Evolution Petroleum (EPM) - 2022 Q2 - Earnings Call Transcript

Financial Data and Key Metrics Changes - For Q2 2022, net income increased by 31% to $6.8 million or$ 0.20 per diluted share, compared to $5.2 million or$ 0.16 per diluted share in the previous quarter [10] - Adjusted EBITDA rose by 20% to $10.2 million from$ 8.5 million in Q1 2022, with adjusted EBITDA per BOE at $22.32, a 41% increase from the prior quarter [23][34] - Total revenue grew to$ 22.3 million, an 18% increase from the previous quarter [34] - Cash position improved to $13.6 million, a 71% increase from September 30, 2021 [11][26] Business Line Data and Key Metrics Changes - Production in Delhi decreased by 8% to 108,245 BOE or 1,177 BOE per day, impacted by CO2 purchase suspensions and maintenance [14] - At Hamilton Dome, net production increased by 2% to 3,021 barrels or 413 barrels of oil per day due to restoration efforts [16] - Barnett assets saw a 25% decrease in production to 285,761 BOE or 3,106 BOE per day, affected by operator decisions to maximize cash flow [17] Market Data and Key Metrics Changes - The company benefited from higher commodity prices as it was unhedged during the quarter, leading to increased cash flow generation [8] - Natural gas revenue reached$ 9.2 million for Q2, driven by production mix adjustments [35] Company Strategy and Development Direction - The company aims to operate within cash flow while paying meaningful cash dividends to shareholders, with a focus on geographic expansion and targeted acquisitions [8][44] - Recent acquisitions in the Williston Basin and Jonah Field are expected to enhance the longevity of the dividend payout program [9][45] Management's Comments on Operating Environment and Future Outlook - Management expressed optimism about the business and economic environment, declaring a third-quarter dividend of $0.10 per share, a 33% increase from the previous quarter [21][22] - The company anticipates continued cash flow generation and plans to maintain a strong balance sheet while pursuing strategic acquisitions [30][70] Other Important Information - The company amended its credit facility to reflect the acquisition of Barnett Shale assets, increasing the borrowing base to$ 50 million [27] - The company plans to hedge a portion of its production to protect cash flows and maintain compliance with its credit facility [32] Q&A Session Summary Question: What is the current rate on the credit facility, the interest rate? - The current interest rate is 3%, which is LIBOR plus 2.75% with a 25 basis point floor [74] Question: Looking at the two acquisitions, is there likely to be more activity in the Williston Asset compared to Jonah? - Yes, the Williston Asset is expected to have more operational activity, while Jonah will be limited to operational optimization [77] Question: Can you explain the optionality in the Williston acquisition? - The company has the flexibility to propose wells and can choose to drill or not, providing significant optionality in operations [88] Question: Is the operator continuing to ramp up CO2 injection? - CO2 injection has been ramped up to about 105 million cubic feet per day, with expectations to stabilize production over the next 18 to 24 months [84]