Mexco Energy Corporation

What they do

Mexco focuses on acquiring royalty and working interests and non-operated properties in areas with significant development potential, primarily in the Permian Basin. It generates revenue from the production and sale of crude oil and natural gas from its reserves. The company is headquartered in Midland, Texas, and its common stock trades on the NYSE American under the symbol MXC.

Revenue drivers

• Oil production and sales — Revenue from crude oil production is a primary driver; in the first quarter of fiscal 2027, a 52% increase in average oil price drove revenue growth, though oil production decreased 15%.
• Natural gas production and sales — Natural gas sales contribute to revenue; in the first quarter of fiscal 2027, natural gas production decreased 9% and the average natural gas price decreased 49%.
• Royalty interests — The company acquires royalty interests, which provide revenue from production without operating costs; during the quarter ended June 30, 2026, it invested approximately $2.1 million in oil and gas royalty property acquisitions.
• Non-operated working interests — Mexco participates in drilling and completion of horizontal wells as a non-operating working interest owner, sharing in production revenue and costs; it expects to participate in 53 horizontal wells and 20 completions in fiscal 2027 at an estimated cost of approximately $1.8 million.

Recent performance

For the quarter ended June 30, 2026 (first quarter of fiscal 2027), Mexco reported net income of $501,065, or $0.24 per diluted share, a 107% increase from net income of $241,951, or $0.12 per diluted share, in the same quarter a year earlier. Operating revenues were $1,983,169, up 13% from $1,756,940 in the prior-year quarter, driven by a 52% increase in average oil price, partially offset by a 15% decrease in oil production, a 9% decrease in natural gas production, and a 49% decrease in average natural gas price. Net cash provided by operating activities was $1,451,247, up from $1,363,277. Net cash used in investing activities was $2,729,750, reflecting increased capital expenditures for oil and gas property additions. The company paid $204,600 in dividends and ended the quarter with $1,292,873 in cash and cash equivalents.

Strategy

Mexco's long-term strategy is to increase profit margins by acquiring and developing oil and gas properties with potential for long-lived production. It focuses on acquiring royalty and working interests and non-operated properties in areas with significant development potential. During the quarter ended June 30, 2026, the company invested approximately $2.1 million in oil and gas royalty property acquisitions, funded from existing cash. For fiscal 2027, it expects to participate in the drilling of 53 horizontal wells and the completion of 20 horizontal wells at an estimated aggregate cost of approximately $1.8 million, of which approximately $620,000 has been expended to date. The company continues to evaluate additional drilling prospects.

Risks

• Volatility of oil and natural gas prices — The company's revenues and profitability are highly sensitive to changes in oil and natural gas prices, as evidenced by a 49% decrease in average natural gas price in the most recent quarter.
• Production declines — Oil and natural gas production decreased 15% and 9%, respectively, in the first quarter of fiscal 2027 compared to the prior-year period, which can reduce revenues if not offset by new production or higher prices.
• Exploration and development risks — The company's strategy involves participating in drilling and completion of wells, which carries risks of dry holes, cost overruns, and delays that could adversely affect results.
• Concentration in Permian Basin — The company's operations are primarily focused in the Permian Basin, making it vulnerable to regional economic, regulatory, and operational risks.

Outlook

Management expects to participate in the drilling of 53 horizontal wells and the completion of 20 horizontal wells during the fiscal year ending March 31, 2027, at an estimated aggregate cost of approximately $1.8 million, of which approximately $620,000 has been expended to date. The company continues to evaluate additional drilling prospects for participation during the remainder of the fiscal year. Management stated that investment activity is consistent with its ongoing strategy of acquiring oil and gas royalty interests with development potential.