EPM - Earnings call transcript Q2 2018 | Evolution Petroleum Corporation

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Operator

Thank you for standing by. This is the conference operator. Welcome to the Evolution Petroleum Second Quarter Fiscal 2018 Earnings Release Conference Call.

As a reminder, all participants are in listen-only mode and the conference is being recorded. After the presentation, there’ll be an opportunity to ask questions. now turn would to conference I management. Instructions] like the to over [Operator go Please ahead.

Randy Keys

Petroleum’s for earnings quarter Evolution to Welcome presentation XX, ended our XXXX. December second fiscal

am results We date. note Please This a statements may statements today forward-looking the and not discuss provided any CEO of financial presentation information time-sensitive will quarter. Evolution contains operating that I management’s later are Randy and Petroleum. be Keys, of at statements Actual on are that those for based and beliefs and differ financial currently the ended excellent and our These forward-looking results materially reported to available uncertainties quarter subject assumptions December are filings information. risks with results from in XXXX. described XX, Evolution for the expected. accurate SEC. may

$XX.X in high its quarterly are in of quarter. revenues seen of higher for of increase the a a barrel were quarter, in we’ve price founding we mid-XXXX. prices, not improvement resulted million per the end since oil $XX.XX this oil seen the from Most further since XXXX. have Since These prices. levels averaged Evolution which Our

level, from the stock This $X.XX to big downturn increase to set original Jobs tax net the per The common the basis. of an our dividend lower the income $X.X one-time per late $X.XXX was on or $X Act. per tax XXXX. industry the increase rate to annual income Our corporate Tax for share. deferred common a and includes news quarter before million dividend XXXX quarter $X.XX from in tax the our Cuts adjustment This This the share is of million liability for benefit reflect $X.XX the quarterly the restores in share. is in

financially on new of sheet remains well-positioned Even is acquisition to the capitalize cash. and the which the all working $XX.X balance substantially potential dividend, increase of continue we’re Delhi very field to development also in after Our capital, of million with solid opportunities.

we quarter, million. of the total reported revenues $XX.X During

$X.X $X.X Our these million million. resulting our costs was DD&A million, non-cash of Of million. were operations $X.X from total costs, operating was stock-based $X.X and our compensation in income expense

So, DD&A of which million per the reported million, and was We taxes $X common before our totaled quarter. quarter. the earnings $X.X share for $X.XX net earnings interest, in almost

Our was tax tax the Cuts passage the expense $X state rate statutory liability XX%. million. of future of December, Act $X and Tax tax an Jobs quarter expected income was our This combined by a recorded This credit from of a the based which for rate $X.X of year on of adjustment taxes. for expected rate our million lower to was deferred XX% the benefit late corporate over and in Based we XX%, to federal offset reform. slightly tax revalued new a from the liability tax XXXX deferred the million for benefit income on prior

is of For for based get of the the We corporate year-end. rate our year. XXth June our lower the blended year, benefit approximately on rate the half XX.X%,

of excess by of rate an expected rate adjustments benefit income These offset our basis, from increase XX%. result few items tax. a in effective tax with percentage is reduced state expected depletion for smaller Our in the by along

corporate our structure of rate currently significant a benefit simplified now rate. dividends and over of Evolution much rate This have structure at analysis going marginal from range but which based XX% distributing at importantly, XX%, very efficient is a faced new tax individuals. be rate shareholders. from tax tax we XX%, view the XX% would tax combined taxable combined for a We a the more is as taxes a More greatly tax which paying We benefits potential a forward. previously on

prior was quarter. $XX.XX oil Our for realized from quarter the the barrel, XX% average price per up

premium the Our improving majority significant Louisiana the this in field several from over realized past the or WTI. been pricing a Light net improvement increase Delhi results The in of of over quarters. Sweet has LLS,

of barrel. XXXX, per around most premium $X.XX was fiscal During this

most per crude barrel. price during by but surged almost to of resulted under to narrow the discount oil saw in In the premium still a a barrel. strength recent premium in WTI a January, the the per quarter, from our encouraged realized swinging late we LLS our relative $X.XX barrel, are This to to LLS However, $X $X.XX of market. $X the slightly premium oil we

over From late of also Our year, X% seasonal strong, and has pricing have the total prices, we low positive NGL to as summer from for XX% strength, WTI behind several which There revenues. a will in about WTI. in this seen early only XX% our spring NGL discuss been very accounted although of increase are this a later of this our percentage factors we this of call. oil, relative of

$XX.XX saw from of we operating cubic of feet over XXXX. very purchased should directly ago Our COX two we Two brings field. line operating costs cost per barrel any in our an margin the commodity per XX fixed, operating continuing field quarters a generate recent margin a large showed trend the relatively barrel our unusual per of the equivalent production of $XX At per $XX.XX part With increase closer per price barrel. operating equivalent most quarter. spike ago, substantial per day. costs This barrel to equivalent our late to quarters since us improvement, in in the majority barrel increases a million dropping to of $XX.XX,

the compared quarter. prior with lower flat repairs in we plant. day. to increase on in COX, overall our which lower more cost the to of contact saw realized The price XX levels LOE of dropped our that costs Based effect with range to is cubic the directly tied associated cost and million the oil, of quarter. increase the XX% per cost total our COX offset was feet Over past two we’ve by maintenance quarters, a This last back total was typical were and the NGL

plant to turbine, gas that for run With to the to in normal we’ve hope cost it electric the over seen capacity, which NGL power we drop prices, see higher feedstock a operating purchased quarters. should expect a cost drop. see direct if to next at further the a of natural are expect purchased now see We in price. cost continue oil of to couple we our cost also Overall, we oil reduction higher COX function and see

than increase offset this However, operating be field more an in our margin. by should

of G&A awards. higher These be over in account probable results, of to next quarters. should than and based both ticked on performance-based costs have past based the compensation positive Our range the higher for over certain expected, stock incentive slightly in were the $XXX,XXX expenses quarters vesting up and couple vesting had quarters. We down two performance the

was G&A property in other past evaluation and cash Our two the quarters up consulting costs. a engineering, as of result

declared reduction asset technical future severance quarter from share. a XXth now is This began an base. continue trend additional common headcount share as stock, paid paying evaluate see resources acquisition per streamline we above our on We engineering our rate at a of costs has of $X.XX we and on some December may dividend dividends. overhead increased costs had we dividend cash Yesterday, in the and also G&A annual XXXX the line XX last to per opportunities. consecutive costs to slightly continue common basis. quarterly other our We accounting the quarterly quarterly in our match as current new Evolution $X.XX to for

per cumulative a share. now or totals to $X.XX common Our common return shareholders almost million $XX

set central feet XXX while of XXX the facility shareholders past compression almost COX water now rewarding XX XX with wells handles over Delhi the processing We December the also wells. The doubled and of meaningful back the COX have common the a commitment a At by is demonstration to XXXX. it and and has oil months is and production day, a level dividend the produced originally present, of the from dividend. our the This management the and now field. clear cubic COX September in around injection processing million XXXX, Board stock Board, the almost field recycle since of to per

program This early Our next of the production injection not is five COX being are central new will part wells the infill existing kick the in These we off step XXXX. of drilling the which XX-well we consists a flood and to the in March program wells swept which in target development field seven field. with believe of reservoir, effectively existing wells zones new within the expect patterns.

the reserves. above We to add producing oil increase production current recoveries and this proved expect ultimate program

net is program. around for Our the cost at $X.X million estimated

Phase X project are the the rig, same water finish of In drilling Delhi field. of the plan the a wells we addition, wells three the on the of infrastructure for planned last using part injection edge of eastern to These field. expansion the

this $X.X cost range complete net the in expect program. of We to million

plant NGL As a of August capital Since in run NGL per we of NGLs the day improvement mix has producing quarter. in last and a the has recycle of at capacity, of plant we the year. at previously had plant completion project, reported, completed normal production gross liquids. X,XXX of very barrels of inlet the been the The rich

of heavier the very relative liquids, less and seen natural for which gasoline, We’ve seen transportation two other sometimes components. close and These and at WTI, also a high-value refer yield to in quarters, to CX+ NGL past price pricing the pentanes increase the Over sell significantly. of we’ve strength called deductions products process.

We the with higher are heating gasoline entering and into the period for of for in winter demand for cooler months. blending both products, seasonal a these in

as significant the further better our financial price look all dividend the for which very December encouraging This of value Out per per on price XX% concludes reform. common the pricing. product XXXX in yield the an quality prior products; benefit increases from in and market on results increase made continues progress a commodity the net the and our to per increased $XX.XX we the $X.XX tax basis, net improvement purchaser’s led tax expected and reported combination In three quarterly to our and in a prices; significant of $XX.XX annual and issue review summary, rate from quality in for a quarter progress a to from cash barrel. from future share result meeting revenues for resulted a quarter, to operating stock a in environment higher XX% barrel Lastly, promising results of corporate operations specifications. quarter. of This which in reduction reduction solid income resolving had NGL our flows, factors, we’ve

strong dividends and on common our of all Our during cash. $X.X stock position the quarter, in of million out debt balance no We preferred million all very of paid remains liquidity with the of at retired stock substantially We’ve $XX.X sheet. the end capital which quarter. working was the had

at new very much opportunities. Evolution look to We Petroleum. are position growth Thank in interest in a great for your you

Operator

you. Thank

will go Our [Operator Grampp of begin Markets. Northland the from ahead. Jeff session. comes now We question-and-answer Instructions] first Please question Capital

Jeff Grampp

I kind that First, X Is of little project guess kind from you to get sight of there guys the expansion have towards I any Phase that. kind on your you regarding may done line of that’s a of end? of line the initiated sight that your ahead preliminary of think of be I end and highlighted wanted guys being any work when

Randy Keys

COX think is think program the to We some our It on drilling additional we’ll has that’s project; behind get towards after And this end the completed. field. first recycle year limited think of this we’re calendar program that’s resources. been. year, discussions XXXX capacity the the in operator we’ve our I somewhat But, overall will better Well, infill need we sight step require I drilling infill the a preliminary with of got have us. what line

it point. do is intends add remains project; would at economic the And, this it firm that expect operator that it; just I execute. not the a I we does it’s an project think remain to timing

Jeff Grampp

think term And deals? revolver sheet up equity be that’s longer the that balance kind highlighted and financing question. appetite is million permanently I I intended done guess, opportunity -- a I revolver then, guess, how on towards any are deal is there, of thinking putting you guess, generally, something to guys XX I your the a bucks. shorter getting mean, the option? any finance to of M&A of I the And wondering, would to my is just kind to be term leverage side, get potential or about on

Randy Keys

to having not balance the are opposed we sheet. debt Well, on

long-term Equity potential period. times a stay X.X perhaps a be a one so, personal a debt cash leverage. a that significant to that over we’d portion acquisition of flow company. for either want And stretch cap -- get depends we and -- a and But, Xx, repayment done. term through longer to But into a easily portion flow growth cash of beyond of we maintain market equity. in financing or to the very enterprise want play, debt. to likely transaction would from that bring potentially then, manageable about we down preference talk about we growth issuance any It comes order or back is My value in could through of the of if a the

Operator

from [Operator Our Instructions] Insurance. Jon ahead. Please question next Amica comes Burke go of

Jon Burke

is the on I it our done? to it bearishness obviously cash targeted kind and M&A appreciate flows with part. cash definitely production move big a the prospects flow, move of somewhat is given in the at that dividend; on in that keep a into Is are just getting the level that or now leading similar appreciated higher oil, of

Randy Keys

former. seen want than significant that internally is, cash XX%. a the very our XX% set to available. Really, I’d in of the And clearly more dividend target to EBITDA like is we keep don’t in increase around Company. We’ve it the estimated cash I It be our our flow,

companies market. obviously the potential We’ve probably been a MLPs patient. -- in We’ve work exit for and seen to of functions limited XX also in we’ve the expectation, the are that properties. And low-XX% as they execute. We’ve spending based lot our an rationalize large a environment large no, prospects portfolios wrap But, of some shale noticed view, I really, the return for they properties have based of actually and basin. in mostly the XX, of where on their seek Pioneer in wherever exit the Chapter acquisitions. think time plays we to their their the very producing prices. the other want growth been sponsors range, situations those Bakken, that of higher are very more lot confident plays. to plays, exited lot SCOOP/STACK, very a some two flow entirely up. Chapter of on most a legacy or we’ve we announcement whose We’ve in that equity doing at in that are Permian, lot seen of those their had onshore a MLPs divest producing, to private producing been seen and over We their are ready XX%, into to seen rate are yesterday remain under primary a three And ability lot look to strategic in deal attractive looking Permian independents made more, fact, thirdly, We’ve going our on their primary pivot the focus the and properties exit to

deal have given very So, a flow. those lot factors been But, of three patient. us we’ve

and And We be right deal. we to patient try rate We of are to very to see. sense feel the a huge the urgency. about that disciplined want just of want we return don’t find

Jon Burke

had since the go more And on the obviously and is oil, expectations changed you much the forward view out of in big how this obviously on moderate. spot curve we’ve move point sellers’ has move

So, has expectation price much? changed

Randy Keys

primarily expand may looking into PDP upside an have some may it a a impact as that Well, at two on upside a to it view we’re potential of really come it’s economic value, projects, be the There on has also that and value. price, a at, certain of changed What they but oil obviously would is projects subtle ways. has pure $XX bit changed we these example. perception play impact as but in more the just

sellers potential weather with that’s since that trying because side one that as be that buy compensated market the basis. just little had is cash side. the seen flow I then tendency fairly a to on a We price a the we’re the the would on a back of spike moves, want whereas we weak then. we’ve face some got cold oil and for it’s so, upside, add to that struggles in And pulled true January of primarily And to gas in really

on that. side oil just truly it’s So, on the

Jon Burke

Okay. you own And a like spot using when just you have internal don’t do -- you’re your reminder, not a deck this? you’re deck, price price as

Randy Keys

We close stay try strip. to the pretty to

Jon Burke

Okay.

Randy Keys

give could the try too would do We that we hedge. to prices lock far in, to ability us we deviate Because that chose to not from if so.

Jon Burke

Okay. great All seeing with in right, better Yes. It’s the here prices. great. leverage the model

great So, quarter.

Randy Keys

you. Thank

Operator

over the I turn to back for concludes now Instructions] would question-and-answer [Operator closing session. management any conference to This remarks. the like

Randy Keys

Well, thank for the you very call. much in participating

We early and next you all necessary. I think, to in much. gone to forward to talk shareholders through very And, happy quarter’s as look the details, thank I’ve individually of May. call

Operator

This concludes today’s conference call.

disconnect have a pleasant Thank you your day. may for line. You participating, and

Evolution Petroleum (EPM) 8 Feb 182018 Q2 Earnings call transcript