Evolution Petroleum Corporation Inc. (EPM) 2024 Q4 Earnings Call Summary

Optimistic Highlights

• Record Liquids Revenue

Generated record liquids revenue and production for fiscal 2024, driven by transformative transactions with SCOOP/STACK and Chaveroo.

• Expanded Drilling Inventory

Added over 300 locations in SCOOP/STACK, 80+ locations at Chaveroo, and three initial drilling sites at Delhi.

• Strong Production Performance

Participated in 22 wells at SCOOP/STACK, with many performing above expectations. Early results from Chaveroo's first three horizontal wells also exceeded estimates.

• Carbon Capture Certification

Delhi certified as a carbon capture, utilization, and storage site for enhanced oil recovery.

• Consistent Dividends

Announced a $0.12 dividend for September, marking the 44th consecutive quarterly dividend payment.

Pessimistic Highlights

• Volatile Natural Gas Prices

Faced volatile natural gas prices, impacting overall financial performance.

• Increased Drilling Costs

Higher-than-expected drilling and completion costs at Chaveroo due to unusually high fluid losses.

• Downtime at Delhi

Production at Delhi affected by field-wide power outages and downtime from a CO2 recycle compressor issue.

• Lowest Natural Gas Price Environment

Operated in the lowest natural gas price environment since the COVID-19 pandemic.

• Reduced CO2 Injection

CO2 purchase pipeline at Delhi taken offline for maintenance, reducing CO2 injection volumes.

Company Outlook

• Strong Liquids Production Expected

Expect strong liquids production in fiscal 2025, bolstering cash flow and supporting the dividend program.

• Focus on High-Return Regions

Continue expanding in high-return regions, focusing on disciplined cost management and strategic investments.

• Potential M&A Opportunities

Will evaluate additional M&A opportunities and investments within the current asset base to drive further organic growth.

• Commitment to Shareholder Returns

Committed to maximizing total shareholder returns through efficient capital management and sustaining the dividend program.

• Monitoring Market Conditions

Will continue to monitor market conditions and may add additional opportunistic hedges to reduce downside commodity price risk.

Q & A Highlights

• Q: Can you remind us where Test Site V with ExxonMobil is located in the Delhi field? (Donovan Schafer, Northland capital)

A: Test Site V is on the eastern side of the current development, west of the town of Delhi. It is an extension of the current development. (Mark Bunch)

• Q: Are there any new developments or conversations around expanding into more phases at Delhi? (Donovan Schafer, Northland capital)

A: Further expansion is further down the queue. There is still more running room in the current area, and future development depends on production results. (Kelly Loyd, Mark Bunch)

• Q: Will production at Delhi be up quarter-over-quarter in the next quarter? (Donovan Schafer, Northland capital)

A: Yes, production is expected to be up as CO2 recycling is back to full levels, and CO2 purchases are anticipated to resume in early Q2. (Mark Bunch, Kelly Loyd)

• Q: How will the credits from carbon capture sequestration certification be monetized? (Donovan Schafer, Northland capital)

A: Still working on it, no exact timeline for when anthropogenic CO2 will begin to be injected. (Kelly Loyd)

• Q: Are there 1 or 2 operators dominating the recent drilling activity in SCOOP/STACK? (John White, ROTH Capital)

A: Canvas and Continental are the main operators, dominating about half the wells. (Kelly Loyd)

• Q: What formations are being completed in SCOOP/STACK? (John White, ROTH Capital)

A: Woodford, Miss, and a couple of Springer wells. (Kelly Loyd)

• Q: Can you talk about LOE in Chaveroo and the Williston basin? (Jeff Robertson, Water Tower Research)

A: LOE at Chaveroo was high due to initial production setup. Williston basin LOE was down due to reduced workover rates and electrification projects. (Mark Bunch)

• Q: Where do you think LOE will average in fiscal '25? (Jeff Robertson, Water Tower Research)

A: Expect LOE to be around $20 per barrel, plus or minus. (Mark Bunch)

• Q: Can you share an estimate of capital spending for fiscal '25? (Jeff Robertson, Water Tower Research)

A: Estimated range is $12.5 million to $14.5 million, depending on SCOOP/STACK operator plans and market conditions. (Ryan Stash)

• Q: How do you think about funding an acquisition? (Jeff Robertson, Water Tower Research)

A: Could expand the credit facility and potentially raise equity if the deal is accretive. (Ryan Stash)

• Q: Has the ABL been reduced since the end of June? (Bruce Brown, Brown Capital)

A: No, the borrowing base remains at $50 million, and the outstanding part has not been reduced. (Kelly Loyd)

• Q: What is the current outstanding ABL? (Bruce Brown, Brown Capital)

A: Currently still the same at $39.5 million. (Kelly Loyd)

• Comment on 9/11 anniversary (John White, ROTH Capital)

A: Appreciated the comment on the anniversary of the 9/11 terrorist attack. (John White)