Mexico’s revenues are riding the wave of high commodity prices and production volumes

Midland’s Mexco Energy doesn’t have a large office campus – or a lot of employees. It does not drill wells, but participates in drilling projects and acquires royalties, mineral interests and proven reserves. But it has attracted some of the same investor attention as other Midland-based oil companies like Diamondback Energy.

Mexco stock closed at $13.52 on March 3, then climbed above $11 to close at $24.94 on March 4 and rose again when the trading week resumed on March 7, closing at $30.36 before falling and ending the week at $18.38.

“We are having the best year in the company’s 50-year history,” Nick Taylor, chairman of the board and chief executive of Mexco, told The Reporter-Telegram in a telephone interview. “It’s the increase in price and volume.”

Last November, the company reported record net income of $1.103 million or 52 cents per diluted share for the six months ended September 30, 2021, the midpoint of the company’s fiscal year. For the first nine months of Mexco’s fiscal year – ended Dec. 31, 2021 – the company reported net income of $1.857 million versus a net loss of $261,143, an increase of 132%. Oil and gas revenue jumped 159% to $4.37 million for the nine-month period from $1.68 million in the same period a year earlier, due to both rising raw material prices and production volumes.

Tammy McComic, Mexco’s president, chief financial officer, treasurer and assistant secretary, predicted that production volumes will be even higher in the upcoming quarterly report.

“We had a lot of completions in December, so we should see that in the next report. That’s when you get a lot of your production, early on,” she said.

Agreeing with Taylor, “the pop of the first (fiscal) quarter will be great. The main motivation for investors is to catch that start.

Mexco was busy during the fiscal year, it reported, completing the purchase of various overriding royalties at approximately 75 wells, primarily operated by XTO Energy, in the Eagle Ford area in Atascosa and Karnes for $567,000.

“Also, there are other developments in this area,” she said.

During its fiscal year, Mexco expects to participate in the drilling and completion of 43 horizontal wells at an estimated cost of $1.2 million. All are found in the western part of the Delaware Basin, primarily in Reeves County and Lea and Eddy counties, New Mexico. Most have been completed, she said, with the rest completed over the summer and possibly through September. In addition, the operator there announced plans for 10 to 12 additional wells.

“We believe other operators will drill our property,” she said.

Another operator plans to start drilling in Reagan County, and Mexco collects royalties from activity in Upton County.

High commodity prices mean that Taylor and McComic expect to continue setting budget records for the time being.

“I think they overestimated Saudi Arabia’s production capacity,” Taylor observed. “Raymond James thinks that Saudi Arabia
Arabia could produce 10 million barrels. The consensus is that there isn’t a lot of extra capacity. That and the closing of Russian oil markets and it’s almost a perfect storm – from a positive perspective – for producers.

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