EVOLUTION PETROLEUM CORP

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.

The Senior Secured Credit Facility has a maximum capacity of $50.0 million subject to a borrowing base determined by the lender based on the value of our oil and natural gas properties. The Senior Secured Credit Facility has a current borrowing base of $50.0 million, with $39.5 million drawn as of December 31, 2024. The Senior Secured Credit Facility is secured by substantially all of our oil and natural gas properties and matures on April 9, 2026.

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.

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

25% each of expected crude oil and natural gas production each month over that period. Thus, we had the option to choose whether to hedge 40% of expected crude oil production or 25% each of expected crude oil and natural gas production. As of December 31, 2024, we were in compliance with the hedging requirements under the Senior Secured Credit Facility.

The Senior Secured Credit Facility requires for redeterminations of the borrowing base to occur semi-annually. At each redetermination, the Margined Collateral Value is updated based on the estimated value of our oil and natural gas properties, which includes our proved developed reserves, proved undeveloped reserves, and other relevant factors consistent with customary oil and natural gas lending criteria. As a result of our fall borrowing base redetermination, the utilization percentage of our Senior Secured Credit Facility increased whereby we will be required to hedge 50% of our expected crude oil and natural gas production. During the third quarter of fiscal year 2025, we will either make principal repayments of approximately $7.0 million to MidFirst, reducing our borrowings outstanding to such a level that the utilization percentage of the facility drops below 50% or enter into additional derivative contractsto hedge at least 50% of expected crude oil and natural gas production.

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).

We are pursuing new growth opportunities through acquisitions and other transactions. In addition to cash on hand, we have access to the undrawn portion of the borrowing base available under our Senior Secured Credit Facility, totaling $10.5 million as of December 31, 2024. We also have an effective shelf registration statement with the SEC under which we may issue up to $500.0 million of new debt or equity securities.

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.

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.

Capital Expenditures

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.

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.

Full Cost Pool Ceiling Test

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.

Overview of Cash Flow Activities

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.

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.

Net cash flows used in financing activities for the six months ended December 31, 2024 decreased $2.0 million compared to the six months ended December 31, 2023 primarily due to proceeds received from the sale of our common stock under our ATM Sales Agreement. For the six months ended, December 31, 2024, we paid $8.1 million in cash dividends to our common stockholders and receivednet proceeds from the sale of common stock under the ATM Sales Agreement of approximately $2.0 million, after deducting and initial $0.2 million of fees for due diligence incurred with the offering. For the six months ended December 31, 2023, we paid $8.0 million in cash dividends to our common stockholders.