What changed in this filing

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Item 2. Management’s Discussion and Analysis

2025-08-12 compared with 2025-02-07 · 106 added, 208 removed, 82 unchanged (79% of the section changed)

18 unchanged sentences

our future financial condition or results of operations;

and our business strategy and other plans and objectives

our business strategy and other plans;

and, objectives

for future operations.

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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.

Historically, we have funded our operations, acquisitions, exploration and development expenditures from cash

generated by operating activities, bank borrowings, sales of non-core properties and issuance of common stock.

Historically, we have funded our operations, acquisitions, exploration, and development expenditures from

cash generated by operating activities, bank borrowings, sales of non-core properties and issuance of common stock.

Our primary financial

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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, 2024, we had working capital of $1,469,195 compared to working capital of $3,259,200 at March 31, 2024, a decrease of $1,790,005

for the reasons set forth below.

We focus our efforts on the acquisition of royalty and working

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

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

For the Three Months Ended

Net cash provided by operating activities

Net cash used in investing activities

$ (3,670,019 )

$ (1,365,030 )

Net cash used in financing activities

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account balances.

Cash flow provided by our operating activities for the nine months ended December 31, 2024 was $2,941,115 in comparison

to $3,374,717 for the nine months ended December 31, 2023.

This decrease of $433,602 in our cash flow operating activities consisted

of an increase in our accounts receivable of $529,751;

an increase of $106,391 of our accounts payable and accrued expenses and income

and, a decrease in our net income for the current nine months of $3,287.

Cash flow provided by our operating activities for the three months ended June 30, 2025 was $1,363,277 in comparison

to $1,078,614 for the three months ended June 30, 2024.

This increase of $284,663 in our cash flow from operating activities consisted

of an increase in our non-cash expenses of $21,304;

a decrease in our accounts receivable of $211,775;

a increase of $92,998 in our payables

and accrued expenses;

and, a decrease in our net income for the current quarter of $49,088.

Variations in cash flow from operating activities

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

also consist of employee compensation, accounting, insurance and other general and administrative expenses that we have incurred in order

to address normal and necessary business activities of a public company in the crude oil and natural gas production industry.

also consist of employee compensation, accounting, insurance, and other general and administrative expenses that we have incurred in

order to address normal and necessary business activities of a public company in the crude oil and natural gas production industry.

Flow Used in Investing Activities.

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

For the nine months ended December 31, 2024, we had net cash of $3,670,019 used for additions to oil and gas properties compared to $1,365,030

for the nine months ended December 31, 2023.

Flow Provided by Financing Activities.

Cash flow from financing activities is derived from our changes in long-term debt and in equity

account balances.

Net cash flow used in our financing activities was $834,575 for the nine months ended December 31, 2024 compared to

cash flow used in our financing activities of $666,520 for the nine months ended December 31, 2023.

During the nine months ended December

31, 2024, we expended $209,000 to pay the regular annual 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 $1,563,479, leaving cash and cash equivalents on hand of $910,005 as of December 31, 2024.

For the three months ended June 30, 2025, we had net cash of $365,910 used for additions to oil and gas properties compared to $517,387

and a $200,000 investment in a limited liability company for the three months ended June 30, 2024.

Flow Used in Financing Activities.

Cash flow from financing activities is derived from our changes in long-term debt and in

equity account balances.

Net cash flow used in our financing activities was $204,600 for the three months ended June 30, 2025

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

During the three

months ended June 30, 2025, we expended $204,600 to pay the regular annual dividend.

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.

net cash increased $792,767, leaving cash and cash equivalents on hand of $2,546,722 as of June 30, 2025.

June 30, 2025, we had working capital of $2,922,683 compared to working capital of $2,469,664 at March 31, 2025, an increase of $453,019

for the reasons set forth below.

and Natural Gas Property Development

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an estimated cost of approximately $1,100,000 for the fiscal year ending March 31, 2026.

Twenty-five of these wells are in the Delaware

Thirty-four of these wells are in the Delaware

Basin located in the western portion of the Permian Basin in Lea and Eddy Counties, New Mexico.

The remaining 3 wells are in Grady County,

the first nine months of fiscal 2025, Mexco expended approximately $207,000 to participate in the drilling of five horizontal wells in

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

In November 2024, these wells were completed with initial

average production rates of 1,106 barrels of oil, 2,583 barrels of water and 1,165,000 cubic feet of gas per day, or 1,300 BOE per day.

the first nine 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.

In November 2024, these wells were completed with initial average production

rates of 1,089 barrels of oil, 4,716 barrels of water and 3,601,000 cubic feet of gas per day, or 1,689 BOE per day.

October 2024, the Company expended approximately $74,000 for the drilling of two horizontal wells in the Bone Spring Sand formation of

the Delaware Basin in Lea County, New Mexico.

The remaining well is in Reagan County,

June 2025, Mexco expended approximately $116,000 to participate in the drilling of five horizontal wells in the Bone Spring formation

of the Delaware Basin in Eddy County, New Mexico.

Mexco’s working interest in these wells is .5%.

Subsequently, in January 2025, the

Company expended approximately $43,000 to complete these wells.

November 2024, the Company expended approximately $78,000 for the drilling of two horizontal wells in the Penn Shale formation of the

Delaware Basin in Lea County, New Mexico.

Mexco’s average working interest in these wells is .5%.

June 2025, Mexco expended approximately $79,000 to drill and complete three horizontal wells in the Bone Spring formation of the Delaware

Basin in Lea County, New Mexico.

Subsequently, in August 2025, these wells were completed with initial average production rates of 741

barrels of oil, 3,276 barrels of water, and 1,110 cubic feet of gas per day, or 926 BOE per day.

Mexco’s working interest in these

wells is .3%.

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

of which $1,600,000 has been funded as of December 31, 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 $182,767 or 11% of

the total investment.

of which $1,800,000 has been funded as of June 30, 2025.

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 2025, the Company funded the

remaining $200,000 toward this investment.

To date, this LLC has returned $303,164 or 15% of the total investment.

of Wells Drilled in Fiscal 2025.

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

The Company also expects to expend approximately $150,000 for the completion of 17 horizontal wells

in which the Company participated during fiscal 2025.

Company expended approximately $85,000 for the completion costs of six 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 2025.

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wells is .16%.

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

during fiscal 2024 were completed in April 2024 with initial average production rates of 732 barrels of oil, 1,481 barrels of water and

657,000 cubic feet of gas per day, or 842 of oil equivalent per day.

horizontal wells in the Penn Shale formation of the Delaware Basin in Lea County, New Mexico in which the Company participated during

fiscal 2025 were completed in June 2025 with initial average production rates of 676 barrels of oil, 1,899 barrels of water, and 729,000

cubic feet of gas per day, or 798 BOE per day.

Mexco’s working interest in these wells is approximately .5%.

horizontal well in the Penn Shale formation of the Delaware Basin in Lea County, New Mexico was completed in May 2024 with the initial

production rate of 964 barrels of oil, 2,441 barrels of water and 626,000 cubic feet of gas per day, or 1,068 of oil equivalent per day.

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

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%.

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.

Subsequently,

in July 2025, the Company expended approximately $53,000 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 2025.

Mexco’s working interest

in these wells is .28%.

Acquisitions.

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.

This acquisition was effective August 1, 2024.

August 2024, the Company acquired 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.

October 2024, the Company acquired a .3% royalty interest in 15 producing wells operated by Civitas Resources, Inc.

and located in Broomfield

and Adams Counties, Colorado for a purchase price of $450,000.

This acquisition was effective November 1, 2024.

October 2024, the Company acquired a .5% royalty interest in 3 producing wells operated by Mewbourne Oil Company and located in Eddy

County, New Mexico for a purchase price of $260,000.

This acquisition was effective November 1, 2024 and includes acreage for further

October 2024, the Company acquired royalty interests in 8 producing wells operated by Marathon Oil and located in Live Oak County, Texas

In May 2025, the Company acquired royalty (mineral) interests in 2 wells operated by Chevron USA and located in Pecos County, Texas

for a purchase price of $40,000.

royalty interests in 6 producing wells operated by SWN Production Company, LLC and located in DeSoto

Parish, Louisiana for a purchase price of $25,000;

royalty interests in 10 producing wells operated by Ovintiv, Inc.

and located in Upton

County, Texas for a purchase price of $65,000;

and, royalty interests in 12 producing wells operated by Pioneer Natural Resources and

located in Reagan and Upton Counties, Texas for a purchase price of $65,000.

All of these acquisitions were effective November 1, 2024.

in October 2024 and effective November 1, 2024, the Company acquired various small royalty interests in over 300 producing wells operated

by Petro-Hunt Corporation, Hess Bakken Investments II, LLC, Marathon Oil, WPX Energy and others in multiple counties throughout the states

of Nebraska, North Dakota, South Dakota and Montana for a purchase price of $185,000.

This acquisition was effective April 1, 2025 and includes acreage for future development.

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

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

of Properties.

In November 2024, the Company conveyed its working and royalty interests in 13.5 net acres in Ward County, Texas.

The Company received $15,000 per acre in the total amount of $202,500.

The Company retained an overriding royalty interest equal to the

positive difference between 25% and any existing burdens of record as of the effective date.

The divestitures of this non-core oil and

gas asset did not result in a significant alteration of the relationship between the Company’s capitalized costs and proved reserves

and, accordingly, the Company recorded the proceeds as sales proceeds, a reduction of its full cost pool, with no gain or loss recognized

Crude 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 $61.73 per bbl in September

2024 to a high of $82.89 per bbl in April 2024.

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

from a low of $1.21 per MMBtu in November 2024 to a high of $3.40 per MMBtu in December 2024.

December 31, 2024, the WTI posted price for crude oil was $67.70 and the Henry Hub spot price for natural gas was $3.40 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.

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 $53.11 per bbl in May 2025 to a high

of $79.86 per bbl in July 2024.

The Henry Hub Spot Market Price (“Henry Hub”) for natural gas has ranged from a low of $1.21

per MMBtu in November 2024 to a high of $9.86 per MMBtu in January 2025.

June 30, 2025, the WTI posted price for crude oil was $61.09 and the Henry Hub spot price for natural gas was $3.26 per MMBtu.

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 December 31, 2024:

following table summarizes our future payments we are obligated to make based on agreements in place as of June 30, 2025:

Payments due in:

less than 1 year

Contractual obligations:

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1 year and $11,023 1-3 years for his portion of the shared office space.

of Operations – Three Months Ended December 31, 2024 and 2023.

For the quarter ended December 31, 2024, there was net income

of $469,133 compared to $345,610 for the quarter ended December 31, 2023 as a result of an increase in operating revenues due to a increase

in oil and gas production volumes partially offset by a decrease in oil and gas prices and an increase in operating expenses that is

further explained below.

and gas sales .

Revenue from oil and gas sales was $1,828,404 for the third quarter of fiscal 2025, a 14% increase from $1,610,595

for the same period of fiscal 2024.

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

in oil and natural gas prices.

Natural gas prices have been negatively impacted by limited pipeline capacity in the Permian

Volume (bbls)

Average Price (per bbl)

Average Price (per mcf)

operating revenues.

Other revenues increased to $62,861 for the three months ended December 31, 2024, from $45,848 for the three

months ended December 31, 2023.

This increase resulted from a settlement in a class action lawsuit from Contango Resources and an increase

in income from one of our limited liability company investments.

Interest income on corporate funds decreased to $7,315 for the three months ended December 31, 2024, from $36,936 for the

three months ended December 31, 2023.

This decrease resulted from using the corporate funds for property acquisitions.

and exploration.

Production costs were $460,241 for the third quarter of fiscal 2025, a 15% increase from $401,035 for the same

period of fiscal 2024.

This is the result of an increase in production taxes due to an increase in oil revenues and an increase in

marketing and other charges due to the current natural gas pricing environment from limited pipeline takeaway capacity in the

Permian and an increase in lease operating expenses on new wells in which we own an interest.

Depreciation,

depletion and amortization.

Depreciation, depletion and amortization expense was $636,424 for the third quarter of fiscal 2025, a

59% increase from $400,337 for the same period of fiscal 2024, primarily due to an increase in the full cost amortization base, an increase

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

and administrative expenses.

General and administrative expenses were $340,514 for the third quarter of fiscal 2025, a 2% increase

from $335,152 for the same period of fiscal 2024.

This was primarily due to an increase in contract services.

Income taxes.

There was an income

tax benefit of $18,305 for the three months ended December 31, 2024 compared to an expense of $202,945 for the three months ended December

31, 2023, primarily due to a decrease in state income taxes and a decrease in the deferred tax provision.

The effective tax rate for

state and federal taxes combined for the three months ended December 31, 2024 and 2023 was (4%) and 37%, respectively.

The decrease in

the effective tax rate is primarily the result of state income taxes net of federal benefit, primarily in New Mexico, and the impact

of permanent differences between book and taxable income.

of Operations – Nine Months Ended December 31, 2024 and 2023.

For the nine months ended December 31, 2024, there was a net

income of $1,077,370 compared to net income of $1,080,657 for the nine months ended December 31, 2023.

This was a result of an increase

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

increase in operating expenses that is further explained below.

of Operations – Three Months Ended June 30, 2025 Compared to Three Months Ended June 30, 2024.

For the quarter ended June 30,

2025, net income was $241,951 compared to net income of $291,039 for the quarter ended June 30, 2024.

This was primarily the result of

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

and gas sales.

Revenue from oil and gas sales was $5,212,313 for the nine months ended December 31, 2024, an 11% increase from $4,706,395

for the same period of fiscal 2024.

This resulted from a increase in oil and natural gas production partially offset by a decrease in

oil and natural gas prices.

Natural gas prices have been negatively impacted by pipeline capacity in the Permian Basin.

Revenue from oil and gas sales was $1,754,734 for the quarter ended June 30, 2025, a 4% increase from $1,688,056 for

the quarter ended June 30, 2024.

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

offset by a decrease in oil prices.

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)

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operating revenues.

Other revenues increased to $156,014 for the nine months ended December 31, 2024, from $105,077 for the nine

months ended December 31, 2023.

This increase resulted from a settlement in a class action lawsuit from Contango Resources and an increase

in income from one of our limited liability company investments.

Interest income on corporate funds decreased to $50,891 for the nine months ended December 31, 2024, from $86,995 for the

nine months ended December 31, 2023.

This decrease resulted from using the corporate funds for property acquisitions and purchase of

treasury stock.

Other revenues increased 49% to 59,442 for the quarter ended June 30, 2025 from $39,779 for the quarter ended

June 30, 2024.

This resulted from an increase in income from one of our limited liability company investments.

Interest income on corporate funds decreased 36% to $14,531 for the quarter ended June 30, 2025 from $22,746 for the quarter

ended June 30, 2024.

This decrease resulted from a change in our average cash balances due to using the corporate funds for property

acquisitions.

and exploration.

Production costs were $1,311,066 for the nine months ended December 31, 2024, a 15% increase from $1,143,116

for the nine months ended December 31, 2023.

This is the result of an increase in production taxes due to an increase in oil

revenues and an increase in marketing and other charges due to the current natural gas pricing environment from limited pipeline

takeaway capacity in the Permian and an increase in lease operating expenses on new wells in which we own an interest.

Production costs were $404,770 for the three months ended June 30, 2025, a 7% decrease from $437,420 for the three

months ended June 30, 2024.

This was primarily due to a decrease in lease operating expenses on wells in which we own a working interest.

Depreciation,

depletion and amortization.

Depreciation, depletion and amortization expense was $1,760,409 for the nine months ended December 31,

2024, a 39% increase from $1,268,703 for the nine months ended December 31, 2023, primarily due to an increase in the full cost amortization

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

Depreciation, depletion and amortization (“DD&A”) expense was $675,270 for the first

quarter of fiscal 2026, an 25% increase from $539,697 for the first quarter of fiscal 2025, primarily due to an increase in oil and gas

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

and administrative expenses.

General and administrative expenses were $1,042,084 for the nine months ended December 31, 2024, a 6%

increase from $981,664 for the nine months ended December 31, 2023.

This was primarily due to an increase in contract and engineering

services partially offset by a decrease in salaries and stock option compensation.

Income taxes.

Income taxes for

the nine months ended December 31, 2024 was $200,034 compared to $398,971 for the nine months ended December 31, 2023, primarily due

a decrease in state income taxes and a decrease in the deferred tax provision.

The effective tax rate for state and federal taxes combined

for the nine months ended December 31, 2024 and 2023 was 16% and 27%, respectively.

The decrease in the effective tax rate is primarily

the result of state income taxes net of federal benefit, primarily in New Mexico, and the impact of permanent differences between book

and taxable income.

General and administrative expenses were $394,437 for the three months ended June 30, 2025, an 7% increase

from $367,045 for the three months ended June 30, 2024.

This was primarily due to an increase in engineering and accounting fees.

Income tax for the three months ended June 30, 2025 was $103,231 compared to $106,586 for the three months ended June 30,

The effective tax rate for state and federal taxes combined for the three months ended June 30, 2025 and 2024 was 30% and 27%,

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