UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C.  20549

FORM 10-K

ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

FOR THE FISCAL YEAR ENDED SEPTEMBER 30, 20182019

Commission File Number:     001-31759

PANHANDLE OIL AND GAS INC.

(Exact name of registrant as specified in its charter)

Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Exchange Act of 1934.           Yes      X   No

Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Securities Exchange Act of 1934.           Yes      X   No

(Facing Sheet Continued)

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 (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.      X  Yes           No

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Website, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period)period that the registrant was required to submit and post such files.files).      X   Yes           No

Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K (§229.405 of this chapter) is not contained herein, and will not be contained, to the best of the registrant’s knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K.      X   

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, or a non-accelerated filer. See definition of “accelerated filer and large accelerated filer” in Rule 12b-2 of the Securities Exchange Act of 1934. (Check one):

Emerging growth company       

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act.         Yes          No

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Securities Exchange Act of 1934).           Yes      X   No

The aggregate market value of the voting stock held by non-affiliates of the registrant, computed by using the $19.30$15.70 per share closing price of registrant's Class A Common Stock, as reported by the New York Stock Exchange at March 31, 2018,2019, was $303,874,080. $246,376,520.

As of December 1, 2018, 16,751,4142019, the Registrant had 16,339,255 shares of Class A Common Stock were outstanding. As of December 1, 2018, there were no shares of Class B Common Stock outstanding.

Documents Incorporated By Reference

The information required by Part IIIPortions of this Report, to the extent not set forth herein, is incorporated by reference from the registrant’s Definitivedefinitive Proxy Statement of Panhandle Oil and Gas Inc. (to be filed no later than 120 days after September 30, 2019) relating to the annual meetingAnnual Meeting of stockholdersStockholders to be held on March 5, 2019. The definitive proxy statement will be filed with the Securities and Exchange Commission within 120 days after the end3, 2020, are incorporated into Part III of the fiscal year to which this Report relates.Form 10-K.

T A B L E   O F   C O N T E N T S

DEFINITIONSSpecial Note Regarding Forward Looking Statements

The following defined terms are usedThis report includes “forward-looking statements” within the meaning of Section 27A of the Securities Act of 1933 (the “Securities Act”), as amended, and Section 21E of the Securities Exchange Act of 1934, as amended (the “Exchange Act”). These statements involve known and unknown risks, uncertainties and other factors that may cause our actual results, performance or achievements to be materially different from any future results, performance or achievements expressed or implied by the forward-looking statements. In some cases, you can identify forward-looking statements in this report:Form 10-K by words such as “anticipate,” “project,” “intend,” “estimate,” “expect,” “believe,” “predict,” “budget,” “projection,” “goal,” “plan,” “forecast,” “target” or similar expressions.

Bbl – barrel.

Bcf – billion cubic feet.

Bcfe – natural gas stated on a Bcf basis and crudeAll statements, other than statements of historical facts, included in this report that address activities, events or developments that we expect or anticipate will or may occur in the future are forward-looking statements. Forward-looking statements may include, but are not limited to statements relating to: our ability to execute our business strategies; the volatility of realized oil and natural gas liquids converted to a billion cubic feetprices; the level of natural gas equivalent by using the ratioproduction on our properties; estimates of one million Bbl of crude oil or natural gas liquids to six Bcf of natural gas.

Board – board of directors.

BTU – British Thermal Units.

CEO – Chief Executive Officer.

CFO – Chief Financial Officer.

CFTC – the United States Commodity Futures Trading Commission.

Company – Panhandle Oil and Gas Inc.

Common Stock – the Company’s Class A Common Stock.

completion – the post-drilling processes of preparing a well for the production of crude oil and/or natural gas.

conventional – an area believed to be capable of producing crude oil and natural gas occurring in discrete accumulations in structural and stratigraphic traps.

DD&A – depreciation, depletion and amortization.

developed acreage – the number of acres allocated or assignable to productive wells or wells capable of production.

development well – a well drilled within the proved area of a crude oil or natural gas reservoir to the depth of a stratigraphic horizon known to be productive.

dry gas – natural gas that remains in a gaseous state in the reservoir and does not produce large quantities of liquid hydrocarbons when brought to the surface. Also may refer to gas that has been processed or treated to remove a majority of natural gas liquids.

dry hole – exploratory or development well that does not produce crude oil and/or natural gas in economically producible quantities.

ESOP – the Panhandle Oil and Gas Inc. Employee Stock Ownership and 401(k) Plan, a tax qualified, defined contribution plan.

exploratory well – a well drilled to find a new field or to find a new reservoir in a field previously found to be productive of crude oil or natural gas in another reservoir.

FASB – the Financial Accounting Standards Board.

field – an area consisting of a single reservoir or multiple reservoirs all grouped on, or related to, the same individual geological structural feature or stratigraphic condition. The field name refers to the surface area, although it may refer to both the surface and the underground productive formations.

formation – a layer of rock, which has distinct characteristics that differ from nearby rock.

G&A – general and administrative expenses.

gross acres or gross wells – the total acres or wells in which an interest is owned.

held by production or HBP – refers to an oil and gas lease continued into effect into its secondary term for so long as a producing oil and/or gas well is located on any portion of the leased premises or lands pooled therewith.

horizontal drilling – a drilling technique used in certain formations where a well is drilled vertically to a certain depth and then drilled horizontally within a specified interval.

hydraulic fracturing – a process involving the high pressure injection of water, sand and additives into rock formations to stimulate crude oil and natural gas production.

Independent Consulting Petroleum Engineer(s) or Independent Consulting Petroleum Engineering Firm – DeGolyer and MacNaughton of Dallas, Texas.

LOE – lease operating expense.

Mcf – thousand cubic feet.

Mcfd – thousand cubic feet per day.

Mcfe – natural gas stated on an Mcf basis and crude oil and natural gas liquids converted to a thousand cubic feet of natural gas equivalent by using the ratio of one Bbl of crude oil or natural gas liquids to six Mcf of natural gas.

Mmbtu – million BTU.

Mmcf – million cubic feet.

Mmcfe – natural gas stated on an Mmcf basis and crude oil and natural gas liquids converted to a million cubic feet of natural gas equivalent by using the ratio of one thousand Bbl of crude oil or natural gas liquids to six Mmcf of natural gas.

minerals, mineral acres or mineral interests – fee mineral acreage owned in perpetuity by the Company.

net acres or net wells – the sum of the fractional interests owned in gross acres or gross wells.

NGL – natural gas liquids.

NYMEX – the New York Mercantile Exchange.

NYSE – the New York Stock Exchange.

OPEC – Organization of Petroleum Exporting Countries.

Panhandle – Panhandle Oil and Gas Inc.

PDP – proved developed producing.

play – term applied to identified areas with potential oil, NGL and/or natural gas reserves.

production or produced – volumes of oil, NGL and natural gas reserves and their values; general economic or industry conditions; legislation or regulatory requirements; conditions of the securities markets; our ability to raise capital; changes in accounting principles, policies or guidelines; financial or political instability; acts of war or terrorism; title defects in the properties in which we invest; and other economic, competitive, governmental, regulatory or technical factors affecting our properties, operations or prices.

We caution you that have been both producedthe forward-looking statements contained in this Form 10-K are subject to risks and sold.uncertainties, many of which are beyond our control, incident to the exploration for and development, production and sale of oil and natural gas. These risks include, but are not limited to, the risks described in Item 1A of this Annual Report on Form 10-K for the year ended September 30, 2019 (the “2019 Annual Report on Form 10-K” or this “Annual Report”), and all quarterly reports on Form 10-Q filed subsequently thereto.

Should one or more of the risks or uncertainties described above or elsewhere in our 2019 Annual Report on Form 10-K occur, or should underlying assumptions prove incorrect, our actual results and plans could differ materially from those expressed in any forward-looking statements. Any forward-looking statement speaks only as of the date of which such statement is made and the Company undertakes no obligation to correct or update any forward-looking statement, whether as a result of new information, future events or otherwise, except required by applicable law.

Except as required by applicable law, all forward-looking statements attributable to us are expressly qualified in their entirety by this cautionary statement. This cautionary statement should also be considered in connection with any subsequent written or oral forward-looking statements that we or persons acting on our behalf may issue.

Glossary of Certain Terms

proved reserves – the quantities

The following is a glossary of crudecertain accounting, oil and natural gas which, by analysis of geoscienceindustry and engineering data, can be estimated with reasonable certainty to be economically producible from a given date forward, from known reservoirs and under existing economic conditions, operating methods, and government regulations prior to the time at which contracts providing the right to operate expire, unless evidence indicates renewal is reasonably certain.other defined terms used in this Annual Report:

proved developed reserves – reserves expected to be recovered through existing wells with existing equipment and operating methods.

proved undeveloped reserves or PUD – proved reserves expected to be recovered from new wells on undrilled acreage or from existing wells where a relatively major expenditure is required for recompletion.

PV-10 – estimated pre-tax present value of future net revenues discounted at 10% using SEC rules.

royalty interest – well interests in which the Company does not pay a share of the costs to drill, complete and operate a well, but receives a smaller proportionate share (as compared to a working interest) of production.

SEC – the United States Securities and Exchange Commission.

unconventional – an area believed to be capable of producing crude oil and natural gas occurring in accumulations that are regionally extensive, but may lack readily apparent

As used herein, the “Company,” “Panhandle,” “we,” “us” and discrete hydrocarbon water boundaries that typically define conventional reservoirs. These areas tend“our” refer to have low permeabilityPanhandle Oil and may be closely associated with source rock, as isGas Inc. and its predecessors and subsidiaries unless the case with oil and gas shale, tight oil and gas sands, and coalbed methane, and generally require horizontal drilling, fracture stimulation treatments or other special recovery processes in order to achieve economic production.

undeveloped acreage – acreage on which wells have not been drilled or completed to a point that would permit the production of commercial quantities of crude oil and/or natural gas.

working interest – well interests in which the Company pays a share of the costs to drill, complete and operate a well and receives a proportionate share of production.context requires otherwise.

Fiscal year references

All references to years in this report, unless otherwise noted, refer to the Company’s fiscal year end of September 30. For example, references to 20182019 mean the fiscal year ended September 30, 2018.2019.

References to oil and natural gas properties

References to oil and natural gas properties inherently include NGL associated with such properties.

PART I

GENERALOverview

Panhandle Oil and Gas Inc. was founded in Range, Texas County, Oklahoma, in 1926, as Panhandle Cooperative Royalty Company. The Company operated as a cooperative until 1979, when it merged into Panhandle Royalty Company, and its shares became publicly traded. On April 2, 2007, the Company’s name was changed to Panhandle Oil and Gas Inc.

While operatingPanhandle Oil and Gas Inc. is an Oklahoma City-based company focused on perpetual oil and natural gas mineral ownership in resource plays in the United States. In addition, as part of our evolution as a cooperative, the Company distributed most of its net income to shareholders as cash dividends. Upon conversion to a public company, we own interests in 1979, although still paying dividends, the Company began to retain a substantial part of its cash flow to participateleasehold acreage and non-operated interests in oil and natural gas properties. Historically, we have participated with a working interest on some of our mineral and leasehold acreage.

Strategic Focus on Mineral Ownership

During fiscal 2019, the Company made the strategic decision to focus on perpetual oil and natural gas mineral ownership and growth through mineral acquisitions and the development of its significant mineral acreage inventory in its core areas of focus. In accordance with this strategy, the drilling of wellsCompany plans to cease taking any working interest positions on its mineral acreage and to purchase additional mineral acreage. Several acquisitions of additional mineral and leasehold acreage and small companies were made from 1980going forward. The Company believes that its strategy to focus on mineral ownership is the best path to giving our stockholders the greatest risk-weighted returns on their investments going forward.

A “mineral fee” is an interest in real property in which the owner owns all of the rights to the present time.

The Companyminerals under the surface forever, as compared to a mineral lease in which the lessee’s rights end at the expiration of the lease term or after there is involvedno longer production on the lease. Generally, the mineral interest owner of a mineral fee interest reserves a non-cost bearing royalty interest upon the lease of such oil, gas, and other minerals to an oil and gas exploration and development company. Such companies will lease such mineral interest from the fee mineral owner for a term with the expectation of producing oil and gas, thereby generating free cash flow from bonuses and royalties. As referenced above, Panhandle’s leasehold interests are non-operated working interests on the lease of the minerals from the mineral fee owner. These non-operated working interests require Panhandle to contribute its proportionate share of the costs incurred by the operator in the acquisition, management and development of non-operated oilsuch minerals. As discussed above and natural gas properties, including wells located on the Company’s mineral and leasehold acreage.further below, Panhandle no longer expects to participate with such working interests going forward. Panhandle’s mineral and leasehold properties are located primarily in Arkansas, New Mexico,Oklahoma, North Dakota, OklahomaTexas, Arkansas and Texas.New Mexico. The majority of the Company’sour oil, NGL and natural gas production is from wells located in Arkansas, Oklahoma, North Dakota, Texas and Texas.

In March 2007, the Company increased its authorized Class A Common Stock from 12 million shares to 24 million shares. On October 8, 2014, the Company split its Class A Common Stock on a 2-for-1 basis.

The Company’s office is located at Grand Centre, Suite 300, 5400 N. Grand Blvd., Oklahoma City, OK 73112; telephone – (405) 948-1560; facsimile – (405) 948-2038. The Company’s website is www.panhandleoilandgas.com. The Company’s Class A Common Stock trades on the NYSE under the symbol PHX.

The Company files periodic reports with the SEC on Forms 10-Q and 10-K. These forms, the Company’s annual report to shareholders and current press releases are available free of charge on our website as soon as reasonably practicable after they are filed with the SEC or made available to the public. Also, the Company posts copies of its various corporate governance documents on the website. From time to time, the Company posts other important disclosures to investors in the “Press Release” or “Upcoming Events” section of the website, as allowed by SEC rules.

Materials filed with the SEC may be read and copied at the SEC’s Public Reference Room at 100 F Street, N.E., Washington, D.C. 20549. Information on the operation of the Public Reference Room may be obtained by calling the SEC at 1-800-SEC-0330. The SEC also maintains a website at www.sec.gov that contains reports, proxy and information statements, and other information regarding the Company that have been filed electronically with the SEC, including this Form 10-K.

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Arkansas.

BUSINESS STRATEGY

MostAlthough a significant amount of Panhandle’sour revenues areis currently derived from the production and sale of oil, NGL and natural gas (see Item 8 - “Financial Statementson our working interests, a growing portion of our revenues is derived from royalties granted from the production and Supplementary Data”). Thesale of oil, NGL and natural gas. These royalties are tied to ownership of mineral acreage, and this ownership is perpetual, unless sold by

the Company. Royalties are due and payable to the Company whenever oil, NGL or natural gas is produced and sold from wells located on the Company’s mineral acreage.

We owned approximately 258,231 perpetual mineral acres as of September 30, 2019, as detailed in the table below:

Approximately 71% of our net mineral position is currently unleased, providing us the opportunity to generate additional cash flow from bonus payments and royalties without spending additional capital. We also own leases on 17,199 net acres primarily in Oklahoma and working interests, royalty interests or both, in 6,496 producing oil and natural gas properties, including its mineral acreage, leasehold acreagewells and working and royalty interests120 wells in producing wells are located primarily in Arkansas, New Mexico, North Dakota, Oklahoma and Texas (see Item 2 – “Properties”). the process of being drilled or completed.

Exploration and development of the Company’sour oil and natural gas properties are conducted in association withby oil and natural gas exploration and production companies, primarily larger independent operating companies. The Company doesWe do not operate any of itsour oil and natural gas properties, but hasproperties. While we previously have been an active working interest participant for many years in wells drilled on the Company’s mineral and leasehold acres.acreage, our current focus is on growth through mineral acquisitions and through development of our significant mineral acreage inventory in our core areas of focus.

We intend to maximize value to our stockholders through the acquisition of mineral acreage, in the cores of resource plays, with substantial undeveloped opportunities; divestiture of non-core minerals with limited optionality when the amount negotiated exceeds our projected total value; and aggressive leasing of our mineral holdings.

Our Business Strategy

Our principal business objective is to maximize value to our stockholders. At the end of 2019, the Company made the strategic decision to cease taking any working interest positions on its mineral and leasehold acreage going forward. The majorityCompany has decided to focus on growth through mineral acquisitions and through development of its significant mineral acreage inventory in its core areas of focus. The Company believes that this is the best path to giving our stockholders the greatest risk-weighted returns on their investments going forward. We intend to accomplish this objective by executing the following corporate strategies:

Our Business Strengths

We believe the following attributes position Panhandle to achieve its objectives:

Principal Products and Markets

The Company derives revenue through its bonus and royalty payments and from working interests on properties located in unconventional plays in Arkansas, Oklahomaits mineral and Texas.

PRINCIPAL PRODUCTS AND MARKETS

leasehold acreage. The Company’s principal products from the production associated with its non-operated interests, in order of revenue generated, are crude oil, natural gas crude oil and NGL. These products are generally sold by our well operators to various purchasers, including pipeline and marketing companies, which service the areas where the Company’s producing wells are located. Since the Company does not operate any of the wells in which it owns an interest, it relies on the operating expertise of numerous companies that operate wells in which the Company owns interests. This includes expertise in the drilling and completion of new wells, producing well operations and, in most cases, the marketing or purchasing of production from the wells. Oil, NGL and natural gas sales are principally handled by the well operator. Payment for oil, NGL and natural gas sold is received by the Company from the well operator or the contracted purchaser.

Prices of oil, NGL and natural gas are dependent on numerous factors beyond the Company’s control, including supply and demand, competition, weather, international events and circumstances, actions taken by OPEC and economic, political and regulatory developments. Since demand for natural gas is subject to weather conditions, prices received for the Company’s natural gas production aremay be subject to seasonal variations.

The Company enters into price risk management financial instruments (derivatives) to reduce the Company’s exposure to short-term fluctuations in the price of oil and natural gas and protect theits return on investments. The derivative contracts apply only to a portion of the Company’s oil and natural gas production and provide only partial price protection against declines in oil and natural gas prices. These derivative contracts expose the Company to risk of financial loss and may limit the benefit of future increases in oil and natural gas prices. Please read Item 7A – “Quantitative and Qualitative Disclosures about Market Risk” and Note 1 to the financial statements included in Item 8 – “Financial Statements and Supplementary Data” for additional information regarding the derivative contracts.contracts entered into by the Company.

COMPETITIVE BUSINESS CONDITIONS

Competitive Business Conditions

The oil and natural gas industry is highly competitive, particularly in the search for new fee mineral interests and oil, NGL and natural gas reserves. Many factors beyond its control affect Panhandle’s competitive position and the market for its products.position. Some of these factors include: the quantity

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and price of foreign oil imports; domestic supply and deliverability of oil, NGL and natural gas; changes in prices received for oil, NGL and natural gas production; business and consumer demand for refined oil products, NGL and natural gas; and the effects of federal, state and local regulation of the exploration for, production of and sales of oil, NGL and natural gas (see Item 1A – “Risk Factors”). Changes in any of these factors canMany companies have a dramatic influence on the price Panhandle receivessubstantially greater resources than we have, and such companies may have more resources to evaluate, bid for its oil, NGL and natural gas production.purchase more mineral fee, royalty and similar interests than our financial or human resources permit.

The Company does not operate any of the wells in which it has an interest; rather, it relies on companies with greater resources, staff, equipment, research and experience for operation of wells in both the drilling and production phases. The Company’s business strategy is to use its strong financial base and its mineral and leasehold acreage ownership, coupled with its own geologic and economic evaluations, either to elect to participate in drilling operations with these companies or to lease or farmout its mineral or leasehold acreage while retaining a royalty interest. Thisinterest and to acquire new mineral acreage. We believe this strategy allows the Company to compete effectively in expensive and complex drilling operations it could not undertake on its own, with limited capital and staffing.

SOURCES AND AVAILABILITY OF RAW MATERIALS

The existence of economically recoverable oil, NGL and natural gas reserves in commercial quantities is cruciala competitive mineral market; however, our ability to the ultimate realization of value from the Company’s mineral and leasehold acreage. These mineral and leasehold properties are essentially the raw materials of our business. The production and sale of oil, NGL and natural gas from the Company’s properties are essential to provide the cash flow necessary to sustain the ongoing viability of the Company. When it is evaluated and determined to be beneficial to share value, the Company purchases oil and natural gas mineral and leasehold acreage to assure the continued availability of acreage with which to participate in exploration and development drilling operations and, subsequently, to produce and sell oil, NGL and natural gas. This participation in exploration, development and production activities and purchase of additional acreage is necessary to continue to supply the Company with the raw materials with which to generate additional cash flow. Mineral and leasehold acreage purchases are made from many owners. The Company does not rely on any particular companies or persons for the purchases ofacquire additional mineral fee, royalty and leasehold acreage.similar interests in the future will depend upon our ability to evaluate and select suitable properties and to consummate transactions in a highly competitive environment.

MAJOR CUSTOMERSMajor Customers

The Company’s oil, NGL and natural gas production is sold, in most cases, through itsour lessees or well operators to numerous different purchasers. During 2018, sales through three separate well operators accounted for approximately 24%, 16% and 11%

Regulation of the Company’s total oil, NGLOil and natural gas sales. During 2017, sales through two separate well operators accounted for approximately 18%Natural Gas Industry

General

As the owner of mineral fee interests and 13%non-operating working interests, we do not have any employees or contractors in the field and we are not directly subject to many of the Company’s total oil, NGL and natural gas sales. During 2016, sales through two separate well operators accounted for approximately 23% and 12%regulations of the Company’s total oil NGL and natural gas sales. Generally, if one purchaser declines to continue purchasing the Company’s production, several other purchasers can be located. Pricing is generally consistent from one purchaser to another.

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PATENTS, TRADEMARKS, LICENSES, FRANCHISES AND ROYALTY AGREEMENTS

industry. The Company does not own any patents, trademarks, licenses or franchises. Royalty agreements on wells producing oil, NGLfollowing disclosure describes regulations and natural gas generate a portionenvironmental matters more directly associated with operators of the Company’s revenues. These royalties are tied to ownership of mineral acreage, and this ownership is perpetual, unless sold by the Company. Royalties are due and payable to the Company whenever oil, NGL or natural gas is produced and sold from wells located on the Company’s mineral acreage.

REGULATION

All of the Company’s well interests and non-producing properties are located onshore in the contiguous United States. The Company’s oil and natural gas properties, including our current operators. Since the Company does not operate any wells in which it owns an interest, actual compliance with many laws and regulations is controlled by the well operators, with Panhandle being responsible only for its proportionate share of the costs, if any, involved on wells in which it owns a working interest.

Oil and natural gas operations are subject to various taxes,types of legislation, regulation and other legal requirements enacted by governmental authorities. Legislation and regulation affecting the entire oil and natural gas industry is continuously being reviewed for potential revision. Some of these requirements carry substantial penalties for failure to comply.

Although we are generally not directly subject to many of the rules, regulations and limitations impacting the oil and natural gas exploration and production industry as whole, the operators who operate on our properties may be impacted by such as gross production taxesrules and inregulations and we may be responsible for our proportionate share of costs for wells on which we own a working interest. While this may provide the Company with some cases, ad valorem taxes.

States require permits for drilling operations, drilling bondsinsulation from compliance costs applicable to our operator-lessees, we may still be indirectly impacted by operator regulations because our revenue stream depends on operators and reports concerning operations and impose other regulations relating to the exploration for and production of oil, NGL and natural gas.

Regulation of Drilling and Production

The production of oil and natural gas is subject to regulation under federal, state and local statutes, rules, orders and regulations. These statutes and regulations require that operators obtain permits for drilling operations and drilling bonds, as well as require reports concerning operations. Additionally, states alsowhere we own mineral and leasehold interests have enacted regulations addressinggoverning conservation matters, including provisions for the unitization or pooling of oil and natural gas properties, the establishment of maximum allowable rates of production from oil and natural gas wells, the regulation of well spacing and plugging and abandonment of wells. TheseThe effect of these regulations varyis to limit the amount of oil and natural gas that can be produced from wells and to limit the number of wells or the locations at which can be drilled. Additionally, some states where we hold mineral or leasehold interests may impose a production or severance tax with respect to the production and sale of oil, NGL and natural gas within its jurisdiction.

Regulation of Transportation of Oil

The sale and transportation of our crude oil is generally undertaken by the operators (or by third parties at the direction of the operators) of our properties. Sales of crude oil, condensate and NGL are not currently regulated and are made at negotiated prices; however, Congress could reenact price controls in the future.

Sales of crude oil are affected by the availability, terms and cost of transportation. The transportation of oil in common carrier pipelines is also subject to rate regulation. The Federal Energy Regulatory Commission (the “FERC”) regulates interstate oil pipeline transportation rates under the Interstate Commerce Act. Intrastate oil pipeline transportation rates are subject to regulation by state regulatory commissions. The basis for intrastate oil pipeline regulation, and the degree of regulatory oversight and scrutiny given to intrastate oil pipeline rates, varies from state to state. As previously discussed,Interstate and intrastate common carrier oil pipelines must provide service on a non-discriminatory basis. Under this open access standard, common carriers must offer service to all shippers requesting service on the Company must rely on its well operators to comply with governmental regulations.same terms and under the same rates. When oil pipelines operate at full capacity, access is governed by pro-rationing provisions set forth in the pipelines’ published tariffs.

ENVIRONMENTAL MATTERSRegulation of Transportation and Sale of Natural Gas

AsThe sale and transportation of our natural gas is generally undertaken by the Company is directly involvedoperators (or by third parties at the direction of the operators) of our properties. Historically, the transportation and sale for resale of natural gas in interstate commerce has been regulated pursuant to the

Natural Gas Act of 1938, the Natural Gas Policy Act of 1978 and regulations issued under those Acts by the FERC. In the past, the federal government regulated the prices at which natural gas could be sold. While sales by producers of natural gas can currently be made at uncontrolled market prices, Congress could reenact price controls in the extractionfuture.

The FERC has endeavored to make natural gas transportation more accessible to natural gas buyers and usesellers on an open and non-discriminatory basis. The FERC has stated that open access policies are necessary to improve the competitive structure of the interstate natural gas pipeline industry and to create a regulatory framework that will put natural gas sellers into more direct contractual relations with natural gas buyers by, among other things, unbundling the sale of natural resources, itgas from the sale of transportation and storage services. Although the FERC’s orders do not directly regulate natural gas producers, they are intended to foster increased competition within all phases of the natural gas industry.

Intrastate natural gas transportation is subject to variousregulation by state regulatory agencies. The basis for intrastate regulation of natural gas transportation and the degree of regulatory oversight and scrutiny given to intrastate natural gas pipeline rates and services varies from state to state.

Environmental Compliance and Risks

Our operators and properties are impacted by extensive and changing federal, state and local laws and regulations regardingrelating to environmental protection, including the generation, storage, handling, emission, transportation and ecological matters. Compliance with thesedischarge of materials into the environment and relating to safety and health.

Oil and natural gas exploration, development and production operations are subject to stringent federal, state and local laws and regulations governing the discharge of materials into the environment or otherwise relating to environmental protection. Historically, most of the environmental regulation of oil and gas production has been left to state regulatory boards or agencies in those jurisdictions where there is significant oil and natural gas production, with limited direct regulation by such federal agencies as the Environmental Protection Agency. However, there are various regulations issued by the Environmental Protection Agency (“EPA”) and other governmental agencies that would govern significant spills, blow-outs or uncontrolled emissions.

Many states, including states where we own properties have enacted oil and natural gas regulations that apply to the drilling, completion and operations of wells and the disposal of waste oil and salt water. The operators of our properties are subject to such regulations. There are also procedures incident to the plugging and abandonment of dry holes or other non-operational wells, all as governed by the applicable governing state agency.

At the federal level, among the more significant laws and regulations that may necessitate significant capital outlays.affect our business and the oil and natural gas industry are: The Company does not believeComprehensive Environmental Response, Compensation and Liability Act of 1980, also known as “CERCLA” or “Superfund; the existenceOil Pollution Act of these environmental laws,1990; the Resource Conservation and Recovery Act, also known as currently written and interpreted, will materially hinder or adversely affect “RCRA,”;

the Company’s business operations; however, there can be no assurances made regarding future events, changes in laws,Clean Air Act; Federal Water Pollution Control Act of 1972, or the interpretationClean Water Act; and the Safe Drinking Water Act of laws governing our industry. For example, current discussions regarding future governance of hydraulic fracturing could have a material impact on the Company. Several states and local municipalities have adopted or are considering adopting regulations that could impose more stringent requirements on hydraulic fracturing operations or otherwise seek to ban fracturing activities altogether. The Oklahoma Corporation Commission has ordered the shut-in of some saltwater disposal wells and reductions of injected volumes in others in northern and central Oklahoma where these wells are proximal to seismic activity. The Company is currently experiencing insignificant impact and anticipates insignificant future impact from these shut-ins and injection volume reductions due to our minimal working interest ownership in this area. 1974.

Since the Company does not operate any wells in which it owns an interest, actual compliance with environmental laws is controlled by the well operators, with Panhandle being responsible for its proportionate share of the costs involved.involved on wells that we own a working interest. As such, the Company has no knowledge of any instances of non-compliance with existing laws and regulations. Absent an extraordinary event, any noncompliance is not likely to have a material adverse effect on the financial condition of the Company. The Company maintains insurance

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coverage at levels which are customary in the industry, but is not fully insured against all environmental risks.

EMPLOYEESTaxes

The Company’s oil and natural gas properties are subject to various taxes, such as gross production taxes and, in some cases, ad valorem taxes. The Company pays ad valorem taxes on minerals owned in ten states.

Employees

At September 30, 2018,2019, Panhandle employed 20 people with four of the employees22 persons. In addition to serving as executive officers. The President and CEO isthe Interim Chief Executive Officer, Mr. Chad Stephens, also serves as a director of the Company.

Corporate Office

The Company’s office is located at Grand Centre, Suite 300, 5400 N. Grand Blvd., Oklahoma City, OK 73112. Our telephone number is (405) 948-1560 and facsimile number is (405) 948-2038. The Company’s website is www.panhandleoilandgas.com.

Available Information

We make available free of charge on our website (www.panhandleoilandgas.com) our Annual Report on Form 10-K, Quarterly Reports on Form 10-Q, Current Reports on Form 8-K, and other filings pursuant to Section 13(a) or 15(d) of the Securities Exchange Act, and amendments to such filings, as soon as reasonably practicable after each are electronically filed with, or furnished to, the SEC.

We also make available within the “Corporate Governance” section under the “Investors” section of our website our Code of Ethics & Business Practices, Code of Ethics for Senior Financial Officers, Corporate Governance Guidelines, Lead Independent Director Charter and Audit Committee, Corporate Governance and Nominating Committee and Compensation Committee Charters, which have been approved by our Board of Directors. We will make timely disclosure on our website of any change to, or waiver from, the Code of Ethics & Business Practices and Code of Ethics for Senior Financial Officers for our principal executive and senior financial officers. Copies of our Code of Ethics & Business Practices and Code of Ethics for Senior Financial Officers are available free of charge by writing us at: Panhandle Oil and Gas Inc., Attn: Robb Winfield, 5400 N. Grand Blvd., Suite 300, Oklahoma City, OK 73112.

In addition to the other information included in this Form 10-K, the following risk factors should be considered in evaluating the Company’s business and future prospects. If any of the following risk factors should occur, the Company’s financial condition could be materially impacted, and the holders of our securities could lose part or all of their investment in Panhandle. As the owner of mineral fee interests and non-operating working interests, we do not operate any oil and natural gas properties, and we do not have any employees or contractors in the field. As such, the risks associated with oil and gas operations only affect us indirectly and typically through our non-operating working interests as we proportionately share in the costs of operating such wells. The risk factors described below are not exhaustive, and investors are encouraged to perform their own investigation with respect to the Company and its business. Investors should also read the other information in this Form 10-K, including the financial statements and related notes.

Uncertainty of economic conditions, worldwide and in the United States, may have a significant negative effect on operating results, liquidity and financial condition.Risks Related to our Business

Effects of change in domestic and international economic conditions could include: (1) an imbalance in supply and demand for oil, NGL and natural gas resulting in decreased oil, NGL and natural gas reserves due to curtailed drilling activity; (2) a decline in oil, NGL and natural gas prices; (3) risk of insolvency of well operators and oil, NGL and natural gas purchasers; (4) limited availability of certain insurance coverage; (5) limited access to derivative instruments; and (6) limited credit availability. A decline in reserves would lead to a decline in production, and either a production decline, or a decrease in oil, NGL and natural gas prices, would have a negative impact on the Company’s cash flow, profitability and value.

Oil, NGL and natural gas prices are volatile. Volatility in these prices can adversely affect operating results and the price of the Company’s common stock. ThisThe volatility also makes valuation of oil and natural gas producing properties difficultprices, and can disrupt markets.particularly the ongoing decline in those prices, due to factors beyond our control greatly affects our financial condition, results of operations and cash available for distribution.

The supply of and demand for oil, NGL and natural gas impact the prices we realize on the sale of these commodities and, in turn, materially affect the Company’s financial results. Oil, NGL and natural gas prices have historically been, and will likely continue to be, volatile. The prices for oil, NGL and natural gas are subject to wide fluctuation in response to a number of factors beyond our control, including:

Price volatility makes it difficult to budgetOur revenues, operating results, cash available for distribution and project the return on investment in exploration and development projects and to estimate with precision thecarrying value of producing properties that are owned or acquired by the Company. In addition, volatile prices often disrupt the market forour oil and natural gas properties as buyersdepend significantly upon the prevailing prices for oil and sellers have more difficulty agreeing on the purchase price of properties. Revenues, results of operations, reserves and capital availability may fluctuate significantly as a result of variations innatural gas. Historically, oil NGL and natural gas prices have been volatile and are subject to fluctuations in response to changes in supply and demand, market uncertainty and a variety of additional factors that are beyond our control, including:

These factors and the volatility of the energy markets make it extremely difficult to predict future oil and natural gas price movements with any certainty. If the prices of oil and natural gas remain at current levels or decline further, our operations, financial condition and level of expenditures for the development of our oil and natural gas reserves may be materially and adversely affected. Lower oil NGL and natural gas prices may also trigger significant impairment write-downs onresult in a portionreduction in the borrowing base under our credit agreement, which may be determined at the discretion of the Company’s properties which negatively affect the Company’s results of operations. In addition, product prices affect the credit available under its credit facility.our lenders.

Low oil, NGL and natural gas prices for a prolonged period of time would have a material adverse effect on the Company.

The volatility of the energy markets makes it extremely difficult to predict future oil, NGL and natural gas price movements with any certainty. Oil, NGL and natural gas prices continued to fluctuate in fiscal year 20182019 and have fluctuated significantly over the last twopast several months. The Company’s financial position, results of operations, access to capital and the quantities of oil, NGL and natural gas that may be economically produced would be negatively impacted if oil, NGL and natural gas prices were low for an extended period of time. The ways in which low prices could have a material negative effect include:

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Proved Undeveloped Reserves

The following details the changes in proved undeveloped reserves for 20182019 (Mcfe):

BeginningFor the fiscal year ending September 30, 2019, our beginning PUD reserves were 56.963.9 Bcfe. AIn 2019, a total of 2.21.8 Bcfe (4%(3% of the beginning balance) was transferred to proved developed during 2018. In the last two years, 41% of the beginning PUD reserves were transferred to proved developed. The 12.548.4 Bcfe (22%(76% of the beginning balance) of negative revisions to PUD reserves were pricing revisions of 0.70.2 Bcfe and performancea revision of 11.848.2 Bcfe, predominately resulting from the removal of oil, NGL and natural gas reserves associated with our working interest in Eagle Ford wells that areand working interests in wells in the STACK, SCOOP and Arkoma Stack plays, consistent with the Company implementing the strategy to no longer projected to be developed within 5 years from the date they were added due to a delayed drilling program in 2018. participate with working interests moving forward.

We anticipate that all the Company’s current PUD locations will be drilled and converted to PDP within five years of the date they were added. However, PUD locations and associated reserves, which are no longer projected to be drilled within five years from the date they were added to PUD reserves, will be removed as revisions at the time that determination is made. In the event that there are undrilled PUD locations at the end of the five-year period, it is our intent to remove the reserves associated with those locations from our proved reserves as revisions. The Company added 20.44.7 Bcfe of PUD reserves in 2018 primarily2019 within the Company’s active drilling program areas of 1)(i) the Anadarko BasinSCOOP Woodford Shale in western Oklahoma, 2)(ii) the Anadarko Basin STACK Meramec in western Oklahoma, (iii) the Marmaton in Ellis County, Oklahoma, (iv) the Arkoma Stack in eastern Oklahoma and 3)(v) the current drilling program of the Eagle Ford ShaleYeso in Texas.Eddy County, New Mexico. These additions result from continuing development and additional well performance data in each of the referenced plays. OfAdditionally, the Company purchased 0.3 Bcfe in the Bakken play in North Dakota and sold 1.6 Bcfe, predominately in the Permian Basin in Texas and New Mexico.

Estimated Future Net Cash Flows

Set forth below are estimated future net cash flows with respect to Panhandle’s net proved reserves (based on the estimated units set forth above in Proved Reserves) for each of the years indicated, and the present value of such estimated future net cash flows, computed by applying a 10% discount factor as required by SEC rules and regulations. The Company follows

the SEC rule, Modernization of Oil and Gas Reporting Requirements. In accordance with the SEC rule, the estimated future net cash flows were computed using the 12-month average price calculated as the unweighted arithmetic average of the first-day-of-the-month individual product prices for each month within the 12-month period prior to September 30 held flat over the life of the properties and applied to future production of proved reserves less estimated future development and production expenditures for these reserves. The amounts presented are net of operating costs and production taxes levied by the respective states. Prices used for determining future cash flows from oil, NGL and natural gas as of September 30, 2019, 2018 PUD adds, 1.2 Bcfe was drillingand 2017, were as follows: in 2019, $54.40/Bbl for oil, $19.30/Bbl for NGL and $2.48/Mcf for natural gas; in 2018, $62.86/Bbl for oil, $26.13/Bbl for NGL and $2.56/Mcf for natural gas; and in 2017, $46.31/Bbl for oil, $17.55/Bbl for NGL and $2.81/Mcf for natural gas. These future net cash flows based on SEC pricing rules should not be construed as the fair market value of the Company’s reserves. A market value determination would need to include many additional factors, including anticipated oil, NGL and natural gas price and production cost increases or completing at year-end.decreases, which could affect the economic life of the properties.

Evaluation and Review of Reserves

The determination of reserve estimates is a function of testing and evaluating the production and development of oil and natural gas reservoirs in order to establish a production decline curve. The established production decline curves, in conjunction with oil and natural gas prices, development costs, production taxes and operating expenses, are used to estimate oil and natural gas reserve quantities and associated future net cash flows. As information is processed regarding the development of individual reservoirs, and as market conditions change, estimated reserve quantities and future net cash flows will change over time as well. Estimated reserve quantities and future net cash flows are affected by changes in product prices. These prices have varied substantially in recent years and are expected to vary substantially from current pricing in the future.

The Company follows the SEC’s modernized oil and natural gas reporting rules, which were effective for annual reports on Form 10−K10-K for fiscal years ending on or after December 31, 2009. See Note 1113 to the financial statements in Item 8 – “Financial Statements and Supplementary Data” for disclosures regarding our oil and natural gas reserves.

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ProvedUnder the SEC rules, oil and natural gas reserves are those quantities of oil and natural gas which, by analysis of geoscience and engineering data, can be estimated with reasonable certainty to be economically producible – from a given date forward, from known reservoirs and under existing economic conditions, operating methods and government regulations – prior to the time at which contracts providing the right to operate expire, unless evidence indicates that renewal is reasonably certain, regardless of whether deterministic or probabilistic methods are used for the estimation. The project to extract the hydrocarbons must have commenced, or the operator must be reasonably certain that it will commence the project, within a reasonable time. The area of the reservoir considered as proved includes: (i) the area identified by drilling and limited by fluid contacts, if any, and (ii) adjacent undrilled portions of the reservoir that can, with reasonable certainty, be judged to be continuous with it and to contain economically producible oil or natural gas on the basis of available geoscience and engineering data. In the absence of data on fluid contacts, proved quantities in a reservoir are limited by the lowest known hydrocarbons as seen in a well penetration unless geoscience, engineering or performance data and reliable technology establishes a lower contact with reasonable certainty. Where direct observation from well penetrations has defined a highest known oil elevation and the potential exists for an associated natural gas cap, proved oil reserves may be assigned in the structurally higher portions of the reservoir only if geoscience, engineering or performance data and reliable technology establish the higher contact with reasonable certainty. Reserves, which can be produced economically through application of improved recovery techniques (including, but not limited to, fluid injection), are included in the proved classification when: (i) successful testing by a pilot project in an area of the reservoir with properties no more favorable than in the reservoir as a whole, the operation of an installed program in the reservoir or an analogous reservoir or other evidence using reliable technology establishes the reasonable certainty of the engineering analysis on which the project or program was based; and (ii) the project has been approved for development by all necessary parties and entities, including governmental entities. Existing economic conditions include prices and costs at which economic producibility from a reservoir is to be determined. The price shall be the average price during the 12-month period prior to the ending date of the period covered by the report, determined as an unweighted arithmetic average of the first-day-of-the-month price for each month within such period, unless prices are defined by contractual arrangements, excluding escalations based upon future conditions.

Developed oil and natural gas reserves are reserves of any category that can be expected to be recovered through existing wells with existing equipment and operating methods, or in which the cost of the required equipment is relatively minor, compared to the cost of a new well, and through installed extraction equipment and infrastructure operational at the time of the reserve estimate, if the extraction is by means not involving a well.

Undeveloped oil and natural gas reserves are reserves of any category that are expected to be recovered from new wells on undrilled acreage or from existing wells where a relatively major expenditure is required for recompletion. Reserves on undrilled acreage are limited to

those directly offsetting development spacing areas that are reasonably certain of production when drilled, unless evidence using reliable technology exists that establishes reasonable certainty of economic producibility at greater distances. Undrilled locations can be classified as having undeveloped reserves only if a development plan has been adopted indicating that they are scheduled to be drilled within five years, unless the specific circumstances justify a longer time. Under no circumstances shall estimates for undeveloped reserves be attributable to any

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acreage for which an application of fluid injection or other improved recovery technique is contemplated, unless such techniques have been proved effective by actual projects in the same reservoir or an analogous reservoir or by other evidence using reliable technology establishing reasonable certainty.

The independent consulting petroleum engineering firm of DeGolyer and MacNaughton of Dallas, Texas, calculatedprepared the Company’s oil, NGL and natural gas reserves estimates as of September 30, 2019, 2018 2017 and 20162017 (see Exhibits 23.2 and 99). Within DeGolyer and MacNaughton, the technical person primarily responsible for preparing the estimates set forth in the Report of DeGolyer and MacNaughton dated October 7, 2019, filed as Exhibit 99 to this Annual Report on Form 10-K, was Gregory K. Graves. Mr. Graves has a Bachelor of Science degree in Petroleum Engineering from the University of Texas at Austin and is a Registered Professional Engineer in the state of Texas. He is a member or the Society of Petroleum Evaluation Engineers and has over 35 years of experience in oil and gas reservoir studies and reserves evaluations. Mr. Graves meets or exceeds the education, training and experience requirements set forth in the Standards Pertaining to the Estimating and Auditing of Oil and Gas Reserves Information promulgated by the Society of Petroleum Engineers and is proficient in judiciously applying industry standard practices to engineering and geoscience evaluations as well as applying SEC and other industry reserve definitions and guidelines.

All of the reserve estimates are reviewed and approved by our Vice President of Operations, Freda Webb. Ms. Webb holds a Bachelor of Science degree in Mechanical Engineering from the University of Oklahoma, a Master of Science degree in Petroleum Engineering from the University of Southern California and a Professional Engineering License in Petroleum Engineering in the State of Oklahoma. Ms. Webb has more than 36 years of experience in the oil and gas industry. She is an active member of the Society of Petroleum Engineers (SPE).

Our Vice President of Operations and internal staff work closely with our Independent Consulting Petroleum Engineers to ensure the integrity, accuracy and timeliness of data furnished to them for their reserves estimation process. We provide historical information (such as ownership interest, oil and gas production, well test data, commodity prices, operating costs, handling fees, and development costs) for all properties to our Independent Consulting Petroleum Engineers. Throughout the year, our team meets regularly with representatives of our Independent Consulting Petroleum Engineers to review properties and discuss methods and assumptions. The Company’s net proved oil, NGL and natural gas reserves (including certain undeveloped reserves described above) are located onshore in the contiguous United States. All studies have been prepared in accordance with regulations prescribed by the SEC. The reserve estimates were based on economic and operating conditions existing at September 30, 2019, 2018 2017 and 2016.2017. Since the determination and valuation of proved reserves is a function of testing

and estimation, the reserves presented should beare expected to change as future information becomes available.

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ESTIMATED FUTURE NET CASH FLOWS

Set forth below are estimated future net cash flows with respect to Panhandle’s net proved reserves (based on the estimated units set forth above in Proved Reserves) for the year indicated, and the present value of such estimated future net cash flows, computed by applying a 10% discount factor as required by SEC rules and regulations. The Company follows the SEC rule, Modernization of Oil, and Gas Reporting Requirements. In accordance with the SEC rule, the estimated future net cash flows were computed using the 12-month average price calculated as the unweighted arithmetic average of the first-day-of-the-month individual product prices for each month within the 12-month period prior to September 30 held flat over the life of the properties and applied to future production of proved reserves less estimated future development and production expenditures for these reserves. The amounts presented are net of operating costs and production taxes levied by the respective states. Prices used for determining future cash flows from oil, NGL and natural gas as of September 30, 2018, 2017 and 2016, were as follows: $62.86/Bbl, $26.13/Bbl, $2.56/Mcf; $46.31/Bbl, $17.55/Bbl, $2.81/Mcf; $36.77/Bbl, $12.22/Bbl, $1.97/Mcf, respectively. These future net cash flows based on SEC pricing rules should not be construed as the fair market value of the Company’s reserves. A market value determination would need to include many additional factors, including anticipated oil, NGL and natural gas price and production cost increases or decreases, which could affect the economic life of the properties.