Over to our next presenter. Let me remind you that following the presentation, we do expect to have some time for Q&A. If you have a question, you can type it in at any time during the presentation by pressing that Q&A button at the bottom of your screen. As much time permitting, I will read as many questions as I can of the team at Evolution Petroleum Corporation. To get things started, let me turn it over to CEO Kelly Loyd. Kelly?
Thank you, Steve. I appreciate that. Welcome, everybody. Glad you could join us. With me today, I have our Chief Financial Officer, Ryan Stash, and our Director of Operations in Engineering, Peter Pham. The disclaimers page. Do not memorize that. It is all important, though. Who is Evolution? What do we do? Where do we fit into this space of energy companies? We are a non-op working interest and mineral and royalty interest company. We are focused on returning dividends to our shareholders. A lot of companies in our space tend to make oil and gas, and then if they have anything left over, they try to pay a dividend. We are a little bit different than that. We want to make sure that we have the assets in place to be able to fund our dividend. It is a key tenet of who we are and what we do.
As you can see, we have returned nearly $152 million in dividends over the last 10+ years, currently yielding about 13%. That same dividend amount is about $4.77 a share. What we try to bring to the table here is an organic and an inorganic growth strategy via a demonstrated history of highly accretive acquisitions. We participate in low-risk development drilling. One of the things about our model, compared to an operating company, that we think is really advantageous, it allows us to have a sort of lower-risk investment vehicle in the energy industry. Lean operations. We have a team of 10 people that are all professionals. That allows us to leverage our G&A and go into basins without having to really jump to scale because we do not need the full operations team. We do not need the size to justify that. Therefore, it is very scalable.
We own reserves in a couple of different ways. As I mentioned, our non-op working interest model, really what we focus here on, we own working interest, and we receive proportionate share of asset-level cash flow. You also pay your proportionate share on that. We have worked with established operators who really are great at executing field activity. That is why we chose to be with them. We have participation across the Barnett Shale , Jonah. In Wyoming, we have Hamilton Dome, the SCOOP/STACK in Oklahoma, as well as our TexMex field, and in the Permian Basin on the Northwest Shelf on our non-op working interest side. We also own minerals and royalties. We have a revenue interest in the lease with no lifting expenses, drilling capital, or overhead. There is no capital required for future drilling.
Operators really control the timing of development, which is why it is important to us that we get into active basins there. This is a scalable acquisition platform across multiple basins. Why it scales? Look, we have a lean team. I like to say that every deal we do becomes more accretive, not more expensive, because we can do it with the same number of engineers and folks we have in-house. It is very capital efficient, and it allows us to be diversified. When we started this company, our Chairman and Founder, Bob Herlin, started it with one field, the Delhi Field in Louisiana. It has been a tremendous asset for us. But over time, when we decided, very intentionally, to go into the dividend model, we realized we are going to need to add diversification.
As you can see, now we are in 10 areas, having made nine different sort of acquisitions and/or transactions. We started off, again, with the Delhi. Now, the bookend would be the Permian Minerals deal, which we just announced about a month ago . I will keep going here. But I want Ryan, our CFO, to jump in and talk about some of what we have done on the mineral and royalty side.
Yeah, thanks, Kelly. Back in August 2025, we made more of a concerted effort to actively seek out minerals and royalties, really to supplement the portfolio. We had already bought some working interest, non-op working interest in the SCOOP/STACK, and really liked that area and that deal, and we were able to acquire some minerals interest as well in August 2025 as kind of our first large minerals acquisition. Then since then, we have been able to tack on additional interest in the Haynesville, and as Kelly mentioned, most recently, the Permian. We are working with kind of a local group here in Texas to help us source these deals and on the ground, really. So we are not buying marketed deals. We are buying deals that are sourced really ground up, which has made it obviously very efficient and affordable for us to add these really highly valuable assets.
And you kind of see at the bottom, we have kind of increased, call it 150% at least of kind of our net royalty acres kind of over the last two years. On the cash flow side, back in fiscal year 2025, we had effectively no cash flows from royalties. We own a couple of smaller overrides in some of our existing working interest properties, but effectively not much at all on the cash flow side. In 2026 year-end, when you add in, as I mentioned, the SCOOP/STACK mineral acquisition and a lot of the Haynesville royalties were about 10% of our cash flow coming from minerals and royalties. Then when you pro forma in the recent Permian deal, we are now around 20% on cash flow.
We do see that going up over time as the assets we have added in the Haynesville and in the Permian are being actively developed. We expect additional production, cost-free production, I should say, to come online as operators continue to drill there. We mentioned the diversified nature of our assets, and this was obviously by design. Being a one asset, one commodity company when we started, obviously, especially on the dividend model, there are certainly risks, right, having that. We have made a concerted effort to diversify across geography and commodity, and we are now actually very well balanced among all. I mean, as you can see here, we are a little bit more weighted towards oil and liquids on a revenue basis. But on a production basis, we are really pretty evenly split between gas and oil and NGLs.
On the asset side, you can see no one asset really dominates any of our areas. I mean, the Barnett being the largest and part of that being because it is a gas asset, but really good asset diversification as well throughout the U.S. On our strategy, really, as Kelly mentioned, returning capital to shareholders and making shareholder value accret is really the biggest strategy we have, right? In order to do that, certainly, we need to continue to grow our asset base. We do have a declining asset being an oil and gas company, so we do have to replace the reserves and production, and we do that through acquisitions primarily, and more recently now with more organic growth like we have in the royalty acquisitions that we just purchased. Along lines of SCOOP/STACK, which working interest side and mineral side.
In our Chaveroo Field , we have the ability now to grow organically and not just rely on the acquisition market. Lastly, obviously, we want to manage the balance sheet as we grow the company. Our goal is to obviously minimize dilution, which will maximize shareholder value, and we want to keep our leverage and balance sheet strong so we can capitalize on opportunities we see. This shows the dividend history. There is quite a bit going on, but what I point you to, obviously, is the longevity of the dividend, right? We have paid a dividend consistently since 2013. It has varied throughout the time, and if you go back to 2013 up until about 2020, as I mentioned on being a single asset, single commodity company, we were pretty much just an oil company at that point.
You can see when oil precipitously dropped back in 2015, the OPEC shale wars back then, we did lower it to protect the balance sheet and then gradually raised it back up as prices recovered. In 2020, there was obviously COVID when it went negative. Everyone cut the dividend just to figure out what was going on with the world, and then we raised it back up. But the one thing I will note, too, is when you go from 2020 to now, being a much more diversified asset base, you can see oil and gas sort of move independently somewhat, and we can still maintain that same dividend because we have the ability to sell both products and capitalize on what product is actually doing better at the time. Before I turn it over to Peter , I will talk about the acquisition itself.
We've certainly talked about using acquisitions to grow the company. We think this is important to prove how we've done as a company of buying deals. This shows all the deals up until we haven't included the recent Permian minerals deals we just announced. But up until that, the blue area there represents the actual cash that we spent on the acquisitions. The green line is just a cumulative cash flow generated. As you can see, we've definitely more than covered our acquisitions. When you take a look at what we think when you look at going forward, right now the program we think is going to deliver about a 90% rate of return. We've already gotten you about 1.3 times multiple invested cash flow. So very, very highly accretive acquisitions that are certainly well, higher than our cost capital.
I'll let Peter talk about how we grow the assets and talk about the Permian too.
Thanks, Ryan. Acquisitions are the primary driver of Evolution's growth strategy. We are focused on finding the best incremental rate of return for our portfolio. Accretion to cash flow is probably our most important criteria that we look at, because that's going to help us sustain our dividend strategy. Because of this, most of our acquisitions usually have a large component of long life producing wells that help us provide that immediate, sustainable cash flow, along with development opportunities to help sustain or even grow that cash flow over time. We look at acquisitions and how they complement our existing portfolio. We continue to diversify our asset base both geographically and by commodity. We also take into consideration the market access and regulatory environments as those can potentially impact our future cash flows.
Next, we'll go into our recent Midland Basin mineral and royalties acquisition that we completed last month, and how those really hit on what we look for in an acquisition. We purchased about 3,400 net royalty acres for $16 million in the core of the Midland Basin, which is really the premier oil basin due to its exceptional rock qualities and its multiple producing benches, multiple Wolfcamp, Spraberry targets, along with Joe Mill and Dean. Also, its really high levels of activity and economics from high top-tier operators like ExxonMobil, Diamondback, Crescent, Conoco, and several others. This acquisition was our entry into this basin. It really provides us with a lot of geographic diversity for our portfolio and to be in such a great basin. It really expands on our mineral and royalty position.
We acquired about 832 producing wells that hit that long producing life assets component, where it provides us with immediate high margin cash flows, along with over 1,200 undeveloped locations that give us the cost-free upside. About that development and the pace right now, we currently have about seven or eight rigs currently operating in the footprint of our acreage position there. Between 2021 and 2025, we have averaged 241 completions per year. With that level of activity, we feel really confident that even with an assumption of 125 wells per year, that we will be able to not only just sustain the production, but substantially grow that cash flow from this asset for the next coming years, potentially even more than double it.
This was a very attractive acquisition for us, and that really becomes evident when you compare it to some of the recent disclosed Permian royalty transactions here listed on this page. Our price per royalty acre of about $4,700 is a fraction of what some of those deals transacted at. You are probably wondering how we are able to get such a great deal on that, and a lot of it really comes down to the scale of it. This was a negotiated transaction that we purchased an option period for, and it required a significant amount of land and title work to clean that up and took about five months of work to do so. Given the size of this deal, it would have been extremely difficult to market that deal.
With those factors, it really helped us achieve the valuation that we got, which is really comparable to a working interest type of valuation. In this case, for minerals and royalties, which provided us with a lot higher margin on those cash flows and with cost-free development. I guess I will turn it back over to Kelly here to wrap up the presentation.
Yeah. Well, thank you, Peter. To follow up on what he said, as you might imagine, assets that are minerals and royalties generally tend to be worth more than working interest. Why? Well, because they do not have any lifting costs, they are much higher margin, and especially a field that is not even close to fully developed and when you have a whole lot more drilling, in our case, over 1,200 locations, all of that comes with no cost to us, and we just receive the royalty income after their drilling. As one might imagine, and you can see as evidenced here, we look at the enterprise value to trailing 12 months EBITDA on EV to daily production and on yields. The guys on the far right, which represent the mineral and royalty peers out there, trade at a premium, as they should.
Being able to scale this really on a working interest sort of metric and adding in a very significant mineral and royalty platform, it is a really fantastic deal that, per what Peter was saying, for us, a $16 million deal is very significant. For a multi-billion dollar company, it may not have been worth the time and effort to do that, but for us, it makes a huge difference, and it is something we are really proud of. I will just say this. Evolution is coming off of our latest quarter, which has built on our EBITDA. It more than doubled from the previous quarter. We do think there are some operational issues that are even further behind us, which could lead to better things going forward.
Then you throw on top of that this latest acquisition that we have just made, which, again, with our conservative development pace that we have assumed, really should grow significantly over time, and increase the portion of our cash flows, which look more like the minerals and royalties companies, which could really lead to a higher valuation, not just higher numbers and higher EBITDA. It is an exciting time to be a part of Evolution, and with that, I will open it up to Steve for any questions.
Thanks so much, Kelly. I appreciate all the color from Kelly, Peter, Ryan. We are starting to get some questions, and the queue is filling up, but we do have 10- 12 minutes remaining, so if you do have a question, we will probably get to it. Press that Q&A button at the bottom of your screen, type it in, and we will get to work through this diligently. First question ties into some of the closing comments you made, which is, if this Permian minerals deal looks like a real home run, is this an outlier type deal for you guys, or does this fit into a broader strategy?
I will say the answer is probably both, right? Are you always going to find one of this size that makes this much of a difference in one fell swoop? It is probably, I do think, and I have confidence in our team that we will be able to do it again. But it is a tremendous deal. That said, if you go back to our Haynesville acquisitions we have been able to make, I think we have closed on sort of 10 different little parcels there. The total of those adds up to about $6.5 million. But it is the same kind of returns. It has really been done with a piece of it being developed producing, another piece being drilled but uncompleted wells, and then you have near-term permits-
Yeah.
-which have already started to come in really faster than our projections. Yes, it didn't happen $16 million at a time, but at $300,000, $400,000, $500,000 at a time, it's added up to about $6.5 million so far, and we're continuing to see plenty of traction there. We fully expect to be able to find more that are just as accretive. If maybe not in as one big time piece, but they add up, and they're meaningful for us.
How do you find these deals, or is that the secret that you're not going to reveal to us?
Yeah, that's it. We like to think of the oil and gas industry as the biggest small town there is, right?
Between all of our experience here, we've been doing this for many, many years apiece. You're in the flow or you're not. We are most definitely in the flow, and we've been able to work with some partners that rather than finding a marketed deal where you, quote unquote, "win" by being the highest bidder-
Yeah
-putting together a deal from scratch and offering stuff. Look, you literally set a menu. We want this much developed producing, this much on the come in a very near term, and this much maybe a little longer. You go out and offer those, and sure, not everybody's going to say yes, and you may have to build them small piece at a time, but it really is something we do think we've got traction on. We've got momentum, and we think we'll be able to keep going. Is it easy? No. But we've gotten ourselves in a position where we think we'll be able to keep growing that.
Good. Do have a question about how you think about going forward, the right balance between minerals and royalties versus working interests.
Sure. As you can imagine, that's a question we fielded a few times. I would say, I'd love to say that if all the deals we're going to find in the future are minerals deals that trade at working interest metrics, that would be a pretty easy answer.
Yes
If the next deal we find is a tremendous working interest deal, there's no reason why we wouldn't look at it. Just one example on that, when we bought our Jonah gas field, which is in Wyoming, and it sends its natural gas west. Well, as some of you may know, they've decided they don't want any more production out there. They don't want any more pipelines in there. When there's actually a cold winter, you have some true gas-on-gas competition. I think that deal paid for itself in about nine months. If we see some market dislocation kind of stuff that we feel is very opportunistic, absolutely, we'll take a look for the best deal, which will provide the most accretion to our shareholders.
Kelly, we have discussed this before, and I ask this to everyone in this space, which is can you walk through the hierarchy of how you look at deals, basin versus commodity versus, in the royalty case specifically, non-op working interest to the operator? Or does it all boil down to the right valuation?
It is going to start with the right valuation. I think one of the things we do, I would argue, as well as anybody with our team of engineers, with our Chief Operating Officer, Mark Bunch, who is not here, but his team with Peter and Sylvia and Brendan. When we get a deal, we are able to, just due to their vast experience of having worked in basically every basin across North America over the years and staying very much in touch and very much on top of things. I will put it this way. It is not for the layperson. If somebody brings you a deal and says, "It is going to have a 50% rate of return on every well you drill," you better not just believe that. You better do your own engineering and figure it out. I think we are very good at that.
Our sort of in-house team is able to uncover what really things are. So we will pass on a lot of things.
Yeah.
The old you have got to kiss a lot of frogs, right, Steve? You do not just believe anything you see.
Yeah.
That's massive, right? It has to be there first. You can have deals screen out based on operator, for sure. If it's somebody that's going to cause problems, you're better off not having done it. Also, you have to have the infrastructure, the access to market. There are a couple natural gas basins in the U.S., which I won't mention because some people may be a big part of them, but I think takeaway there is a real problem, and I think you're going to see constrained pricing coming out of some of those. We've stayed away from them. It all works into one. You can't do one without the other, Steve. You really got to look at every aspect, and that's a model that we've gotten very good at over the past few years here.
Excellent. Do have a question about what kind of activity have you seen from operators since closing the Permian Midland deal?
Yeah. Peter, you want to jump in on that one?
Yeah. We closed on that deal last month, and even when we closed on it, we had 832 producing wells, but there was a lot of activity going on. There were 40 wells in progress and probably another handful of them that were permitted. Within this past month, we've already converted, I think, a little over 20 wells into PDP, and we-
Another additional 20 wells that are still in some sort of progress, either drilling completions or just waiting to produce after its completion. There's been a lot of activity on the permitting side as well. There's been numerous permits that have been filed by the operators in that area, and a lot of our work right now is to go through those permits and figure out where that fits into our acreage and everything like that.
Yeah, and speaking-
I would say specifically, just looked this morning, there's actually nine rigs now. Exxon just picked up a fifth rig that's running on our acreage. Apache has actually filed a bunch of permits in Upton County recently here. They're not running a rig, but they've got one close. Double Eagle continues to be pretty active in Reagan County. Overall, we've been really pleased with the activity level and what we're continuing to see. In general, a lot of these basins, and Exxon, for instance, often does back half-weighted completion schedules-
Yeah.
-which is pretty common in the industry. I think that's what we're going to end up seeing with Exxon too, here in the Permian, because they've been pretty active.
Have you been surprised to see that this year? We certainly saw, at least in 3Q, drilling clearly outpacing completions. When you have the curve the way it is, that seemed odd to me.
Yeah, I think that's just a function of timing. I think a lot of companies like to drill early in the year and complete in the second half of the year. I think you'll see that trend continue, especially in the Permian. I'll just throw in there, if you look across, again, we're very intentionally in some of the most active basins there are.
Yeah.
In the Bakken and the Williston, we're seeing a bunch of activity come towards us, and taking a close look at some of that. The SCOOP/STACK , on our working interest and on our mineral side, we're having things convert ahead of our schedule. We're getting happy there.
Yeah.
Obviously at Haynesville, listen, we're definitely ahead of schedule on having stuff get turned into production.
Yeah.
Again, as you mentioned, basin's part of it, and we want to be where stuff's happening.
Yeah. I did see a question on LNG. That's obviously the Haynesville is one of the-
Yeah.
It was intentional that we went to Haynesville. That's the best place to be for LNG right now as far as differential. But just in general, LNG demand should prop up natural gas pricing, which will help us really in all of our assets. Like I say, in the Permian specifically, we know Exxon is actually taking the gas that they're producing in the Midland Basin to the coast, so that's going to benefit directly from LNG exports. We're definitely exposed to that.
I wrote a note about that earlier this week, so thank you for backing that up. Can you talk about the importance of reserve replacement as part of your strategy?
Yeah. Ryan, you want to handle that one?
Yeah. We actually think about it more along the lines of cash flow replacement rather than necessarily reserve.
Yeah.
Reserves obviously move based on SEC results and pricing. I would argue they're not a great indicator, because it's a point in time. We think of cash flow replacement. The interesting thing is, as you buy more minerals, the reserves are lower from a royalty and mineral acquisition, because you can't book as many PUDs. From a cash flow perspective, it's much higher. We're looking to replace and increase cash flow. Obviously, being a yield dividend paying company, cash flow to us is the most important metric.
You're really looking at timing. Timing is a key part of that.
That's right.
As opposed to just building reserves, which timing is less of an element.
That's right.
Okay. When you're thinking about capital allocation, what's a comfortable dividend coverage ratio? How important is it to you to protect that dividend versus supporting, again, cash flow replacement and growth?
Yeah. It's a balance, and it's something that every quarter we take a careful look at. When we set our dividend, we don't do it because we think we can cover it this quarter. We think we can do it for the next several quarters, looking at it across a cycle. You always have to be feeding the machine, but the machine has to be paying out as well. I think our dividend coverage right now is in a pretty darn good spot for the next little while, especially with some of the growing nature of some of these assets we've put on, that again, you don't have to pay for drilling CapEx with.
Yeah. We look at it more, Steve, on coverage on cash flow from operations versus necessarily free cash flow, because a lot of that free cash flow is CapEx that we do actually have control over. Certainly-
Yeah.
-Chaveroo we have control with, as we're 50/50 partners. Some are non-op drilling in the SCOOP/STACK . We actually have non-considered some wells we didn't think were actually going to be good. We have control over that CapEx portion.
Do you like having that control versus otherwise taking the smaller working interest or the royalty? Is it worth the extra expense?
It's-
Yeah.
Again, there's another balance, right?
Yeah.
Having 50% working interest in six, seven wells versus the 2% in 30, I think a lot of times that you take away risk by being a smaller part of a larger number of wells, but there is less control.
Yeah.
Yeah, it's a balance there as well, Steve.
Very good. We are just about out of time. Kelly, any closing comments before I wrap it up?
Yeah. I just want to say, like I said, I think it's a really exciting time to be looking at us as we've seen our EBITDA start to grow, and we get more influence from some of our operations that have gotten back to where they're supposed to be. Then you add in what we got going on with this latest acquisition and some of the more conversions we're getting. It's a great time to be looking at the story right now, and happy to answer any questions later on if people have them.
Yeah, there certainly were. I hope we got to most, if not all, of the questions. If not, I'm sure you can reach out directly to Evolution or reach out to us at Sidoti, and we could certainly forward your questions, and I'm sure they'll be happy to address them. Thanks everyone for being here. Kelly, Peter, Ryan, thanks so much for all the color today.
Thank you.
Hope everyone enjoys the remainder of the conference.
Thank you.
Thank you.