Mexco Energy Corporation (MXC) 2019年年度報告「AMEX」.pdf

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1、UNITEDSTATESSECURITIESANDEXCHANGECOMMISSIONWashington,D.C.20549FORM10-KX ANNUALREPORTPURSUANTTOSECTION13OR15(d)OFTHESECURITIESEXCHANGEACTOF1934ForthefiscalyearendedMarch31,2019 TRANSITIONREPORTPURSUANTTOSECTION13OR15(d)OFTHESECURITIESEXCHANGEACTOF1934CommissionFileNo.1-31785MEXCOENERGYCORPORATION(Ex

2、actnameofregistrantasspecifiedinitscharter)Colorado84-0627918(Stateorotherjurisdictionof(I.R.S.Employerincorporationororganization)IdentificationNo.)415W.Wall,Suite47579701Midland,Texas(ZipCode)(Addressofprincipalexecutiveoffices)Registrantstelephonenumber,includingareacode:(432)682-1119Securitiesre

3、gisteredpursuanttoSection12(b)oftheAct:NoneSecuritiesregisteredpursuanttoSection12(g)oftheAct:CommonStock,$0.50parvaluepershareIndicatebycheckmarkiftheregistrantisawell-knownseasonedissuer,asdefinedinRule405oftheSecuritiesAct.YesNoXIndicatebycheckmarkiftheregistrantisnotrequiredtofilereportspursuant

4、toSection13orSection15(d)oftheAct.YesNoXIndicatebycheck-markwhethertheregistrant(1)hasfiledallreportsrequiredtobefiledbySection13or15(d)oftheSecuritiesExchangeActof1934duringtheprecedingtwelve(12)months(orforsuchshorterperiodthattheregistrantwasrequiredtofilesuchreports)and(2)hasbeensubjecttosuchfil

5、ingrequirementsforthepastninety(90)days.YesXNoIndicatebycheckmarkwhethertheregistranthassubmittedelectronicallyandpostedonitscorporateWebsite,ifany,everyInteractiveDataFilerequiredtobesubmittedandpostedpursuanttoRule405ofRegulationS-T(229.405ofthischapter)duringthepreceding12months(orforsuchshorterp

6、eriodthattheregistrantwasrequiredtosubmitandpostsuchfiles).YesXNoIndicatebycheckmarkifdisclosureofdelinquentfilerspursuanttoItem405ofRegulationS-K(229.405ofthischapter)isnotcontainedherein,andwillnotbecontained,tothebestofregistrantsknowledge,indefinitiveproxyorinformationstatementsincorporatedbyref

7、erenceinPartIIIofthisForm10-KoranyamendmenttothisForm10-K.Indicatebycheckmarkwhethertheregistrantisalargeacceleratedfiler,anacceleratedfiler,anon-acceleratedfiler,orasmallerreportingcompany.Seedefinitionsof“largeacceleratedfiler”,“acceleratedfiler”and“smallerreportingcompany”inRule12b-2oftheExchange

8、Act:LargeAcceleratedFilerAcceleratedFilerNon-AcceleratedFilerSmallerReportingCompanyXIndicatebycheckmarkwhethertheregistrantisashellcompany(asdefinedinRule12b-2oftheExchangeAct).YesNoXTheaggregatemarketvalueofthevotingstockheldbynon-affiliatesoftheRegistrantasofSeptember30,2018(thelastbusinessdayoft

9、heRegistrantsmostrecentlycompletedsecondquarter)was$4,717,449basedonMexcoEnergyCorporationsclosingcommonstockpriceof$5.60pershareonthatdateasreportedbytheNYSEAmerican.Therewere2,040,166sharesoftheregistrantscommonstockoutstandingasofJune21,2019.DOCUMENTSINCORPORATEDBYREFERENCEPortionsoftheRegistrant

10、sProxyStatementrelatingtothe2019AnnualMeetingofShareholderstobeheldonSeptember12,2019,havebeenincorporatedbyreferenceinPartIIIofthisForm10-K.SuchProxyStatementwillbefiledwiththeCommissionnotlaterthan120daysafterMarch31,2019,theendofthefiscalyearcoveredbythisreport.TABLEOFCONTENTSPARTIItem1.Business3

11、Item1A.RiskFactors9Item1B.UnresolvedStaffComments14Item2.Properties14Item3.LegalProceedings18Item4.MineSafetyDisclosures18PARTIIItem5.MarketfortheRegistrantsCommonEquity,RelatedStockholderMattersandIssuerPurchasesofEquitySecurities18Item6.SelectedConsolidatedFinancialData19Item7.ManagementsDiscussio

12、nandAnalysisofFinancialConditionandResultsofOperations19Item7A.QuantitativeandQualitativeDisclosuresAboutMarketRisk26Item8.FinancialStatementsandSupplementaryData27Item9.ChangesinandDisagreementswithAccountantsonAccountingandFinancialDisclosures27Item9A.ControlsandProcedures27Item9B.OtherInformation

13、27PARTIIIItem10.Directors,ExecutiveOfficersandCorporateGovernance27Item11.ExecutiveCompensation28Item12.SecurityOwnershipofCertainBeneficialOwnersandManagementandRelatedStockholderMatters28Item13.CertainRelationshipsandRelatedTransactions,andDirectorIndependence28Item14.PrincipalAccountingFeesandSer

14、vices28PARTIVItem15.ExhibitsandFinancialStatementSchedules28Signatures29GlossaryofAbbreviationsandTerms302Asusedinthisdocument,“theCompany”,“Mexco”,“we”,“us”and“our”refertoMexcoEnergyCorporationanditsconsolidatedsubsidiaries.Abbreviationsordefinitionsofcertaintermscommonlyusedintheoilandgasindustrya

15、ndinthisForm10-Kcanbefoundinthe“GlossaryofAbbreviationsandTerms”.PARTICAUTIONARYNOTEREGARDINGFORWARD-LOOKINGSTATEMENTSThisAnnualReportonForm10-Kcontainsforward-lookingstatementswithinthemeaningofSection27AoftheSecuritiesActof1933,asamended,(the“SecuritiesAct”)andSection21EoftheSecuritiesExchangeActo

16、f1934,asamended,(the“ExchangeAct”).Theseforward-lookingstatementsaregenerallylocatedinthematerialsetforthundertheheadings“RiskFactors”,“ManagementsDiscussionandAnalysisofFinancialConditionandResultsofOperations”,“Business”,“Properties”butmaybefoundinotherlocationsaswell,andaretypicallyidentifiedbyth

17、ewords“could”,“should”,“expect”,“project”,“estimate”,“believe”,“anticipate”,“intend”,“budget”,“plan”,“forecast”,“predict”andothersimilarexpressions.Forward-lookingstatementsgenerallyrelatetoourprofitability;plannedcapitalexpenditures;estimatesofoilandgasproduction;futureprojectdates;estimatesoffutur

18、eoilandgasprices;estimatesofoilandgasreserves;ourfuturefinancialconditionorresultsofoperations;andourbusinessstrategyandotherplansandobjectivesforfutureoperationsandarebaseduponourmanagementsreasonableestimatesoffutureresultsortrends.Actualresultsinfutureperiodsmaydiffermateriallyfromthoseexpressedo

19、rimpliedbysuchforward-lookingstatementsbecauseofanumberofrisksanduncertaintiesaffectingourbusiness,includingthosediscussedin“RiskFactors”.Thefactorsthatmayaffectourexpectationsregardingouroperationsinclude,amongothers,thefollowing:oursuccessindevelopment,exploitationandexplorationactivities;ourabili

20、tytomakeplannedcapitalexpenditures;declinesinourproductionorpricesofoilandgas;ourabilitytoraiseequitycapitalorincuradditionalindebtedness;ourrestrictivedebtcovenants;ouracquisitionanddivestitureactivities;weatherconditionsandevents;theproximity,capacity,costandavailabilityofpipelinesandothertranspor

21、tationfacilities;increasesinthecostofdrilling,completionandgasgatheringorothercostsofproductionandoperations;andotherfactorsdiscussedelsewhereinthisdocument.Wedisclaimanyintentionorobligationtoupdateorreviseanyforward-lookingstatementsasaresultofnewinformation,futureeventsorotherwise.ITEM1.BUSINESSG

22、eneralMexcoEnergyCorporation,aColoradocorporation,isanindependentoilandgascompanyengagedintheexploration,developmentandproductionofcrudeoilandnaturalgaspropertieslocatedintheUnitedStates.IncorporatedinApril1972underthenameMillerOilCompany,theCompanychangeditsnametoMexcoEnergyCorporationeffectiveApri

23、l30,1980.Atthattime,theshareholdersoftheCompanyalsoapprovedamendmentstotheArticlesofIncorporationresultinginaone-for-fiftyreversestocksplitoftheCompanyscommonstock.OurtotalestimatedprovedreservesatMarch31,2019wereapproximately1.937millionbarrelsofoilequivalent(“MMBOE”)ofwhich54%wasoilandnaturalgasli

24、quidsand46%wasnaturalgas,andourestimatedpresentvalueofprovedreserveswasapproximately$22millionbasedonestimatedfuturenetrevenuesexcludingtaxesdiscountedat10%perannum,pricingandotherassumptionssetforthin“Item2Properties”below.Duringfiscal2019,weaddedprovedreserves of275thousandBOE(“MBOE”)through exten

25、sions and discoveries and subtracted 365 MBOE through downward revisions of previousestimates.SuchdownwardrevisionsareprimarilytheresultoftherestructuringofourplansfordevelopmentofouroperatedpropertyinEctorCounty,TexasduetomarketconditionspartiallyoffsetbypricingandsuccessfuldevelopmentintheDelaware

26、andMidlandBasins.NicholasC.Taylorbeneficiallyownsapproximately47%oftheoutstandingsharesofourcommonstock.Mr.TaylorisalsoourChairmanoftheBoardandChiefExecutiveOfficer.Asaresult,Mr.Taylorhassignificantinfluenceinmattersvotedonbyourshareholders,includingtheelectionofourBoardmembers.Mr.Taylorparticipates

27、inallfacetsofourbusinessandhasasignificantimpactonbothourbusinessstrategyanddailyoperations.3CompanyProfileSinceourinception,wehavebeenengagedinacquiringanddevelopingoilandgaspropertiesandtheexplorationforandproductionofnaturalgas,crudeoil,condensateandnaturalgasliquids(“NGLs”)withintheUnitedStates.

28、WeespeciallyseektoacquireprovedreservesthatfitwellwithexistingoperationsorinareaswhereMexcohasestablishedproduction.Acquisitionspreferablywillcontainmostoftheirvalueinproducingwells,behindpipereservesandhighqualityprovedundevelopedlocations.Competitionforthepurchaseofprovedreservesisintense.Sellerso

29、ftenutilizeabidprocesstosellproperties.Thisprocessusuallyintensifiesthecompetitionandmakesitextremelydifficulttoacquirereserveswithoutassumingsignificantpriceandproductionrisks.Weactivelysearchforopportunitiestoacquireprovedoilandgasproperties.However,becausethecompetitionisintense,wecannotgiveanyas

30、surancethatwewillbesuccessfulinoureffortsduringfiscal2020.Whileweownoilandgaspropertiesinotherstates,themajorityofouractivitiesarecenteredinthePermianBasinofWestTexas.TheCompanyalsoownsproducingpropertiesandundevelopedacreageinthirteenstates.Weacquireinterestsinproducingandnon-producingoilandgasleas

31、esfromlandownersandleaseholdersinareasconsideredfavorableforoilandgasexploration,developmentandproduction.Inaddition,wemayacquireoilandgasinterestsbyjoininginoilandgasdrillingprospectsgeneratedbythirdparties.Wemayalsoemployacombinationoftheabovemethodsofobtainingproducingacreageandprospects.Inrecent

32、years,wehaveplacedprimaryemphasisontheevaluationandpurchaseofproducingoilandgasproperties,bothworkingandroyaltyinterests,andprospectsthatcouldhaveapotentiallymeaningfulimpactonourreserves.MostoftheCompanysoilandgasinterestsareoperatedbyothers,howevertheCompanyoperatesseveralpropertiesinwhichitownsan

33、interest.From1983to2019,MexcoEnergyCorporationmadeapproximately80acquisitionsofproducingoilandgaspropertiesincludingroyalties,overridingroyalties,mineralsandworkinginterestsbothoperatedandnon-operatedplusthefollowingmostsignificantandrecentacquisitions:1993-2010TabbsBayOilCompanyandThompsonBrothersL

34、umberCompany,respectivelydissolvedin1957and1947.Purchasecoveringthousandsofacreslocatedrespectivelyin19countiesofTexas,3parishesofLouisianaandonecountyinArkansasand8countiesofTexas,respectivelyconsistingofvariousmineral,royaltyandoverridingroyaltyinterests.1997FormanEnergyCorporation,purchasepriceof

35、$1,591,000consistingofprimarilyworkinginterestsinapproximately634wellslocatedin12states.2010SouthwestTexasDisposalCorporation,purchaseprice$478,000consistingofroyaltyinterestsinover300wellslocatedin60countiesandparishesof6states.2012TBOOilandGas,LLC,purchasepriceof$1,150,000consistingofworkingintere

36、stsinapproximately280wellslocatedin16countiesof3states.2014Royaltyinterests,purchasepriceof$200,000covering43wellsin12countiesofeightstates,primarilyinTexas.Royaltyinterests,purchaseprice$580,000covering580wellsin87countiesofeightstates.Approximately90%ofthenetrevenuefromtheseroyaltiesisproducedby15

37、7wellslocatedintheBarnettShaleoftheFortWorthBasinofTexas.Alsoincludedareinterestsin423wellsin8states.Non-Operatedworkinginterests,purchaseprice$525,000for12.5%(approximately10%netrevenueinterest).Thepurchaseincludedeightwellsproducingoilon20-acrespacingatapproximately3,600footdepthon190acresinPecosC

38、ounty,TX.Royaltyandmineralinterests,purchaseprice$1,000,000coveringapproximately1,800wellsin27countiesofTexas.Oftheseoilandgasreserves,approximately80%isnaturalgasand20%oil.Non-Operatedworkinginterests,purchaseprice$840,000in70Naturalgasproducingwellslocatedin5countiesofOklahoma.4IndustryEnvironment

39、andOutlookThechallengingcommoditypriceenvironmentcontinuedinfiscal2019.Commoditypricesimprovedbutcontinuetobevolatile.Inlightofthesechallengesfacingourindustryandinresponsetothecontinuedchallengingenvironment,ourprimarybusinessstrategiesforfiscal2020willcontinuetoinclude:(1)optimizingcashflowsthroug

40、hoperatingefficienciesandcostreductions,(2)divestingofnon-coreassets,and(3)workingtobalancecapitalspendingwithcashflowstominimizeborrowings,reducedebtandmaintainampleliquidity.SeePartII,Item7.ManagementsDiscussionandAnalysisofFinancialConditionandResultsofOperationsfordiscussionofourfiscal2019operat

41、ingresultsandpotentialimpactonfiscal2020operatingresultsduetocommoditypricechanges.OilandGasOperationsAsofMarch31,2019,oilconstitutedapproximately54%ofourtotalprovedreservesandapproximately72%ofourrevenuesforfiscal2019.Revenuesfromoilandgasroyaltyinterestsaccountedforapproximately27%ofourrevenuesfor

42、fiscal2019.TherearetwoprimaryareasinwhichtheCompanyisfocused,1)theDelawareBasinlocatedintheWesternportionofthePermianBasinincludingLeaandEddyCounties,NewMexicoandLovingCounty,Texasand2)theMidlandBasinlocatedintheEasternportionofthePermianBasinincludingReagan,Upton,Midland,Martin,HowardandGlasscockCo

43、unties,Texas.ThePermianBasinintotalaccountsfor70%ofourdiscountedfuturenetcashflowsfromprovedreservesand78%ofournetrevenues.TheDelawareBasinproperties,encompassing29,625grossacres,294netacres,488grossproducingwellsand5netwellsaccountforapproximately34%ofourdiscountedfuturenetcashflowsfromprovedreserv

44、esasofMarch31,2019.Ofthesediscountedfuturenetcashflowsfromprovedreserves,approximately10%areattributabletoprovenundevelopedreserveswhichwillbedevelopedthroughnewdrilling.Forfiscal2019,thesepropertiesaccountedfor45%ofourgrossrevenuesand56%ofournetrevenues.TheMidlandBasinproperties,encompassing99,183g

45、rossacres,298netacres,1,000grossproducingwellsand3netwellsaccountforapproximately36%ofourdiscountedfuturenetcashflowsfromprovedreservesasofMarch31,2019.Ofthesediscountedfuturenetcashflowsfromprovedreserves,approximately29%areattributabletoprovenundevelopedreserveswhichwillbedevelopedthroughnewdrilli

46、ng.Forfiscal2019,thesepropertiesaccountedfor20%ofourgrossrevenuesand25%ofournetrevenues.GomezGasFieldproperties,encompassing13,058grossacres,72netacres,27grosswellsand.13netwellsinPecosCounty,Texas,accountforapproximately10%ofourdiscountedfuturenetcashflowsfromprovedreservesasofMarch31,2019.Ofthesed

47、iscountedfuturenetcashflowsfromprovedreserves,approximately9%areattributabletoprovenundevelopedreserveswhichwillbedevelopedthroughnewdrillinginthehorizontalWolfcamp.Forfiscal2019,thesepropertiesaccountedfor2%ofourgrossrevenuesand2%ofournetrevenues.Alloftheseproperties,exceptforone,areroyaltyinterest

48、s.MexcobelievesitsmostimportantpropertiesforfuturedevelopmentbyhorizontaldrillingandhydraulicfracturingareaarelocatedinMidland,ReaganandUptonCounties,TexasoftheMidlandBasinandtheDelawareBasininLeaandEddyCounties,NewMexicoandLovingCounty,Texas.Formoreontheseandotheroperationsinthisareasee“Item7.Manag

49、ementsDiscussionandAnalysisofFinancialConditionandResultsofOperationsLiquidityandCapitalResourcesCommitments”.Weownpartialinterestsinapproximately6,100producingwellsallofwhicharelocatedwithintheUnitedStatesinthestatesofTexas,NewMexico,Oklahoma,Louisiana,Alabama,Mississippi,Arkansas,Wyoming,Kansas,Co

50、lorado,Montana,VirginiaandNorthDakota.Weown100%workinginterestsinandoperate3producingwellsinEctorCounty,Texas.Additionalinformationconcerningthesepropertiesandouroilandgasreservesisprovidedbelow.5Thefollowingtableindicatesouroilandgasproductionineachofthelastfiveyears:YearOil(Bbls)Gas(Mcf)2019 35,35

51、9 295,1332018 34,743 318,7742017 34,689 356,2682016 38,930 407,9392015 29,557 369,034CompetitionandMarketsTheoilandgasindustryisahighlycompetitivebusiness.Competitionforoilandgasreserveacquisitionsissignificant.Wemaycompetewithmajoroilandgascompanies,otherindependentoilandgascompaniesandindividualpr

52、oducersandoperators,someofwhichhavefinancialandpersonnelresourcessubstantiallyinexcessofthoseavailabletous.Asaresult,wemaybeplacedatacompetitivedisadvantage.Competitivefactorsincludeprice,contracttermsandtypesandqualityofservice,includingpipelinedistribution.Thepriceforoilandgasiswidelyfollowedandis

53、generallysubjecttoworldwidemarketfactors.Ourabilitytoacquireanddevelopadditionalpropertiesinthefuturewilldependuponourabilitytoconductoperations,toevaluateandselectsuitablepropertiesandtoconsummatetransactionsinthishighlycompetitiveenvironmentinatimelymanner.Inaddition,the oil and gas industry as a

54、whole also competes with other industries in supplying the energy and fuel requirements ofindustrial,commercialandindividualconsumers.Thepriceandavailabilityofalternativeenergysourcescouldadverselyaffectourrevenue.Marketfactorsaffectthequantitiesofoilandnaturalgasproductionandthepricewecanobtainfort

55、heproductionfromouroilandnaturalgasproperties.Suchfactorsinclude:theextentofdomesticproduction;thelevelofimportsofforeignoilandnaturalgas;thegenerallevelofmarketdemandonaregional,nationalandworldwidebasis;domesticandforeigneconomicconditionsthatdeterminelevelsofindustrialproduction;politicaleventsin

56、foreignoil-producingregions;andvariationsingovernmentalregulationsincludingenvironmental,energyconservationandtaxlawsortheimpositionofnewregulatoryrequirementsupontheoilandnaturalgasindustry.Themarketforouroil,gasandnaturalgasliquidsproductiondependsonfactorsbeyondourcontrolincluding:domesticandfore

57、ignpoliticalconditions;theoveralllevelofsupplyofanddemandforoil,gasandnaturalgasliquids;thepriceofimportsofoilandgas;weatherconditions;thepriceandavailabilityofalternativefuels;theproximityandcapacityofgaspipelinesandothertransportationfacilities;andoveralleconomicconditions.MajorCustomersWemadesale

58、sthatamountedto10%ormoreofrevenuesasfollowsfortheyearendedMarch31:2019 2018CompanyA 42%37%Historically,theCompanyhasnotexperiencedsignificantcreditlossesonouroilandgasaccountsandmanagementisoftheopinionthatsignificantcreditriskdoesnotexist.Becauseareadymarketexistsforoilandgasproduction,wedonotbelie

59、vethelossofanyindividualcustomerwouldhaveamaterialadverseeffectonourfinancialpositionorresultsofoperations.EnvironmentalRegulationGeneral.ActivitiesontheCompanypropertiesaresubjecttoexistingstringentandcomplexfederal,stateandlocallaws(includingcaselaw)andregulationsgoverninghealth,safety,environment

60、alqualityandpollutioncontrol.Failuretocomplywiththeselaws,rulesandregulations,however,mayresultintheassessmentofadministrative,civilorcriminalpenalties;theimpositionofinvestigatoryorremedialobligations;andtheissuanceofinjunctionslimitingorpreventingsomeoralloftheoperationsontheCompanyproperties.6Cle

61、anup.Undercertainenvironmentallawsandregulations,theoperatorsoftheCompanypropertiescouldbesubjecttostrict,jointandseveralliabilityfor the removal or remediation of property contamination,whether at a drill site or a waste disposal facility,even when the operators did not cause thecontaminationorthei

62、ractivitieswereincompliancewithallapplicablelawsatthetimetheactionsweretaken.TheComprehensiveEnvironmentalResponse,CompensationandLiabilityAct(“CERCLA”),alsoknownasthe“superfund”law,forexample,imposesliability,regardlessoffaultorthelegalityoftheoriginalconduct,oncertainclassesofpersonsforreleasesint

63、otheenvironmentofa“hazardoussubstance.”Liablepersonsmayincludethecurrentorpreviousownerandoperatorofasitewhereahazardoussubstancehasbeendisposedandpersonswhoarrangedforthedisposalofahazardoussubstanceatasite.UnderCERCLAandsimilarstatutes,governmentauthoritiesorprivatepartiesmaytakeactionsinresponset

64、othreatstothepublichealthortheenvironmentorsueresponsiblepersonsfortheassociatedcosts.Inthecourseofoperations,theworkinginterestownerand/ortheoperatoroftheCompanypropertiesmayhavegeneratedandmaygeneratematerialsthatcouldtriggercleanupliabilities.Inaddition,theCompanypropertieshaveproducedoiland/orna

65、turalgasformanyyears,andpreviousoperatorsmayhavedisposedorreleasedhydrocarbons,wastesorhazardoussubstancesattheCompanyproperties.TheoperatoroftheCompanypropertiesortheworkinginterestownersmayberesponsibleforallorpartofthecoststocleanupanysuchcontamination.AlthoughtheCompanyisnottheoperatorofsuchprop

66、erties,itsownershipofthepropertiescouldcauseittoberesponsibleforallorpartofsuchcoststotheextentCERCLAoranysimilarstatuteimposesresponsibilityonsuchpartiesas“owners.”ClimateChange.InDecember2009,theEPAdeterminedthatemissionsofcarbondioxide,methaneandcertainothergreenhousegases(“GHGs”)endangerpubliche

67、althandtheenvironmentbecauseemissionsofsuchgasesarecontributingtowarmingoftheEarthsatmosphereandotherclimaticchanges.Basedonthosefindings,theEPAadoptedandimplementedvariousregulationstorestrictemissionsofGHGsunderexistingprovisionsoftheCleanAirAct(“CAA”).Amongotherthings,thesecoveredreductionsinGHGe

68、missionsfrommotorvehicles,permitsforcertainlargestationarysourcesofGHGs,monitoringandannualreportingofGHGemissionsfromspecifiedGHGemissionsources,includingoilandnaturalgasexplorationandproductionoperations,andpowerplantperformancestandardsthatwereintendedtoleadtothecreationofadditionalstateGHGcontro

69、lprograms.OnAugust3,2015,theEPAissuednewregulationslimitingGHGemissions.Undertheseregulations,nationwidecarbondioxideemissionswouldbereducedbyapproximately30percentfrom2005levelsby2030withaflexibleinterimgoal.Severalindustrygroupsandstateschallengedtherule.OnFebruary9,2016,theU.S.SupremeCourtstayedt

70、heimplementationofthisrulependingjudicialreview.OnMarch28,2017,PresidentTrumpsignedanExecutiveOrderdirectingtheEPAtoreviewtheregulations,andonApril4,2017,theEPAannouncedthatitwasreviewingthe2015carbondioxideregulations.OnApril28,2017,theU.S.CourtofAppealsfortheDistrictofColumbiastayedthelitigationpe

71、ndingthecurrentadministrationsreview.Thatstaywasextendedforanother60daysonAugust8,2017.OnOctober10,2017,theEPAinitiatedtheformalrulemakingprocesstorepealtheregulations.InAugust2018,theEPAproposedtheAffordableCleanEnergyruleasareplacementtothe2015regulations.TheEPAsproposalsaresubjecttopubliccommenta

72、ndlikelylegalchallenge,andassuch,wecannotpredictatthistimewhatimpacttherulemakingwillhaveonthedemandforoilandnaturalgasproductionandouroperations.VariousstategovernmentsandregionalorganizationscomprisingstategovernmentsalreadyhaveenactedlegislationandpromulgatedrulesrestrictingGHGemissionsorpromotin

73、gtheuseofrenewableenergy,andadditionalsuchmeasuresarefrequentlyunderconsideration.AlthoughitisnotpossibleatthistimetoestimatehowpotentialfuturerequirementsaddressingGHGemissionswouldimpactoperationsontheCompanypropertiesandrevenue,eitherdirectlyorindirectly,anyfuturefederal,stateorlocallawsorimpleme

74、ntingregulationsthatmaybeadoptedtoaddressGHGemissionscouldrequiretheoperatorsofourpropertiestoincurneworincreasedcoststoobtainpermits,operateandmaintainequipmentandfacilities,installnewemissioncontrols,acquireallowancestoauthorizeGHGemissions,paytaxesrelatedtoGHGemissionsoradministeraGHGemissionspro

75、gram.RegulationofGHGscouldalsoresultinareductionindemandforandproductionofoilandnaturalgas.Additionally,totheextentthatunfavorableweatherconditionsareexacerbatedbyglobalclimatechangeorotherwise,theCompanypropertiesmaybeadverselyaffectedtoagreaterdegreethanpreviouslyexperienced.Wedidnotincuranymateri

76、alcapitalexpendituresforremediationorpollutioncontrolactivitiesfortheyearendedMarch31,2019.Additionally,asofthedateofthisreport,wearenotawareofanyenvironmentalissuesorclaimsthatwillrequirematerialcapitalexpendituresduringfiscal2020.7TitletoPropertiesTheleaseholdpropertiesweownaresubjecttoroyalty,ove

77、rridingroyaltyandotheroutstandinginterestscustomaryintheindustry.Thepropertiesmaybesubjecttoburdenssuchasliensincidenttooperatingagreementsandcurrenttaxes,developmentobligationsunderoilandgasleasesandotherencumbrances,easementsandrestrictions.Wedonotbelieveanyoftheseburdenswillmateriallyinterferewit

78、htheuseoftheseproperties.Asiscustomaryintheoilandgasindustry,onlyapreliminarytitleexaminationisconductedatthetimepropertiesbelievedtobesuitablefordrillingoperationsareacquiredbyus.Priortothecommencementofdrillingoperations,athoroughtitleexaminationofthedrillsitetractisconductedandcurativeworkisperfo

79、rmedwithrespecttosignificantdefects,ifany,beforeproceedingwithoperations.Athoroughtitleexaminationhasbeenperformedwithrespecttosubstantiallyallleaseholdproducingpropertiescurrentlyownedbyus.Webelievethetitletoourleaseholdpropertiesisgoodanddefensibleinaccordancewithstandardsgenerallyacceptableintheo

80、ilandgasindustrysubjecttosuchexceptionsthat,intheopinionofcounselemployedinthevariousareasinwhichwehaveconductedexplorationactivities,arenotsomaterialastodetractsubstantiallyfromtheuseofsuchproperties.Substantiallyallofourpropertiesarecurrentlymortgagedunderadeedoftrusttosecurefundingthroughalineofc

81、redit.InsuranceOuroperationsaresubjecttoalltherisksinherentintheexplorationforanddevelopmentandproductionofoilandgasincludingblowouts,firesandothercasualties.Wemaintaininsurancecoveragecustomaryforoperationsofasimilarnature,butlossescouldarisefromuninsuredrisksorinamountsinexcessofexistinginsurancec

82、overage.ExecutiveOfficersThefollowingtablesetsforthcertaininformationconcerningtheexecutiveofficersoftheCompanyasofMarch31,2019.NameAgePositionNicholasC.Taylor81ChairmanandChiefExecutiveOfficerTamalaL.McComic50President,ChiefFinancialOfficer,Treasurer,andAssistantSecretaryDonnaGailYanko74VicePreside

83、ntandSecretarySetforthbelowisadescriptionoftheprincipaloccupationsduringatleastthepastfiveyearsofeachexecutiveofficeroftheCompany.NicholasC.TaylorwaselectedChairmanoftheBoardandChiefExecutiveOfficeroftheCompanyinSeptember2011andcontinuestoserveinsuchcapacityonaparttimebasis,asrequired.HeservedasChie

84、fExecutiveOfficer,PresidentandDirectoroftheCompanyfrom1983to2011.FromJuly1993tothepresent,Mr.Taylorhasbeeninvolvedintheindependentpracticeoflawandotherbusinessactivities.InNovember2005hewasappointedbytheSpeakeroftheHousetotheTexasEthicsCommissionandserveduntilFebruary2010.TamalaL.McComic,aCertifiedP

85、ublicAccountant,becameControllerfortheCompanyinJuly2001andwaselectedPresidentandChiefFinancialOfficerinSeptember2011.SheservedtheCompanyasExecutiveVicePresidentandChiefFinancialOfficerfrom2009to2011andVicePresidentandChiefFinancialOfficerfrom2003to2009.Priorthereto,Ms.McComicservedasTreasurerandAssi

86、stantSecretaryoftheCompany.DonnaGailYankowasappointedtothepositionofVicePresidentoftheCompanyin1990.ShehasalsoservedasCorporateSecretarysince1992andfrom1986to1992wasAssistantSecretary.From1986to2015,onapart-timebasis,sheassistedtheChairmanoftheBoardoftheCompanyinhispersonalbusinessactivities.Ms.Yank

87、oalsoservedasadirectoroftheCompanyfrom1990to2008.8EmployeesAsofMarch31,2019,wehadtwofull-timeandthreepart-timeemployees.Webelievethatrelationswiththeseemployeesaregenerallysatisfactory.Fromtimetotime,weutilizetheservicesofindependentgeological,landandengineeringconsultantsonalimitedbasisandexpecttoc

88、ontinuetodosointhefuture.Wealsoutilizetheservicesofindependentcontractorstoperformwelldrillingandproductionoperations,includingpumping,maintenance,inspectionandtesting.OfficeFacilitiesAtMarch31,2019,ourprincipalofficesarelocatedat415W.Wall,Suite475,Midland,Texas79701andourtelephonenumberis(432)682-1

89、119.Webelieveournewfacilitiesareadequateforourcurrentoperationsandfutureneeds.AccesstoCompanyReportsMexcoEnergyCorporationfilesannual,quarterlyandcurrentreports,proxystatementsandotherinformationwiththeSEC.PleasecalltheSECat1-800-SEC-0330forinformationonthepublicreferenceroom.TheSECmaintainsanintern

90、etwebsite(www.sec.gov)thatcontainsannual,quarterlyandcurrentreports,proxystatementsandotherinformationthatissuers,includingMexco,fileelectronicallywiththeSEC.W.IntheInvestorRelationssection,ourwebsitecontainsourAnnualReportsonForm10-K,QuarterlyReportsonForm10-Q,CurrentReportsonForm8-K,andotherreport

91、sandamendmentstothosereportsassoonasreasonablypracticableaftersuchmaterialiselectronicallyfiledwiththeSEC.InformationonourwebsiteisnotincorporatedbyreferenceintothisForm10-KandshouldnotbeconsideredpartofthisreportoranyotherfilingthatwemakewiththeSEC.Additionally,ourCodeofBusinessConductandEthicsandt

92、hechartersofourAuditCommittee,CompensationCommitteeandNominatingCommitteearepostedonourwebsite.AnyofthesecorporatedocumentsaswellasanyoftheSECfiledreportsareavailableinprintfreeofchargetoanystockholderwhorequeststhem.RequestsshouldbedirectedtoourcorporateAssistantSecretarybymailtoP.O.Box10502,Midlan

93、d,T.ITEM1A.RISKFACTORSTherearemanyfactorsthataffectourbusinessandresultsofoperations,someofwhicharebeyondourcontrol.Thefollowingisadescriptionofsomeoftheimportantfactorsthatcouldhaveamaterialadverseeffectonourbusiness,financialposition,liquidityandresultsofoperations.Someofthefollowingrisksrelatepri

94、ncipallytotheindustryinwhichweoperateandtoourbusiness.Otherrisksrelateprincipallytothesecuritiesmarketsandownershipofourcommonstock.RISKSRELATEDTOOURBUSINESSANDINDUSTRYVolatility of oil and gas prices significantly affects our results and profitability.Pricesforoilandnaturalgasfluctuatewidely.Wecann

95、otpredictfutureoilandnaturalgaspriceswithanycertainty.Historically,themarketsforoilandgashavebeenvolatile,andtheyarelikelytocontinuetobevolatile.Factorsthatcancausepricefluctuationsincludethelevelofglobaldemandforpetroleumproducts;foreignsupplyandpricingofoilandgas;theabilityoftheOrganizationofPetro

96、leumExportingCountries(“OPEC”)tosetandmaintainoilpriceandproduction controls;nature and extent of governmental regulation and taxation,including environmental regulations;level of domestic and internationalexploration,drillingandproductionactivity;thecostofexploringfor,producinganddeliveringoilandga

97、s;speculativetradingincrudeoilandnaturalgasderivativecontracts;availability,proximityandcapacityofoilandgaspipelinesandothertransportationfacilities;weatherconditions;thepriceandavailabilityofalternativefuels;technologicaladvancesaffectingenergyconsumption;and,overallpoliticalandeconomicconditionsin

98、oilproducingcountries.Increasesanddecreasesinpricesalsoaffecttheamountofcashflowavailableforcapitalexpendituresandourabilitytoborrowmoneyorraiseadditionalcapital.Theamountwecanborrowfrombanksmaybesubjecttoredeterminationbasedonchangesinprices.Inaddition,wemayhaveceilingtestwritedownswhenpricesdeclin

99、e.Lowerpricesmayalsoreducetheamountofcrudeoilandnaturalgasthatcanbeproducedeconomically.Thus,wemayexperiencematerialincreasesordecreasesinreservequantitiessolelyasaresultofpricechangesandnotasaresultofdrillingorwellperformance.Changesinoilandgaspricesimpactbothestimatedfuturenetrevenueandtheestimate

100、dquantityofprovedreserves.Anyreductioninreserves,includingreductionsduetopricefluctuations,canreducetheborrowingbaseunderourcreditfacilityandadverselyaffecttheamountofcashflowavailableforcapitalexpendituresandourabilitytoobtainadditionalcapitalforourexplorationanddevelopmentactivities.9Oilandnatural

101、gaspricesdonotnecessarilyfluctuateindirectrelationshiptoeachother.Lowerpricesorlackofstoragemayhaveanadverseaffectonourfinancialconditionduetoreductionofourrevenues,operatingincomeandcashflows;curtailmentorshut-inofourproductionduetolackoftransportationorstoragecapacity;causecertainpropertiesinourpo

102、rtfoliotobecomeeconomicallyunviable;and,limitourfinancialcondition,liquidity,and/orabilitytofinanceplannedcapitalexpendituresandoperations.Lower oil and gas prices and other factors may cause us to record ceiling test writedowns.Loweroil and gas prices increase the risk of ceiling limitation write-d

103、owns.We use the full cost method to account for oil and gas operations.Accordingly,wecapitalizethecosttoacquire,exploreforanddevelopcrudeoilandnaturalgasproperties.Underthefullcostaccountingrules,thenetcapitalizedcostofcrudeoilandnaturalgaspropertiesmaynotexceeda“ceilinglimit”whichisbaseduponthepres

104、entvalueofestimatedfuturenetcashflowsfromprovedreserves,discountedat10%plusthelowerofcostorfairmarketvalueofunprovedproperties.Ifnetcapitalizedcostsofoilandnaturalgaspropertiesexceedtheceilinglimit,wemustchargetheamountoftheexcessagainstearnings.Thisiscalleda“ceilingtestwritedown.”Undertheaccounting

105、rules,wearerequiredtoperformaceilingtesteachquarter.Aceilingtestwritedowndoesnotimpactcashflowfromoperatingactivities,butdoesreducestockholdersequityandearnings.Theriskthatwewillberequiredtowritedownthecarryingvalueofoilandnaturalgaspropertiesincreaseswhenoilandnaturalgaspricesarelow.Weincurredimpai

106、rmentchargesduringfiscal2016andmayincuradditionalimpairmentchargesinthefuture,particularlyifcommoditypricesdecline,whichcouldhaveamaterialadverseeffectonourresultsofoperationsfortheperiodsinwhichsuchchargesaretaken.Therewerenoceilingtestimpairmentsonouroilandgaspropertiesduringfiscal2019and2018.We m

107、ust replace reserves we produce.Ourfuturesuccessdependsuponourabilitytofind,developoracquireadditional,economicallyrecoverableoilandgasreserves.Ourprovedreserveswillgenerallydeclineasreservesaredepleted,excepttotheextentthatwecanfind,developoracquirereplacementreserves.Oneoffsettotheobviousbenefitsa

108、ffordedbyhigherproductpricesespeciallyforsmalltomid-capcompaniesinthisindustry,isthatqualitydomesticoilandgasreservesarehardtofind.Approximately 48%and 49%of our total estimated net proved reserves at March 31,2019 and 2018,respectively,were undeveloped,and those reserves may notultimately be develo

109、ped.Recoveryofundevelopedreservesrequiressignificantcapitalexpendituresandsuccessfuldrilling.Ourreservedataassumesthatwecanandwillmaketheseexpendituresandconducttheseoperationssuccessfully.Theseassumptions,however,maynotprovecorrect.Ifweortheoutsideoperatorsofourpropertieschoosenottospendthecapitalt

110、odevelopthesereserves,orifwearenotabletosuccessfullydevelopthesereserves,wewillberequiredtowrite-offthesereserves.Anysuchwrite-offsofourreservescouldreduceourabilitytoborrowmoneyandcouldreducethevalueofourcommonstock.Information concerning our reserves and future net revenues estimates is inherently

111、 uncertain.Estimatesofoilandgasreserves,bynecessity,areprojectionsbasedonengineeringdata,andthereareuncertaintiesinherentintheinterpretationofsuchdataaswellastheprojectionoffutureratesofproductionandthetimingofdevelopmentexpenditures.Reserveengineeringisasubjectiveprocessofestimatingundergroundaccum

112、ulationsofoilandgasthataredifficulttomeasure.Estimatesofeconomicallyrecoverableoilandgasreservesandoffuturenetcashflowsdependuponanumberofvariablefactorsandassumptions,suchasfutureproduction,oilandgasprices,operatingcosts,developmentcostsandremedialcosts,allofwhichmayvaryconsiderablyfromactualresult

113、s.Asaresult,estimatesoftheeconomicallyrecoverablequantitiesofoilandgasandoffuturenetcashflowsexpectedtherefrommayvarysubstantially.AsrequiredbytheSEC,theestimateddiscountedfuturenetcashflowsfromprovedreservesarebasedonatwelvemonthun-weightedfirst-day-of-the-monthaverageoilandgaspricesforthetwelvemon

114、thspriortothedateofthereport.Actualfuturepricesandcostsmaybemateriallyhigherorlower.10 An increase in the differential between NYMEX and the reference or regional index price used to price our oil and gas would reduce our cash flow fromoperations.Ouroilandgasispricedinthelocalmarketswhereitisproduce

115、dbasedonlocalorregionalsupplyanddemandfactors.Thepriceswereceiveforouroilandgasaretypicallylowerthantherelevantbenchmarkprices,suchasTheNewYorkMercantileExchange(“NYMEX”).Thedifferencebetweenthebenchmarkpriceandthepricewereceiveiscalledadifferential.Numerousfactorsmayinfluencelocalpricing,suchasrefi

116、nerycapacity,pipelinecapacityandspecifications,upsetsinthemidstreamordownstreamsectorsoftheindustry,traderestrictionsandgovernmentalregulations.Additionally,insufficientpipelinecapacity,lackofdemandinanygivenoperatingareaorotherfactorsmaycausethedifferentialtoincreaseinaparticularareacomparedwithoth

117、erproducingareas.Duringfiscal2019,differentialsaveraged$5.81perBblofoiland$0.30perMcfofgas.Increasesinthedifferentialbetweenthebenchmarkpricesforoilandgasandthewellheadpricewereceivecouldsignificantlyreduceourrevenuesandourcashflowfromoperations.Our exploration and development drilling may not resul

118、t in commercially productive reserves.Newwellsthatwedrillmaynotbeproductive,orwemaynotrecoveralloranyportionofourinvestmentinsuchwells.Theseismicdataandothertechnologiesweusedonotallowustoknowconclusivelypriortodrillingawellthatcrudeoilornaturalgasispresentormaybeproducedeconomically.Drillingforcrud

119、eoilandnaturalgasofteninvolvesunprofitableefforts,notonlyfromdryholesbutalsofromwellsthatareproductivebutdonotproducesufficientnetreservestoreturnaprofitatthenrealizedpricesafterdeductingdrilling,operatingandothercosts.Thecostofdrilling,completingandoperatingawellisoftenuncertain,andcostfactorscanad

120、verselyaffecttheeconomicsofaproject.Drilling and operating activities are high risk activities that subject us to a variety of factors that we cannot control.Thesefactorsincludeavailabilityofworkoveranddrillingrigs,wellblowouts,cratering,explosions,fires,formationswithabnormalpressures,pollution,rel

121、easesoftoxicgasesandotherenvironmentalhazardsandrisks.Anyoftheseoperatinghazardscouldresultinsubstantiallossestous.Inaddition,weincurtheriskthatnocommerciallyproductivereservoirswillbeencountered,andthereisnoassurancethatwewillrecoveralloranyportionofourinvestmentinwellsdrilledorre-entered.Acquisiti

122、ons are subject to the risks and uncertainties of evaluating reserves and potential liabilities and may be disruptive and difficult to integrate into ourbusiness.Weplantocontinuegrowingourreservesthroughacquisitions.Acquiredpropertiescanbesubjecttosignificantunknownliabilities.Priortocompletinganacq

123、uisition,itisgenerallynotfeasibletoconductadetailedreviewofeachindividualpropertytobeacquiredinanacquisition.Evenadetailedrevieworinspectionofeachpropertymaynotrevealallexistingorpotentialliabilitiesassociatedwithowningoroperatingtheproperty.Moreover,somepotentialliabilities,suchasenvironmentalliabi

124、litiesrelatedtogroundwatercontamination,maynotbediscoveredevenwhenarevieworinspectionisperformed.Ourinitialreserveestimatesforacquiredpropertiesmaybeinaccurate.Downwardadjustmentstoourestimatedprovedreserves,includingreservesaddedthroughacquisitions,couldrequireustowritedownthecarryingvalueofouroila

125、ndgasproperties,whichwouldreduceourearningsandourstockholdersequity.Inaddition,wemayhavetoassumecleanuporreclamationobligationsorotherunanticipatedliabilitiesinconnectionwiththeseacquisitions.Thescopeandcostoftheseobligationsmayultimatelybemateriallygreaterthanestimatedatthetimeoftheacquisition.We m

126、ay not be able to fund the capital expenditures that will be required for us to increase reserves and production.Wemustmakecapitalexpenditurestodevelopourexistingreservesandtodiscovernewreserves.Historically,wehaveusedourcashflowfromoperationsandborrowingsunderourcreditfacilitytofundourcapitalexpend

127、itures,however,loweroilandgaspricesmaypreventtheseoptions.Volatilityinoilandgasprices,thetimingofourdrillingprogramsanddrillingresultswillaffectourcashflowfromoperations.Lowerpricesand/orlowerproductionwillalsodecreaserevenuesandcashflow,thusreducingtheamountoffinancialresourcesavailabletomeetourcap

128、italrequirements,includingreducingtheamountavailabletopursueourdrillingopportunities.Theborrowingbaseunderourcreditfacilitywillbedeterminedfromtimetotimebythelender.Reductionsinestimatesofoilandgasreservescouldresult in a reduction in the borrowing base,which would reduce the amount of financial res

129、ources available under the credit facility to meet our capitalrequirements.Suchareductioncouldbetheresultoflowercommoditypricesand/orproduction,inabilitytodrillorunfavorabledrillingresults,changesinoilandgasreserveengineering,thelendersinabilitytoagreetoanadequateborrowingbaseoradversechangesinthele

130、nderspracticesregardingestimationofreserves.11Ifcashflowfromoperationsorourborrowingbasedecreaseforanyreason,ourabilitytoundertakeexplorationanddevelopmentactivitiescouldbeadverselyaffected.Asaresult,ourabilitytoreplaceproductionmaybelimited.Our identified drilling locations are scheduled out over s

131、everal years,making them susceptible to uncertainties that could materially alter the occurrence or timingof their drilling.Ourmanagementandoutsideoperatorshavespecificallyidentifiedandscheduleddrillinglocationsasanestimationofourfuturemulti-yeardrillingactivitiesonourexistingacreage.Thesedrillinglo

132、cationsrepresentasignificantpartofourgrowthstrategy.Ourabilitytodrillanddeveloptheselocationsdependsonanumberofuncertainties,includingcrudeoilandnaturalgasprices,theavailabilityofcapital,costs,drillingresults,regulatoryapprovalsandotherfactors.Iffuturedrillingresultsintheseprojectsdonotestablishsuff

133、icientreservestoachieveaneconomicreturn,wemaycurtaildrillingintheseprojects.Becauseoftheseuncertainties,wedonotknowifthenumerouspotentialdrillinglocationswehaveidentifiedwilleverbedrilledorifwewillbeabletoproducecrudeoilornaturalgasfromtheseoranyotherpotentialdrillinglocations.Our business depends o

134、n oil and natural gas transportation facilities which are owned by others.Themarketabilityofourproductiondependsinpartontheavailability,proximityandcapacityofnaturalgasgatheringsystems,pipelinesandprocessingfacilities.Federalandstateregulationofoilandgasproductionandtransportation,taxandenergypolici

135、es,changesinsupplyanddemandandgeneraleconomicconditionscouldallaffectourabilitytoproduceandmarketouroilandgas.We have limited control over activities on properties we do not operate,which could reduce our production and revenues.Asubstantialamountofourbusinessactivitiesareconductedthroughjointoperat

136、ingorotheragreementsunderwhichweownworkingandroyaltyinterestsinnaturalgasandoilpropertiesinwhichwedonotoperate.Asaresult,wehavealimitedabilitytoexerciseinfluenceovernormaloperatingprocedures,expendituresorfuturedevelopmentofunderlyingpropertiesandtheirassociatedcosts.Thefailureofanoperatorofourwells

137、toadequatelyperformoperationscouldreduceourrevenuesandproduction.The oil and gas industry is highly competitive.Competitionforoilandgasreserveacquisitionsissignificant.Wemaycompetewithmajoroilandgascompanies,otherindependentoilandgascompaniesandindividualproducersandoperators,someofwhichhavefinancia

138、landpersonnelresourcessubstantiallyinexcessofthoseavailabletous.Asaresult,wemaybeplacedatacompetitivedisadvantage.Ourabilitytoacquireanddevelopadditionalpropertiesinthefuturewilldependuponourabilitytoselectandacquiresuitableproducingpropertiesandprospectsforfuturedevelopmentactivities.Inaddition,the

139、oilandgasindustryasawholealsocompeteswithotherindustriesinsupplyingtheenergyandfuelrequirementsofindustrial,commercialandindividualconsumers.Thepriceandavailabilityofalternativeenergysourcescouldadverselyaffectourrevenue.Themarketforouroil,gasandnaturalgasliquidsproductiondependsonfactorsbeyondourco

140、ntrol,includingdomesticandforeignpoliticalconditions,theoveralllevelofsupplyofanddemandforoil,gasandnaturalgasliquids,thepriceofimportsofoilandgas,weatherconditions,thepriceandavailabilityofalternativefuels,theproximityandcapacityofgaspipelinesandothertransportationfacilitiesandoveralleconomiccondit

141、ions.We may not be insured against all of the operating hazards to which our business is exposed.Ouroperationsaresubjecttoalltherisksinherentintheexplorationfor,anddevelopmentandproductionofoilandgasincludingblowouts,firesandothercasualties.Wemaintaininsurancecoveragecustomaryforoperationsofasimilar

142、nature,butlossescouldarisefromuninsuredrisksorinamountsinexcessofexistinginsurancecoverage.Certain U.S.federal income tax deductions currently available with respect to crude oil and natural gas exploration and development may be eliminated as aresult of proposed legislation.InDecember2017,Congresse

143、nactedthebudgetreconciliationactcommonlyreferredtoastheTaxCutsandJobsAct(“TCJA”).ThelawmadesignificantchangestoU.S.federalincometaxlaws,includingreducingthecorporateincometaxratefrom35percentto21percent,repealingthecorporatealternativeminimumtax(“AMT”),partiallylimitingthedeductibilityofinterestexpe

144、nseandnetoperatinglosses(“NOLs”),eliminatingthedeductionforcertainU.S.productionactivitiesandallowingtheimmediatedeductionofcertainnewinvestmentsinlieuofdepreciationexpenseovertime.12Legislationpreviouslyhasbeenproposedthatwould,ifenactedintolaw,makesignificant changestoU.S.federal incometaxlaws,inc

145、luding theeliminationofcertainkeyU.S.federalincometaxincentivescurrentlyavailabletocrudeoilandnaturalgasexplorationandproductioncompanies.Thesechangesinclude,butarenotlimitedto:(1)therepealofthepercentagedepletionallowanceforcrudeoilandnaturalgasproperties,(2)theeliminationofcurrentdeductionsforinta

146、ngibledrillinganddevelopmentcosts,(3)theeliminationofthedeductionforcertainU.S.domesticproductionactivities,and(4)anextensionoftheamortizationperiodforcertaingeologicalandgeophysicalexpenditures.Itisunclearwhetheranysuchchangeswillbeenactedand,ifenacted,howsoonanysuchchangescouldbecomeeffective.Thep

147、assageofthistypeoflegislationoranyothersimilarchangesinU.S.federalincometaxlawscouldeliminateorpostponecertaintaxdeductionsthatarecurrentlyavailablewithrespecttocrudeoilandnaturalgasexplorationanddevelopment,andanysuchchangecouldhaveanadverseeffectonourfinancialposition,resultsofoperationsandcashflo

148、ws.Additionally,futurelegislationcouldbeenactedthatincreasesthetaxesorfeesimposedonoilandnaturalgasextraction.Anysuchlegislationcouldresultinincreasedoperatingcostsand/orreducedconsumerdemandforpetroleumproducts,whichinturncouldaffectthepriceswereceiveforouroilandnaturalgas.The loss of our chief exe

149、cutive officer or other key personnel could adversely impact our ability to execute our business strategy.Wedepend,andwillcontinuetodependintheforeseeablefuture,uponthecontinuedservicesofourChiefExecutiveOfficer,NicholasC.Taylor,ourPresidentandChiefFinancialOfficer,TamalaL.McComic,andotherkeypersonn

150、el,whohaveextensiveexperienceandexpertiseinevaluatingandanalyzingproducingoilandgasproperties anddrillingprospects,maximizing production fromoilandgaspropertiesanddevelopingandexecutingacquisitionsandfinancing.Wedonothavekey-maninsuranceonthelivesofMr.TaylorandMs.McComic.Theunexpectedlossoftheservic

151、esofoneormoreoftheseindividualscould,therefore,significantlyandadverselyaffectouroperations.We may be affected by one substantial shareholder.NicholasC.Taylorbeneficiallyownsapproximately47%oftheoutstandingsharesofourcommonstock.Mr.TaylorisalsoourChairmanoftheBoardandChiefExecutiveOfficer.Asaresult,

152、Mr.Taylorhassignificantinfluenceinmattersvotedonbyourshareholders,includingtheelectionofourBoardmembers.Mr.Taylorparticipatesinallfacetsofourbusinessandhasasignificantimpactonbothourbusinessstrategyanddailyoperations.Theretirement,incapacityordeathofMr.Taylor,oranychangeinthepowertovotesharesbenefic

153、iallyownedbyMr.Taylor,couldresultinnegativemarketorindustryperceptionandcouldhaveanadverseeffectonourbusiness.RISKSRELATEDTOOURCOMMONSTOCK We may issue additional shares of common stock in the future,which could cause dilution to all shareholders.Wemayseektoraiseadditionalequitycapitalinthefuture.An

154、yissuanceofadditionalsharesofourcommonstockwilldilutethepercentageownershipinterestofallshareholdersandmaydilutethebookvaluepershareofourcommonstock.We have not and do not anticipate paying any cash dividends on our common stock in the foreseeable future.Wehavepaidnocashdividendsonourcommonstocktoda

155、teanditisnotanticipatedthatanywillbepaidtoholdersofourcommonstockintheforeseeablefuture.Thetermsofourexistingcreditfacilityrestrictsthepaymentofdividendswithoutthepriorwrittenconsentofthelenders.Wecurrentlyintendtoretainallfutureearningstofundthedevelopmentandgrowthofourbusiness.Anypaymentoffuturedi

156、videndswillbeatthediscretionofourboardofdirectorsandwilldependon,amongotherthings,ourearnings,financialcondition,capitalrequirements,levelofindebtedness,statutoryandcontractualrestrictionsapplyingtothepaymentofdividendsandotherconsiderationsthatourboardofdirectorsdeemsrelevant.Stockholdersmustrelyon

157、salesoftheircommonstockafterpriceappreciation,whichmayneveroccur,astheonlywaytorealizeareturnontheirinvestment.13 Control by our executive officers and directors may limit your ability to influence the outcome of matters requiring stockholder approval and could discourage ourpotential acquisition by

158、 third parties.AsofMarch31,2019,ourexecutiveofficersanddirectorsbeneficiallyownedapproximately52%ofourcommonstock.Thesestockholders,ifactingtogether,wouldbeabletoinfluencesignificantlyallmattersrequiringapprovalbyourstockholders,includingtheelectionofourboardofdirectorsandtheapprovalofmergersorother

159、businesscombinationtransactions.The price of our common stock has been volatile and could continue to fluctuate substantially.MexcocommonstockistradedontheNYSEAmerican.Themarketpriceofourcommonstockhasandcouldcontinuetoexperiencevolatilityduetoreasonsunrelatedtoouroperatingperformance.Thesereasonsin

160、clude:supplyanddemandfornaturalgasandoil;politicalconditionsinoilandnaturalgasproducingregions;demandforourcommonstockandlimitedtradingvolume;investorperceptionofourindustry;fluctuationsincommodityprices;variationsinourresultsofoperations;legislativeorregulatorychanges;generaltrendsintheoilandnatura

161、lgasindustry;marketconditionsandanalystsestimates;and,othereventsintheoilandgasindustry.Manyofthesefactorsarebeyondourcontrol,andwecannotpredicttheirpotentialeffectsonthepriceofourcommonstock.Wecannotassureyouthatthemarketpriceofourcommonstockwillnotfluctuateordeclinesignificantlyinthefuture.Inaddit

162、ion,thestockmarketsingeneralcanexperienceconsiderablepriceandvolumefluctuations.Failure of the Companys internal control over financial reporting could harm its business and financial results.ThemanagementofMexcoisresponsibleforestablishingandmaintainingeffectiveinternalcontroloverfinancialreporting

163、.InternalcontroloverfinancialreportingisaprocesstoprovidereasonableassuranceregardingthereliabilityoffinancialreportingforexternalpurposesinaccordancewithaccountingprinciplesgenerallyacceptedintheUnitedStates.Internalcontroloverfinancialreportingincludesmaintainingrecordsthatinreasonabledetailaccura

164、telyandfairlyreflectMexcostransactions;providingreasonableassurancethattransactionsarerecordedasnecessaryforpreparationofthefinancialstatements;providingreasonableassurancethatreceiptsandexpendituresaremadeinaccordancewithmanagementauthorization;andprovidingreasonableassurancethatunauthorizedacquisi

165、tion,useordispositionofourassetsthatcouldhaveamaterialeffectonthefinancialstatementswouldbepreventedordetectedonatimelybasis.ITEM1B.UNRESOLVEDSTAFFCOMMENTSNone.ITEM2.PROPERTIESOurpropertiesconsistprimarilyofoilandgaswellsandourownershipinleaseholdacreage,bothdevelopedandundeveloped.AsofMarch31,2019,

166、wehadinterestsinapproximately6,100gross(24net)oilandgaswellsandownedleaseholdmineralandroyaltyinterestsinapproximately553,000gross(3,712net)acres.OilandNaturalGasReservesInaccordancewithcurrentSECrules,theaveragepricesusedincomputingreservesatMarch31,2019were$53.71perbblofoiland$50.63in2018,anincrea

167、seof6%,and$2.77permcfofnaturalgasand$3.03in2018,adecreaseof9%,suchpricesarebasedonthe12-monthunweightedarithmeticaveragemarketpricesforsalesofoilandnaturalgasonthefirstcalendardayofeachmonthduringfiscal2019.Thebenchmarkpriceof$59.52perbblofoilatMarch31,2019versus$49.94atMarch31,2018,wasadjustedbylea

168、seforgravity,transportationfeesandregionalpricedifferentialsanddidnotgiveeffecttoderivativetransactions.Thebenchmarkpriceof$3.07permcfofnaturalgasatMarch31,2019versus$3.00atMarch31,2018,wasadjustedbyleaseforBTUcontent,transportationfeesandregionalpricedifferentials.Forinformationconcerningourcostsin

169、curredforoilandgasoperations,netrevenuesfromoilandgasproduction,estimatedfuturenetrevenuesattributabletoouroilandgasreserves,presentvalueoffuturenetrevenuesdiscountedat10%andchangestherein,seeNotestotheCompanysconsolidatedfinancialstatements.14Provedreservesareestimatedreservesofcrudeoil(includingco

170、ndensateandnaturalgasliquids)andnaturalgasthatgeologicalandengineeringdatademonstrate with reasonable certainty to be recoverable in future years from known reservoirs under existing economic and operating conditions.Proveddevelopedreservesarethoseexpectedtoberecoveredthroughexistingwells,equipmenta

171、ndoperatingmethods.Provedundevelopedreservesareprovedreservesthatareexpectedtoberecoveredfromnewwellsdrilledtoknownreservoirsonundrilledacreageforwhichtheexistenceandrecoverabilityofsuchreservescanbeestimatedwithreasonablecertainty,orfromexistingwellsonwhicharelativelymajorexpenditureisrequiredtoest

172、ablishproduction.TheengineeringreportwithrespecttoMexcosestimatesofprovedoilandgasreservesasofMarch31,2019and2018isbasedonevaluationspreparedbyRussellK.HallandAssociates,Inc.EnvironmentalEngineeringConsultants,basedinMidland,Texas(“HallandAssociates”),asummaryofwhichisfiledasExhibit99.1tothisannualr

173、eport.ManagementmaintainsinternalcontrolsdesignedtoprovidereasonableassurancethattheestimatesofprovedreservesarecomputedandreportedinaccordancewithrulesandregulationsprovidedbytheSEC.Asstatedabove,MexcoretainedHallandAssociatestoprepareestimatesofouroilandgasreserves.Managementworkscloselywiththisfi

174、rm,andisresponsibleforprovidingaccurateoperatingandtechnicaldatatoit.OurChiefFinancialOfficerwhohasover25yearsexperienceintheoilandgasindustryreviewsthefinalreservesestimateandconsultswithadegreedgeologicalconsultantwithextensivegeologicalexperienceandifnecessary,discussestheprocessusedandfindingswi

175、thAlanNeal,thetechnicalpersonatHallandAssociatesresponsibleforevaluatingtheprovedreservescoveredbythisreport.Mr.NealisamemberoftheSocietyofPetroleumEngineersandhasover35yearsofexperienceintheoilandgasindustry.OurChairmanandChiefExecutiveOfficerwhohasover45yearsofexperienceintheoilandgasindustryalsor

176、eviewsthefinalreservesestimate.Numerousuncertaintiesexistinestimatingquantitiesofprovedreserves.Reserveestimatesareimpreciseandsubjectiveandmaychangeatanytimeasadditionalinformationbecomesavailable.Furthermore,estimatesofoilandgasreservesareprojectionsbasedonengineeringdata.Thereareuncertaintiesinhe

177、rentintheinterpretationofthisdataaswellastheprojectionoffutureratesofproduction.Theaccuracyofanyreserveestimateisafunctionofthequalityofavailabledataandofengineeringandgeologicalinterpretation.Actualfutureproduction,oilandgasprices,revenues,taxes,developmentexpenditures,operatingexpensesandquantitie

178、sofrecoverableoilandgasreserveswillmostlikelyvaryfromtheassumptionsandestimates.Anysignificantvariancecouldmateriallyaffecttheestimatedquantitiesandvalueofouroilandgasreserves,whichinturnmayadverselyaffectourcashflow,resultsofoperationsandtheavailabilityofcapitalresources.PerthecurrentSECrules,thepr

179、icesusedtocalculateourprovedreservesandthepresentvalueofprovedreservessetforthhereinaremadeusingthe12-monthunweightedarithmeticaverageofthefirst-day-of-the-monthprice.Allpricesareheldconstantthroughoutthelifeoftheproperties.Actualfuturepricesandcostsmaybemateriallyhigherorlowerthanthoseasofthedateof

180、theestimate.Thetimingofboththeproductionandtheexpenseswithrespecttothedevelopmentandproductionofoilandgaspropertieswillaffectthetimingoffuturenetcashflowsfromprovedreservesandtheirpresentvalue.Excepttotheextentthatweacquireadditionalpropertiescontainingprovedreservesorconductsuccessfulexplorationand

181、developmentactivities,orboth,ourprovedreserveswilldeclineasreservesareproduced.OurestimatedprovedoilandgasreservesandpresentvalueofestimatedfuturenetrevenuesfromprovedoilandgasreservesintheperiodsendedMarch31aresummarizedbelow.15PROVEDRESERVESMarch31,2019 2018Oil(Bbls):ProveddevelopedProducing341,89

182、0 379,390ProveddevelopedNon-producing34,710 11,350Provedundeveloped663,860 805,980Total1,040,460 1,196,720 Naturalgas(Mcf):ProveddevelopedProducing3,420,730 3,774,490ProveddevelopedNon-producing402,710 328,900Provedundeveloped1,557,250 1,383,120Total5,380,690 5,486,510 Totalnetprovedreserves(BOE)1,9

183、37,240 2,111,140 PV-10Value(1)$22,317,300$22,001,900Presentvalueoffutureincometaxdiscountedat10%(3,065,100)(3,125,900)Standardizedmeasureofdiscountedfuturenetcashflows(2)$19,252,200$18,876,000 PricesusedinCalculatingReserves:(3)Naturalgas(perMcf)$2.77$3.03Oil(perBbl)$53.71$50.63(1)ThePV-10Valuerepre

184、sentsthediscountedfuturenetcashflowsattributabletoourprovedoilandgasreservesbeforeincometax,discountedat10%perannum,whichisthemostdirectlycomparableGAAPfinancialmeasure.PV-10isrelevantandusefultoinvestorsbecauseitpresentsthediscountedfuturenetcashflowsattributabletoourestimatednetprovedreservesprior

185、totakingintoaccountfuturecorporateincometaxes.Further,investorsmayutilizethemeasureasabasisforcomparisonoftherelativesizeandvalueofourreservestoothercompanies.Weusethismeasurewhenassessingthepotentialreturnoninvestmentrelatedtoouroilandnaturalgasproperties.Ourreconciliationofthisnon-GAAPfinancialmea

186、sureisshowninthetableasthePV-10,lessfutureincometaxes,discountedat10%perannum,resultinginthestandardizedmeasureofdiscountedfuturenetcashflows.Thestandardizedmeasureofdiscountedfuturenetcashflowsrepresentsthepresentvalueoffuturecashflowsattributabletoourprovedoilandnaturalgasreservesafterincometax,di

187、scountedat10%.(2)InaccordancewithSECrequirement,thestandardizedmeasureofdiscountedfuturenetcashflowswascomputedbyapplying12-monthfirstdayofthemonthaveragepricesforoilandgasduringthefiscalyeartotheestimatedfutureproductionofprovedoilandgasreserves,lessestimatedfutureexpenditures(basedonyear-endcosts)

188、tobeincurredindevelopingandproducingtheprovedreserves,lessestimatedfutureincometaxexpenses(basedonyear-endstatutorytaxrates,withconsiderationoffuturetaxratesalreadylegislated)tobeincurredonpretaxnetcashflowslesstaxbasisofthepropertiesandavailablecredits,andassumingcontinuationofexistingeconomiccondi

189、tions.(3)Thesepricesreflectadjustmentbyleaseforquality,transportationfeesandregionalpricedifferentialsanddidnotgiveeffecttoderivativetransactions.WehavenotfiledanyotheroilorgasreserveestimatesorincludedanysuchestimatesinreportstootherfederalorforeigngovernmentalauthorityoragencyduringtheyearendedMar

190、ch31,2019,andnomajordiscoveryisbelievedtohavecausedasignificantchangeinourestimatesofprovedreservessincethatdate.DuringthefiscalyearendingMarch31,2019,weparticipatedinthedevelopmentof26wellsconvertingreservesofapproximately64,000BOEfromprovedundevelopedtoproveddevelopedproducingwithcapitalcostofappr

191、oximately$828,000.OilandgaspricessignificantlyimpactthecalculationofthePV-10andthestandardizedmeasureofdiscountedfuturenetcashflows.ThepresentvalueoffuturenetcashflowsdoesnotpurporttobeanestimateofthefairmarketvalueoftheCompanysprovedreserves.Anestimateoffairvaluewouldalsotakeintoaccount,amongothert

192、hings,anticipatedchangesinfuturepricesandcosts,theexpectedrecoveryofreservesinexcessofprovedreservesandadiscountfactormorerepresentativeofthetimevalueofmoneyandtherisksinherentinproducingoilandgas.Futurepricesreceivedforproductionandcostsmayvary,perhapssignificantly,fromthepricesandcostsassumedforpu

193、rposesoftheseestimates.The10%discountfactorusedtocalculatepresentvalue,whichisrequiredbyAccountingStandardCodification(“ASC”)932,“ExtractiveActivitiesOilandGas”,maynotnecessarilybethemostappropriatediscountrate.Thepresentvalue,nomatterwhatdiscountrateisused,ismateriallyaffectedbyassumptionsastotimin

194、goffutureproduction,whichmayprovetobeinaccurate.DrillingActivitiesThefollowingtablesetsforthourdrillingactivityinwellsinwhichweownaworkinginterestfortheyearsendedMarch31:YearEndedMarch31,2019 2018Gross Net Gross NetExploratoryWells NonproductiveVertical1.02-Total1.02-DevelopmentWells Productive-Hori

195、zontal43.12 23.10Productive-Vertical3.01 2.01Nonproductive-Vertical1-Total47.14 25.1116Theinformationcontainedintheforegoingtableshouldnotbeconsideredindicativeoffuturedrillingperformance,norshoulditbeassumedthatthereisanynecessarycorrelationbetweenthenumberofproductivewellsdrilledandtheamountofoila

196、ndgasthatmayultimatelyberecoveredbyus.ThenetnumbersaboverepresentMexcosworkinginterestinthegrosswells.Inadditiontotheworkinginterestsmentionedabove,otheroperatorsdrilled113grosswells(.08netwells)oncompany-ownedmineralsandroyaltiesatnoexpensetotheCompany.ProductiveWellsandAcreageProductivewellsconsis

197、tofproducingwellsandwellscapableofproduction,includinggaswellsawaitingpipelineconnections.Wellsthatarecompletedinmorethanoneproducingzonearecountedasonewell.AsofMarch31,2019,weheldaninterestinapproximately6,100gross(24net)productivewells,includingapproximately4,900wellsinwhichweheldanoverridingorroy

198、altyinterestand1,200wellsinwhichweheldaworkinginterest.Mexcooperates3ofitsworkinginterestproducingwells.Agrossacreisanacreinwhichaninterestisowned.Anetacreisdeemedtoexistwhenthesumoffractionalownershipinterestsingrossacresequalsone.Thenumberofnetacresisthesumofthefractionalinterestsownedingrossacres

199、.ThefollowingtablesetsforththeapproximatedevelopedacreageinwhichweheldaleaseholdmineralorotherinterestasofMarch31,2019:DevelopedAcresGross NetTexas353,300 1,949Oklahoma84,400 1,334NewMexico30,000 280Louisiana37,700 59NorthDakota22,500 29Kansas10,600 41Montana6,100 2Wyoming3,800 5Arkansas1,000 5Missi

200、ssippi1,600 3Alabama700 3Colorado1,100 1Virginia100 1Total552,900 3,712NetProduction,UnitPricesandCostsThefollowingtablesummarizesournetoilandnaturalgasproduction,theaveragesalespriceperbarrel(“bbl”)ofoilandperthousandcubicfeet(“mcf”)ofnaturalgasproducedandtheaverageproduction(lifting)costperunitofp

201、roductionfortheyearsendedMarch31:YearEndedMarch31,2019 2018Oil(a):Production(Bbls)35,359 34,743Revenue$1,921,391$1,789,736AverageBblsperday(d)97 95AveragesalespriceperBbl$54.34$51.51Gas(b):Production(Mcf)295,133 318,774Revenue$726,486$860,496AverageMcfperday(d)809 873AveragesalespriceperMcf$2.46$2.7

202、0Productioncost:Productioncost$748,038$870,806Productionandadvaloremtaxes$188,362$199,641TotalBOE(c)84,548 87,872ProductioncostperBOE$8.85$9.91Productioncostpersalesdollar$0.28$0.33Totaloilandgasrevenue$2,647,877$2,650,232(a)Includescondensate.(b)Includesnaturalgasproducts.(c)Naturalgasproductionisc

203、onvertedtooilproductionusingaratioofsixMcftooneBblofoil.(d)Calculatedona365dayyear.17ITEM3.LEGALPROCEEDINGSWemay,fromtimetotime,beinvolvedinlitigationandclaimsarisingoutofouroperationsinthenormalcourseofbusiness.Wearenotawareofanylegalorgovernmentalproceedingsagainstus,orcontemplatedtobebroughtagain

204、stus,undervariousenvironmentalprotectionstatutesorotherregulationstowhichwearesubject.ITEM4.MINESAFETYDISCLOSURESNotapplicable.PARTIIITEM5.MARKETFORREGISTRANTSCOMMONEQUITY,RELATEDSTOCKHOLDERMATTERSANDISSUERPURCHASESOFEQUITYSECURITIESMarketInformationInSeptember2003,ourcommonstockbegantradingontheNYS

205、EAmerican,formerlytheAmericanStockExchangeandmorerecentlytheNYSEMKT,underthesymbol“MXC”.PriortoSeptember2003,theCompanyscommonstockwastradedontheover-the-counterbulletinboardmarketunderthesymbol“MEXC”.TheregistrarandtransferagentisIssuerDirectCorporation,500PerimeterParkDrive,SuiteD,Morrisville,Nort

206、hCarolina,27560(Tel:877-481-4014).ThefollowingtablesetsforthcertaininformationastothehighandlowsalespricequotedforMexcoscommonstockontheNYSEAmerican.High Low2019:April-June2018$6.94$3.07July-September201814.49 4.85October-December20186.40 2.70January-March20195.36 2.85 2018:April-June2017$4.95$3.72J

207、uly-September20175.85 4.40October-December20174.65 3.82January-March20185.04 3.06OnJune18,2019,theclosingsalespriceofourcommonstockontheNYSEAmericanwas$3.44pershare.18StockholdersAsofMarch31,2019,wehad2,107,166sharesissuedand868shareholdersofrecordwhichdoesnotincludeshareholdersforwhomsharesareheldi

208、na“nominee”or“street”name.DividendsWehaveneverdeclaredorpaidanycashdividendsonourcommonstock.Wecurrentlyintendtoretainfutureearningsandothercashresources,ifany,fortheoperationanddevelopmentofourbusinessanddonotanticipatepayinganycashdividendsonourcommonstockintheforeseeablefuture.Paymentofanyfutured

209、ividendswillbeatthediscretionofourBoardofDirectorsaftertakingintoaccountmanyfactors,includingourfinancialcondition,operatingresults,currentandanticipatedcashneedsandplansforexpansion.Inaddition,ourcurrentbankloanprohibitsusfrompayingcashdividendsonourcommonstock.SecuritiesAuthorizedforIssuanceUnderC

210、ompensationPlansThefollowingtableincludescertaininformationaboutourEmployeeIncentiveStockPlanasofMarch31,2019,whichhasbeenapprovedbyourstockholders.NumberofSharesAuthorizedforIssuanceunderPlan NumberofSharestobeIssueduponExerciseofOutstandingOptions WeightedAverageExercisePriceofOutstandingOptions N

211、umberofSharesRemainingAvailableforFutureIssuanceunderPlan2009Plan200,000 185,700$6.18 10,000Total200,000 185,700$6.18 10,000IssuerRepurchasesInSeptember2018,theBoardofDirectorsauthorizedtheuseofupto$250,000torepurchasesharesofourcommonstockforthetreasuryaccount.Thisprogramdoesnothaveanexpirationdate

212、.Undertherepurchaseprogram,sharesofcommonstockmaybepurchasedfromtimetotimethroughopenmarketpurchasesorothertransactions.Theamountandtimingofrepurchaseswillbesubjecttotheavailabilityofstock,prevailingmarketconditions,thetradingpriceofthestock,ourfinancialperformanceandotherconditions.Repurchasesmayal

213、sobemadefromtime-to-timeinconnectionwiththesettlementofourshare-basedcompensationawards.Repurchaseswillbefundedfromcashflowfromoperations.TherewerenosharesofourcommonstockrepurchasedforthetreasuryaccountduringthefiscalyearsendedMarch31,2019and2018.ITEM6.SELECTEDCONSOLIDATEDFINANCIALDATANotapplicable

214、.ITEM7.MANAGEMENTSDISCUSSIONANDANALYSISOFFINANCIALCONDITIONANDRESULTSOFOPERATIONSThefollowingdiscussionisintendedtoprovideinformationrelevanttoanunderstandingofourfinancialcondition,changesinourfinancialconditionandourresultsofoperationsandcashflowsandshouldbereadinconjunctionwithourconsolidatedfina

215、ncialstatementsandnotestheretoincludedelsewhereinthisForm10-K.LiquidityandCapitalResourcesandCommitmentsHistorically,wehavefundedouroperations,acquisitions,explorationanddevelopmentexpendituresfromcashgeneratedbyoperatingactivities,bankborrowings,salesofnon-corepropertiesandissuanceofcommonstock.Our

216、primaryfinancialresourceisourbaseofoilandgasreserves.Wehavepledgedourproducingoilandgaspropertiestosecureourrevolvinglineofcredit.Wedonothaveanydeliverycommitmentstoprovideafixedanddeterminablequantityofouroilandgasunderanyexistingcontractoragreement.19Duetothecurrentcommoditypriceenvironment,wearea

217、pplyingfinancialdisciplinetoallaspectsofourbusiness.Inordertomeetobligations,wemaycontinuetosellnon-coreassets.Ourlongtermstrategyisonincreasingprofitmarginswhileconcentratingonobtainingreserveswithlowcostoperationsbyacquiringanddevelopingoilandgaspropertieswithpotentialforlong-livedproduction.Wefoc

218、usoureffortsontheacquisitionofroyaltiesandworkinginterestsandnon-operatedpropertiesinareaswithsignificantdevelopmentpotential.FortheyearendedMarch31,2019,cashflowfromoperationswas$1,012,328,a130%increasewhencomparedtothecorrespondingperiodoffiscal2018.Netcashfrominvestingactivitiesof$655,395wasusedf

219、oradditionstooilandgasproperties,cashof$700,000wasusedtopayoffthelineofcredit,cashof$39,532wasusedfortheissuanceofournewloanagreementandcashof$18,241wasreceivedfromproceedsfromtheexerciseofemployeestockoptions.Accordingly,netcashdecreased$364,358,leavingcashandcashequivalentsonhandof$128,252asofMarc

220、h31,2019.Wehadworkingcapitalof$395,895asofMarch31,2019comparedtoworkingcapitalof$925,618asofMarch31,2018,adecreaseof$529,723forthereasonssetforthbelow.OilandNaturalGasPropertyDevelopmentInadditionto113grosswells(.08netwells)drilledbyotheroperatorsonMexcosroyaltyinterests,theCompanyparticipatedinthed

221、rillingandcompletionof43horizontalwellsand5verticalwellsatacostofapproximately$900,000forthefiscalyearendingMarch31,2019.Ofthesehorizontalwells,36areintheDelawareBasinlocatedinthewesternportionofthePermianBasininEddyandLeaCounties,NewMexicoand7arelocatedinGradyCounty,Oklahoma.Theoperatorsofthesewell

222、sincludeApacheCorporation,ConchoResources,Inc.,MarathonOilCompany,MewbourneOilCompany,XTOEnergy,Inc.andothers.FiveofthesewellswerecompletedinSeptember2018andtestedatanaveragerateof1,553barrelsofoil;2,075barrelsofwater;and2,067,000cubicfeetofgasperday,or1,899barrelsofoilequivalentperday.Thesewellsare

223、intheUpperWolfcampformationlocatedinLeaCounty,NewMexico.Mexcosworkinginterestinthesewellsis.6%.TwoofthesewellsareintheYeso/PaddockformationsoftheDoddFederalUnitintheGrayburgSanAndresJacksonFieldofEddyCounty,NewMexicoandoperatedbyConchoResources,Inc.ThesewellsbeganproducinginDecember2018ataninitialav

224、eragerateof337barrelsofoil;1,914barrelsofwater;and160,000cubicfeetofgasperwellperday,or364barrelsofoilequivalentperday.Mexcosworkinginterestinthisunitis.1848%.FourofthesewellsbeganproducinginFebruary2019ataninitialaveragerateof1,445barrelsofoil;3,994barrelsofwater;and4,500,000cubicfeetofgasperday,or

225、2,195barrelsofoilequivalentperday.Thesewells,operatedbyMarathonOilCompany,areintheWolfcampformationlocatedinLeaCounty,NewMexico.Mexcosworkinginterestinthesewellsis.03%.Inaddition,twowellswerecompletedinMarch2019andtestedatanaveragerateof1,934barrelsofoil;1,950barrelsofwater;and2,153,000cubicfeetofga

226、sperday,or2,259barrelsofoilequivalentperday.ThesewellsareintheBoneSpringformationlocatedinLeaCounty,NewMexico.Mexcosworkinginterestinthesewellsis.5%.Therewereelevenadditionalwellsthatbeganproducingthroughoutthefiscalyearataninitialaveragerateof470barrelsofoil;2,148barrelsofwater;and1,431,000cubicfee

227、tofgasperday,or708barrelsofoilequivalentperday.Threewells,operatedbyXTOEnergy,Inc.,areintheBoneSpringformationlocatedinEddyCounty,NewMexico.Andtheothereightwells,operatedbyMarathonOilCompanyandMewbourneOilCompany,areinthePurpleSageformationlocatedinLeaCounty,NewMexico.Mexcosworkinginterestinthesevar

228、iouswellsrangefrom.008%to.031%.Theremaining19ofthe48wellshavebeendrilledandareinvariousstagesofcompletionandtesting.Duringfiscal2019,theCompanycontinueditspolicyofsellingnon-coreassetsinordertoconcentrateonthedevelopmentofmoreprofitableassetsandtopaydowndebt.TheCompanyreceivedapproximately$33,000inc

229、ashfromasaleofjointventureleaseholdacreageandmarginalproducingworkinginterestwellsinNorthDakotaandMontana;approximately$72,000incashfromasaleofjointventureleaseholdmarginalproducingworkinginterestsinWardandWinklerCountiesinTexas;and,approximately$51,000incashfromthesaleofadditionalleaseholdacreagein

230、EddyCounty,NewMexico.20Weareparticipatinginotherprojectsandarereviewingprojectsinwhichwemayparticipate.Thecostofsuchprojectswouldbefunded,totheextentpossible,fromexistingcashbalancesandcashflowfromoperations.Theremaindermaybefundedthroughborrowingsonthecreditfacilityand,ifappropriate,salesofnon-core

231、properties.Crudeoilandnaturalgaspricesgenerallyremainedvolatileduringthelastyear.Thevolatilityoftheenergymarketsmakesitextremelydifficulttopredictfutureoilandnaturalgaspricemovementswithanycertainty.Forexampleinthelasttwelvemonths,theNYMEXWestTexasIntermediate(“WTI”)postedpriceforcrudeoilhasrangedfr

232、omalowof$39.25perbblinDecember2018toahighof$73.00perbblinOctober2018.TheHenryHubSpotMarketPrice(“HenryHub”)fornaturalgashasrangedfromalowof$2.54perMMBtuinFebruary2019toahighof$4.70perMMBtuinNovember2018.OnMarch31,2019theWTIpostedpriceforcrudeoilwas$56.50perbblandtheHenryHubspotpricefornaturalgaswas$

233、2.73perMMBtu.SeeResultsofOperationsbelowforrealizedprices.ResultsofOperationsFiscal2019ComparedtoFiscal2018Wehadanetlossof$12,946fortheyearendedMarch31,2019comparedtoanetlossof$321,489fortheyearendedMarch31,2018.Thisisprimarilytheresultofadecreaseinoperatingexpensesandinterestexpenseasfurtherexplain

234、edbelow.Oil and gas sales.Revenuefromoilandgassaleswas$2,647,877fortheyearendedMarch31,2019,a.1%decreasefrom$2,650,232fortheyearendedMarch31,2018.Thisresultedfromanincreaseinoilpriceandproductionpartiallyoffsetbyadecreaseingaspriceandproduction.Thefollowingtablesetsforthouroilandgasrevenues,producti

235、onquantitiesandaveragepricesreceivedduringthefiscalyearsendedMarch31:2019 2018%DifferenceOil:Revenue$1,921,391$1,789,736 7.4%Volume(bbls)35,357 34,743 1.8%AveragePrice(perbbl)$54.34$51.51 5.5%Gas:Revenue$726,486$860,496 (15.6%)Volume(mcf)295,133 318,774 (7.4%)AveragePrice(permcf)$2.46$2.70 (8.9%)Pro

236、duction and exploration.Productioncostswere$936,400infiscal2019,a13%decreasefrom$1,070,447infiscal2018.ThiswasprimarilytheresultofadecreaseinleaseoperatingexpensesduetothesaleofourmarginaloperatedpropertiesinLovingCounty,Texas.Depreciation,depletion and amortization.Depreciation,depletionandamortiza

237、tion(“DD&A”)expensewas$802,425infiscal2019,a9%decreasefrom$880,419infiscal2018.Thiswasprimarilyduetoadecreaseingasproductionandadecreaseinthefullcostpoolasaresultofadecreaseinfuturedevelopmentcostspartiallyoffsetbyadecreaseinoilandgasreserves.General and administrative expenses.Generalandadministrat

238、iveexpenseswere$911,927fortheyearendedMarch31,2019,a5%decreasefrom$955,147fortheyearendedMarch31,2018.Thiswasprimarilyduetoadecreaseinaccountingfeespartiallyoffsetbyanincreaseinrent,engineeringservicesandlegalfees.Interest expense.Interestexpensewas$21,931infiscal2019,a76%decreasefrom$89,537infiscal

239、2018,duetoadecreaseinborrowingspartiallyoffsetbyanincreaseininterestrate.Income taxes.Therewasnoincometaxforfiscal2019orfiscal2018.Theeffectivetaxrateforfiscal2019andfiscal2018was0%.Weareinanetdeferredtaxassetpositionandbelieveitismorelikelythannotthatthesedeferredtaxassetswillnotberealized.21Fiscal

240、2018ComparedtoFiscal2017Wehadanetlossof$321,489fortheyearendedMarch31,2018comparedtoanetlossof$694,553fortheyearendedMarch31,2017.Weachievednetincomeof$264,461forthefiscalquarterendedMarch31,2018.Oil and gas sales.Revenuefromoilandgassaleswas$2,650,232fortheyearendedMarch31,2018,a13%increasefrom$2,3

241、37,222fortheyearendedMarch31,2017.Thisresultedfromanincreaseinoilandgaspricespartiallyoffsetbyadecreaseingasproduction.Thefollowingtablesetsforthouroilandgasrevenues,productionquantitiesandaveragepricesreceivedduringthefiscalyearsendedMarch31:2018 2017%DifferenceOil:Revenue$1,789,736$1,517,606 17.9%

242、Volume(bbls)34,743 34,689 0.2%AveragePrice(perbbl)$51.51$43.75 17.7%Gas:Revenue$860,496$819,616 5.0%Volume(mcf)318,774 356,268 (10.5%)AveragePrice(permcf)$2.70$2.30 17.4%Other operating revenue.Otheroperatingrevenuewas$55,003forfiscal2018comparedto$188,141forfiscal2017primarilyduetothesettlementofal

243、awsuitforunderpaymentofroyaltiesfromChesapeakeEnergyCorporationandTotalE&PUSAintheamountof$148,614duringfiscal2017partiallyoffsetbyanincreaseinSWDincome.Production and exploration.Productioncostswere$1,070,447infiscal2018,a22%increasefrom$878,458infiscal2017.Thiswasprimarilytheresultofanincreaseinle

244、aseoperatingexpensesandproductiontaxesduetotheincreaseinoilandgasrevenuesandXTOEnergy,Inc.incorrectlyprovidingusarefundformarketingandtransportationfeesofapproximately$67,000whichisbeingreversedviamonthlynetting.Depreciation,depletion and amortization.Depreciation,depletionandamortization(“DD&A”)exp

245、ensewas$880,419infiscal2018,a25%decreasefrom$1,177,422infiscal2017.Thiswasprimarilyduetoadecreaseinoilandgasproduction,adecreaseinthefullcostpoolasaresultofoilandgaspropertysales,andadecreaseinoilandgasreserves.General and administrative expenses.Generalandadministrativeexpenseswere$955,147fortheyea

246、rendedMarch31,2018,a2%decreasefrom$976,392fortheyearendedMarch31,2017.Thiswasprimarilyduetoadecreaseinengineeringservices,insuranceexpenseandlegalfeespartiallyoffsetbyanincreaseinaccountingfees.Interest expense.Interestexpensewas$89,537infiscal2018,a41%decreasefrom$152,126infiscal2017,duetoadecrease

247、inborrowingspartiallyoffsetbyanincreaseininterestrate.Income taxes.Therewasnoincometaxforfiscal2018orfiscal2017.Theeffectivetaxrateforfiscal2018andfiscal2017was0%.Weareinanetdeferredtaxassetpositionandbelieveitismorelikelythannotthatthesedeferredtaxassetswillnotberealized.ContractualObligationsWehav

248、enooff-balancesheetdebtorunrecordedobligationsandhavenotguaranteedthedebtofanyotherparty.ThefollowingtablesummarizesfuturepaymentsweareobligatedtomakebasedonagreementsinplaceasofMarch31,2019:Paymentsduein:Total lessthan1year 1-3years over3yearsContractualobligations:Leases(1)$106,682$48,810$57,872$-

249、(1)TheleaseamountrepresentsthemonthlyrentamountforourprincipalofficespaceinMidland,TexasunderonethreeyearleaseagreementeffectiveMay15,2018.Thetotalobligationfortheremainderoftheleaseis$141,385whichincludes$34,703billedtoandreimbursedbyourmajorityshareholderforhisportionofthesharedofficespace.22Alter

250、nativeCapitalResourcesAlthoughwehaveprimarilyusedcashfromoperatingactivities,thesalesofassetsandfundingfromthelineofcreditasourprimarycapitalresources,wehaveinthepast,andcouldinthefuture,usealternativecapitalresources.Thesecouldincludejointventures,carriedworkinginterestsandissuancesofourcommonstock

251、throughaprivateplacementorpublicoffering.OtherMattersCriticalAccountingPoliciesandEstimatesInpreparingfinancialstatements,managementmakesinformedjudgments,estimatesandassumptionsthataffectthereportedamountsofassetsandliabilitiesasofthedateofthefinancialstatementsandaffectthereportedamountsofrevenues

252、andexpensesduringthereportingperiod.Onanongoingbasis,managementreviewsitsestimates,includingthoserelatedtolitigation,environmentalliabilities,incometaxes,fairvalueanddeterminationofprovedreserves.Changesinfactsandcircumstancesmayresultinrevisedestimatesandactualresultsmaydifferfromtheseestimates.The

253、followingrepresentsthosepoliciesthatmanagementbelievesareparticularlyimportanttothefinancialstatementsandthatrequiretheuseofestimatesandassumptionstodescribemattersthatareinherentlyuncertain.FullCostMethodofAccountingforCrudeOilandNaturalGasActivities.SECRegulationS-Xdefinesthefinancialaccountingand

254、reportingstandardsforcompaniesengagedincrudeoilandnaturalgasactivities.Twomethodsareprescribed:thesuccessfuleffortsmethodandthefullcostmethod.Wehavechosentofollowthefullcostmethodunderwhichallcostsassociatedwithpropertyacquisition,explorationanddevelopmentarecapitalized.Wealsocapitalizeinternalcosts

255、thatcanbedirectlyidentifiedwithacquisition,explorationanddevelopmentactivitiesanddonotincludeanycostsrelatedtoproduction,generalcorporateoverheadorsimilaractivities.Thecarryingamountofoilandgaspropertiesalsoincludesestimatedassetretirementcostsrecordedbasedonthefairvalueoftheassetretirementobligatio

256、n(“ARO”)whenincurred.Gainorlossonthesaleorotherdispositionofoilandgaspropertiesisnotrecognized,unlessthesalewouldsignificantlyaltertherelationshipbetweencapitalizedcostsandprovedreservesofoilandnaturalgasattributabletoacountry.Underthesuccessfuleffortsmethod,geologicalandgeophysicalcostsandcostsofca

257、rryingandretainingundevelopedpropertiesarechargedtoexpenseasincurred.Costsofdrillingexploratorywellsthatdonotresultinprovedreservesarechargedtoexpense.Depreciation,depletion,amortizationandimpairmentofcrudeoilandnaturalgaspropertiesaregenerallycalculatedonawellbywellorleaseorfieldbasisversusthe“full

258、cost”poolbasis.Additionally,gainorlossisgenerallyrecognizedonallsalesofcrudeoilandnaturalgaspropertiesunderthesuccessfuleffortsmethod.AsaresultourfinancialstatementswilldifferfromcompaniesthatapplythesuccessfuleffortsmethodsincewewillgenerallyreflectahigherlevelofcapitalizedcostsaswellasahigherDD&Ar

259、ateonourcrudeoilandnaturalgasproperties.Atthetimeitwasadopted,managementbelievedthatthefullcostmethodwouldbepreferable,asearningstendtobelessvolatilethanunderthesuccessfuleffortsmethod.However,thefullcostmethodmakesusmoresusceptibletosignificantnon-cashchargesduringtimesofvolatilecommoditypricesbeca

260、usethefullcostpoolmaybeimpairedwhenpricesarelow.Thesechargesarenotrecoverablewhenpricesreturntohigherlevels.Ourcrudeoilandnaturalgasreserveshavearelativelylonglife.However,temporarydropsincommoditypricescanhaveamaterialimpactonourbusinessincludingimpactfromthefullcostmethodofaccounting.CeilingTest.C

261、ompaniesthatusethefullcostmethodofaccountingforoilandgasexplorationanddevelopmentactivitiesarerequiredtoperformaceilingtesteachquarter.Thefullcostceilingtestisanimpairmenttesttodeterminealimit,orceiling,onthebookvalueofoilandgasproperties.Thatlimitisbasicallytheaftertaxpresentvalueofthefuturenetcash

262、flowsfromprovedcrudeoilandnaturalgasreservesplusthelowerofcostorfairmarketvalueofunprovedproperties.Ifnetcapitalizedcostsofcrudeoilandnaturalgaspropertiesexceedtheceilinglimit,wemustchargetheamountoftheexcesstoearnings.Thisiscalleda“ceilinglimitationwrite-down.”Thisimpairmenttoouroilandgasproperties

263、doesnotimpactcashflowfromoperatingactivities,butdoesreduceourstockholdersequityandreportedearnings.23Theriskthatwewillberequiredtowritedownthecarryingvalueofcrudeoilandnaturalgaspropertiesincreaseswhencrudeoilandnaturalgaspricesaredepressedorvolatile.Inaddition,write-downsmayoccurifweexperiencesubst

264、antialdownwardadjustmentstoourestimatedprovedreservesorifpurchaserscancellong-termcontractsfornaturalgasproduction.Anexpenserecordedinoneperiodmaynotbereversedinasubsequentperiodeventhoughhighercrudeoilandnaturalgaspricesmayhaveincreasedtheceilingapplicabletothesubsequentperiod.Estimatesofourprovedr

265、eservesarebasedonthequantitiesofoilandgasthatengineeringandgeologicalanalysisdemonstrates,withreasonablecertainty,toberecoverablefromestablishedreservoirsinthefutureundercurrentoperatingandeconomicparameters.Ourreserveestimatesandtheprojectedcashflowsarederivedfromthesereserveestimates,inaccordancew

266、ithSECguidelinesbyanindependentengineeringfirmbasedinpartondataprovidedbyus.Theaccuracyofareserveestimateisafunctionofthequalityandquantityofavailabledata,theinterpretationofthatdata,theaccuracyofvariousmandatedeconomicassumptions,andthejudgmentofthepersonspreparingtheestimate.Estimatespreparedbyoth

267、erthirdpartiesmaybehigherorlowerthanthoseincludedherein.Becausetheseestimatesdependonmanyassumptions,allofwhichmaysubstantiallydifferfromfutureactualresults,reserveestimateswillbedifferentfromthequantitiesofoilandgasthatareultimatelyrecovered.Inaddition,resultsofdrilling,testingandproductionafterthe

268、dateofanestimatemayjustifymaterialrevisionstotheestimate.Itshouldnotbeassumedthatthepresentvalueoffuturenetcashflowsisthecurrentmarketvalueofourestimatedprovedreserves.InaccordancewithSECrequirements,thecostceilingrepresentsthepresentvalue(discountedat10%)ofnetcashflowsfromsalesoffutureproductionusi

269、ngtheaveragepriceovertheprior12-monthperiod.TheestimatesofprovedreservesmateriallyimpactDD&Aexpense.Iftheestimatesofprovedreservesdecline,therateatwhichwerecordDD&Aexpensewillincrease,reducingfuturenetincome.Suchadeclinemayresultfromlowermarketprices,whichmaymakeituneconomictodrillforandproducehighe

270、rcostprojects.UseofEstimates.InpreparingfinancialstatementsinconformitywithaccountingprinciplesgenerallyacceptedintheUnitedStatesofAmerica,managementisrequiredtomakeinformedjudgments,estimatesandassumptionsthataffectthereportedamountsofassetsandliabilitiesasofthedateofthefinancial statements and aff

271、ect the reported amounts of revenues and expenses during the reporting period.In addition,significant estimates are used indeterminingyearendprovedoilandgasreserves.Althoughmanagementbelievesitsestimatesandassumptionsarereasonable,actualresultsmaydiffermateriallyfromthoseestimates.Theestimateofouroi

272、landnaturalgasreserves,whichisusedtocomputeDD&Aandimpairmentofoilandgasproperties,isthemostsignificantoftheestimatesandassumptionsthataffectthesereportedresults.ExcludedCosts.Oilandgaspropertiesincludecoststhatareexcludedfromcapitalizedcostsbeingamortized.Theseamountsrepresentinvestmentsinunprovedpr

273、opertiesandmajordevelopmentprojects.Thesecostsareexcludeduntilprovedreservesarefoundoruntilitisdeterminedthatthecostsareimpaired.Allcostsexcludedarereviewedatleastquarterlytodetermineifimpairmenthasoccurred.Theamountofanyimpairmentistransferredtothecapitalizedcostsbeingamortized(theDD&Apool).Impairm

274、entstransferredtotheDD&ApoolincreasetheDD&Arate.Revenue Recognition-Revenue from Contracts with Customers.In May 2014,the Financial Accounting Standards Board(“FASB”)issuedAccountingStandardsUpdate(“ASU”)No.2014-09,RevenuefromContractswithCustomers(Topic606).Theamendmentsinthisupdateareeffectiveforf

275、iscalyearsandinterimperiodswithinthoseyearsbeginningafterDecember15,2017andsupersedesanypreviousrevenuerecognitionguidance.OnApril1,2018weadoptedASU2014-09usingthemodifiedretrospectiveapproachwhichonlyappliestocontractsthatwerenotcompletedasofthedateofinitialapplication.Recognition of revenue involv

276、es a five step approach including identifying the contract,identifying the separate performance obligations,determining thetransactionprice,allocatingthepricetotheperformanceobligationsandrecognizingrevenueastheobligationsaresatisfied.24AdoptionofthisnewstandarddidnothaveamaterialimpactontheCompanys

277、financialstatements.WhencomparingtheCompanyshistoricalrevenuerecognitiontothenewlyappliedrevenuerecognitionunderTopic606,therewasnomaterialchangetotheamountortimingofrevenuerecognized.Therefore,noquantitativeadjustmentwasrequiredtobemadetothepriorperiodspresentedintheunauditedconsolidatedfinancialst

278、atements.UponadoptiontheCompanyhadnotaltereditsexistinginformationtechnologyandinternalcontrolsoutsideofthecontractreviewprocessesinordertoidentifyimpactsoffuturerevenuecontractstheCompanymayenterinto.AccountingPolicy-Revenuesfromourroyaltyandnon-operatedworkinginterestpropertiesarerecordedunderthec

279、ashreceiptsapproachasdirectlyreceivedfromtheremittersstatementaccompanyingtherevenuecheck.Sincetherevenuechecksaregenerallyreceivedtwotofourmonthsaftertheproductionmonth,theCompanyaccruesforrevenueearnedbutnotreceivedbyestimatingproductionvolumesandproductprices.Anyidentifieddifferencesbetweenitsrev

280、enueestimatesandactualrevenuereceivedhistoricallyhavenotbeensignificant.TheCompanydoesnotdisclosethevalueofunsatisfiedperformanceobligationsunderitscontractswithcustomersasitappliesthepracticalexemptioninaccordancewithASC606.Theexemption,asdescribedinASC606-10-50-14(a),appliestovariableconsideration

281、thatisrecognizedascontroloftheproductistransferredtothecustomer.Sinceeachunitofproductrepresentsaseparateperformanceobligation,futurevolumesarewhollyunsatisfiedanddisclosureofthetransactionpriceallocatedtoremainingperformanceobligationsisnotrequired.InaccordancewithASCTopic606,theCompanynowrecordstr

282、ansportationandprocessingcoststhatareincurredaftercontrolofitsproducthastransferredtothecustomerasareductionof“Naturalgassales”ontheConsolidatedStatementofOperations.PriortotheadoptionofASCTopic606,thesetransportationandprocessingcostswererecordedasanexpensewithin“Production”expensesontheConsolidate

283、dStatementsofOperations.TherewasnoimpacttonetlossorretainedearningsasaresultofadoptingASCTopic606.AssetRetirementObligations.Theestimatedcostsofplugging,restorationandremovaloffacilitiesareaccrued.Thefairvalueofaliabilityforanassetsretirementobligationisrecordedintheperiodinwhichitisincurredandtheco

284、rrespondingcostcapitalizedbyincreasingthecarryingamountoftherelatedlong-livedasset.Theliabilityisaccretedtoitsthenpresentvalueeachperiod,andthecapitalizedcostisdepreciatedbytheunitsofproductionmethod.Iftheliabilityissettledforanamountotherthantherecordedamount,againorlossisrecognized.Forallperiodspr

285、esented,wehaveincludedestimatedfuturecostsofabandonmentanddismantlementinthefullcostamortizationbaseandamortizethesecostsasacomponentofourdepletionexpense.GasBalancing.Gasimbalancesareaccountedforunderthesalesmethodwherebyrevenuesarerecognizedbasedonproductionsold.Aliabilityisrecordedwhenourexcessta

286、kesofnaturalgasvolumesexceedourestimatedremainingrecoverablereserves(overproduced).NoreceivablesarerecordedforthosewellswhereMexcohastakenlessthanitsownershipshareofgasproduction(underproduced).Stock-basedCompensation.WeusetheBinomialoptionpricingmodeltoestimatethefairvalueofstockbasedcompensationex

287、pensesatgrantdate.Thisexpenseisrecognizedascompensationexpenseinourfinancialstatementsoverthevestingperiod.WerecognizethefairvalueofstockbasedcompensationawardsaswagesintheConsolidatedStatementsofOperationsbasedonagraded-vestingscheduleoverthevestingperiod.AccountsReceivable.Ouraccountsreceivableinc

288、ludetradereceivablesfromjointinterestownersandoilandgaspurchasers.Creditisextendedbasedonanevaluationofacustomersfinancialconditionand,generally,isuncollateralized.Accountsreceivableunderjointoperatingagreementshavearightofoffsetagainstfutureoilandgasrevenuesifaproducingwelliscompleted.Thecollectabi

289、lityofreceivablesisassessedandanallowanceismadeforanydoubtfulaccounts.Theallowancefordoubtfulaccountsisdeterminedbasedonourpreviouslosshistory.IncomeTaxes.TheCompanyrecognizesdeferredtaxassetsandliabilitiesforfuturetaxconsequencesoftemporarydifferencesbetweenthecarryingamountsofassetsandliabilitiesa

290、ndtheirrespectivetaxbases.Deferredtaxassetsandliabilitiesaremeasuredusingenactedtaxratesapplicabletotheyearsinwhichthosedifferencesareexpectedtobesettled.Theeffectondeferredtaxassetsandliabilitiesofachangeintaxratesisrecognizedinnetincomeintheperiodthatincludestheenactmentdate.Anyinterestandpenaltie

291、sarerecordedasinterestexpenseandgeneralandadministrativeexpense,respectively.25OtherPropertyandEquipment.Provisionsfordepreciationofofficefurnitureandequipmentarecomputedonthestraight-linemethodbasedonestimatedusefullivesofthreetotenyears.RecentAccountingPronouncements.InFebruary2016,theFASBissuedAS

292、U2016-02,Topic842Leases,whichrequirescompaniestoincludeleaseswithatermgreaterthanoneyearontheirbalancesheets,butrecognizeleasecostsontheincomestatementinamannersimilartoaccountingforleasespriortoASU2016-02.ThestandardiseffectiveforfiscalyearsbeginningafterDecember15,2018,andinterimperiodsthereafter.

293、Earlyadoptionispermitted.TheCompanyhasevaluatedtheprovisionsofthisASUanddoesnotanticipateasignificantimpactontheconsolidatedfinancialstatementsfromthisamendment.ITEM7A.QUANTITATIVEANDQUALITATIVEDISCLOSURESABOUTMARKETRISKTheprimarysourceofmarketriskforusincludesfluctuationsincommoditypricesandinteres

294、trates.Allofourfinancialinstrumentsareforpurposesotherthantrading.InterestRateRisk.OnMarch31,2019,wedidnothaveanoutstandingloanbalanceonourcreditagreement.CreditRisk.Creditriskistheriskoflossasaresultofnonperformancebyotherpartiesoftheircontractualobligations.Ourprimarycreditriskisrelatedtooilandgas

295、productionsoldtovariouspurchasersandthereceivablesaregenerallynotcollateralized.AtMarch31,2019,ourlargestcreditriskassociatedwithanysinglepurchaserwas$138,508or40%ofourtotaloilandgasreceivables.Wehavenotexperiencedanysignificantcreditlosses.EnergyPriceRisk.Ourmostsignificantmarketriskisthepricingfor

296、naturalgasandcrudeoil.Ourfinancialcondition,resultsofoperations,andcapitalresourcesarehighlydependentupontheprevailingmarketpricesof,anddemandfor,oilandnaturalgas.Pricesforoilandnaturalgasfluctuatewidely.Wecannotpredictfutureoilandnaturalgaspriceswithanycertainty.Historically,themarketsforoilandgash

297、avebeenvolatile,andtheyarelikelytocontinuetobevolatile.PricesforcrudeoilandnaturalgashavebeenadverselyeffectedbytemporarypipelinecapacityconstraintsprimarilyinthePermianBasin.Weareunabletopredictexactlyhowlongthislimitationwillcontinue.Factorsthatcancausepricefluctuationsincludethelevelofglobaldeman

298、dforpetroleumproducts,foreignanddomesticsupplyofoilandgas,theestablishmentofandcompliancewithproductionquotasbyoil-exportingcountries,weatherconditions,thepriceandavailabilityofalternativefuelsandoverallpoliticalandeconomicconditionsinoilproducingcountries.Declinesinoilandnaturalgaspriceswillmateria

299、llyadverselyaffectourfinancialcondition,liquidity,abilitytoobtainfinancingandoperatingresults.Changesinoilandgaspricesimpactbothestimatedfuturenetrevenueandtheestimatedquantityofprovedreserves.Anyreductioninreserves,includingreductionsduetopricefluctuations,canreducetheborrowingbaseunderourcreditfac

300、ilityandadverselyaffecttheamountofcashflowavailableforcapitalexpendituresandourabilitytoobtainadditionalcapitalforouracquisition,explorationanddevelopmentactivities.Inaddition,anoncashwrite-downofouroilandgaspropertiescouldberequiredunderfullcostaccountingrulesifpricesdeclinedsignificantly,evenifiti

301、sonlyforashortperiodoftime.SeeCriticalAccountingPoliciesandEstimatesCeilingTestunderItem7ofthisreportonForm10-K.Lowerpricesmayalsoreducetheamountofcrudeoilandnaturalgasthatcanbeproducedeconomically.Thus,wemayexperiencematerialincreasesordecreasesinreservequantitiessolelyasaresultofpricechangesandnot

302、asaresultofdrillingorwellperformance.Similarly,anyimprovementsinoilandgaspricescanhaveafavorableimpactonourfinancialcondition,resultsofoperationsandcapitalresources.Oilandnaturalgaspricesdonotnecessarilyfluctuateindirectrelationshiptoeachother.Iftheaverageoilpricehadincreasedordecreasedbyfivedollars

303、perbarrelforfiscal2019,ouroilandgasrevenuewouldhavechangedby$176,785.Iftheaveragegaspricehadincreasedordecreasedbyonedollarpermcfforfiscal2019,oilandgasrevenuewouldhavechangedby$295,133.26ITEM8.FINANCIALSTATEMENTSANDSUPPLEMENTARYDATATheinformationrequiredbythisitemappearsonpagesF1throughF19hereofand

304、areincorporatedhereinbyreference.ITEM9.CHANGESINANDDISAGREEMENTSWITHACCOUNTANTSONACCOUNTINGANDFINANCIALDISCLOSURESNone.ITEM9A.CONTROLSANDPROCEDURESManagementsAnnualReportonInternalControloverFinancialReporting.ThemanagementoftheCompanyisresponsibleforestablishingandmaintainingadequateinternalcontrol

305、overfinancialreportingassuchtermisdefinedinExchangeActRule13a-15(f)and15d-15(f).TheCompanysinternalcontroloverfinancialreportingisdesignedtoprovidereasonableassuranceregardingthereliabilityoffinancialreportingandthepreparationoftheconsolidatedfinancialstatements.Ourinternalcontroloverfinancialreport

306、ingissupportedbyappropriatereviewsbymanagement,writtenpoliciesandguidelines,carefulselectionandtrainingofqualifiedpersonnel,andawrittenCodeofConductadoptedbyourBoardofDirectors,applicabletoalldirectors,officersandemployeesofMexco.Ourchiefexecutiveofficerandchieffinancialofficerassessedtheeffectivene

307、ssourinternalcontroloverfinancialreportingusingthecriteriasetforthbytheCommitteeofSponsoringOrganizationsoftheTreadwayCommissioninthe2013“InternalControl-IntegratedFramework”.Baseduponthatevaluation,ourchiefexecutiveofficerandchieffinancialofficerconcludedthatourinternalcontroloverfinancialreporting

308、waseffectiveasofMarch31,2019.EvaluationofDisclosureControlsandProcedures.WemaintaindisclosurecontrolsandprocedurestoensurethattheinformationwemustdiscloseinourfilingswiththeSECisrecorded,processed,summarizedandreportedonatimelybasis.Attheendoftheperiodcoveredbythisreport,ourprincipalexecutiveofficer

309、andprincipalfinancialofficerreviewedandevaluatedtheeffectivenessofourdisclosurecontrolsandprocedures,asdefinedinExchangeActRule13a-15(e).Basedonsuchevaluation,suchofficersconcludedthat,asofMarch31,2019,ourdisclosurecontrolsandprocedureswereeffective.ChangesinInternalControloverFinancialReporting.Noc

310、hangesintheCompanysinternalcontroloverfinancialreportingoccurredduringtheyearendedMarch31,2019thathavemateriallyaffected,orarereasonablylikelytomateriallyaffect,ourinternalcontroloverfinancialreporting.ITEM9B.OTHERINFORMATIONNonePARTIIIITEM10.DIRECTORS,EXECUTIVEOFFICERSANDCORPORATEGOVERNANCESee“Mexc

311、o Energy Corporation Board of Directors”,“Named Executive Officers Who Are Not Directors”,“Section 16(a)BeneficialOwnershipReporting Compliance”,“Corporate Governance and Code of Business Conduct”and“Meetings and Committees of the Board of Directors”in the ProxyStatementofMexcoEnergyCorporationforou

312、rAnnualMeetingofStockholderstobeheldSeptember12,2019(“ProxyStatement”)tobefiledwiththeSECwithin120daysaftertheendofourfiscalyearendedMarch31,2019,whichisincorporatedhereinbyreference.TheinformationrequiredbythisitemwithrespecttoexecutiveofficersoftheCompanyisalsosetforthinPartIofthisreport.27ITEM11.

313、EXECUTIVECOMPENSATIONTheinformationrequiredbythisitemwillbecontainedintheProxyStatementunderthecaption“ExecutiveCompensation”,andisherebyincorporatedhereinbyreference.ITEM12.SECURITYOWNERSHIPOFCERTAINBENEFICIALOWNERSANDMANAGEMENTANDRELATEDSTOCKHOLDERMATTERSTheinformationrequiredbythisitemwillbeconta

314、inedintheProxyStatementunderthecaptions“SecurityOwnershipofCertainBeneficialOwnersandManagement”and“EmployeeIncentiveStockOptionPlans”,andisherebyincorporatedhereinbyreference.ITEM13.CERTAINRELATIONSHIPSANDRELATEDTRANSACTIONS,ANDDIRECTORINDEPENDENCETheinformationrequiredbythisitemwillbecontainedinth

315、eProxyStatementunderthecaptions“CertainRelationshipsandRelatedTransactions”and“MeetingsandCommitteesoftheBoardofDirectors”,andisherebyincorporatedbyreferenceherein.ITEM14.PRINCIPALACCOUNTINGFEESANDSERVICESTheinformationrequiredbythisitemwillbecontainedintheProxyStatementunderthecaption“AuditFeesandS

316、ervices”,andisherebyincorporatedbyreferenceherein.PARTIVITEM15.EXHIBITSANDFINANCIALSTATEMENTSCHEDULESConsolidatedFinancialStatements.ForalistoftheconsolidatedfinancialstatementsfiledaspartofthisForm10-K,seethe“IndextoConsolidatedFinancialStatements”setforthonpage33ofthisreport.FinancialStatementSche

317、dules.Allscheduleshavebeenomittedbecausetheyarenotapplicable,notrequiredundertheinstructionsortheinformationrequestedissetforthintheconsolidatedfinancialstatementsorrelatednotesthereto.Exhibits.ForalistoftheexhibitsrequiredbythisItemandaccompanyingthisForm10-Kseethe“IndextoExhibits”setforthonpageF20

318、ofthisreport.28SIGNATURESPursuanttotherequirementsofSection13or15(d)oftheSecuritiesExchangeActof1934,theRegistranthasdulycausedthisreporttobesignedonitsbehalfbytheundersigned,thereuntodulyauthorized.MEXCOENERGYCORPORATIONBy:/s/NicholasC.TaylorBy:/s/TamalaL.McComicChairmanoftheBoardandChiefExecutiveO

319、fficerPresidentandChiefFinancialOfficerDated:June24,2019PursuanttotherequirementsoftheSecuritiesExchangeActof1934,thisreporthasbeensignedbelowasofJune24,2019,bythefollowingpersonsonbehalfoftheRegistrantandinthecapacityindicated./s/NicholasC.TaylorNicholasC.TaylorChiefExecutiveOfficer,ChairmanoftheBo

320、ardofDirectors/s/TamalaL.McComicTamalaL.McComicChiefFinancialOfficer,President,TreasurerandAssistantSecretary/s/MichaelJ.BanschbachMichaelJ.BanschbachDirector/s/KennethL.ClaytonKennethL.ClaytonDirector/s/ThomasR.CraddickThomasR.CraddickDirector/s/PaulG.HinesPaulG.HinesDirector/s/ChristopherM.Schroed

321、erChristopherM.SchroederDirector29GlossaryofAbbreviationsandTermsThefollowingareabbreviationsanddefinitionsoftermscommonlyusedintheoilandgasindustryandthisreport.Basin.Alargenaturaldepressionontheearthssurfaceinwhichsedimentsgenerallybroughtbywateraccumulate.BBA LIBOR.BritishBankersAssociationLondon

322、InterbankOfferedRate.BBALiboristhemostwidelyusedrateforshortterminterestratesworldwide.Bbl.Onestocktankbarrel,or42U.S.gallonsofliquidvolume,usedhereininreferencetocrudeoil,condensateornaturalgasliquidshydrocarbons.BOE.Barrelsofoilequivalent,withsixthousandcubicfeetofnaturalgasbeingequivalenttoonebar

323、relofoil.BTU.Britishthermalunit.Completion.Theinstallationofpermanentequipmentfortheproductionofoilornaturalgas.Condensate.Liquidhydrocarbonsassociatedwiththeproductionofaprimarilynaturalgasreserve.Credit Facility.Alineofcreditprovidedbyabankorgroupofbanks,securedbyoilandgasproperties.DD&A.Referstod

324、epreciation,depletionandamortizationoftheCompanyspropertyandequipment.Developed acreage.Thenumberofacreswhichareallocatedorassignabletoproducingwellsorwellscapableofproduction.Development costs.Capitalcostsincurredintheacquisition,exploitationandexplorationofprovedoilandnaturalgasreservesdividedbypr

325、ovedreserveadditionsandrevisionstoprovedreserves.Development well.Awelldrilledintoaprovedoilornaturalgasreservoirtothedepthofastratigraphichorizonknowntobeproductive.Dry hole.Awellfoundtobeincapableofproducinghydrocarbonsinsufficientquantitiessuchthatproceedsfromthesaleofsuchproductionexceedproducti

326、onexpensesandtaxes.Exploration.Thesearchfornaturalaccumulationsofoilandnaturalgasbyanygeological,geophysicalorothersuitablemeans.Exploratory well.Awelldrilledtofindandproduceoilornaturalgasreservesnotclassifiedasproved,tofindanewreservoirinafieldpreviouslyfoundtobeproductiveofoilornaturalgasinanothe

327、rreservoirortoextendaknownreservoir.Extensions and discoveries.Astoanyperiod,theincreasestoprovedreservesfromallsourcesotherthantheacquisitionofprovedpropertiesorrevisionsofpreviousestimates.Field.Anareaconsistingofeitherasinglereservoirormultiplereservoirs,allgroupedonorrelatedtothesameindividualge

328、ologicalstructuralfeatureand/orstratigraphiccondition.Formation.Alayerofrockwhichhasdistinctcharacteristicsthatdiffersfromnearbyrock.Gross acres or wells.ReferstothetotalacresorwellsinwhichtheCompanyownsanyamountofworkinginterest.30Lease.Aninstrumentwhichgrantstoanother(thelessee)theexclusiverightto

329、enterandexplorefor,drillfor,produce,storeandremoveoilandnaturalgasfromthemineralinterest,inconsiderationforwhichthelessorisentitledtocertainrentsandroyaltiespayableunderthetermsofthelease.Typically,thedurationofthelesseesauthorizationisforastatedtermofyearsand“forsolongthereafter”asmineralsareproduc

330、ing.Mcf.Onethousandcubicfeetofnaturalgasatstandardatmosphericconditions.MBOE.Onethousandbarrelsofoilequivalent.MMBOE.Onemillionbarrelsofoilequivalent.MMBtu.OnemillionBritishthermalunitsofenergycommonlyusedtomeasureheatvalueorenergycontentofnaturalgas.Natural gas liquids(“NGLs”).Liquidhydrocarbonstha

331、thavebeenextractedfromnaturalgas,suchasethane,propane,butaneandnaturalgasoline.Net acres or wells.Referstogrossacresorwellsmultiplied,ineachcase,bythepercentageinterestownedbytheCompany.Net production.OilandgasproductionthatisownedbytheCompany,lessroyaltiesandproductiondueothers.Net revenue interest

332、.Anownersinterestintherevenuesofawellafterdeductingproceedsallocatedtoroyaltyandoverridinginterests.Oil.Crudeoilorcondensate.Operator.Theindividualorcompanyresponsiblefortheexploration,developmentandproductionofanoilornaturalgaswellorlease.Overriding royalty interest(“ORRI”).Aroyaltyinterestthatiscr

333、eatedoutoftheoperatingorworkinginterest.Itstermiscoextensivewiththatoftheoperatinginterestfromwhichitwascreated.Plugging and abandonment.Referstothesealingoffoffluidsinthestratapenetratedbyawellsothatthefluidsfromonestratumwillnotescapeintoanotherortothesurface.Regulationsofallstatesrequirepluggingofabandonedwells.Productive well.Awellthatisfoundtobecapableofproducinghydrocarbonsinsufficientquanti