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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Securities registered pursuant to Section 12(b) of the Act:
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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. ☒ NO ☐
Indicate
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Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§ 229.405 of this chapter) during the
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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.
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The number of shares outstanding of the registrant’s common stock, par value $ per share, as of February 10, 2026 was .
MEXCO ENERGY CORPORATION AND SUBSIDIARIES
Table of Contents
| 2 |
PART I – FINANCIAL INFORMATION
Item 1. Financial Statements
Mexco Energy Corporation and Subsidiaries
CONSOLIDATED BALANCE SHEETS
| December 31, | 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 - $ par value; shares authorized; outstanding | ||||||||
| Common stock - $ par value; shares authorized; shares issued; and, shares outstanding as of December 31, 2025 and March 31, 2025, respectively | ||||||||
| Additional paid-in capital | ||||||||
| Retained earnings | ||||||||
| Treasury stock, at cost ( shares) | ( | ) | ( | ) | ||||
| Total stockholders’ equity | ||||||||
| Total liabilities and stockholders’ equity | $ | $ | ||||||
The accompanying notes are an integral part of the consolidated financial statements.
| 3 |
Mexco Energy Corporation and Subsidiaries
CONSOLIDATED STATEMENTS OF OPERATIONS
(Unaudited)
| Three Months Ended | Nine Months Ended | |||||||||||||||
| December 31, | December 31, | |||||||||||||||
| 2025 | 2024 | 2025 | 2024 | |||||||||||||
| Operating revenue: | ||||||||||||||||
| Oil sales | $ | $ | $ | $ | ||||||||||||
| Natural gas sales | ||||||||||||||||
| Other | ||||||||||||||||
| Total operating revenues | ||||||||||||||||
| Operating expenses: | ||||||||||||||||
| Production | ||||||||||||||||
| Accretion of asset retirement obligation | ||||||||||||||||
| Depreciation, depletion, and amortization | ||||||||||||||||
| General and administrative | ||||||||||||||||
| Total operating expenses | ||||||||||||||||
| Operating income | ||||||||||||||||
| Other income (expenses): | ||||||||||||||||
| Interest income | ||||||||||||||||
| Interest expense | ( | ) | ( | ) | ( | ) | ( | ) | ||||||||
| Net other income | ||||||||||||||||
| Income before provision for income taxes | ||||||||||||||||
| Provision for (benefit from) 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.
| 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 | $ | $ | $ | $ | ( | ) | $ | |||||||||||||
| Net income | ||||||||||||||||||||
| Stock based compensation | ||||||||||||||||||||
| Balance at December 31, 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 | $ | $ | $ | $ | ( | ) | $ | |||||||||||||
| Net income | ||||||||||||||||||||
| Purchase of stock | ( | ) | ( | ) | ||||||||||||||||
| Stock based compensation | ||||||||||||||||||||
| Balance at September 30, 2024 | $ | $ | $ | $ | ( | ) | $ | |||||||||||||
| Net income | ||||||||||||||||||||
| Stock based compensation | ||||||||||||||||||||
| Balance at December 31, 2024 | $ | $ | $ | $ | ( | ) | $ | |||||||||||||
| SHARE ACTIVITY | ||||||||||||||||||||
| Common stock shares, issued: | ||||||||||||||||||||
| Balance at April 1, 2025 | ||||||||||||||||||||
| Issued | ||||||||||||||||||||
| Balance at December 31, 2025 | ||||||||||||||||||||
| Common stock shares, held in treasury: | ||||||||||||||||||||
| Balance at April 1, 2025 | ( |
) | ||||||||||||||||||
| Acquisitions | ||||||||||||||||||||
| Balance at Dec. 31, 2025 | ( |
) | ||||||||||||||||||
| Common stock shares, outstanding at December 31, 2025 | ||||||||||||||||||||
The accompanying notes are an integral part of the consolidated financial statements.
| 5 |
Mexco Energy Corporation and Subsidiaries
CONSOLIDATED STATEMENTS OF CASH FLOWS
For the Nine Months Ended December 31,
(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 | ( | ) | ( | ) | ||||
| Stock-based compensation | ||||||||
| Depreciation, depletion and amortization | ||||||||
| Accretion of asset retirement obligations | ||||||||
| Amortization of debt issuance costs | ||||||||
| Changes in operating assets and liabilities: | ||||||||
| Decrease (increase) 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) increase in income taxes payable | ( | ) | ||||||
| (Decrease) increase in operating lease liability | ( | ) | ||||||
| Net cash provided by operating activities | ||||||||
| Cash flows from investing activities: | ||||||||
| Additions to oil and gas properties | ( | ) | ( | ) | ||||
| Investment 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 | ||||||||
| Proceeds from long-term debt | ||||||||
| Reduction of long-term debt | ( | ) | ||||||
| Dividends paid | ( | ) | ( | ) | ||||
| Acquisition of treasury stock | ( | ) | ||||||
| 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.
| 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 December 31, 2025, and the results of its operations and cash flows for the interim periods ended December 31, 2025 and 2024. The consolidated financial statements as of December 31, 2025 and for the three and nine month periods ended December 31, 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 Natural Gas Properties. The Company uses the full cost method of accounting for 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.
| 7 |
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.
Investments.
Segments. Based on the Company’s organizational structure, the Company has one operating segment, which is crude oil and natural gas development, exploration and production. In addition, the Company has a single, company-wide management team that allocates capital resources to maximize profitability and measures financial performance as a single enterprise.
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 in 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 nine months of fiscal 2026:
| 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 December 31, 2025 | ||||
| Less: Current portion | ||||
| Non-Current asset retirement obligation | $ |
The Company recognized stock-based compensation expense of $ and $ in general and administrative expense in the Consolidated Statements of Operations for the three months ended December 31, 2025 and 2024, respectively. Stock-based compensation expense recognized for the nine months ended December 31, 2025 and 2024 was $ and $, respectively. The total cost related to non-vested awards not yet recognized at December 31, 2025 totals $ which is expected to be recognized over a weighted average of years.
During the nine months ended December 31, 2025 and 2024, stock options were granted.
| 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 December 31, 2025 | $ | $ | ||||||||||||||
| Vested at December 31, 2025 | $ | $ | ||||||||||||||
| Exercisable at December 31, 2025 | $ | $ | ||||||||||||||
| 8 |
During
the nine months ended December 31, 2025, there were stock options exercised. During the nine months ended December 31, 2024, stock
options covering shares were exercised with a total intrinsic value of $. The Company received proceeds of $
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 stock options forfeited or expired during the nine months ended December 31, 2025. During the nine months ended December 31, 2024, unvested stock options and vested stock options were forfeited due to the resignation of an employee.
Outstanding options at December 31, 2025 and have exercise prices ranging from $ to $.
5. 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,
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 $
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.
| 9 |
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
The balance sheets classification of lease assets and liabilities was as follows:
| December 31, 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 December 31, 2025 under non-cancellable operating leases are as follows:
| 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 nine months ended December 31, 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.
The income tax provision consists of the following for the nine months ended December 31, 2025 and 2024:
| Nine Months Ended | ||||||||
| December 31 | ||||||||
| 2025 | 2024 | |||||||
| Current income tax expense: | ||||||||
| Federal | $ | $ | ||||||
| State | ||||||||
| Total current income tax expense | ||||||||
| Deferred income tax benefit: | ||||||||
| Federal | ( | ) | ( | ) | ||||
| State | ( | ) | ( | ) | ||||
| Total deferred income tax benefit | ( | ) | ( | ) | ||||
| Total income tax expense: | $ | $ | ||||||
| 10 |
The following table summarizes our income tax expense and effective income tax rate for the nine months ended December 31 follows:
| 2025 | 2024 | |||||||
| Tax expense at federal statutory rate (1) | $ | $ | ||||||
| Statutory depletion carryforward | ||||||||
| Change in valuation allowance | ||||||||
| Permanent differences | ||||||||
| State income expense (benefit), net of federal benefit | ( | ) | ||||||
| Other | ( | ) | ( | ) | ||||
| Total income tax | ||||||||
| Effective income tax rate | % | % | ||||||
| (1) |
Total income tax expense from continuing operations for the nine months ended December 31, 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 December
31, 2025 and 2024 was $
| Three Months Ended | Nine Months Ended | |||||||||||||||
| December 31 | December 31 | |||||||||||||||
| 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 | $ | $ | $ | $ | ||||||||||||
For
the three and nine months ended December 31, 2025, shares relating to stock options were excluded from the computation of diluted
net income because their inclusion would be anti-dilutive. Anti-dilutive stock options have a weighted average exercise price of $
| 11 |
10. Stockholders’ Equity
In
April 2024, the Board of Directors (“the Board”) authorized the use of up to $
During
the nine months ended December 31, 2025, there were shares of common stock repurchased for the treasury account. During the nine months
ended December 31, 2024, the Company repurchased shares for the treasury at an aggregate cost of $
On
May 13, 2025, the Board declared a regular annual dividend of $ per common share. The Company paid the regular annual dividend 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
During
the nine months ended December 31, 2025, the Company incurred approximately $
During
the nine months ended December 31, 2024, the Company incurred approximately $
Subsequently,
in January 2026, the Company acquired royalty interests in 3 producing wells located in Karnes County, Texas for a purchase price of
$
12. Subsequent Events
In January 2026, the Company initiated the process of establishing a defined contribution retirement plan for eligible employees. The plan is not expected to have a material impact on the Company’s financial statements.
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.
| 12 |
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; and 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 the 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 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 its 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 royalties 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 Nine Months Ended December 31, | ||||||||||||
| 2025 | 2024 | Change | ||||||||||
| Net cash provided by operating activities | $ | 2,930,832 | $ | 2,941,115 | $ | (10,283 | ) | |||||
| Net cash used in investing activities | $ | (2,212,547 | ) | $ | (3,670,019 | ) | $ | (1,457,472 | ) | |||
| Net cash used in financing activities | $ | (204,600 | ) | $ | (834,575 | ) | $ | (629,975 | ) | |||
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 nine months ended December 31, 2025 was $2,930,832 in comparison to $2,941,115 for the nine months ended December 31, 2024. This decrease of $10,283 in our cash flow operating activities consisted of an increase in our non-cash expenses, an increase in our accounts receivable of $481,198; a decrease of $376,035 of our accounts payable and accrued expenses and income tax payable; and, a decrease in our net income for the current nine months of $461,668. 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.
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Cash Flow Used in Investing Activities. Cash flow from investing activities is derived from changes in oil and gas property balances. For the nine months ended December 31, 2025, we had net cash of $2,212,547 used for additions to oil and gas properties and our investment in the limited liability company compared to $3,670,019 for the nine months ended December 31, 2024.
Cash Flow Provided by 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 nine months ended December 31, 2025 compared to cash flow used in our financing activities of $834,575 for the nine months ended December 31, 2024. During the nine months ended December 31, 2025, we expended $204,600 to pay the regular annual dividend. During the nine months ended December 31, 2024, we expended $209,000 to pay the regular annual dividend and $703,216 to purchase 57,766 shares of our stock for the treasury account and received $77,641 from the exercise of stock options.
Accordingly, net cash increased $513,685, leaving cash and cash equivalents on hand of $2,267,640 as of December 31, 2025.
At December 31, 2025, we had working capital of $3,186,231 compared to working capital of $2,469,664 at March 31, 2025, an increase of $716,567 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 fifty horizontal wells and one vertical well at an estimated cost of approximately $1,700,000 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 Glasscock, Midland, and Ward Counties, Texas.
Mexco expended approximately $166,000 to participate in the drilling and completion of five horizontal wells in the Bone Spring formation of the Delaware Basin in Eddy County, New Mexico. In November 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%. Subsequently, in February 2026, the Company expended approximately $64,000 to complete the remaining three wells.
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%.
Mexco expended approximately $155,000 to participate in the drilling and completion of three horizontal wells in the Wolfcamp Sand Formation of the Delaware Basin in Lea County, New Mexico. In December 2025, these wells were completed with initial average production rates of 827 barrels of oil, 3,483 barrels of water, and 2,354,000 cubic feet of gas per day, or 1,219 BOE per day. Mexco’s working interest in these wells is .52%.
Mexco expended approximately $65,000 to participate in an exploratory vertical well in the Ellenburger formation of Ward County, Texas. In November, this well was determined to be noncommercial.
In December 2025, Mexco expended approximately $404,000 to participate in the drilling and completion of two horizontal development wells in the Wolfcamp XY formation of the Delaware Basin in Eddy County, New Mexico. Mexco’s working interest in these wells is 2.1%.
In December 2025, Mexco expended approximately $46,000 to participate in the drilling and completion of six horizontal wells in the Bone Spring formation of the Delaware Basin in Lea County, New Mexico. Mexco’s working interest in these wells is .05%.
Completion of Wells Drilled in Fiscal 2025. The Company expended approximately $150,000 for the completion of seventeen horizontal wells in which the Company participated during fiscal 2025. These wells, located in Delaware Basin of Lea County, New Mexico, have been completed and turned to production.
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Investments. In October 2022, the Company made an approximately 2% equity investment commitment in a limited liability company amounting to $2,000,000, which was 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 areas 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. And in December 2025, expended an additional $27,429 to exercise its option to acquire its share of the non-consent interests from the October cash call. As of December 31, 2025, this LLC has returned $476,635 or 21% of the total investment.
Acquisitions. In May 2025, the Company acquired royalty (mineral) interests in 2 wells operated by Chevron Corporation 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 Energy, Inc. and located in Martin County, Texas for a purchase price of $60,300 and royalty interests in 25 wells operated by Chevron Corporation and located in Weld County, Colorado for a purchase price of $26,300. These acquisitions were effective September 1, 2025.
In October 2025, the Company acquired royalty interests in 3 producing wells operated by Expand Energy Corporation and located in Caddo Parish, Louisiana for a purchase price of $31,300; royalty interests in 14 producing wells operated by Diamondback Energy, Inc. and located in Martin County, Texas for a purchase price of $44,300; royalty interests in 3 producing wells operated by Permian Resources Corporation and located in Eddy County, New Mexico for a purchase price of $6,800; and, overriding royalty interest in 4 producing wells operated by Tap Rock Resources and located in Eddy County, New Mexico for a purchase price of $240,300. These acquisitions were effective November 1, 2025.
In December 2025, the Company acquired royalty interests in 14 producing wells operated by Anadarko Petroleum Corporation and located in Weld County, Colorado for a purchase price of $35,300; royalty interests in approximately 4 producing wells operated by SM Energy Company and located in Howard County, Texas for a purchase price of $100,600; royalty interests in 11 producing wells operated by Ovintiv Inc. and located in Martin County, Texas for a purchase price of $18,300. These acquisitions were effective December 1, 2025.
Also in December 2025, the Company acquired additional royalty interests in the 3 producing wells operated by Expand Energy Corporation and located in Caddo Parish, Louisiana for a purchase price of $22,300 and effective January 1, 2026.
Subsequently, in January 2026, the Company royalty interests in 3 producing wells operated by ConocoPhillips and located in Karnes County, Texas for a purchase price of $27,800. This acquisition is effective January 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 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 $51.25 per bbl in December 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 $2.65 per MMBtu in June and October 2025 to a high of $9.86 per MMBtu in January 2025.
On December 31, 2025, the WTI posted price for crude oil was $53.40 and the Henry Hub spot price for natural gas was $4.00 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. These conditions adversely impacted realized prices during certain periods and contributed to variability in operating results.
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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 December 31, 2025:
| Payments due in: | ||||||||||||||||
| Total | less than 1 year | 1 - 3 years | over 3 years | |||||||||||||
| Contractual obligations: | ||||||||||||||||
| Leases (1) | $ | 95,507 | $ | 60,320 | $ | 35,187 | $ | - | ||||||||
| (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 $5,935 1-3 years for his portion of the shared office space. |
Results of Operations – Three Months Ended December 31, 2025 and 2024. For the quarter ended December 31, 2025, there was net income of $50,245 compared to $469,133 for the quarter ended December 31, 2024 as a result of a decrease in operating revenues and an increase in income taxes partially offset by a decrease in operating expenses that is further explained below.
Oil and gas sales. Revenue from oil and gas sales was $1,301,794 for the third quarter of fiscal 2026, a 29% decrease from $1,828,404 for the same period of fiscal 2025. This resulted from a decrease in oil production volumes and a decrease in oil and natural gas prices partially offset by an increase in natural gas production volumes. Natural gas prices have been negatively impacted by limited pipeline capacity in the Permian Basin.
| 2025 | 2024 | % Difference | ||||||||||
| Oil: | ||||||||||||
| Revenue | $ | 1,098,779 | $ | 1,563,663 | (29.7 | %) | ||||||
| Volume (bbls) | 18,753 | 22,451 | (16.5 | %) | ||||||||
| Average Price (per bbl) | $ | 58.59 | $ | 69.65 | (15.9 | %) | ||||||
| Gas: | ||||||||||||
| Revenue | $ | 203,015 | $ | 264,741 | (23.3 | %) | ||||||
| Volume (mcf) | 160,867 | 149,945 | 7.3 | % | ||||||||
| Average Price (per mcf) | $ | 1.26 | $ | 1.77 | (28.8 | %) | ||||||
Other operating revenues. Other revenues increased to $82,093 for the three months ended December 31, 2025, from $62,861 for the three months ended December 31, 2024. This increase resulted from an increase in income from our most recent limited liability company investment.
Interest income. Interest income on corporate funds increased to $23,953 for the three months ended December 31, 2025, from $7,315 for the three months ended December 31, 2024. This increase resulted from an increase in our investment fund balances.
Production and exploration. Production costs were $302,572 for the third quarter of fiscal 2026, a 34% decrease from $460,241 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 and gas revenues.
Depreciation, depletion and amortization. Depreciation, depletion and amortization expense was $664,265 for the third quarter of fiscal 2026, a 4% increase from $636,424 for the same period of fiscal 2025, primarily due to a decrease in oil and gas reserves and an increase in gas production partially offset by a decrease in oil production and a decrease in the full cost pool amortization base.
General and administrative expenses. General and administrative expenses were $317,524 for the third quarter of fiscal 2026, a 7% decrease from $340,514 for the same period of fiscal 2025. This was primarily due to a decrease in contract services.
Income taxes. Income tax expense for the three months ended December 31, 2025 was $64,106 compared an income tax benefit of $18,305 for the three months ended December 31, 2024. The effective tax rate for state and federal taxes combined for the three months ended December 31, 2025 and 2024 was 56% and (4%), respectively. The effective tax rate for the three months ended December 31, 2025 reflects the timing of estimated income tax accruals and other tax items recognized during the quarter. See Note 7 – Income Taxes to the Notes to Consolidated Financial Statements for additional information.
Results of Operations – Nine Months Ended December 31, 2025 and 2024. For the nine months ended December 31, 2025, there was a net income of $615,702 compared to net income of $1,077,370 for the nine months ended December 31, 2024. This was primarily a result of a decrease in operating revenues that is further explained below.
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Oil and gas sales. Revenue from oil and gas sales was $4,681,094 for the nine months ended December 31, 2025, a 10% decrease from $5,212,313 for the same period of fiscal 2025. This resulted from a decrease in oil price and production volume partially offset by an increase in natural gas price and production volume. The following table sets forth our oil and natural gas revenue, production quantities, and average prices received during the nine months ended December 31:
| 2025 | 2024 | % Difference | ||||||||||
| Oil: | ||||||||||||
| Revenue | $ | 3,796,821 | $ | 4,595,585 | (17.4 | %) | ||||||
| Volume (bbls) | 60,877 | 61,685 | (1.3 | %) | ||||||||
| Average Price (per bbl) | $ | 62.37 | $ | 74.50 | (16.3 | %) | ||||||
| Gas: | ||||||||||||
| Revenue | $ | 884,273 | $ | 616,728 | 43.4 | % | ||||||
| Volume (mcf) | 501,830 | 420,236 | 19.4 | % | ||||||||
| Average Price (per mcf) | $ | 1.76 | $ | 1.47 | 19.9 | % | ||||||
Other operating revenues. Other revenues increased 61% to $251,712 for the nine months ended December 31, 2025, from $156,014 for the nine months ended December 31, 2024. This increase resulted from an increase in income from our most recent limited liability company investment.
Interest income. Interest income on corporate funds increased to $58,610 for the nine months ended December 31, 2025, from $50,891 for the nine months ended December 31, 2024. This increase resulted from an increase in our investment fund balances.
Production and exploration. Production costs were $1,076,435 for the nine months ended December 31, 2025, an 18% decrease from $1,311,066 for the nine months ended December 31, 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 gas revenue.
Depreciation, depletion and amortization. Depreciation, depletion and amortization expense was $2,002,182 for the nine months ended December 31, 2025, a 14% increase from $1,760,409 for the nine months ended December 31, 2024, primarily due to a decrease in oil and gas reserves and an increase in gas production partially offset by a decrease in oil production and a decrease in the full cost amortization base.
General and administrative expenses. General and administrative expenses were $1,044,225 for the nine months ended December 31, 2025, a .2% increase from $1,042,084 for the nine months ended December 31, 2024. This was primarily due to an increase in accounting and engineering services, insurance and salaries partially offset by a decrease in contract services and stock option compensation.
Income taxes. Income tax expense for the nine months ended December 31, 2025 was $225,572 compared to $200,034 for the nine months ended December 31, 2024. The effective tax rate for the nine months ended December 31, 2025 and 2024 was 27% and 16%, 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 sources of market risk for us include 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 December 31, 2025, our largest credit risk associated with any single purchaser was $288,468 or 40% 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. Prices for oil and natural gas production has been volatile and unpredictable for several years, and we expect this volatility to continue in the future.
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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.
For example, in the last twelve months, the NYMEX West Texas Intermediate (“WTI”) posted price for crude oil has ranged from a low of $51.25 per bbl in December 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 $2.65 per MMBtu in June and October 2025 to a high of $9.86 per MMBtu in January 2025. On December 31, 2025, the WTI posted price for crude oil was $53.40 and the Henry Hub spot price for natural gas was $4.00. See Results of Operations above for the Company’s realized prices. Pipeline capacity constraints and maintenance in the Permian Basin area had contributed to a wider difference between WaHa Hub and the Henry Hub and at times prices were negative. These conditions adversely impacted realized prices during certain periods and contributed to variability in operating results.
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 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 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 nine months of fiscal 2026, our operating revenues would have increased or decreased $608,770. If the average gas price had increased or decreased by one dollar per mcf for the first nine months of fiscal 2026, our operating revenues would have increased or decreased $501,830.
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 December 31, 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 nine months ended December 31, 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 nine months ended December 31, 2025:
| 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 | |||||||||||
| October 1-31, 2025 | - | - | - | $ | 296,784 | |||||||||||
| November 1-30, 2025 | - | - | - | $ | 296,784 | |||||||||||
| December 1-31, 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: February 10, 2026 | /s/ Nicholas C. Taylor |
| Nicholas C. Taylor | |
| Chairman of the Board and Chief Executive Officer |
| Dated: February 10, 2026 | /s/ Tamala L. McComic |
| Tamala L. McComic | |
| President, Chief Financial Officer, Treasurer and Assistant Secretary |
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