Evolution Petroleum (EPM) - 2025 Q1 - Earnings Call Transcript

Financial Data and Key Metrics Changes - Total revenues for fiscal Q1 2025 were $21.9 million, a 6$2.1 million compared to the prior year period, while adjusted EBITDA increased 21% to $8.1 million due to higher revenue and reduced operating costs [22] - Cash flow from operations increased significantly to$7.6 million for the quarter, up from $4.3 million in the prior year [22] - The company ended the quarter with$6.9 million in cash and $39.5 million in borrowings under its revolving credit facility, resulting in total liquidity of$17.4 million [25] Business Line Data and Key Metrics Changes - Total production increased by 16% year-over-year, reaching 7,478 net barrels of oil equivalent per day, supported by strong performance from SCOOP/STACK and Chaveroo [10] - Production from the three horizontal San Andres wells in Chaveroo met expectations, contributing positively to overall production [10] - At Delhi, production improved quarter-over-quarter due to the replacement of a CO2 recycle compressor and resumed CO2 purchases [18] Market Data and Key Metrics Changes - The company faced the lowest natural gas pricing environment since the COVID-19 pandemic in calendar 2024, yet continued to generate positive cash flow [23] - The production operations in the Williston Basin were impacted by high-volume wells going down, but production was quickly restored [19] Company Strategy and Development Direction - The company focuses on diversifying its portfolio to mitigate exposure to commodity price volatility, emphasizing assets with steady, predictable returns [9] - Future growth will be driven by disciplined capital management, strategic deployment in high-return regions, and ongoing evaluation of accretive M&A opportunities [14][15] - The commitment to returning value to shareholders is highlighted by a consistent dividend program, marking the 45th consecutive dividend payment [12][26] Management's Comments on Operating Environment and Future Outlook - Management expressed confidence in the adaptability of the diversified asset base to thrive under various market conditions, particularly in light of fluctuating natural gas prices [9][28] - The company anticipates continued strong liquids production in fiscal year 2025, enhancing cash flow for the future [10] Other Important Information - The company plans to drill four horizontal wells in Chaveroo and has agreed to participate in five additional gross horizontal wells in SCOOP/STACK [17][39] - The company has a strong commitment to maintaining a disciplined approach to capital expenditures, with expectations of $12 million to$14.5 million for the full fiscal year [44] Q&A Session Summary Question: Expectations for the next batch of wells in SCOOP/STACK - Management indicated that the new wells are expected to perform similarly to previous wells, which exceeded initial type curve projections by approximately 65% [31][32] Question: Production uplift and CapEx expectations for Chaveroo - The expected production uplift is around 220 barrels per day gross per well, with CapEx for drilling estimated at $3.5 million per well [39] Question: CO2 purchases and production response timeline at Delhi - Management expects to see a production response within a month of resuming CO2 purchases, with an overall upward movement anticipated [46][50] Question: M&A activity and market conditions - Management noted an increase in potential deals and seller willingness, indicating a favorable environment for acquisitions [53][54] Question: Changes in drilling and completion for upcoming wells at Chaveroo - The company plans to use produced water for drilling to control costs, which is a change from previous practices [58]