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What changed in MEXCO ENERGY CORP's 10-K — 2022 vs 2023

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Paragraph-level year-over-year comparison of MEXCO ENERGY CORP's 2022 and 2023 10-K annual filings, covering the Business, Risk Factors, Legal Proceedings, Cybersecurity, MD&A and Market Risk sections. Every new, removed and edited paragraph is highlighted side-by-side so you can see exactly what management changed in the 2023 report.

+184 added−180 removedSource: 10-K (2023-06-26) vs 10-K (2022-06-27)

Top changes in MEXCO ENERGY CORP's 2023 10-K

184 paragraphs added · 180 removed · 145 edited across 7 sections

Item 1. Business

Business — how the company describes what it does

35 edited+13 added−8 removed33 unchanged
Biggest changeThe market for our oil, gas and natural gas liquids production depends on factors beyond our control including: national and international pandemics like the COVID-19; domestic and foreign political conditions; the overall level of supply of and demand for oil, gas and natural gas liquids; the price of imports of oil and gas; weather conditions; the price and availability of alternative fuels; the proximity and capacity of gas pipelines and other transportation facilities; and overall economic conditions. 6 Major Customers We made sales that amounted to 10% or more of oil and gas revenues as follows for the years ended March 31: 2022 2021 Company A 68 % 66 % Historically, the Company has not experienced significant credit losses on our oil and gas accounts and management is of the opinion that significant credit risk does not exist.
Biggest changeMajor Customers We made sales that amounted to 10% or more of oil and gas revenues as follows for the years ended March 31: 2023 2022 Company A 53 % 68 % Historically, the Company has not experienced significant credit losses on our oil and gas accounts and management is of the opinion that significant credit risk does not exist.
Taylor participates in all facets of our business and has a significant impact on both our business strategy and daily operations. Company Profile Since our inception, we have been engaged in acquiring and developing oil and gas properties and the exploration for and production of natural gas, crude oil, condensate and natural gas liquids (“NGLs”) within the United States.
Taylor participates in all facets of our business and has a significant impact on both our business strategy and daily operations. 3 Company Profile Since our inception, we have been engaged in acquiring and developing oil and gas properties and the exploration for and production of natural gas, crude oil, condensate and natural gas liquids (“NGLs”) within the United States.
McComic served as Treasurer and Assistant Secretary of the Company. 8 Donna Gail Yanko was appointed to the position of Vice President of the Company in 1990. She also served as Corporate Secretary from 1992 to 2021 and from 1986 to 1992 was Assistant Secretary.
McComic served as Treasurer and Assistant Secretary of the Company. Donna Gail Yanko was appointed to the position of Vice President of the Company in 1990. She also served as Corporate Secretary from 1992 to 2021 and from 1986 to 1992 was Assistant Secretary.
This process usually intensifies the competition and makes it extremely difficult to acquire reserves without assuming significant price and production risks. We actively search for opportunities to acquire proved oil and gas properties. However, because the competition is intense, we cannot give any assurance that we will be successful in our efforts during fiscal 2023.
This process usually intensifies the competition and makes it extremely difficult to acquire reserves without assuming significant price and production risks. We actively search for opportunities to acquire proved oil and gas properties. However, because the competition is intense, we cannot give any assurance that we will be successful in our efforts during fiscal 2024.
Management’s Discussion and Analysis of Financial Condition and Results of Operations – Liquidity and Capital Resources Commitments”. We own partial interests in approximately 6,300 producing wells all of which are located within the United States in the states of Texas, New Mexico, Oklahoma, Louisiana, Alabama, Mississippi, Arkansas, Wyoming, Kansas, Colorado, Montana, Virginia, North Dakota, and Ohio.
Management’s Discussion and Analysis of Financial Condition and Results of Operations – Liquidity and Capital Resources Commitments”. We own partial interests in approximately 6,400 producing wells all of which are located within the United States in the states of Texas, New Mexico, Oklahoma, Louisiana, Alabama, Mississippi, Arkansas, Wyoming, Kansas, Colorado, Montana, Virginia, North Dakota, and Ohio.
We maintain insurance coverage customary for operations of a similar nature, but losses could arise from uninsured risks or in amounts in excess of existing insurance coverage. Executive Officers The following table sets forth certain information concerning the executive officers of the Company as of March 31, 2022. Name Age Position Nicholas C.
We maintain insurance coverage customary for operations of a similar nature, but losses could arise from uninsured risks or in amounts in excess of existing insurance coverage. Executive Officers The following table sets forth certain information concerning the executive officers of the Company as of March 31, 2023. Name Age Position Nicholas C.
The Permian Basin in total accounts for 84% of our discounted future net cash flows from proved reserves and 86% of our gross revenues. The Permian Basin is one of the oldest and most prolific producing basins in North America which has been a significant source of oil production since the 1920s.
The Permian Basin in total accounts for 80% of our discounted future net cash flows from proved reserves and 79% of our gross revenues. The Permian Basin is one of the oldest and most prolific producing basins in North America which has been a significant source of oil production since the 1920s.
Regulations affecting elements of the energy sector are under constant review for amendment or expansion and frequently more stringent requirements are imposed. Various federal and state agencies, including the Texas Railroad Commission, the Bureau of Land Management (the “BLM”), an agency of the U.S Department of the Interior (“DOI”), the U.S. Environmental Protection Agency (the “EPA”) and the U.S.
Regulations affecting elements of the energy sector are under constant review for amendment or expansion and frequently more stringent requirements are imposed. Various federal and state agencies, including the Texas Railroad Commission, the Bureau of Land Management (the “BLM”), an agency of the U.S Department of the Interior (“DOI”), the Federal Energy Regulatory Commission (“FERC”), the U.S.
The decrease in demand for oil, combined with pressures on the global supply-demand balance for oil and related products, resulted in oil prices declining significantly in late February 2020. Since mid-2020, oil prices have improved, with demand steadily increasing despite the uncertainties surrounding the COVID-19 variants, which have continued to inhibit a full global demand recovery.
The decrease in demand for oil, combined with excess supply of oil and related products, resulted in oil prices declining significantly in late February 2020. Since mid-2020, oil prices have improved, with demand steadily increasing despite the uncertainties surrounding the COVID-19 variants, which have continued to inhibit a full global demand recovery.
We may compete with major oil and gas companies, other independent oil and gas companies and individual producers and operators, some of which have financial and personnel resources substantially in excess of those available to us. As a result, we may be placed at a competitive disadvantage.
Competition for oil and gas reserve acquisitions is significant. We may compete with major oil and gas companies, other independent oil and gas companies and individual producers and operators, some of which have financial and personnel resources substantially in excess of those available to us. As a result, we may be placed at a competitive disadvantage.
Our total estimated proved reserves at March 31, 2022 were approximately 1.616 million barrels of oil equivalent (“MMBOE”) of which 50% was oil and natural gas liquids and 50% was natural gas, and our estimated present value of proved reserves was approximately $31 million based on estimated future net revenues excluding taxes discounted at 10% per annum, pricing and other assumptions set forth in “Item 2 – Properties” below.
Our total estimated proved reserves at March 31, 2023 were approximately 1.552 million barrels of oil equivalent (“MMBOE”) of which 47% was oil and natural gas liquids and 53% was natural gas, and our estimated present value of proved reserves was approximately $39 million based on estimated future net revenues excluding taxes discounted at 10% per annum, pricing and other assumptions set forth in “Item 2 – Properties” below.
For fiscal 2022, these properties accounted for 73% of our net revenues. Of these discounted future net cash flows from proved reserves, approximately 19% are attributable to proven undeveloped reserves which would be developed through new drilling.
For fiscal 2023, these properties accounted for 62% of our net revenues. Of these discounted future net cash flows from proved reserves, approximately 15% are attributable to proven undeveloped reserves which would be developed through new drilling.
Taylor 84 Chairman and Chief Executive Officer Tamala L. McComic 53 President, Chief Financial Officer, Treasurer, and Assistant Secretary Donna Gail Yanko 77 Vice President Set forth below is a description of the principal occupations during at least the past five years of each executive officer of the Company. Nicholas C.
Taylor 85 Chairman and Chief Executive Officer Tamala L. McComic 54 President, Chief Financial Officer, Treasurer, and Assistant Secretary Donna Gail Yanko 78 Vice President Stacy D. Hardin 58 Secretary and Assistant Treasurer Set forth below is a description of the principal occupations during at least the past five years of each executive officer of the Company. Nicholas C.
The Permian Basin is known to have a number of zones of oil and natural gas bearing rock throughout. The Delaware Basin properties, encompassing 30,984 gross acres, 206 net acres, 555 gross producing wells and 3 net wells account for approximately 61% of our discounted future net cash flows from proved reserves as of March 31, 2022.
The Permian Basin is known to have a number of zones of oil and natural gas bearing rock throughout. The Delaware Basin properties, encompassing 30,007 gross acres, 195 net acres, 610 gross producing wells and 4 net wells account for approximately 58% of our discounted future net cash flows from proved reserves as of March 31, 2023.
Oil and Gas Operations As of March 31, 2022, oil constituted approximately 72% of our oil and gas revenues and approximately 50% of our total proved reserves volumes for fiscal 2022. Revenues from oil and gas royalty interests accounted for approximately 23% of our oil and gas revenues for fiscal 2022.
Oil and Gas Operations As of March 31, 2023, oil constituted approximately 70% of our oil and gas revenues and approximately 47% of our total proved reserves volumes for fiscal 2023. Revenues from oil and gas royalty interests accounted for approximately 28% of our oil and gas revenues for fiscal 2023.
Under certain environmental laws and regulations, the operators of the Company properties could be subject to strict, joint and several liability for the removal or remediation of property contamination, whether at a drill site or a waste disposal facility, even when the operators did not cause the contamination or their activities were in compliance with all applicable laws at the time the actions were taken.
Occupational Safety and Health Administration (“OSHA”), have legal and regulatory authority and oversight over the operations on the properties in which the Company owns an interest. 7 Under certain environmental laws and regulations, the operators of the Company properties could be subject to strict, joint and several liability for the removal or remediation of property contamination, whether at a drill site or a waste disposal facility, even when the operators did not cause the contamination or their activities were in compliance with all applicable laws at the time the actions were taken.
Prior to drilling of an oil and natural gas well, it is normal practice in our industry for the person or company acting as the operator of the well to obtain a preliminary title review to ensure there are no obvious defects in title to the well.
We do not believe any of these burdens will materially interfere with the use of these properties. 8 Prior to drilling of an oil and natural gas well, it is normal practice in our industry for the person or company acting as the operator of the well to obtain a preliminary title review to ensure there are no obvious defects in title to the well.
Wall, Suite 475, Midland, Texas 79701 and our telephone number is (432) 682-1119. We believe our facilities are adequate for our current operations and future needs. Access to Company Reports Mexco Energy Corporation files annual, quarterly and current reports, proxy statements and other information with the SEC.
We believe our facilities are adequate for our current operations and future needs. Access to Company Reports Mexco Energy Corporation files annual, quarterly and current reports, proxy statements and other information with the SEC.
In addition, worldwide oil inventories are, from a historical perspective, very low and supply increases from Organization of Petroleum Exporting Countries (“OPEC”), Russia and other oil producing nations are not expected to be sufficient to meet forecasted oil demand growth in 2022 and 2023, with many OPEC countries not able to produce at their OPEC agreed upon quota levels due to their lack of capital investments over the past few years in developing incremental oil supplies.
In addition, worldwide oil inventories, from a historical perspective, remain low and concerns exist with the ability of Organization of Petroleum Exporting Countries (“OPEC”) and other oil producing nations to meet forecasted future oil demand growth in 2023 and 2024, with many OPEC countries not able to produce at their OPEC agreed upon quota levels due to their limited capital investments, and increases in cost over the last few years directed towards developing incremental oil supplies.
The Midland Basin properties, encompassing 99,160 gross acres, 266 net acres, 992 gross producing wells and 2 net wells account for approximately 11% of our discounted future net cash flows from proved reserves as of March 31, 2022. For fiscal 2022, these properties accounted for 11% of our net revenues.
The Midland Basin properties, encompassing 97,584 gross acres, 256 net acres, 1,016 gross producing wells and 2 net wells account for approximately 18% of our discounted future net cash flows from proved reserves as of March 31, 2023. For fiscal 2023, these properties accounted for 14% of our net revenues.
The following table indicates our oil and gas production in each of the last five years: Year Oil(Bbls) Gas (Mcf) 2022 61,689 393,841 2021 50,327 324,205 2020 44,301 294,007 2019 35,359 295,133 2018 34,743 318,774 Competition and Markets The oil and gas industry is a highly competitive business. Competition for oil and gas reserve acquisitions is significant.
Additional information concerning these properties and our oil and gas reserves is provided below. 6 The following table indicates our oil and gas production in each of the last five years: Year Oil(Bbls) Gas (Mcf) 2023 73,968 534,363 2022 61,689 393,841 2021 50,327 324,205 2020 44,301 294,007 2019 35,359 295,133 Competition and Markets The oil and gas industry is a highly competitive business.
Industry Environment and Outlook The outbreak of the novel coronavirus (“COVID-19”) resulted in a severe worldwide economic downturn, significantly disrupting the demand for oil throughout the world, and created significant volatility, uncertainty and turmoil in the oil and gas industry.
Royalty interests, purchase price of $117,200 covering 28 producing wells in 6 counties in the Haynesville trend area of Louisiana and 5 counties in Texas. 5 Industry Environment and Outlook The outbreak of the novel coronavirus (“COVID-19”) resulted in a severe worldwide economic downturn, significantly disrupting the demand for oil throughout the world, and created significant volatility, uncertainty and turmoil in the oil and gas industry.
We believe that relations with these employees are generally satisfactory. From time to time, we utilize the services of independent geological, land and engineering consultants on a limited basis and expect to continue to do so in the future. Office Facilities Our principal offices are located at 415 W.
From time to time, we utilize the services of independent geological, land and engineering consultants on a limited basis and expect to continue to do so in the future. 9 Office Facilities Our principal offices are located at 415 W. Wall, Suite 475, Midland, Texas 79701 and our telephone number is (432) 682-1119.
Also, the Russian invasion of Ukraine has caused a number of boycotts of Russian crude oil and natural gas production. See Part II, Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations for discussion of our fiscal 2022 operating results and potential impact on fiscal 2023 operating results due to commodity price changes.
See Part II, Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations for discussion of our fiscal 2023 operating results and potential impact on fiscal 2024 operating results due to commodity price changes.
From 1986 to 2015, on a part-time basis, she assisted the Chairman of the Board of the Company in his personal business activities. Ms. Yanko also served as a director of the Company from 1990 to 2008. Employees As of March 31, 2022, we had two full-time and three part-time employees.
From 1986 to 2015, on a part-time basis, she assisted the Chairman of the Board of the Company in his personal business activities. Ms. Yanko also served as a director of the Company from 1990 to 2008. Stacy D. Hardin joined the Company in 2006 and was elected Corporate Secretary of the Company in September 2021.
From 1983 to 2022, Mexco Energy Corporation made approximately 80 acquisitions of producing oil and gas properties including royalties, overriding royalties, minerals and working interests plus the following most significant and recent acquisitions: 1993-2010 Tabbs Bay Oil Company and Thompson Brothers Lumber Company, respectively dissolved in 1957 and 1947.
From 1983 to 2023, Mexco Energy Corporation made numerous acquisitions of royalties, overriding royalties, minerals and working interests in producing oil and gas properties including the following most significant acquisitions: 1990-1994 Royalty interests, aggregate purchase price of approximately $501,000 covering multiple wells in the Gomez (Ellenberger) Field of Pecos County, Texas. 1993-2014 Tabbs Bay Oil Company and Thompson Brothers Lumber Company, respectively dissolved in 1957 and 1947.
For fiscal 2022, these properties accounted for 2% of our net revenues. All of these properties, except for one, are royalty interests. Of these discounted future net cash flows from proved reserves, approximately 8% are attributable to proven undeveloped reserves which would be developed through new drilling in the horizontal Wolfcamp.
Of these discounted future net cash flows from proved reserves, approximately 8% are attributable to proven undeveloped reserves which would be developed through new drilling.
Purchase covering thousands of acres located respectively in 19 counties of Texas, 3 parishes of Louisiana and one county in Arkansas and 8 counties of Texas, respectively consisting of various mineral, royalty and overriding royalty interests. 1997 Forman Energy Corporation, purchase price of $1,591,000 consisting primarily of working interests in approximately 634 wells located in 12 states. 2010 Southwest Texas Disposal Corporation, purchase price $478,000 consisting of royalty interests in over 300 wells located in 60 counties and parishes of 6 states. 2012 TBO Oil and Gas, LLC, purchase price of $1,150,000 consisting of working interests in approximately 280 wells located in 16 counties of 3 states. 2014 Royalty interests, purchase price of $200,000 covering 43 wells in 12 counties of 8 states, primarily in Texas.
Purchase covering thousands of acres located respectively in 19 counties of Texas, 3 parishes of Louisiana and one county in Arkansas and 8 counties of Texas, respectively consisting of various mineral, royalty and overriding royalty interests. 1997 Forman Energy Corporation, purchase price of $1,591,000 consisting primarily of working interests in approximately 634 wells located in 12 states. 2004 Royalty interests, purchase price $304,000 covering 37 producing wells in the Cotton Valley formation in Limestone County, Texas and the Lower Cotton Valley formation in Jackson Parish, Louisiana.
The properties may be subject to burdens such as liens incident to operating agreements and current taxes, development obligations under oil and gas leases and other encumbrances, easements and restrictions. We do not believe any of these burdens will materially interfere with the use of these properties.
Title to Properties The leasehold properties we own are subject to royalty, overriding royalty and other outstanding interests customary in the industry. The properties may be subject to burdens such as liens incident to operating agreements and current taxes, development obligations under oil and gas leases and other encumbrances, easements and restrictions.
Subsequently, in May 2022, the Company expended $25,000 for the second optional cash call for a total investment of $300,000. 2022 Overriding royalty interests, purchase price of $567,000 covering 53 producing wells and several additional potential locations for development in Atascosa and Karnes Counties, Texas.
This LLC has returned $226,725 and 76% of the total investment since inception in fiscal 2020. 2022-2023 Overriding royalty interests, purchase price of $567,000 covering 53 producing wells and several additional potential locations for development in Atascosa and Karnes Counties, Texas.
However, the Company does not expect that any of these laws and regulations will affect its operations materially differently than they would affect other companies with similar operations, size and financial strength. Title to Properties The leasehold properties we own are subject to royalty, overriding royalty and other outstanding interests customary in the industry.
Because public policy changes are commonplace, and existing laws and regulations are frequently amended, the Company is unable to predict the future cost or impact of compliance. However, the Company does not expect that any of these laws and regulations will affect its operations materially differently than they would affect other companies with similar operations, size and financial strength.
Of these oil and gas reserves, approximately 80% is natural gas and 20% oil. Non-Operated working interests, purchase price $840,000 in 70 Natural gas producing wells located in 5 counties of Oklahoma. 4 2019 In April 2019, the Company made a less than 1% investment commitment in a limited liability company amounting to $250,000 which has been completely funded.
Royalty and mineral interests, purchase price $1,000,000 covering approximately 1,800 wells in 27 counties of Texas. Of these oil and gas reserves, approximately 80% is natural gas and 20% oil. Non-Operated working interests, purchase price $840,000 in 70 Natural gas producing wells located in 5 counties of Oklahoma.
We did not incur any material capital expenditures for remediation or pollution control activities for the year ended March 31, 2022.
We did not incur any material capital expenditures for remediation or pollution control activities for the year ended March 31, 2023. Additionally, as of the date of this report, we are not aware of any environmental issues or claims that will require material capital expenditures during fiscal 2024.
This amount is classified as an investment at cost on the Company’s consolidated balance sheets. The limited liability company was initially capitalized at approximately $50 million to purchase royalty interests consisting of minerals located in the state of Ohio.
Royalty interest investment, $2,000,000 for an approximate 2% investment commitment in a limited liability company, capitalized at approximately $100 million to purchase royalty interests consisting of minerals located in the Marcellus and Utica areas of Ohio. As of the date of this report, $400,000 of the commitment has been expended.
Ensuring compliance with the rules, regulations and orders promulgated by such entities requires extensive effort and incremental costs to comply, which affects the Company’s profitability. Because public policy changes are commonplace, and existing laws and regulations are frequently amended, the Company is unable to predict the future cost or impact of compliance.
Other Regulation Other agencies with certain authority over the Company’s business include the Internal Revenue Service (the “IRS”), the SEC and NYSE. Ensuring compliance with the rules, regulations and orders promulgated by such entities requires extensive effort and incremental costs to comply, which affects the Company’s profitability.
Removed
Non-Operated working interests, purchase price $525,000 for 12.5% (approximately 10% net revenue interest). The purchase included 8 wells producing oil on 20-acre spacing at approximately 3,600 foot depth on 190 acres in Pecos County, TX. Royalty and mineral interests, purchase price $1,000,000 covering approximately 1,800 wells in 27 counties of Texas.
Added
This acreage contains 13 permitted or drilling wells and approximately 100 potential undrilled locations.
Removed
As of March 31, 2022 there are 356 gross wells (2.43 net wells to the limited liability company) of which the Company owns .38%, consisting of 346 Utica gas wells and 10 Marcellus oil wells either producing, drilling or in process.
Added
Royalty interests, purchase price $500,000 covering 4 producing gas units in Freestone County, Texas containing 33 producing wells and 17 potential undeveloped locations in the Cotton Valley formation. 2005 Royalty interests, purchase price $550,000 covering 75 producing wells, 9 permitted and/or drilling wells, and 83 potential undeveloped locations in the Cotton Valley formation of Freestone and Limestone Counties, Texas. 2007 Non-operated working interests, purchase price $425,000 covering 2 properties in Lea County, New Mexico.
Removed
In January 2022, the Company expended $25,000 to exercise its option to participate in the first of two optional cash calls increasing the capitalized investment.
Added
Royalty (mineral) acreage, purchase price $1,850,000 covering 122 mineral acres in the Newark East (Barnett Shale) Field of Tarrant County, Texas amounting to approximately 21.45% royalty interest. 2008 Royalty (mineral) acreage, purchase price $429,000 covering 522 mineral acres in the Newark East (Barnett Shale) Field of Tarrant County, Texas containing 6 producing natural gas wells, 5 proven undeveloped well locations, and 6 potential drill sites on this acreage.
Removed
Global oil price levels will ultimately depend on various factors and consequences beyond the Company’s control, such as the effectiveness of responses to combat the virus and their impact on domestic and worldwide demand; the ability of OPEC, Russia and other oil producing nations to manage the global oil supply; the timing and supply impact of any Iranian sanction relief on Iran’s ability to export oil; additional actions by businesses and governments in response to the pandemic; the global supply chain constraints associated with manufacturing delays; and, political stability of oil consuming countries.
Added
In March 2009, purchased additional interests, $49,000. 4 2010 Southwest Texas Disposal Corporation, purchase price $478,000 consisting of royalty interests in over 300 wells located in 60 counties and parishes of 6 states.
Removed
Of these discounted future net cash flows from proved reserves, approximately 6% are attributable to proven undeveloped reserves which would be developed through new drilling. 5 Gomez Gas Field properties, encompassing 13,058 gross acres, 72 net acres, 27 gross wells and .13 net wells in Pecos County, Texas, account for approximately 11% of our discounted future net cash flows from proved reserves as of March 31, 2022.
Added
Overriding royalty interests, purchase price $1,650,000 covering 5,120 gross acres over 8 sections in the Haynesville trend area of DeSoto Parish, Louisiana containing 6 horizontal producing wells, 2 wells drilling wells, and 57 additional potential drill sites.
Removed
Additional information concerning these properties and our oil and gas reserves is provided below.
Added
The Company paid $1.46 million in cash and the remainder was paid as 26,833 shares of its common stock issued from treasury shares. 2011 Non-operating working interests, purchase price $670,000 covering 160 gross acres in the Fuhrman-Mascho Field of Andrews County, Texas containing 5 producing wells in the Grayburg and San Andres formations and additional 11 potential drill sites.
Removed
Occupational Safety and Health Administration (“OSHA”), have legal and regulatory authority and oversight over the operations on the properties in which the Company owns an interest.
Added
In March 2012, purchased additional working interests, $275,000. 2012 TBO Oil and Gas, LLC, purchase price of $1,150,000 consisting of working interests in approximately 280 wells located in 16 counties of 3 states. 2014 Royalty interests, purchase price $200,000 covering 43 wells in 12 counties of 8 states, primarily in Texas.
Removed
Additionally, as of the date of this report, we are not aware of any environmental issues or claims that will require material capital expenditures during fiscal 2023. 7 Other Regulation Other agencies with certain authority over the Company’s business include the Internal Revenue Service (the “IRS”), the SEC and NYSE.
Added
Non-Operated working interests, purchase price $200,000 covering 80 wells located in Hockley and Pecos Counties, Texas.
Added
Non-Operated working interests, purchase price $450,000 covering 43 wells in Webster Parish, Louisiana; Eddy County, New Mexico; and, Nolan and Smith Counties, Texas. 2019 Royalty interest investment, $300,000 for a less than 1% investment commitment in a limited liability company, capitalized at approximately $50 million to purchase royalty interests consisting of minerals located in the Marcellus and Utica areas of Ohio.
Added
Royalty interests, purchase price of $939,000 covering 22 producing wells and several additional potential locations for development in the Eagleford area of Dimmit County, Texas.
Added
The market for our oil, gas and natural gas liquids production depends on factors beyond our control including: domestic and foreign political conditions; the overall level of supply of and demand for oil, gas and natural gas liquids; the price of imports of oil and gas; weather conditions; the price and availability of alternative fuels; the proximity and capacity of gas pipelines and other transportation facilities; and overall economic conditions.
Added
Environmental Protection Agency (the “EPA”), the Department of Transportation (“DOT”) and the U.S.
Added
She has also served the Company as Assistant Treasurer of the Company since 2010 and from 2006 to 2021 was Assistant Secretary. Prior thereto, Ms. Hardin served as Assistant Controller. Employees As of March 31, 2023, we had three full-time and three part-time employees. We believe that relations with these employees are generally satisfactory.

Item 1A. Risk Factors

Risk Factors — what could go wrong, per management

21 edited+10 added−15 removed49 unchanged
Biggest changeStockholders must rely on sales of their common stock after price appreciation, which may never occur, as the only way to realize a return on their investment. Control by our executive officers and directors may limit your ability to influence the outcome of matters requiring stockholder approval and could discourage our potential acquisition by third parties.
Biggest changeControl by our executive officers and directors may limit your ability to influence the outcome of matters requiring stockholder approval and could discourage our potential acquisition by third parties. As of March 31, 2023, our executive officers and directors beneficially owned approximately 47% of our common stock.
Any reduction in reserves, including reductions due to price fluctuations, can reduce the borrowing base under our credit facility and adversely affect the amount of cash flow available for capital expenditures and our ability to obtain additional capital for our exploration and development activities. Oil and natural gas prices do not necessarily fluctuate in direct relationship to each other.
Any reduction in reserves, including reductions due to price fluctuations, can reduce the borrowing base under our credit facility and adversely affect the amount of cash flow available for capital expenditures and our ability to obtain additional capital for our exploration and development activities. 10 Oil and natural gas prices do not necessarily fluctuate in direct relationship to each other.
As a result, we have a limited ability to exercise influence over normal operating procedures, expenditures or future development of underlying properties and their associated costs. The failure of an operator of our wells to adequately perform operations could reduce our revenues and production. Acquiring reserves in the oil and gas industry is highly competitive.
As a result, we have a limited ability to exercise influence over normal operating procedures, expenditures or future development of underlying properties and their associated costs. The failure of an operator of our wells to adequately perform operations could reduce our revenues and production. 13 Acquiring reserves in the oil and gas industry is highly competitive.
In addition, we incur the risk that no commercially productive reservoirs will be encountered, and there is no assurance that we will recover all or any portion of our investment in wells drilled or re-entered. 11 We may not be able to fund the capital expenditures that will be required for us to increase reserves and production.
In addition, we incur the risk that no commercially productive reservoirs will be encountered, and there is no assurance that we will recover all or any portion of our investment in wells drilled or re-entered. We may not be able to fund the capital expenditures that will be required for us to increase reserves and production.
Our ability to acquire and develop additional properties in the future will depend upon our ability to select and acquire suitable producing properties and prospects for future development activities. 12 We may not be insured against all of the operating hazards to which our business is exposed.
Our ability to acquire and develop additional properties in the future will depend upon our ability to select and acquire suitable producing properties and prospects for future development activities. We may not be insured against all of the operating hazards to which our business is exposed.
The unexpected loss of the services of one or more of these individuals could, therefore, significantly and adversely affect our operations. 13 We may be affected by one substantial shareholder. Nicholas C. Taylor beneficially owns approximately 44% of the outstanding shares of our common stock. Mr. Taylor is also our Chairman of the Board and Chief Executive Officer.
The unexpected loss of the services of one or more of these individuals could, therefore, significantly and adversely affect our operations. 14 We may be affected by one substantial shareholder. Nicholas C. Taylor beneficially owns approximately 44% of the outstanding shares of our common stock. Mr. Taylor is also our Chairman of the Board and Chief Executive Officer.
Many of these factors are beyond our control, and we cannot predict their potential effects on the price of our common stock. We cannot assure you that the market price of our common stock will not fluctuate or decline significantly in the future. In addition, the stock markets in general can experience considerable price and volume fluctuations.
Many of these factors are beyond our control, and we cannot predict their potential effects on the price of our common stock. We cannot assure you that the market price of our common stock will not fluctuate or decline significantly in the future. In addition, the stock markets in general can experience considerable price and volume fluctuations. ITEM 1B.
McComic, who have extensive experience and expertise in evaluating and analyzing producing oil and gas properties and drilling prospects, maximizing production from oil and gas properties and developing and executing acquisitions and financing. As of March 31, 2022, we do not have key-man insurance on the lives of Mr. Taylor and Ms. McComic.
McComic, who have extensive experience and expertise in evaluating and analyzing producing oil and gas properties and drilling prospects, maximizing production from oil and gas properties and developing and executing acquisitions and financing. As of March 31, 2023, we do not have key-man insurance on the lives of Mr. Taylor and Ms. McComic.
Approximately 37% and 32% of our total estimated net proved reserves at March 31, 2022 and 2021, respectively, were undeveloped, and those reserves may not ultimately be developed. Recovery of undeveloped reserves requires significant capital expenditures and successful drilling. Our reserve data assumes that we can and will make these expenditures and conduct these operations successfully.
Approximately 26% and 37% of our total estimated net proved reserves at March 31, 2023 and 2022, respectively, were undeveloped, and those reserves may not ultimately be developed. Recovery of undeveloped reserves requires significant capital expenditures and successful drilling. Our reserve data assumes that we can and will make these expenditures and conduct these operations successfully.
There were no ceiling test impairments on our oil and gas properties during fiscal 2022 and 2021. 10 We must replace reserves we produce. Our future success depends upon our ability to find, develop or acquire additional, economically recoverable oil and gas reserves.
There were no ceiling test impairments on our oil and gas properties during fiscal 2023 and 2022. 11 We must replace reserves we produce. Our future success depends upon our ability to find, develop or acquire additional, economically recoverable oil and gas reserves.
President Biden has indicated that he is supportive of, and has issued executive orders promoting various programs and initiatives designed to, among other things, curtail climate change, control the release of methane from new and existing oil and natural gas operations, and decarbonize electric generation and the transportation sector.
President Biden has indicated that he is supportive of, and has issued executive orders promoting various programs and initiatives designed to, among other things, curtail climate change, control the release of methane from new and existing oil and natural gas operations, and decarbonize electric generation and the transportation sector. In recent years the U.S.
The price of our common stock has been volatile and could continue to fluctuate substantially. Mexco common stock is traded on the New York Stock Exchange’s NYSE American. The market price of our common stock has and could continue to experience volatility due to reasons unrelated to our operating performance.
Mexco common stock is traded on the New York Stock Exchange’s NYSE American. The market price of our common stock has and could continue to experience volatility due to reasons unrelated to our operating performance.
We may seek to raise additional equity capital in the future. Any issuance of additional shares of our common stock will dilute the percentage ownership interest of all shareholders and may dilute the book value per share of our common stock. We have not and do not anticipate paying any cash dividends on our common stock in the foreseeable future.
We may seek to raise additional equity capital in the future. Any issuance of additional shares of our common stock will dilute the percentage ownership interest of all shareholders and may dilute the book value per share of our common stock.
Factors that can cause price fluctuations include the level of global demand for petroleum products; foreign supply and pricing of oil and gas; the ability of OPEC to set and maintain oil price and production controls; nature and extent of governmental regulation and taxation, including environmental regulations; level of domestic and international exploration, drilling and production activity; the cost of exploring for, producing and delivering oil and gas; speculative trading in crude oil and natural gas derivative contracts; availability, proximity and capacity of oil and gas pipelines and other transportation facilities; weather conditions; the price and availability of alternative fuels; technological advances affecting energy consumption; national and international pandemics like the COVID-19; and, overall political and economic conditions in oil producing countries. 9 Increases and decreases in prices also affect the amount of cash flow available for capital expenditures and our ability to borrow money or raise additional capital.
Factors that can cause price fluctuations include the level of global demand for petroleum products; foreign supply and pricing of oil and gas; the actions of OPEC, its members and other state-controlled oil companies relating to oil price and production controls; nature and extent of governmental regulation and taxation, including environmental regulations; level of domestic and international exploration, drilling and production activity; the cost of exploring for, producing and delivering oil and gas; speculative trading in crude oil and natural gas derivative contracts; availability, proximity and capacity of oil and gas pipelines and other transportation facilities; weather conditions; the price and availability of alternative fuels; technological advances affecting energy consumption; national and international pandemics; and, overall political and economic conditions in oil producing countries.
As of March 31, 2022, our executive officers and directors beneficially owned approximately 47% of our common stock. These stockholders, if acting together, would be able to influence significantly all matters requiring approval by our stockholders, including the election of our board of directors and the approval of mergers or other business combination transactions.
These stockholders, if acting together, would be able to influence significantly all matters requiring approval by our stockholders, including the election of our board of directors and the approval of mergers or other business combination transactions. The price of our common stock has been volatile and could continue to fluctuate substantially.
Drilling and operating activities are high risk activities that subject us to a variety of factors that we cannot control. These factors include availability of workover and drilling rigs, well blowouts, cratering, explosions, fires, formations with abnormal pressures, pollution, releases of toxic gases and other environmental hazards and risks.
These factors include availability of workover and drilling rigs, well blowouts, cratering, explosions, fires, formations with abnormal pressures, pollution, releases of toxic gases and other environmental hazards and risks. Any of these operating hazards could result in substantial losses to us.
Thus, we may experience material increases or decreases in reserve quantities solely as a result of price changes and not as a result of drilling or well performance. Changes in oil and gas prices impact both estimated future net revenue and the estimated quantity of proved reserves.
Lower prices may also reduce the amount of crude oil and natural gas that can be produced economically. Thus, we may experience material increases or decreases in reserve quantities solely as a result of price changes and not as a result of drilling or well performance.
The amount we can borrow from banks may be subject to redetermination based on changes in prices. In addition, we may have ceiling test writedowns when prices decline. Lower prices may also reduce the amount of crude oil and natural gas that can be produced economically.
Increases and decreases in prices also affect the amount of cash flow available for capital expenditures and our ability to borrow money or raise additional capital. The amount we can borrow from banks may be subject to redetermination based on changes in prices. In addition, we may have ceiling test writedowns when prices decline.
During fiscal 2022, differentials averaged $2.80 per Bbl of oil and $0.51 per Mcf of gas. Increases in the differential between the benchmark prices for oil and gas and the wellhead price we receive could significantly reduce our revenues and our cash flow from operations.
Increases in the differential between the benchmark prices for oil and gas and the wellhead price we receive could significantly reduce our revenues and our cash flow from operations. 12 Drilling and operating activities are high risk activities that subject us to a variety of factors that we cannot control.
The impact of the changing demand for oil and natural gas services and products may have a material adverse effect on our business, financial condition, results of operations and cash available for distribution. Changes in environmental laws could increase our operators’ costs and adversely impact our business, financial condition and cash flows.
In addition, reduced worldwide demand for debt and equity securities issued by oil and gas companies may make it more difficult for the Company to raise capital to fund its operations or refinance its debt obligations. Changes in environmental laws could increase our operators’ costs and adversely impact our business, financial condition and cash flows.
However, such actions could significantly increase our operators’ costs or impair their ability to explore and develop other projects, which could adversely impact our business, financial condition and cash flows. Lower oil and gas prices and other factors may cause us to record ceiling test writedowns. Lower oil and gas prices increase the risk of ceiling limitation write-downs.
President Biden has issued several executive orders focused on addressing climate change, including items that may impact costs to produce, or demand for, oil and gas. Lower oil and gas prices and other factors may cause us to record ceiling test writedowns. Lower oil and gas prices increase the risk of ceiling limitation write-downs.
Removed
Our results of operations may be negatively impacted by current global events such as the coronavirus outbreak. The industry has experienced sharp declines in the demand for crude oil and natural gas worldwide, which has resulted in steep declines in pricing.
Added
Changes in oil and gas prices impact both estimated future net revenue and the estimated quantity of proved reserves.
Removed
The global economy and commodity prices are being severely negatively impacted, as economic activity and demand for energy have declined in response to the COVID-19 pandemic, as well as due to other geopolitical factors.
Added
Our results of operations may be negatively impacted by current global events. The economies in the United States and certain countries in Europe and Asia have been growing, with resulting improvements in industrial demand and consumer confidence. However, other economies, such as those of certain South American nations, continue to face economic struggles or slowing economic growth.
Removed
The magnitude of the impact of the COVID-19 pandemic will depend on the duration and extent of the pandemic, including increases in COVID-19 case counts, any additional waves of the virus, new variants of the virus and the availability and ultimate efficacy of the vaccine on new variants of the virus.
Added
If these conditions worsen, combined with a decline in economic growth in other parts of the world, there could be a significant adverse effect on global financial markets and commodity prices. In addition, continued hostilities in the Middle East and the occurrence or threat of terrorist attacks in the United States or other countries could adversely affect the global economy.
Removed
The pandemic could have a material adverse effect on the costs, operations, business and financial condition, and therefore, the results of operations. Conservation measures and technological advances could reduce demand for oil and natural gas.
Added
Global or national health concerns may adversely affect the Company by (i) reducing demand for its oil, NGLs and gas because of reduced global or national economic activity, (ii) impairing its supply chain (for example, by limiting manufacturing of materials used in operations) and (iii) affecting the health of its workforce, rendering employees unable to work or travel.
Removed
Fuel conservation measures, alternative fuel requirements, increasing consumer demand for alternatives to oil and natural gas, technological advances in fuel economy and energy generation devices could reduce demand for oil and natural gas.
Added
If the economic climate in the United States or abroad were to deteriorate, due to inflation, rising interest rates or otherwise, demand for petroleum products could diminish or stagnate, which could depress the prices at which the Company could sell its oil, NGLs and gas, affect the ability of the Company’s vendors, suppliers and customers to continue operations and ultimately decrease the Company’s cash flows and profitability.
Removed
It remains unclear what additional actions President Biden will take and what support he will have for any potential legislative changes from Congress. Further, it is uncertain to what extent any new environmental laws or regulations, or any repeal of existing environmental laws or regulations, may affect our or our operators’ business.
Added
Congress has considered legislation to reduce emissions of GHGs, including methane, a primary component of natural gas, and carbon dioxide, a byproduct of the burning of natural gas.
Removed
Any of these operating hazards could result in substantial losses to us.
Added
For example, the Inflation Reduction Act of 2022 (the “IRA”), which appropriates significant federal funding for renewable energy initiatives and, for the first time ever, imposes a fee on GHG emissions from certain facilities, was signed into law in August 2022.
Removed
We are dependent on electrical power, internet and telecommunication infrastructure and information and computer systems. If any of these systems are compromised or unavailable, our business could be adversely affected. We are dependent on electric power, internet and telecommunication infrastructure and our information systems and computer based programs.
Added
The emissions fee and funding provisions of the law could increase operating costs within the oil and gas industry and accelerate the transition away from fossil fuels, which could in turn adversely affect our business and results of operations.
Removed
If any of such infrastructure, systems or programs were to fail or become unavailable or compromised, or create erroneous information in our hardware or software network infrastructure, our ability to safely and effectively conduct our business will be limited and any such consequence could have a material adverse effect on our business.
Added
Governmental, scientific and public concern over the threat of climate change arising from GHG emissions has resulted in increasing political risks in the United States, including climate change related pledges made by certain candidates elected to public office.
Removed
We have paid no cash dividends on our common stock to date and it is not anticipated that any will be paid to holders of our common stock in the foreseeable future. The terms of our existing credit facility restricts the payment of dividends without the prior written consent of the lenders.
Added
During fiscal 2023, differentials averaged $4.57 per Bbl of oil and ($0.28) per Mcf of gas.
Removed
We currently intend to retain all future earnings to fund the development and growth of our business.
Removed
Any payment of future dividends will be at the discretion of our board of directors and will depend on, among other things, our earnings, financial condition, capital requirements, level of indebtedness, statutory and contractual restrictions applying to the payment of dividends and other considerations that our board of directors deems relevant.
Removed
Failure of the Company’s internal control over financial reporting could harm its business and financial results. The management of Mexco is responsible for establishing and maintaining effective internal control over financial reporting.
Removed
Internal control over financial reporting is a process to provide reasonable assurance regarding the reliability of financial reporting for external purposes in accordance with accounting principles generally accepted in the United States.
Removed
Internal control over financial reporting includes maintaining records that in reasonable detail accurately and fairly reflect Mexco’s transactions; providing reasonable assurance that transactions are recorded as necessary for preparation of the financial statements; providing reasonable assurance that receipts and expenditures are made in accordance with management authorization; and providing reasonable assurance that unauthorized acquisition, use or disposition of our assets that could have a material effect on the financial statements would be prevented or detected on a timely basis. 14 ITEM 1B.

Item 2. Properties

Properties — owned and leased real estate

19 edited+2 added−2 removed20 unchanged
Biggest changePROVED RESERVES March 31, 2022 2021 Oil (Bbls): Proved developed – Producing 391,060 344,610 Proved developed – Non-producing 37,620 68,440 Proved undeveloped 380,550 325,020 Total 809,230 738,070 Natural gas (Mcf): Proved developed – Producing 3,454,310 3,172,130 Proved developed – Non-producing 129,160 467,200 Proved undeveloped 1,258,220 956,050 Total 4,841,690 4,595,380 Total net proved reserves (BOE) (1) 1,616,180 1,503,970 PV-10 Value (2) $ 30,777,000 $ 13,758,300 Present value of future income tax discounted at 10% (4,857,000 ) (995,300 ) Standardized measure of discounted future net cash flows (3) $ 25,920,000 $ 12,763,000 Prices used in Calculating Reserves: (4) Natural gas (per Mcf) $ 4.60 $ 2.29 Oil (per Bbl) $ 74.52 $ 37.42 (1) These reserve estimates do not include the Company’s interest in the LLC referred to in Item 1.
Biggest changeOur estimated proved oil and gas reserves and present value of estimated future net revenues from proved oil and gas reserves in the periods ended March 31 are summarized below. 16 PROVED RESERVES March 31, 2023 2022 Oil (Bbls): Proved developed – Producing 451,000 391,060 Proved developed – Non-producing 35,770 37,620 Proved undeveloped 240,060 380,550 Total 726,830 809,230 Natural gas (Mcf): Proved developed – Producing 3,826,370 3,454,310 Proved developed – Non-producing 145,000 129,160 Proved undeveloped 978,010 1,258,220 Total 4,949,380 4,841,690 Total net proved reserves (BOE) (1) 1,551,725 1,616,180 PV-10 Value (2) $ 39,473,000 $ 30,777,000 Present value of future income tax discounted at 10% (6,658,000 ) (4,857,000 ) Standardized measure of discounted future net cash flows (3) $ 32,815,000 $ 25,920,000 Prices used in Calculating Reserves: (4) Natural gas (per Mcf) $ 5.68 $ 4.60 Oil (per Bbl) $ 92.02 $ 74.52 (1) These reserve estimates do not include the Company’s interest in two LLCs referred to in Item 1.
The engineering report with respect to Mexco’s estimates of proved oil and gas reserves as of March 31, 2022 and 2021 is based on evaluations prepared by Russell K. Hall and Associates, Inc. Environmental Engineering Consultants, based in Midland, Texas (“Hall and Associates”), a summary of which is filed as Exhibit 99.1 to this annual report.
The engineering report with respect to Mexco’s estimates of proved oil and gas reserves as of March 31, 2023 and 2022 is based on evaluations prepared by Russell K. Hall and Associates, Inc. Environmental Engineering Consultants, based in Midland, Texas (“Hall and Associates”), a summary of which is filed as Exhibit 99.1 to this annual report.
We have not filed any other oil or gas reserve estimates or included any such estimates in reports to other federal or foreign governmental authority or agency during the year ended March 31, 2022, and no major discovery is believed to have caused a significant change in our estimates of proved reserves since that date.
We have not filed any other oil or gas reserve estimates or included any such estimates in reports to other federal or foreign governmental authority or agency during the year ended March 31, 2023, and no major discovery is believed to have caused a significant change in our estimates of proved reserves since that date.
In addition to the working interests mentioned above, other operators drilled 66 gross wells (.04 net wells) on company-owned minerals and royalties at no expense to the Company. We expect the production of our mineral interests will increase as operators continue to drill, complete and develop our acreage.
In addition to the working interests mentioned above, other operators drilled 85 gross wells (.04 net wells) on company-owned minerals and royalties at no expense to the Company. We expect the production of our mineral interests will increase as operators continue to drill, complete and develop our acreage.
Drilling Activities The following table sets forth our drilling activity in wells in which we own a working interest for the years ended March 31: Year Ended March 31, 2022 2021 Gross Net Gross Net Exploratory Wells Beginning wells in progress - - - - Wells spud - - - - Successful wells - - - - Ending wells in progress - - - - Development Wells Beginning wells in progress 12 .06 22 .08 Wells spud 44 .13 25 .15 Successful wells (45 ) (.15 ) (35 ) (.17 ) Ending wells in progress 11 .04 12 .06 The information contained in the foregoing table should not be considered indicative of future drilling performance, nor should it be assumed that there is any necessary correlation between the number of productive wells drilled and the amount of oil and gas that may ultimately be recovered by us.
Drilling Activities The following table sets forth our drilling activity in wells in which we own a working interest for the years ended March 31: Year Ended March 31, 2023 2022 Gross Net Gross Net Exploratory Wells Beginning wells in progress - - - - Wells spud - - - - Successful wells - - - - Ending wells in progress - - - - Development Wells Beginning wells in progress 11 .04 12 .06 Wells spud 54 .36 44 .13 Successful wells (44 ) (.35 ) (45 ) (.15 ) Ending wells in progress 21 .05 11 .04 The information contained in the foregoing table should not be considered indicative of future drilling performance, nor should it be assumed that there is any necessary correlation between the number of productive wells drilled and the amount of oil and gas that may ultimately be recovered by us.
As of March 31, 2022, we held an interest in approximately 6,300 gross (18.5 net) productive wells, including approximately 5,200 wells in which we held an overriding or royalty interest and 1,100 wells in which we held a working interest. 17 A gross acre is an acre in which an interest is owned.
As of March 31, 2023, we held an interest in approximately 6,400 gross (18.5 net) productive wells, including approximately 5,200 wells in which we held an overriding or royalty interest and 1,100 wells in which we held a working interest. 18 A gross acre is an acre in which an interest is owned.
Business – Company Profile on page 4 hereto. (2) The PV-10 Value represents the discounted future net cash flows attributable to our proved oil and gas reserves before income tax, discounted at 10% per annum, which is the most directly comparable GAAP financial measure.
(2) The PV-10 Value represents the discounted future net cash flows attributable to our proved oil and gas reserves before income tax, discounted at 10% per annum, which is the most directly comparable GAAP financial measure.
The benchmark price of $71.72 per bbl of oil at March 31, 2022 versus $36.49 at March 31, 2021, was adjusted by lease for gravity, transportation fees and regional price differentials and did not give effect to derivative transactions.
The benchmark price of $87.45 per bbl of oil at March 31, 2023 versus $71.72 at March 31, 2022, was adjusted by lease for gravity, transportation fees and market differentials and did not give effect to derivative transactions.
The benchmark price of $4.09 per mcf of natural gas at March 31, 2022 versus $2.16 at March 31, 2021, was adjusted by lease for BTU content, transportation fees and regional price differentials.
The benchmark price of $5.96 per mcf of natural gas at March 31, 2023 versus $4.09 at March 31, 2022, was adjusted by lease for BTU content, transportation fees and market differentials.
The following table sets forth the approximate developed acreage in which we held a leasehold mineral or other interest as of March 31, 2022: Acreage Gross Net Texas 343,300 1,629 Oklahoma 73,300 1,033 Louisiana 34,600 25 New Mexico 31,600 196 North Dakota 22,600 29 Ohio 11,800 1 Kansas 8,500 40 Montana 5,000 1 Wyoming 3,800 5 Arkansas 1,600 5 Colorado 1,100 1 Alabama 1,000 2 Mississippi 700 2 Virginia 100 1 Total 539,000 2,970 Net Production, Unit Prices and Costs The following table summarizes our net oil and natural gas production, the average sales price per barrel (“bbl”) of oil and per thousand cubic feet (“mcf”) of natural gas produced and the average production (lifting) cost per unit of production for the years ended March 31: Years Ended March 31, 2022 2021 Oil (a): Production (Bbls) 61,689 50,327 Revenue $ 4,685,094 $ 2,028,792 Average Bbls per day (d) 169 137 Average sales price per Bbl $ 75.95 $ 40.31 Gas (b): Production (Mcf) 393,841 324,205 Revenue $ 1,840,170 $ 744,987 Average Mcf per day (d) 1,079 888 Average sales price per Mcf $ 4.67 $ 2.30 Total BOE (c) 127,329 104,361 Production costs: Production expenses: $ 778,308 $ 643,541 Production expenses per BOE $ 6.11 $ 6.17 Production expenses per sales dollar $ 0.12 $ 0.23 Production and ad valorem taxes: $ 502,804 $ 228,422 Production and ad valorem taxes per BOE $ 3.95 $ 2.19 Production and ad valorem taxes per sales dollar $ 0.08 $ 0.08 Total oil and gas revenue $ 6,525,264 $ 2,773,779 (a) Includes condensate.
The following table sets forth the approximate developed acreage in which we held a leasehold mineral or other interest as of March 31, 2023: Acreage Gross Net Texas 348,600 1,586 Oklahoma 70,900 884 Louisiana 35,300 25 New Mexico 30,600 185 North Dakota 22,600 29 Ohio 14,500 1 Kansas 8,500 41 Montana 5,000 1 Wyoming 3,800 5 Arkansas 1,600 5 Colorado 1,100 1 Alabama 1,000 2 Mississippi 700 2 Virginia 100 1 Total 544,300 2,768 Net Production, Unit Prices and Costs The following table summarizes our net oil and natural gas production, the average sales price per barrel (“bbl”) of oil and per thousand cubic feet (“mcf”) of natural gas produced and the average production (lifting) cost per unit of production for the years ended March 31: Years Ended March 31, 2023 2022 Oil (a): Production (Bbls) 73,968 61,689 Revenue $ 6,522,163 $ 4,685,094 Average Bbls per day (d) 203 169 Average sales price per Bbl $ 88.18 $ 75.95 Gas (b): Production (Mcf) 534,363 393,841 Revenue $ 2,858,460 $ 1,840,170 Average Mcf per day (d) 1,464 1,079 Average sales price per Mcf $ 5.35 $ 4.67 Total BOE (c) 163,029 127,329 Production costs: Production expenses: $ 1,039,893 $ 778,308 Production expenses per BOE $ 6.38 $ 6.11 Production expenses per sales dollar $ 0.11 $ 0.12 Production and ad valorem taxes: $ 679,826 $ 502,804 Production and ad valorem taxes per BOE $ 4.17 $ 3.95 Production and ad valorem taxes per sales dollar $ 0.07 $ 0.08 Total oil and gas revenue $ 9,380,623 $ 6,525,264 (a) Includes condensate.
The timing of both the production and the expenses with respect to the development and production of oil and gas properties will affect the timing of future net cash flows from proved reserves and their present value.
Actual future prices and costs may be materially higher or lower than those as of the date of the estimate. The timing of both the production and the expenses with respect to the development and production of oil and gas properties will affect the timing of future net cash flows from proved reserves and their present value.
Oil and gas prices significantly impact the calculation of the PV-10 and the standardized measure of discounted future net cash flows. The present value of future net cash flows does not purport to be an estimate of the fair market value of the Company’s proved reserves.
The present value of future net cash flows does not purport to be an estimate of the fair market value of the Company’s proved reserves.
Except to the extent that we acquire additional properties containing proved reserves or conduct successful exploration and development activities, or both, our proved reserves will decline as reserves are produced. Our estimated proved oil and gas reserves and present value of estimated future net revenues from proved oil and gas reserves in the periods ended March 31 are summarized below.
Except to the extent that we acquire additional properties containing proved reserves or conduct successful exploration and development activities, or both, our proved reserves will decline as reserves are produced.
Oil and Natural Gas Reserves In accordance with current SEC rules, the average prices used in computing reserves at March 31, 2022 were $74.52 per bbl of oil compared to $37.42 in 2021, an increase of 99%, and $4.60 per mcf of natural gas compared to $2.29 in 2021, an increase of 101%, such prices are based on the 12-month unweighted arithmetic average market prices for sales of oil and natural gas on the first calendar day of each month during fiscal 2022.
As of March 31, 2023, we had interests in approximately 6,400 gross (18.5 net) producing oil and gas wells and owned leasehold mineral, royalty and other interests in approximately 544,000 gross (2,768 net) acres. 15 Oil and Natural Gas Reserves In accordance with current SEC rules, the average prices used in computing reserves at March 31, 2023 were $92.02 per bbl of oil compared to $74.52 in 2022, an increase of 23%, and $5.68 per mcf of natural gas compared to $4.60 in 2022, an increase of 23%, such prices are based on the 12-month unweighted arithmetic average market prices for sales of oil and natural gas on the first calendar day of each month during fiscal 2023.
(4) These prices reflect adjustment by lease for quality, transportation fees and regional price differentials and did not give effect to derivative transactions. 16 During fiscal 2022, we added proved reserves of 307 thousand BOE (“MBOE”) through extensions and discoveries, added 21 MBOE through acquisitions, subtracted 2 MBOE through sales of oil and gas properties and downward revisions of previous estimates of 86 MBOE.
(4) These prices reflect adjustment by lease for quality, transportation fees and market differentials. During fiscal 2023, we added proved reserves of 101 thousand BOE (“MBOE”) through extensions and discoveries, added 52 MBOE through acquisitions, subtracted 54 MBOE for downward revisions of previous estimates.
During the fiscal year ending March 31, 2022, we had a working or royalty interest in the development of 42 wells converting reserves of approximately 88,000 BOE from proved undeveloped to proved developed – producing with capital cost of approximately $771,000.
During the fiscal year ending March 31, 2023, we had a working or royalty interest in the development of 59 wells converting reserves of approximately 186,000 BOE from proved undeveloped to proved developed – producing with capital cost of approximately $3,612,000. 17 Oil and gas prices significantly impact the calculation of the PV-10 and the standardized measure of discounted future net cash flows.
Such downward revisions are primarily the result of reserves written off due to the five-year limitation and the change in the timing of new development.
Such downward revisions are primarily the result of reserves written off due to the five-year limitation and the change in the timing of new development. They are primarily royalty interests on leases in Loving, Pecos and Ward Counties, Texas which are held by production and still in place to be developed in the future.
Any significant variance could materially affect the estimated quantities and value of our oil and gas reserves, which in turn may adversely affect our cash flow, results of operations and the availability of capital resources. 15 Per the current SEC rules, the prices used to calculate our proved reserves and the present value of proved reserves set forth herein are made using the 12-month unweighted arithmetic average of the first-day-of-the-month price.
Any significant variance could materially affect the estimated quantities and value of our oil and gas reserves, which in turn may adversely affect our cash flow, results of operations and the availability of capital resources.
ITEM 2. PROPERTIES Our properties consist primarily of oil and gas wells and our ownership in leasehold acreage, both developed and undeveloped. As of March 31, 2022, we had interests in approximately 6,300 gross (18.5 net) producing oil and gas wells and owned leasehold mineral, royalty and other interests in approximately 539,000 gross (2,970 net) acres.
ITEM 2. PROPERTIES Our properties consist primarily of oil and gas wells and our ownership in leasehold acreage, both developed and undeveloped.
Removed
All prices are held constant throughout the life of the properties. Actual future prices and costs may be materially higher or lower than those as of the date of the estimate.
Added
Per the current SEC rules, the prices used to calculate our proved reserves and the present value of proved reserves set forth herein are made using the 12-month unweighted arithmetic average of the first-day-of-the-month price. All prices are held constant throughout the life of the properties.
Removed
They are primarily working interests on a lease in Reagan County, Texas which are held by production and still in place to be developed in the future and royalty interests on a lease held by production in Upton County, Texas.
Added
Business – Company Profile on page 4 hereto. The first LLC has returned $226,725 and 76% of the total investment since inception in fiscal 2020.

Item 3. Legal Proceedings

Legal Proceedings — active lawsuits and investigations

1 edited+0 added−0 removed1 unchanged
Biggest changeITEM 4. MINE SAFETY DISCLOSURES Not applicable. 18 PART II
Biggest changeITEM 4. MINE SAFETY DISCLOSURES Not applicable. 19 PART II

Item 5. Market for Registrant's Common Equity

Market for Common Equity — stock, dividends, buybacks

7 edited+7 added−1 removed3 unchanged
Biggest changeSecurities Authorized for Issuance Under Compensation Plans The following table includes certain information about our Employee Incentive Stock Plan as of March 31, 2022, which has been approved by our stockholders.
Biggest changeOur board of directors’ determination with respect to any such dividends, including the record date, the payment date and the actual amount of the dividend, will depend upon our profitability and financial condition, contractual restrictions, restrictions imposed by applicable law and other factors that the board deems relevant at the time of such determination. 20 Securities Authorized for Issuance Under Compensation Plans The following table includes certain information about our Employee Incentive Stock Plan as of March 31, 2023, which has been approved by our stockholders.
Payment of any future dividends will be at the discretion of our Board of Directors after taking into account many factors, including our financial condition, operating results, current and anticipated cash needs and plans for expansion. In addition, our current bank loan prohibits us from paying cash dividends on our common stock without written permission.
Payment of dividends are at the discretion of our Board of Directors after taking into account many factors, including our financial condition, operating results, current and anticipated cash needs and plans for expansion. In addition, our current bank loan prohibits us from paying cash dividends on our common stock without written permission.
High Low 2022: April - June 2021 $ 10.60 $ 6.88 July - September 2021 11.80 7.80 October - December 2021 18.00 8.35 January - March 2022 43.00 9.00 2021: April - June 2020 $ 5.24 $ 2.00 July - September 2020 14.63 2.92 October - December 2020 8.79 4.60 January - March 2021 14.25 5.50 On March 31, 2022, the closing sales price of our common stock on the NYSE American was $16.20 per share.
High Low 2023: April - June 2022 $ 24.18 $ 13.79 July - September 2022 20.84 14.43 October - December 2022 18.25 12.40 January - March 2023 15.39 10.50 2022: April - June 2021 $ 10.60 $ 6.88 July - September 2021 11.80 7.80 October - December 2021 18.00 8.35 January - March 2022 43.00 9.00 On March 31, 2023, the closing sales price of our common stock on the NYSE American was $11.38 per share.
Number of Shares Authorized for Issuance under Plan Number of Shares to be Issued upon Exercise of Outstanding Options Weighted Average Exercise Price of Outstanding Options Number of Shares Remaining Available for Future Issuance under Plan 2009 Plan 200,000 45,250 $ 5.27 - 2019 Plan 200,000 69,000 5.66 128,000 Total 400,000 114,250 $ 5.51 128,000 19 Issuer Repurchases In September 2021, the Board of Directors authorized the use of up to $250,000 to repurchase shares of our common stock for the treasury account.
Number of Shares Authorized for Issuance under Plan Number of Shares to be Issued upon Exercise of Outstanding Options Weighted Average Exercise Price of Outstanding Options Number of Shares Remaining Available for Future Issuance under Plan 2009 Plan 200,000 45,250 $ 5.27 - 2019 Plan 200,000 94,000 9.85 98,000 Total 400,000 139,250 $ 8.36 98,000 Issuer Repurchases In September 2022, the board of directors authorized the use of up to $250,000 to repurchase shares of our common stock for the treasury account.
Stockholders As of March 31, 2022, we had 2,216,416 shares issued and 850 shareholders of record which does not include shareholders for whom shares are held in a “nominee” or “street” name. Of these issued shares, 67,000 are held in the treasury. Dividends We have never declared or paid any cash dividends on our common stock.
Stockholders As of March 31, 2023, we had 2,221,416 shares issued and 849 shareholders of record which does not include shareholders for whom shares are held in a “nominee” or “street” name. Of these issued shares, 85,416 are held in the treasury. Dividends As of March 31, 2023, the Company had never paid a cash dividend to the Company’s shareholders.
This program does not have an expiration date. Under the repurchase program, shares of common stock may be purchased from time to time through open market purchases or other transactions. The amount and timing of repurchases will be subject to the availability of stock, prevailing market conditions, the trading price of the stock, our financial performance and other conditions.
This program does not have an expiration date and may be modified, suspended or terminated at any time by the board of directors. Under the repurchase program, shares of common stock may be purchased from time to time through open market purchases or other transactions.
Repurchases may also be made from time-to-time in connection with the settlement of our share-based compensation awards. Repurchases will be funded from cash flow from operations. There were no shares of our common stock repurchased for the treasury account during the fiscal years ended March 31, 2022 and 2021. ITEM 6. SELECTED CONSOLIDATED FINANCIAL DATA Not applicable.
The amount and timing of repurchases will be subject to the availability of stock, prevailing market conditions, the trading price of the stock, our financial performance and other conditions. Repurchases may also be made from time-to-time in connection with the settlement of our share-based compensation awards. Repurchases will be funded from cash flow from operations.
Removed
We currently intend to retain future earnings and other cash resources, if any, for the operation and development of our business and do not anticipate paying any cash dividends on our common stock in the foreseeable future.
Added
Subsequently, on April 10, 2023, the Company announced that its Board of Directors declared a special dividend of $0.10 per common share to its shareholders of record at the close of business on May 1, 2023. The special dividend was paid on May 15, 2023. The Company obtained written permission from WTNB prior to declaring the special dividend.
Added
The Company can provide no assurance that dividends will be authorized or declared in the future or as to the amount or type of any future dividends.
Added
The following table provides information related to repurchases of our common stock for the treasury account during the year ended March 31, 2023: Total Number of Shares Purchased Average Price Paid per Share Total Number of Shares Purchased as Part of Publicly Announced Program Approximate Dollar Value of Shares that May Yet be Purchased Under the Program November 1-30, 2022 3,716 $ 14.51 3,716 $ 196,072 December 1-31, 2022 8,700 $ 13.14 8,700 $ 81,740 January 1-31, 2023 1,300 $ 12.58 1,300 $ 65,381 February 1-28, 2023 1,727 $ 12.75 1,727 $ 43,359 March 1-31, 2023 2,973 $ 12.73 2,973 $ 5,506 During the year ended March 31, 2023, the Company repurchased 18,416 shares for the treasury account at an aggregate cost of $244,494, an average price of $13.28 per share.
Added
There were no shares of our common stock repurchased for the treasury account during the fiscal year ended March 31, 2022. Subsequently, in April 2023, the Company’s Board of Directors authorized the use of up to $1,000,000 to repurchase shares of the Company’s common stock, par value, $0.50, for the treasury account.
Added
This authorization replaced the previously authorized $250,000 common stock repurchase program which had $5,506 remaining at the time it was replaced. On August 16, 2022, President Biden signed into law the Inflation Reduction Act of 2022 (“IRA 2022”).
Added
The IRA 2022, among other tax provisions, establishes a 1% excise tax on stock repurchases made by publicly traded U.S. corporations, effective for stock repurchases after December 31, 2022.
Added
The IRA 2022 does provide for certain exceptions for repurchases of stock including an exception as long as the aggregate value of the repurchases for the tax year does not exceed $1,000,000. ITEM 6. RESERVED 21

Item 7. Management's Discussion & Analysis

Management's Discussion & Analysis (MD&A) — revenue / margin commentary

55 edited+6 added−7 removed40 unchanged
Biggest changeOperating lease right-of-use assets represent the Company’s right to use an underlying asset for the lease term and lease liabilities represent its obligation to make lease payments arising from the lease. Operating lease assets and liabilities are recognized at the commencement date based on the present value of lease payments over the lease term.
Biggest changeOperating leases are recorded in operating lease right-of-use asset, operating lease liability, current, and operating lease liability, long-term on the consolidated balance sheets. Operating lease right-of-use assets represent the Company’s right to use an underlying asset for the lease term and lease liabilities represent its obligation to make lease payments arising from the lease.
These charges are not recoverable when prices return to higher levels. Our crude oil and natural gas reserves have a relatively long life. However, temporary drops in commodity prices can have a material impact on our business including impact from the full cost method of accounting. Ceiling Test .
These charges are not recoverable when prices return to higher levels. Our crude oil and natural gas reserves have a relatively long life. However, temporary drops in commodity prices can have a material impact on our business including impact from the full cost method of accounting. 26 Ceiling Test .
Any interest and penalties are recorded as interest expense and general and administrative expense, respectively. 26 Other Property and Equipment . Provisions for depreciation of office furniture and equipment are computed on the straight-line method based on estimated useful lives of three to ten years. Investments.
Any interest and penalties are recorded as interest expense and general and administrative expense, respectively. Other Property and Equipment . Provisions for depreciation of office furniture and equipment are computed on the straight-line method based on estimated useful lives of three to ten years. Investments.
The following represents those policies that management believes are particularly important to the financial statements and that require the use of estimates and assumptions to describe matters that are inherently uncertain. 24 Full Cost Method of Accounting for Crude Oil and Natural Gas Activities .
The following represents those policies that management believes are particularly important to the financial statements and that require the use of estimates and assumptions to describe matters that are inherently uncertain. Full Cost Method of Accounting for Crude Oil and Natural Gas Activities .
Variations in cash flow from operating activities may impact our level of exploration and development expenditures. Our expenditures in operating activities consist primarily of drilling expenses, production expenses and engineering services.
Variations in cash flow from operating activities may impact our level of exploration and development expenditures. Our expenditures in operating activities consist primarily of production expenses and engineering services.
If the estimates of proved reserves decline, the rate at which we record DD&A expense will increase, reducing future net income. Such a decline may result from lower market prices, which may make it uneconomic to drill for and produce higher cost projects. Use of Estimates .
The estimates of proved reserves materially impact DD&A expense. If the estimates of proved reserves decline, the rate at which we record DD&A expense will increase, reducing future net income. Such a decline may result from lower market prices, which may make it uneconomic to drill for and produce higher cost projects. Use of Estimates .
Since the revenue checks are generally received two to four months after the production month, the Company accrues for revenue earned but not received by estimating production volumes and product prices. Any identified differences between its revenue estimates and actual revenue received historically have not been significant. Asset Retirement Obligations .
Since the revenue checks are generally received two to three months after the production month, the Company accrues for revenue earned but not received by estimating production volumes and product prices. Any identified differences between its revenue estimates and actual revenue received historically have not been significant. 27 Asset Retirement Obligations .
The following table summarizes future payments we are obligated to make based on agreements in place as of March 31, 2022: Payments due in: Total less than 1 year 1 - 3 years over 3 years Contractual obligations: Leases (1) $ 135,893 $ 58,240 $ 77,653 $ - (1) The lease amount represents the monthly rent amount for our principal office space in Midland, Texas under a 38-month lease agreement effective May 15, 2018 and extended another 36 months to July 31, 2024.
The following table summarizes future payments we are obligated to make based on agreements in place as of March 31, 2023: Payments due in: Total less than 1 year 1 - 3 years over 3 years Contractual obligations: Leases (1) $ 77,653 $ 58,240 $ 19,413 $ - (1) The lease amount represents the monthly rent amount for our principal office space in Midland, Texas under a 38-month lease agreement effective May 15, 2018 and extended another 36 months to July 31, 2024.
Subsequently, on May 4, 2022 the Company acquired various royalty (mineral) interests in 22 wells and several additional potential locations for development operated by Chesapeake Energy Corporation and located in the Eagleford area of Dimmit County, Texas for a purchase price of $939,000 which was effective April 1, 2022.
The Company acquired various royalty (mineral) interests in 22 wells and several additional potential locations for development operated by Chesapeake Energy Corporation and located in the Eagleford area of Dimmit County, Texas for a purchase price of $939,000 which was effective April 1, 2022.
The Company accounts for investments of less than 1% of any limited liability companies at cost. The Company has no control of the limited liability companies. The cost of the investment is recorded as an asset on the consolidated balance sheets and when income from the investment is received, it is immediately recognized on the consolidated statements of operations. Leases.
The Company accounts for investments of less than 3% of any limited liability companies at cost. The Company has no control of the limited liability companies. The cost of the investment is recorded as an asset on the consolidated balance sheets and when income from the investment is received, it is immediately recognized on the consolidated statements of operations. Reclassifications.
Production costs were $1,281,112 in fiscal 2022, a 47% increase from $871,963 in fiscal 2021. This was primarily the result of an increase in production taxes and marketing charges as a result of the increase in oil and gas revenues. Depreciation, depletion and amortization.
Production costs were $1,719,719 in fiscal 2023, a 34% increase from $1,281,112 in fiscal 2022. This was primarily the result of an increase in production taxes and marketing charges as a result of the increase in oil and gas revenues. Depreciation, depletion and amortization.
Cash Flow Provided by Financing Activities. Cash flow from financing activities is derived from our changes in long-term debt and in equity account balances. Net cash flow used in our financing activities was $721,430 for the year ended March 31, 2022 compared to net cash flow provided by our financing activities of $701,009 for the year ended March 31, 2021.
Cash Flow Used in Financing Activities. Cash flow from financing activities is derived from our changes in long-term debt and in equity account balances. Net cash flow used in our financing activities was $209,815 for the year ended March 31, 2023 compared to net cash flow used in our financing activities of $721,430 for the year ended March 31, 2022.
In addition to the above working interests, there were 66 gross wells (.04 net wells) drilled by other operators on Mexco’s royalty interests and 53 gross wells (.15 net wells) obtained through acquisitions.
In addition to the above working interests, there were 85 gross wells (.04 net wells) drilled by other operators on Mexco’s royalty interests and 50 gross wells (.29 net wells) obtained through acquisitions.
Results of Operations Fiscal 2022 Compared to Fiscal 2021 We had net income of $2,855,066 for the year ended March 31, 2022 compared to $155,932 for the year ended March 31, 2021, a 1731% increase as a result of an increase in operating revenues due to an increase in oil and natural gas prices and production partially offset by an increase in operating expenses that is further explained below.
See Results of Operations below for realized prices. 24 Results of Operations Fiscal 2023 Compared to Fiscal 2022 We had net income of $4,662,702 for the year ended March 31, 2023 compared to $2,855,066 for the year ended March 31, 2022, a 63% increase as a result of an increase in operating revenues due to an increase in oil and natural gas prices and production partially offset by an increase in operating expenses that is further explained below.
In April 2022, Mexco expended approximately $427,000 to participate in the drilling of three horizontal wells in the Wolfcamp Sand formation of the Midland Basin located in the eastern portion of the Permian Basin in Reagan County, Texas. Mexco’s working interest in these wells is 2.9%.
Mexco expended approximately $1,196,000 to participate in the drilling and completion of three horizontal wells in the Wolfcamp Sand formation of the Midland Basin located in the eastern portion of the Permian Basin in Reagan County, Texas. Mexco’s working interest in these wells is 3.2%.
In June 2022, Mexco expended approximately $300,000 to participate in the drilling and completion of four horizontal wells in the Bone Spring formation of the Delaware Basin located in the western portion of the Permian Basin in Eddy County, New Mexico. Mexco’s working interest in these wells is 2.1%. Acquisitions.
Mexco expended approximately $649,000 to participate in the drilling and completion of four horizontal wells in the Bone Spring formation of the Delaware Basin in Eddy County, New Mexico. Mexco’s working interest in these wells is 2.1%.
Cash flow from investing activities is derived from changes in oil and gas property balances. For the year ended March 31, 2022, we had net cash of $1,635,024 used for additions to oil and gas properties and a $75,000 investment in a limited liability company compared to $1,337,624 and $50,000, respectively, for the year ended March 31, 2021.
Cash flow from investing activities is derived from changes in oil and gas property balances. For the year ended March 31, 2023, we had net cash of $5,014,357 used for additions to oil and gas properties and a $425,000 investment in two limited liability companies compared to $1,635,024 and $75,000, respectively, for the year ended March 31, 2022.
Cash flow provided by our operating activities for the year ended March 31, 2022 was $3,744,407 in comparison to $710,047 for the year ended March 31, 2021.
Cash flow provided by our operating activities for the year ended March 31, 2023 was $6,515,895 in comparison to $3,744,407 for the year ended March 31, 2022.
In April 2022, Mexco expended approximately $140,000 to participate in the drilling of four horizontal wells in the Wolfcamp Sand formation of the Delaware Basin located in the western portion of the Permian Basin in Lea County, New Mexico. Mexco’s working interest in these wells is .52%.
In April 2022, Mexco expended approximately $176,000 to participate in the drilling of four horizontal wells in the Wolfcamp Sand formation of the Delaware Basin in Lea County, New Mexico. Mexco’s working interest in these wells is .52%. Subsequently, in May 2023, Mexco expended approximately $211,000 to complete these wells.
Oil and natural gas sales. Revenue from oil and natural gas sales was $6,525,264 for the year ended March 31, 2022, a 135% increase from $2,773,779 for the year ended March 31, 2021. This resulted from an increase in oil and natural gas production volumes and an increase in oil and natural gas prices.
Oil and natural gas sales. Revenue from oil and natural gas sales was $9,380,623 for the year ended March 31, 2023, a 44% increase from $6,525,264 for the year ended March 31, 2022. This resulted from an increase in oil and natural gas production volumes and an increase in oil and natural gas prices.
All these horizontal wells are in the Delaware Basin located in the western portion of the Permian Basin in Lea and Eddy Counties, New Mexico and Reeves County, Texas.
Thirty-nine of these horizontal wells are in the Delaware Basin located in the western portion of the Permian Basin in Lea and Eddy Counties, New Mexico and twelve are in the Midland Basin located in the eastern portion of the Permian Basin in Reagan County, Texas.
Depreciation, depletion and amortization (“DD&A”) expense was $1,345,435 in fiscal 2022, a 48% increase from $906,361 in fiscal 2021. This was primarily due to an increase in oil and gas production and an increase in the full cost pool amortization base partially offset by an increase in the oil and gas reserves. General and administrative expenses.
Depreciation, depletion and amortization (“DD&A”) expense was $1,854,047 in fiscal 2023, a 38% increase from $1,345,435 in fiscal 2022. This was primarily due to an increase in oil and gas production and an increase in the full cost pool amortization and a decrease in the oil and gas reserves. General and administrative expenses.
These wells were completed in January 2022 with initial average production rates of 764 barrels of oil, 2,817 barrels of water and 2,917,000 cubic feet of gas per day, or, 1,250 barrels of oil equivalent per day.
These wells were completed in October 2022 with initial average production rates of 507 barrels of oil, 2,147 barrels of water and 2,147,000 cubic feet of gas per day, or, 560 barrels of oil equivalent per day.
Mexco’s working interest in these wells is .52%. Mexco expended approximately $180,000 to participate in the drilling and completion of four horizontal wells in the Lower Wolfcamp Shale of the Delaware Basin in Eddy County, New Mexico. Mexco’s working interest in these wells is .44%.
Mexco expended approximately $681,000 to participate in the drilling and completion of eight horizontal wells in the Wolfcamp Sand formation of the Delaware Basin in Lea County, New Mexico. Mexco’s working interest in these wells is .52%.
For example, in the last twelve months, the NYMEX West Texas Intermediate (“WTI”) posted price for crude oil has ranged from a low of $54.63 per bbl in April 2021 to a high of $119.68 per bbl in March 2022.
For example, in the last twelve months, the NYMEX West Texas Intermediate (“WTI”) posted price for crude oil has ranged from a low of $62.72 per bbl in March 2023 to a high of $118.09 per bbl in June 2022.
Mexco expended approximately $59,000 to participate in the drilling of two horizontal wells in the 3 rd Bone Spring formation and two horizontal wells in the Wolfcamp Sand formation of the Delaware Basin located in the western portion of the Permian Basin in Lea County, New Mexico. Mexco’s working interest in these wells is .37%.
Mexco expended approximately $30,000 to participate in the drilling and completion of two horizontal wells in the Bone Spring formation of the Delaware Basin in Lea County, New Mexico. Mexco’s working interest in these wells is .1%.
In May 2022, Mexco expended approximately $97,000 to participate in the drilling of four horizontal wells in the Wolfcamp Sand formation of the Delaware Basin located in the western portion of the Permian Basin in Lea County, New Mexico.
In May 2023, Mexco expended approximately $133,000 to participate in the drilling of four horizontal wells in the Wolfcamp Sand formation of the Delaware Basin in Lea County, New Mexico. Mexco expended approximately $68,000 to participate in the drilling of two horizontal wells in the Penn Shale formation of the Delaware Basin in Lea County, New Mexico.
In accordance with SEC requirements, the cost ceiling represents the present value (discounted at 10%) of net cash flows from sales of future production using the average price over the prior 12-month period. 25 The estimates of proved reserves materially impact DD&A expense.
It should not be assumed that the present value of future net cash flows is the current market value of our estimated proved reserves. In accordance with SEC requirements, the cost ceiling represents the present value (discounted at 10%) of net cash flows from sales of future production using the average price over the prior 12-month period.
Interest expense was $26,512 in fiscal 2022, a 50% decrease from $53,232 in fiscal 2021, due to a decrease in borrowings. Income taxes. There was no federal income tax for fiscal 2022 or fiscal 2021. The effective tax rate for fiscal 2022 and fiscal 2021 was 0%.
Interest expense was $13,097 in fiscal 2023, a 51% decrease from $26,512 in fiscal 2022, due to a decrease in borrowings. Income taxes. There was no federal income tax for fiscal 2023 or fiscal 2022.
The Henry Hub Spot Market Price (“Henry Hub”) for natural gas has ranged from a low of $2.43 per MMBtu in April 2021 to a high of $6.70 per MMBtu in February 2022.
The Henry Hub Spot Market Price (“Henry Hub”) for natural gas has ranged from a low of $1.93 per MMBtu in March 2023 to a high of $9.85 per MMBtu in August 2022.
General and administrative expenses were $1,051,435 for the year ended March 31, 2022, a 26% increase from $833,431 for the year ended March 31, 2021. This was primarily due to an increase in salaries, employee stock option compensation, director fees, accounting fees and bank charges. Interest expense.
General and administrative expenses were $1,120,691 for the year ended March 31, 2023, an 18% increase from $949,079 for the year ended March 31, 2022. This was primarily due to an increase in employee stock option compensation, salaries and contract services, legal and accounting fees. Interest expense.
As the Company’s lease does not provide an implicit rate, the Company uses the incremental borrowing rate based on the information available at commencement date in determining the present value of lease payments. The incremental borrowing rate used at adoption was 3.75%. Significant judgement is required when determining the incremental borrowing rate.
Operating lease assets and liabilities are recognized at the commencement date based on the present value of lease payments over the lease term. As the Company’s lease does not provide an implicit rate, the Company uses the incremental borrowing rate based on the information available at commencement date in determining the present value of lease payments.
Oil and Natural Gas Property Development New Participations in Fiscal 2022. The Company participated in the drilling and completion of 40 horizontal wells at a cost of approximately $1,275,000, of which $950,000 was expended during the fiscal year ending March 31, 2022. Eleven of these wells have not been completed.
The Company participated in the drilling and completion of 50 horizontal wells at a cost of approximately $4,200,000, of which $3,750,000 was expended during the fiscal year ending March 31, 2023. Eighteen of these wells have not been completed.
Mexco’s working interest in these wells is .52%. 22 In May 2022, Mexco expended approximately $230,000 to participate in the drilling of a horizontal well in the Wolfcamp Sand formation of the Midland Basin located in the eastern portion of the Permian Basin in Reagan County, Texas. Mexco’s working interest in this well is 4.8%.
Mexco expended approximately $607,000 to participate in the drilling and completion of a horizontal well in the Wolfcamp Sand formation of the Midland Basin in Reagan County, Texas. Mexco’s working interest in this well is 5.1%.
These wells were completed in August 2021 with initial average production rates of 1,294 barrels of oil, 3,345 barrels of water and 3,124,000 cubic feet of gas per day, or, 1,815 barrels of oil equivalent per day. Mexco’s working interest in these wells is .1%.
These wells were completed in February and March 2023 with initial average production rates of 1,011 barrels of oil, 4,581 barrels of water and 3,577,000 cubic feet of gas per day, or 1,607 barrels of oil equivalent per day.
The following table sets forth our oil and natural gas revenues, production quantities and average prices received during the fiscal years ended March 31: 2022 2021 % Difference Oil: Revenue $ 4,685,094 $ 2,028,792 130.9 % Volume (bbls) 61,689 50,327 22.6 % Average Price (per bbl) $ 75.95 $ 40.31 88.4 % Gas: Revenue $ 1,840,170 $ 744,987 147.0 % Volume (mcf) 393,841 324,205 21.5 % Average Price (per mcf) $ 4.67 $ 2.30 103.0 % 23 Production and exploration.
The following table sets forth our oil and natural gas revenues, production quantities and average prices received during the fiscal years ended March 31: 2023 2022 % Difference Oil: Revenue $ 6,522,163 $ 4,685,094 39.2 % Volume (bbls) 73,968 61,689 19.9 % Average Price (per bbl) $ 88.18 $ 75.95 16.1 % Gas: Revenue $ 2,858,460 $ 1,840,170 55.3 % Volume (mcf) 534,363 393,841 35.7 % Average Price (per mcf) $ 5.35 $ 4.67 14.6 % Production and exploration.
Cash Flows Changes in the net funds provided by or (used in) each of our operating, investing and financing activities are set forth in the table below: For the Years Ended March 31, 2022 2021 Change Net cash provided by operating activities $ 3,744,407 $ 710,047 $ 3,034,360 Net cash used in investing activities $ (1,710,024 ) $ (1,387,624 ) $ 322,400 Net cash (used in) provided by financing activities $ (721,430 ) $ 701,009 $ (1,422,439 ) 20 Cash Flow Provided by Operating Activities.
Cash Flows Changes in the net funds provided by or (used in) each of our operating, investing and financing activities are set forth in the table below: For the Years Ended March 31, 2023 2022 Change Net cash provided by operating activities $ 6,515,895 $ 3,744,407 $ 2,771,488 Net cash used in investing activities $ (5,441,075 ) $ (1,710,024 ) $ 3,731,051 Net cash used in financing activities $ (209,815 ) $ (721,430 ) $ (511,615 ) Cash Flow Provided by Operating Activities.
Mexco’s working interest in these wells is an average of approximately .22%. Subsequently, these wells were completed in May 2022 with initial average production rates of 1,482 barrels of oil, 2,674 barrels of water and 1,722,000 cubic feet of gas per day, or, 1,769 barrels of oil equivalent per day.
These wells were subsequently completed in May 2023 with initial average production rates of 437 barrels of oil, 983 barrels of water and 603,000 cubic feet of gas per day, or, 538 barrels of oil equivalent per day.
These wells were completed in January 2022 with initial average production rates of 1,204 barrels of oil, 3,369 barrels of water and 3,141,000 cubic feet of gas per day, or, 1,728 barrels of oil equivalent per day. Mexco’s working interest in these wells is .37%.
These wells began producing in January 2023 with initial average production rates of 1,367 barrels of oil, 3,900 barrels of water and 1,786,000 cubic feet of gas per day, or, 1,665 barrels of oil equivalent per day.
These wells were completed in January 2022 with initial average production rates of 1,008 barrels of oil, 3,563 barrels of water and 2,980,000 cubic feet of gas per day, or, 1,505 barrels of oil equivalent per day. Mexco’s working interest in these wells is .37%.
These wells began producing in October 2022 with initial average production rates of 1,154 barrels of oil, 2,887 barrels of water and 2,966,000 cubic feet of gas per day, or, 1,648 barrels of oil equivalent per day.
On March 31, 2022 the WTI posted price for crude oil was $96.26 per bbl and the Henry Hub spot price for natural gas was $5.46 per MMBtu. See Results of Operations below for realized prices.
On March 31, 2023 the WTI posted price for crude oil was $71.65 per bbl and the Henry Hub spot price for natural gas was $2.10 per MMBtu.
Mexco expended approximately $92,000 to participate in the completion of four horizontal wells in the Wolfcamp Sand formation of the Delaware Basin located in the western portion of the Permian Basin in Lea County, New Mexico.
In January 2023, Mexco expended $180,000 to participate in the drilling of four horizontal wells in the Wolfcamp Sand formation of the Delaware Basin in Lea County, New Mexico. Mexco’s working interest in these wells is approximately .52%. These wells are currently awaiting completion operations.
Alternative Capital Resources Although we have primarily used cash from operating activities, the sales of assets and funding from the credit facility as our primary capital resources, we have in the past, and could in the future, use alternative capital resources.
Of this total obligation for the remainder of the lease, our majority shareholder will pay $15,572 less than 1 year and $5,191 1-3 years for his portion of the shared office space. 25 Alternative Capital Resources Although we have primarily used cash from operating activities, the sales of assets and funding from the credit facility as our primary capital resources, we have in the past, and could in the future, use alternative capital resources.
Mexco expended approximately $140,400 to participate in the drilling and completion of four horizontal wells in the Wolfcamp Sand formation of the Delaware Basin located in the western portion of the Permian Basin in Lea County, New Mexico.
Mexco expended approximately $84,000 to participate in the drilling and completion of two horizontal wells in the Penn Shale formation of the Delaware Basin in Lea County, New Mexico. Mexco’s working interest in these wells is .22%.
Rent expense for lease payments is recognized on a straight-line basis over the lease term.
The incremental borrowing rate used at adoption was 3.75%. Significant judgement is required when determining the incremental borrowing rate. Rent expense for lease payments is recognized on a straight-line basis over the lease term. 28
The Company expended approximately $165,000 for the additional completion costs of 12 horizontal wells located in Eddy and Lea Counties, New Mexico that the Company participated in drilling during fiscal 2021. As of June 2021, all of these wells were completed and are currently producing. Subsequent Participations.
The Company expended approximately $329,000 for the completion costs of 8 horizontal wells located in Lea County, New Mexico that the Company participated in drilling during fiscal 2022.
These wells were completed at the end of June 2021 with initial average production rates of 1,184 barrels of oil, 4,380 barrels of water and 1,818,000 cubic feet of gas per day, or 1,444 barrels of oil equivalent per day. Mexco’s working interest in these wells is .6%.
The first 4 of these wells began producing in May 2022 and the remaining 4 were completed in November 2022 with initial average production rates of 1,168 barrels of oil, 3,797 barrels of water and 2,621,000 cubic feet of gas per day, or, 1,605 barrels of oil equivalent per day. Acquisitions in Fiscal 2023.
Mexco expended approximately $107,000 to participate in the drilling of three horizontal wells in the 2 nd Bone Spring formation and two horizontal wells in the 3 rd Bone Spring formation of the Delaware Basin located in the western portion of the Permian Basin in Lea County, New Mexico.
Mexco’s working interest in these wells is approximately .11%. These wells began producing in December 2022. Mexco expended $16,000 to participate in the drilling and completion of three horizontal wells in the Bone Spring formation of the Delaware Basin in Eddy County, New Mexico. Mexco’s working interest in these wells is .05%.
This increase of $3,034,360 in our cash flow operating activities consisted of an increase in our non-cash expenses of $471,554; an increase in our accounts receivable of $291,262; an increase of $91,917 in our accounts payable and accrued expenses; and, an increase in our net income of $2,699,134.
This increase of $2,771,488 in our cash flow operating activities consisted of an increase in our non-cash expenses of $565,838; a decrease in our accounts receivable of $594,673; a decrease of $128,615 in our accounts payable and accrued expenses; and, an increase in our net income of $1,807,636.
Mexco expended $31,500 for its share to participate in the drilling and completion of two horizontal wells in the 3 rd Bone Spring Sand formation of the Delaware Basin located in the western portion of the Permian Basin in Lea County, New Mexico.
In February 2023, Mexco expended approximately $31,000 to participate in the drilling and completion of seven horizontal wells in the Bone Spring formation of the Delaware Basin in Lea County, New Mexico. Mexco’s working interest in these wells is approximately .03%. These wells are currently being completed.
During the years ended March 31, 2022 and 2021, we received advances of $275,000 and $935,000, respectively, from our credit facility. For the year ended March 31, 2022 and March 31, 2021, we made payments of $1,455,000 and $550,000, respectively, on the credit facility.
During the year ended March 31, 2022, we received advances of $275,000 and made payments of $1,455,000 on our credit facility and received proceeds of $458,570 for the exercise of employee and director stock options. 22 Accordingly, net cash increased $865,005, leaving cash and cash equivalents on hand of $2,235,771 as of March 31, 2023.
Accordingly, net cash increased $1,312,953, leaving cash and cash equivalents on hand of $1,370,766 as of March 31, 2022. We had working capital of $2,469,776 as of March 31, 2022 compared to working capital of $618,960 as of March 31, 2021, an increase of $1,850,816 for the reasons set forth below.
We had working capital of $3,475,776 as of March 31, 2023 compared to working capital of $2,469,776 as of March 31, 2022, an increase of $1,006,000 for the reasons set forth below. Oil and Natural Gas Property Development. New Participations in Fiscal 2023.
Subsequently, in April 2022, Mexco expended approximately $101,000 to complete these wells and in May 2022 the wells began flowing with initial average production rates of 1,384 barrels of oil, 3,530 barrels of water and 2,172,000 cubic feet of gas per day, or, 1,804 barrels of oil equivalent per day. 21 Mexco expended approximately $126,000 to participate in the drilling of four horizontal wells in the Wolfcamp Sand formation of the Delaware Basin located in the western portion of the Permian Basin in Lea County, New Mexico.
These wells began producing in February 2023 with initial average production rates of 622 barrels of oil, 1,991 barrels of water and 262,000 cubic feet of gas per day, or, 666 barrels of oil equivalent per day. 23 Mexco expended approximately $93,000 to participate in the drilling and completion of eight horizontal wells in the Spraberry trend of the Midland Basin in Reagan County, Texas.
We are in a net deferred tax asset position and believe it is more likely than not that these deferred tax assets will not be realized. Contractual Obligations We have no off-balance sheet debt or unrecorded obligations and have not guaranteed the debt of any other party.
We are in a net deferred tax asset position and believe it is more likely than not that these deferred tax assets will not be realized. State income tax was $164,510 in fiscal 2023, a 61% increase from $102,356 in fiscal 2022, due to the increase in oil and natural gas sales.
Mexco participated in the drilling and completion of two horizontal wells in the Wolfcamp formation of the Delaware Basin located in the western portion of the Permian Basin in Lea County, New Mexico with aggregate costs of approximately $88,000.
In March 2023, Mexco expended approximately $60,000 to participate in the drilling of two horizontal wells in the Penn Shale formation of the Delaware Basin in Lea County, New Mexico. Mexco’s working interest in these wells is approximately .285%. These wells began drilling in April 2023.
Removed
For the year ended March 31, 2022 and March 31, 2021, we received proceeds of $458,570 and $247,435, respectively for the exercise of employee and director stock options. And for the year ended March 31, 2021, we received $68,574 under the paycheck protection program (PPP).
Added
During the year ended March 31, 2023, we received advances and made payments of $675,000 on our credit facility, received proceeds of $16,700 from the exercise of director stock options, received payment of $30,179 form a director for profits on purchase of stock within the six-month window of a previous stock sale, expended $244,494 for the purchase of 18,416 shares of our stock for the treasury and, expended $12,200 for the renewal of our credit facility.
Removed
Mexco participated in the drilling of two horizontal wells in the Bone Spring formation of the Delaware Basin located in the western portion of the Permian Basin in Reeves County, Texas at an aggregate cost of approximately $131,000. Mexco working interest in these wells is approximately .8%. These wells have been completed and began producing in January 2022.
Added
This well was completed in October 2022 with initial average production rates of 295 barrels of oil, 1,313 barrels of water and 237,000 cubic feet of gas per day, or, 335 barrels of oil equivalent per day.
Removed
The Company also participated in the drilling and completion of four vertical wells in Winkler County, Texas at an aggregate cost of $15,800. Mexco’s working interest in these wells is .41%. These wells, operated by Blackbeard Operating, LLC are currently producing. Completion of Wells Drilled in Fiscal 2021.
Added
In October 2022, the Company made an approximately 2% equity investment commitment in a limited liability company amounting to $2,000,000 of which $400,000 has been funded to date. The limited liability company is capitalized at approximately $100 million to purchase mineral interests in the Utica and Marcellus areas in the state of Ohio. Completion of Wells Drilled in Fiscal 2023.
Removed
The Company purchased various overriding royalty interests in 53 producing wells primarily operated by XTO Energy, Inc. and located in the Eagleford area of Atascosa and Karnes Counties, Texas for a purchase price of $567,000 with an effective date of January 1, 2022.
Added
The Company also acquired, for a purchase price of $117,200, royalty interests covering 28 producing wells in 6 counties in the Haynesville trend area of Louisiana and 5 counties in Texas. Subsequent Participations.
Removed
Of this total obligation for the remainder of the lease, our majority shareholder will pay $15,572 less than 1 year and $20,763 1-3 years for his portion of the shared office space.
Added
The effective tax rate for fiscal 2023 and fiscal 2022 was 3.4% and 3.5%, respectively. Contractual Obligations We have no off-balance sheet debt or unrecorded obligations and have not guaranteed the debt of any other party.
Removed
It should not be assumed that the present value of future net cash flows is the current market value of our estimated proved reserves.
Added
Certain amounts in prior periods’ consolidated financial statements have been reclassified to conform with the current period’s presentation. These reclassifications had no effect on previously reported results of operations, retained earnings or net cash flows. Leases. The Company determines an arrangement is a lease at inception.
Removed
The Company determines an arrangement is a lease at inception. Operating leases are recorded in operating lease right-of-use asset, operating lease liability, current, and operating lease liability, long-term on the consolidated balance sheets.

Item 7A. Quantitative and Qualitative Disclosures About Market Risk

Market Risk — interest-rate, FX, commodity exposure

7 edited+1 added−2 removed7 unchanged
Biggest changeThus, we may experience material increases or decreases in reserve quantities solely as a result of price changes and not as a result of drilling or well performance. 27 Similarly, any improvements in oil and gas prices can have a favorable impact on our financial condition, results of operations and capital resources.
Biggest changeLower prices may also reduce the amount of crude oil and natural gas that can be produced economically. Thus, we may experience material increases or decreases in reserve quantities solely as a result of price changes and not as a result of drilling or well performance.
Our primary credit risk is related to oil and gas production sold to various purchasers and the receivables are generally not collateralized. At March 31, 2022, our largest credit risk associated with any single purchaser was $784,443 or 60% of our total oil and gas receivables. We have not experienced any significant credit losses. Energy Price Risk .
Our primary credit risk is related to oil and gas production sold to various purchasers and the receivables are generally not collateralized. At March 31, 2023, our largest credit risk associated with any single purchaser was $634,672 or 46% of our total oil and gas receivables. We have not experienced any significant credit losses. Energy Price Risk .
Subsequently, on June 14, 2022, the WTI posted price for crude oil was $114.91 and the Henry Hub posted price for natural gas was $7.68. Declines in oil and natural gas prices will materially adversely affect our financial condition, liquidity, ability to obtain financing and operating results.
Subsequently, on June 21, 2023, the WTI posted price for crude oil was $68.51 and the Henry Hub posted price for natural gas was $2.24. Declines in oil and natural gas prices will materially adversely affect our financial condition, liquidity, ability to obtain financing and operating results.
On March 31, 2022 the WTI posted price for crude oil was $96.26 per bbl and the Henry Hub spot price for natural gas was $5.46 per MMBtu. See Results of Operations above for the Company’s realized prices during the fiscal year.
On March 31, 2023 the WTI posted price for crude oil was $71.65 per bbl and the Henry Hub spot price for natural gas was $2.10 per MMBtu. See Results of Operations above for the Company’s realized prices during the fiscal year.
For example, in the last twelve months, the NYMEX West Texas Intermediate (“WTI”) posted price for crude oil has ranged from a low of $54.63 per bbl in April 2021 to a high of $119.68 per bbl in March 2022.
For example, in the last twelve months, the NYMEX West Texas Intermediate (“WTI”) posted price for crude oil has ranged from a low of $62.72 per bbl in March 2023 to a high of $118.09 per bbl in June 2022.
The Henry Hub Spot Market Price (“Henry Hub”) for natural gas has ranged from a low of $2.43 per MMBtu in April 2021 to a high of $6.70 per MMBtu in February 2022.
The Henry Hub Spot Market Price (“Henry Hub”) for natural gas has ranged from a low of $1.93 per MMBtu in March 2023 to a high of $9.85 per MMBtu in August 2022.
If the average gas price had increased or decreased by one dollar per mcf for fiscal 2022, pretax income or loss would have changed by $393,841.
If the average oil price had increased or decreased by ten dollars per barrel for fiscal 2023, our pretax income would have changed by $739,680. If the average gas price had increased or decreased by one dollar per mcf for fiscal 2023, pretax income would have changed by $534,363.
Removed
Lower prices may also reduce the amount of crude oil and natural gas that can be produced economically.
Added
Similarly, any improvements in oil and gas prices can have a favorable impact on our financial condition, results of operations and capital resources. Oil and natural gas prices do not necessarily fluctuate in direct relationship to each other.
Removed
Oil and natural gas prices do not necessarily fluctuate in direct relationship to each other. If the average oil price had increased or decreased by ten dollars per barrel for fiscal 2022, our pretax income or loss would have changed by $616,890.

Other MXC 10-K year-over-year comparisons