Evolution Petroleum Q4 Earnings Call Highlights

Key Points

• Fourth-quarter results rebounded: Production rose 3% sequentially to 6,901 BOE per day, revenue increased 20% to $24.2 million, and adjusted EBITDA more than doubled to $6.5 million. Higher oil and NGL prices, improved operating costs and stronger production helped offset weak natural-gas realizations.
• Evolution expanded its minerals portfolio: The company completed a roughly $16 million Permian Midland Basin acquisition adding 3,420 net royalty acres and more than 200 BOE per day of production, while continuing activity across its SCOOP/STACK, Haynesville and Bossier assets.
• Liquidity and shareholder returns remained priorities: Post-acquisition liquidity was approximately $19 million, and the borrowing base was temporarily increased to $73 million. The company declared its 52nd consecutive quarterly dividend of $0.12 per share and expects fiscal 2027 capital spending of $4 million to $6 million, excluding potential Chaveroo development.

Evolution Petroleum NYSEAMERICAN: EPM reported a fourth-quarter recovery in revenue and adjusted EBITDA as production increased sequentially, operating costs improved and stronger oil and natural-gas-liquids prices offset continued weakness in natural gas realizations.

For the fiscal fourth quarter ended June 30, production averaged 6,901 barrels of oil equivalent per day, up 3% from the prior quarter but down 4% from a year earlier. Total revenue rose 20% sequentially and 15% year over year to $24.2 million. Net income was $4.6 million, or $0.13 per diluted share, compared with a net loss of $8.9 million in the fiscal third quarter and net income of $3.4 million, or $0.10 per diluted share, a year earlier.

President and Chief Executive Officer Kelly Loyd said the fourth quarter reflected the expected resolution of several temporary issues that had weighed on third-quarter performance. He said improved production, lower operating costs per barrel and stronger liquids pricing contributed to a 20% sequential revenue increase and more than doubled adjusted EBITDA.

Fourth-Quarter Financial Performance

Adjusted EBITDA increased to $6.5 million from $3.1 million in the prior quarter. The result remained below adjusted EBITDA of $8.6 million in the year-ago quarter, primarily because the prior-year period included a $1.9 million credit related to a joint-venture audit at the company’s Barnett Shale properties, according to Senior Vice President, Chief Financial Officer and Treasurer Ryan Stash.

The company’s adjusted net loss narrowed to $0.6 million from $2.9 million sequentially. Evolution recorded a $5.8 million unrealized gain on derivative contracts in the fourth quarter, compared with a $7.6 million unrealized loss in the third quarter.

Evolution’s realized oil price before hedge settlements rose 49% year over year to $90.74 per barrel. Its unhedged NGL production realized $32.49 per barrel, up 27% from a year earlier. Loyd said hedge settlements offset some of the benefit from higher oil prices, but the company retained exposure to higher prices on unhedged volumes.

Lease operating expenses totaled $12.8 million, compared with $11.4 million in the year-ago quarter. After adjusting for the Barnett audit credit in the prior-year period, lease operating expense was $20.35 per BOE, compared with $20.25 per BOE a year earlier. On a sequential basis, lease operating expense per BOE improved about 5% from $21.49.

Fiscal-Year Results and Asset Activity

For fiscal 2026, Evolution averaged production of 7,077 BOE per day, narrowly exceeding fiscal 2025 production of 7,074 BOE per day. The company produced about 2.6 million BOE during the year and ended the period with 27.2 million BOE of proved reserves, slightly above its starting reserve level.

Operating cash flow for the year totaled $23.6 million, down from $33.1 million in fiscal 2025, with Stash attributing the decline primarily to working capital. The company paid $16.9 million in common-stock dividends during the fiscal year.

Operationally, the SCOOP/STACK portfolio was a key contributor. Fourth-quarter production in the area averaged 1,275 BOE per day, up about 14% from the prior-year quarter, while per-unit lease operating costs declined to $10.33 per BOE from $11.05. Third-party operators brought 31 gross wells online across the combined SCOOP/STACK portfolio during fiscal 2026.

Evolution also sold non-core, non-producing SCOOP/STACK mineral acreage for approximately $3.1 million during the fourth quarter. Loyd said the company intends to focus its minerals strategy on interests with current production or nearer-term development potential, rather than holding longer-dated acreage.

At Chaveroo, full-year production averaged approximately 260 BOE per day, compared with approximately 175 BOE per day in fiscal 2025. The company completed a rod-pump conversion program for all seven producing wells by June 30 and holds permits for a potential six-well development program. Management said it is working with its operating partner to determine the timing and scope of drilling.

At TexMex, Evolution said an extensive workover program was completed in July and that production should continue improving while operating expenses normalize. The company expects the asset to be an increasingly important cash-flow contributor in fiscal 2027.

Minerals Expansion and Capital Plans

Subsequent to fiscal year-end, Evolution completed an approximately $16 million acquisition of mineral and royalty interests in the Permian Midland Basin. The acquisition added about 3,420 net royalty acres and more than 200 BOE per day of current production across five Texas counties: Reagan, Upton, Glasscock, Midland and Martin.

Loyd said the acquisition expands the company’s higher-margin production and provides potential growth without Evolution funding drilling and completion costs. Management also cited continued operator activity in the company’s Haynesville and Bossier royalty positions in Louisiana and its SCOOP/STACK interests.

During the call, Chief Operating Officer Mark Bunch said activity on the acquired Permian acreage included eight active rigs, with Exxon operating about five rigs across the company’s acreage. He also cited recent permitting activity by Apache in Upton County.

Evolution budgeted fiscal 2027 capital expenditures of $4 million to $6 million, excluding potential Chaveroo development spending. Stash said the budget includes anticipated SCOOP/STACK activity, while Chaveroo drilling timing and well count remain the largest variables.

Liquidity, Borrowing Base and Dividend

Cash on hand was $6.1 million at June 30, up from $2.6 million at March 31. Borrowings under Evolution’s credit facility were unchanged during the quarter at $56.5 million, with $0.8 million in letters of credit outstanding and a weighted average interest rate of 6.69%.

Total liquidity was approximately $13.9 million at June 30. Following the Permian minerals acquisition, which was funded using common-stock offering proceeds and credit-facility borrowings, total liquidity was approximately $19 million as of Aug. 20.

The company received a temporary borrowing-base increase to $73 million from $65 million through Oct. 20, unless redetermined earlier. Stash said the additional $8 million capacity was tied to the Permian acquisition and its engineered reserve report. Evolution expects its fall borrowing-base redetermination around Oct. 1.

The board declared a quarterly dividend of $0.12 per share for fiscal first-quarter 2027, payable Sept. 30 to shareholders of record Sept. 21. The payment will represent Evolution’s 52nd consecutive quarterly dividend. Since December 2013, the company has returned approximately $151.7 million, or $4.53 per share, through common-stock dividends.

Looking ahead, management said it expects contributions from recent mineral and royalty investments, TexMex operational improvements and development activity across its portfolio to support fiscal 2027 cash generation. The company did not provide production or lease-operating-expense guidance, citing limited visibility associated with its non-operated working-interest, mineral and royalty assets.

About Evolution Petroleum (NYSEAMERICAN:EPM)

Evolution Petroleum Corporation is an independent energy company engaged in the acquisition, development, and operation of oil and natural gas properties. The company focuses primarily on mature, long-life assets in the United States, with an emphasis on properties that can benefit from enhanced oil recovery, operational improvements, and additional development.

Evolution Petroleum's flagship asset is its interest in the Delhi Field in northeastern Louisiana, where carbon dioxide is used in a miscible flood program to increase oil recovery from an established reservoir.

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