MEXCO ENERGY CORP

Previous wording

While we have made assumptions that we believe are reasonable, the assumptions that support our forward-looking statements are based upon information that is currently available and is subject to change. All forward-looking statements in the Form 10-Q are qualified in their entirety by the cautionary statement contained in this section. We do not undertake to update, revise or correct any of the forward-looking information. It is suggested that these financial statements be read in conjunction with the consolidated financial statements and notes thereto included in the Form 10-K.

Current wording

While we have made assumptions that we believe are reasonable, the assumptions that support our forward-looking statements are based upon information that is currently available and is subject to change. All forward-looking statements in this Form 10-Q are qualified in their entirety by the cautionary statement contained in this section. We do not undertake to update, revise or correct any of the forward-looking information. It is suggested that these financial statements be read in conjunction with the consolidated financial statements and notes thereto included in the Form 10-K.

Previous wording

Our long-term strategy is on increasing profit margins while concentrating on obtaining reserves with low-cost operations by acquiring and developing oil and gas properties with potential for long-lived production. We focus our efforts on the acquisition of royalty and working interests and non-operated properties in areas with significant development potential.

Current wording

Our long-term strategy is on increasing profit margins while concentrating on obtaining reserves with low-cost operations by acquiring and developing oil and gas properties with potential for long-lived production. We focus our efforts on the acquisition of royalty and working interests in non-operated properties in areas with significant development potential.

Previous wording

At June 30, 2024, we had working capital of $3,038,700 compared to working capital of $3,259,200 at March 31, 2024, a decrease of $220,500 for the reasons set forth below.

Current wording

At September 30, 2024, we had working capital of $1,974,033 compared to working capital of $3,259,200 at March 31, 2024, a decrease of $1,285,167 for the reasons set forth below.

Previous wording

**Cash Flow Provided by Operating Activities.**Cash flow from operating activities is primarily derived from the production of our crude oil and natural gas reserves and changes in the balances of non-cash accounts, receivables, payables or other non-energy property asset account balances. Cash flow provided by our operating activities for the three months ended June 30, 2024 was $1,078,614 in comparison to $1,616,195 for the three months ended June 30, 2023. This decrease of $537,581 in our cash flow from operating activities consisted of an increase in our non-cash expenses of $51,324; a decrease in our accounts receivable of $424,805; an increase of $41,668 in our accounts payable and accrued expenses; a decrease of $14,068 in deferred income tax expense; and, a decrease in our net income for the current quarter of $174,575. Variations in cash flow from operating activities may impact our level of exploration and development expenditures.

Current wording

**Cash Flow Provided by Operating Activities.**Cash flow from operating activities is primarily derived from the production of our crude oil and natural gas reserves and changes in the balances of non-cash accounts, receivables, payables or other non-energy property asset account balances. Cash flow provided by our operating activities for the six months ended September 30, 2024 was $2,006,405 in comparison to $2,430,364 for the six months ended September 30, 2023. This decrease of $423,959 in our cash flow operating activities consisted of an increase in our non-cash expenses of $216,282; a decrease in our accounts receivable of $483,411; a decrease of $20,176 in our accounts payable and accrued expenses; and, a decrease in our net income of $126,810. Variations in cash flow from operating activities may impact our level of exploration and development expenditures.

Previous wording

**Cash Flow Used in Investing Activities.**Cash flow from investing activities is derived from changes in oil and gas property balances. For the three months ended June 30, 2024, we had net cash of $517,387 used for additions to oil and gas properties and a $200,000 investment in a limited liability company compared to $264,091 for the three months ended June 30, 2023.

Current wording

**Cash Flow Used in Investing Activities.**Cash flow from investing activities is derived from changes in oil and gas property balances. For the six months ended September 30, 2024, we had net cash of $2,066,957 used for additions to oil and gas properties compared to $1,544,299 for the six months ended September 30, 2023.

Previous wording

**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 $319,996 for the three months ended June 30, 2024 compared to cash flow provided by our financing activities of $211,388 for the three months ended June 30, 2023. During the three months ended June 30, 2024, we expended $209,000 to pay the regular annual dividend, expended $188,637 to purchase 13,766 shares of our stock for the treasury account, and received proceeds of $77,641 from the exercise of employee stock options. During the three months ended June 30, 2023, we expended $213,600 to pay the special dividend.

Current wording

**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 $834,575 for the six months ended September 30, 2024 compared to cash flow provided by our financing activities of $536,644 for the six months ended September 30, 2023. During the six months ended September 30, 2024, we expended $209,000 to pay the special dividend and $703,216 to purchase 57,766 shares of our stock for the treasury account and received $77,641 from the exercise of stock options.

Previous wording

Accordingly, net cash increased $41,231, leaving cash and cash equivalents on hand of $2,514,715 as of June 30, 2024.

Current wording

Accordingly, net cash decreased $895,127, leaving cash and cash equivalents on hand of $1,578,357 as of September 30, 2024.

Previous wording

**New Participations in Fiscal 2025.**The Company currently plans to participate in the drilling and completion of 30 horizontal wells at an estimated cost of approximately $1,900,000 for the fiscal year ending March 31, 2025. Twenty-six of these wells are in the Delaware Basin located in the western portion of the Permian Basin in Lea and Eddy Counties, New Mexico. The remaining 4 wells are in Reagan County, Texas.

Current wording

**New Participations in Fiscal 2025.**The Company currently plans to participate in the drilling and completion of 30 horizontal wells at an estimated cost of approximately $2,000,000 for the fiscal year ending March 31, 2025. Twenty-six of these wells are in the Delaware Basin located in the western portion of the Permian Basin in Lea and Eddy Counties, New Mexico. The remaining 4 wells are in Reagan County, Texas.

Previous wording

In April 2024, Mexco expended approximately $80,000 to participate in the drilling of five horizontal wells in the Bone Spring formation of the Delaware Basin in Lea County, New Mexico.

Current wording

In April 2024, Mexco expended approximately $80,000 to participate in the drilling of five horizontal wells in the Bone Spring formation of the Delaware Basin in Lea County, New Mexico. Subsequently, in October 2024, the Company expended approximately $127,000 to complete these wells.

Previous wording

In April 2024, Mexco expended approximately $127,800 to drill four horizontal wells in the Wolfcamp Sand formation of the Delaware Basin in Lea County, New Mexico.

Current wording

During the first six months of fiscal 2025, Mexco expended approximately $293,000 to drill and complete four horizontal wells in the Wolfcamp Sand formation of the Delaware Basin in Lea County, New Mexico.

Previous wording

In October 2022, the Company made an approximately 2% equity investment commitment in a limited liability company amounting to $2,000,000 of which $1,000,000 has been funded as of June 30, 2024. 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. Subsequently, in July 2024, the Company funded another $200,000 toward this investment. To date, this LLC has returned $98,637 or 8% of the total investment.

Current wording

In October 2022, the Company made an approximately 2% equity investment commitment in a limited liability company amounting to $2,000,000 of which $1,200,000 has been funded as of September 30, 2024. 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. To date, this LLC has returned $137,076 or 11% of the total investment.

Previous wording

Completion of Wells Drilled in Fiscal 2024. The Company also expects to expend approximately $300,000 in the completion of 19 horizontal wells in which the Company participated during fiscal 2024.

Current wording

Completion of Wells Drilled in Fiscal 2024. The Company expended approximately $300,000 for the completion of 19 horizontal wells in which the Company participated during fiscal 2024.

Previous wording

The Company expended approximately $90,000 for the completion costs of two horizontial wells in the Bone Spring Sand formation of the Delaware Basin in Lea County, New Mexico that the Company participated in drilling during fiscal 2024. Mexco’s working interest in these wells is .53%. Subsequently, in July 2024, these wells were completed with initial average production rates of 1,402 barrels of oil, 2,009 barrels of water and 2,168,000 cubic feet of gas per day, or 1,763 BOE per day.

Current wording

The Company expended approximately $107,000 for the completion costs of two horizontal wells in the Bone Spring Sand formation of the Delaware Basin in Lea County, New Mexico that the Company participated in drilling during fiscal 2024. Mexco’s working interest in these wells is .53%. In July 2024, these wells were completed with initial average production rates of 1,402 barrels of oil, 2,009 barrels of water and 2,168,000 cubic feet of gas per day, or 1,763 BOE per day.

Previous wording

Subsequently, in July 2024, the Company expended approximately $21,000 for the completion costs of four horizontial wells in the Bone Spring Sand formation of the Delaware Basin in Lea County, New Mexico that the Company participated in drilling during fiscal 2024. Mexco’s working interest in these wells is .45%.

Current wording

The Company expended approximately $207,000 for the completion costs of four horizontial wells in the Bone Spring Sand formation of the Delaware Basin in Lea County, New Mexico that the Company participated in drilling during fiscal 2024. Mexco’s working interest in these wells is .45%. Subsequently, in October 2024, these wells were completed with initial average production rates of 893 barrels of oil, 2,990 barrels of water and 1,161,000 cubic feet of gas per day, or 1,087 BOE per day.

Previous wording

**Acquisitions.**In April 2024, the Company acquired small royalty (mineral) interests in 21 wells operated by Anadarko Petroleum Corporation and Cimarex Energy Company and located in Reeves County, Texas for a purchase price of $158,000.

Current wording

**Acquisitions.**In April 2024, the Company acquired royalty interests in 21 producing wells operated by Anadarko Petroleum Corporation and Cimarex Energy Company and located in Reeves County, Texas for a purchase price of $158,000.

Previous wording

Crude oil and natural gas prices generally remained volatile during the last year. The volatility of the energy markets makes it extremely difficult to predict future oil and natural gas price movements with any certainty. For example, in the last twelve months, the NYMEX West Texas Intermediate (“WTI”) posted price for crude oil has ranged from a low of $64.59 per bbl in December 2023 to a high of $89.66 per bbl in September 2023. The Henry Hub Spot Market Price (“Henry Hub”) for natural gas has ranged from a low of $1.25 per MMBtu in March 2024 to a high of $3.34 per MMBtu in October 2023.

Current wording

Crude oil and natural gas prices generally remained volatile during the last year. The volatility of the energy markets makes it extremely difficult to predict future oil and natural gas price movements with any certainty. For example, in the last twelve months, the NYMEX West Texas Intermediate (“WTI”) posted price for crude oil has ranged from a low of $61.73 per bbl in September 2024 to a high of $86.77 per bbl in October 2023. The Henry Hub Spot Market Price (“Henry Hub”) for natural gas has ranged from a low of $1.25 per MMBtu in March 2024 to a high of $3.34 per MMBtu in October 2023.

Previous wording

On June 30, 2024, the WTI posted price for crude oil was $77.52 and the Henry Hub spot price for natural gas was $2.42 per MMBtu. See Results of Operations below for realized prices.

Current wording

On September 30, 2024, the WTI posted price for crude oil was $64.15 and the Henry Hub spot price for natural gas was $2.65 per MMBtu. See Results of Operations below for realized prices. Pipeline capacity constraints and maintenance in the Permian Basin area has contributed to a wider difference between the WaHa Hub and the Henry Hub and at times prices were negative.

Previous wording

**Results of Operations – Three Months Ended June 30, 2024 Compared to Three Months Ended June 30, 2023.**For the quarter ended June 30, 2024, net income was $291,039 compared to net income of $465,614 for the quarter ended June 30, 2023. This was primarily the result of a decrease in operating revenues and an increase in operating expenses, which is further explained below.

Current wording

Results of Operations – Three Months Ended September 30, 2024 Compared to Three Months Ended September 30, 2023. There was net income of $317,198 for the quarter ended September 30, 2024 compared to net income of $269,433 for the quarter ended September 30, 2023. This was a result of an increase in oil and gas revenues partially offset by an increase in operating expense that is further explained below.

Previous wording

Oil and gas sales. Revenue from oil and gas sales was $1,688,056 for the quarter ended June 30, 2024, a 2% decrease from $1,715,090 for the quarter ended June 30, 2023. This primarily resulted from a decrease in oil and gas production and a decrease in gas prices partially offset by an increase in oil prices. The decrease in the natural gas price was, in part, due to temporary pipeline constraints on certain properties and at certain times, prices were negative. The following table sets forth our oil and natural gas revenues, production quantities and average prices received during the three months ended June 30:

Current wording

Oil and gas sales. Revenue from oil and gas sales was $1,695,853 for the second quarter of fiscal 2025, a 23% increase from $1,380,710 for the same period of fiscal 2024. This resulted from an increase in oil and gas production offset by a decrease in oil and gas prices. The decrease in the natural gas price was, in part, due to temporary pipeline constraints on certain properties and at certain times, prices were negative. The following table sets forth our oil and natural gas revenues, production quantities and average prices received during the three months ended September 30:

Previous wording

*Depreciation, depletion and amortization.*Depreciation, depletion and amortization (“DD&A”) expense was $539,697 for the first quarter of fiscal 2025, an 11% increase from $486,186 for the first quarter of fiscal 2024, primarily due to a decrease in gas reserves and an increase in the full cost pool amortization base partially offset by a decrease in oil and gas production volumes and an increase in oil.

Current wording

Depreciation, depletion and amortization. Depreciation, depletion and amortization expense was $584,288 for the second quarter of fiscal 2025, a 53% increase from $382,180 for the same period of fiscal 2024, primarily due to a an increase in the full cost pool amortization base, an increase in oil and gas production and a decrease in gas reserves partially offset by an increase in oil reserves.

Previous wording

Income taxes. Federal income tax for the three months ended June 30, 2024 was $86,520. Federal income tax for the three months ended June 30, 2023 was $88,683. State income tax was $20,066 for the three months ended June 30, 2024, a 39% decrease from $32,818 for the three months ended June 30, 2023 due to the decrease in oil and natural gas sales in the State of New Mexico. The effective tax rate for state and federal taxes combined for the three months ended June 30, 2024 and 2023 was 27% and 21%, respectively.

Current wording

*Income taxes.*Federal income tax for the three months ended September 30, 2024 was $84,833. Federal income tax for the three months ended September 30, 2023 was $61,179. State income tax was $26,920 for the three months ended September 30, 2024, a 102% increase from $13,346 for the three months ended September 30, 2023 due to the increase in oil and natural gas sales in the State of New Mexico and the acquired properties in the State of Colorado. The effective tax rate for the three months ended September 30, 2024 and 2023 was 26% and 22%, respectively.

Previous wording

Production and exploration. Production costs were $437,420 for the three months ended June 30, 2024, a 25% increase from $349,407 for the three months ended June 30, 2023. This increase is primarily the result of an increase in gathering, processing and transportation expenses as well as lease operating expenses on new wells in which we own a working interest.

Current wording

Production and exploration. Production costs were $850,825 for the six months ended September 30, 2024, a 15% increase from $742,081 for the six months ended September 30, 2023. This is the result of an increase in production taxes and marketing charges as a result of the increase in oil and gas revenues and an increase in lease operating expense on new wells in which we own an interest.

Previous wording

General and administrative expenses. General and administrative expenses were $367,045 for the three months ended June 30, 2024, an 8% increase from $340,969 for the three months ended June 30, 2023. This was primarily due to an increase in engineering and contract services.

Current wording

*General and administrative expenses.*General and administrative expenses were $701,570 for the six months ended September 30, 2024, a 9% increase from $646,512 for the six months ended September 30, 2023. This was primarily due to an increase in accounting fess and contract and engineering services.