Exchange: AMEX | Sector: Energy | Industry: Oil Gas Exploration Production
Q3 2025
Published: May 14, 2025
Earnings Highlights
Revenue of $22.56M down 2% year-over-year
EPS of $-0.07 decreased by 914% from previous year
Gross margin of 18.4%
Net income of -2.18M
""This marks our seventh highly accretive acquisition in six years, and we continue to see an encouraging M&A market, even more so now amid oil price volatility."" - Kelly Loyd
Evolution Petroleum Corporation (EPM) QQ3 2025 Results: Diversified Low-Decline Asset Base, Strategic M&A Execution, and Hedged Cash Flow Backstopped by Gas Focus in SCOOP/STACK
Executive Summary
Evolution Petroleum reported a solidly hedged, diversified oil, gas, and NGL portfolio in QQ3 2025, with total revenues of $22.56 million and a net loss of $2.18 million, primarily reflecting operating costs and near-term development spend rather than a fundamental underlying decline in asset quality. Production declined 7.5% year over year to 6,667 Boe/d, driven by planned Delhi maintenance and weather-related downtime in the Barnett, but the quarter was marked by a meaningful post-quarter close inflection: the Tex-Mex acquisition closed in April and four new Chaveroo wells were brought online shortly after quarter-end, contributing to the expected Q4 uplift (net ~850 Boe/d collectively). The Tex-Mex deal, acquired for $9 million, adds about 440 Boe/d of stable, low-decline production with a 60% oil/40% gas mix and was priced at ~3.4x forward adjusted EBITDA based on current strip pricing, underscoring accretion potential even in a volatile oil price environment. Evolution remains focused on preserving financial flexibility, sustaining its quarterly dividend (0.12 per share, 47th consecutive quarter) and growing free cash flow via a disciplined development and acquisition program. Management signaled a shift toward gas-weighted opportunities in SCOOP/STACK and a postponement of the third Chaveroo development block into fiscal 2026 to maintain near-term cash flow and balance sheet flexibility while continuing to pursue oil-weighted load decline assets with hedging support. All told, QQ3 2025 lays the groundwork for a more accretive Q4 as Tex-Mex and Chaveroo contributions materialize and hedging provides a cushion against ongoing commodity volatility.
Key Performance Indicators
Revenue
22.56M
QoQ: 11.27% | YoY:-2.02%
Gross Profit
4.16M
18.43% margin
QoQ: 102.98% | YoY:-7.60%
Operating Income
1.59M
QoQ: 362.15% | YoY:-23.90%
Net Income
-2.18M
QoQ: -19.40% | YoY:-853.98%
EPS
-0.07
QoQ: -16.67% | YoY:-913.95%
Revenue Trend
Margin Analysis
Key Insights
Revenue: $22.56 million, YoY -2.0%, QoQ +11.3% (Q2’25 to Q3’25).
Net Income (loss): -$2.18 million; Net Margin: -9.66%; YoY -853.98%, QoQ -19.4%.
Adj. EBITDA: $7.43 million; YoY -12.9%; QoQ +? (Q2’25 vs Q3’25 +~30% QoQ per management remarks).
Financial Highlights
- Revenue: $22.56 million, YoY -2.0%, QoQ +11.3% (Q2’25 to Q3’25).
- Gross Profit: $4.16 million; Gross Margin: 18.4%; YoY -7.6%, QoQ +103%.
- Operating Income: $1.59 million; Operating Margin: 7.0%; YoY -23.9%, QoQ +362%.
- Net Income (loss): -$2.18 million; Net Margin: -9.66%; YoY -853.98%, QoQ -19.4%.
- Adj. EBITDA: $7.43 million; YoY -12.9%; QoQ +? (Q2’25 vs Q3’25 +~30% QoQ per management remarks).
- Production: 6,667 Boe/d, down 7.5% YoY; Q3 drivers include Delhi downtime and Barnett weather-related issues; SCOOP/STACK contributed meaningfully on a quarterly basis.
- Oil revenue: down ~19% YoY; Natural gas revenue: up ~33% YoY; NGL revenue: up ~14% YoY (offsetting oil weakness).
- Cash and equivalents: $5.6 million; Revolving credit facility borrowings: $35.5 million; Net debt: $29.99 million; Total liquidity: $20.1 million.
- Dividends: $0.12 per share declared for Q3, 47th consecutive quarterly dividend; cumulative dividends paid to date ~ $131 million ($3.93 per share).
- CapEx: $4.4 million in QQ3; Tex-Mex acquisition funded with cash on hand plus ~$2 million drawn on revolver; future CapEx depends on SCOOP/STACK activity and Tex‑Mex/Chaveroo production ramp in Q4.
Income Statement
Metric
Value
YoY Change
QoQ Change
Revenue
22.56M
-2.02%
11.27%
Gross Profit
4.16M
-7.60%
102.98%
Operating Income
1.59M
-23.90%
362.15%
Net Income
-2.18M
-853.98%
-19.40%
EPS
-0.07
-913.95%
-16.67%
Key Financial Ratios
currentRatio
0.88
grossProfitMargin
18.4%
operatingProfitMargin
7.03%
netProfitMargin
-9.66%
returnOnAssets
-1.39%
returnOnEquity
-3.04%
operatingCashFlowPerShare
$0.22
freeCashFlowPerShare
$0.22
dividendPayoutRatio
-188.6%
priceToBookRatio
2.42
priceEarningsRatio
-19.87
Net Income vs. Revenue
Expense Breakdown
Management Commentary
- Strategy and M&A discipline: Evolution emphasizes a diversified, cash-flow-generative portfolio and disciplined capital allocation. Management highlighted Tex‑Mex acquisition closed post-quarter end and four new Chaveroo wells online, contributing to Q4 production and cash flow upside. Kelly Loyd stressed the company’s ability to source, evaluate and integrate high-quality non-operated assets at “incredible value,” with the Tex‑Mex deal priced at ~3.4x forward adjusted EBITDA and funded with cash plus a modest credit facility draw.
- Hedging and risk management: The company remains well hedged, with approximately 40% of oil volumes hedged above $70 through year-end, providing a safety net for CapEx and the dividend while navigating oil price volatility. Ryan Stash noted flexibility to hedge additional gas volumes to meet hedging covenants, preserving cash flow stability.
- Operational execution and cost efficiency: Four Chaveroo wells were completed on schedule and under budget; Mark Bunch reported AFE below 5% for those wells and noted that early results were roughly 50% above expectations. Delhi EOR optimization shifted toward water injection, aiming to reduce LOE by ~$0.5 million per month on a go-forward basis, with LOE expected in the mid-$20s per Boe.
- Guidance and capital allocation: Management plans to emphasize gas-weighted opportunities in SCOOP/STACK, with development timing adjusted to preserve near-term cash flow; expansion of oil-weighted development is being weighed against hedging and macro conditions. The board reaffirmed the dividend, highlighting long-term sustainability even in volatile environments.
- Financial flexibility and liquidity: The company extended its revolver maturity to April 2028 and added Prism Bank for an additional $10 million in commitments (target total commitments ~$65 million), signaling financial flexibility to fund near-term growth initiatives while preserving credit quality.
"This marks our seventh highly accretive acquisition in six years, and we continue to see an encouraging M&A market, even more so now amid oil price volatility."
— Kelly Loyd
"Approximately 40% of oil volumes hedged at prices above $70 through the fiscal year-end, providing a strong safety net that supports both our CapEx program and dividend."
— Kelly Loyd
Forward Guidance
- Near-term catalysts: Tex-Mex and Chaveroo production ramp expected to contribute meaningfully in Q4 2025, improving overall production and cash flow. Management projects combined uplift of approximately 850 Boe/d from Tex‑Mex (~440 Boe/d) and Chaveroo (four wells) that, when fully integrated, should support stronger quarterly performance.
- Development posture: Focus on gas-weighted SCOOP/STACK opportunities to preserve near-term cash flow and balance sheet flexibility; defer oil-weighted drilling until pricing improves.
- M&A and capital allocation: Active pursuit of oil-weighted load‑decline assets or gas properties with favorable hedging potential; evaluation of additional accretive opportunities as the M&A market remains attractive. Expect to finalize new lender commitments and the maturity extension in fiscal Q4, expanding liquidity for ongoing activities.
- Risks and monitoring: Commodity price volatility, execution risk on new wells (Chaveroo performance outlook remains positive but still early), integration risk of Tex-Mex, and potential changes in hedging policy or credit facility covenants. Key factors for investors to watch include: (i) realized prices for oil, gas, and NGLs; (ii) actual ramp and timeline for Tex-Mex and Chaveroo wells; (iii) LOE trajectory under the water-injection approach at Delhi; (iv) hedge coverage and potential need for additional hedges; (v) reserve additions and reserve life through SCOOP/STACK as the company shifts capital allocation toward gas-weighted opportunities.
Competitive Position
Company
Gross Margin
Operating Margin
Return on Equity
P/E Ratio
EPM Focus
18.43%
7.03%
-3.04%
-19.87%
BRN
15.90%
-10.00%
-8.31%
-4.65%
EGY
36.30%
31.40%
2.19%
13.55%
EPSN
27.40%
3.30%
0.37%
87.85%
MXC
42.00%
23.60%
2.60%
12.30%
Gross Profit Margin
Operating Profit Margin
Return on Equity
P/E Ratio Comparison
Investment Outlook
Conclusion: Evolution remains a defensible, cash-flow-generative E&P play with a resilient, hedged portfolio and a disciplined capital-allocation framework. The QQ3 2025 results underscore the value of diversification across oil, gas, and NGLs, as well as the strategic importance of Tex-Mex and Chaveroo as near-term catalysts. The company’s plan to prioritize gas-weighted SCOOP/STACK development while deferring oil-weighted capex to align with commodity prices should help preserve near-term cash flow and dividend sustainability. The liquidity expansion via Prism Bank and the extended maturity on the revolver enhances optionality to fund upcoming developments and potential bolt-on acquisitions. Investors should monitor: (i) the execution and ramp of Tex-Mex and Chaveroo wells; (ii) the Delhi EOR optimization's impact on LOE and field economics; (iii) hedge coverage levels and any further hedging actions; (iv) fourth-quarter and 2026 CapEx plans as reserve data emerges. Base-case: continued dividend reliability, modest near-term growth via gas-weighted assets, with meaningful upside if Tex-Mex and SCOOP/STACK activity scales as expected and commodity prices stabilize or improve.
Key Investment Factors
Growth Potential
Growth hinges on Tex-Mex ramp (approx. 440 Boe/d net) and the four Chaveroo wells (early results above expectations) translating into sustained Q4 cash flow. Additional upside from SCOOP/STACK development and potential reactivation opportunities in Delhi and other non-operated assets.
Profitability Risk
Key risks include oil price volatility affecting long-run returns on oil-weighted assets, execution risk from new developments (Chaveroo, Tex-Mex integration), reliance on midstream and processing uptime, and potential changes in hedging covenants or credit facilities. Delhi EOR optimization changes LOE dynamics; any underperformance could pressure margins.
Financial Position
Solid liquidity with $5.6m cash and $20.1m total liquidity (including revolver capacity). Net debt $29.99m; debt maturity extension to 2028 and new lender commitments increasing financial flexibility to fund growth while sustaining the dividend. Balanced asset mix and hedging provide cash-flow visibility amid volatility.
SWOT Analysis
Strengths
Diversified, long-life low-decline asset base across SCOOP/STACK, Delhi EOR, Hamilton Dome, Williston, Barnett
Strong and visible dividend policy with 47 consecutive quarterly payments and ongoing flexibility
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