Evolution Petroleum's Q4 2025: Contradictions Emerge on Scoop Stack, Barnett LOE, Acquisition Strategy, and LOE Costs

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 both sequentially and YOY

Guidance:

• FY26 capex expected at $4–6M, primarily Scoop Stack and maintenance; no Shabbaroo capex currently, with drilling decisions deferred to calendar 2026 and price-dependent.
• Scoop Stack minerals to deliver majority of initial royalty cash flow starting in Fiscal 1Q26 and ramp with operator schedules.
• Jonah makeup volumes expected to contribute in Fiscal 1Q26.
• Dividend maintained; $0.12/share declared for Fiscal 1Q26.
• Maintain conservative leverage; amended RBL with $65M borrowing base under a $200M revolver (matures 2028), preserving liquidity for accretive opportunities.
• Development to be paced to commodity prices; continue hedging to protect downside while retaining upside.
• Expect Scoop Stack LOE per BOE to be stable or improve with minerals; Barnett LOE to trend slightly below recent ~$18.50/BOE.

Business Commentary:

• Earnings Improvement and Dividend Stability:
• Evolution Petroleum reported a material improvement in net income of $3.4 million and adjusted EBITDA of $8.6 million for Fiscal Q4.
• The company declared a $0.12 per share dividend for Fiscal Q1 2026, extending its record of dependable cash returns for shareholders.

• These improvements were underpinned by a balanced commodity mix and prudent cost controls.

• Acquisition Strategy and Shareholder Returns:

• Evolution Petroleum completed a $9 million TexMex acquisition and a minerals-only acquisition in the Scoop Stack, adding roughly 440 net BOE per day and 5,500 net royalty acres.

• These acquisitions were highly accretive and contribute to the company's low-decline production strategy, aiming to improve durability and capital efficiency.

• Commodity Market Outlook:

• The company noted that oil demand has been steady, with OPEC Plus adding back supply, making net positioning reach some of the shortest levels in a decade.

• For natural gas, a very strong forward demand curve is expected due to increased LNG exports and industrial demand, requiring higher forward Henry Hub prices to meet these expectations.

• Portfolio Expansion and Cost Management:

• The company's capital allocation framework remains unchanged, focusing on durable free cash flow and reliable dividends.
• The recent acquisitions and strategic positioning of the portfolio provide flexibility to capitalize on accretive opportunities for shareholders, both organically and inorganically.

Sentiment Analysis:

• Management highlighted net income of $3.4M and adjusted EBITDA of $8.6M, with EBITDA up 7% YOY and 16% sequentially. They closed an accretive $9M TexMex deal and the largest minerals-only acquisition in company history, declared a $0.12/share dividend, and expanded their credit facility to a $65M borrowing base. They stated they are well-positioned to accelerate growth entering Fiscal 2026.

Q&A:

• Question from Poe Fratt (Alliance Global Partners): Can you share current run-rate production for Scoop Stack, Barnett, and Shabbaroo?
  Response: They won’t provide intra-quarter run rates; production is generally in line with Q4, and Shabbaroo wells are expected to decline ~50% in year one.

• Question from Poe Fratt (Alliance Global Partners): When did all four Shabbaroo wells reach full production?
  Response: In the first two weeks of May.

• Question from Poe Fratt (Alliance Global Partners): What is FY26 capex and the plan for Shabbaroo activity?
  Response: $4–6M FY26 capex (mainly Scoop Stack and maintenance); no Shabbaroo capex currently, with drilling contingent on oil prices and a decision likely in calendar 2026.

• Question from Poe Fratt (Alliance Global Partners): Outlook for LOE in Scoop Stack and Barnett?
  Response: Scoop Stack LOE per BOE expected to be stable to lower (helped by minerals); Barnett should trend slightly below the recent ~$18.50/BOE after audit/process and gathering-cost improvements.

• Question from Chris Degner (Water Tower Research): Does the Scoop Stack minerals deal signal a shift toward minerals over working interests?
  Response: No; it was an opportunistic, highly accretive deal (valued >80% on PDP), and they remain agnostic—pursuing WI or minerals based on per-share cash-flow accretion.