8-K: PHX Minerals to be Acquired by WhiteHawk in $187 Million All-Cash Deal

PHX Minerals Inc. has entered into a definitive agreement to be acquired by WhiteHawk in an all-cash transaction valued at $4.35 per share, totaling approximately $187 million including net debt.

Summary

• PHX Minerals Inc. (PHX) has agreed to be acquired by WhiteHawk in an all-cash transaction valued at $4.35 per share, or approximately $187 million including net debt.
• The agreement was finalized on May 8, 2025.
• Merger Sub will conduct a cash tender offer to acquire all outstanding shares of PHX common stock at $4.35 per share.
• The PHX Board of Directors has unanimously approved the merger agreement and recommends that stockholders accept the offer.
• The offer will remain open for a minimum of 20 business days, subject to possible extensions.
• Following the tender offer, Merger Sub will merge with PHX, with PHX continuing as the surviving corporation and a wholly-owned subsidiary of Parent.
• The merger is governed by Section 251(h) of the Delaware General Corporation Law, requiring no stockholder vote.
• The deal is subject to customary conditions, including a minimum tender of shares representing a majority of outstanding shares and regulatory approvals.
• PHX reported net income of $4.4 million, or $0.12 per diluted share, for the quarter ended March 31, 2025.
• Adjusted EBITDA was $6.2 million for the same period.
• The company's total debt was $19.8 million as of March 31, 2025, with a debt-to-adjusted EBITDA ratio of 0.86x.
• The company announced a $0.04 per share quarterly dividend, payable on June 4, 2025.
• The employment of Ralph D'Amico, the Company's Chief Financial Officer and Executive Vice President and Chad L. Stephens, the Company's President and Chief Executive Officer will be terminated at the Effective Time.

Sentiment

Score: 7

Explanation: The sentiment is moderately positive due to the acquisition announcement and solid Q1 2025 results, but tempered by the inherent risks and uncertainties associated with the transaction and the oil and gas industry.

Positives

• The PHX Board of Directors has unanimously approved the merger agreement and recommends that stockholders accept the offer.
• PHX reported net income of $4.4 million, or $0.12 per diluted share, for Q1 2025.
• Adjusted EBITDA for Q1 2025 was $6.2 million.
• Total debt decreased to $19.8 million, resulting in a debt-to-adjusted EBITDA ratio of 0.86x.
• A quarterly dividend of $0.04 per share was announced, payable on June 4, 2025.
• Natural gas, oil and NGL revenue increased $3.3 million, or 47%, for the quarter ended March 31, 2025, compared to the quarter ended March 31, 2024, due to increases in natural gas and NGL prices of 83% and 26%, respectively, and increases in natural gas and oil volumes of 2% and 14%, respectively, partially offset by a decrease in oil price of 7% and a decrease in NGL volumes of 9%.

Negatives

• Royalty production volumes decreased 9% to 1,910 Mmcfe compared to the quarter ended Dec. 31, 2024.
• Total production volumes decreased 9% to 2,159 Mmcfe compared to the quarter ended Dec. 31, 2024.
• The Company had a net loss on derivative contracts of ($3.2) million for the quarter ended March 31, 2025, comprised of a ($0.2) million loss on settled derivatives and a ($2.9) million non-cash loss on derivatives, as compared to a net gain of $0.6 million for the quarter ended March 31, 2024.

Risks

• The transaction is subject to customary closing conditions, including regulatory approvals, which could delay or prevent the acquisition.
• Forward-looking statements are subject to various risks and uncertainties that could cause actual results to differ materially.
• The possibility that the transaction will not close or that the closing may be delayed.
• The anticipated synergies of the combined companies may not be achieved after closing.
• The combined operations may not be successfully integrated in a timely manner, if at all.
• General economic conditions in regions in which either company does business.
• The possibility that the WhiteHawk Parties or the Company may be adversely affected by other economic, business, and/or competitive factors.

Future Outlook

The company expects heightened operator activity across its mineral acreage to continue throughout 2025 and into 2026, supporting increased production volumes and enhanced cash flow.

Management Comments

• Chad L. Stephens, President and CEO, commented, 'PHX had a strong start to 2025, delivering solid cash flow and adjusted EBITDA on both a sequential and year-over-year basis.'
• Chad L. Stephens, President and CEO, commented, 'The closing of our recent divestiture of non-producing minerals in January, along with strong cash generation, enabled us to further reduce our debt to $19.8 million as of March 31, 2025, resulting in a debt-to-adjusted EBITDA (TTM) ratio under 1x.'
• Chad L. Stephens, President and CEO, commented, 'A strong and flexible balance sheet continues to be an important part of our strategy.'
• Chad L. Stephens, President and CEO, commented, 'The natural gas environment showed meaningful improvement during the first quarter driven by tightening supply-demand dynamics, colder-than-expected winter weather, and increasing liquefied natural gas (LNG) export demand.'
• Chad L. Stephens, President and CEO, commented, 'This backdrop is translating into heightened operator activity across our mineral acreage as demonstrated by a higher gross and net number of wells in progress as of the quarter end.'
• Chad L. Stephens, President and CEO, commented, 'We expect this trend to continue throughout 2025 and into 2026, supporting the increased production volumes and enhanced cash flow from our assets.'

Industry Context

The acquisition reflects ongoing consolidation trends in the oil and gas industry, with companies seeking to expand their asset base and improve operational efficiencies.

Comparison to Industry Standards

• It is difficult to compare this acquisition to industry standards without knowing the specific metrics used to value PHX Minerals' assets, such as proved reserves, production rates, and acreage quality.
• Comparable transactions in the mineral rights space would need to be analyzed to determine if the $4.35 per share offer is within a reasonable range.
• Companies like Viper Energy Partners and Black Stone Minerals are key players in the mineral rights sector, and their valuations could provide some context.
• However, each company's asset portfolio and financial situation are unique, making direct comparisons challenging.

Management Changes

Stakeholder Impact

• Shareholders will receive $4.35 per share in cash.
• Employees face potential job losses or changes in compensation and benefits.
• The acquisition could impact the company's relationships with customers, suppliers, and creditors.

Next Steps

• Merger Sub will commence a cash tender offer to acquire all outstanding shares of PHX common stock at $4.35 per share.
• Stockholders need to decide whether to tender their shares into the offer.
• The transaction is expected to close after the satisfaction of customary conditions, including regulatory approvals.

Key Dates

Keywords

acquisition, merger, tender offer, PHX Minerals, WhiteHawk, oil and gas, mineral rights, EBITDA, debt, dividend