What changed in this filing

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Item 1. Business

2022-06-27 compared with 2021-06-25 · 105 added, 93 removed, 206 unchanged (49% of the section changed)

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At that time, the shareholders of the

Company also approved amendments to the Articles of Incorporation resulting in a one-for-fifty reverse stock split of the Company’s

common stock.

total estimated proved reserves at March 31, 2021 were approximately 1.504 million barrels of oil equivalent (“MMBOE”) of

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”

in “Item 2 – Properties” below.

Taylor beneficially owns approximately 44% of the outstanding shares of our common stock.

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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.

We especially seek to acquire proved

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could have a potentially meaningful impact on our reserves.

All of the Company’s oil and gas interests are operated by others.

1983 to 2022, Mexco Energy Corporation made approximately 80 acquisitions of producing oil and gas properties including royalties, overriding

royalties, minerals and working interests both operated and non-operated plus the following most significant and recent acquisitions:

royalties, minerals and working interests plus the following most significant and recent acquisitions:

Bay Oil Company and Thompson Brothers Lumber Company, respectively dissolved in 1957 and 1947.

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consisting of various mineral, royalty and overriding royalty interests.

Energy Corporation, purchase price of $1,591,000 consisting of primarily working interests in approximately 634 wells located in

Energy Corporation, purchase price of $1,591,000 consisting primarily of working interests in approximately 634 wells located

in 12 states.

Texas Disposal Corporation, purchase price $478,000 consisting of royalty interests in over 300 wells located in 60 counties and

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Oil and Gas, LLC, purchase price of $1,150,000 consisting of working interests in approximately 280 wells located in 16 counties

interests, purchase price of $200,000 covering 43 wells in 12 counties of eight states, primarily in Texas.

interests, purchase price $580,000 covering 580 wells in 87 counties of eight states.

Approximately 90% of the net revenue from these

royalties is produced by 157 wells located in the Barnett Shale of the Fort Worth Basin of Texas.

Also included are interests in 423

wells in 8 states.

interests, purchase price of $200,000 covering 43 wells in 12 counties of 8 states, primarily in Texas.

interests, purchase price $580,000 covering 580 wells in 87 counties of 8 states.

Approximately 90% of the net revenue from

these royalties is produced by 157 wells located in the Barnett Shale of the Fort Worth Basin of Texas.

Also included are interests

in 423 wells in 8 states.

working interests, purchase price $525,000 for 12.5% (approximately 10% net revenue interest).

The purchase included eight wells producing

oil on 20-acre spacing at approximately 3,600 foot depth on 190 acres in Pecos County, TX.

The purchase included 8 wells

producing oil on 20-acre spacing at approximately 3,600 foot depth on 190 acres in Pecos County, TX.

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.

Of these oil and gas

reserves, approximately 80% is natural gas and 20% oil.

working interests, purchase price $840,000 in 70 Natural gas producing wells located in 5 counties of Oklahoma.

April 2019, the Company made a less than 1% investment commitment in a limited liability company amounting to $250,000 of which $200,000

has been funded through March 31, 2021.

This amount is classified as an investment at cost on the Company’s consolidated balance

The limited liability company is capitalized at approximately $50 million to purchase royalty interests consisting of minerals

located in the state of Ohio.

As of March 31, 2021 there are 225 gross wells (.85 net wells) of which 215 are Utica gas wells and

10 are Marcellus oil wells either producing, drilling or in process.

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.

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.

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.

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.

Subsequently, in May 2022, the Company expended $25,000 for the second optional cash call for a total

investment of $300,000.

royalty interests, purchase price of $567,000 covering 53 producing wells and several additional potential locations for development

in Atascosa and Karnes Counties, Texas.

Environment and Outlook

outbreak of the novel coronavirus (“COVID-19”) in the first calendar quarter of 2020 and its continued spread across the

globe in the second, third and fourth calendar quarters of 2020 has resulted, and is likely to continue to result in, significant economic

disruption and has, and is likely to continue to, adversely affect the operations of the Company’s business, as the significantly

reduced global and national economic activity has resulted in reduced demand for oil and natural gas.

Federal, state and local governments

mobilized to implement containment mechanisms to minimize impacts to their populations and economies.

Various containment measures, which

include the quarantining of cities, regions and countries, while aiding in the prevention of further outbreak, have resulted in a severe

drop in general economic activity and a resulting decrease in energy demand.

In addition, the global economy has experienced a significant

disruption to global supply chains.

The direct impact to the Company’s operations began to take effect at the close of the fiscal

year ended March 31, 2020, and continued through the close of the Company’s third quarter of this fiscal year.

challenging commodity price environment continued in fiscal 2021 and in May 2020, commodity prices experienced extreme volatility resulting

in historic lows.

In light of these challenges facing our industry and in response to the continued challenging environment, our primary

business strategies for fiscal 2022 will continue to include:

(1) optimizing cash flows through operating efficiencies and cost reductions,

(2) divesting of non-core assets, and (3) working to balance capital spending with cash flows to minimize borrowings, reduce debt and

maintain ample liquidity.

the Company’s fourth quarter of fiscal 2021 and continuing through the first quarter of fiscal 2022, oil and natural gas prices

recovered to pre-pandemic levels, due in part to the accessibility of vaccines, reopening of states after the lockdown and optimism about

the economic recovery.

However, the continued spread of the virus, including vaccine-resistant strains, could once again reduce the demand

for oil and gas and deteriorate the oil and natural prices.

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.

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.

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.

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

Also, the Russian invasion of Ukraine has caused a number of boycotts of Russian crude oil and natural gas production.

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.

and Gas Operations

of March 31, 2021, oil constituted approximately 73% of our oil and gas revenues and approximately 49% of our total proved reserves for

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.

are two primary areas in which the Company is focused, 1) the Delaware Basin located in the Western portion of the Permian Basin including

Lea and Eddy Counties, New Mexico and Loving County, Texas and 2) the Midland Basin located in the Eastern portion of the Permian Basin

including Reagan, Upton, Midland, Martin, Howard and Glasscock Counties, Texas.

The Permian Basin in total accounts for 80% of our discounted

future net cash flows from proved reserves and 86% of our gross revenues.

Lea and Eddy Counties, New Mexico and Reeves and Loving Counties, Texas and 2) the Midland Basin located in the Eastern portion of the

Permian Basin including Reagan, Upton, Midland, Martin, Howard and Glasscock Counties, Texas.

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 is known to have a number of zones of oil and natural gas bearing rock throughout.

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.

For fiscal 2021, these properties accounted for

66% of our gross revenues and 76% of our net revenues.

For fiscal 2022, these properties accounted for 73% of our net revenues.

Of these discounted future net cash flows from proved reserves, approximately

11% are attributable to proven undeveloped reserves which will be developed through new drilling.

19% are attributable to proven undeveloped reserves which would be developed through new drilling.

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 2021, these properties accounted for

14% of our gross revenues and 13% of our net revenues.

For fiscal 2022, these properties accounted for 11% of our net revenues.

Of these discounted future net cash flows from proved reserves, approximately

9% are attributable to proven undeveloped reserves which will be developed through new drilling.

6% are attributable to proven undeveloped reserves which would be developed through new drilling.

Gas Field properties, encompassing 13,058 gross acres, 72 net acres, 27 gross wells and .13 net wells in Pecos County, Texas, account

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For fiscal 2022, these properties

accounted for 3% of our gross revenues and 2% of our net revenues.

accounted for 2% of our net revenues.

All of these properties, except for one, are royalty interests.

these discounted future net cash flows from proved reserves, approximately 10% are attributable to proven undeveloped reserves which

will 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 in the horizontal Wolfcamp.

believes its most important properties for future development by horizontal drilling and hydraulic fracturing area are located in Lea

and Eddy Counties, New Mexico of the Delaware Basin and the Midland Basin in Midland, Reagan and Upton Counties, Texas.

more on these and other operations in this area see “Item 7.

Management’s Discussion and Analysis of Financial Condition

and Results of Operations –

Liquidity and Capital Resources Commitments”.

more on these and other operations in this area see “Item 7.

Management’s Discussion and Analysis of Financial Condition

and Results of Operations – Liquidity and Capital Resources Commitments”.

own partial interests in approximately 6,300 producing wells all of which are located within the United States in the states of Texas,

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industrial production;

political events in foreign oil-producing regions like the crude oil price disputes between Saudi Arabia and Russia;

and variations in governmental regulations including environmental, energy conservation and tax laws or the imposition of new regulatory

requirements upon the oil and natural gas industry.

political events in foreign oil-producing regions;

and variations in governmental regulations including environmental,

energy conservation and tax laws or the imposition of new regulatory requirements upon the oil and natural gas industry.

market for our oil, gas and natural gas liquids production depends on factors beyond our control including:

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and overall economic conditions.

made sales that amounted to 10% or more of revenues as follows for the years ended March 31:

made sales that amounted to 10% or more of oil and gas revenues as follows for the years ended March 31:

Historically,

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credit risk does not exist.

Because a ready market exists for oil and gas production, we do not believe the loss of any individual customer

Because a ready market exists for oil and gas production, we do not believe the loss of any individual purchaser

would have a material adverse effect on our financial position or results of operations.

Environmental

exploration and development of crude oil and natural gas properties are subject to existing stringent and complex federal, state and

local laws (including case law) and regulations governing health, safety, environmental quality and pollution control.

Failure to comply

with these laws, rules and regulations, however, may result in the assessment of administrative, civil or criminal penalties;

the imposition

of investigatory or remedial obligations;

and the issuance of injunctions limiting or preventing some or all of the operations on the

properties in which the Company owns an interest.

oil and gas industry is extensively regulated at the federal, state, and local levels.

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.

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.

certain environmental laws and regulations, the operators of the Company properties could be subject to strict, joint and several liability

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did not cause the contamination or their activities were in compliance with all applicable laws at the time the actions were taken.

Comprehensive Environmental Response, Compensation and Liability Act (“CERCLA”), also known as the “superfund”

law, for example, imposes liability, regardless of fault or the legality of the original conduct, on certain classes of persons for releases

into the environment of a “hazardous substance.”

Liable persons may include the current or previous owner and operator of

into the environment of a “hazardous substance.” Liable persons may include the current or previous owner and operator of

a site where a hazardous substance has been disposed and persons who arranged for the disposal of a hazardous substance at a site.

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its ownership of the properties could cause it to be responsible for all or part of such costs to the extent CERCLA or any similar statute

imposes responsibility on such parties as “owners.”

state governments and regional organizations comprising state governments already have enacted legislation and promulgated rules restricting

greenhouse gases (“GHGs”) emissions or promoting the use of renewable energy, and additional such measures are frequently

under consideration.

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during fiscal 2023.

agencies with certain authority over the Company’s business include the Internal Revenue Service (the “IRS”), the SEC

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.

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.

to Properties

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such examinations, certain curative work must be done to correct defects in the marketability of the title, and such curative work entails

Our operators’

failure to cure any title defects may delay or prevent us from utilizing the associated mineral interest.

Our operators’ failure to cure any title defects may delay or prevent us from utilizing the associated mineral interest.

We believe the title to our properties is good and defensible in accordance with standards generally acceptable in the oil and gas industry

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Chief Financial Officer, Treasurer, and Assistant Secretary

President and Secretary

forth below is a description of the principal occupations during at least the past five years of each executive officer of the Company.

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Gail Yanko was appointed to the position of Vice President of the Company in 1990.

She has also served as Corporate Secretary since 1992

She also served as Corporate Secretary from 1992 to

2021 and from 1986 to 1992 was Assistant Secretary.

From 1986 to 2015, on a part-time basis, she assisted the Chairman of the Board of the

Company in his personal business activities.

From 1986 to 2015, on a part-time basis, she assisted the Chairman of the Board of

the Company in his personal business activities.

Yanko also served as a director of the Company from 1990 to 2008.

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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 1. Business