OKLAHOMA CITY, Jan. 4, 2016 /PRNewswire/ -- PANHANDLE OIL AND GAS INC. (NYSE: PHX), "the
Company," today delivers an operations update.
Operations Update
The Company entered into a land
lease agreement in the northwestern shelf area of the Permian Basin
in late December 2015. We leased out
4,052 acres of our undeveloped minerals in a 34.5-square-mile block
located in southern Cochran County,
Texas. The block is prospective for horizontal San Andres
development and is adjacent to the Levelland and Slaughter fields, which have
cumulative production from the San Andres of 2.2 billion barrels of
oil equivalent (Boe). This general area has experienced an
acceleration of horizontal San Andres drilling during 2015. The
lease generated a $2.0 million cash
bonus for Panhandle during the
first fiscal quarter of 2016, and the Company will receive a
proportionately reduced 25% non-cost bearing royalty from all
production on the property. Additionally, Panhandle has the right to buy back a portion
of the lease and participate with up to a 10% working interest in
each unit when the initial well in each unit is proposed. Full
participation by Panhandle would
yield an average 10% working interest and a 12.1% net revenue
interest in the project.
The operator began drilling the first well on our
43.6-square-mile acreage block (2,440 net Panhandle acres) in Andrews and Winker Counties, Texas, in mid-December
2015. This block is located on the Central Basin Platform of
the Permian Basin and has several potential productive horizons.
This initial well is designed to penetrate and collect data from
all of the prospective horizons. Panhandle will receive a proportionately
reduced 25% royalty from all production on the property. We also
received a $1.2 million upfront cash
bonus for the lease in June 2015 and
have the right to buy back a portion of the lease and participate
with up to a 10% working interest in each unit as initial unit
wells are proposed. Panhandle
elected not to participate in this initial well and unit, but
instead chose to evaluate all data collected from the well to
determine the economic viability of participation in additional
wells as they are proposed and drilled. Full participation by
Panhandle in the remaining 43
square miles of the block would yield an average 7% working
interest and a 7.5% net revenue interest in all remaining wells in
the project.
During the first quarter, the Company also leased out
approximately 970 net mineral acres in Woodward County, Okla., for an upfront cash
bonus of $660,000 and an 18.75%
non-cost bearing royalty.
After the three transactions discussed above, the Company still
owns a total of 187,100 acres of undeveloped and unleased minerals
in 10 states covering several different oil and gas producing
basins. Of that total, 21,200 acres of undeveloped and unleased
minerals are in the Permian Basin (Midland Basin, Delaware Basin, Central Basin Platform and
shelf areas).
Management Comments
Michael C.
Coffman, Panhandle's
President and CEO, said: "These three transactions, which generated
$3.9 million in upfront cash bonuses
for the Company from June through December
2015, comprise a total of only 7,462 acres of Panhandle's total 194,500 acres of undeveloped
and unleased minerals before these transactions. These mineral
holdings were not sold, they were leased for a specified period,
and are still owned perpetually. In addition to the upfront cash
bonuses, we will receive a proportionately reduced non-cost bearing
royalty from all production on the properties. As a result of our
perpetual ownership and the right to collect royalties, the value
of these mineral holdings is significantly higher than the upfront
cash bonuses received, in the same way that the value of any real
property is greater than the amount at which it is leased. We
believe this leasing activity clearly highlights the considerable
value in the remaining 187,100 acres of undeveloped unleased
minerals."
Paul F. Blanchard, Panhandle's Sr. Vice-President and COO, added:
"The structure of the two Permian Basin lease agreements secures
significant lease bonuses and attractive royalties for Panhandle while maintaining the option to
participate with a material working interest should it be
determined that the projects meet our investment standards. This
structure minimizes the risk of employing capital until project
viability has been proven, at which point we are exposed to the
participation upside with its potential to materially increase our
Company's value as hundreds of wells could be drilled on each of
these blocks."
Panhandle Oil and Gas Inc. (NYSE: PHX) is engaged in the
exploration for and production of natural gas and oil.
Additional information on the Company can be found on the internet
at www.panhandleoilandgas.com.
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SOURCE PANHANDLE OIL AND GAS
INC.