Evolution Petroleum Q4 2024 Earnings Call Transcript

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Provided by Quartr
September 11, 2024

Key Takeaways

  • Record liquids revenue driven by the SCOOPSTACK and Chaburu acquisitions added 6.6 million BOE of proved reserves, positioning Evolution for strong liquids production in FY 2025 and beyond.
  • Q4 production rose 11% year-over-year to 7,209 net BOE/day (oil +20%, gas +5%, NGLs +17%), outpacing forecasts despite historically low natural gas prices.
  • Fiscal Q4 revenue increased 17% year-over-year to $21.2 million, net income improved to $1.2 million, adjusted EBITDA grew 12% to $8 million, and cash from operations turned positive $8 million versus negative $0.4 million a year ago.
  • 44th consecutive quarterly dividend of $0.12 per share declared, reflecting Evolution’s commitment to returning capital to shareholders without diluting equity.
  • Delhi field certified as a carbon capture, utilization and storage site and gearing up to drill three initial Test Site 5 wells with ExxonMobil by year-end, with further development options under review.
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Earnings Conference Call
Evolution Petroleum Q4 2024
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Operator

Good morning, and welcome to the Evolution Petroleum Fourth Quarter and Fiscal Year 2024 Earnings Release Conference Call. All participants will be in listen-only mode. Should you need assistance, please signal a conference specialist by pressing the star key followed by zero. After today's presentation, there will be an opportunity to ask questions. To ask a question, you may press star then one on your telephone keypad. To withdraw your question, please press Star then two. Please note, today's event is being recorded. I would now like to turn the conference over to Brandi Hudson, Investor Relations Manager. Please go ahead.

Brandi Hudson
Brandi Hudson
Investor Relations Manager at Evolution Petroleum

Thank you. Welcome to Evolution Petroleum's Fiscal Q4 2024 Earnings Call. I'm joined by Kelly Loyd, President and Chief Executive Officer, Mark Bunch, Chief Operating Officer, and Ryan Stash, Senior Vice President and Chief Financial Officer and Treasurer. We released our fiscal fourth quarter and full-year 2024 financial results after the market closed yesterday. Please refer to our earnings press release for additional information containing these results. You can access our earnings release in the Investors section of our website. Please note that any statements and information provided in today's call speak only as of today's date, September 11th, 2024, and any time-sensitive information may not be accurate at a later date. Our discussion today will contain forward-looking statements of management's beliefs and assumptions based on currently available information. These forward-looking statements are subject to the risks, assumptions, and uncertainties as described in our SEC filings.

Brandi Hudson
Brandi Hudson
Investor Relations Manager at Evolution Petroleum

Actual results may differ materially from those expected. We undertake no obligation to update any forward-looking statement. During today's call, we may discuss certain non-GAAP financial measures, including adjusted EBITDA. Reconciliations of these measures to the closest comparable GAAP measures can be found in our earnings release. Kelly will begin today's call with opening comments, Mark will provide an update on our properties and plans as they relate to our ongoing strategy of maximizing shareholder returns, and Ryan will provide a brief overview of our fiscal quarter highlights. After our prepared remarks, the management team will be available to answer any questions. As a reminder, this conference call is being recorded. If you wish to listen to a webcast replay of today's call, it will be available on the Investors section of our website. With that, I will turn the call over to Kelly.

Kelly Loyd
Kelly Loyd
CEO at Evolution Petroleum

Thank you, Brandi, and good morning, everyone. Following our record year of natural gas production and revenue in fiscal 2023, this fiscal year has proven that adaptability is key. In the face of volatile natural gas prices this year, we understood the importance of balancing our portfolio while simultaneously positioning ourselves for future growth. As a result, we generated record liquids revenue and production for this fiscal year, in part driven by two transformative transactions with SCOOP/STACK and Chaveroo that added 6.6 million barrels of oil equivalent of proved reserves, with the majority of the locations yet to be booked. With these transactions, we expect fiscal year 2025 liquids production to be very strong and bolster our cash flow for years to come, building upon our multi-year track record of executing strategic investments for the benefits of our shareholders.

Kelly Loyd
Kelly Loyd
CEO at Evolution Petroleum

I'd like to start today's call by highlighting key operational achievements for fiscal 2024. This year, we significantly expanded our drilling inventory, adding over 300 locations in the SCOOP/STACK region, 80+ locations at Chaveroo, as well as three initial drilling sites within Test Site 5 at Delhi. Our efforts in the SCOOP/STACK and Chaveroo are especially noteworthy, as we believe both assets provide us with exposure to highly economic and durable locations. We participated in 22 wells at SCOOP/STACK, many of which are performing well above our initial expectations, generating both higher returns and stronger production than our original type curves predicted. Similarly, in Chaveroo, we drilled our first three horizontal San Andres wells, with early results exceeding our estimates. These wells are a testament to our strategic focus on efficient, high return growth opportunities.

Kelly Loyd
Kelly Loyd
CEO at Evolution Petroleum

At Delhi, we have initiated development of Test Site 5 in collaboration with ExxonMobil, aiming to drill the first of an initial three wells by calendar year-end. As we have stated throughout this fiscal year, following Exxon's acquisition of Denbury, we believe their priorities for the asset are well aligned with Evolution's, and this initial development further validates our expectations. I'm also pleased to announce that Delhi has been certified as a carbon capture, utilization, and storage site for enhanced oil recovery, which we believe will drive further benefits to Evolution. All said, in fiscal 2024, we generated $86 million of revenue, $4 million of net income, and $30 million of adjusted EBITDA. Meanwhile, our disciplined capital allocation approach has allowed us to remain within our targeted leverage ratios with no incremental dilution, despite executing key strategic investments during the year.

Kelly Loyd
Kelly Loyd
CEO at Evolution Petroleum

All of this was accomplished while facing the lowest natural gas price environment we've seen since the COVID-19 pandemic. Consistently generating cash flow remains a core tenet of our strategy as it supports Evolution's continued return of capital to shareholders via dividends. We are very proud to have consistently paid dividends for over a decade. In this quarter, I'm pleased to announce that we will pay another $0.12 dividend in September, marking our 44th consecutive quarterly dividend payment. As I have often stated, our dividend strategy is supported by our diverse, low-decline assets that require minimal CapEx. The diversification of our portfolio and low maintenance requirements of our assets provides us with the confidence in sustaining our dividend program for years to come, even in the face of fluctuating commodity prices.

Kelly Loyd
Kelly Loyd
CEO at Evolution Petroleum

With the recent additions of SCOOP/STACK and Chaveroo, we have further extended the runway for our dividend program. As we look to the future, our focus remains on creating long-term value for our shareholders. We are committed to maximizing total shareholder returns through efficient, diligent capital management and deployment. For our current asset base, our strategy is simple: continue expanding in high return regions, focus on disciplined cost management, and ensure that every decision we make supports our dividend program. We have built a strong portfolio of assets that balance oil and natural gas production, positioning us well for various market conditions. We will also continue to evaluate additional M&A opportunities, as well as investment within our current asset base to drive further organic growth. We've proven that we can execute on both fronts, and we will continue to pursue what is best for our shareholders.

Kelly Loyd
Kelly Loyd
CEO at Evolution Petroleum

I want to thank our team for their hard work and dedication, and of course, thank all of you, our shareholders, for your continued support. We are excited about the future of Evolution Petroleum, and believe we are well positioned to deliver sustainable growth and strong returns in the years to come. With that, I'll turn the call over to our COO, Mark Bunch, to review our operations in more detail. Mark?

Mark Bunch
Mark Bunch
COO at Evolution Petroleum

Thank you, Kelly, and good morning, everyone. I will focus my remarks on key operational highlights from the quarter, and encourage listeners to review our earnings, press release, and filings for additional details across our asset base. During the quarter, our operators turned in line three gross wells in SCOOP/STACK, with 10 additional gross wells currently in progress, and as of today, seven of these 10 wells are currently producing. Additionally, we have agreed to participate in three gross new horizontal wells across the acreage. From the effective date through June thirtieth, 22 gross wells were converted to proved developed producing. Overall, actual production has exceeded our original forecasted production at the time of acquisition by approximately 20%. In the Chaveroo Oil Field, we drilled and completed three wells that were turned in line on February 1st.

Mark Bunch
Mark Bunch
COO at Evolution Petroleum

While the wells cost more than expected to drill and complete due to unusually high fluid losses, we're quite happy with the results, as the EURs are approximately 20% higher than our original expectations. In fiscal 2025, we plan to participate for our full 50% working interest share in four horizontal well locations in drilling block 2. These operations are expected to begin in early fiscal Q2 2025. We have preliminarily agreed to six additional horizontal well locations in drilling block 3, that are estimated to begin in fiscal Q4 2025. We also purchased drilling blocks 4 and 5 in advance, bringing the total number of pad locations to 18 at Chaveroo. We expect to systematically participate in future development blocks. Future net acreage costs are fixed at $36,000 per additional horizontal well.

Mark Bunch
Mark Bunch
COO at Evolution Petroleum

Williston Basin production increased during the fiscal quarter due to a full quarter of natural gas and NGL sales from the ONEOK Grasslands system, which came back online during the prior quarter. At Delhi, production was affected during the quarter by field-wide power outages for seven days, combined with downtime from one of the CO2 recycle compressors in May, which reduced CO2 injection volumes for most of the quarter. The compressor was replaced and full CO2 recycling resumed in July. The CO2 purchase pipeline was taken offline for preventative maintenance at the end of February 2024 and remained down throughout this quarter. The operator anticipates resuming CO2 purchases in early second quarter of fiscal 2025.

Mark Bunch
Mark Bunch
COO at Evolution Petroleum

All said, our fiscal fourth quarter production was up 11% year over year to 7,209 net BOE per day, with oil increasing 20%, natural gas up 5%, and NGLs up 17% compared to a year ago quarter. Our strong drilling results and the contribution from acquisitions more than offset natural gas price declines and downtime related to maintenance. With that, I will turn the call over to our CFO, Ryan Stash, to review our financials in more detail. Ryan?

Ryan Stash
Ryan Stash
CFO at Evolution Petroleum

Thank you, Mark, and good morning, everyone. As Brandy mentioned earlier, we released our earnings yesterday, which contains more information on our results. My comments will focus mainly on the highlights of the fiscal fourth quarter. In fiscal Q4, we had total revenues of $21.2 million, up 17% year over year. The improvement was driven largely by an increase in oil and natural gas liquids revenue, partially offset by lower natural gas revenue, driven by historically low pricing. Net income for the fourth quarter increased to $1.2 million compared to the year ago quarter, and Adjusted EBITDA increased 12% to $8 million, primarily due to increased revenue and reduced operating costs. Cash flow from operations also increased materially to $8 million for the quarter, compared to cash used of $400,000 in the year-ago period.

Ryan Stash
Ryan Stash
CFO at Evolution Petroleum

Overall, our financial results demonstrated the resilience and diversification of our asset base. As Kelly mentioned earlier, this year, we faced the lowest natural gas pricing environment since the COVID-19 pandemic. However, we continued to generate another quarter and year of positive cash flow from operations while maintaining our multiyear quarterly dividend. On the development side, we spent $2.5 million in CapEx, primarily related to the development in the SCOOP/STACK and Chaveroo Fields. We ended the quarter with $6.4 million in cash on hand and borrowings of $39.5 million on our credit facility. During the quarter, we received cash payment totaling $5 million related to purchase price reductions from the SCOOP/STACK properties for net cash flows received during the period between the effective date of November first, 2023, and the closing date.

Ryan Stash
Ryan Stash
CFO at Evolution Petroleum

We continued to add hedges in order to comply with the terms of our credit facility. Our goal for our hedging program will continue to be to reduce downside commodity price risk while maintaining the maximum amount of upside available. As such, we will continue to monitor the market and may add additional opportunistic hedges. With respect to shareholder return, the board of directors declared a cash dividend of $0.12 per share of common stock on September ninth, 2024, which will be paid on September thirtieth, 2024. This will mark the forty-fourth consecutive quarterly cash dividend and the ninth consecutive dividend at the current price level. To date, Evolution has returned approximately $118.4 million, or $3.57 per share, back to shareholders in common stock dividends. I'll hand it back over to Kelly now for closing comments.

Kelly Loyd
Kelly Loyd
CEO at Evolution Petroleum

Thanks, Ryan. To sum it up, fiscal 2024 was a year of investment for Evolution. The reality is that we don't control cyclical commodity prices. We contended with a challenging macro environment for natural gas in 2024, and we responded to this by making key moves to diversify our portfolio and position ourselves to drive record levels of liquid revenue and production in fiscal 2024 and beyond. With that, I'll turn it over to the operator to begin the Q&A session. Thank you very much.

Operator

Thank you. We will now begin the question-and-answer session. To ask a question, you may press star then one on your telephone keypad. If you are using a speakerphone, we ask that you please pick up your handset before pressing the keys. If at any time your question has been addressed and you'd like to withdraw your question, please press star then two. Today's first question comes from Donovan Schafer with Northland Capital. Please go ahead.

Donovan Schafer
Donovan Schafer
Managing Director, Senior Analyst at Northland Capital Markets

Hey, guys. Thanks for taking the questions. First, I wanna ask about the Test Site 5 with ExxonMobil that you guys are starting. So can you just remind us, you know, where that is in the Delhi Field? You know, I think nomenclature is looking at different sources, sometimes it varies, and so, you know, with some SPE papers and things, it talks about, like, phases I, II, III, and IV and so forth, and, you know, here we're talking Test Site 5. Is this, you know, is this kind of down in the southwest dip, or is it up towards northeast, like, kinda on the other side of the town that's there? Or is this going back, you know, to recover the area that was isolated with the water curtain? Just helping me kind of place where this is.

Kelly Loyd
Kelly Loyd
CEO at Evolution Petroleum

Sure. Hey, Donovan, this is Kelly. I'm gonna let Mark get into more detail on that, but quickly, just a couple of things. I apologize for my voice. I've been a little bit under the weather here, so if I sound funny, that's why. And just second, real quickly, on this 9/11 anniversary, I just wanna acknowledge the actions of the brave men and women in those hours, months, years after that tragic event and how it makes us, you know, as Americans, all feel proud. So look, with that, Donovan, I'm gonna let Mark go ahead and answer this for you.

Mark Bunch
Mark Bunch
COO at Evolution Petroleum

Hey, Donovan, good to hear from you and good question. Probably does need to be updated for everybody. Okay, so Test Site 5 is on the eastern side of the current development, but it's actually really west of the city of Delhi, or the, excuse me, the town side of Delhi. And so it's just an extension off further towards Delhi, towards the town of Delhi.

Donovan Schafer
Donovan Schafer
Managing Director, Senior Analyst at Northland Capital Markets

Not so much as, like, a whole new phase, but more of an incremental broadening of kind of what existing phases have already been developed.

Mark Bunch
Mark Bunch
COO at Evolution Petroleum

That's correct.

Donovan Schafer
Donovan Schafer
Managing Director, Senior Analyst at Northland Capital Markets

Okay.

Mark Bunch
Mark Bunch
COO at Evolution Petroleum

It's just tacking on to the current development.

Donovan Schafer
Donovan Schafer
Managing Director, Senior Analyst at Northland Capital Markets

Got it. Okay, okay. And then are there any new developments on or conversations around expanding into more phases? Because I think, you know, those are the things that could be the real kind of big material changes, and with the CO2 certification. You know, getting certified for carbon capture and sequestration, are those kind of bigger, real needle mover potential things moving forward, or are they further down in the queue in terms of just even having conversations about them?

Mark Bunch
Mark Bunch
COO at Evolution Petroleum

They're the latter, further down in the queue, Donovan. Yeah, basically, there's still more running room, even potentially in the test, in the area that we're talking about, Test Site 5. I mean, so it's not like what we're talking about right now is the last thing it could be. I mean, a lot depends upon how the production works out for the wells that are planned to be drilled.

Kelly Loyd
Kelly Loyd
CEO at Evolution Petroleum

Yeah. Yeah, hey, Donovan, just a little more color. Previously, your Test Site 5 was a full CO2 flood project with a whole bunch of CapEx associated with it. What they've discovered and what they believe for now is that there has been CO2 that sort of migrated over there, and the most efficient, most cost-effective, highest return way to do it is to just go ahead and drill producers over there. So we're gonna start off with that, and then see how many more come from the results on that. High, high return stuff we're excited about, really.

Donovan Schafer
Donovan Schafer
Managing Director, Senior Analyst at Northland Capital Markets

That makes sense. Okay. So still focusing on Delhi Field, you know, production was down material amount in the quarter, you know, like 20%, quarter over quarter, and I understand, you know, that's because there were no CO2 injections. Recycling itself was scaled back quite a bit. So I guess just like at a basic level, just for orienting ourselves with everything, all the different moving pieces there at Delhi, yeah, would you expect that number to be up quarter over quarter in the next quarter, or will it stay down or, you know, or potentially even go lower?

Donovan Schafer
Donovan Schafer
Managing Director, Senior Analyst at Northland Capital Markets

And as a follow up, related to that, if you're not injecting CO2 volumes, and I know, you know, I think fiscal second quarter is when you said that operators said that would pick up again, and the recycling volumes are down. Does that mean you're, like, on a net basis, kind of actually taking CO2 out of the reservoir? And is that causing, you know, like, a material drop in reservoir pressure? Would that cause any issues in terms of, like, carbon capture sequestration stuff? I mean, can you get, like, a penalty or a fine or anything for that?

Mark Bunch
Mark Bunch
COO at Evolution Petroleum

Okay, so answer your question on a number of things. One, the recycling is all the way back up to full levels, and yes, it's still less than if we were normally buying CO2. So when we start to buy CO2, we'll get that back up. We do expect that you know, the production will be up going forward. We kinda look at it as like last quarter doesn't really fit the trend because we weren't injecting quite a bit of CO2 that we normally do. And the last time we saw CO2 outage was when we weren't buying purchased CO2. When we brought Delhi back on with CO2 purchases, it was actually a significant flattening of the decline.

Mark Bunch
Mark Bunch
COO at Evolution Petroleum

And so we feel like that, you know, you look back like the previous quarter and kind of work your way from there would be more realistic. As far as, like, what actually happened reservoir-wise, you know, we, you know, I don't know that they have any particular hard data, but I suspect that we did have, we were creating some voidage in the reservoir. I don't believe that meant that we were, you know, producing extra CO2, because one of the things that, the operator did was to selectively shut down wells that were high CO2 users, and therefore, that, that way, it would kind of minimize the effect of, of, reducing injections.

Mark Bunch
Mark Bunch
COO at Evolution Petroleum

That might be kind of a long way to answer your question, but I think you should probably look back to the quarter before last to get an idea of where to start once the CO2 injections are fully back up.

Kelly Loyd
Kelly Loyd
CEO at Evolution Petroleum

Yeah, and just to further that, Donovan, so Mark, correct me if I'm wrong, I think there were three compressors in the recycle plant, and one of them was down?

Mark Bunch
Mark Bunch
COO at Evolution Petroleum

There's four. There was four. There's actually four. One of them was down.

Kelly Loyd
Kelly Loyd
CEO at Evolution Petroleum

Okay. We're still injecting recycled CO2, just not at the rates that we, you know, we want to. And as you said, the purchase line was down, still is. We expect that early Q2.

Donovan Schafer
Donovan Schafer
Managing Director, Senior Analyst at Northland Capital Markets

Okay. And then, as just my last question, is there any more clarity or clarification on how the credits from, you know, capture sequestration, certification, you know, how that would be monetized, you know, in what way for you guys and the timeline on that?

Mark Bunch
Mark Bunch
COO at Evolution Petroleum

Go ahead, Kelly.

Kelly Loyd
Kelly Loyd
CEO at Evolution Petroleum

Go ahead. Okay. We're still talking about it, still working on it. We don't have an exact timeline for when anthropogenic CO2 will begin to be injected, so we still have some time there, but that's still something we're working on, Donovan.

Donovan Schafer
Donovan Schafer
Managing Director, Senior Analyst at Northland Capital Markets

Okay. Thanks, guys. I'll take the rest of my questions offline.

Operator

Thank you. And our next question today comes from John White at Roth Capital. Please go ahead.

John White
John White
Senior Research Analyst at Roth Capital

Good morning, everybody, and congratulations on a nice quarter.

Kelly Loyd
Kelly Loyd
CEO at Evolution Petroleum

Thanks, John.

Mark Bunch
Mark Bunch
COO at Evolution Petroleum

Thanks, John.

John White
John White
Senior Research Analyst at Roth Capital

Really like seeing all the drilling activity during fiscal fourth quarter and planned activity going forward. Wanna get some more details on the SCOOP/STACK of the 10 recent wells. Are there one or two operators that are dominating that activity, and or is it a more diversified list of operators?

Mark Bunch
Mark Bunch
COO at Evolution Petroleum

Yeah, yeah, we have really one operator that's really the maybe two that are kinda dominating it, but not, you know, after that, they're probably, I think, doing about half the wells.

John White
John White
Senior Research Analyst at Roth Capital

Who is that?

Mark Bunch
Mark Bunch
COO at Evolution Petroleum

Canvas and Camino.

Mark Bunch
Mark Bunch
COO at Evolution Petroleum

Okay. Yeah, you've mentioned that before.

Mark Bunch
Mark Bunch
COO at Evolution Petroleum

I'm sorry, I'm sorry, I misspoke. The last one was Continental. Canvas and Continental.

John White
John White
Senior Research Analyst at Roth Capital

Yeah. Yeah, Continental. Generally, what formations are being completed?

Mark Bunch
Mark Bunch
COO at Evolution Petroleum

Woodford and Miss.

John White
John White
Senior Research Analyst at Roth Capital

The usual suspects?

Mark Bunch
Mark Bunch
COO at Evolution Petroleum

Correct.

John White
John White
Senior Research Analyst at Roth Capital

They're all horizontal wells?

Mark Bunch
Mark Bunch
COO at Evolution Petroleum

Yes, you know, and we have a couple of Springer wells, too.

John White
John White
Senior Research Analyst at Roth Capital

Thanks for the detail. And then you're gonna get four horizontal wells going. They're gonna start in fiscal 2Q 2025, and that is the same as calendar 4Q 2024, correct?

Mark Bunch
Mark Bunch
COO at Evolution Petroleum

That's correct.

John White
John White
Senior Research Analyst at Roth Capital

Okay. And then looks like a lot of things at Delhi have gotten cleaned up. So, congratulations on that.

Mark Bunch
Mark Bunch
COO at Evolution Petroleum

Yeah, thank you.

John White
John White
Senior Research Analyst at Roth Capital

All right, thanks for taking my questions, and I'll pass the call back.

Mark Bunch
Mark Bunch
COO at Evolution Petroleum

Perfect. Thank you, Joe.

Operator

Thank you. And as a reminder, please, please press star and one to ask a question. Our next question today comes from Jeff Robertson with Water Tower Research. Please go ahead.

Jeff Robertson
Managing Director - Natural Resources at Water Tower Research

Thank you. Good morning. Mark, you all had, overall, LOE was down about 10% in your fourth quarter from your third. There were some pretty big quarter-to-quarter fluctuations. Can you talk about LOE in Chaveroo, which was up quite a bit from the fourth quarter, and also LOE in the Williston Basin, which was down quite a bit? I'm wondering whether or not the change in Delhi just reflects the lack of purchase of CO2 and whether or not that will, at least for that field, that will return to a more normal level, beginning in second quarter or your second fiscal quarter. I'm just trying to think about how your LOE should look for the year compared to what you were doing a year ago.

Mark Bunch
Mark Bunch
COO at Evolution Petroleum

Okay. Yeah, I can answer that, so let's answer Delhi question first. You're actually correct. The main change in OpEx there was the fact we weren't buying CO2 because the purchase line was down. At Chaveroo, what looked like an issue on that is really more of just getting things lined, getting things initially lined out for production. You know how it is when you first bring on a bunch of wells like that, like we did. There's costs kind of bounce around a lot. We also, early on, had an issue where we had to shut. We lost some production for about three or four weeks, and then we got it back on, and so we have lower production, making the dollars per BOE probably look a little bit high.

Mark Bunch
Mark Bunch
COO at Evolution Petroleum

And then at Williston, the workover rates are dramatically down, and I'd like to credit the operator on that because they've done a really good job of picking up from whom we bought it. There's a lot of things that needed to be done to be fixed, and I think now, going forward, we're gonna see typically, on average, a lot less well work needed to be done. And they also, we expect with the electrification projects that they're doing in the Williston, we expect that to be a reduction in LOE as well.

Jeff Robertson
Managing Director - Natural Resources at Water Tower Research

Thank you. Mark or Ryan, can you talk about where you think LOE will average in fiscal 2025?

Mark Bunch
Mark Bunch
COO at Evolution Petroleum

Yeah, so, I think, to your point, I think we're gonna see Delhi kinda return, you know, to, to more historical levels, and so, you know, just kinda looking at, you know, our last, kinda our last quarter, we averaged around $20 per barrel. Same thing with the year ago period. So I would assume something that would probably be more in that, more in that area of $20 a barrel ±, going forward, would be kind of a, I would think, steady state.

Jeff Robertson
Managing Director - Natural Resources at Water Tower Research

And then on capital, Ryan, with the well, with drilling activity set to resume in second fiscal quarter of 2025, and then again in the fourth fiscal quarter of 2025, I assume that will cause just some, a little bit of lumpiness in capital spending, but can you share an estimate of where you think spending for the full fiscal year will line out?

Ryan Stash
Ryan Stash
CFO at Evolution Petroleum

Sure. So right now we have kind of a range of $12.5 million-$14.5 million for fiscal year 2025. And that does include. You know, obviously, the Chaveroo drilling is something that we have more control over, right? So that includes kind of the four wells we've talked about, you know, drilling, completing, and starting really the next development block. Now that, you know, depending on timing, that could slip into the following fiscal year. The other big piece of that, obviously, is SCOOP/STACK. You know, we've had conversations with the operators, and, you know, a lot of them have been fairly forthcoming with their drilling plans, so we are basing kind of our budget based on what they've told us.

Ryan Stash
Ryan Stash
CFO at Evolution Petroleum

But, you know, as you know, that's dynamic, and if pricing continues to be soft, I might expect that to trend towards the lower end, right? You just don't have as much visibility on the SCOOP/STACK.

Jeff Robertson
Managing Director - Natural Resources at Water Tower Research

If I can slip one more in, with respect to acquisitions and where the balance sheet is today, can you talk about how you think about funding, an acquisition?

Mark Bunch
Mark Bunch
COO at Evolution Petroleum

Yeah. So, you know, right now, from a debt perspective, you know, we've, you know, we're around, you know, on a pro forma basis, kind of around a turn of leverage, right? Which is sort of what we've tried to manage the business to, and that hasn't changed. You know, our total borrowing base is, you know, $50 million, and it's really more self-selected, right? It's sort of based on, you know, kind of MidFirst and how much they've been willing to sort of how much they can give to any single company, right? But we have had conversations with them and, you know, have thought about and are looking into potentially expanding that credit facility, you know, which will give us additional liquidity, right?

Mark Bunch
Mark Bunch
COO at Evolution Petroleum

So I think we could certainly go up on a debt basis to expand sort of the credit facility there. And then really, the other option, obviously, would be, you know, equity in the marketplace, and we would look to do that if we were to find a deal that was, you know, really accretive, right? If we have a deal that makes sense for the shareholders and we feel is very accretive, that's always, you know, something that we could look to do as well. So I think it'd probably be a combination, depending on the size of the deal, of an expansion of the borrowing base and potentially looking to raise equity, you know, if it really looks accretive.

Jeff Robertson
Managing Director - Natural Resources at Water Tower Research

Thank you. I'll get back in the queue.

Operator

Thank you. And our next question today comes from Bruce Brown at Brown Capital. Please go ahead.

Bruce Brown
President at Brown Capital

Thank you. Fellas, just wanted to check in with you on, since we're almost all the way through the first fiscal quarter, is the ABL, has it been reduced from what it was at the end of June?

Mark Bunch
Mark Bunch
COO at Evolution Petroleum

No. So like I said, so the way our borrowing base works is, you know, it's $50 million, which is a borrowing base, which we haven't done our fall redetermination yet, but we have no reason to believe that it would be any different. The other number that's in there is what, you know, we call sort of margin collateral value, and what that is really determines how much we have to hedge. And that's been around. The last redetermination was right around $100 million, just a little under. And we'll look at that number, obviously, coming up here in October. But again, that doesn't affect our liquidity. That's just more along the lines of sort of hedging covenants going forward.

Bruce Brown
President at Brown Capital

I was curious as to to what extent has your ABL been reduced since your June thirty number?

Mark Bunch
Mark Bunch
COO at Evolution Petroleum

It hasn't, as of this point, at all.

Bruce Brown
President at Brown Capital

Okay, fine.

Mark Bunch
Mark Bunch
COO at Evolution Petroleum

We don't, again, expect the borrowing base to go down below 50.

Bruce Brown
President at Brown Capital

Right. But the outstanding part has not been reduced is what you're saying?

Mark Bunch
Mark Bunch
COO at Evolution Petroleum

Sorry, I was misunderstanding. We'll file our 10-K here, you know, this week here. And, and you can see in our press release we put out, we did pay down $3 million. So we went from $42.5 million to $39.5 million at the end of the year, at the end of our fiscal year.

Bruce Brown
President at Brown Capital

Right. I was asking, what is it currently?

Mark Bunch
Mark Bunch
COO at Evolution Petroleum

It's currently still the same.

Bruce Brown
President at Brown Capital

Oh, it's still the same. Okay, fine. Got it. Thanks. Appreciate it.

Mark Bunch
Mark Bunch
COO at Evolution Petroleum

Sure.

Operator

Thank you. And our next question is a follow-up from John White at Roth Capital. Please go ahead.

John White
John White
Senior Research Analyst at Roth Capital

I don't have a question, but Kelly, I just wanted to say I appreciated your comment on the anniversary of the 9/11 terrorist attack. That was well done.

Kelly Loyd
Kelly Loyd
CEO at Evolution Petroleum

Oh, thanks, John. It's like I said, the heroism of the responders, the men and women, it's moving to me, and I felt it was important to say something.

John White
John White
Senior Research Analyst at Roth Capital

It was well done. Thank you.

Kelly Loyd
Kelly Loyd
CEO at Evolution Petroleum

Thank you, John.

Operator

Thank you. And this concludes our question and answer session. I'd like to turn the conference back over to the management team for any closing remarks.

Kelly Loyd
Kelly Loyd
CEO at Evolution Petroleum

We just want to thank you all for taking your time and being with us on the call, and as always, we appreciate you. If you have any more questions, don't hesitate to contact us. Thank you.

Operator

Thank you. This concludes today's conference call. We thank you all for attending today's presentation. You may now disconnect your lines, and have a wonderful day.

Executives
    • Ryan Stash
      Ryan Stash
      CFO
    • Kelly Loyd
      Kelly Loyd
      CEO
    • Mark Bunch
      Mark Bunch
      COO
    • Brandi Hudson
      Brandi Hudson
      Investor Relations Manager
Analysts
    • Donovan Schafer
      Managing Director, Senior Analyst at Northland Capital Markets
    • Bruce Brown
      President at Brown Capital
    • John White
      Senior Research Analyst at Roth Capital
    • Jeff Robertson
      Managing Director - Natural Resources at Water Tower Research
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