AMEN Properties : First Quarter 2022 Report

2022 First Quarter Report

Consolidated Financial Statements

Periods Ended March 31, 2022 (Unaudited)

and 2021 (Unaudited)

# Shares Outstanding at 3/31/22: 53,146

Amen Properties, Inc.

P. O. Box 835451

Richardson, Texas 75080

Phone: (972) 999‐0494

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2022 FIRST QUARTER REPORT

TABLE OF CONTENTS

	Page
COMPANY OVERVIEW	3
MANAGEMENT DISCUSSION AND ANALYSIS	5
2022 FIRST QUARTER CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
CONSOLIDATED BALANCE SHEETS (UNAUDITED)	6
CONSOLIDATED STATEMENTS OF OPERATIONS (UNAUDITED)	7
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY (UNAUDITED)	8
CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED)	9
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)	10

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COMPANY OVERVIEW

Background

Amen Properties was originally incorporated under the name DIDAX in 1997 and soon thereafter began doing business as Crosswalk.com. For several years, the company operated one of the leading Christian sites on the web, crosswalk.com. In late 2002, on the brink of insolvency, the Company sold almost all its assets and changed its name to Amen Properties.

Amen Properties is a Christian corporation that donates 10% of its net earnings to Christian causes.

Evolution of Strategy - Increasing Focus on Energy

Real Estate

Having sold all its assets, the Company embarked on a new business strategy in 2002 focused on real estate investments in secondary and out‐of‐favor markets. The Company acquired an 18% interest in an entity which owns over 200 thousand square feet of office space located in Midland, Texas but was unable to find additional viable real estate investment opportunities. Consequently, the Company decided to maintain its relatively small investment in real estate and focus on other areas for growth.

In December 2014, the Company sold its interest in the Midland office buildings; its only remaining real estate asset is an 18% interest in a parking lot in downtown Midland (the "Superblock").

Energy Services

In 2003 deregulation of the Texas electricity market, the largest electricity market in the United States, created numerous opportunities for growth. The Company decided to approach this market in two ways:

• Retail Electricity Provider (REP): In 2004 the Company started a REP named W Power. As a REP, W Power sold electricity and provided the related billing, customer service and collection services to residential and commercial customers. In June of 2008, the Company decided to shut down the operations of W Power due to the significant credit requirements imposed on REP's by the State of Texas and adverse changes in the business climate of the Texas retail electricity market.
• Energy Management and Consulting: In 2006 the Company acquired Priority Power, one of the leading electricity aggregation, brokering and consulting firms in the State of Texas, for a total purchase price of $3.5 million. Priority provides services to its customers in the areas of load aggregation, natural gas and electricity procurement, energy risk management, and energy consulting in both regulated and deregulated domestic markets. In October of 2010, the Company sold Priority Power to its management team.

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Energy Resources

One of the elements of the Company's revised business plan was to tap into the oil and gas expertise possessed by several of its Directors to acquire profitable oil and gas‐related assets. The Company owns numerous oil and gas royalty and working interests in several states, including those acquired from the former Santa Fe Energy Trust in 2007:

• Santa Fe Energy Trust Assets: in December 2007 the Company acquired a one‐third interest in the royalty (SFF Royalty, LLC) and working (SFF Production, LLC) interests formerly owned by the Santa Fe Energy Trust for a total purchase price of $10 million. In December 2008, the Company increased its ownership of SFF Production to approximately 79% for an additional investment of $6.9 million. In December 2014, the Company purchased the remaining shares of SFF Production for a total purchase price of $1.3 million and now owns 100%.

People

Amen's Board of Directors

Eric L. Oliver was appointed as a director of AMEN in July 2001 and was appointed Chairman of the Board on September 19, 2002. Mr. Oliver was elected to the Board of Texas Mutual Insurance Company in 2009. He is founder of Softvest LP in Abilene and serves on the board of ACIMCO, Abilene Christian University's endowment management company.

Jon M. Morgan was appointed as a director of AMEN in October 2000 and is the Chairman and CEO of Anthem Oil and Gas, Inc. based in Midland Texas. Mr. Morgan principally founded and has been actively involved in over a dozen companies involved in real estate, oil and gas, minor league sports, geophysical services, financial services, data management, power procurement and the internet.

Bruce E. Edgington has been director of AMEN since November 1997. From 1979 through 1988, Mr. Edgington was a registered representative with Johnston Lemon & Co., a securities broker‐dealer, where his responsibilities included the management of retail securities accounts and administration. In 1988 he founded and continues to be an officer, director and stockholder of DiBiasio & Edgington, a firm engaged in providing software to investment firms and money managers. He currently serves as a director for wireless charging firm Momentum Dynamics.

Management Team

Kris Oliver was appointed Chief Financial Officer of the Company on March 7, 2007. Mr. Oliver is a Certified Public Accountant and began his career in the Audit Practice of Arthur Andersen, where he left as an Audit Senior in

1990. After receiving an MBA in Finance from the University of Texas at Austin in 1992, Mr. Oliver spent 14 years at American Airlines / Sabre in a variety of roles including Corporate Finance, Business Development, Marketing and Sales. Just prior to joining the Company, Mr. Oliver was a Senior Financial Advisor with Technology Partners International, the world's largest outsourcing advisory firm. Mr. Oliver served on the Richardson ISD Board of Trustees from 2010 through 2017 and is the brother of Eric Oliver, the Company's Chairman of the Board of Directors.

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MANAGEMENT DISCUSSION and ANALYSIS 2022 FIRST QUARTER FINANCIAL RESULTS

Operating

The Company recognized $927 thousand in oil and gas revenue for the quarter, an increase of $505 thousand versus the same quarter in 2021. Operating Income was $389 thousand for the quarter versus a loss of $(32) thousand in first quarter 2021. This improvement in earnings is attributable to increased demand and commodity prices for oil and gas.

Investments / Other

During the quarter, the Company recognized the following transactions related to investment income:

• $341 thousand of equity income and cash distributions totaling $308 thousand resulting from its investment in SFF Royalty, LLC.

Amen's Board approved a plan in 2012 whereby the Company will no longer hedge the revenue stream associated with its oil and gas royalties. The Board reached this decision based on reduced cash flow risk associated with the retirement of the Company's debt in 2011. The Company has notified shareholders that they now hold an unhedged long oil and gas position and should pursue their own hedging strategy if they are uncomfortable with that risk.

Net Income / Dividends

The Company recognized Net Income of $725 thousand for the quarter versus $154 thousand in the first quarter of 2021. The increase in earnings was caused primarily by the increase in oil and gas revenue described above.

The Company declared a regular dividend of $7.50 and 2021 tithing dividend of $3.30 per share during the quarter. The Company anticipates making regular quarterly dividends to common stockholders, the amount of which will be largely determined by fluctuations in commodity prices for oil and gas.

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