Evolution Petroleum Q1 2027 Earnings Results & Report

Evolution Petroleum EPS Results

• Actual EPS: -$0.01
• Consensus EPS: $0.0067
• Beat/Miss: Missed by -$0.0167
• One Year Ago EPS: N/A
• EPS Beat Rate: 2 of last 8 quarters

Evolution Petroleum Revenue Results

• Actual Revenue: $22.57 million
• Expected Revenue: $22.57 million
• Beat/Miss: Beat by +$2.00 thousand
• YoY Revenue Growth: N/A

Evolution Petroleum (NYSEAMERICAN:EPM) Corporation is an independent oil and natural gas company focused on acquiring, developing and optimizing mature, long-lived producing properties in the United States. The company emphasizes assets that can generate production and cash flow through enhanced oil recovery, operational improvements and reservoir management.

Evolution Petroleum’s portfolio has historically included the Delhi Field in northeastern Louisiana, where carbon dioxide injection is used for tertiary oil recovery. The company has also held interests in producing properties in Wyoming, including the Jonah Field and other conventional oil and natural gas assets. Its operations are concentrated in U.S. onshore basins.

Founded in 2003 and headquartered in Houston, Texas, Evolution Petroleum is led by President and Chief Executive Officer Jason E. Brown. The company trades on the NYSE American under the symbol EPM.

Evolution Petroleum Q1 2027 Earnings Call Transcript

Key Takeaways

• Positive Sentiment: Royalty growth is emerging ahead of expectations: Permian production averaged about 218 BOE per day after closing, above the company’s 200–210 BOE-per-day forecast, while Haynesville/Bossier royalty production rose approximately 92% sequentially. These interests require no drilling capital or lifting expenses from Evolution, and a fuller contribution is expected in the second quarter.
• Positive Sentiment: Farm-outs could generate cash while preserving production and future upside: After quarter-end, Evolution received about $2.5 million for a Williston acreage farm-out while retaining an overriding royalty interest; it is pursuing additional deals and expects to use proceeds primarily to reduce revolver borrowings.
• Neutral Sentiment: The board declared a quarterly dividend of $0.12 per share, the company’s 53rd consecutive quarterly payment. Management said it remains focused on sustaining the dividend while prioritizing liquidity and debt reduction.
• Negative Sentiment: Quarterly results reflected weaker year-over-year production and hedge losses: Production fell 5% year over year, adjusted EBITDA declined to $6.8 million from $7.3 million, and the company reported a $3 million net loss, including a $4.1 million unrealized derivative loss. The adjusted net loss was narrower, at $0.3 million.
• Negative Sentiment: Leverage and operating disruptions remain concerns: Revolver borrowings rose to $60 million following the Permian acquisition, with total liquidity of about $15.3 million at quarter-end. Delhi compressor downtime continued to constrain oil production, and management said the timing of a repair remains uncertain.

Presentation

[Operator]

Good day, and welcome to the Evolution Petroleum fiscal first quarter 2027 earnings release conference call. All participants will be in a 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 a touchtone phone. To withdraw your question, please press star then two. Please note, this event is being recorded. I would now like to turn the conference over to Brandi Hudson, Director of Investor Relations. Please go ahead.

[Brandi Hudson, Director of Investor Relations at Evolution Petroleum]

Thank you. Welcome to Evolution Petroleum fiscal first quarter 2027 earnings call. I am joined today by Kelly Loyd, President and Chief Executive Officer, Mark Bunch, Chief Operating Officer, and Ryan Stash, Senior Vice President, Chief Financial Officer, and Treasurer. We released our fiscal first quarter 2027 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 Investor section of our website. Please note that any statements and information provided in today's call speak only as of today's date, November 11, 2026, 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 described in our SEC filings.

[Brandi Hudson, Director of Investor Relations at Evolution Petroleum]

Actual results may differ materially from those expected. We undertake no obligation to update any forward-looking statements. During today's call, we may discuss certain non-GAAP financial measures, including Adjusted EBITDA and adjusted net income. Reconciliations to the most directly comparable GAAP measures are included in our earnings release. Kelly will begin with an overview of the quarter and our strategic priorities, Mark will follow with an operational update, and Ryan will review our financial results and liquidity. Kelly will then provide closing comments, and the management team will take your questions. As a reminder, this conference call is being recorded. A webcast replay will be available in the Investor section of our website. With that, I will turn the call over to Kelly.

[Kelly Loyd, President and CEO at Evolution Petroleum]

Thank you, Brandi, and good morning, everyone. There is a lot to talk about this morning, and I am pleased to say most of it reflects real progress on our strategy. During the quarter, we closed on a $16 million Permian Minerals acquisition, expanded our Haynesville and Bossier Shale royalty position in Louisiana, and after quarter end, we continued our strategy of turning undeveloped acreage into cash. Revenue from the quarter was up 6% from a year ago. Production was slightly up from the fourth quarter, Adjusted EBITDA increased from last quarter, and while net income came in at a loss for the quarter, it was due in large part to hedging losses, most of which were non-cash. Beyond just the quarter's headline numbers, we are very excited about the progress we are seeing across important parts of our business, particularly our Mineral and Royalty portfolio.

[Kelly Loyd, President and CEO at Evolution Petroleum]

September production from our newly acquired Permian Minerals interest has already exceeded our acquisition expectations, and new wells in Louisiana are beginning to contribute just as we expected. We bought these assets for both their existing production and their substantial development potential, which is really beginning to deliver. What makes that development particularly valuable to us is how it is funded. Our operating partners bear the drilling and completion costs, and we receive our share of production without having to make those additional capital commitments. We also do not bear lifting expenses on these Mineral and Royalty Interests. That means growth in these assets contributes high-margin cash flow without the CapEx associated with working interest development. As these contributions continue to build, it gives us more capacity to strengthen the balance sheet and further support our dividend.

[Kelly Loyd, President and CEO at Evolution Petroleum]

Specifically in the Permian, from the effective date of August 20th through September, production averaged approximately 218 BOE per day, ahead of the 200 BOE-210 BOE per day we expected. We have sufficient production data to include the results from 21 of the approximately 27 gross wells that operators brought online between closing and September 30th. That September rate does not yet include production from those roughly six additional wells that we know are online. In our fiscal second quarter, we expect to benefit from a full quarter of ownership, production from those six wells, and production from new wells that come online during the quarter. It's exciting to see this level of activity so soon after closing. Our Louisiana interests offer a similar opportunity.

[Kelly Loyd, President and CEO at Evolution Petroleum]

Production from our Haynesville and Bossier royalty interests grew approximately 92% from the fourth quarter as operators brought new wells online, very much in line with our expectations. We added a couple of small bolt-ons during the quarter and have continued adding to the position since quarter end. We've been building this position over time, and we are now seeing this acreage begin to contribute in a meaningful way. We are also looking beyond new production for ways to realize value within the portfolio. We own a great deal of undeveloped acreage with meaningful long-term potential.

[Kelly Loyd, President and CEO at Evolution Petroleum]

Like we did in the fourth fiscal quarter when we sold minerals for $3 million that we felt were unlikely to be developed in the next year or two, we always consider the best path to bring value forward to today across our portfolio, whether that's participating in development through working interest, selling longer-term development prospects, or farming out the acreage to a partner, we have many ways to accelerate value. In the right situations and where the operator is aligned with us, a farm-out of working interest with an ORRI and/or an option to participate can be the most efficient option. It allows us to bring in cash today and retain an interest in future production with zero CapEx net to us. Following quarter end, we did farm-out some undeveloped acreage in the Williston Basin for approximately $2.5 million, while retaining a quarter percent overriding royalty interest.

[Kelly Loyd, President and CEO at Evolution Petroleum]

This acreage represents roughly 2% of our roughly 40,000-acre position and just a fraction of the 300+ probable and possible drilling locations that we have identified. We are also in negotiations for further farm-outs of very low or non-currently producing acreage here and in other parts of our portfolio that we hope to be able to report on soon. These agreements are expected to generate cash upfront and overrides and possible options to participate, and we intend to apply these proceeds to pay down borrowings on our revolver. That gives us a way to reduce debt while keeping today's production and cash flow fully intact. We expect to find more opportunities like these as we work to strengthen the balance sheet and create value for our shareholders while maintaining future upside. Taken together, these opportunities shape how we are allocating capital.

[Kelly Loyd, President and CEO at Evolution Petroleum]

We have already invested in assets that can contribute more as they develop, and our near-term priority is to realize those returns in the quarters and years ahead. With meaningful growth already built into the portfolio, we can be highly selective about new capital and put more of the cash we generate towards strengthening the balance sheet. That approach also supports our dividend. The board has declared a quarterly dividend of $0.12 per share, our 53rd consecutive quarterly payment, and since December 2013, we have returned approximately $156.6 million to shareholders. We think about that commitment over multiple years and across commodity cycles, and the growth underway in our mineral and royalty portfolio strengthens our ability to support it. For fiscal 2027, we are off to a start that really reflects the portfolio we have been building.

[Kelly Loyd, President and CEO at Evolution Petroleum]

New production from our Permian and Louisiana interests, value emerging from undeveloped acreage, and a clear path to stronger cash generation. We look forward to updating you on that progress next quarter. With that, I will turn the call over to Mark for more details on our operations.

[Mark Bunch, COO at Evolution Petroleum]

Thanks, Kelly. Good morning, everyone. I will focus on the development activity and operating performance across our portfolio and what we see as we move through fiscal 2027. Overall, first quarter operating performance was up sequentially. Underneath that, the picture varies by area, so let me take them in turn, starting with SCOOP/STACK. At SCOOP/STACK, new well activity continued across both our working interest and Mineral and Royalty positions. During the quarter, two gross wells came online, eight gross wells were in progress, and we elected to participate in three additional gross wells. In Louisiana, new wells continued to come online across our Haynesville and Bossier Mineral and Royalty Interests. During the quarter, we acquired approximately $300,000 of additional interest, primarily in undeveloped acreage that third-party operators are actively developing. That activity continues to build our production without requiring us to fund drilling or completion costs.

[Mark Bunch, COO at Evolution Petroleum]

In the Permian, integration is progressing well. As Kelly mentioned, operators moved at least 21 gross wells into producing status between closing and September 30th. With additional wells entering production and a full quarter of ownership, we expect a larger contribution in the second quarter. For now, our Permian and Louisiana volumes are reported within TexMex and other, and as they become more established in our reporting, we plan to present their contributions separately. At TexMex, operating costs declined compared to the year-ago quarter following the change of operator. In the Barnett Shale, we have met with the new operator, whose entire focus is solely on Barnett operations and improving field profitability through operating changes and workover opportunities. At Delhi, oil production was affected by continued compressor downtime during the quarter. Finally, at Chaveroo, we continued to work with our partner on the timing of future drilling.

[Mark Bunch, COO at Evolution Petroleum]

We view the development inventory as attractive, particularly in the current price environment, and we will provide updates as plans develop. With that, I will turn it over to Ryan.

[Ryan Stash, SVP, CFO, and Treasurer at Evolution Petroleum]

Thanks, Mark, and good morning. As Brandi mentioned earlier, we issued our earnings release yesterday, which contains more information on our results. For today, I would like to go through our fiscal first quarter financial highlights. In fiscal Q1, production averaged 6,978 BOE per day, up 1% sequentially and down 5% year-over-year. The lower year-over-year production was due to unplanned downtime at our Delhi and TexMex assets, as well as natural declines across the portfolio. In addition, the prior year period includes flush production from wells brought online at Chaveroo Field. These declines were partially offset by development in our SCOOP/STACK asset, as well as mineral and royalty acquisitions in the Haynesville/Bossier Shale and Permian. Total revenues were $22.6 million, down 7% sequentially and up 6% year-over-year. The sequential decrease reflected lower realized oil and NGL prices, partially offset by higher natural gas realizations and increased production.

[Ryan Stash, SVP, CFO, and Treasurer at Evolution Petroleum]

Compared to the year-ago quarter, average realized prices before hedge settlements increased 11%, more than offsetting the decline in production. Net loss for the quarter was $3 million, or $0.08 per diluted share, compared to net income of $4.6 million in fiscal Q4 and net income of $0.8 million, or $0.02 per diluted share, in the year-ago period. The quarter included a $4.1 million unrealized loss on derivative contracts, compared to a $5.8 million unrealized gain in fiscal Q4. Excluding selected items, adjusted net loss narrowed to $0.3 million from $0.6 million sequentially, compared to an adjusted net loss of $0.1 million a year ago. Adjusted EBITDA increased sequentially to $6.8 million, driven by lower operating costs as a result of increased Mineral and Royalty production that helped offset lower revenues.

[Ryan Stash, SVP, CFO, and Treasurer at Evolution Petroleum]

Compared to the prior year quarter, Adjusted EBITDA declined from $7.3 million, primarily due to lower production and lower realized natural gas prices compared to the prior year period. Lease operating costs decreased to $12.4 million compared to $13.1 million in the year-ago quarter. The decrease was primarily driven by lower operating costs at SCOOP/STACK and at TexMex following the change of operator, as well as lower taxes and gathering and transportation costs associated with decreased natural gas prices at Jonah and Barnett. On a per-unit basis, LOE per BOE improved approximately 1% from the year-ago quarter and improved approximately 5% sequentially to $19.25 from $20.35 in fiscal Q4. On the hedging front, we have continued to add hedges to comply with our credit facility covenants.

[Ryan Stash, SVP, CFO, and Treasurer at Evolution Petroleum]

Our ongoing goal remains to reduce commodity price risk and protect cash flow for our shareholder return strategy while preserving the maximum potential upside. This strategy can result in realized and unrealized losses on our hedges in some periods, but benefit us in other periods and provide more predictable and stable cash flows over time. Currently, we have hedged approximately 73% of expected PDP oil production and 76% of expected PDP natural gas production for the remainder of calendar year 2026. For calendar year 2027, we have hedged approximately 72% of expected PDP oil production and 67% of expected PDP natural gas production. Volumes for 100% of our NGL production and development on our asset base remains unhedged to provide upside to commodity pricing. We continue to utilize a mix of swaps and collars to hedge both oil and gas.

[Ryan Stash, SVP, CFO, and Treasurer at Evolution Petroleum]

For the quarter, realized losses on our derivative contracts were $1.3 million compared to realized gains of $0.9 million a year ago. That change reduced Adjusted EBITDA by approximately $2.2 million year-over-year. The volumes and prices by instrument and period are included in the hedge schedule in our earnings release. Turning to the balance sheet, cash on hand totaled $3.1 million at September 30th, down from $6.1 million at June 30th. Borrowings under our credit facility increased during the quarter to $60 million from $56.5 million as a result of the Permian Minerals acquisition, with $0.8 million in letters of credit outstanding and a weighted average interest rate of 6.48%. Total liquidity at September 30th, including cash and available borrowing capacity, was approximately $15.3 million. We generated $8.4 million in operating cash flow before changes in working capital during the quarter, compared to $6.5 million in fiscal Q4.

[Ryan Stash, SVP, CFO, and Treasurer at Evolution Petroleum]

Capital expenditures incurred were $0.7 million, and we completed the $16 million Permian Minerals acquisition. We also received approximately $12.5 million of net proceeds from our common stock offering and had $3.5 million of net borrowings under our credit facility. Subsequent to quarter end, our borrowing base was redetermined at $70 million, down from the interim $73 million borrowing base established in August to provide liquidity to complete the Permian Minerals acquisition, but up from the spring 2026 borrowing base value of $65 million. As of October 20th, availability under the facility was $9.2 million. This does not include approximately $2.5 million in cash received for the closing of the initial Williston farm-out transaction in November or any subsequent farm-out transactions that we are currently pursuing. During the quarter, we paid $4.9 million in common stock dividends.

[Ryan Stash, SVP, CFO, and Treasurer at Evolution Petroleum]

The board has declared a quarterly dividend of $0.12 per share for fiscal Q2 2027, payable December 31st to shareholders of record on December 15th, marking our 53rd consecutive quarterly payment. As we move through fiscal 2027, our financial priorities remain focused on maintaining liquidity, managing leverage, and deploying capital where we expect attractive returns per share. The growing contribution from our recent Permian Minerals and royalty investments that don't require any CapEx, combined with expected farm out proceeds, support our focus on reducing borrowings while continuing to return capital to shareholders. I'll now hand it back over to Kelly for closing comments.

[Kelly Loyd, President and CEO at Evolution Petroleum]

Thanks, Ryan. As we move through fiscal 2027, our focus is on realizing the returns from the portfolio that we have already built. We're encouraged by the early performance of our recent investments and the opportunities ahead, while recognizing that the measure of our progress will be the cash those assets generate for shareholders. We will remain disciplined in how we commit capital, with debt reduction and sustaining our quarterly dividend at the forefront of our decisions. We appreciate your continued support of Evolution and look forward to updating you on our progress. I just want to say thank you and happy Veterans Day to all of our vets out there. With that, I'll turn it back over to the operator to begin the Q&A session. Thank you.

[Operator]

We will now begin the question-and-answer session. To ask a question, you may press star, then one on your touch-tone phone. If you are using a speakerphone, please pick up your handset before pressing the keys. If at any time your question has been addressed and you would like to withdraw your question, please press star then two. At this time, we will pause momentarily to assemble our roster. The first question today comes from Jeff Grampp with Northland Capital Markets. Please go ahead.

[Jeff Grampp, Analyst at Northland Capital Markets]

Hey, morning, guys. Wanted to start on the Permian. I know it's super early here, but just curious how the performance thus far has been relative to the underwriting model. I know you guys were expecting that asset to grow, and it seems like that's playing out, but just kind of curious how that's tracking in early days, and if you have a rig count on the assets, that'd be interesting as well. Thanks.

[Mark Bunch, COO at Evolution Petroleum]

Hey, Jeff, it's Mark Bunch, and so far, at the rate we're converting, it'd be almost like we'd be converting it around 200 wells per year. We're actually really quite happy because we actually didn't underwrite on anything that large. I'll let Ryan answer the question about the rig count.

[Ryan Stash, SVP, CFO, and Treasurer at Evolution Petroleum]

Yeah, Jeff, we're still running eight rigs currently out there. Double Eagle's got four, Exxon's got four. The other interesting thing is, even since the end of the quarter, we've seen upwards of 30-40 permits actually been filed here since the end of the quarter. Diamondback actually filed some new ones on our acreage here in the last couple weeks, and Apache's still got a few out there. We definitely think even beyond Double Eagle and Exxon, there should be some other guys moving rigs in soon.

[Kelly Loyd, President and CEO at Evolution Petroleum]

Yeah. Hey, Jeff, this is Kelly. I mean, one of the things, right, we only want to include production that we actually know, right? We got information on 21 wells that were converted. We have another six that we know are on production, but we didn't have information on, so we couldn't include any results from those. Yeah, that 218 could be a little understated, frankly.

[Jeff Grampp, Analyst at Northland Capital Markets]

Understood. That all sounds really good. I appreciate the details. For my follow-up, kind of a bigger picture question, you guys have a slide in the new deck, I think kind of targeting like 20% pro forma cash flow coming from minerals and royalties. Just kind of curious, like based on this quarter's results or maybe looking forward a couple quarters, like where does that trend over time given that the royalty stuff seems to be the faster growing of the asset base today?

[Kelly Loyd, President and CEO at Evolution Petroleum]

Yeah, and you sort of put the nail on the head. You said today, right? As we currently speak, I do think we continue to see some highly accretive opportunities there. Look, just naturally with a couple of the assets that is growing and a couple having natural declines, it should grow just on its own without us doing anything else. We do see that growing over time, but also, look, with where we are right now, the competition for dollars to pay down debt, or we will talk to the board about maybe even a share buyback, it gets pretty stiff. Any new acquisition is going to have to look really good.

[Ryan Stash, SVP, CFO, and Treasurer at Evolution Petroleum]

Yeah, Jeff, I do not think the 20% number, I think obviously we still feel good about, and we are probably close to that. Obviously going forward, some of it is going to depend on performance of legacy assets versus drilling pace in the Permian, right? We still think kind of that 20% number right now kind of makes sense, but obviously subject to change as we see how the other assets perform.

[Jeff Grampp, Analyst at Northland Capital Markets]

Understood. I appreciate the time, guys. I will turn it back.

[Kelly Loyd, President and CEO at Evolution Petroleum]

Thanks, Jeff.

[Operator]

The next question comes from Jeff Robertson with Water Tower Research. Please go ahead.

[Jeff Robertson, Analyst at Water Tower Research]

Thank you. Good morning. Kelly, to follow on your previous discussion, from a high-level perspective, how much exposure or organic growth exposure do you think the Minerals portfolio gives to help offset natural declines on the legacy non-op working interest assets, that is, again, with the Minerals Interest adding volumes at zero CapEx and virtually zero LOE?

[Kelly Loyd, President and CEO at Evolution Petroleum]

Right. Well, if you model it out in a static sense, it gets a large part of the way there. I do not know that it gets all the way there. A lot of it will depend on, are we starting from this level with the legacy assets and the working interest assets and what they produce, and how are they going to perform? A couple of the assets did not perform as we might have wanted. We think we have some real fixes in certainly in the TexMex area, and with Delhi sort of remains to be seen with more compressors were down during the quarter. You just do not know what exactly it is going to do from there. But I think overall, we are pretty excited, and it goes a long way towards holding production flat without any additional CapEx.

[Ryan Stash, SVP, CFO, and Treasurer at Evolution Petroleum]

Yeah, I mean, I think as we have said in the past, I mean, given the delta on production from buying royalty assets versus working interest, just where we sit today, you could see production decline some, but cash flow is going to remain pretty strong, right? Obviously depending on-

[Kelly Loyd, President and CEO at Evolution Petroleum]

Yeah.

[Ryan Stash, SVP, CFO, and Treasurer at Evolution Petroleum]

-strip, we do think that the addition of the assets can certainly go a long way to replacing the cash flow loss from decline in our legacy assets.

[Kelly Loyd, President and CEO at Evolution Petroleum]

Right, and that's more how we look at it really, is what is the cash it's going to produce.

[Jeff Robertson, Analyst at Water Tower Research]

On the Williston farm-out, pardon me, did the operator give any indication of their commitment toward drilling the wells that they purchase?

[Mark Bunch, COO at Evolution Petroleum]

Yeah, the new operator? Yeah, they actually have to have It's written such that they're required for a drilling commitment. So yeah, everything's That well is on their

[Kelly Loyd, President and CEO at Evolution Petroleum]

Recall when we first bought this, there were 350-ish plus identified locations that were probable, possible sticks on a piece of paper. But for the right sort of drilling cost and for the right commodity price environment, those are very real possibilities. And a bigger company with a continuous drilling program that can get these drilled as we mentioned in the past, moving towards us. It's allowed us to be part of a bigger group here and retain that override, as well as get some cash up front. I think we alluded to this. We have 40,000 acres in that area. This was 636. I'm excited to see what comes down the pipe as the activity and results come in. We're talking to others that have approached us.

[Mark Bunch, COO at Evolution Petroleum]

To the point, like, as we make other deals in the future out here, they'll always have a drilling commitment associated with them, especially if we have like an override, because obviously, why would you keep an override if you didn't sell out and have no recourse? There's always going to be some sort of drilling commitment when you make one of these farm-out deals.

[Jeff Robertson, Analyst at Water Tower Research]

You can convert long-dated drilling development activity into the mineral and royalty portfolio after they drill the wells and you collect on your overrides?

[Mark Bunch, COO at Evolution Petroleum]

Yeah, it also just allows for the fact that we're not completely selling out our acreage. If they, for some reason, elect not to drill or perform, then our acreage comes back to us. We just don't want it to disappear. We only want it to become, shall we say, like it converts to an override if the case is they actually perform and drill wells.

[Jeff Robertson, Analyst at Water Tower Research]

In the Barnett market, have the conversations with the new operators started to lead to any proposals on activity? Do you think that there will be CapEx dollars spent in that area in 2027?

[Mark Bunch, COO at Evolution Petroleum]

I don't know about the CapEx side, but they've already approached us about wanting to do some additional workovers. I think they've already put some online in some of the areas that were more struggling economically. They've gone into some of the areas and looked at reducing costs. We're actually really happy with the way the new operator's performing.

[Jeff Robertson, Analyst at Water Tower Research]

Thanks. Lastly, Ryan, on the RBL with the $70 million borrowing base and the Williston deal, it sounds like you were able to create liquidity without having any impact on the collateral value for the borrowing base since these are undeveloped locations that you've essentially farmed down and converted to an override and cash.

[Ryan Stash, SVP, CFO, and Treasurer at Evolution Petroleum]

Yeah, that is exactly right. I think some of the ones specifically in the Williston weren't actually mortgaged because it was just acreage and PUDs. To the extent that we do the same thing, I think it is going to be the same going forward. We are going to be selling very little, if any, PDP or production. Mostly just acreage or PUDs, which won't impact the borrowing base.

[Jeff Robertson, Analyst at Water Tower Research]

Thank you.

[Kelly Loyd, President and CEO at Evolution Petroleum]

Yeah, and it could be that the cash you get up front is worth more than the PUDs are on the books for.

[Operator]

The next question comes from Nicholas Pope with Roth Capital. Please go ahead.

[Nicholas Pope, Analyst at Roth Capital]

Morning, everyone.

[Kelly Loyd, President and CEO at Evolution Petroleum]

Morning, Nick.

[Mark Bunch, COO at Evolution Petroleum]

Hi, Nick.

[Nicholas Pope, Analyst at Roth Capital]

I was hoping we could expand a little bit on Jeff's question on potential CapEx here in fiscal 2027. As you look at some of the fields with bigger working interests and where maybe spending has been a little light for the last year or so, is there any visibility into Chaveroo, SCOOP/STACK? I'm just trying to broaden a little bit an understanding of what potential might be out there to kind of increase CapEx the remainder of fiscal 2027.

[Kelly Loyd, President and CEO at Evolution Petroleum]

Yeah, so what I'd say as far as We'll start with SCOOP/STACK working interest. We have not seen anything that would make us change sort of our current, the way it's looked in the past. We expect it to be similar to that. The AFEs are sort of coming in line with the way it has the last year or so. So I think we're kind of on pace there. As for Chaveroo, like I said, we're excited about those. We think those wells make nice returns right now. I'll just say we're still working with the operator on scheduling, when, if, timing, all that on those. We have some permitted wells that we think are going to have really nice returns, but we're working with the operator on that. As you know, they've had a small shakeup there.

[Nicholas Pope, Analyst at Roth Capital]

I'll make sure to ask them about it as well tomorrow on their call. Curious, sustainability of kind of where operating costs have been running. We've seen a couple quarters of pretty decent improvement in kind of unit operating costs. Just trying to understand a little bit how much of that might be the mix changing with More Royalty Interests versus some more, I guess, sustainable or longer-term kind of improvements in that, seeing that lower operating costs across the board. Like, where's that coming from? Should we expect kind of the rate that we're seeing right now to be sustained over the next year?

[Ryan Stash, SVP, CFO, and Treasurer at Evolution Petroleum]

Yeah, I mean, Nick, this is Ryan. Yeah, I mean, I would expect In fact, we hope the rate will actually come down from what we reported, right? I mean, we should continue to see some improvements, as we've mentioned, sort of in TexMex as well as it come online and the operator gets a hold of kind of the asset. Then, as you mentioned, certainly the Royalty production having such low LOE, in the $2-$3 per BOE range compared to kind of our other assets, as that becomes a bigger piece, that's certainly going to take the LOE down. So yeah, I mean, I think, we were like around, what, mid-$19, a little above $19 per BOE, and we do think that that level should come down over time.

[Nicholas Pope, Analyst at Roth Capital]

Yeah, that makes sense. All right, that's all I got. I appreciate it. Thank you.

[Kelly Loyd, President and CEO at Evolution Petroleum]

Thanks, Nick.

[Operator]

As a reminder, if you would like to ask a question, please press star and one to join the question queue. The next question comes from Poe Fratt with Alliance Global Partners. Please go ahead.

[Poe Fratt, Analyst at Alliance Global Partners]

Hey, good morning. I have two questions, the first of which is, you are talking about additional farm-outs, raising capital. Can you sort of frame the potential proceeds from those farm-outs? $5.5 million over the last two quarters, roughly. Any way to frame what the future might hold there?

[Kelly Loyd, President and CEO at Evolution Petroleum]

Well, I will play this a little close to the vest because we are in talks with a few parties right now. I will say this. We do not want to do everything all at once because we think as results come in, it will translate into higher value later on. You do want to do enough to get that increased activity by the bigger operators who can drill these things as part of a continuous drilling program and be super efficient. So, it will be a little bit of a balance there. By the way, we are also It is not just Williston. We have other areas where people have approached us too. So, I would say, hopefully we will have something here we can announce pretty soon that will at least clear up your immediate term question.

[Poe Fratt, Analyst at Alliance Global Partners]

Great. When you talked about stock buybacks, Kelly, it is ironic because you just issued stock for an acquisition. But is there anything within your credit agreements that held you back here? I mean, stock is just getting crushed, and I was just wondering how you are thinking about that and whether there are any structural issues that you have to contend with.

[Ryan Stash, SVP, CFO, and Treasurer at Evolution Petroleum]

No, there is nothing from a structural issue perspective. I mean, obviously, yes, we did issue stock to get the Permian deal done. But we have also announced, and as you asked the question, we have had some additional proceeds come in from accelerated asset sales. So when we have that cash come in, we have the options of obviously paying down debt, which may be the initial use of proceeds, but we will also look at making investments. And where our stock, I agree with you, I think the reaction is overdone today. But where it is trading, I mean, buying our stock back could be our best investment of capital right now as we look at creating shareholder value.

[Ryan Stash, SVP, CFO, and Treasurer at Evolution Petroleum]

So, again, as we monetize some of the portfolio and rationalize the asset base, one of the uses of proceeds could be potentially buying back shares, and there is nothing prohibited in our credit agreement for that.

[Poe Fratt, Analyst at Alliance Global Partners]

Okay. Then just, if I may, just one more. Delhi, what is the color on that? It seems to have been a thorn in your side for an extended period of time. And can you just preview what the next couple quarters look like there?

[Mark Bunch, COO at Evolution Petroleum]

Well, yes, this is Mark Bunch. We have been advised by the operator that one of the compressors is not running. They have not told us when they are going to have it back up and running. What that amounts to is that they had to shut in some production in order to not have excess CO2 that they would have to flare. We do not know from the operator when that particular metric is going to change on how they are operating the field. We are trying to figure that out. When we know that, when we have better color on that, we will let you know.

[Poe Fratt, Analyst at Alliance Global Partners]

Great.

[Kelly Loyd, President and CEO at Evolution Petroleum]

Because that compressor issue led to the step-down in production this quarter. We hope that changes and gets better, but it is already down.

[Poe Fratt, Analyst at Alliance Global Partners]

Great. Thanks for your time.

[Kelly Loyd, President and CEO at Evolution Petroleum]

Thank you.

[Operator]

This concludes our question and answer session. I would like to turn the conference back over for any closing remarks.

[Kelly Loyd, President and CEO at Evolution Petroleum]

No, just want to thank everyone for joining us here, and that's it. Thank you.

[Operator]

The conference has now concluded. Thank you for attending today's presentation. You may now disconnect.

Participants

Executives

• Brandi Hudson, Director of Investor Relations
• Kelly Loyd, President and CEO
• Mark Bunch, COO
• Ryan Stash, SVP, CFO, and Treasurer

Analysts

• Jeff Grampp, Analyst at Northland Capital Markets
• Jeff Robertson, Analyst at Water Tower Research
• Nicholas Pope, Analyst at Roth Capital
• Poe Fratt, Analyst at Alliance Global Partners