the demand for water may exceed the supply. A lack of readily available water or a significant increase in the cost of water could cause delays or increased completion costs.

In addition to water, hydraulic fracturing fluid contains chemical additives designed to optimize production. Well operators are being required in certain states to disclose the components of these additives. Additional states and the federal government may follow with similar requirements or may restrict the use of certain additives. This could result in more costly or less effective development of wells.

Once a well has been hydraulically fractured, the fluid produced from the fractured wells must be either treated for reuse or disposed of by injecting the fluid into disposal wells. Injection well disposal processes have been, and continue to be, studied to determine the extent of correlation between injection well disposal and the occurrence of earthquakes. Certain studies have concluded there is a correlation, and this has resulted in the cessation of or the reduction of injection rates in certain water disposal wells, especially in northern Oklahoma.

Efforts to regulate hydraulic fracturing and fluid disposal continue at the local, state and federal level. New regulations are being considered, including limiting water withdrawals and usage, limiting water disposition, restricting which additives may be used, implementing state-wide hydraulic fracturing moratoriums and temporary or permanent bans in certain environmentally sensitive areas. Public sentiment against

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hydraulic fracturing and fluid disposal and shale production could result in more stringent permitting and compliance requirements. Consequences of these actions could potentially increase capital, compliance and operating costs significantly, as well as delay or halt the further development of oil and gas reserves on the Company’s properties.

Any of the above factors could have a material adverse effect on our financial position, results of operations or cash flows.

Climate Change

Certain studies have suggested that emission of certain gases, commonly referred to as "greenhouse gases," may be impacting the earth's climate. Methane, the primary component of natural gas, and carbon dioxide, a by-product of burning oil and natural gas, are examples of greenhouse gases. Various state governments and regional organizations are considering enacting new legislation and promulgating new regulations governing or restricting the emission of greenhouse gases from stationary sources such as oil and gas production equipment and operations.

In December 2015, the United States joined the international community at the 21st Conference of the Parties of the United Nations Framework Convention on Climate Change in Paris, France, in preparing an agreement which set greenhouse gas emission reduction goals every five years beginning in 2020. This “Paris Agreement” was signed by the United States in April 2016 and entered into force in November 2016. To help achieve these reductions, federal agencies addressed climate change through a variety of administrative actions.long‑term success. The U.S. Environmental Protection Agency (the “EPA”) issued greenhousegas monitoring and reporting regulations that cover oil and natural gas facilities, among other industries. However, on June 1, 2017, President Trump announced that the United States will withdraw and attempt to negotiate a different agreement.

The direction of future U.S. climate change regulation is difficult to predict given the current uncertainties surrounding the policies of the Trump Administration. The EPA may or may not continue developing regulations to reduce greenhouse gas emissions from the oil and natural gas industry. Even if federal efforts in this area slow, states may continue pursuing climate regulations. Any laws or regulations that may be adopted to restrict or reduce emissions of greenhouse gases could require our operators to incur additional operating costs, such as costs to purchase and operate emissions controls, to obtain emission allowances or to pay emission taxes, and reduce demand.

Seismic Activity

Recent earthquakes in northern and central Oklahoma and elsewhere have prompted concerns about seismic activity and possible relationships with the energy industry. Legislative and regulatory initiatives intended to address these concerns may result in additional levels of regulation that could lead to operational delays, increase operating and compliance costs or otherwise adversely affect operations.

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Shortages of oilfield equipment, services, qualified personnel and resulting cost increases could adversely affect results of operations.

The demand for qualified and experienced field personnel, geologists, geophysicists, engineers and other professionals in the oil and natural gas industry can fluctuate significantly, often in correlation with oil, NGL and natural gas prices, resulting in periodic shortages. When demand for rigs and equipment increases due to an increase in the number of wells being drilled, there have been shortages of drilling rigs, hydraulic fracturing equipment and personnel and other oilfield equipment. Higher oil, NGL and natural gas prices generally stimulate increased demand for, and result in increased prices of, drilling rigs, crews and associated supplies, equipment and services. These shortages or price increases could negatively affect the ability to drill wells and conduct ordinary operations by the operators of the Company’s wells, resulting in an adverse effect on the Company’s financial condition, cash flow and operating results.

Competition in the oil and natural gas industry is intense, and most of our competitors have greater financial and other resources than we do.

We compete in the highly competitive areas of oil and natural gas acquisition, development, exploration and production. We face intense competition from both major and independent oil and natural gas companies to acquire desirable producing properties, new properties for future exploration and human resource expertise necessary to effectively develop properties. We also face similar competition in obtaining sufficient capital to maintain drilling rights in all drilling units.

A substantial number of our competitors have financial and other resources significantly greater than ours, and some of them are fully integrated oil and natural gas companies. These companies are able to pay more for development prospects and productive oil and natural gas properties and are able to define, evaluate, bid for, purchase and subsequently drill a greater number of properties and prospects than our financial or human resources permit, potentially reducing our ability to participate in drilling on certain of our acreage as a working interest owner. Our ability to develop and exploit our oil and natural gas properties and to acquire additional quality properties in the future will depend upon our ability to successfully evaluate, select and acquire suitable properties and join in drilling with reputable operators in this highly competitive environment.

Significant capital expenditures are required to replace our reserves and conduct our business.

The Company funds exploration, development and production activities primarily through cash flows from operations and acquisitions through borrowings under its credit facility. The timingdeclaration and amount of capital necessary to carry out these activities can vary significantly as a resultfuture dividends is at the discretion of product price fluctuations, property acquisitions, drilling resultsour Board and the availability of drilling rigs, equipment, well services and transportation capacity.

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Cash flows from operations and access to capital are subject to a number of variables, including the Company’s:

We may have limited ability to obtain the capital required to sustain our operations at current levels if our borrowing base under our credit facility is lowered as a result of decreased revenues, lower product prices, declines in reserves or for other reasons. Failure to sustain operations at current levels could have a material adverse effectwill depend on our financial condition, cash flow and results of operations.operations, cash flows, prospects, industry conditions, capital requirements and other factors and restrictions our Board deems relevant. The likelihood that dividends will be reduced or suspended is increased during periods of prolonged market weakness. In addition, our ability to pay dividends may be limited by agreements governing our indebtedness now or in the future. Although we do not currently have plans to reduce or suspend our dividend, there can be no assurance that we will not reduce our dividend or that we will continue to pay a dividend in the future.

WeIf we cannot meet the NYSE continued listing requirements, the NYSE may delist our common stock.

Our common stock is currently listed on the NYSE. In the future, if we are unable to meet the continued listing requirements of the NYSE, including, among other things, (i) the requirement of maintaining a minimum average closing price of $1.00 per share over a consecutive 30 trading-day period and (ii) the requirement of maintaining an average market capitalization of not less than $50 million over a 30 trading-day period with, at the same time, stockholders’ equity not less than $50 million, we would fall below compliance standards and risk having our common stock delisted. In addition, in the event of an abnormally low share price of our common stock and/or we fail to maintain an average market capitalization of at least $15 million over a 30-trading day period, we would be subject to information technology system failures, network disruptions, cyber-attacks orimmediate delisting under the NYSE’s rules without any opportunity to cure. A delisting of our common stock could negatively impact us by, among other breaches in data security.

Power, telecommunication or other system failures due to hardware or software malfunctions, computer viruses, vandalism, terrorism, natural disasters, fire, human error or by other means could significantly affectthings, the Company’s ability to conduct its business. Though we have implemented complex network security measures, stringent internal controls and maintain offsite backup of all crucial electronic data, there cannot be absolute assurance that a form of system failure or data security breach will not have a material adverse effect on our financial condition and operations results.following:

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General Background

The Company is focused on perpetual natural gas and oil mineral ownership in resource plays in the United States. As part of our evolution as a company, we also own interests in leasehold acreage and non-operated working interests in natural gas and oil properties.

At September 30, 2017, Panhandle’s2020, the Company’s principal properties consisted of (1)(i) perpetual ownership of 255,039252,443 net mineral acres, held principally in Arkansas, New Mexico,Oklahoma, Texas, North Dakota, Oklahoma, TexasArkansas and six other states; (2)New Mexico; (ii) leases on 19,35117,091 net acres primarily in Oklahoma:Oklahoma; and (3)(iii) working interests, royalty interests or both in 6,0956,510 producing oil and natural gas and oil wells and 63125 wells in the process of being drilled or completed.

Management’s Business Strategy Related to Properties

During fiscal 2019, the Company made the strategic decision to focus on perpetual natural gas and oil mineral ownership and growth through mineral acquisitions and the development of its significant mineral acreage inventory in its core areas of focus. In accordance with this strategy, the Company will no longer participate in new development on its mineral or leasehold acreage with a cost-bearing working interest. The Company believes that its strategy to focus on mineral ownership is the best path to giving the Company’s stockholders the greatest risk-weighted returns on their investments.

Our goal is to increase stockholder value through the management of our fee mineral and leasehold assets as a portfolio. We plan to grow our mineral fee holdings by acquiring mineral acreage, in the core areas of resource plays with substantial undeveloped opportunities, that meets or exceeds our corporate return threshold. We also plan to aggressively lease our mineral holdings. We have an active program in place focused on leasing open acreage to generate additional lease bonus revenue and future royalty revenue.

Title to Properties

Consistent with industry practice, the Company does not have current abstracts or title opinions on all of its mineral acreage and, therefore, cannot be certain that it has unencumbered title to all of theseits properties. In recent years, a few insignificant challenges have been made against the Company’s fee title to its acreage.

The Company pays ad valorem taxes on minerals owned in nine states.

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ACREAGEAcreage

Mineral Interests Owned

The following table of mineral acreageinterests owned reflects, in each respective state, the number of (i) net and gross acres owned by the Company, (ii) net and gross producing acres owned by the Company, (iii) net and gross acres leased to others by the Company and (iv) net and gross acres open (unleased) as of September 30, 2017.2020.

Leases

The following table reflects the Company’s net mineral acres leased from others, lease expiration dates, and net leased acres held by production as of September 30, 2017.2020.

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PROVED RESERVESSummary of Proved Reserves

The following table summarizes estimates of proved reserves of oil, NGL and natural gas, oil and NGL held by Panhandlethe Company as of September 30, 2017,2020, compared to the two preceding year ends.ends, using prices and costs under existing economic conditions. Proved reserves are located onshore within the contiguous United States and are principally made up of small interests in 6,0956,510 wells, which are predominately located in the Mid-Continent region. Other than this report, the Company’s reserve estimates are not filed with any other federal agency.

Summary of Proved Natural Gas and Oil Reserves