Release Date: February 12, 2025
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
Positive Points
- Evolution Petroleum Corp (EPM, Financial) reported a 10% year-over-year increase in total production, reaching 6,935 BOE per day.
- The company has maintained its quarterly dividend payout at $0.12 per share for 11 consecutive quarters, marking its 46th consecutive dividend payment.
- EPM is actively evaluating multiple acquisition opportunities that could enhance long-term growth and improve cash flow generation.
- The company has a strong financial position with $11.7 million in cash on hand and total liquidity of $22.2 million.
- EPM's diversified portfolio has shown resilience, allowing the company to sustain strong production growth despite market volatility.
Negative Points
- Total revenues for fiscal Q2 were down 4% year-over-year, primarily due to a 12% decline in realized commodity prices.
- Temporary downtime in the Williston and Chaveroo fields resulted in approximately 90 BOE per day of deferred production for the quarter.
- A compressor failure in the Williston Basin caused a 30-day downtime, impacting natural gas and NGL sales.
- The company faces challenges with delayed payments from operators in the SCOOP/STACK region, affecting revenue realization.
- Despite a strong acquisition pipeline, the company acknowledges the difficulty in aligning buyer and seller expectations in the current commodity cycle.
Q & A Highlights
Q: Would Evolution Petroleum be comfortable executing multiple M&A transactions simultaneously, and what is the size of the targets in your pipeline?
A: Kelly Loyd, President and CEO, stated that most opportunities align with past transactions. The company prefers digestible deals, but if multiple transactions are highly accretive and make sense financially, they would consider executing them in quick succession.
Q: Why does it seem like there is an acceleration in M&A opportunities?
A: Kelly Loyd explained that the alignment of buyer and seller expectations is currently favorable, allowing for reasonable offers and responses. This alignment is not always present, but when it is, it creates a conducive environment for M&A activity.
Q: Can you provide an update on the SCOOP/STACK performance relative to expectations?
A: J. Mark Bunch, COO, reported that gas production is about 10% above the type curve, while oil production is on target. This indicates strong performance from the new wells in the region.
Q: How does Evolution Petroleum plan to finance future acquisitions, considering the balance between debt and equity?
A: Ryan Stash, CFO, mentioned that the company aims to maintain leverage within their target of 1x. They are open to using debt or equity, including the ATM program, for large and accretive acquisitions, ensuring any financing is beneficial to shareholders.
Q: Are there plans to expand into new core areas through acquisitions, or will the focus remain on existing areas?
A: Kelly Loyd indicated that while some opportunities overlap with existing areas, others could introduce new core areas. As a non-operator, Evolution Petroleum can expand without the G&A increase typically associated with new operational areas.
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
