EPM - Evolution Petroleum Corporation
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$4.93
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Q3 2026 Earnings Call
2026-05-13Operator: Good morning, and welcome to the Evolution Petroleum Third Quarter 26 Earnings Release Conference Call. All participants are in a listen-only mode. Please also note today's event is being recorded. At this time, I would now like to turn the call over to Brandi Hudson, Investor Relations Manager. Please go ahead.
Brandi Hudson: Thank you. Welcome to Evolution Petroleum's fiscal Q3 2026 Earnings Call. I am joined today by Kelly W. Loyd, President and Chief Executive Officer Mark Bunch, Chief Operating Officer and Ryan Stash, Senior Vice President, Chief Financial Officer and Treasurer. We released our fiscal third quarter 2026 financial results after the market closed yesterday. Please refer to our earnings press release, for additional information containing these results. You can access our earnings release in the Investors section of our website. Please note that any statements and information provided in today's call speak only as of today's date 05/13/2026 and any time sensitive information may not be accurate at a later date. Our discussion today will contain forward looking statements as management's beliefs and assumptions based on currently available information. These forward looking statements are subject to the risks, assumptions and uncertainties as described in our SEC filings. Actual results may differ materially from those expected. We undertake no obligation to update any forward looking statement. During today's call, we may discuss certain non GAAP financial measures, including adjusted EBITDA, and adjusted net income. Reconciliations to the most directly comparable GAAP measures are included in our earnings release. Kelly will begin with opening remarks followed by Mark with an operational update and then Ryan will review the financial results. After our prepared comments, the management team will open the call for questions. As a reminder, this conference call is being recorded. If you wish to listen to a webcast replay of today's call, it will be available on the Investors section of our website. With that, I will turn the call over to Kelly.
Kelly W. Loyd: Thank you, Brandi, and good morning, everyone. Before walking through the quarter, I want to step back and provide some context on where we are as a company and how we are thinking about the path forward. Over the last 7 years, we have deliberately reshaped Evolution's portfolio expanding beyond our legacy asset base into a more diversified capital efficient platform designed to generate durable free cash flow through commodity cycles. That has meant adding long life low decline assets such as Jonah and the Barnett, expanding our non operating working interest base through acquisitions like Tex Mex and most recently building a minerals and royalty platform that we believe can become a durable and growing component of our portfolio. The common thread across these decisions is the same. Building a business with long life assets, modest capital requirements, sustainable free cash flow and the ability to support our dividend while compounding per share value over time. That is the framework through which we evaluate every capital allocation decision and it is the lens through which I would encourage investors to evaluate our results. Including in quarters like this 1, where reported results were impacted by items that do not reflect the underlying earnings power of the business. With that context, let me address the fiscal third quarter directly. This was a more challenging period than the second quarter and I want to be transparent about what drove the variance. A combination of isolated and largely non operational items weighed on our reported results, including regional natural gas pricing dislocations that impacted realized prices at Jonah and Barnett. A $1.2 million 1-time prior period transportation adjustment at Delhi related to changes made by the operator dating back to 2024. And weather related production disruptions across multiple fields during the January ice storms. These are not structural issues. They do not reflect any change in the underlying quality of our assets or our cost structure or our strategy. These were largely timing related and 1-time in nature we expect underlying performance to normalize as they roll off. Setting those items aside, what stands out to me is how the portfolio held up despite those headwinds. Production was essentially flat year over year at 6.7 thousand BOE per day, a result we view as a meaningful sign of resilience. Given the level of weather related disruption and downtime we experienced in the quarter, Contributions from our new acquisitions helped offset downtime and natural declines at certain assets, which is exactly the kind of portfolio level stability we have been working to build. This reflects the benefits of diversification across assets, commodities and operating partners. That diversification is not accidental, It is the direct result of the capital allocation discipline we have applied consistently over multiple years. On our mineral and royalty program, we continued to make progress during the quarter. We completed 2 additional Louisiana mineral and royalty acquisitions targeting the Haynesville and Bossier Shales, bringing the total consideration for our Louisiana minerals to approximately $5 million These assets are being actively developed by operators in the area. Wells are being drilled and completed. And we expect contributions from these positions to begin building as that activity translates into production. All of that to say, the financial contribution from our minerals platform is still in early stages. However, the activity we see from operators gives us confidence that the production ramp we underwrote when we made these acquisitions is right on track. We will provide more specific updates as those results come through. As we move into the fiscal fourth quarter, we expect the picture to look meaningfully different The prior period Delhi adjustment is behind us. The February gas dislocation at Jonah was a singular weather event. Differentials are returning to more normal levels. The Tex Mex workover program is in its final phase and we expect that asset to be a more meaningful contributor as that work is completed. The combination of these factors alongside the continued ramp of our minerals and royalty assets gives us confidence that the fourth quarter will better reflect the underlying earnings power of this business. Expect to generate robust cash flow in the fourth quarter and beyond which reinforces our continued confidence in the dividend. In addition, we believe the current commodity price environment provides incremental upside from here. On May 11, our board declared our 51st consecutive quarterly dividend and 16th consecutive dividend at $0.12 per share. A milestone that reflects the durability of our underlying cash generation across a range of commodity environments. Our capital allocation framework has not changed. Protect the balance sheet, support a dividend we believe is sustainable through cycles, deploy capital where we see compelling risk adjusted returns. As always dividends are paid at levels that are meant to be sustainable given the current outlook for multiple years to come. This portfolio has always been designed to withstand any ill effects of the odd difficult quarter and it is this same framework that gives us confidence in what we expect to be a strong finish to fiscal 26. Before I hand it over to Mark for more detail on our operations, want to leave you with 1 final thought. Looking at the broader picture for commodity prices, in March 2026 WTI oil prices reached their highest levels since 2022 and remain at elevated although highly backwardated risk premium levels. The significant increase in forward oil commodity prices as of March 31 resulted in an unrealized loss on the mark to market value of our hedges for the quarter. Additionally, the large non cash loss associated with unrealized hedge losses was based off of a crude oil strip at the March where spot prices for WTI were over $100 per barrel. No 1 knows where WTI will be at June 30, 2026, but where we sit today, I think it is likely that the unrealized losses will show a reversal in the next quarter. Although our unrealized gains and losses on hedges will fluctuate as forward commodity prices change, I sometimes think that people forget that selling oil for higher prices than our hedges is a really good thing. The current oil price environment will provide incremental upside in the fourth quarter as we expect to benefit from the higher pricing to the extent that prices exceed our applicable oil hedges. Additionally, our NGLs which are priced as a percentage of crude oil remain unhedged and should receive the full benefit of pricing. As far as our natural gas hedges are concerned, we expect to realize a benefit as our hedges are priced at levels higher than current strip pricing. With that, I will turn the call over to Mark.
J. Mark Bunch: Thank you, Kelly, and good morning, everyone. I will focus my remarks on key operational highlights from the quarter and encourage listeners to review our earnings press release and filings for additional details across our asset base. Overall, our operations continue to demonstrate steady base performance across the portfolio during the quarter. The results were impacted by the weather related disruptions and 1-time items Kelly described. Now on to our assets. At our Haynesville and Bossier Shales, we continue to build scale and are prioritizing value on wells that are either currently producing or expected to be producing within 1 year of purchase. To that end, we expect 23 wells to be brought online and meaningfully contribute to revenue and cash flow in the fiscal fourth quarter. At SCOOPSTACK, production from the mineral and royalty interest acquired in August 2025 modestly contributed to overall volumes during the quarter. Additionally, there are 7 gross wells in progress and 12 gross wells on production that we are still awaiting first production and revenue data. At Chavaroo, production increased year over year reflecting the benefit of wells brought online over the past 12 months. The January winter storm and gas interference on the wells with ESPs decreased production by a 30 net BOE per day quarter over quarter. Subsequent to quarter end, we converted 1 well from ESP to rod pump. Currently, all but 1 of our 7 wells has now been converted to rod pumps. We continue to advance permitting for the 6 wells, expect to have those permits in hand before the end of fiscal 2026. At Tex Mex, oil production increased quarter over quarter due to a successful workover program. At the end of the prior quarter. However, January winter storms not only impacted production, but also caused power outages and surface equipment damages that required repairs. This led to higher expenses in the quarter. We expect Tex Mex to continue to improve. Subsequent to quarter end, we began a new workover program which we expect will increase production by an additional 100 net BOE per day by the end of fiscal Q4. At Delhi, revenues were impacted by the 1-time prior period transportation adjustment Kelly described earlier which is now behind us. The January winter storm outages impacted production for 6 days during the quarter, and the CO2 recycled compressor, which is down from most of the prior quarter remained down for 40 days during fiscal Q3. Negatively affecting production. These issues were resolved during the quarter, Despite this, field level profitability remained strong supported by lower operating costs, reflecting the continued benefit of the cessation of CO2 purchases that concluded late in fiscal Q3 of last year. We expect production volumes to improve as operational stability continues. At the Barnett, quarterly production was heavily impacted by the winter storm as well, resulting in a decline of approximately 160 BOE per day. The impacts carried into February and restored by March. Across the portfolio, production was heavily impacted by the January winter storm and other downtime accounting for over 300 net BOE per day. However, these have been resolved during the quarter and we remain focused on maintaining operational flexibility optimizing our cost structure and deploying capital where returns are most attractive. With that, I will turn it over to Ryan.
Ryan Stash: Thank you, Mark, and good morning, everyone. As Brandi mentioned earlier, we released our earnings yesterday, which contains more information on our results. For today, I would like to go through our fiscal third quarter financial highlights. In fiscal Q3, we had total revenues of $20.2 million down 11% year-over-year. The decrease in revenues was primarily driven by an 11% decline in average realized equivalent prices, partially offset by a slight increase in production volumes. The decline in pricing reflected regional natural gas pricing dislocation at Jonah and Barnett during the quarter. But especially in the month of February. as well as $1.2 million in 1-time prior period transportation adjustments at Delhi related to a new marketing contract entered into by the operator and dating back to December 2024. Net loss for the quarter was $8.9 million or $0.26 per diluted share compared to a net loss of $2.2 million or $0.07 per diluted share in the year ago period. This quarter was negatively impacted by $7.6 million in unrealized hedge losses due to the spike in crude oil prices with the war in Iran. Excluding the impact of selected items, including the unrealized hedge losses, adjusted net loss for the quarter was $2.9 million compared to $800 thousand in adjusted net income in the year ago period. Adjusted EBITDA was $3.1 million compared to $7.4 million in the prior year quarter, reflecting lower revenues due to historically unfavorable differentials production downtime in many of our assets, and realized losses on derivative contracts. More specifically, as it relates to differentials, in Jonah, the winter differentials were the worst since we have owned the asset and the lowest in the past 10 years, due to the warmest winter on record for the West Coast. Going forward, we would expect differentials at Jonah and our other natural gas assets to return to more historical levels. We estimate that the winter differentials negatively impacted our realized price per BOE by approximately $3.39 as compared to the prior year period. Lease operating expenses improved to $13 million or $21.49 per BOE compared to $22.32 per BOE in the prior year quarter. The decrease was primarily driven by reduced ad valorem taxes at Barnett Shale, the continued benefit of the cessation of CO2 purchases at Delhi, partially offset by the addition of the Tex Mex properties and incremental workover activity during the quarter. The addition of our royalty assets in Oklahoma and Louisiana have also contributed to higher margins and lower operating costs for our asset base. On the hedging front, we have continued to add additional hedges to comply with our credit facility covenants. Our ongoing goal remains to reduce downside commodity price risk and protect cash flow for our shareholder return strategy while preserving the maximum potential upside. This strategy can result in realized and unrealized losses on our hedges in some periods such as the current quarter. But benefit us in other periods and will provide more predictable and stable cash flows over time. Turning to the balance sheet. As of March 31, 2026, cash on hand totaled $2.6 million borrowings under our credit facility stood at $56.5 million, and $800 thousand in letters of credit outstanding. Total liquidity, including cash and available borrowing capacity, was approximately $10.3 million providing us with the flexibility to support our ongoing operations capital allocation priorities, and selective growth initiatives. During the quarter, we paid dividends totaling $4.3 million As previously announced, the Board declared a quarterly cash dividend of $0.12 per share reflecting our continued commitment to returning capital to shareholders. Overall, our asset base and balance sheet strength position us to continue returning capital to shareholders while selectively deploying capital into opportunities that we expect to be accretive over the long term, just as we have done over the past 7 years. I will now hand it back over to Kelly for closing comments.
Kelly W. Loyd: Thanks, Ryan. To sum it up, fiscal Q3 was a quarter shaped by temporary headwinds rather than structural weakness. The portfolio held up well at the asset level. Our minerals and royalty strategy continued to advance and we maintained the dividend for the 51st consecutive quarter. Which we believe speaks to the durability of our underlying cash flow. As these 1-time items roll off and our recent acquisitions contribute more fully, we expect our results to better reflect the earnings power we have built in this business in the fiscal Q4 and thereafter. We look forward to updating you on our progress. With that, I will turn it over to the operator to begin the Q&A session.
Operator: Thank you. We will now begin the question and answer session. If you are using a speaker phone, please pick up your handset before pressing the keys. If at any time your question has been addressed and you would like to withdraw the question, At this time, we will pause momentarily to assemble our roster. Our first question comes from Jeffrey Robertson with Water Tower Research. Please go ahead. Analyst (Jeff Robertson): Thank you. Good morning. Mark, at Delhi with the new crude marketing agreement that the operator entered into, can you talk about how much flexibility Evolution has to or whether you want to do it as you alluded to in the press release to do anything different with respect to marketing your equity production from that field?
Kelly W. Loyd: Jeffrey, I am going to flip that-- excellent. I know you asked me, but I am going to flip it over to Ryan to answer.
Ryan Stash: Yes. So that is part of the thing we have actually been actively looking at and we do actually have a lot of flexibility in the JOA to take the production in kind. We are actively looking at now. The 1 point I will make on the actual changes is, obviously, it was a move from, you know, Denbury to Exxon. The ultimate contract with Plane has not changed that much other than they are now trucking where in the past they had a pipeline that went down. So that is really the biggest difference in kind of charges. But to directly answer your question, we are definitely looking at that at something that we are actively considering. We think we probably can do a little better than what they are in the market. Analyst (Jeff Robertson): Ryan, in the second quarter and going forward, do you expect the GPT charges to be similar to what they were last year? As opposed to, obviously, the I am sorry, the in previous quarters as opposed to what they were in the in your second fiscal quarter?
Ryan Stash: Yeah. I mean, in gathering, there is, you know, there is nothing that is been out of the ordinary that I am aware of in the past quarter. I mean, those have been relatively constant. I mean, there are some contracts we mentioned in the past like Barnett that is tied a little bit to natural gas pricing, so it will move a bit. But overall, it is more volume driven, right? Analyst (Jeff Robertson): And so know, I would not expect those to vary much from this historical. Can you talk about what kind of communications you are having from your operators with respect to any initiatives they might have to go out and do short cycle workover type projects or whether they are opportunities to bring wells back online to take advantage of the high oil prices we have at least for the next month at least the next couple of months.
J. Mark Bunch: Yes. So Jeff, this is Mark. And yes, our operators are all working towards that. Fact, we actually mentioned 1 in particular Tex Mex, they really accelerated their second round of workovers to bring things online in New Mexico. Largely because the prices went up and so the timing was really good. So we speeded that up somewhat. So, yeah, everybody's looking at making sure that they keep as much production oil production on as possible.
Kelly W. Loyd: And Jeff, hey, it is Kelly. I will just add on. Mark's right across the board, we are seeing it. And look, these are simple projects that are fast, right? Drilling takes longer, to get on production. But if you do a workover that takes a week and things are back up producing, I mean, we evaluate these. I mean, these are very, very high return projects that can get done quickly and could be meaningful. So we have seen a lot of guys try to do that as much as we can. In Hamilton Dome, you are seeing activity increase, really across the board. Analyst (Jeff Robertson): So And then lastly, getting back in the queue, Kelly, can you speak to the state of the both the non op market and the minerals market just given the volatility and in commodity prices and what that means for trying to value transactions.
Kelly W. Loyd: Yes. it is interesting. On the non op side, it is I mean, would almost argue it is kind of a dearth of availability. Like there is not a whole lot that we have seen out there. On the mineral side, again, working with some folks that we have a whole lot of confidence and trust in, we have been able to do sort of you know, I do not know if you want to call it bespoke, but we deals we put together, and along with them go execute on. And minerals just, you know, in general especially when you are able to build them in little onesies and twosies like we have been, they are more liquid. And we can find real dislocations and opportunities, which, like I said, we and the folks we are working with have been doing a great job of finding those, and we expect to see that continuing. There will be a flip, but at some point, non op will come back in vogue and we will start seeing better returns. But when you only have a couple of deals and a bunch of people bidding on them, it just has not you know, in the last couple quarters, it really has not been super attractive. Analyst (Jeff Robertson): Thanks. I will jump back in the queue.
Kelly W. Loyd: Thanks, Jeffrey.
Operator: Our next question comes from Poe Fratt with Alliance Global Partners. Please go ahead. Analyst (Poe Fratt): Thanks for taking my call. I am trying to figure out what your run rate is for the June right now. You reported 6.7 thousand BOE, you talked about 300 BOE of impact on production from storms and other things. Are you above 7 thousand right now? what is your run rate for the June or can you just help me calibrate that?
Kelly W. Loyd: Sure. Hey, Poe, this is Kelly. Thanks for calling. Yes, I think we made it clear. I do not want to speak out of school or Ryan will, slap me. But we have the 300 is almost substantially all back online and starting to get there before the end of the quarter. And if there was anything left over, it is pretty much there now. We are well underway in our progress on adding about a 100 net BOE per day in Tex Mex, And we also have you know, and I will be a little cautious here. We have 12 wells, in our royalty properties. Alone in the SCOOPSTACK. That we know, are on production, they have been completed. We just do not have data yet. Again, in Oklahoma, it can take a while. So we expect to get data where we do not want to aggregate if we did not had no data. Yes, We have type curves, but you need to actually get data before you put it on there. So we have got 12 wells that we are a part of there that we are going to get we expect to get data on and be able to include in our fourth quarter results. Same thing with our Haynesville and Bossier Shale. Bossier Shale assets. We have got 24 wells that we expect to get data on and have production from during the fourth quarter. We know that at least 20 of them have already completed and others are sort of in process. So I cannot really quantify that number. I mean, I could guess off my type curve, but that would not be appropriate. So, again, we have got the 300 back online. We have got another 100. We fully expect and is in progress of working towards that Tex Mex plus additionals from new wells that we do not have data on that we are either already producing or getting there very shortly.
Ryan Stash: So Yes, it is probably Poe, this is Ryan. it is probably helpful just sometimes to remind you guys on how from the non op perspective how it works. You know, we you know, there are some wells in some areas we have real time data, but certainly not all across our portfolio. We will not probably really know true April production for another week or 2 until we actually start getting our revenue statements in from the month of April. Right? So as we sit today, we still do not have actual revenue statements yet for April production. We have we do know of some areas, obviously, Kelly said, and we do know things that have returned to normal, but we will not know for a fact, like, what production actually was for April yet. And then and from the royalty side, Poe, it is even more delayed just because you had you are further removed from the operator. So those almost those, like, in Oklahoma, can be somewhat delayed like by 180 days. So it is, you know, where we get information, we start applying and accruing for it, but sometimes we do not know about it until it actually comes on. Analyst (Poe Fratt): Okay. And I you know, I am not going to hold you to any guesses, but is there it sounds like the SCOOPSTACK might get some data maybe 2 months would potentially hit the production for the June And then the Haynesville and the Bossier is probably first quarter next year or the September. But I guess a short question. What could potentially be the impact from SCOOPSTACK if you do get the data? In the in the June. Oh, I am Is it yeah. I am I am probably Is it 50, 25, you know, sort of just I am not going to hold you to any guesses that you make, but just I am just trying to calibrate. I understand. And but, I mean, I do not think I am comfortable speculating on that. Okay. I am not going to beat the dead horse.
J. Mark Bunch: You talked about Chavaroo that you know, the permits are potentially in place for the 6 wells or the next pad there. by the end of June. Do you think the operator there will pull the trigger in the September? Or is it more December with potential impact in calendar 27? So, as you know, the operator there has undergone a merger and it is our understanding that they are prioritizing assets and are working on the schedule. We are working with them closely and I would just it is just too early to say at this exact point in time. But we are working on that and trying to get things scheduled as quickly as we can and to understand from our own capital needs exactly when this is going to work out. So I do not want to speculate and answer for them, so I am going to wait for that. Okay. Analyst (Poe Fratt): We will update you when we know. How about that? Yeah. I guess so from a conceptual standpoint, those are shorter term, you know, shorter lead time they are permitted, there is generally you can drill a lot quicker there than you can in other places. But okay. And then on Delhi, is there any legal recourse that you have? I mean, is there is quite a delay between the time that the contract went in place and then it hit the quarter,, Did I read in between the lines that you may have legal recourse? I am officially not going to answer that.
Kelly W. Loyd: Okay. I think that is it. Thank you. I appreciate it. Thanks. Really appreciate it, Poe.
Operator: Thank Our next question comes from John Baer with Ascend Wealth Advisors. Please go ahead. Analyst (John Baer): Thanks. there is Noel in there. that is the first time. Thank you. it is Baer, B-A-I-R. Thanks. Appreciate you are taking my call, and touched on a number of aspects of my questions. Is it fair to say that add back, I mean, this was a quarter pardon the pun, but a really perfect storm. Right?
Analyst: Off 5 of your areas, impacted here.
Kelly W. Loyd: Your comments are that the flow rates are back. And so I am just wondering, do you have any was there any impact that is known as to flow rates or any reservoir damage, anything like that while these wells were shut in?
J. Mark Bunch: No. This is there were not any damages. This is the typical thing we have happened in the wintertime when we have bad weather. So, pardon me, over cold, but we do it like typically we see at the Barnett, which is it is the 1 that is slowest to come back, but it comes back. It just takes it a few weeks to get back up to full rate.
Kelly W. Loyd: I mean yeah. And back to your perfect storm, I mean, we have 1 area where lightning strike blew up a tank battery. Right? I mean Oh, boy. Yeah. Again, all covered by insurance, all fixed, but, you know, caused downtime for sure. Analyst (John Baer): And then 1 thing, John, and this is Kelly by the way, thanks for calling.
Kelly W. Loyd: On the West Coast, we talk about some of the impacts of differentials. From our, you know, Jonah gas and how far from normal it was. I mean, it was-- I mean, Ryan talked about it a little bit. I mean, once in like, once in a 100 years, plus kind of winter, What did they draw on the West Coast for gas, Ryan?
Ryan Stash: I mean, it was probably about 60-65 BCF, which is, you know, pretty much the lowest I can find for a long period of time.
Kelly W. Loyd: Right? Yeah. You know, we could call you I was going to say that it went the other way. Think not long after you purchased that did.
Analyst: that property. Yes. Yes. Analyst (John Baer): So that was kind of another follow on question I was gonna say is, okay. So you got impacted because of warmer winter, but if it is a more hotter or more severe summer and there is higher demand, then this could flip the other way. Is that a fair way of looking at it?
Kelly W. Loyd: Yes, for sure. So Ryan and I were doing some research on this On the West Coast, right, it is not just California, let's look at the whole Coast. When you have a good snowpack, right, a nice wet cold winter, in the summer months when it is hot, you get a lot of hydro. Hydro is the cheapest, best, easiest way for them to generate electricity. And it can be, you know, in a wet cold winter, it can be up to 50% of the power in some of those areas. When you have no snow pack essentially and you are expecting no hydro, Ryan, I think your research showed it can use an extra 1.1+ BCF a day, of natural gas usage. So there will be a bounce back effect that is to our favor on this during the summer.
Ryan Stash: Yeah. No, we think there is definitely potential for differentials that we see right now in the summer months might be over stating kind of the potential high stories that we are going into right now in the injection season. So it was kind of a normal to warm summer, although snowpack could set up for hopefully a little bit better demand on the summer heating. Sorry, summer cooling. Analyst (John Baer): Yes. From whatever we are seeing out there now, California is in a pretty bad state. Given they have to import just about everything it seems, whether it is energy from Asia since they have run off the industry internally. Their water and their electric. So, they are they are kind of in a bad spot there as far as-- yes.
Kelly W. Loyd: And, you know, we talked about elevated storage there. I mean, honestly, they have so few days of coverage. I mean, just happened this particular winter. There was no sort of you know, gas on gas competition because they did not hardly use any gas. So it goes away and switches very quickly. it is very light storage relative to usage there.
Ryan Stash: As a matter of fact, I would say out of all the regions of the country, has the least sort of storage relative to usage. So I mean, they have got around, you know, assuming they would not inject, which they will, they got generally 30 days or less of storage based on typical demand out there, which is very low. Also had storage come out of the system, right, of the past 5 years, which has kind of increase the volatility. As you mentioned, John, I mean, you know, we are kind of-- we are not benefiting from it from this winter, but we have definitely been a beneficiary of higher pricing due to this volatility. Around the asset. We cannot complain that much. Analyst (John Baer): Going back to Delhi for just a moment, is there any anticipation that CO2 purchases will need to be resumed or ramped up anytime soon that could be impactful?
J. Mark Bunch: John, this is Mark. No, they do not have any plans at the moment to purchase any additional CO2. And then and honestly, with the reservoir work that we have done, we actually think CO2 utilization is probably improved by dropping the amount of CO2 that is being put in the system. So we do not have any disagreements with it, and it helps our operating costs. Analyst (John Baer): A little disconcerting is I think it was referenced by an earlier caller. The questioner, The kind of lack of communication that you have had with or by the operator. So I hope, in all areas, you will be able to somehow improve that communication and updates so that you are a little bit better aware of what is going on and what they anticipate and realize that as a non op, it is perhaps a little more difficult. Still.
J. Mark Bunch: Well, John, just to FYI on that, just so we really actually have a very good relationship with Exxon in my opinion for I have worked with Exxon before and it is tough because they are a big company and you know, big companies do different things differently. But we actually have a good relationship with them, I think, and, yeah, they do talk to us. it is you know, they have had some difficult maintenance issues going on, and, you know, we treat them pretty much like the rest of our partners. And, actually, I would say they are definitely not the worst. So that is, you know, which is a big plus because I was kind of afraid they could have been. But, you know, we have been really happy with what they are doing. Analyst (John Baer): Okay. that is good to hear. And I suppose that this field is you know, kind of somewhat off their radar in the grand scheme of things for their size and so forth. So thanks very much for taking the calls.
Kelly W. Loyd: Thanks, John. Bye.
Operator: Our next question comes from Nicholas Pope with Roth Capital. Please go ahead. Analyst (Nicholas Pope): Good morning, guys.
Kelly W. Loyd: Good morning, Nick. Kelly. You, I think, you made a comment that the non-op, the market for kind of non-op assets has been you know, a little tight right now. Analyst (Nicholas Pope): So I thought it was kind of encouraging that you-- there is a-- that you sold with a $3.3 million of scoop stacks non ops assets. Post quarter end. So I am curious that you Can I give you a little color on that?
Kelly W. Loyd: Yeah. that is exactly what I wanted. So go ahead. Yeah. So just to be clear, that is it is SCOOP/STACK, but it was from our minerals package, right? If you recall, paid $17 million before post effective date. What was the ultimate adjusted price? $16.1 million for that package of royalties. But when you in the difference between effective date and closing date is cash flows. And we placed the vast majority of that on all the stuff we kept, right? There were some locations that were we again, they could absolutely be viable home run candidates but they were further out in time. And so when we put most of our valuation work, we front loaded that. So if you take that valuation, which again, we think has borne out to be a very good high return project at 16.1. If you knock another $3.25 million to $3.3 million off of that, it is an absolute home run. So what do you do with that capital? Well, you go try to redeploy it. Right? Sort of high grade that portfolio from stuff that, again, we think is good. It has value. Clearly, we sold it. But into stuff that is going to be completed in our opinion, more near term and begin to add cash flows in the near term. So that was the sort of process behind that. Let's see if we can put some of these potentially longer dated to be completed stuff flip that into stuff that we think is going to be more near term, and also, you know, very attractive rates, which we were buying. So that was the process there, Nick. Analyst (Nicholas Pope): I mean, I think it makes total sense. I mean, it is, I think y'all been active in the past to divestitures, and it sounds like maybe the non op market is a bit of a seller's market right now just with the how quickly commodity prices have moved. Is there other opportunities? I mean, is that something I know you are always active looking at your own assets and high-grading stuff. I mean, is there other opportunities you think might be possible to divest here in the near term with some non op stuff?
Kelly W. Loyd: There are, for sure, yes. There are a couple that I would say need to sort of be seasoned a little more, but that could be very And then there is always little stuff on the margin you could flip around with. So, if I were modeling, I probably would not account for it, but we would call that as the Cajun say, lagniappe. Right? Got it. All right, Joey. I appreciate the time. Analyst (Nicholas Pope): Thanks for the question.
Kelly W. Loyd: Thank you, Nick.
Operator: Up next, we have a follow-up from Jeffrey Robertson with Water Tower Research. Please go ahead. Analyst (Jeff Robertson): Thank you. Ryan, on CapEx, do you have much visibility into the rest of calendar 2026?
Ryan Stash: From your operating partners? No. I mean, I think at this point, it is going to be probably the we do not really know under SCOOP/STACK, which is a majority, as you know, kind of our CapEx other than Chavaroo. And at that, we are not getting a lot of drill schedules, from them. And we are seeing AFEs and activities but we do not have a ton of insight there as to how much capital. So we are not budgeting much more than we have probably spent this year right now. We have we will come out with our official kind of 2027 budget here probably on the next fiscal 27 that is on our next call. But at this point, no, we have not seen a lot of activity or that we would know of for really on the non op side. Analyst (Jeff Robertson): Right now, will say, as you know, obviously, the activity we have talked about on the mineral side, I mean, will not impact our capital budget, which is the nice thing about it. So all those wells coming on for ScoopStack are not going to impact our capital budget. Thank you. I guess into that note of the mineral interest production that you talk about that should come on near term should have a, yes, high-margin addition to cash flow.
Ryan Stash: Yes, absolutely. And yes, we are excited about it, but it is it is again, we are going to gain more info this quarter and even more going forward as we get more wells being completed over time. So again, very excited about that. Analyst (Jeff Robertson): Thank you.
Operator: Our next question is a follow-up with John Baer from Ascend Wealth Advisors. Please go ahead. Analyst (John Baer): Thanks for taking the follow-up here. Just a quick question. Are you looking at any adjustment or any ways that you can adjust your hedging program given the current elevated prices or whatever? Is there any way that you can kind of high grade that? And know what my personal take is, these prices, even if, you know, some solution to the Persian Gulf Strait of Hormuz thing was resolved. You got a long lead time to get all that cargo out of there. So, I know the market response would probably try to reflect it, but given where we are at right now and all those uncertainties, are you looking at doing any high-grading of the hedging program?
Ryan Stash: Yeah. John, this is Ryan. So, you know, unfortunately, in the near term, right, we definitely have looked at restructuring, but most of the restructuring opportunities would be things like converting our collars to swaps which, you know, is not really that beneficial to create upside, given where the prices are, it would be too expensive to take a lot of those swaps out or just take them off. What we are doing is we have taken the opportunity to start adding hedges in calendar 2027. So we are able to get 70 plus you know, swaps and floors in some instances with higher callers. And so those prices calendar 2027 are pretty attractive, right? So to us, adding hedges out in the future at good prices is really what we are doing for the most part with this kind of spike. The other point I would make is while we do have you know, we are not completely hedged out on our crude, right? So we have still got for this kind of our fiscal fourth quarter at least 30% unhedged. On the crude side. All of our NGLs are unhedged. So we definitely have upside there from the run in kind of the heavier parts of the barrel for the NGL. So we are still going to see some of that upside as Kelly kind of mentioned in his comments, but really near term, there is not a lot of restructuring opportunities. We are just going to take advantage of adding stuff in 2027. Analyst (John Baer): Very good. I think 1 of the big takeaways from what is been going on is domestic production I think globally you are going to be looking at more cautiously at where you source your crude from, right? So I think from that standpoint being a domestic producer should be given a little bit of a premium perhaps, I do not know. But just kind of food for thought there. So thanks again for taking the question.
Kelly W. Loyd: Hi, John. Really appreciate your interest and call and we agree. Think good old USA is the place to be, so. Very good.
Operator: This concludes our question and answer session.
Kelly W. Loyd: I would now like to turn the call back over to Kelly W. Loyd for any closing remarks. Yes. Thank you. And thank you everybody for attending. As we move forward, like I said, we are excited about the future here. So thanks again for your interest. Really appreciate it.
Operator: The conference has now concluded. Thank you for attending today's presentation. You may now disconnect.
Brandi Hudson: Thank you. Welcome to Evolution Petroleum's fiscal Q3 2026 Earnings Call. I am joined today by Kelly W. Loyd, President and Chief Executive Officer Mark Bunch, Chief Operating Officer and Ryan Stash, Senior Vice President, Chief Financial Officer and Treasurer. We released our fiscal third quarter 2026 financial results after the market closed yesterday. Please refer to our earnings press release, for additional information containing these results. You can access our earnings release in the Investors section of our website. Please note that any statements and information provided in today's call speak only as of today's date 05/13/2026 and any time sensitive information may not be accurate at a later date. Our discussion today will contain forward looking statements as management's beliefs and assumptions based on currently available information. These forward looking statements are subject to the risks, assumptions and uncertainties as described in our SEC filings. Actual results may differ materially from those expected. We undertake no obligation to update any forward looking statement. During today's call, we may discuss certain non GAAP financial measures, including adjusted EBITDA, and adjusted net income. Reconciliations to the most directly comparable GAAP measures are included in our earnings release. Kelly will begin with opening remarks followed by Mark with an operational update and then Ryan will review the financial results. After our prepared comments, the management team will open the call for questions. As a reminder, this conference call is being recorded. If you wish to listen to a webcast replay of today's call, it will be available on the Investors section of our website. With that, I will turn the call over to Kelly.
Kelly W. Loyd: Thank you, Brandi, and good morning, everyone. Before walking through the quarter, I want to step back and provide some context on where we are as a company and how we are thinking about the path forward. Over the last 7 years, we have deliberately reshaped Evolution's portfolio expanding beyond our legacy asset base into a more diversified capital efficient platform designed to generate durable free cash flow through commodity cycles. That has meant adding long life low decline assets such as Jonah and the Barnett, expanding our non operating working interest base through acquisitions like Tex Mex and most recently building a minerals and royalty platform that we believe can become a durable and growing component of our portfolio. The common thread across these decisions is the same. Building a business with long life assets, modest capital requirements, sustainable free cash flow and the ability to support our dividend while compounding per share value over time. That is the framework through which we evaluate every capital allocation decision and it is the lens through which I would encourage investors to evaluate our results. Including in quarters like this 1, where reported results were impacted by items that do not reflect the underlying earnings power of the business. With that context, let me address the fiscal third quarter directly. This was a more challenging period than the second quarter and I want to be transparent about what drove the variance. A combination of isolated and largely non operational items weighed on our reported results, including regional natural gas pricing dislocations that impacted realized prices at Jonah and Barnett. A $1.2 million 1-time prior period transportation adjustment at Delhi related to changes made by the operator dating back to 2024. And weather related production disruptions across multiple fields during the January ice storms. These are not structural issues. They do not reflect any change in the underlying quality of our assets or our cost structure or our strategy. These were largely timing related and 1-time in nature we expect underlying performance to normalize as they roll off. Setting those items aside, what stands out to me is how the portfolio held up despite those headwinds. Production was essentially flat year over year at 6.7 thousand BOE per day, a result we view as a meaningful sign of resilience. Given the level of weather related disruption and downtime we experienced in the quarter, Contributions from our new acquisitions helped offset downtime and natural declines at certain assets, which is exactly the kind of portfolio level stability we have been working to build. This reflects the benefits of diversification across assets, commodities and operating partners. That diversification is not accidental, It is the direct result of the capital allocation discipline we have applied consistently over multiple years. On our mineral and royalty program, we continued to make progress during the quarter. We completed 2 additional Louisiana mineral and royalty acquisitions targeting the Haynesville and Bossier Shales, bringing the total consideration for our Louisiana minerals to approximately $5 million These assets are being actively developed by operators in the area. Wells are being drilled and completed. And we expect contributions from these positions to begin building as that activity translates into production. All of that to say, the financial contribution from our minerals platform is still in early stages. However, the activity we see from operators gives us confidence that the production ramp we underwrote when we made these acquisitions is right on track. We will provide more specific updates as those results come through. As we move into the fiscal fourth quarter, we expect the picture to look meaningfully different The prior period Delhi adjustment is behind us. The February gas dislocation at Jonah was a singular weather event. Differentials are returning to more normal levels. The Tex Mex workover program is in its final phase and we expect that asset to be a more meaningful contributor as that work is completed. The combination of these factors alongside the continued ramp of our minerals and royalty assets gives us confidence that the fourth quarter will better reflect the underlying earnings power of this business. Expect to generate robust cash flow in the fourth quarter and beyond which reinforces our continued confidence in the dividend. In addition, we believe the current commodity price environment provides incremental upside from here. On May 11, our board declared our 51st consecutive quarterly dividend and 16th consecutive dividend at $0.12 per share. A milestone that reflects the durability of our underlying cash generation across a range of commodity environments. Our capital allocation framework has not changed. Protect the balance sheet, support a dividend we believe is sustainable through cycles, deploy capital where we see compelling risk adjusted returns. As always dividends are paid at levels that are meant to be sustainable given the current outlook for multiple years to come. This portfolio has always been designed to withstand any ill effects of the odd difficult quarter and it is this same framework that gives us confidence in what we expect to be a strong finish to fiscal 26. Before I hand it over to Mark for more detail on our operations, want to leave you with 1 final thought. Looking at the broader picture for commodity prices, in March 2026 WTI oil prices reached their highest levels since 2022 and remain at elevated although highly backwardated risk premium levels. The significant increase in forward oil commodity prices as of March 31 resulted in an unrealized loss on the mark to market value of our hedges for the quarter. Additionally, the large non cash loss associated with unrealized hedge losses was based off of a crude oil strip at the March where spot prices for WTI were over $100 per barrel. No 1 knows where WTI will be at June 30, 2026, but where we sit today, I think it is likely that the unrealized losses will show a reversal in the next quarter. Although our unrealized gains and losses on hedges will fluctuate as forward commodity prices change, I sometimes think that people forget that selling oil for higher prices than our hedges is a really good thing. The current oil price environment will provide incremental upside in the fourth quarter as we expect to benefit from the higher pricing to the extent that prices exceed our applicable oil hedges. Additionally, our NGLs which are priced as a percentage of crude oil remain unhedged and should receive the full benefit of pricing. As far as our natural gas hedges are concerned, we expect to realize a benefit as our hedges are priced at levels higher than current strip pricing. With that, I will turn the call over to Mark.
J. Mark Bunch: Thank you, Kelly, and good morning, everyone. I will focus my remarks on key operational highlights from the quarter and encourage listeners to review our earnings press release and filings for additional details across our asset base. Overall, our operations continue to demonstrate steady base performance across the portfolio during the quarter. The results were impacted by the weather related disruptions and 1-time items Kelly described. Now on to our assets. At our Haynesville and Bossier Shales, we continue to build scale and are prioritizing value on wells that are either currently producing or expected to be producing within 1 year of purchase. To that end, we expect 23 wells to be brought online and meaningfully contribute to revenue and cash flow in the fiscal fourth quarter. At SCOOPSTACK, production from the mineral and royalty interest acquired in August 2025 modestly contributed to overall volumes during the quarter. Additionally, there are 7 gross wells in progress and 12 gross wells on production that we are still awaiting first production and revenue data. At Chavaroo, production increased year over year reflecting the benefit of wells brought online over the past 12 months. The January winter storm and gas interference on the wells with ESPs decreased production by a 30 net BOE per day quarter over quarter. Subsequent to quarter end, we converted 1 well from ESP to rod pump. Currently, all but 1 of our 7 wells has now been converted to rod pumps. We continue to advance permitting for the 6 wells, expect to have those permits in hand before the end of fiscal 2026. At Tex Mex, oil production increased quarter over quarter due to a successful workover program. At the end of the prior quarter. However, January winter storms not only impacted production, but also caused power outages and surface equipment damages that required repairs. This led to higher expenses in the quarter. We expect Tex Mex to continue to improve. Subsequent to quarter end, we began a new workover program which we expect will increase production by an additional 100 net BOE per day by the end of fiscal Q4. At Delhi, revenues were impacted by the 1-time prior period transportation adjustment Kelly described earlier which is now behind us. The January winter storm outages impacted production for 6 days during the quarter, and the CO2 recycled compressor, which is down from most of the prior quarter remained down for 40 days during fiscal Q3. Negatively affecting production. These issues were resolved during the quarter, Despite this, field level profitability remained strong supported by lower operating costs, reflecting the continued benefit of the cessation of CO2 purchases that concluded late in fiscal Q3 of last year. We expect production volumes to improve as operational stability continues. At the Barnett, quarterly production was heavily impacted by the winter storm as well, resulting in a decline of approximately 160 BOE per day. The impacts carried into February and restored by March. Across the portfolio, production was heavily impacted by the January winter storm and other downtime accounting for over 300 net BOE per day. However, these have been resolved during the quarter and we remain focused on maintaining operational flexibility optimizing our cost structure and deploying capital where returns are most attractive. With that, I will turn it over to Ryan.
Ryan Stash: Thank you, Mark, and good morning, everyone. As Brandi mentioned earlier, we released our earnings yesterday, which contains more information on our results. For today, I would like to go through our fiscal third quarter financial highlights. In fiscal Q3, we had total revenues of $20.2 million down 11% year-over-year. The decrease in revenues was primarily driven by an 11% decline in average realized equivalent prices, partially offset by a slight increase in production volumes. The decline in pricing reflected regional natural gas pricing dislocation at Jonah and Barnett during the quarter. But especially in the month of February. as well as $1.2 million in 1-time prior period transportation adjustments at Delhi related to a new marketing contract entered into by the operator and dating back to December 2024. Net loss for the quarter was $8.9 million or $0.26 per diluted share compared to a net loss of $2.2 million or $0.07 per diluted share in the year ago period. This quarter was negatively impacted by $7.6 million in unrealized hedge losses due to the spike in crude oil prices with the war in Iran. Excluding the impact of selected items, including the unrealized hedge losses, adjusted net loss for the quarter was $2.9 million compared to $800 thousand in adjusted net income in the year ago period. Adjusted EBITDA was $3.1 million compared to $7.4 million in the prior year quarter, reflecting lower revenues due to historically unfavorable differentials production downtime in many of our assets, and realized losses on derivative contracts. More specifically, as it relates to differentials, in Jonah, the winter differentials were the worst since we have owned the asset and the lowest in the past 10 years, due to the warmest winter on record for the West Coast. Going forward, we would expect differentials at Jonah and our other natural gas assets to return to more historical levels. We estimate that the winter differentials negatively impacted our realized price per BOE by approximately $3.39 as compared to the prior year period. Lease operating expenses improved to $13 million or $21.49 per BOE compared to $22.32 per BOE in the prior year quarter. The decrease was primarily driven by reduced ad valorem taxes at Barnett Shale, the continued benefit of the cessation of CO2 purchases at Delhi, partially offset by the addition of the Tex Mex properties and incremental workover activity during the quarter. The addition of our royalty assets in Oklahoma and Louisiana have also contributed to higher margins and lower operating costs for our asset base. On the hedging front, we have continued to add additional hedges to comply with our credit facility covenants. Our ongoing goal remains to reduce downside commodity price risk and protect cash flow for our shareholder return strategy while preserving the maximum potential upside. This strategy can result in realized and unrealized losses on our hedges in some periods such as the current quarter. But benefit us in other periods and will provide more predictable and stable cash flows over time. Turning to the balance sheet. As of March 31, 2026, cash on hand totaled $2.6 million borrowings under our credit facility stood at $56.5 million, and $800 thousand in letters of credit outstanding. Total liquidity, including cash and available borrowing capacity, was approximately $10.3 million providing us with the flexibility to support our ongoing operations capital allocation priorities, and selective growth initiatives. During the quarter, we paid dividends totaling $4.3 million As previously announced, the Board declared a quarterly cash dividend of $0.12 per share reflecting our continued commitment to returning capital to shareholders. Overall, our asset base and balance sheet strength position us to continue returning capital to shareholders while selectively deploying capital into opportunities that we expect to be accretive over the long term, just as we have done over the past 7 years. I will now hand it back over to Kelly for closing comments.
Kelly W. Loyd: Thanks, Ryan. To sum it up, fiscal Q3 was a quarter shaped by temporary headwinds rather than structural weakness. The portfolio held up well at the asset level. Our minerals and royalty strategy continued to advance and we maintained the dividend for the 51st consecutive quarter. Which we believe speaks to the durability of our underlying cash flow. As these 1-time items roll off and our recent acquisitions contribute more fully, we expect our results to better reflect the earnings power we have built in this business in the fiscal Q4 and thereafter. We look forward to updating you on our progress. With that, I will turn it over to the operator to begin the Q&A session.
Operator: Thank you. We will now begin the question and answer session. If you are using a speaker phone, please pick up your handset before pressing the keys. If at any time your question has been addressed and you would like to withdraw the question, At this time, we will pause momentarily to assemble our roster. Our first question comes from Jeffrey Robertson with Water Tower Research. Please go ahead. Analyst (Jeff Robertson): Thank you. Good morning. Mark, at Delhi with the new crude marketing agreement that the operator entered into, can you talk about how much flexibility Evolution has to or whether you want to do it as you alluded to in the press release to do anything different with respect to marketing your equity production from that field?
Kelly W. Loyd: Jeffrey, I am going to flip that-- excellent. I know you asked me, but I am going to flip it over to Ryan to answer.
Ryan Stash: Yes. So that is part of the thing we have actually been actively looking at and we do actually have a lot of flexibility in the JOA to take the production in kind. We are actively looking at now. The 1 point I will make on the actual changes is, obviously, it was a move from, you know, Denbury to Exxon. The ultimate contract with Plane has not changed that much other than they are now trucking where in the past they had a pipeline that went down. So that is really the biggest difference in kind of charges. But to directly answer your question, we are definitely looking at that at something that we are actively considering. We think we probably can do a little better than what they are in the market. Analyst (Jeff Robertson): Ryan, in the second quarter and going forward, do you expect the GPT charges to be similar to what they were last year? As opposed to, obviously, the I am sorry, the in previous quarters as opposed to what they were in the in your second fiscal quarter?
Ryan Stash: Yeah. I mean, in gathering, there is, you know, there is nothing that is been out of the ordinary that I am aware of in the past quarter. I mean, those have been relatively constant. I mean, there are some contracts we mentioned in the past like Barnett that is tied a little bit to natural gas pricing, so it will move a bit. But overall, it is more volume driven, right? Analyst (Jeff Robertson): And so know, I would not expect those to vary much from this historical. Can you talk about what kind of communications you are having from your operators with respect to any initiatives they might have to go out and do short cycle workover type projects or whether they are opportunities to bring wells back online to take advantage of the high oil prices we have at least for the next month at least the next couple of months.
J. Mark Bunch: Yes. So Jeff, this is Mark. And yes, our operators are all working towards that. Fact, we actually mentioned 1 in particular Tex Mex, they really accelerated their second round of workovers to bring things online in New Mexico. Largely because the prices went up and so the timing was really good. So we speeded that up somewhat. So, yeah, everybody's looking at making sure that they keep as much production oil production on as possible.
Kelly W. Loyd: And Jeff, hey, it is Kelly. I will just add on. Mark's right across the board, we are seeing it. And look, these are simple projects that are fast, right? Drilling takes longer, to get on production. But if you do a workover that takes a week and things are back up producing, I mean, we evaluate these. I mean, these are very, very high return projects that can get done quickly and could be meaningful. So we have seen a lot of guys try to do that as much as we can. In Hamilton Dome, you are seeing activity increase, really across the board. Analyst (Jeff Robertson): So And then lastly, getting back in the queue, Kelly, can you speak to the state of the both the non op market and the minerals market just given the volatility and in commodity prices and what that means for trying to value transactions.
Kelly W. Loyd: Yes. it is interesting. On the non op side, it is I mean, would almost argue it is kind of a dearth of availability. Like there is not a whole lot that we have seen out there. On the mineral side, again, working with some folks that we have a whole lot of confidence and trust in, we have been able to do sort of you know, I do not know if you want to call it bespoke, but we deals we put together, and along with them go execute on. And minerals just, you know, in general especially when you are able to build them in little onesies and twosies like we have been, they are more liquid. And we can find real dislocations and opportunities, which, like I said, we and the folks we are working with have been doing a great job of finding those, and we expect to see that continuing. There will be a flip, but at some point, non op will come back in vogue and we will start seeing better returns. But when you only have a couple of deals and a bunch of people bidding on them, it just has not you know, in the last couple quarters, it really has not been super attractive. Analyst (Jeff Robertson): Thanks. I will jump back in the queue.
Kelly W. Loyd: Thanks, Jeffrey.
Operator: Our next question comes from Poe Fratt with Alliance Global Partners. Please go ahead. Analyst (Poe Fratt): Thanks for taking my call. I am trying to figure out what your run rate is for the June right now. You reported 6.7 thousand BOE, you talked about 300 BOE of impact on production from storms and other things. Are you above 7 thousand right now? what is your run rate for the June or can you just help me calibrate that?
Kelly W. Loyd: Sure. Hey, Poe, this is Kelly. Thanks for calling. Yes, I think we made it clear. I do not want to speak out of school or Ryan will, slap me. But we have the 300 is almost substantially all back online and starting to get there before the end of the quarter. And if there was anything left over, it is pretty much there now. We are well underway in our progress on adding about a 100 net BOE per day in Tex Mex, And we also have you know, and I will be a little cautious here. We have 12 wells, in our royalty properties. Alone in the SCOOPSTACK. That we know, are on production, they have been completed. We just do not have data yet. Again, in Oklahoma, it can take a while. So we expect to get data where we do not want to aggregate if we did not had no data. Yes, We have type curves, but you need to actually get data before you put it on there. So we have got 12 wells that we are a part of there that we are going to get we expect to get data on and be able to include in our fourth quarter results. Same thing with our Haynesville and Bossier Shale. Bossier Shale assets. We have got 24 wells that we expect to get data on and have production from during the fourth quarter. We know that at least 20 of them have already completed and others are sort of in process. So I cannot really quantify that number. I mean, I could guess off my type curve, but that would not be appropriate. So, again, we have got the 300 back online. We have got another 100. We fully expect and is in progress of working towards that Tex Mex plus additionals from new wells that we do not have data on that we are either already producing or getting there very shortly.
Ryan Stash: So Yes, it is probably Poe, this is Ryan. it is probably helpful just sometimes to remind you guys on how from the non op perspective how it works. You know, we you know, there are some wells in some areas we have real time data, but certainly not all across our portfolio. We will not probably really know true April production for another week or 2 until we actually start getting our revenue statements in from the month of April. Right? So as we sit today, we still do not have actual revenue statements yet for April production. We have we do know of some areas, obviously, Kelly said, and we do know things that have returned to normal, but we will not know for a fact, like, what production actually was for April yet. And then and from the royalty side, Poe, it is even more delayed just because you had you are further removed from the operator. So those almost those, like, in Oklahoma, can be somewhat delayed like by 180 days. So it is, you know, where we get information, we start applying and accruing for it, but sometimes we do not know about it until it actually comes on. Analyst (Poe Fratt): Okay. And I you know, I am not going to hold you to any guesses, but is there it sounds like the SCOOPSTACK might get some data maybe 2 months would potentially hit the production for the June And then the Haynesville and the Bossier is probably first quarter next year or the September. But I guess a short question. What could potentially be the impact from SCOOPSTACK if you do get the data? In the in the June. Oh, I am Is it yeah. I am I am probably Is it 50, 25, you know, sort of just I am not going to hold you to any guesses that you make, but just I am just trying to calibrate. I understand. And but, I mean, I do not think I am comfortable speculating on that. Okay. I am not going to beat the dead horse.
J. Mark Bunch: You talked about Chavaroo that you know, the permits are potentially in place for the 6 wells or the next pad there. by the end of June. Do you think the operator there will pull the trigger in the September? Or is it more December with potential impact in calendar 27? So, as you know, the operator there has undergone a merger and it is our understanding that they are prioritizing assets and are working on the schedule. We are working with them closely and I would just it is just too early to say at this exact point in time. But we are working on that and trying to get things scheduled as quickly as we can and to understand from our own capital needs exactly when this is going to work out. So I do not want to speculate and answer for them, so I am going to wait for that. Okay. Analyst (Poe Fratt): We will update you when we know. How about that? Yeah. I guess so from a conceptual standpoint, those are shorter term, you know, shorter lead time they are permitted, there is generally you can drill a lot quicker there than you can in other places. But okay. And then on Delhi, is there any legal recourse that you have? I mean, is there is quite a delay between the time that the contract went in place and then it hit the quarter,, Did I read in between the lines that you may have legal recourse? I am officially not going to answer that.
Kelly W. Loyd: Okay. I think that is it. Thank you. I appreciate it. Thanks. Really appreciate it, Poe.
Operator: Thank Our next question comes from John Baer with Ascend Wealth Advisors. Please go ahead. Analyst (John Baer): Thanks. there is Noel in there. that is the first time. Thank you. it is Baer, B-A-I-R. Thanks. Appreciate you are taking my call, and touched on a number of aspects of my questions. Is it fair to say that add back, I mean, this was a quarter pardon the pun, but a really perfect storm. Right?
Analyst: Off 5 of your areas, impacted here.
Kelly W. Loyd: Your comments are that the flow rates are back. And so I am just wondering, do you have any was there any impact that is known as to flow rates or any reservoir damage, anything like that while these wells were shut in?
J. Mark Bunch: No. This is there were not any damages. This is the typical thing we have happened in the wintertime when we have bad weather. So, pardon me, over cold, but we do it like typically we see at the Barnett, which is it is the 1 that is slowest to come back, but it comes back. It just takes it a few weeks to get back up to full rate.
Kelly W. Loyd: I mean yeah. And back to your perfect storm, I mean, we have 1 area where lightning strike blew up a tank battery. Right? I mean Oh, boy. Yeah. Again, all covered by insurance, all fixed, but, you know, caused downtime for sure. Analyst (John Baer): And then 1 thing, John, and this is Kelly by the way, thanks for calling.
Kelly W. Loyd: On the West Coast, we talk about some of the impacts of differentials. From our, you know, Jonah gas and how far from normal it was. I mean, it was-- I mean, Ryan talked about it a little bit. I mean, once in like, once in a 100 years, plus kind of winter, What did they draw on the West Coast for gas, Ryan?
Ryan Stash: I mean, it was probably about 60-65 BCF, which is, you know, pretty much the lowest I can find for a long period of time.
Kelly W. Loyd: Right? Yeah. You know, we could call you I was going to say that it went the other way. Think not long after you purchased that did.
Analyst: that property. Yes. Yes. Analyst (John Baer): So that was kind of another follow on question I was gonna say is, okay. So you got impacted because of warmer winter, but if it is a more hotter or more severe summer and there is higher demand, then this could flip the other way. Is that a fair way of looking at it?
Kelly W. Loyd: Yes, for sure. So Ryan and I were doing some research on this On the West Coast, right, it is not just California, let's look at the whole Coast. When you have a good snowpack, right, a nice wet cold winter, in the summer months when it is hot, you get a lot of hydro. Hydro is the cheapest, best, easiest way for them to generate electricity. And it can be, you know, in a wet cold winter, it can be up to 50% of the power in some of those areas. When you have no snow pack essentially and you are expecting no hydro, Ryan, I think your research showed it can use an extra 1.1+ BCF a day, of natural gas usage. So there will be a bounce back effect that is to our favor on this during the summer.
Ryan Stash: Yeah. No, we think there is definitely potential for differentials that we see right now in the summer months might be over stating kind of the potential high stories that we are going into right now in the injection season. So it was kind of a normal to warm summer, although snowpack could set up for hopefully a little bit better demand on the summer heating. Sorry, summer cooling. Analyst (John Baer): Yes. From whatever we are seeing out there now, California is in a pretty bad state. Given they have to import just about everything it seems, whether it is energy from Asia since they have run off the industry internally. Their water and their electric. So, they are they are kind of in a bad spot there as far as-- yes.
Kelly W. Loyd: And, you know, we talked about elevated storage there. I mean, honestly, they have so few days of coverage. I mean, just happened this particular winter. There was no sort of you know, gas on gas competition because they did not hardly use any gas. So it goes away and switches very quickly. it is very light storage relative to usage there.
Ryan Stash: As a matter of fact, I would say out of all the regions of the country, has the least sort of storage relative to usage. So I mean, they have got around, you know, assuming they would not inject, which they will, they got generally 30 days or less of storage based on typical demand out there, which is very low. Also had storage come out of the system, right, of the past 5 years, which has kind of increase the volatility. As you mentioned, John, I mean, you know, we are kind of-- we are not benefiting from it from this winter, but we have definitely been a beneficiary of higher pricing due to this volatility. Around the asset. We cannot complain that much. Analyst (John Baer): Going back to Delhi for just a moment, is there any anticipation that CO2 purchases will need to be resumed or ramped up anytime soon that could be impactful?
J. Mark Bunch: John, this is Mark. No, they do not have any plans at the moment to purchase any additional CO2. And then and honestly, with the reservoir work that we have done, we actually think CO2 utilization is probably improved by dropping the amount of CO2 that is being put in the system. So we do not have any disagreements with it, and it helps our operating costs. Analyst (John Baer): A little disconcerting is I think it was referenced by an earlier caller. The questioner, The kind of lack of communication that you have had with or by the operator. So I hope, in all areas, you will be able to somehow improve that communication and updates so that you are a little bit better aware of what is going on and what they anticipate and realize that as a non op, it is perhaps a little more difficult. Still.
J. Mark Bunch: Well, John, just to FYI on that, just so we really actually have a very good relationship with Exxon in my opinion for I have worked with Exxon before and it is tough because they are a big company and you know, big companies do different things differently. But we actually have a good relationship with them, I think, and, yeah, they do talk to us. it is you know, they have had some difficult maintenance issues going on, and, you know, we treat them pretty much like the rest of our partners. And, actually, I would say they are definitely not the worst. So that is, you know, which is a big plus because I was kind of afraid they could have been. But, you know, we have been really happy with what they are doing. Analyst (John Baer): Okay. that is good to hear. And I suppose that this field is you know, kind of somewhat off their radar in the grand scheme of things for their size and so forth. So thanks very much for taking the calls.
Kelly W. Loyd: Thanks, John. Bye.
Operator: Our next question comes from Nicholas Pope with Roth Capital. Please go ahead. Analyst (Nicholas Pope): Good morning, guys.
Kelly W. Loyd: Good morning, Nick. Kelly. You, I think, you made a comment that the non-op, the market for kind of non-op assets has been you know, a little tight right now. Analyst (Nicholas Pope): So I thought it was kind of encouraging that you-- there is a-- that you sold with a $3.3 million of scoop stacks non ops assets. Post quarter end. So I am curious that you Can I give you a little color on that?
Kelly W. Loyd: Yeah. that is exactly what I wanted. So go ahead. Yeah. So just to be clear, that is it is SCOOP/STACK, but it was from our minerals package, right? If you recall, paid $17 million before post effective date. What was the ultimate adjusted price? $16.1 million for that package of royalties. But when you in the difference between effective date and closing date is cash flows. And we placed the vast majority of that on all the stuff we kept, right? There were some locations that were we again, they could absolutely be viable home run candidates but they were further out in time. And so when we put most of our valuation work, we front loaded that. So if you take that valuation, which again, we think has borne out to be a very good high return project at 16.1. If you knock another $3.25 million to $3.3 million off of that, it is an absolute home run. So what do you do with that capital? Well, you go try to redeploy it. Right? Sort of high grade that portfolio from stuff that, again, we think is good. It has value. Clearly, we sold it. But into stuff that is going to be completed in our opinion, more near term and begin to add cash flows in the near term. So that was the sort of process behind that. Let's see if we can put some of these potentially longer dated to be completed stuff flip that into stuff that we think is going to be more near term, and also, you know, very attractive rates, which we were buying. So that was the process there, Nick. Analyst (Nicholas Pope): I mean, I think it makes total sense. I mean, it is, I think y'all been active in the past to divestitures, and it sounds like maybe the non op market is a bit of a seller's market right now just with the how quickly commodity prices have moved. Is there other opportunities? I mean, is that something I know you are always active looking at your own assets and high-grading stuff. I mean, is there other opportunities you think might be possible to divest here in the near term with some non op stuff?
Kelly W. Loyd: There are, for sure, yes. There are a couple that I would say need to sort of be seasoned a little more, but that could be very And then there is always little stuff on the margin you could flip around with. So, if I were modeling, I probably would not account for it, but we would call that as the Cajun say, lagniappe. Right? Got it. All right, Joey. I appreciate the time. Analyst (Nicholas Pope): Thanks for the question.
Kelly W. Loyd: Thank you, Nick.
Operator: Up next, we have a follow-up from Jeffrey Robertson with Water Tower Research. Please go ahead. Analyst (Jeff Robertson): Thank you. Ryan, on CapEx, do you have much visibility into the rest of calendar 2026?
Ryan Stash: From your operating partners? No. I mean, I think at this point, it is going to be probably the we do not really know under SCOOP/STACK, which is a majority, as you know, kind of our CapEx other than Chavaroo. And at that, we are not getting a lot of drill schedules, from them. And we are seeing AFEs and activities but we do not have a ton of insight there as to how much capital. So we are not budgeting much more than we have probably spent this year right now. We have we will come out with our official kind of 2027 budget here probably on the next fiscal 27 that is on our next call. But at this point, no, we have not seen a lot of activity or that we would know of for really on the non op side. Analyst (Jeff Robertson): Right now, will say, as you know, obviously, the activity we have talked about on the mineral side, I mean, will not impact our capital budget, which is the nice thing about it. So all those wells coming on for ScoopStack are not going to impact our capital budget. Thank you. I guess into that note of the mineral interest production that you talk about that should come on near term should have a, yes, high-margin addition to cash flow.
Ryan Stash: Yes, absolutely. And yes, we are excited about it, but it is it is again, we are going to gain more info this quarter and even more going forward as we get more wells being completed over time. So again, very excited about that. Analyst (Jeff Robertson): Thank you.
Operator: Our next question is a follow-up with John Baer from Ascend Wealth Advisors. Please go ahead. Analyst (John Baer): Thanks for taking the follow-up here. Just a quick question. Are you looking at any adjustment or any ways that you can adjust your hedging program given the current elevated prices or whatever? Is there any way that you can kind of high grade that? And know what my personal take is, these prices, even if, you know, some solution to the Persian Gulf Strait of Hormuz thing was resolved. You got a long lead time to get all that cargo out of there. So, I know the market response would probably try to reflect it, but given where we are at right now and all those uncertainties, are you looking at doing any high-grading of the hedging program?
Ryan Stash: Yeah. John, this is Ryan. So, you know, unfortunately, in the near term, right, we definitely have looked at restructuring, but most of the restructuring opportunities would be things like converting our collars to swaps which, you know, is not really that beneficial to create upside, given where the prices are, it would be too expensive to take a lot of those swaps out or just take them off. What we are doing is we have taken the opportunity to start adding hedges in calendar 2027. So we are able to get 70 plus you know, swaps and floors in some instances with higher callers. And so those prices calendar 2027 are pretty attractive, right? So to us, adding hedges out in the future at good prices is really what we are doing for the most part with this kind of spike. The other point I would make is while we do have you know, we are not completely hedged out on our crude, right? So we have still got for this kind of our fiscal fourth quarter at least 30% unhedged. On the crude side. All of our NGLs are unhedged. So we definitely have upside there from the run in kind of the heavier parts of the barrel for the NGL. So we are still going to see some of that upside as Kelly kind of mentioned in his comments, but really near term, there is not a lot of restructuring opportunities. We are just going to take advantage of adding stuff in 2027. Analyst (John Baer): Very good. I think 1 of the big takeaways from what is been going on is domestic production I think globally you are going to be looking at more cautiously at where you source your crude from, right? So I think from that standpoint being a domestic producer should be given a little bit of a premium perhaps, I do not know. But just kind of food for thought there. So thanks again for taking the question.
Kelly W. Loyd: Hi, John. Really appreciate your interest and call and we agree. Think good old USA is the place to be, so. Very good.
Operator: This concludes our question and answer session.
Kelly W. Loyd: I would now like to turn the call back over to Kelly W. Loyd for any closing remarks. Yes. Thank you. And thank you everybody for attending. As we move forward, like I said, we are excited about the future here. So thanks again for your interest. Really appreciate it.
Operator: The conference has now concluded. Thank you for attending today's presentation. You may now disconnect.