Exchange: AMEX | Sector: Energy | Industry: Oil Gas Exploration Production
Q4 2024
Published: Sep 11, 2024
Earnings Highlights
Revenue of $21.23M up 16.8% year-over-year
EPS of $0.04 increased by 967.6% from previous year
Gross margin of 28.1%
Net income of 1.24M
""Delhi has been certified as a carbon capture, utilization and storage site for enhanced oil recovery, which we believe will drive further benefits to evolution."" - Kelly Loyd
Evolution Petroleum Corporation (EPM) QQ4 2024 Results Analysis: Diversified Liquids Growth in SCOOP/STACK and Delhi Test Site V; Solid Cash Generation and Dividend Commitment
Executive Summary
Evolution Petroleum reported a resilient QQ4 2024 performance amid a low natural gas pricing environment, underpinned by higher liquids revenue and a diversified asset base. In the quarter, total revenue reached $21.2 million, up 17% year-over-year, with net income of $1.24 million and adjusted EBITDA of $8.0 million. Operating metrics improved as production rose 11% year-over-year to 7,209 net BOE/d, driven by ongoing SCOOP/STACK activity and the Chaveroo developments, partially offset by weaker natural gas pricing and downtime at Delhi.
Key Performance Indicators
Revenue
21.23M
QoQ: -7.81% | YoY:16.80%
Gross Profit
5.97M
28.14% margin
QoQ: 32.73% | YoY:136.88%
Operating Income
2.40M
QoQ: 15.31% | YoY:827.80%
Net Income
1.24M
QoQ: 327.34% | YoY:643.98%
EPS
0.04
QoQ: 359.30% | YoY:967.57%
Revenue Trend
Margin Analysis
Key Insights
Revenue: $21.2 million; YoY +17% (QoQ not disclosed in release)
Gross Profit: $5.97 million; gross margin 28.1%
EBITDA: $7.66 million; EBITDA margin 36.1%
Operating Income: $2.40 million; margin 11.3%
Net Income: $1.24 million; net margin 5.8%
Financial Highlights
Key QQ4 2024 metrics and cadence:
- Revenue: $21.2 million; YoY +17% (QoQ not disclosed in release)
- Gross Profit: $5.97 million; gross margin 28.1%
- EBITDA: $7.66 million; EBITDA margin 36.1%
- Operating Income: $2.40 million; margin 11.3%
- Net Income: $1.24 million; net margin 5.8%
- EPS (GAAP): $0.0395; Diluted EPS: $0.0401
- Production: 7,209 boe/d (Jan–Jun period ending 2024); Oil +20%, NGL +17%, Gas +5% YoY
- Cash Flow: Operating cash flow = $7.99 million; Capex = $2.51 million; Free cash flow (reported) = $10.50 million
- Balance sheet: Cash $6.45 million; debt $39.5 million; net debt $33.21 million; Total assets $162.88 million; Total liabilities $81.75 million; Stockholders’ equity $81.13 million
- Liquidity/Leverage: Current ratio 1.37; debt-to-capitalization 0.328; interest coverage 2.75; hedging program maintained
- Dividend: $0.12 per share declared for September 2024 (44th consecutive quarterly dividend)
Income Statement
Metric
Value
YoY Change
QoQ Change
Revenue
21.23M
16.80%
-7.81%
Gross Profit
5.97M
136.88%
32.73%
Operating Income
2.40M
827.80%
15.31%
Net Income
1.24M
643.98%
327.34%
EPS
0.04
967.57%
359.30%
Key Financial Ratios
currentRatio
1.37
grossProfitMargin
28.1%
operatingProfitMargin
11.3%
netProfitMargin
5.82%
returnOnAssets
0.76%
returnOnEquity
1.52%
debtEquityRatio
0.49
operatingCashFlowPerShare
$0.24
freeCashFlowPerShare
$0.32
dividendPayoutRatio
324%
priceToBookRatio
2.2
priceEarningsRatio
36.12
Net Income vs. Revenue
Expense Breakdown
Management Commentary
Management insights and quotes from the QQ4 2024 earnings call (themes grouped by topic):
- Strategy and capital allocation:
• "Following our record year of natural gas production and revenue in fiscal 2023, this fiscal year has proven that adaptability is key... we generated record liquids revenue in production for this fiscal year, in part driven by 2 transformative transactions with SCOOP/STACK and Chaveroo that added 6.6 million barrels of oil equivalent of proved reserves" (Kelly Loyd).
• "In fiscal 2024 we generated $86 million of revenue, $4 million of net income and $30 million of adjusted EBITDA" (Kelly Loyd).
• "This quarter, we will pay another $0.12 dividend in September, marking our 44th consecutive quarterly dividend payment" (Kelly Loyd).
- Operations and asset mix:
• "During the quarter, our operators turned-in-line 3 gross wells in SCOOP/STACK... 7 of these 10 wells are currently producing" (Mark Bunch).
• "At Delhi, production was affected during the quarter by field wide power outages for 7 days... CO2 recycling resumed in July" (Mark Bunch).
• "Williston basin production increased... due to a full quarter of natural gas and NGL sales from the ONEOK Grassland System" (Mark Bunch).
- Financials and cash generation:
• "In fiscal Q4, we had total revenues of $21.2 million, up 17% year-over-year. Net income for the fourth quarter increased to $1.2 million... adjusted EBITDA increased 12% to $8 million" (Ryan Stash).
• "Cash flow from operations also increased materially to $8 million for the quarter" (Ryan Stash).
• "We ended the quarter with $6.4 million in cash on hand and borrowings of $39.5 million on our credit facility" (Ryan Stash).
- Growth optionality and CCS/CO2 context:
• "Delhi has been certified as a carbon capture, utilization and storage site for enhanced oil recovery" (Kelly Loyd).
• "We will resume CO2 purchases in early second quarter of fiscal 2025" (Mark Bunch).
- Guidance and hedging:
• "We will continue to add hedges to reduce downside commodity price risk while maintaining upside" (Ryan Stash).
• "In fiscal 2025, four horizontal wells in Chaveroo (Block 2) and six additional horizontals in Block 3 are planned to begin in 2025; future net acreage costs are fixed at $36,000 per additional horizontal well" (Mark Bunch).
- Dividend and shareholder returns:
• "Evolution has returned approximately $118.4 million or $3.57 per share back to shareholders in common stock dividends" (Ryan Stash).
"Delhi has been certified as a carbon capture, utilization and storage site for enhanced oil recovery, which we believe will drive further benefits to evolution."
— Kelly Loyd
"This quarter, we generated $86 million of revenue, $4 million of net income and $30 million of adjusted EBITDA"
— Kelly Loyd
Forward Guidance
Management commentary underscores a constructive path to higher liquids production in fiscal 2025, supported by expanded drilling inventory and targeted development in SCOOP/STACK and Chaveroo. Key forward-looking elements:
- Liquids production: Management states that fiscal year 2025 liquids production is expected to be very strong, benefiting from the SCOOP/STACK and Chaveroo development programs and the tests in Test Site V at Delhi. Kelly Loyd explicitly framed the goal as strengthening cash flow for years to come.
- Development program and capex cadence: In fiscal 2025, Evolution plans to participate in four horizontal wells in Chaveroo (Block 2) starting early fiscal Q2 2025, and preliminarily six additional horizontals in Block 3 anticipated in fiscal Q4 2025. Net acreage costs are fixed at $36,000 per additional horizontal well, providing some cost visibility. Ryan Stash guided a fiscal 2025 capex range of $12.5–$14.5 million, with SCOOP/STACK activity driving variability depending on pricing signals.
- Delhi CCS/CO2 strategy: Delhi CO2 injection volumes were temporarily constrained by outages; management expects CO2 purchases to resume in early FY2025 Q2, and the CO2 CCS certification at Delhi could unlock longer-term monetization opportunities once anthropogenic CO2 injection economics are clearer.
- Financing and hedging: The company maintains a debt-friendly balance sheet with a borrowing base of $50 million and ongoing hedging as a risk-management tool. Evolution signaled willingness to expand capacity if an accretive acquisition arises and to pursue equity only if a highly accretive deal is available. Investors should monitor: (i) the pace of Test Site V development, (ii) the timing of CO2 purchase resumption, (iii) commodity price trajectories influencing SCOOP/STACK economics, and (iv) capex execution versus budget.
Competitive Position
Company
Gross Margin
Operating Margin
Return on Equity
P/E Ratio
EPM Focus
28.14%
11.30%
1.52%
36.12%
BRN
1.36%
-63.00%
-14.40%
-3.01%
EGY
54.80%
55.50%
9.19%
2.68%
EPSN
35.60%
-52.90%
2.58%
10.84%
MXC
39.10%
24.50%
1.50%
23.15%
Gross Profit Margin
Operating Profit Margin
Return on Equity
P/E Ratio Comparison
Investment Outlook
Overall, Evolution Petroleum presents a constructive long-term thesis anchored in a diversified, low-decline asset base, disciplined capital allocation, and an explicit plan to ramp liquids production through SCOOP/STACK and Chaveroo while leveraging Delhi Test Site V and CCS opportunities. The QQ4 2024 results illustrate resilient cash flow generation despite a challenging gas price backdrop, with EBITDA margins (~36%) and net margins (~5.8%) translating into meaningful free cash flow and a solid dividend cadence. The 2025 plan—4 horizontal Chaveroo wells, additional Drilling Block 3 wells, fixed drilling costs, and a targeted capex range of $12.5–$14.5 million—points to a path for higher liquids revenue, provided oil pricing supports development economics and SCOOP/STACK activity remains durable. Investors should monitor the timing of CO2 purchases in Delhi, the monetization timeline for carbon credits, and Test Site V outcomes as primary near-term catalysts, alongside commodity price trajectories and hedging effectiveness.
Key Investment Factors
Growth Potential
Growth resides in expanded liquids exposure from SCOOP/STACK and Chaveroo through 4 horizontal wells in Chaveroo Block 2 (early FY2025) and 6 additional horizontals in Block 3 (FY2025). Test Site V addition to Delhi and CO2 EOR certification may unlock future monetization opportunities and additional production uplift as CO2 injection economics stabilize. An established dividend framework and low-decline asset base support sustainable cash flow as volumes scale.
Profitability Risk
Key risks include (1) continued weakness in natural gas prices weighing on overall earnings; (2) execution risk and cost overruns in new drilling blocks and in Delhi CO2-related activities; (3) uncertain monetization timelines for anthropogenic CO2 credits and potential regulatory changes around CCS; (4) dependence on hedging constructs and potential volatility in commodity hedges; (5) potential delays in Test Site V development or approvals for additional Delhi phases; (6) balance-sheet liquidity depending on capex trajectory and acquisition appetite.
Financial Position
Solid liquidity relative to peers with cash on hand of $6.45M and a debt burden of $39.5M (net debt $33.21M), total assets $162.88M and stockholders’ equity $81.13M. Current ratio 1.374 and debt-to-capitalization 0.328 indicate a moderate leverage profile for a small-cap E&P with a diversified asset base. Free cash flow reported as $10.50M supports dividend stability (44th consecutive quarterly payout). The hedging program and conservative capex cadence underpin cash flow resilience in a volatile commodity environment.
SWOT Analysis
Strengths
Diversified asset mix across SCOOP/STACK, Chaveroo, Williston and Delhi with a low-decline profile
Consistent dividend payments with 44th consecutive quarterly dividend and $0.12 per share in Sep 2024
Strong liquidity position for a micro-cap E&P: cash on hand $6.45M, debt $39.5M, net debt $33.21M
CO2 EOR exposure and Delhi CCS certification offer optionality for longer-term value via carbon credits and improved recovery
Robust capex discipline and project execution that generated 11% production growth YoY in Q4 2024
Hedge program to manage downside price risk while preserving upside
Weaknesses
Small-scale producer with dependence on volatile oil and gas prices
Reliance on natural gas price environment; 2024 saw the lowest natural gas pricing since COVID-19 impact
Limited scale may constrain immediate resource upside versus larger peers
Realization of CO2 credit monetization and CCS benefits remains uncertain and contingent on policy timelines
Opportunities
Expansion of Delhi Test Site V and possible additional phases leveraging CO2 infrastructure
Increased liquids share from SCOOP/STACK and Chaveroo drilling inventory; potential 2025 liquids production uplift
Potential M&A opportunities that are accretive to shareholder value
Monetization of CCS credits as anthropogenic CO2 injection progresses
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