Mexco Energy (MXC -2.73%), an independent oil and gas company with a core focus in the Permian Basin, released its results for the quarter ended June 30, 2025, on August 12, 2025. Key highlights included a modest increase in operating revenue to $1.81 million (GAAP), driven by higher oil and gas production and improved natural gas pricing, as well as a notable decline in net income to $241,951 (GAAP). With no Wall Street analyst estimates available for the quarter, results are compared to year-ago figures for Q1 FY2025. The period showed solid volume growth but demonstrated ongoing exposure to commodity price declines and margin pressures, especially given a sharp drop in oil prices.
| Metric | Q1 FY26 (ended 6/30/25) | Q1 FY25 (ended 6/30/24) | Y/Y Change |
|---|---|---|---|
| EPS (GAAP) | $0.12 | $0.14 | (14.3%) |
| Revenue (GAAP) | $1.81 million | $1.73 million | 4.6% |
| Net Income (GAAP) | $241,951 | $291,039 | (16.9%) |
| Average Oil & Gas Production Volume | +21% | — | 21% |
| Oil & Gas Price per BOE | (14%) | — | N/A |
What Does Mexco Energy Do, and How Has It Evolved?
Mexco Energy operates as an independent oil and gas producer in the United States. Its projects are primarily focused on extracting crude oil and natural gas, with the majority of production and investment activity centered in the prolific Permian Basin of Texas and New Mexico. The company generates revenue by selling crude oil and natural gas from its non-operated interests, with a stable contribution from royalty interests. These royalty interests entitle Mexco to a share of production revenue from acreage it does not operate directly, diversifying cash flows with lower operating risk.
Recently, Mexco Energy has concentrated on expanding production capacity by participating in new horizontal wells, which use techniques like hydraulic fracturing to unlock more reserves. Management also emphasizes discipline in capital allocation and has maintained a debt-free, lean financial structure. The company's major success factors are the ability to add new reserves, sustain or increase production volumes, and manage margins in the face of commodity price swings.
Quarterly Performance: Growth in Volumes, Margin Pressure, and Strategic Investments
Operating revenue increased 5%, reflecting gains in both oil and natural gas production. Oil production volumes grew by 16%, while natural gas production surged by 25%, both compared to Q1 FY2025. The company also benefited from a 62% increase in the average price received for its natural gas output. Revenue from Mexco's investment in a limited liability company rose 49%, contributing further to the top line. These gains were partially offset by a sharp 21% decrease in the average oil price received per barrel.
The revenue increase was not enough to prevent a 17% decline in net income (GAAP) compared to Q1 FY2025. Production mix remains heavily oil-weighted, which increases exposure to future oil price shifts. At the same time, the average price per barrel of oil equivalent—a combined measure of oil and gas revenues adjusted for production volumes—fell 14%, further compressing profit margins.
In operational terms, average oil and gas output was up 21%. This marks a continuation of recent growth efforts, supported by active investments in new wells and participation in third-party-operated projects. Mexco has committed to participate in 35 new horizontal wells and complete 17 in FY2026, with roughly $350,000 already spent out of an expected $1.2 million for the total program.
No material one-time items or unusual charges were disclosed in this release.
Business Model: Geography, Assets, and Market Dynamics Explained
The Permian Basin remains Mexco's premier area of operation. The Permian is a major oil and gas region stretching across western Texas and southeastern New Mexico. Mexco continues to execute its business model by investing in working interests and selective acquisitions of royalty and mineral rights. This strategy lets Mexco boost cash flow without incurring heavy development or operating costs, as it benefits from production on properties it does not operate directly.
Reserves are a central focus: as of March 31, 2025 (FY2025), Mexco reported proved reserves of about 1.401 million barrels of oil equivalent, split nearly evenly between oil (48%) and natural gas (52%), and a present value of $23 million. However, both proved oil and natural gas reserves declined year over year—oil reserves by 15% and gas by 4% in FY2025. To address this trend, the company continues to participate in new well drilling and is evaluating further property acquisitions. Maintaining reserve levels is essential for supporting future revenue and defending the company's valuation.
Looking Ahead: Guidance and Key Risks
Management did not issue formal forward guidance for revenue, earnings, or production volumes for the rest of fiscal 2026. However, it currently expects to participate in the drilling of 35 and completion of 17 horizontal wells for the fiscal year ending March 31, 2026, reflecting a continued focus on sustaining and potentially growing its production base. Additional opportunities remain under consideration as management evaluates further prospects across its core operating areas.
With oil still representing 80% of gross oil and gas sales, price sensitivity remains a key concern for future results. The decrease in proved reserves—specifically, a 15% decline in proved oil reserves and a 4% decline in natural gas reserves as of March 31, 2025 (FY2025)—along with ongoing investment in new wells, will be important metrics to watch in the coming quarters.
Revenue and net income presented using U.S. generally accepted accounting principles (GAAP) unless otherwise noted.
