Good afternoon, everyone. Welcome back to Sidoti's Virtual Investor Conference. I'm Steve Ferazani, an analyst at Sidoti, and pleased to be joined by Evolution Petroleum. I'll introduce the speakers in just a moment, but first, I'd like to remind everyone, as the room seems to still be filling in, if you do have questions, we expect time remaining after the presentation. Press that Q&A button at the bottom of your screen, type in the questions, and we'll get to absolutely as many as we can, time permitting. With that being said, let me welcome Evolution Petroleum, the ticker is EPM. We're joined by President and CEO Kelly Loyd and CFO Ryan Stash. Gentlemen, it's all yours.
Thanks, Steve. I appreciate it. Good afternoon to everybody. It's nice to see you here. So, Evolution, who are we? What do we do? We are a company that is really, we are focused on, unlike some of our peers, our focus is on our dividend. We put together a portfolio of assets that we have designed for long-term sustainable dividend payments. That's how we look at the world. That's what we want to go through when we evaluate acquisitions. They need to have a great return, but additionally, they need to be accretive to our dividend per share. Over the last 10 years, we've paid out over $130 million in dividends. Our current yield right now is about 9.8%, but that dividend payout is over $4 a share that we've paid out over the last, you know, since 2013.
Our asset base started off with one field in Louisiana, the Delhi Field. Over time, as you can see, we have now added several others. All of these, as Ryan will get to in his portion of the presentation, we have done. This is what our expertise is. We evaluate deals, we look at how they're going to fit strategically, how do they fit into our dividend program, and we've done a great job of folding them in. Our enterprise value today is just under $200 million, and like I said, our dividend yield is about 9.8% currently. We are a non-op business model, and I'm not sure everybody always understands what that means. I'll tell you effectively what it means is that we've been able to put together that portfolio of assets with only 11 people. It allows us to run really lean. We have several professionals.
We've got the engineering side who are absolutely critical to evaluating the assets in the ground and what they're going to produce over time and how they're going to positively affect our ability to pay our dividend. We're a public company, so we have our public accounting staff. We have a support person. We have investor relations in Brandi Hudson, who's on with us. On top of that, the rest is all strategy. How does it fit together? How does it work? This allows us to leverage that DNA and go into all of these other operations. Had we operated in all of our eight sort of different asset areas, we would probably need to have 80 plus people. It's very effective for us, and we're very happy with that. It's scalable. We can diversify both geographically and by commodity base without having to add a lot of DNA.
As I mentioned, we started off with one area. The company was founded. We'd like to say it's the first great deal we did in the Delhi Field with an operator called Denbury. Very CO2 flood, very long life, low decline, just a tremendous operation. As you guys may know, Louisiana is subject to hurricanes. It also has a lot of heat, and it can get cold. People don't believe it, but it really can. We quickly decided, all right, we need to diversify and have more than just one asset. In 2019, we added our Hamilton Dome, which is up in Wyoming. It's another oil field. It's been producing since the early 1900s, very low decline, terrific for what we aim to do, which again is have a really long runway for paying our dividend.
After that, it became apparent that oil and gas are going to move independently of each other. We tried to find something very uncorrelated to oil. We went with the Barnett Shale in Texas, the original, if you will, natural gas shale play. When you think about shale plays, you think of high declines. They start off that way, but if you buy them many, many years into their production, they get to that tail sort of decline, which is perfect for us. Again, long life, low decline, natural gas, uncorrelated to the other markets we had. From there, we've moved on and done several more. We bought the Jonah Field, and we bought the Williston Basin Field. Williston is obviously North Dakota and oil focused, really a great play. You've seen tons of good wells going on there.
We bought that on a PDP basis, meaning proved developed producing, already making oil up there, really good. The Jonah Field, again, intentionally designed to buy natural gas that would flow west into California, where you can see some dislocation in the market there, as we did in early 2023, late 2022. Prices there, again, they have very limited gas storage there, no really new pipelines or additional supply coming in. It's gas on gas competition, and when there's demand, the prices can get very high there. Intentionally wanted that sort of uncorrelated gas market. We also have entered into a partnership in the Chaveroo Field. We decided on a strategic basis, there are going to be great times to make acquisitions, which I think we're living in over the last couple of years. There's also going to be great times to put money into the ground.
Sometimes that's your cheapest acquisition. We needed to have that arrow in our quiver. The Chaveroo drilling partnership that we have there, we've drilled seven wells now, and they've just exceeded our type curves, and we're very happy with that and very happy with our partner there. Latest couple of deals we've done, we did the Scoop Stack, which is in Oklahoma. Again, very heavily PDP weighted. There are still a lot of wells being drilled, but there we're a very small working interest. We like to say that we would rather have, instead of 20% of five wells, we'd rather have 5% of 20 wells. It increases your diversification, lowers your risk of any single well risk. I think on average there we're about 3%, 3 or 4% working interest. We recently bought a deal that we call TexMex. Not very creative. It's in Texas and New Mexico.
Again, the field in New Mexico, which is the majority of the value there, has been producing since, I believe, the 1970s. Very low decline, long life stuff, fits our profile perfectly. A little bit of upside there is just simply based on improved operations and some additional water flooding, the kind of upside you don't really want to pay for, but you get it with it. The long life, low decline fits our assets perfectly. We most recently, you may have seen, bought a minerals interest in Scoop Stack. Some of it overlaps what we already had in our Scoop Stack area, which is great. It just improves our net backs and our net interest there. Minerals deals, if you know, have no lifting costs. They only have very marginal costs. They make money in almost any price environment.
Additionally, we put 80+% of the value on that, on the proved developed producing, already making oil and gas, but there are a multitude, I mean, over 650 potential locations, which can be drilled by other operators. We pay no AFEs. There's no authorization for expenditure that comes to us. We just participate in the upside as they get drilled. Really a sweet deal for us that fits what we want to do very well. We went from one asset. Now we have a very diversified portfolio of assets. Over here, this does not include the results of TexMex and the latest minerals deal because our fiscal year end is 6/30. These will be lumped into our newest reserve report, which will come out when we report earnings later in September. As you can see, though, 56% natural gas, 15% natural gas liquids, 29% oil.
Again, a very diversified production stream. One of the things I want to talk about is natural gas. Currently, the U.S. is producing roughly 107 Bcf per day. What we're looking at here are pretty conservative numbers that AI, data centers, additional power draws that will be funded by a whole stream. It's going to use solar. It's going to use wind. It's also going to have to use natural gas. What we've projected here is natural gas's portion of that incremental demand load for electricity. Conservatively, it's about another 10 Bcf per day. Probably more realistically, it could be another 20, but we'll call that sort of 15 between now and 2030. Additionally, we have seen this wave one buildout go from zero LNG exports from the U.S. to 15 by sort of 2023. Now, the second wave of the LNG buildout is well and truly underway.
We already have a couple Bcf on that in place, and we have several other long-term contracts in place which have been funded. This new buildout here is underway. As you can see, that takes you from about 15- 28 or 30 Bcf a day. What does that mean? That means currently, like I said, record demand, record production of natural gas at roughly 107 Bcf a day. We're talking about adding another 30 over the next five years, four or five years. That is a tremendous amount of incremental demand that is coming on and less weather-related than your typical natural gas demand, more industrial, which is great as far as we can see. We're really excited about the long-term case for natural gas. On the oil side, you know, demand has typically, it grows anywhere from 1%- 3% globally.
It's tied to GDP and various other things. People have been espousing the decline of oil demand for many, many years, and it's proven robust throughout all of these environments over the years. We're happy with where oil's going. Natural gas, I think we'll see a sort of sea change in demand over the next few years. Again, it just shows that the storage is not overly stored by any means. We probably need more storage, frankly, in natural gas as we go forward. From here, I'd like to hand the presentation over to our Chief Financial Officer, Ryan Stash.
Thanks, Kelly. I'll talk about how do we grow our asset base. As Kelly has mentioned, one of the ways we grow it, obviously, is acquisitions, and we've done that very successfully. We've added recently, as you mentioned, also some organic growth via our partnership with Pedevco for our Chaveroo asset. Really, we've grown the asset primarily through doing accretive acquisitions at good prices. We've certainly tried to time them, and you can't always be perfect. We've had some good success as we bought the gas assets, as Kelly's talked about. We knew at the time gas was much lower, and we had a strong outlook on gas and wanted to diversify into the gas side. With our acquisitions of the Barnett and the Jonah Field, we've done really well.
I'll show you a slide here just how well, but we've done really well on a return basis by buying those assets. The acquisitions themselves on this slide is how do we look at the world, right? Long life, low decline, production-dominated assets, always be accretive. If you ask us what's the one metric we want to look at when we buy something, it's accretion to cash flow per share. Ultimately, that drives how we can pay the dividend and grow the asset base going forward. That's the primary metric we look at when we look at an asset to buy. The market access is important. That's one way, as Kelly's mentioned, we had the Barnett gas asset, which primarily prices, excuse me, off of Henry Hub, or it's priced off Houston Ship Channel in the past.
Now it's more contract tied to what they call NGPL, PEXOK in the Mid-Con. It's really more Gulf Coast pricing because that's where the gas goes. Our Jonah asset goes to the West Coast, so it's tied to California pricing. It's a different dynamic on the West Coast when it can be a really cold winter, like it has been a couple of winters ago. You can get real big blowouts for gas prices, which we experienced, which can create a big profit. We sold gas one month for $50 an MCF a couple of years ago, which is kind of unheard of. The way the storage works in California, it's not that uncommon to see that happen once every three or four years. That's really why we wanted to get that access too.
We sort of talked about the diversification and the ability of the non-op model to allow us to diversify. You know, we get the question a lot, what's the ultimate commodity mix? What are you guys looking for? There's not really an answer per se. We really, we're value buyers, right? We look at deals, oil or gas, that we think has, again, good access to markets. It's priced appropriately with the right amount of PDP versus upside. We're not beholden to buying gas or oil. We'll buy whatever we see on the market that we think is good value at the time. Ultimately, we do want to remain somewhat balanced, but we'll buy the right asset at the right time. Efficient operators, the operators are pretty important to us. We have good relationships with all of the operators in our portfolio.
Generally, with the exception of, kind of like Kelly mentioned, the Scoop Stack, where we've got a lot of operators that have small working interests, a lot of our other assets have a larger interest with minimal operators. We have monthly meetings with the majority of our operators, like Exxon or Denbury, we meet with on a monthly basis. Merit, who operates our Hamilton Dome asset, we meet with on a monthly basis. Diversified, who operates Barnett. We meet with a lot of our large operators, and we have good insight into what they're going to do and are able to see what's going on with the asset. This is a slide I kind of alluded to. What we did is, we can tell you guys that we're good at buying assets, but unless you really show it, it's hard to really tell.
What we did is we took, since Hamilton Dome, you can see the kind of orange dots represent when we bought the asset. That blue area chart is how much we paid for the assets, right? You can see the step change, and this is cumulative, right? The little green line, what's the operating cash flow? What have we received from the assets? What you can see is, since we started buying assets from Hamilton Dome through the end of last calendar year, we've done very well. We've certainly paid back all our acquisitions. If you look at how you might look at an investment, more than three times the multiple of invested cash flow that we think we're going to get, and plus over a 100% rate of return, right?
When we take what we've made versus what we had in our prior reserve report, we think the acquisitions and our track record sort of speak volumes, I think, about what the team can do and how we've evaluated assets here. This is just kind of a graphic depiction of how we've grown the asset field over time. We talked about starting with Delhi and, most recently, adding TexMex, but we've really been able to grow the production quite a bit, right? We're saying three times since 2019. The production has grown a lot. It's diversified. We're no longer one operator, one field, one commodity, right? We're multiple fields with a lot of different operators and a good mix of commodities, which is what we wanted to build the company for. The dividends, as we mentioned here, here's our kind of history of the dividend.
You can see overall, we've tried to maintain it as consistent as possible, but the important thing is we're going to protect the balance sheet, right? When we've had periods of very low oil prices back in 2015, you can see, and then really in COVID in 2020, we have cut the dividend when needed to protect the balance sheet. Ultimately, we're not going to sacrifice, again, the balance sheet at the expense of the dividend. I think we build an asset base now, and Kelly would agree, that's very resilient, even in lower commodity prices. We raised the dividend up to current $0.12 back in September of 2022. If we had kind of an overlay of commodity prices, yes, they did pretty well kind of late 2022, 2023, but over the last 12- 18 months, they have not done well, right?
One commodity or the other has not performed, where we've been able to keep the dividend flat, really just as a testament to the diversified asset base. On this chart here, which is one of the last charts before we'll go into maybe talk a little bit about the acquisitions we've done recently, as funding, the way we funded it has been really, as you can see, primarily through internally generated cash flow. Doing good deals and debt. We've kept kind of our, historically, as you could tell, we've almost had no leverage, right? Once we started buying assets, we started to take on some leverage. We were able to pay that debt down. That's the way we've managed our business. You can see the share count.
Obviously, we do have an ATM equity program in place that we've sold over the last, call it, 10 months or so, about $4 million in total. That's really just to fund the acquisitions, all the acquisitions we've done, and to maintain the balance sheet. Overall, our share count, when you add in the buybacks that we've done as well, has maintained relatively flat. We've grown our asset base quite a bit without really diluting the shareholders much at all.
This does not include TexMex or our latest Scoop Stack minerals deal.
Yeah. You want to sum it up, Kelly?
Yeah, sure. Key takeaways, I think Ryan went through a lot of these, but just long life, low decline, 15+ year reserve life, right? This is very important for us as we look to extend that dividend fairway. Positive free cash flow throughout the commodity cycle. You can just look at natural gas prices the last couple of years being in the mid to low $2.00s. Now oil has dropped about 20% since its peak, and we're still able to very comfortably maintain our dividend throughout the entire commodity price cycle. Our dividend is, we focus on total shareholder return, really set up by our ability to keep paying our dividend throughout the entire commodity price cycle. We're primed for continued execution. As you can see, we just did a deal for about $17 million, just closed the other day. We are a proven non-op buyer.
We see deals, people come to us because they know we have a reputation for being able to close on deals and do a good job. We have a drill-ready, attractive set of locations, both in our Chaveroo and Scoop Stack. When you do see prices at sort of above marginal replacement value, which I would say for crude is going to be $75-ish, and natural gas, again, given that we need to grow to meet the coming industrial demand that's coming on, it's going to be sort of $3.50, really probably $3.75 to meet that demand. We have plenty of great drillable locations that meet that, which again are very low CapEx for us. This is what we do. We have that financial flexibility. We have the great engineering team who can quickly evaluate deals.
Between all of our connections for having been in this industry for a long time, we see deals that other people don't. Importantly, I would say, as you compare us to some of the other non-op publics, our future call of capital from people coming to us saying, "Hey, you have this working interest, you owe us a bunch of money." We are heavily dominated with PDP, proved developed producing, already producing assets. We try to keep our potential drilling outflows, our CapEx, very low. It's a differentiator that we focus more on what's already producing and have that as upside, not as a crucial part to us continuing to go forward. As Ryan mentioned, we might just quickly go into a couple of our recent acquisitions. We've gotten several questions about this. Our Scoop Stack minerals, right? This is the one we just closed.
I think it's a really interesting deal. Again, as I mentioned, we had the Scoop Stack asset. We know it very well. Had a chance to bring in little to no cost producing minerals that we bought for just under $17 million. We valued that based on the proved developed producing stuff for 80-ish% of that. Then about 90 locations that we put a lot of value on. There are a whole bunch of other locations that probably don't meet our 30%+ IRR if we were to drill it. We want to have 30%+ IRR to drill it. Other people, in our mind, other people have been and are currently drilling wells that are 20%- 30% rate of return. As a minerals owner, we don't have to pay anything for those. We just get the royalty interest on that. We're really excited about that.
We think that has the potential to be an absolute home run. Really excited about this latest acquisition we just closed on. The one before that is our TexMex. Again, it's about 440 net BOE per day. We bought this at a very attractive discount rate, highly accretive to where we trade or what we do. The cash flow that this spits off, in excess of any money we put in for any kind of CapEx or workovers, is very accretive and adds to our ability to continue to fund our dividend going forward. Again, guys, we're super happy to have you here on the presentation. I think we're going to turn it over to Q&A now.
Excellent. Thanks so much, Kelly and Ryan. Appreciate the informative presentation. It looks like you did, and that last bit looks like you covered several of the questions that were asked. I'd like to remind everyone, we've got about five minutes left. Press the button at the bottom of your screen, the Q&A, type it in, and we'll get to as many as we can. The obvious question that came in, which is, what's the acquisition pipeline looking like now in this environment? Are you seeing, you talked about you see a lot of deals other people don't. You probably are as good as anyone to ask this question. Are you seeing more deals, less deals? What are the prices like? If you can sort of give a general overview of what's out there.
Sure. It's a great question. I would say that right now, over really the last year and a half, has been one of the best environments for making acquisitions that I've seen. Prices aren't so low that sellers don't want to sell, and they're not so high that everybody wants to demand you pay them out as if it's going to be high forever, which is really a sweet spot for us. We do think, again, that the current strip certainly on, honestly, on both commodities is kind of certainly with oil below marginal replacement value, which again, if you buy something that declines 40% in the first year, like a lot of people do, you got a real chance to get yourself backwards. If you buy long life, low decline, knowing that the best cure for low oil prices is low oil prices.
If it stays, prices stay in the $60s for the next six, 12 months, it doesn't affect us that much because at some point the cycle's going to turn and that thing will pay off very quickly, which we have both seen and executed on several times in the past. On natural gas, this is a strip. It's interesting. Current prices, obviously, spot is a little bit below $3 right now, but the current prices where we could actually hedge some of these out at and our pricing acquisitions are very attractive. I don't know if Ryan, you want to add to that or?
Yeah, I mean, I was going to say, I saw a question come through on hedging and, you know, it is relevant. Historically, we've hedged very, very little. We've wanted to, one, we've carried no debt, so I haven't had a need to hedge, but we've wanted to make sure that investors got exposure to commodity prices. Now, as we've taken on some debt, bought some more assets, now we have a little bit of drilling, the bank requires us to hedge now, but we think it's prudent, right, with the dividend to hedge and be opportunistic about it. As Kelly mentioned on the gas side, we've been pretty aggressive in adding hedges and have actually pretty good. We've got, this year we've got swaps at $3.60 or above and some collars with $4 floors.
We honestly just put on some hedges second half of next year for $4 on a swap. If you look at where spot is versus where we can hedge, it makes a lot of sense to hedge gas. We've been 50-60% hedged on gas, call it over the next 12 months at least, just to make sure we can meet those prices even if the spot market continues to move. The oil side's a little more challenging. We'll add opportunistically on the oil side, but we do have the flexibility with our bank to hedge, looking to hedge on a BOE basis. We can choose to hedge oil or gas just as long as we hit kind of a 50% threshold for that.
I'm assuming you primarily use collars if it was oil, and then maybe a mix of collars and swaps on gas.
Yeah, for oil, we have used some swaps. Right now, over the next 12 months, if we can get anything with a $60 floor or above, we'll look at that with maybe a little bit of a, maybe some swaps in the low 60s mix in there. We do have some pretty nice existing swaps this year that are high 60- 70, which we're pretty happy about. On the gas side, gas side, we typically will hedge, we'll collar the winters or the first quarter, January to March, and kind of swap the rest of the year. That gives us some of this optionality.
Excellent. The question I hear a lot about non-ops is, when you're looking at a deal, how much do you have to weigh the operator versus the quality of the field?
Certainly, there is a minimum threshold, right? We only want to deal with operators who are going to be both environmentally and safety and sound and do everything right from that perspective, because you can throw money away if you end up with a bad operator. We certainly don't want to do that, but the quality of the field is very, very important. We have to look at both. I guess I could envision a field that was awesome and the operator was terrible that we might pass on a deal like that, but I haven't actually encountered that yet.
Fair enough. Where would you go for a really good deal in terms of net leverage while knowing you want to protect the dividend?
Yeah, we've said we might go up to 1.5 times net leverage.
Okay, remain extremely conservative.
Yes, we wouldn't go any higher than that, right? Generally, what we've done is fund it with debt, like I said, pay it down with free cash flow, and issue some equity under the ATM, which is the lowest cost form of equity capital we can do, really.
Okay. There were some questions to go. Unfortunately, we're already out of time. This went very, very fast for a half hour. Let me give you a minute if there's some closing comments you want to leave with everyone.
Sure, I'll just say this. We thank everybody here for their interest, and I think you can tell we kind of like talking about our company. We have a great platform. I think we got the best team in the business. Honestly, our results of these acquisitions, I think, bear that out. If anybody has any more questions, please feel free to contact Brandi Hudson in our IR, and she will get back to us, and we're happy to take some time to do it. We thank everyone for coming. Like I said, the last thing I'll leave you with is what we've done over the last couple of years of fairly depressed natural gas prices and currently low oil prices is put together a very robust portfolio that can maintain our current dividend at $0.12 per share per quarter or $0.48 a year.
That sort of leaves us with some hyper jet fuel. If all we do is get to what I would consider the marginal replacement value of $75 or even $70 and $3.50- $3.75, the direct effect that this new sort of portfolio we've put together, the EBITDA effect on that is kind of, we would consider it kind of jet fuel. We put together something that can maintain the dividend at these lower commodity prices, but the upside is tremendous when you get to replacement value.
Jet fuel, I'm writing that down. I feel that. Thanks so much, Kelly Loyd, Ryan Stash. I hope everyone found this as informative as I did. If you can't reach out to them, reach out directly to us at Sidoti. We'll certainly forward any questions. I know there are a lot of really good questions in the queue today. We'll certainly make sure Kelly and Ryan get those. Thanks, everyone, and I hope you enjoy the remainder of the conference. Thanks, Kelly. Thanks, Ryan.
Thank you, everyone.