Evolution Petroleum Corporation press release

Evolution Petroleum Reports Fiscal Year 2023 First Quarter Results and Declares Quarterly Cash Dividend for the Second Quarter

2022-11-08

NYSE - New York Stock Exchange · Oil · Natural Gas · Natural Gas Liquids · United States · Corporate Finance

HOUSTON, TX / ACCESSWIRE / November 8, 2022 / Evolution Petroleum (NYSE American:EPM) ("Evolution" or the "Company") today announced financial and operating results for its fiscal 2023 first quarter (the "current quarter") ended September 30, 2022. Evolution also declared a quarterly cash dividend of $0.12 per common share for the fiscal 2023 second quarter.

Key Highlights

Increased daily production in the current quarter by 2% over the fiscal 2022 fourth quarter ended June 30, 2022 (the "prior quarter") to an average of 7,598 net barrels of oil equivalent per day ("BOEPD"); Recorded revenue of $39.8 million and net income of $10.7 million, or $0.32 per diluted share, for the current quarter; Generated Adjusted EBITDA(1)of $17.0 million during the current quarter; Paid an increased quarterly dividend of $0.12 per common share, a 20% increase over the prior quarter; Reduced debt by $9.0 million in the current quarter, lowering debt net of cash to $1.5 million at September 30, 2022 and targeting pay off of all outstanding borrowings during the quarter ending December 31, 2022; and Continued to fund all operations, development capital expenditures, and dividends out of operating cash flow.

1. Adjusted EBITDA is Adjusted Earnings Before Interest, Taxes, Depreciation and Amortization and is a non-GAAP financial measure; see "Non-GAAP Information" section later in this release for more information including reconciliations to the most comparable GAAP measures.

Kelly Loyd, President and Chief Executive Officer, commented, "We are pleased with our overall results for the first quarter of fiscal 2023, which helped us to deliver on our commitment to maximize total returns to shareholders and further pay down borrowings on our credit facility. This included a reduction of our outstanding borrowings by $9 million, and we remain on target to pay down the facility completely by the end of the calendar year, creating substantial liquidity to support internal and external growth initiatives as well as enhance returns to our shareholders. Our first quarter again highlighted strong free cash flow generation from our low decline, long life assets, which we used to fund operations, capital spending, and the payment of our quarterly cash dividend."

Mr. Loyd concluded, "The first quarter represented a strong start for fiscal 2023. We are clearly seeing the benefits afforded by the two accretive acquisitions we completed in the second half of fiscal 2022, which have provided Evolution with a much larger and diversified asset base both geographically and by commodity mix. The intrinsic value of our enhanced sales mix was on full display in the first quarter as higher natural gas production and pricing were able to significantly offset the impact of lower oil prices compared to the fourth quarter of fiscal 2022. Our steadfast commitment to maintain a conservative balance sheet and to remain disciplined in our management of capital put us in a strong position to continue to execute our strategic plan focused on maximizing total shareholder returns. I want to thank our dedicated workforce for their tireless efforts and their outstanding execution of our proven strategies that has served us well for many years and will continue to do so into the future. Also as important, we truly appreciate the continued support of our shareholders. We look forward to capitalizing on additional opportunities to profitably grow the business while continuing to provide our shareholders with a meaningful and tangible return on their investment through our well-established, ongoing cash dividend strategy further supported by our program to opportunistically repurchase our shares."

Cash Dividend on Common Stock

On November 7, 2022, the Board of Directors declared a cash dividend of $0.12 per share of common stock, which will be paid on December 30, 2022 to common stockholders of record on December 15, 2022. This will be the 37thconsecutive quarterly cash dividend on the common stock since cash dividends were initiated on December 31, 2013. To date, the Company has paid over $90.3 million, or $2.73 per share, back to stockholders in common stock dividends. Maintaining and ultimately growing the common stock dividend remains a Company priority.

Share Repurchase Program

On September 8, 2022, the Board of Directors authorized a share repurchase program of up to $25 million of Evolution's common stock through December 31, 2024. The Company intends to fund repurchases from working capital and cash provided by operating activities. The shares may be repurchased from time to time in open market transactions, through privately negotiated transactions or by other means in accordance with federal securities laws.

Financial and Operational Results for the Quarter Ended September 30, 2022

| | | Current Quarter | | | Current Quarter % Change From | | | Prior Quarter | | | Current Quarter % Change From | | | Year-Ago Quarter | | | | | | | | Average BOEPD | | | 7,598 | | | | 2 | % | | | 7,451 | | | | 30 | % | | | 5,848 | | | Revenues ($M) | | $ | 39,797 | | | | (5) | % | | $ | 42,020 | | | | 111 | % | | $ | 18,879 | | | Net Income ($M) | | $ | 10,707 | | | | (28) | % | | $ | 14,872 | | | | 105 | % | | $ | 5,218 | | | Adjusted Net Income(1)($M) | | $ | 10,075 | | | | (33) | % | | $ | 15,113 | | | | 93 | % | | $ | 5,218 | | | Adjusted EBITDA(2)($M) | | $ | 17,005 | | | | (22) | % | | $ | 21,669 | | | | 100 | % | | $ | 8,515 | |

1. Adjusted net income is a non-GAAP financial measure, see "Non-GAAP Information" section later in this release for more information including reconciliations to the most comparable GAAP measures. 2. Adjusted EBITDA is Adjusted Earnings Before Interest, Taxes, Depreciation and Amortization and is a non-GAAP financial measure; see "Non-GAAP Information" section later in this release for more information including reconciliations to the most comparable GAAP measures.

Total production for the first quarter of fiscal 2023 was 7,598 net BOEPD, including 1,826 barrels per day ("BOPD") of oil; 27,109 thousand cubic feet per day ("MCFPD"), or 4,522 BOEPD, of natural gas; and 1,250 BOEPD of natural gas liquids ("NGLs").

Driving the 3% decrease in oil production from 1,890 BOPD in the prior quarter was the natural decline curve in multiple fields partially offset by higher production in the first quarter at Evolution's Williston Basin properties. Natural gas production increased 2% from 26,516 MCFPD in the prior quarter due to higher sales in the Barnett Shale. NGL production increased 9% from 1,142 BOEPD in the prior quarter due to higher sales in the Barnett Shale and at Delhi Field.

Evolution reported $39.8 million of total revenue for the first quarter of fiscal 2023, which was a 5% decrease from the prior quarter driven by lower oil prices. Oil revenue decreased 17% to $15.2 million from the prior quarter due to 2% lower sales volumes and a 15% decrease in realized commodity price. Natural gas revenue increased 7% to $19.8 million from the prior quarter due to 3% higher sales volumes and a 4% increase in realized commodity pricing. NGL revenue decreased 7% to $4.8 million with the 9% increase in sales volumes offset by a 16% decrease in realized pricing. The average realized price per BOE decreased 8% to $56.93 per BOE compared to $61.98 per BOE in the prior quarter, primarily due to lower realized crude oil and NGL prices.

Lease operating costs increased to $19.1 million from $17.3 million in the prior quarter. Primarily contributing to the increase was higher gathering, transportation & other expenses in the Barnett Shale associated with increased production and commodity pricing as well as changes in estimates from prior periods. Also contributing to the increase was higher workover expense in the Williston Basin. Partially offsetting the overall increase in lease operating costs was lower CO2costs at Delhi Field associated with the decrease in crude oil prices from the prior quarter.

Depletion, depreciation, and accretion expense was flat at $3.6 million compared to the prior quarter. On a per BOE basis, the Company's depletion rate decreased to $4.75 from $4.97 in the prior quarter.

The Company's general and administrative expenses were $2.5 million for the current quarter compared to $1.6 million in the prior quarter. The increase was largely a result of the prior quarter having included a $1.2 million reduction in non-cash stock-based compensation related to the forfeiture of unvested shares.

Net income for the current quarter was $10.7 million, or $0.32 per diluted share, compared to $14.9 million, or $0.44 per diluted share, in the prior quarter. Adjusted net income, excluding selected items (see "Non-GAAP Information" section later in this release for a reconciliation of the GAAP to non-GAAP metric), was $10.1 million, or $0.30 per diluted share, compared to $15.1 million, or $0.44 per diluted share, in the prior quarter.

Adjusted EBITDA was $17.0 million for the current quarter compared to $21.7 million in the prior quarter. On a per BOE basis, Adjusted EBITDA was $24.33 for the current quarter versus $31.96 for the prior quarter.

Operations Update

Net production of the Jonah Field properties was 958 million cubic feet ("Mmcf") of natural gas (181 thousand BOE ("MBOE")) in the current quarter versus 1.0 billion cubic feet ("Bcf") of natural gas (188 MBOE) in the prior quarter. The average natural gas price realized by Evolution at the Jonah Field was $8.21 in the current quarter compared to $7.80 in the prior quarter, a 5% sequential increase.

Net production of the Williston Basin properties was 45 MBOE for the current quarter (37 thousand barrels ("MBBL") of oil) compared to 44 MBOE (35 MBBL of oil) in the prior quarter. The average oil price per barrel realized by Evolution at the Williston Basin during the current quarter was $90.76 compared to $109.03 during the prior quarter.

Net production of the Barnett Shale properties was 329 MBOE (77% natural gas and 23% NGL) for the current quarter compared to 304 MBOE (76% natural gas, 23% NGL, and 1% oil) in the prior quarter, an increase of 8%. The average natural gas price per Mcf realized by Evolution at Barnett Shale during the current quarter was $7.81 compared to $7.55 during the prior quarter, an increase of 3%.

Hamilton Dome Field oil production volumes increased to 38 MBOE (100% oil) in the current quarter from 37 MBOE in the prior quarter primarily due to the increase in overall days in the current quarter. The average oil price per barrel realized by Evolution at Hamilton Dome Field during the current quarter was $78.37 compared to $99.89 during the prior quarter, a decrease of 22%.

Net production at Delhi Field in the current quarter was 106 MBOE (78% oil and 22% NGL) compared to 105 MBOE (83% oil and 17% NGL) in the prior quarter. The average oil price per barrel realized by Evolution at Delhi Field during the current quarter was $94.46 compared to $108.51 during the prior quarter. The average realized NGL price per barrel was $40.91 compared to $50.11 during the prior quarter.

Balance Sheet, Liquidity and Capital Spending

At September 30, 2022, cash and cash equivalents totaled $10.7 million and working capital was $6.5 million. Evolution had $12.3 million of debt outstanding under its revolving credit facility and total liquidity was $48.5 million, an increase in liquidity of 31% since June 30, 2022. Since quarter-end, Evolution has paid down another $7.5 million under its revolving credit facility. During the first quarter of fiscal 2023, the Company fully funded operations, development capital expenditures and cash dividends and reduced outstanding debt by $9.0 million through cash generated from operations and working capital.

For the three months ended September 30, 2022, Evolution paid $4.0 million in common stock dividends and incurred $1.0 million in development capital expenditures and minor plugging and abandonment costs. For fiscal 2023, the Company continues to expect development capital expenditures collectively across its existing portfolio of properties to range between $6.5 million to $9.5 million. These estimates are inclusive of the Delhi Central Facility upgrades, expected workovers at Hamilton Dome Field, the Barnett Shale, and the Jonah Field, as well as sidetrack drilling opportunities and low-risk development projects in the Williston Basin, but do not yet include Pronghorn and Three Forks development drilling, subject to industry commodity pricing and other considerations. Evolution believes its near-term capital spending requirements will be met from cash flows from operations and current working capital, as well as from borrowings under its revolving credit facility as needed for future acquisitions or development of proved undeveloped reserves at the Company's Williston Basin properties.

Conference Call

As previously announced, Evolution Petroleum will host a conference call on Wednesday, November 9, 2022 at 2:00 p.m. Eastern (1:00 p.m. Central) to discuss its fiscal 2023 results and outlook. To access the call, please dial 1-877-270-2148 (Toll-free) or 1-412-902-6510 (International). Participants should ask to be joined into the Evolution Petroleum Corporation call. To listen live via webcast, click the link https://event.choruscall.com/mediaframe/webcast.html?webcastid=DGQ7I1rLor go to the Company's website at www.evolutionpetroleum.com. A webcast replay will be available on Evolution's website under "Investors" on the "Presentations & Events" page following the call or via the webcast link listed above. The replay will be available through November 9, 2023.

About Evolution Petroleum

Evolution Petroleum Corporation is an independent energy company focused on maximizing total returns to its shareholders through the ownership of and investment in onshore oil and natural gas properties in the United States. The Company's long-term goal is to maximize total shareholder return from a diversified portfolio of long-life oil and natural gas properties built through acquisition and through selective development opportunities, production enhancement, and other exploitation efforts on its oil and natural gas properties. Properties include non-operated interests in the following areas: the Jonah Field in Sublette County, Wyoming, a natural gas and natural gas liquids producing field; the Williston Basin in North Dakota, a producing oil and natural gas property; the Barnett Shale located in North Texas, a natural gas and natural gas liquids producing property; the Hamilton Dome Field located in Hot Springs County, Wyoming, a secondary oil recovery field utilizing water injection wells to pressurize the reservoir; the Delhi Holt-Bryant Unit in the Delhi Field in Northeast Louisiana, a CO2enhanced oil recovery project; as well as small overriding royalty interests in four onshore Texas wells. Additional information, including the Company's annual report on Form 10-K and its quarterly reports on Form 10-Q, is available on its website at http://www.evolutionpetroleum.com.

Cautionary Statement

All forward-looking statements contained in this press release regarding current expectations, potential results and future plans and objectives of the Company involve a wide range of risks and uncertainties. Statements herein using words such as "believe," "expect," "plans," "outlook," "should," "will," and words of similar meaning are forward-looking statements. Although the Company's expectations are based on business, engineering, geological, financial, and operating assumptions that it believes to be reasonable, many factors could cause actual results to differ materially from its expectations and can give no assurance that its goals will be achieved. These factors and others are detailed under the heading "Risk Factors" and elsewhere in our periodic documents filed with the Securities and Exchange Commission. The Company undertakes no obligation to update any forward-looking statement.

Company Contacts

Kelly Loyd, President and Chief Executive Officer Ryan Stash, Senior Vice President & Chief Financial Officer (713) 935-0122 KLoyd@evolutionpetroleum.com RStash@evolutionpetroleum.com

Evolution Petroleum Corporation Condensed Consolidated Statements of Operations (Unaudited) (In thousands, except per share amounts)

| | | Three Months Ended | | | | | | | | | | | | | | September 30, | | | June 30, | | | | | | | | | | | 2022 | | | 2021 | | | 2022 | | | | | | Revenues | | | | | | | | | | | | | | Crude oil | | $ | 15,163 | | | $ | 8,859 | | | $ | 18,374 | | | Natural gas | | | 19,848 | | | | 5,458 | | | | 18,475 | | | Natural gas liquids | | | 4,786 | | | | 4,562 | | | | 5,171 | | | Total revenues | | | 39,797 | | | | 18,879 | | | | 42,020 | | | Operating costs | | | | | | | | | | | | | | Lease operating costs | | | 19,116 | | | | 8,625 | | | | 17,277 | | | Depletion, depreciation, and accretion | | | 3,598 | | | | 1,528 | | | | 3,564 | | | General and administrative expenses | | | 2,472 | | | | 1,940 | | | | 1,557 | | | Total operating costs | | | 25,186 | | | | 12,093 | | | | 22,398 | | | Income (loss) from operations | | | 14,611 | | | | 6,786 | | | | 19,622 | | | Other income and expenses | | | | | | | | | | | | | | Net gain (loss) on derivative contracts | | | (603 | ) | | | - | | | | (1,172 | ) | | Interest and other income | | | 6 | | | | 3 | | | | 83 | | | Interest expense | | | (243 | ) | | | (51 | ) | | | (300 | ) | | Income (loss) before income taxes | | | 13,771 | | | | 6,738 | | | | 18,233 | | | Income tax (expense) benefit | | | (3,064 | ) | | | (1,520 | ) | | | (3,361 | ) | | Net income (loss) | | $ | 10,707 | | | $ | 5,218 | | | $ | 14,872 | | | Earnings (loss) per common share: | | | | | | | | | | | | | | Basic | | $ | 0.32 | | | $ | 0.16 | | | $ | 0.44 | | | Diluted | | $ | 0.32 | | | $ | 0.15 | | | $ | 0.44 | | | Weighted average number of common shares outstanding | | | | | | | | | | | | | | Basic | | | 33,134 | | | | 32,863 | | | | 33,010 | | | Diluted | | | 33,319 | | | | 33,126 | | | | 33,450 | |

Evolution Petroleum Corporation Condensed Consolidated Balance Sheets (Unaudited) (In thousands, except share and per share amounts)

| | | September 30, 2022 | | | June 30, 2022 | | | | | Assets | | | | | | | | | | Current assets | | | | | | | | | | Cash and cash equivalents | | $ | 10,714 | | | $ | 8,280 | | | Receivables from crude oil, natural gas, and natural gas liquids revenues | | | 18,846 | | | | 24,043 | | | Derivative contract assets | | | 49 | | | | 170 | | | Prepaid expenses and other current assets | | | 2,235 | | | | 3,875 | | | Total current assets | | | 31,844 | | | | 36,368 | | | Property and equipment, net of depletion, depreciation, accretion, and impairment | | | | | | | | | | Oil and natural gas properties, net-full-cost method of accounting, of which none were excluded from amortization | | | 108,199 | | | | 110,508 | | | Other assets, net | | | 1,159 | | | | 1,171 | | | Total assets | | $ | 141,202 | | | $ | 148,047 | | | Liabilities and Stockholders' Equity | | | | | | | | | | Current liabilities | | | | | | | | | | Accounts payable | | $ | 10,044 | | | $ | 15,133 | | | Accrued liabilities and other | | | 10,696 | | | | 11,893 | | | Derivative contract liabilities | | | 924 | | | | 2,164 | | | State and federal taxes payable | | | 3,673 | | | | 1,095 | | | Total current liabilities | | | 25,337 | | | | 30,285 | | | Long term liabilities | | | | | | | | | | Senior secured credit facility | | | 12,250 | | | | 21,250 | | | Deferred income taxes | | | 7,063 | | | | 7,099 | | | Asset retirement obligations | | | 14,175 | | | | 13,899 | | | Total liabilities | | | 58,825 | | | | 72,533 | | | Commitments and contingencies | | | | | | | | | | Stockholders' equity | | | | | | | | | | Common stock; par value $0.001; 100,000,000 shares authorized: issued and | | | | | | | | | | outstanding 33,546,236 and 33,470,710 shares as of September 30, 2022 | | | | | | | | | | and June 30, 2022, respectively | | | 33 | | | | 33 | | | Additional paid-in capital | | | 42,811 | | | | 42,629 | | | Retained earnings | | | 39,533 | | | | 32,852 | | | Total stockholders' equity | | | 82,377 | | | | 75,514 | | | Total liabilities and stockholders' equity | | $ | 141,202 | | | $ | 148,047 | |