PR Newswire | Dec 13, 2021 04:15PM EST

DIVIDEND PAYMENT

12/13 15:15 CST

PHX MINERALS INC. REPORTS FOURTH QUARTER AND FISCAL 2021 RESULTS AND ANNOUNCES DIVIDEND PAYMENT OKLAHOMA CITY, Dec. 13, 2021

OKLAHOMA CITY, Dec. 13, 2021 /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, 2021.

HIGHLIGHTS FOR THE PERIOD ENDED SEPT. 30, 2021, AND SUBSEQUENT EVENTS

* Total production volumes for the full fiscal year 2021 increased 6% to 9,076 Mmcfe from 8,593 Mmcfe in the full fiscal year 2020. * Royalty production volumes for the full fiscal year 2021 increased 25% to 4,178 Mmcfe from 3,348 Mmcfe in the full fiscal year 2020. * Total production volumes for the fourth fiscal quarter of 2021 decreased 11% to 2,212 Mmcfe from 2,493 Mmcfe in the third fiscal quarter of 2021. * Royalty production volumes for the fourth fiscal quarter of 2021 decreased 17% to 998 Mmcfe from 1,205 Mmcfe in the third fiscal quarter of 2021. * Announced the quarterly dividend increased to 1.5 cents per share, a 50% increase, payable on March 3, 2022, to shareholders of record on February 17, 2022. * Recorded a net loss in fiscal 2021 of $(6.2) million, or $(0.24) per share, as compared to net loss of $(24.0) million, or $(1.41) per share, in fiscal 2020. * Recorded a net loss in the fourth quarter 2021 of $(3.8) million, or $(0.14) per share, as compared to a net loss of $(1.4) million, or $(0.05) per share, in the third fiscal quarter of 2021. * Adjusted EBITDA(1) increased in the full fiscal year 2021 to $15.0 million from $13.5 million in the full fiscal year 2020. * Adjusted EBITDA(1) decreased in the fourth fiscal quarter of 2021 to $4.1 million from $4.7 million in the third fiscal quarter of 2021 and increased from $2.7 million in the fourth fiscal quarter of 2020. * Reduced debt 39% from $28.8 million as of Sept. 30, 2020, to $17.5 million, as of Sept. 30, 2021. * Total debt to adjusted EBITDA(1) ratio was 1.17x at Sept. 30, 2021. * Increased the borrowing base to $32.0 million from $27.5 million. * Completed approximately $30.0 million of mineral and royalty interest acquisitions in fiscal 2021 and an additional approximately $10.0 million in fiscal 2022. * Completed the divestiture of 708 legacy non operated working interest wellbores for net proceeds of $4.6 million and the removal of approximately $0.7 million of asset retirement obligation from the balance sheet since Sept. 30, 2021.

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

Chad L. Stephens, President and CEO, commented, "Throughout the last several quarters, we have repeatedly expressed our stated strategy to focus on growing our asset base through the acquisition of minerals in core areas with active development under reputable operators, high grade the asset base by divesting of lower margin working interest wells and strengthen the balance sheet. As we close out an excellent fiscal year 2021, we can proudly report that we have achieved stellar results at the high end of expectations in all of these areas.

"An important barometer of the success of our strategy is produced royalty volumes, which increased year over year almost 25%, while our non-operated working interest volumes continue to decline and become a lower percent of our total company volumes. Also, our adjusted EBITDA for the full fiscal year 2021 increased 11% year over year, we reduced our debt by 39% year over year and, since our fiscal year-end 2021, increased our bank borrowing base by 16%, which improves our liquidity. This increase is a direct reflection of high grading the asset base and our improving collateral profile. Most importantly, while paying down our debt by $11.3 million, we closed on the acquisition of minerals totaling approximately $30.0 million in fiscal year 2021. Since fiscal year-end, we have announced the close of an additional $10.0 million of mineral acquisitions with $5.8 million more to close mid-December. Given these significant accomplishments and our confidence in continuing to execute our strategy, we are increasing our quarterly dividend by 50% to $.015 per share.

"With a stronger balance sheet, improved liquidity and allocating 100% of our free cash flow to our mineral acquisition strategy, we are excited about PHX's ability to build shareholder value."

OPERATING HIGHLIGHTS

Fourth Quarter Ended Fourth Quarter Ended Year Ended Year Ended Sept. 30, 2021 Sept. 30, 2020 Sept. 30, 2021 Sept. 30, 2020

Mcfe Sold 2,211,570 2,037,779 9,075,519 8,593,153

Average Sales Price per Mcfe $ 5.46 $ 2.47 $ 4.16 $ 2.72

Gas Mcf Sold 1,609,101 1,423,602 6,699,720 5,962,705

Average Sales Price per Mcf $ 4.27 $ 1.68 $ 3.13 $ 1.72

Oil Barrels Sold 54,043 55,626 224,479 269,785

Average Sales Price per Barrel $ 68.02 $ 37.80 $ 56.58 $ 41.47

NGL Barrels Sold 46,369 46,737 171,488 168,623

Average Sales Price per Barrel $ 32.91 $ 11.84 $ 23.80 $ 11.42

Total Production for the last four quarters was as follows:

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

9/30/2021 1,609,101 54,043 46,369 2,211,570

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

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

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

9/30/2021 705,397 29,442 19,364 998,230

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

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

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

9/30/2021 903,704 24,601 27,005 1,213,340

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

FINANCIAL HIGHLIGHTS

Fourth Quarter Fourth Quarter Year Ended Year Ended Ended Ended Sept. 30, 2021 Sept. 30, 2020 Sept. 30, 2021 Sept. 30, 2020

Working Interest Sales $ 6,071,031 $ 2,937,807 $ 19,317,009 $ 12,914,080

Royalty Interest Sales $ 6,007,389 $ 2,103,179 $ 18,432,035 $ 10,455,923

Natural Gas, Oil and NGL Sales $ 12,078,420 $ 5,040,986 $ 37,749,044 $ 23,370,003

Lease Bonuses and Rental Income $ 105,974 $ 118,174 $ 425,113 $ 690,961

Total Revenue $ 4,071,567 $ 3,651,178 $ 21,971,668 $ 24,968,383

LOE per Mcfe $ 0.51 $ 0.48 $ 0.47 $ 0.56

Transportation, Gathering and Marketing per Mcfe $ 0.74 $ 0.55 $ 0.64 $ 0.56

Production Tax per Mcfe $ 0.28 $ 0.09 $ 0.21 $ 0.12

G&A Expense per Mcfe $ 0.97 $ 0.84 $ 0.90 $ 0.93

Interest Expense per Mcfe $ 0.09 $ 0.16 $ 0.11 $ 0.15

DD&A per Mcfe $ 0.71 $ 1.24 $ 0.85 $ 1.32

Total Expense per Mcfe $ 3.30 $ 3.36 $ 3.18 $ 3.64

Net Income $ (3,764,200) $ (1,834,122) $ (6,217,237) $ (23,952,037)

Adjusted EBITDA^(1) $ 4,141,890 $ 2,723,331 $ 14,999,938 $ 13,465,853

Cash Flow from Operations $ (6,298,246) $ 1,280,555 $ 3,942,087 $ 11,106,295

CapEx - Drilling & Completing $ 36,413 $ 206,968 $ 733,172 $ 403,136

CapEx - Mineral Acquisitions $ 1,287,082 $ 15,766 $ 20,624,347 $ 10,288,250

Borrowing Base $ 27,500,000 $ 31,000,000

Debt $ 17,500,000 $ 28,750,000

Debt/Adjusted EBITDA ^(1) 1.17 2.14

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

RESULTS OF FOURTH QUARTER 2021 COMPARED TO THE FOURTH QUARTER 2020

Natural gas, oil and NGL revenue increased 140% in the 2021 quarter as total production increased 9% and product prices increased 121%, relative to the 2020 quarter. Royalty revenue increased 186% in the 2021 quarter as total production increased 29% and product prices increased 122%, relative to the 2020 quarter. Total production increased due to the recent mineral and royalty interest acquisitions in the Haynesville play, in Texas and Louisiana, and SCOOP. These increases were offset by naturally declining production in the Eagle Ford and Arkoma Stack.

The 2% 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 $950,365, or 38%, in the 2021 quarter to $0.71 per Mcfe, as compared to $1.24 per Mcfe in the 2020 quarter. Of the decrease, $1,165,857 was a result of a $0.53 decrease in the DD&A rate per Mcfe, partially offset by an increase of $215,492 resulting from total production increasing 9% in the 2021 quarter. The rate decrease was partially due to higher natural gas, oil and NGL prices utilized in the reserve calculations during the 2021 period, as compared to 2020 period, lengthening the economic life of wells. This resulted in higher projected remaining reserves on a significant number of wells causing decreased units of production DD&A, despite the increase in projection.

No material impairment charge was recorded during the 2021 and 2020 quarters.

No significant divestitures of minerals occurred in the fourth quarter of 2021. 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.

On Sept. 2, 2021, the Company settled all of its derivative contracts with Bank of Oklahoma ("BOKF") by paying $8.8 million. On Sept. 3, 2021, the Company entered into new derivative contracts with BP Energy Company ("BP") that had similar terms to the contracts settled with BOK and received a payment of $8.8 million from BP. The new derivative contracts consisted of all fixed swap contracts and are secured under the Company's credit facility with Independent Bank. The $8.8 million paid to BOK to settle the derivatives is included as a loss on derivatives. The $8.8 million received from BP was considered a cash flow from financing activities and had no effect on the statement of operations. The derivative activity was associated with entering into a new credit agreement with Independent Bank and ending the relationship with BOKF. The 2021 quarter included an $8.1 million loss on derivative contracts as compared to a $1.5 million loss for the 2020 quarter.

The Company's net income (loss) changed from net loss of $(1.8) million in the 2020 quarter to a net loss of $(3.8) million in the 2021 quarter. The change was primarily due to the increase in loss on derivative contracts (as noted above) in 2021, partially offset by an increase in natural gas, oil and NGL revenue.

RESULTS OF FISCAL YEAR 2021 AS COMPARED TO FISCAL YEAR 2020

Natural gas, oil and NGL revenue increased 62% in 2021 as production increased 6% and product prices increased 53%, relative to 2020. Royalty revenue increased 76% in 2021 as total production increased 25% and product prices increased 41%, relative to 2020. Total production increased due to an increase in natural gas production from the recent mineral and royalty acquisitions in the Haynesville play of Texas and Louisiana, and slightly offset by naturally declining production in the Fayetteville, SCOOP and Arkoma STACK. The decrease in oil production was a result of naturally declining production in working interest wells in the Eagle Ford play and royalty wells in the Bakken play, due to the company strategy of no longer participating with working interest in new drilling in the Eagle Ford, and reduced drilling activity in the Bakken. These decreases were partially offset by new drilling in the STACK. The increase in NGL production is primarily attributable to high interest wells coming back online after being shut-in for part of fiscal year 2020, as well as new wells being brought online in the STACK. This was partially offset by naturally declining production in the SCOOP.

Given our strategic decision to cease participating with working interests, we plan to offset the natural decline of our existing production base by the development of our current inventory of mineral acreage and through acquisitions of additional mineral interests.

Expenses decreased in 2021, primarily the result of a decrease in the provision for impairment, DD&A, LOE and interest expense, offset by an increase in transportation, gathering and marketing expenses, production taxes and loss on debt extinguishment. The reduction in DD&A expense is discussed above and the reduction in interest expense is due to the Company paying down $11.3 million of debt in 2021. The increase in transportation, gathering and marketing expense and production taxes is due to the increase in production and related revenue.

An impairment expense of $50,475 was recorded during 2021 compared to $29,904,528 in 2020. In 2020, an impairment of expense of $19.3 million and $7.3 million was recorded on the Fayetteville Shale and Eagle Ford fields, respectively. The remaining $2.7 million of impairment was taken on other producing assets.

In 2021, the Company sold 2,857 net mineral acres in the Central Basin Platform, TX, for a gain on sales of $0.2 million. In 2020, the Company sold 530 net mineral acres in Eddy County, N.M., for a gain on sales of $3.3 million and 5,925 open and non-producing net mineral acres in northwest Oklahoma for a net gain on sales of $0.7 million.

The Company's net income (loss) changed from a net loss of $(24.0) million in 2020 to a net loss of $(6.2) million in 2021. The change in net (loss) was due to the increase in revenue mentioned above and decrease in expenses, partially offset by an increase in loss on derivative contracts and a decrease on net gain on sale of assets. Fiscal 2021 total revenues included a $16.2 million loss on derivative contracts, as compared to a $0.9 million gain on derivative contracts for 2020.

OPERATIONS UPDATE

At Nov. 15, 2021, the Company had a total of 86 gross wells (0.46 net wells) in progress across its mineral positions and 33 gross active permitted wells. As of Nov. 15, 2021, there were 15 rigs operating on the Company's acreage and 73 rigs operating within 2.5 miles of its acreage.

Bakken/ Arkoma SCOOP STACK Three Stack Permian Fayetteville Haynesville Other Total Forks

As of 11/15/21:

Gross Wells in Progress on PHX 41 8 2 3 3 - 26 3 86Acreage

Net Wells in Progress on PHX 0.04 0.04 - 0.03 0.14 - 0.20 0.01 0.46Acreage

Gross Active Permits on PHX 13 6 5 4 - - - 5 33Acreage

As of 11/15/21:

Rigs Present on PHX Acreage 7 1 - 1 - - 6 - 15

Rigs Within 2.5 Miles of PHX 19 14 9 2 3 - 16 10 73Acreage

Leasing Activity

During the fourth quarter of fiscal year 2021, the Company leased 265 net mineral acres for an average bonus payment of $402 and an average royalty of 20%.

Bakken/ Arkoma SCOOP STACK Three Stack Permian Fayetteville Haynesville Other Total Forks

During Three Months Ended 9/30/21:

Net Mineral Acres Leased 184 37 - - 30 - - 14 265

Average Bonus per Net Mineral Acre 225 1,450 - - 488 - - 325 402

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

ACQUISITION AND DIVESTITURE UPDATE

During the fourth quarter of fiscal year 2021 through Nov. 15, 2021, the Company purchased 1,311 net royalty acres for $11,129,413.

Bakken Arkoma SCOOP STACK / Permian Fayetteville Haynesville Other Total Three Stack Forks

For the period ended 11/15/21: ^(1)

Net Mineral Acres Purchased 208 - - - - - 698 - 906

Net Royalty Acres Purchased 241 - - - - - 1,070 - 1,311

Price per Net Royalty Acre $ 5,747 - - - - - $ 9,107 - $ 8,489

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

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

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

^(1) Fourth quarter 2021 through Nov. 15, 2021.

During the fourth quarter of fiscal year 2021 through Nov. 15, 2021, the Company sold 731 gross working interest wells (20.21 net wells).

P&A LiabilityFor the Period Ended Proceeds ($) Gross Wells Net Wells (Net Value $)

September 30, 2021 $ 419,171 $ 37,242 23 1.28

November 23, 2021 $ 4,625,000 $ 693,235 708 18.93

$ 5,044,171 $ 730,477 731 20.21

RESERVES UPDATE

At Sept. 30, 2021, proved reserves were 83.0 Bcfe, as calculated by DeGolyer and MacNaughton, the Company's independent consulting petroleum engineering firm. This was a 44% increase, compared to the 57.7 Bcfe of proved reserves at Sept. 30, 2020. Total proved developed reserves increased 42% to 77.7 Bcfe, as compared to Sept. 30, 2020 reserve volumes, mainly due to 2021 pricing revisions, partially offset by production and performance revisions. The pricing revisions were due to well economic limits extending later than was projected in 2020 as a result of higher gas and oil prices. The performance revisions were principally due to lower performance of high-interest Mississippian and Woodford wells in the STACK play in Oklahoma that were brought online in 2021. Total proved undeveloped reserves increased 2.2 Bcfe, principally due to mineral interest acquisitions in the Haynesville Shale in Texas and Louisiana and Meramec and Woodford SCOOP play in Oklahoma. SEC prices used for the Sept. 30, 2021, report averaged $2.79 per Mcf for natural gas, $56.51 per barrel for oil and $20.58 per barrel for NGL, compared to $1.62 per Mcf for natural gas, $40.18 per barrel for oil and $9.95 per barrel for NGL for the Sept. 30, 2020, report. These prices reflect net prices received at the wellhead.

BORROWING BASE

On Sept. 1, 2021, the Company entered into a new four-year $100 million senior secured credit facility with an initial Borrowing Base of $27.5 million and a maturity date of Sept. 1, 2025 (the "New Credit Facility"). The New Credit Facility is led by Independent Bank and replaced the Company's prior credit facility. On Dec. 6, 2021,cr the borrowing base was increased to $32.0 million.

FOURTH QUARTER EARNINGS CALL

PHX will host a conference call to discuss fourth quarter results at 5:00 p.m. EST on Dec. 13, 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 13725000.

FINANCIALS

Statements of Operations

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

2021 2020 2021 2020

Revenues:

Natural gas, oil and NGL sales $ 12,078,420 $ 5,040,986 $ 37,749,044 $ 23,370,003

Lease bonuses and rental income 105,974 118,174 425,113 690,961

Gains (losses) on derivative contracts (8,112,827) (1,507,982) (16,202,489) 907,419

$ 4,071,567 3,651,178 21,971,668 24,968,383

Costs and expenses:

Lease operating expenses 1,130,916 969,723 4,230,968 4,841,541

Transportation, gathering and marketing 1,628,634 1,116,587 5,767,287 4,812,869

Production taxes 622,266 187,628 1,938,304 1,022,912

Depreciation, depletion and amortization 1,569,631 2,519,996 7,745,804 11,313,783

Provision for impairment 4,620 - 50,475 29,904,528

Interest expense 204,925 328,359 995,127 1,286,788

General and administrative 2,142,205 1,718,422 8,207,882 8,024,901

Loss on debt extinguishment 260,236 - 260,236 -

Losses (gains) on asset sales and other (178,615) (677,355) (356,127) (3,997,902)

Total costs and expenses 7,384,818 6,163,360 28,839,956 57,209,420

Income (loss) before provision (benefit) for income taxes (3,313,251) (2,512,182) (6,868,288) (32,241,037)

Provision (benefit) for income taxes 450,949 (678,060) (651,051) (8,289,000)

Net income (loss) $ (3,764,200) $ (1,834,122) $ (6,217,237) $ (23,952,037)

Basic and diluted earnings (loss) per common share $ (0.14) $ (0.07) $ (0.24) $ (1.41)

Basic and diluted weighted average shares outstanding:

Common shares 29,997,490 18,289,502 25,742,202 16,856,792

Unissued, directors' deferred compensation shares 210,002 147,341 183,334 154,142

30,207,492 18,436,843 25,925,536 17,010,934

Dividends declared per share of

common stock and paid in period $ 0.01 $ 0.01 $ 0.04 $ 0.10

Balance Sheets

Sept. 30, 2021 Sept. 30, 2020

Assets

Current assets:

Cash and cash equivalents $ 2,438,511 $ 10,690,395

Natural gas, oil and NGL sales receivables (net of $0 6,428,982 2,943,220

allowance for uncollectable accounts)

Refundable income taxes 2,413,942 3,805,227

Other 942,082 351,088

Total current assets 12,223,517 17,789,930

Properties and equipment at cost, based on

successful efforts accounting:

Producing natural gas and oil properties 319,984,874 324,886,491

Non-producing natural gas and oil properties 40,466,098 18,993,814

Other 794,179 582,444

361,245,151 344,462,749

Less accumulated depreciation, depletion and amortization (257,643,661) (263,590,801)

Net properties and equipment 103,601,490 80,871,948

Investments 308 79,308

Operating lease right-of-use assets 607,414 690,316

Other, net 578,285 590,333

Total assets $ 117,011,014 $ 100,021,835

Liabilities and Stockholders' Equity

Current liabilities:

Accounts payable $ 772,717 $ 997,637

Derivative contracts, net 12,087,988 281,942

Current portion of operating lease liability 132,287 127,108

Income taxes payable 334,050 -

Accrued liabilities and other 1,809,337 1,297,363

Short-term debt - 1,750,000

Total current liabilities 15,136,379 4,454,050

Long-term debt 17,500,000 27,000,000

Deferred income taxes, net 343,906 1,329,007

Asset retirement obligations 2,836,172 2,897,522

Derivative contracts, net 1,696,479 425,705

Operating lease liability, net of current portion 789,339 921,625

Total liabilities 38,302,275 37,027,909

Stockholders' equity:

Class A voting common stock, par value $0.01666 per share: 36,000,500 shares 545,956 377,304

authorized and 32,770,443 shares issued and outstanding at Sept. 30, 2021;24,000,500

shares authorized and 22,647,306 shares issued and outstanding at Sept. 30,2020

Capital in excess of par value 33,213,645 10,649,611

Deferred directors' compensation 1,768,151 1,874,007

Retained earnings 48,966,420 56,244,100

84,494,172 69,145,022

Treasury stock, at cost: 388,545 shares at Sept. 30,

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

Total stockholders' equity 78,708,739 62,993,926

Total liabilities and stockholders' equity $ 117,011,014 $ 100,021,835

Condensed Statements of Cash Flows

Year ended Sept. 30,

2021 2020

Operating Activities

Net income (loss) $ (6,217,237) $ (23,952,037)

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

by operating activities:

Depreciation, depletion and amortization 7,745,804 11,313,783

Impairment of producing properties 50,475 29,904,528

Provision for deferred income taxes (985,101) (4,647,000)

Gain from leasing fee mineral acreage (421,915) (685,927)

Proceeds from leasing fee mineral acreage 441,653 701,948

Net (gain) loss on sales of assets (309,348) (3,973,321)

ESOP contribution expense - 103,104

Directors' deferred compensation expense 234,466 228,408

Total (gain) loss on derivative contracts 16,202,489 (907,419)

Cash receipts (payments) on settled derivative contracts (11,925,669) 4,109,210

Restricted stock awards 801,200 743,897

Loss on debt extinguishment 260,236 -

Other (11,099) (2,611)

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

Natural gas, oil and NGL sales receivables (3,485,762) 1,434,426

Refundable income taxes 1,391,285 (2,299,785)

Other current assets (436,401) (89,931)

Accounts payable (151,875) 1,308,731

Other non-current assets (86,282) (1,044,680)

Accrued liabilities 845,168 (1,139,029)

Total adjustments 10,159,324 35,058,332

Net cash provided by operating activities 3,942,087 11,106,295

Investing Activities

Capital expenditures (733,172) (403,136)

Acquisition of minerals and overriding royalty interests (20,624,347) (10,288,250)

Proceeds from sales of assets 988,600 4,228,868

Net cash provided (used) by investing activities (20,368,919) (6,462,518)

Financing Activities

Borrowings under Credit Facility 26,300,000 6,061,725

Payments of loan principal (37,550,000) (12,736,725)

Net proceeds from equity issuance 11,688,137 8,220,726

Cash receipts from (payments on) off-market derivative contracts 8,800,000 -

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

Payments of dividends (1,060,448) (1,652,164)

Net cash provided (used) by financing activities 8,174,948 (114,073)

Increase (decrease) in cash and cash equivalents (8,251,884) 4,529,704

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

Cash and cash equivalents at end of year $ 2,438,511 $ 10,690,395

Supplemental Disclosures of Cash Flow

Information

Interest paid (net of capitalized interest) $ 1,021,142 $ 1,306,967

Income taxes paid (net of refunds received) $ (1,391,225) $ (1,342,275)

Supplemental Schedule of Noncash Investing and Financing Activities

Additions and revisions, net, to asset retirement obligations $ - $ 4

Gross additions to properties and equipment $ 31,485,015 $ 10,701,284

Equity offering used for acquisitions (10,272,288) -

Net (increase) decrease in accounts payable for properties 144,792 (9,898)

and equipment additions

Capital expenditures, including dry hole costs $ 21,357,519 $ 10,691,386

Proved Reserves

Proved Reserves SEC Pricing

Sept. 30, 2021 Sept. 30, 2020

Proved Developed Reserves:

Mcf of Gas 60,287,881 40,924,083

Barrels of Oil 1,439,860 1,148,989

Barrels of NGL 1,467,092 1,135,864

Mcfe (1) 77,729,593 54,633,201

Proved Undeveloped Reserves:

Mcf of Gas 4,664,787 1,448,690

Barrels of Oil 64,980 184,668

Barrels of NGL 34,761 83,993

Mcfe (1) 5,263,233 3,060,656

Total Proved Reserves:

Mcf of Gas 64,952,668 42,372,773

Barrels of Oil 1,504,840 1,333,657

Barrels of NGL 1,501,853 1,219,857

Mcfe (1) 82,992,826 57,693,857

10% Discounted Estimated Future

Net Cash Flows (before income taxes):

Proved Developed $ 86,793,303 $ 33,270,804

Proved Undeveloped 9,731,035 5,659,479

Total $ 96,524,338 $ 38,930,283

SEC Pricing

Gas/Mcf $ 2.79 $ 1.62

Oil/Barrel $ 56.51 $ 40.18

NGL/Barrel $ 20.58 $ 9.95

Proved Reserves - Projected Future Pricing (2)

10% Discounted Estimated Future Proved Reserves

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

Proved Developed $ 111,007,369 $ 63,648,347

Proved Undeveloped 11,989,928 7,197,350

Total $ 122,997,297 $ 70,845,697

(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, 2021, and Sept. 30, 2020, basisadjusted to Company wellhead price

Hedge Position as of Nov. 26, 2021

Fiscal Product Volume Mcf/Bbl Swap Price Collar Average Collar AveragePeriod Floor Price Ceiling Price

2022 Natural Gas 80,000 $ 3.50 $ 5.10

2022 Natural Gas 3,162,000 $ 2.93

2023 Natural Gas 300,000 $ 3.20 $ 4.86

2023 Natural Gas 1,980,000 $ 3.22

2024 Natural Gas 60,000 $ 3.00 $ 4.70

2024 Natural Gas 360,000 $ 3.40

2022 Crude Oil 125,500 $ 44.25

2023 Crude Oil 43,500 $ 52.84

2024 Crude Oil 4,500 $ 67.55

Non-GAAP Reconciliation

This press release includes certain "non-GAAP financial measures" under the rules of the Securities and Exchange Commission (the "SEC"), 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 thereto), included in our SEC filings and posted on our website.

Adjusted EBITDA Reconciliation

Adjusted EBITDA excluding unrealized gains (losses) on derivatives and including cash receipts from off-market derivatives is defined as adjusted EBITDA. We have included a presentation of adjusted EBITDA excluding unrealized gains (losses) on derivatives and including cash receipts from off-market derivatives 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. Adjusted EBITDA excluding unrealized gains (losses) on derivative contracts and including cash receipts from off-market derivatives 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 unrealized gains (losses) on derivatives and including cash receipts from off market-derivatives 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 unrealized gains (losses) on derivative contracts and including cash receipts from off-market derivatives for the periods indicated:

Fourth Quarter Ended Fourth Quarter Ended Year Ended Year Ended Third Quarter Ended

Sept. 30, 2021 Sept. 30, 2020 Sept. 30, 2021 Sept. 30, 2020 June 30, 2021

Net Income (Loss) $ (3,764,200) $ (1,834,122) $ (6,217,237) $ (23,952,037) $ (1,356,594)

Plus:

Income Tax Expense

(Benefit) 450,949 (678,060) (651,051) (8,289,000) (816,000)

Interest Expense 204,925 328,359 995,127 1,286,788 220,439

DD&A 1,569,631 2,519,996 7,745,804 11,313,783 2,137,707

Impairment 4,620 - 50,475 29,904,528 45,855

Less:

Unrealized gains (losses)

on derivatives 3,124,035 (2,387,158) (4,276,820) (3,201,791) (4,482,793)

Plus:

Cash receipts from off-market derivative contracts^(1) 8,800,000 - 8,800,000 - -

Adjusted EBITDA $ 4,141,890 $ 2,723,331 $ 14,999,938 $ 13,465,853 $ 4,714,200

Debt $ 17,500,000 $ 28,750,000

Debt/Adjusted EBITDA 1.17 2.14

(1) The initial receipt of cash from BP for entering into the off-marketderivative contracts has no effect on the statement of operations and isconsidered a cash flow from financing activities.

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, Louisiana, North Dakota, 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 PHX's current views about future events. Forward-looking statements may include, but are not limited to, statements relating to: the Company's ability to execute its business strategies; the volatility of realized natural gas and oil prices; the level of production on the Company's 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; the Company's 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 the Company invests; and other economic, competitive, governmental, regulatory or technical factors affecting properties, operations or prices. Although the Company believes 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.

View original content: https://www.prnewswire.com/news-releases/phx-minerals-inc-reports-fourth-quarter-and-fiscal-2021-results-and-announces-dividend-payment-301443380.html

SOURCE PHX MINERALS INC.