What changed in this filing

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Item 2. Management’s Discussion and Analysis

2024-11-07 compared with 2024-08-08 · 127 added, 89 removed, 102 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.

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We focus our efforts on the acquisition of royalty and working

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

June 30, 2024, we had working capital of $3,038,700 compared to working capital of $3,259,200 at March 31, 2024, a decrease of $220,500

for the reasons set forth below.

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

September 30, 2024, we had working capital of $1,974,033 compared to working capital of $3,259,200 at March 31, 2024, a decrease of $1,285,167 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 Three Months Ended

Net cash provided by operating activities

the Six Months Ended September 30,

Net cash provided by operating

Net cash used in investing activities

$ (2,066,957 )

$ (1,544,299 )

Net cash used in financing activities

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account balances.

Cash flow provided by our operating activities for the three months ended June 30, 2024 was $1,078,614 in comparison

to $1,616,195 for the three months ended June 30, 2023.

This decrease of $537,581 in our cash flow from operating activities consisted

Cash flow provided by our operating activities for the six months ended September 30, 2024 was $2,006,405 in comparison

to $2,430,364 for the six months ended September 30, 2023.

This decrease of $423,959 in our cash flow operating activities consisted

of an increase in our non-cash expenses of $216,282;

a decrease in our accounts receivable of $483,411;

an increase of $41,668 in our

a decrease of $20,176 in our

accounts payable and accrued expenses;

a decrease of $14,068 in deferred income tax expense;

and, a decrease in our net income for the

current quarter of $174,575.

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

and, a decrease in our net income of $126,810.

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.

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

For the three months ended June 30, 2024, we had net cash of $517,387 used for additions to oil and gas properties and a $200,000 investment

in a limited liability company compared to $264,091 for the three months ended June 30, 2023.

For the six months ended September 30, 2024, we had net cash of $2,066,957 used for additions to oil and gas properties compared to $1,544,299

for the six months ended September 30, 2023.

Flow Provided by Financing Activities.

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account balances.

Net cash flow used in our financing activities was $319,996 for the three months ended June 30, 2024 compared to cash

flow provided by our financing activities of $211,388 for the three months ended June 30, 2023.

During the three months ended June 30,

2024, we expended $209,000 to pay the regular annual dividend, expended $188,637 to purchase 13,766 shares of our stock for the treasury

account, and received proceeds of $77,641 from the exercise of employee stock options.

During the three months ended June 30, 2023, we

expended $213,600 to pay the special dividend.

net cash increased $41,231, leaving cash and cash equivalents on hand of $2,514,715 as of June 30, 2024.

Net cash flow used in our financing activities was $834,575 for the six months ended September 30, 2024 compared to

cash flow provided by our financing activities of $536,644 for the six months ended September 30, 2023.

During the six months ended September

30, 2024, we expended $209,000 to pay the special dividend and $703,216 to purchase 57,766 shares of our stock for the treasury account

and received $77,641 from the exercise of stock options.

net cash decreased $895,127, leaving cash and cash equivalents on hand of $1,578,357 as of September 30, 2024.

and Natural Gas Property Development

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of the Delaware Basin in Lea County, New Mexico.

April 2024, Mexco expended approximately $127,800 to drill four horizontal wells in the Wolfcamp Sand formation of the Delaware Basin

in Lea County, New Mexico.

Subsequently, in October 2024, the Company expended approximately $127,000 to complete

the first six months of fiscal 2025, Mexco expended approximately $293,000 to drill and complete four horizontal wells in the Wolfcamp

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

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

of which $1,000,000 has been funded as of June 30, 2024.

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 2024, the Company funded another

$200,000 toward this investment.

To date, this LLC has returned $98,637 or 8% of the total investment.

of which $1,200,000 has been funded as of September 30, 2024.

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.

To date, this LLC has returned $137,076 or 11% of

the total investment.

of Wells Drilled in Fiscal 2024.

The Company also expects to expend approximately $300,000 in the completion of 19 horizontal wells

in which the Company participated during fiscal 2024.

Company expended approximately $90,000 for the completion costs of two horizontial wells in the Bone Spring Sand formation of the Delaware

The Company expended approximately $300,000 for the completion of 19 horizontal wells in which the

Company participated during fiscal 2024.

Company expended approximately $107,000 for the completion costs of two horizontal wells in the Bone Spring Sand formation of the Delaware

Basin in Lea County, New Mexico that the Company participated in drilling during fiscal 2024.

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wells is .53%.

Subsequently, in July 2024, these wells were completed with initial average production rates of 1,402 barrels of oil,

2,009 barrels of water and 2,168,000 cubic feet of gas per day, or 1,763 BOE per day.

In July 2024, these wells were completed with initial average production rates of 1,402 barrels of oil, 2,009 barrels

of water and 2,168,000 cubic feet of gas per day, or 1,763 BOE per day.

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

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Mexco’s working interest in this well is .165%.

Subsequently,

in July 2024, the Company expended approximately $21,000 for the completion costs of four horizontial wells in the Bone Spring Sand formation

of the Delaware Basin in Lea County, New Mexico that the Company participated in drilling during fiscal 2024.

Mexco’s working interest

in these wells is .45%.

May 2024, Mexco expended approximately $27,000 for additional drilling costs in an exploratory well in the Fusselman Formation of Irion

County, Texas.

This well was later determined to be noncommercial and will be plugged and abandoned.

Company expended approximately $207,000 for the completion costs of four horizontial wells in the Bone Spring Sand formation of the Delaware

Basin in Lea County, New Mexico that the Company participated in drilling during fiscal 2024.

Mexco’s working interest in these

wells is .45%.

Subsequently, in October 2024, these wells were completed with initial average production rates of 893 barrels of oil,

2,990 barrels of water and 1,161,000 cubic feet of gas per day, or 1,087 BOE per day.

Acquisitions.

In April 2024, the Company acquired small royalty (mineral) interests in 21 wells operated by Anadarko Petroleum Corporation and

Cimarex Energy Company and located in Reeves County, Texas for a purchase price of $158,000.

In April 2024, the Company acquired royalty interests in 21 producing wells operated by Anadarko Petroleum Corporation and Cimarex

Energy Company and located in Reeves County, Texas for a purchase price of $158,000.

August 2024, the Company acquired royalty interests in 6 producing wells operated by Marathon Oil and located in Karnes County, Texas

for a purchase price of $50,000;

royalty interests in 15 producing wells operated by Anadarko Petroleum Corporation and located in Weld

County, Colorado for a purchase price of $118,000;

and, royalty interests in approximately 250 producing wells operated by Samson Exploration,

EOG Resources and others in Laramie County, Wyoming and Adams and Weld Counties, Colorado for a purchase price of $483,000.

acquisitions were effective September 1, 2024.

September 2024, the Company acquired royalty interests in 20 producing wells operated by Marathon Oil and Murphy Exploration and located

in Karnes County, Texas for a purchase price of $90,000 and effective August 1, 2024.

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

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For example, in the last twelve months, the NYMEX

West Texas Intermediate (“WTI”) posted price for crude oil has ranged from a low of $64.59 per bbl in December 2023 to a

high 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 $1.25 per MMBtu in March 2024 to a high of $3.34 per MMBtu in October 2023.

June 30, 2024, the WTI posted price for crude oil was $77.52 and the Henry Hub spot price for natural gas was $2.42 per MMBtu.

of Operations below for realized prices.

West Texas Intermediate (“WTI”) posted price for crude oil has ranged from a low of $61.73 per bbl in September 2024 to a

high of $86.77 per bbl in October 2023.

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

of $1.25 per MMBtu in March 2024 to a high of $3.34 per MMBtu in October 2023.

September 30, 2024, the WTI posted price for crude oil was $64.15 and the Henry Hub spot price for natural gas was $2.65 per MMBtu.

Results of Operations below for realized prices.

Pipeline capacity constraints and maintenance in the Permian Basin area has contributed

to a wider difference between the WaHa Hub and the Henry Hub and at times prices were negative.

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, 2024:

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 September 30, 2024:

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, extended another 36 months to July 31, 2024 and extended another 36 to July 31, 2027.

Of this total obligation

for the remainder of the lease, our majority shareholder will pay $10,625 less than 1 year and $21,198 1-3 years for his portion

of the shared office space.

of Operations – Three Months Ended June 30, 2024 Compared to Three Months Ended June 30, 2023.

For the quarter ended June 30,

2024, net income was $291,039 compared to net income of $465,614 for the quarter ended June 30, 2023.

This was primarily the result of

a decrease in operating revenues and an increase in operating expenses, which is further explained below.

The lease amount represents

the monthly rent amount for our principal office space in Midland, Texas under a 36-month lease agreement expiring July 31, 2027.

this total obligation for the remainder of the lease, our majority shareholder will pay $10,175 less than 1 year and $18,354 1-3 years

for his portion of the shared office space.

of Operations – Three Months Ended September 30, 2024 Compared to Three Months Ended September 30, 2023.

There was net income

of $317,198 for the quarter ended September 30, 2024 compared to net income of $269,433 for the quarter ended September 30, 2023.

was a result of an increase in oil and gas revenues partially offset by an increase in operating expense that is further explained below.

and gas sales.

Revenue from oil and gas sales was $1,688,056 for the quarter ended June 30, 2024, a 2% decrease from $1,715,090 for

the quarter ended June 30, 2023.

This primarily resulted from a decrease in oil and gas production and a decrease in gas prices partially

offset by an increase in oil prices.

Revenue from oil and gas sales was $1,695,853 for the second quarter of fiscal 2025, a 23% increase from $1,380,710

for the same period of fiscal 2024.

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

The decrease in the natural gas price was, in part, due to temporary pipeline constraints on certain properties and at certain times,

prices were negative.

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

during the three months ended September 30:

Volume (bbls)

Average Price (per bbl)

Average Price (per mcf)

and exploration.

Production costs were $413,405 for the second quarter of fiscal 2025, a 5% increase from $392,674 for the same period

of fiscal 2024.

This is the result of an increase in production taxes and marketing charges as a result of the increase in oil revenues and an increase in lease operating expense on new wells in which we own a working interest.

Depreciation,

depletion and amortization.

Depreciation, depletion and amortization expense was $584,288 for the second quarter of fiscal 2025,

a 53% increase from $382,180 for the same period of fiscal 2024, primarily due to a an increase in the full cost pool amortization base,

an increase in oil and gas production and a decrease in gas reserves partially offset by an increase in oil reserves.

and administrative expenses.

General and administrative expenses were $334,525 for the second quarter of fiscal 2025, a 9%

increase from $305,543 for the same period of fiscal 2024.

This was primarily due to an increase in accounting fees and contract

Federal income tax for the three months ended September 30, 2024 was $84,833.

Federal income tax for the three months ended

September 30, 2023 was $61,179.

State income tax was $26,920 for the three months ended September 30, 2024, a 102% increase from $13,346

for the three months ended September 30, 2023 due to the increase in oil and natural gas sales in the State of New Mexico and the acquired

properties in the State of Colorado.

The effective tax rate for the three months ended September 30, 2024 and 2023 was 26% and 22%, respectively.

of Operations – Six Months Ended September 30, 2024 Compared to Six Months Ended September 30, 2023.

For the six months ended

September 30, 2024, there was net income of $608,237 compared to net income of $735,047 for the six months ended September 30, 2023.

This was a result of an increase in operating revenues partially offset by an increase in operating expenses that is further explained

and gas sales.

Revenue from oil and gas sales was $3,383,909 for the six months ended September 30, 2024, a 9% increase from $3,095,800

for the same period of fiscal 2024.

This resulted from an increase in oil and gas production and an increase in oil prices partially

offset by a decrease gas prices.

The decrease in the natural gas price was, in part, due to temporary pipeline constraints on certain

1 unchanged sentence

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

and average prices received during the three months ended June 30:

and average prices received during the six months ended September 30:

Volume (bbls)

2 unchanged sentences

and exploration.

Production costs were $437,420 for the three months ended June 30, 2024, a 25% increase from $349,407 for the three

months ended June 30, 2023.

This increase is primarily the result of an increase in gathering, processing and transportation expenses

as well as lease operating expenses on new wells in which we own a working interest.

Production costs were $850,825 for the six months ended September 30, 2024, a 15% increase from $742,081 for the

six months ended September 30, 2023.

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

in oil and gas revenues and an increase in lease operating expense on new wells in which we own an interest.

Depreciation,

depletion and amortization.

Depreciation, depletion and amortization (“DD&A”) expense was $539,697 for the first

quarter of fiscal 2025, an 11% increase from $486,186 for the first quarter of fiscal 2024, primarily due to a decrease in gas reserves

and an increase in the full cost pool amortization base partially offset by a decrease in oil and gas production volumes and an increase

Depreciation, depletion and amortization expense was $1,123,985 for the six months ended September 30,

2024, a 29% increase from $868,366 for the six months ended September 30, 2023, primarily due to an increase in the full cost pool amortization

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

and administrative expenses.

General and administrative expenses were $367,045 for the three months ended June 30, 2024, an 8% increase

from $340,969 for the three months ended June 30, 2023.

This was primarily due to an increase in engineering and contract services.

Interest expense, which consisted of debt issuance costs, was $1,083 for the first quarter of fiscal 2025, an increase of

0.2% from $1,081 for the first quarter of fiscal 2024.

Federal income tax for the three months ended June 30, 2024 was $86,520.

Federal income tax for the three months ended June

General and administrative expenses were $701,570 for the six months ended September 30, 2024, a 9%

increase from $646,512 for the six months ended September 30, 2023.

This was primarily due to an increase in accounting fess

and contract and engineering services.

Federal income tax for the six months ended September 30, 2024 was $171,353.

Federal income tax for the six months ended September

30, 2023 was $149,862.

State income tax was $20,066 for the three months ended June 30, 2024, a 39% decrease from $32,818 for the three

months ended June 30, 2023 due to the decrease in oil and natural gas sales in the State of New Mexico.

The effective tax rate for state

and federal taxes combined for the three months ended June 30, 2024 and 2023 was 27% and 21%, respectively.

State income tax was $46,986 for the six months ended September 30, 2024, a 2% increase from $46,164 for the six

months ended September 30, 2023 due to the increase in oil and natural gas sales in the states that have state income tax.

The effective

tax rate for the six months ended September 30, 2024 and 2023 was 26% and 21%, 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