Exchange: AMEX | Sector: Energy | Industry: Oil Gas Exploration Production
Q1 2025
Published: Nov 13, 2024
Earnings Highlights
Revenue of $21.90M up 6.3% year-over-year
EPS of $0.06 increased by 42.4% from previous year
Gross margin of 20.0%
Net income of 2.07M
""Our strategy is to focus on assets with steady, predictable returns that allow us to thrive even amid fluctuations in commodity prices. This adaptability is key to our approach, enabling us to prioritize growth areas while managing risks, all with the aim of maximizing value for our shareholders."" - Kelly Loyd
Evolution Petroleum Corporation (EPM) QQ1 2025 Results Review: Diversified Asset Base Delivers Production Growth and Sustainable Dividends in a Volatile Energy Market
Executive Summary
Evolution Petroleum reported a strong start to fiscal 2025, underpinned by a 16% year-over-year production increase to 7,478 net boe/d and a 6% rise in quarterly revenues to $21.9 million. The company continues to execute a diversified growth strategy across SCOOP/STACK, Chaveroo, and Delhi, while returning substantial value to shareholders via a long-running dividend program (45th consecutive quarterly payment announced). Management highlighted the resilience of a low-decline asset base, ongoing capex discipline, and a hedging program designed to reduce downside risk while preserving upside potential. Formation of a broader organic growth engine is complemented by deliberate capital redeployment toward high-return opportunities, with Delhi development activities progressing in partnership with ExxonMobil and CO2 injection activity resumed after a period of maintenance. Looking ahead, Evolution remains focused on growing liquids production, sustaining disciplined capital allocation, and pursuing accretive acquisitions when value-accretive opportunities arise. While explicit full-year guidance remains undisclosed, management reaffirmed a full-year CapEx target of roughly $12–$14 million and emphasized the potential for continued dividend stability supported by a diversified, high-quality asset base.
Key Performance Indicators
Revenue
21.90M
QoQ: 3.15% | YoY:6.29%
Gross Profit
4.38M
20.01% margin
QoQ: -26.67% | YoY:-1.68%
Operating Income
1.85M
QoQ: -22.85% | YoY:0.05%
Net Income
2.07M
QoQ: 67.21% | YoY:40.09%
EPS
0.06
QoQ: 59.75% | YoY:42.44%
Revenue Trend
Margin Analysis
Key Insights
Production: 7,478 net boe/d in Q1 2025, up 16% YoY (Kelly Loyd noted growth driven by SCOOP/STACK acquisitions and Chaveroo contributions).
Revenue: $21.896 million in Q1 2025, up 6% YoY; offset by a lower realized price per BOE.
EBITDA: $9.434 million; EBITDAR ~43.1% of revenue (per reported ratios).
Financial Highlights
Overview of key financial and operating metrics with YoY and QoQ context where available:
- Production: 7,478 net boe/d in Q1 2025, up 16% YoY (Kelly Loyd noted growth driven by SCOOP/STACK acquisitions and Chaveroo contributions).
- Revenue: $21.896 million in Q1 2025, up 6% YoY; offset by a lower realized price per BOE.
- Gross Profit: $4.381 million; gross margin ~20.0%.
- Operating Income: $1.854 million; operating margin ~8.47%.
- EBITDA: $9.434 million; EBITDAR ~43.1% of revenue (per reported ratios).
- Net Income: $2.066 million; net margin ~9.43%.
- EPS (GAAP): $0.0631; Diluted EPS: $0.0628.
- Cash Flow: Operating cash flow $7.614 million; capex $2.7 million; free cash flow $4.612 million.
- Balance Sheet highlights: total assets $157.94 million; total liabilities $78.31 million; total equity $79.63 million. Total debt $39.63 million; net debt $32.70 million. Cash $6.94 million; liquidity $17.40 million.
- Leverage and liquidity: Debt-to-equity ~0.50; debt ratio ~0.25; interest coverage ~2.25x; dividend yield ~2.32%.
- Dividend: $0.12 per share paid on 12/31/2024; 45th consecutive quarterly dividend; to-date shareholder return of ~$122.5 million (~$3.69 per share).
- Guidance context: Management reiterated CapEx guidance for the full year of roughly $12–$14 million and signaled ongoing hedging to balance risk/reward; no formal full-year revenue or production guidance was issued in the call.
Income Statement
Metric
Value
YoY Change
QoQ Change
Revenue
21.90M
6.29%
3.15%
Gross Profit
4.38M
-1.68%
-26.67%
Operating Income
1.85M
0.05%
-22.85%
Net Income
2.07M
40.09%
67.21%
EPS
0.06
42.44%
59.75%
Key Financial Ratios
currentRatio
1.69
grossProfitMargin
20%
operatingProfitMargin
8.47%
netProfitMargin
9.43%
returnOnAssets
1.31%
returnOnEquity
2.59%
debtEquityRatio
0.5
operatingCashFlowPerShare
$0.23
freeCashFlowPerShare
$0.14
dividendPayoutRatio
195.3%
priceToBookRatio
2.18
priceEarningsRatio
21.04
Net Income vs. Revenue
Expense Breakdown
Management Commentary
Key insights from management discussions and quotes, grouped by themes:
- Strategy and market position
- Kelly Loyd (CEO): Our strategy is to focus on assets with steady, predictable returns that allow us to thrive even amid fluctuations in commodity prices. This adaptability is key to maximizing shareholder value in a volatile energy market.
- Ryan Stash (CFO): The hedging program is designed to reduce downside commodity price risk while preserving upside; we will continue to monitor the market and add hedges when strategic opportunities arise.
- Operational execution and asset growth
- Mark Bunch (COO): Seven wells online in SCOOP/STACK in Q1 2025, with three additional gross wells coming online after quarter-end; Evolution plans to participate in five gross horizontal wells across SCOOP/STACK acreage. Since acquisition, 32 gross wells have been brought online.
- Loyd (CEO): Production uplift is being driven by SCOOP/STACK and Chaveroo; 65%+ production uplift versus acquisition-type curves in the wells analyzed to date (more than three months of data).
- Delhi CO2 and asset resilience
- Mark Bunch: Delhi production benefited from replacement of a CO2 recycle compressor and the CO2 purchase pipeline back on line; CO2 purchases resumed in October 2024, with expected positive impact on oil production and revenue.
- Jeff Grampp (analyst): The Delhi CO2-driven uplift is expected to contribute to higher production in the near term, with a flatter decline profile over time.
- Financial health and shareholder returns
- Ryan Stash: In Q1, total revenues grew 6% YoY to $21.9 million; net income rose 40% YoY to $2.1 million; adjusted EBITDA up 21% to $8.1 million; cash flow from operations rose to $7.6 million.
- Kelly Loyd: The company remains committed to shareholder returns via a robust dividend program and disciplined capital allocation; this quarter marked the 45th consecutive quarterly dividend.
- M&A and growth opportunities
- Management signaled ongoing exploration for accretive acquisitions but emphasized a disciplined, value-driven approach. Jeff Grampp and Ryan Stash underscored an active market with ongoing deal processes and appetite from sellers, consistent with a broader industry backdrop of M&A activity.
"Our strategy is to focus on assets with steady, predictable returns that allow us to thrive even amid fluctuations in commodity prices. This adaptability is key to our approach, enabling us to prioritize growth areas while managing risks, all with the aim of maximizing value for our shareholders."
— Kelly Loyd
"on the wells we have info on, which is 10 wells so far, we have more than three months of data, on average, they have come in approximately 65% above our acquisition type curve. So, we're very pleased with that."
— Kelly Loyd
Forward Guidance
Outlook and management commentary on future performance and risk factors:
- Capital allocation and growth trajectory: Management reaffirmed a full-year CapEx target of approximately $12–$14 million, anchoring investments in SCOOP/STACK and Chaveroo developments, with multiple wells planned in both blocks through fiscal 2025 and into early fiscal 2026. Mark Bunch indicated preparations to drill four SCOOP/STACK wells beginning in January, with five additional gross wells already notified for execution.
- Production and commodity mix: The company expects liquids production to remain robust in fiscal 2025, supported by increased SCOOP/STACK activity and Chaveroo contributions. The mix is likely to continue skewing toward oil and NGLs as certain shale opportunities are pursued given market dynamics; however, a meaningful and sustained shift in balance toward gas is possible if gas prices strengthen and more gas-well opportunities materialize.
- CO2 injection and Delhi trajectory: CO2 injections resumed in October 2024, following maintenance-related downtime; management expects a positive production response as reinjection volumes increase, contributing to a flatter oil production decline profile and higher oil revenue.
- Hedging and risk management: Continued hedging is anticipated to shield GAAP earnings and EPS from downside price risk, while preserving upside exposure.
- M&A and external growth: The company remains open to accretive acquisitions but will prioritize high-quality assets and value-creating opportunities; the market backdrop remains active with ongoing deal processes and a likelihood of continued seller activity into year-end.
- Key factors investors should monitor: (1) performance of SCOOP/STACK and Chaveroo wells relative to type curves (early outperformance noted but requires continued execution), (2) Delhi Test Site V milestones and CO2 integration economics, (3) commodity price trajectories (oil and gas) and impact on hedging strategy, (4) capex cadence and free cash flow generation, (5) dividend coverage and stability given debt levels and cash flow generation, and (6) potential accretive M&A opportunities that could alter the production profile and reserve base.
Competitive Position
Company
Gross Margin
Operating Margin
Return on Equity
P/E Ratio
EPM Focus
20.01%
8.47%
2.59%
21.04%
BRN
7.44%
-42.70%
-17.00%
-1.98%
EGY
0.00%
0.00%
1.53%
12.62%
EPSN
58.00%
44.30%
4.03%
9.67%
MXC
43.00%
21.80%
1.65%
20.49%
Gross Profit Margin
Operating Profit Margin
Return on Equity
P/E Ratio Comparison
Investment Outlook
Base-case: Positive long-term cash flows supported by a diversified, low-decline asset base and a sustainable dividend framework. The Q1 2025 results show robust production growth (YoY +16%), stable revenue growth, and meaningful free cash flow generation, underpinning dividend sustainability and potential for accretive growth through SCOOP/STACK and Chaveroo expansions. The Delhi CO2 program and Test Site V development with ExxonMobil could contribute to higher oil volumes and revenue in the near to intermediate term, assuming execution milestones are met and CO2 injection rates increase as planned. The hedging program remains a critical risk management tool, potentially supporting earnings resilience amid volatile natural gas prices. Relative to peers (examples: BRN, EGY, EPSN, MXC, NOG), Evolution’s P/E around 21x and price-to-book around 2.18x reflect a growth-oriented but smaller-cap E&P profile with income attributes via dividend. Investors should consider Evolution as a growth-leaning income staple with exposure to high-return assets and potential M&A upside, while monitoring commodity price trends, CO2 project economics, and the cadence of SCOOP/STACK and Chaveroo development. Bear-case scenarios would involve sustained low gas prices reducing LOE advantages and zero or negative revisions to Delhi/CO2 benefits, plus slower-than-expected well performance in new drilling programs. Overall, Evolution offers a disciplined, risk-aware entry into a balanced E&P portfolio with meaningful dividend upside and optionality from inorganic growth.
Key Investment Factors
Growth Potential
Growth driven by: (a) SCOOP/STACK production ramp and continued wells online (7 wells in Q1; 32 gross wells online since acquisitions; additional 10 wells notified for 2025), (b) Chaveroo development with 4 horizontal wells in 2025 and 6 in early 2026, (c) Delhi CO2 project expansion and Test Site V development with ExxonMobil, (d) ongoing electrification projects to lower lift costs, and (e) potential accretive M&A activity.
Profitability Risk
Key downside risks include: (a) commodity price volatility (oil and gas), (b) CO2 supply/delivery disruptions and capex/opex intensity of CO2 projects, (c) execution risk in fast-paced shale development and water handling, (d) hedging effectiveness changing with market conditions, (e) scale gap versus larger E&P peers leading to sensitivity to price cycles, and (f) potential dilution or leverage if acquisitions are pursued aggressively.
Financial Position
Solid liquidity build with cash at period-end of $6.9 million and total liquidity of $17.4 million; debt levels manageable (total debt $39.6 million; net debt $32.7 million) and a diversified asset base that reduces single-asset risk. EBITDA generation and cash flow from operations comfortably support the dividend program and capex needs within the stated guidance. The balance sheet reflects a prudent leverage posture (debt-to-equity ~0.50; debt ratio ~0.25) with a focus on sustaining distributions while financing growth via modest leverage and internally generated cash flow.
SWOT Analysis
Strengths
Diversified, low-decline asset base across SCOOP/STACK, Chaveroo, Delhi, Williston Basin and Barnett; higher quality, cash-generating assets with lower operating costs in shale plays.
Strong dividend discipline with 45 consecutive quarterly payments; dividend yield ~2.32% indicating attractive income component.
Recent production growth driven by SCOOP/STACK acquisitions and Chaveroo development; 16% YoY production growth and 7,478 boe/d in Q1 2025.
Active hedging program to mitigate downside risks and preserve upside potential.
Weaknesses
Relatively modest scale compared to large E&P peers, leading to greater sensitivity to sector cycles.
Higher reliance on CO2-injection projects (Delhi) and CO2 supply chain reliability; downtime or maintenance can impact production and capex intensity.
Limited visibility on full-year guidance; reliance on hedging and discretionary capex decisions.
Opportunities
Delta CO2 project development with ExxonMobil could unlock additional production and cash flow in Delhi.
Electrification projects to lower lifting costs and improve margins across Williston Basin and other assets.
Ongoing M&A activity and potential bolt-on acquisitions in favorable markets with accretive economics.
Continued growth in SCOOP/STACK and Chaveroo provides scalable production upside with low incremental capex.
Threats
Commodity price volatility (oil and natural gas) remains a core macro risk affecting revenues and hedge effectiveness.
Operational risks related to multi-field execution, drilling campaigns, and water handling/completion activities.
Regulatory and fiscal changes or incentives affecting hydrocarbons economics.
Competition for acquisition targets could compress returns if prices rise.
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