Evolution Petroleum Announces Acquisition of Non-Operated Oil and Natural Gas Assets in New Mexico, Texas, and Louisiana

Rhea-AI Summary

Evolution Petroleum (NYSE American: EPM) has announced a definitive agreement to acquire non-operated oil and natural gas assets in New Mexico, Texas, and Louisiana for $9.0 million. The acquisition adds approximately 440 BOEPD of net production with a 60% oil and 40% natural gas mix.

Key highlights include:

• Sub-7% annual base decline rate in production
• 254 gross producing wells across all regions
• Purchase price represents ~2.8x estimated Next Twelve Months Adjusted EBITDA
• $9.0 million purchase price versus ~$15 million of Proved Developed PV-10

The transaction is expected to close by the end of Evolution's third quarter of fiscal 2025, with an effective date of February 1, 2025. The company plans to finance the acquisition through a combination of cash on hand and existing credit facility borrowings.

Positive

• Purchase price of $9.0M represents significant discount to $15M Proved Developed PV-10 value
• Immediately accretive acquisition at 2.8x NTM EBITDA multiple
• Low 7% annual decline rate ensures stable cash flows
• Balanced commodity mix (60% oil, 40% gas) reduces price risk
• Additional upside potential through waterflood reactivations

Negative

• Non-operated position limits direct operational control
• Requires partial debt financing through credit facility

Insights

Financial Analyst

Evolution Petroleum's $9 million acquisition represents a strategically sound deployment of capital that enhances the company's production profile and cash flow stability. The transaction's 2.8x NTM Adjusted EBITDA multiple indicates favorable pricing well below industry averages, which typically range from 4-6x for similar assets. This valuation efficiency is further validated by the $15 million Proved Developed PV-10 assessment, suggesting the company is acquiring these assets at a 40% discount to their intrinsic value.

The addition of 440 BOEPD with a balanced 60/40 oil-to-gas mix and sub-7% annual decline rate will provide long-term predictable cash flows with minimal maintenance capital requirements. This low-decline characteristic is particularly valuable in the current volatile commodity price environment, providing downside protection while maintaining upside exposure.

This marks EPM's seventh acquisition in six years, demonstrating consistent execution of their consolidation strategy focused on mature, cash-flowing assets. The transaction structure - using a combination of cash on hand and existing credit facilities - maintains financial flexibility without overleveraging the balance sheet, which remains critical for supporting their dividend program. The immediate accretion to key financial metrics enhances EPM's dividend coverage ratio, reinforcing their shareholder return proposition in a sector where yield is increasingly valued by investors.

Energy Industry Expert

This acquisition exemplifies the growing trend of strategic consolidation in the oil and gas mid-cap space, where companies are prioritizing cash flow stability over production growth. The asset mix across three states (New Mexico, Texas, and Louisiana) provides geographic diversification that mitigates regional regulatory and infrastructure risks.

The 60% oil weighting is particularly advantageous in the current commodity environment where oil commands superior margins to natural gas. These assets' sub-7% decline rate stands in stark contrast to the 20-30% first-year declines typical in unconventional shale plays, translating to significantly lower maintenance capital requirements.

Evolution's approach of acquiring non-operated interests while partnering with "top-tier private operators" allows them to benefit from operational expertise without maintaining the overhead and complexity of direct operations. This asset-light model enables EPM to efficiently allocate capital across a diverse portfolio while maintaining a lean organizational structure. The mention of potential "reactivations of existing waterfloods" suggests untapped recovery potential in these mature assets - waterflood optimization typically offers 5-15% incremental recovery with modest capital investment, providing organic growth opportunities beyond the base production.

This transaction reinforces Evolution's positioning as a dividend-focused energy company capable of delivering both yield and modest growth - an increasingly sought-after profile as institutional investors return to the energy sector seeking reliable income streams.

Strategic Benefits of the Acquisition:

• Adds approximately 440 net BOEPD of stable, low-decline production.
• Enhances cash flow visibility with a balanced commodity mix.
• Strengthens Evolution’s long-term dividend sustainability.
• Offers low-risk development opportunities with potential for incremental production growth.
• ~2.8x estimated Adjusted EBITDA¹ for the next 12 months (NTM)², providing immediate accretion.
• $9.0 million purchase price vs. ~$15 million of Proved Developed PV-10³.

HOUSTON, March 04, 2025 (GLOBE NEWSWIRE) -- Evolution Petroleum Corporation (NYSE American: EPM) ("Evolution" or the "Company") today announced that it has entered into a definitive agreement to acquire non-operated oil and natural gas assets in New Mexico, Texas, and Louisiana (the "Acquisition"). The total purchase price for the Acquisition is $9.0 million, subject to customary closing adjustments. The Acquisition is expected to close by the end of Evolution's third quarter of fiscal 2025 with an effective date of February 1, 2025. The Company intends to finance the Acquisition through a combination of cash on hand and borrowings under its existing credit facility.

Kelly Loyd, President and Chief Executive Officer, commented: "This Acquisition marks our 7^th such transaction in the last 6 years and is another step forward in strengthening our production base – aligns with our disciplined growth strategy by adding high-quality, low-decline production at an attractive valuation, estimated at ~2.8x NTM² Adjusted EBITDA¹ which doesn’t include any incremental cash flows for upside opportunities. These assets complement our existing portfolio and enhance our ability to generate stable free cash flow, which supports our long-standing commitment to returning capital to shareholders. We see additional upside through reactivations of existing waterfloods and through operational efficiencies, which will further enhance long-term value."

The Acquisition expands Evolution's diverse asset portfolio with approximately 440 barrels of oil equivalent per day (BOEPD) of net production, consisting of a balanced commodity mix of 60% oil and 40% natural gas. The acquired assets are primarily low-decline, Proved Developed Producing (PDP) properties, characterized by a sub-7% annual base decline, ensuring stable cash flows and long-term value creation. The transaction is immediately accretive to all key metrics, reinforcing Evolution's ability to sustain and grow its shareholder returns. The portfolio consists of approximately 254 gross producing wells across all regions. The assets will be managed by a top-tier private operator, ensuring operational efficiency and the ability to maximize value.

"We remain committed to executing our strategy of acquiring high-quality, long-life assets that enhance our production base while maintaining financial discipline," added Mr. Loyd. "This transaction further reinforces our strong balance sheet and ability to deliver consistent shareholder value through sustainable production and cash flow generation."

Non-GAAP Disclosure

Certain financial information utilized by the Company are not measures of financial performance recognized by accounting principles generally accepted in the United States (“GAAP”).

Adjusted EBITDA is a non-GAAP financial measure used as a supplemental financial measure by management and external users of the Company's financial statements, such as investors, commercial banks, and others, to assess our operating performance as compared to that of other companies in our industry. We use these measures to assess our ability to incur and service debt and fund capital expenditures. Adjusted EBITDA should not be considered in isolation from or as a substitute for net income, as an indication of operating performance or cash flows from operating activities or as a measure of liquidity. Adjusted EBITDA may not be comparable to similarly titled measures reported by other companies. The Company defines “Adjusted EBITDA” as net income (loss) plus interest expense, income tax expense (benefit), depreciation, depletion, and accretion (DD&A), stock-based compensation, ceiling test impairment, and other impairments, unrealized loss (gain) on change in fair value of derivatives, and other non-recurring or non-cash expense (income) items. The Company cannot provide a reconciliation of NTM Adjusted EBITDA without unreasonable efforts because it is unable to predict with reasonable certainty the ultimate outcome of certain significant items required for reconciliation. These items are uncertain, depend on various factors and could have a material impact on GAAP reported results.

PV-10 is a non-GAAP financial measure that differs from a financial measure under GAAP known as “standardized measure of discounted future net cash flows” in that PV-10 is calculated without including future income taxes. The Company believes the presentation of PV-10 provides useful information because it is widely used by investors in evaluating oil and natural gas companies without regard to specific income tax characteristics of such entities. The Company also uses PV-10 when assessing the potential return on investment related to oil and natural gas properties and in evaluating acquisition opportunities. PV-10 is not intended to represent the current market value of the Company’s estimated proved reserves. PV-10 should not be considered in isolation or as a substitute for the standardized measure as defined under GAAP. The Company also presents PV-10 at strip pricing, which is PV-10 adjusted for price sensitivities. Since GAAP does not prescribe a comparable GAAP measure for PV-10 of reserves adjusted for pricing sensitivities, it is not practicable for the Company to reconcile PV-10 at strip pricing to a standardized measure or any other GAAP measure.

About Evolution Petroleum

Evolution Petroleum Corporation is an independent energy company focused on maximizing total shareholder returns through the ownership of and investment in onshore oil and natural gas properties in the U.S. The Company aims to build and maintain a diversified portfolio of long-life oil and natural gas properties through acquisitions, selective development opportunities, production enhancements, and other exploitation efforts. Properties include non-operated interests in the following areas: the SCOOP/STACK plays of the Anadarko Basin in Oklahoma; the Chaveroo Oilfield located in Chaves and Roosevelt Counties, New Mexico; the 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; as well as small overriding royalty interests in four onshore Texas wells. Visit www.evolutionpetroleum.com for more information.

Cautionary Statement

All forward-looking statements contained in this press release regarding the Company's current and future expectations, potential results, and plans and objectives involve a wide range of risks and uncertainties. Statements herein using words such as "believe," "expect," "may," "plans," "outlook," "should," "will," and words of similar meaning are forward-looking statements. Although the Company's expectations are based on business, engineering, geological, financial, and operating assumptions that it believes to be reasonable, many factors could cause actual results to differ materially from its expectations. The Company gives no assurance that its goals will be achieved. These factors and others are detailed under the heading "Risk Factors" and elsewhere in our periodic reports filed with the Securities and Exchange Commission ("SEC"). The Company undertakes no obligation to update any forward-looking statement.

Contact
Investor Relations
(713) 935-0122
ir@evolutionpetroleum.com

1)			Adjusted EBITDA is Adjusted Earnings Before Interest, Taxes, Depreciation, and Amortization and is a non-GAAP financial measure; see disclosures at the end of this release for more information.
2)			Based on current NYMEX strip prices as of 3/3/25; NTM represents 12-month period of 4/1/25-4/1/26.
3)			PV-10 is based on proved reserves determined by internal management estimates using current NYMEX strip prices as of 3/3/25 and is a non-GAAP financial measure; see disclosures at the end of this release for more information.

This press release was published by a CLEAR® Verified individual.

FAQ

What is the production mix of EPM's newly acquired assets?

The acquired assets will provide 440 BOEPD of net production with a 60% oil and 40% natural gas commodity mix.

How much is Evolution Petroleum paying for the new oil and gas assets?

EPM is paying $9.0 million for the acquisition, subject to customary closing adjustments.

When will EPM's new asset acquisition close?

The acquisition is expected to close by the end of Evolution's third quarter of fiscal 2025, with an effective date of February 1, 2025.

What is the decline rate of EPM's newly acquired wells?

The acquired assets have a low sub-7% annual base decline rate, ensuring stable cash flows.

How many producing wells are included in EPM's new acquisition?

The portfolio consists of approximately 254 gross producing wells across New Mexico, Texas, and Louisiana.