Evolution Petroleum (US:EPM)2025-05-14 16:02Financial Data and Key Metrics Changes - Total revenues for fiscal Q3 were $22.6 million, down 2% year over year, primarily due to lower production volumes, partially offset by a 7% increase in average realized commodity prices driven by stronger natural gas and NGL prices [21][22] - Net loss for the third quarter was $2.2 million or $0.07 per share, compared to net income of $0.3 million or $0.01 per share in the prior year [22] - Adjusted EBITDA was $7.4 million, down from $8.5 million in the year-ago period, primarily due to lower revenue volumes and higher operating costs [22] Business Line Data and Key Metrics Changes - Natural gas revenue rose 33% year over year to $7.8 million, while NGL revenue increased 14% to $3 million, partially offsetting a 19% decline in oil revenue [10] - Total production declined 7.5% year over year to 6,667 barrels of oil equivalent per day, primarily due to planned maintenance and weather-related downtime [11] Market Data and Key Metrics Changes - Oil prices softened during April, falling nearly $12 a barrel to below $60, while natural gas prices strengthened, providing a partial offset to weaker crude prices [10] - Approximately 40% of oil volumes are hedged at prices above $70 through the fiscal year end, providing a safety net for capital expenditures and dividends [11] Company Strategy and Development Direction - The company remains focused on disciplined capital allocation, sustaining dividends, and pursuing opportunistic growth, particularly in low decline assets [6][13] - The recent Tex Mex acquisition adds approximately 440 barrels of oil equivalent per day of stable production, aligning with the company's long-term strategy [8][9] - Development activities are being shifted towards gas-weighted opportunities, particularly in the SCOOPSTACK area, while delaying oil-weighted drilling [14][15] Management's Comments on Operating Environment and Future Outlook - Management expressed confidence in the ability to sustain dividends despite ongoing commodity price volatility, highlighting a strong operating cash flow driven by a diversified portfolio [12][13] - The company anticipates that the effects of recent acquisitions will be evident in fiscal Q4, with production and cash flow expected to improve [13][26] Other Important Information - The company declared a cash dividend of $0.12 per share, marking the 47th consecutive quarter of issuing a dividend [12][24] - The company has negotiated with lenders to extend the maturity of its credit facility and increase total commitments, enhancing financial flexibility [24][66] Q&A Session Summary Question: Insights on M&A market and bid-ask spreads - Management noted that while bid-ask spreads may widen with weaker oil prices, there are still encouraging opportunities in the M&A market, particularly for low decline assets [29][35] Question: Performance of new wells at Chavaroo - New wells were drilled and completed under budget, approximately 5% below AFE, with initial production rates exceeding expectations [39][41] Question: Impact of Delhi EOR project shift - The shift from CO2 floods to waterflood development is expected to result in significant cost savings, estimated at $400,000 per month, without impacting performance [49][53] Question: Clarification on production increases - The combined production from Tex Mex and Chavaroo is expected to exceed initial projections, with Tex Mex contributing approximately 440 BOE per day [56][58]