What changed in this filing

/stocks — the workspaceLOADING

Item 2. Management’s Discussion and Analysis

2023-08-10 compared with 2023-02-10 · 105 added, 163 removed, 77 unchanged (78% of the section changed)

27 unchanged sentences

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 financial statements and notes thereto included in the

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.

and Capital Resources.

4 unchanged sentences

We have pledged our producing oil and gas properties to secure our credit facility.

do not have any delivery commitments to provide a fixed and determinable quantity of its oil and gas under any existing contract or agreement.

do not have any delivery commitments to provide a fixed and determinable quantity of our oil and gas under any existing contract or agreement.

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 royalties and

working interests in non-operated properties in areas with significant development potential.

December 31, 2022, we had working capital of $2,468,314 compared to working capital of $2,469,776 at March 31, 2022, a decrease of $1,462

We focus our efforts on the acquisition of royalty and working

interests and non-operated properties in areas with significant development potential.

June 30, 2023, we had working capital of $4,090,753 compared to working capital of $3,475,776 at March 31, 2023, an increase of $614,977

for the reasons set forth below.

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 Nine Months Ended

Net cash provided by operating activities

the Three Months Ended

Net cash provided by operating

Net cash used in investing activities

$ (2,329,363 )

$ (2,065,272 )

Net cash used in financing activities

3 unchanged sentences

account balances.

Cash flow provided by our operating activities for the nine months ended December 31, 2022 was $4,350,920 in comparison

to $2,728,586 for the nine months ended December 31, 2021.

This increase of $1,622,334 in our cash flow operating activities consisted

of an increase in our non-cash expenses of $496,349;

an increase in our accounts receivable of $639,657;

and, an increase in our net

income for the current nine months of $1,898,037.

Variations in cash flow from operating activities may impact our level of exploration

and development expenditures.

Cash flow provided by our operating activities for the three months ended June 30, 2023 was $1,616,195 in comparison

to $1,495,598 for the three months ended June 30, 2022.

This increase of $120,597 in our cash flow operating activities consisted of

an increase in our non-cash expenses of $126,249;

a decrease in our accounts receivable of $692,094;

an increase of $44,475 in our accounts

payable and accrued expenses;

an increase of $88,683 in deferred income tax expense;

and, a decrease in our net income for the current

quarter of $833,058.

Variations in cash flow from operating activities may impact our level of exploration and development expenditures.

expenditures in operating activities consist primarily of drilling expenses, production expenses and engineering services.

3 unchanged sentences

Cash flow from investing activities is derived from changes in oil and gas property balances.

For the nine months ended December 31, 2022, we had net cash of $4,969,269 used for additions to oil and gas properties compared to $1,021,849

for the nine months ended December 31, 2021.

For the three months ended June 30, 2023, we had net cash of $264,091 used for additions to oil and gas properties compared to $2,329,363

for the three months ended June 30, 2022.

Flow Provided by Financing Activities.

1 unchanged sentence

account balances.

Cash flow used in our financing activities was $121,381 for the nine months ended December 31, 2022 compared to cash

flow used in our financing activities of $884,360 for the nine months ended December 31, 2021.

During the nine months ended December

31, 2022, we received advances and made repayments of $675,000 on our credit facility, received proceeds of $16,700 from the exercise

of director stock options, received payment of $30,179 from a director for profits on purchase of stock within the six-month window of

a previous stock sale, and expended $168,260 for the purchase of 12,416 shares of our stock for the treasury.

net cash decreased $739,730, leaving cash and cash equivalents on hand of $631,036 as of December 31, 2022.

Cash flow used in our financing activities was $211,388 for the three months ended June 30, 2023 compared to cash flow

provided by our financing activities of $0 for the three months ended June 30, 2022.

During the three months ended June 30, 2023, we

expended $213,600 to pay the special dividend.

net cash increased $1,140,716, leaving cash and cash equivalents on hand of $3,376,487 as of June 30, 2023.

and Natural Gas Property Development

1 unchanged sentence

The Company currently plans to participate in the drilling and completion of 40 horizontal wells at

an estimated aggregate cost of approximately $4,000,000 for the fiscal year ending March 31, 2023, of which 53% will be spent in the

Delaware Basin and the remaining balance in the Midland Basin.

Thirty-eight 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.

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%.

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%.

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.

expended approximately $681,000 to participate in the drilling and completion of eight horizontal wells in the Wolfcamp Sand formation

an estimated aggregate cost of approximately $1,700,000 for the fiscal year ending March 31, 2024.

All 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.

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’s working interest in these wells is .52%.

These wells are currently being

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%.

This well was completed in October 2022

with initial average production rates of 134 barrels of oil, 874 barrels of water and 143,000 cubic feet of gas per day, or, 158 barrels

of oil equivalent per day.

expended approximately $625,000 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%.

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.

expended approximately $78,000 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.

May 2023, 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.

Mexco’s working interest in these wells is .4%.

These wells are currently being completed.

expended approximately $85,000 to participate in the drilling and completion of eight horizontal wells in the Spraberry trend of the

Midland Basin in Reagan County, Texas.

April 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 are currently

being completed.

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%.

These wells are currently being completed.

October 2022, the Company made an approximately 2% equity investment commitment in a limited liability company amounting to $2,000,000

of which $200,000 has been funded through December 31, 2022.

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 2023, the Company expended approximately $45,000 to complete these wells.

of Wells Drilled in Fiscal 2023.

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.

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 953 barrels of oil, 4,063 barrels

of water and 3,071,000 cubic feet of gas per day, or, 1,465 barrels of oil equivalent per day.

in Fiscal 2023.

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 also expects to expend approximately $450,000 in the completion of 21 horizontal wells

in which the Company participated in fiscal 2023 of which approximately $225,000 has been expended to date.

Company expended approximately $211,000 for the completion costs of four horizontal wells in the Wolfcamp Sand formation of the Delaware

Basin in Lea County, New Mexico that the Company participated in drilling during fiscal 2023.

Mexco’s working interest in these

wells is .52%.

horizontal wells in the Bone Spring formation of the Delaware Basin in Eddy County, New Mexico in which the Company participated during

fiscal 2023 were 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.

Mexco’s working interest in these wells is .05%.

Acquisitions.

In June 2023, the Company acquired small royalty (mineral) interests in 6 wells operated by Highpeak Energy and located in Howard

County, Texas for a purchase price of $20,000 which is effective July 1, 2023.

of Properties.

During the first quarter of fiscal 2024, the Company received approximately $280,000 in cash from a sale of joint

venture leasehold acreage and marginal producing working interest wells in Reagan County, Texas, marginal producing working interest

wells in Pecos County, Texas and interest in surface acreage in Palo Pinto County, Texas.

Participations.

In January 2023, Mexco expended $180,000 to participate in the drilling of four horizontal wells in the Wolfcamp

In July 2023, Mexco expended approximately $787,000 to participate in the drilling of five horizontal wells in the

Bone Spring Sand formation of the Delaware Basin in Lea County, New Mexico.

July 2023, Mexco expended approximately $36,000 to participate in the drilling and completion of two horizontal wells in the Bone Spring

Sand formation of the Delaware Basin in Lea County, New Mexico.

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.

are participating in other projects and are reviewing projects in which we may participate.

3 unchanged sentences

the credit facility and, if appropriate, sales of non-core properties.

oil and natural gas 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 $67.00 per bbl in December 2022 to a high of $119.68

per bbl in March 2022.

The Henry Hub Spot Market Price (“Henry Hub”) posted price for natural gas has ranged from a low of

$3.46 per MMBtu in November 2022 to a high of $9.85 per MMBtu in August 2022.

December 31, 2022, the WTI posted price for crude oil was $76.24 and the Henry Hub posted price for natural gas was $3.52.

of Operations below for realized price.

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 $62.72 per bbl in March 2023 to a high

of $104.41 per bbl in July 2022.

The Henry Hub Spot Market Price (“Henry Hub”) for natural gas has ranged from a low of $1.74

per MMBtu in June 2023 to a high of $9.85 per MMBtu in August 2022.

June 30, 2023, the WTI posted price for crude oil was $66.62 and the Henry Hub spot price for natural gas was $2.48 per MMBtu.

of Operations below for realized prices.

We have no off-balance sheet debt or unrecorded obligations and have not guaranteed the debt of any other party.

following table summarizes our future payments we are obligated to make based on agreements in place as of December 31, 2022:

Payments due in:

less than 1 year

following table summarizes our future payments we are obligated to make based on agreements in place as of June 30, 2023:

Contractual obligations:

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.

Of this total obligation for the remainder of the lease,

our majority shareholder will pay $15,572 less than 1 year and $9,083 1-3 years for his portion of the shared office space.

of Operations – Three Months Ended December 31, 2022 and 2021.

For the quarter ended December 31, 2022, there was net income

of $1,244,785 compared to $753,302 for the quarter ended December 31, 2021, a 65% increase as a result of an increase in operating revenues

due to an increase in oil and gas production and prices partially offset by an increase in operating expenses that is further explained

and gas sales .

Revenue from oil and gas sales was $2,486,017 for the third quarter of fiscal 2023, a 58% increase from $1,573,984

for the same period of fiscal 2022.

This resulted from an increase in oil and natural gas production volumes and an increase in oil price

partially offset by a decrease in natural gas price.

Volume (bbls)

Average Price (per bbl)

Average Price (per mcf)

and exploration.

Production costs were $478,670 for the third quarter of fiscal 2023, a 64% increase from $291,068 for the same period

of fiscal 2022.

This is 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.

Depreciation, depletion and amortization expense was $496,509 for the third quarter of fiscal 2023, an

85% increase from $268,018 for the same period of fiscal 2022, primarily due to an increase in production and full cost pool amortization

base partially offset by an increase in oil and gas reserves.

and administrative expenses.

General and administrative expenses were $288,536 for the third quarter of fiscal 2023, a 20% increase

from $239,767 for the same period of fiscal 2022.

This was primarily due to an increase in salaries, employee stock option compensation

and accounting fees.

Interest expense was $3,230 for the third quarter of fiscal 2023, a 3% increase from $3,132 for the same period of fiscal

2022, due to an increase in interest rate.

Income tax expense was $61,986 for the three months ended December 31, 2022, an 89% increase from $32,785 for the three months

ended December 31, 2021 consisting only of state income tax.

This increase was due to our continuing development program primarily in

the State of New Mexico.

The effective tax rate for the three months ended December 31, 2022 and 2021 was 5% and 4%, respectively.

federal income tax purposes, 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.

of Operations – Nine Months Ended December 31, 2022 and 2021.

For the nine months ended December 31, 2022, there was a net

income of $3,755,173 compared to net income of $1,857,136 for the nine months ended December 31, 2021.

This was a result of an increase

in operating revenues due to an increase in oil and gas production volumes and prices partially offset by an increase in operating expenses

that is further explained below.

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.

Of this total obligation for the remainder of the lease, our majority shareholder

will pay $15,572 less than 1 year and $1,298 1-3 years for his portion of the shared office

of Operations – Three Months Ended June 30, 2023 Compared to Three Months Ended June 30, 2022.

For the quarter ended June 30,

2023, net income was $465,614 compared to net income of $1,298,672 for the quarter ended June 30, 2022.

This was primarily the result

of a decrease in operating revenues due to a decrease in oil and gas prices and an increase in operating expenses, partially offset by

an increase in oil and gas production volumes, which is further explained below.

and gas sales.

Revenue from oil and gas sales was $7,184,025 for the nine months ended December 31, 2022, a 64% increase from $4,370,720

for the same period of fiscal 2022.

This resulted from an increase in oil and natural gas prices and an increase in oil and natural gas

production volumes.

Revenue from oil and gas sales was $1,715,090 for the quarter ended June 30, 2023, a 29% decrease from $2,416,113

for the quarter ended June 30, 2022.

This primarily resulted from a decrease in oil and gas prices partially offset by an increase in oil and gas production volumes.

The following table sets forth our oil and natural gas revenues, production quantities and average prices

received during the three months ended June 30:

Volume (bbls)

2 unchanged sentences

and exploration.

Production costs were $1,308,143 for the nine months ended December 31, 2022, a 45% increase from $903,643 for the

nine months ended December 31, 2021.

This increase is primarily the result of an increase in production taxes and marketing charges as

a result of the increase in oil and gas revenues.

Production costs were $349,407 for the three months ended June 30, 2023, a 20% decrease from $435,028 for the three

months ended June 30, 2022.

This decrease is primarily the result of a decrease in production taxes and lease operating expenses as a

result of the decrease in oil and gas revenues.

Depreciation,

depletion and amortization.

Depreciation, depletion and amortization expense was $1,268,016 for the nine months ended December 31,

2022, a 56% increase from $812,398 for the nine months ended December 31, 2021, due to an increase production and full cost pool amortization

base partially offset by an increase in oil and gas reserves.

Depreciation, depletion and amortization (“DD&A”) expense was $486,186 for the first

quarter of fiscal 2024, a 26% increase from $387,128 for the first quarter of fiscal 2023, primarily due to an increase in oil and gas

production and a decrease in the oil and gas reserves, partially offset by a decrease in the full cost pool amortization base.

and administrative expenses.

General and administrative expenses were $876,735 for the nine months ended December 31, 2022, a 19%

increase from $739,469 for the nine months ended December 31, 2021.

This was primarily due to an increase in employee stock option compensation,

salaries and contract services, and legal fees.

Interest expense was $9,770 for the nine months ended December 31, 2022, a 58% decrease from $23,255 for the nine months

ended December 31, 2021 due to a decrease in borrowings.

Income tax expense was $115,236 for the nine months ended December 31, 2022, a 108% increase from $55,492 for the nine months

ended December 31, 2021 consisting only of state income tax.

This increase was due to our continuing development program primarily in

the State of New Mexico.

The effective tax rate for the nine months ended December 31, 2022 and 2021 was 3%.

For federal income tax purposes,

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.

General and administrative expenses were $340,969 for the three months ended June 30, 2023, a 17% increase

from $290,243 for the three months ended June 30, 2022.

This was primarily due to an increase in employee stock option compensation and

engineering services.

Interest expense, which consisted of debt issuance costs, was $1,081 for the first quarter of fiscal 2024, a decrease of

65% from $3,131 for the first quarter of fiscal 2023.

Federal income tax for the three months ended June 30, 2023 was $88,683.

There was no federal income tax expense for the three

months ended June 30, 2022 because the Company was in a net deferred tax asset position.

State income tax was $32,818 for the three months

ended June 30, 2023, a 16% increase from $28,287 for the three months ended June 30, 2022 due to the increase in oil and natural gas

sales in the State of New Mexico.

The effective tax rate for the three months ended June 30, 2023 and 2022 was 21% and 2%, respectively.

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-Q

Item 2. Management’s Discussion and Analysis