EVOLUTION PETROLEUM CORP

As of March 31, 2025, we had $5.6 million in cash and cash equivalents and $35.5 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 nine months ended March 31, 2025 were cash provided by operations and net proceeds from the ATM Sales Agreement. Our primary uses of liquidity and capital resources for the nine months ended March 31, 2025 were cash dividend payments to our common stockholders, repayments of borrowings under our Senior Secured Credit Facility, deposit made for the TexMex Acquisition, and development capital expenditures. As of March 31, 2025, working capital was a deficit of $2.7 million primarily due to our current derivative contracts, which vary quarter-to-quarter based on forecasted commodity prices at the end of each quarter, as well as current payables associated with our active drilling in the Chaveroo Field. As of June 30, 2024, working capital was $5.9 million.

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 $35.5 million drawn as of March 31, 2025. The Senior Secured Credit Facility is secured by substantially all of our oil and natural gas properties and matures on April 9, 2026. We have received approval from our lender, MidFirst Bank, to extend the maturity of our existing Senior Secured Credit Facility to April 2028 and increase their total commitments from $50.0 million to $55.0 million. Also, we expect to receive $10.0 million in additional commitments from a new lender, Prism Bank, bringing our total commitments to $65.0 million. We expect all other terms to remain substantially the same and anticipate closing on the facility during our fiscal fourth quarter.

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 nine months ended March 31, 2025 and 2024, the weighted average interest on our borrowings was 7.59% and 8.13%, respectively. 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 March 31, 2025, 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. 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. On March 7, 2025, in conjunction with the spring redetermination, we entered into a letter agreement with MidFirst Bank, which allows us the option to hedge 72% of expected natural gas production rather than hedging 25% of expected crude oil production in each month for the calendar year ending December 31, 2026, as long as we remain in the 25% required hedging tier. As of March 31, 2025, we were in compliance with the hedging requirements under the Senior Secured Credit Facility.

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 $14.5 million as of March 31, 2025. 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 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; 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 46 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. Periodically, the Board of Directors reviews the dividend level, taking into account dividend stability, historical cash flow performance, financial strength of the Company, and future outlook. On May 12, 2025, the Board of Directors declared a quarterly cash dividend of $0.12 per share of common stock to shareholders of record on June 13, 2025 and payable on June 30, 2025.

Capital Expenditures

During the nine months ending March 31, 2025, we incurred $8.8 million on development capital expenditures. A majority of our spending occurred at Chaveroo Field, where we are actively participating in four gross drilling locations and at SCOOP/STACK, where our operators have brought 13 gross (0.14 net) 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 remainder of the year as well as further drilling at SCOOP/STACK.

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 13 gross (0.14 net) wells brought online at SCOOP/STACK during the first nine months of the fiscal year, discussed above, with an additional five gross (0.02 net) wells in progress. It also includes the drilling and completion of four gross (1.64 net) wells at Chaveroo Field for development block two, which began production at the end of April 2025.

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 March 31, 2025 were $75.33 per barrel of oil, $2.45 per MMBtu of natural gas and $22.38 per barrel of NGLs. As of March 31, 2025, 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 March 31, 2025 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 April 1, 2025 of $71.61 per barrel and $4.11 per MMBtu and May 1, 2025 of $59.24 per barrel and $3.33 per MMbtu, and holding the May prices constant for one month 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 nine months ended March 31, 2025 increased $7.9 million compared to the nine months ended March 31, 2024 primarily due to changes in the timing of our working capital. Cash flows provided by operating activities before changes in working capital for the nine months ended March 31, 2025 decreased $3.5 million compared to the nine months ended March 31, 2024 primarily due to increases in our lease operating costs and interest expense for the comparable periods. Refer to*“Results of Operations”* below for further information.

Cash used in investing activities for the nine months ended March 31, 2025 decreased $42.1 million compared to the nine months ended March 31, 2024 primarily due to the SCOOP/STACK Acquisitions in February 2024 together with the timing of drilling and completing our Chaveroo development block one in the prior year as compared to this year, partially offset by the deposit we made for the TexMex Acquisition in the current year.

Net cash flows used in financing activities for the nine months ended March 31, 2025 were $13.4 million compared to net cash flows provided by financing activities of $29.4 million for the nine months ended March 31, 2024. For the nine months ended, March 31, 2025, we paid $12.2 million in cash dividends to our common stockholders, repaid $4.0 million of borrowings under our Senior Secured Credit Facility, and receivednet proceeds from the sale of common stock under the ATM Sales Agreement of approximately $3.1 million, after deducting $0.3 million in offering costs. For the nine months ended March 31, 2024, we borrowed $42.5 million under our Senior Secured Credit Facility to finance our SCOOP/STACK Acquisitions which was partially offset by $12.0 million in cash dividends to our common stockholders together with $0.8 million paid to repurchase shares of our common stock under our share repurchase plan.