CKX LANDS, INC. The following discussion of our financial condition and results of operations should be read in conjunction with our unaudited condensed consolidated financial statements and the notes to those financial statements appearing elsewhere in this Report.
Overview
Today the Company's income is derived from mineral royalties, timber sales and surface payments from its lands. CKX receives income from royalty interests and mineral leases related to oil and gas production, timber sales, land sales and surface rents. Although CKX is active in the management of its land and planting and harvesting its timber, CKX is passive in the production of income from oil and gas production in that CKX does not explore for oil and gas or operate wells. These oil and gas activities are performed by unrelated third parties.
CKX leases its property to oil and gas operators and collects income through its land ownership in the form of oil and gas royalties and lease rentals and geophysical revenues. The Company's oil and gas income fluctuates as new oil and gas production is discovered on Company land and then ultimately depletes or becomes commercially uneconomical to produce. The volatility in the daily commodity pricing of a barrel of oil or a thousand cubic feet, or "MCF," of gas will also cause fluctuations in the Company's oil and gas income. These commodity prices are affected by numerous factors and uncertainties external to CKX's business and over which it has no control, including the global supply and demand for oil and gas, and domestic and global economic conditions, among other factors.
CKX has small royalty interests in 20 different producing oil and gas fields. The size of each royalty interest is determined by the Company's net ownership in the acreage unit for the well. CKX's royalty interests range from 0.0045% for the smallest to 7.62% for the largest. As the Company does not own or operate the wells, it does not have access to any reserve information. Eventually, the oil and gas reserves under the Company's current land holdings will be depleted.
Timber income is derived from sales of timber on Company lands. The timber income will fluctuate depending on our ability to secure stumpage agreements in the regional markets, timber stand age, and/or stumpage commodity prices. Timber is a renewable resource that the Company actively manages.
Surface income is earned from various recurring and non-recurring sources. Recurring surface income is earned from lease arrangements for farming, recreational and commercial uses. Non-recurring surface income can include such activities as pipeline right of ways, and temporary worksite rentals.
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In managing its lands, the Company relies on and has established relationships with real estate, forestry, environmental and agriculture consultants as well as attorneys with legal expertise in general corporate matters, real estate, and minerals.
The Company actively searches for additional real estate for purchase in
The Company's Board of Directors regularly evaluates a range of strategic alternatives that could increase shareholder value, and the Board and management conduct due diligence activities in connection with such alternatives. These include opportunities for growth though the acquisitions of land or other assets, business combinations, dispositions of assets and reinvestment of the proceeds, and other alternatives. We cannot assure you that the Board's evaluations or the Company's due diligence activities will result in any transaction or other course of action.
Recent Developments
In the first quarter of 2019, the Company began developing several
ranchette-style subdivisions on certain of its lands in Calcasieu and Beauregard
Parishes using existing road rights of way. The Company has identified demand
in those areas for ranchette-style lots, which consist of more than three acres
each, and the Board of Directors and management believe this project will allow
the Company to realize a return on its investment in the applicable lands after
payment of expenses. The Company has completed and recorded plats for three
subdivisions. The three subdivisions are located on approximately 415 acres in
The Company is working to identify additional undeveloped acres owned by the
Company in
Summary of Fiscal Year 2022 Results
The Company's net loss for the year ended
Results of Operations - for the years ended
Revenue
Total revenues for 2022 were
Years Ended December 31,
Change from Percent Change
2022 2021 Prior Year from Prior Year
Revenues:
Oil and gas $ 596,755 $ 364,907 $ 231,848 63.5 %
Timber sales 219,974 151,102 68,872 45.6 %
Surface revenue 288,765 228,536 60,229 26.4 %
Total revenues $ 1,105,494 $ 744,545 $ 360,949 48.5 %
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Oil and Gas
Oil and gas revenues were 54% and 49% of total revenues for 2022 and 2021,
respectively. A breakdown of oil and gas revenues for the years ended
Years Ended December 31,
Change from Percent Change
2022 2021 Prior Year from Prior Year
Oil $ 455,277 $ 324,198 $ 131,079 40.4 %
Gas 108,852 36,957 71,895 194.5 %
Lease and geophysical 32,626 3,752 28,874 769.6 %
Total revenues $ 596,755 $ 364,907 $ 231,848 63.5 %
CKX received oil and/or gas revenues from 95 and 73 wells during the years ended
The following schedule summarizes barrels and MCF produced and average price per
barrel and per MCF for the years ended
Years Ended
December 31,
2022 2021
Net oil produced (Bbl)(2) 4,719 5,072
Average oil sales price (per Bbl)(1,2)
14,891 10,410
Average gas sales price (per MCF)(1)
(1) Before deduction of production costs and severance taxes (2) Excludes plant products
Oil revenues increased for the year ended
The following eight fields produced 94.31% of the Company's oil and gas revenues
in 2022. The following table shows the number of barrels of oil (Bbl Oil) and
MCF of gas (
Field Bbl Oil MCF Gas
South Bear Head Creek 2,139 948
Reeves 608 354
Gonzales County 830 290
Castor Creek 406 -
Cowards Gully 1,257 -
South Lake Charles 209 2,239
Lake Arthur 106 2,186
South Elton 50 4,323
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The following eight fields produced 96.42% of the Company's oil and gas revenues
in 2021. The following table shows the number of barrels of oil (Bbl Oil) and
MCF of gas (
Field Bbl Oil MCF Gas
South Bear Head Creek 1,260 2,476
Reeves 881 163
Gonzales County 840 493
Castor Creek 680 0
Cowards Gully 500 109
South Lake Charles 348 3,143
Lake Arthur 77 1,893
North Indian Village 334 1,565
The Company was a lessor in the following non-producing mineral leases:
Activity 2022 2021 Bonus lease 0 0 Delay lease 1 1 Gross acres 5152 230 Net acres 859 38
Lease and geophysical revenues increased for the year ended
Timber
Timber revenues were 20% and 20% of total revenues for 2022 and 2021,
respectively. Timber revenues increased for the year ended
Surface
Surface revenues were 26% and 31% of total revenues for 2022 and 2021,
respectively. Surface revenues increased for the year ended
Costs and Expenses
Oil and gas costs increased for the year ended
Timber costs increased for the year ended
General and administrative expenses increased for the year ended
Gain on Sale of Land and Equipment
Gain on sale of land was
Outlook for Fiscal Year 2023
The Company will continue to consider and evaluate commercial, agricultural and
timber lands, and other business opportunities for acquisitions and to evaluate
its current holdings for divestiture. The Company will consider purchases
outside of southwest
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The Company will continue to actively market its timber. Due to damage to the Company's timber stands from Hurricanes Laura and Delta in 2020, the Company sold some of its timber in 2021 at salvage prices. Stumpage prices have improved year over year, and management is optimistic they will continue to improve. The Company will seek to enter into additional stumpage agreements.
The Company began directly managing its lands in 2017, except for approximately
5,030 acres of timber property in which the Company owns an undivided 1/6
interest, which is managed by
Liquidity and Capital Resources
Sources of Liquidity
The Company's current assets totaled
As of
In the opinion of management, cash and cash equivalents are adequate for projected operations and possible land acquisitions.
The Company's Board of Directors regularly evaluates a range of strategic alternatives that could increase shareholder value, and the Board and management conduct due diligence activities in connection with such alternatives. These include opportunities for growth though the acquisitions of land or other assets or business combinations, dispositions of assets and reinvestment of the proceeds, and other alternatives. The cost and terms of any financing to be raised in conjunction with any growth opportunity, including the Company's ability to raise debt or equity capital on terms and at costs satisfactory to the Company, and the effect of such opportunities on the Company's balance sheet, are critical considerations in any such evaluation.
Analysis of Cash Flows
Net cash provided by (used in) operating activities changed by
Net cash provided by (used in) investing activities was
Net cash provided by (used in) financing activities was
Significant Accounting Policies
For a discussion of significant accounting policies, see Note 1 in the notes to our audited financial statements included elsewhere in this Form 10-K.
Off Balance Sheet Arrangements
We do not have any off-balance sheet arrangements, financings, or other relationships with unconsolidated entities or other persons, also known as "special purpose entities" (SPEs).
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