EVOLUTION PETROLEUM CORP

Previous wording

“Current quarter” refers to the three months ended September 30, 2024, our first quarter of fiscal year 2025.

Current wording

“Current quarter” refers to the three months ended December 31, 2024, our second quarter of fiscal year 2025.

Previous wording

“Year-ago quarter” refers to the three months ended September 30, 2023, our first quarter of fiscal year 2024.

Current wording

“Year-ago quarter” refers to the three months ended December 31, 2023, our second quarter of fiscal year 2024.

Previous wording

Our non-operated interests in the Williston Basin, an oil and natural gas producing property, consist of approximately 39% average net working interest and approximately 33% average net revenue interest located on approximately 141,400 gross or 42,200 net acres (approximately 95% held by production) across Billings, Golden Valley, and McKenzie Counties in North Dakota. The properties are operated by Foundation Energy Management.

Current wording

Our non-operated interests in the Williston Basin, an oil and natural gas producing property, consist of approximately 39% average net working interest and approximately 33% average net revenue interest located on approximately

Previous wording

On October 21, 2024, we entered into an ATM equity Sales Agreement (the “ATM Sales Agreement”) with Roth Capital Partners, LLC (the “Lead Agent”), Northland Securities Inc., and A.G.P./Alliance Global Partners pursuant to which we may issue and sell, from time to time, up to $30.0 million of shares of common stock through or to the Lead Agent, acting as agent or principal. We have not sold any shares of common stock under the ATM Sales agreement and are not obligated to sell any shares of common stock in the future. We intend to use the net proceeds from any sales of common stock for general corporate purposes, including to redeem or repay outstanding indebtedness.

Current wording

On October 21, 2024, we entered into an ATM equity Sales Agreement (the “ATM Sales Agreement”) with Roth Capital Partners, LLC (the “Lead Agent”), Northland Securities Inc., and A.G.P./Alliance Global Partners pursuant to which we may issue and sell, from time to time, up to $30.0 million of shares of common stock through or to the Lead Agent, acting as agent or principal. During the period ended December 31, 2024, we sold a total of approximately 0.4 million shares of our common stock under the ATM Sales Agreement for net proceeds of approximately $2.0 million, after deducting an initial $0.2 million in fees for due diligence incurred with the offering. We intend to use the net proceeds from any sales of common stock for general corporate purposes, including to redeem or repay outstanding indebtedness. We are not obligated to sell any shares of common stock in the future.

Previous wording

The oil and natural gas industry is a global market impacted by many factors, such as government regulations, particularly in the areas of trade sanctions, taxation, energy, climate change and the environment, geopolitical instability and armed conflicts (including between Russia and Ukraine and in the Middle East between Israel and Gaza), demand in Asian and European markets, and the extent to which members of OPEC and other oil exporting nations manage oil supply through export quotas. Natural gas prices are generally determined by North American supply and demand and are also affected by imports and exports of liquefied natural gas. Weather also has a significant impact on demand for natural gas since it is a primary heating source.

Current wording

The oil and natural gas industry is a global market impacted by many factors, such as government regulations, particularly in the areas of trade sanctions, taxation, energy, climate change and the environment, geopolitical instability and armed conflicts (including between Russia and Ukraine and in the Middle East between Israel and Gaza), demand in Asian and European markets, and the extent to which members of OPEC and other oil exporting nations manage oil supply through export quotas. Natural gas prices are generally determined by North American supply and demand and

Previous wording

As of September 30, 2024, we had $6.9 million in cash and cash equivalents and $39.5 million outstanding borrowings on our Senior Secured Credit Facility compared to $6.4 million in cash and cash equivalents and $39.5 million borrowings outstanding on our Senior Secured Credit Facility at June 30, 2024. Our primary sources of liquidity and capital resources during the three months ended September 30, 2024 were cash provided by operations. Our primary uses of liquidity and capital resources for the three months ended September 30, 2024 were our cash dividend payments to our common stockholders and development capital expenditures. As of September 30, 2024, working capital was $8.5 million, an increase of $2.6 million from working capital of $5.9 million as of June 30, 2024.

Current wording

As of December 31, 2024, we had $11.7 million in cash and cash equivalents and $39.5 million outstanding borrowings on our Senior Secured Credit Facility compared to $6.4 million in cash and cash equivalents and $39.5 million borrowings outstanding on our Senior Secured Credit Facility at June 30, 2024. Our primary sources of liquidity and capital resources during the six months ended December 31, 2024 were cash provided by operations. Our primary uses of liquidity and capital resources for the three months ended December 31, 2024 were our cash dividend payments to our common stockholders and development capital expenditures. As of December 31, 2024, working capital was $10.5 million, an increase of $4.6 million from working capital of $5.9 million as of June 30, 2024.

Previous wording

Borrowings bear interest, at our option, at either the SOFR plus 2.80% or the Prime Rate, as defined under the Senior Secured Credit Facility, plus 1.0%. For the three months ended September 30, 2024, the weighted average interest on our borrowings was 8.09%. The Senior Secured Credit Facility contains covenants requiring the maintenance of (i) a total leverage ratio of not more than 3.00 to 1.00, (ii) a current ratio of not less than 1.00 to 1.00, and (iii) a consolidated tangible net worth of not less than $40.0 million, each as defined in the Senior Secured Credit Facility. It also contains other customary affirmative and negative covenants, including a hedging covenant discussed below, and events of default. As of September 30, 2024, we were in compliance with all covenants under the Senior Secured Credit Facility.

Current wording

Borrowings bear interest, at our option, at either the SOFR plus 2.80% or the Prime Rate, as defined under the Senior Secured Credit Facility, plus 1.0%. For the six months ended December 31, 2024, the weighted average interest on our borrowings was 7.80%. The Senior Secured Credit Facility contains covenants requiring the maintenance of (i) a total leverage ratio of not more than 3.00 to 1.00, (ii) a current ratio of not less than 1.00 to 1.00, and (iii) a consolidated tangible net worth of not less than $40.0 million, each as defined in the Senior Secured Credit Facility. It also contains other customary affirmative and negative covenants, including a hedging covenant discussed below, and events of default. As of December 31, 2024, we were in compliance with all covenants under the Senior Secured Credit Facility.

Previous wording

The Senior Credit Agreement contains hedging requirements that apply when there is 25% or more utilization of the Margined Collateral Value, as defined in the Senior Credit Agreement, to the extent it exceeds the borrowing base then in effect. At each redetermination, our Margined Collateral Value takes into account the estimated value of our oil and natural gas properties, proved developed reserves, total indebtedness, and other relevant factors consistent with customary oil and natural gas lending criteria. On February 12, 2024, we entered into an amendment to the Senior Secured Credit Facility. This amendment required that we enter into hedges for the next 12-month period, and on a rolling 12-month basis thereafter, covering expected crude oil and natural gas production from proved developed reserves, calculated separately, equal to a minimum of 40% of expected crude oil production each month, or 25% each of expected crude oil and natural gas production each month over that period. Thus, we have the option to choose whether to hedge 40% of expected crude oil production or 25% each of expected crude oil and natural gas production.

Current wording

The Senior Secured Credit Facility contains hedging requirements that apply when there is 25% or more utilization of the Margined Collateral Value, as defined under the Senior Secured Credit Facility, to the extent it exceeds the borrowing base then in effect. The Required Hedging Percentage, as defined in the Eighth Amendment to the Senior Secured Credit Facility dated November 9, 2021, provides for a tiered approach for adding hedges based on the utilization of the facility. On February 12, 2024, in conjunction with the Scoop/Stack Acquisitions, we entered into an amendment to the Senior Secured Credit Facility, which required us to enter into hedges for the next 12-month period, and on a rolling 12-month basis thereafter, covering expected crude oil and natural gas production from proved developed reserves, calculated separately, equal to a minimum of 40% of expected crude oil production each month, or

Previous wording

We have historically funded operations through cash from operations and working capital. Our primary source of cash is the sale of produced crude oil, natural gas, and NGLs. A portion of these cash flows is used to fund capital expenditures and pay cash dividends to shareholders. We expect to fund near-future capital development activities for our properties with cash flows from operating activities, existing working capital and, as needed, borrowings under our Senior Secured Credit Facility and any proceeds from ATM Sales Agreement (as described in “Recent Developments” above).

Current wording

We have historically funded operations through cash from operations and working capital. Our primary source of cash is the sale of produced crude oil, natural gas, and NGLs. A portion of these cash flows is used to fund capital expenditures and pay cash dividends to shareholders. We expect to fund near-future capital development activities for our properties with cash flows from operating activities, existing working capital and, as needed, borrowings under our Senior Secured Credit Facility and proceeds from the ATM Sales Agreement (as described in “Recent Developments” above).

Previous wording

On October 21, 2024, we entered into an ATM Sales Agreement with Roth Capital Partners, LLC as our Lead Agent, Northland Securities Inc., and A.G.P./Alliance Global Partners pursuant to which we may issue and sell, from time to time, up to $30.0 million of shares of common stock through or to the Lead Agent, acting as agent or principal. We have not sold any shares of our common stock under the ATM Sales Agreement and are not obligated to sell any shares of common stock in the future.

Current wording

On October 21, 2024, we entered into an ATM Sales Agreement with Roth Capital Partners, LLC as our Lead Agent, Northland Securities Inc., and A.G.P./Alliance Global Partners pursuant to which we may issue and sell, from time to time, up to $30.0 million of shares of common stock through or to the Lead Agent, acting as agent or principal. During the period ended December 31, 2024, we sold a total of approximately 0.4 million shares of our common stock under the ATM Sales Agreement for net proceeds of approximately $2.0 million, after deducting an initial $0.2 million in fees for due diligence incurred with the offering; however, we are not obligated to sell any shares of common stock in the future.

Previous wording

Our Board of Directors instituted a cash dividend on common stock in December 2013. We have since paid 44 consecutive quarterly dividends. Distribution of a substantial portion of free cash flow in excess of operating and capital requirements through cash dividends remains a priority of our financial strategy, and it is our long-term goal to increase dividends over time, as appropriate. On November 11, 2024, the Board of Directors declared a quarterly cash dividend of $0.12 per share of common stock to shareholders of record on December 13, 2024 and payable on December 31, 2024.

Current wording

Our Board of Directors instituted a cash dividend on common stock in December 2013. We have since paid 45 consecutive quarterly dividends. Distribution of a substantial portion of free cash flow in excess of operating and capital requirements through cash dividends remains a priority of our financial strategy, and it is our long-term goal to increase dividends over time, as appropriate. On February 10, 2025, the Board of Directors declared a quarterly cash dividend of $0.12 per share of common stock to shareholders of record on March 14, 2025 and payable on March 31, 2025.

Previous wording

During the three months ending September 30, 2024, we incurred $1.0 million on development capital expenditures. During the first quarter of 2024, capital spending occurred at our fields, including the SCOOP/STACK properties where our operators are actively drilling and have brought seven gross wells online. Based on discussions with our operators, we expect capital workover projects to continue in most of our fields throughout the year.

Current wording

During the six months ending December 31, 2024, we incurred $2.2 million on development capital expenditures. During the first half of fiscal 2025, capital spending occurred at our fields, including at SCOOP/STACK where our operators are actively drilling and have brought 10 gross wells online during the fiscal year. Based on discussions with our operators, we expect capital workover projects to continue in most of our fields throughout the year.

Previous wording

Overall, for fiscal year 2025, we expect budgeted capital expenditures to be in the range of $12.5 million to $14.5 million, which excludes any potential acquisitions. Our expected capital expenditures for fiscal year 2025 include the seven gross wells brought online at our SCOOP/STACK properties, discussed above, bringing an additional eight gross wells online at our SCOOP/STACK properties, the drilling and completion of four new wells at Chaveroo Field, and the drilling and completion of one new well at Delhi Field Test Site V.

Current wording

Overall, for fiscal year 2025, we expect budgeted capital expenditures to be in the range of $12.5 million to $14.5 million, which excludes any potential acquisitions. Our expected capital expenditures for fiscal year 2025 include the 10 gross wells brought online at SCOOP/STACK during the first six months of the fiscal year, discussed above, and bringing an additional eight gross wells online during the remainder of the year. It also includes the drilling and completion of four new gross wells at Chaveroo Field for development block two, which commenced drilling operations in January 2025, and the drilling and completion of one new well at Delhi Field Test Site V.

Previous wording

Under the full cost method of accounting, capitalized costs of oil and natural gas properties, net of accumulated depletion, depreciation, and amortization and related deferred taxes, are limited to the estimated future net cash flows from proved oil and natural gas reserves, discounted at 10%, plus the lower of cost or fair value of unproved properties, as adjusted for related income tax effects (the valuation “ceiling”). If capitalized costs exceed the full cost ceiling, the excess would be charged to expense as a write-down of oil and natural gas properties in the quarter in which the excess occurred. The quarterly ceiling test calculation requires that we use the average first day of the month price for our petroleum products during the 12-month period ending with the balance sheet date. The prices used in calculating our ceiling test as of September 30, 2024 were $79.40 per barrel of oil, $2.21 per MMBtu of natural gas and $23.63 per barrel of NGLs. As of September 30, 2024, our capitalized costs of oil and natural gas properties were below the full cost valuation ceiling. If commodity price levels were to substantially decline from the 12-month average first day of the month pricing levels as of September 30, 2024 and remain down for a prolonged period of time, our valuation ceiling over our capitalized costs may be reduced and adversely impact our ceiling test results in future quarters. While a 10% reduction in respective commodity prices at September 30, 2024, while all other factors remained constant, would not have generated an impairment, we cannot give assurance that a write-down of capitalized oil and natural gas properties will not be required in the future.

Current wording

Under the full cost method of accounting, capitalized costs of oil and natural gas properties, net of accumulated depletion, depreciation, and amortization and related deferred taxes, are limited to the estimated future net cash flows from proved oil and natural gas reserves, discounted at 10%, plus the lower of cost or fair value of unproved properties, as adjusted for related income tax effects (the valuation “ceiling”). If capitalized costs exceed the full cost ceiling, the excess would be charged to expense as a write-down of oil and natural gas properties in the quarter in which the excess occurred. The quarterly ceiling test calculation requires that we use the average first day of the month price for our petroleum products during the 12-month period ending with the balance sheet date. The prices used in calculating our ceiling test as of December 31, 2024 were $76.32 per barrel of oil, $2.13 per MMBtu of natural gas and $22.60 per barrel of NGLs. As of December 31, 2024, our capitalized costs of oil and natural gas properties were below the full cost valuation ceiling. If commodity price levels were to substantially decline from the 12-month average first day of the month pricing levels as of December 31, 2024 and remain down for a prolonged period of time, our valuation ceiling over our capitalized costs may be reduced and adversely impact our ceiling test results in future quarters. While using the crude oil and natural gas price for January 1, 2025 of $72.44 per barrel and $3.40 per MMBtu, and holding it constant for two months to create a trailing 12-month period of average prices (which is more reflective of recent price trends) would not generate an impairment under our ceiling test limitation, we cannot give assurance that a write-down of capitalized oil and natural gas properties will not be required in the future.

Previous wording

Cash provided by operating activities for the three months ended September 30, 2024 increased $3.3 million compared to the three months ended September 30, 2023 primarily due to an increase in revenues. Total revenues increased $1.3 million as compared to the prior year period primarily due increased production volumes partially offset by lower commodity prices. Our average daily production increased 1,021 BOEPD or 15.8% from the prior year period; however our average realized price per barrel of oil equivalent (“BOE”) decreased $2.85, or 8.2% from the prior year period. Refer to*“Results of Operations”* below for further information.

Current wording

Cash provided by operating activities for the six months ended December 31, 2024 increased $4.0 million compared to the six months ended December 31, 2023 primarily due to an increase in revenues and changes in the timing of our working capital. Total revenues increased $0.5 million as compared to the prior year period primarily due increased production volumes partially offset by lower commodity prices. Our average daily production increased 832 BOEPD or 13.0% from the prior year period; however our average realized price per barrel of oil equivalent (“BOE”) decreased $3.68, or 10.4% from the prior year period. Refer to*“Results of Operations”* below for further information.

Previous wording

Cash used in investing activities for the three months ended September 30, 2024 increased $1.2 million compared to the three months ended September 30, 2023 primarily due to the addition of our SCOOP/STACK properties since the prior year period and the active drilling and completion projects of our operators in the field.

Current wording

Cash used in investing activities for the six months ended December 31, 2024 decreased $1.9 million compared to the six months ended December 31, 2023 primarily due to the participation of our drilling and completion of three gross wells in the Chaveroo Field in the prior year partially offset by the addition of our SCOOP/STACK properties and associated development capital expenditures since the prior year period.