Permian Partnership Adds Organic Capital Allocation Option
We hosted a fireside chat with CEO Kelly Loyd and COO Mark Bunch on October 24, 2023. The conversation can be accessed on-demand along with the full transcript of our event in this report. Corporate consolidation among oil & gas producers could have a trickle-down impact on the asset market as companies high-grade their property portfolios. Evolution’s asset base has been built through the acquisition of non-operated working interests in mature long-lived producing assets. Activity in the market for assets that fit management’s strategy has picked up in recent months. Upon closing its acquisition of Denbury Inc. ExxonMobil will take over as operator of the Delhi field in northeast Louisiana where Evolution owns a non-operated working interest. Management expects the new operator will look to optimize the field’s value. The Permian Strategic Partnership to develop the Chaveroo oil field on the Northwest Shelf in the Permian Basin adds an element of organic growth to Evolution’s asset base. Drilling is underway on the first three wells, which are expected to be completed in February 2024. From a modeling standpoint, incremental volumes could be more impactful to Evolution’s FY25 production profile. The pay-as-you-go partnership structure provides significant capital flexibility. Management expects to fund the company’s share of acreage and drilling capital from within cash flow and for the program to be accretive to the long-term dividend. The partnership covers ~16,000 gross (~8,000 net) acres believed to hold the potential for 81 gross horizontal wells targeting the San Andres formation on 12 separate development blocks. The development pace implies ~10 years of inventory. Evolution’s core business model is squarely focused on growing the asset base through accretive acquisitions and maintaining a strong balance sheet to support management’s dividend strategy. The development partnership adds another capital allocation option to support the strategy. Evolution is scheduled to report 1QFY24 financial and operating results after the market closes on Tuesday, November 7, 2023. Management will host a conference call at 10:00 am CT on Wednesday, November 8, 2023.Evolution Petroleum is an oil and gas company focused on the ownership, management and development of producing oil and gas properties. The company has interest in the oil recovery project in Louisiana's Delhi field.
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