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Evolution Petroleum Corporation Fiscal Third Quarter 2023 Results

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   |    Wednesday,May 10,2023

Evolution Petroleum Corporation announced fiscal third quarter 2023 results.


  • Reported sequential growth in revenue of 9% to a record $36.9 million and in net income of 34% to a record $14.0 million or $0.41 per diluted share in Fiscal Q3.
  • Fiscal 2023 year-to-date ("Fiscal YTD") revenue and net income increased year-over-year ("YoY") by 65% and 97%, respectively.
  • Increased quarterly Adjusted Net Income (1) by 46% sequentially and 84% YoY to $14.1 million.
  • Generated record Adjusted EBITDA (2) of $22.0 million during Fiscal Q3 and $55.4 million Fiscal YTD - an increase of 34% sequentially and 78% YoY.
  • Produced 7,089 net barrels of oil equivalent per day ("BOEPD") in Q3, and 7,314 BOEPD Fiscal YTD (34% higher YoY).
  • Paid a quarterly dividend of $0.12 per common share for the current quarter - a 20% increase from the dividend paid during the fiscal 2022 third quarter.
  • Repurchased $3.9 million of common shares under our previously announced share repurchase plan.
  • During Fiscal YTD, repaid all outstanding debt (incurred mainly due to 2022 acquisitions), leaving $50 million available borrowing capacity under the senior secured credit facility.
Evolution Petroleum Corp. announced its financial and operating results for its fiscal third quarter ended March 31, 2023 ("Fiscal Q3"). Evolution also declared a quarterly cash dividend of $0.12 per common share for the fiscal 2023 fourth quarter.

Kelly Loyd, President and Chief Executive Officer, commented, "Evolution is proud to report another quarter of excellent results achieved through our diversified portfolio of onshore oil and natural gas assets located across key producing regions in the U.S. We reported record quarterly revenue, net income, and Adjusted EBITDA during Fiscal Q3, primarily due to a year-over-year increase in production coupled with an increase in our average realized price per barrel of oil equivalent ("BOE"). During the quarter, we briefly realized unusually high natural gas prices contributing to the exceptional performance. While we are very pleased with these results, we do not budget for such pricing on a go-forward basis. We believe our strong cash flow generation, zero outstanding debt, and stable liquidity highlight our disciplined approach to maximizing total shareholder returns as we continue to evaluate accretive acquisition opportunities."

"During the quarter, the Board appointed Mark Bunch as the Company's Chief Operating Officer. Mark has been a natural addition to the team as he has been a consultant to the company for over 5 years. He will continue to help maximize the value of Evolution's existing cash-flow-producing properties and development opportunities and enhance the strategic relationships with our operating partners. Mark will be instrumental in driving Evolution to realize its strategic vision as we evaluate and prudently execute targeted future growth opportunities," continued Mr. Loyd.

Mr. Loyd concluded, "Our 38 th consecutive quarterly dividend payment in March, the declaration of a $0.12 dividend for fiscal Q4, and the execution of $3.9 million in share repurchases during the quarter - while maintaining a debt-free balance sheet - illustrate our dedication to providing our shareholders with a superior long-term total return."

Cash Dividend on Common Stock

On May 8, 2023, Evolution's Board of Directors declared a cash dividend of $0.12 per share of common stock, which will be paid on June 30, 2023, to common stockholders of record on June 15, 2023. This will be the 39 th consecutive quarterly cash dividend on the Company's common stock, which has been paid since December 31, 2013. To date, Evolution has returned approximately $98.4 million, or $2.97 per share, back to stockholders in common stock dividends. Maintaining and ultimately growing the common stock dividend remains a key Company priority.

Total production for the third quarter of fiscal 2023 was 7,089 net BOEPD, including 1,856 barrels per day ("BOPD") of crude oil; 24,489 thousand cubic feet per day ("MCFPD"), or 4,077 BOEPD, of natural gas; and 1,156 BOEPD of natural gas liquids ("NGLs").

  • Oil increased 3% from 1,804 BOPD in the prior quarter, primarily due to the reactivation of lost production from the winter storms during fiscal Q2.
  • Natural gas production decreased 4.5% from 25,728 MCFPD, or 4,294 BOEPD, in the prior quarter primarily due to natural declines and the extended downtime in the Barnett Shale from the winter storm that occurred at the end of fiscal Q2.
  • NGL production was essentially flat relative to the prior quarter.

Evolution reported $36.9 million of total revenue for the current quarter, a 9% increase from the prior quarter. Oil revenue decreased 10% to $11.8 million from the previous quarter, primarily due to a 10% decrease in realized commodity pricing. Natural gas revenue increased 24% from the prior quarter to $21.6 million due to a 34% increase in realized commodity pricing, partially offset by a 7% decrease in sales volumes. NGL revenue increased 8% to $3.5 million, primarily due to a 10% increase in realized pricing. The average realized price per BOE increased 14% to $57.79 compared to $50.49 in the prior quarter.

Lease operating costs decreased by 10% to $13.6 million from $15.0 million in the prior quarter. Primarily contributing to the decreases were lower costs at the Barnett Shale. The decreased costs were partially offset by increased production taxes due to higher realized natural gas prices at Jonah Field. Also contributing to the decrease were lower CO 2 costs at Delhi Field, associated with the decline in crude oil prices from the prior quarter.

Depletion, depreciation, and accretion ("DD&A") expense was $3.4 million compared to $3.5 million in the prior quarter. On a per BOE basis, the Company's depletion rate of $4.86 increased slightly from the $4.76 depletion rate in Q2 due to slight changes in our depletable base quarter-over-quarter. The Company's general and administrative ("G&A") expenses were $2.3 million for the current quarter compared to $2.6 million in the prior quarter. The decrease was primarily associated with the current quarter's lower consulting and auditing fees.

Net income for the current quarter was $14.0 million, or $0.41 per diluted share, compared to $10.4 million, or $0.31 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 $14.1 million, or $0.42 per diluted share, compared to $9.6 million, or $0.28 per diluted share, in the prior quarter.

Adjusted EBITDA was $22.0 million for the current quarter compared to $16.4 million in the prior quarter. On a per BOE basis, Adjusted EBITDA was $34.42 for the current quarter versus $24.66 for the preceding quarter.

Operations Update

At the end of the prior quarter, Evolution's operations were affected by a winter storm. The operators diligently responded to restore production as soon as practicable. However, the Barnett Shale did experience some extended downtime which was primarily responsible for the decreased gas production from the prior quarter.

Evolution participated in a vertical Bakken recompletion in the Williston Basin during the quarter and is awaiting results. Additionally, the two sidetrack locations targeting the Birdbear formation have been pushed to fiscal year 2024 due to permitting delays that are currently anticipated to be resolved during the first quarter of fiscal year 2024.

The Delhi Field NGL plant heat exchanger project to improve operational efficiency is ongoing and expected to be online before fiscal year-end and should positively impact performance.

Evolution continues to support our operators in their remedial workovers, capital development projects, and facility modifications.

Balance Sheet, Liquidity, and Capital Spending

At March 31, 2023, cash and cash equivalents totaled $18.4 million, and working capital was $10.7 million. Evolution did not have any debt outstanding under its $50 million revolving credit facility after retiring all of the debt incurred in the Williston Basin and Jonah Field acquisitions. As a result, total liquidity at March 31, 2023, was $68.4 million, including cash and cash equivalents. This represents an increase in liquidity of 85% since June 30, 2022.

During the fiscal 2023 third quarter, the Company fully funded operations, development capital expenditures, cash dividends, and share repurchases through cash generated from operations and working capital.

For the three months ended March 31, 2023, Evolution paid $4.0 million in common stock dividends, repurchased $3.9 million of common shares under our previously announced share repurchase plan, and incurred $2.3 million in development capital expenditures. For fiscal 2023, the Company expects development capital expenditures collectively across its existing portfolio of properties to range between $6.0 million to $7.0 million. These expenditures include anticipated capital costs as described in the Operations Update above.

Evolution believes its near-term capital spending requirements will be met from cash flows from operations and current working capital.

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