What changed in this filing

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Item 2. Management’s Discussion and Analysis

2023-11-08 compared with 2023-08-10 · 127 added, 82 removed, 100 unchanged (68% of the section changed)

24 unchanged sentences

that is currently available and is subject to change.

All forward-looking statements in the Form 10-Q are qualified in their entirety

All forward-looking statements in this Form 10-Q are qualified in their entirety

by the cautionary statement contained in this section.

12 unchanged sentences

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

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

September 30, 2023, we had working capital of $3,245,180 compared to working capital of $3,475,776 at March 31, 2023, a decrease of $230,596

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:

the Three Months Ended

Net cash provided by operating

Net cash used in investing activities

the Six Months Ended September 30,

cash provided by operating activities

cash used in investing activities

$ (1,544,299 )

$ (4,253,453 )

Net cash used in financing activities

$ (2,709,154 )

cash (used in) provided by financing activities

Flow Provided by Operating Activities.

2 unchanged sentences

account balances.

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;

Cash flow provided by our operating activities for the six months ended September 30, 2023 was $2,430,364 in comparison

to $3,418,087 for the six months ended September 30, 2022.

This decrease of $987,723 in our cash flow operating activities consisted

of an increase in our non-cash expenses of $295,985;

a decrease in our accounts receivable of $447,403;

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.

a increase of $35,655 in our

accounts payable and accrued expenses;

and, a decrease in our net income for the current quarter of $1,775,341.

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 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.

For the six months ended September 30, 2023, we had net cash of $1,544,299 used for additions to oil and gas properties compared to $4,253,453

for the six months ended September 30, 2022.

Flow Provided by Financing Activities.

1 unchanged sentence

account balances.

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.

Cash flow used in our financing activities was $536,644 for the six months ended September 30, 2023 compared to cash

flow provided by our financing activities of $30,179 for the six months ended September 30, 2022.

During the six months ended September

30, 2023, we expended $213,600 to pay the special dividend and $325,256 to purchase 26,000 shares of our stock for the treasury account.

net cash increased $349,421, leaving cash and cash equivalents on hand of $2,585,192 as of September 30, 2023.

and Natural Gas Property Development

7 unchanged sentences

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

Subsequently, in October 2023,

Mexco expended approximately $65,000 to complete two of these wells.

May 2023, Mexco expended approximately $68,000 to participate in the drilling of two horizontal wells in the Penn Shale formation of

1 unchanged sentence

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

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.

Subsequently, in October 2023, Mexco

expended approximately $83,000 to complete these wells.

the first six months of fiscal 2024, Mexco expended approximately $105,000 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.

Mexco’s working interest in these wells is approximately

Subsequently, in

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

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.

Mexco’s working interest in these wells is approximately 2.2%.

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.

Mexco’s working interest in these wells is approximately .1%.

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

of which $600,000 has been funded to date.

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.

April 2019, the Company invested over a period of four years $300,000 for a less than 1% investment commitment in a limited liability

company to purchase mineral interests in the Utica and Marcellus areas of Ohio.

To date, this LLC has returned $255,657 or 85% of the

total investment.

of Wells Drilled in Fiscal 2023.

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

The Company expended approximately $450,000 in the completion of 21 horizontal wells in which the

Company participated in fiscal 2023.

Company expended approximately $427,000 for the completion costs of eight 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.

1 unchanged sentence

wells is .52%.

Subsequently, these wells began producing in October 2023 with initial average production rates of 825 barrels of oil,

3,540 barrels of water and 2,150,000 cubic feet of gas per day, or, 1,183 barrels of oil equivalent per day.

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

2 unchanged sentences

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

Subsequently,

in October 2023, six of seven horizontal wells in the Bone Spring Sand formation of the Delaware Basin in Lea County, New Mexico in which

the Company participated during fiscal 2023 were completed with initial average production rates of 1,991 barrels of oil, 2,134 barrels

of water and 2,414,000 cubic feet of gas per day, or, 2,393 barrels of oil equivalent per day.

Mexco’s working interest in these

wells is .033%.

Acquisitions.

5 unchanged sentences

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

Participations.

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.

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

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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.

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 $1.74 per MMBtu in June 2023 to a high of $7.20 per MMBtu in December 2022.

September 30, 2023, the WTI posted price for crude oil was $86.77 and the Henry Hub spot price for natural gas was $2.68 per MMBtu.

Results 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 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 $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.

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

The 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

Of this total obligation for the remainder of the lease, our majority shareholder will pay $12,977 less than 1 year for his

portion of the shared office space.

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

There was net income

of $269,433 for the quarter ended September 30, 2023 compared to net income of $1,211,716 for the quarter ended September 30, 2022.

was a result of a decrease in oil and gas prices and production that is further explained below.

and gas sales.

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)

Average Price (per bbl)

Average Price (per mcf)

Revenue from oil and gas sales was $1,380,710 for the second quarter of fiscal 2024, a 39% decrease from $2,281,895

for the same period of fiscal 2023.

This resulted from a decrease in oil and gas prices and a decrease in oil and gas production, partly

due to wells shut in during completion of new wells.

Price (per bbl)

Price (per mcf)

and exploration.

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.

Production costs were $392,674 for the second quarter of fiscal 2024, a .4% decrease from $394,445 for the same

period of fiscal 2023.

This is the result of a decrease in production taxes and marketing charges as a result of the decrease in oil

and gas revenues offset by an increase in lease operating expense on non-operated wells in New Mexico.

Depreciation,

depletion and amortization.

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.

Depreciation, depletion and amortization expense was $382,180 for the second quarter of fiscal 2024,

a 1% decrease from $384,379 for the same period of fiscal 2023, primarily due to a decrease in oil and gas production partially offset

by a decrease in reserves.

and administrative expenses.

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.

General and administrative expenses were $305,543 for the second quarter of fiscal 2024, a 3% increase

from $297,956 for the same period of fiscal 2023.

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

offset by a decrease in legal fees.

Federal income tax for the three months ended September 30, 2023 was $61,179.

There was no federal income tax expense for

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

State income tax was $13,346

for the three months ended September 30, 2023, a 47% decrease from $24,963 for the three months ended September 30, 2022 due to the decrease

in oil and natural gas sales in the State of New Mexico.

The effective tax rate for the three months ended September 30, 2023 and 2022

was 22% and 2%, respectively.

of Operations – Six Months Ended September 30, 2023 Compared to Six Months Ended September 30, 2022.

For the six months ended

September 30, 2023, there was net income of $735,047 compared to net income of $2,510,388 for the six months ended September 30, 2022.

This was a result of a decrease in operating revenues and an increase in operating expenses that is further explained below.

and gas sales.

Revenue from oil and gas sales was $3,095,800 for the six months ended September 30, 2023, a 34% decrease from $4,698,008

for the same period of fiscal 2023.

This resulted from a decrease in oil and gas prices partially offset by an increase in oil and gas

Price (per bbl)

Price (per mcf)

and exploration.

Production costs were $742,081 for the six months ended September 30, 2023, an 11% decrease from $829,473 for the

six months ended September 30, 2022.

This is the result of a decrease in production taxes and marketing charges as a result of the decrease

in oil and gas revenues offset by an increase in lease operating expense on non-operated wells in New Mexico.

Depreciation,

depletion and amortization.

Depreciation, depletion and amortization expense was $868,366 for the six months ended September 30,

2023, a 13% increase from $771,507 for the six months ended September 30, 2022, primarily due to an increase in oil and gas production

and a decrease in reserves.

and administrative expenses.

General and administrative expenses were $646,512 for the six months ended September 30, 2023, a 10%

increase from $588,199 for the six months ended September 30, 2022.

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

and engineering services.

Federal income tax for the six months ended September 30, 2023 was $149,862.

There was no federal income tax expense for the

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

State income tax was $46,164 for the

six months ended September 30, 2023, a 13% decrease from $53,250 for the six months ended September 30, 2022 due to the decrease in oil

and natural gas sales in the State of New Mexico.

The effective tax rate for the six months ended September 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