Evolution Petroleum’s Mixed Earnings Call Reveals Strategic Moves

Evolution Petroleum ((EPM)) has held its Q3 earnings call. Read on for the main highlights of the call.

The recent earnings call for Evolution Petroleum painted a mixed picture of the company’s performance. While there were notable achievements such as the successful acquisition of Tex-Mex and robust growth in natural gas revenue, these were counterbalanced by challenges like a decline in total revenue and production, as well as a reported net loss for the quarter. The company’s steadfast commitment to dividends and financial flexibility offers a positive outlook, although operational setbacks and financial losses temper the overall sentiment.

Tex-Mex Acquisition and Chaveroo Wells Performance

Following the quarter’s end, Evolution Petroleum successfully closed the Tex-Mex acquisition and brought online four new wells in the Chaveroo development block. These developments contributed more than 850 net barrels of oil equivalent per day, which is expected to bolster production and cash flow in the fiscal fourth quarter.

Strong Natural Gas Revenue Growth

The company reported a 33% year-over-year increase in natural gas revenue, reaching $7.8 million, with NGL revenue also rising by 14% to $3 million. This growth helped to partially offset a 19% decline in oil revenue, showcasing the resilience of Evolution Petroleum’s diversified portfolio.

Dividend Declaration

Evolution Petroleum’s Board declared a cash dividend of $0.12 per share, marking the 47th consecutive quarter of issuing a dividend and the 12th consecutive quarter at this rate. This reflects the company’s ongoing commitment to returning capital to its shareholders.

Increased Liquidity and Credit Facility Expansion

The company reported total liquidity of $20.1 million, alongside borrowings of $35.5 million. Additionally, Evolution Petroleum received approval to expand its credit facility commitments to $65 million, enhancing its financial flexibility.

Decline in Overall Revenue and Production

Total revenues saw a 2% year-over-year decline to $22.6 million, primarily due to an 8% decrease in production volumes. This was attributed to downtime at Barnett and maintenance activities at Delhi.

Net Loss Reported

Evolution Petroleum reported a net loss of $2.2 million, or $0.07 per share, contrasting with a net income of $0.3 million or $0.01 per share in the same period last year.

Operational Challenges at Delhi and Barnett

Production was impacted by planned maintenance at Delhi and weather-related downtime in Barnett, resulting in a 7.5% decline in total production year-over-year.

Forward-Looking Guidance

Looking ahead, Evolution Petroleum plans to focus on maintaining financial flexibility, sustaining dividends, and pursuing growth opportunities, especially in gas-weighted areas. The company intends to delay certain oil-weighted developments due to current market conditions. It also maintains a strong hedging strategy, with about 40% of oil volumes hedged at prices above $70 through the fiscal year-end.

In conclusion, Evolution Petroleum’s earnings call highlighted a blend of achievements and challenges. While the company is making strategic moves to enhance its production capabilities and financial standing, operational setbacks and financial losses present hurdles. Nonetheless, the commitment to shareholder returns and financial flexibility provides a foundation for potential future growth.