Panhandle Oil and Gas Inc. Reports Fiscal 2012 First Quarter Results

Panhandle Oil And Gas Inc. reported financial and operating results for the 2012 fiscal first quarter ending Dec. 31, 2011.

FIRST QUARTER 2012 HIGHLIGHTS

• Recorded first quarter 2012 net income of $3,412,110, $.41 per share, compared to a net income of $1,426,849, $.17 per share, for the 2011 first quarter
• Increased first quarter 2012 Mcfe production 16% to 2,559,524 Mcfe, compared to 2,208,218 Mcfe for the 2011 first quarter
• Increased first quarter 2012 oil production by 52% to 38,040 barrels, compared to 24,965 barrels for the 2011 first quarter
• Cash generated by operating activities of $7.7 million for the 2012 first quarter fully funded capital expenditures of $6.3 million for drilling and equipping wells during the quarter
• Funded $17.4 million acquisition of 193 producing non-operated wells and 1,531 net acres of leasehold with more than 240 potential drilling locations in the Fayetteville Shale by accessing bank line-of-credit

For the 2012 first quarter, the Company recorded net income of $3,412,110, or $.41 per share, as compared to a net income of $1,426,849, or $.17 per share, for the 2011 first quarter. Net cash provided by operating activities decreased 10% to $7,745,652 for the 2012 first quarter, as compared to the 2011 first quarter. Cash flow from operations fully funded costs to drill and equip wells for the quarter. Capital expenditures for the 2012 quarter totaled $25,127,955, which included $6,344,006 for drilling and equipping wells, $17,399,052 for acquiring the Fayetteville Shale producing wells and leasehold and $1,384,897 for overriding royalty interests and 353 fee mineral acres, both in the Fayetteville Shale.

Total revenues for the 2012 quarter were $13,404,333, as compared to $9,901,548 for the 2011 quarter. The 2012 quarter included lease bonuses and rentals of $1,755,191, as compared to $113,365 in the 2011 quarter. $1,714,000 of the lease bonus was one transaction in which the Company leased 2,431 net acres in the Mississippi Limestone play in northern Oklahoma. Oil and gas sales revenues increased $2,012,703 or 21% in the 2012 quarter, as compared to the 2011 quarter, as a result of a 16% increase in Mcfe production and a 4% increase in the average Mcfe sales price.

Oil production increased 52% in the 2012 quarter to 38,040 barrels, as compared to 24,965 barrels in the 2011 quarter, while gas production also increased 184,884 Mcf, or 9%. Gas production volumes attributable to the Fayetteville property acquisition which closed in late October are primarily responsible for the gas production increase. In addition, 14,662 barrels of natural gas liquids (NGL) were sold in the 2012 first quarter. The Company reported NGL reserve volumes for the first time in its year end 2011 reserve report, and the 2012 first quarter marks initial reporting of quarterly NGL production volumes. The average sales price per Mcfe of production during the 2012 first quarter was $4.59, as compared to $4.41 for the 2011 first quarter. Further, Mcfe production in the first quarter increased 5% over fiscal 2011 fourth quarter volumes.

MANAGEMENT COMMENTS

Michael C. Coffman, President and CEO, said, "We are pleased with our first quarter results, both from a financial and operational standpoint. Our continuing focus on oil and natural gas liquids rich drilling over the last year has resulted in continually increasing production volumes of both products, which, at today's prices, adds significantly to our revenue stream. In addition, the attractively priced acquisition of the properties in the Fayetteville allowed us to layer on current cash flow generating properties with excellent upside potential as future infill drilling develops the more than 240 drilling locations purchased.

"The current market price for natural gas will make 2012 a somewhat challenging year for the Company, but our strong financial position, mineral acreage ownership in numerous oily plays in Western Oklahoma and our capital efficient strategies will allow us to continue to invest capital in projects which will enhance Panhandle's share value over the long term."

Paul Blanchard, Senior Vice President and COO, said, "As most operating companies drilling in Western Oklahoma continue to increase their budgets for oily plays, this gives us the opportunity to further increase our spending in projects such as the horizontal Granite Wash, Hogshooter, Cleveland, Marmaton and Tonkawa plays. This will translate into additional oil and natural gas liquids production in future quarters. Of the 40,000+ net mineral acres Panhandle owns in Western Oklahoma and the Texas Panhandle, 25,000 net acres are located in the counties where these plays are active. There are 17,100 acres available for our working interest participation. The remaining mineral acres were leased, predominately prior to the Company's strategy change in 2006. These leased minerals will continue to generate significant non-cost bearing royalty for the Company as development continues.

"We were also pleased we were able to lease 2,431 net mineral acres in the horizontal Mississippi Limestone play in Northern Oklahoma for $1,714,000 and retain a 3/16 royalty interest in future production generated on the acreage. We were not interested in participating as a non-operating working interest in wells in this play due to the high operating costs associated with water disposal. We will be able to deploy this capital to more favorable return projects for the Company."

The Company reported NGL reserves for the first time in its 2011 year-end reserve report. Increased drilling activity over the last 12-18 months in several western Oklahoma plays which produce significant NGL, have resulted in meaningful NGL production and reserves for the Company, necessitating inclusion in the reserve calculation and inclusion of NGL production volumes with first quarter 2012 results.

The Company's derivative contracts in place for natural gas at Dec. 31, 2010 are outlined in its Form 10-Q for the period ending Dec. 31, 2011.