Evolution Petroleum (EPM) - 2025 Q4 - Earnings Call Transcript

Financial Data and Key Metrics Changes - The company reported a net income of $3.4 million and adjusted EBITDA of $8.6 million, reflecting a 7% year-over-year increase in adjusted EBITDA and a 16% sequential increase [4][17] - Total revenues for Fiscal Q4 2025 were $21.1 million, essentially flat year-over-year, with average production at 7,198 BOE per day [16][17] - Realized natural gas prices increased by 66% year-over-year, while oil prices declined by 20% and NGL prices declined by 12% [17] Business Line Data and Key Metrics Changes - The company closed a $9 million acquisition of TexMex, adding approximately 440 net BOE per day of stable, low-decline production [4][5] - The recent acquisition in the SCOOP/STACK added approximately 5,500 net royalty acres with roughly 420 net BOE per day, enhancing cash flow without additional lifting costs [5][6] Market Data and Key Metrics Changes - The demand for oil is expected to grow at a steady rate of over 1% per year, with OPEC+ continuing to add back supply [7] - The natural gas market is anticipated to see strong forward demand due to increased LNG exports and industrial demand related to new data centers and AI implementation [10] Company Strategy and Development Direction - The company aims to maximize shareholder returns through a disciplined capital allocation framework, focusing on durable free cash flow and reliable dividends [12][20] - The strategy includes pursuing accretive low-decline opportunities, both organic and inorganic, to enhance per share value over time [12][20] Management's Comments on Operating Environment and Future Outlook - Management expressed confidence in the portfolio and future cash flows, highlighting the ability to adapt to market conditions and capitalize on opportunities [12][20] - The company remains cautious about drilling activities, preferring to wait for favorable commodity prices before making significant investments [28] Other Important Information - The company declared a $0.12 per share dividend for Fiscal Q1 2026, marking the 48th consecutive quarterly dividend [19] - The company amended its senior secured reserve-based credit facility, establishing a $65 million borrowing base under a $200 million revolving credit facility [18] Q&A Session Summary Question: Current run rates for SCOOP/STACK, Barnett, and Shabbaroo - Management indicated that production rates are in line with previous quarters, with Shabbaroo wells expected to decline approximately 50% over the first year [22][23] Question: CapEx outlook for Fiscal 2026 - The budget for Fiscal 2026 is estimated at $4 million to $6 million, primarily for SCOOP/STACK and maintenance CapEx [25] Question: LOE expectations for SCOOP/STACK and Barnett - Management expects a material improvement in LOE due to the minerals acquisition, with current levels for Barnett anticipated to decrease slightly [29][35]