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Organic Development Projects Contribute to Record 3QFY24 Oil Production

We hosted a fireside chat on March 20, 2024, with President and CEO Kelly Loyd, CFO Ryan Stash, and COO Mark Bunch to discuss the addition of organic growth areas in the Chaveroo Oil Field in New Mexico and Central Oklahoma’s SCOOP/STACK play to the company’s asset portfolio. This report contains a transcript of the conversation, which can be accessed on demand. The link is accessible in our full report. The addition of the Chaveroo development partnership in September 2023 and the SCOOP/STACK assets in February 2024 add an organic growth element to Evolution’s asset base. The projects diversify management’s capital allocation options and are expected to add more oil and liquids to the commodity mix over time. Evolution’s shareholder return framework is built on a strategy of returning cash to shareholders and investing in the asset base to maintain and grow cash flow and is supported by a conservative balance sheet. Management believes the new projects further extend the dividend visibility for many years. The SCOOP/STACK acquisition added ~300 gross undeveloped locations with an average ~3% working interest. Since the acquisition’s effective date (November 1, 2023), 19 of the 21 DUC wells included in the package have been completed at the seller’s expense for Evolution’s benefit. New completions have helped to maintain steady production at ~1,500 BOE/d. Evolution elected to participate in 15 wells (0.2 net), 13 of which were spudded by the end of March. Initial results from the first three horizontal San Andres wells in the Chaveroo field have met or exceeded expectations. Each of the wells reached peak production between 300 and 375 gross BOE/d (80% oil). Evolution has elected to participate in four wells in Drilling Block 2 and six in Drilling Block 3. Operations in Block 2 are expected to begin in 1QFY25. Block 3 operations are expected to begin in 4QFY25. The partnership allows Evolution to participate on a block-by-block basis in up to 82 gross development wells (50% working interest). Contributions from new well completions lifted 3QFY24 oil production to a new company record of ~2,200 b/d. Total production increased 14% Q/Q and 2% Y/Y to ~7,200 BOE/d. Oil production increased 27% Q/Q and 18% Y/Y and represented 30% of total output. 3QFY24 adjusted EBITDA was $8.5 million, up 24% from 2QFY24. Sharply lower realized natural gas prices contributed to a Y/Y adjusted EBITDA decline from $22.0 million in 3QFY23. Realized gas prices in 3QFY24 were $2.77/Mcf, compared with $9.80/Mcf in 3QFY23. As of March 31, 2024, net debt was $39.4 million, including $42.5 million outstanding under Evolution’s existing RBL credit facility. Management is comfortable with the existing facility and believes the asset base collateral value could support an increase if needed to opportunistically capture additional assets.