Panhandle Royalty Company (PHX)

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Panhandle Oil and Gas Inc. (PHX)

Wall Street Analyst Forum

September 9, 2008 11:50 am ET


Helen Baud - Wall Street Analyst Forum

Michael Coffman - President and CEO



Helen Baud

Good afternoon everybody. My name is Helen Baud from the Wall Street Analyst Forum and I am the host in this room for today.

I would ask at this time, if anyone has any cell phones, BlackBerry, hand-held device to please turn it off or turn it into the silent position so as not to disturb the presentation. Also as a reminder, the University Club does have a very strict policy regarding cell phone use in the building and they do enforce their policy quite strictly.

The next company we have presenting today is Panhandle Oil and Gas. The majority of Panhandle Oil and Gas Incorporated's revenue are derived from the production and sale of oil and natural gas. The company's oil and gas holdings, including its minerals, acreage and its interests in producing wells, both working interests and royalty interests are centered in Oklahoma.

Panhandle does not operate any of its oil and gas properties. Exploration on and development of the company's oil and gas properties are conducted in association with operating oil and gas companies, primarily large, independent companies. The company has been an active working interest participant for many years in wells drilled on the company's mineral acreage and in third-party drilling prospects.

A large percentage of the company's drilling participation continues to be on properties in which the company owns mineral acreage, and in many cases already owns an interest in producing wells in the unit. This increased density drilling has accounted for a significant part of the successful oil and gas wells completed during recent years and has added significant reserves for the company.

The company is very active in gas resource projects on its mineral acreage in Southeast Oklahoma and Arkansas. Activity in these projects is expected to substantially increase in fiscal year 2008.

Presenting today is Michael Coffman, the President and CEO.

Michael Coffman

Yes it is good afternoon now. She gave a pretty good summary of Panhandle. I think we would move on after that. Here is our normal forward-looking statement. So what I would do today is give you a brief summary of Panhandle's history. A lot of you probably are not aware of Panhandle.

I will give you a little bit of idea of where we are at with our financial statements etcetera and then probably spend the biggest part of the talk on where we are drilling and what our current operational activities are.

Panhandle Oil and Gas changed its name from Panhandle Royalty Company effective April 2 of 2007. We made the name change for two basic reasons; one, we were continually being confused with being a royalty trust, which we never have been.

Also in 2006 we made some very significant changes in the strategies of the company going forward, operational strategies and we wanted to get the royalty out of the name and the oil and gas into the name. We are not a royalty company anymore. We have made the shift away from that. Our stock is traded on the New York Stock Exchange.

We just moved over from the AMEX in July of this year. We have 8.4 million shares outstanding, whereas our stock closed yesterday at $30.39 a share. We have not had any secondarily offerings. We have not deluded our shareholders any since going public in 1979. We have had several stocks splits since that time and we are in the midst right now of finalizing a stock repurchase. It will be our second repurchase that we have done since June and we are going to purchase about $5 million worth of our shares.

Panhandle is a very unique company compared to most oil and gas companies. What we do is we are a mineral acreage owner. We own about 255,000 net mineral acres in perpetuity. We like to leverage the use of those mineral acres into working interest and wells that are drilled on those properties.

The laws in the States where we operate allow us to be able to take a working interest in the wells that are drilled on those properties by paying our share of the cost. We are a non-operator as was mentioned.

We do drill wells with a lot of the very large independents we will go over some of those little bit latter, but we think it is a very good business plan and allows us to maintain a very low overhead. We have 18 people on staff right now and we will do somewhere little bit above $60 million in revenue this year.

We also use those mineral acres, as I mentioned both to participate in wells with a working interest and if we do not like the economics or the geology of the particular prospect, we will just take a mineral interest in wells that are drilled on our properties.

We like to drill on our mineral acres, because it increases the rate of return on our drilling. When you drill on your own mineral acres, the people that are having to go out and lease acreage from third parties have to pay a royalty to the other mineral owners. Being a mineral owner our self, we get to keep that royalty. So our rate of return is higher than the operators that are drilling wells.

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