Evolution Petroleum Corporation said it is acquiring non-operated oil and natural gas assets in New Mexico, Texas, and Louisiana for a total purchase price of $9 million, subject to customary closing adjustments.
The acquisition is expected to close by the end of Evolution’s third quarter of fiscal 2025 with an effective date of February 1, 2025, the company said in a news release.
Evolution said the acquisition expands its asset portfolio with approximately 440 barrels of oil equivalent per day (boepd) of net production, consisting of a balanced commodity mix of 60 percent oil and 40 percent natural gas with the acquired assets primarily being low-decline.
The portfolio consists of approximately 254 gross producing wells across all regions, and the assets will be managed by a top-tier private operator, “ensuring operational efficiency and the ability to maximize value,” Evolution said.
The company said it intends to finance the acquisition through a combination of cash on hand and borrowings under its existing credit facility.
Evolution President and CEO Kelly Loyd said, “This acquisition marks our seventh such transaction in the last 6 years and is another step forward in strengthening our production base – aligns with our disciplined growth strategy by adding high-quality, low-decline production at an attractive valuation, estimated at ~2.8x NTM2 Adjusted EBITDA which doesn’t include any incremental cash flows for upside opportunities. These assets complement our existing portfolio and enhance our ability to generate stable free cash flow, which supports our long-standing commitment to returning capital to shareholders. We see additional upside through reactivations of existing waterfloods and through operational efficiencies, which will further enhance long-term value”.
“We remain committed to executing our strategy of acquiring high-quality, long-life assets that enhance our production base while maintaining financial discipline,” Loyd said. “This transaction further reinforces our strong balance sheet and ability to deliver consistent shareholder value through sustainable production and cash flow generation”.
In the company’s second fiscal quarter, total revenues decreased 4 percent to $20.3 million compared with $21.0 million in the year-ago quarter. The decline was driven primarily by a 12 percent decrease in average realized commodity prices which offset an increase in production volumes, it said in its most recent earnings release.
Production for the quarter increased 10 percent year-over-year to 6,935 average boepd, with oil increasing 13 percent, natural gas increasing 9 percent, and natural gas liquids (NGLs) increasing 9 percent.
The increase in production volumes was largely due to the company’s SCOOP/STACK acquisitions in February 2024 and subsequent drilling and completion activities, as well as new wells at Chaveroo that came online at the same time, Evolution said.
“Despite operational issues and downtime at Chaveroo and Williston, which resulted in approximately 90 boepd lower production for the quarter, our balanced portfolio delivered strong year-over-year production growth of 10 percent. These issues have been resolved, and rates were restored before the end of January. Lower commodity pricing, particularly for natural gas, was the main contributor to a modest revenue decline and net adjusted loss. However, towards the end of the quarter and beyond, we have seen a strong recovery throughout the natural gas futures curve and substantially improved natural gas price realizations to date, while oil and natural gas liquids pricing has remained relatively stable to slightly improved,” Loyd said.
Source: by Rocky Teodoro for Rigzone Staff