Evolution Petroleum (EPM) - 2021 Q2 - Quarterly Report

Part I. Financial Information Item 1. Financial Statements (Unaudited) The unaudited financial statements for the period ended December 31, 2020, reflect a significant downturn compared to the prior year, reporting a net loss of $19.8 million driven by lower commodity prices and impairment charges Consolidated Condensed Balance Sheets Total assets decreased to $64.7 million by December 31, 2020, from $92.1 million at June 30, 2020, primarily due to a decline in oil and natural gas properties Consolidated Condensed Balance Sheet Summary (Unaudited) | Balance Sheet Items | Dec 31, 2020 ($) | June 30, 2020 ($) | | :--- | :--- | :--- | | Total Current Assets | 25,055,350 | 25,316,698 | | Total Property and Equipment, net | 39,284,754 | 66,529,920 | | Total Assets | 64,702,008 | 92,138,236 | | Total Current Liabilities | 3,481,123 | 4,278,859 | | Total Liabilities | 11,473,282 | 18,013,754 | | Total Stockholders' Equity | 53,228,726 | 74,124,482 | Consolidated Condensed Statements of Operations The company reported a net loss of $19.8 million for the six months ended December 31, 2020, primarily due to a $24.8 million impairment charge and a 39% decrease in total revenues Statement of Operations Highlights (Unaudited) | Metric | Three Months Ended Dec 31, 2020 ($) | Three Months Ended Dec 31, 2019 ($) | Six Months Ended Dec 31, 2020 ($) | Six Months Ended Dec 31, 2019 ($) | | :--- | :--- | :--- | :--- | :--- | | Total Revenues | 5,768,152 | 9,381,615 | 11,363,528 | 18,533,830 | | Proved Property Impairment | 15,189,459 | — | 24,792,079 | — | | Income (Loss) from Operations | (15,910,266) | 2,249,764 | (25,339,986) | 5,523,783 | | Net Income (Loss) | (12,710,007) | 1,764,918 | (19,845,155) | 4,557,738 | | Diluted EPS | (0.38) | 0.05 | (0.60) | 0.14 | Consolidated Condensed Statements of Cash Flows Net cash from operating activities significantly decreased to $1.2 million for the six months ended December 31, 2020, from $8.2 million in the prior-year period Cash Flow Summary (Unaudited) | Cash Flow Activity | Six Months Ended Dec 31, 2020 ($) | Six Months Ended Dec 31, 2019 ($) | | :--- | :--- | :--- | | Net Cash from Operating Activities | 1,223,957 | 8,174,058 | | Net Cash from Investing Activities | (182,935) | (10,418,590) | | Net Cash from Financing Activities | (1,668,458) | (8,372,033) | | Net Decrease in Cash | (627,436) | (10,616,565) | | Cash at End of Period | 19,035,092 | 20,935,968 | Notes to Unaudited Consolidated Condensed Financial Statements Notes detail significant accounting policies, including a $24.8 million impairment, credit facility reduction to $23 million, and reduced dividend payments - The company recorded ceiling test impairment charges of $15.2 million for the three months ended Dec 31, 2020, and $9.6 million for the quarter ended Sep 30, 2020, driven by a decrease in the 12-month average WTI price from $47.37 to $39.54 at Dec 31, 2020[48][49] - Quarterly cash dividends were reduced from $0.10 per share in Q2 FY2020 to $0.025 per share in Q2 FY2021, with total dividends paid in the six months ended Dec 31, 2020, being $1.7 million compared to $6.6 million in the prior-year period[56] - On November 2, 2020, the company's credit facility borrowing base was redetermined and reduced to $23 million, with no amounts outstanding as of December 31, 2020, and maturity extended to April 9, 2024[79][80] Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations Management discusses the impact of low oil prices and COVID-19, leading to a $15.2 million impairment, while highlighting strong liquidity and a recent dividend increase Executive Overview The company recorded a $12.7 million net loss for Q2 FY2021, heavily impacted by a $15.2 million impairment, yet increased its next dividend and maintained strong liquidity - Key highlights for Q2 FY2021 include paying the 29th consecutive quarterly cash dividend and increasing the next dividend by 20%, ending the quarter with $19.0 million in cash and no debt, resuming CO2 purchases at the Delhi field, and amending the credit agreement for more flexible covenants[105] - A $15.2 million impairment was recorded at December 31, 2020, as capitalized costs exceeded the full cost valuation ceiling, driven by a decrease in the 12-month trailing average crude oil price from $43.63/bbl at September 30 to $39.54/bbl at December 31[111] Liquidity and Capital Resources The company maintains $19.0 million in cash and an undrawn $23 million credit facility, with a recent dividend increase and delayed Delhi field development Liquidity Position as of Dec 31, 2020 | Component | Amount ($) | | :--- | :--- | | Cash and cash equivalents | 19.0 million | | Credit Facility Borrowing Base | 23.0 million | | Borrowings Outstanding | 0 | - The Board of Directors adjusted the quarterly dividend from $0.10 to $0.025 per share in the quarter ending June 30, 2020, and subsequently increased it by 20% to $0.03 per share for the quarter ending March 31, 2021[125] - The Phase V development project at the Delhi field, with associated future development costs of approximately $8.6 million, has been delayed by the operator for twelve to twenty-four months, with an expected start in calendar year 2022 or 2023[128] Results of Operations Revenues for the three months ended December 31, 2020, fell 38.5% to $5.8 million, resulting in a $12.7 million net loss due to lower prices, production, and a $15.2 million impairment Three-Month Operational Comparison (Q2 FY21 vs Q2 FY20) | Metric | Q2 2021 | Q2 2020 | % Change | | :--- | :--- | :--- | :--- | | Total Revenues | $5.8M | $9.4M | (38.5)% | | Equivalent Volumes (BOEPD) | 1,797 | 2,124 | (15.4)% | | Equivalent Price per BOE | $34.87 | $48.00 | (27.4)% | | Lease Operating Costs | $3.0M | $4.2M | (29.0)% | | Net Income (Loss) | ($12.7M) | $1.8M | (820.1)% | Six-Month Operational Comparison (H1 FY21 vs H1 FY20) | Metric | H1 2021 | H1 2020 | % Change | | :--- | :--- | :--- | :--- | | Total Revenues | $11.4M | $18.5M | (38.7)% | | Equivalent Volumes (BOEPD) | 1,819 | 2,017 | (9.8)% | | Equivalent Price per BOE | $33.94 | $49.94 | (32.0)% | | Lease Operating Costs | $5.4M | $7.3M | (26.2)% | | Net Income (Loss) | ($19.8M) | $4.6M | (535.4)% | - The company recorded a proved property impairment of $24.8 million during the six months ended December 31, 2020, primarily due to the decline in oil prices over the preceding twelve months, which lowered the full cost accounting ceiling[158] Item 3. Quantitative and Qualitative Disclosures About Market Risks The company's market risk disclosures remain consistent with its 2020 Form 10-K, with no open derivative contracts as of December 31, 2020 - The company is exposed to energy commodity price risk, counterparty risk, and interest rate risk, monitoring commodity prices to assess the need for derivative instruments but not engaging in speculative trading[168][170] - As of December 31, 2020, the company did not have any remaining open derivative contracts[169] Item 4. Controls and Procedures Management concluded that disclosure controls and procedures were effective as of December 31, 2020, with no material changes to internal controls - The CEO and CFO concluded that as of December 31, 2020, the company's disclosure controls and procedures were effective[172] - There were no changes in internal controls over financial reporting during the quarter ended December 31, 2020, that have materially affected, or are reasonably likely to materially affect, internal controls[175] Part II. Other Information Item 1. Legal Proceedings The company reported no legal proceedings during the period - None[177] Item 1A. Risk Factors The company refers to its Annual Report on Form 10-K for the fiscal year ended June 30, 2020, for a detailed description of its risk factors - For a detailed description of risk factors, the company refers to its Annual Report on Form 10-K for the year ended June 30, 2020[178] Item 2. Unregistered Sales of Equity Securities and Use of Proceeds The company did not purchase any common stock under its share repurchase program during the quarter ended December 31, 2020 - The company did not purchase any common stock in the open market during the quarter ended December 31, 2020[179] Item 6. Exhibits This section lists exhibits filed with the Form 10-Q, including the Sixth Amendment to the Credit Agreement and CEO/CFO certifications - Key exhibits filed include the Sixth Amendment to the Credit Agreement, CEO/CFO certifications (Rule 13a-14(a) and Section 1350), and XBRL data files[182]