What changed in this filing

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Item 2. Properties

2021-06-25 compared with 2020-06-26 · 122 added, 121 removed, 55 unchanged (82% of the section changed)

properties consist primarily of oil and gas wells and our ownership in leasehold acreage, both developed and undeveloped.

March 31, 2020, we had interests in approximately 6,300 gross (22 net) oil and gas wells and owned leasehold mineral and royalty

interests in approximately 559,000 gross (3,402 net) acres.

31, 2021, we had interests in approximately 6,400 gross (20 net) oil and gas wells and owned leasehold mineral, royalty and other interests

in approximately 586,000 gross (3,169 net) acres.

and Natural Gas Reserves

accordance with current SEC rules, the average prices used in computing reserves at March 31, 2020 were $53.23 per bbl of oil

and $53.71 in 2019, a decrease of 1%, and $1.66 per mcf of natural gas and $2.77 in 2019, a decrease of 40%, 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

accordance with current SEC rules, the average prices used in computing reserves at March 31, 2021 were $37.42 per bbl of oil compared

to $53.23 in 2020, a decrease of 30%, and $2.29 per mcf of natural gas compared to $1.66 in 2020, an increase of 38%, 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 2021.

The benchmark price of $52.23 per bbl of oil at March 31, 2020 versus $59.52 at March 31, 2019, was

adjusted by lease for gravity, transportation fees and regional price differentials and did not give effect to derivative transactions.

The benchmark price of $2.30 per mcf of natural gas at March 31, 2020 versus $3.07 at March 31, 2019, was adjusted by lease for

BTU content, transportation fees and regional price differentials.

information concerning our costs incurred for oil and gas operations, net revenues from oil and gas production, estimated future

net revenues attributable to our oil and gas reserves, present value of future net revenues discounted at 10% and changes therein,

see Notes to the Company’s consolidated financial statements.

reserves are estimated reserves of crude oil (including condensate and natural gas liquids) and natural gas that geological and

engineering data demonstrate with reasonable certainty to be recoverable in future years from known reservoirs under existing

economic and operating conditions.

Proved developed reserves are those expected to be recovered through existing wells, equipment

and operating methods.

Proved undeveloped reserves are proved reserves that are expected to be recovered from new wells drilled

to known reservoirs on undrilled acreage for which the existence and recoverability of such reserves can be estimated with reasonable

certainty, or from existing wells on which a relatively major expenditure is required to establish production.

engineering report with respect to Mexco’s estimates of proved oil and gas reserves as of March 31, 2020 and 2019 is based

on evaluations prepared by Russell K.

The benchmark price of $36.49 per bbl of oil at March 31, 2021 versus $52.23 at March 31, 2020, was adjusted

by lease for gravity, transportation fees and regional price differentials and did not give effect to derivative transactions.

The benchmark

price of $2.16 per mcf of natural gas at March 31, 2021 versus $2.30 at March 31, 2020, was adjusted by lease for BTU content, transportation

fees and regional price differentials.

information concerning our costs incurred for oil and gas operations, net revenues from oil and gas production, estimated future net

revenues attributable to our oil and gas reserves, present value of future net revenues discounted at 10% and changes therein, see Notes

to the Company’s consolidated financial statements.

reserves are estimated reserves of crude oil (including condensate and natural gas liquids) and natural gas that geological and engineering

data demonstrate with reasonable certainty to be recoverable in future years from known reservoirs under existing economic and operating

Proved developed reserves are those expected to be recovered through existing wells, equipment and operating methods.

undeveloped reserves are proved reserves that are expected to be recovered from new wells drilled to known reservoirs on undrilled acreage

for which the existence and recoverability of such reserves can be estimated with reasonable certainty, or from existing wells on which

a relatively major expenditure is required to establish production.

engineering report with respect to Mexco’s estimates of proved oil and gas reserves as of March 31, 2021 and 2020 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.

Environmental Engineering Consultants, based in Midland, Texas (“Hall and Associates”),

a summary of which is filed as Exhibit 99.1 to this annual report.

maintains internal controls designed to provide reasonable assurance that the estimates of proved reserves are computed and reported

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of our oil and gas reserves.

Management works closely with this firm, and is responsible for providing accurate operating and

technical data to it.

Our Chief Financial Officer who has over 25 years experience in the oil and gas industry reviews the final

reserves estimate and consults with a degreed geological consultant with extensive geological experience and if necessary, discusses

the process used and findings with Alan Neal, the technical person at Hall and Associates responsible for evaluating the proved

reserves covered by this report.

Neal is a member of the Society of Petroleum Engineers and has over 35 years of experience

in the oil and gas industry.

Our Chairman and Chief Executive Officer who has over 45 years of experience in the oil and gas industry

also reviews the final reserves estimate.

Management works closely with this firm, and is responsible for providing accurate operating and technical

Our Chief Financial Officer who has over 25 years experience in the oil and gas industry reviews the final reserves estimate

and consults with a degreed geological consultant with extensive geological experience and if necessary, discusses the process used and

findings with Alan Neal, the technical person at Hall and Associates responsible for evaluating the proved reserves covered by this report.

Neal is a member of the Society of Petroleum Engineers and has over 35 years of experience in the oil and gas industry.

and Chief Executive Officer who has over 45 years of experience in the oil and gas industry also reviews the final reserves estimate.

uncertainties exist in estimating quantities of proved reserves.

Reserve estimates are imprecise and subjective and may change

at any time as additional information becomes available.

Furthermore, estimates of oil and gas reserves are projections based

on engineering data.

There are uncertainties inherent in the interpretation of this data as well as the projection of future rates

of production.

The accuracy of any reserve estimate is a function of the quality of available data and of engineering and geological

interpretation.

Actual future production, oil and gas prices, revenues, taxes, development expenditures, operating expenses and

quantities of recoverable oil and gas reserves will most likely vary from the assumptions and estimates.

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.

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.

Actual future prices and costs may be materially higher or lower than those as of the date of the

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.

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.

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.

Reserve estimates are imprecise and subjective and may change at any

time as additional information becomes available.

Furthermore, estimates of oil and gas reserves are projections based on engineering

There are uncertainties inherent in the interpretation of this data as well as the projection of future rates of production.

accuracy of any reserve estimate is a function of the quality of available data and of engineering and geological interpretation.

future production, oil and gas prices, revenues, taxes, development expenditures, operating expenses and quantities of recoverable oil

and gas reserves will most likely vary from the assumptions and estimates.

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.

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.

Actual future prices and costs may be materially higher or lower than those as of the date of the estimate.

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.

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.

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.

Proved developed –

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Oil (per Bbl)

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.

PV-10 is relevant

and useful to investors because it presents the discounted future net cash flows attributable to our estimated net proved

reserves prior to taking into account future corporate income taxes.

Further, investors may utilize the measure as a

basis for comparison of the relative size and value of our reserves to other companies.

We use this measure when

assessing the potential return on investment related to our oil and natural gas properties.

Our reconciliation

of this non-GAAP financial measure is shown in the table as the PV-10, less future income taxes, discounted at 10% per annum,

resulting in the standardized measure of discounted future net cash flows.

The standardized measure of discounted future net

cash flows represents the present value of future cash flows attributable to our proved oil and natural gas reserves after

income tax, discounted at 10%.

accordance with SEC requirement, the standardized measure of discounted future net cash flows was computed by applying 12-month

first day of the month average prices for oil and gas during the fiscal year to the estimated future production of proved

oil and gas reserves, less estimated future expenditures (based on year-end costs) to be incurred in developing and producing

the proved reserves, less estimated future income tax expenses (based on year-end statutory tax rates, with consideration

of future tax rates already legislated) to be incurred on pretax net cash flows less tax basis of the properties and available

credits, and assuming continuation of existing economic conditions.

prices reflect adjustment by lease for quality, transportation fees and regional price differentials and did not give effect

to derivative transactions.

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, 2020, and no major discovery is believed to have caused a significant change

in our estimates of proved reserves since that date.

the fiscal year ending March 31, 2020, we participated in the development of 57 wells converting reserves of approximately 96,000

reserve estimates do not include the Company’s interest in the LLC referred to in Item 1.

Business –

Company Profile

on page 4 hereto.

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.

PV-10 is relevant and useful to investors because

it presents the discounted future net cash flows attributable to our estimated net proved reserves prior to taking into account future

corporate income taxes.

Further, investors may utilize the measure as a basis for comparison of the relative size and value of our

reserves to other companies.

We use this measure when assessing the potential return on investment related to our oil and natural

gas properties.

Our reconciliation of this non-GAAP financial measure is shown in the table as the PV-10, less future income taxes,

discounted at 10% per annum, resulting in the standardized measure of discounted future net cash flows.

The standardized measure

of discounted future net cash flows represents the present value of future cash flows attributable to our proved oil and natural

gas reserves after income tax, discounted at 10%.

accordance with SEC requirement, the standardized measure of discounted future net cash flows was computed by applying 12-month first

day of the month average prices for oil and gas during the fiscal year to the estimated future production of proved oil and gas reserves,

less estimated future expenditures (based on year-end costs) to be incurred in developing and producing the proved reserves, less

estimated future income tax expenses (based on year-end statutory tax rates, with consideration of future tax rates already legislated)

to be incurred on pretax net cash flows less tax basis of the properties and available credits, and assuming continuation of existing

economic conditions.

prices reflect adjustment by lease for quality, transportation fees and regional price differentials and did not give effect to derivative

transactions.

fiscal 2021, we added proved reserves of 139 thousand BOE (“MBOE”) through extensions and discoveries, subtracted 23 MBOE

through sales of oil and gas properties and downward revisions of previous estimates of 324 MBOE.

Such downward revisions are primarily

the result of reserves written off due to the five-year limitation.

They are primarily working interests in a unit in the Wolfcamp B

Zone in Upton and Reagan Counties, Texas which are on a lease held by production and still in place to be developed in the future.

the fiscal year ending March 31, 2021, we had a working or royalty interest in the development of 35 wells converting reserves of approximately

83,200 BOE from proved undeveloped to proved developed –

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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.

An estimate of fair value would also take into account, among other things, anticipated changes in future prices

and costs, the expected recovery of reserves in excess of proved reserves and a discount factor more representative of the time

value of money and the risks inherent in producing oil and gas.

Future prices received for production and costs may vary, perhaps

significantly, from the prices and costs assumed for purposes of these estimates.

The 10% discount factor used to calculate present

value, which is required by Financial Accounting Standards Board (“FASB”) Accounting Standard Codification

(“ASC”) 932, “Extractive Activities –

Oil and Gas”, may not necessarily be the most appropriate

discount rate.

The present value, no matter what discount rate is used, is materially affected by assumptions as to timing of

future production, which may prove to be inaccurate.

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.

An estimate of fair value would also take into account, among other things, anticipated changes in future prices and costs, the expected

recovery of reserves in excess of proved reserves and a discount factor more representative of the time value of money and the risks

inherent in producing oil and gas.

Future prices received for production and costs may vary, perhaps significantly, from the prices and

costs assumed for purposes of these estimates.

The 10% discount factor used to calculate present value, which is required by Financial

Accounting Standards Board (“FASB”) Accounting Standard Codification (“ASC”) 932, “Extractive Activities

Oil and Gas”, may not necessarily be the most appropriate discount rate.

The present value, no matter what discount rate

is used, is materially affected by assumptions as to timing of future production, which may prove to be inaccurate.

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, 2021, and no major discovery is believed to have caused a significant change in our

estimates of proved reserves since that date.

following table sets forth our drilling activity in wells in which we own a working interest for the years ended March 31:

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Exploratory Wells

Nonproductive –

Nonproductive

Development Wells

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Nonproductive - Vertical

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.

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.

The net numbers above represent Mexco’s working interest in the gross wells.

addition to the working interests mentioned above, other operators drilled 86 gross wells (.09 net wells) on company-owned minerals

and royalties at no expense to the Company.

addition to the working interests mentioned above, other operators drilled 57 gross wells (.13 net wells) on company-owned minerals and

royalties at no expense to the Company.

Wells and Acreage

wells consist of producing wells and wells capable of production, including gas wells awaiting pipeline connections.

are completed in more than one producing zone are counted as one well.

As of March 31, 2020, we held an interest in approximately

6,300 gross (22 net) productive wells, including approximately 5,100 wells in which we held an overriding or royalty interest

and 1,200 wells in which we held a working interest.

Wells that are completed

in more than one producing zone are counted as one well.

As of March 31, 2021, we held an interest in approximately 6,400 gross (20 net)

productive wells, including approximately 5,100 wells in which we held an overriding or royalty interest and 1,100 wells in which we

held a working interest.

gross acre is an acre in which an interest is owned.

A net acre is deemed to exist when the sum of fractional ownership interests

in gross acres equals one.

A net acre is deemed to exist when the sum of fractional ownership interests in

gross acres equals one.

The number of net acres is the sum of the fractional interests owned in gross acres.

The following

table sets forth the approximate developed acreage in which we held a leasehold mineral or other interest as of March 31, 2020:

The following table

sets forth the approximate developed acreage in which we held a leasehold mineral or other interest as of March 31, 2021:

Developed Acres

Production, Unit Prices and Costs

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:

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,

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Average sales price per Mcf

Production cost:

Total BOE (c)

Production costs:

Production expenses:

Production expenses per BOE

Production expenses per sales dollar

Production and ad valorem taxes:

Total BOE (c)

Production cost per BOE

Production cost per sales dollar

Production and ad valorem taxes per BOE

Production and ad valorem taxes per sales dollar

Total oil and gas revenue

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Compared sentence by sentence after normalising whitespace, quotation marks, case and digits, so re-formatting and restated figures do not read as changed language. Wording changes appear as one removal and one addition. The current filing and the prior one are authoritative.

What changed 10-K

Item 2. Properties