PR Newswire | Dec 10, 2020 04:30PM EST

Dividend Payment

12/10 15:30 CST

PHX MINERALS INC. Reports Fourth Quarter And Fiscal 2020 Results And Announces Dividend Payment OKLAHOMA CITY, Dec. 10, 2020

OKLAHOMA CITY, Dec. 10, 2020 /PRNewswire/ -- PHX MINERALS INC., "PHX" or the "Company," (NYSE: PHX), today reported financial and operating results for the fourth quarter and fiscal year ended Sept. 30, 2020.

Chad L. Stephens, President and CEO, commented, "In many respects, the COVID-19 pandemic impacted the energy industry harder than any other major sector of the U.S. economy in 2020. While natural gas and oil prices have rebounded recently, 2020 saw some of the largest price declines in decades causing producers to quickly shut-in production, slash capital investments and significantly reduce overhead including workforce reductions.

"Despite the impact of the pandemic, we have made significant progress throughout this year on the strategy we laid out in January to focus solely on minerals, high grade the asset base and maintain a flexible balance sheet. We are pleased to see our sequential quarter financial performance improve materially. For the full fiscal year, we have paid down our debt through operating cash flow by $6.7 million, or roughly 20%; controlled cash expenses, which are down approximately $4 million, or 19%; reaffirmed our bank borrowing base; closed on an acquisition for total consideration of $9.3 million and executed a common equity offering of 5.75 million shares to fund additional acquisitions. Since the Sept. 30, 2020, fiscal year end, we have also closed on or entered into a purchase and sales agreement to acquire additional minerals in the SCOOP and Haynesville plays for total cash consideration of $7.3 million. Additionally, we changed our name and logo to better align ourselves with our core strategy. When looking toward the horizon, we estimate we will have completely eliminated our debt within four years, using operating cash flows at current strip prices. The hedges we have in place protect operating cash flows and allow us to weather the volatility in the market. As we pay down debt, our financial position will get stronger and allow us to allocate more capital to our core growth strategy of making value accretive mineral acquisitions. We also believe that the current sector dislocation will provide us with additional opportunities to use our public company platform to be an active minerals consolidator over the next few years."

HIGHLIGHTS FOR THE PERIODS ENDED SEPT. 30, 2020 AND SUBSEQUENT EVENTS

* Production volumes for the fourth fiscal quarter of 2020 were 2,038 Mmcfe, up from 1,904 Mmcfe in the third fiscal quarter of 2020 and down from 2,555 Mmcfe in the fourth fiscal quarter of 2019. * Production volumes for the full fiscal year 2020 were 8,593 Mmcfe, down from 10,359 Mmcfe in the full fiscal year 2019. * Recorded a net loss in fiscal 2020 of $24.0 million or $1.41 per share, as compared to net loss of $40.7 million or $2.43 per share in fiscal 2019. Net loss in both years was primarily due to non-cash impairments. Adjusted pre-tax net income(1) in fiscal 2020 was $0.9 million or $0.05 per share, as compared to $16.7 million or $1.00 per share in fiscal 2019. * Adjusted EBITDA(1) for the fourth fiscal quarter of 2020 was $2.7 million, up from $1.2 million in the third fiscal quarter of 2020 and down from $9.5 million in the fourth fiscal quarter of 2019. This includes gain on sale of assets in the 2020 and 2019 fiscal fourth quarters of $0.7 million and $5.9 million, respectively. * Adjusted EBITDA(1) for the full fiscal year 2020 was $13.5 million, down from $36.9 million in the full fiscal year 2019. This includes gain on sale of assets in 2020 and 2019 of $4.0 million and $19.0 million, respectively. * Reduced debt 19% from $35.4 million as of Sept. 30, 2019, to $28.8 million, as of Sept. 30, 2020. Debt has been further reduced to $27.3 million as of Dec. 1, 2020. * Debt to adjusted EBITDA (TTM) ratio was 2.14x at Sept. 30, 2020. * On Oct. 8, 2020, the Company closed on the purchase of 297 net royalty acres in Grady County, Okla., and 257 net mineral acres and 12 net royalty acres in Harrison, Panola and Nacogdoches Counties, Texas, for a purchase price of $5.5 million and 153,375 shares of PHX common stock. * On Nov. 12, 2020, the Company closed on the purchase of 134 net mineral acres in San Augustine County, Texas, for a purchase price of $750,000. * On Dec. 4, 2020, the Company signed a purchase and sale agreement to purchase an additional 87 net mineral acres in San Augustine County, Texas, for a purchase price of $1 million, subject to customary closing adjustments. The Company expects this acquisition to close in the first fiscal quarter of 2021. * On Dec. 4, 2020, the Company entered into an Eighth Amendment to the Credit Facility, which reaffirmed the Company's borrowing base. * Approved a payment of a one cent per share dividend payable on March 5, 2021, to stockholders of record on Feb. 19, 2021.

(1) This is a non-GAAP measure. Refer to the Non-GAAP Reconciliation section.

OPERATING HIGHLIGHTS

Fourth Fourth Year Ended Year Ended Quarter Ended Quarter Ended

Sept. 30, Sept. 30, Sept. 30, Sept. 30, 2020 2019 2020 2019

Mcfe Sold 2,037,779 2,555,085 8,593,153 10,359,509

Average Sales Price $ 2.47 $ 3.21 $ 2.72 $ 3.80per Mcfe

Gas Mcf Sold 1,423,602 1,786,167 5,962,705 7,086,761

Average Sales Price $ 1.68 $ 1.90 $ 1.72 $ 2.48per Mcf

Oil Barrels Sold 55,626 75,934 269,785 329,199

Average Sales Price $ 37.80 $ 55.28 $ 41.47 $ 55.07per Barrel

NGL Barrels Sold 46,737 52,219 168,623 216,259

Average Sales Price $ 11.84 $ 11.50 $ 11.42 $ 17.10per Barrel

FINANCIAL HIGHLIGHTS

Fourth Quarter Fourth Quarter Year Ended Year Ended Ended Ended

Sept. 30, 2020 Sept. 30, 2019 Sept. 30, 2020 Sept. 30, 2019

Working Interest Sales $ 2,937,807 $ 5,253,699 $ 12,914,080 $ 25,418,411

Royalty Interest Sales $ 2,103,179 $ 2,941,962 $ 10,455,923 $ 13,991,625

Natural Gas, Oil and NGL Sales $ 5,040,986 $ 8,195,661 $ 23,370,003 $ 39,410,036

Lease Bonuses and Rental Income $ 118,174 $ 594,700 $ 690,961 $ 1,547,078

Total Revenue $ 4,372,618 $ 15,728,084 $ 28,965,819 $ 66,035,685

LOE per Mcfe $ 0.48 $ 0.69 $ 0.56 $ 0.62

Transportation, Gathering and $ 0.55 $ 0.58 $ 0.56 $ 0.59Marketing per Mcfe

Production Tax per Mcfe $ 0.09 $ 0.13 $ 0.12 $ 0.18

G&A Expense per Mcfe $ 0.84 $ 1.05 $ 0.93 $ 0.83

Interest Expense per Mcfe $ 0.16 $ 0.17 $ 0.15 $ 0.19

DD&A per Mcfe $ 1.24 $ 2.50 $ 1.32 $ 1.76

Total Expense per Mcfe $ 3.36 $ 5.12 $ 3.64 $ 4.17

Impairment $ - $ 76,824,337 $ 29,904,528 $ 76,824,337

Net Income $ (1,834,122) $ (56,153,780) $ (23,952,037) $ (40,744,938)

Adj. Pre-Tax Net Income (Loss) ^(1) $ (125,024) $ 2,650,922 $ 865,282 $ 16,690,239

Adjusted EBITDA ^(1) $ 2,723,331 $ 9,470,758 $ 13,465,853 $ 36,882,611

Cash Flow from Operations $ 1,280,555 $ 6,672,733 $ 11,106,295 $ 21,005,684

CapEx - Drilling & Completing $ 206,968 $ 176,367 $ 403,136 $ 3,526,007

CapEx - Mineral Acquisitions $ 15,766 $ 542,403 $ 10,288,250 $ 5,662,869

Borrowing Base $ 31,000,000 $ 70,000,000

Debt $ 28,750,000 $ 35,425,000

Debt/Adjusted EBITDA (TTM) ^(1) 2.14 0.96

^(1) This is a non-GAAP measure. Refer to the Non-GAAP Reconciliation section.

FOURTH QUARTER 2020 RESULTS

Natural gas, oil and NGL revenue decreased 38% in the 2020 quarter as production decreased 20% and product prices decreased 23%, relative to the 2019 quarter. The 2020 quarter included a $1.5 million loss on derivative contracts as compared to a $1.1 million gain for the 2019 quarter.

Total production decreased 20% in the 2020 quarter, as compared to the 2019 quarter. Total production decreased due to naturally declining production in the Eagle Ford, Arkoma Stack, STACK and, to a lesser extent, the Fayetteville, production downtime in high interest wells in the Arkoma Stack, postponement of workovers due to prevailing economic conditions in high interest wells in the Eagle Ford, and asset sales in 2019 and 2020 in the Permian Basin in Texas and New Mexico. These decreases were slightly offset by a ten-well drilling program in the Bakken that came online in November 2019 and mineral acquisitions of Bakken and STACK producing properties in late 2019.

In the fourth quarter of 2020, the Company sold open and non-producing net mineral acres in northwest Oklahoma for a gain of $717,640. In the fourth quarter of 2019, the Company sold working interests in Martin County, Texas, and mineral acreage in Reagan, Upton, Loving, Martin, Ward and Reeves Counties, Texas, for a gain of $5,858,701.

The 34% decrease in total cost per Mcfe in the 2020 quarter, relative to the 2019 quarter, was primarily driven by a decrease in DD&A. DD&A decreased $3,855,882, or 60%, in the 2020 quarter to $1.24 per Mcfe, as compared to $2.50 per Mcfe in the 2019 quarter. Of the decrease, $1,293,263 was a result of production decreasing 20% in the 2020 quarter. Also, DD&A decreased $2,562,619 as a result of a $1.26 decrease in the DD&A rate per Mcfe (due to impairments taken at the end of fiscal 2019 and the 2020 second quarter), which lowered the basis of the assets. The rate decrease was partially offset by lower natural gas, oil and NGL prices utilized in the reserve calculations during the 2020 quarter, as compared to the 2019 quarter, shortening the economic life of wells.

No impairment charge was recorded during the 2020 quarter. In the fourth quarter of 2019, impairment was $76,824,337, of which $76,560,376 was recorded on the Eagle Ford assets. The remaining $263,961 of impairment was taken on various other assets. The impairment on the Eagle Ford assets was triggered by the Company making the strategic decision to cease participating with a working interest on its mineral and leasehold acreage going forward and, therefore, removing all working interest PUDs from the reserve reports. The removal of the PUDs caused the Eagle Ford assets to fail the step one test for impairment, as its undiscounted cash flows were not high enough to cover the book basis of the assets. These assets were written down to their fair market value as required by GAAP.

The Company's net income (loss) changed from net loss of $56.2 million in the 2019 quarter to a net loss of $1.8 million in the 2020 quarter. The change was primarily due to the non-cash impairment (as noted above) in 2019, as well as lower expenses in 2020, partially offset by lower gain on asset sales and loss on derivative contracts in 2020. Adjusted pretax net income(1) was $2.7 million in the 2019 quarter, as compared to $0.1 million adjusted pretax net loss(1) in the 2020 quarter.

^(1) This is a non-GAAP measure. Refer to the Non-GAAP Reconciliation section.

FISCAL YEAR 2020 RESULTS

Natural gas, oil and NGL revenue decreased 41% in 2020 as production decreased 17% and product prices decreased 28%, relative to 2019. Fiscal 2020 total revenues included a $4.0 million gain on asset sales and also included a $0.9 million gain on derivative contracts, as compared to a $19.0 million gain on asset sales and $6.1 million gain on derivative contracts for 2019.

Total production decreased 17% in 2020, as compared to 2019. This decrease for 2020 was due to factors consistent with those discussed above. The Company also elected not to participate with a working interest in any wells proposed on its mineral acreage during 2020 or 2019.

In 2020, the Company sold 530 net mineral acres in Eddy County, N.M., for a gain on sales of $3.3 million. The Company also sold 5,925 open and non-producing net mineral acres in northwest Oklahoma for a net gain on sales of $0.7 million. In 2019, the Company sold 975 net mineral and royalty acres for a net gain on sales of $18.7 million.

The 13% decrease in total cost per Mcfe in 2020, relative to 2019, was primarily driven by a decrease in DD&A as noted above.

The Company's net loss changed from net loss of $40.7 million in 2019 to a net loss of $24.0 million in 2020. The majority of the loss in 2019 and 2020 was due to the non-cash impairments. In 2020, net loss was also driven by lower natural gas, oil and NGL sales due to lower commodity prices and decreased production.

During the year, the Company paid down $6.7 million of debt under the Company's credit facility.

OPERATIONS UPDATE

At Nov. 20, 2020, the Company had a total of 115 gross wells (0.51 net wells) in progress across its mineral positions and 107 gross active permitted wells. As of Nov. 20, 2020, there were four rigs operating on the Company's acreage and 32 rigs operating within 2.5 miles of its acreage.

Bakken /

Three Arkoma

SCOOP STACK Forks Stack Permian Fayetteville Haynesville Other Total

As of 11/20/20:

Gross Wells in Progress on PHX Acreage 46 31 5 1 4 - 21 7 115

Net Wells in Progress on PHX Acreage 0.09 0.16 - - 0.14 - 0.05 0.07 0.51

Gross Active Permits on PHX Acreage 31 22 25 10 - - 1 18 107

As of 11/20/20:

Rigs Present on PHX Acreage 4 - - - - - - - 4

Rigs Within 2.5 Miles of PHX Acreage 10 2 4 - 4 - 7 5 32

Leasing Activity

During the fourth quarter of fiscal 2020, the Company leased 205 net mineral acres for an average bonus payment of $583 and an average royalty of 23%.

Bakken /

Three Arkoma

SCOOP STACK Forks Stack Permian Fayetteville Haynesville Other Total

During Three Months Ended 9/30/20:

Net Mineral Acres Leased 52 14 - - 139 - - - 205

Average Bonus per Net Mineral Acre $ 125 $ 2,500 - - $ 1,063 - - - $ 583

Average Royalty per Net Mineral Acre 23% 13% - - 25% - - - 23%

ACQUISITION AND DIVESTITURE UPDATE

During the fourth quarter of fiscal 2020, the Company sold 5,925 predominantly open and non-producing net mineral acres at an average price of $134 per acre and did not purchase any net mineral acres.

Bakken /

Three Arkoma

SCOOP STACK Forks Stack Permian Fayetteville Haynesville Other Total

During Three Months Ended 9/30/20:

Net Mineral Acres Purchased - - - - - - - - -

Price per Net Mineral Acre - - - - - - - - -

Net Mineral/Royalty Acres Sold - 363 - - - - - 5,562 5,925

Price per Net Mineral/Royalty Acre - $ 134 - - - - - $ 134 $ 134

RESERVES UPDATE

At Sept. 30, 2020, proved reserves were 57.7 Bcfe, as calculated by DeGolyer and MacNaughton, the Company's independent consulting petroleum engineering firm. This was a 46% decrease, compared to the 106.4 Bcfe of proved reserves at Sept. 30, 2019. Total proved developed reserves decreased 39% to 54.6 Bcfe, as compared to Sept. 30, 2019, reserve volumes, mainly due to 2020 production and pricing and performance revisions. The pricing revisions were due to wells reaching their economic limits earlier than projected in 2019. The performance revisions were principally due to lower performance of the Company's high-interest Woodford natural gas wells in the STACK and Arkoma Stack in Oklahoma and, to a lesser extent, lower performance of the Eagle Ford Shale oil properties in southern Texas. Total proved undeveloped reserves decreased 14.0 Bcfe principally due to the impact of COVID-19 and reduced pricing leading to an unprecedented decrease in operator activity in 2020 and a decision to remove PUD locations not permitted, in progress, or drilled and uncompleted (DUC). SEC prices used for the Sept. 30, 2020, report averaged $1.62 per Mcf for natural gas, $40.18 per barrel for oil and $9.95 per barrel for NGL, compared to $2.48 per Mcf for natural gas, $54.40 per barrel for oil and $19.30 per barrel for NGL for the Sept. 30, 2019, report. These prices reflect net prices received at the wellhead.

BORROWING BASE

On Dec. 4, 2020, the Company entered into an Eighth Amendment to the Credit Facility. The borrowing base after Quarterly Reduction Commitments was reaffirmed at $30.0 million. This amendment favorably reduced the Quarterly Commitment Reductions from $1,000,000 to $600,000. Additionally, the consolidated cash balance in the anti-cash hoarding provision was reduced from $2,000,000 to $1,000,000 and the debt to EBITDA ratio was reduced from 4.0:1.00 to 3.50:1.00.

FOURTH QUARTER EARNINGS CALL

PHX will host a conference call to discuss fourth quarter results at 5:00 p.m. EST on Dec. 10, 2020. Management's discussion will be followed by a question and answer session with investors. To participate on the conference call, please dial 844-369-8770 (domestic) or 862-298-0840 (international). A replay of the call will be available for seven days after the call. The number to access the replay of the conference call is 877-481-4010 and the PIN for the replay is 38618.

FINANCIALS

Statements of Operations

Three Months Ended Sept. 30, Year Ended Sept. 30,

2020 2019 2020 2019

Revenues:

Natural gas,oil and NGL $ 5,040,986 $ 8,195,661 $ 23,370,003 $ 39,410,036sales

Lease bonusesand rental 118,174 594,700 690,961 1,547,078income

Gains (losses)on derivative (1,507,982) 1,079,022 907,419 6,105,145contracts

Gain on asset 721,440 5,858,701 3,997,436 18,973,426sales

4,372,618 15,728,084 28,965,819 66,035,685

Costs andexpenses:

Lease operating 969,723 1,758,772 4,841,541 6,398,522expenses

Transportation,gathering and 1,116,587 1,487,945 4,812,869 6,089,903marketing

Production 187,628 337,598 1,022,912 1,902,636taxes

Depreciation,depletion and 2,519,996 6,375,878 11,313,783 18,196,583amortization

Provision for - 76,824,337 29,904,528 76,824,337impairment

Interest 328,359 443,958 1,286,788 1,995,789expense

General and 1,718,422 2,683,811 8,024,901 8,565,243administrative

Loss on assetsales and other 44,085 206,565 (466) 288,610expense(income)

6,884,800 90,118,864 61,206,856 120,261,623

Income (loss)beforeprovision (2,512,182) (74,390,780) (32,241,037) (54,225,938)(benefit) forincome taxes

Provision(benefit) for (678,060) (18,237,000) (8,289,000) (13,481,000)income taxes

Net income $ (1,834,122) $ (56,153,780) $ (23,952,037) $ (40,744,938)(loss)

Basic anddilutedearnings (loss) $ (0.07) $ (3.35) $ (1.41) $ (2.43)per commonshare

Basic anddilutedweightedaverage sharesoutstanding:

Common shares 18,289,502 16,362,493 16,856,792 16,575,160

Unissued,directors'deferred 147,341 175,463 154,142 168,586compensationshares

18,436,843 16,537,956 17,010,934 16,743,746

Dividendsdeclared pershare of

common stockand paid in $ 0.01 $ 0.04 $ 0.10 $ 0.16period

Balance Sheets

Sept. 30, 2020 Sept. 30, 2019

Assets

Current assets:

Cash and cash equivalents $ 10,690,395 $ 6,160,691

Natural gas, oil and NGL sales receivables 2,943,220 4,377,646(net of

allowance for uncollectable accounts)

Refundable income taxes 3,805,227 1,505,442

Derivative contracts, net - 2,256,639

Other 351,088 177,037

Total current assets 17,789,930 14,477,455

Properties and equipment, at cost, based on

successful efforts accounting:

Producing natural gas and oil properties 324,886,491 354,718,398

Non-producing natural gas and oil properties 18,993,814 14,599,023

Other 582,444 717,121

344,462,749 370,034,542

Less accumulated depreciation, depletion and (263,590,801) (258,607,521)amortization

Net properties and equipment 80,871,948 111,427,021

Investments 79,308 205,076

Derivative contracts, net - 237,505

Operating lease right-of-use assets 690,316 -

Other, net 590,333 297,890

Total assets $ 100,021,835 $ 126,644,947

Liabilities and Stockholders' Equity

Current liabilities:

Accounts payable $ 997,637 $ 665,160

Derivative contracts, net 281,942 -

Current portion of operating lease liability 127,108 -

Accrued liabilities and other 1,297,363 2,433,466

Short-term debt 1,750,000 -

Total current liabilities 4,454,050 3,098,626

Long-term debt 27,000,000 35,425,000

Deferred income taxes 1,329,007 5,976,007

Asset retirement obligations 2,897,522 2,835,781

Derivative contracts, net 425,705 -

Operating lease liability, net of current 921,625 -portion

Stockholders' equity:

Class A voting common stock, $0.01666 parvalue; 24,000,500 shares authorized;

22,647,306 issued at Sept. 30, 2020, andClass A voting common stock, $0.01666 par

value; 24,000,000 shares authorized; 377,304 281,50916,897,306 issued at Sept. 30, 2019

Capital in excess of par value 10,649,611 2,967,984

Deferred directors' compensation 1,874,007 2,555,781

Retained earnings 56,244,100 81,848,301

69,145,022 87,653,575

Less treasury stock, at cost; 411,487 sharesat Sept. 30, 2020; 558,051 shares

at Sept. 30, 2019 (6,151,096) (8,344,042)

Total stockholders' equity 62,993,926 79,309,533

Total liabilities and stockholders' equity $ 100,021,835 $ 126,644,947

Condensed Statements of Cash Flows

Year ended Sept. 30,

2020 2019

Operating Activities

Net income (loss) $ (23,952,037) $ (40,744,938)

Adjustments to reconcile net income (loss) tonet cash provided

by operating activities:

Depreciation, depletion and amortization 11,313,783 18,196,583

Impairment 29,904,528 76,824,337

Provision for deferred income taxes (4,647,000) (12,112,000)

Gain from leasing of fee mineral acreage (685,927) (1,546,298)

Proceeds from leasing of fee mineral acreage 701,948 1,565,649

Net (gain) loss on sale of assets (3,973,321) (18,730,197)

ESOP contribution expense 103,104 372,274

Directors' deferred compensation expense 228,408 272,491

Total (gain) loss on derivative contracts (907,419) (6,105,145)

Cash receipts (payments) on settled derivative 4,109,210 196,985contracts

Restricted stock awards 743,897 771,797

Other (2,611) 19,085

Cash provided (used) by changes in assets andliabilities:

Natural gas, oil and NGL sales receivables 1,434,426 2,723,983

Refundable income taxes (2,299,785) (1,472,277)

Other current assets (89,931) 21,116

Accounts payable 1,308,731 105,217

Other non-current assets (1,044,680) 7,166

Accrued liabilities (1,139,029) 639,856

Total adjustments 35,058,332 61,750,622

Net cash provided by operating activities 11,106,295 21,005,684

Investing Activities

Capital expenditures (403,136) (3,526,007)

Acquisition of minerals and overrides (10,288,250) (5,662,869)

Investments in partnerships - (1,648)

Proceeds from sales of assets 4,228,868 19,515,735

Net cash provided (used) by investing (6,462,518) 10,325,211activities

Financing Activities

Borrowings under debt agreement 6,061,725 16,642,481

Payments of loan principal (12,736,725) (32,217,481)

Net proceeds from equity issuance 8,220,726 -

Purchase of treasury stock (7,635) (7,454,000)

Payments of dividends (1,652,164) (2,673,706)

Net cash used in financing activities (114,073) (25,702,706)

Increase (decrease) in cash and cash 4,529,704 5,628,189equivalents

Cash and cash equivalents at beginning of year 6,160,691 532,502

Cash and cash equivalents at end of year $ 10,690,395 $ 6,160,691

Supplemental Disclosure of Cash FlowInformation

Interest paid (net of capitalized interest) $ 1,306,967 $ 2,031,762

Income taxes paid (net of refunds received) $ (1,342,275) $ 103,279

Supplemental Schedule of Noncash Investing andFinancing Activities

Additions and revisions, net, to asset $ 4 $ 27,782retirement obligations

Gross additions to properties and equipment $ 10,701,284 $ 9,248,415

Net (increase) decrease in accounts payable forproperties

and equipment additions (9,898) (59,539)

Capital expenditures and acquisitions $ 10,691,386 $ 9,188,876

Proved Reserves

Proved Reserves SEC Pricing

Sept. 30, 2020 Sept. 30, 2019

Proved Developed Reserves:

Mcf of Gas 40,924,083 67,713,193

Barrels of Oil 1,148,989 1,863,096

Barrels of NGL 1,135,864 1,747,242

Mcfe (1) 54,633,201 89,375,221

Proved Undeveloped Reserves:

Mcf of Gas 1,448,690 12,560,713

Barrels of Oil 184,668 516,994

Barrels of NGL 83,993 226,038

Mcfe (1) 3,060,656 17,018,905

Total Proved Reserves:

Mcf of Gas 42,372,773 80,273,906

Barrels of Oil 1,333,657 2,380,090

Barrels of NGL 1,219,857 1,973,280

Mcfe (1) 57,693,857 106,394,126

10% Discounted Estimated Future

Net Cash Flows (before income taxes):

Proved Developed $ 33,270,804 $ 86,814,212

Proved Undeveloped 5,659,479 23,581,427

Total $ 38,930,283 $ 110,395,639

SEC Pricing

Gas/Mcf $ 1.62 $ 2.48

Oil/Barrel $ 40.18 $ 54.40

NGL/Barrel $ 9.95 $ 19.30

Proved Reserves - Projected Future Pricing (2)

10% Discounted Estimated Future Proved Reserves

Net Cash Flows (before income taxes): Sept. 30, 2020 Sept. 30, 2019

Proved Developed $ 63,648,347 $ 99,204,697

Proved Undeveloped 7,197,350 27,518,415

Total $ 70,845,697 $ 126,723,112

(1) Crude oil and NGL converted to natural gas on a one barrel of crude oil orNGL equals six Mcf of natural gas basis

(2) Projected futures pricing as of Sept. 30, 2020, and Sept. 30, 2019, basisadjusted to Company wellhead price

Hedge Position as of Dec. 1, 2020

Period Product Volume Mcf Swap Collar Average Collar Average /Bbl Price Floor Price Ceiling Price

2020 Natural 226,000 $ 2.30 $ 3.00 Gas

2020 Natural 118,000 $ 2.70 Gas

2021 Natural 2,924,500 $ 2.33 $ 3.03 Gas

2021 Natural 1,014,500 $ 2.69 Gas

2022 Natural 1,402,500 $ 2.47 $ 3.14 Gas

2022 Natural 125,500 $ 2.70 Gas

2020 Crude 7,500 $ 46.47 $ 53.81 Oil

2020 Crude 20,000 $ 58.02 Oil

2021 Crude 51,000 $ 36.74 $ 44.79 Oil

2021 Crude 96,000 $ 37.00 Oil

2022 Crude 23,500 $ 36.89 $ 45.73 Oil

2022 Crude 49,000 $ 41.10 Oil

Non-GAAP Reconciliation

This news release includes certain "non-GAAP financial measures" under the rules of the Securities and Exchange Commission, including Regulation G. These non-GAAP measures are calculated using GAAP amounts in our financial statements.

Adjusted EBITDA Reconciliation

Adjusted EBITDA is defined as net income (loss) plus interest expense, provision for impairment, depreciation, depletion and amortization of properties and equipment, including amortization of other assets, provision (benefit) for income taxes and unrealized (gains) losses on derivative contracts. We have included a presentation of adjusted EBITDA because we recognize that certain investors consider adjusted EBITDA a useful means of measuring our ability to meet our debt service obligations and evaluating our financial performance. Adjusted EBITDA has limitations and should not be considered in isolation or as a substitute for net income, operating income, cash flow from operations or other consolidated income or cash flow data prepared in accordance with GAAP. Because not all companies use identical calculations, this presentation of adjusted EBITDA may not be comparable to a similarly titled measure of other companies. The following table provides a reconciliation of net income (loss) to adjusted EBITDA for the periods indicated.

Fourth Fourth Quarter Year Ended Year Ended Quarter Ended Ended

Sept. 30, Sept. 30, 2019 Sept. 30, 2020 Sept. 30, 2019 2020

Net Income $ (1,834,122) $ (56,153,780) $ (23,952,037) $ (40,744,938)(Loss)

Plus:

Unrealized(gains) 2,387,158 217,365 3,201,791 (5,908,160)losses onderivatives

IncomeTax Expense (678,060) (18,237,000) (8,289,000) (13,481,000)(Benefit)

Interest 328,359 443,958 1,286,788 1,995,789Expense

DD&A 2,519,996 6,375,878 11,313,783 18,196,583

- 76,824,337 29,904,528 76,824,337Impairment

Adjusted $ 2,723,331 $ 9,470,758 $ 13,465,853 $ 36,882,611EBITDA

Adjusted Pre-Tax Net Income (Loss) Reconciliation

Adjusted pre-tax net income (loss) is defined as net income (loss) plus provision (benefit) for income taxes and unrealized (gains) losses on derivative contracts. We have included a presentation of adjusted pre-tax net income (loss) because we recognize that certain investors consider adjusted pre-tax net income (loss) a useful means of evaluating our financial performance. Adjusted pre-tax net income (loss) has limitations and should not be considered in isolation or as a substitute for net income, operating income, cash flow from operations or other consolidated income or cash flow data prepared in accordance with GAAP. Because not all companies use identical calculations, this presentation of adjusted pre-tax net income (loss) may not be comparable to a similarly titled measure of other companies. The following table provides a reconciliation of net income (loss) to adjusted pre-tax net income (loss) for the periods indicated.

Fourth Fourth Quarter Year Ended Year Ended Quarter Ended Ended

Sept. 30, Sept. 30, 2019 Sept. 30, 2020 Sept. 30, 2019 2020

Net Income $ (1,834,122) $ (56,153,780) $ (23,952,037) $ (40,744,938)(Loss)

Plus:

Impairment - 76,824,337 29,904,528 76,824,337

Unrealized(gains) 2,387,158 217,365 3,201,791 (5,908,160)losses onderivatives

Income TaxExpense (678,060) (18,237,000) (8,289,000) (13,481,000)(Benefit)

AdjustedPre-Tax Net $ (125,024) $ 2,650,922 $ 865,282 $ 16,690,239Income (Loss)

PHX Minerals Inc. (NYSE: PHX)Oklahoma City-based, PHX Minerals Inc. is a natural gas and oil mineral company with a strategy to proactively grow its mineral position in our core areas of focus. PHX owns approximately 253,000 net mineral acres principally located in Oklahoma, Texas, North Dakota, New Mexico and Arkansas. Approximately 71% of this mineral count is unleased and undeveloped. Additional information on PHX can be found at www.phxmin.com.

Cautionary Statement Regarding Forward-Looking Statements

This press release includes "forward-looking statements" within the meaning of Section 27A of the Securities Act of 1933 and Section 21E of the Securities Exchange Act of 1934. Words such as "anticipates," "plans," "estimates," "believes," "expects," "intends," "will," "should," "may" and similar expressions may be used to identify forward-looking statements. Forward-looking statements are not statements of historical fact and reflect the Company's current views about future events. Forward-looking statements may include, but are not limited to, statements relating to: our future financial and operating results; our ability to execute our business strategies; estimations and the respective values of natural gas, oil and NGL reserves; the level of production on our properties and the future expenses associated therewith; projections and volatility of future realized natural gas and oil prices; planned capital expenditures associated with our mineral, leasehold and non-operated working interests; statements concerning anticipated cash flow and liquidity; and our strategy and other plans and objectives for future operations. Although the Company believes the expectations reflected in these and other forward-looking statements are reasonable, we can give no assurance they will prove to be correct. Such forward-looking statements are subject to a number of assumptions, risks and uncertainties, many of which are beyond the control of the Company. These forward-looking statements involve certain risks and uncertainties that could cause the results to differ materially from those expected by the Company's management. Information concerning these risks and other factors can be found in the Company's filings with the Securities and Exchange Commission, including its Annual Reports on Form 10-K and Quarterly Reports on Form 10-Q, available on the Company's website or the SEC's website at www.sec.gov.

Investors are cautioned that any such statements are not guarantees of future performance and that actual results or developments may differ materially from those projected in forward-looking statements. The forward-looking statements in this press release are made as of the date hereof, and the Company does not undertake any obligation to update the forward-looking statements as a result of new information, future events or otherwise.

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SOURCE PHX MINERALS INC.