Evolution Petroleum NYSEAMERICAN: EPM reported a fiscal first-quarter loss as derivative losses outweighed higher revenue, while executives said new mineral and royalty assets are contributing production without requiring the company to fund drilling.
The company posted a net loss of $3 million, or $0.08 per diluted share, compared with net income of $0.8 million, or $0.02 per share, a year earlier. The latest quarter included a $4.1 million unrealized loss on derivative contracts, compared with a $5.8 million unrealized gain in the preceding quarter.
Revenue rose 6% year over year to $22.6 million, although it fell 7% sequentially as lower realized oil and natural gas liquids prices offset higher natural gas realizations and production. Average production was 6,978 barrels of oil equivalent per day, up 1% from the prior quarter but down 5% from a year earlier.
President and Chief Executive Officer Kelly Loyd said the company’s near-term focus is on realizing returns from existing investments, reducing debt and sustaining its dividend. Evolution’s board declared a quarterly dividend of $0.12 per share, payable Dec. 31 to shareholders of record on Dec. 15. It will mark the company’s 53rd consecutive quarterly payment.
New assets add production
Evolution completed a $16 million Permian minerals acquisition during the quarter. From the Aug. 20 effective date through September, production from the acquired interests averaged approximately 218 barrels of oil equivalent per day, above the company’s expectation of 200 to 210.
Loyd said that figure included production data from 21 of approximately 27 gross wells that operators brought online between closing and Sept. 30. The remaining wells were online but lacked sufficient data to be included, he said. Management expects a larger contribution in the fiscal second quarter from a full quarter of ownership and additional wells.
Chief Financial Officer Ryan Stash said eight rigs were operating on the Permian acreage, with four each run by Double Eagle and Exxon. He added that 30 to 40 permits had been filed since the end of the quarter.
Production from Evolution’s Haynesville and Bossier royalty interests in Louisiana rose approximately 92% sequentially as operators brought new wells online. Chief Operating Officer Mark Bunch said the company acquired about $300,000 of additional interests in the area during the quarter, primarily in undeveloped acreage being actively developed by third parties.
Loyd said mineral and royalty growth could offset a substantial portion of natural declines at legacy working-interest assets, though not necessarily all of them. Stash said production could still decline, but the new assets could help replace cash flow lost to declines elsewhere.
Farm-out proceeds and debt priorities
After quarter end, Evolution farmed out undeveloped Williston Basin acreage for approximately $2.5 million while retaining a 0.25% overriding royalty interest. Loyd said the transaction covered 636 acres of the company’s roughly 40,000-acre position.
Bunch said the agreement includes a drilling commitment and that the acreage would return to Evolution if the operator did not perform. Loyd said the company is negotiating additional farm-outs involving low-producing or non-producing acreage and intends to use proceeds to reduce credit-facility borrowings.
Stash said some of the Williston acreage was not mortgaged under the credit facility. He said potential similar transactions would generally involve acreage or undeveloped locations rather than existing production and therefore would not be expected to affect the borrowing base.
Evolution had $3.1 million in cash and $60 million in credit-facility borrowings at Sept. 30. Total liquidity was approximately $15.3 million. After quarter end, the borrowing base was redetermined at $70 million, down from an interim $73 million established in August but above the $65 million spring 2026 level.
Executives also discussed a possible share buyback. Loyd said management could raise the idea with the board, while Stash said the credit agreement does not prohibit one. Neither announced an approved repurchase program. The company received approximately $12.5 million in net proceeds from a common stock offering during the quarter.
Costs and operating outlook
Adjusted EBITDA rose sequentially to $6.8 million but declined from $7.3 million a year earlier. Stash said realized derivative losses of $1.3 million, compared with gains of $0.9 million a year earlier, reduced adjusted EBITDA by approximately $2.2 million year over year.
Lease operating expense fell to $19.25 per barrel of oil equivalent from $20.35 in the prior quarter. Stash said the company expects the rate to decline over time as royalty production grows and operating improvements take hold at TexMex.
At Delhi, compressor downtime reduced oil production during the quarter. Bunch said the operator had not provided a timetable for restarting an idle compressor, which has required some production to be shut in to avoid flaring excess carbon dioxide.
At Chaveroo, Loyd said Evolution continues to work with its partner on the timing of potential drilling. At SCOOP/STACK, he said spending authorizations were arriving at a pace similar to the past year.
About Evolution Petroleum (NYSEAMERICAN:EPM)
Evolution Petroleum 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.
This instant news alert was generated by narrative science technology and financial data from MarketBeat in order to provide readers with the fastest reporting and unbiased coverage. Please send any questions or comments about this story to contact@marketbeat.com.
Before you consider Evolution Petroleum, you'll want to hear this.
MarketBeat keeps track of Wall Street's top-rated and best performing research analysts and the stocks they recommend to their clients on a daily basis. MarketBeat has identified the five stocks that top analysts are quietly whispering to their clients to buy now before the broader market catches on... and Evolution Petroleum wasn't on the list.
While Evolution Petroleum currently has a Moderate Buy rating among analysts, top-rated analysts believe these five stocks are better buys.
View The Five Stocks Here
Tesla, Nvidia, and Google helped shape the last era of market growth, but the next wave could come from a new group of companies. Inside this report, you’ll find 7 stocks that could play a major role in the next tech-driven market boom.
Get This Free Report
Continue following MarketBeat
Add MarketBeat as your preferred source on Google to see our latest stories in your feed.
