Earnings call transcript: PHX Minerals beats EPS forecast in Q4 2024

PHX Minerals Inc. (PHX) reported its fourth-quarter 2024 earnings, surpassing expectations with an earnings per share (EPS) of $0.04, double the forecasted $0.02. Despite this positive earnings surprise, the company missed revenue expectations, posting $8.02 million against a forecast of $8.71 million. Following the earnings release, PHX shares experienced a slight decline, closing down 0.51% at $3.93. According to InvestingPro data, PHX maintains a strong financial health score of "GOOD" and has consistently paid dividends for 41 consecutive years, demonstrating remarkable stability in shareholder returns.

Key Takeaways

• PHX Minerals posted an EPS of $0.04, beating the forecast of $0.02.
• Revenue fell short of expectations, coming in at $8.02 million versus the $8.71 million forecast.
• The company’s stock declined by 0.51% in after-hours trading.
• PHX Minerals reduced total debt significantly from $29.5 million to $19.8 million.
• The company remains optimistic about 2025 prospects despite industry headwinds.

Company Performance

PHX Minerals demonstrated resilience in Q4 2024, achieving a 13% increase in quarterly revenues to $8.9 million compared to the previous quarter. However, full-year revenues decreased by 8% to $33.7 million year-over-year. The company’s adjusted EBITDA for the quarter rose to $5.4 million from $4.9 million in Q3, while full-year adjusted EBITDA declined to $21.3 million from $22.7 million in 2023. The reduction in total debt by $9.7 million highlights the company’s commitment to strengthening its balance sheet. InvestingPro analysis shows the company operates with a moderate debt level and maintains a healthy current ratio of 3.19, indicating strong short-term liquidity position.

Financial Highlights

• Revenue: $8.9 million in Q4 2024, up 13% quarter-over-quarter.
• Full-year revenue: $33.7 million, down 8% year-over-year.
• EPS: $0.04 in Q4 2024, exceeding the forecast of $0.02.
• Adjusted EBITDA: $5.4 million in Q4 2024, up from $4.9 million in Q3.
• Total debt reduced to $19.8 million from $29.5 million.

Earnings vs. Forecast

PHX Minerals outperformed EPS expectations by 100%, with actual EPS at $0.04 compared to the forecasted $0.02. This marks a significant earnings surprise, although the revenue fell short by approximately 8%, coming in at $8.02 million against an $8.71 million forecast. Historically, PHX has shown variability in meeting revenue forecasts, but this quarter’s EPS outperformance suggests improved operational efficiency.

Market Reaction

Despite the positive earnings surprise, PHX Minerals’ stock price dipped by 0.51% in after-hours trading, closing at $3.93. This decline may reflect investor concerns over the revenue miss and broader market conditions. The stock’s current price is near its 52-week low of $3.01, indicating potential investor caution amid industry challenges. InvestingPro data reveals the stock generally trades with low price volatility, with a beta of 0.5, and analysts have set price targets ranging from $4.50 to $5.25, suggesting potential upside. Get access to detailed valuation analysis and 8 additional exclusive ProTips with an InvestingPro subscription.

Outlook & Guidance

PHX Minerals remains optimistic about its prospects for 2025, though it did not provide specific production guidance. The company is exploring strategic opportunities and anticipates potential reserve recoupment with current natural gas prices. Future EPS and revenue forecasts suggest gradual growth, with EPS expected to reach $0.27 by FY2025 and revenue projected at $46.44 million. The company maintains an impressive gross profit margin of 82.23% and has demonstrated strong dividend growth, with a 77.78% increase in the last twelve months. Discover comprehensive analysis and valuation metrics in PHX’s detailed Pro Research Report, available exclusively on InvestingPro.

Executive Commentary

CEO Chad Stevens highlighted the company’s growth and asset quality amid industry headwinds, stating, "Despite industry headwinds, PHX demonstrated growth, maintained asset quality and successfully enhanced shareholder returns." VP of Engineering Danielle Mezzo emphasized ongoing development, noting, "We continue to see steady development on both our legacy and recently acquired mineral assets, which should lead to annually increasing royalty volumes."

Risks and Challenges

• Volatile natural gas prices may impact future revenues and profitability.
• Macro-economic pressures, including U.S. election cycles and Fed interest rates, could create industry uncertainty.
• Delayed well production due to low gas prices may affect short-term output and revenues.
• Competition from other mineral companies poses a risk to market share.
• Strategic alternatives evaluation may lead to operational disruptions.

Q&A

During the earnings call, analysts inquired about the company’s strategic alternatives. PHX management refrained from providing specific details but assured ongoing business operations during the review process. The continuation of production trends from the past two years was suggested, reflecting a focus on stable growth.

Full transcript - PHX Minerals Inc (PHX) Q4 2024:

Conference Operator: Greetings, and welcome to the PHX Minerals Inc. Fourth Quarter and Year End twenty twenty four Earnings Call. At this time, all participants are in a listen only mode. A question and answer session will follow the formal presentation. As a reminder, this conference is being recorded.

It’s now my pleasure to turn the call over to your host, Stephen Lee, Investor Relations. Please go ahead.

Stephen Lee, Investor Relations, PHX Minerals Inc.: Thank you, operator, and thank you for everyone for joining us today to discuss PSX Mineral’s December thirty one, twenty twenty four, quarterly and annual results. On the call today are Chad Stevens, President and Chief Executive Officer Ralph D’Amico, Executive Vice President and Chief Financial Officer and Danielle Mezzo, Vice President of Engineering. The earnings press release that was issued yesterday after the close is also posted on PHX Investor Relations website. Before I turn the call over to Chad, I’d like to remind everyone that during today’s call, including the Q and A session, management may make forward looking statements regarding expected revenue, earnings, future plans, opportunities and other expectations of the company. These estimates and other forward looking statements involve known and unknown risks and uncertainties that may cause actual results to be materially different from those expressed or implied on the call.

These risks are detailed in PAH Mineral’s most recent annual report on Form 10 K, as such may be amended or supplemented by subsequent quarterly reports on Form 10 Q or other reports filed with the Securities and Exchange Commission. The statements made during this call are based upon information known to PHAs as of today, 03/13/2025, and the company does not intend to update these forward looking statements whether as a result of new information, future events or otherwise unless required by law. With that, I’d like to turn the call over to Chad Stevens, PHX’s Chief Executive Officer. Chad?

Chad Stevens, President and Chief Executive Officer, PHX Minerals Inc.: Thanks, Steven, and thanks to all of you on this call for participating in PHX’s December thirty one, twenty twenty four, quarter end and annual earnings conference call. We appreciate your interest in the company. Standby. Computer just went down. Thank you.

Our results in calendar twenty twenty four were largely influenced by natural gas macro fundamentals. As we eliminated throughout this past year, the macro headwinds created difficult industry conditions with lower rig counts and reduced industry CapEx budgets. The general uncertainty in The U. S. Election cycle and the Fed’s decision to maintain current interest rates added to these headwinds.

But PHX delivered commendable financial results this year even considering this unfavorable environment. Despite slower industry activity, our total production volumes were up approximately 5% year over year with royalty volume up 8% for the year. EBITDA was down slightly year over year and was supported by our traditional hedging program. Over the last several quarters and as we weathered the low natural gas prices, we opined on an imminent improvement in the natural gas macro story. Our forecast then for improving fundamentals is resonating now with a gas strip well over $4 This will improve our financials and should translate into increased industry activity on our strategically located mineral assets.

I also highlight that our total well conversions to production remained at historical levels in 2024 and our well activity remains high, which will drive future well conversions in 2025 and beyond. All of this speaks to the high quality of our assets and resulted in a 33% increase in our dividend announced in the third quarter of twenty twenty four. As disclosed in our subsequent events section, we sold non producing minerals for $8,000,000 at the January 2025. These minerals were old legacy assets that had no production, cash flow or reserves associated with them. They were located in areas with little to no industry activity and thus had no strategic value to the company’s core business.

We have always maintained a strong conservative balance sheet. Upon the sale of our non core minerals closing in January ’5, we applied these sale proceeds to reducing debt. Ralph will discuss more about leverage in a moment. As previously disclosed, we formally began evaluating strategic alternatives in December and that process is progressed as planned. We are committed to keeping shareholders informed and will provide an update on the outcomes once the process is complete.

At this point, I’d like to turn the call over to Danielle to provide a quick operational overview and then to Ralph to discuss the financials.

Danielle Mezzo, Vice President of Engineering, PHX Minerals Inc.: Thanks, Chad, and good morning to everyone participating on the call. For our year ended 12/31/2024, total corporate production increased 5% to 9,841 millimeters millimeters

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Danielle Mezzo, Vice President of Engineering, PHX Minerals Inc.: millimeters millimeters millimeters millimeters millimeters millimeters millimeters mill at 2,379 millimeters millimeters millimeters millimeters millimeters millimeters millimeters millimeters millimeters millimeters millimeters millimeters millimeters millimeters millimeters millimeters millimeters millimeters millimeters millimeters millimeters millimeters millimeters millimeters millimeters millimeters millimeters millimeters millimeters millimeters millimeters millimeters millimeters millimeters millimeters millimeters millimeters millimeters millimeters millimeters millimeters mill at 2,096 millimeters millimeters millimeters millimeters millimeters millimeters millimeters

: millimeters millimeters millimeters millimeters millimeters millimeters millimeters millimeters millimeters millimeters millimeters millimeters millimeters millimeters millimeters millimeters millimeters millimeters millimeters

Danielle Mezzo, Vice President of Engineering, PHX Minerals Inc.: millimeters millimeters millimeters millimeters millimeters millimeters millimeters millimeters millimeters millimeters millimeters millimeters millimeters millimeters millimeters millimeters millimeters mill are better evaluated on a rolling twelve month basis. Royalty volumes represented 88% of total production during our December. ’80 percent of our quarter’s production volumes were natural gas which aligns with our long term position that natural gas is key transition fuel for sustainable energy future. Oil represented 11% of production volumes and NGL represented 9%. At December 3138, our total proved reserves decreased 11% to 63.7 Bcfe with the PV10 of $79,600,000 at SEC pricing and proved royalty reserves decreased 9% to 52.5 Bcfe with a PV10 of $71,900,000 at SEC pricing.

These reserve decreases were primarily attributable to the large year over year drop in gas prices. Given where natural gas prices currently are, these reserves could be recouped in the coming year. In addition to our proved reserves, we have a robust inventory of over 2,400 undrilled probable locations that fuel our population of WIPs and permits and drives our year over year royalty volume growth. During fourth quarter twenty twenty four, third party operators active on our mineral acreage converted 71 growth or 0.22 net wells in progress or WIP to producing wells compared to 46 or 0.1 net in the prior sequential quarter. We are pleased with our well conversion rates particularly given the challenging natural gas macro environment which includes some operators deferring bringing completed wells online until there is an improvement in gas prices.

At the same time, our inventory of wells in progress on our minerals which includes DUCs, wells being drilled and permits filed, remains strong with two twenty five growth or 0.91 net wells compared to two seventy eight growth or 0.93 net at the September quarter. The continued track record of well conversions and replenishment of the inventory of wells in progress or WIPs reflects the high quality portfolio of assets we have assembled to provide steady sustainable future growth. In addition to our WIPs, we regularly monitor third party operator rig activities in our focus areas and observe 16 rigs present on PHX Minerals acreage as of 02/03/2025. Additionally, we had 62 rigs active within 2.5 miles of PHX ownership. In summary, we continue to see steady development on both our legacy and recently acquired mineral assets, which should lead to annually increasing royalty volumes.

Now I will turn the call back to Ralph to discuss financials.

Ralph D’Amico, Executive Vice President and Chief Financial Officer, PHX Minerals Inc.: Thanks, Danielle, and thanks to everyone for being on the call today. For the quarter ended 12/31/2024, natural gas, oil and NGL sales revenues increased 13% to $8,900,000 and decreased 8% to $33,700,000 respectively compared to $7,900,000 in the prior sequential quarter and $36,500,000 for the full year 2023. During our fourth quarter, volumes remained relatively flat, as Danielle mentioned, and realized prices increased 13% compared to the prior sequential quarter. For the full year 2024, volumes increased 5%, realized prices decreased 12% compared to 2023. Recall also that we sold two working interest packages with closing dates in the first quarter of twenty twenty three.

So 2024 did not have any production associated with these assets, while 2023 included approximately one full month for both sets of assets. Realized natural gas prices for the fourth quarter of twenty twenty four averaged $2.64 per Mcf compared to $2 even in the third quarter of twenty twenty four. Realized oil prices averaged $69.82 down 7% from the third quarter of twenty twenty four and NGLs averaged $23.01 up 17% compared to the third quarter. For the full year 2024, natural gas prices averaged $2.19 compared to $2.61 in 2023 and oil averaged $74.59 compared to $76.76 in 2023, while NGLs averaged $21.95 compared to $22.18 in 2023. Realized hedge gains for the fourth quarter were $511,000 and were $4,300,000 for the full year 2024.

Our current hedge position is available in our most recently filed 10 ks. Total transportation expenses decreased 9% on a sequential quarter basis to approximately $1,000,000 primarily due to volumes in areas with lower transportation costs representing a larger percentage of the overall volumes. For the full year, transportation expenses increased 18% to $4,500,000 primarily due to some high interest wells in the Haynesville coming online where leases were cost bearing in 2024. Production taxes decreased 33% on a sequential quarter basis to $284,000 primarily due to lower production volumes in areas that had in states that had lower production tax rates. For the full year 2024, taxes decreased 15% to $1,700,000 compared to 2023, primarily due to lower realized prices offset by slightly higher volumes.

LOE associated with our legacy non operated working interest wells increased 4% on a sequential quarter basis to $307,000 For the full year, LOE decreased 23 to $1,200,000 and recall that as I mentioned earlier, the comparable period in 2023 also had approximately one full month of LOE expenses with the assets that were divested. Cash G and A increased to $2,340,000 in the fourth quarter compared to the prior sequential quarter, primarily due to normal year end professional service expenses. For the full year, cash G and A decreased 4% to $9,200,000 compared to 2023, primarily due to our internal ongoing internal cost control effort. Adjusted EBITDA for the quarter was up to $5,400,000 compared to $4,900,000 in the third quarter. For the full year, adjusted EBITDA was $21,300,000 compared to $22,700,000 in 2023, as Chad mentioned, primarily due to lower realized prices, offset

: by slightly higher volumes.

Ralph D’Amico, Executive Vice President and Chief Financial Officer, PHX Minerals Inc.: Net income for the quarter was offset by slightly higher volumes. Net income for the quarter was $109,000 or $0 per share compared to $1,100,000 or $0.03 per share in the prior sequential quarter. Note that the fourth quarter natural gas prices increased towards the end of the quarter causing a negative non cash mark to market adjustment of $1,500,000 to our hedge book. Absent this non cash expense, we would have generated higher positive net income. Total debt as of 12/31/2024 was $29,500,000 and our trailing debt to twelve month adjusted EBITDA was 1.38x.

As Chad mentioned, subsequent to the quarter, we reduced our debt to $19,800,000 through a combination of operating cash flow and the sale the proceeds from the sale of the non producing unleased open mineral acres, bringing our pro form a leverage to under one times. With that, I’ll turn the call over to Chad for some final remarks.

Chad Stevens, President and Chief Executive Officer, PHX Minerals Inc.: Thanks, Ralph. As we reflect on 2024, I’m proud of our resilience and performance amid a challenging macro environment. Despite industry headwinds, PHX demonstrated growth, maintained asset quality and successfully enhanced shareholder returns. Looking ahead to 2025, we remain optimistic about our prospects. With a solid foundation of high quality assets and improving financial position and a commitment to exploring strategic opportunities that can unlock value, we are well positioned for continued growth and value creation for our shareholders in the year ahead.

As always, I thank both our employees and Board of Directors for the dedication and hard work. This concludes the prepared remarks portion of the call. Operator, please open up the queue for questions.

Conference Operator: Certainly. We’ll now be conducting a question and answer session. Our first question is coming from Derek Whitfield from Texas Capital. Your line is now live.

Derek Whitfield, Analyst, Texas Capital: Good morning, all and thanks for taking my questions.

Ralph D’Amico, Executive Vice President and Chief Financial Officer, PHX Minerals Inc.: Hi, Derek.

Derek Whitfield, Analyst, Texas Capital: With the understanding that the strategic alternatives review is ongoing, are there any highlights or insights that you can share with us on what you’ve learned through the process today?

Ralph D’Amico, Executive Vice President and Chief Financial Officer, PHX Minerals Inc.: Derek, I think our policy really is not to comment on an ongoing process in any sort of way.

Derek Whitfield, Analyst, Texas Capital: Completely fair. Maybe speak about it from this perspective, if you could. So while this effort is underway, how should we think about your approach to M and A and ground game leasing?

Ralph D’Amico, Executive Vice President and Chief Financial Officer, PHX Minerals Inc.: Well, we continue to operate the business as is, right, as we always have. So there really is no change to how we approach the business.

Derek Whitfield, Analyst, Texas Capital: Great. And then maybe on 2025, with the understanding that you’re not providing production guidance or guidance today, does your line of sight well support flattish production?

Ralph D’Amico, Executive Vice President and Chief Financial Officer, PHX Minerals Inc.: I think you can see what’s happened with our conversions and production over the last two years in a significantly lower natural gas price environment. So, you can extrapolate from the last two years with what’s happening what’s happened, right, that you could see a trend continuing to 2025. But I’ll leave it at that as again, we’re not providing guidance while we’re going through this process.

Derek Whitfield, Analyst, Texas Capital: Understood and appreciate. Thanks for your time. Thanks, Derek.

Conference Operator: Thank you. We’ve reached the end of our question and answer session. I’d like to turn the floor back over for any further or closing comments.

Chad Stevens, President and Chief Executive Officer, PHX Minerals Inc.: Thank you, operator. Again, I’d like to thank our employees and shareholders for their continued support. I’d also like to note that Ralph and I will continue to expand our investor marketing activities over the coming weeks and months. If you’d be interested in meeting with us, please don’t hesitate to reach out to myself, Ralph or the folks at ThinkIR. We look forward to hosting our next call in May 2025 to discuss our first quarter ’twenty five results.

Thank you.

Conference Operator: Thank you. That does conclude today’s teleconference and webcast. You may disconnect your line at this time and have a wonderful day. We thank you for your participation today.

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