Mexco Energy H1 net income rises to $945K
Sentiment and the balance of points
Rhea-AI Sentiment reads the wording of the document, how positive or negative its language is on a 1 to 5 scale. The balance of points shown with the takes weighs what the document actually discloses, so the two can disagree, for example when a trial that missed its main goal is described in upbeat language.
Mexco Energy Corporation (MXC) reported second-quarter fiscal 2027 operating revenue of $2,118,988, versus $1,629,640 a year earlier, and net income of $444,087, versus $323,506. For the six months ended September 30, 2026, operating revenue was $4,102,157 and net income was $945,152, compared with $3,386,580 and $565,457 a year earlier. Operating cash flow for the six months was $2,424,321, compared with $2,067,549; natural gas revenue fell 22.6% to $527,339 from $681,258.
Mexco acquired royalty and overriding royalty interests during the period. After quarter-end, it acquired interests in 977 producing wells for $1,191,700, effective November 1, 2026. It currently plans to participate in drilling and completion of 55 horizontal wells at an estimated cost of approximately $1,300,000 in fiscal 2027. Cash was $903,819 as of September 30, 2026; after October borrowings and November repayments, $325,000 was outstanding under its credit facility as of November 12, 2026.
How this balance works
Rhea-AI gives every point it takes from this document a weight. Minor counts 1, Moderate 3 and Major 9, so one Major point outweighs several Minor ones. The bar adds up the weights on each side, and when neither side holds more than 65% of the total the balance reads Mixed.
It reads the document as published, with the same rules for every company, and it does not look at what the market expected or at how the stock traded, so a point can be objectively good on a day the stock falls.
Rhea-AI Sentiment measures something else, the tone of the wording.
Positive
- Moderate pointSix-month oil and gas sales rose 21% to $4,094,555.
- Moderate pointSix-month net income was $945,152, versus $565,457.
- Moderate pointOperating cash flow increased $356,772 to $2,424,321.
Negative
- Moderate pointSix-month natural gas revenue fell 22.6% to $527,339.
Filing Explained
The plan adds potential equity-award capacity, while $900,000 of the LLC commitment remained unfunded at September 30 and is payable as capital calls are made.
Shareholders approved an amendment on
The plan permits stock options, stock awards and cash awards; if equity awards result in newly issued shares, the share count rises and existing holders’ percentage ownership falls, absent offsetting changes.
For the six months ended
Separately, the company had funded
Key Figures
Key Terms
full cost method technical
unit-of-production method technical
asset retirement obligations financial
borrowing base financial
overriding royalty interests technical
anti-dilutive financial
FAQ
AI-generated questions and answers. How Rhea-AI works. Not financial advice.
How much did Mexco Energy (MXC) earn in the six months ended September 30, 2026?
How much did Mexco Energy (MXC) borrow and repay after quarter-end?
AI-generated analysis. How Rhea-AI works. Not financial advice.
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D. C. 20549
FORM
For
the quarterly period ended
OR
For the transition period from to
Commission
File No.
(Exact name of registrant as specified in its charter)
| (State or other jurisdiction of | (IRS Employer | |
| incorporation or organization) | Identification Number) |
| (Address of principal executive offices) | (Zip code) |
(Registrant’s telephone number, including area code)
Securities registered pursuant to Section 12(b) of the Act:
| Title of each class | Trading Symbol(s) | Name of each exchange on which registered | ||
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months and (2) has been subject to such filing requirements for the past 90 days. YES ☒ NO ☐
Indicate
by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule
405 of Regulation S-T (§ 232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant
was required to submit and post such files).
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company as defined in Rule 12b-2 of the Exchange Act.
| Large Accelerated Filer | ☐ | Accelerated Filer | ☐ |
| ☒ | Smaller reporting company | ||
| Emerging growth company |
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐
Indicate
by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). YES ☐ NO
The
number of shares outstanding of the registrant’s common stock, par value $
MEXCO ENERGY CORPORATION AND SUBSIDIARIES
| Table of Contents | |||
| Page | |||
| PART I. FINANCIAL INFORMATION | |||
| Item 1. | Financial Statements | ||
| Consolidated Balance Sheets as of September 30, 2026 (Unaudited) and March 31, 2026 | 3 | ||
| Consolidated Statements of Operations (Unaudited) for the three months and six months ended September 30, 2026 and September 30, 2025 | 4 | ||
| Consolidated Statements of Changes in Stockholders’ Equity (Unaudited) for the three and six months ended September 30, 2026 and September 30, 2025 | 5 | ||
| Consolidated Statements of Cash Flows (Unaudited) for the six months ended September 30, 2026 and September 30, 2025 | 6 | ||
| Notes to Consolidated Financial Statements (Unaudited) | 7 | ||
| Item 2. | Management’s Discussion and Analysis of Financial Condition and Results of Operations |
14 | |
| Item 3. | Quantitative and Qualitative Disclosures About Market Risk | 18 | |
| Item 4. | Controls and Procedures | 19 | |
| PART II. OTHER INFORMATION | |||
| Item 1. | Legal Proceedings | 20 | |
| Item 1A. | Risk Factors | 20 | |
| Item 2. | Unregistered Sales of Equity Securities and Use of Proceeds | 20 | |
| Item 6. | Exhibits | 20 | |
| SIGNATURES | 21 | ||
| CERTIFICATIONS | 20 | ||
| Page 2 |
PART I – FINANCIAL INFORMATION
Item 1. Financial Statements
Mexco
Energy Corporation and Subsidiaries
CONSOLIDATED BALANCE SHEETS
| September 30, 2026 | March 31, 2026 | |||||||
| (Unaudited) | ||||||||
| ASSETS | ||||||||
| Current assets | ||||||||
| Cash and cash equivalents | $ | $ | ||||||
| Accounts receivable: | ||||||||
| Oil and natural gas sales | ||||||||
| Trade | ||||||||
| Prepaid costs and expenses | ||||||||
| Prepaid drilling | ||||||||
| Total current assets | ||||||||
| Property and equipment, at cost | ||||||||
| Oil and gas properties, using the full cost method | ||||||||
| Other | ||||||||
| Accumulated depreciation, depletion and amortization | ( | ) | ( | ) | ||||
| Property and equipment, net | ||||||||
| Investments – cost basis | ||||||||
| Operating lease, right-of-use asset | ||||||||
| Other noncurrent assets | ||||||||
| Total assets | $ | $ | ||||||
| LIABILITIES AND STOCKHOLDERS’ EQUITY | ||||||||
| Current liabilities | ||||||||
| Accounts payable and accrued expenses | $ | $ | ||||||
| Income tax payable | ||||||||
| Operating lease liability, current | ||||||||
| Total current liabilities | ||||||||
| Long-term liabilities | ||||||||
| Operating lease liability, long-term | - | |||||||
| Asset retirement obligations | ||||||||
| Deferred income tax liabilities | ||||||||
| Total long-term liabilities | ||||||||
| Total liabilities | ||||||||
| Commitments and contingencies | - | - | ||||||
| Stockholders’ equity | ||||||||
| Preferred stock - $ | - | - | ||||||
| Common stock - $ | ||||||||
| Additional paid-in capital | ||||||||
| Retained earnings | ||||||||
| Treasury
stock, at cost ( | ( | ) | ( | ) | ||||
| Total stockholders’ equity | ||||||||
| Total liabilities and stockholders’ equity | $ | $ | ||||||
The accompanying notes are an integral part of the consolidated financial statements.
| Page 3 |
Mexco
Energy Corporation and Subsidiaries
CONSOLIDATED STATEMENTS OF OPERATIONS
(Unaudited)
| 2026 | 2025 | 2026 | 2025 | |||||||||||||
| Three Months Ended | Six Months Ended | |||||||||||||||
| September 30, | September 30, | |||||||||||||||
| 2026 | 2025 | 2026 | 2025 | |||||||||||||
| Operating revenues: | ||||||||||||||||
| Oil sales | $ | $ | $ | $ | ||||||||||||
| Natural gas sales | ||||||||||||||||
| Other | ||||||||||||||||
| Total operating revenues | ||||||||||||||||
| Operating expenses: | ||||||||||||||||
| Production | ||||||||||||||||
| Accretion of asset retirement obligations | ||||||||||||||||
| Depreciation, depletion, and amortization | ||||||||||||||||
| General and administrative | ||||||||||||||||
| Total operating expenses | ||||||||||||||||
| Operating income | ||||||||||||||||
| Other income (expenses): | ||||||||||||||||
| Income from investments in LLCs | ||||||||||||||||
| Interest income | ||||||||||||||||
| Interest expense | ( | ) | ( | ) | ( | ) | ( | ) | ||||||||
| Net other income | ||||||||||||||||
| Income before provision for income taxes | ||||||||||||||||
| Provision for income taxes | ||||||||||||||||
| Net income | $ | $ | $ | $ | ||||||||||||
| Income per common share: | ||||||||||||||||
| Basic: | $ | $ | $ | $ | ||||||||||||
| Diluted: | $ | $ | $ | $ | ||||||||||||
| Weighted average common shares outstanding: | ||||||||||||||||
| Basic: | ||||||||||||||||
| Diluted: | ||||||||||||||||
| Dividends declared per share | $ | - | $ | - | $ | $ | ||||||||||
The accompanying notes are an integral part of the consolidated financial statements.
| Page 4 |
Mexco Energy Corporation and Subsidiaries
CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS’ EQUITY
(Unaudited)
| Common Stock Par Value | Additional Paid-In Capital | Retained Earnings | Treasury Stock | Total
Stockholders’ Equity | ||||||||||||||||
| Balance at April 1, 2026 | $ | $ | $ | $ | ( | ) | $ | |||||||||||||
| Net income | - | - | - | |||||||||||||||||
| Dividends paid | - | - | ( | ) | - | ( | ) | |||||||||||||
| Stock-based compensation | - | - | - | |||||||||||||||||
| Balance at June 30, 2026 | $ | $ | $ | $ | ( | ) | $ | |||||||||||||
| Net income | - | - | - | |||||||||||||||||
| Stock-based compensation | - | - | - | |||||||||||||||||
| Balance at September 30, 2026 | $ | $ | $ | $ | ( | ) | $ | |||||||||||||
| Common Stock Par Value | Additional Paid-In Capital | Retained Earnings | Treasury Stock | Total
Stockholders’ Equity | ||||||||||||||||
| Balance at April 1, 2025 | $ | $ | $ | $ | ( | ) | $ | |||||||||||||
| Net income | - | - | - | |||||||||||||||||
| Dividends paid | ( | ) | ( | ) | ||||||||||||||||
| Stock-based compensation | - | - | - | |||||||||||||||||
| Balance at June 30, 2025 | $ | $ | $ | $ | ( | ) | $ | |||||||||||||
| Balance | $ | $ | $ | $ | ( | ) | $ | |||||||||||||
| Net income | - | - | - | |||||||||||||||||
| Stock-based compensation | - | - | - | |||||||||||||||||
| Balance at September 30, 2025 | $ | $ | $ | $ | ( | ) | $ | |||||||||||||
| Balance | $ | $ | $ | $ | ( | ) | $ | |||||||||||||
| SHARE ACTIVITY | ||||||||||||||||||||
| Common stock shares, issued: | ||||||||||||||||||||
| Balance at April 1, 2026 | ||||||||||||||||||||
| Issued | - | |||||||||||||||||||
| Balance at September 30, 2026 | ||||||||||||||||||||
| Common stock shares, held in treasury: | ||||||||||||||||||||
| Balance at April 1, 2026 | ( | ) | ||||||||||||||||||
| Acquisitions | - | |||||||||||||||||||
| Balance at September 30, 2026 | ( | ) | ||||||||||||||||||
| Common stock shares, outstanding at September 30, 2026 | ||||||||||||||||||||
The accompanying notes are an integral part of the consolidated financial statements.
| Page 5 |
Mexco
Energy Corporation and Subsidiaries
CONSOLIDATED STATEMENTS OF CASH FLOWS
For the Six Months Ended September 30,
(Unaudited)
| 2026 | 2025 | |||||||
| Cash flows from operating activities: | ||||||||
| Net income | $ | $ | ||||||
| Adjustments to reconcile net income to net cash provided by operating activities: | ||||||||
| Deferred income tax expense (benefit) | ( | ) | ||||||
| Stock-based compensation | ||||||||
| Depreciation, depletion and amortization | ||||||||
| Accretion of asset retirement obligations | ||||||||
| Amortization of debt issuance costs | ||||||||
| Changes in operating assets and liabilities: | ||||||||
| (Increase) decrease in accounts receivable | ( | ) | ||||||
| Decrease in right-of-use asset | ||||||||
| Decrease in prepaid expenses | ||||||||
| Increase (decrease) in accounts payable and accrued expenses | ( | ) | ||||||
| Settlement of asset retirement obligations | ( | ) | ( | ) | ||||
| Decrease in income taxes payable | ( | ) | ( | ) | ||||
| Decrease in operating lease liability | ( | ) | ( | ) | ||||
| Net cash provided by operating activities | ||||||||
| Cash flows from investing activities: | ||||||||
| Additions to oil and gas properties | ( | ) | ( | ) | ||||
| Additions to other property and equipment | ( | ) | - | |||||
| Drilling refunds | - | |||||||
| Investments in limited liability companies at cost | ( | ) | ( | ) | ||||
| Proceeds from sale of oil and gas properties and equipment | ||||||||
| Net cash used in investing activities | ( | ) | ( | ) | ||||
| Cash flows from financing activities: | ||||||||
| Dividends paid | ( | ) | ( | ) | ||||
| Net cash used in financing activities | ( | ) | ( | ) | ||||
| Net (decrease) increase in cash and cash equivalents | ( | ) | ||||||
| Cash and cash equivalents at beginning of period | ||||||||
| Cash and cash equivalents at end of period | $ | $ | ||||||
| Supplemental disclosure of cash flow information: | ||||||||
| Cash paid for interest | $ | $ | ||||||
| Cash paid for income taxes | $ | $ | ||||||
| Accrued capital expenditures included in accounts payable | $ | $ | ||||||
| Non-cash investing and financing activities: | ||||||||
| Asset retirement obligations | $ | $ | ||||||
The accompanying notes are an integral part of the consolidated financial statements.
| Page 6 |
Mexco Energy Corporation and Subsidiaries
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
1. Nature of Operations
Mexco Energy Corporation (a Colorado corporation) and its wholly owned subsidiaries, Forman Energy Corporation (a New York corporation), Southwest Texas Disposal Corporation (a Texas corporation), and TBO Oil & Gas, LLC (a Texas limited liability company) (collectively, the “Company”) are engaged in the acquisition, exploration, development, and production of crude oil, natural gas, condensate, and natural gas liquids (“NGLs”). Most of the Company’s oil and gas interests are centered in West Texas and Southeastern New Mexico; however, the Company owns producing properties and undeveloped acreage in fourteen states. All of the Company’s oil and gas interests are operated by others.
2. Basis of Presentation and Significant Accounting Policies
Principles of Consolidation. The consolidated financial statements include the accounts of Mexco Energy Corporation and its wholly owned subsidiaries. All significant intercompany balances and transactions associated with the consolidated operations have been eliminated.
Estimates and Assumptions. In preparing consolidated financial statements in conformity with accounting principles generally accepted in the United States of America (“GAAP”), management is required to make informed judgments, estimates and assumptions that affect the reported amounts of assets and liabilities as of the date of the consolidated financial statements and affect the reported amounts of revenues and expenses during the reporting period. In addition, significant estimates are used in determining proved oil and gas reserves. Although management believes its estimates and assumptions are reasonable, actual results may differ materially from those estimates. The estimate of the Company’s oil and natural gas reserves, which is used to compute depreciation, depletion, amortization, and impairment of oil and gas properties, is the most significant of the estimates and assumptions that affect these reported results.
Interim Financial Statements. In the opinion of management, the accompanying unaudited consolidated financial statements contain all adjustments (consisting only of normal recurring accruals) necessary to present fairly the financial position of the Company as of September 30, 2026, and the results of its operations and cash flows for the interim periods ended September 30, 2026 and 2025. The consolidated financial statements as of September 30, 2026 and for the three and six month periods ended September 30, 2026 and 2025 are unaudited. The consolidated balance sheet as of March 31, 2026 was derived from the audited balance sheet filed in the Company’s 2026 annual report on Form 10-K filed with the Securities and Exchange Commission (“SEC”). The results of operations for the periods presented are not necessarily indicative of the results to be expected for a full year. The accounting policies followed by the Company are set forth in more detail in Note 2 of the “Notes to Consolidated Financial Statements” in the Form 10-K. Certain information and footnote disclosures normally included in financial statements prepared in accordance with accounting principles generally accepted in the United States of America have been condensed or omitted in this Form 10-Q pursuant to the rules and regulations of the SEC. However, the disclosures herein are adequate to make the information presented not misleading. It is suggested that these consolidated financial statements be read in conjunction with the consolidated financial statements and notes thereto included in the Form 10-K.
Oil and Gas Properties. The Company accounts for its oil and natural gas properties using the full cost method of accounting. Under this method, all costs incurred in the acquisition, exploration, and development of oil and natural gas properties are capitalized and amortized using the unit-of-production method based on proved reserves. Costs directly related to exploration and development activities are capitalized, while production costs, general corporate overhead, and similar activities are expensed as incurred.
The carrying value of oil and natural gas properties includes asset retirement costs associated with the fair value of asset retirement obligations (“ARO”) when incurred.
Sales or other dispositions of oil and natural gas properties, whether or not currently being amortized, are generally accounted for as adjustments to capitalized costs, with no gain or loss recognized unless the disposition significantly alters the relationship between capitalized costs and proved reserves. This treatment includes transactions involving Term Assignments and Assignments, Bills of Sale and Conveyances.
| Page 7 |
Depletion of evaluated oil and natural gas properties is calculated using the unit-of-production method, whereby capitalized costs plus estimated future development costs are amortized over total proved reserves.
In addition, capitalized costs less accumulated depletion and related deferred income taxes are not allowed to exceed an amount (the full cost ceiling) equal to the sum of: 1)the present value of estimated future net revenues discounted at ten percent computed in compliance with SEC guidelines; 2) plus the cost of properties not being amortized; 3) plus the lower of cost or estimated fair value of unproven properties included in the costs being amortized; 4) less income tax effects related to differences between the book and tax basis of the properties.
Accounts
Receivable. Accounts receivable includes trade receivables from joint interest owners and oil and gas purchasers. Credit is extended
based on an evaluation of a customer’s financial condition and is generally uncollateralized. The collectibility of receivables
is assessed, and an allowance is made for any credit losses. The allowance for credit losses is determined based on a number of factors,
including the length of time accounts receivable are past due, the Company’s previous loss history, the debtor’s current
ability to pay its obligation to the Company, the condition of the general economy and the industry as a whole. The Company has not experienced
any significant credit losses. For the three and six months ended September 30, 2026 and 2025,
Investments. The Company utilizes the measurement alternative to account for investments when it does not possess the ability to exercise significant influence or control and the investment does not have a readily determinable fair value. Under this method, investments are initially recognized at cost and subsequently measured at cost, adjusted for any observable changes in the fair value of the investment. In addition, the Company reviews the carrying value of investments measured under the measurement alternative for impairment on a regular basis. If there is an indication of impairment, the Company assesses whether the carrying value of the investment exceeds its recoverable amount. Any impairment losses are recognized in the consolidated statements of operations. Income from these investments is recognized as Income from investments in LLCs in the consolidated statements of operations.
Reclassifications. Certain amounts in prior periods’ consolidated financial statements have been reclassified to conform with the current period’s presentation. These reclassifications had no effect on previously reported results of operations, retained earnings or net cash flows.
Segments.
The Company’s chief operating decision maker (“CODM”), comprised of the Chairman of the Board and the President, evaluates
operating results and allocates capital resources on a consolidated basis. Accordingly, the Company has
Recently Issued Accounting Standards. The Financial Accounting Standards Board (“FASB”) periodically issues new accounting standards. The Company has evaluated recently issued pronouncements and identified the following standards for consideration.
In November 2024, FASB issued Accounting Standards Update (“ASU”) 2024-03, Income Statement – Reporting Comprehensive Income – Expense Disaggregation Disclosures (“Subtopic 220-40”), which requires public entities to provide additional disclosures regarding certain costs and expenses, including employee compensation and depreciation, depletion and amortization (“DD&A”). In January 2025, FASB issued ASU 2025-01, Income Statement – Reporting Comprehensive Income – Expense Disaggregation Disclosures (Subtopic 220-40): Clarifying the Effective Date, which clarifies the effective date of ASU 2024-03. The guidance is effective for the Company’s fiscal year ending March 31, 2028, and for interim periods beginning with the quarter ending June 30, 2028. Early adoption is permitted. The Company is currently evaluating the impact of this standard, which is expected to affect financial statement disclosures only.
In December 2025, FASB issued ASU 2025-12, Codification Improvements, which clarifies and makes minor improvements to various accounting standards. The ASU is effective for annual periods beginning after December 15, 2026, and interim periods within those annual periods. Early adoption is permitted. The Company is currently evaluating the impact of this standard on its consolidated financial statements and related disclosures.
| Page 8 |
3. Asset Retirement Obligations
The Company’s asset retirement obligations (“ARO”) relate to the plugging of wells, the removal of facilities and equipment, and site restoration on oil and gas properties. The ARO is included on the consolidated balance sheets with the current portion being included in the accounts payable and other accrued expenses.
The following table provides a rollforward of the AROs for the first six months of fiscal 2027:
Schedule of Rollforward of Asset Retirement Obligations
| Carrying amount of asset retirement obligations as of April 1, 2026 | $ | |||
| Liabilities incurred | ||||
| Liabilities settled | ( | ) | ||
| Accretion expense | ||||
| Carrying amount of asset retirement obligations as of September 30, 2026 | ||||
| Less: Current portion | ||||
| Non-Current asset retirement obligation | $ |
4. Long Term Debt
On
December 28, 2018, the Company entered into a loan agreement (the “Agreement”) with West Texas National Bank (“WTNB”),
which originally provided for a credit facility of $
No
principal payments are anticipated to be required through the maturity date of the credit facility,
Amounts borrowed under the Agreement are collateralized by the common stock of the Company’s wholly owned subsidiaries and substantially all of the Company’s oil and gas properties.
In addition, this Agreement prohibits the Company from paying cash dividends on its common stock without prior written permission of WTNB. The Company obtained written permission from WTNB prior to declaring the regular annual dividend on June 4, 2026, as discussed in Note 10. The Agreement does not permit the Company to enter into hedge agreements covering crude oil and natural gas prices without prior WTNB approval.
There
was
| Page 9 |
5. Stock-based Compensation
The
Company recognized compensation expense of $
On
September 8, 2026, the Company’s shareholders approved the Amended and Restated 2019 Employee Incentive Stock Plan, increasing
the maximum number of shares of common stock authorized for issuance under the plan from
The
total cost related to non-vested awards not yet recognized at September 30, 2026 totals $
During
the six months ended September 30, 2026 and 2025,
No
forfeiture rate is assumed for stock options granted to directors or employees due to the forfeiture rate history of these types of awards.
During the six months ended September 30, 2026 and 2025, there were
The following table is a summary of stock options activity for the six months ended September 30, 2026:
Schedule of Activity of Stock Options
| Number of Shares | Weighted Average Exercise Price | Weighted Average Remaining Contract Life in Years | Intrinsic Value | |||||||||||||
| Outstanding at April 1, 2026 | $ | $ | ||||||||||||||
| Granted | - | - | ||||||||||||||
| Exercised | - | - | ||||||||||||||
| Forfeited or Expired | - | - | ||||||||||||||
| Outstanding at September 30, 2026 | $ | $ | ||||||||||||||
| Vested at September 30, 2026 | $ | $ | ||||||||||||||
| Exercisable at September 30, 2026 | $ | $ | ||||||||||||||
Outstanding
options at September 30, 2026
6. Leases
The
Company leases approximately
The Company determines an arrangement is a lease at inception. Operating leases are recorded as operating lease right-of-use asset, operating lease liability, current, and operating lease liability, long-term on the consolidated balance sheets.
Operating
lease right-of-use assets represent the Company’s right to use an underlying asset for the lease term, and lease liabilities represent
its obligation to make lease payments arising from the lease. Operating lease assets and liabilities are recognized at the commencement
date based on the present value of lease payments over the lease term. As the Company’s lease does not provide an implicit rate,
the Company uses the incremental borrowing rate based on the information available at commencement date in determining the present value
of lease payments. The incremental borrowing rate used at adoption was
| Page 10 |
The balance sheets classification of lease assets and liabilities was as follows:
Schedule of Operating Lease Assets and Liabilities
| September 30, 2026 | ||||
| Assets | ||||
| Operating lease right-of-use asset, beginning balance | $ | |||
| Current period amortization | ( | ) | ||
| Lease extension | - | |||
| Total operating lease right-of-use asset | $ | |||
| Liabilities | ||||
| Operating lease liability, current | $ | |||
| Operating lease liability, long term | - | |||
| Total lease liabilities | $ | |||
Future minimum lease payments as of September 30, 2026 under non-cancellable operating leases are as follows:
Schedule of Future Minimum Lease Payments
| Lease Obligation | ||||
| Fiscal Year Ended March 31, 2027 | ||||
| Fiscal Year Ended March 31, 2028 | ||||
| Total lease payments | $ | |||
| Less: imputed interest | ( | ) | ||
| Operating lease liability | ||||
| Less: operating lease liability, current | ( | ) | ||
| Operating lease liability, long term | $ | - | ||
Net
cash paid for our operating lease for the six months ended September 30, 2026 and 2025 was $
7. Income Taxes
On July 4, 2025, the One Big Beautiful Bill Act (“OBBBA”) was enacted, making significant changes to U.S. federal tax law. The Company has evaluated the impact of the OBBBA and concluded that it did not have a material impact on the Company’s consolidated financial statements.
The income tax provision consists of the following for the six months ended September 30, 2026 and 2025:
Schedule of Income Tax Provision
| 2026 | 2025 | |||||||
| Six Months Ended | ||||||||
| September 30 | ||||||||
| 2026 | 2025 | |||||||
| Current income tax expense: | ||||||||
| Federal | $ | $ | ||||||
| State | ||||||||
| Total current income tax expense | ||||||||
| Deferred income tax (benefit) expense: | ||||||||
| Federal | ( | ) | ||||||
| State | ||||||||
| Total deferred income tax (benefit) expense | ( | ) | ||||||
| Total income tax expense: | $ | $ | ||||||
The
Company’s effective tax rate will typically differ from the U.S. federal statutory rate primarily as a result of state income taxes,
particularly in New Mexico, percentage depletion in excess of basis, and other permanent differences. The effective income tax rate was
| Page 11 |
8. Related Party Transactions
Related
party transactions for the Company consist of shared office expenditures, as well as administrative and operating expenses paid on behalf
of the principal stockholder. The total amount billed to and reimbursed by the principal stockholder for the quarters ended September
30, 2026 and 2025 was $
9. Income Per Common Share
The following is a reconciliation of the number of shares used in the calculation of basic and diluted net income per share for the three and six month periods ended September 30, 2026 and 2025.
Schedule of Reconciliation of Basic and Diluted Net Income (Loss) Per Share
| 2026 | 2025 | 2026 | 2025 | |||||||||||||
| Three Months Ended | Six Months Ended | |||||||||||||||
| September 30, | September 30, | |||||||||||||||
| 2026 | 2025 | 2026 | 2025 | |||||||||||||
| Net income | $ | $ | $ | $ | ||||||||||||
| Shares outstanding: | ||||||||||||||||
| Weighted avg. shares outstanding – basic | ||||||||||||||||
| Effect of assumed exercise of dilutive stock options | ||||||||||||||||
| Weighted avg. shares outstanding – dilutive | ||||||||||||||||
| Income per common share: | ||||||||||||||||
| Basic | $ | $ | $ | $ | ||||||||||||
| Diluted | $ | $ | $ | $ | ||||||||||||
For
the three and six months ended September 30, 2026,
10. Stockholders’ Equity
In
April 2024, the Board of Directors (the “Board”) authorized the use of up to $
During
the six months ended September 30, 2026 and 2025, there were
On
June 4, 2026, the Board declared a regular annual dividend of $
| Page 12 |
Dividends declared by the Board during the period are presented in the Company’s consolidated statements of changes in stockholders’ equity as dividends paid. Dividends paid during the period are presented as cash used in financing activities in the Company’s consolidated statements of cash flows.
11. Acquisitions
In
April 2026, the Company acquired royalty and overriding royalty interests in 144 producing wells in Weld County, Colorado and Atascosa,
Howard, LaSalle, Martin, and Yoakum Counties, Texas, and additional royalty interests in 3 properties in which we already owned an interest
in Howard County, Texas for an aggregate purchase price of $
In
June 2026, the Company acquired royalty and overriding royalty interests in 256 producing wells in Adams and Larimer Counties,
Colorado; Caddo and DeSoto Parishes, Louisiana; Karnes, McMullen, Panola, and Winkler Counties, Texas; and Ashtabula County, Ohio
and additional royalty interests in 8 properties in which we already owned an interest for an aggregate purchase price of $
In
August 2026, the Company acquired royalty and overriding royalty interests in approximately 260 producing wells in various counties in
the states of Arkansas, Louisiana, and Texas and Eddy County, New Mexico for an aggregate purchase price of $
12. Subsequent Events
In
October 2026, the Company acquired royalty and overriding royalty interests in 977 producing wells in Weld County, Colorado; DeSoto
Parish, Louisiana; Uinta County, Wyoming; and various counties in the state of Texas for an aggregate purchase price of $
In
October 2026, the Company expended approximately $
In
October 2026, the Company borrowed a total of $
The Company completed a review and analysis of all events that occurred after the consolidated balance sheet date to determine if any such events must be reported and has determined that there are no other subsequent events to be disclosed.
| Page 13 |
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations
Unless the context otherwise requires, references to the “Company”, “Mexco”, “we”, “us” or “our” mean Mexco Energy Corporation and its consolidated subsidiaries.
Cautionary Statements Regarding Forward-Looking Statements. Management’s Discussion and Analysis of Financial Condition and Results of Operations (“MD&A”) contains forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended (the “Securities Act”), and Section 21E of the Securities Exchange Act of 1934, as amended (the “Exchange Act”). Forward-looking statements are based on management’s current expectations, assumptions and beliefs and may be identified by words such as “could”, “should”, “expect”, “project”, “estimate”, “believe”, “anticipate”, “intend”, “plan”, “forecast”, “predict”, and similar expressions.
Forward-looking statements in this Form 10-Q include, among other things, statements regarding profitability, planned capital expenditures, estimated oil and gas production and reserves, future project dates, future oil and gas prices; future financial condition or results of operations, business strategy, and other plans and objectives for future operations. These statements involve known and unknown risks and uncertainties that could cause actual results to differ materially from those expressed or implied by the forward-looking statements.
Although we believe the expectations and assumptions reflected in these forward-looking statements are reasonable, they are inherently subject to risks, uncertainties, and changes in circumstances that are difficult to predict. Except as required by the Exchange Act and Securities Act, we undertake no obligation to update or revise any forward-looking statements. Readers should review the consolidated financial statements and related notes, as well as the risk factors, included in our Annual Report on Form 10-K.
Liquidity 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. Our primary financial resource is our base of oil and gas reserves. We have pledged our producing oil and gas properties to secure our credit facility. We do not have any delivery commitments to provide a fixed and determinable quantity of our oil and gas under any existing contract or agreement.
Our 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 royalty and working interests and non-operated properties in areas with significant development potential.
Over the next 12 months, we expect to fund operating costs, planned drilling and completion expenditures, and capital calls as they are made from cash on hand, cash generated by operations, and available borrowings under our credit facility. At September 30, 2026, we had $903,819 in cash and cash equivalents and $1,500,000 available under the facility. After quarter-end borrowings and repayments, $325,000 was outstanding as of November 12, 2026. Beyond the next 12 months, we expect operating cash flow to be our primary source of funding for ongoing development and any remaining capital commitments. Our credit facility matures on March 28, 2029.
Cash Flows
Changes 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 Six Months Ended September 30, | ||||||||||||
| 2026 | 2025 | Change | ||||||||||
| Net cash provided by operating activities | $ | 2,424,321 | $ | 2,067,549 | $ | 356,772 | ||||||
| Net cash used in investing activities | $ | (4,091,878 | ) | $ | (870,212 | ) | $ | (3,221,666 | ) | |||
| Net cash used in financing activities | $ | (204,600 | ) | $ | (204,600 | ) | $ | - | ||||
Cash Flow Provided by Operating Activities. Cash flow from operating activities is primarily derived from the production of our crude oil and natural gas reserves and changes in the balances of non-cash accounts, receivables, payables, or other non-energy property asset account balances. Net cash provided by operating activities was $2,424,321 for the six months ended September 30, 2026 compared to $2,067,549 for the six months ended September 30, 2025, an increase of $356,772. The increase was primarily attributable to a $379,695 increase in net income, a $369,410 change in deferred income taxes, and a $104,877 increase in accounts payable and accrued expenses partially offset by a $507,346 change in accounts receivable. Variations in cash flow from operating activities may affect our level of exploration and development expenditures.
Our expenditures in operating activities consist primarily of production expenses, employee compensation, accounting fees, insurance, and other general and administrative costs incurred to support our oil and natural gas operations and public company reporting obligations. Capitalized acquisition, drilling, and development expenditures are classified as investing activities.
Cash Flow Used in Investing Activities. Cash flow from investing activities is derived from changes in oil and gas property balances. For the six months ended September 30, 2026, net cash used for additions to oil and gas and other properties, net of drilling refunds and proceeds from property sales was $3,991,878 compared to net cash for additions to oil and gas properties net of proceeds from property sales of $670,212 for the six months ended September 30, 2025. The increase in capital expenditures reflects our strategy of acquiring royalty interests and participating in drilling opportunities that management believes will enhance long-term reserves and production. For the six months ended September 30, 2026 and 2025, the Company invested $100,000 and $200,000, respectively, in limited liability companies.
Cash Flow Used in Financing Activities. Cash flow from financing activities is derived from changes in long-term debt and in equity account balances. For the six months ended September 30, 2026 and 2025, the Company expended $204,600 to pay the regular annual dividend.
Accordingly, net cash decreased $1,872,157, leaving cash and cash equivalents on hand of $903,819 as of September 30, 2026.
| Page 14 |
We had working capital of $2,194,952 as of September 30, 2026 compared to $3,995,456 at March 31, 2026, a decrease of $1,800,504 for the reasons set forth below.
Oil and Natural Gas Property Development
New Participations in Fiscal 2027. The Company currently plans to participate in the drilling and completion of 55 horizontal wells at an estimated cost of approximately $1,300,000 for the fiscal year ending March 31, 2027. Fifty 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 wells are in Reeves County, Texas.
In May 2026, Mexco expended approximately $400,000 to participate in the drilling and completion of five horizontal wells in the Wolfcamp A formation of the Delaware Basin in Reeves County, Texas. Mexco’s working interest in these wells is .8%.
In July 2026, the Company expended approximately $70,000 to drill and complete three horizontal wells in the Bone Spring formation of the Delaware Basin in Lea County, New Mexico.
Completion of Wells Drilled in Fiscal 2026. The Company also expects to expend approximately $500,000 for the completion of 20 horizontal wells in which the Company participated during fiscal 2026.
The Company expended approximately $330,000 for additional drilling and completion costs of five horizontal wells in the Wolfcamp B formation in the Spraberry trend area of the Midland Basin in Midland and Glasscock Counties, Texas that the Company participated in drilling during fiscal 2026. Mexco’s working interest in these wells is 1.9%.
Two horizontal wells in the Wolfcamp XY formation of the Delaware Basin in Eddy County, New Mexico in which the Company participated during fiscal 2026 were completed in April 2026 with initial average production rates of 607 barrels of oil, 1,295 barrels of water, and 2,170,000 cubic feet of gas per day, or 969 BOE per day. Mexco’s working interest in these wells is approximately 2.1%.
Subsequently, in October 2026, the Company expended approximately $50,000 to drill four horizontal wells in the Bone Spring formation of the Delaware Basin in Lea County, New Mexico.
Investments. In October 2022, the Company made an approximately 2% equity investment commitment in a limited liability company amounting to $2,000,000, which has been fully funded as of July 2025. The limited liability company is capitalized at approximately $100 million to purchase mineral interests in the Utica and Marcellus formations in the state of Ohio. In October 2025, the Company expended $200,000 to exercise its option to participate in a voluntary optional cash call to increase its capitalized investment. In December 2025, the Company expended an additional $27,429 to exercise its option to acquire its share of the non-consenting interests from the October cash call. As of September 30, 2026, this LLC has returned $734,451 or 33% of the total investment.
In July 2026, the Company made an approximately 1% equity investment commitment in another limited liability company amounting to $1,000,000 of which $100,000 has been funded through September 30, 2026. The limited liability company is capitalized at approximately $100 million to acquire non-cost bearing mineral and royalty interests in the Utica Shale play in the state of Ohio.
As of September 30, 2026, the Company had funded $100,000 of its $1,000,000 capital commitment to this limited liability company, leaving an unfunded commitment of $900,000. The remaining commitment is payable as capital calls are made.
Acquisitions. In April 2026, the Company acquired royalty and overriding royalty interests in 82 producing wells in Weld County, Colorado for an aggregate purchase price of $690,900. These acquisitions were effective May 1, 2026.
In April 2026, the Company acquired royalty interests in 62 producing wells in Atascosa, Howard, LaSalle, Martin, and Yoakum Counties, Texas, and additional royalty interests in 3 properties in which we already owned an interest in Howard County, Texas for an aggregate purchase price of $337,700. These acquisitions were effective May 1, 2026.
| Page 15 |
In June 2026, the Company acquired royalty and overriding royalty interests in 32 producing wells in Adams and Larimer Counties, Colorado for an aggregate purchase price of $377,600. These acquisitions are effective July 1, 2026.
In June 2026, the Company acquired royalty interests in 30 producing wells in Karnes, McMullen, Panola, and Winkler Counties, Texas for an aggregate purchase price of $408,700. These acquisitions are effective July 1, 2026.
In June 2026, the Company acquired royalty interests in 9 producing wells and additional royalty interests in 8 properties in which we already owned an interest in Caddo and DeSoto Parishes, Louisiana for an aggregate purchase price of $266,200. These acquisitions are effective July 1, 2026.
In June 2026, the Company acquired overriding royalty interests in 185 producing wells in Ashtabula County, Ohio for a purchase price of $14,100. These acquisitions are effective July 1, 2026.
In August 2026, the Company acquired royalty interests in 42 wells in Columbia, Lafayette, and Van Buren Counties, Arkansas for a purchase price of $39,800. This acquisition was effective September 1, 2026.
In August 2026, the Company acquired royalty and overriding royalty interests in 48 producing wells in Claiborne, DeSoto, Evangeline, and Iberville Parishes, Louisiana for a purchase price of $62,100. This acquisition was effective September 1, 2026.
In August 2026, the Company acquired royalty and overriding royalty interests in 48 producing wells in Eddy County, New Mexico for a purchase price of $50,800. This acquisition was effective September 1, 2026.
In August 2026, the Company acquired royalty and overriding royalty interests in 122 producing wells in Andrews, Dewitt, Ector, Gaines, Gonzales, Henderson, Hidalgo, LaSalle, Live Oak, Martin, and Yoakum Counties, Texas for an aggregate purchase price of $919,600. These acquisitions were effective September 1, 2026.
All of our acquisitions were funded from existing cash resources.
Subsequently, in October 2026, the Company acquired royalty and overriding royalty interests in 977 producing wells in Weld County, Colorado; DeSoto Parish, Louisiana; Uinta County, Wyoming; and various counties in the state of Texas for an aggregate purchase price of $1,191,700. All of these acquisitions are effective November 1, 2026.
Other Projects. We are participating in other projects and are reviewing projects in which we may participate. The cost of such projects would be funded, to the extent possible, from existing cash balances and cash flow from operations. The remainder may be funded through borrowings on the credit facility and, if appropriate, sales of non-core properties.
Pricing. Crude oil and natural gas prices 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 Plains Marketing West Texas Intermediate (“WTI”) Area #1 posted price for crude oil has ranged from a low of $51.25 per bbl in December 2025 to a high of $108.93 per bbl in April 2026. The Henry Hub Spot Market Price (“Henry Hub”) for natural gas has ranged from a low of $2.54 per MMBtu in April 2026 to a high of $30.72 per MMBtu in January 2026, reflecting a temporary price spike during a period of severe weather and significant market volatility.
On September 30, 2026, the WTI posted price for crude oil was $86.40 and the Henry Hub spot price for natural gas was $3.02 per MMBtu. See Results of Operations below for realized prices. Pipeline capacity constraints and maintenance in the Permian Basin area have contributed to a wider difference between the Waha Hub and the Henry Hub, and at times prices were negative.
| Page 16 |
Contractual Obligations. We have no off-balance sheet debt or unrecorded obligations and have not guaranteed the debt of any other party. The following table summarizes our future payments we are obligated to make based on agreements in place as of September 30, 2026:
| Payments due in: | ||||||||||||||||
| Total | less than 1 year | 1 - 3 years | over 3 years | |||||||||||||
| Contractual obligations: | ||||||||||||||||
| Leases (1) | $ | 50,267 | $ | 50,267 | $ | - | $ | - | ||||||||
| (1) | 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. Of this total obligation for the remainder of the lease, our majority shareholder will pay $8,479 within 1 year for his portion of the shared office space. |
Results of Operations – Three Months Ended September 30, 2026 Compared to Three Months Ended September 30, 2025. There was net income of $444,087 for the quarter ended September 30, 2026 compared to net income of $323,506 for the quarter ended September 30, 2025. This was the result of an increase in operating revenues partially offset by an increase in operating expenses, which is further explained below.
Oil and gas sales. Revenue from oil and gas sales was $2,116,397 for the second quarter of fiscal 2027, a 30% increase from $1,624,566 for the same period of fiscal 2026. This resulted from an increase in oil and gas prices and an increase in oil and gas production. The following table sets forth our oil and natural gas revenues, production quantities and average prices received during the three months ended September 30:
| 2026 | 2025 | % Difference | ||||||||||
| Oil: | ||||||||||||
| Revenue | $ | 1,756,033 | $ | 1,302,105 | 34.9 | % | ||||||
| Volume (bbls) | 20,187 | 20,114 | 0.4 | % | ||||||||
| Average Price (per bbl) | $ | 86.99 | $ | 64.74 | 34.4 | % | ||||||
| Gas: | ||||||||||||
| Revenue | $ | 360,364 | $ | 322,461 | 11.8 | % | ||||||
| Volume (mcf) | 184,631 | 171,058 | 7.9 | % | ||||||||
| Average Price (per mcf) | $ | 1.95 | $ | 1.89 | 3.2 | % | ||||||
Income from investments in LLCs. Income from investments in LLCs decreased 32% to $71,193 for the quarter ended September 30, 2026 from $105,103 for the quarter ended September 30, 2025. This decrease resulted primarily from lower earnings from the Company’s limited liability companies.
Interest income. Interest income on corporate funds decreased 81% to $3,861 for the quarter ended September 30, 2026 from $20,126 for the quarter ended September 30, 2025. This decrease resulted from a change in our average cash balances.
Production and exploration. Production costs were $454,907 for the three months ended September 30, 2026, a 23% increase from $369,093 for the three months ended September 30, 2025. This was primarily due to an increase in lease operating expenses on wells in which we own a working interest.
Depreciation, depletion and amortization. Depreciation, depletion and amortization expense was $715,175 for the three months ended September 30, 2026, an 8% increase from $662,647 for the three months ended September 30, 2025. This was primarily due to an increase in oil and gas production volumes and an increase in the full cost amortization base partially offset by an increase in oil and gas reserves.
General and administrative expenses. General and administrative expenses were $368,903 for the three months ended September 30, 2026, an 11% increase from $332,264 for the three months ended September 30, 2025. This was primarily due to an increase in legal fees, subscriptions and dues, and costs related to the shareholders’ annual meeting partially offset by a decrease in stock option compensation.
Income taxes. Income tax for the three months ended September 30, 2026 was $202,328 compared to $58,235 for the three months ended September 30, 2025. The combined federal and state effective tax rate for the three months ended September 30, 2026 and 2025 was 31% and 15%, respectively. See Note 7 – Income Taxes to the Notes to Consolidated Financial Statements for additional information.
| Page 17 |
Results of Operations – Six Months Ended September 30, 2026 Compared to Six Months Ended September 30, 2025. For the six months ended September 30, 2026, there was net income of $945,152 compared to net income of $565,457 for the six months ended September 30, 2025. This was the result of an increase in operating revenues partially offset by an increase in operating expenses that is further explained below.
Oil and gas sales. Revenue from oil and gas sales was $4,094,555 for the six months ended September 30, 2026, a 21% increase from $3,379,300 for the six months ended September 30, 2025. This resulted from an increase in oil prices partially offset by a decrease in gas prices and oil and gas production. The following table sets forth our oil and natural gas revenues, production quantities and average prices received during the six months ended September 30:
| 2026 | 2025 | % Difference | ||||||||||
| Oil: | ||||||||||||
| Revenue | $ | 3,567,216 | $ | 2,698,042 | 32.2 | % | ||||||
| Volume (bbls) | 38,989 | 42,124 | (7.4 | %) | ||||||||
| Average Price (per bbl) | $ | 91.49 | $ | 64.05 | 42.8 | % | ||||||
| Gas: | ||||||||||||
| Revenue | $ | 527,339 | $ | 681,258 | (22.6 | %) | ||||||
| Volume (mcf) | 340,058 | 340,963 | (0.3 | %) | ||||||||
| Average Price (per mcf) | $ | 1.55 | $ | 2.00 | (22.5 | %) | ||||||
Income from investments in LLCs. Income from investments in LLCs increased 15% to $186,447 for the six months ended September 30, 2026 from $162,339 for the six months ended September 30, 2025. This increase resulted primarily from higher earnings from the Company’s limited liability companies.
Interest income. Interest income on corporate funds decreased 46% to $18,713 for the six months ended September 30, 2026 from $34,657 for the six months ended September 30, 2025. This decrease resulted from a change in our average cash balances.
Production and exploration. Production costs were $865,913 for the six months ended September 30, 2026, a 12% increase from $773,863 for the six months ended September 30, 2025. This was primarily the result of an increase in lease operating expenses on wells in which we own a working interest.
Depreciation, depletion and amortization. Depreciation, depletion and amortization expense was $1,321,696 for the six months ended September 30, 2026, a 1% decrease from $1,337,917 for the six months ended September 30, 2025, primarily due to a decrease in oil and gas production volumes and an increase in oil and gas reserves partially offset by an increase in full cost amortization base.
General and administrative expenses. General and administrative expenses were $758,732 for the six months ended September 30, 2026, a 4% increase from $726,701 for the six months ended September 30, 2025. This was primarily due to an increase in legal fees, subscriptions and dues, and accounting fees partially offset by a decrease in stock option compensation.
Income taxes. Income tax for the six months ended September 30, 2026 was $397,638 compared to $161,466 for the six months ended September 30, 2025. The combined federal and state effective tax rate for the six months ended September 30, 2026 and 2025 was 30% and 22%, respectively. See Note 7 – Income Taxes to the Notes to Consolidated Financial Statements for additional information.
Item 3. Quantitative and Qualitative Disclosures About Market Risk
The primary source of market risk for us includes fluctuations in commodity prices and interest rates. All of our financial instruments are for purposes other than trading.
Credit Risk. Credit risk is the risk of loss as a result of nonperformance by other parties of their contractual obligations. Our primary credit risk relates to oil and gas production sold to various purchasers and the receivables are generally not collateralized. At September 30, 2026, our three largest purchasers accounted for approximately 24%, 21% and 12%, respectively, of our total oil and gas receivables. We have not experienced any significant credit losses.
| Page 18 |
Energy Price Risk. Our most significant market risk is the pricing applicable to our crude oil and natural gas production. Our financial condition, results of operations, and capital resources are highly dependent on the prevailing market prices of, and demand for, oil and natural gas. Prices for oil and natural gas production have been volatile and unpredictable for several years, and we expect this volatility to continue in the future.
Factors that can cause price fluctuations include the level of global demand for petroleum products, foreign and domestic supply of oil and gas, the establishment of and compliance with production quotas by oil-exporting countries, weather conditions, the price and availability of alternative fuels, and overall political and economic conditions in oil producing and consuming countries.
For example, in the last twelve months, the Plains Marketing West Texas Intermediate Area #1 posted price for crude oil has ranged from a low of $51.25 per bbl in December 2025 to a high of $108.93 per bbl in April 2026. The Henry Hub Spot Market Price (“Henry Hub”) for natural gas has ranged from a low of $2.54 per MMBtu in April 2026 to a high of $30.72 per MMBtu in January 2026, reflecting a temporary price spike during a period of severe weather and significant market volatility.
Pipeline capacity constraints and maintenance in the Permian Basin area have contributed to a wider difference between the Waha Hub and the Henry Hub, and at times realized prices were negative.
Declines in oil and natural gas prices will materially adversely affect our financial condition, liquidity, ability to obtain financing, and operating results. Changes in oil and gas prices affect both estimated future net revenues and the estimated quantity of proved reserves. Any reduction in reserves, including reductions due to price fluctuations, can reduce the borrowing base under our credit facility and adversely affect the amount of cash flow available for capital expenditures and our ability to obtain additional capital for our acquisition, exploration, and development activities. In addition, a noncash write-down of our oil and gas properties could be required under full cost accounting rules if prices declined significantly, even if it is only for a short period of time. Lower prices may also reduce the amount of crude oil and natural gas that can be produced economically. Thus, we may experience material increases or decreases in reserve quantities solely as a result of price changes, not drilling or well performance.
Similarly, any improvements in oil and gas prices can have a favorable impact on our financial condition, results of operations, and capital resources. Oil and natural gas prices do not necessarily fluctuate in direct relationship to each other. If the average oil price had increased or decreased by ten dollars per barrel for the six months ended September 30, 2026, our oil sales would have changed by $389,890. If the average gas price had increased or decreased by one dollar per mcf for the six months ended September 30, 2026, our natural gas sales would have increased or decreased by $340,058.
Item 4. Controls and Procedures
Evaluation of Disclosure Controls and Procedures. We maintain disclosure controls and procedures to ensure that the information we must disclose in our filings with the SEC is recorded, processed, summarized, and reported on a timely basis. At the end of the period covered by this report, our principal executive officer and principal financial officer reviewed and evaluated the effectiveness of our disclosure controls and procedures, as defined in Exchange Act Rules 13a-15(e). Based on such evaluation, such officers concluded that, as of September 30, 2026, our disclosure controls and procedures were effective.
Changes in Internal Control over Financial Reporting. No changes in the Company’s internal control over financial reporting occurred during the three months ended September 30, 2026 that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.
| Page 19 |
PART II – OTHER INFORMATION
Item 1. Legal Proceedings
We may, from time to time, be a party to legal proceedings and claims arising in the ordinary course of business. As of September 30, 2026, the Company is not involved in any legal proceedings that management believes would have a material adverse effect on its financial condition, results of operations, or liquidity.
Item 1A. Risk Factors
There have been no material changes to the information previously disclosed in Item 1A. “Risk Factors” in our 2026 Annual Report on Form 10-K.
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds
c. Issuer Purchases of Equity Securities
The following table provides information related to repurchases of our common stock for the treasury account during the three months ended September 30, 2026:
| Total Number of Shares Purchased | Average Price Paid per Share | Total Number of Shares Purchased as Part of Publicly Announced Program | Approximate Dollar Value of Shares that May Yet be Purchased Under the Program | |||||||||||||
| July 1-31, 2026 | - | - | - | $ | 546,784 | |||||||||||
| August 1-31, 2026 | - | - | - | $ | 546,784 | |||||||||||
| September 1-30, 2026 | - | - | - | $ | 546,784 | |||||||||||
Item 6. Exhibits
| 10.7* | Mexco Energy Corporation Amended and Restated 2019 Employee Incentive Stock Plan, filed as Exhibit A to the Company’s Definitive Proxy Statement on Schedule 14A filed on July 30, 2026, and incorporated herein by reference. | |
| 10.8* | Form of Award Agreement under the Mexco Energy Corporation Amended and Restated 2019 Employee Incentive Stock Plan (Four-Year Vesting Schedule), filed as Exhibit 10.1 to the Company’s Current Report on Form 8-K filed on September 10, 2026, and incorporated herein by reference. | |
| 10.9* | Form of Award Agreement under the Mexco Energy Corporation Amended and Restated 2019 Employee Incentive Stock Plan (One-Third Vesting on Grant Date and Each of First Two Anniversaries), filed as Exhibit 10.2 to the Company’s Current Report on Form 8-K filed on September 10, 2026, and incorporated herein by reference. | |
| 31.1 | Certification of the Chief Executive Officer of Mexco Energy Corporation | |
| 31.2 | Certification of the Chief Financial Officer of Mexco Energy Corporation | |
| 32.1 | Certification of the Chief Executive Officer and Chief Financial Officer of Mexco Energy Corporation pursuant to 18 U.S.C. §1350 | |
| 101.INS | Inline XBRL Instance Document | |
| 101.SCH | XBRL Taxonomy Extension Schema Document | |
| 101.CAL | XBRL Taxonomy Extension Calculation Linkbase Document | |
| 101.DEF | XBRL Taxonomy Extension Definition Linkbase Document | |
| 101.LAB | XBRL Taxonomy Extension Label Linkbase Document | |
| 101.PRE | XBRL Taxonomy Extension Presentation Linkbase Document | |
| 104 | Cover Page Interactive Data File (embedded within the Inline XBRL and contained in Exhibit 101) |
* Management contract or compensatory plan or arrangement.
| Page 20 |
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.
| MEXCO ENERGY CORPORATION | |
| (Registrant) | |
| Dated: November 12, 2026 | /s/ Nicholas C. Taylor |
| Nicholas C. Taylor | |
| Chairman of the Board and Chief Executive Officer | |
| Dated: November 12, 2026 | /s/ Tamala L. McComic |
| Tamala L. McComic | |
| President, Chief Financial Officer, Treasurer and Assistant Secretary |
| Page 21 |