Evolution Petroleum Q3 Earnings Call Highlights

Key Points

• Evolution Petroleum’s fiscal Q3 results were weighed down by temporary issues, including weather-related downtime, weak natural gas pricing, and a one-time Delhi transportation adjustment, leading to revenue of $20.2 million and a net loss of $8.9 million.
• Management said production held roughly flat at about 6,700 BOEPD despite disruptions, and expects Q4 to improve as weather-related impacts clear, the Delhi issue ends, TexMex workovers ramp up, and mineral/royalty assets contribute more meaningfully.
• The company maintained its quarterly dividend at $0.12 per share, marking its 51st straight quarterly payout, while also discussing moderate liquidity, ongoing hedging, and recent Louisiana mineral and royalty acquisitions targeting future growth.

Evolution Petroleum NYSEAMERICAN: EPM management said fiscal third-quarter 2026 results were pressured by temporary items, including weather-related downtime, weak regional natural gas pricing and a one-time transportation adjustment at Delhi, while emphasizing that the company expects a stronger fourth quarter as those headwinds subside.

President and Chief Executive Officer Kelly Loyd said the quarter was “more challenging” than the prior period, but argued that the issues did not reflect a change in the company’s asset quality, cost structure or strategy. He said Evolution’s portfolio has been reshaped over the past seven years toward long-life, low-decline assets and capital-efficient cash flow generation, with additions including Jonah, Barnett, TexMex and a newer minerals and royalty platform.

“These are not structural issues,” Loyd said, referring to the quarter’s headwinds. “They don’t reflect any change in the underlying quality of our assets or our cost structure or our strategy.”

Quarter Pressured by Pricing, Weather and Delhi Adjustment

Senior Vice President, Chief Financial Officer and Treasurer Ryan Stash said total revenue for the fiscal third quarter was $20.2 million, down 11% from the year-earlier period. The decline was primarily attributed to an 11% decrease in average realized equivalent prices, partly offset by a slight increase in production volumes.

Stash said realized pricing was hurt by regional natural gas pricing dislocations at Jonah and Barnett, especially in February, as well as a $1.2 million one-time prior period transportation adjustment at Delhi. The Delhi adjustment was tied to a new marketing contract entered into by the operator and dated back to December 2024.

The company reported a net loss of $8.9 million, or $0.26 per diluted share, compared with a net loss of $2.2 million, or $0.07 per diluted share, in the year-earlier quarter. Stash said the latest quarter included $7.6 million of unrealized hedge losses due to a spike in crude oil prices. Excluding selected items, including unrealized hedge losses, adjusted net loss was $2.9 million, compared with adjusted net income of $0.8 million a year earlier.

Adjusted EBITDA was $3.1 million, down from $7.4 million in the prior-year quarter. Stash said the decrease reflected lower revenues due to unfavorable differentials, production downtime across assets and realized losses on derivative contracts.

Lease operating expenses improved to $13 million, or $21.49 per barrel of oil equivalent, compared with $22.32 per BOE in the prior quarter. Stash cited lower ad valorem taxes at Barnett and continued benefits from the end of CO2 purchases at Delhi, partly offset by the addition of TexMex properties and incremental workover activity.

Production Held Flat Despite Downtime

Evolution reported production of about 6,700 barrels of oil equivalent per day, which Loyd said was essentially flat year over year despite disruptions. Chief Operating Officer Mark Bunch said the January winter storms and other downtime reduced production by more than 300 net BOEPD across the portfolio, with the impacts resolved during the quarter.

At Barnett, Bunch said production was heavily affected by the winter storm, resulting in a decline of about 160 BOEPD. Impacts extended into February, with production restored by March. At Delhi, the winter storm affected production for six days, while the CO2 recycle compressor was down for 40 days during the quarter after being down for much of the prior quarter. Bunch said those issues were resolved during the quarter.

At TexMex, oil production increased quarter over quarter due to a successful workover program at the end of the prior quarter, though winter storms caused power outages and surface equipment damage that required repairs. Bunch said a new workover program began after quarter-end and is expected to increase production by an additional 100 net BOEPD by the end of fiscal Q4.

At Chaveroo, production increased year over year as wells brought online during the past 12 months contributed, though the winter storm and gas interference on wells with electric submersible pumps reduced production by 30 net BOEPD quarter over quarter. Bunch said Evolution converted one well from an ESP to a rod pump after quarter-end, leaving all but one of seven wells converted to rod pumps. The company is also advancing permits for the next six wells and expects to have those permits before the end of fiscal 2026.

Minerals and Royalty Platform Continues to Build

Loyd said Evolution completed two additional Louisiana mineral and royalty acquisitions targeting the Haynesville and Bossier Shales, bringing total consideration for Louisiana minerals to about $5 million. He said those assets are being actively developed, with wells being drilled and completed, and that contributions are expected to build as activity translates into production.

Bunch said Evolution expects 23 wells in the Haynesville and Bossier Shales to be brought online and meaningfully contribute to revenue and cash flow in fiscal Q4. At SCOOP/STACK, production from mineral and royalty interests acquired in August 2025 modestly contributed to volumes during the quarter. Bunch said there are seven gross wells in progress and 12 gross wells on production for which Evolution is still awaiting first production and revenue data.

During the question-and-answer session, management said royalty production data can be delayed, particularly in Oklahoma, and declined to quantify the near-term production impact from the SCOOP/STACK wells before receiving actual data.

Dividend Maintained; Balance Sheet Discussed

Evolution paid $4.3 million in dividends during the quarter. The board declared a quarterly cash dividend of $0.12 per share on May 11, marking the company’s 51st consecutive quarterly dividend and its 16th consecutive dividend at that level, according to Loyd.

As of March 31, 2026, Evolution had $2.6 million of cash on hand, $56.5 million of borrowings under its credit facility and $0.8 million in letters of credit outstanding. Stash said total liquidity, including cash and available borrowing capacity, was about $10.3 million.

On hedging, Stash said the company continues to add hedges to comply with credit facility covenants and protect cash flow. He said near-term restructuring opportunities are limited, but Evolution has used higher prices to add hedges in calendar 2027, including swaps and floors above $70 in some cases. He also noted that at least 30% of fiscal fourth-quarter crude volumes remain unhedged and that NGLs are unhedged.

Management Points to Fourth-Quarter Improvement

Loyd said the company expects fiscal Q4 to “look meaningfully different,” citing the end of the Delhi adjustment, a return toward more normal differentials after the February Jonah gas dislocation, the final phase of the TexMex workover program and the continued ramp of minerals and royalty assets.

In response to analyst questions, Loyd said the 300 BOEPD of weather-related impact was “almost substantially all back online” and that Evolution is progressing toward the expected 100 net BOEPD addition at TexMex. Management also said it is evaluating whether to take Delhi production in kind under the joint operating agreement, with Stash saying the company believes it “probably can do a little bit better” than the current marketing arrangement.

Loyd closed the call by reiterating that fiscal Q3 was shaped by temporary headwinds rather than structural weakness, and said recent acquisitions and the resolution of one-time items should help fiscal Q4 better reflect the company’s underlying earnings power.

About Evolution Petroleum NYSEAMERICAN: EPM

Evolution Petroleum Corporation (NYSE American: EPM) is an independent oil and natural gas company focused on enhanced oil recovery (EOR) through the use of carbon dioxide. Headquartered in Houston, Texas, the company specializes in acquiring and developing mature hydrocarbon reservoirs that benefit from CO₂ injection to increase production efficiency. Evolution Petroleum's business model combines property acquisition, reservoir engineering, and CO₂ management to optimize recovery of oil and associated gas.

The company's primary asset is the Jackson Dome CO₂ field in southwestern Mississippi, where natural carbon dioxide is produced, separated and reinjected into adjacent oil-bearing formations.

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