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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
 Washington, D.C. 20549
 FORM 10-K
 
 Annual Report Pursuant To Section 13 or 15(d) of the Securities Exchange Act of 1934
 For the fiscal year ended September 30, 2010
 Commission File Number: 001-31759
 PANHANDLE OIL AND GAS INC.
  OKLAHOMA
    
    73-1055775(State or other jurisdiction of incorporation 
or organization)
    
    (I.R.S. Employer Identification No.)
 Grand Centre, Suite 300, 5400 North Grand Blvd ., Oklahoma City, OK
    
    73112(Address of principal executive offices)
    
    (Zip code)
 (405) 948-1560
  CLASS A COMMON STOCK (VOTING)
    
    NEW YORK STOCK EXCHANGE(Title of Class)
    
    (Name of each exchange on which registered)
   CLASS B COMMON STOCK (NON-VOTING) $1.00 par value
  o þ
  o þ
  þ o
  o o
 o
  Large accelerated filer o
Accelerated filer þ
Non-accelerated filer o
(Do not check if a smaller reporting company)
Smaller reporting company o
  o þ
  Documents Incorporated By Reference




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##### 



TABLE
OF CONTENTS
 PagePART IItem 1
    
    Business
    
    
    1Item 1B
    
    Unresolved Staff Comments
    
    
    10Item 2
    
    Properties
    
    
    10Item 3
    
    Legal Proceedings
    
    
    19Item 4
    
    Submission of Matters to a Vote of
Security Holders
    
    
    19PART IIItem 5
    
    Market for Registrants Common Equity and
Related Stockholder Matters
    
    
    20Item 6
    
    Selected Financial Data
    
    
    21Item 7
    
    Managements Discussion and Analysis of Financial
Condition and Results of Operations
    
    
    22Item 7A
    
    Quantitative and Qualitative Disclosures about Market
Risk
    
    
    37Item 8
    
    Financial Statements and Supplementary Data
    
    
    38Item 9
    
    Changes in and Disagreements with
Accountants on Accounting and
Financial Disclosure
    
    
    72Item 9A
    
    Controls and Procedures
    
    
    72Item 9B
    
    Other Information
    
    
    72PART IIIItem 10-14
    
    Incorporated by Reference to Proxy StatementPART IVItem 15
    
    Exhibits, Financial Statement Schedules and Reports on Form 8- K
    
    
    73Signature Page
    
    
    74Exhibit 21
    
    
    
    
    75Exhibit 23
    
    
    
    
    76Exhibit 31.1-31.2
    
    
    77Exhibit 32.1-32.2
    
    
    79Exhibit 99
    
    
    
    
    81




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Bbl
 Bcf
 Board
 CEGT
 CEO
 CFO
 CO2
 COO
 DD&A
 ESOP
 FASB
 gross wells gross acres
 Independent Consulting Petroleum Engineer(s) Independent Consulting Petroleum Engineering
Firm(s)
 LOE
 Mcf
 Mcfd
 Mcfe
 minerals mineral acres mineral interests
 net wells net acres
 NYMEX
 PEPL
 play
 PV-10
 royalty interest
 SEC
 working interest
 Fiscal year references
  References to natural gas




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PART I
 
 ITEM 1 BUSINESS
 GENERAL
     www.panhandleoilandgas.com
   BUSINESS STRATEGY
  (1)




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PRINCIPAL PRODUCTS AND MARKETS
    COMPETITIVE BUSINESS CONDITIONS
   (2)




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SOURCES AND AVAILABILITY OF RAW MATERIALS
  MAJOR CUSTOMERS
  PATENTS, TRADEMARKS, LICENSES, FRANCHISES AND ROYALTY AGREEMENTS
  REGULATION
    (3)




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(4)




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ENVIRONMENTAL MATTERS
  EMPLOYEES
  RISK FACTORS
  Worldwide and in the United States, economic recession continues to have a negative effect on
demand for and the price of oil and natural gas.
  Oil and natural gas prices are volatile. Volatility in oil and natural gas prices can adversely
affect results and the price of the Companys common stock. This volatility also makes valuation
of oil and natural gas producing properties difficult and can disrupt markets.
  
    
    worldwide economic conditions;
    
    economic, political and regulatory developments;
 (5)




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
    
    market uncertainty;
    
    relatively minor changes in the supply of and demand for oil and natural gas;
    
    availability and capacity of necessary transportation and processing facilities;
    
    commodity futures trading;
    
    weather conditions;
    
    import prices;
    
    political conditions in major oil producing regions, especially the Middle
East and West Africa;
    
    actions taken by OPEC; and
    
    competition from alternative sources of energy.
  A substantial decline in oil and natural gas prices for an extended period of time would
have a material adverse effect on the Company.
  
    
    cash flow would be reduced, decreasing funds available for capital expenditures
employed to replace reserves or increase production;
    
    certain reserves may no longer be economic to produce, leading to both lower proved
reserves and cash flow; and
    
    access to sources of capital, such as equity or long-term debt markets, could
be severely limited or unavailable.
 We cannot control activities on properties we do not operate.
  The Companys derivative activities may reduce the cash flow received for oil and natural gas
sales.
  (6)




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Lower oil and natural gas prices may cause impairment charges.
   Our estimated proved reserves are based on many assumptions that may prove to be inaccurate.
Any material inaccuracies in these reserve estimates or underlying assumptions will materially
affect the quantities and present value of our reserves.
     (7)




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Failure to find or acquire additional reserves will cause reserves and production to
decline materially from their current levels.
    Reserve estimates for September 30, 2010, calculated under the new SEC reporting rules, Modernization of Oil and Gas Reporting Requirements , are not directly comparable to reserve
estimates made in prior years.
 Modernization of Oil and Gas Reporting Requirements
 (8)




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Oil and natural gas drilling and producing operations involve various risks.
   Future legislative or regulatory changes may result in increased costs and decreased revenues,
cash flows and liquidity.
        (9)




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Shortages of oil field equipment, services, qualified personnel and resulting cost increases
could adversely affect results of operations.
  Competition in the oil and natural gas industry is intense, and most of our competitors
have greater financial and other resources than we do.
   
 ITEM 1B UNRESOLVED STAFF COMMENTS
  
 ITEM 2 PROPERTIES
  (10)




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ACREAGE
 Mineral Interests Owned
  Net
    
    GrossNet
    
    Gross
    
    Acres
    
    Acres
    
    NetAcres
    
    Acres
    
    Leased
    
    Leased
    
    Acres
    
    Gross AcresNet
    
    
    
    
    
    Producing
    
    Producing
    
    to Others
    
    to Others
    
    Open
    
    OpenState
    
    Acres
    
    Gross Acres
    
    (1)
    
    (1)
    
    (2)
    
    (2)
    
    (3)
    
    (3)Arkansas
    
    
    9,951
    
    
    
    45,277
    
    
    
    4,106
    
    
    
    16,174
    
    
    
    3,312
    
    
    
    13,102
    
    
    
    2,533
    
    
    
    16,001Colorado
    
    
    8,217
    
    
    
    39,080
    
    
    
    
    
    
    
    
    
    
    
    223
    
    
    
    447
    
    
    
    7,994
    
    
    
    38,633Florida
    
    
    5,589
    
    
    
    12,239
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    5,589
    
    
    
    12,239Kansas
    
    
    3,082
    
    
    
    11,816
    
    
    
    144
    
    
    
    1,200
    
    
    
    
    
    
    
    
    
    
    
    2,938
    
    
    
    10,616Montana
    
    
    1,007
    
    
    
    17,947
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    1,007
    
    
    
    17,947North Dakota
    
    
    11,179
    
    
    
    64,286
    
    
    
    110
    
    
    
    800
    
    
    
    
    
    
    
    
    
    
    
    11,069
    
    
    
    63,486New Mexico
    
    
    57,396
    
    
    
    174,460
    
    
    
    1,352
    
    
    
    7,125
    
    
    
    525
    
    
    
    760
    
    
    
    55,519
    
    
    
    166,575Oklahoma
    
    
    112,975
    
    
    
    945,038
    
    
    
    36,799
    
    
    
    296,339
    
    
    
    1,099
    
    
    
    9,029
    
    
    
    75,077
    
    
    
    639,670South Dakota
    
    
    1,825
    
    
    
    9,300
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    1,825
    
    
    
    9,300Texas
    
    
    43,174
    
    
    
    359,864
    
    
    
    7,451
    
    
    
    70,500
    
    
    
    547
    
    
    
    5,578
    
    
    
    35,176
    
    
    
    283,786OTHER
    
    
    27
    
    
    
    262
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    27
    
    
    
    262Total:
    
    
    254,422
    
    
    
    1,679,569
    
    
    
    49,962
    
    
    
    392,138
    
    
    
    5,706
    
    
    
    28,916
    
    
    
    198,754
    
    
    
    1,258,515
 
 (1)
    
    Producing represents the mineral acres in which Panhandle owns a royalty or working
interest in a producing well.(2)
    
    Leased represents the mineral acres owned by Panhandle that are leased to third parties but
not producing.(3)
    
    Open represents mineral acres owned by Panhandle that are not leased or in production. Leases
  Net AcresHeld byState
    
    
    
    Net Acres
    
    Net Lease Acres Expiring
    
    Production2011
    
    2012
    
    2013
    
    2014
    
    2015Kansas
    
    
    
    
    
    
    2,117
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    2,117Oklahoma
    
    
    
    
    
    
    15,077
    
    
    
    1,597
    
    
    
    167
    
    
    
    600
    
    
    
    653
    
    
    
    32
    
    
    
    12,028Texas
    
    
    
    
    
    
    504
    
    
    
    
    
    
    
    3
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    501Other
    
    
    
    
    
    
    1,368
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    1,368TOTAL
    
    
    
    
    
    
    19,066
    
    
    
    1,597
    
    
    
    170
    
    
    
    600
    
    
    
    653
    
    
    
    32
    
    
    
    16,014
 (11)




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##### Table of Contents



PROVED RESERVES
  Barrels of Oil
    
    Mcf of Natural Gas
    
    McfeNet Proved
Developed Reserves
September 30, 2010
    
    
    861,240
    
    
    
    57,344,190
    
    
    
    62,511,630September 30, 2009
    
    
    882,987
    
    
    
    45,036,460
    
    
    
    50,334,382September 30, 2008
    
    
    895,430
    
    
    
    35,970,450
    
    
    
    41,343,030Net Proved
Undeveloped Reserves
September 30, 2010
    
    
    63,769
    
    
    
    40,826,265
    
    
    
    41,208,879September 30, 2009
    
    
    37,886
    
    
    
    8,991,350
    
    
    
    9,218,666September 30, 2008
    
    
    94,530
    
    
    
    12,180,220
    
    
    
    12,747,400Net Total
Proved Reserves
September 30, 2010
    
    
    925,009
    
    
    
    98,170,455
    
    
    
    103,720,509September 30, 2009
    
    
    920,873
    
    
    
    54,027,810
    
    
    
    59,553,048September 30, 2008
    
    
    989,960
    
    
    
    48,150,670
    
    
    
    54,090,430
    (12)




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(13)




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ESTIMATED FUTURE NET CASH FLOWS
 Modernization of Oil and Gas Reporting
Requirements
 (14)




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Estimated Future Net Cash Flows
 9-30-10
    
    
    9-30-09
    
    
    9-30-08Proved Developed
    
    $
    202,056,455
    
    
    $
    131,674,245
    
    
    $
    182,996,389Proved Undeveloped
    
    
    84,200,597
    
    
    
    15,372,040
    
    
    
    31,863,340Income Tax Expense
    
    
    99,118,090
    
    
    
    43,832,666
    
    
    
    67,278,008Total Proved
    
    $
    187,138,962
    
    
    $
    103,213,619
    
    
    $
    147,581,721
 10% Discounted Present Value of Estimated Future Net Cash Flows
 9-30-10
    
    
    9-30-09
    
    
    9-30-08Proved Developed
    
    $
    103,270,565
    
    
    $
    73,869,512
    
    
    $
    104,840,854Proved Undeveloped
    
    
    21,960,347
    
    
    
    6,800,080
    
    
    
    15,068,040Income Tax Expense
    
    
    52,730,503
    
    
    
    26,923,084
    
    
    
    41,896,610Total Proved
    
    $
    72,500,409
    
    
    $
    53,746,508
    
    
    $
    78,012,284
  OIL AND NATURAL GAS PRODUCTION
  Year Ended
    
    Year Ended
    
    Year Ended9-30-10
    
    9-30-09
    
    9-30-08Bbls  Oil
    
    
    102,379
    
    
    
    128,160
    
    
    
    132,402Mcf  Natural Gas
    
    
    8,302,342
    
    
    
    9,109,988
    
    
    
    6,928,038Mcfe
    
    
    8,916,616
    
    
    
    9,878,948
    
    
    
    7,722,450
  AVERAGE SALES PRICES AND PRODUCTION COSTS
 The following table sets forth unit price and cost data for the fiscal periods indicated.
 Year Ended
    
    Year Ended
    
    Year EndedAverage Sales Price
    
    9-30-10
    
    9-30-09
    
    9-30-08Per Bbl, Oil
    
    $
    72.83
    
    
    $
    51.79
    
    
    $
    103.91Per Mcf, Natural Gas (1)
    
    $
    4.41
    
    
    $
    3.38
    
    
    $
    7.98Per Mcfe
    
    $
    4.94
    
    
    $
    3.79
    
    
    $
    8.94
 
 (1)
    
    Proceeds from the sale of natural gas liquids have been included in natural
gas sales, and are therefore included in the price per Mcf of natural gas. (15)




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##### Table of Contents



Year Ended
    
    
    Year Ended
    
    
    Year EndedAverage Production (lifting costs)
    
    9-30-10
    
    
    9-30-09
    
    
    9-30-08(Per Mcfe of Natural Gas)(1)
    
    $
    0.92
    
    
    $
    0.78
    
    
    $
    0.86(2)
    
    
    0.16
    
    
    
    0.12
    
    
    
    0.44$
    1.08
    
    
    $
    0.90
    
    
    $
    1.30
 
 (1)
    
    Includes actual well operating costs, compression, handling and marketing
fees paid on natural gas sales and other minor expenses associated with well
operations.(2)
    
    Includes production taxes only. The low production tax rate per Mcfe in 2009
and 2010 is because of a large proportion of the Companys natural gas revenue coming
from horizontally drilled wells which are eligible for either Oklahoma production tax
credits or reduced Arkansas production tax rates.  GROSS AND NET PRODUCTIVE WELLS AND DEVELOPED ACRES
  Gross Wells
    
    Net WellsOil
    
    
    997
    
    
    
    20.47Natural Gas
    
    
    3,992
    
    
    
    92.30Total
    
    
    4,989
    
    
    
    112.77
   UNDEVELOPED ACREAGE
  DRILLING ACTIVITY
  (16)




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Net Productive Wells
    
    Net Dry WellsDevelopment
WellsFiscal years ended:September 30, 2010
    
    
    4.029693
    
    
    
    0.057282September 30, 2009
    
    
    8.893170
    
    
    
    0.092978September 30, 2008
    
    
    8.120236
    
    
    
    0.067177Exploratory
WellsFiscal years ended:September 30, 2010
    
    
    0.160270
    
    
    
    0.000000September 30, 2009
    
    
    0.867702
    
    
    
    0.138051September 30, 2008
    
    
    0.985659
    
    
    
    0.083333Purchased
WellsFiscal years ended:September 30, 2010
    
    
     0 
    
    
    
     0 September 30, 2009
    
    
     0 
    
    
    
     0 September 30, 2008
    
    
     0 
    
    
    
     0 
 PRESENT ACTIVITIES
  Gross Wells
    
    Net WellsOil
    
    
    7
    
    
    
    0.15976Natural Gas
    
    
    33
    
    
    
    0.74449
 OTHER FACILITIES
  SAFE HARBOR STATEMENT
  (17)




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Commodity Prices.
  Uncertainty of Oil and Natural Gas Reserves.
  (18)




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ITEM 3 LEGAL PROCEEDINGS
  
 ITEM 4 SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
  (19)




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PART II
 
 ITEM 5 MARKET FOR REGISTRANTS COMMON EQUITY AND RELATED
STOCKHOLDER MATTERS
 
   Quarter Ended
    
    High
    
    LowDecember 31, 2008
    
    $
    28.18
    
    
    $
    13.75March 31, 2009
    
    $
    23.75
    
    
    $
    13.15June 30, 2009
    
    $
    24.62
    
    
    $
    15.79September 30, 2009
    
    $
    28.02
    
    
    $
    18.17December 31, 2009
    
    $
    26.25
    
    
    $
    19.06March 31, 2010
    
    $
    29.65
    
    
    $
    20.34June 30, 2010
    
    $
    29.29
    
    
    $
    21.97September 30, 2010
    
    $
    30.31
    
    
    $
    21.00
 (20)




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Date
    
    Rate Per ShareDecember 2008
    
    $
    0.07March 2009
    
    $
    0.07June 2009
    
    $
    0.07September 2009
    
    $
    0.07December 2009
    
    $
    0.07March 2010
    
    $
    0.07June 2010
    
    $
    0.07September 2010
    
    $
    0.07
     
 ITEM 6 SELECTED FINANCIAL DATA
  (21)




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As of and for the year ended September 30,2010
    
    
    2009
    
    
    2008
    
    
    2007
    
    
    2006RevenuesOil and natural gas sales
    
    $
    44,068,947
    
    
    $
    37,421,688
    
    
    $
    69,026,785
    
    
    $
    37,449,174
    
    
    $
    36,008,527Lease bonuses and rentals
    
    
    1,120,674
    
    
    
    188,906
    
    
    
    167,559
    
    
    
    208,625
    
    
    
    410,984Gains (losses) on derivative contracts
    
    
    6,343,661
    
    
    
    (661,828
    )
    
    
    (940,823
    )
    
    
    765,316
    
    
    
    Income from partnerships
    
    
    405,134
    
    
    
    323,848
    
    
    
    631,891
    
    
    
    383,391
    
    
    
    536,36551,938,416
    
    
    
    37,272,614
    
    
    
    68,885,412
    
    
    
    38,806,506
    
    
    
    36,955,876Costs and expensesLease
operating expense and production taxes
    
    
    9,639,864
    
    
    
    8,897,235
    
    
    
    10,055,762
    
    
    
    6,057,456
    
    
    
    5,262,834Exploration costs
    
    
    1,583,773
    
    
    
    711,582
    
    
    
    455,943
    
    
    
    1,050,069
    
    
    
    222,892Depreciation,
depletion and amortization
    
    
    19,222,123
    
    
    
    28,168,933
    
    
    
    19,784,660
    
    
    
    15,291,625
    
    
    
    10,142,367Provision for impairment
    
    
    605,615
    
    
    
    2,464,520
    
    
    
    526,380
    
    
    
    3,761,832
    
    
    
    3,009,953Loss
(gain) on asset sales, interest and other
    
    
    (1,028,148
    )
    
    
    (2,677,407
    )
    
    
    14,826
    
    
    
    65,568
    
    
    
    (178,288
    )General and administrative
    
    
    5,594,499
    
    
    
    4,866,044
    
    
    
    5,006,512
    
    
    
    3,877,492
    
    
    
    3,335,899Bad debt expense (recovery)
    
    
    
    
    
    
    (185,272
    )
    
    
    591,258
    
    
    
    
    
    
    
    35,617,726
    
    
    
    42,245,635
    
    
    
    36,435,341
    
    
    
    30,104,042
    
    
    
    21,795,657Income (loss) before provision
(benefit) for income taxes
    
    
    16,320,690
    
    
    
    (4,973,021
    )
    
    
    32,450,071
    
    
    
    8,702,464
    
    
    
    15,160,219Provision (benefit) for income taxes
    
    
    4,901,000
    
    
    
    (2,568,000
    )
    
    
    10,894,302
    
    
    
    2,359,000
    
    
    
    4,586,000Net income (loss)
    
    $
    11,419,690
    
    
    $
    (2,405,021
    )
    
    $
    21,555,769
    
    
    $
    6,343,464
    
    
    $
    10,574,219Basic and diluted earnings (loss) per share
    
    $
    1.36
    
    
    $
    (0.29
    )
    
    $
    2.54
    
    
    $
    0.75
    
    
    $
    1.25Dividends declared per share
    
    $
    0.28
    
    
    $
    0.28
    
    
    $
    0.28
    
    
    $
    0.25
    
    
    $
    0.185Weighted average shares outstandingBasic and diluted
    
    
    8,422,387
    
    
    
    8,397,337
    
    
    
    8,492,378
    
    
    
    8,499,233
    
    
    
    8,479,406Net cash provided by (used in):Operating activities
    
    $
    27,806,475
    
    
    $
    37,710,606
    
    
    $
    40,063,896
    
    
    $
    28,106,500
    
    
    $
    23,470,145Investing activities
    
    $
    (9,845,516
    )
    
    $
    (36,322,992
    )
    
    $
    (37,846,172
    )
    
    $
    (26,940,679
    )
    
    $
    (21,118,606
    )Financing activities
    
    $
    (13,003,609
    )
    
    $
    (1,643,414
    )
    
    $
    (2,311,376
    )
    
    $
    (610,814
    )
    
    $
    (3,556,019
    )Total assets
    
    $
    105,124,839
    
    
    $
    108,549,632
    
    
    $
    122,007,183
    
    
    $
    78,539,797
    
    
    $
    70,949,242Long-term debt
    
    $
    
    
    
    $
    10,384,722
    
    
    $
    9,704,100
    
    
    $
    4,661,471
    
    
    $
    1,166,649Shareholders equity
    
    $
    73,581,996
    
    
    $
    64,122,343
    
    
    $
    68,348,901
    
    
    $
    53,681,371
    
    
    $
    49,065,697
  
 ITEM 7 MANAGEMENTS DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
 RESULTS OF OPERATIONS
 General
  (22)




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##### Table of Contents



For the Year Ended September 30,Percent
    
    
    
    
    
    Percent2010
    
    Incr. or (Decr.)
    
    2009
    
    Incr. or (Decr.)
    
    2008Production:Oil (Bbls)
    
    
    102,379
    
    
    
    -20
    %
    
    
    128,160
    
    
    
    -3
    %
    
    
    132,402Natural Gas (Mcf)
    
    
    8,302,342
    
    
    
    -9
    %
    
    
    9,109,988
    
    
    
    31
    %
    
    
    6,928,038Mcfe
    
    
    8,916,616
    
    
    
    -10
    %
    
    
    9,878,948
    
    
    
    28
    %
    
    
    7,722,450Average Sales Price:Oil (per Bbl)
    
    $
    72.83
    
    
    
    41
    %
    
    $
    51.79
    
    
    
    -50
    %
    
    $
    103.91Natural Gas (Mcf) (1)
    
    $
    4.41
    
    
    
    30
    %
    
    $
    3.38
    
    
    
    -58
    %
    
    $
    7.98Mcfe
    
    $
    4.94
    
    
    
    30
    %
    
    $
    3.79
    
    
    
    -58
    %
    
    $
    8.94
 
 (1)
    
    Proceeds from the sale of natural gas liquids have been included in natural
gas sales, and are therefore included in the price per Mcf of natural gas. Fiscal Year 2010 Compared to Fiscal Year 2009
 Overview
  (23)




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##### Table of Contents



Oil and Natural Gas (and associated natural gas liquids) Sales
   First quarter
    
    
    2,278,133
    McfeSecond quarter
    
    
    2,090,154
    McfeThird quarter
    
    
    2,236,236
    McfeFourth quarter
    
    
    2,312,093
    McfeTotal
    
    
    8,916,616
    Mcfe
  Lease Bonus and Rentals
  Gains (Losses) on Natural Gas Derivative Contracts
  Gains (losses) on
    
    Fiscal yearderivative contracts
    
    2010
    
    
    2009Realized
    
    $
    2,209,900
    
    
    $
    2,497,800Unrealized
    
    
    4,133,761
    
    
    
    (3,159,628
    )Total
    
    $
    6,343,661
    
    
    
    ($661,828
    )
 (24)




---



##### Table of Contents



Lease Operating Expenses (LOE) and Production Taxes
    Exploration Costs
   Depreciation, Depletion and Amortization (DD&A)
  Provision for Impairment
  (25)




---



##### Table of Contents



Loss (Gain) on Asset Sales, Interest and Other
  General and Administrative Costs (G&A)
  Bad Debt Expense (Recovery)
  Provision (Benefit) for Income Taxes
  (26)




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##### Table of Contents



Liquidity and Capital Resources
   As of
    
    
    As of9/30/2010
    
    
    9/30/2009
    
    
    ChangeCURRENT ASSETS:Cash and cash equivalents (1)
    
    $
    5,597,258
    
    
    $
    639,908
    
    
    $
    4,957,350Oil and natural gas sales receivables (net)
    
    
    9,063,002
    
    
    
    7,747,557
    
    
    
    1,315,445Refundable production taxes (2)
    
    
    804,120
    
    
    
    616,668
    
    
    
    187,452Derivative contracts (3)
    
    
    1,481,527
    
    
    
    
    
    
    
    1,481,527Deferred income taxes (4)
    
    
    
    
    
    
    1,934,900
    
    
    
    (1,934,900
    )Other
    
    
    412,778
    
    
    
    68,817
    
    
    
    343,961Total current assets
    
    
    17,358,685
    
    
    
    11,007,850
    
    
    
    6,350,835CURRENT LIABILITIES:Accounts payable
    
    
    5,062,806
    
    
    
    4,810,687
    
    
    
    252,119Derivative contracts (3)
    
    
    
    
    
    
    1,726,901
    
    
    
    (1,726,901
    )Deferred income taxes
    
    
    354,100
    
    
    
    53,100
    
    
    
    301,000Accrued income taxes and other liabilities (5)
    
    
    1,842,918
    
    
    
    980,470
    
    
    
    862,448Total current liabilities
    
    
    7,259,824
    
    
    
    7,571,158
    
    
    
    (311,334
    )WORKING CAPITAL
    
    $
    10,098,861
    
    
    $
    3,436,692
    
    
    $
    6,662,169
 
 (1)
    
    During 2010, cash provided by operating activities exceeded cash used in
investing activities enabling the Company to pay off its line-of-credit during May
2010.(2)
    
    Refundable production taxes of approximately $759,000, previously reported as
non-current, have now become current, thus increasing current refundable production
taxes. This increase was partially offset by payments received during fiscal 2010 of
approximately $518,000.(3)
    
    The Companys current portion of fair value of derivative contracts has
changed from a liability of $1,726,901 as of September 30, 2009, to an asset of
$1,481,527 as of September 30, 2010, due to lower forward-looking natural gas prices
as of September 30, 2010. The Company has received net payments relative to its
derivative contracts of $2,209,900 during 2010.(4)
    
    Approximately $1,039,000 of the decrease in the current assets portion of
deferred income taxes relates to expected utilization of the Companys Alternative
Minimum Tax (AMT) credit during fiscal 2010. The change from a liability to an asset
in the unrealized value of the Companys derivative contracts (as mentioned above)
decreased the current asset portion of deferred income taxes approximately $896,000.(5)
    
    Income taxes payable increased $583,625 on higher net income before tax.
Accrued liabilities for employee bonuses increased a combined $268,682. (27)




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##### Table of Contents



12 months ended
    
    
    12 months ended9/30/2010
    
    
    9/30/2009
    
    
    ChangeNet income (loss)
    
    $
    11,419,690
    
    
    $
    (2,405,021
    )
    
    $
    13,824,711Adjustments to reconcile net income (loss) to
net cash provided by operating activities:DD&A and impairment (1)
    
    
    19,827,738
    
    
    
    30,633,453
    
    
    
    (10,805,715
    )Provision for deferred income taxes (2)
    
    
    777,000
    
    
    
    (3,814,000
    )
    
    
    4,591,000Exploration costs (3)
    
    
    1,208,653
    
    
    
    711,582
    
    
    
    497,071Net (gain) loss on asset sales and other (4)
    
    
    (1,189,605
    )
    
    
    (2,654,759
    )
    
    
    1,465,154Income from partnerships
    
    
    (405,134
    )
    
    
    (323,848
    )
    
    
    (81,286
    )Distributions received from partnerships
    
    
    523,317
    
    
    
    432,805
    
    
    
    90,512Other
    
    
    64,555
    
    
    
    4,708
    
    
    
    59,847Common stock contributed to ESOP
    
    
    287,194
    
    
    
    245,811
    
    
    
    41,383Common stock (unissued) to Directors
Deferred Compensation Plan
    
    
    359,628
    
    
    
    256,688
    
    
    
    102,940Restricted stock awards
    
    
    12,028
    
    
    
    
    
    
    
    12,028Bad debt expense (recovery)
    
    
    
    
    
    
    (185,272
    )
    
    
    185,272Cash provided by changes in assets
and liabilities:Oil and natural gas sales receivables (5)
    
    
    (1,315,445
    )
    
    
    9,620,843
    
    
    
    (10,936,288
    )Fair value of derivative contracts (6)
    
    
    (4,133,761
    )
    
    
    3,159,628
    
    
    
    (7,293,389
    )Refundable income taxes (7)
    
    
    
    
    
    
    2,162,305
    
    
    
    (2,162,305
    )Refundable production taxes (8)
    
    
    (69,874
    )
    
    
    (921,769
    )
    
    
    851,895Other current assets
    
    
    (343,961
    )
    
    
    74,455
    
    
    
    (418,416
    )Accounts payable
    
    
    (24,896
    )
    
    
    287,883
    
    
    
    (312,779
    )Income taxes payable (7)
    
    
    583,625
    
    
    
    338,511
    
    
    
    245,114Accrued liabilities
    
    
    225,723
    
    
    
    86,603
    
    
    
    139,120Net cash provided by operating activities
    
    $
    27,806,475
    
    
    $
    37,710,606
    
    
    $
    (9,904,131
    )
 
 (1)
    
    DD&A declined as a result of a decline in oil and natural gas production,
increased oil and natural gas reserves and a net reduction during fiscal year 2009
in asset basis, as DD&A, impairment and basis in assets sold during 2009 exceeded
additions to properties and equipment. An impairment of $605,615 was recorded in
2010, compared to $2,464,520 in 2009. For further discussion related to these
items, see Depreciation, Depletion and Amortization and Provision for
Impairment in Managements Discussion and Analysis.(2)
    
    The deferred income tax expense change of $4,591,000 resulted from a provision
for deferred income taxes during 2010 of $777,000, compared to a deferred income tax
benefit of $3,814,000 during 2009. Deferred income tax provisions or benefits are
primarily related to expenditures for intangible drilling costs, which are expensed
for tax purposes in the year incurred, but amortized over the life of the oil and
natural gas properties for financial purposes, thus creating an income tax timing
difference. Levels of expenditures for intangible drilling costs in relation to the
before tax income or loss were significantly less in 2010 than in 2009. (28)




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##### Table of Contents



(3)
    
    Leases expired or impaired during 2010 exceeded those expired or impaired during
2009 by approximately $557,000.(4)
    
    In 2010, we received $1,124,682 from the settlement of a lawsuit related to
one well in western Oklahoma. In 2009, the Company sold a portion of its working
interest in the Southeast Leedey field and all of its working interest in the
McElmo Dome CO2 Unit for a combined gain of approximately $2.5 million.(5)
    
    For the year ending September 30, 2010, oil and natural gas sales receivables
increased due to higher average oil and natural gas prices; whereas, through September
30, 2009, oil and natural gas sales receivables had decreased primarily as a result of
lower average oil and natural gas prices. The net change to cash provided by operating
activities was a decrease of $10,936,288; as receivables collected during 2009
exceeded those collected during 2010.(6)
    
    During 2010, the Company had an unrealized gain related to derivative
contracts of $4,133,761. During 2009, we had an unrealized loss related to
derivative contracts of $3,159,628.(7)
    
    During 2010, income taxes payable increased $583,625; whereas, during 2009
income taxes payable increased $338,511 resulting in a positive impact to net cash
provided by operating activities of $245,114. Refundable income taxes did not change
during 2010 and decreased $2,162,305 (primarily due to refund payments of
approximately $2.2 million) during 2009. Refundable income taxes and income taxes
payable overall had a negative effect change of $1,917,191 in 2010 compared to 2009.(8)
    
    During 2010, we received payment of approximately $552,000 of refundable
production taxes, which were reflected as a receivable at September 30, 2009.     (29)




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##### Table of Contents



Contractual Obligations and Commitments
    Payments due by periodContractual Obligations
    
    
    
    
    
    Less than
    
    
    
    
    
    
    
    
    
    More thanand Commitments
    
    Total
    
    1 Year
    
    1-3 Years
    
    3-5 Years
    
    5 YearsLong-term debt
obligations
    
    $
    
    
    
    $
    
    
    
    $
    
    
    
    $
    
    
    
    $
    Building lease
    
    $
    323,141
    
    
    $
    204,089
    
    
    $
    119,052
    
    
    $
    
    
    
    $
    
   (30)




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##### Table of Contents



Fiscal Year 2009 Compared to Fiscal Year 2008
 Overview
  Oil and Natural Gas (and associated natural gas liquids) Sales
   First quarter
    
    
    2,495,299
    McfeSecond quarter
    
    
    2,380,124
    McfeThird quarter
    
    
    2,647,474
    McfeFourth quarter
    
    
    2,356,051
    McfeTotal
    
    
    9,878,948
    Mcfe
 Gains (Losses) on Natural Gas Derivative Contracts
  Gains (losses) on
    
    Fiscal yearderivative contracts
    
    2009
    
    
    2008Realized
    
    $
    2,497,800
    
    
    
    ($1,480,100
    )Unrealized
    
    
    (3,159,628
    )
    
    
    539,277Total
    
    
    ($661,828
    )
    
    
    ($940,823
    )
 Lease Operating Expenses (LOE) and Production Taxes
  (31)




---



##### Table of Contents



Exploration Costs
  Depreciation, Depletion and Amortization (DD&A)
  Provision for Impairment
  Loss (Gains) on Asset Sales, Interest and Other
  (32)




---



##### Table of Contents



General and Administrative Costs (G&A)
  Bad Debt Expense (Recovery)
  Provision (Benefit) for Income Taxes
   CRITICAL ACCOUNTING POLICIES
   (33)




---



##### Table of Contents



Oil and Natural Gas Reserves
 Modernization of Oil and Gas Reporting Requirements
 Successful Efforts Method of Accounting
  Derivative contracts
  (34)




---



##### Table of Contents



Impairment of Assets
   (35)




---



##### Table of Contents



Oil and Natural Gas Sales Revenue Accrual
  Income Taxes
  Refundable Production Taxes Accrual
   (36)




---



##### Table of Contents



ITEM 7A QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
 Market Risk
  Commodity Price Risk
  Financial Market Risk
  (37)




---



##### 



ITEM 8 FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
  
 Managements Report on Internal Control Over Financial Reporting
    
    
    39Report of Registered Public Accounting Firm on Internal Control
Over Financial Reporting
    
    
    40Report of Independent Registered Public Accounting Firm
    
    
    41Consolidated Balance Sheets
As of September 30, 2010 and 2009
    
    
    42Consolidated Statements of Operations for the
Years Ended September 30, 2010, 2009 and 2008
    
    
    44Consolidated Statements of Stockholders Equity for the
Years Ended September 30, 2010, 2009 and 2008
    
    
    45Consolidated Statements of Cash Flows for the
Years Ended September 30, 2010, 2009 and 2008
    
    
    46Notes to Consolidated Financial Statements
    
    
    48
  (38)




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##### Table of Contents



Managements Annual Report on Internal Control Over Financial Reporting
  
    
    Pertain to the maintenance of records that in reasonable detail accurately and
fairly reflect the transactions and dispositions of the assets of the Company;
    
    Provide reasonable assurance that transactions are recorded as necessary to
permit preparation of financial statements in accordance with generally accepted
accounting principles, and that receipts and expenditures of the Company are
being made only in accordance with authorizations of management and directors of
the Company; and
    
    Provide reasonable assurance regarding prevention or timely detection of
unauthorized acquisition, use or disposition of the Companys assets that could have a
material effect on the financial statements.
  Internal Control  Integrated Framework
  (39)




---



##### Table of Contents



.
   
 (40)




---



##### Table of Contents



(41)




---



##### Table of Contents



September 30,2010
    
    2009AssetsCurrent Assets:Cash and cash equivalents
    
    $
    5,597,258
    
    
    $
    639,908Oil and natural gas sales receivables, net of allowance
for uncollectible accounts
    
    
    9,063,002
    
    
    
    7,747,557Deferred income taxes
    
    
    
    
    
    
    1,934,900Refundable production taxes
    
    
    804,120
    
    
    
    616,668Derivative contracts
    
    
    1,481,527
    
    
    
    Other
    
    
    412,778
    
    
    
    68,817Total current assets
    
    
    17,358,685
    
    
    
    11,007,850Properties and equipment at cost, based on successful
efforts accounting:Producing oil and natural gas properties
    
    
    207,928,578
    
    
    
    198,076,244Non-producing oil and natural gas properties
    
    
    9,616,330
    
    
    
    10,332,537Furniture and fixtures
    
    
    656,889
    
    
    
    578,460218,201,797
    
    
    
    208,987,241Less accumulated depreciation, depletion, and
amortization
    
    
    131,983,249
    
    
    
    112,900,027Net properties and equipment
    
    
    86,218,548
    
    
    
    96,087,214Investments
    
    
    754,208
    
    
    
    682,391Derivative contracts
    
    
    138,799
    
    
    
    Refundable production taxes
    
    
    654,599
    
    
    
    772,177Total assets
    
    $
    105,124,839
    
    
    $
    108,549,632
  See accompanying notes.
 (42)




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##### Table of Contents



September 30,2010
    
    2009Liabilities and Stockholders EquityCurrent Liabilities:Accounts payable
    
    $
    5,062,806
    
    
    $
    4,810,687Derivative contracts
    
    
    
    
    
    
    1,726,901Deferred income taxes
    
    
    354,100
    
    
    
    53,100Accrued income taxes and other liabilities
    
    
    1,842,918
    
    
    
    980,470Total current liabilities
    
    
    7,259,824
    
    
    
    7,571,158Long-term debt
    
    
    
    
    
    
    10,384,722Deferred income taxes
    
    
    22,552,650
    
    
    
    24,064,650Asset retirement obligations
    
    
    1,730,369
    
    
    
    1,620,225Derivative contracts
    
    
    
    
    
    
    786,534Stockholders equity:Class A voting common stock, $.0166 par value;
24,000,000 shares authorized, 8,431,502 issued at
September 30, 2010 and 2009
    
    
    140,524
    
    
    
    140,524Capital in excess of par value
    
    
    1,816,365
    
    
    
    1,922,053Deferred directors compensation
    
    
    2,222,127
    
    
    
    1,862,499Retained earnings
    
    
    73,599,733
    
    
    
    64,507,54777,778,749
    
    
    
    68,432,623Treasury stock, at cost; 120,560 shares at
September 30, 2010, and 119,866 shares at
September 30, 2009
    
    
    (4,196,753
    )
    
    
    (4,310,280
    )Total stockholders equity
    
    
    73,581,996
    
    
    
    64,122,343Total liabilities and stockholders equity
    
    $
    105,124,839
    
    
    $
    108,549,632
 See accompanying notes.
 (43)




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##### Table of Contents



Year ended September 30,2010
    
    2009
    
    2008Revenues:Oil and natural gas (and associated
natural gas liquids) sales
    
    $
    44,068,947
    
    
    $
    37,421,688
    
    
    $
    69,026,785Lease bonuses and rentals
    
    
    1,120,674
    
    
    
    188,906
    
    
    
    167,559Gains (losses) on derivative contracts
    
    
    6,343,661
    
    
    
    (661,828
    )
    
    
    (940,823
    )Income from partnerships
    
    
    405,134
    
    
    
    323,848
    
    
    
    631,89151,938,416
    
    
    
    37,272,614
    
    
    
    68,885,412Costs and expenses:Lease operating expenses and production taxes
    
    
    9,639,864
    
    
    
    8,897,235
    
    
    
    10,055,762Exploration costs
    
    
    1,583,773
    
    
    
    711,582
    
    
    
    455,943Depreciation, depletion, and amortization
    
    
    19,222,123
    
    
    
    28,168,933
    
    
    
    19,784,660Provision for impairment
    
    
    605,615
    
    
    
    2,464,520
    
    
    
    526,380Loss (gain) on asset sales, interest and other
    
    
    (1,028,148
    )
    
    
    (2,677,407
    )
    
    
    14,826General and administrative
    
    
    5,594,499
    
    
    
    4,866,044
    
    
    
    5,006,512Bad debt expense (recovery)
    
    
    
    
    
    
    (185,272
    )
    
    
    591,25835,617,726
    
    
    
    42,245,635
    
    
    
    36,435,341Income (loss) before provision (benefit)
for income taxes
    
    
    16,320,690
    
    
    
    (4,973,021
    )
    
    
    32,450,071Provision (benefit) for income taxes
    
    
    4,901,000
    
    
    
    (2,568,000
    )
    
    
    10,894,302Net income (loss)
    
    $
    11,419,690
    
    
    $
    (2,405,021
    )
    
    $
    21,555,769Basic and diluted earnings per common share:Net income (loss)
    
    $
    1.36
    
    
    $
    (0.29
    )
    
    $
    2.54
 See accompanying notes.
 (44)




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##### Table of Contents



Class A voting
    
    Capital in
    
    DeferredCommon Stock
    
    Excess of
    
    Directors
    
    Retained
    
    Treasury
    
    TreasuryShares
    
    Amount
    
    Par Value
    
    Compensation
    
    Earnings
    
    Shares
    
    Stock
    
    TotalBalances at September 30, 2007
    
    
    8,431,502
    
    
    $
    140,524
    
    
    $
    2,146,071
    
    
    $
    1,358,778
    
    
    $
    50,035,998
    
    
    
    
    
    
    $
    
    
    
    $
    53,681,371Purchase of treasury stock
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (139,014
    )
    
    
    (4,998,842
    )
    
    
    (4,998,842
    )Issuance of common shares to ESOP
    
    
    
    
    
    
    
    
    
    
    (56,001
    )
    
    
    
    
    
    
    
    
    
    
    7,640
    
    
    
    274,734
    
    
    
    218,733Common shares to be issued to
directors for services
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    247,033
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    247,033Dividends declared ($.28 per share)
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (2,355,163
    )
    
    
    
    
    
    
    
    
    
    
    (2,355,163
    )Net income
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    21,555,769
    
    
    
    
    
    
    
    
    
    
    
    21,555,769Balances at September 30, 2008
    
    
    8,431,502
    
    
    $
    140,524
    
    
    $
    2,090,070
    
    
    $
    1,605,811
    
    
    $
    69,236,604
    
    
    
    (131,374
    )
    
    $
    (4,724,108
    )
    
    $
    68,348,901Issuance of treasury shares to ESOP
    
    
    
    
    
    
    
    
    
    
    (168,017
    )
    
    
    
    
    
    
    
    
    
    
    11,508
    
    
    
    413,828
    
    
    
    245,811Common shares to be issued to
directors for services
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    256,688
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    256,688Dividends declared ($.28 per share)
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (2,324,036
    )
    
    
    
    
    
    
    
    
    
    
    (2,324,036
    )Net loss
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (2,405,021
    )
    
    
    
    
    
    
    
    
    
    
    (2,405,021
    )Balances at September 30, 2009
    
    
    8,431,502
    
    
    $
    140,524
    
    
    $
    1,922,053
    
    
    $
    1,862,499
    
    
    $
    64,507,547
    
    
    
    (119,866
    )
    
    $
    (4,310,280
    )
    
    $
    64,122,343Purchase of treasury stock
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (12,326
    )
    
    
    (291,383
    )
    
    
    (291,383
    )Issuance of treasury shares to ESOP
    
    
    
    
    
    
    
    
    
    
    (117,716
    )
    
    
    
    
    
    
    
    
    
    
    11,632
    
    
    
    404,910
    
    
    
    287,194Restricted stock awards
    
    
    
    
    
    
    
    
    
    
    12,028
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    12,028Common shares to be issued to
directors for services
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    359,628
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    359,628Dividends declared ($.28 per share)
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (2,327,504
    )
    
    
    
    
    
    
    
    
    
    
    (2,327,504
    )Net income
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    11,419,690
    
    
    
    
    
    
    
    
    
    
    
    11,419,690Balances at September 30, 2010
    
    
    8,431,502
    
    
    $
    140,524
    
    
    $
    1,816,365
    
    
    $
    2,222,127
    
    
    $
    73,599,733
    
    
    
    (120,560
    )
    
    $
    (4,196,753
    )
    
    $
    73,581,996
 See accompanying notes.
 (45)




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##### Table of Contents



Year ended September 30,2010
    
    2009
    
    2008Operating ActivitiesNet income (loss)
    
    $
    11,419,690
    
    
    $
    (2,405,021
    )
    
    $
    21,555,769Adjustments to reconcile net income (loss) to net
cash provided by operating activities:Depreciation, depletion, amortization
and impairment
    
    
    19,827,738
    
    
    
    30,633,453
    
    
    
    20,311,040Provision for deferred income taxes
    
    
    777,000
    
    
    
    (3,814,000
    )
    
    
    9,116,000Exploration costs
    
    
    1,208,653
    
    
    
    711,582
    
    
    
    455,943Net (gain) loss on sales of assets
    
    
    (1,189,605
    )
    
    
    (2,654,759
    )
    
    
    20,632Income from partnerships
    
    
    (405,134
    )
    
    
    (323,848
    )
    
    
    (631,891
    )Distributions received from partnerships
    
    
    523,317
    
    
    
    432,805
    
    
    
    724,765Other
    
    
    64,555
    
    
    
    4,708
    
    
    
    Common stock contributed to ESOP
    
    
    287,194
    
    
    
    245,811
    
    
    
    218,733Common stock (unissued) to Directors
Deferred Compensation Plan
    
    
    359,628
    
    
    
    256,688
    
    
    
    247,033Restricted stock awards
    
    
    12,028
    
    
    
    
    
    
    
    Bad debt expense (recovery)
    
    
    
    
    
    
    (185,272
    )
    
    
    591,258Cash provided (used) by changes in assets
and liabilities:Oil and natural gas sales receivables
    
    
    (1,315,445
    )
    
    
    9,620,843
    
    
    
    (9,671,136
    )Fair value of dervative contracts
    
    
    (4,133,761
    )
    
    
    3,159,628
    
    
    
    (539,277
    )Refundable income taxes
    
    
    
    
    
    
    2,162,305
    
    
    
    (2,162,305
    )Refundable production taxes
    
    
    (69,874
    )
    
    
    (921,769
    )
    
    
    (467,076
    )Other current assets
    
    
    (343,961
    )
    
    
    74,455
    
    
    
    (25,927
    )Accounts payable
    
    
    (24,896
    )
    
    
    287,883
    
    
    
    59,921Income taxes payable
    
    
    583,625
    
    
    
    338,511
    
    
    
    (211,155
    )Accrued liabilities
    
    
    225,723
    
    
    
    86,603
    
    
    
    471,569Total adjustments
    
    
    16,386,785
    
    
    
    40,115,627
    
    
    
    18,508,127Net cash provided by operating activities
    
    
    27,806,475
    
    
    
    37,710,606
    
    
    
    40,063,896Investing ActivitiesCapital expenditures, including dry hole costs
    
    
    (11,308,506
    )
    
    
    (39,915,051
    )
    
    
    (38,747,749
    )Proceeds from leasing of fee mineral acreage
    
    
    1,316,377
    
    
    
    209,930
    
    
    
    200,356Investments in partnerships
    
    
    (254,555
    )
    
    
    (59,742
    )
    
    
    (139,177
    )Proceeds from sales of assets
    
    
    401,168
    
    
    
    3,441,871
    
    
    
    840,398Net cash used in investing activities
    
    
    (9,845,516
    )
    
    
    (36,322,992
    )
    
    
    (37,846,172
    )
  (46)




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##### Table of Contents



Year ended September 30,2010
    
        2009
    
        2008Financing ActivitiesBorrowings under debt agreement
    
    $
    10,799,814
    
    
    $
    49,027,225
    
    
    $
    47,281,411Payments of loan principal
    
    
    (21,184,536
    )
    
    
    (48,346,603
    )
    
    
    (42,238,782
    )Purchases of treasury stock
    
    
    (291,383
    )
    
    
    
    
    
    
    (4,998,842
    )Payments of dividends
    
    
    (2,327,504
    )
    
    
    (2,324,036
    )
    
    
    (2,355,163
    )Net cash used in financing activities
    
    
    (13,003,609
    )
    
    
    (1,643,414
    )
    
    
    (2,311,376
    )Increase (decrease) in cash and cash equivalents
    
    
    4,957,350
    
    
    
    (255,800
    )
    
    
    (93,652
    )Cash and cash equivalents at beginning of year
    
    
    639,908
    
    
    
    895,708
    
    
    
    989,360Cash and cash equivalents at end of year
    
    $
    5,597,258
    
    
    $
    639,908
    
    
    $
    895,708Supplemental Disclosures of Cash Flow
InformationInterest paid (net of capitalized interest)
    
    $
    60,912
    
    
    $
    
    
    
    $
    23,212Income taxes paid, net of refunds received
    
    $
    3,530,718
    
    
    $
    (1,261,808
    )
    
    $
    4,145,122Supplemental schedule of noncash
investing and financing activities:Additions and revisions, net, to asset
retirement obligations
    
    $
    110,144
    
    
    $
    95,076
    
    
    $
    151,998Gross additions to properties and equipment
    
    $
    11,585,521
    
    
    $
    28,540,290
    
    
    $
    52,812,138Net (increase) decrease in accounts payable for
properties and equipment additions
    
    
    (277,015
    )
    
    
    11,374,761
    
    
    
    (14,064,389
    )Capital expenditures, including dry hole costs
    
    $
    11,308,506
    
    
    $
    39,915,051
    
    
    $
    38,747,749
 See accompanying notes.
 (47)




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##### Table of Contents



1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
 Nature of Business
  Principles of Consolidation and Basis of Presentation
   Use of Estimates
   (48)




---



##### Table of Contents



1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
   Cash and Cash Equivalents
  Oil and Natural Gas (and associated natural gas liquids) Sales and Natural Gas Imbalances
   Concentration of Credit Risk
   (49)




---



##### Table of Contents



1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
  Derivative contracts entered into by the Company are also unsecured.
 Oil and Natural Gas Producing Activities
    Derivatives
  (50)




---



##### Table of Contents



1.
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
  
 Production volume
    
    Indexed (1)Contract period
    
    covered per month
    
    Pipeline
    
    Fixed priceFixed price swapsMarch  December, 2009
    
    60,000 Mmbtu
    
    CEGT
    
    $
    4.010April  December, 2009
    
    100,000 Mmbtu
    
    CEGT
    
    $
    3.710May  December, 2009
    
    70,000 Mmbtu
    
    CEGT
    
    $
    3.615July  December, 2009
    
    70,000 Mmbtu
    
    PEPL
    
    $
    3.745January  December, 2010
    
    100,000 Mmbtu
    
    CEGT
    
    $
    5.015January  December, 2010
    
    50,000 Mmbtu
    
    CEGT
    
    $
    5.050January  December, 2010
    
    100,000 Mmbtu
    
    PEPL
    
    $
    5.570January  December, 2010
    
    50,000 Mmbtu
    
    PEPL
    
    $
    5.560
 
 (1)
    
    CEGT  Centerpoint Energy Gas Transmissions East pipeline in
OklahomaPEPL  Panhandle Eastern Pipeline Companys Texas/Oklahoma
mainline (51)




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##### Table of Contents



1.
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
 
 Production volume
    
    Indexed (1)Contract period
    
    covered per month
    
    Pipeline
    
    Fixed priceFixed price swapsJanuary  December, 2010
    
    100,000 Mmbtu
    
    CEGT
    
    $
    5.015January  December, 2010
    
    50,000 Mmbtu
    
    CEGT
    
    $
    5.050January  December, 2010
    
    100,000 Mmbtu
    
    PEPL
    
    $
    5.570January  December, 2010
    
    50,000 Mmbtu
    
    PEPL
    
    $
    5.560Basis protection swapsJanuary  December, 2011
    
    50,000 Mmbtu
    
    CEGT
    
    NYMEX -$.27January  December, 2011
    
    50,000 Mmbtu
    
    CEGT
    
    NYMEX -$.27January  December, 2011
    
    50,000 Mmbtu
    
    PEPL
    
    NYMEX -$.26January  December, 2011
    
    50,000 Mmbtu
    
    PEPL
    
    NYMEX -$.27January  December, 2012
    
    50,000 Mmbtu
    
    CEGT
    
    NYMEX -$.29January  December, 2012
    
    40,000 Mmbtu
    
    CEGT
    
    NYMEX -$.30January  December, 2012
    
    50,000 Mmbtu
    
    PEPL
    
    NYMEX -$.29January  December, 2012
    
    50,000 Mmbtu
    
    PEPL
    
    NYMEX -$.30
 
 (1)
    
    CEGT  Centerpoint Energy Gas Transmissions East pipeline in
Oklahoma 
PEPL  Panhandle Eastern Pipeline Companys Texas/Oklahoma
mainline  Gains (losses) on natural gas
    
    Fiscal year endedderivative contracts
    
    9/30/2010
    
    
    9/30/2009
    
    
    9/30/2008Realized
    
    $
    2,209,900
    
    
    $
    2,497,800
    
    
    $
    (1,480,100
    )Increase (decrease) in fair value
    
    
    4,133,761
    
    
    
    (3,159,628
    )
    
    
    539,277Total
    
    $
    6,343,661
    
    
    $
    (661,828
    )
    
    $
    (940,823
    )
  (52)




---



##### Table of Contents



1.
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
 Balance Sheet
    
    9/30/2010
    
    
    9/30/2009Location
    
    Fair Value
    
    
    Fair ValueAsset Derivatives:Derivatives not designated as Hedging Instruments:Commodity contracts
    
    Short-term derivative contracts
    
    $
    1,481,527
    
    
    $
    Commodity contracts
    
    Long-term derivative contracts
    
    
    138,799
    
    
    
    Total Asset Derivatives (a)
    
    
    
    $
    1,620,326
    
    
    $
    Liability Derivatives:Derivatives not designated as Hedging Instruments:Commodity contracts
    
    Short-term derivative contracts
    
    $
    
    
    
    $
    1,726,901Commodity contracts
    
    Long-term derivative contracts
    
    
    
    
    
    
    786,534Total Liability Derivatives (a)
    
    
    
    $
    
    
    
    $
    2,513,435
 
 (a)
    
    See Fair Value Measurements section for further disclosures regarding fair value of
financial instruments.  Fair Value Measurements
   (53)




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##### Table of Contents



1.
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
   Quoted
    
    SignificantPrices in
    
    Other
    
    SignificantActive
    
    Observable
    
    UnobservableMarkets
    
    Inputs
    
    Inputs
    
    Total Fair(Level 1)
    
    (Level 2)
    
    (Level 3)
    
    ValueFinancial Assets (Liabilities):Derivative Contracts  Swaps
    
    
    
    
    
    $
    1,620,326
    
    
    
    
    
    
    $
    1,620,326
   Total Losses for theYear EndedSeptember 30, 2010Impairments:Producing Properties
    
    $
    605,615
    (a)
 
 (a)
    
    At the end of each quarter, the Company assessed the carrying value of its
producing properties for impairment. This assessment utilized estimates of future cash
flows. Significant judgments and assumptions in these assessments include estimates of
future oil and natural gas prices using a forward NYMEX curve adjusted for locational
basis differentials, drilling plans, expected capital costs and an applicable discount
rate commensurate with risk of the underlying cash flow estimates. These assessments
identified certain properties with carrying value in excess of their calculated fair
values. As a result, the Company recorded $605,615 in impairment charges during 2010. Fair Values of Financial Instruments
  (54)




---



##### Table of Contents



1.
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
  Depreciation, Depletion, Amortization and Impairment
    Capitalized Interest
  (55)




---



##### Table of Contents



1.
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
  Investments
  Asset Retirement Obligations
   PluggingLiabilityPlugging Liability as of September 30, 2009
    
    $
    1,620,225Accretion of Discount
    
    
    106,093New Wells Placed on Production
    
    
    20,476Wells Sold or Plugged
    
    
    (16,425
    )Plugging Liability as of September 30, 2010
    
    $
    1,730,369Plugging Liability as of September 30, 2008
    
    $
    1,504,411Accretion of Discount
    
    
    104,991New Wells Placed on Production
    
    
    118,371Wells Sold or Plugged
    
    
    (107,548
    )Plugging Liability as of September 30, 2009
    
    $
    1,620,225
 Environmental Costs
  (56)




---



##### Table of Contents



1.
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
   Earnings (Loss) Per Share of Common Stock
   Share-based Compensation
    Income Taxes
  (57)




---



##### Table of Contents



1.
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
    New Accounting Standards
   (58)




---



##### Table of Contents



1.
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
   2. COMMITMENTS
  3. INCOME TAXES
 The Companys provision (benefit) for income taxes is detailed as follows:
 2010
    
    2009
    
    2008Current:Federal
    
    $
    3,950,000
    
    
    $
    1,246,000
    
    
    $
    1,728,000State
    
    
    174,000
    
    
    
    
    
    
    
    50,3024,124,000
    
    
    
    1,246,000
    
    
    
    1,778,302Deferred:Federal
    
    
    708,000
    
    
    
    (3,254,000
    )
    
    
    8,090,000State
    
    
    69,000
    
    
    
    (560,000
    )
    
    
    1,026,000777,000
    
    
    
    (3,814,000
    )
    
    
    9,116,000$
    4,901,000
    
    
    $
    (2,568,000
    )
    
    $
    10,894,302
 (59)




---



##### Table of Contents



2010
    
    2009
    
    2008Provision (benefit) for income taxes at statutory rate
    
    $
    5,712,242
    
    
    $
    (1,690,827
    )
    
    $
    11,336,596Percentage depletion
    
    
    (684,053
    )
    
    
    (469,962
    )
    
    
    (1,072,282
    )State income taxes, net of federal provision (benefit)
    
    
    325,000
    
    
    
    (451,440
    )
    
    
    797,550State net operating loss carryforward benefit
    
    
    
    
    
    
    (154,000
    )
    
    
    (143,000
    )State net operating loss valuation allowance (release)
    
    
    (278,000
    )
    
    
    278,000
    
    
    
    Other
    
    
    (174,189
    )
    
    
    (79,771
    )
    
    
    (24,562
    )$
    4,901,000
    
    
    $
    (2,568,000
    )
    
    $
    10,894,302
  2010
    
    2009Deferred tax liabilities:Financial basis in excess of tax basis, principally
intangible drilling costs capitalized for financial
purposes and expensed for tax purposes
    
    $
    24,141,021
    
    
    $
    27,139,652Derivative contracts
    
    
    630,307
    
    
    
    24,771,328
    
    
    
    27,139,652Deferred tax assets:Alternative minimum tax credit carryforwards
    
    
    
    
    
    
    2,207,810State net operating loss carry forwards, net of
valuation allowance of $278,000 in 2009
    
    
    825,048
    
    
    
    926,600Derivative contracts
    
    
    
    
    
    
    977,726Deferred directors compensation, allowance
for uncollectible accounts and other
    
    
    1,039,530
    
    
    
    897,7661,864,578
    
    
    
    5,009,902Net deferred tax liabilities
    
    $
    22,906,750
    
    
    $
    22,129,750
  (60)




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##### Table of Contents



4. LONG-TERM DEBT
   5. SHAREHOLDERS EQUITY
  (61)




---



##### Table of Contents



6. EARNINGS PER SHARE
  Year ended September 30,2010
    
    2009
    
    2008Numerator for basic and diluted earnings per share:Net income (loss)
    
    $
    11,419,690
    
    
    $
    (2,405,021
    )
    
    $
    21,555,769Denominator
for basic and diluted earnings per share 
weighted average shares (including for 2010, 2009
and 2008, unissued, vested directors shares
of 111,491, 97,177 and 85,504, respectively)
    
    
    8,422,387
    
    
    
    8,397,337
    
    
    
    8,492,378
 7. EMPLOYEE STOCK OWNERSHIP PLAN
  Year
    
    Shares
    
    Amount2010
    
    
    11,632
    
    
    $
    287,1942009
    
    
    11,508
    
    
    $
    245,8112008
    
    
    7,640
    
    
    $
    218,733
 8. DEFERRED COMPENSATION PLAN FOR DIRECTORS
  (62)




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##### Table of Contents



9. RESTRICTED STOCK PLAN
    WeightedUnvested
    
    AverageRestricted
    
    Grant-DateShares
    
    Fair ValueUnvested shares as of October 1, 2009
    
    
    
    
    
    $
    Granted
    
    
    8,500
    
    
    $
    28.30Vested
    
    
    
    
    
    $
    Forfeited
    
    
    
    
    
    $
    Unvested shares as of September 30, 2010
    
    
    8,500
    
    
    $
    28.30
  10. INFORMATION ON OIL AND NATURAL GAS PRODUCING ACTIVITIES
   (63)




---



##### Table of Contents



10. INFORMATION ON OIL AND NATURAL GAS PRODUCING ACTIVITIES (CONTINUED)
 Aggregate Capitalized Costs
  2010
    
    2009Producing properties
    
    $
    207,928,578
    
    
    $
    198,076,244Non-producing minerals
    
    
    7,744,767
    
    
    
    8,036,236Non-producing leasehold
    
    
    1,360,264
    
    
    
    2,241,232Exploratory wells in progress
    
    
    511,299
    
    
    
    55,069217,544,908
    
    
    
    208,408,781Accumulated depreciation, depletion and amortization
    
    
    (131,529,373
    )
    
    
    (112,505,428
    )Net capitalized costs
    
    $
    86,015,535
    
    
    $
    95,903,353
 Costs Incurred
  2010
    
    2009
    
    2008Property acquisition costs
    
    $
    742,005
    
    
    $
    382,239
    
    
    $
    2,359,988Exploration costs
    
    
    530,931
    
    
    
    1,647,456
    
    
    
    1,887,182Development costs
    
    
    10,685,088
    
    
    
    26,411,704
    
    
    
    48,503,130$
    11,958,024
    
    
    $
    28,441,399
    
    
    $
    52,750,300
 11. SUPPLEMENTARY INFORMATION ON OIL AND NATURAL GAS RESERVES (UNAUDITED)
 .
  (64)




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11. SUPPLEMENTARY INFORMATION ON OIL AND NATURAL GAS RESERVES (UNAUDITED)
(CONTINUED)
      (65)




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11. SUPPLEMENTARY INFORMATION ON OIL AND NATURAL GAS RESERVES (UNAUDITED)
(CONTINUED)
     Estimated Quantities of Proved Oil and Natural Gas Reserves
  (66)




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11. SUPPLEMENTARY INFORMATION ON OIL AND NATURAL GAS RESERVES (UNAUDITED)
(CONTINUED)
 Proved ReservesOil
    
    Natural Gas(Mbarrels)
    
    (MMcf)September 30, 2007
    
    
    823
    
    
    
    37,006Revisions of previous estimates
    
    
    136
    
    
    
    117Divestitures
    
    
    (1
    )
    
    
    (83
    )Extensions and discoveries
    
    
    164
    
    
    
    18,039Production
    
    
    (132
    )
    
    
    (6,928
    )September 30, 2008
    
    
    990
    
    
    
    48,151Revisions of previous estimates
    
    
    (30
    )
    
    
    589Divestitures
    
    
    (4
    )
    
    
    (317
    )Extensions and discoveries
    
    
    93
    
    
    
    14,715Production
    
    
    (128
    )
    
    
    (9,110
    )September 30, 2009
    
    
    921
    
    
    
    54,028Revisions of previous estimates
    
    
    48
    
    
    
    15,763Divestitures
    
    
    (1
    )
    
    
    (8
    )Extensions and discoveries
    
    
    59
    
    
    
    36,690Production
    
    
    (102
    )
    
    
    (8,303
    )September 30, 2010
    
    
    925
    
    
    
    98,170
    (67)




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11. SUPPLEMENTARY INFORMATION ON OIL AND NATURAL GAS RESERVES (UNAUDITED)
(CONTINUED)
  Proved Developed Reserves
    
    Proved Undeveloped ReservesOil
    
    Natural Gas
    
    Oil
    
    Natural Gas(Mbarrels)
    
    (Mmcf)
    
    (Mbarrels)
    
    (Mmcf)September 30, 2008
    
    
    895
    
    
    
    35,970
    
    
    
    95
    
    
    
    12,181September 30, 2009
    
    
    883
    
    
    
    45,036
    
    
    
    38
    
    
    
    8,991September 30, 2010
    
    
    861
    
    
    
    57,344
    
    
    
    64
    
    
    
    40,826
  The following details the changes in proved undeveloped reserves for 2010 (Mmcfe):
 Beginning proved undeveloped reserves
    
    
    9,219Proved undeveloped reserves transferred to proved developed
    
    
    (3,545
    )Revisions
    
    
    3,060Extensions and discoveries
    
    
    32,476Ending proved undeveloped reserves
    
    
    41,210
  Standardized Measure of Discounted Future Net Cash Flows
   (68)




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11. SUPPLEMENTARY INFORMATION ON OIL AND NATURAL GAS RESERVES (UNAUDITED)
(CONTINUED)
  2010
    
    2009
    
    2008Future cash inflows
    
    $
    489,691,155
    
    
    $
    216,181,210
    
    
    $
    318,004,410Future production costs
    
    
    148,727,914
    
    
    
    62,102,230
    
    
    
    79,668,500Future development costs
    
    
    52,975,820
    
    
    
    5,412,470
    
    
    
    19,364,580Asset retirement obligation
    
    
    1,730,369
    
    
    
    1,620,225
    
    
    
    1,504,411Future income tax expense
    
    
    99,118,090
    
    
    
    43,832,666
    
    
    
    68,086,237Future net cash flows
    
    
    187,138,962
    
    
    
    103,213,619
    
    
    
    149,380,68210% annual discount
    
    
    114,638,553
    
    
    
    49,467,111
    
    
    
    70,585,957Standardized measure of discounted
future net cash flows
    
    $
    72,500,409
    
    
    $
    53,746,508
    
    
    $
    78,794,725
  (69)




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11. SUPPLEMENTARY INFORMATION ON OIL AND NATURAL GAS RESERVES
(UNAUDITED) (CONTINUED)
 2010
    
    2009
    
    2008Beginning of year
    
    $
    53,746,508
    
    
    $
    78,794,725
    
    
    $
    77,029,122Changes resulting from:Sales of oil and natural gas, net of
production costs (1)
    
    
    (34,429,083
    )
    
    
    (28,524,453
    )
    
    
    (58,971,023
    )Net change in sales prices and production costs
    
    
    30,806,970
    
    
    
    (59,790,799
    )
    
    
    9,274,593Net change in future development costs
    
    
    (26,093,254
    )
    
    
    7,769,930
    
    
    
    (5,841,539
    )Net change in asset retirement obligation
    
    
    (48,185
    )
    
    
    (63,536
    )
    
    
    (142,847
    )Extensions and discoveries
    
    
    53,274,047
    
    
    
    21,677,448
    
    
    
    46,677,163Revisions of quantity estimates
    
    
    28,946,810
    
    
    
    587,215
    
    
    
    2,417,457Divestitures of reserves-in-place
    
    
    (15,706
    )
    
    
    (480,535
    )
    
    
    (208,419
    )Accretion of discount
    
    
    8,066,959
    
    
    
    12,110,733
    
    
    
    11,626,875Net change in income taxes
    
    
    (25,807,417
    )
    
    
    15,389,517
    
    
    
    (3,072,975
    )Change in timing and other, net
    
    
    (15,947,240
    )
    
    
    6,276,263
    
    
    
    6,318Net change
    
    
    18,753,901
    
    
    
    (25,048,217
    )
    
    
    1,765,603End of year
    
    $
    72,500,409
    
    
    $
    53,746,508
    
    
    $
    78,794,725
 
 (1)
    
    Sales of natural gas includes associated natural gas liquids 12. QUARTERLY RESULTS OF OPERATIONS (UNAUDITED)
 The following is a summary of the Companys unaudited quarterly results of operations.
 Fiscal 2010Quarter EndedDecember 31
    
    March 31
    
    June 30
    
    September 30Revenues
    
    $
    12,321,352
    
    
    $
    16,856,884
    
    
    $
    10,461,870
    
    
    $
    12,298,310Income before provision
for income taxes
    
    
    2,411,378
    
    
    
    6,964,566
    
    
    
    2,264,300
    
    
    
    4,680,446Net income
    
    
    1,708,378
    
    
    
    5,163,566
    
    
    
    1,511,300
    
    
    
    3,036,446Earnings per share
    
    $
    0.20
    
    
    $
    0.61
    
    
    $
    0.18
    
    
    $
    0.36Fiscal 2009Quarter EndedDecember 31
    
    March 31
    
    June 30
    
    September 30Revenues
    
    $
    11,261,642
    
    
    $
    8,835,617
    
    
    $
    8,665,216
    
    
    $
    8,510,139Income (loss) before provision
for income taxes
    
    
    (1,053,629
    )
    
    
    (1,971,256
    )
    
    
    (2,001,512
    )
    
    
    53,376Net income (loss)
    
    
    (874,629
    )
    
    
    (945,256
    )
    
    
    (928,512
    )
    
    
    343,376Earnings (loss) per share
    
    $
    (0.10
    )
    
    $
    (0.11
    )
    
    $
    (0.11
    )
    
    $
    0.04
 (70)




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13. SUBSEQUENT EVENTS
  (71)




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##### Table of Contents



ITEM 9
    
    CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE
  
 ITEM 9A
    
    CONTROLS AND PROCEDURES
 (a) EVALUATION OF DISCLOSURE CONTROLS AND PROCEDURES
  (b) MANAGEMENTS REPORT ON INTERNAL CONTROL OVER FINANCIAL REPORTING
 Internal Control
 Integrated Framework
 (c) CHANGES IN INTERNAL CONTROL OVER FINANCIAL REPORTING
  
 ITEM 9B
    
    OTHER INFORMATION
  (72)




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PART III
  
 PART IV
 
 ITEM 15
    
    EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND REPORTS ON FORM 8-K
 FINANCIAL STATEMENT SCHEDULES
  EXHIBITS
 (3)
    
    Amended Certificate of Incorporation (incorporated by reference to Exhibit
attached to Form 10 filed January 27, 1980, and to Forms 8-K dated June 1, 1982,
December 3,
1982, to Form 10-QSB dated March 31, 1999, and to
Form 10-Q dated March 31, 2007)
By-Laws as amended (incorporated by reference to Form 8-K dated
October 31, 1994)
By-Laws as amended (incorporated by reference to Form 8-K dated
February 24, 2006)
By-Laws as amended (incorporated by reference to Form 8-K dated October 29, 2008)(4)
    
    Instruments defining the rights of security holders (incorporated by reference
to Certificate of Incorporation and By-Laws listed above)*(10)
    
    Agreement indemnifying directors and officers (incorporated by
reference to Form 10-K dated September 30, 1989, and Form 8-K dated June
15, 2007)*(10)
    
    Agreements to provide certain severance payments and benefits to executive
officers should a Change-in-Control occur as defined by the agreements (incorporated by
reference to Form 8-K dated September 4, 2007)(21)
    
    Subsidiaries of the Registrant(23)
    
    Consent of DeGolyer and MacNaughton, Independent Petroleum Engineering Consultants(31.1)
    
    Certification of Chief Executive Officer(31.2)
    
    Certification of Chief Financial Officer(32.1)
    
    Certification of Chief Executive Officer(32.2)
    
    Certification of Chief Financial Officer(99)
    
    Report of DeGolyer and MacNaughton, Independent Petroleum Engineering Consultants*
    
    Indicates management contract or compensatory plan or arrangement
 REPORTS ON FORM 8-K
  (73)




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SIGNATURES
  PANHANDLE OIL AND GAS INC.By:
    
    /s/ Michael C. Coffman
    
    
    
    By:
    
    /s/ Lonnie J. LowryMichael C. Coffman
    
    
    
    
    
    Lonnie J. LowryPresident;
    
    
    
    
    
    Vice President;Chief Executive Officer
    
    
    
    
    
    Chief Financial OfficerDate: December 9, 2010
    
    
    
    Date: December 9, 2010By:
    
    /s/ Robb P. WinfieldRobb P. WinfieldController;Chief Accounting OfficerDate: December 9, 2010
  /s/ Bruce M. Bell
    
    /s/ E. Chris KauffmanBruce M. Bell, Director
    
    E. Chris Kauffman, DirectorDate December 9, 2010
    
    Date December 9, 2010/s/ Duke R. Ligon
    
    /s/ Robert O. LorenzDuke R. Ligon, Director
    
    Robert O. Lorenz, Lead Independent DirectorDate December 9, 2010
    
    Date December 9, 2010/s/ Robert A. Reece
    
    /s/ Robert E. RobottiRobert A. Reece, Director
    
    Robert E. Robotti, DirectorDate December 9, 2010
    
    Date December 9, 2010/s/ Darryl G. Smette
    
    /s/ H. Grant SwartzwelderDarryl G. Smette, Director
    
    H. Grant Swartzwelder, DirectorDate December 9, 2010
    
    Date December 9, 2010
 (74)