OKLAHOMA CITY, Nov. 5, 2018 /PRNewswire/ -- PANHANDLE OIL AND
GAS INC. (NYSE: PHX) today reported that it has entered into
a definitive agreement to sell 206 net mineral acres and the
associated royalty production in Lea and Eddy
Counties, N.M., to a private buyer for $9,290,000 cash. The transaction is expected to
close by Nov. 30, 2018, and will have
an effective date of Nov. 1,
2018.
Like the vast majority of Panhandle's mineral acreage, these
minerals were purchased by Panhandle several years ago for a
minimal cost. In this case, the assets have been completely
amortized. Therefore, these mineral rights have no current book
value and the total value received will be a gain on the sale of
assets in the Company's first quarter of 2019. The Company is
utilizing a like-kind exchange under IRS code 1031 to defer income
tax on almost all of the sale price by offsetting it with the
Bakken mineral acreage that was purchased earlier this year
(8/21/18) utilizing a qualified exchange accommodation agreement.
Current royalty production from the acreage is 101 Bo + 71 Bngl +
138 Mcf per day, of which 95% is from a well in its second month of
production in the steep initial decline period.
Paul Blanchard, President and
CEO, commented: "The divestiture of these assets is consistent with
our overall strategy to maximize the value of our assets and
optimize cash flow, while maintaining a strong financial position
and rewarding our shareholders.
"The particular history of these mineral rights is useful to
understand. The minerals were purchased by Panhandle for nominal
value several years ago. The majority of the minerals remained
unleased and non-producing until 2016. Between 2016 and 2018,
Panhandle leased 175 acres of the 206 total acres for lease bonus
consideration of $1,155,000 or an
average of $6,600 per acre. In
addition, we have received approximately $883,000 in royalty payments from the properties.
Including the lease bonus, royalty and sale price, the 206 acres
have generated $11,328,000 in revenue
or $54,990 per acre for Panhandle. We
believe this illustrates the power of owning perpetual mineral
rights and proactively managing them in an era of rapidly changing
technology.
"Panhandle currently owns 258,600 mineral acres, of which 60,200
are producing, 13,500 are leased, and 184,900 are open. Panhandle
will continuously pursue opportunities that high-grade the
Company's portfolio by strategically monetizing certain mineral
rights from our portfolio, while acquiring additional undervalued
mineral rights in resource plays. We are seeking to take advantage
of exuberance in certain plays and apathy in others."
Panhandle Oil and Gas Inc. (NYSE: PHX)
Oklahoma City-based, Panhandle Oil
and Gas Inc. is an oil and natural gas mineral and leasehold
acreage-focused capital allocator seeking the highest per share
returns while maintaining a conservative net leverage ratio to
ensure survivability and prosperity in all business and mineral
commodity price cycles. The capital allocation tools include: (i)
selective participation in working interest wells on its existing
holdings in the highest quality, low-risk projects that are
projected to exceed corporate return thresholds; (ii) aggressive
leasing of its mineral holdings outside of areas of potential
working interest participation; (iii) acquisition of undervalued
mineral rights in established resource plays; (iv) divestiture of
limited optionality and overvalued mineral rights; (v) payment of
quarterly dividends, with optionality for special dividends when
available capital exceeds operational requirements and has no other
higher shareholder return option for an extended time period; and
(vi) repurchase of common shares when the share price trades at a
material discount to the company's estimated intrinsic value.
Panhandle's principal properties are located in Oklahoma, Arkansas, Texas, New
Mexico and North Dakota.
Additional information on the Company can be found at
www.panhandleoilandgas.com.
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SOURCE PANHANDLE OIL AND GAS INC.