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Item 2. Properties

2026-06-29 compared with 2025-06-27 · 113 added, 126 removed, 54 unchanged (82% of the section changed)

properties consist primarily of oil and gas wells and our ownership in leasehold acreage, both developed and undeveloped.

31, 2025, we had interests in approximately 7,500 gross (26.4 net) producing oil and gas wells and owned leasehold mineral, royalty and

other interests in approximately 662,000 gross (2,712 net) acres.

properties consist primarily of oil and gas wells and ownership interests in leasehold acreage, both developed and undeveloped.

of March 31, 2026, we had interests in approximately 8,100 gross (26.1 net) producing oil and gas wells and owned leasehold mineral,

royalty and other interests in approximately 705,000 gross (2,697 net) acres.

and Natural Gas Reserves

accordance with current SEC rules, the average prices used in computing reserves at March 31, 2026 were $62.76 per bbl of oil compared

to $76.88 in 2024, a decrease of 4%, and $2.14 per mcf of natural gas compared to $2.75 in 2024, a decrease of 22%, such prices are based

on the 12-month unweighted arithmetic average market prices for sales of oil and natural gas on the first calendar day of each month

during fiscal 2025.

The benchmark price of $71.00 per bbl of oil at March 31, 2025 versus $73.96 at March 31, 2024, was adjusted by lease

for gravity, transportation fees and market differentials and did not give effect to derivative transactions.

to $73.79 in 2025, a decrease of 15%, and $2.24 per mcf of natural gas compared to $2.14 in 2025, an increase of 5%.

These prices are

based on the 12-month unweighted arithmetic average of the first-day-of-the-month market prices for oil and natural gas sales during

The benchmark price of $59.79 per bbl of oil at March 31, 2026 versus $71.00 at March 31, 2025, was adjusted by lease for

gravity, transportation fees and market differentials and did not give effect to derivative transactions.

The benchmark price of $3.72

$2.44 per mcf of natural gas at March 31, 2025 versus $2.45 at March 31, 2024, was adjusted by lease for BTU content, transportation

fees and market differentials.

per mcf of natural gas at March 31, 2026 versus $2.44 at March 31, 2025, was adjusted by lease for BTU content, transportation fees and

market differentials.

information concerning our costs incurred for oil and gas operations, net revenues from oil and gas production, estimated future net

revenues attributable to our oil and gas reserves, present value of future net revenues discounted at 10% and changes therein, see Notes

to the Company’s consolidated financial statements.

reserves are estimated reserves of crude oil (including condensate) and natural gas that geological and engineering

data demonstrate with reasonable certainty to be recoverable in future years from known reservoirs under existing economic and operating

Proved developed reserves are those expected to be recovered through existing wells, equipment and operating methods.

undeveloped reserves are proved reserves that are expected to be recovered from new wells drilled to known reservoirs on undrilled acreage

for which the existence and recoverability of such reserves can be estimated with reasonable certainty, or from existing wells on which

a relatively major expenditure is required to establish production.

engineering report with respect to Mexco’s estimates of proved oil and gas reserves as of March 31, 2025 and 2024 is based on evaluations

prepared by Russell K.

Hall and Associates, Inc.

Environmental Engineering Consultants, based in Midland, Texas (“Hall and Associates”),

a summary of which is filed as Exhibit 99.1 to this annual report.

maintains internal controls designed to provide reasonable assurance that the estimates of proved reserves are computed and reported

in accordance with rules and regulations provided by the SEC.

As stated above, Mexco retained Hall and Associates to prepare estimates

of our oil and gas reserves.

Management works closely with this firm, and is responsible for providing accurate operating and technical

Our Chief Financial Officer who has over 30 years experience in the oil and gas industry reviews the final reserves estimate

and consults with a degreed geological consultant with extensive geological experience and if necessary, discusses the process used and

findings with Alan Neal, the technical person at Hall and Associates responsible for evaluating the proved reserves covered by this report.

Neal is a member of the Society of Petroleum Engineers and has over 40 years of experience in the oil and gas industry.

and Chief Executive Officer who has over 50 years of experience in the oil and gas industry also reviews the final reserves estimate.

uncertainties exist in estimating quantities of proved reserves.

Reserve estimates are imprecise and subjective and may change at any

time as additional information becomes available.

Furthermore, estimates of oil and gas reserves are projections based on engineering

There are uncertainties inherent in the interpretation of this data as well as the projection of future rates of production.

accuracy of any reserve estimate is a function of the quality of available data and of engineering and geological interpretation.

future production, oil and gas prices, revenues, taxes, development expenditures, operating expenses and quantities of recoverable oil

and gas reserves will most likely vary from the assumptions and estimates.

Any significant variance could materially affect the estimated

quantities and value of our oil and gas reserves, which in turn may adversely affect our cash flow, results of operations and the availability

of capital resources.

the current SEC rules, the prices used to calculate our proved reserves and the present value of proved reserves set forth herein are

made using the 12-month unweighted arithmetic average of the first-day-of-the-month price.

All prices are held constant throughout the

life of the properties.

Actual future prices and costs may be materially higher or lower than those as of the date of the estimate.

timing of both the production and the expenses with respect to the development and production of oil and gas properties will affect the

timing of future net cash flows from proved reserves and their present value.

Except to the extent that we acquire additional properties

containing proved reserves or conduct successful exploration and development activities, or both, our proved reserves will decline as

reserves are produced.

revenues attributable to our oil and gas reserves, the present value of future net revenues discounted at 10%, and related changes, see

the Notes to the Company’s consolidated financial statements.

oil and natural gas reserves are those quantities of oil and gas that, by analysis of geoscience and engineering data, can be estimated

with reasonable certainty to be economically producible under existing economic and operating conditions.

Proved developed reserves are

those expected to be recovered from existing wells, equipment, and operating methods.

Proved undeveloped reserves are those expected

to be recovered from new wells on undrilled acreage or from existing wells requiring significant additional investment to establish production.

proved reserves as of March 31, 2026 and 2025 were prepared by Russell K.

Hall and Associates, Inc., Environmental Engineering Consultants

(“Hall and Associates”), an independent petroleum engineering firm located in Midland, Texas.

A summary of their report is

filed as Exhibit 99.1 to this Annual Report.

is responsible for providing accurate technical and operating data to Hall and Associates and for maintaining internal controls over

the reserve estimation process to provide reasonable assurance that proved reserve estimates are calculated in accordance with SEC rules.

Our Chief Financial Officer reviews the final reserves estimate and consults with Alan Neal, the representative at Hall and Associates

responsible for evaluating the proved reserves covered by this report.

Our Chairman and Chief Executive Officer also reviews the final

reserves report.

of proved reserves are inherently imprecise and subject to change as additional data becomes available.

These estimates are based on

engineering and geological interpretation and require assumptions regarding production rates, future development costs, operating expenses,

and commodity prices.

Actual results will vary from these estimates, and such variances could be material and may adversely affect future

cash flows, results of operations, and capital resources.

accordance with SEC rules, reserve estimates and related present value calculations use the 12-month unweighted arithmetic average of

the first-day-of-the-month prices for oil and natural gas.

Prices are held constant over the economic life of the properties.

future prices and costs may differ materially from those used in these estimates.

Unless replaced through acquisitions, successful exploration,

or development activities, proved reserves will decline as production occurs.

estimated proved oil and gas reserves and present value of estimated future net revenues from proved oil and gas reserves in the periods

7 unchanged sentences

Proved undeveloped

Total net proved reserves (BOE) (1)

net proved reserves (BOE) (1)

PV-10 Value (2)

Present value of future income tax discounted at 10%

Standardized measure of discounted future net cash flows (3)

Present value of future

income tax discounted at 10%

measure of discounted future net cash flows (3)

Prices used in calculating reserves:

1 unchanged sentence

Oil (per Bbl)

These reserve

estimates do not include the Company’s interest in two LLCs referred to in Item 1.

Business – Company Profile on page

The PV-10 Value represents

the discounted future net cash flows attributable to our proved oil and gas reserves before income tax, discounted at 10% per annum,

which is the most directly comparable GAAP financial measure.

PV-10 is relevant and useful to investors because it presents the discounted

future net cash flows attributable to our estimated net proved reserves prior to taking into account future corporate income taxes.

Further, investors may utilize the measure as a basis for comparison of the relative size and value of our reserves to other companies.

We use this measure when assessing the potential return on investment related to our oil and natural gas properties.

Our reconciliation

of this non-GAAP financial measure is shown in the table as the PV-10, less future income taxes, discounted at 10% per annum, resulting

in the standardized measure of discounted future net cash flows.

The standardized measure of discounted future net cash flows represents

the present value of future cash flows attributable to our proved oil and natural gas reserves after income tax, discounted at 10%.

In accordance with SEC

requirement, the standardized measure of discounted future net cash flows was computed by applying 12-month first day of the month

average prices for oil and gas during the fiscal year to the estimated future production of proved oil and gas reserves, less estimated

future expenditures (based on year-end costs) to be incurred in developing and producing the proved reserves, less estimated future

income tax expenses (based on year-end statutory tax rates, with consideration of future tax rates already legislated) to be incurred

on pretax net cash flows less tax basis of the properties and available credits, and assuming continuation of existing economic conditions.

These prices reflect adjustment

by lease for quality, transportation fees and market differentials.

fiscal 2025, we added proved reserves of 101 thousand BOE (“MBOE”) through extensions and discoveries, added 77 MBOE through

acquisitions, subtracted 145 MBOE for downward revisions of previous estimates.

Such downward revisions are primarily attributable to

reserves written off due to the five-year limitation and the change in the timing of new development.

The reserves written off were primarily

in Lea County, New Mexico due to a change in the timing of development in wells in which we own a working interest.

These interests are

held by production and still in place to be developed in the future.

reserve estimates do not include the Company’s interest in two LLCs referred to in

Business – Company Profile.

represents the present value of estimated future net cash flows attributable to our proved

oil and natural gas reserves, before income taxes, discounted at 10% per annum.

a non-GAAP financial measure.

It is relevant to investors because it provides a standardized

basis for comparing the relative size and value of proved reserves across companies and excludes

the impact of future income taxes.

We use PV-10 internally to evaluate the economic attractiveness

of our oil and natural gas properties.

The standardized measure of discounted future net

cash flows is derived from PV-10 after deducting estimated future income taxes.

accordance with SEC requirements, the standardized measure of discounted future net cash

flows is calculated using 12-month average first-day-of-the-month prices for oil and natural

Future cash flows are estimated based on expected production from proved reserves, reduced

by estimated future development and production costs (based on year-end costs) and estimated

future income taxes (based on year-end statutory tax rates, including consideration of enacted

future rate changes and available tax attributes).

All calculations assume continuation of

existing economic conditions and constant prices and costs over the life of the reserves.

prices reflect adjustments by lease for quality, transportation fees, and market differentials.

During fiscal 2026, we added proved reserves of 247 thousand BOE (“MBOE”) through extensions and discoveries, added 39 MBOE

through acquisitions, and added 53 MBOE for upward revisions of previous estimates.

Such upward revisions are primarily attributable to

improved well performance, revisions to estimated future recoveries based on additional production history, and changes in the timing

of future development activities.

The reduction in proved undeveloped reserves was primarily attributable to properties in Lea County,

New Mexico, due to changes in the timing of future development in wells in which we own a working interest.

These interests are held by

production and remain in place for future development.

the fiscal year ending March 31, 2026, we had a working or royalty interest in the development of 25 wells, converting reserves of approximately

48,000 BOE from proved undeveloped to proved developed – producing with a capital cost of approximately $119,000.

and gas prices significantly impact the calculation of the PV-10 and the standardized measure of discounted future net cash flows.

present value of future net cash flows does not purport to be an estimate of the fair market value of the Company’s proved reserves.

An estimate of fair value would also take into account, among other things, anticipated changes in future prices and costs, the expected

recovery of reserves in excess of proved reserves and a discount factor more representative of the time value of money and the risks

inherent in producing oil and gas.

Future prices received for production and costs may vary, perhaps significantly, from the prices and

costs assumed for purposes of these estimates.

The 10% discount factor used to calculate present value, which is required by Financial

Accounting Standards Board (“FASB”) Accounting Standard Codification (“ASC”) 932, “Extractive Activities

– Oil and Gas”, may not necessarily be the most appropriate discount rate.

The present value, no matter what discount rate

is used, is materially affected by assumptions as to timing of future production, which may prove to be inaccurate.

and natural gas prices significantly impact the calculation of PV-10 and the standardized measure of discounted future net cash flows.

These measures do not represent an estimate of the fair value of the Company’s proved reserves.

Any estimate of fair value would

also consider, among other factors, expected changes in future prices and costs, recovery of reserves beyond proved reserves, and a discount

rate more reflective of the time value of money and associated risks.

prices and costs may differ materially from those used in these estimates.

The 10% discount rate required by Financial Accounting Standards

Board (“FASB”) Accounting Standards Codification (“ASC”) 932, Extractive Activities—Oil and Gas ,

may not be the most appropriate rate for all purposes.

In addition, the present value calculations are highly sensitive to assumptions

regarding the timing of future production, which may prove inaccurate.

have not filed any other oil or gas reserve estimates or included any such estimates in reports to other federal or foreign governmental

2 unchanged sentences

following table sets forth our drilling activity in wells in which we own a working interest for the years ended March 31:

Year Ended March 31,

Ended March 31,

Exploratory Wells

Beginning wells in progress

Successful wells

Ending wells in progress

wells in progress

Development Wells

Beginning wells in progress

Successful wells

Ending wells in progress

wells in progress

information contained in the foregoing table should not be considered indicative of future drilling performance, nor should it be assumed

3 unchanged sentences

and royalties at no expense to the Company.

We expect the production of our mineral interests will increase as operators continue to

drill, complete, and develop our acreage.

We expect to capitalize on this development, which requires no capital expenditure funding

from us and believe the anticipated aggregate royalty receipts will enable us to grow our cash flows.

A number of the horizontal wells

in which the Company participates involve longer lateral which are more efficient and have greater estimated ultimate recovery.

We expect production from our mineral interests to increase as operators continue to drill,

complete, and develop our acreage.

We expect to capitalize on this development, which requires no capital expenditure funding from us,

and believe the anticipated aggregate royalty receipts will enable us to grow our cash flows.

A number of the horizontal wells in which

the Company participates involve longer laterals that are more efficient and have greater estimated ultimate recovery.

Wells and Acreage

15 unchanged sentences

for the years ended March 31:

Years Ended March 31,

Production (Bbls)

Average Bbls per day (d)

Average sales price per Bbl

Ended March 31,

Average Bbls per day

Average sales price

Production (Mcf)

Average Mcf per day (d)

Average sales price per Mcf

Average Mcf per day

Average sales price

Total BOE (c)

1 unchanged sentence

Production expenses:

Production expenses per BOE

Production expenses per sales dollar

Production and ad valorem taxes:

Production and ad valorem taxes per BOE

Production and ad valorem taxes per sales dollar

Production expenses

per sales dollar

Production and ad valorem

taxes per BOE

Production and ad valorem

taxes per sales dollar

Total oil and gas revenue

Includes natural gas

Natural gas production

is converted to oil production using a ratio of six Mcf to one Bbl of oil.

Calculated on a 365-day

Includes condensate.

Includes natural gas liquids.

Natural gas production is

converted to oil production at a ratio of six Mcf to one Bbl of oil.

Calculated on a 365-day year.

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 2. Properties