EVOLUTION PETROLEUM CORP (EPM)·Q2 2025 Earnings Summary

Executive Summary

• Fiscal Q2 2025 showed resilient operations but weaker pricing: production rose 10% Y/Y to 6,935 BOEPD, yet revenue fell 4% Y/Y to $20.3M and GAAP EPS was $(0.06), driven by a ~12% decline in realized commodity prices and a $1.4M unrealized derivative loss .
• Mix and costs improved: LOE/BOE fell 6% Y/Y to $20.05 as SCOOP/STACK and Chaveroo (lower unit cost assets) scaled, partially offset by CO2 purchases resuming at Delhi late in the quarter .
• Capital returns and balance sheet steady: 46th consecutive $0.12 dividend declared for FQ3; liquidity was $22.2M with $39.5M drawn on RCF at quarter-end .
• Near-term catalysts: four gross Chaveroo wells scheduled to complete and be turned in-line in FQ4; SCOOP/STACK outperformance vs type curve (~10% on gas) continues; active M&A pipeline and a subsequent acquisition adding ~440 BOEPD announced March 4, 2025 .
• Estimate context: S&P Global consensus was unavailable at time of analysis due to access limits; we anchor analysis to company-reported actuals and prior-quarter trends [GetEstimates error].

What Went Well and What Went Wrong

• What Went Well

  • Double-digit production growth despite downtime: BOEPD +10% Y/Y to 6,935, with oil +13% and gas +9%; downtime at Chaveroo/Williston cut ~90 BOEPD but was resolved by late January .
  • Per-unit costs improved: LOE/BOE fell to $20.05 from $21.30 Y/Y, helped by SCOOP/STACK and Chaveroo’s lower relative operating costs .
  • Positive operational momentum and pipeline: SCOOP/STACK wells outperforming type curves (~10% above for gas); four Chaveroo wells slated to be online in FQ4; management reiterated focus on accretive, PDP-heavy M&A . Quote: “We remain very excited about the upcoming four gross wells... expect all four wells to be completed and turned in line during our fiscal fourth quarter” .

• What Went Wrong

  • Price-driven revenue pressure: total revenue declined 4% Y/Y to $20.3M as realized prices fell ~12% per BOE, notably natural gas (–19% Y/Y) .
  • GAAP loss and lower EBITDA Q/Q: net loss $(1.8)M vs Q1’s $2.1M profit; Adjusted EBITDA fell to $5.7M from $8.1M in Q1 on pricing and higher total operating costs post-SCOOP/STACK .
  • Operational hiccups: gas interference in Chaveroo pumps and third-party gathering system issues in Williston reduced gas/NGL sales during the quarter (since resolved) .

Financial Results

Overall P&L, cash metrics, prices, and volumes

Commodity revenue mix

Volumes by commodity (daily)

Q2 2025 vs Estimates (S&P Global)

• Consensus estimates were unavailable due to S&P Global access limits at the time of analysis; therefore, beats/misses could not be determined [GetEstimates error].

Drivers and context

• Y/Y revenue decline reflects lower realized pricing (–12% per BOE; gas –19%), despite higher volumes (+10% BOEPD) .
• Q/Q softness tied to downtime at Williston and Chaveroo (~90 BOEPD impact) and lower realized oil price vs Q1; both operational issues were resolved by late January .
• GAAP loss was influenced by unrealized derivative loss ($1.368M) and higher DD&A; adjusted net loss was $(0.8)M .

Guidance Changes

Earnings Call Themes & Trends

Management Commentary

• Strategic positioning and M&A: “We’re currently evaluating multiple acquisition opportunities… at highly compelling valuations that… will be materially accretive… We are confident in our ability to deliver sustainable growth, create value through accretive M&A, and continue supporting our dividend program” .
• Dividend durability and cash flow: “This quarter marks our 46th consecutive dividend… underscores… ability to generate reliable cash flow…” .
• Commodity outlook: “Natural gas prices throughout the futures curve look much more favorable… oil… tight… a very promising setup for the second half of fiscal year ’25” .
• Operations: “We continue to see above-average results from new wells in the SCOOP/STACK… expect all four [Chaveroo] wells to be completed and turned in line during our fiscal fourth quarter” .
• Costs and efficiencies: “LOE… partially offset by reduction in CO2 purchases at Delhi… increase in production from SCOOP/STACK and Chaveroo… has driven down LOE on a per-unit basis” .

Q&A Highlights

• M&A cadence and size: Company could execute multiple deals in close succession if both are accretive and digestible; focus remains PDP-heavy and FCF-accretive .
• SCOOP/STACK performance: Wells running ~10% above type curve on gas; oil in line with expectations .
• Revenue recognition timing: Non-op nature and operator payment lags can cause prior-period revenue to hit subsequent quarters; improving with better data access .
• Chaveroo timing: Completions in April; limited contribution expected in FQ4 initially (flowback) .
• Capex: FY25 budget range maintained; back-half weighted for Chaveroo D&C and SCOOP/STACK .
• Financing and leverage: Maintain ~1x leverage; funding flexibility via RCF and potential ATM if a larger accretive deal arises .

Estimates Context

• Consensus (S&P Global) was unavailable due to access limits at the time of analysis; we cannot determine beats/misses versus Street for revenue or EPS this quarter [GetEstimates error].
• Given pricing dynamics (12% Y/Y realized price decline) and derivative losses, we would expect Street models to revise gas price realizations higher for 2H FY25 (management constructive on futures) and to reflect modest near-term production ramp tied to SCOOP/STACK and late FQ4 Chaveroo turns .

Key Takeaways for Investors

• Mix-led resilience: Despite pricing headwinds, EPM’s diversified, low-decline portfolio sustained Y/Y production growth and lowered per-unit LOE, positioning for operating leverage on any pricing recovery .
• Near-term growth catalyst: Four gross Chaveroo wells are set to be completed and turned in-line in FQ4; expect limited early contribution but a visible ramp thereafter .
• SCOOP/STACK outperformance continues: ~10% above type curve on gas supports volume and efficiency upside into 2H FY25 .
• Capital return durability: 46th straight $0.12 dividend underscores focus on cash-return framework through cycles .
• Balance sheet discipline: Liquidity of $22.2M and ~1x leverage target provide flexibility to pursue accretive PDP-centric M&A without stretching the balance sheet .
• M&A as a catalyst: Management highlighted an encouraging pipeline; subsequent to Q2, EPM announced a ~$9.0M acquisition adding ~440 BOEPD (60% oil), at ~2.8x NTM Adjusted EBITDA—immediately accretive to FCF and dividend sustainability .
• Watch list for next print: Price realizations (especially gas), LOE per unit as Delhi CO2 fully normalizes, Chaveroo ramp timing, and incremental SCOOP/STACK AFEs/well results .

Appendix: Additional Detail and Cross-Checks

• Pricing table (Q2): Oil $65.72/bbl (–11% Y/Y), Gas $2.73/mcf (–19% Y/Y), NGL $25.90/bbl (–9% Y/Y), Blended $31.78/BOE (–12% Y/Y) .
• Liquids revenue share: 71% of revenue in Q2 (vs 69% Y/Y); Q1 liquids generated 80% of revenue .
• Balance sheet and liquidity: Cash $11.7M, RCF $39.5M drawn, liquidity $22.2M at 12/31/24; dividends paid $4.1M; capex $0.8M in Q2 .

All data are sourced from company filings and transcripts as cited above.