Evolution Petroleum's Q4 2025 Earnings Call: Contradictions Emerge on Chaveroo Production, SCOOP/STACK Acquisitions, and M&A Strategy

The above is the analysis of the conflicting points in this earnings call

Date of Call: September 17, 2025

Financials Results

• Revenue: $21.1M, essentially flat YOY
• EPS: $0.10 per diluted share, improved YOY and sequentially

Guidance:

• Fiscal 2026 CapEx budget expected at $4–$6M, primarily SCOOP/STACK and maintenance; no Chaveroo CapEx currently planned.
• Chaveroo next drilling decision will depend on oil prices; timing likely in calendar 2026.
• SCOOP/STACK minerals acquisition to ramp gradually, with most initial royalty cash flow starting in fiscal Q1 ’26 and building thereafter.
• Management expects SCOOP/STACK LOE/BOE to remain stable; blended LOE could improve with minerals (≈10% decline viewed as a reasonable starting point).
• Jonah pipeline balancing makeup volumes expected to contribute in fiscal Q1 ’26.
• Board declared a $0.12/share dividend for fiscal Q1 ’26, payable September 30, 2025.

Business Commentary:

* Operational Performance and Dividend: - Evolution Petroleum reported a material improvement in net income of $3.4 million and adjusted EBITDA of $8.6 million in fiscal Q4 2025. - The company declared a$0.12 per share dividend for fiscal Q1 '26, extending its record of dependable cash returns for shareholders. - The improvement in profitability was due to a balanced commodity mix and prudent cost controls.

• Acquisitions and Capital Allocation:
• Evolution Petroleum completed the acquisition of theTexMex assets for$9 million, adding approximately 440 net BOE per day of stable, low decline production.
• The company acquired approximately 5,500 net royalty acres in the SCOOP/STACK for no net cost, with an effective date of 420 net BOE per day.

• These acquisitions align with the company's strategy of pursuing accretive, low-decline opportunities to enhance shareholder value.

• Commodity Market Outlook:

• The company noted that oil demand is expected to grow at an average of over 1% per year, with OPEC+ adding back supply, affecting global demand dynamics.
• For natural gas, a strong forward demand curve is anticipated due to increased LNG exports and industrial demand, necessitating higher prices to support production growth.

• The company's diversified commodity exposure and tight cost discipline are designed to smooth out cash flows and support returns in varying market conditions.

• Financial Flexibility and Balance Sheet:

• Evolution Petroleum amended its senior secured reserve-based credit facility, establishing a $65 million borrowing base under a $200 million revolving credit facility.
• The company returned $4.1 million through common dividends in the quarter and $16.3 million in fiscal 2025.
• This balance sheet flexibility enables the company to capitalize on accretive opportunities and support its dividend program.

Sentiment Analysis:

• “Net income of $3.4M” and “adjusted EBITDA of $8.6M, up 7% YOY and 16% sequentially.” “Average production was 7,198 BOE/d.” “Declared a $0.12 per share dividend… 48th consecutive quarterly dividend.” Closed “highly accretive” TexMex and the “largest minerals only acquisition in company history,” and are “well positioned to accelerate growth” entering fiscal ’26.

Q&A:

• Question from Charles Fratt (Alliance Global Partners): Can you provide run-rate production for SCOOP/STACK, Barnett, and Chaveroo?
  Response: Management declined intra-quarter specifics; asset run rates are broadly in line with Q4 levels, with Chaveroo wells following typical steep first-year declines (~50%).

• Question from Charles Fratt (Alliance Global Partners): When did all four Chaveroo wells reach full production?
  Response: First two weeks of May.

• Question from Charles Fratt (Alliance Global Partners): What is the expected CapEx for fiscal 2026, including Chaveroo plans?
  Response: $4–$6M, primarily SCOOP/STACK and maintenance; no Chaveroo spending budgeted unless oil prices improve, with a drill decision likely in calendar 2026.

• Question from Charles Fratt (Alliance Global Partners): How do you expect LOE trends for SCOOP/STACK and Barnett?
  Response: SCOOP/STACK LOE/BOE should remain stable, potentially improving with minerals (≈10% lower seen as reasonable). Barnett LOE was ~$18.50/BOE and is expected to be slightly lower due to audit/process changes and renegotiated gathering.

• Question from Christopher Degner (Water Tower Research): Does the SCOOP/STACK minerals deal signal a strategy shift vs. working interest acquisitions?
  Response: No; it’s opportunistic and cash flow per share–accretive. Paid mainly for PDP with significant no-cost drilling upside; will pursue WI or minerals based on accretion.