Evolution Petroleum Corp 10-Q for FY2023 Q2

Evolution Petroleum Corp (EPM)

10-Q 2023-02-08 For: 2022-12-31

Added on April 08, 2026

About this 10-Q

Evolution Petroleum Corp filed this 10-Q on February 8, 2023, covering the quarter ended December 31, 2022 (FY2023 Q2).

Headline figures

Quarter ended December 31, 2022, as reported in this filing, compared with the same period a year earlier where the filing states it.

Revenue: $33.68M; up 50.7% from $22.34M a year earlier
Net income: $10.39M; up 52.0% from net income of $6.83M a year earlier
Diluted EPS: $0.31; up 55.0% from $0.20 a year earlier

Search and read filings like this one from Claude or ChatGPT with the SEC filings MCP server →


Title of Each Class	Trading Symbol(s)	Name of Each Exchange On Which Registered
Common Stock, $0.001 par value	EPM	NYSE American



Large accelerated filer	☐	Accelerated filer	☐	Non-accelerated filer	☒	Smaller reporting company	☒
						Emerging growth company	☐


Forward-Looking Statements		2
PART I.	FINANCIAL INFORMATION	4
Item 1.	Condensed Consolidated Financial Statements (Unaudited)	4
	Condensed Consolidated Balance Sheets (Unaudited) as of December 31, 2022 and June 30, 2022	4
	Condensed Consolidated Statements of Operations (Unaudited) for the three and six months ended December 31, 2022 and 2021	5
	Condensed Consolidated Statements of Cash Flows (Unaudited) for the six months ended December 31, 2022 and 2021	6
	Condensed Consolidated Statements of Changes in Stockholders’ Equity (Unaudited) for the three and six months ended December 31, 2022 and 2021	7
	Notes to Unaudited Condensed Consolidated Financial Statements	8
Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	27
Item 3.	Quantitative and Qualitative Disclosures about Market Risk	40
Item 4.	Controls and Procedures	41
PART II. OTHER INFORMATION		41
Item 1.	Legal Proceedings	41
Item 1A.	Risk Factors	41
Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	41
Item 3.	Defaults Upon Senior Securities	42
Item 4.	Mine Safety Disclosures	42
Item 5.	Other Information	42
Item 6.	Exhibits	43
	Signatures	44


	December 31, 2022		June 30, 2022
Assets
Current assets
Cash and cash equivalents	$	3,710	$	8,280
Receivables from crude oil, natural gas, and natural gas liquids revenues		18,213		24,043
Derivative contract assets		244		170
Prepaid expenses and other current assets		1,908		3,875
Total current assets		24,075		36,368
Property and equipment, net of depletion, depreciation, and impairment
Oil and natural gas properties, net—full-cost method of accounting, of
which none were excluded from amortization		106,227		110,508
Other assets, net		1,358		1,171
Total assets	$	131,660	$	148,047
Liabilities and Stockholders' Equity
Current liabilities
Accounts payable	$	10,091	$	15,133
Accrued liabilities and other		9,883		11,893
Derivative contract liabilities		49		2,164
State and federal taxes payable		1,151		1,095
Total current liabilities		21,174		30,285
Long term liabilities
Senior secured credit facility		—		21,250
Deferred income taxes		6,744		7,099
Asset retirement obligations		14,455		13,899
Operating lease liability		149		—
Total liabilities		42,522		72,533
Commitments and contingencies (Note 10)
Stockholders' equity
Common stock; par value $0.001; 100,000,000 shares authorized: issued and
outstanding 33,808,233 and 33,470,710 shares as of December 31, 2022
and June 30, 2022, respectively		34		33
Additional paid-in capital		43,243		42,629
Retained earnings		45,861		32,852
Total stockholders' equity		89,138		75,514
Total liabilities and stockholders' equity	$	131,660	$	148,047


	Three Months Ended				Six Months Ended
	December 31,				December 31,
	2022		2021		2022		2021
Revenues
Crude oil	$	13,100	$	10,582	$	28,263	$	19,441
Natural gas		17,370		9,170		37,218		14,628
Natural gas liquids		3,206		2,587		7,992		7,149
Total revenues		33,676		22,339		73,473		41,218
Operating costs
Lease operating costs		15,041		10,671		34,157		19,296
Depletion, depreciation, and accretion		3,458		1,224		7,056		2,752
General and administrative expenses		2,581		1,823		5,053		3,763
Total operating costs		21,080		13,718		46,266		25,811
Income (loss) from operations		12,596		8,621		27,207		15,407
Other income and expenses
Net gain (loss) on derivative contracts		846		—		243		—
Interest and other income		7		7		13		10
Interest expense		(129)		(51)		(372)		(102)
Income (loss) before income taxes		13,320		8,577		27,091		15,315
Income tax (expense) benefit		(2,933)		(1,744)		(5,997)		(3,264)
Net income (loss)	$	10,387	$	6,833	$	21,094	$	12,051
Net income (loss) per common share:
Basic	$	0.31	$	0.20	$	0.63	$	0.36
Diluted	$	0.31	$	0.20	$	0.62	$	0.36
Weighted average number of common shares outstanding:
Basic		33,174		32,929		33,154		32,896
Diluted		33,394		33,262		33,356		33,193


☒	QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934


☐	TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934


	Six Months Ended December 31,
	2022		2021
Cash flows from operating activities:
Net income (loss)	$	21,094	$	12,051
Adjustments to reconcile net income (loss) to net cash provided by operating activities:
Depletion, depreciation, and accretion		7,056		2,752
Stock-based compensation		702		528
Settlement of asset retirement obligations		(71)		—
Deferred income taxes		(355)		(54)
Unrealized (gain) loss on derivative contracts		(2,189)		—
Accrued settlements on derivative contracts		(919)		—
Other		(4)		(7)
Changes in operating assets and liabilities:
Receivables from crude oil, natural gas, and natural gas liquids revenues		8,113		(4,253)
Prepaid expenses and other current assets		(316)		185
Accounts payable and accrued liabilities		(5,398)		2,122
State and federal income taxes payable		56		569
Net cash provided by operating activities		27,769		13,893
Cash flows from investing activities:
Acquisition of oil and natural gas properties		(31)		—
Capital expenditures for oil and natural gas properties		(2,886)		(526)
Net cash used in investing activities		(2,917)		(526)
Cash flows from financing activities:
Common stock dividends paid		(8,085)		(5,045)
Common stock repurchases, including stock surrendered for tax withholding		(87)		(2)
Repayments of senior secured credit facility		(21,250)		—
Net cash used in financing activities		(29,422)		(5,047)
Net increase (decrease) in cash and cash equivalents		(4,570)		8,320
Cash and cash equivalents, beginning of period		8,280		5,277
Cash and cash equivalents, end of period	$	3,710	$	13,597

Supplemental disclosures of cash flow information:
Non-cash investing and financing transactions:
Settlement proceeds receivable attributable to acquired Barnett Shale oil and gas property costs	$	—	$	858
Increase (decrease) in accrued capital expenditures for oil and natural gas properties		(768)		112


				Additional						Total
	Common Stock			Paid-in		Retained		Treasury		Stockholders'
	Shares	Par Value		Capital		Earnings		Stock		Equity
For the Three Months Ended December 31, 2022
Balances at September 30, 2022	33,546	$	33	$	42,811	$	39,533	$	—	$	82,377
Issuance of restricted common stock	296		1		(1)		—		—		—
Forfeitures of restricted stock	(26)		—		—		—		—		—
Common stock repurchases, including stock surrendered for tax withholding	—		—		—		—		(61)		(61)
Retirements of treasury stock	(8)		—		(61)		—		61		—
Stock-based compensation	—		—		494		—		—		494
Net income (loss)	—		—		—		10,387		—		10,387
Common stock dividends paid	—		—		—		(4,059)		—		(4,059)
Balances at December 31, 2022	33,808	$	34	$	43,243	$	45,861	$	—	$	89,138

For the Six Months Ended December 31, 2022
Balances at June 30, 2022	33,471	$	33	$	42,629	$	32,852	$	—	$	75,514
Issuance of restricted common stock	375		1		(1)		—		—		—
Forfeitures of restricted stock	(26)		—		—		—		—		—
Common stock repurchases, including stock surrendered for tax withholding	—		—		—		—		(87)		(87)
Retirements of treasury stock	(12)		—		(87)		—		87		—
Stock-based compensation	—		—		702		—		—		702
Net income (loss)	—		—		—		21,094		—		21,094
Common stock dividends paid	—		—		—		(8,085)		—		(8,085)
Balances at December 31, 2022	33,808	$	34	$	43,243	$	45,861	$	—	$	89,138

For the Three Months Ended December 31, 2021
Balances at September 30, 2021	33,632	$	34	$	42,737	$	14,716	$	—	$	57,487
Issuance of restricted common stock	57		—		—		—		—		—
Stock-based compensation	—		—		330		—		—		330
Net income (loss)	—		—		—		6,833		—		6,833
Common stock dividends paid	—		—		—		(2,523)		—		(2,523)
Balances at December 31, 2021	33,689	$	34	$	43,067	$	19,026	$	—	$	62,127

For the Six Months Ended December 31, 2021
Balances at June 30, 2021	33,515	$	34	$	42,541	$	12,020	$	—	$	54,595
Issuance of restricted common stock	254		—		—		—		—		—
Forfeitures of restricted stock	(80)		—		—		—		—		—
Common stock repurchases, including stock surrendered for tax withholding	—		—		—		—		(2)		(2)
Retirements of treasury stock	—		—		(2)		—		2		—
Stock-based compensation	—		—		528		—		—		528
Net income (loss)	—		—		—		12,051		—		12,051
Common stock dividends paid	—		—		—		(5,045)		—		(5,045)
Balances at December 31, 2021	33,689	$	34	$	43,067	$	19,026	$	—	$	62,127


	Three Months Ended		Six Months Ended
	December 31, 2021		December 31, 2021
As reported:
Net income (loss) for earnings per share calculation	$	6,833	$	12,051

Weighted average number of common shares outstanding — Basic		33,646		33,590
Weighted average number of common shares and dilutive potential common shares used in diluted earnings per share		33,646		33,590

Net income (loss) per common share — Basic	$	0.20	$	0.36
Net income (loss) per common share — Diluted	$	0.20	$	0.36

Revised:
Net income (loss) for earnings per share calculation	$	6,690	$	11,806

Weighted average number of common shares outstanding — Basic		32,929		32,896
Weighted average number of common shares and dilutive potential common shares used in diluted earnings per share		33,262		33,193

Net income (loss) per common share — Basic	$	0.20	$	0.36
Net income (loss) per common share — Diluted	$	0.20	$	0.36


	December 31, 2022		June 30, 2022
Oil and natural gas properties
Property costs subject to amortization	$	190,853	$	188,634
Less: Accumulated depletion, depreciation, and impairment		(84,626)		(78,126)
Oil and natural gas properties, net	$	106,227	$	110,508


Derivatives not designated
as hedging contracts	Balance sheet	Derivative Contract Assets				Balance sheet	Derivative Contract Liabilities
under ASC 815	location	December 31, 2022		June 30, 2022		location	December 31, 2022		June 30, 2022
Commodity contracts	Current assets - derivative contract assets	$	244	$	170	Current liabilities - derivative contract liabilities	$	49	$	2,164
Commodity contracts	Other assets - derivative contract assets		—		—	Long term liabilities - derivative contract liabilities		—		—
Total derivatives not designated as hedging contracts under ASC 815		$	244	$	170		$	49	$	2,164


Derivatives not designated	Location of gain (loss)	Three Months Ended				Six Months Ended
as hedging contracts	recognized in income on	December 31,				December 31,
under ASC 815	derivative contracts	2022		2021		2022		2021
Commodity contracts:
Realized gain (loss) on derivative contracts	Other income and expenses - net gain (loss) on derivative contracts	$	(224)	$	—	$	(1,946)	$	—
Unrealized gain (loss) on derivative contracts	Other income and expenses - net gain (loss) on derivative contracts		1,070		—		2,189		—
Total net gain (loss) on derivative contracts		$	846	$	—	$	243	$	—


	Derivative Contracts Assets				Derivative Contracts Liabilities
Offsetting of Derivative Assets and Liabilities	December 31, 2022		June 30, 2022		December 31, 2022		June 30, 2022
Gross amounts presented in the Consolidated Balance Sheet	$	244	$	170	$	49	$	2,164
Amounts not offset in the Consolidated Balance Sheet		(32)		(170)		(32)		(170)
Net amount	$	212	$	—	$	17	$	1,994


	December 31, 2022
	Level 1		Level 2		Level 3		Total
Assets
Derivative contract assets	$	—	$	244	$	—	$	244

Liabilities
Derivative contract liabilities	$	—	$	49	$	—	$	49


	December 31, 2022
Asset retirement obligations — beginning of period	$	13,921
Accretion of discount		556
Asset retirement obligations — end of period		14,477
Less: current asset retirement obligations		(22)
Long-term portion of asset retirement obligations	$	14,455


	Fiscal Year
	2023		2022
Second quarter ended December 31,	$	0.120	$	0.075
First quarter ended September 30,		0.120		0.075


		Weighted
	Number of	Average
	Restricted	Grant-Date
Award Type	Shares	Fair Value
Time-vested awards	388,520	$	6.76
Performance-based awards	183,748		5.28
Unvested at December 31, 2022	572,268	$	6.28


						Weighted
		Weighted		Unamortized		Average
	Number of	Average		Compensation		Remaining
	Restricted	Grant-Date		Expense		Amortization
	Shares	Fair Value		(In thousands)		Period (Years)
Unvested at June 30, 2022	341,211		4.54	$	1,092	2.1
Time-vested shares granted	283,994		7.51
Performance-based shares granted	91,198		7.56
Vested	(118,515)		5.14
Forfeited	(25,620)		6.51
Unvested at December 31, 2022	572,268	$	6.28	$	3,081	2.5


	December 31, 2022		June 30, 2022
Prepaid expenses and other current assets:
Receivable for settlement proceeds from acquisitions⁽¹⁾	$	—	$	2,263
Other receivables		17		37
Prepaid insurance		488		743
Prepaid federal and state income taxes		838		8
Prepaid subscription and licenses		40		38
Carryback of EOR tax credit		347		347
Prepaid other		178		439
Total prepaid expenses and other current assets	$	1,908	$	3,875

Other assets, net:
Deposit	$	1,150	$	1,150
Right of use asset under operating lease		208		21
Total other assets, net	$	1,358	$	1,171

Accrued liabilities and other:
Accrued payables	$	6,822	$	8,070
Accrued incentive and other compensation		418		626
Accrued royalties payable		2,221		1,517
Accrued taxes other than income		58		178
Accrued severance		244		332
Accrued settlements on derivative contracts		—		919
Operating lease liability		59		26
Asset retirement obligations due within one year		22		22
Accrued - other		39		203
Total accrued liabilities and other	$	9,883	$	11,893


	December 31, 2022		June 30, 2022
Balance Sheets:
Operating lease ROU asset (included in other assets)	$	208	$	21
Accrued liabilities and other - current		59		26
Operating lease liability - long-term		149		—


Fiscal Year	December 31, 2022
Remaining in 2023	$	30
2024		61
2025		62
2026		64
2027		16
Thereafter		—
Total operating lease payments		233
Less: discount to present value		(25)
Total operating lease liabilities		208
Less: current operating lease liabilities		59
Non current operating lease liabilities	$	149


	Three Months Ended
	December 31,
(in thousands, except per unit and per BOE amounts)	2022		2021		Variance		Variance %
Net income (loss)	$	10,387	$	6,833	$	3,554	52.0	%
Revenues:
Crude oil		13,100		10,582		2,518	23.8	%
Natural gas		17,370		9,170		8,200	89.4	%
Natural gas liquids		3,206		2,587		619	23.9	%
Total Revenue		33,676		22,339		11,337	50.7	%
Operating costs:
Lease operating costs:
CO₂ costs		2,007		1,897		110	5.8	%
Ad valorem and production taxes		2,096		1,292		804	62.2	%
Other lease operating costs		10,938		7,482		3,456	46.2	%
Depletion, depreciation, and accretion:
Depletion of full cost proved oil and gas properties		3,178		1,118		2,060	184.3	%
Depreciation of other property and equipment		—		3		(3)	(100.0)	%
Accretion of asset retirement obligations		280		103		177	171.8	%
General and administrative:
General and administrative		2,087		1,493		594	39.8	%
Stock-based compensation		494		330		164	49.7	%
Other income (expenses):
Net gain (loss) on derivative contracts		846		—		846	—	%
Interest and other income		7		7		—	—	%
Interest expense		(129)		(51)		(78)	152.9	%
Income tax (expense) benefit		(2,933)		(1,744)		(1,189)	68.2	%

Production:
Crude oil (MBBL)		166		150		16	10.7	%
Natural gas (MMCF)		2,367		1,823		544	29.8	%
Natural gas liquids (MBBL)		106		2		104	5,200.0	%
Equivalent (MBOE)⁽¹⁾		667		456		211	46.3	%
Average daily production (BOEPD)⁽¹⁾		7,250		4,957		2,293	46.3	%

Average price per unit⁽²⁾:
Crude oil (BBL)	$	78.92	$	70.55	$	8.37	11.9	%
Natural gas (MCF)		7.34		5.03		2.31	45.9	%
NGL (BBL)		30.25		1,293.50		(1,263.25)	(97.7)	%
Equivalent (BOE)⁽¹⁾		50.49		48.99		1.50	3.1	%

Average cost per unit:
Operating costs:
Lease operating costs:
CO₂ costs	$	3.01	$	4.16		(1.15)	(27.6)	%
Ad valorem and production taxes		3.14		2.83		0.31	11.0	%
Other lease operating costs		16.40		16.41		(0.01)	(0.1)	%
Depletion of full cost proved oil and gas properties		4.76		2.45		2.31	94.3	%
General and administrative:
General and administrative		3.13		3.27		(0.14)	(4.3)	%
Stock-based compensation		0.74		0.72		0.02	2.8	%


				(c) Total number	(d) Maximum dollar value
	(a) Total number			of shares	of shares that may yet be
	of shares			purchased as part	purchased under the
	purchased and	(b) Average price		of public announced	plans or programs
Period	received ⁽¹⁾	paid per share ⁽¹⁾		plans or programs⁽²⁾	(in thousands)⁽²⁾
October 2022	—	$	—	—	$	25,000
November 2022	4,869		7.73	—		25,000
December 2022	3,375		6.71	—		25,000









3.1*		Restated Articles of Incorporation
3.2		Certificate of Amendment to Articles of Incorporation (incorporated by reference to Exhibit 3.2 of our Current Report on Form 8-K filed February 7, 2002)
3.3		Certificate of Amendment to Articles of Incorporation (incorporated by reference to Exhibit 3.3 of our Registration Statement on Form SB-2/A filed October 19, 2005)
3.4		Certificate of Designation of Rights and Preferences for 8.5% Series A Cumulative Preferred Stock (incorporated by reference to Exhibit 3.1 of our Current Report on Form 8-K filed June 29, 2011)
3.5		Amended Bylaws (incorporated by reference to Exhibit 2.1 of our Annual Report on Form 10-KSB filed March 31, 2004)
10.9†*		Employment Offer Letter to Kelly Loyd dated October 25, 2022.
31.1**		Certification of Principal Executive Officer Pursuant to Rule 15D-14 of the Securities Exchange Act of 1934, as Amended as Adopted Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002
31.2**		Certification of Principal Financial Officer Pursuant to Rule 15D-14 of the Securities Exchange Act of 1934, as Amended as Adopted Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002
32.1**		Certification of Principal Executive Officer Pursuant to 18 U.S.C. Section 1350, as Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002
32.2**		Certification of Principal Financial Officer Pursuant to 18 U.S.C. Section 1350, as Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002
101.INS*		Inline XBRL Instance Document
101.SCH*		Inline XBRL Taxonomy Extension Schema Document
101.CAL*		Inline XBRL Taxonomy Extension Calculation Linkbase Document
101.DEF*		Inline XBRL Taxonomy Extension Definition Linkbase Document
101.LAB*		Inline XBRL Taxonomy Extension Label Linkbase Document
101.PRE*		Inline XBRL Taxonomy Extension Presentation Linkbase Document
104*		Cover Page Interactive Data File (embedded within the Inline XBRL document)

	Evolution Petroleum Corporation
Date: February 8, 2023	By:	/s/ KELLY W. LOYD
		Kelly W. Loyd President and Chief Executive Officer (Principal Executive Officer) and Director
	By:	/s/ RYAN STASH
		Ryan Stash Senior Vice President and Chief Financial Officer (Principal Financial Officer) and Treasurer


Dated: February 8, 2023	/s/ KELLY W. LOYD
	Kelly W. Loyd
	President and Chief Executive Officer (Principal Executive Officer) and Director


Dated: February 8, 2023	/s/ RYAN STASH
	Ryan Stash
	Senior Vice President, Chief Financial Officer (Principal Financial Officer and Principal Accounting Officer) and Treasurer