PR Newswire | May 6, 2021 04:15PM EDT

05/06 15:15 CDT

PHX MINERALS INC. Reports Second Quarter 2021 Results OKLAHOMA CITY, May 6, 2021

OKLAHOMA CITY, May 6, 2021 /PRNewswire/ -- PHX MINERALS INC., "PHX" or the "Company," (NYSE: PHX), today reported financial and operating results for the second quarter ended March 31, 2021.

SUMMARY OF RESULTS FOR THE PERIOD ENDED MARCH 31, 2021, AND SUBSEQUENT EVENTS

* Production volumes for the second fiscal quarter of 2021 were 2,297 Mmcfe, decreased from 2,373 Mmcfe in the second fiscal quarter of 2020 and increased from 2,074 Mmcfe in the first fiscal quarter of 2021. * Net loss in the second fiscal quarter of 2021 was $0.5 million, or $0.02 per share, as compared to net loss $20.5 million, or $1.24 per share, in the second fiscal quarter of 2020 and net loss of $0.6 million, or $0.03 per share, in the first fiscal quarter of 2021. * Adjusted EBITDA excluding gain on asset sales(1) for the second quarter of 2021 was $3.4 million, increased from $2.4 million in the second fiscal quarter of 2020 and $2.7 million in the first fiscal quarter of 2021. * On April 30, 2021, the Company closed on the previously announced acquisition of 2,514 net royalty acres in the SCOOP play of Oklahoma for approximately $8.5 million in cash and 1.2 million shares of PHX stock. * Reduced total debt 13% from $27.0 million as of Dec. 31, 2020, to $23.5 million as of March 31, 2021. As of April 30, 2021, debt had been further reduced by $1.75 million to $21.75 million. * Debt to adjusted EBITDA (TTM) (1) ratio was 2.34x at March 31, 2021. * Approved the payment of a one cent per share dividend payable on June 4, 2021, to stockholders of record on May 20, 2021.

Chad L. Stephens, President and CEO, commented, "PHX continues to achieve excellent results towards its stated objectives of growing the company through the strategic acquisition of producing minerals with line-of-sight development in our core focus areas, high grading our asset base by divesting of lower margin assets outside of our core focus areas and reducing our debt to strengthen our financial position.

"During the quarter, production volumes increased 11% sequentially. Significantly, for the first-time in the last 10 years, royalty production volumes exceeded working interest production volumes, which illuminates our stated mineral-only growth strategy. The increase in our volumes and the improved realized commodity prices, resulted in adjusted EBITDA(1) excluding gain on asset sales of $3.4 million, which was an increase of approximately 26%, or $0.7 million, over the first quarter of fiscal 2021.

"With our improved financial performance, we were able to reduce our debt by $3.5 million, or 13%, from the end of the first quarter of fiscal year 2021, which continues to improve our financial strength. Since the end of the second quarter, we paid down debt an additional $1.75 million, bringing our total borrowings to $21.75 million as of April 30, 2021. We now believe that our Debt to adjusted EBITDA (TTM) (1) will approximate 1.0x by calendar year end 2021. Overall, our credit profile has significantly improved, as compared to one year ago. We believe this puts us in a stronger position to allocate more of our capital to our stated strategy.

"Further, since quarter end, we completed our second equity offering over the last seven months which allowed us to fund our previously announced SCOOP-focused mineral acquisition in Oklahoma. This acquisition closed on Friday, April 30, 2021. We continue to see good deal flow and look forward to keeping you apprised of our efforts to continue to drive shareholder value."

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

OPERATING HIGHLIGHTS

Second Second Six Months Six Months Quarter Ended Quarter Ended Ended Ended

March 31, March 31, March 31, March 31, 2021 2020 2021 2020

Mcfe Sold 2,296,802 2,373,135 4,371,139 4,651,622

Average Sales Price $ 3.63 $ 3.04 $ 3.38 $ 3.18per Mcfe

Gas Mcf Sold 1,735,820 1,529,367 3,211,276 3,177,194

Average Sales Price $ 2.52 $ 1.64 $ 2.44 $ 1.89per Mcf

Oil Barrels Sold 56,269 93,141 114,945 159,021

Average Sales Price $ 55.89 $ 44.99 $ 47.73 $ 48.14per Barrel

NGL Barrels Sold 37,228 47,487 78,365 86,717

Average Sales Price $ 22.24 $ 11.05 $ 18.54 $ 13.14per Barrel

Total Production for the last four quarters was as follows:

Quarter ended Mcf Sold Oil Bbls Sold NGL Bbls Sold Mcfe Sold

3/31/2021 1,735,820 56,269 37,228 2,296,802

12/31/2020 1,475,456 58,675 41,138 2,074,334

9/30/2020 1,423,602 55,626 46,737 2,037,779

6/30/2020 1,361,909 55,138 35,169 1,903,752

Royalty Interest Production for the last four quarters was as follows:

Quarter ended Mcf Sold Oil Bbls Sold NGL Bbls Sold Mcfe Sold

3/31/2021 924,969 31,768 19,088 1,230,105

12/31/2020 487,925 27,840 14,948 744,653

9/30/2020 491,234 27,326 20,181 776,276

6/30/2020 544,249 28,468 16,574 814,501

Working Interest Production for the last four quarters was as follows:

Quarter ended Mcf Sold Oil Bbls Sold NGL Bbls Sold Mcfe Sold

3/31/2021 810,851 24,501 18,140 1,066,697

12/31/2020 987,531 30,835 26,190 1,329,681

9/30/2020 932,368 28,300 26,556 1,261,503

6/30/2020 817,660 26,670 18,595 1,089,251

FINANCIAL HIGHLIGHTS

Second Second Quarter Six Months Six Months Quarter Ended Ended Ended Ended

March 31, March 31, 2020 March 31, March 31, 2020 2021 2021

Working $ 3,851,478 $ 3,415,049 $ 7,759,002 $ 8,099,785Interest Sales

Royalty $ 4,494,347 $ 3,802,569 $ 7,011,802 $ 6,711,671Interest Sales

Natural Gas,Oil and NGL $ 8,345,825 $ 7,217,618 $ 14,770,804 $ 14,811,456Sales

Lease Bonusesand Rental $ 58,554 $ 22,092 $ 59,987 $ 549,791Income

Total Revenue $ 6,079,493 $ 11,311,287 $ 12,272,137 $ 21,887,818

LOE per Mcfe $ 0.45 $ 0.65 $ 0.47 $ 0.59

Transportation,Gathering and $ 0.57 $ 0.57 $ 0.59 $ 0.59Marketing perMcfe

Production Tax $ 0.19 $ 0.16 $ 0.16 $ 0.15per Mcfe

G&A Expense per $ 0.90 $ 0.92 $ 0.87 $ 0.95Mcfe

InterestExpense per $ 0.12 $ 0.15 $ 0.13 $ 0.15Mcfe

DD&A per Mcfe $ 0.77 $ 1.42 $ 0.92 $ 1.36

Total Expense $ 3.00 $ 3.87 $ 3.14 $ 3.79per Mcfe

Net Income $ (499,723) $ (20,454,814) $ (1,096,443) $ (18,562,700)(Loss)

Adj. Pre-TaxNet Income $ 1,333,989 $ (1,338,550) $ 1,535,619 $ 2,527,231(Loss) ^(1)

Adjusted EBITDA $ 3,379,671 $ 2,381,541 $ 6,143,848 $ 9,573,688^(1)

Cash Flow from $ 4,205,726 $ 4,009,901 $ 4,677,107 $ 6,108,342Operations

CapEx -Drilling & $ 297,015 $ 34,490 $ 425,098 $ 139,755Completing

CapEx - Mineral $ 64,758 $ 81,422 $ 7,934,504 $ 10,254,016Acquisitions

Borrowing Base $ 29,400,000 $ 45,000,000

Debt $ 23,500,000 $ 32,000,000

Debt/AdjustedEBITDA (TTM) ^ 2.34 1.14(1)

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

SECOND QUARTER 2021 RESULTS

The Company recorded a second quarter 2021 net loss of $499,723, or $0.02 per share, as compared to a net loss of $20,454,814, or $1.24 per share, in the second quarter 2020. This change in net loss was principally the result of increased natural gas, oil and NGL sales and decreased general and administrative expenses (G&A), lease operating expenses (LOE), transportation, gathering and marketing expenses, depreciation, depletion and amortization (DD&A) and impairment expense, partially offset by a decrease in gain (losses) on derivative contracts and income tax benefit.

Natural gas, oil and NGL revenue increased $1,128,207, or 16%, for the second quarter 2021, compared to the corresponding 2020 quarter due to increases in natural gas, oil and NGL prices of 54%, 24% and 101%, respectively, and an increase in natural gas production volumes of 13%, partially offset by decrease in oil and NGL production volumes of 40% and 22%, respectively.

The decrease in oil production was primarily due to naturally declining production in high-interest wells brought online during the first quarter of 2020 in the Bakken play, as well as reduced drilling and completion activity in 2021, compared to 2020 in the Eagle Ford and SCOOP plays due to prevailing economic conditions. The decrease in NGL production was primarily attributable to production downtime and curtailments in high-interest wells in response to market conditions in the SCOOP and STACK plays, as well as naturally declining production in liquid-rich gas areas of the Anadarko Granite Wash play. Natural gas volumes increased as a result of acquisitions in the Haynesville Shale, which were partially offset by naturally declining production in the Fayetteville Shale, production downtime and curtailments in high-interest wells in response to market conditions in the STACK and SCOOP plays.

The Company had a net loss on derivative contracts of $2,348,143 in the 2021 quarter, as compared to a net gain of $4,071,577 in the 2020 quarter. The net loss on derivative contracts in the current period was principally due to the natural gas and oil collars and fixed price swaps being less beneficial in relation to their respective contracted volumes and prices at the beginning of the period, compared to such natural gas and oil collars and fixed price swaps being more beneficial in the comparative period causing a net gain.

The 22% decrease in total cost per Mcfe in the 2021 quarter, relative to the 2020 quarter, was primarily driven by a decrease in DD&A. DD&A decreased $1,595,701, or 47%, in the 2021 quarter to $0.77 per Mcfe, as compared to $1.42 per Mcfe in the 2020 quarter. $108,393 of the decrease was a result of production decreasing 3% in the 2021 quarter and $1,487,308 of the decrease was as a result of a $0.65 decrease in the DD&A rate per Mcfe. The rate decrease was mainly due to impairments taken at the end of 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 2021 quarter, as compared to prices used for the 2020 quarter, shortening the economic life of wells. This resulted in lower projected remaining reserves on a significant number of wells causing increased units of production DD&A.

SIX MONTHS 2021 RESULTS

The Company recorded a six-month net loss of $1,096,443, or $0.05 per share, in the 2021 period, as compared to a net loss of $18,562,700, or $1.12 per share, in the 2020 period. The change in net loss was principally the result of decreased G&A, LOE, transportation, gathering and marketing expenses, DD&A and impairment expense, partially offset by a decrease in natural gas, oil and NGL sales, gain (losses) on derivative contracts, gain on asset sales and income tax benefit.

Natural gas, oil and NGL sales remained relatively consistent with decreases in oil and NGL volumes of 28% and 10%, respectively, partially offset by increases in natural gas and NGL prices of 29% and 41%, respectively.

The decrease in oil production was primarily due to naturally declining production in high-interest wells brought online during the first quarter of 2020 in the Bakken play, as well as reduced drilling and completion activity in 2021, compared to 2020 in the Eagle Ford and SCOOP plays due to prevailing economic conditions. The decrease in NGL production was primarily attributable to production downtime and curtailments in high-interest wells in response to market conditions in the SCOOP play as well as naturally declining production in liquid-rich gas areas of the Anadarko Granite Wash play. Natural gas volumes increased as a result of acquisitions in the Haynesville Shale, which were partially offset by naturally declining production in the Fayetteville Shale, production downtime and curtailments in high-interest wells in response to market conditions in the STACK and SCOOP plays.

The Company had a net loss on derivative contracts of $2,602,179 in the 2021 period, as compared to a net gain of $3,253,683 in the 2020 period. The net loss on derivative contracts in the current period was principally due to the natural gas and oil collars and fixed price swaps being less beneficial in relation to their respective contracted volumes and prices at the beginning of the period, compared to such natural gas and oil collars and fixed price swaps being more beneficial in the 2020 period causing a net gain.

The 17% decrease in total cost per Mcfe in the 2021 period, relative to the 2020 period, was primarily driven by a decrease in DD&A. DD&A decreased $2,290,753, or 36%, in the 2021 period to $0.92 per Mcfe, as compared to $1.36 per Mcfe in the 2020 period. $381,457 of the decrease was a result of production decreasing 6% in the 2021 period and $1,909,296 of the decrease was as a result of a $0.44 decrease in the DD&A rate per Mcfe. The rate decrease was mainly due to impairments taken at the end of 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 2021 period, as compared to prices used for the 2020 period, shortening the economic life of wells. This resulted in lower projected remaining reserves on a significant number of wells causing increased units of production DD&A.

OPERATIONS UPDATE

During the quarter ended March 31, 2021, we converted 37 gross and 0.16 net wells in progress to producing wells. Our inventory of wells in progress decreased to 80 gross wells and 0.44 net wells.

Bakken/

Three Arkoma

SCOOP STACK Forks Stack Permian Fayetteville Haynesville Other Total

Gross Wells in Progress on PHX Acreage:

As of 12/31/20 45 32 5 2 4 - 25 7 120

Net Change -3 -19 -2 - -1 - -12 -3 -40

As of 3/31/21 42 13 3 2 3 - 13 4 80

Net Wells in Progress on PHX Acreage:

As of 12/31/20 0.09 0.16 - - 0.14 - 0.16 0.07 0.62

Net Change -0.01 -0.13 - - - - -0.03 -0.01 -0.18

As of 3/31/21 0.08 0.03 - - 0.14 - 0.13 0.06 0.44

Gross Active Permits on PHX Acreage:

As of 12/31/20 29 15 10 7 - - - 13 74

Net Change -15 -4 -4 -4 - - - -7 -34

As of 3/31/21 14 11 6 3 - - - 6 40

As of 3/31/21:

Rigs Present on PHX Acreage 1 1 - - 2 - 1 - 5

Rigs Within 2.5 Miles of PHX Acreage 5 11 1 - 3 - 5 2 27

Leasing Activity

During the second quarter of fiscal 2021, the Company leased 368 net mineral acres for $63,815.

Bakken/

Three Arkoma

SCOOP STACK Forks Stack Permian Fayetteville Haynesville Other Total

During Three Months Ended 3/31/21:

Net Mineral Acres Leased - 1 - - 41 - - 326 368

Average Bonus per Net Mineral Acre - $ 1,100 - - $ 483 - - $ 148 $ 173

Average Royalty per Net Mineral Acre - 13% - - 25% - - 18% 18%

ACQUISITION AND DIVESTITURE UPDATE

During the second quarter of fiscal 2021, the Company purchased 18 net royalty acres for $362,486.

Bakken /

Three Arkoma

SCOOP STACK Forks Stack Permian Fayetteville Haynesville Other Total

During Three Months Ended 3/31/21:

Net Mineral Acres Purchased - - - - - - 11 - 11

Net Royalty Acres Purchased - - - - - - 18 - 18

Price per Net Royalty Acre - - - - - - $ 19,772 - $ 19,772

Net Mineral Acres Sold - - - - - - - - -

Net Royalty Acres Sold - - - - - - - - -

Price per Net Royalty Acre - - - - - - - - -

SECOND QUARTER EARNINGS CALL

PHX will host a conference call to discuss second quarter results at 5:00 p.m. EDT on May 6, 2021. Management's discussion will be followed by a question and answer session with investors. To participate on the conference call, please dial 888-506-0062 (domestic) or 973-528-0011 (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 40717.

FINANCIAL RESULTS

Statements of Operations

Three Months Ended March 31, Six Months Ended March 31,

2021 2020 2021 2020

Revenues:

Natural gas,oil and NGL $ 8,345,825 $ 7,217,618 $ 14,770,804 $ 14,811,456sales

Lease bonusesand rental 58,554 22,092 59,987 549,791income

Gains (losses)on derivative (2,348,143) 4,071,577 (2,602,179) 3,253,683contracts

Gain on asset 23,257 - 43,525 3,272,888sales

6,079,493 11,311,287 12,272,137 21,887,818

Costs andexpenses:

Lease operating 1,030,651 1,542,199 2,035,063 2,723,870expenses

Transportation,gathering and 1,319,514 1,356,628 2,600,479 2,739,629marketing

Production 443,154 373,754 719,180 701,035taxes

Depreciation,depletion and 1,777,817 3,373,518 4,038,466 6,329,219amortization

Provision for - 29,545,702 - 29,545,702impairment

Interest 267,865 346,573 569,763 717,238expense

General and 2,059,476 2,174,661 3,790,573 4,397,689administrative

Other expense (102,261) 40,066 (98,944) 29,136(income)

6,796,216 38,753,101 13,654,580 47,183,518

Income (loss)beforeprovision (716,723) (27,441,814) (1,382,443) (25,295,700)(benefit) forincome taxes

Provision(benefit) for (217,000) (6,987,000) (286,000) (6,733,000)income taxes

Net income $ (499,723) $ (20,454,814) $ (1,096,443) $ (18,562,700)(loss)

Basic anddilutedearnings (loss) $ (0.02) $ (1.24) $ (0.05) $ (1.12)per commonshare

Basic anddilutedweightedaverage sharesoutstanding:

Common shares 22,429,777 16,384,687 22,403,678 16,362,057

Unissued,directors'deferred 178,597 139,390 177,923 186,443compensationshares

22,608,374 16,524,077 22,581,601 16,548,500

Dividendsdeclared pershare of

common stockand paid in $ 0.01 $ 0.04 $ 0.02 $ 0.08period

Dividendsdeclared pershare of

common stockand to be paid $ 0.01 $ -in quarterended June 30

Balance Sheets

March 31, 2021 Sept. 30, 2020

Assets

Current assets:

Cash and cash equivalents $ 1,270,482 $ 10,690,395

Natural gas, oil, and NGL sales receivables 4,712,793 2,943,220(net of $0

allowance for uncollectable accounts)

Refundable income taxes 2,448,871 3,805,227

Other 752,248 351,088

Total current assets 9,184,394 17,789,930

Properties and equipment at cost, based on

successful efforts accounting:

Producing natural gas and oil properties 329,708,071 324,886,491

Non-producing natural gas and oil properties 21,012,897 18,993,814

Other 582,444 582,444

351,303,412 344,462,749

Less accumulated depreciation, depletion and (265,863,136) (263,590,801)amortization

Net properties and equipment 85,440,276 80,871,948

Operating lease right-of-use assets 649,500 690,316

Other, net 593,150 669,641

Total assets $ 95,867,320 $ 100,021,835

Liabilities and Stockholders' Equity

Current liabilities:

Accounts payable $ 672,507 $ 997,637

Derivative contracts, net 3,000,530 281,942

Current portion of operating lease liability 129,672 127,108

Accrued liabilities and other 1,382,066 1,297,363

Short-term debt - 1,750,000

Total current liabilities 5,184,775 4,454,050

Long-term debt 23,500,000 27,000,000

Deferred income taxes, net 1,041,007 1,329,007

Asset retirement obligations 2,927,662 2,897,522

Derivative contracts, net 625,179 425,705

Operating lease liability, net of current 856,142 921,625portion

Stockholders' equity:

Class A voting common stock, $0.01666 parvalue; 36,000,500

shares authorized; 22,825,226 issued at March31, 2021, and

Class A voting common stock, $0.01666 parvalue;

24,000,500 shares authorized; 22,647,306 380,268 377,304issued at September 30, 2020

Capital in excess of par value 11,150,749 10,649,611

Deferred directors' compensation 1,633,939 1,874,007

Retained earnings 54,402,724 56,244,100

67,567,680 69,145,022

Less treasury stock, at cost; 390,267 sharesat March 31,

2021, and 411,487 shares at Sept. 30, 2020 (5,835,125) (6,151,096)

Total stockholders' equity 61,732,555 62,993,926

Total liabilities and stockholders' equity $ 95,867,320 $ 100,021,835

Condensed Statements of Cash Flows

Six Months Ended March 31,

2021 2020

Operating Activities

Net income (loss) $ (1,096,443) $ (18,562,700)

Adjustments to reconcile net income (loss) tonet cash provided

by operating activities:

Depreciation, depletion and amortization 4,038,466 6,329,219

Impairment of producing properties - 29,545,702

Provision for deferred income taxes (288,000) (4,711,000)

Gain from leasing fee mineral acreage (57,493) (544,979)

Proceeds from leasing fee mineral acreage 64,047 559,462

Net (gain) loss on sales of assets (62,097) (3,265,449)

Directors' deferred compensation expense 100,254 140,130

Total (gain) loss on derivative contracts 2,602,179 (3,253,683)

Cash receipts (payments) on settled derivative 315,883 1,530,912contracts

Restricted stock awards 284,148 491,616

Other 31,544 7,225

Cash provided (used) by changes in assets andliabilities:

Natural gas, oil and NGL sales receivables (1,732,801) 1,168,943

Other current assets (388,864) (232,349)

Accounts payable (340,404) 117,561

Income taxes receivable 1,356,356 (2,072,428)

Other non-current assets 56,545 50,010

Accrued liabilities (206,213) (1,189,850)

Total adjustments 5,773,550 24,671,042

Net cash provided by operating activities 4,677,107 6,108,342

Investing Activities

Capital expenditures (425,098) (139,755)

Acquisition of minerals and overrides (7,934,504) (10,254,016)

Proceeds from sales of assets 21,000 3,376,049

Net cash provided (used) by investing activities (8,338,602) (7,017,722)

Financing Activities

Borrowings under Credit Facility - 5,561,725

Payments of loan principal (5,250,000) (8,986,725)

Net proceeds from equity issuance (53,482) -

Purchases of treasury stock - (7,635)

Payments of dividends (454,936) (1,319,899)

Net cash provided (used) by financing activities (5,758,418) (4,752,534)

Increase (decrease) in cash and cash equivalents (9,419,913) (5,661,914)

Cash and cash equivalents at beginning of period 10,690,395 6,160,691

Cash and cash equivalents at end of period $ 1,270,482 $ 498,777

Supplemental Schedule of Noncash Investing andFinancing Activities

Dividends declared and unpaid $ 289,997 $ -

Additions to asset retirement obligations $ - $ 4

Gross additions to properties and equipment $ 8,759,616 $ 10,229,121

Equity offering used for acquisitions (250,000) -

Net (increase) decrease in accounts payable forproperties

and equipment additions (150,014) 164,650

Capital expenditures and acquisitions $ 8,359,602 $ 10,393,771

Proved Reserves

Proved Reserves SEC Pricing

March 31, 2021 Sept. 30, 2020

Proved Developed Reserves:

Mcf of Gas 47,482,766 40,924,083

Barrels of Oil 1,096,654 1,148,989

Barrels of NGL 1,170,146 1,135,864

Mcfe (2) 61,083,566 54,633,201

Proved Undeveloped Reserves:

Mcf of Gas 2,403,400 1,448,690

Barrels of Oil 91,910 184,668

Barrels of NGL 27,920 83,993

Mcfe (2) 3,122,380 3,060,656

Total Proved Reserves:

Mcf of Gas 49,886,166 42,372,773

Barrels of Oil 1,188,564 1,333,657

Barrels of NGL 1,198,066 1,219,857

Mcfe (2) 64,205,946 57,693,857

10% Discounted Estimated Future

Net Cash Flows (before income taxes):

Proved Developed $ 40,765,559 $ 33,270,804

Proved Undeveloped 3,913,169 5,659,479

Total $ 44,678,728 $ 38,930,283

SEC Pricing

Gas/Mcf $ 1.96 $ 1.62

Oil/Barrel $ 37.52 $ 40.18

NGL/Barrel $ 10.95 $ 9.95

Proved Reserves - Projected Future Pricing (3)

10% Discounted Estimated Future Proved Reserves

Net Cash Flows (before income taxes): March 31, 2021 Sept. 30, 2020

Proved Developed $ 73,345,570 $ 63,648,347

Proved Undeveloped 5,830,561 7,197,350

Total $ 79,176,131 $ 70,845,697

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

(3) Projected futures pricing as of March 31, 2021 and Sept. 30, 2020 basisadjusted to Company wellhead price

Derivative Contracts as of May 3, 2021

Period Collar Collar Average Average

(Calendar Product Volume Mcf/ Swap Floor Price CeilingYear) Bbl Price Price

Remaining Natural 1,961,000 $ 2.35 $ 3.042021 Gas

Remaining Natural 1,025,000 $ 2.812021 Gas

2022 Natural 2,200,500 $ 2.40 $ 3.12 Gas

2022 Natural 377,500 $ 2.61 Gas

2023 Natural 86,000 $ 2.25 $ 2.96 Gas

2023 Natural 84,000 $ 2.56 Gas

Remaining Crude Oil 27,500 $ 36.78 $ 45.142021

Remaining Crude Oil 79,000 $ 39.612021

2022 Crude Oil 68,500 $ 40.25 $ 50.35

2022 Crude Oil 59,000 $ 41.51

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. These measures, detailed below, are provided in addition to, not as an alternative for, and should be read in conjunction with, the information contained in our financial statements prepared in accordance with GAAP (including the notes), included in our SEC filings and posted on our website.

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. Adjusted EBITDA is not a measure of financial performance under GAAP. 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:

Second Second Quarter Six Months Six Months Quarter Ended Ended Ended Ended

March 31, March 31, 2020 March 31, March 31, 2020 2021 2021

Net Income $ (499,723) $ (20,454,814) $ (1,096,443) $ (18,562,700)(Loss)

Plus:

Unrealized(gains) losses 2,050,712 (3,442,438) 2,918,062 (1,722,771)on derivatives

Income TaxExpense (217,000) (6,987,000) (286,000) (6,733,000)(Benefit)

Interest 267,865 346,573 569,763 717,238Expense

DD&A 1,777,817 3,373,518 4,038,466 6,329,219

Impairment - 29,545,702 - 29,545,702

Adjusted EBITDA $ 3,379,671 $ 2,381,541 $ 6,143,848 $ 9,573,688

Adjusted EBITDA Excluding Gain on Asset Sales Reconciliation

Adjusted EBITDA excluding gain on asset sales is defined as the adjusted EBITDA less gains on asset sales. We have included a presentation of adjusted EBITDA excluding gain on asset sales because we recognize that certain investors consider this amount a useful means of measuring our ability to meet our debt service obligations and evaluating our financial performance. The adjusted EBITDA excluding gain on asset sales 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 excluding gain on asset sales may not be comparable to a similarly titled measure of other companies. The following table provides a presentation of net income (loss) to adjusted EBITDA and of the resulting adjusted EBITDA excluding gain on asset sales for the periods indicated:

Second Second Quarter Six Months Six Months First Quarter Ended Ended Ended Quarter Ended Ended

March 31, March 31, 2020 March 31, March 31, 2020 Dec. 30, 2021 2021 2020

Net Income $ (499,723) $ (20,454,814) $ (1,096,443) $ (18,562,700) $ (596,720)(Loss)

Plus:

Unrealized(gains)losses

on 2,050,712 (3,442,438) 2,918,062 (1,722,771) 867,350derivatives

IncomeTax Expense

(Benefit) (217,000) (6,987,000) (286,000) (6,733,000) (69,000)

Interest 267,865 346,573 569,763 717,238 301,898Expense

DD&A 1,777,817 3,373,518 4,038,466 6,329,219 2,260,649

Impairment - 29,545,702 - 29,545,702 -

Adjusted $ 3,379,671 $ 2,381,541 $ 6,143,848 $ 9,573,688 $ 2,764,177EBITDA

Gain on 23,257 - 43,525 3,272,888 20,268asset sales

AdjustedEBITDAexcluding

Gain on $ 3,356,414 $ 2,381,541 $ 6,100,323 $ 6,300,800 $ 2,743,909asset sales

Debt/Adjusted EBITDA (TTM) Reconciliation

Debt/adjusted EBITDA (TTM) is defined as the ratio of long-term debt to adjusted EBITDA on a trailing 12-month ("TTM") basis. We have included a presentation of debt/adjusted EBITDA (TTM) because we recognize that certain investors consider such ratios a useful means of measuring our ability to meet our debt service obligations and evaluating our financial performance. The debt/adjusted EBITDA (TTM) ratio 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 debt/adjusted EBITDA (TTM) may not be comparable to a similarly titled measure of other companies. The following table provides a presentation of net income (loss) to adjusted EBITDA on a TTM basis, and of the resulting debt/adjusted EBITDA (TTM) ratio:

TTM Ended TTM Ended

March 31, 2021 March 31, 2020

Net Income (Loss) $ (6,485,780) $ (70,112,244)

Plus:

Unrealized (gains) losses on derivatives 7,842,624 (3,399,709)

Income Tax Expense (Benefit) (1,842,000) (23,655,000)

Interest Expense 1,139,313 1,687,873

DD&A 9,023,030 17,088,140

Impairment 358,826 106,370,039

Adjusted EBITDA $ 10,036,013 $ 27,979,099

Debt $ 23,500,000 $ 32,000,000

Debt/Adjusted EBITDA 2.34 1.14

Adjusted Pre-Tax Net Income (Loss) Reconciliation

Adjusted pre-tax net income (loss) is defined as net income (loss) plus provision for impairment, 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:

Second Second Quarter Six Months Six Months Quarter Ended Ended Ended Ended

March 31, March 31, 2020 March 31, March 31, 2020 2021 2021

Net Income $ (499,723) $ (20,454,814) $ (1,096,443) $ (18,562,700)(Loss)

Plus:

Impairment - 29,545,702 - 29,545,702

Unrealized(gains) losses 2,050,712 (3,442,438) 2,918,062 (1,722,771)on derivatives

Income TaxExpense (217,000) (6,987,000) (286,000) (6,733,000)(Benefit)

Adjusted Pre-TaxNet Income $ 1,333,989 $ (1,338,550) $ 1,535,619 $ 2,527,231(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 its core areas of focus. PHX owns approximately 255,000 net mineral acres principally located in Oklahoma, Texas, North Dakota, New Mexico and Arkansas. 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 ability to execute our business strategies; the volatility of realized natural gas and oil prices; the level of production on our properties; estimates of quantities of natural gas, oil and NGL reserves and their values; general economic or industry conditions; legislation or regulatory requirements; conditions of the securities markets; our ability to raise capital; changes in accounting principles, policies or guidelines; financial or political instability; acts of war or terrorism; title defects in the properties in which we invest; and other economic, competitive, governmental, regulatory or technical factors affecting our properties, operations or prices. 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.