Evolution Petroleum to acquire natural gas assets in Oklahoma for $43.5M in cash

Evolution Petroleum announced that it has entered into definitive agreements to acquire non-operated oil and natural gas assets in the SCOOP and STACK plays in central Oklahoma from Red Sky Resources III, Red Sky Resources IV and Coriolis Energy Partners I. The combined purchase price of the acquisitions is $43.5M in cash, subject to customary closing adjustments, with an effective date of November 1 and an expected closing date in mid-February during the company’s third quarter of fiscal 2024. Evolution expects to fund the acquisition with cash on hand and borrowings from EPM‘s revolving credit facility. Production of approximately 1,550 barrels of oil equivalent per day (“BOEPD”) and commodity mix of 42% oil, 15% natural gas liquids, and 43% natural gas as of the effective date. Acquisition highlights include: approximately 230 producing wells in the SCOOP and STACK plays of the Anadarko Basin in Blaine, Canadian, Carter, Custer, Dewey, Garvin, Grady, Kingfisher, McClain, and Stephens counties, Oklahoma; significant upside associated with approximately 3,700 net acres in the SCOOP and STACK plays with more than 300 gross undeveloped locations, with an average working interest of approximately 3%; highly accretive to key valuation metrics, including TEV/EBITDA, EPS, and CFPS; acquisitions and associated development drilling expected to be self-funding and generate incremental cash flow to further support the Company’s quarterly dividend while adding minimal additional overhead. As of the effective date, there were 22 gross wells in process, 21 of which were drilled but uncompleted to be paid through completion by the seller. As of now, 13 of these DUCs have been completed and are producing. Assets managed by best-in-class operators, including Continental, Ovintiv, EOG, Marathon, and Gulfport. Evolution expects to fund the transactions from cash on hand and borrowings from the Company’s senior credit facility with MidFirst Bank. As of December 31, 2023, and prior to the transaction, the Company had approximately $8 million in cash on hand and had no outstanding borrowings under the credit facility. The Company estimates that net debt after giving effect to the transaction will be within the Company’s targeted leverage ratio of one-times pro forma adjusted EBITDA.