What changed in this filing

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Item 1A. Risk Factors

2023-06-26 compared with 2022-06-27 · 74 added, 93 removed, 239 unchanged (41% of the section changed)

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foreign supply and pricing of oil and gas;

the ability of OPEC to set and maintain

the actions of OPEC, its members and other state-controlled oil companies relating to

oil price and production controls;

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energy consumption;

national and international pandemics like the COVID-19;

and, overall political and economic conditions in oil producing

national and international pandemics;

and, overall political and economic conditions in oil producing countries.

and decreases in prices also affect the amount of cash flow available for capital expenditures and our ability to borrow money or raise

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and, limit our financial condition, liquidity, and/or ability to finance planned capital expenditures and operations.

results of operations may be negatively impacted by current global events such as the coronavirus outbreak.

industry has experienced sharp declines in the demand for crude oil and natural gas worldwide, which has resulted in steep declines in

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.

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.

could have a material adverse effect on the costs, operations, business and financial condition, and therefore, the results of operations.

measures and technological advances could reduce demand for oil and natural gas.

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.

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.

results of operations may be negatively impacted by current global events.

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.

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

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.

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.

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.

in environmental laws could increase our operators’ costs and adversely impact our business, financial condition and cash flows.

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decarbonize electric generation and the transportation sector.

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.

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.

In recent years the U.S.

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.

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

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.

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.

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 prices and other factors may cause us to record ceiling test writedowns.

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We use the full cost method to account for oil and gas operations.

Accordingly, we capitalize the cost to acquire, explore for and develop crude oil and natural gas properties including the cost of

abandoned properties, dry holes, geophysical costs and annual lease rentals.

Sales or other dispositions of oil and natural gas properties

are accounted for as adjustments to capitalized costs, with no gain or loss recorded.

Accordingly, we capitalize the cost to acquire, explore for and develop crude oil and natural gas properties including the cost of abandoned

properties, dry holes, geophysical costs and annual lease rentals.

Sales or other dispositions of oil and natural gas properties are

accounted for as adjustments to capitalized costs, with no gain or loss recorded.

Depletion of evaluated oil and natural gas properties

is computed in the units of production method, whereby capitalized costs are amortized over total proved reserves.

Under the full

cost accounting rules, the net capitalized cost of crude oil and natural gas properties may not exceed a “ceiling limit”

which is based upon the present value of estimated future net cash flows from proved reserves, discounted at 10% plus the lower of cost

or fair market value of unproved properties.

If net capitalized costs of oil and natural gas properties exceed the ceiling limit, we

must charge the amount of the excess against earnings.

This is called a “ceiling test writedown.” We use the unweighted

arithmetic average first day of the month price for oil and natural gas for the 12-month period preceding the calculation date in estimating

discounted future net reserves.

Under the full cost

accounting rules, the net capitalized cost of crude oil and natural gas properties may not exceed a “ceiling limit” which

is based upon the present value of estimated future net cash flows from proved reserves, discounted at 10% plus the lower of cost or

fair market value of unproved properties.

If net capitalized costs of oil and natural gas properties exceed the ceiling limit, we must

charge the amount of the excess against earnings.

This is called a “ceiling test writedown.” We use the unweighted arithmetic

average first day of the month price for oil and natural gas for the 12-month period preceding the calculation date in estimating discounted

future net reserves.

Under the accounting rules, we are required to perform a ceiling test each quarter.

A ceiling test

writedown does not impact cash flow from operating activities, but does reduce stockholders’ equity and earnings.

The risk that

we will be required to write down the carrying value of oil and natural gas properties increases when oil and natural gas prices are

We incurred impairment charges during fiscal 2016 and may incur additional impairment charges in the future, particularly if commodity

prices decline, which could have a material adverse effect on our results of operations for the periods in which such charges are taken.

There were no ceiling test impairments on our oil and gas properties during fiscal 2022 and 2021.

A ceiling test writedown does

not impact cash flow from operating activities, but does reduce stockholders’ equity and earnings.

The risk that we will be required

to write down the carrying value of oil and natural gas properties increases when oil and natural gas prices are low.

We incurred impairment

charges during fiscal 2016 and may incur additional impairment charges in the future, particularly if commodity prices decline, which

could have a material adverse effect on our results of operations for the periods in which such charges are taken.

There were no ceiling

test impairments on our oil and gas properties during fiscal 2023 and 2022.

must replace reserves we produce.

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These assumptions, however, may not prove correct.

Delays in the

development of our reserves, increases in costs to develop such reserves, or decreases in commodity prices will reduce the future net

revenues or our estimated proved undeveloped reserves and may result in some projects becoming uneconomical.

In addition, if we or

the outside operators of our properties choose not to spend the capital to develop these reserves, or if we are not able to successfully

develop these reserves, we will be required to write-off these reserves.

Any such write-offs of our reserves could reduce our ability

to borrow money and could reduce the value of our common stock.

Delays in the development

of our reserves, increases in costs to develop such reserves, or decreases in commodity prices will reduce the future net revenues or

our estimated proved undeveloped reserves and may result in some projects becoming uneconomical.

In addition, if we or the outside operators

of our properties choose not to spend the capital to develop these reserves, or if we are not able to successfully develop these reserves,

we will be required to write-off these reserves.

Any such write-offs of our reserves could reduce our ability to borrow money and could

reduce the value of our common stock.

concerning our reserves and future net revenues estimates is inherently uncertain.

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averaged $4.57 per Bbl of oil and ($0.28) 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.

and operating activities are high risk activities that subject us to a variety of factors that we cannot control.

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borrowing base under our credit facility will be determined from time to time by the lender.

Reductions in estimates of oil and gas reserves

could result in a reduction in the borrowing base, which would reduce the amount of financial resources available under the credit facility

to meet our capital requirements.

Such a reduction could be the result of lower commodity prices and/or production, inability to drill

or unfavorable drilling results, changes in oil and gas reserve engineering, the lender’s inability to agree to an adequate borrowing

base or adverse changes in the lender’s practices regarding estimation of reserves.

cash flow from operations or our borrowing base decrease for any reason, our ability to undertake exploration and development activities

could be adversely affected.

Reductions in estimates of oil and gas

reserves could result in a reduction in the borrowing base, which would reduce the amount of financial resources available under the

credit facility to meet our capital requirements.

Such a reduction could be the result of lower commodity prices and/or production,

inability to drill or unfavorable drilling results, changes in oil and gas reserve engineering, the lender’s inability to

agree to an adequate borrowing base or adverse changes in the lender’s practices regarding estimation of reserves.

cash flow from operations or our borrowing base decrease for any reason, our ability to undertake exploration and development

activities could be adversely affected.

As a result, our ability to replace production may be limited.

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and cash flows.

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.

are dependent on electric power, internet and telecommunication infrastructure and our information systems and computer based programs.

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.

reliance on information technology, including those hosted by third parties, exposes us to cyber security risks that could affect our

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ownership interest of all shareholders and may dilute the book value per share of our common stock.

have not and do not anticipate paying any cash dividends on our common stock in the foreseeable future.

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.

We currently intend to retain all future earnings to fund the development and growth of our business.

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.

Stockholders 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.

by our executive officers and directors may limit your ability to influence the outcome of matters requiring stockholder approval and

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in general can experience considerable price and volume fluctuations.

of the Company’s internal control over financial reporting could harm its business and financial results.

management of Mexco is responsible for establishing and maintaining effective internal control over financial reporting.

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.

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

UNRESOLVED STAFF COMMENTS

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 1A. Risk Factors