UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D. C. 20549
FORM 10-Q
[X]☒ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended December 31, 2017September 30, 2021
OR
[ ]☐ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from to
Commission File No. 1-31785
MEXCO ENERGY CORPORATION
(Exact name of registrant as specified in its charter)
Colorado | 84-0627918 | |
(State or other jurisdiction of | (IRS Employer | |
incorporation or organization) |
Identification Number) |
Midland, Texas | 79701 | |
(Address of principal executive offices) | (Zip code) |
(432)682-1119
(Registrant’s telephone number, including area code)
Securities registered pursuant to Section 12(b) of the Act:
Title of each class | Trading Symbol(s) | Name of each exchange on which registered | ||
Common Stock, par value $0.50 per share | MXC | NYSE American |
Indicate by check mark whether the registrant (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 and (2) has been subject to such filing requirements for the past 90 days. YES [X] ☒ NO [ ]☐
Indicate by check mark whether the registrant 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 (§ 229.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files). Yes [X] ☒ No [ ]☐
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company as defined in Rule 12b-2 of the Exchange Act.
Large Accelerated Filer | Accelerated Filer | |
Non-Accelerated Filer | Smaller reporting company | |
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. ☐
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). YES [ ] ☐ NO [X] ☒
The number of shares outstanding of the registrant’s common stock, par value $.50 per share, as of February 12, 2018November 5, 2021 was 2,037,266. .
MEXCO ENERGY CORPORATION AND SUBSIDIARIES
Page 2 |
PART I – FINANCIAL INFORMATION
Item 1. Financial Statements
Mexco Energy Corporation and Subsidiaries
CONSOLIDATED BALANCE SHEETS
September 30, | March 31, | |||||||
2021 | 2021 | |||||||
(Unaudited) | ||||||||
ASSETS | ||||||||
Current assets | ||||||||
Cash and cash equivalents | $ | 93,574 | $ | 57,813 | ||||
Accounts receivable: | ||||||||
Oil and natural gas sales | 791,184 | 621,384 | ||||||
Trade | 55 | 30,402 | ||||||
Prepaid costs and expenses | 43,237 | 47,895 | ||||||
Total current assets | 928,050 | 757,494 | ||||||
Property and equipment, at cost | ||||||||
Oil and gas properties, using the full cost method | 39,274,777 | 38,664,347 | ||||||
Other | 120,208 | 120,208 | ||||||
Accumulated depreciation, depletion and amortization | (29,559,992 | ) | (29,015,612 | ) | ||||
Property and equipment, net | 9,834,993 | 9,768,943 | ||||||
Investment – cost basis | 225,000 | 200,000 | ||||||
Operating lease, right-of-use asset | 156,318 | 20,861 | ||||||
Other noncurrent assets | 23,143 | 83,389 | ||||||
Total assets | $ | 11,167,504 | $ | 10,830,687 | ||||
LIABILITIES AND STOCKHOLDERS’ EQUITY | ||||||||
Current liabilities | ||||||||
Accounts payable and accrued expenses | $ | 129,880 | $ | 116,569 | ||||
Operating lease liability, current | 53,288 | 21,965 | ||||||
Total current liabilities | 183,168 | 138,534 | ||||||
Long-term liabilities | ||||||||
Long-term debt, net | - | 1,154,949 | ||||||
Operating lease liability, long-term | 103,030 | - | ||||||
Asset retirement obligations | 731,900 | 713,797 | ||||||
Total long-term liabilities | 834,930 | 1,868,746 | ||||||
Total liabilities | 1,018,098 | 2,007,280 | ||||||
Commitments and contingencies | - | - | ||||||
Stockholders’ equity | ||||||||
Preferred stock - $ | par value; shares authorized; outstanding- | - | ||||||
Common stock - $ | par value; shares authorized; and shares issued; and shares outstanding as of September 30, 2021 and March 31, 2021, respectively1,085,783 | 1,071,833 | ||||||
Additional paid-in capital | 7,832,429 | 7,624,214 | ||||||
Retained earnings | 1,577,195 | 473,361 | ||||||
Treasury stock, at cost ( | shares)(346,001 | ) | (346,001 | ) | ||||
Total stockholders’ equity | 10,149,406 | 8,823,407 | ||||||
Total liabilities and stockholders’ equity | $ | 11,167,504 | $ | 10,830,687 |
The accompanying notes are an integral part of the consolidated financial statements.
Page 3 |
Mexco Energy Corporation and Subsidiaries
CONSOLIDATED STATEMENTS OF OPERATIONS
(Unaudited)
Three Months Ended | Six Months Ended | |||||||||||||||
September 30, | September 30, | |||||||||||||||
2021 | 2020 | 2021 | 2020 | |||||||||||||
Operating revenues: | ||||||||||||||||
Oil sales | $ | 1,133,134 | $ | 504,957 | $ | 2,120,237 | $ | 787,327 | ||||||||
Natural gas sales | 408,037 | 125,007 | 676,499 | 206,816 | ||||||||||||
Other | 12,310 | 6,078 | 20,943 | 12,355 | ||||||||||||
Total operating revenues | 1,553,481 | 636,042 | 2,817,679 | 1,006,498 | ||||||||||||
Operating expenses: | ||||||||||||||||
Production | 335,588 | 217,117 | 612,575 | 388,783 | ||||||||||||
Accretion of asset retirement obligations | 7,245 | 7,237 | 14,303 | 14,424 | ||||||||||||
Depreciation, depletion, and amortization | 280,060 | 236,134 | 544,380 | 460,239 | ||||||||||||
General and administrative | 214,242 | 192,360 | 522,409 | 441,238 | ||||||||||||
Total operating expenses | 837,135 | 652,848 | 1,693,667 | 1,304,684 | ||||||||||||
Operating income (loss) | 716,346 | (16,806 | ) | 1,124,012 | (298,186 | ) | ||||||||||
Other income (expenses): | ||||||||||||||||
Interest income | 12 | 301 | 71 | 316 | ||||||||||||
Interest expense | (7,530 | ) | (13,515 | ) | (20,249 | ) | (24,570 | ) | ||||||||
Loss on derivative instruments | - | (11,950 | ) | - | (19,200 | ) | ||||||||||
Net other expense | (7,518 | ) | (25,164 | ) | (20,178 | ) | (43,454 | ) | ||||||||
Income (loss) before income taxes | 708,828 | (41,970 | ) | 1,103,834 | (341,640 | ) | ||||||||||
Income tax | - | - | - | - | ||||||||||||
Net income (loss) | $ | 708,828 | $ | (41,970 | ) | $ | 1,103,834 | $ | (341,640 | ) | ||||||
Income (loss) per common share: | ||||||||||||||||
Basic: | $ | 0.34 | $ | (0.02 | ) | $ | 0.53 | $ | (0.17 | ) | ||||||
Diluted: | $ | 0.33 | $ | (0.02 | ) | $ | 0.52 | $ | (0.17 | ) | ||||||
Weighted average common shares outstanding: | ||||||||||||||||
Basic: | 2,091,417 | 2,040,941 | 2,084,127 | 2,040,553 | ||||||||||||
Diluted: | 2,143,743 | 2,040,941 | 2,131,889 | 2,040,553 |
The accompanying notes are an integral part of
the consolidated financial statements.
Page 4 |
Mexco Energy Corporation and Subsidiaries
CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS’ EQUITY
(Unaudited)
Common Stock Par Value | Additional Paid-In Capital | Retained Earnings (Losses) | Treasury Stock | Total Stockholders’ Equity | ||||||||||||||||
Balance at April 1, 2021 | $ | 1,071,833 | $ | 7,624,214 | $ | 473,361 | $ | (346,001 | ) | $ | 8,823,407 | |||||||||
2,143,666 | (67,000) | |||||||||||||||||||
Net income | - | - | 1,103,834 | - | 1,103,834 | |||||||||||||||
Issuance of stock through options exercised | 13,950 | 171,782 | 185,732 | |||||||||||||||||
Stock based compensation | - | 36,433 | - | - | 36,433 | |||||||||||||||
27,900 | ||||||||||||||||||||
- | ||||||||||||||||||||
Balance at September 30, 2021 | $ | 1,085,783 | $ | 7,832,429 | $ | 1,577,195 | $ | (346,001 | ) | $ | 10,149,406 | |||||||||
2,171,566 | (67,000) |
Common Stock Par Value | Additional Paid-In Capital | Retained Earnings (Losses) | Treasury Stock | Total Stockholders’ Equity | ||||||||||||||||
Balance at June 30, 2021 | $ | 1,074,333 | $ | 7,669,579 | $ | 868,367 | $ | (346,001 | ) | $ | 9,266,278 | |||||||||
Net income | - | - | 708,828 | - | 708,828 | |||||||||||||||
Issuance of stock through options exercised | 11,450 | 140,282 | 151,732 | |||||||||||||||||
Stock based compensation | - | 22,568 | - | - | 22,568 | |||||||||||||||
Balance at September 30, 2021 | $ | 1,085,783 | $ | 7,832,429 | $ | 1,577,195 | $ | (346,001 | ) | $ | 10,149,406 |
Common Stock Par Value | Additional Paid-In Capital | Retained Earnings | Treasury Stock | Total Stockholders’ Equity | ||||||||||||||||
Balance at April 1, 2020 | $ | 1,053,583 | $ | 7,339,351 | $ | 317,429 | $ | (346,001 | ) | $ | 8,364,362 | |||||||||
Net loss | - | - | (341,640 | ) | - | (341,640 | ) | |||||||||||||
Issuance of stock through options exercised | 750 | 8,685 | - | - | 9,435 | |||||||||||||||
Stock based compensation | - | 27,948 | - | - | 27,948 | |||||||||||||||
Balance at September 30, 2020 | $ | 1,054,333 | $ | 7,375,984 | $ | (24,211 | ) | $ | (346,001 | ) | $ | 8,060,105 |
Common Stock Par Value | Additional Paid-In Capital | Retained Earnings | Treasury Stock | Total Stockholders’ Equity | ||||||||||||||||
Balance at June 30, 2020 | $ | 1,053,583 | $ | 7,353,356 | $ | 17,759 | $ | (346,001 | ) | $ | 8,078,697 | |||||||||
Net loss | - | - | (41,970 | ) | - | (41,970 | ) | |||||||||||||
Issuance of stock through options exercised | 750 | 8,685 | - | - | 9,435 | |||||||||||||||
Stock based compensation | - | 13,943 | - | - | 13,943 | |||||||||||||||
Balance at September 30, 2020 | $ | 1,054,333 | $ | 7,375,984 | $ | (24,211 | ) | $ | (346,001 | ) | $ | 8,060,105 |
SHARE ACTIVITY | ||||
Common stock shares, issued: | ||||
Balance at April 1, 2021 | 2,143,666 | |||
27,900 | ||||
Balance at September 30, 2021 | 2,171,566 | |||
Common stock shares, held in treasury: | ||||
Balance at April 1, 2021 | (67,000 | ) | ||
Acquisitions | - | |||
Balance at September 30, 2021 | (67,000 | ) | ||
Common stock shares, outstanding at September 30, 2021 | ||||
2,104,566 |
Mexco Energy Corporation and Subsidiaries
(Unaudited)
December 31, 2017 | March 31, 2017 | |||||||
ASSETS | ||||||||
Current assets | ||||||||
Cash and cash equivalents | $ | 97,282 | $ | 73,451 | ||||
Accounts receivable: | ||||||||
Oil and gas sales | 399,987 | 381,414 | ||||||
Trade | 30,415 | 13,744 | ||||||
Escrow | 200,000 | - | ||||||
Prepaid costs and expenses | 18,782 | 36,325 | ||||||
Total current assets | 746,466 | 504,934 | ||||||
Property and equipment, at cost | ||||||||
Oil and gas properties, using the full cost method | 35,669,560 | 37,640,096 | ||||||
Other | 107,484 | 107,484 | ||||||
Accumulated depreciation, depletion and amortization | (26,417,172 | ) | (25,572,606 | ) | ||||
Property and equipment, net | 9,359,872 | 12,174,974 | ||||||
Other noncurrent assets | 121,598 | 28,157 | ||||||
Total assets | $ | 10,227,936 | $ | 12,708,065 | ||||
LIABILITIES AND STOCKHOLDERS’ EQUITY | ||||||||
Current liabilities | ||||||||
Accounts payable and accrued expenses | $ | 212,429 | $ | 137,259 | ||||
Total current liabilities | 212,429 | 137,259 | ||||||
Long-term debt | 950,000 | 2,900,000 | ||||||
Asset retirement obligations | 931,870 | 968,484 | ||||||
Total liabilities | 2,094,299 | 4,005,743 | ||||||
Commitments and contingencies | ||||||||
Stockholders’ equity | ||||||||
Preferred stock - $1.00 par value; 10,000,000 shares authorized; none outstanding | - | - | ||||||
Common stock - $0.50 par value; 40,000,000 shares authorized; 2,104,266 issued and 2,037,266 shares outstanding as of December 31, 2017 and March 31, 2017 | 1,052,133 | 1,052,133 | ||||||
Additional paid-in capital | 7,262,113 | 7,244,848 | ||||||
Retained earnings | 165,392 | 751,342 | ||||||
Treasury stock, at cost – (67,000 shares) | (346,001 | ) | (346,001 | ) | ||||
Total stockholders’ equity | 8,133,637 | 8,702,322 | ||||||
Total liabilities and stockholders’ equity | $ | 10,227,936 | $ | 12,708,065 |
The accompanying notes are an integral part of
the consolidated financial statements.
Page 5 |
Mexco Energy Corporation and Subsidiaries
CONSOLIDATED STATEMENTS OF OPERATIONSCASH FLOWS
(Unaudited)For the Six Months Ended September 30,
Three Months Ended | Nine Months Ended | |||||||||||||||
December 31 | December 31 | |||||||||||||||
2017 | 2016 | 2017 | 2016 | |||||||||||||
Operating revenue: | ||||||||||||||||
Oil and gas | $ | 641,468 | $ | 580,419 | $ | 1,903,361 | $ | 1,662,985 | ||||||||
Other | 13,463 | 9,715 | 38,342 | 178,174 | ||||||||||||
Total operating revenues | 654,931 | 590,134 | 1,941,703 | 1,841,159 | ||||||||||||
Operating expenses: | ||||||||||||||||
Production | 248,865 | 234,372 | 813,570 | 721,864 | ||||||||||||
Accretion of asset retirement obligation | 8,639 | 9,248 | 25,196 | 26,939 | ||||||||||||
Depreciation, depletion, and amortization | 247,801 | 273,885 | 844,566 | 879,637 | ||||||||||||
General and administrative | 225,528 | 199,995 | 765,056 | 780,608 | ||||||||||||
Total operating expenses | 730,833 | 717,500 | 2,448,388 | 2,409,048 | ||||||||||||
Operating loss | (75,902 | ) | (127,366 | ) | (506,685 | ) | (567,889 | ) | ||||||||
Other income (expenses): | ||||||||||||||||
Interest income | 34 | 3 | 45 | 175 | ||||||||||||
Interest expense | (25,360 | ) | (32,378 | ) | (79,310 | ) | (123,385 | ) | ||||||||
Net other expense | (25,326 | ) | (32,375 | ) | (79,265 | ) | (123,210 | ) | ||||||||
Loss before income taxes | (101,228 | ) | (159,741 | ) | (585,950 | ) | (691,099 | ) | ||||||||
Income tax benefit: | ||||||||||||||||
Deferred | - | - | - | - | ||||||||||||
Net loss | $ | (101,228 | ) | $ | (159,741 | ) | $ | (585,950 | ) | $ | (691,099 | ) | ||||
Loss per common share: | ||||||||||||||||
Basic and diluted | $ | (0.05 | ) | $ | (0.08 | ) | $ | (0.29 | ) | $ | (0.34 | ) | ||||
Weighted average common shares outstanding: | ||||||||||||||||
Basic and diluted | 2,037,266 | 2,037,266 | 2,037,266 | 2,037,266 |
(Unaudited)
2021 | 2020 | |||||||
Cash flows from operating activities: | ||||||||
Net income (loss) | $ | 1,103,834 | $ | (341,640 | ) | |||
Adjustments to reconcile net income (loss) to net cash provided by operating activities: | ||||||||
Stock-based compensation | 36,433 | 27,948 | ||||||
Depreciation, depletion and amortization | 544,380 | 460,239 | ||||||
Accretion of asset retirement obligations | 14,303 | 14,424 | ||||||
Amortization of debt issuance costs | 6,263 | 6,263 | ||||||
Changes in operating assets and liabilities: | ||||||||
Increase in accounts receivable | (139,453 | ) | (36,667 | ) | ||||
(Increase) decrease in right-of-use asset | (135,457 | ) | 23,017 | |||||
Decrease in prepaid expenses | 4,659 | 26,287 | ||||||
Increase in accounts payable and accrued expenses | 16,553 | 7,185 | ||||||
Settlement of asset retirement obligations | (1,052 | ) | (1,028 | ) | ||||
Increase (decrease) in operating lease liability | 134,353 | (21,791 | ) | |||||
Net cash provided by operating activities | 1,584,816 | 164,237 | ||||||
Cash flows from investing activities: | ||||||||
Additions to oil and gas properties | (657,308 | ) | (714,079 | ) | ||||
Drilling refunds | 115,552 | 42,060 | ||||||
Investment – cost basis | (25,000 | ) | (25,000 | ) | ||||
Proceeds from sale of oil and gas properties and equipment | 11,969 | 106,285 | ||||||
Additions to other property and equipment | - | (3,215 | ) | |||||
Net cash used in investing activities | (554,787 | ) | (593,949 | ) | ||||
Cash flows from financing activities: | ||||||||
Proceeds from exercise of stock options | 185,732 | 9,435 | ||||||
Proceeds from long-term debt | 275,000 | 673,574 | ||||||
Reduction of long-term debt | (1,455,000 | ) | (225,000 | ) | ||||
Net cash (used in) provided by financing activities | (994,268 | ) | 458,009 | |||||
Net increase in cash and cash equivalents | 35,761 | 28,297 | ||||||
Cash and cash equivalents at beginning of period | 57,813 | 34,381 | ||||||
Cash and cash equivalents at end of period | $ | 93,574 | $ | 62,678 | ||||
Supplemental disclosure of cash flow information: | ||||||||
Cash paid for interest | $ | 14,834 | $ | 17,859 | ||||
Non-cash investing and financing activities: | ||||||||
Asset retirement obligations | $ | 7,472 | $ | 11,269 | ||||
Operating lease – right of use asset and associated liabilities | $ | 165,007 | $ | 9,360 |
The accompanying notes are an integral part of
the consolidated financial statements.
Page 6 |
Mexco Energy Corporation and Subsidiaries
CONSOLIDATED STATEMENT OF CHANGES IN STOCKHOLDERS’ EQUITY
(Unaudited)
Common Stock Par Value | Treasury Stock | Additional Paid-In Capital | Retained Earnings | Total Stockholders’ Equity | ||||||||||||||||
Balance at April 1, 2017 | $ | 1,052,133 | $ | (346,001 | ) | $ | 7,244,848 | $ | 751,342 | $ | 8,702,322 | |||||||||
Net loss | - | - | - | (585,950 | ) | (585,950 | ) | |||||||||||||
Stock based compensation | - | - | 17,265 | - | 17,265 | |||||||||||||||
Balance at December 31, 2017 | $ | 1,052,133 | $ | (346,001 | ) | $ | 7,262,113 | $ | 165,392 | $ | 8,133,637 | |||||||||
SHARE ACTIVITY | ||||||||||||||||||||
Common stock shares, issued: | ||||||||||||||||||||
Balance at April 1, 2017 | 2,104,266 | |||||||||||||||||||
Issued | - | |||||||||||||||||||
Balance at Dec. 31, 2017 | 2,104,266 | |||||||||||||||||||
Common stock shares, held in treasury: | ||||||||||||||||||||
Balance at April 1, 2017 | (67,000 | ) | ||||||||||||||||||
Acquisitions | - | |||||||||||||||||||
Balance at Dec. 31, 2017 | (67,000 | ) | ||||||||||||||||||
Common stock shares, outstanding at December 31, 2017 | 2,037,266 |
The accompanying notes are an integral part of
the consolidated financial statements.
Mexco Energy Corporation and Subsidiaries
CONSOLIDATED STATEMENTS OF CASH FLOWS
For the Nine Months Ended December 31,
(Unaudited)
2017 | 2016 | |||||||
Cash flows from operating activities: | ||||||||
Net loss | $ | (585,950 | ) | $ | (691,099 | ) | ||
Adjustments to reconcile net loss to net cash provided by operating activities: | ||||||||
Stock-based compensation | 17,265 | 42,424 | ||||||
Depreciation, depletion and amortization | 844,566 | 879,637 | ||||||
Accretion of asset retirement obligations | 25,196 | 26,939 | ||||||
Changes in assets and liabilities: | ||||||||
Increase in accounts receivable | (235,244 | ) | (65,801 | ) | ||||
Decrease in prepaid expenses | 17,543 | 33,649 | ||||||
Increase in non-current assets | - | (25,219 | ) | |||||
Increase (decrease) in accounts payable and accrued expenses | 77,024 | (103,500 | ) | |||||
Settlement of asset retirement obligations | (7,264 | ) | (93,630 | ) | ||||
Net cash provided by operating activities | 153,136 | 3,400 | ||||||
Cash flows from investing activities: | ||||||||
Additions to oil and gas properties | (802,184 | ) | (517,454 | ) | ||||
Additions to other property and equipment | - | - | ||||||
Drilling refunds | 74,744 | 75,808 | ||||||
Proceeds from sale of oil and gas properties and equipment | 2,548,135 | 2,975,091 | ||||||
Net cash provided by investing activities | 1,820,695 | 2,533,445 | ||||||
Cash flows from financing activities: | ||||||||
Reduction of long-term debt | (1,950,000 | ) | (2,510,000 | ) | ||||
Net cash used in financing activities | (1,950,000 | ) | (2,510,000 | ) | ||||
Net increase in cash and cash equivalents | 23,831 | 26,845 | ||||||
Cash and cash equivalents at beginning of period | 73,451 | 34,013 | ||||||
Cash and cash equivalents at end of period | $ | 97,282 | $ | 60,858 | ||||
Supplemental disclosure of cash flow information: | ||||||||
Cash paid for interest | $ | 81,415 | $ | 126,593 | ||||
Non-cash investing and financing activities: | ||||||||
Asset retirement obligations | $ | 6,356 | $ | 5,247 |
The accompanying notes are an integral part of
the consolidated financial statements.
Mexco Energy Corporation and Subsidiaries
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
1. Nature of Operations
Mexco Energy Corporation (a Colorado corporation) and its wholly owned subsidiaries, Forman Energy Corporation (a New York corporation), Southwest Texas Disposal Corporation (a Texas corporation) and TBO Oil & Gas, LLC (a Texas limited liability company) (collectively, the “Company”) are engaged in the exploration, development and production of natural gas, crude oil, condensate and natural gas liquids (“NGLs”). Most of the Company’s oil and gas interests are centered in the West Texas;Texas and Southeastern New Mexico; however, the Company owns producing properties and undeveloped acreage in thirteenfourteen states. AlthoughAll of the Company’s oil and gas interests predominately are operated by others, the Company operates five wells in which it owns an interest.others.
2. Basis of Presentation and Significant Accounting Policies
Principles of Consolidation. The consolidated financial statements include the accounts of Mexco Energy Corporation and its wholly owned subsidiaries. All significant intercompany balances and transactions associated with the consolidated operations have been eliminated.
Estimates and Assumptions. In preparing consolidated financial statements in conformity with accounting principles generally accepted in the United States of America (“GAAP”), management is required to make informed judgments, estimates and assumptions that affect the reported amounts of assets and liabilities as of the date of the financial statements and affect the reported amounts of revenues and expenses during the reporting period. In addition, significant estimates are used in determining proved oil and gas reserves. Although management believes its estimates and assumptions are reasonable, actual results may differ materially from those estimates. The estimate of the Company’s oil and natural gas reserves, which is used to compute depreciation, depletion, amortization and impairment of oil and gas properties, is the most significant of the estimates and assumptions that affect these reported results.
Interim Financial Statements.Statements. In the opinion of management, the accompanying unaudited consolidated financial statements contain all adjustments (including(consisting only of normal recurring accruals) necessary to present fairly the financial position of the Company as of December 31, 2017,September 30, 2021, and the results of its operations and cash flows for the interim periods ended December 31, 2017September 30, 2021 and 2016.2020. The consolidated financial statements as of December 31, 2017September 30, 2021 and for the three and ninesix month periods ended December 31, 2017September 30, 2021 and 20162020 are unaudited. The consolidated balance sheet as of March 31, 20172021 was derived from the audited balance sheet filed in the Company’s 20172021 annual report on Form 10-K filed with the Securities and Exchange Commission (“SEC”). The results of operations for the periods presented are not necessarily indicative of the results to be expected for a full year. The accounting policies followed by the Company are set forth in more detail in Note 2 of the “Notes to Consolidated Financial Statements” in the Form 10-K. Certain information and footnote disclosures normally included in financial statements prepared in accordance with accounting principles generally accepted in the United States of America have been condensed or omitted in this Form 10-Q pursuant to the rules and regulations of the SEC. However, the disclosures herein are adequate to make the information presented not misleading. It is suggested that these consolidated financial statements be read in conjunction with the consolidated financial statements and notes thereto included in the Form 10-K.
Reclassifications.Investments. Certain amountsThe Company accounts for investments of less than 1% in prior periods’limited liability companies at cost. The Company has no control of the limited liability companies. The cost of the investment is recorded as an asset on the consolidated balance sheets and when income from the investment is received, it is immediately recognized on the consolidated statements of operations.
Derivative Financial Instruments. The Company’s derivative financial statements have been reclassifiedinstruments are used to conform withmanage commodity price risk attributable to expected oil and gas production. While there is risk the current period’s presentation. These reclassifications had no effect on previously reported resultsfinancial benefit of operations, retained earnings or net cash flows.
3. Property Sales
In December 2017,rising oil and gas prices may not be captured, the Company received approximately $1.9 million inbelieves the benefits of stable and predictable cash from a sale of joint venture leasehold marginal producing working interests in several thousand acres located in Ward and Midland Counties, Texas. Of these proceeds, approximately $1.518 million was applied toflows outweigh the Company’s bank debt and the balance to the Company’s working capital. Additionally, approximately $200,000 of the purchase price is being held in escrow pending payment of closing costs and resolution of title issues as to a small portion of the sale assets. This amount is reflected in accounts receivable escrow on our consolidated balance sheets.potential risks.
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The Company accounts for derivative financial instruments using fair value accounting and recognizes gains and losses in earnings during the period in which they occur. Unsettled derivative instruments are recorded in the accompanying consolidated balance sheets as either a current or non-current asset or a liability measured at its fair value. The Company only offsets derivative assets and liabilities for arrangements with the same counterparty when right of offset exists. Derivative assets and liabilities with different counterparties are recorded gross in the consolidated balance sheets. Derivative contract settlements are reflected in operating activities in the accompanying consolidated statements of cash flows.
As of September 30, 2021, the Company had no derivative contracts. During the first ninesix months of fiscal 2018,ended September 30, 2020, the Company sold forentered into a total considerationseries of $460,461, leasehold interests in 137 net acres in the Scoop-Stack areas of Canadian and Grady Counties, Oklahoma. The firstcrude oil put option contracts. All of these transactionssuch contracts expired in which the Company retained its interests in the existing producing wellbores on the acreage was in the amount of $336,730. The second transaction in the amount of $123,731 included the producing wellbores as well as the acreage. Of these proceeds, $410,000 was applied to reduce bank indebtednessJuly and the balance of $50,461 was applied to working capital of the Company.August 2020.
Subsequently, in January 2018, the Company sold additional leasehold interests in the Scoop-Stack area of Grady County, Oklahoma for $46,000 which the Company used to reduce bank indebtedness. The Company retained its interests in the existing producing wellbore on the acreage.
4. 3. Asset Retirement Obligations
The Company’s asset retirement obligations (“ARO”) relate to the plugging of wells, the removal of facilities and equipment, and site restoration on oil and gas properties. The fair value of a liability for an ARO is recorded in the period in which it is initially incurred, discounted to its present value using the credit adjusted risk-free interest rate, and a corresponding amount capitalized by increasing the carrying amount of the related long-lived asset. The liability is accreted each period anduntil the capitalizedliability is settled or the well is sold, at which time the liability is removed. The related asset retirement cost is depreciatedcapitalized as part of the carrying amount of our oil and natural gas properties, using the full cost method.properties. The ARO is included inon the Consolidated Balance Sheetsconsolidated balance sheets with the current portion being included in the accounts payable and other accrued expenses.
The following table provides a rollforward of the AROs for the first ninesix months of fiscal 2018:2022:
Schedule of Rollforward of Asset Retirement Obligations
Carrying amount of asset retirement obligations as of April 1, 2021 | $ | 728,797 | ||
Liabilities incurred | 7,472 | |||
Liabilities settled | (3,672 | ) | ||
Accretion expense | 14,303 | |||
Carrying amount of asset retirement obligations as of September 30, 2021 | 746,900 | |||
Less: Current portion | 15,000 | |||
Non-Current asset retirement obligation | $ | 731,900 |
4. Long Term Debt
Long-term debt on the Consolidated Balance Sheets consisted of the following as of the dates indicated:
Schedule of Long-Term Debt
September 30, 2021 | March 31, 2021 | |||||||
Credit facility | $ | - | $ | 1,180,000 | ||||
Unamortized debt issuance costs(1) | - | (25,051 | ) | |||||
Total long-term debt, net | $ | - | $ | 1,154,949 |
Carrying amount of asset retirement obligations as of April 1, 2017 | $ | 978,484 | ||
Liabilities incurred | 6,356 | |||
Liabilities settled | (68,166 | ) | ||
Accretion expense | 25,196 | |||
Carrying amount of asset retirement obligations as of December 31, 2017 | 941,870 | |||
Less: Current portion | 10,000 | |||
Non-Current asset retirement obligation | $ | 931,870 |
5. Credit Facility
The
(1) | For the current period, since the Company has no long term debt outstanding, unamortized debt issuance costs in the amount of $18,789 are included in Other noncurrent assets. |
For the current period, since the Company has no long term debt outstanding, unamortized debt issuance costs are included in Other noncurrent assets.
On December 28, 2018, the Company entered into a loan agreement with Bank of America, N.A. (the “Agreement”) with West Texas National Bank (“WTNB”), which provided for a credit facility of $5,570,000$1,000,000 with a maturity date of December 28, 2021. The Agreement has no monthly commitment reductionsreduction and a borrowing base to be evaluated on July 30annually.
On February 28, 2020, the Agreement was amended to increase the credit facility to $2,500,000, extend the maturity date to March 28, 2023 and January 1 of each year or at any additional time in the bank’s discretion. The borrowing base was evaluated on January 26, 2018 and set at $950,000. The borrowing base also resets to the extent the Company sells or otherwise disposes of any of its oil and gas properties as the Company is required to pay 100% of such net proceeds to the lender resulting in a permanent reduction ofincrease the borrowing base unless prior approval byto $1,500,000.
Under the bank states otherwise.
The Agreement, was renewed eleven times with the eleventh amendment effective as of March 8, 2017 with a maturity date of November 30, 2020. Under such renewal agreement, interest on the facility accrues at an annuala rate equal to the British Bankers Association London Interbank Offered Rate (“BBA LIBOR”prime rate as quoted in the Wall Street Journal plus one-half of one percent (0.5%) daily floating rate, plus 3.0 percentage points, which was 4.56% on December 31, 2017.daily. Interest on the outstanding amount under the credit agreementAgreement is payable monthly. ThereIn addition, the Company will pay an unused commitment fee in an amount equal to one-half of one percent (0.5%) times the daily average of the unadvanced amount of the commitment. The unused commitment fee is payable quarterly in arrears on the last day of each calendar quarter. As of September 30, 2021, there was no availability of this line of credit at December 31, 2017. $1,500,000 available for borrowing by the Company on the facility.
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No principal payments are anticipated to be required through November 30, 2020. the maturity date of the credit facility, March 28, 2023. Upon closing with WTNB on the original Agreement, the Company paid a .5% loan origination fee in the amount of $5,000 plus legal and recording expenses totaling $34,532, which were deferred over the life of the credit facility. Upon closing the amendment to the Agreement, the Company paid a .1% loan origination fee of $2,500 and an extension fee of $3,125 plus legal and recording expenses totaling $12,266, which were also deferred over the life of the credit facility.
Amounts borrowed under the Agreement are collateralized by the common stock of the Company’s wholly owned subsidiaries and substantially all of the Company’s oil and gas properties.
The Agreement contains customary covenants for credit facilities of this type including limitations on change in control, disposition of assets, mergers and reorganizations. The Company is also obligated to meet certain financial covenants under the Agreement and requires minimumsenior debt to earnings before interest, taxes, depreciation and amortization (“EBITDA”) of $650,000 for eachratios (Senior Debt/EBITDA) less than or equal to 4.00 to 1.00 measured with respect to the four trailing four fiscal quarters and minimum interest coverage ratios (EBITDA/Interest Expense) of 2.00 to 1.00 for each quarter. The Company is in compliance with all covenants as of December 31, 2017 and believes it will remain in compliance for the next fiscal year.quarter.
In addition, this Agreement prohibits the Company from paying cash dividends on its common stock.stock without written permission of WTNB. The Agreement does grantnot permit the Company permission to enter into hedge agreements however, it is undercovering crude oil and natural gas prices without prior WTNB approval.
There was no obligation to do so.
The Agreement allows for up to $500,000 of the facility to be used for outstanding letters of credit. As of December 31, 2017, one letter of credit for $50,000, in lieu of plugging bond with the Texas Railroad Commission (“TRRC”) covering the properties the Company operates is outstanding under the facility. This letter of credit renews annually. The Company will pay a fee in an amount equal to 1 percent (1.0%) per annum of the outstanding undrawn amount of each standby letter of credit, payable monthly in arrears, on the basis of the face amount outstanding on the day the fee is calculated.
The balance outstanding on the line of credit as of December 31, 2017 was $950,000.September 30, 2021. The following table is a summary of activity on the Bank of America, N.A.WTNB line of credit for the ninesix months ended DecemberSeptember 30, 2021:
Summary of Line of Credit Activity
Principal | ||||
Balance at April 1, 2021: | $ | 1,180,000 | ||
Borrowings | 275,000 | |||
Repayments | (1,455,000 | ) | ||
Balance at September 30, 2021: | $ | - |
5. Leases
The Company leases approximately 4,160 rentable square feet of office space from an unaffiliated third party for our corporate office located in Midland, Texas. This includes square feet of office space shared with and reimbursed by our majority shareholder. The lease does not include an option to renew and is a 36 month lease that expired in May 2021. In June 2020, in exchange for a reduction in rent for the months of June and July 2020, the Company agreed to a 2-month extension to its current lease agreement at the regular monthly rate extending its current lease expiration date to July 2021. In June 2021, the Company agreed to extend its current lease at a flat (unescalated) rate for 36 months. The amended lease now expires on July 31, 2017:2024.
Principal | ||||
Balance at April 1, 2017: | $ | 2,900,000 | ||
Borrowings | - | |||
Repayments | 1,950,000 | |||
Balance at December 31, 2017: | $ | 950,000 |
The balance outstandingCompany determines an arrangement is a lease at inception. Operating leases are recorded in operating lease right-of-use asset, operating lease liability, current, and operating lease liability, long-term on the line of credit as of February 12, 2018 was $900,000.consolidated balance sheets.
6. Income Taxes
On December 22, 2017,Operating lease right-of-use assets represent the tax legislation referredCompany’s right to as the “Tax Cuts and Jobs Act” (the 2017 Tax Reform Act) was enacted. The more significant changes that impact the Company are the reduction in the corporate federal income tax rate from 35% to 21%. Under GAAP, the tax effects of a change in tax law must be recognized in the period in which the law is enacted, or the quarter ending December 31, 2017use an underlying asset for the 2017 Tax Reform Act. GAAP also requires deferred income taxlease term and lease liabilities represent its obligation to make lease payments arising from the lease. Operating lease assets and liabilities are recognized at the commencement date based on the present value of lease payments over the lease term. As the Company’s lease does not provide an implicit rate, the Company uses the incremental borrowing rate based on the information available at commencement date in determining the present value of lease payments. The incremental borrowing rate used at adoption was 3.75%. Significant judgement is required when determining the incremental borrowing rate. Rent expense for lease payments is recognized on a straight-line basis over the lease term.
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The balance sheets classification of lease assets and liabilities was as follows:
Schedule of Operating Lease Assets and Liabilities
September 30, 2021 | ||||
Assets | ||||
Operating lease right-of-use asset, beginning balance | $ | 20,861 | ||
Current period amortization | (29,550 | ) | ||
Lease amendment | 165,007 | |||
Total operating lease right-of-use asset | $ | 156,318 | ||
Liabilities | ||||
Operating lease liability, current | $ | 53,288 | ||
Operating lease liability, long term | 103,030 | |||
Total lease liabilities | $ | 156,318 |
Future minimum lease payments as of September 30, 2021 under non-cancellable operating leases are as follows:
Schedule of Future Minimum Lease Payments
Lease Obligation | ||||
Fiscal Year Ended March 31, 2022 | 29,120 | |||
Fiscal Year Ended March 31, 2023 | 58,240 | |||
Fiscal Year Ended March 31, 2024 | 58,240 | |||
Fiscal Year Ended March 31, 2025 | 19,413 | |||
Total lease payments | $ | 165,013 | ||
Less: imputed interest | (8,695 | ) | ||
Operating lease liability | 156,318 | |||
Less: operating lease liability, current | (53,288 | ) | ||
Operating lease liability, long term | $ | 103,030 |
Net cash paid for our operating lease for the six months ended September 30, 2021 and 2020 was $20,903 and $21,693, respectively. Rent expense, less sublease income of $10,768 and $9,459, respectively, is included in general and administrative expenses.
The Company recognized stock-based compensation expense of $measuredrecognized over a weighted average of years. and $ in general and administrative expense in the Consolidated Statements of Operations for the three months ended September 30, 2021 and 2020, respectively. Stock-based compensation expense recognized for the six months ended September 30, 2021 and 2020 was $ and $ , respectively. The total cost related to non-vested awards not yet recognized at September 30, 2021 totals $ which is expected to be
During the six months ended September 30, 2021, the Compensation Committee of the Board of Directors approved and the Company granted stock options exercisable at $8.51 per share with an estimated fair value of $ . During the six months ended September 30, 2020, stock options were granted. These options are exercisable at a price not less than the fair market value of the stock at the enacted taxdate of grant, have an exercise period of and generally vest over .
Summary of Grant-date Fair Value of Stock Options Granted and Assumptions Used Binomial Models
Six Months Ended | ||||||||
September 30 | ||||||||
2021 | 2020 | |||||||
Grant-date fair value | $ | |||||||
Volatility factor | % | |||||||
Dividend yield | ||||||||
Risk-free interest rate | % | |||||||
Expected term (in years) |
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Summary of Activity of Stock Options
Number of Shares | Weighted Average Exercise Price | Weighted Average Remaining Contract Life in Years | Intrinsic Value | |||||||||||||
Outstanding at April 1, 2021 | 156,000 | $ | 5.28 | 5.53 | $ | 555,100 | ||||||||||
Granted | 31,000 | 8.51 | ||||||||||||||
Exercised | (27,900 | ) | 6.63 | |||||||||||||
Forfeited or Expired | - | - | ||||||||||||||
Outstanding at September 30, 2021 | 159,100 | $ | 5.67 | 6.50 | $ | 752,622 | ||||||||||
Vested at September 30, 2021 | 87,350 | $ | 5.56 | 4.59 | $ | 422,362 | ||||||||||
Exercisable at September 30, 2021 | 87,350 | $ | 5.56 | 4.59 | $ | 422,362 |
During the six months ended September 30, 2021, stock options covering 185,732 from these exercises. During the six months ended September 30, 2020, stock options covering shares were exercised with a total intrinsic value of $ . The Company received proceeds of $9,435 from these exercises. shares were exercised with a total intrinsic value of $ . The Company received proceeds of $
There were expectedis assumed for stock options granted to apply when temporary differences aredirectors or employees due to be realized or settled. The Company’s deferred income taxes were remeasured based upon the new tax rates which amountedforfeiture rate history of these types of awards. stock options forfeited or expired during the six months ended September 30, 2021 and 2020. No forfeiture rate
Outstanding options at September 30, 2021 expire between a $509,863 reduction in deferred tax asset and valuation amount.$ . and and have exercise prices ranging from $ to
7. Income Taxes
A valuation allowance for deferred tax assets, including net operating losses, is recognized when it is more likely than not that some or all of the benefit from the deferred tax asset will not be realized. To assess that likelihood, we use estimates and judgment regarding our future taxable income, and we consider the tax consequences in the jurisdiction where such taxable income is generated, to determine whether a valuation allowance is required. Such evidence can include our current financial position, our results of operations, both actual and forecasted, the reversal of deferred tax liabilities, and tax planning strategies as well as the current and forecasted business economics of our industry.
Based on the material write-downs of the carrying value of our oil and natural gas properties during fiscal 2016, we are in a net deferred tax asset position as of December 31, 2017.September 30, 2021. Our deferred tax asset is $822,425$1,045,531 as of December 31, 2017September 30, 2021 with a valuation amount of $822,425.$1,045,531. We believe it is more likely than not that these deferred tax assets will not be realized. Management assesses the available positive and negative evidence to estimate whether sufficient future taxable income will be generated to permit the use of deferred tax assets. The amount of the deferred tax asset considered realizable, however, could be adjusted if estimates of future taxable income are reduced or increased or if objective negative evidence in the form of cumulative losses is no longer present and additional weight is given to subjective evidence such as expected future expected growth.
8. Related Party Transactions
Related party transactions for the Company relate to shared office expenditures in addition to administrative and operating expenses paid on behalf of the principal stockholder. The total billed to and reimbursed by the stockholder for the quarters ended September 30, 2021 and 2020 was $10,288 and $8,219, respectively. The total billed to and reimbursed by the stockholder for the six months ended September 30, 2021 and 2020 was $23,056 and $18,321, respectively. The principal stockholder pays for his share of the lease amount for the shared office space directly to the lessor. Amounts paid by the principal stockholder directly to the lessor for the three months ending September 30, 2021 and 2020 were $3,944 and $3,846, respectively. Amounts paid by the principal stockholder directly to the lessor for the six months ending September 30, 2021 and 2020 were $7,988 and $7,649, respectively.
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7. Loss
The Company’s basic net lossincome (loss) per share has been computed based on the weighted average number of common shares outstanding during the period. Diluted net lossincome (loss) per share assumes the exercise of all stock options having exercise prices less than the average market price of the common stock during the period using the treasury stock method and is computed by dividing net lossincome (loss) by the weighted average number of common shares and dilutive potential common shares (stock options) outstanding during the period. In periods where losses are reported, the weighted-average number of common shares outstanding excludes potential common shares, because their inclusion would be anti-dilutive.
Schedule of Reconciliation of Basic and Diluted Net Income (loss) Per Share
Three Months Ended | Six Months Ended | |||||||||||||||
September 30, | September 30, | |||||||||||||||
2021 | 2020 | 2021 | 2020 | |||||||||||||
Net income (loss) | $ | 708,828 | $ | (41,970 | ) | $ | 1,103,834 | $ | (341,640 | ) | ||||||
Shares outstanding: | ||||||||||||||||
Weighted avg. shares outstanding – basic | 2,091,417 | 2,040,941 | 2,084,127 | 2,040,553 | ||||||||||||
Effect of assumed exercise of dilutive stock options | 52,326 | - | 47,762 | - | ||||||||||||
Weighted avg. shares outstanding – dilutive | 2,143,743 | 2,040,941 | 2,131,889 | 2,040,553 | ||||||||||||
Income (loss) per common share: | ||||||||||||||||
Basic | $ | 0.34 | $ | (0.02 | ) | $ | 0.53 | $ | (0.17 | ) | ||||||
Diluted | $ | 0.33 | $ | (0.02 | ) | $ | 0.52 | $ | (0.17 | ) |
Three Months Ended | Nine Months Ended | |||||||||||||||
December 31 | December 31 | |||||||||||||||
2017 | 2016 | 2017 | 2016 | |||||||||||||
Net loss | $ | (101,228 | ) | $ | (159,741 | ) | $ | (585,950 | ) | $ | (691,099 | ) | ||||
Shares outstanding: | ||||||||||||||||
Weighted avg. common shares outstanding – basic | 2,037,266 | 2,037,266 | 2,037,266 | 2,037,266 | ||||||||||||
Effect of the assumed exercise of dilutive stock options | - | - | - | - | ||||||||||||
Weighted avg. common shares outstanding – dilutive | 2,037,266 | 2,037,266 | 2,037,266 | 2,037,266 | ||||||||||||
Loss per common share: | ||||||||||||||||
Basic and diluted | $ | (0.05 | ) | $ | (0.08 | ) | $ | (0.29 | ) | $ | (0.34 | ) |
For the three and six months ended September 30, 2021, 31,000 shares relating to stock options were excluded from the computation of diluted net income because their inclusion would be anti-dilutive. Due to a net loss for the for the three and ninesix months ended December 31, 2017 and 2016,September 30, 2020, the weighted average number of common shares outstanding excludes common stock equivalents because their inclusion would be anti-dilutive.
8. Related Party Transactions10. Subsequent Events
Related party transactionsOn October 4, 2021, stock options covering 103,928 from these exercises. shares were exercised with a total intrinsic value of $ . The Company received proceeds of $
On October 5, 2021, stock options covering 5,980 from these exercises. shares were exercised with a total intrinsic value of $ . The Company received proceeds of $
On October 22, 2021, the Company expended $84,600 for the completion of 4 wells in Lea County, NM.
On October 27, 2021, the Company relate to shared office expenditures in addition to administrative and operating expenses paid on behalf of the principal stockholder. The total billed to and reimbursed by the stockholderexpended $126,000 for the three months ended December 31, 2017drilling of 4 wells in Lea County, NM.
On November 1, 2021, the Company had cash on hand of approximately $335,000.
The Company completed a review and 2016 was $11,873analysis of all events that occurred after the consolidated balance sheet date to determine if any such events must be reported and $9,565, respectively. The total billedhas determined that there are no other subsequent events to and reimbursed by the stockholder for the nine months ended December 31, 2017 and 2016 was $30,355 and $22,061, respectively.be disclosed.
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Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations
Unless the context otherwise requires, references to the “Company”, “Mexco”, “we”, “us” or “our” mean Mexco Energy Corporation and its consolidated subsidiaries.
Cautionary Statements Regarding Forward-Looking Statements. Management’s Discussion and Analysis of Financial Condition and Results of Operations (“MD&A”) contains “forward-looking statements”forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended (the “Securities Act”), and Section 21E of the Securities Exchange Act of 1934, as amended (the “Exchange Act”). Forward-looking statements include statements regarding our plans, beliefs or current expectations and may be signified by the words “could”, “should”, “expect”, “project”, “estimate”, “believe”, “anticipate”, “intend”, “budget”, “plan”, “forecast”, “predict” and other similar expressions. Forward-looking statements appear throughout this Form 10-Q with respect to, among other things: profitability; planned capital expenditures; estimates of oil and gas production; future project dates; estimates of future oil and gas prices; estimates of oil and gas reserves; our future financial condition or results of operations; and our business strategy and other plans and objectives for future operations. Forward-looking statements involve known and unknown risks and uncertainties that could cause actual results to differ materially from those contained in any forward-looking statement.
While we have made assumptions that we believe are reasonable, the assumptions that support our forward-looking statements are based upon information that is currently available and is subject to change. All forward-looking statements in thethis Form 10-Q are qualified in their entirety by the cautionary statement contained in this section. We do not undertake to update, revise or correct any of the forward-looking information. It is suggested that these financial statements be read in conjunction with the consolidated financial statements and notes thereto included in the Form 10-K.
Liquidity and Capital Resources. Historically, we have funded our operations, acquisitions, exploration and development expenditures from cash generated by operating activities, bank borrowings, sales of non-core properties and issuance of common stock. Our primary financial resource is our base of oil and gas reserves. We pledgehave pledged our producing oil and gas properties to secure our revolving line of credit.credit facility. We do not have any delivery commitments to provide a fixed and determinable quantity of its oil and gas under any existing contract or agreement.
Due to depressed commodity price environment, we are applying financial discipline to all aspects of our business. In order to meet obligations, we may continue to sell non-core assets.
Our long term strategy is on increasing profit margins while concentrating on obtaining reserves with low cost operations by acquiring and developing oil and gas properties with potential for long-lived production. We focus our efforts on the acquisition of minerals, royalties and working interests and non-operated properties in areas with significant development potential.
ForAt September 30, 2021, we had working capital of $744,882 compared to working capital of $618,960 at March 31, 2021, an increase of $125,922 for the first ninereasons set forth below.
Cash Flows
Changes in the net funds provided by or (used in) each of our operating, investing and financing activities are set forth in the table below:
For the Six Months Ended September 30, | ||||||||||||
2021 | 2020 | % Difference | ||||||||||
Net cash provided by operating activities | 1,584,816 | 164,237 | 865 | % | ||||||||
Net cash used in investing activities | (554,787 | ) | (593,949 | ) | (7 | )% | ||||||
Net cash (used in) provided by financing activities | (994,268 | ) | 458,009 | (317 | )% |
Cash Flow Provided by Operating Activities. Cash flow from operating activities is primarily derived from the production of our crude oil and natural gas reserves and changes in the balances of non-cash accounts, receivables, payables or other non-energy property asset account balances. Cash flow provided by our operating activities for the six months ended September 30, 2021 was $1,584,816 in comparison to $164,237 for the six months ended September 30, 2020. This increase of $1,420,579 in our cash flow operating activities consisted of an increase in our non-cash expenses of $92,505; an increase in our accounts receivable of $102,786; and, an increase in our net income for the current six months of fiscal 2018,$1,445,474 compared to a net loss the same six month period of the prior year. Variations in cash flow from operations was $153,136,operating activities may impact our level of exploration and development expenditures.
Our expenditures in operating activities consist primarily of non-operated lease expenses and production expenses. Our expenses also consist of employee compensation, accounting, insurance and other general and administrative expenses that we have incurred in order to address normal and necessary business activities of a 4404% increase when compared topublic company in the corresponding period of fiscal 2017. crude oil and natural gas production industry.
Cash of $2,548,135 was receivedFlow Used in Investing Activities. Cash flow from the sale ofinvesting activities is derived from changes in oil and gas properties,property balances. For the six months ended September 30, 2021, we had net cash of $74,744 was received for drilling refunds, cash of $1,950,000 was used to reduce the line of credit, and cash of $802,184 was$554,787 used for additions to oil and gas properties. properties compared to $593,949 for the six months ended September 30, 2020.
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Cash Flow Provided by Financing Activities. Cash flow from financing activities is derived from our changes in long-term debt and in equity account balances. Cash flow used in our financing activities was $994,268 for the six months ended September 30, 2021 compared to cash flow provided by our financing activities of $458,009 for the six months ended September 30, 2020. During the six months ended September 30, 2021 and 2020, we received advances of $275,000 and $605,000, respectively, from our credit facility. During the six months ended September 30, 2021 and 2020, we made payments of $1,455,000 and $225,000, respectively, on the credit facility. For the six months ended September 30, 2021 and 2020, we received proceeds of $185,732 and $9,435, respectively, from the exercise of employee and director stock options. For the six months ended September 30, 2020, we received $68,574 under the paycheck protection program (PPP).
Accordingly, net cash increased $23,831.$35,761, leaving cash and cash equivalents on hand of $93,574 as of September 30, 2021.
At December 31, 2017, we had working capital of $534,037 compared to working capital of $367,675 at March 31, 2017, an increase of $166,362 for the reasons set forth below.
Oil and Natural Gas PropertiesProperty Development
In addition to an indeterminate number of wells to be drilled by other operators on Mexco’s royalty interests, theNew Participations in Fiscal 2022. The Company currently expectsplans to participate in the drilling and completion of approximately 3039 horizontal wells at an estimated aggregate cost of approximately $1,200,000$1,000,000 for the fiscal year ending March 31, 2018. The operators of these wells include Concho Resources, Inc., Marathon Oil Permian LLC, McElvain Energy, Inc., Mewbourne Oil Company, XTO Energy, Inc. and others.
As of December 31, 2017, Mexco has expended approximately $700,000 for seventeen2022. All of these horizontal wells are in the Delaware Basin located in the western portion of the Permian Basin in Lea and Eddy Counties, New Mexico and Reeves County, Texas.
During the six months ended September 30, 2021, Mexco expended approximately $180,000 to participate in the drilling and completion of four horizontal wells in the Lower Wolfcamp Shale of the Delaware Basin.
The first two ofBasin in Eddy County, New Mexico. Mexco’s working interest in these wells began producingis .44%.
Also during the six months ended September 30, 2021, Mexco expended $31,500 for its share to participate in September at anthe drilling and completion of two horizontal wells in the 3rd Bone Spring Sand formation of the Delaware Basin located in the western portion of the Permian Basin in Lea County, New Mexico. These wells were completed in August 2021 with initial average rateproduction rates of 2881,294 barrels of oil; 1,308oil, 3,345 barrels of water;water and 332,0003,124,000 cubic feet of gas per day, or, 3431,815 barrels of oil equivalent per day. The third well began producing in November at an initial rate of 245 barrels of oil; 1,053 barrels of water; and 247,000 cubic feet of gas per day, or 286 barrels of oil equivalent per day. These wells are in the Yeso/Paddock formations of the Dodd Federal Unit in the Grayburg San Andres Jackson Field of Eddy County, New Mexico and operated by Concho Resources, Inc. Mexco’s working interest in this unit is .1848%.
The next three of these wells were completed in December 2017 and tested at an average rate of 1,162 barrels of oil; 2,283 barrels of water; and 1,991,000 cubic feet of gas per day, or 1,494 barrels of oil equivalent per day, with an average flowing tubing pressure of 647 pounds per square inch. These wells areis .1%.
In September 2021, Mexco expended approximately $43,000 to participate in the Lower Avalondrilling of three horizontal wells in the 2nd Bone Spring formation and two horizontal wells in the 3rd Bone Spring formation of the Delaware Basin located in the western portion of the Permian Basin in Lea County, New Mexico. Mexco’s working interest in these wells is .6%an average of approximately .22%.
The remaining elevenIn August 2021, Mexco expended approximately $28,000 to participate in the drilling of two horizontal wells in the Wolfcamp Sand formation of the Delaware Basin located in the western portion of the Permian Basin in Lea County, New Mexico. Mexco’s working interest in these wells is .37%. Subsequently, in October 2021, Mexco expended approximately $42,000 for the completion of these seventeenwells.
In August 2021, Mexco expended approximately $52,000 to participate in the drilling of two horizontal wells in the Bone Spring formation of the Delaware Basin located in the western portion of the Permian Basin in Reeves County, Texas. Mexco working interest in these wells is approximately .6%. These wells have been drilled and are planned to be completed in various stages of completion.November 2021.
During the first nine months of fiscal 2018, the Company sold for a total consideration of $460,461, leasehold interests in 137 net acresIn May 2021, Mexco expended approximately $28,000 to participate in the Scoop-Stack areasdrilling of Canadian and Grady Counties, Oklahoma. The first of these transactions in which the Company retained its intereststwo horizontal wells in the existing producing wellbores onWolfcamp Sand formation of the acreage wasDelaware Basin located in the amount of $336,730. The second transaction in the amount of $123,731 included the producing wellbores as well as the acreage. Of these proceeds, $410,000 was applied to reduce bank indebtedness and the balance of $50,461 was applied to working capital of the Company.
Subsequently, in January 2018, the Company sold additional leasehold interests in the Scoop-Stack area of Grady County, Oklahoma for $46,000 which the Company used to reduce bank indebtedness. The Company retained its interests in the existing producing wellbore on the acreage.
In December 2017, the Company received approximately $1.9 million in cash from a sale of joint venture leasehold marginal producing working interests in several thousand acres located in Ward and Midland Counties, Texas. Of these proceeds, approximately $1.518 million was applied to the Company’s bank debt and the balance to the Company’s working capital. Additionally, approximately $200,000 of the purchase price is being held in escrow pending payment of closing costs and resolution of title issues as to a smallwestern portion of the sale assets. This amountPermian Basin in Lea County, New Mexico. Mexco’s working interest in these wells is reflected.37%. Subsequently, in accounts receivable escrow on our consolidated balance sheets.October 2021, Mexco expended approximately $42,000 for the completion of these wells.
Also, during the quarter ended June 30, 2021, Mexco participated in the drilling and completion of two horizontal wells in the Wolfcamp formation of the Delaware Basin located in the western portion of the Permian Basin in Lea County, New Mexico with aggregate costs of approximately $88,000. These wells were completed at the end of June 2021 with initial average production rates of 1,184 barrels of oil, 4,380 barrels of water and 1,818,000 cubic feet of gas per day, or 1,444 barrels of oil equivalent per day. Mexco’s working interest in these wells is .56%.
Completion of Wells Drilled in Fiscal 2021. The Company expended approximately $165,000 for the additional completion costs of 12 horizontal wells located in Eddy and Lea Counties, New Mexico that the Company participated in drilling during fiscal 2021.
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The Company participated in the completion of two horizontal wells in the Wolfcamp formation of the Delaware Basin located in the western portion of the Permian Basin in Lea County, New Mexico with aggregate costs of approximately $108,000. These wells were completed at the end of June 2021 and beginning of July 2021 with initial average production rates of 1,046 barrels of oil, 3,214 barrels of water and 2,146,000 cubic feet of gas per day, or 1,403 barrels of oil equivalent per day. Mexco’s working interest in these wells is 1.2%.
The Company participated in the completion of two horizontal wells in the Wolfcamp formation of the Delaware Basin located in the western portion of the Permian Basin in Lea County, New Mexico with aggregate costs of approximately $55,000. These wells were completed at the end of June 2021 with initial average production rates of 774 barrels of oil, 2,648 barrels of water and 973,000 cubic feet of gas per day, or 913 barrels of oil equivalent per day. Mexco’s working interest in these wells is .56%.
We are participating in other projects and are reviewing projects in which we may participate. The cost of such projects would be funded, to the extent possible, from existing cash balances and cash flow from operationsoperations. The remainder may be funded through borrowings on the credit facility and, if appropriate, sales of non-core properties.
Crude oil and natural gas pricesgenerally remained significantly depressedvolatile during the last year. Lower product prices reduce our cash flow from operations and diminish the present value of our oil and gas reserves. Lower product prices also offer us less incentive to assume the drilling risks that are inherent in our business. The volatility of the energy markets makes it extremely difficult to predict future oil and natural gas price movements with any certainty. For example, in the last twelve months, the NYMEX West Texas Intermediate (“WTI”) posted price for crude oil has ranged from a low of $39.00$31.75 per bbl in June 2017October 2020 to a high of $56.75$71.43 per bbl in December 2017.September 2021. The Henry Hub Spot Market Price (“Henry Hub”) for natural gas has ranged from a low of $2.44$1.41 per MMBtu in October 2020 to a high of $23.86 per MMBtu in February 2017 to a high of $3.71 per MMBtu in January 2017. 2021.
On December 31, 2017September 30, 2021, the WTI posted price for crude oil was $56.75 per bblas $71.01 and the Henry Hub spot price for natural gas was $3.69$5.58 per MMBtu. See Results of Operations below for realized prices.
Contractual Obligations.We have no off-balance sheet debt or unrecorded obligations and have not guaranteed the debt of any other party. The following table summarizes our future payments we are obligated to make based on agreements in place as of December 31, 2017:September 30, 2021:
Payments due in: | ||||||||||||||||
Total | less than 1 year | 1 - 3 years | over 3 years | |||||||||||||
Contractual obligations: | ||||||||||||||||
Leases (1) | $ | 165,013 | $ | 50,421 | $ | 114,593 | $ | - |
Payments due in: | ||||||||||||||||
Total | less than 1 year | 1 - 3 years | over 3 years | |||||||||||||
Contractual obligations: | ||||||||||||||||
Secured bank line of credit (1) | $ | 950,000 | $ | - | $ | 950,000 | $ | - | ||||||||
Leases (2) | $ | 4,755 | $ | 4,755 | $ | - | $ | - |
(1) | ||
The lease amount represents the monthly rent amount for our principal office space in Midland, Texas under a |
Results of Operations – Three Months Ended December 31, 2017 and 2016.September 30, 2021 Compared to Three Months Ended September 30, 2020. ForThere was net income of $708,828 for the quarter ended December 31, 2017, the net loss of $101,228September 30, 2021 compared to a net loss of $159,741$41,970 for the quarter ended December 31, 2016September 30, 2020. This was a result of an increase in oil and gas revenuesprices and an increase in oil and gas production partially offset by an increase in total operating expenses asthat is further explained below.
Oil and gas salessales.. Revenue from oil and gas sales was $641,468$1,541,171 for the thirdsecond quarter of fiscal 2018, an 11%2022, a 145% increase from $580,419$629,964 for the same period of fiscal 2017.2021. This resulted from an increase in oil and gas prices partially offset by a decreaseas well as an increase in oil and gas production. This decrease in production was primarily due to the sale of our operated oil and gas properties in Pecos County, Texas and to a lesser extent, the shut-in of current production in certain fields with drilling and completion activities. The following table sets forth our oil and gas revenues, production quantities and average prices received during the three months ended December 31, 2017 and 2016:
2021 | 2020 | % Difference | ||||||||||
Oil: | ||||||||||||
Revenue | $ | 1,133,134 | $ | 504,957 | 124.4 | % | ||||||
Volume (bbls) | 16,277 | 13,143 | 23.8 | % | ||||||||
Average Price (per bbl) | $ | 69.62 | $ | 38.42 | 81.2 | % | ||||||
Gas: | ||||||||||||
Revenue | $ | 408,037 | $ | 125,007 | 226.4 | % | ||||||
Volume (mcf) | 92,607 | 88,890 | 4.2 | % | ||||||||
Average Price (per mcf) | $ | 4.41 | $ | 1.41 | 212.8 | % |
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2017 | 2016 | % Difference | ||||||||||
Oil: | ||||||||||||
Revenue | $ | 434,729 | $ | 376,014 | 15.6 | % | ||||||
Volume (bbls) | 8,209 | 8,502 | (3.4 | %) | ||||||||
Average Price (per bbl) | $ | 52.96 | $ | 44.23 | 19.7 | % | ||||||
Gas: | ||||||||||||
Revenue | $ | 206,739 | $ | 204,405 | 1.1 | % | ||||||
Volume (mcf) | 76,033 | 87,512 | (13.1 | %) | ||||||||
Average Price (per mcf) | $ | 2.72 | $ | 2.34 | 16.2 | % |
Production and exploration.Production costs were $248,865$335,588 for the thirdsecond quarter of fiscal 2018,2022, a 6%55% increase from $234,372$217,117 for the same period of fiscal 2017.2021. This increase is primarily the result of an increase in lease operating expense for well repairs on non-operated properties and an increase in production taxes due toand marketing charges as a result of the increase in oil and gas sales.revenues.
Depreciation, depletion and amortization. Depreciation, depletion and amortization expense was $247,801$280,060 for the thirdsecond quarter of fiscal 2018,2022, a 10% decrease19% increase from $273,885$236,134 for the same period of fiscal 2017,2021, primarily due to a decrease in oil and gas production and the full cost pool as a result of oil and gas property sales. And additionally due to an increase in oil and gas production and a decrease in oil and gas reserves partially offset by an increasea decrease in future development costs.the full cost pool amortization base.
General and administrative expenses.General and administrative expenses were $225,528$214,242 for the thirdsecond quarter of fiscal 2018, a 13%2022, an 11% increase from $199,995$192,360 for the same period of fiscal 2017.2021. This was primarily due to an increase in engineering services, accounting fees,office and salaries partially offset by a decrease inrent expenses and employee stock option compensation expense and insurance expense.
Interest expense.Interest expense was $25,360$7,530 for the thirdsecond quarter of fiscal 2018,2022, a 22%44% decrease from $32,378$13,515 for the same period of fiscal 2017,2021, due to a decrease in borrowings partially offset by an increase in interest rate.borrowings.
Income taxes.There was no income tax expense for the quarterthree months ended December 31, 2017September 30, 2021 and for the quarterthree months ended December 31, 2016.September 30, 2020. The effective tax rate for the three months ended December 31, 2017September 30, 2021 and December 31, 2016September 30, 2020 was 0%. We are in a net deferred tax asset position and believe it is more likely than not that these deferred tax assets will not be realized.
Results of Operations – NineSix Months Ended December 31, 2017 and 2016.September 30, 2021 Compared to Six Months Ended September 30, 2020. For the ninesix months ended December 31, 2017, theSeptember 30, 2021, there was net lossincome of $585,950$1,103,834 compared to a net loss of $691,099$341,640 for the ninesix months ended December 31, 2016September 30, 2020. This was a result of an increase in operating revenues partially offset by an increase in total operating expenses asthat is further explained below.
Oil and gas salessales.. Revenue from oil and gas sales was $1,903,361$2,796,736 for the ninesix months ended December 31, 2017,September 30, 2021, a 14%181% increase from $1,662,985$994,143 for the same period of fiscal 2017.2021. This resulted from an increase in oil and gas prices partially offset by a decreaseas well as an increase in oil and gas production. This decrease in production was primarily due to the sale of our operated oil and gas properties in Pecos County, Texas and to a lesser extent, the shut-in of current production in certain fields with drilling and completion activities. The following table sets forth our oil and gas revenues, production quantities and average prices received during the nine months ended December 31, 2017 and 2016:
2017 | 2016 | % Difference | 2021 | 2020 | % Difference | |||||||||||||||||||
Oil: | ||||||||||||||||||||||||
Revenue | $ | 1,240,151 | $ | 1,117,525 | 11.0 | % | $ | 2,120,237 | $ | 787,327 | 169.3 | % | ||||||||||||
Volume (bbls) | 26,178 | 26,434 | (1.0 | %) | 31,715 | 24,677 | 28.5 | % | ||||||||||||||||
Average Price (per bbl) | $ | 47.37 | $ | 42.28 | 12.0 | % | $ | 66.85 | $ | 31.91 | 109.5 | % | ||||||||||||
Gas: | ||||||||||||||||||||||||
Revenue | $ | 663,210 | $ | 545,460 | 21.6 | % | $ | 676,499 | $ | 206,816 | 227.1 | % | ||||||||||||
Volume (mcf) | 250,049 | 266,606 | (6.2 | %) | 182,670 | 168,406 | 8.5 | % | ||||||||||||||||
Average Price (per mcf) | $ | 2.65 | $ | 2.05 | 29.3 | % | $ | 3.70 | $ | 1.23 | 200.8 | % |
Other operating revenue.Other operating revenue was $38,342 for the nine months ended December 31, 2017 compared to $178,174 for the nine months ended December 31, 2016 due to the settlement of a lawsuit for underpayment of royalties from Chesapeake Energy Corporation and Total E & P USA in the amount of $148,614 during fiscal 2017.
Production and exploration.Production costs were $813,570$612,575 for the ninesix months ended December 31, 2017,September 30, 2021, a 13%58% increase from $721,864$388,783 for the ninesix months ended December 31, 2016.September 30, 2020. This wasincrease is primarily the result of an increase in lease operating expenses and production taxes due toas a result of the increase in oil and gas revenue.revenues and an increase in lease operating expenses over last year due to numerous wells being shut-in during the month of May 2020 as well as cost cutting measures being implemented by the operators because of the depressed oil and gas prices during the pandemic.
Depreciation, depletion and amortization. Depreciation, depletion and amortization expense was $844,566$544,380 for the ninesix months ended December 31, 2017, a 4% decreaseSeptember 30, 2021, an 18% increase from $879,637$460,239 for the ninesix months ended December 31, 2016,September 30, 2020, primarily due to a decrease in oil and gas production and the full cost pool as a result of oil and gas property sales. And additionally due to an increase in oil and gas production and a decrease of oil and gas reserves partially offset by an increasea decrease in future development costs.the full cost pool amortization base.
General and administrative expenses.General and administrative expenses were $765,056$522,409 for the ninesix months ended December 31, 2017, a 2% decreaseSeptember 30, 2021, an 18% increase from $780,608$441,238 for the ninesix months ended December 31, 2016.September 30, 2020. This was primarily due to our effortsan increase in bonuses and director’s fees which were significantly reduced last year due to apply financial discipline in all areas of our business resulting in a decrease in engineering services, insurance expense, legal feesthe pandemic and stock option compensation expense partially offset by an increase in accounting fees and salaries.fees.
Interest expense.Interest expense was $79,310$20,249 for the ninesix months ended December 31, 2017, a 36%September 30, 2021, an 18% decrease from $123,385$24,570 for the nine months ended December 31, 2016same period fiscal 2021 due to a decrease in borrowings partially offset by an increase in interest rate.borrowings.
Income taxes.There was no income tax expense for the ninesix months ended December 31, 2017September 30, 2021 and for the ninesix months ended December 31, 2016.September 30, 2020. The effective tax rate for the ninesix months ended December 31, 2017September 30, 2021 and December 31, 2016September 30, 2020 was 0%. We are in a net deferred tax asset position and believe it is more likely than not that these deferred tax assets will not be realized.
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Item 3. Quantitative and Qualitative Disclosures About Market Risk
The primary sourcessource of market risk for us includeincludes fluctuations in commodity prices and interest rates.prices. All of our financial instruments are for purposes other than trading.
Interest Rate Risk. At December 31, 2017, we had an outstanding loan balance of $950,000 under our revolving credit agreement, which bears interest at an annual rate equal to the BBA LIBOR daily floating rate, plus 3.0 percentage points. If the interest rate on our bank debt increases or decreases by one percentage point, our annual pretax income would change by $9,500 based on the outstanding balance at December 31, 2017.
Credit Risk. Credit risk is the risk of loss as a result of nonperformance by other parties of their contractual obligations. At December 31, 2017, our largest credit risk was $200,000 or 32% of our total accounts receivables which related to escrow pending payment of closing costs on our property sale in Midland and Ward Counties, Texas. Our primary credit risk is related to oil and gas production sold to various purchasers and the receivables are generally not collateralized. At December 31, 2017,September 30, 2021, our largest credit risk associated with any single purchaser was $68,330$594,715 or 17%76% of our total oil and gas receivables. We are also exposed to credit risk in the event of nonperformance from any of our working interest co-owners. At December 31, 2017, our largest credit risk associated with any working interest partner was $8,718 or 29% of our total trade receivables. We have not experienced any significant credit losses.
Energy Price Risk.Risk. Our most significant market risk is the pricing forapplicable to our crude oil and natural gas and crude oil.production. Our financial condition, results of operations, and capital resources are highly dependent upon the prevailing market prices of, and demand for, oil and natural gas. PricesPricing for oil and natural gas fluctuate widely. We cannot predict future oil and natural gas prices with any certainty. Historically, the markets for oil and gas haveproduction has been volatile and they are likelyunpredictable for several years, and we expect this volatility to continue in the future.
For example, in the last twelve months, the NYMEX West Texas Intermediate (“WTI”) posted price for crude oil has ranged from a low of $31.75 per bbl in October 2020 to be volatile.
Factors that can causea high of $71.43 per bbl in September 2021. The Henry Hub Spot Market Price (“Henry Hub”) posted price fluctuations include the level of global demand for petroleum products, foreign and domestic supply of oil and gas, the establishment of and compliance with production quotas by oil-exporting countries, weather conditions, the price and availability of alternative fuels and overall political and economic conditions in oil producing countries.
Declines in oil and natural gas prices will materially adversely affect our financial condition, liquidity, abilityhas ranged from a low of $1.41 per MMBtu in October 2020 to obtain financing and operating results. Changesa high of $23.86 per MMBtu in February 2021. On September 30, 2021, the WTI posted price for crude oil and gas prices impact both estimated future net revenuewas $71.01 and the estimated quantity of proved reserves. Any reduction in reserves, including reductions due toHenry Hub posted price fluctuations, can reduce the borrowing base under our revolving credit facility and adversely affect the amount of cash flow available for capital expenditures and our ability to obtain additional capital for our acquisition, exploration and development activities. In addition, a noncash write-down of our oil and gas properties could be required under full cost accounting rules if prices declined significantly, even if it is only for a short period of time. Lower prices may also reduce the amount of crude oil and natural gas that can be produced economically. Thus, we may experience material increases or decreases in reserve quantities solely as a resultwas $5.58. See Results of price changesOperations above for the Company’s realized prices during the three and not as a result of drilling or well performance.six months.
Similarly, any improvements in oil and gas prices can have a favorable impact on our financial condition, results of operations and capital resources. Oil and natural gas prices do not necessarily fluctuate in direct relationship to each other. Our financial results are more sensitive to movements in oil prices than gas prices because most of our production is oil. If the average oil price had increased or decreased by ten dollars per barrel for the first ninesix months of fiscal 2018,2022, our pretax income or loss would have changedincreased or decreased by $261,780.$317,150. If the average gas price had increased or decreased by one dollar per mcf for the first ninesix months of fiscal 2018,2022, our pretax income or loss would have changedincreased or decreased by $250,049.$182,670.
Information about market risks for the six months ended September 30, 2021, does not differ materially from that discussed under Item 7A of the registrant’s 2021 Annual Report on Form 10-K.
Item 4. Controls and Procedures
Evaluation of Disclosure Controls and Procedures.We maintain disclosure controls and procedures to ensure that the information we must disclose in our filings with the SEC is recorded, processed, summarized and reported on a timely basis. At the end of the period covered by this report, our principal executive officer and principal financial officer reviewed and evaluated the effectiveness of our disclosure controls and procedures, as defined in Exchange Act Rules 13a-15(f)13a-15(e). Based on such evaluation, such officers concluded that, as of December 31, 2017,September 30, 2021, our disclosure controls and procedures were effective.
Changes in Internal Control over Financial Reporting.No changes in our internal control over financial reporting occurred during the ninesix months ended December 31, 2017September 30, 2021 that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.
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PART II – OTHER INFORMATION
We may, from time to time, be involved in litigation and claims arising out of our operations in the normal course of business. We are not aware of any legal or governmental proceedings against us, or contemplated to be brought against us, under various environmental protection statutes or other regulations to which we are subject.
Item 1A. Risk Factors
There have been no material changes to the information previously disclosed in Item 1A. “Risk Factors” in our 20172021 Annual Report on Form 10-K.
Item 2.Unregistered Sales of Equity Securities and Use of Proceeds
None
Item 3.Defaults Upon Senior Securities
None
Item 4.Mine Safety Disclosures
None
None
31.1 | Certification of the Chief Executive Officer of Mexco Energy Corporation | |
31.2 | Certification of the Chief Financial Officer of Mexco Energy Corporation | |
32.1 | Certification of the Chief Executive Officer and Chief Financial Officer of Mexco Energy Corporation pursuant to 18 U.S.C. §1350 | |
101.INS 101.SCH 101.CAL 101.DEF 101.LAB 101.PRE | iXBRL Instance Document iXBRL Taxonomy Extension Schema Document iXBRL Taxonomy Calculation Linkbase Document iXBRL Taxonomy Extension Definition Linkbase Document iXBRL Taxonomy Label Linkbase Document iXBRL Taxonomy Presentation Linkbase Document | |
104 | Cover Page Interactive Data File (formatted as Inline XBRL and contained in Exhibit 101). |
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Pursuant to the requirements of the Securities and Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.
MEXCO ENERGY CORPORATION | ||
(Registrant) | ||
Dated: | /s/Nicholas C. Taylor | |
Nicholas C. Taylor | ||
Chairman of the Board and Chief Executive Officer | ||
Dated: | /s/Tamala L. McComic | |
Tamala L. McComic | ||
President, Chief Financial Officer, Treasurer and Assistant Secretary |
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