{"url_path":"/sec/mxc/10-k/2026/item-7a","section_key":"item-7a","section_title":"Item 7A ****QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK**","topic":"sec","document":{"doc_type":"10-K","doc_date":"2026-06-29","source_url":"https://www.sec.gov/Archives/edgar/data/66418/0001493152-26-030386-index.html","accession_number":"0001493152-26-030386","cik":"0000066418","ticker":"MXC","issuer_name":"MEXCO ENERGY CORP","edgar_url":"https://www.sec.gov/Archives/edgar/data/66418/0001493152-26-030386-index.html","primary_entity_key":"0000066418","primary_entity_name":"MEXCO ENERGY CORP"},"word_count":682,"has_tables":true,"body_markdown":"**ITEM 7A.****QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK**\n\n** **\n\nThe\nprimary source of market risk for us includes fluctuations in commodity prices and interest rates. All of our financial instruments are\nfor purposes other than trading.\n\n \n\n**Credit\nRisk.** Credit risk is the risk of loss as a result of nonperformance by other parties of their contractual obligations. Our primary\ncredit risk is related to oil and gas production sold to various purchasers and the receivables are generally not collateralized. At\nMarch 31, 2026, our largest credit risk associated with any single purchaser was $474,335 or 37% of our total oil and gas receivables.\nWe have not experienced any significant credit losses.\n\n \n\n**Energy\nPrice Risk**. Our most significant market risk is the pricing applicable to our crude oil and natural gas production. Our financial\ncondition, results of operations, and capital resources are highly dependent on the prevailing market prices of, and demand for, oil\nand natural gas. Prices for oil and natural gas production have been volatile and unpredictable for several years, and we expect this\nvolatility to continue in the future.\n\n \n\nFactors\nthat can cause price fluctuations include the level of global demand for petroleum products, foreign and domestic supply of oil and gas,\nthe establishment of and compliance with production quotas by oil-exporting countries, weather conditions, the price and availability\nof alternative fuels, and overall political and economic conditions in oil producing and consuming countries.\n\n \n\nFor\nexample, in the last twelve months, the NYMEX West Texas Intermediate (“WTI”) posted price for crude oil has ranged from\na low of $51.25 per bbl in December 2025 to a high of $98.86 per bbl in March 2026. The Henry Hub Spot Market Price (“Henry\nHub”) for natural gas has ranged from a low of $2.65 per MMBtu in June and October 2025 to a high of $30.72 per MMBtu in\nJanuary 2026, reflecting a temporary price spike during a period of severe weather and significant market volatility.\n\n \n\nOn\nMarch 31, 2026, the WTI posted price for crude oil was $97.36 per bbl, and the Henry Hub spot price for natural gas was $2.88 per MMBtu.\nSee Results of Operations above for realized prices. Pipeline capacity constraints and maintenance in the Permian Basin area have contributed\nto a wider difference between the Waha Hub and the Henry Hub, and at times realized prices were negative. Subsequently, on June 15, 2026,\nthe WTI posted price for crude oil was $76.73, and the Henry Hub posted price for natural gas was $3.06.\n\n \n\n29\n\n \n\n \n\nDeclines\nin oil and natural gas prices will materially adversely affect our financial condition, liquidity, ability to obtain financing, and operating\nresults. Changes in oil and gas prices affect both estimated future net revenues and the estimated quantity of proved reserves. Any reduction\nin reserves, including reductions due to price fluctuations, can reduce the borrowing base under our credit facility and adversely affect\nthe amount of cash flow available for capital expenditures and our ability to obtain additional capital for our acquisition, exploration,\nand development activities. In addition, a noncash write-down of our oil and gas properties could be required under full cost accounting\nrules if prices declined significantly, even if only for a short period of time. See Critical Accounting Policies and Estimates —\nCeiling Test under Item 7 of this report on Form 10-K. Lower prices may also reduce the amount of crude oil and natural gas that can\nbe produced economically. Thus, we may experience material increases or decreases in reserve quantities solely as a result of price changes,\nnot drilling or well performance.\n\n \n\nSimilarly,\nany improvements in oil and gas prices can have a favorable impact on our financial condition, results of operations, and capital resources.\nOil and natural gas prices do not necessarily fluctuate in direct relationship to each other. If the average oil price had increased\nor decreased by ten dollars per barrel for fiscal 2026, our pretax income would have changed by $821,133. If the average gas price had\nincreased or decreased by one dollar per mcf for fiscal 2026, pretax income would have changed by $681,794."}