SPINDLETOP OIL & GAS CO (SPND) stock intrinsic value fair value estimate & owner earnings analysis

Spindletop Oil & Gas is a small Dallas company. It operates and owns interests in oil and gas wells in Texas, Oklahoma, New Mexico, Louisiana and Alabama, runs some small gas-gathering lines, and owns its Dallas office building, part of which it leases out. Chris and Michelle Mazzini control 89% of the shares through Giant Energy Corp., so outside shareholders cannot force any decision. The company has no debt. Most of its value sits in its treasury: at the end of 2025 it held $3.6 million in cash plus $17.8 million in Treasury bonds, CDs and mutual funds. The central fact about the business is that the oil and gas operations, taken alone, have not covered their own overhead across a full price cycle. We measure cash to owners as operating cash flow, with working-capital swings removed, minus the capital spending needed to hold production. Two adjustments: we exclude the interest earned on the treasury, because we count the treasury itself at face value, and we treat the $500,000 deferred-compensation award expensed in 2025 as a real cost. On that basis the operations produced roughly +$0.6 million in 2017, +$0.4 million in 2018, +$1.1 million in 2021 and +$1.5 million in 2022. They lost about $1.0 million in 2016, $0.7 million in 2019, $1.2 million in 2020, $0.9 million in 2023, $1.8 million in 2024 and $2.3 million in 2025. The ten-year median is a loss of about $0.79 million a year. Those ten years include both oil-price collapses (2015-16 and 2020) and the 2022 peak, so they cover a full cycle, which is why we use all ten. The main drag is general and administrative cost of about $2.9-3.5 million a year. That compares with oil and gas revenue of $3.7-4.5 million in recent years, before field operating costs and production taxes. One accounting choice matters a lot. In 2025 the company raised its estimate of the cost of plugging and abandoning its wells. The liability rose from $4.3 million to $5.9 million, and the income statement shows a $1.54 million charge. Management cites sharply higher plugging costs and regulators pushing operators to plug faster. That charge is non-cash this year, so it is excluded from the yearly cash figures above. Instead we treat the obligation itself as a debt-like claim that will one day have to be paid out of the treasury. Proved reserves were revised up 29% to 524,000 barrels of oil equivalent. At the SEC's prescribed prices their discounted value is about $4.3 million, before overhead and plugging costs. At 2025 production rates that is only about four years of output, so the business must keep spending to replace what it produces. Shareholders' assets: the cash and investments, less $4.6 million of payables net of receivables (most of it production proceeds owed to royalty and working-interest owners, plus drilling advances), less the $0.5 million deferred-compensation liability and a small operating cash cushion. That leaves about $16.2 million of surplus funds, roughly $2.45 a share on 6.6 million shares. Each case starts from that figure, subtracts the plugging obligation, and then adds or subtracts the present value of ten more years of operations. The company has no borrowings, so no case depends on refinancing. Base case: operations keep losing about $0.79 million a year, the ten-year median, for the next decade. The plugging obligation is about $6.5 million (book value adjusted to our discount rate). The business is worth about -$5.8 million of operating value against $16.2 million of surplus funds and $6.5 million of plugging liabilities, leaving about $3.9 million, or $0.59 a share. We credit no growth. The reserve additions in 2025 and the new Oklahoma horizontal well replace production; they do not demonstrably grow it. Bear case: the 2023-2025 average operating loss of about $1.65 million a year continues. On top of it comes one oil-price collapse like 2015-16 or 2020, which cuts the roughly $1.9 million of oil revenue by about 40% for two years. Plugging costs keep rising at the pace management has just described, to about $7.5 million. Ten years of losses then use up most of the treasury: surplus funds of $16.2 million against a plugging obligation of $7.5 million and operating losses worth about $13.5 million today. The result is about -$4.8 million, or -$0.73 a share. In this case the company would owe more in plugging costs and operating losses than it holds. Because there is no debt, shareholders could not lose more than they paid. But nothing would be left for them. Bull case: operations average about +$0.5 million a year. That is the level of the good years (2017-18 and 2021-22), helped by better gas prices, the 2025 reserve additions, and stronger first-half 2026 results: revenue of $3.3 million and net income of $1.0 million. The plugging obligation stays at its $5.9 million book value. Value is about $14 million, or $2.10 a share. Even this case does not reach the cash per share, because the plugging obligation is a real claim on that cash. A note on 2026: first-half net income of $1.0 million looks like a turnaround. On a cash basis it was about breakeven once roughly $1.2 million of drilling spending is counted, and interest income made up about a third of profit. First-half 2025 also looked fine before the fourth-quarter plugging charge. We are not changing the earnings level on two quarters. How sure are we? Fairly sure of the balance sheet, which is mostly government bonds and CDs. Less sure of the plugging obligation, which has just jumped 36% and which the company itself expects may keep rising. Least sure of how long the controlling family will keep running a business that loses money before interest income. The worst plausible outcome no case models: the treasury slowly drains into overhead and wells while the stock trades on the lowest OTC tier, which now carries a warning label, with no dividend and no way for minority holders to force a sale or liquidation. The structure gives outside holders no lever: 89% control, no dividend, and only small buybacks ($351,000 in 2025). The three things we are most likely to be wrong about are the operating loss, the final plugging bill, and whether the family ever returns the cash. If we are wrong on the first two in the bad direction, the shares are worth nothing. If we are wrong on the third in the good direction, through a buyout or liquidation at close to net cash less plugging costs, they could be worth roughly $1.50-2.00. The business pays nothing while waiting, and the treasury shrinks a little every year it does not earn its keep. The margin-of-safety price is $0.20 a share, a market value of about $1.3 million, against roughly $16 million of surplus funds and a $6-7.5 million plugging bill. At that price the base case is covered without needing the controlling owner to act. Even a partial return of cash, or a take-private by the majority holder at any reasonable fraction of net assets, implies the required return. Above that price, too much depends on a decision only the Mazzinis can make. We previously valued the shares on a different basis, so those earlier figures are not comparable to these.