[10-Q] MEXCO ENERGY CORP Quarterly Earnings Report
Mexco Energy (MXC) reported Q2 results for the quarter ended September 30, 2025. Total operating revenues were $1,734,743, with operating income of $362,696 and net income of $323,506, or diluted EPS of $0.16. Oil revenue declined as prices fell, while gas revenue rose on higher volumes and better pricing. Production costs decreased 11% and DD&A increased 13%.
For the first six months, revenues were $3,548,919 and net income was $565,457, or diluted EPS of $0.27. Operating cash flow reached $2,067,549, funding $676,601 of additions to oil and gas properties and a
- None.
- None.
Insights
Stable quarter: flat revenue, steady profits, strong liquidity.
Mexco Energy posted Q2 operating revenues of
Liquidity remains sound: cash was
Actual activity hinges on commodity prices and operator schedules. Subsequent filings may detail the ~
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)
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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 ☐
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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, 2025 (Unaudited) and March 31, 2025 | 3 | ||
| Consolidated Statements of Operations (Unaudited) for the three months and six months ended September 30, 2025 and September 30, 2024 | 4 | ||
| Consolidated Statements of Changes in Stockholders’ Equity (Unaudited) for the three and six months ended September 30, 2025 and September 30, 2024 | 5 | ||
| Consolidated Statements of Cash Flows (Unaudited) for the six months ended September 30, 2025 and September 30, 2024 | 6 | ||
| Notes to Consolidated Financial Statements (Unaudited) | 7 | ||
| Item 2. | Management’s Discussion and Analysis of Financial Condition and Results of Operations |
13 | |
| Item 3. | Quantitative and Qualitative Disclosures About Market Risk | 17 | |
| Item 4. | Controls and Procedures | 18 | |
| PART II. OTHER INFORMATION | |||
| Item 1. | Legal Proceedings | 19 | |
| Item 1A. | Risk Factors | 19 | |
| Item 2. | Unregistered Sales of Equity Securities and Use of Proceeds | 19 | |
| Item 6. | Exhibits | 19 | |
| SIGNATURES | 20 | ||
| CERTIFICATIONS | 21 | ||
| Page 2 |
PART I – FINANCIAL INFORMATION
Item 1. Financial Statements
Mexco
Energy Corporation and Subsidiaries
CONSOLIDATED BALANCE SHEETS
| September 30, | March 31, | |||||||
| 2025 | 2025 | |||||||
| (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)
| 2025 | 2024 | 2025 | 2024 | |||||||||||||
| Three Months Ended | Six Months Ended | |||||||||||||||
| September 30, | September 30, | |||||||||||||||
| 2025 | 2024 | 2025 | 2024 | |||||||||||||
| 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): | ||||||||||||||||
| Interest income | ||||||||||||||||
| Interest expense | ( | ) | ( | ) | ( | ) | ( | ) | ||||||||
| Net other income (expense) | ||||||||||||||||
| 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, 2025 | $ | $ | $ | $ | ( | ) | $ | |||||||||||||
| Net income | - | - | - | |||||||||||||||||
| Dividends paid | - | - | ( | ) | - | ( | ) | |||||||||||||
| Stock-based compensation | - | - | - | |||||||||||||||||
| Balance at June 30, 2025 | $ | $ | $ | $ | ( | ) | $ | |||||||||||||
| Net income | - | - | - | |||||||||||||||||
| Stock-based compensation | - | - | - | |||||||||||||||||
| Balance at September 30, 2025 | $ | $ | $ | $ | ( | ) | $ | |||||||||||||
| Common Stock Par Value | Additional Paid-In Capital | Retained Earnings | Treasury Stock | Total Stockholders’ Equity | ||||||||||||||||
| Balance at April 1, 2024 | $ | $ | $ | $ | ( | ) | $ | |||||||||||||
| Net income | - | - | - | |||||||||||||||||
| Dividends paid | ( | ) | ( | ) | ||||||||||||||||
| Issuance of stock through options exercised | - | - | ||||||||||||||||||
| Purchase of stock | - | - | - | ( | ) | ( | ) | |||||||||||||
| Stock-based compensation | - | - | - | |||||||||||||||||
| Balance at June 30, 2024 | $ | $ | $ | $ | ( | ) | $ | |||||||||||||
| Balance | $ | $ | $ | $ | ( | ) | $ | |||||||||||||
| Net income | - | - | - | |||||||||||||||||
| Purchase of stock | - | - | - | ( | ) | ( | ) | |||||||||||||
| Stock-based compensation | - | - | - | |||||||||||||||||
| Balance at September 30, 2024 | $ | $ | $ | $ | ( | ) | $ | |||||||||||||
| Balance | $ | $ | $ | $ | ( | ) | $ | |||||||||||||
| SHARE ACTIVITY | ||||||||||||||||||||
| Common stock shares, issued: | ||||||||||||||||||||
| Balance at April 1, 2025 | ||||||||||||||||||||
| Issued | - | |||||||||||||||||||
| Balance at September 30, 2025 | ||||||||||||||||||||
| Common stock shares, held in treasury: | ||||||||||||||||||||
| Balance at April 1, 2025 | ( | ) | ||||||||||||||||||
| Acquisitions | - | |||||||||||||||||||
| Balance at September 30, 2025 | ( | ) | ||||||||||||||||||
| Common stock shares, outstanding at September 30, 2025 |
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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)
| 2025 | 2024 | |||||||
| Cash flows from operating activities: | ||||||||
| Net income | $ | $ | ||||||
| Adjustments to reconcile net income to net cash provided by operating activities: | ||||||||
| Deferred income tax (benefit) expense | ( | ) | ||||||
| Stock-based compensation | ||||||||
| Depreciation, depletion and amortization | ||||||||
| Accretion of asset retirement obligations | ||||||||
| Amortization of debt issuance costs | ||||||||
| Changes in operating assets and liabilities: | ||||||||
| Decrease in accounts receivable | ||||||||
| Decrease (increase) in right-of-use asset | ( | ) | ||||||
| Decrease in prepaid expenses | ||||||||
| (Decrease) increase in accounts payable and accrued expenses | ( | ) | ||||||
| Settlement of asset retirement obligations | ( | ) | ( | ) | ||||
| Decrease in income taxes payable | ( | ) | ( | ) | ||||
| (Increase) decrease in operating lease liability | ( | ) | ||||||
| Net cash provided by operating activities | ||||||||
| Cash flows from investing activities: | ||||||||
| Additions to oil and gas properties | ( | ) | ( | ) | ||||
| 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: | ||||||||
| Proceeds from exercise of stock options | - | |||||||
| Acquisition of treasury stock | - | ( | ) | |||||
| Dividends paid | ( | ) | ( | ) | ||||
| Net cash used in financing activities | ( | ) | ( | ) | ||||
| Net increase (decrease) 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, 2025, and the results of its operations and cash flows for the interim periods ended September 30, 2025 and 2024. The consolidated financial statements as of September 30, 2025 and for the three and six month periods ended September 30, 2025 and 2024 are unaudited. The consolidated balance sheet as of March 31, 2025 was derived from the audited balance sheet filed in the Company’s 2025 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 uses the full cost method of accounting for its oil and natural gas properties. Under this method, all acquisition, exploration, and development costs are capitalized and amortized on a composite unit of production method based on proved oil and natural gas reserves. This includes any internal costs that are directly related to exploration and development activities but does not include any costs related to production, general corporate overhead or similar activities. The carrying amount of oil and gas properties also includes estimated asset retirement costs recorded based on the fair value of the asset retirement obligation (“ARO”) when incurred. Sales of oil and natural gas properties, whether or not being amortized currently, are accounted for as adjustments of capitalized costs, with no gain or loss recognized, unless such adjustments would significantly alter the relationship between capitalized costs and proved reserves of oil and natural gas. This includes any sales of properties such as Term Assignments and Assignments, Bill of Sales and Conveyances. Depletion of evaluated oil and natural gas properties is computed on the units 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.
| Page 7 |
Investments.
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.
Based on the Company’s organizational structure, the Company has
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 2026:
Schedule of Rollforward of Asset Retirement Obligations
| Carrying amount of asset retirement obligations as of April 1, 2025 | $ | |||
| Liabilities incurred | ||||
| Liabilities settled | ( | ) | ||
| Accretion expense | ||||
| Carrying amount of asset retirement obligations as of September 30, 2025 | ||||
| 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.
| Page 8 |
In addition, this Agreement prohibits the Company from paying cash dividends on its common stock without written permission of WTNB. The Company obtained written permission from WTNB prior to declaring the regular annual dividend on May 13, 2025 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.
On
September 17, 2025, WTNB reaffirmed the borrowing base at $
5. Stock-based Compensation
The
Company recognized stock-based compensation expense of $
During
the six months ended September 30, 2025 and 2024,
The following table is a summary of activity of stock options for the six months ended September 30, 2025:
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, 2025 | $ | $ | - | |||||||||||||
| Granted | - | - | ||||||||||||||
| Exercised | - | - | ||||||||||||||
| Forfeited or Expired | - | - | ||||||||||||||
| Outstanding at September 30, 2025 | $ | $ | - | |||||||||||||
| Vested at September 30, 2025 | $ | $ | ||||||||||||||
| Exercisable at September 30, 2025 | $ | $ | ||||||||||||||
During
the six months ended September 30, 2025, there were
No
forfeiture rate is assumed for stock options granted to directors or employees due to the forfeiture rate history of these types of awards.
There were
Outstanding
options at September 30, 2025
| Page 9 |
6. Leases
The
Company leases approximately
The Company determines an arrangement is a lease at inception. Operating leases are recorded in 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 of the renewal was
The balance sheets classification of lease assets and liabilities was as follows:
Schedule of Operating Lease Assets and Liabilities
| September 30, 2025 | ||||
| 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, 2025 under non-cancellable operating leases are as follows:
Schedule of Future Minimum Lease Payments
| Lease Obligation | ||||
| Fiscal Year Ended March 31, 2026 | ||||
| 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, 2025 and 2024 was $
7. Income Taxes
On July 4, 2025, the “One Big Beautiful Bill” (“OBBB”) was enacted. The OBBB is a significant piece of legislation that includes significant changes to federal tax policy, environmental funding, and energy development regulations. Key provisions relevant to the crude oil and natural gas industry include (i) tax policy changes that extend and expand components of the 2017 Tax Cuts and Jobs Act and (ii) the introduction of fee and royalty-related provisions aimed at reducing financial and administrative burdens on domestic energy producers. The Company is currently evaluating the full impact of the OBBB on the Company’s condensed consolidated balance sheets, condensed consolidated statements of operations and condensed consolidated statements of cash flows in its condensed consolidated financial statements.
| Page 10 |
The income tax provision consists of the following for the six months ended September 30, 2025 and 2024:
Schedule of Income Tax Provision
| 2025 | 2024 | |||||||
| Six Months Ended | ||||||||
| September 30 | ||||||||
| 2025 | 2024 | |||||||
| 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: | $ | $ | ||||||
A reconciliation of the provision for income taxes to income taxes computed using the federal statutory rate for the six months ended September 30 follows:
Schedule of Reconciliation of Provision for Income Taxes
| 2025 | 2024 | |||||||
| Tax expense at federal statutory rate (1) | $ | $ | ||||||
| Statutory depletion carryforward | ( | ) | - | |||||
| Change in valuation allowance | - | - | ||||||
| Permanent differences | ||||||||
| State income expense, net of federal benefit | ||||||||
| Other | - | |||||||
| Total income tax | ||||||||
| Effective income tax rate | % | % | ||||||
| (1) |
Total income tax expense from continuing operations for the six months ended September 30, 2025 and 2024 differed from amounts computed by applying the U.S. federal statutory tax rate to pre-tax income primarily due to state income taxes, net of federal benefit, and the impact of permanent differences between book and taxable income.
8. Related Party Transactions
Related
party transactions for the Company primarily relate to shared office expenditures in addition to administrative and operating expenses
paid on behalf of the principal stockholder. The total billed to and reimbursed by the stockholder for the three months ended September
30, 2025 and 2024 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, 2025 and 2024.
Schedule of Reconciliation of Basic and Diluted Net Income (Loss) Per Share
| 2025 | 2024 | 2025 | 2024 | |||||||||||||
| Three Months Ended | Six Months Ended | |||||||||||||||
| September 30, | September 30, | |||||||||||||||
| 2025 | 2024 | 2025 | 2024 | |||||||||||||
| 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 | $ | $ | $ | $ | ||||||||||||
| Page 11 |
For
the three and six months ended September 30, 2025,
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, 2025, there were
On
May 13, 2025, the Board of Directors declared a regular annual of $
Dividends declared by the Board and stock repurchased during the period are presented in the Company’s consolidated statements of changes in stockholders’ equity as dividends paid and purchases of treasury stock, respectively. Dividends paid and stock repurchased during the period are presented as cash used in financing activities in the Company’s consolidated statements of cash flows. Stock repurchases are included as treasury stock in the consolidated balance sheets.
11. Acquisitions
In
May 2025, the Company acquired royalty (mineral) interests in
In
August 2025, the Company acquired royalty interests in
Subsequently,
in October 2025, the Company acquired royalty interests in
| Page 12 |
12. Subsequent Events
In
October 2025, the Company expended approximately $
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.
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 include statements regarding our plans, beliefs or current expectations and may be signified by the words “could”, “should”, “expect”, “project”, “estimate”, “believe”, “anticipate”, “intend”, “budget”, “plan”, “forecast”, “predict”, and other similar expressions. Forward-looking statements appear throughout this Form 10-Q with respect to, among other things: profitability; planned capital expenditures; estimates of oil and gas production; future project dates; estimates of future oil and gas prices; estimates of oil and gas reserves; our future financial condition or results of operations; our business strategy and other plans; and, objectives for future operations. Forward-looking statements involve known and unknown risks and uncertainties that could cause actual results to differ materially from those contained in any forward-looking statement.
While we have made assumptions that we believe are reasonable, the assumptions that support our forward-looking statements are based upon information that is currently available and is subject to change. All forward-looking statements in this Form 10-Q are qualified in their entirety by the cautionary statement contained in this section. 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 consolidated financial statements and notes thereto included in the 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 in non-operated properties in areas with significant development potential.
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, | ||||||||||||
| 2025 | 2024 | Change | ||||||||||
| Net cash provided by operating activities | $ | 2,067,549 | $ | 2,006,405 | $ | 61,144 | ||||||
| Net cash used in investing activities | $ | (870,212 | ) | $ | (2,066,957 | ) | $ | (1,196,745 | ) | |||
| Net cash used in financing activities | $ | (204,600 | ) | $ | (834,575 | ) | $ | (629,975 | ) | |||
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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. Cash flow provided by our operating activities for the six months ended September 30, 2025 was $2,067,549 in comparison to $2,006,405 for the six months ended September 30, 2024. This increase of $61,144 in our cash flow operating activities consisted of an decrease in our non-cash expenses of $38,080; an increase in our accounts receivable of $167,957; a decrease of $26,351 in our accounts payable and accrued expenses; and, a decrease in our net income of $42,780. Variations in cash flow from operating activities may impact our level of exploration and development expenditures.
Our expenditures in operating activities consist primarily of drilling expenses, production expenses, and engineering services. Our expenses 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.
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, 2025, we had net cash of $870,212 used for additions to oil and gas properties compared to $2,066,957 for the six months ended September 30, 2024.
Cash 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 six months ended September 30, 2025 compared to $834,575 for the six months ended September 30, 2024. During the six months ended September 30, 2025, we expended $204,600 to pay the regular annual dividend. During the six months ended September 30, 2024, we expended $703,216 to purchase 57,766 shares of stock for the treasury account, $209,000 to pay the special dividend and received $77,641 from the exercise of stock options.
Accordingly, net cash increased $992,737, leaving cash and cash equivalents on hand of $2,746,692 as of September 30, 2025.
At September 30, 2025, we had working capital of $3,282,347 compared to working capital of $2,469,664 at March 31, 2025, an increase of $812,683 for the reasons set forth below.
Oil and Natural Gas Property Development
New Participations in Fiscal 2026. The Company currently plans to participate in the drilling and completion of forty-six horizontal wells and one vertical well at an estimated cost of approximately $1,000,000 for the fiscal year ending March 31, 2026. Forty-five 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 Reagan and Ward Counties, Texas.
Mexco expended approximately $166,000 to participate in the drilling of five horizontal wells in the Bone Spring formation of the Delaware Basin in Eddy County, New Mexico. Subsequently, in October 2025, two of these wells were completed with initial average production rates of 1,194 barrels of oil, 2,924 barrels of water, and 1,819,000 cubic feet of gas per day, or 1,497 BOE per day. Mexco’s working interest in these wells is .5%.
Mexco expended approximately $79,000 to drill and complete two horizontal wells in the Bone Spring formation of the Delaware Basin in Lea County, New Mexico. In August 2025, these wells were completed with initial average production rates of 741 barrels of oil, 3,276 barrels of water, and 1,110,000 cubic feet of gas per day, or 926 BOE per day. Mexco’s working interest in these wells is .3%.
In September 2025, Mexco expended approximately $70,000 to participate in the drilling of three horizontal wells in the Wolfcamp Sand Formation of the Delaware Basin in Lea County, New Mexico. Mexco’s working interest in these wells is .52%.
Completion of Wells Drilled in Fiscal 2025. The Company also expects to expend approximately $150,000 for the completion of seventeen horizontal wells in which the Company participated during fiscal 2025.
The 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. In May 2025, these wells were completed with initial average production rates of 1,375 barrels of oil, 3,499 barrels of water, and 1,934,000 cubic feet of gas per day, or 1,697 BOE per day. Mexco’s working interest in these wells is .16%.
Two 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 during the first six months of fiscal 2026 with initial average production rates of 805 barrels of oil, 2,142 barrels of water, and 721,000 cubic feet of gas per day, or 925 BOE per day. Mexco’s working interest in these wells is approximately .5%.
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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. In September 2025, these wells were completed with initial average production rates of 955 barrels of oil, 1,340 barrels of water, and 608,000 cubic feet of gas per day, or 1,056 BOE per day. Mexco’s working interest in these wells is .28%.
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 September 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. As of September 30, 2025, this LLC has returned $401,801 or 20% of the total investment. Subsequently, in October 2025, the Company expended $200,000 to exercise its option to participate in a voluntary optional cash call increasing the capitalized investment.
Acquisitions. 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. This acquisition was effective April 1, 2025 and includes acreage for future development.
In August 2025, the Company acquired royalty interests in 12 producing wells operated by Diamondback E & P and located in Martin County, Texas for a purchase price of $60,000 and royalty interests in 25 wells operated by Chevron USA and located in Weld County, Colorado for a purchase price of $26,000. These acquisitions were effective September 1, 2025.
Subsequently, in October 2025, the Company acquired royalty interests in 3 producing wells operated by Expand Operating and located in Caddo Parish, Louisiana for a purchase price of $31,000; royalty interests in 14 producing wells wells operated by Diamondback E & P and located in Martin County, Texas for a purchase price of $44,000; royalty interests in 3 producing wells operated by Permian Resources and located in Eddy County, New Mexico for a purchase price of $7,000; and, overriding royalty interest in 4 producing wells operated by Tap Rock Operating and located in Eddy County, New Mexico for a purchase price of $240,000. All of these acquisitions are effective November 1, 2025.
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.
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 $53.11 per bbl in May 2025 to a high of $76.02 per bbl in January 2025. 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 $7.15 per MMBtu in February 2025.
On September 30, 2025, the WTI posted price for crude oil was $58.35 and the Henry Hub spot price for natural gas was $3.12 per MMBtu. See 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.
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, 2025:
| Payments due in: | ||||||||||||||||
| Total | less than 1 year | 1 - 3 years | over 3 years | |||||||||||||
| Contractual obligations: | ||||||||||||||||
| Leases (1) | $ | 110,587 | $ | 60,320 | $ | 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 $10,175 less than 1 year and $8,479 1-3 years for his portion of the shared office space. |
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Results of Operations – Three Months Ended September 30, 2025 Compared to Three Months Ended September 30, 2024. There was net income of $323,506 for the quarter ended September 30, 2025 compared to net income of $317,198 for the quarter ended September 30, 2024. This was a result of a decrease in the provision for income taxes partially offset by a decrease in oil and gas revenues and an increase in operating expense that is further explained below.
Oil and gas sales. Revenue from oil and gas sales was $1,624,566 for the second quarter of fiscal 2026, a 4% decrease from $1,695,853 for the same period of fiscal 2025. This resulted from a decrease in oil price partially offset by an increase in gas price and 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:
| 2025 | 2024 | % Difference | ||||||||||
| Oil: | ||||||||||||
| Revenue | $ | 1,302,105 | $ | 1,521,618 | (14.4 | %) | ||||||
| Volume (bbls) | 20,114 | 20,325 | (1.0 | %) | ||||||||
| Average Price (per bbl) | $ | 64.74 | $ | 74.86 | (13.5 | %) | ||||||
| Gas: | ||||||||||||
| Revenue | $ | 322,461 | $ | 174,235 | 85.1 | % | ||||||
| Volume (mcf) | 171,058 | 133,984 | 27.7 | % | ||||||||
| Average Price (per mcf) | $ | 1.89 | $ | 1.30 | 45.4 | % | ||||||
Other operating revenues. Other revenues increased 106% to $110,177 for the quarter ended September 30, 2025 from $53,374 for the quarter ended September 30, 2024. This resulted from an increase in income from our most recent limited liability company investment.
Production and exploration. Production costs were $369,093 for the second quarter of fiscal 2026, an 11% decrease from $413,405 for the same period of fiscal 2025. This was primarily the result of a decrease in lease operating expenses on wells in which we own a working interest and a decrease in production taxes due to the decrease in oil revenue partially offset by the increase in gas revenue.
Depreciation, depletion and amortization. Depreciation, depletion and amortization expense was $662,647 for the second quarter of fiscal 2026, a 13% increase from $584,288 for the same period of fiscal 2025, primarily due to a a decrease in the full cost pool amortization base, an increase in gas production volumes and a decrease in oil and gas reserves partially offset by a decrease in the full cost amortization base.
General and administrative expenses. General and administrative expenses were $332,264 for the second quarter of fiscal 2026, a 1% decrease from $334,525 for the same period of fiscal 2025. This was primarily due to a decrease in contract services.
Income taxes. Federal income tax for the three months ended September 30, 2025 was $31,001. Federal income tax for the three months ended September 30, 2024 was $84,833. State income tax was $27,234 for the three months ended September 30, 2025, a 1% increase from $26,920 for the three months ended September 30, 2024. The effective tax rate for the three months ended September 30, 2025 and 2024 was 15% and 26%, respectively.
Results of Operations – Six Months Ended September 30, 2025 Compared to Six Months Ended September 30, 2024. For the six months ended September 30, 2025, there was net income of $565,457 compared to net income of $608,237 for the six months ended September 30, 2024. This was a result of an increase in operating revenues partially offset by an increase in operating expenses that is further explained below.
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Oil and gas sales. Revenue from oil and gas sales was $3,379,300 for the six months ended September 30, 2025, a decrease from $3,383,909 for the same period of fiscal 2025. This resulted from a decrease in oil prices partially offset an increase in oil and gas production and an increase in gas prices. The following table sets forth our oil and natural gas revenues, production quantities and average prices received during the six months ended September 30:
| 2025 | 2024 | % Difference | ||||||||||
| Oil: | ||||||||||||
| Revenue | $ | 2,698,042 | $ | 3,031,922 | (11.0 | %) | ||||||
| Volume (bbls) | 42,124 | 39,234 | 7.4 | % | ||||||||
| Average Price (per bbl) | $ | 64.05 | $ | 77.28 | (17.1 | %) | ||||||
| Gas: | ||||||||||||
| Revenue | $ | 681,258 | $ | 351,987 | 93.5 | % | ||||||
| Volume (mcf) | 340,963 | 270,291 | 26.1 | % | ||||||||
| Average Price (per mcf) | $ | 2.00 | $ | 1.30 | 53.7 | % | ||||||
Other operating revenues. Other revenues increased 82% to $169,619 for the six months ended September 30, 2025 from $93,153 for the six months ended September 30, 2024. This resulted from an increase in income from our most recent limited liability company investment.
Production and exploration. Production costs were $773,863 for the six months ended September 30, 2025, a 9% decrease from $850,825 for the six months ended September 30, 2024. This was primarily the result of a decrease in lease operating expenses on wells in which we own a working interest and a decrease in production taxes due to the decrease in oil revenue partially offset by the increase in gas revenue.
Depreciation, depletion and amortization. Depreciation, depletion and amortization expense was $1,337,917 for the six months ended September 30, 2025, a 19% increase from $1,123,985 for the six months ended September 30, 2024, 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.
General and administrative expenses. General and administrative expenses were $726,701 for the six months ended September 30, 2025, a 4% increase from $701,570 for the six months ended September 30, 2024. This was primarily due to an increase in accounting fees and engineering services partially offset by a decrease in contract services.
Income taxes. Federal income tax for the six months ended September 30, 2025 was $108,781. Federal income tax for the six months ended September 30, 2024 was $171,353. State income tax was $52,685 for the six months ended September 30, 2025, a 12% increase from $46,986 for the six months ended September 30, 2024 due to the increase in oil and natural gas sales in the states that have state income tax. The effective tax rate for the six months ended September 30, 2025 and 2024 was 22% and 26%, respectively.
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 is related to oil and gas production sold to various purchasers and the receivables are generally not collateralized. At September 30, 2025, our largest credit risk associated with any single purchaser was $295,461 or 34% of our total oil and gas receivables. We have not experienced any significant credit losses.
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 upon the prevailing market prices of, and demand for, oil and natural gas. Pricing for oil and natural gas production has been volatile and unpredictable for several years, and we expect this volatility to continue in the future.
Currently, prices for natural gas have been adversely affected by temporary pipeline capacity constraints primarily in the Permian Basin.
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.
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For example, in the last twelve months, the NYMEX West Texas Intermediate (“WTI”) posted price for crude oil has ranged from a low of $53.11 per bbl in May 2025 to a high of $76.02 per bbl in January 2025. 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 $7.15 per MMBtu in February 2025. On September 30, 2025, the WTI posted price for crude oil was $58.35 and the Henry Hub spot price for natural gas was $3.12 per MMBtu. See 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.
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 impact both estimated future net revenue 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 non-cash 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 and not as a result of 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 first six months of fiscal 2026, our operating revenues would have increased or decreased by $421,240. If the average gas price had increased or decreased by one dollar per mcf for the first six months of fiscal 2026, our operating revenues would have increased or decreased by $340,963.
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, 2025, our disclosure controls and procedures were effective.
Changes in Internal Control over Financial Reporting. No changes in our internal control over financial reporting occurred during the six months ended September 30, 2025 that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.
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PART II – OTHER INFORMATION
Item 1. Legal Proceedings
We may, from time to time, be a party to various proceedings and claims incidental to our business. While many of these matters involve inherent uncertainty, we believe that the amount of the liability, if any, ultimately incurred with respect to these proceedings and claims will not have a material adverse effect on our consolidated financial position as a whole or on our liquidity, capital resources or future results of operations.
Item 1A. Risk Factors
There have been no material changes to the information previously disclosed in Item 1A. “Risk Factors” in our 2025 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 six months ended September 30, 2024:
| 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 | |||||||||||||
| April 1-30, 2025 | - | - | - | $ | 296,784 | |||||||||||
| May 1-31, 2025 | - | - | - | $ | 296,784 | |||||||||||
| June 1-30, 2025 | - | - | - | $ | 296,784 | |||||||||||
| July 1-31, 2025 | - | - | - | $ | 296,784 | |||||||||||
| August 1-31, 2025 | - | - | - | $ | 296,784 | |||||||||||
| September 1-30, 2025 | - | - | - | $ | 296,784 | |||||||||||
Item 6. Exhibits
| 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 | Inline XBRL Taxonomy Extension Schema Document | |
| 101.CAL | Inline XBRL Taxonomy Extension Calculation Linkbase Document | |
| 101.DEF | Inline XBRL Taxonomy Extension Definition Linkbase Document | |
| 101.LAB | Inline XBRL Taxonomy Extension Label Linkbase Document | |
| 101.PRE | Inline XBRL Taxonomy Extension Presentation Linkbase Document | |
| 104 | Cover Page Interactive Data File (embedded within the Inline XBRL and contained in Exhibit 101) |
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SIGNATURES
Pursuant to the requirements of the Securities and 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, 2025 | /s/ Nicholas C. Taylor |
| Nicholas C. Taylor | |
| Chairman of the Board and Chief Executive Officer |
| Dated: November 12, 2025 | /s/ Tamala L. McComic |
| Tamala L. McComic | |
| President, Chief Financial Officer, Treasurer and Assistant Secretary |
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FAQ
What were Mexco Energy (MXC) Q2 revenues and earnings?
How did MXC perform for the first six months of FY2026?
What is MXC’s cash and debt position?
What were MXC’s operating cash flows and capital spending?
Did MXC pay a dividend in the period?
How many MXC shares are outstanding?
What are MXC’s plans for new wells in FY2026?
