PR Newswire | Aug 5, 2021 04:16PM EDT

Payment

08/05 15:15 CDT

PHX MINERALS INC. Reports Third Quarter 2021 Results And Announces Dividend Payment OKLAHOMA CITY, Aug. 5, 2021

OKLAHOMA CITY, Aug. 5, 2021 /PRNewswire/ -- PHX MINERALS INC., "PHX" or the "Company," (NYSE: PHX), today reported financial and operating results for the third quarter ended June 30, 2021.

SUMMARY OF RESULTS FOR THE PERIOD ENDED JUNE 30, 2021, AND SUBSEQUENT EVENTS

* Production volumes for the third fiscal quarter of 2021 increased 31% to 2,493 Mmcfe from 1,904 Mmcfe in the third fiscal quarter of 2020 and increased 9% from 2,297 Mmcfe in the second fiscal quarter of 2021. * Net loss in the third fiscal quarter of 2021 was $1.4 million, or $0.05 per share, as compared to net loss of $3.6 million, or $0.21 per share, in the third fiscal quarter of 2020 and net loss of $0.5 million, or $0.02 per share, in the second fiscal quarter of 2021. * Adjusted EBITDA excluding gain/loss on asset sales(1) for the third quarter of 2021 was $4.7 million, increased from $1.2 million in the third fiscal quarter of 2020 and increased from $3.4 million in the second fiscal quarter of 2021. * On April 30, 2021, the Company closed on the 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 common stock. * Additionally, during the quarter ended June 30, the Company closed on two separate acquisitions totaling 393 net royalty acres in the Haynesville for an aggregate $2.3 million in cash. * Total debt was reduced to $19.9 million as of June 30, 2021, a 15% decrease from the $23.5 million as of March 31, 2021. * Debt to adjusted EBITDA (TTM) (1) ratio was 1.47x at June 30, 2021. * A payment of a one cent per share dividend payable on Sept. 10, 2021, to stockholders of record on Aug. 26, 2021, was approved.

Chad L. Stephens, President and CEO, commented, "PHX's third quarter 2021 reflects excellent quarterly results as we reported adjusted EBITDA of $4.7 million, an increase of 38% over the sequential prior quarter and a 292% increase compared to the year over year quarter. This is due mainly to higher volumes and improved commodity prices. Importantly, it is a direct reflection of our continued success as we execute our stated strategy of growth through mineral acquisitions in our core focus areas. During the quarter, we closed on the purchase of minerals in three different acquisitions located in the Haynesville and SCOOP for $13.25 million of total consideration, the cash portion of which was funded with proceeds from the April equity offering. This brings our total year to date acquisitions to approximately $21.2 million. We also closed on the sale of non-core/non-operated working interest in 71 well bores for approximately $225,000 as part of our strategy of constantly looking to high grade our asset base.

"Additionally, we reduced our debt to $19.9 million at quarter end, which represents a 15% reduction to sequential prior quarter and a 34% reduction compared to the year over year quarter. Current debt equates to a roughly 1.5x Debt to adjusted EBITDA (TTM) (1). Our goal is to achieve a 1.2x Debt to EBITDA (TTM) (1) by fiscal year end Sept. 30, 2021. This puts us in a strong financial position and will allow us to allocate a majority of our growing free cash flow to mineral acquisitions over the coming quarters. We look forward to informing you of our results to drive shareholder value in the future."

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

OPERATING HIGHLIGHTS

Third Quarter Ended Third Quarter Ended Nine Months Ended Nine Months Ended

June 30, 2021 June 30, 2020 June 30, 2021 June 30, 2020

Mcfe Sold 2,492,813 1,903,752 6,863,949 6,555,378

Average Sales Price per Mcfe $ 4.37 $ 1.85 $ 3.74 $ 2.80

Gas Mcf Sold 1,879,343 1,361,909 5,090,619 4,539,103

Average Sales Price per Mcf $ 3.33 $ 1.36 $ 2.77 $ 1.73

Oil Barrels Sold 55,492 55,138 170,437 214,159

Average Sales Price per Barrel $ 63.77 $ 25.94 $ 52.95 $ 42.43

NGL Barrels Sold 46,753 35,169 125,118 121,887

Average Sales Price per Barrel $ 23.58 $ 6.62 $ 20.42 $ 11.26

Total Production for the last four quarters was as follows:

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

6/30/2021 1,879,343 55,492 46,753 2,492,813

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

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

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

6/30/2021 908,471 31,095 18,255 1,204,571

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

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

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

6/30/2021 970,872 24,397 28,498 1,288,242

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

FINANCIAL HIGHLIGHTS

Third Quarter Third Quarter Nine Months Nine Months Ended Ended Ended Ended

June 30, 2021 June 30, 2020 June 30, 2021 June 30, 2020

Working Interest Sales $ 5,486,978 $ 1,876,489 $ 13,245,980 $ 9,976,274

Royalty Interest Sales $ 5,412,842 $ 1,641,072 $ 12,424,644 $ 8,352,743

Natural Gas, Oil and NGL Sales $ 10,899,820 $ 3,517,561 $ 25,670,624 $ 18,329,017

Lease Bonuses and Rental Income $ 259,152 $ 22,996 $ 319,139 $ 572,787

Total Revenue $ 5,941,559 $ 2,705,383 $ 18,213,696 $ 24,593,201

LOE per Mcfe $ 0.43 $ 0.60 $ 0.45 $ 0.59

Transportation, Gathering and $ 0.62 $ 0.50 $ 0.60 $ 0.56Marketing per Mcfe

Production Tax per Mcfe $ 0.24 $ 0.07 $ 0.19 $ 0.13

G&A Expense per Mcfe $ 0.91 $ 1.00 $ 0.88 $ 0.96

Interest Expense per Mcfe $ 0.09 $ 0.13 $ 0.12 $ 0.15

DD&A per Mcfe $ 0.86 $ 1.29 $ 0.90 $ 1.34

Total Expense per Mcfe $ 3.15 $ 3.59 $ 3.14 $ 3.73

Net Income (Loss) $ (1,356,594) $ (3,555,215) $ (2,453,037) $ (22,117,915)

Adj. Pre-Tax Net Income (Loss) ^(1) $ 2,356,054 $ (1,536,925) $ 3,891,673 $ 990,306

Adjusted EBITDA ^(1) $ 4,714,200 $ 1,168,834 $ 10,858,048 $ 10,742,522

Cash Flow from Operations $ 5,563,226 $ 3,717,398 $ 10,240,333 $ 9,825,740

CapEx - Drilling & Completing $ 271,661 $ 56,413 $ 696,759 $ 196,168

CapEx - Mineral Acquisitions $ 11,402,761 $ 50,000 $ 19,337,265 $ 10,304,016

Borrowing Base $ 28,500,000 $ 32,000,000

Debt $ 19,900,000 $ 30,000,000

Debt/Adjusted EBITDA (TTM) ^(1) 1.47 1.48

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

THIRD QUARTER 2021 RESULTS

The Company recorded a third quarter 2021 net loss of $1,356,594, or $0.05 per share, as compared to a net loss of $3,555,215, or $0.21 per share, in the third quarter 2020. The change in net loss was principally the result of increased natural gas, oil and NGL sales and decreased LOE, DD&A and impairment expense, partially offset by an increase in losses on derivative contracts, G&A, transportation, gathering and marketing expenses and production taxes.

Natural gas, oil and NGL revenue increased $7,382,259, or 210%, for the third quarter 2021, compared to the corresponding 2020 quarter due to increases in natural gas, oil and NGL prices of 145%, 146% and 256%, respectively, and an increase in natural gas, oil and NGL volumes of 38%, 1% and 33%, respectively.

Production increased across all three product categories during the three months ended June 30, 2021, as compared to the three months ended June 30, 2020, due to improved market conditions, resulting in (i) previously curtailed, high interest wells being worked over and brought fully back online in the STACK, Arkoma Stack, and Fayetteville Shale, (ii) acquisitions in the STACK and Haynesville, and (iii) increased drilling and completions activity in the STACK and SCOOP. These were partially offset by plays with naturally declining production in high interest wells, such as the Eagle Ford Shale.

The Company had a net loss on derivative contracts of $5,487,483 in the 2021 quarter, as compared to a net loss of $838,282 in the 2020 quarter. The net loss on derivative contracts in both periods 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 periods.

The 12% 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 $326,861, or 13%, in the 2021 quarter to $0.86 per Mcfe, as compared to $1.29 per Mcfe in the 2020 quarter. Of the DD&A decrease, $1,086,750 was a result of a $0.43 decrease in the DD&A rate per Mcfe, partially offset by an increase of $759,889 resulting from production increasing 31% in the 2021 quarter. The rate decrease was mainly due to an increase in reserves during the 2021 quarter, as compared to the 2020 quarter.

NINE MONTHS 2021 RESULTS

The Company recorded a nine-month net loss of $2,453,037, or $0.10 per share, in the 2021 period, as compared to a net loss of $22,117,915, or $1.34 per share, in the 2020 period. The change in net loss was principally the result of increased natural gas, oil and NGL sales and decreased LOE, DD&A, impairment expense and G&A, partially offset by an increase in losses on derivative contracts, transportation, gathering and marketing expenses, production taxes and a reduction in gain on asset sales and income tax benefit.

Natural gas, oil and NGL sales increased $7,341,607, or 40%, for the 2021 period, compared to the 2020 period due to increases in natural gas, oil and NGL prices of 60%, 25% and 81%, respectively, and an increase in natural gas and NGL volumes of 12% and 3%, respectively.

Natural gas volumes increased during the nine months ended June 30, 2021, as compared to the nine months ended June 30, 2020, primarily as a result of (i) acquisitions in the Haynesville Shale, (ii) maintenance workovers on high-interest wells in the Arkoma Stack, and (iii) increased drilling and completion activity in the STACK. These gas volumes were partially offset by naturally declining production in the Fayetteville Shale and production downtime and curtailments in response to market conditions in the SCOOP. 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, as well as reduced drilling and completion activity in 2021 due to prevailing economic conditions compared to 2020 in the Eagle Ford and SCOOP. Oil production decreases were partially offset by increased drilling and completion activity in the STACK. The increased activity in the STACK also resulted in increased NGL production, which was partially offset by production downtime and curtailments in high-interest wells in in the SCOOP as well as naturally declining production in liquid-rich gas areas of the Anadarko Granite Wash.

The Company had a net loss on derivative contracts of $8,089,662 in the 2021 period, as compared to a net gain of $2,415,401 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.

The 16% 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 $2,617,614, or 30%, in the 2021 period to $0.90 per Mcfe, as compared to $1.34 per Mcfe in the 2020 period. Of the DD&A decrease, $3,031,099 was a result of a $0.44 decrease in the DD&A rate per Mcfe, partially offset by an increase of $413,485 resulting from production increasing 5% in the 2021 period. The rate decrease was mainly due an increase in reserves during the 2021 period, as compared to the 2020 period.

OPERATIONS UPDATE

During the quarter ended June 30, 2021, 37 gross and 0.18 net wells in progress converted to producing wells. Our inventory of wells in progress increased to 97 gross wells and 0.48 net wells.

Bakken /

Three Arkoma

SCOOP STACK Forks Stack Permian Fayetteville Haynesville Other Total

Gross Wells in Progress on PHX Acreage:

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

Net Change 18 1 -2 - - - -1 1 17

As of 6/30/21 60 14 1 2 3 - 12 5 97

Net Wells in Progress on PHX Acreage:

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

Net Change 0.05 0.01 - - - - -0.01 -0.01 0.04

As of 6/30/21 0.13 0.04 - - 0.14 - 0.12 0.05 0.48

Gross Active Permits on PHX Acreage:

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

Net Change -1 -4 -1 - - - - - -6

As of 6/30/21 13 7 5 3 - - - 6 34

As of 6/30/21:

Rigs Present on PHX Acreage 6 1 2 - - - 3 1 13

Rigs Within 2.5 Miles of PHX Acreage 12 7 6 1 2 - 13 5 46

Leasing Activity

During the third quarter of fiscal 2021, the Company leased 518 net mineral acres for $270,890, primarily in Dawson County, TX in the Midland Basin.

Bakken /

Three Arkoma

SCOOP STACK Forks Stack Permian Fayetteville Haynesville Other Total

During Three Months Ended 6/30/21:

Net Mineral Acres Leased - 30 - - 307 - - 181 518

Average Bonus per Net Mineral Acre - $ 500 - - $ 527 - - $ 377 $ 524

Average Royalty per Net Mineral Acre - 20% - - 25% - - 19% 22%

ACQUISITION AND DIVESTITURE UPDATE

During the third quarter of fiscal 2021, the Company purchased 2,913 net royalty acres for $13,310,340 and sold 5,197 net royalty acres at an average price of $57 per acre.

Bakken /

Three Arkoma

SCOOP STACK Forks Stack Permian Fayetteville Haynesville Other Total

During Three Months Ended 6/30/21:

Net Mineral Acres Purchased 1,819 47 - - - - 308 23 2,197

Net Royalty Acres Purchased 2,420 61 - - - - 398 34 2,913

Price per Net Royalty Acre $ 4,455 $ 1,624 - - - - $ 5,955 $ 1,754 $ 4,570

Net Mineral Acres Sold - - - - 2,857 - - 32 2,889

Net Royalty Acres Sold - - - - 5,165 - - 32 5,197

Price per Net Royalty Acre - - - - $ 55 - - $ 391 $ 57

THIRD QUARTER EARNINGS CALL

PHX will host a conference call to discuss third quarter results at 5:00 p.m. EDT on Aug. 5, 2021. Management's discussion will be followed by a question and answer session with investors. To participate on the conference call, please dial 877-407-3088 (domestic) or 201-389-0927 (international). A replay of the call will be available for 14 days after the call. The number to access the replay of the conference call is 877-660-6853 and the PIN for the replay is 13720096.

FINANCIAL RESULTS

Statements of Operations

Three Months Ended June 30, Nine Months Ended June 30,

2021 2020 2021 2020

Revenues:

Natural gas, oil and NGL sales $ 10,899,820 $ 3,517,561 $ 25,670,624 $ 18,329,017

Lease bonuses and rental income 259,152 22,996 319,139 572,787

Gains (losses) on derivative contracts (5,487,483) (838,282) (8,089,662) 2,415,401

Gain on asset sales 270,070 3,108 313,595 3,275,996

5,941,559 2,705,383 18,213,696 24,593,201

Costs and expenses:

Lease operating expenses 1,064,989 1,147,948 3,100,052 3,871,818

Transportation, gathering and marketing 1,538,174 956,653 4,138,653 3,696,282

Production taxes 596,858 134,249 1,316,038 835,284

Depreciation, depletion and amortization 2,137,707 2,464,568 6,176,173 8,793,787

Provision for impairment 45,855 358,826 45,855 29,904,528

Interest expense 220,439 241,191 790,202 958,429

General and administrative 2,275,104 1,908,790 6,065,677 6,306,479

Other expense (income) 235,027 (73,687) 136,083 (44,551)

Total costs and expenses 8,114,153 7,138,538 21,768,733 54,322,056

Income (loss) before provision (benefit) for income taxes (2,172,594) (4,433,155) (3,555,037) (29,728,855)

Provision (benefit) for income taxes (816,000) (877,940) (1,102,000) (7,610,940)

Net income (loss) $ (1,356,594) $ (3,555,215) $ (2,453,037) $ (22,117,915)

Basic and diluted earnings (loss) per common share $ (0.05) $ (0.21) $ (0.10) $ (1.34)

Basic and diluted weighted average shares outstanding:

Common shares 28,117,199 16,403,243 24,308,185 16,375,736

Unissued, directors' deferred compensation shares 192,059 141,799 174,454 152,500

28,309,258 16,545,042 24,482,639 16,528,236

Dividends declared per share of

common stock and paid in period $ 0.01 $ 0.01 $ 0.03 $ 0.09

Balance Sheets

June 30, 2021 Sept. 30, 2020

Assets

Current assets:

Cash and cash equivalents $ 2,908,500 $ 10,690,395

Natural gas, oil, and NGL sales receivables (net of $0 5,114,387 2,943,220

allowance for uncollectable accounts)

Refundable income taxes 2,379,756 3,805,227

Other 480,600 351,088

Total current assets 10,883,243 17,789,930

Properties and equipment at cost, based on

successful efforts accounting:

Producing natural gas and oil properties 323,187,303 324,886,491

Non-producing natural gas and oil properties 32,894,588 18,993,814

Other 681,125 582,444

356,763,016 344,462,749

Less accumulated depreciation, depletion and amortization (259,018,926) (263,590,801)

Net properties and equipment 97,744,090 80,871,948

Operating lease right-of-use assets 628,617 690,316

Other, net 558,659 669,641

Total assets $ 109,814,609 $ 100,021,835

Liabilities and Stockholders' Equity

Current liabilities:

Accounts payable $ 1,173,258 $ 997,637

Derivative contracts, net 6,754,328 281,942

Current portion of operating lease liability 130,973 127,108

Accrued liabilities and other 1,324,482 1,297,363

Short-term debt - 1,750,000

Total current liabilities 9,383,041 4,454,050

Long-term debt 19,900,000 27,000,000

Deferred income taxes, net 212,007 1,329,007

Asset retirement obligations 2,845,919 2,897,522

Derivative contracts, net 1,354,174 425,705

Operating lease liability, net of current portion 822,907 921,625

Total liabilities 34,518,048 37,027,909

Stockholders' equity:

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

shares authorized and 30,200,226 issued at June 30, 2021;

24,000,500 shares authorized and 22,647,306 issued at Sept. 30, 2020 503,136 377,304

Capital in excess of par value 25,844,372 10,649,611

Deferred directors' compensation 1,701,110 1,874,007

Retained earnings 53,033,376 56,244,100

81,081,994 69,145,022

Less treasury stock, at cost; 388,545 shares at June 30,

2021, and 411,487 shares at Sept. 30, 2020 (5,785,433) (6,151,096)

Total stockholders' equity 75,296,561 62,993,926

Total liabilities and stockholders' equity $ 109,814,609 $ 100,021,835

Condensed Statements of Cash Flows

Nine Months Ended June 30,

2021 2020

Operating Activities

Net income (loss) $ (2,453,037) $ (22,117,915)

Adjustments to reconcile net income (loss) to net cash provided

by operating activities:

Depreciation, depletion and amortization 6,176,173 8,793,787

Impairment of producing properties 45,855 29,904,528

Provision for deferred income taxes (1,117,000) (6,158,000)

Gain from leasing fee mineral acreage (316,541) (567,975)

Proceeds from leasing fee mineral acreage 334,938 582,458

Net (gain) loss on sales of assets (136,596) (3,258,994)

Directors' deferred compensation expense 167,425 184,188

Total (gain) loss on derivative contracts 8,089,662 (2,415,401)

Cash receipts (payments) on settled derivative contracts (688,807) 3,230,034

Restricted stock awards 542,674 619,812

Other 72,126 3,718

Cash provided (used) by changes in assets and liabilities:

Natural gas, oil and NGL sales receivables (2,134,395) 2,194,430

Other current assets (89,957) (121,635)

Accounts payable 209,014 31,755

Income taxes receivable 1,425,471 (134,908)

Other non-current assets 87,065 6,544

Accrued liabilities 26,263 (950,686)

Total adjustments 12,693,370 31,943,655

Net cash provided by operating activities 10,240,333 9,825,740

Investing Activities

Capital expenditures (696,759) (196,168)

Acquisition of minerals and overriding royalty interests (19,337,265) (10,304,016)

Proceeds from sales of assets 533,371 3,457,500

Net cash provided (used) by investing activities (19,500,653) (7,042,684)

Financing Activities

Borrowings under Credit Facility - 6,061,725

Payments of loan principal (8,850,000) (11,486,725)

Net proceeds from equity issuance 11,088,858 -

Purchases of treasury stock (2,741) (7,635)

Payments of dividends (757,692) (1,486,031)

Net cash provided (used) by financing activities 1,478,425 (6,918,666)

Increase (decrease) in cash and cash equivalents (7,781,895) (4,135,610)

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

Cash and cash equivalents at end of period $ 2,908,500 $ 2,025,081

Supplemental Schedule of Noncash Investing and Financing Activities

Additions to asset retirement obligations $ - $ 4

Gross additions to properties and equipment $ 23,794,178 $ 10,335,534

Equity offering used for acquisitions (3,718,000) -

Net (increase) decrease in accounts payable for properties

and equipment additions (42,154) 164,650

Capital expenditures and acquisitions $ 20,034,024 $ 10,500,184

Derivative Contracts as of Aug. 1, 2021

Period Collar Average Collar Average

(Calendar Product Volume Mcf/Bbl Swap Price Floor Price Ceiling PriceYear)

Remaining 2021 Natural 1,193,500 $ 2.38 $ 3.07 Gas

Remaining 2021 Natural 600,500 $ 2.82 Gas

2022 Natural 2,540,500 $ 2.42 $ 3.17 Gas

2022 Natural 547,500 $ 2.73 Gas

2023 Natural 166,000 $ 2.37 $ 3.26 Gas

2023 Natural 84,000 $ 2.56 Gas

Remaining 2021 Crude 9,000 $ 37.00 $ 46.69 Oil

Remaining 2021 Crude 55,000 $ 40.75 Oil

2022 Crude 68,500 $ 40.25 $ 50.35 Oil

2022 Crude 59,000 $ 41.51 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. 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:

Third Quarter Third Quarter Nine Months Nine Months Ended Ended Ended Ended

June 30, 2021 June 30, 2020 June 30, 2021 June 30, 2020

Net Income (Loss) $ (1,356,594) $ (3,555,215) $ (2,453,037) $ (22,117,915)

Plus:

Unrealized (gains) losses on derivatives 4,482,793 2,537,404 7,400,855 814,633

Income Tax Expense (Benefit) (816,000) (877,940) (1,102,000) (7,610,940)

Interest Expense 220,439 241,191 790,202 958,429

DD&A 2,137,707 2,464,568 6,176,173 8,793,787

Impairment 45,855 358,826 45,855 29,904,528

Adjusted EBITDA $ 4,714,200 $ 1,168,834 $ 10,858,048 $ 10,742,522

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:

Third Quarter Third Quarter Nine Months Nine Months Second Quarter Ended Ended Ended Ended Ended

June 30, 2021 June 30, 2020 June 30, 2021 June 30, 2020 March 31, 2021

Net Income (Loss) $ (1,356,594) $ (3,555,215) $ (2,453,037) $ (22,117,915) $ (499,723)

Plus:

Unrealized (gains) losses

on derivatives 4,482,793 2,537,404 7,400,855 814,633 2,050,712

Income Tax Expense

(Benefit) (816,000) (877,940) (1,102,000) (7,610,940) (217,000)

Interest Expense 220,439 241,191 790,202 958,429 267,865

DD&A 2,137,707 2,464,568 6,176,173 8,793,787 1,777,817

Impairment 45,855 358,826 45,855 29,904,528 -

Adjusted EBITDA $ 4,714,200 $ 1,168,834 $ 10,858,048 $ 10,742,522 $ 3,379,671

Less:

Gain on asset sales 270,070 3,108 313,595 3,275,996 23,257

Loss on asset sales^(1) (238,827) (4,345) (248,301) (11,849) (5,681)

Adjusted EBITDA excluding

Gain/loss on asset sales $ 4,682,957 $ 1,170,071 $ 10,792,754 $ 7,478,375 $ 3,362,095

(1) Included in other expense (income) line item on the Company's Statements ofOperations

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

June 30, 2021 June 30, 2020

Net Income (Loss) $ (4,287,159) $ (78,271,695)

Plus:

Unrealized (gains) losses on derivatives 9,788,013 1,031,998

Income Tax Expense (Benefit) (1,780,060) (25,847,940)

Interest Expense 1,118,561 1,402,387

DD&A 8,696,169 15,169,665

Impairment 45,855 106,728,865

Adjusted EBITDA $ 13,581,379 $ 20,213,280

Debt $ 19,900,000 $ 30,000,000

Debt/Adjusted EBITDA 1.47 1.48

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:

Third Quarter Ended Third Quarter Ended Nine Months Nine Months Ended Ended

June 30, 2021 June 30, 2020 June 30, 2021 June 30, 2020

Net Income (Loss) $ (1,356,594) $ (3,555,215) $ (2,453,037) $ (22,117,915)

Plus:

Impairment 45,855 358,826 45,855 29,904,528

Unrealized (gains) losses on derivatives 4,482,793 2,537,404 7,400,855 814,633

Income Tax Expense (Benefit) (816,000) (877,940) (1,102,000) (7,610,940)

Adjusted Pre-Tax Net Income (Loss) $ 2,356,054 $ (1,536,925) $ 3,891,673 $ 990,306

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 251,000 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.