Evolution Petroleum Corporation press release

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

2023-02-07

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

HOUSTON, TX / ACCESSWIRE / February 7, 2023 / Evolution Petroleum (NYSE American:EPM) ("Evolution" or the "Company") today announced financial and operating results for its fiscal 2023 second quarter (the "current quarter") ended December 31, 2022. Evolution also declared a quarterly cash dividend of $0.12 per common share for the fiscal 2023 third quarter.

Key Highlights

Recorded current quarter revenue of $33.7 million and net income of $10.4 million or $0.31 per diluted share; Fiscal year to date ("YTD fiscal 2023") revenue and net income increased year-over-year ("YOY") 78% and 75%, respectively;

Generated Adjusted EBITDA(1)of $16.4 million during the current quarter; YTD fiscal 2023 Adjusted EBITDA grew 79% YOY to $33.5 million;

YTD fiscal 2023 daily production was 7,418 BOEPD, or 37% higher YOY; Paid a quarterly dividend of $0.12 per common share for the current quarter - a 60% increase from the dividend paid during the second quarter of fiscal 2022; Eliminated all debt during the current quarter through the full repayment of $12.3 million of outstanding borrowings; $50 million availability under the senior secured credit facility; All operations, development capital expenditures, dividends, and debt reduction funded 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 to report solid results for the second quarter of fiscal 2023. Our targeted portfolio of assets located in key prolific oil and natural gas producing regions in the onshore U.S. provide us with a strong platform for ongoing cash flow generation that is fully funding our operating and capital needs. As important, we paid off all outstanding borrowings under our credit facility incurred early in calendar 2022 to complete two major acquisitions and now have a debt-free balance sheet. Our increased liquidity enhances our ability to execute on our long-tenured return of shareholder capital program and continue to evaluate accretive acquisition opportunities."

Mr. Loyd added, "The benefits of our focused efforts to diversify, both geographically and by commodity mix, were on full display during the second quarter of fiscal 2023, highlighted by the premium natural gas price realized at our Jonah Field of $11.00 per MCF that helped raise company-wide natural gas realizations to $7.34 per MCF versus average Henry Hub pricing of $5.55 per MCF, over the same time period."

Mr. Loyd concluded, "With the payment in December of our 37thconsecutive quarterly cash dividend to our shareholders, the declaration of a $0.12 dividend for the next quarter and the completed repayment of borrowings on our credit facility, we continue to demonstrate our disciplined approach to maximizing total shareholder returns. In addition, we recently began making purchases through our share repurchase program to further implement our shareholder focus."

Cash Dividend on Common Stock

On February 6, 2023, Evolution's Board of Directors declared a cash dividend of $0.12 per share of common stock, which will be paid on March 31, 2023 to common stockholders of record on March 15, 2023. This will be the 38thconsecutive quarterly cash dividend on the Company's common stock, which has been paid since the quarter ended December 31, 2013. To date, Evolution has returned approximately $94.4 million, or $2.85 per share, back to stockholders in common stock dividends. Maintaining and ultimately growing the common stock dividend remains a key Company priority.

Financial and Operational Results for the Quarter Ended December 31, 2022

| | | Current Quarter | | Current Quarter % Change From | | | Prior Quarter | | Current Quarter % Change From | | | Year-Ago Quarter | | | Current YTD | | Current YTD % Change From | | | Prior YTD | | | | | | | | | | Average BOEPD | | | 7,250 | | | (5) | % | | | 7,598 | | | 46 | % | | | 4,957 | | | | 7,418 | | | 37 | % | | | 5,402 | | Revenues ($M) | | $ | 33,676 | | | (15) | % | | $ | 39,797 | | | 51 | % | | $ | 22,339 | | | $ | 73,473 | | | 78 | % | | $ | 41,218 | | Net Income ($M) | | $ | 10,387 | | | (3) | % | | $ | 10,707 | | | 52 | % | | $ | 6,833 | | | $ | 21,094 | | | 75 | % | | $ | 12,051 | | Adjusted Net Income(1)($M) | | $ | 9,646 | | | (4) | % | | $ | 10,075 | | | 41 | % | | $ | 6,833 | | | $ | 19,721 | | | 64 | % | | | 12,051 | | Adjusted EBITDA(2)($M) | | $ | 16,446 | | | (3) | % | | $ | 17,005 | | | 62 | % | | $ | 10,182 | | | $ | 33,451 | | | 79 | % | | $ | 18,697 |

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 second quarter of fiscal 2023 was 7,250 net BOEPD, including 1,804 barrels per day ("BOPD") of oil; 25,728 thousand cubic feet per day ("MCFPD"), or 4,294 BOEPD, of natural gas; and 1,152 BOEPD of natural gas liquids ("NGLs").

The 1% decrease in oil production from 1,826 BOPD in the prior quarter was primarily due to downtime associated with severe winter storms in the current quarter. Natural gas production decreased 5% from 27,109 MCFPD, or 4,522 BOEPD, in the prior quarter primarily due to downtime associated with severe winter storms and slightly lower production in the Barnett Shale due to temporary issues at select compression stations and certain offset operator activities. NGL production decreased 8% from 1,250 BOEPD in the prior quarter primarily due to downtime associated with severe winter storms and slightly lower production in the Barnett Shale due to temporary issues at select compression stations and certain offset operator activities. Also contributing to the decrease was the decision to maximize natural gas production thus reducing NGL recoveries from Jonah Field during the current quarter to capitalize on higher relative natural gas pricing.

Evolution reported $33.7 million of total revenue for the current quarter, a 15% decrease from the prior quarter. Oil revenue decreased 14% to $13.1 million from the prior quarter due to 1% lower sales volumes and a 13% decrease in realized commodity pricing. Natural gas revenue decreased 12% to $17.4 million from the prior quarter due to 5% lower sales volumes and an 8% decrease in realized commodity pricing. NGL revenue decreased 33% to $3.2 million due to 8% lower sales volumes and a 27% decrease in realized pricing. The average realized price per BOE decreased 11% to $50.49 per BOE compared to $56.93 per BOE in the prior quarter.

Lease operating costs decreased 21% to $15.0 million from $19.1 million in the prior quarter. Primarily contributing to the decrease were changes in estimates from prior periods and lower ad valorem and production taxes associated with lower revenues in the current quarter. Also contributing to the decrease were lower workover expense in the Williston Basin and lower CO2costs at Delhi Field associated with the decrease in crude oil prices from the prior quarter.

Depletion, depreciation, and accretion ("DD&A") expense was $3.5 million compared to $3.6 million in the prior quarter. On a per BOE basis, the Company's depletion rate of $4.76 was essentially flat with the $4.75 depletion rate in the prior quarter.

The Company's general and administrative ("G&A") expenses were $2.6 million for the current quarter compared to $2.5 million in the prior quarter. The increase was primarily associated with higher non-cash stock-based compensation in the current quarter due to sign-on awards and additional one-time director grants that was partially offset by lower professional services fees compared to the prior quarter.

Net income for the current quarter was $10.4 million, or $0.31 per diluted share, compared to $10.7 million, or $0.32 per diluted share, in the prior quarter. Adjusted Net Income (see "Non-GAAP Information" section later in this release for a reconciliation of the GAAP to non-GAAP metric), was $9.6 million, or $0.28 per diluted share, compared to $10.1 million, or $0.30 per diluted share, in the prior quarter.

Adjusted EBITDA was $16.4 million for the current quarter compared to $17.0 million in the prior quarter. On a per BOE basis, Adjusted EBITDA was $24.66 for the current quarter versus $24.33 for the prior quarter.

Operations Update

Net production of the Jonah Field properties was 175 thousand barrels of oil equivalent ("MBOE") (950 million cubic feet ("MMCF") of natural gas) in the current quarter versus 181 MBOE (958 MMCF of natural gas) in the prior quarter. The average natural gas price per MCF realized by Evolution at the Jonah Field was $11.00 in the current quarter compared to $8.21 in the prior quarter, a 34% sequential increase primarily due to higher realized prices as a result of strong winter demand on the West Coast.

Net production of the Williston Basin properties was 45 MBOE (34 MBBL of oil) for the current quarter compared to 45 MBOE (37 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 $82.31 compared to $90.76 during the prior quarter.

Net production of the Barnett Shale properties was 304 MBOE for the current quarter compared to 329 MBOE in the prior quarter. The average natural gas price per MCF realized by Evolution at Barnett Shale during the current quarter was $4.88 compared to $7.81 during the prior quarter.

Hamilton Dome Field oil production was 38 MBOE in the current quarter versus 38 MBOE in the prior quarter. The average oil price per barrel realized by Evolution at Hamilton Dome Field during the current quarter was $66.49 compared to $78.37 during the prior quarter, a decrease of 15%.

Net production at Delhi Field in the current quarter was 104 MBOE compared to 105 MBOE in the prior quarter. The average oil price per barrel realized by Evolution at Delhi Field during the current quarter was $83.50 compared to $93.31 during the prior quarter. The average realized NGL price per barrel was $32.15 compared to $40.91 during the prior quarter.

Balance Sheet, Liquidity and Capital Spending

At December 31, 2022, cash and cash equivalents totaled $3.7 million and working capital was $2.9 million. During the second quarter of fiscal 2023, Evolution fully repaid the remaining $12.3 million of debt outstanding under its revolving credit facility, which has a borrowing base of $50.0 million. As a result, total liquidity at December 31, 2022 was $53.7 million, including cash and cash equivalents. This represents an increase in liquidity of 45% since June 30, 2022.

During the second quarter of fiscal 2023, the Company fully funded operations, development capital expenditures, cash dividends, and debt repayment through cash generated from operations and working capital.

For the three months ended December 31, 2022, Evolution paid $4.1 million in common stock dividends and incurred $1.1 million in development capital expenditures. 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 expenditures include anticipated capital costs at Delhi field for a NGL plant heat exchanger project, projected to improve operational efficiency throughout the year, which is currently underway. Evolution's expected capital expenditures for fiscal year 2023 also include participating in the drilling of two sidetrack locations targeting the Birdbear formation and recompleting up to four vertical wells in the Williston Basin, but do not include any capital expenditures for drilling in the Pronghorn and Three Forks locations in the Williston Basin at this time. We continue to evaluate those potential drilling locations with the operator.

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.

Conference Call

As previously announced, Evolution Petroleum will host a conference call on Wednesday, February 8, 2023 at 2:00 p.m. Eastern (1:00 p.m. Central) to discuss its second quarter 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=5m8kN1QHor 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 February 8, 2024.

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 | | Six Months Ended | | | | | | | | | | | | | | | December 31, | | September 30, | | December 31, | | | | | | | | | | | | | 2022 | | 2021 | | 2022 | | 2022 | | 2021 | | | | | | | | Revenues | | | | | | | | | | | | | | | | | Crude oil | $ | 13,100 | | $ | 10,582 | | $ | 15,163 | | $ | 28,263 | | $ | 19,441 | | | Natural gas | | 17,370 | | | 9,170 | | | 19,848 | | | 37,218 | | | 14,628 | | | Natural gas liquids | | 3,206 | | | 2,587 | | | 4,786 | | | 7,992 | | | 7,149 | | | Total revenues | | 33,676 | | | 22,339 | | | 39,797 | | | 73,473 | | | 41,218 | | | Operating costs | | | | | | | | | | | | | | | | | Lease operating costs | | 15,041 | | | 10,671 | | | 19,116 | | | 34,157 | | | 19,296 | | | Depletion, depreciation, and accretion | | 3,458 | | | 1,224 | | | 3,598 | | | 7,056 | | | 2,752 | | | General and administrative expenses | | 2,581 | | | 1,823 | | | 2,472 | | | 5,053 | | | 3,763 | | | Total operating costs | | 21,080 | | | 13,718 | | | 25,186 | | | 46,266 | | | 25,811 | | | Income (loss) from operations | | 12,596 | | | 8,621 | | | 14,611 | | | 27,207 | | | 15,407 | | | Other income and expenses | | | | | | | | | | | | | | | | | Net gain (loss) on derivative contracts | | 846 | | | - | | | (603 | ) | | 243 | | | - | | | Interest and other income | | 7 | | | 7 | | | 6 | | | 13 | | | 10 | | | Interest expense | | (129 | ) | | (51 | ) | | (243 | ) | | (372 | ) | | (102 | ) | | Income (loss) before income taxes | | 13,320 | | | 8,577 | | | 13,771 | | | 27,091 | | | 15,315 | | | Income tax (expense) benefit | | (2,933 | ) | | (1,744 | ) | | (3,064 | ) | | (5,997 | ) | | (3,264 | ) | | Net income (loss) | $ | 10,387 | | $ | 6,833 | | $ | 10,707 | | $ | 21,094 | | $ | 12,051 | | | Net income (loss) per common share: | | | | | | | | | | | | | | | | | Basic | $ | 0.31 | | $ | 0.20 | | $ | 0.32 | | $ | 0.63 | | $ | 0.36 | | | Diluted | $ | 0.31 | | $ | 0.20 | | $ | 0.32 | | $ | 0.62 | | $ | 0.36 | | | Weighted average number of common shares outstanding: | | | | | | | | | | | | | | | | | Basic | | 33,174 | | | 32,929 | | | 33,134 | | | 33,154 | | | 32,896 | | | Diluted | | 33,394 | | | 33,262 | | | 33,319 | | | 33,356 | | | 33,193 | |

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

| | | December 31, 2022 | | | June 30, 2022 | | | | | Assets | | | | | | | | | | Current assets | | | | | | | | | | Cash and cash equivalents | | $ | 3,710 | | | $ | 8,280 | | | Receivables from crude oil, natural gas, and natural gas liquids revenues | | | 18,213 | | | | 24,043 | | | Derivative contract assets | | | 244 | | | | 170 | | | Prepaid expenses and other current assets | | | 1,908 | | | | 3,875 | | | Total current assets | | | 24,075 | | | | 36,368 | | | Property and equipment, net of depletion, depreciation, and impairment | | | | | | | | | | Oil and natural gas properties, net-full-cost method of accounting, of | | | | | | | | | | which none were excluded from amortization | | | 106,227 | | | | 110,508 | | | Other assets, net | | | 1,358 | | | | 1,171 | | | Total assets | | $ | 131,660 | | | $ | 148,047 | | | Liabilities and Stockholders' Equity | | | | | | | | | | Current liabilities | | | | | | | | | | Accounts payable | | $ | 10,091 | | | $ | 15,133 | | | Accrued liabilities and other | | | 9,883 | | | | 11,893 | | | Derivative contract liabilities | | | 49 | | | | 2,164 | | | State and federal taxes payable | | | 1,151 | | | | 1,095 | | | Total current liabilities | | | 21,174 | | | | 30,285 | | | Long term liabilities | | | | | | | | | | Senior secured credit facility | | | - | | | | 21,250 | | | Deferred income taxes | | | 6,744 | | | | 7,099 | | | Asset retirement obligations | | | 14,455 | | | | 13,899 | | | Operating lease liability | | | 149 | | | | - | | | Total liabilities | | | 42,522 | | | | 72,533 | | | Commitments and contingencies | | | | | | | | | | Stockholders' equity | | | | | | | | | | Common stock; par value $0.001; 100,000,000 shares authorized: issued and | | | | | | | | | | outstanding 33,808,233 and 33,470,710 shares as of December 31, 2022 | | | | | | | | | | and June 30, 2022, respectively | | | 34 | | | | 33 | | | Additional paid-in capital | | | 43,243 | | | | 42,629 | | | Retained earnings | | | 45,861 | | | | 32,852 | | | Total stockholders' equity | | | 89,138 | | | | 75,514 | | | Total liabilities and stockholders' equity | | $ | 131,660 | | | $ | 148,047 | |