PHX Minerals (PHX) Q4 2022 Results - Feb 14

[dan_s]

PHX Minerals is a recent addition to our Small-Cap Growth Portfolio. They announced Q4 results on February 8th. I have updated my forecast/valuation model based on their results and updated guidance for 2023.

PHX recently changed their fiscal year-end from September 30 to December 31.

The Company's production is 80% to 85% natural gas, so my valuation has been reduced to $4.40.

If you are bullish long-term on natural gas prices then PHX is worth a hard look. It pays a small dividend that should go a lot higher if natural gas prices climb back to $6.00.

At the time of this post PHX was trading for $3.10.

TipRanks: "On February 13th, Northland Capital Markets analyst Donovan Schafer lowered his price target to $5.50 and maintains his Outperform rating."

[ChuckGeb]

Acquiring gas assets over last 18 months would seem to have been at top of the market. Keeping their metrics stable would appear unlikely. Seems like a flawed business model or unfortunate timing.

[dan_s]

Unfortunate timing. Long-term outlook for natural gas is very bullish IMO.

Just remember, the natural gas price that you see each day is the front month NYMEX natural gas contract for gas that will go to Henry Hub, Louisiana. Henry Hub has plenty of gas and one of the largest physical gas consumers in the Gulf Coast region (Freeport) is still offline.

NYMEX futures contracts for all commodities (just like stock prices) are set by Buyers and Sellers of the paper contracts. The very warm January and the Feds keeping Freeport offline caused the utilities to pull out of the futures market (i.e. - less Buyers). So, the Paper Traders are having trouble finding Buyers for their long contracts. Paper Traders must close their NYMEX long contracts since they cannot take physical delivery of the gas without paying large storage fees.

In a few months the utilities will return the futures market.

[ChuckGeb]

You might want to check your calculations in your updated forecast valuation model. CFPS was $1.05 for fye 9/30/22. It does not appear that your year 2022 is 12 months in the forecast as it is reflected as $.22.

[dan_s]

Column G is just for Q4 2022 (the "transition quarter"). Look at the 10-QT filed with the SEC here: https://phxmin.com/investors/sec-filings

Colmuns E and F are for the last two fiscal years that ended 9/30/2021 and 9/30/2022.

[ChuckGeb]

Yes and you used G4 in your calculation of annualized cash flow times your 9 multiplier. Is that what you intended?

[dan_s]

No, but $4.40 is a reasonable current valuation since my 2023 operating CFPS forecast is only $0.48.

PHX is going to host a webinar for us on March 3.

[ChuckGeb]

Sounds good. Thanks for that.