EVOLUTION PETROLEUM CORP

General

Evolution Petroleum Corporation is an independent energy company focused on maximizing total returns to its shareholders through the ownership of and investment in onshore oil and natural gas properties in the United States. In support of that objective, our long-term goal is to maximize total shareholder return from a diversified portfolio of long-life oil and natural gas properties built through acquisitions and through selective development opportunities, production enhancements, and other exploitation efforts on our oil and natural gas properties.

Our oil and natural gas properties consist of non-operated interests in the SCOOP and STACK plays of the Anadarko Basin located in central Oklahoma; the Chaveroo Field in Chaves and Roosevelt Counties of New Mexico; Jonah Field in Sublette County, Wyoming; the Williston Basin in North Dakota; the Barnett Shale located in North Texas; the Hamilton Dome Field located in Hot Springs County, Wyoming; the Delhi Holt-Bryant Unit in the Delhi Field in Northeast Louisiana; and small overriding royalty interests in four onshore central Texas wells.

Our non-operated interests in the SCOOP and STACK plays consist of oil and natural gas producing properties in the Anadarko basin, where we hold approximately 2.6% average net working interest and approximately 2.0% average net revenue interests located on approximately 103,700 gross or 4,200 net acres (approximately 96% held by production), across Blaine, Canadian, Carter, Custer, Dewey, Garvin, Grady, Kingfisher, McClain, Murray, and Stephens counties in Oklahoma. The oil and natural gas properties are operated by Continental Resources, Inc., Ovintiv USA Inc. and EOG Resources, Inc. with approximately 40% of wells operated by other operators. Production from our SCOOP/STACK properties for the nine months ended March 31, 2025 is comprised of 50% natural gas, 34% crude oil, and 16% NGLs.

Our non-operated interests in the Chaveroo Field consist of a 50% net working interest, with an average associated 41% revenue interest, in approximately 3,200 gross or 1,600 net acres all held by production, associated with five development blocks with the right to acquire the same working interest in additional development locations and associated acreage at a fixed price. The field is operated by PEDEVCO Corp. (“PEDEVCO”). Production from our Chaveroo Field properties for the nine months ended March 31, 2025 is comprised of 100% crude oil.

Our non-operated interests in the Jonah Field, a natural gas and NGL property in Sublette County, Wyoming, consist of approximately 20% average net working interest and approximately 15% average net revenue interest located on approximately 5,300 gross or 950 net acres all held by production. The properties are operated by Jonah Energy. Production from our Jonah Field properties for the nine months ended March 31, 2025 is comprised of 90% natural gas, 5% crude oil, and 5% NGLs.

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. Production from our Williston Basin properties for the nine months ended March 31, 2025 is comprised of 77% crude oil, 13% NGL, and 10% natural gas.

Our non-operated interests in the Barnett Shale, a natural gas and NGL producing shale reservoir, consist of approximately 17% average net working interest and approximately 14% average net revenue interest (inclusive of small overriding royalty interests). The approximately 123,800 gross or 21,000 net acres are held by production across nine North Texas counties. The oil and natural gas properties are primarily operated by Diversified Energy Company with approximately 10% of wells operated by six other operators. Production from our Barnett Shale properties for the nine months ended March 31, 2025 is comprised of 74% natural gas, 25% NGLs, and 1% crude oil.

Our non-operated interests in the Hamilton Dome Field, a secondary recovery field utilizing water injection wells to pressurize the reservoir, consist of approximately 24% average net working interest, with an associated 20% average net revenue interest (inclusive of a small overriding royalty interest). The approximately 5,900 gross acre unitized field, of which we hold approximately 1,400 net acres, is operated by Merit Energy Company, who owns the majority of the remaining working interest in the Hamilton Dome Field. The Hamilton Dome Field is located in the southwest region of the Big Horn Basin in northwest Wyoming. Production from our Hamilton Dome Field properties for the nine months ended March 31, 2025 is comprised of 100% crude oil.

Our non-operated interests in the Delhi Field, a CO 2-EOR project, consist of approximately 24% average net working interest, with an associated 19% revenue interest and separate overriding royalty and mineral interests of approximately 7% yielding a total average net revenue interest of approximately 26%. The field is operated by Denbury Onshore LLC, a subsidiary of Exxon Mobil Corporation. The approximately 13,600 gross acre unitized Delhi Field, of which we hold approximately 3,200 net acres, is located in northeast Louisiana in Franklin, Madison, and Richland Parishes. Production from our Delhi Field properties for the nine months ended March 31, 2025 is comprised of 77% crude oil and 23% NGL.

During the nine months ended March 31, 2025, crude oil, natural gas and NGL production increased 5% compared to the year-ago period due to our recent acquisitions and development drilling activities since the year-ago period. Our crude oil, natural gas and NGL revenues remained flat over the same period despite our increase in production volumes due to declines in commodity prices. Our lease operating costs for the nine months ended March 31, 2025 have increased 3% in total, but decreased $0.45 per BOE due to increased production, compared to the year-ago period.

Of particular note, the Company’s financial results were adversely impacted by net unrealized losses on derivative contracts of $3.9 million and $3.4 million for the three and nine months ended March 31, 2025. The unrealized losses on derivative contracts are non-cash charges incurred at a point in time, due to the mark-to-market valuation of our hedges for future periods based on current forward price curves. The mark-to-market is also reflected as derivative contract assets and liabilities on the Company’s unaudited condensed consolidated balance sheets. Continued volatility in commodity markets will also cause volatility in the valuation of our derivative contracts. Financial hedges are a requirement under our Senior Secured Credit Facility and help establish commodity price floors, contributing to stable cash flows when the derivative contracts are settled, thereby supporting our dividend strategy. See below for a further discussion around our results of operations and cash flow activities.

Recent Developments

Dividend Declaration

On May 12, 2025, Evolution’s Board of Directors approved and declared a quarterly dividend of $0.12 per common share payable June 30, 2025.

Purchase of Non-operated Oil and Natural Gas Assets

On April 14, 2025, we closed the acquisition of non-operating working interests in certain long life oil and natural gas wells located primarily in Lea, Eddy and Chaves Counties, New Mexico and Stephens County, Texas (the “TexMex Acquisition”) from a private seller. In March 2025, we made a deposit of $1.8 million with the seller to acquire the assets. The total purchase price for the TexMex Acquisition was approximately $9.0 million before customary post-closing adjustments, with an effective date of February 1, 2025. We funded the balance of the purchase price for the TexMex Acquisition in April 2025 with a combination of cash on hand and borrowings under our Senior Secured Credit Facility.

The TexMex Acquisition includes an average working interest of 42.2% and an average revenue interest of 35.2% in approximately 600 wells. The current net daily production of the acquired assets is approximately 440 BOEPD, based on the average for the three months ended March 31, 2025, with a commodity split of 60% oil and 40% natural gas.

At-the-Market (“ATM”) Equity Sales Program

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 nine months ended March 31, 2025, we sold a total of approximately 0.6 million shares of our common stock under the ATM Sales Agreement for net proceeds of approximately $3.1 million, after deducting $0.3 million in offering costs. 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.

Risks and uncertainties

The oil and natural gas industry is a global market impacted by many factors, such as government regulations, particularly in the areas of tariffs, 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.

Oil and natural gas prices have been, and we expect may continue to be, volatile. Lower oil and natural gas prices not only decrease our revenues, but an extended decline in oil or natural gas prices may affect planned capital expenditures and the oil and natural gas reserves that we can economically produce. Lower oil and natural gas prices may also reduce the amount of our borrowing base under our Senior Secured Credit Facility, which is determined at the discretion of the lenders based on various factors including the collateral value of our proved reserves, as well as the dividend rate determined by the Board of Directors each quarter.

Currently, our oil and natural gas properties are operated by third-party operators and involve other third-party working interest owners. As a result, we have limited ability to influence the operation or future development of such properties. Despite these uncertainties, we remain focused on our long-term objectives and continue to be proactive with our third-party operators to review the management of capital expenditures.

Given the dynamic nature of these factors and events, we cannot reasonably estimate the period of time that certain market conditions will persist. Continuing volatility in political, trade, regulatory and economic conditions could impact supply and demand fundamentals, and any related declines in crude oil, natural gas, and NGL prices could lead to proved property impairments in the future. Future impairments of proved properties are difficult to predict, especially in a volatile price environment.