Mexco Energy is a Midland non-operator that just chose royalties over cash. The June quarter doubled earnings because oil prices jumped, not because wells produced more barrels. Volumes fell even as management spent most of the cash pile on royalty packages across several basins. The debate is whether those purchases buy a higher-duration income stream or merely recycle cash into more of the same price beta.
Oil realizations climbed about half from the year-ago quarter. That more than offset a mid-teens drop in oil volumes and a near-halving of gas prices. Operating cash still covered the modest working-interest program. The royalty checks, however, absorbed more cash than operations generated. Cash on the balance sheet fell from nearly $2.8 million at March year-end to about $1.3 million by mid-year.
Revenue reached $2 million. Net income more than doubled on the oil-price move. The open question is whether the next several quarters show royalty volumes arriving fast enough to offset decline if crude gives back the spring spike.