Evolution Petroleum (EPM) - 2024 Q4 - Annual Report

Forward-Looking Statements The report contains forward-looking statements involving risks and uncertainties that are not guarantees of future performance - The report includes forward-looking statements concerning plans, strategies, financial projections, and operational expectations[3] - The company warns that actual results may differ materially from these statements due to known and unknown risks, including changes in commodity prices for oil, natural gas, and NGLs[4][6] Glossary of Selected Petroleum Industry Terms Definitions for key technical terms and abbreviations used in the petroleum industry are provided Part I Business The company is an independent energy firm focused on acquiring and developing onshore U.S. oil and gas properties to maximize shareholder returns - The company's core business strategy is to maximize total shareholder return by acquiring and developing a diversified portfolio of long-life oil and gas properties, maintaining financial discipline, and returning cash to shareholders[18][27] - In February 2024, the company acquired non-operated assets in the SCOOP and STACK plays of Oklahoma for approximately $39.2 million[20] - In September 2023, the company entered into a participation agreement with PEDEVCO for the joint development of the Chaveroo oilfield, acquiring a 50% working interest in participated locations[24][25] Proved Reserves as of June 30, 2024 | Reserve Category | Oil (MBbls) | Natural Gas (MMcf) | NGLs (MBbls) | Total Proved Reserves (MBOE) | Percent of Total Proved | | :--- | :--- | :--- | :--- | :--- | :--- | | Developed Producing | 7,746 | 66,627 | 5,065 | 23,917 | 75.2% | | Developed Non-Producing | 108 | 33 | 9 | 123 | 0.4% | | Undeveloped | 3,956 | 11,249 | 1,914 | 7,745 | 24.4% | | Total Proved | 11,810 | 77,909 | 6,988 | 31,785 | 100.0% | | Product Mix | 37% | 41% | 22% | 100% | | - For fiscal year 2024, four individual purchasers collectively accounted for approximately 69% of the company's total revenues, indicating significant customer concentration[62] Risk Factors The company faces significant risks from commodity price volatility, operational dependencies, reserve estimation, and regulatory changes - A substantial or extended decline in oil and natural gas prices could adversely affect the company's business, financial condition, and ability to fund capital expenditures[103][104] - The company has limited control over its properties as they are all operated by third parties, which could lead to unexpected costs or lower production[109] - Estimates of oil and natural gas reserves are inherently uncertain and subjective, and inaccurate estimates could lead to material financial adjustments[119] - The company faces transition and physical risks from climate change, including stricter regulations, increased litigation risk, and potential impacts from extreme weather[129][130][131] - A cyber-attack could result in information theft, operational disruption, and financial loss as the industry is increasingly dependent on digital technologies[139][140] Unresolved Staff Comments The company reports no unresolved comments from the Securities and Exchange Commission - None[168] Cybersecurity The company maintains a cybersecurity risk management program overseen by the Board and has experienced no material incidents - Cybersecurity risk management is part of the company's enterprise risk management program, with oversight from the Board of Directors and management by the Principal Financial Officer[169][170] - The company reports that no cybersecurity incidents or threats have materially impacted its business or operations[170] Properties Detailed information on the company's oil and gas properties is incorporated by reference from other sections - Information regarding the company's properties is located in Item 1. Business and Note 4 to the consolidated financial statements[172] Legal Proceedings Information on legal proceedings is incorporated by reference and discloses no material pending litigation - Information on legal proceedings is incorporated by reference from Note 10, "Commitments and Contingencies"[173] Mine Safety Disclosures This section is not applicable to the company - Not Applicable[173] Part II Market for Registrant's Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities The company's stock trades on the NYSE American, with a history of quarterly dividends and an active share repurchase program - The company's common stock is traded on the NYSE American under the ticker symbol 'EPM'[175] Quarterly Dividends Per Share | Quarter Ended | Fiscal Year 2024 | Fiscal Year 2023 | | :--- | :--- | :--- | | June 30 | $0.12 | $0.12 | | March 31 | $0.12 | $0.12 | | December 31 | $0.12 | $0.12 | | September 30 | $0.12 | $0.12 | - A share repurchase program authorized up to $25.0 million is effective through December 31, 2024, with $20.4 million remaining available for repurchases as of June 30, 2024[180] Reserved This item is reserved and contains no information Management's Discussion and Analysis of Financial Condition and Results of Operations Management discusses a significant decline in net income due to lower commodity prices, its liquidity position, and future capital plans Financial Performance Comparison (FY 2024 vs. FY 2023) | Metric | FY 2024 | FY 2023 | Change | Change % | | :--- | :--- | :--- | :--- | :--- | | Total Revenues | $85.9M | $128.5M | ($42.6M) | (33.2)% | | Net Income | $4.1M | $35.2M | ($31.1M) | (88.4)% | | Diluted EPS | $0.12 | $1.04 | ($0.92) | (88.5)% | | Avg. Price per BOE | $34.56 | $49.56 | ($15.00) | (30.3)% | Cash Flow Summary (in thousands) | Cash Flow Activity | FY 2024 | FY 2023 | | :--- | :--- | :--- | | Operating Activities | $22,729 | $51,272 | | Investing Activities | ($49,633) | ($6,992) | | Financing Activities | $22,316 | ($41,526) | - As of June 30, 2024, the company had $6.4 million in cash and $39.5 million outstanding on its Senior Secured Credit Facility, which has a $50.0 million borrowing base[205][206] - The decrease in revenue was primarily driven by a 62.7% decrease in realized natural gas prices and a 4.2% decrease in total equivalent production volumes[226][227] - Budgeted capital expenditures for fiscal year 2025 are expected to be between $12.5 million and $14.5 million, excluding potential acquisitions[217] Quantitative and Qualitative Disclosures About Market Risks The company's primary market exposures are to energy commodity price volatility and interest rate fluctuations on its debt - The company's main market risks are from volatile energy commodity prices and changes in interest rates on its debt[249][252] - The Senior Secured Credit Facility may require the company to hedge a portion of its oil and natural gas production to mitigate price risk[249][331] - Borrowings under the credit facility bear interest at a floating rate based on SOFR, exposing the company to interest rate fluctuations[252] Consolidated Financial Statements and Supplementary Data This section presents the audited consolidated financial statements, notes, and supplementary data on oil and gas activities Consolidated Balance Sheet Highlights (in thousands) | Account | June 30, 2024 | June 30, 2023 | | :--- | :--- | :--- | | Total Assets | $162,877 | $128,317 | | Total Liabilities | $81,750 | $36,223 | | Total Stockholders' Equity | $81,127 | $92,094 | Changes in Proved Reserves (MBOE) | Description | FY 2024 | FY 2023 | | :--- | :--- | :--- | | Beginning Balance | 31,176 | 36,243 | | Revisions | (4,939) | (2,598) | | Extensions & Discoveries | 4,803 | 124 | | Purchases | 3,230 | - | | Production | (2,485) | (2,593) | | Ending Balance | 31,785 | 31,176 | Standardized Measure of Discounted Future Net Cash Flows (in thousands) | Year | Standardized Measure | | :--- | :--- | | 2024 | $166,601 | | 2023 | $238,177 | | 2022 | $314,783 | Changes In and Disagreements with Accountants on Accounting and Financial Disclosure The company reports no changes in or disagreements with its accountants on accounting and financial disclosure - None[389] Controls and Procedures Management concluded that the company's disclosure controls and internal controls over financial reporting were effective - Management concluded that the company's disclosure controls and procedures were effective as of June 30, 2024[390] - Management concluded that the company maintained effective internal control over financial reporting as of June 30, 2024, based on the COSO 2013 framework[392] - There were no changes in internal control over financial reporting during the fourth quarter that materially affected, or are reasonably likely to materially affect, these controls[395] Other Information The company reports no other information for this item - None[395] Disclosure Regarding Foreign Jurisdictions that Prevent Inspections This section is not applicable to the company - Not applicable[395] Part III Directors, Executive Officers, and Corporate Governance Information for this item is incorporated by reference from the company's 2024 Annual Meeting Proxy Statement - Information is incorporated by reference to the registrant's 2024 Annual Meeting of Stockholders proxy statement[397] Executive Compensation Information for this item is incorporated by reference from the company's 2024 Annual Meeting Proxy Statement - Information is incorporated by reference to the registrant's 2024 Annual Meeting of Stockholders proxy statement[398] Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters Information for this item is incorporated by reference from the company's 2024 Annual Meeting Proxy Statement - Information is incorporated by reference to the registrant's 2024 Annual Meeting of Stockholders proxy statement[398] Certain Relationships and Related Transactions, and Director Independence Information for this item is incorporated by reference from the company's 2024 Annual Meeting Proxy Statement - Information is incorporated by reference to the registrant's 2024 Annual Meeting of Stockholders proxy statement[398] Principal Accountant Fees and Services Information for this item is incorporated by reference from the company's 2024 Annual Meeting Proxy Statement - Information is incorporated by reference to the registrant's 2024 Annual Meeting of Stockholders proxy statement[398] Part IV Exhibits and Financial Statement Schedules This section lists all financial statements, schedules, and exhibits filed with or incorporated into the report - This section lists all financial statements, schedules, and exhibits filed with the report, including key corporate documents, material agreements, and consents from independent auditors and reservoir engineers[400][401] Form 10-K Summary The company reports no information for this item - None[401]