Evolution Petroleum outlines capital-light mineral acquisition strategy while maintaining $0.12 dividend

Earnings Call Insights: Evolution Petroleum Corporation (EPM) Q1 2026

MANAGEMENT VIEW

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Kelly Loyd, CEO, highlighted the company’s strong start to fiscal 2026, stating that "our first quarter reflected continued execution across a broad and diversified portfolio, underscoring the resiliency of our business model through commodity price cycles." Loyd emphasized the closing of Evolution’s first minerals and royalties acquisition in the SCOOP/STACK, noting it "expands our exposure to high-quality, long-lived reserves while maintaining the capital-light profile that defines our portfolio." The deal offers participation in over 650 gross locations with minimal operating expenses and no future capital commitments.

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Loyd stated that the company is "maintaining a strong financial foundation with ample liquidity and low leverage, supported by the credit facility expansion completed at the end of fiscal '25." He also announced the 49th consecutive quarterly cash dividend and the 14th consecutive cash dividend of $0.12 per share for the fiscal second quarter.

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The company’s strategy remains "operate efficiently, allocate capital prudently and return capital to shareholders while maintaining financial strength," according to Loyd, with continued focus on sustainable free cash flow to support the regular dividend and opportunistic acquisitions.

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COO J. Bunch reported operational consistency across assets, including the turning to sales of 3 wells in SCOOP/STACK and ongoing drilling activity on 12 gross wells from the newly acquired acreage. Bunch noted cost optimization at Chaveroo and stable operations at other assets, stating "overall, our assets continue to perform as expected, and we remain disciplined in allocating capital to the highest return opportunities while maintaining operational flexibility."

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Ryan Stash, CFO, reported, "total revenue was $21.3 million compared to $21.9 million in the same period last year and up from fiscal Q4." Stash also noted adjusted EBITDA at $7.3 million, net income of $0.8 million or $0.02 per diluted share, and cash provided by operating activities of $7.8 million. Stash highlighted the return of $4.1 million to shareholders through the quarterly dividend and stated, "we have continued to add hedges to maintain compliance with our credit facility covenants and protect cash flow for our shareholder return program."

OUTLOOK

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Management reiterated the ongoing commitment to the quarterly dividend, with Loyd stating, "we'll continue to return meaningful capital to shareholders through our dividend program, maintaining our policy of setting the dividend at a level that we view to be sustainable for multiple years."

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Stash indicated that capital expenditure guidance for fiscal 2026 remains at $4 million to $6 million, and a flattish production outlook for the year, noting "like a flattish outlook is probably not -- that's not a bad assumption." No formal annual production guidance was provided due to the variable nature of development and reporting, especially on royalty assets.

FINANCIAL RESULTS

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Stash detailed a revenue mix for the quarter of 60% oil, 28% natural gas, and 12% NGLs, with an average realized price of $31.63 per BOE. Net income was $0.8 million, compared to $2.1 million in the year-ago quarter. Adjusted EBITDA was $7.3 million, down from $8.1 million last year. Cash provided by operating activities increased to $7.8 million, and capital expenditures were $1.9 million. At quarter end, cash and cash equivalents were $0.7 million, with $53 million of borrowings and $0.8 million in letters of credit, resulting in total liquidity of approximately $11.9 million.

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The reduction in net working capital was attributed to the integration of two recent acquisitions, with expectations for improvement in the coming months.

Q&A

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Jeffrey Grampp, Northland Capital Markets, asked about normalizing LOE at TexMex and upside from optimization. Bunch explained that "with the production being brought back up to where we expect it to be, and we've also seen the baseline cost dropping with the new operator taking over control, we expect the lifting cost to get back to a more reasonable level. It's not going to stay at $47."

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Grampp also inquired about M&A deal flow and the dichotomy between oil and gas prices. Loyd responded, "we are seeing a number of attractive or potentially attractive deals that we're looking at... buying that at 3x, 4x, 3.5x multiple, those are multiples that we consider really attractive for minerals with upside in inventory."

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Jeffrey Robertson, Water Tower Research, asked about workover trajectories at TexMex and margin trends at Delhi. Bunch confirmed expectations for normalization and improvement, while Stash and Bunch noted that costs at Delhi should remain consistent, with production increases leading to lower lifting costs per BOE.

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Ron Aubrey, RJ Aubrey Investments, focused on natural gas hedging and West Coast pricing premiums. Stash stated, "we're over 50% hedged, actually closer to probably 70% hedged for the next year... our floors are generally in the $350 to $360 range for next year."

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Charles Fratt, Alliance Global Partners, asked about the minerals acquisition’s impact. Loyd clarified it contributed for less than 2 months of the quarter and expects the full benefit in the next quarter.

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Fratt also questioned full-year production guidance and CapEx. Stash reiterated the $4 million to $6 million CapEx range and described the production outlook as flattish.

SENTIMENT ANALYSIS

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Analysts pressed for clarity on LOE normalization, production cadence, margin outlooks, and M&A multiples. Their tone was generally neutral, seeking specifics on operational improvements and the impact of recent acquisitions.

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Management retained a confident but measured tone, frequently emphasizing operational discipline and prudent capital allocation. Loyd expressed confidence in the company’s ability to "reap the rewards" of market cycles and maintain shareholder returns. Stash’s responses were factual and aligned with prior guidance, reflecting stability and discipline.

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Compared to the previous quarter, analyst questions continued to focus on cost trends and asset performance, with a similar neutral to slightly positive tone. Management’s sentiment remained consistent, projecting steady confidence and strategic discipline.

QUARTER-OVER-QUARTER COMPARISON

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Guidance language remained largely unchanged, with management reiterating a focus on a sustainable dividend and prudent CapEx allocation ($4 million to $6 million for fiscal 2026).

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Strategic focus shifted slightly, with greater emphasis this quarter on capital-light mineral acquisitions and operational flexibility.

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Key metrics showed a decrease in net income and adjusted EBITDA compared to the previous quarter, while cash flow from operations improved slightly. Revenue was up from Q4 but down year-over-year.

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Analysts’ tone was consistent with prior quarters, focusing on cost management, asset-level performance, and the integration of new acquisitions.

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Management’s confidence and messaging around asset quality and cash flow discipline remained steady, with ongoing emphasis on capital returns and opportunistic M&A.

RISKS AND CONCERNS

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Management highlighted commodity price volatility as a persistent risk, particularly noting that "at $60 a barrel, CapEx budgets are beginning to be reduced which will lead to, at some point, prices needing to move higher to spur enough drilling to meet demand" (Loyd).

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Operational challenges included higher initial costs at TexMex due to operator transition and production downtime at Delhi from unscheduled turbine repairs and high temperatures. Bunch noted that "the turbine has been repaired and temperatures are already cooler."

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Integration of recent acquisitions affected net working capital, with expectations for improvement as integration progresses.

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Weather and storage constraints were identified as factors in natural gas market volatility, particularly for West Coast pricing.

FINAL TAKEAWAY

Evolution Petroleum’s management underscored the company’s operational consistency, disciplined capital allocation, and growing focus on capital-light mineral and royalty acquisitions. Despite commodity price headwinds and modest declines in oil and NGL prices, the company maintained strong liquidity, consistent dividend returns, and a flexible approach to both organic and inorganic growth. Management remains confident in the resilience and upside potential of its diversified portfolio, aiming to sustain shareholder value through market cycles.

Read the full Earnings Call Transcript [https://seekingalpha.com/symbol/epm/earnings/transcripts]

MORE ON EVOLUTION PETROLEUM CORPORATION

* Evolution Petroleum Corporation (EPM) Q1 2026 Earnings Call Transcript [https://seekingalpha.com/article/4842613-evolution-petroleum-corporation-epm-q1-2026-earnings-call-transcript]
* Evolution Petroleum: Year-End Specifics Add Clarity To Q1 Projection And Dividend Future [https://seekingalpha.com/article/4826475-evolution-petroleum-year-end-specifics-add-clarity-to-q1-projection-dividend-future]
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* Evolution Petroleum Corporation Q1 2026 Earnings Preview [https://seekingalpha.com/news/4519417-evolution-petroleum-corporation-q1-2026-earnings-preview]
* Evolution Petroleum outlines capital-light growth and $0.12 dividend amid portfolio upgrades [https://seekingalpha.com/news/4495786-evolution-petroleum-outlines-capital-light-growth-and-0_12-dividend-amid-portfolio-upgrades]