Chris Degner

Chris Degner asked about the key hurdles and timing for the 45Z tax credit program, the impact of tariffs and crush spreads on the ethanol industry for 2026, and the permitting process for the carbon sequestration pipeline, including potential challenges with the Illinois state government.

Answer

CEO Zafar Rizvi explained that the Treasury Department has not yet issued guidelines for the 45Z tax credit, and the company is awaiting clarity on prevailing wages and carbon intensity (CI) score calculations. Executive Chairman Stuart Rose added that while they are working diligently, they cannot guarantee credits this year due to unknown regulations. Zafar Rizvi also discussed the positive impact of tariffs on ethanol exports to Europe and other countries, expecting a record year, but noted some negative impacts on corn oil and DDG exports. He highlighted strong corn production in Illinois and South Dakota as beneficial for input costs. Regarding the carbon sequestration pipeline, Zafar Rizvi mentioned the moratorium through July 1st for pipelines and that the Illinois Commerce Commission (ICC) is working on requirements, confirming they have easements for their six-mile pipeline.

Asked about the company's M&A strategy, how it measures returns on acquisitions versus development, and the specific plans for reducing well costs from $5.6 million to $5 million.

Answer

The company is highly selective in M&A, targeting off-market deals at 2-2.5x EBITDA, well below peer transaction multiples. Cost reduction is a core strategy, achieved by running competitive national RFPs for all services, inviting out-of-basin vendors, and focusing on efficiencies gained from a full one-rig program.

Chris Degner of Water Tower Research asked about the shift from CO2 injection to a waterflood at the Delhi EOR project and its expected long-term impact on Lease Operating Expenses (LOE).

Answer

President and CEO Kelly Loyd expressed strong approval for the operational change, noting it was a move they had wanted for years. He stated it will save Evolution approximately $400,000 to $500,000 per month with minimal impact on production. CFO Ryan Stash quantified the potential impact, suggesting future LOE could be in the mid-$20s per BOE, similar to periods when the CO2 line was previously down.

Chris Degner of Water Tower Research inquired about the Delhi EOR project, specifically asking for views on the potential long-term impact on Lease Operating Expenses (LOE) following the shift from CO2 floods to a waterflood-based development.

Answer

CEO Kelly Loyd expressed strong support for the change, noting it was a move the company had advocated for. He explained that replacing purchased CO2 with increased water injection is expected to save approximately $400,000 to $500,000 per month in costs with minimal to no difference in production performance. CFO Ryan Stash added context, suggesting that LOE could be in the mid-$20s per BOE going forward, similar to when the CO2 line was down previously.