Evolution Petroleum outlines capital-light growth and $0.12 dividend amid portfolio upgrades

Earnings Call Insights: Evolution Petroleum Corporation (EPM) Q4 2025

MANAGEMENT VIEW

* CEO Kelly Loyd highlighted a material improvement in net income to $3.4 million and adjusted EBITDA of $8.6 million, noting, “Evolution reported a material improvement in net income of $3.4 million and adjusted EBITDA of $8.6 million, underpinned by a balanced commodity mix and prudent cost controls.”
* Loyd reported average production of 7,198 BOE per day and a revenue mix of 61% oil, emphasizing stability even in volatile oil markets. He announced the closure of the $9 million TexMex acquisition and, subsequent to quarter end, the largest minerals-only acquisition in company history in the SCOOP/STACK, adding 5,500 net royalty acres and approximately 420 net BOE per day at the effective date.
* Loyd stated, “We also declared a $0.12 per share dividend for fiscal Q1 '26, extending our record of dependable cash returns for shareholders.”
* The CEO explained the rationale behind recent acquisitions: “These acquisitions are a great example of the kind of low decline, high return exposure that we seek, scalable capital-light and immediately cash generative.”
* COO J. Bunch provided operational highlights, noting that in Chaveroo, “we turned in line 4 gross wells on time and under budget, and early results are ahead of plan.” He addressed downtime at Delhi due to facility safety upgrades and seasonal effects limiting CO2 injection.
* CFO Ryan Stash stated, “In fiscal Q4 2025, we had total revenues of $21.1 million, essentially flat year-over-year. This reflected flat production at 7,198 BOE per day and overall pricing that was roughly unchanged on an aggregate basis given our diversified commodity mix.”
* Stash added, “Quarterly net income improved materially, both sequentially and year-over-year to $3.4 million or $0.10 per diluted share. Adjusted EBITDA for the quarter was $8.6 million, up 7% year-over-year and 16% sequentially.”

OUTLOOK

* Management maintained guidance discipline, emphasizing a continued focus on durable free cash flow, reliable dividend payments, and seeking accretive low-decline opportunities. Loyd stated, “Our capital allocation framework is unchanged, prioritize durable free cash flow, return cash through a reliable dividend and pursue accretive low-decline opportunities, both organic and inorganic.”
* For fiscal 2026, CapEx guidance was given as “around $4 million to $6 million,” primarily for SCOOP/STACK and maintenance, with Chaveroo spending to be determined based on commodity pricing.
* Management stated that the majority of initial royalty cash flow from the new minerals acquisition in SCOOP/STACK will begin in fiscal Q1 2026 and build from there.

FINANCIAL RESULTS

* Total revenues for the quarter were $21.1 million with flat production at 7,198 BOE per day.
* Realized natural gas prices rose 66% year-over-year, while oil and NGL prices declined 20% and 12%, respectively.
* Adjusted EBITDA for the quarter was $8.6 million. Cash provided by operating activities was $10.5 million for the quarter, and capital expenditures were $4.7 million.
* On a per unit basis, LOE was $17.35 per barrel and G&A, excluding stock-based compensation, was $2.99 per barrel.
* At June 30, 2025, cash and cash equivalents were $2.5 million, with $37.5 million in borrowings and total liquidity of approximately $30 million. The company amended its senior secured reserve-based credit facility, increasing the borrowing base to $65 million.

Q&A

* Charles Fratt, Alliance Global Partners, asked about production run rates for SCOOP/STACK, Barnett, and Chaveroo. CEO Loyd responded, “The SCOOP/STACK is -- I mean it's in line with where we were in the quarter, honestly... but we don't like to give out intra-quarter sort of exact run rate. So I'm being a little evasive on purpose here for you.”
* Fratt also inquired about CapEx for fiscal 2026, with CFO Stash stating, “our budget currently is around $4 million to $6 million... that's primarily SCOOP/STACK CapEx, along with other maintenance CapEx... we're not currently budgeting any CapEx in that range for Chaveroo, and that's obviously dependent on our partner and just the outlook for oil prices in general.”
* When asked about LOE trends, Loyd and Bunch indicated expectations for at least a 10% decline in per BOE LOE for SCOOP/STACK as minerals cash flows are integrated.
* Christopher Degner, Water Tower Research, questioned whether the minerals acquisition signaled a strategic shift. CEO Loyd replied, “This was done on a truly an opportunistic basis... If it's working interest, if it's minerals, we're going to go for whatever adds the most accretion to our cash flow per share going forward.”

SENTIMENT ANALYSIS

* Analyst tone was probing, focusing on run rates, cost trends, and CapEx, with some skepticism evident in requests for more granular production data.
* Management’s tone during prepared remarks was positive and confident, but during Q&A, CEO Loyd became more evasive and cautious: “I'm being a little evasive on purpose here for you.” Management expressed confidence in the portfolio, stating, “we are well positioned to accelerate growth.”
* Compared to the previous quarter, both management and analysts maintained a cautious yet optimistic stance, though management appeared more confident in their acquisition strategy and cash flow stability.

QUARTER-OVER-QUARTER COMPARISON

* Guidance language remained disciplined, with continued emphasis on free cash flow and dividends.
* Strategic focus shifted more visibly toward capital-light, minerals-based acquisitions, and deploying capital opportunistically rather than aggressively drilling in a low-price environment.
* Key metrics improved quarter-over-quarter: net income rose to $3.4 million from a loss in Q3, and adjusted EBITDA increased sequentially.
* Analysts continued to focus on production, cost trends, and CapEx, but management was more explicit in deferring significant Chaveroo spending until oil prices improve.
* Management’s tone was more upbeat regarding acquisition execution and organic growth potential, bolstered by improved profitability and balance sheet flexibility.

RISKS AND CONCERNS

* CEO Loyd highlighted ongoing volatility in oil prices and the potential for negative production response if prices remain in the 60s.
* COO Bunch noted operational downtime at Delhi due to facility safety upgrades and pipeline balancing at Jonah, though these were partially offset by new wells and acquisitions.
* Management reiterated their approach of pacing development to commodity prices and maintaining tight capital discipline to mitigate these risks.
* Analyst concerns focused on LOE trends, integration of new assets, and CapEx flexibility in response to changing market conditions.

FINAL TAKEAWAY

Evolution Petroleum’s fourth-quarter call underscored the company’s ability to generate improved profitability and maintain steady capital returns even in a volatile market. Management emphasized a disciplined capital-light strategy with opportunistic acquisitions and cost control, highlighted by the $0.12 per share dividend and expanded mineral interests that provide high-margin, low-cost cash flow. Operational execution, portfolio upgrades, and strong liquidity position the company for growth and resilience as the market evolves in fiscal 2026.

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

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